-----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, Sjd6H3P0cji6ONp+iZvHWS2GDEy1c2dPIZCDCnDNT68087RsQ+0dc1Fs+0YZ8dkU ddpz9ToN4N2S8QgxP93kUw== 0000310158-97-000017.txt : 19971104 0000310158-97-000017.hdr.sgml : 19971104 ACCESSION NUMBER: 0000310158-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971103 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: SEC FILE NUMBER: 001-06571 FILM NUMBER: 97706429 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 September 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 September 30, 1997: 732,150,623 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 Nine Months Ended Ended September 30 September 30 1997 1996 1997 1996 Sales . . . . . . . . . . . . . $1,709 $1,383 $4,997 $4,242 Costs and expenses: Cost of sales. . . . . . . . . 326 257 945 807 Selling, general and administrative. . . . . . 681 563 1,954 1,645 Research and development . . . 220 182 608 523 Other, net . . . . . . . . . . 15 (5) 32 28 1,242 997 3,539 3,003 Income before income taxes. . . 467 386 1,458 1,239 Income taxes. . . . . . . . . . 114 95 357 304 Net Income. . . . . . . . . . . $ 353 $ 291 $1,101 $ 935 Earnings per common share . . . $ .48 $ .39 $ 1.50 $ 1.27 Dividends per common share. . . $ .19 $ .165 $ .545 $ .475 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in millions, except per share figures)
September 30, December 31, 1997 1996 Assets Cash and cash equivalents . . . . . . . . $ 732 $ 535 Accounts receivable, net. . . . . . . . . 588 542 Inventories . . . . . . . . . . . . . . . 750 594 Prepaid expenses. . . . . . . . . . . . . 251 246 Deferred income taxes and other current assets . . . . . . . . . . . . . 635 448 Total current assets. . . . . . . . . 2,956 2,365 Property, plant and equipment . . . . . . 3,628 3,362 Less accumulated depreciation . . . . . . 1,189 1,116 Property, net . . . . . . . . . . . . 2,439 2,246 Other assets. . . . . . . . . . . . . . . 1,053 787 $ 6,448 $ 5,398 Liabilities and Shareholders' Equity Accounts payable. . . . . . . . . . . . . $ 667 $ 561 Short-term borrowings and current portion of long-term debt. . . . . . . . 761 855 Other accrued liabilities . . . . . . . . 1,509 1,184 Total current liabilities . . . . . . 2,937 2,600 Long-term debt. . . . . . . . . . . . . . 64 46 Other long-term liabilities . . . . . . . 744 692 Shareholders' Equity: Preferred shares - $1 par value each; issued - none. . . . . . . . . . . - - Common shares - $1 par value each; shares issued: 1997 - 1,014,759,198 1996 - 507,368,360 . . . . . . . . . . . 1,015 507 Paid-in capital . . . . . . . . . . . . . 33 172 Retained earnings . . . . . . . . . . . . 5,472 5,081 Foreign currency translation adjustment and other . . . . . . . . . . (201) (140) Total . . . . . . . . . . . . . . . . 6,319 5,620 Less treasury shares, at cost - 1997, 282,608,575 shares; 1996, 142,001,799 shares . . . . . . . . 3,616 3,560 Total shareholders' equity. . . . . . 2,703 2,060 $ 6,448 $ 5,398 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED) (Dollars in millions)
1997 1996 Operating Activities: Net Income. . . . . . . . . . . . . . . . $1,101 $ 935 Depreciation and amortization . . . . . . 157 127 Accounts receivable . . . . . . . . . . . 41 (17) Inventories . . . . . . . . . . . . . . . (55) (84) Prepaid expenses and other assets . . . . (179) (145) Accounts payable and other liabilities . 297 214 Net cash provided by operating activities 1,362 1,030 Investing Activities: Purchase of business, net of cash acquired . . . . . . . . . . . . . . . . (351) - Capital expenditures. . . . . . . . . . . (221) (208) Proceeds from sales of investments. . . . 37 1 Purchases of investments. . . . . . . . . (98) (35) Other, net. . . . . . . . . . . . . . . . (20) (2) Net cash used for investing activities . . . . . . . . . . . . . . . (653) (244) Financing Activities: Short-term borrowings, net. . . . . . . . (100) (180) Repayment of long-term debt . . . . . . . (3) (140) Common shares repurchased . . . . . . . . (56) (46) Dividends paid to common shareholders . . (400) (350) Other equity transactions, net. . . . . . 54 46 Net cash used for financing activities . . . . . . . . . . . . . . . (505) (670) Effect of exchange rates on cash and cash equivalents. . . . . . . . . . . . . (7) - Net increase in cash and cash equivalents . 197 116 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . 535 321 Cash and cash equivalents, end of period . $ 732 $ 437 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 nine months ended September 30, 1997 and 1996 were 731,899,000 and 735,952,000, 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 September 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 have been included in the Company's statement of consolidated income from the date of acquisition. Consolidated other assets include net intangible assets totaling $472 and $297 at September 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: September 30, December 31, 1997 1996 Finished products . . . . . . . $ 341 $ 297 Goods in process. . . . . . . . 199 173 Raw materials and supplies. . . 210 124 Total inventories . . . . . . $ 750 $ 594 Sales Segment sales for the nine months ended September 30, 1997 and 1996 were as follows: 1997 1996 Pharmaceutical products . . . . $4,462 $3,749 Health care products. . . . . . 535 493 Consolidated sales. . . . . . $4,997 $4,242 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 September 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 agreed to 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 August 1997, the Seventh Circuit reversed the grant of summary judgment to the wholesalers. The Seventh Circuit also reversed the District Court's decision on the right of indirect purchasers of pharmaceutical products to collect damages if they purchased from distributors who were not, or who were not named as, co-conspirators. However, because the Seventh Circuit reversed the grant of summary judgment to the wholesalers, the Seventh Circuit's ruling on indirect purchasers will have no immediate effect on those cases where wholesalers have been named as defendants. Plaintiffs that did not name wholesalers as defendants have recently asked the District Court to permit them to amend their complaints to add the wholesalers as defendants. 