Pfizer 2015 Annual Report Download - page 56

Financial Review
Pfizer Inc. and Subsidiary Companies
2015 Financial Report
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make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications
generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid
significant amounts under these provisions and, as of December 31, 2015, recorded amounts for the estimated fair value of these
indemnifications were not significant.
Certain of our co-promotion or license agreements give our licensors or partners the rights to negotiate for, or in some cases to obtain under
certain financial conditions, co-promotion or other rights in specified countries with respect to certain of our products.
Share-Purchase Plans and Accelerated Share Repurchase Agreement
Our December 2011 $10 billion share-purchase plan was exhausted in the first quarter of 2013. Our November 2012 $10 billion share-purchase
plan was exhausted in the fourth quarter of 2013. On June 27, 2013, we announced that the Board of Directors had authorized a $10 billion
share-purchase plan, which was exhausted in the first quarter of 2015. On October 23, 2014, we announced that the Board of Directors had
authorized an additional $11 billion share-purchase plan, and share repurchases commenced thereunder in January 2015. In December 2015,
the Board of Directors authorized a new $11 billion share repurchase program to be utilized over time.
On February 9, 2015, we entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. (GS&Co.) to repurchase shares
of our common stock. This agreement was entered into under our previously announced share repurchase authorization. Pursuant to the terms
of the agreement, on February 11, 2015, we paid $5 billion to GS&Co. and received approximately 151 million shares of our common stock
from GS&Co. This agreement was completed in July 2015, and pursuant to the agreement’s settlement terms, we elected to settle the
agreement in cash and paid an additional $160 million to GS&Co. on July 13, 2015, resulting in a total of approximately $5.2 billion paid to
GS&Co. The final average price paid for the shares delivered under the accelerated share repurchase agreement was $34.13 per share. For
additional information, see Notes to Consolidated Financial Statements––Note 12. Equity.
The following table provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced
share-purchase plans, including our accelerated share repurchase agreement:
(SHARES IN MILLIONS, DOLLARS IN BILLIONS) 2015(a) 2014 2013
Shares of common stock purchased 182 165 563
Cost of purchase $6.2$5.0$
16.3
(a) Includes approximately 151 million shares purchased for $5.2 billion pursuant to the accelerated share repurchase agreement as well as other share repurchases
through year-end 2015.
After giving effect to the accelerated share repurchase agreement, as well as other share repurchases through year-end 2015, our remaining
share-purchase authorization was approximately $16.4 billion at December 31, 2015.
In November 2015, we announced that, consistent with 2015, we expect to execute an approximately $5 billion accelerated share repurchase
program in the first half of 2016. We anticipate additional future share repurchases to continue following the consummation of the pending
combination with Allergan. The actual size and timing of any such share repurchases will depend on actual and expected financial results.
Dividends on Common Stock
We paid dividends on our common stock of $6.9 billion in 2015, $6.6 billion in 2014 and $6.6 billion in 2013. In December 2015, our Board of
Directors declared a first-quarter 2016 dividend of $0.30 per share, payable on March 2, 2016, to shareholders of record at the close of
business on February 5, 2016. The first-quarter 2016 cash dividend will be our 309th consecutive quarterly dividend.
Our current and projected dividends provide a return to shareholders while maintaining sufficient capital to invest in growing our businesses and
to seek to increase shareholder value. Our dividends are not restricted by debt covenants. The definitive merger agreement we entered into
with Allergan in November 2015 includes a provision that Pfizer may continue to pay regular quarterly cash dividends on Pfizer’s common stock
of not more than $0.28 per share per quarter (subject to annual adjustment, if any, in a manner consistent with past practice by Pfizer’s Board of
Directors), consistent with past practice as to timing of declaration, record date and payment date. On December 14, 2015, we declared a $0.30
dividend per share for the first quarter of 2016, which is in compliance with the definitive merger agreement. While the dividend level remains a
decision of Pfizer’s Board of Directors and will continue to be evaluated in the context of future business performance, we currently believe that
we can support future annual dividend increases, barring significant unforeseen events.
Pending Combination with Allergan plc
On November 23, 2015, we announced that we have entered into a definitive merger agreement with Allergan, a global pharmaceutical
company incorporated in Ireland, under which we have agreed to combine with Allergan in a stock transaction valued at $363.63 per Allergan
share, for a total enterprise value of approximately $160 billion, based on the closing price of Pfizer common stock of $32.18 on November 20,
2015 (the last trading day prior to the announcement) and certain other assumptions. Allergan shareholders will receive 11.3 shares of the
combined company for each of their Allergan shares by virtue of a share split, and Pfizer shareholders will have the option of receiving one
share of the combined company for each of their Pfizer shares or receiving cash instead of shares of the combined company for some or all of
their Pfizer shares, provided that the aggregate amount of cash to be paid in the merger will not be less than $6 billion or greater than $12
billion. In the event that elections to receive cash and shares in the merger would otherwise result in an aggregate of less than $6 billion or
greater than $12 billion of cash being paid out in the merger, then the share elections and cash elections will be subject to proration. The
completion of the transaction, which is expected in the second half of 2016, is subject to certain conditions, including receipt of regulatory
approval in certain jurisdictions, including the U.S. and EU, the receipt of necessary approvals from both Pfizer and Allergan shareholders, and
the completion of Allergan’s pending divestiture of its generics business to Teva Pharmaceuticals Industries Ltd. The merger agreement also
provides that the businesses of Pfizer and Allergan will be combined under the existing Allergan entity, which, subject to approval by Allergan
shareholders, will be renamed “Pfizer plc.”