-----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, PqbVajtvAEkCIMV0DvIemxJ69wLtLeP93sUQ6aKYWFmKdcu0j9z/i43kUKRMGWlZ iDQ5ocPURPULRerGVfrLpA== 0000950123-99-006289.txt : 19990708 0000950123-99-006289.hdr.sgml : 19990708 ACCESSION NUMBER: 0000950123-99-006289 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990707 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: 11-K SEC ACT: SEC FILE NUMBER: 001-03305 FILM NUMBER: 99659952 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 11-K 1 MEDCO 401 (K) SAVINGS PLAN 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 30549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No.: 1-08734 MEDCO 401 (k) SAVINGS PLAN - -------------------------------------------------------------------------------- (Full title of the plan) MERCK & CO., INC. - -------------------------------------------------------------------------------- (Name of issuer of the securities held pursuant to the plan) P.O. Box 100 Whitehouse Station, New Jersey 08889 - -------------------------------------------------------------------------------- (address of principal executive office) 2 Medco 401(k) Savings Plan Financial Statements as of December 31, 1998 and 1997 Together with Report of Independent Public Accountants 3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Retirement Committee of Medco 401(k) Savings Plan: We have audited the accompanying statement of net assets available for benefits of the Medco 401 (k) Savings Plan as of December 31, 1998 and 1997, and the related statement of changes in net assets available for benefits for the year ended December 31, 1998. These financial statements and the schedules referred to below are the responsibility of the Plan administrator. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1998 and 1997, and the changes in its net assets available for benefits for the year ended December 31, 1998, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for purposes of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The fund information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for plan benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP ------------------- Arthur Andersen LLP New York, New York May 14, 1999 4 MEDCO 401(k) SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1998 MERCK COMMON STOCK FUND
MERCK COMMON STOCK FUND ----------------------------------- (NON-PARTICIPANT (PARTICIPANT T. ROWE PRICE DIRECTED; SEE DIRECTED; SEE BLUE CHIP TOTAL NOTE 1) NOTE 1) GROWTH FUND ----- ------- ------- ----------- December 31, 1998 - ----------------- Assets Investments, at market value $291,049,437 $ 77,619,149 $127,602,308 $ 38,847,928 ------------ ------------ ------------ ------------ Receivables Employer's contributions 589,656 -- 511,080 9,281 Participants' contributions 861,721 -- 584,596 177,938 Accrued interest and dividends 734,305 277,692 456,613 -- ------------ ------------ ------------ ------------ Total receivables 2,185,682 277,692 1,552,289 187,219 ------------ ------------ ------------ ------------ Net assets available for benefits $293,235,119 $ 77,896,841 $129,154,597 $ 39,035,147 ============ ============ ============ ============
FIDELITY EQUITY- INCOME FUND ----------- December 31, 1998 - ----------------- Assets Investments, at market value $ 894,660 ------------ Receivables Employer's contributions 4,230 Participants' contributions 4,098 Accrued interest and dividends -- ------------ Total receivables 8,328 ------------ Net assets available for benefits $ 902,988 ============
The accompanying notes to financial statements are an integral part of this financial statement. 5 MEDCO 401(k) SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1998
FIDELITY T. ROWE PRICE VANGUARD GROWTH & T. ROWE PRICE MID-CAP EUROPACIFIC U.S. GROWTH INCOME NEW INCOME GROWTH GROWTH PORTFOLIO PORTFOLIO FUND FUND FUND --------- --------- ------------- ------------- ------------- December 31, 1998 (Participant directed; see Note 1) - ----------------- Assets Investments, at market value $3,202,030 $2,543,500 $7,062,858 $1,343,734 $ 908,656 ---------- ---------- ---------- ---------- ---------- Receivables Employer's contributions 7,641 8,271 2,631 5,450 2,834 Participants' contributions 14,667 11,650 32,351 6,155 4,162 Accrued interest and dividends -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total receivables 22,308 19,921 34,982 11,605 6,996 ---------- ---------- ---------- ---------- ---------- Net assets available for benefits $3,224,338 $2,563,421 $7,097,840 $1,355,339 $ 915,652 ========== ========== ========== ========== ==========
The accompanying notes to financial statements are an integral part of this financial statement. 6 MEDCO 401(k) SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1998
