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EXHIBIT 99(a)
FINANCIAL STATEMENTS AND EXHIBITS
REQUIRED BY FORM 11-K ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-3305
---------------------
MERCK & CO., INC. EMPLOYEE SAVINGS AND SECURITY PLAN
(Full title of the plan)
MERCK & CO., INC.
P.O. BOX 100
WHITEHOUSE STATION, NEW JERSEY 08889-0100
(Name of issuer of the securities held pursuant to the
plan and the address of its principal executive office)
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merck & Co., Inc.:
We have audited the accompanying statement of net assets available for
benefits of the Merck & Co., Inc. Employee Savings and Security Plan (the
"Plan") as of December 31, 1999 and 1998, and the related statement of changes
in net assets available for benefits for the year ended December 31, 1999. These
financial statements and the schedule referred to below are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan as
of December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedule of assets
held for investment purposes is presented for purposes of additional analysis
and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
June 12, 2000
1
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Assets:
Investments at market value............................... $2,907,375,673 $2,808,322,824
-------------- --------------
Receivables:
Employer's contribution................................. 3,848,031 3,461,459
Participants' contributions............................. 8,844,613 7,883,239
Accrued interest and dividends.......................... 7,380,499 6,753,854
-------------- --------------
Total receivables..................................... 20,073,143 18,098,552
-------------- --------------
Net assets available for benefits........................... $2,927,448,816 $2,826,421,376
============== ==============
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
2
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Additions to net assets attributed to:
Investment income (loss):
Net depreciation in market value of investments......... ($ 27,238,973)
Interest................................................ 3,009,430
Dividends............................................... 77,186,265
--------------
Total investment income............................... 52,956,722
--------------
Contributions to the Plan:
By participants......................................... 130,380,972
By the employer......................................... 49,151,005
--------------
Total contributions................................... 179,531,977
--------------
Total additions....................................... 232,488,699
--------------
Deductions from net assets attributed to:
Benefits paid to participants............................. (134,907,873)
--------------
Net reallocations........................................... 3,446,614
--------------
Total deductions and net reallocations among Plans.... (131,461,259)
--------------
Net increase........................................ 101,027,440
Net assets available for benefits
Beginning of year................................... 2,826,421,376
--------------
End of year......................................... $2,927,448,816
==============
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
3
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
A. DESCRIPTION OF PLAN:
The following description of the Merck & Co., Inc. Employee Savings and
Security Plan (the "Plan") provides only general information. Participants
should refer to the Plan document for a more complete description of the Plan's
provisions.
1. GENERAL
The Plan was designed to provide an easy, economical way for employees to
become stockholders of Merck & Co., Inc. (the "Company" or "Merck") as well as a
systematic means of saving and investing for the future. Regular full-time,
part-time, and temporary employees of the Company and of certain wholly-owned
subsidiaries as defined by the Plan document who were not covered by a
collective bargaining agreement are eligible to enroll in the Plan as of the
first day of the third month following their date of hire.
The Plan is administered by a management committee appointed by the Chief
Executive Officer of the Company. All costs of administering the Plan are borne
by the Company.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
2. CONTRIBUTIONS
Participants may contribute from 2% up to 15% of their base pay. In
addition, the Company matches 75% of employee contributions up to 6% of base pay
per pay period. Company matching contributions are invested according to the
following age parameters:
Under age 50 -- 50% of Company matching contributions is invested in the
Merck Common Stock Fund (Non-participant directed) and 50% is invested in the
funds to which the participant is currently contributing (Participant directed).
Age 50 and above -- Participants have the option to invest all Company
matching contributions in any of the available fund options (Participant
directed).
Participants direct the investment of their contributions into any
investment option, including the Merck Common Stock Fund (Participant directed).
The Plan currently offers 15 mutual funds and the Merck Common Stock Fund.
3. PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution,
the Company's matching contribution and allocation of Plan earnings. The
allocation is based on participants' account balances, as defined in the Plan
document.
4. VESTING
Participants are immediately vested in their contributions, all Company
matching contributions, plus actual earnings thereon.
5. PARTICIPANT LOANS
Participants may borrow from their account balances with interest charged
at the prime rate plus 1%. Loan terms range from one to five years or up to
thirty years for the purchase of a primary residence. The
4
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
minimum loan is $500 and the maximum loan is the lesser of $50,000 less the
highest outstanding loan balance during the one year period prior to the new
loan application date, or 50% of the participant's account balance less any
current outstanding loan balance.
6. PAYMENT OF BENEFITS
In-service (which include hardship withdrawals) and termination
distributions are made throughout the year in accordance with applicable Plan
provisions. At December 31, 1999 and 1998, net assets available for benefits
included distributions in process of payment of $2,114,034 and $1,816,514,
respectively.
B. SUMMARY OF ACCOUNTING POLICIES:
USE OF ESTIMATES
The financial statements are prepared in conformity with accounting
principles generally accepted in the United States and, accordingly, include
amounts that are based on management's best estimates and judgments. Actual
results could differ from these estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION
The financial statements of the Plan have been prepared on the accrual
basis of accounting. The investments of the Plan are stated at quoted market
value. Shares of mutual funds are valued at the net asset value of the shares
held by the Plan at year-end.
Purchases and sales of securities are recorded on a trade-date basis.
Dividend income is recorded on the ex-dividend date. The net appreciation
(depreciation) in market value of investments is based on the beginning of the
year market value or value at the time of purchase during the year and is
included in the statement of changes in net assets available for benefits.
