DELAWARE (State of Incorporation) | 13-5315170 (I.R.S. Employer Identification No.) |
YES X | NO ___ |
YES X | NO ___ |
YES ____ | NO X |
Page | |
Condensed Consolidated Statements of Income for the three months ended April 3, 2016 and March 29, 2015 | |
Condensed Consolidated Statements of Comprehensive Income for the three months ended April 3, 2016 and March 29, 2015 | |
Condensed Consolidated Balance Sheets as of April 3, 2016 and December 31, 2015 | |
Condensed Consolidated Statements of Cash Flows for the three months ended April 3, 2016 and March 29, 2015 | |
Three Months Ended | ||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | April 3, 2016 | March 29, 2015 | ||||||
Revenues | $ | 13,005 | $ | 10,864 | ||||
Costs and expenses: | ||||||||
Cost of sales(a) | 2,851 | 1,838 | ||||||
Selling, informational and administrative expenses(a) | 3,385 | 3,104 | ||||||
Research and development expenses(a) | 1,731 | 1,885 | ||||||
Amortization of intangible assets | 1,006 | 940 | ||||||
Restructuring charges and certain acquisition-related costs | 141 | 60 | ||||||
Other (income)/deductions––net | 330 | (46 | ) | |||||
Income from continuing operations before provision for taxes on income | 3,561 | 3,082 | ||||||
Provision for taxes on income | 535 | 706 | ||||||
Income from continuing operations | 3,026 | 2,376 | ||||||
Discontinued operations––net of tax | — | 5 | ||||||
Net income before allocation to noncontrolling interests | 3,026 | 2,381 | ||||||
Less: Net income attributable to noncontrolling interests | 9 | 6 | ||||||
Net income attributable to Pfizer Inc. | $ | 3,016 | $ | 2,376 | ||||
Earnings per common share––basic: | ||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.49 | $ | 0.38 | ||||
Discontinued operations––net of tax | — | — | ||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 0.49 | $ | 0.38 | ||||
Earnings per common share––diluted: | ||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.49 | $ | 0.38 | ||||
Discontinued operations––net of tax | — | — | ||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 0.49 | $ | 0.38 | ||||
Weighted-average shares––basic | 6,150 | 6,203 | ||||||
Weighted-average shares––diluted | 6,214 | 6,292 | ||||||
Cash dividends paid per common share | $ | 0.30 | $ | 0.28 | ||||
(a) | Excludes amortization of intangible assets, except as disclosed in Note 9A. Identifiable Intangible Assets and Goodwill:Identifiable Intangible Assets. |
Three Months Ended | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | March 29, 2015 | ||||||
Net income before allocation to noncontrolling interests | $ | 3,026 | $ | 2,381 | ||||
Foreign currency translation adjustments, net | 67 | (1,308 | ) | |||||
67 | (1,308 | ) | ||||||
Unrealized holding losses on derivative financial instruments, net | (273 | ) | (315 | ) | ||||
Reclassification adjustments for realized (gains)/losses(a) | (339 | ) | 234 | |||||
(612 | ) | (82 | ) | |||||
Unrealized holding gains/(losses) on available-for-sale securities, net | 129 | (328 | ) | |||||
Reclassification adjustments for realized losses(a) | 209 | 247 | ||||||
339 | (81 | ) | ||||||
Benefit plans: actuarial gains, net | — | 32 | ||||||
Reclassification adjustments related to amortization(b) | 139 | 136 | ||||||
Reclassification adjustments related to settlements, net(b) | 26 | 40 | ||||||
Other | 38 | 158 | ||||||
203 | 365 | |||||||
Benefit plans: prior service costs and other, net | — | (1 | ) | |||||
Reclassification adjustments related to amortization(b) | (41 | ) | (35 | ) | ||||
Reclassification adjustments related to curtailments, net(b) | (6 | ) | (10 | ) | ||||
Other | 5 | — | ||||||
(42 | ) | (46 | ) | |||||
Other comprehensive loss, before tax | (44 | ) | (1,152 | ) | ||||
Tax provision/(benefit) on other comprehensive loss(c) | (41 | ) | 105 | |||||
Other comprehensive loss before allocation to noncontrolling interests | $ | (4 | ) | $ | (1,257 | ) | ||
Comprehensive income before allocation to noncontrolling interests | $ | 3,022 | $ | 1,124 | ||||
Less: Comprehensive income/(loss) attributable to noncontrolling interests | 4 | (10 | ) | |||||
Comprehensive income attributable to Pfizer Inc. | $ | 3,019 | $ | 1,134 | ||||
(a) | Reclassified into Other (income)/deductions—net in the condensed consolidated statements of income. |
(b) | Generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, in the condensed consolidated statements of income. For additional information, see Note 10. Pension and Postretirement Benefit Plans. |
(c) | See Note 5C. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Loss. |
(MILLIONS OF DOLLARS) | April 3, 2016 | December 31, 2015 | ||||||
(Unaudited) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 2,561 | $ | 3,641 | ||||
Short-term investments | 16,882 | 19,649 | ||||||
Trade accounts receivable, less allowance for doubtful accounts: 2016—$649; 2015—$384 | 9,033 | 8,176 | ||||||
Inventories | 7,578 | 7,513 | ||||||
Current tax assets | 2,888 | 2,662 | ||||||
Other current assets | 2,355 | 2,163 | ||||||
Total current assets | 41,298 | 43,804 | ||||||
Long-term investments | 14,146 | 15,999 | ||||||
Property, plant and equipment, less accumulated depreciation: 2016—$14,002; 2015—$13,502 | 13,584 | 13,766 | ||||||
Identifiable intangible assets, less accumulated amortization | 39,602 | 40,356 | ||||||
Goodwill | 48,558 | 48,242 | ||||||
Noncurrent deferred tax assets and other noncurrent tax assets | 1,738 | 1,794 | ||||||
Other noncurrent assets | 4,003 | 3,420 | ||||||
Total assets | $ | 162,929 | $ | 167,381 | ||||
Liabilities and Equity | ||||||||
Short-term borrowings, including current portion of long-term debt | $ | 11,546 | $ | 10,159 | ||||
Trade accounts payable | 3,125 | 3,620 | ||||||
Dividends payable | — | 1,852 | ||||||
Income taxes payable | 920 | 418 | ||||||
Accrued compensation and related items | 1,725 | 2,359 | ||||||
Other current liabilities | 11,419 | 10,990 | ||||||
