Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-Q

___________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission File Number 1-1136

___________________________

BRISTOL-MYERS SQUIBB COMPANY

(Exact name of registrant as specified in its charter)

___________________________



Delaware		22-0790350
(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)

430 E. 29th Street, 14FL, New York, NY 10016

(Address of principal executive offices) (zip code)

(212) 546-4000

(Registrant’s telephone number, including area code)

___________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	BMY	New York Stock Exchange
1.000% Notes due 2025		New York Stock Exchange
1.750% Notes due 2035		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

At June 30, 2019, there were 1,635,766,530 shares outstanding of the Registrant’s $0.10 par value common stock.

BRISTOL-MYERS SQUIBB COMPANY

INDEX TO FORM 10-Q

June 30, 2019




PART I—FINANCIAL INFORMATION

Item 1.
Financial Statements:
Consolidated Statements of Earnings and Comprehensive Income	3
Consolidated Balance Sheets	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.
Quantitative and Qualitative Disclosure About Market Risk	43

Item 4.
Controls and Procedures	43

PART II—OTHER INFORMATION

Item 1.
Legal Proceedings	43

Item 1A.
Risk Factors	43

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 6.
Exhibits	44

Summary of Abbreviated Terms	45
Signatures	46


*	Indicates brand names of products which are trademarks not owned by BMS. Specific trademark ownership information is included in the Exhibit Index at the end of this Quarterly Report on Form 10-Q.

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENTS OF EARNINGS

Dollars in Millions, Except Per Share Data

(UNAUDITED)



	Three Months Ended June 30,					Six Months Ended June 30,
EARNINGS	2019		2018			2019			2018
Net product sales	$	6,031	$	5,461		$	11,744		$	10,433
Alliance and other revenues	242		243			449			464
Total Revenues	6,273		5,704			12,193			10,897

Cost of products sold	1,992		1,625			3,836			3,209
Marketing, selling and administrative	1,076		1,131			2,082			2,111
Research and development	1,328		2,435			2,679			3,685
Other income (net)	101		(4		)	(159		)	(404		)
Total Expenses	4,497		5,187			8,438			8,601

Earnings Before Income Taxes	1,776		517			3,755			2,296
Provision for Income Taxes	337		135			601			419
Net Earnings	1,439		382			3,154			1,877
Noncontrolling Interest	7		9			12			18
Net Earnings Attributable to BMS	$	1,432	$	373		$	3,142		$	1,859

Earnings per Common Share
Basic	$	0.88	$	0.23		$	1.92		$	1.14
Diluted	0.87		0.23			1.92			1.13

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Dollars in Millions

(UNAUDITED)



	Three Months Ended June 30,						Six Months Ended June 30,
COMPREHENSIVE INCOME	2019			2018			2019			2018
Net Earnings	$	1,439		$	382		$	3,154		$	1,877
Other Comprehensive Income/(Loss), net of taxes and reclassifications to earnings:
Derivatives qualifying as cash flow hedges	(28		)	85			(14		)	66
Pension and postretirement benefits	39			43			88			172
Available-for-sale securities	13			(7		)	39			(33		)
Foreign currency translation	(1		)	(221		)	28			(216		)
Other Comprehensive Income/(Loss)	23			(100		)	141			(11		)

Comprehensive Income	1,462			282			3,295			1,866
Comprehensive Income Attributable to Noncontrolling Interest	7			9			12			18
Comprehensive Income Attributable to BMS	$	1,455		$	273		$	3,283		$	1,848

The accompanying notes are an integral part of these consolidated financial statements.

