-----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, VS9iW/M1Wi1YPhfqhFCFJD1ilYDVa87P6t2QRs0o+vrW+Ogx82SHfzjqWBHcUdwq 3UWSvv0vnx30V1pBJF3Waw== 0000310158-98-000014.txt : 19980812 0000310158-98-000014.hdr.sgml : 19980812 ACCESSION NUMBER: 0000310158-98-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 SROS: BSE SROS: CSE SROS: CSX SROS: NYSE SROS: PHLX SROS: PCX 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: 98681640 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, 1998 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 (973) 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, 1998: 734,000,000 PART I. - FINANCIAL INFORMATION Item 1. Financial Statements SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) (Amounts in millions, except per share figures)
Three Months Six Months Ended Ended June 30 June 30 1998 1997 1998 1997 Sales . . . . . . . . . . . . . $2,124 $1,720 $4,032 $3,288 Costs and expenses: Cost of sales. . . . . . . . . 423 330 803 619 Selling, general and administrative. . . . . . 828 679 1,540 1,273 Research and development . . . 261 209 485 388 Other, net . . . . . . . . . . 9 8 5 17 1,521 1,226 2,833 2,297 Income before income taxes. . . 603 494 1,199 991 Income taxes. . . . . . . . . . 148 121 294 243 Net Income. . . . . . . . . . . $ 455 $ 373 $ 905 $ 748 Basic earnings per common share. . . . . . . . . . . . . $ .62 $ .51 $ 1.23 $ 1.02 Diluted earnings per common share . . . . . . . . . . . . $ .61 $ .50 $ 1.22 $ 1.01 Dividends per common share. . . $ .22 $ .19 $ .41 $ .355 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in millions, except per share figures)
June 30, December 31, 1998 1997 Assets Cash and cash equivalents . . . . . . . . $ 707 $ 714 Accounts receivable, net. . . . . . . . . 840 645 Inventories . . . . . . . . . . . . . . . 745 713 Prepaid expenses, deferred income taxes and other current assets . . . . . 988 848 Total current assets. . . . . . . . . 3,280 2,920 Property, plant and equipment . . . . . . 3,835 3,750 Less accumulated depreciation . . . . . . 1,297 1,224 Property, net . . . . . . . . . . . . 2,538 2,526 Intangible assets, net. . . . . . . . . . 524 481 Other assets. . . . . . . . . . . . . . . 623 580 $6,965 $6,507 Liabilities and Shareholders' Equity Accounts payable. . . . . . . . . . . . . $ 853 $ 803 Short-term borrowings and current portion of long-term debt. . . . . . . . 316 581 Other accrued liabilities . . . . . . . . 1,586 1,507 Total current liabilities . . . . . . 2,755 2,891 Long-term debt. . . . . . . . . . . . . . 46 46 Other long-term liabilities . . . . . . . 763 749 Shareholders' Equity: Preferred shares - $1 par value; issued - none. . . . . . . . . . . . . . - - Common shares - $1 par value; issued - 1,015 . . . . . . . . . . . . . 1,015 1,015 Paid-in capital . . . . . . . . . . . . . 195 96 Retained earnings . . . . . . . . . . . . 6,276 5,673 Accumulated other comprehensive income. . (273) (244) Total . . . . . . . . . . . . . . . . 7,213 6,540 Less treasury shares, at cost - 1998, 281 shares; 1997, 282 shares . . . 3,812 3,719 Total shareholders' equity. . . . . . 3,401 2,821 $6,965 $6,507 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (UNAUDITED) (Amounts in millions)
1998 1997 Operating Activities: Net Income. . . . . . . . . . . . . . . . $ 905 $ 748 Depreciation and amortization . . . . . . 114 95 Accounts receivable . . . . . . . . . . . (223) (177) Inventories . . . . . . . . . . . . . . . (43) (19) Prepaid expenses and other assets . . . . (174) (114) Accounts payable and other liabilities . 262 187 Net cash provided by operating activities . . . . . . . . . . . . . . . 841 720 Investing Activities: Purchase of business, net of cash acquired . . . . . . . . . . . . . . . . - (315) Capital expenditures and purchased software . . . . . . . . . . . . . . . . (127) (134) Proceeds from sales of investments. . . . - 34 Purchases of investments. . . . . . . . . (69) (79) Other, net. . . . . . . . . . . . . . . . (2) (5) Net cash used for investing activities . . . . . . . . . . . . . . . (198) (499) Financing Activities: Dividends paid to common shareholders . . (302) (260) Common shares repurchased . . . . . . . . (85) (3) Short-term borrowings, net. . . . . . . . (256) 164 Other net . . . . . . . . . . . . . . . . (6) 43 Net cash used for financing activities . . . . . . . . . . . . . . . (649) (56) Effect of exchange rates on cash and cash equivalents. . . . . . . . . . . . . (1) (1) Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . (7) 164 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . 714 535 Cash and cash equivalents, end of period . $ 707 $ 699 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 1997 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. Earnings Per Common Share The shares used for basic earnings per common share and diluted earnings per common share are reconciled as follows (number of shares in millions): Three Months Six Months Ended Ended June 30, June 30, 1998 1997 1998 1997 Average shares outstanding for basic earnings per share . . . . . 