S12 Gilead Financial Analysis Project

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Transcript of S12 Gilead Financial Analysis Project

San Jose State University Spring 2012 Business 224C

Company Financial Statement Analysis ProjectPreparers

Student Names Team : The Ice Dustin Hoang Pansy Le John Rowney

Title Page X

IS

BS X

SCF

Ratios X

Segments X

X

X

Soft Copy Reviewer Names/Initials: DH, PL, JR Hard copy binder printout reviewers Names/Initials: DH, PL, JR

Company Selection - Name : Gilead Sciences, Inc. Company Stock Symbol: GILD Fiscal Year End: 2010 Analyze latest published 10K and prior year. Note any exceptions below: Years analyzed: [2010] and [2009] Year 2 [2010]$(000) Income Statement Data Horizontal Analysis Vertical Analysis

Year 1 [2009]$(000)

Difference Difference / Yr 1 Yr 2-Yr1 % change % %

Total Sales/Revenue Total Gross Profit Net Income Balance Sheet Data Goodwill Total Assets Total LiabilitiesTotal Stockholders' Equity

7,949,420 3,962,222 2,889,749

7,011,383 3,529,221 2,625,592

938,037 433,001 264,157

13.4% 12.3% 10.1%

100.0% 49.8% 73.8%

100.0% 50.3% 74.4%

532,669 11,592,630 5,470,793 6,121,837 11,592,630

462,558

70,111

15.2% 19.5% 71.3% -5.9% 19.5% 100% 47.2% 52.8% 100% 100% 32.9% 67.1% 100%

9,698,559 1,894,071 3,193,401 2,277,392 6,505,158 -383,321 9,698,559 1,894,071

Total Liabilities + Stockholders' Equity

Title of Soft Copy Files: S12 Gilead Financial Statement Analysis.xls

1 Title Page

Gilead Sciences, Inc. Income Statement FYE Dec 31, Income Statement Analysis Format Product: Sales Cost of goods sold Gross Profit Other Revenues and expenses Other Revenues Other Expenses

2010 $(000)

Horizontal Analysis 2009 Difference % $(000) $(000)

Vertical Analysis Footnote % of assets % of assets Reference 2010 2009

7,389,921 6,469,311 1,869,876 1,595,558 5,520,045 4,873,753

920,610 274,318 646,292

14.2% 17.2% 13.3%

100.0% 25.3% 74.7%

100.0% 24.7% 75.3%

1 2 2

559,499 542,072 2,117,322 1,886,604

17,427 230,718

3.2% 12.2%

7.6% 28.7%

8.4% 29.2%

3 4

Total Sales Total Cost and expenses Total Gross Profit Margin

7,949,420 7,011,383 3,987,198 3,482,162 3,962,222 3,529,221

938,037 505,036 433,001 384,327 17,890 -39,339 411,592 147,435 264,157 1,345 0 -48,544

13.4% 14.5% 12.3% 10.9% 42.2% 56.5% 11.8% 16.8% 10.1% 13.2% 16.5% -5.4%

100.0% 50.2% 49.8% 100.0% 1.5% -2.8% 100.0% 26.2% 73.8% 0.3% n/a n/a

100.0% 49.7% 50.3% 100.0% 1.2% -2.0% 99.2% 24.8% 74.4% 0.3% n/a n/a

1,3 2,3,4 2

Income from operations 3,913,548 3,529,221 Interest and other income , net 60,287 42,397 Interest expense -108,961 -69,622 Income before provision for income taxes 3,913,548 3,501,956 provision for income taxes 1,023,799 876,364 Net income 2,889,749 2,625,592 net loss attributable to Gilead 11,508 10,163 Net income per share attributable to Gilead common stockholders- basic $3.39 $2.91 Shares used in per share calculation- basic 856,060 904,604

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2 IS Hor (Vert) Analysis Format

