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Harvard Business School
9-101-019
!"#$%&'()'*+%,-.%/00,
Vyaderm Pharmaceuticals
In 1999 we threw out the old executive compensation system altogether and
introduced EVA. It was meant to be symbolic—a cathartic change.
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Research Associate Indra A. Reinbergs prepared this case under the supervision of Professor Robert Simons as the basis for
class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
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1
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
101-019
Vyaderm Pharmaceuticals
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2
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
Vyaderm Pharmaceuticals
101-019
N;%T+'<"*E%<";C*49"<%76"%C2(C"37%4(%47;%,\\\%'(()'>%*"32*7.
EVA is a tool which simply yet effectively combines the income statement and
balance sheet into one number, by subtracting from earnings a charge for the utilization of
assets employed in generating those earnings.
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3
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
101-019
Vyaderm Pharmaceuticals
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4(7"*#'>%?"*"%);)'>>+%W"37%C2(;7'(7%@*2E%+"'*%72%+"'*$%%Exhibit 2%<"34C7;%5*'364C'>>+%T+'<"*EY;%ZTN
4(C"(74#"%C'>C)>'742($
N(% 4E32*7'(7% @"'7)*"% 2@% ZTN% ?';% 76"% )(>4E47"<% )3;4<"% '(<% <2?(;4<"% 2@% '(% 4(<4#4<)'>
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target bonus% ?';% ;"7% ';% '% @4d"<% 3"*C"(7'5"% 2@% 9';"% 3'+.% *'(54(5% @*2E% H0a% @2*% E4<<>"% E'('5"*;% 72
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'?'*<;%?"*"%@)>>+%3'4<%2)7$
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'C64"#"<.%76"%C2E3'(+%?2)><%C*"<47%76"%@)>>%'E2)(7%2@%76"%92();S3>);%'(+%'<<4742('>%'E2)(7%<)"
72%*";)>7;%4(%"dC";;%2@%76"%ZTN%52'>S72%76"%92();%9'(W$%%=*2E%764;%g9'(W%9'>'(C"h%76"%E'('5"*%?';
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76"%C)**"(7%+"'*.%2*%72%76"%C'**+F@2*?'*<%2@%9'>'(C";%@*2E%3*"#42);%+"'*;j$
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3"*@2*E'(C"%@">>%9">2?%76"%ZTN%4(7"*#'>.%'%("5'74#"%"(7*+%?';%E'<"%72%76"%92();%9'(W.%?64C6%?2)><
*"<)C"%76"%9'(W%9'>'(C"%';%?">>%';%@)7)*"%*"?'*<;$%%A2?"#"*.%4@%;)@@4C4"(7%@)(<;%"d4;7"<.%'%E'('5"*
?';%;74>>%">4549>"%72%<*'?%<2?(%76"%9'>'(C"%4(%76"%9'(W%4(%'(%'E2)(7%"D)'>%72%76"%7'*5"7%92();%3>);
