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 April 4, 1999
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 of incorporation) (I.R.S. Employer
Identification No.)
235 East 42nd Street, New York, New York 10017
(Address of principal executive offices)
(212) 573-2323
(Registrant's telephone number)
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 the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
At May 17, 1999, 1,294,270,250 shares of the issuer's common stock were
outstanding (voting).
PFIZER INC.
FORM 10-Q
For the Quarter Ended
April 4, 1999
Table of Contents
<TABLE>
PART I. FINANCIAL INFORMATION
<CAPTION>
Item 1. Page
<S> <C>
Financial Statements:
Condensed Consolidated Statement of Income for
the three months ended April 4, 1999 and
March 29, 1998 3
Condensed Consolidated Balance Sheet at
April 4, 1999, December 31, 1998 and
March 29, 1998 4
Condensed Consolidated Statement of Cash Flows for
the three months ended April 4, 1999 and
March 29, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Independent Auditors' Report 10
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings 22
Item 4.
Submission of Matters to a Vote of Security Holders 28
Item 6.
Exhibits and Reports on Form 8-K 29
</TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
April 4, March 29,
1999 1998
(millions, except per share data)
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . $3,524 $2,886
Alliance revenue . . . . . . . . . . . . . . . 403 150
Total revenues . . . . . . . . . . . . . . . . 3,927 3,036
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . 546 443
Selling, informational and
administrative expenses . . . . . . . . . . 1,570 1,199
Research and development expenses . . . . . . 655 481
Other deductions-net. . . . . . . . . . . . . 7 171
Income from continuing operations
before provision for taxes on
income and minority interests . . . . . . . . 1,149 742
Provision for taxes on income. . . . . . . . . 333 206
Minority interests . . . . . . . . . . . . . . 1 1
Income from continuing operations. . . . . . . 815 535
Discontinued operations-net of tax . . . . . . -- 157
Net income . . . . . . . . . . . . . . . . . . $ 815 $ 692
Earnings per common share - basic
Income from continuing operations. . . . . . $ .65 $ .42
Discontinued operations-net of tax . . . . . -- .13
Net income . . . . . . . . . . . . . . . . . $ .65 $ .55
Earnings per common share - diluted
Income from continuing operations. . . . . . $ .62 $ .41
Discontinued operations-net of tax . . . . . -- .12
Net income . . . . . . . . . . . . . . . . . $ .62 $ .53
Weighted average shares used to calculate
earnings per common share amounts
Basic . . . . . . . . . . . . . . . . . . 1,261 1,262
Diluted . . . . . . . . . . . . . . . . . 1,311 1,315
Cash dividends per common share. . . . . . . . $ .22 $ .19
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<TABLE>
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
<CAPTION>
(millions of dollars) April 4, Dec. 31, March 29,
1999* 1998** 1998*
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents. . . . . . . . . . $ 1,166 $ 1,552 $ 1,053
Short-term investments . . . . . . . . . . . 3,039 2,377 795
Accounts receivable, less allowance for
doubtful accounts: $73, $67 and $39. . . . 3,470 2,914 2,609
Short-term loans . . . . . . . . . . . . . . 325 150 99
Inventories
Finished goods . . . . . . . . . . . . . . 618 697 482
Work in process. . . . . . . . . . . . . . 809 890 833
Raw materials and supplies . . . . . . . . 277 241 212
Total inventories. . . . . . . . . . . . 1,704 1,828 1,527
Prepaid expenses, taxes
and other assets . . . . . . . . . . . . . 1,045 1,110 680
Net assets of discontinued operations. . . . -- -- 1,236
Total current assets . . . . . . . . . . 10,749 9,931 7,999
Long-term loans and investments. . . . . . . . 1,548 1,756 1,350
Property, plant and equipment, less
accumulated depreciation:
$2,493, $2,429 and $2,128. . . . . . . . . 4,531 4,415 3,815
Goodwill, less accumulated amortization:
$109, $109 and $94 . . . . . . . . . . . . . 788 813 970
Other assets, deferred taxes and
deferred charges . . . . . . . . . . . . . . 1,409 1,387 1,488
Total assets . . . . . . . . . . . . . . $19,025 $18,302 $15,622
