<PAGE>   1
                                  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, 1999

                                       OR

           [ ] 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 1-11557



                           PHARMACIA & UPJOHN, INC.
           (Exact name of registrant as specified in its charter)


                     Delaware                  98-0155411
             (State of incorporation)      (I. R. S. Employer
                                            Identification No.)


  Pharmacia & Upjohn Company, 95 Corporate Drive, Bridgewater, NJ  08807
           (Address of principal executive offices)  (Zip Code)


              Registrant's telephone number     888/768-5501


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 twelve months, and (2) has been subject
to such filing requirements for the past 90 days.  YES   X      NO

The number of shares of Common Stock, $1 Par Value, outstanding as of August 4,
1999            was 506,672,675.

                               Page 1 of 23 pages
                   The exhibit index is set forth on page 22.


                                      1

<PAGE>   2

                       QUARTERLY REPORT ON FORM 10-Q

                         PHARMACIA & UPJOHN, INC.

                      QUARTER ENDED JUNE 30, 1999


                  INDEX OF INFORMATION INCLUDED IN REPORT
<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----
<S>                                                                     <C>
PART I - FINANCIAL INFORMATION

  Item 1.     Financial Statements (Unaudited)

              Consolidated Statements of Earnings                          3

              Condensed Consolidated Statements of Cash Flows              4

              Condensed Consolidated Balance Sheets                        5

              Notes to Consolidated Financial Statements                   6

  Item 2.     Management's Discussion and Analysis of Financial
                Condition and Results of Operations                       11

  Item 3.     Quantitative and Qualitative Disclosures About
                Market Risk                                               21


Part II - OTHER INFORMATION

  Item 6.     Exhibits and Reports on Form 8-K                            22
</TABLE>





                                       2
<PAGE>   3

PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements

PHARMACIA & UPJOHN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
($s in millions, except per-share data)

<TABLE>
<CAPTION>
                                                 Unaudited
                               -----------------------------------------------
                                   For Three Months           For Six Months
                                   Ended June 30,             Ended June 30,
                               -----------------------     -------------------
                                   1999          1998         1999      1998
                                ----------    ---------     --------  --------
<S>                             <C>           <C>           <C>       <C>
Net sales                       $ 1,760       $ 1,654       $ 3,534   $ 3,240

Cost of products sold               447           493           940       979
Research and development            324           295           651       573
Selling, general and
  administrative                    677           700         1,345     1,266
Interest income, net                 (9)          (16)          (20)      (34)
All other, net                       13           (34)           (6)      (37)
                                ----------    ---------     --------  --------
Earnings before income taxes        308           216           624       493
Provision for income taxes           92            70           187       158
                                ----------    ---------     --------  --------
Net earnings                     $  216        $  146       $   437   $   335
                                ==========    =========     ========  ========

Net earnings per common share:

  Basic                            $.42          $.28          $.85      $.65
                                   ====          ====          ====      ====
  Diluted                          $.41          $.28          $.83      $.64
                                   ====          ====          ====      ====
</TABLE>




                           See accompanying notes.


                                       3
<PAGE>   4

PHARMACIA & UPJOHN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($s in millions)


For the six months ended June 30

<TABLE>
<CAPTION>
                                                                   Unaudited
                                                             -------------------
                                                               1999       1998
                                                             --------   --------
<S>                                                          <C>        <C>
Net cash provided by operations                              $   185    $   234
                                                             --------   --------
Cash flows provided (required) by investment activities:
  Proceeds from sale of subsidiaries                              35          -
  Additions of properties                                       (220)      (221)
  Purchases of intangibles                                      (123)        (6)
  Proceeds from sales of investments                             327        582
  Purchases of investments                                       (83)      (336)
  Other                                                            6          5
                                                             --------   --------
Net cash (required) provided by investment activities            (58)        24
                                                             --------   --------
Cash flows provided (required) by financing activities:
  Repayment of debt                                              (31)      (147)
  Payments of ESOP debt                                          (22)       (16)
  Net increase in debt with initial maturity
    of 90 days or less                                           405        377
  Dividend payments                                             (281)      (283)
  Purchases of treasury stock                                   (170)       (31)
  Proceeds from exercise of stock options                         41         25
  Other                                                           24         14
                                                             --------   --------
Net cash (required) by financing activities                      (34)       (61)
                                                             --------   --------
Effect of exchange rate changes on cash                          (48)        (3)
                                                             --------   --------
Net change in cash and cash equivalents                           45        194

Cash and cash equivalents, beginning of year                     857        775
                                                             --------   --------
Cash and cash equivalents, end of period                     $   902    $   969
                                                             ========   ========

</TABLE>




                             See accompanying notes.




                                        4
<PAGE>   5

PHARMACIA & UPJOHN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($s in millions)

<TABLE>
<CAPTION>
                                                    June 30,      December 31,
                                                      1999            1998
                                                   -----------    -----------
<S>                                                <C>            <C>
                    ASSETS                         (unaudited)
Current assets:
  Cash and cash equivalents                        $    902       $    857
  Short-term investments                                130            352
  Trade accounts receivable, less allowance
    of $100 (1998: $103)                              1,383          1,417
  Inventories                                         1,011          1,032
  Other current assets                                  847            874
                                                   -----------    -----------
     Total current assets                             4,273          4,532
Long-term investments                                   411            454
Properties, net                                       3,178          3,226
Goodwill and other intangible assets, net             1,208          1,238
Other noncurrent assets                                 891            862
                                                   -----------    -----------
Total assets                                       $  9,961       $ 10,312
                                                   ===========    ===========

      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Short-term debt, including current
    maturities of long-term debt                   $    926       $    332
  Other current liabilities                           2,074          2,519
                                                   -----------    -----------
     Total current liabilities                        3,000          2,851
Long-term debt and guarantee of ESOP debt               284            508
Other noncurrent liabilities                          1,305          1,353
                                                   -----------    -----------
Shareholders' equity:
  Preferred stock, one cent par value; at
    stated value; authorized 100,000,000 shares;
    issued 6,791 shares (1998: 6,863 shares)            273            277
  Common stock, one cent par value;
    authorized 1,500,000,000 shares; issued
    506,597,506 shares (1998: 508,682,707 shares)         5              5
  Capital in excess of par value                      1,329          1,376
  Retained earnings                                   5,649          5,493
  ESOP-related accounts                                (242)          (254)
  Treasury stock                                       (120)           (35)
  Accumulated other comprehensive income             (1,522)        (1,262)
                                                   -----------    -----------
     Total shareholders' equity                       5,372          5,600
                                                   -----------    -----------
Total liabilities and shareholders' equity         $  9,961       $ 10,312
                                                   ===========    ===========

</TABLE>




                             See accompanying notes.