THE GEORGE FIDELITY SPARTAN FIDELITY PUTNAM RETIREMENT U.S. EQUITY LOW-PRICED FRANKLIN FUND OF MONEY INDEX STOCK SMALL CAP BOSTON A MARKET FUND FUND GROWTH FUND I December 31, 1998 - ----------------- Assets Investments, at market value $ 659,777 $17,130,097 $ 2,108,356 $ 1,367,419 $ 1,246,750 ----------- ----------- ----------- ----------- ----------- Receivables Employer's contributions 2,738 3,482 7,403 6,507 5,156 Participants' contributions 3,022 78,463 9,657 6,263 5,711 Accrued interest and dividends -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total receivables 5,760 81,945 17,060 12,770 10,867 ----------- ----------- ----------- ----------- ----------- Net assets available for benefits $ 665,537 $17,212,042 $ 2,125,416 $ 1,380,189 $ 1,257,617 =========== =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of this financial statement. 7 MEDCO 401(k) SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1998
TEMPLETON PUTNAM DEVELOPING T. ROWE PRICE VOYAGER MARKETS DIVIDEND PARTICIPANTS' FUND A TRUST I GROWTH FUND LOAN ACCOUNT December 31, 1998 - ----------------- Assets Investments, at market value $1,294,804 $375,211 $885,920 $5,956,280 ---------- -------- -------- ---------- Receivables Employer's contributions 7,077 2,752 3,123 -- Participants' contributions 5,931 1,719 4,058 (88,720) Accrued interest and dividends -- -- -- -- ---------- -------- -------- ---------- Total receivables 13,008 4,471 7,181 (88,720) ---------- -------- -------- ---------- Net assets available for benefits $1,307,812 $379,682 $893,101 $5,867,560 ========== ======== ======== ==========
The accompanying notes to financial statements are an integral part of this financial statement. 8 MEDCO 401(k) SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1997
MERCK COMMON STOCK FUND ----------------------------------- (NON-PARTICIPANT (PARTICIPANT T. ROWE PRICE DIRECTED; SEE DIRECTED; SEE BLUE CHIP TOTAL NOTE 1) NOTE 1) GROWTH FUND ----- ------- ------- ----------- December 31, 1997 - ----------------- Assets Investments, at market value $193,366,663 $56,891,975 $82,398,981 $31,077,897 ------------ ----------- ----------- ----------- Receivables Employer's contributions 1,576,870 1,576,870 - - Participants' contributions 588,003 - 305,605 181,838 Accrued interest and dividends 584,654 238,792 345,862 - ------------ ----------- ----------- ----------- Total receivables 2,749,527 1,815,662 651,467 181,838 ------------ ----------- ----------- ----------- Net assets available for benefits $196,116,190 $58,707,637 $83,050,448 $31,259,735 ============ =========== =========== ===========
T. ROWE PRICE GUARANTEED PRIME NEW INCOME INVESTMENT RESERVE PARTICIPANTS' FUND CONTRACT FUND LOAN ACCOUNT ---- -------- ---- ------------ December 31, 1997 Participant directed; see Note 1) - ----------------- Assets Investments, at market value $6,035,721 $8,625,494 $4,836,984 $3,499,611 ---------- ---------- ---------- ---------- Receivables Employer's contributions - - - - Participants' contributions 37,128 73,290 51,132 (60,990) Accrued interest and dividends - - - - ---------- ---------- ---------- ---------- Total receivables 37,128 73,290 51,132 (60,990) ---------- ---------- ---------- ---------- Net assets available for benefits $6,072,849 $8,698,784 $4,888,116 $3,438,621 ========== ========== ========== ==========
The accompanying notes to financial statements are an integral part of this financial statement. 9 MEDCO 401(k) SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998
MERCK COMMON STOCK FUND ------------------------------------- (NON-PARTICIPANT (PARTICIPANT DIRECTED; SEE DIRECTED; SEE YEAR ENDED DECEMBER 31, 1998 TOTAL NOTE 1) NOTE 1) - ---------------------------- Additions to net assets attributed to: Investment income Net appreciation (depreciation) in market value of investments $ 63,426,415 $ 21,380,401 $ 33,383,891 Interest 971,912 341,060 532,540 Dividends 4,750,761 783,202 1,272,922 ------------- ------------- ------------- Total investment income (loss) 69,149,088 22,504,663 35,189,353 ------------- ------------- ------------- Contributions to the Plan By participants 27,274,110 -- 12,546,668 By employer 11,208,981 -- 9,715,275 ------------- ------------- ------------- Total contributions 38,483,091 -- 22,261,943 ------------- ------------- ------------- Total additions 107,632,179 22,504,663 57,451,296 ------------- ------------- ------------- Deductions from net assets attributed to: Benefits paid to participants (9,847,116) (2,361,803) (3,687,777) ------------- ------------- ------------- Transfers among funds and Plans: Net reallocations (666,134) (190,729) (6,468,119) Loans to participants -- (1,253,637) (1,957,459) Loan repayments by participants -- 490,710 766,208 ------------- ------------- ------------- Net transfers among funds and Plans (666,134) (953,656) (7,659,370) ------------- ------------- ------------- Total deductions and net transfers among funds & Plans (10,513,250) (3,315,459) (11,347,147) ------------- ------------- ------------- Net increase (decrease) 97,118,929 19,189,204 46,104,149 Net assets available for benefits Beginning of year 196,116,190 58,707,637 83,050,448 ------------- ------------- ------------- End of year $ 293,235,119 $ 77,896,841 $ 129,154,597 ============= ============= =============
