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
Commission file number 2-84723
SCHERING-PLOUGH EMPLOYEES' SAVINGS PLAN
(Full Title of Plan)
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
(Name of Issuer of Securities Held Pursuant to the Plan and Address of
Principal Executive Offices)
SCHERING-PLOUGH EMPLOYEES' SAVINGS PLAN
TABLE OF CONTENTS
PAGE
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
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.
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants of the
Schering-Plough Employees' Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Schering-Plough Employees' 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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SCHERING-PLOUGH EMPLOYEES' SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
($ in 000's)
2003 2002
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INVESTMENTS:
Vanguard funds $379,973 $285,327
Schering-Plough stock fund 80,604 95,575
Loan fund 7,797 8,067
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TOTAL INVESTMENTS 468,374 388,969
Participant contributions receivable 61 98
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NET ASSETS AVAILABLE FOR BENEFITS $468,435 $389,067
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See Notes to Financial Statements.
4
SCHERING-PLOUGH EMPLOYEES' SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2003
($ in 000's)
Additions to net assets attributed to:
Investment income:
Dividend income, registered investment companies $ 5,090
Dividend income, Schering-Plough Stock Fund 2,515
Interest income, participant loans 554
Net appreciation in fair value of investments 46,561
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Total investment income 54,720
Participant contributions 55,163
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Total additions 109,883
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Deductions from net assets attributed to:
Benefits paid to participants 30,515
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Increase in net assets 79,368
Net assets available for benefits:
Beginning of year 389,067
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End of year $468,435
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See Notes to Financial Statements.
5
($ in 000's except per share amounts)
SCHERING-PLOUGH EMPLOYEES' SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN
The Schering-Plough Employees' Savings Plan (the "Plan") is a defined
contribution plan available to all United States employees of Schering-Plough
Corporation (the "Company") and its participating subsidiaries. Generally, all
such employees are eligible to participate in the Plan on the date of
employment. Schering Corporation, a subsidiary of the Company, is the Plan's
Sponsor.
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 - Each year participants may contribute from 1% to
50% of pretax annual compensation, up to an annual IRS maximum. Highly
compensated employees are limited to 6% of pretax annual compensation, up to an
annual IRS maximum. Catch up contributions are available to employees over age
50.
PARTICIPANT ACCOUNTS AND VESTING - Each participant's account is credited with
the participant's contribution and earnings and (losses) thereon. 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 Fiduciary Trust Company
("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
Participants may also direct their contribution 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
6
($ in 000's except per share amounts)
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 (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 Employee Benefits 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, 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. Alternatively,
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 70.
CHANGES TO PLAN ON JANUARY 1, 2004 - Effective January 1, 2004, the Plan Sponsor
amended the Plan to incorporate a company contribution and a company match. All
employees eligible to participate in the Plan will receive a company
contribution of 3% of eligible earnings, whether they elect to participate in
the Plan or not. For employees who elect to participate in the Plan, the Company
will make a matching contribution (dollar for dollar) on the first 2% of
employee salary deferral contributions. The company matching contribution, and
any earnings accrued thereon, are fully and immediately vested. In addition,
contributions from highly compensated employees will no longer be limited to 6%
of pretax annual compensation, but are subject to an annual IRS maximum.
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.
7
($ in 000's except per share amounts)
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.
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 recorded 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 the 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 Internal Revenue has determined and informed the sponsor by letter dated May
30, 2003 that the Plan and related trust are designed in accordance with
applicable sections of the Internal Revenue Code (IRC). The Plan's tax counsel
believes that the Plan is designed in compliance with the applicable
requirements of the IRC, and the Plan Administrator believes that the Plan is
being operated in compliance with the applicable requirements of the IRC.
5. RELATED-PARTY TRANSACTIONS
Contributions are held and managed by The Vanguard Group, Inc. (the "Trustee"),
which invests cash received, interest and dividend income and makes
distributions to the participants. The Trustee also administers the
participant's payment of interest and principal on participant loans. These
transactions qualify as permitted party-in-interest transactions.
