0001104659-13-011817.txt : 20130219 0001104659-13-011817.hdr.sgml : 20130219 20130219163927 ACCESSION NUMBER: 0001104659-13-011817 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20130214 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130219 DATE AS OF CHANGE: 20130219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Merck & Co. Inc. CENTRAL INDEX KEY: 0000310158 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221918501 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06571 FILM NUMBER: 13623910 BUSINESS ADDRESS: STREET 1: ONE MERCK DRIVE STREET 2: P.O. BOX 100 CITY: WHITEHOUSE STATION STATE: NJ ZIP: 08889-0100 BUSINESS PHONE: 908-423-4840 MAIL ADDRESS: STREET 1: ONE MERCK DRIVE STREET 2: P.O. BOX 100 CITY: WHITEHOUSE STATION STATE: NJ ZIP: 08889-0100 FORMER COMPANY: FORMER CONFORMED NAME: SCHERING PLOUGH CORP DATE OF NAME CHANGE: 19920703 8-K 1 a13-5320_18k.htm 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) February 19, 2013 (February 14, 2013)

 

Merck & Co., Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

New Jersey

(State or Other Jurisdiction of Incorporation)

 

1-6571

 

22-1918501

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

One Merck Drive, PO Box 100, Whitehouse Station, NJ

 

08889-0100

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code (908) 423-1000

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02.     Results of Operations and Financial Condition.

 

The following information, including the exhibits hereto, is being furnished pursuant to this Item 2.02.

 

Incorporated by reference is a press release issued by the Registrant on February 14, 2013, entitled “Merck Resolves Securities Class-Action Lawsuits Related to the ENHANCE Trial,” attached as Exhibit 99.1.  Also incorporated by reference is certain supplemental information not included in the press release, attached as Exhibit 99.2.  This supplemental information consists of financial tables which were originally furnished by the Registrant as part of Exhibits 99.1 and 99.2 to a Form 8-K dated February 1, 2013.  Certain of these tables have been amended where appropriate to reflect the settlement of the litigation referred to in Exhibit 99.1.

 

This information shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01.  Financial Statements and Exhibits.

 

(d)  Exhibits

 

Exhibit 99.1

 

Press release issued February 14, 2013 entitled “Merck Resolves Securities Class-Action Lawsuits Related to the ENHANCE Trial”

 

 

 

Exhibit 99.2

 

Certain supplemental information not included in the press release

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Merck & Co., Inc.

 

 

 

 

Date: February 19, 2013

By:

/s/ Katie E. Fedosz

 

 

KATIE E. FEDOSZ

 

 

Senior Assistant Secretary

 

3



 

EXHIBIT INDEX

 

Exhibit

 

 

Number

 

Description

 

 

 

99.1

 

Press release issued February 14, 2013 entitled “Merck Resolves Securities Class-Action Lawsuits Related to the ENHANCE Trial”

 

 

 

99.2

 

Certain supplemental information not included in the press release

 

4


EX-99.1 2 a13-5320_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

News Release

 

 

 

 

Media Contacts:

Ron Rogers

Investor Contacts:

 

Carol Ferguson

 

(908) 423-6449

 

 

(908) 423-4465

 

 

 

 

 

 

Steve Cragle

 

 

Justin Holko

 

(908) 423-3461

 

 

(908) 423-5088

 

Merck Resolves Securities Class-Action Lawsuits Related to the ENHANCE Trial

 

The Company Records $493 Million Charge Reducing 2012 GAAP Results

 

WHITEHOUSE STATION, N.J., Feb. 14, 2013 — Merck, known as MSD outside the United States and Canada, announced today that it has reached an agreement in principle with plaintiffs to resolve two federal securities class-action lawsuits.  The suits are pending in the U.S. District Court for the District of New Jersey against Merck, Schering-Plough Corporation and certain of their current and former officers and directors.

 

Under the proposed agreement, which will have no impact on Merck’s 2013 results of operations, the company will pay $215 million to resolve the securities class action against all of the Merck defendants and $473 million to resolve the securities class action against all of the Schering-Plough defendants. In connection with the settlement, Merck recorded a pre-tax and after-tax charge of $493 million, which reflects anticipated insurance recoveries.  This charge reduced the company’s previously reported fourth-quarter 2012 GAAP (generally accepted accounting principles) EPS (earnings per share) results from $0.46 to $0.30 per share and full-year 2012 GAAP results from $2.16 to $2.00 per share, but did not change its previously reported non-GAAP results.

