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Disclaimer Publication of
Merck KGaA, Darmstadt, Germany. In the United States and Canada the
subsidiaries of Merck KGaA, Darmstadt, Germany operate under the
umbrella brand EMD.

Table of contents

  • Page 1
    Disclaimer Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the subsidiaries of Merck KGaA, Darmstadt, Germany operate under the umbrella brand EMD.

  • Page 2
    Merck Annual Report 2012 Efficient Committed Performance-oriented Objective-driven

  • Page 3
    ... a leading pharmaceutical, chemical and life science company with four strong and dynamic divisions: Merck Serono, Consumer Health, Performance Materials and Merck Millipore. We have a clear focus on research and development as well as profitable, high-margin specialties for highgrowth markets. We...

  • Page 4
    ... Board #02 Group Management Report 048 ➝ Overall Economic Situation 058 ➝ Merck Serono 046 ➝ Merck Shares 037 ➝ Corporate Responsibility 031 ➝ Merck at a glance 049 ➝ Financial Position and Results of Operations 070 ➝ Consumer Health 084 ➝ Risk Report 083 ➝ Corporate...

  • Page 5
    ...In brief The Merck Group In brief Key figures of the Merck Group â,¬ million 2012 2011 Change in % Total revenues Sales Operating result (EBIT) Margin (% of sales) EBITDA Margin (% of sales) EBITDA pre one-time items Margin (% of sales) EPS pre one-time items (in â,¬) Free cash ï¬,ow 11,172...

  • Page 6
    The road to tomorrow Merck Annual Report for 2012 Join us on the road to tomorrow - with our 2012 Annual Report, which offers far more than just a look back at the past year. Follow our progress on... to tomorrow The road to tomorrow The road to tomorr ➝ www.merckgroup.com ➝ magazine.merck.com

  • Page 7
    ... management positions throughout the entire company ➝ A new talent and performance management process A shared PERFoRMANCE CULTURE ➝ Five leadership principles "Results Orientation", "Efficiency", "Global Footprint", "Innovation/Quality", and "Customer Focus" ➝ An improved feedback culture

  • Page 8
    ...we launched a change process called "Fit for 2018". We are streamlining our organizational structure and at the same time aligning it specifically to current and future requirements. We are giving our strong divisions full business accountability. We are increasing our profitability and establishing...

  • Page 9
    4 Merck objective-driven Merck 2012 The road to tomorrow M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M Ideas that connect ➝ Ideas that enable change The road to tomorrow I

  • Page 10
    ...I Ideas that connect Objective-driven -A- The road to tomorrow 1 / 4 Through our objective-driven actions, we're capturing new markets -B- Objective ➝ General: A clearly defined, targeted future status. ➝ To us: The motivation for our actions and the key driver of our innovative strength...

  • Page 11
    ...-driven actions are a cornerstone of our corporate strategy. Constant innovations have enabled us to become a driving force in the life sciences sector and help our customers - whether research laboratories or pharmaceutical manufacturers - to work even more productively and safely. ➝ We're doing...

  • Page 12
    Merck 2012 The road to tomorrow I M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M 7

  • Page 13
    8 Merck Performance-oriented Merck 2012 The road to tomorrow M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M Ideas that connect ➝ Ideas that enable change The road to tomorrow I

  • Page 14
    ... L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M Performance ➝ General: The result of an endeavor over a certain period of time. ➝ To us: The foundation for achieving our objectives and meeting the needs of our customers and business partners. 2 /4

  • Page 15
    10 Merck 2012 The road to tomorrow I Ideas that enable change Performance-oriented -A- Gonal-f ® - how performance creates mutual benefit ➝ Performance and customer orientation are two of our top priorities at our pharmaceutical research hubs in darmstadt (Germany), Boston, MA (United ...

  • Page 16
    Merck 2012 The road to tomorrow I M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M 11

  • Page 17
    12 Merck With commitment Merck 2012 The road to tomorrow M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M Ideas that connect ➝ Ideas that enable change The road to tomorrow I

  • Page 18
    Merck 2012 The road to tomorrow 13 I Ideas that connect With commitment -A- The road to tomorrow 3 / 4 We are committed to helping people all over the world -B- M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M Commitment ➝ ...

  • Page 19
    ... of a solution that helps people. These mobile laboratories can be used worldwide to check medicines for their authenticity. They were developed by the Global Pharma Health Fund (GPHF), a charitable initiative funded by Merck. Thanks to GPHF and its collaboration with international partners, our...

  • Page 20
    Merck 2012 The road to tomorrow I M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M 15

  • Page 21
    16 Merck Efficiently Merck 2012 The road to tomorrow M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M Ideas that connect ➝ Ideas that enable change The road to tomorrow I

  • Page 22
    Merck 2012 The road to tomorrow 17 I Ideas that connect Efficiently -A- The road to tomorrow 4 / 4 By working together, we are creating efficient supply -B- M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M Efficiency ➝ ...

  • Page 23
    ... improve our range of products and services, also for oncology patients, giving them more economical access to high-quality medicines, and, last but not least, help optimize the performance capability of health care systems in emerging countries. -B- M E R C K A N N U A L R E P o R T 2 01...

  • Page 24
    Merck 2012 The road to tomorrow I M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M 19

  • Page 25
    20 Merck 2012 The road to tomorrow I oNE TEAM 38,847 employees ToGETHER on the road to tomorrow â,¬ 11,173 million in total revenues oNE WoRLd M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M

  • Page 26
    Merck 2012 021 028 # 01 To our Shareholders 023 ➝ 026 ➝ Letter from Karl-Ludwig Kley The Executive Board

  • Page 27
    22 Merck 2012 To our Shareholders I 1/5 Letter from Karl-Ludwig Kley

  • Page 28
    ...dividend payment reflects the robust financial strength and good business performance of Merck. We also made good progress in 2012 with the internal realignment of Merck. We simplified our organizational structures, accelerated processes and thus started to lower costs considerably. For instance, we...

  • Page 29
    ... external research and development partners. Strengthening profitability and focusing on strategic brands are the main objectives of Consumer Health. In Performance Materials, firstly we want to defend our global market leadership in liquid crystals. Secondly, we are positioning ourselves in oLEd...

  • Page 30
    Merck 2012 To our Shareholders 25 Letter from Karl-Ludwig Kley Our goal is to transform Merck into a faster and more efficient company that delivers profitable growth through its innovative pharmaceutical, chemical and life science businesses. In doing so, we will remain true to our well-...

  • Page 31
    ... Merck in June 2011 as a Member of the Executive Board Responsibility for Group functions: Group Accounting & Subsidiaries; Group Controlling & Risk Management; Corporate Finance; Group Tax; Group Insurance; Group Procurement; Investor Relations Kai Beckmann Head of Group Human Resources Chief...

  • Page 32
    ... the Performance Materials and Merck Millipore divisions Born in 1955, biochemist; Joined Merck in 1986; Member of the Executive Board since 2007 Responsibility for Group functions: Environment, Health, Safety, Security, Quality Stefan oschmann Responsible for the Merck Serono and Consumer Health...

  • Page 33
    ... -ID- -i- Page 78 -qR- Merck Millipore Our Merck Millipore division is the world's third-largest supplier of products and services for the life science industry. These are used by customers working in research and analytical laboratories as well as in pharmaceutical manufacturing. our divisions

  • Page 34
    ... Corporate Responsibility Merck Shares Overall Economic Situation Financial Position and Results of Operations Merck Serono Consumer Health Performance Materials Merck Millipore Corporate and Other Risk Report Report on Expected Developments Report in accordance with Section 315 (4) of the German...

