UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________to_______
COMMISSION FILE NUMBER 1-3619
--
PFIZER INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-5315170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
235 East 42nd Street, New York, New York 10017
(Address of principal executive offices, including zip code)
(212) 573-2323
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
At July 31, 1995, there were 634,217,993 shares par value
$.05, of the issuer's common stock outstanding.
<PAGE>
PFIZER INC.
FORM 10-Q
For the Quarter Ended
July 2, 1995
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements: Page
Condensed Consolidated Statement of Income for
the three months and six months ended
July 2, 1995 and July 3, 1994 3
Condensed Consolidated Balance Sheet at
July 2, 1995, December 31, 1994 and July 3, 1994 4
Condensed Consolidated Statement of Cash Flows for the
six months ended July 2, 1995 and July 3, 1994 5
Notes to Condensed Consolidated Financial Statements 6
Independent Auditors' Report 9
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings 19
Item 4.
Submission of Matters to a Vote of Security Holders 24
Item 6.
Exhibits and Reports on Form 8-K 25
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
(millions of dollars, except
per share data)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . $2,482.0 $1,923.3 $4,884.9 $3,906.2
Costs and expenses
Cost of sales . . . . . . . . . . . . 603.3 464.1 1,154.8 896.3
Selling, informational and
administrative expenses. . . . . . . 984.1 800.0 1,848.9 1,530.5
Research and development expenses . . 358.2 262.0 674.8 516.7
Other deductions--net. . . . . . . . . 60.9 27.4 100.0 62.9
Income before provision for taxes on
income and minority interests . . . . 475.5 369.8 1,106.4 899.8
Provision for taxes on income . . . . . 156.9 110.9 365.1 269.9
Minority interests. . . . . . . . . . . 2.3 1.7 4.6 2.0
Net income. . . . . . . . . . . . . . . $ 316.3 $ 257.2 $ 736.7 $ 627.9
Earnings per common share . . . . . . . $ .50 $ .42 $ 1.18 $ 1.01
Cash dividends per common share . . . . $ .26 $ .235 $ .52 $ .47
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars) July 2, Dec. 31, July 3,
1995* 1994** 1994*
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . .$ 623.6 $ 1,458.5 $ 804.1
Short-term investments. . . . . . . . . . . 1,018.4 560.1 614.4
Accounts receivable, less allowances
July 2, 1995 - $52.9; Dec. 31, 1994 -
$44.1; July 3, 1994 - $40.6 . . . . . . . 2,083.1 1,665.0 1,548.6
Short-term loans. . . . . . . . . . . . . . 269.2 361.3 405.7
Inventories
Finished goods. . . . . . . . . . . . . . 934.2 528.0 500.9
Work in process . . . . . . . . . . . . . 442.7 534.9 540.2
Raw materials and supplies. . . . . . . . 90.5 202.0 198.5
Total inventories . . . . . . . . . . . 1,467.4 1,264.9 1,239.6
Prepaid expenses and taxes. . . . . . . . . 520.4 478.6 559.3
Total current assets. . . . . . . . . . 5,982.1 5,788.4 5,171.7
Long-term loans and marketable securities . . 673.5 724.3 723.3
Property, plant and equipment, less
accumulated depreciation
July 2, 1995 - $2,123.1;
Dec. 31, 1994 - $1,919.7;
July 3, 1994 - $1,829.0 . . . . . . . . . 3,589.7 3,073.2 2,805.6
Goodwill, less accumulated amortization
July 2, 1995 - $65.4; Dec. 31, 1994 -
$48.2; July 3, 1994 - $42.0 . . . . . . . . 1,218.2 325.7 288.7
Other assets, deferred taxes and
deferred charges. . . . . . . . . . . . . . 1,481.9 1,186.9 1,110.6
Total assets. . . . . . . . . . . . . .$12,945.4 $11,098.5 $10,099.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings, including current
portion of long-term debt
July 2, 1995 - $4.1; Dec. 31, 1994 -
$6.5; July 3, 1994 - $1.4 . . . . . . .$ 3,059.5 $ 2,220.0 $ 1,836.2
Accounts payable. . . . . . . . . . . . . . 715.1 524.9 427.1
Income taxes payable. . . . . . . . . . . . 722.1 731.1 617.6
Dividends payable . . . . . . . . . . . . . 164.1 -- 149.0
Accrued compensation and related items. . . 397.8 419.0 346.1
Other current liabilities . . . . . . . . . 1,043.9 930.9 910.2
Total current liabilities . . . . . . . 6,102.5 4,825.9 4,286.2
Long-term debt. . . . . . . . . . . . . . . . 611.2 604.2 570.2
Postretirement benefit obligation other
than pension plans. . . . . . . . . . . . . 431.3 432.6 443.2
Deferred taxes on income. . . . . . . . . . . 254.3 211.7 239.2
Other non-current liabilities . . . . . . . . 672.1 661.4 776.3
Minority interests. . . . . . . . . . . . . . 44.8 38.8 36.8
Total liabilities . . . . . . . . . . . 8,116.2 6,774.6 6,351.9
Shareholders' Equity
Preferred stock . . . . . . . . . . . . . . -- -- --
Common stock. . . . . . . . . . . . . . . . 34.1 34.0 33.9
Additional paid-in capital. . . . . . . . . 840.0 651.4 462.8
Retained earnings . . . . . . . . . . . . . 6,189.4 5,944.5 5,420.7
Currency translation adjustment and other . 315.8 196.0 129.4
Employee benefit trust. . . . . . . . . . . (873.7) (749.3) (620.6)
Common stock in treasury, at cost . . . . . (1,676.4) (1,752.7) (1,678.2)