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(UNAUDITED)



ASSETS	June 30, 2019			December 31, 2018
Current Assets:
Cash and cash equivalents	$	28,404		$	6,911
Marketable securities	953			1,973
Receivables	5,667			5,965
Inventories	1,308			1,195
Prepaid expenses and other	1,384			1,116
Total Current Assets	37,716			17,160
Property, plant and equipment	4,849			5,027
Goodwill	6,533			6,538
Other intangible assets	995			1,091
Deferred income taxes	1,442			1,371
Marketable securities	994			1,775
Other assets	2,634			2,024
Total Assets	$	55,163		$	34,986

LIABILITIES
Current Liabilities:
Short-term debt obligations	$	545		$	1,703
Accounts payable	2,005			1,892
Accrued and other current liabilities	7,161			7,059
Total Current Liabilities	9,711			10,654
Income taxes payable	2,971			3,043
Other non-current liabilities	1,897			1,516
Long-term debt	24,433			5,646
Total Liabilities	39,012			20,859

Commitments and contingencies

EQUITY
Bristol-Myers Squibb Company Shareholders’ Equity:
Preferred stock	—			—
Common stock	221			221
Capital in excess of par value of stock	2,150			2,081
Accumulated other comprehensive loss	(2,621		)	(2,762		)
Retained earnings	35,870			34,065
Less cost of treasury stock	(19,571		)	(19,574		)
Total Bristol-Myers Squibb Company Shareholders’ Equity	16,049			14,031
Noncontrolling interest	102			96
Total Equity	16,151			14,127
Total Liabilities and Equity	$	55,163		$	34,986

The accompanying notes are an integral part of these consolidated financial statements.

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(UNAUDITED)



	Six Months Ended June 30,
	2019			2018
Cash Flows From Operating Activities:
Net earnings	$	3,154		$	1,877
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization, net	339			300
Deferred income taxes	(87		)	(37		)
Stock-based compensation	101			106
Impairment charges	174			104
Pension settlements and amortization	126			104
Divestiture gains and royalties	(320		)	(497		)
Asset acquisition charges	25			85
Equity investment (gains)/losses	(246		)	341
Other adjustments	(14		)	(27		)
Changes in operating assets and liabilities:
Receivables	307			112
Inventories	28			(122		)
Accounts payable	156			(101		)
Deferred income	9			92
Income taxes payable	(65		)	216
Other	(214		)	(321		)
Net Cash Provided by Operating Activities	3,473			2,232
Cash Flows From Investing Activities:
Sale and maturities of marketable securities	2,288			1,080
Purchase of marketable securities	(437		)	(447		)
Capital expenditures	(395		)	(437		)
Divestiture and other proceeds	368			583
Acquisition and other payments	(49		)	(1,170		)
Net Cash Provided by/(Used in) Investing Activities	1,775			(391		)
Cash Flows From Financing Activities:
Short-term debt obligations, net	84			(546		)
Issuance of long-term debt	18,790			—
Repayment of long-term debt	(1,256		)	(5		)
Repurchase of common stock	—			(320		)
Dividends	(1,340		)	(1,307		)
Other	(39		)	(59		)
Net Cash Provided by/(Used in) Financing Activities	16,239			(2,237		)
Effect of Exchange Rates on Cash and Cash Equivalents	6			(26		)
Net Increase/(Decrease) in Cash and Cash Equivalents	21,493			(422		)
Cash and Cash Equivalents at Beginning of Period	6,911			5,421
Cash and Cash Equivalents at End of Period	$	28,404		$	4,999

The accompanying notes are an integral part of these consolidated financial statements.

Note 1. BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING STANDARDS

Basis of Consolidation

Bristol-Myers Squibb Company prepared these unaudited consolidated financial statements following the requirements of the SEC and U.S. GAAP for interim reporting. Under those rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Quarterly Report on Form 10-Q, which include all adjustments necessary for a fair presentation of the financial position at June 30, 2019 and December 31, 2018, the results of operations for the three and six months ended June 30, 2019 and 2018, and cash flows for the six months ended June 30, 2019 and 2018. All intercompany balances and transactions have been eliminated. These financial statements and the related notes should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018 included in the 2018 Form 10-K. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for terms used throughout the document.

