<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
Commission File No. 1-3305
MERCK & CO., INC.
P. O. Box 100
One Merck Drive
Whitehouse Station, N.J. 08889-0100
(908) 423-1000
<TABLE>
<S> <C>
Incorporated in New Jersey I.R.S. Employer Identification
No. 22-1109110
</TABLE>
The number of shares of common stock outstanding as of the close of business on
October 31, 1994:
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
----- ----------------------------
<S> <C>
Common Stock 1,258,365,534
</TABLE>
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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------
<PAGE> 2
Part I - Financial Information
- ------------------------------
MERCK & CO., INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
--------------------------------------------------------------
($ in millions except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- ---------------------
1994 1993 1994 1993
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Sales $3,792.0 $2,544.1 $11,098.3 $7,497.4
-------- -------- --------- --------
Costs and Expenses
Materials and production 1,451.9 538.6 4,436.1 1,658.9
Marketing and administrative 820.7 711.5 2,303.3 2,135.8
Research and development 308.4 287.6 865.6 818.6
Restructuring charge - - - 775.0
Other (income) expense, net 39.3 .3 163.8 (33.3)
-------- -------- --------- --------
2,620.3 1,538.0 7,768.8 5,355.0
-------- -------- --------- --------
Income Before Taxes 1,171.7 1,006.1 3,329.5 2,142.4
Taxes on Income 386.9 300.4 1,105.4 650.4
-------- -------- --------- --------
Net Income $ 784.8 $ 705.7 $ 2,224.1 $1,492.0
======== ======== ========= ========
Per Share of Common Stock:
Net Income $ .62 $ .62 $1.77 $1.31
Dividends Declared $ .30 $ .28 $ .86 $ .78
Average Number of Common
Shares Outstanding (millions) 1,260.9 1,136.0 1,257.9 1,139.2
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 1 -
<PAGE> 3
MERCK & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
----------------------------------------
($ in millions)
<TABLE>
<CAPTION>
September 30 December 31
1994 1993
------------ -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,213.0 $ 829.4
Short-term investments 1,193.1 712.9
Accounts receivable 2,148.8 2,094.3
Inventories 1,589.5 1,641.7
Prepaid expenses and taxes 472.6 456.3
--------- ---------
Total Current Assets 6,617.0 5,734.6
--------- ---------
Investments 1,545.4 1,779.9
Property, Plant and Equipment, at cost,
net of allowance for depreciation of
$2,525.7 in 1994 and $2,278.2 in 1993 5,220.4 4,894.6
Goodwill and Other Intangibles,
net of accumulated amortization of
$229.1 in 1994 and $97.2 in 1993 6,684.2 6,645.5
Other Assets 1,053.1 872.9
--------- ---------
$21,120.1 $19,927.5
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 2,485.0 $ 2,378.3
Loans payable 961.6 1,736.0
Income taxes payable 1,794.7 1,430.4
Dividends payable 379.2 351.0
--------- ---------
Total Current Liabilities 5,620.5 5,895.7
--------- ---------
Long-Term Debt 1,103.8 1,120.8
--------- ---------
Deferred Income Taxes and Noncurrent Liabilities 1,881.3 1,744.9
--------- ---------
Minority Interests 1,257.1 1,144.4
--------- ---------
Stockholders' Equity
Common stock
Authorized - 2,700,000,000 shares
Issued - 1,482,609,850 shares - 1994
- 1,480,611,247 shares - 1993 4,612.9 4,576.5
Retained earnings 10,557.5 9,393.2
--------- ---------
15,170.4 13,969.7
Less treasury stock, at cost
221,503,746 shares - 1994
226,676,597 shares - 1993 3,913.0 3,948.0
--------- ---------
Total Stockholders' Equity 11,257.4 10,021.7
--------- ---------
$21,120.1 $19,927.5
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 2 -
<PAGE> 4
MERCK & CO., INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
---------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
Nine Months
Ended September 30
-----------------------
1994 1993
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,224.1 $ 1,492.0
Restructuring charge - 775.0
Adjustments to net income 610.4 (116.7)
Net changes in assets and liabilities 301.9 (17.5)
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,136.4 2,132.8
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (720.2) (690.9)
Purchase of securities, subsidiaries and other investments (10,940.9) (6,985.7)
Proceeds from sale of securities, subsidiaries and
other investments 10,700.4 7,495.4
Other (47.5) -
---------- ---------
