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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 31, 1997
COMMISSION FILE NUMBER 1-6351
ELI LILLY AND COMPANY
(Exact name of Registrant as specified in its charter)
INDIANA 35-0470950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
LILLY CORPORATE CENTER, INDIANAPOLIS, INDIANA 46285
(Address of principal executive offices)
Registrant's telephone number, including area code (317)
276-2000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of common stock outstanding as of
April 30, 1997:
Class Number of Shares Outstanding
Common 555,388,595
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months
Ended March 31,
1997 1996
(Dollars in millions
except per-share data)
Net sales ............................. $1,953.0 $1,783.3
Cost of sales ......................... 541.3 518.0
Research and development .............. 301.2 276.0
Marketing and administrative .......... 471.7 460.0
Interest expense ...................... 60.6 69.9
Other (income) expense - net .......... 1.4 (64.4)
1,376.2 1,259.5
Income before income taxes ............ 576.8 523.8
Income taxes .......................... 144.2 134.6
Net income ............................ $ 432.6 $ 389.2
Earnings per share .................... $ .79 $ .71
Dividends paid per share .............. $ .36 $ .3425
See Notes to Consolidated Condensed Financial Statements.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
Eli Lilly and Company and Subsidiaries
March 31, December 31,
1997 1996
(Millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ....... $ 1,042.1 $ 813.7
Short-term investments .......... 75.4 141.4
Accounts receivable, net of
allowances for doubtful accounts
of $66.3 (1997) and $82.4 (1996) 1,554.1 1,474.6
Other receivables ............... 240.7 262.5
Inventories ..................... 876.3 881.4
Deferred income taxes ........... 312.9 145.2
Prepaid expenses ................ 174.2 172.5
TOTAL CURRENT ASSETS ............ 4,275.7 3,891.3
OTHER ASSETS
Prepaid retirement .............. 517.2 512.9
Investments ..................... 408.2 443.5
Goodwill and other intangibles,
net of allowances for amortization
of $341.4 (1997) and $311.0 (1996) 3,995.0 4,028.2
Sundry .......................... 1,123.2 1,124.3
6,043.6 6,108.9
PROPERTY AND EQUIPMENT
Land, buildings, equipment, and
construction-in-progress ...... 7,002.5 7,096.4
Less allowances for depreciation 2,808.2 2,789.4
4,194.3 4,307.0
$14,513.6 $14,307.2
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings ........... $ 1,333.6 $ 1,212.9
Accounts payable ................ 694.8 829.3
Employee compensation ........... 236.4 388.4
Dividends payable ............... - 198.8
Income taxes payable ............ 965.5 691.8
Other liabilities ............... 831.4 901.0
TOTAL CURRENT LIABILITIES ....... 4,061.7 4,222.2
LONG-TERM DEBT ..................... 2,509.6 2,516.5
DEFERRED INCOME TAXES .............. 375.4 376.0
RETIREE MEDICAL BENEFIT OBLIGATION . 126.7 136.4
OTHER NONCURRENT LIABILITIES ....... 870.7 956.0
3,882.4 3,984.9
COMMITMENTS AND CONTINGENCIES ...... - -
SHAREHOLDERS' EQUITY
Common stock .................... 355.6 355.6
Additional paid-in capital ...... - 67.4
Retained earnings ............... 7,629.3 7,207.3
Deferred costs-ESOP ............. (171.4) (176.9)
Currency translation adjustments (169.7) (57.4)
7,643.8 7,396.0
Less cost of common stock in
treasury .................... 1,074.3 1,295.9
6,569.5 6,100.1
$14,513.6 $14,307.2
See Notes to Consolidated Condensed Financial Statements.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months Ended
March 31,
1997 1996
(Millions)
OPERATING ACTIVITIES
Net income .............................. $432.6 $389.2
Adjustments to Reconcile Net Income to
Cash Flows from Operating Activities:
Changes in operating assets and
liabilities ............................. (121.8) (395.4)
Change in deferred taxes ................ (153.4) 157.2
Depreciation and amortization ........... 139.0 132.7
Other items, net ........................ 7.3 (62.7)
NET CASH FLOWS FROM OPERATING ACTIVITIES 303.7 221.0
INVESTING ACTIVITIES
Net additions to property and equipment . (58.7) (101.1)
Additions to sundry assets and
intangibles ............................. (16.1) (9.6)
Reduction of investments ................ 137.4 55.5
Additions to investments ................ (60.2) (75.7)
Acquisitions ............................ (0.2) (86.0)
NET CASH FROM (USED FOR) INVESTING 2.2 (216.9)
ACTIVITIES ..............................