 

The plaintiffs are investors who purchased certain securities issued by Merck and Schering-Plough between December 2006 and March 2008 and claim that they lost money when the results of the ENHANCE trial were published in early 2008.  Merck continues to believe that both companies acted responsibly in connection with the ENHANCE study, and this agreement contains no admission of liability or wrongdoing.  The agreement is subject to court approval.

 

“This agreement avoids the uncertainties of a jury trial and will resolve all of the remaining litigation in connection with the ENHANCE study,” said Bruce N. Kuhlik, executive vice president and general counsel of Merck.  “We believe it is in the best interests of the company and its shareholders to put this matter behind us, and to continue our focus on scientific innovations that improve health worldwide.”

 



 

Judge Dennis M. Cavanaugh is presiding over the cases.  Merck is represented by Theodore V. Wells, Jr. and Daniel J. Kramer of Paul, Weiss, Rifkind, Wharton & Garrison LLP.

 

About Merck

 

Today’s Merck is a global healthcare leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies, and consumer care and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to healthcare through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook and YouTube.

 

Forward-Looking Statement

 

This news release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

 

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; Merck’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of Merck’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

 

Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck’s 2011 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

 

###

 

2


EX-99.2 3 a13-5320_1ex99d2.htm EX-99.2

Exhibit 99.2

 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

 

 

 

GAAP

 

 

 

GAAP

 

 

 

 

 

4Q12

 

4Q11

 

% Change

 

Full Year
2012

 

Full Year
2011

 

% Change

 

Sales

 

$

11,738

 

$

12,294

 

-5

%

 

$

47,267

 

$

48,047

 

-2

%

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production (1)

 

4,160

 

4,176

 

 

 

16,446

 

16,871

 

-3

%

 

Marketing and administrative (1) 

 

3,390

 

3,704

 

-8

%

 

12,776

 

13,733

 

-7

%

 

Research and development (1) 

 

2,224

 

2,419

 

-8

%

 

8,168

 

8,467

 

-4

%

 

Restructuring costs (2) 

 

191

 

533

 

-64

%

 

664

 

1,306

 

-49

%

 

Equity income from affiliates (3)

 

(231

)

(257

)

-10

%

 

(642

)

(610

)

5

%

 

Other (income) expense, net (1)(4)

 

669

 

139

 

*

 

 

1,116

 

946

 

18

%

 

Income Before Taxes

 

1,335

 

1,580

 

-16

%

 

8,739

 

7,334

 

19

%

 

Income Tax Provision

 

385

 

37

 

 

 

 

2,440

 

942

 

 

 

 

Net Income

 

950

 

1,543

 

-38

 

 

6,299

 

6,392

 

-1

%

 

Less: Net Income Attributable to Noncontrolling Interests

 

42

 

31

 

 

 

 

131

 

120

 

 

 

 

Net Income Attributable to Merck & Co., Inc.

 

$

908

 

$

1,512

 

-40

 

 

$

6,168

 

$

6,272

 

-2

%

 

Earnings per Common Share Assuming Dilution (5)

 

$

0.30

 

$

0.49

 

-39

 

 

$

2.00

 

$

2.02

 

-1

%

 

Average Shares Outstanding Assuming Dilution

 

3,074

 

3,069

 

 

 

 

3,076

 

3,094

 

 

 

 

Tax Rate (6)

 

28.8

%

2.3

%

 

 

 

27.9

%

12.8

%

 

 

 

 

* 100% or greater

 

(1) Amounts include the impact of acquisition-related costs, restructuring costs and certain other items. See accompanying tables for details.

 

(2) Represents separation and other related costs associated with restructuring activities under the company’s formal restructuring programs.

 

(3) Primarily reflects equity income from the AstraZeneca LP and Sanofi Pasteur MSD partnerships.