NET CASH USED BY INVESTING ACTIVITIES (1,008.2) (181.2)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings (779.4) (251.7)
Proceeds from issuance of debt 179.1 100.0
Payments on debt (131.0) (13.8)
Purchase of treasury stock (109.1) (371.0)
Dividends paid to stockholders (1,055.0) (856.3)
Other 69.9 27.7
---------- ---------
NET CASH USED BY FINANCING ACTIVITIES (1,825.5) (1,365.1)
---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 80.9 35.8
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 383.6 622.3
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 829.4 575.1
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,213.0 $ 1,197.4
========== =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
Notes to Financial Statements
- -----------------------------
1. The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations for reporting on Form
10-Q. Accordingly, certain information and footnotes required by
generally accepted accounting principles for complete financial
statements are not included herein. The interim statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's latest Annual Report on Form 10-K.
Interim statements are subject to possible adjustments in connection with
the annual audit of the Company's accounts for the full year 1994; in the
Company's opinion, all adjustments necessary for a fair presentation of
these interim statements have been included and are of a normal and
recurring nature.
- 3 -
<PAGE> 5
Notes to Financial Statements (continued)
- -----------------------------
2. Inventories consisted of:
<TABLE>
<CAPTION>
($ in millions)
-----------------------------
September 30 December 31
1994 1993
------------ -----------
<S> <C> <C>
Finished goods $ 930.4 $1,024.4
Raw materials and work in process 597.3 570.6
Supplies 80.9 65.8
--------- --------
Total (approximates current cost) 1,608.6 1,660.8
Reduction to LIFO cost 19.1 19.1
--------- --------
$ 1,589.5 $1,641.7
========= ========
</TABLE>
3. In August 1994, the Company issued a $200.0 million three-year zero coupon
note, for net proceeds of $165.5 million. The 5.97% fixed rate inherent
in the note was swapped for a floating rate slightly below commercial
paper rates. The effect on long-term debt of the issuance of the zero
coupon note was offset by conversion of $128.6 million Medco convertible
debentures.
4. Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities, which requires certain
investments to be recorded at fair value or amortized cost. In accordance
with this Statement, the Company has classified its investments as
available-for-sale and held-to-maturity. Available-for-sale investments
are carried at fair value with unrealized gains and losses recorded, net
of tax and minority interest, in Stockholders' Equity and held-to-maturity
investments are carried at amortized cost. Prior to 1994, the Company's
investments were carried at the lower of cost or market. At January 1,
1994, the net unrealized gain associated with available-for-sale
investments of $37.5 million, net of tax and minority interest, was
included in Retained earnings. The net unrealized gain included in
Retained earnings at September 30, 1994, amounted to $23.4 million, net of
tax and minority interest.
5. Sales consisted of:
<TABLE>
<CAPTION>
($ in millions)
-----------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
------------------- -------------------
1994* 1993 1994* 1993
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Human and Animal Health Products
and Services:
Cardiovasculars $1,314.8 $1,176.5 $ 3,850.4 $3,466.8
Anti-ulcerants 465.8 351.2 1,293.2 978.9
Antibiotics 202.0 208.9 603.3 642.3
Vaccines/biologicals 155.9 143.6 373.9 396.8
Ophthalmologicals 128.6 115.1 345.4 331.7
Anti-inflammatories/analgesics 64.2 82.4 192.8 249.3
Other Merck human health 85.0 121.3 321.7 341.8
Other human health 999.2 - 3,042.4 -
Animal health/crop protection 269.0 244.3 765.4 680.6
-------- -------- --------- --------
3,684.5 2,443.3 10,788.5 7,088.2
Specialty Chemical Products 107.5 100.8 309.8 409.2
-------- -------- --------- --------
$3,792.0 $2,544.1 $11,098.3 $7,497.4
======== ======== ========= ========
</TABLE>
* Sales by therapeutic class include Medco and West Point Pharma (Merck's
generic pharmaceutical division) sales of Merck products. Medco and West
Point Pharma sales of non-Merck products and Medco services are included
in Other human health.
