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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001 Commission file number 1-1225
AMERICAN HOME PRODUCTS CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2526821
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or
organization)
Five Giralda Farms, Madison, N.J. 07940
--------------------------------- -----
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (973) 660-5000
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 such filing requirements for the past 90 days.
Yes X No
------ --
The number of shares of Common Stock outstanding as of the close of business on
April 30, 2001:
Number of
Class Shares Outstanding
----- ------------------
Common Stock, $0.33-1/3 par value 1,314,431,905
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AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I -Financial Information 2
Item 1. Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
March 31, 2001 and December 31, 2000 3
Consolidated Condensed Statements of Operations -
Three Months Ended March 31, 2001 and 2000 4
Consolidated Condensed Statements of Changes in
Stockholders' Equity - Three Months Ended
March 31, 2001 and 2000 5
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 2001 and 2000 6
Notes to Consolidated Condensed Financial Statements 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-20
Part II - Other Information 21
Item 1. Legal Proceedings 21-22
Item 6. Exhibits and Reports on Form 8-K 23
Signature 24
Exhibit Index EX-1
Items other than those listed above have been omitted because they are not
applicable.
1
Part I - Financial Information
------------------------------
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
The consolidated condensed financial statements included herein have been
prepared by American Home Products Corporation (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, the
consolidated condensed financial statements include all adjustments necessary to
present fairly the financial position of the Company as of March 31, 2001 and
December 31, 2000, and the results of its operations, cash flows and changes in
stockholders' equity for the three months ended March 31, 2001 and 2000. It is
suggested that these consolidated condensed financial statements and
management's discussion and analysis of financial condition and results of
operations be read in conjunction with the financial statements and the notes
thereto included in the Company's 2000 Annual Report on Form 10-K.
In the 2000 fourth quarter, the Company sold a portion of its ownership in
Immunex Corporation (Immunex) common stock, which reduced the Company's
ownership interest below 50%. As a result, the financial results of Immunex,
which previously were consolidated in the financial results of the Company, were
deconsolidated and included in the financial results of the Company on an equity
basis retroactive to January 1, 2000. Accordingly, alliance revenue relating to
co-promotion agreements between the Company and Immunex was included in
pharmaceutical net revenue for both the 2001 and 2000 first quarters. The 2000
first quarter financial results were restated to reflect the deconsolidation
of Immunex, which had no effect on income from continuing operations.
As of January 1, 2001, the Company early adopted new authoritative accounting
guidance reflecting certain rebates and sales incentives (i.e., coupons and
other rebate programs) as reductions of revenues instead of selling and
marketing expenses. Financial information for all prior periods presented has
been reclassified to comply with the income statement classification
requirements of the new guidance.
2
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands Except Per Share Amounts)
March 31, December 31,
2001 2000
----------- -------------
ASSETS
Cash and cash equivalents $3,512,218 $2,644,306
Marketable securities 404,572 341,031
Accounts receivable less allowances 2,484,847 2,740,272
Inventories:
Finished goods 580,027 585,123
Work in progress 651,465 586,656
Materials and supplies 351,587 359,948
----------- -------------
1,583,079 1,531,727
Other current assets including deferred taxes 2,343,951 2,923,475
----------- -------------
Total Current Assets 10,328,667 10,180,811
Property, plant and equipment 7,798,622 7,578,233
Less accumulated depreciation 2,582,062 2,543,409
----------- -------------
5,216,560 5,034,824
Goodwill and other intangibles, net of
accumulated amortization 3,993,082 4,052,410
Other assets including deferred taxes 2,489,926 1,824,421
----------- -------------
Total Assets $22,028,235 $21,092,466
=========== =============
LIABILITIES
Loans payable $57,473 $58,717
Trade accounts payable 512,778 595,233
Accrued expenses 5,139,851 8,831,459
Accrued federal and foreign taxes 297,247 256,650
----------- -------------
Total Current Liabilities 6,007,349 9,742,059
Long-term debt 7,334,314 2,394,790
Other noncurrent liabilities 4,535,309 5,226,495
Accrued postretirement benefit obligations
other than pensions 929,739 911,029
STOCKHOLDERS' EQUITY
$2 convertible preferred stock, par value
$2.50 per share 54 55
Common stock, par value $0.33-1/3 per share 437,984 437,258
Additional paid-in capital 4,004,394 3,952,457
Accumulated deficit (469,070) (899,118)
Accumulated other comprehensive loss (751,838) (672,559)
----------- -------------
Total Stockholders' Equity 3,221,524 2,818,093
----------- -------------
Total Liabilities and Stockholders'
Equity $22,028,235 $21,092,466
=========== =============
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
Three Months
Ended March 31,
--------------------------
2001 2000
----------- -----------
Net revenue $3,449,176 $3,195,852
----------- -----------
Cost of goods sold 798,603 781,992
Selling, general and administrative expenses 1,285,468 1,164,204
Research and development expenses 450,989 408,218
Interest expense, net 3,939 50,884
Other income, net (70,811) (66,400)
Termination fee - (1,709,380)
----------- -----------
Income from continuing operations before
federal and foreign taxes 980,988 2,566,334
Provision for federal and foreign taxes 247,434 820,325
----------- -----------
Income from continuing operations 733,554 1,746,009
----------- -----------
Discontinued Operations:
Income from operations of agricultural products
business (net of federal and foreign taxes of
$57,289) - 103,346
Loss on disposal of agricultural products business
(including federal and foreign tax charges of
$855,248) - (1,572,993)
----------- -----------
Loss from discontinued operations - (1,469,647)
----------- -----------
Net income $733,554 $276,362
=========== ===========
Basic earnings per share from continuing operations $0.56 $1.34
Basic loss per share from discontinued operations - (1.13)
----------- -----------
Basic earnings per share $0.56 $0.21
=========== ===========
Diluted earnings per share from continuing
operations $0.55 $1.32
Diluted loss per share from discontinued operations - (1.11)
----------- -----------
Diluted earnings per share $0.55 $0.21
=========== ===========
