SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993 Commission file number 1-6571
SCHERING-PLOUGH CORPORATION
Incorporated in New Jersey 22-1918501
One Giralda Farms (I.R.S. Employer Identification No.)
Madison, New Jersey 07940-1000 201-822-7000
(telephone number)
Securities registered pursuant to section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Shares, $1 par value New York Stock Exchange
Preferred Share Purchase Rights* New York Stock Exchange
*At the time of filing, the Rights were not traded separately from the Common
Shares.
Indicate by check mark whether the registrant 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 and has been
subject to such filing requirements for the past
90 days.
YES_X__ NO____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.__X_
Common shares outstanding as of January 31, 1994: 193,606,197
Aggregate market value of common shares at January 31, 1994 held by
non-affiliates based on
closing price: $12.1 billion.
Documents incorporated Part of Form 10-K
by reference incorporated into
Schering-Plough Corporation 1993
Annual Report to Shareholders Parts I, II, and IV
Schering-Plough Corporation Proxy
Statement for the annual meeting of
shareholders on April 26, 1994 Part III
<PAGE>
Part I
Item 1. Business
General
Schering-Plough*, incorporated in 1970, is a worldwide company engaged in
the research, development, manufacturing and marketing of pharmaceutical
and health care products. Products include prescription drugs, vision
care, animal health, over-the-counter (OTC), foot care and sun care
products.
Business Segment and Other Financial Information
The "Business Segment Data" as set forth in the Notes to Consolidated
Financial Statements in the Company's 1993 Annual Report to Shareholders
is incorporated herein by reference.
Sales by major product groups for each of the three years in the period
ended December 31, 1993 were as follows (dollars in millions):
1993 1992 1991
Respiratory $1,185 $1,063 $ 986
Anti-infective and Anticancer 1,032 906 629
Dermatologicals 443 451 416
Cardiovasculars 316 267 238
Other Pharmaceuticals 399 405 345
OTC 312 346 376
Foot Care 240 214 218
Animal Health 154 157 141
Sun Care 131 117 113
Vision Care 112 111 140
Other Health Care Products 17 19 14
Consolidated Sales $4,341 $4,056 $3,616
Pharmaceutical Products
The Company's pharmaceutical operations include prescription drugs,
vision care products and animal health products. Principal prescription
products include: CELESTAMINE, CLARITIN, POLARAMINE, PROVENTIL, THEO-
DUR, TRINALIN, VANCENASE and VANCERIL, respiratory; CEDAX, EULEXIN,
GARAMYCIN, INTRON A, ISEPACIN and NETROMYCIN, anti-infective and
anticancer; DIPROLENE, DIPROSONE, ELOCON, FULVICIN, LOTRIMIN, LOTRISONE,
QUADRIDERM and VALISONE, dermatologicals; K-DUR, NITRO-DUR and NORMODYNE,
cardiovascular; CELESTONE, DIPROSPAN, LOSEC, NOIN, PALACOS and TRILAFON,
other pharmaceuticals.
* As used herein, the term "Schering-Plough" or "Company" refers to
Schering-Plough Corporation and its consolidated subsidiaries
unless the context indicates otherwise.<PAGE>
Item 1. Business (continued)
The Company's major vision care product line is contact lenses sold under
the DURASOFT trademark. The leading product within the DURASOFT line is
DURASOFT Colors, a soft lens that can alter the appearance of eye color.
Also, in early 1994 the Company received marketing clearance from the
U.S. Food and Drug Administration for its FRESHLOOK line of disposable
contact lenses. Animal health biological and pharmaceutical products
include antibiotics, vaccines, anti-arthritics, steroids and
nutritionals. Major animal health products are: GENTOCIN and GARASOL,
antibiotics, and BANAMINE, an anti-arthritic.
Pharmaceutical products also include pharmaceutical chemical substances
sold in bulk to third parties for production of their own products.
Prescription drugs are introduced and made known to physicians,
pharmacists, hospitals and managed care organizations by trained
professional service representatives, and are sold to hospitals, managed
care organizations and wholesale and retail druggists. Pharmaceutical
products are also promoted through journal advertising, direct mail
advertising and by distributing samples to physicians. Vision care
products are promoted and sold by a separate sales force to practitioners
and retail outlets. Animal health products are promoted and sold by a
separate sales force to veterinarians, distributors and animal producers.
To meet the anticipated worldwide need for its biotechnology-based
pharmaceutical compounds, the Company is expanding its manufacturing
facility in Brinny, Ireland. The total cost of the expansion is
expected to be approximately $160 million. The Company is also expanding
its Rathdrum, Ireland manufacturing operation to meet increasing demands.
The overall cost of this project is expected to approximate $78 million.
The Company's subsidiaries own (or have licensed rights under) a number
of patents and patent applications, both in the United States and abroad.
In the aggregate, patents and patent applications are believed to be of
material importance to the operations of the pharmaceutical segment. In
December 1989, the U.S. patent covering PROVENTIL, an asthma product,
expired. The PROVENTIL formulations of the tablet, syrup and solution
have been subject to generic competition. In January 1994, the Food and
Drug Administration issued bioequivalence standards for generic albuterol
metered dose inhalers, which may result in generic inhaler entries late
in 1994. The introduction of a generic inhaler will negatively affect
the sales and profitability of PROVENTIL.
Raw materials essential to this segment are available in adequate
quantities from a number of potential suppliers. Energy was and is
expected to be available to the Company in sufficient quantities to meet
operating requirements.
Worldwide, the Company's pharmaceutical products are sold under
trademarks. Trademarks are considered in the aggregate to be of material
importance to the pharmaceutical business and are protected by
registration or common law in the United States and most other markets
where the products are sold or likely to be sold.
Item 1. Business (continued)
Seasonal patterns do not have a pronounced effect on the combined
activities of this industry segment.
There is generally no significant backlog of orders since the Company's
business is normally conducted on an immediate shipment basis.
The pharmaceutical industry is highly competitive and includes other
large companies with substantial resources for research, product
development and promotion. There are numerous domestic and international
competitors in this industry. Some of the principal competitive
techniques used by the Company for its pharmaceutical products include
research and development of new and improved products, product quality,
varied dosage forms and strengths, and educational services for the
medical community.
Health Care Products
The principal product categories in the health care segment are the
Company's over-the-counter (OTC) medicines, foot care and sun care
products primarily sold in the United States. Principal products
include: AFRIN and DURATION nasal decongestants; CHLOR-TRIMETON
antihistamine; CORICIDIN and DRIXORAL cold and decongestant tablets;
CORRECTOL laxative; CLEAR AWAY and DUO BRAND wart remover; DI-GEL
antacid; GYNE-LOTRIMIN and FEMCARE for vaginal yeast infections; DR.
SCHOLL'S foot care products; LOTRIMIN AF and TINACTIN antifungals;
COPPERTONE, QT, SHADE, SOLARCAINE and TROPICAL BLEND sun care products; A
and D ointment; and PAAS egg coloring and holiday products. Business in
this segment is conducted through wholesale and retail drug, food chain
and variety outlets, and is promoted directly to the consumer through
television, radio, print and other advertising media.
Raw materials essential to this segment are available in adequate
quantities from a number of potential suppliers. Energy was and is
expected to be available to the Company in sufficient quantities to meet
operating requirements.
Trademarks for the major products included in this segment are registered
in the United States and most overseas countries where these products are
marketed. Trademarks are considered to be vital to the operations of
this segment.
Principally due to the seasonal sales of sun care products, operating
profits in this segment are relatively higher in the first half of the
year.
There is generally no significant backlog of orders since the Company's
business is normally conducted on an immediate shipment basis.
The health care products' industry is highly competitive and includes
other large companies with substantial resources for product development
and promotion. There are several dozen significant competitors in this
industry. The Company believes that in the United <PAGE>
Item 1. Business (continued)
States it has a leading position in the foot care and sun care
industries, with its DR. SCHOLL'S lines of foot pads, cushions, wart
removal and other treatments and its brands of sun care products. In
addition, the Company's brands are among the leaders in nasal sprays,
laxatives, antifungals and vaginal yeast infection treatments sold OTC.
The principal competitive techniques used by the Company in this industry
segment include switching prescription products to OTC medicines, the
development and introduction of new and improved products, and product
promotion methods to gain and retain consumer acceptance.
Foreign Operations
Foreign activities are carried out primarily through wholly-owned
subsidiaries wherever market potential is adequate and circumstances
permit. In addition, the Company is represented in some markets through
joint ventures, licensees or other distribution arrangements. There are
approximately 11,200 employees outside the United States.
Foreign operations are subject to certain risks which are inherent in
conducting business overseas. These risks include possible national-
ization, expropriation, importation limitations and other restrictive
governmental actions. Also, fluctuations in foreign currency exchange
rates can significantly impact the Company's consolidated financial
results. For additional information on foreign operations, see
"Management's Discussion and Analysis of Operations and Financial
Condition" and "Business Segment Data" in the Company's 1993 Annual
Report to Shareholders which is incorporated herein by reference.
Operations in Puerto Rico
The Company has operations in Puerto Rico that manufacture products for
distribution to both domestic and foreign markets. These businesses
operate under tax-relief and other incentives granted by the government
of Puerto Rico that expire at various dates through 2018.
The Company has also been exempt from U.S. tax on certain income derived
from its operations in Puerto Rico. The Omnibus Budget Reconciliation
Act of 1993 will phase down this exemption over the next five years to 40
percent of the pre-amendment level. The Company will be partially
impacted by this change in 1994.
Under present U.S. tax laws, accumulated funds generated from operations
in Puerto Rico can be remitted tax-free to the parent company. Under
recently revised Puerto Rico tax laws, remittance of these funds, with
the exception of certain amounts qualifying for tax free distribution,
will result in a tollgate tax of from 5 percent to 10 percent based upon
prescribed dividend and investment restrictions.
For additional information relating to the Puerto Rico operations, see
"Income Taxes" in the Notes to Consolidated Financial Statements in the
Company's 1993 Annual Report to Shareholders which is incorporated herein
by reference.
Item 1. Business (continued)
Research and Development
The Company's research activities are primarily aimed at discovering and
developing new and enhanced pharmaceutical products of medical and
commercial significance. Company sponsored research and development
expenditures were $577.6 million, $521.5 million and $425.9 million in
1993, 1992, and 1991, respectively. Research expenditures represented
approximately 13 percent of consolidated sales in 1993 and 1992 and 12
percent in 1991.
The Company's pharmaceutical research activities are concentrated in the
therapeutic areas of allergic and inflammatory disorders, infectious and
cardiovascular diseases, oncology and central nervous system disorders.
The Company also has substantial efforts directed toward biotechnology
and immunology.
While several pharmaceutical compounds are in varying stages of
development, it cannot be predicted when or if products will become
available for commercial sale.
Government Regulation
Most products manufactured or sold by the Company are subject to varying
degrees of governmental regulation in the countries in which operations
are conducted. In the United States, the drug industry has long been
subject to regulation by various federal, state and local agencies,
primarily as to product safety, efficacy, advertising and labeling.
Compliance with the broad regulatory powers of the Food and Drug
Administration (the "FDA") requires significant amounts of Company time,
testing and documentation, and corresponding costs to obtain clearance of
new drugs. Similar product regulations also apply in many international
markets.
In the United States, many of the Company's pharmaceutical products are
subject to competitive pricing as managed care groups, institutions and
the government seek price discounts. President Clinton's health care
reform proposal includes several measures that, if enacted, will have an
impact on operations of the Company. These measures include, but are not
limited to, the requirement of all health plans to offer prescription
drug coverage, the extension of Medicare coverage to include outpatient
drugs, and rebates on Medicare sales. In addition, prices of new drugs
would be reviewed with the Secretary of Health and Human Services, who
would be empowered to deny Medicare reimbursement for those drugs deemed
too expensive.
In most international markets, the Company operates in an environment of
government-mandated cost containment programs. In addition, several
markets have enacted across-the-board price reductions or directly
control selling prices as a further method of cost control. Currently, a
number of other international markets are reviewing the implementation of
additional programs to contain health care costs.
For additional information on prescription drug pricing, see
"Management's Discussion and Analysis of Operations and Financial
Condition" in the Company's 1993 Annual Report to Shareholders which is
incorporated herein by reference.
<PAGE>
Item 1. Business (continued)
The Company has and will continue to comply with the government
regulations of the countries in which operations are conducted.
Environment
To date, compliance with federal, state and local environmental
protection laws has not had a materially adverse effect on the Company.
The Company has and will continue to make necessary expenditures for
environmental protection. Worldwide capital expenditures during 1993
included approximately $31.7 million for environmental control purposes.
It is anticipated that continued compliance with such environmental
regulations will not significantly affect the Company's financial
condition, results of operations or its competitive position. For
additional information on environmental matters, see "Legal and
Environmental Matters" in the Notes to the Consolidated Financial
Statements in the Company's 1993 Annual Report to Shareholders which is
incorporated herein by reference.
Employees
There were approximately 21,600 people employed by the Company at
December 31, 1993.
Item 2. Properties
The Company's corporate headquarters are located in Madison, New Jersey.
Principal manufacturing facilities are located in Kenilworth and Union,
New Jersey, Des Plaines, Illinois, Miami, Florida, the Commonwealth of
Puerto Rico, Argentina, Australia, Belgium, Canada, Colombia, France,
Ireland, Italy, Japan, Mexico and Spain (pharmaceutical products);
Cleveland and Memphis, Tennessee (health care products). The Company's
principal research facilities are located in Kenilworth and Union, New
Jersey and Palo Alto, California (DNAX Research Institute).
The major portion of properties is owned by the Company. These
properties are maintained in good operating condition, and the
manufacturing plants have capacities considered appropriate to meet the
Company's needs.
Item 3. Legal Proceedings
Schering Corporation and White Laboratories, Inc., which are Company
subsidiaries, are defendants in approximately 95 lawsuits, involving
approximately 140 plaintiffs, arising out of the use of synthetic
estrogens by the mothers of the plaintiffs. In many of these lawsuits, a
substantial number of other drug companies are also defendants. The
female plaintiffs claim various injuries, including cancerous or
precancerous lesions of the vagina and cervix and a multiplicity of
pregnancy problems. A number of suits involve infants with birth defects
born to daughters whose mothers took the drug. The total amount claimed
against all defendants in all the suits amounts to approximately $750
million. While it is not possible to precisely predict the outcome of
these proceedings, it is management's opinion that the ultimate
liability, if any, will not have a material impact on the Company's
consolidated financial position or results of operations.
Item 3. Legal Proceedings (continued)
The Company has been named as a potentially responsible party ("PRP") by
the government under the Comprehensive Environmental Response,
Compensation and Liability Act, commonly known as Superfund. The Company
is also a party to a number of proceedings brought under Superfund.
