Pfizer 2013 Annual Report Download

Download and view the complete annual report

Please find the complete 2013 Pfizer annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 123

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

Appendix A
2013 Financial Report

Table of contents

  • Page 1
    Appendix A 2013 Financial Report

  • Page 2
    ... operating and financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans, and plans relating to share repurchases and dividends. Such forward-looking statements are based on management's current...

  • Page 3
    ... of intellectual property rights and the expiration of co-promotion and licensing rights, healthcare legislation, regulatory environment and pricing and access pressures, pipeline productivity and competition among branded products. We also face challenges as a result of the global economic...

  • Page 4
    ...spending to support new product launches; a gain recorded in 2013 (approximately $459 million, pre-tax) associated with the transfer of certain product rights to our equity-method investment in China, Hisun Pfizer Pharmaceuticals Company Limited (Hisun Pfizer) (see also the "Our Business Development...

  • Page 5
    ... products in various markets over the next few years. For additional information, see the "Patents and Other Intellectual Property Rights" section of our 2013 Annual Report on Form 10-K. Our financial results in 2013 and our financial guidance for 2014, respectively, reflect the impact and projected...

  • Page 6
    ...and also known as the Affordable Care Act or ACA), was enacted in the U.S. For additional information, see the "Government Regulation and Price Constraints" section of our 2013 Annual Report on Form 10-K. This legislation has resulted in both current and longer-term impacts on us, as discussed below...

  • Page 7
    ... the United States--Pricing and Reimbursement" section of our 2013 Annual Report on Form 10-K. Also, health insurers and benefit plans continue to limit access to certain of our medicines by imposing formulary restrictions in favor of the increased use of generics. In prior years, Presidential...

  • Page 8
    ...the challenging economic environment, including high unemployment levels, and increases in co-pays, sometimes switch to generic products, delay treatments, skip doses or use less effective treatments to reduce their costs. Challenging economic conditions in the U.S. also have increased the number of...

  • Page 9
    ... by ongoing internal investments and targeted business development designed to maximize the value of our in-line products and ensure a robust pipeline of highly-differentiated product candidates in areas of unmet medical need. In addition, VOC includes our Consumer Healthcare 8 2013 Financial Report

  • Page 10
    ... of Directors authorized a new $10 billion share-purchase plan, to be utilized over time. Also, on December 16, 2013, our Board of Directors declared a first-quarter 2014 dividend of $0.26 per share, an increase from the $0.24 per-share quarterly dividend paid during 2013. 2013 Financial Report 9

  • Page 11
    ...formed a new company, Hisun Pfizer, to develop, manufacture, market and sell pharmaceutical products, primarily branded generic products, predominately in China. On January 1, 2013, we contributed assets constituting a business to this 49%-owned equity-method investment and recognized a pre-tax gain...

  • Page 12
    ... financial guidance for 2014(a), (b): Adjusted revenues Adjusted cost of sales as a percentage of adjusted revenues Adjusted selling, informational and administrative expenses Adjusted research and development expenses Adjusted other (income)/deductions Effective tax rate on adjusted income Reported...

  • Page 13
    ... primarily represent rebates and discounts to government agencies, wholesalers, distributors and managed care organizations with respect to our pharmaceutical products. See also Notes to Consolidated Financial Statements--Note 1G. Basis of Presentation and Significant Accounting Policies: Revenues...

  • Page 14
    ... delayed launch dates. The intangible asset impairment charges for 2013 are associated with the following: Specialty Care ($394 million); Established Products ($201 million); Worldwide Research and Development ($140 million); Primary Care ($54 million); and Consumer Healthcare ($14 million). In 2012...

  • Page 15
    ... in 2011 are associated with the following: Worldwide Research and Development ($394 million); Established Products ($193 million); Specialty Care ($135 million); Primary Care ($56 million); and Oncology ($56 million). For a description of our accounting policy, see Notes to Consolidated Financial...

  • Page 16
    ... of operations. The following table provides the expected versus actual rate of return on plan assets and the discount rate used to measure the benefit obligations for our U.S. qualified pension plans and our international pension plans(a): 2013 U.S. Qualified Pension Plans Expected annual rate of...

  • Page 17
    ... our respective plans (see Notes to Consolidated Financial Statements-Note 11D. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Plan Assets for asset allocation ranges and actual asset allocations for 2013 and 2012). The expected annual rate of return on plan assets for our...

