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, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number: 1-3305
Employer Identification Number: 22-1109110
Plan Number: 001
MERCK & CO., INC. 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 & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
EMPLOYER IDENTIFICATION NUMBER: 22-1109110
PLAN NUMBER: 001
INDEX
PAGE
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits as of
December 31, 2002 and 2001 2
Statement of Changes in Net Assets Available for 3
Benefits for the Year Ended December 31, 2002
Notes to Financial Statements 4-9
Supplemental Schedule*:
H - Line 4i - Schedule of Assets (Held at End of Year) 10
Signature 11
Exhibit Index 12
Exhibit 23 - Consent of Independent Accountants 13
Exhibit 99.1 - Certification by the Chief Executive Officer of the Merck & Co., Inc.
Employee Savings and Security Plan Pursuant to 18 U.S.C. Section 1350, as Adopted 14
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2 - Certification by the Chief Financial Officer of the Merck & Co., Inc.
Employee Savings and Security Plan Pursuant to 18 U.S.C. Section 1350, as Adopted 15
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 are omitted because they are not
applicable.
[PRICEWATERHOUSECOOPERS LOGO] PRICEWATERHOUSECOOPERS LLP
400 Campus Drive
P.O. Box 988
Florham Park NJ 07932
Telephone (973) 236-4000
Facsimile (973) 236-5000
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants in the Merck & Co., Inc.
Employee Savings and Security Plan 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 the Merck & Co., Inc. Employee Savings and Security Plan (the "Plan") as of
December 31, 2002 and 2001 and the changes in net assets available for benefits
for the year ended December 31, 2002 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 audits. We
conducted our audits 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 audits provide a reasonable basis for our opinion.
Our audits were 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 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.
/s/ PricewaterhouseCoopers LLP
June 20, 2003
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
2002 2001
ASSETS
Investment in the Master Trust $2,479,000,771 $2,631,042,137
Participant loans at contract value 36,825,429 37,605,117
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Total investments 2,515,826,200 2,668,647,254
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RECEIVABLES
Employer's contribution 5,797,892 132,484
Participants' contributions 13,422,754 282,035
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Total receivables 19,220,646 414,519
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Net assets available for benefits $2,535,046,846 $2,669,061,773
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The accompanying notes are an integral part of these financial statements.
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED
DECEMBER 31,
2002
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Contributions to the Plan
By participants $ 182,592,732
By employer 73,324,006
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Total contributions 255,916,738
Transfers in 1,418,797
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Total additions 257,335,535
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Investment loss from the Master Trust 236,421,113
Benefits paid to participants 148,873,763
Transfers out 6,055,586
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Total deductions 391,350,462
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Net decrease 134,014,927
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 2,669,061,773
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End of year $2,535,046,846
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The accompanying notes are an integral part of these financial statements.
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN
The following description of the Merck & Co., Inc. 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 was designed to provide an easy, economical way for employees
to become stockholders of Merck & Co., Inc. (the "Company" or "Merck")
as well as a systematic means of saving and investing for the future.
Regular full-time, part-time, and temporary employees of the Company
and of certain wholly-owned subsidiaries as defined by the Plan
document who were not covered by a collective bargaining agreement are
eligible to enroll in the Plan as of the first day of the third month
following their date of hire.
The Plan is administered by a management committee appointed by the
Chief Executive Officer of the Company.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
MASTER TRUST
The assets of the Plan are maintained, for investment purposes only, on
a commingled basis with the assets of the Merck & Co., Inc. Employee
Stock Purchase & Savings Plan and the Merck-Medco Managed Care 401(k)
Savings Plan in the Merck & Co., Inc. Employee Savings & Security Plan
and the Merck & Co., Inc. Employee Stock Purchase & Savings Plan Trust
(the "Master Trust"). The plans do not own specific Master Trust assets
but rather maintain individual beneficial interests in such assets. The
portion of fund assets allocable to each plan is based upon the
participant's account balance within each plan. Investment income for
each fund is allocated to each plan based on the relationship of each
plan's beneficial interest in the fund to the total beneficial interest
of all plans in the fund.
CONTRIBUTIONS
Participants may contribute from 2% up to 18% of their base pay.
Employees earning less than $90,000 are allowed to contribute a maximum
of 18% of base pay. Effective January 1, 2003, employees earning less
than $90,000 are allowed to contribute a maximum of 25% of base pay.
Employees earning $90,000 or more are limited to maximum contributions
of 15% of base pay. In addition, the Company matches 75% of employee
contributions up to 6% of base pay per pay period. Company matching
contributions are invested according to the following age parameters:
Under age 50 -- 50% of Company matching contributions is invested in
the Merck Common Stock Fund (non-participant directed) and 50% is
invested in the funds to which the participant is currently
contributing (participant directed).
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
Age 50 and above -- Participants have the option to invest all Company
matching contributions in any of the available fund options
(participant directed). Also, the Economic Growth and Tax Relief
Reconciliation Act of 2001 permits catch-up contributions that are
designed to provide individuals age 50 and above with an additional
pre-tax retirement savings opportunity. As such, effective July 1,
2002, eligible participants in the Plan may contribute an additional
$1,000 for 2002. The limit for this "catch-up" contribution increases
by $1,000 each year until it reaches $5,000 a year in 2006.
