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, 1994 / / 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, $.10 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. / / 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 27, 1995 was approximately $25.8 billion. The number of shares outstanding of each of the registrant's classes of common stock as of February 27, 1995 was: 314,219,772 shares of common stock, all of one class. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for the fiscal year ended December 31, 1994 Parts I, II and IV Proxy Statement dated March 16, 1995 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................. 4 Consumer Health Care.......... 5 Food Science.................. 5 Financial Subsidiaries........ 6 International Operations...... 6 Tax Matters................... 6 Patents and Research.......... 7 Employees..................... 8 Regulation.................... 8 Raw Materials and Energy...... 9 Environment................... 9 2. Properties.................... 9 3. Legal Proceedings............. 11 4. Submission of Matters to a Vote of Security Holders..... 14 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters.......... 15 6. Selected Financial Data....... 15 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 16 8. Financial Statements and Supplementary Data........... 16 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 16 PART III 10. Directors and Executive Officers of the Registrant... 16 11. Executive Compensation........ 22 12. Security Ownership of Certain Beneficial Owners and Management................... 22 13. Certain Relationships and Related Transactions......... 22 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 22 Signatures.................... 24 Financial Statement Schedule Exhibit 11 Exhibit 12 Exhibit 23
PART I ITEM 1. BUSINESS GENERAL Pfizer Inc. (the "Company") is a diversified, research-based health care company with global operations. The Company discovers, develops, manufactures and sells technology-intensive products in four 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; Consumer Health Care, which includes a variety of nonprescription drugs and personal care products; and Food Science, which includes ingredients for the food and beverage industries. 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 and geographic data for the three years ended December 31, 1994 are set forth on pages 35 and 36, and in the Note "Financial Subsidiaries" on page 42 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1994 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. Methods of competition in health care vary with the 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 purchasers. 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. Pharmaceutical products are distributed in large part to wholesale and retail outlets, hospitals, clinics and managed care organizations. Hospital products are generally sold directly to medical institutions and, in some cases, through distributors and surgical supply dealers. PHARMACEUTICALS The Company's worldwide pharmaceutical products are comprised primarily of drugs which fall into the following major therapeutic classes: cardiovascular agents, anti-infectives, central nervous system agents, anti-inflammatories and anti-diabetes agents. In 1994, pharmaceuticals made up 70% 2 of the Company's consolidated net sales, an increase from 69% in 1993 and 63% in 1992. Increases in both United States and international pharmaceutical revenues in 1994 were principally the result of strong sales of products launched in the 1990s, including Norvasc (amlodipine besylate), Cardura (doxazosin mesylate), Diflucan (fluconazole), Zithromax (azithromycin) and Zoloft (sertraline). Cardiovascular products are the Company's largest therapeutic product line accounting for 29% of the Company's consolidated 1994 net sales, an increase from 27% in 1993 and 23% in 1992. These products realized sales growth of 20% in 1994, including an 85% increase in sales of Norvasc, an intrinsically once-a-day calcium channel blocker for hypertension and angina, as well as a 27% increase in sales of Cardura, an alpha blocker for hypertension. A supplemental New Drug Application for the use of Cardura in the treatment of benign prostatic hyperplasia ("BPH") was approved by the United States Food and Drug Administration ("FDA") in February 1995. Sales of Procardia XL (nifedipine GITS), a once-a-day calcium channel blocker for hypertension and angina, increased by less than 1% in 1994. The Company's U.S. cardiovascular sales grew 12% and international sales of cardiovascular agents rose 38% in 1994. Worldwide anti-infective sales increased 7% in 1994 on the strength of Diflucan and Zithromax. U.S. anti-infective sales grew 14% while international sales rose by 3%. Diflucan, an antifungal 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 14% in 1994 and Zithromax, an oral antibiotic, posted a sales increase of 43%. Total anti-infective sales accounted for 21% of the Company's consolidated 1994 net sales, compared to 22% in 1993 and 20% in 1992. Sales of Pfizer's central nervous system agents rose 46% in 1994, reflecting increased sales of Zoloft, an anti-depressant introduced in the U.S. in 1992. Central nervous system agents grew to 13% of 1994 net pharmaceutical sales and 9% of the Company's consolidated 1994 net sales. The Company's anti-inflammatory agents, including Feldene (piroxicam), accounted for less than 10% of the Company's consolidated 1994 net sales. The Company's anti-diabetes agents, including Glucotrol (glipizide) and Glucotrol XL (glipizide GITS), a sustained release anti-diabetic approved in the U.S. in 1994, accounted for less than 10% of the Company's consolidated 1994 net sales. The Company currently is seeking approval by the FDA for the following products for the indications listed:
PRODUCT INDICATION(S) ----------------------------------- -------------------------------------------------- Cetirizine (launched in Canada in 1991 under the name Reactine; received "approvable" letter from the FDA in February 1995 for cetirizine as an antihistamine)... Low-sedating antihistamine; Pediatric Enable (tenidap) (known as Enablex outside the United States)........ Osteo- and rheumatoid arthritis Unasyn (sulbactam/ampicillin)...... Injectable antibiotic-pediatric Zithromax (received "approvable" letter from the FDA in January 1995 for pediatric indications)... Oral antibiotic-pediatric; sexually transmitted diseases Zoloft............................. Obsessive-compulsive disorder ("OCD")
3 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. To date, Diflucan has been launched in 62 countries and regulatory approvals have been obtained in 16 additional countries. Norvasc has been launched in 74 countries and approvals have been obtained in 14 additional countries. Cardura has been launched in 23 countries and approvals have been obtained in 35 additional countries. In addition, Cardura for BPH has been approved in five countries. Zithromax has been launched in 38 countries and approvals have been obtained in 24 additional countries. Zoloft has been launched in 31 countries for depression. Approvals have been obtained in an additional 16 countries. Applications for regulatory approval for the OCD indication have been made worldwide and approvals have been obtained in four additional countries, although it has not yet been launched in these countries. In addition to the United States, where regulatory approval is being sought for both the osteo- and rheumatoid arthritis indications, regulatory approvals for Enablex capsules for rheumatoid arthritis have been applied for in 29 countries and have been obtained in two countries. No launches of Enablex have yet taken place. HOSPITAL PRODUCTS The Company's Hospital Products Group consists of two divisions -- Howmedica and Medical Devices. Howmedica manufactures and markets orthopedic implants. Medical Devices consists of three core businesses -- Valleylab, Schneider, and American Medical Systems and two smaller businesses -- Strato/Infusaid and Biomedical Sensors. Howmedica's reconstructive hip, knee and bone cement products are used to replace joints which have deteriorated as a result of disease or injury. Major product lines are P.C.A. Hips, ABG Hips, Duracon Knees and Simplex Bone Cement. Howmedica's trauma products are used by orthopedic surgeons to aid in trauma surgery and in setting fractures and include the Gamma Nail, Luhr System and Alta System. Schneider, an international leader in angioplasty catheters, is also a market leader in vascular and non-vascular stent applications. In March 1995, the Company acquired NAMIC U.S.A. Corporation ("NAMIC"), a Company that designs, manufactures and markets a broad range of single-patient use medical products, primarily for use in the diagnosis of atherosclerotic cardiovascular disease. NAMIC's product lines complement those of Schneider and are expected to expand the opportunities for this business. Valleylab is a worldwide leader in electrosurgical devices. Valleylab continues to invest in new product lines to enhance patient and physician safety. American Medical Systems is a leader in impotence and incontinence implants. Its major product development activities in 1994 were focused on new therapies for the treatment of BPH and urological strictures. The merger and the consolidation of operations of Strato Medical Corporation, a supplier of implantable vascular access ports, and Infusaid, an innovator of implantable infusion pumps, were completed in 1994. The combined operation will focus on advanced drug delivery systems. Biomedical Sensors grew in 1994 reflecting the full year launch of the Paratrend 7 intravascular continuous blood gas monitoring system, incorporating both electrochemical and fiberoptic technology. ANIMAL HEALTH The Company's Animal Health Group discovers, develops, manufactures and sells animal health products for the prevention and treatment of diseases in livestock, poultry and other animals. The principal products are: Dectomax (doramectin), the Company's new antiparasitic which was first launched in 1993 and is now available in much of Latin America, South Africa and the United Kingdom; 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; Terramycin (oxytetracycline), a broad-spectrum antibiotic used for a variety of 4 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, is to be launched in 1995. Aviax is currently under regulatory review in many countries, with approvals already received in a number of countries, including the United States and Japan. In 1995, the Animal Health Group plans a total of 49 new market launches of Dectomax, Advocin and Aviax. Animal health and nutrition products are sold through drug wholesalers, distributors, retail outlets and directly to users, including feed manufacturers, animal producers and veterinarians. 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. In January 1995, the Company acquired the SmithKline Beecham Animal Health ("SBAH") business. SBAH is a world leader in animal vaccines and companion animal health products, which complement the Company's existing animal health business in terms of product, species and regional sales coverage. SBAH's principal products are Stafac (virginiamycin), a feed additive anti-infective for poultry, cattle and swine; Valbazen (albendazole), a bovine parasiticide; Filaribits (diethylcarbamazine citrate), a pet parasiticide; and a variety of vaccines including BoviShield, Leukocell, RespiSure and Vanguard. A substantial number of other companies manufacture and sell one or more similar products for animal health use. There are hundreds of producers of animal health products throughout the world. The Company is a significant manufacturer of injectable antibiotics, anthelmintics and anticoccidial products for food animals. With the acquisition of SBAH, the Company became a significant manufacturer of biologicals and pet products as well. CONSUMER HEALTH CARE The Company's Consumer Health Care Group's products include proprietary health items, baby care products and toiletries, Plax pre-brushing dental rinse, 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 and new formulations of Rid and Plax. Many other OTC companies, large and small, manufacture and sell one or more similar consumer 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 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. FOOD SCIENCE The Company's Food Science Group serves the global food processing industry with innovative food ingredients to meet worldwide trends toward convenient and healthful foods. Specialty ingredients with quality parameters of appeal, taste and freshness, coupled with Food Science's technical, 5 application and discovery skills, serve the needs of the worldwide food industry. Food Science's longer-term goals are linked to the Company's healthcare strategies by targeting a new generation of food ingredients to allow better health maintenance through diet. Food Science's specialty ingredients include: "lite" food ingredients such as Litesse (polydextrose); flavors (veltols); food protectants (erythorbates); and brewery ingredients. Currently under development are products for calorie control utilizing bulking agents; products for fat replacement and reduced calorie intake from fats; high temperature fat substitutes; intense sweeteners; food protectants; and flavors. In October 1994, Food Science acquired certain assets of Flavor Technology Inc., a company that specializes in the design, customization and manufacture of proprietary flavorings. The Food Science business competes with other organizations for sales of most of its ingredients as well as substitute products. Some of these organizations produce and sell products that are either identical to, or serve the same function as, ingredients marketed by Food Science. The number of competitors varies with each particular ingredient. Methods of competition vary by ingredient but include innovation and quality, prompt delivery, ability to meet exacting specifications, technical service and cost. FINANCIAL SUBSIDIARIES In 1992, the Company completed the transfer of its international banking operations from Puerto Rico to the Republic of Ireland. This subsidiary, Pfizer International Bank Europe (PIBE), operates under a full banking license from the Central Bank of Ireland. This reorganization and transfer was made in anticipation of the integration and unification of the European Union's financial markets. PIBE makes loans and accepts deposits in U.S. dollars in international markets and is an active Euromarket lender with a portfolio of loans, floating rate notes and Euronotes of high quality corporations and sovereigns. Loans are made primarily 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 subsidiaries. INTERNATIONAL OPERATIONS Outside the United States, the Company has significant operations, both direct and through distributors that, in general, parallel its United States businesses. 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, changes in the values of currencies take place from time to time and can be either favorable or unfavorable to the net income and net assets 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 routine transactional hedging programs. In addition, from time to time, the 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" found on pages 42 and 43 of the Annual Report to Shareholders for the fiscal year ended December 31, 1994. TAX MATTERS 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 6 Revenue Code (the "Puerto Rico tax credit"). Such tax benefits will decline an additional 5% 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") is currently auditing the years 1987 through 1989. In October 1994, the Company received a Notice of Proposed Adjustments from the IRS. 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. 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. The Company has satisfactorily resolved all issues with the Internal Revenue Service for the years through 1986. The Company believes that its accrued tax liabilities are adequate for all open years. 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 business. 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. 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 $1.1 billion in 1994, $974 million in 1993, and $863 million in 1992 on Company-sponsored research and development throughout the world. In 1995, the Company plans to spend approximately $1.4 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. 7 EMPLOYEES Approximately 40,800 persons were employed by the Company, as of December 31, 1994, throughout the world as follows: United States, 15,700; Europe, 11,600; Asia, 7,500; Canada/Latin America, 4,500; and Africa/Middle East, 1,500. The Company has a good relationship with its employees. 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 1994 were reduced by Medicaid rebates and rebates under related state programs which amounted to $74 million. In addition, in 1994, Pfizer provided $56 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 over-the-counter 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" allows for a single central approval that is valid in all EU states. A "decentralized procedure" provides for approval in all EU states through recognition of a first approval in one member state. The centralized procedure must be used for all biotechnology products (including products derived from recombinant DNA technology, hybridoma and monoclonal antibody methods) and is available at the applicant's option for other products. 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. During 1994, Congress continued debate on reform of the U.S. health care system. While numerous health care reform bills were introduced, including the Administration's "Health Security Act," Congress was unable to reach consensus on an approach to health care reform. Health care has been identified by the current Republican Congressional majority as a long-term priority item. The focus in Congress on balancing the Federal budget may have a more immediate impact on health care, however, if the Medicare and Medicaid programs are targeted for significant cuts. Medicaid managed care systems driven by budget concerns are already under consideration in several states. If the Medicare and Medicaid programs implement managed care systems that severely restrict the access of program participants to innovative new medicines, this could have a significant adverse effect on the Company. 8 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 1995. Energy was available to the Company in sufficient quantities to meet Company requirements and this condition is expected to continue in 1995. 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 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 STATES ALL OTHER TOTAL ---------------- ----------- -------- (MILLIONS OF DOLLARS) Environment-related capital expenditures: 1994 Actual..................................... $ 41.1 $13.7 $54.8 1995 Estimated.................................. 56.8 4.6 61.4 1996 Estimated.................................. 65.8 1.4 67.2 Other environmental-related expenses: 1994 Actual..................................... 34.7 11.6 46.3 1995 Estimated.................................. 37.9 13.9 51.8
ITEM 2. PROPERTIES Following is a summary description of the Company's principal plants and properties: Groton Plant and Research Laboratories -- 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 3,250,000 square feet of floor space either existing or under construction. Principal products produced at Groton are bulk pharmaceuticals, specialty chemicals and food ingredients. 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 by 1996. In the research complex, construction of significant new buildings is continuing, with major enlargement (116,000 square feet) of the pharmaceutical research and development facilities. These improvements are also scheduled for completion by 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. Brooklyn Plant -- The Company's site in Brooklyn, New York, is on approximately 17 acres, including a number of buildings containing approximately 888,000 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. Vigo Plant and Research Facility -- These facilities, located in Vigo County near Terre Haute, Indiana, are on a site of approximately 2,100 acres owned in fee and consist of a number of buildings of 9 one to five stories containing approximately 740,000 square feet of floor space. Principal products produced at this plant are pharmaceutical products, bulk antibiotics, polydextrose and chymosin. Animal health research is also performed on this site. 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. Acquisition of an adjacent 9-acre site was recently approved. The facilities contain four major manufacturing buildings (of two to four floors) and twelve support buildings with a total approximate area of 403,000 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 484,000 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. Other U.S. Locations -- The Company also operates 15 other production facilities in the United States and has five regional sales and distribution centers in various parts of the country which are owned in fee. 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. Outside the United States -- The Company's major manufacturing facilities outside the United States are located in Australia, Belgium, Brazil, France, Germany, Great Britain, India, Ireland, Italy, Japan, Mexico and Spain. The plants in these twelve countries have an aggregate of over two million square feet of floor space. Other plants are located in over 17 additional countries located in various parts of 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 is in progress on a 97,000-square-foot pharmaceutical sciences building due for occupancy in 1996 and also on a 120,000-square-foot administration and services building which is scheduled for completion in early 1995. An effluent treatment plant is also under construction at this location. Ringaskiddy -- The Ringaskiddy facility in Ireland comprises three important bulk organic synthesis manufacturing plants, two of which are now in full operation. The third has just been completed and is scheduled for startup in early 1995. Ringaskiddy manufactures the majority of bulk products required by the International Pharmaceuticals Group in its worldwide dosage-form operations. These manufacturing plants are computer controlled and among them provide considerable flexibility in supplying both the current and foreseeable requirements for the Group. 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. Fermentation, bulk organic synthesis and dosage-form manufacturing are important to the supply of the Company's operations in Japan (the country with the second 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. 10 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(degree) or 70(degree) Shiley Convexo-Concave (C/C) heart valves, or anxiety that properly functioning implanted valves might fracture in the future or, in a few cases, 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 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 20, 1993 by the United States Court of Appeals for the Sixth Circuit. A motion for rehearing en banc was denied on March 8, 1994, and the U.S. Supreme Court denied a writ of certiorari on October 4, 1994. 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, eight 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 11 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. The Company's operations are subject to federal, state and local 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 is a potentially responsible party or participant with respect to several waste sites in Canada. 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 and local 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 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 20 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 10 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. 12 Concurrently with the filing of the future claims class action, the CCR settled approximately 16,360 personal injury cases on behalf of Pfizer and Quigley. It is the CCR's intention 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, 1994 is 14,543 asbestos cases against Quigley, 5,643 asbestos cases against Pfizer Inc. and 147 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. In connection with the divestiture of Minerals Technologies Inc. (MTI), to which the net assets of the Pfizer Minerals and the Quigley businesses were transferred, Pfizer and Quigley agreed to indemnify MTI against any liability with respect to products manufactured and sold prior to October 30, 1992, as well as against liability for certain environmental matters. 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 brought by retail pharmacy companies in federal and state courts. The federal cases consist principally of a class action by retail pharmacies (including approximately 30 named plaintiffs), as well as additional actions by approximately 1,900 individual retail pharmacies (the "individual actions"). These cases, all of which have been or are in the process of being transferred to the United States District Court for the Northern District of Illinois and coordinated for pretrial purposes, allege that the defendant drug manufacturers have violated the Sherman Act in that they have unlawfully agreed with each other (and, as alleged in some cases, with wholesalers) not to extend to retail pharmacy companies the same discounts allegedly extended to managed care companies, mail order pharmacies and certain other institutional purchasers. In addition, the individual actions also allege violations of the Robinson-Patman Act in that the manufacturers allegedly have unlawfully discriminated against retail pharmacy companies by not extending them such discounts. The federal court has certified a class consisting of all persons or entities who, since October 15, 1989, bought prescription brand name drugs from any manufacturer or wholesaler defendant, but specifically excluding government entities, mail order pharmacies, HMOs, hospitals, clinics and nursing homes. The federal court had denied a motion for certification made by a purported class of Alabama consumers (in a case that was originally filed in state court, then removed to federal court). In the state cases, motions for class certification are anticipated, except in one Alabama action still in state court, where plaintiffs have stated that they intend to amend their complaint to withdraw their class allegations. The Company believes that these cases are without merit and is vigorously defending them. 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 13 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 and are vigorously defending it. 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 and are vigorously defending it. On January 28, 1993, a purported class action entitled Kearse v. Pfizer Inc. and Howmedica Inc. was commenced in the United States District Court for the Northern District of Ohio. Howmedica Inc. ("Howmedica") is a wholly owned subsidiary of the Company. The action sought 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 alleged that the prostheses were defectively designed and manufactured and posed undisclosed risks to implantees. On August 3, 1993, a virtually identical purported class action, Bradshaw/Davids v. Pfizer Inc. and Howmedica Inc., was brought and the Kearse case was subsequently voluntarily dismissed. The district court has denied the plaintiffs' motion to certify the case as a class action. The Company believes that the suit is without merit and is vigorously defending it. During 1994, seven purported class actions were filed against American Medical Systems ("AMS") in federal courts in South Carolina (later transferred to Minnesota), California, Minnesota (2), Indiana, Ohio and Louisiana. In January 1995, an additional purported class action was filed in state court in Louisiana, replicating the federal suit. The California 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 and on March 3, 1995, the Court in the California suit denied plaintiffs' motion for class certification. The Company believes the suits are without merit and is vigorously defending them. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 14 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference to the "Quarterly Consolidated Statement of Income (Unaudited)" found on page 53 and to page 58 of the Annual Report to Shareholders for the fiscal year ended December 31, 1994. ITEM 6. SELECTED FINANCIAL DATA SELECTED CONSOLIDATED STATEMENT OF INCOME DATA
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 1994 1993 1992 1991 1990 ----------- ------------- -------------- ------------- ---------- (MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) Net sales............................... $ 8,281.3 $ 7,477.7 $ 7,230.2 $ 6,950.0 $ 6,406.0 ----------- ------------- -------------- ------------- ---------- ----------- ------------- -------------- ------------- ---------- Income before cumulative effect of accounting changes..................... $ 1,298.4 $ 657.5(a) $ 1,093.5(b) $ 722.1(d) $ 801.2 Cumulative effect of accounting changes................................ -- -- (282.6)(c) -- -- ----------- ------------- -------------- ------------- ---------- Net income.............................. $ 1,298.4 $ 657.5(a) $ 810.9(b) $ 722.1(d) $ 801.2 ----------- ------------- -------------- ------------- ---------- ----------- ------------- -------------- ------------- ---------- Earnings per common share (e): Income before cumulative effect of accounting changes..................... $ 4.19 $ 2.05 $ 3.25 $ 2.13 $ 2.38 Cumulative effect of accounting changes................................ -- -- (.84)(c) -- -- ----------- ------------- -------------- ------------- ---------- Net income.............................. $ 4.19 $ 2.05 $ 2.41 $ 2.13 $ 2.38 ----------- ------------- -------------- ------------- ---------- ----------- ------------- -------------- ------------- ---------- Cash dividends paid per common share (e).................................... $ 1.88 $ 1.68 $ 1.48 $ 1.32 $ 1.20 ----------- ------------- -------------- ------------- ---------- ----------- ------------- -------------- ------------- ----------
SELECTED CONSOLIDATED BALANCE SHEET DATA
DECEMBER 31, --------------------------------------------------------------------- 1994 1993 1992 1991 1990 ----------- ------------- -------------- ------------- ---------- (MILLIONS OF DOLLARS) Total assets............................ $ 11,098.5 $ 9,330.9 $ 9,590.1 $ 9,634.6 $ 9,052.0 ----------- ------------- -------------- ------------- ---------- ----------- ------------- -------------- ------------- ---------- Long-term debt.......................... $ 604.2 $ 570.5 $ 571.3 $ 396.6 $ 193.3 ----------- ------------- -------------- ------------- ---------- ----------- ------------- -------------- ------------- ---------- ------------------------ (a) Includes pre-tax charges of $690.2 million for restructuring programs, $121.7 million of unusual items relating to the write-down of goodwill and a pre-tax gain of $59.9 million on the sale of a business. (b) Includes a pre-tax gain of $258.6 million representing the gain on the sale of certain businesses and pre-tax charges of $204.6 million for restructuring, consolidating and streamlining. In addition, it includes pre-tax curtailment gains of $56.5 million associated with postretirement benefits of divested operations. (c) Represents a pre-tax charge of $520.5 million ($312.6 million after-tax or $.93 per share) for the cumulative effect of adopting Statement of Financial Accounting Standards ("SFAS") No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions and a credit of $30.0 million ($.09 per share) for the cumulative effect of adopting SFAS No. 109, Accounting for Income Taxes. (d) Includes an after-tax special charge of $195.0 million for potential future Shiley C/C heart valve fracture claims. (e) In 1991, the Company effected a two-for-one stock split of its common stock. The year ended December 31, 1990 has been restated to reflect this stock split.
15 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 26 through 33 of the Annual Report to Shareholders for the fiscal year ended December 31, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is incorporated by reference to the "Independent Auditors' Report" found on page 34 and to pages 35 through 53 of the Annual Report to Shareholders for the fiscal year ended December 31, 1994. 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 following Executive Officers who are Directors, is incorporated by reference to pages 3 through 7 of the Company's Proxy Statement dated March 16, 1995. 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.
