-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IAj/Vq1+HZS8a4UlzmZ7Ed2JuZaN0f6Od8c1yKJ5RdV5ANGSGrVOHA5vkMP1YOew 5/6q3o1ht7gmm2cqC57Kfw== 0000912057-96-005586.txt : 19960401 0000912057-96-005586.hdr.sgml : 19960401 ACCESSION NUMBER: 0000912057-96-005586 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PFIZER INC CENTRAL INDEX KEY: 0000078003 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 135315170 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03619 FILM NUMBER: 96541471 BUSINESS ADDRESS: STREET 1: 235 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125732323 MAIL ADDRESS: STREET 1: 235 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: PFIZER CHARLES & CO INC DATE OF NAME CHANGE: 19710908 10-K 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K --------------- (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-3619 PFIZER INC. (Exact name of registrant as specified in its charter) DELAWARE 13-5315170 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 235 East 42nd Street New York, New York 10017 (Address of principal executive (Zip Code) offices)
(212) 573-2323 (Registrant's telephone number including area code) ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, $.05 par value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange 4% Convertible Subordinated Debentures Due 1997 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of the voting stock held by non-affiliates of the registrant computed by reference to the closing price at which the stock was sold as of February 26, 1996 was approximately $42.1 billion. The number of shares outstanding of each of the registrant's classes of common stock as of February 26, 1996 was: 639,181,479 shares of common stock, all of one class. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for the fiscal year ended December 31, 1995 Parts I, II and IV Proxy Statement dated March 19, 1996 Part III - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS PART I
ITEM PAGE - ----- ---- 1. Business......................................................... 2 General.......................................................... 2 Comparative Segment and Geographic Data.......................... 2 Health Care...................................................... 2 Animal Health.................................................... 5 Consumer Health Care............................................. 5 Discontinued Operations: Food Science Business................... 6 Financial Subsidiaries........................................... 6 International Operations......................................... 6 Tax Matters...................................................... 7 Patents and Research............................................. 8 Employees........................................................ 8 Regulation....................................................... 8 Raw Materials and Energy......................................... 9 Environment...................................................... 9 2. Properties....................................................... 10 3. Legal Proceedings................................................ 12 4. Submission of Matters to a Vote of Security Holders.............. 16 4a. Executive Officers of the Company................................ 17 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................................... 22 6. Selected Financial Data.......................................... 22 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 22 8. Financial Statements and Supplementary Data...................... 22 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ 22 PART III 10. Directors and Executive Officers of the Registrant............... 22 11. Executive Compensation........................................... 23 12. Security Ownership of Certain Beneficial Owners and Management... 23 13. Certain Relationships and Related Transactions................... 23 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................................. 23 Signatures....................................................... 25 Financial Statement Schedule Exhibit 11 Exhibit 12 Exhibit 23 Exhibit 99
PART I ITEM 1. BUSINESS GENERAL Pfizer Inc. (the "Company") is a research-based global health care company. The Company discovers, develops, manufactures and sells innovative technology-intensive products in three business segments: Health Care, which includes a broad range of prescription pharmaceuticals, orthopedic implants, medical devices and surgical equipment; Animal Health, which includes animal health products and feed supplements; and Consumer Health Care, which includes a variety of nonprescription drugs and personal care products. Additionally, the Company's Financial Subsidiaries include a banking operation in Europe and a small captive insurance operation. COMPARATIVE SEGMENT AND GEOGRAPHIC DATA Comparative segment information and geographic data as of and for the years ended December 31, 1995, 1994 and 1993 are set forth on pages 40 and 41, and in the Note "Financial Subsidiaries" on page 47 and a description of the Company's business segments is set forth on page 58 of the Company's Annual Report to Shareholders for the year ended December 31, 1995 and are incorporated herein by reference. HEALTH CARE The Company's Health Care business is comprised of pharmaceuticals and hospital products. The Company competes with numerous other health care companies in the discovery and development of new, technologically advanced pharmaceutical and hospital products; in seeking use of its products by the medical profession; and in the sale of its product lines to wholesale and retail outlets, public and private hospitals, managed care organizations, government and the medical profession. The principal methods of competition in health care vary by product category. There are a significant number of innovative companies in the field. A critical factor in most markets in which the Company competes is the ability to offer technological advances over competitive products. The productivity of scientific discovery and clinical development efforts is central to long-term operational success since there are many companies that specialize in marketing products that no longer have patent or regulatory protection. Other important factors in these markets include the ability to transfer knowledge of technological advances to the medical community, product quality, prompt delivery and price. The United States pharmaceutical marketplace has in recent years experienced intensified price competition, brought about by a range of market forces, including: new product development, increased generic competition, growth of managed care organizations and legislation requiring pharmaceutical companies to provide rebates and discounts to government agencies. Similar competitive forces, in varying degrees, have also been present in various other countries in which the Company operates. Prescription pharmaceutical and hospital products, both in the United States and abroad, are promoted directly to physicians, as well as to a variety of managed care organizations. The Company conducts corporate advertising nationally, using both print and television media, to inform the general public about the Company and its innovative medical research. Certain specific products have also been advertised directly to consumers beginning in 1995. Pharmaceutical products are distributed in large part to wholesalers, retail outlets, hospitals, clinics, government agencies and managed care organizations. Hospital products are generally sold directly to medical institutions and, in some cases, through distributors and surgical supply dealers. 2 PHARMACEUTICALS The Company's worldwide pharmaceutical products are comprised primarily of drugs which fall into the following major therapeutic classes: cardiovasculars, anti-infectives, central nervous system agents, anti-inflammatories and antidiabetes agents. In 1995, pharmaceuticals contributed 71% of the Company's consolidated net sales, as compared to 73% in 1994 and 72% in 1993. Increases in both United States and international pharmaceutical revenues in 1995 were principally the result of strong sales of products launched in the 1990s, including Norvasc (amlodipine besylate), Cardura (doxazosin mesylate), Diflucan (fluconazole), Zithromax (azithromycin), Zoloft (sertraline) and Glucotrol XL (glipizide GITS). Cardiovascular products are the Company's largest therapeutic product line accounting for 30% of the Company's 1995 consolidated net sales as compared to 30% and 28% in 1994 and 1993, respectively. Sales of these products grew 23% in 1995, including a 65% increase in sales of Norvasc, a long-lasting (once-a-day) calcium channel blocker for hypertension and angina, as well as a 32% increase in sales of Cardura, an alpha blocker for hypertension. Sales of Procardia XL (nifedipine GITS), a long-lasting (once-a-day) calcium channel blocker for hypertension and angina, decreased by 4% in 1995. A supplemental New Drug Application for the use of Cardura in the treatment of benign prostatic hyperplasia ("BPH"), an enlargement of the prostate gland, was approved by the United States Food and Drug Administration ("FDA") in February 1995. Usage of Cardura for this indication contributed to its increase in sales for the year. Worldwide anti-infective sales increased 23% in 1995 mainly on the strength of Diflucan and Zithromax. U.S. anti-infective sales grew 24% while international sales rose by 22%. Diflucan, an anti-fungal agent, is indicated for use in a variety of fungal infections including certain types which afflict AIDS and immunosuppressed cancer patients. The product also received U.S. approval for the indication of vaginal candidiasis in 1994. Diflucan posted a sales increase of 22% in 1995 and Zithromax, an oral antibiotic, posted a sales increase of 97%. Part of the growth of Zithromax in the U.S. can be attributed to the October 1995 approval from the FDA for pediatric use of Zithromax oral suspension for acute otitis media and streptococcal pharnygitis/tonsillitis. Total anti-infective sales accounted for 21% of the Company's consolidated 1995 net sales, compared to 22% in 1994 and 23% in 1993. U.S. sales of Pfizer's central nervous system agents rose 41% in 1995, reflecting increased sales of Zoloft, an anti-depressant introduced in the U.S. in 1992. In August 1995, the Company received an approvable letter from the FDA for an indication of obsessive compulsive disorder ("OCD"). Central nervous system agents grew to 11% of the Company's consolidated 1995 net sales from 10% in 1994 and 7% in 1993. In September 1995, the Company received an approvable letter from the FDA for pediatric use of the antihistamine, Zyrtec (cetirizine HCl). In December 1995, the FDA granted marketing clearance to Zyrtec for the treatment of seasonal and perennial allergic rhinitis, and chronic urticaria. 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 S.A., will copromote Zyrtec in the U.S. This product was launched in Canada in 1991 under the name Reactine. It was launched in the United States in February 1996. In February 1996, the Company acquired Bioindustria Farmaceutici S.p.A. an Italian company engaged in the production and distribution of prescription and over-the-counter pharmaceutical products. 3 The Company currently is seeking approval by the FDA for the following products for the indications listed:
PRODUCT INDICATIONS DATE FILED - ----------- ------------------------------------------------------ ------------- Zithromax Lower respiratory tract infection -- pediatric December 1995 Zithromax MYCOBACTERIUM AVIUM COMPLEX (MAC) December 1995 Zithromax Atypical pneumonia December 1995 Zoloft Panic disorder December 1995 Norvasc Safety-label change for treatment of hypertension and April 1995 angina among those with congestive heart failure Zithromax Certain sexually transmitted diseases December 1994 tenidap Osteo- and rheumatoid arthritis December 1993 Unasyn Injectible antibiotic -- pediatric November 1993 Zyrtec Pediatric January 1993 Zoloft Obsessive-compulsive disorder May 1992
In addition, the Company has marketing rights in the United States and Japan to XOMA Corporation, Inc.'s E5, a monoclonal antibody for the treatment of gram negative sepsis, which is undergoing FDA regulatory review. HOSPITAL PRODUCTS The Company's Hospital Products Group consists of two divisions -- Howmedica and the Medical Devices Division. Howmedica manufactures and markets orthopedic implants. Medical Devices consists of four core businesses -- Schneider, NAMIC U.S.A. Corporation ("NAMIC"), Valleylab and American Medical Systems as well as smaller businesses, including Strato/Infusaid. In 1995, the sales of the Hospital Products Group accounted for 13% of the Company's consolidated net sales compared with 14% in 1994 and 15% in 1993. Howmedica's reconstructive hip, knee and bone cement products are used to replace joints which have deteriorated as a result of disease or injury. Howmedica's internal and external fixation devices are used by orthopedic surgeons to manage bone fractures. In January 1996, Pfizer acquired the Leibinger Companies headquartered in Freiburg, Germany and Dallas, Texas. The Leibinger Companies, which will operate as a division of Howmedica, are leaders in the development, manufacture and distribution of implantable devices used in oral and craniomaxillofacial surgery and specialty surgical instruments. They have also pioneered advances in stereotaxy equipment and computer software for sophisticated neurological procedures. Schneider, an international leader in angioplasty catheters, is a leading supplier of stents for vascular and non-vascular applications. NAMIC, acquired in March 1995, designs, manufactures and markets a broad range of single-patient-use medical products, primarily for use in the diagnosis and treatment of atherosclerotic cardiovascular disease. NAMIC's product lines complement those of Schneider and are expected to expand opportunities for both businesses. Valleylab is a leading manufacturer of electrosurgical and ultrasonic surgical equipment used in open and minimally invasive surgical procedures. Valleylab continues to invest in new product lines to improve surgical outcomes and enhance both patient and physician safety. American Medical Systems is a manufacturer and marketer of impotence and incontinence implants. In September 1995, AMS entered into an agreement with Reprogenesis L.P. to collaborate on novel applications of tissue engineering for the treatment of urological disorders. 4 Strato/Infusaid is a manufacturer and supplier of vascular access devices and advanced drug delivery systems. In October 1995, Strato/Infusaid received FDA approval for sale of implantable pumps for the intrathecal administration of morphine. ANIMAL HEALTH In January 1995, the Company acquired the SmithKline Beecham Animal Health ("SBAH") business, a world leader in animal vaccines and companion animal health products, which complemented the Company's existing animal health business in terms of product, species and geographic sales coverage. The acquired business has been fully integrated into the Company's animal health business. The Company's Animal Health Group discovers, develops, manufactures and sells animal health products for the prevention and treatment of diseases in livestock, poultry, companion animals and other animals. The Company is a significant manufacturer of injectable antibiotics, anthelmintics and anticoccidial products for food animals, and with the acquisition of SBAH, the Company became a significant manufacturer of biologicals and pet products. In 1995, the Animal Health Group contributed 12% of the Company's consolidated net sales, compared with 8% in 1994 and in 1993. The principal products of the Animal Health Group are: Dectomax (doramectin), the Company's antiparasitic which was first launched in 1993 and is now available in much of Latin America, South Africa and Europe; Stafac (virginiamycin), a feed additive anti-infective for poultry, cattle and swine; Terramycin LA-200 (oxytetracycline) (marketed as TM/LA outside of North America), a broad-spectrum injectable antibiotic; the Banminth (pyrantel tartrate), Nemex (pyrantel pamoate) and Paratect (morantel tartrate) anthelmintics; Coxistac and Posistac (salinomycin) anticoccidials primarily for poultry; Valbazen (albendazole), a bovine parasiticide; Terramycin (oxytetracycline), a broad-spectrum antibiotic used for a variety of animal diseases; Mecadox (carbadox), an antibacterial for pigs; and Advocin (danofloxacin), the Company's new antibacterial for treating respiratory diseases in livestock and poultry. Aviax (semduramicin), a potent, broad-spectrum ionophore anticoccidial used to prevent coccidiosis in poultry, was launched in 1995 in Japan and Latin America. The Company also manufactures and sells an extensive line of cattle, swine and companion animal vaccines including BoviShield, Leukocell, RespiSure and Vanguard. Animal health and nutrition products are sold through veterinarians, drug wholesalers, distributors, retail outlets and directly to users, including feed manufacturers and animal producers. The principal methods of competition with respect to animal health products vary somewhat but include product innovation, service, price, quality and effective transfer of technological advances to the market through advertising and promotion. A substantial number of other companies manufacture and sell one or more products that are similar to the Company's animal health products. There are hundreds of producers of animal health products throughout the world. CONSUMER HEALTH CARE The Company's Consumer Health Care Group's products include proprietary health items, baby care products and toiletries, and a number of products sold only in selected international markets, including Vanart hair care products in Mexico and Migraleve over-the-counter ("OTC") migraine medication and the TCP line of antiseptic and germicidal products marketed primarily in the United Kingdom. Among the better-known OTC brands manufactured and marketed by Consumer Health Care are Visine (tetrahydrozoline HCl) eyedrops, Ben-Gay topical analgesics, Desitin diaper rash ointments, Unisom (doxylamine succinate) sleep aids, Plax pre-brushing dental rinse, Rid anti-lice products and Barbasol shave creams and gels. Line extensions introduced in recent years include: Unisom SleepGels, soft liquid-filled gels with a maximum-strength sleep aid formula; Daily Care from Desitin, a lotion for the prevention of diaper rash; Barbasol Pure Silk women's shave products; and new 5 formulations of Rid and Plax. In August 1995, the Company purchased Bain de Soleil skin care products from Procter & Gamble. In March 1996, the Company agreed to acquire the Cortizone and Hemorid brands from Thompson Medical Co., Inc. Cortizone is a leading brand of over-the-counter hydrocortisone products and Hemorid is the only brand of hemorrhoidal preparations expressly designed for women. The Company completed several successful prescription--to--over-the-counter (OTC) launches in 1995. An OTC version of Reactine, Canada's leading Rx antihistamine (cetirizine HCl), was launched in that country in April. OTC formulations of tioconazole were introduced in Canada as GyneCure for vaginal candidiasis and Trosyd AF for athlete's foot. In November, Diflucan One (fluconazole) was launched in the United Kingdom as a one-pill OTC treatment for vaginal candidiasis. In February 1996, Juscoat (piroxicam gel) was launched in Japan for treatment of chronic shoulder and back pain. Many other companies, large and small, manufacture and sell one or more products that are similar to the Company's consumer health products. The Company is a significant competitor in this extensive OTC market, and its principal methods of competition include product quality, product innovation, customer satisfaction, broad distribution capabilities, significant advertising and promotion efforts and price. In general, the winning and retaining of consumer acceptance of the Company's consumer products involve heavy expenditures for advertising, promotion and marketing. DISCONTINUED OPERATIONS: FOOD SCIENCE BUSINESS 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 Company's business or the food science business, is expected to be completed over several years. The food science business has been reported in the Company's financial statements as a discontinued operation. FINANCIAL SUBSIDIARIES The Company conducts international banking operations through a subsidiary, Pfizer International Bank Europe (PIBE), based in Dublin, Ireland. PIBE, incorporated under the laws of Ireland, operates under a full banking license from the Central Bank of Ireland. It makes loans and accepts deposits in a number of currencies in international markets. PIBE is an active Euromarket lender through its portfolio of loans and money market instruments to high quality corporations and sovereigns. Loans are made on a short and medium term basis, with floating interest rates. The Company's insurance operation, The Kodiak Company Limited, reinsures certain assets, inland transport and marine cargo of Pfizer's international operations. INTERNATIONAL OPERATIONS Outside the United States, the Company has significant operations, both direct and through distributors that, in general, parallel its United States businesses. 