-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GPlk+DFcXELvP1y8pPwUPRm9L92a0anp7oazQna7qCxoFD+l2iiG6EGC7MQLbMx9 ewcmthskHttKYL8IyLnE3w== 0000310158-97-000016.txt : 19970811 0000310158-97-000016.hdr.sgml : 19970811 ACCESSION NUMBER: 0000310158-97-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970808 SROS: BSE SROS: CSE SROS: CSX SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHERING PLOUGH CORP CENTRAL INDEX KEY: 0000310158 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221918501 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06571 FILM NUMBER: 97654418 BUSINESS ADDRESS: STREET 1: ONE GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940-1000 BUSINESS PHONE: 9738227000 10-Q 1 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 June 30, 1997 Commission file number 1-6571 SCHERING-PLOUGH CORPORATION Incorporated in New Jersey 22-1918501 One Giralda Farms (I.R.S. Employer Identification No.) Madison, N.J. 07940-1000 (201) 822-7000 (telephone number) 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, and (2) has been subject to such filing requirements for the past 90 days. YES X NO Common Shares Outstanding as of June 30, 1997: 732,649,197 PART I. - FINANCIAL INFORMATION Item 1. Financial Statements SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) (Dollars in millions, except per share figures)
Three Months Six Months Ended Ended June 30 June 30 1997 1996 1997 1996 Sales . . . . . . . . . . . . . $1,719.8 $1,476.6 $3,287.9 $2,859.3 Costs and expenses: Cost of sales. . . . . . . . . 329.9 287.0 619.2 549.7 Selling, general and administrative. . . . . . 679.7 578.6 1,273.2 1,081.9 Research and development . . . 208.7 177.9 387.9 340.8 Other, net . . . . . . . . . . 7.4 13.1 16.4 34.3 1,225.7 1,056.6 2,296.7 2,006.7 Income before income taxes. . . 494.1 420.0 991.2 852.6 Income taxes. . . . . . . . . . 121.0 102.9 242.8 208.9 Net Income. . . . . . . . . . . 373.1 317.1 748.4 643.7 Earnings per common share . . . $ .51 $ .43 $ 1.02 $ .88 Dividends per common share. . . $ .19 $ .165 $ .355 $ .31 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in millions, except per share figures)
June 30, December 31, 1997 1996 Assets Cash and cash equivalents . . . . . . . . $ 699.2 $ 535.1 Accounts receivable, net. . . . . . . . . 834.6 542.0 Inventories . . . . . . . . . . . . . . . 729.0 594.1 Prepaid expenses, deferred income taxes and other current assets . . . . . 841.2 693.4 Total current assets. . . . . . . . . 3,104.0 2,364.6 Property, plant and equipment . . . . . . 3,570.2 3,362.5 Less accumulated depreciation . . . . . . 1,158.7 1,116.2 Property, net . . . . . . . . . . . . 2,411.5 2,246.3 Other assets. . . . . . . . . . . . . . . 1,021.0 787.2 $ 6,536.5 $ 5,398.1 Liabilities and Shareholders' Equity Accounts payable. . . . . . . . . . . . . $ 586.3 $ 560.6 Short-term borrowings and current portion of long-term debt. . . . . . . . 1,051.5 855.1 Other accrued liabilities . . . . . . . . 1,535.7 1,183.4 Total current liabilities . . . . . . 3,173.5 2,599.1 Long-term debt. . . . . . . . . . . . . . 64.7 46.4 Other long-term liabilities . . . . . . . 746.5 692.7 Shareholders' Equity: Preferred shares - $1 par value each; issued - none. . . . . . . . . . . - - Common shares - $1 par value each; shares issued: 1997 - 1,014,753,458 1996 - 507,368,360 . . . . . . . . . . . 1,014.8 507.4 Paid-in capital . . . . . . . . . . . . . 17.2 172.3 Retained earnings . . . . . . . . . . . . 5,259.4 5,080.6 Foreign currency translation adjustment and other . . . . . . . . . . (179.1) (140.6) Total . . . . . . . . . . . . . . . . 6,112.3 5,619.7 Less treasury shares, at cost - 1997, 282,104,261 shares; 1996, 142,001,799 shares . . . . . . . . 3,560.5 3,559.8 Total shareholders' equity. . . . . . 2,551.8 2,059.9 $ 6,536.5 $ 5,398.1 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (UNAUDITED) (Dollars in millions)
1997 1996 Operating Activities: Net Income. . . . . . . . . . . . . . . . $ 748.4 $ 643.7 Depreciation and amortization . . . . . . 95.4 84.2 Accounts receivable . . . . . . . . . . . (177.8) (84.2) Inventories . . . . . . . . . . . . . . . (18.9) (45.9) Prepaid expenses and other assets . . . . (114.7) (115.9) Accounts payable and other liabilities . 187.2 194.2 Net cash provided by operating activities 719.6 676.1 Investing Activities: Purchase of business, net of cash acquired . . . . . . . . . . . . . . . . (314.5) - Capital expenditures. . . . . . . . . . . (126.7) (125.9) Proceeds from sales of investments. . . . 34.2 .6 Purchases of investments. . . . . . . . . (79.2) (15.5) Other, net. . . . . . . . . . . . . . . . (12.5) (1.1) Net cash used for investing activities . . . . . . . . . . . . . . . (498.7) (141.9) Financing Activities: Short-term borrowings, net. . . . . . . . 163.9 (59.1) Repayment of long-term debt . . . . . . . - (100.0) Common shares repurchased . . . . . . . . (2.6) (6.2) Dividends paid to common shareholders . . (259.7) (227.8) Other equity transactions, net. . . . . . 