These proceedings seek to require the owners or operators of facilities
that treated, stored or disposed of hazardous substances and transporters
and generators of such substances to clean up contaminated facilities or
reimburse the government for its clean up costs. The Company has been
named a PRP or a party to these proceedings as an alleged generator of
hazardous substances found at certain facilities. In each proceeding,
the government or private litigants allege that the Company is jointly
and severally liable for clean up costs. Although joint and several
liability is alleged, a company's share of clean up costs is frequently
determined on the basis of the type and quantity of hazardous substances
sent to a facility by the generator. However, this allocation process
varies greatly from facility to facility and can take years to complete.
The Company's potential share of clean up costs also depends on how many
other parties are involved in the proceedings, insurance coverage,
available indemnity contracts and contribution rights against other
parties. While it is not feasible to predict or determine the outcome of
these proceedings, in the opinion of management, such proceedings should
not ultimately result in a liability which would have a material adverse
effect on the Company's consolidated financial position or results of
operations.
The Company is a defendant in approximately sixty antitrust lawsuits
filed in several states and federal courts, including California,
Georgia, Illinois, Louisiana, Minnesota, New York, Pennsylvania, South
Carolina and Texas. More than fifty of these are class action lawsuits.
These actions were commenced in the second half of 1993 and in 1994 by
independent and chain pharmacies against the Company and other
pharmaceutical manufacturers, and in some instances, wholesalers and mail
order pharmacies, alleging (1) conspiracy to restrain trade by jointly
refusing to sell pharmaceuticals at discounted prices to plaintiffs,
and/or (2) price discrimination. The federal cases have all been
consolidated in the United States District Court for the Northern
District of Illinois for pretrial and discovery purposes. Plaintiffs
seek treble damages in an unspecified amount and an injunction against
the allegedly unlawful conduct. The Company has not conspired to
restrain trade and believes that its pricing practices have been and are
in compliance with the law. The Company will defend itself vigorously
against the claims in all these actions. While it is not feasible to
predict or determine the outcome of these actions, management believes
that such actions should not result in any liability which would have a
material adverse effect on the Company's consolidated financial position
or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.<PAGE>
Executive Officers of the Registrant
The following information regarding executive officers is included
herein in accordance with Part III, Item 10.
Officers are elected to serve for one year and until their successors
shall have been duly elected.
Name and Current Position Business Experience Age
Robert P. Luciano Present position 1986 60
Chairman and
Chief Executive Officer
Richard J. Kogan Present position 1986 52
President and
Chief Operating Officer
David E. Collins Present position 1989; President 59
Executive Vice President and Chief Operating Officer - Galen
and President Associates, Inc. 1988-1989
Schering-Plough
HealthCare Products
Donald R. Conklin Present position 1989; Executive 57
Executive Vice President Vice President - Pharmaceutical
and President Operations 1987-1989
Schering-Plough
Pharmaceuticals
Hugh A. D'Andrade Present position 1984 55
Executive Vice President
Administration
Harold R. Hiser, Jr. Present position 1986 62
Executive Vice President
Finance
Joseph C. Connors Present position 1992; Vice 45
Senior Vice President President and General Counsel
and General Counsel 1991; Staff Vice President and
Deputy General Counsel 1987-1991
Allan S. Kushen Present position 1981 64
Senior Vice President
Public Affairs
Daniel A. Nichols Present position 1991; Vice 53
Senior Vice President President Taxes 1983-1991
Taxes
<PAGE>
Executive Officers of the Registrant (continued)
Name and Current Position Business Experience Age
Gordon C. O'Brien Present position 1988 53
Senior Vice President
Human Resources
J. Martin Comey Present position 1991; Vice 59
Vice President President and Treasurer
Administration and Business 1979-1990
Development
John T. Fogarty Present position 1990; Staff 64
Vice President, Secretary Vice President and Secretary
and Associate General Counsel 1980-1989
Geraldine U. Foster Present position 1988 51
Vice President
Investor Relations
Domenic Guastadisegni Present position 1990; Staff 63
Vice President Vice President - Corporate Audits
Corporate Audits 1980-1989
Thomas H. Kelly Present position 1991; Partner, 44
Vice President and Deloitte & Touche 1982-1990
Controller
Robert S. Lyons Present Position 1991; Staff 53
Vice President Vice President - Corporate
Corporate Information Information Services 1988-1990
Services
Jack L. Wyszomierski Present position 1991; Staff 38
Vice President and Vice President - Planning
Treasurer and Business Development
1987-1990
<PAGE>
Part II
Item 5.Market for Registrant's Common Equity and Related Stockholder
Matters
The Common Share Dividends and Market Data as set forth in the Company's
1993 Annual Report to Shareholders are incorporated herein by reference.
Item 6.Selected Financial Data
The Six-Year Selected Financial and Statistical Data as set forth in the
Company's 1993 Annual Report to Shareholders is incorporated herein by
reference.
Item 7.Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Operations and Financial
Condition as set forth in the Company's 1993 Annual Report to
Shareholders is incorporated herein by reference.
Item 8.Financial Statements and Supplementary Data
The Consolidated Balance Sheets as of December 31, 1993 and 1992, and the
related Statements of Consolidated Income, Consolidated Retained Earnings
and Consolidated Cash Flows for each of the three years in the period
ended December 31, 1993, Notes to Consolidated Financial Statements, the
Independent Auditors' Report of Deloitte & Touche and Quarterly Results
of Operations, as set forth in the Company's 1993 Annual Report to
Shareholders, are incorporated herein by reference.
Item 9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
Part III
Item 10.Directors and Executive Officers of the Registrant
The information concerning directors and nominees for directors as set
forth in the Company's Proxy Statement for the annual meeting of share-
holders on April 26, 1994 is incorporated herein by reference.
Information required as to executive officers is included in Part I of
this filing under the caption "Executive Officers of the Registrant."
Item 11.Executive Compensation
Executive compensation information as set forth in the Company's Proxy
Statement for the annual meeting of shareholders on April 26, 1994 is
incorporated herein by reference.<PAGE>
Item 12.Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners
and management as set forth in the Company's Proxy Statement for the
annual meeting of shareholders on April 26, 1994 is incorporated herein
by reference.
Item 13.Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions as
set forth in the Company's Proxy Statement for the annual meeting of
shareholders on April 26, 1994 is incorporated herein by reference.
Part IV
Item 14.Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1.Financial Statements
The following consolidated financial statements and independent auditors'
report, included in the Company's 1993 Annual Report to Shareholders, are
incorporated herein by reference.
Statements of Consolidated Income for the
Years Ended December 31, 1993, 1992 and 1991
Statements of Consolidated Retained Earnings for
the Years Ended December 31, 1993, 1992 and 1991
Statements of Consolidated Cash Flows for the Years
Ended December 31, 1993, 1992 and 1991
Consolidated Balance Sheets at December 31, 1993 and 1992
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) 2.Financial Statement Schedules
Page in
Form 10-K
Independent Auditors' Report . . . . . . . . . . . . 18
Schedule I - Marketable Securities - Other
Investments. . . . . . . . . . . . . . . . . . . . 19
Schedule V - Property, Plant and Equipment . . . . . 20
Schedule VI - Accumulated Depreciation of
Property, Plant and Equipment. . . . . . . . . . . 21
Schedule VIII - Valuation and Qualifying Accounts. . 22
Schedule IX - Short-term Borrowings. . . . . . . . . 23
Schedule X - Supplementary Income Statement
Information. . . . . . . . . . . . . . . . . . . . 24<PAGE>
Item 14. (continued)
(a) 2.Financial Statement Schedules (continued)
Schedules not included have been omitted because they are not applicable
or not required or because the required information is set forth in the
financial statements or the notes thereto. Columns omitted from
schedules filed have been omitted because the information is not
applicable.
Financial statements of fifty percent or less owned companies accounted
for by the equity method have been omitted because, considered
individually or in the aggregate, they do not constitute a significant
subsidiary.
(a) 3. Exhibits
Exhibit Method
Number Description of Filing
3(a) A complete copy of the Certificate Incorporated by
of Incorporation as amended and reference to Exhibit
currently in effect. 3(a) to the Company's
Annual Report for 1989
on Form 10-K
3(b) A complete copy of the By-Laws Incorporated by
as amended and currently in effect. reference to Exhibit
4(b) to the Company's
Form S-8 (No. 33-
19013)
4(a) Rights Agreement between the Incorporated by
Company and The Bank of New York reference to Exhibit 4
dated July 25, 1989. to the Company's
Quarterly Report for
the period ended
June 30, 1989 on
Form 10-Q
4(b) Indenture dated as of November 1, Incorporated by
1982 between the Company and The reference to Exhibit
Chase Manhattan Bank, N.A. as 4(a) to the Company's
Trustee. Registration Statement
on Form S-3, File No.
2-80012
4(c) Supplemental Indenture No. 1 Incorporated by
dated as of November 1, 1991 reference to Exhibit 4.1
to Indenture dated as of to the Company's Report
November 1, 1982. on Form 8-K dated
November 20, 1991
4(d) LYNX Equity Unit Agreement Incorporated by
reference to Exhibit
10.1 to the Company's
Report on Form 8-K dated
October 1, 1991
<PAGE>
Item 14. (continued)
(a) 3. Exhibits (continued)
Exhibit Method
Number Description of Filing
4(e) LYNX Equity Unit Guarantee Incorporated by
Agreement reference to Exhibit
10.1 to the Company's
Report on Form 8-K dated
October 1, 1991
10(a) The Company's Executive Incentive Plan incorporated by
Plan (as amended) and Trust related reference to Exhibit
thereto 10(a) to the Company's
Annual Report for 1991
on Form 10-K. Trust
Agreement incorporated
by reference to Exhibit
10(a) to the Company's
Annual Report for 1988
on Form 10-K
10(b) The Company's 1983 Stock Incentive Incorporated by
Plan (as amended) reference to Exhibit
10(c) to the Company's
Annual Report for 1988
on Form 10-K
10(c) The Company's 1987 Stock Incentive Incorporated by
Plan (as amended) reference to Exhibit
10(d) to the Company's
Annual Report for 1990
on Form 10-K
10(d) The Company's 1992 Stock Incentive Incorporated by
Plan (as amended) reference to Exhibit
10(d) to the Company's
Annual Report for 1992
on Form 10-K
10(e)(i) Employment agreement between the Incorporated by
Company and Robert P. Luciano reference to Exhibit
10(e)(i) to the
Company's Annual Report
for 1989 on Form 10-K
10(e)(ii) Employment agreement between the Incorporated by
Company and Richard J. Kogan reference to Exhibit
10(e)(ii) to the
Company's Annual Report
for 1989 on Form 10-K
10(e)(iii) Employment agreement between the Incorporated by
Company and David E. Collins reference to Exhibit
10(e)(iv) to the
Company's Annual Report
for 1989 on Form 10-K
<PAGE>
Item 14. (continued)
(a) 3. Exhibits (continued)
Exhibit Method
Number Description of Filing
10(e) Agreements between the Company and Incorporated by
(iv) certain executive officers related reference to Exhibit
to termination payments 10(e)(v) to the
Company's Annual Report
for 1989 on Form 10-K
10(f) Directors Deferred Compensation Plan incorporated by
Plan and Trust related thereto reference to Exhibit 10
(f) to the Company's
Annual Report for 1991
on Form 10-K. Trust
Agreement incorporated
by reference to Exhibit
10(a) to the Company's
Annual Report for 1988
on Form 10-K
10(g) Pension Plan for Directors Plan incorporated by
and Trust related thereto reference to Exhibit
10(g) to the Company's
Annual Report for 1987
on Form 10-K; Trust
Agreement incorporated
by reference to Exhibit
10(g) to the Company's
Annual Report for 1988
on Form 10-K; Amendment
to Trust Agreement filed
with this document
10(h) Supplemental Executive Retirement Plan incorporated by
Plan and Trust related thereto reference to Exhibit
10(h) to the Company's
Annual Report for 1987
on Form 10-K; Trust
Agreement incorporated
by reference to Exhibit
10(g) to the Company's
Annual Report for 1988
on Form 10-K; Amendment
to Trust Agreement filed
with this document in
10(g) above
10(i) Directors Stock Award Plan Incorporated by
reference to Exhibit
10(i) to the Company's
Annual Report for 1988
on Form 10-K
11 Computation of Earnings Per Filed with this document
Common Share
Item 14. (continued)
(a) 3. Exhibits (continued)
Exhibit Method
Number Description of Filing
12 Computation of Ratio of Filed with this document
Earnings to Fixed charges
13 The Financial Section of the Filed with this document
Company's 1993 Annual Report
to Shareholders. With the
exception of those portions of
said Annual Report which are
specifically incorporated by
reference in this Form 10-K, such
report shall not be deemed filed
as part of this Form 10-K
22 Subsidiaries of the registrant Filed with this document
24 Consents of experts and counsel Filed with this document
25 Power of attorney Filed with this document
All other exhibits are not applicable. Copies of above exhibits
will be furnished upon request.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Schering-Plough Corporation
(Registrant)
Date March 4, 1994 By /s/ Thomas H. Kelly
Thomas H. Kelly
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
By * By *
Robert P. Luciano Regina E. Herzlinger
Chairman and Chief Executive Director
Officer and Director
By * By *
Richard J. Kogan H. Barclay Morley
President and Chief Operating Director
Officer and Director
By * By *
Harold R. Hiser, Jr. Richard de J. Osborne
Executive Vice President - Finance Director
and Principal Financial Officer
By * By *
Thomas H. Kelly William A. Schreyer
Vice President and Controller Director
and Principal Accounting Officer
By * By *
Hans W. Becherer Robert F. W. van Oordt
Director Director
By * By *
Hugh A. D'Andrade R. J. Ventres
Director Director
By * By *
Virginia A. Dwyer James Wood
Director Director
By *
David C. Garfield
Director
*By /s/ Thomas H. Kelly Date March 4, 1994
Thomas H. Kelly
Attorney-in-fact
<PAGE>
INDEPENDENT AUDITORS' REPORT
Schering-Plough Corporation:
We have audited the consolidated balance sheets of Schering-Plough
Corporation and subsidiaries as of December 31, 1993 and 1992 and
the related statements of consolidated income, retained earnings and
cash flows for each of the three years in the period ended December
31, 1993, and have issued our report thereon dated February 15,
1994; such financial statements and report are included in your 1993
Annual Report to Shareholders and are incorporated herein by
reference. Our audits also included the financial statement
schedules of Schering-Plough Corporation and subsidiaries, listed in
Item 14. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express our
opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/DELOITTE & TOUCHE
Parsippany, New Jersey
February 15, 1994
<PAGE>
<TABLE>
Schedule I
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1993
(Dollars in millions)
<CAPTION>
Name of Issuer Amount at Which Market Value
or Title of Principal Carried in at Balance
Each Group Amount Balance Sheet Sheet Date
<S> <C> <C> <C>
Short-Term Investments:
Santander Federal Savings
Bank certificates
of deposit (a) $100.0 $100.2 $100.2
Municipal obligations 85.0 92.0 92.0
Other investments 15.0 15.0 15.0
Total $200.0 $207.2 $207.2
<FN>
(a) Collateralized by United States government obligations.
