PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
UNAUDITED COMBINED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED
OCTOBER 1, 2006 AND OCTOBER 2, 2005
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PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
TABLE OF CONTENTS
Page
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COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Combined Balance Sheets as of October 1, 2006 and December 31, 2005 1
Combined Statements of Income for the three and nine months ended
October 1, 2006 and October 2, 2005 2
Combined Statements of Business Unit Equity for the nine months ended
October 1, 2006 and the year ended December 31, 2005 3
Combined Statements of Cash Flows for the nine months ended October 1,
2006 and October 2, 2005 4
Notes to Combined Financial Statements 5-20
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
October 1, December 31,
2006* 2005**
---------- ------------
ASSETS
Current assets:
Cash $ 6,201 $ 5,995
Accounts receivable, less allowance for doubtful accounts:
2006 - $9,052; 2005 - $8,584 778,209 664,989
Inventories 523,887 585,223
Deferred income taxes 6,936 5,300
Prepaid expenses and other current assets 23,460 25,690
---------- ----------
Total current assets 1,338,693 1,287,197
Property, plant and equipment, net 797,495 742,189
Goodwill 2,751,078 2,790,755
Identifiable intangible assets, less accumulated amortization 1,633,090 1,541,193
Deferred income taxes 15,603 10,608
Other noncurrent assets 3,652 3,306
---------- ----------
Total assets $6,539,611 $6,375,248
========== ==========
LIABILITIES AND BUSINESS UNIT EQUITY
Current liabilities:
Accounts payable $ 169,177 $ 152,813
Income taxes payable 97,312 199,054
Deferred income taxes 3,117 2,406
Accrued compensation and related items 65,793 76,396
Other current liabilities 255,960 253,433
---------- ----------
Total current liabilities 591,359 684,102
Pension benefit obligations 14,337 12,219
Postretirement benefit obligations 22,070 18,789
Deferred income taxes 278,155 235,870
Other noncurrent liabilities 5,277 5,063
---------- ----------
Total liabilities 911,198 956,043
---------- ----------
Minority interest 12,645 9,989
---------- ----------
Business unit equity 5,367,224 5,250,336
Accumulated other comprehensive expense 248,544 158,880
---------- ----------
Total business unit equity 5,615,768 5,409,216
---------- ----------
Total liabilities and business unit equity $6,539,611 $6,375,248
========== ==========
* Unaudited.
** From audited financial statements.
See accompanying notes to combined financial statements.
1
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three Months Ended Nine Months Ended
----------------------- -----------------------
October 1, October 2, October 1, October 2,
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenues $975,883 $923,507 $2,910,624 $2,841,928
Costs and expenses:
Cost of sales 351,356 290,820 1,020,985 917,258
Marketing and distribution expenses 388,754 388,100 1,234,108 1,238,043
Research and development expenses 47,380 43,287 140,064 134,920
General and administrative expenses 50,172 46,640 144,392 134,292
Restructuring charges and merger-related costs 1,023 4,185 13,761 14,424
Other income - net (6,242) (8,341) (32,457) (26,200)
-------- -------- ---------- ----------
Income from continuing operations before provision for 143,440 158,816 389,771 429,191
taxes on income and minority interests
Provision for taxes on income 48,384 52,408 128,126 144,496
Minority interests 380 1,255 2,656 3,104
-------- -------- ---------- ----------
Income from continuing operations 94,676 105,153 258,989 281,591
Discontinued operations:
Loss from discontinued operations - net of tax (124) (109) (304) 337
-------- -------- ---------- ----------
Discontinued operations - net of tax (124) (109) (304) 337
-------- -------- ---------- ----------
Net income $ 94,552 $105,044 $ 258,685 $ 281,928
======== ======== ========== ==========
See accompanying notes to combined financial statements.
2
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
COMBINED STATEMENTS OF BUSINESS UNIT EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Accumulated
Other
Business Unit Comprehensive
Equity Expense Total
------------- ------------- -----------
Balance January 1, 2005 $5,090,186 $300,212 $5,390,398
Comprehensive income:
Net income 414,387 414,387
Other comprehensive expense - currency
translation adjustment (141,332) (141,332)
------------
Total comprehensive income 273,055
Cash dividends paid to Pfizer (2,422) (2,422)
Other activity with Pfizer (251,815) (251,815)
---------- -------- ----------
Balance December 31, 2005* 5,250,336 158,880 5,409,216
Comprehensive income:
Net income 258,685 258,685
Other comprehensive income - currency
translation adjustment 89,664 89,664
----------
Total comprehensive income 348,349
Cash dividends paid to Pfizer (14,827) (14,827)
Other activity with Pfizer (126,970) (126,970)
---------- -------- ----------
Balance October 1, 2006** $5,367,224 $248,544 $5,615,768
========== ======== ==========
* From audited financial statements.
** Unaudited.
See accompanying notes to combined financial statements.
3
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Nine Months Ended
-----------------------
October 1, October 2,
2006 2005
---------- ----------
OPERATING ACTIVITIES
Net income $ 258,685 $ 281,928
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 64,385 58,004
Amortization of other intangible assets 9,504 7,536
Gain on disposals of property, plant and equipment (60) (134)
Gain on sale of businesses/product lines (1,164) (558)
Asset impairments 2,401 4,748
Minority interest 2,656 3,104
Share-based compensation expense 22,447 4,944
Changes in assets and liabilities net of effect of
acquired/divested businesses: (101,829) (103,847)
--------- ---------
Net cash provided by operating activities 257,025 255,725
--------- ---------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (100,776) (126,052)
--------- ---------
Net cash used in investing activities (100,776) (126,052)
--------- ---------
FINANCING ACTIVITIES
Cash dividend paid to Pfizer (14,827) --
Other cash activity with Pfizer - net (141,397) (131,396)
--------- ---------
Net cash used in financing activities (156,224) (131,396)
--------- ---------
Effect of exchange-rate changes on cash 181 (164)
Net increase (decrease) in cash 206 (1,887)
Cash at beginning of period 5,995 7,415
--------- ---------
Cash at end of period $ 6,201 $ 5,528
========= =========
See accompanying notes to combined financial statements.