Business Segment Information

The Company operates in a single segment engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of innovative medicines that help patients prevail over serious diseases. A global research and development organization and supply chain organization are responsible for the discovery, development, manufacturing and supply of products. Regional commercial organizations market, distribute and sell the products. The business is also supported by global corporate staff functions. The determination of a single segment is consistent with the financial information regularly reviewed by the chief executive officer for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods. For further information on product and regional revenue, see “—Note 2. Revenue.”

Use of Estimates and Judgments

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be indicative of full year operating results. The preparation of financial statements requires the use of management estimates, judgments and assumptions. The most significant assumptions are estimates used in determining sales rebate and return accruals; legal contingencies; income taxes; and pension and postretirement benefits. Actual results may differ from estimates.

Reclassification

Certain prior period amounts were reclassified to conform to the current period presentation. Accrued liabilities, Deferred income and Income taxes payable previously presented separately in Total Current Liabilities in the consolidated balance sheets are now presented as Accrued and other current liabilities. Deferred income and Pension and other liabilities previously presented separately in Total Liabilities in the consolidated balance sheets are now presented as Other non-current liabilities.

Recently Adopted Accounting Standards

Leases

Amended guidance for lease accounting was adopted on January 1, 2019 using the modified retrospective method with the cumulative effect of the change recognized in retained earnings in the period of adoption. The new guidance requires an entity to recognize a right-of-use asset and a lease liability initially measured at the present value of future lease payments. The cumulative effect of the accounting change was not material. The Company elected the package of practical expedients upon adoption and will apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. In addition, the Company applied the short-term lease recognition exemption for leases with terms at inception not greater than 12 months. The amended guidance does not materially impact the Company’s results of operations other than recognition of the operating lease right-of-use asset and lease liability.

Goodwill Impairment Testing

Amended guidance that simplifies the recognition and measurement of a goodwill impairment loss by eliminating Step 2 of the quantitative goodwill impairment test was adopted prospectively in the first quarter of 2019. Under the amended guidance, a goodwill impairment loss is recognized for the amount by which the reporting units carrying amount, including goodwill, exceeds its fair value up to the amount of its allocated goodwill. The adoption of the amended guidance did not have an impact on the Company’s results of operations.

Recently Issued Accounting Standards Not Yet Adopted

Financial Instruments - Measurement of Credit Losses

In June 2016, the FASB issued amended guidance for the measurement of credit losses on financial instruments. Entities will be required to use a forward-looking estimated loss model. Available-for-sale debt security credit losses will be recognized as allowances rather than a reduction in amortized cost. The guidance is effective January 1, 2020 with early adoption permitted in 2019 on a modified retrospective approach. The amended guidance is not expected to materially impact the Company’s results of operations.

Note 2. REVENUE

The following table summarizes the disaggregation of revenue by nature:



	Three Months Ended June 30,				Six Months Ended June 30,
Dollars in Millions	2019		2018		2019		2018
Net product sales	$	6,031	$	5,461	$	11,744	$	10,433
Alliance revenues	146		154		275		306
Other revenues	96		89		174		158
Total Revenues	$	6,273	$	5,704	$	12,193	$	10,897

The following table summarizes GTN adjustments:



	Three Months Ended June 30,						Six Months Ended June 30,
Dollars in Millions	2019			2018			2019			2018
Gross product sales	$	8,819		$	7,509		$	16,813		$	14,210
GTN adjustments^(a)
Charge-backs and cash discounts	(890		)	(663		)	(1,664		)	(1,246		)
Medicaid and Medicare rebates	(1,090		)	(765		)	(1,890		)	(1,322		)
Other rebates, returns, discounts and adjustments	(808		)	(620		)	(1,515		)	(1,209		)
Total GTN adjustments	(2,788		)	(2,048		)	(5,069		)	(3,777		)
Net product sales	$	6,031		$	5,461		$	11,744		$	10,433


(a)	Includes adjustments to provisions for product sales made in prior periods resulting from changes in estimates of $49 million and $127 million for the three and six months ended June 30, 2019 and $60 million and $110 million for the three and six months ended June 30, 2018, respectively.