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% of total net sales. The Company's international businesses are subject, in varying degrees, to a number of risks inherent in carrying on business in certain countries outside the United States, including possible nationalization, expropriation and other restrictive government actions such as capital regulations. In addition, the values of currencies change and can either favorably or unfavorably impact the financial position and the results of operations of the Company. It is impossible to predict future changes in foreign exchange values or the effect they will have on the Company. The Company actively manages its foreign exchange risk through a variety of techniques including the use of foreign currency contracts. In addition, the 6 Company engages in hedging programs designed to protect selected balance sheet positions and future cash flow exposures. Further information with respect to the financial instruments used to carry out these hedging programs is incorporated by reference to the note entitled "Financial Instruments and Concentrations of Credit Risk" beginning on page 47 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. TAX MATTERS 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. For tax years beginning after December 31, 1993, the Omnibus Budget Reconciliation Act of 1993 ("OBRA") reduced by 40% the benefits accruing to the Company under Section 936 of the Internal Revenue Code (the "Puerto Rico tax credit"). Such tax benefits will decline an additional five percentage points per year through 1998. For tax years beginning after December 31, 1997, the Puerto Rico tax credit will be fixed at 40% of the level allowed prior to the enactment of OBRA. 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. 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 Belgium tax laws and the written opinions of outside legal 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. 7 PATENTS AND RESEARCH The Company owns or is licensed under a number of patents relating to its products and manufacturing processes which, in the aggregate, are believed to be of material importance in its businesses. Based on current product sales, and in view of the vigorous competition with products sold by others, the Company does not consider any single patent or related group of patents to be significant in relation to the enterprise as a whole, except for the Procardia XL, Zithromax, Diflucan, Zoloft and Norvasc patents. Procardia XL employs a novel drug delivery system developed and patented by Alza Corporation. The Company holds an exclusive license to use this delivery system with nifedipine until 2003. In mid-1993, the FDA approved a New Drug Application (" 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. Other forms of sustained-release nifedipine have been reported to be in various stages of development and in the marketplace by other companies. It is not possible to predict the timing and impact on sales of Procardia XL of possible future competition. Zithromax is a novel, broad spectrum macrolide antibiotic patented by Pliva and exclusively licensed to the Company for sales and marketing in all major countries of the world. The U.S. product patent on Zithromax (azithromycin) expires in 2005. The Company holds patents relating to Diflucan, Zoloft, and Norvasc. The Company spent in excess of $1.4 billion in 1995, $1.1 billion in 1994, and $960 million in 1993 on Company-sponsored research and development throughout the world. In 1996, the Company plans to spend approximately $1.7 billion on research and development. In 1991, the Company also established Pfizer Research and Development Company (PRDCO) in Ireland. In 1992, the Company provided PRDCO with an initial capitalization of approximately $1 billion to enable PRDCO to engage in research and development through a cost-sharing arrangement with Pfizer Ltd. (a Pfizer U.K. subsidiary) in exchange for PRDCO's receiving a portion of property rights relating to the development of specific products. Competition in research, involving the development of new products and processes and the improvement of existing products and processes, is particularly significant and results from time to time in product and process obsolescence. The development of new and improved products is important to the Company's success in all areas of its business. EMPLOYEES As of December 31, 1995, the Company employed approximately 43,800 persons in its continuing operations throughout the world as follows: United States, 17,800; Europe, 12,500; Asia, 7,200; Canada/Latin America, 4,900; and Africa/Middle East, 1,400. The Company has a good relationship with its employees. The Food Science business, which was sold in January 1996, employed approximately 500 persons as of December 31, 1995. REGULATION Most of the Company's businesses are subject to varying degrees of governmental regulation in the countries in which operations are conducted. Such regulation in the United States involves a more complex product approval process than in many other countries and therefore often results in later marketing clearances and a corresponding increase in the expense of introducing new products in the United States. In many international markets, prices of pharmaceuticals are controlled by the government. The 1990 Omnibus Budget Reconciliation Act requires pharmaceutical companies to extend rebates to state Medicaid agencies based on each state's reimbursement of pharmaceutical products under the Medicaid program. The Veterans Health Care Act, passed in 1992, requires manufacturers to provide discounts on purchases of pharmaceutical products by the Department of Veterans Affairs ("DVA") and by certain entities funded by the Public Health Service. The Company's net sales in 1995 8 were reduced by Medicaid rebates and rebates under related state programs which amounted to $85 million. In addition, in 1995, Pfizer provided $80 million in discounts to the federal government, primarily to the DVA and the Department of Defense, for drugs purchased in accordance with the Veterans Health Care Act. In 1990, the FDA announced a call for data for ingredients contained in products bearing anti-plaque and related claims. The call for data is part of the FDA's ongoing review, begun in 1972, of OTC drug products. The FDA is taking this administrative approach to evaluate the safety and efficacy of anti-plaque products and has not proceeded further with regard to 1989 regulatory letters it issued to the Company and several other manufacturers of products bearing anti-plaque claims. The Company submitted its response to the call for data relating to Plax, its pre-brushing dental rinse, on June 17, 1991. This filing, as well as filings of other manufacturers, is still under review and is currently being considered by an FDA Advisory Panel. On January 1, 1995, the new European Medicines Evaluation Agency ("EMEA") instituted a new drug-approval process for the member states of the European Union ("EU"). The EMEA provides two new drug-approval procedures. A "centralized procedure" supplements the traditional decentralized approach and allows for a single central approval that is valid in all EU states. The first such approval, for a non-Pfizer pharmaceutical, was issued in 1995. While it is envisioned that it will take several years for EMEA to be fully operational, it is expected that a harmonized, centralized regulatory agency in Europe would offer benefits to the human and veterinary drug industries. The Company continues to assess developments in this area and is implementing strategies designed to maximize benefits to the Company's products. During 1995, Congress set aside its debate on reform of the U.S. healthcare system and focused on balancing the Federal budget. As part of the budget process, proposals from both parties call for substantial reforms of the Medicare and Medicaid programs. As with the Congressional coordination of healthcare reform in 1994, Congress has not, to date, been able to reach a consensus. If consensus is reached, and Medicare and/or Medicaid legislation is enacted, it may require significant reductions from currently projected expenditures for the Medicare and Medicaid programs. Medicaid managed care systems driven by budget concerns are already under consideration in several states. If the Medicare and Medicaid programs implement systems that severely restrict the access of program participants to innovative new medicines, this could have a significant adverse effect on the Company. RAW MATERIALS AND ENERGY Raw materials essential to the business of the Company and its subsidiaries are generally obtainable from multiple sources. The Company did not experience any significant restrictions on availability of raw materials or supplies during the last year and none is expected in 1996. Energy was available to the Company in sufficient quantities to meet Company requirements and this condition is expected to continue in 1996. ENVIRONMENT Certain of the Company's operations are affected by Federal, State and local laws and regulations relating to environmental quality. The Company has made and intends to continue to make the 9 necessary expenditures for environmental protection. Compliance with such laws and regulations is not expected to have a material adverse effect on the financial position or the results of operations of the Company.
UNITED ALL STATES OTHER TOTAL ------ ----- ----- (MILLIONS OF DOLLARS) Environment-related capital expenditures: 1995 Actual.......................................... $41.9 $ 4.0 $45.9 1996 Estimated....................................... 49.5 11.8 61.3 1997 Estimated....................................... 42.7 3.5 46.2 Other environmental-related expenses: 1995 Actual.......................................... 35.7 13.0 48.7 1996 Estimated....................................... 43.5 20.3 63.8
ITEM 2. PROPERTIES Following is a summary description of the Company's principal plants and properties: The Company's world headquarters is located at 235 East 42nd Street, New York, NY. The Company owns this 33-story office building which contains approximately 650,000 square feet. The building stands on slightly less than one acre of land which is leased under an agreement expiring in 2057. In 1983, the Company purchased a nine-story office building located at 219 East 42nd Street, containing approximately 263,400 square feet which is immediately adjacent to the Company's headquarters. The Company also leases additional office space in New York City consisting of approximately 111,000 square feet. All of the following properties are owned in fee by the Company. Groton Research Laboratories and Plant Facilities -- These facilities are located in Groton, Connecticut, and surrounding towns, on approximately 649 acres, and include a number of buildings of one to eight stories, containing approximately 3,088,000 square feet of floor space either existing or under construction. In the research complex at Groton, construction of significant new buildings is continuing, with major expansion (116,000 square feet) of the pharmaceutical research and development facilities scheduled for completion in 1996. Construction was completed in 1993 on several research expansions including a 156,000-square-foot drug-safety building addition, a 30,000-square-foot central-utilities building, and a 442,000-square-foot parking facility. Principal products produced at Groton are bulk pharmaceuticals. Since acquiring the plant in 1946, the Company has made major improvements, including construction of production facilities, a powerhouse and generating equipment and a large research complex adjacent to the plant. In 1992, major improvements to plant facilities were initiated, including a process effluent and waste water treatment facility and a major pharmaceutical capacity replacement project. Both projects are expected to be completed in 1996. Brooklyn Plant -- The Company's site in Brooklyn, New York, is on approximately 17 acres, including a number of buildings containing approximately 596,000 square feet of floor space. The primary operations, pharmaceutical dosage-form manufacturing and packaging, are housed in an eight-story production facility containing 545,000 square feet. Memphis Logistics Center -- This distribution and order fulfillment operation is located on a 20-acre site in Memphis, Tennessee. Three former distribution centers (Atlanta, Chicago and Dallas) merged into the Memphis Logistics Center in 1995, creating this geographically centralized facility. The Center provides the Company with 262,440 square feet of warehouse space and 15,000 square feet of office space. In addition, the warehouse has the capability of expanding by another 175,000 square feet. Besides distribution and transportation services, the Memphis facility is also used as a center for certain customer service operations of the Company. 10 Vigo Plant and Research Facility -- These facilities, located in Vigo County near Terre Haute, Indiana, are on a site of approximately 2,000 acres and consist of a number of buildings of one to five stories containing approximately 575,000 square feet of floor space. Principal products produced at this plant are pharmaceutical products and bulk antibiotics. Animal health research is also performed on this site. The acreage and floor space reflect the sale of Pfizer's Food Science Group to Cultor Ltd. The sale was consummated on January 28, 1996. Barceloneta Plant -- Pfizer Pharmaceuticals Inc. is located on an 89-acre property owned by the Company at Barceloneta, Puerto Rico. An additional 151 acres of land adjacent to this property were purchased in 1991 for future utilization. An adjacent 9-acre site was purchased in 1995 and integrated into existing facilities. The facilities contain four major manufacturing buildings (of two to four floors) and twelve support buildings with a total approximate area of 419,700 square feet of floor space; and ten additional facilities (tank farms, electrical substations, cooling towers, etc.) with an approximate area of 81,000 square feet, for a total plant facilities area of approximately 500,700 square feet. The plant houses organic synthesis manufacturing, pharmaceutical dosage-form manufacturing and packaging facilities and the required service areas, such as bulk and drum liquid storage, laboratories, utilities, engineering shops, employee services and administration. Lincoln Plant and Research Facility and Lee's Summit Facility -- The Company's principal Animal Health facilities are located in Lincoln, Nebraska and Lee's Summit, Missouri. The extensive Lincoln property encompasses 850,651 square feet, including a biological production facility covering 285,348 square feet of floor space, a pharmaceutical production facility covering 87,640 square feet, 18 satellite buildings and two offsite research farms. Operations at Lincoln include a manufacturing center for biological and pharmaceutical animal health products, and a research and development center for biological products. The Lee's Summit Facility is located on a site of approximately 104 acres owned by the Company in the City of Lee's Summit, Jackson County, Missouri. There are five major buildings on the site of one to five floors with a total floor space of approximately 215,000 square feet. Primary operations at the facility are manufacturing and packaging of sterile injectible products, blending and packaging of medicated premix products, and distribution operations. Other U.S. Locations -- The Company also operates 9 other production facilities in the United States and has five regional sales centers and two additional distribution centers in various parts of the country which are owned in fee. Outside the United States -- The Company's major manufacturing facilities outside the United States are located in Australia, Belgium, Brazil, China, France, Germany, Great Britain, India, Ireland, Italy, Japan, Mexico and Venezuela. The plants in these thirteen countries have an aggregate of over 2.5 million square feet of floor space. Other plants are located in over 16 other countries around the world. Sandwich -- A large medicinal and animal health research unit is located in Sandwich, England where an 82,000-square-foot clinical-sciences building became operational in 1993 and a 99,000-square-foot animal-sciences building became operational in early 1994. Construction of a 97,000-square-foot pharmaceutical sciences building is in the advanced stage of completion. An effluent treatment plant is also under construction for this site. Ringaskiddy -- The Ringaskiddy facility in Ireland comprises three fully operational bulk organic synthesis manufacturing plants which are of key importance to bulk organic substance sourcing. The last unit began operating in early 1995 and is now operating at design capacity. Ringaskiddy manufactures the majority of bulk products required by the International Pharmaceuticals Group in its worldwide dosage-form operations. These manufacturing plants, which are computer controlled, provide considerable flexibility in supplying both the current and foreseeable requirements for the Group. The facility also has the capacity to support the manufacture of substances being developed for 11 future products. Ringaskiddy's manufacturing operations are self-supported by a modern and efficient infrastructure, providing such services as utilities, quality assurance, environmental treatment systems and maintenance. Nagoya -- The Nagoya facility in Japan encompasses several significant individual operations in addition to its research function and is the sole supplier of certain bulk substances. Fermentation, bulk organic synthesis and dosage-form manufacturing are important to the supply of the Company's operations in Japan (the country with the largest sales after the United States) as well as elsewhere in the world. Various facilities on the site are computer controlled and, similar to Ringaskiddy, the manufacturing operations are self-supported by utility services, quality assurance, environmental treatment systems and maintenance functions. Manufacturing facilities for fermentation and refining are being expanded to meet the growing demand for specialized drug substances and are expected to be operational by the end of 1996. In addition to the facilities outlined above, research laboratories also exist in France and Germany. The Company's major manufacturing facilities in the U.S. and the other locations referred to above manufacture various products for all of the Company's businesses. These properties are maintained in good operating condition and the manufacturing facilities have capacities considered adequate to meet the Company's needs. ITEM 3. LEGAL PROCEEDINGS 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 DEG. or 70 DEG. 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 12 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 13 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, 14 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, consumer 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 have been 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 generally seek damages and certain injunctive relief, are without merit. Schneider (USA) Inc. and Schneider (Europe) AG have been named, together with Advanced Cardiovascular Systems, 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 15 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. Information on income tax adjustments proposed by the U.S. and Belgian tax authorities is incorporated by reference to the Tax Matters section in Item 1 on page 7. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 16 ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
