SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K Annual Report PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 Commission file Number 1-6571 SCHERING-PLOUGH CORPORATION Incorporated in New Jersey 22-1918501 One Giralda Farms (I.R.S. Employer Madison, New Jersey 07940-1000 Identification No.) (973) 822-7000 (telephone number) Securities registered pursuant to section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Shares, $.50 par value New York Stock Exchange Preferred Share Purchase Rights* New York Stock Exchange *At the time of filing, the Rights were not traded separately from the Common Shares. Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Common shares outstanding as of January 29, 1999: 1,472,315,748 Aggregate market value of common shares at January 29, 1999 held by non-affiliates based on closing price: $80 billion. Part of Form 10-K Documents incorporated by reference incorporated into Schering-Plough Corporation 1998 Parts I, II and IV Annual Report to Shareholders Schering-Plough Corporation Proxy Part III Statement for the annual meeting of shareholders on April 27, 1999 Part I Item 1. Business General The terms "Schering-Plough" and the "Company," as used herein, refer to Schering-Plough Corporation and its subsidiaries, except as otherwise indicated by the context. Schering-Plough Corporation is a holding company which was incorporated in 1970. Subsidiaries of Schering-Plough Corporation are engaged in the discovery, development, manufacturing and marketing of pharmaceutical and health care products worldwide. Products include prescription drugs and consumer products. Business Segment and Other Financial Information The "Business Segment Data" as set forth in the Notes to Consolidated Financial Statements in the Company's 1998 Annual Report to Shareholders is incorporated herein by reference. Net sales by major product groups for each of the three years in the period ended December 31, 1998 were as follows (dollars in millions): 1998 1997 1996 Allergy/Respiratory $3,375 $2,708 $2,113 Anti-infective and Anticancer 1,263 1,156 1,135 Dermatologicals 619 571 560 Cardiovasculars 750 637 533 Other Pharmaceuticals 688 649 512 Animal Health 647 389 196 Foot Care 336 300 261 Sun Care 181 148 123 OTC 205 208 210 Other Health Care Products 13 12 13 Consolidated Net Sales $8,077 $6,778 $5,656 In June 1997, the Company purchased the worldwide animal health operations of Mallinckrodt Inc. The acquisition was recorded under the purchase method of accounting at a cost of approximately $490 million, which includes the assumption of debt and direct costs of the acquisition. Pharmaceutical Products The Company's pharmaceutical operations include prescription drugs and animal health products. Prescription products include: CLARITIN, CLARITIN-D, NASONEX, PROVENTIL, THEO-DUR, VANCENASE and VANCERIL, allergy/respiratory; CEDAX, INTRON A, REBETRON Combination Therapy containing REBETOL capsules and INTRON A injection, EULEXIN, GARAMYCIN, and NETROMYCIN, anti-infective and anticancer; DIPROLENE, DIPROSONE, ELOCON, and LOTRISONE, derma- tologicals; INTEGRILIN, IMDUR, K-DUR, NITRO-DUR and NORMODYNE, cardiovasculars; CELESTONE, and SUBUTEX, other pharmaceuticals. Animal health biological and pharmaceutical products include anthelmintics, GENTOCIN and NUFLOR, antibiotics; BANAMINE, a non-steroidal anti-inflammatory agent; TRIBRISSEN, an antimicrobial; RALGRO, a growth promotant; nutritionals; OTOMAX, a steroid ointment and OPTIMMUNE, an ophthalmic ointment and vaccines. Prescription drugs are introduced and made known to physicians, pharmacists, hospitals and managed care organizations by trained professional service representatives, and are sold to hospitals, managed care organizations and wholesale and retail druggists. Pharmaceutical products are also promoted through journal advertising, direct mail advertising, consumer advertising and by distributing samples to physicians. Animal health products are promoted and sold by a separate sales force to veterinarians, distributors and animal producers. The Company's subsidiaries own (or have licensed rights under) a number of patents and patent applications, both in the United States and abroad. Patents and patent applications relating to the Company's significant products, including without limitation the CLARITIN family of products and INTRON A, are of material importance to the operations of the pharmaceutical segment. Raw materials essential to this segment are available in adequate quantities from a number of potential suppliers. Energy is expected to be available to the Company in sufficient quantities to meet operating requirements. Worldwide, the Company's pharmaceutical products are sold under trademarks. Trademarks are considered in the aggregate to be of material importance to the pharmaceutical business and are protected by registration or common law in the United States and most other markets where the products are sold. Seasonal patterns do not have a pronounced effect on the combined