Financial Contents
30 Financial Review
38 Responsibility for Financial Statements and
System of Internal Control
39 Audit Committee's Report
39 Independent Auditors' Report
Financial Statements:
40 Segment Information
41 Geographic Data
42 Consolidated Statement of Income
43 Consolidated Statement of Shareholders' Equity
44 Consolidated Balance Sheet
45 Consolidated Statement of Cash Flows
46 Notes to Consolidated Financial Statements
59 Quarterly Consolidated Statement of Income (Unaudited)
60 Financial Summary (1985-1995)
(The table below was represented by a graph in the printed Annual Report)
Earnings Per Common Share
(dollars)
$1.06 $1.20 $1.03 $2.09 $2.50
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1991 1992 1993 1994 1995
In 1993, excluding after-tax net charges for divestitures, restructuring and
unusual items, earnings per common share would have been $1.85.
The 1995 increase in earnings per common share reflects strong worldwide
sales growth complemented by continuing improvements in operating
efficiencies.
(The table below was represented by a graph in the printed Annual Report.)
Cash Dividends Paid Per Common Share
(dollars)
$.66 $.74 $.84 $.94 $1.04
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1991 1992 1993 1994 1995
The 1995 cash dividends paid represented the 28th consecutive year of
dividend increases.
Financial Review
Pfizer Inc and Subsidiary Companies
Significant Events Affecting Comparability
Restructuring initiatives, as well as various acquisitions and divestitures over
the past several years, were taken in order to better position the Company as a
research-based, global health care company. As a result, financial data
comparability is affected by the following:
n In January 1995, the Company acquired SmithKline Beecham's animal health
business (SBAH) for approximately $1.5 billion. SBAH, which was a world leader
in animal vaccines and companion animal health products, had products and a
presence in countries that complemented the Company's animal health business.
n In March 1995, the Company acquired NAMIC U.S.A. Corporation (NAMIC), a
manufacturer of accessories for angioplasty procedures, in a stock transaction
valued at approximately $170 million.
n In April 1995, the Company announced a two-for-one stock split in the form
of a 100 percent stock dividend effective in June 1995. Prior years' data have
been restated to reflect this stock split.
n In August 1995, Bain de Soleil skin care products were acquired from the
Procter & Gamble Company.
n In the fourth quarter of 1995, the Company entered into an agreement to
sell substantially all of the net assets of its worldwide food science business
to Cultor Ltd., a publicly held international company based in Finland. As a
result, the Company's food science segment has been reported as a discontinued
operation. The sale was completed in January 1996.
n In 1993, the Company recorded pre-tax charges of approximately $745 million
and $56 million (excluding approximately $11 million directly related to
discontinued operations) for certain restructuring and unusual items. These
charges covered restructuring costs, including personnel reductions and the
writedown of certain tangible assets as well as intangible assets whose carrying
value would not have been recovered through future cash flows.
n In April 1993, the Company sold its remaining 40% interest in Minerals
Technologies Inc., a formerly wholly-owned subsidiary comprised of the Company's
specialty minerals businesses. This sale resulted in a pre-tax gain of
approximately $60 million.
See the footnotes "Acquisitions" beginning on page 54, "Common Stock" on page
53, "Discontinued Operations" on page 55 and "Divestitures, Restructuring and
Unusual Items" beginning on page 49.
Overview of Consolidated Operating Results
In 1995, net sales from continuing operations exceeded $10.0 billion for the
first time in the Company's history (an increase of 26% compared with 1994).
These results continue to reflect the
benefits of the Company's innovative research and development (R&D) efforts,
which have produced a broad product pipeline. In 1995, R&D expenditures exceeded
$1.4 billion, an increase of 28% over 1994. In 1995, selling, informational and
administrative expenses, as a percentage of sales, decreased 1.4 percentage
points compared with 1994, partially due to the Company's continuous improvement
and restructuring programs.
In 1995, income from continuing operations was $1,554.2 million, an increase of
22% as compared with 1994. Net income, including discontinued operations, in
1995 was $1,572.9 million ($2.50 per share), an increase of 21% (20% per share)
as compared with $1,298.4 million ($2.09 per share) in 1994. This increase
reflects strong sales growth augmented by improvements in operating efficiencies
and was achieved despite an increase in the Company's effective tax rate from
30% to 32.1%.
(The table below was represented by a graph in the printed Annual Report.)
Income from Continuing Operations
(millions of dollars)
$699 $1,098 $645 $1,277 $1,554
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1991 1992 1993 1994 1995
In 1993, excluding after-tax net charges for divestitures, restructuring and
unusual items, income from continuing operations would have been $1,163
million.
The strong growth in income from continuing operations of 22% in 1995 was
achieved while continuing to invest aggressively in research and development.
Net Sales
Net sales increased $2,044.1 and $815.5 million, or 26% and 11% in 1995 and
1994, respectively. Excluding the effect of the SBAH acquisition, net sales for
1995 increased 18% compared with 1994. The consolidated net sales increases in
1995 and 1994 were primarily driven by volume increases. (There was no material
price impact on either the 1995 or 1994 net sales growth.) The U.S. and
international markets reflected net sales increases of 21% and 31% in 1995 and
11% and 12% in 1994, respectively. In 1995, the Company registered net sales in
excess of $10 million in each of 45 countries outside the U.S., with no single
country, other than the U.S. and Japan, contributing more than 10% to total net
sales.
Several analyses of the Company's net sales by business segment follow:
Segment Net Sales Analysis
% Increase/
(Decrease)
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(millions of dollars) 1995 1994 1993 95/94 94/93
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Health Care $8,408.6 $6,963.0 $6,210.3 21 12
Animal Health 1,219.5 605.3 578.0 101 5
Consumer Health Care 393.3 409.0 373.5 (4) 10
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Total $10,021.4 $7,977.3 $7,161.8 26 11
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Diversification of Net Sales by Business
% of Consolidated Net Sales
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1995 1994 1993
- ------------------------------------------------------------
Health Care 84 87 87
Animal Health 12 8 8
Consumer Health Care 4 5 5
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Consolidated 100 100 100
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(The table below was represented by a graph in the printed Annual Report)
Composition of Net Sales Growth
Volume Price Currency
1993 4% 2% -2%
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1994 11 0 0
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1995 24 -1 3
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Increases in volume have been the major contributors to sales growth in each
of the last three years.
Percentage Change in Net Sales
Total Analysis of Change
% -------------------------------
Change Volume Price Currency
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Health Care
1995 vs. 1994 21 19 (1) 3
1994 vs. 1993 12 12 0 0
Animal Health
1995 vs. 1994 101 102 (1) 0
1994 vs. 1993 5 3 1 1
Consumer Health Care
1995 vs. 1994 (4) (2) 4 (6)
1994 vs. 1993 10 9 1 0
Consolidated
1995 vs. 1994 26 24 (1) 3
1994 vs. 1993 11 11 0 0
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Net sales for the health care segment reflected a 22% and a 13% increase in
worldwide pharmaceutical sales in 1995 and 1994, respectively. The 1995 increase
in worldwide pharmaceutical sales reflected 17% growth in the U.S. and 27%
overseas. Exchange fluctuations, principally the relative weakness of the dollar
as compared with the yen and major European currencies in 1995 versus 1994,
increased worldwide pharmaceutical net sales by 3% and overseas pharmaceutical
net sales by 7%.
The following table shows percentage net sales growth of the Company's major
pharmaceuticals:
Percentage Change in Net Sales-Major Pharmaceuticals
% Increase/(Decrease)
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95/94 94/93
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Cardiovasculars:
Norvasc 65 85
Procardia XL (4) 0
Cardura 32 27
Anti-Infectives:
Diflucan 22 14
Zithromax 97 43
Unasyn 15 (5)
Central Nervous System Agents:
Zoloft 44 55
Anti-Inflammatories:
Feldene 1 (16)
Antidiabetes Agents:
Glucotrol XL 254 *
Glucotrol (55) (25)
*Calculation not meaningful.
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Worldwide net sales of three of the Company's pharmaceutical products exceeded
$1 billion in 1995: Norvasc-$1.3 billion, Procardia XL-$1.1 billion and
Zoloft-$1.0 billion. Additionally, 1995 net sales of Diflucan were approximately
$880 million. In 1995, Procardia XL continued to be the largest selling
cardiovascular drug in the U.S. as demand for the product remained strong.
Aggregate worldwide net sales of the six pharmaceutical products launched in
the U.S. during the 1990s-Norvasc, Zoloft, Diflucan, Cardura, Zithromax and
Glucotrol XL-represented 41%, 34% and 27% of consolidated net sales for the
years 1995, 1994 and 1993, respectively. Net sales of these products
increased 48% and 44% in 1995 and 1994, respectively. Of these six major new
products, only Cardura's patent will expire before 2003.
Net sales of Feldene and Glucotrol have been affected by a combination of
generic competition and new competitive brand-name products.
The 1990 Omnibus Budget Reconciliation Act included a provision requiring
pharmaceutical companies to rebate a portion of revenues from pharmaceutical
products dispensed to state Medicaid recipients. Medicaid rebates and related
state programs reduced net sales by $85, $74 and $70 million in 1995, 1994 and
1993, respectively. In addition, the Company provided approximately $80, $56 and
$51 million in discounts to the federal government in 1995, 1994 and 1993,
respectively. Performance-based contracts with several customers in the U.S.
that reduced net sales growth were offset by volume increases for 1995 and 1994.
Net sales of the Hospital Products Group (HPG) increased 16% and 6% in 1995 and
1994, respectively. Net sales for 1995 reflect the strength of new product
rollouts, the NAMIC acquisition and favorable exchange effects. Sales of the
Schneider business increased by 31% during the year primarily due to the launch
of new angioplasty and angiography catheters and strong demand for stents. In
addition, the acquisition in March 1995 of NAMIC, which designs, manufactures
and markets a broad range of single-patient use medical products, primarily for
the diagnosis and treatment of atherosclerotic cardiovascular disease,
contributed 5 percentage points to HPG's net sales increase. Exchange
fluctuations contributed 4 percentage points to HPG's net sales growth in 1995.
In 1994, the HPG business benefited from new product introductions and from the
success of its coronary catheters and stents, although its sales trends were
tempered by overall market conditions. The HPG business was adversely affected
in 1993 by events influencing the industry in general, principally the deferral
of medical procedures and changes in purchasing practices, including shifts to
lower-cost products and reduced hospital inventories.
Net sales in the animal health segment increased 101% in 1995 due to the
sales volume contribution of the SBAH acquisition. In addition, net sales of
Dectomax, the innovative livestock antiparasitic developed by the Company,
increased 69% in 1995 due, in part, to the recent launches in major Western
European countries, including the United Kingdom, Germany and France.
Dectomax, Aviax (a poultry antiparasitic) and Advocin (a quinoline
antibiotic) are expected to be broadly launched around the world in the next
few years and are expected to be the key sources of growth for the animal
health business for the remainder of the decade. Animal health net sales
increased 5% in 1994 and reflected the strong performance of Dectomax,
particularly in Latin America, where its sales increased 21%.
Net sales in the consumer health care segment in 1995 declined 4% as compared
with 1994 due to increased private-label competition in the U.S. for existing
brands and the impact of the devaluation of the Mexican peso. These factors were
partially offset by launches of over-the-counter products in a number of
countries including the successful launch of the antihistamine, Reactine, in
Canada. In 1994, net sales in the consumer health care segment increased 10%,
reflecting improved U.S. market share for Desitin, Unisom, BenGay and Rid, line
extensions of certain existing products and international expansion.
An analysis of percentage changes in reported net sales in the U.S. and
international markets by business segment follows:
United States Operations
% Increase/(Decrease)
in Net Sales
- ----------------------------------------------------
95/94 94/93
- ----------------------------------------------------
Health Care 17 12
Animal Health 148 (1)
Consumer Health Care (9) 4
Total U.S. Operations 21 11
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International Operations
% Increase
in Net Sales
- -----------------------------------------------------
95/94 94/93
- -----------------------------------------------------
Health Care 25 13
Animal Health 82 7
Consumer Health Care 7 22
Total International
Operations 31 12
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Geographically, the Company's business is diversified, as shown in the following
table:
Diversification by Geographic Area
% of Consolidated Net Sales
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1995 1994 1993
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U.S. 51 53 53
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Europe 25 22 22
Asia 15 15 15
Canada/Latin America 7 8 7
Africa/Middle East 2 2 3
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International 49 47 47
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Consolidated 100 100 100
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(The table below was represented by a graph in the printed Annual Report)
Research and Development Expenditures
(millions of dollars)
$745 $851 $961 $1,126 $1,442
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1991 1992 1993 1994 1995
Research and development expenditures have increased at a compound annual
growth rate of almost 18% over the past five years. The Company now has 15
new chemical entities in late-stage development.
Product Developments
The Company continues to invest in R&D to develop both new products and
additional uses for existing products. Following are certain significant
regulatory actions that occurred in 1995:
n In February 1995, the U.S. Food and Drug Administration (FDA) approved the
Company's hypertensive agent Cardura for the treatment of benign prostatic
hyperplasia (BPH), an enlargement of the prostate gland in men. Cardura was
approved for the treatment of BPH in many major European countries and
applications are pending in several other countries.
n In August 1995, the Company was informed by the FDA that Zoloft, the
Company's antidepressant, is approvable for the treatment of patients with
obsessive-compulsive disorder.
n In September 1995, the Company received an approvable letter from the FDA
related to its antihistamine Zyrtec (cetirizine HCl) for pediatric use.
n In October 1995, the FDA approved a pediatric version of Zithromax, the
Company's broad-spectrum antibiotic.
n In December 1995, the Company was informed by the FDA that the antibiotic
Zithromax is approvable for certain sexually transmitted diseases.
n In December 1995, the FDA granted marketing clearance to the antihistamine
Zyrtec (cetirizine HCl) for the treatment of allergies, itching and hives.
Zyrtec, the most widely prescribed antihistamine in Europe, is currently
marketed worldwide by the Belgian company, UCB S.A. and is licensed to the
Company for the U.S. and Canada. Pfizer and UCB Pharma, a subsidiary of UCB,
will copromote Zyrtec in the U.S.
The table below lists the Company's pending New Drug Applications (NDAs) and the
related filing dates with the FDA:
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Product Indication(s) Date Filed
- ----------------------------------------------------------------------------
Zithromax Lower respiratory tract infection-
pediatric December 1995
Zithromax Mycobacterium avium complex December 1995
Zithromax Atypical pneumonia December 1995
Zoloft Panic disorder December 1995
Norvasc Safety-label change for treatment April 1995
of hypertension and angina among
those with congestive heart failure
Zithromax Certain sexually transmitted diseases December 1994
tenidap Osteo- and rheumatoid arthritis December 1993
Unasyn Injectable antibiotic-pediatric November 1993
Zyrtec Pediatric January 1993
Zoloft Obsessive-compulsive disorder May 1992
- ----------------------------------------------------------------------------
The Company currently has 15 new chemical entities in late-stage development and
48 other compounds in early development.
Components of Net Income
The components of net income, expressed as a percentage of net sales, for the
years 1995, 1994 and 1993 are reflected in the following table:
Analysis of the Consolidated Statement of Income
% Increase/
(Decrease)
- ----------------------------------------------------------------------------
(millions of dollars) 1995 1994 1993 95/94 94/93
- ----------------------------------------------------------------------------
Net sales $10,021.4 $7,977.3 $7,161.8 26 11
Cost of sales $ 2,164.1 $1,722.2 $1,559.0 26 10
% of net sales 21.6% 21.6% 21.8%
Selling,
informational
and administra-
tive expenses $ 3,854.7 $3,184.1 $3,005.7 21 6
% of net sales 38.5% 39.9% 42.0%
R&D expenses $ 1,442.4 $1,126.1 $ 961.3 28 17
% of net sales 14.4% 14.1% 13.4%
Divestitures,
restructuring
and unusual
items-net - - $ 740.6 * *
% of net sales - - 10.3%
Other deduc-
tions-net $ 261.0 $ 114.4 $ 59.9 128 91
% of net sales 2.6% 1.5% .8%
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Income from continu-
ing operations
before taxes and
minority interests $ 2,299.2 $1,830.5 $ 835.3 26 119
% of net sales 22.9% 22.9% 11.7%
Taxes on income $ 738.0 $ 549.2 $ 187.7 34 193
Effective tax rate 32.1% 30.0% 22.5%
Minority interests $ 7.0 $ 4.6 $ 2.6 52 77
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Income from con-
tinuing operations $ 1,554.2 $1,276.7 $ 645.0 22 98
% of net sales 15.5% 16.0% 9.0%
Discontinued
operations-net $ 18.7 $ 21.7 $ 12.5 (14) 74
% of net sales .2% .3% .2%
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Net income $ 1,572.9 $1,298.4 $ 657.5 21 97
% of net sales 15.7% 16.3% 9.2%
- ----------------------------------------------------------------------------
*Calculation not meaningful.