T. ROWE PRICE FIDELITY BLUE CHIP EQUITY- YEAR ENDED DECEMBER 31, 1998 GROWTH FUND INCOME FUND - ---------------------------- Additions to net assets attributed to: (PARTICIPANT DIRECTED; SEE NOTE 1) Investment income Net appreciation (depreciation) in market value of investments $ 8,202,741 $ (13,217) Interest 46,229 852 Dividends 621,148 40,085 ------------- ------------ Total investment income (loss) 8,870,118 27,720 ------------- ------------ Contributions to the Plan By participants 5,256,207 338,134 By employer 176,416 80,411 ------------- ------------ Total contributions 5,432,623 418,545 ------------- ------------ Total additions 14,302,741 446,265 ------------- ------------ Deductions from net assets attributed to: Benefits paid to participants (1,106,633) (4,375) ------------- ------------ Transfers among funds and Plans: Net reallocations (5,030,770) 462,647 Loans to participants (614,190) (19,441) Loan repayments by participants 224,264 17,892 ------------- ------------ Net transfers among funds and Plans (5,420,696) 461,098 ------------- ------------ Total deductions and net transfers among funds & Plans (6,527,329) 456,723 ------------- ------------ Net increase (decrease) 7,775,412 902,988 Net assets available for benefits Beginning of year 31,259,735 -- ------------- ------------ End of year $ 39,035,147 $ 902,988 ============= ============
The accompanying notes to financial statements are an integral part of this financial statement. 10 MEDCO 401(k) SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998
FIDELITY T. ROWE PRICE VANGUARD GROWTH & T. ROWE PRICE MID-CAP EUROPACIFIC U.S. GROWTH INCOME NEW INCOME GROWTH GROWTH YEAR ENDED DECEMBER 31, 1998 PORTFOLIO PORTFOLIO FUND FUND FUND (PARTICIPANT DIRECTED; SEE NOTE 1) ---------------------------------------------------------------------------- Additions to net assets attributed to: Investment income Net appreciation (depreciation) in market value of investments $ 273,718 $ 208,204 ($ 201,925) $ 112,108 ($ 22,411) Interest 3,550 1,679 8,675 1,418 705 Dividends 188,646 116,923 514,775 27,315 47,417 ----------- ----------- ----------- ----------- ----------- Total investment income (loss) 465,914 326,806 321,525 140,841 25,711 ----------- ----------- ----------- ----------- ----------- Contributions to the Plan By participants 812,042 1,084,778 454,489 252,372 1,083,972 By employer 145,243 50,020 103,602 53,880 ----------- ----------- ----------- ----------- ----------- 157,224 Total contributions 957,285 1,241,196 1,134,798 558,091 306,252 ----------- ----------- ----------- ----------- ----------- Total additions 1,423,199 1,568,002 1,456,323 698,932 331,963 ----------- ----------- ----------- ----------- ----------- Deductions from net assets attributed to: Benefits paid to participants (55,705) (115,884) (324,858) (3,252) (32,710) ----------- ----------- ----------- ----------- ----------- Transfers among funds and Plans: Net reallocations 1,875,814 1,149,131 1,305 670,109 611,014 Loans to participants (41,057) (46,246) (143,361) (22,803) (5,029) Loan repayments by participants 22,087 8,418 35,582 12,353 10,414 ----------- ----------- ----------- ----------- ----------- Net transfers among funds and Plans 1,856,844 1,111,303 (106,474) 659,659 616,399 ----------- ----------- ----------- ----------- ----------- Total deductions and net transfers among funds & Plans 1,801,139 995,419 (431,332) 656,407 583,689 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) 3,224,338 2,563,421 1,024,991 1,355,339 915,652 Net assets available for benefits Beginning of year - - 6,072,849 - - ----------- ----------- ----------- ----------- ----------- End of year $ 3,224,338 $ 2,563,421 $ 7,097,840 $ 1,355,339 $ 915,652 =========== =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of this financial statement. 11 MEDCO 401(k) SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998
THE GEORGE FIDELITY SPARTAN FIDELITY PUTNAM RETIREMENT U.S. EQUITY LOW-PRICED FRANKLIN FUND OF MONEY INDEX STOCK SMALL CAP YEAR ENDED DECEMBER 31, 1998 BOSTON A MARKET FUND FUND GROWTH FUND I (PARTICIPANT DIRECTED; SEE NOTE 1) --------------------------------------------------------------------------------- Additions to net assets attributed to: Investment income Net appreciation (depreciation) in market value of investments ($ 27,523) $ - $ 258,295 ($ 157,111) ($ 33,659) Interest 955 29,557 724 1,207 964 Dividends 52,390 807,621 26,656 102,035 17,181 ------------ ------------ ------------ ------------ ------------ Total investment income (loss) 25,822 837,178 285,675 (53,869) (15,514) ------------ ------------ ------------ ------------ ------------ Contributions to the Plan By participants 274,094 2,513,827 734,613 472,422 436,299 By employer 52,051 66,184 140,734 123,697 98,015 ------------ ------------ ------------ ------------ ------------ Total contributions 326,145 2,580,011 875,347 596,119 534,314 ------------ ------------ ------------ ------------ ------------ Total additions 351,967 3,417,189 1,161,022 542,250 518,800 ------------ ------------ ------------ ------------ ------------ Deductions