0000059478
2009-03-31
0000059478
2008-12-31
0000059478
2010-03-31
0000059478
2009-12-31
0000059478
2009-01-01
2009-03-31
0000059478
2010-04-20
0000059478
2010-01-01
2010-03-31
xbrli:pure
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
false
--12-31
Q1
2010
2010-03-31
10-Q
0000059478
1153140541
Large Accelerated Filer
Lilly Eli & Co
0
50000000
0
-32500000
3363600000
3777700000
1.20
1.13
-3013200000
-3013200000
3699800000
4031600000
-1063100000
-56500000
-8400000
54600000
0
-50000000
1109800000
1202200000
9623800000
10559700000
968100000
964000000
3343300000
3194300000
1088400000
1138300000
6902600000
6194100000
-2471900000
-2776900000
4635600000
4623900000
109900000
115000000
27460900000
27197800000
12486500000
12252400000
6777000000
6958400000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Acquisitions of Marketed Products and Products in Development</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In March 2010, we entered into a license agreement with Acrux Limited to acquire the exclusive rights to commercialize its proprietary testosterone solution with the proposed tradename Axiron™. The product is currently under regulatory review by the U.S. Food and Drug Administration (FDA) for the treatment of testosterone deficiency in men and has no alternative future use. The charge of $50.0 million for acquired in-process research and development (IPR&D) related to this arrangement was included as expense in the first quarter of 2010 and is deductible for tax purposes. In connection with this arrangement, our partner is entitled to future milestones and royalties based on sales if this product is approved for commercialization.</div>
<!-- xbrl,n --></div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
5496700000
3313100000
4462900000
4725200000
-2183600000
262300000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 10pt; font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">We often enter into collaborative arrangements to develop and commercialize drug candidates. Collaborative activities might include research and development, marketing and selling (including promotional activities and physician detailing), manufacturing, and distribution. These collaborations often require milestone and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements or payments to the third party. Revenues related to products sold by us pursuant to these arrangements are included in net product sales, while other sources of revenue (e.g., royalties and profit share payments) are included in collaboration and other revenue. Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments made to or reimbursements received from our collaboration partners. Each collaboration is unique in nature, and our more significant arrangements are discussed below. The following table summarizes the composition of our total revenue recognized from all transactions, including collaboration activity:</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr valign="bottom">
<td width="76%"></td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">Three Months Ended</td>
<td> </td>
<td align="center" colspan="3">Three Months Ended</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">March 31,</td>
<td> </td>
<td align="center" colspan="3">March 31,</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2010</td>
<td style="border-bottom: #000000 1px solid;"> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2009</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="7">(Dollars in millions)</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Net product sales</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">5,332.5</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,891.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Collaboration and other revenue</div>
</td>
<td> </td>
<td> </td>
<td align="right">153.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">155.2</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Total revenue</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">5,485.5</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,047.0</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
</tr>
<!-- End Table Body --></table>
</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">Erbitux®</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Prior to our acquisition in November 2008, ImClone Systems Inc. (ImClone) entered into several collaborations with respect to Erbitux, a product approved to fight cancer, while still in its development phase. The most significant collaborations operate in these geographic territories: the U.S., Japan, and Canada (Bristol-Myers Squibb Company); and worldwide except the U.S. and Canada (Merck KGaA). The agreements are expected to expire in 2018, upon which all of the rights with respect to Erbitux in the U.S. and Canada return to us. The following table summarizes the revenue recognized with respect to Erbitux:</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr valign="bottom">
<td width="72%"></td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="1%"> </td>
<td width="4%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="1%"> </td>
<td width="4%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">Three Months Ended</td>
<td> </td>
<td align="center" colspan="3">Three Months Ended</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">March 31,</td>
<td> </td>
<td align="center" colspan="3">March 31,</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2010</td>
<td style="border-bottom: #000000 1px solid;"> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2009</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="7">(Dollars in millions)</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Net product sales</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">17.0</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26.1</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Collaboration and other revenue</div>
</td>
<td> </td>
<td> </td>
<td align="right">75.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68.0</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Total revenue</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">92.5</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">94.1</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
</tr>
<!-- End Table Body --></table>
<div style="margin-top: 12pt; font-size: 10pt;" align="left"><i>Bristol-Myers Squibb Company</i></div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Pursuant to a commercial agreement with Bristol-Myers Squibb Company and E.R. Squibb (collectively, BMS), relating to Erbitux, ImClone is co-developing and co-promoting Erbitux in the U.S. and Canada with BMS, exclusively, and in Japan with BMS and Merck KGaA. The companies have jointly agreed to expand the investment in the ongoing clinical development plan for Erbitux to further explore its use in additional tumor types. Under this arrangement, Erbitux research and development and other costs, up to threshold amounts, are the sole responsibility of BMS, with costs in excess of the thresholds shared by both companies according to a predetermined ratio.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Responsibilities associated with clinical and other ongoing studies are apportioned between the parties under the agreement. Collaborative reimbursements received by ImClone for supply of clinical trial materials; for research and development; and for a portion of marketing, selling, and administrative expenses are recorded as a reduction to the respective expense line items on the consolidated condensed statement of operations. We receive a distribution fee in the form of a royalty from BMS, based on a percentage of net sales in the U.S. and Canada, which is recorded in collaboration and other revenue. Royalty expense paid to third parties, net of any reimbursements received, is recorded as a reduction of collaboration and other revenue.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We are responsible for the manufacture and supply of all requirements of Erbitux in bulk-form active pharmaceutical ingredient (API) for clinical and commercial use in the territory, and BMS will purchase all of its requirements of API for commercial use from us, subject to certain stipulations per the agreement. Sales of Erbitux to BMS for commercial use are reported in net product sales.</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left"><i>Merck KGaA</i></div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">A development and license agreement between ImClone and Merck KGaA (Merck) with respect to Erbitux granted Merck exclusive rights to market Erbitux outside of the U.S. and Canada, and co-exclusive rights with BMS and ImClone in Japan. Merck also has rights to manufacture Erbitux for supply in its territory. We manufacture and provide a portion of Merck’s requirements for API, which is included in net product sales. We also receive a royalty on the sales of Erbitux outside of the U.S. and Canada, which is included in collaboration and other revenue as earned. Collaborative reimbursements received for supply of product; for research and development; and marketing, selling, and administrative expenses are recorded as a reduction to the respective expense line items on the consolidated condensed statement of operations. Royalty expense paid to third parties, net of any royalty reimbursements received, is recorded as a reduction of collaboration and other revenue.</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">Necitumumab</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In January 2010, we restructured the commercial agreement with BMS described above to allow for the co-development and co-commercialization of necitumumab, which is currently in Phase III clinical testing for non-small cell lung cancer. Within this restructured arrangement, we and BMS have agreed to share in the cost of developing and potentially commercializing necitumumab in the U.S., Canada, and Japan. We maintain exclusive rights to necitumumab in all other markets. We will fund 45 percent of the development costs for studies that will be used only in the U.S., and 72.5 percent for global studies. We will be responsible for the manufacturing of API and BMS will be responsible for manufacturing the finished product. We could receive a payment of $250.0 million upon approval in the U.S. In the U.S. and Canada, BMS will record sales and we will receive 45 percent of the profits for necitumumab, while we will provide 50 percent of the selling effort. In Japan, we and BMS will share costs and profits evenly.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<div style="margin-top: 12pt; font-size: 10pt;" align="left">Exenatide</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We are in a collaborative arrangement with Amylin Pharmaceuticals (Amylin) for the joint development, marketing, and selling of Byetta® (exenatide injection) and other forms of exenatide such as exenatide once weekly. Byetta is presently approved as an adjunctive therapy to improve glycemic control in patients with type 2 diabetes who have not achieved adequate glycemic control using metformin, a sulfonylurea or a combination of metformin and sulfonylurea; and in the U.S. only, as an adjunctive therapy in patients using a thiazolidinedione (with or without metformin) and as a monotherapy. Lilly and Amylin are co-promoting exenatide in the U.S. Amylin is responsible for manufacturing and primarily utilizes third-party contract manufacturers to supply Byetta. However, we are manufacturing Byetta pen delivery devices for Amylin. We are responsible for development and commercialization costs outside the U.S.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Under the terms of our arrangement, we report as collaboration and other revenue our 50 percent share of gross margin on Amylin’s net product sales in the U.S. We report as net product sales 100 percent of sales outside the U.S. and our sales of Byetta pen delivery devices to Amylin. The following table summarizes the revenue recognized with respect to Byetta:</div>
