-----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, VAhBYeH20oswb4GW4UxM4i4LadzvVvbl29ZxO85tizlYd/7bIO+WeKH3g7N5XPIn 0GXkAXxxjn8zEmRTpycl+w== /in/edgar/work/20000810/0000950123-00-007394/0000950123-00-007394.txt : 20000921 0000950123-00-007394.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950123-00-007394 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCK & CO INC CENTRAL INDEX KEY: 0000064978 STANDARD INDUSTRIAL CLASSIFICATION: [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: 691625 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 e10-q.txt MERCK & CO., INC. 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 June 30, 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 July 31, 2000: Class Number of Shares Outstanding ----- ---------------------------- Common Stock 2,300,535,217 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 AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited, $ in millions except per share amounts)
Three Months Six Months Ended June 30 Ended June 30 ----------------------- ----------------------------- 2000 1999 2000 1999 ---------- ---------- ------------ ------------- Sales $9,477.1 $8,018.2 $18,328.4 $15,554.8 ---------- ---------- ------------ ------------- Costs, Expenses and Other Materials and production 5,087.0 4,370.2 9,920.4 8,524.4 Marketing and administrative 1,463.6 1,184.4 2,880.7 2,338.6 Research and development 548.0 482.7 1,071.7 924.4 Equity income from affiliates (211.8) (179.6) (400.1) (354.4) Other (income) expense, net 113.0 (170.1) 184.4 (51.6) ---------- ---------- ------------ ------------- 6,999.8 5,687.6 13,657.1 11,381.4 ---------- ---------- ------------ ------------- Income Before Taxes 2,477.3 2,330.6 4,671.3 4,173.4 Taxes on Income 755.6 852.5 1,450.0 1,395.7 ---------- ---------- ----------- ----------- Net Income $1,721.7 $1,478.1 $ 3,221.3 $ 2,777.7 ========== ========== =========== =========== Basic Earnings per Common Share $.74 $.63 $1.39 $1.18 Earnings per Common Share Assuming Dilution $.73 $.61 $1.37 $1.15 Dividends Declared per Common Share $.29 $.27 $.58 $.54
The accompanying notes are an integral part of this consolidated financial statement. - 1 - 3 MERCK & CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30, 2000 AND DECEMBER 31, 1999 (Unaudited, $ in millions)
June 30 December 31 2000 1999 --------- --------- ASSETS Current Assets Cash and cash equivalents $ 2,806.0 $ 2,021.9 Short-term investments 1,105.7 1,180.5 Accounts receivable 3,863.2 4,089.0 Inventories 2,927.9 2,846.9 Prepaid expenses and taxes 1,137.9 1,120.9 --------- --------- Total current assets 11,840.7 11,259.2 --------- --------- Investments 5,059.2 4,761.5 Property, Plant and Equipment, at cost, net of allowance for depreciation of $5,004.0 in 2000 and $4,670.3 in 1999 10,406.4 9,676.7 Goodwill and Other Intangibles, net of accumulated amortization of $1,668.0 in 2000 and $1,488.7 in 1999 7,549.1 7,584.2 Other Assets 2,587.9 2,353.3 --------- --------- $37,443.3 $35,634.9 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 3,923.7 $ 4,158.7 Loans payable and current portion of long-term debt 3,784.3 2,859.0 Income taxes payable 673.0 1,064.1 Dividends payable 667.2 677.0 --------- --------- Total current liabilities 9,048.2 8,758.8 --------- --------- Long-Term Debt 3,439.1 3,143.9 --------- --------- Deferred Income Taxes and Noncurrent Liabilities 7,226.6 7,030.1 --------- --------- Minority Interests 5,010.4 3,460.5 --------- --------- Stockholders' Equity Common stock Authorized - 5,400,000,000 shares Issued - 2,968,195,053 shares - June 30, 2000 - 2,968,030,509 shares - December 31, 1999 29.7 29.7 Other paid-in capital 5,973.7 5,920.5 Retained earnings 25,330.2 23,447.9 Accumulated other comprehensive (loss) income (6.2) 8.1 --------- --------- 31,327.4 29,406.2 Less treasury stock, at cost 668,462,613 shares - June 30, 2000 638,953,059 shares - December 31, 1999 18,608.4 16,164.6 --------- --------- Total stockholders' equity 12,719.0 13,241.6 --------- --------- $37,443.3 $35,634.9 ========= =========
The accompanying notes are an integral part of this consolidated financial statement. - 2 - 4 MERCK & CO., INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited, $ in millions)
