EX-99.2 3 tm213179d2_ex99-2.htm EXHIBIT 99.2

Exhibit 99.2

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1a

	2020															2019															% Change
		1Q			2Q			3Q			4Q			Full Year			1Q			2Q			3Q			4Q			Full Year			4Q		Full Year
Sales	$	12,057		$	10,872		$	12,551		$	12,514		$	47,994		$	10,816		$	11,760		$	12,397		$	11,868		$	46,840			5	%	2	%

Costs, Expenses and Other
Cost of sales		3,312			3,159			3,481			5,532			15,485			3,052			3,401			3,990			3,669			14,112			51	%	10	%
Selling, general and administrative		2,555			2,378			2,450			3,086			10,468			2,425			2,712			2,589			2,888			10,615			7	%	-1	%
Research and development		2,209			2,123			3,390			5,838			13,558			1,931			2,189			3,204			2,548			9,872			*		37	%
Restructuring costs		72			83			114			309			578			153			59			232			194			638			59	%	-9	%
Other (income) expense, net		71			(390	)		(312	)		(258	)		(886	)		188			140			35			(223	)		139			16	%	*
Income (Loss) Before Taxes		3,838			3,519			3,428			(1,993	)		8,791			3,067			3,259			2,347			2,792			11,464			*		-23	%
Income Tax Provision		619			509			483			99			1,709			205			615			440			428			1,687
Net Income (Loss)		3,219			3,010			2,945			(2,092	)		7,082			2,862			2,644			1,907			2,364			9,777			*		-28	%
Less: Net Income (Loss) Attributable to Noncontrolling Interests		-			8			4			2			15			(53	)		(26	)		6			7			(66	)
Net Income (Loss) Attributable to Merck & Co., Inc.	$	3,219		$	3,002		$	2,941		$	(2,094	)	$	7,067		$	2,915		$	2,670		$	1,901		$	2,357		$	9,843			*		-28	%
Earnings (Loss) per Common Share Assuming Dilution ⁽¹⁾	$	1.26		$	1.18		$	1.16		$	(0.83	)	$	2.78		$	1.12		$	1.03		$	0.74		$	0.92		$	3.81			*		-27	%

Average Shares Outstanding Assuming Dilution ⁽¹⁾		2,547			2,536			2,538			2,540			2,541			2,603			2,588			2,572			2,559			2,580
Tax Rate		16.1	%		14.5	%		14.1	%		-5.0	%		19.4	%		6.7	%		18.9	%		18.7	%		15.3	%		14.7	%

* 100% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

⁽¹⁾Because the company recorded a net loss in the fourth quarter of 2020, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

FOURTH QUARTER 2019

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2c

	GAAP			Acquisition and Divestiture-Related Costs ⁽¹⁾			Restructuring Costs ⁽²⁾			Certain Other Items			Adjustment Subtotal			Non-GAAP
Cost of sales	$	3,669			325			90						415		$	3,254
Selling, general and administrative		2,888			44			1						45			2,843
Research and development		2,548			166						11			177			2,371
Restructuring costs		194						194						194			-
Other (income) expense, net		(223	)		(37	)					7			(30	)		(193	)
Income Before Taxes		2,792			(498	)		(285	)		(18	)		(801	)		3,593
Income Tax Provision (Benefit)		428			(55	)⁽³⁾		(49	)⁽³⁾		(76	)⁽⁴⁾		(180	)		608
Net Income		2,364			(443	)		(236	)		58			(621	)		2,985
Net Income Attributable to Merck & Co., Inc.		2,357			(443	)		(236	)		58			(621	)		2,978
Earnings per Common Share Assuming Dilution	$	0.92			(0.17	)		(0.09	)		0.02			(0.24	)	$	1.16
Tax Rate		15.3	%														16.9	%

Only the line items that are affected by non-GAAP adjustments are shown.