</TABLE>
<PAGE>
SCHEDULE V
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION> (Dollars in millions)
BALANCE AT BALANCE
BEGINNING ADDITIONS RETIREMENTS TRANSLATION AT END
CLASSIFICATION OF YEAR AT COST OR SALES ADJUSTMENTS OF YEAR
<S> <C> <C> <C> <C> <C>
1993
Land $ 47.5 $ - $ (.2) $ (.2) $ 47.1
Buildings and
improvements 978.0 402.3 (56.2) (4.3) 1,319.8
Equipment 1,007.2 182.2 (35.8) (7.0) 1,146.6
Construction in
progress 546.8 (219.3) (1.6) (.5) 325.4
TOTAL $2,579.5 $ 365.2 $ (93.8) $(12.0) $2,838.9
1992
Land $ 44.2 $ 4.9 $ (1.2) $ (.4) $ 47.5
Buildings and
improvements 922.3 77.3 (13.3) (8.3) 978.0
Equipment 952.3 120.7 (54.4) (11.4) 1,007.2
Construction in
progress 349.2 200.3(a) (.5) (2.2) 546.8
TOTAL $2,268.0 $ 403.2 $ (69.4) $(22.3) $2,579.5
1991
Land $ 43.2 $ .9 $ - $ .1 $ 44.2
Buildings and
improvements 884.5 51.1 (14.0) .7 922.3
Equipment 887.7 100.8 (36.6) .4 952.3
Construction in
progress 165.1 186.6(a) (2.6) .1 349.2
TOTAL $1,980.5 $ 339.4 $ (53.2) $ 1.3 $2,268.0
<FN>
(a) Additions to construction in progress are net of transfers to other plant and
equipment classifications for those construction projects completed during the year.
Depreciation is provided over the estimated useful lives of the assets, generally by use
of the straight-line method. Service lives used in the determination of depreciation
expense are as follows: buildings and improvements - 20 to 50 years; manufacturing
equipment - 10 to 15 years; furniture and fixtures (equipment) - 6 to 12 years; and
automotive equipment - 3 to 10 years.
</TABLE>
PAGE
<PAGE>
SCHEDULE VI
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in millions)
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND RETIREMENTS TRANSLATION AT END
DESCRIPTION OF YEAR EXPENSES OR SALES ADJUSTMENTS OF YEAR
<S> <C> <C> <C> <C> <C>
1993
Buildings and
improvements $ 338.7 $ 35.3 $ (51.0) $ (1.4) $ 321.6
Equipment 492.3 91.6 (31.4) (2.9) 549.6
TOTAL $ 831.0 $ 126.9 $ (82.4) $ (4.3) $ 871.2
1992
Buildings and
improvements $ 323.2 $ 36.2 $ (17.6) $ (3.1) $ 338.7
Equipment 454.4 83.6 (40.6) (5.1) 492.3
TOTAL $ 777.6 $ 119.8 $ (58.2) $ (8.2) $ 831.0
1991
Buildings and
improvements $ 293.9 $ 39.1 $ (10.3) $ .5 $ 323.2
Equipment 402.2 75.7 (23.9) .4 454.4
TOTAL $ 696.1 $ 114.8 $ (34.2) $ .9 $ 777.6
_______________________________________________________________________________
/TABLE
<PAGE>
<TABLE>
SCHEDULE VIII SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(Dollars in millions)
<CAPTION>
Valuation and qualifying accounts deducted from assets to which they apply:
Allowances for accounts receivable:
RESERVE RESERVE RESERVE
FOR DOUBTFUL FOR CASH FOR CLAIMS
ACCOUNTS DISCOUNTS AND OTHER TOTAL
<S> <C> <C> <C> <C>
1993
Balance at beginning of year $ 32.5 $ 9.0 $ 1.8 $ 43.3
Additions:
Charged to costs and expenses 5.1 54.3 16.1 75.5
Total 37.6 63.3 17.9 118.8
Translation adjustment (1.1) (.1) - (1.2)
Deductions from reserves (6.0) (55.3) (11.4) (72.7)
Balance at end of year $ 30.5 $ 7.9 $ 6.5 $ 44.9
1992
Balance at beginning of year $ 33.4 $ 6.8 $ 4.3 $ 44.5
Additions:
Charged to costs and expenses 20.5 50.9 5.0 76.4
Total 53.9 57.7 9.3 120.9
Translation adjustment (1.6) (.1) (.1) (1.8)
Deductions from reserves (19.8) (48.6) (7.4) (75.8)
Balance at end of year $ 32.5 $ 9.0 $ 1.8 $ 43.3
1991
Balance at beginning of year $ 39.1 $ 5.9 $ 2.6 $ 47.6
Additions:
Charged to costs and expenses 4.6 46.2 10.3 61.1
Total 43.7 52.1 12.9 108.7
Translation adjustment (.1) (.1) - (.2)
Deductions from reserves (10.2) (45.2) (8.6) (64.0)
Balance at end of year $ 33.4 $ 6.8 $ 4.3 $44.5
/TABLE
<PAGE>
<TABLE> SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
SCHEDULE IX SHORT-TERM BORROWINGS (a)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in millions)
<CAPTION>
WEIGHTED MAXIMUM AVERAGE WEIGHTED
CATEGORY OF AVERAGE AMOUNT AMOUNT AVERAGE
AGGREGATE INTEREST OUTSTANDING OUTSTANDING INTEREST RATE
SHORT-TERM BALANCE AT RATE AT DURING THE DURING THE DURING THE
BORROWINGS DEC. 31 DEC. 31 YEAR YEAR (b) YEAR (c)
<S> <C> <C> <C> <C> <C>
1993
Commercial paper $961.4 3.3 % $1,025.9 $996.1 3.1 %
Bank loans and
notes payable $112.0 5.7 % $ 202.9 $163.0 7.8 %
1992
Commercial paper $715.8 3.4 % $1,153.0 $840.2 3.7 %
Bank loans and
notes payable $229.6 9.8 % $ 345.5 $153.1 9.0 %
1991
Commercial paper $396.0 4.8 % $ 692.3 $559.7 6.1 %
Bank loans and
notes payable $209.6 8.5 % $ 245.8 $225.9 9.3 %
____________________________________________________________________________________
<FN>
(a)Excludes the current portion of long-term debt.
(b)For commercial paper, represents average of daily balances outstanding; for
bank loans and notes payable, represents average of quarterly balances outstanding.
(c)Computed by dividing interest costs for the year by the average balance
outstanding during the year.
/TABLE
<PAGE>
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in millions)
<CAPTION>
CHARGED TO
COSTS AND EXPENSES
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $ 84.1 $ 77.2 $ 71.4
Royalties 101.9 92.9 45.3
Advertising costs 317.1 308.4 289.8
</TABLE>
________________________________________________________________
Exhibit 10(g)
SCHERING-PLOUGH CORPORATION
RESOLVED, That the Trust Agreement dated March 31, 1987 by
and among Schering-Plough Corporation, The Chase Manhattan
Bank (National Association) as Trustee, and the Wyatt
Company, as Trustee's Agent, be and it hereby is amended,
effective October 1, 1993, as follows:
1. By deleting the fourth sentence of Section 2.1 and
substituting therefor the following:
"If the Trust Department of the Trustee receives written
allegations of an event of insolvency from a third
party, the Trustee shall request that the Company's
independent auditors determine whether the Company is
insolvent; the Trustee may conclusively rely on written
certification of solvency or insolvency received from
such auditors."
2. By deleting the phrase "so long as said firm continues
to be the Company's independent consulting actuary" from
the second sentence of Section 3.1.
3. By deleting from the last sentence of Section 3.1 the
phrase "actions or omissions of said Trustee's Agent and
shall" and substituting therefor the following:
"liability, loss, suit or expense (including attorney's
fees) in connection with or arising out of actions or
omissions of said Trustee's Agent (including any
direction to or failure to direct the Trustee) and
shall"
4. By deleting from Section 4.3 the phrase "otherwise
administering the Fund, other than by its negligence or
willful misconduct" and substituting therefor the
following:
"otherwise administering the Fund or carrying out its
duties hereunder, except to the extent that such
liabilities or expenses arise from actions constituting
gross negligence or willful misconduct by the Trustee
under this Agreement."
5. By deleting from Section 5.1 the phrase "and any
applicable Federal or state laws, rules or regulations"
and substituting therefor the phrase "with respect to
the Trustee's responsibilities under this Agreement."
6. By deleting from the sixth sentence of Section 5.3 the
phrase "one year" and substituting therefor the phrase
"fifteen months."
7. By adding the following language to the seventh sentence
of Section 5.3:
", or solely as a result of the performance by the
Trustee or its officers, employees or agents, of any
custodial, reporting, recording or bookkeeping functions
with respect to any such investment account, except to
the extent that such performance constituted gross
negligence or willful misconduct on the part of the
Trustee."
8. By deleting from the first sentence of Section 7.2 the
phrase "(or, in the Company's or Trustee's discretion,
at more frequent intervals)" and substituting therefor
the phrase "(or, as agreed to by the Company and
Trustee)."
9. By deleting the words "New York" and substituting
therefor the word "Illinois" in Section 11.1.
10. By adding to the second sentence of Section 11.8 the
phrase "from the Company or the Trustee's Agent
indicating that an amount to the credit of a
Participant's account is subject to Federal income tax."
FURTHER RESOLVED That the Officers of the Corporation be
and each of them hereby is authorized, in the name and
on behalf of the Corporation to execute and deliver, or
cause to be executed and delivered, all such agreements
and documents, and to do or cause to be done all such
other things as may in their discretion be necessary or
desirable, to carry out the intent and purposes of the
foregoing resolution.
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except per share figures)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Earnings per Common Share, As Reported:
Net Income Applicable
to Common Shares . . . . . . . . . . . $ 730.8 $ 720.4 $ 645.6
Average Number of Common Shares
Outstanding. . . . . . . . . . . . . 195.1 200.2 214.5
Earnings Per Common Share. . . . . . . $ 3.75 $ 3.60 $ 3.01
Earnings per Common Share, Assuming
Full Dilution: (a)
Average Number of Common Shares
Outstanding . . . . . . . . . . . . 195.1 200.2 214.5
Shares Contingently Issuable for
Stock Incentive Plans . . . . . . . 2.2 2.8 3.1
Average Number of Common Shares
and Common Share Equivalents
Outstanding . . . . . . . . . . . . 197.3 203.0 217.6
Earnings Per Common Share Assuming
Full Dilution . . . . . . . . . . . $ 3.70 $ 3.55 $ 2.97
<FN>
(a) This calculation is submitted in accordance with the regulations of the
Securities
and Exchange Commission although not required by APB Opinion No. 15 because it
results in dilution of less than 3%.
</TABLE>
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Income Before Income Taxes . . . . . $1,078.4 $953.9 $860.8 $768.9 $645.6
Add : Fixed Charges
Interest Expense . . . . . . . . . 48.2 55.4 65.3 82.4 95.4
1/3 Rentals. . . . . . . . . . . . 9.0 8.5 7.9 7.7 6.6
Capitalized Interest . . . . . . . 12.7 15.8 11.8 6.3 4.7
Total Fixed Charges. . . . . . . 69.9 79.7 85.0 96.4 106.7
Less: Capitalized Interest . . . . . 12.7 15.8 11.8 6.3 4.7
Add : Amortization of
Capitalized Interest. . . . . . . . 3.5 4.1 4.0 3.8 3.7
Earnings Before Income Taxes and
Fixed Charges (other than
Capitalized Interest) . . . . . . . $1,139.1 $1,021.9 $ 938.0 $862.8 $751.3
Ratio of Earnings to Fixed Charges . 16.3 12.8 11.0 9.0 7.0
<FN>
"Earnings" consist of income before income taxes and fixed charges (other than capitalized interest). "Fixed charges" consist of in
believes to be a reasonable estimate of an interest factor on leases.
</TABLE>
Exhibit 13
Financial Section of the Company's 1993 Annual Report to Shareholders
<PAGE>
Management's Discussion and Analysis of Operations and Financial
Condition
Sales
Consolidated sales in 1993 totaled $4.34 billion, an increase of
$285.6 million, or 7 percent, over 1992. Volume growth
contributed 7 percent and price increases added 2 percent, while
unfavorable foreign exchange of 2 percent moderated the
comparison. This performance reflects sales gains for INTRON A,
the Company's alpha interferon anticancer and antiviral agent, to
more than $570 million, and the domestic introduction of
CLARITIN, a once-daily nonsedating antihistamine, which recorded
worldwide sales of $295 million.
Consolidated 1992 sales of $4.06 billion grew $440.1 million, or
12 percent, over 1991, reflecting volume growth of 9 percent,
price increases of 2 percent and favorable foreign exchange of 1
percent. This growth resulted primarily from significant INTRON
A sales gains, due to the March 1992 approval for treatment of
chronic hepatitis C in Japan, and the July 1992 approval for
treatment of chronic hepatitis B in the United States.
Worldwide 1993 pharmaceutical sales of $3.64 billion advanced
$281.2 million, or 8 percent, over 1992, as volume growth of 8
percent and price increases of 2 percent were partially offset by
unfavorable foreign exchange rate fluctuations of 2 percent.
Worldwide sales of pharmaceutical products in 1992 increased
$464.4 million, or 16 percent, over 1991, reflecting volume
growth of 12 percent, price increases of 2 percent and favorable
foreign exchange of 2 percent.
Domestic prescription pharmaceutical product sales rose 10
percent in 1993. Sales of respiratory products increased 10
percent, led by strong introductory sales of CLARITIN, following
Food and Drug Administration (FDA) approval in April 1993. The
respiratory product growth also reflects gains for the VANCENASE
line of allergy products.
The sales advance for respiratory products was mitigated by a 17
percent decline in sales of the PROVENTIL (albuterol) line of
asthma products to $353 million. The PROVENTIL formulations of
solution, syrup and tablets have been subject to generic
competition. In January 1994, the FDA issued bioequivalence
standards for generic albuterol metered dose inhalers, which may
result in generic entries late in the year. The introduction of
a generic inhaler will further negatively affect sales and
profitability of PROVENTIL. Respiratory growth was also
moderated by lower sales of THEO-DUR, a sustained-action
theophylline, reflecting continued shrinkage of the theophylline
market, increased generic usage and price reductions.