Cost of sales, expressed as a percentage of net sales, was the same in 1995 and
1994. The 1995 results were primarily attributable to favorable product mix as
well as the benefit of reengineering of manufacturing operations, including the
shutdown of a number of overseas plants, offset by lower production margins for
SBAH relative to the Company overall and the impact of purchase accounting,
mostly relating to the acquired SBAH inventories. The decrease in cost of sales
as a percentage of net sales in 1994, as compared with 1993, was attributable to
the Company's cost-containment program and favorable business and product mix
reflecting continued growth in the pharmaceutical business.
Selling, informational and administrative expenses (SI&A), as a percentage of
net sales, continued to decline in 1995 and 1994 partially due to the beneficial
impact of the Company's continuous improvement and restructuring programs.
Selling and informational expenses in 1995, as a percentage of net sales,
decreased versus the prior year due to the fact that net sales grew more rapidly
than these expenses. The absolute increases in SI&A in 1995 versus 1994 and 1994
versus 1993 were primarily due to the rollout of new products and support for
the newly launched products.
In response to the changes in the health care environment, the Company adopted a
strategy in 1994, which continued throughout 1995, that focuses on the diverse
needs of managed care customers and decision makers. SI&A includes expenses
incurred in communicating scientific, medical and clinical information about the
Company's various products to the medical community and others. Health care
information is also communicated by means of Company-sponsored medical symposia
and conventions, as well as through distribution of informative literature
concerning the Company's products. Advertising and promotion expenses totaled
$687.5 and $609.2 million for 1995 and 1994, respectively. Advertising expenses
include costs associated with the production and purchase of print space in
magazines and journals and media time on radio and television of approximately
$200 million in both 1995 and 1994. A significant portion of these advertising
expenditures are for the Company's consumer health care products.
R&D expenses reflected a 19% compound growth rate from 1993 through 1995. Health
care R&D expenses, expressed as a percentage of health care net sales, were
15.4%, 14.9% and 14.3% for
1995, 1994 and 1993, respectively. The increase in 1995 as compared with prior
years reflected the rapid advancement of a number of drug candidates in
late-stage development. In 1996, the Company plans to spend about $1.7 billion
on R&D.
Other deductions-net increased $146.6 million in 1995 primarily due to the
amortization of goodwill and other intangibles recorded as a result of the SBAH
acquisition, additional interest expense on borrowings to finance the
acquisition, a provision for various litigation issues, the impact of
unfavorable changes in foreign exchange in hyperinflationary markets and charges
resulting from decisions to withdraw from a product line and to modify certain
distribution relationships in HPG. Partially offsetting these events was the
recognition of income related to the completion of all appeals in a patent
infringement case with SciMed Life Systems, Inc. In 1994, the increase of $54.5
million in Other deductions-net was due to a decrease in interest income because
of changes in the Company's capital structure and an increase in interest
expense as a result of changes in the scope and nature of the Company's foreign
exchange hedging program and higher interest rates. For further details, see the
footnote "Other Deductions-Net" on page 49.
The Company exceeded its goal of increasing income from continuing operations
before taxes and other deductions-net, expressed as a percentage of net sales,
by one percentage point in 1995 as compared to 1994. This increase reflects the
success of the Company's new products, coupled with the beneficial impact of
continuous improvement and restructuring programs.
The effective tax rate increased from 30% in 1994 to 32.1% in 1995. This
increase was attributable to the continuing reduction in the tax benefit from
the Company's operations in Puerto Rico as the result of the enactment of the
Omnibus Budget Reconciliation Act of 1993, the expiration of the R&D tax credit
during 1995 and changes in the mix of income by country. In the fourth quarter
of 1995, the Company reduced the effective tax rate from the previously assumed
33% to 32.1% due to changes in U.S. Treasury regulations governing Internal
Revenue Code Section 861 dealing with allocation rules for R&D expenses.
The Company has received and is protesting assessments from the U.S. and Belgian
tax authorities. For further details, see the footnote "Taxes on Income"
beginning on page 50.
The following table shows profit/(loss) by business segment for the years 1995,
1994 and 1993:
Segment Profit
% Increase/
(Decrease)
- -----------------------------------------------------------------------------
(millions of dollars) 1995 1994 1993 95/94 94/93
- -----------------------------------------------------------------------------
Health Care $2,547.8 $1,976.6 $1,129.9 29 75
Animal Health 96.9 47.4 (5.8) 104 *
Consumer Health Care 36.2 34.1 (102.3) 6 *
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Total $2,680.9 $2,058.1 $1,021.8 30 101
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*Calculation not meaningful.
For further details, see the footnote "Segment Information and Geographic Data"
on page 58.
Liquidity and Capital Resources
Company operations in 1995 provided significant positive cash flows which,
supplemented by the ability to issue commercial paper as well as to maintain
other worldwide credit facilities, provided adequate liquidity to meet the
Company's operational needs. Cash and cash equivalents and short-term
investments, which are principal measures of liquidity, amounted to $1.5, $2.0
and $1.2 billion at December 31, 1995, 1994 and 1993, respectively.
The following table presents certain measures of liquidity and capital resources
for the years 1995, 1994 and 1993:
1995 1994 1993
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Working capital (millions of dollars) $965.2 $962.5 $1,289.6
Current ratio 1.19:1 1.20:1 1.37:1
Debt to total capitalization 34% 40% 31%
Shareholders' equity per
common share* $8.90 $7.10 $6.22
Days of sales outstanding 60 60 63
Months of inventory on hand 9.2 8.6 8.5
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*Represents shareholders' equity divided by the actual number of common
shares outstanding.
The decrease in the percentage of debt to total capitalization in 1995 versus
1994 was primarily due to higher shareholders' equity resulting from growth in
net income. The significant increase in the percentage of debt to total
capitalization in 1994 versus 1993 was primarily due to share purchases and an
increase in short-term borrowings.
The increase in shareholders' equity per common share for 1995 and 1994 was due
to the Company's enhanced profitability, partially offset in 1994 by the stock
purchase program.
The table below summarizes the Company's cash flows from operating, investing
and financing activities:
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(millions of dollars) 1995 1994 1993
- ---------------------------------------------------------------------------
Cash provided by/(used in):
Operating activities $ 1,821.4 $1,488.5 $ 1,263.0
Investing activities (2,342.8) (840.3) (196.9)
Financing activities (519.1) 61.9 (1,567.0)
Effect of exchange rate
changes on cash and
cash equivalents (14.7) 19.0 (26.8)
- ---------------------------------------------------------------------------
Net (decrease)/increase in
cash and cash equivalents $(1,055.2) $ 729.1 $ (527.7)
- ---------------------------------------------------------------------------
Operating Activities
The increases in cash flows from operations in both 1995 and 1994 primarily
reflect growth in income generated by the continued rollout of new
pharmaceutical products and additional indications for existing pharmaceutical
products.
In 1993, the Company initiated a program which recognized the need to
restructure its global operations. This worldwide restructuring program included
the consolidation of manufacturing facilities with the planned elimination of 4
facilities in the U.S. and 32 facilities internationally, the demolition of
buildings resulting from the consolidation, reconfiguration and rehabilitation
of remaining facilities and the consolidation of distribution and administrative
organizations and infrastructures, including the consolidation of U.S.
distribution facilities from 6 to 2 and the consolidation of finance
organizations in Europe from 34 to 6. Such actions were expected to result in a
reduction of approximately 3,000 employees.
Through December 31, 1995, completed restructuring initiatives reduced the work
force by approximately 1,600 people and resulted in the closing of 18
facilities. The annualized benefit of efficiencies resulting from completed
efforts was approximately $86 million. The full implementation of such plans is
anticipated to lower annual operating costs by $130 million and to be
substantially completed by the end of 1996. To date, there have been no
significant changes in estimates of the cost of the plan. For further
information, including the components of the charges, see the "Divestitures,
Restructuring and Unusual Items" footnote beginning on page 49.
Cash outlays for 1995, 1994 and 1993 related to the restructuring totaled
$121.4, $88.1 and $38.5 million, respectively. Cash outlays in 1996, which will
be funded through operations, are expected to be approximately $140 million.
Investing Activities
Cash used in investing activities increased $1,502.5 million in 1995 primarily
due to the acquisition of SBAH, which was substantially financed by the issuance
of the Company's commercial paper. Additionally, an increase in the purchases of
short-term investments was largely offset by a decrease in the loan portfolio of
the Company's banking operation. Cash used in investing activities increased
$643.4 million in 1994 primarily due to the increase in short-term investments,
the reduction in the liquidation of loans and long-term investments by financial
subsidiaries and the fact that there were no sales of businesses in 1994.
Capital expenditures are primarily funded through operating activities. In 1996,
the Company anticipates capital expenditures will be comparable to the prior
year, including approximately $200 million for research and development
projects. The Company completed a major pharmaceutical capacity replacement
project at its Groton facility in 1995 at a cost of approximately $185 million.
Financing Activities
Cash used in financing activities increased by $581.0 million in 1995 as
compared with 1994. This increase was principally related to a decrease in
short-term borrowings versus an increase last year, plus higher dividends. This
change was partially offset by an increase in the proceeds from long-term debt,
primarily resulting from a sale-and-repurchase financing, a decrease in the
Company's purchases of its common stock and an increase in proceeds from stock
option transactions. The increase in cash provided by financing activities in
1994 of $1,628.9 million from 1993 related to higher levels of short-term
borrowings used to fund working capital needs as well as certain short-term
investment opportunities. In addition, cash used for the completion of stock
purchase programs decreased in 1994 as compared with 1993. Share purchases were
funded through cash generated by operating activities.
Cash dividends paid to shareholders in 1995 were $658.5 million compared with
$594.6 million in 1994, reflecting an 11% increase in the annual dividend rate
from $.94 to $1.04 per common share.
In December 1994, the Company announced that it planned to purchase up to 4.5
million shares of its common stock in order to fund its NAMIC acquisition. Under
this plan, approximately 2.5 and 2.0 million shares were purchased in the open
market at a cost of approximately $108.5 and $74.8 million in 1995 and 1994,
respectively.
In February 1993, the Company announced a program to purchase up to 40
million shares of its common stock in the open market or in privately
negotiated transactions. Under this program, 14.9 and 25.0 million shares
were repurchased in the open market at a cost of approximately $436.4 and
$804.0 million in 1994 and 1993, respectively, completing this share purchase
program. These shares are available for use in the Company's employee benefit
plans and for general corporate purposes.
The Company maintains lines of credit and revolving-credit agreements with a
select group of banks and other financial intermediaries. Its major unused lines
of credit totaled approximately $1.2 billion at December 31, 1995.
An indicator of the Company's financial strength is that its senior debt has
been rated Aaa by Moody's Investors Services (Moody's) and AAA by Standard and
Poor's (S&P)-their highest ratings-for the past ten years. Moody's and S&P are
the major corporate rating organizations.
Banking Operation
The Company's international banking operation, Pfizer International Bank Europe
(PIBE), operates under a full banking license from the Central Bank of Ireland.
PIBE extends credit to financially strong borrowers largely through U.S. dollar
loans made primarily for the short and medium term, with floating interest
rates. Generally, loans are made on an unsecured basis. When deemed appropriate,
guarantees and certain covenants may be obtained as a condition to the extension
of credit. To reduce credit risk, PIBE has established credit approval
guidelines, borrowing limits and monitoring procedures. Credit risk is further
reduced through an active policy of diversification with respect to borrower,
industry and geographic location. The net income of PIBE is affected by
fluctuations in market interest rates because of repricing and maturity
mismatches between its interest-sensitive assets and liabilities. When PIBE is
asset sensitive (more assets repricing in a given period than liabilities), net
income would benefit in a period of increasing interest rates. PIBE's asset and
liability management reflects its liquidity, interest-rate outlook and general
market conditions. The interest-rate sensitivity of PIBE's largely U.S.
dollar-denominated floating-rate asset portfolio is largely offset by the
corresponding interest-rate sensitivity inherent in the Company's U.S.
dollar-denominated short-term debt. PIBE enters into interest-rate swaps,
currency swaps and forward-rate agreements as vehicles to manage the
interest-rate sensitivity of its portfolio.
The following table summarizes the composition of the loan portfolios, the most
significant of the interest-earning assets held by the international banking
operations, at November 30, 1995, 1994 and 1993:
Borrowers
(millions of dollars) 1995 1994 1993
------------------------------------------------------------------
Commercial and industrial $255.2 $526.3 $569.1
Government 97.6 139.7 91.9
Financial institutions 103.9 120.9 146.6
------------------------------------------------------------------
Total $456.7 $786.9 $807.6
------------------------------------------------------------------
Maturities
(millions of dollars) 1995 1994 1993
------------------------------------------------------------------
Within one year $289.2 $361.3 $456.9
One to five years 167.5 425.6 350.7
------------------------------------------------------------------
Total $456.7 $786.9 $807.6
------------------------------------------------------------------
The following table shows the percentage of interest-earning assets of PIBE
(including interest-bearing deposits, loans, Eurosecurities and securities
purchased under a resale agreement) by country of the borrower, depository,
issuer or guarantor, where the total for such country is 3% or more of the total
assets of the international banking operations:
% of Banking Operations
Total Assets
------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------
U.K. 29 19 19
Switzerland 22 12 7
Italy 10 7 6
Netherlands 10 11 9
Sweden 7 6 4
Denmark 6 8 12
France 6 8 12
Norway 6 - -
Germany 3 4 5
Canada - 5 13
Spain - - 5
U.S. - 17 8
------------------------------------------------------------------
The 1995 data reflect a reduced loan portfolio effected to bring PIBE's balance
sheet into line with its business needs. PIBE continues to have S&P's highest
short-term rating of A1+.
Prospective Information
Subsequent Event
In January 1996, the Company completed the acquisition of the Leibinger
Companies, a leader in the manufacture of specialty surgical instruments and
implantable devices used in skull, jaw, facial, hand and foot surgery.
Competition and the Health Care Environment
In the United States, many of the Company's pharmaceutical products are subject
to increased competition as managed care groups, institutions and government
agencies seek price discounts. Federal and state government efforts to reduce
Medicare and Medicaid expenses are expected to increase the use of managed care
and to offer incentives to beneficiaries to join these plans. This may result in
managed care influencing prescription decisions for a larger segment of the
population. International operations are also subject to increasing degrees of
government regulations.
It is expected that pressures on pricing and operating results will continue in
1996 as a result of this market competition and environment.
Feldene and Glucotrol have been subject to generic competition since 1992 and
1994, respectively. The majority of the unfavorable impact on Feldene sales was
felt in 1993, 1994 and 1995. The combined U.S. net sales of these products were
$95, $203 and $308 million in 1995, 1994 and 1993, respectively.
In mid-1993, the FDA approved an NDA for a competitor's sustained-release
form of nifedipine for the treatment of hypertension. This product uses a
different delivery system from the patented technology used in Procardia XL,
the Company's product, which is approved for the treatment of hypertension
and angina and which has a delivery system that is patent-protected until
2003. Other forms of sustained-release nifedipine have been reported to be in
various stages of development by other companies. It is not possible to
predict the timing and impact of possible future competition on sales of
Procardia XL.
Calcium Channel Blockers
During 1995, reports from several nonclinical studies raised questions about the
safety of calcium channel blockers, particularly the Company's immediate-release
nifedipine capsules, sold as Procardia. In January 1996, the FDA's advisory
panel, after carefully reviewing all of the data on the use of calcium channel
blockers, recommended that labeling for immediate-release nifedipine
capsules-approved only to treat a form of angina-be clarified. However, the
Advisory Panel specifically noted that there was no data which questioned the
safety of the newer sustained-release and intrinsically long-acting calcium
channel blockers, such as the Company's Procardia XL and Norvasc, which are
approved for both hypertension and angina and are prescribed for the vast
majority of patients on calcium channel blockers. The safety and effectiveness
of these new long-acting calcium channel blockers in lowering blood pressure and
controlling angina are supported by a large body of data from numerous studies
and the daily clinical experiences of physicians around the world.
It is not possible to predict the impact, if any, of these studies and the
FDA panel's recommendations on its future sales, but the Company does not
believe that any impact will have a material adverse effect on its financial
position or results of operations.
