-----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, Fe4j7qeecLOn9ySzDHXUhWMuHpzvC+LoM9wj6eW4cGWD1ZPWSKwkEdFF+g317/bu XeMY2sapQozsLH80pjqn7A== 0000950123-04-000713.txt : 20040126 0000950123-04-000713.hdr.sgml : 20040126 20040126064634 ACCESSION NUMBER: 0000950123-04-000713 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040126 ITEM INFORMATION: ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040126 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06571 FILM NUMBER: 04542227 BUSINESS ADDRESS: STREET 1: ONE GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940-1000 BUSINESS PHONE: 9738227000 8-K 1 y93521e8vk.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 JANUARY 26, 2004 Date of Report (Date of Earliest Event Reported) SCHERING-PLOUGH CORPORATION (Exact name of registrant as specified in its charter) NEW JERSEY 1-6571 22-1918501 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification Number)
2000 GALLOPING HILL ROAD KENILWORTH, NJ 07033 (Address of principal executive offices, including Zip Code) (908) 298-4000 (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE 2003 Fourth Quarter and Full-Year Earnings Press Release Schering-Plough issued a press release titled "Schering-Plough Reports Financial Results for 2003 Fourth Quarter, Full Year" on January 26, 2004, and the press release is attached to this 8-K as Exhibit 99.1. Schering-Plough also issued related Supplemental Data, which is attached to this 8-K as Exhibit 99.2. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. The following exhibits are filed with this 8-K: 99.1 Press release titled "Schering-Plough Reports Financial Results for 2003 Fourth Quarter, Full Year" 99.2 Supplemental Financial Data ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION Schering-Plough today issued a press release titled "Schering-Plough Reports Financial Results for 2003 Fourth Quarter, Full Year" and provided additional supplemental financial data. The press release is attached to this 8-K as Exhibit 99.1. The supplemental financial data is attached to this 8-K as Exhibit 99.2. SIGNATURES 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 hereunto duly authorized. Schering-Plough Corporation By: /s/Thomas H. Kelly Thomas H. Kelly Vice President and Controller Date: January 26, 2004 Exhibit Index The following exhibits are filed with this 8-K: 99.1 Press release titled "Schering-Plough Reports Financial Results for 2003 Fourth Quarter, Full Year" 99.2 Supplemental Financial Data
EX-99.1 3 y93521exv99w1.txt PRESS RELEASE News Release Schering-Plough Corporation 2000 Galloping Hill Road Kenilworth, New Jersey 07033-0530 FOR RELEASE: IMMEDIATELY Investor Contacts: Lisa W. DeBerardine Janet M. Barth (908) 298-7436 Media Contact: Steve Galpin, Jr. (908) 298-7415 SCHERING-PLOUGH REPORTS FINANCIAL RESULTS FOR 2003 FOURTH QUARTER, FULL YEAR KENILWORTH, N.J., Jan. 26, 2004 - Schering-Plough Corporation (NYSE: SGP) today reported financial results for the 2003 fourth quarter and full year, including lower 2003 sales and a loss for the year stemming primarily from the decline in sales and recognition of special charges. "Shortly after I took over Schering-Plough in the second quarter of 2003, we started taking tough actions to stabilize the serious systemic problems affecting this company, problems that had been a long time in the making," said Fred Hassan, Schering-Plough chairman and CEO. "We are closely tracking the five-point Action Agenda that we presented at last year's annual shareholders meeting. We are making good progress in stabilizing our allergy franchises and building market share in the cholesterol-treatment market in spite of the aggressive launch of a new competitor. As planned, 2004 will be the year of repair and cleanup, bridging to an expected turnaround starting in 2005." The company had previously indicated in 2003 that fourth quarter comparisons would be affected by unusual dynamics of its hepatitis C business in that quarter as well as the absence of LOSEC revenues from Europe, which ended in the preceding quarter. The company had also previously indicated that 2004 comparisons with 2003 would be difficult. Added Hassan, "Though we have accomplished a great deal in a short period of time, much remains to be done. We know that this is a long-haul process, and it won't be easy or without occasional setbacks. But we are building for the long term, avoiding quick fixes and staying focused on making Schering-Plough a highly competitive global organization, with multiple growth drivers and capable of delivering superior growth. Our commitment to business integrity, quality and compliance remains fundamental to all our plans." The company's results for 2003 reflect a number of factors and difficult comparisons with prior -2- financial periods. The decline in full-year sales was largely due to the impact from the 2002 patent expiration of prescription CLARITIN, which was launched without exclusivity protection as an over-the-counter (OTC) product at year-end 2002, and to the introduction of new competition for its hepatitis C franchise in a market that in the 2002 fourth quarter benefited from wait-listed patients going on the company's new therapy. Results for the hepatitis C franchise in 2003 also reflect lower trade inventory levels in anticipation of U.S. generic competition for REBETOL. Special charges in the 2003 fourth quarter were primarily related to the Voluntary Early Retirement Program (VERP) in the United States, which was initiated as part of the company's global cost-cutting program designated the Value Enhancement Initiative (VEI). Out of an eligible 2,400 U.S. employees (the eligible population of employees excluded customer-facing employees and employees