Total shareholders' equity. . . . . . . 4,829.2 4,323.9 3,748.0
Total liabilities and
shareholders' equity . . . . . . . .$12,945.4 $11,098.5 $10,099.9
* Unaudited
** Condensed from audited financial statements.
See accompanying Notes to Condensed Consolidated Financial Statements.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(millions of dollars)
Six Months Ended
July 2, July 3,
1995 1994
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . .$ 736.7 $627.9
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of intangibles . . . . 180.9 139.5
Changes in operating assets and liabilities,
net of effect of businesses acquired. . . . . . . . (154.6) (162.6)
Other. . . . . . . . . . . . . . . . . . . . . . . . (14.0) (2.0)
Net cash provided by operating activities. . . . . . . . 749.0 602.8
Investing Activities
Acquisitions, net of cash acquired . . . . . . . . . .(1,461.9) --
Purchases of property, plant and equipment . . . . . . (315.7) (289.1)
Purchases of short-term investments. . . . . . . . . .(1,273.6) (786.4)
Proceeds from redemptions of short-term
investments. . . . . . . . . . . . . . . . . . . . . 927.9 626.3
Net change in loans and long-term investments
by financial subsidiaries. . . . . . . . . . . . . . 206.2 (4.8)
Purchases and redemptions of short-term
investments by financial subsidiaries. . . . . . . . (35.4) 29.5
Purchases of long-term investments . . . . . . . . . . (80.2) (115.8)
Other investing activities . . . . . . . . . . . . . . 75.4 49.6
Net cash used in investing activities. . . . . . . . . .(1,957.3) (490.7)
Financing Activities
Increase in short-term debt. . . . . . . . . . . . . . 729.2 657.7
Purchases of common stock. . . . . . . . . . . . . . . (108.5) (434.9)
Cash dividends paid. . . . . . . . . . . . . . . . . . (327.8) (298.9)
Stock option transactions. . . . . . . . . . . . . . . 60.3 18.5
Other financing activities . . . . . . . . . . . . . . 20.1 12.7
Net cash provided by/(used in) financing
activities . . . . . . . . . . . . . . . . . . . . . . 373.3 (44.9)
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . . . . . . .1 7.5
Net (decrease)/increase in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . (834.9) 74.7
Cash and cash equivalents balance at beginning
of period. . . . . . . . . . . . . . . . . . . . . . . 1,458.5 729.4
Cash and cash equivalents balance at end
of period. . . . . . . . . . . . . . . . . . . . . . .$ 623.6 $804.1
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the rules and regulations of the
United States Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
Subsidiaries operating outside the United States generally are included
on the basis of interim periods ended May 28, 1995 and May 29, 1994.
Note 2: Responsibility for Interim Financial Statements
Pfizer Inc. (the "Company") is responsible for the accompanying
unaudited interim financial statements which reflect all normal and
recurring adjustments considered necessary for a fair statement of the
results for the periods presented.
The interim financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's latest
annual report on Form 10-K.
The results of operations for the interim periods ended July 2, 1995 are
not necessarily indicative of the results which ultimately might be
expected for the current year.
Note 3: Earnings Per Common Share
Earnings per common share are computed by dividing net income by the
weighted average number of common shares and common share equivalents
outstanding. Common share equivalents consist of shares issuable upon
exercise of stock options. The weighted average number of common shares
and common share equivalents totaled 624.8 million and 621.8 million for
the first six months of 1995 and 1994, respectively. These amounts have
been adjusted for the two-for-one stock split in the form of a 100%
stock dividend effective June 30, 1995. For further details, see Note
8, "Stock Split," on page 8.
Note 4: Currency Impact
An analysis of the changes in the currency translation adjustment for
the six months ended July 2, 1995 is as follows:
(millions of dollars)
Currency translation adjustment December 31, 1994 $194.0
Translation adjustments and hedges 119.0
Currency translation adjustment July 2, 1995 $313.0
The balance sheet caption Currency translation adjustment and other also
includes a net unrealized gain of $2.8 million on investment securities
available for sale.
Exchange gains/(losses) included in "Other deductions--net" were as
follows:
(millions of dollars) 1995 1994
Second Quarter $4.5 $(4.2)
Six Months $6.2 $(6.3)
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 5: Interest Expense
Included in "Other deductions--net" was interest expense of $56.4
million and $29.6 million for the second quarters of 1995 and 1994,
respectively. Interest expense for the first six months of 1995 and
1994 was $105.9 million and $63.8 million, respectively.
Note 6: Acquisitions
In January 1995, the Company acquired the capital stock of certain
subsidiaries of SmithKline Beecham plc operating solely in the animal
health business and certain net assets used in the animal health
business from other SmithKline Beecham plc subsidiaries for
approximately $1.5 billion including direct costs of the acquisition.
The acquisition was substantially financed at closing by the issuance of
commercial paper. The SmithKline Beecham animal health (SBAH) business
is a global business which manufactures and sells products in four
principal categories: vaccines, anti-infectives, productivity enhancers
and parasiticides.
This acquisition has been recorded under the purchase method of
accounting. The Company's first-half 1995 results include six months of
SBAH's activity in the U.S. and five months in international markets.
The excess of the purchase price over the estimated fair value of the
tangible net assets acquired has been allocated to identifiable
intangibles of approximately $280 million and goodwill of approximately
$800 million. The goodwill and identifiable intangibles are being
amortized on a straight-line basis over periods of 10 to 40 years.
Sales of the SBAH business were approximately $261 million for the first
six months of 1994. Pro forma net income and earnings per share for the
first six months of 1994 that reflect this acquisition as if it had
occurred as of the beginning of the period result in a negative impact
of approximately 3% on both reported amounts. Pro forma results include
a period comparable to the first six months of 1995 as well as interest
expense and amortization of goodwill and other intangibles related to
the acquisition. The pro forma results of operations are not
necessarily indicative of the results of operations that would have
occurred had the acquisition actually occurred as of the beginning of
the period nor are these results indicative of future consolidated
results of operations.
In March 1995, the Company acquired NAMIC U.S.A. Corporation for
approximately 4.4 million of the Company's common shares in a stock for
stock transaction valued at approximately $170 million including direct
costs of the acquisition. This acquisition was accounted for under the
purchase method of accounting. Pro forma results of operations that
reflect this acquisition as if it had occurred at the beginning of the
periods presented would not be materially different from the reported
amounts. Results of operations have been included in the Condensed
Consolidated Statement of Income from April 3, 1995.
<PAGE>
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 7: Financial Instruments
During the second quarter of 1995, the Company adjusted its existing
Japanese yen option hedging program in order to enhance the protection
provided by previously purchased yen put option hedges when the
prevailing yen spot rate was considerably higher than the option strike
rate during the quarter. The Company purchased additional yen put
options equal to $104 million with maturities through 1996. In order to
offset the original put options, the Company wrote yen call options
equal to $104 million with identical terms as the previously purchased
put options. Both options are reported at market value and any market
value changes are reported in Other deductions--net. Due to the fact
that these positions effectively offset, there is no net impact on
earnings.
Note 8: Stock Split
In April 1995, the Company announced a two-for-one stock split in the
form of a 100 percent stock dividend effective on June 30, 1995 to
shareholders of record on June 1, 1995. The split followed a vote by
Pfizer shareholders to increase the number of authorized common shares
from 750 million to 1.5 billion and to decrease the par value from $.10
to $.05 per share. The number of shares and the per share amounts
included in these consolidated financial statements have been restated
to reflect the stock split. <PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of Pfizer Inc.:
We have reviewed the condensed consolidated balance sheet of Pfizer Inc.
