Earnings Per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share

16. 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,
($ and shares in millions except per share amounts)	2012		2011		2012		2011
Basic Earnings per Common Share
Net income attributable to Merck & Co., Inc.	$	1,729	$	1,692	$	5,261	$	4,760
Less: Income allocated to participating securities		-		3		4		12
Net income allocated to common shareholders	$	1,729	$	1,689	$	5,257	$	4,748
Average common shares outstanding		3,045		3,070		3,043		3,079
	$	0.57	$	0.55	$	1.73	$	1.54
Earnings per Common Share Assuming Dilution
Net income attributable to Merck & Co., Inc.	$	1,729	$	1,692	$	5,261	$	4,760
Less: Income allocated to participating securities		-		3		4		12
Net income allocated to common shareholders	$	1,729	$	1,689	$	5,257	$	4,748
Average common shares outstanding		3,045		3,070		3,043		3,079
Common shares issuable (1)		34		21		34		23
Average common shares outstanding assuming dilution		3,079		3,091		3,077		3,102
	$	0.56	$	0.55	$	1.71	$	1.53

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

For the three months ended September 30, 2012 and 2011, 97 million and 170 million, respectively, and for the first nine months of 2012 and 2011, 111 million and 170 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.