dedicated to fulfillment of the company's consent decree obligations), approximately 900 people elected to take the VERP. The number of people taking the VERP closely approximated the company's original estimate. The VERP was the first step toward Schering-Plough's goal of reducing overall payroll and related expenses by at least 10 percent (excluding customer-facing employees and consent decree-related employees). While the VERP is expected to achieve a substantial part of the 10 percent goal to reduce payroll and related expenses, additional global workforce reductions will occur in 2004 in order to reduce the company's cost base. The special charges in the 2003 fourth quarter also include asset impairment charges related to certain fixed and intangible assets. "We are taking the necessary steps now so that we can begin the turnaround in 2005 and get Schering-Plough on a sustainable growth path," added Hassan. "We are aggressively pursuing our Value Enhancement Initiative (VEI), which is expected to yield annual cost savings in excess of $200 million." VEI actions taken to date include VERP; elimination of profit-sharing; elimination of employee bonuses under the company's standard plans in 2003 and of routine merit increases in 2004 (excluding customer-facing employees and consent decree-related employees); renegotiated contracts with product and service providers; tight controls on new hires; and cutbacks in travel costs and general expenses. Hassan noted that the company is reinvesting a significant portion of the VEI cost savings back into the company to help build a solid foundation for long-term growth. "We will be restoring the strength of our primary care sales force and enhancing our specialty sales force, providing the resources to maximize our ZETIA and ezetimibe/simvastatin opportunities, and supporting our major profit-making products like NASONEX, REMICADE and our hepatitis C franchise. In addition, we will continue to invest in our promising research compounds and strengthen our manufacturing and compliance systems in concert with meeting our extensive consent decree obligations and other -3- initiatives to repair and upgrade our infrastructure. We also continue to work hard at pursuing in-licensing opportunities to supplement our R&D pipeline. We are pleased to note that, based on fourth quarter sales, ZETIA is now annualizing at more than $600 million in sales, one of the few large launches in the pharmaceutical industry in recent years. "The road ahead will be difficult and challenging," Hassan added, "but we have an exciting opportunity to become a leader in innovation and execution, and to achieve earnings growth beginning with the anticipated turnaround in 2005." FOURTH QUARTER 2003 RESULTS The company reported a loss for the 2003 fourth quarter of $181 million or 12 cents per share compared with net income of $313 million and diluted earnings per share of 21 cents in the 2002 period. The special charges in the 2003 fourth quarter were $229 million, or 13 cents per share (as measured using the company's effective tax rate). These charges include employee termination costs of approximately $179 million primarily related to the VERP and asset impairment charges of $50 million related to certain fixed and intangible assets. As discussed above, the fourth quarter results reflect the substantially lower sales comparisons for the INTRON franchise, which includes the anticancer/antiviral agent INTRON A Injection, as monotherapy and in combination with REBETOL Capsules for treating hepatitis C, and PEG-INTRON Powder for Injection, a longer-acting form of INTRON A, as monotherapy and in combination with REBETOL for treating hepatitis C. Fourth quarter 2003 sales of $1.9 billion were 18 percent lower versus the comparable 2002 period, including a favorable exchange impact of 6 percent. These sales do not include any results from the cholesterol joint venture with Merck. Contributing to lower fourth quarter sales comparisons was a 55 percent decline to $369 million in global sales of the company's INTRON franchise. U.S. sales of the INTRON franchise were down 76 percent to $132 million. Also contributing to lower fourth quarter sales comparisons was a reduction in overall trade inventories, including a reduction of REBETOL trade inventories in anticipation of U.S. generic competition. U.S. REBETOL sales in the fourth quarter were $18 million. Additionally, as the company's LOSEC agreement with AstraZeneca ended in the 2003 third quarter, there were no LOSEC revenues recorded in the fourth quarter. LOSEC revenues in the 2002 fourth quarter were $37 million. The company's U.S. allergy franchise continued to face intense competitive pressures for its major products. The company succeeded, however, in stabilizing CLARINEX market share (reported at 19.3 percent in December 2003 after a market bottom in new prescriptions of 18.5 percent in August 2003) and NASONEX market share (reported at 25.5 percent in December 2003 after a bottom of 23.3 -4- percent in new prescriptions in July 2003). Fourth quarter 2003 U.S. CLARINEX sales were $93 million, down 36 percent, primarily reflecting a decline in the prescription antihistamine market due to the introduction of OTC CLARITIN and private label generic loratadine. NASONEX U.S. sales were $78 million, down 3 percent due to year-over-year market share comparisons. Sales of OTC CLARITIN totaled $96 million in the 2003 fourth quarter compared to sales of $105 million in the 2002 period when the product was first shipped. The company continued to record strong positive results outside the United States for several major products in the 2003 fourth quarter, reflecting market share gains and favorable foreign exchange. Products