Total current liabilities | 28,735 | 29,399 | ||||||
Long-term debt | 27,824 | 28,740 | ||||||
Pension benefit obligations, net | 5,264 | 6,310 | ||||||
Postretirement benefit obligations, net | 1,980 | 1,809 | ||||||
Noncurrent deferred tax liabilities | 26,547 | 26,877 | ||||||
Other taxes payable | 4,053 | 3,992 | ||||||
Other noncurrent liabilities | 5,180 | 5,257 | ||||||
Total liabilities | 99,582 | 102,384 | ||||||
Commitments and Contingencies | ||||||||
Preferred stock | 26 | 26 | ||||||
Common stock | 460 | 459 | ||||||
Additional paid-in capital | 81,443 | 81,016 | ||||||
Treasury stock | (84,313 | ) | (79,252 | ) | ||||
Retained earnings | 74,971 | 71,993 | ||||||
Accumulated other comprehensive loss | (9,520 | ) | (9,522 | ) | ||||
Total Pfizer Inc. shareholders’ equity | 63,068 | 64,720 | ||||||
Equity attributable to noncontrolling interests | 279 | 278 | ||||||
Total equity | 63,347 | 64,998 | ||||||
Total liabilities and equity | $ | 162,929 | $ | 167,381 | ||||
Three Months Ended | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | March 29, 2015 | ||||||
Operating Activities | ||||||||
Net income before allocation to noncontrolling interests | $ | 3,026 | $ | 2,381 | ||||
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,425 | 1,260 | ||||||
Asset write-offs and impairments | 146 | 11 | ||||||
Deferred taxes from continuing operations | (204 | ) | (41 | ) | ||||
Share-based compensation expense | 143 | 162 | ||||||
Benefit plan contributions in excess of expense | (853 | ) | (874 | ) | ||||
Other adjustments, net | 229 | (336 | ) | |||||
Other changes in assets and liabilities, net of acquisitions and divestitures | (2,261 | ) | (1,883 | ) | ||||
Net cash provided by operating activities | 1,651 | 680 | ||||||
Investing Activities | ||||||||
Purchases of property, plant and equipment | (301 | ) | (239 | ) | ||||
Purchases of short-term investments | (3,489 | ) | (7,546 | ) | ||||
Proceeds from redemptions/sales of short-term investments | 7,922 | 10,702 | ||||||
Net proceeds from redemptions/sales of short-term investments with original maturities of three months or less | 493 | 5,243 | ||||||
Purchases of long-term investments | (1,308 | ) | (3,150 | ) | ||||
Proceeds from redemptions/sales of long-term investments | 1,142 | 1,937 | ||||||
Acquisitions of businesses, net of cash acquired | (110 | ) | (678 | ) | ||||
Acquisitions of intangible assets | — | (7 | ) | |||||
Other investing activities, net | 6 | 330 | ||||||
Net cash provided by investing activities | 4,355 | 6,592 | ||||||
Financing Activities | ||||||||
Proceeds from short-term borrowings | 682 | 1,999 | ||||||
Principal payments on short-term borrowings | (1,350 | ) | — | |||||
Net proceeds from short-term borrowings with original maturities of three months or less | 1,724 | 863 | ||||||
Principal payments on long-term debt | (1,536 | ) | (2,998 | ) | ||||
Purchases of common stock | (5,000 | ) | (6,000 | ) | ||||
Cash dividends paid | (1,854 | ) | (1,758 | ) | ||||
Proceeds from exercise of stock options | 296 | 794 | ||||||
Other financing activities, net | 25 | 122 | ||||||
Net cash used in financing activities | (7,014 | ) | (6,978 | ) | ||||
Effect of exchange-rate changes on cash and cash equivalents | (73 | ) | (74 | ) | ||||
Net increase/(decrease) in cash and cash equivalents | (1,080 | ) | 220 | |||||
Cash and cash equivalents, beginning | 3,641 | 3,343 | ||||||
Cash and cash equivalents, end | $ | 2,561 | $ | 3,563 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | 518 | $ | 372 | ||||
Interest | 382 | 332 | ||||||
• | Quoted prices for identical assets or liabilities in active markets (Level 1 inputs). |
• | Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs). |
• | Unobservable inputs that reflect estimates and assumptions (Level 3 inputs). |
(MILLIONS OF DOLLARS) | Amounts Recognized as of Acquisition Date (as previously reported as of December 31, 2015) | Measurement Period Adjustments | Amounts Recognized as of Acquisition Date (as adjusted) | |||||||||
Working capital, excluding inventories | $ | 274 | $ | (6 | ) | $ | 268 | |||||
Inventories | 1,924 | (16 | ) | 1,908 | ||||||||
Property, plant and equipment(a) | 2,410 | (53 | ) | 2,357 | ||||||||
Identifiable intangible assets, excluding in-process research and development(a) | 8,270 | 65 | 8,335 | |||||||||
In-process research and development | 995 | 5 | 1,000 | |||||||||
Other noncurrent assets | 408 | (46 | ) | 362 | ||||||||
Long-term debt | (1,928 | ) | — | (1,928 | ) | |||||||
Benefit obligations | (117 | ) | — | (117 | ) | |||||||
Net income tax accounts | (3,394 | ) | 25 | (3,369 | ) | |||||||
Other noncurrent liabilities | (39 | ) | — | (39 | ) | |||||||
Total identifiable net assets | 8,803 | (25 | ) | 8,778 | ||||||||
Goodwill | 7,284 | 25 | 7,309 | |||||||||
Net assets acquired/total consideration transferred | $ | 16,087 | $ | — | $ | 16,087 | ||||||
(a) | The measurement period adjustments for Identifiable intangible assets reflect changes in the estimated fair value of acquired finite-lived developed technology rights. The measurement period adjustments for Property, plant and equipment primarily reflect changes in the estimated fair value of acquired buildings and machinery and equipment. The changes in the estimated fair values for identifiable intangible assets and property, plant and equipment are primarily to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date. The measurement period adjustments did not result from intervening events subsequent to the acquisition date. |
• | Amounts for certain balances included in working capital (excluding inventories), certain investments and certain legal contingencies, pending receipt of certain information that could affect provisional amounts recorded. We do not believe any adjustments for legal contingencies will have a material impact on our consolidated financial statements. |
