SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section of 15 (d) of the
Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from January 1, 2001 to December 31, 2001
Commission File Number: 1-3305
Employer Identification Number: 66-0288298
Plan Number: 061
MERCK PUERTO RICO EMPLOYEE SAVINGS AND SECURITY PLAN
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(Full title of the plan)
MERCK & CO., INC.
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(Name of issuer of the securities held pursuant to the plan)
P.O. BOX 100
Whitehouse Station, New Jersey 08889-0100
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(Address of principal executive office)
Merck Puerto Rico Employee Savings and Security Plan
Employer Identification Number: 66-0288298
Plan Number: 061
INDEX
Page
REPORT OF INDEPENDENT ACCOUNTANTS 1-2
FINANCIAL STATEMENTS
Statement of Net Assets Available for Benefits as
of December 31, 2001 and 2000 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001 4
NOTES TO FINANCIAL STATEMENTS 5-8
SUPPLEMENTAL SCHEDULE*
H - Line 4i - Schedule of Assets (Held at End of Year) 9
SIGNATURE 10
CONSENT OF INDEPENDENT ACCOUNTANTS 11
*Other schedules required by Section 2520.103-8 are omitted because they are not
required.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Merck & Co., Inc.:
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Merck Puerto Rico Employee Savings and Security Plan (the "Plan") as of
December 31, 2001 and the changes in net assets available for benefits for the
year ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, which 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, assessing
the accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose 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. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit 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.
The Schedule of Assets (Held at End of Year) that accompanies the Plan's
financial statements does not disclose the historical cost of certain
nonparticipant directed plan assets held by the Plan's trustee. Disclosure of
this information is required by the Department of Labor's Rules and Regulations
for Reporting and Disclosure under the Employee Retirement Income Security Act
of 1974.
PricewaterhouseCoopers LLP
San Juan, PR
May 3, 2002
1
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY
ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merck Sharp & Dohme Quimica de Puerto Rico, Inc. and
Merck Sharp & Dohme (I.A.) Corp.:
We have audited the accompanying statement of net assets available for benefits
of the Merck Puerto Rico Employee Savings and Security Plan (the "Plan") as of
December 31, 2000 and 1999, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2000. 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, 2000 and 1999, and the changes in its net assets available for
benefits for the year ended December 31, 2000, 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 audit 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
San Juan, Puerto Rico
May 4, 2001
2
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, DECEMBER 31,
ASSETS 2001 2000
------------- -------------
Investments at market value $ 29,831,972 $ 41,733,662
Investments at contract value 2,103,597 2,055,578
------------- -------------
Total investments 31,935,569 43,789,240
------------- -------------
Receivables
Employer's contribution 40,915 90,157
Participants' contributions 144,925 323,019
Accrued interest and dividends 159,598 149,916
------------- -------------
Total receivables 345,438 563,092
------------- -------------
Net assets available for benefits $ 32,281,007 $ 44,352,332
============= =============
The accompanying notes to financial statements are an integral part of these
financial statements.
3
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED
DECEMBER 31, 2001
-----------------
Additions to net assets attributed to
Investment income
Net depreciation in market value of investments $ (14,751,966)
Interest and dividends 795,883
--------------
Total investment income (loss) (13,956,083)
--------------
Contributions to the Plan
By participants 4,347,687
By the employer 1,165,468
--------------
Total contributions 5,513,155
--------------
Total additions (deductions) (8,442,928)
--------------
Deductions from net assets attributed to
Benefits paid to participants (3,628,397)
--------------
Net (decrease) (12,071,325)
--------------
Net assets available for benefits
Beginning of year 44,352,332
--------------
End of year $ 32,281,007
==============
The accompanying notes to financial statements are an integral part of these
financial statements.
4
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN:
The following description of the Merck Puerto Rico 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.
General
The Plan is a profit sharing plan designed to provide an opportunity for
employees of Merck Sharp & Dohme Quimica de Puerto Rico, Inc. and Merck Sharp &
Dohme (I.A.) Corp. (the "Companies") to become stockholders of Merck & Co., Inc.