Domestic sales of cardiovascular products rose 20 percent,
reflecting growth for K-DUR potassium supplements and NITRO-DUR
transdermal nitroglycerin patches, as well as the August 1993 FDA
approval of IMDUR, an oral nitrate for angina. Sales of anti-
infective and anticancer products grew 13 percent, due to gains
for EULEXIN, a therapy for advanced prostate cancer, and INTRON
A.
Sales of domestic vision care products declined 15 percent, due
to lower sales of colored lenses and the sale of the contact lens
solutions business in May 1992. Excluding the contact lens
solutions business, vision care sales were down 8 percent
compared with 1992.
Domestic prescription pharmaceutical sales in 1992 increased
$92.4 million, or 7 percent, over 1991, reflecting advances in
the anti-infective and anticancer, respiratory, and
cardiovascular product groups.
In 1993, international sales of pharmaceutical products grew
$163.4 million, or 9 percent. Excluding the impact of foreign
currency exchange rate fluctuations, sales would have increased
approximately 13 percent. The higher sales reflect a 16 percent
advance in anti-infective and anticancer products, due to
continued strong sales for INTRON A in Japan resulting from the
March 1992 approval for the treatment of chronic hepatitis C.
Sales of INTRON A in Japan approximated $300 million in 1993, but
are expected to moderate in 1994 due to an anticipated
government-mandated price reduction. Anti-infective and
anticancer sales were also aided by growth of EULEXIN in major
European markets, and introductory sales of CEDAX, a third-
generation cephalosporin.
International sales of respiratory products grew 18 percent, due
to worldwide gains for CLARITIN, and higher sales of asthma and
allergy products in Japan. Sales of cardiovascular products rose
22 percent, reflecting increases for NITRO-DUR and a calcium
channel blocker licensed from AB Astra.
Also contributing to the overall international sales growth were
gains for LOSEC, an anti-ulcer treatment licensed from AB Astra,
and higher sales of vision care products following the launch of
FRESHLOOK disposable lenses in Canada and major European markets.
In 1992, international pharmaceutical sales, excluding foreign
exchange, increased $346.5 million, or 24 percent, over 1991, led
by significant gains for INTRON A in Japan, coupled with
respiratory and cardiovascular product growth.
Sales of health care products in 1993 increased $4.4 million, or
1 percent, over 1992, as price increases of 2 percent were
moderated by volume declines of 1 percent. Foot care sales rose
12 percent, primarily due to higher sales of the upgraded and
repackaged DR. SCHOLL'S insoles line. Sun care sales advanced 12
percent following the introduction of COPPERTONE KIDS sunblock
and SHADE UVAGUARD, a broad-spectrum sunscreen that protects
against UVA and UVB rays. Over-the-counter (OTC) product sales
declined 10 percent, principally the result of lower sales of
female health products, caused by the intensely competitive
nature of the vaginal antifungal category. OTC sales were
further moderated by reduced sales of allergy/cold products, the<PAGE>
result of pressures exerted by the 1993 introductions of several
competitive brands.
In 1992, health care product sales decreased $24.3 million, or 3
percent, reflecting volume declines of 6 percent, tempered by
price increases of 3 percent. The sales shortfall was largely
due to lower sales of female health products.
Income Before Income Taxes
Income before income taxes totaled $1,078.4 million in 1993, an
increase of $124.5 million, or 13 percent, over 1992. In 1992,
income before income taxes of $953.9 million grew $93.1 million,
or 11 percent, over the $860.8 million in 1991.
<TABLE>
Summary of Costs and Expenses:
(Dollars in millions)
<CAPTION>
% Increase/(Decrease)
1993 1992 1991 1993/92 1992/91
<S> <C> <C> <C> <C> <C>
Cost of sales . . . . . . $ 908.8 $ 900.6 $ 816.4 1 % 10 %
% of sales . . . . . . . 20.9 % 22.2 % 22.6 %
Selling, general and
administrative . . . . . $1,747.4 $1,629.8 $1,503.5 7 % 8 %
% of sales . . . . . . . 40.3 % 40.2 % 41.6 %
Research and development. $ 577.6 $ 521.5 $ 425.9 11 % 22 %
% of sales . . . . . . . 13.3 % 12.9 % 11.8 %
Other expense, net $ 29.1 $ 49.9 $ 9.0 (42)% -
% of sales . . . . . . . .7 % 1.2 % .2 %
________________________________________________________________________________________
</TABLE>
Cost of sales as a percentage of sales declined to 20.9 percent
in 1993 from 22.2 percent in 1992 and 22.6 percent in 1991. The
improvements reflect a change in sales mix to higher margin
ethical pharmaceutical products in several international markets,
and the 1993 launch of CLARITIN in the United States. Cost of
sales percentages also improved as a result of continuing cost
containment efforts.
Selling, general and administrative expenses represented 40.3
percent of sales in 1993, 40.2 percent in 1992 and 41.6 percent
in 1991. The increase as a percent of sales in 1993 from 1992
reflects higher promotional and selling expenses for the launch
of CLARITIN in the United States. The decline as a percent of
sales between 1992 and 1991 was due to lower promotional spending
following the 1991 launch of GYNE-LOTRIMIN, an antifungal for
vaginal yeast infections.
Research and development expenditures increased $56.1 million, or
11 percent, in 1993, representing 13.3 percent of sales, compared
with 12.9 percent of sales in 1992 and 11.8 percent in 1991.
These increases reflect the Company's ongoing commitment to
provide the resources necessary to ensure a steady flow of
innovative products and line extensions. In 1993, research and
development spending dedicated to the discovery and development
of pharmaceutical products increased 13 percent over 1992, and
represented 15.1 percent of total pharmaceutical sales compared
with 14.4 percent in 1992.
Other expense, net consists of interest income, interest expense,
foreign exchange gains and losses, and non-recurring items. In
1993, the net expense declined $20.8 million, reflecting
favorable foreign exchange in Japan and Ireland, and reduced
interest expense, moderated by lower interest income. The 1992
change resulted from lower interest income and higher foreign
exchange losses, tempered by lower interest expense.
Income Taxes
The Company's effective tax rate was 23.5 percent in 1993, 24.5
percent in 1992 and 25.0 percent in 1991. The effective tax rate
for each period was lower than the U.S. statutory income tax
rate, primarily due to tax incentives in Puerto Rico and lower
foreign tax rates. For additional information, see "Income
Taxes" in the Notes to Consolidated Financial Statements on page
31.
The Omnibus Budget Reconciliation Act of 1993 (the "Act")
increases the U.S. corporate tax rate from 34 percent to 35
percent, restricts deductibility of certain operating expenses,
reduces the tax benefit generated from operations in Puerto Rico
and, in certain circumstances, taxes a portion of undistributed
earnings of foreign subsidiaries. Management estimates that the
primary impact on the Company is the reduction in the benefit
arising from its operations in Puerto Rico. This reduction in
benefit is to be phased-in over a five-year period. Management
estimates the Act will unfavorably impact the effective tax rate
by 1.5 percentage points in 1994, and an additional 1.5 to 2.5
percentage points by 1996.
Accounting Changes And Extraordinary Item
During the first quarter of 1993, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." In
connection with this adoption, the Company fully funded its
initial accumulated benefit obligation. The cumulative effect of
adopting SFAS No. 106 was a one-time, after-tax charge of $94.2
million, or $.48 per common share. For additional information on
this transaction, see "Other Post-retirement Benefits" in the
Notes to Consolidated Financial Statements on page 29.
During the first quarter of 1992, the Company adopted SFAS No.
109, "Accounting for Income Taxes." The cumulative effect of
implementing SFAS No. 109 was a one-time gain of $27.1 million,
or $.13 per common share. Also in this quarter, the Company
effected an in-substance defeasance of its zero-coupon debt,
which resulted in an extraordinary loss of $26.7 million, or $.13
per common share. For additional information on these
transactions, see "Income Taxes" and "Borrowings" in the Notes to
Consolidated Financial Statements on pages 31 and 26,
respectively.
Net Income
Income in 1993, excluding the extraordinary item and the
cumulative effect of accounting changes, totaled $825.0 million,
an increase of $105.0 million, or 15 percent, over 1992. Income
in 1992 exceeded 1991 by $74.4 million, or 12 percent, when
excluding the extraordinary item and the cumulative effect of
accounting changes. Differences in year-to-year exchange rates
reduced comparative growth in income in 1993 and 1992. After
eliminating these differences, income would have increased
approximately 18 percent in 1993 and 13 percent in 1992. Net
income in 1993, after the extraordinary item and accounting
changes, totaled $730.8 million, an increase of $10.4 million, or
1 percent, over 1992.
Earnings Per Common Share
Earnings per common share for the years 1991 through 1993 were
as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Earnings per common share before the
extraordinary item and accounting
changes $ 4.23 $ 3.60 $ 3.01
Extraordinary item - (.13) -
Accounting changes (.48) .13 -
Earnings per common share $ 3.75 $ 3.60 $ 3.01
Average shares outstanding
(in millions) 195.1 200.2 214.5
</TABLE>
Earnings per common share before the extraordinary item and
accounting changes rose 18 percent in 1993 and 20 percent in
1992. Earnings per common share increased at a faster rate than
income due to the Company's share repurchase programs.
Fluctuations in year-to-year exchange rates have reduced
comparative growth in earnings per common share. Excluding the
impact of these exchange differences, earnings per common share
before the extraordinary item and accounting changes would have
advanced approximately 21 percent in both 1993 and 1992.
During the first quarter of 1993, the Company completed a $1.0
billion share repurchase program initiated in 1990, with the
purchase of .5 million common shares at a cost of $31.6 million.
This particular program also included the purchase of 3.1 million
common shares at a cost of $171.0 million in 1992 and the
purchase of 11.0 million shares at a cost of $547.4 million in
1991. In February 1993, the Board of Directors authorized the
purchase of up to an additional $500 million of the Company's
common shares. At year-end 1993, the program was approximately
77 percent complete with the purchase of 6.4 million common
shares at a cost of $386.7 million. During the first quarter of
1994, the Company expects to obtain medium-term financing to
complete its $500 million share repurchase program.
The Company also completed a debt-for-shares exchange transaction
during the fourth quarter of 1991 in which 10.0 million of the
Company's common shares were acquired and retired. Additional
information about this transaction is included in "Shareholders'
Equity" in the Notes to Consolidated Financial Statements on page
30.
Environmental Matters
The Company has obligations for environmental safety and clean-up
under various state, local and federal laws, including the
Comprehensive Environmental Response, Compensation and Liability
Act, commonly known as Superfund. Based on information currently
available, environmental expenditures have not had, and are not
anticipated to have, a material impact on the Company's financial
position, results of operations, liquidity or capital resources.
Additional Factors Influencing Operations
Prescription Drug Pricing
In the United States, many of the Company's pharmaceutical
products are subject to competitive pricing as managed care
groups, institutions and the government seek price discounts.
For the past three years, the Company held average net
prescription price increases in the United States to below the
increase in the Consumer Price Index (CPI). For 1994, the
Company once again expects average U.S. net prescription price
increases to be at or below the increase in the CPI.
The Clinton health care reform proposal includes several measures
that, if enacted, will have an impact on operations of the
Company. These measures include, but are not limited to, the
requirement of all health plans to offer prescription drug
coverage, the extension of Medicare coverage to include
outpatient drugs, and rebates on Medicare sales. In addition,
prices of new drugs would be reviewed with the Secretary of
Health and Human Services, who would be empowered to deny
Medicare reimbursement for those drugs deemed too expensive.
In most international markets, the Company operates in an
environment of government-mandated cost containment programs.
Sales in Italy and Germany declined in 1993 as a result of
restrictions placed on physician prescription levels and patient
reimbursements, and greater generic usage. In addition, several
markets have enacted across-the-board price reductions as a
further method of cost control. Currently, a number of other
international markets are reviewing the implementation of
additional programs to contain health care costs.
Because the Company is unable to predict the final form and
timing of various domestic and international governmental health
care reform proposals, their effect on future operations and cash
flows cannot be reasonably estimated.
Foreign Exchange
Sales outside of the United States represented 47 percent of
total sales in both 1993 and 1992. Fluctuating foreign exchange
rates have affected sales and earnings, as previously discussed.
Sales and earnings growth in 1994 will be negatively impacted if
the U.S. dollar continues to strengthen. The Company continues
to implement selective hedging strategies to mitigate the
possible adverse effects of additional 1994 exchange rate
changes.
Inflation
Inflation has had only a minimal impact on operations in recent
years.
Liquidity and Financial Resources
In 1993, total cash and investments, which includes cash and cash
equivalents and short- and long-term investments, decreased
$108.7 million, and total debt increased $128.2 million. This
change increased the Company's net debt position (debt less cash
and investments) to $824.3 million. While operations provided
$962.1 million in cash, net debt increased, resulting from
spending of $418.3 million for common share repurchases, $365.2
million for additions to property and $339.6 million for
shareholder dividends.
In 1992, the Company's net debt position of $587.4 million was
$207.1 million higher than the $380.3 million net debt position
in 1991. This change reflects spending for property additions,
shareholder dividends and common share repurchases in excess of
cash provided by operations.
Cash provided by operating activities totaled $962.1 million in
1993, $691.9 million in 1992 and $897.4 million in 1991. The
1993 increase primarily reflects lower working capital
requirements. Cash from operating activities has been reduced by
$147.0 million for the January 1993 funding of the Company's
initial accumulated post-retirement benefit obligation.
Capital expenditures amounted to $365.2 million in 1993, $403.2
million in 1992 and $339.4 million in 1991. It is anticipated
that expenditures will approximate $380 million in 1994, mainly
reflecting continuing plant expansions in Ireland and
manufacturing upgrades in New Jersey. Commitments related to
1994 capital expenditures totaled $117.8 million at December 31,
1993.
Dividend payments of $339.6 million were made in 1993, compared
with $300.2 million in 1992 and $273.6 million in 1991. These
increases reflect dividends per common share paid to shareholders
of $1.74 per share in 1993, up from $1.50 per share in 1992 and
$1.27 in 1991.
The Company's ratio of debt to total capital increased to 44
percent in 1993 from 41 percent in 1992, reflecting higher levels
of short-term debt. The Company's current liquidity levels and
financial resources continue to be sufficient to meet its
operating needs. As of December 31, 1993, the Company had $955.3
million in unused lines of credit, of which $680.0 million was in
support of commercial paper borrowings. The Company had an A-1+
and P-1 rating for its commercial paper, and AA and Aa3 general
bond rating from Standard and Poor's and Moody's, respectively,
as of December 31, 1993.