• | Amounts for intangibles, inventory and property, plant and equipment, pending finalization of valuation efforts for acquired intangible assets as well as the completion of certain physical inventory counts and the confirmation of the physical existence and condition of certain property, plant and equipment assets. |
• | Amounts for income tax assets, receivables and liabilities, pending the filing of Hospira pre-acquisition tax returns and the receipt of information including but not limited to that from taxing authorities, which may change certain estimates and assumptions used. |
The following table provides supplemental pro forma information as if the acquisition of Hospira had occurred on January 1, 2014: | ||||
Unaudited Supplemental Pro Forma Consolidated Results | ||||
Three Months Ended | ||||
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) | March 29, 2015 | |||
Revenues | $ | 12,039 | ||
Net income attributable to Pfizer Inc. common shareholders | 2,375 | |||
Diluted earnings per share attributable to Pfizer Inc. common shareholders | 0.38 | |||
• | Elimination of Hospira’s historical intangible asset amortization expense (approximately $12 million in the first quarter of 2015). |
• | Additional amortization expense (approximately $127 million in the first quarter of 2015) related to the preliminary estimate of the fair value of identifiable intangible assets acquired. |
• | Additional depreciation expense (approximately $22 million in the first quarter of 2015) related to the preliminary estimate of the fair value adjustment to property, plant and equipment (PP&E) acquired. |
• | Adjustment related to the preliminary estimate of the non-recurring fair value adjustment to acquisition-date inventory estimated to have been sold (the addition of $5 million of charges in the first quarter of 2015). |
• | Adjustment to decrease interest expense (approximately $10 million in the first quarter of 2015) related to the fair value adjustment of Hospira debt. |
• | Adjustment for non-recurring acquisition-related costs directly attributable to the acquisition (the elimination of $14 million of charges in the first quarter of 2015), reflecting non-recurring charges incurred by Hospira, which would have been recorded in 2014 under the pro forma assumption that the Hospira acquisition was completed on January 1, 2014. Pfizer did not incur any such charges in the first quarter of 2015. |
• | In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and |
• | In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems. |
• | Manufacturing plant network rationalization and optimization, where execution timelines are necessarily long. Our plant network strategy is expected to result in the exit of four sites over the next several years. In connection with these activities, during 2014-2016, we expect to incur costs of approximately $400 million associated with prior acquisition activity and costs of approximately $1.0 billion associated with new non-acquisition-related cost-reduction initiatives. Through April 3, 2016, we incurred approximately $357 million and $570 million, respectively, associated with these initiatives. |
• | The 2014 global commercial structure reorganization, which primarily includes the streamlining of certain functions, the realignment of regional locations and colleagues to support the businesses, as well as implementing the necessary system changes to support different reporting requirements. In connection with this reorganization, during 2014-2016, we expect to incur costs of approximately $225 million. Through April 3, 2016, we incurred approximately $219 million associated with this reorganization. |
• | Other new cost-reduction/productivity initiatives, primarily related to commercial property rationalization and consolidation. In connection with these cost-reduction activities, during 2014-2016, we expect to incur costs of approximately $850 million. Through April 3, 2016, we incurred approximately $532 million associated with these initiatives. |
The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives: | ||||||||
Three Months Ended | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | March 29, 2015 | ||||||
Restructuring charges(a): | ||||||||
Employee terminations | $ | 24 | $ | 31 | ||||
Asset impairments | 1 | 6 | ||||||
Exit costs | 4 | 6 | ||||||
Total restructuring charges | 30 | 42 | ||||||
Transaction costs(b) | 24 | 5 | ||||||
Integration costs(c) | 87 | 13 | ||||||
Restructuring charges and certain acquisition-related costs | 141 | 60 | ||||||
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d): | ||||||||
Cost of sales | 45 | 17 | ||||||
Research and development expenses | 4 | 1 | ||||||
Total additional depreciation––asset restructuring | 49 | 18 | ||||||
Implementation costs recorded in our condensed consolidated statements of income as follows(e): | ||||||||
Cost of sales | 43 | 13 | ||||||
Selling, informational and administrative expenses | 12 | 26 | ||||||
Research and development expenses | 6 | 8 | ||||||
Total implementation costs | 62 | 48 | ||||||
Total costs associated with acquisitions and cost-reduction/productivity initiatives | $ | 252 | $ | 127 | ||||
(a) | In the three months ended April 3, 2016, Employee terminations represent the expected reduction of the workforce by approximately 100 employees, mainly in manufacturing. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination. |
• | the Global Innovative Pharmaceutical segment (GIP) ($8 million); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC) ($1 million); the Global Established Pharmaceutical segment (GEP) ($3 million); Worldwide Research and Development and Medical (WRD/M) ($3 million); manufacturing operations ($14 million); and Corporate ($1 million). |
• | GIP ($12 million); VOC ($13 million); GEP ($10 million); WRD/M ($12 million); manufacturing operations ($22 million income); and Corporate ($18 million). |