<div align="center">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0"><!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="1%"> </td>
<td width="4%"> </td>
<td width="5%"> </td>
<td width="4%"> </td>
<td width="1%"> </td>
<td width="4%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">Three Months Ended</td>
<td> </td>
<td align="center" colspan="3">Three Months Ended</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">March 31,</td>
<td> </td>
<td align="center" colspan="3">March 31,</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2010</td>
<td style="border-bottom: #000000 1px solid;"> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2009</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="7">(Dollars in millions)</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Net product sales</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">43.2</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">27.3</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Collaboration and other revenue</div>
</td>
<td> </td>
<td> </td>
<td align="right">72.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">70.2</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Total revenue</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">115.7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97.5</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
</tr>
<!-- End Table Body --></table>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We pay Amylin a percentage of the gross margin of exenatide sales outside of the U.S., and these costs are recorded in cost of sales. Under the 50/50 profit-sharing arrangement for the U.S., in addition to recording as revenue our 50 percent share of exenatide’s gross margin, we also record 50 percent of U.S. research and development costs and marketing and selling costs in the respective line items on the consolidated condensed statements of operations.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">A New Drug Application has been submitted to the FDA for Bydureon™, the proposed brand name for exenatide once weekly. Amylin is constructing and will operate a manufacturing facility for exenatide once weekly, and we have entered into a supply agreement in which Amylin will supply exenatide once weekly product to us for sales outside the U.S. The estimated total cost of the facility is approximately $550 million. In 2008, we paid $125.0 million to Amylin, which we will amortize to cost of sales over the estimated life of the supply agreement beginning with product launch. We would be required to reimburse Amylin for a portion of any future impairment of this facility, recognized in accordance with GAAP. A portion of the $125.0 million payment we made to Amylin would be creditable against any amount we would owe as a result of impairment. We have also agreed to loan up to $165.0 million to Amylin at an indexed rate beginning December 1, 2009; no amounts have been loaned pursuant to this arrangement and any borrowings have to be repaid by June 30, 2014. We have also agreed to cooperate with Amylin in the development, manufacturing, and marketing of exenatide once weekly in a dual-chamber cartridge pen configuration. We will contribute 60 percent of the total initial capital costs of the project, our portion of which will be approximately $130 million, of which we have contributed approximately $62 million as of March 31, 2010.</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">Cymbalta®</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">
<div style="margin-top: 6pt; font-size: 10pt;" align="left"><i>Boehringer Ingelheim</i></div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We have been in a collaborative arrangement with Boehringer Ingelheim (BI) to jointly market and promote Cymbalta (duloxetine), a product for the treatment of major depressive disorder, diabetic peripheral neuropathic pain, generalized anxiety disorder, and fibromyalgia, outside the U.S. and Japan. Pursuant to the terms of the agreement, we generally shared equally in development, marketing, and selling expenses, and paid BI a commission on sales in the co-promotion territories. We manufacture the product for all territories. Reimbursements or payments for the cost sharing of marketing, selling, and administrative expenses were recorded in the respective expense line items in the consolidated condensed statements of operations. The commission paid to BI was recorded in marketing, selling, and administrative expenses. In March 2010, the parties agreed to terminate this agreement, and the exclusive rights to develop and market duloxetine for all indications in countries outside the U.S. and Japan were re-acquired by us. In connection with the arrangement, we paid BI approximately $400 million and will also pay a royalty to BI on our sales in these countries through 2012. We record these costs as intangible assets and will amortize to marketing, selling and administrative expenses over the life of the original agreement, which is through 2015.</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left"><i>Quintiles</i></div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We were in a collaborative arrangement with Quintiles Transnational Corp. (Quintiles) to jointly market and promote Cymbalta in the U.S. since Cymbalta’s launch in 2004. Pursuant to the terms of the agreement, Quintiles shared in the costs to co-promote Cymbalta with us and receives a commission based upon net product sales. According to that agreement, Quintiles’ obligation to promote Cymbalta expired during 2009, and we will pay a lower rate on net product sales for three years after completion of the promotion efforts specified in that agreement. The commissions paid to Quintiles are recorded in marketing, selling, and administrative expenses.</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">Effient®</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We are in a collaborative arrangement with Daiichi Sankyo Company, Limited (D-S) to develop, market, and promote Effient, an antiplatelet agent for the treatment of patients with acute coronary syndrome (ACS) who are being managed with an artery-opening procedure known as percutaneous coronary intervention (PCI). The product was approved for marketing by the European Commission under the trade name Efient® in February 2009, and the initial sales were recorded in the first quarter of 2009. The product was also approved for marketing by the FDA under the tradename Effient in July 2009, and the initial sales in the U.S. were recorded in the third quarter. Within this arrangement, we and D-S have agreed to co-promote under the same trademark in certain territories (including the U.S. and five major European markets), while we have exclusive marketing rights in certain other territories. D-S has exclusive marketing rights in Japan. Under the agreement, we paid D-S an upfront license fee and milestones related to successful development and product launch. The parties share approximately 50/50 in the profits, as well as in the costs of development and marketing in the co-promotion territories. A third party manufactures bulk product, and we produce the finished product for our exclusive and co-promotion territories. We record product sales in our exclusive and co-promotion territories. In our exclusive territories, we pay D-S a royalty specific to these territories. Profit share payments made to D-S are recorded as marketing, selling, and administrative expenses. All royalties paid to D-S and the third-party manufacturer are recorded in cost of sales. Worldwide Effient sales were $8.8 million in the first quarter of 2010. The acceleration in total prescription growth sequentially from last quarter has generated a substantial reduction in the original product stocking. We and D-S continue to make progress in gaining reimbursement and access for the product.</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">TPG-Axon Capital</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In 2008, we entered into an agreement with an affiliate of TPG-Axon Capital (TPG) for the Phase III development of semagacestat and solanezumab, our two lead molecules for the treatment of mild to moderate Alzheimer’s disease. Under the agreement, both we and TPG will provide funding for the Alzheimer’s clinical trials. Funding from TPG will not exceed $325 million and could extend into 2014. In exchange for their funding, TPG may receive success-based milestones totaling $330 million and mid- to high-single digit royalties that are contingent upon the successful development of the Alzheimer’s treatments. The royalties will be paid for approximately eight years after launch of a product. Reimbursements received from TPG for its portion of research and development costs incurred related to the Alzheimer’s treatments are recorded as a reduction to the research and development expense line item on the consolidated condensed statements of operations. The reimbursement from TPG has not been and is not expected to be material in any period.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Summary of Collaboration Related Commission and Profit Share Payments</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">The aggregate amount of commission and profit share payments included in marketing, selling, and administrative expense pursuant to the collaborations described above was $65.1 million and $77.6 million in the quarters ended March 31, 2010 and 2009, respectively.</div>