World Trade Organization (WTO)
In December 1994, the U.S. Congress ratified the WTO treaty, previously known as
the General Agreement on Tariffs and Trade. A key provision of the treaty
relates to intellectual property protection. The 10-year transition period
relating to the major pharmaceutical patent-infringing countries such as Brazil,
Turkey, Argentina and India will result, however, in the continued
discrimination against patents filed prior to the effective date of the
agreement. In addition, changes in the U.S. patent law have resulted in limited
extensions of the terms of patents for some of the Company's products.
Foreign Exchange
Sales and earnings growth in 1996 could be impacted by changes in foreign
exchange rates. The Company manages its foreign exchange risk through a variety
of techniques. For further details, see the footnote "Financial Instruments and
Concentrations of Credit Risk" beginning on page 47.
Tax Reform Proposal
The U.S. Congress and the Clinton Administration are presently negotiating the
balancing of the federal budget. Both the vetoed Balanced Budget Reconciliation
Act of 1995 and the Clinton Administration budget proposal contain language that
amends Section 936, so as to completely phase out the income-based tax credit
for those companies with operations in Puerto Rico, where the Company has a
major manufacturing facility. Both proposals provide for the phase down of the
Section 936 credit over a period of five to ten years. In addition, both
proposals contain a provision extending the Research and Development credit. Due
to the significant degree of uncertainty as to the outcome of these
deliberations, the Company is unable to predict the timing and impact upon its
results of operations.
Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which became
effective on January 1, 1996. This statement establishes accounting standards
for the impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed. Adoption of SFAS No. 121 is
not expected to have a material impact on the Company's consolidated financial
position and operating results, nor will it affect the Company's cash flows.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. This statement establishes an alternative method of accounting for
stock- based compensation awarded to employees, such as stock options granted by
the Company to employees. SFAS No. 123 provides for the recognition of
compensation expense based on the fair value of the stock-based award, but
allows companies to continue to measure compensation cost in accordance with
Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to
Employees. Companies electing to retain this method must make pro forma
disclosures of net income and earnings per share as if the fair value based
method had been applied. The Company plans to continue to use APB No. 25, which
does not require the Company to record compensation expense for the stock
options it awards to employees. In 1996, the Company will disclose the pro forma
effect of the fair value method on 1995 and 1996 net income and earnings per
share.
Litigation and Environmental Matters
Claims have been brought against the Company and its subsidiaries for various
legal matters. In addition, the Company's operations are subject to
international, federal, state and local environmental laws and regulations. For
further details, see the footnote "Litigation" beginning on page 55.
Dividend Growth
The dividend payout ratio amounted to 41.6%, 45.0% and 81.6% in 1995, 1994 and
1993, respectively. Excluding the effect of divestitures, restructuring and
unusual items-net, this ratio would have been 45.4% in 1993.
In January 1996, the Board of Directors declared a first-quarter 1996 dividend
of $.30, an increase of 15% compared with the $.26 dividend declared in each
quarter of 1995 (adjusted for the June 1995 two-for-one stock split). This
marked the 29th consecutive year of quarterly dividend increases.
Responsibility for Financial Statements and
System of Internal Control
The financial statements that appear on pages 40 through 59 were prepared by and
are the responsibility of the Company's management. These financial statements
are in conformity with
generally accepted accounting principles and, therefore, include amounts based
upon informed judgments and estimates. Management also accepts responsibility
for the preparation of other financial information included in this document.
The Company's management has designed a system of internal control to safeguard
its assets, ensure that transactions are properly authorized and provide
reasonable assurance, at reasonable cost, as to the integrity, objectivity and
reliability of financial information. Even an effective internal control system,
regardless of how well designed, has inherent limitations and, therefore, can
provide only reasonable assurance with respect to financial statement
preparation. The system is built on a business ethics policy that requires all
employees to maintain the highest ethical standards in conducting Company
affairs. The system of internal control includes careful selection, training and
development of financial managers, an organizational structure that segregates
responsibilities and a communications program which ensures that Company
policies and procedures are well understood throughout the organization. The
Company also has an extensive program of internal audits, with prompt follow-up,
including reviews of separate Company operations and functions around the world.
The Company's independent certified public accountants, KPMG Peat Marwick LLP,
have audited the annual financial statements in accordance with generally
accepted auditing standards. The independent auditors' report expresses an
informed judgment as to the fair presentation of the Company's reported
operating results, financial position and cash flows. This judgment is based on
the results of auditing procedures performed and such other tests that they
deemed necessary, including consideration of the Company's internal control
structure.
Recommendations made by KPMG Peat Marwick LLP and the Company's internal
auditors are considered and appropriate action taken with respect to these
recommendations. The Company believes that its system of internal control is
effective and adequate to accomplish the objectives discussed above.
W. C. Steere, Jr.
Principal Executive Officer
D. L. Shedlarz
Principal Financial Officer
H. V. Ryan
Principal Accounting Officer
February 22, 1996
#
Audit Committee's Report
Pfizer Inc and Subsidiary Companies
The Board of Directors reviews the audit function, internal controls and the
financial statements largely through its Audit Committee, which consists solely
of directors who are not Company employees. In 1995, the Audit Committee met
five times with management, the independent auditors and internal auditors
concerning their respective responsibilities. Among its various duties, the
Audit Committee recommends the appointment of the Company's independent
auditors. Both KPMG Peat Marwick LLP and the internal auditors have full access
to the Audit Committee and meet with it,
without management present, to discuss the scope and results of their
examinations including internal control, audit and financial reporting matters.
S. O. Ikenberry, Ph.D.
Chair, Audit Committee
February 22, 1996
Independent Auditors' Report
KPMG Peat Marwick LLP
Certified Public Accountants
To the Shareholders and Board of Directors of Pfizer Inc:
We have audited the accompanying consolidated balance sheet of Pfizer Inc and
subsidiary companies as of December 31, 1995, 1994 and 1993 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pfizer Inc and
subsidiary companies at December 31, 1995, 1994 and 1993, and the results of
their operations and their cash flows for each of the years then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat MarwicK LLP
345 Park Avenue
New York, NY 10154
February 22, 1996
#
Segment Information
Pfizer Inc and Subsidiary Companies
Consumer Corporate/
Health Animal Health Financial
(millions of dollars) Care Health Care Subsidiaries(a) Consolidated
- ------------------------------------------------------------------------------------------------------------
1995
Net sales $8,408.6 $1,219.5 $ 393.3 $ - $10,021.4
Segment profit $2,547.8 $ 96.9 $ 36.2 $ - $ 2,680.9
Net interest and
corporate
expenses (381.7) (381.7)
- ------------------------------------------------------------------------------------------------------------
Income from continuing
operations before
provision for taxes
on income and minority
interests $ 2,299.2
- ------------------------------------------------------------------------------------------------------------
Identifiable
assets $5,557.0 $2,069.0 $ 307.2 $ 4,796.1 $12,729.3
- ------------------------------------------------------------------------------------------------------------
Capital additions $ 515.5 $ 73.7 $ 28.5 $ 78.6 $ 696.3
- ------------------------------------------------------------------------------------------------------------
Depreciation $ 252.3 $ 28.7 $ 8.1 $ 31.8 $ 320.9
- ------------------------------------------------------------------------------------------------------------
1994
Net sales $6,963.0 $ 605.3 $ 409.0 $ - $ 7,977.3
- ------------------------------------------------------------------------------------------------------------
Segment profit $1,976.6 $ 47.4 $ 34.1 $ - $ 2,058.1
Net interest and
corporate
expenses (227.6) (227.6)
- ------------------------------------------------------------------------------------------------------------
Income from continuing
operations before
provision for taxes
on income and
minority
interests $ 1,830.5
- ------------------------------------------------------------------------------------------------------------
Identifiable
assets $5,388.1 $ 501.8 $ 205.3 $ 5,003.3 $11,098.5
- ------------------------------------------------------------------------------------------------------------
Capital additions $ 482.5 $ 45.9 $ 15.6 $ 127.5 $ 671.5
- ------------------------------------------------------------------------------------------------------------
Depreciation $ 216.3 $ 16.9 $ 7.1 $ 35.1 $ 275.4
- ------------------------------------------------------------------------------------------------------------
1993
Net sales $6,210.3 $ 578.0 $ 373.5 $ - $ 7,161.8
- ------------------------------------------------------------------------------------------------------------
Segment profit/
(loss)(b) $1,129.9 $ (5.8) $(102.3) $ - $ 1,021.8
Net interest
and corporate
expenses(b) (186.5) (186.5)
- ------------------------------------------------------------------------------------------------------------
Income from
continuing
operations
before provision
for taxes
on income and
minority
interests $ 835.3
- ------------------------------------------------------------------------------------------------------------
Identifiable
assets $4,650.3 $ 444.6 $ 152.4 $ 4,083.6 $ 9,330.9
- ------------------------------------------------------------------------------------------------------------
Capital additions $ 480.9 $ 39.2 $ 15.4 $ 98.7 $ 634.2
- ------------------------------------------------------------------------------------------------------------
Depreciation $ 182.6 $ 17.0 $ 6.5 $ 35.0 $ 241.1
- ------------------------------------------------------------------------------------------------------------
(a) Includes identifiable assets, capital additions and depreciation of the
discontinued operation. Additionally, net interest and corporate expenses
include amounts that relate to the operations of the financial subsidiaries.
Segment information for the financial subsidiaries can be found in the
"Financial Subsidiaries" footnote on page 47.
(b) Includes pre-tax charges of approximately $745 million and $56 million to
cover a worldwide restructuring program as well as unusual items and a gain of
approximately $60 million realized on the sale of the Company's remaining
interest in Minerals Technologies Inc. (MTI). Amounts directly attributable to
individual segments have been allocated to them. Amounts not directly traceable
to individual segments are included in net interest and corporate expenses.
Various segments use common production facilities. Allocation among such
segments of property, plant and equipment, as well as capital additions and
depreciation, is based principally on physical production. Corporate assets
consist primarily of cash, short-term investments and long-term marketable
securities.
Segment Information for 1994 and 1993 has been restated to report the food
science business as a discontinued operation. See the footnote "Discontinued
Operations" on page 55.
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
#
Geographic Data
Pfizer Inc and Subsidiary Companies
Canada/ Africa/ Corporate/
United Latin Middle Financial Adjustments/
(millions of dollars) States(a) Europe Asia America East Subsidiaries(b) Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
1995
Net sales $5,113.4 $2,443.8 $1,538.2 $ 696.0 $230.0 $ - $ - $10,021.4
Intercompany sales 175.3 691.7 75.3 29.4 9.5 - (981.2) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total $5,288.7 $3,135.5 $1,613.5 $ 725.4 $239.5 $ - $ (981.2) $10,021.4
- ---------------------------------------------------------------------------------------------------------------------------------
Geographic profit $1,628.0 $ 777.5 $ 261.1 $ 48.7 $ 12.5 $ - $ (46.9) $ 2,680.9
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest and corporate expenses (381.7) (381.7)
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing
operations before provision
for taxes on income and minority
interests $ 2,299.2
- ---------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $3,199.5 $3,646.7 $1,242.9 $ 611.7 $193.4 $4,796.1 $ (961.0) $12,729.3
- ---------------------------------------------------------------------------------------------------------------------------------
1994
Net sales $4,236.8 $1,758.6 $1,201.4 $ 598.3 $182.2 $ - $ - $ 7,977.3
Intercompany sales 140.3 439.3 42.8 8.4 5.0 - (635.8) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total $4,377.1 $2,197.9 $1,244.2 $ 606.7 $187.2 $ - $ (635.8) $ 7,977.3
- ---------------------------------------------------------------------------------------------------------------------------------
Geographic profit $1,409.6 $ 531.3 $ 108.8 $ 41.5 $ 11.6 $ - $ (44.7) $ 2,058.1
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest and
corporate expenses (227.6) (227.6)
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing
operations before provision
for taxes on income and
minority interests $ 1,830.5
- ---------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $2,402.2 $2,385.4 $1,276.4 $ 470.3 $139.1 $5,003.3 $ (578.2) $11,098.5
- ---------------------------------------------------------------------------------------------------------------------------------
1993
Net sales $3,828.3 $1,583.0 $1,071.3 $ 503.1 $176.1 $ - $ - $ 7,161.8
Intercompany sales 134.5 481.1 11.8 8.1 3.6 - (639.1) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total $3,962.8 $2,064.1 $1,083.1 $ 511.2 $179.7 $ - $ (639.1) $ 7,161.8
- ---------------------------------------------------------------------------------------------------------------------------------
Geographic profit/(loss)(c) $ 697.8 $ 378.5 $ 67.6 $ (4.9) $(28.6) $ - $ (88.6) $ 1,021.8
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest and
corporate expenses(c) (186.5) (186.5)
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing
operations before provision
for taxes on income
and minority interests $ 835.3
- ---------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $2,294.1 $2,005.1 $1,169.0 $ 383.3 $127.7 $4,083.6 $ (731.9) $ 9,330.9
- ---------------------------------------------------------------------------------------------------------------------------------
(a) The Company's manufacturing operations in Puerto Rico are included in the
United States for Geographic Data purposes.
(b) Includes identifiable assets of the discontinued operation.
(c) Includes pre-tax charges of approximately $745 million and $56 million to
cover a worldwide restructuring program as well as unusual items and a gain of
approximately $60 million realized on the sale of the Company's remaining
interest in MTI. Amounts directly attributable to individual geographic areas
have been allocated to them. Amounts not directly traceable to individual
geographic areas are included in net interest and corporate expenses.
Products are transferred between geographic areas for additional processing, as
well as for ultimate sale, on a basis intended to recognize economic and
competitive circumstances in the market of end use. The assets physically
located in one area are considered assets of that area even though they provide
goods and/or services to other areas.
Geographic data for 1994 and 1993 have been restated to report the food
science business as a discontinued operation. See the footnote "Discontinued
Operations" on page 55.
