UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 1-6571
SCHERING-PLOUGH CORPORATION
Incorporated in New Jersey 22-1918501
One Giralda Farms (I.R.S. Employer Identification No.)
Madison, N.J. 07940-1000 (973) 822-7000
(telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Common Shares Outstanding as of June 30, 1998: 734,000,000
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(Amounts in millions, except per share figures)
<CAPTION>
Three Months Six Months
Ended Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . $2,124 $1,720 $4,032 $3,288
Costs and expenses:
Cost of sales. . . . . . . . . 423 330 803 619
Selling, general
and administrative. . . . . . 828 679 1,540 1,273
Research and development . . . 261 209 485 388
Other, net . . . . . . . . . . 9 8 5 17
1,521 1,226 2,833 2,297
Income before income taxes. . . 603 494 1,199 991
Income taxes. . . . . . . . . . 148 121 294 243
Net Income. . . . . . . . . . . $ 455 $ 373 $ 905 $ 748
Basic earnings per common
share. . . . . . . . . . . . . $ .62 $ .51 $ 1.23 $ 1.02
Diluted earnings per common
share . . . . . . . . . . . . $ .61 $ .50 $ 1.22 $ 1.01
Dividends per common share. . . $ .22 $ .19 $ .41 $ .355
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Amounts in millions, except per share figures)
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Assets
Cash and cash equivalents . . . . . . . . $ 707 $ 714
Accounts receivable, net. . . . . . . . . 840 645
Inventories . . . . . . . . . . . . . . . 745 713
Prepaid expenses, deferred income
taxes and other current assets . . . . . 988 848
Total current assets. . . . . . . . . 3,280 2,920
Property, plant and equipment . . . . . . 3,835 3,750
Less accumulated depreciation . . . . . . 1,297 1,224
Property, net . . . . . . . . . . . . 2,538 2,526
Intangible assets, net. . . . . . . . . . 524 481
Other assets. . . . . . . . . . . . . . . 623 580
$6,965 $6,507
Liabilities and Shareholders' Equity
Accounts payable. . . . . . . . . . . . . $ 853 $ 803
Short-term borrowings and current
portion of long-term debt. . . . . . . . 316 581
Other accrued liabilities . . . . . . . . 1,586 1,507
Total current liabilities . . . . . . 2,755 2,891
Long-term debt. . . . . . . . . . . . . . 46 46
Other long-term liabilities . . . . . . . 763 749
Shareholders' Equity:
Preferred shares - $1 par value;
issued - none. . . . . . . . . . . . . . - -
Common shares - $1 par value;
issued - 1,015 . . . . . . . . . . . . . 1,015 1,015
Paid-in capital . . . . . . . . . . . . . 195 96
Retained earnings . . . . . . . . . . . . 6,276 5,673
Accumulated other comprehensive income. . (273) (244)
Total . . . . . . . . . . . . . . . . 7,213 6,540
Less treasury shares, at cost -
1998, 281 shares; 1997, 282 shares . . . 3,812 3,719
Total shareholders' equity. . . . . . 3,401 2,821
$6,965 $6,507
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
(UNAUDITED)
(Amounts in millions)
<CAPTION>
1998 1997
<S> <C> <C>
Operating Activities:
Net Income. . . . . . . . . . . . . . . . $ 905 $ 748
Depreciation and amortization . . . . . . 114 95
Accounts receivable . . . . . . . . . . . (223) (177)
Inventories . . . . . . . . . . . . . . . (43) (19)
Prepaid expenses and other assets . . . . (174) (114)
Accounts payable and other liabilities . 262 187
Net cash provided by operating
activities . . . . . . . . . . . . . . . 841 720
Investing Activities:
Purchase of business, net of cash
acquired . . . . . . . . . . . . . . . . - (315)
Capital expenditures and purchased
software . . . . . . . . . . . . . . . . (127) (134)
Proceeds from sales of investments. . . . - 34
Purchases of investments. . . . . . . . . (69) (79)
Other, net. . . . . . . . . . . . . . . . (2) (5)
Net cash used for investing
activities . . . . . . . . . . . . . . . (198) (499)
Financing Activities:
Dividends paid to common shareholders . . (302) (260)
Common shares repurchased . . . . . . . . (85) (3)
Short-term borrowings, net. . . . . . . . (256) 164
Other net . . . . . . . . . . . . . . . . (6) 43
Net cash used for financing
activities . . . . . . . . . . . . . . . (649) (56)
Effect of exchange rates on cash and
cash equivalents. . . . . . . . . . . . . (1) (1)
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . . (7) 164
Cash and cash equivalents, beginning
of period . . . . . . . . . . . . . . . . 714 535
Cash and cash equivalents, end of period . $ 707 $ 699
<FN>
See notes to consolidated financial statements.