 

(4) Other (income) expense, net in the fourth quarter and full year of 2012 reflect a $493 million net charge related to a litigation settlement.  Other (income) expense, net in the full year of 2011 includes a charge of $500 million related to the resolution of the arbitration proceeding with Johnson & Johnson, a $136 million gain on the divestiture of the company’s interest in the Johnson & JohnsonºMerck Consumer Pharmaceuticals Company joint venture and a $127 million gain on the sale of certain manufacturing facilities and related assets.

 

(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate earnings per common share assuming dilution was $908 million and $1,510 million for the fourth quarter of 2012 and 2011, respectively, and was $6,165 million and $6,257 million for the full year of 2012 and 2011, respectively.

 

(6) The GAAP effective tax rates for the fourth quarter and full year of 2012 were 28.8% and 27.9%, respectively.  Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 23.6% and 23.8% for the fourth quarter and full year of 2012, respectively.  Both the GAAP and non-GAAP effective tax rates for the fourth quarter and full year of 2012 reflect a favorable ruling on a state tax matter.  In addition,  both the GAAP and non-GAAP effective tax rates for the full year of 2012 reflect the favorable impacts of a settlement with a foreign tax authority and the realization of foreign tax credits.  The GAAP effective tax rates for the fourth quarter and full year of 2011 were 2.3% and 12.8%, respectively.  Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 19.9% and 23.4% for the fourth quarter and full year of 2011, respectively.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

% Change

 

 

 

1Q

 

2Q

 

3Q

 

4Q

 

Full Year

 

1Q

 

2Q

 

3Q

 

4Q

 

Full Year

 

4Q

 

Full Year

 

Sales

 

$

11,731

 

$

12,311

 

$

11,488

 

$

11,738

 

$

47,267

 

$

11,580

 

$

12,151

 

$

12,022

 

$

12,294

 

$

48,047

 

-5

%

-2%

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

4,037

 

4,112

 

4,137

 

4,160

 

16,446

 

4,059

 

4,284

 

4,352

 

4,176

 

16,871

 

 

-3%

 

 

Marketing and administrative

 

3,074

 

3,249

 

3,063

 

3,390

 

12,776

 

3,164

 

3,525

 

3,340

 

3,704

 

13,733

 

-8

%

-7%

 

 

Research and development

 

1,862

 

2,165

 

1,918

 

2,224

 

8,168

 

2,158

 

1,936

 

1,954

 

2,419

 

8,467

 

-8

%

-4%

 

 

Restructuring costs

 

219

 

144

 

110

 

191

 

664

 

(14

)

668

 

119

 

533

 

1,306

 

-64

%

-49%

 

 

Equity income from affiliates

 

(110

)

(142

)

(158

)

(231

)

(642

)

(138

)

(55

)

(161

)

(257

)

(610

)

-10

%

5%

 

 

Other (income) expense, net

 

142

 

103

 

200

 

669

 

1,116

 

622

 

121

 

66

 

139

 

946

 

*

 

18%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Taxes

 

2,507

 

2,680

 

2,218

 

1,335

 

8,739

 

1,729

 

1,672

 

2,352

 

1,580

 

7,334

 

-16

%

19%

 

 

Income Tax Provision (Benefit)

 

740

 

860

 

455

 

385

 

2,440

 

658

 

(382

)

628

 

37

 

942

 

 

 

 

 

 

Net Income

 

1,767

 

1,820

 

1,763

 

950

 

6,299

 

1,071

 

2,054

 

1,724

 

1,543

 

6,392

 

-38

%

-1%

 

 

Less: Net Income Attributable to Noncontrolling Interests

 

29

 

27

 

34

 

42

 

131

 

28

 

30

 

32

 

31

 

120

 

 

 

 

 

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,738

 

$

1,793

 

$

1,729

 

$

908

 

$

6,168

 

$

1,043

 

$

2,024

 

$

1,692

 

$

1,512

 

$

6,272

 

-40

%

-2%

 

 

Earnings per Common Share Assuming Dilution

 

$

0.56

 

$

0.58

 

$

0.56

 

$

0.30

 

$

2.00

 

$

0.34

 

$

0.65

 

$

0.55

 

$

0.49

 

$

2.02

 

-39

%

-1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

3,074

 

3,072

 

3,079

 

3,074

 

3,076

 

3,104

 

3,110

 

3,091

 

3,069

 

3,094

 

 

 

 

 

 

Tax Rate

 