recording higher sales outside the United States included REMICADE, up 46 percent to $159 million; TEMODAR, up 44 percent to $48 million; CAELYX, up 57 percent to $32 million; CLARINEX, up 30 percent to $40 million; and NASONEX, up 21 percent to $55 million. The company noted that its cholesterol joint venture with Merck has moved well beyond the research and development phase. ZETIA was launched in late 2002 and global sales of ZETIA in the 2003 fourth quarter totaled $165 million, with U.S. sales of $144 million. Further, a U.S. marketing application for ezetimibe/simvastatin, a new cholesterol-lowering product, was submitted in September 2003 and accepted for filing in November 2003. To reflect the venture's first full year of commercial operations, the company will begin presenting the venture's results in accordance with the equity method of accounting. Under this method, the company reports its share of operating profits of the venture, net of its share of research and development costs. This presentation is effective for the full year 2003. Accordingly, the operating profits of the venture that had been included in net sales as alliance revenue in the first three quarters of 2003 have been reclassified to "Equity Income from Cholesterol Joint Venture." Likewise, the company's share of the venture's research and development costs, which had been reported in "Research and Development" in the previous quarters of 2003, have been reclassified to "Equity Income from Cholesterol Joint Venture." Further, in the second quarter of 2003, the company earned a milestone from Merck of $20 million that had been reported in "Other, net" in the second quarter. This amount has also been reclassified to "Equity Income from Cholesterol Joint Venture." Prior years are not affected by this new presentation. The "Equity Income from Cholesterol Joint Venture" for the 2003 fourth quarter totaled $33 million. This amount includes operating profits of $47 million less research and development costs of $14 million. For the full year ended 2003, "Equity Income from Cholesterol Joint Venture" totaled $54 million, which is comprised of $113 million of operating profits, plus $20 million for the milestone earned in the second quarter, less $79 million which represents the company's share of the research and -5- development costs. It should be noted that the company incurs substantial costs, such as selling costs, that are not reflected in the equity income from the cholesterol joint venture and are borne by the overall cost structure of Schering-Plough. The company's gross margin ratio to sales was 62.1 percent for the 2003 fourth quarter versus 74.4 percent in the 2002 period. However, 3.9 points of the decline were due to the benefit in the 2002 fourth quarter from a favorable adjustment of $92 million related to the settlement of a royalty dispute with Biogen regarding interferon products. The remaining amount of the decline was due to a change in product sales mix and increased spending for the company's current Good Manufacturing Practices (cGMP) compliance efforts. Selling, general and administrative expenses declined 9 percent to $821 million in the fourth quarter of 2003, reflecting lower marketing expenses in the global pharmaceutical business and VEI savings, primarily from the absence of payments for profit sharing and bonuses, offset by higher promotional spending for OTC CLARITIN and unfavorable foreign exchange. While the VEI savings should create better comparisons in the overhead costs in 2004 and 2005, the company also expects to invest more in sales and marketing to protect its U.S. market shares, to support new product launches and to invest in R&D projects. Research and development spending for the fourth quarter totaled $395 million. Including the amount reported as "Equity Income from Cholesterol Joint Venture," research and development spending was essentially flat versus the 2002 period due to the timing of research spending. Going forward, the company said there will be VEI savings realized in R&D, but these are expected to be offset by expenditures on ZETIA and the improving early pipeline. Schering-Plough noted that its continued focus on compliance in all key functions is negatively impacting the overall cost structure of the company. The "Other, net" line reflects higher net interest expense from increased borrowings including higher borrowing costs associated with the long-term debt issued in the 2003 fourth quarter. The 2002 fourth quarter "Other, net" line included a nonrecurring gain of $80 million from the sale of U.S. marketing rights for SUBOXONE and SUBUTEX back to Reckitt Benckiser plc. FOURTH QUARTER 2003 CONFERENCE CALL AND WEBCAST Schering-Plough will conduct a conference call at 8 a.m. (EST) today to review these results and respond to investor inquiries. Fred Hassan, Schering-Plough's chairman and CEO, and other members of management will participate in the conference call. To listen live to the call, dial 1-706-634-5003. A replay of the call will be available starting at approximately 11 a.m. on Jan. 26 through 5 p.m. on Jan. -6- 29. To listen to the replay, dial 1-706-645-9291 and enter the conference ID # 4807512. A live audio webcast of the conference call also will be available to all interested parties via the Schering-Plough corporate Web site, www.schering-plough.com, by clicking on the "View Webcasts" link. Software needed to listen to the webcast (Windows Media Player) is available via the site and should be downloaded prior to the beginning of the webcast. A replay of the webcast will be available starting at approximately 11 a.m. on Jan. 26 through 5 p.m. on Feb. 2. DISCLOSURE NOTICE: The information in this press release includes certain "forward-looking" statements relating to the company's business prospects, earnings outlook, anticipated turnaround and resulting growth prospects, and savings goals relating to productivity and efficiency initiatives. Actual results may differ materially from forward-looking statements due to a number of risks and uncertainties, including the market viability of the company's marketed and pipeline products, including the current and pipeline products in the company's joint venture with Merck; possible changes in business strategies and the ability to successfully implement those business strategies; general market and economic factors; competitive product development; market acceptance of new products; product availability; current and future branded, generic or OTC competition; federal and state regulations and legislation; the research and regulatory processes for new products and indications; existing and new manufacturing issues that may arise; trade buying patterns; patent positions; litigation and investigations; and instability or destruction in a geographic area important to the company due to reasons such as war. For further details and a discussion of these and other risks and uncertainties, see the company's past and future Securities and Exchange Commission filings, including the company's 10-Q for the 2003 third quarter. The company does not assume any obligation to update any forward-looking statements. Schering-Plough is a research-based company engaged in the discovery, development, manufacturing and marketing of pharmaceutical products worldwide. -7- SCHERING-PLOUGH CORPORATION Report for the fourth quarter and twelve months ended December 31 (unaudited): (Amounts in millions, except per share figures)
Fourth Quarter Twelve Months -------------------------------------- ------------------------------------- 2003 2002 % 2003 2002 % -------- -------- -------- -------- -------- -------- Net Sales ....................... $ 1,948 $ 2,370 (18) $ 8,334 $ 10,180 (18) Cost of Sales ................... (739) (607) 22 (2,833) (2,505) 13 Selling, General and Administrative ........... (821) (897) (9) (3,474) (3,681) (6) Research and Development ........ (395) (409) (3) (1,469) (1,425) 3 Equity Income from Cholesterol Joint Venture a/ ............. 33 0 N/M 54 0 N/M Other, net ...................... (10) 98 N/M (59) 144 N/M Special Charges b/ .............. (229) (150) 53 (599) (150) N/M -------- -------- -------- -------- (Loss)/Income Before Income Taxes (213) 405 N/M (46) 2,563 N/M Income Tax Benefit/(Expense) .... 32 (92) N/M (46) (589) (92) -------- -------- -------- -------- Net (Loss)/Income ............... $ (181) $ 313 N/M $ (92) $ 1,974 N/M ======== ======== ======== ======== Diluted (Loss)/Earnings per Common Share ................. $ (0.12) $ 0.21 N/M $ (0.06) $ 1.34 N/M ======== ======== ======== ======== Effective Tax Rate c/ ........... 15.0% 23.0% N/M 23.0% Average Common Shares Outstanding - Diluted ........ 1,470 1,469 1,469 1,470 Actual Number of Common Shares Outstanding at December 31 ... 1,471 1,468 1,471 1,468
N/M - Not a meaningful percentage a/ Effective for the full year 2003, the company is presenting its collaboration with Merck under the equity method of accounting. Under that method, the company records its share of the operating profits less its share of research and development costs in "Equity Income from Cholesterol Joint Venture." Included in this line for the full year 2003 are the company's share of the operating profits of $113 million and a $20 million milestone payment, less its share of research and development costs of $79 million. It should be noted that the company incurs substantial costs, such as selling costs, that are not reflected in the equity income from the cholesterol joint venture and are borne by the overall cost structure of Schering-Plough. -8- b/ Special Charges for the fourth quarter of 2003 included $179 million of employee termination costs, primarily related to the VERP in the United States, as well as $50 million of asset impairment charges related to certain fixed and intangible assets. Special Charges for the full year 2003 also included the $350 million provision to increase litigation reserves recorded in the third quarter, as well as $20 million of asset impairment charges related to manufacturing facility fixed assets recorded in the second quarter. Special charges in 2002 included a $150 million provision to increase litigation reserves. c/ For the full year 2003, the effective tax rate was 15% excluding the $350 million provision to increase litigation reserves, which is not tax deductible. Foreign exchange had no impact on diluted earnings per share for the fourth quarter of 2003. Diluted earnings per share for the 12 months of 2003 reflect a favorable exchange impact of $0.05 per share. The company advises that the trend in earnings per share should be viewed with and without the effects of foreign exchange rates. -9- SCHERING-PLOUGH CORPORATION Report for the fourth quarter and twelve months ended December 31 (unaudited):
Net Sales by Major Product: (Dollars in Millions) Fourth Quarter Twelve Months -------------------------------- ------------------------------- 2003 2002 % 2003 2002 % ------- ------- ------- ------- ------- ------- ANTI-INFECTIVE & ANTICANCER $ 726 $ 1,088 (33) $ 3,098 $ 3,733 (17) Caelyx 32 21 57 111 71 55 Intron franchise* 369 817 (55) 1,851 2,736 (32) Remicade 159 109 46 540 337 60 Temodar 87 69 26 324 278 16 ALLERGY & RESPIRATORY 487 338 44 2,003 3,304 (39) Clarinex 133 176 (25) 694 598 16 Claritin Rx 81 (51) N/M 370 1,802 (79) Nasonex 132 125 6 500 523 (4) Proventil 43 17 N/M 125 128 (2) CARDIOVASCULARS 87 102 (15) 467 433 8 Integrilin 46 81 (43) 306 304 1 DERMATOLOGICALS 115 158 (27) 507 511 (1) OTHER PHARMACEUTICALS 101 236 (57) 597 807 (26) ------- ------- ------- ------- GLOBAL PHARMACEUTICALS 1,516 1,922 (21) 6,672 8,788 (24) OTC 143 155 (8) 563 269 N/M OTC Claritin 96 105 (9) 415 105 N/M FOOT CARE 64 65 (1) 275 279 (1) SUN CARE 11 35 (69) 127 167 (24) ------- ------- ------- ------- CONSUMER HEALTH CARE 218 255 (14) 965 715 35 ANIMAL HEALTH CARE 214 193 11 697 677 3 ------- ------- ------- ------- CONSOLIDATED NET SALES $ 1,948 $ 2,370 (18) $ 8,334 $10,180 (18) ======= ======= ======= =======