</TABLE>
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in millions, except per share figures)
Basis of Presentation
The unaudited financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission for reporting on Form 10-Q. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The statements should be
read in conjunction with the accounting policies and notes to
consolidated financial statements included in the Company's 1997
Annual Report on Form 10-K.
In the opinion of management, the financial statements reflect
all adjustments necessary for a fair statement of the operations
for the interim periods presented.
Earnings Per Common Share
The shares used for basic earnings per common share and diluted
earnings per common share are reconciled as follows (number of
shares in millions):
Three Months Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
Average shares outstanding for
basic earnings per share . . . . . 734 732 733 732
Dilutive effect of options and
deferred stock units . . . . . . . 10 8 10 7
Average shares outstanding for
diluted earnings per share . . . . 744 740 743 739
Comprehensive Income and Segments
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 130,
"Reporting Comprehensive Income". Comprehensive income is
defined as the total change in shareholders' equity during the
period other than from transactions with shareholders. For the
Company, comprehensive income is comprised of net income, the net
change in the accumulated foreign currency translation adjustment
account and the net change in unrealized gains and losses on
securities classified for SFAS No. 115 purposes as held available
for sale. Total comprehensive income for the three months ended
June 30, 1998 and 1997 was $431 and $372, respectively. Total
comprehensive income for the six months ended June 30, 1998 and
1997 was $876 and $710, respectively.
In 1997, the FASB issued SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information." As required by the
standard, the Company will begin reporting under SFAS No. 131 in
its 1998 Annual Report.
Inventories
Inventories consisted of: June 30, December 31,
1998 1997
Finished products . . . . . . . $372 $334
Goods in process. . . . . . . . 187 191
Raw materials and supplies. . . 186 188
Total inventories . . . . . . $745 $713
Legal and Environmental Matters
The Company is involved in various claims and legal proceedings
of a nature considered normal to its business, including
environmental matters and product liability cases. The recorded
liabilities for these matters at June 30, 1998 were not material.
Management believes that, except for the matters discussed in the
following paragraph, it is remote that any material liability in
excess of the amounts accrued will be incurred.
The Company is a defendant in more than 160 antitrust actions
commenced (starting in 1993) in state and federal courts by
independent retail pharmacies, chain retail pharmacies and
consumers. The plaintiffs allege price discrimination and/or
conspiracy between the Company and other defendants to restrain
trade by jointly refusing to sell prescription drugs at
discounted prices to the plaintiffs.
One of the federal cases is a class action on behalf of
approximately two-thirds of all retail pharmacies in the United
States and alleges a price-fixing conspiracy. The Company has
agreed to settle the federal class action for a total of $22
payable over three years. The settlement provides, among other
things, that the Company shall not refuse to grant discounts on
brand-name prescription drugs to a retailer based solely on its
status as a retailer and that, to the extent a retailer can
demonstrate its ability to affect market share of a Company
brand-name prescription drug in the same manner as a managed care
organization with which the retailer competes, it will be
entitled to negotiate similar incentives subject to the rights,
obligations, exemptions and defenses of the Robinson-Patman Act
and other laws and regulations. The United States District Court
in Illinois approved the settlement of the federal class action
on June 21, 1996. In June 1997, the Seventh Circuit Court of
Appeals dismissed all appeals from that settlement, and it is not
subject to further review. In addition, in August 1997, the
Seventh Circuit ruled that there was sufficient evidence of
participation in the alleged conspiracy by certain wholesalers to
require them to proceed to trial.
In May 1998, the Company settled six of the federal antitrust
cases brought by 26 food and drug chain retailers and several
independent retail stores. Plaintiffs in these cases comprise
collectively approximately one-fifth of the prescription drug
retail market. The settlement amounts were not material to the
Company.