from net assets attributed to: Benefits paid to participants (59,332) (1,552,514) (1,443) (7,633) (60,932) ------------ ------------ ------------ ------------ ------------ Transfers among funds and Plans: Net reallocations 387,961 15,671,584 995,050 844,334 805,604 Loans to participants (17,061) (462,104) (36,286) (6,652) (23,695) Loan repayments by participants 2,002 137,887 7,073 7,890 17,840 ------------ ------------ ------------ ------------ ------------ Net transfers among funds and Plans 372,902 15,347,367 965,837 845,572 799,749 ------------ ------------ ------------ ------------ ------------ Total deductions and net transfers among funds & Plans 313,570 13,794,853 964,394 837,939 738,817 ------------ ------------ ------------ ------------ ------------ Net increase (decrease) 665,537 17,212,042 2,125,416 1,380,189 1,257,617 Net assets available for benefits Beginning of year - - - - - ------------ ------------ ------------ ------------ ------------ End of year $ 665,537 $ 17,212,042 $ 2,125,416 $ 1,380,189 $ 1,257,617 ============ ============ ============ ============ ============
The accompanying notes to financial statements are an integral part of this financial statement. 12 MEDCO 401(k) SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998 TEMPLETON PUTNAM DEVELOPING T. ROWE PRICE GUARANTEED PRIME VOYAGER MARKETS DIVIDEND INVESTMENT RESERVE YEAR ENDED DECEMBER 31, 1998 FUND A TRUST I GROWTH FUND CONTRACT FUND - ---------------------------- ------ ------- ----------- -------- ---- Additions to net assets attributed to: (Participant directed; see Note 1) ------------------------------------------------------------------------------- Investment income Net appreciation (depreciation) in market value of investments $ 55,248 ($ 28,092) $ 35,747 $ 0 $ 0 Interest 890 466 441 0 0 Dividends 85,587 5,970 40,888 0 0 ------------------------------------------------------------------------------- Total investment income (loss) 141,725 (21,656) 77,076 0 0 ------------------------------------------------------------------------------- Contributions to the Plan By participants 562,192 187,367 264,634 0 0 By employer 134,537 52,321 59,371 0 0 ------------------------------------------------------------------------------- Total contributions 696,729 239,688 324,005 0 0 ------------------------------------------------------------------------------- Total additions 838,454 218,032 401,081 0 0 ------------------------------------------------------------------------------- Deductions from net assets attributed to: Benefits paid to participants (54,737) (13,501) (18,103) 0 0 ------------------------------------------------------------------------------- Transfers among funds and Plans: Net reallocations 522,238 176,382 500,869 (8,698,784) (4,888,116) Loans to participants (3,991) (6,922) (5,509) 0 0 Loan repayments by participants 5,848 5,691 14,763 0 0 ------------------------------------------------------------------------------- Net transfers among funds and Plans 524,095 175,151 510,123 (8,698,784) (4,888,116) ------------------------------------------------------------------------------- Total deductions and net transfers among funds & Plans 469,358 161,650 492,020 (8,698,784) (4,888,116) ------------------------------------------------------------------------------- Net increase (decrease) 1,307,812 379,682 893,101 (8,698,784) (4,888,116) Net assets available for benefits Beginning of year - - - 8,698,784 4,888,116 ------------------------------------------------------------------------------- End of year $ 1,307,812 $ 379,682 $ 893,101 $ 0 $ 0 ===============================================================================
The accompanying notes to financial statements are an integral part of this financial statement. 13 MEDCO 401(k) SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998 PUTNAM PARTICIPANTS' YEAR ENDED DECEMBER 31, 1998 LOAN ACCOUNT - ---------------------------- ------------ Additions to net assets attributed to: Investment income Net appreciation (depreciation) in market value of investments $ -- Interest -- Dividends -- ------------- Total investment income (loss) -- ------------- Contributions to the Plan By participants -- By employer -- ------------- Total contributions -- ------------- Total additions -- ------------- Deductions from net assets attributed to: Benefits paid to participants (385,924) ------------- Transfers among funds and Plans: Net reallocations (63,658) Loans to participants 4,665,443 Loan repayments by participants (1,786,922) ------------- Net transfers among funds and Plans 2,814,863 ------------- Total deductions and net transfers among funds & Plans 2,428,939 ------------- Net increase (decrease) 2,428,939 Net assets available for benefits Beginning of year 3,438,621 ------------- End of year $ 5,867,560 =============
