The Gallaher Group PLC -Corporate Responsibility Reporting - Essay Example

CORPORATE RESPONSIBILITY REPORTING INTRODUCTION: Each company is enjoined to produce a periodic corporate responsibility report that will be given to affected parties. It is a very useful tool in determining if the company places importance on the its responsibility to comply with all political, economic, social and technological rules and regulations for the betterment of all affected parties. BODY: Choose a company which interest you and is likely to have a corporate social responsibility strategy. Locate and read any of their most recent CSR, environment and social/community reports. Produce a report to answer the following questions: The Gallaher Group PLC states in its report as follows: "Corporate Responsibility Report Last year, we published our first 'Corporate Responsibility Review', describing our principles, policies and practices over the years. One year on, we are commencing an annual process of reporting. This report examines our activities during 2004 and highlights the steps we intend to take in the future. We also provide an update on how we are performing against targets set last year; how we are establishing new performance indicators, and explaining further what we are doing, as we strive for continual improvement in corporate responsibility. Tobacco, by its very nature, is a controversial business sector, and it is important that we continue to listen to the opinions of others and communicate with clarity. One of the areas that we recognise is of key importance is communication and engagement with all of those who interact with our business. Feedback on our approach to corporate responsibility confirms that this is an area where we should continue to focus attention and, in recognition of this, dialogue is a key theme throughout this report. I hope that you will find this report informative. We believe that good corporate responsibility is the hallmark of a successful organisation, and we very much welcome your views, (yourviews@gallaherltd.com)". (http://www.gallaher-group.com/corporate/crr.asp) What sector does the company appear under GALLAHER GROUP PLC' main purpose is to increase it cash inflow from its big clients (Tobacco sector) in the countries like Austria, Republic of Ireland, Sweden and the UK and capitalize its operations in international growth strategy (Thompson, 1999) through export opportunities such as investing money in acquiring other companies and also entering into joint ventures and business tie ups with businesses all over Europe, the CIS, Africa and the emerging Asian economic region. In the UK, Gallaher Group PLC wants to increase its market shares(Irwin, 2000) in the growing value cigarette sector within the United Kingdom by continuing increasing its leading positions in the premium cigarette and cigar market segment. Gallaher Group PLC also aims to attain its goal of equalizing its sales figure with its profit percentages gained on these volume sales. Gallaher Group PLC also plains to vigorously maintain its top market positions in Austria and the Republic of Ireland by continuing its management strategy of equalizing its sales volume with profit percentages. Gallaher will implement its plans to enter into uncharted territories especially in Central and Eastern Europe. Gallaher Group PLC is presently aiming to increase geometrically its regional market portion(Chisolm, 1981) in the Commonwealth of the Independent States while it is doubling its efforts to increase the proportion of its brands(Goldman, 1997) marketed in the higher priced and intermediate markets in this region. Gallaher Group PLC plans to also increase its market positions(Slavin, 1989) in Poland, the Baltics, Africa and the Asia Pacific region. Alongside with this plan, Gallaher Group PLC is currently fighting to maintain it present market share in Sweden's cigarette market by also implementing it company policy of balancing its volume sales and profit ratios. ( Aug, 2006) What macro PEST(E) factors appear to be shaping the business environment for that sector/company POLITICAL : Gallaher Group PLC is committed to be a good corporate citizen by paying correctly Its taxes and following government rules by improving the safety of its cigarette and related Products. The company is also implying ethics. It has complied with current government regulations in its over eighty country market segments across the world. It political corporate strategy is centered on integrity and ethics, pride and passion, continuous improvement, performance and working together. Its key political statement is to invest in its health and safety programs geared towards keeping their client's concerns and obeying government statutes, regulations and legal rules in all its country locations. It continues to listen and answer to the government's and the people's comments, criticisms and suggestions through continuous research and development fundings. The company will not spare a single pound in its commitment to its policy of "Nothing is more important than behaving responsibility and to the highest standards of ethics in all we do. No