1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________________ to _______________________
Commission File Number: 1-08734
Employer Identification Number: 22-3461740
Plan Number: 003
MERCK-MEDCO MANAGED CARE 401 (k) SAVINGS PLAN
____________________________________________________________
(Full title of the plan)
MERCK & CO., INC.
____________________________________________________________
(Name of issuer of the securities held pursuant to the plan)
P.O. Box 100
Whitehouse Station, New Jersey 08889-0100
____________________________________________________________
(address of principal executive office)
2
Merck-Medco Managed Care 401 (k) Savings Plan
Employer Identification Number: 22-3461740
Plan Number: 003
INDEX
Page
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Statement of Net Assets Available for Benefits as of December 31, 2000 and 1999 2
Statement of Changes in Net Assets Available for Benefits for the Year Ended
December 31, 2000 3
NOTES TO FINANCIAL STATEMENTS 4 - 8
SUPPLEMENTAL SCHEDULE
H - Line 4i - Schedule of Assets Held for Investment Purposes as of
December 31, 2000 9
SIGNATURE PAGE 10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 11
3
Merck-Medco Managed Care 401(k) Savings Plan
Financial Statements as of December 31, 2000 and 1999
Together with
Report of Independent Public Accountants
4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefits Committee of
Merck-Medco Managed Care 401 (k) Savings Plan:
We have audited the accompanying statement of net assets available for benefits
of the Merck-Medco Managed Care 401 (k) Savings 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
administrator. 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 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
May 18, 2001
1
5
MERCK-MEDCO MANAGED CARE 401 (k) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
------------------------------------
2000 1999
------------ ------------
Assets:
Investments at market value $415,544,253 $316,782,812
------------ ------------
Receivables:
Employer's contribution 1,012,329 594,338
Participants' contributions 1,257,041 1,018,482
Accrued dividends 864,334 827,251
------------ ------------
Total receivables 3,133,704 2,440,071
------------ ------------
Net assets available for benefits $418,677,957 $319,222,883
============ ============
The accompanying notes are an integral part of this financial statement.
2
6
MERCK-MEDCO MANAGED CARE 401 (k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 31, 2000
-------------
Additions to net assets attributed to:
Investment income:
Net appreciation in market value of investments $ 49,306,346
Interest 679,484
Dividends 14,002,476
-------------
Total investment income 63,988,306
-------------
Contributions to the Plan:
By participants 34,521,488
By the employer 14,442,018
-------------
Total contributions 48,963,506
-------------
Total additions 112,951,812
-------------
Deductions from net assets attributed to:
Benefits paid to participants (19,359,098)
-------------
Net reallocations among Plans 5,862,360
-------------
Total deductions and net reallocations among Plans (13,496,738)
-------------
Net increase 99,455,074
Net assets available for benefits:
Beginning of year 319,222,883
-------------
End of year $ 418,677,957
=============
The accompanying notes are an integral part of this financial statement.
3
7
MERCK-MEDCO MANAGED CARE 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE PLAN
The following description of the Merck-Medco Managed Care 401(k)
Savings Plan (the "Plan") provides only general information. More
complete information regarding the Plan's provisions may be found in
the Plan document.
GENERAL
Effective January 1, 1989, Medco Containment Services, Inc., which
changed its name and corporate structure to Merck-Medco Managed Care,
L.L.C. (the "Company"), effective January 1, 1997, established the Plan
under the provisions of Section 401(a) of the Internal Revenue Code
("IRC"), which includes a qualified cash or defined arrangement as
described in Section 401(k) of the IRC, for the benefit of eligible
employees of the Company. The Plan is a defined contribution plan
covering substantially all employees of the Company and certain
subsidiaries, other than certain employees subject to collective
bargaining agreements, who have completed one year of service and
attained the age of twenty-one. Participation in the Plan is voluntary.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
The Plan was amended as a result of the merger, effective November 18,
1993, by and between the Company and a subsidiary of Merck & Co., Inc.
("Merck"). The amendment provided participants with an option to invest
all or part of their contributions in the common stock of Merck.