AGE AS OF THE DATE OF THE COMPANY'S ANNUAL MEETING POSITIONS AND OFFICES NAME APRIL 27, 1995 WITH COMPANY PRESENTLY HELD --------------------------------- ----------------------------- ------------------------------------------------------ Brian W. Barrett................. 55 Vice President; President, Northern Asia, Australasia and Canada -- International Pharmaceuticals Group Edward C. Bessey................. 60 Vice Chairman; President -- U.S. Pharmaceuticals Group; Director; Member of the Corporate Management Committee M. Kenneth Bowler................ 52 Vice President -- Federal Government Relations C. L. Clemente................... 57 Senior Vice President -- Corporate Affairs; Secretary and Corporate Counsel; Member of the Corporate Management Committee Bruce R. Ellig................... 58 Vice President -- Personnel Donald F. Farley................. 52 Vice President; President -- Food Science Group David M. Fitzgerald.............. 61 Vice President; Executive Vice President -- Hospital Products Group, and President, Howmedica Division George A. Forcier................ 56 Vice President -- Quality Control P. Nigel Gray.................... 56 Vice President; Executive Vice President -- Hospital Products Group, and President, Medical Devices Division
16
AGE AS OF THE DATE OF THE COMPANY'S ANNUAL MEETING POSITIONS AND OFFICES NAME APRIL 27, 1995 WITH COMPANY PRESENTLY HELD --------------------------------- ----------------------------- ------------------------------------------------------ William E. Harvey................ 64 Vice President; Treasurer (Retired on December 31, 1994) Gary N. Jortner.................. 50 Vice President; Group Vice President, Disease Management -- U.S. Pharmaceuticals Group Karen L. Katen................... 46 Vice President; Executive Vice President -- U.S. Pharmaceuticals Group Alan G. Levin.................... 33 Treasurer Henry A. McKinnell............... 52 Executive Vice President and Chief Financial Officer; President -- Hospital Products Group; Member of the Corporate Management Committee Brower A. Merriam................ 60 Vice President; President -- Animal Health Group John C. Mesloh................... 60 Vice President -- Corporate Purchasing Victor P. Micati................. 55 Vice President; President, Europe -- International Pharmaceuticals Group Paul S. Miller................... 56 Senior Vice President; General Counsel; Member of the Corporate Management Committee George M. Milne, Jr.............. 51 Vice President; President -- Central Research Robert Neimeth................... 59 Executive Vice President; President -- International Pharmaceuticals Group; Member of the Corporate Management Committee John F. Niblack.................. 56 Executive Vice President -- Research and Development; Member of the Corporate Management Committee William J. Robison............... 59 Vice President; President -- Consumer Health Care Group Herbert V. Ryan.................. 58 Controller Craig Saxton..................... 52 Vice President; Executive Vice President -- Central Research Gerald H. Schulze................ 47 Vice President -- Pharmaceutical Planning Robert L. Shafer................. 62 Vice President -- Public Affairs David L. Shedlarz................ 47 Vice President -- Finance William C. Steere, Jr............ 58 Chairman of the Board and Chief Executive Officer; Director; Member of the Corporate Management Committee Frederick W. Telling............. 43 Vice President -- Corporate Strategic Planning and Policy
17 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; in 1985, President -- Africa/ Middle East and in 1991, President -- Asia/Canada. In 1992, Mr. Barrett was elected Vice President of the Company. He assumed the responsibilities of his present position, President, Northern Asia, Australasia and Canada -- International Pharmaceuticals Group, in 1993. 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 as Vice President; General Counsel and Secretary, Pfizer International, Inc. He has also held the position of 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 the Company. 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. DAVID M. FITZGERALD Mr. Fitzgerald joined the Company's Howmedica division in 1970 as Controller. In 1974, he was promoted to Corporate Controller of Howmedica. He served as Assistant General Manager and Vice President -- General Manager and in 1980 he assumed responsibility for Howmedica's worldwide orthopedics operations. In 1982, he was appointed Senior Vice President of Howmedica. In 1984, he became President of Howmedica and Senior Vice President of Hospital Products. In 1988, he became Executive Vice President of the Hospital Products Group. In 1992, Mr. Fitzgerald was elected Vice President of the Company. 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. Dr. Forcier was elected Vice President -- Quality Control of the Company, effective January 1, 1994. 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 October 1994, he was elected a Vice President of the Company. WILLIAM E. HARVEY Mr. Harvey joined the Company in 1966 as Assistant to the Treasurer of Pfizer International. In 1969, he was appointed Assistant Treasurer, International and in 1981, he became Assistant Treasurer of the Company. In 1990, Mr. Harvey was elected Vice President; Treasurer of the Company and served in this capacity until his retirement on December 31, 1994. 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 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. Pharmaceuticals 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 May 1993, Ms. Katen became Executive Vice 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, and in 1988 joined the Treasurer's Division as Controller, Pfizer International Bank. He became Director -- Finance, International in 1991 and in 1993 was named Senior Director -- Finance, Asia. On January 1, 1995, Mr. Levin was elected Treasurer of the Company. 19 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 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. 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. JOHN C. MESLOH Mr. Mesloh joined Howmedica, Inc. as Controller in 1973. In 1974, he was appointed Vice President -- Finance and Treasurer of Howmedica, and in 1980 he was elected Corporate Controller of the Company. In 1989, Mr. Mesloh was elected Vice President of the Company. Mr. Mesloh was elected Vice President, Corporate Purchasing, effective January 1993. 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. He returned to the International Pharmaceutical Division in 1984 as Senior Vice President, and in 1990 was named President, Pfizer Europe. In 1992, Mr. Micati was elected Vice President of the Company. 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 September 1993, he was elected Vice President of the Company and President, Central Research. 20 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, Mr. Neimeth became a 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. 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 September 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 assumed his present position as President of the Consumer Health Care Group. In 1992, Mr. Robison was also elected Vice President of the Company. HERBERT V. RYAN Mr. Ryan joined the Company 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 Ltd. 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 September 1993, he was named Executive Vice President -- Central Research and was elected a Vice President of the Company. GERALD H. SCHULZE Mr. Schulze joined the Company in 1971 as a Medical Service Representative for Roerig. He served in a number of positions of increasing responsibility in the Pharmaceuticals and International divisions before being named Vice President -- Business Development for the Consumer Products division in 1985. In 1987, he was named Vice President -- Business Development for Hospital Products, and in 1988, became that division's Senior Vice President. In 1992, he was elected a Vice President of the Company and was named Executive Vice President for the Hospital Products Group 21 and President of the Medical Devices Division. In November 1993, Mr. Schulze was elected Vice President, Corporate Strategic Planning of the Company. In October 1994, he was elected Vice President, Pharmaceutical Planning. ROBERT L. SHAFER Mr. Shafer joined the Company in 1966 as Assistant to the Director of Government Relations. In 1967, he became Associate Director of Government Relations and in 1968, Director of Government Relations. In 1973, Mr. Shafer was elected a Vice President of the Company. In 1982, he was elected Vice President -- Public Affairs. 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. 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 the Company's U.S. Pharmaceuticals Group. In October 1994, Dr. Telling was elected Vice President, Corporate Strategic Planning and Policy. ITEM 11. EXECUTIVE COMPENSATION Information with regard to executive compensation is incorporated by reference to pages 8 through 19 of the Company's Proxy Statement dated March 16, 1995. 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 16, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with regard to certain relationships and related transactions is incorporated by reference to pages 20 and 21 of the Company's Proxy Statement dated March 16, 1995. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following is a list of all Financial Statement Schedules and Exhibits filed as a part of this Annual Report. (a)(1) Financial Statements See Part II (a)(2) Financial Statement Schedule
PAGE ---- Schedule II -- Valuation and Qualifying Accounts...................... 26
Schedules not listed above have been omitted for the reason that they are inapplicable 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. 22 (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 (as filed in the Office of the Secretary of State of the State of Delaware on January 3, 1995, and as filed herewith). 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). 10(a) -- Executive Compensation Plans and Arrangements: 10.1 -- Form of Severance Agreement for Certain Executive Officers of the Company. 10.2 -- Pfizer Inc. Performance-Contingent Share Award Program (incorporated by reference to Exhibit 4 of Form S-8, Registration No. 33-56977). 10(b) -- Stock and Asset Purchase Agreement, dated as of November 23, 1994, between SmithKline Beecham plc and Pfizer Inc., as amended (incorporated by reference to Exhibit 2 of the Company's Form 8-K Report dated February 7, 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, 1994 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, 1994. 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, 1994. 21 -- Subsidiaries of the Registrant. 23 -- Report and consent of KPMG Peat Marwick LLP, independent certified public accountants. 27 -- Financial Data Schedule
(b) The Company filed a report on Form 8-K dated December 13, 1994. Exhibits to the Form 10-K are available upon request at the charges set out below. Requests should be directed to C. L. Clemente, Secretary, Pfizer Inc., 235 East 42nd Street, New York, N.Y. 10017. Exhibit 13(b)........... $ 1.40 Exhibit 13(c)........... 1.30 Exhibit 21.............. .60
23 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 23, 1995 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 23, 1995 William C. Steere, Jr.) Executive Officer) /s/ HENRY A. MCKINNELL -------------------------------------- Executive Vice President (Principal March 23, 1995 (Henry A. McKinnell) Financial Officer) /s/ HERBERT V. RYAN -------------------------------------- Controller (Principal Accounting Officer) March 23, 1995 (Herbert V. Ryan) /s/ EDWARD C. BESSEY -------------------------------------- Director March 23, 1995 (Edward C. Bessey) /s/ M. ANTHONY BURNS -------------------------------------- Director March 23, 1995 (M. Anthony Burns) -------------------------------------- Director March , 1995 (Grace J. Fippinger) /s/ GEORGE B. HARVEY -------------------------------------- Director March 23, 1995 (George B. Harvey) /s/ CONSTANCE J. HORNER -------------------------------------- Director March 23, 1995 (Constance J. Horner)
24
SIGNATURES TITLE DATE ------------------------------------------------ ------------------------------------------- ------------------ /s/ STANLEY O. IKENBERRY -------------------------------------- Director March 23, 1995 (Stanley O. Ikenberry) /s/ THOMAS G. LABRECQUE -------------------------------------- Director March 23, 1995 (Thomas G. Labrecque) /s/ JAMES T. LYNN -------------------------------------- Director March 23, 1995 (James T. Lynn) /s/ PAUL A. MARKS -------------------------------------- Director March 23, 1995 (Paul A. Marks) /s/ EDMUND T. PRATT, JR. -------------------------------------- Director March 23, 1995 (Edmund T. Pratt, Jr.) /s/ FRANKLIN D. RAINES -------------------------------------- Director March 23, 1995 (Franklin D. Raines) /s/ FELIX G. ROHATYN -------------------------------------- Director March 23, 1995 (Felix G. Rohatyn) /s/ JEAN-PAUL VALLES -------------------------------------- Director March 23, 1995 (Jean-Paul Valles)
25 PFIZER INC. AND SUBSIDIARY COMPANIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS ------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING OF COSTS AND OTHER AT END OF DESCRIPTION PERIOD EXPENSES ACCOUNTS(B) DEDUCTIONS(A)(C) PERIOD -------------------------------------------------- ------------ ----------- ----------- -------------- --------- (MILLIONS OF DOLLARS) 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(d) $13.5 ----- ----- --- ----- --------- ----- ----- --- ----- --------- Year ended December 31, 1992 Valuation and qualifying accounts deducted from assets to which they apply Allowance for doubtful accounts............. $38.8 $11.5 $ 0.5 $14.6(e) $36.2 ----- ----- --- ----- --------- ----- ----- --- ----- --------- Allowance for credit losses................. $11.5 $ 3.0 $-- $-- $14.5 ----- ----- --- ----- --------- ----- ----- --- ----- --------- ------------------------ (a) Includes impact of translation of foreign currencies. (b) Recoveries of accounts previously written off. (c) Uncollectible accounts charged against allowance accounts. (d) Decrease in allowance arising from lower loan loss exposure. (e) Includes $6.4 million of adjustments arising from businesses divested.
26 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) FELDENE (PIROXICAM) GLUCOTROL (GLIPIZIDE) GLUCOTROL XL (GLIPIZIDE GITS) NORVASC (AMLODIPINE BESYLATE) PROCARDIA (NIFEDIPINE) PROCARDIA XL (NIFEDIPINE GITS) REACTINE (CETIRIZINE) UNASYN (SULBACTAM/AMPICILLIN) ZITHROMAX (AZITHROMYCIN) ZOLOFT (SERTRALINE) ABG ALTA DURACON GAMMA LUHR PARATREND P.C.A. SIMPLEX LITESSE (POLYDEXTROSE) ADVOCIN (DANOFLOXACIN) AVIAX (SEMDURAMICIN) BANMINTH (PYRANTEL TARTRATE) BOVISHIELD COXISTAC (SALINOMYCIN) DECTOMAX (DORAMECTIN) FILARIBITS (DIETHYLCARBAMAZINE CITRATE) LEUKOCELL MECADOX (CARBADOX) NEMEX (PYRANTEL PAMOATE) RESPISURE STAFAC (VIRGINIAMYCIN) TERRAMYCIN LA-200 (OXYTETRACYCLINE) TM/LA (OXYTETRACYCLINE) PARATECT (MORANTEL TARTRATE) POSISTAC (SALINOMYCIN) VALBAZEN (ALBENDAZOLE) VANGUARD BARBASOL BEN-GAY DAILY CARE FROM DESITIN DESITIN PLAX RID UNISOM (DOXYLAMINE SUCCINATE) UNISOM SLEEPGELS VISINE (TETRAHYDROZOLINE HCI) EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE --------------- ---------------------------------------------------------------------------------------- --------- 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 (as filed in the Office of the Secretary of State of the State of Delaware on January 3, 1995, and as filed herewith)........................................................ 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).................... 10(a) Executive Compensation Plans and Arrangements........................................... 10.1 Form of Severance Agreement for Certain Executive Officers of the Company............... 10.2 Pfizer Inc. Performance-Contingent Share Award Program (incorporated by reference to Exhibit 4 of Form S-8, Registration No. 33-56977)...................................... 10(b) Stock and Asset Purchase Agreement, dated as of November 23, 1994, between SmithKline Beecham plc and Pfizer Inc., as amended (incorporated by reference to Exhibit 2 of the Company's Form 8-K Report dated February 7, 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, 1994 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, 1994.................................................... 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, 1994....... 21 Subsidiaries of the Registrant.......................................................... 23 Report and consent of KPMG Peat Marwick LLP, independent certified public accountants... 27 Financial Data Schedule.................................................................
EX-3.I 2 EXHIBIT 3(I) CERTIFICATE OF CORRECTION OF THE RESTATED CERTIFICATE OF INCORPORATION OF PFIZER INC. Pfizer Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), pursuant to Section 103(f) of the General Corporation Law of the State of Delaware, hereby certifies: FIRST: That the Restated Certificate of Incorporation of the Corporation (the "Restated Certificate") which was filed with the Secretary of State of the State of Delaware on April 30, 1991 is an inaccurate record of the corporate action therein referred to and requires correction as permitted by Section 103(f) of the General Corporation Law of the State of Delaware. SECOND: The inaccuracy or defect in said Restated Certificate to be corrected is that the terms of the Series A Junior Preferred Stock, as set forth in an Amended and Restated Certificate of Designations filed in the Office of the Secretary of State of the State of Delaware on June 22, 1989, were inadvertently omitted from Article FOURTH of said Restated Certificate, and should be added thereto. THIRD: Article FOURTH of the Restated Certificate is corrected by inserting at the end thereof the following: SERIES A JUNIOR PREFERRED STOCK Pursuant to authority conferred by this Article FOURTH upon the Board of Directors of the Corporation, the Board of Directors, pursuant to the Amended and Restated Certificate of Designations filed in the Office of the Secretary of State of the State of Delaware on June 22, 1989, has provided for a series of Preferred Stock of the Corporation and has stated the designation and number shares, and has fixed the relative rights, preferences, and limitations thereof as follows: Series A Preferred Stock: "RESOLVED, the designation and amount of a series of Preferred Stock of the Company previously designated as "Series A Junior Participating Preferred Stock," and the voting powers, preferences and relative, participating, optional or other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof, are hereby amended and restated to read in their entirety as follows: Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as "Series A Junior Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting such series shall be 1,900,000. Section 2. DIVIDENDS AND DISTRIBUTIONS. (A) Subject to the provisions for adjustment hereinafter set forth, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, (i) in the event the Board of Directors of the Company shall, at any time after the issuance of any share of Series A Preferred Stock, declare a cash dividend payable on the Common Stock, $.10 par value per share, of the Company (the "Common Stock"), a preferential cash dividend in an amount per share (rounded to the nearest cent) equal to 100 times the per share amount of such cash dividend declared on a -2- share of the Common Stock and (ii) a preferential cash dividend (the "Preferential Dividends"), if any, on the first day of January, April, July and October of each year (each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount equal to $10 per share of Series A Preferred Stock less the per share amount of all cash dividends declared on the Series A Preferred Stock pursuant to clause (i) of this sentence since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share of Series A Preferred Stock. In the event the Board of Directors of the Company shall, at any time after the issuance of any share of Series A Preferred Stock, declare a distribution on the shares of Common Stock of the Company, whether by way of a dividend or a reclassification of stock, a recapitalization, reorganization or partial liquidation of the Company or otherwise, which is payable in cash or any debt security, debt instrument, real or personal property or any other property (other than cash dividends subject to the immediately preceding sentence, a distribution of shares of Common Stock or other capital stock of the Company or a distribution of rights or warrants to acquire any such share, including any debt security convertible into or exchangeable for any such share, at a price less than the Fair Market Value of such share), then and in each such event each holder of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the purpose, a preferential distribution on each then outstanding share of Series A -3- Preferred Stock of the Company, in like kind, in an amount equal to 100 times the amount of such distribution paid on a share of Common Stock (subject to the provisions for adjustment hereinafter set forth). The dividends and distributions on the Series A Preferred Stock to which holders thereof are entitled pursuant to clause (i) of the first sentence of this paragraph and pursuant to the second sentence of this paragraph are hereinafter referred to as "Series A Dividends" and the multiple of such cash and non-cash dividends on the Common Stock applicable to the determination of the Series A Dividends, which shall be 100 initially but shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Dividend Multiple." In the event the Company shall at any time after October 5, 1987 declare or pay any dividend or make any distribution on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of the Series A Dividends which holders of shares of Series A Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) So long as any shares of Series A Preferred Stock are outstanding, no dividend or other distribution (other than a dividend or distribution paid in shares -4- of Common Stock) shall be paid or set apart for payment by the Company on the Common Stock, unless, in each case, the full dividends on all outstanding shares of Series A Preferred Stock to which the holders thereof are entitled shall have been paid. No dividends shall be paid or declared or set apart for payment on the Series A Preferred Stock in respect of any period unless dividends shall be or have been paid, or declared and set apart for payment, pro rata on all shares of Preferred Stock at the time outstanding of each other series which ranks equally as to dividends with the Series A Preferred Stock so that the amount of dividends declared on the Series A Preferred Stock shall bear the same ratio to the amount declared on each such other series as the accrued dividends on the Series A Preferred Stock shall bear to the accrued dividends on each such other series. Holders of shares of Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full dividends, as herein provided, on shares of Series A Preferred Stock. Accruals of dividends shall not bear interest. (C) Preferential Dividends shall begin to accrue on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issuance of any shares of Series A Preferred Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall not bear interest. Preferential Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. -5- Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Each share of Series A Preferred Stock shall entitle the holder thereof to 1 vote on all matters submitted to a vote of the stockholders of the Company. Except as otherwise provided herein, in the Restated Certificate of Incorporation or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Company. (B) In the event that the Preferential Dividends accrued on the Series A Preferred Stock for four or more quarterly dividend periods, whether consecutive or not, shall not have been declared and paid or set apart for payment, the holders of record of the Series A Preferred Stock, together with any other series of Preferred Stock in respect of which the following right is expressly granted by the authorizing resolutions included in the Certificate of Designations therefor, shall have the right, at the next meeting of stockholders called for the election of directors, to elect two members to the Board of Directors, which directors shall be in addition to the number required by the By-laws prior to such event, to serve until the next Annual Meeting and until their successors are elected and qualified or their earlier resignation, removal or incapacity or until such earlier time as all accrued and unpaid Preferential Dividends upon the outstanding shares of Series A Preferred Stock shall have been paid (or set aside for payment) in full. The holders of shares of Series A Preferred Stock shall continue to have the right to elect directors as provided by the immediately preceding -6- sentence until all accrued and unpaid Preferential Dividends upon the outstanding shares of Series A Preferred Stock shall have been paid (or set aside for payment) in full. Such directors may be removed and replaced by such stockholders, and vacancies in such directorships may be filled only by such stockholders (or by the remaining director elected by such stockholders, if there be one) in the manner permitted by law; provided, however, that any such action by stockholders shall be taken at a meeting of stockholders and shall not be taken by written consent thereto. (C) Except as otherwise required by the Restated Certificate of Incorporation or by law or set forth herein, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action. Section 4. CERTAIN RESTRICTIONS. (A) Whenever Preferential Dividends or the Series A Dividends are in arrears or the Company shall be in default of payment thereof, thereafter and until all accrued and unpaid Preferential Dividends and the Series A Dividends, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid or set aside for payment in full, and in addition to any and all other rights which any holder of shares of Series A Preferred Stock may have in such circumstances, the Company shall not (i) declare or pay dividends on, make any other distributions on (other than a dividend or distribution paid in shares of Common Stock), or -7- redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series A Preferred Stock, unless dividends are paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled if the full dividends accrued thereon were to be paid; (iii) except as permitted by subparagraph (iv) of this paragraph 4(A), redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (both as to dividends and upon liquidation, dissolution or winding up) to the Series A Preferred Stock: or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock (either as to dividends or upon liquidation, dissolution or winding up), except in accordance with a purchase offer -8- made to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any Subsidiary (as hereinafter defined) of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. A "Subsidiary" of the Company shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other persons performing similar functions are beneficially owned, directly or indirectly, by the Company or by any corporation or other entity that is otherwise controlled by the Company. (C) The Company shall not issue any shares of Series A Preferred Stock except upon exercise of Rights issued pursuant to that certain Rights Agreement, dated as of September 24, 1987, as amended by First Amendment to Rights Agreement, dated as of May 25, 1989, between the Company and The Chase Manhattan Bank, N.A., a copy of which is on file with the Secretary of the Company at its principal executive office and shall be made available to stockholders of record without charge upon written request therefor addressed to said Secretary. Notwithstanding the foregoing sentence, nothing contained in the provisions hereof -9- shall prohibit or restrict the Company from issuing for any purpose any series of Preferred Stock with rights and privileges similar to, different from, or greater than, those of the Series A Preferred Stock. Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares upon their retirement and cancellation shall become authorized but unissued shares of Preferred Stock, without designation as to series, and such shares may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors. Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless the holders of shares of Series A Preferred Stock shall have received, subject to adjustment as hereinafter provided, (A) $300 per one-hundredth share plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (B) if greater than the amount specified in clause (i)(A) of this sentence, an amount equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, as the same may be adjusted as hereinafter provided, and (ii) to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Series A Preferred Stock, unless -10- simultaneously therewith distributions are made ratably on the Series A Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Series A Preferred Stock are entitled under clause (i)(A) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up. The amount to which holders of Series A Preferred Stock may be entitled upon liquidation, dissolution or winding up of the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to as the "Participating Liquidation Amount" and the multiple of the amount to be distributed to holders of shares of Common Stock upon the liquidation, dissolution or winding up of the Company applicable pursuant to said clause to the determination of the Participating Liquidation Amount, as said multiple may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Liquidation Multiple." In the event the Company shall at any time after October 5, 1987 declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Liquidation Multiple thereafter applicable to the determination of the Participating Liquidation Amount to which holders of Series A Preferred Stock shall be entitled after such event shall be the Liquidation Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding -11- immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. CERTAIN RECLASSIFICATIONS AND OTHER EVENTS. (A) In the event that holders of shares of Common Stock of the Company receive after October 5, 1987 in respect of their shares of Common Stock any share of capital stock of the Company (other than any share of Common Stock of the Company), whether by way of reclassification, recapitalization, reorganization, dividend or other distribution or otherwise (a "Transaction"), then and in each such event the dividend rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall be adjusted so that after such event the holders of Series A Preferred Stock shall be entitled, in respect of each share of Series A Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such adjustment, to (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such Transaction multiplied by the additional dividends which the holder of a share of Common Stock shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock and (ii) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such Transaction multiplied by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company by virtue of the receipt in the Transaction of such capital stock, as the case may be, all as provided by the terms of such capital stock. -12- (B) In the event that holders of shares of Common Stock of the Company receive after October 5, 1987 in respect of their shares of Common Stock any right or warrant to purchase Common Stock (including as such a right, for all purposes of this paragraph, any security convertible into or exchangeable for Common Stock) at a purchase price per share less than the Fair Market Value (as hereinafter defined) of a share of Common Stock on the date of issuance of such right or warrant, then and in each such event the dividend rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall each be adjusted so that after such event the Dividend Multiple and the Liquidation Multiple shall each be the product of the Dividend Multiple and the Liquidation Multiple, as the case may be, in effect immediately prior to such event multiplied by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the maximum number of shares of Common Stock which could be acquired upon exercise in full of all such rights or warrants and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the number of shares of Common Stock which could be purchased, at the Fair Market Value of the Common Stock at the time of such issuance, by the maximum aggregate consideration payable upon exercise in full of all such rights or warrants. (C) In the event that holders of shares of Common Stock of the Company receive after October 5, 1987 in respect of their shares of Common Stock -13- any right or warrant to purchase capital stock of the Company (other than shares of Common Stock), including as such a right, for all purposes of this paragraph, any security convertible into or exchangeable for capital stock of the Company (other than Common Stock), at a purchase price per share less than the Fair Market Value of such shares of capital stock on the date of issuance of such right or warrant, then and in each such event the dividend rights and rights upon liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall each be adjusted so that after such event each holder of a share of Series A Preferred Stock shall be entitled, in respect of each share of Series A Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such event, to receive (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such event multiplied, first, by the additional dividends to which the holder of a share of Common Stock shall be entitled upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction (as hereinafter defined) and (ii) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such event multiplied, first, by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction. For purposes of this paragraph, the "Discount Fraction" shall be a fraction the numerator -14- of which shall be the difference between the Fair Market Value of a share of the capital stock subject to a right or warrant distributed to holders of shares of Common Stock of the Company as contemplated by this paragraph immediately after the distribution thereof and the purchase price per share for such share of capital stock pursuant to such right or warrant and the denominator of which shall be the Fair Market Value of a share of such capital stock immediately after the distribution of such right or warrant. (D) For purposes of this Section 7, the "Fair Market Value" of a share of capital stock of the Company (including a share of Common Stock) on any date shall be deemed to be the average of the daily closing price per share thereof over the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that, in the event that such Fair Market Value of any such share of capital stock is determined during a period which includes any date that is within 30 Trading Days after (i) the ex-dividend date for a dividend or distribution on stock payable in shares of such stock or securities convertible into shares of such stock, or (ii) the effective date of any subdivision, split, combination, consolidation, reverse stock split or reclassification of such stock, then, and in each such case, the Fair Market Value shall be appropriately adjusted by the Board of Directors of the Company to take into account ex-dividend or post-effective date trading. The closing price for any day shall be the last sale price, regular way, or, in case, no such sale takes place on such day, the average of the closing bid and asked prices, regular way (in either case, as reported in the applicable transaction reporting system with respect -15- to securities listed or admitted to trading on the New York Stock Exchange), or, if the shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the applicable transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares are listed or admitted to trading or, if the shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or if on any such date the shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares are listed or admitted to trading is open for the transaction of business or, if the shares are not listed or admitted to trading on any national securities exchange, on which the New York Stock Exchange or such other national securities exchange as may be selected by the Board of Directors of the Company is open. If the shares are not publicly held or not so listed or traded on any day within the period of 30 Trading Days applicable to the determination of Fair Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value thereof per share as determined in good faith by the Board of Directors of the Company. In either case referred to in the foregoing -16- sentence, the determination of Fair Market Value shall be described in a statement filed with the Secretary of the Company. Section 8. CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Series A Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged multiplied by the higher of the Dividend Multiple or the Liquidation Multiple in effect immediately prior to such event. Section 9. EFFECTIVE TIME OF ADJUSTMENTS. (A) Adjustments to the Series A Preferred Stock required by the provisions hereof shall be effective as of the time at which the event requiring such adjustments occurs. (B) The Company shall give prompt written notice to each holder of a share of Series A Preferred Stock of the effect of any adjustment to the dividend rights or rights upon liquidation, dissolution or winding up of the Company of such shares required by the provisions hereof. Notwithstanding the foregoing sentence, the failure of the Company to give such notice shall not affect the validity of or the force or effect of or the requirement for such adjustment. -17- Section 10. NO REDEMPTION. The shares of Series A Preferred Stock shall not be redeemable at the option of the Company or any holder thereof. Notwithstanding the foregoing sentence of this Section, the Company may acquire shares of Series A Preferred Stock in any other manner permitted by law, the provisions hereof and the Restated Certificate of Incorporation of the Company. Section 11. RANKING. Unless otherwise provided in the Restated Certificate of Incorporation of the Company or a Certificate of Designations relating to a subsequent series of preferred stock of the Company, the Series A Preferred Stock shall rank junior to all other series of the Company's Preferred Stock as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up and senior to the Common Stock. Section 12. AMENDMENT. The provisions hereof and the Restated Certificate of Incorporation of the Company shall not be amended in any manner which would adversely affect the rights, privileges or powers of the Series A Preferred Stock without, in addition to any other vote of stockholders required by law, the affirmative vote of the holders to two-thirds or more of the outstanding shares of Series A Preferred Stock, voting together as a single class." -18- IN WITNESS WHEREOF, Pfizer Inc. has caused this Certificate of Correction to be executed by Terence J. Gallagher, its Vice President - Corporate Governance and Assistant Secretary, this 27th day of December, 1994. PFIZER INC. -------------------------------------------- Terence J. Gallagher Vice President - Corporate Governance and Assistant Secretary -19- EX-10.1 3 EXHIBIT 10.1 , 1995 Pfizer Inc. 235 East 42nd Street New York, New York 10017 Dear : Pfizer Inc. (the "Company") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, should the Company receive a proposal from a third party, whether solicited by the Company or unsolicited, concerning a possible business combination with, or the acquisition of a substantial share of the equity or voting securities of, the Company, the Board of Directors of the Company (the "Board") has determined that it is imperative that it and the Company be able to rely upon your continued services without concern that you might be distracted by the personal uncertainties and risks that such a proposal might otherwise entail. Accordingly, the Board in the past has taken steps to reinforce and encourage the continued attention and dedication of members of the Company's management, yourself included, to their assigned duties without distraction in the face of potentially disturbing circumstances that could arise out of a proposal for a change in control of the Company. The Board has reviewed the terms of the Company's existing severance arrangements with you and has determined that it is appropriate to update and modify certain of such arrangements, all upon the terms set forth herein. In order to induce you to remain in the employ of the Company and its subsidiaries and in consideration of your agreement set forth in Section 2(ii) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company and its subsidiaries is terminated subsequent to a Change in Control (as defined in Section 2 hereof) under the circumstances described below. 