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, which the District Court has denied. 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. Class actions have not been certified in three other state consumer actions. Plaintiffs in the state class actions 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 nine months ended September 30, 1997 compared with the corresponding periods in 1996. Sales Consolidated sales for the third quarter advanced $326 million or 24 percent compared with the same period in 1996. For the nine months, sales rose $755 million or 18 percent over 1996. Excluding the effect of foreign currency exchange rate fluctuations, consolidated sales grew 27 percent in the quarter and 21 percent for the nine month period. This performance reflects worldwide sales of the CLARITIN brand of nonsedating antihistamines of $448 million and $1.3 billion for the quarter and nine-month period, respectively, compared with $323 million and $906 million for the corresponding periods in 1996. Domestic prescription pharmaceutical sales increased 31 percent for the 1997 third quarter and 27 percent for the nine-month period. Sales of allergy/respiratory products advanced 39 percent in the quarter and 31 percent for the nine-month period, due to continued strong growth of the CLARITIN brand. Sales of VANCENASE allergy products increased in the quarter and year-to-date due to market expansion. Sales of VANCERIL asthma products advanced in both periods reflecting gains from the first quarter launch of a new "Double Strength". The domestic allergy/respiratory sales gain reflects an increase in sales of PROVENTIL (albuterol) line of asthma products for the quarter due primarily to trade buying patterns. PROVENTIL declined 18 percent for the first nine months, due to increased generic competition. Sales of the PROVENTIL line totaled $82 million for the quarter and $214 million for the nine months, with metered-dose inhalers contributing over 60 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 36 percent in the quarter and 24 percent for the nine months, reflecting market share gains for IMDUR, a once-daily oral nitrate for angina and K-Dur, a sustained- release potassium supplement. Domestic sales of anti-infective and anticancer products rose 26 percent in the quarter and 18 percent for the nine-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. The nine-month period, however, was negatively affected by lower sales of EULEXIN, a prostate cancer treatment, due to branded competition. U.S. sales of dermatological products increased 13 percent for the quarter and 9 percent for the nine 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 4 percent for the third quarter and 5 percent for the nine-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 21 percent for the quarter and 20 percent for the nine-month period, led by CLARITIN in most world markets. International dermatological product sales were flat in the quarter and increased 4 percent for the nine-month period led by ELOCON and LOTRISONE. Cardiovascular product sales grew 14 percent for the third quarter and 11 percent for the nine months, led by higher sales of NITRO-DUR. International sales of anti-infective and anticancer products declined 1 percent in the third quarter and increased 2 percent for the nine months. Both periods were negatively impacted by lower EULEXIN sales due to generic and branded competition in Europe. Sales of INTRON A increased 10 percent in the quarter and nine-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 in the quarter and for the nine months, excluding foreign exchange rate fluctuations. On June 30, 1997, the Company completed the acquisition of the worldwide animal health business of Mallinckrodt, Inc., which contributed sales of $78 million in the quarter. In addition, the three- and nine-month periods benefited from higher sales of NUFLOR, a broad-spectrum, multi-species antibiotic. Excluding Mallinckrodt revenues in the third quarter, sales would have increased 14 percent in both the three- and nine-month periods. Sales of health care products increased 15 percent for the third quarter and 9 percent for the first nine months of 1997. The higher sales were largely due to gains in foot care products, benefiting from the continued strength of DYNA STEP Inserts in the DR. SCHOLL'S foot care line. Sales of sun care products rose for the nine-month period, while sales of over-the-counter products declined for both periods. Income before income taxes increased 21 percent for the quarter compared with 1996, and represented 27.3 percent of sales versus 27.9 percent last year. For the nine months, income before taxes grew 18 percent over 1996, representing 29.2 percent of sales in 1997 and 1996. Cost of sales as a percentage of sales increased to 19.1 percent in the quarter from 18.6 percent in 1996, and for the first nine months, the ratio declined to 18.9 percent from 19.0 percent in 1996. The increase in the ratio for the quarter is primarily driven by sales mix. The decline for the nine months is the result of a more favorable sales mix of higher margin domestic pharmaceutical products. Selling, general and administrative expenses represented 39.8 percent of sales in the third quarter compared with 40.7 percent last year. For the nine-month period, the ratio was 39.1 percent versus 38.8 percent in 1996. The increase in the ratio for the nine-month period reflects