and subsidiary companies as of July 2, 1995 and July 3, 1994, and the
related condensed consolidated statements of income for each of the
three month and six month periods then ended and cash flows for the six
month periods then ended. These condensed consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Pfizer Inc. and
subsidiary companies as of December 31, 1994, and the related
consolidated statements of income, shareholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated
February 23, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
December 31, 1994, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
KPMG Peat Marwick LLP
New York, New York
August 11, 1995
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
<TABLE>
PFIZER INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS ENDED JULY 2, 1995 AND JULY 3, 1994
(millions of dollars, except
per share data)
<CAPTION>
Percent Percent
Increase Increase
Comparison Comparison
Second Quarter Six Months 2nd Quarter Six Months
1995 1994 1995 1994 1995/1994 1995/1994
<S> <C> <C> <C> <C> <C> <C>
Net sales $2,482.0 $1,923.3 $4,884.9 $3,906.2 29 25
Cost of sales $ 603.3 $ 464.1 $1,154.8 $ 896.3 30 29
% of net sales 24.3% 24.1% 23.6% 23.0%
Production margin $1,878.7 $1,459.2 $3,730.1 $3,009.9 29 24
% of net sales 75.7% 75.9% 76.4% 77.0%
Selling,
informational
and administrative
expenses $ 984.1 $ 800.0 $1,848.9 $1,530.5 23 21
% of net sales 39.6% 41.6% 37.9% 39.2%
Research and
development
expenses $ 358.2 $ 262.0 $ 674.8 $ 516.7 37 31
% of net sales 14.4% 13.6% 13.8% 13.2%
Other deductions--net $ 60.9 $ 27.4 $ 100.0 $ 62.9 122 59
% of net sales 2.5% 1.5% 2.1% 1.6%
Income before taxes $ 475.5 $ 369.8 $1,106.4 $ 899.8 29 23
% of net sales 19.2% 19.2% 22.6% 23.0%
Taxes on income $ 156.9 $ 110.9 $ 365.1 $ 269.9 41 35
Effective tax rate 33.0% 30.0% 33.0% 30.0%
Net income $ 316.3 $ 257.2 $ 736.7 $ 627.9 23 17
% of net sales 12.7% 13.4% 15.1% 16.1%
Earnings per
common share $ .50 $ .42 $ 1.18 $ 1.01 19 17
Cash dividends
per common share $ .26 $ .235 $ .52 $ .47 11 11
<FN>
For explanation of percent changes, see discussion beginning on page 13.
</FN>
</TABLE>
PFIZER INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
NET SALES BY BUSINESS SEGMENT
FOR THE PERIODS ENDED JULY 2, 1995 AND JULY 3, 1994
(millions of dollars)
Percent
Increase/(Decrease)
Second Quarter Comparison
% of % of 2nd Qtr. 1995
Net Net from
1995 Sales 1994 Sales 2nd Qtr. 1994
$2,016.0 81.2 $1,598.1 83.1 Health Care 26
284.3 11.5 141.4 7.4 Animal Health 101
100.4 4.0 106.7 5.5 Consumer Health Care (6)
81.3 3.3 77.1 4.0 Food Science 5
$2,482.0 100.0 $1,923.3 100.0 Consolidated 29
Percent
Increase/(Decrease)
Six Months Comparison
% of % of Six Months 1995
Net Net from
1995 Sales 1994 Sales Six Months 1994
$3,983.1 81.5 $3,257.4 83.4 Health Care 22
557.4 11.4 286.7 7.3 Animal Health 94
198.1 4.1 213.2 5.5 Consumer Health Care (7)
146.3 3.0 148.9 3.8 Food Science (2)
$4,884.9 100.0 $3,906.2 100.0 Consolidated 25
For explanation of percent changes, see discussion beginning on page 13.
<PAGE>
PFIZER INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
NET SALES BY GEOGRAPHIC AREA
FOR THE PERIODS ENDED JULY 2, 1995 AND JULY 3, 1994
(millions of dollars)
Percent
Increase
Second Quarter Comparison
% of % of 2nd Qtr. 1995
Net Net from
1995 Sales 1994 Sales 2nd Qtr. 1994
$1,200.6 48.4 $1,016.0 52.8 United States 18
652.3 26.3 435.1 22.6 Europe 50
406.9 16.4 288.2 15.0 Asia 41
174.2 7.0 144.2 7.5 Canada/Latin America 21
48.0 1.9 39.8 2.1 Africa/Middle East 21
$2,482.0 100.0 $1,923.3 100.0 Consolidated 29
Percent
Increase
Six Months Comparison
% of % of Six Months 1995
Net Net from
1995 Sales 1994 Sales Six Months 1994
$2,497.6 51.1 $2,116.5 54.2 United States 18
1,178.8 24.1 844.7 21.6 Europe 40
750.5 15.4 569.4 14.6 Asia 32
341.6 7.0 284.8 7.3 Canada/Latin America 20
116.4 2.4 90.8 2.3 Africa/Middle East 28
$4,884.9 100.0 $3,906.2 100.0 Consolidated 25
For explanation of percent changes, see discussion beginning
on page 13.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
NET SALES
The following statistical data are provided to assist the reader in
understanding the composition of changes affecting the increase in net
sales.
Sales Growth Analysis
% Increase/(Decrease)
Comparison
2nd Qtr. 1995 Six Months 1995
from from
2nd Qtr. 1994 Six Months 1994
Volume 26 23
Price (1) (2)
Currency 4 4
Total net sales increase 29 25
Consolidated net sales increased 29% in the second quarter, and 25% in
the first six months of 1995 to $2,482.0 million and $4,884.9 million,
respectively. Sales growth for the second quarter and the first half of
1995 was driven predominately by increased sales volume of the Company's
new products. This is the first quarter in the Company's history in
which four products--Norvasc, Zoloft, Diflucan and Procardia XL--each
had sales in excess of $200 million. The strengthening of foreign
currencies, particularly in Japan and major European countries, relative
to the U.S. dollar had a 4% positive effect on sales in both periods.
Excluding the effect of the SmithKline Beecham animal health business,
worldwide sales increased by 21% in the second quarter and 18% in the
first six months of 1995 versus last year's comparable periods.
Worldwide sales of pharmaceuticals increased 28% and 24%, respectively,
in the second quarter and first half of 1995 versus the comparable
periods of last year. In the second quarter of 1995, U.S.
pharmaceutical sales increased 17% and International pharmaceutical
sales increased 40%, 11% of which was due to the impact of foreign
exchange. For the first half of 1995, U.S. pharmaceutical sales
increased 17% and International pharmaceutical sales increased 32%, 9%
of which was due to the impact of foreign exchange.
Worldwide sales of the anti-infective Zithromax increased by 161% and
138% in the second quarter and first half of 1995, respectively, versus
the comparable periods of 1994 as a result of continued strong
marketplace acceptance worldwide and launches in several countries
during the past 12 months. In addition, there was a rise in demand as a
result of a new marketing campaign launched in the U.S. in November
1994.
In the second quarter, worldwide sales of cardiovascular drugs increased
by 28% versus last year's second quarter. Sales of Norvasc, a calcium
channel blocker for the treatment of hypertension and angina, increased
by 72%. Sales of Cardura, an alpha blocker for the treatment of
hypertension and benign prostatic hyperplasia (BPH), increased by 37%,
while sales of Procardia XL showed a modest decline of 3%.
