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Page 52
AMGEN 2002 ANNUAL REPORT
on net (loss) income and (loss) earnings per share if the
Company had applied the fair value recognition provi-
sions of SFAS No. 123, “Accounting for Stock-Based
Compensation” (see Note 7, “Employee stock option, stock
purchase, and defined contribution plans”):
Years ended December 31, 2002 2001 2000
Net (loss) income $(1,391.9) $1,119.7 $1,138.5
Stock based compensation,
net of tax 189.8 189.1 103.1
Pro forma net (loss) income $(1,581.7) $ 930.6 $1,035.4
(Loss) earnings per share:
Basic $(1.21) $ 1.07 $ 1.11
Basic — pro forma $(1.37) $ 0.89 $ 1.01
Diluted $(1.21) $ 1.03 $ 1.05
Diluted — pro forma $(1.37) $ 0.86 $ 0.95
Use of estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United
States (“GAAP”) requires management to make estimates
and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results
may differ from those estimates.
Recent accounting pronouncements
In June 2001, the Financial Accounting Standards Board
(“FASB”) issued SFAS No. 143, “Asset Retirement
Obligations” effective for fiscal years beginning after June
15, 2002. Under the new rules, the cost to retire assets or
remediate property or certain leased assets is capitalized
and recognized as an operating expense over the life of the
asset. The Company will apply the new rules on account-
ing for asset retirement obligations in the first quarter of
2003. The impact of adoption of the new standard is not
expected to have a material impact on the results of oper-
ations or the financial position of the Company.
In August 2001, the FASB issued SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets” effective for fiscal years beginning after December
15, 2001. The impact of adopting this standard has not
had a material impact on the results of operations or the
financial position of the Company.
Reclassification
Certain prior year amounts have been reclassified to con-
form to the current year presentation.
Note 2. Related party transactions
The Company owns a 50% interest in Kirin-Amgen, a cor-
poration formed in 1984 with Kirin Brewery Company,
Limited (“Kirin”) for the development and commercial-
ization of certain products based on advanced biotechnol-
ogy. Kirin-Amgen has given exclusive licenses to Amgen
to manufacture and market certain products including
erythropoietin, granulocyte colony-stimulating factor
(“G-CSF”), darbepoetin alfa, and pegfilgrastim in certain
geographic areas of the world. The Company currently mar-
kets certain of these products under the brand names
EPOGEN
®
(erythropoietin), NEUPOGEN
®
(G-CSF), Aranesp
®
(darbepoetin alfa), and Neulasta
™
(pegfilgrastim). Kirin-
Amgen’s revenues primarily consist of royalty income related
to its licensed technology rights. Kirin-Amgen receives
royalty income from Amgen, as well as Kirin, Johnson
& Johnson, F. Hoffmann-La Roche Ltd (“Roche”), and
others under separate product license agreements for cer-
tain geographic areas outside of the United States. During
the years ended December 31, 2002, 2001, and 2000,
Kirin-Amgen earned royalties from Amgen of $168.2 mil-
lion, $147.1 million, and $140.8 million, respectively,
which are included in “Cost of sales” in the accompanying
consolidated statements of operations.
Kirin-Amgen’s expenses primarily consist of costs
related to research and development activities conducted on
its behalf by Amgen and Kirin. Kirin-Amgen pays Amgen
and Kirin for such services at negotiated rates. During the
years ended December 31, 2002, 2001, and 2000, Amgen
earned revenues from Kirin-Amgen of $174.6 million,
$210.1 million, and $221.0 million, respectively, for cer-
tain research and development activities performed on
Kirin-Amgen’s behalf, which are included in “Corporate
partner revenues” in the accompanying consolidated state-
ments of operations.
At December 31, 2002, Amgen’s share of Kirin-
Amgen’s undistributed retained earnings was approximately
$96.5 million.