-----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, FA15iPfGH2/dE2ESKgdhhBRf8rzQcuksINrekE2SerGUm6kwz03ULmFeBjjICPHp Zjf3uEnJdRdbCi7IIKGBYw== 0000950123-97-004227.txt : 19970514 0000950123-97-004227.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950123-97-004227 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCK & CO INC CENTRAL INDEX KEY: 0000064978 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221109110 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03305 FILM NUMBER: 97602760 BUSINESS ADDRESS: STREET 1: ONE MERCK DR STREET 2: P O BOX 100 CITY: WHITEHOUSE STATION STATE: NJ ZIP: 08889-0100 BUSINESS PHONE: 9084234044 MAIL ADDRESS: STREET 1: ONE MERCK DR STREET 2: PO BOX 100 WS3AB-05 CITY: WHITEHOUSE STATION STATE: NJ ZIP: 08889-0100 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 1-3305 MERCK & CO., INC. P. O. Box 100 One Merck Drive Whitehouse Station, N.J. 08889-0100 (908) 423-1000 Incorporated in New Jersey I.R.S. Employer Identification No. 22-1109110 The number of shares of common stock outstanding as of the close of business on April 30, 1997:
Class Number of Shares Outstanding Common Stock 1,207,113,399
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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 2 Part I - Financial Information MERCK & CO., INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENT OF INCOME THREE MONTHS ENDED MARCH 31, 1997 AND 1996 ($ in millions except per share amounts)
Three Months Ended March 31 1997 1996 -------- -------- Sales $5,567.9 $4,530.4 -------- -------- Costs, Expenses and Other Materials and production 2,786.3 2,233.1 Marketing and administrative 1,060.6 814.3 Research and development 368.7 349.5 Equity income from affiliates (151.0) (165.4) Other (income) expense, net 39.9 59.9 -------- -------- 4,104.5 3,291.4 -------- -------- Income Before Taxes 1,463.4 1,239.0 Taxes on Income 443.1 375.2 -------- -------- Net Income $1,020.3 $ 863.8 ======== ======== Per Share of Common Stock: Net Income $ .84 $ .70 Dividends Declared $ .42 $ .34 Average Number of Common Shares Outstanding (millions) 1,208.9 1,227.0
The accompanying notes are an integral part of this financial statement. -1- 3 MERCK & CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1997 AND DECEMBER 31, 1996 ($ in millions)
March 31 December 31 1997 1996 ---- ---- ASSETS Current Assets Cash and cash equivalents $ 1,736.6 $ 1,352.4 Short-term investments 862.3 829.2 Accounts receivable 2,721.8 2,655.9 Inventories 2,088.1 2,148.8 Prepaid expenses and taxes 807.8 740.3 ----------- ----------- Total current assets 8,216.6 7,726.6 ----------- ----------- Investments 2,408.0 2,499.4 Property, Plant and Equipment, at cost, net of allowance for depreciation of $2,994.0 in 1997 and $2,799.7 in 1996 5,973.5 5,926.7 Goodwill and Other Intangibles, net of accumulated amortization of $654.3 in 1997 and $606.5 in 1996 6,689.6 6,736.6 Other Assets 1,444.7 1,403.8 ----------- ----------- $ 24,732.4 $ 24,293.1 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 2,787.6 $ 2,937.8 Loans payable and current portion of long-term debt 477.5 606.1 Income taxes payable 1,021.3 802.6 Dividends payable 508.3 482.7 ----------- ----------- Total current liabilities 4,794.7 4,829.2 ----------- ----------- Long-Term Debt 1,232.3 1,155.9 ----------- ----------- Deferred Income Taxes and Noncurrent Liabilities 4,056.7 4,027.3 ----------- ----------- Minority Interests 2,216.5 2,310.2 ----------- ----------- Stockholders' Equity Common stock Authorized - 2,700,000,000 shares Issued - 1,483,721,131 shares - 1997 - 1,483,619,311 shares - 1996 5,018.5 4,967.5 Retained earnings 15,316.7 14,817.7 ----------- ----------- 20,335.2 19,785.2 Less treasury stock, at cost 274,186,571 shares - 1997 277,016,963 shares - 1996 7,903.0 7,814.7 ----------- ----------- Total stockholders' equity 12,432.2 11,970.5 ----------- ----------- $ 24,732.4 $ 24,293.1 =========== ===========
The accompanying notes are an integral part of this financial statement. -2- 4 MERCK & CO., INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 ($ in millions)
Three Months Ended March 31 1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Income before taxes $ 1,463.4 $ 1,239.0 Adjustments to reconcile income before taxes to cash provided from operations before taxes: Other 299.7 111.7 Net changes in assets and liabilities (102.8) 1.3 ---------- ---------- CASH PROVIDED BY OPERATING ACTIVITIES BEFORE TAXES 1,660.3 1,352.0 INCOME TAXES PAID (167.3) (168.4) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,493.0 1,183.6 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (261.6) (265.6) Purchase of securities, subsidiaries and other investments (4,047.3) (1,860.0) Proceeds from sale of securities, subsidiaries and other investments 3,980.7 1,556.5 Other (14.1) (16.4) ---------- ---------- NET CASH USED BY INVESTING ACTIVITIES (342.3) (585.5) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in short-term borrowings 13.9 (.3) Proceeds from issuance of debt 87.3 300.2 Payments on debt (134.5) (2.0) Purchase of treasury stock (245.3) (575.3) Dividends paid to stockholders (482.7) (438.5) Other 75.5 50.5 ---------- ---------- NET CASH USED BY FINANCING ACTIVITIES (685.8) (665.4) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (80.7) (26.7) ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 384.2 (94.0) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,352.4 1,847.4 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,736.6 $ 1,753.4 ========== ==========