financial objective, no sales target, no effort to outdo the competition outweighs this commitment". All its cigarette packs carry the message "FOR ADULTS ONLY" in accordance with government regulations. The company also supports government regulations that it will not advertise and promote its products and exert efforts to prevent minors from acquiring their tobacco products. ECONOMIC: It continues to increase its sales in all its markets in over eighty countries by implementing marketing strategies that would increase its volume sales without violating government rules and regulations. Its major aim is to defend its current top market positions in all its major markets and continue to increase its market shares in new country markets that it has already started operations. It has implemented in the current year its plans to enter new markets in the tobacco industry. It has taken cared for its employees in over eighty countries. Communication lines between management and employees have been kept open keeping in mind the employees' welfare. Collective bargaining in the United Kingdom and other countries have been enforced with seventy six percent of its United Kingdom employees signing the collective bargaining agreement. Each employee's annual work evaluation and promotion is non discriminatory in accordance with laws of the United Kingdom and other countries. SOCIAL: The company has exerted extra efforts to prevent he minors from buying cigarettes. The company has been concentrating its sales efforts on the adults while at the same time it also places in its advertisements the sign " SMOKING IS DANGEROUS TO YOUR HEALTH". In some countries, customers have to show their Identification Cards indicating that they of legal age to buy the cigarette products. The company believes that the smokers also have the right to exercise their freedom to smoke in certain "smoking areas" in public places just as the non smokers have the right not to inhale the cigarette smoke coming from smokers and this is upheld by most governments. Gallaher Group PLC states that it "continues to listen to the opinions of others and communicate with clarity. One of the areas that we recognise is of key importance is communication and engagement with all of those who interact with our business. Feedback on our approach to corporate responsibility confirms that this is an area where we should continue to focus attention and, in recognition of this, dialogue is a key theme throughout this report" TECHNOLOGICAL: Gallaher Group PLC spends large amounts of cash in its research and development department in order to continuously improve the quality, safety and composition of each cigarette product. Using the table in reader CH6 as a template provide a short discussion of the key stakeholders environmental interests for that company. STAKEHOLDERS: Stockholders: The company has been continually pleasing its stockholders by keeping track with its number one priority of increasing the sales volume and also increase the profit margin ratio. According to (http://www.google.com/financecid=660638) Gallaher Group PLC generated total revenue of $8,214,000,000 for the year 2005 and generated net income for the same year 2005 of $300,000,000. (Lerda, 2002) Customers: The company's implementation of its research and development programs for many years have improved the quality and safety of its cigarette products. The company has been marketing its products only to the adult market segments. Creditors and Suppliers: The creditors and suppliers have been paid on time based on the balance sheet the accounts payable have increased from $996,000,000 in the year 2004 to the higher $1,032,000 in the year 2005. Creditors will increase their maximum loan credit limit if the company pays its debts on time.(Anderson, 2000) Employees: The employees have been well taken cared of by the company based on the above data discussed in the P E S T macro analysis specifically the economic and social issues. Community: The community will be directly affected by the company's massive billboard, radio print and television advertisements because smoking is a health hazard. The Youth must not be enticed to make smoking a status symbol in exchange for their health safetiness. Government: The government is interested to know if rules and regulations in relation to the selling of cigarettes because of smoking's health concerns. Using your own judgement - based on the available evidence - rate the performance of the company on the itemised criteria on a scale of 1-4 where 1=basic, 2=average, 3=good, 4=excellent. The company is rated excellent because, based on the CORPORATE RESPONSIBILITY REPORT, it has been exerting all efforts to comply will all government regulations in all its eighty country market segments. It is also rated excellent because it is trying its best efforts to prevent minors from buying cigarettes by requiring them to present their identification cards to show that that they are of legal age to buy cigarettes. The company has also place in its advertisements remarks such as FOR ADULTS ONLY and also spend large sums of money on its research and development