N/M - not a meaningful percentage *The Intron franchise includes INTRON A, PEG-INTRON and REBETOL. NOTE: Additional information about U.S. and international sales for specific products is available by calling the company or visiting the investor relations Web site at http://ir.schering-plough.com. EX-99.2 4 y93521exv99w2.txt SUPPLEMENTAL FINANCIAL DATA . . . SCHERING-PLOUGH CORPORATION STATEMENTS OF CONSOLIDATED OPERATIONS (DOLLARS IN MILLIONS, EXCEPT EPS)
--------------------------------------------------------------------- 2003 2002 --------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. $ $ $ $ $ $ $ $ --------------------------------------------------------------------- Net Sales * 2,082 2,308 4,389 1,998 6,386 1,948 8,334 2,556 Cost of Sales 658 784 1,442 652 2,094 739 2,833 579 --------------------------------------------------------------------- Gross Margin 1,424 1,524 2,947 1,346 4,292 1,209 5,501 1,977 Total SG&A 843 938 1,780 873 2,653 821 3,474 919 Research & Development * 322 369 691 382 1,074 395 1,469 305 Equity (Income)/Loss from Cholesterol Joint Venture * 30 (26) 4 (24) (21) (33) (54) - Other, Net* 13 (4) 8 41 49 10 59 (26) Special Charges ** - 20 20 350 370 229 599 - --------------------------------------------------------------------- (Loss)/Income Before Income Taxes 216 227 444 (276) 167 (213) (46) 779 Income Taxes (Benefit)/Expense 43 45 89 (11) 77 (32) 46 179 --------------------------------------------------------------------- Net (Loss)/Income 173 182 355 (265) 90 (181) (92) 600 ===================================================================== Diluted (Loss)/Earnings per Common Share 0.12 0.12 0.24 (0.18) 0.06 (0.12) (0.06) 0.41 ===================================================================== Avg. Shares Outstanding- Diluted 1,470 1,471 1,471 1,469 1,470 1,470 1,469 1,471 Actual Shares Outstanding 1,469 1,469 1,469 1,469 1,469 1,471 1,471 1,466 ---------------------------------------------------------------------
----------------------------------------------------------------------- 2002 ----------------------------------------------------------------------- 2nd 6 3rd 9 4th 4th Qtr. 12 Mos. Qtr. Mos. Qtr. Mos. Qtr. Year vs vs $ $ $ $ $ $ 4th Qtr. 12 Mos. ----------------------------------------------------------------------- Net Sales * 2,833 5,389 2,421 7,810 2,370 10,180 (18%) (18%) Cost of Sales 675 1,254 644 1,898 607 2,505 22% 13% ----------------------------------------------------------------------- Gross Margin 2,158 4,135 1,777 5,912 1,763 7,675 (31%) (28%) Total SG&A 995 1,914 870 2,784 897 3,681 (9%) (6%) Research & Development * 357 662 354 1,017 409 1,425 (3%) 3% Equity (Income)/Loss from Cholesterol Joint Venture * - - - - - - N/M N/M Other, Net* (16) (41) (4) (47) (98) (144) N/M N/M Special Charges ** - - - - 150 150 53% N/M ----------------------------------------------------------------------- (Loss)/Income Before Income Taxes 822 1,600 557 2,158 405 2,563 N/M N/M Income Taxes (Benefit)/Expense 189 368 128 496 92 589 N/M (92%) ----------------------------------------------------------------------- Net (Loss)/Income 633 1,232 429 1,662 313 1,974 N/M N/M ======================================================================= Diluted (Loss)/Earnings per Common Share 0.43 0.84 0.29 1.13 0.21 1.34 N/M N/M ======================================================================= Avg. Shares Outstanding- Diluted 1,470 1,470 1,469 1,470 1,469 1,470 Actual Shares Outstanding 1,466 1,466 1,467 1,467 1,468 1,468 -----------------------------------------------------------------------
--------------------------------------------------------------------------------------- 2003 2002 --------------------------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st 2nd Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. Qtr. --------------------------------------------------------------------------------------- Ratios To Net Sales Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 31.6% 34.0% 32.9% 32.6% 32.8% 37.9% 34.0% 22.6% 23.8% Gross Margin 68.4% 66.0% 67.1% 67.4% 67.2% 62.1% 66.0% 77.4% 76.2% Total SG&A 40.5% 40.6% 40.6% 43.7% 41.5% 42.1% 41.7% 35.9% 35.1% Research & Development 15.5% 16.0% 15.8% 19.1% 16.8% 20.3% 17.6% 11.9% 12.6% (Loss)/Income Before Income Taxes 10.4% 9.8% 10.1% (13.8%) 2.6% (11.0%) (0.6%) 30.5% 29.0% Income Taxes (Benefit)/Expense 2.1% 2.0% 2.0% (0.6%) 1.2% (1.6%) 0.5% 7.0% 6.7% Net (Loss)/Income 8.3% 7.9% 8.1% (13.3%) 1.4% (9.3%) (1.1%) 23.5% 22.3% ---------------------------------------------------------------------------------------
---------------------------------------------- 2002 ---------------------------------------------- 6 3rd 9 4th Mos. Qtr. Mos. Qtr. Year ---------------------------------------------- Ratios To Net Sales Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 23.3% 26.6% 24.3% 25.6% 24.6% Gross Margin 76.7% 73.4% 75.7% 74.4% 75.4% Total SG&A 35.5% 35.9% 35.6% 37.9% 36.2% Research & Development 12.3% 14.6% 13.0% 17.2% 14.0% (Loss)/Income Before Income Taxes 29.7% 23.0% 27.6% 17.1% 25.2% Income Taxes (Benefit)/Expense 6.8% 5.3% 6.4% 3.9% 5.8% Net (Loss)/Income 22.9% 17.7% 21.3% 13.2% 19.4% ----------------------------------------------