AGE AS OF THE DATE OF THE COMPANY'S ANNUAL MEETING APRIL 25, POSITIONS AND OFFICES NAME 1996 WITH COMPANY PRESENTLY HELD - -------------------- ----------------- ------------------------------------------------------- Brian W. Barrett.... 56 Vice President; Executive Vice President -- International Pharmaceuticals Group M. Kenneth Bowler... 53 Vice President -- Federal Government Relations C. L. Clemente...... 58 Senior Vice President -- Corporate Affairs; Secretary and Corporate Counsel; Member of the Corporate Management Committee Bruce R. Ellig...... 59 Vice President -- Employee Resources Donald F. Farley.... 53 Vice President; President -- Consumer Health Care Group George A. Forcier... 57 Vice President -- Quality Control P. Nigel Gray....... 57 Vice President; President -- Hospital Products Group Gary N. Jortner..... 51 Vice President; Group Vice President, Disease Management -- U.S. Pharmaceuticals Group Karen L. Katen...... 47 Vice President; President -- U.S. Pharmaceuticals Group Alan G. Levin....... 34 Treasurer Henry A. 53 Executive Vice President; Member of the Corporate McKinnell.......... Management Committee Brower A. Merriam... 61 Vice President; President -- Animal Health Group Victor P. Micati.... 56 Vice President; Executive Vice President -- International Pharmaceuticals Group Paul S. Miller...... 57 Senior Vice President; General Counsel; Member of the Corporate Management Committee George M. Milne, 52 Jr................. Vice President; President -- Central Research Robert Neimeth...... 60 Executive Vice President; President -- International Pharmaceuticals Group; Member of the Corporate Management Committee John F. Niblack..... 57 Executive Vice President -- Research and Development; Member of the Corporate Management Committee William J. 60 Robison............ Senior Vice President -- Employee Resources Herbert V. Ryan..... 59 Controller Craig Saxton........ 53 Vice President; Executive Vice President -- Central Research David L. Shedlarz... 48 Vice President -- Finance and Chief Financial Officer
17
AGE AS OF THE DATE OF THE COMPANY'S ANNUAL MEETING APRIL 25, POSITIONS AND OFFICES NAME 1996 WITH COMPANY PRESENTLY HELD - -------------------- ----------------- ------------------------------------------------------- William C. Steere, 59 Chairman and Chief Executive Officer; Chair of the Jr................. Corporate Management Committee Frederick W. 44 Vice President -- Corporate Strategic Planning and Telling............ Policy
BUSINESS EXPERIENCE OF NON-DIRECTOR OFFICERS BRIAN W. BARRETT Mr. Barrett joined Pfizer Canada in 1966, where he served in various financial positions, including Chief Financial Officer of the Canadian subsidiary. In 1971, he was appointed Assistant Controller of Pfizer International in New York; in 1973, Director of International Planning and in 1976, Director of Planning. In 1980, Mr. Barrett was appointed Vice President -- Corporate Strategic Planning; in 1983, he became Vice President -- Finance for Pfizer International; and in 1985, President -- Africa/ Middle East and in 1991, President -- Asia/Canada. In 1992, Mr. Barrett was elected Vice President of the Company and in 1993 became President, Northern Asia, Australasia and Canada -- International Pharmaceuticals Group. Mr. Barrett has recently been named Executive Vice President, International Pharmaceuticals Group, effective January 1, 1996. M. KENNETH BOWLER Mr. Bowler joined the Company in 1989, and has been Vice President -- Federal Government Relations since 1990. He formerly served as Staff Director for the House Ways and Means Committee. C. L. CLEMENTE Mr. Clemente joined the Company in 1964 and has served in a number of domestic and international positions, including Vice President; General Counsel and Secretary, Pfizer International, Inc. and Vice President of Coty, formerly Pfizer's fragrance and cosmetic division. In 1983, he was named Associate General Counsel of Pfizer Inc. In 1986, he was elected Vice President; General Counsel and Secretary of the Company. He became a member of the Corporate Management Committee of the Company in 1991. In 1992, he was elected Senior Vice President -- Corporate Affairs; Secretary and Corporate Counsel. BRUCE R. ELLIG Mr. Ellig joined the Company in 1960. He progressed through a number of positions of increasing responsibility in the Corporate Personnel Division including Vice President -- Compensation and Benefits in 1978 and Vice President - -- Employee Relations in 1983. In 1985, he was elected Vice President -- Personnel of Pfizer Inc., the title of which recently was changed to Vice President -- Employee Resources. DONALD F. FARLEY Mr. Farley joined the Company in 1965 as Production Engineer for the Chemical Division. After serving in a number of positions of increasing responsibility within the Chemical Division, he was named its Vice President, Operations in 1982. In 1986 he became Senior Vice President of the Division, and in 1988, Executive Vice President -- Specialty Chemicals. In 1992, Mr. Farley was named President of the Food Science Group, and in February 1993 was elected a Vice President of the Company. Mr. Farley was recently named President of the Company's Consumer Health Care Group, effective January 1, 1996. 18 GEORGE A. FORCIER Dr. Forcier joined the Company in 1966 as Analytical Research Chemist for the Company's Medical Research Laboratories. In 1970, he was named Project Leader, in 1979 Manager, and in 1981, Assistant Director, of the Analytical Research Department. In 1986 he was named Director of the Analytical Research and Development Department and in 1991, he became Group Director. In 1994, Dr. Forcier became Vice President -- Quality Control of the Company. P. NIGEL GRAY Mr. Gray joined the Company in 1975 as Export Sales Manager for Howmedica U.K., Ltd. in England, and progressed through a number of positions of increasing responsibility before being named Vice President, Marketing for Howmedica Europe in 1983. In 1987, Mr. Gray became Senior Vice President and General Manager of Howmedica International in Staines, England, then President of Howmedica International in 1992. In 1993, he came to New York as Executive Vice President of the Company's Hospital Products Division and President of the Medical Devices Division, and in 1994, he was elected a Vice President of the Company. In July 1995, Mr. Gray assumed his current position as President of the Company's Hospital Products Group. GARY N. JORTNER Mr. Jortner joined the Company in 1973 as a Systems Analyst for Pfizer Pharmaceuticals. In 1974, he transferred to product management and progressed through a series of promotions that resulted in his being named Group Product Manager for Pfizer Labs in 1978. In 1981, he became Vice President of Marketing for Pfizer Labs. In 1986, he was promoted to Vice President of Operations for Pfizer Labs. In 1991, he was named Vice President and General Manager, Pfizer Labs Division. In 1992, Mr. Jortner was elected Vice President of the Company. In 1994, he was named Vice President; Group Vice President, Disease Management - -- U.S. Pharmamaceuticals Group. KAREN L. KATEN Ms. Katen joined the Company in 1974 as a Marketing Associate for Pfizer Pharmaceuticals. Beginning in 1975, she progressed through a number of positions of increasing responsibility in the Roerig product management group which resulted in her being named Group Product Manager in 1978. In 1980, she transferred to Pfizer Labs as a Group Product Manager and later became Director, Product Management. In 1983, she returned to Roerig as Vice President -- Marketing. In 1986, she was named Vice President and General Manager -- Roerig Division. In 1992, she was elected Vice President of the Company. In 1993, Ms. Katen became Executive Vice President of the U.S. Pharmaceuticals Group and, effective August 1, 1995, Ms. Katen assumed her present position as President of the U.S. Pharmaceuticals Group. ALAN G. LEVIN Mr. Levin joined the Company in 1987 as Senior Operations Auditor for the Controllers Division. In 1988 he joined the Treasurer's Division as Controller of the Pfizer International Bank in San Juan, Puerto Rico. He returned to New York in 1991 as Director -- Finance, Asia, and in 1993 was named Senior Director - -- Finance, Asia. In January 1995, Mr. Levin assumed his present position as Treasurer of the Company. HENRY A. MCKINNELL Dr. McKinnell joined the Company in 1971. In 1977, he became Vice President - -- Area Manager for Pfizer Asia. In 1979, he became Executive Vice President and in 1981, President of Pfizer Asia. In 1984, Dr. McKinnell was named Vice President -- Corporate Strategic Planning, and in 1986, he was elected a Vice President of the Company. In 1990, Dr. McKinnell became the Company's Chief 19 Financial Officer and was named Vice President -- Finance of the Company. In 1992, he became a member of the Corporate Management Committee of the Company. In that same year, he became Executive Vice President of the Company, and President of the Company's Hospital Products Group, in addition to remaining the Company's Chief Financial Officer. In 1995, Dr. McKinnell's responsibilities changed, with the Vice Presidents in charge of the U.S. Pharmaceuticals Group, the Consumer Health Care Group and the Food Science Group reporting to him, as well as the Vice President -- Finance and Chief Financial Officer, and the Vice President in charge of Corporate Strategic Planning and Policy. BROWER A. MERRIAM Mr. Merriam joined the Company in 1969 as Country Manager for Peru, and in 1971, he was appointed Country Manager for Argentina. In 1973, he was appointed President of Pfizer Latin America. He was appointed Director of Pfizer International in 1984, and in 1988 assumed the position of President for Latin America, Southeast Asia, Indo-Pacific and Canada. In 1990, he was appointed Executive Vice President of Pfizer International. In 1991, he became Executive Vice President of the Animal Health Group and in 1992 was appointed its President. Mr. Merriam was elected a Vice President of the Company in 1992. VICTOR P. MICATI Mr. Micati joined the Company in 1965 as a Management Candidate for Pfizer Labs. Beginning in 1966, he progressed through a number of positions of increasing responsibility in the Pfizer Labs division, which resulted in his being named Vice President -- Marketing in 1971. In 1972 he became Vice President of Pharmaceutical Development for International Pharmaceuticals. In 1980, he was named Executive Vice President of the European Management Center. Mr. Micati returned to the International Pharmaceutical Division in 1984 as Senior Vice President, and in 1990 was named President, Europe. In 1992, he was elected Vice President of the Company. Mr. Micati has recently been named Executive Vice President, International Pharmaceuticals Group, effective January 1, 1996. PAUL S. MILLER Mr. Miller joined the Company in 1971 and was appointed an Assistant Secretary and Assistant General Counsel in 1975. In 1983, he was named Associate General Counsel. In 1986, he became Secretary of the Corporate Management Committee, and in that same year he was elected Vice President; General Counsel of the Company. He became a member of the Corporate Management Committee of the Company in 1991. In 1992, Mr. Miller was elected Senior Vice President; General Counsel of the Company. GEORGE M. MILNE, JR. Dr. Milne joined the Company in 1970 as a Research Scientist. In 1973, he was named Senior Research Scientist and progressed through a number of positions of increasing responsibility which resulted in his being named Vice President, Research and Development Operations in 1985. In 1988, Dr. Milne became Senior Vice President, Research and Development, and in 1993, he was elected Vice President of the Company and President, Central Research. ROBERT NEIMETH Mr. Neimeth joined the Company in 1962 as a management trainee, subsequently serving as Country Manager, Nigeria, as Vice President, Pharmaceutical Development in Asia, and then as President of Pfizer Asia from 1972 to 1977. He then served as Vice President and Director of Operations for Pfizer Labs in the U.S. In 1980 he became President Pfizer Europe and, in 1983, 20 Mr. Neimeth became Vice President of the Company. In 1984, he was also elected Executive Vice President of Pfizer International Subsidiaries and assumed supervision of the pharmaceutical business in Africa and the Middle East, in addition to his responsibilities in Europe. In 1990, he was named President, Pfizer International Subsidiaries. In 1991, he became Chairman, President and Chief Executive Officer of Pfizer International. He also became a member of the Corporate Management Committee of the Company in 1991. In 1992, he was elected Executive Vice President of the Company, and President, International Pharmaceuticals Group. In this capacity, Mr. Neimeth supervises the Company's International Pharmaceutical and worldwide Animal Health operations and, beginning in 1995, the Hospital Products Group as well. JOHN F. NIBLACK Dr. Niblack joined the Company in 1967 and held various management positions in new drug discovery operations before being appointed in 1984 as Vice President, Medicinal Products Research and in 1986 as Executive Vice President, Central Research. In 1990, Dr. Niblack was named President -- Central Research and elected a Vice President of the Company. In 1993, Dr. Niblack was elected Executive Vice President -- Research and Development, and became a member of the Corporate Management Committee of the Company. WILLIAM J. ROBISON Mr. Robison joined the Company in 1961 as a Sales Representative for Pfizer Labs. After serving in a number of positions of increasing responsibility in the Labs division, he was appointed Vice President of Sales in 1980, and Senior Vice President Pfizer Labs in 1986. In 1990 he was appointed Vice President and General Manager of Pratt Pharmaceuticals, and in 1992 was named President of the Consumer Health Care Group, and was elected Vice President of the Company. Mr. Robison was recently elected Senior Vice President -- Employee Resources, effective January 1, 1996. HERBERT V. RYAN Mr. Ryan joined Pfizer in 1962 as Supervisor, Capital Assets. In 1964 he was named Supervisor, Corporate Ledger, and in 1966 became Director, Corporate Accounting. In 1981 he was appointed Assistant Controller, Corporate Accounting. In 1993, Mr. Ryan was elected Controller. CRAIG SAXTON Dr. Saxton joined the Company in 1976 as Clinical Projects Director for the Central Research Division of Pfizer Limited in Sandwich, England. In 1981, he was named Senior Associate Medical Director for the International Division of Pfizer Inc., and in 1982 became the Division's Vice President, Medical Director. Dr. Saxton became Senior Vice President, Clinical Research and Development for the Central Research Division in 1988. In 1993, he was named Executive Vice President -- Central Research and was elected a Vice President of the Company. DAVID L. SHEDLARZ Mr. Shedlarz joined the Company in 1976 as Senior Financial Analyst for the Pharmaceuticals Division. After serving in a number of positions of increasing responsibility, he was named Production Controller in 1979 and Assistant Group Controller in 1981. In 1984, he became Group Controller and in 1989 was named Vice President of Finance for the Pharmaceuticals Group. In 1992, Mr. Shedlarz was elected Vice President -- Finance of the Company. In August 1995, Mr. Shedlarz became Chief Financial Officer of the Company. 21 FREDERICK W. TELLING Dr. Telling joined the Company in 1977 as Associate Personnel Manager for the Pharmaceuticals Division, and progressed through a number of positions of increasing responsibility before being named Director of Planning for the Pharmaceuticals Division in 1981. In 1987, he was named the Vice President of Planning and Policy, and in 1994, Senior Vice President of Planning and Policy for USPG. In 1994, Dr. Telling was elected Vice President, Corporate Strategic Planning and Policy. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The principal market for the Company's Common Stock is the New York Stock Exchange. It is also listed on the London, Paris, Brussels, and Swiss Stock Exchanges. The Company's Common Stock is also traded on various United States regional stock exchanges. Additional information required by this item is incorporated by reference to the "Quarterly Consolidated Statement of Income (Unaudited)" found on page 59 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 6. SELECTED FINANCIAL DATA Financial information for the five most recent fiscal years, as required by this item, is incorporated by reference to the "Financial Summary" on pages 60 and 61 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information required by this item is incorporated by reference to the "Financial Review" on pages 30 through 37 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is incorporated by reference to the "Independent Auditors' Report" found on page 39 and to consolidated financial statements and supplementary data found on pages 40 through 59 of the Annual Report to Shareholders for the fiscal year ended December 31, 1995. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with regard to the Directors of the Company, including those of the Executive Officers who are Directors, is incorporated by reference to pages 2 through 7 of the Company's Proxy Statement dated March 19, 1996. The Board of Directors elects officers at its first meeting after each annual meeting of shareholders. The Board may also elect officers from time to time throughout the year. Elected officers of the Company hold office until their successors are chosen or until their earlier death, resignation or removal. Information with regard to the Executive Officers of the Company is incorporated by reference to pages 17 through 22 of this Form 10-K under the heading "Executive Officers of the Company." 22 ITEM 11. EXECUTIVE COMPENSATION Information with regard to executive compensation is incorporated by reference to pages 8 through 20 of the Company's Proxy Statement dated March 19, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with regard to security ownership of certain beneficial owners and management is incorporated by reference to pages 2 through 7 of the Company's Proxy Statement dated March 19, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with regard to certain relationships and related transactions is incorporated by reference to page 21 of the Company's Proxy Statement dated March 19, 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following documents are filed as a part of this report. (a)(1) Financial Statements The following consolidated financial statements, related notes and independent auditors' report, included on pages 39 through 59 of the Annual Report to Shareholders for the year ended December 31, 1995 have previously been incorporated by reference in Item 8 of Part II of this report:
PAGE IN THE ANNUAL REPORT TO SHAREHOLDERS ----------------- Independent Auditors' Report...................................... 39 Segment Information............................................... 40 Geographic Data................................................... 41 Consolidated Statement of Income.................................. 42 Consolidated Statement of Shareholders' Equity.................... 43 Consolidated Balance Sheet........................................ 44 Consolidated Statement of Cash Flows.............................. 45 Notes to Consolidated Financial Statements........................ 46-58 Quarterly Consolidated Statement of Income........................ 59
(a)(2) Financial Statement Schedule
PAGE ----- Schedule II -- Valuation and Qualifying Accounts........................... 27
Schedules not listed above have been omitted for the reason that they are not applicable or not required or the information is given elsewhere in the financial statements. The financial statements of unconsolidated subsidiaries are omitted on the basis that these subsidiaries, considered in the aggregate, would not constitute a significant subsidiary. (a)(3) Exhibits 3(i) -- Restated Certificate of Incorporation of the Company, as of April 1991 (incorporated by reference to Exhibit 4(a) of Form S-8, Registration No. 33-44053), as corrected by the Certificate of Correction of the Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3(i) of the Company's Form 10-K for the fiscal year ended December 31, 1994). 3(ii) -- By-laws of the Company, as amended June 23, 1994 (incorporated by reference to Exhibit 3(ii) of the Company's Form 8-K Current Report dated June 23, 1994).