projects to improve the quality and health safety of its smoking products. Its keeping the communication line with its customers and employees by having a suggestion box (yourviews@gallaherltd.com) so everyone have give their comments, suggestions and complaints. It has also financially taken care of business transactions as shown by the income statement and balance sheet in the abstract below. Comment on the factors which you think have led the company to achieve the rating score. The factors are Political, Economic, Social and Technological macro efforts of the company and the company that gives Gallaher Group PLC an excellent score. The company has put all its resources like the employees and cash flows to fulfill its PEST goals in the earliest possible time and in quality time also. Describe the overall approach of the company in strategic terms - is the approach to CSR risk based, competitive based, both neither The company is concentrating its over all strategy on the competition and also risk based. The company is trying its best to maintain its well entrenched top current position many major world markets where it had already placed a foothold for the past many years and to at the same time also increase its market share in investing in new markets in its continuous drive to cover the entire planet. It is also risked based because if the company products will be rejected or if the business will not prosper in its markets, then the company will loss money and the stockholders will then divest their money and funnel them to other money making companies. What more could/should the company do/being doing under CSR in your opinion. If you were the CSR manager for the company what would you be recommending. The company will have to continue its research and development programs in order to continue improving the quality and the safety of its products. The company must also not spare money in its drive to open up its lines to customers, stockholders, suppliers and especially its most important assets, the employees, because they are the major contributors for the company to generate increases in volume sales and increases in margin ratios. The company should also buy insurance so that if any customer in any part of the world will file a claim for injuries caused by smoking the Gallaher Group PLC cigarette products, the company will just sit back and relax because the insurance companies will pay for the health costs. What factors might act as a barrier to the adoption to the actions you recommend Money is the major barrier to the implementation of such plans above. The company can plan and plan but if they company does not have the money to pay for the plans then the plans will just be plans. The major aim of the company is to generate volume sales and this runs against the barrier of health and safety rules and statutes that must be followed such as it is against the law to sell cigarettes to minors and smokers are only allowed to smoke in smoking zones in public places. The no smoking zones are designated to be used by non smoking citizens who have the right not to inhale the cancer and health danger causing smoke coming from cigarettes. Other factors are the voices of the stockholders and board of directors. The stockholders and the board of directors may not approve of the company's plan to spend more money than necessary on research and development projects as well as venturing into the plan to insure the smoking public against health claims caused by smoking the Gallaher Group PLC cigarettes. CONCLUSION: The company has been on overdrive keeping everyone of the stakeholders happy because it has fast tracked its Political, Economic, Social and Technological programs. REFERENCES: Corporate Responsibility Report (http://www.gallaher-group.com/corporate/2005_cr/2005_crr_2.pdf) Gallaher Group PLC Income Statement (http://www.google.com/financecid=660638) Gallaher Group PLC Balance Sheet (http://www.google.com/financefstype=bi&cid=660638) Slavin, S., Economics, R. Irwin Press, London, 1989 Chisolm, R., McCarty, M., Principles of Economics, Scott, Foresman Press, London, 1981 Thompson, A., Strickland, A., Strategic Management, McGraw-Hill, 1999 Irwin, D., On Target - Achieving Best Business Performance, Thompson Press, U.K., 2000 Goldman, M., Revolution and Change in Central and Eastern Europe: Political, Economic, and Social Challenges, NY, 1997 Lerda, V., Which "Global Village"Societies, Cultures and Political-Economic Systems in a Euro-Atlantic Perspective, Praeger, Westport, CT,USA. 2002 Anderson et al., The Global Course of the Information Revolution: Political, Economic, and Social Consequences, Rand, Santa Monica, CA, USA, 2000 APPENDIX: EXHIBIT A Gallaher Group PLC Income Statement (http://www.google.com/financecid=660638) Gallaher Group Plc (ADR) ( NYSE:GLH ) Overview| Income Statement| Balance Sheet| Cash Flow View: QuarterlyData| AnnualData In Millions of GBP (except for per share items) 6 months Ending 2006-06-30 6 months Ending 2005-12-31 6 months Ending 2005-06-30 6 months Ending 2004-12-31 6 months Ending 2004-06-30 Revenue 4,028.00 4,268.00 3,946.00 4,161.00 3,954.00 Other Revenue, Total - - - - - Total Revenue 4,028.00 4,268.00 3,946.00 4,161.00 3,954.00 Cost of Revenue, Total 3,490.00 3,683.00 3,438.00 3,617.00 3,447.00 Gross Profit 538.00 585.00 508.00 544.00 507.00 Selling/General/Admin. Expenses, Total 177.00 179.00 161.00 166.00 155.00 Research & Development - - - - - Depreciation/Amortization - - - - - Interest Expense(Income) - Net Operating -13.00 -10.00 -7.00 -10.00 -9.00 Unusual Expense (Income) - - - - - Other Operating Expenses, Total 67.00 76.00 78.00 64.00 67.00 Total Operating Expense 3,721.00 3,928.00 3,670.00 3,837.00 3,660.00 Operating Income 307.00 340.00 276.00 324.00 294.00 Interest Income(Expense), Net Non-Operating -48.00 -49.00 -51.00 -55.00 -59.00 Gain (Loss) on Sale of Assets - - - - - Other, Net - - - - - Income Before Tax 259.00 291.00 225.00 269.00 235.00 Income After Tax 187.00 212.00 160.00 193.00 169.00 Minority Interest -2.00 -1.00 -2.00 -2.00 -2.00 Equity In Affiliates - - - - - Net Income Before Extra. Items 155.00 134.00 166.00 191.00 167.00 Accounting Change - - - - - Discontinued Operations - - - - - Extraordinary Item - - - - - Net Income 155.00 134.00 166.00 191.00 167.00 Preferred Dividends - - - - - Income Available to Common Excl. Extra Items 155.00 134.00 166.00 191.00 167.00 Income Available to Common Incl. Extra Items 155.00 134.00 166.00 191.00 167.00 Basic Weighted Average Shares - - - - - Basic EPS Excluding Extraordinary Items - - - - - Basic EPS Including Extraordinary Items - - - - - Dilution Adjustment - 0.00 - 0.00 0.00 Diluted Weighted Average Shares 655.30 655.10 654.70 653.80 653.20 Diluted EPS Excluding Extraordinary Items 0.24 0.20 0.25 0.29 0.26 Diluted EPS Including Extraordinary Items - - - - - Dividends per Share - Common Stock Primary Issue 0.11 0.23 0.11 0.21 0.10 Gross Dividends - Common Stock - - - - - Net Income after Stock Based Comp. Expense - - - - - Basic EPS after Stock Based Comp. Expsense - - - - - Diluted EPS after Stock Based Comp. Expense - - - - - Depreciation, Supplemental - - - - - Total Special Items - - - - - Normalized Income Before Taxes - - - - - Effect of Special Items on Income Taxes - - - - - Income Taxes Ex. Impact of Special Items - - - - - Normalized Income After Taxes - - - - - Normalized Income Avail to Common - - - - - Basic Normalized EPS - - - - - Diluted Normalized EPS 0.24 0.20 0.25 0.29 0.26 In Millions of GBP (except for per share items) 12 months Ending 2005-12-31 12 months Ending 2004-12-31 12 months Ending 2003-12-31 12 months Ending 2002-12-31 12 months Ending 2001-12-31 12 months Ending 2000-12-31 Revenue 8,214.00 8,115.00 7,993.00 7,460.00 5,416.00 4,427.00 Other Revenue, Total - - - - - - Total Revenue 8,214.00 8,115.00 7,993.00 7,460.00 5,416.00 4,427.00 Cost of Revenue, Total 7,108.00 7,056.00 6,936.00 6,459.00 4,653.00 3,747.00 Gross Profit 1,106.00 1,059.00 1,057.00 1,001.00 763.00 680.00 Selling/General/Admin. Expenses, Total 476.00 446.00 520.00 509.00 340.00 257.00 Research & Development - - - - - - Depreciation/Amortization - - - - - - Interest Expense(Income) - Net Operating - - - - - - Unusual Expense (Income) 35.00 17.00 39.00 0.00 - - Other Operating Expenses, Total -4.00 -3.00 -2.00 -6.00 -3.00 -3.00 Total Operating Expense 7,615.00 7,516.00 7,493.00 6,962.00 4,990.00 4,001.00 Operating Income 599.00 599.00 500.00 498.00 426.00 426.00 Interest Income(Expense), Net Non-Operating -83.00 -95.00 -126.00 -127.00 -111.00 -94.00 Gain (Loss) on Sale of Assets - - - - - - Other, Net - - 5.00 7.00 14.00 11.00 Income Before Tax 516.00 504.00 379.00 378.00 329.00 343.00 Income After Tax 372.00 362.00 253.00 259.00 246.00 252.00 Minority Interest -3.00 -4.00 -6.00 -4.00 -6.00 0.00 Equity In Affiliates - - - - - - Net Income Before Extra. Items 300.00 339.00 266.00 314.00 229.00 254.00 Accounting Change - - - - - - Discontinued Operations - - - - - - Extraordinary Item - - - - - - Net Income 300.00 339.00 266.00 314.00 229.00 254.00 Preferred Dividends - - - - - - Income Available to Common Excl. Extra Items 300.00 339.00 266.00 314.00 229.00 254.00 Income Available to Common Incl. Extra Items 300.00 339.00 266.00 314.00 229.00 254.00 Basic Weighted Average Shares - - - - - - Basic EPS Excluding Extraordinary Items - - - - - - Basic EPS Including Extraordinary Items - - - - - - Dilution Adjustment 0.00 0.00 0.00 0.00 0.00 0.00 Diluted Weighted Average Shares 653.50 654.90 651.72 650.67 629.90 633.97 Diluted EPS Excluding Extraordinary Items 0.46 0.52 0.41 0.48 0.36 0.40 Diluted EPS Including Extraordinary Items - - - - - - Dividends per Share - Common Stock Primary Issue 0.34 0.32 0.30 0.28 0.25 0.24 Gross Dividends - Common Stock - - - - - - Net Income after Stock Based Comp. Expense - - - - - - Basic EPS after Stock Based Comp. Expsense - - - - - - Diluted EPS after Stock Based Comp. Expense - - - - - - Depreciation, Supplemental - - - - - - Total Special Items - - - - - - Normalized Income Before Taxes - - - - - - Effect of Special Items on Income Taxes - - - - - - Income Taxes Ex. Impact of Special Items - - - - - - Normalized Income After Taxes - - - - - - Normalized Income Avail to Common - - - - - - Basic Normalized EPS - - - - - - Diluted Normalized EPS 0.50 0.54 