The accompanying notes are an integral part of this financial statement. Notes to Financial Statements 1. The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. The interim statements should be read in conjunction with the financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K. Interim statements are subject to possible adjustments in connection with the annual audit of the Company's accounts for the full year 1997; in the Company's opinion, all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature. -3- 5 Notes to Financial Statements (continued) 2. Inventories consisted of: ($ in millions) March 31 December 31 1997 1996 ---- ---- Finished goods $ 1,136.7 $ 1,237.3 Raw materials and work in process 880.9 841.1 Supplies 70.5 70.4 ---------- ---------- Total (approximates current cost) 2,088.1 2,148.8 Reduction to LIFO cost -- -- ---------- ---------- $ 2,088.1 $ 2,148.8 ========== ==========
3. The Company, along with numerous other defendants, is a party in several antitrust actions brought by retail pharmacies and consumers, alleging conspiracies in restraint of trade and challenging pricing and/or purchasing practices, one of which has been certified as a Federal class action and a number of which have been certified as state class actions. In January 1996, the Company and several other defendants entered into an agreement, subject to court approval, to settle the Federal class action alleging conspiracy, which represents the single largest group of retail pharmacy claims, pursuant to which the Company is obligated to pay $51.8 million, payable in four equal annual installments. In April 1996, the court declined to approve the settlement. Subsequently, the Company and several other defendants entered into an amended settlement agreement, which provides for the same monetary payment and addresses the court's concerns as expressed in its April 1996 opinion. In June 1996, the court granted approval of the amended settlement agreement, to which objecting retail class members filed appeals in July 1996. The Company has not engaged in any conspiracy and no admission of wrongdoing has been made or is included in the amended agreement, which was entered into in order to avoid the cost of litigation and the risk of an inaccurate adverse verdict by a jury presented with a case of this size and complexity. While it is not feasible to predict or determine the final outcome of these proceedings, management does not believe that they should result in a materially adverse effect on the Company's financial position, results of operations or liquidity. 4. Sales consisted of:
($ in millions) Three Months Ended March 31 1997 1996 ---- ---- Elevated cholesterol $ 1,083.1 $ 808.8 Hypertension/heart failure 921.9 822.5 Anti-ulcerants 308.5 280.9 Antibiotics 206.6 215.4 Ophthalmologicals 175.6 149.8 Vaccines/biologicals 151.0 112.1 Osteoporosis 101.8 44.1 Benign prostatic hyperplasia 99.3 120.2 Other Merck human health 72.0 4.6 Other human health 2,229.4 1,751.6 Animal health/crop protection 218.7 220.4 ---------- ---------- $ 5,567.9 $ 4,530.4 ========== ==========
Sales by therapeutic class include Merck-Medco Managed Care (Merck-Medco) sales of Merck products. Other human health primarily includes Merck-Medco sales of non-Merck products and Merck-Medco human health services, principally managed prescription drug programs. -4- 6 Notes to Financial Statements (continued) 5. Other (income) expense, net, consisted of:
($ in millions) Three Months Ended March 31 1997 1996 ---- ---- Interest income $ (51.2) $ (60.2) Interest expense 25.0 34.5 Exchange gains (5.5) (7.5) Minority interests 42.6 29.4 Amortization of goodwill & other intangibles 47.8 47.0 Other, net (18.8) 16.7 ------- ------- $ 39.9 $ 59.9 ======= =======
Minority interests include third parties' share of exchange gains and losses arising from translation of the financial statements into U.S. dollars. Interest paid for the three-month periods ended March 31, 1997 and 1996 was $20.9 million and $10.3 million, respectively. 6. Income taxes paid for the three-month periods ended March 31, 1997 and 1996 were $167.3 million and $168.4 million, respectively. 7. Legal proceedings to which the Company is a party are discussed in Part I Item 3, Legal Proceedings, in the Annual Report on Form 10-K. There were no material developments in the three-month period ended March 31, 1997. -5- 7 MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION Earnings per share for the first quarter of 1997 were $0.84, an increase of 20% over the first quarter of 1996. First quarter net income increased 18% to $1,020.3 million. Sales for the quarter were $5.6 billion, up 23% from the same period last year. Sales growth for the quarter was led by established major products, recent product introductions and growth from the Merck-Medco Managed Care business. Both domestic and international operations reported strong unit volume gains. Foreign exchange reduced the first quarter sales growth by one percentage point. Excluding exchange, sales of Merck human and animal health products increased 22% for the first quarter. Sales outside the United States accounted for 29% of 1997 first quarter sales, compared with 31% for the same period last year. Income growth for the quarter was driven by strong unit volume gains. The unfavorable effects of inflation, net of price, and exchange were partially offset by cost controls and productivity improvements in manufacturing, selling and general and administrative expenses. Results for the first quarter were paced by sales volume gains of established major products, including 'Zocor', 'Mevacor', 'Vasotec', 'Vaseretic', 'Prinivil', 'Pepcid' and 'Recombivax HB', and by the newer product introductions, 'Crixivan', 'Cozaar'*, 'Hyzaar'*, 'Fosamax', 'Trusopt' and 'Varivax'. Significant prescription volume growth in the Merck-Medco Managed Care business also contributed to the sales increase for the quarter. The number of patients taking 'Zocor' has nearly doubled to 6.7 million since the results from the landmark Scandinavian Simvastatin Survival Study (4S) were announced two years ago. This study showed that 'Zocor' saves lives and prevents heart attacks in people with high cholesterol and coronary heart disease. 