<SEC-DOCUMENT>0000950123-00-004907-index.html : 20000515
<SEC-HEADER>0000950123-00-004907.hdr.sgml : 20000515
ACCESSION NUMBER: 0000950123-00-004907
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20000331
FILED AS OF DATE: 20000512
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:
SEC FILE NUMBER: 001-03305
FILM NUMBER: 627435
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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<DESCRIPTION>MERCK & CO., INC.
<TEXT>
<PAGE> 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, 2000
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 28, 2000:
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
----- ----------------------------
<S> <C>
Common Stock 2,299,421,680
</TABLE>
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
----- -----
<PAGE> 2
Part I - Financial Information
MERCK & CO., INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited, $ in millions except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31
------------------------
2000 1999
--------- ---------
<S> <C> <C>
Sales $ 8,851.4 $ 7,536.7
--------- ---------
Costs, Expenses and Other
Materials and production 4,833.4 4,154.2
Marketing and administrative 1,417.2 1,154.3
Research and development 523.6 441.8
Equity income from affiliates (188.3) (174.8)
Other (income) expense, net 71.5 118.4
--------- ---------
6,657.4 5,693.9
--------- ---------
Income Before Taxes 2,194.0 1,842.8
Taxes on Income 694.4 543.2
--------- ---------
Net Income $ 1,499.6 $ 1,299.6
========= =========
Basic Earnings per Common Share $.65 $.55
Earnings per Common Share Assuming Dilution $.63 $.54
Dividends Declared per Common Share $.29 $.27
</TABLE>
The accompanying notes are an integral part of this
consolidated financial statement.
- 1 -
<PAGE> 3
MERCK & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000 AND DECEMBER 31, 1999
(Unaudited, $ in millions)
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
--------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,222.7 $ 2,021.9
Short-term investments 1,070.0 1,180.5
Accounts receivable 3,691.7 4,089.0
Inventories 2,977.5 2,846.9
Prepaid expenses and taxes 1,122.5 1,120.9
--------- ---------
Total current assets 11,084.4 11,259.2
--------- ---------
Investments 4,784.8 4,761.5
Property, Plant and Equipment, at cost,
net of allowance for depreciation of
$4,795.8 in 2000 and $4,670.3 in 1999 9,946.6 9,676.7
Goodwill and Other Intangibles,
net of accumulated amortization of
$1,578.4 in 2000 and $1,488.7 in 1999 7,451.5 7,584.2
Other Assets 2,511.1 2,353.3
--------- ---------
$35,778.4 $35,634.9
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 3,941.9 $ 4,158.7
Loans payable and current portion of long-term debt 2,355.6 2,859.0
Income taxes payable 1,019.3 1,064.1
Dividends payable 671.9 677.0
--------- ---------
Total current liabilities 7,988.7 8,758.8
--------- ---------
Long-Term Debt 3,443.4 3,143.9
--------- ---------
Deferred Income Taxes and Noncurrent Liabilities 7,247.1 7,030.1
--------- ---------
Minority Interests 4,997.5 3,460.5
--------- ---------
Stockholders' Equity
Common stock
Authorized - 5,400,000,000 shares
Issued - 2,968,073,321 shares - March 31, 2000
- 2,968,030,509 shares - December 31, 1999 29.7 29.7
Other paid-in capital 5,953.7 5,920.5
Retained earnings 24,275.7 23,447.9
Accumulated other comprehensive income 12.9 8.1
--------- ---------
30,272.0 29,406.2
Less treasury stock, at cost
666,886,378 shares - March 31, 2000
638,953,059 shares - December 31, 1999 18,170.3 16,164.6
--------- ---------
Total stockholders' equity 12,101.7 13,241.6
--------- ---------
$35,778.4 $35,634.9
========= =========
</TABLE>
The accompanying notes are an integral part of this
consolidated financial statement.