0.45 0.48 0.36 0.40 In Millions of GBP (except for per share items) As of 2006-06-30 As of 2005-12-31 As of 2005-06-30 As of 2004-12-31 As of 2004-06-30 Cash & Equivalents 197.00 221.00 147.00 761.00 722.00 Short Term Investments 10.00 32.00 17.00 84.00 17.00 Cash and Short Term Investments 207.00 253.00 164.00 845.00 739.00 Accounts Receivable - Trade, Net - - - - - Receivables - Other - - - - - Total Receivables, Net 734.00 812.00 744.00 800.00 757.00 Total Inventory 568.00 474.00 496.00 484.00 725.00 Prepaid Expenses - - - - - Other Current Assets, Total - - - - - Total Current Assets 1,509.00 1,539.00 1,404.00 2,129.00 2,221.00 Property/Plant/Equipment, Total - Gross - - - - - Goodwill, Net 1,462.00 1,452.00 1,431.00 1,401.00 1,357.00 Intangibles, Net - - - - - Long Term Investments 135.00 168.00 165.00 169.00 126.00 Other Long Term Assets, Total 202.00 93.00 40.00 45.00 40.00 Total Assets 3,941.00 3,874.00 3,623.00 4,332.00 4,314.00 Accounts Payable 909.00 1,032.00 1,046.00 996.00 1,237.00 Accrued Expenses - - - - - Notes Payable/Short Term Debt 800.00 859.00 259.00 925.00 919.00 Current Port. of LT Debt/Capital Leases - - - - - Other Current liabilities, Total 93.00 75.00 82.00 91.00 78.00 Total Current Liabilities 1,802.00 1,966.00 1,387.00 2,012.00 2,234.00 Long Term Debt 1,685.00 1,594.00 2,122.00 2,215.00 2,101.00 Capital Lease Obligations - - - - - Total Long Term Debt 1,685.00 1,594.00 2,122.00 2,215.00 2,101.00 Total Debt 2,485.00 2,453.00 2,381.00 3,140.00 3,020.00 Deferred Income Tax 110.00 72.00 52.00 51.00 38.00 Minority Interest 29.00 32.00 32.00 31.00 29.00 Other Liabilities, Total 127.00 106.00 113.00 114.00 118.00 Total Liabilities 3,753.00 3,770.00 3,706.00 4,423.00 4,520.00 Redeemable Preferred Stock, Total - - - - - Preferred Stock - Non Redeemable, Net - - - - - Common Stock, Total 65.00 65.00 66.00 65.00 65.00 Additional Paid-In Capital 134.00 134.00 131.00 129.00 126.00 Retained Earnings (Accumulated Deficit) -11.00 -95.00 -280.00 -285.00 -397.00 Treasury Stock - Common - - - - - Other Equity, Total - - - - - Total Equity 188.00 104.00 -83.00 -91.00 -206.00 Total Liabilities & Shareholders' Equity 3,941.00 3,874.00 3,623.00 4,332.00 4,314.00 Shares Outs - Common Stock Primary Issue - - - - - Total Common Shares Outstanding 654.10 656.00 653.20 655.10 651.10 In Millions of GBP (except for per share items) As of 2005-12-31 As of 2004-12-31 As of 2003-12-31 As of 2002-12-31 As of 2001-12-31 As of 2000-12-31 Cash & Equivalents 221.00 761.00 93.00 74.00 122.00 66.30 Short Term Investments - - 24.00 22.00 23.00 13.90 Cash and Short Term Investments 221.00 761.00 117.00 96.00 145.00 80.20 Accounts Receivable - Trade, Net 812.00 800.00 698.00 702.00 584.00 472.20 Receivables - Other - - - - - - Total Receivables, Net 812.00 800.00 741.00 745.00 627.00 496.40 Total Inventory 474.00 484.00 504.00 466.00 385.00 267.40 Prepaid Expenses - - 15.00 12.00 7.00 98.40 Other Current Assets, Total 32.00 84.00 27.00 31.00 39.00 0.00 Total Current Assets 1,539.00 2,129.00 1,404.00 1,350.00 1,203.00 942.40 Property/Plant/Equipment, Total - Gross 1,004.00 910.00 896.00 816.00 754.00 485.80 Goodwill, Net 1,205.00 1,214.00 1,219.00 1,200.00 1,193.00 366.40 Intangibles, Net 247.00 187.00 180.00 175.00 174.00 - Long Term Investments 168.00 170.00 129.00 132.00 126.00 2.30 Other Long Term Assets, Total 93.00 44.00 - - - - Total Assets 3,874.00 4,332.00 3,527.00 3,432.00 3,248.00 1,606.20 Accounts Payable 176.00 147.00 131.00 123.00 153.00 63.70 Accrued Expenses - - - - - - Notes Payable/Short Term Debt 859.00 929.00 139.00 201.00 233.00 101.40 Current Port. of LT Debt/Capital Leases - - - - - - Other Current liabilities, Total 931.00 936.00 986.00 921.00 781.00 514.50 Total Current Liabilities 1,966.00 2,012.00 1,256.00 1,245.00 1,167.00 679.60 Long Term Debt 1,594.00 2,215.00 2,429.00 2,387.00 2,336.00 1,381.00 Capital Lease Obligations - - - - - - Total Long Term Debt 1,594.00 2,215.00 2,429.00 2,387.00 2,336.00 1,381.00 Total Debt 2,453.00 3,144.00 2,568.00 2,588.00 2,569.00 1,482.40 Deferred Income Tax 72.00 51.00 22.00 18.00 18.00 52.30 Minority Interest 32.00 31.00 31.00 25.00 24.00 0.00 Other Liabilities, Total 106.00 114.00 104.00 119.00 48.00 42.80 Total Liabilities 3,770.00 4,423.00 3,842.00 3,794.00 3,593.00 2,155.70 Redeemable Preferred Stock, Total - - - - - - Preferred Stock - Non Redeemable, Net - - - - - - Common Stock, Total 65.00 65.00 65.00 65.00 65.00 61.30 Additional Paid-In Capital 134.00 129.00 125.00 117.00 105.00 105.90 Retained Earnings (Accumulated Deficit) -90.00 -272.00 -505.00 -544.00 -515.00 -716.70 Treasury Stock - Common - - - - - - Other Equity, Total -5.00 -13.00 - - - - Total Equity 104.00 -91.00 -315.00 -362.00 -345.00 -549.50 Total Liabilities & Shareholders' Equity 3,874.00 4,332.00 3,527.00 3,432.00 3,248.00 1,606.20 Shares Outs - Common Stock Primary Issue - - - - - - Total Common Shares Outstanding 656.00 655.10 653.60 651.59 649.73 613.46 In Millions of GBP (except for per share items) 6 months Ending 2006-06-30 6 months Ending 2005-12-31 6 months Ending 2005-06-30 6 months Ending 2004-12-31 Net Income/Starting Line 187.00 212.00 160.00 193.00 Depreciation/Depletion 