Six Months Ended June 30 ----------------------------- 2000 1999 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Income before taxes $ 4,671.3 $ 4,173.4 Adjustments to reconcile income before taxes to cash provided from operations before taxes: Depreciation and amortization 638.8 577.2 Other (139.2) (344.5) Net changes in assets and liabilities (74.2) (119.4) ---------- ---------- CASH PROVIDED BY OPERATING ACTIVITIES BEFORE TAXES 5,096.7 4,286.7 INCOME TAXES PAID (1,339.1) (1,047.2) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,757.6 3,239.5 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,198.0) (1,089.2) Purchase of securities, subsidiaries and other investments (13,332.7) (17,686.2) Proceeds from sale of securities, subsidiaries and other investments 12,859.0 16,333.5 Proceeds from relinquishment of certain AstraZeneca product rights 93.6 1,679.9 Other (35.1) (16.7) ---------- ---------- NET CASH USED BY INVESTING ACTIVITIES (1,613.2) (778.7) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in short-term borrowings 915.5 (4.1) Proceeds from issuance of debt 300.7 11.4 Payments on debt (74.2) (15.9) Proceeds from issuance of preferred units of subsidiary 1,500.0 - Purchase of treasury stock (2,802.0) (1,525.1) Dividends paid to stockholders (1,348.8) (1,275.4) Other 186.9 99.6 ---------- ---------- NET CASH USED BY FINANCING ACTIVITIES (1,321.9) (2,709.5) ---------- ---------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (38.4) (89.6) ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 784.1 (338.3) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,021.9 2,606.2 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,806.0 $ 2,267.9 ========== ==========
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 - 5 Notes to Consolidated Financial Statements (continued) 2. Inventories consisted of:
($ in millions) ------------------------ June 30 December 31 2000 1999 -------- ----------- Finished goods $1,960.4 $1,895.6 Raw materials and work in process 890.8 869.8 Supplies 76.7 81.5 -------- -------- Total (approximates current cost) 2,927.9 2,846.9 Reduction to LIFO cost - - -------- -------- $2,927.9 $2,846.9 ======== ========
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 $51.8 million. Since that time, the Company has entered into other settlements on satisfactory terms. The Company has not engaged in any conspiracy, and no admission of wrongdoing was made nor was included in the final agreements. While it is not feasible to predict or determine the final outcome of these proceedings, management does not believe that they should result in a materially adverse effect on the Company's financial position, results of operations or liquidity. 5. Sales consisted of:
($ in millions) -------------------------------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 --------------------------- --------------------------- 2000 1999 2000 1999 -------- -------- --------- --------- Elevated cholesterol $1,439.1 $1,239.9 $ 2,723.4 $ 2,410.4 Hypertension/heart failure 1,202.0 1,204.3 2,341.3 2,292.2 Anti-inflammatory/analgesics 497.2 122.9 888.8 149.9 Osteoporosis 323.0 243.3 599.6 474.6 Vaccines/biologicals 239.0 221.4 447.6 392.8 Anti-ulcerants 215.4 191.9 422.2 452.1 Antibiotics 208.0 187.0 397.9 376.8 Respiratory 213.1 112.5 380.1 200.7 Ophthalmologicals 165.1 162.6 321.3 314.2 Human immunodeficiency virus (HIV) 133.7 175.9 272.0 325.8 Other Merck products 402.5 399.9 859.9 831.8 Merck-Medco 4,439.0 3,756.6 8,674.3 7,333.5 -------- -------- --------- --------- $9,477.1 $8,018.2 $18,328.4 $15,554.8 ======== ======== ========= =========
Other Merck products include sales of other human pharmaceuticals, continuing sales to divested businesses and pharmaceutical and animal health supply sales to the Company's joint ventures and AstraZeneca LP. - 4 - 6 Notes to Consolidated Financial Statements (continued) 6. Other (income) expense, net, consisted of:
($ in millions) ------------------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 ------------------------ ------------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Interest income $(107.0) $ (89.4) $(201.7) $(168.9) Interest expense 116.0 68.9 233.3 140.3 Exchange (gains) losses (9.7) (7.3) (17.5) 2.1 Minority interests 95.8 57.3 156.0 106.7 Amortization of goodwill and other intangibles 78.6 77.8 157.4 161.1 Other, net (60.7) (277.4) (143.1) (292.9) ------- ------- ------- ------- $ 113.0 $(170.1) $ 184.4 $ (51.6) ======= ======= ======= =======
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 six-month periods ended June 30, 2000 and 1999 was $221.3 million and $105.0 million, respectively. 7. Income taxes paid for the six-month periods ended June 30, 2000 and 1999 were $1,339.1 million and $1,047.2 million, respectively. 8. The net income effect of dilutive securities was not significant to the Company's calculation of Earnings per common share assuming dilution. A reconciliation of weighted average common shares outstanding to weighted average common shares outstanding assuming dilution follows:
($ in millions) --------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 -------------------- -------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Average common shares outstanding 2,300.2 2,357.6 2,310.0 2,359.2 Common shares issuable(1) 45.5 56.0 45.5 59.4 ------- ------- ------- ------- Average common shares outstanding assuming dilution 2,345.7 2,413.6 2,355.5 2,418.6 ======= ======= ======= ======= - ------------------------------------------------- (1) Issuable primarily under stock option plans.