  • Page 35
    ... until 2014 ➝ No transformational deals before 2014 Portfolio ➝ Fill key positions with best managers ➝ Foster performance culture Cultural Change Merck Serono generates the largest proportion of sales and earnings 56% 24% Merck Millipore Merck Serono 56% 19% Merck Millipore Merck Serono...

  • Page 36
    ... 2012 Group Management Report 31 Merck at a glance Our divisions Merck is a global company with operations spanning innovative pharmaceutical and biopharmaceutical products, life science tools and specialty chemicals. Merck is organized around four divisions. Group Sales â,¬ million 0 2012 2011...

  • Page 37
    ...the productivity of its drug discovery activities, providing access to innovative and emerging technologies. The division is also seeking to strengthen its franchises by in-licensing of clinical stage compounds. Consumer Health The Consumer Health division manufactures and markets prescription-free...

  • Page 38
    ...Global number three supplier in the life science market Merck Millipore offers solutions to two key customer groups: on the one hand research and analytical laboratories in the pharmaceutical/biotechnology industry or in academic institutions and on the other hand production customers manufacturing...

  • Page 39
    ...2012 Group Management Report Merck at a glance Bioscience mainly serves the research sector Process Solutions addresses the needs of pharmaceutical manufacturers The Bioscience business unit, which contributes 18% to divisional sales, is focused on the needs of researchers to understand complete...

  • Page 40
    ... to structurally improved Group profitability. For Merck Serono, the company aims to generate net cost savings of â,¬ 300 million annually from 2014 onwards. Out of these savings, 40% are planned to come from lower but more effective spending in the division's R&D functions. Commercial Operations...

  • Page 41
    ...efficiency program, cash is being reserved with high priority to fund restructuring measures across all divisions and regions. Around â,¬ 800 million of one-time costs related to restructuring are planned to be incurred from 2012 to 2015. Secondly, Merck aims to maintain a healthy balance sheet. The...

  • Page 42
    ...employees (2011: 40,676 employees). Merck was represented in 66 countries by 203 companies and had 65 production sites located in 22 countries. The "Fit for 2018" efficiency program significantly impacted HR work in 2012. In order to implement the necessary personnel reduction measures in a socially...

  • Page 43
    38 Merck 2012 Group Management Report Corporate Responsibility Merck remains committed to the vocational and advanced training of its employees. Consequently, Merck has maintained a constant level of vocational training in Darmstadt, the largest site of the Merck Group. A total of 528 young ...

  • Page 44
    ... of local programs to meet the specific requirements of the individual sites. BeSafe! focuses on anchoring the safety culture as a management task and on empowering our employees to take independent responsibility. Incidents 2008 2009 2010 2011 2012 LTIR (Lost Time Injury Rate) Number of...

  • Page 45
    40 Merck 2012 Group Management Report Corporate Responsibility Employee diversity As a global company, Merck endeavors to achieve a good balance between different cultures and nationalities, between different age groups, as well as between male and female employees. We are convinced that ...

  • Page 46
    ... include the global Responsible Care Charter in the chemical industry as well as rules governing pharmaceutical marketing practices specified by pharmaceutical industry associations. Our aim is to offer customers and patients high-quality original products. When developing new products, we take the...

  • Page 47
    ... of the company, helping us to more effectively address issues relating to access to medicines in developing countries. Fight against counterfeit products: MACON Network Merck is resolute in its fight against counterfeit products. Counterfeit medicines endanger the life and health of patients...

  • Page 48
    Merck 2012 Group Management Report 43 Corporate Responsibility Energy 2008 2009 2010 2011 2012 Energy consumption (in GWh) Purchased energy Natural gas (in million m³) Liquid fossil fuels (in kilotons) Electricity (in GWh) Portfolio-adjusted in accordance with the Greenhouse Gas Protocol ...

  • Page 49
    ...and climate protection. In 2012, the two Merck production sites of Darmstadt and Gernsheim, which account for around 40% of the global energy consumption at Merck, were certified to the ISO 50001 standard for energy management systems. Carbon Performance Leadership Index: Rating improved The Carbon...

  • Page 50
    ... Millipore division is working intensively on this topic and has carried out a number of life cycle analyses and comparative product studies. Merck Millipore is also using these to further reduce the environmental impact of products as part of its Design for Sustainability program. Responsibility...

  • Page 51
    ... continue to dominate. Together, the top five investors held around 30% of the free float at year-end. The performance of Merck shares vs. the DAX ®, the Bloomberg Europe 500 Pharmaceuticals Index (BEPHARM) and the Bloomberg EMEA Chemicals Index (BEUCHEM) - 2012 Jan. Feb. March April May June July...

  • Page 52
    Merck 2012 Group Management Report 47 I 2/5 Share data 1 2012 2011 Dividend Share price high Share price low Year-end share price Daily average number of Merck shares traded 2 Market capitalization 3 (at year-end) Market value of authorized shares 4 (at year-end) 1 / in â,¬ / in â,¬ / in â,¬ ...

  • Page 53
    ... product of 0.4%. Merck operates in the pharmaceutical, chemical and life science sectors. Pharmaceutical market Subdued growth in the pharmaceutical market IMS Health, a provider of market analyses for the health care industry, points to an increase in sales in the prescription drugs segment...

  • Page 54
    ...of the three largest divisions as well as changes from foreign exchange rates Strong operational performance while substantially advancing with the transformation of the company Good profitability and strong working capital management lead to increased free cash flow Merck Serono generates solid top...

  • Page 55
    50 Merck 2012 Group Management Report Financial position and results of operations Sales growth driven by organic growth and foreign exchange rates In 2012, Merck delivered a strong business performance while significantly transforming the company. Total revenues of the Merck Group rose 8.7% to ...

  • Page 56
    ... (LSB) manufacturing site in Vevey (Switzerland) as well as idle costs in production and selected factory shut-downs as a result of initiatives to lower inventories in the Performance Materials and Merck Millipore divisions lowered the gross margin compared to 2011. Group marketing and selling...

  • Page 57
    ... one-time items by division - 2012 â,¬ million / in % 4 1 Merck Serono 2 Consumer Health 3 Performance Materials 1 2 1,785 63 731 596 56% 2% 23% 19% 3 4 Merck Millipore Not shown: Group EBITDA pre one-time items lowered by â,¬ 211 million in Corporate and Other Increase in EBITdA pre one-time...

  • Page 58
    ...The majority of savings were achieved in Merck Serono followed by Consumer Health, which delivered substantial savings relative to its size. Two-thirds of the restructuring costs incurred were reported in the Merck Serono division. The restructuring costs booked in Corporate and Other mainly related...

  • Page 59
    ... the Merck Group amounted to â,¬ 21,643 million as of December 31, 2012 (December 31, 2011: â,¬ 22,122 million). This decrease was driven by the increased focus on working capital management and resulted in both lower trade accounts receivable and inventories. Non-current assets, mainly intangibles...

  • Page 60
    ... few years, in line with increasing sales and profit margins on the back of the efficiency program. Both ratings ensure that Merck will be able to benefit from attractive financing terms in the future. The factor of net financial debt to net cash flow from operating activities lessened from 2.7x as...

  • Page 61
    56 Merck 2012 Group Management Report Financial position and results of operations Record level of free cash flow Merck's strong operational performance in 2012 as well as effective working capital management generated a record free cash flow of â,¬ 2,040 million (2011: â,¬ 1,436 million), up 42...