41.00 41.00 38.00 38.00 Amortization 8.00 9.00 6.00 6.00 Deferred Taxes - - - - Non-Cash Items 43.00 28.00 77.00 49.00 Changes in Working Capital -81.00 -76.00 77.00 -22.00 Cash from Operating Activities 198.00 214.00 358.00 264.00 Capital Expenditures -60.00 -56.00 -122.00 -46.00 Other Investing Cash Flow Items, Total -48.00 17.00 6.00 0.00 Cash from Investing Activities -108.00 -39.00 -116.00 -46.00 Financing Cash Flow Items -42.00 -80.00 -39.00 -85.00 Total Cash Dividends Paid -150.00 -69.00 -141.00 -65.00 Issuance (Retirement) of Stock, Net -1.00 2.00 0.00 3.00 Issuance (Retirement) of Debt, Net 74.00 41.00 -667.00 -39.00 Cash from Financing Activities -119.00 -106.00 -847.00 -186.00 Foreign Exchange Effects 6.00 3.00 -4.00 4.00 Net Change in Cash -23.00 72.00 -609.00 36.00 Cash Interest Paid, Supplemental 72.00 111.00 52.00 98.00 Cash Taxes Paid, Supplemental 48.00 76.00 67.00 55.00 In Millions of GBP (except for per share items) 12 months Ending 2005-12-31 12 months Ending 2004-12-31 12 months Ending 2003-12-31 12 months Ending 2002-12-31 12 months Ending 2001-12-31 12 months Ending 2000-12-31 Net Income/Starting Line 372.00 362.00 539.00 498.00 426.00 426.00 Depreciation/Depletion 79.00 77.00 83.00 74.00 83.00 45.00 Amortization 15.00 12.00 77.00 72.00 - - Deferred Taxes - - - - - - Non-Cash Items 249.00 250.00 -3.00 14.00 15.00 1.00 Changes in Working Capital -143.00 -26.00 -90.00 -228.00 -44.00 -255.00 Cash from Operating Activities 572.00 675.00 606.00 430.00 480.00 217.00 Capital Expenditures -178.00 -109.00 -127.00 -139.00 -121.00 -82.00 Other Investing Cash Flow Items, Total 23.00 6.00 -5.00 17.00 -1,151.00 -248.00 Cash from Investing Activities -155.00 -103.00 -132.00 -122.00 -1,272.00 -330.00 Financing Cash Flow Items -119.00 -129.00 -133.00 -134.00 -76.00 -85.00 Total Cash Dividends Paid -210.00 -196.00 -183.00 -169.00 -151.00 -146.00 Issuance (Retirement) of Stock, Net 2.00 3.00 2.00 3.00 148.00 -165.00 Issuance (Retirement) of Debt, Net -626.00 371.00 -113.00 -7.00 844.00 547.00 Cash from Financing Activities -953.00 49.00 -427.00 -307.00 765.00 151.00 Foreign Exchange Effects -1.00 1.00 - - - - Net Change in Cash -537.00 622.00 47.00 1.00 -27.00 38.00 Cash Interest Paid, Supplemental 163.00 140.00 133.00 137.00 76.00 97.00 Cash Taxes Paid, Supplemental 143.00 90.00 99.00 101.00 111.00 80.00 EXHIBIT B Gallaher Group PLC Balance Sheet (http://www.google.com/financefstype=bi&cid=660638) Gallaher Group Plc (ADR) ( NYSE:GLH ) Overview| Income Statement| Balance Sheet| Cash Flow View: QuarterlyData| AnnualData In Millions of GBP (except for per share items) 6 months Ending 2006-06-30 6 months Ending 2005-12-31 6 months Ending 2005-06-30 6 months Ending 2004-12-31 6 months Ending 2004-06-30 Revenue 4,028.00 4,268.00 3,946.00 4,161.00 3,954.00 Other Revenue, Total - - - - - Total Revenue 4,028.00 4,268.00 3,946.00 4,161.00 3,954.00 Cost of Revenue, Total 3,490.00 3,683.00 3,438.00 3,617.00 3,447.00 Gross Profit 538.00 585.00 508.00 544.00 507.00 Selling/General/Admin. Expenses, Total 177.00 179.00 161.00 166.00 155.00 Research & Development - - - - - Depreciation/Amortization - - - - - Interest Expense(Income) - Net Operating -13.00 -10.00 -7.00 -10.00 -9.00 Unusual Expense (Income) - - - - - Other Operating Expenses, Total 67.00 76.00 78.00 64.00 67.00 Total Operating Expense 3,721.00 3,928.00 3,670.00 3,837.00 3,660.00 Operating Income 307.00 340.00 276.00 324.00 294.00 Interest Income(Expense), Net Non-Operating -48.00 -49.00 -51.00 -55.00 -59.00 Gain (Loss) on Sale of Assets - - - - - Other, Net - - - - - Income Before Tax 259.00 291.00 225.00 269.00 235.00 Income After Tax 187.00 212.00 160.00 193.00 169.00 Minority Interest -2.00 -1.00 -2.00 -2.00 -2.00 Equity In Affiliates - - - - - Net Income Before Extra. Items 155.00 134.00 166.00 191.00 167.00 Accounting Change - - - - - Discontinued Operations - - - - - Extraordinary Item - - - - - Net Income 155.00 134.00 166.00 191.00 167.00 Preferred Dividends - - - - - Income Available to Common Excl. Extra Items 155.00 134.00 166.00 191.00 167.00 Income Available to Common Incl. Extra Items 155.00 134.00 166.00 191.00 167.00 Basic Weighted Average Shares - - - - - Basic EPS Excluding Extraordinary Items - - - - - Basic EPS Including Extraordinary Items - - - - - Dilution Adjustment - 0.00 - 0.00 0.00 Diluted Weighted Average Shares 655.30 655.10 654.70 653.80 653.20 Diluted EPS Excluding Extraordinary Items 0.24 0.20 0.25 0.29 0.26 Diluted EPS Including Extraordinary Items - - - - - Dividends per Share - Common Stock Primary Issue 0.11 0.23 0.11 0.21 0.10 Gross Dividends - Common Stock - - - - - Net Income after Stock Based Comp. Expense - - - - - Basic EPS after Stock Based Comp. Expsense - - - - - Diluted EPS after Stock Based Comp. Expense - - - - - Depreciation, Supplemental - - - - - Total Special Items - - - - - Normalized Income Before Taxes - - - - - Effect of Special Items on Income Taxes - - - - - Income Taxes Ex. Impact of Special Items - - - - - Normalized Income After Taxes - - - - - Normalized Income Avail to Common - - - - - Basic Normalized EPS - - - - - Diluted Normalized EPS 0.24 0.20 0.25 0.29 0.26 In Millions of