  • Page 18
    ...Total revenues were $51.6 billion in 2013, a decrease of 6% compared to 2012, which reflects an operational decline of $1.9 billion, or 4%. The operational decrease was primarily the result of the continued erosion of branded Lipitor in the U.S., developed Europe and certain other developed markets...

  • Page 19
    ... represent rebates and discounts to government agencies, wholesalers, distributors and managed care organizations with respect to our pharmaceutical products. These deductions represent estimates of the related obligations and, as such, judgment and knowledge of market conditions and practice...

  • Page 20
    ... date of January 31, 2011. Represents revenues generated from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and includes, in 2013, the revenues related to our transitional manufacturing and supply agreements with Zoetis. Biopharmaceutical...

  • Page 21
    ... Products unit, and the termination and final-year terms of certain co-promotion agreements, reduced Primary Care unit revenues by approximately $2.9 billion, or 19%, in comparison with 2012. Specialty Care and Oncology Operating Segment • Specialty Care unit revenues decreased 6% in 2013...

  • Page 22
    ...resulting shift in the reporting of certain product revenues to the Established Products unit, and the expiration of the co-promotion agreement for Enbrel in the U.S. and Canada reduced Specialty Care unit revenues by $996 million, or 7%, in comparison with 2012. • Oncology unit revenues increased...

  • Page 23
    Financial Review Pfizer Inc. and Subsidiary Companies • • an increase in operational revenues of approximately $1.4 billion in developed markets for certain biopharmaceutical products, particularly Lyrica, Enbrel, generic atorvastatin, Celebrex, Inlyta and Benefix; and an increase in ...

  • Page 24
    ... to 2011, reflecting higher operational revenues of 13%, primarily due to: the shift in the reporting of branded Lipitor revenues in the U.S. and Japan from the Primary Care unit, totaling $1.4 billion, to the Established Products unit beginning January 1, 2012; recent launches of generic versions...

  • Page 25
    Financial Review Pfizer Inc. and Subsidiary Companies Revenues-Major Biopharmaceutical Products The following table provides revenue information for several of our major biopharmaceutical products: (MILLIONS OF DOLLARS) Year Ended December 31, PRIMARY INDICATIONS Epilepsy, post-herpetic neuralgia ...

  • Page 26
    ... is for the treatment of elevated LDL-cholesterol levels in the blood. Lipitor has lost exclusivity and faces generic competition in all major markets. Branded Lipitor recorded worldwide revenues of $2.3 billion, or a decrease of 41%, in 2013, compared to 2012, due to: 2013 Financial Report 25

  • Page 27
    ... tumor. Sutent worldwide revenues decreased 3% in 2013, compared to 2012, as a result of increased competition and cost-containment measures in developed Europe and Japan, as well as some conversion from Sutent to Inlyta in Japan as a result of the broader label for Inlyta in Japan, which overlaps...

  • Page 28
    ... 2011. We anticipate returning Embeda to the market in the second quarter of 2014. See Notes to Consolidated Financial Statements-Note 17. Commitments and Contingencies for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed...

  • Page 29
    ... milestones related to manufacturing and following guidance received from the FDA earlier in 2013, we announced in October 2013 that we will proceed with the additional clinical studies and other actions required to address the "complete response" letter received in June 2011. These new clinical...

  • Page 30
    ... indications. Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the "Our Business Development Initiatives" section of this Financial Review. COSTS AND EXPENSES Cost of Sales (MILLIONS OF DOLLARS) Year Ended December 31, 2013 2012...

  • Page 31
    ... spending, both partly in response to product losses of exclusivity; more streamlined corporate support functions; and the favorable impact of foreign exchange of 2%, partially offset by: • costs associated with the separation of Zoetis employees, net assets and operations from Pfizer. Research...

  • Page 32
    ...482 $ $ Primary Care (a) Specialty Care and Oncology(a) Established Products and Emerging Markets(a) Consumer Healthcare(a), (b) Worldwide Research and Development/Pfizer Medical(c) Corporate and Other(d) Total Research and Development Expenses (a) 8,681 (b) (c) (d) Our operating segments, in...

  • Page 33
    ... of shared services, including the development of global systems. • All of our businesses and functions have been impacted by these types of actions, including sales and marketing, manufacturing and R&D, as well as groups such as information technology, shared services and corporate operations...