9. Comprehensive income for the three months ended June 30, 2000 and 1999 was $1,702.6 million and $1,474.5 million, respectively. Comprehensive income for the six months ended June 30, 2000 and 1999 was $3,207.0 million and $2,775.4 million, respectively. - 5 - 7 Notes to Consolidated Financial Statements (continued) 10. The Company's operations are principally managed on a products and services basis and are comprised of two reportable segments: Merck Pharmaceutical and Merck-Medco. Merck Pharmaceutical products consist of therapeutic agents, sold by prescription, for the treatment of human disorders. Merck-Medco revenues are derived from the filling and management of prescriptions and health management programs. All Other includes non-reportable human and animal health segments. Revenues and profits for these segments are as follows:
($ in millions) ---------------------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 ------------------------ -------------------------- 2000 1999 2000 1999 --------- -------- --------- --------- Segment revenues: Merck Pharmaceutical $ 4,103.2 $3,606.8 $ 7,804.5 $ 6,885.7 Merck-Medco 5,188.0 4,435.2 10,137.6 8,729.7 All Other 896.4 611.5 1,769.7 1,242.5 --------- -------- --------- --------- $10,187.6 $8,653.5 $19,711.8 $16,857.9 ========= ======== ========= ========= Segment profits: Merck Pharmaceutical $ 2,362.9 $2,200.7 $ 4,460.0 $ 4,195.1 Merck-Medco 150.2 127.7 292.4 251.4 All Other 845.4 572.5 1,645.5 1,133.4 --------- -------- --------- --------- $ 3,358.5 $2,900.9 $ 6,397.9 $ 5,579.9 ========= ======== ========= =========
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:
($ in millions) ---------------------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 -------------------------- ------------------------ 2000 1999 2000 1999 -------- -------- --------- -------- Segment profits $3,358.5 $2,900.9 $6,397.9 $5,579.9 Other profits 4.6 19.8 30.3 45.4 Adjustments 128.3 49.7 249.4 88.8 Unallocated: Interest income 107.0 89.4 201.7 168.9 Interest expense (116.0) (68.9) (233.3) (140.3) Equity income from affiliates 70.9 59.8 149.2 145.5 Depreciation and amortization (248.9) (231.1) (498.7) (455.3) Research and development (548.0) (482.7) (1,071.7) (924.4) Other expenses, net (279.1) (6.3) (553.5) (335.1) -------- -------- --------- -------- $2,477.3 $2,330.6 $4,671.3 $4,173.4 ======== ======== ========= ========
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 six-month period ended June 30, 2000. - 6 - 8 MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION Earnings per share for the second quarter of 2000 were $0.73, an increase of 20% over the second quarter of 1999. Second quarter net income increased 16% to $1,721.7 million. Sales for the quarter were $9.5 billion, up 18% from the same period last year. For the first six months, earnings per share were $1.37, an increase of 19% from the first six months of 1999. Net income was $3,221.3 million for the first six months of 2000, an increase of 16% from the first six months of 1999. Sales rose 18% to $18.3 billion. Sales growth for the quarter and the first half of 2000 was led by 'Vioxx', the other newer and established products and growth from the Merck-Medco Managed Care business. Strong volume gains in both the domestic and international operations contributed to the second quarter results. Sales of Merck human health products increased 19% and 18% for the second quarter and six months, respectively. Sales of Merck human health products outside of the United States accounted for 37% of Merck human health first half 2000 sales. Foreign exchange reduced the human health sales growth for both the second quarter and first six months performance by one percentage point. Five key products -'Vioxx', 'Zocor', 'Cozaar'/'Hyzaar'*, 'Fosamax', and 'Singulair' - led Merck's growth and account for more than 50% of Merck's worldwide human health sales for the first six months. Supply shipments to AstraZeneca LP also contributed to the sales volume growth. The five products provide a strong platform for growth. Each is a successful, high growth medicine, offering a unique competitive advantage in the market, and Merck is conducting additional clinical studies that will potentially extend each franchise to even more patients. Income growth for the first six months was driven by strong sales volume gains led by the U.S. market as well as manufacturing productivity improvements. The savings from productivity improvements helped fund research and development and selling and promotion programs in support of new products. 'Vioxx', Merck's newest medicine for osteoarthritis and acute pain, has been launched in nearly 70 countries, including in the United States, the United Kingdom, Germany, Spain, Mexico, Sweden and Denmark. It remains the world's fastest growing prescription arthritis medicine, with more than 12 million prescriptions written since it was first introduced last year. In addition, 'Vioxx' is the only medicine specifically inhibiting COX-2 that is indicated in the United States both for treatment of osteoarthritis and for relief of acute pain. In May, Merck presented results from the 8,000-patient 'Vioxx' Gastrointestinal Outcomes Research (VIGOR) study in which 'Vioxx' reduced the incidence of serious gastrointestinal side effects, such as ulcers and bleeding, by more than 50 percent compared to the nonsteroidal anti-inflammatory drug naproxen. In June, Merck submitted a Supplemental New Drug Application for 'Vioxx' to the U.S. Food and Drug Administration (FDA) to request labeling changes based on the study. To expand the market for 'Vioxx', Merck continues clinical trials to determine whether 'Vioxx' is effective 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', Merck's cholesterol-modifying medicine, continue to show strong growth. The landmark 4S (Scandinavian Simvastatin Survival Study) study has shown that 'Zocor' saves lives by preventing heart attacks and other cardiovascular events in people with heart disease and high cholesterol. As a result of the medicine's proven ability to not only lower levels of "bad" (LDL) cholesterol, but also to increase levels of "good" cholesterol (HDL) in people with high LDL levels, the FDA approved 'Zocor' as the first "statin" to raise HDL. 