activities of this industry segment. There is generally no significant backlog of orders since the Company's business is normally conducted on an immediate shipment basis. The pharmaceutical industry is highly competitive and includes other large companies with substantial resources for research, product development and promotion. There are numerous domestic and international competitors in this industry. Some of the principal competitive techniques used by the Company for its pharmaceutical products include research and development of new and improved products, high product quality, varied dosage forms and strengths and disease management programs. In the United States, many of the Company's pharmaceutical products are subject to increasingly competitive pricing as managed care groups, institutions, government agencies and other buying groups seek price discounts and rebates. During 1998, 11 percent of consolidated net sales were made to McKesson Corporation, a major pharmaceutical and health care products distributor; substantially all of these sales were in the pharmaceutical segment in the United States. Health Care Products The product categories in the health care segment are foot care, sun care and OTC products primarily sold in the United States. Products include: CLEAR AWAY wart remover; DR. SCHOLL'S foot care products; LOTRIMIN AF and TINACTIN antifungals; COPPERTONE and SOLARCAINE sun care products; AFRIN nasal decongestant; CHLOR- TRIMETON antihistamine; CORICIDIN and DRIXORAL cold and decongestant products; CORRECTOL laxative; GYNE-LOTRIMIN for vaginal yeast infections; A & D ointment; and PAAS egg coloring products. Business in this segment is conducted through wholesale and retail drug, food chain and mass merchandiser outlets, and is promoted directly to the consumer through television, radio, print and other advertising media. Raw materials essential to this segment are available in adequate quantities from a number of potential suppliers. A substantial portion of the Company's sun care products are produced by third party suppliers. However, the Company does not believe that the loss of any one of these suppliers would have a material adverse effect on the health care segment. Energy is expected to be available to the Company in sufficient quantities to meet operating requirements. Trademarks for the major products included in this segment are registered in the United States and some overseas countries where these products are marketed. Trademarks are very important to the operations of this segment. Principally due to the seasonal sales of sun care products, operating profits in this segment are relatively higher in the first half of the year. There is generally no significant backlog of orders since the Company's business is normally conducted on an immediate shipment basis. The health care products' industry is highly competitive and includes other large companies with substantial resources for product development and promotion. There are several dozen significant competitors in this industry. The Company believes that in the United States it has a leading position in the foot care and sun care categories, with its DR. SCHOLL'S lines of foot insoles, cushions, wart removal and antifungals and its brands of sun care products. In addition, AFRIN is among the leaders in nasal sprays. The principal competitive techniques used by the Company in this industry segment include the development and introduction of new and improved products, switching prescription products to OTC medicines, and product promotion methods to gain and retain consumer acceptance. During 1998, approximately 38 percent of the health care segment's sales were to the segment's five largest customers as compared to 38 percent and 33 percent for the years ended December 31, 1997 and 1996, respectively. Foreign Operations Foreign activities are carried out primarily through wholly-owned subsidiaries wherever market potential is adequate and circum- stances permit. In addition, the Company is represented in some markets through joint ventures, licensees or other distribution arrangements. There are approximately 13,300 employees outside the United States. Foreign operations are subject to certain risks which are inherent in conducting business overseas. These risks include possible nationalization, expropriation, importation limitations and other restrictive governmental actions. Also, fluctuations in foreign currency exchange rates can impact the Company's consolidated financial results. For additional information on foreign operations, see "Management's Discussion and Analysis of Operations and Financial Condition", "Financial Instruments" and "Business Segment Data" in the Company's 1998 Annual Report to Shareholders which is incorporated herein by reference. Research and Development The Company's research activities are primarily aimed at discovering and developing new and enhanced pharmaceutical products of medical and commercial significance. Company sponsored research