- 4 -
<PAGE> 6
Notes to Financial Statements (continued)
- -----------------------------
6. Other (income) expense, net, consisted of:
<TABLE>
<CAPTION>
($ in millions)
---------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1994 1993 1994 1993
------ ------ ------- -------
<S> <C> <C> <C> <C>
Interest income $(37.0) $(34.8) $(111.0) $(103.0)
Interest expense 31.0 20.7 97.0 62.0
Exchange (gains) losses (6.1) 16.1 26.9 41.7
Minority interests 19.1 12.8 72.5 31.1
Amortization of goodwill
& other intangibles 44.7 5.0 131.9 10.3
Other income, net (12.4) (19.5) (53.5) (75.4)
------ ------ ------- -------
$ 39.3 $ .3 $ 163.8 $ (33.3)
====== ====== ======= =======
</TABLE>
Minority interests include third parties' share of exchange gains and
losses arising from translation of the financial statements into U.S.
dollars.
Interest paid for the nine-month period ended September 30, 1994 and 1993
was $84.7 million and $59.5 million, respectively.
7. Income taxes paid for the nine-month period ended September 30, 1994 and
1993 were $624.0 million and $646.3 million, respectively.
8. As a consequence of the June 1993 sale of the Calgon Water Management
business and the November 1993 acquisition of Medco Containment Services,
Inc. the relative importance of the Company's Specialty Chemical
operations has substantially diminished in 1994 and management views its
Human and Animal Health business as a dominant industry segment.
9. Legal proceedings to which the Company is a party are discussed in Part I
Legal Proceedings, in the Annual Report on Form 10-K. There were no
material developments in the three-month period ended September 30, 1994.
- 5 -
<PAGE> 7
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION
------------------------------------------------------
Net income for the third quarter was $784.8 million, an increase of 11% over
the third quarter of 1993. Earnings per share for the third quarter were
$0.62, level with the third quarter of 1993. The dilution in the earnings per
share growth in 1994 is principally due to the additional shares issued in
November 1993 to complete the Medco acquisition. Sales for the quarter were
$3.8 billion, up 49% from the same period last year.
For the first nine months, net income was $2,224.1 million, an increase of 10%
from the first nine months of 1993, excluding the effect of the 1993
restructuring charge. Earnings per share on this basis were $1.77 for the
first nine months, level with the first nine months of 1993 which were also
impacted by the shares issued to complete the Medco acquisition. Sales rose
48% to $11.1 billion.
Sales for the quarter and the first nine months were affected by the Medco
acquisition in 1993 and the nine months results were also impacted by the sale
of the Calgon Water Management business in the second quarter of 1993.
Adjusting for these effects, sales for the third quarter and first nine months
increased 15% and 17%, respectively.
The difference between the aforementioned sales and net income growth rates on
a year-to-year basis stems predominantly from the lower gross margins and lower
marketing and administrative cost and expense levels, relative to sales,
historically associated with Medco's business.
Sales growth for the first nine months was led by newer products and the
continued growth of Merck-Medco Managed Care. Both our domestic and
international operations reported solid unit volume gains. Sales of Merck
human and animal health products and services increased 11% for the third
quarter. Foreign exchange had a one percentage point favorable effect on the
third quarter sales growth as compared to essentially no impact on the second
quarter. The effect of pricing actions reduced the third quarter sales growth
by almost two percentage points, primarily as a result of sales of human and
animal health products in certain international markets.