Four of the state antitrust cases have been certified as class
actions. Two are class actions on behalf of certain retail
pharmacies in California and Wisconsin, and the other two are
class actions in California and the District of Columbia, on
behalf of consumers of prescription medicine. In addition, an
action has been brought in Alabama purportedly on behalf of
consumers in Alabama and several other states. Plaintiffs are
seeking to maintain the action as a class action. The Company
has settled the retailer class action in Wisconsin and the
alleged class action in Minnesota and those settlements have been
approved by their respective courts; the settlement amounts were
not significant. The Company has also recently settled in
principal the consumer cases in all of the states except Alabama
and California. Court approval of those settlements is currently
being sought; the settlement amounts are not material.
Plaintiffs generally seek treble damages in an unspecified amount
and an injunction against the allegedly unlawful conduct. The
Company believes that all of the antitrust actions are without
merit and is defending itself vigorously.
In April 1997, certain of the plaintiffs in the federal class
action commenced another purported class action in United States
District Court in Illinois against the Company and the other
defendants who settled the previous federal class action. The
complaint alleges that the defendants conspired not to implement
the settlement commitments following the settlement discussed
above. The District Court has denied the plaintiffs' motion for
a preliminary injunction hearing. The Company believes the
action is without merit and is defending itself vigorously.
On March 13, 1996, the Company was notified that the United
States Federal Trade Commission (FTC) is investigating whether
the Company, along with other pharmaceutical companies, conspired
to fix prescription drug prices. The investigation is ongoing.
The Company vigorously denies that it has engaged in any price-
fixing conspiracy.
The Company is a defendant in a state court action in Texas
brought by Foxmeyer Health Corporation, the parent of a
pharmaceutical wholesaler that filed for bankruptcy in August
1996, which has now been removed to Federal Bankruptcy Court in
Dallas. The case is against another pharmaceutical wholesaler
and 11 pharmaceutical companies, and alleges that the defendants
conspired to drive the plaintiff's wholesaler subsidiary out of
business. The plaintiff is seeking damages in the amount of
$400. Motions for summary judgment are pending in the Delaware
bankruptcy of the bankrupt wholesaler.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations - three and six months ended June 30, 1998
compared with the corresponding periods in 1997.
Sales
Consolidated sales for the second quarter advanced $404 million
or 23 percent compared with the same period in 1997. For the six
months, sales rose $744 million or 23 percent over 1997.
Excluding the effect of foreign currency exchange rate
fluctuations, consolidated sales grew 26 percent in the quarter
and 25 percent for the six month period. Excluding the June 1997
acquisition of the worldwide animal health business of
Mallinckrodt Inc., which contributed sales of $121 million in the
quarter and $212 million in the first half of 1998, sales would
have increased 16 percent in both periods. This performance
reflects worldwide sales of the CLARITIN brand of $687 million
and $1,124 million for the quarter and first half, respectively,
compared with $536 million and $889 million for the corresponding
periods in 1997.
Domestic prescription pharmaceutical sales increased 25 percent
for the 1998 second quarter and 26 percent for the six-month
period. Sales of allergy/respiratory products increased 35
percent in the quarter and 31 percent for the first half, due to
continued strong growth of the CLARITIN brand of nonsedating
antihistamines. Franchise sales of nasal inhaled steroid products
including VANCENASE allergy products and NASONEX a once-daily
corticosteroid for allergic rhinitis, increased in the quarter
and year-to-date due to market expansion and market share growth.
Sales of VANCERIL asthma products advanced in both periods
primarily reflecting market growth.
U.S. sales of cardiovascular products rose 29 percent in the
quarter and 32 percent for the six months reflecting market share
gains for Imdur, a once-daily oral nitrate for angina and market
growth for K-Dur, a sustained-release potassium supplement.
Domestic sales of anti-infective and anticancer products
decreased 22 percent in the quarter primarily due to lower sales
of INTRON A, the Company's alpha interferon anticancer antiviral
agent for malignant melanoma and hepatitis C, following heavy
first quarter buying by the trade. For the six-month period
sales of anti-infectives and anticancer products increased 13
percent primarily due to increased utilization of INTRON A. Sales
of EULEXIN, a prostate cancer treatment, were also higher in both
periods.
U.S. sales of dermatological products increased 29 percent for
the quarter and 32 percent for the six months, primarily due to
higher sales of LOTRISONE, an antifungal/anti-inflammatory cream,
and ELOCON, a mid-potency topical corticosteroid.
International ethical pharmaceutical product sales increased 6
percent for the second quarter and 5 percent for the six-month
period. Excluding the impact of foreign exchange rate
fluctuations, sales would have risen 12 percent in both periods.
Sales of allergy/respiratory products advanced 8 percent for the
quarter and 11 percent for the first half, led by CLARITIN in
most world markets.