* Effective for the full year 2003, the company is presenting its collaboration with Merck under the equity method of accounting. Under that method, the company records its share of the operating profits less its share of research and development costs in "Equity (Income)/Loss from Cholesterol Joint Venture." Included in this line for the full year 2003 are the company's share of the operating profits of $113 million and a $20 million milestone payment, less its share of research and development costs of $79 million. It should be noted that the company incurs substantial costs, such as selling costs, that are not reflected in the equity income from the cholesterol joint venture and are borne by the overall cost structure of Schering-Plough. ** Special Charges for the fourth quarter of 2003 included $179 million of employee termination costs, primarily related to the VERP in the United States, as well as $50 million of asset impairment charges related to certain fixed and intangible assets. Special charges for the full year 2003 also included the $350 million provision to increase litigation reserves recorded in the third quarter, as well as $20 million of asset impairment charges related to manufacturing facility assets recorded in the second quarter. Special Charges in 2002 included a $150 million provision to increase litigation reserves. All figures rounded. Totals may not add due to rounding. N/M - not a meaningful percentage. 1 SCHERING-PLOUGH CORPORATION ANTI-INFECTIVE/ANTICANCER PRODUCT SALES (DOLLARS IN MILLIONS)
----------------------------------------------------------------------------------------------------- 2003 2002 ----------------------------------------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st 2nd 6 3rd Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. Qtr. Mos. Qtr. $ $ $ $ $ $ $ $ $ $ $ ----------------------------------------------------------------------------------------------------- U.S.: 303 349 652 215 867 171 1,039 411 420 830 472 Intron Franchise* 279 302 581 171 752 132 884 342 377 719 426 Temodar 26 48 73 47 120 39 159 34 47 80 42 Other (2) (1) (2) (3) (5) - (4) 35 (4) 31 4 INTERNATIONAL: 477 521 998 506 1,505 555 2,059 387 471 858 485 Caelyx 22 26 49 30 78 32 111 14 17 31 19 Intron Franchise* 237 266 503 227 730 236 966 215 282 497 277 Remicade 114 126 240 142 382 159 540 60 76 137 92 Temodar 34 40 73 44 117 48 165 25 28 53 34 Other 70 63 133 63 198 80 277 73 68 140 63 TOTAL: 781 870 1,650 722 2,372 726 3,098 797 891 1,688 957 Caelyx 22 26 49 30 78 32 111 14 17 31 19 Intron Franchise* 516 569 1,084 398 1,482 369 1,851 556 659 1,216 703 Remicade 114 126 240 142 382 159 540 60 76 137 92 Temodar 59 87 146 90 237 87 324 59 74 133 76 Other 70 62 131 62 193 79 272 108 65 171 67 -----------------------------------------------------------------------------------------------------
------------------------------------------------- 2002 ------------------------------------------------- 9 4th 4th Qtr. 12 Mos. Mos. Qtr. Year vs vs $ $ $ 4th Qtr. 12 Mos. ------------------------------------------------- U.S.: 1,302 580 1,881 (70%) (45%) Intron Franchise* 1,145 544 1,689 (76%) (48%) Temodar 122 36 158 10% 1% Other 35 - 34 N/M N/M INTERNATIONAL: 1,343 508 1,851 9% 11% Caelyx 51 21 71 57% 55% Intron Franchise* 774 273 1,047 (13%) (8%) Remicade 228 109 337 46% 60% Temodar 87 33 120 44% 37% Other 203 72 276 11% - TOTAL: 2,645 1,088 3,733 (33%) (17%) Caelyx 51 21 71 57% 55% Intron Franchise* 1,919 817 2,736 (55%) (32%) Remicade 228 109 337 46% 60% Temodar 209 69 278 26% 16% Other 238 72 311 10% (13%) -------------------------------------------------
* The INTRON franchise consists of INTRON A, PEG-INTRON and REBETOL. Notes: All figures rounded. Totals may not add due to rounding. N/M - not a meaningful percentage. 2 SCHERING-PLOUGH CORPORATION ALLERGY/RESPIRATORY PRODUCT SALES (DOLLARS IN MILLIONS)
-------------------------------------------------------------------------------------------- 2003 2002 -------------------------------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st 2nd Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. Qtr. $ $ $ $ $ $ $ $ $ -------------------------------------------------------------------------------------------- U.S: 213 332 545 231 775 230 1,005 805 899 Clarinex 133 144 277 128 405 93 498 70 137 Claritin Rx Franchise* 16 13 29 (3) 26 - 25 565 677 Nasonex 34 115 149 74 223 78 301 101 54 Proventil 17 42 59 23 82 43 125 59 30 Other 13 18 31 9 39 16 56 10 1 INTERNATIONAL: 240 289 530 211 741 257 998 209 249 Clarinex 41 75 116 41 157 40 196 14 36 Claritin Rx Franchise 93 99 192 72 264 81 345 94 115 Nasonex 44 60 105 39 144 55 199 37 47 Other 62 55 117 59 176 81 258 64 51 TOTAL: 453 621 1,074 442 1,516 487 2,003 1,014 1,147 Clarinex 173 219 392 169 561 133 694 85 173 Claritin Rx Franchise* 109 112 221 68 289 81 370 659 792 Nasonex 79 175 254 114 368 132 500 138 101 Proventil 17 42 59 23 82 43 125 59 30 Other 75 73 148 68 216 98 314 73 51 --------------------------------------------------------------------------------------------
--------------------------------------------------------------------- 2002 --------------------------------------------------------------------- 6 3rd 9 4th 4th Qtr. 12 Mos. Mos. Qtr. Mos. Qtr. Year vs vs $ $ $ $ $ 4th Qtr. 12 Mos. --------------------------------------------------------------------- U.S: 1,703 579 2,282 124 2,406 85% (58%) Clarinex 207 132 340 146 485 (36%) 3% Claritin Rx Franchise* 1,242 303 1,545 (121) 1,424 N/M (98%) Nasonex 155 124 279 80 359 (3%) (16%) Proventil 89 22 111 17 128 N/M (2%) Other 10 (2) 7 2 10 N/M N/M INTERNATIONAL: 458 226 684 214 898 20% 11% Clarinex 50 32 82 31 112 30% 74% Claritin Rx Franchise 209 99 308 70 378 16% (9%) Nasonex 83 36 119 45 164 21% 21% Other 116 59 175 68 244 19% 6% TOTAL: 2,161 805 2,966 338 3,304 44% (39%) Clarinex 258 164 422 176 598 (25%) 16% Claritin Rx Franchise* 1,451 402 1,853 (51) 1,802 N/M (79%) Nasonex 238 160 398 125 523 6% (4%) Proventil 89 22 111 17 128 N/M (2%) Other 125 57 182 71 253 38% 24% ---------------------------------------------------------------------
