# Research and Development

Research and development expenses amounted to $1,255 million in 1978 and $1,142 million in 1977.

## Retirement Plans

The company and its U.S. subsidiaries have trustee, non-contributory retirement plans, covering substantially all regular and part-time employees, for which accrued costs are funded. At December 31, 1978, there were 11,013 individuals receiving benefits under the plans. Most subsidiaries outside the United States have retirement plans under which funds are deposited with trustees, reserves are provided, or annuities are purchased under group contracts. The cost of all plans totaled $877 million for the year 1978, compared with $704 million for the year 1977. At December 31, 1978, unfunded or unaudited prior service costs under all plans amounted to approximately $876 million.

As of December 31, 1978, the actuarially computed value of retirement benefits vested under the terms of certain plans, which included a significant portion of the above-mentioned prior service costs, exceeded the market value of fund assets and reserves of such plans by approximately $616 million.

## Rental Expense and Lease Commitments

Rental expense amounted to $278 million in 1978 and $239 million in 1977. Minimum rental commitments, in millions of dollars, under non-cancellable leases for 1979 and thereafter are as follows: 1979, $255; 1980, $197; 1981, $142; 1982, $98; 1983, $74; and after 1983, $287. These leases are principally for the rental of office premises. Many of the leases contain renewal options and many provide for the payment of a proportionate share of maintenance, insurance, and taxes in addition to the above minimum annual rentals. All of the above amounts exclude minor amounts of sublease income.

## Notes and Accounts Receivable

At December 31, 1978, notes and accounts receivable include $803 million of installment receivables maturing after one year, net of unearned interest. Of this amount, 57% matures in 1980 and the balance in decreasing amounts through 1983.

### Taxes

|  | 1978 | 1977 |
| --- | --- | --- |
| Provision for U.S. Federal and non-U.S. income taxes | $2,687,000 | $2,373,000 |
| Real estate, personal property, state and local franchise (including state income taxes of $165 million in 1978, and $163 million in 1977), social security and other taxes | 1,185,000 | 993,000 |
| Total | $3,872,000 | $3,366,000 |

The portion of the provision for U.S. Federal and non-U.S. income taxes applicable to U.S. operations was $1,366 million in 1978, and $1,279 million in 1977, and to non-U.S. operations was $1,321 million in 1978, and $1,094 million in 1977.

### Marketable Securities

|  | December 31, 1978 | December 31, 1977 |
| --- | --- | --- |
| U.S. Treasury securities | $1,187,566 | $2,721,832 |
| U.S. Federal agency securities | 65,638 | 229,746 |
| State and municipal securities | 70,933 | 116,651 |
| Time deposits and other bank obligations | 2,003,937 | 1,709,957 |
| Corporate bonds, notes and other fixed-term obligations | 428,813 | 376,562 |
| Total | $3,756,887 | $5,154,738 |
| Market value | $3,767,225 | $5,173,642 |

### Plant, Rental Machines and Other Property

|  | December 31, 1978 | December 31, 1977 |
| --- | --- | --- |
| Land and land improvements | $496,714 | $414,610 |
| Buildings | 2,950,116 | 2,570,846 |
| Factory, laboratory and office equipment | 3,988,760 | 3,356,371 |
| Less–Accumulated depreciation | 7,435,590 | 6,341,827 |
| 3,211,983 | 2,836,718 |
| Rental machines and parts | 4,223,607 | 3,505,109 |
| Less–Accumulated depreciation | 11,739,581 | 10,728,740 |
| 6,660,960 | 6,344,523 |
| Total | 5,078,621 | 4,384,217 |
| $9,302,228 | $7,889,326 |

Rental machines and parts include machines installed with IBM in the amount of $1,359 million at December 31, 1978 and $1,198 million at December 31, 1977. Accumulated depreciation for these machines was $1,108 million at December 31, 1978 and $959 million at December 31, 1977. Depreciation of plant, rental machines and other property charged to costs and expenses amounted to $1,824 million in 1978 and $1,806 million in 1977.