International dermatological product sales grew 10 percent in the
quarter and 13 percent for the six-month period, led by ELOCON.
Cardiovascular product sales grew 9 percent for the second
quarter and 20 percent for the six months, led by higher sales of
NITRO-DUR, a transdermal nitroglycerin patch for angina.
International sales of anti-infectives and anticancer products
increased 16 percent in the second quarter and 7 percent for the
six months. The growth was attributable to higher sales of
INTRON A in the quarter and six-month period.
Worldwide sales of animal health products increased 234 percent
in the quarter and 206 percent for the six months. On June 30,
1997, the Company completed the acquisition of the worldwide
animal health business of Mallinckrodt, Inc., which contributed
sales of $121 million in the quarter and $212 million for the
first six months of 1998. Excluding Mallinckrodt, sales were
essentially flat for the quarter and six month period.
Sales of health care products increased 13 percent for the second
quarter and 12 percent for the first six months of 1998. The
higher sales were recorded in foot care products and suncare
products for both periods, while sales of over-the-counter
products increased slightly for the six-month period.
Income before income taxes increased 22 percent for the quarter
compared with 1997, and represented 28.4 percent of sales versus
28.7 percent last year. For the six months, income before taxes
grew 21 percent over 1997, representing 29.7 percent of sales
compared with 30.1 percent of last year.
Cost of sales as a percentage of sales increased to 19.9 percent
in the quarter from 19.2 percent in 1997, and for the first six
months, the ratio increased to 19.9 percent from 18.8 percent in
1997 principally driven by the inclusion of Mallinckrodt products
which have lower margins.
Selling, general and administrative expenses represented 39.0
percent of sales in the second quarter compared with 39.5 percent
last year. For the six-month period, the ratio was 38.2 percent
versus 38.7 percent in 1997. The decreases in the ratios are the
result of timing related spending for promotional and selling
activities.
Research and development spending rose 25 percent in the quarter,
representing 12.3 percent of sales compared with 12.1 percent a
year ago. For the six-month period, spending grew 25 percent, and
represented 12.0 percent of sales versus 11.8 percent in 1997.
The higher spending reflects the Company's funding of both
internal research efforts and research collaborations with
various partners to develop a steady flow of innovative products
and line extensions.
The effective tax rate was 24.5 percent in the three- and six-
month periods of both 1998 and 1997.
Basic earnings per common share advanced 22 percent in the second
quarter to $.62 from $.51 in 1997. Diluted earnings per common
share advanced 22 percent to $.61 from $.50 for the same period.
For the six-month period, basic earnings per common share rose 21
percent to $1.23 from $1.02 in 1997, and diluted earnings per
common share rose 21 percent to $1.22 from $1.01 in 1997.
Excluding the impact of fluctuations in foreign currency exchange
rates, basic earnings per common share would have increased
approximately 25 percent for the quarter and six-month periods
and diluted earnings per common share would have increased
approximately 26 percent for the quarter and approximately 25
percent for the six-month period.
Additional Factors Influencing Operations
In the United States, many of the Company's pharmaceutical
products are subject to increasingly competitive pricing as
managed care groups, institutions, government agencies and other
buying groups seek price discounts. In most international
markets, the Company operates in an environment of government-
mandated cost containment programs. Several governments have
placed restrictions on physician prescription levels and patient
reimbursements, emphasized greater use of generic drugs and
enacted across-the-board price cuts as methods of cost control.
Since the Company is unable to predict the final form and timing
of any future domestic and international governmental or other
health care initiatives, their effect on operations and cash
flows cannot be reasonably estimated.
The market for pharmaceutical products is competitive. The
Company's operations may be affected by technological advances of
competitors, patents granted to competitors, new products of
competitors, and generic competition as the Company's products
mature. In addition, patent positions can be highly uncertain
and an adverse result in a patent dispute can preclude
commercialization of products or negatively affect sales of
existing products. The effect on operations of competitive
factors and patent disputes cannot be predicted.
Uncertainties inherent in government regulatory approval
processes, including among other things delays in approval of new
products, may also affect the Company's operations. The effect
on operations of regulatory approval processes cannot be
predicted.
The Company began implementing its plan to modify its computer
systems to enable the proper processing of transactions relating
to the Year 2000. The plan includes replacing and/or updating
existing systems in order to avoid business interruption. The
Company expects this project to be substantially completed by the
end of 1998. The estimated cost of these modifications, incurred
over the life of the project, is expected to be approximately $50
million.