Dividends per share of common stock $0.23 $0.23
=========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
Three Months Ended March 31, 2001:
$2 Accumulated
Convertible Additional Other Total
Preferred Common Paid-in Accumulated Comprehensive Stockholders'
Stock Stock Capital Deficit Loss Equity
------------ --------- ----------- ------------ ------------- -------------
Balance at January 1, 2001 $55 $437,258 $3,952,457 ($899,118) ($672,559) $2,818,093
Net income 733,554 733,554
Currency translation adjustments (112,279) (112,279)
Unrealized gain on derivative
contracts 31,683 31,683
Unrealized gain on marketable
securities 1,317 1,317
-------------
Comprehensive income 654,275
-------------
Cash dividends declared (302,036) (302,036)
Common stock issued for stock
options 645 51,811 52,456
Conversion of preferred stock
and other exchanges (1) 81 126 (1,470) (1,264)
------------ --------- ----------- ------------ ------------- -------------
Balance at March 31, 2001 $54 $437,984 $4,004,394 ($469,070) ($751,838) $3,221,524
============ ========= =========== ============ ============= =============
Three Months Ended March 31, 2000:
$2 Accumulated
Convertible Additional Other Total
Preferred Common Paid-in Retained Comprehensive Stockholders'
Stock Stock Capital Earnings Loss Equity
------------ --------- ----------- ------------ ------------- -------------
Balance at January 1, 2000 $61 $434,639 $3,392,705 $3,000,827 ($613,485) $6,214,747
Net income 276,362 276,362
Currency translation adjustments 119,388 119,388
Unrealized gain on marketable
securities 14,686 14,686
-------------
Comprehensive income 410,436
-------------
Cash dividends declared (300,084) (300,084)
Common stock acquired for treasury (817) (5,310) (114,232) (120,359)
Common stock issued for stock
options 620 40,781 41,401
Conversion of preferred stock
and other exchanges (2) 76 8,266 (2,096) 6,244
------------ --------- ----------- ------------ ------------- -------------
Balance at March 31, 2000 $59 $434,518 $3,436,442 $2,860,777 ($479,411) $6,252,385
============ ========= =========== ============ ============= =============
The accompanying notes are an integral part of these consolidated condensed financial statements.
5
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months
Ended March 31,
2001 2000
----------- -----------
Operating Activities
- --------------------
Income from continuing operations $733,554 $1,746,009
Adjustments to reconcile income from
continuing operations to net cash
provided from (used for) operating
activities of continuing operations:
Gains on sales of assets (8,728) (49,078)
Depreciation and amortization 149,644 137,485
Deferred income taxes 53,398 184,613
Changes in working capital, net (99,361) 732,732
Diet drug litigation payments (4,141,615) (639,639)
Deconsolidation of Immunex - (236,768)
Other items, net (99,717) (17,645)
----------- -----------
Net cash provided from (used for) continuing
operations (3,412,825) 1,857,709
Net cash used for discontinued operations - (260,680)
----------- -----------
Net cash provided from (used for) operating
activities (3,412,825) 1,597,029
----------- -----------
Investing Activities
- --------------------
Purchases of property, plant and equipment (361,749) (238,730)
Proceeds from sales of assets 24,573 65,504
Proceeds from sales and maturities of
marketable securities 53,300 58,000
Purchases of marketable securities (116,841) (64,288)
----------- -----------
Net cash used for investing activities (400,717) (179,514)
----------- -----------
Financing Activities
- --------------------
Net proceeds from/(repayments of) debt 4,942,467 (1,036,295)
Dividends paid (302,036) (300,084)
Exercises of stock options 52,456 41,401
Purchases of common stock for treasury - (120,359)
----------- -----------
Net cash provided from (used for) financing
activities 4,692,887 (1,415,337)
----------- -----------
Effects of exchange rates on cash balances (11,433) (4,622)
----------- -----------
Increase (decrease) in cash and cash
equivalents 867,912 (2,444)
Cash and cash equivalents, beginning of period 2,644,306 1,892,715
----------- -----------
Cash and cash equivalents, end of period $3,512,218 $1,890,271
=========== ===========
Supplemental Information
- ------------------------
Interest payments $76,297 $161,581
Income tax payments, net of refunds 162,097 133,226
The accompanying notes are an integral part of these consolidated condensed
financial statements.
6
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Credit Facilities and Term Debt Financing
-----------------------------------------
In addition to the Company's existing $2,000.0 million credit
facility, in March 2001, the Company obtained new credit facilities
totaling $6,000.0 million. The new credit facilities include a
$3,000.0 million, 364-day credit facility (which support borrowings
under the commercial paper program). Any borrowings actually drawn
from the credit facility are extendible for an additional year.
The portion of commercial paper outstanding at March 31, 2001
supported by the $3,000.0 million credit facility was classified as
long-term debt since the Company intends, and has the ability, to
refinance these obligations through the issuance of additional
commercial paper or through the use of its $3,000.0 million credit
facility as described above. The credit facility contains
substantially identical financial and other covenants,
representations, warranties, conditions and default provisions as the
Company's existing $2,000.0 million credit facility, which terminates
on July 31, 2002.
In addition, the new credit facilities include a $3,000.0 million,
364-day bridge facility, which facility was terminated when the
Company issued $3,000.0 million of Senior Notes (the "Notes") on
March 30, 2001. On March 30, 2001, the Company issued three tranches
of Notes in a transaction exempt from registration pursuant to Rule
144A under the Securities Act of 1933, as amended, as follows:
- $500.0 million 5.875% Notes due March 15, 2004
- $1,000.0 million 6.25% Notes due March 15, 2006
- $1,500.0 million 6.70% Notes due March 15, 2011
In connection with the Notes, the Company filed a Registration
Statement on Form S-4 with the Securities and Exchange Commission
(SEC) on April 27, 2001 in order to offer the holders of the Notes
the ability to exchange the outstanding Notes for new notes with
substantially identical terms, but which are registered under the
Securities Act. The Company's Registration Statement was declared
effective by the SEC on May 8, 2001.
Interest on the Notes is payable semi-annually, on March 15 and
September 15, and is subject to adjustment under certain
circumstances. The Company entered into two $750.0 million notional
amount interest rate swaps relating to the $1,500.0 million 6.70%
Notes. The interest rate swaps are contracts under which the Company
converted the fixed rate on the $1,500.0 million 6.70% Notes to a
floating rate of interest over the term of the swap agreements, which
is the same term as the underlying debt.