GBP (except for per share items) 12 months Ending 2005-12-31 12 months Ending 2004-12-31 12 months Ending 2003-12-31 12 months Ending 2002-12-31 12 months Ending 2001-12-31 12 months Ending 2000-12-31 Revenue 8,214.00 8,115.00 7,993.00 7,460.00 5,416.00 4,427.00 Other Revenue, Total - - - - - - Total Revenue 8,214.00 8,115.00 7,993.00 7,460.00 5,416.00 4,427.00 Cost of Revenue, Total 7,108.00 7,056.00 6,936.00 6,459.00 4,653.00 3,747.00 Gross Profit 1,106.00 1,059.00 1,057.00 1,001.00 763.00 680.00 Selling/General/Admin. Expenses, Total 476.00 446.00 520.00 509.00 340.00 257.00 Research & Development - - - - - - Depreciation/Amortization - - - - - - Interest Expense(Income) - Net Operating - - - - - - Unusual Expense (Income) 35.00 17.00 39.00 0.00 - - Other Operating Expenses, Total -4.00 -3.00 -2.00 -6.00 -3.00 -3.00 Total Operating Expense 7,615.00 7,516.00 7,493.00 6,962.00 4,990.00 4,001.00 Operating Income 599.00 599.00 500.00 498.00 426.00 426.00 Interest Income(Expense), Net Non-Operating -83.00 -95.00 -126.00 -127.00 -111.00 -94.00 Gain (Loss) on Sale of Assets - - - - - - Other, Net - - 5.00 7.00 14.00 11.00 Income Before Tax 516.00 504.00 379.00 378.00 329.00 343.00 Income After Tax 372.00 362.00 253.00 259.00 246.00 252.00 Minority Interest -3.00 -4.00 -6.00 -4.00 -6.00 0.00 Equity In Affiliates - - - - - - Net Income Before Extra. Items 300.00 339.00 266.00 314.00 229.00 254.00 Accounting Change - - - - - - Discontinued Operations - - - - - - Extraordinary Item - - - - - - Net Income 300.00 339.00 266.00 314.00 229.00 254.00 Preferred Dividends - - - - - - Income Available to Common Excl. Extra Items 300.00 339.00 266.00 314.00 229.00 254.00 Income Available to Common Incl. Extra Items 300.00 339.00 266.00 314.00 229.00 254.00 Basic Weighted Average Shares - - - - - - Basic EPS Excluding Extraordinary Items - - - - - - Basic EPS Including Extraordinary Items - - - - - - Dilution Adjustment 0.00 0.00 0.00 0.00 0.00 0.00 Diluted Weighted Average Shares 653.50 654.90 651.72 650.67 629.90 633.97 Diluted EPS Excluding Extraordinary Items 0.46 0.52 0.41 0.48 0.36 0.40 Diluted EPS Including Extraordinary Items - - - - - - Dividends per Share - Common Stock Primary Issue 0.34 0.32 0.30 0.28 0.25 0.24 Gross Dividends - Common Stock - - - - - - Net Income after Stock Based Comp. Expense - - - - - - Basic EPS after Stock Based Comp. Expsense - - - - - - Diluted EPS after Stock Based Comp. Expense - - - - - - Depreciation, Supplemental - - - - - - Total Special Items - - - - - - Normalized Income Before Taxes - - - - - - Effect of Special Items on Income Taxes - - - - - - Income Taxes Ex. Impact of Special Items - - - - - - Normalized Income After Taxes - - - - - - Normalized Income Avail to Common - - - - - - Basic Normalized EPS - - - - - - Diluted Normalized EPS 0.50 0.54 0.45 0.48 0.36 0.40 In Millions of GBP (except for per share items) As of 2006-06-30 As of 2005-12-31 As of 2005-06-30 As of 2004-12-31 As of 2004-06-30 Cash & Equivalents 197.00 221.00 147.00 761.00 722.00 Short Term Investments 10.00 32.00 17.00 84.00 17.00 Cash and Short Term Investments 207.00 253.00 164.00 845.00 739.00 Accounts Receivable - Trade, Net - - - - - Receivables - Other - - - - - Total Receivables, Net 734.00 812.00 744.00 800.00 757.00 Total Inventory 568.00 474.00 496.00 484.00 725.00 Prepaid Expenses - - - - - Other Current Assets, Total - - - - - Total Current Assets 1,509.00 1,539.00 1,404.00 2,129.00 2,221.00 Property/Plant/Equipment, Total - Gross - - - - - Goodwill, Net 1,462.00 1,452.00 1,431.00 1,401.00 1,357.00 Intangibles, Net - - - - - Long Term Investments 135.00 168.00 165.00 169.00 126.00 Other Long Term Assets, Total 202.00 93.00 40.00 45.00 40.00 Total Assets 3,941.00 3,874.00 3,623.00 4,332.00 4,314.00 Accounts Payable 909.00 1,032.00 1,046.00 996.00 1,237.00 Accrued Expenses - - - - - Notes Payable/Short Term Debt 800.00 859.00 259.00 925.00 919.00 Current Port. of LT Debt/Capital Leases - - - - - Other Current liabilities, Total 93.00 75.00 82.00 91.00 78.00 Total Current Liabilities 1,802.00 1,966.00 1,387.00 2,012.00 2,234.00 Long Term Debt 1,685.00 1,594.00 2,122.00 2,215.00 2,101.00 Capital Lease Obligations - - - - - Total Long Term Debt 1,685.00 1,594.00 2,122.00 2,215.00 2,101.00 Total Debt 2,485.00 2,453.00 2,381.00 3,140.00 3,020.00 Deferred Income Tax 110.00 72.00 52.00 51.00 38.00 Minority Interest 29.00 32.00 32.00 31.00 29.00 Other Liabilities, Total 127.00 106.00 113.00 114.00 118.00 Total Liabilities 3,753.00 3,770.00 3,706.00 4,423.00 4,520.00 Redeemable Preferred Stock, Total - - - - - Preferred Stock - Non Redeemable, Net - - - - - Common Stock, Total 65.00 65.00 66.00 65.00 65.00 Additional Paid-In Capital 134.00 134.00 131.00 129.00 126.00 Retained Earnings (Accumulated Deficit) -11.00 -95.00 -280.00 -285.00 -397.00 Treasury Stock - Common - - - - - Other Equity, Total - - - - - Total Equity 188.00 104.00 -83.00 -91.00 -206.00 Total Liabilities & Shareholders' Equity 3,941.00 3,874.00 3,623.00 4,332.00 4,314.00 Shares Outs - Common Stock Primary Issue - - - - - Total Common Shares Outstanding 654.10 656.00 653.20 655.10 651.10 In Millions of GBP (except for per share