<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
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 Number 1-2516
PHARMACIA CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 43-0420020
(State of incorporation) (I. R. S. Employer
Identification No.)
</TABLE>
Pharmacia Corporation, 100 Route 206 North, Peapack, NJ 07977
(Address of principal executive offices) (Zip Code)
Registrant's telephone number 908/901-8000
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 twelve 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, $2 Par Value, outstanding as of August 4,
2000 was 1,297,731,970.
Page 1 of 32 pages
The exhibit index is set forth on page 30
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QUARTERLY REPORT ON FORM 10-Q
PHARMACIA CORPORATION
QUARTER ENDED JUNE 30, 2000
INDEX OF INFORMATION INCLUDED IN REPORT
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<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION .............................................................. 3
Item 1. Financial Statements ................................................................ 3
Consolidated Statement of Earnings ........................................................ 3
Condensed Consolidated Statements of Cash Flows ........................................... 4
Condensed Balance Sheets .................................................................. 5
Notes to Consolidated Financial Statements -Unaudited ..................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................................... 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk .......................... 25
PART II - OTHER INFORMATION ................................................................. 26
Item 1. Legal Proceedings ................................................................... 26
Item 4. Submission of Matters to a Vote of Security Holders ................................. 27
Item 5. Other Information ................................................................... 28
Item 6. Exhibits and Reports on Form 8-K .................................................... 29
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PHARMACIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In millions of U.S. dollars, except per-share data) (Unaudited)
<TABLE>
<CAPTION>
For Three Months For Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 5,029 $ 4,359 $ 9,322 $ 8,459
Cost of products sold 1,510 1,357 2,915 2,734
Research and development 721 679 1,421 1,389
Selling, general and administrative 1,754 1,389 3,356 2,758
Amortization and adjustment of goodwill 145 67 202 128
Interest expense 104 116 201 221
Interest income (25) (22) (54) (50)
Merger and restructuring 111 -- 572 --
All other, net 28 (35) (31) (41)
-------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes 681 808 740 1,320
Provision for income taxes 243 290 262 470
-------------------------------------------------------------------------------------------------
Earnings from continuing operations 438 518 478 850
Discontinued operations
Earnings from discontinued
operations, net of tax -- 18 -- 30
Loss on sale of discontinued
operations, net of tax (59) -- (1) --
-------------------------------------------------------------------------------------------------
Earnings before cumulative effect
of accounting change 379 536 477 880
Cumulative effect of a change in
accounting principle, net of tax -- -- -- (20)
-------------------------------------------------------------------------------------------------
Net earnings $ 379 $ 536 $ 477 $ 860
=================================================================================================
Net earnings per common share:
Basic
Earnings from continuing operations $ .34 $ .41 $ .37 $ .67
Net earnings .30 .43 .37 .68
Diluted
Earnings from continuing operations .33 .40 .36 .66
Net earnings .29 .42 .36 .67
=================================================================================================
</TABLE>
See accompanying notes.
3
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PHARMACIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of U.S. dollars) (Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
Net cash (required) by continuing operations $ (450) $ (321)
Net cash (required) provided by discontinued operations (1) 208
-------------------------------------------------------------------------------------
Net cash (required) by operations (451) (113)
-------------------------------------------------------------------------------------
Cash flows provided (required) by investment activities:
Proceeds from sale of subsidiaries 75 35
Additions of properties (643) (613)
Proceeds from sales of investments 91 399
Purchases of investments (174) (101)
Proceeds from sale of discontinued operations, net 1,077 --
Other (51) (117)
-------------------------------------------------------------------------------------
Net cash provided (required)
by investment activities 375 (397)
-------------------------------------------------------------------------------------
Cash flows (required) provided by financing activities:
Proceeds from issuance of debt 12 72
Repayment of debt (379) (161)
Payments of ESOP debt (31) (22)
Net (decrease) increase in debt with initial maturity
of 90 days or less (33) 1,085
Dividend payments (334) (319)
Purchases of treasury stock -- (170)
Proceeds from exercise of stock options 480 116
Other -- 1
-------------------------------------------------------------------------------------
Net cash (required) provided by financing activities (285) 602
-------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (40) (43)
-------------------------------------------------------------------------------------
Net change in cash and cash equivalents (401) 49
Cash and cash equivalents, beginning of year 1,600 970
-------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 1,199 $ 1,019
=====================================================================================
</TABLE>
See accompanying notes.
4
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PHARMACIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of U.S. dollars)(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,199 $ 1,600
Short-term investments 100 138
Trade accounts receivable, less allowance
of $290 (1999: $271) 5,694 4,131
Inventories 2,658 2,905
Other current assets 1,844 1,908
--------------------------------------------------------------------------------------
Total current assets 11,495 10,682
Long-term investments 640 476
Properties, net 6,976 6,825
Goodwill and other intangible assets, net 5,548 5,796
Other noncurrent assets 2,064 1,858
Net assets of discontinued operations 459 1,557
--------------------------------------------------------------------------------------
Total assets $ 27,182 $ 27,194
======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt, including current
maturities of long-term debt $ 2,805 $ 1,992
Trade accounts payable 931 1,272
Other current liabilities 3,759 3,910
--------------------------------------------------------------------------------------
Total current liabilities 7,495 7,174
Long-term debt and guarantee of ESOP debt 5,005 6,236
Other noncurrent liabilities 2,904 2,873
--------------------------------------------------------------------------------------
Total liabilities 15,404 16,283
--------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, one cent par value; at
stated rate; authorized 10,000,000 shares;
issued 6,602 (1999: 6,692 shares) 269 270
Common stock, two dollar par value; authorized
3,000,000,000 shares; issued 1,468,295,000
shares (1999: 1,465,381,000 shares) 2,937 2,931
Capital in excess of par value 2,398 1,791
Retained earnings 10,844 10,696
ESOP-related accounts and other (343) (330)
Treasury stock (2,258) (2,432)
Accumulated other comprehensive loss (2,069) (2,015)
--------------------------------------------------------------------------------------
Total shareholders' equity 11,778 10,911
--------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 27,182 $ 27,194
======================================================================================
</TABLE>
See accompanying notes.
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE DATA UNLESS OTHERWISE INDICATED)
Trademarks of Pharmacia Corporation and its subsidiaries are indicated in all
upper case letters. In the notes that follow, per-share amounts are presented on
a diluted, after-tax basis.
The term "the company" is used to refer to Pharmacia Corporation or to Pharmacia
Corporation and its subsidiaries, as appropriate to the context.
A - INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial information presented herein is unaudited. The
interim financial statements and notes thereto do not include all disclosures
required by generally accepted accounting principles and should be read in
conjunction with the 1999 Pharmacia Corporation consolidated financial
statements and notes thereto filed on Form 8-K on May 22, 2000.
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of the
results for interim periods. The current period's results of operations are not
necessarily indicative of results that ultimately may be achieved for the year.
In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Transactions." This statement requires companies to record derivatives
on the balance sheet as assets and liabilities measured at fair value. The
accounting treatment of gains and losses resulting from changes in the value of
derivatives depends on the use of the derivative and whether it qualifies for
hedge accounting. The company expects to adopt SFAS No. 133, as amended by SFAS
No. 138, no earlier than January 1, 2001, and is currently assessing the impact
of adoption on its financial position, results of operations and liquidity.
In December 1999, the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101) which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements. SAB 101 allows companies to report any changes
in revenue recognition related to adopting its provisions as an accounting
change at the time of implementation in accordance with Accounting Principles
Board (APB) Opinion No. 20, "Accounting Changes."
In response to a specific dialogue with the SEC, the company recorded a
cumulative effect of a change in accounting principle, effective January 1,
1999, for revenue recognized in 1998 related to the sale of certain marketing
rights. The effect on earnings in 1999 was an after-tax loss of $20 ($0.02 per
share), net of tax of $12. The pre-tax amount of $32 will be amortized to
income over twenty years.
The company is currently in the process of assessing the impact of adopting
SAB 101 on its revenue recognition policies and on prior revenue transactions.
The company currently anticipates that SAB 101 will not have a material impact
on future financial position, cash flows or results of operations. However, due
primarily to certain up-front and milestone payments from co-promotion partners
that were recognized in earnings in prior years, implementation of SAB 101 is
expected to result in a cumulative effect adjustment. While the company has not
yet finalized its review, it is currently estimated that the pre-tax amount of
the cumulative adjustment will lie within a range of $200 to $300. Any
accounting changes that result from the adoption of SAB 101 must be made no
later than the fourth quarter of 2000, effective as of January 1, 2000.