("Merck") and to encourage them to save on a regular basis by setting aside part
of their earnings. Regular full-time and part-time employees of the Companies,
as defined in the Plan document, who are not covered by a collective bargaining
agreement, are eligible to enroll in the Plan on the first day of January or
July, following the completion of one year of service.
The Plan is administered by the Employee Benefits Committee appointed by the
President of the Companies. All costs of administering the Plan are borne by the
Companies.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
Contributions
Participants may contribute from 2% up to 15% of their base pay, provided
that pre-tax contributions shall not exceed 10% of base compensation, subject
to ERISA limits. In addition, the Companies match 50% of employee contributions
up to 5% of base pay per pay period. The Companies' matching contributions are
invested entirely in the Merck Common Stock Fund (non-participant directed) and
may not be reallocated into any other investment option.
Participants direct the investment of their contributions into any
investment option including the Merck Common Stock Fund (participant directed).
During 2001, the Plan offered 21 mutual funds and the Merck Common Stock Fund.
Effective January 1, 2002, the Plan offers 20 mutual funds and the Merck Common
Stock Fund.
Participant Accounts
Each participant's account is credited with the participant's contribution,
the Companies' matching contribution and allocation of Plan earnings. The
allocation is based on participants' account balances, as defined in the Plan
document.
Vesting
Participants are immediately vested in their contributions, all of the
Companies' 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 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.
Payment of Benefits
Participants are entitled to receive automatic, voluntary, in-service (which
include hardship withdrawals), or mandatory distributions as provided in the
applicable Plan provisions.
2. SUMMARY OF ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of
accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reported period. Management believes that these
estimates are adequate. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
The investments of the Plan are stated at quoted market prices in an active
market (except for participant loans which are presented at the outstanding
balance). Shares of mutual funds are presented at quoted market prices which
represent the net asset value of the shares held by the Plan at the reporting
date.
Purchases and sales of securities are recorded on a trade-date basis.
Dividend income is recorded on the ex-dividend date. The Plan presents in the
statement of changes in assets available for benefits the net appreciation
(depreciation) in the fair value of its investments which consists of the
realized gains or losses and the unrealized appreciation (depreciation) on them.
Contributions
Employee and Company matching contributions are recorded in the period in
which the Company makes the payroll deductions from the participant earnings.
Payment of Benefits
Benefits are recorded when paid.
Transfer of Assets to Other Plans
Company employees or retirees may elect to transfer their savings to other
plans qualified by the Puerto Rico Department of Treasury or by the U.S.
Internal Revenue Service.
Risks and Uncertainties
The Plan provides for various investment options in investment securities.
Investment securities, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility. Due to the level of risk
associated with certain investment securities, it is reasonably possible that
changes in the values of investment securities will occur in the near term and
that such changes could materially affect the amounts reported in the statement
of net assets available for benefits.
6
Reclassifications
Certain reclassifications have been made to prior year amounts to conform
with current year presentation.
3. INVESTMENTS:
The following presents investments that represent 5% or more of the Plan's
net assets as of year-end.
DECEMBER 31, DECEMBER 31,
2001 2000
---------------- ---------------
Merck Common Stock $ 26,241,792 * $ 38,318,297 *
Participant loan 2,103,597 **
----------
* Includes non-participant directed portion
** This investment did not represent 5% of the Plan's net assets as of December
31, 2000.
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated in
value by ($14,751,966) as follows:
Mutual Funds $ (506,194)
Merck Common Stock (14,245,772)
-------------
$ (14,751,966)
=============
4. 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:
DECEMBER 31, DECEMBER 31,
2001 2000
-------------- ------------
Net Assets
Merck Common Stock Fund $ 8,399,740 $ 12,457,228
-------------- ------------
YEAR ENDED
DECEMBER 31, 2001
-----------------
Changes in Net Assets
Contributions $ 1,153,008
Dividends and interest 241,118
Net depreciation (4,572,793)
Benefits paid to participants (888,153)
Transfers to participant directed investments
and other Plans 9,332
------------
$ (4,057,488)
============
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5. 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.