29.5

%

32.1

%

20.5

%

28.8

%

27.9

%

38.1

%

-22.8

%

26.7

%

2.3

%

12.8

%

 

 

 

 

 

 

* 100% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

FOURTH QUARTER 2012

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items 
(3)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$11,738

 

 

 

 

 

 

 

$—

 

$11,738

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

4,160

 

1,185

 

40

 

 

 

1,225

 

2,935

 

Marketing and administrative

 

3,390

 

89

 

20

 

 

 

109

 

3,281

 

Research and development

 

2,224

 

24

 

3

 

 

 

27

 

2,197

 

Restructuring costs

 

191

 

 

 

191

 

 

 

191

 

 

Equity income from affiliates

 

(231

)

 

 

 

 

 

 

 

(231

)

Other (income) expense, net

 

669

 

 

 

 

 

493

 

493

 

176

 

Income Before Taxes

 

1,335

 

(1,298

)

(254

)

(493

)

(2,045

)

3,380

 

Taxes on Income

 

385

 

 

 

 

 

 

 

(413

)(4)

798

 

Net Income

 

950

 

 

 

 

 

 

 

(1,632

)

2,582

 

Less: Net Income Attributable to Noncontrolling Interests

 

42

 

 

 

 

 

 

 

 

42

 

Net Income Attributable to Merck & Co., Inc.

 

$908

 

 

 

 

 

 

 

$(1,632

)

$2,540

 

Earnings per Common Share Assuming Dilution

 

$0.30

 

 

 

 

 

 

 

 

 

$0.83

(5)

Average Shares Outstanding Assuming Dilution

 

3,074

 

 

 

 

 

 

 

 

 

3,074

 

Tax Rate

 

28.8

%

 

 

 

 

 

 

 

 

23.6

%

 

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance.  This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets recognized as a result of mergers and acquisitions.  Amounts included in marketing and administrative expenses reflect merger integration costs.  Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Represents a net charge related to a litigation settlement.

 

(4) Represents the estimated tax impact on the reconciling items.

 

(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $2,540 million for the fourth quarter of 2012.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

FULL YEAR 2012

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2b

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items 
(3)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

47,267

 

 

 

 

 

 

 

$

 

$

47,267

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

16,446

 

4,872

 

188

 

 

 

5,060

 

11,386

 

Marketing and administrative

 

12,776

 

272

 

90

 

 

 

362

 

12,414

 

Research and development

 

8,168

 

200

 

57

 

 

 

257

 

7,911

 

Restructuring costs

 

664

 

 

 

664

 

 

 

664

 

 

Equity income from affiliates

 

(642

)

 

 

 

 

 

 

 

(642

)

Other (income) expense, net

 

1,116

 

 

 

 

 

493

 

493

 

623

 

Income Before Taxes

 

8,739

 

(5,344

)

(999

)

(493

)

(6,836

)

15,575

 

Taxes on Income

 

2,440

 

 

 

 

 

 

 

(1,261

)(4)

3,701

 

Net Income

 

6,299

 

 

 

 

 

 

 

(5,575

)

11,874

 

Less: Net Income Attributable to Noncontrolling Interests

 

131

 

 

 

 

 

 

 

 

131

 

Net Income Attributable to Merck & Co., Inc.

 

$

6,168

 

 

 

 

 

 

 

$

(5,575

)

$

11,743

 

Earnings per Common Share Assuming Dilution

 

$

2.00

 

 

 

 

 

 

 

 

 

$

3.82

(5)

Average Shares Outstanding Assuming Dilution

 

3,076

 

 

 

 

 

 

 

 

 

3,076

 

Tax Rate

 

27.9

%

 

 

 

 

 

 

 

 

23.8

%

 

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance.  This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets recognized as a result of mergers and acquisitions.  Amounts included in marketing and administrative expenses reflect merger integration costs.  Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Represents a net charge related to a litigation settlement.

 

(4) Represents the estimated tax impact on the reconciling items.