  • Page 62
    Merck 2012 Group Management Report 57 Financial position and results of operations Socially responsible job reductions and site closures being assessed Apart from EBITDA pre, a new cash flow performance indicator was introduced in 2012 to be used as the second key indicator for internal target ...

  • Page 63
    58 Merck 2012 Group Management Report I 2/5 Merck Serono our business by region -i- Page 58 7% 22% North America Rest of World 29% 42% Europe Merck Serono Sales by region 2012 M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C o M...

  • Page 64
    ... income from the strong sales performance of Humira ® in addition to a positive impact from foreign exchange rates. Merck Serono | Key figures â,¬ million 2012 2011 Change in % Total revenues Sales Operating result (EBIT) Margin (% of sales) EBITDA Margin (% of sales) EBITDA pre one-time items...

  • Page 65
    ... market, where pressures on health care budgets led to continuous price cuts across the industry, resulted in a 2.1% decline in organic sales. This was primarily due to lower sales of General Medicine products. Sales in the Rest of World region grew 12.0%, mainly thanks to the good performance...

  • Page 66
    Merck 2012 Group Management Report 61 Merck Serono Rebif ® sales increase to around â,¬ 1.9 billion Increasing sales in Emerging Markets drive Erbitux ® growth Merck Serono's largest single product, Rebif ® (interferon beta-1a), for the treatment of relapsing forms of MS grew 7.5% ...

  • Page 67
    ... million. Strong volume growth in the Emerging Markets region, which accounted for 56% of sales, was offset by pricing declines as well as lower volumes in Europe, especially in southern European markets and France. Merck Serono | Key products, organic growth rates â,¬ million 0 612 526 380 397 400...

  • Page 68
    ... several processes related to the manufacturing of Rebif ®, which the FDA concluded were not in full compliance with good manufacturing practice standards. Merck is working closely with the FDA to address its observations. The agency completed its initial evaluation of the company's responses. In...

  • Page 69
    64 Merck 2012 Group Management Report Merck Serono Merck Serono pipeline, as of January 2013 Therapeutic area Compound Indication Status ... conducted under the responsibility of Merck Sponsored by the National Cancer Institute (USA) Post approval request by the European Medicines Agency More...

  • Page 70
    Merck 2012 Group Management Report 65 Merck Serono The goals of the "Fit for 2018" efficiency program in R&d Focus and simplifying our global footprint Research: creating an early-stage pipeline of clearly differentiated molecules oncology, Multiple Sclerosis and Immunology are key areas of ...

  • Page 71
    ... globally competitive on productivity, value, cost and speed in conducting clinical development. Merck Serono aims to attract and retain key talents to build up world class capabilities. Simplified processes are being put in place in compliance with highest quality standards in order to improve...

  • Page 72
    ... Group Management Report 67 Merck Serono Clinical pipeline update The Merck Serono pipeline has a strong focus on oncology. Currently, 16 projects are in various phases of clinical development. In late 2012, approval was obtained in Japan from the Ministry of Health, Labor and Welfare for the use...

  • Page 73
    68 Merck 2012 Group Management Report Merck Serono Pimasertib moved to Phase II development L-BLP25 misses primary endpoint in the START study; additional analysis ongoing Phase III results for cilengitide expected in the first half of 2013 decision regarding further development of ONO-4641 to...

  • Page 74
    Merck 2012 Group Management Report 69 Merck Serono After careful evaluation of the available Phase I data, the division decided to end the development of long-acting interferons in the area of MS. In the area of immunology, Merck Serono is currently analyzing data from the double-blind, ...

  • Page 75
    70 Merck 2012 Group Management Report I 2/5 Consumer Health our business by region -i- Page 70 4% 29% Emerging Markets Rest of World 67% Europe Consumer Health Sales by region 2012 M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. M E R C K G R o U P. C...

  • Page 76
    ... The Consumer Health division reported sales of â,¬ 473 million in 2012, compared to â,¬ 494 million in 2011. To fundamentally improve its operational profitability, Consumer Health began the process of restructuring its operations in 2012. This process, which is planned to be completed in 2013...

  • Page 77
    72 Merck 2012 Group Management Report Consumer Health EBITdA pre one-time items improved to 13.4% of sales On a reported basis, EBIT declined to â,¬ 4 million (2011: â,¬ 47 million). Adjusted for restructuring charges of â,¬ 37 million (mainly due to the planned closure of the Seven Seas plant ...

  • Page 78
    Merck 2012 Group Management Report 73 The exit from unprofitable markets and brands as well as the impact of restructuring led to an organic sales decline ranging between 2% and 10% across all of the division's health themes. Consumer Health | Core brands Bion® Kytta® Cebion femibion® Nasivin...

  • Page 79
    74 Merck 2012 Group Management Report I 2/5 Performance Materials our business by region -i- Page 74 12% 5% Rest of World 10% Europe North America 73% Emerging Markets Performance Materials Sales by region 2012 M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o ...

  • Page 80
    ...performance of the division in 2012. The sale of the battery electrolyte business to BASF, announced in February 2012, lowered sales only by 0.1%. Performance Materials | Key figures â,¬ million 2012 2011 Change in % Total revenues Sales Operating result (EBIT) Margin (% of sales) EBITDA Margin...

  • Page 81
    76 Merck 2012 Group Management Report Performance Materials Inventory optimization and softer pricing weighing on gross margin R&d at an unchanged high level, displaying leadership claim for liquid crystal materials In 2012, the division's gross profit grew 9.6% to â,¬ 959 million (2011: â,¬ ...

  • Page 82
    ...division's active ingredients for cosmetics. Performance Materials | Sales growth components by region - 2012 â,¬ million / change in % Sales Organic growth Exchange rate effects Acquisitions/ divestments Reported sales growth Europe North America Emerging Markets Rest of World World in total...

  • Page 83
    78 Merck 2012 Group Management Report I 2/5 Merck Millipore our business by region -i- Page 78 12% 27% Rest of World 37% Europe North America 24% Emerging Markets Merck Millipore Sales by region 2012 M E R C K A N N U A L R E P o R T 2 01 2 - T H E R o A d T o T o M o R R o W - W W W. ...

  • Page 84
    ...customers from the pharmaceutical industry, which benefited from higher drug volumes, including new drug launches. Consequently, the Process Solutions business unit, which supplies materials and services for drug production, saw the strongest sales increase. The Lab Solutions business unit performed...

  • Page 85
    80 Merck 2012 Group Management Report Merck Millipore EBIT slightly down due to restructuring costs, EBITdA pre one-time items increased To further drive the development of innovative products, the division also increased its R&D spending by 24.5% to â,¬ 166 million (2011: â,¬ 133 million), ...

  • Page 86
    ... products and services to support life science research - continued to grow in line with the market, reporting an organic increase of 2.0% to sales of â,¬ 455 million in 2012 (2011: â,¬ 421 million). Growth was driven by Asian and Latin American markets offsetting softer conditions in North America...

  • Page 87
    ... manufactured drugs, seeing strong demand for biosafety solutions, process systems hardware and single-use manufacturing technologies. In November 2012, the business unit's product portfolio in the area of cell culture media was strengthened with the takeover of Biochrom. Merck Millipore | Sales...

  • Page 88
    ... Merck Group. As a result, Corporate and Other has no sales to report. Gains or losses on currency hedging also are reported in Corporate and Other. Corporate and Other | Key figures â,¬ million 2012 2011 Change Operating result (EBIT) EBITDA Restructuring costs Integration / IT related costs...

