Cash Flow Statement

The cash flow statement provides information about a company cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company balance sheet.

The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities.

Merck & Co. Inc., consolidated cash flow statement

US$ in millions

12 months ended:	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Net income from continuing operations	17,133)	377)	14,526)	12,358)	7,082)
Amortization	2,395)	2,044)	2,085)	1,636)	1,899)
Depreciation	2,104)	1,828)	1,824)	1,578)	1,726)
Intangible asset impairment charges	39)	792)	1,749)	302)	1,718)
(Income) loss from investments in equity securities, net	(14)	(340)	1,419)	(1,940)	—)
Charges for certain research and development asset acquisitions	3,456)	11,409)	—)	1,556)	2,660)
Deferred income taxes	(1,249)	(1,899)	(1,568)	187)	(668)
Share-based compensation	761)	645)	541)	479)	475)
Other	510)	355)	1,301)	805)	(49)
Accounts receivable	(244)	(1,148)	(644)	(2,033)	(1,002)
Inventories	(835)	(816)	(161)	(674)	(855)
Trade accounts payable	182)	(380)	(289)	405)	724)
Accrued and other current liabilities	(2,328)	1,783)	(50)	277)	(1,138)
Income taxes payable	1,023)	214)	380)	(540)	560)
Noncurrent liabilities	(49)	456)	(545)	484)	(453)
Other	(1,416)	(2,314)	(1,473)	(1,758)	(2,426)
Net changes in assets and liabilities	(3,667)	(2,205)	(2,782)	(3,839)	(4,590)
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities	4,335)	12,629)	4,569)	764)	3,171)
Net cash provided by operating activities	21,468)	13,006)	19,095)	13,122)	10,253)
Capital expenditures	(3,372)	(3,863)	(4,388)	(4,448)	(4,684)
Purchase of Seagen Inc. common stock	—)	—)	—)	—)	(1,000)
Purchases of securities and other investments	(519)	(955)	(1,204)	(1)	(95)
Proceeds from sale of Seagen Inc. common stock	—)	1,145)	—)	—)	—)
Proceeds from sales of securities and other investments	377)	1,658)	721)	1,026)	2,812)
Acquisition of Eyebiotech Limited, net of cash acquired	(1,344)	—)	—)	—)	—)
Acquisition of Elanco Animal Health Incorporated aqua business	(1,303)	—)	—)	—)	—)
Acquisition of Harpoon Therapeutics, Inc., net of cash acquired	(746)	—)	—)	—)	—)
Acquisition of MK-1045 from Curon Pharmaceutical	(700)	—)	—)	—)	—)
Acquisition of Prometheus Biosciences, Inc., net of cash acquired	—)	(10,705)	—)	—)	—)
Acquisition of Imago BioSciences Inc., net of cash acquired	—)	(1,327)	—)	—)	—)
Acquisition of Acceleron Pharma Inc., net of cash acquired	—)	—)	—)	(11,174)	—)
Acquisition of Pandion Therapeutics, Inc., net of cash acquired	—)	—)	—)	(1,554)	—)
Acquisition of VelosBio Inc., net of cash acquired	—)	—)	—)	—)	(2,696)
Acquisition of ArQule, Inc., net of cash acquired	—)	—)	—)	—)	(2,545)
Other	(127)	(36)	(89)	(270)	(1,235)
Net cash used in investing activities	(7,734)	(14,083)	(4,960)	(16,421)	(9,443)
Net change in short-term borrowings	—)	—)	—)	(3,986)	2,549)
Payments on debt	(1,290)	(1,755)	(2,251)	(2,319)	(1,957)
Proceeds from issuance of debt	3,599)	5,939)	—)	7,936)	4,419)
Distribution from Organon & Co.	—)	—)	—)	9,000)	—)
Purchases of treasury stock	(1,306)	(1,346)	—)	(840)	(1,281)
Dividends paid to stockholders	(7,840)	(7,445)	(7,012)	(6,610)	(6,215)
Proceeds from exercise of stock options	177)	125)	384)	202)	89)
Other	(372)	(328)	(240)	(286)	(436)
Net cash provided by (used in) financing activities	(7,032)	(4,810)	(9,119)	3,097)	(2,832)
Net cash provided by operating activities	—)	—)	—)	987)	—)
Net cash used in investing activities	—)	—)	—)	(134)	—)
Net cash used in financing activities	—)	—)	—)	(504)	—)
Net cash flows provided by discontinued operations	—)	—)	—)	349)	—)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(293)	23)	(410)	(133)	253)
Net increase (decrease) in cash, cash equivalents and restricted cash	6,409)	(5,864)	4,606)	14)	(1,769)
Cash, cash equivalents and restricted cash at beginning of year	6,909)	12,773)	8,167)	8,153)	9,934)
Cash, cash equivalents and restricted cash at end of year	13,318)	6,909)	12,773)	8,167)	8,165)

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

Net Income from Continuing Operations

The net income shows considerable variability over the years analyzed. It increased substantially from 7,082 million in 2020 to 12,358 million in 2021 and further to 14,526 million in 2022. However, there was a sharp decline to 377 million in 2023, followed by a recovery to 17,133 million in 2024, indicating volatility in profitability during this period.