'Zocor' has a well-established, long-term safety profile. It is the only "statin" proven to save lives in people with coronary heart disease and high cholesterol. Despite the introduction of new competition, 'Zocor' continues to grow and to command the leading share of total and new prescriptions among cholesterol-lowering medicines. 'Mevacor' continues to have a strong position in the market; together, 'Mevacor' and 'Zocor' hold more than a 40 percent share. The cholesterol-lowering market continues to grow as doctors increasingly recognize the health benefits of lipid-lowering therapy. Still, less than 30 percent of patients with coronary disease and high cholesterol currently take cholesterol-lowering therapy. 'Vasotec', Merck's angiotensin converting enzyme (ACE) inhibitor for the treatment of high blood pressure, asymptomatic left ventricular dysfunction and heart failure, continued to grow. It is the most widely prescribed branded cardiovascular medicine in the world. U.S. prescription sales remain strong for 'Pepcid', an H2-receptor antagonist for the treatment of duodenal ulcers and the short-term treatment of gastric ulcers and gastroesophageal reflux disease (GERD). 'Pepcid' is now the second most-prescribed prescription H2-receptor antagonist in the United States. In the U.S. over-the-counter market, Pepcid AC Acid Controller(TM), sold by Johnson & Johnson Merck Consumer Pharmaceuticals Co., continues to lead the growing and highly competitive acid indigestion market. 'Crixivan', Merck's protease inhibitor for the treatment of HIV infection in adults, has achieved broad acceptance by physicians and patients. Within a year of its record-breaking 42-day clearance in the United States, it has been cleared for marketing in more than 50 additional countries, including 15 member states of the European Union. 'Crixivan' is being taken by more than 140,000 people worldwide and holds about 60 percent of the U.S. market. Two clinical endpoint studies with 'Crixivan', announced in February and March, demonstrated that 'Crixivan' has a positive impact on reducing mortality and the incidence of AIDS-related conditions, including opportunistic infections and cancers. The reduction in one study was by as much as 60 percent. Physicians have adopted 'Cozaar' and 'Hyzaar' (a combination of 'Cozaar' and the diuretic hydrochlorothiazide) faster than any new antihypertensive product launched in this decade. The products are now marketed in more than 40 countries and have been taken by more than 1.8 million patients. 'Cozaar' and 'Hyzaar', the first in a new class of antihypertensive drugs called angiotensin-II (A-II) receptor antagonists, are exceptionally well tolerated. 'Cozaar' and 'Hyzaar' were developed in collaboration with the DuPont Merck Pharmaceutical Company. *'Cozaar' and 'Hyzaar' are registered trademarks of E.I. du Pont de Nemours and Company, Wilmington, DE, USA. -6- 8 MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued) 'Fosamax', Merck's breakthrough nonhormonal medicine for the treatment of osteoporosis in postmenopausal women, has been introduced in 47 countries, including the United States. More than 1.7 million patients worldwide have received a prescription for 'Fosamax' and prescription trends remain strong. Merck continues to educate women about postmenopausal osteoporosis and treatment with 'Fosamax' through major consumer campaigns. The Vertebral Fracture Study arm of the Fracture Intervention Trial (FIT), published in December, showed that 'Fosamax' reduced by about one-half the risk of hip and vertebral fractures and significantly reduced hospitalizations in postmenopausal women with osteoporosis who had a previous vertebral fracture. The results of this study have been filed in the United States and other worldwide markets for inclusion in the product labeling for 'Fosamax'. In April 1997, the U.S. Food and Drug Administration (FDA) cleared for marketing the new 'Fosamax' 5 mg. dose as the first nonhormonal drug to prevent osteoporosis in postmenopausal women. In addition, the FDA cleared 'Fosamax' 10 mg. to prevent fractures of the hip, spine and wrist in postmenopausal women who already have osteoporosis. Sales of 'Trusopt', the first carbonic anhydrase inhibitor made in a topical (eyedrop) formulation, have proceeded at a strong pace since it was first introduced in the United States in May 1995. 'Trusopt' is now the most widely prescribed anti-glaucoma medicine in the United States and in several countries in Europe. The product is indicated for the treatment of elevated intraocular pressure in patients with ocular hypertension or open-angle glaucoma. In its first two years on the market, 'Varivax', the first and only chickenpox vaccine marketed in the United States, has achieved the most rapid acceptance of any vaccine since Merck introduced the first measles vaccine in 1963. In January, Merck launched its newest vaccine, 'Comvax', a combination of the antigenic components of two existing Merck vaccines, 'PedvaxHIB' and 'Recombivax HB'. 