and development expenditures were $1,007 million, $847 million and $723 million in 1998, 1997, and 1996, respectively. Research expenditures represented approximately 13 percent of consolidated net sales in each of the three years. The Company's pharmaceutical research activities are concentrated in the therapeutic areas of allergic and inflammatory disorders, infectious and cardiovascular diseases, oncology and central nervous system disorders. The Company also has substantial efforts directed toward biotechnology, gene therapy and immunology. Research activities include expenditures for both internal research efforts and research collaborations with various partners. While several pharmaceutical compounds are in varying stages of development, it cannot be predicted when or if products will become available for commercial sale. Government Regulation Most products manufactured or sold by the Company are subject to varying degrees of governmental regulation in the countries in which operations are conducted. In the United States, the drug industry has long been subject to regulation by various federal, state and local agencies, primarily as to product safety, efficacy, advertising and labeling. Compliance with the broad regulatory powers of the Food and Drug Administration requires significant amounts of Company time, testing and documentation, and corresponding costs to obtain clearance of new drugs. Similar product regulations also apply in many international markets. In most international markets, the Company operates in an environment of government-mandated cost-containment programs. Several governments have placed restrictions on physician prescription levels and patient reimbursements, emphasized greater use of generic drugs and enacted across-the-board price cuts as methods of cost control. Since the Company is unable to predict the final form and timing of any future domestic and international governmental or other health care initiatives, their effect on operations and cash flows cannot be reasonably estimated. The Company has complied and will continue to comply with the government regulations of the countries in which operations are conducted. Environment To date, compliance with federal, state and local environmental protection laws has not had a materially adverse effect on the Company. The Company has made and will continue to make necessary expenditures for environmental protection. Worldwide capital expenditures during 1998 included approximately $13 million for environmental control purposes. It is anticipated that continued compliance with such environmental regulations will not significantly affect the Company's financial statements or its competitive position. For additional information on environmental matters, see "Legal and Environmental Matters" in the Notes to the Consolidated Financial Statements in the Company's 1998 Annual Report to Shareholders which is incorporated herein by reference. Employees There were approximately 25,100 people employed by the Company at December 31, 1998. Item 2. Properties The Company's corporate headquarters is located in Madison, New Jersey. Principal manufacturing facilities for the pharmaceutical segment are located in Kenilworth, New Jersey, Miami, Florida, Omaha, Nebraska, Puerto Rico, Argentina, Australia, Belgium, Canada, Colombia, France, Ireland, Italy, Japan, Mexico, Singapore and Spain; health care segment: Kenilworth, New Jersey, Cleveland, Tennessee and Puerto Rico. The Company's principal research facilities are located in Kenilworth and Union, New Jersey and Palo Alto, California (DNAX) and San Diego, California (Canji and Syntro) and Elkhorn, Nebraska. The major portion of properties are owned by the Company. These properties are well maintained, adequately insured and in good operating condition. The Company's manufacturing facilities have capacities considered appropriate to meet the Company's needs. Item 3. Legal Proceedings Subsidiaries of the Company are defendants in 185 lawsuits involving approximately 730 plaintiffs arising out of the use of synthetic estrogens by the mothers of the plaintiffs. In virtually all of these lawsuits, many other pharmaceutical companies are also named defendants. The female plaintiffs claim various injuries, including cancerous or precancerous lesions of the vagina and cervix and a multiplicity of pregnancy problems. A number of suits involve infants with birth defects born to daughters whose mother took the drug. The total amount claimed against all defendants in all the suits amounts to more than $2 billion. While it is not possible to precisely predict the outcome of these proceedings, it is management's opinion that it is remote that any material liability in excess of the amount accrued will be incurred. The Company is a party to, or otherwise involved in, environmental clean-up actions or proceedings under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as Superfund) or equivalent state laws. These actions or proceedings seek to require