  • Page 89
    ... for the Merck Group, reporting this to the Executive Board, the Supervisory Board and the Finance Committee twice a year. Group Internal Auditing conducts regular reviews Internal control system for the consolidated accounting process The objective of the internal control system for accounting is...

  • Page 90
    ... companies is confirmed by both the local managing director and the Chief Financial Officer by signing the single entity reporting. All the structures and processes described are subject to constant review by Group Internal Auditing based on an annual audit plan specified by the Executive Board...

  • Page 91
    ... deviations from the business plan. Risks in connection with investment decisions are minimized by the use of detailed guidelines. Total revenues and the economic success of the Merck Group depend on a large number of pharmaceutical and chemical products for various industries. This diversification...

  • Page 92
    ... Group Management Report 87 Risk Report Financial risks As a company that operates internationally and due to its presence in the capital market, Merck is exposed to various financial risks. These are primarily liquidity, default, and market-price risks; fluctuations in the valuation of pension...

  • Page 93
    88 Merck 2012 Group Management Report Risk Report externally funded. (More information can be found starting on page 171 in the Notes to the Consolidated Financial Statements). As far as pension obligations are covered by plan assets consisting of interest-bearing securities, shares, real estate,...

  • Page 94
    Merck 2012 Group Management Report 89 Risk Report Human resources risks Merck's future growth is highly dependent on its innovativeness. Therefore, the expertise and engagement of employees in all sectors in which Merck operates are crucial to the success of the company. The markets relevant to ...

  • Page 95
    ... by means of auditing, advising and training in matters of environmental protection as well as occupational health and safety. In order to ensure the continuity of plant and equipment, Merck monitors these risks both at our own sites as well as at suppliers and contract manufacturers. By adhering to...

  • Page 96
    ... dealing proactively with their major short-term economic challenges. Thus, global activity is projected to re-accelerate. For the medium term the IMF notes that important questions remain about how the global economy will operate in a world of high government debt and whether emerging market...

  • Page 97
    ... on our sales. With regard to our main performance indicator, EBITDA pre, the Executive Board expects that the Merck Group will again be able to post an increase in 2013 and 2014 resulting from net savings achieved via the "Fit for 2018" efficiency program. Reported EBITDA will increase markedly in...

  • Page 98
    .... For the Merck Serono division, we expect a slight, organic sales increase in 2013 and 2014, however, slower than in 2012. We currently assume no major new product launch in our forecast. The efficiency program should lead to further cost savings and thus enable further EBITDA pre improvement in...

  • Page 99
    ...the Consumer Health division Consumer Health focusing on profitable products to improve its EBITdA pre Our Consumer Health division is committed to enhancing the quality of people's lives around the world with innovative over-the-counter health care solutions. According to the market research firm...

  • Page 100
    Merck 2012 Group Management Report 95 Report on Expected Developments In 2013 and 2014, the opportunities and risks of the Consumer Health division will be closely linked to the successful marketing of the existing product portfolio and a strengthening of faster growing geographies. The focus ...

  • Page 101
    ...growth in sales and EBITdA pre expected for Merck Millipore Merck Millipore is a leading supplier to the life science industry. Its products and services are used for customers in the research, development and production of biotech and pharmaceutical drugs as well as general laboratory applications...

  • Page 102
    ...on the world economy. Sales of the Merck Group are expected to grow organically at a moderate pace in both 2013 and 2014. Merck assumes neither any major technology shifts in its chemical businesses nor any major new product launches in the pharmaceutical business in either year. On a reported basis...

  • Page 103
    ... with the members of the Executive Board or employees in the event of a takeover offer. Subsequent Events Subsequent to the balance sheet date, no further events of special importance occurred that could have a material impact on the financial position and results of operations of the Merck Group.

  • Page 104
    Merck 2012 # 03 Corporate Governance Statement on Corporate Governance Report of the Supervisory Board 124 ➝ Objectives of the Supervisory Board with respect to its composition 101 ➝ 121 ➝ 099 126

  • Page 105
    ... 2012 Corporate Governance I Merck KGaA at a glance 3/5 Capital structure and bodies of Merck KGaA Total capital of Merck KGaA â,¬ 565,211,241.95 Share capital â,¬ 168,014,927.60 Equity interest â,¬ 397,196,314.35 Limited liability shareholders Merck KGaA General Meeting General partner...

  • Page 106
    .... Merck KGaA has resolved to apply the Code logically to serve the interests of its shareholders. In order to enable shareholders to compare the situation at other companies more easily, we base corporate governance on the conduct recommendations made by the Code Commission relating to management...

  • Page 107
    ... am Main, Germany, on April 20, 2012. At 63.5%, the proportion of share capital represented at the meeting was stable, significantly exceeding the proportion of 56.6% in 2011. In particular, the Annual General Meeting passes resolutions concerning the approval of the annual financial statements, the...

  • Page 108
    ... proposed to the 2013 General Meeting. The Government Commission German Corporate Governance Code amended the latest version of section 5.4.1 para 2 of the Code by adding the recommendation that the Supervisory Board shall also define the number of independent Supervisory Board members in the future...

  • Page 109
    ... Corporate Governance Code) The compensation report is part of the audited Notes to the Group accounts. Compensation of members of the Executive Board of Merck KGaA Contrary to management board members of German stock corporations, the members of the Executive Board of Merck KGaA are not employed...

  • Page 110
    ... Plan was added to the variable compensation of the members of the Executive Board. It aims to enhance the sustainability of the compensation system and to align it not only with target achievement based on key performance indicators, but above all with a sustainable performance of Merck shares...

  • Page 111
    ... compensation results for the members of the Executive Board of Merck KGaA broken down by performance-independent and performance-related components: Performance-independent components Performance-related components without a long-term incentive effect Total Sharebased compensation expensed in...

  • Page 112
    Merck 2012 Corporate Governance 107 Statement on Corporate Governance Pension provisions The individual contractual pension obligations grant the members of the Executive Board entitlement to a lifelong old-age pension or surviving dependents' pension in the event of reaching the individual ...

  • Page 113
    ...of Merck KGaA The compensation of the Supervisory Board members is defined by Article 20 of the Articles of Association of Merck KGaA. However, a new compensation system will be proposed to the General Meeting to reflect the changes in the German Corporate Governance Code announced on June 15, 2012...

  • Page 114
    Merck 2012 Corporate Governance 109 Statement on Corporate Governance The individual values are presented in the following table: Compensation of the Supervisory Board members of Merck KGaA Fixed compensation â,¬ 2012 2011 Variable compensation 2012 2011 Total compensation 2012 2011 Rolf ...

  • Page 115
    ... Merck 2012 Corporate Governance Statement on Corporate Governance Ownership, purchase or sale of shares in the company by members of the Executive Board and of the Supervisory Board Section 6.6 of the German Corporate Governance Code As of December 31, 2012, the members of the Executive Board...

  • Page 116
    ... training courses on the Code of Conduct, all employees are instructed on the subject of insider trading. Accounting and audits of financial statements Merck KGaA prepares its consolidated financial statements and Group management report in accordance with International Financial Reporting...

  • Page 117
    ... observance of the Code of Conduct with support from corresponding auditing and training programs throughout the Group. All employees are called upon to report compliance violations to their supervisor, Legal, HR or other relevant departments. Merck created the position of Group Compliance Officer...

  • Page 118
    Merck 2012 Corporate Governance 113 Statement on Corporate Governance Risk and opportunity management The Executive Board, the Supervisory Board and the Finance Committee are regularly informed about the current risk portfolio of the Group and the individual companies. More detailed information ...