<PAGE>
<TABLE>
Schering-Plough Corporation and Subsidiaries
Statements of Consolidated Income
(Dollars in millions, except per share figures)
<CAPTION>
For The Years Ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . $4,341.3 $4,055.7 $3,615.6
Costs and Expenses:
Cost of sales . . . . . . . . . . . . . . . . 908.8 900.6 816.4
Selling, general and administrative . . . . . 1,747.4 1,629.8 1,503.5
Research and development. . . . . . . . . . . 577.6 521.5 425.9
Other expense, net . . . . . . . . . 29.1 49.9 9.0
Total costs and expenses . . . . . . . . . . 3,262.9 3,101.8 2,754.8
Income before Income Taxes. . . . . . . . . . . 1,078.4 953.9 860.8
Income taxes. . . . . . . . . . . . . . . . . 253.4 233.9 215.2
Income before extraordinary item and
cumulative effect of accounting changes. . . . 825.0 720.0 645.6
Extraordinary Item. . . . . . . . . . . . . . - (26.7) -
Cumulative effect of accounting changes . . . (94.2) 27.1 -
___________________________________________________________________________________
Net Income. . . . . . . . . . . . . . . . . . . $ 730.8 $ 720.4 $ 645.6
Earnings per common share before extraordinary
item and cumulative effect of accounting changes $ 4.23 $ 3.60 $ 3.01
Extraordinary item. . . . . . . . . . . . . . - (.13) -
Cumulative effect of accounting changes . . . (.48) .13 -
___________________________________________________________________________________
Earnings Per Common Share . . . . . . . . . . . $ 3.75 $ 3.60 $ 3.01
Statements of Consolidated Retained Earnings
(Dollars in millions, except per share figures)
For The Years Ended December 31, 1993 1992 1991
Retained Earnings, Beginning of Year. . . . . . $3,044.4 $2,624.2 $2,817.8
Net income. . . . . . . . . . . . . . . . . . . 730.8 720.4 645.6
Cash dividends on common shares (per share:
1993, $1.74; 1992, $1.50; and 1991, $1.27) . . (339.6) (300.2) (273.6)
Common shares retired . . . . . . . . . . . . . - - (565.6)
___________________________________________________________________________________
Retained Earnings, End of Year. . . . . . . . . $3,435.6 $3,044.4 $2,624.2
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Schering-Plough Corporation and Subsidiaries
Statements of Consolidated Cash Flows
(Dollars in millions)
<CAPTION>
For The Years Ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . $ 730.8 $ 720.4 $ 645.6
Depreciation and amortization. . . . . . . . . . . . 142.4 135.0 129.0
Working capital changes - source (use):
Accounts receivable . . . . . . . . . . . . . . . 48.4 (246.5) (45.3)
Inventories . . . . . . . . . . . . . . . . . . . (11.4) (28.8) (26.5)
Other current assets. . . . . . . . . . . . . . . (41.2) (78.1) (19.7)
Accounts payable, income taxes and accrued
liabilities. . . . . . . . . . . . . . . . . . . 101.9 142.2 185.5
Other, net . . . . . . . . . . . . . . . . . . . . . (8.8) 47.7 28.8
Net cash provided by operating activities. . . . . . 962.1 691.9 897.4
Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . (365.2) (403.2) (339.4)
Reduction of investments . . . . . . . . . . . . . . 192.7 323.0 575.9
Purchases of investments . . . . . . . . . . . . . . (287.1) (93.1) (315.3)
Other, net . . . . . . . . . . . . . . . . . . . . . (18.1) (2.5) (2.8)
Net cash used for investing activities (477.7) (175.8) (81.6)
Financing Activities:
Dividends paid to common shareholders. . . . . . . . (339.6) (300.2) (273.6)
Net change in short-term borrowings. . . . . . . . . 120.0 352.1 (172.6)
Reduction of long-term debt. . . . . . . . . . . . . (.6) (580.3) -
Common shares repurchased. . . . . . . . . . . . . . (418.3) (171.0) (547.4)
Proceeds from other equity transactions. . . . . . . 33.7 18.7 18.2
Other, net . . . . . . . . . . . . . . . . . . . . . (62.3) (9.7) 1.4
Net cash used for financing activities . . . . . . . (667.1) (690.4) (974.0)
Effect of Exchange Rates on Cash and Cash equivalents. (1.4) (3.7) -
Net Decrease in Cash and Cash Equivalents. . . . . . . (184.1) (178.0) (158.2)
Cash and Cash Equivalents, Beginning of Year . . . . . 406.3 584.3 742.5
Cash and Cash Equivalents, End of Year . . . . . . . . $ 222.2 $ 406.3 $ 584.3
_______________________________________________________________________________________
<FN>
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<TABLE>
Schering-Plough Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in millions, except per share figures)
<CAPTION>
At December 31, 1993 1992
<S> <C> <C>
ASSETS
__________________________________________________________________________
Current Assets:
Cash and cash equivalents. . . . . . . . . . . $ 222.2 $ 406.3
Short-term investments . . . . . . . . . . . . 207.2 122.8
Accounts receivable, less allowances:
1993, $44.9; 1992, $43.3 . . . . . . . . . . 687.1 735.9
Inventories. . . . . . . . . . . . . . . . . . 404.6 393.4
Prepaid expenses, deferred income taxes
and other current assets . . . . . . . . . . . 379.4 354.6
Total current assets . . . . . . . . . . . . . 1,900.5 2,013.0
Property, at cost:
Land . . . . . . . . . . . . . . . . . . . . . 47.1 47.5
Buildings and improvements . . . . . . . . . . 1,319.8 978.0
Equipment. . . . . . . . . . . . . . . . . . . 1,146.6 1,007.2
Construction in progress . . . . . . . . . . . 325.4 546.8
Total. . . . . . . . . . . . . . . . . . . . . 2,838.9 2,579.5
Less accumulated depreciation. . . . . . . . . 871.2 831.0
Property, net. . . . . . . . . . . . . . . . . 1,967.7 1,748.5
Intangible Assets, net. . . . . . . . . . . . . . . 182.5 189.6
Other Assets. . . . . . . . . . . . . . . . . . . . 266.2 205.5
$4,316.9 $4,156.6
/TABLE
<PAGE>
<TABLE>
<CAPTION>
1993 1992
LIABILITIES AND SHAREHOLDERS' EQUITY
___________________________________________________________________________
<S> <C> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . $ 249.0 $ 239.7
Short-term borrowings and current portion of
long-term debt . . . . . . . . . . . . . . . 1,076.0 946.0
U.S., foreign and state income taxes . . . . . 341.8 312.3
Accrued compensation . . . . . . . . . . . . . 157.4 146.3
Other accrued liabilities. . . . . . . . . . . 308.2 324.9
Total current liabilities. . . . . . . . . . . 2,132.4 1,969.2
Long-Term Liabilities:
Long-term debt . . . . . . . . . . . . . . . . 182.3 184.1
Deferred income taxes. . . . . . . . . . . . . 175.9 198.5
Other long-term liabilities. . . . . . . . . . 244.4 207.9
Total long-term liabilities. . . . . . . . . . 602.6 590.5
Shareholders' Equity:
Preferred shares - authorized, 50,000,000
shares of $1 par value each; issued - none . - -
Common shares - authorized, 300,000,000 shares
of $1 par value each; issued,
251,482,691 shares . . . . . . . . . . . . . 251.5 251.5
Paid-in capital . . . . . . . . . . . . . . . . 80.9 47.5
Retained earnings . . . . . . . . . . . . . . . 3,435.6 3,044.4
Foreign currency translation adjustment . . . . (116.2) (90.9)
Total . . . . . . . . . . . . . . . . . . . . . 3,651.8 3,252.5
Less treasury shares, at cost - 1993, 57,927,994
shares; 1992, 51,965,499 shares . . . . . . 2,069.9 1,655.6
Total shareholders' equity . . . . . . . . . . 1,581.9 1,596.9
$4,316.9 $4,156.6
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
Notes to Consolidated Financial Statements
(Dollars in millions, except per share figures)
Accounting Policies
Principles of Consolidation
The consolidated financial statements include Schering-Plough
Corporation and its subsidiaries. Intercompany balances and
transactions are eliminated. Certain prior year amounts have been
reclassified to conform to the current year presentation.
Cash and Cash Equivalents
Cash and cash equivalents include operating cash and highly liquid
investments, generally with maturities of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined by using the last-in, first-out method for substantially
all domestic inventories. The cost of all other inventories is
determined by the first-in, first-out method.
Depreciation
Depreciation is provided over the estimated useful lives of the
properties, generally by use of the straight-line method.
Intangible Assets
Intangible assets principally include goodwill, patents, licenses
and trademarks. Goodwill represents the excess of cost over the
fair value of net assets of companies purchased, and is amortized on
the straight-line method, generally over 40 years. Other intangible
assets are recorded at cost and amortized over their expected useful
lives on the straight-line method. Accumulated amortization of
intangible assets was $86.5 and $69.8 at December 31, 1993 and 1992,
respectively. Intangible assets are periodically reviewed to
determine recoverability by comparing their carrying values to
expected future cash flows.
Foreign Currency Translation
The net assets of most of the Company's foreign subsidiaries are
translated into U.S. dollars using current exchange rates. The U.S.
dollar effects that arise from translating the net assets of these
subsidiaries at changing rates are recorded in the foreign currency
translation adjustment (FCTA) account in shareholders' equity. For
the remaining foreign subsidiaries, non-monetary assets are
translated using historical rates, while monetary assets are
translated at current rates, with the U.S. dollar effects of rate
changes included in income.
Exchange gains and losses arising from hedging foreign net
investments and from translating intercompany balances of a long-
term investment nature are recorded in the FCTA account. Other
exchange gains and losses are included in income.
<PAGE>
Net foreign exchange losses included in income were $13.6, $21.5,
and $8.4 in 1993, 1992 and 1991, respectively.
Earnings Per Common Share
Earnings per common share is computed by dividing net income by the
weighted-average number of common shares outstanding. Shares
issuable through the exercise of stock options, warrants and under
deferred delivery agreements are not considered in the calculation,
as they are either not dilutive or do not have a material effect on
the determination of earnings per common share.
Financial Instruments
The following table presents information on the Company's financial
instruments:
<TABLE>
<CAPTION>
1993 1992
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 222 $ 222 $406 $406
Investments 212 212 136 136
Foreign currency put options 4 6 8 12
Liabilities:
Short-term borrowings 1,076 1,076 946 946
Long-term debt 182 194 184 198
Interest rate swap contracts 6 6 3 3
Forward exchange contracts 53 68 55 62
</TABLE>
The estimated fair values of investments, short-term borrowings and
long-term debt were based on the quoted market prices of these or
similar instruments. The estimated fair values of foreign currency
put options, interest rate swap contracts and forward exchange
contracts were based upon quotes from brokers.
All investments are available for sale and mature within 12 months
of year-end. Investments consist primarily of certificates of
deposit and municipal obligations, and are carried at amortized
cost. Realized gains and losses, based on the specific
identification method, were not material.
On a selective basis, the Company uses derivative financial
instruments to hedge against adverse changes in interest rates and
foreign exchange rates. The Company has also used such instruments
as a part of its international cash management strategy. The
Company is neither a trader nor a speculator in such instruments.
Certain financial instruments, including derivative financial
instruments, expose the holder to credit risk for non-performance
and to market risk for changes in interest and currency rates. The
Company mitigates credit risk by dealing only with financially sound
counterparties. Accordingly, the Company does not anticipate loss
for non-performance. The Company manages market risk by limiting
the use of derivatives to hedging activities or by limiting maximum
potential exposures to amounts that are not material to results of
operations or cash flow.
Following is a description of the derivative financial instruments
shown above:
Foreign Currency Put Options
The Company uses these instruments to hedge future inventory
purchases. The total U.S. dollar amount of such instruments was
$150.0 at December 31, 1993 and $354.0 at December 31, 1992. At
December 31, 1993, these instruments were to sell Deutschemarks,
French francs and yen, and at December 31, 1992, these instruments
were for the sale of Deutschemarks and yen. These options mature
within 15 months from date of purchase. During 1993, transactions
included the purchase, exercise and expiration of options of $382.1,
$281.8 and $304.3, respectively. Loss on option contracts is
limited to the premiums paid. Gains on such instruments are
deferred and ultimately reduce the cost of inventory. Gains arising
from these instruments were not material.
Interest Rate Swap Contracts
The Company has used interest rate swap contracts as a part of its
international cash management strategy. At December 31, 1993 and
1992, two arrangements having notional principal amounts of $650 and
$950 were outstanding. These arrangements provide for the receipt
and payment of interest through 2012. These contracts are carried
at market value.
Forward Exchange Contracts
The Company uses these instruments to hedge investments in its
foreign subsidiaries. The aggregate face values were $87.3 and
$105.0 at December 31, 1993 and 1992, respectively. During 1993,
activity included a $7.0 purchase and a $24.7 maturity. At December
31, 1993, these contracts were primarily for the exchange of yen for
U.S. dollars and at December 31, 1992, these contracts were for the
exchange of yen and Swiss francs for U.S. dollars. The arrangements
mature at various dates through 2002. In accordance with SFAS No.
52, these instruments are recorded at foreign exchange spot rates in
effect at year-end.
Borrowings
Short-term borrowings consist of commercial paper issued in the
United States, bank loans and notes payable. Commercial paper
outstanding at December 31, 1993 and 1992 was $961.4 and $715.8,
respectively. Bank loans and notes payable at December 31, 1993 and
1992 totaled $112.0 and $229.6, respectively.
At December 31, 1993, unused domestic bank lines of credit, which
were considered as support for commercial paper borrowings, were
$680.0. These lines of credit do not require compensating balances;
however, a nominal commitment fee is paid on the unused portion of
these lines.
The Company's foreign subsidiaries had available $275.3 in unused
lines of credit from various financial institutions at December 31,
1993. Generally, these credit lines do not require commitment fees
or compensating balances and are cancelable at the option of the
Company or the financial institutions.
