Hello friends!
This is the first part of the "Togo Look at the Pharmaceutical Factory" series, let's mainly look at the universe drug factory Novartis (Novartis) from the following 2 angles.
1. The history and evolution of the company from its inception to 2001
2. The company's 2001-2020 annual report study
Disclaimer: Although I have worked for Novartis, all information and data in this series of articles come from the publicly accessible Internet, have no affiliation with Novartis, and represent only my personal views. Any reproduction or quotation from this article requires my own permission.
Another: Don't worry, you will definitely write about Novartis in 2020 or even after, and never give up the pit~
Novartis Annual Report 2001
Togo read the annual report systematically for the first time, and it is expected to clarify the following problems:
1. What the company wants to do in 2001, how well it will be done (strategy, execution)
2. How the company's money is spent
3. The company's future development plan and the logical judgment behind it
Maybe not every question can be fully answered, let's explore it together!
Annual report structure
The 2001 annual report is divided into the following parts:
1. Overview
1.1 Breaking news from Novartis 2001
1.2 Summary of Novartis Group's financial reports
1.3 Summary of financial reports of Novartis' business units
1.4 Letter from Chairman & CEO Danial Vasella
2. Novartis business unit reports
2.1 Pharmaceuticals
2.2 Generics
2.3 Consumer Health
2.4 CIBA Vision
2.5 Animal Health
3. Corporate Social Responsibility
4. Novartis' contribution to health, safety and the environment
5. Human resources
6. Corporate Governance
7. Financial Statements
Fifty-first issue, we looked at 1. Review.
In issues 52 to 112, we looked at 5 business units of Novartis: Pharmaceuticals/Innovative Pharmaceuticals, Generics/Generics, Consumer Health/Consumer Health, CIBA Vision/CIBA Vision, and Animal Health/Animal Health.
Issues 113 to 138, we introduce 3 in turn. Corporate Social Responsibility, 4. Novartis' contribution to health, safety and the environment, 5. Human resources and 6. Corporate Governance.
Annual Report 7. financial statement
The 2001 Financial Report/Financial Statements are divided into the following 5 major sections:
- Operating and Financial Review/Operational Financial Review
- Novartis Group Consolidated Financial Statements/Novartis Group Consolidated Financial Statements
- Principal Companies/Major Companies
- Reconciliation to US GAAP/Earnings is adjusted in accordance with US GAAP rules
- Financial Statements of Novartis AG/Novartis AG
Issues 139 to 147, we studied the first part of the Operating and Financial Review/ Operational Finance Review.
Next, let's look at the second part: Novartis Group Consolidated Financial Statements/Novartis Group Consolidated Financial Statements.
7.2 Group Consolidated Financial Statements
Novartis Group Consolidated Financial Statements/Novartis Group Consolidated Financial Statements, comprising the following 4 tables:
- Consolidated Income Statements/Consolidated Income Statement
- Consolidated Balance Sheets/Consolidated Balance Sheet
- Consolidated Statement of Changes in Equity
- Consolidated Cash Flow Statements/Consolidated Cash Flow Statement
1, 2, 4 we have all seen, 3 can be counted as a supplement of 2. The Consolidated/synthesis here can be understood as a more detailed version, and the key is more Notes~
In the 148th to 153rd issues, we learned Note 1-6 and continue Note 7-9 today.
7.2.7 Earnings per share (EPS)/EPS
EPS/EPS is one of the most important indicators of public companies, and Novartis EPS/EPS/share in 2001 was 2.73 CHF.
The three figures in the chart about 2001, the Net income/net profit of 7024M CHF are already familiar to us, and the key is the number of shares issued in the second row of Weighted average number of shares outstanding/weighted average.
As we said before, the formation of a joint-stock limited liability company needs to be registered with the government and the company's Issued shares/issued shares are stated in the company's articles of association. After that, the company raises funds through the sale of shares to the outside world, and the shares that have been sold (including those issued to "insiders" such as company executives) are called Outstanding shares/issued shares. Shares that have not been sold or have been repurchased by the company after being sold are called Treeury shares/ treasury shares.