'Comvax' is the first combination product indicated for the vaccination of infants, beginning at two months of age, against both invasive Haemophilus influenzae type b diseases (Hib) and hepatitis B virus. The combination reduces the number of injections required to immunize children against the two infections. In February, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which requires adoption in 1997. This Statement generally requires the presentation of basic and diluted earnings per share on the face of the statement of income. The amount of basic earnings per share will not differ from the earnings per share currently reported on the face of the statement of income and the diluted earnings per share will not be materially different. On February 25, the Board of Directors declared a quarterly dividend of 42 cents a share on the Company's common stock which was paid April 1 to stockholders of record at the close of business on March 7. The Company's total dividend paid to date in 1997 is 82 cents per share, a 21 percent increase over the amount paid during the same period in 1996. In May, Merck issued $500 million of debt under its 1993 shelf registration. The remaining capacity under the shelf is $170 million. The debt has a scheduled maturity of May 3, 2037 and pays interest semi-annually at a rate of 5.76%. Also in May, Merck announced the signing of a definitive agreement to sell its crop protection business to Novartis for $910 million in cash. The sale is expected to close in the second or third quarter, subject to antitrust reviews. The crop protection business is not significant to the Company's financial position or results of operations. -7- 9 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Number Description Method of Filing ------ ----------- ---------------- 3(a) Restated Certificate of Incorporated by reference to Form 10-K Incorporation of Merck & Co., Inc. Annual Report for the fiscal year ended (May 6, 1992) December 31,1992 3(b) By-Laws of Merck & Co., Inc. Filed with this document (as amended effective February 25, 1997) 11 Computation of Earnings Per Filed with this document Common Share 12 Computation of Ratios of Filed with this document Earnings to Fixed Charges 27 Financial Data Schedule Filed with this document
(b) Reports on Form 8-K During the three-month period ending March 31, 1997, no current reports on Form 8-K were filed. -8- 10 Signatures Pursuant to the requirements of the Securities Exchange Act of l934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MERCK & CO., INC. Date: May 13, 1997 /s/ Mary M. McDonald ---------------------- MARY M. MCDONALD Senior Vice President and General Counsel Date: May 13, 1997 /s/ Peter E. Nugent ---------------------- PETER E. NUGENT Vice President, Controller -9- 11 EXHIBIT INDEX
Exhibit Number Description ------ ----------- 3(a) Restated Certificate of Incorporation of Merck & Co., Inc. (May 6, 1992) - Incorporated by reference to Form 10-K Annual Report for the fiscal year ended December 31, 1992 3(b) By-Laws of Merck & Co., Inc. (as amended effective February 25, 1997) 11 Computation of Earnings Per Common Share 12 Computation of Ratios of Earnings to Fixed Charges 27 Financial Data Schedule
EX-3.B 2 BY-LAWS OF MERCK & CO., INC. 1 Exhibit 3(b) By-Laws OF MERCK & CO., INC. ----------- As Amended Effective February 25, 1997 2 MERCK & CO., INC. BY-LAWS ------ A R T I C L E I. STOCKHOLDERS. SECTION 1. Annual Meeting. A meeting of the stockholders of Merck & Co., Inc. (hereinafter referred to as "the Company") shall be held at such places as may from time to time be designated by the Board of Directors and stated in the notice of the meeting, on the fourth Tuesday in April in each year (or as close as practicable thereto), for the purpose of electing Directors and for the transaction of such other business as may properly be brought before the meeting. SECTION 2. Special Meetings. Special meetings of the stockholders may be held at any location designated by the Board of Directors whenever and as often as the Board of Directors shall call such meetings. Such meetings shall be called at any time upon the written request of the holders of record of a majority of the stock of the Company entitled to vote at any such meeting. SECTION 3. Notice of Meetings; Waiver of Notice. At least ten days' written or printed notice of the time and place of every meeting of the stockholders shall be mailed or delivered personally to each stockholder of record entitled to vote at such meeting at such holder's last address appearing on the books of the Company which notice shall state in general terms the object of the meeting. By unanimous written waiver of notice of the meeting signed by or on behalf of all stockholders entitled to vote at such meeting, any meeting of the stockholders may be held without notice. SECTION 4. Quorum. Except as otherwise provided in the Restated Certificate of Incorporation of the Company, the holders of a majority in interest of all the stock of the Company, entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders; but, if there be less than a quorum represented at any such meeting, a majority in interest so represented may adjourn the meeting from time to time. SECTION 5. Voting and Inspectors. At all meetings of the stockholders every registered owner of shares entitled to vote may vote in person or by proxy, and each holder of shares of Common Stock shall have one vote for every such share standing in such holder's name on the books of the Company. At all elections of Directors, each holder of Common Stock entitled to vote thereat shall be entitled to as many votes as shall equal the number of shares of Common Stock held multiplied by the number of Directors to be elected by vote of stockholders without regard to class, and such holder may cast all such votes for a single Director or may distribute them among the number of Directors to 3 be voted for or any two or more of them as such holder may see fit. At such meetings the Chairman shall appoint two Inspectors of Election, who shall first subscribe an oath to execute faithfully the duties of Inspector at such meeting with strict impartiality and according to the best of their ability, and who shall take charge of the polls, and after the balloting, shall make a certificate