SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 11-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
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Commission file number 2-84723
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THE SCHERING-PLOUGH PUERTO RICO EMPLOYEES' RETIREMENT SAVINGS PLAN
(Full Title of Plan)
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, NJ 07033
(Name of Issuer of Securities Held Pursuant to the Plan and Address of
Principal Executive Offices)
THE SCHERING-PLOUGH PUERTO RICO
EMPLOYEES' RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
Page
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 3
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits
as of December 31, 2003 and 2002 4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2003 5
Notes to Financial Statements 6-10
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Part IV, Line 4i - Schedule of Assets
(Held at End of Year) as of December 31, 2003 11
SIGNATURES 12
EXHIBIT I - Consent of Independent Registered Public Accounting Firm 13
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All other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 have been omitted because they are not applicable.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants of
The Schering-Plough Puerto Rico Employees' Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of The Schering-Plough Puerto Rico Employees' Retirement Savings Plan (the
"Plan") as of December 31, 2003 and 2002, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2003. 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 in accordance with the standards of the Public Company
Accounting Oversight Board (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 also 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, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2003 and 2002, and the changes in net assets available for benefits for the year
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.
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 schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our audit of
the basic 2003 financial statements, and, in our opinion, is fairly stated in
all material respects when considered in relation to the basic financial
statements taken as a whole.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
June 25, 2004
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THE SCHERING-PLOUGH PUERTO RICO
EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
2003 2002
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INVESTMENTS:
Vanguard funds $20,279,825 $15,470,824
Schering-Plough stock fund 2,913,363 3,125,535
Loan fund 1,826,086 1,912,905
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TOTAL INVESTMENTS 25,019,274 20,509,264
Participant contributions receivable 185,594 119,727
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NET ASSETS AVAILABLE FOR BENEFITS $25,204,868 $20,628,991
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See Notes to Financial Statements.
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THE SCHERING-PLOUGH PUERTO RICO
EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2003
Additions to net assets attributed to:
Investment income:
Dividend income, registered investment companies $ 303,944
Dividend income, Schering-Plough Stock Fund 88,947
Interest income, participant loans 105,825
Net appreciation in fair value of investments 2,645,291
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Total investment income 3,144,007
Participant contributions 3,058,446
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Total additions 6,202,453
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Deductions from net assets attributed to:
Benefits paid to participants 1,626,576
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Increase in net assets 4,575,877
Net assets available for benefits:
Beginning of year 20,628,991
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End of year $25,204,868
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See Notes to Financial Statements.
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THE SCHERING-PLOUGH PUERTO RICO
EMPLOYEES' RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN
The Schering-Plough Puerto Rico Employees' Retirement Savings Plan (the
"Plan") is a defined contribution plan established effective April 1,
1990. The Plan is intended to encourage retirement savings by eligible
employees of Schering-Plough Products LLC (the "Sponsor" or the "Company")
and any of its affiliated companies that adopt the Plan. Vanguard
Fiduciary Trust Company ("Vanguard"), the recordkeeper, is a trust company
incorporated under Chapter 10 of the Pennsylvania Banking Code, and a
wholly-owned subsidiary of The Vanguard Group, Inc. Banco Santander serves
as the Plan's trustee.
Generally, all Puerto Rico employees of Schering-Plough Products LLC and
Schering-Plough del Caribe, Inc. are eligible to participate in the Plan
on the date of employment. The participants may elect to have their salary
deferral contributions allocated to any of the investment funds available
under this Plan.
The following brief description of the Plan is provided for general
information purposes only. Participants should refer to the Plan document
for more complete information.
SALARY DEFERRAL CONTRIBUTIONS - The Plan is designed to permit eligible
employees to elect to have a portion of their salary contributed to the
Plan on their behalf ("Salary Deferral Contributions"). Under the
provisions of the Plan, Salary Deferral Contributions can range from 1% to
10% of the employee's earnings, in increments of 1%, subject to certain
regulated limits. Salary Deferral Contributions and any earnings accrued
thereon are fully and immediately vested to the participant.
PARTICIPANT ACCOUNTS AND VESTING - Each participant's account is credited
with the participant's contribution and allocations of Plan earnings
(losses). Allocations are based on participant earnings or account
balances, as defined. Participants have a non-forfeitable right to their
contributions plus (minus) actual earnings (losses) thereon which vest
fully and immediately.