6
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B - MERGER
On March 31, 2000, the company completed a merger accounted for as a pooling of
interests. The merger was accomplished according to an Agreement and Plan of
Merger dated December 19, 1999 as amended on February 18, 2000, whereby a wholly
owned subsidiary of the former Monsanto Company merged with and into Pharmacia &
Upjohn and Monsanto Company changed its name to Pharmacia Corporation. Monsanto
was a life sciences company, committed to finding solutions to the growing
global needs for food and health by applying common forms of science and
technology to agriculture, nutrition and health. Monsanto manufactured,
researched and marketed high-value agricultural products, pharmaceuticals and
nutrition-based health products. Pharmacia & Upjohn was a global pharmaceutical
company engaged in the research, development, manufacture and sale of
pharmaceutical and health care products.
Pursuant to the merger agreement, each share of common stock of Pharmacia &
Upjohn issued and outstanding was converted into 1.19 shares of common stock of
Pharmacia Corporation and each share of Series A Convertible Perpetual Preferred
Stock of Pharmacia & Upjohn issued and outstanding was converted into one share
of a new series of convertible preferred stock of Pharmacia Corporation
designated as Series B Convertible Perpetual Preferred Stock. The Series B
preferred shares have a conversion ratio into common shares of 1,725.5:1.
Approximately 620 million shares of common stock were issued and approximately
6,640 shares of preferred stock were issued in connection with the merger.
As the merger was accounted for as a pooling of interests under APB Opinion No.
16, all prior period consolidated financial statements have been restated to
reflect the combined results of operations, financial position and cash flows of
both companies as if they had always been combined. There were no material
transactions between the former Monsanto Company and Pharmacia & Upjohn prior to
the combination. Certain reclassifications have been made to conform the
respective earnings statement and balance sheet presentations.
C - INVENTORIES
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<CAPTION>
June 30, December 31,
2000 1999
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<S> <C> <C>
Estimated replacement cost (FIFO basis):
Pharmaceutical, Agricultural and other
finished products $ 1,041 $ 1,281
Raw materials, supplies
and work-in-process 1,838 1,794
----------------------------------------------------------------------------------
Inventories (FIFO basis) 2,879 3,075
Less reduction to LIFO cost (221) (170)
----------------------------------------------------------------------------------
$ 2,658 $ 2,905
==================================================================================
</TABLE>
Inventories valued on the LIFO method had an estimated replacement cost (FIFO
basis) of $1,140 at June 30, 2000, and $1,038 at December 31, 1999.
7
<PAGE> 8
D - CONTINGENT LIABILITIES AND LITIGATION
The condensed consolidated balance sheets include accruals for estimated product
and intellectual property litigation and environmental liabilities. The latter
includes exposures related to discontinued operations, including the industrial
chemical facility referred to below and several sites which, under the
Comprehensive Environmental Response, Compensation, and Liability Act, are
commonly known as Superfund sites. The company's ultimate liability in
connection with Superfund sites depends on many factors, including the number of
other responsible parties and their financial viability and the remediation
methods and technology to be used. Actual costs to be incurred may vary from the
estimates given the inherent uncertainties in evaluating environmental
exposures.
With regard to the company's discontinued industrial chemical facility in North
Haven, Connecticut, the company will soon be required to submit a corrective
measures study report to the U.S. Environmental Protection Agency (EPA). It now
appears that this report will need to be submitted for EPA review possibly as
early as the latter part of 2000 or the first half of 2001. It is reasonably
possible that a material increase in accrued liabilities will be required. It is
not possible, however, to estimate a range of potential losses. Accordingly, it
is not possible to determine what, if any, additional exposure exists at this
time.
In April 1999, a jury verdict was returned against the company in a lawsuit
filed in U.S. District Court in North Carolina. The lawsuit claims that a 1994
license agreement was induced by fraud stemming from nondisclosure of relevant
information and that the company did not have the right to license, make or sell
products using the plaintiffs technology for glyphosate resistance under this
agreement. The jury awarded $15 in actual damages for unjust enrichment and $50
in punitive damages. The company has appealed this verdict, believes it has
meritorious grounds to overturn the verdict and intends to vigorously pursue all
available means to have the verdict overturned. No provision has been made in
the company's consolidated financial statements with respect to the award for
punitive damages.
The company has been a party along with a number of other defendants (both
manufacturers and wholesalers) in several federal civil antitrust lawsuits, some
of which were consolidated and transferred to the Federal District Court for the
Northern District of Illinois. These suits, brought by independent pharmacies
and chains, generally allege unlawful conspiracy, price discrimination and price
fixing and, in some cases, unfair competition. These suits specifically allege
that the company and the other named defendants violated the following: (1) the
Robinson-Patman Act by giving substantial discounts to hospitals, nursing homes,
mail-order pharmacies and health maintenance organizations ("HMOs") without
offering the same discounts to retail drugstores, and (2) Section I of the
Sherman Antitrust Act by entering into agreements with other manufacturers and
wholesalers to restrict certain discounts and rebates so they benefited only
favored customers.
The Federal District Court for the Northern District of Illinois certified a
national class of retail pharmacies in November 1994. Eighteen class action
lawsuits seeking damages based on the same alleged conduct have been filed in 14
states and the District of Columbia. The plaintiffs claim to represent consumers
who purchased prescription drugs in those jurisdictions and four other states.
Two of the lawsuits have been dismissed. The former Pharmacia & Upjohn company
announced in 1998 that it reached a settlement with the plaintiffs in the
federal class action cases for $103; and Searle received a favorable verdict in
1999.
8
<PAGE> 9
On April 11, 2000, the University of Rochester filed suit in U.S. District Court
for the Western District of New York, asserting patent infringement against the
company and certain of its subsidiaries as well as Pfizer, Inc. The University
asserts that its U.S. patent granted on April 11 is infringed by the sale and
use of CELEBREX. The patent has claims directed to a method of treating human
patients by administering a selective COX-2 inhibitor. The University has sought
injunctive relief, as well as monetary compensation for infringement of the
patent. The company intends to defend itself vigorously against this action.
Although the results of litigation cannot be predicted with certainty,
management's belief is that any potential remaining liability that might exceed
amounts already accrued will not have a material adverse effect on the company's
consolidated financial position, profitability or liquidity.
E - COMPREHENSIVE INCOME
Comprehensive income for the three months ended June 30, 2000 and 1999 was $319
and $437, respectively. Comprehensive income for the six months ended June 30,
2000 and 1999 was $423 and $287, respectively.
F - EARNINGS PER SHARE
Basic earnings per share is computed by dividing the earnings measure by the
weighted average number of shares of common stock outstanding. Diluted earnings
per share is computed assuming the exercise of stock options, conversion of
preferred stock, and the issuance of stock as incentive compensation to certain
employees. Under these assumptions, the weighted-average number of common shares
outstanding is increased accordingly, and net earnings is reduced by an
incremental contribution to the applicable Employee Stock Ownership Plan (ESOP).
This contribution is the after-tax difference between the income that the ESOP
would have received from the preferred stock and the assumed dividend yield to
be earned on the common shares.
9
<PAGE> 10
The following table reconciles the numerators and denominators of the basic and
diluted earnings per share computations on earnings from continuing operations:
<TABLE>
<CAPTION>
For the three months ended June 30, 2000 2000 1999 1999
Basic Diluted Basic Diluted
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<S> <C> <C> <C> <C>
EPS numerator:
Earnings from continuing operations $ 438 $ 438 $ 518 $ 518
Less: Preferred stock dividends, net of tax (3) -- (3) --
Less: ESOP contribution, net of tax -- (2) -- (1)
-------------------------------------------------------------------------------------------------------
Earnings from continuing operations
available to common shareholders $ 435 $ 436 $ 515 $ 517
=======================================================================================================
EPS denominator:
Average common shares outstanding 1,269 1,269 1,247 1,247
Effect of dilutive securities:
Stock options & stock warrants -- 26 -- 24
Convertible instruments and
incentive compensation -- 13 -- 12
-------------------------------------------------------------------------------------------------------
Total shares (in millions) 1,269 1,308 1,247 1,283
=======================================================================================================
Earnings per share Continuing operations $ .34 $ .33 $ .41 $ .40
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30, 2000 2000 1999 1999
Basic Diluted Basic Diluted
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EPS numerator:
Earnings from continuing operations $ 478 $ 478 $ 850 $ 850
Less: Preferred stock dividends,
net of tax (6) -- (6) --
Less: ESOP contribution, net of tax -- (4) -- (2)
-------------------------------------------------------------------------------------------------------
Earnings from continuing operations
available to common shareholders $ 472 $ 474 $ 844 $ 848
=======================================================================================================
EPS denominator:
Average common shares outstanding 1,263 1,263 1,247 1,247
Effect of dilutive securities:
Stock options & stock warrants -- 19 -- 24
Convertible instruments and
incentive compensation -- 12 -- 12
-------------------------------------------------------------------------------------------------------
Total shares (in millions) 1,263 1,294 1,247 1,283
=======================================================================================================
Earnings per share
Continuing operations $ .37 $ .36 $ .67 $ .66
=======================================================================================================
</TABLE>
G - SEGMENT INFORMATION
The company operates in two primary segments: pharmaceuticals and agricultural
products. The pharmaceutical segment consists principally of prescription and
nonprescription products for humans and animals, bulk pharmaceuticals and
contract manufacturing. The agricultural segment develops, produces and markets
crop protection products, seeds and related traits.