higher selling and promotional related spending, primarily for the CLARITIN brand and INTRON A. Research and development spending rose 21 percent in the quarter, representing 12.9 percent of sales compared with 13.2 percent a year ago. For the nine-month period, spending grew 16 percent, and represented 12.2 percent of sales versus 12.3 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 nine- month periods of both 1997 and 1996. Earnings per common share advanced 23 percent in the third quarter to $.48 from $.39 in 1996. For the nine-month period, earnings per share increased 18 percent to $1.50 from $1.27 last year. Excluding the impact of fluctuations in foreign currency exchange rates, earnings per common share would have risen approximately 28 percent in the quarter and 20 percent for the nine 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. For example, while the Company is confident that CLARITIN will receive regulatory approval in Japan, based on discussions in October 1997 with regulatory authorities in Japan, the Company does not expect regulatory approval of CLARITIN in Japan in 1997 and will not predict when regulatory approval will be granted. Liquidity and financial resources - nine months ended September 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 $197 million in the first nine months of 1997, primarily due to cash provided by operating activities of $1.4 billion which exceeded the net decrease in short-term borrowings of $100 million, the funding required for the acquisition of the animal health business of Mallinckrodt Inc. of $351 million, shareholder dividends of $400 million and capital expenditures of $221 million. In September 1996, the Board of Directors authorized the repurchase of $500 million of common shares. As of September 30, 1997 this program was approximately 85 percent complete. In September 1997, the Board of Directors authorized an additional $1 billion share repurchase program. The new $1 billion program is expected to commence soon after the current program is completed. 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 Reports on Form 10-Q for the quarterly periods ended March 31, 1997 and June 30, 1997, respectively) relating to certain antitrust actions is incorporated herein by reference. In August 1997, the Seventh Circuit reversed the grant of summary judgment to the wholesalers. The Seventh Circuit also reversed the District Court's decision on the right of indirect purchasers of pharmaceutical products to collect damages if they purchased from distributors who were not, or who were not named as, co-conspirators. However, because the Seventh Circuit reversed the grant of summary judgment to the wholesalers, the Seventh Circuit's ruling on indirect purchasers will have no immediate effect on those cases where wholesalers have been named as defendants. Plaintiffs that did not name wholesalers as defendants have recently asked the District Court to permit them to amend their complaints to add the wholesalers as defendants. The District Court has denied the plaintiff's motion for a preliminary injunction hearing in the new purported class action complaint that was filed in April 1997 and which sought injunctive relief only. Item 6. Exhibits and Reports on Form 8-K a) Exhibits - The following Exhibits are filed with this document: Exhibit Number Description 10 - 1997 Stock Incentive Plan 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: No report has been filed during the three months ended September 30, 1997. 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 November 3, 1997 /s/Thomas H. Kelly Thomas H. Kelly Vice President and Controller WD3QTR.10R - 5 - WD3QTR.10R WD3QTR.10R - 9 - EX-10 2 Exhibit 10 Schering-Plough Corporation 1997 STOCK INCENTIVE PLAN 1. PURPOSE OF PLAN The purpose of the Schering-Plough Corporation 1997 Stock Incentive Plan (hereinafter called the "Plan") is to aid Schering-Plough Corporation (hereinafter called the "Company") and its subsidiaries and affiliates (whether incorporated or unincorporated) in securing and retaining employees of outstanding ability and to provide additional motivation to such employees to exert their best efforts on behalf of the Company and its subsidiaries and affiliates. The Company expects that it will benefit from the added interest which such employees will have in the welfare of the Company as a result of their ownership or increased ownership of the Company's Common Shares ("Common Stock"). 2. STOCK SUBJECT TO THE PLAN Subject to adjustment as provided in Paragraph 12, the total number of shares of Common Stock of the Company that may be awarded or optioned under the Plan is 18,000,000; provided that the maximum number of such shares which may be awarded in the form of Deferred Stock Units (hereinafter sometimes called "Units") is 7,500,000. The shares may consist, in whole or in part, of unissued shares or treasury shares. Any shares subject to an award hereunder that shall not be issued because of the forfeiture of such award and any shares optioned hereunder that shall cease to be subject to the option may again be awarded or optioned under the Plan. In addition to the foregoing limitations, no participant may be granted awards or options covering in excess of 750,000 shares of Common Stock in any fiscal year, subject to changes in capital as described in Paragraph 12. 