The accompanying notes to financial statements are an integral part of this financial statement. 14 MEDCO 401(k) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS (1) DESCRIPTION OF THE PLAN: The following description of the Medco 401(k) Savings Plan (the "Plan") is provided for general information purposes only. More complete information regarding the Plan's provisions may be found in the Plan document. GENERAL - - Effective January 1, 1989, Medco Containment Services, Inc. (the "Company"), which changed its name and corporate structure to Merck-Medco Managed Care, L.L.C., effective January 1, 1997, established the Plan under the provisions of Section 401(a) of the Internal Revenue Code ("IRC"), which includes a qualified cash or defined arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Company. The Plan is a defined contribution plan covering substantially all employees of the Company and certain subsidiaries, other than certain employees subject to collective bargaining agreements, who have completed one year of service and attained the age of twenty-one. Participation in the Plan is voluntary. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan was amended as a result of the merger, effective November 18, 1993, by and between the Company and a subsidiary of Merck & Co., Inc. ("Merck"). The amendment provides participants with an option to invest all or part of their contributions in the common stock of Merck. CONTRIBUTIONS - - Plan participants can contribute an amount up to 15% of base compensation as defined by the Plan (up to 10% if a highly compensated employee as defined by the IRC) subject to certain limitations under the IRC. During 1998, the Company matched 100% of employee contributions for the first 3% of base compensation deferred and 50% of employee contributions for the next 3% deferred. Participants had the option to invest all Company matching contributions in any of the available fund options (participant directed). The Company eliminated the Bonus Matching Contribution. During 1997, the Company matched 50% of employee contributions up to 4% of base compensation deferred. Company contributions were invested in Merck Common Stock (non-participant directed). In addition, the Company provided a Bonus Matching Contribution on behalf of each participant of 100% of each participant's contribution, up to $200 per participant, subject to certain conditions as defined in the provisions of the Plan. The Plan is administered by the Retirement Committee which is appointed by the Board of Directors of the Company. The expenses incurred in connection with the operation of the Plan are expenses of 15 the Plan and payable from the assets thereon. The Company has the option to pay such expenses. For the year ended December 31, 1998, all such expenses incurred were paid by the Company. INVESTMENT OPTIONS - - Upon enrollment in the Plan, each participant shall direct their contributions to be invested in 1% increments in any of the investment programs including Merck Common Stock (participant directed) managed by Fidelity Institutional Retirement Services Company. If a participant does not designate a fund, the Plan will automatically allocate a participant contribution to the Fidelity Retirement Money Market Fund. Such designation may be revised by participants on a daily basis. Participants should refer to each investment fund's prospectus for a more complete description of the risks and strategies associated with each fund. On December 31, 1997, all net assets, except for the Guaranteed Investment Contract and the Prime Reserve Fund, were transferred to a new custodian, Fidelity Institutional Retirement Services Company. As part of this transfer, all net assets within the Growth Stock Fund were transferred to the T. Rowe Price Blue Chip Growth Fund. There was no effect on the remaining funds as a result of this transfer. The investment options of the Plan, as described in the Plan document, are as follows: o Guaranteed Investment Contract: The guaranteed investment contract ("GIC"), managed by the Hartford Life Insurance Company ("Hartford"), invests primarily in insurance sub-contracts which pay interest at a predetermined rate for a specific period of time. As these sub-contracts mature at various times, the actual rate of return is a blend of the individual sub-contract rates at any point in time. As of December 31, 1997, the GIC consisted of six Hartford sub-contracts with an average interest rate of 6.25%. This investment option was eliminated from the plan effective January 2, 1998. The liquidated value was wired to the Fidelity Retirement Money Market account. o Prime Reserve Fund: Invested primarily in short-term money market securities. This investment option was eliminated from the plan effective January 2, 1998. The liquidated value was wired to the Fidelity Retirement Money Market account. o Merck Common Stock Fund: The Merck Common Stock Fund invests primarily in Merck common stock and a small portion of money market instruments for liquidity. This liquidity allows for daily trading in the fund. Ownership is measured in units rather than shares. An investment in this option allows the participant to become a stockholder and part owner of the Company. The value of the 16 investment