The following tables show net sales and earnings for the company's segments.
Information about segment assets, interest income and expense, and income taxes
is not provided as the segments are reviewed based on earnings before interest
and income taxes. Assets are not allocated to segments in all cases and
accordingly depreciation is not available. Corporate support functions and
certain goodwill and other intangible assets and associated amortization are not
allocated to segments. There are no intersegment revenues.
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<PAGE> 11
<TABLE>
<CAPTION>
Sales Earnings
For the quarter ended June 30, 2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Pharmaceutical $ 3,180 $ 2,706 $ 561 $ 588
Agricultural 1,849 1,653 357 448
----------------------------------------------------------------------------------------------
$ 5,029 $ 4,359 918 1,036
Unallocated corporate and other (158) (134)
----------------------------------------------------------------------------------------------
Earnings from continuing operations
before interest and taxes 760 902
Interest expense, net 79 94
----------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $ 681 $ 808
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Sales Earnings
For the six months ended June 30, 2000 1999 2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pharmaceutical $ 6,031 $ 5,323 $ 1,079 $ 1,041
Agricultural 3,291 3,136 607 716
----------------------------------------------------------------------------------------------
$ 9,322 $ 8,459 1,686 1,757
======================================================================
Unallocated corporate and other (799) (266)
----------------------------------------------------------------------------------------------
Earnings from continuing operations
before interest and taxes 887 1,491
Interest expense, net 147 171
----------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $ 740 $ 1,320
==============================================================================================
</TABLE>
As a result of the recent merger, management is still in the process of defining
the segments and the financial metric that will be used to measure segment
performance. Therefore, segment reporting will tend to evolve and may change in
future periods.
H - DISCONTINUED OPERATIONS
On July 1, 1999, the company announced its intention to sell the artificial
sweetener (bulk aspartame and tabletop sweeteners) and biogum businesses. In
addition, the company's Board of Directors approved, in 1998, the divestiture of
the alginates and ORTHO lawn-and-garden businesses.
Net sales, income and net assets from discontinued operations in the second
quarter 2000 represent the biogums and two months of bulk aspartame sweeteners
business whereas the second quarter 1999 included the alginates, biogums, bulk
aspartame, and tabletop sweeteners business. The principal cause of the
year-over-year decline in earnings from discontinued operations is the second
quarter reduction of proceeds associated with the sale of the biogums business.
Net sales, income and net assets from discontinued operations in the first six
months of 2000 include biogums, five months of bulk aspartame and two months of
the tabletop sweeteners business compared with the first six months of 1999
which include the alginates, biogums, bulk aspartame, and table top sweeteners,
and one month of the ORTHO lawn-and-garden products business.
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<PAGE> 12
Net sales, income and net assets from discontinued operations are as follows:
<TABLE>
<CAPTION>
Three months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 116 $ 234 $ 276 $ 469
--------------------------------------------------------------------------------------
Income from discontinued operations,
before tax -- 26 -- 45
Loss on sale of discontinued
operations, before tax (93) -- (32) --
Discontinued operations income tax
expense (benefit) (34) 8 (31) 15
--------------------------------------------------------------------------------------
Income (loss) from discontinued
operations $ (59) $ 18 $ (1) $ 30
--------------------------------------------------------------------------------------
Diluted earnings (loss) per share:
Discontinued operations $ -- $ .02 $ -- $ .03
Loss on sale of discontinued
operations (.04) -- -- --
--------------------------------------------------------------------------------------
Total discontinued operations
earnings (loss) per share $(.04) $ .02 -- .03
======================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net assets of discontinued operations as of: June 30, December 31,
2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 177 $ 545
Noncurrent assets 425 1,240
-----------------------------------------------------------------------------------
Total Assets $ 602 $1,785
===================================================================================
Current liabilities $ 140 $ 213
Noncurrent liabilities 3 15
-----------------------------------------------------------------------------------
Total liabilities $ 143 $ 228
===================================================================================
Net assets of discontinued operations $ 459 $1,557
===================================================================================
</TABLE>
During the first half of 2000, Pharmacia reached an agreement to sell the
biogums business to a joint venture between Hercules, Inc. and Lehman
Brothers Merchant Banking Partners II, L.P. This agreement was amended by the
parties on August 10, 2000. Under the revised agreement, the final sale price
for the biogums business is $592. Closing of the transaction is subject to the
customary closing conditions and is anticipated to occur during the third
quarter of 2000. On March 17, 2000, Pharmacia completed the sale of the
tabletop sweeteners business to Merisant Company for $570 cash. On May 25,
2000, Pharmacia completed the sale of its sweetener ingredient business to J.W.
Childs Equity Partners II, L.P., for $440 in cash proceeds. Pharmacia also
completed the sale of equity interests in two European joint venture companies,
NutraSweet A.G., and Euro-Aspartame S.A., to Ajinomoto Co., Inc., for $67 in
cash proceeds. Proceeds from these transactions will be used to pay down debt
and for other corporate purposes.
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<PAGE> 13
I - MERGER, RESTRUCTURING AND OTHER CHARGES
During the second quarter, the company recorded merger and restructuring charges
of $227 associated with the merger transaction involving Pharmacia & Upjohn and
the former Monsanto and the restructuring of operations in the agricultural
product business.
The company recorded on the merger and restructuring line an additional $7 of
merger costs during the second quarter, totaling approximately $470 in
merger-related costs for the year. These merger-related costs are comprised, in
part, of transaction costs including investment bankers, attorneys, registration
and regulatory fees and other professional services. In addition, these costs
included various employee incentive and change-of-control costs directly
associated with the merger. The latter includes a non-cash charge of $232 during
the first quarter that was related to certain employee stock options that were
repriced in conjunction with the merger pursuant to change of control
provisions. Pursuant to the terms of these "premium options," at consummation of
the merger, the original above-market exercise price was reduced to equal the
fair market value on the date of grant.
The $220 of additional charges during the second quarter was recorded on several
lines of the earnings statement. $104 was recorded on the merger & restructuring
line and included $90 associated with the separation of 424 employees and $14
relating to asset impairments and contract termination costs. An inventory
write-off of $32 was recorded in cost of products sold and goodwill impairments
of $84 were recorded in the amortization and adjustment of goodwill line.
Of the second-quarter charges to merger and restructuring, $59 relates to the
restructuring of corporate functions including the separation of 49 employees,
primarily the result of duplicate positions. As of June 30, 2000, $35 of the $59
was paid and 33 of the 49 employees have been severed. The remaining $45 of
charges are associated with the restructuring of agricultural products
operations and include the separation of 375 employees throughout the world,
mainly in research and development. These charges encompassed a decision to more
stringently focus on the four key crops of corn, soybeans, wheat and cotton as
well as on key programs in each of those crops. The strategy also included the
elimination of food and biotech research programs, including laureate oil, wheat
quality and others.
Inventory write-offs of laureate oil resulted in the $32 recorded on the cost of
products sold line and asset impairments related to oil and wheat programs
resulted in the $84 adjustment to goodwill.
During 1999, the company recorded $54 in expenses which was comprised of $57 of
restructuring charges related to the merger with SUGEN, Inc. net of a $3
adjustment to the 1998 turnaround restructuring. The charge included costs
pertaining to reorganizations that will result in the elimination of certain
research and development (R&D) projects as well as the elimination of 375
employee positions impacting the pharmaceutical segment and corporate and
administrative functions. The objective of the restructuring is to eliminate
duplicate functions and investments in R&D as well as reorganize the sales force
based on anticipated future requirements of the company. During the first half
of 2000, $20 was paid and charged against the liability. These amounts related
to a portion of separation benefits for the approximately 128 employees severed
during the first six months of 2000 as well as some terminated during 1999. The
company anticipates all activities associated with this restructuring to be
substantially complete by the end of 2000. The remaining cash expenditures
relating to this restructuring total $31 and are expected to be made during 2000
with some separation annuity payments being completed in 2001.
At June 30, 2000, $28 remained of the restructuring accruals made during 1998 by
Pharmacia & Upjohn related to a comprehensive turnaround program. The balance
primarily represents annuity payments for severance that will extend into 2001.
