Amgen 2001 Annual Report Download - page 43

attorneys’ fees, that the Company incurred in the
arbitration as well as one-half of the audit costs (the
“Fee Award”). As a result, the Company recorded a net
$73.9 million legal award, which represents the Fee
Award reduced by minor amounts related to other mis-
cellaneous disputes with Johnson & Johnson, in the third
quarter of 2000.
Amgen Foundation contribution
In 2000, the Company contributed $25.0 million to the
Amgen Foundation. This contribution will allow the
Amgen Foundation to increase its support of non-profit
organizations that focus on issues in health and medicine,
science education, and other activities that strengthen
local communities over the next several years.
Note 5: Income taxes
The provision for income taxes includes the following
(in millions):
Years ended December 31, 2001 2000 1999
Current provision:
Federal (including
U.S. possessions) $ 636.6 $481.7 $422.8
State 78.3 47.5 37.2
Total current provision 714.9 529.2 460.0
Deferred (benefit) provision:
Federal (including
U.S. possessions) (104.3) 9.6 5.3
State (44.0) (3.0) 4.5
Total deferred (benefit)
provision (148.3) 6.6 9.8
$ 566.6 $535.8 $469.8
Deferred income taxes reflect the net tax effects of
net operating loss and credit carryforwards and tempo-
rary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant
components of the Company’s deferred tax assets and
liabilities are as follows (in millions):
AMGEN 2001 ANNUAL REPORT
amounts previously capitalized related to these agreements,
and $100.7 million with respect to amounts to be paid
to third parties in connection with the termination of
these relationships.
Legal award, net
In September 1985, the Company granted Johnson &
Johnson’s affiliate, Ortho Pharmaceutical Corporation, a
license relating to certain patented technology and know-
how of the Company to sell a genetically engineered form
of recombinant human erythropoietin, called Epoetin
alfa, throughout the United States for all human uses
except dialysis and diagnostics. A number of disputes
have arisen between Amgen and Johnson & Johnson as to
their respective rights and obligations under the various
agreements between them, including the agreement
granting the license (the “License Agreement”).
A dispute between Amgen and Johnson & Johnson
that had been the subject of an arbitration proceeding
related to the audit methodology currently employed by
the Company to account for Epoetin alfa sales. Under the
License Agreement, the Company and Johnson & Johnson
are required to compensate each other for Epoetin alfa
sales that either party makes into the other party’s exclu-
sive market, sometimes described as “spillover” sales.
The Company has established and is employing an audit
methodology to measure each party’s spillover sales
and to allocate the net profits from those sales to the
appropriate party. The arbitrator in this dispute (the
“Arbitrator”) issued a final order adopting the Company’s
audit methodology with certain adjustments and also
found that the Company was the successful party in the
arbitration. Pursuant to the final order in the arbitration,
an independent panel was formed principally (i) to
address ongoing challenges to the survey results for the
years 1995 through 1999 and (ii) to refine the procedures
for measuring the erythropoietin market as may be
necessary. As a result of decisions made by this indepen-
dent panel regarding certain challenges by Johnson &
Johnson as well as other reduced uncertainties, the
Company reduced amounts previously provided for
potential spillover liabilities by $49 million in the third
quarter of 1999.
Because the Arbitrator ruled that the Company
was the successful party in the arbitration, Johnson &
Johnson was ordered to pay to the Company all costs and
expenses, including reasonable attorneys’ fees, that the
Company incurred in the arbitration as well as one-half
of the audit costs. On July 17, 2000, the Arbitrator
issued a final order awarding the Company approximately
$78 million in costs and expenses, including reasonable
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