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings, including current
portion of long-term debt:
$3, $4 and $3. . . . . . . . . . . . . . $ 4,296 $ 2,729 2,508
Accounts payable . . . . . . . . . . . . . . 656 971 606
Dividends payable. . . . . . . . . . . . . . -- 285 --
Income taxes payable . . . . . . . . . . . . 1,093 1,162 688
Accrued compensation and related items . . . 430 614 486
Other current liabilities. . . . . . . . . . 1,277 1,431 1,096
Total current liabilities. . . . . . . . 7,752 7,192 5,384
Long-term debt . . . . . . . . . . . . . . . . 525 527 724
Postretirement benefit obligation other
than pension plans . . . . . . . . . . . . . 358 359 392
Deferred taxes on income . . . . . . . . . . . 164 197 125
Other noncurrent liabilities . . . . . . . . . 1,181 1,217 808
Total liabilities. . . . . . . . . . . . 9,980 9,492 7,433
Shareholders' Equity
Preferred stock. . . . . . . . . . . . . . . -- -- --
Common stock . . . . . . . . . . . . . . . . 71 70 70
Additional paid-in capital . . . . . . . . . 6,331 5,646 4,126
Retained earnings. . . . . . . . . . . . . . 12,254 11,439 9,796
Accumulated other comprehensive expense. . . (370) (234) (172)
Employee benefit trusts. . . . . . . . . . . (4,204) (4,200) (3,445)
Treasury stock, at cost. . . . . . . . . . . (5,037) (3,911) (2,186)
Total shareholders' equity . . . . . . . 9,045 8,810 8,189
Total liabilities and
shareholders' equity. . . . . . . . . $19,025 $18,302 $15,622
</TABLE>
* Unaudited.
** Condensed from audited financial statements.
See accompanying Notes to Condensed Consolidated Financial Statements.
<TABLE>
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(millions of dollars)
Three Months Ended
April 4, March 29,
1999 1998
<S> <C> <C>
Operating Activities
Income from continuing operations . . . . . . . . $ 815 $ 535
Adjustments to reconcile income from continuing
operations to net cash (used in)/provided by
operating activities:
Depreciation and amortization . . . . . . . . . 128 118
Other . . . . . . . . . . . . . . . . . . . . . (5) 7
Changes in assets and liabilities . . . . . . . (1,062) (465)
Net cash (used in)/provided by operating
activities. . . . . . . . . . . . . . . . . . . . (124) 195
Investing Activities
Purchases of property, plant and equipment. . . . (352) (190)
Purchases net of maturities of short-term
investments. . . . . . . . . . . . . . . . . . . (1,910) (669)
Proceeds from redemptions of short-term
investments . . . . . . . . . . . . . . . . . . 1,246 586
Purchases of long-term investments. . . . . . . . (41) (17)
Proceeds from sale of business. . . . . . . . . . -- 425
Other investing activities. . . . . . . . . . . . 34 24
Net cash (used in)/provided by
investing activities. . . . . . . . . . . . . . . (1,023) 159
Financing Activities
Repayments of long-term debt. . . . . . . . . . . (3) (2)
Increase in short-term debt-net . . . . . . . . . 1,596 262
Purchases of common stock . . . . . . . . . . . . (689) (201)
Cash dividends paid . . . . . . . . . . . . . . . (285) (245)
Stock option transactions . . . . . . . . . . . . 143 83
Other financing activities. . . . . . . . . . . . 9 14
Net cash provided by/(used in)
financing activities. . . . . . . . . . . . . . . 771 (89)
Net cash used in discontinued operations. . . . . . -- (84)
Effect of exchange-rate changes on cash and
cash equivalents. . . . . . . . . . . . . . . . . (10) (5)
Net (decrease)/increase in cash and
cash equivalents. . . . . . . . . . . . . . . . . (386) 176
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . . . . . 1,552 877
Cash and cash equivalents at end of period. . . . . $1,166 $1,053
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes. . . . . . . . . . . . . . . . . . . $ 422 $ 355
Interest. . . . . . . . . . . . . . . . . . . . . 39 30
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
We prepared the condensed financial statements following the requirements of
the Securities and Exchange Commission (SEC) for interim reporting. As
permitted under those rules, certain footnotes or other financial information
that are normally required by GAAP (generally accepted accounting principles)
can be condensed or omitted.