FINANCING ACTIVITIES
Dividends paid .......................... (197.9) (187.6)
Purchase of common stock and other
capital transactions ................. 53.0 (7.8)
Net additions to short-term borrowings .. 114.9 109.6
Net additions (reductions) to long-term
debt ................................. 7.6 (0.4)
NET CASH USED FOR FINANCING ACTIVITIES .. (22.4) (86.2)
Effect of exchange rate changes on cash . (55.1) (19.0)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .......................... 228.4 (101.1)
Cash and cash equivalents at January 1 .. 813.7 999.5
CASH AND CASH EQUIVALENTS AT MARCH 31 ... $1,042.1 $898.4
See Notes to Consolidated Condensed Financial Statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the
requirements of Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. In
the opinion of management, the financial statements reflect all
adjustments (consisting only of normal recurring accruals) that
are necessary for a fair statement of the results for the
periods shown. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosures at the date of the financial
statements and during the reporting period. Actual results
could differ from those estimates.
As presented herein, sales include sales of the Company's life-
sciences products and service revenue from PCS Health Systems,
Inc. (PCS) and Integrated Medical Systems, Inc. (IMS).
CONTINGENCIES
The Company has been named as a defendant in numerous product
liability lawsuits involving primarily two products,
diethylstilbestrol and Prozac(R). The Company has accrued for its
estimated exposure, including costs of litigation, with respect
to all current product liability claims. In addition, the
Company has accrued for certain future anticipated product
liability claims to the extent the Company can formulate a
reasonable estimate of their costs. The Company's estimates of
these expenses are based primarily on historical claims
experience and data regarding product usage. The Company expects
the cash amounts related to the accruals to be paid out over the
next several years. The majority of costs associated with
defending and disposing of these suits are covered by insurance.
The Company's estimate of insurance recoveries is based on
existing deductibles, coverage limits, and the existing and
projected future level of insolvencies among its insurance
carriers.
Under the Comprehensive Environmental Response, Compensation, and
Liability Act, commonly known as Superfund, the Company has been
designated as one of several potentially responsible parties with
respect to certain sites. Under Superfund, each responsible
party may be jointly and severally liable for the entire amount
of the cleanup. The Company also continues remediation of
certain of its own sites. The Company has accrued for estimated
Superfund cleanup costs, remediation, and certain other
environmental matters, taking into account, as applicable,
available information regarding site conditions, potential
cleanup methods, estimated costs, and the extent to which other
parties can be expected to contribute to the payment of those
costs. The Company has reached a settlement with its primary
liability insurance carrier providing for coverage for certain
environmental liabilities and has instituted litigation seeking
coverage from certain excess carriers.
The Company has been named, along with numerous other U.S.
prescription drug manufacturers, as a defendant in a large number
of related actions brought by retail pharmacies alleging
violations of federal and state antitrust and pricing laws. The
federal suits include a class action on behalf of the majority of
U.S. retail pharmacies. The Company and several other
manufacturers agreed to settle the federal class action case and
the anticipated settlement was accrued in the fourth quarter of
1995.
The settlement has been approved by the U.S. District Court but
an appeal of that decision is pending. Other related suits,
brought in federal and state courts by several thousand
pharmacies, involve claims of price discrimination or claims
under other pricing laws. Additional cases have been brought on
behalf of consumers in several states.
The environmental liabilities and litigation accruals have been
reflected in the Company's consolidated balance sheet at the
gross amount of approximately $398 million at March 31, 1997.
Estimated insurance recoverables of approximately $254 million
have been reflected as assets in the consolidated balance sheet
at March 31, 1997.
Barr Laboratories, Inc. (Barr) has submitted an Abbreviated New
Drug Application (ANDA) seeking FDA approval to market a generic
form of Prozac several years before expiration of the company's
patents. The ANDA asserts that Lilly's U.S. patents covering
Prozac are invalid and unenforceable. Lilly has filed suit in
federal court in Indianapolis seeking a ruling that Barr's
challenge to Lilly's patents is without merit. While the Company
believes Barr's claims are without merit, there can be no
assurance that the Company will prevail. An unfavorable outcome
of this claim could have a material adverse effect on the
Company's consolidated financial position, liquidity, or results
of operations.