23 10(i) -- Executive Compensation Plans and Arrangements: -- 10.1 -- Form of Severance Agreement for Certain Executive Officers of the Company (incorporated by reference to Exhibit 10(a)(1) of the Company's Form 10-K for the fiscal year ended December 31, 1994). -- 10.2 -- Pfizer Inc. Performance-Contingent Share Award Program (incorporated by reference to Exhibit 4 of Form S-8, Registration No. 33-56977). (ii) -- Stock and Asset Purchase Agreement: -- 10.3 -- The Stock and Asset Purchase Agreement, dated as of November 23, 1994 between the Company and SmithKline Beecham plc is incorporated by reference to the Company's Form 8-K dated January 19, 1995. 11 -- Computation of Earnings Per Common Share and Fully Diluted Earnings Per Common Share. 12 -- Computation of Ratio of Earnings to Fixed Charges. 13(a) -- Portions of the Annual Report of the Company for the fiscal year ended December 31, 1995 which are expressly incorporated by reference herein. 13(b) -- Copy of the Annual Report of the Pfizer Savings and Investment Plan on Form 11-K for the fiscal year ended December 31, 1995. 13(c) -- Copy of the Annual Report of the Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico on Form 11-K for the fiscal year ended December 31, 1995. 21 -- Subsidiaries of the Registrant. 23 -- Report and consent of KPMG Peat Marwick LLP, independent certified public accountants. 27 -- Financial Data Schedule 99 -- Cautionary Statements Regarding "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K The Company filed a report on Form 8-K dated November 29, 1995. Exhibits to the Form 10-K are available upon request at a charge of ten cents per page. Requests should be directed to C. L. Clemente, Secretary, Pfizer Inc., 235 East 42nd Street, New York, N.Y. 10017. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Pfizer Inc. (Registrant) By /s/ C.L. Clemente ----------------------------------- C.L. Clemente (Secretary) Dated: March 28, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
SIGNATURES TITLE DATE - -------------------------------- ------------------------------------------ -------------- /s/ WILLIAM C. STEERE, JR. - -------------------------------- Chairman of the Board, Director (Principal March 28, 1996 (William C. Steere, Jr.) Executive Officer) /s/ DAVID L. SHEDLARZ Vice President -- Finance and Chief - -------------------------------- Financial Officer (Principal Financial March 28, 1996 (David L. Shedlarz) Officer) /s/ HERBERT V. RYAN - -------------------------------- Controller (Principal Accounting Officer) March 28, 1996 (Herbert V. Ryan) - -------------------------------- Director March , 1996 (M. Anthony Burns) /s/ GRACE J. FIPPINGER - -------------------------------- Director March 28, 1996 (Grace J. Fippinger) /s/ GEORGE B. HARVEY - -------------------------------- Director March 28, 1996 (George B. Harvey) /s/ CONSTANCE J. HORNER - -------------------------------- Director March 28, 1996 (Constance J. Horner)
25
SIGNATURES TITLE DATE - -------------------------------- ------------------------------------------ -------------- /s/ STANLEY O. IKENBERRY - -------------------------------- Director March 28, 1996 (Stanley O. Ikenberry) /s/ THOMAS G. LABRECQUE - -------------------------------- Director March 28, 1996 (Thomas G. Labrecque) /s/ JAMES T. LYNN - -------------------------------- Director March 28, 1996 (James T. Lynn) - -------------------------------- Director March , 1996 (Paul A. Marks) /s/ EDMUND T. PRATT, JR. - -------------------------------- Director March 28, 1996 (Edmund T. Pratt, Jr.) - -------------------------------- Director March , 1996 (Franklin D. Raines) /s/ FELIX G. ROHATYN - -------------------------------- Director March 28, 1996 (Felix G. Rohatyn) /s/ JEAN-PAUL VALLES - -------------------------------- Director March 28, 1996 (Jean-Paul Valles)
26 PFIZER INC. AND SUBSIDIARY COMPANIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Additions Balance BALANCE AT ------------------------- at BEGINNING CHARGED TO CHARGED TO End OF COSTS AND OTHER of DESCRIPTION PERIOD EXPENSES ACCOUNTS(a) Deductions(b) Period - --------------------------------------------- ----------- ----------- ----------- ----------- ----- (millions of dollars) Year ended December 31, 1995 Valuation and qualifying accounts deducted from assets to which they apply: Allowance for doubtful accounts........ $44.1 $23.9 $ 0.3 $ 7.3(c) $61.0 ----- ----- --- --- ----- ----- ----- --- --- ----- Allowance for credit losses............ $20.5 $ 3.0 $-- $-- $23.5 ----- ----- --- --- ----- ----- ----- --- --- ----- Year ended December 31, 1994 Valuation and qualifying accounts deducted from assets to which they apply: Allowance for doubtful accounts........ $40.6 $11.5 $-- $ 8.0 $44.1 ----- ----- --- --- ----- ----- ----- --- --- ----- Allowance for credit losses............ $13.5 $ 7.0 $-- $-- $20.5 ----- ----- --- --- ----- ----- ----- --- --- ----- Year ended December 31, 1993 Valuation and qualifying accounts deducted from assets to which they apply: Allowance for doubtful accounts........ $36.2 $12.1 $ 0.4 $ 8.1 $40.6 ----- ----- --- --- ----- ----- ----- --- --- ----- Allowance for credit losses............ $14.5 $-- $-- $ 1.0 $13.5 ----- ----- --- --- ----- ----- ----- --- --- -----
- ------------------------ (a) Recoveries of accounts previously written off. (b) Primarily consists of uncollectible accounts charged against the allowance accounts. Deductions also include the impact of translation of foreign currencies. (c) Amount includes approximately $2.2 million of allowances related to the food science business that were classified as net assets held for sale as of December 31, 1995. 27 The following trademarks, found in this report, are among those used by Pfizer Inc. CARDURA (DOXAZOSIN MESYLATE) DIFLUCAN (FLUCONAZOLE) ENABLE (TENIDAP) ENABLEX (TENIDAP) E5 (ANTI-ENDOTOXIN ANTIBODY) GLUCOTROL XL (GLIPIZIDE GITS) NORVASC (AMLODIPINE BESYLATE) PROCARDIA XL (NIFEDIPINE GITS) REACTINE (CETIRIZINE HCL) UNASYN (SULBACTAM/AMPICILLIN) ZITHROMAX (AZITHROMYCIN) ZOLOFT (SERTRALINE) ZYRTEC (CETIRIZINE HCL) ADVOCIN (DANOFLOXACIN) AVIAX (SEMDURAMICIN) BANMINTH (PYRANTEL TARTRATE) BOVISHIELD COXISTAC (SALINOMYCIN) DECTOMAX (DORAMECTIN) LEUKOCELL MECADOX (CARBADOX) NEMEX (PYRANTEL PAMOATE) RESPISURE STAFAC (VIRGINIAMYCIN) TERRAMYCIN (OXYTETRACYCLINE) TERRAMYCIN LA-200 (OXYTETRACYCLINE) TM/LA (OXYTETRACYCLINE) PARATECT (MORANTEL TARTRATE) POSISTAC (SALINOMYCIN) VALBAZEN (ALBENDAZOLE) VANGUARD BAIN DE SOLEIL BARBASOL BARBASOL PURE SILK BEN-GAY DAILY CARE FROM DESITIN DESITIN DIFLUCAN ONE GYNECURE JUSCOAT MIGRALEVE PLAX RID TCP TROSYD AF UNISOM UNISOM SLEEPGELS VANART VISINE EX-11 2 COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11 PFIZER INC. AND SUBSIDIARY COMPANIES COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED)
YEAR ENDED DECEMBER 31, --------------------------- 1995 1994 1993 -------- -------- ------- (MILLIONS, EXCEPT PER SHARE DATA) EARNINGS: Income from continuing operations........................................ $1,554.2 $1,276.7 $ 645.0 Discontinued operations.................................................. 18.7 21.7 12.5 -------- -------- ------- Net income............................................................... $1,572.9 $1,298.4 $ 657.5 -------- -------- ------- -------- -------- ------- PRIMARY: Weighted average shares: Weighted average number of common shares outstanding................. 614.5 611.6 631.0 Common share equivalents (a)......................................... 15.0 8.8 9.8 -------- -------- ------- Weighted average number of common shares and common share equivalents......................................................... 629.5 620.4 640.8 -------- -------- ------- -------- -------- ------- Earnings per common share: Income from continuing operations.................................... $ 2.47 $ 2.05 $ 1.01 Discontinued operations.............................................. .03 .04 .02 -------- -------- ------- Net income per common share.......................................... $ 2.50 $ 2.09 $ 1.03 -------- -------- ------- -------- -------- ------- FULLY DILUTED (b): Weighted average shares: Weighted average number of common shares outstanding................. 614.5 611.6 631.0 Common share equivalents and other dilutive securities............... 16.6 9.6 10.2 -------- -------- ------- Weighted average number of common shares and common share equivalents......................................................... 631.1 621.2 641.2 -------- -------- ------- -------- -------- ------- Earnings per common share: Income from continuing operations.................................... $ 2.46 $ 2.05 $ 1.01 Discontinued operations.............................................. .03 .04 .02 -------- -------- ------- Net income per common share.......................................... $ 2.49 $ 2.09 $ 1.03 -------- -------- ------- -------- -------- -------
- ------------------------ (a) Common share equivalents applicable to stock option plans. (b) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. Note: In April 1995, the Company announced a two-for-one stock split in the form of a 100 percent stock dividend effective on June 30, 1995 to shareholders of record on June 1, 1995. The above common share and per share data have been adjusted for this two-for-one split. EX-12 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CNARGES EXHIBIT 12 PFIZER INC. AND SUBSIDIARY COMPANIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, -------------------------------------------------- 1995 1994 1993 1992 1991 -------- -------- ------ -------- -------- (MILLIONS OF DOLLARS, EXCEPT RATIOS) Determination of Earnings: 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 Less: Minority interests...................................... 7.0 4.6 2.6 2.7 3.2 Undistributed earnings/(losses) of unconsolidated subsidiaries........................................... (0.3) (0.7) 0.7 8.5 0.8 -------- -------- ------ -------- -------- Adjusted income........................................... 2,292.5 1,826.6 832.0 1,529.8 909.2 Fixed charges........................................... 231.9 158.4 135.6 130.1 155.2 -------- -------- ------ -------- -------- Total earnings as defined............................. $2,524.4 $1,985.0 $967.6 $1,659.9 $1,064.4 -------- -------- ------ -------- -------- -------- -------- ------ -------- -------- Fixed charges Interest expense (a)...................................... $ 192.5 $ 126.9 $106.5 $ 103.4 $ 130.1 Rents (b)................................................. 39.4 31.5 29.1 26.7 25.1 -------- -------- ------ -------- -------- Fixed charges........................................... 231.9 158.4 135.6 130.1 155.2 Capitalized interest...................................... 12.4 14.7 14.0 12.2 8.0 -------- -------- ------ -------- -------- Total fixed charges..................................... $ 244.3 $ 173.1 $149.6 $ 142.3 $ 163.2 -------- -------- ------ -------- -------- -------- -------- ------ -------- -------- Ratio of earnings to fixed charges.......................... 10.3 11.5 6.5 11.7 6.5 -------- -------- ------ -------- -------- -------- -------- ------ -------- --------
- ------------------------ (a) Interest expense includes amortization of debt discount and expenses. (b) Rents included in the computation consist of one-third of rental expense, which the Company believes to be a conservative estimate of an interest factor in its leases, which are not material. Note: In December 1995, the Company agreed to sell substantially all the net assets of the food science business. As a result, the food science business has been reported as a discontinued operation. The sale was completed in January 1996. The computations of the ratio of earnings to fixed charges for the years 1991 through 1994 have been restated to remove the income from operations of the Company's food science business. EX-13.(A) 4 PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS 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 - ----------------------------------------------------------------- 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 - ------------------------------------------------------------------ 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 - ------------------------------------------------------------------ 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) - ------------------------------------------------------------------------------ (millions of dollars) 1995 1994 1993 95/94 94/93 - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------ Total $10,021.4 $7,977.3 $7,161.8 26 11 - ------------------------------------------------------------------------------ Diversification of Net Sales by Business % of Consolidated Net Sales - ------------------------------------------------------------ 1995 1994 1993 - ------------------------------------------------------------ Health Care 84 87 87 Animal Health 12 8 8 Consumer Health Care 4 5 5 - ------------------------------------------------------------ Consolidated 100 100 100 - ------------------------------------------------------------ (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% - -------------------------------------------------- 1994 11 0 0 - -------------------------------------------------- 1995 24 -1 3 - -------------------------------------------------- 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 - --------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------- 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) - ------------------------------------------------------------------ 95/94 94/93 - ------------------------------------------------------------------ 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. - ------------------------------------------------------------------ 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 - ---------------------------------------------------- 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 - ----------------------------------------------------- Geographically, the Company's business is diversified, as shown in the following table: Diversification by Geographic Area % of Consolidated Net Sales - --------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------- U.S. 51 53 53 - -------------------------------------------------- Europe 25 22 22 Asia 15 15 15 Canada/Latin America 7 8 7 Africa/Middle East 2 2 3 - -------------------------------------------------- International 49 47 47 - -------------------------------------------------- Consolidated 100 100 100 - -------------------------------------------------- (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 - ----------------------------------------------------------------- 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: - ---------------------------------------------------------------------------- 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% - ---------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------- 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% - ---------------------------------------------------------------------------- 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 * - ----------------------------------------------------------------------------- Total $2,680.9 $2,058.1 $1,021.8 30 101 - ----------------------------------------------------------------------------- *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 - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------ *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: - --------------------------------------------------------------------------- (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.# EX-13.(B) 5 ANNUAL REPORT ON FORM 11-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ... to ... Commission file number 1-3619 A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF DIFFERENT FROM THAT OF THE ISSUER NAMED BELOW: PFIZER SAVINGS AND INVESTMENT PLAN B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICES: PFIZER INC. 235 EAST 42ND STREET NEW YORK, NEW YORK 10017 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PFIZER SAVINGS AND INVESTMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1995 (THOUSANDS OF DOLLARS EXCEPT UNIT VALUES)
NON-PARTICIPANT DIRECTED --------------- PARTICIPANT DIRECTED COMPANY COMMON ------------------------------------------------------ TOTAL STOCK FUND FUND A FUND B FUND C FUND D LOAN FUND ---------- --------------- ---------- ---------- ---------- ------- --------- Investments, at fair value: Pfizer Inc. common stock: Company Common Stock Fund, 10,451,382 shares, cost $132,164; Fund C, 10,048,630 shares, cost $180,795........................... $1,291,501 $ 658,437 $ -- $ -- $ 633,064 $ -- $ -- Intermediate Treasury Bond Fund, The Northern Trust Company, cost $137,223..... 140,002 140,002 -- -- -- -- Collective Stock Index Fund, The Northern Trust Company, cost $59,403............... 110,014 -- 110,014 -- -- -- Investment contracts with insurance companies, at contract value................ 41,089 -- 41,089 -- -- -- -- Investments, at cost which approximates fair value: Loans to participants...................... 31,707 -- -- -- -- -- 31,707 Cash and short-term securities............. 16,056 90 94 -- 69 15,803 -- ---------- --------------- ---------- ---------- ---------- ------- --------- Total investments........................ 1,630,369 658,527 181,185 110,014 633,133 15,803 31,707 Interest receivable.......................... 2,608 2 2,525 1 1 79 -- Contributions receivable from employers, including amounts collected from employees................................... 8,338 2,554 1,788 1,492 2,143 361 -- ---------- --------------- ---------- ---------- ---------- ------- --------- 1,641,315 661,083 185,498 111,507 635,277 16,243 31,707 Payables arising from securities purchased... (54) -- (1) (40) (13) -- -- ---------- --------------- ---------- ---------- ---------- ------- --------- Net assets available for plan benefits -- Note 8...................................... $1,641,261 $ 661,083 $ 185,497 $ 111,467 $ 635,264 $16,243 $31,707 ---------- --------------- ---------- ---------- ---------- ------- --------- ---------- --------------- ---------- ---------- ---------- ------- --------- Number of units outstanding at end of year... 34,575,800 16,345,905 8,249,272 33,396,661 1,472,371 Unit Value -- Note 1......................... $18.96 $11.29 $13.40 $18.91 $10.69
See Notes to Financial Statements which are an integral part of these financial statements. 1 PFIZER SAVINGS AND INVESTMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1994 (THOUSANDS OF DOLLARS EXCEPT UNIT VALUES)