42.9 35.6 Net cash used for financing activities . . . . . . . . . . . . . . . (55.5) (357.5) Effect of exchange rates on cash and cash equivalents. . . . . . . . . . . . . (1.3) (.5) Net increase in cash and cash equivalents . 164.1 176.2 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . 535.1 321.4 Cash and cash equivalents, end of period . $ 699.2 $ 497.6 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in millions, except per share figures) Basis of Presentation The unaudited financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The statements should be read in conjunction with the accounting policies and notes to consolidated financial statements included in the Company's 1996 Annual Report on Form 10-K. In the opinion of management, the financial statements reflect all adjustments necessary for a fair statement of the operations for the interim periods presented. Accounting Policies - Derivatives The following disclosures reflect the additional accounting policy disclosures required by the SEC's January 1997 release regarding derivatives and financial instruments. The Company does not enter into derivatives for speculation or trading purposes. The only derivatives currently used by the Company for hedging purposes are foreign currency swap contracts initiated in the 1980's. These contracts are designated as hedges of the Company's net investment in Japan, and are deemed effective as a hedge when the related translation gain or loss equals or exceeds the after tax gain or loss on the contracts. If all or any portion of the contracts are not effective as a hedge, the related gain or loss is recorded in income. Cash flows upon settlement of these contracts are classified as investing activities. The Company has used interest rate swap contracts for international cash management purposes. Interest rate swaps are recorded at market value. Changes in market value during the period are recorded in earnings. Annual net cash flows for payments and receipts under the contracts are not material. The net asset or liability under each interest rate swap is recorded in other current assets or other accrued liabilities, as applicable. Earnings Per Common Share Earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Shares issuable through the exercise of stock options and warrants and under deferred delivery agreements are not considered in the calculation, as they do not have a material effect on the determination of earnings per common share. The weighted-average number of shares used in the computation of earnings per common share for the six months ended June 30, 1997 and 1996 were 731,736,000 and 734,630,000, respectively. On April 22, 1997, the Board of Directors of the Company authorized a 2-for-1 stock split, and voted to increase the number of authorized common shares from 600 million to 1.2 billion. Distribution of the split shares was made on June 3, 1997, to shareholders of record at the close of business on May 2, 1997. The per share amounts included in these consolidated financial statements reflect the stock split. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". The new standard revises certain methodology and disclosure requirements for reporting earnings per common share. The new standard will require the reporting of two earnings per share figures on the face of income statements: basic earnings per share and diluted earnings per share. SFAS No. 128 must be adopted in the fourth quarter of 1997 with earlier adoption prohibited. Basic earnings per share, for the Company, is expected to be the same as reported earnings per share. Diluted earnings per share is expected to be substantially the same as fully diluted earnings per share reported in an Exhibit to the Company's quarterly Form 10-Q's and annual Form 10-K. Share Purchase Rights In June 1997, the Board of Directors of the Company approved the redemption of the Company's outstanding Preferred Share Purchase Rights at the redemption price of $.00125 per right, effective July 10, 1997. The Board also declared a dividend distribution of one new Preferred Share Purchase Right on each outstanding share of Schering-Plough common stock to replace the rights being redeemed. The 1997 rights will be exercisable only if a person or group acquires 20 percent or more of the Company's common stock or announces a tender offer which, if completed, would result in ownership by a person or group of 20 percent or more of the Company's common stock. Should a person acquire 20 percent or more of the Company's outstanding common stock through a merger or other business combination transaction, each right will entitle its holder (other than such acquirer) to purchase common shares of either Schering-Plough or the acquirer, as applicable, having a market value of twice the exercise price of the right. The exercise price is $200.00 for each right. Following the acquisition by a person or group of beneficial