the owners or operators of facilities that treated, stored or disposed of hazardous substances and transporters and generators of such substances to remediate contaminated facilities and/or reimburse the government or private parties for their clean-up costs. The Company, along with such owners, operators, transporters and generators, is alleged to be a potentially responsible party ("PRP") as an alleged generator of hazardous substances found at certain facilities. In each proceeding, the government or private litigants allege that any one PRP, including the Company, is jointly and severally liable for all clean-up requirements and costs. Although joint and several liability is alleged, a PRP's share of clean-up costs is frequently determined on the basis of several factors, including the type and quantity of hazardous substances; however, the allocation process varies greatly from facility to facility and may take years to complete. The Company's potential share of clean-up costs also depends on how many other PRPs are involved in the action or proceeding, insurance coverage, available indemnity contracts, and contribution rights against other PRPs. While it is not possible to predict with certainty the outcome of any action or proceeding, it is management's opinion that it is remote that any material liability in excess of amounts accrued will be incurred. The Company is a defendant in more than 160 antitrust actions commenced (starting in 1993) in state and federal courts by independent retail pharmacies, chain retail pharmacies and consumers. The plaintiffs allege price discrimination and/or conspiracy between the Company and other defendants to restrain trade by jointly refusing to sell prescription drugs at discounted prices to the plaintiffs. One of the federal cases is a class action on behalf of approximately two-thirds of all retail pharmacies in the United States and alleges a price-fixing conspiracy. The Company agreed to settle the federal class action for a total of $22 million, which has been paid in full as of January 31, 1999. The settlement provides, among other things, that the Company shall not refuse to grant discounts on brand-name prescription drugs to a retailer based solely on its status as a retailer and that, to the extent a retailer can demonstrate its ability to affect market share of a Company brand-name prescription drug in the same manner as a managed care organization with which the retailer competes, it will be entitled to negotiate similar incentives subject to the rights, obligations, exemptions and defenses of the Robinson- Patman Act and other laws and regulations. The United States District Court in Illinois approved the settlement of the federal class action on June 21, 1996. In June 1997, the Seventh Circuit Court of Appeals dismissed all appeals from that settlement, and it is not subject to further review. The defendants that did not settle the class action proceeded to trial in September 1998. The trial ended in November 1998 with a directed verdict in the defendants' favor. Four of the state antitrust cases have been certified as class actions. Two are class actions on behalf of certain retail pharmacies in California and Wisconsin, and the other two are class actions in California and the District of Columbia, on behalf of consumers of prescription medicine. In addition, an action has been brought in Alabama purportedly on behalf of consumers in Alabama and several other states. Plaintiffs are seeking to maintain the action as a class action. The Company has settled the retailer class action in Wisconsin and the alleged class action in Minnesota. The settlements of the state antitrust cases in Wisconsin and Minnesota have been approved by the respective courts. The settlement amounts were not significant. The Company has also recently settled in principle the state consumer cases in all of the states except Alabama and California. Court approval of those settlements has either already been obtained or is currently being sought. The settlement amounts were not material to the Company. In August 1998, a class action was brought in Tennessee purportedly on behalf of consumers in Tennessee and several other states. The court has conditionally certified a class of consumers, but has stayed the case pending the resolution of an earlier-filed Tennessee case, which the Company has settled in principle. Plaintiffs in these antitrust actions generally seek treble damages in an unspecified amount and an injunction against the allegedly unlawful conduct. In May 1998, the Company settled six of the federal antitrust cases brought by 26 food and drug chain retailers and several independent retail stores. Plaintiffs in these cases comprise collectively approximately one-fifth of the prescription drug retail market. The settlement amounts were not material to the Company. The Great Atlantic and Pacific Tea Company, Inc. (A&P) was among the settling plaintiffs. Mr. James Wood, a director of the Company, was an executive