NON-PARTICIPANT DIRECTED --------------- PARTICIPANT DIRECTED COMPANY COMMON ------------------------------------------------------ TOTAL STOCK FUND FUND A FUND B FUND C FUND D LOAN FUND ---------- --------------- ---------- ---------- ---------- ------- --------- Investments, at fair value: Pfizer Inc. common stock: Company Common Stock Fund, 10,685,710 shares, cost $121,681; Fund C, 9,436,552 shares, cost $132,223 -- Note 2......... $ 777,223 $ 412,736 $ -- $ -- $ 364,487 $ -- $ -- Intermediate Treasury Bond Fund, The Northern Trust Company, cost $120,852..... 114,791 -- 114,791 -- -- -- -- Collective Stock Index Fund, The Northern Trust Company, cost $40,603............... 66,783 -- -- 66,783 -- -- -- Investment contracts with insurance companies, at contract value................ 37,892 -- 37,892 -- -- -- -- Investments, at cost which approximates fair value: Loans to participants...................... 24,528 -- -- -- -- -- 24,528 Cash and short-term securities............. 4,584 78 250 107 71 4,078 -- ---------- --------------- ---------- ---------- ---------- ------- --------- Total investments........................ 1,025,801 412,814 152,933 66,890 364,558 4,078 24,528 Interest receivable.......................... 2,334 5 2,306 1 4 18 -- Contributions receivable from employers, including amounts collected from employees................................... 7,149 2,268 1,758 868 919 1,336 -- ---------- --------------- ---------- ---------- ---------- ------- --------- 1,035,284 415,087 156,997 67,759 365,481 5,432 24,528 Payables arising from securities purchased... (5) -- (2) (3) -- -- -- ---------- --------------- ---------- ---------- ---------- ------- --------- Net assets available for plan benefits -- Note 8...................................... $1,035,279 $ 415,087 $ 156,995 $ 67,756 $ 365,481 $ 5,432 $24,528 ---------- --------------- ---------- ---------- ---------- ------- --------- ---------- --------------- ---------- ---------- ---------- ------- --------- Number of units outstanding at end of year... 35,818,415 15,360,416 6,808,008 31,611,989 493,338 Unit Value -- Note 1......................... $11.38 $10.00 $9.77 $11.38 $10.08
See Notes to Financial Statements which are an integral part of these financial statements. 2 PFIZER SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEAR ENDED DECEMBER 31, 1995 (THOUSANDS OF DOLLARS)
NON-PARTICIPANT DIRECTED ---------- COMPANY PARTICIPANT DIRECTED COMMON ---------------------------------------------- TOTAL STOCK FUND FUND A FUND B FUND C FUND D LOAN FUND ---------- ---------- -------- ------- -------- ------ --------- Net investment income Cash dividends: Pfizer Inc. common stock.............................. $ 21,180 $ 10,919 $ -- $ -- $ 10,261 $ -- $ -- Other marketable securities........................... 2,333 -- -- 2,333 -- -- -- Interest................................................ 15,605 38 12,351 29 86 939 2,162 ---------- ---------- -------- ------- -------- ------ --------- 39,118 10,957 12,351 2,362 10,347 939 2,162 Investment management fees -- Note 4...................... (90) -- (57) (33) -- -- -- ---------- ---------- -------- ------- -------- ------ --------- 39,028 10,957 12,294 2,329 10,347 939 2,162 ---------- ---------- -------- ------- -------- ------ --------- Realized gains (losses) on investments, net -- Note 5 Pfizer Inc. common stock................................ 40,853 20,137 -- -- 20,716 -- -- Other securities........................................ 379 -- (638) 1,017 -- -- -- ---------- ---------- -------- ------- -------- ------ --------- 41,232 20,137 (638) 1,017 20,716 -- -- ---------- ---------- -------- ------- -------- ------ --------- Unrealized appreciation of investments, net -- Note 6..... 488,494 235,218 8,840 24,431 220,005 -- -- ---------- ---------- -------- ------- -------- ------ --------- 568,754 266,312 20,496 27,777 251,068 939 2,162 ---------- ---------- -------- ------- -------- ------ --------- Contributions -- Note 7 Employees............................................... 132,035 -- 13,942 13,281 41,807 63,005 -- Employers............................................... 32,068 32,068 -- -- -- -- -- Withdrawals -- Note 8..................................... (126,875) (51,631) (20,772) (8,374) (42,046) (4,052) -- Loan transaction transfers -- net......................... -- (753) (970) (545) (2,605) (114) 5,017 Transfers at fair market value -- net..................... -- -- 15,806 11,572 21,559 (48,937) -- ---------- ---------- -------- ------- -------- ------ --------- 37,228 (20,316) 8,006 15,934 18,715 9,872 5,017 ---------- ---------- -------- ------- -------- ------ --------- Net increase.............................................. 605,982 245,996 28,502 43,711 269,783 10,811 7,179 Net assets available for plan benefits -- Note 8: Beginning of year....................................... 1,035,279 415,087 156,995 67,756 365,481 5,432 24,528 ---------- ---------- -------- ------- -------- ------ --------- End of year............................................. $1,641,261 $661,083 $185,497 $111,467 $635,264 $16,243 $31,707 ---------- ---------- -------- ------- -------- ------ --------- ---------- ---------- -------- ------- -------- ------ ---------
See Notes to Financial Statements which are an integral part of these financial statements. 3 PFIZER SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEAR ENDED DECEMBER 31, 1994 (THOUSANDS OF DOLLARS)
NON-PARTICIPANT DIRECTED ---------- COMPANY PARTICIPANT DIRECTED COMMON ------------------------------------------------ TOTAL STOCK FUND FUND A FUND B FUND C FUND D LOAN FUND -------- ---------- -------- ------- -------- -------- --------- Net investment income Cash dividends: Pfizer Inc. common stock.............................. $ 18,635 $ 9,852 $ -- $ -- $ 8,783 $ -- $ -- Other marketable securities......... 1,699 -- -- 1,699 -- -- -- Interest................................ 12,759 35 11,628 24 38 28 1,006 -------- ---------- -------- ------- -------- -------- --------- 33,093 9,887 11,628 1,723 8,821 28 1,006 Investment management fees -- Note 4.... (39) -- (24) (15) -- -- -- -------- ---------- -------- ------- -------- -------- --------- 33,054 9,887 11,604 1,708 8,821 28 1,006 -------- ---------- -------- ------- -------- -------- --------- Realized gains (losses) on investments, net -- Note 5 Pfizer Inc. common stock.............. 20,942 10,582 -- -- 10,360 -- -- Other securities...................... (343) -- (350) 7 -- -- -- -------- ---------- -------- ------- -------- -------- --------- 20,599 10,582 (350) 7 10,360 -- -- -------- ---------- -------- ------- -------- -------- --------- Unrealized appreciation (depreciation) of investments, net -- Note 6.......... 54,321 32,408 (6,015) (838) 28,766 -- -- -------- ---------- -------- ------- -------- -------- --------- 107,974 52,877 5,239 877 47,947 28 1,006 -------- ---------- -------- ------- -------- -------- --------- Contributions -- Note 7 Employees............................. 60,115 -- 14,525 11,603 33,952 35 -- Employers............................. 28,723 28,723 -- -- -- -- -- Withdrawals -- Note 8................... (86,387) (33,694) (19,644) (5,467) (27,582) -- -- Loan transaction transfers -- net....... -- (1,733) (2,015) (678) (4,225) (4) 8,655 Transfers at fair market value -- net... -- -- 3,615 1,628 (10,616) 5,373 -- -------- ---------- -------- ------- -------- -------- --------- 2,451 (6,704) (3,519) 7,086 (8,471) 5,404 8,655 -------- ---------- -------- ------- -------- -------- --------- Net increase............................ 110,425 46,173 1,720 7,963 39,476 5,432 9,661 Net assets available for plan benefits -- Note 8: Beginning of year..................... 924,854 368,914 155,275 59,793 326,005 -- 14,867 -------- ---------- -------- ------- -------- -------- --------- End of year........................... $1,035,279 $415,087 $156,995 $67,756 $365,481 $ 5,432 $24,528 -------- ---------- -------- ------- -------- -------- --------- -------- ---------- -------- ------- -------- -------- ---------
See Notes to Financial Statements which are an integral part of these financial statements. 4 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 NOTE 1 -- SUMMARY PLAN DESCRIPTION GENERAL -- The Pfizer Savings and Investment Plan (the "Plan") was originally adopted by Pfizer Inc. (the "Company") in 1965 as the Pfizer Savings Plan and has been amended from time to time since that date. Participation in the Plan is open to all eligible employees of the Company and any corporation which, with the consent of the Company, adopts the Plan ("Associate Companies"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. Effective December 31, 1992, all new contributions, in excess of withdrawals and transfers, directed to Fund A of the Plan are invested in an intermediate U.S. Treasury bond fund. In addition, as the investment contracts with insurance companies in Fund A mature, the contracts' proceeds are invested in an intermediate U.S. Treasury bond fund. Effective as of January 1, 1995, the Plan was amended to accept a rollover contribution by a participant in certain instances (as defined in the Plan) and to value a deceased participant's account as of the valuation date subsequent to the receipt of the distribution election rather than the valuation date preceeding the decedent's death. The following is a general description of certain provisions of the Plan. Refer to the Plan for a complete description. CONTRIBUTIONS -- Each participant may make contributions on an after-tax basis or on a before-tax basis (that is, choose to reduce his or her compensation and have the Company contribute on his or her behalf), or may contribute on a basis combining the two. Before-tax contributions are subject to certain restrictions for employees who are considered highly compensated under the Internal Revenue Code of 1986, as amended. Contributions of up to 2% of compensation are matched 100% by the Company and the next 4% is matched 50%. Employee contributions in excess of 6% are not matched. INVESTMENT OPTIONS -- Each participant in the Plan elects to have his or her contribution invested in any one or any combination of four investment funds. These funds are described as follows: Fund A -- An intermediate U.S. Treasury bond fund and investment contracts with insurance companies (see GENERAL caption above for a description of Fund A investments effective December 31, 1992). Fund B -- An index fund of corporate common stocks. Fund C -- Common stock of the Company. Fund D -- U.S. Treasury and government agency money market investments with short maturities of less than one year (fund became available to participants in October 1994). At December 31, 1995 and 1994, respectively, there were 13,033 and 11,788 employees participating in the Plan, some of whom had investments in more than one employee investment fund. On the basis of allocations by the employees of their contributions at December 31, 1995 and 1994, respectively, Fund A had 5,218 and 5,506 participating employees; Fund B, 4,802 and 4,242, Fund C, 10,828 and 9,299 and Fund D, 291 and 55. All Company matching contributions are invested by the Trustee in a fifth fund designated the "Company Common Stock Fund," which consists solely of common stock of the Company. These contributions are non-participant directed. 5 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 AND 1994 NOTE 1 -- SUMMARY PLAN DESCRIPTION (CONTINUED) The Trust Agreement provides that any portion of any of the five funds may, pending its permanent investment or distribution, be invested in short-term investments. The net assets used to calculate the unit values disclosed on the Statement of Net Assets Available for Plan Benefits as of December 31, 1995 and 1994, have been reduced by benefits payable (Note 8) as of that date. ELIGIBILITY AND VESTING -- Substantially all the domestic employees of the Company, except those covered by a collective bargaining agreement, are eligible to participate in the Plan beginning on the first January 1 following their date of employment, or the beginning of any month thereafter. Participants are immediately vested in the full value of their accounts (i.e., participants' and employers' contributions) in Funds A, B, C and D and the Company Common Stock Fund. PAYMENT OF BENEFITS -- Upon separation from service, retirement, disability or death, a participant has the option to elect to receive a lump sum distribution immediately or at any time up to age 65, subject to the provisions of the Plan. WITHDRAWALS -- A participant in the Plan may make a full or partial withdrawal of funds subject to the provisions of the Plan. LOANS -- Since July 1, 1993, Plan participants are permitted to borrow against their vested balance. The minimum amount a participant may borrow is $1,000 and the maximum amount is the lesser of 50% of the vested account balance reduced by any current outstanding loan balance or $50,000 reduced by the highest outstanding loan balance in the preceding 12 months. Under the terms of the Plan, loans must be repaid within five years, unless the funds are used to purchase a primary residence. Primary residence loans must be repaid over 10 or 15 years at the participant's option. The interest rate on all loans is based on the prime rate plus 1%. Interest paid by the participant is credited to the participant's account. TERMINATION -- The Company expects to continue the Plan indefinitely, but necessarily reserves the right to amend, suspend or discontinue it in whole or in part at any time by action of the Company's Board of Directors. Upon termination of the Plan, each member affected thereby shall receive the full value of his or her share in Funds A, B, C, D and his or her share in the Company Common Stock Fund as though he or she had retired as of the date of such termination. No part of the assets in the investment funds established pursuant to the Plan will at any time revert to the Company. NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING -- The financial statements of the Plan are prepared on the accrual basis of accounting. For treatment of benefits payable refer to Note 8. INVESTMENT VALUATION -- Pfizer Inc. common stock is valued at the closing market price on the last business day of the year. The investments in the index fund of corporate common stocks and intermediate U.S. Treasury bond fund are recorded at fair value based on the closing market prices of the underlying investments of the respective fund as of the last business day of the year. Loans to participants and cash and short-term securities are recorded at cost which approximates fair value and the investment contracts with insurance companies are recorded at contract value. 6 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 AND 1994 NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SECURITY TRANSACTIONS -- Purchases and sales of securities are reflected on a trade-date basis. Realized gains and losses on sales of investments represent the difference between the net proceeds received and the cost of the investments (average cost if less than the entire investment is sold). UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS -- Unrealized appreciation (depreciation) of investments for the year represents the difference between the cost of the investments and their fair value at the end of the year. Additionally, it reflects the reversal of the unrealized appreciation (depreciation) as of the end of the prior year. DIVIDEND RECOGNITION -- Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned. PFIZER INC. COMMON STOCK -- In June 1995, the Company effected a two-for-one stock split in the form of a 100% stock dividend. The number of shares of Pfizer Inc. common stock held by the Plan as of December 31, 1994 (Company Common Stock Fund and Fund C) have been restated to reflect the two-for-one stock split. NOTE 3 -- INCOME TAXES The Internal Revenue Service has determined and informed the Company that the Plan and related trust as of May 26, 1994 were designed in accordance with the applicable sections of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. The Plan administrator and the Plan's legal and tax counsel believe that the Plan is designed and is currently being operated in compliance with all the applicable requirements. Therefore, no provision has been made for Federal income taxes. All contributions made to the Plan by the Company, including before-tax contributions made on the employee's behalf by the Company and the appreciation on all funds in the employee's account are not taxable to the employee under Federal income tax law while these amounts remain in the Plan. NOTE 4 -- ADMINISTRATIVE COSTS Except for certain member transfer costs and the investment management fees (Fund A and Fund B), all costs and expenses of administering the Plan were borne by the Company. NOTE 5 -- REALIZED GAINS (LOSSES) ON INVESTMENTS The aggregate net proceeds and carrying value used in the calculation of the realized gains (losses) on investments are as follows:
REALIZED GAINS NET PROCEEDS COST (LOSSES) ------------ --------- -------------- (THOUSANDS OF DOLLARS) Pfizer Inc. Common Stock: 1995........................................................ $ 58,802 $ 17,949 $ 40,853 1994........................................................ 32,958 12,016 20,942 Other Securities: 1995........................................................ 31,833 31,454 379 1994........................................................ 19,928 20,271 (343)
Net share proceeds from the disposal of Pfizer Inc. common stock of $19,664,000 in 1995 and $15,172,000 in 1994 related to shares distributed in kind to participants who withdrew from the Plan on retirement or termination. 7 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 AND 1994 NOTE 6 -- UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS The change in the amount of unrealized appreciation (depreciation) was as follows:
AGGREGATE UNREALIZED --------------------------- DECEMBER 31, DECEMBER 31, 1995 1994 CHANGE DURING 1995 ------------- ------------ ------------------- (THOUSANDS OF DOLLARS) Company Common Stock Fund............................ $ 526,273 $ 291,055 $ 235,218 Fund A............................................... 2,779 (6,061) 8,840 Fund B............................................... 50,611 26,180 24,431 Fund C............................................... 452,269 232,264 220,005 ------------- ------------ ---------- $ 1,031,932 $ 543,438 $ 488,494 ------------- ------------ ---------- ------------- ------------ ----------
AGGREGATE UNREALIZED -------------------------- DECEMBER 31, DECEMBER 31, 1994 1993 CHANGE DURING 1994 ------------ ------------ ------------------- (THOUSANDS OF DOLLARS) Company Common Stock Fund............................. $ 291,055 $ 258,647 $ 32,408 Fund A................................................ (6,061) (46) (6,015) Fund B................................................ 26,180 27,018 (838) Fund C................................................ 232,264 203,498 28,766 ------------ ------------ -------- $ 543,438 $ 489,117 $ 54,321 ------------ ------------ -------- ------------ ------------ --------
NOTE 7 -- CONTRIBUTIONS The participating employees and their employers contributed the following amounts to the Plan:
1995 --------------------------------------- PARTICIPATING PARTICIPATING EMPLOYEES EMPLOYERS TOTAL ------------ ------------ ----------- (THOUSANDS OF DOLLARS) Pfizer Inc..................................................... $ 117,093 $ 26,104 $ 143,197 Associate Companies............................................ 14,942 5,964 20,906 ------------ ------------ ----------- $ 132,035 $ 32,068 $ 164,103 ------------ ------------ ----------- ------------ ------------ -----------
In 1995, contributions by participating employees of Pfizer Inc. includes rollover contributions of $62,260,000 from the employees of the former SmithKline Beecham animal health business that was acquired by the Company in January 1995.
