Amgen 2007 Annual Report Download - page 141

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In addition, in connection with the rationalization of our worldwide network of manufacturing facilities, we
decided to accelerate the closure of one of our ENBREL commercial bulk manufacturing operations. The deci-
sion to accelerate the closure of this manufacturing operation was principally based on a thorough review of the
supply plans for bulk ENBREL inventory across its worldwide manufacturing network, including consideration
of expected increases in manufacturing yields, and the determination that the related assets no longer had any al-
ternative future uses in our operations. Because the related estimated future cash flows for this manufacturing
operation were sufficient to recover the respective book values, we were required to accelerate depreciation of
the related assets rather than immediately impairing their carrying values. The amount included in COS in the ta-
ble above, $147 million, represents the excess of the accelerated depreciation expense recognized during the year
ended December 31, 2007 over the depreciation that would otherwise have been recorded, $6 million, if there
were no plans to accelerate the closure of this manufacturing operation.
During the year ended December 31, 2007, we also recorded cost recoveries of $114 million for certain re-
structuring charges, principally with respect to accelerated depreciation, in connection with our co-promotion
agreement with Wyeth. Such amounts are recorded as a reduction of SG&A expenses. In addition during the year
ended December 31, 2007, we accrued $119 million, primarily related to loss accruals for leases for certain R&D
facilities that will not be used in our operations. Such amounts are included in “Other items (primarily certain re-
structuring costs in 2007)” in the Consolidated Statement of Income.
The following table summarizes the charges and spending relating to the restructuring plan (in millions):
Separation
costs Other Total
Restructuring reserves as of January 1, 2007 $ — $ — $ —
Expense ........................................... 209 119 328
Payments .......................................... (112) (17) (129)
Restructuring reserves as of December 31, 2007 $ 97 $102 $ 199
The Company records restructuring activities in accordance with SFAS No. 88, Employers’ Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, SFAS No. 144,
Accounting for the Impairment and Disposal of Long-Lived Assets and SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities.
3. Employee stock-based payments
We have employee compensation plans under which various types of stock-based instruments are granted.
These instruments, as more fully described below, principally include stock options, restricted stock (including
restricted stock units) and performance units. As of December 31, 2007, these plans provide for future grants
and/or issuances of up to approximately 35 million shares of common stock to our employees. Stock-based
awards under our employee compensation plans are made with newly issued shares reserved for this purpose.
Prior to January 1, 2006, we accounted for our employee stock-based compensation under the recognition
and measurement principles of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Is-
sued to Employees” (“APB 25”), and related interpretations, as permitted by SFAS No. 123, “Accounting for
Stock-Based Compensation” (“SFAS 123”). Under the recognition principles of APB 25, compensation expense
related to restricted stock and performance units was recognized in our financial statements. However, APB 25
generally did not require the recognition of compensation expense for our stock options because the exercise
price of these instruments was generally equal to the market value of the underlying common stock on the date of
grant, and the related number of shares granted were fixed at that point in time.
Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R), “Share-
Based Payment” (“SFAS 123(R)”). In addition to recognizing compensation expense related to restricted stock
F-15