The financial statements include the assets and liabilities and the operating
results of subsidiaries operating outside the U.S. Balance sheet amounts for
these subsidiaries are as of February 28, 1999 and February 22, 1998. The
operating results for these subsidiaries are for the three month periods
ending on the same dates.
As a result of the 1998 divestiture, the Valleylab, Schneider, American
Medical Systems and Howmedica businesses which comprised the Medical
Technology Group (MTG) are presented as "discontinued operations" in the 1998
financial statements.
Note 2: Responsibility for Interim Financial Statements
We are responsible for the unaudited financial statements included in this
document. The financial statements include all normal and recurring
adjustments that are considered necessary for the fair presentation of our
financial position and operating results. As these are condensed financial
statements, one should also read the financial statements and notes in our
company's latest Form 10-K.
Revenues, expenses, assets and liabilities can vary during each quarter of the
year. Therefore, the results and trends in these interim financial statements
may not be the same as those for the full year.
Note 3: Change in Method of Inventory Accounting
During the first quarter of 1999, we changed the method of determining the
cost of all of our remaining inventories previously on the "Last-in, first-
out" (LIFO) method to the "First-in, first-out" (FIFO) method. Those
inventories consisted of U.S. sourced pharmaceuticals and part of animal
health inventories.
We believe that the change in accounting for inventories from LIFO to FIFO is
preferable because inventory costs are stable and substantially unaffected by
inflation. Accordingly, the inventory carrying amount on the balance sheet
dated April 4, 1999, as reflected using FIFO, is more meaningful to users of
our financial statements.
The change in the method of inventory costing resulted in a pre-tax benefit of
$6.6 million recorded in "Cost of sales."
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4: Restructuring
During the fourth quarter 1998, we recorded restructuring charges of $177
million. These charges provided for plant and product line rationalizations,
including the exit from certain product lines associated with our animal
health business and certain of our fermentation businesses. During the first
quarter 1999, cash outlays associated with these charges were $9 million. The
components of the charges for the activities under the restructuring program
and the subsequent utilization through the end of the first quarter of 1999
follow:
<TABLE>
<CAPTION>
Utilization
Charges First Reserve
in Quarter April 4,
1998 1998 1999 1999
<S> <C> <C> <C> <C>
Property, plant and equipment $ 49 $ 49 $-- $--
Write-down of intangibles 44 44 -- --
Employee termination costs 40 12 6 22
Other 44 11 3 30
$177 $116 $ 9 $52
</TABLE>
We expect to complete the restructuring activities by the end of 1999.
As a result of the restructuring, the work force will be reduced by 520
manufacturing, sales and corporate personnel. Notifications to personnel have
been made. Cumulative terminations were 134 at December 31, 1998 and 196 at
the end of the first quarter 1999.