of the result of the vote taken; but no candidate for the office of Director shall be appointed as such Inspector. A R T I C L E II. BOARD OF DIRECTORS. SECTION 1. Number; Time of Holding Office. The business, property and concerns of the Company shall be managed and controlled by the Board of Directors, and each Director shall serve for the term of the class for which elected or until such time as a successor shall have been duly chosen and shall have qualified. The number of Directors constituting the Board of Directors shall be the number, not less than 10 nor more than 18, fixed from time to time by a majority vote of the whole Board of Directors; provided, no decrease in the number of Directors shall shorten the term of any incumbent Director. SECTION 2. Nominations. Subject to the rights of the holders of any class or series of Preferred Stock then outstanding, nominations for the election of Directors may be made by the Board of Directors or by a Committee appointed by the Board or by any stockholder entitled to vote for the election of Directors. Any stockholder entitled to vote for the election of Directors at a meeting may nominate persons for election as Directors only if written notice of such stockholder's intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company not later than (i) with respect to an election to be held at an annual meeting of stockholders, 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders, and (ii) with respect to an election of directors to be held at a special meeting of stockholders, the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. Each such notice of nomination shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a Director of the Company if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person made without compliance with the foregoing procedure. SECTION 3. Qualifications. Every Director shall be a holder of at least one share of the stock of the Company and shall cease to be a Director of the Company when no longer such holder. The retirement age of and other restrictions and qualifications for Directors shall be fixed from time to time by majority vote of the whole Board. 2 4 SECTION 4. Vacancies. Whenever any vacancy shall occur in the Board of Directors by death, resignation or otherwise, it shall be filled by a majority vote of the Directors then in office, though less than a quorum, but any such Director so elected shall hold office only until the next succeeding annual meeting of stockholders or until his or her successor shall have been elected and qualified in the class to which such Director is assigned and for the term or remainder of the term of such class. SECTION 5. Place of Meeting. The Directors may hold their meetings and have offices and keep the books of the Company in such places within or without the State of New Jersey as the Board may from time to time determine. SECTION 6. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and on such notice as the Directors may from time to time determine. The annual meeting for the election of the officers of the Company shall, if practicable, be held immediately after the annual meeting of the stockholders; and no notice thereof need be given. SECTION 7. Special Meetings. Special meetings of the Board may be held at any time upon the call of the Chairman of the Board, the President, or a quorum of Directors, by oral, telegraphic, telephonic or written notice, communicated to each Director not less than one day before such meeting. SECTION 8. Waiver of Notice of Meeting . Notice of any meeting of the Board of Directors may be waived in writing by any Director either before or after the time of such meeting; and at any meeting at which every Director shall be present, even though without any notice, any business may be transacted. SECTION 9. Quorum. A majority of the Board of Directors shall constitute a quorum of the Board for the transaction of business; but, if there be less than a quorum present at any meeting of the Board, the Directors present may adjourn the meeting from time to time. SECTION 10. Committees. The Board of Directors shall appoint from among its members and shall designate the powers and functions of the Executive Committee which may exercise the powers of the Directors in the management of the affairs, business and property of the Company during the intervals between meetings of the Board of Directors. The Chairman of the Board shall be a member of the Executive Committee which shall consist, in addition, of such number of other Directors as will assure that the majority of the Executive Committee will not be employees of the Company. Regular meetings of the Executive Committee shall be held at such time and on such notice as the Directors may from time to time determine. Special meetings of the Executive Committee may be held at any time upon the call of the Chairman of the Executive Committee or Chairman of the Board. The quorum requirements and other rules of procedure for this Committee shall be determined by resolution of the Board of Directors. The Board of Directors may also appoint from time to time from among its members other committees with such powers and functions as the Board may delegate and specify. 