Merck is providing certain 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 results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

⁽¹⁾Amount included in cost of sales primarily reflects $306 million of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $12 million of intangible asset impairment charges. Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures. Amount included in research and development expenses primarily reflects $164 million of in-process research and development (IPR&D) impairment charges.

⁽²⁾Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.

⁽³⁾ Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

⁽⁴⁾ Primarily reflects an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck's Consumer Care business in 2014 as a result of the lapse in the statute of limitations.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

FULL YEAR 2019

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2d

	GAAP			Acquisition and Divestiture-Related Costs ⁽¹⁾			Restructuring Costs ⁽²⁾			Certain Other Items ⁽⁴⁾			Adjustment Subtotal			Non-GAAP
Cost of sales	$	14,112			2,126			251						2,377		$	11,735
Selling, general and administrative		10,615			126			34						160			10,455
Research and development		9,872			145			4			993			1,142			8,730
Restructuring costs		638						638						638			-
Other (income) expense, net		139			284						55			339			(200	)
Income Before Taxes		11,464			(2,681	)		(927	)		(1,048	)		(4,656	)		16,120
Income Tax Provision (Benefit)		1,687			(493	)⁽³⁾		(155	)⁽³⁾		(380	)⁽⁵⁾		(1,028	)		2,715
Net Income		9,777			(2,188	)		(772	)		(668	)		(3,628	)		13,405
Less: Net (Loss) Income Attributable to Noncontrolling Interests		(66	)		(89	)								(89	)		23
Net Income Attributable to Merck & Co., Inc.		9,843			(2,099	)		(772	)		(668	)		(3,539	)		13,382
Earnings per Common Share Assuming Dilution	$	3.81			(0.82	)		(0.30	)		(0.26	)		(1.38	)	$	5.19
Tax Rate		14.7	%														16.8	%

Only the line items that are affected by non-GAAP adjustments are shown.

⁽¹⁾Amount included in cost of sales primarily reflects $1.4 billion of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $705 million of intangible asset impairment charges, including $612 million related to SIVEXTRO. Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures, including costs related to the acquisition of Antelliq Corporation. Amounts included in research and development expenses primarily reflect $172 million of in-process research and development (IPR&D) impairment charges, partially offset by a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Amount included in other (income) expense, net primarily reflects goodwill and intangible asset impairment charges related to certain businesses in the Healthcare Services segment and expenses related to an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.

⁽³⁾ Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

⁽⁴⁾ Amount included in research and development represents the charge related to the acquisition of Peloton Therapeutics, Inc.

⁽⁵⁾ Primarily reflects a $364 million net tax benefit related to the settlement of certain federal income tax matters, an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck's Consumer Care business in 2014 as a result of the lapse in the statute of limitations, and a $117 million tax charge related to the finalization of treasury regulations associated with the 2017 enactment of U.S. tax legislation.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