6. PLAN TERMINATION:
Although they have not expressed any intent to do so, the Companies have the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
7. TAX STATUS:
The Plan obtained a tax determination letter from the Puerto Rico Department
of Treasury dated February 18, 1998 indicating that it had been designed in
accordance with applicable sections of the Puerto Rico Internal Revenue Code of
1994 ("PRIRC"). The Plan sponsor and legal counsel believe that the Plan is
designed and operated in compliance with the PRIRC. The Plan sponsor also
believes that the Plan is designed and currently operated as a qualified plan
under the United States Internal Revenue Code. However, the Plan has been
amended since the receipt of the determination letter. A favorable determination
letter was received from the Internal Revenue Service in November, 1998.
Therefore, no provision for income taxes has been made.
8
SCHEDULE H
EIN: 66-0288298
PLAN NO.: 061
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
LINE 4i -- SCHEDULE OF ASSETS (HELD AT END OF YEAR)
(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
--- ------------------------------------ -------------------------------------------- -------- -----------
* Merck & Co., Inc. Merck Common Stock ** $26,241,792
* Fidelity Investments Fidelity Equity-Income Fund *** 116,494
Fidelity Retirement Money Market Fund *** 541,579
Fidelity Spartan U.S. Equity Index Fund *** 138,321
Fidelity Spartan Government Income Fund *** 10,001
Fidelity Low-Priced Stock Fund *** 147,086
Fidelity Dividend Growth Fund *** 453,198
Putnam Investments Putnam Vista A Fund *** 245,824
Putnam International Voyager Fund *** 5,673
Putnam Global Equity Fund A *** 3,222
T. Rowe Price T. Rowe Price Blue Chip Growth Fund *** 859,390
The Vanguard Group Vanguard Asset Allocation Fund *** 193,938
The Capital Group Company American Funds Europacific A *** 217,395
American Century Investment American Century Emerging Markets
Services, Inc. Investments Fund *** 36,423
Franklin Templeton Franklin Small-Mid Cap Growth Fund A *** 160,941
Liberty Wagner Asset Management, L.P. Liberty Acorn Fund - Class Z *** 588
Janus Janus Enterprise Fund *** 8,007
Janus Growth and Income Fund *** 410,439
PIMCO PIMCO Total Return Fund - Institutional Class *** 32,805
PIMCO Long-Term US Government Fund -
Institutional Class *** 8,856
PIMCO Foreign Bond Fund - Institutional Class -
* Participants' Loans Interest rates ranging from 6.5% to 10.5%
and with maturities through 2012 2,103,597
-----------
Total $31,935,569
===========
----------
* Denotes a party-in-interest to the Plan.
** Historical cost is not available from the Trustee.
*** Cost is not required for participant directed investments.
The accompanying notes to financial statements are an integral part of this
schedule.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
undersigned plan administrator has duly caused this annual report to be signed
on behalf of the Merck Puerto Rico Employee Savings and Security Plan by the
undersigned thereunto duly authorized.
Merck & Co., Inc., as
plan administrator
By: /s/ CAROLINE DORSA
-----------------------
Caroline Dorsa
Vice President
& Treasurer
June 27, 2002
10
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated May 3, 2002 included in the financial
statements and exhibits required by Form 11-K Annual Report for the Merck
Puerto Rico Employee Savings and Security Plan into the previously filed
Registration Statements of Merck & Co., Inc. on Forms 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, 333-31762, 333-40282, 333-52264,
333-53246, 333-56696, 333-72206 and 333-65796), on Forms S-4 (No. 33-50667 and
333-61982) and on Forms S-3 (Nos. 33-60322, 33-39349, 33-51785, 33-57421,
333-17045, 333-36383, 333-77569 and 333-72546). It should be noted that we have
not audited any financial statements of the Plan subsequent to December 31,
2001 or performed any audit procedures subsequent to the date of our report.
PricewaterhouseCoopers LLP
San Juan, Puerto Rico
May 3, 2002
11