- 2 -
<PAGE> 4
MERCK & CO., INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited, $ in millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31
------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income before taxes $ 2,194.0 $ 1,842.8
Adjustments to reconcile income before taxes to cash provided from
operations before taxes:
Depreciation and amortization 319.9 284.9
Other (87.7) (39.5)
Net changes in assets and liabilities (28.2) 102.4
--------- ---------
CASH PROVIDED BY OPERATING ACTIVITIES BEFORE TAXES 2,398.0 2,190.6
INCOME TAXES PAID (314.1) (223.0)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,083.9 1,967.6
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (504.3) (476.0)
Purchase of securities, subsidiaries and other investments (8,407.9) (11,022.9)
Proceeds from sale of securities, subsidiaries and other investments 8,448.4 9,661.8
Other 71.9 (3.9)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (391.9) (1,841.0)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings (471.0) 3.8
Proceeds from issuance of debt 300.0 .2
Payments on debt (67.1) (.5)
Proceeds from issuance of preferred units of subsidiary 1,500.0 --
Purchase of treasury stock (2,142.9) (361.6)
Dividends paid to stockholders (677.0) (637.4)
Other 94.9 128.0
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (1,463.1) (867.5)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (28.1) (72.7)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 200.8 (813.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,021.9 2,606.2
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,222.7 $ 1,792.6
========= =========
</TABLE>
The accompanying notes are an integral part of this
consolidated financial statement.
Notes to Consolidated Financial Statements
1. The accompanying unaudited interim consolidated financial statements have
been prepared pursuant to the rules and regulations for reporting on Form
10-Q. Accordingly, certain information and disclosures required by
accounting principles generally accepted in the United States for complete
consolidated 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 2000; 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.
Certain reclassifications have been made to prior year amounts to conform
with current year presentation.
- 3 -
<PAGE> 5
Notes to Consolidated Financial Statements (continued)
2. Inventories consisted of:
<TABLE>
<CAPTION>
($ in millions)
------------------------
March 31 December 31
2000 1999
-------- -----------
<S> <C> <C>
Finished goods $1,979.6 $1,895.6
Raw materials and work in process 919.2 869.8
Supplies 78.7 81.5
-------- --------
Total (approximates current cost) 2,977.5 2,846.9
Reduction to LIFO cost -- --
-------- --------
$2,977.5 $2,846.9
======== ========
</TABLE>
3. In March 2000, a wholly-owned subsidiary of the Company issued $1.5 billion
par value of variable rate preferred units. The units are redeemable at par
value plus accrued dividends at the option of the issuer at any time. They
are also redeemable at the option of the holders in March 2010, and at the
end of each five-year interval thereafter. The preferred units are included
in Minority interests in the consolidated financial statements.
4. 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
1996, the Company and several other defendants finalized an agreement to
settle the federal class action alleging conspiracy, which represents the
single largest group of retail pharmacy claims, pursuant to which the
Company paid $51.8 million. Since that time, the Company has entered into
other settlements on satisfactory terms. The Company has not engaged in any
conspiracy, and no admission of wrongdoing was made nor was included in the
final agreements. While it is not feasible to predict or determine the
final outcome of these proceedings, management does not believe that they
should result in a materially adverse effect on the Company's financial
position, results of operations or liquidity.
5. Sales consisted of:
<TABLE>
<CAPTION>
($ in millions)
---------------------
Three Months
Ended March 31
---------------------
2000 1999
-------- --------
<S> <C> <C>
Elevated cholesterol $1,284.3 $1,170.5
Hypertension/heart failure 1,138.3 1,087.9
Anti-inflammatory/analgesics 391.6 27.0
Osteoporosis 276.7 231.4
Vaccines/biologicals 208.6 171.5
Anti-ulcerants 206.8 260.2
Antibiotics 189.9 189.8
Respiratory 167.0 88.1
Ophthalmologicals 156.2 151.5
Human immunodeficiency virus (HIV) 138.3 149.9
Other Merck products 458.4 432.0
Merck-Medco 4,235.3 3,576.9
-------- --------
$8,851.4 $7,536.7
======== ========
</TABLE>
Other Merck products include sales of other human pharmaceuticals,
continuing sales to divested businesses and pharmaceutical and animal
health supply sales to the Company's joint ventures and AstraZeneca LP.
- 4 -
<PAGE> 6
Notes to Consolidated Financial Statements (continued)
6. Other (income) expense, net, consisted of:
<TABLE>
<CAPTION>
($ in millions)
------------------
Three Months
Ended March 31
------------------
2000 1999
------- -------
<S> <C> <C>
Interest income $ (94.7) $ (79.5)
Interest expense 117.3 71.4
Exchange (gains) losses (7.8) 9.4
Minority interests 60.2 49.5
Amortization of goodwill and other intangibles 78.8 83.3
Other, net (82.3) (15.7)
------- -------
$ 71.5 $ 118.4
======= =======
</TABLE>
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, 2000 and 1999 was
$120.3 million and $46.8 million, respectively.
