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GlaxoSmithKline PLC (GSK) | Analysis of Equity Method Investment

Selected Financial Data

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GlaxoSmithKline PLC's selected financial data

USD $ in millions, translated from GBP £

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
Share of after tax profits of associates and joint ventures
Investments in associates
   
ROA (equity method investments only)1 % % % % %

Source: Based on data from GlaxoSmithKline PLC Annual Reports

2010 Calculations

1 ROA (equity method investments only) = 100 × Share of after tax profits of associates and joint ventures ÷ Investments in associates
= 100 × ÷ = %

Item Description The company
Share of after tax profits of associates and joint ventures This item represents the entity's proportionate share for the period of the net income (loss) of its investee (such as unconsolidated subsidiaries and joint ventures) to which the equity method of accounting is applied. Such amount typically reflects adjustments similar to those made in preparing consolidated statements, including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between cost and underlying equity in net assets of the investee at the date of investment. GlaxoSmithKline PLC's share of after tax profits of associates and joint ventures increased from 2008 to 2009 and from 2009 to 2010.
Investments in associates This item represents the carrying amount on the entity's balance sheet of its investment in common stock of an equity method investee. This is not an indicator of the fair value of the investment, rather it is the initial cost adjusted for the entity's share of earnings and losses of the investee, adjusted for any distributions (dividends) and other than temporary impairment losses recognized. GlaxoSmithKline PLC's investments in associates increased from 2008 to 2009 and from 2009 to 2010.
ROA (equity method investments only) A profitability ratio calculated as share of after tax profits of associates and joint ventures divided by investments in associates. GlaxoSmithKline PLC's ROA of equity method investments deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.

Summarized Financial Information

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Summarized financial information for GlaxoSmithKline PLC's affiliates, subsidiaries, associates, and joint ventures

USD $ in millions, translated from GBP £

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
Total assets
Total liabilities
Equity
Total liabilities and equity
Total turnover
Total profit

Source: Based on data from GlaxoSmithKline PLC Annual Reports

Item Description The company
Equity This item represents the disclosure of summarized financial information for unconsolidated subsidiaries and 50 percent-or-less owned entities accounted for using the equity method of accounting. If investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material in relation to the financial position or results of operations of an investor, it may be necessary to present summarized information as to assets, liabilities, and results of operations of the investee, or group of investments for which combined disclosure is appropriate, either by individual financial statement caption or in groups, as appropriate. Such summarized financial information may include total equity or capital (as applicable). Equity of GlaxoSmithKline PLC's affiliates, subsidiaries, associates, and joint ventures increased from 2008 to 2009 and from 2009 to 2010.
Total profit This item represents the disclosure of summarized financial information for unconsolidated subsidiaries and 50 percent-or-less owned entities accounted for using the equity method of accounting. If investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material in relation to the financial position or results of operations of an investor, it may be necessary to present summarized information as to assets of the investee, or group of investments for which combined disclosure is appropriate, either by individual financial statement caption or in groups, as appropriate. Such summarized financial information may, at a minimum, include net income or loss. Total profit of GlaxoSmithKline PLC's affiliates, subsidiaries, associates, and joint ventures increased from 2008 to 2009 and from 2009 to 2010.

Adjustments to Financial Data: Proportionate Consolidation

Recognition of GlaxoSmithKline PLC's proportionate share of affiliates, subsidiaries, associates, and joint ventures assets and liabilities instead of net equity.

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GlaxoSmithKline PLC, adjustments to financial data

USD $ in millions, translated from GBP £

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
Weighted average percentage interest in affiliates % % % % %
  Adjustment to Total Assets
Total assets (as reported)
Less: Investments in associates (adjustment)
Add: Total assets of affiliates (adjustment)
Total assets (adjusted)
  Adjustment to Total Liabilities
Total liabilities (as reported)
Add: Total liabilities of affiliates (adjustment)
Total liabilities (adjusted)
  Adjustment to Turnover
Turnover (as reported)
Add: Total turnover of affiliates (adjustment)
Turnover (adjusted)