3. ADMINISTRATION The Executive Compensation and Organization Committee of the Board of Directors (hereinafter called the "Committee") consisting of two or more members of the Board of Directors, shall administer the Plan. Each member of the Committee shall be a "non-employee director" within the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor definition adopted by the Securities and Exchange Commission, and an "outside director" for purposes of Section 162(m)(4) of the Internal Revenue Code of 1986, as amended (the "Code"). The Committee shall have the authority, consistent with the Plan, to determine the provisions and timing of the awards or options to be granted, to interpret the Plan and the awards and options granted under the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan and the awards and options, including rules with respect to limitations on the utilization of shares of Common Stock of the Company in full or part payment of the option price under Paragraph 6(d) of the Plan, and generally to conduct and administer the Plan and to make all determinations in connection therewith which may be necessary or advisable. Committee decisions and selections shall be made by a majority of its members present at a meeting at which a quorum is present, and shall be final. Any decision or selection reduced to writing and signed by all of the members of the Committee shall be as fully effective as if it had been made at a meeting duly held. The Committee may delegate some or all of its authority under the Plan as the Committee deems appropriate; provided, however, that no such delegation may be made that would (i) cause options or awards under the Plan to cease to be exempt from Section 16(b) of the Exchange Act or (ii) cause a Performance Award (as defined in Paragraph 8) to cease to qualify for exemption from the deduction limitations under Section 162(m) of the Code. 4. ELIGIBILITY Employees, including officers of the Company and its subsidiaries and affiliates, who are from time to time responsible for the performance, growth and protection of the business of the Company or its subsidiaries and affiliates are eligible to be granted awards and options under the Plan. The employees who shall receive awards or options under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible, and the Committee shall determine, in its sole discretion, the number of shares to be covered by the award or awards and by the option or options granted to each such employee selected. 5. LIMITATIONS No award or option may be granted under the Plan after December 31, 2002, but awards or options theretofore granted may extend beyond that date. 6. TERMS AND CONDITIONS OF STOCK OPTIONS All options granted under this Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine. (a) The option price per share shall be determined by the Committee but shall not be less than 100% of the fair market value at the time the option is granted. The fair market value shall be the closing price at which shares of such stock are traded on the New York Stock Exchange on the day on which the option is granted. If there is no sale of the shares on such Exchange on the date the option is granted, the mean between the bid and asked prices on such Exchange at the close of the market on such date shall be deemed to be the fair market value of the shares. In the event that the method for determining the fair market value of the shares provided for in this Paragraph 6(a) shall not be practicable, then the fair market value per share shall be determined by such other reasonable method as the Committee shall, in its discretion, select and apply at the time of grant of the option concerned. (b) Except as otherwise provided in Paragraphs 6(f), 6(g), and 6(h), each option shall be exercisable during and over such period ending not later than ten years from the date it was granted, as may be determined by the Committee and stated in the option. (c) Except as provided in Paragraphs 6(f), 6(g), 6(h), and 13, no option shall be exercisable during the year ending on the first anniversary date of the granting of the option or if the Committee so determines at the time of grant or subsequent thereto, during such lesser period not less than six months and one day from the date of grant. (d) Each option may be exercised by giving written notice to the Company specifying the number of shares to be purchased, which shall be accompanied by payment in full including applicable taxes, if any. Payment for taxes shall be in cash, in shares of Common Stock or in shares of Common Stock withheld by the Company from shares issuable upon exercise of the option, or such other consideration as shall be approved by the Committee. Payment of the option price shall be in cash, or in shares of Common Stock of the Company already owned by the optionee for at least six months before the date of payment, or by a combination of cash and shares of Common Stock of the Company already owned by the optionee for at least six months before the date of payment. (When payment of taxes or the option price is made in Common Stock, the Common Stock shall be valued at the closing price at which the shares are traded on the New York Stock Exchange on the last business day before the day on which the option is exercised.) No option shall be exercised for less than the lesser of 100 shares or the full number of shares for which the option is then exercisable. No optionee shall have any rights to dividends or other rights of a shareholder with respect to shares subject to his option until he has given written notice of exercise of his option, paid in full for such shares (including taxes) and, if requested, given the representation described in Paragraph 9. (e) Notwithstanding the foregoing Paragraph 6(d), each option granted hereunder may, at the time of grant or subsequent thereto, provide the right either (i) to exercise such option in whole or in part without any payment of the option price, or (ii) to request the Committee to permit, in its sole discretion, such exercise without any payment of the option price. If an option is exercised without a payment of the option price, the optionee shall be entitled to receive that number of whole shares as is determined by dividing (a) an amount equal to the fair market value per share on the date of exercise into (b) an