                                        5
<PAGE>   6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
($S IN MILLIONS, EXCEPT PER-SHARE DATA)


A - INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial information presented herein is unaudited, other
than the condensed consolidated balance sheet at December 31, 1998, which is
derived from audited financial statements. The interim financial statements and
notes thereto do not include all disclosures required by generally accepted
accounting principles and should be read in conjunction with the financial
statements and notes thereto included in the company's latest annual report on
Form 10-K.

In the opinion of management, all adjustments necessary for a fair presentation
are reflected in the interim period financial statements presented and are of a
normal recurring nature. The current period's results of operations are not
necessarily indicative of results that ultimately may be achieved for the year.
The company is presenting its consolidated statement of earnings in a
"single-step" format and, accordingly, reclassifications of prior year amounts
have been made to conform to this presentation.

In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities". This statement requires companies to record derivatives on
the balance sheet as assets and liabilities measured at fair value. The
accounting treatment of gains and losses resulting from changes in the value of
derivatives depends on the use of the derivative and whether it qualifies for
hedge accounting. The company expects to adopt SFAS No. 133 no earlier than
January 1, 2000, and is currently assessing the impact of adoption on its
financial position, results of operations, and liquidity.

B - INVENTORIES

<TABLE>
<CAPTION>
                                                      June 30,    December 31,
                                                        1999          1998
                                                     ----------   -----------
<S>                                                   <C>            <C>
    Estimated replacement cost (FIFO basis):
    Pharmaceutical and other finished products        $   477        $  558
    Raw materials, supplies and work-in-process           679           628
                                                     ----------    ----------
                                                        1,156         1,186
    Less reduction to LIFO cost                          (145)         (154)
                                                     ----------    ----------
                                                      $ 1,011        $1,032
                                                     ==========    ==========
</TABLE>

Inventories valued on the LIFO method had an estimated replacement cost (FIFO
basis) of $554 at June 30, 1999, and $521 at December 31, 1998.

C - CONTINGENT LIABILITIES

The consolidated balance sheets include accruals for estimated product
litigation and environmental liabilities. The latter includes exposures related
to discontinued operations, including the industrial chemical facility referred
to below and several sites which, under the Comprehensive Environmental
Response,



                                       6
<PAGE>   7

C - CONTINGENT LIABILITIES (continued)

Compensation, and Liability Act, are commonly known as Superfund sites (see Note
D). The company's ultimate liability in connection with Superfund sites depends
on many factors, including the number of other responsible parties and their
financial viability and the remediation methods and technology to be used.
Actual costs to be incurred may vary from the estimates given the inherent
uncertainties in evaluating environmental exposures.

With regard to its discontinued industrial chemical facility in North Haven,
Connecticut, the company may soon be required to submit a corrective measures
study report to the U.S. Environmental Protection Agency (EPA). As the
corrective action process progresses, it may become appropriate to reevaluate
the existing reserves designated for remediation in light of changing
circumstances. It is reasonably possible that a material increase in accrued
liabilities will be required but it is not possible to determine what, if any,
exposure exists at this time.

D - LITIGATION

The company is involved in a number of legal and environmental proceedings.
These include a substantial number of product liability suits claiming damages
as a result of the use of the company's products as well as administrative and
judicial proceedings at approximately 50 Superfund sites.

While it is not possible to predict or determine the outcome of legal actions
brought against the company, or the ultimate cost of environmental matters, the
company continues to believe that any potentially unaccrued costs and
liabilities associated with such matters will not have a material adverse effect
on the company's consolidated financial position, and unless there is a
significant deviation from the historical pattern of resolution of these issues,
there should not be a material adverse effect on the company's results of
operations or liquidity.

The company has been a party along with a number of other defendants (both
manufacturers and wholesalers) in several federal civil antitrust lawsuits, some
of which were consolidated and transferred to the Federal District Court for the
Northern District of Illinois. These suits, brought by independent pharmacies
and chains, generally allege unlawful conspiracy, price discrimination and price
fixing and, in some cases, unfair competition, and specifically allege that the
company and the other named defendants violated the following: (1) the
Robinson-Patman Act by giving substantial discounts to hospitals, nursing homes,
mail-order pharmacies and health maintenance organizations ("HMOs") without
offering the same discounts to retail drugstores, and (2) Section I of the
Sherman Antitrust Act by entering into illegal vertical combination with other
manufacturers and wholesalers to restrict certain discounts and rebates so they
benefited only favored customers. The Federal District Court for the Northern
District of Illinois certified a national class of retail pharmacies in November
1994. Similar actions by proposed retailer classes have been filed in the state
courts of Alabama, California, Minnesota, Mississippi, and Wisconsin. Eighteen
class action lawsuits seeking damages based on the same alleged conduct have
been filed in 14 states and the District of Columbia. The plaintiffs claim to
represent consumers who purchased prescription drugs in those jurisdictions and
four other states. Two of the lawsuits have been dismissed. The company
announced in 1998 that it reached a settlement with the plaintiffs in the
federal class action cases for $103 which was paid during the first quarter of
1999.


                                       7

<PAGE>   8

D - LITIGATION (continued)

The company believes that any potential remaining liability above amounts
accrued will not have a material adverse effect on the company's consolidated
financial position, its results of operations, or liquidity.

E - RESTRUCTURING

The company initiated a global turnaround program in 1997 to rationalize
infrastructure, establish a global headquarters, and eliminate duplicate
resources in manufacturing, administration, and research and development. At
June 30, 1999, the remaining accrual balance was $94. Cash spending caused the
decrease in the accrual.