Note 5: Comprehensive Income
<TABLE>
<CAPTION>
Three Months Ended
(millions of dollars) April 4, March 29,
1999 1998
<S> <C> <C>
Net income $ 815 $ 692
Other comprehensive expense:
Currency translation adjustment (114) (92)
Net unrealized (loss)/gain on investment
securities (22) 5
(136) (87)
Total comprehensive income $ 679 $ 605
</TABLE>
Changes in the currency translation adjustment included in "Accumulated other
comprehensive expense" for the first quarter of 1999 and 1998 were:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998
<S> <C> <C>
Opening balance $(153) $ (79)
Translation adjustments and hedges (114) (92)
Ending balance $(267) $(171)
</TABLE>
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6: Segment Information
For the three months ended April 4, 1999 and March 29, 1998:
<TABLE>
<CAPTION>
(millions of Pharma- Animal Corporate/
dollars) ceutical Health Other Consolidated
<S> <C> <C> <C> <C> <C>
Total revenues 1999 $3,641 $286 $ -- $3,927
1998 2,746 290 -- 3,036
Segment profit 1999 1,317 12 (180)(1) 1,149 (2)
1998 892 20 (170)(1) 742 (2)
</TABLE>
(1) Includes interest income/(expense) and corporate expenses. Also includes
other income/(expense) of the financial subsidiaries.
(2) Consolidated total equals income from continuing operations before
provision for taxes on income and minority interests.
Note 7: Employee Benefit Trust
In February 1999, the Pfizer Inc. Grantor Trust transferred all of its
remaining 33,609,756 shares to us at the fair market value of $130 7/8 per
share. The Trust satisfied the remaining $450 million note due to us using
these shares resulting in an increase in Pfizer Inc. treasury shares, and
Pfizer Inc. funded a new trust. The new trust, the Pfizer Inc. Employee
Benefit Trust, was funded with 30,170,264 shares from Pfizer at fair market
value. The new trust will be used primarily to fund our benefit plans
including the stock option plan and global stock option plan.
Note 8: Subsequent Events
On April 22, our shareholders voted to increase
- -- the number of authorized common shares from three billion to nine
billion
- -- the number of shares of common stock authorized to be issued under the
Stock and Incentive Plan by 55 million shares and to extend the term of
the Plan to December 31, 2008
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Also on April 22, the Board of Directors:
- -- approved a three-for-one stock split in the form of a 200% stock
dividend to all shareholders who own shares on June 2, 1999. The par
value will remain at $.05 per share. We will issue the additional shares
on June 30, 1999. Common share and per share amounts in the financial
statements do not reflect the impact of the stock split. If restated for
the split, figures in this filing would be:
<TABLE>
<CAPTION>
Three Months Ended
April 4, March 29,
1999 1998
<S> <C> <C>
Weighted average number of common shares
and common share equivalents outstanding
(millions, except per share data):
As reported - basic 1,261 1,262
Split basis - basic 3,783 3,785
As reported - diluted 1,311 1,315
Split basis - diluted 3,932 3,945
Earnings per common share
As reported - basic $.65 $.55
Split basis - basic .22 .18
As reported - diluted $.62 $.53
Split basis - diluted .21 .18
</TABLE>
- -- declared a $.22 per share second-quarter cash dividend on a pre-split
basis. The dividend is payable on June 10, 1999 to all shareholders who
owned shares on May 7, 1999
- -- approved a global stock option program under which we granted options
for 150 shares of Pfizer stock at a price of $126.21 per share to every
eligible employee worldwide
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 April 4, 1999 and March 29, 1998, and the related
condensed consolidated statements of income and cash flows for the three 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, 1998, 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 25, 1999, 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, 1998, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
KPMG LLP
New York, New York
May 18, 1999
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The components of the Statement of Income follow:
<TABLE>
<CAPTION>
(millions of dollars,
except per share data) First Quarter
1999 1998* % Change+
<S> <C> <C> <C>
Net sales $3,524 $2,886 22
Alliance revenue 403 150 168
Total revenues $3,927 $3,036 29
Cost of sales $ 546 $ 443 23
Selling, informational
and administrative expenses $1,570 $1,199 31
% of total revenues 40.0% 39.5%
R&D expenses $ 655 $ 481 36
% of total revenues 16.7% 15.8%
Other deductions-net $ 7 $ 171 (96)
Income from continuing
operations before taxes $1,149 $ 742 55
% of total revenues 29.3% 24.4%
Taxes on income $ 333 $ 206 62
Effective tax rate 29.0% 27.8%
Income from continuing operations $ 815 $ 535 52
% of total revenues 20.8% 17.6%
Discontinued operations-net of tax -- 157 **
Net income $ 815 $ 692 18
% of total revenues 20.8% 22.8%
Earnings per common share - basic
Income from continuing operations $ .65 $ .42 55
Discontinued operations-net of tax -- .13 **
Net income $ .65 $ .55 18
Earnings per common share - diluted
Income from continuing operations $ .62 $ .41 51
Discontinued operations-net of tax -- .12 **
Net income $ .62 $ .53 17
Cash dividends per common share $ .22 $ .19 16
</TABLE>
* The 1998 results of MTG are presented in "Discontinued
operations-net of tax."