So what is this weighted average? Because Outstanding shares/issued shares may change during the year, trigger events include
- Share buybacks/share buybacks
- Retirement of existing shares/cancellation of existing shares
- Employees exercising stock options/ Employees exercise stock options
- Issuance of new shares/ Issuance of new shares
To illustrate a little,
- Share buybacks/share buybacks reduce the number of outsent shares/outgoing shares and turn them into Tresury shares/treasury shares.
- Retirement of existing shares/existing shares are cancelled, and the company needs to repurchase the shares first, then write them off, reducing the number of shares issued byoutout
- Employees exercising stock options/Employee exercise of stock options issues shares to employees from the company's Treeury shares/treasury shares, increasing the Numberstanding shares/issued shares
- Issuance of new shares/issuance of new shares is also the sale of shares from Treeasury shares/treasury shares, increasing the number of outstanding shares/issued shares
As a result, the number of Outstanding shares/outstanding shares may vary during the year. The key question is: EPS/EARNINGS per share is calculated according to the number of outstanding shares/issued shares, so which number should be used? The answer is weighted average/weighted average.
In simple terms, it is a weighted average of the number of outstanding shares/issued shares in that year according to the proportion of the number of shares issued by an External shares/external issue in that year.
For example:
A company had 100,000 Outstanding shares/issued shares in the first half of the year, and 100,000 shares were issued in the second half of the year, and the total Outstanding shares/issued shares became 200,000 shares. The proportion of the first and second half of the year was 0.5 each, so the weighted average Outstanding shares/issued shares were 100,000 * 0.5 + 200,000 * 0.5 = 150,000 shares. Net income/net profit divided by the weighted average number of shares outstanding/weighted average number of issued shares is EPS/eps per share.
In addition, there is an indicator called Diluted EPS/diluted earnings per share, which refers to the net profit divided by outgoing shares/issued shares plus all potentially diluted shares, such as convertible bonds and options, as a worst-case estimate for EPS.
When we looked at Novartis stock (see chart below), we said that there were 59,405,716 treasury shares
Reserved to secure conversion rights on bond and call options/ Reserved shares to guarantee redemption of convertible bonds and buy options, which are further divided into two parts:
- 4,503,754 shares were redeemed for convertible bonds
- 54,901,962 shares were redeemed for buy options
If all 59,405,716 shares were converted into Outstanding shares/issued shares, the total Outstanding shares/issued shares would be 2,631,079,081, and Diluted EPS/diluted earnings per share would be 2.67, not the 2.72 stated in the annual report.
At that time, we were very confused, and today we solved the case (see the red box above) - the key is how the potential of "all potentially diluted shares" is defined: according to the definition in Novartis annual report, it is calculated according to the estimated real exercise of convertible bonds, stock buy options, (employee's) stock options, rather than all theoretically possible convertible bonds and options.
EPS/EPS/diluted EPS/diluted EPS, as an important indicator of the company's earnings, should be reasonable to place in the Consolidated Income Statements/consolidated income statement
That's it, 1.Consolidated Income Statements/Consolidated Income Statement is over!
Starting with Note 8, let's move on to 2. Consolidated Balance Sheets/Consolidated Balance Sheet.
7.2.8 Tangible fixed asset movements/changes in fixed assets
This section, as the name suggests, is primarily about how Tangible fixed assets changed in 2001.
The numbers are a bit much, don't panic
First look at the first line, Novartis' Tangible fixed asset/fixed asset, divided into 4 categories:
- Land/Land
- Building/Architecture
- Machinery/Machinery
- Plant under construction and other equipment/ Factories and other equipment under construction
The bulk of these are Building/Construction and Machiny/Machinery.
Looking at the first column, the table can be divided into three major blocks:
- Cost/Cost
- Accumulated depreciation/cumulative amortization
- other
Let's take a look at each one.
Cost/cost, the cost of purchasing these fixed assets, was 17.551 B CHF as of January 1, 2001. After a year, by December 31, 2001, the total Tangible fixed asset/fixed asset cost increased to 17.869 B CHF due to consolidated changes/earnings adjustments, Additions/new acquisitions, Disposals/processing, and taking into account Tradesalation effects/exchange changes. Among them, the main activities were the new acquisition and disposal of Building/construction and Machiney/machinery.