ownership of 20 percent or more but less than 50 percent of the Company's common stock, the Board of Directors may call for the exchange of the rights (other than rights owned by such acquirer), in whole or in part, for the common stock at an exchange ratio of one for one, or one one-hundredth of a share of the Junior Participating Preferred Stock per right. Also, prior to the acquisition by a person or group of beneficial ownership of 20 percent or more of the Company's common stock, the rights are redeemable for 1 cent per right at the option of the Board of Directors. The new rights will expire in July, 2007 unless earlier redeemed. The Board of Directors is also authorized to reduce the 20 percent thresholds referred to above to not less than 10 percent. Acquisition On June 30, 1997 the Company acquired the worldwide animal health business of Mallinckrodt Inc. for approximately $490, including the assumption of debt and direct costs of the acquisition. The acquisition was recorded under the purchase method of accounting. The June 30, 1997 balance sheet reflects a preliminary allocation of the purchase price pending the completion of fair value studies of individual assets acquired. The results of operations of the purchased animal health business will be included in the Company's statement of consolidated income beginning in the third quarter of 1997. Other assets include net intangible assets totaling $465.1 and $296.8 at June 30, 1997 and December 31, 1996, respectively; the increase is primarily due to the acquisition of the worldwide animal health business of Mallinckrodt Inc. Pro forma results of the Company, assuming the acquisition had been made at the beginning of each period presented, would not be materially different from the results reported. Inventories Inventories consisted of: June 30, December 31, 1997 1996 Finished products . . . . . . . $ 362.1 $ 296.7 Goods in process. . . . . . . . 215.0 173.0 Raw materials and supplies. . . 151.9 124.4 Total inventories . . . . . . $ 729.0 $ 594.1 Sales Segment sales for the six months ended June 30, 1997 and 1996 were as follows: 1997 1996 Pharmaceutical products . . . . $2,910.5 $2,504.2 Health care products. . . . . . 377.4 355.1 Consolidated sales. . . . . . $3,287.9 $2,859.3 Legal and Environmental Matters The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including environmental matters and product liability cases. The recorded liabilities for these matters at June 30, 1997 were not material. Management believes that, except for the matters discussed in the following paragraph, it is remote that any material liability in excess of the amounts accrued will be incurred. The Company is a defendant in more than 160 antitrust actions commenced in state and federal courts by independent retail pharmacies, chain retail pharmacies and consumers. The plaintiffs allege price discrimination and/or conspiracy between the Company and other defendants to restrain trade by jointly refusing to sell prescription drugs at discounted prices to the plaintiffs. One of the federal cases is a class action on behalf of approximately two-thirds of all retail pharmacies in the United States alleging a price-fixing conspiracy. The Company has agreed to settle the federal class action for a total of $22.1 payable over three years. The settlement provides, among other things, that the Company shall not refuse to grant discounts on brand-name prescription drugs to a retailer based solely on its status as a retailer and that, to the extent a retailer can demonstrate its ability to affect market share of a Company brand name prescription drug in the same manner as a managed care organization with which the retailer competes, it will be entitled to negotiate similar incentives subject to the rights, obligations, exemptions and defenses of the Robinson- Patman Act and other laws and regulations. The District Court approved the settlement of the federal class action on June 21, 1996. In early July 1996, the Seventh Circuit Court of Appeals agreed to review before trial the District Court's denial of defendants' summary judgment motion seeking dismissal of all claims by indirect purchasers of pharmaceutical products in all remaining cases before the District Court. In addition, the Seventh Circuit Court of Appeals will hear an appeal by the plaintiffs from the grant of summary judgment to the wholesaler defendants. In June 1997, the Seventh Circuit Court of Appeals dismissed an appeal by certain class members from the approval by the settlement by the District Court and a motion for rehearing was filed. In April 1997, certain of the plaintiffs in the federal class action commenced another purported class action in Federal District Court in Illinois against the Company and the other defendants who settled the previous federal class action. The complaint alleges that the defendants conspired not to implement the settlement commitments following the settlement discussed