* U.S. OTC CLARITIN sales are now reported in the OTC category (see page 6). Notes: All figures rounded. Totals may not add due to rounding. N/M - not a meaningful percentage. 3 SCHERING-PLOUGH CORPORATION CARDIOVASCULAR PRODUCT SALES (DOLLARS IN MILLIONS)
------------------------------------------------------------------------------------------------- 2003 2002 ------------------------------------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st 2nd 6 3rd 9 Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. Qtr. Mos. Qtr. Mos. $ $ $ $ $ $ $ $ $ $ $ $ ------------------------------------------------------------------------------------------------- U.S.: 95 109 204 99 303 55 357 95 89 184 74 258 Integrilin 84 87 171 73 244 40 284 62 71 134 72 206 Other 11 22 33 26 59 15 73 33 18 50 2 52 INTERNATIONAL: 24 28 52 26 78 32 110 22 26 48 26 74 Integrilin 5 5 10 6 16 6 22 6 6 12 5 17 Other 19 23 42 20 62 26 88 16 20 36 21 57 TOTAL: 119 137 257 124 380 87 467 117 115 232 99 331 Integrilin 89 92 181 79 260 46 306 68 78 146 77 223 Other 30 45 76 45 120 41 161 49 37 86 22 108 -------------------------------------------------------------------------------------------------
------------------------------------ 2002 ------------------------------------ 4th 4th Qtr. 12 Mos. Qtr. Year vs vs $ $ 4th Qtr. 12 Mos. ------------------------------------ U.S.: 78 336 (30%) 6% Integrilin 77 283 (49%) - Other 1 53 N/M 38% INTERNATIONAL: 24 97 35% 13% Integrilin 4 20 75% 8% Other 20 77 30% 14% TOTAL: 102 433 (15%) 8% Integrilin 81 304 (43%) 1% Other 21 129 95% 25% ------------------------------------
Notes: Certain prior period amounts have been reclassified to conform to the current year presentation. All figures rounded. Totals may not add due to rounding. N/M - not a meaningful percentage. 4 SCHERING-PLOUGH CORPORATION DERMATOLOGICALS, OTHER PHARMACEUTICAL, GLOBAL PHARMACEUTICAL (DOLLARS IN MILLIONS)
------------------------------------------------------------------------------------------------------------- 2003 2002 ------------------------------------------------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st 2nd 6 3rd Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. Qtr. Mos. Qtr. $ $ $ $ $ $ $ $ $ $ $ ------------------------------------------------------------------------------------------------------------- U.S. 18 41 59 23 81 9 90 32 20 52 27 INTERNATIONAL 100 103 203 108 311 106 417 88 92 180 94 DERMATOLOGICALS: 118 143 262 130 392 115 507 120 112 232 121 OTHER PHARM: 191 126 316 180 496 101 597 174 229 403 167 - ----------------------------------------------------------------------------------------------------------------------------------- U.S. 643 757 1,401 549 1,950 426 2,376 1,337 1,441 2,778 1,156 INTERNATIONAL 1,019 1,139 2,158 1,048 3,206 1,090 4,296 885 1,053 1,938 993 GLOBAL PHARM: 1,662 1,897 3,559 1,598 5,156 1,516 6,672 2,222 2,494 4,716 2,149 - -----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------- 2002 --------------------------------------------------- 9 4th 4th Qtr. 12 Mos. Mos. Qtr. Year vs vs $ $ $ 4th Qtr. 12 Mos. --------------------------------------------------- U.S. 79 53 132 (84%) (32%) INTERNATIONAL 274 104 378 2% 10% DERMATOLOGICALS: 353 158 511 (27%) (1%) OTHER PHARM: 571 236 807 (57%) (26%) - ------------------------------------------------------------------------- U.S. 3,934 885 4,819 (52%) (51%) INTERNATIONAL 2,932 1,037 3,969 5% 8% GLOBAL PHARM: 6,866 1,922 8,788 (21%) (24%) - -------------------------------------------------------------------------
Notes: International pharmaceutical sales reflect a favorable foreign exchange rate impact of 12% in the 2003 4th quarter and 11% year to date. Certain prior period amounts have been reclassified to conform to the current year presentation. All figures rounded. Totals may not add due to rounding. N/M - not a meaningful percentage. 5 SCHERING-PLOUGH CORPORATION ANIMAL HEALTH, OTC, FOOT CARE, SUN CARE & CONSOLIDATED SALES (DOLLARS IN MILLIONS)
-------------------------------------------------------------------------------------------------- 2003 2002 -------------------------------------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st 2nd Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. Qtr. $ $ $ $ $ $ $ $ $ -------------------------------------------------------------------------------------------------- OTC: 155 122 276 143 420 143 563 39 37 OTC Claritin 125 88 212 107 319 96 415 0 0 Other OTC 30 34 64 36 101 47 148 39 37 FOOT CARE: 58 79 137 75 211 64 275 73 79 SUN CARE: 64 39 104 12 116 11 127 72 52 CONSUMER HEALTH CARE: 277 240 517 230 747 218 965 184 168 U.S. 45 49 94 57 150 68 218 57 49 INTERNATIONAL 98 122 220 113 333 146 479 94 122 ANIMAL HEALTH: 143 171 313 170 483 214 697 150 171 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. 965 1,047 2,012 836 2,848 712 3,559 1,577 1,659 International 1,116 1,261 2,378 1,162 3,539 1,236 4,775 979 1,175 TOTAL CONSOLIDATED: 2,082 2,308 4,389 1,998 6,386 1,948 8,334 2,556 2,833 - ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------- 2002 ---------------------------------------------------------------------------- 6 3rd 9 4th 4th Qtr. 12 Mos. Mos. Qtr. Mos. Qtr. Year vs vs $ $ $ $ $ 4th Qtr. 12 Mos. ---------------------------------------------------------------------------- OTC: 76 39 115 155 269 (8%) N/M OTC Claritin 0 0 0 105 105 (9%) N/M Other OTC 76 39 115 50 164 (6%) (10%) FOOT CARE: 152 63 214 65 279 (1%) (1%) SUN CARE: 124 8 132 35 167 (69%) (24%) CONSUMER HEALTH CARE: 352 110 461 255 715 (14%) 35% U.S. 106 59 165 62 227 10% (4%) INTERNATIONAL 215 103 318 131 450 11% 7% ANIMAL HEALTH: 321 162 483 193 677 11% 3% - -------------------------------------------------------------------------------------------------------------- U.S. 3,236 1,324 4,560 1,201 5,761 (41%) (38%) International 2,153 1,096 3,250 1,169 4,419 6% 8% TOTAL CONSOLIDATED: 5,389 2,421 7,810 2,370 10,180 (18%) (18%) - --------------------------------------------------------------------------------------------------------------