1994 ------------------------------------- PARTICIPATING PARTICIPATING EMPLOYEES EMPLOYERS TOTAL ------------ ------------ --------- (THOUSANDS OF DOLLARS) Pfizer Inc...................................................... $ 46,405 $ 22,914 $ 69,319 Associate Companies............................................. 13,710 5,809 19,519 ------------ ------------ --------- $ 60,115 $ 28,723 $ 88,838 ------------ ------------ --------- ------------ ------------ ---------
8 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1995 AND 1994 NOTE 8 -- WITHDRAWALS AND RECONCILIATION WITH FORM 5500 For financial statement purposes, participant withdrawals and distributions are recorded when paid rather than when processed and approved for payment. Therefore, the net assets available for Plan benefits as of December 31, 1995 and 1994 do not reflect a reduction for the following benefits payable to participants who had requested withdrawals as of December 31, but which were not distributed until the subsequent year:
1995 1994 --------- --------- (THOUSANDS OF DOLLARS) Company Common Stock Fund........................................................ $ 5,471 $ 7,588 Fund A........................................................................... 871 3,253 Fund B........................................................................... 933 1,250 Fund C........................................................................... 3,735 5,856 Fund D........................................................................... 508 461 --------- --------- $ 11,518 $ 18,408 --------- --------- --------- ---------
For the purposes of Form 5500, such withdrawals and distributions are recorded when processed and approved for payment. Therefore, the above benefits payable to participants have been reported as benefit expense on Form 5500 for those years. 9 PFIZER SAVINGS AND INVESTMENT PLAN ITEM 27A -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1995 (THOUSANDS OF DOLLARS)
FUND A: NUMBER OF COST OR INVESTMENT CONTRACTS WITH INSURANCE INTEREST MATURITY SHARES OR CONTRACT FAIR COMPANIES RATE DATE UNITS VALUE VALUE - ------------------------------------------- --------- ----------- ------------- --------- --------- Continental Assurance Co. Group Annuity Contract #12682........................... 8.46% 6/3/96 -- $ 27,404 $ 27,404 Provident National Assurance Co. Group Annuity Contract #027-65041............... 8.43% 6/3/96 -- 13,685 13,685 --------- --------- Total Investment Contracts with Insurance Companies................... 41,089 41,089 INTERMEDIATE TREASURY BOND FUND - ------------------------------------------- The Northern Trust Company, Intermediate Treasury Bond Fund........................ -- -- 132,850,000 137,223 140,002 CASH AND SHORT-TERM SECURITIES - ------------------------------------------- The Northern Trust Company, Short-Term Investment Fund........................... Various Various 93,734 94 94 --------- --------- Total of Fund A........................ $ 178,406 $ 181,185 --------- --------- --------- --------- FUND B: The Northern Trust Company, Collective Stock Index Fund.......................... -- -- 2,076,125 $ 59,403 $ 110,014 --------- --------- --------- --------- FUND C: Pfizer Inc. Common Stock................... -- -- 10,048,630 $ 180,795 $ 633,064 CASH AND SHORT-TERM SECURITIES - ------------------------------------------- The Northern Trust Company, Short-Term Investment Fund........................... Various Various 68,536 69 69 --------- --------- Total of Fund C...................... $ 180,864 $ 633,133 --------- --------- --------- --------- FUND D: The Northern Trust Company, Government Short-Term Investment Fund................ Various Various 15,803,507 $ 15,803 $ 15,803 --------- --------- --------- --------- COMPANY COMMON STOCK FUND: Pfizer Inc. Common Stock................... -- -- 10,451,382 $ 132,164 $ 658,437 CASH AND SHORT-TERM SECURITIES - ------------------------------------------- The Northern Trust Company, Short-Term Investment Fund........................... Various Various 74,470 90 90 --------- --------- Total of Company Stock Fund............ $ 132,254 $ 658,527 --------- --------- --------- --------- LOAN FUND: Loans to participants...................... Various Various -- $ 31,707 $ 31,707 --------- --------- --------- ---------
10 PFIZER SAVINGS AND INVESTMENT PLAN ITEM 27D -- SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1995 (THOUSANDS OF DOLLARS) FUND C AND COMPANY COMMON STOCK FUND:
NUMBER OF NUMBER OF SECURITIES PURCHASED TRANSACTIONS SHARES COST - ------------------------------------------- ------------ --------- -------- Pfizer Inc. common stock................... 29 1,668,909** $ 77,001 ------------ --------- -------- ------------ --------- --------
FAIR VALUE SECURITIES NUMBER OF NUMBER OF OF DISPOSED REALIZED DISPOSED* TRANSACTIONS SHARES COST SHARES GAINS - ------------------- ------------ --------- ------- ----------- -------- Pfizer Inc. common stock............. 255 1,291,159 $17,949** $58,802 $ 40,853 ----- --------- ------- ----------- -------- ----- --------- ------- ----------- --------
- ------------------------ * Dispositions represent sales of stock and shares distributed in kind to members who withdrew from the Plan on retirement or termination. ** In June 1995, Pfizer Inc. effected a two-for-one stock split in the form of a 100% stock dividend. The number of shares of Pfizer Inc. common stock purchased and disposed of by the Plan prior to the date of the stock split have been restated to reflect the split. 11 INDEPENDENT AUDITORS' REPORT To the Savings and Investment Plan Committee Pfizer Savings and Investment Plan: We have audited the accompanying statements of net assets available for plan benefits of the Pfizer Savings and Investment Plan (the Plan) as of December 31, 1995 and 1994 and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1995 and 1994 and the changes in net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of (1) assets held for investment purposes and (2) reportable transactions, as of and for the year ended December 31, 1995 are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The Fund Information in the statements of net assets available for plan benefits and the statements of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for plan benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ KPMG Peat Marwick LLP -------------------------------------- KPMG PEAT MARWICK LLP New York, New York March 15, 1996 12 SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Savings and Investment Plan Committee have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. PFIZER SAVINGS AND INVESTMENT PLAN By: /s/ David L. Shedlarz ----------------------------------- David L. Shedlarz VICE PRESIDENT -- FINANCE AND CHIEF FINANCIAL OFFICER CHAIR, SAVINGS AND INVESTMENT PLAN COMMITTEE Date: March 28, 1996 13 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS To the Savings and Investment Plan Committee Pfizer Savings and Investment Plan: We consent to the use of our report included herein and incorporated herein by reference in the Registration Statement on Form S-8 dated January 24, 1991 (File No. 33-38708) of our report dated March 15, 1996, relating to the statements of net assets available for plan benefits of the Pfizer Savings and Investment Plan as of December 31, 1995 and 1994, and the related statements of changes in net assets available for plan benefits for the years then ended, which report appears in the December 31, 1995 annual report on Form 11-K of the Pfizer Savings and Investment Plan. /s/ KPMG Peat Marwick LLP -------------------------------------- KPMG PEAT MARWICK LLP New York, New York March 28, 1996 14 EX-13.(C) 6 ANNUAL REPORT ON FORM 11-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ... to ... Commission file number 1-3619 A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF DIFFERENT FROM THAT OF THE ISSUER NAMED BELOW: PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICES: PFIZER INC. 235 EAST 42ND STREET NEW YORK, NEW YORK 10017 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1995
NON-PARTICIPANT DIRECTED -------------- PFIZER INC. PARTICIPANT DIRECTED COMMON STOCK ----------------------------------------- TOTAL FUND FUND A FUND B FUND C -------------- -------------- ------------- ----------- ------------- ASSETS - --------------------------------------------- Investments, at fair value: Pfizer Inc. common stock: Pfizer Inc. Common Stock Fund, 87,517 shares, cost $2,596,932; Fund C, 71,818 shares; cost $2,271,405................. $ 10,037,703 $ 5,513,160 $ -- $ -- $ 4,524,543 Other marketable securities: Fund A, cost $1,806,318; Fund B, cost $278,353......... 2,292,532 -- 1,876,876 415,656 -- Interest-bearing deposits, at cost which approximates fair value..................... 210,494 57,834 115,476 13,387 23,797 -------------- -------------- ------------- ----------- ------------- Total investments...................... 12,540,729 5,570,994 1,992,352 429,043 4,548,340 Interest receivable.......................... 32,630 155 32,379 34 62 Contributions receivable: Employees.................................. 300,316 -- 103,983 13,772 182,561 Employers.................................. 157,502 157,502 -- -- -- -------------- -------------- ------------- ----------- ------------- Net assets available for plan benefits -- Note 8.................................. $ 13,031,177 $ 5,728,651 $ 2,128,714 $ 442,849 $ 4,730,963 -------------- -------------- ------------- ----------- ------------- -------------- -------------- ------------- ----------- ------------- Number of units outstanding at end of year... 1,461,391 1,438,320 231,858 1,238,472 Unit value................................... $3.92 $1.48 $1.91 $3.82
See Notes to Financial Statements which are an integral part of these financial statements. 1 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1994
NON-PARTICIPANT DIRECTED -------------- PFIZER INC. PARTICIPANT DIRECTED COMMON STOCK ----------------------------------------- TOTAL FUND FUND A FUND B FUND C ------------- -------------- ------------- ----------- ------------- ASSETS - ---------------------------------------------- Investments, at fair value: Pfizer Inc. common stock: Pfizer Inc. Common Stock Fund, 76,414 shares, cost $2,059,026; Fund C, 67,854 shares, cost $2,056,665.................. $ 5,572,351 $ 2,951,523 $ -- $ -- $ 2,620,828 Other marketable securities: Fund A, cost $1,428,837; Fund B, cost $230,455.......... 1,634,171 -- 1,369,619 264,552 -- Interest-bearing deposits, at cost which approximates fair value...................... 159,799 47,863 107,407 4,529 -- ------------- -------------- ------------- ----------- ------------- Total investments....................... 7,366,321 2,999,386 1,477,026 269,081 2,620,828 Interest receivable........................... 28,067 212 27,721 16 118 Contributions receivable: Employees................................... 240,606 -- 91,543 12,747 136,316 Employers................................... 131,149 131,149 -- -- -- ------------- -------------- ------------- ----------- ------------- Net assets available for plan benefits -- Note 8..................................... $ 7,766,143 $ 3,130,747 $ 1,596,290 $ 281,844 $ 2,757,262 ------------- -------------- ------------- ----------- ------------- ------------- -------------- ------------- ----------- ------------- Number of units outstanding at end of year.... 1,297,807 1,233,674 199,889 1,174,996 Unit value.................................... $2.41 $1.29 $1.41 $2.35
See Notes to Financial Statements which are an integral part of these financial statements. 2 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEAR ENDED DECEMBER 31, 1995
NON-PARTICIPANT DIRECTED -------------- PFIZER INC. PARTICIPANT DIRECTED COMMON STOCK ----------------------------------------- TOTAL FUND FUND A FUND B FUND C -------------- -------------- ------------- ----------- ------------- Net investment income: Cash Dividends: Pfizer Inc. common stock................. $ 159,945 $ 86,696 $ -- $ -- $ 73,249 Other marketable securities.............. 4,898 -- -- 4,898 -- Interest................................... 129,556 3,825 119,267 4,196 2,268 -------------- -------------- ------------- ----------- ------------- 294,399 90,521 119,267 9,094 75,517 Investment management fees -- Note 4......... (5,129) -- -- (5,129) -- -------------- -------------- ------------- ----------- ------------- 289,270 90,521 119,267 3,965 75,517 Realized gain on investments, net -- Note 5: Pfizer Inc. common stock................... 60,220 29,373 -- -- 30,847 Other marketable securities................ 5,614 -- 156 5,458 -- -------------- -------------- ------------- ----------- ------------- 65,834 29,373 156 5,458 30,847 -------------- -------------- ------------- ----------- ------------- Unrealized appreciation of investments, net -- Note 6................................... 3,945,688 2,023,731 129,776 103,206 1,688,975 -------------- -------------- ------------- ----------- ------------- 4,300,792 2,143,625 249,199 112,629 1,795,339 -------------- -------------- ------------- ----------- ------------- Contributions -- Note 7: Employees.................................. 2,340,054 -- 846,905 136,407 1,356,742 Employers.................................. 1,231,787 1,231,787 -- -- -- Withdrawals -- Note 8........................ (2,607,599) (788,809) (526,514) (77,333) (1,214,943) Transfers between funds -- net............... -- 11,301 (37,166) (10,698) 36,563 -------------- -------------- ------------- ----------- ------------- 964,242 454,279 283,225 48,376 178,362 -------------- -------------- ------------- ----------- ------------- Net increase................................. 5,265,034 2,597,904 532,424 161,005 1,973,701 Net assets available for plan benefits -- Note 8: Beginning of year.......................... 7,766,143 3,130,747 1,596,290 281,844 2,757,262 -------------- -------------- ------------- ----------- ------------- End of year................................ $ 13,031,177 $ 5,728,651 $ 2,128,714 $ 442,849 $ 4,730,963 -------------- -------------- ------------- ----------- ------------- -------------- -------------- ------------- ----------- -------------
See Notes to Financial Statements which are an integral part of these financial statements. 3 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEAR ENDED DECEMBER 31, 1994
NON-PARTICIPANT DIRECTED -------------- PFIZER INC. PARTICIPANT DIRECTED COMMON STOCK ----------------------------------------- TOTAL FUND FUND A FUND B FUND C -------------- -------------- ------------- ----------- ------------- Net investment income: Cash Dividends: Pfizer Inc. common stock................. $ 126,512 $ 66,877 $ -- $ -- $ 59,635 Other marketable securities.............. 6,102 -- -- 6,102 -- Interest................................... 84,462 1,803 80,710 295 1,654 -------------- -------------- ------------- ----------- ------------- 217,076 68,680 80,710 6,397 61,289 Investment management fees -- Note 4......... (1,026) -- -- (1,026) -- -------------- -------------- ------------- ----------- ------------- 216,050 68,680 80,710 5,371 61,289 Realized gains on other marketable securities, net -- Note 5................... 1,356 -- -- 1,356 -- Unrealized appreciation (depreciation) of investments, net -- Note 6.................. 576,161 350,942 (81,819) (10,308) 317,346 -------------- -------------- ------------- ----------- ------------- 793,567 419,622 (1,109) (3,581) 378,635 -------------- -------------- ------------- ----------- ------------- Contributions -- Note 7: Employees.................................. 2,068,551 -- 789,189 130,285 1,149,077 Employers.................................. 1,093,036 1,093,036 -- -- -- Withdrawals -- Note 8........................ (1,998,601) (716,082) (399,980) (89,122) (793,417) Transfers between funds -- net............... -- 765 37,973 (1,059) (37,679) -------------- -------------- ------------- ----------- ------------- 1,162,986 377,719 427,182 40,104 317,981 -------------- -------------- ------------- ----------- ------------- Net increase................................. 1,956,553 797,341 426,073 36,523 696,616 Net assets available for plan benefits -- Note 8: Beginning of year.......................... 5,809,590 2,333,406 1,170,217 245,321 2,060,646 -------------- -------------- ------------- ----------- ------------- End of year................................ $ 7,766,143 $ 3,130,747 $ 1,596,290 $ 281,844 $ 2,757,262 -------------- -------------- ------------- ----------- ------------- -------------- -------------- ------------- ----------- -------------
