Earnings per Share

9 Months Ended

Sep. 30, 2011

15. Earnings Per Share

The Company calculates earnings per share pursuant to the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. RSUs and certain PSUs granted before December 31, 2009 to certain management level employees participate in dividends on the same basis as common shares and such dividends are nonforfeitable by the holder. As a result, these RSUs and PSUs meet the definition of a participating security. For RSUs and PSUs issued on or after January 1, 2010, dividends declared during the vesting period are payable to the employees only upon vesting and therefore such RSUs and PSUs do not meet the definition of a participating security.

The calculations of earnings per share under the two-class method are as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010

Basic Earnings per Common Share
Net income attributable to Merck & Co., Inc.	$	1,692	$	342	$	4,760	$	1,393
Less: Income allocated to participating securities		3		2		12		6

Net income allocated to common shareholders	$	1,689	$	340	$	4,748	$	1,387

Average common shares outstanding		3,070		3,078		3,079		3,099

	$	0.55	$	0.11	$	1.54	$	0.45

Earnings per Common Share Assuming Dilution
Net income attributable to Merck & Co., Inc.	$	1,692	$	342	$	4,760	$	1,393
Less: Income allocated to participating securities		3		2		12		6

Net income allocated to common shareholders	$	1,689	$	340	$	4,748	$	1,387

Average common shares outstanding		3,070		3,078		3,079		3,099
Common shares issuable ⁽¹⁾		21		24		23		24

Average common shares outstanding assuming dilution		3,091		3,102		3,102		3,123

	$	0.55	$	0.11	$	1.53	$	0.44


⁽¹⁾		Issuable primarily under share-based compensation plans.

For the three months ended September 30, 2011 and 2010, 170 million and 173 million, respectively, and for the nine months ended 2011 and 2010, 170 million and 177 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.