Notes: Certain prior period amounts have been reclassified to conform to the current year presentation. All figures rounded. Totals may not add due to rounding. N/M - not a meaningful percentage. 6 MISCELLANEOUS DATA (DOLLARS IN MILLIONS)
----------------------------------------------------------------------------------------------------- 2003 2002 ----------------------------------------------------------------------------------------------------- 1st 2nd 6 3rd 9 4th 1st 2nd 6 3rd Qtr. Qtr. Mos. Qtr. Mos. Qtr. Year Qtr. Qtr. Mos. Qtr. $ $ $ $ $ $ $ $ $ $ $ ----------------------------------------------------------------------------------------------------- CONSOLIDATED SALES GROWTH RATES: As Reported (19%) (19%) (19%) (17%) (18%) (18%) (18%) 11% 8% 9% 2% Excluding Exchange (23%) (24%) (24%) (21%) (23%) (24%) (23%) 13% 8% 10% (1%) OTHER, NET Interest Income $13 $15 $28 $9 $37 $20 $57 $17 $18 $35 $18 Interest Expense (13) (12) (25) (24) (49) (32) (81) (5) (12) (17) (4) FX Gains/(Losses) (1) - (1) 1 (1) - (1) 2 2 4 (1) Other Income/(Expense) (12) 1 (10) (27) (36) 2 (34) 12 8 19 (9) Total - Other, Net ($13) $4 ($8) ($41) ($49) ($10) ($59) $26 $16 $41 $4 EFFECTIVE TAX RATE 20.0% 20.0% 20.0% ** ** 15.0% ** 23.0% 23.0% 23.0% 23.0% -----------------------------------------------------------------------------------------------------
------------------------ 2002 ------------------------ 9 4th Mos. Qtr. Year $ $ $ ------------------------ CONSOLIDATED SALES GROWTH RATES: As Reported 7% (4%) 4% Excluding Exchange 7% (6%) 3% OTHER, NET Interest Income $53 $22 $75 Interest Expense (21) (6) (28) FX Gains/(Losses) 4 (2) 2 Other Income/(Expense) 11 84 95 Total - Other, Net $47 $98 $144 EFFECTIVE TAX RATE 23.0% 23.0% 23.0% ------------------------
** In the 2003 third quarter, the company reduced its estimate of the 2003 annual effective tax rate to 15% from 20% on income, excluding the $350 million non-tax deductible provision to increase litigation reserves. All figures rounded. Totals may not add due to rounding. N/M - not a meaningful percentage. --------------------------------------------------- Lisa W. DeBerardine 908-298-7437 Janet M. Barth 908-298-7417 --------------------------------------------------- 7 SCHERING-PLOUGH CORPORATION 2003 RECONCILIATION FOR EQUITY INCOME FROM CHOLESTEROL JV and SPECIAL CHARGES (DOLLARS IN MILLIONS)
2003 FIRST QUARTER - --------------------------------------------------------------------------------------- As Reported Adjustment As Adjusted ----------- ---------- ----------- Net Sales $2,074 $8 $2,082 Cost of Sales 658 -- 658 --------------------------------------- Gross Margin 1,416 8 1,424 R&D 344 (22) 322 Equity (Income)/Loss from Cholesterol J.V. -- 30 30 Other (Income)/Expense 13 -- 13 Special Charges -- -- -- Ratios to Sales Net Sales 100% 100% 100% Cost of Sales 31.7% (0.1) 31.6% Gross Margin 68.3% 0.1 68.4% R&D 16.6% (1.1) 15.5% - ---------------------------------------------------------------------------------------
2003 SECOND QUARTER 2003 FIRST SIX MONTHS - ----------------------------------------------------------------------------------------------------------------------------------- As Reported Adjustment As Adjusted As Reported Adjustment As Adjusted ----------- ---------- ----------- ----------- ---------- ----------- Net Sales $2,338 ($30) $2,308 $4,411 ($22) $4,389 Cost of Sales 784 -- 784 1,442 -- 1,442 ---------------------------------------- ------------------------------------- Gross Margin 1,554 (30) 1,524 2,969 (22) 2,947 R&D 393 (24) 369 737 (46) 691 Equity (Income)/Loss from Cholesterol J.V. -- 26 (26) -- 4 4 Other (Income)/Expense (4) 0 (4) 8 0 8 Special Charges -- 20 20 -- 20 20 Ratios to Sales Net Sales 100% 100% 100% 100% 100% 100% Cost of Sales 33.5% 0.5 34.0% 32.7% 0.2 32.9% Gross Margin 66.5% (0.5) 66.0% 67.3% (0.2) 67.1% R&D 16.8% (0.8) 16.0% 16.7% (0.9) 15.8% - -----------------------------------------------------------------------------------------------------------------------------------
2003 THIRD QUARTER 2003 FIRST NINE MONTHS - ----------------------------------------------------------------------------------------------------------------------------------- As Reported Adjustment As Adjusted As Reported Adjustment As Adjusted ----------- ---------- ----------- ----------- ---------- ----------- Net Sales $2,041 ($43) $1,998 $6,452 ($66) $6,386 Cost of Sales 652 -- 652 2,094 -- 2,094 ----------------------------------------- ------------------------------------- Gross Margin 1,389 (43) 1,346 4,358 (66) 4,292 R&D 401 (19) 382 1,139 (65) 1,074 Equity (Income)/Loss from Cholesterol J.V. -- (24) (24) -- 21 (21) Other (Income)/Expense 391 (350) 41 399 350 49 Special Charges -- 350 350 -- 370 370 Ratios to Sales Net Sales 100% 100% 100% 100.0% 100.0% 100.0% Cost of Sales 31.9% (0.7) 32.6% 32.5% 0.3 32.8% Gross Margin 68.1% 0.7 67.4% 67.5% (0.3) 67.2% R&D 19.7% (0.6) 19.1% 17.6% (0.8) 16.8% - -----------------------------------------------------------------------------------------------------------------------------------
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