can go up or down depending on general factors affecting the stock market and specific factors affecting the Company's business. This is neither a mutual fund nor a diversified or managed investment option. Investing in a non-diversified single stock involves more investment risk than investing in a diversified fund. o T. Rowe Price Blue Chip Growth Fund: The T. Rowe Price Blue Chip Growth Fund seeks to provide long-term growth of capital. The fund invests primarily (at least 65% of its assets) in common stocks of large and medium-sized blue chip companies that have the potential for above-average earnings growth and are well established in their respective industries. The fund may also invest in convertible stocks and bonds, preferred stocks, bonds and warrants. Up to 20% of assets (excluding reserves) may be invested in foreign securities, which may be subject to currency risks and political and sovereign risks of the home country. o T. Rowe Price New Income Fund: The T. Rowe Price New Income Fund is a bond fund that seeks to provide the highest level of income consistent with preservation of capital by purchasing securities that have been rated as investment-grade by Standard & Poor's, Moody's or Fitch Investor Services. The fund invests at least 80% of its assets in income-producing investment-grade debt securities including U.S. government and agency securities, corporate bonds, bank obligations and utilities. The fund's dollar-weighted average maturity is generally expected to be between four and fifteen years. The following investment options were added to the Plan effective January 1, 1998: o Fidelity Equity-Income Fund: Funds are invested in income-producing equity securities. Normally, at least 65% of the fund's assets will be invested in income producing equity securities. The fund has the flexibility to invest the balance in all types of domestic and foreign securities, including bonds. o Vanguard U.S. Growth Portfolio: The Vanguard U.S. Growth Portfolio seeks to provide long-term capital growth by investing in equity securities of large, established U.S. companies that have good growth records, strong market positions and have exhibited long-term financial strength to provide potential long-term growth. o Fidelity Growth & Income Portfolio: Funds are invested primarily in U.S. and foreign stocks, focusing on those that pay current dividends and offer potential growth of earnings such as common stocks, convertible securities, preferred stocks and warrants. 17 o T. Rowe Price Mid-Cap Growth Fund: The T. Rowe Price Mid-Cap Growth Fund seeks to provide long-term capital appreciation by investing primarily in the stock of medium-sized (mid-cap) growth companies that offer the potential for above-average earnings growth. The fund focuses on companies that are no longer considered new or emerging, but are well-established. It may also invest in convertible securities, warrants and foreign securities, which are subject to greater risks. o Fund EuroPacific Growth: This fund seeks long-term capital growth by investing primarily in securities of companies outside the United States. Normally, at least 65% of the fund's total assets will be invested in Europe or the Pacific Basin. The Pacific Basin is generally defined as those countries bordering the Pacific Ocean and includes, but is not limited to Australia, Canada, Japan, Malaysia and Singapore. The fund may also invest in convertible securities, debt and government securities and preferred stock. Foreign investments, especially in developing countries, involve greater risks and may offer greater potential. o The George Putnam Fund of Boston A: This fund seeks to provide a balanced investment comprised of a well-diversified portfolio of stocks and bonds that will produce both capital growth and current income. Normally, no more than 75% of the fund's assets will be invested in common stocks and convertible securities. o Fidelity Retirement Money Market: Funds are invested in high-quality U.S. dollar-denominated money market instruments of U.S. and foreign issuers. Normally, the fund intends to invest more than 25% of its total assets in obligations of institutions in the financial services industry. o Spartan U.S. Equity Index Fund: This fund seeks to provide investment results that correspond to the total return performance of common stocks traded in the United States. Funds are primarily invested in securities of the companies which comprise the S&P 500 index. o Fidelity Low-Priced Stock Fund: This fund seeks capital appreciation by investing mainly in low-priced domestic and foreign common stocks ($35 or less at time of purchase). Foreign securities may involve a higher degree of risk. This fund charges a redemption fee to discourage short-term buying and selling of fund shares. If fund shares are sold after being held for less than 90 days, the fund will deduct a redemption fee from participants' accounts equal to 1.5% of the value of the shares sold. 18 o Franklin Small Cap Growth Fund I: This fund seeks long-term capital