Any proceeds from commercial paper supported by the credit facilities
and the proceeds from the issuance of the Notes will be used for the
Company's general corporate and working capital requirements,
including payments related to the REDUX and PONDIMIN diet drug
litigation.
7
Note 2. Discontinued Operations
-----------------------
On March 20, 2000, the Company signed a definitive agreement with
BASF Aktiengesellschaft (BASF) to sell the agricultural products
business which manufactures, distributes and sells crop protection
and pest control products worldwide. On June 30, 2000, the sale was
completed and BASF paid the Company $3,800.0 million in cash and
assumed certain debt. As a result, the Company recorded an after-tax
loss on the sale of this business of $1,573.0 million or $1.19 per
share-diluted and reflected this business as a discontinued operation
in the 2000 first quarter.
Note 3. Contingencies and Litigation Settlement
---------------------------------------
The Company is involved in various legal proceedings, including
product liability and environmental matters of a nature considered
normal to its business. It is the Company's policy to accrue for
amounts related to these legal matters if it is probable that a
liability has been incurred and an amount is reasonably estimable.
In the 2000 fourth quarter, the Company recorded a $7,500.0 million
litigation charge for the estimated final amount required to resolve
all REDUX and PONDIMIN diet drug litigation, including all
anticipated payments in connection with the nationwide, class action
settlement, payments to the opt out claimants with whom the Company
has agreed to settle, and all anticipated payments to resolve the
claims of the remaining opt outs and any primary pulmonary
hypertension (PPH) claimants, as well as all legal fees and other
costs. The Company recorded an initial litigation charge of $4,750.0
million, net of insurance, related to the diet drug litigation in the
1999 third quarter. As of April 15, 2001, the Company has reached
agreements or agreements in principle to settle the claims of 85% of
the individuals who initially opted out of the Company's nationwide,
class action settlement.
During the 2001 first quarter, payments to the nationwide, class
action settlement funds, individual settlement payments, legal fees
and other costs totaling $4,141.6 million were paid and applied
against the litigation accrual. As of March 31, 2001, $4,024.0
million of the litigation accrual remained.
In the opinion of the Company, although the outcome of any legal
proceedings cannot be predicted with certainty, the ultimate
liability of the Company in connection with its legal proceedings
will not have a material adverse effect on the Company's financial
position but could be material to the results of operations or cash
flows in any one accounting period.
Note 4. Restructuring Programs
----------------------
In December 1998, the Company recorded a special charge for
restructuring and related asset impairments of $321.2 million to
recognize costs of the reorganization of its worldwide supply chains
and U.S. distribution systems, and the globalization of certain
business units. The restructuring will ultimately result in the
elimination of 3,600 positions
8
worldwide offset, in part, by 1,000 newly created positions in the
same functions at other locations. At March 31, 2001, approximately
3,550 positions had been eliminated, and two distribution centers
owned by the Company and a leased distribution center had been
closed. The Company anticipates closing 14 manufacturing plants,
eight of which were closed in 2000. These plants are continuing their
phase-out period. The Company currently anticipates closing three
plants by the end of 2001, two of which were closed in April 2001,
and the remaining facilities in 2002, assuming no further delays in
regulatory approvals.
The activity in the restructuring accruals was as follows:
Personnel Other Closure/
(In thousands) Costs Exit Costs Total
---------------------- --------- -------------- -------
Restructuring accruals
at December 31, 2000 $6,249 $59,635 $65,884
Cash expenditures (5,632) (4,388) (10,020)
--------- -------------- -------
Restructuring accruals
at March 31, 2001 $617 $55,247 $55,864
========= ============== =======
Note 5. Foreign Currency Risk Management Programs
-----------------------------------------
As of January 1, 2001, the Company adopted Statement of Financial
Accounting Standards Nos. 133 and 138, which require that all
derivative financial instruments be measured at fair value and be
recognized as assets or liabilities on the balance sheet with changes
in the fair value of the derivatives recognized in either net income
(loss) or accumulated other comprehensive income (loss), depending on
the designated purpose of the derivative. The impact on the Company's
financial results, upon the adoption of these pronouncements, was
immaterial.
The Company currently engages in two primary programs to manage its
exposure to foreign currency risk:
1. Short-term foreign exchange forward contracts to manage foreign
currency balance sheet exposures. As of March 31, 2001, the
Company recorded $20.2 million in its Statement of Operations
relating to gains on these foreign exchange forward contracts.
The $20.2 million consists of gains from contracts settled during
the 2001 first quarter, as well as contracts outstanding that are
marked-to-market.
2. Cash flow hedging programs to cover currency risk related to
intercompany inventory sales denominated in foreign currencies
through the purchase of primarily foreign currency put options.
As of March 31, 2001, the Company has recorded gains of $31.7
million in Accumulated other comprehensive loss relating to the
cash flow hedging programs.
Refer to the "Quantitative and Qualitative Disclosures About Market
Risk" section on pages 19 and 20 for further discussion and
disclosures relating to the Company's foreign currency risk
management programs.
9
Note 6. Company Data by Operating Segment
---------------------------------
The Company has three reportable segments: Pharmaceuticals, Consumer
Health Care and Corporate. The Company's Pharmaceuticals and Consumer
Health Care reportable segments are strategic business units that are
managed separately because they manufacture, distribute and sell
distinct products and provide services, which require various
technologies and marketing strategies.
Income from
Continuing Operations
Net Revenue (1) before Taxes (2)
-------------------- --------------------
Three Months Three Months
(In millions) Ended March 31, Ended March 31,
-------------------- --------------------
Operating Segment 2001 2000 2001 2000
--------------------- -------- -------- ------- --------
Pharmaceuticals (3) $2,879.3 $2,602.9 $915.5 $744.0
Consumer Health Care 569.9 593.0 124.0 130.4
-------- -------- -------- --------
3,449.2 3,195.9 1,039.5 874.4
Corporate (4) - - (58.5) 1,691.9
-------- -------- -------- --------
Total $3,449.2 $3,195.9 $981.0 $2,566.3
======== ======== ======== ========
(1) The Company early adopted new authoritative accounting guidance
as of January 1, 2001 reflecting certain rebates and sales incentives
(i.e., coupons and other rebate programs) as reductions of revenues
instead of selling and marketing expenses. Financial information for
all prior periods presented has been reclassified to comply with the
income statement classification requirements of the new guidance.