amount equal to the excess of the total fair market value of the shares on such date with respect to which the option is being exercised over the total cash purchase price of such shares as set forth in the option. Fractional shares will be rounded to the next lowest whole number. At the sole discretion of the Committee, or as specified in the option, the settlement of all or part of an optionee's rights under this Paragraph 6(e) may be made in cash in an amount equal to the fair market value of the shares otherwise payable hereunder. The number of shares with respect to which any option is exercised under this Paragraph 6(e) shall reduce the number of shares thereafter available for exercise under the option, and such shares thereafter may not again be optioned under the Plan. In no event may an option be exercised under this Paragraph 6(e) at a time when the option price per share of Common Stock of the Company equals or exceeds the fair market value per share of such Common Stock. (f) If an optionee's employment by the Company or a subsidiary terminates by reason of his retirement, his option may thereafter be exercised to the extent to which it was exercisable at the time of his retirement (unless the Committee, in its discretion, determines otherwise), and may be exercised at any time during the stated period of the option. If the optionee dies prior to such expiration of the option, any unexercised option, to the extent to which it was exercisable at the time of his death, may thereafter be exercised by his designated beneficiary or, if none by the legal representative of his estate or by the legatee of the option under his last will for the stated period of the option, except that in no event shall such period expire less than one year from the date of his death in the case of a non-qualified option. (g) If an optionee's employment by the Company or a subsidiary terminates by reason of permanent disability, his option may thereafter be exercised in full, and may be exercised at any time during the stated period of the option. If the optionee dies prior to such expiration of the option, any unexercised option may thereafter be exercised by his designated beneficiary or, if none, by the legal representative of his estate or by the legatee of the option under his last will for the stated period of the option, except that in no event shall such period expire less than one year from the date of his death in the case of a non-qualified option. (h) If an optionee's employment by the Company or a subsidiary terminates by reason of his death, his option may thereafter be immediately exercised in full by his designated beneficiary or, if none, by the legal representative of his estate or by the legatee of the option under his last will, and for the stated period of the option, except that in no event shall such period expire less than one year from the date of his death in the case of a non-qualified option. (i) Except as set forth in Paragraph 11(d), if an optionee's employment terminates for any reason other than death, retirement, or permanent disability, his option shall be exercisable, to the extent that it was exercisable at the time of termination, for three months after his termination of employment, or if earlier, upon the expiration of the stated period of the option. (j) Except as permitted under Paragraph 6(k), no option granted pursuant to this Plan may be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution and, during the lifetime of the optionee, may be exercised only by such optionee. The optionee may designate in writing a beneficiary of the option in the event of his death. (k) The Committee may grant options that are transferable, or amend outstanding options to make them transferable, by the optionee (any such option so granted or amended a "Transferable Option") to one or more members of the optionee's immediate family, to a partnership of which the only partners are members of the optionee's immediate family, or to a trust established by the optionee for the benefit of one or more members of the optionee's immediate family and the Committee may in its discretion permit transfers to other persons or entities. For this purpose the term "immediate family" means the optionee's spouse, children and grandchildren. Consideration may not be paid for the transfer of a Transferable Option. A transferee described in this Paragraph 6(k) shall be subject to all terms and conditions applicable to the Transferable Option prior to its transfer. The stock option agreement with respect to a Transferable Option shall set forth its transfer restrictions, and only options granted pursuant to a stock option agreement expressly permitting transfer pursuant to this Paragraph 6(k) shall be so transferable. (l) Notwithstanding any intent to grant incentive stock options, an option will not be considered an incentive stock option to the extent that it together with any earlier incentive stock options granted to any optionee permits the exercise for the first time by such optionee in any calendar year of more than $100,000 in value of stock of the Company (determined at the time of grant). (m) The Committee may from time to time establish option exercise procedures for purposes of permitting an optionee to defer compensation. Such procedures may permit an optionee to elect to have all or a portion of the shares issuable by the Company on exercise of an option transferred to a trust established by the Company. Notwithstanding Paragraph 6(d) above, an optionee who elects to follow any such procedures shall not have any rights as a stockholder with respect to shares issued on exercise of options under such procedures. 