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
#
Consolidated Statement of Income
Pfizer Inc and Subsidiary Companies
Year ended December 31
- -------------------------------------------------------------------------------
(millions of dollars except per share data) 1995 1994 1993
- -------------------------------------------------------------------------------
Net sales $10,021.4 $7,977.3 $7,161.8
Costs and expenses
Cost of sales 2,164.1 1,722.2 1,559.0
Selling, informational and
administrative expenses 3,854.7 3,184.1 3,005.7
Research and development
expenses 1,442.4 1,126.1 961.3
Divestitures, restructuring
and unusual items-net - - 740.6
Other deductions-net 261.0 114.4 59.9
- -------------------------------------------------------------------------------
Income from continuing operations
before provision for taxes on
income and minority interests 2,299.2 1,830.5 835.3
Provision for taxes on income 738.0 549.2 187.7
Minority interests 7.0 4.6 2.6
- -------------------------------------------------------------------------------
Income from continuing operations 1,554.2 1,276.7 645.0
Discontinued operations-net of taxes
on income 18.7 21.7 12.5
- -------------------------------------------------------------------------------
Net income $ 1,572.9 $1,298.4 $ 657.5
- -------------------------------------------------------------------------------
Earnings per common share
Income from continuing operations $ 2.47 $ 2.05 $ 1.01
Discontinued operations-net of
taxes on income .03 .04 .02
- -------------------------------------------------------------------------------
Net income $ 2.50 $ 2.09 $ 1.03
- -------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
#
Consolidated Statement of Shareholders' Equity
Pfizer Inc and Subsidiary Companies
Common Stock Additional Translation Employee
------------------ Paid-In Retained Adjustment Benefit Treasury Stock
(millions) Shares Par Value Capital Earnings and Other Trust Shares Cost Total
- ----------------------------------------------------------------------------------------------------------------------------------
Balance January
1, 1993, as
reported 337.0 $33.7 $ 374.9 $5,119.3 $ 45.3 $ - (11.8) $ (854.6) $ 4,718.6
Restatement for
the 1995 stock
split 336.9 - - - - - (11.9) - -
- ----------------------------------------------------------------------------------------------------------------------------------
Balance January
1, 1993,
as restated 673.9 33.7 374.9 5,119.3 45.3 - (23.7) (854.6) 4,718.6
Net income 657.5 657.5
Cash dividends
declared (536.1) (536.1)
Currency
translation
adjustment (13.6) (13.6)
Stock option
transactions 2.8 .2 41.9 - .6 42.7
Purchases of
common stock (31.6) (1,019.6) (1,019.6)
Employee
benefit trust
transactions-
net 63.2 (690.0) 20.0 631.1 4.3
Dividend
reinvestment
plan .4 - 11.7 11.7
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December 31,
1993 677.1 33.9 491.7 5,240.7 31.7 (690.0) (35.3) (1,242.5) 3,865.5
Net income 1,298.4 1,298.4
Cash dividends
declared (594.6) (594.6)
Currency translation
adjustment 162.3 162.3
Stock option
transactions 3.1 .1 63.1 - 1.0 64.2
Purchases of
common stock (16.9) (511.2) (511.2)
Employee benefit
trust transactions-
net 83.4 (59.3) 24.1
Dividend
reinvestment
plan .5 - 11.8 11.8
Unrealized net
gain on avail-
able-for-sale
securities-net 2.0 2.0
Other - - 1.4 1.4
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December
31, 1994 680.7 34.0 651.4 5,944.5 196.0 (749.3) (52.2) (1,752.7) 4,323.9
Net income 1,572.9 1,572.9
Cash dividends
declared (658.5) (658.5)
Currency
translation
adjustment 12.6 12.6
Stock option
transactions 4.3 .3 125.8 2.3 78.9 205.0
Purchases of
common stock (2.5) (108.5) (108.5)
Employee benefit
trust transactions-
net 440.2 (420.5) 19.7
Dividend
reinvestment plan .3 - 15.8 15.8
Unrealized net gain
on available-for-
sale securities-net 22.7 22.7
Minimum pension
liability-net (67.9) (67.9)
Treasury stock
utilized for the
NAMIC acquisition 4.4 166.9 166.9
Other - - 2.0 2.0
- ----------------------------------------------------------------------------------------------------------------------------------
Balance December
31, 1995 685.3 $ 34.3 $1,235.2 $6,858.9 $163.4 $(1,169.8) (48.0) $(1,615.4) $ 5,506.6
- ----------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
Consolidated Balance Sheet
Pfizer Inc and Subsidiary Companies
December 31
- ----------------------------------------------------------------------------
(millions of dollars) 1995 1994 1993
- ----------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $403.3 $ 1,458.5 $ 729.4
Short-term investments 1,108.7 560.1 447.1
Accounts receivable, less
allowances for doubtful accounts:
1995-$61.0; 1994-$44.1; 1993-$40.6 2,024.0 1,665.0 1,468.7
Short-term loans 289.1 361.3 456.9
Inventories
Finished goods 564.4 528.0 413.3
Work in process 578.8 534.9 502.1
Raw materials and supplies 240.9 202.0 178.1
- ----------------------------------------------------------------------------
Total inventories 1,384.1 1,264.9 1,093.5
- ----------------------------------------------------------------------------
Prepaid expenses, taxes
and other assets 943.2 478.6 537.6
- ----------------------------------------------------------------------------
Total current assets 6,152.4 5,788.4 4,733.2
Long-term loans and investments 544.9 828.6 693.4
Property, plant and equipment,
less accumulated depreciation 3,472.6 3,073.2 2,632.5
Goodwill, less accumulated
amortization 1995-
$78.8; 1994-$48.2; 1993-$37.4 1,243.0 325.7 231.1
Other assets, deferred taxes
and deferred charges 1,316.4 1,082.6 1,040.7
- ----------------------------------------------------------------------------
Total assets $12,729.3 $11,098.5 $ 9,330.9
- ----------------------------------------------------------------------------
Liabilities and Shareholders'
Equity
Current Liabilities
Short-term borrowings, including
current portion of long-
term debt $2,035.5 $ 2,220.0 $ 1,178.8
Accounts payable 715.3 524.9 479.1
Income taxes payable 822.3 731.1 606.2
Accrued compensation and related
items 421.3 419.0 408.6
Other current liabilities 1,192.8 930.9 770.9
- ----------------------------------------------------------------------------
Total current liabilities 5,187.2 4,825.9 3,443.6
- ----------------------------------------------------------------------------
Long-term debt 833.0 604.2 570.5
Postretirement benefit
obligation other than pension plans 426.3 432.6 443.3
Deferred taxes on income 166.1 211.7 189.4
Other non-current liabilities 563.5 661.4 779.3
Minority interests 46.6 38.8 39.3
- ----------------------------------------------------------------------------
Total liabilities 7,222.7 6,774.6 5,465.4
- ----------------------------------------------------------------------------
Shareholders' Equity
Preferred stock, without
par value; 12,000,000 shares
authorized, none issued - - -
Common stock, $.05 par value;
1,500,000,000 shares authorized;
issued: 1995-685,315,496;
1994-680,661,632;
1993-677,129,504 34.3 34.0 33.9
Additional paid-in capital 1,235.2 651.4 491.7
Retained earnings 6,858.9 5,944.5 5,240.7
Currency translation adjustment
and other 163.4 196.0 31.7
Employee benefit trust (1,169.8) (749.3) (690.0)
Common stock in treasury,
at cost: 1995-48,048,739;
1994-52,209,682;
1993-35,284,538 (1,615.4) (1,752.7) (1,242.5)
- ----------------------------------------------------------------------------
Total shareholders' equity 5,506.6 4,323.9 3,865.5
- ----------------------------------------------------------------------------
Total liabilities and
shareholders' equity $12,729.3 $11,098.5 $ 9,330.9
- ----------------------------------------------------------------------------
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
Consolidated Statement of Cash Flows
Pfizer Inc and Subsidiary Companies
Year ended December 31
- ----------------------------------------------------------------------------
(millions of dollars) 1995 1994 1993
- ----------------------------------------------------------------------------
Operating Activities
Net income $1,572.9 $ 1,298.4 $ 657.5
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Loss on sale-discontinued
operations 3.0 - -
Depreciation and amortization of
intangibles 374.0 292.0 258.2
Divestitures, restructuring and
unusual items - - 740.6
Deferred taxes (12.9) 32.6 (336.1)
Other 74.2 (5.9) 22.4
Changes in assets and
liabilities, net of effect of
businesses acquired and divested:
Accounts receivable (290.2) (160.7) (160.8)
Inventories (24.6) (110.8) (142.3)
Prepaid and other assets (170.7) (11.5) (44.8)
Accounts payable and accrued
liabilities 320.4 167.9 30.5
Income taxes payable 87.5 121.3 227.9
Other deferred items (112.2) (134.8) 9.9
- ----------------------------------------------------------------------------
Net cash provided by operating
activities 1,821.4 1,488.5 1,263.0
- ----------------------------------------------------------------------------
Investing Activities
Acquisitions, net of cash acquired (1,520.9) - -
Purchases of property, plant and
equipment (696.3) (671.5) (634.2)
Proceeds from sales of businesses - - 241.2
Purchases of short-term investments (2,610.4) (1,355.9) (739.6)
Proceeds from redemptions of
short-term investments 2,184.6 1,244.8 846.8
Purchases of long-term investments (151.0) (162.1) (175.9)
Purchases and redemptions of
short-term investments by
financial subsidiaries (30.1) 43.4 (21.3)
Decrease in loans and long-term
investments by financial
subsidiaries 330.3 20.7 167.3
Other investing activities 151.0 40.3 118.8
- ----------------------------------------------------------------------------
Net cash used in investing activities (2,342.8) (840.3) (196.9)
- ----------------------------------------------------------------------------
Financing Activities
Proceeds from issuances of
long-term debt 502.3 39.8 6.4
(Decrease)/increase in short-term
debt (444.3) 1,030.8 (70.1)
Stock option transactions 205.0 64.2 42.7
Purchases of common stock (108.5) (511.2) (1,019.6)
Cash dividends paid (658.5) (594.6) (536.1)
Other financing activities (15.1) 32.9 9.7
- ----------------------------------------------------------------------------
Net cash (used in)/provided by
financing activities (519.1) 61.9 (1,567.0)
- ----------------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents (14.7) 19.0 (26.8)
- ----------------------------------------------------------------------------
Net (decrease)/increase in cash and
cash equivalents (1,055.2) 729.1 (527.7)
Cash and cash equivalents at
beginning of year 1,458.5 729.4 1,257.1
- ----------------------------------------------------------------------------
Cash and cash equivalents at end of year $403.3 $ 1,458.5 $ 729.4
- ----------------------------------------------------------------------------
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
#
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
Significant Accounting Policies
The consolidated financial statements include the accounts of Pfizer Inc and all
significant subsidiaries (the "Company"). Material intercompany transactions are
eliminated. Certain reclassifications have been made to the 1994 and 1993
financial statements to conform to the 1995 presentation, including
classification of the food science business as a discontinued operation in the
statement of income. See the footnote "Discontinued Operations" on page 55.
The preparation of the consolidated financial statements requires management to
make estimates and assumptions that affect reported amounts and disclosures in
these financial statements. Actual results could differ from those estimates.
The Company is subject to certain risks and uncertainties as a result of
changes in the health care environment, competition, foreign exchange and tax
reform as discussed in "Prospective Information" beginning on page 36.
Cash equivalents consist primarily of demand deposits, certificates of deposit
and certain time deposits with maturities of three months or less at the date of
purchase. Certain items which meet the definition of cash equivalents but are
part of a larger pool of investments are included in Short-term investments.
Inventories are valued at cost or market, whichever is lower. Except as noted
below, raw materials and supplies are valued at average or latest actual costs
and finished goods and work in process at average actual costs. Inventories
valued utilizing the last-in, first-out (LIFO) method represent approximately
15% of worldwide inventories at December 31, 1995 and consist of substantially
all of the Company's U.S.-sourced pharmaceuticals as well as a portion of the
animal health inventories. The estimated replacement cost for these inventories
is not materially different from the LIFO value.
Property, plant and equipment are recorded at cost. Significant improvements are
capitalized. In general, the straight-line method of depreciation is used for
financial reporting purposes and accelerated methods are used for U.S. and
certain foreign tax reporting purposes.
Foreign currency translation into U.S. dollars for the assets and liabilities of
most of the Company's international subsidiaries is accomplished using current
exchange rates with resulting translation adjustments recorded in Shareholders'
equity. Exchange gains and losses on hedges of foreign net investments and on
intercompany balances of a long-term investment nature are also recorded in
Shareholders' equity. International subsidiaries and branches operating in
highly inflationary economies translate non-monetary assets at historical rates,
while net monetary assets are translated at current rates, with the resulting
translation adjustments included in net income.
The provision for taxes on income does not include a provision for U.S.
income taxes on international subsidiaries' unremitted earnings which, for
the most part, are expected to be reinvested overseas. The Company intends to
remit a portion of future earnings. To the extent that the parent company
receives such foreign earnings as dividends, foreign taxes paid on those
earnings will generate tax credits which substantially offset the related U.S.
income taxes. The Omnibus Budget Reconciliation Act of 1993 imposed a limitation
on the tax credit allowed to the Company for U.S. taxes on income earned in
Puerto Rico for tax years beginning after December 31, 1993. As a result, taxes
have been provided to the extent required by this change in law.
Goodwill and other intangibles are recorded at cost. Amounts arising from
acquisitions accounted for as purchases subsequent to 1970 are amortized over
various periods not exceeding 40 years. Other intangibles are included in
Other assets, deferred taxes and deferred charges in the Consolidated Balance
Sheet. When events or changes in circumstances occur that indicate that the
carrying amount of goodwill and other intangibles may not be recoverable, the
Company assesses the recoverability from future operations using undiscounted
cash flows and measures the impairment, if any, using discounted cash flows.
Advertising production costs are expensed as incurred while costs related to
space in publications or radio or television time are deferred and expensed the
first time the advertising occurs. Advertising expense was $687.5, $609.2 and
$621.9 million for 1995, 1994 and 1993, respectively.
Common stock and per share data for 1994 and 1993 have been restated to reflect
the 1995 two-for-one stock split. See the footnote "Common Stock" on page 53.
Consolidated International Subsidiaries
Subsidiaries operating outside the U.S. generally are included in the
consolidated financial statements on a fiscal year basis ending November 30.
Substantially all the international subsidiaries' unremitted earnings are free
from legal or contractual restrictions. Additional information is shown on page
41.
Net exchange losses included in Other deductions-net were $13.8, $1.5 and
$40.0 million in 1995, 1994 and 1993, respectively.
Changes in the currency translation adjustment included in Shareholders' equity
were as follows:
(millions of dollars) 1995 1994 1993
- ----------------------------------------------------------------------------
Currency translation
adjustment January 1 $194.0 $ 31.7 $ 45.3
Translation adjustments and hedges 12.3 161.8 (92.6)
Income taxes allocated to
translation adjustments and hedges .3 .5 .9
Transfer to income statement on sale
or liquidation of businesses - - 78.1
- ----------------------------------------------------------------------------
Currency translation adjustment
December 31 $206.6 $194.0 $ 31.7
- ----------------------------------------------------------------------------
Investments in Debt and Equity Securities
In 1994, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and Equity Securities.
As of December 31, 1995 and 1994, the status of the securities accounted for
under SFAS No. 115 was as follows:
Amortized Cost
------------------------------------------------------------
(millions of dollars) 1995 1994
------------------------------------------------------------
Held-to-maturity:
Corporate debt $ 682.2 $381.5
Certificates of deposit 350.3 234.7
Municipals 221.6 88.6
U.S. government
agencies 56.4 28.2
Foreign governments 51.1 51.8
Commercial paper 48.0 91.0
Mortgage-backed 30.4 33.4
------------------------------------------------------------
Total $1,440.0 $909.2
------------------------------------------------------------
As of December 31, 1995 and 1994, the aggregate fair value of the
held-to-maturity securities was $1,440.2 and $900.7 million, respectively. The
gross unrealized gains and losses by type of security were not material.
Amortized Fair Gross Unrealized
----------------
(millions of dollars) Cost Value Gains Losses
----------------------------------------------------------------------
Available-for-sale: Equity
securities
1995 $67.7 $109.5 $49.6 $ (7.8)
1994 56.7 60.1 18.8 (15.4)
----------------------------------------------------------------------
The above securities are reflected in the Consolidated Balance Sheet as follows:
(millions of dollars) 1995 1994
-------------------------------------------------------------------
Cash and cash equivalents $ 153.2 $ 90.0
Short-term investments 1,108.7 560.1
Long-term loans and investments 287.6 319.2
-------------------------------------------------------------------
The contractual maturities of the held-to-maturity securities as of December 31,
1995 were as follows:
Years
---------------------------------------
Over 1 Over 5
(millions of dollars) Within 1 to 5 to 10 Over 10 Total
- --------------------------------------------------------------------------
Corporate debt $ 572.0 $ 82.3 $20.1 $7.8 $ 682.2
Certificates of
deposit 332.8 17.5 - - 350.3
Municipals 201.6 20.0 - - 221.6
U.S. government
agencies 56.4 - - - 56.4
Foreign
governments 51.1 - - - 51.1
Commercial
paper 48.0 - - - 48.0
- --------------------------------------------------------------------------
Subtotal $1,261.9 $119.8 $20.1 $7.8 1,409.6
- --------------------------------------------------------------------------
Mortgage-backed 30.4
- --------------------------------------------------------------------------
Total $1,440.0
- --------------------------------------------------------------------------
Financial Subsidiaries
Combined financial data/segment information as of November 30, 1995, 1994 and
1993 applicable to the Company's financial subsidiaries, consisting of Pfizer
International Bank Europe (PIBE) and a small captive insurance company, was as
follows:
Condensed Balance Sheet
(millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------------
Cash and interest-bearing deposits $ 13.5 $ 285.2 $ 222.2
Eurosecurities and securities
purchased under a resale
agreement 34.0 3.8 46.8
Loans, net 433.2 766.4 794.1
Other assets 7.6 13.2 10.3
- --------------------------------------------------------------------------
Total assets $488.3 $1,068.6 $1,073.4
- --------------------------------------------------------------------------
Certificates of deposit and
other liabilities $ 85.4 $ 184.5 $ 166.5
Deferred income - 13.0 26.2
Shareholders' equity 402.9 871.1 880.7
- --------------------------------------------------------------------------
Total liabilities and
shareholders' equity $488.3 $1,068.6 $1,073.4
- --------------------------------------------------------------------------
Condensed Statement of
Income
- --------------------------------------------------------------------------
(millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------------
Interest income $ 44.2 $ 49.2 $ 48.1
Interest expense (3.5) (4.6) (4.2)
Other (expense)/income-net (5.9) (12.0) 1.2
- --------------------------------------------------------------------------
Net income $ 34.8 $ 32.6 $ 45.1
- --------------------------------------------------------------------------
Investments of the banking subsidiary generally are held until maturity and
therefore, are recorded at amortized cost.
The 1995 data reflect a reduced loan portfolio effected to bring PIBE's balance
sheet into line with its business needs. PIBE continues to have S&P's highest
short-term rating of A1+.
In 1995, the Company adopted SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, which did not have a material effect on its financial
position or results of operations.
Financial Instruments and Concentrations of Credit Risk
Changes in the value of the U.S. dollar and other currencies affect the
Company's financial position and results of operations since the Company has
manufacturing operations in many countries and sells its products on a worldwide
basis. Changes in interest rates affect the Company's financial position and
results of operations as a result of its investments and borrowings. The Company
manages its foreign exchange and interest-rate risks through a variety of
techniques, including the use of foreign-currency and interest-rate contracts.