  • Page 34
    ... site counts exclude five Nutrition business-related manufacturing sites as the Nutrition business was sold in 2012, and exclude 24 Zoetis sites as the disposition of the remaining 80.2% interest in Zoetis common stock was completed on June 24, 2013. See Notes to Consolidated Financial Statements...

  • Page 35
    Financial Review Pfizer Inc. and Subsidiary Companies 2013 v. 2012 Other (income)/deductions-net changed favorably by $4.6 billion in 2013, compared to 2012, primarily due to patent litigation settlement income of $1.3 billion recorded in 2013 (for additional information, see Notes to Consolidated ...

  • Page 36
    ...tax rate was to decline over time from 4% in 2011 to 1% in 2016. Act No. 2-2013 extended the excise tax through 2017 and, effective July 1, 2013, increased the tax rate to 4% for all years through 2017. The impact of Act No. 2-2013 is being recorded in Cost of sales and Provision for taxes on income...

  • Page 37
    ... receives a monthly analysis of our operating results that is prepared on an Adjusted income basis; our annual budgets are prepared on an Adjusted income basis; and senior management's annual compensation is derived, in part, using this Adjusted income measure. Adjusted income is the performance...

  • Page 38
    ... qualify as discontinued operations under U.S. GAAP; amounts associated with transitional service, manufacturing and supply agreements in support of discontinued operations after sale; certain intangible asset impairments; adjustments related to the resolution of certain tax positions; the impact of...

  • Page 39
    ...Review Pfizer Inc. and Subsidiary Companies The following table provides a reconciliation of Reported diluted EPS, as reported under U.S. GAAP, and Non-GAAP Adjusted diluted EPS: Year Ended December 31, 2013 2012 2011 Earnings per common share-diluted GAAP Reported income from continuing operations...

  • Page 40
    ...Patent litigation settlement income(j) Other legal matters, net(k) Gain associated with the transfer of certain product rights to an equity-method investment(k) Certain asset impairments and related charges Costs associated with the Zoetis IPO(m) Income associated with the transitional manufacturing...

  • Page 41
    ... returns on plan assets) and the reclassification of certain amounts related to amortization and curtailments/settlements into income. See also Notes to Consolidated Financial Statements-Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. 40 2013 Financial Report

  • Page 42
    ... Plans and Defined Contribution Plans. ANALYSIS OF THE CONSOLIDATED BALANCE SHEETS For information about certain of our financial assets and liabilities, including Cash and cash equivalents, Short-term investments, Long-term investments, Short-term borrowings, including current portion of long-term...

  • Page 43
    ..., see Notes to Consolidated Financial Statements-Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. ANALYSIS OF THE CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (MILLIONS OF DOLLARS) % Change 2011 13/12 6 * (6) 12/11 (17) * (22) (93) * 2013 $ 17,765...

  • Page 44
    ...Notes to Consolidated Financial Statements-Note 17A5. Commitments and Contingencies: Legal Proceedings--Certain Matters Resolved During 2013. ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES We rely largely on operating cash flows, short-term investments, short-term commercial paper...

  • Page 45
    ... the Consolidated Statements of Cash Flows" section of this Financial Review. Working capital includes net assets held for sale of $55 million as of December 31, 2013 and $4.5 billion (Zoetis) as of December 31, 2012. Represents total Pfizer Inc. shareholders' equity divided by the actual number of...

  • Page 46
    ...see Notes to Consolidated Financial Statements--Note 1C. Basis of Presentation and Significant Accounting Policies: Estimates and Assumptions. Credit Ratings Two major corporate debt-rating organizations, Moody's and S&P, assign ratings to our short-term and long-term debt. A security rating is not...

  • Page 47
    ...Plans: Cash Flows, and Note 17. Commitments and Contingencies. Includes operating and capital lease obligations. Includes agreements to purchase goods and services that are enforceable and legally binding and includes amounts relating to advertising, information technology services, employee benefit...

  • Page 48
    ... or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, plans relating to share repurchases and dividends, government regulation and financial...

  • Page 49
    ... or delays in manufacturing; • trade buying patterns; • the impact of existing and future legislation and regulatory provisions on product exclusivity; • trends toward managed care and healthcare cost containment; • the impact of the U.S. Budget Control Act of 2011 (the Budget Control Act...