<!-- xbrl,n -->
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
<!-- xbrl,n --></div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left"> </div>
</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left"> </div>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We are a party to various legal actions, government investigations, and environmental proceedings. The most significant of these are described below. While it is not possible to determine the outcome of these matters, we believe that, except as specifically noted below, the resolution of all such matters will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations in any one accounting period.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><b><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Patent Litigation</font></b></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We are engaged in the following U.S. patent litigation matters brought pursuant to procedures set out in the Hatch-Waxman Act (the Drug Price Competition and Patent Term Restoration Act of 1984):</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> Cymbalta: Sixteen generic drug manufacturers have submitted Abbreviated New Drug Applications (ANDAs) seeking permission to market generic versions of Cymbalta prior to the expiration of our relevant U.S. patents (the earliest of which expires in 2013). Of these challengers, all allege non-infringement of the patent claims directed to the commercial formulation, and nine allege invalidity of the patent claims directed to the active ingredient duloxetine. Of the nine challengers to the compound patent claims, one further alleges invalidity of the claims directed to the use of Cymbalta for treating fibromyalgia, and one alleges the patent having claims directed to the active ingredient is unenforceable. In November 2008 we filed lawsuits in U.S. District Court for the Southern District of Indiana against Actavis Elizabeth LLC; Aurobindo Pharma Ltd.; Cobalt Laboratories, Inc.; Impax Laboratories, Inc.; Lupin Limited; Sandoz Inc.; and Wockhardt Limited, seeking rulings that the patents are valid, infringed, and enforceable. We filed similar lawsuits in the same court against Sun Pharma Global, Inc. in December 2008 and against Anchen Pharmaceuticals, Inc. in August 2009. The cases have been consolidated and actions against all but Wockhardt Limited have been stayed pursuant to stipulations by the defendants to be bound by the outcome of the litigation through appeal.</font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> Gemzar®: Mayne Pharma (USA) Inc., now Hospira, Inc. (Hospira); Fresenius Kabi Oncology Plc (Fresenius); Sicor Pharmaceuticals, Inc., now Teva Parenteral Medicines, Inc. (Teva); and Sun Pharmaceutical Industries Inc. (Sun) each submitted one or more ANDAs seeking permission to market generic versions of Gemzar prior to the expiration of our relevant U.S. patents (compound patent expiring in 2010 and method-of-use patent expiring in 2013), and alleging that these patents are invalid. Sandoz Inc. (Sandoz) and APP Pharmaceuticals, LLC (APP) have similarly challenged our method-of-use patent. We filed lawsuits in the U.S. District Court for the Southern District of Indiana against Teva (February 2006), Hospira (October 2006, January 2008, and March 2010), Sandoz (October 2009), APP (December 2009), and Fresenius (February 2010), seeking rulings that our patents are valid and are being infringed. In November 2007, Sun filed a declaratory judgment action in the United States District Court for the Eastern District of Michigan, seeking rulings that our method-of-use and compound patents are invalid or unenforceable, or would not be infringed by the sale of Sun’s generic product. The status of these cases is as follows:</font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0pt 49.5pt; text-indent: -0.25in; text-align: left;" align="left"><font style="font-family: Wingdings;" class="_mt"><font class="_mt"><font size="2" class="_mt">§</font><font style="font: 7pt 'Times New Roman';" class="_mt"> <font size="2" class="_mt"><font style="font-family: 'DIN-Medium','sans-serif';" class="_mt">In August 2009, the district court in Michigan granted a motion by Sun for partial summary judgment, invalidating our method-of-use patent. We have appealed this decision, and the oral argument will be heard in the U.S. Court of Appeals for the Federal Circuit in May 2010. The outcome of litigation with several generic companies, some of which have tentative or final marketing approval for generic gemcitabine, depends on the outcome of the appeal, and an affirmation of the district court's decision could result in generic product on the market in the U.S. as early as November 2010. The trial originally scheduled for December 2009 has been postponed while the court considers Sun’s second summary judgment motion, related to the validity of our compound patent. <font style="font-family: 'DIN-Medium','sans-serif';" class="_mt">Sun’s ANDA has received tentative approval from the FDA.</font></font></font></font></font></font></p>
<p class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 49.5pt;"><font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt"> </font></font></p>
<p class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 49.5pt; text-indent: -0.25in; text-align: left;" align="left"><font style="font-family: Wingdings;" class="_mt"><font class="_mt"><font size="2" class="_mt">§</font><font style="font: 7pt 'Times New Roman';" class="_mt"> <font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt">The trial against Teva was held in September 2009. In March 2010, the district court in Indiana upheld the validity of our compound patent. The court also ruled in our favor on all invalidity theories brought forward by Teva on our method-of-use patent, except for obviousness-type double patenting. The court applied collateral estoppel with regard to this theory, given the ruling in the Sun case. Teva’s ANDAs have been approved by the FDA.</font></font></font></font></font></p>
<p class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in;"><font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt"> </font></font></p>
<p class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 49.5pt; text-indent: -0.25in; text-align: left;" align="left"><font style="font-family: Wingdings;" class="_mt"><font class="_mt"><font size="2" class="_mt">§</font><font style="font: 7pt 'Times New Roman';" class="_mt"> <font size="2" class="_mt"><font style="font-family: 'DIN-Medium','sans-serif';" class="_mt">Two suits against Hospira have been administratively closed, and the parties have agreed to be bound by the results of the Teva suit. <font style="font-family: 'DIN-Medium','sans-serif';" class="_mt">The remaining suit is in the early stages.</font></font></font></font></font></font></p>
<p class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 49.5pt;"><font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt"> </font></font></p>
<p class="MsoListParagraphCxSpLast" style="margin: 0in 0in 0pt 49.5pt; text-indent: -0.25in;"><font style="font-family: Wingdings;" class="_mt"><font class="_mt"><font size="2" class="_mt">§</font><font style="font: 7pt 'Times New Roman';" class="_mt"> <font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt">Sandoz withdrew its ANDA and the suit against it was dismissed in February 2010.</font></font></font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font class="_mt"> </font></font></p>
<p class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0pt 49.5pt; text-indent: -0.25in; text-align: left;" align="left"><font style="font-family: Wingdings;" class="_mt"><font class="_mt"><font size="2" class="_mt">§</font><font style="font: 7pt 'Times New Roman';" class="_mt"> <font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt">APP filed a motion to dismiss our suit, based on the decision in the Sun case.<font class="_mt"> APP’s ANDA has received tentative approval from the FDA, but APP is prohibited from entering the market by a 30-month stay, which expires in May 2012.<font class="_mt"> </font></font></font></font></font></font></font></p>
<p class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 49.5pt;"><font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt"> </font></font></p>
<p class="MsoListParagraphCxSpLast" style="margin: 0in 0in 0pt 49.5pt; text-indent: -0.25in; text-align: left;" align="left"><font style="font-family: Wingdings;" class="_mt"><font class="_mt"><font size="2" class="_mt">§</font><font style="font: 7pt 'Times New Roman';" class="_mt"> <font style="font-family: 'DIN-Medium','sans-serif';" class="_mt"><font size="2" class="_mt">The Fresenius case is in the early stages.<b><font class="_mt"> </font></b></font></font></font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font lang="ES" style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> Alimta®: Teva Parenteral Medicines, Inc. <font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">(Teva), APP, and Barr Laboratories, Inc. (Barr) each submitted ANDAs seeking approval to market generic versions of Alimta prior to the expiration of the relevant U.S. patent (licensed from the Trustees of Princeton University and expiring in 2016), and alleging the patent is invalid. We, along with Princeton, filed lawsuits in the U.S. District Court for the District of Delaware against Teva, APP, and Barr seeking rulings that the compound patent is valid and infringed. Trial is scheduled for November 2010 against Teva and APP.</font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> Evista®: In 2006, Teva Pharmaceuticals USA, Inc. (Teva) submitted an ANDA seeking permission to market a generic version of Evista prior to the expiration of our relevant U.S. patents (expiring in 2012-2017) and alleging that these patents are invalid, not enforceable, or not infringed. In June 2006, we filed a lawsuit against Teva in the U.S. District Court for the Southern District of Indiana, seeking a ruling that these patents are valid, enforceable, and being infringed by Teva. The trial against Teva was completed in March 2009. In September 2009, the court upheld our method-of-use patents (the last expires in 2014) and Teva has appealed that ruling. In addition, the court held that our particle-size patents (expiring 2017) are invalid, and we have appealed that ruling. InvaGen Pharmaceuticals, Inc. (InvaGen) submitted an ANDA in 2008 seeking approval to market a generic version of Evista prior to the expriation of the particle-size patents at issue in the Teva matter.