  • Page 119
    ... (a) statutory supervisory boards and (b) comparable German and foreign supervisory bodies of corporations Karl-Ludwig Kley Darmstadt Chairman Kai Beckmann Griesheim, Head of Group Human Resources Stefan Oschmann Munich, Responsible for the Merck Serono and Consumer Health divisions Bernd Reckmann...

  • Page 120
    ... Works Council of the Gernsheim site of Merck KGaA Edeltraud Glänzer Wiesbaden, Member of the Managing Board of Industriegewerkschaft Bergbau, Chemie, Energie (IG BCE) (a) - Epigenomics AG, Berlin (Chairman) (until April 2012) - Ganymed Pharmaceuticals AG, Mainz (Chairman) - Merz GmbH & Co. KGaA...

  • Page 121
    ... the Works Council of the Darmstadt site of Merck KGaA Osman Ulusoy (until April 30, 2012) Wiesbaden, Vice Regional Director (Hesse-Thuringia) of Industriegewerkschaft Bergbau, Chemie, Energie (IG BCE) 1 no board positions no board positions Internal board position 2 Members appointed by E. Merck...

  • Page 122
    ... planning, especially financial, investment and HR planning; the profitability of the Merck Group; the progress of business; the risk situation; risk management (including compliance), and the internal auditing system. In addition, by means of consultation with the Executive Board, it creates...

  • Page 123
    118 Merck 2012 Corporate Governance Statement on Corporate Governance Board of Partners of E. Merck KG Some of the responsibilities that lie with the supervisory board of a German stock corporation are fulfilled at Merck by E. Merck KG. This applies primarily to the Board of Partners of E. Merck...

  • Page 124
    Merck 2012 Corporate Governance 119 Statement on Corporate Governance The Board of Partners supervises the Executive Board in its management of the company. It informs itself about the business matters of Merck KGaA, and may inspect and examine the company's accounts and other business documents,...

  • Page 125
    ... General Meeting. In addition, the Finance Committee is concerned with the financial position, results of operations and liquidity of Merck, as well as accounting, internal auditing, risk management and compliance issues. Upon request of the Board of Partners, the Finance Committee examines capital...

  • Page 126
    ...Lastly, the risk report, planning and the "Fit for 2018" program were topics of this meeting. The meeting held on May 3, 2012 focused on current business developments in the first quarter of 2012. In addition, the Supervisory Board closely examined the internal auditing system. Furthermore, the head...

  • Page 127
    ..., as defined by the German Corporate Governance Code, involving Supervisory Board members during 2012. After addressing corporate governance topics in detail, the Executive Board and Supervisory Board resolved to adopt the updated Statement of Compliance on February 20, 2013 (Executive Board) and...

  • Page 128
    ... in the Statement of Compliance on pages 101 et seq. of the Annual Report. Committees The Supervisory Board of Merck KGaA currently has no committees on account of the special features that apply to the Supervisory Board of a corporation with general partners (KGaA) under German company law and...

  • Page 129
    ... its composition and reports on the status of their implementation below. As recommended in the latest version of the German Corporate Governance Code dated May 15, 2012, an objective regarding the number of independent Supervisory Board members has been added. Expertise and diversity Professional...

  • Page 130
    ... appropriate management experience in family-owned companies of this size. Internationality The Supervisory Board shall have at least three members with business experience in the main sales markets of Merck KGaA. Currently, the main sales markets of Merck KGaA are Europe, North and Latin America...

  • Page 131
    126 Merck 2012 Corporate Governance Objectives of the Supervisory Board with respect to its composition Number of independent members/no material conflicts of interest The Supervisory Board is to have an adequate number of independent members. Assuming that the status of being an employee ...

  • Page 132
    ... Merck Consolidated Financial Statements for 2012 127 128 ➝ Consolidated Financial Statements Consolidated Income Statement Consolidated Statement of Comprehensive Income 130 ➝ Consolidated Balance Sheet 131 ➝ Consolidated Cash Flow Statement 132 ➝ Consolidated Statement of Changes...

  • Page 133
    128 Merck 2012 Consolidated Financial Statements Merck Consolidated Income Statement I 4/5 â,¬ million Note 22 23 2012 2011 Sales Royalty, license and commission income Total revenues Cost of sales Gross margin Marketing and selling expenses Royalty, license and commission expenses ...

  • Page 134
    Merck 2012 Consolidated Financial Statements 129 Merck Consolidated Statement of Comprehensive Income â,¬ million Note 2012 2011 Profit after tax Available-for-sale financial assets Fair value adjustments Reclassification to income statement Deferred taxes Changes recognized in equity ...

  • Page 135
    ... 2012 Consolidated Financial Statements Merck Consolidated Balance Sheet â,¬ million Note Dec. 31, 2012 Dec. 31, 2011 Jan. 1, 2011 Current assets Cash and cash equivalents Current financial assets Trade accounts receivable Inventories Other current assets Tax receivables Assets held for sale...

  • Page 136
    ... Financial Statements 131 Merck Consolidated Cash Flow Statement â,¬ million Note 2012 2011 Profit after tax Depreciation / amortization / impairment losses / write-ups Changes in inventories Changes in trade accounts receivable Changes in trade accounts payable Changes in provisions Changes...

  • Page 137
    132 Merck 2012 Consolidated Financial Statements Merck Consolidated Statement of Changes in Net Equity For details see Note [52] Equity capital Capital reserves (share premium) Merck KGaA Retained earnings â,¬ million General partner's equity Merck KGaA Subscribed capital Merck KGaA Retained...

  • Page 138
    Merck 2012 Consolidated Financial Statements 133 Gains / losses recognized immediately in equity Equity attributable to Merck KGaA shareholders Available-for-sale financial assets Derivative financial instruments Currency translation difference Non-controlling interest Equity -3.1 - -3.1 -...

  • Page 139
    ... accompanying consolidated financial statements as at December 31, 2012 have been prepared with Merck KGaA, Frankfurter Strasse 250, 64293 Darmstadt, which manages the operations of the Merck Group, as parent company. In accordance with the provisions of the German financial reporting disclosure law...

  • Page 140
    ... any material effects on the consolidated financial statements. Scope of consolidation Including the parent company Merck KGaA, Darmstadt, 203 (2011: 228) German and foreign companies were fully consolidated in the annual financial statements of the Merck Group. Of these companies, 178 (2011: 206...

  • Page 141
    ...company is a specialist in the production and commercialization of cell culture media and buffer solutions and is expected to strengthen the Process Solutions business unit of the Merck Millipore division. The first-time consolidation of Biochrom AG took place on November 6, 2012. The purchase price...

  • Page 142
    ... was reported as goodwill. This mainly included the expertise of the workforce as well as synergies from the expansion of the Merck Millipore product portfolio, increases in market shares, and from combining the companies. The fair value adjustments made as part of the purchase price allocation...

  • Page 143
    .... Merck made use of the possibility to adopt the standard earlier, and has been applying the rules contained in IAS 19 (2011) since January 1, 2012. At Merck, the changes that the amended standard involve related in particular to expected returns on plan assets, the treatment of past service cost as...

  • Page 144
    ...-time items Adjusted presentation 2011 Sales Royalty, license and commission income Total revenues Cost of sales Gross margin Marketing and selling expenses Royalty, license and commission expenses Administration expenses Other operating expenses and income Research and development Amortization of...

  • Page 145
    ... property, plant and equipment, as well as provisions. In each case, the assumptions and estimates are based on the state of knowledge and data available as of the reporting date; however the actual results may deviate from the expected values and lead to corresponding adjustments of book values for...

