Pfizer 2013 Annual Report Download - page 100

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2013 Financial Report 99
In 2013,
• We purchased approximately 563 million shares of our common stock for approximately $16.3 billion under our publicly announced
share-purchase plans. In 2012, we purchased approximately 349 million shares of our common stock for approximately $8.2 billion under
our publicly announced share-purchase plans. In 2011, we purchased approximately 459 million shares of our common stock for
approximately $9.0 billion under our publicly announced share-purchase plans. After giving effect to share purchases through year-end
2013, our remaining share-purchase authorization is approximately $5.5 billion at December 31, 2013.
• We exchanged all of our remaining interest in Zoetis for approximately 405.117 million shares of our common stock, valued at $11.4
billion. The common stock received in the exchange transaction was recorded in Treasury stock. For additional information, see Note 2B.
Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures.
B. 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. We may redeem the preferred stock at any time or upon termination of the Preferred
ESOP, at our 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
We have two employee stock ownership plans (collectively, the ESOPs), the Preferred ESOP and another that holds common stock of the
Company (Common ESOP).
Allocated shares held by the Common ESOP are considered outstanding for the earnings per share (EPS) calculations and the eventual
conversion of allocated preferred shares held by the Preferred ESOP is assumed in the diluted EPS calculation. As of December 31, 2013, the
Preferred ESOP held preferred shares with a stated value of approximately $33 million, convertible into approximately 2 million shares of our
common stock. As of December 31, 2013, the Common ESOP held approximately 3 million shares of our common stock. As of December 31,
2013, all preferred and common shares held by the ESOPs have been allocated to the Pharmacia U.S. and certain Puerto Rico savings plan
participants.
Note 13. Share-Based Payments
Our compensation programs can include share-based payments, in the form of Restricted Stock Units (RSUs), stock options, Portfolio
Performance Shares (PPSs), Total Shareholder Return Units (TSRUs) and Performance Share Awards (PSAs).
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, 2013, 156 million shares were available for award.
The 2004 Stock Plan, as amended, (2004 Stock Plan) 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, 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 (including those reported
as part of discontinued operations):
Year Ended December 31,
(MILLIONS OF DOLLARS) 2013 2012 2011
Restricted Stock Units $249 $235 $228
Stock Options 140 157 166
Portfolio Performance Shares 56 14 —
Total Shareholder Return Units 37 35 17
Performance Share Awards 34 35 3
Directors’ compensation 755
Share-based payment expense 523 481 419
Tax benefit for share-based compensation expense (173)(149)(139)
Share-based payment expense, net of tax $350 $332 $280