2("F6'>@% 2@% '(+% 9'>'(C"% @*2E% 3*"#42);% +"'*;$% iL""% Table A% 2(% 76"% ("d7% 3'5"% @2*% '(% "d'E3>"% 2@% 764;
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4
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
Vyaderm Pharmaceuticals
101-019
#2>)(7'*4>+% >"@7% 76"% C2E3'(+.% 76"% 9'>'(C"% 4(% 76"% 92();% 9'(W% ?';% @2*@"47"<$% % N;% T+'<"*EY;% 3*2d+
;7'7"E"(7% ;7'7"<.% g764;% 92();% 9'(W% C*"'7";% ;62*7F% '(<% >2(5F7"*E% 4(C"(74#"% @"'7)*";.% *"?'*<4(5
;);7'4("<%3"*@2*E'(C"%'(<%C2(74()"<%"E3>2+E"(7$h
Table A
L'E3>"%K2();%1'>C)>'742(
B6"% @2>>2?4(5% "d'E3>"% 4>>);7*'7";% 76"% "@@"C7% 2(% 92();";% 2@% ZTN% 3"*@2*E'(C"% '92#"% '(<
9">2?%76"%ZTN%7'*5"7P
Assumptions:
•
M'('5"*Y;%K';"%:'+P%
^,00.000
•
B'*5"7%K2();P
H0a%2@%9';"%3'+%l%^H0.000
•
ZTN%XE3*2#"E"(7%`2'>
^%G%E4>>42(
•
ZTN%X(7"*#'>
^%,G%E4>>42(
•
1'>C)>'7"<%K2();%l%B'*5"7%K2();%d%ZTN%:"*@2*E'(C"
•
ZTN%:"*@2*E'(C"%l%,%q%miNC7)'>%XE3*2#"E"(7%F%XE3*2#"E"(7%`2'>jQ%X(7"*#'>n
Year One: Actual EVA Improvement = $10 million
Year Two: Actual EVA Improvement = - $11 million
(Performance Above EVA Target)
(Performance Below EVA Target)
Beginning Bank Balance = $0
Beginning Bank Balance = $6,667
1. Calculated Bonus = Target Bonus x EVA Performance 1. Calculated Bonus = Target Bonus x EVA Performance
= $40,000 x [1 + [10 million - 5 million]/15 million]
= $40,000 x [1+ [-11 million - 5 million]/15 million]
= $40,000 x 1.33
= $40,000 x [ -.067]
= $53,333
= - $2,667
New Bank Balance = $0 + 53,333 = $53,333
New Bank Balance = $6,667 - 2,667 = $4,000
2. Payout = Target Bonus + 50% Remaining Balance
2. Payout = Target Bonus + 50% Remaining Balance
(but not to exceed balance in bank)
= $40,000 + 0.5 [4,000]
= $40,000 + 0.5 [53,333 - 40,000]
(but not to exceed $4,000 balance in bank)
= $46,667
= $4,000
Ending Bank Balance = $6,667
Ending Bank Balance = $0
N;% 76"% "d'E3>"% 4>>);7*'7";.% 4(% 76"% @4*;7% +"'*% 2@% '(% ZTN% 4(C"(74#"% 3*25*'E% E'('5"*;% 6'<% (2
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Redesigning the Organization
X(%,\\J.%T+'<"*E%?';%2*5'(4_"<%3*4E'*4>+%9+%5"25*'36+P%;)9;4<4'*4";%?"*"%4(C2*32*'7"<%4(
,0% C2)(7*4";% 2)7;4<"% 76"% e(47"<% L7'7";$% ]4764(% 76"% e(47"<% L7'7";.% T+'<"*E% 23"*'7"<% G% <4@@"*"(7
9);4(";;%)(47;$
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)(47;% <4<% (27% 6'#"% C2E3>"7"% 9'>'(C"% ;6""7;$% % N;% M+"*;% *"C'>>"<.% gB64;% >'CW% 2@% 9'>'(C"% ;6""7
5
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
101-019
Vyaderm Pharmaceuticals