While it is not possible to predict or determine the outcome of
the product liability, antitrust, patent, or other legal actions
brought against the Company or the ultimate cost of environmental
matters, the Company believes that, except as noted above, the
costs associated with all such matters will not have a material
adverse effect on its consolidated financial position or
liquidity but could possibly be material to the results of
operations in any one accounting period.
EARNINGS PER SHARE
Earnings per share are calculated based on the weighted average
number of outstanding common shares.
ACCOUNTING CHANGES
Effective January 1, 1997, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities". This statement requires that each party to a
transfer analyze the components of financial asset transfers and
recognize only assets it controls and liabilities it has
incurred, derecognize assets only when control has been
surrendered and derecognize liabilities only when they have
been extinguished. Adoption of this statement did not have a
material impact on the Company's consolidated results of
operations or financial position.
In February 1997, SFAS No. 128, ``Earnings per Share'', was
issued. The statement must be adopted by the Company on December
31, 1997 for the fourth quarter and the year then ended. Under
provisions of this statement, the Company will be required to
change the method currently used to compute earnings per share as
presented on the income statement and Exhibit 11 to the Form 10-Q
and present both "basic" and "diluted" earnings per share on the
income statement. As a consequence of this change, earnings per
share for previously reported periods will be restated.
Implementation of this standard is not expected to materially
impact earnings per share as reported by the Company.
SUBSEQUENT EVENT
The Company has reached an agreement with The Dow Chemical
Company (Dow) whereby Dow will acquire the Company's 40 percent
interest in DowElanco. The purchase price will be approximately
$1.2 billion resulting in a gain, net of tax, of approximately
$310 to $340 million. The transaction is expected to close by
June 30, 1997, subject to necessary governmental approvals.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OPERATING RESULTS:
The Company's sales for the first quarter increased 10 percent as
compared with the first quarter of 1996. Sales inside the United
States increased 20 percent while sales outside of the United
States decreased 5 percent. Compared with the first quarter of
1996, worldwide sales volume growth of 12 percent and a 1 percent
increase in selling prices were partially offset by unfavorable
exchange rate comparisons of 3 percent.
Worldwide pharmaceutical sales increased 10 percent in the first
quarter compared with the same period last year. Worldwide sales
of three of the Company's newer products contributed $163.4
million to this increase. Zyprexa(TM), launched in the fourth
quarter of 1996, had first quarter sales of $105.4 million,
Gemzar(R) sales grew to $33.1 million, an increase of $29.1
million, and ReoPro(R) sales of $51.7 million reflected an increase
in the quarter of $28.9 million. Prozac sales in the first
quarter of 1997 were $563.4 million, a decrease of 3 percent from
the first quarter of 1996. U.S. sales of Prozac increased 3
percent, but were more than offset by declines in international
sales. The Company expects moderate growth in Prozac sales for
the full year of 1997. Among other major products, Humulin(R)
increased 1 percent to $209.8 million and Axid(R) increased 9
percent to $163.6 million. Health-care-management revenues,
primarily in the U.S., were $117.7 million for the quarter, an
increase of 52 percent. Worldwide anti-infective sales decreased
$42.2 million (11 percent) in the first quarter, due in part to
continued generic competition in certain markets and unfavorable
exchange rates. The primary contributor to the decline was
Ceclor(R), which decreased 11 percent to $140.3 million. The
Company anticipates that 1997 sales of anti-infectives will be
slightly below 1996 levels due largely to continued pricing
pressures.
U.S. pharmaceutical sales and services growth of 21 percent
during the quarter was primarily due to increased volume. The
sales increase was driven by Zyprexa, ReoPro, and Gemzar. Prozac
sales increased 3 percent to $435.7 million in the first quarter,
despite the negative effect of U.S. wholesaler purchasing
patterns. First quarter 1997 Prozac sales were slowed as a
result of wholesaler stocking at the end of 1996. In addition,
sales comparisons were adversely affected by wholesaler stocking
that occurred in the first quarter of 1996. Axid sales increased
to $138.0 million (up 19 percent) in the first quarter, partly
due to the positive effect of wholesaler stocking patterns.