7. TERMS AND CONDITIONS OF DEFERRED STOCK UNIT AWARDS All awards of Units under the Plan shall be subject to all the applicable provisions thereof, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Committee shall determine. (a) Awards of Units may be in addition to or in lieu of option grants. (b) The number of Units allotted to an employee shall be credited to a memorandum account maintained by the Company for the employee. No employee shall be a shareholder with respect to any Units credited to his account, nor shall he (or any beneficiary) have any right to or interest in any specific asset of the Company or its subsidiaries, including any shares of Common Stock which may be purchased or held by the Company or its subsidiaries to provide the benefits payable under the Plan, until such shares are actually distributed under the Plan. (c) When dividends other than stock dividends are paid from time to time by the Company with respect to its Common Stock, the Company shall calculate the amount which would have been payable in cash or other property on the total undistributed Units in each employee's memorandum account on each dividend record date as if each such Unit represented one share of issued and outstanding Common Stock of the Company held by the employee. An amount equivalent to each such dividend shall thereupon be paid to the employee on the dividend payment date in cash or other property, as the case may be, as additional compensation to the employee. (d) With respect to each award of Units to an employee, and except as provided in Paragraphs 7(e), 8, and 13 of the Plan, shares of Common Stock of the Company equal in number to the number of Units so awarded to the employee shall be distributed to such employee in a single lump sum on the second, third, fourth or fifth anniversary of the date on which such award of Units was made or in two, three, four or five equal annual installments commencing on a date not earlier than six months after such award date and on each anniversary thereafter for the duration of the installment period, all as specified in the award of such Units; provided, however, that the Committee may, in its sole discretion, accelerate the payment of any lump sum or installment in the event of the retirement or permanent disability of an employee or for any other reason decided by the Committee. (e) If an employee retires within one year from the date on which an award of Units shall have been made to such employee, the number of Units credited to his memorandum account as a result of such award, other than Units paid or accelerated pursuant to Paragraph 7(d), shall be forfeited as of the date of his retirement (unless the Committee, in its sole discretion, waives such forfeiture) and the number of Units remaining in his memorandum account shall be distributed pursuant to Paragraph 7(d). Notwithstanding the foregoing, an award of Units may specify that such Units shall be forfeited if the employee retires prior to the payment date or dates specified in the award. In such case, the Units shall be forfeited in accordance with the terms of the award, unless the Committee, in its sole discretion, waives such forfeiture. If an employee or former employee dies, such number of shares of Common Stock of the Company as is equal to the total number of Units credited to his memorandum account as of the date of his death shall be distributed to his designated beneficiaries as soon thereafter as practicable. If an employee's employment with the Company or a subsidiary or affiliate terminates by reason of his permanent disability, such number of shares of Common Stock of the Company as is equal to the total number of Units credited to his memorandum account as of the date of his termination shall be distributed as provided in Paragraph 7(d). If an employee ceases to be an employee of the Company or a subsidiary or affiliate for any reason other than retirement, permanent disability, or death, the total number of Units credited to his memorandum account shall be forfeited as of the date of such termination of employment. In the case of termination for cause, the provisions of Paragraph 11(d) shall also apply. (f) Designations of beneficiaries shall be made in writing filed with the Company in such form and in such manner as the Committee may from time to time prescribe. Beneficiaries may be changed in the same manner at any time prior to the death of an employee. If an employee dies without having designated any surviving beneficiaries, his interest in Units under the Plan shall be distributed to the legal representative of his estate. (g) The Company may require any employee or other person receiving Common Stock of the Company pursuant to an award under the Plan to pay to the Company the amount of any taxes which the Company or a subsidiary is required to withhold in connection with the distribution of such Common Stock. Such tax payments may be made to the Company in cash, in shares of Common Stock (including shares of Common Stock withheld by the Company from shares then distributable), with the value of such Common Stock being the closing price at which the shares are traded on the New York Stock Exchange on the last business day before the day on which the distribution is made, or in such other consideration as shall be approved by the Committee. (h) The Committee may from time to time establish procedures for the distribution of shares distributable pursuant to Units for purposes of permitting an awardee to defer compensation. Such procedures may permit an awardee to elect to have all or a portion of the shares distributable pursuant to Units transferred to a trust established by the Company. An awardee who elects to follow any such procedures shall not have any rights as a stockholder with respect to shares distributed under such procedures. 