Effective January 1, 1998, the Plan was amended to reflect various
statutory changes and to provide participants the ability to direct the
investment of Company matching contributions in any of the available
investment options.
The Plan is administered by the Employee Benefits Committee, which is
appointed by the Board of Managers of the Company. All costs of
administering the Plan are borne by the Company.
CONTRIBUTIONS
Each year, participants may contribute an amount up to 15% of base
compensation, as defined by the Plan (up to 10% if a highly compensated
employee as defined by the IRC) subject to certain limitations under
the IRC. Participants direct the investment of their contributions into
various investment options offered by the Plan, with a minimum
investment of 1% in any investment medium. Fidelity Management Trust
Company ("Fidelity") is the trustee of the Plan. As of December 31,
2000, the Plan offered 15 mutual funds and the Merck Common Stock Fund.
Effective February 1, 2001, the Plan offers 22 investment options: 21
mutual funds and the Merck Common Stock Fund.
The Company matches 100% of employee contributions for the first 3% of
base compensation deferred and 50% of employee contributions for the
next 3% deferred. Participants direct the investment of all Company
matching contributions in any of the available investment options.
4
8
MERCK-MEDCO MANAGED CARE 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS ---- (Continued)
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution and the Company's matching contribution and allocation of
Plan earnings. Allocation is based on participants' account balances,
as defined in the Plan document.
VESTING
Participants are vested immediately in their contributions plus actual
earnings thereon. Participants with an employment commencement date
before January 1, 1992 became 100% vested on January 1, 1999.
Participants with an employment commencement date on or after January
1, 1992 become vested in Company contributions as follows:
Years of Service % Vested
---------------- --------
Less than 2 years 0%
2 years but less than 3 25%
3 years but less than 4 50%
4 years but less than 5 75%
5 years or more 100%
At December 31, 2000, forfeited nonvested accounts totaled $1,805,382.
These accounts will be used to reduce future Company contributions.
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 $1,000 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 vested account balance less any current outstanding loan
balance.
PAYMENT OF BENEFITS
In-service and termination distributions are made throughout the year
in accordance with applicable Plan provisions.
5
9
MERCK-MEDCO MANAGED CARE 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS ---- (Continued)
(2) 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 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.
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.
(3) INVESTMENTS
The following presents investments that represent 5 percent or more of
the Plan's net assets as of year-end:
December 31,
--------------------------------
2000 1999
------------ ------------
Merck Common Stock Fund, 7,530,475 and 8,514,937 units, respectively $240,646,254 $195,219,801
T. Rowe Price Blue Chip Growth Fund, 1,495,699 and 1,317,333 units,
respectively $ 50,629,405 $ 47,871,865
Fidelity Retirement Money Market Fund, 31,516,490 and 17,498,784
units, respectively $ 31,516,490 $ 17,498,784
6
10
MERCK-MEDCO MANAGED CARE 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS ---- (Continued)
During 2000, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
appreciated in value by $49,306,346 as follows:
Mutual Funds $(20,365,561)
Merck Common Stock Fund 69,671,907
------------
$ 49,306,346
============
(4) NONPARTICIPANT-DIRECTED INVESTMENTS
The Plan does not have nonparticipant-directed investments.
(5) RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by
Fidelity. Because Fidelity is the trustee, these transactions qualify
as party-in-interest transactions.
Merck & Co., Inc. 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
schedule.
(6) 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. In the event
of Plan termination, participants will become fully vested in their
account balances.
(7) TAX STATUS
The trust established under the Plan is qualified under the IRC as
exempt from Federal income taxes and the Plan received a favorable
determination letter from the Internal Revenue Service ("IRS") on June
26, 1992. Prior to December 31, 1994, the Plan was amended to meet
certain requirements of the Tax Reform Act of 1986. The Plan was
restated as of January 1, 1998. The Plan administrator and legal
counsel are of the opinion that the Plan meets the IRS requirements
and, therefore, the trust continues to be tax exempt. As a result, no
provision for income taxes has been made. Prior to December 31, 2001,
the Employee Benefits Committee intends to review the Plan and will
amend it, if necessary, to meet certain requirements of recent tax code
revisions.
