Pfizer 2006 Annual Report Download - page 67

66 2006 Financial Report
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
16.
Earnings Per Common Share
Basic and diluted earnings per common share were computed
using the following common share data:
YEAR ENDED DEC. 31,
(MILLIONS) 2006 2005 2004
EPS Numerator—Basic:
Income from continuing operations
before cumulative effect of a change
in accounting principles $11,024 $7,610 $10,936
Less: Preferred stock dividends—net of tax 5 64
Income available to common share-
holders from continuing operations
before cumulative effect of a change
in accounting principles 11,019 7,604 10,932
Discontinued operations:
Income from discontinued
operations—net of tax 433 451 374
Gains on sales of discontinued
operations—net of tax 7,880 47 51
Discontinued operations—net of tax 8,313 498 425
Income available to common share-
holders before cumulative effect of
a change in accounting principles 19,332 8,102 11,357
Cumulative effect of a change in
accounting principles—net of tax — (23) —
Net income available to common
shareholders $19,332 $8,079 $11,357
EPS Denominator—Basic:
Weighted average number of
common shares outstanding 7,242 7,361 7,531
EPS Numerator—Diluted:
Income from continuing operations
before cumulative effect of a change
in accounting principles $11,024 $7,610 $10,936
Less: ESOP contribution—net of tax 3 55
Income available to common share-
holders from continuing operations
before cumulative effect of a change
in accounting principles 11,021 7,605 10,931
Discontinued operations:
Income from discontinued
operations—net of tax 433 451 374
Gains on sales of discontinued
operations—net of tax 7,880 47 51
Discontinued operations—net of tax 8,313 498 425
Income available to common share-
holders before cumulative effect of
a change in accounting principles 19,334 8,103 11,356
Cumulative effect of a change in
accounting principles—net of tax — (23) —
Net income available to common
shareholders $19,334 $8,080 $11,356
EPS Denominator—Diluted:
Weighted-average number of
common shares outstanding 7,242 7,361 7,531
Common share equivalents—stock
options, stock issuable under
employee compensation plans and
convertible preferred stock 32 50 83
Weighted-average number of
common shares outstanding
and common share equivalents 7,274 7,411 7,614
Stock options and stock issuable under employee compensation
plans representing equivalents of 552 million shares of common
stock during 2006, 557 million shares of common stock during 2005
and 359 million shares of common stock during 2004 had exercise
prices greater than the annual average market price of our
common stock. These common stock equivalents were outstanding
during 2006, 2005 and 2004, but were not included in the
computation of diluted earnings per common share for those years
because their inclusion would have had an anti-dilutive effect.
17. Lease Commitments
We lease properties and equipment for use in our operations. In
addition to rent, the leases may require us to pay directly for taxes,
insurance, maintenance and other operating expenses, or to pay
higher rent when operating expenses increase. Rental expense,
net of sublease income, was $420 million in 2006, $410 million in
2005 and $438 million in 2004. This table shows future minimum
rental commitments under noncancellable operating leases as of
December 31 for the following years:
AFTER
(MILLIONS OF DOLLARS) 2007 2008 2009 2010 2011 2011
Lease commitments $229 $200 $174 $113 $72 $524
18.
Insurance
Our insurance coverage reflects market conditions (including cost
and availability) existing at the time it is written, and our decision
to obtain insurance coverage or to self-insure varies accordingly. The
cost of insurance has risen substantially and the availability of
insurance has become more restrictive. Thus, depending upon the
cost of insurance and the nature of the risk involved, the amount
of self-insurance may be significant. We consider the impact of these
changes as we assess our future insurance needs. If we incur
substantial liabilities that are not covered by insurance or
substantially exceed insurance coverage and that are in excess of
existing accruals, there could be a material adverse effect on our
results of operations in any particular period (see Note 19. Legal
Proceedings and Contingencies).
19. Legal Proceedings and Contingencies
We and certain of our subsidiaries are involved in various patent,
product liability, consumer, commercial, securities, environmental
and tax litigations and claims; government investigations; and
other legal proceedings that arise from time to time in the
ordinary course of our business. We do not believe any of them
will have a material adverse effect on our financial position.
We record accruals for such contingencies to the extent that we
conclude their occurrence is probable and the related damages
are estimable. If a range of liability is probable and estimable and
some amount within the range appears to be a better estimate
than any other amount within the range, we accrue that amount.
If a range of liability is probable and estimable and no amount
within the range appears to be a better estimate than any other
amount within the range, we accrue the minimum of such
probable range. Many claims involve highly complex issues relating
to causation, label warnings, scientific evidence, actual damages
and other matters. Often these issues are subject to substantial
uncertainties and, therefore, the probability of loss and an
estimation of damages are difficult to ascertain. Consequently, we