F - COMPREHENSIVE INCOME

Total comprehensive income for the three months ended June 30, 1999, and June
30, 1998, was $150 and $159, respectively. Total comprehensive income for the
six months ended June 30, 1999, and June 30, 1998, was $177 and $224,
respectively.

G - EARNINGS PER SHARE

Basic earnings per share is computed by dividing net earnings available to
holders of common stock by the weighted average number of shares of common stock
outstanding. Diluted earnings per share is computed assuming the exercise of
stock options, conversion of preferred stock, and the issuance of stock as
incentive compensation to certain employees. Under these assumptions, the
weighted-average number of common shares outstanding is increased accordingly,
and net earnings is reduced by an incremental contribution to the Employee Stock
Ownership Plan (ESOP). This contribution is the after-tax difference between the
income the ESOP would have received from the preferred stock and the assumed
dividend yield to be earned on the common shares.

The following table reconciles the numerators and denominators of the basic and
diluted earnings per share computations:


<TABLE>
<CAPTION>
For the three months ended June 30,        1999      1999      1998       1998
                                          Basic    Diluted    Basic    Diluted
                                         -------   -------   -------   -------
<S>                                      <C>       <C>       <C>       <C>
EPS numerator:
Net earnings                              $ 216     $ 216     $ 146     $ 146
Less: Preferred stock dividends,
  net of tax                                 (3)        -        (3)        -
Less: ESOP contribution, net of tax           -        (1)        -        (1)
                                         -------   -------   -------   -------
Income available to common shareholders   $ 213     $ 215     $ 143     $ 145
                                         =======   =======   =======   =======
</TABLE>





                                       8
<PAGE>   9

G - EARNINGS PER SHARE (continued)

<TABLE>
<CAPTION>
For the three months ended June 30,        1999      1999      1998      1998
                                          Basic    Diluted    Basic    Diluted
                                         -------   -------   -------   -------
<S>                                      <C>       <C>       <C>       <C>
EPS denominator:
Average common shares outstanding           507       507       508       508
Effect of dilutive securities:
       Stock options                          -         6         -         4
       Convertible preferred stock and
         incentive compensation               -        10         -        10
                                         -------   -------   -------   -------
Total shares                                507       523       508       522
                                         =======   =======   =======   =======


Earnings per share                         $.42      $.41      $.28      $.28
                                         =======   =======   =======   =======

<CAPTION>
For the six months ended June 30,          1999      1999      1998      1998
                                          Basic    Diluted    Basic    Diluted
                                         -------   -------   -------   -------
<S>                                      <C>       <C>       <C>       <C>
EPS numerator:
Net earnings                              $ 437     $ 437     $ 335     $ 335
Less: Preferred stock dividends,
  net of tax                                 (6)        -        (6)        -
Less: ESOP contribution, net of tax           -        (2)        -        (2)
                                         -------   -------   -------   -------
Income available to common shareholders   $ 431     $ 435     $ 329     $ 333
                                         =======   =======   =======   =======
</TABLE>

<TABLE>
<CAPTION>
                                           1999      1999      1998      1998
                                          Basic    Diluted    Basic    Diluted
                                         -------   -------   -------   -------
<S>                                      <C>       <C>       <C>       <C>
EPS denominator:
Average common shares outstanding           507       507       508       508
Effect of dilutive securities:
       Stock options                          -         6         -         3
       Convertible preferred stock and
         incentive compensation               -        10         -        11
                                         -------   -------   -------   -------
Total shares                                507       523       508       522
                                         =======   =======   =======   =======


Earnings per share                         $.85      $.83      $.65      $.64
                                         =======   =======   =======   =======

</TABLE>




                                       9
<PAGE>   10

H - SEGMENT INFORMATION

The company's core business is the development, manufacture and sale of
pharmaceutical products. The pharmaceutical segment includes prescription and
nonprescription products for humans and animals. The nonpharmaceutical segment
includes diagnostics, plasma, nutrition, and biotechnology businesses.

The following table shows revenues and expenses for the company's operating
segments and reconciling items necessary to total to amounts in the consolidated
financial statements. Information about segment interest income and expense,
income taxes, corporate support functions, and depreciation are not available on
a segment basis. There are no intersegment revenues.

<TABLE>
<CAPTION>
                                       Sales                 Profit
                                -------------------   --------------------
For the three months ended June 30, 1999       1998       1999       1998
                                ---------  ---------  ---------  ---------
<S>                              <C>        <C>        <C>       <C>
Pharmaceutical                   $ 1,663    $ 1,488    $   365    $   293
Nonpharmaceutical                     97        166         30         38
                                ---------  ---------  ---------  ---------
                                 $ 1,760    $ 1,654        395        331
                                =========  =========

                     Unallocated corporate and other       (87)      (115)
                                                      ---------  ---------
                        Earnings before income taxes   $   308    $   216
                                                      =========  =========
</TABLE>

<TABLE>
<CAPTION>
                                       Sales                 Profit
                                -------------------   --------------------
For the six months ended June 30,  1999       1998       1999       1998
                                ---------  ---------  ---------  ---------
<S>                             <C>        <C>        <C>        <C>
Pharmaceutical                   $ 3,339    $ 2,918    $   731    $   599
Nonpharmaceutical                    195        322         54         67
                                ---------  ---------  ---------  ---------
                                 $ 3,534    $ 3,240        785        666
                                =========  =========

                     Unallocated corporate and other      (161)      (173)
                                                      ---------  ---------
                        Earnings before income taxes   $   624    $   493
                                                      =========  =========
</TABLE>

I - SUGEN MERGER AGREEMENT

On June 15, 1999, the company entered into an agreement to merge with SUGEN. The
merger, subject to the approval of SUGEN shareholders, is intended to be a
tax-free reorganization accounted for as a pooling-of-interests. The expected
completion of the SUGEN merger in the third quarter of 1999 will result in a
restatement of financial statements to reflect the combined entities under
pooling-of-interests accounting.