4
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BUSINESS DESCRIPTION
ORGANIZATION
Pfizer Consumer Healthcare ("PCH") is a business unit within Pfizer Inc
("Pfizer"). PCH is comprised of approximately one hundred wholly-owned Pfizer
subsidiaries that are either completely dedicated to consumer healthcare or
contain certain assets and operations that are dedicated to the business.
Collectively, these entities constitute the consumer healthcare business unit,
as defined by Pfizer. As discussed in Notes 6 and 15, on December 20, 2006
Pfizer sold the PCH business to Johnson & Johnson.
BUSINESS DESCRIPTION
PCH manufactures, markets, sells and distributes self-medications for oral care,
upper respiratory health, tobacco dependence, gastrointestinal health, skin
care, eye care and hair growth. PCH's products are sold in most major countries
around the world and appear in a variety of channels including mass
merchandisers, chain food, drug, convenience and wholesale outlets. Around the
world, PCH manufacturing and distribution is performed by Pfizer's manufacturing
division.
Three Months Ended Nine Months Ended
------------------- -----------------------
Oct. 1, Oct. 2 Oct. 1, Oct. 2,
2006 2005 2006 2005
-------- -------- ---------- ----------
Revenues
United States(a) $489,666 $492,894 $1,426,318 $1,446,861
All other countries 486,217 430,613 1,484,306 1,395,067
-------- -------- ---------- ----------
Total combined $975,883 $923,507 $2,910,624 $2,841,928
======== ======== ========== ==========
As of As of
Oct. 1, Dec. 31,
2006 2005
---------- ----------
Long-lived assets(b)
United States(a) $1,051,457 $1,002,857
Sweden 1,079,139 970,284
All other countries 299,989 310,241
---------- ----------
Total combined $2,430,585 $2,283,382
========== ==========
(a) Includes operations in Puerto Rico.
(b) Long-lived assets include identifiable intangible assets (excluding
goodwill) and property, plant and equipment.
5
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (GAAP) and present the
financial position, results of operations and cash flows for PCH. As permitted
under the rules for interim reporting, certain footnotes or other financial
information that are normally required can be condensed or omitted. The PCH
combined financial statements were prepared according to the legal entity deal
structure as contemplated in the agreement referenced in Note 15 and reflect:
1) all assets and liabilities of subsidiary companies where the entire
legal entity is expected to be conveyed to a buyer as part of the sale
of PCH
2) assets and liabilities that either legally belong to PCH or are
expected to transfer to a buyer as part of the sale of PCH but are not
part of a conveyed subsidiary (Asset-selling location)
3) costs associated with PCH employees and approximately 3,500 employees
in Pfizer's manufacturing division dedicated primarily to the PCH
business (costs associated with other Pfizer employees who may
ultimately be identified as dedicated primarily to PCH are not
included)
4) costs associated with PCH products made at seven manufacturing
facilities and three distribution centers which are primarily PCH
dedicated facilities and are deemed to be wholly PCH assets expected
to transfer to a buyer as part of the sale of PCH (Conveyed
Facilities)
5) costs associated with PCH products made at 27 facilities that are
shared with other Pfizer businesses and are not deemed to be wholly
PCH assets expected to transfer to a buyer as part of the sale of PCH
(Non-Conveyed Facilities)
6) costs associated with PCH products made at one manufacturing facility
that is primarily PCH dedicated; however, only selected assets (mainly
machinery and equipment) and not the entire facility are deemed to be
wholly PCH assets expected to transfer to a buyer as part of the sale
of PCH.
All significant intercompany transactions and balances have been eliminated.
Generally, operations outside the U.S. are included on a fiscal basis for the
three-month and nine-month periods ending August 27, 2006 and August 28, 2005.
Revenues, expenses, assets and liabilities can vary during each quarter of the
year. Therefore, the results and trends in these interim combined financial
statements may not be representative of those for the full year. PCH is
responsible for these combined unaudited financial statements which include all
normal and recurring adjustments that are considered necessary for the fair
presentation of PCH's financial position and operating results. These combined
interim financial statements should be read in conjunction with PCH's audited
combined financial statements and accompanying notes for the year ended December
31, 2005.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts and disclosures. For
example, estimates are used when accounting for deductions from revenues (such
as rebates, discounts, incentives and product returns), depreciation,
amortization, employee benefits, contingencies and asset and liability
valuations. Management's estimates are often based on complex judgments,
probabilities and assumptions that it believes to be reasonable but that are
inherently uncertain and unpredictable. Assumptions may be incomplete or
inaccurate and unanticipated events and circumstances may occur. It is also
possible that other professionals, applying reasonable judgment to the same
facts and circumstances, could develop and support a range of alternative
estimated amounts. There are other risks and uncertainties that may cause actual
results to differ from estimated amounts, such as changes in the healthcare
environment, competition, foreign exchange, litigation, legislation and
regulations.