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. To reach even more patients, Merck is pursuing important new studies for 'Zocor' that may provide evidence that the medicine lowers the risk of peripheral vascular disease, especially among high-risk patients, including the elderly and those with diabetes. *'Cozaar' and 'Hyzaar' are registered trademarks of E.I. du Pont de Nemours and Company, Wilmington, DE, USA. - 7 - 9 MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued) 'Cozaar' and 'Hyzaar' for high blood pressure are the world's most widely prescribed medicines in the angiotensin II antagonist class. Strong growth continues as physicians recognize the excellent tolerability and efficacy of these two products. The Company has a number of trials underway to evaluate the medicines' effectiveness in improving survival and reducing disability associated with hypertension, diabetic kidney disease and recent heart attacks. 'Fosamax', the leading product worldwide for treatment of postmenopausal osteoporosis, is now available in more than 100 countries. The Company has submitted applications to regulatory agencies worldwide, including the United States, for approval to market 'Fosamax' for the treatment of osteoporosis in men as well as for a convenient once-weekly formulation. Mexico has approved once-weekly use in women and men with osteoporosis. 'Fosamax' remains the only treatment for osteoporosis proven to reduce the incidence of hip fractures, the most serious fractures related to osteoporosis. Merck presented data this month for 'Fosamax' during the European League Against Rheumatism Congress, demonstrating a statistically significant anti-fracture effect within 12 months. 'Singulair', Merck's leukotriene receptor antagonist, continues to show strong growth in all markets in which it has been introduced. Given the medicine's convenient, once-a-day dose and its effectiveness in treating children as young as age two, pediatricians in the United States now prescribe 'Singulair' more than any other asthma controller therapy. To help even more patients benefit from use of 'Singulair', Merck is studying its effectiveness for acute use in the hospital setting and in allergic rhinitis. 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. On May 22, 2000, the Board of Directors declared a quarterly dividend of 29 cents per share on the Company's common stock for the third quarter of 2000. On July 25, 2000, the Board of Directors declared a quarterly dividend of 34 cents per share on the Company's common stock for the fourth quarter of 2000. The Company's total dividends paid during 2000 will be $1.21 per share, a ten percent increase over the amount paid in 1999. In May 2000, the Company and Schering-Plough Corporation (Schering-Plough) created two partnerships to develop and market in the United States new prescription medicines in the cholesterol-management and respiratory therapeutic areas. The companies will jointly pursue the development and marketing of: - 'Zocor' as a once-daily fixed-combination tablet with ezetimibe, Schering-Plough's investigational cholesterol absorption inhibitor - ezetimibe as once-daily monotherapy - a once-daily fixed-combination tablet of 'Singulair' and 'Claritin'** for the treatment of allergic rhinitis and asthma. 'Claritin' is Schering-Plough's nonsedating antihistamine for treatment of seasonal allergic rhinitis. The arrangements are not expected to have a significant near-term impact on the Company's results of operations or financial position. Merck-Medco Managed Care, L.L.C. completed its acquisition of ProVantage Health Services, Inc. (ProVantage) in June 2000 for an aggregate cash-purchase price of $222.0 million. ProVantage provides pharmacy benefit services to about 5 million people, many of whom are covered by mid-sized and small plan sponsors and third-party administrators. The acquisition, which was accounted for by the purchase method, did not have a material impact on the Company's results of operations or financial position. The Company's $1.0 billion shelf registration statement for the issuance of debt securities became effective in August 2000, increasing available capacity under such filings to $1.7 billion. The Company also has a $1.5 billion Euro Medium Term Note program, under which no securities have been issued. Any proceeds from the sale of these securities will be used for general corporate purposes. **'Claritin' is a registered trademark of the Schering-Plough Corporation, Madison, NJ, USA. - 8 - 10 MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued) 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. In June 2000, the FASB issued Statement No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FAS 133, which is effective concurrently with FAS 133. Although the Company continues to perform extensive analysis of the Statements, the ultimate effect on the Company's financial position or results of operations cannot yet be determined. - 9 - 11 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. - 10 - 12 Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders The following matters were voted upon at the Annual Meeting of Stockholders held on April 25, 2000, and received the votes set forth below: 1. All of the following persons nominated were elected to serve as directors and received the number of votes set opposite their respective names:
For Withheld --- -------- Niall FitzGerald 1,859,534,763 36,000,618 Anne M. Tatlock 1,867,759,481 27,775,900 Lawrence A. Bossidy 1,868,005,605 27,529,776 Johnnetta B. Cole, Ph.D. 1,868,169,053 27,366,328 William B. Harrison, Jr. 1,868,537,915 26,997,466 William N. Kelley, M.D. 1,868,515,873 27,019,508
2. A proposal to ratify the appointment of independent public accountants received 1,884,394,956 votes FOR and 3,289,882 votes AGAINST, with 7,850,543 abstentions. 3. A proposal to adopt the 2001 Incentive Stock Plan received 1,711,501,202 votes FOR and 166,394,464 votes AGAINST, with 17,618,383 abstentions. 4. A stockholder proposal concerning appointment of directors from outside the Company received 101,992,401 votes FOR and 1,295,635,796 votes AGAINST, with 48,798,230 abstentions and 449,108,954 broker non-votes. 5. A stockholder proposal concerning annual election of directors received 739,240,749 votes FOR and 660,727,273 votes AGAINST, with 46,324,439 abstentions and 449,242,920 broker non-votes. 6. A stockholder proposal concerning bonuses for management received 67,588,642 votes FOR and 1,317,565,401 votes AGAINST, with 52,252,824 abstentions and 458,128,514 broker non-votes. 7. A stockholder proposal concerning pharmaceutical pricing received 80,306,979 votes FOR and 1,300,298,698 votes AGAINST, with 65,500,390 abstentions and 449,429,314 broker non-votes. 