above. The complaint seeks solely injunctive relief and the plaintiffs have moved to have the District Court set a date for a hearing on a request for a preliminary injunction. Four of the state antitrust cases have been certified as class actions. Two are class actions on behalf of certain retail pharmacies in California and Wisconsin, and the other two are class actions in California and the District of Columbia, on behalf of certain consumers of prescription medicine. Plaintiffs seek treble damages in an unspecified amount and an injunction against the allegedly unlawful conduct. The Company believes that all the antitrust actions are without merit and is defending itself vigorously against all such claims. New Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Both standards for the Company are effective beginning in 1998. SFAS No. 130 will require the Company to add the reporting of Comprehensive Income to its financial statements. Under SFAS No. 131 the Company will continue to report information for its pharmaceutical and health care businesses. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - three and six months ended June 30, 1997 compared with the corresponding periods in 1996. Sales Consolidated sales for the second quarter advanced $243.2 million or 16 percent compared with the same period in 1996. For the six months, sales rose $428.6 million or 15 percent over 1996. Excluding the effect of foreign currency exchange rate fluctuations, consolidated sales grew 19 percent in the quarter and 18 percent for the six month period. This performance reflects worldwide sales of the CLARITIN brand of nonsedating antihistamines of $536 million and $889 million for the quarter and first half, respectively, compared with $347 million and $584 million for the corresponding periods in 1996. Domestic prescription pharmaceutical sales increased 29 percent for the 1997 second quarter and 25 percent for the six-month period. Sales of allergy/respiratory products advanced 29 percent in the quarter and 26 percent for the first half, due to continued strong growth of the CLARITIN brand. Sales of VANCENASE allergy products declined in the quarter due to the first quarter trade stock-in of the new once-daily version. For the six month period sales of VANCENASE grew. Sales of VANCERIL asthma products advanced in both periods reflecting the first quarter launch of a new "Double Strength". The domestic allergy/respiratory sales gain reflects a 25 percent decline in sales of the PROVENTIL (albuterol) line of asthma products for the quarter, and a 36 percent decline for the first half, due to increased generic competition. Sales of the PROVENTIL line totaled $67 million for the quarter and $132 million for the six months, with metered-dose inhalers contributing over 50 percent. The PROVENTIL line has been subject to generic competition, and in December 1995 generic metered-dose inhalers entered the market. In response, the Company's generic pharmaceutical marketing subsidiary, Warrick Pharmaceuticals, launched its generic inhaler in December 1995. In December 1996, the Company began marketing PROVENTIL HFA, a new metered-dose inhaler that uses an advanced delivery system and a propellant free of ozone-damaging chlorofluorocarbons. Competition from generic metered-dose inhalers will, however, continue to negatively affect future sales and profitability of the PROVENTIL (albuterol) line of asthma products. U.S. sales of cardiovascular products rose 18 percent in the quarter and 17 percent for the six months, reflecting market share gains for IMDUR, a once-daily oral nitrate for angina. Domestic sales of anti-infective and anticancer products rose 37 percent in the quarter and 14 percent for the six-month period, primarily due to increased utilization of INTRON A, the Company's alpha interferon anticancer and antiviral agent for malignant melanoma and hepatitis C. Both periods, however, were negatively affected by lower sales of EULEXIN, a prostate cancer treatment, due to branded competition. U.S. sales of dermatological products increased 14 percent for the quarter and 6 percent for the six months, primarily due to higher sales of LOTRISONE, an antifungal/anti-inflammatory cream, and ELOCON, a mid-potency topical corticosteroid. International ethical pharmaceutical product sales increased 5 percent for the second quarter and 6 percent for the six-month period. Excluding the impact of foreign currency exchange rate fluctuations, sales would have risen 12 percent in both periods. Sales of allergy/respiratory products advanced 16 percent for the quarter and 19 percent for the first half, led by CLARITIN in most world markets. International dermatological product sales advanced 9 percent in the quarter and 7 percent for the six-month period, primarily reflecting gains for ELOCON. Cardiovascular product sales grew 15 percent for the second quarter and 9 percent for the six months, led by higher sales of NITRO-DUR. International