'CC2)(7'94>47+%?';%#4;49>"%4(%C'3'C47+%3>'((4(5$%%Z#"*+764(5%?';%@*""$%%B6"*"%?';%722%E)C6%C';6%74"<
)3% 4(% 76"% 9);4(";;$% % N;% 9);4(";;";% E'7)*"<% '(<% 3*2<)C7;% 9"C'E"% C2EE2<474";.% E'*54(;% 9"5'(% 72
<"C>4("$h
e(<"*%B2E%=4((.%@4('(C4'>%7'*5"7;%?"*"%;"7%'7%C2*32*'7"%6"'<D)'*7"*;$%%N;%>2(5%';%76"%5"("*'>
E'('5"*;% 2@% "'C6% C2)(7*+% E"7% 76"4*% ()E9"*;.% 76"+% ?"*"% 54#"(% '% 5*"'7% <"'>% 2@% 4(<"3"(<"(C"% 4(
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76'7% 76"+% C2)><% C2(7*2>% E2*"% <4*"C7>+$% % B6"% @)*76"*% '?'+% E'('5"*;% ?"*"% >2C'7"<% @*2E% L"'77>".% 76"
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5*2?76.%*'76"*%76'(%C2*32*'7"%ZTN$%%iL""%Exhibit 4 @2*%'%>4;7%2@%ZTN%<*4#"*;$j
B2% 3>'C'7"% 76"% *"542('>% E'('5"*;.% L'(<"*;% '(<% M+"*;% E'<"% ;"#"*'>% 4(474'>% <";45(% C624C";$
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*"542('>% C"(7"*;% i@*2E% 76"% e(47"<% L7'7";% 72% L2)76% N;4'j.% '(<% 76"% C2*32*'7"% ZTN% C"(7"*% 4(% L"'77>"$
=)*76"*E2*".% 72% "';"% 76"% 7*'(;4742(% @*2E% 76"% 2><% 92();% ;+;7"E.% E2;7% 3'*74C43'(7;.% ;)C6% ';% 5>29'>
9);4(";;% ;7'@@% '(<% *"542('>% ;7'@@.% ?2)><% 6'#"% 2(>+% IGa% 2@% 76"4*% ,\\\% 92();% 9';"<% 2(% 76"4*% ZTN
C"(7"*Y;%*";)>7;$%%B6"%*"E'4(4(5%/Ga%*"3*";"(74(5%4(<4#4<)'>%2*%7"'E%52'>;%?2)><%9"%9';"<%2(%ZTN
<*4#"*;.%?64C6%'>>2?"<%@2*%;2E"%;)9c"C74#47+$%%B6"%6"'<%2@%76"%E'('5"*Y;%5>29'>%9);4(";;%)(47%;"7%76"
4(<4#4<)'>% <*4#"*;$% % iL""% Exhibit 6 @2*% ,\\\% 52'>% ?"4567;j$% % =2*% E4<<>"% E'('5"*;% "'*(4(5% 9"7?""(
'92)7%^J0.000%'(<%^-0.000.%76"%ZTN%92();%?';%76"%>'*5";7%3'*7%2@%76"4*%727'>%C2E3"(;'742(%3'CW'5"$
The Diagnostic Adjustment
X(%,\\\.%76"%@4*;7%+"'*%2@%76"%ZTN%3*25*'E.%76"%V4'5(2;74C%9);4(";;%6'<%'(%)("d3"C7"<>+%9'<
+"'*$%%e(<"*%76"%("?%ZTN%3*25*'E.%76"%;62*7@'>>%?2)><%9"%32;7"<%';%'%<"@4C47%72%76"%92();%9'(WS
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?2**4"<% 5*"'7>+% '92)7% <"E274#'74(5% E'('5"*;% '7% 76"% 2)7;"7% 2@% 76"% 3*25*'E$% % K)7% 6"% ?';% #"*+
*">)C7'(7%72%';W%T+'<"*EY;%92'*<%E"E9"*;%72%'<c);7%76"%4(474'>%ZTN%C'>C)>'742(.%;4(C"%6"%6'<%';;)*"<
76"E%76'7%76"*"%?2)><%9"%(2%"dC"3742(;$%X(%76"%"(<.%76"%92'*<%E"E9"*;%'5*""<%72%?43"%76"%;>'7"%C>"'(
@2*% V4'5(2;74C.% 54#"% '% #"*+% ;E'>>% 92();.% '(<% (27% '33>+% 76"% ZTN% C'>C)>'742(% 4(% 76"% @4*;7% +"'*% 2@% 76"
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9"C');"%76"(%276"*%3"23>"%;'4<.%p]6+%(27%<2%47%@2*%);fY%g
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;7'7"<.