FOURTH QUARTER 2020

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3a

	Global							U.S.						International
	4Q 2020			4Q 2019		% Change		4Q 2020		4Q 2019		% Change		4Q 2020			4Q 2019		% Change
TOTAL SALES ⁽¹⁾	$	12,514		$	11,868		5	$	5,631	$	5,199		8	$	6,882		$	6,669		3
PHARMACEUTICAL		11,367			10,533		8		5,247		4,751		10		6,120			5,782		6
Oncology
Keytruda		3,993			3,111		28		2,246		1,780		26		1,747			1,331		31
Alliance Revenue - Lynparza ⁽²⁾		206			132		56		120		82		46		85			49		73
Alliance Revenue - Lenvima ⁽²⁾		158			124		28		90		70		27		69			53		29
Emend		31			53		-42				10		-102		31			42		-27
Vaccines ⁽³⁾
Gardasil / Gardasil 9		998			693		44		546		252		117		452			441		2
ProQuad / M-M-R II / Varivax		488			481		2		345		358		-4		144			123		17
Pneumovax 23		339			334		1		249		251		-1		90			83		8
RotaTeq		196			227		-14		131		146		-10		65			81		-20
Vaqta		31			71		-56		25		28		-11		7			43		-85
Hospital Acute Care
Bridion		355			313		13		172		152		13		183			162		13
Noxafil		82			103		-20		15		14		6		67			89		-24
Prevymis		80			50		61		32		24		32		48			25		90
Cancidas		65			58		13		5		2		198		60			56		7
Primaxin		62			67		-8								62			67		-8
Invanz		53			57		-7		2				*		50			57		-11
Cubicin		36			50		-27		10		13		-22		26			36		-30
Zerbaxa		19			32		-42		17		18		-7		2			14		-86
Immunology
Simponi		223			205		9								223			205		9
Remicade		88			89		-2								88			89		-2
Neuroscience
Belsomra		83			83		1		14		24		-42		69			59		18
Virology
Isentress / Isentress HD		211			223		-5		83		95		-13		128			128
Zepatier		45			66		-32		22		23		-2		23			44		-47
Cardiovascular
Zetia		98			146		-33		3		3		15		94			144		-34
Vytorin		43			54		-19		3		4		-27		40			49		-19
Atozet		105			108		-3								105			108		-3
Alliance Revenue - Adempas ⁽⁴⁾		65			60		8		58		57		2		7			3		128
Adempas ⁽⁵⁾		53			57		-7								53			57		-7
Diabetes ⁽⁶⁾
Januvia		857			943		-9		360		502		-28		497			441		13
Janumet		472			475		-1		115		127		-9		356			348		2
Women's Health
Implanon / Nexplanon		165			206		-20		114		147		-22		50			59		-14
NuvaRing		53			179		-70		25		150		-83		28			29		-4
Diversified Brands
Singulair		124			195		-36		4		5		-18		120			190		-37
Cozaar / Hyzaar		94			113		-17		4		8		-52		91			105		-14
Nasonex		57			67		-14		3		7		-63		55			60		-9
Follistim AQ		57			58		-2		24		22		9		33			36		-9
Arcoxia		54			67		-19								54			67		-19
Other Pharmaceutical ⁽⁷⁾		1,228			1,183		4		410		377		9		818			809		1

ANIMAL HEALTH		1,168			1,122		4		361		341		6		807			781		3
Livestock		794			777		2		165		177		-7		629			600		5
Companion Animals		374			345		8		196		164		20		178			181		-2

Other Revenues ⁽⁸⁾		(21	)		213		-110		23		107		-78		(45	)		106		-142

* 200% or greater

Sum of U.S. plus international may not equal global due to rounding.

⁽¹⁾Only select products are shown.

⁽²⁾Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

⁽³⁾Total Vaccines sales were $2,163 million and $1,928 million on a global basis in the fourth quarter of 2020 and 2019, respectively.

⁽⁴⁾Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.

⁽⁵⁾Net product sales in Merck's marketing territories.

⁽⁶⁾Total Diabetes sales were $1,412 million and $1,472 million on a global basis in the fourth quarter of 2020 and 2019, respectively.

⁽⁷⁾Includes Pharmaceutical products not individually shown above.

⁽⁸⁾Other Revenues are comprised primarily of Healthcare Services segment revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