1. TERM OF AGREEMENT. This Agreement shall commence on the date hereof and shall continue in effect through September 30, 1996; provided, however, the term of this Agreement shall automatically be extended for one additional year commencing on October 1, 1996 and each October 1 thereafter, unless, not later than June 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, that, notwithstanding any such notice by the Company not , 1995 Page 2 to extend, if a Change in Control shall have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of forty-eight (48) months beyond the expiration of the term in effect immediately before such Change in Control. 2. CHANGE IN CONTROL. (i) No benefits shall be payable hereunder unless there shall have been a Change in Control of the Company, as set forth below. For purposes of this Agreement, and subject to the proviso set forth in clause (C) below, a "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change in Control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; or (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director, whose election to the Board or nomination for election to the Board by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (C) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding immediately thereafter securities representing more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (D) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (ii) You agree that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company occurring after the date hereof, you will not voluntarily terminate your employment with the Company and its subsidiaries for a period of six (6) months from the , 1995 Page 3 occurrence of such potential change in control of the Company. If more than one potential change in control occurs during the term of this Agreement, the provisions of the preceding sentence shall be applicable to each potential change in control occurring prior to the occurrence of a Change in Control. For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; (C) any person becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power or the Company's then outstanding securities; or (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has occurred. 3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events described in Section 2(i) hereof constituting a Change in Control shall have occurred, you shall be entitled to the benefits provided in Section 4(iv) hereof upon the subsequent termination of your employment with the Company and its subsidiaries during the term of this Agreement unless such termination is (A) a result of your death or Retirement, or (B) by you for other than Good Reason, or (C) by the Company or any of its subsidiaries for Disability or for Cause. (i) DISABILITY; RETIREMENT. For purposes of this Agreement, "Disability" shall mean permanent and total disability as such term is defined under Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified independent physician selected by you (or, if you are unable to make such selection, such selection shall be made by any adult member of your immediate family or your legal representative), and approved by the Company, said approval not to be unreasonably withheld. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement. For purposes of this Agreement, "Retirement" shall mean your voluntary termination of employment with the Company in accordance with the Company's retirement policy (excluding early retirement) generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you. (ii) CAUSE. For purposes of this Agreement, "Cause" shall mean your willful breach of duty in the course of your , 1995 Page 4 employment, or your habitual neglect of your employment duties. For purposes of this Section 3(ii), no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company and its subsidiaries. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this Section 3(ii) and specifying the particulars thereof in detail. (iii) GOOD REASON. You shall be entitled to terminate your employment for Good Reason. For the purpose of this Agreement, "Good Reason" shall mean the occurrence, without your express written consent, of any of the following circumstances unless, in the case of paragraphs 3(iii)(A), (E), (F), (G), or (H), such circumstances are fully corrected prior to the Date of Termination (as defined in Section 3(v)) specified in the Notice of Termination (as defined in Section 3(iv)) given in respect thereof: (A) the assignment to you of any duties inconsistent with your status as an executive officer of Pfizer Inc., your removal from that position, or a substantial diminution in the nature or status of your responsibilities from those in effect immediately prior to the Change in Control; (B) a reduction by the Company or any of its subsidiaries in your annual base salary or bonus as in effect on the date hereof or as the same may be increased from time to time; (C) the relocation of the office in which you are based to a location (i) outside of the Borough of Manhattan if the office in which you are based prior to the Change In Control is located in the Borough of Manhattan or (ii) outside of the Town of Groton, Connecticut or the Borough of Manhattan if the office in which you are based prior to the Change In Control is located in the Town of Groton, Connecticut; , 1995 Page 5 (D) the failure by the Company to pay to you any portion of any installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; (E) the failure by the Company or any of its subsidiaries to continue in effect any incentive compensation plan in which you participate prior to the Change in Control, unless an equitable alternative compensation arrangement (embodied in an ongoing substitute or alternative plan) has been provided for you, or the failure by the Company or any of its subsidiaries to continue your participation in any such incentive plan on the same basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change in Control; (F) except as required by law, the failure by the Company or any of its subsidiaries to continue to provide you with benefits at least as favorable as those enjoyed by you under the employee benefit and welfare plans of the Company and its subsidiaries, including, without limitation, the pension, life insurance, medical, dental, health and accident, disability, deferred compensation retirement and savings plans, in which you were participating at the time of the Change in Control, the taking of any action by the Company or any of its subsidiaries which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the Change in Control, or the failure by the Company or any of its subsidiaries to provide you with the number of paid vacation days to which you are entitled at the time of the Change in Control; (G) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or (H) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(iv) below (and, if applicable, the requirements of Section 3(ii) above); for purposes of this Agreement, no such purported termination shall be effective. , 1995 Page 6 Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (iv) NOTICE OF TERMINATION. Any purported termination of your employment by the Company and its subsidiaries or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (v) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (A) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (B) if your employment is terminated pursuant to Section 3(ii) or (iii) above or for any reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Section 3(ii) above shall not be less than thirty (30) days, and in the case of a termination pursuant to Section 3(iii) above shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the grounds for termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company and its subsidiaries will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary and bonus) and continue you as a participant in all incentive compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Section 3(v). Amounts paid under this Section 3(v) are in addition to all other , 1995 Page 7 amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a Change in Control of the Company, as defined by Section 2(i), upon termination of your employment or during a period of Disability you shall be entitled to the following benefits, provided that such period of Disability or Date of Termination occurs during the term of this Agreement: (i) During any period that you fail to perform your full-time duties with the Company and its subsidiaries as a result of your Disability, you shall continue to receive an amount equal to your base salary and bonus at the rate in effect at the commencement of any such period through the Date of Termination for Disability. Thereafter, your benefits shall be determined in accordance with the insurance programs of the Company and its subsidiaries then in effect. (ii) If your employment shall be terminated by the Company or any of its subsidiaries for Cause or by you other than for Good Reason, the Company (or one of its subsidiaries, if applicable) shall pay you your full base salary and bonus through the Date of Termination at the rate in effect at the time Notice of Termination is given and shall pay any amounts to be paid to you pursuant to any other compensation plans, programs or employment agreements then in effect, and the Company shall have no further obligations to you under this Agreement. (iii) If your employment shall be terminated by reason of your death or Retirement, your benefits shall be determined in accordance with the retirement and insurance programs of the Company and its subsidiaries then in effect. (iv) If your employment by the Company and its subsidiaries shall be terminated by (a) the Company and its subsidiaries other than for Cause, your death, Retirement, or Disability or (b) you for Good Reason, then you shall be entitled to the benefits provided below: (A) The Company (or one of its subsidiaries, if applicable) shall pay you your full base salary and annual incentive payment through the Date of Termination at the rate in effect at the time the Notice of Termination is given, no later than the fifth day following the Date of Termination, plus all other amounts to which you are entitled under any compensation plan of the Company applicable to you, at the time such payments are due. For purposes of this Section 4(iv)(A) and the other provisions , 1995 Page 8 of this Agreement, your annual incentive payment "in effect at the time the Notice of Termination is given" shall mean the greater of (i) the target amount of your annual incentive payment for the year in which the Notice of Termination is given and (ii) the amount of the annual incentive payment made to you in respect of the year immediately prior to the year in which the Notice of Termination is given. (B) The Company shall pay you, on a date that is no later than the fifth day following the Date of Termination, as severance pay to you a severance payment equal to 2.99 times the greater of (i) your "Base Amount" as such term is defined under Section 280G(b)(3) of the Code or (ii) the sum of (x) your full base salary and (y) annual incentive payment, in each case in effect at the time the Notice of Termination is given. In addition, the Company shall pay or otherwise transfer to you, on a date that is no later than the fifth day following the Date of Termination, amounts and property that you are eligible to receive in respect of awards made to you prior to the Date of Termination pursuant to the Company's Performance - Contingent Share Awards (or any successor long-term compensation plan or award in effect as of the Date of Termination) that remain outstanding as of the Date of Termination, such amounts and property to be calculated using the maximum number of shares, payments or other benefits that you could have received pursuant to all such outstanding awards. For purposes of this Section 4(iv)(B), your Base Amount shall be determined in accordance with Section 280G(b)(3) of the Code and with any proposed, temporary or final regulations promulgated under that Section in effect. In the absence of such regulations, if you were not employed by the Company (or any corporation affiliated with the Company (an "Affiliate") within the meaning of Section 1504 of the Code or a predecessor of the Company) during the entire five calendar years (the "Base Period") preceding the calendar year in which a Change in Control of the Company occurred, your average annual compensation for the purposes of such determination shall be the average of your annual compensation for both complete and partial calendar years during the Base Period during which you were so employed, determined by annualizing any compensation (other than nonrecurring items) includible in your gross income for any partial calendar year. For purposes of the preceding sentence, compensation payable to you by the Company or any Affiliate or predecessor of the Company shall include every type and form of compensation includible in your gross , 1995 Page 9 income in respect of your employment by the Company or any Affiliate or predecessor of the Company, including compensation income recognized as a result of your exercise of stock options or sale of the stock so acquired, except to the extent otherwise provided in proposed, temporary or final regulations promulgated under Section 280G of the Code defining base amount. The payment to be made to you pursuant to this Section 4(iv)(B) shall not be reduced by the amount of any other payment or the value of any benefit received or to be received by you in connection with your termination of employment or contingent upon a Change in Control of the Company (whether payable pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or an Affiliate, predecessor or successor of the Company or any person whose actions result in a Change in Control of the Company or an Affiliate of such person). (C) In the event that any payment or benefit received or to be received by you pursuant to the terms of this Agreement (the "Contract Payments") or in connection with your termination of employment or contingent upon a Change in Control of the Company pursuant to any plan or arrangement or other agreement with the Company (or any affiliate) ("Other Payments" and, together with the Contract Payments, the "Payments") would be subject to the excise tax (the "Excise Tax") imposed by Section 4999 of the Code, as determined as provided below, the Company shall pay to you, at the time specified in Section 4(iv)(D) below, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of the Excise Tax on Contract Payments and Other Payments and any federal, state and local income tax and Excise Tax upon the payment provided for by this Section 4(iv)(C), and any interest, penalties or additions to tax payable by you with respect thereto, shall be equal to the total present value of the Contract Payments and Other Payments at the time such Payments are to be made. For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amounts of such Excise Tax, (1) the total amount of the Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to the extent that, in the opinion of independent tax counsel selected by the Company's independent auditors and reasonably acceptable to you ("Tax Counsel"), a Payment (in whole or in part) does not , 1995 Page 10 constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, or such "excess parachute payments" (in whole or in part) are not subject to the Excise Tax, (2) the amount of the Payments that shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Payments or (B) the amount of "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code (after applying clause (1) hereof), and (3) the value of any noncash benefits or any deferred payment or benefit shall be determined by Tax Counsel in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income tax at the highest marginal rates of federal income taxation applicable to individuals in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation applicable to individuals as are in effect in the state and locality of your residence in the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account any limitations applicable to individuals subject to federal income tax at the highest marginal rates. (D) The Gross-Up Payments provided for in Section 4(iv)(C) hereof shall be made upon the earlier of (i) the payment to you of any Contract Payment or Other Payment or (ii) the imposition upon you or payment by you of any Excise Tax. (E) If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the Excise Tax is less than the amount taken into account under Section 4(iv)(C) hereof, you shall repay to the Company within five days of your receipt of notice of such final determination or opinion the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax or a federal, state and local income tax deduction) plus any interest received by you on the amount of such repayment. If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the Excise Tax exceeds the amount taken into account hereunder (including by reason of , 1995 Page 11 any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess within five days of the Company's receipt of notice of such final determination or opinion. (F) The Company shall also pay to you all legal fees and expenses reasonably incurred by you in connection with this Agreement (including all such fees and expenses, if any, incurred in contesting or disputing the nature of any such termination for purposes of this Agreement or in seeking to obtain or enforce any right or benefit provided by this Agreement); and (G) (i) Upon the date of Termination, you (or your spouse or applicable beneficiary in the event of your death) will receive a benefit payable from the Company's general funds to be calculated using the benefit calculation provisions of the Pfizer Retirement Annuity Plan ("PRAP") and the Company's unfunded Supplemental Retirement Plan ("SRP") as if the provisions thereunder contained the assumptions set forth herein, and offset by any benefits actually payable under PRAP and SRP not taking into account the assumptions set forth herein. Any elections made under SRP for purposes of determining the form of payment will also apply for purposes of this benefit. The assumptions to be used in calculating your benefit are: (x) you have continued in the employ of the Company for an additional three years after the Date of Termination, and (y) you have earned annually from the Date of Termination to the date of your assumed continued employment pursuant to clause (x) above the same compensation you earned in the twelve months preceding the Date of Termination or in the twelve months preceding the Change of Control, if greater. In addition, the pension payable to you at age 55 (or upon the Date of Termination, if you are then age 55 or over) shall not be reduced because it is payable prior to age 65. (ii) There will be added three years to your actual age for determining whether you are age 55 or over for the purposes of your eligibility to commence receiving payments of benefits pursuant to Section 4(iv)(G)(i) above. (H) You shall be immediately eligible for all benefits, in addition to those described in Section 4(iv) (G) above, made available immediately prior to the Date of Termination to retirees of the Corporation, including, without limitation, retiree medical coverage and life insurance benefits, as if you had at the Date of Termination , 1995 Page 12 satisfied the age and service conditions for coverage under the applicable provisions of the Company's employee benefit plans. If the Company is unable to provide you coverage under such plans, it shall provide you with separate comparable coverage. (I) Upon the Date of Termination (i) all restrictions and limitations on any "restricted" stock awards previously made to you pursuant to the Company's Stock and Incentive Plan or otherwise shall lapse and have no further force and effect and you shall be entitled to receive in respect thereof certificates evidencing shares of stock reflecting your right to vote, dispose, receive distributions and enjoy all other rights in respect of such stock free of the previously imposed restrictions and (ii) all options to purchase stock that are not vested shall immediately vest and become exercisable and all options to purchase stock then held by you shall remain in effect for the respective terms of such options notwithstanding any early termination provisions that otherwise would be applicable. (J) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits received after the Date of Termination or otherwise. 5. SUCCESSORS; BINDING AGREEMENT. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you had terminated your employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. , 1995 Page 13 (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. NOTICE. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the address set forth on the first page of this Agreement with respect to the Company and on the signature page with respect to you, provided that all notices to the Company shall be directed to the attention of the Senior Vice President-General Counsel of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any conditions or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York, including Section 198 (1-a) of the New York Labor Law. All references to sections of the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or , 1995 Page 14 enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 11. EFFECT ON EXISTING AGREEMENT. This Agreement supersedes and replaces that certain letter agreement, dated __________________, between you and the Company, which shall have no further continuing force or effect. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, Pfizer Inc. By:_____________________________________ Name: Title: Agreed to this ____ day of , 1995. ____________________________________ EX-11 4 EXHIBIT 11 EXHIBIT 11 PFIZER INC. AND SUBSIDIARY COMPANIES COMPUTATION OF EARNINGS PER COMMON SHARE AND FULLY DILUTED EARNINGS PER COMMON SHARE
YEAR ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 ---------- --------- --------- (IN MILLIONS EXCEPT PER SHARE DATA) Net income....................................................................... $ 1,298.4 $ 657.5 $ 810.9 Add: Interest on 8 3/4% Convertible Subordinated Debentures Due 2006 and amortization of expenses incurred in connection with the issuance of the 8 3/4% Convertible Subordinated Debentures, net of applicable income tax effect (a).................................................................. -- -- .2 ---------- --------- --------- Adjusted net income for earnings per common share computation.................... $ 1,298.4 $ 657.5 $ 811.1 ---------- --------- --------- ---------- --------- --------- Weighted average number of common shares outstanding............................. 305.8 315.5 329.0 Common share equivalents applicable to stock option plans........................ 4.4 4.9 7.5 ---------- --------- --------- Weighted average number of common shares and common share equivalents used to compute earnings per common share............................................... 310.2 320.4 336.5 ---------- --------- --------- ---------- --------- --------- Earnings per common share........................................................ $ 4.19 $ 2.05 $ 2.41 ---------- --------- --------- ---------- --------- --------- Adjusted net income for fully diluted earnings per common share computation...... $ 1,298.4 $ 657.5 $ 811.1 ---------- --------- --------- ---------- --------- --------- Weighted average number of common shares outstanding............................. 305.8 315.5 329.0 Common share equivalents applicable to stock option plans........................ 4.8 5.1 7.5 Common share equivalents applicable to 4% Convertible Subordinated Debentures Due 1997 (b)........................................................................ -- -- .1 ---------- --------- --------- Weighted average number of common shares and common share equivalents used to compute fully diluted earnings per common share................................. 310.6 320.6 336.6 ---------- --------- --------- ---------- --------- --------- Fully diluted earnings per common share (c)...................................... $ 4.18 $ 2.05 $ 2.41 ---------- --------- --------- ---------- --------- --------- ------------------------ (a) The 8 3/4% Convertible Subordinated Debentures Due 2006 are considered to be common share equivalents since the interest rate on the debentures was less than two-thirds of the prime interest rate at the time of issuance. These debentures were redeemed on April 15, 1992. (b) The 4% Convertible Subordinated Debentures Due 1997 are not considered to be common share equivalents since the interest rate on the debentures was not less than two-thirds of the prime interest rate at the time of issuance. (c) 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%.
EX-12 5 EXHIBIT 12 EXHIBIT 12 PFIZER INC. AND SUBSIDIARY COMPANIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, --------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- --------- ---------- ---------- ---------- (MILLIONS OF DOLLARS, EXCEPT RATIOS) Earnings Income before provision for taxes on income, minority interests and cumulative effect of accounting changes................................. $ 1,861.5 $ 851.4 $ 1,534.8 $ 943.7 $ 1,103.3 Less: Minority interests........................ 4.6 2.6 2.7 3.2 4.2 Undistributed earnings (losses) of unconsolidated subsidiaries................. (.7) .7 8.5 0.8 (0.3) ---------- --------- ---------- ---------- ---------- Adjusted income..................................... 1,857.6 848.1 1,523.6 939.7 1,099.4 Fixed charges, excluding capitalized interest....... 158.4 135.6 130.1 155.2 153.8 ---------- --------- ---------- ---------- ---------- Total earnings.................................. $ 2,016.0 $ 983.7 $ 1,653.7 $ 1,094.9 $ 1,253.2 ---------- --------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Fixed Charges Interest expense (including amortization of debt discount and expenses and capitalized interest)........................................ $ 141.6 $ 120.5 $ 115.6 $ 138.1 $ 142.4 One-third of rental expense....................... 31.5 29.1 26.7 25.1 21.3 ---------- --------- ---------- ---------- ---------- Total fixed charges............................. $ 173.1 $ 149.6 $ 142.3 $ 163.2 $ 163.7 ---------- --------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Ratio of earnings to fixed charges (a)................ 11.6 6.6 11.6 6.7 7.7 ---------- --------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- ------------------------ (a) "Earnings" consist of income before provision for taxes on income, minority interests and cumulative effect of accounting changes less minority interests and less undistributed earnings (losses) of unconsolidated subsidiaries adjusted for fixed charges, excluding capitalized interest. "Fixed charges" consist of interest expense, amortization of debt discount and expenses, capitalized interest and 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.
EX-13.A 6 EXHIBIT 13(A) FINANCIAL REVIEW SIGNIFICANT EVENTS AFFECTING COMPARABILITY The comparability of income statement data is affected by the following: / / In September 1993, the Company recorded a $750 million pre-tax charge ($525 million after-tax) for certain restructuring and unusual items. This charge 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. / / In October 1992, the Company sold approximately 60% of its interest in Minerals Technologies Inc. (MTI), a wholly owned company comprised of the Company's specialty minerals businesses. The net proceeds ($226.6 million) approximated the net book value of the interest sold. In April 1993, the Company's remaining interest was sold, resulting in a pre-tax gain of approximately $60 million. / / In 1992, the Company adopted new accounting standards for postretirement health care and life insurance benefits and for income taxes. These standards resulted in a one-time net after-tax charge ($282.6 million), with no effect on cash flows. Postretirement benefit curtailment gains ($56.5 million) related to 1992 divestitures were included in divestitures, restructuring and unusual items--net. / / In June 1992, the Company sold its Coty business, resulting in a pre-tax gain of $258.6 million which was substantially offset by charges associated with restructuring, consolidation and streamlining of certain of the Company's businesses. / / In March 1992, the Company sold certain product lines and other assets of Shiley Incorporated to Sorin Biomedica S.p.A. for approximately $230 million, resulting in a gain which was used to offset costs associated with the Bowling Settlement Agreement. See the footnote "Litigation" beginning on page 49 for additional information. OVERVIEW OF CONSOLIDATED OPERATING RESULTS Restructuring initiatives and various divestitures over the past several years were taken in order to position the Company as a research-based, health care company operating in global markets. Net income in 1994 was $1,298.4 million, or $4.19 per share, compared with $657.5 million, or $2.05 per share, in 1993. Excluding the net effects of divestitures, restructuring and unusual items, net income and earnings per share in 1993 would have been $1,183.9 million, or $3.70 per share. Operating results, excluding the items noted above as well as certain phased-out product lines, are referred to in this report as results of ongoing operations. On this ongoing basis, net income and earnings per share for 1994 increased 10% and 13%, respectively. Net sales in 1994 ($8,281.3 million) increased 11% compared with 1993. Aggregate worldwide sales of the pharmaceutical products launched during the 1990s--Norvasc, Diflucan, Zoloft, Cardura, Zithromax and Glucotrol XL-- represented 33% and 25% of net sales for the years 1994 and 1993, respectively. The 44% increase in sales of these six products compared with 1993 was almost exclusively related to volume. These results continued to reflect the Company's successful innovative research and development (R&D) efforts, which have produced a broad product pipeline. In 1994, R&D expenditures were in excess of $1.1 billion, an increase of 17% over 1993. NET SALES Net sales in 1994 increased $803.6 million, or 11% over 1993. Net sales in 1993 increased $247.5 million, or 3% over 1992. Net sales from ongoing operations in 1993 increased 9% over 1992. Both the U.S. and international markets reflected net sales increases in 1994 and 1993. In 1994, the Company registered net sales of more than $10 million in each of 43 countries outside the U.S., with no single country, other than the U.S. and Japan, contributing more than 10% to total net sales. The following tables detail net sales by segment on a reported and ongoing basis for 1994 and 1993. For 1994, the reported and ongoing net sales amounts were the same. 1994 NET SALES BY SEGMENT
% CHANGE COMPARED WITH AS -------------------------- (MILLIONS OF DOLLARS) REPORTED AS REPORTED ONGOING --------------------------------------------------------------------------- Health Care $6,963.0 12 12 Animal Health 605.3 5 5 Consumer Health Care 409.0 10 10 Food Science 304.0 (4) 0 --------------------------------------------------------------------------- Total $8,281.3 11 11 ---------------------------------------------------------------------------
NET SALES (The table below was represented by a graph in the printed Annual Report.) Net Sales (millions of dollars) U.S. International Total ----------------------------------------- 1990 3,473 2,933 6,406 ----------------------------------------- 1991 3,809 3,141 6,950 ----------------------------------------- 1992 3,888 3,342 7,230 ----------------------------------------- 1993 4,006 3,472 7,478 ----------------------------------------- 1994 4,411 3,870 8,281 ----------------------------------------- The 1994 sales increase of 11% was spearheaded by growth in pharmaceutical products. 26 1993 NET SALES BY SEGMENT
AS % % (MILLIONS OF DOLLARS) REPORTED CHANGE ONGOING CHANGE --------------------------------------------------------------------------- Health Care $6,210.3 11 $6,210.3 11 Animal Health 578.0 3 578.0 3 Consumer Health Care 373.5 (8) 373.5 0 Food Science* 315.9 (51) 303.8 (8) --------------------------------------------------------------------------- Total $7,477.7 3 $7,465.6 9 ---------------------------------------------------------------------------
PERCENTAGE CHANGE IN NET SALES--AS REPORTED
ANALYSIS OF CHANGE TOTAL % -------------------------- CHANGE VOLUME PRICE CURRENCY --------------------------------------------------------------------------- Health Care 1994 vs. 1993 12 12 0 0 1993 vs. 1992 11 11 2 (2) Animal Health 1994 vs. 1993 5 3 1 1 1993 vs. 1992 3 0 6 (3) Consumer Health Care 1994 vs. 1993 10 9 1 0 1993 vs. 1992 (8) (9) 2 (1) Food Science 1994 vs. 1993 (4) (2) (2) 0 1993 vs. 1992* (51) (52) 1 0 Consolidated 1994 vs. 1993 11 11 0 0 1993 vs. 1992 3 3 2 (2) --------------------------------------------------------------------------- *REFLECTS THE SALE OF MTI IN 1992.