<font class="_mt"> We filed suit against InvaGen in January 2009 in the U.S. District Court for the Southern District of Indiana.<font class="_mt"> That action has been stayed pending the outcome of the Teva appeal.</font></font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> Strattera®: Actavis Elizabeth LLC (Actavis), Apotex Inc. (Apotex), Aurobindo Pharma Ltd. (Aurobindo), Mylan Pharmaceuticals Inc. (Mylan), Sandoz Inc. (Sandoz), Sun Pharmaceutical Industries Limited (Sun), and Teva Pharmaceuticals USA, Inc. (Teva) each submitted an ANDA seeking permission to market generic versions of Strattera prior to the expiration of our relevant U.S. patent (expiring in 2017), and alleging that this patent is invalid. In 2007, we brought a lawsuit against Actavis, Apotex, Aurobindo, Mylan, Sandoz, Sun, and Teva in the United States District Court for the District of New Jersey. The court has ruled on all pending summary judgment motions, and granted our infringement motion. The remaining invalidity defenses will be decided at trial, scheduled for May 2010. Several companies have received tentative approval to market generic atomoxetine, but are prohibited from entering the market by a 30-month stay that expires in November 2010. <font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">An adverse court decision prior to November 2010 would terminate the stay and enable one or more companies to launch generic atomoxetine.</font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We believe each of these Hatch-Waxman challenges is without merit and expect to prevail in this litigation. However, it is not possible to determine the outcome of this litigation, and accordingly, we can provide no assurance that we will prevail. An unfavorable outcome in any of these cases could have a material adverse impact on our future consolidated results of operations, liquidity, and financial position.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We have received challenges to Zyprexa® patents in a number of countries outside the U.S.:</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> In Canada, several generic pharmaceutical manufacturers have challenged the validity of our Zyprexa patent (expiring in 2011). In April 2007, the Canadian Federal Court ruled against the first challenger, Apotex Inc. (Apotex), and that ruling was affirmed on appeal in February 2008. In June 2007, the Canadian Federal Court held that an invalidity allegation of a second challenger, Novopharm Ltd. (Novopharm), was justified and denied our request that Novopharm be prohibited from receiving marketing approval for generic olanzapine in Canada. Novopharm began selling generic olanzapine in Canada in the third quarter of 2007. In September 2009, the Canadian Federal Court ruled against us in the Novapharm suit, finding our patent invalid. We have appealed this decision, and the appeal is scheduled to be heard in June 2010. If the decision is upheld, we could face liability for damages related to delays in the launch of generic olanzapine products; however, we have concluded at this time that the damages are not probable or estimable.</font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> In Germany, the German Federal Supreme Court upheld the validity of our Zyprexa patent (expiring in 2011) in December 2008, reversing an earlier decision of the Federal Patent Court. Following the decision of the Supreme Court, the generic companies who launched generic olanzapine based on the earlier decision either agreed to withdraw from the market or were subject to injunction. We have negotiated settlements of the damages arising from infringement with most of the generic companies.</font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> We have received challenges in a number of other countries, including Spain, Austria, Australia, and several smaller European countries. In Spain, we have been successful at both the trial and appellate court levels in defeating the generic manufacturers’ challenges, but additional actions against multiple generic companies are now pending. In March 2010, the District Court of Hague ruled against us and revoked our compound patent in the Netherlands.<font class="_mt"> We plan to appeal this decision.</font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We are vigorously contesting the various legal challenges to our Zyprexa patents on a country-by-country basis. We cannot determine the outcome of this litigation. The availability of generic olanzapine in additional markets could have a material adverse impact on our consolidated results of operations.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Xigris® and Evista: In June 2002, Ariad Pharmaceuticals, Inc. (Ariad), the Massachusetts Institute of Technology, the Whitehead Institute for Biomedical Research, and the President and Fellows of Harvard College in the U.S. District Court for the District of Massachusetts sued us, alleging that sales of two of our products, Xigris and Evista, were inducing the infringement of a patent related to the discovery of a natural cell signaling phenomenon in the human body, and seeking royalties on past and future sales of these products. Following jury and bench trials on separate issues, the U.S. District Court of Massachusetts entered final judgment in September 2007 that Ariad’s claims were valid, infringed, and enforceable, and finding damages in the amount of $65 million plus a 2.3 percent royalty on net U.S. sales of Xigris and Evista since the time of the jury decision. However, the court deferred the requirement to pay any damages until after all rights to appeal are exhausted. In April 2009, the Court of Appeals for the Federal Circuit overturned the District Court judgment, concluding that Ariad’s asserted patent claims are invalid. In August 2009, the Court of Appeals agreed to review this decision en banc, thereby vacating the Court of Appeals decision. In March 2010, the Court of Appeals ruled in our favor.<font class="_mt"> The plaintiffs may seek review of this decision by the U.S. Supreme Court, but we believe the likelihood of success in such an appeal is remote.</font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><b><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Zyprexa Litigation</font></b></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We have been named as a defendant in a large number of Zyprexa product liability lawsuits in the U.S. and have been notified of many other claims of individuals who have not filed suit. The lawsuits and unfiled claims (together the “claims”) allege a variety of injuries from the use of Zyprexa, with the majority alleging that the product caused or contributed to diabetes or high blood-glucose levels. The claims seek substantial compensatory and punitive damages and typically accuse us of inadequately testing for and warning about side effects of Zyprexa. Many of the claims also allege that we improperly promoted the drug. Almost all of the federal lawsuits are part of a Multi-District Litigation (MDL) proceeding before The Honorable Jack Weinstein in the Federal District Court for the Eastern District of New York (EDNY) (MDL No. 1596).</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Since June 2005, we have entered into agreements with various claimants’ attorneys involved in U.S. Zyprexa product liability litigation to settle a substantial majority of the claims. The agreements cover a total of approximately 32,670 claimants, including a large number of previously filed lawsuits and other asserted claims. The two primary settlements were as follows:</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> In 2005, we settled and paid more than 8,000 claims for $690.0 million, plus $10.0 million to cover administration of the settlement.</font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt 0.4in; text-indent: -0.2in;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">•<font class="_mt"> In 2007, we settled and paid more than 18,000 claims for approximately $500 million.</font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We are prepared to continue our vigorous defense of Zyprexa in all remaining claims. The U.S. Zyprexa product liability claims not subject to these agreements include approximately 150 lawsuits in the U.S. covering approximately 240 plaintiffs, of which about 125 cases covering about 140 plaintiffs are part of the MDL. The MDL cases have been scheduled for trial in groups, the earliest trial groups have been tentatively scheduled for September and October 2010. We also have trials scheduled in Texas state court in August and December 2010 and in Ohio in December 2010.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">In January 2009, we reached resolution with the Office of the U.S. Attorney for the Eastern District of Pennsylvania (EDPA), and the State Medicaid Fraud Control Units of 36 states and the District of Columbia, of an investigation related to our U.S. marketing and promotional practices with respect to Zyprexa. As part of the resolution, we pled guilty to one misdemeanor violation of the Food, Drug, and Cosmetic Act for the off-label promotion of Zyprexa in elderly populations as treatment for dementia, including Alzheimer’s dementia, between September 1999 and March 2001. We recorded a charge of $1.42 billion for this matter in the third quarter of 2008. In 2009, we paid substantially all of this amount, as required by the settlement agreements. As part of the settlement, we have entered into a corporate integrity agreement with the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS), which requires us to maintain our compliance program and to undertake a set of defined corporate integrity obligations for five years. The agreement also provides for an independent third-party review organization to assess and report on the company’s systems, processes, policies, procedures, and practices.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">In October 2008, we reached a settlement with 32 states and the District of Columbia related to a multistate investigation brought under various state consumer protection laws. While there is no finding that we have violated any provision of the state laws under which the investigations were conducted, we accrued and paid $62.0 million and agreed to undertake certain commitments regarding Zyprexa for a period of six years, through consent decrees filed with the settling states.