FULL YEAR 2020

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3b

	Global						U.S.							International
	Full Year 2020		Full Year 2019		% Change		Full Year 2020			Full Year 2019		% Change		Full Year 2020		Full Year 2019		% Change
TOTAL SALES ⁽¹⁾	$	47,994	$	46,840		2	$	21,027		$	20,519		2	$	26,967	$	26,321		2
PHARMACEUTICAL		43,021		41,751		3		19,449			18,953		3		23,572		22,798		3
Oncology
Keytruda		14,380		11,084		30		8,352			6,305		32		6,028		4,779		26
Alliance Revenue - Lynparza ⁽²⁾		725		444		63		417			269		55		308		176		75
Alliance Revenue - Lenvima ⁽²⁾		580		404		44		359			239		50		220		165		34
Emend		145		388		-63		18			183		-90		127		205		-38
Vaccines ⁽³⁾
Gardasil / Gardasil 9		3,938		3,737		5		1,755			1,831		-4		2,184		1,905		15
ProQuad / M-M-R II / Varivax		1,878		2,275		-17		1,378			1,683		-18		500		592		-16
Pneumovax 23		1,087		926		17		727			679		7		359		247		46
RotaTeq		797		791		1		486			506		-4		311		284		9
Vaqta		170		238		-29		103			130		-21		67		108		-38
Hospital Acute Care
Bridion		1,198		1,131		6		583			533		10		615		598		3
Noxafil		329		662		-50		42			282		-85		287		380		-24
Prevymis		281		165		70		119			84		41		162		81		101
Primaxin		251		273		-8		2			2		31		248		271		-9
Cancidas		213		249		-14		7			6		9		207		242		-15
Invanz		211		263		-20		9			30		-70		202		233		-13
Cubicin		152		257		-41		46			92		-49		106		165		-36
Zerbaxa		130		121		8		74			63		17		56		58		-2
Immunology
Simponi		838		830		1									838		830		1
Remicade		330		411		-20									330		411		-20
Neuroscience
Belsomra		327		306		7		81			92		-12		247		214		15
Virology
Isentress / Isentress HD		857		975		-12		326			398		-18		531		576		-8
Zepatier		167		370		-55		60			118		-49		107		252		-58
Cardiovascular
Zetia		482		590		-18		(1	)		14		-108		483		575		-16
Vytorin		182		285		-36		12			16		-24		171		269		-37
Atozet		453		391		16									453		391		16
Alliance Revenue - Adempas ⁽⁴⁾		281		204		38		259			194		33		22		10		130
Adempas ⁽⁵⁾		220		215		3									220		215		3
Diabetes ⁽⁶⁾
Januvia		3,306		3,482		-5		1,470			1,724		-15		1,836		1,758		4
Janumet		1,971		2,041		-3		477			589		-19		1,494		1,452		3
Women's Health
Implanon / Nexplanon		680		787		-14		488			568		-14		192		219		-12
NuvaRing		236		879		-73		110			742		-85		127		136		-7
Diversified Brands
Singulair		462		698		-34		18			29		-40		444		669		-34
Cozaar / Hyzaar		386		442		-13		21			24		-13		365		418		-13
Arcoxia		258		288		-11									258		288		-11
Nasonex		218		293		-26		12			9		31		206		284		-27
Follistim AQ		193		241		-20		84			103		-18		109		138		-21
Other Pharmaceutical ⁽⁷⁾		4,709		4,615		2		1,555			1,416		10		3,152		3,204		-2

ANIMAL HEALTH		4,703		4,393		7		1,484			1,306		14		3,219		3,086		4
Livestock		2,939		2,784		6		612			582		5		2,327		2,201		6
Companion Animals		1,764		1,609		10		872			724		20		892		885		1

Other Revenues ⁽⁸⁾		270		696		-61		94			260		-64		176		437		-60

Sum of U.S. plus international may not equal global due to rounding.

⁽¹⁾Only select products are shown.

⁽²⁾Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

⁽³⁾Total Vaccines sales were $8,258 million and $8,368 million on a global basis for December YTD 2020 and 2019, respectively.

⁽⁴⁾Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.

⁽⁵⁾Net product sales in Merck's marketing territories.

⁽⁶⁾Total Diabetes sales were $5,588 million and $5,714 million on a global basis for December YTD 2020 and 2019, respectively.

⁽⁷⁾Includes Pharmaceutical products not individually shown above.

⁽⁸⁾Other Revenues are comprised primarily of Healthcare Services segment revenues, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

MERCK & CO., INC.