Sales outside the United States accounted for 32% of the first nine months of
1994 sales, compared with 45% for the same period last year. The 13 point
shift is principally due to higher domestic sales as a result of the Medco
acquisition.
Income growth for the first nine months resulted from strong unit volume gains.
The unfavorable effects of inflation, product mix and a higher tax rate were
offset by cost controls and productivity improvements from our continuing
efforts to streamline and restructure our operations.
In the human and animal health products segment of Merck's business, results
for the first nine months were paced by unit sales gains by 'Vasotec',
'Vaseretic', 'Prinivil', 'Zocor', 'Prilosec', 'Pepcid', 'Proscar' and
ivermectin. Significant volume growth in Merck-Medco Managed Care added to the
nine month sales increase.
'Vasotec', Merck's angiotensin converting enzyme (ACE) inhibitor for reducing
high blood pressure and treating heart failure, is sold in all major markets
and continues to be the leading branded product in the worldwide cardiovascular
market. New Federal guidelines for the treatment of heart failure -- which are
based on the results of the latest clinical trials and outcomes research --
call for wider use of ACE inhibitors.
- 6 -
<PAGE> 8
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued)
- ------------------------------------------------------
Together, Merck's cholesterol-lowering agents, 'Mevacor' and 'Zocor' hold over
40% of the worldwide cholesterol-lowering market and continued solid sales
growth for the first nine months of 1994. Unit sales for 'Mevacor', however,
were down due to strong competition and the lower rate of growth in the
cholesterol-lowering market in the United States. 'Mevacor' is the most widely
prescribed cholesterol-lowering agent in the treatment of patients with primary
elevated cholesterol in the United States. Out of the 13 million people in the
United States who could benefit from treatment with cholesterol-lowering
agents, only 6.8 million are being treated. Merck continues strategic
initiatives to increase appropriate usage.
'Pepcid', an H2-receptor antagonist for treatment of duodenal ulcers and the
short-term treatment of gastric ulcers and gastroesophageal reflux disease
(GERD), continues to grow rapidly in the United States and maintains its
position against strong competition outside the United States. A New Drug
Application has been filed with the U.S. Food and Drug Administration for an
over-the-counter version. Over-the-counter versions of 'Pepcid' have been
launched in the United Kingdom and in New Zealand.
'Prilosec', which is indicated for poorly responsive symptomatic GERD and as a
first-line therapy for short-term treatment of active duodenal ulcers and
severe erosive esophagitis, continues to show strong volume growth.
'Proscar' recorded significant volume growth in the first nine months of 1994.
It is the only drug indicated to treat symptomatic benign prostate enlargement
that shrinks the prostate. 'Proscar', developed to treat a common condition
that affects the majority of men over the age of 50, has been introduced in
over 50 countries, representing nearly every major market including the United
States. The Company is continuing an extensive medical and consumer education
program worldwide to heighten awareness of the disease, improve understanding
of its natural history and communicate the effects of treatment with 'Proscar',
including new direct-to-consumer ads for 'Proscar' in the United States.
Ivermectin, Merck's broad-spectrum antiparasitic and the world's leading animal
health product, continues to show strong growth.
'Fosamax', Merck's new medicine for the treatment of post-menopausal
osteoporosis, was launched in Italy in November 1993 and has been cleared for
marketing in Mexico. Regulatory filings have been made in 32 countries to date
and a filing in the United States is scheduled for 1995.
Cozaar (TM), Merck's new once daily antihypertensive product, was cleared for
marketing recently in Sweden and Denmark and is expected to be launched in
these countries shortly. Marketing applications for the treatment of
hypertension have been submitted in the United States and other countries, and
applications have also been made in the United States and France for a
combination of Cozaar (TM) and hydrochlorothiazide (a diuretic), which is
called Hyzaar (TM). Cozaar (TM) is the first in a new class of drugs that
blocks a substance called angiotensin II, a potent elevator of blood pressure.
Cozaar (TM) has been developed in collaboration with The DuPont Merck
Pharmaceutical Company.