3 5 SECTION 11. Letters of Attorney. The Board of Directors may authorize the Chairman of the Board or any other officer or officers of the Company to confer all kinds of letters of attorney upon any person, persons or entities, with all the faculties and limitations that the Chairman of the Board or they may deem convenient and also to revoke the same in whole or in part. A R T I C L E III. OFFICERS. SECTION 1. Officers. The officers of the Company shall be elected by the Board of Directors; there shall be a Chairman of the Board, a President, a Controller, a Secretary and a Treasurer, and such other officers as the Board of Directors may designate. Divisional officers, who shall not be officers of the Company, may be appointed by the Chairman of the Board to perform such duties as may be assigned from time to time by, or under the authority of, the Chairman of the Board. The same person, whether an officer of the Company or a divisional officer, may hold more than one office, so far as permitted by law, and exercise and perform the powers and duties thereof. SECTION 2. Agents and Employees. The Board of Directors may from time to time appoint agents and employees of the Company and may assign to them such powers and duties as the Board of Directors may from time to time deem proper. SECTION 3. Powers and Duties of the Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders, the Board of Directors and the Executive Committee of the Board; and shall have and possess all such further powers and discharge such further duties as may be assigned from time to time by the Board of Directors. SECTION 4. Powers and Duties of the President. The President shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and the Board of Directors and shall perform such other duties as may be assigned from time to time by the Chairman of the Board. SECTION 5. Powers and Duties of the Controller. The Controller shall have the powers and duties incident to the office, and subject to the direction of the Chairman of the Board, shall perform such other duties as may be assigned from time to time by the Board of Directors or under its authority. It shall be the Controller's duty to report directly to the Board of Directors on matters in which the Controller deems such action necessary. SECTION 6. Powers and Duties of the Secretary. The Secretary shall have the powers and duties incident to such office, and subject to the direction of the Chairman of the Board, shall perform such other duties as may be assigned from time to time by the Board of Directors or under its authority. 4 6 SECTION 7. Powers and Duties of the Treasurer. The Treasurer shall have the powers and duties incident to such office, and subject to the direction of the Chairman of the Board, shall perform such other duties as may be assigned from time to time by the Board of Directors or under its authority. SECTION 8. Powers and Duties of Other Officers. The other officers shall have such powers and perform such duties as may be assigned to them from time to time by the Board of Directors or under its authority. SECTION 9. Bills of Exchange, Checks, Notes, Deeds, Contracts, etc . All bonds, debentures, notes, acceptances or other obligations and all bills of exchange, checks, drafts, and other instruments for the payment of money, all deeds of real estate and all contracts, bills of lading, warehouse receipts, insurance policies and other documents requiring signature or endorsement by or on behalf of the Company, shall be signed or endorsed by such officer or officers, person or persons as are designated (i) by the Board of Directors or (ii) pursuant to authorizations duly adopted by the Board of Directors. A R T I C L E IV. CAPITAL STOCK: DIVIDENDS: SEAL. SECTION 1. Certificate of Shares. Ownership or proprietary interest in the assets of the Company shall be evidenced by certificates of shares in the capital stock of the Company in such form as the Board may from time to time prescribe. All certificates shall be consecutively numbered and shall be issued in consecutive numerical order; and the name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the stub of each certificate or in some other appropriate record. No certificate of stock shall be valid unless: (a) signed by the Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary or have engraved or printed thereon their facsimile signatures; (b) countersigned by the duly appointed Transfer Agent of the Company's stock or have engraved or printed thereon its facsimile signature; (c) registered by the duly appointed Registrar of the Company's stock; and (d) impressed with the Company's seal or have a facsimile thereof engraved upon such certificate. All certificates exchanged or surrendered to the Company shall be cancelled by the Secretary or the Transfer Agent, upon the authority of the Secretary, and no new certificate shall be issued until the old certificate for an equal or greater number of shares has been so surrendered and cancelled. The cancelled certificates, or an appropriate microfilm thereof, shall be preserved with the records of the Company for a period of not less than seven years from the date of cancellation thereof. SECTION 2. Lost or Stolen Certificates. No certificates of shares in the Capital Stock of the Company shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, unless the Board of Directors is, or such Transfer Agent or officer or officers of the Company as may be designated by the Board of Directors are, satisfied as to such loss, destruction or theft, and unless a 5 7 bond of indemnity against loss or damage on account of such alleged lost, destroyed or stolen certificate has been furnished to the Transfer Agent or the Company. Such bond shall be approved by the Board of Directors, or by such Transfer Agent or officer or officers of the Company as may be designated by the Board of Directors, as to its amount and sufficiency. Proper and sufficient evidence of such loss, destruction or theft shall be produced to the Board or such designated officer or officers if they require the same. SECTION 3. Transfer of Shares. Shares in the Capital Stock of the Company shall be transferred on the books of the Company only by the holder thereof in person, or by such holder's attorney or lawful successor, upon surrender and