  • Page 50
    Financial Review Pfizer Inc. and Subsidiary Companies those related to our research and development organization, and of the internal separation of our commercial operations into three new global businesses effective January 1, 2014. We cannot guarantee that any forward-looking statement will be ...

  • Page 51
    ... course of business, such as patent litigation, product liability and other product-related litigation, commercial litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications (see Notes to Consolidated Financial Statements-Note 17. Commitments...

  • Page 52
    ..., use or disposition of the Company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods...

  • Page 53
    ... the Company's financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. In this context, the Committee has met and held discussions with management and...

  • Page 54
    ... Statements The Board of Directors and Shareholders of Pfizer Inc.: We have audited the accompanying consolidated balance sheets of Pfizer Inc. and Subsidiary Companies as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, equity, and cash...

  • Page 55
    ... standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Pfizer Inc. and Subsidiary Companies as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years...

  • Page 56
    Consolidated Statements of Income Pfizer Inc. and Subsidiary Companies (MILLIONS, EXCEPT PER COMMON SHARE DATA) Revenues Costs and expenses: Cost of sales(a) Selling, informational and administrative expenses(a) Research and development expenses(a) Amortization of intangible assets Restructuring ...

  • Page 57
    ... Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, in the consolidated statements of income. For additional information, see Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. See Note 5E. Tax...

  • Page 58
    Consolidated Balance Sheets Pfizer Inc. and Subsidiary Companies (MILLIONS, EXCEPT PREFERRED STOCK ISSUED AND PER COMMON SHARE DATA) As of December 31, 2013 2012 Assets Cash and cash equivalents Short-term investments Accounts receivable, less allowance for doubtful accounts: 2013-$478; 2012-$...

  • Page 59
    ... (a) Relates to Zoetis (our former Animal Health subsidiary). See Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures. See Notes to Consolidated Financial Statements, which are an integral part of these statements. 58 2013 Financial Report

  • Page 60
    ...term debt Purchases of common stock Cash dividends paid Proceeds from exercise of stock options Other financing activities Net cash used in financing activities Effect of exchange-rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents...

  • Page 61
    Consolidated Statements of Cash Flows Pfizer Inc. and Subsidiary Companies Year Ended December 31, 2013 Supplemental Cash Flow Information Non-cash transactions: Sale of subsidiary common stock (Zoetis) for Pfizer common stock(b) Exchange of subsidiary common stock (Zoetis) for the retirement of ...

  • Page 62
    ... 31, 2011, we acquired King Pharmaceuticals, Inc. (King). Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of King, and, in accordance with our domestic and international reporting periods, our consolidated financial...

  • Page 63
    ...and when accounting for and reporting on certain financial instruments. We estimate fair value using an exit price approach, which requires, among other things, that we determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination...

  • Page 64
    ... represent rebates and discounts to government agencies, wholesalers, distributors and managed care organizations with respect to our pharmaceutical products. These deductions represent estimates of the related obligations and, as such, judgment and knowledge of market conditions and practice...

  • Page 65
    ... agreement term or the expected product life cycle, whichever is shorter. Research and development expenses related to upfront and milestone payments for intellectual property rights totaled $203 million in 2013, $371 million in 2012 and $306 million in 2011. K. Amortization of Intangible Assets...

  • Page 66
    ... statement of income, and a new cost basis in the investment is established. Derivative financial instruments are carried at fair value in various balance sheet categories (see Note 7A. Financial Instruments: Selected Financial Assets and Liabilities), with changes in fair value reported in current...

  • Page 67
    ... standard. Liabilities associated with uncertain tax positions are classified as current only when we expect to pay cash within the next 12 months. Interest and penalties, if any, are recorded in Provision for taxes on income and are classified on our consolidated balance sheet with the related tax...

  • Page 68
    ...connection with this Worldwide Research and Development acquisition, we recorded $19 million in Identifiable intangible assets. King Pharmaceuticals, Inc. Description of the Transaction On January 31, 2011 (the acquisition date), we completed a tender offer for the outstanding shares of common stock...

  • Page 69
    ... intangible assets, excluding in-process research and development In-process research and development Net tax accounts All other long-term assets and liabilities, net Total identifiable net assets Goodwill(b) Net assets acquired/total consideration transferred (a) (b) Includes animal health-related...