In the fourth quarter of 1998, the company recorded net restructuring charges of
$327 as part of an approved plan to close facilities, reduce the current
workforce and exit nonstrategic businesses. The activities that the former
Monsanto planned to exit in connection with this plan principally comprised a
tomato business and a business involved in the operation of membership-based
health and wellness centers. The charge of $327 was comprised of facility
shut-down charges of $99, workforce reduction costs of $103 and asset
impairments and other costs of $125.
13
<PAGE> 14
As of June 30, 2000, 300 employees were severed at a cost of approximately $31.
Cash outflows associated with these separations were charged against the 1998
restructuring liability. Additional charges and adjustments of the 1998 accrual
amounting to $7 were made during the year reducing the accrual balance as of
June 30 to $6. The company expects to complete the remaining restructuring
actions within the originally planned time frame.
Additional restructuring charges are expected to be incurred as the combining
and restructuring of operations of the former Monsanto and Pharmacia & Upjohn
continues to take place. Total merger and restructuring charges are estimated to
be $2 billion to $2.5 billion over the next three years and yield estimated
annual savings of $800.
14
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Trademarks of Pharmacia Corporation and its subsidiaries are indicated in all
upper case letters. In the following discussion of consolidated results,
per-share amounts are presented on a diluted, after-tax basis.
The term "the company" is used to refer to Pharmacia Corporation or to Pharmacia
Corporation and its subsidiaries, as appropriate to the context.
FINANCIAL REVIEW
OVERVIEW
On March 31, 2000, a subsidiary of the former Monsanto Company and Pharmacia &
Upjohn merged and the former Monsanto Company was renamed Pharmacia Corporation.
The merger was accounted for as a pooling of interests. As such, all data
presented herein are reflective of the combined results of operations of the two
predecessor companies, their statements of financial position and their cash
flows as though they had always been combined, by applying consistent
disclosures and classification practices.
The table below provides a comparative overview of consolidated results for the
second quarters and first six-month periods of 2000 and 1999 in millions of U.S.
dollars, except per-share data.
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------- ----------
Percent Percent
2000 Change 1999 2000 Change 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 5,029 15% $ 4,359 $ 9,322 10% $ 8,459
Earnings from continuing
operations before interest
and income taxes* 760 (16) 902 887 (41) 1,491
Earnings from continuing
operations 438 (16) 518 478 (44) 850
Discontinued operations (59) n.m. 18 (1) n.m. 30
Cumulative effect of an
accounting change -- n.m. -- -- n.m. (20)
Net earnings 379 (29) 536 477 (45) 860
Net earnings per common share:
Continuing operations:
Basic $ .34 (17) $ .41 $ .37 (45) $ .67
Diluted .33 (18) .40 .36 (45) .66
Net earnings
Basic .30 (30) .43 .37 (46) .68
Diluted $ .29 (31) $ .42 $ .36 (46) $ .67
------------------------------------------------------------------------------------------------------------------------
</TABLE>
n.m. = not meaningful
* Earnings before interest and taxes (EBIT) is presented here to provide
additional information about the company's operations. This item should be
considered in addition to, but not as a substitute for or superior to, net
earnings, cash flow or other measures of financial performance prepared in
accordance with generally accepted accounting principles. Determination of
EBIT may vary from company to company.
Year-to-year comparisons are complicated by a number of factors including
charges incurred throughout the first six months of 2000.
15
<PAGE> 16
Specifically, merger and restructuring charges which approximate $227 million
and $688 million before tax for the quarter and year-to-date, respectively. Of
these total charges, $32 million was recorded within cost of products sold in
the second quarter ($20 million after tax or $0.02 per share), $84 million was
recorded as adjustments to goodwill in the second quarter ($83 million after
tax or $0.07 per share) and $111 million for the second quarter and $572
million year-to-date was recorded in merger and restructuring ($81 million
after tax or $0.05 per share and $404 million after tax or $0.30 per share,
respectively). A charitable contribution of $100 million ($62 million after tax
or $0.05 per share) realized during the first quarter may also have an effect
on comparability as may the divestments of certain product lines which are not
included in discontinued operations.
NET SALES
Consolidated net sales for the second quarter of 2000 rose 15 percent to $5,029
million as compared to the same quarter of 1999. Sales for the corresponding
year-to-date periods were $9,322 million and $8,459 million resulting in a 10
percent increase. Excluding the effects of divested businesses (Pharmacia &
Upjohn's nutritional therapies business and the Stoneville Pedigreed Seed
Company), growth rates over the prior year periods were 16 percent for the
quarter and 11 percent year-to-date. The impact of currency exchange rates on
consolidated sales was 2 percent unfavorable for both the quarter and
year-to-date periods. The continued implementation of the company's ROUNDUP
pricing strategy was the primary contributor to a consolidated adverse price
effect on sales of 2 percent for both the quarter and year-to-date periods over
1999. More than offsetting the adverse effects of consolidated exchange and
price variances, volume increases contributed 19 percent for the quarter and 14
percent for the year-to-date periods to consolidated sales growth. The volume
increase was led by sales of ROUNDUP and CELEBREX.
The company reports its operations within the two segments indicated in the
table below. Sales of divested businesses have been excluded from the analysis.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
Net Percent Net Percent
(U.S. dollars in millions) 2000 Change 1999 2000 Change 1999
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales:
Pharmaceuticals $ 3,180 18% $ 2,686 $ 6,025 14% $ 5,274
Agricultural products 1,849 13 1,641 3,291 6 3,107
-------------------------------------------------------------------------------------------------------------------------
Total sales, excluding
divested businesses $ 5,029 16 $ 4,327 9,316 11 8,381
-------------------------------------------------------------------------------------------------------------------------
Earnings:
Pharmaceuticals EBIT* $ 561 (5)% $ 588 1,079 4 1,041
Agricultural products EBIT* 357 (20) 448 607 (15) 716
-------------------------------------------------------------------------------------------------------------------------
EBIT from operations 918 (11) 1,036 1,686 (4) 1,757
Corporate and other (158) (134) (799) (266)
-------------------------------------------------------------------------------------------------------------------------
Consolidated EBIT* 760 902 887 1,491
Interest expense (79) (94) (147) (171)
Income tax provision (243) (290) (262) (470)
-------------------------------------------------------------------------------------------------------------------------
Net Earnings from continuing
operations $ 438 $ 518 $ 478 $ 850
=========================================================================================================================
</TABLE>
* Earnings before interest and taxes (EBIT) is presented here to provide
additional information about the company's operations. This item should be
considered in addition to, but not as a substitute for or superior to, net
earnings, cash flow or other measures of financial performance prepared in
accordance with generally accepted accounting principles. Determination of
EBIT may vary from company to company.
16
<PAGE> 17
As a result of the recent merger, management is still in the process of defining
the segments and the financial metric that will be used to measure segment
performance. Therefore, segment reporting will tend to evolve and may change in
future periods.
Pharmaceutical Segment -
Pharmaceutical sales for the company consist of the former Pharmacia & Upjohn
businesses and the pharmaceutical business of the former Monsanto's Searle unit.
Sales for the pharmaceutical segment (excluding divested businesses) were $3.2
billion for the second quarter resulting in year-to-date sales of $6.0 billion.
These results reflect quarter and year-to-date growth rates of 18 percent and 14
percent over 1999, respectively. Actual sales dollars for the 1999 periods on a
comparable basis were $2.7 billion and $5.3 billion. The impact of exchange
rates on sales was 3 percent unfavorable for the periods presented. Divested
businesses had no sales impact on the second quarter and positive impact of $6
million year-to-date. In 1999, divested businesses affected sales favorably by
$20 million and $49 million quarter and year-to-date ending June 30,
respectively. In the company's largest market, the U.S., sales growth for the
quarter and year-to-date periods was 26 percent and 20 percent, respectively.
Japan, the company's second largest market, recorded sales growth rates of 27
percent and 26 percent for the same periods. The growth rate in Japan reflects,
in part, favorable currency exchange movements. Sales performance by country in
the following table is based on location of customer.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
%Chg. %Chg.
Net % Excl. Net % Excl.
(U.S. dollars in millions) 2000 Change Ex.* 1999 2000 Change Ex.* 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States $1,710 26% 26% $1,352 $3,194 20% 20% $2,657
Japan 252 27 12 199 461 26 13 367
Italy 144 3 16 140 281 0 13 281
United Kingdom 121 6 11 114 222 1 5 219
Germany 110 (4) 9 114 218 (6) 6 233
France 87 (8) 3 95 177 (11) 1 199
Rest of world 756 13 19 672 1,472 12 17 1,318
----------------------------------------------------------------------------------------------------------------
Total sales, excluding
divested businesses 3,180 18 21 2,686 6,025 14 17 5,274
Divested businesses -- n/a n/a 20 6 n/a n/a 49
----------------------------------------------------------------------------------------------------------------
Consolidated net sales $3,180 18% 21% $2,706 $6,031 13% 16% $5,323
================================================================================================================
</TABLE>
* Underlying growth reflects the percentage change excluding currency exchange
effects.