C. INVESTMENTS:
The following presents investments that represent 5% or more of the Plan's
net assets as of year-end.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Merck Common Stock Fund, 72,896,801 and
71,924,065 units, respectively.............. $1,671,494,991* $1,813,160,707*
T. Rowe Price Blue Chip Growth Fund, 8,522,756
and 8,443,142 units, respectively........... 309,716,959 258,360,153
</TABLE>
---------------------
* Includes non-participant directed portion
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated in
value by $(27,238,973) as follows:
<TABLE>
<S> <C>
Mutual Funds......................................... $ 134,814,870
Common Stock Fund.................................... (162,053,843)
-------------
$ (27,238,973)
=============
</TABLE>
5
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
D. NON-PARTICIPANT-DIRECTED INVESTMENTS:
Information about the net assets and the significant components of the
changes in net assets relating to the non-participant-directed investments is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net Assets:
Merck Common Stock Fund..................... $353,946,622 $384,532,691
============ ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Changes in Net Assets
Contributions.................................. $ 23,343,589
Dividends...................................... 5,728,670
Interest....................................... 65,961
Net depreciation............................... (40,775,847)
Benefits paid to participants....................... (13,683,040)
Transfers to participant directed investments and
other Plans....................................... (5,265,402)
------------
$(30,586,069)
============
</TABLE>
E. RELATED-PARTY TRANSACTIONS:
Certain Plan investments are shares of mutual funds managed by Fidelity
Management Trust Company ("Fidelity"). Fidelity is the trustee as defined by the
Plan and, therefore, these transactions qualify as party-in-interest
transactions.
Merck & Co., Inc. also is a party-in-interest to the Plan under the
definition provided in Section 3(14) of ERISA. Therefore, Merck Common Stock
Fund transactions qualify as party-in-interest transactions.
All party-in-interest transactions are set forth on the attached schedules.
F. PLAN TERMINATION:
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
G. TAX STATUS:
The Plan obtained a tax determination letter from the Internal Revenue
Service dated September 18, 1995 indicating that it had been designed in
accordance with applicable sections of the Internal Revenue Code ("IRC"). The
Plan was most recently amended in December 1999. The Plan sponsor believes that
the Plan is designed and currently operated in compliance with the IRC.
Therefore, no provision for income taxes has been made.
H. PROHIBITED TRANSACTIONS:
There were no prohibited transactions during 1999.
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
I. OTHER MATTERS:
Net reallocations in 1999 of $3,446,614 consist of transfers of $2,822,691
between the Plan and the Merck & Co., Inc. Employee Stock Purchase and Savings
Plan for employees who changed their status during the year, $765,926 for
employees who transferred from Merck-Medco Managed Care, L.L.C. and ($142,003)
of miscellaneous net transfers.
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SCHEDULE H
EIN: 22-1109110
PLAN NO.: 001
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
LINE 4i -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
<TABLE>
<CAPTION>
(C) DESCRIPTION OF INVESTMENT INCLUDING
(B) IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, COLLATERAL, (E) CURRENT
(A) LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE (D) COST VALUE
------- -------------------------------- --------------------------------------------- -------------- -----------------
<C> <S> <C> <C> <C>
* Merck & Co., Inc. Merck Common Stock Fund
72,896,801 units $ 682,393,028 $1,671,494,991
* Fidelity Investments Fidelity Equity-Income Fund
922,115 units 43,996,620 49,313,929
Fidelity Growth & Income Portfolio
2,998,550 units 103,919,576 141,410,136
Fidelity Retirement Money Market Fund
107,908,631 units 107,936,553 107,936,553
Spartan U.S. Equity Index Fund
1,992,218 units 71,824,494 103,774,476
Fidelity Low-Priced Stock Fund
536,469 units 12,758,815 12,145,657
Putnam Investments The George Putnam Fund of Boston A
3,618,142 units 65,350,568 58,903,350
Putnam Voyager Fund A
1,049,880 units 24,640,405 32,504,284
T. Rowe Price T. Rowe Price Blue Chip Growth Fund
8,522,756 units 204,281,684 309,716,959
T. Rowe Price New Income Fund
3,347,849 units 29,528,073 27,318,451
T. Rowe Price Mid-Cap Growth Fund
1,793,137 units 54,127,663 71,958,582
T. Rowe Price Dividend Growth Fund
472,964 units 9,842,083 9,558,598
Franklin Templeton Franklin Small Cap Growth Fund A
1,059,972 units 29,080,849 46,776,548
Templeton Developing Markets Trust A
709,924 units 9,793,218 11,081,911
The Vanguard Group Vanguard U.S. Growth Portfolio
3,259,531 units 107,988,062 141,887,383
The American Funds Group EuroPacific Growth Fund
1,753,885 units 54,291,345 74,820,742
*Participants' Loan Account (with interest
rates ranging from 6.5% to 12.5% and with
maturities through 2029) 36,773,123 36,773,123
-------------- --------------
Total $1,648,526,159 $2,907,375,673
============== ==============
</TABLE>
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* Denotes a party-in-interest to the Plan.
The accompanying notes to financial statements are an integral part of this
schedule.
8
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EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated June 12, 2000 included in the financial
statements and exhibits required by Form 11-K Annual Report for the Merck & Co.,
Inc. Employee Savings and Security Plan into the Company's previously filed
Registration Statements on Form S-8 (Nos. 33-21087, 33-21088, 33-36101,
33-40177, 33-51235, 33-53463, 33-64273, 33-64665, 333-23293, 333-23295,
333-91769, 333-30526 and 333-31762), on Form S-4 (No. 33-50667) and on Form S-3
(Nos. 33-60322, 33-39349, 33-51785, 33-57421, 333-17045, 333-36383 and
333-77569). It should be noted that we have not audited any financial statements
of the Plan subsequent to December 31, 1999 or performed any audit procedures
subsequent to the date of our report.
ARTHUR ANDERSEN LLP
New York, New York
June 27, 2000