The Company does not leverage or trade derivative financial instruments.
Generally, gains and losses arising from the contracts used for foreign exchange
and interest-rate risk management are recognized in income simultaneously with
the net income effect of the related transactions generating such risks.
The aggregate notional amounts of the Company's foreign-currency and
interest-rate contracts were approximately as follows:
(millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------------
Foreign-currency contracts:
Forward contracts $1,888.0 $750.0 $420.0
Purchased options 497.0 150.0 180.0
Written options 74.0 - -
Swaps 559.0 90.0 -
Interest-rate contracts:
Swaps 874.0 275.0 200.0
- --------------------------------------------------------------------------
The Company enters into forward-exchange contracts to match local market
short-term assets and liabilities denominated in currencies other than the
functional currency. The Company's contracts generally have maturities of six
months or less. Changes in the fair value of forward-exchange contracts are
included in Other deductions-net, together with foreign exchange gains and
losses.
The Company purchases currency options to hedge anticipated inventory purchases
and sales. The currency options are reported at cost which is amortized to
operations on a straight-line basis through the expected inventory delivery
date. Unrealized gains at that date are deferred as a reduction of inventory
cost and recognized in net income as sales occur. The Company's currency options
have maturities of up to two years.
The U.S. dollar equivalent notional amounts of the significant foreign currency
forward contracts and purchased options were as follows:
(millions of dollars) 1995 1994
- --------------------------------------------------------------------------
Commitments to sell foreign currencies:
U.K. pounds $644.9 $ 61.3
French francs 237.6 34.4
Belgian francs 113.7 8.2
Irish punt 104.3 48.6
German marks 67.1 29.3
Japanese yen 39.6 107.2
Norwegian kroner 36.4 14.0
Commitments to purchase foreign currencies:
U.K. pounds 283.1 131.8
German marks 79.1 55.2
Japanese yen 39.1 -
Irish punt 34.8 91.8
Purchased options:
Japanese yen 231.0 150.0
German marks 104.0 -
French francs 87.0 -
Belgian francs 56.0 -
- --------------------------------------------------------------------------
The commitments to sell and purchase foreign currencies and purchased options
are primarily in exchange for U.S. dollars.
During 1995, the Company wrote Japanese yen call options with terms identical to
previously purchased put options. Both options are reported at market value and
any market value changes are reported in Other deductions-net. Due to the fact
that these positions effectively offset, there is no net impact on earnings.
Interest-rate swap contracts are used to manage interest-rate risk on assets and
liabilities and to lower the Company's borrowing cost. The differential to be
paid or received under the contracts is accrued over the lives of the contracts
as interest rates change. Such amounts are included in Other deductions-net.
At December 31, 1995, the interest-rate swap contracts include a two-year
Japanese yen denominated contract with a notional principal amount of $350
million. This contract effectively converted the Company's Japanese
yen-denominated short-term floating-rate debt (based on the yen London Interbank
Offered Rate [LIBOR]-0.5% at December 31, 1995) into 1.3% fixed-rate debt.
At December 31, 1994, PIBE had contracts of $200 million to convert certain
floating-rate assets to fixed-rate assets. The Company sold the right to receive
the fixed-rate payments under the contracts totaling $200 million in order to
reduce counterparty credit risk. Income on this transaction was deferred and
amortized over the life of the swap contracts, all of which expired in 1995.
Additionally, a contract of $50 million that matured early in 1995 converted
certain fixed-rate assets of PIBE into floating-rate assets based on U.S. dollar
LIBOR.
Currency swap contracts are used to manage foreign exchange risk on foreign
currency denominated assets and liabilities with the differential to be paid or
received under the agreements accrued over the lives of the contracts as foreign
exchange gains and losses. Such amounts are included in Other deductions-net.
Currency swap contracts are reported net in the balance sheet.
In 1995, in connection with a sale-and-repurchase financing, the Company entered
into an interest-rate swap and a currency swap to effectively convert a U.K.
sterling liability from fixed rate to U.S. dollar variable rate for a period of
five years. The notional amount of the U.K. sterling denominated interest-rate
swap is $499 million and involves the exchange of a 7.3% fixed rate for a
variable rate (based on U.K. sterling LIBOR-6.5% at December 31, 1995). The
amount of the currency swap is $499 million and involves the exchange of the
U.K. sterling variable rate for U.S. dollar variable rate (based on U.S. dollar
LIBOR-5.9% at December 31, 1995), with the effective payment of the principal
amount in U.S. dollars at maturity.
At December 31, 1995 and 1994, the Company had other currency swap contracts
with notional amounts of approximately $60 and $90 million outstanding,
respectively, maturing through 1997. Such contracts effectively convert
certain PIBE fixed-rate (6.8% in 1995, 6.4% in 1994) foreign currency assets
into floating-rate (based on U.S. dollar LIBOR-6.0% in 1995, 5.8% in 1994)
U.S. dollar-denominated assets.
The Company periodically reviews the credit quality of financial institutions
which are counterparties to its foreign-currency and interest-rate contracts and
does not expect any loss from the failure of such institutions to perform under
the contracts. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral from its customers.
At December 31, 1995, the Company had no significant concentrations of credit
risk related to financial instruments.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair values of
financial instruments:
For short-term financial instruments, the carrying amount approximates the fair
value because of the short maturities of those instruments. For loans, the
carrying amount approximates the fair value because of the short reset period.
Quoted market prices or dealer quotes for the same or similar instruments were
used for certain long-term interest-bearing deposits and investments, long-term
debt, forward-exchange contracts and currency options.
Interest-rate and currency-swap agreements have been valued by using the
estimated amount that the Company would receive or pay to terminate the swap
agreements at the reporting date based on broker quotes, taking into account
current interest rates and the current creditworthiness of the swap
counterparties.
The difference between the fair values and carrying values of the Company's
financial instruments is not material.
Property, Plant and Equipment
The major categories of property, plant and equipment and accumulated
depreciation are as follows:
(millions of dollars) 1995 1994 1993
- ---------------------------------------------------------------------
Land $95.1 $ 85.2 $ 81.8
Buildings 1,405.6 1,218.6 1,093.8
Machinery and equipment 2,345.3 2,108.4 1,897.8
Furniture, fixtures and other 1,100.0 940.2 812.8
Construction in progress 517.4 640.5 414.5
- ---------------------------------------------------------------------
5,463.4 4,992.9 4,300.7
Less: accumulated depreciation 1,990.8 1,919.7 1,668.2
- ---------------------------------------------------------------------
$3,472.6 $3,073.2 $2,632.5
- ---------------------------------------------------------------------
Long-Term Debt
Long-term debt, exclusive of current maturities of $277.1, $6.5 and $3.6 million
in 1995, 1994 and 1993, respectively, is summarized as follows:
(millions of dollars) 1995 1994 1993
- -----------------------------------------------------------------------
Repurchase Agreement Obligation $499.0 $ - $ -
7 1/8% Notes due 1996 - 250.0 250.0
6 1/2% Notes due 1997 250.0 250.0 250.0
10 1/4% Industrial Development
Bonds due 2001 22.0 22.0 22.0
7% Solid Waste Disposal Facilities
Revenue Bonds due 2025 18.0 18.0 -
Other borrowings and mortgages 44.0 64.2 48.5
- -----------------------------------------------------------------------
$833.0 $604.2 $570.5
- -----------------------------------------------------------------------
In 1995, the Company sold securities for $499 million with an obligation to
repay the same principal amount pursuant to a repurchase agreement maturing in
December 2000. In addition, the $250 million of 7 1/8% Notes due 1996 were
reclassified from Long-term debt to Short-term borrowings in 1995.
Long-term debt maturities for the years 1997 through 2000, are $260.7, $3.3,
$4.0 and $499.8 million, respectively.
The effective weighted average interest rate on short-term borrowings and
long-term debt outstanding as of December 31, 1995, 1994 and 1993 was 5.5%, 6.0%
and 5.1%, respectively.
At December 31, 1995, the Company had approximately $1.2 billion in major unused
lines of credit.
During 1995, 1994 and 1993, respectively, the Company incurred interest costs of
$204.9, $141.6 and $120.5 million, including $12.4, $14.7 and $14.0 million
which was capitalized. Interest paid was approximately $175.0, $106.9 and
$122.2 million in 1995, 1994 and 1993, respectively.
Other Deductions-Net
Other deductions-net are summarized in the following table:
(millions of dollars) 1995 1994 1993
- ------------------------------------------------------------------
Interest income $(157.7) $(123.0) $(163.5)
Interest expense 192.5 126.9 106.5
Amortization of goodwill
and other intangibles 45.6 13.8 13.3
Other, net 180.6 96.7 103.6
- ------------------------------------------------------------------
Other deductions-net $ 261.0 $ 114.4 $ 59.9
- ------------------------------------------------------------------
In 1995, Other, net included approximately $57 million of net pre-tax income
related to the completion of all appeals in a patent infringement case with
SciMed Life Systems, Inc., a provision for various litigation issues and pre-tax
charges of approximately $53 million that resulted from decisions to withdraw
from a product line and to modify certain distribution relationships.
Divestitures, Restructuring and Unusual Items
Income before taxes for 1993 included charges of approximately $745 million and
$56 million, which excludes approximately $11 million directly related to
discontinued operations, to cover a worldwide restructuring program, as well as
unusual items. Unusual items included the write-down of goodwill of
approximately $122 million which related to a business evaluation where it was
determined that revenue and profitability levels were not meeting previously
estimated levels and unamortized goodwill would not be recovered through future
cash flows of the business. Restructuring actions for the program included the
consolidation of manufacturing facilities, the demolition of buildings resulting
from the consolidation, reconfiguration and rehabilitation of remaining
facilities and the consolidation of distribution and administrative
infrastructures. It is expected that the 1993 program will be substantially
completed in 1996.
The following table reflects the status of the 1993 restructuring charges by
component:
1993 Balance
Restructuring Utilization December 31,
----------------------
(millions of dollars) charges 1993 1994 1995 1995
- --------------------------------------------------------------------------------
Employee severance
payments $220.3 $ 22.9 $ 22.9 $56.5 $118.0
Operating assets to
be sold/disposed of 211.7 61.5 44.3 28.1 77.8
Other charges 246.8 62.0 82.1 72.0 30.7
- --------------------------------------------------------------------------------
$678.8 $146.4 $149.3 $156.6 $226.5
- --------------------------------------------------------------------------------
There have been no reclassifications between the components of the reserve
presented in the preceding table. Other charges consist primarily of provisions
for closed facilities' costs, currency translation adjustments related to the
liquidation or disposal of businesses, administrative infrastructures and lease
and third-party contract termination costs which were previously presented as
separate captions.Write-downs of operating assets, which primarily involve
manufacturing rationalizations, are considered utilized and the reserve charged
when the asset is sold or otherwise disposed of by the Company.
In 1993, the Company sold its remaining interest of approximately 40% in
Minerals Technologies Inc. for gross proceeds of approximately $241 million. The
sale resulted in a pre-tax gain of approximately $60 million.
Taxes on Income
Income from continuing operations before taxes for U.S. and international
operations consisted of the following:
(millions of dollars) 1995 1994 1993
- -------------------------------------------------------------------------
United States $1,041.3 $1,056.8 $439.5
International 1,257.9 773.7 395.8
- -------------------------------------------------------------------------
Total income from continuing
operations before taxes $2,299.2 $1,830.5 $835.3
- -------------------------------------------------------------------------
The classification of items presented in the above table differs from that in
the geographic data table on page 41. The geographic data table displays
information by management organization, exclusive of financial subsidiaries, net
interest and corporate expenses. Income from continuing
operations before taxes in the above table is classified based on the location
of the operations of the Company.
The provision for taxes on income consisted of the following:
(millions of dollars) 1995 1994 1993
- -------------------------------------------------------------------------
United States
Taxes currently payable
Federal $341.6 $238.3 $264.1
State and local 41.2 14.4 65.6
Deferred income taxes (22.4) 35.2 (273.4)
- -------------------------------------------------------------------------
Tax provision 360.4 287.9 56.3
- -------------------------------------------------------------------------
International
Taxes currently payable 368.1 263.9 194.1
Deferred income taxes 9.5 (2.6) (62.7)
- -------------------------------------------------------------------------
Tax provision 377.6 261.3 131.4
- -------------------------------------------------------------------------
Total provision for taxes on income $738.0 $549.2 $187.7
- -------------------------------------------------------------------------
The provision for taxes on income shown in the previous table is classified
based on the location of the taxing authority, regardless of the location in
which the taxable income is generated. A provision for U.S. income taxes of
approximately $760 million has not been made on approximately $3.3 billion of
international subsidiaries' unremitted earnings as of December 31, 1995 which,
for the most part, are expected to be reinvested overseas.
The earnings of the Company's pharmaceutical subsidiary operating in Puerto
Rico are subject to taxes pursuant to an incentive grant effective through
December 31, 2002. Under this grant, the Company is partially exempt from
income, property and municipal taxes. The Omnibus Budget Reconciliation Act
of 1993 imposed a limitation on the tax credit allowed to the Company for
U.S. taxes on income earned in Puerto Rico for tax years beginning after
December 31, 1993. As a result, taxes have been provided to the extent
required by this change in law.
The major elements contributing to the difference between the U.S. statutory tax
rate and the consolidated effective tax rate were as follows:
(percentages) 1995 1994 1993*
- -----------------------------------------------------------------------
U.S. statutory tax rate 35.0 35.0 35.0
Effect of partially tax-exempt
operations in Puerto Rico (5.8) (9.9) (19.4)
Effect of reduced rates in Ireland (4.5) (2.6) (4.0)
Divestitures, restructuring and
unusual items-net - - 4.4
State and local taxes .9 1.2 4.3
R&D tax credit (.7) (1.1) (3.3)
All other-net 7.2 7.4 5.5
- -----------------------------------------------------------------------
Consolidated effective tax rate 32.1 30.0 22.5
- -----------------------------------------------------------------------
*Excluding the effect of divestitures, restructuring and unusual items-net, the
effects of partially tax-exempt operations in Puerto Rico and of reduced rates
in Ireland would have been approximately (10.0%) and (2.1%), respectively.
Deferred tax assets and liabilities, netted by jurisdiction, as of December 31,
1995, 1994 and 1993 are included in the Consolidated Balance Sheet as follows:
(millions of dollars) 1995 1994 1993
- ---------------------------------------------------------------------------
Current assets-Prepaid expenses,
taxes and other assets $ 468.9 $ 373.8 $ 435.3
Non-current assets-Other assets,
deferred taxes and deferred charges 254.8 336.2 305.1
Non-current liabilities-Deferred
taxes on income (166.1) (211.7) (189.4)
- ---------------------------------------------------------------------------
Net deferred tax asset $ 557.6 $ 498.3 $ 551.0
- ---------------------------------------------------------------------------
Temporary differences which give rise to a significant portion of deferred tax
assets and liabilities at December 31, 1995, 1994 and 1993 were as follows:
(millions of dollars) 1995 1994 1993
Deferred Tax Deferred Tax Deferred Tax
--------------------- --------------------- ----------------------
Assets Liabilities Assets Liabilities Assets Liabilities
- -----------------------------------------------------------------------------------------------
Prepaid/
deferred
items $236.5 $192.7 $ 157.8 $150.1 $ 149.4 $ 85.8
Inventories 245.1 71.0 185.5 67.3 143.1 31.9
Property,
plant and
equipment 43.1 372.5 31.5 322.1 30.9 304.8
Employee
benefits 277.2 100.0 207.4 127.7 206.8 129.1
Restructurings
and special
charge 214.5 - 280.3 - 377.9 -
Foreign tax
credit carry-
forwards 110.0 - 165.1 - 100.0 -
Other carry-
forwards 153.2 - 117.1 - 59.0 -
All other 105.6 60.8 76.0 27.4 82.3 23.1
- -----------------------------------------------------------------------------------------------
Subtotal 1,385.2 797.0 1,220.7 694.6 1,149.4 574.7
Valuation
allowance (30.6) - (27.8) - (23.7) -
- -----------------------------------------------------------------------------------------------
Total deferred
taxes $1,354.6 $797.0 $1,192.9 $694.6 $1,125.7 $574.7
- -----------------------------------------------------------------------------------------------
Net deferred
tax asset $557.6 $ 498.3 $ 551.0
- -----------------------------------------------------------------------------------------------
In 1994 and 1993, foreign tax credit carryforwards arose from dividends received
by the Company from foreign subsidiaries. These carryforwards expire through
1999.
