Pfizer 2012 Annual Report Download - page 96

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2012 Financial Report 95
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 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.
Note 13. Share-Based Payments
Our compensation programs can include share-based payments, in the form of stock options, Restricted Stock Units (RSUs), Portfolio
Performance Shares (PPSs), 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) (known as TSRUs) or other performance-based awards that may be granted to any one individual during any 36-month period is limited
to 8 million shares, and that RSUs, PPSs, PSAs and restricted stock grants count as 2 shares, while stock options and TSRUs count as 1
share, toward the maximums for the incremental 425 million shares. As of December 31, 2012, 236 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.
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 following table provides the components of share-based compensation expense and the associated tax benefit:
Year Ended December 31,
(MILLIONS OF DOLLARS) 2012 2011 2010
Restricted stock units $235 $228 $211
Stock options 157 166 150
Total shareholder return units 35 17 28
Performance share awards 35 314
Portfolio performance shares 14 ——
Directors’ compensation and other 552
Share-based payment expense 481 419 405
Tax benefit for share-based compensation expense (149)(139)(129)
Share-based payment expense, net of tax $332 $280 $276
Amounts capitalized as part of inventory cost and the impact of modifications under our cost-reduction and productivity initiatives to share-
based awards were not significant for any period presented. Generally, the modifications resulted in an acceleration of vesting, either in
accordance with plan terms or at management’s discretion.
B. Restricted Stock Units (RSUs)
RSUs are awarded to select employees and, when vested, entitle the holder to receive a specified number of shares of Pfizer common stock,
including shares resulting from dividend equivalents paid on such RSUs. For RSUs granted during the periods presented, in virtually all
instances, the units vest after three years of continuous service from the grant date.
We measure the value of RSU grants as of the grant date using the closing price of Pfizer common stock. The values determined through this
fair value methodology generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and
administrative expenses, and Research and development expenses, as appropriate.