sales of anti-infective and anticancer products declined 2 percent in the second quarter but rose 4 percent for the six months. Both periods were negatively impacted by lower EULEXIN sales due to generic and branded competition in Europe. While sales of INTRON A were flat in the quarter, growth was recorded for the six-month period. International sales, in both periods, also benefited from higher sales of LOSEC, an anti-ulcer treatment licensed from AB Astra. Worldwide sales of animal health products rose 5 percent in the quarter and 18 percent in the first half, excluding foreign exchange rate fluctuations. The six-month period benefited from higher sales of NUFLOR, a broad-spectrum, multi-species antibiotic. On June 30, 1997, the Company completed the acquisition of the worldwide animal health business of Mallinckrodt, Inc. The results of operations from this acquisition will be included in the Company's statement of consolidated income beginning in the third quarter of 1997. Sales of health care products increased 6 percent in both the second quarter and first half of 1997. Strong foot care sales, which benefited from the addition of DYNA STEP inserts to the DR. SCHOLL'S foot care line, added to both periods. Sun care sales were flat in the quarter, but grew 4 percent in the six months. Sales of over-the-counter products increased 3 percent in the second quarter, while down 3 percent for the six-month period. Income before income taxes increased 18 percent for the quarter compared with 1996, and represented 28.7 percent of sales versus 28.4 percent last year. For the six months, income before taxes grew 16 percent over 1996, representing 30.1 percent of sales compared with 29.8 percent of last year. Cost of sales as a percentage of sales decreased to 19.2 percent in the quarter from 19.4 percent in 1996, and for the first half, the ratio declined to 18.8 percent from 19.2 percent in 1996. These declines are the result of a more favorable sales mix of higher margin domestic pharmaceutical products. Selling, general and administrative expenses represented 39.5 percent of sales in the second quarter compared with 39.2 percent last year. For the six-month period, the ratio was 38.7 percent versus 37.8 percent in 1996. The increases in the ratios reflect higher selling and promotional related spending, primarily for the CLARITIN brand and INTRON A. Research and development spending rose 17 percent in the quarter, representing 12.1 percent of sales compared with 12.0 percent a year ago. For the first half, spending grew 14 percent, and represented 11.8 percent of sales versus 11.9 percent in 1996. The higher spending reflects the Company's funding of both internal research efforts and research collaborations with various partners to develop innovative products and line extensions. The effective tax rate was 24.5 percent in the three- and six- month periods of both 1997 and 1996. Earnings per common share advanced 19 percent in the second quarter to $.51 from $.43 in 1996. For the six-month period, earnings per share increased 16 percent to $1.02 from $.88 last year. Excluding the impact of fluctuations in foreign currency exchange rates, earnings per common share would have risen approximately 19 percent in the quarter and 17 percent for the six months. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". For additional information, see "Earnings Per Common Share" in the Notes to Consolidated Financial Statements. Additional Factors Influencing Operations In the United States, many of the Company's pharmaceutical products are subject to increasingly competitive pricing as managed care groups, institutions, government agencies and other buying groups seek price discounts. In most international markets, the Company operates in an environment of government- mandated cost containment programs. Several governments have placed restrictions on physician prescription levels and patient reimbursements, emphasized greater use of generic drugs and enacted across-the-board price cuts as methods of cost control. Since the Company is unable to predict the final form and timing of any future domestic and international governmental or other health care initiatives, their effect on operations and cash flows cannot be reasonably estimated. The market for pharmaceutical products is competitive. The Company's operations may be affected by technological advances of competitors, patents granted to competitors, new products of competitors, and generic competition as the Company's products mature. In addition, patent positions can be highly uncertain and an adverse result in a patent dispute can preclude commercialization of products or negatively affect sales of existing products. The effect on operations of competitive factors and patent disputes cannot be predicted. Uncertainties inherent in government regulatory approval processes, including among other things delays in approval of new products, may also