6
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
These combined financial statements have been extracted from the Pfizer
accounting records on the basis of the accounting policies and procedures
described below in the section entitled, Summary of Significant Accounting
Policies. Although PCH is accounted for by Pfizer as a separate operating
segment, its operations are integrated with those of Pfizer. These combined
financial statements are not intended to be a complete representation of the
financial position or results of operations of PCH had it been a stand-alone
company. The accompanying combined balance sheets primarily reflect the assets
and liabilities directly attributable to the business. The assets and
liabilities that have been excluded from the accompanying combined balance
sheets consist primarily of:
- Cash from PCH operations at subsidiaries that are not completely PCH
dedicated is generally not included in "Cash" in the accompanying
combined balance sheets at October 1, 2006 and December 31, 2005 since
this cash is swept into Pfizer's centralized cash management systems.
Accordingly, PCH's cash balance at October 1, 2006 and December 31,
2005 is not representative of an independent company. The interest
income associated with cash is not included in the accompanying
combined statements of income. PCH's financing requirements and
settlement of intercompany transactions are represented by cash
transactions with Pfizer and are reflected in business unit equity.
The cash that is reported in the accompanying combined balance sheets
is the cash held by those subsidiaries that are completely PCH
dedicated
- Current and deferred tax assets and liabilities at subsidiary
companies that are not completely PCH dedicated
- Pension liabilities at subsidiary companies that are not completely
PCH dedicated
- Assets and liabilities of the Non-Conveyed Facilities that are not
considered part of the PCH business or are not expected to transfer to
a buyer as part of the sale of PCH
- Other assets and liabilities at Asset-selling locations that are not
specifically owned by or commitments of the PCH business or that are
expected to transfer to a buyer upon the sale of PCH
The accompanying combined statements of income include the accounts specifically
attributed to PCH and allocations of expenses relating to shared services and
administrative functions incurred at various divisional levels of Pfizer. Pfizer
operating divisions perform certain administrative, logistical and manufacturing
services for PCH. In addition, PCH operating divisions perform certain
administrative and logistical services for other Pfizer locations. The cost of
these services is charged to either PCH or Pfizer operations either on a
specific identification basis or using proportional cost allocation methods
(i.e., headcount, occupied office space, third party sales, etc.) depending on
the nature of the service. PCH and Pfizer management believes the above
allocations are reasonable; however, there can be no assurance that such
allocations are indicative of future results of operations of the PCH business
nor reflective of historical results had the PCH business been a separate,
stand-alone entity. Pfizer does not routinely allocate various other corporate
level activity expenses such as senior corporate executives, corporate
accounting, treasury and corporate level tax to its operating divisions.
Accordingly, the costs of such corporate functions have not been included in the
accompanying combined statements of income.
7
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - PCH records revenue from product sales when the goods are
shipped and title passes to the customer.
DEDUCTIONS FROM REVENUES--Gross product sales are subject to a variety of
deductions such as sales rebates, discounts, coupons, incentives, and product
returns, that are generally estimated and recorded in the same period that the
revenue is recognized. PCH records sales incentives as a reduction of revenues
at the time the related revenues are recorded or when the incentive is offered,
whichever is later. PCH estimates the cost of its sales incentives based on its
historical experience with similar incentive programs.
COST OF SALES AND INVENTORIES - PCH values inventories at cost or fair value, if
lower. Cost is determined as follows:
- finished goods and work in process at average actual cost; and
- raw materials and supplies at average or latest actual cost.
ADVERTISING EXPENSE - Advertising expenses related to production costs are
expensed as incurred and the costs of radio time, television time and space in
publications are expensed when the related advertising occurs. Advertising and
promotion expenses were $193,610 and $191,126 for the three months ended October
1, 2006 and October 2, 2005, and $639,218 and $656,709 for the nine months ended
October 1, 2006 and October 2, 2005 and are included in Marketing and
distribution expenses in the accompanying combined statements of income.
RESEARCH AND DEVELOPMENT EXPENSES - Research and development (R&D) expenses are
expensed as incurred. R&D expenses were $47,380 and $43,287 for the three months
ended October 1, 2006 and October 2, 2005, and $140,064 and $134,920 for the
nine months ended October 1, 2006 and October 2, 2005. PCH has its own R&D
resources with its primary research facilities in New Jersey and Sweden.
INCOME TAXES - As an operating unit of Pfizer, PCH - U.S. does not file separate
U.S. Federal tax returns, but rather is included as part of the various returns
filed by Pfizer or its subsidiaries. For the purpose of these combined financial
statements, the PCH tax provision was computed as if it were a separate company
using the effective tax rates in effect in the locations where the income was
recorded. Permanent items and credits were considered when determining the
provision but were not included due to immateriality. For entities having losses
on a stand alone basis, financial statement benefit was provided for those
losses. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of differences between the financial reporting and tax
bases of assets and liabilities using enacted tax rates and laws.
BUSINESS UNIT EQUITY - Business unit equity includes balances and transactions
among PCH, Pfizer and other Pfizer subsidiaries. PCH participates in Pfizer's
centralized cash management systems and generally all excess cash is transferred
to Pfizer. In addition, PCH entities will occasionally declare and pay dividends
to other Pfizer companies.
8
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
AMORTIZATION OF INTANGIBLE ASSETS, DEPRECIATION AND CERTAIN LONG-LIVED ASSETS -
Long-lived assets include:
- Goodwill - Goodwill represents the difference between the purchase
price of a business acquisition and the fair value of its net assets.
Goodwill is not amortized.
- Identifiable intangible assets - These acquired assets are recorded at
cost. Intangible assets with finite lives are amortized evenly over
their estimated useful lives. Intangible assets with indefinite lives
are not amortized.
