EX-99.2
3
mrkex-992.htm
EXHIBIT 99.2 MERCK'S UNAUDITED PRO FORMA FINANCIAL INFORMATION
MRK EX-99.2
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%.

EX - 99 . 2 3 mrkex - 992 . htm EXHIBIT 99 . 2 MERCK 'S UNAUDITED PRO FORMA FINANCIAL INFORMATION MRK EX - 99 . 2 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 Non controlling 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 % .