Unit sales declined for a group of longer-established human and animal health
products due to competition.
- 7 -
<PAGE> 9
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued)
- ------------------------------------------------------
Merck-Medco Managed Care currently manages pharmaceutical benefits for
approximately 38 million plan participants, up from 33 million at the time of
the merger announcement. Merck-Medco is developing a series of disease
management programs based on patient, pharmacist and physician communication
and intervention to improve drug therapy, promote better health outcomes and
lower the long-term costs of care associated with certain chronic diseases.
On August 16, 1994, the Company announced its intention to sell its remaining
specialty chemical units, Kelco and Calgon Vestal Laboratories. The decision
reflects the Company's intention to focus its resources more fully on its human
and animal health business. On November 3, 1994 the Company announced the
signing of a definitive agreement for the sale of Calgon Vestal Laboratories to
ConvaTec, a division of Bristol-Myers Squibb, for a cash purchase price of
$261.5 million. Neither business is significant to the Company's financial
position or ongoing results of operation.
In September 1994, the Company resumed its 1993 treasury stock buy back program
which was suspended in July 1993 in anticipation of the Medco acquisition.
On November 1, 1994, Astra AB paid the Company $820.0 million for an interest
in a joint venture. The venture will be carried on in a company called Astra
Merck, Inc., in which Merck and Astra each own a 50 percent share. The payment
to Merck will result in an estimated after-tax gain of approximately $275.0
million. The transaction is not expected to have a material impact on the
Company's ongoing results of operations. However, the transaction will affect
the Company's future sales-growth rates, since Astra Merck product sales will
no longer be reported as Merck sales. Sales of Astra Merck products were
$696.5 million for the nine months ended September 30, 1994.
In November 1994, the Company issued a 200.0 million three-year Swiss franc
note. The 5.375% fixed rate inherent in the note was swapped for a floating
rate slightly below commercial paper rates and is payable in U.S. dollars. The
debt was effectively converted into approximately $156.0 million U.S. dollars
through a currency swap under which the Company will exchange U.S. dollars for
Swiss francs at maturity.
- 8 -
<PAGE> 10
Part II - Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit
-------
<TABLE>
<CAPTION>
Number Description Method of Filing
------ ----------- ----------------
<S> <C> <C>
11 Computation of Earnings Filed with this document
Per Common Share
12 Computation of Ratios of Filed with this document
Earnings to Fixed Charges
27 Financial Data Schedule Filed with this document
</TABLE>
(b) Reports on Form 8-K
-------------------
During the three-month period ending September 30, 1994, the
following report was filed on Form 8-K under Item 5, Other Events:
1. The report dated August 16, 1994 and filed August 17, 1994
announcing Registrant's intention to sell its specialty
chemical units, Kelco and Calgon Vestal Laboratories.
- 9 -
<PAGE> 11
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.
MERCK & CO., INC.