- Property, plant and equipment - These assets are recorded at original
cost and increased by the cost of significant improvements after
purchase. The cost is depreciated evenly over the assets' estimated
useful lives. For tax purposes, accelerated depreciation methods are
used as allowed by tax laws. Depreciation is computed generally on a
straight-line basis over the following estimated useful lives:
Buildings and building improvements 20-50 years
Machinery and equipment 8-12 years
Furniture, fixtures and other 3-12 years
Amortization expense related to acquired intangible assets that contribute to
our ability to sell, manufacture, research, market and distribute products,
compounds and intellectual property are included in Other Income-net as they
benefit multiple business functions. Amortization expense related to intangible
assets that are associated with a single function and depreciation of property,
plant and equipment are included in Cost of sales, General and administrative
expenses and Research and development expenses, as appropriate.
PCH reviews all of its long-lived assets, including goodwill and other
intangible assets, for impairment at least annually and whenever events or
circumstances present an indication of impairment. When necessary, PCH records
charges for impairments of long-lived assets for the amount by which the present
value of future cash flows, or some other fair value measure, is less than the
carrying value of these assets.
FOREIGN CURRENCY TRANSLATION - The financial statements of operations outside
the U.S. are maintained in their local currency. PCH translates assets and
liabilities to their U.S. dollar equivalents at rates in effect at the balance
sheet date. Income and expense items are translated into their U.S. dollar
equivalents at average rates of exchange for the period. Translation gains and
losses are accumulated in a separate component of business unit equity. Gains
and losses on foreign currency transactions are included in earnings.
FINANCIAL INSTRUMENTS - The carrying values of PCH's financial instruments
approximate their estimated fair values. At October 1, 2006 and December 31,
2005, the cost of each type of financial instrument, primarily accounts
receivable and accounts payable, approximates fair value because of the short
term nature of these instruments.
BENEFIT PLANS - Substantially all active PCH employees participate in Pfizer,
legacy Warner-Lambert and legacy Pharmacia benefit plans (collectively, "Pfizer
benefit plans"). In the U.S., PCH employees participate in qualified and
supplemental defined benefit pension plans and defined contribution plans, as
well as other postretirement benefit plans, consisting primarily of healthcare
for retirees. Outside the U.S., PCH employees participate in defined benefit
plans that Pfizer generally funds to the extent that tax or other incentives
exist. A measurement date of December 31 is used for a majority of the U.S.
pension and postretirement plans and November 30 for a majority of the
international plans.
Only the pension assets and liabilities at those subsidiaries that are
completely dedicated to PCH business have been reflected in the accompanying
combined balance sheets since only those assets and liabilities legally belong
to PCH and are expected to transfer to a buyer as part of the sale of PCH.
9
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
Only liabilities related to PCH employees participating in other postretirement
benefit plans in the U.S. that are expected to transfer to a buyer as part of
the sale of PCH have been reflected in the accompanying combined balance sheets.
The combined statements of income include an allocation from Pfizer for the
pension and postretirement benefit costs associated with all PCH employees who
participate in the pension and postretirement benefit plans.
3. ADOPTION OF NEW ACCOUNTING STANDARD
On January 1, 2006, PCH adopted the provisions of Financial Accounting Standards
(SFAS) No. 123R, Share-Based Payment, as supplemented by the interpretation
provided by SEC Staff Accounting Bulletin No. 107, issued in March 2005. (SFAS
123R replaced SFAS 123, Stock-Based Compensation, issued in 1995). PCH elected
the modified prospective application transition method of adoption and, as such,
prior period financial statements have not been restated. Under this method, the
fair value of all stock options granted or modified after adoption must be
recognized in the combined statement of income and total compensation cost
related to nonvested awards not yet recognized, determined under the original
provisions of SFAS 123, must also be recognized in the combined statement of
income.
Prior to January 1, 2006, PCH accounted for stock options under Accounting
Principle Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees,
an elective accounting policy permitted by SFAS 123. Under this standard, since
the exercise price of stock options granted is set equal to the market price on
the date of grant, PCH did not record any expense to the combined statement of
income related to stock options, unless certain original grant date terms were
subsequently modified. However, as required, PCH disclosed, in the Notes to
Combined Financial Statements, the pro forma expense impact of the stock option
grants as if PCH had applied the fair-value based recognition provisions. The
adoption of SFAS 123R primarily impacted PCH's accounting for stock options (see
Note 13, Share-Based Payments).
4. ADAPTING TO SCALE INITIATIVE
PCH incurred the following costs in connection with Pfizer's Adapting to Scale
(AtS) productivity initiative launched in early 2005:
Three Months Ended Nine Months Ended
------------------ -----------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2
2006 2005 2006 2005
------ -------- ------- -------
Implementation costs (a) $ (553) $5,067 $ 4,388 $5,067
Restructuring charges (b) 2,746 1,760 12,418 1,760
------ ------ ------- ------
Total AtS costs $2,193 $6,827 $16,806 $6,827
====== ====== ======= ======
(a) Included in Cost of sales - ($691), Marketing and distribution expenses -
($1,263) and General and administrative expenses - $1,401 for the three
months ended October 1, 2006 and included in Cost of sales - $541,
Marketing and distribution expenses - $677 and General and administrative
expenses - $3,170 for the nine months ended October 1, 2006. Included in
Marketing and distribution expenses - $393 and General and administrative
expenses - $4,674 for both the three and nine months ended October 2, 2005.
(b) Included in Restructuring charges and merger-related costs.