7. Income taxes paid for the three-month periods ended March 31, 2000 and 1999
were $314.1 million and $223.0 million, respectively.
8. The net income effect of dilutive securities was not significant to the
Company's calculation of Earnings per common share assuming dilution. A
reconciliation of weighted average common shares outstanding to weighted
average common shares outstanding assuming dilution follows:
<TABLE>
<CAPTION>
($ in millions)
-----------------
Three Months
Ended March 31
-----------------
2000 1999
------- -------
<S> <C> <C>
Average common shares outstanding 2,317.5 2,361.9
Common shares issuable(1) 45.6 63.0
------- -------
Average common shares outstanding assuming dilution 2,363.1 2,424.9
======= =======
</TABLE>
(1) Issuable primarily under stock option plans.
9. Comprehensive income for the three months ended March 31, 2000 and 1999,
representing all changes in Stockholders' equity during the period other
than changes resulting from the Company's stock, was $1,504.4 million and
$1,300.9 million, respectively.
- 5 -
<PAGE> 7
Notes to Consolidated Financial Statements (continued)
10. The Company's operations are principally managed on a products and services
basis and are comprised of two reportable segments: Merck Pharmaceutical
and Merck-Medco. Merck Pharmaceutical products consist of therapeutic
agents, sold by prescription, for the treatment of human disorders.
Merck-Medco revenues are derived from the filling and management of
prescriptions and health management programs. All Other includes
non-reportable human and animal health segments. Revenues and profits for
these segments are as follows:
<TABLE>
<CAPTION>
($ in millions)
------------------------
Three Months
Ended March 31
------------------------
2000 1999
-------- --------
<S> <C> <C>
Segment revenues:
Merck Pharmaceutical $3,701.3 $3,278.9
Merck-Medco 4,949.5 4,294.5
All Other 873.3 631.0
-------- --------
$9,524.1 $8,204.4
======== ========
Segment profits:
Merck Pharmaceutical $2,097.1 $1,994.3
Merck-Medco 142.3 123.8
All Other 799.9 560.9
-------- --------
$3,039.3 $2,679.0
======== ========
</TABLE>
Segment profits are comprised of segment revenues less certain elements of
materials and production costs and operating expenses, including components
of equity income (loss) from joint ventures and depreciation and
amortization expenses. The Company does not internally allocate the vast
majority of indirect production costs, research and development expenses
and general and administrative expenses, all predominantly related to the
Merck pharmaceutical business, as well as the cost of financing these
activities. Separate divisions maintain responsibility for monitoring and
managing these costs, including depreciation related to fixed assets
utilized by these divisions and, therefore, they are not included in the
marketing segment profits. The vast majority of goodwill and other
intangibles amortization, predominantly related to the Merck-Medco
business, as well as the cost of financing capital employed, also are not
allocated internally and, therefore, are not included in the marketing
segment profits.
A reconciliation of total segment profits to consolidated income before
taxes is as follows:
<TABLE>
<CAPTION>
($ in millions)
-----------------------
Three Months
Ended March 31
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Segment profits $3,039.3 $2,679.0
Other profits 25.7 25.6
Adjustments 121.1 39.1
Unallocated:
Interest income 94.7 79.5
Interest expense (117.3) (71.4)
Equity income from affiliates 78.4 85.8
Depreciation and amortization (249.8) (224.4)
Research and development (523.6) (441.8)
Other expenses, net (274.5) (328.6)
-------- --------
$2,194.0 $1,842.8
======== ========
</TABLE>
Other profits primarily represent operating income related to divested
products or businesses. Adjustments represent the elimination of the effect
of double counting certain items of income and expense. Equity income from
affiliates includes taxes paid at the joint venture level and a portion of
equity income that is not reported in segment profits. Other expenses, net,
include expenses from corporate and manufacturing cost centers and other
miscellaneous income (expense), net.
11. Legal proceedings to which the Company is a party are discussed in Part 1
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, 2000.
- 6 -
<PAGE> 8
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION
Earnings per share for the first quarter of 2000 were $0.63, an increase of 17%
over the first quarter of 1999. First quarter net income increased 15% to
$1,499.6 million. Sales for the quarter were $8.9 billion, up 17% from the same
period last year.
