Pfizer 2011 Annual Report Download - page 101

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
In September 2004, Quigley filed a petition in the U.S. Bankruptcy Court for the Southern District of New York seeking
reorganization under Chapter 11 of the U.S. Bankruptcy Code. In March 2005, Quigley filed a reorganization plan in the Bankruptcy
Court that needed the approval of 75% of the voting claimants, as well as the Bankruptcy Court and the U.S. District Court for the
Southern District of New York. In connection with that filing, Pfizer entered into settlement agreements with lawyers representing
more than 80% of the individuals with claims related to Quigley products against Quigley and Pfizer. The agreements provide for a
total of $430 million in payments, of which $215 million became due in December 2005 and has been and is being paid to claimants
upon receipt by the Company of certain required documentation from each of the claimants. The reorganization plan provided for the
establishment of a Trust (the Trust) for the evaluation and, as appropriate, payment of all unsettled pending claims, as well as any
future claims alleging injury from exposure to Quigley products.
In February 2008, the Bankruptcy Court authorized Quigley to solicit an amended reorganization plan for acceptance by claimants.
According to the official report filed with the court by the balloting agent in July 2008, the requisite votes were cast in favor of the
amended plan of reorganization.
The Bankruptcy Court held a confirmation hearing with respect to Quigley’s amended plan of reorganization that concluded in
December 2009. In September 2010, the Bankruptcy Court declined to confirm the amended reorganization plan. As a result of the
foregoing, Pfizer recorded additional charges for this matter of approximately $1.3 billion pre-tax (approximately $800 million after-
tax) in 2010. Further, in order to preserve its right to address certain legal issues raised in the court’s opinion, in October 2010,
Pfizer filed a notice of appeal and motion for leave to appeal the Bankruptcy Court’s decision denying confirmation.
In March 2011, Pfizer entered into a settlement agreement with a committee (the Ad Hoc Committee) representing approximately
40,000 claimants in the Quigley bankruptcy proceeding (the Ad Hoc Committee claimants). Consistent with the additional charges
recorded in 2010 referred to above, the principal provisions of the settlement agreement provide for a settlement payment in two
installments and other consideration, as follows:
•the payment to the Ad Hoc Committee, for the benefit of the Ad Hoc Committee claimants, of a first installment of $500 million upon
receipt by Pfizer of releases of asbestos-related claims against Pfizer Inc. from Ad Hoc Committee claimants holding $500 million in the
aggregate of claims (Pfizer began paying this first installment in June 2011);
•the payment to the Ad Hoc Committee, for the benefit of the Ad Hoc Committee claimants, of a second installment of $300 million upon
Pfizer’s receipt of releases of asbestos-related claims against Pfizer Inc. from Ad Hoc Committee claimants holding an additional $300
million in the aggregate of claims following the earlier of the effective date of a revised plan of reorganization and April 6, 2013;
•the payment of the Ad Hoc Committee’s legal fees and expenses incurred in this matter up to a maximum of $19 million (Pfizer began
paying these legal fees and expenses in May 2011); and
•the procurement by Pfizer of insurance for the benefit of certain Ad Hoc Committee claimants to the extent such claimants with
non-malignant diseases have a future disease progression to a malignant disease (Pfizer procured this insurance in August 2011).
Following the execution of the settlement agreement with the Ad Hoc Committee, Quigley filed a revised plan of reorganization and
accompanying disclosure statement with the Bankruptcy Court in April 2011. Under the revised plan, and consistent with the
additional charges recorded in 2010 referred to above, we expect to contribute an additional amount to the Trust, if and when the
Bankruptcy Court confirms the plan, of cash and non-cash assets (including insurance proceeds) with a value in excess of $550
million. The Bankruptcy Court must find that the revised plan meets the requisite standards of the U.S. Bankruptcy Code before it
confirms the plan. We expect that, if approved by claimants, confirmed by the Bankruptcy Court and the District Court and upheld on
any subsequent appeal, the revised reorganization plan will result in the District Court entering a permanent injunction directing
pending claims, as well as future claims, alleging personal injury from exposure to Quigley products to the Trust. There is no
assurance that the plan will be confirmed by the courts.
In a separately negotiated transaction with an insurance company in August 2004, we agreed to a settlement related to certain
insurance coverage which provides for payments to an insurance proceeds trust established by Pfizer and Quigley over a ten-year
period of amounts totaling $405 million. Most of these insurance proceeds, as well as other payments from insurers that issued
policies covering Pfizer and Quigley, would be paid, following confirmation, to the Trust for the benefit of present unsettled and
future claimants with claims arising from exposure to Quigley products.
•Other Matters
Between 1967 and 1982, Warner-Lambert owned American Optical Corporation, which manufactured and sold respiratory protective
devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify
the purchaser for certain liabilities, including certain asbestos-related and other claims. As of December 31, 2011, approximately
67,700 claims naming American Optical and numerous other defendants were pending in various federal and state courts seeking
damages for alleged personal injury from exposure to asbestos and other allegedly hazardous materials. Warner-Lambert is actively
engaged in the defense of, and will continue to explore various means to resolve, these claims.
Warner-Lambert and American Optical brought suit in state court in New Jersey against the insurance carriers that provided
coverage for the asbestos and other allegedly hazardous materials claims related to American Optical. A majority of the carriers
subsequently agreed to pay for a portion of the costs of defending and resolving those claims. The litigation continues against the
carriers who have disputed coverage or how costs should be allocated to their policies, and the court held that Warner-Lambert and
American Optical are entitled to payment from each of those carriers of a proportionate share of the costs associated with those
claims. Under New Jersey law, a special allocation master was appointed to implement certain aspects of the court’s rulings.
100 2011 Financial Report