officer of A&P. Mr. Wood did not participate in any review or deliberations by the Board of Directors relating to this action. In April 1997, certain of the plaintiffs in the federal class action commenced another purported class action in United States District Court in Illinois against the Company and the other defendants who settled the previous federal class action. The complaint alleges that the defendants conspired not to implement the settlement commitments following the settlement discussed above. The District Court has denied the plaintiffs' motion for a preliminary injunction hearing. The Company believes all the antitrust actions are without merit and is defending itself vigorously. On March 13, 1996, the Company was notified that the United States Federal Trade Commission (FTC) is investigating whether the Company, along with other pharmaceutical companies, conspired to fix prescription drug prices. The investigation is ongoing. The Company vigorously denies that it has engaged in any price- fixing conspiracy. The Company is a defendant in a state court action in Texas brought by Foxmeyer Health Corporation, the parent of a pharmaceutical wholesaler that filed for bankruptcy in August 1996. The case is against another pharmaceutical wholesaler and 11 pharmaceutical companies and alleges that the defendants conspired to drive the plaintiff's wholesaler subsidiary out of business. The complaint also alleged that the defendants defamed the wholesaler and interfered with its business. There are related actions pending in the Delaware bankruptcy proceedings of the wholesaler; certain of the plaintiff's claims against the Company have been dismissed. Plaintiff is seeking damages in the amount of $400 million. The Company believes that this action is without merit and is defending itself vigorously against all claims. In February 1998, Geneva Pharmaceuticals, Inc. (Geneva) submitted an Abbreviated New Drug Application (ANDA) to the U.S. Food and Drug Administration seeking to market a generic form of CLARITIN in the United States several years before the expiration of the Company's patents. Geneva has alleged that certain of the Company's U.S. CLARITIN patents are invalid and unenforceable. The CLARITIN patents are material to the Company's business. In March 1998, the Company filed suit in federal court seeking a ruling that Geneva's ANDA submission constitutes willful infringement of the Company's patents and that its challenge to the Company's patents is without merit. The Company believes that it should prevail in the suit. However, as with any litigation, there can be no assurance that the Company will prevail. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Executive Officers of the Registrant The following information regarding executive officers is included herein in accordance with Part III, Item 10. Officers are elected to serve for one year and until their successors shall have been duly elected. Name and Current Position Business Experience Age Richard Jay Kogan Present position 1998; 57 Chairman of the Board President and Chief Executive and Chief Executive Officer Officer 1996-1998; President And Chief Operating Officer 1986-1995 Raul E. Cesan Present position 1998; 51 President and Chief Executive Vice President Operating Officer and President Schering- Plough Pharmaceuticals 1994-1998 Hugh A. D'Andrade Present position 1996; 60 Vice Chairman and Executive Vice President Chief Administrative Officer Administration 1984-1995 Joseph C. Connors Present position 1996; 50 Executive Vice President Senior Vice President and and General Counsel General Counsel 1992-1995 Jack L. Wyszomierski Present position 1996; 43 Executive Vice President Vice President and Treasurer and Chief Financial Officer 1991-1995 Geraldine U. Foster Present position 1994; 56 Senior Vice President Vice President - Investor Investor Relations and Relations 1988-1994 Corporate Communications Daniel A. Nichols Present position 1991 58 Senior Vice President Taxes John P. Ryan Present position 1998; 58 Senior Vice President Vice President-Human Resources Human Resources Schering-Plough Pharmaceuticals 1988-1998 Douglas J. Gingerella Present position 1999; 40 Vice President, Corporate Staff Vice President, Corporate Audits Audits 1995-1998; Director Corporate Audits 1991-1995 Name and Current Position Business Experience Age Thomas H. Kelly Present position 1991 49 Vice President and Controller Robert S. Lyons Present position 1991 58 Vice President Corporate Information Services E. Kevin Moore Present position 1996; 46 Vice President and Staff Vice President and Treasurer Assistant Treasurer 1993-1995; Treasurer-Europe, The Dun and Bradstreet Corporation 1990-1993 John E. Nine Present position 1996; 62 Vice President President - Technical Operations and President, Schering Schering Laboratories 1990-1995 Technical Operations William J. Silbey Present position 1996; 39 Staff Vice President, Corporate Counsel 1993-1995; Secretary and Associate Partner - Stearns, Weaver, Miller, General