growth by investing primarily in stocks of companies with market capitalization of less than $1.5 billion at the time of the investment. Although the fund's assets are invested primarily in small companies, it may invest up to 35% of its total assets in larger capitalized companies with strong growth potential, in relatively well-known larger companies in mature industries with potential for capital appreciation, and in corporate debt securities, including bonds, notes and debentures if deemed appropriate. The fund may also invest up to 25% of its total assets in foreign securities, which may involve greater risks. Effective January 1, 1999, the Franklin Small Cap Growth Fund I shares were changed to Class A. o Putnam Voyager Fund A: This fund seeks capital appreciation by investing primarily in common stocks of companies that have potential for capital appreciation which is significantly greater than that of the market averages. The fund may also invest in convertible bonds, convertible preferred stocks, warrants, preferred stocks, money market instruments and debt securities. The fund may invest up to 20% of its total assets in securities principally traded in foreign markets. Foreign securities are subject to currency, political, financial or sovereign risks of the issuer's home country. o Templeton Developing Markets Trust I: This fund seeks long-term capitalization by investing in equity securities of emerging market countries. The fund may invest up to 35% of its total assets in debt securities, including bonds, notes, debentures, commercial paper, certificates of deposit, time deposits and bankers' acceptances. Foreign investments may involve greater risks. Effective January 1, 1999, the Templeton Developing Markets Trust I shares were changed to Class A. o T. Rowe Price Dividend Growth Fund: This fund seeks to provide increasing dividend income over time, long-term capital appreciation and reasonable current income through investments primarily in dividend-paying stocks. The fund may also invest in bonds and foreign securities. VESTING - - Participants are immediately vested in their contributions plus actual earnings thereon. Participants with an employment commencement date before January 1, 1993 became 100% vested on January 1, 1998. Participants with an employment commencement date on or after January 1, 1993 become vested in Company contributions as follows: 19 Years of Service % Vested ------------------------------------------------- Less than 2 years 0% 2 years but less than 3 25% 3 years but less than 4 50% 4 years but less than 5 75% 5 years or more 100% At December 31, 1998, forfeited nonvested accounts totaled $798,038. These accounts will be used to reduce future Company contributions. PARTICIPANTS' LOAN ACCOUNT - - Participants who are active employees may borrow up to 50% of their total vested balance, provided such loan does not exceed $50,000. The minimum loan amount is $1,000. All loans bear interest at a rate similar to that charged by commercial lenders at the time of the loan application. For the year ended December 31, 1998, the interest rate on all participant loans was 9.5%. Loans are repaid over a period of one to five years, or up to thirty years if the loan is used to purchase a home to be the participant's principal residence. BENEFITS PAID TO PARTICIPANTS - - In-service and termination distributions are made throughout the year in accordance with applicable Plan provisions. The Company instituted a voice response system effective January 1, 1998, which ensures that distributions are requested and paid on the same day. As such, at December 31, 1998, there were no distributions in process included in net assets available for benefits. At December 31, 1997, net assets available for benefits included distributions in process of $76,045. DIVIDEND RECEIVABLE - - The Plan recorded a dividend receivable for the Merck Common Stock Fund. Merck declared the dividend for holders on record as of December 4, 1998. The dividend was paid on January 4, 1999. USE OF ESTIMATES - - The financial statements are prepared in conformity with generally accepted accounting principles and, accordingly, include amounts that are based on management's best estimates and judgments. Actual results could differ from these estimates. (2) SUMMARY OF ACCOUNTING POLICIES: The financial statements of the Plan have been prepared on the accrual basis of accounting. The investments of the Plan are stated at quoted market value except for the GIC which is stated at contract value. Contract value represents contributions made under the contract, plus earnings, less Plan withdrawals. Contract value of the GIC approximates fair value as reported to the Plan by Hartford. Participant notes are valued at cost which approximates fair value. Dividend income is recorded on the ex-dividend date. The appreciation in market value of investments is based on the 20 beginning of the year market value or value at the time of purchase during the year and is included in the statement of changes in net assets