These reclassifications had no effect on total net revenue growth
between the periods presented.
(2) Includes goodwill amortization for 2001 and 2000 as follows:
Pharmaceuticals - $34.6 and $38.9, and Consumer Health Care - $6.0
and $8.0, respectively.
(3) Effective January 1, 2000, the financial results of Immunex,
which previously were consolidated in the results of the Company,
were deconsolidated and included in the financial results of the
Company on an equity basis. As a result, alliance revenue relating to
co-promotion agreements between the Company and Immunex is included
in pharmaceutical net revenue for both 2001 and 2000. The 2000 first
quarter pharmaceutical net revenue was restated to reflect the
deconsolidation.
(4) Corporate for the 2000 first quarter included income of $1,709.4
resulting from the receipt of a $1,800.0 termination fee provided for
under the merger agreement with Warner-Lambert Company offset, in
part, by certain related expenses.
10
Note 7. Earnings per Share
------------------
The following table sets forth the computations of Basic Earnings per
Share and Diluted Earnings per Share:
Three Months
Ended March 31,
----------------------
(In thousands except per share amounts) 2001 2000
------------------------------------------------------ ---------- ----------
Income from continuing operations less preferred
dividends $733,543 $1,745,997
Loss from discontinued operations - (1,469,647)
---------- ----------
Net income less preferred dividends $733,543 $276,350
Denominator:
Average number of common shares outstanding 1,313,855 1,305,213
---------- ----------
Basic Earnings per Share from Continuing Operations $0.56 $1.34
Basic Loss per Share from Discontinued Operations - (1.13)
---------- ----------
Basic Earnings per Share $0.56 $0.21
========== ==========
Income from continuing operations $733,554 $1,746,009
Loss from discontinued operations - (1,469,647)
---------- ----------
Net income $733,554 $276,362
Denominator:
Average number of common shares outstanding 1,313,855 1,305,213
Common share equivalents of outstanding stock
options and deferred common stock awards 14,200 14,459
---------- ----------
Total shares 1,328,055 1,319,672
---------- ----------
Diluted Earnings per Share from Continuing Operations $0.55 $1.32
Diluted Loss per Share from Discontinued Operations - (1.11)
---------- ----------
Diluted Earnings per Share $0.55 $0.21
========== ==========
11
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2001
Results of Operations
---------------------
Effective January 1, 2000, the financial results of Immunex, which
previously were consolidated in the financial results of the Company,
were deconsolidated and included in the financial results of the Company
on an equity basis. Accordingly, alliance revenue relating to
co-promotion agreements between the Company and Immunex was included in
pharmaceutical net revenue for both the 2001 and 2000 first quarters.
The 2000 first quarter financial results were restated to reflect the
deconsolidation of Immunex, which had no effect on income from
continuing operations. In addition, the Company early adopted new
authoritative accounting guidance as of January 1, 2001 reflecting
certain rebates and sales incentives (i.e., coupons and other rebate
programs) as reductions of revenues instead of selling and marketing
expenses. Financial information for all prior periods presented has been
reclassified to comply with the income statement classification
requirements of the new guidance. These reclassifications had no effect
on total net revenue growth between the periods presented.
Worldwide net revenue for the 2001 first quarter was 8% higher compared
with prior year levels. The increase in worldwide net revenue for the
2001 first quarter was due primarily to higher worldwide net revenue of
human pharmaceuticals. Excluding the negative impact of foreign
exchange, worldwide net revenue increased 11% for the 2001 first
quarter.
The following table sets forth worldwide net revenue results by
operating segment together with the percentage changes from the
comparable period in the prior year:
Net Revenue
---------------------
Three Months
($ in Millions) Ended March 31,
--------------------- % Increase
Operating Segment 2001 2000 (Decrease)
----------------- -------- -------- ------------
Pharmaceuticals $2,879.3 $2,602.9 11%
Consumer Health Care 569.9 593.0 (4)%
-------- -------- ------------
Total Net Revenue $3,449.2 $3,195.9 8%
======== ======== ============
Pharmaceuticals
---------------
Worldwide pharmaceutical net revenue increased 11% for the 2001 first
quarter due primarily to higher sales of human pharmaceuticals offset,
in part, by decreased sales of animal health products. Excluding the
negative impact of foreign exchange, worldwide pharmaceutical net
revenue increased 14% for the 2001 first quarter.
Worldwide human pharmaceutical net revenue increased 12% for the 2001
first quarter due primarily to higher sales of PREVNAR (introduced in
the 2000 first quarter), PROTONIX (introduced in the 2000 second
quarter), PREMARIN products and EFFEXOR XR (as a result of higher volume
and additional market share of new prescriptions) offset, in part, by
lower sales of MENINGITEC, oral contraceptives and ZIAC (due to generic
competition). Excluding the negative impact of foreign exchange,
worldwide human pharmaceutical net
12
revenue increased 15% for the 2001 first quarter. MENINGITEC, the
Company's meningococcal meningitis vaccine, was launched in the United
Kingdom in the fourth quarter of 1999 as the first vaccine for this
disease. The Company successfully obtained a majority of the
meningococcal meningitis vaccine market, with a significant volume of
sales occurring in the 2000 first quarter, and by the end of 2000 most
children and adolescents in the United Kingdom had been vaccinated.
The product is currently being launched in other European countries.
This second round of mutual recognition could encompass up to eight
European markets for MENINGITEC; however, the Company does not currently
anticipate that any of these markets, individually, will provide sales
volume equivalent to that generated in the United Kingdom.
Worldwide animal health net revenue decreased 4% in the 2001 first
quarter due primarily to lower sales of animal health biologicals and
pharmaceuticals offset, in part, by higher sales of CYDECTIN, the
Company's topical parasite control product for beef and dairy cattle.
