21. ACQUISITION OF SUBSIDIARY UNDERTAKINGS

On 1 January 1997 the Company acquired the entire issued share capital of Clark Laboratories, Inc. for a total consideration of IR£5,312,951 (US$7,550,016). The consideration was satisfied by cash and the issue of shares by the Company to the common stock holders of Clark Laboratories, Inc. Acquisition expenses amounted to IR£76,039 (US$108,127). On 1 July 1997 the Company acquired the entire issued share capital of Centocor UK Holdings Limited for a total consideration of IR£4,129,403 (US$5,872,011). The consideration was satisfied by cash and deferred consideration. Acquisition expenses amounted to IR£76,212 (US$108,373).

The subsidiary undertakings acquired during the year contributed IR£374,491 (US$532,526) to the Company's net operating cash flows, paid IR£111,193 (US$158,116) in respect of net returns on investment and servicing of finance, utilised IR£451,560 (US$642,118) for capital expenditure and financial investment, and had inflows of IR£179,117 (US$254,704) from increases in long term debt

Goodwill written off during the year in respect of acquisitions of subsidiary undertakings amounted to IR£8,612,248(US$12,246,617) and comprises:

The book value of the assets and liabilities shown above have been taken from the management accounts of the acquired businesses at the date of acquisition.

The fair value adjustments above principally arise for the following reasons:

A. Revaluation representing the restatement of freehold property acquired to estimated market value.

B. Write down of capitalised intangibles following assessment of their realisable value.

C. Write down of stock following an assessment of the realisable value of finished goods, work in progress and raw materials and reflection of group policy in respect of recognition of sales income.

D. Write down of fixed assets following a physical verification exercise and assessment of the realisable value of certain assets.

E. Write down of stock following an assessment of the realisable value of finished goods, work in progress and raw materials.

F. Write down of debtors following an assessment of the estimated recoverable value.

G. Recognition of unprovided amounts in respect of onerous contracts and other liabilities.

22. PRE-ACQUISITION PROFIT AND LOSS DETAILS PERTAINING TO CERTAIN ACQUISITIONS

The unaudited US$ and Stg£ profit and loss details have been translated at the year end 1997 at the US dollar and sterling rates of US$1.4245 to IR£1 and Stg£0.89 to IR£1 respectively. The financial information has been prepared in accordance with generally accepted accounting practices and under the under the accounting policies of the companies prior to acquisition.

The profit attributable to ordinary shareholders for the pre-acquisition period is the same as the total recognised gains and losses for that period.

The profit attributable to ordinary shareholders for the pre-acquisition period is the same as the total recognised gains and losses for that period.

23. SUPPLEMENTARY CASH FLOW INFORMATION

(a) Purchase of tangible fixed assets

(b) Management of liquid resources

Cash flows from the use of liquid resources have primarily arisen from the sale of equity investments.

24. COMMITMENTS AND CONTINGENCIES

(a) Capital Commitments

The capital commitments of the group were as follows

(b) Operating lease commitments payable during the next twelve months amount to IR£281,831 (US$400,764) payable on the lease of buildings at Dublin, Ireland and at Guildford, United Kingdom which expire in more than five years.

(c) During 1995 the Company entered into a licence agreement which provided for the back payment of royalties on sales of the Company's pregnancy test. The agreement also provided for the payment of royalties on future sales of certain products of the Company.

(d) Under agreements between group companies and Forbairt, grants amounting to IR£505,000 (US$718,110) have been received or are receivable which may be revoked, cancelled or abated in certain circumstances.

(e) Under agreements between a group company and the Irish Trade Board, a loan amounting to IR£131,782 (US$187,394) is payable which may be required to be repayed in full in certain circumstances.

(f) The Company has guaranteed the bank borrowings of subsidiary undertakings up to the amount of IR£2,688,720 (US$3,823,360).

(g) Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of certain of its subsidiary undertakings in the Republic of Ireland for the financial year to 31 December, 1997 and as a result such subsidiary undertakings have been exempted from the filing provisions of Section 7, Companies (Amendment) Act, 1986.

25. PENSION SCHEME

The Group operates a defined contribution pension scheme for its full-time employees. The benefits under this scheme are financed by Group and employee contributions. Total contributions made by the Group in the financial year and charged against income amounted to IR£181,704 (US$258,383) - December 31, 1996 IR£38,187 (US$54,302).

26. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the Republic of Ireland ("Irish GAAP"), which differ in certain significant respects from accounting principles generally accepted in the United States ("US GAAP"). These differences relate principally to the following items and the necessary adjustments are shown in the table set out below;

(1) Stock Compensation:

In contrast to Irish GAAP, US GAAP requires that the grant of share options exercisable at prices per share less than the fair market value of the shares at the time of the grant of the options be accounted for as compensation expense to be recognised over the related vesting period.

(2) Goodwill:

Under Irish GAAP, goodwill may be either written off immediately on completion of the acquisition against shareholders' equity, or capitalised in the balance sheet and amortised through the income statement on a systematic basis over its useful economic life. Under US GAAP, accounting for goodwill as an offset against shareholders' equity is not permitted; rather, goodwill must be amortised over the period of its expected useful life, subject to a maximum write off period of 40 years, through the income statement. For the purposes of the reconciliation a useful life of 10 years has been adopted for goodwill.

(3) Cash Flow Statements:

The consolidated statement of cash flows prepared under Irish GAAP presents substantially the same information as that required under US GAAP by SFAS 95 "Statement of Cash Flows". This standard differs, however, with regard to the classification of items within the statements and as regards the definition of cash. Under US GAAP, cash equivalents would not include bank overdrafts. The movements on such bank overdrafts are required to be included in financing activities under SFAS 95. Under US GAAP short term investments with a maturity of three months or less at the date of acquisition are included in cash equivalents. Under Irish GAAP, movements in short term investments are classified as management of liquid resources.

Under Irish GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, equity dividends paid, management of liquid resources and financing. US GAAP, however, requires only three categories of cash flow activity to be reported: operating, investing and financing. Cash flows from taxation and returns on investments and servicing of finance shown under Irish GAAP would, with the exception of preference dividends paid, be included as operating activities under US GAAP. The payment of dividends would be included as a financing activity under US GAAP. Under US GAAP, capitalised interest is treated as a part of the cost of the asset to which it relates and is thus included as part of investing cash flows; under Irish GAAP all interest is treated as part of returns on investments and servicing of finance.

(4) Share Capital Not Paid:

Under Irish GAAP, unpaid share capital is classified as a receivable under current assets. Under US GAAP, share capital receivable should be reported as a reduction to Shareholders' Equity.

(5) Recognition of Escrow Income:

Under Irish GAAP, the Company has recognised as revenue amounts due to be released from an Escrow account in 1997. Under US GAAP such amounts are not recognisable until received.

27. GROUP UNDERTAKINGS

NEXT    BACK TO ANNUAL REPORT