]"% ?"*"% @22>4;6% 72% '5*""% 72% <2% 76"% ,G% ZTN% C"(7"*;% 4(% ,\\\$% % =4@7""(% ZTN
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]476% T+'<"*EY;% E)>74('742('>% 23"*'742(;.% 47% ?';% <4@@4C)>7% 72% *";7'7"% 3*2@47% '(<% >2;;
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4(C2E3>"7"b% '(<% 76"*"% ?"*"% 7*'(;@"*% 3*4C4(5% 4;;)";$% % ]"% ?"*"% @'9*4C'74(5% 52'>;% '(<
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6
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
Vyaderm Pharmaceuticals
101-019
Streamlining EVA
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'%E4d%2@%C2*32*'7"%ZTN.%9);4(";;%)(47%ZTN.%'(<%4(<4#4<)'>%2*%7"'E%ZTN%52'>;$
The Dermatology Opportunity
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X(%V"C"E9"*%,\\\.%'5"(7;%2@%76"%=22<%'(<%V*)5%N<E4(4;7*'742(%i=VNj%)("d3"C7"<>+%;"4_"<
'>>%2@%76"%3*2<)C7;%'7%:&r%@2*%#42>'742(;%2@%D)'>47+%;7'(<'*<;$%%iX7%?';%>'7"*%*"#"'>"<%76'7%76"%=VN%6'<
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';%E)C6%';%(""<"<%72%*"E'4(%=VNFC2E3>4'(7%'(<%;74>>%C2E3"7"$h%%N;%'%*";)>7%2@%76"%=VN%'C742(.%:&rY;
3*2<)C742(% @'C4>47+% ?';% ;6)7% <2?(.% '(<% 2#"*% '% E4>>42(% 7)9";% 2@% 47;% 7234C'>% '(74@)(5'>% ;2>)742(% ?"*"
*"C'>>"<$%%e(74>%76"%=VN%'>>2?"<%:&r%72%*";)E"%3*2<)C742(.%764;%;47)'742(%;)<<"(>+%>"@7%T+'<"*E%';
76"%<2E4('(7%;)33>4"*%2@%'(74@)(5'>%C*"'E%@2*%76"%"(74*"%e$L$%E'*W"7$
B6"% C6'(5"% 4(% 76"% C2E3"7474#"% ;47)'742(% ?2)><% "('9>"% 76"% e$L$% <"*E'72>25+% 9);4(";;% 72
7"E32*'*4>+% *'4;"% 3*4C";% 72% (2*E'>% >"#">;% '(<% 76"*"9+% 922;7% 47;% 3*2@47% E'*54(% ;)9;7'(74'>>+$
7
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
101-019
Vyaderm Pharmaceuticals
T+'<"*EY;% "E3>2+"";% 9"5'(% 5"'*4(5% )3% 3*2<)C742(% 72% 7'W"% '<#'(7'5"% 2@% 76"% 2332*7)(47+.% ?64C6
E'('5"*;%W("?%C2)><%9"%;62*7F>4#"<$%%]64>"%47%?';%(27%C"*7'4(%76'7%:&r%?2)><%*"5'4(%=VN%'33*2#'>.
276"*% 5"("*4C% E'()@'C7)*"*;% ?"*"% C"*7'4(% 72% "(7"*% 76"% E'*W"7% 72% C'37)*"% 76"% 3*2@47% 327"(74'>$% X(% 76"
E"'(74E".%'>>%'#'4>'9>"%*";2)*C";%?"*"%72%9"%<"<4C'7"<%72%*'E34(5%)3%3*2<)C742(S'(<%3*2@47;$
January 2001
V'(4">>"%L'(<"*;% '(<% K>'W"% M+"*;% ?"*"% 3*"3'*4(5% 72% E""7% ?476% M')*4C"% TU<*4("$% % N;% 76"+
6'<%'(74C43'7"<.%/000%3*2@47;%@2*%76"%V"*E'72>25+%9);4(";;%6'<%5*"'7>+%"dC""<"<%76"%ZTN%7'*5"7$%%K)7.
';%"d3"C7"<.%'%("?%C2E3"7472*%6'<%"(7"*"<%76"%5"("*4C%'(74@)(5'>%9);4(";;%>'7"%4(% 76"% +"'*.% C');4(5
3*2@47;% 72% @'>>% 9'CW% 72% 64;72*4C'>% >"#">;$% % B6"% 7?2% 2@@4C"*;% ?2)><% 6'#"% 72% E'W"% '% *"C2EE"(<'742(
*"5'*<4(5%76"%/000%ZTN%92();%@2*%76"%R2*76%NE"*4C'(%V"*E'72>25+%9);4(";;$%%L62)><%76"%7'*5"7%9"
'<c);7"<% 72% *"@>"C7% 76"% g?4(<@'>>h% C*"'7"<% 9+% 76"% "d47% 2@% :&r% @*2E% 76"% 5"("*4C% E'*W"7% 3>'C"f
N*5)E"(7;%C2)><%9"%E'<"%9276%?'+;$
X(%76"2*+.%76"%("?%ZTN%3>'(%?';%;)332;"<%72%6'#"%)(>4E47"<%)3;4<"%327"(74'>$%%e(<"*%764;
#4"?.% 76"% <4#4;42('>% E'('5"*;% ;62)><% *"C"4#"% '% @)>>% 92();% @2*% 76"% )("d3"C7"<>+% 6456% 3*2@47;$% =2*
"d'E3>".%4@%76"%"d47%2@%:&r%@*2E%76"%E'*W"7%"('9>"<%T+'<"*E%72%"dC""<%47;%ZTN%7'*5"7%9+%O00a.%76"(
4(%/000%76"%E'('5"*;%?2)><%*"C"4#"%,00a%2@%76"4*%7'*5"7%92();%3>);% 6'>@%2@%76"%"dC";;%i,G0aj.%?476
76"% *"E'4(<"*% 9"4(5% 9'(W"<$% % X@% 4(% /00,% 76"% V"*E'72>25+% 9);4(";;% 76"(% )(<"*3"*@2*E"<% 47;% ("?.