 

(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $11,738 million for the full year of 2012.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

FOURTH  QUARTER 2011

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2c

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

12,294

 

 

 

 

 

 

 

$

 

$

12,294

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

4,176

 

1,212

 

68

 

7

 

1,287

 

2,889

 

Marketing and administrative

 

3,704

 

86

 

42

 

 

 

128

 

3,576

 

Research and development

 

2,419

 

244

 

49

 

 

 

293

 

2,126

 

Restructuring costs

 

533

 

 

 

533

 

 

 

533

 

 

Equity income from affiliates

 

(257

)

 

 

 

 

 

 

 

(257

)

Other (income) expense, net

 

139

 

(63

)

 

 

(1

)

(64

)

203

 

Income Before Taxes

 

1,580

 

(1,479

)

(692

)

(6

)

(2,177

)

3,757

 

Taxes on Income

 

37

 

 

 

 

 

 

 

(711

)(3)

748

 

Net Income

 

1,543

 

 

 

 

 

 

 

(1,466

)

3,009

 

Less: Net Income Attributable to Noncontrolling Interests

 

31

 

 

 

 

 

 

 

 

31

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,512

 

 

 

 

 

 

 

$

(1,466

)

$

2,978

 

Earnings per Common Share Assuming Dilution

 

$

0.49

 

 

 

 

 

 

 

 

 

$

0.97

(4)

Average Shares Outstanding Assuming Dilution

 

3,069

 

 

 

 

 

 

 

 

 

3,069

 

Tax Rate

 

2.3

%

 

 

 

 

 

 

 

 

19.9

%

 

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance.  This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets and the amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions.  Amounts included in marketing and administrative expenses reflect integration costs, as well as other costs associated with mergers and acquisitions, such as severance costs which are not part of the company’s formal restructuring programs.  Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.  Amounts included in other (income) expense, net reflect the favorable resolution of certain reserves assumed in conjunction with mergers and acquisitions.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Includes the favorable impact of certain state tax rate changes that resulted in a net $40 million reduction of deferred tax liabilities on intangibles established in purchase accounting, as well as the estimated tax impact on the reconciling items.

 

(4) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $2,973 million for the fourth quarter of 2011.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

FULL YEAR 2011

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2d

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items 
(3)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

48,047

 

 

 

 

 

 

 

$

 

$

48,047

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

16,871

 

5,137

 

348

 

7

 

5,492

 

11,379

 

Marketing and administrative

 

13,733

 

278

 

119

 

 

 

397

 

13,336

 

Research and development

 

8,467

 

587

 

138

 

 

 

725

 

7,742

 

Restructuring costs

 

1,306

 

 

 

1,306

 

 

 

1,306

 

 

Equity income from affiliates

 

(610

)

 

 

 

 

 

 

 

(610

)

Other (income) expense, net

 

946

 

(63

)

 

 

235

 

172

 

774

 

Income Before Taxes

 

7,334

 

(5,939

)

(1,911

)

(242

)

(8,092

)

15,426

 

Taxes on Income

 

942

 

 

 

 

 

 

 

(2,667

)(4)

3,609

 

Net Income

 

6,392

 

 

 

 

 

 

 

(5,425

)

11,817

 

Less: Net Income Attributable to Noncontrolling Interests

 

120

 

 

 

 

 

 

 

 

120

 

Net Income Attributable to Merck & Co., Inc.

 

$

6,272

 

 

 

 

 

 

 

$

(5,425

)

$

11,697

 

Earnings per Common Share Assuming Dilution

 

$

2.02

 

 

 

 

 

 

 

 

 

$

3.77

(5)

Average Shares Outstanding Assuming Dilution

 

3,094

 

 

 

 

 

 

 

 

 

3,094

 

Tax Rate

 

12.8

%

 

 

 

 

 

 

 

 

23.4

%

 

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance.  This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs reflect expenses of $5.0 billion for the amortization of intangible assets and the amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions, as well as $118 million of impairment charges on product intangibles.  Amounts included in marketing and administrative expenses reflect integration costs, as well as other costs associated with mergers and acquisitions, such as severance costs which are not part of the company’s formal restructuring programs.  Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.  Amounts included in other (income) expense, net reflect the favorable resolution of certain reserves assumed in conjunction with mergers and acquisitions.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Included in other (income) expense, net is a $500 million charge related to the resolution of the arbitration proceeding with Johnson & Johnson,  a $136 million gain on the divestiture of the company’s interest in the Johnson & JohnsonºMerck Consumer Pharmaceuticals Company joint venture and a $127 million gain on the sale of certain manufacturing facilities and related assets.