Sales growth for the quarter was led by 'Vioxx', the fastest growing
prescription arthritis medicine in the United States, other newer and
established products and growth from the Merck-Medco Managed Care business.
Overall, worldwide operations reported strong sales volume gains.
Sales of Merck human health products increased 17% for the first quarter. Sales
of Merck human health products outside of the United States accounted for 37% of
Merck human health sales. Foreign exchange had essentially no effect on the
human health sales growth for the first quarter.
Income growth for the quarter was driven by strong sales volume gains as well as
manufacturing productivity improvements. The savings from productivity
improvements helped fund selling and promotion programs to support new products
as well as research and development.
Five key products - 'Vioxx', 'Zocor', 'Fosamax', 'Singulair' and
'Cozaar'/'Hyzaar'* - led Merck's growth, and now account for more than 50% of
Merck's worldwide human health sales. Supply shipments to AstraZeneca LP also
contributed to sales volume growth.
'Vioxx' remains the fastest growing prescription arthritis medicine in the
United States. More than 9 million prescriptions have been written for 'Vioxx'
since its U.S. introduction 10 months ago. In addition, it is the only medicine
specifically inhibiting COX-2 that is indicated both for treatment of
osteoarthritis and for relief of acute pain, such as pain following knee, hip
replacement and dental surgery. 'Vioxx' is enjoying strong success in the
European countries where it has been launched, including the United Kingdom,
Germany and Spain. In all, 'Vioxx' has been launched in more than 50 countries.
Merck is conducting extensive clinical studies with 'Vioxx' to evaluate its
efficacy in the treatment of rheumatoid arthritis and in the prevention and
treatment of Alzheimer's disease. Merck has also begun studies to investigate
whether 'Vioxx' can reduce the number of colon polyps in patients who suffer
from them - a broad population at risk of developing colon cancer.
Sales of 'Zocor' continue to show strong growth. Extensive studies showed that
this cholesterol-modifying medicine saves lives by preventing heart attacks and
other cardiovascular events. The first study comparing 'Zocor' 80 mg, the
highest recommended dose, with atorvastatin 80 mg showed that 'Zocor' increased
levels of both "good" (HDL) cholesterol and a key component of good cholesterol
called apolipoprotein (apo A-I) to a greater degree. Low HDL has been identified
as a risk factor for heart disease. The independent effect of raising HDL on
cardiovascular disease has not been determined.
Merck's high blood pressure medication 'Cozaar' and its companion agent 'Hyzaar'
rank among the Company's fastest-growing products. 'Cozaar' is currently
registered in more than 90 countries, where it has been used to treat more than
7 million patients. 'Cozaar' is the world's most widely prescribed medication in
the angiotensin II antagonist class and it continues its strong growth, as
physicians increasingly recognize the excellent tolerability and efficacy of
these two products.
Results from a new study with 'Cozaar' and 'Hyzaar' have countered a
traditionally held belief that African Americans might not be responsive to
recently developed antihypertensives. Physicians traditionally have prescribed
older classes of drugs, such as diuretics and calcium channel blockers, to treat
hypertension in this population. Average blood pressure levels are higher in
African Americans compared to Caucasians, and African Americans tend to develop
hypertension earlier in life. As a result, they are more vulnerable to heart
attack, stroke and kidney failure. Study results showed that African Americans
with hypertension who were treated with 'Cozaar' and 'Hyzaar' demonstrated
statistically significant reductions in blood pressure compared to placebo.
'Fosamax' is available in more than 100 countries and continues as the leading
product worldwide for the treatment of postmenopausal osteoporosis. 'Fosamax'
remains the only non-hormonal medicine proven to reduce the incidence of hip
fractures, the most serious fractures related to osteoporosis. Merck has
submitted an application to the U.S. Food and Drug Administration (FDA) for
approval to market 'Fosamax' to treat osteoporosis in men. The Company also has
filed with the FDA and with regulatory agencies worldwide for a convenient
once-weekly formulation, which has already received approval in Mexico.
*'Cozaar' and 'Hyzaar' are registered trademarks of E.I. du Pont de Nemours and
Company, Wilmington, DE, USA.
- 7 -
<PAGE> 9
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued)
'Singulair' is now the third-largest selling branded product for the chronic
treatment of asthma. Merck recently filed for regulatory approval to market
'Singulair' in Japan, the world's second-largest national pharmaceutical market.