8. A stockholder proposal concerning stock ownership of director candidates received 77,357,685 votes FOR and 1,296,660,597 votes AGAINST, with 76,022,735 abstentions and 445,494,364 broker non-votes. - 11 - 13 Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -------- Number Description Method of Filing ------ ----------- ----------------- 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 10(a) 2001 Incentive Stock Plan Filed with this document (Effective January 1, 2001) 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 June 30, 2000, no current reports on Form 8-K were filed. - 12 - 14 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: August 9, 2000 /s/ Kenneth C. Frazier ------------------------- KENNETH C. FRAZIER Senior Vice President and General Counsel Date: August 9, 2000 /s/ Richard C. Henriques ------------------------- RICHARD C. HENRIQUES Vice President, Controller - 13 - 15 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 10(a) 2001 Incentive Stock Plan (effective January 1, 2001) 12 Computation of Ratios of Earnings to Fixed Charges 27 Financial Data Schedule
EX-10.A 2 ex10-a.txt 2001 INCENTIVE STOCK PLAN 1 ================================================================================ Exhibit 10(a) MERCK & CO., INC. 2001 INCENTIVE STOCK PLAN (effective January 1, 2001) ================================================================================ 2 2001 INCENTIVE STOCK PLAN The 2001 Incentive Stock Plan ("ISP"), effective January 1, 2001, is established to encourage employees of Merck & Co., Inc. (the "Company"), its subsidiaries, its affiliates and its joint ventures to acquire Common Stock in the Company ("Common Stock"). It is believed that the ISP will stimulate employees' efforts on the Company's behalf, will tend to maintain and strengthen their desire to remain with the Company, will be in the interest of the Company and its Stockholders and will encourage such employees to have a greater personal financial investment in the Company through ownership of its Common Stock. 1. INCENTIVES Incentives under the ISP may be granted in any one or a combination of (a) Incentive Stock Options (or other statutory stock options); (b) Nonqualified Stock Options; (c) Stock Appreciation Rights; (d) Restricted Stock Grants and (e) Performance Shares (collectively "Incentives"). All Incentives shall be subject to the terms and conditions set forth herein and to such other terms and conditions as may be established by the Compensation and Benefits Committee of the Board of Directors (the "Committee"). 2. ELIGIBILITY Regular full-time and part-time employees of the Company, its subsidiaries, its affiliates and its joint ventures, including officers, whether or not directors of the Company, and employees of a joint venture partner or affiliate of the Company who provide services to the joint venture with such partner or affiliate, shall be eligible to participate in the ISP ("Eligible Employees") if designated by the Committee. Directors of the Company who are not regular employees are not eligible to participate in the ISP. 3. ADMINISTRATION The ISP shall be administered by the Committee. The Committee shall be responsible for the administration of the ISP including, without limitation, determining which Eligible Employees receive Incentives, what kind of Incentives are made under the ISP and for what number of shares, and the other terms and conditions of such Incentives. Determinations by the Committee under the ISP including, without limitation, determinations of the Eligible Employees, the form, amount and timing of Incentives, the terms and provisions of Incentives and the agreements evidencing Incentives, need not be uniform and may be made selectively among Eligible Employees who receive, or are eligible to receive, Incentives hereunder, whether or not such Eligible Employees are similarly situated. The Committee shall have the responsibility of construing and interpreting the ISP and of establishing and amending such rules and regulations as it may deem necessary or desirable for the proper administration of the ISP. Any decision or action taken or to be taken by the Committee, arising out of or in connection with the construction, administration, interpretation and effect of the ISP and of its rules and regulations, shall, to the maximum extent permitted by applicable law, be within its absolute discretion (except as otherwise specifically provided herein) and shall be conclusive and binding upon the Company, all Eligible Employees and any person claiming under or through any Eligible Employee. 3 The Committee may delegate some or all of its power and authority hereunder to the Chief Executive Officer or other senior member of management as the Committee deems appropriate; provided, however, that the Committee may not delegate its authority with regard to any matter or action affecting an officer subject to Section 16 of the Securities Exchange Act of 1934. For the purpose of this section and all subsequent sections, the ISP shall be deemed to include this plan and any comparable sub-plans established by subsidiaries which, in the aggregate, shall constitute one plan governed by the terms set forth herein. 4. SHARES AVAILABLE FOR INCENTIVES (a) SHARES SUBJECT TO ISSUANCE OR TRANSFER. Subject to adjustment as provided in Section 4(c) hereof, there is hereby reserved for issuance under the ISP 95 million shares of Common Stock. The shares available for granting awards shall be increased by the number of shares as to which options or other benefits granted under the ISP have lapsed, expired, terminated or been canceled. In addition, any shares reserved for issuance under the Company's 1996 Incentive Stock Plan and 1991 Incentive Stock Plan ("Prior Plans") in excess of the number of shares as to which options or other benefits have been awarded thereunder, plus any such shares as to which options or other benefits granted under the Prior Plans may lapse, expire, terminate or be canceled, shall also be reserved and available for issuance or reissuance under the ISP. Shares under this ISP may be delivered by the Company from its authorized but unissued shares of Common Stock or from Common Stock held in the Treasury. (b) LIMIT ON AN INDIVIDUAL'S INCENTIVES. In any given year, no Eligible Employee may receive Incentives covering more than three (3) million shares of the Company's Common Stock (such number of shares shall be adjusted in accordance with Section 4(c)). (c) ADJUSTMENT OF SHARES. In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering or other similar change in the capital structure of the Company, then (i) the number of shares authorized for issuance under the ISP, and (ii) the number of shares subject to outstanding Incentives and, in the case of Stock Options, the option price, and in the case of stock appreciation rights, the fair market value, will be proportionately adjusted, provided that fractions of a share will be rounded down to the nearest whole share. 