 

(4) Includes a net benefit of approximately $700 million relating to the settlement of the company’s 2002-2005 federal income tax audit, the favorable impact of certain foreign and state tax rate changes that resulted in a net $270 million reduction of deferred tax liabilities on intangibles established in purchase accounting, as well as the estimated tax impact on the reconciling items.

 

(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $11,670 million for the full year of 2011.

 



 

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3

 

 

 

2012

 

2011

 

% Change

 

% Change

 

 

 

1Q

 

2Q

 

3Q

 

4Q

 

Full Year

 

1Q

 

2Q

 

3Q

 

4Q

 

Full Year

 

4Q

 

Full Year

 

TOTAL SALES (1)

 

$

11,731

 

$

12,311

 

$

11,488

 

$

11,738

 

$

47,267

 

$

11,580

 

$

12,151

 

$

12,022

 

$

12,294

 

$

48,047

 

-5

 

-2

 

PHARMACEUTICAL

 

10,082

 

10,560

 

9,875

 

10,085

 

40,601

 

9,820

 

10,360

 

10,354

 

10,755

 

41,289

 

-6

 

-2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Care and Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zetia

 

614

 

632

 

645

 

676

 

2,567

 

582

 

592

 

614

 

640

 

2,428

 

6

 

6

 

Vytorin

 

444

 

445

 

423

 

435

 

1,747

 

480

 

459

 

469

 

475

 

1,882

 

-8

 

-7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diabetes & Obesity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Januvia

 

919

 

1,058

 

975

 

1,134

 

4,086

 

739

 

779

 

846

 

960

 

3,324

 

18

 

23

 

Janumet

 

392

 

411

 

405

 

452

 

1,659

 

305

 

321

 

350

 

386

 

1,363

 

17

 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Respiratory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singulair

 

1,340

 

1,431

 

602

 

480

 

3,853

 

1,328

 

1,354

 

1,336

 

1,461

 

5,479

 

-67

 

-30

 

Nasonex

 

375

 

293

 

292

 

308

 

1,268

 

373

 

323

 

266

 

325

 

1,286

 

-5

 

-1

 

Clarinex

 

134

 

140

 

64

 

56

 

393

 

155

 

209

 

128

 

129

 

621

 

-57

 

-37

 

Dulera

 

39

 

50

 

52

 

67

 

207

 

13

 

25

 

22

 

37

 

96

 

83

 

*

 

Asmanex

 

48

 

51

 

42

 

44

 

185

 

60

 

47

 

42

 

57

 

206

 

-23

 

-10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Women’s Health & Endocrine

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fosamax

 

184

 

186

 

152

 

154

 

676

 

208

 

221

 

215

 

211

 

855

 

-27

 

-21

 

NuvaRing

 

146

 

157

 

156

 

164

 

623

 

142

 

154

 

159

 

168

 

623

 

-2

 

 

Follistim AQ

 

116

 

125

 

111

 

116

 

468

 

133

 

143

 

129

 

126

 

530

 

-8

 

-12

 

Implanon

 

76

 

85

 

93

 

94

 

348

 

60

 

81

 

80

 

74

 

294

 

27

 

18

 

Cerazette

 

67

 

72

 

64

 

68

 

271

 

59

 

66

 

74

 

69

 

268

 

-1

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maxalt

 

156

 

154

 

166

 

162

 

638

 

173

 

131

 

156

 

178

 

639

 

-9

 

 

Arcoxia

 

112

 

117

 

109

 

115

 

453

 

114

 

100

 

108

 

110

 

431

 

5

 

5

 

Avelox

 

73

 

44

 

30

 

55

 

201

 

106

 

61

 

59

 

95

 

322

 

-42

 

-37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospital and Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Immunology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remicade

 

519

 

518

 

490

 

549

 

2,076

 

753

 

842

 

561

 

511

 

2,667

 

8

 

-22

 

Simponi

 

74

 

76

 

86

 

95

 

331

 

54

 

75

 

74

 

61

 

264

 

56

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infectious Disease

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isentress

 

337

 

398

 

399

 

381

 

1,515

 

292

 

337

 

343

 