                                       10
<PAGE>   11

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


FINANCIAL REVIEW


OVERVIEW

The company achieved double-digit sales and earnings growth in the second
quarter and first half of 1999. Strong growth in U.S. pharmaceutical segment
sales coupled with improvements in the company's gross margin and effective tax
rate drove the growth in earnings. The impact of currency exchange rate
fluctuations also had a favorable impact on earnings in the second quarter and,
to a lesser extent, in the first half. Given the company's substantial research
and manufacturing base in Europe, the weakening of European currencies
translated into a positive exchange impact on earnings. The strengthening of the
yen had a similar favorable effect, offset somewhat by the unfavorable impact of
weaker Latin American currencies.

In the following discussion of consolidated results, the three-month and
six-month periods ended June 30, 1999 are compared to the corresponding periods
in 1998 unless otherwise noted. The table below provides an overview of
consolidated results in millions of U.S. dollars, except per-share data.

<TABLE>
<CAPTION>
                                    Second Quarter               Six Months
                               -----------------------      ---------------------
                                       Percent                     Percent
                                 1999  Change     1998      1999   Change     1998
                               ------  -------  ------     ------  -------  ------
<S>                            <C>     <C>      <C>        <C>     <C>      <C>
Net sales                      $1,760    6.4%   $1,654     $3,534     9.1%  $3,240
Earnings before income taxes      308   42.9       216        624    26.7      493
Net earnings                      216   47.1       146        437    30.4      335
Net earnings per common share:
  Basic                        $  .42   50.0    $  .28     $  .85    30.8   $  .65
  Diluted                      $  .41   46.4    $  .28     $  .83    29.7   $  .64
</TABLE>

When comparing operating performance for the second quarter and first half of
1999 to the same periods in 1998, one unusual item in the prior year should be
excluded. In July 1998, the company reached a settlement of $103 million in a
federal class-action lawsuit filed in 1993 on behalf of retail pharmacies. As a
result of the settlement, the company increased its litigation reserves by $61
million, resulting in an after-tax charge of $41 million or $0.08 per share in
the second quarter of 1998. The amount was recorded in selling, general and
administrative expense.

On June 15, 1999, the company entered into an agreement to merge with SUGEN,
Inc., a world leader in target-driven drug discovery and development. The
merger, subject to the approval of SUGEN shareholders, is intended to be a
tax-free reorganization accounted for as a pooling-of-interests and is expected
to strengthen the company's research and development efforts by positioning P&U
as a new challenger for leadership in the field of oncology. The expected
completion of the SUGEN merger in the third quarter of 1999 will result in a
restatement of financial statements to reflect the combined entities under
pooling-of-interests accounting. In conjunction



                                       11
<PAGE>   12

with the merger, the company also may incur certain charges during the second
half of 1999.

NET SALES

During the last two years, the company sold its nutrition and biotechnology
businesses. The following discussion excludes sales of these divested businesses
from total reported sales to facilitate year-to-year comparisons.

Consolidated sales increased 11 percent in the second quarter and 14 percent in
the first half of 1999. In the quarter, the growth was composed of an 11 percent
volume increase, a 1 percent price increase, and a 1 percent negative exchange
impact. In the first half, the growth was composed of a 12 percent volume
increase and a 2 percent price increase. Sales growth was driven by strong
performances of key products XALATAN and DETROL/DETRUSITOL as both products
continued to be launched in new markets throughout the world. Because the
current to prior-year comparisons have begun to incorporate the 1998 U.S. launch
of Detrol, management does not expect sales growth for the full year to be as
high as that achieved in the first half of 1999.

As shown in the table below, sales in the U.S. rose 21 percent in the second
quarter while sales outside the U.S. increased 6 percent. In the first six
months of 1999, U.S. sales increased 25 percent and non-U.S. sales increased 8
percent. The proportion of global sales from the U.S. continues to rise and now
represents 40 percent of total consolidated sales. In Japan, the company's
second largest market and the second largest pharmaceutical market in the world,
sales increased 29 percent in the second quarter and 26 percent year-to-date
reflecting improved performance and a favorable currency effect. Sales
performance by country in the following table is based on location of customer
and is in millions of U.S. dollars:

<TABLE>
<CAPTION>
                                Second Quarter                   Six Months
                         ----------------------------   ----------------------------
                                        % Chg.                         % Chg.
                                 Net %   Excl.                  Net %   Excl.
                          1999  Change   Ex.*    1998    1999  Change   Ex.*    1998
                         -----  ------  ------  -----   -----  ------  ------  -----
<S>                     <C>     <C>     <C>    <C>     <C>     <C>     <C>    <C>
United States           $  691   20.8%   20.8% $  572  $1,408   24.7%   24.7% $1,129
Japan                      176   29.0    15.1     137     329   25.6    13.3     262
Italy                      113    1.9     5.1     111     221    4.0     3.9     213
Germany                     87   (2.5)    0.7      89     178    2.1     1.5     174
United Kingdom              83   12.8    15.4      73     160   13.1    14.8     141
France                      68    5.6     8.9      65     142   12.3    11.8     126
Sweden                      63   (4.7)    2.9      66     129   (0.5)    3.2     130
Spain                       41    4.8     8.2      39      84   11.5    11.2      76
Rest of world              419    1.6     6.1     412     834    3.0     6.7     810
                        ------  ------  ------ ------  ------  -----   -----   -----
Total sales, excluding
   divested businesses   1,741   11.3    12.4   1,564   3,485   13.9    13.9   3,061
Divested businesses         19    n/a     n/a      90      49    n/a     n/a     179
                        ------  ------  ------ ------  ------  -----   -----  ------
Consolidated net sales  $1,760    6.4%    7.4% $1,654  $3,534    9.1     9.1  $3,240
                        ======  ======  ====== ======  ======  =====   =====  ======

</TABLE>

*Underlying growth equals percent change excluding currency exchange effects.