See Notes to Financial Statements which are an integral part of these financial statements. 4 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 NOTE 1 -- SUMMARY PLAN DESCRIPTION GENERAL -- The Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico (the "Plan") is a defined contribution savings plan which was adopted on February 1, 1990. Participation in the Plan is open to all eligible employees of the Puerto Rico branches of Pfizer Pharmaceuticals, Inc., a subsidiary of Pfizer Inc., and Pfizer Corporation, an indirect wholly-owned subsidiary of Pfizer Inc., (individually and collectively, the "Companies"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. The following is a general description of certain provisions of the Plan. Refer to the Plan for a complete description of the Plan. CONTRIBUTIONS -- Each participant may make contributions on an after-tax basis or on a before-tax basis (that is, choose to reduce his or her compensation and have the Companies contribute on his or her behalf), or may contribute on a basis combining the two. Before-tax contributions are subject to certain restrictions for employees who are considered highly compensated under Section 165(e) of the Puerto Rico Income Tax Act of 1954, as amended. Contributions of up to 2% of compensation are matched 100% by the Companies and the next 4% is matched 50%. Employee contributions in excess of 6% are not matched. INVESTMENT OPTIONS -- Each participant in the Plan elects to have his or her contributions invested in any one or any combination of the three investment funds. These funds are described below: Fund A -- Fixed income Fund B -- An index fund of corporate common stocks Fund C -- Common stock of Pfizer Inc. At December 31, 1995 and 1994, there were 1,015 and 970 employees, respectively, participating in the Plan, some of whom had investments in more than one employee investment fund. On the basis of allocations by the employees of their contributions at December 31, 1995 and 1994, respectively, Fund A had 566 and 518 participating employees, Fund B, 160 and 152 and Fund C, 763 and 678. All matching contributions are invested by the Trustee in a fourth fund designated the "Pfizer Inc. Common Stock Fund," which consists solely of common stock of Pfizer Inc. These contributions are non-participant directed. The Plan's trust agreement provides that any portion of any of the funds may, pending its permanent investment or distribution, be invested in short-term investments. ELIGIBILITY AND VESTING -- Substantially all the employees of the Companies, who are resident in Puerto Rico, are eligible to participate in the Plan beginning on the first January 1 following their date of employment, or the beginning of any month or payroll period thereafter. A member is immediately vested in the full value of his or her accounts (i.e., participant and employer contributions) in Funds A, B and C and the Pfizer Inc. Common Stock Fund. PAYMENT OF BENEFITS -- Upon separation from service, retirement, disability or death, a participant may elect to receive either a lump-sum amount equal to the value of the participant's account, or annual installments subject to the provisions of the Plan. For termination of service due to other reasons, a participant may receive the value of his or her account as a lump-sum distribution. 5 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 NOTE 1 -- SUMMARY PLAN DESCRIPTION (CONTINUED) WITHDRAWALS -- A participant in the Plan may make full or partial withdrawals of funds subject to the provisions of the Plan. TERMINATION -- The Companies expect to continue the Plan indefinitely, but necessarily reserve the right to amend, suspend or discontinue it in whole or in part, at any time, by action of the Companies' Boards of Directors. Upon termination of the Plan, each member affected thereby shall receive the full value of his or her share in Fund A, B and C and his or her share in the Company Common Stock Fund as though he or she had retired as of the date of such termination. No part of the assets in the investment fund established pursuant to the Plan will at any time revert to the Companies. NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING -- The financial statements of the Plan are prepared on the accrual basis of accounting. For treatment of benefits payable refer to Note 8. INVESTMENT VALUATION -- Pfizer Inc. common stock is valued at the closing market price on the last business day of the year. Other marketable securities are valued at fair value based on the closing market price of the security on the last business day of the year except for investments in the index fund of corporate common stocks, which are recorded at fair value based on the closing market price of the underlying investments held by the fund as of the last business day of the year. Interest-bearing deposits are recorded at cost, which approximates fair value. SECURITY TRANSACTIONS -- Purchases and sales of securities are reflected on a trade-date basis. Realized gains and losses on sales of investments represent the difference between the net proceeds received and the cost of the investments (average cost if less than the entire investment is sold). UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS -- Unrealized appreciation (depreciation) of investments represents the difference between the cost of the investments and the fair value at the end of the year. Additionally, it includes the reversal of the unrealized appreciation (depreciation) as of the end of the prior year. DIVIDEND RECOGNITION -- Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned. PFIZER INC. COMMON STOCK -- In June 1995, Pfizer Inc. effected a two-for-one stock split in the form of a 100% stock dividend. The number of shares of Pfizer Inc. common stock held by the Plan as of December 31, 1994 (Pfizer Inc. Stock Fund and Fund C) have been restated to reflect the stock split. NOTE 3 -- INCOME TAXES No provision has been made for Puerto Rico income tax in reliance upon a determination letter issued by the Puerto Rico Department of Treasury, which states that the Plan meets the requirements of Section 165(a) of the Puerto Rico Income Tax Act of 1954 and that the trust established thereunder is entitled to exemption. All contributions made to the Plan by the Companies, including before-tax contributions made on the employee's behalf by the Companies and the appreciation on all funds in the employee's account are not taxable to the employee under Puerto Rico income tax law while these amounts remain in the Plan. 6 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 NOTE 4 -- ADMINISTRATIVE COSTS Except for certain investment management fees (Fund B), all costs and expenses of administering the Plan were borne by the Companies. NOTE 5 -- REALIZED GAINS ON INVESTMENTS The aggregate net proceeds and carrying value used in the calculation of the realized gains on investments are as follows:
NET REALIZED PROCEEDS COST GAINS ----------- ----------- ----------- Pfizer Inc. Common Stock: 1995................................................. $ 183,217 $ 122,997 $ 60,220 Other Marketable Securities: 1995................................................. 65,012 59,398 5,614 1994................................................. 116,380 115,024 1,356
NOTE 6 -- UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS The change in the amount of unrealized appreciation (depreciation) was as follows:
AGGREGATE UNREALIZED ---------------------------- DECEMBER 31, DECEMBER 31, CHANGE DURING 1995 1994 1995 ------------- ------------- -------------- Pfizer Inc. Common Stock Fund................... $ 2,916,228 $ 892,497 $ 2,023,731 Fund A.......................................... 70,558 (59,218) 129,776 Fund B.......................................... 137,303 34,097 103,206 Fund C.......................................... 2,253,138 564,163 1,688,975 ------------- ------------- -------------- $ 5,377,227 $ 1,431,539 $ 3,945,688 ------------- ------------- -------------- ------------- ------------- -------------- AGGREGATE UNREALIZED ---------------------------- DECEMBER 31, DECEMBER 31, CHANGE DURING 1994 1993 1994 ------------- ------------- -------------- Pfizer Inc. Common Stock Fund................... $ 892,497 $ 541,555 $ 350,942 Fund A.......................................... (59,218) 22,601 (81,819) Fund B.......................................... 34,097 44,405 (10,308) Fund C.......................................... 564,163 246,817 317,346 ------------- ------------- -------------- $ 1,431,539 $ 855,378 $ 576,161 ------------- ------------- -------------- ------------- ------------- --------------
7 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 NOTE 7 -- CONTRIBUTIONS The participating employees and their employers contributed the following amounts to the Plan:
1995 EMPLOYEES EMPLOYERS TOTAL ------------- ------------- ------------- Pfizer Pharmaceuticals, Inc. (Puerto Rico Branch)............................ $ 1,947,066 $ 1,024,059 $ 2,971,125 Pfizer Corporation (Puerto Rico Branch)............................ 392,988 207,728 600,716 ------------- ------------- ------------- $ 2,340,054 $ 1,231,787 $ 3,571,841 ------------- ------------- ------------- ------------- ------------- ------------- 1994 Pfizer Pharmaceuticals, Inc. (Puerto Rico Branch)............................ $ 1,669,542 $ 904,692 $ 2,574,234 Pfizer Corporation (Puerto Rico Branch)............................ 399,009 188,344 587,353 ------------- ------------- ------------- $ 2,068,551 $ 1,093,036 $ 3,161,587 ------------- ------------- ------------- ------------- ------------- -------------
NOTE 8 -- WITHDRAWALS AND RECONCILIATION WITH FORM 5500 For financial statement purposes, participant withdrawals and distributions are recorded when paid rather than when processed and approved for payment. Therefore, the net assets available for Plan benefits as of December 31, 1995 and 1994 do not reflect a reduction for the following benefits payable to participants who had requested withdrawals as of December 31, but which were not distributed until the subsequent year:
1995 1994 ----------- ----------- Pfizer Inc. Common Stock Fund....................................... $ 62,751 $ 68,397 Fund A.............................................................. 27,423 30,505 Fund B.............................................................. 3,822 4,929 Fund C.............................................................. 89,894 104,993 ----------- ----------- $ 183,890 $ 208,824 ----------- ----------- ----------- -----------
For the purposes of Form 5500, such withdrawals and distributions are recorded when processed and approved for payment. Therefore, benefits payable to participants who have requested withdrawals have been reported as benefit expense within Form 5500 for those years. 8 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO ITEM 27A -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1995 FUND A:
INTEREST RATE MATURITY COST FAIR VALUE -------------- ---------- ------------- ------------- OTHER MARKETABLE SECURITIES: - ------------------------------------------------------ U.S. GOVERNMENT SECURITIES - ------------------------------------------------------ U.S. Treasury Notes................................... 7.87% 08/15/01 $ 111,035 $ 123,974 U.S. Treasury Notes................................... 6.87 10/31/96 50,594 50,641 ------------- ------------- 161,629 174,615 ------------- ------------- OTHER MARKETABLE SECURITIES - ------------------------------------------------------ Federal Home Loan Bank................................ 9.15 03/25/97 43,168 43,857 Federal Home Loan Bank Medium Term Note................................................. 6.97 11/20/97 75,000 77,156 Federal National Mortgage Association................. 8.80 07/25/97 49,406 52,617 Federal National Mortgage Association................. 7.85 09/10/98 25,969 26,516 Federal National Mortgage Association................. 5.74 02/12/98 71,050 70,041 Federal Farm Credit Bank Bond......................... 6.05 04/21/03 29,822 30,520 Federal Home Loan Mortgage Corporation................ 6.35 03/07/01 26,758 27,943 Federal National Mortgage Association Term Note....... 7.90 04/10/02 44,944 46,371 Federal National Mortgage Association Term Note....... 6.95 09/10/02 44,788 45,710 Federal National Mortgaage Association Term Note...... 5.80 12/10/03 8,938 9,934 SLMA Medium Term Note................................. 5.50 07/08/02 57,213 59,325 Federal Home Loan Mortgage Term Note.................. 7.03 10/19/96 60,355 61,472 Federal National Mortgage Association................. 7.05 10/10/96 25,813 25,297 ------------- ------------- 563,224 576,759 ------------- ------------- CORPORATE DEBENTURES - ------------------------------------------------------ World Bank Medium Term Note........................... 9.19 06/23/98 42,807 43,411 Tennessee Valley Authority............................ zero coupon 07/15/03 87,554 97,970 Tennessee Valley Authority............................ 6.12 07/15/03 76,641 75,140 Tennessee Valley Authority............................ 6.37 06/15/05 117,188 124,124 Citicorp.............................................. 9.00 04/15/99 51,213 54,820 Dean Witter Discover Bond............................. 6.25 03/15/00 22,810 24,358 Exxon Bond............................................ 7.87 08/15/97 57,520 57,063 Lehman Brothers Holdings, Inc. Note................... 8.37 04/01/97 100,409 102,969 Merrill Lynch......................................... 6.37 03/30/99 31,920 32,525 Shell Oil Co. Bond.................................... 6.95 12/15/98 50,406 52,002 AT&T Corporate Bond................................... 6.75 04/01/04 50,677 52,250 New Jersey Bell Corporate Bond........................ 5.87 02/01/04 39,048 39,662 Bell South Telephone.................................. 6.37 06/15/04 40,000 40,900 Dean Witter, Discover & Co............................ 6.87 03/01/03 25,499 28,094 General Telephone Co. Florida......................... 8.00 03/01/01 39,684 40,584 Georgia Power First Mortgage Bond..................... 6.62 04/01/03 29,888 30,548 IBM Corporate Bond.................................... 7.25 11/01/02 29,738 32,100 Merrill Lynch Corporate Bond.......................... 6.25 10/15/08 22,906 26,476 (CONTINUED)
9 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO ITEM 27A -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES (CONTINUED) DECEMBER 31, 1995
INTEREST RATE MATURITY COST FAIR VALUE -------------- ---------- ------------- ------------- New Jersey Bell Telephone............................. 7.25% 06/01/02 $ 9,882 $ 10,707 Wal-Mart Stores....................................... 6.75 05/15/02 90,675 93,867 General Electric Credit Corporation................... 7.46 09/30/96 40,000 40,590 General Electric Credit Corporation................... 6.94 11/22/96 25,000 25,342 ------------- ------------- 1,081,465 1,125,502 ------------- ------------- Total other marketable securities................... 1,806,318 1,876,876 INTEREST-BEARING DEPOSIT - ------------------------------------------------------ Banco Popular de Puerto Rico, Time Deposit............ 4.62 115,476 115,476 ------------- ------------- Total of Fund A................................. $ 1,921,794 $ 1,992,352 ------------- ------------- ------------- -------------
FUND B:
NUMBER OF INTEREST OTHER MARKETABLE SECURITIES SHARES OR UNITS RATE COST FAIR VALUE - --------------------------------------------------------- --------------- ----------- ------------- ------------- The Northern Trust Company, Collective Stock Index Fund.................................................... 7,844 -- $ 278,353 $ 415,656 INTEREST-BEARING DEPOSITS - --------------------------------------------------------- The Northern Trust Company, Short-Term Investment Fund... -- 5.64% 13,387 13,387 ------------- ------------- Total of Fund B.................................... $ 291,740 $ 429,043 ------------- ------------- ------------- ------------- FUND C: Pfizer Inc. Common Stock................................. 71,818 -- $ 2,271,405 $ 4,524,543 INTEREST-BEARING DEPOSIT - --------------------------------------------------------- Banco Popular de Puerto Rico, Time Deposit............... -- 4.62 23,797 23,797 ------------- ------------- Total of Fund C.................................... $ 2,295,202 $ 4,548,340 ------------- ------------- ------------- ------------- COMPANY COMMON STOCK FUND: Pfizer Inc. Common Stock................................. 87,517 -- $ 2,596,932 $ 5,513,160 INTEREST-BEARING DEPOSIT - --------------------------------------------------------- Banco Popular de Puerto Rico, Time Deposit............... -- 4.62 57,834 57,834 ------------- ------------- Total Company Common Stock Fund.................... $ 2,654,766 $ 5,570,994 ------------- ------------- ------------- -------------
See accompanying independent auditors' report 10 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO ITEM 27D -- SCHEDULE OF REPORTABLE TRANSACTIONS DECEMBER 31, 1995 FUNDS A, B, C AND COMPANY COMMON STOCK FUND:
NUMBER OF NUMBER OF INVESTMENTS PURCHASED TRANSACTIONS SHARES COST - ------------------------------------------------------------------------- --------------- ----------- ------------- Pfizer Inc. Common Stock................................................. 22 19,217* $ 875,645 Interest-bearing Deposits: Banco Popular de Puerto Rico, Time Deposits... 187 -- 3,612,835
NUMBER OF NUMBER OF REALIZED INVESTMENTS DISPOSED TRANSACTIONS SHARES COST FAIR VALUE GAIN - ------------------------------------------------ --------------- ----------- ------------- ----------- --------- Pfizer Inc. Common Stock........................ 4 4,150* $ 122,997 183,217 60,220 Interest-bearing Deposits: Banco Popular de Puerto Rico, Time Deposits..................... 143 -- 3,562,139 3,562,139 --
* On June 1995, Pfizer Inc. effected a two-for-one stock split in the form of a 100% stock dividend. The number of shares of Pfizer Inc. common stock purchased and disposed of by the Plan prior to the date of the stock split have been restated to reflect the split. See accompanying independent auditors' report 11 INDEPENDENT AUDITORS' REPORT To the Administrative Committee Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico: We have audited the accompanying statements of net assets available for plan benefits of the Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico (the Plan) as of December 31, 1995 and 1994, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1995 and 1994, and the changes in net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of (1) assets held for investment purposes and (2) reportable transactions, as of and for the year ended December 31, 1995, are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The Fund Information in the statements of net assets available for plan benefits and the statements of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for plan benefits of each Fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ KPMG Peat Marwick LLP -------------------------------------- KPMG Peat Marwick LLP February 6, 1996 Stamp No. 1308451 of the Puerto Rico Society of Certified Public Accountants was affixed to the record copy of this report. 12 SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Savings and Investment Plan Committee have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO By: /S/ ANTHONY MADDALUNE ----------------------------------- Anthony Maddalune GENERAL MANAGER, PFIZER PHARMACEUTICALS, INC. CHAIR, SAVINGS AND INVESTMENT PLAN COMMITTEE Date: March 28,1996 13 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS To the Administrative Committee Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico: We consent to the use of our report included herein and incorporated by reference in the Registration Statement on Form S-8 dated November 18, 1991 (File No. 33-44053) of our report dated February 6, 1996, relating to the statements of net assets available for plan benefits of the Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico as of December 31, 1995 and 1994, and the related statements of changes in net assets available for plan benefits for the years then ended, which report appears in the December 31, 1995 annual report on Form 11-K of the Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico. /s/ KPMG Peat Marwick LLP -------------------------------------- KPMG Peat Marwick LLP San Juan, Puerto Rico March 28, 1996 14 EX-21 7 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT The following is a list of subsidiaries of the Company as of the date hereof, omitting certain subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
PERCENTAGE OF VOTING SECURITIES OWNED BY IMMEDIATE NAME WHERE INCORPORATED PARENT --------------------------------------------------- ------------------- -------------- (a) Subsidiaries of Pfizer Inc.: Radiologic Sciences, Inc........................... California 100 Shiley Incorporated................................ California 100 Valleylab Inc...................................... Colorado 100 NAMIC U.S.A. Corporation........................... Delaware 100 Health Care Ventures, Inc.......................... Delaware 100 Howmedica Inc...................................... Delaware 100 Pfizer Enterprises Inc............................. Delaware 100 Pfizer Health Solutions, Inc....................... Delaware 100 Pfizer Medical Systems, Inc........................ Delaware 100 Pfizer Pharmaceuticals, Inc........................ Delaware 100 Pfizer Pigments Inc................................ Delaware 100 Site Realty, Inc................................... Delaware 100 Strato/Infusaid Inc................................ Massachusetts 100 American Medical Systems, Inc...................... Minnesota 100 Schneider (USA) Inc................................ Minnesota 100 Adforce Inc........................................ New York 100 Quigley Company Inc................................ New York 100 Pfizer International Inc........................... New York 100 Howmedica G.m.b.H.................................. Austria 100 Cadsand Medica N.V................................. Belgium 100 Laboratorios Pfizer Ltd............................ Brazil 100 Orsim, S.A......................................... France 100 Van Cadsand Beheer B.V............................. Netherlands 100 Pfizer Healthcare Ltd. (Korea)..................... South Korea 100 Pfizer Trading Corp................................ Taiwan 100 (b) Subsidiaries of Pfizer International Inc. (a subsidiary of Pfizer Inc.): Pfizer Overseas Inc................................ Delaware 100 Pfizer H.C.P. Corporation.......................... New York 100 Pfizer Corporation Austria G.m.b.H................. Austria 100 Pfizer S.A......................................... Belgium 100 The Kodiak Company Ltd............................. Bermuda 100 Pfizer Canada Inc.................................. Canada 100 Roerig S.A......................................... Chile 100 Pfizer Biogal L.L.C................................ Hungary 71.35 Pfizer (Ireland) Limited........................... Ireland 100 Pfizer Chemical Corp. Ltd.......................... Isle of Man 100 Pfizer Pharmaceutics Israel Ltd.................... Israel 100 Compania Distribuidora Del Centro, S.A. de C.V..... Mexico 100