Amortization and Depreciation

Amortization expenses displayed an increasing trend overall, declining slightly in 2021, then rising notably to 2,395 million by 2024. Depreciation also increased steadily, from 1,726 million in 2020 to 2,104 million in 2024, suggesting ongoing capital asset usage and amortization.

Intangible Asset Impairment Charges

These charges varied significantly, with a peak of 1,749 million in 2022, a reduction in subsequent years, and only 39 million recorded by 2024. This trend suggests a diminishing necessity for impairment charges over the analyzed period.

Income/Loss from Investments in Equity Securities

The impact of equity securities investments was irregular, including a notable loss of 1,940 million in 2021 and gains and losses in other years, reflecting fluctuating performance or valuation of equity investments.

Research and Development Asset Acquisitions Charges

After decreasing to 1,556 million in 2021, these charges surged substantially to 11,409 million in 2023 before falling back to 3,456 million in 2024, indicating large acquisitions or developments impacting R&D expenses in 2023.

Income Tax and Related Items

Deferred income taxes fluctuated with negative and positive values, ending at -1,249 million in 2024. Income taxes payable showed irregular movements but remained positive in the later years. This variability indicates changing tax liabilities and timing differences.

Share-based Compensation

Share-based compensation consistently increased each year from 475 million in 2020 to 761 million in 2024, suggesting a growing use or value of stock-based incentives.

Working Capital Components (Accounts Receivable, Inventories, Trade Payable, and Other Current Liabilities)

Accounts receivable showed a reduction in negative changes, with the decrease ameliorating by 2024.

Inventories displayed smaller negative changes, indicating modest inventory level management.

Trade accounts payable showed a shift from positive changes in 2020-2021 to negative and back to positive, suggesting fluctuations in payment cycles.

Accrued and other current liabilities varied widely, peaking at an increase of 1,783 million in 2023 but then decreasing sharply.

Net Changes in Assets and Liabilities

A consistent negative trend in net changes was observed, indicating cash outflows from working capital changes, although the magnitude lessened over time before increasing again in 2024.

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities

Adjustments were volatile, with a peak of 12,629 million in 2023 and a decrease to 4,335 million in 2024, indicating varying non-cash items and changes in working capital impacting cash flow.

Net Cash Provided by Operating Activities

Operating cash flow increased from 10,253 million in 2020 to 21,468 million in 2024, peaking and dipping in interim years. This overall positive trend suggests strong cash generation capacity despite income fluctuations.

Capital Expenditures

Capital expenditures steadily decreased from 4,684 million in 2020 to 3,372 million in 2024, indicating a gradual reduction in investment in fixed assets.

Investing Activities

Net cash used in investing activities showed significant variability, with a peak outflow of 16,421 million in 2021 and a decrease to 7,734 million by 2024. Acquisitions contributed significantly to cash outflows, especially in 2023 and 2024.

Proceeds from sales of securities fluctuated, generally trending downward from 2,812 million in 2020 to 377 million in 2024.

Financing Activities

Financing cash flows were volatile, with a net inflow of 3,097 million in 2021 followed by outflows in subsequent years. Debt issuance and repayments were notable, with proceeds peaking in 2021 and repayments gradually decreasing.

Dividends paid consistently increased from 6,215 million in 2020 to 7,840 million in 2024, reflecting growing shareholder returns.

Purchases of treasury stock fluctuated but remained significant, indicating ongoing stock buyback activities.

Cash and Cash Equivalents

Cash and equivalents decreased sharply from 9,934 million in early 2020 to 6,909 million at the end of 2023 but rebounded to 13,318 million by the end of 2024, highlighting considerable fluctuations in liquidity levels.

Overall Summary

There is a pattern of strong operating cash flow generation amid erratic net income and volatile investing and financing activities. The company engaged in substantial acquisitions contributing to investment outflows, while capital expenditures decreased steadily. Financing activities also fluctuated but showed sustained dividend payments and stock repurchases. Changes in working capital generally resulted in cash outflows but varied year to year. Cash position exhibited significant variability, declining through 2023 with a strong recovery in 2024.

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Merck & Co. Inc. (NYSE:MRK)

Cash Flow Statement