734 732 733 732 Dilutive effect of options and deferred stock units . . . . . . . 10 8 10 7 Average shares outstanding for diluted earnings per share . . . . 744 740 743 739 Comprehensive Income and Segments In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income". Comprehensive income is defined as the total change in shareholders' equity during the period other than from transactions with shareholders. For the Company, comprehensive income is comprised of net income, the net change in the accumulated foreign currency translation adjustment account and the net change in unrealized gains and losses on securities classified for SFAS No. 115 purposes as held available for sale. Total comprehensive income for the three months ended June 30, 1998 and 1997 was $431 and $372, respectively. Total comprehensive income for the six months ended June 30, 1998 and 1997 was $876 and $710, respectively. In 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information." As required by the standard, the Company will begin reporting under SFAS No. 131 in its 1998 Annual Report. Inventories Inventories consisted of: June 30, December 31, 1998 1997 Finished products . . . . . . . $372 $334 Goods in process. . . . . . . . 187 191 Raw materials and supplies. . . 186 188 Total inventories . . . . . . $745 $713 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, 1998 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 (starting in 1993) 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 and alleges a price-fixing conspiracy. The Company has agreed to settle the federal class action for a total of $22 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 United States District Court in Illinois approved the settlement of the federal class action on June 21, 1996. In June 1997, the Seventh Circuit Court of Appeals dismissed all appeals from that settlement, and it is not subject to further review. In addition, in August 1997, the Seventh Circuit ruled that there was sufficient evidence of participation in the alleged conspiracy by certain wholesalers to require them to proceed to trial. In May 1998, the Company settled six of the federal antitrust cases brought by 26 food and drug chain retailers and several independent retail stores. Plaintiffs in these cases comprise collectively approximately one-fifth of the prescription drug retail market. The settlement amounts were not material to the Company. 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 consumers of prescription medicine. In addition, an action has been brought in Alabama purportedly on behalf of consumers in Alabama and several other states. Plaintiffs are seeking to maintain the action as a class action. The Company has settled the retailer class action in Wisconsin and the alleged class action in Minnesota and those settlements have been approved by their respective courts; the settlement amounts were not significant. The Company has also recently settled in principal the consumer cases in all of the states except Alabama and California. Court approval of those settlements is currently being sought; the settlement amounts are not material. Plaintiffs generally seek treble damages in an unspecified amount and an injunction against the allegedly unlawful conduct. The Company believes that all of the antitrust actions are without merit and is defending itself vigorously. In April 1997, certain of the plaintiffs in the federal class action commenced another purported class action in United States 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 District Court has denied the plaintiffs' motion for a preliminary injunction hearing. The Company believes the action is without merit and is defending itself vigorously. On March 13, 1996, the Company was notified that the United States Federal Trade Commission (FTC) is investigating whether the Company, along with other pharmaceutical companies, conspired to fix prescription drug prices. The investigation is ongoing. The Company vigorously denies that it has engaged in any price- fixing conspiracy. The Company is a defendant in a state court action in Texas brought by Foxmeyer Health Corporation, the parent of a pharmaceutical wholesaler that filed for bankruptcy in August 1996, which has now been removed to Federal Bankruptcy Court in Dallas. The case is against another pharmaceutical wholesaler and 11 pharmaceutical companies, and alleges that the defendants conspired to drive the plaintiff's wholesaler subsidiary out of business. The plaintiff is seeking damages in the amount of $400. Motions for summary judgment are pending in the Delaware bankruptcy of the bankrupt wholesaler. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - three and six months ended June 30, 1998 compared with the corresponding periods in 1997. Sales Consolidated sales for the second quarter advanced $404 million or 23 percent compared with the same period in 1997. For the six months, sales rose $744 million or 23 percent over 1997. Excluding the effect of foreign currency exchange rate fluctuations, consolidated sales grew 26 percent in the quarter and 25 percent for the six month period. Excluding the June 1997 acquisition of the worldwide animal health business of Mallinckrodt Inc., which contributed sales of $121 million in the quarter and $212 million in the first half of 1998, sales would have increased 16 percent in both periods. This performance reflects worldwide sales of the CLARITIN brand of $687 million and $1,124 million for the quarter and first half, respectively, compared with $536 million and $889 million for the corresponding periods in 1997. Domestic prescription pharmaceutical sales increased 25 percent for the 1998 second quarter and 26 percent for the six-month period. Sales of allergy/respiratory products increased 35 percent in the quarter and 31 percent for the first half, due to continued strong growth of the CLARITIN brand of nonsedating antihistamines. Franchise sales of nasal inhaled steroid products including VANCENASE allergy products and NASONEX a once-daily corticosteroid for allergic rhinitis, increased in the quarter and year-to-date due to market expansion and market share growth. Sales of VANCERIL asthma products advanced in both periods primarily reflecting market growth. U.S. sales of cardiovascular products rose 29 percent in the quarter and 32 percent for the six months reflecting market share gains for Imdur, a once-daily oral nitrate for angina and market growth for K-Dur, a sustained-release potassium supplement. Domestic sales of anti-infective and anticancer products decreased 22 percent in the quarter primarily due to lower sales of INTRON A, the Company's alpha interferon anticancer antiviral agent for malignant melanoma and hepatitis C, following heavy first quarter buying by the trade. For the six-month period sales of anti-infectives and anticancer products increased 13 percent primarily due to increased utilization of INTRON A. Sales of EULEXIN, a prostate cancer treatment, were also higher in both periods. U.S. sales of dermatological products increased 29 percent for the quarter and 32 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 6 percent for the second quarter and 5 percent for the six-month period. Excluding the impact of foreign exchange rate fluctuations, sales would have risen 12 percent in both periods. Sales of allergy/respiratory products advanced 8 percent for the quarter and 11 percent for the first half, led by CLARITIN in most world markets. International dermatological product sales grew 10 percent in the quarter and 13 percent for the six-month period, led by ELOCON. Cardiovascular product sales grew 9 percent for the second quarter and 20 percent for the six months, led by higher sales of NITRO-DUR, a transdermal nitroglycerin patch for angina. International sales of anti-infectives and anticancer products increased 16 percent in the second quarter and 7 percent for the six months. The growth was attributable to higher sales of INTRON A in the quarter and six-month period. Worldwide sales of animal health products increased 234 percent in the quarter and 206 percent for the six months. On June 30, 1997, the Company completed the acquisition of the worldwide animal health business of Mallinckrodt, Inc., which contributed sales of $121 million in the quarter and $212 million for the first six months of 1998. Excluding Mallinckrodt, sales were essentially flat for the quarter and six month period. Sales of health care products increased 13 percent for the second quarter and 12 percent for the first six months of 1998. The higher sales were recorded in foot care products and suncare products for both periods, while sales of over-the-counter products increased slightly for the six-month period. Income before income taxes increased 22 percent for the quarter compared with 1997, and represented 28.4 percent of sales versus 28.7 percent last year. For the six months, income before taxes grew 21 percent over 1997, representing 29.7 percent of sales compared with 30.1 percent of last year. Cost of sales as a percentage of sales increased to 19.9 percent in the quarter from 19.2 percent in 1997, and for the first six months, the ratio increased to 19.9 percent from 18.8 percent in 1997 principally driven by the inclusion of Mallinckrodt products which have lower margins. Selling, general and administrative expenses represented 39.0 percent of sales in the second quarter compared with 39.5 percent last year. For the six-month period, the ratio was 38.2 percent versus 38.7 percent in 1997. The decreases in the ratios are the result of timing related spending for promotional and selling activities. Research and development spending rose 25 percent in the quarter, representing 12.3 percent of sales compared with 12.1 percent a year ago. For the six-month period, spending grew 25 percent, and represented 12.0 percent of sales versus 11.8 percent in 1997. The higher spending reflects the Company's funding of both internal research efforts and research collaborations with various partners to develop a steady flow of innovative