Norvasc, shown by a recent study to be safe for use in patients with
congestive heart failure, has become the largest selling calcium channel
blocker in 9 countries and is number 2 in several other countries.
Cardura benefited from greater acceptance of alpha-blocking drugs in the
treatment of hypertension and launches for BPH, notably in the U.S., the
Netherlands, Spain and the U.K.
Worldwide sales of the anti-depressant Zoloft increased by 52% in the
second quarter, driven by increasing acceptance of this class of drugs
(selective serotonin re-uptake inhibitors) in general and of Zoloft in
particular. Sales of the antifungal Diflucan increased by 29% in the
quarter as a result of its greater use for systemic candidiasis
worldwide and its mid-1994 approval in the U.S. as the first oral
treatment for vaginal "yeast" (candida) infections.
In the second quarter, the combined worldwide sales of the Company's six
newest pharmaceuticals -- Zithromax, Norvasc, Zoloft, Cardura, Diflucan
and Glucotrol XL -- increased by 57% and made up 58% of total
pharmaceutical sales for the quarter. The following table shows the
percentage sales growth of the Company's major pharmaceuticals for the
second quarter and first half of 1995:
Net Sales Growth of Major Pharmaceuticals 1995 vs. 1994
Percentage Increase/(Decrease)
2nd Qtr. Six Months
Zithromax 161 138
Norvasc 72 72
Zoloft 52 51
Cardura 37 29
Diflucan 29 28
Procardia XL (3) (3)
Hospital Products Group's (HPG) sales grew 18% in the second quarter and
15% in the first half of 1995 reflecting the strength of new product
rollouts, business expansion, and favorable exchange effects. Given the
launch of new products in 1994 and the rollout of a new line of stents
in Japan during the second quarter of 1995, growth in Schneider was
particularly strong in the quarter. The acquisition in March 1995 of
NAMIC U.S.A. Corp, which manufactures ancillary equipment for fluid
administration and waste disposal in angioplasty and angiography
procedures, contributed sales of $18 million, or 6% to HPG sales growth
for the quarter. Exchange fluctuations increased second quarter HPG
sales by 6% in the quarter.
Animal health care sales increased by 101% in the second quarter and 94%
in the first half as a result of the SmithKline Beecham animal health
acquisition. Sales of Dectomax, an anti-parasitic drug used in cattle
increased by 89% to $20 million in the second quarter as the worldwide
product rollout continued.
Consumer health care sales decreased by 6% in the quarter, reflecting
increased competition and the devaluation of the peso in Mexico.
Food science sales increased 5% in the second quarter of 1995. Sales of
specialty products increased 21%, reflecting an increase in sales of
Litesse, a low-fat bulking agent plus strong sales of flavors. The
Company has received inquiries from parties about possibly acquiring the
Food Science segment and is exploring these inquiries; however, no
decision has been made to sell the business.
It appears that given the strong sales performance to date, the
Company's sales will exceed $10 billion for the year.
COSTS AND EXPENSES
As a percentage of net sales, cost of sales increased in the second
quarter and first half of 1995 versus the comparable periods of last
year. This increase was mainly due to the impact of purchase accounting
relating to SmithKline Beecham Animal Health (SBAH) inventories and
lower production margins for SBAH relative to the Company overall.
Costs of sales in 1994 included the recording of additional Procardia XL
royalty expense in the second quarter as a result of the issuance of a
composition of matter patent for nifedipene. Production margin also
benefited from the reengineering of manufacturing operations, including
the shutdown of a number of pharmaceutical plants to date. Selling,
informational and administrative expenses as a percentage of sales
decreased in the second quarter and first half of 1995 compared with the
same periods of 1994. This improvement reflects the beneficial impact
of the Company's continuous improvement and restructuring programs.
Research and development (R&D) expenditures were up 37% and 31% in the
second quarter and first half, respectively, relative to last year's
comparable periods due to the rapid advancement of a number of drug
candidates in late stages of development.
In 1995, the Company plans to spend approximately $1.5 billion on R&D.
Health care R&D expenses, expressed as a percentage of health care net
sales, were 15.1% and 15.4% in the first six months of 1995 and 1994,
respectively.
Income before taxes and other deductions--net, expressed as a percentage
of net sales, was approximately the same for both the first six months
of 1995 and 1994. This percentage is targeted to improve by about one
percentage point for the full year 1995 versus 1994.
Other Deductions--net for the second quarter and first six months of
1995 and 1994 are summarized in the following table:
(millions of dollars) % Incr./
Second Quarter 1995 1994 (dec.)
Interest income $(38.2) $(28.3) 35
Interest expense 56.4 29.6 91
Other income (2.6) (6.2) (58)
Other deductions 45.3 32.3 40
Other deductions--net $ 60.9 $ 27.4 122
Six Months
Interest income $(85.9) $(50.9) 69
Interest expense 105.9 63.8 66
Other income (5.0) (10.9) (54)
Other deductions 85.0 60.9 40
Other deductions--net $100.0 $ 62.9 59
The increase in interest income in the second quarter and first six
months of 1995 was due to higher interest rates and higher average
levels of interest earning assets. The increase in interest expense was
primarily due to higher levels of borrowings which were mainly used to
finance the acquisition of the SmithKline Beecham animal health
business. The increase in Other deductions in the second quarter and
first half of 1995 versus last year was primarily attributable to the
amortization of goodwill and other intangibles as a result of the
SmithKline Beecham animal health business, partially offset by exchange
gains in 1995 as opposed to exchange losses in 1994.
<PAGE>
INCOME TAXES
The Company's effective tax rate increased from 30% in 1994 to 33% this
year due to the continuing reduction of the tax benefit from the
Company's Puerto Rican operations as a result of the Omnibus Budget
Reconciliation Act of 1993, the expiration of the R&D tax credit and of
the Section 861 R&D allocation rules during 1995 and changes in the mix
of income by country. The effective tax rate of 33% could decline to
31.5% if both the tax allocation rules and the current congressional
deliberation about the future of the R&D tax credit are concluded with a
favorable result.
OTHER
In the first six months of 1995, approximately 2.6 million shares were
purchased in the open market at an average cost of approximately $42 per
share and a portion of these shares were utilized in the acquisition of
NAMIC U.S.A. Corporation. In the first six months of 1994, approximately
15.0 million shares were purchased at an average cost of $29 per share.
In 1993, the Company initiated a restructuring program which included
the consolidation of manufacturing facilities, the demolition of
buildings resulting from the consolidation, reconfiguration and
rehabilitation of remaining facilities and the consolidation of
distribution and administrative organizations and infrastructures,
including the consolidation of finance organizations in Europe.
Through July 2, 1995, completed restructuring initiatives reduced the
workforce by approximately 1,000 people and resulted in the closing of
15 facilities. The annualized benefit of efficiencies resulting from
completed efforts was approximately $61 million. The full
implementation of such plans is still anticipated to lower annual
operating costs by $130 million. To date, there have been no
reclassifications between the components presented below, nor have there
been significant changes in estimates of the cost of the plan.