/s/ Mary M. McDonald
---------------------------
Date: November 10, 1994 MARY M. MCDONALD
Senior Vice President and
General Counsel
/s/ Peter E. Nugent
---------------------------
Date: November 10, 1994 PETER E. NUGENT
Vice President, Controller
- 10 -
<PAGE> 12
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
11 Computation of Earnings Per Common Share
12 Computation of Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 11
MERCK & CO., INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
----------------------------------------
(In millions except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income and Adjusted Earnings:
- ---------------------------------
Net Income..................................... $ 784.8 $ 705.7 $2,224.1 $1,492.0
Effect on Earnings of Compensation Expense on
Stock Option and Executive Incentive Plans... 2.6 .7 3.6 4.5
Effect on Earnings of Interest on
Debentures Issued by Medco................... (.1) - .1 -
Adjusted Earnings for Fully Diluted -------- -------- -------- --------
Earnings Per Share........................... $ 787.3 $ 706.4 $2,227.8 $1,496.5
======== ======== ======== ========
Weighted Average Shares and Share
Equivalents Outstanding:
- ---------------------------------
Weighted Average Shares Outstanding (As Reported) 1,260.9 1,136.0 1,257.9 1,139.2
Common Share Equivalents Issuable
Under Stock Option Plans .................... 16.9 4.2 16.8 5.7
Common Shares Issuable Under
Executive Incentive Plans.................... 1.9 2.0 1.9 2.0
Common Share Equivalents Issuable on Assumed
Conversion of Debentures Issued by Medco..... 1.3 - 1.3 -
Weighted Average Shares and -------- -------- -------- --------
Share Equivalents Outstanding................ 1,281.0 1,142.2 1,277.9 1,146.9
======== ======== ======== ========
Earnings Per Share (As Reported):
Net Income..................................... $ .62 $ .62 $ 1.77 $ 1.31
======== ======== ======== ========
Fully Diluted Earnings Per Share: (a)
- ---------------------------------
Fully Diluted Earnings Per Share............... $ .61 $ .62 $ 1.74 $ 1.30
======== ======== ======== ========
</TABLE>
(a) This calculation is submitted in accordance with the
regulations of the Securities and Exchange Commission although
not required by APB Opinion No. 15 because it results in
dilution of less than 3%.
<PAGE> 1
Exhibit 12
MERCK & CO., INC. AND SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
--------------------------------------------------
(In millions except ratio data)
<TABLE>
<CAPTION>
Nine Months
Ended
Sept. 30, Years Ended December 31
----------------------------------------------------
1994 1993 1992 1991 1990 1989
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Income Before Taxes
and Cumulative Effect
of Accounting Changes $3,329.5 $3,102.7 $3,563.6 $3,166.7 $2,698.8 $2,283.0
-------- -------- -------- -------- -------- --------
Add:
One-third of Rents 27.5 35.0 34.0 31.1 26.5 20.0
Interest Expense,(Net) 78.9 48.0 23.6 26.0 51.9 45.5
-------- -------- -------- -------- -------- --------
Income as Adjusted $3,435.9 $3,185.7 $3,621.2 $3,223.8 $2,777.2 $2,348.5
======== ======== ======== ======== ======== ========
Fixed Charges
One-third of Rents $ 27.5 $ 35.0 $ 34.0 $31.1 $26.5 $20.0
Interest Expense 97.0 84.7 72.7 68.7 69.8 53.2
------ ------ ------ ----- ----- -----
Fixed Charges $124.5 $119.7 $106.7 $99.8 $96.3 $73.2
====== ====== ====== ===== ===== =====
Ratio of Earnings
to Fixed Charges 28 27 34 32 29 32
-- -- -- -- -- --
</TABLE>
For purposes of computing these ratios, "earnings" consist of income before
taxes and cumulative effect of accounting changes, one-third of rents (deemed
by the Company to be representative of the interest factor inherent in rent),
and interest expense, net of amounts capitalized. "Fixed charges" consist of
one-third of rents and interest expense as reported in the Company's
consolidated financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE INTERIM CONSOLIDATED STATEMENT OF INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1994 AND THE CONSOLIDATED BALANCE
SHEET AS OF SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,213
<SECURITIES> 1,193
<RECEIVABLES> 2,149
<ALLOWANCES> 0<F1>
<INVENTORY> 1,590
<CURRENT-ASSETS> 6,617
<PP&E> 7,746
<DEPRECIATION> (2,526)
<TOTAL-ASSETS> 21,120
<CURRENT-LIABILITIES> 5,621
<BONDS> 1,104
<COMMON> 4,613
0
0
<OTHER-SE> 14,471
<TOTAL-LIABILITY-AND-EQUITY> 21,120
<SALES> 11,098
<TOTAL-REVENUES> 11,098
<CGS> 4,436
<TOTAL-COSTS> 4,436
<OTHER-EXPENSES> 866
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 3,330
<INCOME-TAX> 1,105
<INCOME-CONTINUING> 2,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,224
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.74
<FN>
<F1>NOT MATERIAL TO THE CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
