Amgen 2013 Annual Report Download - page 52

payments for accelerated vesting of equity awards as part of the acquisition that were previously granted under the Onyx equity award programs which would
not have otherwise vested. SG&A also increased by $98 million related primarily to favorable changes in 2012 to the estimated U.S. healthcare reform federal
excise fee.
The increase in SG&A expense for 2012 was driven primarily by higher ENBREL profit share expenses of $207 million as well as international
expansion, offset partially by lower U.S. healthcare reform federal excise fee expense of $106 million in 2012 compared with 2011, which includes a $61
million favorable adjustment related to the 2011 fee.
Historically, under our ENBREL collaboration agreement, we paid Pfizer a percentage of annual gross profits on our ENBREL sales in the United
States and Canada on a scale that increased with gross profits. The ENBREL co-promotion term expired on October 31, 2013, and we are now required to pay
Pfizer residual royalties on a declining percentage of net ENBREL sales in the United States and Canada of 12% through October 31, 2014, 11% through
October 31, 2015 and 10% through October 31, 2016.
Other
Other operating expenses for 2013 included $113 million of adjustments to our estimated contingent consideration liability related to the BioVex Group,
Inc. (BioVex) business combination, certain charges related to our cost savings initiatives of $71 million, which includes severance expenses, and $12 million
of other charges related primarily to legal proceedings.
Other operating expenses for 2012 included charges of $175 million related to our cost savings initiatives, which includes severance and expenses
associated with abandoning leased facilities, legal charges of $64 million and other operating expenses of $56 million, which includes adjustments to our
estimated contingent consideration liability related to the BioVex business combination.
Other operating expenses for 2011 included primarily a legal settlement charge of $780 million and charges related to cost savings initiatives, primarily
severance, of $109 million.
See Item 1. Government Regulation — Other Regulation and Note 8, Other charges, to the Consolidated Financial Statements for further discussion of
our legal settlement.
Non-operating expenses/income and provision for income taxes
Non-operating expenses/income and provisions for income taxes were as follows (dollar amounts in millions):



Interest expense, net $ 1,022
$ 1,053
$ 610
Interest and other income, net $420
$ 485
$448
Provisions for income taxes $184
$664
$ 467
Effective tax rate 3.5%
13.3%
11.3%
Interest expense, net
The decrease in interest expense, net in 2013 was due primarily to the decrease in non-cash interest resulting from the settlement of our 0.375% 2013
Convertible Notes in February 2013 offset partially by increases resulting from the higher average balance of other outstanding debt and financing fees paid in
association with the acquisition of Onyx. The increase in interest expense, net in 2012 was due primarily to a higher average debt balance.
Interest and other income, net
The decrease in interest and other income, net for 2013 was due primarily to lower net gains on sales of investments recognized in the current year. The
increase in interest and other income, net for 2012 was due primarily to higher interest income due to a higher average balance of cash, cash equivalents and
marketable securities offset partially by lower yields and lower net gains realized on investments.
Income taxes
The decrease in our effective rate for 2013 was due primarily to three significant events occurring in 2013: (i) the acquisition of Onyx, which resulted in
a tax benefit of $182 million; (ii) the $187 million settlement of our examination with the Internal Revenue Service (IRS) for the years ended December 31,
2007, 2008 and 2009 in which we agreed to certain adjustments proposed by the IRS and remeasured our unrecognized tax benefits (UTBs) accordingly; and
(iii) the reinstatement of the federal R&D tax credit for 2012 and 2013. Because the American Taxpayer Relief Act of 2012 was not enacted until 2013, certain
provisions of the Act benefiting the Company's 2012 federal taxes, including the retroactive extension of the R&D tax credit for 2012, were not
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