The following table summarizes the disaggregation of revenue by product and region:



	Three Months Ended June 30,				Six Months Ended June 30,
Dollars in Millions	2019		2018		2019		2018
Prioritized Brands
Opdivo	$	1,823	$	1,627	$	3,624	$	3,138
Eliquis	2,042		1,650		3,967		3,156
Orencia	778		711		1,418		1,304
Sprycel	544		535		1,003		973
Yervoy	367		315		751		564
Empliciti	91		64		174		119

Established Brands
Baraclude	147		179		288		404
Other Brands	481		623		968		1,239
Total Revenues	$	6,273	$	5,704	$	12,193	$	10,897

United States	$	3,667	$	3,230	$	7,116	$	6,008
Europe	1,491		1,408		2,971		2,814
Rest of the World	988		923		1,862		1,796
Other^(a)	127		143		244		279
Total Revenues	$	6,273	$	5,704	$	12,193	$	10,897


(a)	Other revenues include royalties and alliance-related revenues for products not sold by the Company's regional commercial organizations.

Revenue recognized from performance obligations satisfied in prior periods was $117 million and $264 million for the three and six months ended June 30, 2019 and $150 million and $300 million for the three and six months ended June 30, 2018, respectively, consisting primarily of royalties for out-licensing arrangements and revised estimates for gross-to-net adjustments related to prior period sales. Contract assets were not material at June 30, 2019 and December 31, 2018.

Note 3. ALLIANCES

The Company enters into collaboration arrangements with third parties for the research, development, manufacturing and/or commercialization of certain products. Although each of these arrangements is unique in nature, both parties are active participants in the operating activities of the collaboration and exposed to significant risks and rewards depending on the commercial success of the activities. The Company may either in-license intellectual property owned by the other party or out-license its intellectual property to the other party. These arrangements can cover a single investigational compound or commercial product or multiple compounds and/or products in various life cycle stages. The rights and obligations of the parties can be global or limited to geographic regions. The Company refers to these collaborations as alliances and its partners as alliance partners.

Selected financial information pertaining to the Company's alliances was as follows, including net product sales when the Company is the principal in the third-party customer sale for products subject to the alliance. Expenses summarized below do not include all amounts attributed to the activities for the products in the alliance, but only the payments between the alliance partners or the related amortization if the payments were deferred or capitalized.



	Three Months Ended June 30,						Six Months Ended June 30,
Dollars in Millions	2019			2018			2019			2018
Revenues from alliances:
Net product sales	$	2,570		$	2,178		$	4,948		$	4,098
Alliance revenues	146			154			275			306
Total Revenues	$	2,716		$	2,332		$	5,223		$	4,404

Payments to/(from) alliance partners:
Cost of products sold	$	1,080		$	891		$	2,099		$	1,690
Marketing, selling and administrative	(32		)	(28		)	(60		)	(50		)
Research and development	7			1,057			21			1,062
Other income (net)	(16		)	(16		)	(30		)	(30		)



Selected Alliance Balance Sheet information:
Dollars in Millions	June 30, 2019		December 31, 2018
Receivables - from alliance partners	$	351	$	395
Accounts payable - to alliance partners	1,068		904
Deferred income from alliances^(a)	469		491


(a)	Includes unamortized upfront and milestone payments.

The nature and purpose, significant rights and obligations of the parties and specific accounting policy elections for each of the Company's significant alliances are discussed in the Company's 2018 Form 10-K. There were no significant developments and updates related to alliances during 2019.

Note 4. ACQUISITIONS, DIVESTITURES AND OTHER ARRANGEMENTS

Acquisitions

IFM

In the second quarter of 2019, a $25 million milestone was achieved and paid as additional contingent consideration following the commencement of a Phase I clinical study under the STING agonist program. The additional consideration was included in Research and development expense as the IFM acquisition in 2017 was accounted for as an asset acquisition.