  • Page 70
    ... results of the animal health business are reported as Income from discontinued operations--net of tax in the consolidated statements of income through June 24, 2013, the date of disposal. In addition, in the consolidated balance sheet as of December 31, 2012, the assets and liabilities associated...

  • Page 71
    ...The operating results of this business are reported as Income from discontinued operations--net of tax in the consolidated statements of income through November 30, 2012, the date of disposal. While the full purchase price of $11.85 billion was received on November 30, 2012, the sale of the business...

  • Page 72
    ... Revenues-Alliance revenues(b) Total revenues from collaborative arrangements Cost of sales(c) Selling, informational and administrative expenses(d) Research and development expenses Other (income)/deductions-net(f) (a) (b) (c) (d) (e) (f) Represents sales to our partners of products manufactured...

  • Page 73
    ... Pharmaceuticals Company Limited (Hisun Pfizer) On September 6, 2012, we and Zhejiang Hisun Pharmaceuticals Co., Ltd., a leading pharmaceutical company in China, formed a new company, Hisun Pfizer, to develop, manufacture, market and sell pharmaceutical products, primarily branded generic products...

  • Page 74
    ...--asset restructuring Implementation costs recorded in our consolidated statements of income as follows(e): Cost of sales Selling, informational and administrative expenses Research and development expenses Total implementation costs Total costs associated with acquisitions and cost-reduction...

  • Page 75
    ... to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies The restructuring charges in 2012 are associated with the following: • Primary Care operating segment ($295 million), Specialty Care and Oncology operating segment ($174 million), Established Products and Emerging Markets...

  • Page 76
    ... findings and delayed launch dates. The intangible asset impairment charges for 2013 are associated with the following: Specialty Care ($394 million); Established Products ($201 million); Worldwide Research and Development ($140 million); Primary Care ($54 million); and Consumer Healthcare ($14...

  • Page 77
    ...: Equity-Method Investments. 2012 v. 2011--The increase in the domestic loss was primarily due to the reduction in revenues resulting from the loss of exclusivity of Lipitor, Geodon and certain other biopharmaceutical products; certain legal settlements and related charges, primarily associated with...

  • Page 78
    ... tax rate associated with the $1.3 billion of patent litigation settlement income; The non-deductibility of the $292 million of goodwill derecognized and the jurisdictional mix of the other intangible assets divested as part of the transfer of certain product rights to our equity-method investment...

  • Page 79
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies In all years, federal, state and international net tax liabilities assumed or established as part of a business acquisition are not included in Provision for taxes on income (see Note 2A. Acquisitions, Divestitures, ...

  • Page 80
    ...and credit carryforwards as a result of the adoption of a new accounting standard, a decrease in current deferred tax assets related to product liability reserves due to settlements, and the decrease in noncurrent deferred tax assets related to employee benefits, partially offset by the reduction in...

  • Page 81
    ... to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Adoption of New Accounting Standard On December 31, 2013, we changed the presentation of certain unrecognized tax benefits, where we have net operating loss carryforwards, similar tax losses, and/or tax credit carryforwards...

  • Page 82
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies other current tax assets ($14 million) and Other taxes payable ($752 million). Accrued penalties are not significant. See also Note 5A. Tax Matters: Taxes on Income from Continuing Operations. Status of Tax Audits and ...

  • Page 83
    ... in 2011. Relates to Zoetis (our former Animal Health subsidiary). See Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures. As of December 31, 2013, we estimate that we will reclassify into 2014 income the following pre-tax amounts currently...

  • Page 84
    ...at equity method or at cost(f), (g) Total selected financial assets Financial liabilities measured at fair value on a recurring basis(a) Derivative financial instruments in a liability position(h): Interest rate swaps Foreign currency swaps Foreign currency forward-exchange contracts Other financial...

  • Page 85
    ... selected financial assets and liabilities in our consolidated balance sheets: As of December 31, (MILLIONS OF DOLLARS) 2013 $ 1,104 30,225 16,406 286 (b) 2012 $ 947 22,318 14,149 296 1,086 $ $ 38,796 6,424 330 31,036 374 $ 38,164 Assets Cash and cash equivalents Short-term investments Long-term...