<TABLE>
Long-term debt, including current maturities, at December 31
consisted of the following:
<CAPTION>
1993 1992
<S> <C> <C>
Notes, 7.8%, due 1996 . . . . . . . . . . . . . . $100.0 $100.0
Industrial revenue bonds, 2.8%-12.0%,
due 2001-2013 . . . . . . . . . . . . . . . . . 80.0 80.0
Other . . . . . . . . . . . . . . . . . . . . . . 4.9 4.7
184.9 184.7
Current maturities. . . . . . . . . . . . . . . . (2.6) (.6)
Total long-term debt. . . . . . . . . . . . . . . $182.3 $184.1
</TABLE>
During the 1992 first quarter, the Company purchased approximately
$600.0 of U.S. Government securities and deposited them into an
irrevocable trust to complete an in-substance defeasance of the
Company's zero-coupon notes. The funds in the trust will be used
solely to satisfy the $828.6 maturity value of the zero-coupon notes
due December 2, 1996. Accordingly, the government securities and
the zero-coupon notes have been excluded from the 1992 and 1993
balance sheets. The debt extinguishment resulted in an
extraordinary loss of $26.7 (net of income taxes of $15.0), or $.13
per share.
The Company has a shelf registration statement on file with the
Securities and Exchange Commission covering the issuance of up to
$200.0 of debt securities. These securities may be offered from
time to time on terms to be determined at the time of sale. As of
December 31, 1993, no debt securities have been issued pursuant to
this registration.
Interest Income and Interest Expense
Interest income for 1993, 1992 and 1991 was $23.9, $38.5 and $72.2,
respectively.
Interest expense, net of amounts capitalized as part of the
construction cost of property, plant and equipment for 1993, 1992
and 1991 was $48.2, $55.4 and $65.3, respectively. Interest costs
of $12.7, $15.8, and $11.8 in 1993, 1992, and 1991, respectively,
have been capitalized and included in the cost of property, plant
and equipment. Total cash payments for interest, net of amounts
capitalized, were $49.4, $54.8 and $62.2 in 1993, 1992 and 1991,
respectively.
Interest income and interest expense are included in other expense,
net.
Stock Incentive Plans
Under the terms of the Company's 1992 Stock Incentive Plan, 9
million shares of the Company's common stock may be granted as stock
options or awarded as deferred stock units to officers and certain
employees of the Company through December 1997. Options are granted
at prices not less than the market value of the common stock at
grant dates, become exercisable not earlier than six months and one
day from the date of the grant, and expire not later than 10 years
after the date of the grant. Deferred stock units are payable in an
equivalent number of common shares; the shares are distributable in
a single installment or in up to five equal annual installments
commencing not earlier than six months and one day from the date of
the award.
The table below summarizes stock option activity over the past two
years under current and prior plans:
<TABLE>
<CAPTION>
Number Option price
of shares (range per share)
<S> <C> <C>
Outstanding at January 1, 1992 . . . . 4,555,668 $ 7.41-$56.50
Granted . . . . . . . . . . . . . . 624,275 $55.38-$58.88
Exercised . . . . . . . . . . . . . (575,141) $ 7.41-$48.75
Canceled or expired . . . . . . . . (33,576)
Outstanding at December 31, 1992. . . . 4,571,226 $ 8.81-$58.88
Granted . . . . . . . . . . . . . . 608,195 $53.00-$66.38
Exercised . . . . . . . . . . . . . (772,910) $ 8.81-$58.88
Canceled or expired . . . . . . . . (26,105)
Outstanding at December 31,1993 . . . . 4,380,406 $ 8.81-$66.38
Exercisable at December 31, 1993. . . . 2,623,516
</TABLE>
There were 315,770 deferred stock units awarded in 1993 and 306,846
in 1992. As of December 31, 1993 and 1992, there were 942,300 and
897,842 deferred stock units outstanding, respectively, under
current and prior plans. At December 31, 1993, there were 8,023,790
shares available for future options or awards.
Inventories
<TABLE>
Year-end inventories consisted of the following:
<CAPTION>
1993 1992
<S> <C> <C>
Finished products . . . . . . . . . . . . . . $168.3 $155.6
Goods in process. . . . . . . . . . . . . . . 95.5 112.3
Raw materials and supplies. . . . . . . . . . 140.8 125.5
Total inventories . . . . . . . . . . . . . . 404.6 $393.4
</TABLE>
Inventories valued on a last-in, first-out basis comprised
approximately 42 percent and 47 percent of total inventories at
December 31, 1993 and 1992, respectively. The estimated replacement
cost of total inventories at December 31, 1993 and 1992 was $458.7
and $443.5, respectively.
Retirement Plans
The Company and certain of its subsidiaries have defined benefit
pension plans covering eligible employees in the United States and
certain foreign countries. Benefits under these plans are generally
based upon the participants' average final earnings and years of
credited service, and take into account governmental retirement
benefits. The Company's funding policy is to contribute actuarially
determined amounts, after taking into consideration the funded
status of each plan and regulatory limitations.
The components of the net pension expense (income) for all Company-
sponsored plans were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost - benefits earned during
the year. . . . . . . . . . . . . . . $ 26.6 $ 24.0 $ 24.0
Interest cost on projected benefit
obligations . . . . . . . . . . . . . 40.5 37.5 35.4
Actual return on plan assets . . . . . (101.5) (46.3) (109.0)
Net amortization and deferral . . . . . 36.8 (15.3) 50.6
Net pension (income) expense. . . . . . $ 2.4 $ (.1) $ 1.0
</TABLE>
The year-to-year changes in the net amortization and deferral
component of pension cost are principally attributable to
differences between actual and expected returns on plan assets.
<TABLE>
The actuarial present value of benefit obligations and funded status
of the plans at December 31 were as follows:
<CAPTION>
1993 1992
<S> <C> <C>
Projected benefit obligations:
Accumulated benefit obligations,
including vested benefits of
$466.8 in 1993 and $389.4 in 1992. . . $504.1 $400.1
Effect of future salary increases . . . 101.8 93.3
Total projected benefit obligations . . . 605.9 493.4
Plan assets at fair value,
primarily stocks and bonds. . . . . . . 711.2 622.9
Excess of plan assets over projected
benefit obligations . . . . . . . . . . 105.3 129.5
Unrecognized net transition asset . . . . (87.9) (96.1)
Unrecognized prior service cost . . . . . 11.0 7.6
Unrecognized net loss (gain) to date. . . 20.0 (2.3)
Prepaid pension cost . . . . . . . . . . $ 48.4 $ 38.7
</TABLE>
The discount rate used in determining the projected benefit obli-
gation for the Company's U.S. plans was 7.0 percent at December 31,
1993 and 8.5 percent at December 31, 1992. The weighted-average
discount rate for the Company's non-U.S. plans was 7.3 percent at
December 31, 1993, and 7.9 percent at December 31, 1992. The
weighted-average rate of increase in future compensation levels for
all plans was 4.2 percent and 5.5 percent at December 31, 1993 and
1992, respectively. The weighted-average expected long-term rate of
return on plan assets was approximately 10.0 percent for both years.
The assumption changes increased the projected benefit obligation by
approximately 14 percent.
The Company has a defined contribution profit-sharing plan covering
substantially all of its full-time domestic employees who have
completed one year of service. The annual contribution is
determined by a formula based on the Company's income, shareholders'
equity and participants' compensation. Profit-sharing expense
totaled $58.2, $53.7 and $47.1 in 1993, 1992 and 1991, respectively.
<PAGE>
Other Post-retirement Benefits
The Company provides post-retirement health care and other benefits
to its eligible United States retirees and their dependents.
Eligibility for benefits depends upon age and years of service.
Retirees share in the cost of the health care benefits.
Health care benefits for retirees in most countries other than the
United States are provided through local government-sponsored plans.
The direct cost of Company sponsored, non-U.S. plans is not
significant. Accordingly, these plans are excluded from the
following disclosures.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The
statement requires the accrual of post-retirement benefits during
the years an employee provides service to the Company. Previously,
these costs were expensed on a pay-as-you-go basis.
As of January 1, 1993, the cumulative accrual of such benefits
totaled $147.0, $94.2 after-tax, or $.48 per share. The Company
elected to recognize this entire amount effective with the adoption
of the statement.
<TABLE>
The components of 1993 net post-retirement benefit cost were as
follows:
<CAPTION>
<S> <C>
Service cost - benefits earned during the year. . . . $ 5.3
Interest cost on accumulated post-retirement
benefit obligation . . . . . . . . . . . . . . . . . 12.1
Actual return on plan assets. . . . . . . . . . . . . (15.9)
Deferral. . . . . . . . . . . . . . . . . . . . . . . 4.2
Post-retirement benefit cost . . . . . . . . . . . . . $ 5.7
</TABLE>
The pay-as-you-go cost was $6.1 and $5.6 in 1992 and 1991,
respectively.
<TABLE>
The accumulated post-retirement benefit obligation and funded status
at December 31, 1993, were as follows:
<CAPTION>
<S> <C>
Accumulated post-retirement benefit
obligation attributable to:
Retirees. . . . . . . . . . . . . . . . . . . . . $ 69.6
Fully eligible active plan participants . . . . . 24.2
Other active plan participants. . . . . . . . . . 56.2
Accumulated post-retirement benefit obligation . . . . 150.0
Plan assets at fair value,
primarily stocks & bonds. . . . . . . . . . . . . . 157.6
Plan assets in excess of accumulated post-retirement
benefit obligation . . . . . . . . . . . . . . . 7.6
Unrecognized gain . . . . . . . . . . . . . . . . . . (12.3)
Accrued post-retirement benefit liability . . . . . . $ (4.7)
/TABLE
<PAGE>
In January 1993, the Company fully funded its initial accumulated
benefit obligation. Future funding is at the discretion of the
Company.
The assumed health care cost trend rates used for measurement
purposes were 13 percent for 1994, trending down to 5 percent by
2003. The weighted-average discount rate used was 7 percent. The
weighted-average expected long-term rate of return on plan assets
was 9 percent. Earnings on plan assets that have been segregated
for tax purposes and funded through a Voluntary Employee Benefit
Association (VEBA trust) are subject to a tax rate of 39.6 percent.
A 1 percent increase in the assumed health care cost trend rate
would increase the combined service and interest cost by
approximately 8 percent, and the accumulated post-retirement benefit
obligation by approximately 13 percent.
Shareholders' Equity
The Preferred Share Purchase Rights (the "Rights") outstanding are
attached to, and presently only trade with, the Company's common
shares and are not exercisable. The Rights will begin to trade
separately from the common shares and become exercisable upon the
earlier of (i) 10 days following a public announcement that a person
or group has acquired beneficial ownership of 20 percent or more of
the Company's outstanding common shares, or (ii) 10 business days
following a person or group's commencement of, or announcement of,
an intention to make a tender or exchange offer, the consummation of
which would result in beneficial ownership of 20 percent or more of
the Company's common shares.
Upon becoming exercisable, each Right will entitle the holder to
purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $1 per share, of the
Company at an exercise price of $250. In the event that the Company
is acquired pursuant to a merger, or 50 percent or more of its
consolidated assets or earning power are sold, each Right will
entitle its holder to purchase shares of the acquiring company
having a market value of twice the exercise price of the Right. In
the event that any person or group becomes the beneficial owner of
20 percent or more of the common shares, each Right will entitle its
holder to purchase common shares of the Company having a market
value of twice the exercise price of the Right. The Company may
redeem the Rights at $.01 per Right at any time prior to the
acquisition, by a person or group, of 20 percent or more of the
Company's outstanding common shares. The Rights will expire on
August 9, 1999, unless earlier redeemed.
<PAGE>
A summary of activity in common shares, paid-in capital and treasury
shares follows (number of shares in thousands):
<TABLE>
<CAPTION>
Common Paid-in Treasury Shares
Shares Capital Number Amount
<S> <C> <C> <C> <C>
Balance at January 1, 1991. . . $261.5 $ 17.3 39,457 $945.0
Shares issued under stock
incentive plans . . . . . . . - 22.1 (802) (5.0)
Common shares retired. . . . . (10.0) (29.0) - -
Issuance of warrants . . . . . - 10.4 - -
Purchase of treasury shares. . - - 11,039 547.4
___________________________________________________________________
Balance at December 31, 1991. . 251.5 20.8 49,694 1,487.4
Shares issued under stock
incentive plans . . . . . . . - 26.7 (791) (2.8)
Purchase of treasury shares. . - - 3,062 171.0
__________________________________________________________________
Balance at December 31, 1992. . 251.5 47.5 51,965 1,655.6
Shares issued under stock
incentive plans . . . . . . . - 41.8 (990) (4.0)
Warrant transactions . . . . . - (8.4) - -
Purchase of treasury shares . . - - 6,953 418.3
____________________________________________________________________
Balance at December 31, 1993. . $251.5 $ 80.9 57,928 $ 2,069.9
</TABLE>
During 1991, the Company received and retired 10 million shares of
common stock in exchange for zero-coupon notes and warrants. The
warrants, exercisable during a 90-day period ending on November 22,
1996, entitle their holders to purchase up to 8.5 million shares of
common stock at an exercise price of $97.33 per share. In February
1993, the Company entered into a transaction that effectively
eliminated, for financial reporting purposes, its obligation for
warrants covering 3.4 million common shares. The net cost of this
transaction was $8.4. In December 1993, pursuant to certain rights
provided by the agreement, warrants covering 2.6 million shares were
surrendered in exchange for $7.0. Also, during 1993, the Company
entered into an option-type contract that reduces its exposure under
warrants that remain outstanding at December 31, 1993, covering 2.5
million shares.
Income Taxes
Effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes", under which deferred taxes are based on the asset and
liability method. Prior to the adoption of SFAS No. 109, income
taxes were accounted for under the deferral method.
The cumulative effect of implementing SFAS No. 109 was a one-time gain of $27.1,
or $.13 per share. As permitted by SFAS No. 109, the Company has not restated
prior year financial statements.
<TABLE>
U.S. and foreign operations contributed to income before income taxes as follows:
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
United States. . . . . . . . . . . . $ 588.7 $561.7 $569.0
Foreign. . . . . . . . . . . . . . . . 489.7 392.2 291.8
Total income before income taxes . . . $1,078.4 $953.9 $860.8
</TABLE>
<TABLE>
The components of income tax expense before the extraordinary item and cumulative
effect of accounting changes were as follows:
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current:
Federal. . . . . . . . . . . . . . . $ 110.9 $131.5 $134.3
Foreign. . . . . . . . . . . . . . . 121.7 111.5 65.0
State. . . . . . . . . . . . . . . . 6.9 24.3 11.2
Total current. . . . . . . . . . . . 239.5 267.3 210.5
Deferred:
Federal and state. . . . . . . . . . 10.4 6.1 4.1
Foreign. . . . . . . . . . . . . . . 3.5 (39.5) .6
Total deferred . . . . . . . . . . . 13.9 (33.4) 4.7
Total income tax expense . . . . . . . $ 253.4 $233.9 $215.2
</TABLE>
Deferred taxes include provisions (credits) for the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Non-recurring items . . . . . . . . . . $ 5.7 $ 13.5 $ 19.8
Excess of tax depreciation over
financial statement depreciation . . . 17.2 .8 9.3
Intercompany inventory transfers . . . 2.6 (17.4) (5.8)
Operating costs not currently
deductible for tax purposes* . . . . (11.1) (15.3) (15.7)
</TABLE>
* Principally consisting of accruals for employee benefits and other operating
costs and allowances for accounts receivable and inventory.