Actions associated with the AtS productivity initiatives include implementation
costs primarily for consulting activities and restructuring charges primarily
related to asset impairments, exit costs and employee termination
10
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
costs at our manufacturing facilities and marketing and worldwide research
operations. The components of restructuring charges associated with AtS follow:
Provisions
for the Nine Utilization Accrual as
Provisions Months Ended Provisions Through of Oct. 1,
2005 Oct. 1, 2006 Total Oct. 1, 2006 2006 (a)
---------- ------------ ---------- ------------ ----------
Employee termination costs $ 2,349 $11,615 $13,964 $(13,758) $206
Asset impairments 8,777 663 9,440 (9,440) --
Other 312 140 452 (417) 35
------- ------- ------- -------- ----
Total $11,438 $12,418 $23,856 $(23,615) $241
======= ======= ======= ======== ====
(a) Included in Other current liabilities.
Through October 1, 2006, Employee termination costs represent the reduction of
the PCH workforce by 81 employees, mainly in manufacturing, sales and research.
We notified affected individuals and 79 employees were terminated as of October
1, 2006. Employee termination costs are recorded as incurred and include accrued
severance benefits, pension and postretirement benefits. Asset impairments
reflect charges to write down property, plant and equipment. Other primarily
includes costs to exit certain activities.
5. MERGER-RELATED COSTS
On April 16, 2003, Pfizer completed its merger with Pharmacia Corporation
(Pharmacia). PCH recorded the following merger-related activity primarily in
connection with the acquisition of Pharmacia:
Three Months Ended Nine Months Ended
------------------ -----------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
2006 2005 2006 2005
------- -------- ------- -------
Integration costs:
Pharmacia $ 767 $1,203 $ 766 $ 4,532
Purell 4 69 109 940
Restructuring costs:
Pharmacia (2,494) 1,153 468 7,192
------- ------ ------ -------
Total merger-related costs(a) $(1,723) $2,425 $1,343 $12,664
======= ====== ====== =======
(a) Included in Restructuring charges and merger-related costs.
INTEGRATION COSTS
Integration costs represent external, incremental costs directly related to an
acquisition, including expenditures for consulting and systems integration.
11
PFIZER CONSUMER HEALTH CARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
RESTRUCTURING COSTS-PHARMACIA
In connection with the acquisition of Pharmacia, Pfizer management approved
plans to restructure the operations of both legacy Pfizer and legacy Pharmacia
to eliminate duplicative facilities and reduce costs. As of October 1, 2006, the
restructuring activities resulting from Pfizer's acquisition of Pharmacia are
substantially complete.
Restructuring costs associated with exiting certain activities of the consumer
healthcare business of legacy Pfizer (PCH) and legacy Pharmacia (from April 16,
2004), including severance, costs of vacating duplicative facilities, contract
termination and other exit costs, have been recorded as a charge to the results
of operations and are included in Restructuring charges and merger-related
costs.
The components of the restructuring costs associated with the acquisition of
Pharmacia, which were expensed, follow:
Provisions for Utilization
the Nine Months Provisions through Accrual
Ended Oct. 1, Provisions Provisions Prior to Provisions Oct. 1, as of Oct. 1,
2006 2005 2004 Jan. 1, 2004 Total 2006 2006(a)
--------------- ---------- ---------- ------------ ---------- ----------- -------------
Employee termination costs $ (534) $ 3,969 $12,409 $ 9,447 $25,291 $(24,924) $ 367
Property, plant and
equipment 1,738 8,082 5,046 133 14,999 (14,999) --
Other (736) 7,166 6,974 1,580 14,984 (9,502) 5,482
------ ------- ------- ------- ------- -------- ------
Total $ 468 $19,217 $24,429 $11,160 $55,274 $(49,425) $5,849
====== ======= ======= ======= ======= ======== ======
(a) included in Other current liabilities.
Through October 1, 2006, the charges for Employee termination costs represent
the approved reduction of PCH's workforce by 237 people mainly in corporate,
manufacturing, distribution, sales and research functions. PCH notified these
people and 233 people were terminated as of October 1, 2006. Employee
termination costs include accrued severance benefits. Other restructuring costs
include charges for contract termination payments.
6. DIVESTITURE
On June 26, 2006, Pfizer announced that it reached a definitive agreement to
sell PCH to Johnson & Johnson for $16.6 billion. Pfizer completed the sale of
PCH to Johnson & Johnson on December 20, 2006.
7. INVENTORIES
Oct. 1, Dec. 31,
2006 2005
-------- --------
Finished goods $444,710 $478,933
Work in process 22,685 38,778
Raw materials 56,492 67,512
-------- --------
Total inventories $523,887 $585,223
======== ========
8. PROPERTY, PLANT AND EQUIPMENT
12
PFIZER CONSUMER HEALTH CARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
Oct. 1, Dec. 31,
2006 2005
---------- ----------
Land $ 11,446 $ 9,666
Buildings and building improvements 435,316 424,474
Machinery and equipment 536,048 586,807
Furniture, fixtures and other 248,946 172,365
Construction in progress 149,560 110,547
---------- ----------
1,381,316 1,303,859
Less: accumulated depreciation (583,821) (561,670)
---------- ----------
Net property, plant and equipment $ 797,495 $ 742,189
========== ==========
Depreciation expense totaled $21,929 and $16,325 for the three months ended
October 1, 2006 and October 2, 2005. Depreciation expense totaled $64,385 and
$58,004 for the nine months ended October 1, 2006 and October 2, 2005.