There was no price impact on 1994 net sales growth. In 1993, the Company's average pharmaceutical price increases in the U.S. were below the increase in the U.S. Consumer Price Index. The increase in 1993 consolidated net sales included a 9% rise in unit volume from ongoing operations, offset by a reduction of 6% applicable to net sales of businesses divested in 1992. Reported 1994 and 1993 net sales for the health care segment reflected a 13% increase in worldwide pharmaceutical sales in both years. The following table shows percentage sales growth of the Company's major pharmaceuticals: PERCENTAGE CHANGE IN NET SALES--MAJOR PHARMACEUTICALS
% INCREASE/(DECREASE) --------------------------------------------------------------------------- 94/93 93/92 --------------------------------------------------------------------------- Cardiovasculars: Procardia XL 0 11 Norvasc 85 119 Cardura 27 40 Anti-Infectives: Diflucan 14 19 Zithromax 43 82 Unasyn (5) 7 Central Nervous System Agents: Zoloft 55 138 Anti-Inflammatories: Feldene (16) (41) Antidiabetes Agents: Glucotrol/Glucotrol XL (15) 13 ---------------------------------------------------------------------------
Procardia XL sales totaled $1.2 billion in 1994, an amount comparable to the 1993 sales level. The underlying demand for Procardia XL declined modestly in 1994. Decreases in Feldene and Glucotrol sales were attributable to 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 $74 million in 1994 and $70 million in 1993. In addition, the Company provided approximately $56 million and $51 million in discounts to the federal government in 1994 and 1993, respectively. Performance-based contracts with several customers in the U.S. reduced the price impact on net sales for 1994, but were offset by increases in volume. Net sales of the Hospital Products Group increased 6% and 2% in 1994 and 1993, respectively. Hospital Products continues to benefit from new product introductions and from the success of its coronary catheters and stents, although sales trends in this group continue to be tempered by overall market conditions. The Hospital Products 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. Foreign exchange reduced net sales growth from 6% to 2% for 1993. Net sales in the animal health segment increased 5% in 1994 and reflected the strong performance of Dectomax, particularly in Latin America, where sales increased 21%. Net sales increased 3% in 1993 owing to strong U.S. sales of Terramycin/Liquamycin LA-200 and the growth of Dectomax and Advocin in international markets. (The table below was represented by a graph in the printed Annual Report.) Composition of Net Sales Growth (As Reported) Price Volume Currency ---------------------------------------- 1992 3% 0% 1% ---------------------------------------- 1993 2% 3% -2% ---------------------------------------- 1994 0% 11% 0% ---------------------------------------- 1994 sales growth was driven entirely by volume. Aggregate sales of the six pharmaceutical products launched in the 1990s increased by 44%. 27 Net sales in the consumer health care segment increased 10% in 1994, reflecting improved U.S. market share in Desitin, Unisom, BenGay and Rid, line extensions of certain existing products and international expansion. Net sales in 1993 decreased 8% from 1992, primarily as a result of the sale of the Coty business, strong private-label competition and a weak economy. Net sales in the food science segment declined 4% in 1994, reflecting the continuing phase-out of commodity chemicals in favor of specialty food products, sales of which increased 13%. Net sales in 1993 declined 51% primarily because of the October 1992 divestment of MTI and the Company's de-emphasis and phase-out of commodity chemicals. An analysis of percentage changes in reported net sales in the U.S. and international markets and the percentage of consolidated net sales by business segment follows: UNITED STATES OPERATIONS
% INCREASE/(DECREASE) IN NET SALES --------------------------------------------------------------------------- 1994 1993 1992 --------------------------------------------------------------------------- Health Care 12 12 14 Animal Health (1) 7 0 Consumer Health Care 4 (13) (45) Food Science (2) (56)* (10)* Total U.S. Operations 10 3 2 ---------------------------------------------------------------------------
INTERNATIONAL OPERATIONS
% INCREASE/(DECREASE) IN NET SALES --------------------------------------------------------------------------- 1994 1993 1992 --------------------------------------------------------------------------- Health Care 13 9 10 Animal Health 7 1 10 Consumer Health Care 22 6 (30) Food Science (6) (44)* (11)* Total International Operations 11 4 6 --------------------------------------------------------------------------- *REFLECTS THE SALE OF MTI IN 1992.
(The table below was represented by a graph in the printed Annual Report.) Production Margin as Percentage of Net Sales 1990 65% 1991 68% 1992 72% 1993 76% 1994 77% Improvement in production margin was essentially attributable to the divestiture of low-margin businesses, cost reductions and favorable product mix. DIVERSIFICATION BY BUSINESS
% OF CONSOLIDATED NET SALES --------------------------------------------------------------------------- 1994 1993 1992 --------------------------------------------------------------------------- Health Care 84 83 78 Animal Health 7 8 8 Consumer Health Care 5 5 5 Food Science 4 4* 9* --------------------------------------------------------------------------- Consolidated 100 100 100 --------------------------------------------------------------------------- *REFLECTS THE SALE OF MTI IN 1992.
Geographically, the Company's business is diversified, as shown in the following table: DIVERSIFICATION BY GEOGRAPHIC AREA
% OF CONSOLIDATED NET SALES --------------------------------------------------------------------------- 1994 1993 1992 --------------------------------------------------------------------------- U.S. 53 54 54 --------------------------------------------------------------------------- Europe 22 22 24 Asia 15 15 14 Canada/Latin America 8 7 6 Africa/Middle East 2 2 2 --------------------------------------------------------------------------- International 47 46 46 --------------------------------------------------------------------------- Consolidated 100 100 100 ---------------------------------------------------------------------------
PRODUCT DEVELOPMENTS The table below lists the Company's pending New Drug Applications (NDAs) and the related filing dates with the U.S. Food and Drug Administration (FDA): PRODUCT INDICATIONS DATE FILED --------------------------------------------------------------------------- Cetirizine Pediatric January 1993 Enable Osteo- and rheumatoid arthritis December 1993 Unasyn Injectable antibiotic--pediatric November 1993 Zithromax Sexually transmitted diseases December 1994 Zoloft Obsessive-compulsive disorder May 1992 --------------------------------------------------------------------------- In November 1994, the Company received approval from the FDA for the marketing of Diflucan for pediatric use. In addition, Cardura gained marketing clearance from the FDA for the treatment of benign prostatic hyperplasia in February 1995.In 1995, the Company was advised by the FDA that the following chemical entities were approvable: Zithromax, an oral antibiotic, for pediatric indications and cetirizine, an oral antihistamine, for allergic rhinitis and chronic urticaria. The Company currently has 15 new chemical entities in advanced development. 28 INCOME BEFORE TAXES AND NET INCOME The components of income before taxes and net income, expressed as a percentage of net sales, for the years 1994, 1993 and 1992 are reflected in the following table: ANALYSIS OF INCOME BEFORE TAXES AND NET INCOME
% INCREASE/ (DECREASE) ----------------------------------------------------------------------------------------------------------------------------- (MILLIONS OF DOLLARS) 1994 1993 1992 94/93 93/92 ----------------------------------------------------------------------------------------------------------------------------- Net sales $8,281.3 $7,477.7 $7,230.2 11 3 Cost of sales $1,918.6 $1,772.0 $2,024.3 8 (12) % of net sales 23.2% 23.7% 28.0% ----------------------------------------------------------------------------------------------------------------------------- Production margin $6,362.7 $5,705.7 $5,205.9 12 10 % of net sales 76.8% 76.3% 72.0% Selling, informational and administrative expenses $3,250.8 $3,066.0 $2,899.3 6 6 % of net sales 39.3% 41.0% 40.1% R&D expenses $1,139.4 $ 974.4 $ 863.2 17 13 % of net sales 13.7% 13.0% 11.9% Divestitures, restructuring and unusual items--net -- $ 752.0 $ (110.5) * * % of net sales -- 10.1% (1.5%) Other deductions--net $ 111.0 $61.9 $ 19.1 79 224 % of net sales 1.3% .8% .3% ----------------------------------------------------------------------------------------------------------------------------- Income before taxes $1,861.5 $ 851.4 $1,534.8 119 (45) % of net sales 22.5% 11.4% 21.2% Taxes on income $ 558.5 $ 191.3 $ 438.6 192 (56) Effective tax rate 30.0% 22.5% 28.6% Net income $1,298.4 $ 657.5 $ 810.9 97 (19) % of net sales 15.7% 8.8% 11.2% ----------------------------------------------------------------------------------------------------------------------------- *CALCULATION NOT MEANINGFUL.
Production margin, as a percentage of net sales, increased in 1994 compared with 1993. The improvement was attributable to the Company's cost-containment program and favorable product mix reflecting continued growth in the pharmaceutical business. The 1994 increase in selling, informational and administrative expenses (SI&A) over 1993 was primarily due to the rollout of new products and support for recently launched products, particularly in the international markets. As a percentage of net sales, SI&A decreased in 1994 compared with 1993. This decrease reflects restrained growth in marketing expenses relative to the prior year, as well as the beneficial impact of the Company's continuous improvement and restructuring programs. The 1993 increase in selling expenses reflects costs associated with the launch of new products. SI&A includes expenses incurred in communicating scientific, medical and clinical information about the Company's various products to the medical community and others. In response to the changes in the health care environment, the Company adopted a strategy in 1994 which focuses on the diverse needs of managed care customers and decision makers. Health care information is also communicated by means of Company sponsorship of medical symposia and conventions, as well as through distribution of informative literature concerning the Company's products. Also included in this category are advertising expenses associated with the production and purchase of print space in magazines/journals and media time on radio and television comprising approximately 8% of SI&A expenses. A significant portion of such expenditures are for the Company's consumer health care business. R&D expenses reflect a 15% compound growth rate from 1992 through 1994. Health care R&D expenses, expressed as a percentage of health care net sales, were 14.9%, 14.3% and 13.6% for 1994, 1993 and 1992, respectively. In 1995, the Company plans to spend approximately $1.4 billion on R&D. Other deductions--net are summarized in the following table:
(MILLIONS OF DOLLARS) 1994 1993 1992 --------------------------------------------------------------------------- Interest income $(123.0) $(163.5) $(184.6) Interest expense 126.9 106.5 103.4 Other income (20.0) (34.6) (34.6) Other deductions 127.1 153.5 134.9 --------------------------------------------------------------------------- Other deductions--net $ 111.0 $ 61.9 $ 19.1 ---------------------------------------------------------------------------
Interest income decreased in 1994 from 1993 primarily because of changes in the Company's capital structure. The decline in interest income in 1993 was caused by lower interest rates. Interest expense increased in 1994 from 1993 as a result of changes in the scope and nature of the Company's foreign exchange hedging program and higher interest rates. The increase in interest expense in 1993 was primarily due to higher average borrowing levels, partially offset by lower interest rates. Other deductions included net exchange losses of $1.5, $40.0 and $22.8 million in 1994, 1993 and 1992, respectively. In addition, amortization of intangibles was approximately $13.8, $13.3 and $16.9 million in 1994, 1993 and 1992, respectively. On an ongoing basis, income before taxes was $258.1 million higher in 1994 than in 1993, even though the Company increased the investment in its R&D program. This increase was primarily attributable to the Company's aggressive development of a large number of drug candidates. As a percentage of net sales, the decrease in cost of sales and SI&A expenses more than offset the increase in R&D expenses and Other deductions--net, so that income before taxes, as a percentage of net sales, increased. This improved performance resulted from a favorable business mix, moderation in expense growth and initial benefits of restructuring. The increase in ongoing income before taxes in 1993 was primarily attributable to improved production margins. Excluding the impact of nonrecurring items from 1993 results, income before taxes and net income would have been 29 $1,603.4 million and $1,183.9 million, respectively. The 1993 effective tax rate of 22.5% would have been 26%. The Company's effective tax rate increased from an ongoing rate of 26% in 1993 to 30% in 1994 as a result of various changes contained in the Omnibus Budget Reconciliation Act of 1993 which, among other provisions, included the imposition of a limitation on the tax credit allowed to the Company for tax years beginning after December 31, 1993 for U.S. tax on income earned in Puerto Rico, where the Company has a major manufacturing facility. The Internal Revenue Service is currently auditing the years 1987 through 1989. For further details, see the footnote "Taxes on Income" beginning on page 44. The following tables show profit/(loss) by business segment on a reported and ongoing basis for 1994 and 1993: 1994 SEGMENT PROFIT
% CHANGE COMPARED WITH AS -------------------------- (MILLIONS OF DOLLARS) REPORTED* AS REPORTED ONGOING --------------------------------------------------------------------------- Health Care $1,976.6 75 22 Animal Health 47.4 ** 26 Consumer Health Care 34.1 ** 9 Food Science 31.0 93 12 --------------------------------------------------------------------------- Total $2,089.1 101 22 --------------------------------------------------------------------------- *REPORTED AND ONGOING AMOUNTS ARE THE SAME.
1993 SEGMENT PROFIT/(LOSS)
AS % % (MILLIONS OF DOLLARS) REPORTED CHANGE ONGOING CHANGE --------------------------------------------------------------------------- Health Care $1,129.9 (9) $1,621.8 18 Animal Health (5.8) ** 37.5 (9) Consumer Health Care (102.3) ** 31.3 (7) Food Science 16.1 (23) 27.6 14 --------------------------------------------------------------------------- Total $1,037.9 (36) $1,718.2 17 --------------------------------------------------------------------------- ** CALCULATION NOT MEANINGFUL.
For further details, see the footnote "Segment Information and Geographic Data" on page 52. LIQUIDITY AND CAPITAL RESOURCES Company operations in 1994 provided a positive cash flow which, supplemented by the ability to issue commercial paper and maintenance of other worldwide credit facilities, provided adequate liquidity to meet the Company's operational needs. Cash and cash equivalents and short-term investments are principal measures of liquidity. These items amounted to $2.0, $1.2 and $1.7 billion at December 31, 1994, 1993 and 1992, respectively.
1994 1993 1992 --------------------------------------------------------------------------- Working capital (millions of dollars) $962.5 $1,289.6 $2,167.4 Current ratio 1.20:1 1.37:1 1.67:1 Debt to total capitalization 40% 31% 28% Shareholders' equity per common share* $14.20 $ 12.43 $ 14.51 Days of sales outstanding 60 63 57 Months of inventory on hand 8.6 8.5 8.1 --------------------------------------------------------------------------- *REPRESENTS SHAREHOLDERS' EQUITY DIVIDED BY THE ACTUAL NUMBER OF COMMON SHARES OUTSTANDING.
The 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 the percentage of debt to total capitalization in 1993 versus 1992 was due to a decrease in shareholders' equity arising from the Company's program of purchasing its common stock. The increase in shareholders' equity per common share to $14.20 in 1994 from $12.43 in the preceding year was due to the Company's enhanced profitability resulting from growth in sales of its new pharmaceutical products, partially offset by the stock purchase program. The decrease in shareholders' equity per common share to $12.43 in 1993 from $14.51 in 1992 was due to the Company's program of purchasing its common stock. The table below summarizes the Company's cash flows from operating, investing and financing activities:
(MILLIONS OF DOLLARS) 1994 1993 1992 -------------------------------------------------------------------------------------------------------------- Cash provided by/(used in): Operating activities $1,488.5 $1,263.0 $ 807.0 Investing activities (840.3) (196.9) 389.9 Financing activities 61.9 (1,567.0) (1,228.0) Effect of exchange rate changes on cash and cash equivalents 19.0 (26.8) (29.4) -------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in cash and cash equivalents $ 729.1 $ (527.7) $ (60.5) --------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES Cash provided by operating activities amounted to $1,488.5 million in 1994 and was primarily attributable to income generated by the introduction of new pharmaceutical products and new indications for existing pharmaceutical products. The $456.0 million increase in cash generated by operating activities in 1993 was primarily a result of higher income before taxes, excluding restructuring charges. The environment in which the Company operates has undergone significant change, as evidenced by the increase and change in competition, global health care reform and the reduction of residual trade barriers in North America and Europe. In 1993, the Company initiated a program which recognized the need to restructure its global operations in response to such changes. The 1993 worldwide restructuring program encompasses more than 60 operations located in over 25 countries. Restructuring actions include 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 are expected to result in a reduction of approximately 3,000 employees. This program will require three years to complete, given the global scope and nature of the programs involved and the need to comply with various legal requirements. 30 Since the program's initiation, the workforce has been reduced by approximately 900 people and 9 facilities have been closed. The initiatives are projected to lower annual operating costs by at least $130 million when the full benefits of efficiencies are realized. The annualized benefit of completed restructuring efforts through December 31, 1994 is approximately $48 million. Through December 31, 1994, there have been no significant changes in estimates of the cost of the plan. For further information regarding the components of the charge, see the "Divestitures, Restructuring and Unusual Items" footnote on page 44. Cash outlays for 1994 and 1993 related to the restructuring totaled $91.7 and $41.4 million, respectively. Expected cash outlays, funded through operations, for the next two years are approximately $130 and $150 million, respectively. INVESTING ACTIVITIES Cash used in investing activities increased $643.4 million because of the increase in short-term investments, the change in loans and long-term investments by financial subsidiaries and the fact that there were no sales of businesses in 1994. Investing activities in 1993 reflected proceeds from the sale of the Company's remaining interest in MTI. Capital expenditures are primarily funded through operating activities. The current research expansion programs undertaken at Groton, Connecticut and Sandwich, England are expected to be completed in 1996 at a total cost of approximately $500 million. In addition, the Company is in the process of completing a major pharmaceutical capacity replacement project at its Groton facility. This is expected to be completed in 1995 at a projected capital expenditure of approximately $190 million. The construction of the Company's pharmaceutical plant in Dalian, China was completed in 1993 as part of a joint venture. FINANCING ACTIVITIES Cash provided by financing activities in 1994 increased by $1,628.9 million from 1993. This increase 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 1994 were $594.6 million compared with $536.1 million in 1993 and reflected a 12% increase in the annual dividend rate from $1.68 to $1.88 per common share. This increase was partially offset by the Company's purchase of its common shares. In December 1994, the Company announced that it planned to purchase up to 2.25 million shares of its common stock from time to time in the open market. Under this plan, approximately 1.0 million shares were purchased in 1994 at a cost of $74.8 million. The shares purchased under this plan are intended for use in the acquisition of NAMIC U.S.A. Corporation (NAMIC) announced in October 1994. In August 1993, the Company sold 10 million shares of treasury stock to the Pfizer Inc. Grantor Trust (the Trust), an employee benefit trust which will primarily fund future obligations for previously approved benefit plans. The Trust acquired common stock from the Company in exchange for a promissory note of approximately $600 million. The amount, representing unearned employee benefits, has been recorded as a deduction from shareholders' equity and will be reduced as employee benefits are satisfied. In February 1993, the Company announced a program to purchase up to 20 million shares of its common stock in the open market or in privately negotiated transactions. Under this program, 7.5 and 12.5 million shares were purchased in the open market at a cost of approximately $436.4 and $804.0 million in 1994 and 1993, respectively, thereby completing the 20 million share purchase program. These shares are available for use in the Company's employee benefit plans and for general corporate purposes. The August 1992 program to purchase 10 million shares of its common stock was completed in 1993 at a total cost of $721.6 million. 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 $1.1 billion at December 31, 1994. 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 nine 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, all borrowers must satisfy credit approval guidelines, which also establish 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 be benefited in a 31 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 the 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, 1994, 1993 and 1992: BORROWERS
(MILLIONS OF DOLLARS) 1994 1993 1992 --------------------------------------------------------------------------- Commercial and industrial $526.3 $569.1 $587.2 Government 139.7 91.9 210.0 Financial institutions 120.9 146.6 177.7 --------------------------------------------------------------------------- Total $786.9 $807.6 $974.9 ---------------------------------------------------------------------------
MATURITIES
(MILLIONS OF DOLLARS) 1994 1993 1992 --------------------------------------------------------------------------- Within one year $361.3 $456.9 $628.3 One to five years 425.6 350.7 346.6 --------------------------------------------------------------------------- Total $786.9 $807.6 $974.9 ---------------------------------------------------------------------------
The following table shows the percentage of interest-earning assets of the international banking operations (including interest-bearing deposits, loans and Eurosecurities) 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 --------------------------------------------------------------------------- 1994 1993 1992 --------------------------------------------------------------------------- U.K. 19 19 19 U.S. 17 8 8 Switzerland 12 7 5 Netherlands 11 9 6 Denmark 8 12 9 France 8 12 8 Italy 7 6 20 Sweden 6 4 7 Canada 5 13 15 Germany 4 5 -- Spain -- 5 -- --------------------------------------------------------------------------- PROSPECTIVE INFORMATION SUBSEQUENT EVENTS On January 19, 1995, the Company acquired SmithKline Beecham's animal health business for approximately $1.45 billion substantially financed by the issuance of commercial paper. The Company expects to acquire NAMIC in a stock-for-stock transaction, valued at approximately $175 million, in the first quarter of 1995. On February 23, 1995, the Company announced that its Board of Directors intends to vote on a two-for-one split of Pfizer common stock on April 27, 1995. At the annual meeting to take place on the same date, shareholders will vote on a proposal to increase the authorized shares and reduce the par value of the Company's common stock. HEALTH CARE REFORM PROPOSAL The Company's primary markets are highly competitive and subject to substantial governmental regulation. In the U.S., legislation proposing changes in the health care system was not enacted in 1994. New legislation may be introduced in 1995 and may make changes in the availability, delivery and payment for health care products and services. International operations are also subject to a degree of government regulation. While the Company cannot predict with certainty the nature of the potential future U.S. reforms, whether or not they will be enacted and the impact they may have on its U.S. business, pressures on pricing and operating results as a result of market competition are expected to continue in 1995. COMPETITION Mature products of the Company's pharmaceutical business will face significant exposure from competitive brand names and generic competition during the next several years. 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 and 1994. The combined U.S. net sales of these products were $203, $308 and $473 million in 1994, 1993 and 1992, 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 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 impact of possible future competition on sales of Procardia XL. GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) In December 1994, the U.S. Congress ratified the GATT world trade agreement. A key provision 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 32 the continued discrimination against patents filed prior to the effective date of the agreement. Necessary 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 Net sales outside the U.S. represented 47% and 46% of total sales in 1994 and 1993, respectively. Exchange-rate fluctuations had no impact on the Company's net sales in 1994 and marginal impact in 1993. Sales and earnings growth in 1995 could be adversely affected if the U.S. dollar strengthens. 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 42. 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 federal, state and local environmental laws and regulations. For further details, see the footnote "Litigation" beginning on page 49. DIVIDEND GROWTH The dividend payout ratio amounted to 44.9%, 82.0% and 61.4% in 1994, 1993 and 1992, respectively. Excluding the effect of divestitures, restructuring and unusual items--net, this ratio would have been 45.4% and 48.4% in 1993 and 1992, respectively. In January 1995, the Board of Directors declared a first-quarter 1995 dividend increase of 11% to $.52 from $.47 in each quarter of 1994. This marked the 28th consecutive year of dividend increases. INFLATION AND CHANGING PRICES Inflation, although moderate in many parts of the world during 1994, continues to affect worldwide economies. Inflation had no material impact on the Company's operations throughout the period. RESPONSIBILITY FOR FINANCIAL STATEMENTS AND SYSTEM OF INTERNAL CONTROL The financial statements which appear on pages 35 through 53 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. /s/ William C. Steere, Jr. W. C. Steere, Jr. PRINCIPAL EXECUTIVE OFFICER /s/ H. McKinnell H. McKinnell, Ph.D. PRINCIPAL FINANCIAL OFFICER /s/ H. V. Ryan H. V. Ryan PRINCIPAL ACCOUNTING OFFICER February 23, 1995 33 AUDIT COMMITTEE'S REPORT 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. The Audit Committee meets at least quarterly 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/ Stanley O. Ikenberry S. O. Ikenberry, Ph.D. CHAIR, AUDIT COMMITTEE February 23, 1995 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, 1994, 1993 and 1992 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, 1994, 1993 and 1992, and the results of their operations and their cash flows for each of the years then ended, in conformity with generally accepted accounting principles. As discussed in the notes to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, and Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES, in 1992. /S/ KPMG PEAT MARWICK LLP 345 Park Avenue New York, NY 10154 February 23, 1995 34 SEGMENT INFORMATION
CONSUMER CORPORATE/ HEALTH ANIMAL HEALTH FOOD FINANCIAL (MILLIONS OF DOLLARS) CARE HEALTH CARE SCIENCE (A) SUBSIDIARIES (D) CONSOLIDATED ---------------------------------------------------------------------------------------------------------------------------------- 1994 Net sales $6,963.0 $605.3 $ 409.0 $304.0 $ -- $ 8,281.3 ---------------------------------------------------------------------------------------------------------------------------------- Segment profit $1,976.6 $ 47.4 $ 34.1 $ 31.0 $ -- $ 2,089.1 ---------------------------------------------------------------------------------------------------------------------------------- Interest income 123.0 123.0 Interest expense (126.9) (126.9) Net corporate expenses (223.7) (223.7) ---------------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income and minority interests $1,861.5 ---------------------------------------------------------------------------------------------------------------------------------- Identifiable assets $5,388.1 $501.8 $ 205.3 $447.6 $4,555.7 $11,098.5 ---------------------------------------------------------------------------------------------------------------------------------- Capital additions $ 482.5 $ 45.9 $ 15.6 $ 58.3 $69.2 $ 671.5 ---------------------------------------------------------------------------------------------------------------------------------- Depreciation $ 216.3 $ 16.9 $ 7.1 $ 19.3 $15.8 $ 275.4 ---------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- 1993 Net sales $6,210.3 $578.0 $ 373.5 $315.9 $ -- $ 7,477.7 ---------------------------------------------------------------------------------------------------------------------------------- Segment profit/(loss)(B) $1,129.9 $ (5.8) $(102.3) $ 16.1 $ -- $ 1,037.9 ---------------------------------------------------------------------------------------------------------------------------------- Interest income 163.5 163.5 Interest expense (106.5) (106.5) Net corporate expenses (243.5) (243.5) ---------------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income and minority interests $ 851.4 ---------------------------------------------------------------------------------------------------------------------------------- Identifiable assets $4,650.3 $444.6 $ 152.4 $374.4 $3,709.2 $ 9,330.9 ---------------------------------------------------------------------------------------------------------------------------------- Capital additions $ 480.9 $ 39.2 $ 15.4 $ 62.9 $35.8 $634.2 ---------------------------------------------------------------------------------------------------------------------------------- Depreciation $ 182.6 $ 17.0 $ 6.5 $ 19.6 $15.4 $241.1 ---------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- 1992 Net sales $5,613.9 $560.8 $ 404.6 $650.9 $ -- $ 7,230.2 ---------------------------------------------------------------------------------------------------------------------------------- Segment profit(C) $1,241.8 $ 41.2 $ 329.7 $ 21.0 $ -- $ 1,633.7 ---------------------------------------------------------------------------------------------------------------------------------- Interest income 184.6 184.6 Interest expense (103.4) (103.4) Net corporate expenses (180.1) (180.1) ---------------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income, minority interests and cumulative effect of accounting changes $ 1,534.8 ---------------------------------------------------------------------------------------------------------------------------------- Identifiable assets $4,153.2 $478.6 $ 285.9 $368.9 $4,303.5 $ 9,590.1 ---------------------------------------------------------------------------------------------------------------------------------- Capital additions $ 436.4 $ 41.3 $ 9.2 $126.3 $61.0 $ 674.2 ---------------------------------------------------------------------------------------------------------------------------------- Depreciation $ 147.0 $ 13.7 $ 6.9 $ 51.8 $23.2 $ 242.6 ---------------------------------------------------------------------------------------------------------------------------------- (A) INCLUDES THE RESULTS OF THE DIVESTED MINERALS BUSINESSES THROUGH OCTOBER 30, 1992. (B) INCLUDES PRE-TAX CHARGES OF $750 MILLION AND APPROXIMATELY $62 MILLION TO COVER A WORLDWIDE RESTRUCTURING PROGRAM AS WELL AS UNUSUAL ITEMS. IT ALSO INCLUDES A GAIN OF APPROXIMATELY $60 MILLION REALIZED ON THE SALE OF THE COMPANY'S REMAINING INTEREST IN MTI. AMOUNTS DIRECTLY ATTRIBUTABLE TO INDIVIDUAL SEGMENTS HAVE BEEN ALLOCATED TO THEM. AMOUNTS NOT DIRECTLY TRACEABLE TO INDIVIDUAL SEGMENTS ARE INCLUDED IN NET CORPORATE EXPENSES. (C) INCLUDES A $110.5 MILLION NET CREDIT RELATING TO THE DIVESTITURE AND RESTRUCTURING OF CERTAIN OF THE COMPANY'S BUSINESSES AND CURTAILMENT GAINS ASSOCIATED WITH POSTRETIREMENT BENEFITS OTHER THAN PENSIONS OF DIVESTED OPERATIONS. AMOUNTS DIRECTLY ATTRIBUTABLE TO INDIVIDUAL SEGMENTS HAVE BEEN ALLOCATED TO THEM. AMOUNTS NOT DIRECTLY TRACEABLE TO INDIVIDUAL SEGMENTS ARE INCLUDED IN NET CORPORATE EXPENSES. (D) SEGMENT INFORMATION FOR THE FINANCIAL SUBSIDIARIES CAN BE FOUND IN THE "FINANCIAL SUBSIDIARIES" FOOTNOTE ON PAGE 42.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS. 35 GEOGRAPHIC DATA