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We have been served with lawsuits filed by the states of Alaska, Arkansas, Connecticut, Idaho, Louisiana, Minnesota, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina, Utah, and West Virginia alleging that Zyprexa caused or contributed to diabetes or high blood-glucose levels, and that we improperly promoted the drug. These suits seek to recover the costs paid for Zyprexa through Medicaid and other drug-benefit programs, as well as the costs alleged to have been incurred and that will be incurred by the states to treat Zyprexa-related illnesses. The Connecticut, Idaho, Louisiana, Minnesota, Mississippi, Montana, New Mexico, and West Virginia cases are part of the MDL proceedings in the EDNY. The Alaska case was settled in March 2008 for a payment of $15.0 million, plus terms designed to ensure, subject to certain limitations and conditions, that Alaska is treated as favorably as certain other states that may settle with us in the future over similar claims. We are in advanced discussions with the attorneys general for several of these states, seeking to resolve their Zyprexa-related claims, and we have agreed to settlements with the states of Arkansas, Connecticut, Idaho, Louisiana, Mississippi, Montana, New Mexico, South Carolina, Utah, and West Virginia. In the second and third quarters of 2009, we incurred pretax charges of $105.0 million and $125.0 million, respectively, reflecting the currently probable and estimable exposures in connection with these claims. The Pennsylvania case is set for trial in June 2010 in state court.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">In 2005, two lawsuits were filed in the EDNY purporting to be nationwide class actions on behalf of all consumers and third-party payors, excluding governmental entities, which have made or will make payments for their members or insured patients being prescribed Zyprexa. These actions have now been consolidated into a single lawsuit, which is brought under certain state consumer protection statutes, the federal civil RICO statute, and common law theories, seeking a refund of the cost of Zyprexa, treble damages, punitive damages, and attorneys’ fees. Two additional lawsuits were filed in the EDNY in 2006 on similar grounds. In September 2008, Judge Weinstein certified a class consisting of third-party payors, excluding governmental entities and individual consumers. We appealed the certification order, and Judge Weinstein’s order denying our motion for summary judgment, in September 2008. While the Second Circuit Court of Appeals heard oral arguments on the appeal in December 2009, no opinions have been rendered. In 2007, The Pennsylvania Employees Trust Fund brought claims in state court in Pennsylvania as insurer of Pennsylvania state employees, who were prescribed Zyprexa on similar grounds as described in the New York cases. As with the product liability suits, these lawsuits allege that we inadequately tested for and warned about side effects of Zyprexa and improperly promoted the drug. In December 2009, the court granted our summary judgment motion dismissing the case. Plaintiffs have appealed this decision.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">In early 2005, we were served with four lawsuits seeking class action status in Canada on behalf of patients who took Zyprexa. One of these four lawsuits has been certified for residents of Quebec, and a second has been certified in Ontario and includes all Canadian residents except for residents of Quebec and British Columbia. The allegations in the Canadian actions are similar to those in the product liability litigation pending in the U.S. We are in advanced discussions to resolve all Zyprexa class-action litigation in Canada.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We cannot determine with certainty the additional number of lawsuits and claims that may be asserted. The ultimate resolution of Zyprexa product liability and related litigation could have a material adverse impact on our consolidated results of operations, liquidity, and financial position.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Other Product Liability Litigation</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">We have been named as a defendant in numerous other product liability lawsuits involving primarily diethylstilbestrol (DES), thimerosal, and Byetta. Approximately half of these claims are covered by insurance, subject to deductibles and coverage limits.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Product Liability Insurance</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of product liability and related claims for other products in the future. In the past several years, we have been unable to attain product liability insurance due to a very restrictive insurance market. Therefore, for substantially all of our currently marketed products, we have been and expect that we will continue to be completely self-insured for future product liability losses. In addition, there is no assurance that we will be able to fully collect from our insurance carriers in the future.</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Environmental Matters</font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" class="_mt">Under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, we have been designated as one of several potentially responsible parties with respect to fewer than 10 sites. Under Superfund, each responsible party may be jointly and severally liable for the entire amount of the cleanup. We also continue remediation of certain of our own sites. We have accrued for estimated Superfund cleanup costs, remediation, and certain other environmental matters. This takes into account, as applicable, available information regarding site conditions, potential cleanup methods, estimated costs, and the extent to which other parties can be expected to contribute to payment of those costs. We have limited liability insurance coverage for certain environmental liabilities.</font></p>
</div><!-- body --></div></div> </div>
0.49
0.49
718700000
721300000
969600000
943100000
816400000
1122500000
271000000
275200000
84800000
81200000
-306300000
-299400000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 10pt; font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>Our stock-based compensation expense consists primarily of performance awards (PAs) and shareholder value awards (SVAs). We recognized pretax stock-based compensation cost of $73.7 million and $66.1 million in the first quarter of 2010 and 2009, respectively.
<div style="margin-top: 6pt; font-size: 10pt;" align="left">PAs are granted to officers and management and are payable in shares of our common stock. The number of PA shares actually issued, if any, varies depending on the achievement of certain earnings per share targets over a two-year period. PA shares are accounted for at fair value based upon the closing stock price on the date of grant and fully vest at the end of the measurement periods. As of March 31, 2010, the total remaining unrecognized compensation cost related to nonvested PAs amounted to $157.4 million, which will be amortized over the weighted-average remaining requisite service period of approximately 15 months.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">SVAs are granted to officers and management and are payable in shares of common stock at the end of a three-year period. The number of shares actually issued varies depending on our stock price at the end of the three-year vesting period compared to pre-established target prices. We measure the fair value of the SVA unit on the grant date using a Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. As of March 31, 2010, the total remaining unrecognized compensation cost related to nonvested SVAs amounted to $81.8 million, which will be amortized over the weighted-average remaining requisite service period of approximately 26 months.</div>
<!-- xbrl,n --></div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
538000000
0
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font class="_mt" style="font-size: 10pt; font-family: 'DIN-Medium','sans-serif';">Unless otherwise noted in the footnotes, all per-share amounts are presented on a diluted basis, that is, based on the weighted-average number of outstanding common shares plus the effect of all potentially dilutive common shares (primarily contingently issuable shares and unexercised stock options).</font></p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
-118400000
-96100000
894200000
506100000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 9pt; font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments. Wholesale distributors of life-sciences products account for a substantial portion of trade receivables; collateral is generally not required. The risk associated with this concentration is mitigated by our ongoing credit review procedures and insurance. Major financial institutions represent the largest component of our investments in corporate debt securities. In accordance with documented corporate policies, we limit the amount of credit exposure to any one financial institution or corporate issuer. We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect any counterparties to fail to meet their obligations given their high credit ratings.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Accounting Policy for Risk-Management Instruments</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Our derivative activities are initiated within the guidelines of documented corporate risk-management policies and do not create additional risk because gains and losses on derivative contracts offset losses and gains on the assets, liabilities, and transactions being hedged. As derivative contracts are initiated, we designate the instruments individually as either a fair value hedge or a cash flow hedge. Management reviews the correlation and effectiveness of our derivatives on a quarterly basis.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">For derivative contracts that are designated and qualify as fair value hedges, the derivative instrument is marked to market with gains and losses recognized currently in income to offset the respective losses and gains recognized on the underlying exposure. For derivative contracts that are designated and qualify as cash flow hedges, the effective portion of gains and losses on these contracts is reported as a component of other comprehensive loss and reclassified into earnings in the same period the hedged transaction affects earnings. Hedge ineffectiveness is immediately recognized in earnings. Derivative contracts that are not designated as hedging instruments are recorded at fair value with the gain or loss recognized currently in earnings during the period of change.