  • Page 146
    ... Merck Group generally conduct their operations independently. The functional currency of these companies is normally the respective local currency. Assets and liabilities are measured at the closing rate, and income and expenses are measured at weighted average annual rates in euros, the reporting...

  • Page 147
    ...launch, development expenses in the Merck Millipore and Performance Materials divisions can likewise not be capitalized. In addition to our own research and development, Merck is also a partner in collaborations aimed at developing marketable products. These collaborations typically involve payments...

  • Page 148
    ... "fair value through profit or loss" on initial recognition (fair value option) or as "financial instruments held for trading". We did not apply the fair value option during the fiscal year. Merck only assigns derivatives to the "held for trading" measurement category. Special accounting rules apply...

  • Page 149
    ... do not or no longer meet the documentation or effectiveness requirements for hedge accounting, or whose hedged item no longer exists, are reported as "financial assets and liabilities at fair value through profit or loss." Changes in fair value are then recognized in profit or loss. As a rule, the...

  • Page 150
    ... and future customers, future realizable selling prices and volumes and corresponding costs are made. The existing plans normally cover a period of four years. Cash flows for periods in excess of this are included using an individualized long-term growth rate for the specific cash-generating unit...

  • Page 151
    ...follows: Merck Serono 1.5% (2011: 1.5%), Consumer Health 2.5% (2011: 2.5%) and Performance Materials 1.0% (2011: 1.0%). The use of division-specific long-term growth rates is suited to taking the specific business and the imminent growth prospects thereof into account. The expected future cash flows...

  • Page 152
    Merck 2012 Consolidated Financial Statements 147 Accounting policies Useful life of property, plant and equipment Useful life Production buildings Administration buildings Plant and machinery Operating and office equipment; other facilities maximum of 33 years maximum of 40 years 6 to 25 ...

  • Page 153
    ... entire period of service of the participating employees. Annual actuarial opinions are prepared for this purpose. The actuarial parameters for discount rates, salary and pension trends, staff turnover as well as health care cost increases, which were used to calculate the benefit obligation, were...

  • Page 154
    ... of cooperation and distribution agreements. The breakdown of royalty, license and commission income by division is presented in the Segment Reporting (see Note [53]). ( 24 ) Cost of sales Cost of sales primarily included the cost of manufactured products as well as goods purchased for resale. In...

  • Page 155
    ... included both trade accounts receivable as well as other receivables disclosed in the balance sheet under "other current assets" insofar as the expenses were not reported under one-time items. Other operating expenses included, among other things, special environmental protection costs and non...

  • Page 156
    ... program "Fit for 2018". The aim of the associated measures is to increase the competitiveness of Merck, especially by optimizing cost structures in all divisions. The recognized restructuring charges largely related to personnel measures, for instance the elimination of positions in order to create...

  • Page 157
    ... assets to the Merck Group, this item is disclosed separately in the income statement. This item mainly included amortization of intangible assets in connection with the purchase price allocations for Serono and Millipore. Amortization of intangible assets decreased to â,¬ 871.6 million in 2012 from...

  • Page 158
    Merck 2012 Consolidated Financial Statements 153 Notes to the consolidated income statement Net interest amounting to â,¬ -205.3 million (2011: â,¬ -186.4 million) worsened in comparison with 2011 owing to lower interest income from cash investments due to the general decline in interest rates. ...

  • Page 159
    154 Merck 2012 Consolidated Financial Statements Notes to the consolidated income statement The tax expense consisted of corporation and trade income taxes for the companies domiciled in Germany as well as comparable income taxes for foreign companies. In 2012, one-time deferred tax income of â,¬...

  • Page 160
    ... dividing the profit after tax attributable to the shareholders of Merck KGaA by the weighted average number of theoretical shares outstanding. The use of a theoretical number of shares takes into account the fact that the general partner's capital is not represented by shares. The share capital of...

  • Page 161
    156 Merck 2012 Consolidated Financial Statements Notes to the consolidated balance sheet Notes to the consolidated balance sheet ( 37 ) Cash and cash equivalents This item comprised: â,¬ million Dec. 31, 2012 Dec. 31, 2011 Cash, bank balances and cheques Short-term cash investments 349.1 ...

  • Page 162
    ... management processes that take individual customer risks into account are used to assess the recoverability of receivables. If there are indications that individual trade accounts receivable are partly or fully impaired, corresponding allowances are recognized. Additions to allowances relate mainly...

  • Page 163
    158 Merck 2012 Consolidated Financial Statements Notes to the consolidated balance sheet ( 40 ) Inventories This item comprised: â,¬ million Dec. 31, 2012 Dec. 31, 2011 Raw materials and production supplies Work in progress, finished goods and goods purchased for resale 308.1 1,225.8 1,533...

  • Page 164
    Merck 2012 Consolidated Financial Statements 159 Notes to the consolidated balance sheet Other receivables from third parties past due were as follows: â,¬ million Dec. 31, 2012 Dec. 31, 2011 Neither past due nor impaired Past due, but not impaired up to 3 months up to 6 months up to 12 ...

  • Page 165
    ... Financial Statements Notes to the consolidated balance sheet ( 43 ) Intangible assets Patents, licenses and similar rights, brands, trademarks and other â,¬ million Finite useful life Indefinite useful life Goodwill Software Advance payments Total Acquisition and manufacturing cost...

  • Page 166
    ...Patents, licenses and similar rights, brands, trademarks and other" with finite useful lives amounting to â,¬ 5,957.8 million (2011: â,¬ 6,812.1 million) mainly included the identified and capitalized assets from the Millipore and Serono purchase price allocations. The vast majority was attributable...

  • Page 167
    ... sheet The book values of "Patents, licenses and similar rights, brands, trademarks and other" as well as goodwill were attributable to the divisions as follows: â,¬ million Remaining useful life in years Merck Serono Consumer Health Performance Materials Merck Millipore Total Dec. 31, 2012...

  • Page 168
    ... Plant and machinery Other facilities, operating and office equipment Construction in progress and advance payments to vendors and contractors Total Acquisition and manufacturing cost January 1, 2011 Currency translation Changes in scope of consolidation Additions Disposals Transfers Reclassi...

  • Page 169
    ... "other operating expenses". Of this amount, â,¬ 10.3 million was attributable to the Performance Materials division, â,¬ 4.3 million to Merck Serono, and â,¬ 3.3 million to Merck Millipore. The total amount of property, plant and equipment used as collateral was immaterial. Total government grants...

  • Page 170
    Merck 2012 Consolidated Financial Statements 165 Notes to the consolidated balance sheet Moreover, fair value adjustments of â,¬ -0.4 million (2011: â,¬ 2.5 million) were made on "available-for-sale financial assets" and recognized in equity. ( 46 ) Financial liabilities This item comprised: ...

  • Page 171
    ...increased to â,¬ 10 billion. The following bonds were issued by the Merck Group: Issuer Nominal value Maturity Nominal interest rate Issue price Merck Financial Services GmbH, Germany Merck Financial Services GmbH, Germany Merck Financial Services GmbH, Germany Millipore Corporation, USA Merck...

  • Page 172
    Merck 2012 Consolidated Financial Statements 167 Notes to the consolidated balance sheet ( 47 ) Trade accounts payable Trade accounts payable consisted of the following: â,¬ million Dec. 31, 2012 Dec. 31, 2011 Liabilities due to third parties Liabilities due to affiliates 1,288.2 0.1 1,288...

  • Page 173
    ...government agencies involve uncertainties. As of December 31, 2012, provisions amounted to â,¬ 678.9 million (2011: â,¬ 473.7 million). Provisions for litigation took into account the material litigation risks described in the following. As of the balance sheet date, provisions existed in connection...