Liquidity and financial resources - six months ended June 30,
1998
Cash generated from operations continues to be the Company's
major source of funds to finance working capital, additions to
property, shareholder dividends and common share repurchases.
Cash provided by operating activities was $841 million for the
first six months of 1998. Cash was used to pay shareholder
dividends of $302 million, reduce short-term borrowing by $256
million, fund capital expenditures and purchase software of $127
million, repurchase shares for $85 million and purchase
investments for $69 million.
In October 1997, the Board of Directors authorized the repurchase
of $1 billion of the Company's common shares. As of June 30,
1998 this program was approximately nine percent complete.
In April 1998, the Board of Directors increased the quarterly
dividend by 16 percent to $.22 from $.19 per common share.
The Company's liquidity and financial resources continue to be
sufficient to meet its operating needs.
Market Risk Disclosures
As discussed in the 1997 Annual Report to Shareholders, the
Company's exposure to market risk from changes in foreign
currency exchange rates and interest rates, in general, is not
material.
Cautionary Statements for Forward Looking Information
Management's discussion and analysis set forth above contains
certain forward looking statements, including statements
regarding the Company's financial position and results of
operations. These forward looking statements are based on
current expectations. Certain factors have been identified by
the Company in Exhibit 99 of the Company's December 31, 1997,
Form 10-K filed with the Securities and Exchange Commission,
which could cause the Company's actual results to differ
materially from expected and historical results. Exhibit 99 from
the Form 10-K is incorporated by reference herein.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 3, Legal Proceedings, of Part I of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997,
is incorporated by reference.
In May 1998, the Company settled six of the federal antitrust
cases brought by 26 food and drug chain retailers and several
independent retail stores. Plaintiffs in these cases comprise
collectively approximately one-fifth of the prescription drug
retail market. The settlement amounts were not material to the
Company. The Great Atlantic and Pacific Tea Company, Inc. (A&P)
was among the settling plaintiffs.
The settlements of the state antitrust cases in Wisconsin and
Minnesota have been approved by the respective courts. The
Company has also recently settled in principal the state consumer
cases in all of the states except Alabama and California. Court
approval of those settlements is currently being sought. The
settlement amounts were not material to the Company.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - The following Exhibits are filed with this
document:
Exhibit
Number Description
10(a) - Agreement between the Company and Rodolfo C.
Bryce dated June 10, 1998.
27 - Financial Data Schedule
99 - Company Statement Relating to Forward
Looking Information
b) Reports on Form 8-K:
No report has been filed during the six months ended June
30, 1998.
SIGNATURE(S)
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Schering-Plough Corporation
(Registrant)
Date August 10, 1998 /s/Thomas H. Kelly
Thomas H. Kelly
Vice President and Controller
WD2QTR.10Q
- 4 -
WD2QTR.10Q
WD2QTR.10Q
- 14 -
Exhibit 10(a)
AGREEMENT
THIS AGREEMENT is made and entered into by and between Rodolfo
Bryce (hereinafter referred to as "Bryce") and Schering-Plough
Corporation, including all of its affiliates, subsidiaries,
divisions and related companies (hereinafter referred to as the
"Company").
W I T N E S S E T H:
WHEREAS, Bryce has indicated to the Company his desire and
intention to cease active employment with the Company after December
31, 1998 and thereafter to take early retirement when eligible;
WHEREAS, Bryce and the Company intend in this Agreement to set
forth the terms of, and fully and finally resolve any matters that
may arise from, Bryce's continued employment with the Company and
eventual departure therefrom.
NOW, THEREFORE, in consideration of the promises and mutual
promises herein contained, it is agreed as follows:
1. Bryce will continue active employment with Schering-
Plough HealthCare Products and remain Executive Vice President of
Schering-Plough Corporation as well as maintain all of his other
current officerships, directorships, and committee memberships with
the Company through December 31, 1998. He will resign from all the
above-cited positions effective January 1, 1999, and on request will
execute such documents as may be necessary to effectuate the
resignations. Bryce will be entitled to an Executive Incentive Plan
("EIP") payment and profit sharing for the year 1998 in accordance
with the terms of the EIP and Profit Sharing Plan. He will also
receive a lump-sum payment, less applicable deductions, for banked
and accrued but unused vacation through December 1998 on a date of
his choosing no later than April 1, 2001.