A comparison of the period-to-period consolidated net sales of the company's
major pharmaceutical products (including generic equivalents where applicable)
is provided in the table below.
17
<PAGE> 18
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
Net Percent Net Percent
(U.S. dollars in millions) 2000 Change 1999 2000 Change 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CELEBREX $ 630 103% $ 311 $1,155 97% $ 585
XALATAN 151 37 110 312 47 212
AMBIEN 165 35 122 265 26 210
GENOTROPIN 128 13 113 241 11 218
DETROL/DETRUSITOL 93 8 86 194 29 150
CAMPTOSAR 111 71 65 191 48 129
CLEOCIN/DALACIN 95 23 77 175 4 168
XANAX 81 11 73 165 2 161
MEDROL 78 11 70 144 (2) 147
ARTHROTEC 73 (26) 98 128 (30) 183
DEPO-PROVERA 69 17 59 125 -- 125
FRAGMIN 56 10 51 114 12 102
NICORETTE Line 54 (13) 62 109 (11) 123
PHARMORUBICIN/ELLENCE 49 (6) 52 99 -- 99
ALDACTONE/SPIRO Line 52 (10) 58 96 (10) 107
COVERA/CALAN/VERAPAMIL 42 5 40 80 (7) 86
DAYPRO 38 (33) 57 73 (43) 129
ROGAINE 36 -- 36 68 10 62
HEALON 34 (6) 36 64 (6) 68
MIRAPEX/MIRAPEXIN 30 50 20 60 54 39
CABASER/DOSTINEX 31 63 19 56 56 36
----------------------------------------------------------------------------------------------------------------
Total $2,096 30% $1,615 $3,914 25% $3,139
================================================================================================================
</TABLE>
CELEBREX, the company's leading product and the most successful drug launched in
pharmaceutical history, recorded sales of $630 million in the second quarter and
$1,155 million in the first half. Since its introduction in the U.S. in January
1999 and subsequent approval in over 60 countries, more than 29 million
prescriptions have been written for CELEBREX. In order to strengthen the U.S.
presence, the company increased the U.S. sales force by 20 percent during the
quarter.
The company conducted its first major European launches of CELEBREX in the
second quarter. In May, the company launched CELEBREX in the United Kingdom and
Germany, after gaining Mutual Recognition approval in Sweden at the end of the
first quarter. Other major European launches are expected during the remainder
of the year. In Europe, as in the U.S., CELEBREX will be co-promoted (or where
required by law, co-marketed) by Pfizer, Inc.
The company filed a supplemental New Drug Application (sNDA) in the U.S. for
CELEBREX in the second quarter based on the results of a landmark safety trial.
This trial of 8,000 arthritis patients evaluated the safety of CELEBREX at a
dose four-times the normal osteoarthritis dose compared to two commonly
prescribed non-steroidal anti-inflammatory drugs. In the study, patients treated
with CELEBREX experienced significantly fewer ulcer complications and
symptomatic ulcers. In addition, CELEBREX showed a positive renal and hepatic
profile with no increase in cardiovascular-related events.
XALATAN, the top-selling glaucoma medication in the U.S. and worldwide, posted
double-digit sales growth in the second quarter and first half of 2000 (37
percent and 47 percent, respectively). XALATAN continues to grow rapidly in all
key markets as it expands its market leadership position in the U.S. and other
major markets like Japan. In June, the company received an approvable letter
from the U.S. Food and Drug Administration (FDA) for XALCOM, a combination
product containing XALATAN and timolol in a single daily dose.
AMBIEN, the market leading treatment for short-term insomnia in the U.S.,
increased 35 percent over the prior year in the second quarter and 26 percent in
the first half. AMBIEN maintained a U.S. market share of greater than 50 percent
and prescription volume continues to increase.
18
<PAGE> 19
GENOTROPIN is the world's leading growth hormone. Sales in the U.S. continue to
experience rapid growth benefiting from new product introductions and the
increasing new patient market share. MiniQuick, a new convenience device, was
launched in the U.S. during the first quarter, expanding the potential for
GENOTROPIN. Recently, the FDA and European Medicines Evaluation Agency (EMEA)
approved GENOTROPIN for the treatment of patients with Prader-Willi Syndrome
(PWS), the most common genetic cause of obesity. Given the small number of
patients affected by PWS, GENOTROPIN has been granted orphan drug status and
seven years of marketing exclusivity for the PWS indication in the U.S.
Sales of DETROL, the world's leading treatment for overactive bladder, increased
to $194 million in the first half, a 29 percent increase versus 1999. Despite
gains in total prescription volume, U.S. sales in the second quarter declined
slightly compared to the prior year due to increased trade purchasing in the
second quarter of 1999. In the first half of 2000, the company expanded its
promotional efforts in the U.S., bringing the total U.S. DETROL sales force to
1,800 representatives. The company also filed an NDA for DETROL XL, a once-daily
formulation of DETROL, in the U.S. and European Union.
CAMPTOSAR, the leading treatment of colorectal cancer in the U.S., experienced
significant growth in the second quarter, up 71 percent over the prior year,
following FDA approval of a new indication and the release of new clinical data.
Subsequent to a review by the Oncologic Drugs Advisory Committee in March, the
FDA granted approval to market CAMPTOSAR for first-line treatment of patients
with colorectal cancer during the second quarter. The approval establishes a
CAMPTOSAR-containing regimen as the standard of care for patients with
metastatic colorectal cancer. CAMPTOSAR sales increased by 48 percent during the
first half of 2000 compared to the prior year.
Other products that contributed to the growth of the pharmaceutical business
included MIRAPEX, the treatment for Parkinson's disease and CABASER/DOSTINEX for
Parkinson's disease/hyperprolactinemia. MIRAPEX sales grew by 54 percent in the
first half on continued prescription growth in the U.S. and Europe. CABASER also
grew by more than 50 percent in the first half due to continued expansion in
Europe and a successful launch in Japan in late 1999.
During the second quarter and first half of 2000, arthritis treatments ARTHROTEC
and DAYPRO experienced reductions in sales volume as the COX-2 inhibitors, led
by CELEBREX, continue to take a larger share of the U.S. market. NICORETTE for
smoking cessation also experienced a decline in sales during the second quarter
and first half of 2000, largely due to trade inventory contractions in the U.S.
business.
After declining in the first quarter as a result of reduced trade inventories,
sales of DEPO-PROVERA, XANAX, CLEOCIN and MEDROL increased in the second quarter
as inventory levels normalized, bringing the first half performance for these
products in line with the 1999 performance.
FRAGMIN, the company's low molecular weight heparin product for prevention of
blood clots, continued rapid growth in the U.S. as the product is being added to
hospital formularies following FDA approval for two new indications in 1999 -
use in hip surgery and use in the treatment of unstable coronary artery disease.
U.S. sales of FRAGMIN in the first half also benefited from the expansion of the
hospital sales force in advance of the ZYVOX launch.
Following FDA approval early in the second quarter, the company launched ZYVOX
in the U.S. ZYVOX is the first antibiotic from a completely new class of
antibiotics in over thirty years. ZYVOX is indicated for the treatment of
patients with severe Gram-positive infections including pneumonia, skin and skin
structure infections, and bacteremia. During the quarter, sales of ZYVOX were
$19 million, largely reflecting initial wholesaler inventory levels that will
moderate in subsequent quarters.
19
<PAGE> 20
In other developments, the company launched AROMASIN for advanced breast cancer,
and the women's health drugs ACTIVELLA, VAGIFEM and CLEOCIN VAGINAL OVULE.
Cost of products sold as a percent of sales realized a favorable change of 3
percentage points during the second quarter of 2000 to 22 percent versus the
prior year quarter while remaining comparable on a year-to-year basis at 24
percent versus 25 percent. A favorable shift in product mix to higher margin
products was the main factor for the improvement. Although down slightly as a
percentage of sales, research and development spending increased during the
quarter and year-to-date over comparable periods mainly as a result of higher
development costs for compounds entering later phases of development, offset by
lower development spending for ZYVOX which has now received FDA approval. Total
spending for research and development was $575 million versus $505 million and
$1.13 billion versus $1.05 billion for the quarter and year-to-date periods of
2000 and 1999. Selling, General and Administrative costs rose 4 percentage
points to 44 percent of sales for the quarter and 3 percentage points for the
year-to-date versus the prior year. Co-promotion payments, promotion and
marketing costs and sales force expansion were the drivers behind the increases
for both the quarterly and year-to-date periods.