available for benefits. (3) PLAN TERMINATION: Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become fully vested in their account balances. (4) INCOME TAX STATUS: The trust established under the Plan is qualified under the IRC as exempt from Federal income taxes and the Plan received a favorable determination letter from the Internal Revenue Service ("IRS") on June 26, 1992. Prior to December 31, 1994, the Plan was amended to meet certain requirements of the Tax Reform Act of 1986. The Plan was restated as of January 1, 1998. The Plan administrator is of the opinion that the Plan meets the IRS requirements and, therefore, the trust continues to be tax exempt. As a result, no provision for income taxes has been made. (5) OTHER MATTERS: For the 1998 plan year, net transfers among funds and plans equaled $666,134. This amount primarily consists of a transfer, totaling $662,160, between the Plan and the Merck & Co., Inc. ("Merck") Employee Savings and Security Plan for the employees who were transferred to Merck during 1998. The remaining amounts relate to miscellaneous transfers. (6) PARTY-IN-INTEREST: All party-in-interest transactions are set forth on the attached schedules. (7) PROHIBITED TRANSACTIONS: There were no prohibited transactions during 1998. 21 SCHEDULE I EIN: 22-3461740 PLAN NO.: 003 MEDCO 401(k) SAVINGS PLAN ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1998
NUMBER OF UNITS/SHARES AT NAME OF ISSUER AND TITLE OF ISSUE CLOSE OF PERIOD COST CURRENT VALUE - --------------------------------- --------------- ---- ------------- Merck Common Stock Fund* 8,141,578 $ 87,458,800 $ 205,221,457 T. Rowe Price Blue Chip Growth Fund 1,269,540 31,392,294 38,847,928 Fidelity Equity-Income Fund 16,105 897,011 894,660 Vanguard U.S. Growth Portfolio 85,410 2,932,058 3,202,030 Fidelity Growth & Income Portfolio 55,486 2,336,143 2,543,500 T. Rowe Price New Income Fund 801,686 7,246,511 7,062,858 T. Rowe Price Mid-Cap Growth Fund 39,429 1,236,971 1,343,734 EuroPacific Growth Fund 31,995 907,622 908,656 The George Putnam Fund of Boston A 36,573 679,461 659,777 Fidelity Retirement Money Market 17,130,097 17,130,097 17,130,097 Spartan U.S. Equity Index Fund 47,961 1,863,533 2,108,356 Fidelity Low-Priced Stock Fund 59,843 1,508,458 1,367,419 Franklin Small Cap Growth Fund I 55,240 1,259,183 1,246,750 Putnam Voyager Fund A 59,070 1,231,080 1,294,804 Templeton Developing Markets Trust I 36,428 399,314 375,211 T. Rowe Price Dividend Growth Fund 40,251 850,690 885,920 Participants' Loan Account (with interest of 9.5%) -- 5,956,280 5,956,280 ------------- ------------- Total investments $ 165,285,506 $ 291,049,437 ============= =============
* Denotes a party-in-interest to the Plan. The accompanying notes to financial statements are an integral part of this schedule. 22 Schedule II EIN: 22-3461740 Plan No.: 003 MEDCO 401(k) SAVINGS PLAN ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS (A) FOR THE YEAR ENDED DECEMBER 31, 1998
Current Value of Asset on Purchase Selling Cost of Transaction Net Description Price Price Asset Date Gain - ------------------------------------------------------------------------------------------------------------------------------------ Merck Common Stock* 235 purchase transactions $50,918,043 $ -- $50,918,043 $50,918,043 $ -- 224 sales transactions -- 39,724,101 23,169,779 39,724,101 16,554,322 Fidelity Retirement Money Market 235 purchase transactions 40,937,657 -- 40,937,657 40,937,657 -- 221 sales transactions -- 23,807,560 23,807,560 23,807,560 -- T. Rowe Price Blue Chip Growth Fund 232 purchase transactions 8,783,378 -- 8,783,378 8,783,378 -- 221 sales transactions -- 9,216,088 8,468,980 9,216,088 747,108
* Denotes a party-in-interest to the Plan. (A) Reportable transactions are defined as those transactions in excess of 5% individually or in the aggregate of the Plan's net assets available for benefit at the beginning of the Plan year. The accompanying notes to financial statements are an integral part of this schedule. 23 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the undersigned member of the Retirement Committee has duly caused this annual report to be signed on behalf of the Medco 401(k) Savings Plan by the undersigned thereunto duly authorized. MEDCO 401(k) SAVINGS PLAN By: /s/ JoAnn Reed ------------------------------------ JoAnn Reed Member of the Retirement Committee Date: June 22, 1999. 24 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference of our report dated May 14, 1999 included in the financial statements and exhibits required by Form 11K Annual Report for the Medco 401 (k) Savings Plan into the Company's previously filed Post Effective Amendment on Form S-8 (No. 33-50667) to Registration Statement on Form S-4. It should be noted that we have not audited any financial statements of the plan, subsequent to December 31, 1998 or performed any audit procedures subsequent to the date of our report. /s/ Arthur Andersen LLP ------------------- Arthur Andersen LLP New York, New York June 28, 1999. -----END PRIVACY-ENHANCED MESSAGE-----