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We may enter into foreign currency forward and purchase option contracts to reduce the effect of fluctuating currency exchange rates (principally the euro, the British pound, and the Japanese yen). Foreign currency derivatives used for hedging are put in place using the same or like currencies and duration as the underlying exposures. Forward contracts are principally used to manage exposures arising from subsidiary trade and loan payables and receivables denominated in foreign currencies. These contracts are recorded at fair value with the gain or loss recognized in other-net, expense (income). The purchased option contracts are used to hedge anticipated foreign currency transactions, primarily intercompany inventory activities expected to occur within the next year. These contracts are designated as cash flow hedges of those future transactions, and the impact on earnings is included in cost of sales. We may enter into foreign currency forward contracts and currency swaps as fair value hedges of firm commitments. Forward and purchase option contracts generally have maturities not exceeding 12 months. At March 31, 2010, we did not hold any foreign currency option contracts. At March 31, 2010, we had outstanding foreign currency forward commitments to purchase 415 million British pounds and sell 457 million euro, commitments to purchase 869 million U.S. dollars and sell 644 million euro, and commitments to buy 1.06 billion euro and sell 1.44 billion U.S. dollars, which will settle within five months.</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In the normal course of business, our operations are exposed to fluctuations in interest rates. These fluctuations can vary the costs of financing, investing, and operating. We address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments. The objective of controlling these risks is to limit the impact of fluctuations in interest rates on earnings. Our primary interest rate risk exposure results from changes in short-term U.S. dollar interest rates. In an effort to manage interest rate exposures, we strive to achieve an acceptable balance between fixed and floating rate debt and investment positions and may enter into interest rate swaps or collars to help maintain that balance. Interest rate swaps or collars that convert our fixed-rate debt or investments to a floating rate are designated as fair value hedges of the underlying instruments. Interest rate swaps or collars that convert floating rate debt or investments to a fixed rate are designated as cash flow hedges. Interest expense on the debt is adjusted to include the payments made or received under the swap agreements. At March 31, 2010, approximately 97 percent of our total debt is at a fixed rate. We have converted approximately 65 percent of our fixed-rate debt to floating rates through the use of interest rate swaps.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">The Effect of Risk-Management Instruments on the Statement of Operations</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Both the losses on the hedged fixed-rate debt and the offsetting gains on the related interest rate swaps for the first quarter of 2010 were $31.6 million. In the first quarter of 2009, both the gains on the hedged fixed-rate debt and the offsetting losses on the related interest rate swaps were $139.6 million. These amounts net to zero for each quarter and were included in other - net, expense (income).</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We expect to reclassify $11.9 million of pretax net losses on cash flow hedges of the variability in expected future interest payments on floating rate debt from accumulated other comprehensive loss to earnings during the next 12 months.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Other-net, expense (income) for the three months ended March 31, 2010 and 2009, includes the effective portion of losses on interest rate contracts in designated cash flow hedging relationships reclassified from accumulated other comprehensive loss into income of $2.2 million and $2.5 million, respectively, and the net gains on foreign exchange contracts not designated as hedging instruments recognized in income of $6.8 million and $36.6 million, respectively. The effective portion of net gains on interest rate contracts in designated cash flow hedging relationships recorded in other comprehensive loss for the three months ended March 31, 2010 and 2009, was zero and $37.8 million, respectively.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<div style="margin-top: 6pt; font-size: 10pt;" align="left">During the three months ended March 31, 2010 and 2009, net losses related to ineffectiveness and net losses related to the portion of our risk-management hedging instruments, fair value and cash flow hedges excluded from the assessment of effectiveness were not material.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Fair Value of Financial Instruments</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">The following tables summarize certain fair value information at March 31, 2010 and December 31, 2009 for assets and liabilities measured at fair value on a recurring basis, as well as the carrying amount and amortized cost of certain other investments:</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"><font class="_mt" style="font-family: 'DIN-Medium','sans-serif';"> </font></div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<div style="font-family: 'DIN-Medium','sans-serif';" align="center">
<div align="center">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0"><!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="11" nowrap="nowrap">Fair Value Measurements Using</td>
<td> </td>
<td align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" colspan="3">Quoted </td>
<td> </td>
<td align="center" colspan="3"> </td>
<td> </td>
<td align="center" colspan="3"> </td>
<td> </td>
<td align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" colspan="3">Prices in</td>
<td> </td>
<td align="center" colspan="3"> </td>
<td> </td>
<td align="center" colspan="3"> </td>
<td> </td>
<td align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" colspan="3">Active</td>
<td> </td>
<td align="center" colspan="3"> </td>
<td> </td>
<td align="center" colspan="3"> </td>
<td> </td>
<td align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" colspan="3">Markets</td>
<td> </td>
<td align="center" colspan="3"></td>
<td> </td>
<td align="center" colspan="3"> </td>
<td> </td>
<td align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" colspan="3">for</td>
<td> </td>
<td align="center" colspan="3">Significant</td>
<td> </td>
<td align="center" colspan="3">Significant</td>
<td> </td>
<td align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="center" colspan="3">Identical</td>
<td> </td>
<td align="center" colspan="3">Other</td>
<td> </td>
<td align="center" colspan="3">Unobservable</td>
<td> </td>
<td align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">Carrying</td>
<td> </td>
<td align="center" colspan="3">Amortized</td>
<td> </td>
<td align="center" colspan="3">Assets</td>
<td> </td>
<td align="center" colspan="3">Observable Inputs</td>
<td> </td>
<td align="center" colspan="3">Inputs</td>
<td> </td>
<td align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td align="center">Description</td>
<td> </td>
<td align="center" colspan="3">Amount</td>
<td> </td>
<td align="center" colspan="3">Cost</td>
<td> </td>
<td align="center" colspan="3">(Level 1)</td>
<td> </td>
<td align="center" colspan="3">(Level 2)</td>
<td> </td>
<td align="center" colspan="3">(Level 3)</td>
<td> </td>
<td align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="font-size: 1px;">
<td style="border-top: #000000 1px solid;" align="left" colspan="25"> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;"><b>March 31, 2010</b></div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Short-term investments</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Corporate debt securities</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">19.1</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19.2</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19.1</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19.1</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">U.S. government and agencies</div>
</td>
<td> </td>
<td> </td>
<td align="right">13.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13.9</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Other securities</div>
</td>
<td> </td>
<td> </td>
<td align="right">0.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.2</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">33.2</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">33.3</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Noncurrent investments</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Corporate debt securities</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">172.3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">175.4</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">172.3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">172.3</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Mortgage-backed</div>
</td>
<td> </td>
<td> </td>
<td align="right">229.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">288.1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">229.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">229.3</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Asset-backed</div>
</td>
<td> </td>
<td> </td>
<td align="right">58.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">73.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58.9</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">U.S. government and agencies</div>
</td>
<td> </td>
<td> </td>
<td align="right">75.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75.5</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Other debt securities</div>
</td>
<td> </td>
<td> </td>
<td align="right">7.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.0</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Marketable equity</div>
</td>
<td> </td>
<td> </td>
<td align="right">409.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">186.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">409.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">409.4</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Equity method and other investments</div>
</td>
<td> </td>
<td> </td>
<td align="right">146.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" colspan="3">NA</td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">1,099.2</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">955.4</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Long-term debt, including current portion</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">(6,681.0</td>
<td>)</td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">(6,844.8</td>
<td>)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">(6,844.8</td>
<td>)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Risk-management instruments</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Interest rate contracts<br />
designated as hedging<br />
instruments<br />
Sundry</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">160.3</td>
<td> </td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">160.3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">160.3</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Foreign exchange contracts<br />
not designated as hedging<br />
instruments<br />
Prepaid expenses</div>
</td>
<td> </td>
<td> </td>
<td align="right">14.0</td>
<td> </td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14.0</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 60px; text-indent: -15px;">Other current liabilities</div>
</td>
<td> </td>
<td align="right"> </td>
<td align="right">(9.1</td>
<td>)</td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td align="right">(9.1</td>
<td>)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td align="right">(9.1</td>
<td>)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;"><b>December 31, 2009</b></div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Short-term investments</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Corporate debt securities</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">15.8</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">16.1</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15.8</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">U.S. government and agencies</div>
</td>
<td> </td>
<td> </td>
<td align="right">18.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18.5</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Other securities</div>
</td>
<td> </td>
<td> </td>
<td align="right">0.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.4</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">34.7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">35.3</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Noncurrent investments</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body --></table>
</div>
</div>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"><font class="_mt" style="font-family: 'DIN-Medium','sans-serif';"> </font></div>
<div style="margin-top: 6pt; font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" align="left">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Corporate debt securities</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">185.9</td>