The following table indicates the status of the restructuring charges by
component:
Utilization Reserves
(millions of dollars) 1993 Through Remaining
Restructuring 1st Qtr. 2nd Qtr. at July 2,
Charges 1995 1995 1995
Employee severance
payments $230.7 $ 64.6 $16.3 $149.8
Operating assets to be
sold/disposed of 211.7 107.6 .7 103.4
Closed facilities'
costs 101.1 25.7 4.0 71.4
Currency translation
adjustment related
to the liquidation/
disposal of business 57.8 57.8 -- --
Administrative
infrastructures 37.6 34.4 2.9 .3
Lease and third party
contract termination
costs 37.0 21.7 -- 15.3
Other 14.3 11.1 1.3 1.9
$690.2 $322.9 $25.2 $342.1
Closed facilities' costs relate primarily to the rationalization of
manufacturing capacity and the demolition of structures within certain
manufacturing facilities. Administrative infrastructure costs relate
primarily to consulting costs involved in restructuring the
administrative support organizations and distribution centers.
Writedowns of operating assets, which primarily involve manufacturing
rationalizations, are considered utilized and the reserve charged when
the asset is sold or otherwise disposed of by the Company.
In April 1995, the Company announced a two-for-one stock split in the
form of a 100 percent stock dividend which was effective on June 30,
1995 to shareholders of record on June 1, 1995. The split followed a
vote in April 1995 by Pfizer shareholders to increase the number of
authorized common shares from 750 million to 1.5 billion and to decrease
the par value from $.10 to $.05 per share. The number of shares and the
per share amounts included in the consolidated financial statements and
herein are presented after giving effect to the stock split.
PROSPECTIVE FINANCIAL STANDARD
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of," (SFAS No. 121), which will become
effective on January 1, 1996. SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used and
for long-lived assets and certain identifiable intangibles to be
disposed. Adoption of SFAS No. 121 is not expected to have a material
impact on the Company's consolidated financial position and operating
results, nor will it affect the Company's cash flows.
<PAGE>
ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and short-term investments totaled $1,642.0
million at July 2, 1995 as compared to $2,018.6 million at December 31,
1994. Total borrowings were $3,670.7 million at July 2, 1995 as compared
with $2,824.2 million at December 31, 1994. Working capital at July 2,
1995 decreased versus December 31, 1994 and July 3, 1994. The decrease
in both periods was primarily attributable to increased short-term
borrowings used to finance the SmithKline Beecham animal health business
acquisition.
July 2, Dec. 31, July 3,
1995 1994 1994
Working capital (millions of dollars) $(120.4) $962.5 $885.5
Current ratio 0.98:1 1.20:1 1.21:1
Debt to total capitalization (percentage)* 43% 40% 39%
Shareholders' equity per common share** $ 7.86 $ 7.10 $ 6.16
Days of sales outstanding - trade
accounts receivable 77 60 71
Months of inventory on hand 9.0 8.6 8.9
* Represents total short and long-term borrowings divided by the sum of
total short and long-term borrowings and total shareholders' equity.
** Represents total shareholders' equity divided by the actual number of
common shares outstanding adjusted for the 1995 two-for-one stock split
in the form of a 100% stock dividend.
<PAGE>
FORM 10-Q
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
The Company is involved in a number of claims and litigations,
including product liability claims and litigations considered normal in
the nature of its businesses. These include suits involving various
pharmaceutical and hospital products that allege either reaction to or
injury from use of the product.
As previously disclosed, numerous claims have been brought against
the Company and Shiley Incorporated, a wholly owned subsidiary, alleging
either personal injury from fracture of 60(degree) or 70(degree) Shiley
Convexo-Concave (C/C) heart valves, or anxiety that properly functioning
implanted valves might fracture in the future, or, in a few cases,
personal injury from a prophylactic replacement of a functioning valve.
In an attempt to resolve all claims alleging anxiety that properly
functioning valves might fracture in the future, the Company entered
into a settlement agreement in January 1992 in Bowling v. Shiley et al.,
a case brought in the United States District Court for the Southern
District of Ohio that establishes a worldwide settlement class of people
with C/C heart valves and their spouses, except those who elect to
exclude themselves. The settlement provides for a Consultation Fund of
$90 to $140 million (depending on the number of claims filed) from which
valve recipients who make claims will receive payments that are intended
to cover their cost of consultation with cardiologists or other health
care providers with respect to their valves. The settlement agreement
establishes a second fund of at least $75 million to support C/C
valve-related research, including the development of techniques to
identify valve recipients who may have significant risk of fracture, and
to cover the unreimbursed medical expenses that valve recipients may
incur for certain procedures related to the valves. The Company's
obligation as to coverage of these unreimbursed medical expenses is not
subject to any dollar limitation. Following a hearing on the fairness
of the settlement, it was approved by the court on August 19, 1992. An
appeal of the court's approval of the settlement was dismissed on
December 20, 1993 by the United States Court of Appeals for the Sixth
Circuit. A motion for rehearing en banc was denied on March 8, 1994,
and the U.S. Supreme Court denied a writ of certiorari on October 4,
1994. A second appeal to the Sixth Circuit by the same appellants
regarding the denial of their earlier motion to intervene is pending.
It is expected that most of the costs arising from the Bowling class
settlement will be covered by insurance and the proceeds of the sale of
certain product lines of the Shiley businesses in 1992. Of
approximately 900 implantees (and spouses of some of them) who opted out
of the Bowling settlement class, nine have cases pending; approximately
792 have been resolved; and approximately 100 have never filed a case or
claim.
Several claims relating to elective reoperations of valve
recipients are currently pending. Some of these claims relate to
elective reoperations covered by the Bowling class settlement described
above, and, therefore, the claimants are entitled to certain benefits in
accordance with the settlement. Such claimants, if they irrevocably
waive all of the benefits of the settlement, may pursue separate
litigation to recover damages in spite of the class settlement. The
Company is defending these claims.
Generally, the plaintiffs in all of the pending heart valve
litigations discussed above seek money damages. Based on the experience
of the Company in defending these claims to date, including available
insurance and reserves, the Company is of the opinion that these actions
should not have a material adverse effect on the financial position or
the results of operations of the Company.
On September 30, 1993, Dairyland Insurance Co., a carrier
providing excess liability coverage ("excess carrier") in the early
1980s, commenced an action in the California Superior Court in Orange
County, seeking a declaratory judgment that it was not obligated to
provide insurance coverage for Shiley heart valve liability claims. On
October 8, 1993, Pfizer filed cross-complaints against Dairyland and
filed third-party complaints against 73 other excess carriers who sold
excess liability policies covering periods from 1978 to 1985, seeking
damages and declaratory judgments that they are obligated to pay for
defense and indemnity to the extent not paid by other carriers. Several
such claims have been resolved and the remainder are involved in
pretrial discovery.