A valuation allowance is provided when it is more likely that some portion
of the deferred tax assets will not be realized. The major component of the
valuation allowance relates to the uncertainty of realizing certain foreign
deferred tax assets.
The Internal Revenue Service (IRS) has completed its examination of the
Company's federal income tax returns for the years 1987 through 1989. As part of
this process, the Company received an examination report from the IRS in August
1995, requesting a response within 30 days, which sets forth the adjustments the
IRS is proposing for those years. The Company has filed a response protesting
the proposed adjustments and is awaiting communication from the IRS Appeals
Office. The proposed adjustments relate primarily to the tax accounting
treatment of certain swaps and related transactions undertaken by the Company in
1987 and 1988. These transactions resulted in the receipt of cash in those
years, which the Company duly reported as income for tax purposes. In 1989 (in
Notice 89-21), the IRS announced that it believed cash received in certain swap
transactions should be reported as income for tax purposes over the life of the
swaps, rather than when received. In the case of the Company, this would cause
some of the income to be reported in years subject to the Tax Reform Act of
1986. The IRS proposed adjustment involves approximately $72 million in federal
taxes for the years 1987 through 1989, plus interest. If the proposed adjustment
is carried through to the maturity of the transactions in 1992, an additional
tax deficiency of approximately $86 million, plus interest, would result. The
Company disagrees with the proposed adjustment and continues to believe that its
tax accounting treatment for the transactions in question was proper. The
Company is protesting and appealing the proposed adjustments. While it is
impossible to determine the final disposition, the Company is of the opinion
that the ultimate resolution of this matter should not have a material adverse
effect on the financial position or the results of operations of the Company.
In November 1994, Belgian tax authorities notified Pfizer Research and
Development Company N.V./S.A. (PRDCO), an indirect wholly owned subsidiary of
the Company, of a proposed adjustment to the taxable income of PRDCO for fiscal
year 1992. The proposed adjustment arises from an assertion by the Belgian tax
authorities of jurisdiction with respect to income resulting primarily from
certain transfers of property by non-Belgian subsidiaries of the Company to the
Irish branch of PRDCO. In January 1995, PRDCO received an assessment from the
tax authorities for additional taxes and interest of approximately $432 million
and $97 million, respectively, relating to these matters for the fiscal year
1992. In January 1996, PRDCO received an assessment from the tax authorities,
for fiscal year 1993, for additional taxes and interest of approximately $86
million and $18 million, respectively. The new assessment arises from the same
assertion by the Belgian tax authorities of jurisdiction with respect to all
income of the Irish branch of PRDCO. Based upon the relevant facts regarding the
Irish branch of PRDCO and the provisions of the Belgian tax laws and the written
opinions of outside counsel, the Company believes that the assessments are
wholly without merit.
The Company believes that its accrued tax liabilities are adequate for all open
years.
The Company made income tax payments of approximately $646.1, $414.1 and $323.6
million during 1995, 1994 and 1993, respectively.
Pension Plans
The Company and its subsidiaries have pension plans covering substantially all
eligible employees on a contributory or non-contributory basis. The components
of net periodic pension cost for 1995, 1994 and 1993 are as follows:
(millions of dollars) 1995 1994 1993
- -------------------------------------------------------------------------
Service cost-benefits earned
during the period $ 81.5 $ 79.2 $ 60.2
Interest cost on projected
benefit obligations 131.1 115.8 107.5
Actual return on plan assets (415.0) (32.8) (197.4)
Net amortization and deferral 290.8 (88.4) 71.4
- -------------------------------------------------------------------------
Net periodic pension cost $ 88.4 $ 73.8 $ 41.7
- -------------------------------------------------------------------------
Rate assumptions used in accounting for the defined benefit plans were:
(percentages) 1995 1994 1993
- --------------------------------------------------------------------------
U.S. Plans
Discount rate 7.5 8.5 7.5
Rate of increase in salary levels 5.5 5.5 5.5
Expected long-term rate
of return on plan assets 10.0 9.0 9.0
International Plans (Weighted Average)
Discount rate 6.4 7.1 6.7
Rate of increase in salary levels 4.3 4.6 4.4
Expected long-term rate of
return on plan assets 8.1 8.1 8.5
- --------------------------------------------------------------------------
As a result of changes in long-term interest rates, the Company modified its
assumed discount rate for U.S. plans to 7.5% and 8.5% in 1995 and 1994,
respectively. The effect of these changes resulted in a net increase in
projected benefit obligations of $128.9 million for 1995 and a net decrease of
$117.2 million for 1994.
As of December 31, 1995, 1994 and 1993, the funded status of the Company's
pension plans was as follows:
(millions of dollars) 1995 1994 1993
- -------------------------------------------------------------------------------
Actuarial present value of
accumulated benefit obligations:
Vested $(1,557.9) $(1,312.0) $(1,290.4)
Non-vested (215.8) (133.3) (99.8)
- -------------------------------------------------------------------------------
Total (1,773.7) (1,445.3) (1,390.2)
- -------------------------------------------------------------------------------
Effect of future salary increases (288.0) (258.9) (204.4)
Projected benefit obligations (2,061.7) (1,704.2) (1,594.6)
Plan assets at fair value 2,167.9 1,773.6 1,774.9
- -------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligations 106.2 69.4 180.3
Unrecognized overfunding at date
of adoption (17.8) (26.9) (29.6)
Unrecognized net losses 129.1 162.6 140.8
Unrecognized prior service costs 94.7 118.1 61.5
Minimum liability adjustment (180.3) (36.3) (21.1)
- -------------------------------------------------------------------------------
Net pension asset included in
Consolidated Balance Sheet $131.9 $ 286.9 $ 331.9
- -------------------------------------------------------------------------------
For 1995 and 1994, the preceding table includes accumulated benefit
obligations of $619.6 and $172.6 million, respectively, and assets at fair
value of $326.0 and $5.5 million, respectively, primarily related to
partially funded international plans. The funding policy for the
international plans conforms to local governmental and tax requirements. In
1995, a previously fully funded international plan became partially funded
due primarily to a decrease in the discount rate.
Benefits under defined benefit plans generally are based on years of service
and employee career earnings. Participants become fully vested after as few
as five years of employment.
The Company's funding policy for U.S. plans generally is to contribute annually
into trust funds at a rate intended to remain at a level percentage of
compensation for covered employees. Since the major U.S. plan is overfunded, the
Company's last contribution to this plan was made in 1992.
The plans' assets are invested primarily in stocks, bonds and short-term
investments. At December 31, 1995, the major U.S. plan held approximately 3.2
million shares of the Company's common stock with a fair value of $200.3
million. Dividends of approximately $4 million were paid on such shares in
1995.
Savings and Investment Plans
The Company maintains voluntary savings and investment plans for most
employees in the U.S., Puerto Rico, the U.K. and Ireland. Within prescribed
limits, the Company bases its contributions to the plans on employee
contributions. For 1995, 1994 and 1993, Company contributions to the U.S. and
Puerto Rican plans amounted to $33.3, $29.8 and $28.8 million, respectively.
Postretirement Benefits Other Than Pensions
The Company has defined benefit postretirement plans that provide medical and
life insurance benefits for retirees and eligible dependents. Employees become
eligible for these benefits if they meet minimum age and service requirements
and are eligible for retirement benefits. The Company reserves the right to
modify or terminate these plans. The plans are not funded.
The components of the 1995, 1994 and 1993 expense were as follows:
(millions of dollars) 1995 1994 1993
- -----------------------------------------------------------------------
Service cost-benefits earned
during the period $5.2 $ 5.8 $ 5.0
Interest cost on the accumulated
obligation 22.1 21.7 20.2
Net amortization and deferral (24.4) (24.2) (24.4)
- ------------------------------------------------------------------------
Net periodic postretirement expense $2.9 $ 3.3 $ .8
- ------------------------------------------------------------------------
The accumulated postretirement benefit obligation recognized in the December 31,
1995, 1994 and 1993 Consolidated Balance Sheets consists of:
(millions of dollars) 1995 1994 1993
- ---------------------------------------------------------------------------
Retirees $196.7 $192.1 $178.7
Fully eligible active plan participants 31.8 35.1 47.1
Other active plan participants 61.3 52.7 57.0
- ---------------------------------------------------------------------------
Accumulated postretirement benefit
obligation 289.8 279.9 282.8
Unrecognized prior service cost 132.9 157.2 181.6
Unrecognized net gain/(loss) 3.6 (4.5) (21.1)
- ---------------------------------------------------------------------------
Recorded obligation $426.3 $432.6 $443.3
- ---------------------------------------------------------------------------
An average increase of 10% in the cost of covered health care benefits was
assumed for 1996 and is projected to decrease to 5.2% after 9 years and to
then remain at that level. A 1% increase in the health care cost trend rate
would have increased the accumulated postretirement benefit obligation as of
December 31, 1995 by $15.8 million and the total of service and interest cost
by $1.3 million. The discount rates used to estimate the accumulated
postretirement benefit obligation were 7.5%, 8.5% and 7.5% at December 31,
1995, 1994 and 1993, respectively.
In 1995, the Company adopted SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, for its postretirement benefit
plans outside the U.S. The effect of adoption was not material to the financial
position or results of operations of the Company.
Postemployment Benefits
The Company adopted SFAS No. 112, Employers' Accounting for Postemployment
Benefits effective January 1, 1994. This statement pertains to benefits provided
to former or inactive employees after employment but before retirement. Because
the Company's past accounting practices were in compliance with this statement,
no cumulative effect adjustment was required.
Common Stock
In June 1995, the Company effected a two-for-one stock split in the form of a
100% stock dividend on its common stock. The par value decreased from $.10 to
$.05 a share. All historical share and per share data have been restated to
reflect the two-for-one stock split. The stock split followed a vote by the
shareholders to increase the Company's authorized common shares to 1.5 billion
shares from 750 million.
The 1993 program to purchase 40 million shares of common stock in the open
market or in privately negotiated transactions was completed during 1994.
Earnings per Common Share
Earnings per common share are computed by dividing net income by the weighted
average number of common shares and common share equivalents outstanding. The
latter consists of shares issuable upon exercise of stock options. The
information necessary for the calculation of earnings per common share for the
years ended December 31, 1995, 1994 and 1993, is as follows:
(millions of dollars and shares
except per share amounts) 1995 1994 1993
- --------------------------------------------------------------------------------
Income from continuing operations $1,554.2 $1,276.7 $645.0
Discontinued operations-net of
taxes on income 18.7 21.7 12.5
- --------------------------------------------------------------------------------
Net income $1,572.9 $1,298.4 $657.5
- --------------------------------------------------------------------------------
Weighted average number of
common shares outstanding 614.5 611.6 631.0
Common share equivalents 15.0 8.8 9.8
- --------------------------------------------------------------------------------
Total 629.5 620.4 640.8
- --------------------------------------------------------------------------------
Earnings per common share
Income from continuing operations $2.47 $2.05 $1.01
Discontinued operations-net of
taxes on income .03 .04 .02
- --------------------------------------------------------------------------------
Net income $2.50 $2.09 $1.03
- --------------------------------------------------------------------------------
Preferred Stock Purchase Rights
Preferred Stock Purchase Rights were granted in 1987. The rights are not
exercisable until either certain changes in ownership of the Company occur or an
announcement of a tender offer for at
least 30% of the Company's common stock is made. If the rights become
exercisable, separate certificates evidencing the rights will be distributed and
each right will entitle the holder to purchase from the Company a new series of
preferred stock at a predefined price. The rights also contain an option to
purchase shares in a change-of-control situation. The preferred stock, in
addition to a preferred dividend and liquidation right, will entitle the holder
to vote, on a pro rata basis, with the Company's common stock.
The rights are redeemable by Pfizer at a fixed price until 10 days, or longer as
determined by the Board, after certain defined events, or at any time prior to
the expiration of the rights on October 5, 1997, if such events do not occur.
Through December 31, 1995, the Company had reserved 1.9 million preferred shares
as issuable pursuant to these rights. At the present time, the rights have no
dilutive effect on the earnings per common share calculation.
Employee Benefit Trust
In 1993, the Company sold 20 million shares of treasury stock to the Pfizer Inc.
Grantor Trust (the Trust) in exchange for a promissory note valued at
approximately $600 million at the date of sale. The Trust is being used
primarily to fund future obligations for previously approved Company benefit
plans over its 15-year term. The amount, representing unearned employee
benefits, is recorded as a deduction from shareholders' equity and is reduced as
employee benefits are satisfied.
In 1995 and 1994, .8 and .6 million shares, respectively, were released from the
Trust to satisfy exercised employee stock options and the Company's obligation
under other employee benefit plans. Compensation costs related to the other
employee benefit plans are recorded at fair market value at the date the shares
are released.
Stock Option Plans and Performance Awards
Under the Stock and Incentive Plan, the Company may grant options to any
employee, including officers, to purchase common stock at the market price on
the date an option is granted. The options may be exercised subject to continued
employment and certain other conditions. At December 31, 1995, options for
29,692,383 shares were exercisable. The Plan also provides for stock
appreciation rights, stock awards or performance unit awards.
In 1994, under the terms of the Stock and Incentive Plan, restricted stock
awards were made to several key employees. Restrictions generally expire over
a three-year period from the date of grant. Under the award, 29,984 shares
were outstanding at December 31, 1995 with 2,500 shares issued during the
year.
In 1993, the shareholders approved amendments to the Plan for an additional 22
million shares to be made available for future grants of options. The following
table summarizes information relative to the Plan:
(shares) 1995 1994 1993
---------------------------------------------------------------------------
Under option January 1 44,242,410 38,588,634 35,720,378
Granted (per share:
$49.00 in 1995;
$28.13 to $34.88 in 1994;
$31.50 in 1993) 7,052,818 9,918,036 6,428,118
Exercised (per share:
$12.13 to $49.00 in 1995;
$9.13 to $32.63 in 1994;
$7.00 to $32.63 in 1993) (7,548,762) (3,562,050) (2,904,320)
Cancelled-available for
future grants (842,249) (697,552) (611,548)
Cancelled-not available for
future grants - (4,658) (43,994)
---------------------------------------------------------------------------
Under option December 31
(per share:
$15.13 to $49.00 in 1995;
$12.13 to $40.50 in 1994;
$9.13 to $40.50 in 1993) 42,904,217 44,242,410 38,588,634
---------------------------------------------------------------------------
Available for grant
December 31 3,574,593 9,785,162 19,005,646
---------------------------------------------------------------------------
The Performance-Contingent Share Award Program (the Program), established in
1993, provides executives and other key employees with the right to earn awards
payable in shares of the Company's common stock with the actual payout
determined using two performance criteria. Actual issuance of shares occurs when
the performance period is completed and the criteria measured. The Program
provides for up to 20 million shares to be awarded. In 1995, 46,080 shares were
issued under the Program. At December 31, 1995, executives and other key
employees had the right to earn up to approximately 1.5 million shares.
Compensation cost related to the Program amounted to $15.4 and $7.5 million in
1995 and 1994, respectively.
Lease Commitments
Rent expense, net of sublease rentals, for the years ended December 31, 1995,
1994 and 1993 amounted to approximately $118.1, $94.4 and $87.2 million,
respectively. Total future minimum
rental commitments under all non-cancellable leases for the years 1996 through
2000 and thereafter are approximately $28.2, $22.6, $16.7, $8.8, $6.8 and $185.9
million, respectively.
Under the more significant lease agreements, the Company must either pay
directly for taxes, insurance, maintenance and other operating expenses or
pay higher rentals when such expenses increase.
Acquisitions
n In January 1995, the Company acquired the capital stock of certain
subsidiaries of SmithKline Beecham plc operating solely in the animal health
business and certain net assets used in the animal health business from other
SmithKline Beecham plc subsidiaries (collectively, SBAH) for approximately $1.5
billion, including direct costs of the acquisition. The acquisition was
substantially financed at closing by the issuance of commercial paper.
The Company's results of operations for 1995 include twelve months of SBAH's
activity in the U.S. and eleven months in international markets. The excess of
the purchase price over the estimated fair value of the tangible net assets
acquired has been allocated to identifiable intangibles of approximately $285
million and goodwill of approximately $790 million. The goodwill and
identifiable intangibles are being amortized on a straight-line basis over
periods of 10 to 40 years.
Sales of the SBAH business were approximately $644 million for 1994. Pro forma
net income and earnings per share for 1994 that reflect this acquisition as if
it had occurred as of the beginning of the period result in a negative impact of
approximately 2% on both reported amounts. Pro forma results include a period
comparable to 1995 as well as interest expense and amortization of goodwill and
other intangibles related to the acquisition. The pro forma results of
operations are not necessarily indicative of the results of operations that
would have occurred had the acquisition actually occurred as of the beginning of
the period nor are these results intended to be a projection of future
consolidated results of operations.
n In March 1995, the Company acquired NAMIC U.S.A. Corporation for
approximately 4.4 million shares of the Company's common shares in a stock
transaction valued at approximately $170 million, including direct costs of the
acquisition.
n In August 1995, the Company acquired Bain de Soleil skin care products from
the Procter & Gamble Company.