Agricultural Products Segment-
Net sales for the agricultural segment increased 12 percent in the second
quarter of 2000 and 5 percent for the first six months compared with
corresponding periods of 1999. Sales for the family of ROUNDUP herbicides
increased 16 percent compared with the prior year second quarter, fueled by
higher sales volumes, primarily in North America and Latin America. Sales
volumes for ROUNDUP herbicide increased 23 percent in the second quarter on a
global basis, as both conservation tillage and the expanded use of ROUNDUP READY
crop applications continue to grow. Sales associated with these volume increases
were partially offset by lower overall prices of ROUNDUP herbicide. Revenues for
ROUNDUP lawn-and-garden herbicide grew 31 percent over second quarter 1999
results. The year-to-date increase in the agricultural segment sales also is
primarily attributed to increased sales of ROUNDUP and other glyphosate
products, including ROUNDUP lawn-and-garden products, and to a lesser degree,
due to gains in selective chemistries and an 8 percent increase in trait fee
revenues. Partially offsetting these gains was a moderate decline in seeds, most
of which is due to the divestiture of the Stoneville Pedigreed seed business in
December 1999. Excluding the divested business, year-over-year sales growth
rates were 13 percent and 6 percent for the second quarter and six-month
periods, respectively.
Second quarter EBIT for the agricultural segment was 20 percent or $91
million lower than the same quarter a year ago. EBIT decreased $109 million or
15 percent in the first six months compared with 1999. These declines can be
primarily attributed to a charge of $161 million to continuing operations,
primarily associated with the company's plan to focus on delivering key programs
within research and development and included the elimination of certain food and
biotech research programs. Excluding this charge, EBIT would have ended the
second quarter 2000 at $518 million or an increase of 16 percent over the prior
year second quarter results, and at $768 million or an increase of 7 percent
over the prior year six-month period.
During the second quarter, the agricultural segment recorded total merger and
restructuring charges of $162 million. These charges encompassed a decision to
more stringently focus on the four key crops of corn, soybeans, wheat and cotton
as well as on key programs in each of those crops. The strategy also included
the elimination of food and biotech research programs, including laureate oil,
wheat quality and others. Of these charges, $32 million was recorded in cost of
products sold, $84 million was recorded in amortization and adjustment of
goodwill and the remaining amounts were recorded on the merger and restructuring
line of the earnings statement.
20
<PAGE> 21
Inventory write-offs of laureate oil resulted in the $32 million recorded on the
cost of products sold line and asset impairments related to oil and wheat
programs resulted in the $84 million adjustment to goodwill. The merger and
restructuring total consisted of approximately $1 million of merger costs with
the remaining $45 million being associated with the separation of 375 employees
as well as some asset impairment charges.
Corporate and Other -
Corporate expenses of $158 million in the second quarter include $7 million of
merger costs and $59 million of corporate restructuring charges. On a
year-to-date basis, corporate expenses totaled $799 million, consisting of
approximately $530 million of merger and corporate restructuring costs, a $100
million charitable contribution made in the first quarter and other items.
The merger-related costs include expenditures such as investment bankers' fees,
legal and accounting costs related to the merger transaction between the former
Monsanto and Pharmacia & Upjohn. In addition, there were a number of employee
benefit arrangements for which expense was recognized in direct connection with
the merger. These included premium stock option awards for which the exercise
price was reset coincident with the change in control. Other employee benefit
expenses were similarly accelerated due to the merger. The restructuring charges
relate mainly to separation payments made to corporate employees of the merged
companies. The restructuring charges relating to the agricultural segment have
been separately identified and allocated to that segment.
In spite of an increase in interest rates, interest expense declined 10 percent
and 9 percent, respectively, for the three- and six-month periods ended June 30,
2000, due to lower debt levels.
The estimated annual effective tax rate for 2000 is 34 percent. This includes
certain nondeductible charges and related merger and restructuring costs causing
the rise in the rate from 31 percent in 1999. For the second quarter, the
effective tax rate was 35.7 percent, impacted by the write-off of certain
nondeductible goodwill. Excluding such costs, the estimated annual effective
tax rate for 2000 is 31.5 percent.
Discontinued Operations -
The company recorded a net loss from discontinued operations during the quarter
ended June 30, 2000 of $59 million compared to net income of $18 million for the
same period in 1999. The quarterly loss results in a year-to-date net loss of $1
million as compared to net income of $30 million for the first six months of
1999. The principal cause of the year-over-year decline in earnings from
discontinued operations is the reduction of proceeds associated with the sale
of the biogums business.
During the second quarter, the sale of the artificial sweeteners business was
completed resulting in gross proceeds of $507 million. These events combined
with the sale of the company's tabletop sweetener business ($570 million) in the
first quarter results in total gross proceeds of these businesses of $1.1
billion on a year-to-date basis.
During the first half of 2000, Pharmacia reached an agreement to sell the
biogums business to a joint venture between Hercules, Inc. and Lehman
Brothers Merchant Banking Partners II, L.P. This agreement was amended by the
parties on August 10, 2000. Under the revised agreement, the final sale price
for the biogums business is $592 million. Closing of the transaction is
subject to the customary closing conditions and is anticipated to occur
during the third quarter of 2000.
21
<PAGE> 22
MERGER, RESTRUCTURING AND OTHER CHARGES
During the second quarter, the company recorded merger and restructuring charges
of $227 million associated with the merger transaction involving Pharmacia &
Upjohn and Monsanto and the restructuring of operations in the agricultural
products business.
The merger-related costs of $7 million in the second quarter include
expenditures such as investment bankers' fees, legal and accounting costs
related to the merger transaction between the former Monsanto and Pharmacia &
Upjohn. The $220 million of additional charges was recorded on several lines of
the earnings statement. $104 million was recorded on the merger & restructuring
line and included $90 million associated with the separation of 424 employees
and $14 million relating to asset impairments and contract termination costs. An
inventory write-off of $32 million was recorded in cost of products sold and
goodwill impairments of $84 million were recorded in the amortization and
adjustment of goodwill line.
Of the total charges, $59 million was recorded to merger and restructuring and
relates to the restructuring of corporate functions including the separation of
49 employees, primarily the result of duplicate positions. As of June 30, 2000,
$35 million of the $59 million was paid and 33 of the 49 employees had been
severed. The remaining charges are associated with the restructuring of
agricultural products operations and include the separation of 375 employees
throughout the world, mainly in research and development. These charges
encompassed a decision to more stringently focus on the four key crops of corn,
soybeans, wheat and cotton as well as on key programs in each of those crops.
The strategy also included the elimination of food and biotech research
programs, including laureate oil, wheat quality and others.
Inventory write-offs of laureate oil resulted in the $32 million recorded on the
cost of products sold line and asset impairments related to oil and wheat
programs resulted in the $84 million adjustment to goodwill.
During 1999, the company recorded $54 million in restructuring expenses which
was comprised of $57 million of restructuring charges related to the merger with
SUGEN, INC. net of a $3 million adjustment to the 1998 turnaround restructuring.
The charge included costs pertaining to reorganizations that will result in the
elimination of certain research and development (R&D) projects as well as the
elimination of 375 employee positions impacting the pharmaceutical segment and
corporate and administrative functions. The objective of the restructuring is to
eliminate duplicate functions and investments in R&D as well as reorganize the
sales force based on anticipated future requirements of the company. During the
first half of 2000, $20 million was paid and charged against the liability.
These amounts related to a portion of separation benefits for the approximately
128 employees severed during the first six months of 2000 as well as some
terminated during 1999. The company anticipates all activities associated with
this restructuring to be substantially complete at the end of 2000. The
remaining cash expenditures relating to this restructuring total $31 million and
are expected to be made during 2000 with some separation annuity payments being
completed in 2001.
At June 30, 2000, $28 million remained of the restructuring accruals made during
1998 related to a comprehensive turnaround program. The balance primarily
represents annuity payments that will extend into 2001.
In the fourth quarter of 1998, the company recorded net restructuring charges of
$327 million as part of an approved plan to close facilities, reduce the current
workforce and exit nonstrategic businesses. The activities that the former
Monsanto planned to exit in connection with this plan principally comprised a
tomato business and a business involved in the operation of membership-based
health and wellness centers. The charge of $327 million was comprised of
facility shutdown charges of $99 million, workforce reduction costs of $103
million and asset impairments and other costs of $125 million.
22
<PAGE> 23
As of June 30, 2000, 300 employees were severed at a cost of approximately $31
million. Cash outflows associated with these separations were charged against
the 1998 restructuring liability. Additional charges and adjustments of the 1998
accrual amounting to $7 million were made during the year reducing the accrual
balance as of June 30 to $6 million. The company expects to complete the
remaining restructuring actions within the originally planned time frame.