Excluding the negative impact of foreign exchange, worldwide animal
health net revenue was flat for the 2001 first quarter.
Consumer Health Care
--------------------
Worldwide consumer health care net revenue decreased 4% for the 2001
first quarter due primarily to lower sales of the CENTRUM product line
and ADVIL offset, in part, by higher sales of CHAP STICK. Excluding the
negative impact of foreign exchange, worldwide consumer health care net
revenue decreased 2% for the 2001 first quarter.
13
The following table sets forth the percentage changes in worldwide net
revenue by operating segment compared to the prior year, including the
effect volume, price and foreign exchange had on these percentage
changes:
% Increase (Decrease)
Three Months Ended March 31, 2001
-----------------------------------------------
Foreign Total
Volume Price Exchange Net Revenue
----------- ----------- ---------- -----------
Pharmaceuticals
--------------------
United States 18% 5% - 23%
International 2% - (8%) (6%)
-----------------------------------------------
Total 11% 3% (3%) 11%
===============================================
Consumer Health Care
--------------------
United States (3%) 1% - (2%)
International (2%) 2% (7%) (7%)
-----------------------------------------------
Total (3%) 1% (2%) (4%)
===============================================
Total
--------------------
United States 14% 4% - 18%
International 2% - (8%) (6%)
-----------------------------------------------
Total 9% 3% (4%) 8%
===============================================
Cost of goods sold, as a percentage of Net revenue, decreased more than
one percentage point to 23.2% for the 2001 first quarter compared with
24.5% for the 2000 first quarter due primarily to an increase in sales
volume on higher margin products in the pharmaceuticals segment.
Selling, general and administrative expenses increased 10% for the 2001
first quarter. Higher expenses were due primarily to higher selling and
marketing expenses, including increased headcount, related to recent
pharmaceutical product launches and direct-to-consumer promotional costs
for significant established pharmaceutical products.
Research and development expenses increased 10% for the 2001 first
quarter due primarily to increased headcount and other research
operating expenses, including higher chemical and material costs, and
cost sharing expenditures from pharmaceutical collaborations commencing
in 2000 offset, in part, by lower payments for licensing agreements.
Interest expense, net decreased 92% for the 2001 first quarter due
primarily to lower interest expense as a result of lower average debt
levels and more favorable interest rates on the debt outstanding,
primarily commercial paper, as well as additional capitalized interest
recognized during the 2001 first quarter compared with the prior year.
As described in Note 1 to the Consolidated Condensed Financial
Statements, the commercial paper issuance associated with the new
$3,000.0 million credit facility and the $3,000.0 million Notes occurred
in late March
14
2001 and, therefore, was not outstanding for a majority of the 2001
first quarter. As a result, weighted average long-term debt outstanding
during the 2001 and 2000 first quarters was $3,920.2 million and
$4,843.3 million, respectively. In addition, the Company generated
higher interest income due to higher average levels of cash on hand
throughout the 2001 first quarter.
The following table sets forth worldwide income from continuing
operations before taxes by operating segment together with the
percentage changes from the comparable period in the prior year:
Income from Continuing
Operations before Taxes (1)
----------------------------
Three Months
($ in millions) Ended March 31,
--------------------------
% Increase
Operating Segment 2001 2000 (Decrease)
-------------------- ----------- ------------ ----------
Pharmaceuticals $915.5 $744.0 23%
Consumer Health Care 124.0 130.4 (5)%
----------- ------------ ----------
1,039.5 874.4 19%
Corporate (2) (58.5) 1,691.9 -
----------- ------------ ----------
Total (3) $981.0 $2,566.3 (62)%
=========== ============ ==========
(1) Includes goodwill amortization for 2001 and 2000 as follows:
Pharmaceuticals - $34.6 and $38.9, and Consumer Health Care - $6.0
and $8.0, respectively.
(2) Corporate for the 2000 first quarter included income of $1,709.4
resulting from the receipt of a $1,800.0 termination fee provided for
under the merger agreement with Warner-Lambert Company offset, in part,
by certain related expenses. Excluding the termination fee, Corporate
expenses, net increased for the 2001 first quarter.
(3) Excluding the termination fee, total income from continuing
operations before taxes increased 14% for the 2001 first quarter.
Worldwide pharmaceutical income from continuing operations before taxes
increased 23% (25% for human pharmaceuticals) for the 2001 first quarter
due primarily to increased worldwide sales of human pharmaceuticals and
higher other income, net offset, in part, by higher selling, general and
administrative expenses and research and development expenses.
The Company experienced greater growth of worldwide pharmaceutical
income from continuing operations before taxes (23%) than growth of
worldwide pharmaceutical net revenue (11%). This difference was due
primarily to product mix of human pharmaceuticals, which improved
margins by more than one percentage point for the 2001 first quarter,
and other expense incurred in the 2000 first quarter compared to higher
other income generated in the 2001 first quarter. Other expense recorded
in the 2000 first quarter included a one-time access fee paid pursuant
to a collaboration agreement with Elan Pharmaceuticals, with which
15
the Company has formed an alliance for the development of a treatment
for mild to moderate Alzheimer's disease. Other income generated in the
2001 first quarter included gains on sales of non-strategic assets,
mostly non-core product rights, and higher equity income related to
Immunex.
Worldwide consumer health care income from continuing operations before
taxes decreased 5% for the 2001 first quarter due primarily to lower
worldwide consumer health care sales offset, in part, by lower selling,
general and administrative expenses.
Corporate expenses, net, excluding the Warner-Lambert Company
termination fee, increased for the 2001 first quarter due primarily to
lower other income relating to a one-time insurance recovery of
environmental costs recorded in the 2000 first quarter offset, in part,
by lower interest expense in the 2001 first quarter.
The effective tax rate of continuing operations decreased to 25.2% for
the 2001 first quarter compared with 25.9% for the 2000 first quarter
(excluding the effect of the Warner-Lambert Company termination fee).
The tax rate reduction occurring in the 2001 first quarter was due to an
increased benefit from products manufactured in lower taxed
jurisdictions.