2. Effective January 1, 1999, Bryce will be placed on a
Leave of Absence without pay and without eligibility for EIP
payments, profit sharing, or vacation accruals. His participation
in the Company's 401(k) plan shall also end as of January 1, 1999.
Bryce will be eligible for the Financial Counseling and Tax
Preparation Program for the years 1999, 2000 and 2001. While on his
Leave of Absence, Bryce will also be eligible to participate in the
Company's other benefit programs (including but not limited to the
E-grade Medical/Dental Plan, the Executive Life Insurance Plan, the
Long Term Disability Plan, the Retirement Plan, the Supplemental
Executive Retirement Plan and the Retirement Benefits Equalization
Plan) subject to the limitations set forth in paragraphs 3-6 below.
This Leave of Absence shall continue until April 1, 2001. Once
Bryce's Leave of Absence has expired, his employment with the
Company shall be terminated.
3. Bryce agrees to forfeit stock options which have not
vested as of December 31, 1998, except that he will not forfeit 7080
options from the February 23, 1998 grant which vests on February 24,
1999 while Bryce is on his Leave of Absence. This means that Bryce
will forfeit 8,000 options of the 40,000 option grant made on
September 24, 1990, the entire 200,000 option grant made on
September 26, 1994, and 28,320 options of the 35,400 option grant
made on February 23, 1998.
4. In summary, after taking account of the forfeitures
indicated in the preceding paragraph and options previously
exercised, Bryce shall continue to own the following options, the
terms and provisions of which shall continue to be governed by the
applicable stock incentive plan:
32,000 options from the 9/25/89 grant
16,000 options from the 9/24/90 grant
11,400 options from the 2/26/96 grant
35,400 options from the 2/24/97 grant
7,080 options from the 2/23/98 grant
Bryce's status as an optionee with respect to the options listed
immediately above shall be equivalent to that of an employee under
the respective stock incentive plans during his Leave of Absence,
and thereafter of a retiree if he elects early retirement upon the
termination of his Leave of Absence.
5. Bryce agrees to forfeit all stock awards which have not
been distributed as of December 31, 1998, except that he will be
entitled to distribution of 20% of the February 23, 1998 award of
18,800 shares on February 23, 1999 and to distribution of the entire
September 26, 1994 award of 80,000 shares on September 26, 1999.
6. In summary, after taking account of the forfeitures
indicated in the preceding paragraph (and assuming acceleration of
the 1995, 1996, and 1997 awards by the Executive Compensation and
Organization Committee of the Board of Directors, which acceleration
remains at the sole discretion of such committee), Bryce shall be
entitled to the following stock award distributions in the months
indicated:
December 1998: 7,680 shares of the 2/27/95 award (which
represents 40% of the total award of 2/27/95); 3,840 shares
of the 2/26/96 award (which represents 20% of the total
award of 2/26/96); and 3,760 shares of the 2/24/97 award
(which represents 20% of the total award of 2/24/97).
February 1999: 3,760 shares of the 2/23/98 award (which
represents 20% of the total award of 2/23/98).
September 1999: the entirety of the 9/26/94 award of
80,000 shares.
Bryce will forfeit 7,680 shares of the 2/26/96 award (which
represents 40% of the total award of 2/26/96), 11,280 shares of the
2/24/97 award (which represents 60% of the total award of 2/24/97),
and 15,040 shares of the 2/23/98 award (which represents 80% of the
total award of 2/23/98).
7. Bryce will be eligible to retire on April 1, 2001, in
accordance with the terms of the Company's Retirement Plan. At that
time, Bryce will be entitled to receive those retirement benefits
that the Company provides to separated employees of the same age
with the same amount of Company service and whose grade and
compensation levels are the same, subject to all terms and
conditions of all such plans. These benefits will be calculated
according to the benefits formula established by the Company for
eligible participants. The precise benefits that will be made
available will be calculated by the Company's outside actuarial
benefit firm and documented in writing to Bryce at the end of
Bryce's Leave of Absence period.
8. Bryce will return to the Company all Company property he
has received in the course of his employment with the Company
including but not limited to documents, reports, studies, memoranda,
computer based information, credit cards, and other such materials
within ten (10) days of the end of his active employment with the
Company and he shall retain no copies of any such property. Bryce
acknowledges that the terms of a previously signed Employee
Confidentiality and Invention Agreement and the Company's Business
Conduct Policy remain in effect and nothing herein shall relieve him
thereunder.