Additional restructuring charges are expected to be incurred as the combining
and restructuring of operations of the former Monsanto and Pharmacia & Upjohn
continues to take place. Total merger and restructuring charges over the next
three years are estimated to be $2 billion to $2.5 billion and yield annual
savings of approximately $800 million.
COMPREHENSIVE INCOME
Comprehensive income equals net earnings plus or minus other comprehensive
income or loss (OCI). For Pharmacia Corporation, OCI includes currency
translation adjustments, unrealized gains and losses on available-for-sale
securities, and minimum pension liability adjustments. Comprehensive income for
the three months ended June 30, 2000, and June 30, 1999, was $319 million and
$437 million, respectively. For the six months ended June 30, 2000 and 1999
comprehensive income was $423 and $287. The difference between net earnings and
comprehensive income for all periods presented was largely due to fluctuations
in the currency translation adjustments reflecting the changes in the strength
of the dollar against other currencies.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
Working capital (U.S. dollars in millions) $4,000 $3,508
Current ratio 1.53:1 1.49:1
Debt to total capitalization 39.7% 42.9%
-----------------------------------------------------------------------------------
</TABLE>
The company's working capital and current ratio increased at June 30, 2000 as
compared to year end due mainly to increases in accounts receivable. Increased
overall sales volume in addition to seasonal activity in the agricultural
business accounts for the change. Offsetting reductions in working capital were
the completion of divestitures of certain businesses (see Note H to the
consolidated financial statements) affecting other current assets and seasonal
operating decreases in cash and inventories. The debt to total capitalization
ratio improved at June 30, 2000 due to reduced seasonal borrowings and the
23
<PAGE> 24
maturities of certain debt instruments refinanced through operating cash flows
and reductions in cash.
The company remains for the year-to-date period in a net cash required position.
Significant seasonal increases in accounts receivable and debt reduction in
addition to normal operating outflows including purchases of capital assets and
dividends account for the result.
The company's future cash provided by operations and borrowing capacity are
expected to cover normal operating cash flow needs, planned capital acquisitions
and dividend payments as approved by the board of directors for the foreseeable
future.
CONTINGENT LIABILITIES AND LITIGATION
The company is involved in a number of legal and environmental proceedings.
These include a substantial number of product liability suits claiming damages
as a result of the use of the company's products and administrative and judicial
proceedings at several "Superfund" sites.
Although the results of litigation cannot be predicted with certainty,
management's belief is that any potential remaining liability that might exceed
amounts already accrued will not have a material adverse effect on the company's
consolidated financial position, profitability or liquidity.
The company's estimate of the ultimate cost to be incurred in connection with
environmental situations could change due to uncertainties at many sites with
respect to potential cleanup remedies, the estimated cost of cleanup, and the
company's share of a site's cost. With regard to the company's discontinued
industrial chemical facility in North Haven, Connecticut, the company will soon
be required to submit a corrective measures study report to the EPA. It now
appears that this report will need to be submitted for EPA review possibly as
early as the latter part of 2000 or the first half of 2001, at which time it may
become appropriate to reevaluate the existing reserves designated for
remediation in light of changing circumstances. It is reasonably possible that a
material increase in accrued liabilities will be required but it is not possible
to determine what, if any, exposure exists at this time.
OTHER
In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement requires companies to record derivatives on
the balance sheet as assets and liabilities measured at fair value. The
accounting treatment of gains and losses resulting from changes in the value of
derivatives depends on the use of the derivative and whether it qualifies for
hedge accounting. The company expects to adopt SFAS No. 133, as amended by SFAS
No. 138, no earlier than January 1, 2001, and is currently assessing the impact
of adoption on its financial position, results of operations, and liquidity.
In December 1999, the SEC released Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101) which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements. SAB
101 allows companies to report any changes in revenue recognition related to
adopting its provisions as an accounting change at the time of implementation in
accordance with APB Opinion No. 20, "Accounting Changes."
In response to a specific dialogue with the SEC, the company recorded a
cumulative effect of a change in accounting principle, effective January 1,
1999, for revenue recognized in 1998 related to sale of certain marketing
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<PAGE> 25
rights. The effect on earnings in 1999 was an after-tax loss of $20 million
($0.02 per share), net of tax of $12 million. The pre-tax amount of $32 million
will be amortized to income over twenty years.
The company is currently in the process of assessing the impact of adopting SAB
101 on its revenue recognition policies and on prior revenue transactions. The
company currently anticipates that SAB 101 will not have a material impact on
future financial position, cash flows or results of operations. However, due
primarily to certain up-front and milestone payments from co-promotion partners
that were recognized in earnings in prior years, implementation of SAB 101 is
expected to result in a cumulative effect adjustment. While the company has not
yet finalized its review, it is currently estimated that the pre-tax amount of
the cumulative adjustment will lie within a range of $200 million to $300
million. Any accounting changes that result from the adoption of SAB 101 must be
made no later than the fourth quarter of 2000, effective as of January 1, 2000.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There are no material changes from the disclosures in Pharmacia Corporation's
Form 8-K filed on May 22, 2000 with the Securities and Exchange Commission.
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<PAGE> 26
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Because of the size and nature of its business, Pharmacia and its subsidiaries
are parties to numerous legal proceedings. Most of these proceedings have arisen
in the ordinary course of business and involve claims for money damages
(including product liability) or seek to restrict the company's business
activities. While the results of litigation cannot be predicted with certainty,
Pharmacia does not believe these matters or their ultimate disposition will have
a material adverse effect on its position, profitability or liquidity, as
applicable.
On April 11, 2000, the University of Rochester filed suit in U.S. District Court
for the Western District of New York, asserting patent infringement against the
company and certain of its subsidiaries as well as Pfizer, Inc. The University
asserts that its U.S. patent granted on April 11 is infringed by the sale and
use of CELEBREX. The patent has claims directed to a method of treating human
patients by administering a selective COX-2 inhibitor. The University has sought
injunctive relief, as well as monetary compensation for infringement of the
patent.
In June 1996, Mycogen Corporation, Mycogen Plant Sciences, Inc. and
Agrigenetics, Inc. filed suit against Pharmacia in California State Superior
Court in San Diego alleging that the company failed to license, under an option
agreement, technology relating to Bt corn and glyphosate-tolerant corn, cotton
and canola. On October 20, 1997, the court construed the agreement as a license
to receive genes rather than a license to receive germplasm. Jury trial of the
damage claim for lost future profits from the alleged delay in performance ended
March 20, 1998, with a verdict against the company awarding damages totaling
$174.9 million. On June 28, 2000, the California Court of Appeal for the Fourth
Appellate District issued its opinion reversing the jury verdict and related
judgment of the trial court, and directed that judgment should be entered in the
company's favor. Mycogen's subsequent motion for rehearing has been denied and,
on August 7, 2000, Mycogen filed a petition with the California Supreme Court
requesting that further appeal to that court should be granted. The company will
oppose the discretionary appeal sought by Mycogen.
On November 8, 1999, a class action lawsuit was filed against Pharmacia in the
U.S. District Court for the Northern District of Mississippi by a single
plaintiff purporting to represent a class of purchasers of genetically modified
soybeans that contain our patented technology. The complaint asserted claims
under the Racketeer Influenced and Corrupt Organizations Act (RICO) and various
antitrust acts, and claims for breach of contract. The plaintiffs seek an award
of antitrust damages, treble damages, compensatory damages and attorneys' fees.
On June 21, 2000, the case was transferred to the U.S. District Court for the
Eastern District of Missouri. On July 28, 2000, plaintiff filed a motion for
leave to amend his complaint to withdraw all antitrust and RICO claims and class
action allegations. Plaintiff's only remaining claim relates to performance of
products that he purchased.
On December 30, 1999, following Pharmacia's announcement that it had withdrawn
its filing for U.S. antitrust clearance of the proposed merger with Delta and
Pine Land Company in light of the Department of Justice's unwillingness to
approve the transaction on commercially reasonable terms, two alleged holders of
Delta and Pine Land common stock filed a derivative and class action lawsuit
against the company, Delta and Pine Land and members of the Delta and Pine Land
board of directors in the Delaware Court of Chancery. Plaintiffs alleged that
Delta and Pine Land has been harmed by the termination of the effort to complete
the merger and that the individual defendants have a continuing duty to seek a
value-maximizing transaction for the stockholders, and requested compensatory
damages, costs, disbursements and fees. On January 19, 2000, Pharmacia filed a
cross-claim in the Delaware action for declaratory relief
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<PAGE> 27
against Delta and Pine Land, seeking a determination that the company had no
further liability to Delta and Pine Land in connection with the failed merger.
On June 21, 2000, the Delaware Chancery Court dismissed the shareholder
derivative action. On July 17, 2000, the court stayed proceedings on the
company's declaratory judgment action, subject to action by the Mississippi
court in the case described below.