Income and diluted earnings per share from continuing operations for the
2001 first quarter increased to $733.6 million and $0.55 compared to
$634.9 million and $0.48 in the prior year (excluding the Warner-Lambert
Company termination fee), increases of 16% and 15%, respectively.
Exclusive of the Warner-Lambert Company termination fee, the increases
in income and diluted earnings per share from continuing operations for
the 2001 first quarter were due to additional worldwide sales of human
pharmaceuticals and lower interest expense offset, in part, by higher
selling, general and administrative expenses, and research and
development expenses.
Euro Currency
-------------
As of January 1, 2001, 12 of the 15 member countries of the European
Union adopted the Euro as a new common legal currency. However, the
legacy currencies of the member countries are scheduled to remain legal
tender as sub-denominations of the Euro between January 1, 1999 and
January 1, 2002 (the transition period). Critical areas impacted by the
conversion to the Euro have been identified and appropriate strategies
developed, which are currently being implemented to facilitate the
adoption of the Euro and to facilitate business transactions during the
transition period. The costs related to the Euro conversion and
transition period will not have a material adverse effect on the
Company's financial position or results of operations. However, the Euro
conversion may have competitive implications on the Company's pricing
and marketing strategies, the total impact of which is not known at this
time.
16
Competition
-----------
The Company operates in the highly competitive pharmaceutical and
consumer health care industries. The Company is not dependent on any one
patent-protected product or line of products for a substantial portion
of its net revenue or results of operations. PREMARIN, the Company's
principal conjugated estrogens product manufactured from pregnant mare's
urine, and related products PREMPRO and PREMPHASE (which are single
tablet combinations of the conjugated estrogens in PREMARIN and the
progestin medroxyprogesterone acetate), are the leaders in their
categories and contribute significantly to net revenue and results of
operations. Premarin's natural composition is not subject to patent
protection (although PREMPRO has patent protection). The principal uses
of PREMARIN, PREMPRO and PREMPHASE are to manage the symptoms of
menopause and to prevent osteoporosis, a condition involving a loss of
bone mass in postmenopausal women. Estrogen-containing products
manufactured by other companies have been marketed for many years for
the treatment of menopausal symptoms, and several of these products also
have an approved indication for the prevention of osteoporosis. During
the past several years, other manufacturers have introduced products for
the treatment and/or prevention of osteoporosis. New products containing
different estrogens than those found in PREMPRO and PREMPHASE and having
many forms of the same indications have also been introduced. Some
companies have attempted to obtain approval for generic versions of
PREMARIN. These products, if approved, would be routinely substitutable
for PREMARIN and related products under many state laws and third-party
insurance payer plans. In May 1997, the U.S. Food and Drug
Administration (FDA) announced that it would not approve certain
synthetic estrogen products as generic equivalents of PREMARIN given
known compositional differences between the active ingredient of these
products and PREMARIN. Although the FDA has not approved any generic
equivalent to PREMARIN to date, PREMARIN will continue to be subject to
competition from existing and new competing estrogen and other products
for its approved indications and may be subject to generic competition
from either synthetic or natural conjugated estrogens products in the
future. At least one other company has announced that it is in the
process of developing a generic version of PREMARIN from the same
natural source, and the Company currently cannot predict the timing or
outcome of these or any other efforts.
17
Liquidity, Financial Condition and Capital Resources
----------------------------------------------------
The Company generated operating cash inflows totaling $1,194.1 million
during the 2001 first quarter due primarily to income from continuing
operations and collections on outstanding receivables. These cash
inflows were more than offset by payments made on outstanding payables
and accrued expenses and $4,141.6 million of payments relating to the
diet drug litigation (see Note 3 to the Consolidated Condensed Financial
Statements).
The Company used $478.6 million of cash relating to investments in
property, plant and equipment and marketable securities. The capital
expenditures made during the 2001 first quarter were consistent with the
Company's commitment to expand existing manufacturing and research and
development facilities worldwide, and build new biotechnology
facilities. The Company received investment proceeds through the sales
and maturities of marketable securities and the sales of non-strategic
assets totaling $77.9 million.
As described in Note 1 to the Consolidated Condensed Financial
Statements, the Company obtained new credit facilities totaling $6,000.0
million in March 2001. The new credit facilities include a $3,000.0
million, 364-day credit facility (which support borrowings under the
commercial paper program). Any borrowings actually drawn from the credit
facility are extendible for an additional year. In addition, the new
credit facilities include a $3,000.0 million, 364-day bridge facility,
which facility was terminated when the Company issued $3,000.0 million
of Notes on March 30, 2001. On March 30, 2001, the Company issued
three tranches of Notes in a transaction exempt from registration
pursuant to Rule 144A under the Securities Act as follows:
- $500.0 million, 5.875% Notes due March 15, 2004
- $1,000.0 million, 6.25% Notes due March 15, 2006
- $1,500.0 million, 6.70% Notes due March 15, 2011
The interest rate payable on each series of Notes is subject to an
increase of .25 percentage points each time Moody's or Standard & Poor's
downgrades the Company's credit rating. The total adjustment to the
interest rate for the series of Notes cannot exceed two percentage
points. The Company would incur approximately a total of $7.5 million of
additional annual interest expense for every .25 percentage point
increase in the interest rate.
The $3,000.0 million, 364-day facility is combined with the Company's
existing $2,000.0 million five-year credit facility (termination date of
July 31, 2002) to provide $5,000.0 million of credit facilities to
support the Company's commercial paper program. The Company offers its
commercial paper in a very liquid market commensurate with its long term
credit ratings from Moody's (A3) and Standard & Poor's (single-A). The
proceeds received from the combined Notes and commercial paper supported
by the credit facilities totaled $24,179.3 million for the 2001 first
quarter. These proceeds were offset by repayments of $19,236.4 million
of commercial paper during the 2001 first quarter. The Company will use
the proceeds from the Notes and commercial paper supported by the credit
facilities for general corporate
18
and working capital requirements, including the capital expenditures
identified above, and payments related to the REDUX and PONDIMIN diet
drug litigation.
The Company also used cash for financing activities related to dividend
payments of $302.0 million.