The Company's operations are subject to federal, state, and local
environmental laws and regulations. Under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA" or "Superfund"), the Company has been designated as a
potentially responsible party by the United States Environmental
Protection Agency with respect to certain waste sites with which the
Company may have had direct or indirect involvement. Similar
designations have been made by some state environmental agencies under
applicable state superfund laws. Such designations are made regardless
of the extent of the Company's involvement. There are also claims that
the Company may be a responsible party or participant with respect to
several waste site matters in foreign jurisdictions. Such claims have
been made by the filing of a complaint, the issuance of an
administrative directive or order, or the issuance of a notice or demand
letter. These claims are in various stages of administrative or
judicial proceedings. They include demands for recovery of past
governmental costs and for future investigative or remedial actions. In
many cases, the dollar amount of the claim is not specified. In most
cases, claims have been asserted against a number of other entities for
the same recovery or other relief as was asserted against the Company.
The Company is currently participating in remedial action at a number of
sites under federal, state and local laws.
To the extent possible with the limited amount of information
available at this time, the Company has evaluated its responsibility for
costs and related liability with respect to the above sites and is of
the opinion that the Company's liability with respect to these sites
should not have a material adverse effect on the financial position or
the results of operations of the Company. In arriving at this
conclusion, the Company has considered, among other things, the payments
that have been made with respect to the sites in the past; the factors,
such as volume and relative toxicity, ordinarily applied to allocate
defense and remedial costs at such sites; the probable costs to be paid
by the other potentially responsible parties; total projected remedial
costs for a site, if known; existing technology; and the currently
enacted laws and regulations. The Company anticipates that a portion of
these costs and related liability will be covered by available
insurance.
Through the early 1970s, Pfizer (Minerals Division) and Quigley
Company, Inc., a wholly owned subsidiary, sold a minimal amount of one
construction product and several refractory products containing some
asbestos. These sales were discontinued thereafter. Although these
sales represented a minor market share, the Company has been named as
one of a number of defendants in numerous lawsuits. These actions, and
actions related to the Company's sale of talc products in the past,
claim personal injury resulting from exposure to asbestos-containing
products, and nearly all seek general and punitive damages. In these
actions, the Company or Quigley is typically one of a number of
defendants, and both are members of the Center for Claims Resolution
(the "CCR"), a joint defense organization that is defending these
claims. The Company and Quigley are responsible for varying percentages
of defense and liability payments for all members of the CCR. Prior to
September 1990, the cases involving talc products were defended by the
CCR, but the Company is now overseeing its own defense of these actions.
A number of cases alleging property damage from asbestos-containing
products installed in buildings have also been brought against Pfizer.
On January 15, 1993, a class action complaint and settlement
agreement were filed in the United States District Court for the Eastern
District of Pennsylvania involving all personal injury claims by persons
who have been exposed to asbestos-containing products but who have not
yet filed a personal injury action against the twenty members of the
CCR. The settlement agreement establishes a claims-processing mechanism
that will provide historic settlement values upon proof of impaired
medical condition as well as claims-processing rates over ten years. In
addition, the shares allocated to the CCR members eliminate joint and
several liability. The court has determined that the settlement is fair
and reasonable. Subsequently, the court entered an injunction enforcing
its determination. An appeal from that injunction is pending in the
United States Court of Appeals for the Third Circuit.
At approximately the time it filed the future claims class action,
the CCR settled approximately 16,360 personal injury cases on behalf of
Pfizer and Quigley. The CCR has continued to settle remaining and
opt-out cases and claims on a similar basis to past settlements. The
total pending number of cases as of June 30, 1995 is 16,917 asbestos
cases against Quigley, 5,322 asbestos cases against Pfizer Inc., and 147
talc cases against Pfizer Inc.
Costs incurred by the Company in defending the asbestos personal
injury claims and the property damage claims, as well as settlements and
damage awards in connection therewith, are largely insured against under
policies issued by several primary insurance carriers and a number of
excess carriers. The Company believes that its costs incurred in
defending and ultimately disposing of the asbestos personal injury
claims, as well as the property damage claims, will be largely covered
by insurance policies issued by carriers that have agreed to provide
coverage, subject to deductibles, exclusions, retentions and policy
limits. In connection with the future claims settlement, the defendants
have commenced a third-party action against their respective excess
insurance carriers that have not agreed to provide coverage seeking a
declaratory judgment that (a) the future claims settlement is fair and
reasonable as to the carriers; (b) the carriers had adequate notice of
the future claims class settlement; and (c) the carriers are obligated
to provide coverage for asbestos personal injury claims. Based on the
Company's experience in defending the claims to date and the amount of
insurance coverage available, the Company is of the opinion that the
actions should not ultimately have a material adverse effect on the
financial position or the results of operations of the Company.
In connection with the divestiture of Minerals Technologies Inc.
(MTI), to which the net assets of the Pfizer Minerals and the Quigley
businesses were transferred, Pfizer and Quigley agreed to indemnify MTI
against any liability with respect to products manufactured and sold
prior to October 30, 1992, as well as against liability for certain
environmental matters.
The Company has been named, together with numerous other
manufacturers of brand name prescription drugs and certain companies
that distribute brand name prescription drugs, in suits brought by
retail pharmacy companies in federal and state courts. The federal
cases consist principally of a class action by retail pharmacies
(including approximately 30 named plaintiffs), as well as additional
actions by approximately 3,000 individual retail pharmacies (the
"individual actions"). These cases, all of which have been or are in
the process of being transferred to the United States District Court for
the Northern District of Illinois and coordinated for pretrial purposes,
allege that the defendant drug manufacturers have violated the Sherman
Act in that they have unlawfully agreed with each other (and, as alleged
in some cases, with wholesalers) not to extend to retail pharmacy
companies the same discounts allegedly extended to managed care
companies, mail order pharmacies and certain other institutional
purchasers. In addition, the individual actions also allege violations
of the Robinson-Patman Act in that the manufacturers allegedly have
unlawfully discriminated against retail pharmacy companies by not
extending them such discounts. State court actions are pending in
California, Minnesota, Washington State and Wisconsin; a further Alabama
state court action has now been removed to federal court.
The federal court has certified a class consisting of all persons
or entities who, since October 15, 1989, bought prescription brand name
drugs from any manufacturer or wholesaler defendant, but specifically
excluding government entities, mail order pharmacies, HMOs, hospitals,
clinics and nursing homes. The federal court had denied a motion for
certification made by a purported class of Alabama consumers (in a case
that was originally filed in state court, then removed to federal
court). In the state cases, other than the recently removed Alabama
case, motions for class certification are pending or anticipated.
The Company believes that these cases are without merit and is
vigorously defending them.
FDA administrative proceedings relating to Plax are pending,
principally an industry-wide call for data on all anti-plaque products
by the FDA. The call for data notice specified that products that have
been marketed for a material time and to a material extent may remain on
the market pending FDA review of the data, provided the manufacturer has
a good faith belief that the product is generally recognized as safe and
effective and is not misbranded. The Company believes that Plax
satisfied these requirements and prepared a response to the FDA's
request, which was filed on June 17, 1991. This filing, as well as the
filings of other manufacturers, is still under review and is currently
being considered by an FDA Advisory Committee.