9. GOODWILL AND OTHER INTANGIBLE ASSETS
A. GOODWILL
The changes in the carrying amount of goodwill for the nine months ended October
1, 2006 follow:
Balance, December 31, 2005 $2,790,755
Foreign currency impact (33,995)
Other (5,682)
----------
Balance, October 1, 2006 $2,751,078
==========
13
PFIZER CONSUMER HEALTH CARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
B. OTHER INTANGIBLE ASSETS
The components of identifiable intangible assets as of October 1, 2006 and
December 31, 2005 follow:
Oct. 1, 2006 Dec. 31, 2005
------------------------- -------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
---------- ------------ ---------- ------------
Finite-lived intangible assets:
Developed technology rights(a) $ 52,180 $(11,251) $ 51,496 $ (8,690)
Brands(b) 139,130 (12,025) 136,659 (8,888)
License agreements 9,381 (5,874) 8,582 (3,214)
Trademarks 49,216 (27,841) 44,287 (24,142)
Other(c) 10,354 (5,428) 9,157 (3,600)
--------- ------- --------- -------
Total amortized finite-lived intangible assets 260,261 (62,419) 250,181 (48,534)
--------- ------- --------- -------
Indefinite-lived intangible assets:
Brands(b) 932,805 -- 873,579 --
License agreements 331,447 -- 295,892 --
Trademarks 149,034 -- 148,131 --
Other 21,962 -- 21,944 --
--------- ------- --------- -------
Total indefinite-lived intangible assets 1,435,248 -- 1,339,546 --
--------- ------- --------- -------
Total identifiable intangible assets 1,695,509 (62,419) 1,589,727 (48,534)
--------- ------- --------- -------
Total identifiable intangible assets, less
accumulated amortization $1,633,090 $1,541,193
========== ==========
(a) developed technology rights represent the amortized value associated with
developed technology, which has been acquired from third parties and which
can include the right to develop, use, market, sell and/or offer for sale
the product, compounds and intellectual property that has been acquired
with respect to products, compounds and/or processes that have been
completed. These rights are subject to the impairment review process
described in Note 2.
(b) brands represent the amortized value associated with tradenames, as the
products themselves no longer receive patent protection. The significant
components of the indefinite-lived brands include values determined for
tobacco dependence products and Rogaine.
(c) includes patents, non-compete agreements and other intangible assets.
Total amortization expense for finite-lived intangible assets was $2,747 and
$2,972 for the three months ended October 1, 2006 and October 2, 2005, and
$9,504 and $7,536 for the nine months ended October 1, 2006 and October 2, 2005.
14
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
10. OTHER CURRENT LIABILITIES
Oct. 1, Dec. 31,
2006 2005
-------- --------
Advertising and promotional accruals $ 75,303 $ 62,492
Merger-related restructuring accruals 5,849 7,392
Inventory accruals 36,357 25,632
Freight accruals 4,751 3,143
Coupon accruals 12,159 10,416
Selling accruals 5,157 6,491
Royalties accruals 4,830 11,226
Returns accruals 33,249 40,419
Rebate accruals 4,444 11,318
Production accruals 7,933 6,405
R&D accruals 7,915 11,071
Property and other tax accruals 4,043 2,758
Legal accruals 4,305 5,992
Environmental accruals 1,500 1,500
Other marketing accruals 4,097 8,586
Other 44,068 38,592
-------- --------
Total $255,960 $253,433
======== ========
11. OTHER INCOME - NET
Three Months Ended Nine Months Ended
------------------- -------------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
2006 2005 2006 2005
-------- -------- -------- --------
Amortization of intangibles $ 2,692 $ 2,945 $ 9,396 $ 7,456
Royalties income(a) (10,763) (11,267) (33,523) (33,635)
(Gain)/loss on disposal of PP&E (29) 15 (60) (134)
(Gain)/loss on sales of businesses/product lines (69) 12 (1,164) (558)
Net exchange (gains)/losses 1,077 (1,178) (283) 512
Other, net(b) 850 1,132 (6,823) 159
-------- -------- -------- --------
Total other income - net $ (6,242) $ (8,341) $(32,457) $(26,200)
======== ======== ======== ========
(a) PCH has granted Glaxo SmithKline Consumer Healthcare (GSKCH) exclusive
distribution rights in the U.S. to Nicotine Polacrilex Gum ("Gum"),
including exclusive rights to the Nicorette name to be used on Gum and in
conjunction with GSKCH's Commit Lozenge but PCH only supplies Gum (the
Lozenge is supplied by a third party). Although the distribution agreement
terminates on December 31, 2010, GSK may renew the agreement at their
option for successive 3 year terms giving not less than 6 months prior
written notice. GSKCH purchases the finished packaged products from PCH.
GSKCH pays PCH a supply price and a royalty which taken together are capped
at 30% of GSKCH's net selling price to the trade. PCH recorded royalty
income from the agreement of $9,480 and $8,242 for the three months ended
October 1, 2006 and October 2, 2005 and $29,722 and $26,580 for the nine
months ended October 1, 2006 and October 2, 2005 in Other Income-net. PCH
holds rights to its entire Nicorette range of products in basically all
other locations where they are sold except for Japan where there is a
collaboration with Takeda. In addition, PCH has rights to the NicoDerm
Patch in Canada. Pfizer Inc will continue to hold rights to Nicotrol
Inhaler and Nasal Spray in the U.S.
15
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
(b) During the nine months ended October 1, 2006, Other, net includes income
from a legal settlement of $10,000.
12. PENSION AND POSTRETIREMENT BENEFITS
Generally, most PCH employees participate in Pfizer's pension plans for
employees worldwide. For all the plans, plan benefits depend on years of service
and employee final average earnings. Participants vest in their benefits after
as few as five years of service. Pfizer does not fund postretirement plans, but
contributes to the plans as benefits are paid. The portion of the pension and
postretirement benefit cost allocated to PCH in the U.S. and certain significant
international locations was approximately $11,623 and $10,650 for the three
months ended October 1, 2006 and October 2, 2005, and $34,869 and $32,318 for
the nine months ended October 1, 2006 and October 2, 2005.