<td> </td>
<td> </td>
<td align="right"> $</td>
<td align="right">195.4</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> $</td>
<td align="right">185.9</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> $</td>
<td align="right">185.9</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Mortgage-backed</div>
</td>
<td> </td>
<td> </td>
<td align="right">240.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">310.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">240.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">240.3</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Asset-backed</div>
</td>
<td> </td>
<td> </td>
<td align="right">78.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">94.1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">78.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">78.7</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">U.S. government and agencies</div>
</td>
<td> </td>
<td> </td>
<td align="right">81.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81.3</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Other debt securities</div>
</td>
<td> </td>
<td> </td>
<td align="right">34.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34.4</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Marketable equity</div>
</td>
<td> </td>
<td> </td>
<td align="right">378.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">184.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">378.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">378.7</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Equity methods and</div>
<div style="margin-left: 30px; text-indent: -15px;">other investments</div>
</td>
<td> </td>
<td> </td>
<td align="right">156.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">156.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" colspan="3">NA</td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">1,155.8</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,034.5</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Long-term debt,</div>
<div style="margin-left: 15px; text-indent: -15px;">including current portion</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">(6,655.0</td>
<td>)</td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">(6,827.8</td>
<td>)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">(6,827.8</td>
<td>)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Risk-management instruments</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Interest rate contracts</div>
<div style="margin-left: 30px; text-indent: -15px;"> designated as</div>
<div style="margin-left: 30px; text-indent: -15px;"> hedging instruments</div>
<div style="margin-left: 30px; text-indent: -15px;"> Sundry</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">134.9</td>
<td> </td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">134.9</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">134.9</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 45px; text-indent: -15px;">Other noncurrent liabilities</div>
</td>
<td> </td>
<td align="right"> </td>
<td align="right">(6.2</td>
<td>)</td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td align="right">(6.2</td>
<td>)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td align="right">(6.2</td>
<td>)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Foreign exchange</div>
<div style="margin-left: 30px; text-indent: -15px;">contracts not designated</div>
<div style="margin-left: 30px; text-indent: -15px;">as hedging instruments</div>
<div style="margin-left: 30px; text-indent: -15px;"> Prepaid expenses</div>
</td>
<td> </td>
<td> </td>
<td align="right">8.8</td>
<td> </td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8.8</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 45px; text-indent: -15px;">Other current liabilities</div>
</td>
<td> </td>
<td align="right"> </td>
<td align="right">(10.7</td>
<td>)</td>
<td> </td>
<td align="center" colspan="3">NA</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td align="right">(10.7</td>
<td>)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td align="right">(10.7</td>
<td>)</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr valign="top">
<td colspan="3">NA — Not applicable</td>
</tr>
</table>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We determine fair values based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses. The fair value of equity method investments and other investments is not readily available.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Approximately $225 million of our investments in debt securities, measured at fair value, will mature within five years.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">A summary of the fair value of available-for-sale securities in an unrealized gain or loss position and the amount of unrealized gains and losses (pretax) in other comprehensive loss follows:</div>
<div align="center">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0"><!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">March 31, 2010</td>
<td> </td>
<td align="center" colspan="3">December 31, 2009</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Unrealized gross gains</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">230.7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">222.4</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Unrealized gross losses</div>
</td>
<td> </td>
<td> </td>
<td align="right">87.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">101.7</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Fair value of securities in an unrealized gain position</div>
</td>
<td> </td>
<td> </td>
<td align="right">667.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">579.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Fair value of securities in an unrealized loss position</div>
</td>
<td> </td>
<td> </td>
<td align="right">313.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">449.4</td>
<td> </td>
</tr>
<!-- End Table Body --></table>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Other-than-temporary impairment losses on fixed income securities of $1.0 million and $7.9 million were recognized in the statement of operations for the three months ended March 31, 2010 and 2009, respectively. These losses primarily relate to credit losses on certain mortgage-backed securities. The amount of credit losses represents the difference between the present value of cash flows expected to be collected on these securities and the amortized cost. Factors considered in assessing the credit loss were the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">The securities in an unrealized loss position are comprised of fixed-rate debt securities of varying maturities. The value of fixed income securities is sensitive to changes in the yield curve and other market conditions, which led to the decline in value in 2008. Approximately 60 percent of the securities in a loss position are investment-grade debt securities. The majority of these securities first moved into an unrealized loss position during 2008. At this time, there is no indication of default on interest or principal payments for debt securities other than those for which an other-than-temporary impairment charge has been recorded. We do not intend to sell and it is not more likely than not we will be required to sell the securities in a loss position before the market values recover or the underlying cash flows have been received, and we have concluded that no additional other-than-temporary loss is required to be charged to earnings as of March 31, 2010.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Activity related to our available-for-sale investment portfolio was as follows:</div>
<div align="center">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0"><!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 0px solid;" align="center" colspan="7" nowrap="nowrap">Three Months Ended</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="3">March 31, 2010</td>
<td> </td>
<td align="center" colspan="3">March 31, 2009</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Proceeds from sales</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">178.7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">287.6</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Realized gross gains on sales</div>
</td>
<td> </td>
<td> </td>
<td align="right">63.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45.7</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Realized gross losses on sales</div>
</td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8.7</td>
<td> </td>
</tr>
<!-- End Table Body --></table>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Realized gains and losses on sales of available-for-sale securities are computed based upon specific identification of the initial cost adjusted for any other-than-temporary declines in fair value that were recorded in earnings.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In March 2009, we issued $2.40 billion of fixed-rate notes ($1.00 billion at 3.55 percent due in 2012; $1.00 billion at 4.20 percent due in 2014; and $400.0 million at 5.95 percent due in 2037) with interest to be paid semi-annually.</div>
<!-- xbrl,n --></div>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left"> </div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
1683400000
1707800000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 10pt; font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font class="_mt" style="font-size: 10pt; color: black; font-family: 'DIN-Medium','sans-serif';">We file income tax returns in the U.S. federal jurisdiction and various state, local, and non-U.S. jurisdictions. <font class="_mt"> We are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations in major taxing jurisdictions for years before 2005. <font class="_mt"> The IRS began its examination of tax years 2005-2007 during the third quarter of 2008. <font class="_mt"> In the third quarter of 2009, we settled an IRS administrative appeals matter from the 2001-2004 IRS audit.<font class="_mt"> Considering the status of the 2005-2007 IRS examination at that time and the settlement of the IRS administrative appeals matter from the 2001-2004 audit, gross unrecognized tax benefits were reduced approximately $190 million in the third quarter of 2009. <font class="_mt"> Additionally, in the third quarter of 2009, our income tax expense was reduced by $54.4 million, and a cash payment of $52.8 million was paid, after utilization of applicable tax credit carryovers.</font></font></font></font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font class="_mt" style="font-size: 10pt; color: black; font-family: 'DIN-Medium','sans-serif';"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font class="_mt" style="font-size: 10pt; color: black; font-family: 'DIN-Medium','sans-serif';">The IRS continues its examination of tax years 2005-2007. <font class="_mt"> In the first quarter of 2010, we began the process of advancing the examination procedures to tax years 2008-2009 for certain matters currently being examined in the 2005-2007 audit cycle.<font class="_mt"> The resolution of all issues related to these tax examinations will likely extend beyond the next 12 months.</font></font></font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font class="_mt" style="font-size: 10pt; color: black; font-family: 'DIN-Medium','sans-serif';"> </font></p>
<p class="MsoNormal" style="margin: 0in 0in 0pt;"><font class="_mt" style="font-size: 10pt; color: black; font-family: 'DIN-Medium','sans-serif';">The new U.S. health care legislation (both the primary “Patient Protection and Affordable Care Act” and the “Health Care and Education Reconciliation Act”) eliminated the tax-free nature of the subsidy we receive for sponsoring retiree drug coverage that is “actuarially equivalent” to Medicare Part D. This provision is effective January 1, 2013.<font class="_mt"> While this change has a future impact on our net tax deductions related to retiree health benefits, we are required to record a one-time charge to adjust our deferred tax asset for this change in the law in the quarter of enactment.<font class="_mt"> Accordingly, we recorded a non-cash charge of $85.1 million in the first quarter of 2010.</font></font></font></p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
370300000
459700000
129100000
230500000
-672000000
-815100000
2849900000
2471100000
27460900000
27197800000
6568100000
5657600000
11367500000
11077900000
6634700000
6661300000
1155800000
1099200000
1600000
2700000
-2380400000
-547000000
227300000
-52600000
87900000
958000000
1313100000
1248100000
488500000
535600000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We have prepared the accompanying unaudited consolidated condensed financial statements in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (GAAP). In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for a fair presentation of the results of operations for the periods shown. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2009. We issued our financial statements by filing with the Securities and Exchange Commission (SEC) and have evaluated subsequent events up to the time of the filing.</div>
<!-- xbrl,n --></div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
1921400000
1827600000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 10pt; font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Other - net, expense (income) comprised the following:</div>
