Pfizer 2011 Annual Report Download - page 93

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
approximately 459 million shares of our common stock for approximately $9.0 billion. In 2010, we purchased approximately
61 million shares of our common stock for approximately $1.0 billion. We did not purchase any shares of our common stock in 2009.
After giving effect to share purchases through year-end 2011, our remaining share-purchase authorization is approximately $10
billion at December 31, 2011.
B. Preferred Stock
The Series A convertible perpetual preferred stock is held by an Employee Stock Ownership Plan (Preferred ESOP) Trust and
provides dividends at the rate of 6.25%, which are accumulated and paid quarterly. The per-share stated value is $40,300 and the
preferred stock ranks senior to our common stock as to dividends and liquidation rights. Each share is convertible, at the holder’s
option, into 2,574.87 shares of our common stock with equal voting rights. The conversion option is indexed to our common stock
and requires share settlement, and, therefore, is reported at the fair value at the date of issuance. We may redeem the preferred
stock at any time or upon termination of the Preferred ESOP, at our option, in cash, in shares of common stock or, a combination of
both at a price of $40,300 per share.
C. Employee Stock Ownership Plans
We have two employee stock ownership plans (collectively, the ESOPs), the Preferred ESOP and another that holds common stock
of the Company (Common ESOP).
Allocated shares held by the Common ESOP are considered outstanding for the earnings per share (EPS) calculations and the
eventual conversion of allocated preferred shares held by the Preferred ESOP is assumed in the diluted EPS calculation. As of
December 31, 2011, the Preferred ESOP held preferred shares with a stated value of approximately $45 million, convertible into
approximately 3 million shares of our common stock. As of December 31, 2011, the Common ESOP held approximately 4 million
shares of our common stock. As of December 31, 2011, all preferred and common shares held by the ESOPs have been allocated
to the Pharmacia U.S. and certain Puerto Rico savings plan participants.
D. Employee Benefit Trust
The Pfizer Inc. Employee Benefit Trust (EBT) was established in 1999 to fund our employee benefit plans through the use of its
holdings of Pfizer Inc. stock. Our consolidated balance sheets reflect the fair value of the shares owned by the EBT as a reduction of
Shareholders’ equity. Beginning in May 2009, the Company began using the shares held in the EBT to help fund the Company’s
matching contribution in the Pfizer Savings Plan.
13. Share-Based Payments
Our compensation programs can include share-based payments, in the form of stock options, Restricted Stock Units (RSUs),
Performance Share Awards (PSAs) and Total Shareholder Return Units (TSRUs).
The Company’s shareholders approved the amendment and restatement of the 2004 Stock Plan at the Annual Meeting of
Shareholders held on April 23, 2009. The primary purpose of the amendment was to increase the number of shares of common
stock available for grants by 425 million shares. In addition, the amendment provided other changes, including that the number of
stock options, Stock Appreciation Rights (SARs) (now known as TSRUs) or other performance-based awards that may be granted
to any one individual during any 36-month period is limited to eight million shares, and that RSUs, PSAs and restricted stock grants
count as two shares, while stock options and TSRUs count as one share, toward the maximums for the incremental 425 million
shares. As of December 31, 2011, 319 million shares were available for award. The 2004 Stock Plan, as amended, is the only Pfizer
plan under which equity-based compensation may currently be awarded to executives and other employees.
The Company’s shareholders originally approved the 2004 Stock Plan at the Annual Meeting of Shareholders held on April 22,
2004, and, effective upon that approval, new stock option and other share-based awards could be granted only under the originally
approved 2004 Stock Plan. As originally approved, the 2004 Stock Plan allowed a maximum of three million shares to be awarded to
any employee per year and 475 million shares in total. RSUs, PSAs and restricted stock grants counted as three shares, while stock
options and SARs counted as one share, toward the maximums under the Plan, as originally approved.
Although not required to do so, we have used authorized and unissued shares and, to a lesser extent, shares held in our Employee
Benefit Trust and treasury stock to satisfy our obligations under these programs.
A. Impact on Net Income
The components of share-based compensation expense and the associated tax benefit follow:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2011 2010 2009
Stock option expense $ 166 $ 150 $165
RSU expense 228 211 183
TSRU expense 17 28 15
Directors’ compensation and other 523
PSA expense/(expense reduction) 314 (17)
Share-based payment expense 419 405 349
Tax benefit for share-based compensation expense (139) (129) (99)
Share-based payment expense, net of tax $ 280 $ 276 $250
92 2011 Financial Report