products and line extensions. The effective tax rate was 24.5 percent in the three- and six- month periods of both 1998 and 1997. Basic earnings per common share advanced 22 percent in the second quarter to $.62 from $.51 in 1997. Diluted earnings per common share advanced 22 percent to $.61 from $.50 for the same period. For the six-month period, basic earnings per common share rose 21 percent to $1.23 from $1.02 in 1997, and diluted earnings per common share rose 21 percent to $1.22 from $1.01 in 1997. Excluding the impact of fluctuations in foreign currency exchange rates, basic earnings per common share would have increased approximately 25 percent for the quarter and six-month periods and diluted earnings per common share would have increased approximately 26 percent for the quarter and approximately 25 percent for the six-month period. 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. The Company began implementing its plan to modify its computer systems to enable the proper processing of transactions relating to the Year 2000. The plan includes replacing and/or updating existing systems in order to avoid business interruption. The Company expects this project to be substantially completed by the end of 1998. The estimated cost of these modifications, incurred over the life of the project, is expected to be approximately $50 million. Liquidity and financial resources - six months ended June 30, 1998 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 provided by operating activities was $841 million for the first six months of 1998. Cash was used to pay shareholder dividends of $302 million, reduce short-term borrowing by $256 million, fund capital expenditures and purchase software of $127 million, repurchase shares for $85 million and purchase investments for $69 million. In October 1997, the Board of Directors authorized the repurchase of $1 billion of the Company's common shares. As of June 30, 1998 this program was approximately nine percent complete. In April 1998, the Board of Directors increased the quarterly dividend by 16 percent to $.22 from $.19 per common share. The Company's liquidity and financial resources continue to be sufficient to meet its operating needs. Market Risk Disclosures As discussed in the 1997 Annual Report to Shareholders, the Company's exposure to market risk from changes in foreign currency exchange rates and interest rates, in general, is not material. 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 of the Company's December 31, 1997, 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 from the Form 10-K is incorporated by reference herein. PART II OTHER INFORMATION Item 1. Legal Proceedings Item 3, Legal Proceedings, of Part I of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, is incorporated by reference. In May 1998, the Company settled six of the federal antitrust cases brought by 26 food and drug chain retailers and several independent retail stores. Plaintiffs in these cases comprise collectively approximately one-fifth of the prescription drug retail market. The settlement amounts were not material to the Company. The Great Atlantic and Pacific Tea Company, Inc. (A&P) was among the settling plaintiffs. The settlements of the state antitrust cases in Wisconsin and Minnesota have been approved by the respective courts. The Company has also recently settled in principal the state consumer cases in all of the states except Alabama and California. Court approval of those settlements is currently being sought. The settlement amounts were not material to the Company. Item 6. Exhibits and Reports on Form 8-K a) Exhibits - The following Exhibits are filed with this document: Exhibit Number Description 10(a) - Agreement between the Company and Rodolfo C. Bryce dated June 10, 1998. 27 - Financial Data Schedule 99 - Company Statement Relating to Forward Looking Information b) Reports on Form 8-K: No report has been filed during the six months ended June 30, 1998. 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 10, 1998 /s/Thomas H. Kelly Thomas H. Kelly Vice President and Controller WD2QTR.10Q - 4 - WD2QTR.10Q WD2QTR.10Q - 14 - EX-10 2 Exhibit 10(a) AGREEMENT THIS AGREEMENT is made and entered into by and between Rodolfo Bryce (hereinafter referred to as "Bryce") and Schering-Plough Corporation, including all of its affiliates, subsidiaries, divisions and related companies (hereinafter referred to as the "Company"). W I T N E S S E T H: WHEREAS, Bryce has indicated to the Company his desire and intention to cease active employment with the Company after December 31, 1998 and thereafter to take early retirement when eligible; WHEREAS, Bryce and the Company intend in this Agreement to set forth the terms of, and fully and finally resolve any matters that may arise from, Bryce's continued employment with the Company and eventual departure therefrom. NOW, THEREFORE, in consideration of the promises and mutual promises herein contained, it is agreed as follows: 1. Bryce will continue active employment with Schering- Plough HealthCare Products and remain Executive Vice President of Schering-Plough Corporation as well as maintain all of his other current officerships, directorships, and committee memberships with the Company through December 31, 1998. He will resign from all the above-cited positions effective January 1, 1999, and on request will execute such documents as may be necessary to effectuate the resignations. Bryce will be entitled to an Executive Incentive Plan ("EIP") payment and profit sharing for the year 1998 in accordance with the terms of the EIP and Profit Sharing Plan. He will also receive a lump-sum payment, less applicable deductions, for banked and accrued but unused vacation through December 1998 on a date of his choosing no later than April 1, 2001. 