Divestitures

The following table summarizes proceeds, gains or losses and royalty income resulting from divestitures. Revenue and pretax earnings related to all divestitures and assets held-for-sale were not material in all periods presented (excluding divestiture gains or losses).



	Three Months Ended June 30,
	Proceeds^(a)				Divestiture Losses/(Gains)					Royalty Income
Dollars in Millions	2019		2018		2019		2018			2019			2018
Diabetes Business	$	164	$	155	$	—	$	—		$	(161	)	$	(165	)
Erbitux* Business	3		50		—		—			—			(50		)
Manufacturing Operations	1		1		—		—			—			—
Mature Brands and Other	2		2		8		(25		)	(1		)	(2		)
Total	$	170	$	208	$	8	$	(25	)	$	(162	)	$	(217	)



	Six Months Ended June 30,
	Proceeds^(a)				Divestiture Losses/(Gains)					Royalty Income
Dollars in Millions	2019		2018		2019		2018			2019			2018
Diabetes Business	$	328	$	243	$	—	$	—		$	(326	)	$	(327	)
Erbitux* Business	8		109		—		—			—			(97		)
Manufacturing Operations	3		159		—		—			—			—
Mature Brands and Other	2		72		8		(70		)	(2		)	(3		)
Total	$	341	$	583	$	8	$	(70	)	$	(328	)	$	(427	)


(a)	Includes royalties received subsequent to the related sale of the asset or business.

Assets Held-For-Sale

UPSA Business

In 2018, the Company agreed to sell its UPSA consumer health business for approximately $1.6 billion. The transaction closed in July 2019 and will result in a gain of approximately $1.2 billion in the third quarter of 2019. Assets were reclassified to assets held-for-sale as of June 30, 2019 and December 31, 2018 and included within Prepaid expenses and other. Liabilities were reclassified to liabilities related to assets held-for-sale and included within Accrued and other current liabilities.

Manufacturing Operations

In the second quarter of 2019, the Company agreed to sell its manufacturing and packaging facility in Anagni, Italy to Catalent for approximately $50 million. The transaction is expected to close by the end of 2019 subject to regulatory approvals and the satisfaction of certain other customary closing conditions and will be accounted for as a sale of a business. Catalent will provide certain manufacturing and packaging services for the Company for a period of time subsequent to closing. The business was accounted for as held-for-sale and its assets were reduced to the estimated relative fair value resulting in a $109 million impairment charge that was included in Cost of products sold. Assets were reclassified to assets held-for-sale as of June 30, 2019 and included within Prepaid expenses and other. Liabilities were reclassified to liabilities related to assets held-for-sale and included within Accrued and other current liabilities.

The following table summarizes the net assets held-for-sale as of June 30, 2019 and December 31, 2018.



Dollars in Millions	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	18	$	—
Receivables	40		79
Inventories	94		81
Property, plant and equipment	229		187
Goodwill	132		127
Other	23		5
Assets held-for-sale	$	536	$	479

Accounts payable	$	31	$	35
Accrued and other current liabilities	81		78
Deferred income taxes	26		25
Other liabilities	25		14
Liabilities related to assets held-for-sale	$	163	$	152

Net assets held-for-sale	$	373	$	327

Note 5. OTHER INCOME (NET)



	Three Months Ended June 30,						Six Months Ended June 30,
Dollars in Millions	2019			2018			2019			2018
Interest expense	$	123		$	45		$	168		$	91
Investment income	(119		)	(38		)	(175		)	(74		)
Equity investment (gains)/losses	(71		)	356			(246		)	341
Provision for restructuring	10			37			22			57
Acquisition expenses	303			—			468			—
Integration expenses	106			—			128			—
Litigation and other settlements	—			(1		)	1			(1		)
Equity in net income of affiliates	—			(27		)	—			(51		)
Divestiture losses/(gains)	8			(25		)	8			(70		)
Royalties and licensing income	(303		)	(353		)	(611		)	(720		)
Transition and other service fees	(2		)	(1		)	(4		)	(5		)
Pension and postretirement	26			(19		)	70			(30		)
Intangible asset impairment	15			—			15			64
Other	5			22			(3		)	(6		)
Other income (net)	$	101		$	(4	)	$	(159	)	$	(404	)

