These consolidated financial statements have been prepared with Merck KGaA, Darmstadt, which manages the operations of the Merck Group, as parent company.
Accounting policies
The unaudited interim financial statements of the Merck Group as of June 30, 2010 comply with IAS 34. They have been prepared in accordance with the International Financial Reporting Standards (IFRS) in force on the reporting date and adopted by the European Union. In accordance with IAS 34, a condensed scope of reporting as compared with the consolidated financial statements as of December 31, 2009 was selected. With the exception of the disclosure changes described in the following, the accounting policies have remained unchanged in comparison with the previous year. In the consolidated financial statements as of December 31, 2009, Merck started to disclose commission income as a part of total revenues. Furthermore, for the first time in Q1 2010, a separate line “royalty and commission expenses” was added to the Income Statement. In the quarterly reports issued in 2009, royalty and commissions expenses as well as commission income were reported within marketing and selling expenses. The previous year’s presentation and key figures have been adjusted accordingly. The notes to the consolidated financial statements of the Merck Group for 2009, particularly the accounting policies, thus apply accordingly.
Income tax includes the taxes on taxable profit paid in the individual countries plus the change in deferred taxes. The income tax in the interim financial statements is calculated based on the income of the consolidated companies and the currently valid tax rate as a best possible estimate.
The preparation of the interim financial statements requires that assumptions and estimates be made to a certain extent. The assumptions and estimates are based on the state of knowledge and the data currently available.
The following amendments to standards and the following interpretations take effect as of fiscal 2010:
- Amendment to IAS 27 “Consolidated and Separate Financial Statements”
- Amendment to IAS 39 “Financial Instruments: Recognition and Measurement: Eligible Hedged Items”
- Revised version of IFRS 1 “First-time Adoption of International Financial Reporting Standards” and subsequent amendment to this standard
- Amendment to IFRS 2 “Share-based payment“
- Revised version of IAS 3 “Business Combinations”
- “Improvements to International Financial Reporting Standards“
- IFRIC 12 “Service Concession Arrangements”
- IFRIC 15 “Agreements for the Construction of Real Estate”
- IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”
- IFRIC 17 “Distributions of Non-cash Assets to Owners”
- IFRIC 18 “Transfers of Assets from Customers”
The new rules do not have any material effects on the interim financial statements.
Scope of consolidation
As of June 30, 2010, a total of 176 (December 31, 2009: 176) companies are fully consolidated. No companies are consolidated on a pro rata basis. One associate is included using the equity method. The following changes have occurred since the beginning of 2010: Six newly established companies have been consolidated for the first time. Six companies have been liquidated or merged and deconsolidated.
Acquisition of Millipore
On July 14, 2010, Merck KGaA successfully completed its acquisition of Millipore Corporation, a leading life science company based in Billerica, Massachusetts, USA. The Millipore companies will be consolidated in the financial statement of the Merck Group for the first time as of this date. The aggregate purchase price including debt and cash was EUR 5.2 billion (USD 7.0 billion). Merck agreed to acquire Millipore on February 28, 2010 for USD 107 in cash per share of Millipore common stock. The closing follows the approval of the acquisition by Millipore’s shareholders at a special meeting held on June 3, 2010 and the satisfaction of other customary conditions, including antitrust clearance in the United States and Europe. On July 26, the delisting of Millipore from the New York Stock Exchange became effective. Also on July 26, 2010 the application for the deregistration of Millipore from the U.S. Securities and Exchange Commission (SEC) was filed. Effectiveness of the deregistration is anticipated for October 13, 2010.
The transaction will be funded through available cash and borrowings. Bonds with a nominal volume of EUR 3.2 billion and commercial papers totaling EUR 318 million have been issued.
Segment reporting
The segment report presents the assets, income and other key figures by operating segment. Segmentation was performed in accordance with the internal reporting of the Merck Group. The operating segments are described in detail in the sections about the divisions in the interim management report. Expenses and income as well as assets and cash flows are fully allocated to the reported divisions and, to the extent they relate to corporate functions, to the segment Corporate and Other. The financial result and income taxes as well as the resulting cash flows are reported in full in the “Corporate and Other” segment. We determine the transfer prices of intragroup transactions in accordance with market values. There were no significant intercompany relations between the business segments.