;)9;7'(74'>>+%6456"*%ZTN%7'*5"7%9+%/00a.%76"%("5'74#"%/00a%?2)><%g?43"%2)7h%76"%32;474#"%9'>'(C"%4(
76"%92();%9'(W$%%N;%'%*";)>7.%76"%E'('5"*;%?2)><%*"C"4#"%(2%92();%@2*%/00,.%'(<%6'#"%(2%C);642(%@2*
/00/$%%M2*"2#"*.%ZTN%3"*@2*E'(C"%E4567%(27%*4;"%72%/000%>"#">;%@2*%;"#"*'>%+"'*;%4(72%76"%@)7)*"$
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<4#4;42(%'(<%6)*7%"@@2*7;%72%*"C*)47%("?%64*";%?62%?4>>%(27%6'#"%'%92();%9'(W%72%@'>>%9'CW%2($%%K)7%76"
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C6'(5"%76"%3;+C62>254C'>%4E3'C7%2@%?4((4(5%945%764;%+"'*%'(<%3"*@2*E4(5%322*>+%76"%("d7$h
e;4(5% <'7'% @*2E% Exhibit 8, L'(<"*;% '(<% M+"*;% 9"5'(% 72% 3*"3'*"% 76"4*% *"C2EE"(<'742($
L4(C"% 764;% ?';% 76"% @4*;7% +"'*% 2@% 76"% ZTN% 3*25*'E% @2*% 76"% ("?>+% @2*E"<% V"*E'72>25+% <4#4;42(.
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]476%76";"%C'>C)>'742(;%4(%6'(<.%'(<%'?'*"%2@%76"%*"C"(7%3*";;)*"%2(%;72CW%3*4C";%iExhibit 7j.
L'(<"*;%'(<%M+"*;%?2)><%E'W"%76"4*%*"C2EE"(<'742(%72%M')*4C"%TU<*4("$
8
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
Vyaderm Pharmaceuticals
Exhibit 1(a)
101-019
12E32("(7;%2@%T+'<"*EY;%ZTN%@2*E)>'
NET OPERATING PROFIT AFTER TAXES
CAPITAL
Operating Earnings
Net Operating Assets (NOA)
+ R&D expense reported on P&L
①
+ Capitalized research & development
- R&D amortization for EVA adjustment
➁
➂
(less accumulated amortization)
+ Advertising expense reported on P&L
+ Advertising expense
- Advertising amortization for EVA adjustment
(less accumulated amortization)
+ Goodwill amortization add-back
+ Accumulated amortization of goodwill
+ Restructuring add-back
+ Restructuring add-back
= Net Operating Profit Before Taxes (NOPBT)
= Capital
- Taxes (based on actual payments)
= Net Operating Profit After Taxes (NOPAT)
Exhibit 1(b)
L'E3>"%LC6"<)>"%2@%!kV%NE2*74_'742(%@2*%,\\\%ZTN%N<c);7E"(7
i@4*;7%+"'*%2@%3*25*'Ej
1995
1996
1997
R&D Expense as Reported on P&L $ 1,500
$ 2,200
$ 2,600
$ 3,100
$ 3,700
Amortization for
1995
$
300
$
300
$
300
$
300
EVA Adjustment
1996
1997
1998
1999
$
440
$
$
440
520
$
$
$
440
520
620
$
$
$
$
440
520
620
740
$
300
1998
$ 2,620
1999 R&D Amortization under EVA
Cumulative R&D Expense (P&L)
1999
$ 1,500
Less: Cumulative Amortization (EVA) $
300
$ 3,700
$ 6,300
$ 9,400
$ 13,100
$ 1,040
$ 2,300
$ 4,180
$ 6,800
Capitalized R&D for 1999 EVA