CANADA/ UNITED LATIN (MILLIONS OF DOLLARS) STATES (A) EUROPE ASIA AMERICA ----------------------------------------------------------------------------------------------------------------------------- 1994 Net sales $4,411.2 $1,816.4 $1,249.1 $619.4 Intercompany sales 140.3 459.8 57.2 21.3 ----------------------------------------------------------------------------------------------------------------------------- Total $4,551.5 $2,276.2 $1,306.3 $640.7 ----------------------------------------------------------------------------------------------------------------------------- Geographic profit $1,426.8 $ 534.6 $ 115.2 $ 45.6 ----------------------------------------------------------------------------------------------------------------------------- Interest income Interest expense Net corporate expenses ----------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income and minority interests ----------------------------------------------------------------------------------------------------------------------------- Identifiable assets $2,768.1 $2,429.0 $1,303.4 $479.9 ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------- 1993 Net sales $4,006.0 $1,632.0 $1,131.9 $528.3 Intercompany sales 134.5 489.6 23.1 20.4 ----------------------------------------------------------------------------------------------------------------------------- Total $4,140.5 $2,121.6 $1,155.0 $548.7 ----------------------------------------------------------------------------------------------------------------------------- Geographic profit/(loss)(B) $ 698.5 $ 381.8 $ 75.2 $ (.4) ----------------------------------------------------------------------------------------------------------------------------- Interest income Interest expense Net corporate expenses ----------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income and minority interests ----------------------------------------------------------------------------------------------------------------------------- Identifiable assets $2,598.2 $2,034.6 $1,198.2 $393.7 ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------- 1992 Net sales $3,888.2 $1,709.1 $1,012.7 $470.4 Intercompany sales 92.6 409.7 23.8 16.0 ----------------------------------------------------------------------------------------------------------------------------- Total $3,980.8 $2,118.8 $1,036.5 $486.4 ----------------------------------------------------------------------------------------------------------------------------- Geographic profit(C) $1,172.4 $ 404.8 $26.0 $ 54.2 ----------------------------------------------------------------------------------------------------------------------------- Interest income Interest expense Net corporate expenses ----------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income, minority interests and cumulative effect of accounting changes ----------------------------------------------------------------------------------------------------------------------------- Identifiable assets $2,280.5 $2,018.6 $1,008.3 $325.0 ----------------------------------------------------------------------------------------------------------------------------- AFRICA/ CORPORATE/ MIDDLE FINANCIAL ADJUSTMENTS/ (MILLIONS OF DOLLARS) EAST SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------------------------------------------------------------------------------------------------------------------------- 1994 Net sales $185.2 $ -- $ -- $ 8,281.3 Intercompany sales 5.7 -- (684.3) -- ----------------------------------------------------------------------------------------------------------------------------- Total $190.9 $ -- $(684.3) $ 8,281.3 ----------------------------------------------------------------------------------------------------------------------------- Geographic profit $ 11.6 $ -- $ (44.7) $ 2,089.1 ----------------------------------------------------------------------------------------------------------------------------- Interest income 123.0 123.0 Interest expense (126.9) (126.9) Net corporate expenses (223.7) (223.7) ----------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income and minority interests $ 1,861.5 ----------------------------------------------------------------------------------------------------------------------------- Identifiable assets $140.6 $4,555.7 $(578.2) $11,098.5 ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------- 1993 Net sales $179.5 $ -- $ -- $ 7,477.7 Intercompany sales 3.8 -- (671.4) -- ----------------------------------------------------------------------------------------------------------------------------- Total $183.3 $ -- $(671.4) $ 7,477.7 ----------------------------------------------------------------------------------------------------------------------------- Geographic profit/(loss)(B) $(28.6) $ -- $ (88.6) $ 1,037.9 ----------------------------------------------------------------------------------------------------------------------------- Interest income 163.5 163.5 Interest expense (106.5) (106.5) Net corporate expenses (243.5) (243.5) ----------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income and minority interests $ 851.4 ----------------------------------------------------------------------------------------------------------------------------- Identifiable assets $128.9 $3,709.2 $(731.9) $ 9,330.9 ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------- 1992 Net sales $149.8 $ -- $ -- $ 7,230.2 Intercompany sales .7 -- (542.8) -- ----------------------------------------------------------------------------------------------------------------------------- Total $150.5 $ -- $(542.8) $ 7,230.2 ----------------------------------------------------------------------------------------------------------------------------- Geographic profit(C) $ 16.3 $ -- $ (40.0) $ 1,633.7 ----------------------------------------------------------------------------------------------------------------------------- Interest income 184.6 184.6 Interest expense (103.4) (103.4) Net corporate expenses (180.1) (180.1) ----------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income, minority interests and cumulative effect of accounting changes $ 1,534.8 ----------------------------------------------------------------------------------------------------------------------------- Identifiable assets $108.9 $4,303.5 $(454.7) $ 9,590.1 ----------------------------------------------------------------------------------------------------------------------------- (A) THE COMPANY'S MANUFACTURING OPERATIONS IN PUERTO RICO ARE INCLUDED IN THE UNITED STATES FOR GEOGRAPHIC DATA PURPOSES. (B) INCLUDES PRE-TAX CHARGES OF $750 MILLION AND APPROXIMATELY $62 MILLION TO COVER A WORLDWIDE RESTRUCTURING PROGRAM AS WELL AS UNUSUAL ITEMS. IT ALSO INCLUDES 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 CORPORATE EXPENSES. (C) INCLUDES A $110.5 MILLION NET CREDIT RELATING TO THE DIVESTITURE AND RESTRUCTURING OF CERTAIN OF THE COMPANY'S BUSINESSES AND CURTAILMENT GAINS ASSOCIATED WITH POSTRETIREMENT BENEFITS OTHER THAN PENSIONS OF DIVESTED OPERATIONS. AMOUNTS DIRECTLY ATTRIBUTABLE TO INDIVIDUAL GEOGRAPHIC AREAS HAVE BEEN ALLOCATED TO THEM. AMOUNTS NOT DIRECTLY TRACEABLE TO INDIVIDUAL GEOGRAPHIC AREAS ARE INCLUDED IN NET CORPORATE EXPENSES.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS. 36 CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31 ----------------------------------------------------------------------------------------------------------------------------- (MILLIONS OF DOLLARS EXCEPT PER SHARE DATA) 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------------------- Net sales $8,281.3 $7,477.7 $7,230.2 Costs and expenses Cost of sales 1,918.6 1,772.0 2,024.3 Selling, informational and administrative expenses 3,250.8 3,066.0 2,899.3 Research and development expenses 1,139.4 974.4 863.2 Divestitures, restructuring and unusual items--net -- 752.0 (110.5) Other deductions--net 111.0 61.9 19.1 ----------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income, minority interests and cumulative effect of accounting changes 1,861.5 851.4 1,534.8 Provision for taxes on income 558.5 191.3 438.6 Minority interests 4.6 2.6 2.7 ----------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting changes 1,298.4 657.5 1,093.5 Cumulative effect of change in accounting for: Postretirement benefits, net of income taxes -- -- (312.6) Income taxes -- -- 30.0 ----------------------------------------------------------------------------------------------------------------------------- Net income $1,298.4 $657.5 $810.9 ----------------------------------------------------------------------------------------------------------------------------- Earnings per common share Income before cumulative effect of accounting changes $4.19 $2.05 $3.25 Cumulative effect of change in accounting for: Postretirement benefits, net of income taxes -- -- (.93) Income taxes -- -- .09 ----------------------------------------------------------------------------------------------------------------------------- Net income $4.19 $2.05 $2.41 -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS. 37 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
COMMON STOCK ADDITIONAL --------------------- PAID-IN RETAINED (MILLIONS) SHARES PAR VALUE CAPITAL EARNINGS ----------------------------------------------------------------------------------------------------------------------------- Balance January 1, 1992 332.4 $33.2 $212.5 $4,794.9 Net income 810.9 Cash dividends declared (486.5) Debenture conversions .8 .1 10.9 Currency translation adjustment Stock option transactions 3.7 .4 142.1 Purchase of common stock Shares purchased from Retirement Annuity Plan Shares purchased from Savings and Investment Plan Dividend reinvestment plan .1 -- 9.4 ----------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1992 337.0 33.7 374.9 5,119.3 Net income 657.5 Cash dividends declared (536.1) Currency translation adjustment Stock option transactions 1.4 .2 41.9 Purchase of common stock Employee benefit trust transactions--net 63.2 Dividend reinvestment plan .2 -- 11.7 ----------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1993 338.6 33.9 491.7 5,240.7 Net income 1,298.4 Cash dividends declared (594.6) Currency translation adjustment Stock option transactions 1.5 .1 63.1 Purchase of common stock Employee benefit trust transactions--net 83.4 Dividend reinvestment plan .2 -- 11.8 Unrealized net gain on available-for-sale securities Other 1.4 ----------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1994 340.3 $34.0 $651.4 $5,944.5 ----------------------------------------------------------------------------------------------------------------------------- CURRENCY TRANSLATION EMPLOYEE TREASURY STOCK ADJUSTMENT BENEFITS --------------------- (MILLIONS) AND OTHER TRUST SHARES COST TOTAL ----------------------------------------------------------------------------------------------------------------------------- Balance January 1, 1992 $157.8 $ -- (2.8) $(172.1) $5,026.3 Net income 810.9 Cash dividends declared (486.5) Debenture conversions 11.0 Currency translation adjustment (112.5) (112.5) Stock option transactions (.1) (17.4) 125.1 Purchase of common stock (8.5) (632.2) (632.2) Shares purchased from Retirement Annuity Plan (.4) (30.0) (30.0) Shares purchased from Savings and Investment Plan -- (2.9) (2.9) Dividend reinvestment plan 9.4 ----------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1992 45.3 -- (11.8) (854.6) 4,718.6 Net income 657.5 Cash dividends declared (536.1) Currency translation adjustment (13.6) (13.6) Stock option transactions -- .6 42.7 Purchase of common stock (15.8) (1,019.6) (1,019.6) Employee benefit trust transactions--net (690.0) 10.0 631.1 4.3 Dividend reinvestment plan 11.7 ----------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1993 31.7 (690.0) (17.6) (1,242.5) 3,865.5 Net income 1,298.4 Cash dividends declared (594.6) Currency translation adjustment 162.3 162.3 Stock option transactions -- 1.0 64.2 Purchase of common stock (8.5) (511.2) (511.2) Employee benefit trust transactions--net (59.3) 24.1 Dividend reinvestment plan 11.8 Unrealized net gain on available-for-sale securities 2.0 2.0 Other 1.4 ----------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1994 $196.0 $(749.3) (26.1) $(1,752.7) $4,323.9 -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS. 38 CONSOLIDATED BALANCE SHEET
DECEMBER 31 ----------------------------------------------------------------------------------------------------------------------------- (MILLIONS OF DOLLARS) 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,458.5 $ 729.4 $1,257.1 Short-term investments 560.1 447.1 446.6 Accounts receivable, less allowance for doubtful accounts: 1994-$44.1; 1993-$40.6; 1992-$36.2 1,665.0 1,468.7 1,400.3 Short-term loans 361.3 456.9 620.3 Inventories Finished goods 528.0 413.3 413.5 Work in process 534.9 502.1 465.8 Raw materials and supplies 202.0 178.1 188.5 ----------------------------------------------------------------------------------------------------------------------------- Total inventories 1,264.9 1,093.5 1,067.8 ----------------------------------------------------------------------------------------------------------------------------- Prepaid expenses, taxes and other current assets 478.6 537.6 592.7 ----------------------------------------------------------------------------------------------------------------------------- Total current assets 5,788.4 4,733.2 5,384.8 Long-term loans and marketable securities 724.3 586.7 601.4 Property, plant and equipment, less accumulated depreciation 3,073.2 2,632.5 2,305.1 Goodwill, less accumulated amortization 325.7 231.1 368.2 Other assets, deferred taxes and deferred charges 1,186.9 1,147.4 930.6 ----------------------------------------------------------------------------------------------------------------------------- Total assets $11,098.5 $9,330.9 $9,590.1 ----------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings, including current portion of long-term debt $ 2,220.0 $1,178.8 $1,252.3 Accounts payable 524.9 479.1 456.4 Income taxes payable 731.1 606.2 395.9 Accrued compensation and related items 419.0 408.6 332.9 Other current liabilities 930.9 770.9 779.9 ----------------------------------------------------------------------------------------------------------------------------- Total current liabilities 4,825.9 3,443.6 3,217.4 Long-term debt 604.2 570.5 571.3 Postretirement benefit obligation other than pension plans 432.6 443.3 459.1 Deferred taxes on income 211.7 189.4 146.9 Other non-current liabilities 661.4 779.3 441.9 Minority interests 38.8 39.3 34.9 ----------------------------------------------------------------------------------------------------------------------------- Total liabilities 6,774.6 5,465.4 4,871.5 ----------------------------------------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Preferred stock, without par value; 12,000,000 shares authorized, none issued -- -- -- Common stock, $.10 par value; 750,000,000 shares authorized; issued: 1994-340,330,816; 1993-338,564,752; 1992-336,972,295 34.0 33.9 33.7 Additional paid-in capital 651.4 491.7 374.9 Retained earnings 5,944.5 5,240.7 5,119.3 Currency translation adjustment and other 196.0 31.7 45.3 Employee benefit trust (749.3) (690.0) -- Common stock in treasury, at cost: 1994-26,104,841; 1993-17,642,269; 1992-11,831,522 (1,752.7) (1,242.5) (854.6) ----------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 4,323.9 3,865.5 4,718.6 ----------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $11,098.5 $9,330.9 $9,590.1 -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS. 39 CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 ----------------------------------------------------------------------------------------------------------------------------- (MILLIONS OF DOLLARS) 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 1,298.4 $ 657.5 $ 810.9 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting changes -- -- 282.6 Depreciation and amortization of intangibles 292.0 258.2 263.9 Divestitures, restructuring and unusual items -- 752.0 (110.5) Deferred taxes 32.6 (336.1) (14.5) Deferred income amortization (11.4) (28.3) (74.3) Other 5.5 39.3 5.0 Changes in assets and liabilities, net of effect of businesses acquired and divested: Accounts receivable (160.7) (160.8) (193.8) Inventories (110.8) (142.3) (116.1) Prepaid and other assets (11.5) (44.8) (246.3) Accounts payable and accrued liabilities 167.9 30.5 69.7 Income taxes payable 121.3 227.9 44.6 Other deferred items (134.8) 9.9 85.8 ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,488.5 1,263.0 807.0 ----------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Purchases of property, plant and equipment (671.5) (634.2) (674.2) Purchases of short-term investments (1,355.9) (739.6) (535.7) Proceeds from redemptions of short-term investments 1,244.8 846.8 459.8 Proceeds from sales of businesses -- 241.2 896.6 Purchases of long-term investments (162.1) (175.9) (154.6) Purchases and redemptions of short-term investments by financial subsidiaries 43.4 (21.3) 51.0 Decrease in loans and long-term investments by financial subsidiaries 20.7 167.3 283.3 Other investing activities 40.3 118.8 63.7 ----------------------------------------------------------------------------------------------------------------------------- Net cash (used in)/provided by investing activities (840.3) (196.9) 389.9 ----------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from issuance of long-term debt 39.8 6.4 266.0 Increase/(decrease) in short-term debt 1,030.8 (70.1) (407.7) Stock option transactions 64.2 42.7 125.1 Purchases of common stock (511.2) (1,019.6) (665.1) Cash dividends paid (594.6) (536.1) (486.5) Other financing activities 32.9 9.7 (59.8) ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by/(used in) financing activities 61.9 (1,567.0) (1,228.0) ----------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 19.0 (26.8) (29.4) ----------------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in cash and cash equivalents 729.1 (527.7) (60.5) Cash and cash equivalents at beginning of year 729.4 1,257.1 1,317.6 ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 1,458.5 $ 729.4 $ 1,257.1 -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include the accounts of Pfizer Inc and all significant subsidiaries. Material intercompany transactions are eliminated. The Company considers demand deposits, certificates of deposit and certain time deposits with maturities of three months or less at the date of purchase to be cash equivalents. 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. Substantially all of the Company's U.S. sourced pharmaceuticals, animal health and food science inventories are valued utilizing the last-in, first-out (LIFO) method. 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. The assets and liabilities for most of the Company's international subsidiaries are translated into U.S. dollars 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. Income statement items are generally translated at average exchange rates prevailing during the period. Other foreign currency transaction gains and losses are included in net income. 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 accompanying consolidated financial statements generally do 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. Amounts arising prior to that year are not amortized unless there is a permanent diminution in value. Goodwill is shown separately, while other intangibles are included in Other assets, deferred taxes and deferred charges in the Consolidated Balance Sheet. When factors indicate that goodwill and other intangibles be evaluated for possible impairment, the Company assesses the recoverability from future operations using undiscounted cash flows. 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 36. Net exchange losses, included in Other deductions (which totaled $127.1, $153.5 and $134.9 million in 1994, 1993 and 1992, respectively), were $1.5, $40.0, and $22.8 million in 1994, 1993 and 1992, respectively. Changes in the currency translation adjustment included in Shareholders' equity are as follows:
(MILLIONS OF DOLLARS) 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------------------- Currency translation adjustment January 1 $ 31.7 $45.3 $157.8 Translation adjustments and hedges 161.8 (92.6) (84.0) Income taxes allocated to translation adjustments and hedges .5 .9 (13.1) Transfer to income statement on sale or liquidation of businesses -- 78.1 (15.4) ----------------------------------------------------------------------------------------------------------------------------- Currency translation adjustment December 31 $194.0 $31.7 $ 45.3 -----------------------------------------------------------------------------------------------------------------------------
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. The statement requires that investments in such securities be designated as trading, held-to-maturity or available-for-sale. Trading securities are reported at fair value with unrealized gains and losses recognized in earnings. Available-for-sale securities are reported at fair value with unrealized gains and losses recognized in the caption "Currency translation adjustment and other" included in Shareholders' equity. Securities classified as held-to-maturity are reported at amortized cost. 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) As of December 31, 1994, the status of such securities is as follows:
DECEMBER 31, 1994 ------------------------------------------------------------------------------- GROSS UNREALIZED AMORTIZED FAIR --------------------- (MILLIONS OF DOLLARS) COST VALUE GAINS LOSSES ------------------------------------------------------------------------------- Held-to-Maturity: U.S. Government agencies $ 28.2 $ 28.2 $ -- $ -- Municipals 88.6 88.4 .1 (.3) Foreign governments 51.8 51.2 .1 (.7) Certificates of deposit 234.7 234.7 -- -- Mortgage-backed 33.4 31.8 -- (1.6) Corporate debt 381.5 375.4 .3 (6.4) Commercial paper 91.0 91.0 -- -- -------------------------------------------------------------------------------- 909.2 900.7 .5 (9.0) Available for Sale: Equity securities 56.7 60.1 18.8 (15.4) -------------------------------------------------------------------------------- $965.9 $960.8 $19.3 $(24.4) --------------------------------------------------------------------------------
Of the above securities, amounts are included in the Consolidated Balance Sheet as follows:
(MILLIONS OF DOLLARS) 1994 -------------------------------------------------------------------------------- Cash $90.0 Short-term investments 560.1 Long-term loans and marketable securities 319.2 --------------------------------------------------------------------------------
The contractual maturities of such securities as of December 31, 1994 are as follows:
YEARS ----------------------------------------- OVER 1 OVER 5 (MILLIONS OF DOLLARS) WITHIN 1 TO 5 TO 10 OVER 10 TOTAL -------------------------------------------------------------------------------- Held-to-Maturity: U.S. Government agencies $ 28.2 $ -- $ -- $ -- $ 28.2 Municipals 78.6 10.0 -- -- 88.6 Foreign governments .7 51.1 -- -- 51.8 Certificates of deposit 220.7 14.0 -- -- 234.7 Corporate debt 211.6 128.2 21.8 19.9 381.5 Commercial paper 91.0 -- -- -- 91.0 -------------------------------------------------------------------------------- Subtotal $630.8 $203.3 $21.8 $19.9 875.8 ----------------------------------------------------------------------- Mortgage-backed 33.4 -------- Total $909.2 --------------------------------------------------------------------------------
Interest income was $123.0, $163.5 and $184.6 million for 1994, 1993 and 1992, respectively. FINANCIAL SUBSIDIARIES Combined financial data/segment information as of November 30, 1994, 1993 and 1992 applicable to the Company's financial subsidiaries, which include Pfizer International Bank Europe (PIBE) and a small captive insurance company, are presented as follows:
CONDENSED BALANCE SHEET (MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- Cash and interest-bearing deposits $ 285.2 $ 222.2 $ 63.7 Eurosecurities 3.8 46.8 25.0 Loans, net 766.4 794.1 960.4 Other assets 13.2 10.3 15.3 ------------------------------------------------------------------------------- Total assets $1,068.6 $1,073.4 $ 1,064.4 ------------------------------------------------------------------------------- Certificates of deposit and other liabilities $ 184.5 $ 166.5 $ 171.5 Deferred income 13.0 26.2 50.2 Shareholders' equity 871.1 880.7 842.7 ------------------------------------------------------------------------------- Total liabilities and shareholders' equity $1,068.6 $1,073.4 $1,064.4 ------------------------------------------------------------------------------- CONDENSED STATEMENT OF INCOME (MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- Interest income $ 49.2 $ 48.1 $ 91.3 Interest expense (4.6) (4.2) (5.5) Other (expense)/income--net (12.0) 1.2 (4.2) ------------------------------------------------------------------------------- Net income $ 32.6 $ 45.1 $ 81.6 -------------------------------------------------------------------------------
Investments of the banking subsidiary generally are recorded at amortized cost and are held until maturity. PROPERTY, PLANT AND EQUIPMENT The major categories of property, plant and equipment and accumulated depreciation follow:
(MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- Land $ 85.2 $ 81.8 $ 71.7 Buildings 1,218.6 1,093.8 953.9 Machinery and equipment 2,108.4 1,897.8 1,706.9 Furniture, fixtures and other 940.2 812.8 698.3 Construction in progress 640.5 414.5 385.6 ------------------------------------------------------------------------------- 4,992.9 4,300.7 3,816.4 Less: accumulated depreciation 1,919.7 1,668.2 1,511.3 ------------------------------------------------------------------------------- $ 3,073.2 $2,632.5 $2,305.1 -------------------------------------------------------------------------------
INVENTORIES Inventories valued on a LIFO basis comprised approximately 15% of worldwide inventories at December 31, 1994, 1993 and 1992. The estimated replacement cost of these inventories at December 31, 1994, 1993 and 1992 was $220.3, $204.7 and $199.0 million, respectively. 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 31 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 42 and borrowings. The Company manages its foreign exchange and interest-rate risks through a variety of techniques, including the use of derivative financial instruments. The Company does not leverage or trade derivative financial instruments. Generally, gains and losses arising from financial instruments 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. Forward-exchange contracts with maturities of six months or less are used to match local market short-term assets and liabilities denominated in currencies other than the local currency. Changes in the fair value of forward-exchange contracts are included in Other deductions--net, together with foreign exchange gains and losses. At December 31, 1994, 1993 and 1992, the Company had approximately $750, $420 and $380 million, respectively, of forward-exchange contracts. The December 31, 1994 contracts include $383 million of currencies exchanged for U.S. dollars, $132 million exchanged for U.K. pounds, $92 million exchanged for Irish punt, $55 million exchanged for German marks and $88 million for other currencies. The principal currencies exchanged for U.S. dollars are Japanese yen, U.K. pounds, Irish punt, French francs and German marks of $107, $61, $49, $34 and $29 million, respectively. The principal currency exchanged for U.K. pounds is U.S. dollars of $129 million, exchanged for Irish punt is U.K. pounds of $72 million and exchanged for German marks is U.S. dollars of $52 million. Currency options purchased to hedge anticipated inventory purchases and sales are reported at amortized cost. The cost is amortized to operations on a straight-line basis through the inventory delivery date. Unrealized gains at that date are deferred as a reduction of inventory cost and recognized in net income as sales occur. At December 31, 1994 and 1993, $150 and $180 million of yen-denominated currency options were purchased with maturities through 1996 and 1995, respectively, to hedge anticipated inventory purchases and sales. Interest-rate swap agreements are used to manage interest-rate risk on assets and liabilities with the differential to be paid or received under the agreements accrued over the lives of the contracts as interest rates change. Such amounts are included in Other deductions--net. At December 31, 1994, the Company had interest-rate swap contracts outstanding with notional amounts of approximately $275 million. Interest-rate swap contracts of $25 million, maturing in 2001, have the effect of converting fixed-rate long-term debt into a floating rate based on the Bankers Trust Tax Exempt Note Rate. A contract of $50 million maturing shortly after year-end converts certain fixed-rate assets of PIBE into floating rate based on the London Interbank Offered Rate (LIBOR). Contracts of $200 million convert certain floating-rate assets of PIBE to fixed-rate. The Company sold the right to receive the fixed-rate payments under the swap contracts totaling $200 million in order to reduce counterparty credit risk. Income on this transaction was deferred and is being amortized over the life of the swap contracts, all of which expire in 1995. Approximately $13, $13 and $24 million of this deferred income is included in Other current liabilities in the Consolidated Balance Sheet at December 31, 1994, 1993 and 1992, respectively. At December 31, 1994, the Company had currency swap contracts with notional amounts of approximately $90 million outstanding, maturing in 1995 through 1997. Such contracts effectively convert certain PIBE foreign currency assets into floating rate (based on LIBOR) U.S. dollar denominated assets. The Company periodically reviews the credit quality of financial institutions which are counterparties to derivative financial instruments and does not expect any loss from the failure of such institutions to perform under the contracts. At December 31, 1994, 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 cash, short-term interest-bearing deposits and investments, accounts receivable and payable, accrued liabilities, commercial paper and certificates of deposit, short-term debt and other liabilities, 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 the carrying values of the Company's long-term interest-bearing deposits and investments and long-term debt, as well as each class of derivative financial instrument, is not material and, therefore, such amounts are not presented herein. LONG-TERM DEBT Long-term debt, exclusive of current maturities of $6.5, $3.6 and $4.6 million in 1994, 1993 and 1992, respectively, is summarized as follows:
(MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- 7-1/8% Notes due 1996 $250.0 $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 -- -- Other borrowings and mortgages 64.2 48.5 49.3 ------------------------------------------------------------------------------- $604.2 $570.5 $571.3 -------------------------------------------------------------------------------
43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In 1991, the Company filed a shelf registration with the U.S. Securities and Exchange Commission under which the Company could issue up to $750 million of debt securities. Under this shelf registration, the Company issued an aggregate of $500 million of notes, leaving $250 million available to be issued as of December 31, 1994. Long-term debt maturities for the years ending December 31, 1996 through 1999, are $276.3, $260.8, $2.4 and $2.0 million, respectively. The weighted average interest rate on short-term and long-term debt outstanding as of December 31, 1994 and 1993 was 6.0% and 5.1%, respectively. At December 31, 1994, the Company had approximately $1.1 billion in major unused lines of credit. During 1994, 1993 and 1992, respectively, the Company incurred interest costs of $141.6, $120.5 and $115.6 million, including $14.7, $14.0 and $12.2 million which was capitalized. Interest paid was approximately $106.9, $122.2 and $92.5 million in 1994, 1993 and 1992, respectively. DIVESTITURES, RESTRUCTURING AND UNUSUAL ITEMS Income before taxes for 1993 included a third-quarter charge of $750 million to cover a worldwide restructuring program, as well as unusual items. Unusual items included the write-down of goodwill of $121.7 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. An additional 1993 restructuring charge of $61.9 million was taken prior to the third quarter. 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, including the consolidation of finance organizations in Europe. It is expected that the 1993 program will be completed within three years. The following table indicates the status of the 1993 restructuring charges by component:
1993 Utilization Reserves at Restructuring ------------- December 31, charges 1993 1994 1994 ------------------------------------------------------------------------------- Employee severance payments $230.7 $ 25.8 $ 26.5 $178.4 Operating assets to be sold/disposed of 211.7 61.5 44.3 105.9 Closed facilities' costs 101.1 1.5 18.6 81.0 Currency translation adjustment related to the liquidation/ disposal of businesses 57.8 57.8 -- -- Administrative infrastructures 37.6 .7 33.7 3.2 Lease and third-party contract termination costs 37.0 .8 20.8 15.4 Other 14.3 1.2 9.0 4.1 ------------------------------------------------------------------------------- $690.2 $149.3 $152.9 $388.0 -------------------------------------------------------------------------------
Closed facilities' costs relate primarily to the rationalization of manufacturing capacity, as well as costs related to the demolition of structures within certain manufacturing facilities. Administrative infrastructure costs relate primarily to consulting costs involved in restructuring the administrative support organizations and the distribution centers. Writedowns 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. (MTI), the Company's former specialty minerals businesses. The sale resulted in a pre-tax gain of approximately $60 million. Income before taxes for 1992 included a net credit of $110.5 million consisting of a $258.6 million gain on the sale of a business, offset by $204.6 million for restructuring, consolidation and streamlining of certain businesses. In addition, curtailment gains ($56.5 million) associated with postretirement benefits other than pensions of divested operations were recognized. TAXES ON INCOME Income before taxes for U.S. and international operations consists of the following:
(MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- United States $1,074.0 $442.2 $856.4 International 787.5 409.2 678.4 ------------------------------------------------------------------------------- Total income before taxes $1,861.5 $851.4 $1,534.8 -------------------------------------------------------------------------------
The classification of items presented in the above table differs from that in the geographic table on page 36. The geographic table displays information by management organization, exclusive of certain corporate expenses. Income before taxes in the above table is classified based on the location of the operations of the Company. The provision for taxes on income consists of the following:
(MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- UNITED STATES Taxes currently payable U.S. $ 243.5 $ 264.7 $ 176.2 State and local 14.4 65.6 88.8 Deferred income taxes 35.2 (273.4) (16.8) ------------------------------------------------------------------------------- Tax provision 293.1 56.9 248.2 ------------------------------------------------------------------------------- INTERNATIONAL Taxes currently payable 268.0 197.1 188.1 Deferred income taxes (2.6) (62.7) 2.3 ------------------------------------------------------------------------------- Tax provision 265.4 134.4 190.4 ------------------------------------------------------------------------------- Total provision for taxes on income $ 558.5 $ 191.3 $ 438.6 -------------------------------------------------------------------------------
44 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 $730 million has not been made on approximately $2.9 billion of international subsidiaries' unremitted earnings as of December 31, 1994. 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 are as follows:
(PERCENTAGES) 1994 1993 1992 ------------------------------------------------------------------------------- U.S. statutory tax rate 35.0 35.0 34.0 Effect of partially tax-exempt operations in Puerto Rico (9.9) (19.4) (8.2) Effect of reduced rates in Ireland (2.6) (4.0) (2.7) Divestitures, restructuring and unusual items--net -- 4.4 1.8 State and local taxes 1.2 4.3 2.8 R&D tax credit (1.1) (3.3) (.5) All other--net 7.4 5.5 1.4 ------------------------------------------------------------------------------- Consolidated effective tax rate 30.0 22.5 28.6 -------------------------------------------------------------------------------
Excluding the effect of divestitures, restructuring and unusual items--net, the effect of partially tax-exempt operations in Puerto Rico and the effect of reduced rates in Ireland would have been approximately (10.0%) and (2.1%) in 1993, respectively. Deferred tax assets and liabilities, netted by jurisdiction, as of December 31, 1994, 1993 and 1992 are included in the Consolidated Balance Sheet as follows:
(MILLIONS OF DOLLARS) 1994 1993 1992 -------------------------------------------------------------------------------- Current--Prepaid expenses, taxes and other current assets $ 373.8 $ 435.3 $ 347.3 Non-current--Other assets, deferred taxes and deferred charges 336.2 305.1 -- Non-current--Deferred taxes on income (211.7) (189.4) (146.9) -------------------------------------------------------------------------------- Net deferred tax asset $ 498.3 $ 551.0 $ 200.4 --------------------------------------------------------------------------------
Temporary differences which give rise to a significant portion of deferred tax assets and liabilities at December 31, 1994, 1993 and 1992 are as follows:
(MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- Deferred Tax Deferred Tax Deferred Tax ----------------------------------------------------------- Assets Liabilities Assets Liabilities Assets Liabilities Prepaid/ deferred items $ 157.8 $ 150.1 $ 149.4 $ 85.8 $ 115.8 $ 76.5 Inventories 185.5 67.3 143.1 31.9 121.6 36.2 Investments 5.7 -- 14.1 -- 30.0 -- Property, plant and equipment 31.5 322.1 30.9 304.8 60.2 270.8 Employee benefits 207.4 127.7 206.8 129.1 208.8 132.8 Restructurings and special charge 280.3 -- 377.9 -- 180.3 -- Foreign tax credit carryforwards 165.1 -- 100.0 -- -- -- State and local taxes 37.7 -- 34.3 -- 42.0 -- Other carry- forwards 117.1 -- 59.0 -- 40.4 -- All other 32.6 27.4 33.9 23.1 44.4 51.4 ------------------------------------------------------------------------------- Subtotal 1,220.7 694.6 1,149.4 574.7 843.5 567.7 Valuation allowance (27.8) -- (23.7) -- (75.4) -- ------------------------------------------------------------------------------- Total deferred taxes $1,192.9 $694.6 $1,125.7 $ 574.7 $768.1 $567.7 -------------------------------------------------------------------------------- Net deferred tax asset $ 498.3 $ 551.0 $200.4 --------------------------------------------------------------------------------
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 net decrease in the total valuation allowance for 1993 of $51.7 million was primarily due to a change in U.K. tax legislation. The net decrease in the total valuation allowance for 1992 of $5.8 million was primarily related to changes in foreign currency translation rates. The valuation allowance at January 1, 1992, was $81.2 million. The Internal Revenue Service (IRS) is currently auditing the years 1987 through 1989. In October 1994, the Company received a Notice of Proposed Adjustments from the IRS. 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 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 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. The Company believes that its accrued tax liabilities are adequate for all open years. The Company made income tax payments of approximately $414.1, $323.6 and $319.9 million during 1994, 1993 and 1992, respectively. The Company adopted SFAS No. 109 effective January 1, 1992. The cumulative effect of this change increased net income by $30.0 million ($.09 per share) and is reported separately in the 1992 Consolidated Statement of Income. 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 1994, 1993 and 1992 are as follows:
(MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- Service cost-benefits earned during the period $ 79.2 $ 60.2 $ 56.7 Interest cost on projected benefit obligations 115.8 107.5 110.8 Actual return on plan assets (32.8) (197.4) (97.7) Net amortization and deferral (88.4) 71.4 (43.8) ------------------------------------------------------------------------------- Net periodic pension cost $ 73.8 $ 41.7 $ 26.0 -------------------------------------------------------------------------------
Assumptions used to measure the projected benefit obligations were: 1994 1993 1992 ------------------------------------------------------------------------------- U.S. PLANS Discount rate 8.5% 7.5% 8.5% Rate of increase in salary levels 5.5% 5.5% 6.0% Expected long-term rate of return on plan assets 9.0% 9.0% 9.0% INTERNATIONAL PLANS (WEIGHTED AVERAGE) Discount rate 7.1% 6.7% 7.7% Rate of increase in salary levels 4.6% 4.4% 5.3% Expected long-term rate of return on plan assets 8.1% 8.5% 9.2% As a result of changes in long-term interest rates, the Company modified its assumed discount rate for U.S. plans to 8.5% and 7.5% in 1994 and 1993, respectively. The Company also reduced its rate of increase in salary levels from 6.0% to 5.5% in 1993 because of lower inflation. The effect of these changes resulted in a net decrease in projected benefit obligations of $117.2 million for 1994 and a net increase of $98.2 million for 1993. As of December 31, 1994, 1993 and 1992, the funded status of the Company's pension plans are as follows:
(MILLIONS OF DOLLARS) 1994 1993 1992 ------------------------------------------------------------------------------- Actuarial present value of accumulated benefit obligations: Vested $(1,312.0) $(1,290.4) $(969.7) Non-vested (133.3) (99.8) (156.3) ------------------------------------------------------------------------------- Total (1,445.3) (1,390.2) (1,126.0) Effect of future salary increases (258.9) (204.4) (224.5) ------------------------------------------------------------------------------- Projected benefit obligations (1,704.2) (1,594.6) (1,350.5) Plan assets at fair value 1,773.6 1,774.9 1,662.1 ------------------------------------------------------------------------------- Plan assets in excess of projected benefit obligations 69.4 180.3 311.6 Unrecognized overfunding at date of adoption (26.9) (29.6) (32.5) Unrecognized net losses/(gains) 162.6 140.8 (20.5) Unrecognized prior service costs 118.1 61.5 75.7 Minimum liability adjustment (36.3) (21.1) (5.0) ------------------------------------------------------------------------------- Net pension asset included in Consolidated Balance Sheet $ 286.9 $ 331.9 $ 329.3 -------------------------------------------------------------------------------
The preceding table includes 1994 accumulated benefit obligations of $172.6 million and assets at fair value of $5.5 million primarily related to partially funded international plans. The funding policy for the international plans conforms to local governmental and tax requirements. 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. The plans' assets are invested primarily in stocks, bonds and short-term investments. At December 31, 1994, the major U.S. plan held approximately 2.0 million shares of the Company's common stock with a fair value of $152.6 million. Dividends of $3.7 million were paid on such shares in 1994. 46 SAVINGS AND INVESTMENT PLANS The Company maintains voluntary Savings and Investment Plans for most employees in the U.S. and Puerto Rico. Within prescribed limits, the Company bases its contributions to the plans on employee contributions. For 1994, 1993 and 1992, Company contributions amounted to $29.8, $28.8 and $29.1 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. In 1992, the Company adopted SFAS No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. This statement requires the accrual of the projected future cost of providing postretirement benefits during the period that employees render the services necessary to be eligible for such benefits. In prior years, the expense was recognized when claims were paid (pay-as-you-go basis). Most retirees outside the United States are covered by government-sponsored and -administered programs. The cost is not significant. The Company elected to immediately recognize the accumulated benefit obligation measured as of January 1, 1992 and reflected a pre-tax charge of $520.5 million ($312.6 million after taxes) as the cumulative effect of this accounting change. The initial accumulated postretirement benefit obligation was subsequently reduced as a result of curtailment gains of $56.5 million related to 1992 divestitures. Plan modifications adopted in 1992 further reduced the obligation, with this reduction being amortized as a component of the net periodic postretirement expense. The components of the 1994, 1993 and 1992 expense were as follows:
(MILLIONS OF DOLLARS) 1994 1993 1992 --------------------------------------------------------------------------- Service cost--benefits earned during the period $ 5.8 $ 5.0 $ 9.8 Interest cost on the accumulated obligation 21.7 20.2 25.8 Net amortization and deferral (24.2) (24.4) (19.9) --------------------------------------------------------------------------- Net periodic postretirement expense $ 3.3 $ .8 $ 15.7 ---------------------------------------------------------------------------
The accumulated postretirement benefit obligation recognized in the December 31, 1994, 1993 and 1992 Consolidated Balance Sheets, consist of:
(MILLIONS OF DOLLARS) 1994 1993 1992 --------------------------------------------------------------------------- Retirees $192.1 $178.7 $164.5 Fully eligible active plan participants 35.1 47.1 41.6 Other active plan participants 52.7 57.0 46.9 --------------------------------------------------------------------------- Accumulated postretirement benefit obligation 279.9 282.8 253.0 Unrecognized prior service cost 157.2 181.6 206.1 Unrecognized net loss (4.5) (21.1) -- --------------------------------------------------------------------------- Recorded obligation $432.6 $443.3 $459.1 ---------------------------------------------------------------------------
An average increase of 12% in the cost of covered health care benefits was assumed for 1995 and is projected to decrease to 6.2% after 16 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, 1994 by $16.8 million and the total of service and interest cost by $1.5 million. The discount rates used to estimate the accumulated postretirement benefit obligation were 8.5%, 7.5% and 8.5% at December 31, 1994, 1993 and 1992, respectively. 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. 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, 1994, 1993 and 1992, is as follows:
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE AMOUNTS) 1994 1993 1992 --------------------------------------------------------------------------- Net income, adjusted $1,298.4 $657.5 $811.1 --------------------------------------------------------------------------- Weighted average number of common shares outstanding 305.8 315.5 329.0 Common share equivalents 4.4 4.9 7.5 --------------------------------------------------------------------------- Total 310.2 320.4 336.5 --------------------------------------------------------------------------- Earnings per common share $4.19 $2.05 $2.41 ---------------------------------------------------------------------------
COMMON STOCK In December 1994, the Company announced that it plans to purchase up to 2.25 million shares of its common stock in the open market to be used for the acquisition of NAMIC U.S.A. Corporation (NAMIC). Under this plan, approximately 1.0 million shares were purchased in 1994. In February 1993, the Company announced a program to purchase up to 20 million shares of its currently issued common stock in the open market or in privately negotiated transactions. This program was completed during the third quarter of 1994. These shares are available for use in the Company's employee benefit plans and for general corporate purposes. 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) PREFERRED STOCK PURCHASE RIGHTS In 1987, the Board of Directors declared a dividend of one Preferred Stock Purchase Right on each outstanding share of Pfizer Common Stock to holders of record on October 5, 1987. 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 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. 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, 1994, 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 10 million shares of treasury stock to the Pfizer Inc. Grantor Trust (the Trust). The Trust will be used primarily to fund future obligations for previously approved Company benefit plans over its 15-year term. Common stock was acquired by the Trust from the Company in exchange for a promissory note valued at approximately $600 million at the date of sale. The amount, representing unearned employee benefits, is recorded as a deduction from shareholders' equity and is reduced as employee benefits are satisfied. In 1994, .3 million shares were released from the Trust to satisfy employee stock options exercised 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, 1994, options for 15,046,075 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, 20,609 shares were outstanding at December 31, 1994. In 1993, the shareholders approved amendments to the Plan for an additional 11 million shares to be made available for future grants of options. The following table summarizes information relative to the Plan:
(SHARES) 1994 1993 1992 --------------------------------------------------------------------------- Under option January 1 19,294,317 17,860,189 16,961,631 Granted (per share: $56.25 to $69.75 in 1994; $63.00 in 1993; $69.50 to $81.00 in 1992) 4,959,018 3,214,059 5,064,322 Exercised (per share: $18.25 to $65.25 in 1994; $14.00 to $65.25 in 1993; $14.00 to $65.25 in 1992) (1,781,025) (1,452,160) (3,750,610) Cancelled--available for future grants (348,776) (305,774) (415,154) Cancelled--not available for future grants (20,055) (21,997) -- --------------------------------------------------------------------------- Under option December 31 (per share: $24.25 to $81.00 in 1994; $18.25 to $81.00 in 1993; $17.50 to $81.00 in 1992) 22,103,479 19,294,317 17,860,189 --------------------------------------------------------------------------- Available for grant December 31 4,892,581 9,502,823 1,411,108 ---------------------------------------------------------------------------
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. The actual payout of shares is determined using two performance criteria measuring the Company's performance relative to a determined industry peer group. The Program provides for up to 10 million shares to be awarded. At December 31, 1994, executives and other key employees had the right to earn up to 563,670 shares, although no shares have yet been issued. Actual issuances of shares can only occur when the performance period is completed and the criteria measured. Compensation cost to date related to the Program aggregated $7.5 million. LEASE COMMITMENTS Rent expense, net of sublease rentals, for the years ended December 31, 1994, 1993 and 1992 amounted to approximately $94.4, $87.2 and $80.1 million, respectively. Total future minimum rental commitments under all non-cancellable leases for the years 1995 through 1999 and thereafter are approximately $26.4, $20.8, $17.0, $9.9, $12.1 and $188.2 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. 48 ACQUISITIONS AND DIVESTITURES ACQUISITIONS In 1994, the Company acquired: - Certain assets of Flavor Technology Inc., a specialty flavors business, for approximately $32 million. - Restiva Italiana S.p.A. for approximately $26 million. Restiva produces and sells a wide range of innovative products for health and skin care. - Rovi Farma, S.A., in Spain, for approximately $24 million. Rovi is a distributor and producer of a variety of over-the-counter products. In 1993, the Company purchased Charwell Pharmaceuticals Limited, a distributor of over-the-counter consumer health care products located in the United Kingdom, for approximately $41.5 million. In 1992, the Company acquired certain assets and liabilities of Koshin Medical Corp., a Japanese distributor of hospital products, for approximately $16.4 million. The above acquisitions were recorded under the purchase method of accounting. DIVESTITURES In 1993, the Company sold its remaining interest of approximately 40% in MTI, through a public offering and a sale of stock to MTI for gross proceeds of approximately $241.2 million. The sale resulted in a pre-tax gain of approximately $60 million. In 1992, the Company: - Sold the Coty business, a part of the Company's consumer health care segment, for gross proceeds of approximately $440 million, resulting in a pre-tax gain of $258.6 million. - Closed the transaction to sell certain product lines of Shiley Incorporated and other assets to Sorin Biomedica S.p.A. for approximately $230 million in cash. The gain on this transaction was used to partly offset costs associated with the Bowling Settlement Agreement. See the "Litigation" footnote beginning on this page. - Sold a majority interest of approximately 60% in MTI. The net proceeds of $226.6 million approximated the net book value of the interest sold. 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 DEG. or 70 DEG. Shiley Convexo-Concave (C/C) heart valves, or anxiety that properly functioning implanted valves might fracture in the future or, in a few cases, 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 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 20, 1993 by the United States Court of Appeals for the Sixth Circuit. A motion for rehearing EN BANC was denied on March 8, 1994, and the U.S. Supreme Court denied a writ of certiorari on October 4, 1994. 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, eight 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. 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. The Company's operations are subject to federal, state and local 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 is a potentially responsible party or participant with respect to several waste sites in Canada. 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 and local 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 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 20 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 10 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. Concurrently with the filing of the future claims class action, the CCR settled approximately 16,360 personal injury cases on behalf of Pfizer and Quigley. It is the CCR's intention 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, 1994 is 14,543 asbestos cases against Quigley, 5,643 asbestos cases against Pfizer Inc. and 147 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 50 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. In connection with the divestiture of Minerals Technologies Inc. (MTI), to which the net assets of the Pfizer Minerals and the Quigley businesses were transferred, Pfizer and Quigley agreed to indemnify MTI against any liability with respect to products manufactured and sold prior to October 30, 1992, as well as against liability for certain environmental matters. 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 brought by retail pharmacy companies in federal and state courts. The federal cases consist principally of a class action by retail pharmacies (including approximately 30 named plaintiffs), as well as additional actions by approximately 1,900 individual retail pharmacies (the "individual actions"). These cases, all of which have been or are in the process of being transferred to the United States District Court for the Northern District of Illinois and coordinated for pretrial purposes, allege that the defendant drug manufacturers have violated the Sherman Act in that they have unlawfully agreed with each other (and, as alleged in some cases, with wholesalers) not to extend to retail pharmacy companies the same discounts allegedly extended to managed care companies, mail order pharmacies and certain other institutional purchasers. In addition, the individual actions also allege violations of the Robinson-Patman Act in that the manufacturers allegedly have unlawfully discriminated against retail pharmacy companies by not extending them such discounts. The federal court has certified a class consisting of all persons or entities who, since October 15, 1989, bought prescription brand name drugs from any manufacturer or wholesaler defendant, but specifically excluding government entities, mail order pharmacies, HMOs, hospitals, clinics and nursing homes. The federal court had denied a motion for certification made by a purported class of Alabama consumers (in a case that was originally filed in state court, then removed to federal court). In the state cases, motions for class certification are anticipated, except in one Alabama action still in state court, where plaintiffs have stated that they intend to amend their complaint to withdraw their class allegations. The Company believes that these cases are without merit and is vigorously defending them. Food and Drug Administration (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 and are vigorously defending it. 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 and are vigorously defending it. 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) On January 28, 1993, a purported class action entitled Kearse v. Pfizer Inc. and Howmedica Inc. was commenced in the United States District Court for the Northern District of Ohio. Howmedica Inc. ("Howmedica") is a wholly owned subsidiary of the Company. The action sought 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 alleged that the prostheses were defectively designed and manufactured and posed undisclosed risks to implantees. On August 3, 1993, a virtually identical purported class action, Bradshaw/Davids v. Pfizer Inc. and Howmedica Inc., was brought and the Kearse case was subsequently voluntarily dismissed. The district court has denied the plaintiffs' motion to certify the case as a class action. The Company believes that the suit is without merit and is vigorously defending it. During 1994, seven purported class actions were filed against American Medical Systems ("AMS") in federal courts in South Carolina (later transferred to Minnesota), California, Minnesota (2), Indiana, Ohio and Louisiana. In January 1995, an additional purported class action was filed in state court in Louisiana, replicating the federal suit. The California 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, and on March 3, 1995, the Court in the California suit denied plaintiffs' motion for class certification. The Company believes the suits are without merit and is vigorously defending them. SUBSEQUENT EVENTS On January 19, 1995, the Company acquired SmithKline Beecham's animal health business for approximately $1.45 billion substantially financed by the issuance of commercial paper. The Company expects to acquire NAMIC in a stock-for-stock transaction valued at approximately $175 million, in the first quarter of 1995. Both of these acquisitions will be accounted for as purchase transactions, with goodwill generated to be amortized on a straight-line basis over a period not exceeding 40 years. SEGMENT INFORMATION AND GEOGRAPHIC DATA Segment information (including major product groups) and geographic data for the years ended December 31, 1994, 1993 and 1992 are shown on pages 35 and 36 and in the footnote "Financial Subsidiaries" on page 42 and are incorporated in this footnote. Net sales represent merchandise shipments to third parties. Expenses were deducted from net sales to arrive at segment profit. Those expenses directly traceable to individual segments were charged to them. Other expenses were allocated to the segments on a reasonable basis. Interest income, interest expense and net corporate expenses were not allocated to individual segments and include those amounts that relate to the operations of the financial subsidiaries. In many instances, various segments use common production facilities which require allocation among segments of property, plant and equipment, as well as capital additions and depreciation. Physical production is the principal method used for the allocation. Each segment is then considered the owner of its own assets as well as its allocated facilities. Corporate assets consist principally of cash, short-term investments and long-term marketable securities. 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. The Company's segments consist of four product lines 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). Animal health: animal health products, antibiotic and vitamin feed supplements and veterinary items. Consumer health care: over-the-counter health care items and oral care products. Food science: specialty food ingredients and innovative technology for the global food processing industry. Financial subsidiaries: a banking operation that makes loans and accepts deposits in international markets and an insurance operation that reinsures certain assets, inland transport and marine cargo of the Company's subsidiaries. 52
QUARTERLY CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) QUARTERS -------------------------------------- (MILLIONS OF DOLLARS EXCEPT PER SHARE DATA) FIRST SECOND THIRD FOURTH YEAR ------------------------------------------------------------------------------------------------------------------------ 1994 Net sales $1,982.9 $1,923.3 $2,074.9 $2,300.2 $8,281.3 Costs and expenses Cost of sales 432.2 464.1 476.0 546.3 1,918.6 Selling, informational and administrative expenses 730.5 800.0 796.6 923.7 3,250.8 Research and development expenses 254.7 262.0 295.4 327.3 1,139.4 Other deductions--net 35.5 27.4 24.1 24.0 111.0 ------------------------------------------------------------------------------------------------------------------------ Income before provision for taxes on income and minority interests 530.0 369.8 482.8 478.9 1,861.5 Provision for taxes on income 159.0 110.9 144.9 143.7 558.5 Minority interests .3 1.7 1.4 1.2 4.6 ------------------------------------------------------------------------------------------------------------------------ Net income $370.7 $257.2 $336.5 $334.0 $1,298.4 ------------------------------------------------------------------------------------------------------------------------ Earnings per common share $1.18 $.84 $1.09 $1.08 $4.19 ------------------------------------------------------------------------------------------------------------------------ Cash dividends paid per common share $.47 $.47 $.47 $.47 $1.88 ------------------------------------------------------------------------------------------------------------------------ Stock prices* High $69-7/8 $64-3/4 $70-1/2 $79-3/8 Low $53-1/8 $53-1/4 $59-1/8 $68 ------------------------------------------------------------------------------------------------------------------------ 1993 Net sales $1,867.3 $1,748.7 $1,872.5 $1,989.2 $7,477.7 Costs and expenses Cost of sales 423.4 437.1 436.4 475.1 1,772.0 Selling, informational and administrative expenses 740.7 757.9 745.3 822.1 3,066.0 Research and development expenses 215.4 230.8 242.6 285.6 974.4 Divestitures, restructuring and unusual items--net 28.8 (26.8) 750.0 -- 752.0 Other deductions--net 14.7 5.8 26.5 14.9 61.9 ------------------------------------------------------------------------------------------------------------------------ Income/(loss) before provision for taxes on income and minority interests 444.3 343.9 (328.3) 391.5 851.4 Provision for/(benefit from) taxes on income 115.5 89.6 (115.5) 101.7 191.3 Minority interests (.2) .5 1.4 .9 2.6 ------------------------------------------------------------------------------------------------------------------------ Net income/(loss) $329.0 $253.8 $(214.2) $288.9 $657.5 ------------------------------------------------------------------------------------------------------------------------ Earnings/(loss) per common share $1.01 $.79 $(.65) $.90 $2.05 ------------------------------------------------------------------------------------------------------------------------ Cash dividends paid per common share $.42 $.42 $.42 $.42 $1.68 ------------------------------------------------------------------------------------------------------------------------ Stock prices* High $72-3/4 $75-5/8 $66-1/4 $70-3/8 Low $52-1/2 $57-1/2 $55-5/8 $57-3/4 ------------------------------------------------------------------------------------------------------------------------ *AS REPORTED IN The Wall Street Journal.