Only the pension assets and liabilities at those subsidiaries that are
completely dedicated to the PCH business have been reflected in the accompanying
combined balance sheets since only those assets and liabilities legally belong
to PCH and are expected to transfer to a buyer as part of the sale of PCH.
Only the postretirement benefit obligations for employees who are not retirement
eligible at January 1, 2006 and which are expected to transfer to a buyer as
part of the sale of PCH are included in the accompanying combined balance
sheets.
Information about pension plans at subsidiaries in Germany, France and Italy
that are dedicated solely to PCH and are expected to transfer to a buyer as part
of the sale of PCH is provided in the tables below:
Three Months
Ended Nine Months Ended
----------------- -----------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
2006 2005 2006 2005
------- ------- ------ --------
Service cost $221 $177 $ 643 $ 570
Interest cost 163 149 473 474
Amortization of:
Prior service costs/(gains) (36) (7) (25) 5
Net transition obligation 8 8 24 25
Actuarial losses 87 28 167 63
---- ---- ------ ------
Net periodic benefit costs $443 $355 $1,282 $1,137
==== ==== ====== ======
For the first nine months of 2006, $256 from the general assets of the
subsidiaries in Germany, France and Italy was contributed to these plans. During
2006, contributions of $357 are expected to be made to these plans.
Contributions expected to be made for 2006 are inclusive of amounts contributed
during the first nine months of 2006. The contributions from the general assets
of the subsidiaries in Germany, France and Italy include direct employer benefit
payments.
16
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
13. SHARED-BASED PAYMENTS
PCH employees participate in Pfizer's compensation programs which can include
share-based payments. In 2006 and 2005, the primary share-based awards and their
general terms and conditions are as follows:
- Stock options, which entitle the holder to purchase, at the end of a
vesting term, a specified number of shares of Pfizer common stock at a
price per share set equal to the market price of Pfizer common stock
on the date of grant.
- Restricted stock units (RSUs), which entitle the holder to receive, at
the end of a vesting term, a specified number of shares of Pfizer
common stock, including shares resulting from dividend equivalents
paid on such RSUs.
- Performance share awards (PSAs) and performance-contingent share
awards (PCSAs), which entitle the holder to receive, at the end of a
vesting term, a number of shares of Pfizer common stock, within a
range of shares from zero to a specified maximum, calculated using a
non-discretionary formula that measures Pfizer's performance relative
to an industry peer group.
- Restricted stock grants, which entitle the holder to receive, at the
end of a vesting term, a specified number of shares of Pfizer common
stock, and which also entitle the holder to receive dividends paid on
such grants.
A. Impact on Net Income
The components of share-based compensation expense and the associated tax
benefit follow:
Three Months
Ended Nine Months Ended
----------------- -----------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
2006 2005 2006 2005
------- ------- ------- -------
Stock option expense $ 4,119 $ -- $13,935 $ --
Restricted stock unit expense 2,559 1,641 6,890 3,822
Performance share awards and performance-contingent
share awards expense 1,027 151 1,622 1,122
------- ------ ------- -------
Share-based payment expense(a) 7,705 1,792 22,447 4,944
Tax benefit for share-based compensation expense (2,430) (702) (6,567) (1,938)
------- ------ ------- -------
Share-based payment expense, net of tax $ 5,275 $1,090 $15,880 $ 3,006
======= ====== ======= =======
a) Included in Cost of sales, Selling, informational and administrative
expense and Research and development expense, as appropriate, generally
according to the expense classification of the employees' payroll costs.
17
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
B. Stock Options
Stock options, which entitle the holder to purchase, at the end of a vesting
term, a specified number of shares of Pfizer common stock at a price per share
set equal to the market price of Pfizer common stock on the date of grant, are
accounted for at fair value at the date of grant in the income statement
beginning in 2006. These fair values are generally amortized on an even basis
over the vesting term into Cost of sales, Selling, informational and
administrative expenses and Research and development expenses, as appropriate.
In 2005 and earlier years, stock options were accounted for under APB No. 25
using the intrinsic value method in the income statement and fair value
information was disclosed. In these disclosures of fair value, stock option
compensation expense was allocated based on the nominal vesting period, rather
than the expected time to achieve retirement eligibility. In 2006, Pfizer
changed its method of allocating stock option compensation expense to a method
based on the substantive vesting period for all new awards, while continuing to
allocate outstanding nonvested awards not yet recognized as of December 31, 2005
under the nominal vesting period method. Specifically, under this prospective
change in accounting policy, compensation expense related to stock options
granted prior to 2006 that are subject to accelerated vesting upon retirement
eligibility is being recognized over the vesting term of the grant, even though
the service period after retirement eligibility is not considered to be a
substantive vesting requirement. The impact of this change was not significant.
All employees may receive stock option grants. In virtually all instances, stock
options vest after three years of continuous service from the grant date and
have a contractual term of ten years; for certain members of management, vesting
typically occurs in equal annual installments after three, four and five years
from the grant date. In all cases, even for stock options that are subject to
accelerated vesting upon voluntary retirement, stock options must be held for at
least one year from grant date before any vesting may occur. In the event of a
divestiture, options held by employees of the divested business are immediately
vested and are exercisable from three months to their remaining term, depending
on various conditions.