<div align="center">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0"><!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 0px solid;" align="center" colspan="7" nowrap="nowrap">Three Months Ended March 31,</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2010</td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2009</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="7">(Dollars in millions)</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Interest expense</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">47.6</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">87.6</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Interest income</div>
</td>
<td> </td>
<td align="right"> </td>
<td align="right">(10.6</td>
<td>)</td>
<td> </td>
<td align="right"> </td>
<td align="right">(27.4</td>
<td>)</td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Other</div>
</td>
<td> </td>
<td align="right"> </td>
<td align="right">(111.5</td>
<td>)</td>
<td> </td>
<td> </td>
<td align="right">10.5</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;"> </div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">(74.5</td>
<td>)</td>
<td> </td>
<td align="right">$</td>
<td align="right">70.7</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
</tr>
<!-- End Table Body --></table>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Other Income for the first quarter of 2010 is primarily related to damages recovered from generic pharmaceutical companies following Zyprexa patent litigation in Germany and a gain related to the disposition of investment securities acquired in the ImClone acquisition.</div>
<!-- /xbrl,ns --><!-- link2 "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" -->
<div align="left"><a name="2"></a></div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left"> </div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
2683900000
2773100000
1224900000
1172900000
-70700000
74500000
19000000
10500000
157000000
125100000
-286200000
800000
536800000
539200000
67700000
57200000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 10pt; font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>Net pension and retiree health benefit expense included the following components:
<div align="center">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0"><!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="7" nowrap="nowrap">Defined Benefit Pension Plans</td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="7" nowrap="nowrap">Retiree Health Benefit Plans</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="7">Three Months Ended</td>
<td> </td>
<td align="center" colspan="7">Three Months Ended</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 0px solid;" align="center" colspan="7" nowrap="nowrap">March 31,</td>
<td> </td>
<td style="border-bottom: #000000 0px solid;" align="center" colspan="7" nowrap="nowrap">March 31,</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2010</td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2009</td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2010</td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2009</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="15">(Dollars in millions)</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Components of net periodic benefit cost</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Service cost</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">57.8</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">60.7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15.7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">16.3</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Interest cost</div>
</td>
<td> </td>
<td> </td>
<td align="right">108.1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">103.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28.7</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Expected return on plan assets</div>
</td>
<td> </td>
<td align="right"> </td>
<td align="right">(157.6</td>
<td>)</td>
<td> </td>
<td align="right"> </td>
<td align="right">(142.3</td>
<td>)</td>
<td> </td>
<td align="right"> </td>
<td align="right">(30.7</td>
<td>)</td>
<td> </td>
<td align="right"> </td>
<td align="right">(29.5</td>
<td>)</td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Amortization of prior service cost</div>
</td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td align="right">(9.3</td>
<td>)</td>
<td> </td>
<td align="right"> </td>
<td align="right">(9.0</td>
<td>)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Recognized actuarial loss</div>
</td>
<td> </td>
<td> </td>
<td align="right">40.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17.2</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="15"> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Net periodic benefit cost</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">50.8</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45.2</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">27.0</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">23.7</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="15"> </td>
</tr>
<!-- End Table Body --></table>
</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">As of March 31, 2010, approximately $265 million of the total expected 2010 contributions of approximately $400 million has been made to our defined benefit pension plans. During the remainder of 2010, we expect to make contributions to our defined benefit pension plans of approximately $25 million to satisfy minimum funding requirements and approximately $110 million of additional discretionary funding.</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
2334700000
2024200000
1036200000
1017800000
2400000000
100000
-4243600000
-7900000
184800000
191000000
15100000000
14181100000
8197400000
7987000000
947300000
1039100000
0
26200000
9830400000
11077200000
5047000000
5485500000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In March 2010, the Financial Accounting Standards Board (FASB) ratified Emerging Issues Task Force (EITF) guidance related to Revenue Recognition that applies to arrangements with milestones relating to research or development deliverables. This guidance provides criteria that must be met to recognize consideration that is contingent upon achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. This guidance is effective for us January 1, 2011 and is not expected to have a material impact to our consolidated financial position or results of operations.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">In 2009, the FASB ratified EITF guidance related to Revenue Recognition that amends the previous guidance on arrangements with multiple deliverables. This guidance provides principles and application guidance on whether multiple deliverables exist, how the arrangements should be separated, and how the consideration should be allocated. It also clarifies the method to allocate revenue in an arrangement using the estimated selling price. This guidance is effective for us January 1, 2011, and is not expected to be material to our consolidated financial position or results of operations.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We adopted the FASB Statement on Transfers and Servicing, an amendment of previous authoritative guidance. The most significant amendments resulting from this Statement consist of the removal of the concept of a qualifying special-purpose entity (SPE) from previous authoritative guidance, and the elimination of the exception for qualifying SPEs from the Consolidation guidance regarding variable interest entities. This Statement was effective for us January 1, 2010, and had no effect on our consolidated financial position or results of operations.</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We adopted the FASB Statement that amended the previous Consolidations guidance regarding variable interest entities and addressed the effects of eliminating the qualifying SPE concept from the guidance on Transfers and Servicing. This Statement responded to concerns about the application of certain key provisions of the previous guidance on Consolidations regarding variable interest entities, including concerns over the transparency of enterprises’ involvement with variable interest entities. This Statement was effective for us January 1, 2010, and had no effect on our consolidated financial position or results of operations.</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">We operate in one significant business segment - human pharmaceutical products. Operations of the animal health business segment are not material and share many of the same economic and operating characteristics as human pharmaceutical products. Therefore, they are included with pharmaceutical products for purposes of segment reporting. Our business segments are distinguished by the ultimate end user of the product: humans or animals. Performance is evaluated based on profit or loss from operations before income taxes. Income before income taxes for the animal health business for the first quarters of 2010 and 2009 was $36.8 million and $35.7 million, respectively.</div>
<div style="margin-top: 12pt; font-size: 10pt;" align="left">REVENUE BY CATEGORY</div>
<div style="margin-top: 6pt; font-size: 10pt;" align="left">Worldwide revenue by category was as follows:</div>
<div align="center">
<table style="font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%" border="0"><!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="7">Three Months Ended</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 0px solid;" align="center" colspan="7" nowrap="nowrap">March 31,</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2010</td>
<td style="border-bottom: #000000 1px solid;"> </td>
<td style="border-bottom: #000000 1px solid;" align="center" colspan="3" nowrap="nowrap">2009</td>
</tr>
<tr style="font-size: 8pt;" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="7">(Dollars in millions)</td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Revenue — to unaffiliated customers:</div>
</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Neuroscience</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">2,244.1</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,077.6</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Endocrinology</div>
</td>
<td> </td>
<td> </td>
<td align="right">1,477.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,396.4</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Oncology</div>
</td>
<td> </td>
<td> </td>
<td align="right">907.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">797.3</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Cardiovascular</div>
</td>
<td> </td>
<td> </td>
<td align="right">519.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">455.1</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Animal health</div>
</td>
<td> </td>
<td> </td>
<td align="right">289.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">264.1</td>
<td> </td>
</tr>
<tr style="background: #cceeff;" valign="bottom">
<td>
<div style="margin-left: 30px; text-indent: -15px;">Other pharmaceuticals</div>
</td>
<td> </td>
<td> </td>
<td align="right">46.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">56.5</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" align="left" colspan="7"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 15px; text-indent: -15px;">Total revenue</div>
</td>
<td> </td>
<td align="right">$</td>
<td align="right">5,485.5</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,047.0</td>
<td> </td>
</tr>
<tr style="font-size: 1px;">
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" align="left" colspan="7"> </td>
</tr>
<!-- End Table Body --></table>
</div>
</div>
<div>
<div>
<div> </div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
1529200000
1614400000
-66100000
-73700000
27400000
20100000
34700000
33200000
9525300000
10462300000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 10pt; font-family: Arial, sans-serif;">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div style="margin-top: 6pt; font-size: 10pt; font-family: 'DIN-Medium','sans-serif';" align="left">As of March 31, 2010, we have purchased $2.58 billion of our previously announced $3.0 billion share repurchase program. During the first quarter of 2010, we did not acquire any shares pursuant to this program, nor do we expect any share repurchases under this program for the remainder of 2010.</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
346700000
192100000
-77400000
-75300000
98500000
97400000
<div> <div><!-- 2.0.3706.15792 --><div><!-- body --><div style="font-size: 10pt; font-family: Arial, sans-serif;" align="left">
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<div>
<p class="MsoNormal" style="margin: 0in 0in 0pt;">We recognized asset impairments, restructuring and other special charges of $26.2 million in the first quarter of 2010 as a result of our previously announced initiatives to reduce our cost structure and global workforce as well as previously announced strategic decisions. These charges primarily related to severance costs, which are expected to be paid in the first half of 2010, and exit costs incurred in the first quarter of 2010.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div><!-- body --></div></div> </div>
The significant components of other comprehensive loss were losses of $377.0 million and $403.7 million from foreign currency translation adjustments for the three months ended March 31, 2010 and March 31, 2009, respectively.