2. Effective January 1, 1999, Bryce will be placed on a Leave of Absence without pay and without eligibility for EIP payments, profit sharing, or vacation accruals. His participation in the Company's 401(k) plan shall also end as of January 1, 1999. Bryce will be eligible for the Financial Counseling and Tax Preparation Program for the years 1999, 2000 and 2001. While on his Leave of Absence, Bryce will also be eligible to participate in the Company's other benefit programs (including but not limited to the E-grade Medical/Dental Plan, the Executive Life Insurance Plan, the Long Term Disability Plan, the Retirement Plan, the Supplemental Executive Retirement Plan and the Retirement Benefits Equalization Plan) subject to the limitations set forth in paragraphs 3-6 below. This Leave of Absence shall continue until April 1, 2001. Once Bryce's Leave of Absence has expired, his employment with the Company shall be terminated. 3. Bryce agrees to forfeit stock options which have not vested as of December 31, 1998, except that he will not forfeit 7080 options from the February 23, 1998 grant which vests on February 24, 1999 while Bryce is on his Leave of Absence. This means that Bryce will forfeit 8,000 options of the 40,000 option grant made on September 24, 1990, the entire 200,000 option grant made on September 26, 1994, and 28,320 options of the 35,400 option grant made on February 23, 1998. 4. In summary, after taking account of the forfeitures indicated in the preceding paragraph and options previously exercised, Bryce shall continue to own the following options, the terms and provisions of which shall continue to be governed by the applicable stock incentive plan: 32,000 options from the 9/25/89 grant 16,000 options from the 9/24/90 grant 11,400 options from the 2/26/96 grant 35,400 options from the 2/24/97 grant 7,080 options from the 2/23/98 grant Bryce's status as an optionee with respect to the options listed immediately above shall be equivalent to that of an employee under the respective stock incentive plans during his Leave of Absence, and thereafter of a retiree if he elects early retirement upon the termination of his Leave of Absence. 5. Bryce agrees to forfeit all stock awards which have not been distributed as of December 31, 1998, except that he will be entitled to distribution of 20% of the February 23, 1998 award of 18,800 shares on February 23, 1999 and to distribution of the entire September 26, 1994 award of 80,000 shares on September 26, 1999. 6. In summary, after taking account of the forfeitures indicated in the preceding paragraph (and assuming acceleration of the 1995, 1996, and 1997 awards by the Executive Compensation and Organization Committee of the Board of Directors, which acceleration remains at the sole discretion of such committee), Bryce shall be entitled to the following stock award distributions in the months indicated: December 1998: 7,680 shares of the 2/27/95 award (which represents 40% of the total award of 2/27/95); 3,840 shares of the 2/26/96 award (which represents 20% of the total award of 2/26/96); and 3,760 shares of the 2/24/97 award (which represents 20% of the total award of 2/24/97). February 1999: 3,760 shares of the 2/23/98 award (which represents 20% of the total award of 2/23/98). September 1999: the entirety of the 9/26/94 award of 80,000 shares. Bryce will forfeit 7,680 shares of the 2/26/96 award (which represents 40% of the total award of 2/26/96), 11,280 shares of the 2/24/97 award (which represents 60% of the total award of 2/24/97), and 15,040 shares of the 2/23/98 award (which represents 80% of the total award of 2/23/98). 7. Bryce will be eligible to retire on April 1, 2001, in accordance with the terms of the Company's Retirement Plan. At that time, Bryce will be entitled to receive those retirement benefits that the Company provides to separated employees of the same age with the same amount of Company service and whose grade and compensation levels are the same, subject to all terms and conditions of all such plans. These benefits will be calculated according to the benefits formula established by the Company for eligible participants. The precise benefits that will be made available will be calculated by the Company's outside actuarial benefit firm and documented in writing to Bryce at the end of Bryce's Leave of Absence period. 