'Singulair' became the first asthma controller therapy in more than 15 years
indicated for children as young as two, following FDA approval to market the 4
mg chewable tablet for children ages two to five. Similar applications are
pending in Europe and Latin America. This new indication is significant because
asthma remains the most prevalent chronic disease of childhood, affecting an
estimated 1 in 10 children, and its prevalence and incidence is increasing.
On February 22, 2000, the Board of Directors declared a quarterly dividend of 29
cents per share on the Company's common stock which was paid April 3 to
stockholders of record at the close of business on March 3. The Company's total
dividend paid to date in 2000 is 58 cents per share, a seven percent increase
over the amount paid during the same period in 1999.
In February 2000, the Company completed the $5.0 billion share repurchase
program authorized by the Board of Directors in July 1998 and the Board approved
purchases of up to an additional $10.0 billion of Merck shares. The Company
purchased a total of $2.1 billion of treasury shares in the first quarter of
2000 under the programs.
In March 2000, a wholly-owned subsidiary of the Company issued $1.5 billion par
value of variable rate preferred units. The units are redeemable at par value
plus accrued dividends at the option of the issuer at any time. They are also
redeemable at the option of the holders in March 2010, and at the end of each
five - year interval thereafter. The proceeds will be used for general corporate
purposes. The preferred units are included in Minority interests in the
consolidated financial statements.
In April 2000, Merck-Medco Managed Care, L.L.C. (Merck-Medco) introduced a new
service, YOURxPLAN, a prescription savings plan for people who have to pay for
medicines out of their own pockets. With discounts on virtually all prescription
drugs, plus additional cash back savings on some major medicines, YOURxPLAN
allows people of all ages to save money on their drug bills. Merck's partner in
this venture is Reader's Digest, one of the nation's premier direct marketers
and most trusted resources for health information and products.
On May 4, 2000, the Company entered into a definitive agreement to acquire all
of the outstanding common shares of ProVantage Health Services, Inc.
(ProVantage), a pharmaceutical benefit services company, for $12.25 per share or
an estimated aggregate purchase price of $222.0 million. ProVantage would become
part of Merck-Medco. The proposed acquisition, which would be accounted for by
the purchase method, would not have a material impact on the Company's results
of operations or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133).
The Statement established accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as either an asset
or liability measured at fair value and that changes in fair value be recognized
currently in earnings, unless specific hedge accounting criteria are met. In
June 1999, the FASB issued Statement No. 137, Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133, which delayed the Company's required adoption of FAS 133 to
January 1, 2001. The Company will adopt the Statement at that time. The FASB is
currently finalizing certain amendments to FAS 133. The effect of the final
statement on the Company's financial position or results of operations has not
yet been determined.
- 8 -
<PAGE> 10
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
This report and other written reports and oral statements made from time to time
by the Company may contain so-called "forward-looking statements," all of which
are subject to risks and uncertainties. One can identify these forward-looking
statements by their use of words such as "expects," "plans," "will,"
"estimates," "forecasts," "projects" and other words of similar meaning. One can
also identify them by the fact that they do not relate strictly to historical or
current facts. These statements are likely to address the Company's growth
strategy, financial results, product approvals and development programs. One
must carefully consider any such statement and should understand that many
factors could cause actual results to differ from the Company's forward-looking
statements. These factors include inaccurate assumptions and a broad variety of
other risks and uncertainties, including some that are known and some that are
not. No forward-looking statement can be guaranteed and actual future results
may vary materially.
