Pfizer 2005 Annual Report Download - page 60

2005 Financial Report 59
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
F. Cash Flows
It is our practice to fund amounts for our qualified pension plans
at least sufficient to meet the minimum requirements set forth
in applicable employee benefit laws and local tax laws. Liabilities
for amounts in excess of these funding levels are included in our
consolidated balance sheet, to the extent required by GAAP.
The following table presents expected cash flow information:
FOR THE YEAR ENDED POST-
DECEMBER 31 U.S. QUALIFIED INTERNATIONAL RETIREMENT
(MILLIONS OF DOLLARS) PENSION PLANS PENSION PLANS BENEFITS
Employer Contributions:
2006 (estimated) $ 3 $ 339 $150
Expected Benefit Payments:
2006 $ 321 $ 260 $150
2007 342 271 152
2008 361 286 153
2009 394 303 155
2010 422 310 155
2011—2015 2,717 1,827 769
Employer contributions for U.S. supplemental (non-qualified)
pension plans for 2006 are estimated to be $69 million with
expected benefit payments for 2006 through 2010 estimated to
be $69 million, $74 million, $81 million, $63 million and $68
million, respectively, and for 2011 through 2015 totaling $398
million.
The table reflects the total U.S. plan benefits projected to be paid
from the plans or from the Company’s general assets under the
current actuarial assumptions used for the calculation of the
projected benefit obligation and therefore, actual benefit
payments may differ from projected benefit payments. Under the
provisions of the Medicare Prescription Drug Improvement and
Modernization Act of 2003, the expected benefit payments for our
U.S. postretirement plans were reduced by $156 million through
2015.
G. Defined Contribution Plans
We have savings and investment plans in several countries
including the U.S., Puerto Rico and Japan. For the U.S. and Puerto
Rico plans, employees may contribute a portion of their salaries
and bonuses to the plans, and we match, largely in company
stock, a portion of the employee contributions. Employees are
permitted to diversify a portion of the company stock match
contribution, subject to certain plan limits. The contribution
match for certain legacy Pfizer U.S. participants are held in an
employee stock ownership plan. We recorded charges related to
our plans of $234 million in 2005, $313 million in 2004 and $180
million in 2003.
14. Equity and Stock Plans
A. Common Stock
We purchase our common stock via privately negotiated
transactions or in open market purchases as circumstances and
prices warrant. Purchased shares under each of the share-purchase
programs, which are authorized by our Board of Directors, are
available for general corporate purposes.
A summary of common stock purchases follows:
FOR THE YEAR ENDED DECEMBER 31, SHARES OF AVERAGE TOTAL COST OF
(MILLIONS OF SHARES AND COMMON STOCK PER-SHARE COMMON STOCK
DOLLARS EXCEPT PER SHARE DATA) PURCHASED PRICE PAID PURCHASED
2005:
June 2005 program(a) 22 $22.38 $ 493
October 2004 program(b) 122 $27.20 3,304
Total 144 $ 3,797
2004:
October 2004 program(b) 63 $26.79 $ 1,696
December 2003 program(c) 145 $34.14 4,963
Total 208 $ 6,659
2003:
December 2003 program(c) 1$34.57 $ 37
July 2002 program(d) 406 $31.99 13,000
Total 407 $13,037
(a) In June 2005, we announced a new $5 billion share-purchase
program.
(b) In October 2004, we announced a $5 billion share-purchase
program, which we completed in June 2005.
(c) In December 2003, we announced a $5 billion share-purchase
program, which we completed in October 2004.
(d) In July 2002, we announced a $16 billion share-purchase program,
which we completed in November 2003.
B. Preferred Stock
In connection with our acquisition of Pharmacia in 2003, we issued
a newly created class of Series A convertible perpetual preferred
stock (7,500 shares designated) in exchange for and with rights
substantially similar to Pharmacia’s Series C convertible perpetual
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. The Company may
redeem the preferred stock, at any time or upon termination of the
Preferred ESOP, at its 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
In connection with our acquisition of Pharmacia, we assumed two
employee stock ownership plans (collectively the “ESOPs”), a
Preferred ESOP and another that held Pharmacia common stock
that upon acquisition was exchanged for the common stock of the
Company (“Common ESOP”). A portion of the matching
contributions for legacy Pharmacia U.S. savings plan participants
is funded through the ESOPs.
Legacy Pharmacia guaranteed a note relating to the ESOPs for the
original principal amount of $80 million (8.13%). This guarantee
continued after Pfizer’s acquisition of Pharmacia. At December 31,
2005, the balance of the note was $2 million, which was classified
as current. Compensation expense related to the ESOPs totaled
approximately $42 million in 2005 and $45 million in 2004. The
Preferred ESOP has access to up to $95 million in financing at the