(b) | Transaction costs represent external costs for banking, legal, accounting and other similar services, most of which are directly related to the terminated transaction with Allergan. |
(c) | Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes, primarily related to the acquisition of Hospira. |
(d) | Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions. |
(e) | Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives. |
The following table provides the components of and changes in our restructuring accruals: | ||||||||||||||||
(MILLIONS OF DOLLARS) | Employee Termination Costs | Asset Impairment Charges | Exit Costs | Accrual | ||||||||||||
Balance, December 31, 2015(a) | $ | 1,109 | $ | — | $ | 48 | $ | 1,157 | ||||||||
Provision | 24 | 1 | 4 | 30 | ||||||||||||
Utilization and other(b) | (165 | ) | (1 | ) | (9 | ) | (175 | ) | ||||||||
Balance, April 3, 2016(c) | $ | 968 | $ | — | $ | 43 | $ | 1,011 | ||||||||
(a) | Included in Other current liabilities ($776 million) and Other noncurrent liabilities ($381 million). |
(b) | Includes adjustments for foreign currency translation. |
(c) | Included in Other current liabilities ($638 million) and Other noncurrent liabilities ($373 million). |
The following table provides components of Other (income)/deductions––net: | ||||||||
Three Months Ended | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | March 29, 2015 | ||||||
Interest income(a) | $ | (113 | ) | $ | (93 | ) | ||
Interest expense | 306 | 309 | ||||||
Net interest expense | 193 | 216 | ||||||
Royalty-related income | (187 | ) | (222 | ) | ||||
Certain legal matters, net(b) | 274 | — | ||||||
Net gains on asset disposals(c) | (9 | ) | (175 | ) | ||||
Certain asset impairments(d) | 131 | — | ||||||
Business and legal entity alignment costs(e) | 51 | 101 | ||||||
Other, net(f) | (122 | ) | 34 | |||||
Other (income)/deductions––net | $ | 330 | $ | (46 | ) | |||
(a) | Interest income increased in the first quarter of 2016, primarily due to higher investment returns. |
(b) | In the first quarter of 2016, primarily includes an accrual for an unresolved legal matter and a settlement related to a patent matter. |
(c) | In the first quarter of 2016, primarily includes gains on sales/out-licensing of product and compound rights (approximately $16 million). In the first quarter of 2015, primarily includes gains on sales/out-licensing of product and compound rights (approximately $45 million) and gains on sales of investments in equity securities (approximately $120 million). |
(d) | In the first quarter of 2016, represents an impairment loss of $81 million related to Pfizer’s 49%-owned equity-method investment with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China, Hisun Pfizer, and an impairment loss of $50 million related to Pfizer's 40%-owned equity-method investment in Teuto. For additional information concerning Hisun Pfizer and Teuto, see Note 2C. |
(e) | In the first quarter of 2016 and 2015, represents expenses for changes to our infrastructure to align our commercial operations, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business. |
(f) | In the first quarter of 2016, primarily includes, among other things, income of $116 million from resolution of a contract disagreement. |
• | benefits related to the final resolution (pending court approval) of an agreement in principle reached in February 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax position; |
• | benefits associated with our Venezuela operations; |
• | an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years with various foreign tax authorities, and the expiration of certain statutes of limitations; as well as |
• | an increase in benefits associated with the U.S. R&D tax credit, which was not in effect in the prior year quarter but was permanently extended on December 18, 2015, |
• | an unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business. |
• | With respect to Pfizer Inc., the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014-2016 are open, but not under audit. All other tax years are closed. |
• | With respect to Hospira, Inc., the IRS is auditing 2010-2011 and 2012-2013. Tax years 2014-2015 (through date of acquisition) are open but not under audit. All other tax years are closed. The open tax years and audits for Hospira, Inc. and its subsidiaries are not considered material to Pfizer. |
The following table provides the components of Tax provision/(benefit) on other comprehensive loss: | ||||||||
Three Months Ended | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | March 29, 2015 | ||||||
Foreign currency translation adjustments, net(a) | $ | (14 | ) | $ | 85 | |||
Unrealized holding losses on derivative financial instruments, net | (36 | ) | (224 | ) | ||||
Reclassification adjustments for realized (gains)/losses | (72 | ) | 183 | |||||
(108 | ) | (41 | ) | |||||
Unrealized holding gains/(losses) on available-for-sale securities, net | 17 | (31 | ) | |||||
Reclassification adjustments for realized losses | 26 | (1 | ) | |||||
43 | (32 | ) | ||||||
Benefit plans: actuarial gains, net | — | 12 | ||||||
Reclassification adjustments related to amortization | 47 | 46 | ||||||
Reclassification adjustments related to settlements, net | 9 | 15 | ||||||
Other | (1 | ) | 37 | |||||
55 | 109 | |||||||
Benefit plans: prior service costs and other, net | — | — | ||||||
Reclassification adjustments related to amortization | (15 | ) | (13 | ) | ||||
Reclassification adjustments related to curtailments, net | (2 | ) | (4 | ) | ||||
Other | 1 | — | ||||||
(16 | ) | (17 | ) | |||||
Tax provision/(benefit) on other comprehensive loss | $ | (41 | ) | $ | 105 | |||
(a) | Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely. |
The following table provides the changes, net of tax, in Accumulated other comprehensive loss: | ||||||||||||||||||||||||