                                       12
<PAGE>   13

The company reports its operations within two segments as illustrated in the
table below:

<TABLE>
<CAPTION>
                                      Second Quarter               Six Months
                                 ------------------------   ------------------------
                                          Percent                   Percent
                                  1999    Change    1998     1999   Change    1998
                                 -------  -------  ------   ------  -------  ------
<S>                              <C>      <C>      <C>      <C>     <C>      <C>
Pharmaceutical segment sales     $1,663    11.7%   $1,488   $3,339    14.4%  $2,918
Nonpharmaceutical segment sales*     78     4.4        76      146     2.7      143
                                 ------   -----    ------   ------  ------   ------
Total sales,
   excluding divested businesses $1,741    11.3%   $1,564   $3,485    13.9%  $3,061
                                 ======   =====    ======   ======  ======   ======

</TABLE>

*Excludes divested businesses

The increase in pharmaceutical segment sales was driven by a 20 percent increase
in the U.S. in the second quarter and a 24 percent increase in the U.S. in the
first half. Outside the U.S., pharmaceutical segment sales grew 7 percent and 8
percent, respectively, in the second quarter and first six months. Performance
of the nonpharmaceutical segment also improved in the period-to-period
comparisons. In accordance with its previously announced strategy to focus on
its core pharmaceutical business, the company expects to complete the divestment
of its global nutrition business by the end of 1999. In July, the company
reached agreements to sell its remaining nutrition businesses in Germany and
China. Additional segment information may be found in Note H to the consolidated
financial statements.





                                       13
<PAGE>   14

PHARMACEUTICAL PRODUCT SALES

A period-to-period consolidated net sales comparison of the company's top 20
pharmaceutical segment products (including generic equivalents where applicable)
is provided in the table below.

U.S. dollars in millions

<TABLE>
<CAPTION>
                              Second Quarter                     Six Months
                     --------------------------------   ----------------------------
                                    Net                              Net
                                  Percent                          Percent
                       1999       Change       1998       1999     Change     1998
                     --------    --------    --------   --------  --------  --------
<S>                  <C>         <C>         <C>        <C>       <C>       <C>
GENOTROPIN           $   112       18.1%     $    95    $   217     26.5%   $   172
XALATAN                  111       63.7           68        212     54.7        137
CLEOCIN/DALACIN           77        2.7           75        168     14.9        146
XANAX                     73       (6.1)          77        161      5.2        153
DETROL/DETRUSITOL         86      301.4           21        150    534.6         24
MEDROL                    70       11.2           63        147     14.9        128
DEPO-PROVERA              60       (0.8)          60        126     12.7        111
CAMPTOSAR                 66       49.9           44        129     51.3         85
NICORETTE                 62       31.2           47        123     23.1        100
FRAGMIN                   51        7.3           48        103     11.3         92
PHARMORUBICIN             52       27.4           41         99     13.2         87
HEALON                    36       (0.3)          36         68     (3.7)        70
MICRONASE/GLYNASE         18      (22.9)          23         48    (12.7)        54
PROVERA                   20      (20.2)          25         47     (5.8)        50
ROGAINE/REGAINE           36       24.9           29         62      3.3         60
AZULFIDINE/SALAZOPYRIN    26       16.0           23         49     11.3         44
HALCION                   24        4.8           23         46      6.5         43
MIRAPEX/MIRAPEXIN         20       51.5           13         39     64.4         23
ADRIAMYCIN                15      (13.6)          17         33     (6.9)        35
CAVERJECT                 13      (30.8)          19         28    (31.4)        41
                     --------    --------    --------   --------  --------  --------
Total                $ 1,028       21.4%     $   847    $ 2,055     24.2%   $ 1,655
                     ========    ========    ========   ========  ========  ========
</TABLE>

DETROL/DETRUSITOL, the leading therapy for overactive bladder with symptoms of
urinary urgency, frequency and urge incontinence, led product sales growth in
the second quarter and first half of 1999. The product, launched in the U.S. in
April 1998, continues to exhibit strong growth in major markets worldwide. Sales
in the second quarter were partly impacted by increased trade purchasing in the
U.S. in advance of a price increase. In the face of new competitive threats,
market development remains the focus of the company's promotional activities to
maximize the potential of the overactive bladder market.

XALATAN, a novel therapy for glaucoma, posted double-digit growth in the second
quarter and first half of 1999 as the product continued to capture a
market-leading share of total glaucoma prescriptions. Second-quarter sales
outside the U.S. were strong, accounting for 46 percent of total sales of the
product as a result of its excellent market penetration in key European
countries including France, the United Kingdom, Spain, and Italy. In addition,
Xalatan performed well in Japan where it was launched in May. In preparation for
the launch in the world's second largest glaucoma market, the company tripled
its ophthalmology sales force in Japan.




                                       14
<PAGE>   15

Other key products achieving double-digit growth in both the second quarter and
first half of 1999 included GENOTROPIN, CAMPTOSAR, NICORETTE, PHARMORUBICIN, and
MIRAPEX/MIRAPEXIN. Sales of GENOTROPIN, a growth hormone, continued to grow in
the U.S. where the product now captures more than one-third of new patient
starts. Genotropin sales also increased in Japan due to the favorable effects of
currency and the 1998 retrieval of the product from a former licensee.
CAMPTOSAR, a treatment for metastatic colorectal cancer, continued to benefit
from the full FDA approval received in late 1998 based on improved survival data
versus standard treatment for colorectal cancer. A portion of CAMPTOSAR's growth
in the first half was also attributable to first quarter 1999 changes in trade
inventory buying patterns. The NICORETTE line of products to treat tobacco
dependency performed well largely due to strong sales of the new mint-flavored
NICORETTE gum in the U.S. introduced earlier this year. PHARMORUBICIN, an
oncology product, posted strong sales in Japan, partly due to the favorable
exchange impact of the stronger yen. MIRAPEX/MIRAPEXIN, a treatment for
Parkinson's disease, maintained its position as the leading dopamine agonist in
both new and total prescriptions in the U.S.

FRAGMIN, a low molecular weight heparin for preventing the formation of blood
clots, also achieved good growth in 1999. During the second quarter, the company
strengthened its U.S. label by obtaining FDA approval for a new indication in
unstable angina. Earlier this year, the company also received a new indication
in the U.S. in hip replacement surgery.