  • Page 86
    ... amounts for commercial paper of $3.0 billion and $2.7 billion as of December 31, 2013 and December 31, 2012, respectively. The weighted-average effective interest rate on short-term borrowings outstanding was 1.7% as of December 31, 2013 and 1.6% as of December 31, 2012. 2013 Financial Report 85

  • Page 87
    ...Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies D. Long-Term Debt On June 3, 2013, we completed a public offering of $4.0 billion aggregate principal amount of senior unsecured notes. In addition, we repaid at maturity our 3.625% senior unsecured notes that were due June 2013...

  • Page 88
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies All derivative contracts used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the consolidated balance sheet. Changes in fair value are reported in earnings or in ...

  • Page 89
    ... primarily supports the approximate fair value of our derivative contracts. With respect to the collateral received, which is included in Cash and cash equivalents, the obligations are reported in Short-term borrowings, including current portion of long-term debt. 88 2013 Financial Report

  • Page 90
    ...Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Note 8. Inventories The following table provides the components of Inventories: As of December 31, (MILLIONS OF DOLLARS) 2013 $ 2,216 3,445 505 $ $ 6,166 463 $ $ $ 2012 2,254 3,374 448 6,076 612 Finished goods Work-in-process...

  • Page 91
    ...intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization Developed technology rights: Specialty Care (68%); Established Products (19%); Primary Care (12%); and Oncology (1%); Brands, finite-lived: Consumer Healthcare...

  • Page 92
    ... component, developed technology rights, is approximately 10 years. Total amortization expense for finite-lived intangible assets was $4.8 billion in 2013, $5.3 billion in 2012 and $5.7 billion in 2011. The following table provides the annual amortization expense expected for the years 2014 through...

  • Page 93
    ... Pfizer Inc. and Subsidiary Companies A. Components of Net Periodic Benefit Costs and Changes in Other Comprehensive Loss The following table provides the annual cost (including costs reported as part of discontinued operations) and changes in Other comprehensive income/(loss) for our benefit plans...

  • Page 94
    ... retirement benefits. The discount rate for our U.S. defined benefit plans is determined annually and evaluated and modified to reflect at year-end the prevailing market rate of a portfolio of high-quality corporate bond investments rated AA/Aa or better that would provide the future cash flows...

  • Page 95
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies The following table provides the effects as of December 31, 2013 of a one-percentage-point increase or decrease in the healthcare cost trend rate assumed for postretirement benefits: (MILLIONS OF DOLLARS) Increase $ 15...

  • Page 96
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies ABO for our U.S. supplemental (non-qualified) pension plans was $1.3 billion in 2013 and $1.5 billion 2012. The ABO for our international pension plans was $9.7 billion in 2013 and $9.4 billion in 2012. The following ...

  • Page 97
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies D. Plan Assets The following table provides the components of plan assets (including those reported as part of Liabilities of discontinued operations): Fair Value(a) As of December 31, 2013 $ 360 4,335 2,294 As of ...

  • Page 98
    ... Total The plans assets are managed with the objectives of minimizing pension expense and cash contributions over the long term. We utilize longterm asset allocation ranges in the management of our plans' invested assets. Our long-term return expectations are developed based on a 2013 Financial...

  • Page 99
    ... to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies diversified, global investment strategy that takes into account historical experience, as well as the impact of portfolio diversification, active portfolio management, and our view of current and future economic and financial...

  • Page 100
    ...(139) 280 Restricted Stock Units Stock Options Portfolio Performance Shares Total Shareholder Return Units Performance Share Awards Directors' compensation Share-based payment expense Tax benefit for share-based compensation expense Share-based payment expense, net of tax 2013 Financial Report 99

  • Page 101
    ... 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...

  • Page 102
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies The following table summarizes all stock option activity during 2013: WeightedAverage Remaining Contractual Term (Years) Shares (Thousands) Outstanding, December 31, 2012 Granted Exercised Forfeited Expired Outstanding...

  • Page 103
    ...not yet recognized, pre-tax Weighted-average period over which PPS cost is expected to be recognized (years) E. Total Shareholder Return Units (TSRUs) TSRUs are awarded to senior and other key management. TSRUs entitle the holders to receive a number of shares of our common stock with a value equal...

  • Page 104
    ... the grant date using the intrinsic value method, for which we use the closing price of Pfizer common stock. The values are amortized on a straight-line basis over the probable vesting term into Cost of sales, Selling, informational and administrative expenses, and Research and development expenses...

