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Merck Announces Second-Quarter 2012 Financial Results

Stocks in this article: MRK

Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck’s 2011 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site ( www.sec.gov).

1 Merck is providing certain 2012 and 2011 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For a description of the items, see Table 2a including the related footnotes, attached to this release.

2 Net income attributable to Merck & Co., Inc.

3 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS which may be different than the amount calculated by dividing the impact of the excluded items by the weighted average shares.

4 Includes expenses for the amortization of intangible assets and amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions, as well as intangible asset impairment charges. Also includes integration and other costs associated with mergers and acquisitions.

5 Includes an estimated income tax (benefit) expense on the reconciling items. The second quarter of 2011 also includes the net favorable impact of approximately $700 million relating to the settlement of a federal income tax audit, as well as the favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting.

6

   

$ in millions

 

SecondQuarter2012

 

SecondQuarter2011

 

Change

Pharmaceutical sales as reported   $10,560   $10,360   2%
Sales of REMICADE and SIMPONI in the territories transferred     (306)    
Pharmaceutical sales as adjusted   $10,560   $10,054   5%
 
 
 

MERCK & CO., INC. CONSOLIDATED STATEMENT OF OPERATIONS - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 1

 

               
       
GAAP % Change GAAP % Change
2Q12   2Q11 YTD 2012   YTD 2011
Sales $ 12,311   $ 12,151 1% $ 24,041   $ 23,732 1%
 
Costs, Expenses and Other
Materials and production (1) 4,112 4,284 -4% 8,150 8,343 -2%
Marketing and administrative (1) 3,249 3,525 -8% 6,322 6,689 -5%
Research and development (1) 2,165 1,936 12% 4,026 4,094 -2%
Restructuring costs (2) 144 668 -78% 363 654 -44%
Equity income from affiliates (3) (142 ) (55 ) * (253 ) (193 ) 31%
Other (income) expense, net (1) / (4) 103 121 -15% 247 744 -67%
 
Income Before Taxes 2,680 1,672 60% 5,186 3,401 52%
Income Tax Provision (Benefit) 860 (382 ) 1,599 276
Net Income 1,820 2,054 -11% 3,587 3,125 15%
Less: Net Income Attributable to Noncontrolling Interests 27 30 56 58
Net Income Attributable to Merck & Co., Inc. $ 1,793 $ 2,024 -11% $ 3,531 $ 3,067 15%
Earnings per Common Share Assuming Dilution (5) $ 0.58     $ 0.65   -11% $ 1.15     $ 0.98   17%
           
Average Shares Outstanding Assuming Dilution 3,072       3,110 3,074       3,106
Tax Rate (6)   32.1 %     -22.8 %   30.8 %     8.1 %
 
 
*100% or greater
(1) Amounts include the impact of acquisition-related costs and restructuring costs. See accompanying tables for details.
 
(2) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs.
 
(3) Primarily reflects equity income from the AstraZeneca LP and Sanofi Pasteur MSD partnerships.
 
(4) Other (income) expense, net in the first six months of 2011 includes a charge of $500 million related to the resolution of the arbitration proceeding with Johnson & Johnson and a $127 million gain on the sale of certain manufacturing facilities and related assets.
 
(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate earnings per common share assuming dilution was $1,792 million and $2,020 million for the second quarter of 2012 and 2011, respectively, and was $3,528 million and $3,059 million for the first six months of 2012 and 2011, respectively.
 
(6) The GAAP effective tax rates for the second quarter and first six months of 2012 were 32.1% and 30.8%, respectively. Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 25.8% and 25.3% for the second quarter and first six months of 2012, respectively. The GAAP effective tax rates for the second quarter and first six months of 2011 were (22.8)% and 8.1%, respectively. Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 24.3% and 24.9% for the second quarter and first six months of 2011, respectively.
 