affect the Company's operations. The effect on operations of regulatory approval processes cannot be predicted. Liquidity and financial resources - six months ended June 30, 1997 Cash generated from operations continues to be the Company's major source of funds to finance working capital, additions to property, shareholder dividends and common share repurchases. Cash and cash equivalents increased by $164.1 million in the first six months of 1997, primarily due to cash provided by operating activities of $719.6 million and the net increase in short-term borrowings of $163.9 million which exceeded the funding required for the acquisition of the animal health business of Mallinckrodt Inc. of $314.5 million, shareholder dividends of $259.7 million and capital expenditures of $126.7 million. In September 1996, the Board of Directors authorized the repurchase of $500 million of common shares. As of June 30, 1997 this program was approximately 74 percent complete. In April 1997, the Board of Directors authorized a 2-for-1 stock split of the Company's common shares. The distribution of the split shares was made on June 3, 1997, to the shareholders of record at the close of business on May 2, 1997. The per share amounts included in these consolidated financial statements reflect the stock split. The Company's liquidity and financial resources continue to be sufficient to meet its operating needs. Cautionary Statements for Forward Looking Information Management's discussion and analysis set forth above contains certain forward looking statements, including statements regarding the Company's financial position and results of operations. These forward looking statements are based on current expectations. Certain factors have been identified by the Company in Exhibit 99.1 of the Company's December 31, 1996, Form 10-K filed with the Securities and Exchange Commission, which could cause the Company's actual results to differ materially from expected and historical results. Exhibit 99.1 from the Form 10-K is incorporated by reference herein PART II OTHER INFORMATION Item 1. Legal Proceedings The fourth paragraph of Item 3, Legal Proceedings, of Part I of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (as updated in the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997), relating to certain antitrust actions, is incorporated herein by reference. In June 1997, the Seventh Circuit Court of Appeals dismissed the appeal by certain class members from the approval of the settlement by the District Court and a motion for rehearing was filed. Item 6. Exhibits and Reports on Form 8-K a) Exhibits - The following Exhibits are filed with this document: Exhibit Number Description 3 - Certificate of Amendment of Certificate of Incorporation of the Company 4 - Rights Agreement between the Company and The Bank of New York dated June 24, 1997. Incorporated by reference to Exhibit 1 to the Form 8-A filed by the Company on June 30, 1997, file no. 1-6571. 11 - Computation of Earnings Per Common Share 27 - Financial Data Schedule 99 - Company Statements Relating to Forward Looking Information b) Reports on Form 8-K: A report on Form 8-K was filed on June 2, 1997 under Item 5 "Other Events" of Form 8-K relating to the acquisition of the worldwide animal health business of Mallinckrodt Inc. A report on Form 8-K was filed on July 14, 1997 under Item 5 "Other Events" of Form 8-K relating to the Company's redemption, effective as of July 10, 1997, of all of the outstanding rights (the "Existing Rights") to purchase shares of Series A Junior Participating Preferred Stock, par value $1.00 per share, issued pursuant to the Rights Agreement, dated as of July 25, 1989, between the Company and The Bank of New York, as Rights Agent, at a redemption price of $.00125 per Existing Right, and, in conjunction therewith, the declaration of a dividend of one preferred share purchase right for each common share, par value $1.00 per share, of the Company outstanding at the close of business on July 10, 1997 to the stockholders of record on that date. SIGNATURE(S) 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. Schering-Plough Corporation (Registrant) Date August 8, 1997 /s/Thomas H. Kelly Thomas H. Kelly Vice President and Controller EX-3 2 Exhibit 3 CERTIFICATE OF AMENDMENT of CERTIFICATE OF INCORPORATION of SCHERING-PLOUGH CORPORATION (Pursuant to Title 14A:7-2(2) of the New Jersey Business Corporation Act) It is hereby certified that: 1. The name of the corporation is Schering-Plough Corporation (hereinafter called the "Corporation"); and 2. The Certificate of Incorporation of the Corporation, as amended (the "Certificate of Incorporation") is hereby amended so that the designation and number of shares of the class and series acted upon in the following resolutions, and the relative rights, preferences and limitations of such class and series, are as stated in such resolutions. 