The results of operations of these acquired businesses have been included
subsequent to the respective dates of acquisition. Pro forma results of
operations that reflect these acquisitions as if they had occurred at the
beginning of the periods presented would not be materially different from the
reported amounts.
In 1994, the Company acquired:
n Certain assets of Flavor Technology Inc., a specialty flavors business, for
approximately $32 million. These assets are a part of the food science business
which is reported as a discontinued operation.
n Restiva Italiana S.p.A. for approximately $26 million. Restiva produces and
sells health and skin care products.
n Rovifarma, S.A. for approximately $24 million. Rovifarma is a Spanish
producer and distributor of over-the-counter products.
In 1993, the Company purchased Charwell Pharmaceuticals Limited, a
distributor of over-the-counter consumer health care products, for
approximately $41.5 million.
All acquisitions were recorded under the purchase method of accounting.
Discontinued Operations
In December 1995, the Company agreed to sell substantially all the net assets of
its food science business to Cultor Ltd., a publicly held international
nutrition company based in Finland, for approximately $350 million in cash. The
sale was completed in January 1996. Disposal of the remaining assets, which are
not material to the food science business, is expected to be completed over
several years. The food science business has been reported as a discontinued
operation.
The Company recorded a loss on disposal of the food science business of $3.0
million after provisions for direct transaction costs and estimated charges
including exit costs, employee severance benefits and professional fees.
Below is a summary of its operating results:
(millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Net sales $328.4 $304.0 $315.9
- --------------------------------------------------------------------
Income before provision for
taxes on income $ 30.9 $ 31.0 $ 16.1
Provision for taxes on income 9.2 9.3 3.6
- --------------------------------------------------------------------
Net income $21.7 $ 21.7 $ 12.5
- --------------------------------------------------------------------
At December 31, 1995, net assets of the food science business of approximately
$330 million were included in "Prepaid expenses, taxes and other assets."
Insurance
The Company maintains insurance coverage it believes to be adequate for its
needs. Under its insurance contracts, the Company usually accepts self-insured
retentions appropriate for the specific risks of its business.
Litigation
The Company is involved in a number of claims and litigations, including product
liability claims and litigations considered normal in the nature of its
businesses. These include suits involving various pharmaceutical and hospital
products that allege either reaction to or injury from use of the product.
As previously disclosed, numerous claims have been brought against the Company
and Shiley Incorporated, a wholly owned subsidiary, alleging either personal
injury from fracture of 60 DEGREES or 70 DEGREES Shiley Convexo-Concave (C/C)
heart valves, or anxiety that properly functioning implanted valves might
fracture in the future or personal injury from a prophylactic replacement of a
functioning valve.
In an attempt to resolve all claims alleging anxiety that properly functioning
valves might fracture in the future, the Company entered into a settlement
agreement in January 1992 in Bowling v. Shiley, et al., a case brought in the
United States District Court for the Southern District of Ohio, that establishes
a worldwide settlement class of people with C/C heart valves and their spouses,
except those who elect to exclude themselves. The settlement provides for a
Consultation Fund of $90 million to $140 million (depending on the number of
claims filed) from which valve recipients who make claims will receive payments
that are intended to cover their cost of consultation with cardiologists or
other health care providers with respect to their valves. The settlement
agreement establishes a second fund of at least $75 million to support C/C
valve-related research, including the development of techniques to identify
valve recipients who may have significant risk of fracture, and to cover the
unreimbursed medical expenses that valve recipients may incur for certain
procedures related to the valves. The Company's obligation as to coverage of
these unreimbursed medical expenses is not subject to any dollar limitation.
Following a hearing on the fairness of the settlement, it was approved by the
court on August 19, 1992. An appeal of the court's approval of the settlement
was dismissed on December 21, 1993, by the United States Court of Appeals for
the Sixth Circuit. A motion for rehearing en banc was denied on March 4, 1994,
and the U.S. Supreme Court denied a writ of certiorari on October 3, 1994. On
August 8, 1994, the Sixth Circuit dismissed an appeal from the denial of a
motion by the same appellants to vacate the judgment approving the settlement,
and the U.S. Supreme Court denied a writ of certiorari on January 9, 1995.
Another appeal to the Sixth Circuit by the same appellants regarding the denial
of their earlier motion to intervene is pending. It is expected that most of the
costs arising from the Bowling class settlement will be covered by insurance and
the proceeds of the sale of certain product lines of the Shiley businesses in
1992. Of approximately 900 implantees (and spouses of some of them) who opted
out of the Bowling settlement class, nine have cases pending; approximately 792
have been resolved; and approximately 100 have never filed a case or claim.
Several claims relating to elective reoperations of valve recipients are
currently pending. Some of these claims relate to elective reoperations covered
by the Bowling class settlement described above, and, therefore, the claimants
are entitled to certain benefits in accordance with the settlement. Such
claimants, if they irrevocably waive all of the benefits of the settlement, may
pursue separate litigation to recover damages in spite of the class settlement.
The Company is defending these claims.
Generally, the plaintiffs in all of the pending heart valve litigations
discussed above seek money damages. Based on the experience of the Company in
defending these claims to date, including available insurance and reserves, the
Company is of the opinion that these actions should not have a material adverse
effect on the financial position or the results of operations of the Company.
On September 30, 1993, Dairyland Insurance Co., a carrier providing excess
liability coverage ("excess carrier") in the early 1980s, commenced an action in
the California Superior Court in Orange County, seeking a declaratory judgment
that it was not obligated to provide insurance coverage for Shiley heart valve
liability claims. On October 8, 1993, Pfizer filed cross-complaints against
Dairyland and filed third-party complaints against 73 other excess carriers who
sold excess liability policies covering periods from 1978 to 1985, seeking
damages and declaratory judgments that they are obligated to pay for defense and
indemnity to the extent not paid by other carriers. Several such claims have
been resolved and the remainder are involved in pretrial discovery.
The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations. Under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA" or
"Superfund"), the Company has been designated as a potentially responsible party
by the United States Environmental Protection Agency with respect to certain
waste sites with which the Company may have had direct or indirect involvement.
Similar designations have been made by some state
environmental agencies under applicable state superfund laws. Such designations
are made regardless of the extent of the Company's involvement. There are also
claims that the Company may be a responsible party or participant with respect
to several waste site matters in foreign jurisdictions. Such claims have been
made by the filing of a complaint, the issuance of an administrative directive
or order, or the issuance of a notice or demand letter. These claims are in
various stages of administrative or judicial proceedings. They include demands
for recovery of past governmental costs and for future investigative or remedial
actions. In many cases, the dollar amount of the claim is not specified. In most
cases, claims have been asserted against a number of other entities for the same
recovery or other relief as was asserted against the Company. The Company is
currently participating in remedial action at a number of sites under federal,
state, local and foreign laws.
To the extent possible with the limited amount of information available at this
time, the Company has evaluated its responsibility for costs and related
liability with respect to the above sites and is of the opinion that the
Company's liability with respect to these sites should not have a material
adverse effect on the financial position or the results of operations of the
Company. In arriving at this conclusion, the Company has considered, among other
things, the payments that have been made with respect to the sites in the past;
the factors, such as volume and relative toxicity, ordinarily applied to
allocate defense and remedial costs at such sites; the probable costs to be paid
by the other potentially responsible parties; total projected remedial costs for
a site, if known; existing technology; and the currently enacted laws and
regulations. The Company anticipates that a portion of these costs and related
liability will be covered by available insurance.
Through the early 1970s, Pfizer (Minerals Division) and Quigley Company, Inc., a
wholly owned subsidiary, sold a minimal amount of one construction product and
several refractory products containing some asbestos. These sales were
discontinued thereafter. Although these sales represented a minor market share,
the Company has been named as one of a number of defendants in numerous
lawsuits. These actions, and actions related to the Company's sale of talc
products in the past, claim personal injury resulting from exposure to
asbestos-containing products, and nearly all seek general and punitive damages.
In these actions, the Company or Quigley is typically one of a number of
defendants, and both are members of the Center for Claims Resolution (the
"CCR"), a joint defense organization of twenty defendants that is defending
these claims. The Company and Quigley are responsible for varying percentages of
defense and liability payments for all members of the CCR. Prior to September
1990, the cases involving talc products were defended by the CCR, but the
Company is now overseeing its own defense of these actions. A number of cases
alleging property damage from asbestos-containing products installed in
buildings have also been brought against Pfizer.
On January 15, 1993, a class action complaint and settlement agreement were
filed in the United States District Court for the Eastern District of
Pennsylvania involving all personal injury claims by persons who have been
exposed to asbestos-containing products but who have not yet filed a personal
injury action against the members of the CCR. The settlement agreement
establishes a claims-processing mechanism that will provide historic settlement
values upon proof of impaired medical condition as well as claims-processing
rates over ten years. In addition, the shares allocated to the CCR members
eliminate joint and several liability. The court has determined that the
settlement is fair and reasonable. Subsequently, the court entered an injunction
enforcing its determination. An appeal from that injunction is pending in the
United States Court of Appeals for the Third Circuit.
At approximately the time it filed the future claims class action, the CCR
settled approximately 16,360 personal injury cases on behalf of its members
including Pfizer and Quigley. The CCR has continued to settle remaining and
opt-out cases and claims on a similar basis to past settlements. The total
pending number of cases as of December 31, 1995 is 14,305 asbestos cases
against Quigley; 5,764 asbestos cases against Pfizer Inc.; and 70 talc cases
against Pfizer Inc.
Costs incurred by the Company in defending the asbestos personal injury
claims and the property damage claims, as well as settlements and damage
awards in connection therewith, are largely insured against under policies
issued by several primary insurance carriers and a number of excess carriers.
The Company believes that its costs incurred in defending and ultimately
disposing of the asbestos personal injury claims, as well as the property
damage claims, will be largely covered by insurance policies issued by
carriers that have agreed to provide coverage, subject to deductibles,
exclusions, retentions and policy limits. In connection with the future
claims settlement, the defendants have commenced a third-party action against
their respective excess insurance carriers that have not agreed to provide
coverage seeking a declaratory judgment that (a) the future claims settlement
is fair and reasonable as to the carriers; (b) the carriers had adequate
notice of the future claims class settlement; and (c) the carriers are
obligated to provide coverage for asbestos personal injury claims. Based on
the Company's experience in defending the claims to date and the amount of
insurance coverage available, the Company is of the opinion that the actions
should not ultimately have a material adverse effect on the financial
position or the results of operations of the Company.
The United States Environmental Protection Agency-Region 1 and the Department of
Justice have informed the Company that the federal government is contemplating
an enforcement action arising primarily out of a December 1993 multimedia
environmental inspection, as well as certain state inspections, of the Company's
Groton, Connecticut facility.
The Company is engaged in discussions with the governmental agencies and does
not believe that an enforcement action, if brought, will have a material adverse
effect on the financial position or the results of operations of the Company.
The Company has been named, together with numerous other manufacturers of
brand name prescription drugs and certain companies that distribute brand
name prescription drugs, in suits in federal and state courts brought by
various groups of retail pharmacy companies. The federal cases consist
principally of a class action by retail pharmacies (including approximately
30 named plaintiffs)(the Federal Class Action), as well as additional actions
by approximately 3,500 individual retail pharmacies and a group of chain and
supermarket pharmacies (the "individual actions"). These cases, which have
been transferred to the United States District Court for the Northern
District of Illinois and coordinated for pretrial purposes, allege that the
defendant drug manufacturers violated the Sherman Act by unlawfully agreeing
with each other (and, as alleged in some cases, with wholesalers) not to
extend to retail pharmacy companies the same discounts allegedly extended to
mail order pharmacies, managed care companies and certain other customers,
and by unlawfully discriminating against retail pharmacy companies by not
extending them such discounts. On November 15, 1994, the federal court
certified a class (the Federal Class Action) consisting of all persons or
entities who, since October 15, 1989, bought brand name prescription drugs
from any manufacturer or wholesaler defendant, but specifically excluding
government entities, mail order pharmacies, HMOs, hospitals, clinics and
nursing homes. Fifteen manufacturer defendants, including the Company, have
agreed to settle the Federal Class Action subject to court approval. The
Company's share, pursuant to an Agreement as of January 31, 1996, is $31.25
million, payable in four annual installments without interest. The Company
continues to believe that there was no conspiracy, and specifically denies
liability in the Settlement Agreement, but has agreed to settle to avoid the
monetary and other costs of litigation. The Settlement was filed with the
Court on February 9, 1996. A hearing was held on February 14, and the
settlement was preliminarily approved and a final fairness hearing was set
for March 27. The Court has tentatively scheduled the Federal Class Action
for trial commencing May 7, 1996. No other action has been scheduled for
trial.In addition, class actions have been filed in state courts, alleging
injury to consumers as well as retail pharmacies from the failure to give
discounts to retail pharmacy companies. Both a consumer class and a retailer
class have been certified in separate California actions. Consumer class
actions filed in Colorado and Washington were dismissed, and are now on
appeal. The Company was dismissed from a consumer class action in Wisconsin,
but a determination of the finality of that dismissal is pending. Consumer
class actions are also pending in Alabama, Arizona, Maine, Michigan and New
York. Retailer class actions are also pending in Alabama and Minnesota.
The Company believes that these cases, which seek damages and certain
injunctive relief, are without merit.
Schneider (USA) Inc. and Schneider (Europe) AG have been named, together with
Advanced Cardiovascular System, Inc., in a federal antitrust action brought on
January 2, 1996, by Boston Scientific Corporation and SciMed Life Systems, Inc.
(a subsidiary of Boston Scientific) in the U.S. District Court, District of
Massachusetts. The suit alleges that the defendants unlawfully obtained and
enforced certain patents covering rapid exchange angioplasty catheters, and
conspired against the plaintiffs by, among other allegations, their settlement
of patent infringement litigation in December of 1991. The suit seeks
unspecified treble damages and injunctive relief. The Company believes that the
case is without merit.
FDA administrative proceedings relating to Plax are pending, principally an
industry-wide call for data on all anti-plaque products by the FDA. The call
for data notice specified that products that have been marketed for a
material time and to a material extent may remain on the market pending FDA
review of the data, provided the manufacturer has a good faith belief that
the product is generally recognized as safe and effective and is not
misbranded. The Company believes that Plax satisfied these requirements and
prepared a response to the FDA's request, which was filed on June 17, 1991.
This filing, as well as the filings of other manufacturers, is still under
review and is currently being considered by an FDA Advisory Committee.
A consolidated class action on behalf of persons who allegedly purchased Pfizer
common stock during the March 24, 1989 through February 26, 1990 period is
pending in the United States District Court for the Southern District of New
York. This lawsuit, which commenced on July 13, 1990, alleges that the Company
and certain officers and former directors and officers violated federal
securities law by failing to disclose potential liability arising out of
personal injury suits involving Shiley heart valves and seeks damages in an
unspecified amount. The defendants in this action believe that the suit is
without merit. A derivative action commenced on April 2, 1990, against certain
directors and officers and former directors and officers alleging breaches of
fiduciary duty and other common law violations in connection with the
manufacture and distribution of Shiley heart valves is pending in the Superior
Court, Orange County, California. The complaint seeks, among other forms of
relief, damages in an unspecified amount. The defendants in the action believe
that the suit is without merit.
A purported class action entitled Bradshaw v. Pfizer Inc. and Howmedica Inc. is
pending in the U.S. District Court, Northern District of Ohio. The action seeks
monetary and injunctive relief, including medical monitoring, on behalf of
patients implanted with the Howmedica P.C.A. one-piece acetabular hip component,
which was manufactured by Howmedica from 1983 to 1990. The
complaint alleges that the prostheses were defectively designed and manufactured
and posed undisclosed risks to implantees. The federal magistrate judge has
recommended that the district court deny the plaintiffs' motion to certify the
case as a class action. The Company believes that the suit is without merit.