Counsel Weissler, Alhadeff & Sitterson, P.A. 1992-1993 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The common share dividends and share price data as set forth in the Company's 1998 Annual Report to Shareholders are incorporated herein by reference. Item 6. Selected Financial Data The Six-Year Selected Financial & Statistical Data as set forth in the Company's 1998 Annual Report to Shareholders is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Operations and Financial Condition as set forth in the Company's 1998 Annual Report to Shareholders is incorporated herein by reference. Item 7(a). Quantitative and Qualitative Disclosures about Market Risk The Market Risk Disclosures as set forth in Management's Discussion and Analysis of Operations and Financial Condition in the Company's 1998 Annual Report to Shareholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The Consolidated Balance Sheets as of December 31, 1998 and 1997, and the related Statements of Consolidated Income, Consolidated Shareholders' Equity and Consolidated Cash Flows for each of the three years in the period ended December 31, 1998, Notes to Consolidated Financial Statements, the Independent Auditors' Report of Deloitte & Touche LLP dated February 12, 1999 and Quarterly Data, as set forth in the Company's 1998 Annual Report to Shareholders, are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Part III Item 10. Directors and Executive Officers of the Registrant The information concerning directors and nominees for directors as set forth in the Company's Proxy Statement for the annual meeting of shareholders on April 27, 1999 is incorporated herein by reference. Information required as to executive officers is included in Part I of this filing under the caption "Executive Officers of the Registrant." Item 11. Executive Compensation Executive compensation information as set forth in the Company's Proxy Statement for the annual meeting of shareholders on April 27, 1999 is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information concerning security ownership of certain beneficial owners and management as set forth in the Company's Proxy Statement for the annual meeting of shareholders on April 27, 1999 is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information concerning certain relationships and related transactions as set forth in the Company's Proxy Statement for the annual meeting of shareholders on April 27, 1999 is incorporated herein by reference. Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements The following consolidated financial statements and independent auditors' report, included in the Company's 1998 Annual Report to Shareholders, are incorporated herein by reference. Statements of Consolidated Income For the Years Ended December 31, 1998, 1997 and 1996 Statements of Consolidated Shareholders' Equity For the Years Ended December 31, 1998, 1997 and 1996 Statements of Consolidated Cash Flows For the Years Ended December 31, 1998, 1997 and 1996 Consolidated Balance Sheets at December 31, 1998 and 1997 Notes to Consolidated Financial Statements Independent Auditors' Report (a) 2. Financial Statement Schedules Page in Form 10-K Independent Auditors' Report . . . . . . . . . . . 21 Schedule II - Valuation and Qualifying Accounts. . 22 Schedules not included have been omitted because they are not applicable or not required or because the required information is set forth in the financial statements or the notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. Financial statements of fifty percent or less owned companies accounted for by the equity method have been omitted because, considered individually or in the aggregate, they do not constitute a significant subsidiary. (a) 3. Exhibits Exhibit Number Description 3(a) A complete copy of the Certificate of Incorporation as amended and currently in effect. Incorporated by reference to Exhibit 3 (i) to the Company's Quarterly Report for the period ended June 30, 1995 on Form 10- Q; Certificate of Amendment of Certificate of Incorporation incorporated by reference to Exhibit 3 to the Company's Quarterly Report for the period ended June 30, 1997 on Form 10-Q, File No. 1-6571. 3(b) A complete copy of the By-Laws as amended and currently in effect. Incorporated by reference to Exhibit 4(2) to the Company's Registration Statement on Form S-3, File No. 333-853; amendment to By-Laws effective September 22, 1998 incorporated by reference to Exhibit 4 to the Company's Quarterly Report for the period ended September 30, 1998 on Form 10-Q, File No. 1-6571. 4(a) Rights Agreement between the Company and The Bank of New York dated June 24, 1997. Incorporated by reference to Exhibit 1 to the Form 8-A filed by the Company on June 30, 1997, File No. 1-6571. 4(b) Indenture dated as of November 1, 1982 between the Company and The Chase Manhattan Bank, N.A. as Trustee. Incorporated by reference to Exhibit 4(a)to the Company's Registration Statement on Form S-3, File No. 2-80012. Exhibit Number Description 4(c) Form of Participation Rights Agreement between the Company and The Chase Manhattan Bank (National Association), as Trustee. Incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-4, Amendment No. 1, File No. 33-65107. 