The Internal Revenue Service (IRS) is currently completing its
examination of the Company's federal income tax returns for the years
1987 through 1989. As part of this process, the Company received an
examination report from the IRS in August 1995, requesting a response
within 30 days, which sets forth the adjustments the IRS is proposing
for those years. The proposed adjustments relate primarily to the tax
accounting treatment of certain swaps and related transactions
undertaken by the Company in 1987 and 1988. These transactions resulted
in the receipt of cash in those years, which the Company duly reported
as income for tax purposes. In 1989 (in Notice 89-21), the IRS
announced that it believed cash received in certain swap transactions
should be reported as income for tax purposes over the life of the
swaps, rather than when received. In the case of the Company, this
would cause some of the income to be reported in years subject to the
Tax Reform Act of 1986. The IRS proposed adjustment involves
approximately $72 million in federal taxes for the years 1987 through
1989, plus interest. If the proposed adjustment is carried through to
the maturity of the transactions in 1992, an additional tax deficiency
of approximately $86 million, plus interest, would result. The Company
disagrees with the proposed adjustment and continues to believe that its
tax accounting treatment for the transactions in question was proper.
The Company intends to protest and appeal the proposed adjustments with
which it disagrees. While it is impossible to determine the final
disposition, the Company is of the opinion that the ultimate resolution
of this matter should not have a material adverse effect on the
financial position or the results of operations of the Company.
In November 1994, Belgium tax authorities notified Pfizer Research
and Development Company N.V./S.A. ("PRDCO"), an indirect wholly-owned
subsidiary of the Company, of a proposed adjustment to the taxable
income of PRDCO for fiscal year 1992. The proposed adjustment arises
from an assertion by the Belgium tax authorities of jurisdiction with
respect to income resulting from certain transfers of property by non-
Belgium subsidiaries of the Company to the Irish branch of PRDCO. In
January 1995, PRDCO received an assessment from the tax authorities for
additional taxes and interest of approximately $432 million and $97
million, respectively, relating to these matters. Based upon the
relevant facts regarding the property transfers to the Irish branch of
PRDCO and the provisions of Belgium tax laws and the written opinions of
outside legal counsel, the Company believes that the assessment is
wholly without merit and intends to contest it vigorously.
The Company believes that its accrued tax liabilities are adequate
for all open years.
A consolidated class action on behalf of persons who allegedly
purchased Pfizer common stock during the March 24, 1989 through February
26, 1990 period is pending in the United States District Court for the
Southern District of New York. This lawsuit, which commenced on July
13, 1990, alleges that the Company and certain officers and former
directors and officers violated federal securities law by failing to
disclose potential liability arising out of personal injury suits
involving Shiley heart valves and seeks damages in an unspecified
amount. The defendants in this action believe that the suit is without
merit and are vigorously defending it. A derivative action commenced on
April 2, 1990 against certain directors and officers and former
directors and officers alleging breaches of fiduciary duty and other
common law violations in connection with the manufacture and
distribution of Shiley heart valves is pending in the Superior Court,
Orange County, California. The complaint seeks, among other forms of
relief, damages in an unspecified amount. The defendants in the action
believe that the suit is without merit and are vigorously defending it.
On January 28, 1993, a purported class action entitled Kearse v.
Pfizer Inc. and Howmedica Inc. was commenced in the United States
District Court for the Northern District of Ohio. Howmedica Inc.
("Howmedica") is a wholly owned subsidiary of the Company. The action
sought monetary and injunctive relief, including medical monitoring, on
behalf of patients implanted with the Howmedica P.C.A. one-piece
acetabular hip component, which was manufactured by Howmedica from 1983
to 1990. The complaint alleged that the prostheses were defectively
designed and manufactured and posed undisclosed risks to implantees. On
August 3, 1993, a virtually identical purported class action,
Bradshaw/Davids v. Pfizer Inc. and Howmedica Inc., was brought and the
Kearse case was subsequently voluntarily dismissed. The federal
magistrate judge has recommended that the district court deny the
plaintiffs' motion to certify the case as a class action. The Company
believes that the suit is without merit and is vigorously defending it.
During 1994, five purported class actions were filed against
American Medical Systems ("AMS") in federal courts in South Carolina,
California, Minnesota (2), and Indiana. The California, Ohio and
Indiana suits and one Minnesota suit also name Pfizer Inc. as a
defendant, based on its ownership of AMS. The suits seek monetary and
injunctive relief on the basis of allegations that implantable penile
prostheses are prone to unreasonably high rates of mechanical failure
and/or various autoimmune diseases as a result of silicone materials.
On September 30, 1994 the federal Judicial Panel on Multidistrict
Litigation denied the various plaintiffs' motions to consolidate or
coordinate the cases for pretrial proceedings. On February 28, 1995,
the Court in the Ohio suit conditionally granted plaintiffs' motion for
class certification and on March 3, 1995, the court in the California
suit denied plaintiffs' motion for class certification. A petition for
mandamus to review the certification order in the Ohio suit is pending
in the United States Court of Appeals for the Sixth Circuit. The
Company believes the suits are without merit and is vigorously defending
them.
Item 4: Submission of Matters to a Vote of Security Holders
The shareholders of the Company voted on three matters at the
Company's Annual Meeting of Shareholders held on April 27, 1995. Matter
(1) related to the election of six director nominees: Ms. Grace J.
Fippinger and Messrs. James T. Lynn, Paul A. Marks, Edmund T. Pratt,
Jr., Felix G. Rohatyn and William C. Steere, Jr., to three-year terms.
274,266,961 votes were cast for Ms. Fippinger and 1,580,343 were
withheld. 273,849,697 votes were cast for Mr. Lynn and 1,997,607 were
withheld. 273,963,197 votes were cast for Dr. Marks and 1,884,107 were
withheld. 271,903,411 votes were cast for Mr. Pratt and 3,943,893 were
withheld. 273,278,305 votes were cast for Mr. Rohatyn and 2,568,999
were withheld. 273,901,795 votes were cast for Mr. Steere and 1,945,509
were withheld. Matter (2) related to the approval of the appointment of
KPMG Peat Marwick LLP as independent auditors of the Company for the
year 1995. 274,047,397 votes were cast for approval, 547,003 were cast
against and there were 1,252,904 abstentions. Matter (3) related to the
approval of an amendment to the Company's Restated Certificate of
Incorporation. 248,682,391 votes were cast for approval, 24,868,228 were
cast against and there were 2,221,181 abstentions.
Based on these voting results, each of the directors nominated was
elected and matters 2 and 3 were passed. As previously stated in the
Company's proxy statement, the election of a director required a
plurality of the votes present and entitled to vote at the meeting.