DEPO-PROVERA, CLEOCIN/DALACIN, and XANAX recorded higher sales in the first half
of 1999 despite relatively flat performances in the second quarter. Sales growth
of these products was influenced in part by trade inventory purchasing in the
first quarter of 1999. Sales of MEDROL were similarly affected in the first
quarter; however, MEDROL sales also benefited from the company's sole supplier
position in the U.S.

Other key product developments in the second quarter included the company's
purchase of rights to Pletal (cilostazol) and the July approvable letter from
the FDA for Vestra, a new antidepressant (reboxetine). PLETAL, launched in May
1999, is used to reduce symptoms associated with intermittent claudication, a
symptom of peripheral arterial disease that occurs in the lower extremities.
Vestra is currently marketed by Pharmacia & Upjohn as EDRONAX and NOREBOX
outside the United States. The company will work with the FDA to secure final
approval of VESTRA and anticipates a launch in the U.S. during the fourth
quarter.

COSTS, EXPENSES AND OTHER

In 1999, the company presented its consolidated statement of earnings for the
first time in a "single-step" format and, accordingly, reclassifications of
prior year amounts have been made to conform to this presentation. Consolidated
expenses, stated as a percentage of net sales, are provided in the table below.

<TABLE>
<CAPTION>
                                      Second Quarter             Six Months
                                   1999          1998        1999          1998
                                 --------      --------    --------      --------
<S>                              <C>           <C>         <C>           <C>
Cost of products sold              25.4%         29.8%       26.6%         30.2%
Research and development           18.4          17.9        18.4          17.7
Selling, general & administrative  38.5          42.3        38.1          39.1
SG&A - excluding an unusual item   38.5          38.6        38.1          37.2
</TABLE>




                                       15
<PAGE>   16

A favorable comparison in product and business mix continued to drive cost of
products sold lower as a percentage of sales. Newer products, representing an
increasing percentage of the company's sales, contributed a higher gross margin
than older products in vigorous price competition. The divestment of the
lower-margin nutrition business also contributed to the improvement. Management
expects gross margin improvement for the full year 1999 to be less than that
achieved in the first half of the year.

Selling, general and administrative (SG&A) expense remained relatively constant
for the second quarter as a percentage of sales, excluding the previously
mentioned 1998 charge of $61 million for the retail pharmacy settlement. In the
first half, SG&A expense rose one percentage point to 38 percent of sales, on
the same basis. The increase reflected sales force expansions in the U.S.,
Japan, and Germany as well as increased promotional expense, particularly for
DETROL/DETRUSITOL.

Research and development (R&D) expense rose modestly as a percentage of sales in
both the second quarter and first half of 1999 due to an increased number of
external research collaborations and Phase IV studies. In addition, clinical
development spending has increased on ZYVOX (linezolid), a new antibiotic.
Management expects to file for approval of ZYVOX, now in Phase III clinical
trials, by the end of 1999 in both the U.S. and Europe.

Pharmaceutical segment profits were $365 million in the second quarter of 1999
and $731 in the first half, up from $293 million and $599 million, respectively,
in the prior year, largely the result of higher U.S. sales levels and success in
cost containment measures. Nonpharmaceutical segment profits fell to $54 million
in the first six months of 1999 from $67 million for the same period in 1998, a
decline attributable to the divestment of the nutrition business.

Net interest income fell in 1999 primarily due to a combination of lower
investment balances and lower interest rates. The change in "All other, net" in
the current year is primarily attributable to decreases in alliance income and
earnings from equity affiliates. The estimated annual effective tax rate
improved from 32 percent in 1998 to 30 percent in 1999 as a result of increased
earnings in jurisdictions with lower tax rates.

TURNAROUND

To rationalize infrastructure, establish a global headquarters, and eliminate
duplicate resources in manufacturing, administration, and research and
development, the company implemented a global turnaround program in 1997. At
June 30, 1999, the remaining accrual balance was $94 million. Cash spending in
the first six months of 1999 relating to restructuring was primarily for
employee separation costs and approximated $37 million, down from the same
period in 1998 when spending was $51 million.

The company also incurred restructuring-related charges in 1999 and 1998. These
charges, while not included in restructuring, are one-time costs associated with
the turnaround program and are recorded on the consolidated statements of
earnings in cost of products sold, R&D, and SG&A expense line items. These costs
include relocation expenses to establish the global headquarters in New Jersey
and registration and validation costs associated with the company's
manufacturing rationalization program. Management expects to record additional
restructuring-



                                       16
<PAGE>   17

related expenses, primarily relocation expenses, in the second half of 1999.
Relocation costs are expected to range between $55 million and $75 million for
the full year.

COMPREHENSIVE INCOME

Comprehensive income equals net earnings plus other comprehensive income (OCI).
OCI includes currency translation adjustments, unrealized gains and losses on
available-for-sale securities, and minimum pension liability adjustments. Total
comprehensive income for the three months ended June 30, 1999, and June 30,
1998, was $150 million and $159 million, respectively. For the first six months,
total comprehensive income was $177 million in 1999 and $224 million in 1998.
The difference between net earnings and comprehensive income in both years was
largely due to unfavorable currency translation adjustments reflecting the
greater strength of the dollar against most major currencies at June 30 as
compared to the previous December 31.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
                                                   June 30,      December 31,
                                                     1999            1998
                                                 ------------    ------------
<S>                                              <C>             <C>
Working capital (U.S. dollars in millions)          $1,273          $1,681
Current ratio                                        1.42:1          1.59:1
Debt to total capitalization                         18.3%           13.0%
</TABLE>

The company's working capital and current ratio decreased at the end of the
second quarter as compared to year-end due to a decrease in short-term
investments coupled with an increase in short-term debt. These changes also
caused the increase in the percentage of debt to total capitalization as well as
the decrease in net financial assets, as shown below. Significant cash payments
in the first half of 1999, including expenditures for the stock repurchase
program, purchases of intangibles, and settlement of the retail pharmacy
lawsuit, created a need for higher short-term debt levels.