8. PERFORMANCE AWARDS The Committee may, prior to or at the time of grant, designate an award of Units as a performance award (hereinafter called a "Performance Award") in which event it shall condition the grant or vesting, as applicable, of such Units upon the attainment of Performance Goals (as defined in Paragraph 8(b) below) and the provisions of Paragraph 8 shall control with respect to such Performance Awards to the extent inconsistent with Paragraph 7. (a) All Performance Awards shall be designated as such by the Committee prior to or at the time of grant, based upon a determination that (i) the recipient is or may be a "covered employee" within the meaning of Section 162(m)(3) of the Code (sometimes referred to herein as a "Covered Employee") in the fiscal year in which the Company would expect to be able to claim a tax deduction with respect to such Performance Awards and (ii) the Committee wishes such Performance Awards to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(c) of the Code. (b) "Performance Goals" means the performance goals established by the Committee in connection with the grant of Performance Awards. Such Performance Goals (i) shall be based on the attainment by the Company of specified levels of one or more of the following measures: earnings per share, return on equity, or profit before taxes, and (ii) shall be set by the Committee within the time period prescribed by Section 162(m) of the Code and related regulations. (c) Following the completion of each fiscal year, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such year and the extent to which Performance Awards have been earned by each Covered Employee for such fiscal year. (d) Notwithstanding Paragraph 7 of the Plan, no Performance Award shall vest or be paid out except (i) upon achievement of the applicable Performance Goals, (ii) upon the death or permanent disability of the employee, or (iii) upon a Change of Control pursuant to Paragraph 13(b). 9. INVESTMENT REPRESENTATION Upon any distribution of shares of Common Stock of the Company pursuant to any provision of the Plan, the distributee may be required to represent in writing that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfers. 10. TRANSFER, LEAVE OF ABSENCE, ETC. For the purpose of the Plan: (a) a transfer of an employee between and among the Company, a subsidiary, or an affiliate, and (b) a leave of absence, duly authorized in writing by the Company, shall not be deemed a termination of employment. 11. RIGHTS OF EMPLOYEES AND OTHERS (a) No person shall have any rights or claims under the Plan except in accordance with the provisions of the Plan. (b) Nothing contained in the Plan shall be deemed to give any employee the right to be retained in the service of the Company or its subsidiaries or affiliates. (c) Except as specifically provided in the Plan, no person shall have the right to assign, transfer, alienate, pledge, encumber or subject to lien the benefits to which he is entitled thereunder, and benefits under the Plan shall not be subject to adverse legal process of any kind. No prohibited assignment, transfer, alienation, pledge or encumbrance of benefits or subjection of benefits to lien or adverse legal process of any kind will be recognized by the Committee and in such case the Committee may terminate the right of such person to such benefits and direct that they be held or applied for the benefit of such person, his spouse, children or other dependents in such manner in such proportion as the Committee deems advisable. If a person to whom benefits shall be due under the Plan shall be or become incompetent, either physically or mentally, in the judgment of the Committee, the Committee shall have the right to determine to whom such benefits shall be paid for the benefit of such person. (d) Notwithstanding any provision in the Plan to the contrary, if an employee ceases to be an employee of the Company or a subsidiary or affiliate by reason of termination for cause, all options and Units (including Performance Awards) held by him or for his account under the Plan shall be immediately forfeited and he shall be liable to the Company for all profit realized by him from options exercised or shares of Company Common Stock distributed to him during the three months immediately preceding such termination. Termination for cause shall include termination initiated by the Company or by the employee incident to or connected with a finding that the employee has engaged in misappropriation, theft, embezzlement, kick-backs, bribery or similar deliberate, gross or willful misconduct or dishonest acts or omissions. 12. CHANGES IN CAPITAL If the outstanding Common Stock of the Company subject to the Plan shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation or other corporate reorganization in which the Company is the surviving corporation, or if the Company shall pay an extraordinary dividend on its Common Stock, the number and kind of shares subject to the Plan and/or the number of Units or option values or prices shall be appropriately and equitably adjusted so as to maintain the value or option price thereof, as the case may be. 13. CHANGE IN CONTROL PROVISIONS (a) Notwithstanding any other provision of the Plan, in the event of a Change of Control, any stock option or related right outstanding as of the date such Change in Control is determined to have occurred, and which is not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. In addition, notwithstanding any other provision of the Plan, during the 60-day period from and after a Change of Control (the "Exercise Period"), an optionee shall have the right, whether or not the option is fully exercisable and in lieu of the payment of the exercise price for the shares of Common Stock being purchased under the option and by giving notice to the Company (or its successor, if applicable), to elect (within the Exercise Period) to surrender all or part of the option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the exercise price per share of Common Stock under the