cancellation of certificates for a like number of shares, with duly executed assignment thereof and power to transfer endorsed thereon or attached thereto in form prescribed by the Company or, if authorized by the Secretary, by the duly appointed Transfer Agent of the Company's stock and with evidence of the legal sufficiency of such transfer satisfactory to the officers or counsel or, if so authorized by the Secretary, to the Transfer Agent. SECTION 4. Closing of Transfer Books and Fixing of Record Date. The Board of Directors shall have power to close the stock transfer books of the Company for a period not exceeding sixty days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of Capital Stock shall go into effect. In lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of Capital Stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, or such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of Capital Stock, and in such case only stockholders of record on the date so fixed shall be entitled to such notice of and to vote at such meeting, or to receive payment of such dividend, or allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Company after any such record date fixed as aforesaid. SECTION 5. Dividends, etc. The Board of Directors may, in the exercise of its discretion and in conformity with the provisions of the Restated Certificate of Incorporation of the Company, from time to time fix and vary the amount of the working capital of the Company and determine what, if any, dividends shall be declared and paid to stockholders out of the surplus or net profits of the Company. SECTION 6. Fiscal Year. The fiscal year of the Company shall begin on the 1st day of January and shall end on the 31st day of December. SECTION 7. Voting Stocks of Other Corporations. Unless otherwise ordered by the Board of Directors, the Chairman of the Board shall have full power and authority in behalf of the Company to attend and to act and to vote at any meeting of stockholders of any corporation in which this Company may hold stock and at any such meeting shall possess and may exercise any and all the rights and powers incident to the ownership of such stock. The Chairman of the Board shall have full power and authority to delegate these powers to any other person or persons with the right of redelegation. 6 8 SECTION 8. Corporate Seal. The Board of Directors shall provide a suitable seal, bearing the name of the Company, which seal shall be in the charge of the Secretary. A R T I C L E V. INDEMNIFICATION OF DIRECTORS AND OTHERS. SECTION 1. Directors, Officers and Employees of Merck & Co., Inc. Any former, present or future Director, officer or employee of the Company or the legal representative of any such Director, officer or employee shall be indemnified by the Company (a) against reasonable costs, disbursements and counsel fees paid or incurred where such person has been successful in the defense on the merits or otherwise of any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, and any appeal therein and any inquiry or investigation which could lead to such action, suit or proceeding, or in defense of any claim, issue or matter therein, brought by reason of such person's being or having been such Director, officer or employee, and (b) with respect to the defense of any such action, suit, proceeding, inquiry or investigation for which indemnification is not made under (a) above, against reasonable costs, disbursements (which shall include amounts paid in satisfaction of settlements, judgments, fines and penalties, exclusive, however, of any amount paid or payable to the Company) and counsel fees if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and in connection with any criminal proceeding such person also had no reasonable cause to believe the conduct was unlawful, with the determination as to whether the applicable standard of conduct was met to be made by a majority of the members of the Board of Directors (sitting as a Committee of the Board) who were not parties to such inquiry, investigation, action, suit or proceeding or by any one or more disinterested counsel to whom the question may be referred by the Board of Directors; provided, however, in connection with any proceeding by or in the right of the Company, no indemnification shall be provided as to any person adjudged by any court to be liable to the Company except as and to the extent determined by such court. The termination of any such inquiry, investigation, action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that such person did not meet the standards of conduct set forth in subsection (b) above. Reasonable costs, disbursements and counsel fees incurred by such person in connection with any inquiry, investigation, action, suit or proceeding may be paid by the Company in advance of the final disposition of such matter if authorized by a majority of the Board of Directors (sitting as a Committee of the Board) not parties to such matter upon receipt by the Company of an undertaking by or on behalf of such person to repay such amount unless it is ultimately determined that such person is entitled to be indemnified as set forth herein. 