5. STOCK OPTIONS The Committee may grant options qualifying as Incentive Stock Options under the Internal Revenue Code of 1986, as amended, or any successor code thereto (the "Code"), other statutory options under the Code and Nonqualified Options (collectively "Stock Options"). Such Stock Options shall be subject to the following terms and conditions and such other terms and conditions as the Committee may prescribe: (a) OPTION PRICE. The option price per share with respect to each Stock Option shall be determined by the Committee, but shall not be less than 100% of the fair market value of the Common Stock on the date the Stock Option is granted, as determined by the Committee. (b) PERIOD OF OPTION. The period of each Stock Option shall be fixed by the Committee, but shall not exceed ten (10) years. - 2 - 4 (c) PAYMENT. No shares shall be issued until full payment of the option price has been made. The option prices may be paid in cash or, if the Committee determines, in shares of Common Stock or a combination of cash and shares. If the Committee approves the use of shares of Common Stock as a payment method, the Committee shall establish such conditions as it deems appropriate for the use of Common Stock to exercise a stock option. Stock options awarded under the ISP shall be exercised through the Company's broker-assisted stock option exercise program, provided such program is available at the time of the option exercise, or by such other means as the Committee may determine from time to time. The Committee may establish rules and procedures to permit an optionholder to defer recognition of gain upon the exercise of a stock option. (d) EXERCISE OF OPTION. The Committee shall determine how and when shares covered by a Stock Option may be purchased. The Committee may establish waiting periods, the dates on which options become exercisable or "vested" and exercise periods, provided that in no event (including those specified in paragraphs (e), (f) and (g) of this section) shall any Stock Option be exercisable after its specified expiration period. (e) TERMINATION OF EMPLOYMENT. Upon the termination of a Stock Option grantee's employment (for any reason other than retirement, death or termination for deliberate, willful or gross misconduct), Stock Option privileges shall be limited to the shares which were immediately exercisable at the date of such termination. The Committee, however, in its discretion, may provide that any Stock Options outstanding but not yet exercisable upon the termination of a Stock Option grantee's employment may become exercisable in accordance with a schedule as may be determined by the Committee. Such Stock Option privileges shall expire unless exercised or surrendered under a Stock Appreciation Right within such period of time after the date of termination of employment as may be established by the Committee, but in no event later than the expiration date of the Stock Option. (f) RETIREMENT. Upon retirement of a Stock Option grantee, Stock Option privileges shall apply to those shares immediately exercisable at the date of retirement. The Committee, however, in its discretion, may provide that any Stock Options outstanding but not yet exercisable upon the retirement of a Stock Option grantee may become exercisable in accordance with a schedule as may be determined by the Committee. Stock Option privileges shall expire unless exercised within such period of time as may be established by the Committee, but in no event later than the expiration date of the Stock Option. (g) DEATH. Upon the death of a Stock Option grantee, Stock Option privileges shall apply to those shares which were immediately exercisable at the time of death. The Committee, however, in its discretion, may provide that any Stock Options outstanding but not yet exercisable upon the death of a Stock Option grantee may become exercisable in accordance with a schedule as may be determined by the Committee. Such privileges shall expire unless exercised by legal representative(s) within a period of time as determined by the Committee, but in no event later than the expiration date of the Stock Option. (h) TERMINATION DUE TO MISCONDUCT. If a Stock Option grantee's employment is terminated for deliberate, willful or gross misconduct, as determined by the Company, all rights under the Stock Option shall expire upon receipt of the notice of such termination. (i) LIMITS ON INCENTIVE STOCK OPTIONS. Except as may otherwise be permitted by the Code, the Committee shall not grant to an Eligible Employee Incentive Stock Options that, in the aggregate, are first exercisable during any one calendar year to the extent that the aggregate fair market value of the Common Stock, at the time the Incentive Stock Options are granted, exceeds $100,000, or such other amount as the Internal Revenue Service may decide from time to time. - 3 - 5 6. STOCK APPRECIATION RIGHTS The Committee may, in its discretion, grant a right to receive the appreciation in the fair market value of shares of Common Stock ("Stock Appreciation Right") either singly or in combination with an underlying Stock Option granted hereunder or under the Prior Plans. Such Stock Appreciation Rights shall be subject to the following terms and conditions and such other terms and conditions as the Committee may prescribe: (a) TIME AND PERIOD OF GRANT. If a Stock Appreciation Right is granted with respect to an underlying Stock Option, it may be granted at the time of the Stock Option grant or at any time thereafter but prior to the expiration of the Stock Option grant. If a Stock Appreciation Right is granted with respect to an underlying Stock Option, at the time the Stock Appreciation Right is granted the Committee may limit the exercise period for such Stock Appreciation Right, before and after which period no Stock Appreciation Right shall attach to the underlying Stock Option. In no event shall the exercise period for a Stock Appreciation Right granted with respect to an underlying Stock Option exceed the exercise period for such Stock Option. If