3. The following resolutions were duly adopted by the Board of Directors of the Corporation as required by Subsection 14A: 7- 2(3) of the New Jersey Business Corporation Act at a meeting duly called and held on June 24, 1997: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of Article Fifth of its Certificate of Incorporation, the Board of Directors hereby increases the number of shares of the Corporation designated as Series A Junior Participating Preferred Stock from 1,500,000 to 12,000,000 shares, and correspondingly decreases the number of preferred shares whose designations have not yet been determined from 48,500,000 to 38,000,000 shares. RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of Article Fifth of its Certificate of Incorporation, the Board of Directors hereby amends and restates in their entirety the designation and number, and the relative rights, preferences and limitation of the Series A Junior Participating Preferred Stock of the Corporation, no shares of which have been issued, as follows: Series A Junior Participating Preferred Stock: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 12,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. Section 2. Dividends and Distributions. A. Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $1 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. B. The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. C. Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: A. Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. B. Except as otherwise provided herein, in any other Certificate of Amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. C. Except as set forth herein, or as otherwise provided by law or the Certificate of Incorporation, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. A. Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section II are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: 1. declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; 2. declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 3. redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or 4. redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. B. The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section IV, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable. Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock. Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Amendment is executed on behalf of the Corporation by its Vice President and attested by its Secretary this eighth day of July 1997. /s/E. Kevin Moore ----------------- E. Kevin Moore Vice President Attest: /s/William J. Silbey ______________________________ William J. Silbey Secretary EX-11 3 Exhibit 11 SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (Amounts in millions, except per share figures)
Six Months Ended June 30, 1997 1996 Earnings per Common Share, As Reported: Net income applicable to common shares. $ 748.4 643.7 Average Number of Common Shares Outstanding . . . . . . . . . . . . . . 731.7 734.6 Earnings per Common Share . . . . . . . $ 1.02 $ .88 Earnings per Common Share, Assuming Full Dilution: (a) Average Number of Common Shares Outstanding . . . . . . . . . . . . . . 731.7 734.6 Shares Contingently Issuable for Stock Incentive Plans and Warrant Agreements. . . . . . . . . . . . . . . 7.3 9.4 Average Number of Common Shares and Common Share Equivalents Outstanding. . 739.0 744.0 Earnings per Common Share, Assuming Full Dilution . . . . . . . . . . . . $ 1.01 $ .87 (a) This calculation is submitted in accordance with the regulations of the Securities and Exchange Commission although not required by APB Opinion No. 15 because it results in dilution of less than 3%.
EX-27 4
5 This schedule contains summary financial information extracted from Schering-Plough Corporation and subsidiaries consolidated Financial Statements, and related Exhibits for the six months ended June 30, 1997 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1997 JUN-30-1997 699200 0 834600 0 729000 3104000 3570200 1158700 6536500 3173500 64700 0 0 1014800 1537000 6536500 3287900 3287900 619200 619200 387900 0 0 991200 242800 748400 0 0 0 748400 1.02 1.01 On April 22, 1997, the Board of Directors of the Company authorized a 2-for-1stock split. Distribution of the split shares was made on June 3, 1997 to shareholders of record at the close of business on May 2, 1997. Prior financial data schedules have not been restated for this recapitalization.
EX-99 5 Exhibit 99 Company Statements Relating To Forward Looking Information (Filed Pursuant to Rule 175) 1. Statement from press release issued by the Company on May 21, 1997: Mr. Richard Jay Kogan, President and Chief Executive Officer, commenting on the Company's earnings per share for 1997, stated that based on the Company's business results to date, the Company projects that the percentage increase in 1997 earnings per share versus 1996 should be in the "mid-teens," assuming no major unforeseen changes in the marketplace. -----END PRIVACY-ENHANCED MESSAGE-----