Net Unrealized Gains/(Losses) | Benefit Plans | |||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Foreign Currency Translation Adjustments | Derivative Financial Instruments | Available-For-Sale Securities | Actuarial Gains/(Losses) | Prior Service (Costs)/Credits and Other | Accumulated Other Comprehensive Loss | ||||||||||||||||||
Balance, December 31, 2015 | $ | (5,863 | ) | $ | 421 | $ | (227 | ) | $ | (4,733 | ) | $ | 880 | $ | (9,522 | ) | ||||||||
Other comprehensive income/(loss)(a) | 87 | (504 | ) | 296 | 148 | (25 | ) | 2 | ||||||||||||||||
Balance, April 3, 2016 | $ | (5,776 | ) | $ | (83 | ) | $ | 69 | $ | (4,585 | ) | $ | 855 | $ | (9,520 | ) | ||||||||
(a) | Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $6 million loss for the first three months of 2016. |
The following table provides additional information about certain of our financial assets and liabilities: | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | December 31, 2015 | ||||||
Selected financial assets measured at fair value on a recurring basis(a) | ||||||||
Trading funds(b) | $ | 260 | $ | 287 | ||||
Available-for-sale debt securities(c) | 27,819 | 32,078 | ||||||
Money market funds | 947 | 934 | ||||||
Available-for-sale equity securities(c) | 497 | 603 | ||||||
Derivative financial instruments in a receivable position(d): | ||||||||
Interest rate swaps | 1,433 | 837 | ||||||
Foreign currency swaps | 103 | 135 | ||||||
Foreign currency forward-exchange contracts | 333 | 559 | ||||||
31,391 | 35,433 | |||||||
Other selected financial assets | ||||||||
Held-to-maturity debt securities, carried at amortized cost(c), (e) | 1,065 | 1,388 | ||||||
Private equity securities, carried at equity-method or at cost(e), (f) | 1,250 | 1,336 | ||||||
2,315 | 2,724 | |||||||
Total selected financial assets | $ | 33,705 | $ | 38,157 | ||||
Selected financial liabilities measured at fair value on a recurring basis(a) | ||||||||
Derivative financial instruments in a liability position(g): | ||||||||
Interest rate swaps | $ | 9 | $ | 139 | ||||
Foreign currency swaps | 1,311 | 1,489 | ||||||
Foreign currency forward-exchange contracts | 432 | 81 | ||||||
1,752 | 1,709 | |||||||
Other selected financial liabilities(h) | ||||||||
Short-term borrowings, carried at historical proceeds, as adjusted(e), (i) | 11,546 | 10,159 | ||||||
Long-term debt, carried at historical proceeds, as adjusted(i), (j) | 27,824 | 28,740 | ||||||
39,370 | 38,899 | |||||||
Total selected financial liabilities | $ | 41,122 | $ | 40,608 | ||||
(a) | We use a market approach in valuing financial instruments on a recurring basis. For additional information, see Note 1C. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than 1% that use Level 1 inputs and money market funds measured at net asset value. |
(b) | As of April 3, 2016, trading funds are composed of $204 million of trading equity funds and $56 million of trading debt funds. As of December 31, 2015, trading funds are composed of $185 million of trading equity funds and $102 million of trading debt funds. As of April 3, 2016 and December 31, 2015, trading equity funds of $65 million and $85 million, respectively, are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan. |
(c) | Gross unrealized gains and losses are not significant. |
(d) | Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $144 million as of April 3, 2016; and foreign currency forward-exchange contracts with fair values of $136 million as of December 31, 2015. |
(e) | Short-term borrowings include foreign currency short-term borrowings with fair values of $547 million as of December 31, 2015, which are used as hedging instruments. The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities at cost and short-term borrowings not measured at fair value on a recurring basis were not significant as of April 3, 2016 or December 31, 2015. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities carried at cost are based on Level 3 inputs. |
(f) | Our private equity securities represent investments in the life sciences sector. |
(g) | Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency swaps with fair values of $188 million and foreign currency forward-exchange contracts with fair values of $117 million as of April 3, 2016; and foreign currency swaps with fair values of $234 million and foreign currency forward-exchange contracts with fair values of $59 million as of December 31, 2015. |
(h) | Some carrying amounts may include adjustments for discount or premium amortization or for the effect of hedging the interest rate fair value risk associated with certain financial liabilities by interest rate swaps. |
(i) | We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. The update does not impact the measurement or recognition of debt issuance costs. As of April 3, 2016, debt issuance costs are $76 million and are presented as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-term debt ($75 million). In the December 31, 2015 condensed consolidated balance sheet, we have reclassified debt issuance costs of $79 million ($1 million from Other current assets and $79 |
(j) | The fair value of our long-term debt (not including the current portion of long-term debt) was $31.8 billion as of April 3, 2016 and $32.7 billion as of December 31, 2015. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. Generally, the difference between the fair value of our long-term debt and the amount reported on the condensed consolidated balance sheet is due to a decline in relative market interest rates since the debt issuance. |
The following table provides the classification of these selected financial assets and liabilities in our condensed consolidated balance sheets: | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | December 31, 2015 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 809 | $ | 978 | ||||
Short-term investments | 16,882 | 19,649 | ||||||