9. Bryce agrees that for the period from the date of this
Agreement until April 1, 2001, he shall not, directly or indirectly,
as principal, agent, employee, employer, stockholder (other than as
a holder of less than 1% of the issued and outstanding stock of a
publicly held corporation), partner, or in any other individual or
representative capacity whatsoever, do any of the following:
(a) Engage in, be connected with, provide goods or services
to, or conduct any "Competing Business," which for purposes of this
Agreement shall be defined as any business engaged in the research,
development, or manufacture and sale of any product directly
competitive with a Company product generating more than $50 million
in worldwide annual sales. The Company's suncare and Dr. Scholl's
lines of products shall each be considered a single Company product
in this definition. Each covenant contained in this subparagraph
(a) shall be deemed to be a separate covenant for each county of
each State of the United States of America and for each other
country in which any customer of any Competing Business has a place
of business or is otherwise located or in which any Competing
Business engages in business, and this subparagraph (a) shall be
limited to such geographical areas.
(b) Induce or attempt to induce any employee of the Company to
terminate his employment with the Company.
(c) Knowingly undertake or participate in any activities,
engage in any conduct or make any statements inconsistent with or
contrary to the interests of the Company or its affiliates.
10. The Company will waive the restrictions set forth in
paragraph 9(a) if the restrictions are not necessary to protect a
significant business interest of the Company, provided that Bryce
follows the procedures set forth in this paragraph. To seek a
waiver, Bryce must notify the Company in writing of his intent to
join a Competing Business at least 30 days in advance of his
anticipated starting date of employment or other affiliation. Bryce
and the Vice Chairman and Administrative Officer or designee shall
meet promptly and confer in good faith concerning whether the
restrictions should be waived. If the parties are unable to agree
on whether the restrictions are necessary to protect a significant
business interest of the Company, Bryce may at his option submit the
dispute to a single arbitrator in a binding arbitration administered
by the American Arbitration Association under its Commercial
Arbitration Rules, such arbitration to be initiated no later than 10
days before Bryce's anticipated starting date of employment or other
affiliation. If Bryce initiates arbitration pursuant to this
paragraph he will not commence his employment or affiliation with
the Competing Business until an award is issued by the arbitrator.
11. Bryce acknowledges that he has carefully read and
considered all of the terms and conditions of this Agreement,
including the restraints imposed pursuant to paragraph 9 hereof,
that he fully understands his right to discuss all aspects of this
Agreement with his attorney, and that he voluntarily enters into
this Agreement. Bryce agrees that such restraints are necessary for
the reasonable and proper protection of the Company, and that each
and every one of said restraints is reasonable in respect to subject
matter, length of time, and area.
12. (a) In the event that in any judicial proceeding a court
of competent jurisdiction refuses to enforce any one or more of the
covenants contained in this Agreement in any respect, then such
covenant shall be deemed limited and restricted to the extent that
such court shall deem it to be enforceable, and as so limited or
restricted, the covenant shall remain in full force and effect. In
the event that any such covenant or covenants shall be deemed
unenforceable in their entirety by such a court, the remaining
covenants (as they may be limited and restricted) shall remain in
full force and effect.
(b) Without limiting the Company's rights and remedies with
respect to any breach of this Agreement, the covenants under
paragraph 9 above, and the Company's rights and remedies with
respect thereto, shall survive the termination of this Agreement for
any reason.
(c) Bryce agrees that in any judicial proceeding in which the
Company seeks an injunction for breach of the covenants in paragraph
9 of this Agreement, he will not assert that an injunction is
unavailable because the Company's remedies at law such as claims for
damages are adequate. Nothing contained herein shall be construed
as limiting the Company's right to any other remedies in equity or
under law, including the recovery of damages from Bryce.
13. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective personal
representatives, heirs, successors and assigns.
14. This Agreement may only be amended or otherwise modified
by an agreement in writing executed by the parties hereto.
15. Bryce agrees that he is entitled to no benefits or
compensation other than what is specifically set forth in this
Agreement.
16. Bryce agrees that at the end of his active employment with
the Company, he will execute a General Release and Covenant Not to
Sue in the form annexed hereto as Exhibit A.
17. The Agreement sets forth the entire Agreement between the
parties and supersedes any and all prior agreements or
understandings between them, whether oral or in writing, except as
otherwise provided herein. The parties agree this Agreement shall
be governed by the law of the State of New Jersey, and Bryce
specifically consents to having any dispute under this Agreement
resolved by the federal or state courts in the State of New Jersey.