The Company does not assume the obligation to update any forward-looking
statement. One should carefully evaluate such statements in light of factors
described in the Company's filings with the Securities and Exchange Commission,
especially on Forms 10-K, 10-Q and 8-K (if any). In Item 1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, as filed on
March 22, 2000, the Company discusses in more detail various important factors
that could cause actual results to differ from expected or historic results. The
Company notes these factors for investors as permitted by the Private Securities
Litigation Reform Act of 1995. One should understand that it is not possible to
predict or identify all such factors. Consequently, the reader should not
consider any such list to be a complete statement of all potential risks or
uncertainties.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Number Description Method of Filing
------ ----------- ----------------
<S> <C> <C>
3(a) Restated Certificate of Incorporated by reference
Incorporation of Merck to Form 10-K Annual Report
& Co., Inc. (May 6, 1992) for the fiscal year ended
December 31, 1992
3(b) Certificate of Amendment to Incorporated by reference
the Certificate of to Form 10-K Annual Report
Incorporation of Merck & for the fiscal year ended
Co., Inc. (as amended December 31, 1998
January 14, 1999, effective
February 16, 1999)
3(c) By-Laws of Merck & Co., Inc. Incorporated by reference
(as amended effective to Form 10-Q Quarterly
February 25, 1997) Report for the period
ended March 31, 1997
12 Computation of Ratios of Filed with this document
Earnings to Fixed Charges
27 Financial Data Schedule Filed with this document
</TABLE>
(b) Reports on Form 8-K
During the three-month period ending March 31, 2000, no current reports on
Form 8-K were filed.
- 9 -
<PAGE> 11
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 thereunto duly authorized.
MERCK & CO., INC.
Date: May 12, 2000 /s/ Kenneth C. Frazier
----------------------
KENNETH C. FRAZIER
Senior Vice President and General Counsel
Date: May 12, 2000 /s/ Richard C. Henriques
------------------------
RICHARD C. HENRIQUES
Vice President, Controller
- 10 -
<PAGE> 12
EXHIBIT INDEX
Exhibits
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) Certificate of Amendment to the Certificate of Incorporation of Merck
& Co., Inc. (as amended January 14, 1999, effective February 16,
1999)
- Incorporated by reference to Form 10-K Annual Report for the fiscal
year ended December 31, 1998
3(c) By-Laws of Merck & Co., Inc. (as amended effective February 25, 1997)
- Incorporated by reference to Form 10-Q Quarterly Report for the
period ended March 31, 1997
12 Computation of Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>2
<DESCRIPTION>COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TEXT>
<PAGE> 1
Exhibit 12
MERCK & CO., INC. AND SUBSIDIARIES
Computation Of Ratios Of Earnings To Fixed Charges
(In millions except ratio data)
<TABLE>
<CAPTION>
Three Months
Ended Years Ended December 31
March 31 ----------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income Before Taxes $2,194.0 $8,619.5 $8,133.1 $6,462.3 $5,540.8 $4,797.2
Add:
One-third of rents 16.4 66.7 56.0 47.0 41.0 28.1
Interest expense, net 89.3 236.4 150.6 98.2 103.2 60.3
Preferred stock dividends 32.1 120.7 62.1 49.6 70.0 2.1
-------- -------- -------- -------- -------- --------
Earnings $2,331.8 $9,043.3 $8,401.8 $6,657.1 $5,755.0 $4,887.7
======== ======== ======== ======== ======== ========
One-third of rents $ 16.4 $ 66.7 $ 56.0 $ 47.0 $ 41.0 $ 28.1
Interest expense 117.3 316.9 205.6 129.5 138.6 98.7
Preferred stock dividends 32.1 120.7 62.1 49.6 70.0 2.1
-------- -------- -------- -------- -------- --------
Fixed Charges $ 165.8 $ 504.3 $ 323.7 $ 226.1 $ 249.6 $ 128.9
======== ======== ======== ======== ======== ========
Ratio of Earnings
to Fixed Charges 14 18 26 29 23 38
======== ======== ======== ======== ======== ========
</TABLE>
For purposes of computing these ratios, "earnings" consist of income before
taxes, 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.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>3
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,223
<SECURITIES> 1,070
<RECEIVABLES> 3,692
<ALLOWANCES> 0<F1>
<INVENTORY> 2,978
<CURRENT-ASSETS> 11,084
<PP&E> 14,743
<DEPRECIATION> (4,796)
<TOTAL-ASSETS> 35,778
<CURRENT-LIABILITIES> 7,989
<BONDS> 3,443
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<COMMON> 30
<OTHER-SE> 12,072
<TOTAL-LIABILITY-AND-EQUITY> 35,778
<SALES> 8,851
<TOTAL-REVENUES> 8,851
<CGS> 4,833
<TOTAL-COSTS> 4,833
<OTHER-EXPENSES> 524
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 117
<INCOME-PRETAX> 2,194
<INCOME-TAX> 694
<INCOME-CONTINUING> 1,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,500
<EPS-BASIC> .65
<EPS-DILUTED> .63
<FN>
<F1>NOT MATERIAL TO THE CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>