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SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 18, 1993
MERCK & CO., INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
1-3305 22-1109110
(Commission File Number) (IRS Employer Identification No.)
</TABLE>
One Merck Drive, PO Box 100, Whitehouse Station, NJ 08889-0100
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (908) 423-1000
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AMENDMENT NO. 1
The undersigned registrant hereby amends the following portion of its
current Report on Form 8-K dated November 18, 1993 and filed December 3, 1993
as set forth below:
1. Add Item 7(b) as follows:
Item 7. Financial Statements and Exhibit
(b) UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 1993, and the Unaudited Pro Forma Combined Condensed Statements
of Income for the twelve months ended December 31, 1992, and nine months ended
September 30, 1993, give effect to the Merger accounted for under the purchase
method of accounting. The Unaudited Pro Forma Combined Condensed Financial
Statements are based on the historical Consolidated Financial Statements of
Merck and Medco under the assumptions and adjustments set forth in the
accompanying Notes to the Unaudited Pro Forma Combined Condensed Financial
Statements.
The Unaudited Pro Forma Combined Condensed Balance Sheet assumes that the
Merger was consummated on September 30, 1993, and the Unaudited Pro Forma
Combined Condensed Statements of Income assume the Merger was consummated on
January 1, 1992. The fiscal year of Merck ends on December 31, and the fiscal
year of Medco ends on June 30. For purposes of presenting the Unaudited Pro
Forma Combined Condensed Statements of Income, the historical Statements of
Income for Medco were compiled on a calendar year basis ending December 31,
1992, and nine months ending September 30, 1993, consistent with Merck's
calendar year-end.
The Pro Forma adjustments are based on the Merger Agreement, which provides for
Medco stockholders to elect to receive $39.00 in cash or 1.21401 Merck Shares
for each share of Medco Common Stock. Pursuant to the Merger Agreement, the
Company issued 114,038,323 shares and made cash payments totalling $2,426.5
million to Medco shareholders. For purposes of developing the Unaudited Pro
Forma Combined Condensed Balance Sheet, Medco's assets and liabilities have
been recorded at their estimated fair market values and the excess purchase
price has been assigned to goodwill. These fair values are based on
preliminary estimates. Revisions to these estimates are not expected to be
material.
The Unaudited Pro Forma Combined Condensed Statements of Income exclude any
benefits that result from the Merger due to synergies that may be derived and
the elimination of duplicate efforts.
The Unaudited Pro Forma Combined Condensed Financial Statements may not be
indicative of the results that actually would have occurred if the Merger had
been in effect on the dates indicated or which may be obtained in the future.
The Unaudited Pro Forma Combined Condensed Financial Statements should be read
in conjunction with the historical Consolidated Financial Statements and
accompanying Notes for Merck and Medco.
On October 13, 1993, Merck and Medco made the MMG Proposal. The acquisition of
the remaining equity interest in MMG has not been reflected in the Unaudited
Pro Forma Combined Condensed Financial Statements. However, the proposed
acquisition is not expected to have a material effect on the financial
position, results of operations and liquidity of the combined entity. See "The
Merger - Medco's Public Subsidiaries" section of the Proxy Statement/Prospectus
of Medco and Merck dated October 19, 1993.