Accumulated depreciation/accumulated amortization, i.e. accumulated amortization of these assets (in fact, the tax exemption), as of January 1, 2001, was 8.521 B CHF. After one year, by December 31, 2001, the total Accumulated depreciation/cumulative amortization increased to 8.779B due to consolidated changes/earnings adjustments, Depreciation charges/new depreciation, Depreciation on Disposals/processing, and taking into account Tradealization effects/exchange changes CHF。
Here, let's explain The Advance on Disposals/Processing a little bit. As can be seen from the table, their Accumulated depreciation/cumulative amortization is positive, what does that mean? Because disposals/processing-related fixed assets have been excluded from total cost/cost, their corresponding Accumulated depreciation/cumulative amortization should also be excluded to meet the actual amortization of assets today. But this is not to say that the previous Accumulated depreciation/cumulative amortization of these processed devices is invalid, in fact, they have been used and are now "added" back, just the accounting leveling.
At the end of 2001, the total Cost/Cost was 17.869 B CHF, minus the total Accumulated depreciation/cumulative amortization of 8.779 B CHF, and then the Impairment charge/impairment charge of 30 M CHF was subtracted, and finally the Net book value/NAV of the Tangible fixed asset/fixed asset for that year was obtained, 9060M CHF.
In addition, the company insured the fixed assets worth 21.060 B CHF and leased equipment with an additional net worth 13 M CHF (which should be the remaining lease costs in the lease contract).
Finally, link with the table we learned earlier: net operating assets/net operating assets, the total Tangible fixed asset/fixed assets are 9060M CHF, of which 1351M CHF is added.
See the blue box ~in the Tangible fixed asset Movement/Fixed Asset Movement chart
In the Cash Flow Statements/Cash Flow Statement, the Depreciation/Depreciation and Investment charge/impairment of Tangible fixed assets/fixed assets total 969M CHF.
See the red box in the Tangible fixed asset Movement/fixed asset change chart: Depreciation/Depreciation 930M CHF, Impairment charge/Impairment 30M CHF, just right~
7.2.9 Intangible asset movements/changes in intangible assets
Similarly, this section focuses on how intangible fixed assets/intangibles changed in 2001.
Novartis' Invisible fixed assets are divided into 5 broad categories:
- Goodwill/goodwill
- Product and marketing rights/Product and market rights
- Trademarks/Trademarks
- Software/Software
- Other intangibles/other intangible assets
The bulk of these are Goodwill/goodwill and Product and marketing rights/product and market equity.
The structure of the table is the same as 7.2.8, so let's not talk about it ~ Look at a few key figures: on January 1, 2001, the cost of Intangible fixed assets/intangible assets was 6.508 B CHF, and after one year, it grew to 7.990 B CHF. Its Accumulated amortization/cumulative amortization grew from 678M CHF at the beginning of the year to 1226M CHF at the end of the year.
This does not appear to include Roche transactions: see the chart below, Goodwill/goodwill in 2000 was 1595M CHF, Roche transactions were not counted in 2001, goodwill/goodwill was 320M CHF, which is very close to the 331M CHF in the table.
In addition, the 216M CHF Impulse charge/impairment charge was due to damages to Pitavastatin/Pitavastatin Marketing Rights/business interests.
At the end of 2001, the total Cost/Cost was 7.990 B CHF, minus the total Accumulated depreciation/cumulative amortization of 1.226 B CHF, and then the Impairment charge/impairment charge/impairment charge of 216 M CHF was subtracted, and finally the Net book value/NET asset value of the Implicit fixed asset/intangible asset for that year was 6548 M CHF.
Finally, let's relate to the table we learned earlier: in the Cash Flow Statements/Cash Flow Statement, the Amortization/Amortization/Amortization and Impairment charge/impairment of Intangible fixed assets total 780M CHF.
See the green box in the Intangible fixed asset/intangible asset diagram: Amortization/Amortization 564M CHF, Impairment charge/Impairment 216M CHF, just right~
That's it for today!
Next week we move on to 2. Consolidated Balance Sheets/Consolidated Balance Sheet Ha~
See you next week, friends
Color small password
Purple: Non-subject companies, non-thematic organizations, disease names, and biological terms
Red: Year, important events, highlights
Orange: The name of the drug
Sauce color: position, degree
Of course, limited to color selection, there are sometimes some small exceptions, such as CIBA and Sandoz. In addition, this system will continue to evolve and improve~