option multiplied by the number of shares of Common Stock granted under the option as to which the right granted under this Paragraph 13(a) shall have been exercised. Notwithstanding the foregoing, if any right granted pursuant to this Paragraph 13(a) would make a Change of Control transaction ineligible for pooling-of-interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such right Common Stock with a fair market value equal to the cash that would otherwise be payable hereunder. (b) Notwithstanding any other provision of the Plan, in the event of a Change of Control, the Units (including Performance Awards) credited to the participant's memorandum account but not yet distributed pursuant to Paragraph 7(d) as of the date of the Change of Control shall be paid out as soon thereafter as practicable (but in no event more than 30 days after the Change of Control) at a dollar value per Unit equal to the Change of Control Price. Notwithstanding the foregoing, if any right granted pursuant to this Paragraph 13(b) would make a Change of Control transaction ineligible for pooling-of-interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such right Common Stock with a fair market value equal to the cash that would otherwise be payable hereunder. (c) For purposes of the Plan, a "Change of Control" shall be deemed to have taken place upon the occurrence of any of the following events: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of securities of the Company where such acquisition causes such Person to own 20% or more of either (i) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1) the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) below; and provided, further, that if any Person's beneficial ownership of the Outstanding Company Voting Securities reaches or exceeds 20% as a result of a transaction described in clause (i) or (ii) above, and such Person subsequently acquires beneficial ownership of additional voting securities of the Company, such subsequent acquisition shall be treated as an acquisition that causes such Person to own 20% or more of the Outstanding Company Voting Securities; or (2) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (d) For purposes of the Plan, "Change of Control Price" means the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares may then be listed during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Business Combination, the highest price per share of Common Stock paid in such tender or exchange offer or Business Combination; provided, however, that in the case of incentive stock options, the Change of Control Price shall be in all cases the fair market value of the Common Stock on the date such incentive stock option is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Committee. 14. USE OF PROCEEDS Proceeds from the sale of shares pursuant to options granted under this Plan shall constitute general funds of the Company. 15. AMENDMENTS The Board of Directors may amend, alter or discontinue the Plan, including without limitation any amendment considered to be advisable by reason of changes to the Code, but, no amendment, alteration or discontinuation shall be made (i) which would impair the rights of any holder of an award or option theretofore granted, without his consent, (ii) which would cause a Performance Award to cease to qualify for exemption under Section 162(m) of the Code, or (iii) which, without the approval of the shareholders, would: (a) Except as is provided in Paragraph 12, increase the total number of shares reserved for the purpose of the Plan. (b) Except as is provided in Paragraphs 6(e) and 12, decrease the option price of an option to less than 100% of the fair market value on the date of the granting of the option. (c) Extend the duration of the Plan. Notwithstanding the foregoing, the Board of Directors may amend the Plan and the Committee may amend any option or award, either retroactively or prospectively and without the consent of any optionee or award holder, so as to preserve or come within any exemptions from liability under Section 16(b) of the Exchange Act pursuant to rules and releases promulgated by the Securities and Exchange Commission. 16. GOVERNING LAW The Plan and all awards and options granted and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of New Jersey. EX-11 3 Exhibit 11 SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (Amounts in millions, except per share figures)
Nine Months Ended September 30, 1997 1996 Earnings per Common Share, As Reported: Net income applicable to common shares. $1,101 $ 935 Average Number of Common Shares Outstanding . . . . . . . . . . . . . . 731.9 736.0 Earnings per Common Share . . . . . . . $ 1.50 $ 1.27 Earnings per Common Share, Assuming Full Dilution: (a) Average Number of Common Shares Outstanding . . . . . . . . . . . . . . 731.9 736.0 Shares Contingently Issuable for Stock Incentive Plans and Warrant Agreements. . . . . . . . . . . . . . . 7.8 8.8 Average Number of Common Shares and Common Share Equivalents Outstanding. . 739.7 744.8 Earnings per Common Share, Assuming Full Dilution . . . . . . . . . . . . $ 1.49 $ 1.26 (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 nine months ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 1,000,000 9-MOS DEC-31-1997 SEP-30-1997 732 0 588 0 750 2956 3628 1189 6448 2937 64 0 0 1015 1688 6448 4997 4997 945 945 608 0 0 1458 357 1101 0 0 0 1101 1.50 1.49
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 October 7, 1997: Mr. Richard Jay Kogan, President and Chief Executive Officer, commenting on the Company's business results, stated that the Company expects that 1997 earnings per share will increase by "at least 17 percent" over 1996 earnings per share, barring unforeseen developments. He also said that he was "confident 1998 will be another good year." -----END PRIVACY-ENHANCED MESSAGE-----