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<PAGE> 3
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA PRO FORMA
MERCK MEDCO ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Sales $7,497.4 $2,272.5 $(210.2)(1) $9,559.7
-------- -------- ------- --------
Costs and Expenses
Materials and production 1,658.9 1,928.1 (205.5)(1) 3,375.3
(6.2)(2)
Marketing and administrative 2,135.8 144.6 2,280.4
Research and development 818.6 818.6
Restructuring charge 775.0 775.0
Other (income) expense, net (33.3) (4.2) (7.2)(2) 140.1
120.6 (3)
64.2 (4)
-------- -------- ------- --------
5,355.0 2,068.5 (34.1) 7,389.4
-------- -------- ------- --------
Income Before Taxes 2,142.4 204.0 (176.1) 2,170.3
Taxes on Income 650.4 79.9 (32.7)(5) 697.6
-------- -------- ------- --------
Net Income $1,492.0 $ 124.1 $(143.4) $1,472.7
======== ======== ======= ========
Earnings Per Share of
Common Stock $1.31 $.77 $1.18(6)
Weighted Average Number of
Common Shares Outstanding 1,139.2 162.0 1,253.2
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
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<PAGE> 4
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1992
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA PRO FORMA
MERCK MEDCO ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Sales $9,662.5 $2,210.1 $(210.0)(1) $11,662.6
-------- -------- ------- ---------
Costs and Expenses
Materials and production 2,096.1 1,884.9 (184.8)(1) 3,788.0
(8.2)(2)
Marketing and administrative 2,963.3 147.3 3,110.6
Research and development 1,111.6 1,111.6
Other (income) expense, net (72.1) (13.6) (9.6)(2) 151.2
160.9 (3)
85.6 (4)
-------- -------- ------- ---------
6,098.9 2,018.6 43.9 8,161.4
-------- -------- ------- ---------
Income Before Taxes and Cumulative
Effect of Accounting Changes 3,563.6 191.5 (253.9) 3,501.2
Taxes on Income 1,117.0 74.5 (48.2)(5) 1,143.3
-------- -------- -------- ---------
Income Before Cumulative
Effect of Accounting Changes $2,446.6 $ 117.0 $(205.7) $ 2,357.9
======== ======== ======= =========
Earnings Per Share of
Common Stock Before Cumulative
Effect of Accounting Changes $2.12 $.74 $1.86(6)
Weighted Average Number of
Common Shares Outstanding 1,153.5 157.9 1,267.5
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
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<PAGE> 5
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED STATEMENTS OF INCOME
The Unaudited Pro Forma Combined Condensed Statements of Income have been
prepared to reflect the Merger as if it occurred on January 1, 1992. The
Merger has been accounted for under the purchase method of accounting. The
excess of the purchase price over the fair value of the net assets acquired
(goodwill) is being amortized on a straight-line basis over a 40-year period.
In 1992, Merck adopted three new accounting standards promulgated by the
Financial Accounting Standards Board, changing its method of accounting for
postretirement benefits other than pensions, income taxes and postemployment
benefits. The cumulative effect of these accounting changes has been excluded
from the historical and Unaudited Pro Forma Combined Condensed Statements of
Income presented.
Included in Merck's historical Statement of Income for the nine months ended
September 30, 1993 is a nonrecurring pretax restructuring charge of $775.0
million, or $.46 per share (after tax). The restructuring charge represents
programs by Merck to reduce its workforce through early retirement programs
and other appropriate actions in the near term, as well as longer-term
initiatives designed to consolidate and streamline manufacturing facilities and
distribution centers.
The following is a summary of reclassifications and adjustments reflected in
the Unaudited Pro Forma Combined Condensed Statements of Income:
1) Represents the elimination of intercompany sales by Merck to Medco.
Materials and production includes both the elimination of intercompany
cost of sales and recognition of deferred profit based upon Medco
sales of these products to customers.
2) Represents adjustments to depreciation, amortization and interest
expense resulting from the fair market value adjustments to fixed
assets, intangibles, investments and long-term debt recorded in
connection with the Merger.
3) Represents the amortization of additional goodwill and identifiable
intangibles primarily over 40 years.
4) Represents the increase in interest expense resulting from the
issuance of short-term debt at assumed interest rates varying from
3.0% to 3.47% and long-term debt, issued at a premium, at an assumed
interest rate of 5.25% and the elimination of historical interest
income earned on available cash used in the Merger. Also included is
the amortization of debt issuance costs associated with the debt
issued to finance the Merger net of the amortization of the debt
premium. For purposes of the Unaudited Pro Forma Combined Condensed
Statement of Income for nine months ended September 30, 1993, it is
assumed that the short-term debt issued on January 1, 1992 is
refinanced in 1993 at the same rates of interest.
5) Represents the tax effect of the Unaudited Pro Forma Combined
Condensed Statements of Income adjustments, excluding the goodwill
amortization, based on the statutory rate in effect for the periods
shown.
6) Pro Forma combined earnings per share amounts as presented in the
accompanying Unaudited Pro Forma Combined Condensed Statements of
Income are based on the weighted average number of Merck Shares
adjusted to reflect the exchange of shares of Medco Common Stock for
114,038,323 Merck Shares.