<TABLE>
<CAPTION>
                                                   June 30,      December 31,
                                                     1999            1998
                                                 ------------    ------------
<S>                                              <C>             <C>
Cash, equivalents and investments                   $1,443          $1,663
Short-term and long-term debt                        1,210             840
                                                    -------         -------
Net financial assets                                $  233          $  823
                                                    =======         =======
</TABLE>

Net cash provided by operations for the first six months of 1999 decreased to
$185 million from $234 million for the same period in 1998. Higher 1999 net
earnings were more than offset by large cash expenditures during the first half
of the year including the previously mentioned lawsuit settlement payment.
Within financing activities, a significant use of cash in 1999 was the purchase
of company stock under the stock repurchase program. Within investment
activities, purchases of intangibles resulted in a major use of cash in 1999. In
both years, expenditures for the quarterly dividend and property, plant, and
equipment (capital) also represented primary uses of cash. Capital expenditures
in 1999 mainly relate to expansion and improvement of the headquarters in New
Jersey and research and manufacturing facilities in Ireland, Puerto Rico, and
Sweden.



                                       17
<PAGE>   18

The company's future cash provided by operations and borrowing capacity are
expected to cover normal operating cash flow needs, planned capital acquisitions
and dividend payments for the foreseeable future.

LITIGATION

Various suits and claims arising in the ordinary course of business, primarily
for personal injury alleged to have been caused by the use of the company's
products, are pending against the company and its subsidiaries. The company also
is involved in several administrative and judicial proceedings relating to
environmental concerns, including actions brought by the U.S. Environmental
Protection Agency (EPA) and state environmental agencies for remedial cleanup at
approximately 50 sites.

Based on information currently available and the company's experience with
lawsuits of the nature of those currently filed or anticipated to be filed which
have resulted from business activities to date, the amounts accrued for product
and environmental liabilities are considered adequate. Although the company
cannot predict and cannot make assurances with respect to the outcome of
individual lawsuits, the ultimate liability should not have a material effect on
its consolidated financial position. Unless there is a significant deviation
from the historical pattern of resolution of such issues, the ultimate liability
should not have a material adverse effect on the company's results of operations
or liquidity.

The company has been a party, along with many other U.S. drug manufacturers and
wholesalers, in numerous related federal and state civil antitrust lawsuits
brought by U.S. independent and chain retail pharmacies and consumers. These
suits claim violations of antitrust and pricing laws as a result of the
defendants providing discounts and rebates to allegedly favored managed care
customers that were not offered to the plaintiffs. Several of the suits are
class actions. The company announced in July 1998 that it has reached a
settlement with plaintiffs in the federal class action cases that had been
consolidated in federal court in Chicago, Illinois. The company believes that
any potential remaining liability above amounts accrued will not have a material
adverse effect on the company's consolidated financial position, its results of
operations, or liquidity. Further discussion of current litigation matters is
provided in Note D to the consolidated financial statements.

CONTINGENT LIABILITIES

The company's estimate of the ultimate cost to be incurred in connection with
environmental situations could change due to uncertainties at many sites with
respect to potential cleanup remedies, the estimated cost of cleanup, and the
company's share of a site's cost. With regard to its discontinued industrial
chemical facility in North Haven, Connecticut, the company may soon be required
to submit a corrective measures study report to the EPA. As the corrective
action process progresses, it may become appropriate to reevaluate the existing
reserves designated for remediation in light of changing circumstances. It is
reasonably possible that a material increase in accrued liabilities will be
required but it is not possible to determine what, if any, exposure exists at
this time.



                                       18
<PAGE>   19

YEAR 2000 PROGRAM

The company's global program to address the year 2000 (Y2K) date recognition
problem continues to make good progress towards its ultimate goal to ensure the
millennium event does not have a material adverse effect on the company's
operations. The project, launched in early 1997 and managed by a global team
consisting of technical, functional and business leaders, is led by a program
director who reports to the chief information officer and an executive
operations group. Hundreds of employees worldwide are involved in this effort.

The program encompasses three distinct efforts: (1) assessment and remediation
of information technology (IT) systems; (2) assessment and remediation of
embedded systems; and (3) assessment of high-level business risks and
development of contingency plans to address those risks. Status reports of the
global program's progress have been regularly provided to the company's board of
directors since the inception of the program. Assessment, remediation, and
testing for approximately 95 percent of IT and embedded systems have been
completed as of June 30, 1999. Completion of remaining IT systems is expected
during the third quarter. Completion of the remaining embedded systems will take
place during regularly scheduled shutdown periods throughout the second half.
Also during the second half of 1999, integration testing will be performed. This
testing is a more comprehensive exercise to ensure critical systems will work
together. The high-level business risk assessment is completed and development
of the resulting contingency plans is well underway, especially for those plans
involving steps to be taken during 1999.

An independent assessment of the program was completed in April 1999. The report
concluded that the company should reach a level of "operational sustainability"
through the year 2000. As defined by the independent assessor, achieving this
level of operational sustainability provides assurance that an organization has
eliminated risk of revenue-interrupting Y2K failures. The company's global
program was assessed as "very good" in comparison to the independent assessor's
best practices model.

Much of the Y2K effort is being supported by a reallocation of existing
resources. The company anticipates total spending of $150 million between 1997
and 2000 largely on replacement of applications that, for reasons other than Y2K
non-compliance, had been previously selected for replacement. Many of the
replacement applications, such as the new SAP financial systems, offer improved
functionality and commonality over predecessor systems and, at the same time,
resolve the Y2K problem. To date, the company estimates actual spending of
approximately $125 million of the total projected costs.

There are many factors beyond the company's control that could cause the Y2K
problem to seriously disrupt operations and the company can provide no assurance
that these factors will not cause it to experience business disruptions. For
example, a widespread failure in the utilities industry could severely interrupt
or even halt the company's operations. There are other risks, however, for which
the company may prepare and, in so doing, reduce its exposure. These risks
include a disruption in the supply of product with particular emphasis on
failures of raw material suppliers, third-party manufacturers, and external
distribution channels; internal infrastructure failures such as utilities,
communications, internal IT services and integrated IT systems; non-U.S.
government failures, especially as they impact import and export activity; and
major customer failures or interruptions. The scope



                                       19
<PAGE>   20

of the company's efforts regarding these risks is limited to key products, key
markets, critical suppliers, and major customers.