Management remains confident that cash flows from operating activities
and available financing resources will be adequate to fund the Company's
operations, pay opt out settlement payments and fund the nationwide,
class action settlement relating to the REDUX and PONDIMIN diet drug
litigation, pay dividends, maintain the ongoing programs of capital
expenditures, and repay both the principal and interest on its
outstanding obligations, without requiring the disposition of any
significant strategic core businesses.
Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The market risk disclosures appearing on pages 58 and 59 of the
Company's 2000 Annual Report on Form 10-K have not materially changed
from December 31, 2000 except as follows:
- In conjunction with the Notes issued by the Company on March 30,
2001, the Company entered into interest rate swap agreements
related to the $1,500.0 million 6.70% Notes due March 15, 2011.
- The interest rate swap agreements are contracts under which the
Company converted the fixed rate of the $1,500.0 million 6.70%
Notes to a floating rate of interest over the term of the interest
rate swap agreements, which is the same term as the underlying
debt.
- The interest rate swap agreements are effective fair value hedges,
as the terms of the interest rate swaps are the same as the
underlying debt and therefore the current market interest rate
fluctuations on the debt will be completely offset by the
effectiveness of the interest rate swap.
At March 31, 2001, the fair values of the Company's financial
instruments were as follows:
($ in millions) Notional/
Description Contract Amount Carrying Value Fair Value
--------------- --------------- -------------- ----------
Forward contracts (1) $394.5 $16.2 $16.2
Option contracts (1) 956.4 34.1 34.1
Interest rate swaps 1,500.0 (1.3) (1.3)
Outstanding debt (2) 7,394.3 7,391.8 7,482.3
(1) If the value of the U.S. dollar were to increase or decrease by 10%,
in relation to all hedged foreign currencies, the net receivable on the
forward and option contracts would decrease or increase by approximately
$48.9 million.
(2) If the interest rates were to increase or decrease by one percentage
point, the fair value of the outstanding debt would increase or decrease
by approximately $233.9 million.
19
The estimated fair values approximate amounts at which these financial
instruments could be exchanged in a current transaction between willing
parties. Therefore, fair values are based on estimates using present
value and other valuation techniques that are significantly affected by
the assumptions used concerning the amount and timing of estimated
future cash flows and discount rates that reflect varying degrees of
risk. Specifically, the fair value of outstanding debt instruments
reflects a current yield valuation based on observed market prices as of
March 31, 2001; the fair value of interest rate swaps and forward
contracts reflects the present value of the future potential gain or
(loss) if settlement were to take place on March 31, 2001; and the fair
value of option contracts reflects the present value of future cash
flows if the contracts were settled on March 31, 2001.
ENBREL Supply
-------------
ENBREL is a biological treatment for juvenile, early stage and moderate
to severe rheumatoid arthritis. ENBREL was discovered by Immunex and is
being co-promoted in North America by Immunex and the Company. The
Company has exclusive marketing rights to ENBREL outside of North
America. Although the market demand for ENBREL is increasing, the sales
growth is currently constrained by limits on the existing source of
supply. This is anticipated to continue until the retrofitting of a
Rhode Island facility is completed and approved, which is expected to
occur in 2002. If the market demand continues to grow, there may be
further supply constraints even after the Rhode Island facility begins
producing ENBREL. The current plan for the longer term includes a new
manufacturing facility which will be constructed in Ireland.
Cautionary Statements for Forward Looking Information
-----------------------------------------------------
This Form 10-Q, including management's discussion and analysis set forth
above, contains certain forward-looking statements, including, among
other things, statements regarding the Company's results of operations,
Euro currency, competition, liquidity, financial condition and capital
resources, ENBREL supply, MENINGITEC sales, foreign currency and
interest rate risk, the nationwide, class action settlement relating to
REDUX and PONDIMIN, and additional litigation charges related to REDUX
and PONDIMIN including those for opt outs. These forward-looking
statements are based on current expectations. Certain factors which
could cause the Company's actual results to differ materially from
expected and historical results have been identified by the Company in
Exhibit 99 to the Company's 2000 Annual Report on Form 10-K, which
exhibit is incorporated herein by reference.
20
Part II - Other Information
---------------------------
Item 1. Legal Proceedings
-----------------
The Company and its subsidiaries are parties to numerous lawsuits and
claims arising out of the conduct of its business, including product
liability and other tort claims, the most significant of which are
described in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000.
As of April 15, 2001, the Company had reached agreements or agreements
in principle to settle the claims of approximately 85% of the
individuals who initally opted out of the Company's nationwide, class
action settlement of claims brought by individuals who allege injury as
a result of their use of PONDIMIN and/or REDUX.
On April 3, 2001, a jury in Alice, Texas hearing the case of Lopez v.
American Home Products Corporation, et al., No. 99-07-37723, 79th
Judicial District Court, returned a verdict in favor of the plaintiff
for $11.55 million in compensatory damages and $45 million in punitive
damages for injuries allegedly sustained by the plaintiff due to her
use of PONDIMIN. The trial court indicated following the verdict that
it does not expect to enter a judgment in the case for several months,
while it considers the Company's post-trial motions. If a verdict is
entered in favor of the plaintiff, the Company intends to pursue an
appeal.
In the litigation involving the Company's DIMETAPP and ROBITUSSIN
cough/cold products that contained the ingredient phenylpropanolamine
("PPA"), three additional class actions have been filed. The
allegations in Kaen, et al. v. Novartis Consumer Health, Inc. et al.,
No. GIC 764315, Calif. Super. Ct., San Diego Cty., a putative
statewide class action for disgorgement, restitution and other
economic relief, are similar to the previously-reported class actions
seeking relief under the false advertising provisions of the
California Business & Professions Code. Giunta, et al. v. American
Home Products Corporation, No. L-512-01, N.J. Super. Ct., Gloucester
Cty., is a putative statewide class action for economic damages
brought under the New Jersey Consumer Fraud Act. Risti, et al. v.
Novartis, et al., No. L-4053-01, N.J. Super. Ct., Middlesex Cty., is
a putative nationwide class action seeking damages for economic
loss. In addition to these and the previously reported putative
class actions, there are a total of 23 individual personal injury
suits against the Company that have been filed alleging injury as a
result of ingestion of PPA-containing products. The Company expects
that additional PPA cases may be filed in the future against it and
the other companies which marketed PPA-containing products. The
Company intends to defend all such cases vigorously.