  • Page 174
    ... be received depends on the total value defined for the respective person and the average closing price of Merck shares in Xetra trading during the last 60 trading days prior to January 1 of the respective fiscal year (reference price). In order for members of top management to receive payment, they...

  • Page 175
    170 Merck 2012 Consolidated Financial Statements Notes to the consolidated balance sheet 2012 tranche Performance cycle Term Reference price of Merck shares in â,¬ (60-day average Merck share price prior to the start of the performance cycle) DAX ® value (60-day average of the DAX ® prior to ...

  • Page 176
    ...for pensions payable in the future. In the Merck Group, defined benefit plans are funded and unfunded. Provisions also contain other post-employment benefits, such as accrued future health care costs for retirees in the United States. In order to limit the risks of changing capital market conditions...

  • Page 177
    ...Merck 2012 Consolidated Financial Statements Notes to the consolidated balance sheet The defined benefit obligations of the Merck Group were based on the following types of benefits provided by the respective plan: Germany Present value of defined benefit obligations in â,¬ million Dec. 31, 2012...

  • Page 178
    ...cost Past service cost Gains (-) or losses (+) on settlement Interest expense Actuarial gains (-) / losses (+) Contributions by plan participants Pension payments Changes in the scope of consolidation Reclassification Merck KGaA due to CTA Other effects recognized in income Other changes Cash value...

  • Page 179
    ...adjustments Funding CTA Merck KGaA Employer contributions Employee contributions Pension payments from plan assets Changes in scope of consolidation Plan administration costs paid from the plan assets recognized in income Other effects recognized in income Other changes Fair value of the plan assets...

  • Page 180
    ... instruments issued by Merck Group companies or real estate used by Group companies. The plan assets serve exclusively to meet the defined benefit obligations. Covering these benefit obligations with financial assets represents a means of providing for future cash outflows, which occur in some...

  • Page 181
    176 Merck 2012 Consolidated Financial Statements Notes to the consolidated balance sheet The fair value of the plan assets can be allocated to the following categories:
 Dec. 31, 2012 Quoted market price in an active market No quoted market price in an active market Quoted market price in an ...

  • Page 182
    ... Art. 30 (1) Articles of Association of Merck KGaA Basis for the appropriation of profits Profit transfer to E. Merck KG Ratio general partner's capital to total capital Profit transfer from E. Merck KG Ratio of share capital to total capital Trade tax Corporation tax Net income / loss (100%) (70...

  • Page 183
    ... 2012 Consolidated Financial Statements Segment reporting Segment reporting ( 53 ) Information by division/country and region Information by division Merck Serono â,¬ million 2012 2011 Consumer Health 2012 2011 Sales Royalty, license and commission income Total revenues Gross margin Marketing...

  • Page 184
    Merck 2012 Consolidated Financial Statements 179 Segment reporting Performance Materials 2012 2011 Merck Millipore 2012 2011 Corporate and Other 2012 2011 Group 2012 2011...North America 2012 2011 thereof USA 2012 2011 Emerging Markets 2012 2011 Rest of World 2012 2011 Group 2012 2011 2,128...

  • Page 185
    ... areas and market innovative prescription drugs of chemical and biotechnological origin. The Consumer Health division comprises Merck's business with high-quality over-the-counter products for preventive health care and self-treatment of minor ailments. The Performance Materials division consists of...

  • Page 186
    ... to the Corporate and Other segment. In 2011, an investment result of â,¬ -1.2 million was attributable to the Merck Millipore division. Notes to the consolidated cash flow statement ( 55 ) Net cash flows from operating activities In 2012, tax payments totaled â,¬ 580.5 million (2011: â,¬ 436...

  • Page 187
    ... Segment reporting / Notes to the consolidated cash flow statement â,¬ million Total 2012 Purchase price paid Cash and cash equivalents acquired Acquisitions 21.7 -1.1 20.6 In 2012, cash inflows from disposals of assets amounted to â,¬ 93.6 million. Cash inflows in 2011 related mainly...

  • Page 188
    ... 2012 2011 EBITDA pre one-time items less investments in property, plant and equipment, software as well as advance payments for intangible assets Changes in inventories as reported in the balance sheet Changes in trade accounts receivable as reported in the balance sheet Business free cash...

  • Page 189
    ...with banks that have a good credit rating. Related default risks are continuously monitored. The following derivative financial positions were held as of the balance sheet date: Nominal volume â,¬ million Dec. 31, 2012 Dec. 31, 2011 Fair value Dec. 31, 2012 Dec. 31, 2011 Cash ï¬,ow hedge Interest...

  • Page 190
    Merck 2012 Consolidated Financial Statements 185 Other disclosures The maturity structure of the hedging transactions (nominal volume) is as follows as of the balance sheet date: â,¬ million Remaining maturity less than 1 year Remaining maturity more than 1 year Total Dec. 31, 2012 Remaining...

  • Page 191
    ...2012 Consolidated Financial Statements Other disclosures Market fluctuations with respect to foreign exchange and interest rates represent significant profit and cash flow risks for Merck. Merck aggregates these Group-wide risks and steers them also by using derivative financial instruments. Merck...

  • Page 192
    Merck 2012 Consolidated Financial Statements 187 Other disclosures cash flows beyond the year 2013. A 10% increase in the value of the euro over the Japanese yen, the Taiwan dollar and the U.S. dollar would have changed equity by â,¬ 14.5 million, â,¬ 9.8 million and â,¬ 65.4 million, ...

  • Page 193
    188 Merck 2012 Consolidated Financial Statements Other disclosures Share price risks The shares in publicly listed companies amounting to â,¬ 6.9 million (2011: â,¬ 8.7 million) are generally exposed to a market value risk. A 10% change in the value of the stock market would impact equity by â,¬...

  • Page 194
    ... risk with customers is continuously monitored by analyzing the age structure of trade accounts receivable. The financial crisis has led to an increased risk of default in individual eurozone countries. Merck continuously reviews and monitors open positions vis-Ã -vis all trading partners in the...

  • Page 195
    ...Subsequent measurement according to IAS 39 â,¬ million Book value Dec. 31, 2012 Amortized cost At cost Fair value Carrying value according to IAS 17 Non-financial items Assets Cash and cash equivalents Current financial assets Held for trading (non-derivatives) Non-hedging derivatives Held...

  • Page 196
    Merck 2012 Consolidated Financial Statements 191 Other disclosures Subsequent measurement according to IAS 39 Fair value Dec. 31, 2012 Book value Dec. 31, 2011 Amortized cost At cost Fair value Carrying value according to IAS 17 Non-financial items Fair value Dec. 31, 2011 729.7 - 7.8 ...

  • Page 197
    ... hedging, as well as hedging of planned transactions in operating business were recorded (2011: gains of â,¬ 12.3 million). Foreign exchange gains of â,¬ 11.2 million resulting from financial balance sheet items, their economic hedging as well as fair value fluctuations of option contracts to hedge...

  • Page 198
    Merck 2012 Consolidated Financial Statements 193 Other disclosures The fair value of financial assets is based on the official market prices and market values quoted on the balance sheet date (Level 1 assets) as well as mathematical calculation models with inputs observable in the market on the ...

  • Page 199
    ... Merck 2012 Consolidated Financial Statements Other disclosures ( 62 ) Capital management The objective of capital management is to secure the financial flexibility in order to maintain long-term business operations and to realize strategic options. Maintaining a stable investment grade rating...