a Stock Appreciation Right is granted without an underlying Stock Option, the period for exercise of the Stock Appreciation Right shall be set by the Committee. (b) VALUE OF STOCK APPRECIATION RIGHT. If a Stock Appreciation Right is granted with respect to an underlying Stock Option, the grantee will be entitled to surrender the Stock Option which is then exercisable and receive in exchange therefor an amount equal to the excess of the fair market value of the Common Stock on the date the election to surrender is received by the Company over the Stock Option price multiplied by the number of shares covered by the Stock Option which is surrendered. If a Stock Appreciation Right is granted without an underlying Stock Option, the grantee will receive upon exercise of the Stock Appreciation Right an amount equal to the excess of the fair market value of the Common Stock on the date the election to surrender such Stock Appreciation Right is received by the Company over the fair market value of the Common Stock on the date of grant multiplied by the number of shares covered by the grant of the Stock Appreciation Right. (c) PAYMENT OF STOCK APPRECIATION RIGHT. Payment of a Stock Appreciation Right shall be in the form of shares of Common Stock, cash or any combination of shares and cash. The form of payment upon exercise of such a right shall be determined by the Committee either at the time of grant of the Stock Appreciation Right or at the time of exercise of the Stock Appreciation Right. 7. PERFORMANCE SHARE AWARDS The Committee may grant awards under which payment may be made in shares of Common Stock, cash or any combination of shares and cash if the performance of the Company or any subsidiary, division, affiliate or joint venture of the Company selected by the Committee during the Award Period meets certain goals established by the Committee ("Performance Share Awards"). Such Performance Share Awards shall be subject to the following terms and conditions and such other terms and conditions as the Committee may prescribe: (a) AWARD PERIOD AND PERFORMANCE GOALS. The Committee shall determine and include in a Performance Share Award grant the period of time for which a Performance Share Award is made ( "Award Period "). The Committee shall also establish performance objectives ( "Performance Goals ") to be met by the Company, subsidiary, division or joint venture during the Award Period as a condition to payment of the Performance Share Award. The Performance Goals may include - 4 - 6 earnings per share, return on stockholders' equity, return on assets, net income or any other financial or other measurement established by the Committee. The Performance Goals may include minimum and optimum objectives or a single set of objectives. (b) PAYMENT OF PERFORMANCE SHARE AWARDS. The Committee shall establish the method of calculating the amount of payment to be made under a Performance Share Award if the Performance Goals are met, including the fixing of a maximum payment. The Performance Share Award shall be expressed in terms of shares of Common Stock and referred to as "Performance Shares." After the completion of an Award Period, the performance of the Company, subsidiary, division or joint venture shall be measured against the Performance Goals, and the Committee shall determine whether all, none or any portion of a Performance Share Award shall be paid. The Committee, in its discretion, may elect to make payment in shares of Common Stock, cash or a combination of shares and cash. Any cash payment shall be based on the fair market value of Performance Shares on, or as soon as practicable prior to, the date of payment. (c) REVISION OF PERFORMANCE GOALS. At any time prior to the end of an Award Period, the Committee may revise the Performance Goals and the computation of payment if unforeseen events occur which have a substantial effect on the performance of the Company, subsidiary, division or joint venture and which, in the judgment of the Committee, make the application of the Performance Goals unfair unless a revision is made. (d) REQUIREMENT OF EMPLOYMENT. A grantee of a Performance Share Award must remain in the employ of the Company until the completion of the Award Period in order to be entitled to payment under the Performance Share Award; provided that the Committee may, in its discretion, provide for a full or partial payment where such an exception is deemed equitable. (e) DIVIDENDS. The Committee may, in its discretion, at the time of the granting of a Performance Share Award, provide that any dividends declared on the Common Stock during the Award Period, and which would have been paid with respect to Performance Shares had they been owned by a grantee, be (i) paid to the grantee, or (ii) accumulated for the benefit of the grantee and used to increase the number of Performance Shares of the grantee. (f) LIMIT ON PERFORMANCE SHARE AWARDS. Incentives granted as Performance Share Awards under this section and Restricted Stock Grants under Section 8 shall not exceed, in the aggregate, six (6) million shares of Common Stock (such number of shares shall be adjusted in accordance with Section 4(c)). 8. RESTRICTED STOCK GRANTS The Committee may award shares of Common Stock to a grantee, which shares shall be subject to the following terms and conditions and such other terms and conditions as the Committee may prescribe ("Restricted Stock Grant"): (a) REQUIREMENT OF EMPLOYMENT. A grantee of a Restricted Stock Grant must remain in the employment of the Company during a period designated by the Committee ("Restriction Period") in order to retain the shares under the Restricted Stock Grant. If the grantee leaves the employment of the Company prior to the end of the Restriction Period, the Restricted Stock Grant shall terminate and the shares of Common Stock shall be returned immediately to the Company provided that the Committee may, at the time of the grant, provide for the employment restriction to lapse with respect to a portion or portions of the Restricted Stock Grant at different times during the Restriction Period. The Committee may, in its discretion, also provide for such complete or partial exceptions to the employment restriction as it deems equitable. - 5 - 7 (b) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATES. During the Restriction Period, the grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of Common Stock. Each certificate for shares of Common Stock issued hereunder shall contain a legend giving appropriate notice