Long-term investments | 14,146 | 15,999 | ||||||
Other current assets(a) | 390 | 587 | ||||||
Other noncurrent assets(b) | 1,478 | 944 | ||||||
$ | 33,705 | $ | 38,157 | |||||
Liabilities | ||||||||
Short-term borrowings, including current portion of long-term debt(c) | $ | 11,546 | $ | 10,159 | ||||
Other current liabilities(d) | 862 | 645 | ||||||
Long-term debt(c) | 27,824 | 28,740 | ||||||
Other noncurrent liabilities(e) | 890 | 1,064 | ||||||
$ | 41,122 | $ | 40,608 | |||||
(a) | As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($5 million), foreign currency swaps ($62 million) and foreign currency forward-exchange contracts ($323 million) and, as of December 31, 2015, include interest rate swaps ($2 million), foreign currency swaps ($46 million) and foreign currency forward-exchange contracts ($538 million). |
(b) | As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($1,428 million), foreign currency swaps ($41 million) and foreign currency forward-exchange contracts ($9 million) and, as of December 31, 2015, include interest rate swaps ($835 million), foreign currency swaps ($89 million) and foreign currency forward-exchange contracts ($20 million). |
(c) | We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. The update does not impact the measurement or recognition of debt issuance costs. As of April 3, 2016, debt issuance costs are $76 million and are presented as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-term debt ($75 million). In the December 31, 2015 condensed consolidated balance sheet, we have reclassified debt issuance costs of $79 million ($1 million from Other current assets and $79 million from Other noncurrent assets) and have presented them as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-term debt ($79 million) to conform to the current period presentation. |
(d) | As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($5 million), foreign currency swaps ($454 million) and foreign currency forward-exchange contracts ($403 million) and, as of December 31, 2015, include interest rate swaps ($5 million), foreign currency swaps ($560 million) and foreign currency forward-exchange contracts ($80 million). |
(e) | As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($4 million), foreign currency swaps ($857 million) and foreign currency forward-exchange contracts ($29 million) and, as of December 31, 2015, include interest rate swaps ($134 million), foreign currency swaps ($928 million) and foreign currency forward-exchange contracts ($1 million). |
The following table provides the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities: | ||||||||||||||||||||
Years | April 3, 2016 | |||||||||||||||||||
(MILLIONS OF DOLLARS) | Within 1 | Over 1 to 5 | Over 5 to 10 | Over 10 | Total | |||||||||||||||
Available-for-sale debt securities | ||||||||||||||||||||
Western European, Asian, Scandinavian and other government debt(a) | $ | 7,056 | $ | 1,033 | $ | 8 | $ | — | $ | 8,097 | ||||||||||
Corporate debt(b) | 3,223 | 4,786 | 1,656 | 15 | 9,680 | |||||||||||||||
U.S. government debt | 1,812 | 848 | 207 | — | 2,867 | |||||||||||||||
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities | 34 | 2,110 | 71 | 11 | 2,227 | |||||||||||||||
Western European, Scandinavian and other government agency debt(a) | 1,587 | 210 | — | — | 1,797 | |||||||||||||||
Supranational debt(a) | 911 | 323 | — | — | 1,234 | |||||||||||||||
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities | 599 | 112 | 18 | — | 729 | |||||||||||||||
Other asset-backed debt(c) | 461 | 682 | 40 | 4 | 1,188 | |||||||||||||||
Held-to-maturity debt securities | ||||||||||||||||||||
Time deposits and other | 1,024 | 5 | — | — | 1,029 | |||||||||||||||
Western European government debt(a) | 36 | — | — | — | 36 | |||||||||||||||
Total debt securities | $ | 16,744 | $ | 10,109 | $ | 2,001 | $ | 31 | $ | 28,884 | ||||||||||
(a) | Issued by governments, government agencies or supranational entities, as applicable, all of which are investment-grade. |
(b) | Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment-grade. |
(c) | Includes loan-backed, receivable-backed, and mortgage-backed securities, all of which are investment-grade and in senior positions in the capital structure of the security. Loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans, and receivable-backed securities are collateralized by credit cards receivables. Mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages. These securities are valued by third party models that use significant inputs derived from observable market data like prepayment rates, default rates, and recovery rates. |
The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk: | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||
Amount of Gains/(Losses) Recognized in OID(a), (b), (c) | Amount of Gains/(Losses) Recognized in OCI (Effective Portion)(a), (d) | Amount of Gains/(Losses) Reclassified from OCI into OID (Effective Portion)(a), (d) | ||||||||||||||||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | March 29, 2015 | April 3, 2016 | March 29, 2015 | April 3, 2016 | March 29, 2015 | ||||||||||||||||||
Derivative Financial Instruments in Cash Flow Hedge Relationships: | ||||||||||||||||||||||||
Foreign currency swaps | $ | — | $ | — | $ | 55 | $ | (732 | ) | $ | 118 | $ | (607 | ) | ||||||||||
Foreign currency forward-exchange contracts | 1 | — | (328 | ) | 417 | 221 | 373 | |||||||||||||||||
Derivative Financial Instruments in Net Investment Hedge Relationships: | ||||||||||||||||||||||||
Foreign currency forward-exchange contracts | (2 | ) | 2 | (12 | ) | 249 | — | — | ||||||||||||||||
Derivative Financial Instruments Not Designated as Hedges: | ||||||||||||||||||||||||
Foreign currency forward-exchange contracts | (1 | ) | (41 | ) | — | — | — | — | ||||||||||||||||
Foreign currency swaps | (23 | ) | 1 | — | — | — | — | |||||||||||||||||