INVESTMENT OPTIONS - Upon enrollment in the Plan, participants may direct
their contributions into any of the following Vanguard investment options:
- Vanguard 500 Index Fund Investor Shares
- Vanguard Explorer Fund Investor Shares
- Vanguard Intermediate-Term Corporate Fund Investor Shares
- Vanguard International Growth Fund Investor Shares
- Vanguard LifeStrategy Conservative Growth Fund
- Vanguard LifeStrategy Growth Fund
- Vanguard LifeStrategy Income Fund
- Vanguard LifeStrategy Moderate Growth Fund
- Vanguard Short-Term Corporate Fund Investor Shares
- Vanguard Treasury Money Market Fund
- Vanguard U.S. Growth Fund Investor Shares
- Vanguard Wellington Fund Investor Shares
- Vanguard Windsor Fund Investor Shares
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Participants may also direct their contributions to the:
- Schering-Plough Stock Fund - This fund is comprised of
Schering-Plough common stock and a small percentage of cash as
required for liquidity purposes. Participants may contribute up to a
maximum investment election of 50% of their Salary Deferral
Contribution into this fund or allocate no more than 50% of the
value of his or her accounts at the time of reallocation to this
fund.
Loan Fund - Participants may borrow from their fund accounts up to the
lesser of one half of their account or $50,000 (reduced by any outstanding
loans). Loan transactions are treated as a transfer between the investment
funds and the Loan Fund. These loans, which are secured by the
participants' individual fund accounts, bear a fixed rate of interest as
determined to be reasonable by The Schering-Plough Puerto Rico Employees'
Retirement Savings Plan Committee, and are repayable over periods not
exceeding five years, except loans relating to a principal residence which
are repayable over a period not to exceed 20 years.
PAYMENT OF BENEFITS - On termination of service due to death, disability
or retirement, a participant may elect to receive either a lump sum amount
or installments not to exceed the life expectancy of the participant and
the participant's beneficiary. For termination of service due to other
reasons, a participant may receive the value of the account as a lump sum
distribution. Alternatively, all participants can elect to defer receipt
of their account up to age 70 -1/2. Distribution of all or a portion of a
participant's account, prior to termination of employment, may be granted
by the Sponsor in the case of financial hardship. Active participants may
elect to withdraw all or a portion of their accounts at any time after age
59 1/2.
CHANGES TO PLAN ON JANUARY 1, 2004 - Effective January 1, 2004, the
Sponsor amended the Plan to incorporate a company matching contribution.
All employees eligible to participate in the Plan will receive a company
provided matching contribution (dollar for dollar) on the first 5% of
employee Salary Deferral Contributions. The company matching contribution
and any earnings accrued thereon are fully and immediately vested.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan have been
prepared on an accrual basis in accordance with accounting principles
generally accepted in the United States of America.
The financial statements were prepared in accordance with the financial
reporting requirements of the Employee Retirement Income Security Act of
1974 ("ERISA") as permitted by the Securities and Exchange Commission.
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are
stated at fair value. Shares of registered investment companies are valued
at quoted market prices which represent the net asset value of shares held
by the Plan at year-end.
The Schering-Plough Stock Fund is valued using the unit accounting method
whereby a participant's account value is expressed in units of
participation rather than number of shares of Schering-Plough common
stock.
The closing stock prices of Schering-Plough Corporation common stock at
December 31, 2003 and December 31, 2002 were $17.39 and $22.20,
respectively.
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Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Dividends received in the
Schering-Plough Stock Fund are reinvested in Schering-Plough common stock
units.
Participant loans are valued at cost which approximates fair value.
WITHDRAWALS AND BENEFIT PAYMENTS - Withdrawals and benefit payments are
recorded when paid.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES - The Plan provides for various investment
options. 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 value of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements
of net assets available for benefits.
3. PLAN TERMINATION
Although it has not expressed any intent to do so, the Sponsor has the
right under the Plan to terminate the Plan subject to provisions of ERISA.
4. TAX STATUS
The Plan was amended and restated effective January 1, 1995. The plan
received a favorable determination letter dated February 18, 1997 issued
by the Puerto Rico Department of the Treasury stating that the Plan meets
the requirements of Section 1165(a) of the Puerto Rico Internal Revenue
Code of 1995, as amended (the "PR Code"). The Plan was also amended
effective January 1, 1996 and October 1, 1996 pursuant to Amendment No. 2.
The Puerto Rico Department of the Treasury issued a favorable
determination letter dated April 14, 1997 in connection with the
qualification of Amendment No. 2.
The trust of the Plan is intended to be exempt from taxation under Section
1165(a) of the PR Code, and pursuant to Section 1022(i)(1) of the Employee
Retirement Income Security Act of 1974, as amended, under Section 501(a)
of the United States Internal Revenue Code of 1986, as amended.
As long as the Plan is qualified under the PR Code and related
regulations, participants will generally not be taxed on salary-deferred
contributions until the year received. In addition, the earnings
attributable to such contributions held by the trustee are also generally
exempt from taxation until the taxable year in which they are withdrawn by
or distributed to the participant.
The Plan's tax counsel believes that the Plan is designed in compliance
with the applicable requirements of the Puerto Rico Internal Revenue Code,
and the Plan Administrator believes that the Plan is being operated in
compliance with the applicable requirements of the Puerto Rico Internal
Revenue Code.