of the restrictions in the grant. (c) ESCROW AGREEMENT. The Committee may require the grantee to enter into an escrow agreement providing that the certificates representing the Restricted Stock Grant will remain in the physical custody of an escrow holder until all restrictions are removed or expire. (d) LAPSE OF RESTRICTIONS. All restrictions imposed under the Restricted Stock Grant shall lapse upon the expiration of the Restriction Period if the conditions as to employment set forth above have been met. The grantee shall then be entitled to have the legend removed from the certificates. (e) DIVIDENDS. The Committee shall, in its discretion, at the time of the Restricted Stock Grant, provide that any dividends declared on the Common Stock during the Restriction Period shall either be (i) paid to the grantee, or (ii) accumulated for the benefit of the grantee and paid to the grantee only after the expiration of the Restriction Period. (f) LIMIT ON RESTRICTED STOCK GRANT. Incentives granted as Restricted Stock Grants under this section and Performance Share Awards under Section 7 shall not exceed, in the aggregate, six (6) million shares of Common Stock (such number of shares shall be adjusted in accordance with Section 4(c)). 9. TRANSFERABILITY Each Incentive Stock Option granted under the ISP shall not be transferable other than by will or the laws of descent and distribution; each other Incentive granted under the ISP will not be transferable or assignable by the recipient, and may not be made subject to execution, attachment or similar procedures, other than by will or the laws of descent and distribution or as determined by the Committee in accordance with regulations promulgated under the Securities Exchange Act of 1934, or any other applicable law or regulation. 10. DISCONTINUANCE OR AMENDMENT OF THE PLAN The Board of Directors may discontinue the ISP at any time and may from time to time amend or revise the terms of the ISP as permitted by applicable statutes, except that it may not revoke or alter, in a manner unfavorable to the grantees of any Incentives hereunder, any Incentives then outstanding, nor may the Board amend the ISP without stockholder approval where the absence of such approval would cause the Plan to fail to comply with Rule 16b-3 under the Securities Exchange Act of 1934, or any other requirement of applicable law or regulation. Unless approved by the Company's stockholders, no adjustments or reduction of the exercise price of any outstanding Incentives shall be made by cancellation of outstanding Incentives and the subsequent regranting of Incentives at a lower price to the same individual. No Incentive shall be granted under the ISP after December 31, 2003, but Incentives granted theretofore may extend beyond that date. - 6 - 8 11. NO RIGHT OF EMPLOYMENT OR PARTICIPATION The ISP and the Incentives granted hereunder shall not confer upon any Eligible Employee the right to continued employment with the Company, its subsidiaries, its affiliates or its joint ventures or affect in any way the right of such entities to terminate the employment of an Eligible Employee at any time and for any reason. No individual shall have a right to be granted an Incentive, or having been granted an Incentive, to receive any future Incentives. 12. NO LIMITATION ON COMPENSATION Nothing in the ISP shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized under the ISP. 13. NO IMPACT ON BENEFITS Except as may otherwise be specifically stated under any employee benefit plan, policy or program, no amount payable in respect of any Incentive shall be treated as compensation for purposes of calculating an employee's right under any such plan, policy or program. 14. NO CONSTRAINT ON CORPORATE ACTION Nothing in the ISP shall be construed (i) to limit, impair or otherwise affect the Company's right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell or transfer all or any part of its business or assets, or (ii) except as provided in Section 10, to limit the right or power of the Company or any subsidiary to take any action which such entity deems to be necessary or appropriate. 15. WITHHOLDING TAXES The Company shall be entitled to deduct from any payment under the ISP, regardless of the form of such payment, the amount of all applicable income and employment taxes required by law to be withheld with respect to such payment or may require the Eligible Employee to pay to it such tax prior to and as a condition of the making of such payment. In accordance with any applicable administrative guidelines it establishes, the Committee may allow an Eligible Employee to pay the amount of taxes required by law to be withheld from an Incentive by withholding from any payment of Common Stock due as a result of such Incentive, or by permitting the Eligible Employee to deliver to the Company, shares of Common Stock having a fair market value, as determined by the Committee, equal to the amount of such required withholding taxes. 16. GOVERNING LAW The ISP, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of New Jersey. - 7 - EX-12 3 ex12.txt 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)
Six Months Ended Years Ended December 31 June 30 ----------------------------------------------------------- 2000 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- -------- Income Before Taxes $4,671.3 $8,619.5 $8,133.1 $6,462.3 $5,540.8 $4,797.2 Add: One-third of rents 32.3 66.7 56.0 47.0 41.0 28.1 Interest expense, net 178.9 236.4 150.6 98.2 103.2 60.3 Preferred stock dividends 89.0 120.7 62.1 49.6 70.0 2.1 -------- -------- -------- -------- -------- -------- Earnings $4,971.5 $9,043.3 $8,401.8 $6,657.1 $5,755.0 $4,887.7 ======== ======== ======== ======== ======== ======== One-third of rents $ 32.3 $ 66.7 $ 56.0 $ 47.0 $ 41.0 $ 28.1 Interest expense 233.3 316.9 205.6 129.5 138.6 98.7 Preferred stock dividends 89.0 120.7 62.1 49.6 70.0 2.1 -------- -------- -------- -------- -------- -------- Fixed Charges $ 354.6 $ 504.3 $ 323.7 $ 226.1 $ 249.6 $ 128.9 ======== ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 14 18 26 29 23 38 == == == == == ==
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. EX-27 4 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-2000 JUN-30-2000 2,806 1,106 3,863 0 2,928 11,841 15,410 (5,004) 37,443 9,048 3,439 0 0 30 12,689 37,443 18,328 18,328 9,920 9,920 1,072 0 233 4,671 1,450 3,221 0 0 0 3,221 1.39 1.37 NOT MATERIAL TO THE CONSOLIDATED FINANCIAL STATEMENTS.
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