10(a) The Company's Executive Incentive Plan (as amended) and Trust related thereto.* Plan incorporated by reference to Exhibit 10 to the Company's Quarterly Report for the period ended March 31, 1994 on Form 10-Q; Trust Agreement incorporated by reference to Exhibit 10(a) to the Company's Annual Report for 1988 on Form 10-K; amendment to Trust Agreement incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report for the period ended March 31, 1997 on Form 10-Q, File No. 1-6571. 10(b) The Company's 1987 Stock Incentive Plan (as amended).* Incorporated by reference to Exhibit 10(d) to the Company's Annual Report for 1990 on Form 10-K, File No. 1-6571. 10(c) The Company's 1992 Stock Incentive Plan (as amended).* Incorporated by reference to Exhibit 10(d) to the Company's Annual Report for 1992 on Form 10-K, File No. 1-6571; amendment of December 11, 1995 incorporated by reference to Exhibit 10(d)to the Company's Annual Report for 1995 on Form 10-K, File No. 1-6571. 10(d) The Company's 1997 Stock Incentive Plan.* Incorporated by reference to Exhibit 10 to the Company's Quarterly Report for the period ended September 30, 1997 on Form 10-Q, File No. 1-6571. 10(e)(i) Employment agreement between the Company and Robert P. Luciano (as amended).* Incorporated by reference to Exhibit 10(e)(i) to the Company's Annual Report for 1989 on Form 10-K; first amendment incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report for the period ended June 30, 1994 on Form 10-Q; second amendment incorporated by reference to Exhibit 10(e)(i) to the Company's Annual Report for 1994 on Form 10-K; third amendment incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q, File No. 1-6571. Exhibit Number Description 10(e)(ii) Employment agreement between the Company and Richard J. Kogan (as amended).* Incorporated by reference to Exhibit 10(e)(ii) to the Company's Annual Report for 1989 on Form 10-K; first amendment incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report for the period ended June 30, 1994 on Form 10-Q; second amendment incorporated by reference to Exhibit 10(e)(ii) to the Company's Annual Report for 1994 on Form 10-K; third amendment incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report for the period ended September 30, 1995 on Form 10-Q; fourth amendment incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q; fifth amendment (filed with this document), File No. 1-6571. 10(e)(iii) Employment agreement between the Company and Hugh A. D'Andrade (as amended).* Incorporated by reference to Exhibit 10(c) to the Company's Quarterly Report for the period ended June 30, 1994 on Form 10-Q; first amendment incorporated by reference to Exhibit 10(e)(iii) to the Company's Annual Report for 1994 on Form 10-K, File No. 1- 6571; second amendment incorporated by reference to Exhibit 10(e)(iii) to the Company's Annual Report for 1995 on Form 10-K; third amendment incorporated by reference to Exhibit 10(c) to the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q; fourth amendment (filed with this document), File No. 1-6571. 10(e)(iv) Form of employment agreement between the Company and its executive officers effective upon a change of control.* Incorporated by reference to Exhibit 10(e)(iv) to the Company's Annual Report for 1994 on Form 10-K, File No. 1-6571. 10(e)(v) Agreement between the Company and Robert P. Luciano.* Incorporated by reference to Exhibit 10(d) to the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q, File No. 1-6571. 10(e)(vi) Employment agreement between the Company and Raul E. Cesan (filed with this document), File No. 1-6571.* 10(e)(vii) Agreement between the Company and Rodolfo C. Bryce.* Incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report for the period ended June 30, 1998 on Form 10-Q, File No. 1-6571. Exhibit Number Description 10(f) Directors Deferred Compensation Plan and Trust related thereto.* Incorporated by reference to Exhibit 10(f) to the Company's Annual Report for 1991 on Form 10-K; amendment of December 7, 1998 (filed with this document); Trust Agreement incorporated by reference to Exhibit 10(a) to the Company's Annual Report for 1988 on Form 10-K; amendment to Trust Agreement incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report for the period ended March 31, 1997 on Form 10-Q, File No. 1-6571. 10(g) Supplemental Executive Retirement Plan and Trust related thereto.* Incorporated by reference to Exhibit 10(e) to the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q;amendment incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report for the period ended September 30, 1998 on Form 10-Q; Amended and Restated Trust Agreement (filed with this document), File No. 1-6571. 10(h) Directors' Stock Award Plan.