These increases were offset, in part, by a slight decline in
anti-infective sales (3 percent) and decreased Humulin sales (3
percent).
International pharmaceutical sales decreased 5 percent in the
first quarter with volume growth of 6 percent being more than
offset by an 8 percent unfavorable exchange rate impact and a 3
percent reduction in selling prices. Prozac experienced a 17
percent decline in sales due to continuing generic competition in
Canada and Australia, unfavorable exchange rates, and competitive
pressures in France. Anti-infective sales decreased 14 percent
in the quarter due in part to unfavorable exchange rates and a
mild flu season in Europe. These decreases were offset somewhat
by increased sales of Humulin, Zyprexa, Gemzar, and ReoPro.
Worldwide sales of animal health products increased 1 percent
over the first quarter of 1996 driven by volume growth of 4
percent.
Cost of sales decreased in the first quarter to 27.7 percent of
sales from 29.0 percent of sales in the same quarter of 1996.
This decrease is primarily the result of continued productivity
improvements, enhanced plant utilization, and favorable changes
in product mix. These improvements were offset in part by
increased health-care-management service revenues, which have
lower margins than pharmaceutical products. For the year,
the Company anticipates that cost of sales as a percent of
sales will increase slightly from 1996 levels as reductions in
costs as a percent of sales for the core pharmaceutical business
will likely be more than offset by increases in revenues from
health-care-management services.
Operating expenses increased 5 percent in the first quarter
compared with the same period in 1996. The increase reflects a 9
percent growth in research and development due to clinical trial
expenditures and increased activity under research
collaborations. Marketing and administrative expenses increased
only 3 percent from the first quarter of 1996, largely as a
result of cost-containment and expense-management programs put in
place in the last half of 1996. The Company expects additional
growth in marketing and administrative expenses in 1997 primarily
to support the global sales of its newer products and anticipated
future product launches.
Compared to the first quarter of 1996, interest expense decreased
$9.3 million (13 percent) due to a decline in the Company's
short-term borrowings.
Net other expense for the quarter was $66 million higher than the
first quarter of 1996. This increase results from a $24 million
one-time charge in the first quarter of 1997 related to the
discontinuance of a research collaboration with Somatogen, Inc.
and reduced income from licensing agreements in comparison with
the first quarter of 1996.
The Company's estimated tax rate was 25.0 percent in the first
quarter of 1997 versus a tax rate of 25.7 percent in the first
quarter of 1996. The estimated effective tax rate for the first
quarter of 1997 essentially equals the annual 1996 rate of 25
percent. The decline from the first quarter of 1996 is primarily
the result of changes in the mix of earnings between
jurisdictions having differing tax rates and the effectiveness of
various tax planning strategies. The Company expects current tax
strategies will allow its 1997 effective tax rate to remain
approximately the same as the 1996 annual rate.
As a consequence of the growth in sales-related gross margins and
the reduced estimated tax rate, partially offset by modest
operating expense growth and increased other expenses, net income
of $432.6 million and earnings per share of $0.79 both reflected
an 11 percent increase compared to the first quarter of 1996.
Without the one-time charge related to Somatogen, earnings per
share would have been $0.82, a 15 percent increase.
FINANCIAL CONDITION
As of March 31, 1997, cash, cash equivalents, and short term
investments totaled $1.1 billion as compared with $955 million at
December 31, 1996. Total debt at March 31, 1997, was $3.8
billion, an increase of approximately $100 million from December
31, 1996. The increase primarily reflects additional borrowings
necessary to fund normal seasonal operating needs. Short-term
debt aggregating $1.3 billion is primarily in the form of
commercial paper.
The Company believes that cash generated from operations, along
with available cash and cash equivalents, will be sufficient to fund
essentially all the Company's operating needs, including debt
service, capital expenditures, and dividends for the remainder of
1997. The Company believes that amounts available through
existing commercial paper programs should be adequate to fund
maturities of short-term borrowings. The outstanding commercial
paper is also backed by committed bank credit facilities.