items) As of 2005-12-31 As of 2004-12-31 As of 2003-12-31 As of 2002-12-31 As of 2001-12-31 As of 2000-12-31 Cash & Equivalents 221.00 761.00 93.00 74.00 122.00 66.30 Short Term Investments - - 24.00 22.00 23.00 13.90 Cash and Short Term Investments 221.00 761.00 117.00 96.00 145.00 80.20 Accounts Receivable - Trade, Net 812.00 800.00 698.00 702.00 584.00 472.20 Receivables - Other - - - - - - Total Receivables, Net 812.00 800.00 741.00 745.00 627.00 496.40 Total Inventory 474.00 484.00 504.00 466.00 385.00 267.40 Prepaid Expenses - - 15.00 12.00 7.00 98.40 Other Current Assets, Total 32.00 84.00 27.00 31.00 39.00 0.00 Total Current Assets 1,539.00 2,129.00 1,404.00 1,350.00 1,203.00 942.40 Property/Plant/Equipment, Total - Gross 1,004.00 910.00 896.00 816.00 754.00 485.80 Goodwill, Net 1,205.00 1,214.00 1,219.00 1,200.00 1,193.00 366.40 Intangibles, Net 247.00 187.00 180.00 175.00 174.00 - Long Term Investments 168.00 170.00 129.00 132.00 126.00 2.30 Other Long Term Assets, Total 93.00 44.00 - - - - Total Assets 3,874.00 4,332.00 3,527.00 3,432.00 3,248.00 1,606.20 Accounts Payable 176.00 147.00 131.00 123.00 153.00 63.70 Accrued Expenses - - - - - - Notes Payable/Short Term Debt 859.00 929.00 139.00 201.00 233.00 101.40 Current Port. of LT Debt/Capital Leases - - - - - - Other Current liabilities, Total 931.00 936.00 986.00 921.00 781.00 514.50 Total Current Liabilities 1,966.00 2,012.00 1,256.00 1,245.00 1,167.00 679.60 Long Term Debt 1,594.00 2,215.00 2,429.00 2,387.00 2,336.00 1,381.00 Capital Lease Obligations - - - - - - Total Long Term Debt 1,594.00 2,215.00 2,429.00 2,387.00 2,336.00 1,381.00 Total Debt 2,453.00 3,144.00 2,568.00 2,588.00 2,569.00 1,482.40 Deferred Income Tax 72.00 51.00 22.00 18.00 18.00 52.30 Minority Interest 32.00 31.00 31.00 25.00 24.00 0.00 Other Liabilities, Total 106.00 114.00 104.00 119.00 48.00 42.80 Total Liabilities 3,770.00 4,423.00 3,842.00 3,794.00 3,593.00 2,155.70 Redeemable Preferred Stock, Total - - - - - - Preferred Stock - Non Redeemable, Net - - - - - - Common Stock, Total 65.00 65.00 65.00 65.00 65.00 61.30 Additional Paid-In Capital 134.00 129.00 125.00 117.00 105.00 105.90 Retained Earnings (Accumulated Deficit) -90.00 -272.00 -505.00 -544.00 -515.00 -716.70 Treasury Stock - Common - - - - - - Other Equity, Total -5.00 -13.00 - - - - Total Equity 104.00 -91.00 -315.00 -362.00 -345.00 -549.50 Total Liabilities & Shareholders' Equity 3,874.00 4,332.00 3,527.00 3,432.00 3,248.00 1,606.20 Shares Outs - Common Stock Primary Issue - - - - - - Total Common Shares Outstanding 656.00 655.10 653.60 651.59 649.73 613.46 In Millions of GBP (except for per share items) 6 months Ending 2006-06-30 6 months Ending 2005-12-31 6 months Ending 2005-06-30 6 months Ending 2004-12-31 Net Income/Starting Line 187.00 212.00 160.00 193.00 Depreciation/Depletion 41.00 41.00 38.00 38.00 Amortization 8.00 9.00 6.00 6.00 Deferred Taxes - - - - Non-Cash Items 43.00 28.00 77.00 49.00 Changes in Working Capital -81.00 -76.00 77.00 -22.00 Cash from Operating Activities 198.00 214.00 358.00 264.00 Capital Expenditures -60.00 -56.00 -122.00 -46.00 Other Investing Cash Flow Items, Total -48.00 17.00 6.00 0.00 Cash from Investing Activities -108.00 -39.00 -116.00 -46.00 Financing Cash Flow Items -42.00 -80.00 -39.00 -85.00 Total Cash Dividends Paid -150.00 -69.00 -141.00 -65.00 Issuance (Retirement) of Stock, Net -1.00 2.00 0.00 3.00 Issuance (Retirement) of Debt, Net 74.00 41.00 -667.00 -39.00 Cash from Financing Activities -119.00 -106.00 -847.00 -186.00 Foreign Exchange Effects 6.00 3.00 -4.00 4.00 Net Change in Cash -23.00 72.00 -609.00 36.00 Cash Interest Paid, Supplemental 72.00 111.00 52.00 98.00 Cash Taxes Paid, Supplemental 48.00 76.00 67.00 55.00 In Millions of GBP (except for per share items) 12 months Ending 2005-12-31 12 months Ending 2004-12-31 12 months Ending 2003-12-31 12 months Ending 2002-12-31 12 months Ending 2001-12-31 12 months Ending 2000-12-31 Net Income/Starting Line 372.00 362.00 539.00 498.00 426.00 426.00 Depreciation/Depletion 79.00 77.00 83.00 74.00 83.00 45.00 Amortization 15.00 12.00 77.00 72.00 - - Deferred Taxes - - - - - - Non-Cash Items 249.00 250.00 -3.00 14.00 15.00 1.00 Changes in Working Capital -143.00 -26.00 -90.00 -228.00 -44.00 -255.00 Cash from Operating Activities 572.00 675.00 606.00 430.00 480.00 217.00 Capital Expenditures -178.00 -109.00 -127.00 -139.00 -121.00 -82.00 Other Investing Cash Flow Items, Total 23.00 6.00 -5.00 17.00 -1,151.00 -248.00 Cash from Investing Activities -155.00 -103.00 -132.00 -122.00 -1,272.00 -330.00 Financing Cash Flow Items -119.00 -129.00 -133.00 -134.00 -76.00 -85.00 Total Cash Dividends Paid -210.00 -196.00 -183.00 -169.00 -151.00 -146.00 Issuance (Retirement) of Stock, Net 2.00 3.00 2.00 3.00 148.00 -165.00 Issuance (Retirement) of Debt, Net -626.00 371.00 -113.00 -7.00 844.00 547.00 Cash from Financing Activities -953.00 49.00 -427.00 -307.00 765.00 151.00 Foreign Exchange Effects -1.00 1.00 - - - - Net Change in Cash -537.00 622.00 47.00 1.00 -27.00 38.00 Cash Interest Paid, Supplemental 163.00 140.00 133.00 137.00 76.00 97.00 Cash Taxes Paid, Supplemental 143.00 90.00 99.00 101.00 111.00 80.00 Read More