On January 18, 2000, Delta and Pine Land reinstituted a suit against Pharmacia
in the Circuit Court of the First Judicial District of Bolivar County,
Mississippi, seeking unspecified compensatory damages for lost stock market
value of not less than $1 billion, as well as punitive damages, resulting from
the company's alleged failure to exercise reasonable efforts to complete the
merger. The company obtained a stay of this suit pending resolution of the
Delaware suit filed on December 30, 1999. On July 20, 2000, Delta and Pine Land
filed to lift this stay order.
Other information with respect to specific legal proceedings appears in the
Pharmacia Corporation (formerly Monsanto Company) Report on Form 10-K for the
year ended December 31, 1999; in the Pharmacia & Upjohn, Inc., Report on Form
10-K for the year ended December 31, 1999; and in the Pharmacia Corporation
Report on Form 10-Q for the quarterly period ended March 31, 2000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the company's Annual Meeting of Stockholders on June 23, 2000, three matters
were submitted to a vote of stockholders.
1. The following directors were elected, each to hold office until the Annual
Meeting to be held in 2003 or until a successor is elected and has
qualified or until his or her earlier death, resignation or removal.
Votes were cast as follows:
<TABLE>
<CAPTION>
Name Votes Votes
"FOR" "Withhold Authority"
<S> <C> <C>
Frank C. Carlucci 1,052,073,765 16,121,540
Michael Kantor 1,046,918,544 21,276,761
Gwendolyn S. King 1,055,716,081 12,479,224
Olof Lund 1,055,745,429 12,449,876
John E. Robson 1,052,483,920 15,711,385
Bengt Samuelsson 1,053,563,042 14,632,263
</TABLE>
The following directors are continuing current terms expiring at the 2001 Annual
Meeting: M. Kathryn Eickhoff, Fred Hassan, Philip Leder, Berthold Lindqvist,
John S. Reed and William D. Ruckelshaus. The following directors are continuing
current terms expiring at the 2002 Annual Meeting: C. Steven McMillan, William
U. Parfet, Jacobus F. M. Peters, Ulla Reinius and Robert B. Shapiro.
2. A proposal by a certain stockholder relating to genetically engineered
agricultural products was submitted to a vote of stockholders. The Board
recommended a vote against the proposal. A total of 26,829,456 votes were
cast in favor of this proposal, a total of 886,088,959 votes were cast
against it, 38,628,672 votes were counted as abstentions, and 116,648,218
votes were counted as broker non-votes.
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<PAGE> 28
3. A proposal by a certain stockholder relating to cumulative voting was
submitted to a vote of stockholders. The Board recommended a vote against
the proposal. A total of 332,909,355 votes were cast in favor of this
proposal, a total of 584,071,176 votes were cast against it, 34,566,556
votes were counted as abstentions, and 116,648,218 votes were counted as
broker non-votes.
Item 5. OTHER INFORMATION
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
Except for historical information contained herein, the statements in this
Report are "forward-looking statements" that inherently involve risks and
uncertainties. Forward-looking statements include statements regarding
anticipated financial results, growth plans, product performance, research and
development, regulatory approval and public acceptance of new products, the
potential impact of currency fluctuations and other economic and business
developments. Forward-looking statements often include the words "believes,"
"expects," "will," "intends," "plans," "estimates," or similar expressions.
The company's forward-looking statements are based on current expectations,
currently available information and current assumptions that the company
believes to be reasonable. Actual results, however, may differ materially from
those expressed or implied by such forward-looking statements.
Factors that may cause or contribute to those differences include, among others:
management's ability to integrate the operations of the historic Monsanto
Company with those of the historic Pharmacia & Upjohn, Inc., and to implement
strategic and restructuring initiatives; the ability to fund research and
development, the success of research and development activities and the speed
with which regulatory authorizations and product roll-outs may be achieved; the
effect of new competition; the ability to bring new products to market ahead of
competition; the ability to successfully market new and existing products in new
and existing domestic and international markets; the ability to meet generic and
branded competition after the expiration of the company's patents, including the
expiration of its ROUNDUP herbicide patent in the United States in September
2000; domestic and foreign social, legal and political developments, especially
those relating to health care reform, pricing controls, governmental and public
acceptance of products developed through biotechnology, and product liabilities;
the ability to successfully negotiate pricing of pharmaceutical products with
managed care groups, health care organizations and government agencies
worldwide; the effect of seasonal conditions and of commodity prices on
agricultural markets worldwide; market conditions affecting the timing of the
proposed partial public offering of the company's agriculture business, exposure
to product liability, antitrust and other lawsuits, and contingencies related to
actual or alleged environmental contamination; the company's ability to protect
its intellectual property, and its success in litigation involving its
intellectual property; fluctuations in foreign currency exchange rates; general
domestic and foreign economic and business conditions; the effects of the
company's accounting policies and general changes in generally accepted
accounting practices; the company's ability to attract and retain current
management and other employees of the company; and other factors that may be
described elsewhere in this Report or in other filings of either the company or
Pharmacia & Uphohn, Inc. with the United States Securities and Exchange
Commission, especially on Forms 10-K, 10-Q and 8-K (if any).
The company does not assume the obligation to update any forward-looking
statements. One should understand that it is not possible to predict or identify
all such factors. Consequently, the reader should not consider any such list to
be a complete statement of all potential risks or uncertainties.
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<PAGE> 29
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index
(b) Reports on Form 8-K during the quarter ended June 30, 2000:
A Form 8-K was filed on April 13, 2000, reporting on the merger
transaction involving the former Monsanto Company and Pharmacia &
Upjohn, Inc., and including financial statements of the acquired
business.
A Form 8-K was filed on May 22, 2000, reporting on restated finacial
information.
A Form 8-K was filed on July 13, 2000, reporting on a change in
certifying accountant.
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<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2 1. Agreement and Plan of Merger, dated as of December 19, 1999,
as amended by Amendment No. 1, dated as of February 18,
2000, among MonsantoCompany, MP Sub, Incorporated and
Pharmacia & Upjohn, Inc. (incorporated by reference to
Exhibit 2.1 of the company's Form S-4 filed February 22,
2000, File No. 333-30824).
3 1. Certificate of Amendment to Restated Certificate of
Incorporation of the company, effective March 31, 2000
(incorporated herein by reference to Exhibit 4.2 of the
company's Form S-8 filed on April 5, 2000)
2. By-Laws of the company, as amended and restated effective
March 31, 2000 (incorporated herein by reference to Exhibit
3.2 of the company's Form 10-Q for the quarter ended March
31, 2000).
4 Omitted - Inapplicable
10 1. Monsanto Company Non-Employee Director Equity Incentive
Compensation Plan, as amended March 23, 2000 (incorporated
herein by reference to Exhibit 3.2 of the company's Form
10-Q for the quarter ended March 31, 2000).
2. Pharmacia Corporation Directors Equity Compensation and
Deferral Plan, as effective April 18, 2000 (incorporated
herein by reference to Exhibit 3.2 of the company's Form
10-Q for the quarter ended March 31, 2000).
3. Form of Indemnification Agreement entered into with each
Officer and Director of Pharmacia & Upjohn, Inc.
(incorporated herein by reference to Exhibit (10)(a) to
Pharmacia & Upjohn, Inc.'s Form 10-K for the year ended
December 31, 1995)
4. Employment Agreement with Fred Hassan dated November 15,
1999 (incorporated herein by reference to Exhibit (10)(e) to
Pharmacia & Upjohn, Inc.'s Form 10-K for the year ended
December 31, 1999)
5. Long-Term Incentive Plan (incorporated herein by reference
to Exhibit (10)(j) to Pharmacia & Upjohn, Inc.'s Form 10-K
for the year ended December 31, 1995)
6. Annual Incentive Plan (incorporated herein by reference to
Exhibit (10)(k) to Pharmacia & Upjohn, Inc.'s Form 10-K for
the year ended December 31, 1995)
7. Employment Agreement with Timothy G. Rothwell (incorporated
by reference to Exhibit (10)(i) to Pharmacia & Upjohn's Form
10-K for the year ended December 31, 1997)
11 Omitted - Inapplicable; see Note F of Notes to Financial Statements
15 Omitted - Inapplicable
18 Omitted - Inapplicable
19 Omitted - Inapplicable
22 Omitted - Inapplicable
</TABLE>
30
<PAGE> 31
<TABLE>
<S> <C>
23 Omitted - Inapplicable
24 Omitted - Inapplicable
27 Financial Data Schedule
</TABLE>
31
<PAGE> 32
SIGNATURE:
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.
<TABLE>
<S> <C>
PHARMACIA CORPORATION
(Registrant)
DATE: August 14, 2000 /S/R. G. Thompson
R. G. Thompson
Senior Vice President
and Corporate Controller
</TABLE>
32