The Company continues to evaluate the recoverability of PCS
Health Systems, Inc.'s (PCS) long-lived assets, including
intangibles, pursuant to Statement of Financial Accounting
Standards (SFAS) No. 121. In performing its past review under
SFAS No. 121, the Company compared expected undiscounted cash
flows to the carrying value of PCS'long-lived assets, which
aggregate to approximately $3.8 billion. Past estimates of the
undiscounted cash flows from PCS indicated that PCS' carrying
value was expected to be recovered over the remaining life of the
assets. While revenues and profits are growing and new
capabilities are being developed, the rapidly changing,
competitive and highly regulated nature of PCS' business
environment has prevented the Company from significantly
increasing PCS' operating profits from levels prior to the
acquisition. Further, the Company has been unable to attract
suitable
pharmaceutical co-investors that could benefit from and further
expand the capabilities of PCS. The Company is continuing to
update its assessment as additional information becomes available.
Accordingly, it is reasonably possible that the Company's estimate
of PCS' undiscounted cash flows could change in the near term.
If the estimated cash flows fall below the carrying amount of the
assets, an impairment loss would be recognized. The Company would
be required to reduce the carrying value of PCS to current fair
value which would be significantly less than the current carrying
value.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
Under the safe harbor provisions of the Private Securities
Litigation Reform Act Of 1995, the Company cautions investors
that any forward-looking statements or projections made by the
Company are subject to risks and uncertainties which may cause
actual results to differ materially from those projected.
Economic, competitive, governmental, technological, and other
factors which may affect the Company's operations are discussed
in Exhibit 99 to this Form 10-Q filing.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Pricing Litigation. Reference is made to the discussion of In re
Brand Name Prescription Drugs Antitrust Litigation (MDL No. 997)
and related cases contained in the Company's Form 10-K for the year
ended December 31, 1996, under Part I, Item 3, "Legal Proceedings".
Certain of the class plaintiffs in the Federal Class Action have
brought a separate suit in federal court in the Northern District
of Illinois against the Company and other defendants who were part
of the settlement of the Federal Class Action. The suit alleges
that the defendants conspired to delay implementation of certain
non-monetary commitments of the settlement agreement. These
plaintiffs are seeking a preliminary injunction compelling the
defendants to comply with certain portions of the settlement
agreement notwithstanding that it is subject to an appeal. The
Company and other defendants have sought a stay of the matter
pending a ruling by the Seventh Circuit on the appeal of the
settlement agreement.
There have also been developments in some of the related state
court cases. Among the consumer cases, the Florida and Tennessee
cases now include consumer protection law claims under state unfair
trade practices statutes. The Tennessee consumer case has been
removed to federal court. Plaintiffs have sought to remand the
case to state court and defendants have petitioned to transfer the
case to the MDL court in Chicago. In the Alabama retailer case, a
trial date has been set for October, 1997. In the Alabama consumer
case, pending in federal court in Chicago, the Seventh Circuit
Court of Appeals recently agreed to review the propriety of federal
jurisdiction over the lawsuit.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following documents are filed as exhibits to
this Report:
11. Statement re: Computation of Earnings Per Share on
Primary and Fully Diluted Bases
12. Statement re: Computation of Ratio of Earnings from
Continuing Operations to Fixed Charges
27. Financial Data Schedule
99. Cautionary Statement Under Private Securities
Litigation Reform Act of 1995 - "Safe Harbor"
for Forward-Looking Disclosures
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the first quarter
of 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
ELI LILLY AND COMPANY
(Registrant)
Date May 15, 1997 S/Daniel P. Carmichael
Daniel P. Carmichael
Secretary and Deputy General Counsel
Date May 15, 1997 S/Arnold C. Hanish
Arnold C. Hanish
Director, Corporate Accounting and
Chief Accounting Officer
INDEX TO EXHIBITS
The following documents are filed as a part of this Report:
Exhibit
11. Statement re: Computation of Earnings Per
Share on Primary and Fully Diluted Bases
12. Statement re: Computation of Ratio of Earnings
from Continuing Operations to Fixed Charges
27. Financial Data Schedule
99. Cautionary Statement Under Private Securities
Litigation Reform Act of 1995 - "Safe Harbor" for
Forward-Looking Disclosures
EXHIBIT 11. STATEMENT RE: COMPUTATION OF EARNINGS PER
SHARE ON PRIMARY
AND FULLY DILUTED BASES
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months Ended
March 31,
1997 1996
(Dollars in millions
except per-share data)
(Shares in thousands)
PRIMARY:
Net income ........................... $432.6 $389.2
Preferred stock dividends ............ (.6) -
Adjusted net income .................. 432.0 389.2
Average number of common shares
outstanding .......................... 549,468 546,314
Incremental shares -
stock plans and contingent payments 16,797 13,908
Adjusted average shares .............. 566,265 560,222
Primary earnings per share ........... $ .76 $ .69
FULLY DILUTED:
Net income ........................... $432.6 $389.2
Preferred stock dividends ............ (.6) -
Adjusted net income .................. 432.0 389.2
Average number of common shares
outstanding .......................... 549,468 546,314
Incremental shares -
stock plans and contingent payments 16,797 16,043
Adjusted average shares .............. 566,265 562,357
Fully diluted earnings per share ..... $ .76 $ .69
Common stock equivalents are not materially dilutive and,
accordingly, have not been considered in the computation
of reported net earnings per common share.