To reduce the impact of these failures were they to occur, the company is
developing contingency plans for the most critical business processes. These
plans represent a diversity of approaches and include maintaining higher
inventory levels, developing secondary sources for strategic product chain
links, and documenting back-up procedures and manual work-arounds. The ongoing
assessment of critical external partners also plays an important role in
contingency planning with appropriate actions mapped out at predetermined
decision points depending on the outcome. The company has assessed the readiness
of its major suppliers, third-party manufacturers, and customers and has audited
critical suppliers and third-party manufacturers in an attempt to calculate, to
the extent possible, where the company faces the greatest risk of failure. In
addition, management implemented a company-wide program to strictly control and
limit changes to major IT systems during the latter half of 1999 to reduce
potential additional exposures and to concentrate IT resources on integration
testing and other Y2K-related efforts. Neither this program nor the previously
mentioned reallocation of resources will have an adverse effect on non-Y2K
mission-critical projects. Barring critical failures arising from factors beyond
the company's direct control, management believes that by meeting the objectives
of its Y2K program, the date recognition problem should not have a material
adverse effect on the company's consolidated financial position, its results of
operations, or liquidity.

OTHER

In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities". This statement requires companies to record derivatives on
the balance sheet as assets and liabilities measured at fair value. The
accounting treatment of gains and losses resulting from changes in the value of
derivatives depends on the use of the derivative and whether it qualifies for
hedge accounting. The company expects to adopt SFAS No. 133 no earlier than
January 1, 2000, and is currently assessing the impact of adoption on its
financial position, results of operations, and liquidity.

FORWARD-LOOKING INFORMATION

Certain statements contained in this report, such as statements concerning the
company's anticipated financial or product performance, its ability to pay
dividends, and other non-historical facts, are "forward-looking statements" (as
such term is defined in the Private Securities Litigation Reform Act of 1995).
Since these statements are based on factors that involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Such factors include, among others:
sales and earnings projections; the effectiveness of and expense estimates
related to future projects including restructuring plans, the Year 2000 date
recognition problem, and conversion to the euro; management's ability to make
further progress under the company's global turnaround program; the company's
ability to successfully market new and existing products in new and existing
markets; the success of the company's research and development activities and
the speed with which regulatory authorizations and product rollouts may be
achieved; fluctuations in currency exchange rates; the effects of the company's
accounting policies and general changes in generally accepted accounting
practices; the company's exposure to product



                                       20
<PAGE>   21

liability lawsuits and contingencies related to actual or alleged environmental
contamination; the company's exposure to antitrust lawsuits; social, legal and
political developments, especially those relating to health care reform and
product liabilities; general economic and business conditions; the company's
ability to attract and retain current management and other employees of the
company; and other risks and factors detailed in the company's other Securities
and Exchange Commission filings, including its Proxy Statement and Annual Report
on Form 10-K for the year ended December 31, 1998.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There are no material changes from the disclosures in Form 10-K filed with the
Securities and Exchange Commission on December 31, 1998.






                                       21

<PAGE>   22

PART II - OTHER INFORMATION




Item 6.  Exhibits and Reports on Form 8-K.

         (a)(i)   Exhibit A - Independent Accountant's Report (page 24).

         (a)(ii)  Exhibit 12 - Ratio of Earnings to Fixed Charges (page 25).

         (a)(iii) Exhibit 15 - Awareness of PricewaterhouseCoopers (page 26).

         (a)(iv)  Exhibit 27 - Financial Data Schedule (EDGAR filing only).

         (b)      Form 8-K - No reports on Form 8-K were filed during the
                  quarter ended June 30, 1999.











                                       22
<PAGE>   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.



                                        PHARMACIA & UPJOHN, INC.
                                        ------------------------
                                        (Registrant)


DATE:  August 13, 1999                  /S/C. J. Coughlin
                                        C. J. Coughlin
                                        Executive Vice President
                                        and Chief Financial Officer



DATE:  August 13, 1999                  /S/R. T. Collier
                                        R. T. Collier
                                        Senior Vice President
                                        and General Counsel












                                       23
<PAGE>   24

Exhibit A

With respect to the unaudited consolidated financial information of Pharmacia &
Upjohn for each of the three-month and six-month periods ended June 30, 1999
and 1998, PricewaterhouseCoopers LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated July 23, 1999 appearing below,
states that they did not audit and they do not express an opinion on that
unaudited consolidated financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. PricewaterhouseCoopers LLP
is not subject to the liability provisions of Section 11 of the Securities Act
of 1933 for their report on the unaudited consolidated financial information
because that report is not a "report" or "part" of the registration statement
prepared or certified by PricewaterhouseCoopers LLP within the meaning of
Sections 7 and 11 of the Act.


Independent Accountant's Report

To the Shareholders and Board of Directors of Pharmacia & Upjohn, Inc.

We have reviewed the condensed consolidated balance sheets of Pharmacia &
Upjohn, Inc., and its subsidiaries (the "Company") as of June 30, 1999, and the
related consolidated statements of earnings for each of the three-month and
six-month periods ended June 30, 1999 and 1998 and condensed consolidated
statements of cash flows for the six-month periods ended June 30, 1999 and 1998.
These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.

We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1998, and the related
consolidated statement of earnings, shareholders' equity, and cash flows for the
year then ended (not presented herein), and in our report dated February 10,
1999 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1998, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.


PricewaterhouseCoopers LLP

Florham Park, New Jersey
July 23, 1999


                                       24

<PAGE>   25
                               INDEX TO EXHIBITS



EXHIBIT NO.                   DESCRIPTION
-----------                   -----------

Exhibit 12                    Ratio of Earnings to Fixed Charges

Exhibit 15                    Awareness of PricewaterhouseCoopers

Exhibit 27                    Financial Data Schedule