Non-Derivative Financial Instruments in Net Investment Hedge Relationships: | ||||||||||||||||||||||||
Foreign currency short-term borrowings | — | — | (26 | ) | — | — | — | |||||||||||||||||
Foreign currency long-term debt | — | — | — | (3 | ) | — | — | |||||||||||||||||
$ | (25 | ) | $ | (38 | ) | $ | (311 | ) | $ | (68 | ) | $ | 339 | $ | (234 | ) | ||||||||
(a) | OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income. |
(b) | Also, includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges, as well as the offsetting gains and losses attributable to the hedged items in such hedging relationships. |
(c) | There was no significant ineffectiveness for any period presented. |
(d) | For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive loss––Unrealized holding losses on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive loss––Foreign currency translation adjustments, net. |
The following table provides the components of Inventories: | ||||||||
(MILLIONS OF DOLLARS) | April 3, 2016 | December 31, 2015 | ||||||
Finished goods | $ | 2,782 | $ | 2,714 | ||||
Work-in-process | 3,957 | 3,932 | ||||||
Raw materials and supplies | 840 | 867 | ||||||
Inventories | $ | 7,578 | $ | 7,513 | ||||
Noncurrent inventories not included above(a) | $ | 644 | $ | 594 | ||||
(a) | Included in Other noncurrent assets. There are no recoverability issues associated with these amounts. |
The following table provides the components of Identifiable intangible assets: | ||||||||||||||||||||||||
April 3, 2016 | December 31, 2015 | |||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Gross Carrying Amount | Accumulated Amortization | Identifiable Intangible Assets, less Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Identifiable Intangible Assets, less Accumulated Amortization | ||||||||||||||||||
Finite-lived intangible assets | ||||||||||||||||||||||||
Developed technology rights | $ | 77,630 | $ | (48,088 | ) | $ | 29,543 | $ | 77,613 | $ | (47,193 | ) | $ | 30,419 | ||||||||||
Brands | 2,103 | (956 | ) | 1,147 | 1,973 | (928 | ) | 1,044 | ||||||||||||||||
Licensing agreements and other | 1,772 | (931 | ) | 841 | 1,619 | (918 | ) | 701 | ||||||||||||||||
81,505 | (49,975 | ) | 31,530 | 81,205 | (49,040 | ) | 32,165 | |||||||||||||||||
Indefinite-lived intangible assets | ||||||||||||||||||||||||
Brands and other | 6,893 | 6,893 | 7,021 | 7,021 | ||||||||||||||||||||
In-process research and development | 1,179 | 1,179 | 1,171 | 1,171 | ||||||||||||||||||||
8,072 | 8,072 | 8,192 | 8,192 | |||||||||||||||||||||
Identifiable intangible assets(a) | $ | 89,577 | $ | (49,975 | ) | $ | 39,602 | $ | 89,396 | $ | (49,040 | ) | $ | 40,356 | ||||||||||
(a) | The decrease in Identifiable intangible assets, less accumulated amortization, is primarily related to amortization, partially offset by assets acquired, the impact of measurement period adjustments related to our acquisition of Hospira (see Note 2A) and the impact of foreign exchange. |
Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization: | ||||||||||||
April 3, 2016 | ||||||||||||
GIP | VOC | GEP | WRD | |||||||||
Developed technology rights | 21 | % | 29 | % | 50 | % | — | % | ||||
Brands, finite-lived | — | % | 73 | % | 27 | % | — | % | ||||
Brands, indefinite-lived | — | % | 71 | % | 29 | % | — | % | ||||
In-process research and development | 2 | % | 10 | % | 85 | % | 3 | % | ||||
The following table provides the components of and changes in the carrying amount of Goodwill: | ||||||||||||||||
(MILLIONS OF DOLLARS) | GIP | VOC | GEP | Total | ||||||||||||
Balance, December 31, 2015 | $ | 12,689 | $ | 11,120 | $ | 24,433 | $ | 48,242 | ||||||||
Additions | — | 51 | 26 | 78 | ||||||||||||
Other(a) | 76 | 60 | 102 | 238 | ||||||||||||
Balance, April 3, 2016 | $ | 12,765 | $ | 11,231 | $ | 24,562 | $ | 48,558 | ||||||||
(a) | Primarily reflects the impact of foreign exchange. |
The following table provides the components of net periodic benefit cost: | ||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
Pension Plans | ||||||||||||||||||||||||||||||||
U.S. Qualified(a) | U.S. Supplemental (Non-Qualified)(b) | International(c) | Postretirement Plans(d) | |||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Apr 3, 2016 | Mar 29, 2015 | Apr 3, 2016 | Mar 29, 2015 | Apr 3, 2016 | Mar 29, 2015 | Apr 3, 2016 | Mar 29, 2015 | ||||||||||||||||||||||||
Net periodic benefit cost/(credit): | ||||||||||||||||||||||||||||||||
Service cost(e) | $ | 63 | $ | 72 | $ | 5 | $ | 6 | $ | 42 | $ | 48 | $ | 10 | $ | 14 | ||||||||||||||||
Interest cost(e) | 134 | 169 | 12 | 14 | 60 | 79 | 22 | 32 | ||||||||||||||||||||||||
Expected return on plan assets | (241 | ) | (272 | ) | — | — | (98 | ) | (106 | ) | (8 | ) | (13 | ) | ||||||||||||||||||
Amortization of: | ||||||||||||||||||||||||||||||||
Actuarial losses | 99 | 83 | 9 | 12 | 23 | 32 | 7 | 9 | ||||||||||||||||||||||||
Prior service credits | 1 | (2 | ) | — | — | — | (2 | ) | (41 | ) | (31 | ) | ||||||||||||||||||||
Curtailments | 2 | 2 | — | — | — | — | (6 | ) | (10 | ) | ||||||||||||||||||||||
Settlements | 15 | 26 | 10 | 15 | 1 | — | — | — | ||||||||||||||||||||||||
$ | 73 | $ | 78 | $ | 35 | $ | 45 | $ | 27 | $ | 51 | $ | (16 | ) | $ | 1 | ||||||||||||||||
(a) | The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our U.S. qualified pension plans was primarily driven by (i) lower service and interest costs, resulting from a change in methodology for measuring service and interest costs (see (e) below) and (ii) lower settlement activity. The aforementioned decreases were partially offset by (i) a lower expected return on plan assets resulting from a net decrease of approximately $1.1 billion in the asset base due in part to lump-sum payments made in 2015 to certain terminated colleagues to settle Pfizer’s pension obligation, partially offset by a voluntary contribution of $1.0 billion made at the beginning of January 2016 and (ii) an increase in the amounts amortized for actuarial losses. |