Note 6. RESTRUCTURING

In October 2016, the Company announced a restructuring plan to evolve and streamline its operating model. The majority of the charges are expected to be incurred through 2020, range between $1.5 billion to $2.0 billion and consist of employee termination benefit costs, contract termination costs, plant and equipment accelerated depreciation and impairment charges and other shutdown costs associated with early manufacturing and R&D site exits. Cash outlays in connection with these actions are expected to be approximately 40% to 50% of the total charges. Charges of approximately $1.3 billion have been recognized for these actions since the announcement. Restructuring charges are recognized upon meeting certain criteria, including finalization of committed plans, reliable estimates and discussions with local works councils in certain markets.

Employee workforce reductions were approximately 100 and 300 for the six months ended June 30, 2019 and 2018, respectively.

The following tables summarize the charges and activity related to the restructuring actions:



	Three Months Ended June 30,				Six Months Ended June 30,
Dollars in Millions	2019		2018		2019		2018
Employee termination costs	$	3	$	26	$	7	$	35
Other termination costs	7		11		15		22
Provision for restructuring	10		37		22		57
Accelerated depreciation	32		31		63		52
Asset impairments	109		—		110		10
Other shutdown costs	—		2		—		5
Total charges	$	151	$	70	$	195	$	124



	Three Months Ended June 30,				Six Months Ended June 30,
Dollars in Millions	2019		2018		2019		2018
Cost of products sold	$	122	$	14	$	134	$	27
Marketing, selling and administrative	—		—		1		1
Research and development	19		19		38		39
Other income (net)	10		37		22		57
Total charges	$	151	$	70	$	195	$	124



	Six Months Ended June 30,
Dollars in Millions	2019			2018
Liability at December 31	$	99		$	186
Cease-use lease liability reclassification	(3		)	—
Liability at January 1	96			186

Charges	27			61
Change in estimates	(5		)	(4		)
Provision for restructuring	22			57
Foreign currency translation	—			1
Payments	(74		)	(129		)
Liability at June 30	$	44		$	115

Note 7. INCOME TAXES



	Three Months Ended June 30,						Six Months Ended June 30,
Dollars in Millions	2019			2018			2019			2018
Earnings Before Income Taxes	$	1,776		$	517		$	3,755		$	2,296
Provision for Income Taxes	337			135			601			419
Effective Tax Rate	19.0		%	26.1		%	16.0		%	18.2		%

The reduction in the effective tax rate was primarily due to a non-deductible equity investment fair value loss adjustment relating to Nektar in the second quarter of 2018. Jurisdictional tax rates and other tax impacts attributed to non-deductible R&D charges, equity investment fair value adjustments and other specified items increased the effective tax rate by 0.5% in the second quarter of 2019 and decreased by 0.6% year-to-date. These items increased the effective tax rate by 8.6% in the second quarter of 2018 and by 0.9% year-to-date. The tax impact of these discrete items are reflected immediately and are not considered in estimating the annual effective tax rate. Additional changes to the effective tax rate may occur in future periods due to various reasons including pretax earnings mix, tax reserves, cash repatriations and revised interpretations of the relevant tax code.

The Company is currently under examination by a number of tax authorities, which have proposed or are considering proposing material adjustments to tax positions for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. It is reasonably possible that new issues will be raised by tax authorities, which may require adjustments to the amount of unrecognized tax benefits; however, an estimate of such adjustments cannot reasonably be made at this time.

It is also reasonably possible that the total amount of unrecognized tax benefits at June 30, 2019 could decrease in the range of approximately $