EXHIBIT 12. STATEMENT RE: COMPUTATION OF RATIO OF
EARNINGS FROM CONTINUING
OPERATIONS TO FIXED CHARGES
(Unaudited)
Eli Lilly and Company and Subsidiaries
(Dollars in Millions)
Three Months
Ended
March 31, Years Ended December 31,
1997 1996 1995 1994 1993 1992
Consolidated Pretax
Income from Continuing
Operations before
Accounting Changes... $576.8 $2,031.3 $1,765. $1,698.6 $662.8 $1,193.5
Interest from Continuing
Operations........... 68.5 324.9 324.6 129.2 96.1 108.4
Interest Capitalized
during the Period
from Continuing
Operations........... (7.9) (36.1) (38.3) (25.4) (25.5) (35.2)
Earnings............. $637.4 $2,320.1 $2,051.9 $1,802.4 $733.4 $1,266.7
Fixed Charges(1)..... $ 69.4 $ 329.6 $ 324.6 $ 129.2 $ 96.1 $ 108.4
Ratio of Earnings to
Fixed Charges........ 9.2 7.0 6.3 14.0 7.6 11.7
(1)Fixed charges include interest from continuing operations
for all years presented and beginning in 1996, preferred
stock dividends.
EXHIBIT 99 CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 - ``SAFE HARBOR''
FOR FORWARD-LOOKING DISCLOSURES
Certain forward-looking statements are included in this Form
10-Q and may be made by Company spokespersons based on
current expectations of management. All forward-looking
statements made by the Company are subject to risks and
uncertainties. Certain factors, including but not limited
to those listed below, may cause actual results to differ
materially from current expectations and historical results.
- Economic factors over which the Company has no control,
including changes in inflation, interest rates and foreign
currency exchange rates.
- Competitive factors including generic competition as
patents on key products, such as Prozac, expire; pricing
pressures, both in the U.S. and abroad, primarily from
managed care groups and government agencies; and
technological advances and patents obtained by
competitors.
- Governmental factors including laws and regulations and
judicial decisions at the state and federal level related
to Medicare, Medicaid and healthcare reform; and laws and
regulations affecting international pricing and
pharmaceutical reimbursement.
- The difficulties and uncertainties inherent in new product
development. New product candidates that appear promising
in development may fail to reach the market because of
efficacy or safety concerns, inability to obtain necessary
regulatory approvals, difficulty or excessive costs to
manufacture, or infringement of the patents or intellectual
property rights of others.
- Delays and uncertainties in the FDA approval process and
the approval processes in other countries, resulting in
lost market opportunity.
- Unexpected safety or efficacy concerns arising with
respect to marketed products, whether or not scientifically
justified, leading to product recalls, withdrawals or
declining sales.
- Legal factors including unanticipated litigation of
product liability claims; antitrust litigation;
environmental matters; and patent disputes with competitors
which could preclude commercialization of products or
negatively affect the profitability of existing products.
- Future difficulties obtaining or the inability to obtain
existing levels of product liability insurance.
- Changes in tax laws, including the amendment to the
Section 936 income tax credit, and future changes in tax
laws related to the remittance of foreign earnings or
investments in foreign countries with favorable tax rates.
- Changes in accounting standards promulgated by the
Financial Accounting Standards Board, the Securities and
Exchange Commission, and the American Institute of
Certified Public Accountants which are adverse to the
Company.
- Factors such as changes in business strategies and the
impact of restructurings, impairments in asset carrying
values and business combinations.