The Merck Millipore segment is included as part of the Chemicals business sector in the Segment Reporting for the first time as of June 30, 2010. It includes transaction and integration costs of EUR 32.2 million recorded up until June 30, 2010. As at March 31, 2010, EUR 23.7 million of this amount had already been incurred and was recorded under Corporate and Other.
Operating assets have been reconciliated in the segment report as follows:
| XLS |
|
EUR million |
June 30, |
Dec. 31, |
|
Assets |
22,282.7 |
16,712.6 |
|
Monetary assets (cash and cash equivalents, loans, securities) |
–6,366.7 |
–2,119.7 |
|
Financial assets covering pension obligations |
–212.5 |
–209.6 |
|
Non-operating receivables, tax receivables, deferred taxes |
–689.0 |
–635.6 |
|
Operating assets (gross) |
15,014.5 |
13,747.7 |
|
|
|
|
|
Trade accounts payable |
–1,024.5 |
–935.7 |
|
Other operating liabilities |
–525.6 |
–465.3 |
|
Operating assets (net) |
13,464.4 |
12,346.7 |
Earnings per share
Basic earnings per share equal net profit after non-controlling interest divided by the weighted average number of outstanding theoretical shares. The calculation of the theoretical number of shares is based on the fact that the general partner’s equity capital is not represented by shares. The share capital of EUR 168.0 million is divided into 64,621,126 shares. The general partner’s capital amounts to EUR 397.2 million or 152,767,813 theoretical shares. This results in a total of EUR 565.2 million or 217,388,939 outstanding theoretical shares.
| XLS |
|
|
Q2 |
Q2 |
Jan.-June |
Jan.-June |
|
Net profit after non-controlling interest (EUR million) |
183.4 |
108.5 |
374.8 |
165.1 |
|
Weighted average number of theoretical shares outstanding (in millions) |
217.4 |
217.4 |
217.4 |
217.4 |
|
Basic earnings per share (EUR) |
0.84 |
0.50 |
1.72 |
0.76 |
As of June 30, 2010, there were no potentially dilutive shares. Diluted earnings per share corresponded to basic earnings per share.
Funding
In March 2010, Merck Financial Services GmbH issued a euro bond in three tranches, comprising a two-year issue with a volume of EUR 0.5 billion, a five-year issue with a volume of EUR 1.35 billion, and a ten-year issue with a volume of EUR 1.35 billion. The two-year tranche, which was priced at 99.775%, pays a coupon of 2.125%. The five-year tranche, which was priced at 99.769%, pays a coupon of 3.375%. The ten-year tranche, which was priced at 99.582%, pays a coupon of 4.500%. The bonds are admitted to trading on the regulated market of the Luxembourg Stock Exchange and are issued under the Euro Medium Term Note (EMTN) program. The issue proceeds will be used to fund the announced acquisition of the U.S. firm Millipore Corporation.
Related-party disclosures
As of June 30, 2010, there were liabilities by Merck KGaA, Merck Financial Services GmbH and Merck & Cie, Altdorf, to E. Merck KG in the amount of EUR 234 million. In addition, as of June 30, 2010, there were receivables by Merck KGaA to E. Merck KG in the amount of EUR 10 million and to E. Merck Beteiligungen KG in the amount of EUR 1.8 million. The balances result mainly from the profit transfers by Merck & Cie to E. Merck KG as well as the reciprocal profit transfers between Merck KGaA and E. Merck KG. They included financial payables of EUR 125 million, which are subject to standard market interest rates. From January to June 2010, Merck KGaA and Merck Shared Services Europe GmbH performed services for E. Merck KG with a value of EUR 0.6 million and for Emanuel Merck Vermögens KG with a value of EUR 0.1 million. During the same period, E. Merck KG performed services for Merck KGaA with a value of EUR 0.5 million. From January to June 2010, companies of the Merck Group supplied goods with a value of EUR 0.2 million to associates.
Subsequent events
With receipt of EU antitrust clearance, the legal closing of the Millipore acquisition took place on July 14, 2010.
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