Adjusted Ratios: Proportionate Consolidation (Summary)

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GlaxoSmithKline PLC, adjusted ratios

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Net Profit Margin
Reported net profit margin % % % % %
Adjusted net profit margin % % % % %
  Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
  Financial Leverage
Reported financial leverage
Adjusted financial leverage
  Return on Assets (ROA)
Reported ROA % % % % %
Adjusted ROA % % % % %
Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as net income divided by adjusted revenue. GlaxoSmithKline PLC's adjusted net profit margin improved from 2008 to 2009 but then deteriorated significantly from 2009 to 2010.
Adjusted total asset turnover An activity ratio calculated as adjusted total revenue divided by adjusted total assets. GlaxoSmithKline PLC's adjusted total asset turnover improved from 2008 to 2009 and from 2009 to 2010.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 GlaxoSmithKline PLC's adjusted financial leverage declined from 2008 to 2009 but then increased from 2009 to 2010 not reaching 2008 level.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. GlaxoSmithKline PLC's adjusted ROA improved from 2008 to 2009 but then deteriorated significantly from 2009 to 2010.

Adjusted Net Profit Margin

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Profit attributable to shareholders (USD $ in millions, translated from GBP £)
Turnover (USD $ in millions, translated from GBP £)
   
Net profit margin1 % % % % %
  Adjusted: from Equity Method to Proportionate Consolidation
Profit attributable to shareholders (USD $ in millions, translated from GBP £)
Adjusted turnover (USD $ in millions, translated from GBP £)
   
Adjusted net profit margin2 % % % % %

2010 Calculations

1 Net profit margin = 100 × Profit attributable to shareholders ÷ Turnover
= 100 × ÷ = %

2 Adjusted net profit margin = 100 × Profit attributable to shareholders ÷ Adjusted turnover
= 100 × ÷ = %

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as net income divided by adjusted revenue. GlaxoSmithKline PLC's adjusted net profit margin improved from 2008 to 2009 but then deteriorated significantly from 2009 to 2010.

Adjusted Total Asset Turnover

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Turnover (USD $ in millions, translated from GBP £)
Total assets (USD $ in millions, translated from GBP £)
   
Total asset turnover1
  Adjusted: from Equity Method to Proportionate Consolidation
Adjusted turnover (USD $ in millions, translated from GBP £)
Adjusted total assets (USD $ in millions, translated from GBP £)
   
Adjusted total asset turnover2

2010 Calculations

1 Total asset turnover = Turnover ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Adjusted turnover ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as adjusted total revenue divided by adjusted total assets. GlaxoSmithKline PLC's adjusted total asset turnover improved from 2008 to 2009 and from 2009 to 2010.

Adjusted Financial Leverage

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Total assets (USD $ in millions, translated from GBP £)
Shareholders’ equity (USD $ in millions, translated from GBP £)
   
Financial leverage1
  Adjusted: from Equity Method to Proportionate Consolidation
Adjusted total assets (USD $ in millions, translated from GBP £)
Shareholders’ equity (USD $ in millions, translated from GBP £)
   
Adjusted financial leverage2

2010 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Shareholders’ equity
= ÷ =

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 GlaxoSmithKline PLC's adjusted financial leverage declined from 2008 to 2009 but then increased from 2009 to 2010 not reaching 2008 level.

Adjusted Return On Assets (ROA)

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Profit attributable to shareholders (USD $ in millions, translated from GBP £)
Total assets (USD $ in millions, translated from GBP £)
   
ROA1 % % % % %
  Adjusted: from Equity Method to Proportionate Consolidation
Profit attributable to shareholders (USD $ in millions, translated from GBP £)
Adjusted total assets (USD $ in millions, translated from GBP £)
   
Adjusted ROA2 % % % % %

1 ROA = 100 × Profit attributable to shareholders ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Profit attributable to shareholders ÷ Adjusted total assets
= 100 × ÷ = %

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. GlaxoSmithKline PLC's adjusted ROA improved from 2008 to 2009 but then deteriorated significantly from 2009 to 2010.

February 8, 2012

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