Merck Statement on Venezuelan Currency Devaluation

WHITEHOUSE STATION, N.J.--(BUSINESS WIRE)--Merck, known as MSD outside the United States and Canada, said today that it has completed a preliminary assessment of the impact of the Venezuelan government’s intention to devalue its currency effective Feb. 13, 2013.

As a result of the devaluation, the company will incur a one-time, after-tax loss due to exchange of approximately $0.05 per share in the first quarter of 2013 related to the remeasurement of the local balance sheet at the date of the devaluation. Also, the company expects the impact of the devaluation on ongoing operations to be approximately $0.02 per share spread over the balance of 2013.

Since Jan. 1, 2010, Venezuela has been designated hyperinflationary and, as a result, local foreign operations are remeasured in U.S. dollars with the impact recorded in income. On Feb. 8, 2013, the Venezuelan government declared its intention to devalue its currency (bolívar fuerte). The official exchange rate is expected to move from 4.30 VEF/$ to 6.30 VEF/$.

The effects of the devaluation do not change the company’s full year 2013 GAAP (generally accepted accounting principles) or full year non-GAAP EPS (earnings per share) guidance ranges.

The company is providing guidance about its expectations for the first quarter of 2013, which includes the impact of the devaluation in the quarter. Merck expects first-quarter non-GAAP EPS to be between $0.76 and $0.78, and the GAAP EPS range to be $0.37 to $0.42. A reconciliation of anticipated first-quarter 2013 EPS as reported in accordance with GAAP to non-GAAP EPS that excludes certain items is provided in the table below.

$ in millions, except EPS amounts		First Quarter 2013
GAAP EPS		$0.37 to 0.42
Difference¹		0.39 to 0.36
Non-GAAP EPS that excludes items listed below ²		$0.76 to $0,78

Acquisition-related costs³		$1,280 to $1,200
Restructuring costs		175 to 125
Net decrease (increase) in income before taxes		1,455 to 1,325
Estimated income tax (benefit) expense		(255) to (225)
Decrease (increase) in net income		$1,200 to $1,100

¹ Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.

² Merck is providing certain 2013 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

³ Includes expenses for the amortization of intangible assets and amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions, as well as intangible asset impairment charges. Also includes integration and other costs associated with mergers and acquisitions.

About Merck

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Forward-Looking Statement

This news release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; Merck’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of Merck’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck’s 2011 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).