Monday, 12 November 2012
Definition of Core Financial Measures will change with effect from Q1 2013
As previously announced, with effect from first quarter results 2013, AstraZeneca PLC will update its definition of Core financial measures to exclude all intangible asset amortisation charges and impairments, except those for IS-related intangibles. As intangibles acquired as a result of externalisation become an increasing proportion of the Group’s asset base, the new definition has been extended to provide better clarity of the impact from amortisation and impairment charges included in Reported results and, in addition, while recognising that non-GAAP measures differ between companies, it will aid comparability of our results versus our peers.
The items excluded from Core results under the previous definition as disclosed in detail on page 84 of our Annual Report and Form 20-F Information 2011 remain a constituent part of the new definition.
These excluded certain significant items, such as charges and provisions related to our global restructuring programmes, amortisation and impairment of the significant intangibles relating to our acquisition of MedImmune Inc. in 2007 and our exit arrangements with Merck in the US, and other specified items.
Detailed, un-audited reconciliations between the current Reported basis, the previously disclosed Core basis and the newly defined Core basis for the full-year 2011, first nine months of 2012 and each of the quarters to Q3 2012 are set out below. These are presented as the full reconciliation back to Reported performance, as management believe a full understanding of the performance is best obtained by reviewing both Reported and Core performance. Reported performance remains a key metric for management in reviewing the performance of the Group.
Adjustments between reported and core performance
Amortisation and impairments of intangible assets. The definition of this item has been updated to include all amortisation and impairment charges for intangible assets excluding IS-related assets. Adjusting for these items removes the volatility when impairments are booked on such assets and is intended to provide a better measure of underlying business performance. It has been extended to cover all amortisation and impairments relating to product marketing and distribution rights and other intangibles, incorporating those already excluded under the current definition relating to our acquisition of MedImmune Inc. and our exit arrangements with Merck. The amortisation and impairment of IS-related intangibles are not included in the adjustment, and will remain in core.
Restructuring costs. The definition for this item has not been changed. These charges arise from the major restructuring programmes as separately announced by the Group, and will include the remainder of the third phase of restructuring announced in February 2012.
Legal charges and other charges. The definition for this item has not been changed. Legal payments, charges and expenses related to settlements, judgments and fines in the context of product liability litigation, anti-trust litigation, patent litigation and government investigations will be excluded from the Core measures and the adjustment will be stated net of related insurance recoveries. In the ordinary course, external legal professional fees, including those relating to intellectual property protection costs, and the costs of AstraZeneca's in-house legal function will remain in Core. Professional fees directly attributable to AstraZeneca’s significant acquisitions and other significant business combination activity will continue be excluded from Core. Other specified items deemed not to be in the ordinary course of business will continue to be excluded from Core.
Tax on adjustments. The definition for this item has not been changed. The Group’s Reported effective tax rate, adjusted for significant one-off items embedded within that rate, is applied to all taxable Core adjustments. This approach is unchanged.
Reference document includes reconciliations between the current Reported basis, the previously disclosed Core basis and the newly defined Core basis for the full-year 2011, first nine months of 2012 and each of the quarters to Q3 2012.AZN Core Financial Measures (PDF 162kb)
NOTES TO EDITORS
This announcement shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
AstraZeneca is a global, innovation-driven biopharmaceutical business with a primary focus on the discovery, development and commercialization of prescription medicines for gastrointestinal, cardiovascular, neuroscience, respiratory and inflammation, oncology and infectious disease. AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide. For more information please visit: www.astrazeneca.com.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In order, among other things, to utilise the 'safe harbour' provisions of the US Private Securities Litigation Reform Act 1995, we are providing the following cautionary statement: The interim financial statements contain certain forward-looking statements with respect to the operations, performance and financial condition of the Group. Although we believe our expectations are based on reasonable assumptions, any forward-looking statements, by their very nature, involve risks and uncertainties and may be influenced by factors that could cause actual outcomes and results to be materially different from those predicted. The forward-looking statements reflect knowledge and information available at the date of preparation of the interim financial statements and AstraZeneca undertakes no obligation to update these forward-looking statements. We identify the forward-looking statements by using the words 'anticipates', 'believes', 'expects', 'intends' and similar expressions in such statements. Important factors that could cause actual results to differ materially from those contained in forward-looking statements, certain of which are beyond our control, include, among other things: the loss or expiration of patents, marketing exclusivity or trademarks, or the risk of failure to obtain patent protection; the risk of substantial adverse litigation/government investigation claims and insufficient insurance coverage; exchange rate fluctuations; the risk that R&D will not yield new products that achieve commercial success; the risk that strategic alliances and acquisitions will be unsuccessful; the impact of competition, price controls and price reductions; taxation risks; the risk of substantial product liability claims; the impact of any failure by third parties to supply materials or services; the risk of failure to manage a crisis; the risk of delay to new product launches; the difficulties of obtaining and maintaining regulatory approvals for products; the risk of failure to observe ongoing regulatory oversight; the risk that new products do not perform as we expect; the risk of environmental liabilities; the risks associated with conducting business in emerging markets; the risk of reputational damage; the risk of product counterfeiting; the risk of failure to successfully implement planned cost reduction measures through productivity initiatives and restructuring programmes; the risk that regulatory approval processes for biosimilars could have an adverse effect on future commercial prospects; and the impact of increasing implementation and enforcement of more stringent anti-bribery and anti-corruption legislation.