  • Page 200
    ... Other financial obligations comprised the following: â,¬ million Dec. 31, 2012 thereof affiliates Dec. 31, 2011 thereof affiliates Obligations to acquire intangible assets Obligations to acquire property, plant and equipment Future operating lease payments Long-term purchase commitments...

  • Page 201
    ... and cost reduction program "Fit for 2018" and the related expenses for severance pay and partial retirement packages. In 2012, wages and salaries included severance pay amounting to â,¬ 381.6 million, which is to be seen mainly in this context. As of December 31, 2012, the Merck Group had...

  • Page 202
    ...cost of sales. ( 67 ) Auditors' fees The costs of the auditors (KPMG) of the financial statements of the Merck Group consisted of the following: 2012 thereof KPMG Germany 2011 thereof KPMG Germany â,¬ million Merck Group Merck Group Audits of financial statements Other audit-related services...

  • Page 203
    ... Merck Group as well as pension funds that are classified as funded defined benefit plans in accordance with IAS 19 are also related parties within the meaning of IAS 24. Members of the Executive Board and the Supervisory Board of Merck KGaA, the Executive Board and the Board of Partners of E. Merck...

  • Page 204
    ...-Term Incentive Plan totaled â,¬ 3.1 million (2011: â,¬ 0.0 million), and to the pension provisions of E. Merck KG include current service costs of â,¬ 1.9 million (2011: â,¬ 1.1 million) for members of the Executive Board of Merck KGaA. Subject to the approval of the Annual General Meeting on the...

  • Page 205
    ...Merck Consumer Health Care Holding GmbH Merck Export GmbH Merck Financial Services GmbH Merck Financial Trading GmbH Merck Holding GmbH Merck Internationale Beteiligungen GmbH Merck Pensions GmbH & Co. KG Merck Schuchardt OHG Merck Selbstmedikation GmbH Merck Serono GmbH Merck Shared Services Europe...

  • Page 206
    ...ning Company Ltd. Merck Biosciences Ltd. Merck Chemicals Ltd. Merck Consumer Health Care Ltd. Merck Cross Border Trustees Ltd. Merck Investments Ltd. Merck Ltd. Merck Pension Trustees Ltd. Merck Serono Europe Ltd. Merck Serono Ltd. Millipore (U.K.) Ltd. Millipore UK Holdings LLP New Era Laboratories...

  • Page 207
    ... Merck Serono SIA Merck Serono, UAB Merck Re S.A. Merck-Finanz AG Millilux S.a.r.L. Millipart S.a.r.L. Millipore International Holdings, S.a.r.L. Merck Capital Holding Ltd. Merck Capital Ltd. Merck B.V. Millipore B.V. Millipore International Holding Company B.V. Millipore Ireland B.V. Serono Tri...

  • Page 208
    ... EMD Serono Holding Inc. EMD Serono Research Institute, Inc. EMD Serono, Inc. EMD Shared Services America Corp. Millipore Asia Ltd. Millipore Pacific Ltd. Millipore UK Holdings I, LLC Millipore UK Holdings II, LLC Serono Laboratories Inc. EMD Millipore Corp., Puerto Rico Branch EMD Chemicals Canada...

  • Page 209
    ...., Ltd. Merck Chemicals (Shanghai) Co., Ltd. Merck Consumer Health Care Shanghai Trading Co., Ltd. Merck Display Materials (Shanghai) Co., Ltd. Merck Ltd. Merck Millipore Lab Equipment Co., Ltd. Merck Pharmaceutical (HK) Ltd. Merck Serono (Beijing) Pharmaceutical R&D Co., Ltd. Merck Serono Co., Ltd...

  • Page 210
    Merck 2012 Consolidated Financial Statements 205 Other disclosures Country Company Registered office Equity interest (%) thereof Merck KGaA (%) Taiwan Taiwan Taiwan Thailand United Arab Emirates Vietnam Rest of the World Japan Japan Egypt Mauritius South Africa South Africa Tunisia Tunisia ...

  • Page 211
    206 Merck 2012 Consolidated Financial Statements Other disclosures Country Company Registered office Equity interest (%) thereof Merck KGaA (%) United Kingdom Netherlands Austria Austria Portugal Emerging Markets Nature's Best Health Products Ltd. Merck Holding Netherlands B.V. Eurodrug ...

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    ... Statement 5/5 To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements of the Merck Group give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group management report...

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    ... "German Commercial Code"] and supplementary provisions of the articles of association are the responsibility of the parent company's management. Our responsibility is to express an opinion on the consolidated financial statements and on the Group Management Report based on our audit. We conducted...

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    Merck 2012 # 07 More Information Glossary Financial Calendar for 2013 216 ➝ Awards and Recognitions 210 ➝ 215 ➝ 209 216

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    ... structures. Cash flow Capital spending ratio Beta-blockers C /c D /d Deutscher Aktienindex (German stock index): Its value is based on the stock prices of the 30 largest German companies by trading volume and free float market capitalization. Debt issuance program A debt issuance program...

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    ...a key role in the marketing authorization of medicinal products. Equity ratio Indicator that shows equity capital in proportion to total capital, serving to evaluate the financial stability and independence of a company. Earnings per share F /f Food and Drug Administration: U.S. government agency...

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    ... and Labelling of Chemicals. An international standard system to classify chemicals, including labels and safety data sheets. Global Grade Merck is working with the Global Grading System developed by Towers Watson, a market-focused method to evaluate company positions. Goodwill Goodwill arises...

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    ... (LC) These specialty chemicals are used in LC displays (LCD), for example, in flat-panel televisions, notebooks, mobile telephones, etc. LTIR Lost time injury rate: indicator for workplace safety. The number of workplace accidents with one or more days of lost time per million hours worked. Lupus...

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    ... tax ratio indicates the ratio of total taxes to profit before tax. Total revenues Sum of sales as well as royalty, license and commission income. Royalties are earned primarily through patents held by the Merck Serono division. Tax rate VCI V /v Verband der Chemischen Industrie (German Chemical...

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    Merck 2012 The road to tomorrow 215 I 5/5 January February March 03 /13 04 /13 Annual General Meeting Friday, 04/26/2013 Annual Press Conference Thursday, 03/07/2013 April 05 /13 May Report on the First Quarter Tuesday, 05/14/2013 June July FINANCIAL CALENdAR Merck 2013 08 /13 Report on...

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    ... Center Program Certifies MS Lifelines ® from EMD Serono in the United States for providing an outstanding customer service experience to multiple sclerosis patients Red dot Award For the high design quality of the Muse™ Cell Analyzer from Merck Millipore Knowledge Management Bio-IT World Best...

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    ... Merck 2012 The road to tomorrow Business Development 2008 - 2012 This overview may include historically adjusted values in order to ensure comparability with 2012. â,¬ million Earnings performance Total revenues Sales Operating result (EBIT) Margin (in % of sales) EBITDA Margin (in % of sales...

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    2008 2009 2010 2011 2012 Change in % 7,590 7,202 731 10.2 1,947 27.0 -105 2,052 28.5 575 379 1.69 7,747 7,378 621 8.4 1,625 22.0 -28 1,653 22.4 486 377 1.68 9,291 8,...

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    ... Ziegler / Munich (p. 7, 11, 15, 19) Employee photos KS Ananthasvian / Performance Materials Falk-Felix Passarge / Strategic Planning Tara Smith / Consumer Health Siv-Hung Sy / Performance Materials Eric Walter / Merck Millipore Paper: LuxoArt Printing: Franz Kuthal GmbH & Co. KG Id-No. 1326863 www...

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