From 1994 to 1995, seven purported class actions were filed against American
Medical Systems ("AMS") in federal courts in South Carolina, California,
Minnesota (2), Indiana, Ohio and Louisiana. The California, Ohio and Indiana
suits and one Minnesota suit also name Pfizer Inc. as a defendant, based on its
ownership of AMS. The suits seek monetary and injunctive relief on the basis of
allegations that implantable penile prostheses are prone to unreasonably high
rates of mechanical failure and/or various autoimmune diseases as a result of
silicone materials. On September 30, 1994, the federal Judicial Panel on
Multidistrict Litigation denied the various plaintiffs' motions to consolidate
or coordinate the cases for pretrial proceedings. On February 28, 1995, the
Court in the Ohio suit conditionally granted plaintiffs' motion for class
certification; on March 3, 1995, the court in the California suit denied
plaintiffs' motion for class certification; and on October 25, 1995, the court
in the Indiana suit denied plaintiffs' motion for class certification; on
February 15, 1996, the United States Court of Appeals for the Sixth Circuit
reversed the Ohio Court's conditional certification. The Company believes the
suits are without merit.
In June, 1993, the Ministry of Justice of the State of Sao Paulo, Brazil
commenced a civil public action against the Company's Brazilian subsidiary,
Laboratorios Pfizer Ltda. (Pfizer Brazil) asserting that during a period in
1991, Pfizer Brazil withheld sale of the pharmaceutical product Diabinese in
violation of antitrust and consumer protection laws. The action seeks the award
of moral, economic and personal damages to individuals and the payment to a
public reserve fund. On February 8, 1996, the trial court issued a decision
holding Pfizer Brazil liable. The award of damages to individuals and the
payment into the public reserve fund will be determined in a subsequent phase of
the proceedings. The trial court's opinion sets out a formula for calculating
the payment into the public reserve fund which could result in a sum of
approximately $88 million. The total amount of damages payable to eligible
individuals under the decision would depend on the number of persons eventually
making claims. Pfizer Brazil is appealing this decision. The Company believes
that this action is without merit and should not have a material adverse effect
on the financial position or the results of operations of the Company.
For information on income tax adjustments proposed by the U.S. and Belgian tax
authorities, see the footnote "Taxes on Income" beginning on page 50.
Subsequent Event
In January 1996, the Company completed the acquisition of the Leibinger
Companies, a leader in the manufacture of specialty surgical instruments and
implantable devices used in skull, jaw, facial, hand and foot surgery.
Segment Information and Geographic Data
The Company is a research-based, global health care company. In 1995, the
Company registered net sales in excess of $10 million in each of 45 countries
outside the U.S., with no single country, other than the U.S. and Japan,
contributing more than 10% to total net sales. Segment information (including
major product groups) and geographic data as of and for the years ended December
31, 1995, 1994 and 1993 are shown on pages 40 and 41 and in the footnote
"Financial Subsidiaries" on page 47 and are incorporated in this footnote.
The Company's operations consist of three business segments and a financial
subsidiaries group:
Health care: a broad line of pharmaceutical products (including cardiovascular
agents, anti-infectives, central nervous system agents, anti-inflammatories and
antidiabetes agents) as well as hospital products (including bone and joint
prostheses, diagnostic and therapeutic products used in the treatment of
cardiovascular disease, electrosurgical and ultrasonic surgical devices and
implantable urological devices). Health care products are sold to wholesale and
retail outlets, public and private hospitals, managed care organizations,
government and the medical profession.
Animal health: animal health products for livestock and companion animals
including antibiotic and vitamin feed supplements, animal vaccines and other
veterinary items. Animal health products are sold through drug wholesalers,
distributors, retail outlets and directly to users, including feed
manufacturers, animal producers and veterinarians.
Consumer health care: over-the-counter health care items and oral care products.
Consumer products are sold to wholesalers and retailers.
Financial subsidiaries: a banking operation that makes loans and accepts
deposits in international markets and a small captive insurance operation
that reinsures certain assets, inland transport and marine cargo of the
Company's subsidiaries.
Pfizer Inc and Subsidiary Companies
Quarterly Consolidated Statement of Income (Unaudited)
Quarter
- -------------------------------------------------------------------------------------------
(millions of dollars except per share data) First Second Third Fourth Year
- -------------------------------------------------------------------------------------------
1995
Net sales $2,337.9 $2,400.7 $2,538.5 $2,744.3 $10,021.4
Costs and expenses
Cost of sales 509.2 551.8 535.7 567.4 2,164.1
Selling, informational and
administrative expenses 848.6 966.7 960.8 1,078.6 3,854.7
Research and development expenses 312.8 354.5 350.6 424.5 1,442.4
Other deductions-net 39.1 60.2 64.6 97.1 261.0
- -------------------------------------------------------------------------------------------
Income from continuing operations
before provision for taxes on income
and minority interests 628.2 467.5 626.8 576.7 2,299.2
Provision for taxes on income 207.3 154.3 206.8 169.6 738.0
Minority interests 2.3 2.3 .9 1.5 7.0
- -------------------------------------------------------------------------------------------
Income from continuing operations 418.6 310.9 419.1 405.6 1,554.2
Discontinued operations-net 1.8 5.4 6.2 5.3 18.7
- -------------------------------------------------------------------------------------------
Net income $ 420.4 $ 316.3 $ 425.3 $ 410.9 $ 1,572.9
- -------------------------------------------------------------------------------------------
Earnings per common share:
Continuing operations $ .68 $ .49 $ .66 $ .64 $ 2.47
Discontinued operations-net .00 .01 .01 .01 .03
- -------------------------------------------------------------------------------------------
Net income $ .68 $ .50 $ .67 $ .65 $ 2.50
- -------------------------------------------------------------------------------------------
Cash dividends paid per common share $ .26 $ .26 $ .26 $ .26 $ 1.04
- -------------------------------------------------------------------------------------------
Stock prices*
High $ 45 $ 47 1/2 $ 54 1/4 $ 66 7/8 $ 66 7/8
Low $ 37 1/4 $ 40 1/4 $ 43 1/2 $ 52 5/8 $ 37 1/4
- -------------------------------------------------------------------------------------------
1994
Net sales $1,911.1 $1,846.2 $2,006.7 $2,213.3 $ 7,977.3
Costs and expenses
Cost of sales 383.5 415.0 430.5 493.2 1,722.2
Selling, informational and
administrative expenses 715.8 783.4 780.2 904.7 3,184.1
Research and development expenses 251.5 258.8 292.7 323.1 1,126.1
Other deductions-net 35.7 29.6 24.3 24.8 114.4
- -------------------------------------------------------------------------------------------
Income from continuing operations
before provision for taxes on
income and minority interests 524.6 359.4 479.0 467.5 1,830.5
- -------------------------------------------------------------------------------------------
Provision for taxes on income 157.4 107.8 143.7 140.3 549.2
Minority interests .3 1.7 1.4 1.2 4.6
- -------------------------------------------------------------------------------------------
Income from continuing operations 366.9 249.9 333.9 326.0 1,276.7
Discontinued operations-net 3.8 7.3 2.6 8.0 21.7
- -------------------------------------------------------------------------------------------
Net income $ 370.7 $ 257.2 $ 336.5 $ 334.0 $ 1,298.4
- -------------------------------------------------------------------------------------------
Earnings per common share:
Continuing operations $ .58 $ .41 $ .54 $ .52 $ 2.05
Discontinued operations-net .01 .01 .00 .02 .04
- -------------------------------------------------------------------------------------------
Net income $ .59 $ .42 $ .54 $ .54 $ 2.09
- -------------------------------------------------------------------------------------------
Cash dividends paid per common share $ .235 $ .235 $ .235 $ .235 $ .94
- -------------------------------------------------------------------------------------------
Stock prices*
High $ 35 $ 32 3/8 $ 35 1/4 $ 39 3/4 $ 39 3/4
Low $ 26 5/8 $ 26 5/8 $ 29 5/8 $ 34 $ 26 5/8
- -------------------------------------------------------------------------------------------
*As reported in The Wall Street Journal; adjusted for the second quarter 1995
two-for-one stock split in the form of a 100 percent stock dividend.
- -In December 1995, the Company agreed to sell substantially all the net assets
of its food science business to Cultor Ltd. for approximately $350 million. The
food science business has been reported as a discontinued operation. The sale
was completed in January 1996.
- -In the fourth quarter of 1995, the Company recognized net pre-tax income of
approximately $57 million related to the completion of all appeals in a patent
infringement case with SciMed Life Systems, Inc., a provision for various
litigation issues and pre-tax charges of approximately $53 million that resulted
from decisions to withdraw from a product line and to modify certain
distribution relationships. These items are included in Other deductions-net.
- -As of January 31, 1996, there were approximately 62,855 holders of the
Company's common stock (symbol PFE).
#
Financial Summary
Pfizer Inc and Subsidiary Companies
Year ended December 31
- ----------------------------------------------------------------------------------------------------------------------------------
(millions of dollars except per share data) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales $10,021.4 $ 7,977.3 $7,161.8 $6,871.2 $6,579.5
Costs and expenses
Cost of sales 2,164.1 1,722.2 1,559.0 1,765.6 1,929.4
Selling, informational and
administrative expenses 3,854.7 3,184.1 3,005.7 2,838.4 2,680.3
Research and development expenses 1,442.4 1,126.1 961.3 850.7 744.8
Divestitures, restructuring and unusual items-net* - - 740.6 (141.0) 300.0
Other (income)/deductions-net 261.0 114.4 59.9 16.5 11.8
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
provision for taxes on income, minority
interests and cumulative effect of
accounting changes 2,299.2 1,830.5 835.3 1,541.0 913.2
Provision for taxes on income 738.0 549.2 187.7 440.4 211.4
Minority interests 7.0 4.6 2.6 2.7 3.2
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
cumulative effect of accounting changes 1,554.2 1,276.7 645.0 1,097.9 698.6
Discontinued operations-net 18.7 21.7 12.5 (4.4) 23.5
Cumulative effect of accounting changes - - - (282.6)** -
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,572.9 $ 1,298.4 $ 657.5 $ 810.9 $ 722.1
- ----------------------------------------------------------------------------------------------------------------------------------
Effective tax rate 32.1% 30.0% 22.5% 28.6% 23.1%
Depreciation $320.9 $ 275.4 $ 241.1 $ 242.6 $ 217.7
Capital additions 696.3 671.5 634.2 674.2 593.8
Cash dividends paid 658.5 594.6 536.1 486.5 437.1
- ----------------------------------------------------------------------------------------------------------------------------------
As of December 31
- ----------------------------------------------------------------------------------------------------------------------------------
Working capital $965.2 $ 962.5 $1,289.6 $2,167.4 $1,387.7
Property, plant and equipment-net
of accumulated depreciation 3,472.6 3,073.2 2,632.5 2,305.1 2,381.0
Total assets 12,729.3 11,098.5 9,330.9 9,590.1 9,634.6
Long-term debt 833.0 604.2 570.5 571.3 396.6
Long-term capital+ 6,552.3 5,178.6 4,664.7 5,471.7 5,742.1
Shareholders' equity 5,506.6 4,323.9 3,865.5 4,718.6 5,026.3
- ----------------------------------------------------------------------------------------------------------------------------------
Common share data
Income from continuing operations
before cumulative effect of accounting
changes $ 2.47 $ 2.05 $ 1.01 $ 1.63 $ 1.03
Discontinued operations-net .03 .04 .02 (.01) .03
Cumulative effect of accounting changes - - - (.42)** -
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 2.50 $ 2.09 $ 1.03 $ 1.20 $ 1.06
- ----------------------------------------------------------------------------------------------------------------------------------
Market value per common share (December 31) $63.00 $ 38.63 $ 34.50 $ 36.25 $ 42.00
Cash dividends paid per common share 1.04 .94 .84 .74 .66
Shareholders' equity per common share 8.90 7.10 6.22 7.26 7.63
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common and
common share equivalents
outstanding used to compute
earnings per common share (thousands) 629,509 620,430 640,774 673,078 678,686
Number of employees (thousands) 43.8 40.3 40.0 39.9 43.4
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales per employee (thousands of dollars) $229 $ 198 $ 179 $ 172 $ 152
- ----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31
- ----------------------------------------------------------------------------------------------------------------------------------
(millions of dollars except per share data) 1990 1989 1988 1987 1986 1985
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales $5,858.5 $5,162.1 $4,873.0 $4,406.3 $4,060.4 $3,632.6
Costs and expenses
Cost of sales 1,814.7 1,670.8 1,634.3 1,518.2 1,409.2 1,232.6
Selling, informational and
administrative expenses 2,384.3 2,043.2 1,817.5 1,626.7 1,412.3 1,265.1
Research and development expenses 626.9 518.8 459.4 386.4 321.8 274.6
Divestitures, restructuring and unusual items-net* - - - - - -
Other (income)/deductions-net (41.9) 51.8 (93.1) (66.2) (7.2) (4.2)
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
provision for taxes on income, minority
interests and cumulative effect of
accounting changes 1,074.5 877.5 1,054.9 941.2 924.3 864.5
Provision for taxes on income 290.1 221.5 295.7 295.4 288.0 290.7
Minority interests 4.2 4.1 3.1 3.3 4.2 5.3
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
cumulative effect of accounting changes 780.2 651.9 756.1 642.5 632.1 568.5
Discontinued operations-net 21.0 29.2 35.2 47.7 27.9 11.2
Cumulative effect of accounting changes - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 801.2 $ 681.1 $ 791.3 $ 690.2 $ 660.0 $ 579.7
- ----------------------------------------------------------------------------------------------------------------------------------
Effective tax rate 27.0% 25.2% 28.0% 31.4% 31.2% 33.6%
Depreciation $ 199.9 $ 184.3 $ 176.8 $ 162.0 $ 147.1 $ 129.5
Capital additions 547.5 456.5 343.7 258.3 196.1 195.8
Cash dividends paid 396.7 364.0 330.1 296.8 269.7 241.2
- ----------------------------------------------------------------------------------------------------------------------------------
As of December 31
- ----------------------------------------------------------------------------------------------------------------------------------
Working capital $1,319.0 $1,593.2 $1,750.5 $2,144.1 $1,728.8 $1,708.7
Property, plant and equipment-net
of accumulated depreciation 2,109.8 1,784.1 1,655.1 1,505.9 1,351.5 1,268.5
Total assets 9,052.0 8,324.8 7,593.2 6,872.3 5,178.5 4,458.7
Long-term debt 193.3 190.6 226.9 248.9 285.4 323.5
Long-term capital+ 5,665.8 5,062.1 4,865.9 4,471.2 3,926.1 3,453.4
Shareholders' equity 5,092.0 4,535.8 4,301.1 3,882.4 3,415.2 2,927.3
- ----------------------------------------------------------------------------------------------------------------------------------
Common share data
Income from continuing operations
before cumulative effect of accounting
changes $ 1.16 $ .97 $ 1.13 $ .95 $ .93 $ .84
Discontinued operations-net .03 .04 .05 .07 .04 .02
Cumulative effect of accounting changes - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.19 $ 1.01 $ 1.18 $ 1.02 $ .97 $ .86
- ----------------------------------------------------------------------------------------------------------------------------------
Market value per common share (December 31) $ 20.19 $ 17.38 $ 14.50 $ 11.66 $ 15.25 $ 12.66
Cash dividends paid per common share .60 .55 .50 .45 .41 .37
Shareholders' equity per common share 7.71 6.86 6.50 5.90 5.18 4.47
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common and
common share equivalents
outstanding used to compute
earnings per common share (thousands) 674,304 678,784 677,696 682,252 683,184 682,224
Number of employees (thousands) 41.5 40.8 39.6 39.3 38.6 37.8
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales per employee (thousands of dollars) $ 141 $ 127 $ 123 $ 112 $ 105 $ 96
- ----------------------------------------------------------------------------------------------------------------------------------
*Divestitures, restructuring and unusual items-net include the following:
1993-Pre-tax charges of approximately $745 million and $56 million to cover
worldwide restructuring programs as well as unusual items and a gain of
approximately $60 million realized on the sale of the Company's remaining
interest in Minerals Technologies Inc.
1992-Pre-tax gain of $259 million on the sale of a business offset by
pre-tax charges of $175 million for restructuring, consolidating and
streamlining. In addition, it includes pre-tax curtailment gains of $57
million associated with postretirement benefits other than pensions of
divested operations.
1991-A pre-tax charge of $300 million for potential future Shiley C/C heart
valve fracture claims.
**Accounting changes adopted January 1, 1992: SFAS No. 106-$312.6 million or
$.46 per share; SFAS No. 109-credit of $30.0 million or $.04 per share.
+Defined as long-term debt, deferred taxes on income, minority interests and
shareholders' equity.
The results of operations of the food science business are reported above as a
discontinued operation in the Company's statement of income for all years
presented.
Common share data for the years 1985-1994 and 1985-1990, respectively, have
been restated for the 1995 and 1991 two-for-one stock splits, respectively.
SFAS No. 94, Consolidation of All Majority-Owned Subsidiaries, was adopted in
1987 and the Financial Summary for 1985 and 1986 has been restated.#