 

MERCK & CO., INC. CONSOLIDATED STATEMENT OF OPERATIONS GAAP TO NON-GAAP RECONCILIATION SECOND QUARTER 2012 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2a

                             
GAAP

Acquisition- Related Costs (1)

Restructuring Costs (2)

Adjustment Subtotal

Non-GAAP
Sales $ 12,311 $ - $ 12,311
 
Costs, Expenses and Other
Materials and production 4,112

 

1,226

 

83

1,309 2,803
 
Marketing and administrative 3,249 64 21 85 3,164
 
Research and development 2,165 127 41 168 1,997
 
Restructuring costs 144 144 144 -
 
Equity income from affiliates (142 ) - (142 )
 
Other (income) expense, net 103 - 103
 
Income Before Taxes 2,680 (1,417 ) (289 ) (1,706 ) 4,386
 
Taxes on Income 860 (272 )

(3)

1,132
 
Net Income 1,820 (1,434 ) 3,254
 
Less: Net Income Attributable to Noncontrolling Interests 27 - 27
 
Net Income Attributable to Merck & Co., Inc. $ 1,793 $ (1,434 ) $ 3,227
 
Earnings per Common Share Assuming Dilution $ 0.58   $ 1.05  

(4)

   
Average Shares Outstanding Assuming Dilution 3,072 3,072
Tax Rate   32.1 %   25.8 %
Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
 
(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets recognized as a result of mergers and acquisitions. Amounts included in marketing and administrative expenses reflect merger integration costs. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.
 
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
 
(3) Represents the estimated tax impact on the reconciling items.
 
(4) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $3,226 million for the second quarter of 2012.
 
 

MERCK & CO., INC. CONSOLIDATED STATEMENT OF OPERATIONS GAAP TO NON-GAAP RECONCILIATION SIX MONTHS ENDED JUNE 30, 2012 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b

 
                           
GAAP

Acquisition- Related Costs (1)

Restructuring Costs (2)

Adjustment Subtotal

Non-GAAP
   
Sales $ 24,041 $ - $ 24,041
 
Costs, Expenses and Other
Materials and production 8,150

 

2,455

 

88

2,543 5,607
 
Marketing and administrative 6,322 115 45 160 6,162
 
Research and development 4,026 136 86 222 3,804
 
Restructuring costs 363 363 363 -
 
Equity income from affiliates (253 ) - (253 )
 
Other (income) expense, net 247 - 247
 
Income Before Taxes 5,186 (2,706 ) (582 ) (3,288 ) 8,474
 
Taxes on Income 1,599 (548 )

(3)

2,147
 
Net Income 3,587 (2,740 ) 6,327
 
Less: Net Income Attributable to Noncontrolling Interests 56 - 56
 
Net Income Attributable to Merck & Co., Inc. $ 3,531 $ (2,740 ) $ 6,271
 
Earnings per Common Share Assuming Dilution $ 1.15   $ 2.04  

(4)

   
Average Shares Outstanding Assuming Dilution 3,074 3,074
Tax Rate   30.8 %   25.3 %
Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
 
(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets recognized as a result of mergers and acquisitions. Amounts included in marketing and administrative expenses reflect merger integration costs. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.
 
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
 
(3) Represents the estimated tax impact on the reconciling items.
 
(4) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $6,266 million for the first six months of 2012.
 
     

MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES (AMOUNTS IN MILLIONS) Table 3

 
     
2012 2011 % Change   % Change
             
1Q   2Q   Jun YTD 1Q   2Q   Jun YTD   3Q   4Q   Full Year 2Q   Jun YTD
TOTAL SALES (1) $11,731   $12,311   $24,041 $11,580   $12,151   $23,732   $12,022   $12,294   $48,047 1   1
PHARMACEUTICAL 10,082 10,560 20,642 9,820 10,360 20,179 10,354 10,755 41,289 2 2
 
Primary Care and Women's Health
Cardiovascular
Zetia 614 632 1,246 582 592 1,174 614 640 2,428 7 6
Vytorin 444 445 889 480 459 939 469 475 1,882 -3 -5
 
Diabetes & Obesity
Januvia 919 1,058 1,977 739 779 1,518 846 960 3,324 36 30
Janumet 392 411 802 305 321 626 350 386 1,363 28 28
 