The fair value of each stock option grant is estimated on the grant date using,
for virtually all grants, the Black-Scholes-Merton option-pricing model. These
fair values incorporate a number of valuation assumptions noted in the following
table, shown at their weighted-average values:
Three Months Ended Nine Months Ended
------------------ -----------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
2006 2005 2006 2005
------- ------- ------- -------
Expected dividend yield (a) 3.65% 2.76% 3.66% 2.90%
Risk-free interest rate (b) 4.87% 3.81% 4.59% 3.96%
Expected stock price volatility (c) 22.85% 20.00% 24.50% 21.93%
Expected term (d) (years) 10 5.59 6 5.75
(a) Determined using a constant dividend yield during the expected term of the
option.
(b) Determined using the extrapolated yield on U.S. Treasury zero-coupon
issues.
(c) Determined using implied volatility, after consideration of historical
volatility.
(d) Determined using historical exercise and post-vesting termination patterns.
In the third quarter of 2006, the use of historical patterns was deemed
inappropriate as virtually all of the option-grant activity related to a
single individual; instead, the contractual term of the options was used.
18
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
During the nine months ended October 1, 2006, 3,229,707 options were granted to
PCH employees with a weighted average exercise price of $26.20.
In the first quarter of 2006, Pfizer changed its method of estimating expected
stock price volatility to reflect market-based inputs under emerging stock
option valuation considerations. The implied volatility in a long-term traded
option was used, after consideration of historical volatility. In 2005, Pfizer
used an average term structure of volatility quoted to Pfizer by financial
institutions, after consideration of historical volatility.
C. Restricted Stock Units
RSUs, which entitle the holder to receive, at the end of a vesting term, a
specified number of shares of Pfizer common stock, including shares resulting
from dividend equivalents paid on such RSUs, are accounted for at fair value at
the date of grant. Most RSUs vest in substantially equal portions each year over
five years of continuous service; the fair value related to each year's portion
is then amortized evenly into Cost of sales, Selling, informational and
administrative expenses and Research and development expenses, as appropriate.
For certain members of senior and key management, vesting may occur after three
years of continuous service.
The fair value of each RSU grant is estimated on the grant date using the
average price of Pfizer common stock on the date of grant.
D. Performance Share Awards (PSAs) and Performance-Contingent Share Awards
(PCSAs)
PSAs in 2006 and PCSAs prior to 2006 entitle the holder to receive, at the end
of a vesting term, a number of shares of Pfizer common stock, within a specified
range of shares, calculated using a non-discretionary formula that measures
Pfizer's performance relative to an industry peer group. PSAs are accounted for
at fair value at the date of grant in the income statement beginning with grants
in 2006. Further, PSAs are generally amortized on an even basis over the vesting
term into Cost of sales, Selling, informational and administrative expenses and
Research and development expenses, as appropriate. For grants in 2005 and
earlier years, PCSA grants are accounted for using the intrinsic value method in
the income statement.
Senior and other key members of management may receive PSA and PCSA grants. In
most instances, PSA grants vest after three years and PCSA grants vest after
five years of continuous service from the grant date. In certain instances, PCSA
grants vest over two to four years of continuous service from the grant date.
The vesting terms are equal to the contractual terms.
As of January 1, 2006, Pfizer measures PSA grants at fair value using the
average price of Pfizer common stock on the date of grant times the target
number of shares. The target number of shares is determined by reference to the
fair value of share-based awards to similar employees in the industry peer
group. Pfizer measures PCSA grants at intrinsic value whereby the probable award
was allocated over the term of the award, then the resultant shares are adjusted
to the fair value of Pfizer common stock at each accounting period until the
date of payment.
E. Restricted Stock
Restricted stock grants, which entitle the holder to receive, at the end of a
vesting term, a specified number of shares of Pfizer common stock, and which
also entitle the holder to receive dividends paid on such grants, are accounted
for at fair value at the date of grant.
Senior and key members of management received restricted stock awards prior to
2005. In most instances, restricted stock grants vest after three years of
continuous service from the grant date. The vesting terms are equal to the
contractual terms. These awards have not been significant.
19
PFIZER CONSUMER HEALTHCARE
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 1, 2006
(DOLLARS IN THOUSANDS)
F. Transition Information
The following table shows the effect on results for the three months and nine
months ended October 2, 2005 as if Pfizer had applied the fair-value-based
recognition provisions of SFAS 123R to measure stock-based compensation expense
for the option grants:
Three Months Nine Months
Ended Ended
Oct. 2, 2005 Oct. 2, 2005
------------ ------------
Net income as reported under GAAP(a) $105,044 $281,928
Compensation expense - net of tax(b) (3,741) (12,281)
-------- --------
Net income pro forma $101,303 $269,647
======== ========
(a) Includes stock-based compensation expense, net of related tax effects, of
$1,090 and $3,006 for the three months and nine months ended October 2,
2005.
(b) Pro forma compensation expense related to stock options that are subject to
accelerated vesting upon retirement is recognized over the period of
employment up to the vesting date of the grant.
14. LEGAL PROCEEDINGS AND CONTINGENCIES
PCH is involved in various patent, product liability, consumer, environmental
and tax claims and litigations that arise from time to time in the ordinary
course of business. PCH believes that they have a valid defense with respect to
the legal matters pending against them and, taking into account insurance and
reserves, PCH believes that the ultimate resolution of these matters will not
have a material adverse impact on financial condition, results of operations, or
cash flows. It is possible; however, that cash flows or results of operations
could be affected in any particular period by the resolution of one or more of
these contingencies.
In the combined balance sheet, Other current liabilities include $1.5 million
for estimated environmental remediation at PCH facilities in Australia and New
Jersey.
15. SUBSEQUENT EVENTS
On December 20, 2006, Pfizer completed the sale of PCH to Johnson & Johnson for
$16.6 billion.
20