Bryce acknowledges that he has relied on no statements or
representations of any kind whatsoever, other than those set forth
herein, in agreeing to be bound by this Agreement.
18. Bryce recognizes that he has up to 21 days to execute this
Agreement and 7 days thereafter to revoke his acceptance thereof.
Bryce may accept and return the Agreement prior to the 21st day, but
if he does so, he waives the right to the full 21 days. This
Agreement will not become effective and will not be enforceable
until the seven (7) day period has expired. If Bryce does wish to
revoke his acceptance, he should notify Mr. Hugh D'Andrade, Vice
Chairman and Administrative Officer, in writing of his decision.
IN WITNESS WHEREOF, the parties have set their hand this
tenth day of June of 1998.
/s/Rodolfo Bryce
Rodolfo Bryce
June 11, 1998
On behalf of the Company
/s/Hugh A. D'Andrade
Hugh A. D'Andrade
Vice Chairman and
Chief Administrative Officer
Schering-Plough Corporation
June 10, 1998
EXHIBIT A
GENERAL RELEASE AND COVENANT NOT TO SUE
1. Rodolfo Bryce (hereinafter referred to as "Bryce") agrees
that he will not file or permit any third party to file a lawsuit
against Schering-Plough Corporation or any of its affiliates,
subsidiaries, divisions, or related companies (hereinafter
collectively referred to as "the Company") or any other Releasee
identified in paragraph 2 below in connection with any aspect of his
employment, except with respect to an alleged breach of the
Agreement between Bryce and the Company, dated
(hereinafter referred to as "the Agreement").
2. In consideration of the covenants undertaken herein and
except for those obligations created by or arising out of the
Agreement, Bryce on his behalf and on behalf of his descendants,
dependents, heirs, executors, administrators, assigns and successors
does hereby covenant not to sue and acknowledges complete
satisfaction of and hereby releases, absolves and discharges the
Company and its heirs, successors and assigns, parent companies,
subsidiaries, divisions and affiliated corporations, past and
present, its and their trustees, directors, officers, shareholders,
agents, attorneys, insurers, and employees, past and present, and
each of them (collectively referred to as "Releasees"), with respect
to and from any and all claims, demands, liens, agreements,
contracts, covenants, actions, suits, causes of action, wages,
obligations, debts, expenses, attorneys' fees, damages, judgments,
orders and liabilities of whatever kind or nature in law, equity or
otherwise, whether now known or unknown, suspected or unsuspected,
and whether or not concealed or hidden, which Bryce now owns or
holds or has at any time heretofore owned or held as against said
Releasees, or any of them. Included in this release and discharge,
but not limited by them are any claims that Bryce may have under
federal, state, or local law prohibiting age discrimination (for
example, under the Age Discrimination in Employment Act) or other
forms of discrimination, and/or claims growing out of any legal
restrictions on the Company's right to terminate employees (for
example, claims that may arise under various contract, tort, public
policy or wrongful discharge theories or statutory claims such as
claims under New Jersey's Conscientious Employee Protection Act).
________________
Rodolfo Bryce
________________
Date
168562-1.DOC -1-
168562-1.DOC -1-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Schering-Plough Corporation and subsidiaries consolidated Financial Statements
for the six months ended June 30, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 707
<SECURITIES> 0
<RECEIVABLES> 840
<ALLOWANCES> 0
<INVENTORY> 745
<CURRENT-ASSETS> 3280
<PP&E> 3835
<DEPRECIATION> 1297
<TOTAL-ASSETS> 6965
<CURRENT-LIABILITIES> 2755
<BONDS> 46
0
0
<COMMON> 1015
<OTHER-SE> 2386
<TOTAL-LIABILITY-AND-EQUITY> 6965
<SALES> 4032
<TOTAL-REVENUES> 4032
<CGS> 803
<TOTAL-COSTS> 803
<OTHER-EXPENSES> 485
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1199
<INCOME-TAX> 294
<INCOME-CONTINUING> 905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 905
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.22
</TABLE>
Exhibit 99
Company Statement Relating to Forward Looking Information
(Filed Pursuant to Rule 175)
Mr. Richard Jay Kogan, President and Chief Executive Officer, commenting on the
Company's business results, stated: "Assuming no unforeseen developments,
Schering-Plough's 1998 earnings per share are expected to be higher by about
20 percent."
838410