(8) PROHIBITED TRANSACTIONS
There were no prohibited transactions during 2000.
7
11
MERCK-MEDCO MANAGED CARE 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS ---- (Continued)
(9) OTHER MATTERS:
Net reallocations in 2000 of $5,862,360 primarily consist of $5,610,248
for employees who transferred into the Plan from ProVantage Health
Services, Inc., which was acquired by the Company in June 2000. In
addition, ($4,964) was transferred between the Plan and the Merck &
Co., Inc. Employee Savings and Security Plan for the employees who were
transferred to Merck during 2000. The remaining $257,076 relates to
miscellaneous net transfers.
8
12
Schedule H
EIN: 22-3461740
Plan No.: 003
MERCK-MEDCO MANAGED CARE 401 (k) SAVINGS PLAN
LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 2000
(b) Identity of Issue, Borrower, (c) Description of Investment Including Maturity Date,
(a) Lessor or Similar Party Rate of Interest, Collateral, Par or Maturity Value (d) Cost (e) Current Value
---- -------------------------------- ------------------------------------------------------ ------------- -----------------
* Merck & Co., Inc. Merck Common Stock Fund $ 108,165,979 $ 240,646,254
7,530,475 units
* Fidelity Investments Fidelity Equity-Income Fund 2,554,732 2,548,360
47,695 units
Fidelity Growth & Income Portfolio 7,236,616 6,813,484
161,840 units
Fidelity Retirement Money Market Fund 31,516,490 31,516,490
31,516,490 units
Spartan U.S. Equity Index Fund 7,582,560 7,568,795
161,692 units
Fidelity Low-Priced Stock Fund 3,135,221 3,125,556
135,188 units
Putnam Investments The George Putnam Fund of Boston A 1,457,656 1,452,785
84,612 units
Putnam Voyager Fund A 13,759,952 11,379,888
488,407 units
T. Rowe Price T. Rowe Price Blue Chip Growth Fund 42,693,403 50,629,405
1,495,699 units
T. Rowe Price New Income Fund 8,002,341 7,813,004
919,177 units
T. Rowe Price Mid-Cap Growth Fund 7,671,446 7,686,441
193,175 units
T. Rowe Price Dividend Growth Fund 1,238,096 1,294,426
59,160 units
Franklin Templeton Franklin Small Cap Growth Fund A 16,329,647 14,626,752
371,898 units
Templeton Developing Markets Trust A 1,286,798 1,126,308
106,356 units
The Vanguard Group Vanguard U.S. Growth Portfolio 18,811,219 13,530,002
489,331 units
The American Funds Group EuroPacific Growth Fund 5,728,198 4,958,953
158,180 units
*Participants' Loan Account (with interest rates ranging
from 7% to 10.5% and with maturities through 2030) 8,827,350 8,827,350
--------------- -------------
Total $ 285,997,704 $ 415,544,253
=============== =============
* Denotes a party-in-interest to the Plan.
The accompanying notes to financial statements
are an integral part of this schedule.
9
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
undersigned member of the Employee Benefits Committee has duly caused
this annual report to be signed on behalf of the Merck-Medco Managed Care
401 (k) Savings Plan by the undersigned thereunto duly authorized.
MERCK-MEDCO MANAGED CARE, L.L.C.
/s/ JoAnn Reed
JoAnn Reed
Senior Vice President, Finance
June 22, 2001
10
14
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated May 18, 2001 included in the financial statements
and exhibits required by Form 11-K Annual Report for the Merck-Medco Managed
Care 401 (k) Savings Plan into the Company's previously filed Post Effective
Amendment on Form S-8 to Registration Statement on Form S-4 (No. 33-50667). It
should be noted that we have not audited any financial statements of the plan
subsequent to December 31, 2000 or performed any audit procedures subsequent to
the date of our report.
ARTHUR ANDERSEN LLP
New York, New York
June 22, 2001
11