As of January 31, 1995, there were approximately 59,749 holders of the Company's common stock (symbol PFE). 53
CORPORATE SHAREHOLDER INFORMATION INFORMATION BUSINESS SEGMENTS STOCK LISTINGS ANNUAL MEETING Pfizer Common Stock is listed on the New The Pfizer Annual Meeting will be held HEALTH CARE York Stock Exchange. It is also listed on Thursday, April 27, 1995, at 10:00 ANIMAL HEALTH on the London, Paris, and Brussels A.M. at The Empire State Ballroom, The CONSUMER HEALTH CARE exchanges and Swiss exchanges in Basel, Grand Hyatt, 42nd Street at Lexington FOOD SCIENCE Zurich, and Geneva. Pfizer Common Stock Avenue, New York City. Detailed is also traded on various United States information about the meeting is MAJOR BUSINESS GROUPS, regional stock exchanges. contained in the Notice of Annual THEIR PRINCIPAL DIVISIONS, AND Meeting and Proxy Statement sent with a SUBSIDIARIES REGISTRAR copy of the Annual Report to each Mellon Securities Trust Company shareholder of record as of February 21, U.S. PHARMACEUTICALS GROUP 120 Broadway 1995. New York, NY 10271 Customer Advocacy FORM 10-K Disease Management TRANSFER AGENT The Company, upon written request, will National Accounts Pfizer Inc provide without charge to each Sales Management Inquiries concerning transfer shareholder a copy of the Company's National Healthcare Operations requirements, stock holdings, dividend annual report on Securities and Exchange Pfizer Labs checks, and change of address should be Commission Form 10-K for the fiscal year Pratt Pharmaceuticals directed to: ended December 31, 1994, including the Roerig financial schedules thereto. The report Shareholder Services will be available on or about March 31, INTERNATIONAL PHARMACEUTICALS GROUP Pfizer Inc 1995. Requests should be directed to: Pfizer International subsidiaries 235 East 42nd Street New York, NY 10017-5755 Secretary HOSPITAL PRODUCTS GROUP Tel: (800) PFE 9393 Pfizer Inc Howmedica 235 East 42nd Street Medical Devices DUPLICATE MAILINGS New York, NY 10017-5755 American Medical Systems When several shareholders live at the Biomedical Sensors same address, they may receive more POLITICAL ACTION COMMITTEE Schneider copies of quarterly reports than they A report of campaign contributions made Strato/Infusaid need. The excess can be eliminated by by the Company's Political Action Valleylab writing to: Committee in 1994 is available to shareholders upon written request to: ANIMAL HEALTH GROUP Shareholder Services Pfizer Inc Secretary CONSUMER HEALTH CARE GROUP 235 East 42nd Street Pfizer Inc New York, NY 10017-5755 235 East 42nd Street FOOD SCIENCE GROUP New York, NY 10017-5755 Please be sure to include the numbers of PFIZER INTERNATIONAL BANK EUROPE those accounts whose duplicate mailing INVESTOR RELATIONS should be eliminated. This will not Security analysts and investment affect dividend or proxy mailings. professionals should direct their business-related inquiries to: SHAREHOLDER PROGRAMS A shareholder of record interested in James Gardner, Ph.D. the Shareholder Investment Program, the Vice President--Investor Relations Direct Deposit of Dividends Service, or Pfizer Inc inquiring about an established program 235 East 42nd Street account should direct inquiry to: New York, NY 10017-5755 Tel: (212) 573 3267 Shareholder Services Pfizer Inc CUSTOMER HELP LINE 235 East 42nd Street Consumers or health care professionals New York, NY 10017-5755 who have questions about any Pfizer Tel: (800) PFE 9393 medication should call: (800) 438 1985 SHAREHOLDER HELP LINE Shareholders with questions about their account should call: (800) PFE 9393 CORPORATE AFFAIRS HELP LINE People interested in receiving literature about Pfizer should call: (800) PFE 4717
58 EX-13.B 7 EXHIBIT 13(B) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 1994 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, 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, 5,342,855 shares, cost $121,680; Fund C, 4,718,276 shares, cost $132,224..................... $ 777,223 $412,736 $ -- $ -- $364,487 $ -- $ -- Intermediate Treasury Bond Fund, cost $120,852.................................. 114,791 -- 114,791 -- -- -- -- Other marketable securities, cost $40,603................................... 66,783 -- -- 66,783 -- -- -- Investment contracts with insurance companies, at contract value................ 37,892 -- 37,892 -- -- -- -- Cash and short-term securities, at fair value....................................... 4,584 78 250 107 71 4,078 -- Loans to participants........................ 24,528 -- -- -- -- -- 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 statements. 1 PFIZER SAVINGS AND INVESTMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1993 (THOUSANDS OF DOLLARS EXCEPT UNIT VALUES)
NON-PARTICIPANT DIRECTED --------------- PARTICIPANT DIRECTED COMPANY COMMON -------------------------------------------- TOTAL STOCK FUND FUND A FUND B FUND C LOAN FUND -------- --------------- ---------- --------- ---------- --------- Investments, at fair value: Pfizer Inc. common stock: Company Common Stock Fund, 5,279,097 shares, cost $107,260; Fund C, 4,675,949 shares, cost $120,604..... $690,009 $365,907 $ -- $ -- $324,102 $ -- Intermediate Treasury Bond Fund, cost $33,548.......... 33,502 -- 33,502 -- -- -- Other marketable securities, cost $31,562.............. 58,580 -- -- 58,580 -- -- Investment contracts with insurance companies, at contract value.......................................... 118,998 -- 118,998 -- -- -- Short-term securities, at fair value..................... 1,983 792 223 333 635 -- Loans to participants.................................... 14,867 -- -- -- -- 14,867 Interest receivable...................................... 433 2 428 1 2 -- Contributions receivable from employers, including amounts collected from employees........................ 7,335 2,383 2,413 958 1,581 -- -------- ----------- -------- ------- -------- -------- 925,707 369,084 155,564 59,872 326,320 14,867 Payables arising from securities purchased............... (853) (170) (289) (79) (315) -- -------- ----------- -------- ------- -------- -------- Net assets available for plan benefits -- Note 8......... $924,854 $368,914 $155,275 $59,793 $326,005 $14,867 -------- ----------- -------- ------- -------- -------- -------- ----------- -------- ------- -------- -------- Number of units outstanding at end of year............... 7,763,499 20,233,118 7,207,663 12,489,551 Unit Value -- Note 1..................................... $47.52 $7.67 $8.30 $26.10
See Notes to Financial Statements which are an integral part of these statements. 2 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 -- 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 -- 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: 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 statements. 3 PFIZER SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEAR ENDED DECEMBER 31, 1993 (THOUSANDS OF DOLLARS)
NON- PARTICIPANT DIRECTED ---------- COMPANY PARTICIPANT DIRECTED COMMON -------------------------------------- TOTAL STOCK FUND FUND A FUND B FUND C LOAN FUND -------- ---------- -------- ------- -------- --------- Net investment income Cash dividends: Pfizer Inc. common stock........................................ $ 16,712 $ 8,852 $ -- $ -- $ 7,860 $ -- Other marketable securities..................................... 1,508 -- -- 1,508 -- -- Interest............................................................ 12,946 50 12,622 17 47 210 -------- ---------- -------- ------- -------- --------- 31,166 8,902 12,622 1,525 7,907 210 Investment management fees -- Note 4................................ (41) -- (3) (38) -- -- -------- ---------- -------- ------- -------- --------- 31,125 8,902 12,619 1,487 7,907 210 -------- ---------- -------- ------- -------- --------- Realized gains on investments -- Note 5 Pfizer Inc. common stock.......................................... 39,136 22,278 -- -- 16,858 -- Other securities.................................................. 945 -- 13 932 -- -- -------- ---------- -------- ------- -------- --------- 40,081 22,278 13 932 16,858 -- -------- ---------- -------- ------- -------- --------- Unrealized appreciation (depreciation) of investments -- Note 6..... (72,738) (42,509) (33) 2,727 (32,923) -- -------- ---------- -------- ------- -------- --------- (1,532) (11,329) 12,599 5,146 (8,158) 210 -------- ---------- -------- ------- -------- --------- Contributions -- Note 7: Employees......................................................... 57,267 -- 14,226 8,099 34,942 -- Employers......................................................... 27,580 27,580 -- -- -- -- Withdrawals -- Note 8............................................... (122,873) (48,734) (24,752) (7,074) (42,313) -- Loan transaction transfers -- net................................... -- (2,811) (3,057) (1,136) (7,653) 14,657 Transfers at fair market value -- net............................... -- -- (2,493) 865 1,628 -- -------- ---------- -------- ------- -------- --------- (38,026) (23,965) (16,076) 754 (13,396) 14,657 -------- ---------- -------- ------- -------- --------- Net increase (decrease)............................................. (39,558) (35,294) (3,477) 5,900 (21,554) 14,867 Net assets available for plan benefits: Beginning of year................................................. 964,412 404,208 158,752 53,893 347,559 -- -------- ---------- -------- ------- -------- --------- End of year....................................................... $924,854 $ 368,914 $155,275 $59,793 $326,005 $14,867 -------- ---------- -------- ------- -------- --------- -------- ---------- -------- ------- -------- ---------
See Notes to Financial Statements which are an integral part of these statements. 4 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 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 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. 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 one or more 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 less than one year (fund became available to participants in October 1994). At December 31, 1994 and 1993, respectively, there were 14,670 and 14,197 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, 1994 and 1993, respectively, Fund A had 5,506 and 6,768 participating employees; Fund B, 4,242, and 4,261, Fund C, 9,299 and 11,274 and Fund D, 55 participating employees in 1994. 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. In 1994, the Company changed the Plan Administrator, resulting in unit values established at $10.00 per unit at the date of the change. On the current Plan Administrator's basis, the December 31, 1993 unit values would have been $9.66, $9.63, $9.94 and $9.94 for Funds A, B, C and the Company Common Stock Fund, respectively. 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. 5 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1994 AND 1993 NOTE 1 -- SUMMARY PLAN DESCRIPTION (CONTINUED) VESTING -- Members 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. WITHDRAWALS -- A participant in the Plan may make a full or partial withdrawal of funds subject to the provisions of the Plan. LOANS -- Effective 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. 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 INVESTMENT VALUATION -- The investment in the index fund of corporate common stocks represents the estimated fair value of the number of units of participation held by the Plan in that fund. Pfizer Inc. common stock is valued at the closing market price on the last business day of the year. The investment in the intermediate U.S. Treasury bond fund represents the estimated fair value of the bonds held by the Plan in that fund as of the last business day of the year. Investments in the Collective Short Term Investment Fund included in Cash and short-term securities are recorded at fair value and the investment contracts with insurance companies are recorded at contract value. Other short-term investments and time deposits are recorded at fair value. SECURITY TRANSACTIONS -- Purchases and sales of securities are reflected on a trade-date basis. Realized gains and losses on sales of securities are computed using an actual basis when the entire position in a security is sold, or an average basis when less than the entire position in a security is sold. UNREALIZED APPRECIATION (DEPRECIATION) -- Amounts shown as unrealized appreciation (depreciation) reflect changes between cost and fair value from the beginning of the year or date of purchase, whichever is later, to the end of the year. REVENUE RECOGNITION -- Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned. NOTE 3 -- INCOME TAXES No provision has been made for Federal income tax in reliance upon a determination letter issued by the Internal Revenue Service, which states that the Plan meets the requirements of Section 401(a) of the Internal Revenue Code and that the trust established thereunder is entitled to exemption under the provisions of Section 501(a). 6 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1994 AND 1993 NOTE 3 -- INCOME TAXES (CONTINUED) 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, Fund B and Fund D), all costs and expenses of administering the Plan were borne by the Company. NOTE 5 -- REALIZED GAINS (LOSSES) ON INVESTMENTS The $20,942,000 realized gains on Pfizer Inc. common stock for 1994 represents the difference between the $32,958,000 net proceeds and the $12,016,000 cost (on an average basis) of shares disposed of and includes $15,172,000 related to shares sold and shares distributed in kind to members who withdrew from the Plan on retirement or termination. The $39,136,000 realized gains on Pfizer Inc. common stock for 1993 represents the difference between the $57,634,000 net proceeds and $18,498,000 cost (on an average basis) of shares disposed of and includes $11,161,000 related to shares sold and shares distributed in kind to members who withdrew from the Plan on retirement or termination. In addition, the 1993 realized gains include $27,975,000 related to the transfer of Plan assets of the former employees of the Pfizer Inc. Specialty Minerals Group to the Minerals Technologies Inc. Savings and Investment Plan. The $343,000 realized losses on other securities for 1994 represents the difference between the aggregate actual proceeds of $19,928,000 and the $20,271,000 aggregate cost (actual or average) of securities sold. The $945,000 realized gains on other securities for 1993 represents the excess of the aggregate actual proceeds of $8,722,000 over the $7,777,000 aggregate cost (actual or average) of securities sold. NOTE 6 -- UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS The change in the amount of unrealized appreciation (depreciation) was as follows:
BALANCE ---------------------------------------------------------- DECEMBER 31, 1994 DECEMBER 31,1993 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 ----------------- ----------------- -------- ----------------- ----------------- --------
BALANCE ---------------------------------------------------------- DECEMBER 31, 1993 DECEMBER 31,1992 CHANGE DURING 1993 ----------------- ----------------- ------------------ (THOUSANDS OF DOLLARS) Company Common Stock Fund........ $258,647 $301,156 $(42,509) Fund A............. (46) (13) (33) Fund B............. 27,018 24,291 2,727 Fund C............. 203,498 236,421 (32,923) ----------------- ----------------- -------- $489,117 $561,855 $(72,738) ----------------- ----------------- -------- ----------------- ----------------- --------
7 PFIZER SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1994 AND 1993 NOTE 7 -- CONTRIBUTIONS The participating employees and their employers contributed the following amounts to the Plan:
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 ------------- ------------- ------- ------------- ------------- -------
1993 --------------------------------------- PARTICIPATING PARTICIPATING EMPLOYEES EMPLOYERS TOTAL ------------- ------------- ------- (THOUSANDS OF DOLLARS) Pfizer Inc. ........................... $43,967 $21,759 $65,726 Associate Companies.................... 13,300 5,821 19,121 ------------- ------------- ------- $57,267 $27,580 $84,847 ------------- ------------- ------- ------------- ------------- -------
NOTE 8 -- WITHDRAWALS In 1993, the proportionate interest in the assets of the Plan, amounting to $53,140,087 of former employees of Pfizer Inc. Specialty Minerals Group were transferred to the Minerals Technologies Inc. Savings and Investment Plan. Assets transferred consisted of cash, investment contracts with insurance companies and shares of Pfizer Inc. common stock. The net assets available for Plan benefits as of December 31, 1994 and 1993 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:
1994 1993 ------- ------- (THOUSANDS OF DOLLARS) Company Common Stock Fund..................................... $ 7,588 $ 7,796 Fund A........................................................ 3,253 3,783 Fund B........................................................ 1,250 1,027 Fund C........................................................ 5,856 7,363 Fund D........................................................ 461 -- ------- ------- $18,408 $19,969 ------- ------- ------- -------
NOTE 9 -- RECONCILIATION WITH FORM 5500 For financial statement purposes, participant withdrawals and distributions are recorded when paid rather than when processed and approved for payment. 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 as of December 31, 1994 and 1993 of $18,408,000 and $19,969,000, respectively, have been included in benefit expense within Form 5500 for those years. 8 SCHEDULE 1 PFIZER SAVINGS AND INVESTMENT PLAN ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1994 (THOUSANDS OF DOLLARS) INVESTMENTS: FUND A:
INTEREST MATURITY CONTRACT INVESTMENT CONTRACTS WITH INSURANCE COMPANIES RATE DATE VALUE ----------------------------------------------- --------- -------- -------- Continental Assurance Co. Group Annuity Contract #12682............................... 8.46% 6/3/96 $ 25,270 Provident National Assurance Co. Group Annuity Contract #027-65041........................... 8.43% 6/3/96 12,622 -------- Total Investment Contracts with Insurance Companies................................. $ 37,892 -------- --------
FAIR FIXED INCOME INVESTMENTS COST VALUE ------------------------------------------------- -------- -------- Northern Trust Intermediate Treasury Bond Fund... $120,852 $114,791 -------- -------- -------- -------- FUND B: NUMBER OF FAIR COMMON STOCK INDEX FUND UNITS COST VALUE ------------------------------------------------- --------- -------- -------- Northern Trust Collective Stock Index Fund....... 1,732,831 $ 40,603 $ 66,783 --------- -------- -------- --------- -------- --------
SHORT-TERM SECURITIES:
INTEREST MATURITY NUMBER FAIR NAME OF ISSUER RATE DATE OF UNITS COST VALUE --------------------------------- -------- -------- --------- ------ ------ Northern Trust Collective Short-Term Investment Fund: Company Common Stock Fund Various Various 77,669 $ 78 $ 78 FUND A Various Various 249,777 250 250 FUND B Various Various 106,765 107 107 FUND C Various Various 70,517 71 71 Northern Trust Government Short-Term Investment Fund: FUND D Various Various 4,078,227 4,078 4,078 ------ ------ Total Short-Term Securities.................. $4,584 $4,584 ------ ------ ------ ------
9 SCHEDULE 2 PFIZER SAVINGS AND INVESTMENT PLAN SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1994 (THOUSANDS OF DOLLARS) FUND C AND COMPANY COMMON STOCK FUND:
NUMBER OF NUMBER OF SECURITIES PURCHASED TRANSACTIONS SHARES COST ------------------------------------------- ------------ --------- -------- Pfizer Inc. common stock................... 33 609,641 $ 38,056 ------------ --------- -------- ------------ --------- --------
FAIR VALUE SECURITIES NUMBER OF NUMBER OF OF DISPOSED REALIZED DISPOSED* TRANSACTIONS SHARES COST SHARES GAINS ------------------- ------------ --------- ------- ----------- -------- Pfizer Inc. common stock............. 208 503,556 $12,016 $32,958 $ 20,942 ------------ --------- ------- ----------- -------- ------------ --------- ------- ----------- -------- ------------------------ * Dispositions represent sales of stock and shares distributed in kind to members who withdrew from the Plan on retirement or termination.