PHARMACEUTICAL GEOGRAPHIC SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3c

	2020															2019															% Change		% Change
		1Q			2Q			3Q			4Q			Full Year			1Q			2Q			3Q			4Q			Full Year			4Q		Full Year
TOTAL PHARMACEUTICAL	$	10,655		$	9,679		$	11,320		$	11,367		$	43,021		$	9,663		$	10,460		$	11,095		$	10,533		$	41,751			8		3

United States ⁽¹⁾		4,714			4,270			5,218			5,247			19,449			4,215			4,807			5,180			4,751			18,953			10		3
% Pharmaceutical Sales		44.2	%		44.1	%		46.1	%		46.2	%		45.2	%		43.6	%		46.0	%		46.7	%		45.1	%		45.4	%
Europe ⁽²⁾		2,543			2,196			2,549			2,709			9,997			2,335			2,301			2,304			2,373			9,314			14		7
% Pharmaceutical Sales		23.9	%		22.7	%		22.5	%		23.8	%		23.2	%		24.2	%		22.0	%		20.8	%		22.5	%		22.3	%
China		846			811			990			888			3,534			725			745			898			773			3,141			15		13
% Pharmaceutical Sales		7.9	%		8.4	%		8.7	%		7.8	%		8.2	%		7.5	%		7.1	%		8.1	%		7.3	%		7.5	%
Japan		789			847			805			847			3,288			779			900			894			921			3,494			-8		-6
% Pharmaceutical Sales		7.4	%		8.8	%		7.1	%		7.5	%		7.6	%		8.1	%		8.6	%		8.1	%		8.7	%		8.4	%
Asia Pacific (other than China and Japan)		613			555			601			603			2,372			642			606			638			614			2,500			-2		-5
% Pharmaceutical Sales		5.8	%		5.7	%		5.3	%		5.3	%		5.5	%		6.6	%		5.8	%		5.8	%		5.8	%		6.0	%
Eastern Europe/Middle East/Africa		490			416			419			365			1,689			343			388			423			423			1,577			-14		7
% Pharmaceutical Sales		4.6	%		4.3	%		3.7	%		3.2	%		3.9	%		3.6	%		3.7	%		3.8	%		4.0	%		3.8	%
Latin America		419			399			477			474			1,768			427			523			534			429			1,914			10		-8
% Pharmaceutical Sales		3.9	%		4.1	%		4.2	%		4.2	%		4.1	%		4.4	%		5.0	%		4.8	%		4.1	%		4.6	%
Canada		212			160			216			194			782			177			179			211			216			783			-10		0
% Pharmaceutical Sales		2.0	%		1.7	%		1.9	%		1.7	%		1.8	%		1.8	%		1.7	%		1.9	%		2.0	%		1.9	%
Other ⁽¹⁾		29			25			45			40			142			20			11			13			33			75			21		89
% Pharmaceutical Sales		0.3	%		0.3	%		0.4	%		0.4	%		0.3	%		0.2	%		0.1	%		0.1	%		0.3	%		0.2	%

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

⁽¹⁾Alliance revenue related to Adempas attributable to the United States has been reclassified from Other.

⁽²⁾Europe primarily represents all European Union countries and the European Union accession markets.

MERCK & CO., INC.

OTHER (INCOME) EXPENSE, NET - GAAP

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 4

OTHER (INCOME) EXPENSE, NET

		4Q20			4Q19			Full Year 2020			Full Year 2019
Interest income	$	(11	)	$	(50	)	$	(59	)	$	(274	)
Interest expense		206			220			831			893
Exchange losses		56			21			145			187
Income from investments in equity securities, net ⁽¹⁾		(375	)		(119	)		(1,338	)		(170	)
Net periodic defined benefit plan (credit) cost other than service cost		(80	)		(136	)		(339	)		(545	)
Other, net		(54	)		(159	)		(126	)		48
Total	$	(258	)	$	(223	)	$	(886	)	$	139

⁽¹⁾Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while ownership interests in investment funds are accounted for on a one quarter lag.

MERCK & CO., INC.