Calculation of Capital
$ 6,300
①
➁
➂
Notes:
① = Amount added back to P&L
➁ = Amount subtracted from P&L
➂ = Amount added to Capital (Balance Sheet)
9
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
101-019
Exhibit 2
ZTN%X(C"(74#"%:>'(
BONUS
INCENTIVE
Slope = Target Incentive/
EVA Interval
TOTAL BONUS
EARNED
Bank
Payout
Target Incentive
Year 0
Actual EVA
Year 1
Target
Improvement
Goal
EVA Interval
Note:
The EVA interval is the shortfall from target that eliminates the bonus. An EVA center’s performance (%) = 1 + [(actual improvement - improvement goal)/EVA interval]
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
EVA
IMPROVEMENT
-10-
Vyaderm Pharmaceuticals
Exhibit 3
101-019
ZdC"*37%@*2E%T+'<"*E%Zd"C)74#"%:*";"(7'742(%Zd3>'4(4(5%76"%M"*47;%2@%ZTN
Most
Most“Incentives”
“Incentives”Don’t
Don’tWork
Work. .. .. .
Bonus
•
Caps limit incentive for exceptional performance
•
Thresholds encourage short-term decision making
•
Negotiated targets promote “sandbagging”
Threshold
Performance
Typical Payoff Profile
EVA
EVAIncentives:
Incentives:
Pay
Bonuses
for
Meeting
Pay Bonuses for MeetingEVA
EVAExpectations
Expectations
Bonus
•
•
•
“Equity-like” - share fully in gains and losses
Unlimited upside and downside incentive
Objective targets, not linked to budget negotiations
Unlimited bonus potential
Target
Bonus
Target EVA
EVA
11
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
101-019
Exhibit 4
Vyaderm Pharmaceuticals
ZTN%V*4#"*;
Improvement
Improvementin
inEVA
EVA
Sales
Customer
Satisfaction
Operating Expenses
New
Products
Volume
Marketing
Product
Pricing
Growth
Overhead
Account
Management
Manufacturing
Costs
Compensation
Training/
Development
Capital Charge
Acquisitions/
Divestitures
Working Capital
Management
Alliances
Accounts
Receivable
R&D
Decisions
Inventory
Management
Manufacturing EVA Drivers
Research & Development EVA Drivers
!
!
!
!
!
!
!
!
!
Reduce Inventory
Reduce Cycle Time
Improve Yields
Reduce Scrap/Waste
Maximize Labor Efficiencies
Improve Vendor Efficiencies
Process Improvements
!
!
!
Improve “To-Market” process
Reduce R&D expenses as % of New Product
Sales
Strategic partners for R&D
Stronger Links to Product Marketing
New Products via:
– Research
– Formulation
– Development
– Acquisition
Staff EVA Drivers
Marketing EVA Drivers
!
!
!
!
!
!
!
!
!
!
!
!
!