* Incorporated by reference to Exhibit 10 to the Company's Quarterly Report for the period ended September 30, 1994 on Form 10-Q, File No. 1-6571; amendment of January 1, 1997 incorporated by reference to Exhibit 10(i) to the Company's Annual Report for 1996 on Form 10-K; amendment of April 1, 1998 incorporated by reference to Exhibit 10(h) of the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q, File No. 1-6571. 10(i) The Company's Deferred Compensation Plan.* Incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report for the period ended September 30, 1995 on Form 10-Q, File No. 1-6571. 10(k) The Company's Directors Deferred Stock Equivalency Program.* Incorporated by reference to Exhibit 10(k) to the Company's Annual Report for 1996 on Form 10-K, File No. 1-6571. 10(l) The Company's Form of Split Dollar Agreement and related Collateral Assignment between the Company and its Executive Officers.* Incorporated by reference to Exhibit 10(l) to the Company's Annual Report for 1997 on Form 10-K; amendments incorporated by reference to Exhibit 10(g) to the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q, File No. 1-6571. Exhibit Number Description 10(m) The Company's Retirement Benefits Equalization Plan.* Incorporated by reference to Exhibit 10(f) to the Company's Quarterly Report for the period ended March 31, 1998 on Form 10-Q; amendment incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report for the period ended September 30, 1998 on Form 10-Q, File No. 1- 6571. 12 Computation of Ratio of Earnings to Fixed Charges (filed with this document). 13 The Financial Section of the Company's 1998 Annual Report to Shareholders. With the exception of those portions of said Annual Report which are specifically incorporated by reference in this Form 10-K (filed with this document), such report shall not be deemed filed as part of this Form 10-K. 21 Subsidiaries of the registrant (filed with this document). 23 Consents of experts and counsel (filed with this document). 24 Power of attorney (filed with this document). 27 Financial Data Schedule (filed with this document). 99 Cautionary Statements regarding "Safe Harbor" provision of the Private Securities Litigation Reform Act of 1995 (filed with this document). All other exhibits are not applicable. Copies of above exhibits will be furnished upon request. * Compensatory plan, contract or arrangement. (b) Reports on Form 8-K. None SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized Schering-Plough Corporation (Registrant) Date February 25, 1999 By /s/ Thomas H. Kelly Thomas H. Kelly Vice President and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. By * By * Richard Jay Kogan Robert P. Luciano Chairman of the Board and Chief Director Executive Officer and Director By * By * Raul E. Cesan Donald L. Miller President and Chief Operating Director Officer and Director By * By * Jack L. Wyszomierski H. Barclay Morley Executive Vice President and Director Chief Financial Officer By * By * Thomas H. Kelly Carl E. Mundy, Jr. Vice President and Controller Director and Principal Accounting Officer By * By * Hans W. Becherer Richard de J. Obsorne Director Director By * By * Hugh A. D'Andrade Patricia F. Russo Director Director By * By * David C. Garfield William A. Schreyer Director Director By * By * Regina E. Herzlinger Robert F. W. van Oordt Director Director *By /s/Thomas H. Kelly By * Thomas H. Kelly James Wood Attorney-in-fact Director Date: February 25,1999 INDEPENDENT AUDITORS' REPORT Schering-Plough Corporation: We have audited the consolidated balance sheets of Schering- Plough Corporation and subsidiaries as of December 31, 1998 and 1997 and the related statements of consolidated income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998, and have issued our report thereon dated February 12, 1999; such financial statements and report are included in your 1998 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Schering-Plough Corporation and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express our opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/DELOITTE & TOUCHE LLP Parsippany, New Jersey February 12, 1999 SCHEDULE II <TABLE> SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996 (Dollars in millions) <CAPTION> Valuation and qualifying accounts deducted from assets to which they apply: Allowances for accounts receivable: RESERVE RESERVE RESERVE FOR DOUBTFUL FOR CASH FOR CLAIMS ACCOUNTS DISCOUNTS AND OTHER TOTAL <S> <C> <C> <C> <C> 1998 Balance at beginning of year $ 49 $ 14 $ 24 $ 87 Additions: Charged to costs and expenses 14 133 19 166 Deductions from reserves (12) (129) (14) (155) Balance at end of year $ 51 $ 18 $ 29 $ 98 1997 Balance at beginning of year $ 50 $ 12 $ 11 $ 73 Additions: Charged to costs and expenses 17 103 20 140 Deductions from reserves (18) (101) (7) (126) Balance at end of year $ 49 $ 14 $ 24 $ 87 1996 Balance at beginning of year $ 49 $ 8 $ 12 $ 69 Additions: Charged to costs and expenses 2 90 10 102 Deductions from reserves (1) (86) (11) (98) Balance at end of year $ 50 $ 12 $ 11 $ 73 </TABLE>