NON-GAAP REPORTING CHANGES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 5

Beginning in 2021, the Company will be changing the treatment of certain items for purposes of its non-GAAP reporting. Historically, Merck’s non-GAAP results excluded the amortization of intangible assets recognized in connection with business acquisitions, but did not exclude the amortization of intangibles originating from collaborations, asset acquisitions or licensing arrangements. In 2021, Merck’s non-GAAP results will no longer differentiate between the nature of intangibles amortization and will exclude all amortization of intangible assets. Also, beginning in 2021, Merck’s non-GAAP results will exclude gains and losses on investments in equity securities. These amounts are difficult to predict and can fluctuate significantly period to period affecting comparability of results. Non-GAAP results for the quarterly and annual periods of 2020 will be recast to conform to the new presentation. The table below provides details of the effects of these changes to the Company's non-GAAP results for the full year of 2020 and by quarter as will be presented in 2021 reporting.

	Non-GAAP Results
	As Reported 2020			Impact of non-GAAP reporting changes			As Recast 2020
Full Year 2020
Cost of sales	$	12,332		$	719		$	11,613
Selling, general and administrative		9,486						9,486
Research and development		9,231			11			9,220
Other (income) expense, net		(916	)		(1,292	)		376
Income Before Taxes		17,861			562			17,299
Income Tax Provision		2,764			186			2,578
Net Income		15,097			376			14,721
Net Income Attributable to Merck & Co., Inc.		15,082			376			14,706
Earnings per Common Share Assuming Dilution	$	5.94		$	0.15		$	5.79

Tax Rate		15.5	%					14.9	%

First Quarter 2020
Cost of Sales	$	2,948		$	111		$	2,837
Selling, General and administrative		2,266						2,266
Research and development		2,155			3			2,152
Other (income) expense, net		82			(87	)		169
Income Before Taxes		4,606			(27	)		4,633
Income Tax Provision		784			2			782
Net Income		3,822			(29	)		3,851
Net Income Attributable to Merck & Co., Inc.		3,822			(29	)		3,851
Earnings Per Common Share Assuming Dilution	$	1.50		$	(0.01	)	$	1.51

Tax Rate		17.0	%					16.9	%

Second Quarter 2020
Cost of Sales	$	2,852		$	319		$	2,533
Selling, General and administrative		2,204						2,204
Research and development		2,157			2			2,155
Other (income) expense, net		(437	)		(511	)		74
Income Before Taxes		4,096			190			3,906
Income Tax Provision		604			74			530
Net Income		3,492			116			3,376
Net Income Attributable to Merck & Co., Inc.		3,484			116			3,368
Earnings Per Common Share Assuming Dilution	$	1.37		$	0.05		$	1.32

Tax Rate		14.7	%					13.6	%

Third Quarter 2020
Cost of Sales	$	3,158		$	138		$	3,020
Selling, General and administrative		2,228						2,228
Research and development		2,273			3			2,270
Other (income) expense, net		(311	)		(346	)		35
Income Before Taxes		5,203			205			4,998
Income Tax Provision		772			56			716
Net Income		4,431			149			4,282
Net Income Attributable to Merck & Co., Inc.		4,427			149			4,278
Earnings Per Common Share Assuming Dilution	$	1.74		$	0.06		$	1.68

Tax Rate		14.8	%					14.3	%

Fourth Quarter 2020
Cost of Sales	$	3,373		$	151		$	3,222
Selling, General and administrative		2,789						2,789
Research and development		2,648			3			2,645
Other (income) expense, net		(253	)		(348	)		95
Income Before Taxes		3,957			194			3,763
Income Tax Provision		605			54			551
Net Income		3,352			140			3,212
Net Income Attributable to Merck & Co., Inc.		3,350			140			3,210
Earnings Per Common Share Assuming Dilution	$	1.32		$	0.05		$	1.27

Tax Rate		15.3	%					14.6	%

Merck is providing certain 2020 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 results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.