8. Bryce will return to the Company all Company property he has received in the course of his employment with the Company including but not limited to documents, reports, studies, memoranda, computer based information, credit cards, and other such materials within ten (10) days of the end of his active employment with the Company and he shall retain no copies of any such property. Bryce acknowledges that the terms of a previously signed Employee Confidentiality and Invention Agreement and the Company's Business Conduct Policy remain in effect and nothing herein shall relieve him thereunder. 9. Bryce agrees that for the period from the date of this Agreement until April 1, 2001, he shall not, directly or indirectly, as principal, agent, employee, employer, stockholder (other than as a holder of less than 1% of the issued and outstanding stock of a publicly held corporation), partner, or in any other individual or representative capacity whatsoever, do any of the following: (a) Engage in, be connected with, provide goods or services to, or conduct any "Competing Business," which for purposes of this Agreement shall be defined as any business engaged in the research, development, or manufacture and sale of any product directly competitive with a Company product generating more than $50 million in worldwide annual sales. The Company's suncare and Dr. Scholl's lines of products shall each be considered a single Company product in this definition. Each covenant contained in this subparagraph (a) shall be deemed to be a separate covenant for each county of each State of the United States of America and for each other country in which any customer of any Competing Business has a place of business or is otherwise located or in which any Competing Business engages in business, and this subparagraph (a) shall be limited to such geographical areas. (b) Induce or attempt to induce any employee of the Company to terminate his employment with the Company. (c) Knowingly undertake or participate in any activities, engage in any conduct or make any statements inconsistent with or contrary to the interests of the Company or its affiliates. 10. The Company will waive the restrictions set forth in paragraph 9(a) if the restrictions are not necessary to protect a significant business interest of the Company, provided that Bryce follows the procedures set forth in this paragraph. To seek a waiver, Bryce must notify the Company in writing of his intent to join a Competing Business at least 30 days in advance of his anticipated starting date of employment or other affiliation. Bryce and the Vice Chairman and Administrative Officer or designee shall meet promptly and confer in good faith concerning whether the restrictions should be waived. If the parties are unable to agree on whether the restrictions are necessary to protect a significant business interest of the Company, Bryce may at his option submit the dispute to a single arbitrator in a binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, such arbitration to be initiated no later than 10 days before Bryce's anticipated starting date of employment or other affiliation. If Bryce initiates arbitration pursuant to this paragraph he will not commence his employment or affiliation with the Competing Business until an award is issued by the arbitrator. 11. Bryce acknowledges that he has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed pursuant to paragraph 9 hereof, that he fully understands his right to discuss all aspects of this Agreement with his attorney, and that he voluntarily enters into this Agreement. Bryce agrees that such restraints are necessary for the reasonable and proper protection of the Company, and that each and every one of said restraints is reasonable in respect to subject matter, length of time, and area. 12. (a) In the event that in any judicial proceeding a court of competent jurisdiction refuses to enforce any one or more of the covenants contained in this Agreement in any respect, then such covenant shall be deemed limited and restricted to the extent that such court shall deem it to be enforceable, and as so limited or restricted, the covenant shall remain in full force and effect. In the event that any such covenant or covenants shall be deemed unenforceable in their entirety by such a court, the remaining covenants (as they may be limited and restricted) shall remain in full force and effect. (b) Without limiting the Company's rights and remedies with respect to any breach of this Agreement, the covenants under paragraph 9 above, and the Company's rights and remedies with respect thereto, shall survive the termination of this Agreement for any reason. (c) Bryce agrees that in any judicial proceeding in which the Company seeks an injunction for breach of the covenants in paragraph 9 of this Agreement, he will not assert that an injunction is unavailable because the Company's remedies at law such as claims for damages are adequate. Nothing contained herein shall be construed as limiting the Company's right to any other remedies in equity or under law, including the recovery of damages from Bryce. 13. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective personal representatives, heirs, successors and assigns. 14. This Agreement may only be amended or otherwise modified by an agreement in writing executed by the parties hereto. 15. Bryce agrees that he is entitled to no benefits or compensation other than what is specifically set forth in this Agreement. 16. Bryce agrees that at the end of his active employment with the Company, he will execute a General Release and Covenant Not to Sue in the form annexed hereto as Exhibit A. 17. The Agreement sets forth the entire Agreement between the parties and supersedes any and all prior agreements or understandings between them, whether oral or in writing, except as otherwise provided herein. The parties agree this Agreement shall be governed by the law of the State of New Jersey, and Bryce specifically consents to having any dispute under this Agreement resolved by the federal or state courts in the State of New Jersey. Bryce acknowledges that he has relied on no statements or representations of any kind whatsoever, other than those set forth herein, in agreeing to be bound by this Agreement. 18. Bryce recognizes that he has up to 21 days to execute this Agreement and 7 days thereafter to revoke his acceptance thereof. Bryce may accept and return the Agreement prior to the 21st day, but if he does so, he waives the right to the full 21 days. This Agreement will not become effective and will not be enforceable until the seven (7) day period has expired. If Bryce does wish to revoke his acceptance, he should notify Mr. Hugh D'Andrade, Vice Chairman and Administrative Officer, in writing of his decision. IN WITNESS WHEREOF, the parties have set their hand this tenth day of June of 1998. /s/Rodolfo Bryce Rodolfo Bryce June 11, 1998 On behalf of the Company /s/Hugh A. D'Andrade Hugh A. D'Andrade Vice Chairman and Chief Administrative Officer Schering-Plough Corporation June 10, 1998 EXHIBIT A GENERAL RELEASE AND COVENANT NOT TO SUE 1. Rodolfo Bryce (hereinafter referred to as "Bryce") agrees that he will not file or permit any third party to file a lawsuit against Schering-Plough Corporation or any of its affiliates, subsidiaries, divisions, or related companies (hereinafter collectively referred to as "the Company") or any other Releasee identified in paragraph 2 below in connection with any aspect of his employment, except with respect to an alleged breach of the Agreement between Bryce and the Company, dated (hereinafter referred to as "the Agreement"). 2. In consideration of the covenants undertaken herein and except for those obligations created by or arising out of the Agreement, Bryce on his behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors does hereby covenant not to sue and acknowledges complete satisfaction of and hereby releases, absolves and discharges the Company and its heirs, successors and assigns, parent companies, subsidiaries, divisions and affiliated corporations, past and present, its and their trustees, directors, officers, shareholders, agents, attorneys, insurers, and employees, past and present, and each of them (collectively referred to as "Releasees"), with respect to and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, wages, obligations, debts, expenses, attorneys' fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which Bryce now owns or holds or has at any time heretofore owned or held as against said Releasees, or any of them. Included in this release and discharge, but not limited by them are any claims that Bryce may have under federal, state, or local law prohibiting age discrimination (for example, under the Age Discrimination in Employment Act) or other forms of discrimination, and/or claims growing out of any legal restrictions on the Company's right to terminate employees (for example, claims that may arise under various contract, tort, public policy or wrongful discharge theories or statutory claims such as claims under New Jersey's Conscientious Employee Protection Act). ________________ Rodolfo Bryce ________________ Date 168562-1.DOC -1- 168562-1.DOC -1- EX-27 3
5 This schedule contains summary financial information extracted from Schering-Plough Corporation and subsidiaries consolidated Financial Statements for the six months ended June 30, 1998, and is qualified in its entirety by reference to such financial statements. 1000000 6-MOS DEC-31-1998 JUN-30-1998 707 0 840 0 745 3280 3835 1297 6965 2755 46 0 0 1015 2386 6965 4032 4032 803 803 485 0 0 1199 294 905 0 0 0 905 1.23 1.22
EX-99 4 Exhibit 99 Company Statement Relating to Forward Looking Information (Filed Pursuant to Rule 175) Mr. Richard Jay Kogan, President and Chief Executive Officer, commenting on the Company's business results, stated: "Assuming no unforeseen developments, Schering-Plough's 1998 earnings per share are expected to be higher by about 20 percent." 838410 -----END PRIVACY-ENHANCED MESSAGE-----