Passage of matter 2 required a majority of the votes cast, and passage
of matter 3 required the approval of a majority of the outstanding
Common Stock. Abstentions as to matter 3 had the same effect as a vote
cast "against" the proposal.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
1) Exhibit 11 - Computation of Earnings Per Common
Share
2) Exhibit 12 - Computation of Ratio of Earnings to
Fixed Charges
3) Exhibit 15 - Accountants' Acknowledgment
4) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter
ended July 2, 1995.
<PAGE>
PFIZER INC. AND SUBSIDIARY COMPANIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Pfizer Inc.
(Registrant)
Date: August 11, 1995
H. V. Ryan, Controller
(Principal Accounting Officer and
Duly Authorized Officer)
<PAGE>
Exhibit 11
PFIZER INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
Net income $316.3 $257.2 $736.7 $627.9
Weighted average number of
common shares outstanding 613.8 609.2 612.1 613.6
Common share equivalents (a) 13.4 8.0 12.7 8.2
Weighted average number of
common shares and common
share equivalents 627.2 617.2 624.8 621.8
Earnings per common share $ .50 $ .42 $ 1.18 $ 1.01
Net income for fully diluted
earnings per common share
computation $316.3 $257.2 $736.7 $627.9
Weighted average number of
common shares outstanding 613.8 609.2 612.1 613.6
Common share equivalents and
other dilutive securities (a) 14.8 8.4 14.2 8.4
Weighted average number of
common shares and common
share equivalents 628.6 617.6 626.3 622.0
Fully diluted earnings per
common share(b) $ .50 $ .42 $ 1.18 $ 1.01
(a) Includes common share equivalents applicable to stock option plans.
(b) This calculation is submitted in accordance with Regulation S-K item
601(b) (11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.
Note: In April 1995, the Company announced a two-for-one stock split in the
form of a 100 percent stock dividend effective on June 30, 1995 to
shareholders of record on June 1, 1995. The above common share data reflect
information that has been adjusted for this two-for-one split.
<PAGE>
<TABLE>
Exhibit 12
PFIZER INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(millions of dollars)
(Unaudited)
<CAPTION>
Six
Months
Ended
July 2, Year Ended December 31,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Determination of earnings:
Income before provision for
taxes on income,
minority interests,
and cumulative effect of
accounting changes $1,106.4 $1,861.5 $851.4 $1,534.8 $ 943.7 $1,103.3
Less:
Minority interests 4.6 4.6 2.6 2.7 3.2 4.2
Undistributed
earnings/(losses) of
unconsolidated
subsidiaries (2.9) (.7) .7 8.5 .8 (.3)
Adjusted income 1,104.7 1,857.6 848.1 1,523.6 939.7 1,099.4
Fixed charges 123.9 158.4 135.6 130.1 155.2 153.8
Total earnings
as defined $1,228.6 $2,016.0 $983.7 $1,653.7 $1,094.9 $1,253.2
Fixed charges and other:
Rents $ 18.0 $ 31.5 $ 29.1 $ 26.7 $ 25.1 $ 21.3
Interest 105.9 126.9 106.5 103.4 130.1 132.5
Fixed charges 123.9 158.4 135.6 130.1 155.2 153.8
Capitalized interest 4.1 14.7 14.0 12.2 8.0 9.9
Total fixed charges $ 128.0 $ 173.1 $149.6 $ 142.3 $ 163.2 $ 163.7
Ratio of earnings to fixed
charges 9.6 11.6 6.6 11.6 6.7 7.7
<FN>
(a) The ratio of earnings to fixed charges represents the historical ratio
of the Company and is calculated on a total enterprise basis. The ratio
is computed by dividing the sum of earnings before provision for taxes
and fixed charges (excluding capitalized interest) by fixed charges.
Fixed charges represent interest (including capitalized interest) and
amortization of debt discount and one-third of rental expense which the
Company believes to be a conservative estimate of an interest factor in
its leases, which are not material.
</FN>
</TABLE>
<PAGE>
Exhibit 15
ACCOUNTANTS' ACKNOWLEDGMENT
Board of Directors
Pfizer Inc.:
We hereby acknowledge the incorporation by reference of our report dated
August 11, 1995, included within the Quarterly Report on Form 10-Q of Pfizer
Inc. for the quarter ended July 2, 1995 in the Prospectus dated December 27,
1972, as supplemented February 6, 1973, of Pfizer Inc., filed under the
Securities Act of 1933 in Registration Statement on Form S-16 dated October
27, 1972 (File No. 2-46157), as amended, in the Prospectus dated June 14,
1979, of Pfizer Inc., in the Registration Statement on Form S-16 dated April
26, 1979 (File No. 2-64610), as amended, in the Registration Statement on Form
S-15 dated December 13, 1982 (File No. 2-80884), as amended, in the
Registration Statement on Form S-8 dated October 27, 1983 (File No. 2-87473),
as amended, in the Registration Statement on Form S-8 dated March 22, 1990
(File No. 33-34139), in the Registration Statement on Form S-8 dated January
24, 1991 (File No. 33-38708), in the Registration Statement on Form S-3 dated
June 26, 1991 (File No. 33-41367), as amended, in the Registration Statement
on Form S-8 dated November 18, 1991 (File No. 33-44053), in the Registration
Statement on Form S-3 dated May 27, 1993 (File No. 33-49629), in the
Registration Statement on Form S-8 dated May 27, 1993 (File No. 33-49631), in
the Registration Statement on Form S-8 dated May 19, 1994 (File No. 33-53713),
in the Registration Statement on Form S-8 dated October 5, 1994 (File No. 33-
55771), in the Registration Statement on Form S-3 dated November 14, 1994
(File No. 33-56435), in the Registration Statement on Form S-8 dated December
20, 1994 (File No 33-56979) and in the Registration Statement on Form S-4
dated February 14, 1995 (File No. 33-57709).
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is
not considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
KPMG Peat Marwick LLP
New York, New York
August 11, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PFIZER INC.
AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED
STATEMENT OF INCOME FOR THE PERIOD ENDED JULY 2, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-02-1995
<CASH> 624
<SECURITIES> 1,018
<RECEIVABLES> 2,136
<ALLOWANCES> (53)
<INVENTORY> 1,467
<CURRENT-ASSETS> 5,982
<PP&E> 5,713
<DEPRECIATION> (2,123)
<TOTAL-ASSETS> 12,945
<CURRENT-LIABILITIES> 6,103
<BONDS> 611
<COMMON> 34
0
0
<OTHER-SE> 4,795
<TOTAL-LIABILITY-AND-EQUITY> 12,945
<SALES> 4,885
<TOTAL-REVENUES> 4,885
<CGS> 1,155
<TOTAL-COSTS> 1,155
<OTHER-EXPENSES> 2,524
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 106
<INCOME-PRETAX> 1,106
<INCOME-TAX> 365
<INCOME-CONTINUING> 737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 737
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