Form 10-K for the fiscal year ended December 31, 1995
PERCENTAGE OF VOTING SECURITIES OWNED BY IMMEDIATE NAME WHERE INCORPORATED PARENT --------------------------------------------------- ------------------- -------------- (b) Subsidiaries of Pfizer International Inc. (a subsidiary of Pfizer Inc.): -- (Continued) Pfizer Holding Mexico, S. de R.L. de C.V........... Mexico 90 Pfizer, S.A. de C.V................................ Mexico 100 Laboratoires Pfizer S.A............................ Morocco 98 Pfizer Specialties Limited......................... Nigeria 100 Pfizer Pharmaceuticals Production Corporation...... Panama 100 Pfizer Polska Sp.z.0.0............................. Poland 100 A/O Pfizer......................................... Russia 100 Pfizer Healthcare Ltd. (Korea)..................... South Korea 100 Pfizer, S.A., S en C. (Bioquimica Industrial Espanola).......................................... Spain 100 Pfizer, S.A........................................ Spain 100 Pfizer Group Limited............................... United Kingdom 100 (c) Subsidiaries of Pfizer Pharmaceuticals Production Corporation (a subsidiary of Pfizer International Inc.): Pfizer European Service Center N.V................. Belgium 97.3 Pfizer Research and Development Company N.V./S.A........................................... Belgium 95 Kirchimie Ltee..................................... Canada 100 Pfizer Pension Trustees (Ireland) Limited.......... Ireland 100 Pfizer International Bank Europe................... Ireland 97.5 Pfizer Service Company Ltd......................... Ireland 100 Pfizer Ringaskiddy Production Company.............. Isle of Man 100 Roerig Farmaceutici Italiana S.r.1................. Italy 100 Pfizer (N.Z.) Ltd.................................. New Zealand 100 Pfizer Corporation................................. Panama 100 (d) Subsidiaries of Pfizer Corporation (a subsidiary of Pfizer Pharmaceuticals Production Corporation): Pficonprod Pty. Limited............................ Australia 100 Pfizer Agricare Pty. Ltd........................... Australia 100 Pfizer Pty. Ltd.................................... Australia 100 Pfizer S.A......................................... Colombia 100 Pfizer S.A......................................... Costa Rica 100 Pfizer C.A......................................... Ecuador 100 Pfizer Egypt S.A.E................................. Egypt 85 Pfizer Limited..................................... Ghana 50 Pfizer Hellas, A.E................................. Greece 100 Pfizer Limited..................................... India 40 PT Pfizer Indonesia................................ Indonesia 68.2 Pfizer Laboratories Limited (Kenya)................ Kenya 100 Pfizer (Malaysia) Sendirian Berhad................. Malaysia 100 Pfizer (Namibia) (Proprietary) Limited............. Namibia 100 Pfizer Laboratories Limited........................ New Zealand 100
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PERCENTAGE OF VOTING SECURITIES OWNED BY IMMEDIATE NAME WHERE INCORPORATED PARENT --------------------------------------------------- ------------------- -------------- (d) Subsidiaries of Pfizer Corporation (a subsidiary of Pfizer Pharmaceuticals Production Corporation): -- (Continued) Livestock Feeds PLC................................ Nigeria 60 Pfizer Products PLC................................ Nigeria 60 Pfizer A/S......................................... Norway 100 Pfizer Laboratories Limited........................ Pakistan 76.3 Pfizer International Corporation S.A............... Panama 100 Harmag Inc......................................... Panama 100 Pfizer S.A......................................... Peru 100 Pfizer Inc......................................... Philippines 100 Pfizer Private Limited............................. Singapore 100 SmithKline Animal Health (Proprietary) Limited..... South Africa 100 Pfizer Laboratories (Proprietary) Limited.......... South Africa 100 Pfizer Korea Limited............................... South Korea 50 Pfizer Limited..................................... South Korea 100 Pfizer A.B......................................... Sweden 100 Roerig A.B......................................... Sweden 100 Pfizer Limited..................................... Taiwan 100 Pfizer Limited..................................... Tanzania 100 Pfizer Limited..................................... Thailand 100 Pfizer Ilaclari A.S................................ Turkey 100 Pfizer Limited..................................... Uganda 100 Laboratorios Pfizer de Venezuela, S.A.............. Venezuela 100 (e) Subsidiaries of Pfizer Research and Development Company N.V./S.A. (a subsidiary of Pfizer Pharmaceuticals Production Corporation): Pfizer A/S......................................... Denmark 100 Pfizer Oy.......................................... Finland 100 Pfizer S.A......................................... France 100 Pfizer Holding Und Verwaltungs G.m.b.H. ........... Germany 95 Pfizer Holdings Ireland............................ Ireland 84 Pfizer Italiana S.p.A. ............................ Italy 100 Pfizer Pharmaceuticals Inc. ....................... Japan 100 Pfizer B.V. ....................................... Netherlands 100 Pfizer S.G.P.S. Limitada........................... Portugal 100 Howmedica Iberica S.A. ............................ Spain 87.8 Schneider (Europe) A.G. ........................... Switzerland 100 Pfizer A.G. ....................................... Switzerland 100
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PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT --------------------------------------------------- ------------------- --------------------------------- (f) Miscellaneous Subsidiaries: Shiley International, Inc. ........................ California Shiley Incorporated 100% Schneider (USA) Pittsburgh, Inc. .................. Delaware Schneider (USA) Inc. 100% Pfizer Pharm Algerie SPA........................... Algeria Pfizer S.A. (France) 60% Pfizer S.A.C.I. ................................... Argentina Pfizer International Corporation S.A. 100% Valleylab Australia Pty. Ltd. ..................... Australia Valleylab Inc. 100% Pfizer Med-Inform Beratungs G.m.b.H. .............. Austria Pfizer Corporation Austria G.m.b.H. 100% Pfizer Animal Health S.A. ......................... Belgium Pfizer S.A. (France) 100% Pfizer Hospital Products (Belgium) N.V. ........... Belgium Pfizer Hospital Products (Netherlands) B.V. 100% PQI Inc. .......................................... Canada Pfizer Canada Inc.. 100% Pfizer Zona Franca S.A. ........................... Costa Rica Pfizer S.A. (Costa Rica) 100% Pfizer s.r.o. ..................................... Czech Republic Pfizer S.A. (Belgium) 100% Benoist Girard & Cie S.C.A. ....................... France Pfizer S.A. 100% Howmedica France S.C.A. ........................... France Pfizer S.A. 100% Laboratoire Beral, S.A. ........................... France Pfizer S.A. 100% Leibinger S.A.R.L.................................. France Howmedica Leibinger G.m.b.H. 100% Pfizer Animal Health S.A. ......................... France Pfizer S.A. (France)100% Heinrich Mack Nachf. .............................. Germany Pfizer G.m.b.H. 100% Hilekes G.m.b.H. .................................. Germany Howmedica G.m.b.H. 100% Howmedica Leibinger G.m.b.H........................ Germany Pfizer G.m.b.H. 100% Pfizer G.m.b.H. ................................... Germany Pfizer Holding Und Verwaltungs G.m.b.H. 100% SmithKline Beecham Tiergesundheit G.m.b.H. ........ Germany Pfizer Holding Und Verwaltungs G.m.b.H. 100% Taylor Kosmetik G.m.b.H. .......................... Germany Pfizer Holding Und Verwaltungs G.m.b.H. 100% Pfizer LLC......................................... Hungary Pfizer S.A. Belgium 100% Leema Chemicals & Cosmetics Private Limited........ India Pfizer Limited 100% Duchem Laboratories Limited........................ India Pfizer Limited (India) 100% Bioindustria Farmaceutici S.p.A.................... Italy Pfizer Italiana S.p.A 98.8% Restiva S.r.1. .................................... Italy Pfizer Italiana S.p.A. 99% SudFarma S.r.1. ................................... Italy Roerig Farmaceutici Italiana S.r.1. 90%; Pfizer Italiana S.p.A. 10% Pfizer Shoji Co., Ltd. ............................ Japan Pfizer Pharmaceuticals Inc. (Japan) 100% Schneider Japan K.K. .............................. Japan Pfizer Pharmaceuticals Inc. (Japan) 100% Pfizer S.A. ....................................... Morocco Pfizer S.A. 56%; Laboratoire Beral, S.A. 44% A.S. Ruffel (Mozambique) Limitada.................. Mozambique SmithKline Animal Health (Proprietary) Limited 100%
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PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT --------------------------------------------------- ------------------- --------------------------------- (f) Miscellaneous Subsidiaries: -- (Continued) SmithKline Animal Health (SWA) (Pty) Ltd. ......... Namibia SmithKline Animal Health (Proprietary) Limited 100% Cadsand Medica B.V. ............................... Netherlands Van Cadsand Beheer B.V. 100% Pfizer Animal Health B.V. ......................... Netherlands Pfizer B.V. 100% Pfizer Hospital Products (Netherlands) B.V. ....... Netherlands Shiley International, Inc. 100% Roerig B.V. ....................................... Netherlands Pfizer B.V. 100% Pfizer Pharmaceuticals Ltd. ....................... People's Republic Pfizer Enterprises Inc. 67.1% of China Laboratorios Pfizer S.A. .......................... Portugal Pfizer S.G.P.S. Limitada 100% SmithKline Becham Animal Health (Singapore) Private Limited............................................ Singapore Pfizer Private Limited 100% Pfizer Salud Animal, S.A. ......................... Spain Pfizer S.A. (Spain) 100% Pfizer Hospital Products A.B. ..................... Sweden Shiley International, Inc. 100% AMS Medinvent S.A. ................................ Switzerland Nilo Holdings, S.A. 100% Nilo Holding, S.A. ................................ Switzerland Schneider (Europe) A.G. 100% Biomedical Sensors (Holdings) Ltd. ................ United Kingdom Howmedica International Inc. 100% Biomedical Sensors Ltd. ........................... United Kingdom Biomedical Sensors (Holdings) Ltd. 100% Charwell Pharmaceuticals Limited................... United Kingdom Unicliffe Limited 100% Howmedica International Limited.................... United Kingdom Pfizer Group Limited 100% Istin 95........................................... United Kingdom Pfizer Limited 100% Measureaim Ltd. ................................... United Kingdom Howmedica International Limited 100% Pfizer Hospital Products Pension Trustees, Ltd. ... United Kingdom Pfizer Hospital Products, Ltd. (U.K.) 100% Pfizer Hospital Products, Ltd. .................... United Kingdom Howmedica International Limited 100% Pfizer Limited..................................... United Kingdom Pfizer Group Limited 100% Pfizer Pension Trustees Ltd. ...................... United Kingdom Pfizer Limited 100% Shiley Ltd. ....................................... United Kingdom Howmedica International Limited 100% Unicliffe Limited.................................. United Kingdom Pfizer Limited 100% Pfizer Bioquimicos S.A. ........................... Venezuela Laboratorios Pfizer de Venezuela, S.A. 100% Pfizer S.A. ....................................... Venezuela Laboratorios Pfizer de Venezuela, S.A. 100% AS Ruffel (Private) Ltd. .......................... Zimbabwe SmithKline Animal Health (Proprietary) Limited 100%
5
PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT --------------------------------------------------- ------------------- --------------------------------- (g) Subsidiaries of Howmedica Inc. (a subsidiary of Pfizer Inc.): Howmedica Leibinger Inc. .......................... Delaware 100 Howmedica Investments Pty. Ltd. ................... Australia 100 S.D. Investments Pty. Ltd. ........................ Australia 100 Howmedica G.m.b.H. ................................ Germany 100 Howmedica International Inc. ...................... Panama 100 Jaquet Orthopedie S.A. ............................ Switzerland 100 (h) Subsidiaries of NAMIC U.S.A. Corporation (a subsidiary of Pfizer Inc.): NAMIC Caribe, Inc. ................................ Delaware 100 NAMIC Eireann Limited.............................. Ireland 100 NAMIC Eireann B. V. ............................... Netherlands 100 NAMIC Worldwide B. V. ............................. Netherlands 100 NAMIC International, Inc. ......................... Virgin Islands 100
6 EX-23 8 EXHIBIT 23 EXHIBIT 23 REPORT AND CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of PFIZER INC.: Under date of February 22, 1996, we reported on the 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 the years then ended, as contained in the 1995 Annual Report to Shareholders. These consolidated financial statements and our report thereon are incorporated by reference in this Annual Report on Form 10-K for the year 1995. The audits referred to in our report dated February 22, 1996 included the related financial statement schedule as of December 31, 1995, 1994 and 1993 and for the years then ended. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to the use of our reports included and incorporated herein by reference. We also consent to the incorporation by reference of our reports in the Prospectus dated December 27, 1972, as supplemented February 6, 1973, of Pfizer Inc., filed under the Securities Act of 1933 on Registration Statement Form S-16 dated October 27, 1972 (File No. 2-46157), as amended, in the Prospectus dated June 14, 1979, of Pfizer Inc., in the Registration Statement on Form S-16 dated April 26, 1979 (File No. 2-64610), as amended, in the Registration Statement on Form S-15 dated December 13, 1982 (File No. 2-80884), as amended, in the Registration Statement on Form S-8 dated October 27, 1983 (File No. 2-87473), as amended, in the Registration Statement on Form S-8 dated March 22, 1990 (File No. 33-34139), in the Registration Statement on Form S-8 dated January 24, 1991 (File No. 33-38708), in the Registration Statement on Form S-3 dated June 26, 1991 (File No. 33-41367), as amended, in the Registration Statement on Form S-8 dated November 18, 1991 (File No. 33-44053), in the Registration Statement on Form S-3 dated May 27, 1993 (File No. 33-49629), in the Registration Statement on Form S-8 dated May 27, 1993 (File No. 33-49631), in the Registration Statement on Form S-8 dated May 19, 1994, (File No. 33-53713), in the Registration Statement on Form S-8 dated October 5, 1994 (File No. 33-55771), in the Registration Statement on Form S-3 dated November 14, 1994 (File No. 33-56435), in the Registration Statement on Form S-8 dated December 20, 1994 (File No. 33-56979), and in the Registration Statement on Form S-4 dated February 14, 1995 (File No. 33-57709). /s/ KPMG Peat Marwick LLP -------------------------------------- KPMG Peat Marwick LLP New York, New York March 28, 1996 EX-27 9 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PFIZER INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED STATEMETN OF INCOME FOR THE PERIOD DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1995 DEC-31-1995 403 1,109 2,085 (61) 1,384 6,152 5,464 (1,991) 12,724 5,187 833 0 0 34 5,472 12,729 10,021 10,021 2,164 2,164 5,297 27 193 2,299 738 1,544 19 0 0 1,573 2.50 2.49
EX-99.1 10 EX-99-1 EXHIBIT 99 CAUTIONARY STATEMENTS REGARDING "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The Company's 1995 Annual Report to Shareholders and Form 10-K are among certain communications by the Company which contain forward looking statements including statements regarding its financial position, results of operations, market position and product development. These forward looking statements are based on current expectations. As permitted by the Private Securities Litigation Reform Act of 1995, the Company is hereby filing the following cautionary statements identifying important factors which, among others, could cause the Company's actual results to differ materially from expected and historical results. - - Changing business conditions including inflation and fluctuations in interest rates and foreign currency exchange rates. - - Competitive factors including managed care groups, institutions and government agencies seeking price discounts; technological advances attained by competitors; patents granted to competitors; and generic competition as products mature. - - Government laws and regulations affecting domestic and international operations, including trade, monetary and fiscal policies, taxes, price controls unstable governments and legal systems and intergovernmental disputes, possible nationalization, as well as actions affecting approvals of products and licensing. - - Adverse publicity and developments resulting from questions raised regarding the use of calcium channel blockers. - - Changes in the current tax law such as those currently being considered by the U.S. Congress and the Clinton Administration which would phase down the Section 936 income tax credit, 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. - - Difficulties or delays in product development including, but not limited to, the inability to identify viable new chemical compounds, successfully complete clinical trials, obtain regulatory approval for the compounds or gain market acceptance of approved products. Similar difficulties or delays can also affect the development of the Company's other businesses. - - Growth in costs and expenses including changes in product mix and the impact of divestitures, restructuring and other unusual items that could result from evolving business strategies, evaluation of asset realization, and organizational structures. - - Issuance of unfavorable accounting standards and rules. - - Changing social conditions. - - Significant litigation adverse to the Company. - - Business combinations among the Company's competitors could affect the Company's ranking in the pharmaceutical industry. -----END PRIVACY-ENHANCED MESSAGE-----