387

 

1,359

 

-2

 

11

 

PegIntron

 

162

 

183

 

165

 

143

 

653

 

166

 

154

 

163

 

175

 

657

 

-18

 

-1

 

Cancidas

 

145

 

166

 

163

 

145

 

619

 

158

 

168

 

150

 

164

 

640

 

-11

 

-3

 

Victrelis

 

111

 

126

 

149

 

115

 

502

 

1

 

21

 

31

 

87

 

140

 

32

 

*

 

Invanz

 

101

 

110

 

118

 

116

 

445

 

87

 

103

 

107

 

110

 

406

 

6

 

10

 

Primaxin

 

88

 

104

 

109

 

83

 

384

 

136

 

136

 

124

 

119

 

515

 

-30

 

-25

 

Noxafil

 

59

 

66

 

66

 

68

 

258

 

55

 

56

 

61

 

59

 

230

 

15

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Temodar

 

237

 

225

 

227

 

229

 

917

 

248

 

234

 

223

 

230

 

935

 

-1

 

-2

 

Emend

 

102

 

145

 

111

 

131

 

489

 

87

 

120

 

98

 

114

 

419

 

16

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cosopt / Trusopt

 

124

 

105

 

102

 

113

 

444

 

114

 

122

 

124

 

117

 

477

 

-3

 

-7

 

Bridion

 

58

 

60

 

68

 

75

 

261

 

41

 

47

 

52

 

60

 

201

 

26

 

30

 

Integrilin

 

53

 

60

 

48

 

51

 

211

 

64

 

56

 

53

 

57

 

230

 

-11

 

-8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cozaar / Hyzaar

 

336

 

337

 

295

 

315

 

1,284

 

426

 

406

 

404

 

427

 

1,663

 

-26

 

-23

 

Propecia

 

108

 

100

 

104

 

112

 

424

 

106

 

112

 

112

 

117

 

447

 

-4

 

-5

 

Zocor

 

103

 

96

 

86

 

98

 

383

 

127

 

107

 

110

 

111

 

456

 

-12

 

-16

 

Claritin Rx

 

87

 

48

 

47

 

63

 

244

 

120

 

65

 

55

 

74

 

314

 

-15

 

-22

 

Remeron

 

57

 

66

 

52

 

57

 

232

 

60

 

57

 

65

 

59

 

241

 

-4

 

-4

 

Proscar

 

51

 

55

 

55

 

56

 

217

 

60

 

53

 

58

 

52

 

223

 

7

 

-3

 

Vasotec / Vaseretic

 

53

 

49

 

42

 

48

 

192

 

57

 

59

 

57

 

58

 

231

 

-17

 

-17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vaccines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardasil

 

284

 

324

 

581

 

442

 

1,631

 

214

 

277

 

445

 

274

 

1,209

 

61

 

35

 

ProQuad, M-M-R II and Varivax

 

255

 

316

 

396

 

306

 

1,273

 

244

 

291

 

391

 

276

 

1,202

 

11

 

6

 

Zostavax

 

76

 

148

 

202

 

225

 

651

 

24

 

122

 

108

 

78

 

332

 

*

 

96

 

RotaTeq

 

142

 

142

 

150

 

168

 

601

 

125

 

148

 

184

 

195

 

651

 

-14

 

-8

 

Pneumovax

 

112

 

101

 

160

 

208

 

580

 

79

 

64

 

133

 

222

 

498

 

-7

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Pharmaceutical (2)

 

1,013

 

985

 

1,023

 

1,113

 

4,141

 

892

 

1,064

 

1,015

 

1,064

 

4,035

 

5

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANIMAL HEALTH

 

821

 

865

 

815

 

898

 

3,399

 

758

 

802

 

826

 

868

 

3,253

 

3

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER CARE

 

554

 

552

 

451

 

395

 

1,952

 

517

 

541

 

421

 

361

 

1,840

 

9

 

6

 

Claritin OTC

 

169

 

145

 

118

 

100

 

532

 

167

 

134

 

118

 

92

 

511

 

9

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenues (3)

 

274

 

333

 

347

 

360

 

1,315

 

486

 

448

 

421

 

310

 

1,666

 

16

 

-21

 

Astra

 

186

 

223

 

255