5. RELATED-PARTY TRANSACTIONS
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Contributions are transmitted from the trustee, Banco Santander, to the
recordkeeper, Vanguard, which invests cash received, interest and dividend
income and makes distributions to the participants. The recordkeeper also
administers the collection of interest and principal on the participant
loans. These transactions qualify as permitted party-in-interest
transactions.
Certain Plan investments are shares of mutual funds managed by the
recordkeeper. These transactions qualify as permitted party-in-interest
transactions.
Certain Plan investments are shares of the Company's stock. These
transactions qualify as permitted party-in-interest transactions.
Certain administrative functions are performed by officers or employees of
the Sponsor who also may be participants in the Plan. These actions
qualify as permitted party-in-interest activities. No such officer or
employee receives compensation from the Plan.
All plan administration expenses are paid by the Sponsor.
6. NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS
During 2003, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
*Vanguard 500 Index Fund Investor Shares $ 1,680,484
*Vanguard Windsor Fund Investor Shares 906,573
*Vanguard Explorer Fund Investor Shares 439,707
*Vanguard Wellington Fund Investor Shares 107,590
*Vanguard International Growth Fund Investor Shares 102,017
*Vanguard U.S. Growth Fund Investor Shares 26,158
*Vanguard LifeStrategy Moderate Growth Fund 24,923
*Vanguard LifeStrategy Growth Fund 21,987
*Vanguard LifeStrategy Conservative Growth Fund 8,331
*Vanguard LifeStrategy Income Fund 6,404
*Vanguard Short-Term Corporate Fund Investor Shares 1,722
*Vanguard Intermediate-Term Corporate Fund Investor
Shares (600)
*Schering-Plough Stock Fund (680,005)
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Net Appreciation in Fair Value of Investments $ 2,645,291
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*Permitted party-in-interest to the Plan.
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7. INVESTMENTS
The following investments represented 5% or more of the Plan's net assets
available for benefits at:
December 31,
2003 2002
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***Vanguard 500 Index Fund Investor Shares $8,128,468 $5,901,432
***Vanguard Windsor Fund Investor Shares 3,523,905 2,528,752
***Vanguard Treasury Money Market Fund 2,945,416 2,937,481
***Schering-Plough Stock Fund 2,913,363 3,125,535
***Loan Fund 1,826,086 1,912,905
***Vanguard Explorer Fund Investor Shares 1,800,510 * *
***Vanguard Short-term
Corporate Fund Investor Shares * 1,155,091
* This fund did not exceed 5% as of December 31, 2003.
** This fund did not exceed 5% as of December 31, 2002.
***Permitted party-in-interest to the Plan.
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THE SCHERING-PLOUGH PUERTO RICO SCHEDULE H
EMPLOYEES' RETIREMENT SAVINGS PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF
YEAR)
AS OF DECEMBER 31, 2003
Employer Identification Number: 52-2170309
Plan number: 002
Identity of
Issuer, Description of investment
Borrower, including maturity date, rate of
Lessor or interest, collateral,
Similar par or maturity Current
Party value Value
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* Vanguard 500 Index Fund Investor Shares $ 8,128,468
* Vanguard Windsor Fund Investor Shares 3,523,905
* Vanguard Treasury Money Market Fund 2,945,416
* Vanguard Explorer Fund Investor Shares 1,800,510
* Vanguard Short-Term Corporate Fund
Investor Shares 1,116,410
* Vanguard Intermediate -Term Corporate Fund
Investor Shares 854,501
* Vanguard Wellington Fund Investor Shares 850,558
* Vanguard International Growth Fund 440,804
Investor Shares
* Vanguard LifeStrategy Moderate Growth Fund 178,380
* Vanguard LifeStrategy Growth Fund 133,306
* Vanguard U.S. Growth Fund Investor Shares 126,716
* Vanguard LifeStrategy Income Fund 101,194
* Vanguard LifeStrategy Conservative Growth 79,657
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Fund
Total Vanguard Registered
Investment Company Funds 20,279,825
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* Schering - Schering-Plough Stock Fund 2,913,363
Plough
Corporation
* Various Outstanding loan balance
participants (interest rates ranging from
5.25% to 6.50%, maturing from 1
to 20 years) 1,826,086
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Total Assets Held at End of Year $25,019,274
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*Permitted party-in-interest to the Plan.
Cost information is not required for participant-directed investments and
therefore is not included.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this Annual
Report to be signed on its behalf by the undersigned hereunto duly authorized.
The Schering-Plough Puerto Rico Employees'
Retirement Savings Plan
Date: June 28, 2004 By: /s/ Vincent Sweeney
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Name: Vincent Sweeney
Title: Plan Administrator
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