10 INDEPENDENT AUDITORS' REPORT To the Savings and Investment Plan Committee Pfizer Savings and Investment Plan: We have audited the accompanying statement of net assets available for plan benefits of the Pfizer Savings and Investment Plan (the Plan) as of December 31, 1994 and 1993, 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, 1994 and 1993, 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 or for the year ended December 31, 1994, 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 23, 1995 11 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 CHAIR, SAVINGS AND INVESTMENT PLAN COMMITTEE Date: March 23, 1995 12 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS To the Savings and Investment Plan Committee Pfizer Savings and Investment Plan: We consent to incorporation by reference in the Registration Statement on Form S-8 dated January 24, 1991 (File No. 33-38708) of our report dated March 23, 1995, relating to the statement of net assets available for plan benefits of the Pfizer Savings and Investment Plan as of December 31, 1994 and 1993, 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, 1994 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 23, 1995 13 EX-13.C 8 EXHIBIT 13(C) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 1994 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, 1994
NON- PARTICIPANT DIRECTED ------------- COMPANY 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, 38,207 shares, cost $2,059,026; Fund C, 33,927 shares, cost $2,056,665.................... $ 5,572,351 $ 2,951,523 $ -- $ -- $ 2,620,828 Other marketable securities, cost $1,659,293................................... 1,634,171 -- 1,369,619 264,552 -- Interest-bearing deposits..................... 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 7)......................................... $ 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 statements. 1 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1993
NON- PARTICIPANT DIRECTED ------------- COMPANY 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, 32,077 shares, cost $1,671,787; Fund C, 27,856 shares; cost $1,675,218.................. $ 4,135,377 $ 2,213,342 $ -- $ -- $ 1,922,035 Other marketable securities, cost $1,165,353................................. 1,232,359 -- 999,584 232,775 -- Interest-bearing deposits................... 88,639 46 88,331 240 22 ------------- ------------- ------------- ------------- ------------- Total investments....................... 5,456,375 2,213,388 1,087,915 233,015 1,922,057 Interest receivable........................... 15,808 104 15,609 -- 95 Contributions receivable: Employees................................... 217,493 -- 66,693 12,306 138,494 Employers................................... 119,914 119,914 -- -- -- ------------- ------------- ------------- ------------- ------------- Net assets available for plan benefits (note 7)......................................... $ 5,809,590 $ 2,333,406 $ 1,170,217 $ 245,321 $ 2,060,646 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Number of units outstanding at end of year.... 1,106,225 901,809 171,281 1,011,238 Unit value.................................... $2.11 $1.30 $1.43 $2.04
See Notes to Financial Statements which are an integral part of these 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, 1994
NON- PARTICIPANT DIRECTED ------------- COMPANY 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 investments.................. 1,356 -- -- 1,356 -- Unrealized appreciation (depreciation) of investments (note 5).......................... 576,161 350,942 (81,819) (10,308) 317,346 -------------- ------------- ------------- ----------- ------------- 793,567 419,622 (1,109) (3,581) 378,635 -------------- ------------- ------------- ----------- ------------- Contributions (note 6): Employees.................................... 2,068,551 -- 789,189 130,285 1,149,077 Employers.................................... 1,093,036 1,093,036 -- -- -- Withdrawals.................................... (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: 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 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, 1993
NON- PARTICIPANT DIRECTED ------------- COMPANY PARTICIPANT DIRECTED COMMON STOCK ----------------------------------------- TOTAL FUND FUND A FUND B FUND C -------------- ------------- ------------- ----------- ------------- Net investment income: Cash Dividends: Pfizer Inc. common stock................... $ 89,147 $ 48,343 $ -- $ -- $ 40,804 Other marketable securities................ 2,445 -- -- 2,445 -- Interest..................................... 61,514 1,057 59,032 183 1,242 -------------- ------------- ------------- ----------- ------------- 153,106 49,400 59,032 2,628 42,046 Investment management fees (note 4)............ (2,050) -- -- (2,050) -- -------------- ------------- ------------- ----------- ------------- 151,056 49,400 59,032 578 42,046 -------------- ------------- ------------- ----------- ------------- Realized gains (losses) on investments: Pfizer Inc. common stock..................... (1,379) (2,679) -- -- 1,300 Other marketable securities.................. 2,915 -- 438 2,477 -- -------------- ------------- ------------- ----------- ------------- 1,536 (2,679) 438 2,477 1,300 -------------- ------------- ------------- ----------- ------------- Unrealized appreciation (depreciation) of investments (note 5).......................... (70,182) (55,143) (1,579) 15,152 (28,612) -------------- ------------- ------------- ----------- ------------- 82,410 (8,422) 57,891 18,207 14,734 -------------- ------------- ------------- ----------- ------------- Contributions (note 6): Employees.................................... 1,783,139 -- 519,176 104,384 1,159,579 Employers.................................... 995,301 995,301 -- -- -- Withdrawals.................................... (1,658,733) (595,472) (375,412) (73,630) (614,219) Transfers between funds -- net................. -- (19,014) 94,025 (10,500) (64,511) -------------- ------------- ------------- ----------- ------------- 1,119,707 380,815 237,789 20,254 480,849 -------------- ------------- ------------- ----------- ------------- Net increase................................... 1,202,117 372,393 295,680 38,461 495,583 Net assets available for plan benefits: Beginning of year............................ 4,607,473 1,961,013 874,537 206,860 1,565,063 -------------- ------------- ------------- ----------- ------------- End of year.................................. $ 5,809,590 $ 2,333,406 $ 1,170,217 $ 245,321 $ 2,060,646 -------------- ------------- ------------- ----------- ------------- -------------- ------------- ------------- ----------- -------------
See Notes to Financial Statements which are an integral part of these statements. 4 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 (1) SUMMARY PLAN DESCRIPTION GENERAL -- The Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico (the "Plan") is a contributory defined contribution savings plan which was adopted on February 1, 1990. Participation in the Plan is open to employees of Pfizer Pharmaceuticals, Inc. (Puerto Rico Branch) and Pfizer Corporation (Puerto Rico Branch) (individually and collectively, the "Companies"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. 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. (parent of the Companies) At December 31, 1994 and 1993, there were 970 and 811 employees, respectively, participating in the Plan, some of whom had investments in more than one employee investment fund. All matching contributions are invested by the Trustee in a fourth fund designated the "Company Common Stock Fund," which consists solely of common stock of Pfizer Inc. 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 -- An employee is eligible to participate in the Plan if he or she is a regular employee of the Companies and enrolls to make contributions. Any employee who was employed on February 1, 1990, by the Companies, and is eligible for participation, may become a member effective on the employee's next payroll date. Any employee hired after February 1, 1990, and who is eligible to participate, may become a member as of the January 1 following his or her employment. 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 Company Common Stock Fund. 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. 5 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVESTMENT VALUATION -- The investment in the index fund of corporate common stocks represents the estimated fair value of the number of units of participation held by the Plan in that fund. Pfizer Inc. common stock and other marketable securities are valued at the market price on 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 securities are computed using an actual basis when the entire position in a security is sold, or an average basis when less than the entire position in a security is sold. UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS -- Amounts shown as unrealized appreciation (depreciation) reflect changes between the cost and fair value from the beginning of the year or the date of the purchase, whichever is later, to the end of the year. REVENUE RECOGNITION -- Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned. RECLASSIFICATIONS -- Certain amounts in the 1993 financial statements have been reclassified to conform to the 1994 presentation. (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. (4) ADMINISTRATIVE COSTS Except for certain investment management fees (Fund B), all costs and expenses of administering the Plan were borne by the Companies. 6 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 (5) UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS The change in the amount of unrealized appreciation (depreciation) was as follows:
BALANCE ----------------------------------------- DECEMBER 31, DECEMBER 31, CHANGE 1994 1993 DURING 1994 ------------- ------------ ------------ Company 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 ------------- ------------ ------------ ------------- ------------ ------------ BALANCE ----------------------------------------- DECEMBER 31, DECEMBER 31, CHANGE 1993 1992 DURING 1993 ------------- ------------ ------------ Company Common Stock Fund............................................. $ 541,555 $ 596,698 $ (55,143) Fund A................................................................ 22,601 24,180 (1,579) Fund B................................................................ 44,405 29,253 15,152 Fund C................................................................ 246,817 275,429 (28,612) ------------- ------------ ------------ $ 855,378 $ 925,560 $ (70,182) ------------- ------------ ------------ ------------- ------------ ------------
(6) CONTRIBUTIONS The participating employees and their employers contributed the following amounts to the Plan:
1994 ------------------------------------------- PARTICIPATING PARTICIPATING EMPLOYEES EMPLOYERS TOTAL ------------- ------------- ------------- 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 ------------- ------------- ------------- ------------- ------------- ------------- 1993 ------------------------------------------- PARTICIPATING PARTICIPATING EMPLOYEES EMPLOYERS TOTAL ------------- ------------- ------------- Pfizer Pharmaceuticals, Inc. (Puerto Rico Branch).................... $ 1,467,399 $ 820,065 $ 2,287,464 Pfizer Corporation (Puerto Rico Branch).............................. 315,740 175,236 490,976 ------------- ------------- ------------- $ 1,783,139 $ 995,301 $ 2,778,440 ------------- ------------- ------------- ------------- ------------- -------------
(7) RECONCILIATION WITH FORM 5500 For financial statement purposes, participant withdrawals and distributions are recorded when paid rather than when processed and approved for payment. 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 as of December 31, 1994 and 1993 of $208,824 and $225,066, respectively, have been included in benefit expense within Form 5500 for those years. 7 SCHEDULE 1 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1994 FUND A:
INTEREST RATE MATURITY COST FAIR VALUE ------------- -------- ---------- ------------ U.S. GOVERNMENT SECURITIES -------------------------------------------------- U.S. Treasury Notes............................... 6.875 % 10-31-96 $ 50,594 $ 49,328 U.S. Treasury Notes............................... 7.875 8-15-01 111,033 111,243 U.S. Treasury Notes............................... 8.500 8-15-95 49,844 50,453 ---------- ------------ 211,471 211,024 ---------- ------------ OTHER MARKETABLE SECURITIES -------------------------------------------------- Federal Home Loan Bank Medium Term Note........... 6.970 11-20-97 75,000 79,547 Federal National Mortgage Association............. 7.850 9-10-98 25,969 25,086 Federal National Mortgage Association............. 7.050 10-10-96 25,813 24,649 Federal National Mortgage Association............. 7.900 4-10-02 44,944 43,355 Federal National Mortgage Association............. 6.950 9-10-02 44,788 41,203 Federal National Mortgage Association............. 8.800 7-15-97 49,406 51,453 Federal National Mortgage Association............. 5.740 2-12-98 71,050 68,832 Federal Home Loan Mortgage Corporation Note....... 6.350 3-07-01 26,757 25,620 Federal Home Loan Bank Note....................... 9.150 3-25-97 43,168 42,984 Federal National Mortgage Association Note........ 5.800 12-10-03 8,938 8,625 Federal Farm Credit Bank Bond..................... 6.050 4-21-03 29,822 26,325 ---------- ------------ 445,655 437,679 ---------- ------------ CORPORATE DEBENTURES -------------------------------------------------- New Jersey Bell Telephone Bond.................... 5.875 2-01-04 39,048 34,007 Dean Witter, Discover & Co. Bond.................. 6.250 3-15-00 22,809 21,649 Dean Witter, Discover & Co. Bond.................. 6.875 3-01-03 25,499 24,152 General Telephone Company of Florida Note......... 8.000 3-01-01 39,684 38,956 Merril Lynch Corp. Bond........................... 6.375 3-30-99 31,920 29,424 Merril Lynch Corp. Bond........................... 6.250 6-01-08 22,906 21,316 Lehman Brothers Holdings, Inc. Note............... 8.375 4-01-97 100,409 98,271 World Bank Medium Term Note....................... 9.190 6-23-98 42,807 41,371 Tennessee Valley Authority Bond................... 6.125 7-15-03 76,641 65,484 Tennessee Valley Authority Bond................... zero coupon 7-15-03 87,554 79,790 Bell South Telephone Bond......................... 6.375 6-15-04 40,000 35,200 Georgia Power First Mortgage Bond................. 6.625 4-1-03 29,888 26,779 New Jersey Bell Telephone Bond.................... 7.250 6-1-02 9,882 9,447 Exxon Corporation Bond............................ 7.875 8-15-97 57,520 54,784 International Business Machines Bond.............. 7.250 11-1-02 29,738 28,050 Shell Oil Company Bond............................ 6.950 12-15-98 50,406 47,873 General Electric Credit Corp. Bond................ 7.460 9-30-96 40,000 39,770 General Electric Credit Corp. Bond................ 6.940 11-22-96 25,000 24,593 ---------- ------------ 771,711 720,916 ---------- ------------ Banco Popular de Puerto Rico time deposit open account.......................................... 5.71 % -- 107,407 107,407 ---------- ------------ Total of Fund A............................. $1,536,244 $ 1,477,026 ---------- ------------ ---------- ------------
8 SCHEDULE 1 (CONTINUED) PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1994
FUND B: NUMBER OF INTEREST COMMON STOCK INDEX FUND UNITS RATE COST FAIR VALUE -------------------------------------------------- ------------- -------- ---------- ------------ Northern Trust Collective Stock Index Fund........ 7,021 -- $ 230,456 $ 264,552 INTEREST-BEARING DEPOSITS -------------------------------------------------- Northern Trust Short-Term Investment Fund......... -- -- 484 484 Banco Popular de Puerto Rico time deposit open account.......................................... -- 5.71% 4,045 4,045 ---------- ------------ Total of Fund B............................. $ 234,985 $ 269,081 ---------- ------------ ---------- ------------ FUND C: PFIZER INC. COMMON STOCK -------------------------------------------------- Pfizer Inc. (33,927 shares)....................... -- -- $2,056,665 $ 2,620,828 ---------- ------------ ---------- ------------ COMPANY COMMON STOCK FUND: PFIZER INC. COMMON STOCK -------------------------------------------------- Pfizer Inc. (38,207 shares)....................... -- -- $2,059,026 $ 2,951,523 INTEREST-BEARING DEPOSIT -------------------------------------------------- Banco Popular de Puerto Rico time deposit open account.......................................... -- 5.71% 47,863 47,863 ---------- ------------ Total Company Common Stock Fund............. $2,106,889 $ 2,999,386 ---------- ------------ ---------- ------------
9 SCHEDULE 2 PFIZER SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES RESIDENT IN PUERTO RICO REPORTABLE TRANSACTIONS DECEMBER 31, 1994 FUNDS A, B, C AND COMPANY COMMON STOCK FUND:
NUMBER OF NUMBER OF INVESTMENTS PURCHASED TRANSACTIONS SHARES COST ------------------------------------------------------------------------- --------------- ---------- ------------- Pfizer Inc. common stock................................................. 20 12,201 $ 768,686 Interest-bearing deposits................................................ 171 -- 3,467,432
NUMBER OF REALIZED INVESTMENTS DISPOSED TRANSACTIONS COST FAIR VALUE GAIN ----------------------------------------------------------- --------------- ------------- ------------- --------- Interest-bearing deposits.................................. 191 $ 3,396,517 $ 3,396,517 --
10 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, 1994 and 1993, 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, 1994 and 1993, 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 or for the year ended December 31, 1994, 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 10, 1995 Stamp No. 1252929 of the Puerto Rico Society of Certified Public Accountants was affixed to the record copy of this report. 11 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/ NATALE RICCIARDI -------------------------------------- Natale Ricciardi VICE PRESIDENT, PFIZER PHARMACEUTICALS, INC. CHAIR, SAVINGS AND INVESTMENT PLAN COMMITTEE Date: March 23, 1995 12 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS To the Administrative Committee Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico: We consent to incorporation by reference in the Registration Statement on Form S-8 dated November 18, 1991 (File No. 33-44053) of our report dated February 10, 1995, 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, 1994 and 1993, 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, 1994 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 23, 1995 13 EX-21 9 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 NAME WHERE INCORPORATED IMMEDIATE PARENT -------------------------------------------------------------- -------------------- ------------------ a) Subsidiaries of Pfizer Inc.: Radiologic Sciences, Inc...................................... California 100 Shiley Incorporated........................................... California 100 Valleylab Inc................................................. Colorado 100 Dart Acquisition Corporation.................................. Delaware 100 Disease Management Sciences Inc............................... Delaware 100 Flavor Technology Corporation................................. Delaware 100 Health Care Ventures, Inc..................................... Delaware 100 Howmedica Inc................................................. Delaware 100 Pfizer Diagnostic Products International Ltd.................. Delaware 100 Pfizer Enterprises Inc........................................ Delaware 100 Pfizer H.C.P. Corporation..................................... New York 100 Pfizer Health Sciences, 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 176864 Canada Inc............................................. Canada 100 Orsim, S.A.................................................... France 100 Van Cadsand Beheer B.V........................................ Netherlands 100 Pfizer Trading Corp........................................... Taiwan 100 (b) Subsidiaries of Pfizer International Inc. (a subsidiary of Pfizer Inc.): Pfizer Overseas Inc........................................... Delaware 100 Pfizer Products Corporation................................... Delaware 100 Pfizer Corporation Austria G.m.b.H............................ Austria 100 Pfizer S.A.................................................... Belgium 100 Pfizer European Service Center N.V............................ Belgium 97.5 (1) ------------------------ (1) 2.5% owned by Pfizer Research and Development Company N.V./S.A.
December 31, 1994
PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT -------------------------------------------------------------- -------------------- ------------------ (b) Subsidiaries of Pfizer International Inc. (a subsidiary of Pfizer Inc.): -- (Continued) The Kodiak Company Ltd............................ Bermuda 100 Pfizer Holding Ltd................................ Canada 100 Roerig S.A........................................ Chile 100 Pfizer A/S........................................ Denmark 100 Pfizer Oy......................................... Finland 100 Pfizer Biogal L.L.C............................... Hungary 71.35 Pfizer Sales Company Limited...................... Ireland 100 Pfizer Chemical Corp. Ltd......................... Isle of Man 100 Compania Distribuidora Del Centro, S.A. de C.V.... Mexico 100 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 S.G.P.S. Limitada.......................... Portugal 100 Bioquimica Industrial Espanola, S.A. -- BINESA.... Spain 100 Pfizer S.A........................................ Spain 100 Pfizer A.G........................................ Switzerland 100 Pfizer Group Limited.............................. United Kingdom 100 (c) Subsidiaries of Pfizer Pharmaceuticals Production Corporation (a subsidiary of Pfizer International Inc.): Pfizer Research and Development Company Belgium 100 (1) N.V./S.A......................................... Kirchimie Ltee.................................... Canada 100 Pfizer C. & G. Inc................................ Canada 86.8 (2) Pfizer Pension Trustees (Ireland) Limited......... Ireland 100 Pfizer International Bank Europe.................. Ireland 82 (3) Pfizer Service Company Ireland.................... 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 ------------------------ (1) Includes 5% owned by Pfizer International Inc. (2) 13.2% owned by Kirchimie Ltee. (3) 18% owned by Pfizer Research and Development Company N.V./S.A.
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PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT --------------------------------------------------------------- ------------------ ---------------------- (d) Subsidiaries of Pfizer Corporation (a subsidiary of Pfizer Pharmaceuticals Production Corporation): Pfizer Limitada................................................ Angola 100 Pficonprod Pty. Limited........................................ Australia 100(1) 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 80(2) Pfizer Kabushiki Kaisha........................................ Japan 100 Pfizer Laboratories Limited (Kenya)............................ Kenya 100 Pfizer (Malaysia) Sendirian Berhad............................. Malaysia 100 Pfizer Limitada................................................ Mozambique 100 Pfizer (Namibia) (Proprietary) Limited......................... Namibia 100 Pfizer Laboratories Limited.................................... New Zealand 100 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 Corporation Farmaceutica S.A. -- COFASA........................ Peru 100 Pfizer Inc..................................................... Philippines 100 Pfizer Private Limited......................................... Singapore 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 Pfizer Limited................................................. Zambia 100 ------------------------ (1) Includes 24.7% of the voting securities owned by subsidiaries of Howmedica Inc., a subsidiary of Pfizer Inc. (2) Includes 11.77% of the voting securities owned by Heinrich Mack Nachf.
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PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT ------------------------------------------------- ------------------ --------------------------------- (e) Subsidiaries of Pfizer Research and Development Company N.V./S.A. (a subsidiary of Pfizer Pharmaceuticals Production Corporation): Pfizer S.A....................................... France 100 Pfizer Holding Und Verwaltungs G.m.b.H........... Germany 95 Pfizer Italiana S.p.A............................ Italy 100 Pfizer Pharmaceuticals Inc....................... Japan 100 Pfizer B.V....................................... Netherlands 100 Howmedica Iberica S.A............................ Spain 87.8 Rovi Farma S.A................................... Spain 50 Schneider (Europe) A.G........................... Switzerland 100 (f) Miscelleaneous Subsidiaries: Shiley International, Inc........................ California Shiley Incorporated 100% Schneider (USA) Pittsburgh, Inc.................. Delaware Schneider (USA) Inc. 100% Angiomedics Inc.................................. Minnesota Schneider (USA) Inc. 100% 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 Hospital Products (Belgium) N.V........... Belgium Pfizer Hospital Products (Netherlands) B.V. 100% Rogar/STB Inc.................................... Canada Pfizer Canada Inc. 100% Pfizer Canada Inc................................ Canada Pfizer Holding Ltd. 100% Pfizer s.r.o..................................... Czech Republic Pfizer Products Corporation 100% Laboratoire Beral, S.A........................... France Pfizer S.A. 100% C.A.L. Pfizer S.C.A. (1)......................... France Pfizer S.A. 100% Howmedica France S.C.A. (1)...................... France Pfizer S.A. 100% Benoist Girard & Cie S.C.A. (1).................. France Pfizer S.A. 100% Forster & Hug (KG) (1)........................... Germany Pfizer G.m.b.H. 100% Heinrich Mack Nachf. (1)......................... Germany Pfizer G.m.b.H. 100% Pfizer 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% Hilekes G.m.b.H.................................. Germany Howmedica G.m.b.H. 100% Pfizer LLC....................................... Hungary Pfizer Products Corporation 100% Dumex Limited.................................... India Pfizer Limited (India) 100% ------------------------ (1) Partnership.
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PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT -------------------------------------------- --------------------- ------------------------------------ (f) Miscellaneous Subsidiaries: (Continued) Duchem Laboratories Limited................. India Pfizer Limited (India) 100% SudFarma S.r.1.............................. Italy Roerig Farmaceutici Italiana S.r.1. 90%; Pfizer Italiana S.p.A. 10% Saninvest S.r.1............................. Italy Roerig Farmaceutici Italiana S.r.1. 100% Restiva Italiana S.p.A...................... Italy Saninvest S.r.1. 100% Schneider Japan K.K......................... Japan Pfizer Pharmaceuticals Inc. (Japan) 100% Pfizer Oral Care Inc........................ Japan Pfizer Pharmaceuticals Inc. (Japan) 100% Pfizer Shoji Co., Ltd....................... Japan Pfizer Pharmaceuticals Inc. (Japan) 100% Pfizer S.A.................................. Morocco Pfizer S.A. 56%; Laboratoire Beral, S.A. 44% Pfizer Hospital Products (Netherlands) B.V........................................ Netherlands Shiley International, Inc. 100% Roerig B.V.................................. Netherlands Pfizer B.V. 100% Cadsand Medica B.V.......................... Netherlands Van Cadsand Beheer B.V. 100% Pfizer Pharmaceuticals Ltd.................. People's Republic of Pfizer Enterprises Inc. 67.1% China Laboratorios Pfizer S.A..................... Portugal Pfizer S.G.P.S. Limitada 100% Pfizer Hospital Products A.B................ Sweden Shiley International, Inc. 100% AMS Medinvent S.A........................... Switzerland Nilo Holdings, S.A. 100% Nilo Holdings, S.A.......................... Switzerland Schneider (Europe) A.G. 100% T.C.P. Limited.............................. United Kingdom Unicliffe Limited 100% Coty Limited................................ United Kingdom Pfizer Limited 100% Pfizer Limited.............................. United Kingdom Pfizer Group Limited 100% Unicliffe Limited........................... United Kingdom Pfizer Limited 100%
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PERCENTAGE OF VOTING SECURITIES OWNED BY NAME WHERE INCORPORATED IMMEDIATE PARENT -------------------------------------------- --------------------- ------------------------------------ (f) Miscellaneous Subsidiaries: (Continued) Pfizer Pension Trustees Ltd................. United Kingdom Pfizer Limited 100% Charwell Pharmaceuticals Limited............ United Kingdom Unicliffe Limited 100% The Stoppers Limited........................ United Kingdom Charwell Pharmaceuticals Limited 100% Biomedical Sensors Ltd...................... United Kingdom Biomedical Sensors (Holdings) Ltd. 100% Biomedical Sensors (Holdings) Ltd........... United Kingdom Howmedica International Inc. 100% Measureaim Ltd.............................. United Kingdom Howmedica International Limited 100% Howmedica International Limited............. United Kingdom Pfizer Group Limited 100% Shiley Ltd.................................. United Kingdom Howmedica International Limited 100% Pfizer Hospital Products, Ltd............... United Kingdom Howmedica International Limited 100% Pfizer Hospital Products Pension Trustees, Ltd........................................ United Kingdom Pfizer Hospital Products, Ltd. (U.K.) 100% Pfizer Bioquimicos S.A...................... Venezuela Laboratorios Pfizer de Venezuela, S.A. 100% Pfizer S.A.................................. Venezuela Laboratorios Pfizer de Venezuela, S.A. 100% (g) Subsidiaries of Howmedica Inc. (a subsidiary of Pfizer Inc.): Orthopedic Sciences Inc..................... Delaware 100 Howmedica Investments Pty. Ltd.............. Australia 100 S.D. Investments Pty. Ltd................... Australia 100 Pfizer Hospital Products Ltd................ Canada 100 Howmedica G.m.b.H........................... Germany 100(1) Howmedica International Inc................. Panama 100 Jaquet Orthopedie S.A....................... Switzerland 100 ------------------------ (1) Includes 32.4% of the voting securities owned by Howmedica International, Inc. and 2.7% of the voting securities owned by Shiley International, Inc.
6 EX-23 10 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 23, 1995, we reported on the consolidated balance sheet of Pfizer Inc. and subsidiary companies as of December 31, 1994, 1993 and 1992 and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended, as contained in the 1994 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 1994. The audits referred to in our report dated February 23, 1995 included the related financial statement schedule as of December 31, 1994, 1993 and 1992 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 23, 1995 EX-27 11 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PFIZER INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET AND CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1994 DEC-31-1994 1,459 560 1,709 (44) 1,265 5,788 4,993 (1,920) 11,099 4,826 604 34 0 0 4,290 11,099 8,281 8,281 1,919 1,919 4,371 19 127 1,862 559 1,298 0 0 0 1,298 4.19 4.18