Business Context and Reporting Period
This Form 6-K filing by GlaxoSmithKline plc (GSK) covers the period ending March 2013. The report serves as a notification of transactions involving directors and persons discharging managerial responsibility (PDMRs). Specifically, it details the grant of conditional share awards on February 28, 2013, under the 2009 Performance Share Plan (PSP) and the 2009 Deferred Annual Bonus Plan (DABP). The filing was signed on March 5, 2013.
Key Financial Metrics
The filing text does not provide a clear value for revenue, profit, cash flow, margins, debt, or liquidity. This document is a regulatory notification regarding executive compensation and does not contain financial statements or operational results.
Material Changes
No material changes to financial performance or business operations are reported in this filing. The document focuses exclusively on the establishment of new equity-based compensation awards for the 2013-2015 performance period.
Guidance, Outlook, and Management Commentary
Performance Measures and Targets:
The PSP awards granted on February 28, 2013, are based on four equally weighted performance measures over a three-year period (January 1, 2013, to December 31, 2015):
- Total Shareholder Return (TSR): 25% of the award is based on relative TSR against a comparator group of 10 global pharmaceutical companies. Vesting is 0% if ranked 6th or below, and 44% if ranked 5th (above median).
- Adjusted Free Cash Flow: 25% of the award is based on specific thresholds. Vesting begins at 25% for £14.06 billion, reaches 50% at £14.49 billion, 75% at £15.94 billion, and 100% at £16.66 billion. No vesting occurs below £14.06 billion.
- R&D New Product Performance: 25% of the award. Specific targets are withheld due to commercial sensitivity. Vesting ranges from 25% at threshold to 100% for performance exceeding 122% of the threshold.
- Business Diversification: 25% of the award. Specific targets are withheld due to commercial sensitivity. Vesting ranges from 25% at threshold to 100% for performance exceeding 114% of the threshold.
Deferred Annual Bonus Plan (DABP):
Executive Directors and Corporate Executive Team members deferred portions of their 2012 bonuses into shares. The company provides a matching award (up to one-for-one) subject to the same performance measures as the PSP.
Valuation Basis:
Awards were determined using an Ordinary Share price of £14.54 and an ADS price of US$44.27, reflecting closing prices on February 27, 2013.
Important Facts for Investors to Verify
- Verify the specific R&D and business diversification targets once disclosed at the end of the performance period, as they are currently confidential.
- Monitor GSK's ranking within the 10-company TSR comparator group to assess the vesting potential of the 25% TSR-linked award.
- Track GSK's adjusted free cash flow performance against the £14.06 billion to £16.66 billion vesting thresholds.
- Note the special vesting condition for CEO Sir Andrew Witty, where 25% of his award is subject to an additional two-year holding period post-performance period.
- Confirm the final post-tax value of Deferred Bonus Awards, as the figures provided are gross of tax.