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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA PRO FORMA
MERCK MEDCO ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,197.4 $ 95.0 $ (101.2)(5) $ 1,186.5
(4.7)(3)
Short-term investments 603.8 540.9 (300.0)(5) 844.7
Accounts receivable 1,869.2 214.1 (27.8)(1) 2,055.5
Inventories 1,187.0 369.9 1,556.9
Prepaid expenses and taxes 428.2 32.8 461.0
--------- -------- -------- ---------
Total Current Assets 5,285.6 1,252.7 (433.7) 6,104.6
--------- -------- -------- ---------
Property, Plant & Equipment, net 4,540.3 145.2 (23.4)(6) 4,662.1
Investments 1,577.6 89.7 6.0 (6) 1,673.3
Goodwill and Other Intangibles, net 107.7 187.8 4,939.6 (2) 6,664.3
1,429.2 (6)
Other Assets 1,113.5 25.4 4.7 (3) 977.8
(14.6)(6)
(151.2)(11)
--------- -------- -------- ---------
$12,624.7 $1,700.8 $5,756.6 $20,082.1
========= ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and
accrued liabilities $ 1,860.0 $ 264.4 $ 96.4 (4) $ 2,272.1
69.7 (6)
(27.8)(1)
9.4 (8)
Loans payable 576.9 1,772.3 (5) 2,349.2
Income taxes payable 1,428.6 39.4 (41.4)(7) 1,426.6
Dividends payable 318.9 318.9
--------- -------- -------- ---------
Total Current Liabilities 4,184.4 303.8 1,878.6 6,366.8
--------- -------- -------- ---------
Long-Term Debt 577.1 280.9 253.0 (5) 1,166.0
55.0 (6)
--------- -------- -------- ---------
Deferred Income Taxes and
Noncurrent Liabilities 1,519.9 38.0 367.0 (7) 1,773.7
(151.2)(11)
--------- -------- --------- ---------
Minority Interests 1,077.7 78.8 1,156.5
--------- -------- --------- ---------
STOCKHOLDERS' EQUITY
Common stock 213.7 585.6 586.8 (8) 4,567.2
3,766.7 (10)
(585.6)(9)
Retained earnings 9,069.1 413.7 (413.7)(9) 9,069.1
--------- -------- -------- ---------
9,282.8 999.3 3,354.2 13,636.3
Less treasury stock, at cost 4,017.2 4,017.2
--------- -------- -------- ---------
Total Stockholders' Equity 5,265.6 999.3 3,354.2 9,619.1
--------- -------- -------- ---------
$12,624.7 $1,700.8 $5,756.6 $20,082.1
========= ======== ======== =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Balance Sheet.
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NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED BALANCE SHEET
The Unaudited Pro Forma Combined Condensed Balance Sheet was prepared to
reflect the Merger, which was accounted for under the purchase method of
accounting on September 30, 1993.
The following is a summary of reclassifications and adjustments reflected in
the Unaudited Pro Forma Combined Condensed Balance Sheet:
1) Represents the elimination of intercompany receivables and payables
between Merck and Medco as of September 30, 1993.
2) Represents the adjustment required to record goodwill related to the
Merger. The purchase price (estimated at $6.6 billion) has been
adjusted to include acquisition-related expenses paid directly by
Merck (see Note 4) and the cost of exchanging options, net of the
related tax benefit (see Note 8).
3) Represents capitalized debt issuance costs to finance a portion of the
acquisition of outstanding shares of Medco Common Stock.
4) Represents the amount of estimated acquisition fees for legal and
investment banker advisory services related to the Merger. The
accrual also includes special compensation to three Medco senior
executives, which is payable by Medco in connection with the Merger.
5) Represents the payment of cash and the issuance of short-term and
long-term debt to acquire outstanding shares of Medco Common Stock.
6) Represents the adjustments of Medco assets and liabilities to their
estimated fair values at the date of the Merger.
7) Represents both the current and deferred tax effects of the Unaudited
Pro Forma Combined Condensed Balance Sheet adjustments calculated at
the statutory rate in effect at the date of the Merger.
8) Represents the cost of exchanging 35,815,887 options to purchase
Merck shares for the outstanding options on shares of Medco Common
Stock at an average exercise price of $20.21 per share. The
exchange reflects the issuance of 1.21401 Merck options for each
Medco option and a corresponding reduction in the average exercise
price by the conversion rate to $16.65, versus an assumed Merck share
price of $33.03 per share. The $9.4 million liability represents the
cost of 292,189 additional options payable to the holders in cash
upon exercise.
9) Represents the elimination of Medco historical equity.
10) Represents the issuance of 114,038,323 new Merck shares to acquire
outstanding shares of Medco Common Stock at the conversion rate of
1.21401 Merck Shares for each share of Medco Common Stock.
11) Represents the reclassification of Merck's net long-term deferred tax
asset to long-term deferred tax liability.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
MERCK & CO., INC.
By: /s/Nancy V. Van Allen
---------------------
Nancy V. Van Allen
Assistant Secretary
February 1, 1994
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