(b) | The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our U.S. non-qualified pension plans was primarily driven by (i) lower settlement activity and (ii) a decrease in the amounts amortized for actuarial losses resulting from the increase, in 2015, in the discount rate used to determine the benefit obligation. |
(c) | The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our international pension plans was primarily driven by (i) lower service and interest costs, resulting from foreign exchange rate changes and a change in methodology for measuring service and interest costs (see (e) below), and (ii) a decrease in the amounts amortized for actuarial losses resulting from large gains in 2015, which decreased the plan net loss position, partially offset by (i) a decrease in the expected return on plan assets due to a lower expected rate of return on plan assets, and foreign exchange rates changes. |
(d) | The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our postretirement plans was primarily driven by (i) lower service and interest costs, resulting from a change in methodology for measuring service and interest costs (see (e) below) and (ii) an increase in prior service credits due to the postretirement medical plan cap changes during 2015. The aforementioned changes were partially offset by (i) a decrease in expected return on plan assets, primarily resulting from a decrease in plan assets reflecting Internal Revenue Code 401(h) reimbursements to Pfizer for eligible 2014 and 2015 prescription drug expenses for certain retirees, and (ii) lower curtailment gains. |
(e) | Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for U.S. and certain international pension and other postretirement benefits. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the bond model or yield curve used to measure the respective plan obligations. For fiscal 2016, we elected to measure service and interest costs by applying the spot rates along the yield curve, or a yield curve implied from the bond model, to the plans' liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations. We have accounted for this change as a change in accounting estimate and, accordingly, have accounted for it on a prospective basis. The expected reduction in expense for 2016 associated with this change in estimate is $191 million, which is expected to be recognized evenly over each quarter of the year. |
Pension Plans | ||||||||||||||||
(MILLIONS OF DOLLARS) | U.S. Qualified | U.S. Supplemental (Non-Qualified) | International | Postretirement Plans | ||||||||||||
Contributions from/reimbursements of our general assets for the three months ended April 3, 2016(a) | $ | 1,000 | $ | 70 | $ | 50 | $ | (148 | ) | |||||||
Expected contributions from our general assets during 2016(b) | $ | 1,000 | $ | 126 | $ | 174 | $ | (6 | ) | |||||||
(a) | Contributions to the postretirement plans reflect Internal Revenue Code 401(h) reimbursements totaling $198 million received for eligible 2014 and 2015 prescription drug expenses for certain retirees. |
(b) | Contributions expected to be made for 2016 are inclusive of amounts contributed during the three months ended April 3, 2016, including the $1.0 billion voluntary contribution that was made in January 2016 for the U.S. qualified plans, which was considered pre-funding for future anticipated mandatory contributions and is also expected to reduce Pension Benefit Guaranty Corporation variable rate premiums. The U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments. |
The following table provides the detailed calculation of Earnings per common share (EPS): | ||||||||
Three Months Ended | ||||||||
(IN MILLIONS) | April 3, 2016 | March 29, 2015 | ||||||
EPS Numerator––Basic | ||||||||
Income from continuing operations | $ | 3,026 | $ | 2,376 | ||||
Less: Net income attributable to noncontrolling interests | 9 | 6 | ||||||
Income from continuing operations attributable to Pfizer Inc. | 3,016 | 2,371 | ||||||
Less: Preferred stock dividends––net of tax | — | — | ||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | 3,016 | 2,370 | ||||||
Discontinued operations––net of tax | — | 5 | ||||||
Less: Discontinued operations––net of tax, attributable to noncontrolling interests | — | — | ||||||
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders | — | 5 | ||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 3,016 | $ | 2,375 | ||||
EPS Numerator––Diluted | ||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | $ | 3,016 | $ | 2,371 | ||||
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | — | 5 | ||||||
Net income attributable to Pfizer Inc. common shareholders and assumed conversions | $ | 3,016 | $ | 2,376 | ||||
EPS Denominator | ||||||||
Weighted-average number of common shares outstanding––Basic | 6,150 | 6,203 | ||||||
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements | 64 | 90 | ||||||
Weighted-average number of common shares outstanding––Diluted | 6,214 | 6,292 | ||||||
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans(a) | 86 | 34 | ||||||
(a) | These common stock equivalents were outstanding for the three months ended April 3, 2016 and March 29, 2015, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect. |
• | Patent litigation, which typically involves challenges to the coverage and/or validity of our patents on various products, processes or dosage forms. We are the plaintiff in the vast majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in a loss of patent protection for the drug at issue, a significant loss of revenues from that drug and impairments of any associated assets. |
• | Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters. |
• | Commercial and other matters, which can include merger-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter. |
• | Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other countries. |