Work Group/Process Simplification
Consistency “Monitors”—Audit
Centralizing Resources/Synergies
Best Practices Benchmarking
Insourcing/Outsourcing Decisions
Simplify EVA Measurements/Reporting
Ensure Compliance with Legislation
Increase Market Share/ Revenue
New Markets
More Focused Channel Programs
Voice of Customer/Consumer
Leverage Advertising/Promotion
Build Brand Awareness
12
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
Vyaderm Pharmaceuticals
Exhibit 5
101-019
T+'<"*E%16'(54(5%[*5'(4_'742('>%L7*)C7)*"
,\\J%[*5'(4_'742('>%L7*)C7)*"%%i,G%:*2@47%k%r2;;%L)9;4<4'*4";j
Corporate HQ (Seattle, WA)
Europe, Middle East
& Africa Division
(5 subsidiaries)
North American
Division
(5 business units)
Asia-Pacific Division
(5 subsidiaries)
,\\\%[*5'(4_'742('>%L7*)C7)*"%%i,G%ZTN%1"(7"*;j
Corporate Consolidated (1 EVA Center)
Global Businesses
(7 EVA Centers)
•Antifungals
•Anti-infectives
•Analgesics
•Nutraceuticals
•Diagnostics
•Gastrointestinals
•Antibiotics
Geographic Regions
(7 EVA Centers)
•United States
•Europe
•Japan
•Latin America
•North Asia
•South Asia
•Canada
/000%[*5'(4_'742('>%L7*)C7)*"%iH%ZTN%1"(7"*;j
Corporate Consolidated (1 EVA Center)
Dermatology
(1 EVA Center)
Internal Medicine
(1 EVA Center)
Veterinary Medicine
(1 EVA Center)
North America
Eur., ME & Africa
Asia
Latin America
13
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
101-019
Vyaderm Pharmaceuticals
%`2'>%]"4567;%F%B*'(;4742(%o"'*%i,\\\j
Exhibit 6
Corporate
EVA
Corporate
9 Management Committee Officers
(includes 3 global product heads)
Staff Officers
Corporate Staff
Business
Unit EVA
Global
Business
EVA
Region
EVA
100%
100%
75%
25%
Global Business
Global Business Staff
75%
Regions
Regional Division President
Regional Marketing Heads
Regional Staff
Country Managers & Controllers
Commercial Directors
Free Standing Businesses
Presidents
Staff
EVA
Drivers
50%
50%
25%
25%
50%
50%
75%
50%
50%
75%
75%
25%
50%
50%
25%
T+'<"*E%L72CW%:"*@2*E'(C"
Exhibit 7
45
40
35
30
25
20
15
10
5
p9
Ja 3
nJu 94
nO 94
ct
M 94
ar
Au -95
gD 95
ec
M -95
ay
Se 96
pFe 96
b9
Ju 7
l-9
N 7
ov
Ap 97
r
Au -98
g9
Ja 8
nJu 99
nO 99
ct
M 99
ar
-0
Ju 0
l-0
D 0
ec
-0
0
0
Se
Closing Weekly Stock Price ($/share)
Vyaderm Stock Price, September 1993 to December 2000
14
Purchased by: Paulo Oliveira [email protected] on March 22, 2014
Vyaderm Pharmaceuticals
Exhibit 8
101-019
R2*76%NE"*4C'(%V"*E'72>25+%=4('(C4'>%V'7'%@2*%ZTN%1'>C)>'742(
($ 000s except bonus)
1996
1997
1998
1999
2000
Divisional EVA Calculation:
Actual EVA
$ 2,920 (a)
EVA Improvement Goal
$ 2,150
EVA Target
.
$ 5,070
EVA Interval
$ 12,000
Profit & Loss:
Income before following items:
Research & Development Expense
Consumer Advertising Expense
Goodwill Amortization
Net Income Before Tax
Current Year’s Income Tax Payments
$ 24,694
$ 31,512
$ 36,584
$ 42,545
$ 92,550
12,487
14,610
17,094
20,000
39,000
34
38
41
45
50
0
2,500
2,500
2,500
2,500
$ 12,173
$ 14,364
$ 16,949
$ 20,000
$ 51,000
(4,260)
(5,902)
(6,807)
(7,875)
(18,725)
Balance Sheet:
Net Operating Assets
$ 66,949
$ 79,000
$ 93,220
$ 110,000
$ 135,000
$0
$ 2,500
$ 5,000
$ 7,500
$ 10,000
From Footnotes:
Accumulated Goodwill Amortization
Capital Charge for EVA Purposes
11%
Divisional Manager’s Bonus:
Base Salary
$ 200,000
$ 200,000
Bonus Target
n.a.
60%
Bonus Payout
$ 60,000
Note:
(a) EVA was introduced in the Dermatology division for the first time in 2000. The 1999 EVA figure was calculated
retroactively solely to set 2000 EVA targets. The 1999 EVA calculation includes the amortization of a 1995 R&D
expense of $10,673.
15
Purchased by: Paulo Oliveira [email protected] on March 22, 2014