7 9 SECTION 2. Directors, Trustees, Officers and Employees of Other Companies. The Board of Directors may, at any regular or special meeting of the Board, by resolution, accord similar indemnification (prospective or retroactive) to any director, trustee, officer or employee of any other company who is serving as such at the request of the Company and any officer, director or employee of any constituent corporation absorbed by the Company in a consolidation or merger, or the legal representative of any such director, trustee, officer or employee. SECTION 3. Indemnification Not Exclusive. The indemnification and advancement of expenses provided for in this Article V shall not exclude any other rights to which any person contemplated by this Article V may be entitled as a matter of law or which may be lawfully granted; provided that no indemnification shall be made to or on behalf of such person if a judgment or other final adjudication adverse to such person establishes that his or her acts or omissions (a) were in breach of his or her duty of loyalty to the Company or its stockholders, (b) were not in good faith or involved a knowing violation of law or (c) resulted in receipt by such person of an improper personal benefit. SECTION 4. Insurance. The Company may purchase and maintain insurance to protect itself and any person contemplated by this Article V against any expenses incurred in any proceeding and any liabilities asserted against him or her by reason of his or her being or having been a director, officer or employee, whether or not the Company would have the power to indemnify him or her against such expenses and liabilities under the provisions of this Article V. The Company may purchase such insurance from, or such insurance may be reinsured in whole or in part by, an insurer owned by or otherwise affiliated with the Company, whether or not such insurer does business with other insureds. A R T I C L E VI. AMENDMENTS TO BY-LAWS. SECTION 1. General Procedure. The Board of Directors shall have power to make, alter and repeal By-Laws of the Company by a vote of a majority of all of the Directors at any regular or special meeting of the Board, provided that, unless every Director shall be present at such meeting, the notice or waiver of notice of such meeting shall have specified or summarized the proposed action. The stockholders may make, alter, and repeal By-Laws of the Company by a vote of a majority of the stockholders at any meeting, provided that the notice or waiver of notice of such meeting shall have specified or summarized the proposed action. SECTION 2. Exceptions. Notwithstanding the provision of Section 1 of this Article VI with respect to the vote required for stockholders to make, alter or repeal By-Laws, the alteration, amendment, adoption of any provision inconsistent with or repeal of Article II of these By-Laws, or of this Section 2 of Article VI, will require the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of the stock of the Company entitled to vote generally in the election of directors, voting together as a single class. 8 EX-11 3 COMPUTATION OF EARNINGS PER COMMON SHARE 1 Exhibit 11 MERCK & CO., INC. AND SUBSIDIARIES Computation of Earnings Per Common Share (In millions except per share amounts)
Three Months Ended March 31 1997 1996 ---- ---- Net Income and Adjusted Earnings: Net Income ............................................... $1,020.3 $ 863.8 Effect on Earnings of Compensation Expense Relating to Stock Option and Incentive Plans ....................... 3.4 2.0 -------- -------- Adjusted Earnings for Fully Diluted Earnings Per Share ... $1,023.7 $ 865.8 ======== ======== Weighted Average Shares and Share Equivalents Outstanding: Weighted Average Shares Outstanding (As Reported) ........ 1,208.9 1,227.0 Common Share Equivalents Issuable Under Stock Option and Incentive Plans ........................................ 31.8 31.5 Common Share Equivalents Issuable on Assumed Conversion of Debentures ............................................. .2 .4 -------- -------- Weighted Average Shares and Share Equivalents Outstanding 1,240.9 1,258.9 ======== ======== Earnings Per Share (As Reported) ......................... $ .84 $ .70 ======== ======== Fully Diluted Earnings Per Share (a) ..................... $ .82 $ .69 ======== ========
(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-12 4 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES 1 Exhibit 12 MERCK & CO., INC. AND SUBSIDIARIES Computation Of Ratios Of Earnings To Fixed Charges (In millions except ratio data)
Three Months Ended March 31 Years Ended December 31 1997 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- Income Before Taxes and Cumulative Effect of Accounting Changes $1,463.4 $5,540.8 $4,797.2 $4,415.2 $3,102.7 $3,563.6 Add: One-third of rents 10.8 41.0 28.1 36.0 35.0 34.0 Interest expense, net 21.0 103.2 60.3 96.0 48.0 23.6 Preferred stock dividends 16.7 70.0 2.1 - - - -------- -------- -------- -------- -------- -------- Earnings $1,511.9 $5,755.0 $4,887.7 $4,547.2 $3,185.7 $3,621.2 ======== ======== ======== ======== ======== ======== Fixed Charges One-third of rents $ 10.8 $ 41.0 $ 28.1 $ 36.0 $ 35.0 $ 34.0 Interest expense 25.0 138.6 98.7 124.4 84.7 72.7 Preferred stock dividends 16.7 70.0 2.1 - - - -------- -------- -------- -------- -------- -------- Fixed Charges $ 52.5 $ 249.6 $ 128.9 $ 160.4 $ 119.7 $ 106.7 ======== ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 29 23 38 28 27 34 ======== ======== ======== ======== ======== ========
For purposes of computing these ratios, "earnings" consist of income before income taxes, cumulative effect of accounting changes, one-third of rents (deemed by the Company to be representative of the interest factor inherent in rents), interest expense, net of amounts capitalized, and dividends on preferred stock of subsidiary companies. "Fixed charges" consist of one-third of rents, interest expense as reported in the Company's consolidated financial statements and dividends on preferred stock of subsidiary companies. EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-1997 MAR-31-1997 1,737 862 2,722 0 2,088 8,217 8,968 (2,994) 24,732 4,795 1,232 0 0 5,019 7,414 24,732 5,568 5,568 2,786 2,786 369 0 25 1,463 443 1,020 0 0 0 1,020 .84 .82 NOT MATERIAL TO THE CONSOLIDATED FINANCIAL STATEMENTS
-----END PRIVACY-ENHANCED MESSAGE-----