Participants direct the investment of their contributions into any
investment option available under the Plan, including Merck Common
Stock (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 Company's 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 Company
matching contributions, plus actual earnings thereon.
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
In-service (which include hardship withdrawals) and termination
distributions are made throughout the year in accordance with
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 financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America 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
Valuation of investments of the Plan represents the Plan's allocable
portion of the Master Trust. Participant loans are valued at cost which
approximates fair value.
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
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.
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.
EXPENSES
The Plan's administrative expenses are paid by the Company.
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 statements of net assets
available for benefits.
3. NON-PARTICIPANT-DIRECTED INVESTMENTS
The non-participant-directed portion of the Company match is invested
in the Merck Common Stock Fund. Information about the net assets and
the significant components of the changes in net assets relating to the
Merck Common Stock Fund is as follows:
DECEMBER 31,
2002 2001
Net assets
Investment in Master Trust $1,275,213,183 $1,323,494,916
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED
DECEMBER 31,
2002
Additions to net assets
Contributions $ 91,148,417
Transfers in 64,067,128
Loan repayments 6,673,308
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Total additions 161,888,853
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Deductions from net assets
Investment loss (16,475,580)
Benefits paid (55,985,787)
Transfer out (131,622,855)
Loan issuance (6,086,364)
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Total deductions (210,170,586)
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Net decrease $ (48,281,733)
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4. 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.
5. 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.
6. TAX STATUS
The Plan obtained a tax determination letter from the Internal Revenue
Service dated September 18, 1995 indicating that it had been designed
in accordance with applicable sections of the Internal Revenue Code
("IRC"). However, the Plan has been amended since the receipt of the
determination letter. The Plan sponsor and legal counsel believe that
the Plan is designed and currently operated in compliance with the IRC.
Therefore, no provision for income taxes has been made.
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
7. OTHER MATTERS
Transfers during 2002 consist of transfers of $1,396,580 between the
Plan and the Merck & Co., Inc. Employee Stock Purchase and Savings Plan
for employees who changed their status during the year, $16,517 for
employees who transferred in from the Merck-Medco Managed Care 401(k)
Savings Plan during the year, and $5,700 for employees who transferred
in from the Merck Puerto Rico Employee Savings and Security Plan.
Transfers out consist of transfers of $171,828 for employees who
transferred out to the Merck & Co., Inc. Employee Stock Purchase and
Savings Plan, $5,855,258 for employees who transferred out to the
Merck-Medco Managed Care 401(k) Savings Plan, and $28,500 for employees
who transferred out to the Merck Puerto Rico Employee Savings and
Security Plan.
8. MASTER TRUST
The Plan has a 79% and 81% interest in the Master Trust at December 31,
2002 and December 31, 2001, respectively. The net assets of the Master
Trust are as follows:
DECEMBER 31,
2002 2001
Mutual Funds $1,472,422,521 $1,546,205,918
Merck Common Stock 1,651,008,624 1,713,814,350
Accrued interest and dividends 10,375,281 10,068,775
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$3,133,806,426 $3,270,089,043
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-8-
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
Changes in net assets for the year ended December 31, 2002 for the Master Trust
are as follows:
Additions to net assets
Contributions
Participant $ 235,188,546
Employer 93,535,066
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Total contributions 328,723,612
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Transfers in 8,487,705
Loan repayments 21,359,843
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Total additions 358,571,160
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Deductions from net assets
Investment loss, net
Interest and dividends 64,130,614
Net depreciation in mutual funds (285,057,632)
Net depreciation in Merck Common Stock (59,679,186)
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Total investment loss (280,606,204)
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Benefits paid (180,707,030)
Transfers out (8,482,149)
Loan issuance (25,058,394)
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Total deductions (494,853,777)
--------------
Net decrease (136,282,617)
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Net assets
Beginning of year 3,270,089,043
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End of year $3,133,806,426
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MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
SCHEDULE H
LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR) EIN: 22-1109110
DECEMBER 31, 2002 PLAN NO.: 001
(c) DESCRIPTION OF INVESTMENT INCLUDING
(b) IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, COLLATERAL, PAR (e) CURRENT
(a) LESSOR OR SIMILAR PARTY OR MATURITY VALUE (d) COST VALUE
* Participants' Loans Interest rates ranging from 6% to 12.5% and with
maturities through 2032 - $ 36,825,429
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Total $ 36,825,429
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* Denotes a party-in-interest to the Plan.
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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 & Co., Inc. Employee Savings and Security Plan by the
undersigned hereunto duly authorized.
Merck & Co., Inc., as plan administrator
By: /s/ Caroline Dorsa
------------------------------------
Caroline Dorsa
Vice President & Treasurer
June 27, 2003
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EXHIBIT INDEX
Exhibit
Number Document Page
------- -------- ----
23 Consent of Independent Accountants 13
99.1 Certification by the Chief Executive Officer of the Merck & Co.,
Inc. Employee Savings and Security Plan Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 14
99.2 Certification by the Chief Financial Officer of the Merck & Co.,
Inc. Employee Savings and Security Plan Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 15
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