Footnote Reference

Income Statement Analysis Comments Double digit sales increase of 14% is a good trend. This is "due primarily to an overall increase in [the] antiviral product sales driven by the strong growth of Atripla sales (6%) and the continued growth of Truvada sales (10%). The growth of [the] cardiovascular products Letairis and Ranexa, also contributed to the overall increase in product sales."(MD&A pg. 63) The cost of goods sold increased at a faster rate then sales, generally not a good trend. But the product gross margin of 75% was consistent with [the] product gross margin for 2009 (MD&A pg. 64). In addition, foreign currency exchange had an unfavorable impact of $93.7 million (MD&A pg. 62). The gross profit increased at a slower rate than sales this is due to a more rapid increase in cost of good sold, this is not a good trend. The other revenues consist primarily of royalty revenues. The "most significant source of royalty revenues was from the sales of Tamiflu by Roche" (MD&A pg. 64)." Other royalty revenues, which include royalties from GSK for Hespera, royalties from Astellas US LLC for Lexiscan and royalties from Japan Tobacco for Truvada contributed to the increase in total royalty revenues" (MD&A pg. 64). There were three main contributors to the other expenses: restructuring expenses, Research and Development expenses and Selling, General and Administrative expense. "During the second quarter of 2010, [it was] approved and communicated for a plan to close [the] research operations in Durham, North Carolina and consolidate [the] liver disease research activities in Foster City, California. Because of this plan expenses were made due to employee severance and facilities-related expenses (MD&A pg. 65). "R&D expenses consisted primarily of personnel costs, including salaries, benefits and stockbased compensation, clinical studies performed by contract research organizations, materials and supplies, licenses and fees, milestone payments under collaboration arrangements and overhead allocations consisting of various support and facilities-related costs (MD&A pg. 65). R&D expenses increased 14% from 2009 "due primarily to impairment charges of $136 million that [were] recorded related to IPR&D assets acquired from CV Therapeutics, $23.5 million of Clinical studies expenses... and $16.1 million of compensation and benefits expense. The majority of the impairment charges are related to [the] GS 9667 program, a product candidate that was in Phase 1 clinical studies for the treatment of diabetes and hypertriglycerdemia, which was terminated in the forth quarter of 2010 due to unfavorable results from the pharmacokinetics and pharmacodynamics tests that demonstrated limited effectiveness of the compound in patients" (MD&A pg. 65). The SG&A expense increased 10% which was "due primarily to increased compensation and benefits expenses of $36.3 million as a result of higher headcount to support [the] expanding commercial activities, increased contract and professional services expenses of $27.3 million driven primarily by [the] expanding sales and marketing activities and $18.1 million related to facilities and equipment expenses" (MD&A pg. 66). The increase in interest and other income, net was "due primarily to decreased costs related to our hedging activities" (MD&A pg. 66). The increase in interest expense was "due primarily to the issuance of [the] convertible senior notes for $2.46 billion, net of issuance costs" (MD&A pg. 66). "The 2010 effective tax rate of 26.2% differed from the U.S. federal statutory rate of 35% due primarily to tax credits and certain operating earnings from non- U.S. subsidiaries that are considered indefinitely invested outside the United States, partially offset by state taxes" (MD&A pg. 66). Net income increased due to a lower increase in expenses, this offsets the higher growth in cost of goods sold relative to the growth in sales.

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3 IS Analysis Comments

Gilead Sciences, Inc. Balance Sheet Dec 31, Assets Cash and Cash equivalents Short term marketable securities Accounts receivable inventories Deferred tax assets Prepaid taxes Prepaid expenses other current assets Total Current Assets Property, plant and equipment Noncurrent portion of prepaid royalties Noncurrent deferred tax assets Long-term marketable securities Intangible assets other noncurrent assets Total Assets Liabilities Accounts Payable Accrued government rebates Accrued compensation and employee benefits Income taxes payable other accrued liabilities Deferred revenues Current portion of convertible senior notes, net and other long-term obligations Total Current Liabilities Long-term deferred revenues Convertible senior notes, net Long-term income taxes payable Other long-term obligations Total Liabilities Shareholder's Equity Common Stock Additional paid-in capital Accumulated other comprehensive income (loss) Retained Earnings

2010 $(000) 907,879 1,190,789 1,621,966 1,203,809 279,339 320,424 67,632 116,244 5,708,082 701,235 203,790 153,379 3,219,403 1,425,592 181,149 11,592,630

Horizontal Analysis 2009 Difference % $(000) $(000) 1,272,958 -365,079 384,017 806,772 1,389,534 232,432 1,051,771 152,038 295,080 -15,741 274,196 46,228 78,111 -10,479 66,891 49,353 4,812,558 895,524 699,970 1,265 226,250 -22,460 101,498 51,881 2,247,871 971,532 1,524,777 -99,185 85,635 95,514 9,698,559 1,894,071 -28.7% 210.1% 16.7% 14.5% -5.3% 16.9% -13.4% 73.8% 18.6% 0.2% -9.9% 51.1% 43.2% -6.5% 111.5% 19.5%

Vertical Analysis Footnote % of assets % of assets Reference 2010 2009 8% 10.3% 14.0% 10.4% 2.4% 2.8% 0.6% 1.0% 49.2% 6.0% 1.8% 1.3% 27.8% 12.3% 1.6% 100.0% 13.1% 4.0% 14.3% 10.8% 3.0% 2.8% 0.8% 0.7% 49.6% 7.2% 2.3% 1.0% 23.2% 15.7% 0.9% 100.0% 4 4 4 4

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1, 4

803,025 325,018 147,632 1,862 437,893 103,175

810,544 248,660 132,481 167,623 384,015 122,721

-7,519 76,358 15,151 -165,761 53,878 -19,546

-0.9% 30.7% 11.4% -98.9% 14.0% -15.9%

6.9% 2.8% 1.3% 0.0% 3.8% 0.9% 5.6% 21.3% 0.3% 24.5% 0.9% 0.2% 47.2%

8.4% 2.6% 1.4% 1.7% 4.0% 1.3% 0.1% 19.3% 0.4% 11.9% 0.9% 0.4% 32.9% 3 2, 3 6 3, 6 6 3, 6 1

646,345 5,587 640,758 11468.7% 2,464,950 1,871,631 593,319 31.7% 32,844 43,026 -10,182 -23.7% 2,838,573 1,155,443 1,683,130 145.7% 107,025 87,383 19,642 22.5% 27,401 35,918 -8,517 -23.7% 5,470,793 3,193,401 2,277,392 71.3%

802 900 4,648,286 4,376,651 30,911 -5,758 1,183,730 1,995,272

-98 271,635 36,669 -811,542

-10.9% 6.2% -636.8% -40.7%

0.01% 40.1% 0.3% 10.2%

0.01% 45.1% -0.1% 20.6%

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