The difference between the U.S. statutory tax rate and the Company's effective
tax rate was due to the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
U.S. statutory tax rate. . . . . . . . . 35.0% 34.0% 34.0%
Increase (decrease) in taxes resulting
from:
Tax exemptions on Puerto Rico
operations . . . . . . . . . . . . . (6.1) (6.8) (7.5)
Difference in effective tax rate on
foreign source income. . . . . . . . (5.6) (5.7) (3.1)
Research tax credit. . . . . . . . . . (.6) (.3) (.7)
All other, net . . . . . . . . . . . . .8 3.3 2.3
Effective tax rate . . . . . . . . . . . 23.5% 24.5% 25.0%
</TABLE>
As of December 31, 1993 and 1992, the Company had total deferred tax
assets of $325.9 and $251.0, respectively, and deferred tax
liabilities of $301.4 and $267.6, respectively. Valuation
allowances are not significant. Significant deferred tax
liabilities and assets at December 31, 1993 and 1992 were for
depreciation differences, $163.5 and $146.2, respectively, and
operating costs not currently deductible for tax purposes, $230.6
and $166.7, respectively. Current assets at December 31, 1993 and
1992 include net deferred tax assets of $187.6 and $179.7,
respectively.
Deferred taxes are not provided on undistributed earnings of foreign
subsidiaries (considered to be permanent investments), which at
December 31, 1993 approximated $1,068.3. Determining the tax
liability that would arise if these earnings were remitted is not
practicable.
The Company has facilities in Puerto Rico that manufacture products
for both domestic and foreign markets. These facilities operate
under tax relief and other incentives that expire at various dates
through 2018.
As of December 31, 1993, the U.S. Internal Revenue Service has
completed its examination of the Company's tax returns for all years
through 1986 and there are no unresolved issues outstanding for
those years.
Total income tax payments during 1993, 1992 and 1991 were $183.1,
$210.3 and $117.8, respectively.
At December 31, 1993, the Company had capital losses for tax
purposes of $73.2 available to be carried forward to future periods
expiring in 1995.
Commitments
Total rent expense amounted to $27.0 in 1993, $25.6 in 1992 and
$23.8 in 1991. Future minimum rental commitments on non-cancelable
operating leases as of December 31, 1993, range from $16.8 in 1994
to $6.1 in 1998, with aggregate minimum lease obligations of $24.0
due thereafter.
The Company has commitments related to future capital expenditures
totaling $117.8 as of December 31, 1993.
Legal and Environmental Matters
The Company has responsibilities for environmental safety and clean-
up under various state, local and federal laws, including the
Comprehensive Environmental Response, Compensation and Liability
Act, commonly known as Superfund.
The Company is named as a potentially responsible party (PRP) at
several Superfund sites. The Company estimates its obligations for
clean-up costs for Superfund sites based on information obtained
from the Environmental Protection Agency, studies prepared by
independent engineers, and probable costs to be paid by other PRPs.
Costs are accrued when the Company becomes aware of its site clean-
up responsibility.
The Company is also involved in various other claims and legal
proceedings of a nature considered normal to its business, including
product liability cases. The estimated costs the Company expects to
pay in these cases are accrued when the liability is considered
probable and the amount can reasonably be estimated.
The recorded liabilities for these matters at December 31, 1993 and
1992, and the related expenses incurred during the three years ended
December 31, 1993, were not material. Expected insurance recoveries
have not been considered in determining the costs related to
recorded liabilities. Management believes that it is remote that
costs materially in excess of the amounts accrued for the above
matters will be incurred.
Consistent with trends in the pharmaceutical industry, the Company
is self-insured for certain events.
Business Segment Data
Schering-Plough is a research-based company engaged in the
discovery, development, manufacturing and marketing of
pharmaceutical and health care products worldwide. Pharmaceutical
products include prescription drugs, vision care and animal health
products. Health care products include over-the-counter, foot care
and sun care products sold primarily in the United States.
<TABLE>
<CAPTION>
Sales and Operating Profit by Industry Segment
Sales Profit
1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Pharmaceutical products. . . $3,640.7 $3,359.5 $2,895.1 $1,055.9 $ 934.6 $785.2
Health care products . . . . 700.6 696.2 720.5 135.8 149.8 155.6
Total sales and operating
profit. . . . . . . . . . . 4,341.3 4,055.7 3,615.6 1,191.7 1,084.4 940.8
General corporate
revenue and expense . . . . (65.1) (75.1) (14.7)
Interest expense . . . . . . (48.2) (55.4) (65.3)
Consolidated sales
and pre-tax profit. . . . . 4,341.3 $4,055.7 $3,615.6 $1,078.4 $953.9 $860.8
</TABLE>
<PAGE>
<TABLE>
Identifiable Assets, Capital Expenditures, Depreciation and Amortization by Industry
Segment
<CAPTION>
Capital Depreciation and
Assets Expenditures Amortization
1993 1992 1991 1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical products. $3,276.1 $3,036.8 $2,428.4 $ 339.4 $383.9 $312.9 $119.5 $113.0 $107.7
Health care products . . 408.7 382.7 418.1 24.2 18.4 22.6 17.8 16.9 16.3
Industry segment totals. 3,684.8 3,419.5 2,846.5 363.6 402.3 335.5 137.3 129.9 124.0
Corporate. . . . . . . . 632.1 737.1 1,166.7 1.6 .9 3.9 5.1 5.1 5.0
Consolidated assets,
capital expenditures,
depreciation and
amortization. . . . . . $4,316.9 $4,156.6 $4,013.2 $ 365.2 $403.2 $339.4 $142.4 $135.0 $129.0
Sales, Operating Profit and Identifiable Assets by Geographic Area
Sales Profit Assets
1993 1992 1991 1993 1992 1991 1993 1992 1991
United States. . . $2,285.1 $2,163.9 $2,117.5 $ 685.2 $664.2 $658.5 $2,263.0 $2,135.3 $1,755.0
Europe, Middle
East and Africa . 955.5 1,018.9 875.8 219.8 214.5 159.7 689.2 567.6 588.6
Latin America. . . 333.1 274.7 232.6 79.4 64.6 48.2 233.9 192.0 201.0
Canada, Pacific
Area and Asia . . 767.6 598.2 389.7 207.3 141.1 74.4 498.7 524.6 301.9
Total sales,
operating profit
and identifiable
assets . . . . . $4,341.3 $4,055.7 $3,615.6 $1,191.7 $1,084.4 $940.8 $3,684.8 $3,419.5 $2,846.5
</TABLE>
Sales, operating profit and identifiable assets as presented are associated
with each geographic area, based on the location of the ultimate customers.
The Company maintains manufacturing facilities in Ireland and Puerto Rico for
the production of several significant finished and semi-finished products for
distribution to domestic and foreign subsidiaries. The sales, operating
profit and identifiable assets of these facilities have been included in the
geographic area in which the ultimate customers are located.
Net assets of foreign subsidiaries totaled $1,571.5, $1,322.4 and $870.1 at
December 31, 1993, 1992 and 1991, respectively.
Corporate assets are principally cash and cash equivalents, investments,
property and deferred taxes.
Report by Management
The management of Schering-Plough is responsible for the preparation
and the integrity of all information and representations contained
in the financial statements and related data included in this Annual
Report. This information was prepared in accordance with generally
accepted accounting principles and is believed by management to
present fairly the Company's results of operations, financial
position and cash flows. It is important to recognize that the
preparation of financial statements requires the use of estimates
and assumptions that affect the reported amounts of assets,
liabilities, sales and expenses.
Schering-Plough maintains, and management relies on, a system of
internal accounting controls that provides reasonable assurance of
the integrity and reliability of the financial statements. The
system provides, at appropriate cost, that assets are safeguarded,
transactions are executed in accordance with management's authoriza-
tion, and fraudulent financial reporting practices are prevented or
detected. In establishing and maintaining this system, judgments
are required to assess and balance the relative cost versus the
expected benefit of a given control.
The Company's internal accounting control system is clearly
documented, provides for careful selection and training of
supervisory and management personnel, and also requires appropriate
segregation of responsibilities and delegation of authority. Formal
policies and procedures are maintained and systematically
disseminated throughout the Company. In addition, the Company
maintains a corporate code of conduct for purposes of determining
possible conflicts of interest, compliance with laws and
confidentiality of proprietary information.
The Company's independent auditors, Deloitte & Touche, audit
Schering-Plough's financial statements. They evaluate the Company's
internal accounting controls and perform tests of procedures and
accounting records to enable them to render their report. In
addition, Schering-Plough has an internal audit function that
assists management in discharging its responsibilities. The
internal audit staff, under the direction of the vice president -
corporate audits, regularly performs audits using programs designed
to test compliance with Company policies and procedures, and to
verify the adequacy of internal accounting controls and other
financial policies. The internal auditors also continually evaluate
the effectiveness and accuracy of financial reporting by the
Company's various operations.
<PAGE>
Management has considered the internal auditors' and independent
auditors' recommendations concerning the Company's system of
internal accounting controls and has taken appropriate action. Such
recommendations are communicated in accordance with Company policy
to the individuals responsible for implementation.
The Finance and Audit Committee of the Board of Directors consists
solely of non-employee directors. The Committee meets periodically
with management, the internal auditors and the independent auditors
to review auditing, financial reporting, internal accounting
controls and other financial matters. Both the independent auditors
and internal auditors have free access to the Committee, with and
without the presence of management, to discuss the adequacy of
Schering-Plough's internal accounting controls, the quality of
financial reporting and other matters relating to their audits.
It is our opinion that the Company's system of internal accounting
controls in effect as of December 31, 1993, provides reasonable
assurance that the financial statements and related data in this
Annual Report are fairly presented in accordance with generally
accepted accounting principles.
/s/Robert P. Luciano /s/Harold R. Hiser, Jr. /s/Thomas H. Kelly
Chairman and Executive Vice President Vice President
Chief Executive Officer Finance and Controller
INDEPENDENT AUDITORS' REPORT
DELOITTE & TOUCHE
Schering-Plough Corporation, its Directors and Shareholders:
We have audited the accompanying consolidated balance sheets of
Schering-Plough Corporation and subsidiaries as of December 31, 1993
and 1992 and the related statements of consolidated income, retained
earnings and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements 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, such consolidated financial statements present
fairly, in all material respects, the financial position of
Schering-Plough Corporation and subsidiaries at December 31, 1993
and 1992 and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1993,
in conformity with generally accepted accounting principles.
As discussed in Notes to Consolidated Financial Statements, the
Company changed, in 1992, its method of accounting for income taxes
to conform with Statement of Financial Accounting Standards ("SFAS")
No. 109, and, in 1993, its method of accounting for postretirement
benefits other than pensions to conform with SFAS No. 106.
/s/Deloitte & Touche
Parsippany, New Jersey
February 15, 1994
COMMON SHARE DIVIDENDS AND MARKET DATA
During 1993, the Board of Directors increased the quarterly dividend
rate from $.39 per share to $.45 per share. Dividends paid on common
shares in 1993 totaled $339.6 million, representing a 13 percent
increase over the $300.2 million paid in 1992. The quarterly
dividends per share paid over the last two years were as follows:
<TABLE>
<CAPTION>
Quarter 1993 1992
<S> <C> <C>
1st $ .39 $ .33
2nd .45 .39
3rd .45 .39
4th .45 .39
$1.74 $1.50
</TABLE>
The approximate number of holders of record of common shares as of
December 31, 1993, was 34,900.
The Company's common shares are listed and principally traded on the
New York Stock Exchange. The following table shows the reported
high and low sale prices for the common shares in each of the
calendar quarters during the past two years:
<TABLE>
<CAPTION>
1993 1992
Quarter High Low High Low
<S> <C> <C> <C> <C>
1st 63 7/8 51 3/4 $68 $54 7/8
2nd 70 7/8 55 1/2 58 1/2 49 7/8
3rd 69 1/4 58 62 7/8 53 3/4
4th 71 63 1/8 70 1/8 55 1/4
__________________________________________________________
</TABLE>
<PAGE>
<TABLE>
Schering-Plough Corporation and Subsidiaries
Six-Year Selected Financial and Statistical Data
(Dollars in millions, except per share figures)
<CAPTION>
1993 1992 1991 1990 1989 1988
Operating Results
<S> <C> <C> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . $4,341.3 $4,055.7 $3,615.6 $3,322.9 $3,157.9 $2,969.4
Income before income taxes. . . 1,078.4 953.9 860.8 768.9 645.6 533.9
Income before extraordinary item
and cumulative effect of
accounting changes . . . . . . 825.0 720.0 645.6 565.1 471.3 389.8
Extraordinary item. . . . . . . - (26.7) - - - -
Cumulative effect of accounting
changes. . . . . . . . . . . . (94.2) 27.1 - - - -
Net income. . . . . . . . . . . 730.8 720.4 645.6 565.1 471.3 389.8
Earnings per common share before
extraordinary item and cumulative
effect of accounting changes . 4.23 3.60 3.01 2.50 2.09 1.74
Extraordinary item. . . . . . . - (.13) - - - -
Cumulative effect of accounting
changes. . . . . . . . . . . . (.48) .13 - - - -
Earnings per common share . . . 3.75 3.60 3.01 2.50 2.09 1.74
______________________________________________________________________________________________
Investments
Research and development. . . . $ 577.6 $ 521.5 $ 425.9 $ 379.6 $ 326.5 $ 297.9
Capital expenditures. . . . . . 365.2 403.2 339.4 242.9 186.1 156.1
Financial Condition
Property, net . . . . . . . . . $1,967.7 $1,748.5 $1,490.4 $1,284.4 $1,210.7 $1,181.0
Total assets. . . . . . . . . . 4,316.9 4,156.6 4,013.2 4,103.1 3,613.5 3,425.6
Long-term debt. . . . . . . . . 182.3 184.1 753.6 182.9 185.5 189.8
Shareholders' equity. . . . . . 1,581.9 1,596.9 1,346.1 2,080.8 1,955.4 1,677.0
Net book value per common share 8.17 8.00 6.67 9.37 8.64 7.46
Financial Statistics
Income before extraordinary item
and cumulative effect of accounting
changes as a percent of sales. 19.0% 17.8% 17.9% 17.0% 14.9% 13.1%
Net income as a percent of sales 16.8% 17.8% 17.9% 17.0% 14.9% 13.1%
Return on average shareholders'
equity . . . . . . . . . . . . 46.0% 49.0% 37.7% 28.0% 25.9% 25.0%
Effective tax rate. . . . . . . 23.5% 24.5% 25.0% 26.5% 27.0% 27.0%
Other Data
Dividends per common share. . . $ 1.74 $ 1.50 $ 1.27 $1.065 $ .875 $ .70
Dividends on common shares. . . 339.6 300.2 273.6 241.2 197.3 157.0
Depreciation and amortization . 142.4 135.0 129.0 121.9 111.9 101.7
Number of employees . . . . . . 21,600 21,100 20,200 19,700 21,300 22,400
Average common shares outstanding
(in millions) . . . . . . . . . 195.1 200.2 214.5 225.9 225.5 224.2
Actual common shares outstanding
at year end (in millions) . . . 193.6 199.5 201.8 222.0 226.3 224.9
</TABLE>
<TABLE>
Quarterly Results of Operations
(Dollars in millions, except per share figures)
<CAPTION>
Three Months Ended March 31, June 30, September 30, December 31,
1993 1992 1993 1992 1993 1992 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales. . . . . . . . . $1,089.6 $1,021.9 $1,123.4 $1,019.6 $1,061.9 $1,019.8 $1,066.4 $994.4
Gross profit . . . . . 855.4 796.5 886.7 791.6 850.1 789.1 840.3 777.9
Income before income
taxes . . . . . . . . 292.1 257.2 278.8 246.6 260.6 229.5 246.9 220.6
Income before extra-
ordinary item and
cumulative effect of
accounting changes. . 223.5 192.9 213.2 184.9 199.4 174.5 188.9 167.7
Extraordinary item . . - (26.7) - - - - - -
Cumulative effect of
accounting changes. . (94.2) 27.1 - - - - - -
Net income . . . . . . 129.3 193.3 213.2 184.9 199.4 174.5 188.9 167.7
Earnings per common
share before extra-
ordinary item and
cumulative effect of
accounting changes. . 1.13 .96 1.09 .92 1.03 .88 .98 .84
Extraordinary item . . - (.13) - - - - - -
Cumulative effect of
accounting changes. . (.48) .13 - - - - - -
Earnings per common
share . . . . . . . . .65 .96 1.09 .92 1.03 .88 .98 .84
______________________________________________________________________________________________
</TABLE>
<PAGE>
Page 1 OF 3
APPENDIX TO EXHIBIT #13
The first page of the financial section of the 1993 annual report to
shareholders presents six bar charts. The following tables provide the
information portrayed in the charts:
Chart 1
Title: Earnings per Common Share*
* Before extraordinary item and accounting changes.