Certain Plan investments are shares of mutual funds managed by the Vanguard
Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc.
The Vanguard Group, Inc. is
8
($ in 000's except per share amounts)
the trustee as defined by the Plan. 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
Company or its subsidiaries who may also 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 Company.
6. NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS
During 2003, investments (including gains and losses on investments bought and
sold, as well as held during the year) appreciated (depreciated) in value as
follows:
*Vanguard Windsor Fund Investor Shares $26,421
*Vanguard 500 Index Fund Investor Shares 14,248
*Vanguard Explorer Fund Investor Shares 13,531
*Vanguard Wellington Fund Investor Shares 6,173
*Vanguard International Growth Fund Investor Shares 3,396
*Vanguard U.S. Growth Fund Investor Shares 1,441
*Vanguard LifeStrategy Growth Fund 1,036
*Vanguard LifeStrategy Moderate Growth Fund 612
*Vanguard LifeStrategy Conservative Growth Fund 223
*Vanguard LifeStrategy Income Fund 156
*Vanguard Intermediate-Term Corporate Fund Investor Shares 15
*Vanguard Short-Term Corporate Fund Investor Shares 7
*Schering-Plough Stock Fund (20,698)
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Net Appreciation in Fair Value of Investments $46,561
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*Permitted party-in-interest to the Plan.
9
($ in 000's except per share amounts)
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 Windsor Fund Investor Shares $102,945 $ 73,521
*Schering-Plough Stock Fund 80,604 95,575
*Vanguard 500 Index Fund Investor Shares 71,754 50,004
*Vanguard Treasury Money Market Fund 56,648 57,426
*Vanguard Explorer Fund Investor Shares 46,113 29,687
*Vanguard Wellington Fund Investor Shares 42,944 33,465
*Permitted party-in-interest to the Plan.
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SCHEDULE H
SCHERING-PLOUGH CORPORATION EMPLOYEES' SAVINGS PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4 i - SCHEDULE OF ASSETS
(HELD AT END OF YEAR)
AS OF DECEMBER 31, 2003
EMPLOYER IDENTIFICATION NUMBER: 22-1261880
PLAN NUMBER: 003
($ in 000's)
Identity of Issuer,
Borrower, Lessor or Description of investment including maturity date,
Similar Party rate of interest, collateral, par or maturity value Current Value
-------------------- --------------------------------------------------- -------------
* Vanguard Windsor Fund Investor Shares $ 102,945
* Vanguard 500 Index Fund Investor Shares 71,754
* Vanguard Treasury Money Market Fund 56,648
* Vanguard Explorer Fund Investor Shares 46,113
* Vanguard Wellington Fund Investor Shares 42,944
* Vanguard International Growth Fund Investor Shares 14,055
* Vanguard Short-Term Corporate Fund Investor Shares 12,153
* Vanguard Intermediate-Term Corporate Fund Investor Shares 9,477
* Vanguard U.S. Growth Fund Investor Shares 7,893
* Vanguard LifeStrategy Growth Fund 6,048
* Vanguard LifeStrategy Moderate Growth Fund 4,699
* Vanguard LifeStrategy Income Fund 2,846
* Vanguard LifeStrategy Conservative Growth Fund 2,398
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Total Vanguard Registered Investment Company Funds 379,973
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* Schering-Plough Schering-Plough Stock Fund 80,604
Corporation
* Various
participants Outstanding Loan Balance (interest rates ranging
from 5.25% to 6.00%, maturing from 1 to 20 years) 7,797
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Total Assets Held at End of Year $ 468,374
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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.
11
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.
Schering-Plough Employees' Savings Plan
Date: June 28, 2004 By: /s/ Vincent Sweeney
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Name: Vincent Sweeney
Title: Plan Administrator
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