Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Merck & Co., Inc. | a8-kmccclose.htm |
| EX-99.1 - EXHIBIT 99.1 PRESS RELEASE OCT 1 2014 - Merck & Co., Inc. | mrkex-991.htm |
Exhibit 99.2
MERCK & CO., INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On October 1, 2014, Merck & Co., Inc. (“Merck” or the “Company”) completed the previously announced sale of Merck’s Consumer Care (“MCC”) business to Bayer AG (“Bayer”). Bayer acquired Merck’s existing over-the-counter business, including the global trademark and prescription rights for Claritin and Afrin.
The following unaudited pro forma consolidated financial statements give effect to the divestiture as if it had been completed on January 1, 2013 for income statement purposes, and as if it had been completed on June 30, 2014 for balance sheet purposes, subject to the assumptions and adjustments as described in the accompanying notes. The unaudited pro forma consolidated financial statements were prepared in accordance with the regulations of the Securities and Exchange Commission (the “SEC”) and should not be considered indicative of the financial position or results of operations that would have occurred if the divestiture had been consummated on the dates indicated, nor are they indicative of the future financial position or results of operations of the Company.
In accordance with SEC regulations, the unaudited pro forma consolidated financial statements reflect adjustments to the extent they are directly attributable to the divestiture, factually supportable and, for income statement purposes, are expected to have a continuing impact on Merck’s operating results.
The unaudited pro forma consolidated financial statements are based upon and should be read in conjunction with the historical consolidated financial statements of Merck included in its Annual Report on Form 10-K for the year ended December 31, 2013 and Quarterly Report on Form 10-Q for the three and six months ended June 30, 2014.
MERCK & CO., INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2014
($ in millions except per share amounts)
As Reported | Pro Forma Adjustments | As Adjusted | |||||||||
Assets | |||||||||||
Current Assets | |||||||||||
Cash and cash equivalents | $ | 9,743 | $ | 14,140 | (a) | $ | 23,883 | ||||
Short-term investments | 3,652 | — | 3,652 | ||||||||
Accounts receivable | 7,022 | — | 7,022 | ||||||||
Inventories | 6,136 | — | 6,136 | ||||||||
Deferred income taxes and other current assets | 3,659 | — | 3,659 | ||||||||
Assets held for sale | 3,375 | (3,292 | ) | (b) | 83 | ||||||
Total current assets | 33,587 | 10,848 | 44,435 | ||||||||
Investments | 12,618 | — | 12,618 | ||||||||
Property, Plant and Equipment, at cost, net | 13,893 | — | 13,893 | ||||||||
Goodwill | 11,789 | — | 11,789 | ||||||||
Other Intangibles, Net | 18,830 | — | 18,830 | ||||||||
Other Assets | 7,143 | — | 7,143 | ||||||||
$ | 97,860 | $ | 10,848 | $ | 108,708 | ||||||
Liabilities and Equity | |||||||||||
Current Liabilities | |||||||||||
Loans payable and current portion of long-term debt | $ | 4,477 | $ | — | $ | 4,477 | |||||
Trade accounts payable | 2,326 | — | 2,326 | ||||||||
Accrued and other current liabilities | 8,829 | — | 8,829 | ||||||||
Income taxes payable | 192 | 4,778 | (c) | 4,970 | |||||||
Dividends payable | 1,303 | — | 1,303 | ||||||||
Liabilities held for sale | 801 | (801 | ) | (b) | — | ||||||
Total current liabilities | 17,928 | 3,977 | 21,905 | ||||||||
Long-Term Debt | 18,590 | — | 18,590 | ||||||||
Deferred Income Taxes | 4,651 | — | 4,651 | ||||||||
Other Noncurrent Liabilities | 8,175 | — | 8,175 | ||||||||
Merck & Co., Inc. Stockholders’ Equity | |||||||||||
Common stock | 1,788 | — | 1,788 | ||||||||
Other paid-in capital | 40,199 | — | 40,199 | ||||||||
Retained earnings | 40,366 | 6,909 | (d) | 47,275 | |||||||
Accumulated other comprehensive loss | (2,444 | ) | (38 | ) | (d) | (2,482 | ) | ||||
79,909 | 6,871 | 86,780 | |||||||||
Less treasury stock, at cost | 31,551 | — | 31,551 | ||||||||
Total Merck & Co., Inc. stockholders’ equity | 48,358 | 6,871 | 55,229 | ||||||||
Noncontrolling Interests | 158 | — | 158 | ||||||||
Total equity | 48,516 | 6,871 | 55,387 | ||||||||
$ | 97,860 | $ | 10,848 | $ | 108,708 | ||||||
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
MERCK & CO., INC.