  • Page 105
    ...income attributable to Pfizer Inc. common shareholders and assumed conversions EPS Denominator Weighted-average number of common shares outstanding--Basic Common-share equivalents: stock options, stock issuable under employee compensation plans and convertible preferred stock Weighted-average number...

  • Page 106
    ... 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...

  • Page 107
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies In October 2010, we filed a patent-infringement action with respect to Viagra in the U.S. District Court for the Southern District of New York against Apotex Inc. and Apotex Corp., Mylan Pharmaceuticals Inc. and Mylan ...

  • Page 108
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Torisel (temsirolimus) In December 2011, we brought a patent-infringement action in the U.S. District Court for the District of Delaware against Sandoz as a result of its abbreviated new drug application with the FDA ...

  • Page 109
    ... failing to disclose or causing Pfizer to fail to disclose material information, concerning the alleged off-label promotion of certain pharmaceutical products, alleged payments to physicians to promote the sale of those products and government investigations related thereto. Plaintiffs seek damages...

  • Page 110
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Neurontin • Off-Label Promotion Actions A number of lawsuits, including purported class actions, have been filed against us in various federal and state courts alleging claims arising from the promotion and sale of ...

  • Page 111
    ... District Court for the District of New Jersey. In November 2012, the defendants moved to dismiss all of the foregoing actions. In September 2013, the court dismissed the claims by direct purchasers that relate to the procurement and/or enforcement of certain patents for Lipitor. In addition, the...

  • Page 112
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies A3. Legal Proceedings--Commercial and Other Matters Average Wholesale Price Litigation Pfizer, certain of its subsidiaries and other pharmaceutical manufacturers were sued in various state courts by a number of states ...

  • Page 113
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies A4. Legal Proceedings--Government Investigations Like other pharmaceutical companies, we are subject to extensive regulation by national, state and local government agencies in the U.S. and in the other countries in ...

  • Page 114
    ...are subsidiaries of Pfizer. C. Purchase Commitments As of December 31, 2013, we have agreements totaling $3.4 billion to purchase goods and services that are enforceable and legally binding and include amounts relating to advertising, information technology services, employee benefit administration...

  • Page 115
    ...estate operations, human resources, legal, compliance, worldwide procurement, and worldwide public affairs and policy), interest income and expense and certain compensation and other corporate costs. Other unallocated costs represent overhead expenses associated with our manufacturing and commercial...

  • Page 116
    ...of products. Other business activities includes the revenues and operating results of Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales operation, and the R&D costs managed by our Worldwide Research and Development organization and our Pfizer Medical organization...

  • Page 117
    ...overhead expenses associated with our manufacturing and commercial operations not directly attributable to an operating segment. B. Geographic Information Revenues exceeded $500 million in each of 12, 14 and 16 countries outside the U.S. in 2013, 2012 and 2011, respectively. The U.S. and Japan were...

  • Page 118
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Significant Product Revenues The following table provides revenues by product: Year Ended December 31, (MILLIONS OF DOLLARS) 2013 2012 2011(a) Revenues from biopharmaceutical products: Lyrica Prevnar family Enbrel (...

  • Page 119
    ... and Eliquis. Other represents revenues generated from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and includes, in 2013, the revenues related to our transitional manufacturing and supply agreements with Zoetis. 118 2013 Financial Report

  • Page 120
    ... fourth quarter costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. The fourth quarter of 2013 reflects higher employee termination costs. The second quarter of 2013 reflects the gain on the disposal of our Animal Health business (Zoetis...

  • Page 121
    ... historically higher fourth quarter costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. The fourth quarter of 2012 reflects higher employee termination costs. The fourth quarter of 2012 reflects the gain on the sale of our Nutrition...

  • Page 122
    ... Pfizer Inc. and Subsidiary Companies Year Ended/As of December 31,(a) (MILLIONS, EXCEPT PER COMMON SHARE DATA) Revenues(b) Income from continuing operations(b) Total assets Long-term obligations(b), (c) Earnings per common share-basic Income from continuing operations attributable to Pfizer...

  • Page 123
    ... Performance Graph Pfizer Inc. and Subsidiary Companies The following graph assumes a $100 investment on December 31, 2008, and reinvestment of all dividends, in each of the Company's Common Shares, the S&P 500 Index, and a composite peer group of the major U.S.- and European-based pharmaceutical...