Respiratory
Singulair 1,340 1,431 2,771 1,328 1,354 2,682 1,336 1,461 5,479 6 3
Nasonex 375 293 668 373 323 696 266 325 1,286 -9 -4
Clarinex 134 140 273 155 209 364 128 129 621 -33 -25
Asmanex 48 51 99 60 47 107 42 57 206 8 -8
Dulera 39 50 89 13 25 37 22 37 96 * *
 
Women's Health & Endocrine
Fosamax 184 186 370 208 221 429 215 211 855 -16 -14
NuvaRing 146 157 303 142 154 297 159 168 623 2 2
Follistim AQ 116 125 241 133 143 276 129 126 530 -12 -13
Implanon 76 85 161 60 81 141 80 74 294 5 14
Cerazette 67 72 139 59 66 125 74 69 268 9 11
 
Other
Maxalt 156 154 310 173 131 304 156 178 639 17 2
Arcoxia 112 117 229 114 100 214 108 110 431 17 7
Avelox 73 44 117 106 61 167 59 95 322 -28 -30
 
Hospital and Specialty
 
Immunology
Remicade 519 518 1,037 753 842 1,595 561 511 2,667 -38 -35
Simponi 74 76 150 54 75 129 74 61 264 1 16
 
Infectious Disease
Isentress 337 398 735 292 337 629 343 387 1,359 18 17
PegIntron 162 183 345 166 154 319 163 175 657 19 8
Cancidas 145 166 311 158 168 326 150 164 640 -1 -4
Victrelis 111 126 238 1 21 22 31 87 140 * *
Invanz 101 110 211 87 103 189 107 110 406 7 12
Primaxin 88 104 192 136 136 272 124 119 515 -24 -30
Noxafil 59 66 125 55 56 110 61 59 230 19 13
 
Oncology
Temodar 237 225 461 248 234 481 223 230 935 -4 -4
Emend 102 145 247 87 120 207 98 114 419 21 19
 
Other
Cosopt / Trusopt 124 105 229 114 122 236 124 117 477 -14 -3
Bridion 58 60 118 41 47 89 52 60 201 27 33
Integrilin 53 60 113 64 56 120 53 57 230 7 -6
 
Diversified Brands
Cozaar / Hyzaar 336 337 674 426 406 832 404 427 1,663 -17 -19
Propecia 108 100 208 106 112 218 112 117 447 -11 -5
Zocor 103 96 199 127 107 234 110 111 456 -10 -15
Claritin Rx 87 48 134 120 65 186 55 74 314 -27 -28
Remeron 57 66 123 60 57 117 65 59 241 16 5
Proscar 51 55 106 60 53 113 58 52 223 4 -6
Vasotec / Vaseretic 53 49 102 57 59 116 57 58 231 -18 -12
 
Vaccines
Gardasil 284 324 608 214 277 490 445 274 1,209 17 24
ProQuad, M-M-R II and Varivax 255 316 571 244 291 535 391 276 1,202 9 7
RotaTeq 142 142 284 125 148 272 184 195 651 -4 4
Zostavax 76 148 224 24 122 146 108 78 332 22 54
Pneumovax 112 101 213 79 64 143 133 222 498 57 49
 
Other Pharmaceutical (2) 1,013 985 2,000 892 1,064 1,957 1,018 1,064 4,038 -7 2
 
 
ANIMAL HEALTH 821 865 1,686 758 802 1,560 826 868 3,253 8 8
 
CONSUMER CARE 554 552 1,106 517 541 1,058 421 361 1,840 2 5
Claritin OTC 169 145 314 167 134 301 118 92 511 8 4
 
Other Revenues (3) 274 333 608 486 448 935 421 310 1,666 -26 -35
Astra 186   223   409 322   306   628   299   256   1,184 -27   -35
 
* 100% or greater
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
(1) Only select products are shown.
(2) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $60 million and $75 million for the first and second quarters of 2012, respectively. Other Vaccines sales included in Other Pharmaceutical were $54 million, $67 million, $100 million and $62 million for the first, second, third and fourth quarters of 2011, respectively.

(3) Other revenues are primarily comprised of alliance revenue, miscellaneous corporate revenues and third party manufacturing sales.





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