UNAUDITED PRO FORMA INTERIM CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2014
($ in millions except per share amounts)
As Reported | Pro Forma Adjustments | As Adjusted | |||||||||
Sales | $ | 21,198 | $ | (1,233 | ) | (e) | $ | 19,965 | |||
Costs, Expenses and Other | |||||||||||
Materials and production | 8,796 | (452 | ) | (e) | 8,344 | ||||||
Marketing and administrative | 5,707 | (403 | ) | (e) | 5,304 | ||||||
Research and development | 3,238 | (34 | ) | (e) | 3,204 | ||||||
Restructuring costs | 288 | — | 288 | ||||||||
Equity income from affiliates | (217 | ) | — | (217 | ) | ||||||
Other (income) expense, net | (596 | ) | — | (596 | ) | ||||||
17,216 | (889 | ) | 16,327 | ||||||||
Income Before Taxes | 3,982 | (344 | ) | 3,638 | |||||||
Taxes on Income | 218 | (131 | ) | (f) | 87 | ||||||
Net Income | 3,764 | (213 | ) | 3,551 | |||||||
Less: Net Income Attributable to Noncontrolling Interests | 55 | — | 55 | ||||||||
Net Income Attributable to Merck & Co., Inc. | $ | 3,709 | $ | (213 | ) | $ | 3,496 | ||||
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders | $ | 1.27 | $ | (0.07 | ) | $ | 1.20 | ||||
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders | $ | 1.25 | $ | (0.07 | ) | $ | 1.18 | ||||
Weighted average common shares used to calculate earnings per share: | |||||||||||
Basic | 2,925 | 2,925 | |||||||||
Diluted | 2,957 | 2,957 | |||||||||
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
MERCK & CO., INC.
UNAUDITED PRO FORMA INTERIM CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2013
($ in millions except per share amounts)
As Reported | Pro Forma Adjustments | As Adjusted | |||||||||
Sales | $ | 44,033 | $ | (2,199 | ) | (e) | $ | 41,834 | |||
Costs, Expenses and Other | |||||||||||
Materials and production | 16,954 | (775 | ) | (e) | 16,179 | ||||||
Marketing and administrative | 11,911 | (718 | ) | (e) | 11,193 | ||||||
Research and development | 7,503 | (65 | ) | (e) | 7,438 | ||||||
Restructuring costs | 1,709 | (5 | ) | (e) | 1,704 | ||||||
Equity income from affiliates | (404 | ) | — | (404 | ) | ||||||
Other (income) expense, net | 815 | — | 815 | ||||||||
38,488 | (1,563 | ) | 36,925 | ||||||||
Income Before Taxes | 5,545 | (636 | ) | 4,909 | |||||||
Taxes on Income | 1,028 | (242 | ) | (f) | 786 | ||||||
Net Income | 4,517 | (394 | ) | 4,123 | |||||||
Less: Net Income Attributable to Noncontrolling Interests | 113 | — | 113 | ||||||||
Net Income Attributable to Merck & Co., Inc. | $ | 4,404 | $ | (394 | ) | $ | 4,010 | ||||
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders | $ | 1.49 | $ | (0.13 | ) | $ | 1.36 | ||||
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders | $ | 1.47 | $ | (0.13 | ) | $ | 1.34 | ||||
Weighted average common shares used to calculate earnings per share: | |||||||||||
Basic | 2,963 | 2,963 | |||||||||
Diluted | 2,996 | 2,996 | |||||||||
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
MERCK & CO., INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents cash proceeds of $14.2 billion expected to be received in the divestiture less estimated transaction costs of $60 million.
(b) Adjustment to reflect the decrease in assets and liabilities held for sale.
(c) Represents estimated taxes payable on the gain on disposition at the blended statutory rate of 38%.
(d) The estimated net gain recognized upon disposition was calculated as follows:
($ in millions) | |||||||
Cash proceeds | $ | 14,200 | |||||
Less: | Carrying value of MCC business (excluding deferred tax liabilities of $543) | (3,034 | ) | ||||
Estimated costs incurred directly attributable to the divestiture | (60 | ) | |||||
Plus: | Realization of cumulative translation adjustment | 38 | |||||
Estimated gain before taxes | 11,144 | ||||||
Estimated taxes on gain (at blended statutory rate of 38%) | 4,235 | ||||||
Estimated gain net of taxes | $ | 6,909 | |||||
(e) Adjustment to eliminate the historical sales and direct expenses of MCC, including branded prescription sales of Claritin and Afrin and related cost of sales, from the Company’s consolidated statement of income.
(f) Represents estimated taxes at the blended statutory rate of 38%.