The vertical axis is in dollars starting at $0.00, increasing in increments of
$1.00, ending at $5.00.
The horizontal axis is in years starting with 1989, ending with 1993.
The data points are:
1989 $2.09
1990 $2.50
1991 $3.01
1992 $3.60
1993 $4.23
Chart 2
Title: Income*
* Before extraordinary item and accounting changes.
The vertical axis is in millions of dollars starting at zero, increasing in
$200 million increments, ending at $1,000 million.
The horizontal axis is in years starting with 1989, ending with 1993.
The data points are:
1989 $471.3
1990 $565.1
1991 $645.6
1992 $720.0
1993 $825.0
Page 2 of 3
APPENDIX TO EXHIBITS #13
Chart 3
Title: Sales
The vertical axis is in millions of dollars starting at zero, increasing in
$1,000 million increments, ending at $5,000 million.
The horizontal axis is in years starting with 1989, ending with 1993.
The data points are:
1989 $3,157.9
1990 $3,322.9
1991 $3,615.6
1992 $4,055.7
1993 $4,341.3
Chart 4
Title: Research and Development
The vertical axis is in millions of dollars starting at zero, increasing in
$100 million increments, ending at $600 million.
The horizontal axis is in years starting with 1989, ending with 1993.
The data points are:
1989 $326.5
1990 $379.6
1991 $425.9
1992 $521.5
1993 $577.6
Page 3 of 3
APPENDIX TO EXHIBIT #13
Chart 5
Title: Capital Expenditures
The vertical axis is in millions of dollars starting at zero, increasing in
$100 million increments, ending at $500 million.
The horizontal axis is in years starting with 1989, ending with 1993.
The data points are:
1989 $186.1
1990 $242.9
1991 $339.4
1992 $403.2
1993 $365.2
Chart 6
Title: Dividends Per Common share
The vertical axis is in dollars starting at $0.00, increasing in $.50
increments, ending at $2.00.
The horizontal axis is in years starting with 1989, ending with 1993.
The data points are:
1989 $.875
1990 $1.065
1991 $1.27
1992 $1.50
1993 $1.74
State or Country
of Incorporation
Subsidiaries of Registrant or Organization
Garden Insurance Company Ltd. Bermuda
Schering Biotech Corporation Delaware
DNAX Research Institute of Molecular and
Cellular Biology, Inc. California
Schering-Plough Products, Inc. Delaware
Plough Broadcasting Company, Inc. Delaware
American Image Productions, Inc. Tennessee
Schering Institutional Sales Corporation Delaware
Schering-Plough Research Institute Delaware
Schering-Plough Investment Co., Inc. Delaware
Schering-Plough Real Estate Co., Inc. Delaware
Schering Corporation New Jersey
Douglas Industries Inc. Delaware
Key Pharmaceuticals, Inc. Florida
Key Pharmaceuticals Export Co., Inc. U.S. Virgin
Islands
Plough Export, Inc. Tennessee
Plough (Australia) Pty. Limited Australia
Schering-Plough Animal Health Corporation Delaware
Professional Vaccine Corporation Delaware
Warrick Pharmaceuticals Corporation Delaware
Pharmaceutical Supply Corporation Delaware
Schering-Plough International, Inc. Delaware
Schering-Plough S.A. Colombia
P.T. Schering-Plough Indonesia Indonesia
Plough Benelux S.A. Belgium
Plough Consumer Products (Asia) Ltd. Hong Kong
Schering Canada, Inc. Canada
Pharmaco (Canada) Ltd. Canada
White Laboratories of Canada Limited Canada
Wesley-Jessen (Canada) Inc. Canada
Schering-Plough del Caribe, Inc. New Jersey
Schering-Plough Corporation, U.S.A. Delaware
Schering-Plough (Grenada) Limited Grenada
Schering-Plough Holdings Ltd. United Kingdom
Dashtag United Kingdom
Fulford (India) Limited India
Schering-Plough (India) Private Ltd. India
Plough Services A.G. Switzerland
Plough (UK) Limited United Kingdom
Schering-Plough Investments Limited Delaware
Schering-Plough Overseas Limited Delaware
S-P RIL Limited United Kingdom
Warrick Pharmaceuticals Limited United Kingdom
Kirby-Warrick Pharmaceuticals Limited United Kingdom
Schering-Plough Limited United Kingdom
White Laboratories Ltd. United Kingdom
Wesley-Jessen France France
Schering-Plough Coordination Center N.V./S.A. Belgium
Wesley-Jessen Limited United Kingdom
State or Country
of Incorporation
Subsidiaries of Registrant or Organization
Schering Corporation (New Jersey) (continued)
Schering-Plough International, Inc. (Delaware) (continued)
Schering-Plough HealthCare Products Canada Inc. Canada
Schering-Plough Ltd. Switzerland
Chemibiotic (Ireland) Ltd. Ireland
Loftus Bryan Chemicals Ltd. Ireland
Irish Fine Chemicals Ireland
Scherico Ltd. Switzerland
AESCA Chemisch-Pharmazeutische Fabrik GmbH Austria
Astra Italia S.p.A. Italy
Essex Chemie A.G. Switzerland
Werthenstein Chemie A.G. Switzerland
Essex Chemie A.G. (East) Switzerland
Essex Pharma GmbH Germany
Essex Pharma S.A. Greece
Farmaceutica Essex S.A. Spain
Plough Trading Ltd. Switzerland
Scherag (Proprietary) Limited South Africa
Med-Nim (Proprietary) Limited South Africa
Schering-Plough France
Schering-Plough AB Sweden
Pro Medica AB Sweden
Schering-Plough A/S Denmark
Schering-Plough B.V. Netherlands
Schering-Plough Farma, Lda Portugal
Plough/OTC Farma Lda. Portugal
Schering-Plough Labo N.V. Belgium
Schering-Plough Limited Iran
Schering-Plough A/S Norway
Schering-Plough N.V./S.A. Belgium
Schering-Plough OY Finland
Schering-Plough Pharmaceutical Industrial and
Commercial S.A. Greece
Plough (Hellas) Ltd. Greece
Schering-Plough S.A. Luxembourg
Schering-Plough S.A. Spain
Desarrollos Farmaceuticos y Cosmeticos S.A. Spain
Schering-Plough Sante Animale France
Schering-Plough S.p.A. Italy
Sentipharm A.G. Switzerland
Wesley-Jessen S.p.A. Italy
Wesley-Jessen S.A. Spain
<PAGE>
State or Country
of InCorporation
Subsidiaries of Registrant or Organization
Schering Corporation (New Jersey) (continued)
Schering-Plough International, Inc. (Delaware) (continued)
Schering-Plough Ltd. (Switzerland) (continued)
SOL Limited Bermuda
Beneficiadora e Industrializadora, S.A. de C.V. Mexico
Scheramex, S.A. de C.V. Mexico
Schering-Plough, S.A. de C.V. Mexico
SBI - Distribuidora de Productos Farmaceuticos
Ltda. Brazil
Industria Quimica e Farmaceutica Schering-Plough
Ltda. Brazil
EssexFarm S.A. Ecuador
Schering-Plough Corporation South Korea
Laboratorios Essex S.A. Argentina
Essex Farmaceutica, S.A. Columbia
Plough Chile Ltda. Chile
Plough Consumer Products (Philippines) Inc. Philippines
S.C.A. - Stabilimenti Chimici dell'Adda, S.p.A. Italy
Schering-Plough, C.A. Venezuela
Schering-Plough China Limited Bermuda
Schering-Plough Compania Limitada Chile
Schering-Plough Corporation Philippines
Schering-Plough INT Limited United Kingdom
Schering-Plough Kabushiki Kaisha Japan
Schering-Plough Limited Taiwan
Schering-Plough Limited Thailand
Schering-Plough Pty. Limited Australia
Schering-Plough S.A. Argentina
Schering-Plough S.A. Panama
Schering-Plough S.A. Uruguay
Schering-Plough Sdn. Bhd. Malaysia
Sentipharm Hong Kong Ltd. Hong Kong
Schering Sales Corporation Delaware
Schering Laboratories Advertising Inc. Delaware
Schering Transamerica Corporation New Jersey
Wesley-Jessen Corporation Delaware
W-J Manufacturing Corporation Delaware
Wesley-Jessen (Japan) K.K. Japan
White Laboratories, Inc. New Jersey
State or Country
of Incorporation
Subsidiaries of Registrant or Organization
Schering-Plough HealthCare Products, Inc. Delaware
Cacene, C.A. Venezuela
Calzado Confort C.A. Venezuela
Casacen, C.A. Venezuela
Dr. Scholl's Foot Comfort Shops, Inc. Delaware
Industrias Arco, Ltda. Costa Rica
Ortopedia Nacional de Venezuela C.A. Venezuela
Pharmaco, Inc. Delaware
Plough de Venezuela, C.A. Venezuela
Plough Laboratories, Inc. Tennessee
PPL, Inc. Tennessee
Schering-Plough HealthCare Products Advertising
Corporation Tennessee
Schering-Plough HealthCare Products Sales Corporation California
SUNTAN Sensations, Inc. California
Technobiotic Limited Australia
The Coppertone Corporation Florida
SP HealthCare Products Corporation Delaware
Schering-Plough HealthCare Holding Company Delaware
EXHIBIT 24
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 2-83963, No. 33-19013, and No. 33-50606 on Form
S-8, Post-Effective Amendment No. 1 to Registration Statement
No. 2-84723 on Form S-8, Post-Effective Amendment No. 1 to
Registration Statement No. 2-80012 on Form S-3 and Post-Effective
Amendment No. 1 to Registration Statement No. 2-77740 on Form
S-15 of our reports dated February 15, 1994, appearing in and
incorporated by reference in this Annual Report on Form 10-K of
Schering-Plough Corporation for the year ended December 31, 1993.
/s/DELOITTE & TOUCHE
Parsippany, New Jersey
March 4, 1994
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers
and/or directors of Schering-Plough Corporation, a New Jersey corporation
(herein called the "Corporation"),
does hereby constitute and appoint John T. Fogarty, Thomas H. Kelly and
Benjamin Croce, or any of them, his or her true and lawful attorney or
attorneys and agent or agents, to do any and all
acts and things and to execute any and all instruments which said attorney or
attorneys and agent or agents may deem necessary or advisable to enable the
Corporation to comply with the Securities
Exchange Act of 1934, as amended, and any rules, regulations, requirements or
requests of the Securities and Exchange Commission thereunder or in respect
thereof in connection with the filing
under said Act of the Annual Report of the Corporation on Form 10-K for the
fiscal year ended December 31, 1993 (herein called the "Form 10-K); including
specifically, but without limiting the
generality of the foregoing, the power and authority to sign the respective
names of the undersigned officers and/or directors as indicated below to the
Form 10-K and/or to any amendment of the Form 10-K and
each of the undersigned does hereby ratify and confirm all that
said attorney or attorneys and agent or agents, or any of them, shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these
presents this 22nd day of February, 1994.
/s/ Robert P. Luciano /s/ Richard J. Kogan
Robert P. Luciano, Chairman and Richard J. Kogan, President
Chief Executive Officer; Director and Chief Operating Officer;
Director
/s/ Harold R. Hiser, Jr. /s/ Thomas H. Kelly
Harold R. Hiser, Jr. Executive Thomas H. Kelly, Vice President
Vice President-Finance; and Controller; Principal
Principal Financial Officer Accounting Officer
/s/ Hans W. Becherer /s/ Richard de J. Osborne
Hans W. Becherer, Director Richard de J. Osborne, Director
/s/ Hugh A. D'Andrade /s/ William A. Schreyer
Hugh A. D'Andrade, Director William A. Schreyer, Director
/s/ Virginia A. Dwyer /s/ Robert F. W. van Oordt
Virginia A. Dwyer, Director Robert F. W. van Oordt, Director
/s/ David C. Garfield /s/ R. J. Ventres
David C. Garfield, Director R. J. Ventres, Director
/s/ Regina E. Herzlinger /s/ James Wood
Regina E. Herzlinger, Director James Wood, Director
/s/ H. Barclay Morley
H. Barclay Morley, Director