In the litigation involving DURACT, the Company's non-narcotic
analgesic pain reliever which was voluntarily withdrawn from the
market, the Company's appeal to the United States Court of Appeals for
the Fifth Circuit from the decision granting class certification in
Rivera, et al. v. Wyeth-Ayerst Laboratories Company, et al., No.
G-00-345, U.S.D.C., S.D.Tex., an economic damage and refund case, is
expected to be argued this year with a decision expected later this
year. In addition to Rivera and the other putative class actions
discussed in prior filings, there are currently a total of 20 filed
lawsuits pending involving former DURACT users alleging myriad
injuries, from gastrointestinal upset and distress to liver transplant
and
21
death. The Company expects that a number of additional DURACT cases may
be filed in the future. The Company intends to defend all such cases
vigorously.
On March 30, 2001, the Federal Trade Commission issued an
administrative complaint (in the matter of Schering-Plough
Corporation, et al., Docket No. 9297) alleging that the Company
violated Section 5 of the Federal Trade Commission Act. The
complaint alleges, among other things, that the Company's agreement
to settle a patent infringement case relating to its generic version
of Schering-Plough Corporation's K-Dur potassium supplement product
unlawfully restrained trade. The complaint alleges further that the
settlement was an agreement allowing Schering-Plough to monopolize
potassium chloride supplement markets in violation of Section 5 of
the FTC Act. The relief sought is a cease and desist order which
would include, among other things, a requirement that the Company not
be a party to an agreement in which an NDA holder provides anything
of value to an alleged infringer and the alleged infringer agrees to
refrain from selling the drug for any period of time. Subsequently,
purported class action cases (HIP Health Plan of Fla., Inc. v.
Schering-Plough Corp., No. 01-CV-1652; United Food and Commercial
Workers Local 56 Health and Welfare Fund v. Schering-Plough Corp., et
al., No. 01-CV-1769; Wallace v. Schering-Plough Corp., et al., No.
01-CV-1771; and Reichert v. Schering-Plough Corp., et al., No.
01-1170) were filed in the federal district court of New Jersey
alleging on behalf of end users and/or end payors of potassium
supplements violations of federal antitrust laws as well as state law
conspiracy and unjust enrichment claims. The relief sought includes
damages, disgorgement and injunctive relief. A purported class action
(Maffei v. Schering-Plough Corp., et al., E.D., PA, No. 01-CV-2012) has
also been filed in federal district court in Pennsylvania on behalf
of indirect purchaser end users of potassium chloride. This case
seeks declaratory and injunctive relief for violations of sections 1
and 2 of the Sherman Act and restitution and disgorgement as well as
a constructive trust for unjust enrichment. Also purported class
action cases were filed in California state courts (Sutin v.
Schering-Plough Corp., et al., Sup. Ct., L.A. Cty., Civ. Act. No.
BC248047; Cundiff v. Schering-Plough Corp., Sup. Ct., Alameda Cty.,
Civ. Act. No. 837776; and Travers v. Schering-Plough Corp. et al.,
Sup. Ct., Alameda Cty., No. 840186-5), in Florida (Grossman v.
Schering-Plough Corp., Cir. Ct., Palm Beach Cty., Case No. CL
01-3504AE), one in Alabama (Steadman v. Schering-Plough Corp., et
al., Cir. Ct., Walker Cty., No. CV01-211), in Minnesota (Roseen v.
Schering-Plough Corp., et al., Dist. Ct., Hennepin Cty., No.
CT01-6345) and in Tennessee (Bellows v. Schering-Plough Corp., et
al., Cir. Ct., Shelby Cty., No. CT-002465-01, D2; and Randolph v.
Schering-Plough Corp., et al., Cir. Ct., Cocke Cty., No. 27,038IV) on
behalf of consumers of potassium chloride supplements. The complaints
in these cases contain similar allegations of violations of state
antitrust and consumer protection laws. The relief sought in these
cases includes unspecified treble damages and injunctive relief.
Other cases may be filed with similar allegations. The Company
believes it has meritorious defenses to these actions and intends to
defend them vigorously.
In the opinion of the Company, although the outcome of any legal
proceedings cannot be predicted with certainty, the ultimate liability
of the Company in connection with its legal proceedings will not have a
material adverse effect on the Company's financial position but could
be material to the results of operations in any one accounting period.
22
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Exhibit No. Description
----------- -----------
(4.1) Second Supplemental Indenture, dated as of
March 30, 2001, between the Corporation and
The Chase Manhattan Bank (as successor to
Manufacturers Hanover Trust Company) is
incorporated by reference to Exhibit 4.3 of
the Registration Statement on Form S-4 of the
Corporation filed on April 27, 2001.
(4.2) Exchange and Registration Rights Agreement,
dated March 30, 2001, among the Corporation
and Chase Securities Inc., Salomon Smith
Barney Inc., as Representatives of the
several Initial Purchasers, is incorporated
by reference to Exhibit 4.4 of the
Registration Statement on Form S-4 of the
Corporation filed on April 27, 2001.
(10.1) Agreement, dated as of March 6, 2001 by and
between the Corporation and John R. Stafford.
(10.2) Amendatory Agreement, dated as of March 6,
2001, by and between the Corporation and John
R. Stafford.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(b) Reports on Form 8-K
-------------------
On April 26, 2001, the Company filed a Current Report on Form
8-K (including disclosure under items 5 and 7) relating to the
2001 First Quarter Earnings Press Release.
23
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION
----------------------------------
(Registrant)
By /s/ Paul J. Jones
-------------------------------
Paul J. Jones
Vice President and Comptroller
(Duly Authorized Signatory
and Chief Accounting Officer)
Date: May 15, 2001
24
Exhibit Index
Exhibit No. Description
----------- -----------
(10.1) Agreement, dated as of March 6, 2001 by and
between the Corporation and John R. Stafford.
(10.2) Amendatory Agreement, dated as of March 6,
2001, by and between the Corporation and John
R. Stafford.
(12) Computation of Ratio of Earnings to Fixed
Charges.
EX-1
EX-1