** Calculation not meaningful.
+ Percentages may reflect rounding adjustments.
TOTAL REVENUES
The components of the total revenue increase were as follows:
<TABLE>
<CAPTION>
% Change from 1998
First Quarter
<S> <C>
Volume 28.1%
Price 1.0
Currency 0.3
Total revenue increase 29.4%
</TABLE>
Wider acceptance of our major pharmaceutical products and our copromotion
products as well as the introductions of our new products, Trovan, Viagra and
Celebrex, contributed to the volume increase. In February 1999, we launched
Celebrex with G.D. Searle & Co., the pharmaceutical division of Monsanto
Company, which discovered and developed the drug. Celebrex is for the relief
of symptoms of adult rheumatoid arthritis and osteoarthritis.
The change in currency was due to the strengthening of the Japanese yen and
European currencies offset by the weakening of currencies in Latin America and
Canada.
Total revenues for the first quarter by segment and the increases over last
year were as follows:
<TABLE>
<CAPTION>
% of % of
Total Total
(millions of dollars) 1999 Revenues 1998 Revenues % Change*
<S> <C> <C> <c <C> <C>
Pharmaceutical
U.S. $2,346 59.7 $1,731 57.0 35
International 1,295 33.0 1,015 33.4 28
Worldwide 3,641 92.7 2,746 90.4 33
Animal Health 286 7.3 290 9.6 (1)
Total $3,927 100.0 $3,036 100.0 29
</TABLE>
* Percentages may reflect rounding adjustments.
The following is a discussion of total revenues by business segment:
Pharmaceutical
Worldwide pharmaceutical revenues by category were as follows:
<TABLE>
<CAPTION>
First Quarter %
1999 1998 Change*
<S> <C> <C> <C>
Cardiovascular $1,100 $ 969 13
Infectious diseases 938 757 24
Central nervous system disorders 553 476 16
Erectile dysfunction 193 0 --
Diabetes 76 71 8
Allergy 128 84 52
Arthritis/Inflammatories 50 52 (4)
Alliance revenue 403 150 168
Consumer health care 147 137 8
Other 53 50 4
Total $3,641 $2,746 33
</TABLE>
*Percentages may reflect rounding adjustments.
Sales of the following pharmaceutical products accounted for 72% of
pharmaceutical revenues and 67% of total company revenues in the first quarter
of 1999. Individual product sales for the first quarter of 1999 and a brief
discussion of each follow:
<TABLE>
<CAPTION>
% Change
Product Category (millions) from 1998
<S> <C> <C> <C>
Norvasc Cardiovascular $703 24
Procardia XL Cardiovascular 141 (27)
Cardura Cardiovascular 194 15
Zithromax Infectious Diseases 441 44
Diflucan Infectious Diseases 245 7
Trovan Infectious Diseases 62 51
Viagra Erectile Dysfunction 193 --
Zoloft Central Nervous System 527 14
Zyrtec Allergy 126 54
</TABLE>
- -- Norvasc's sales increased because of the favorable benefits Norvasc
provides to patients--once-daily dosing, 24-hour control for hypertension and
angina, and tolerability.
- -- Sales of Procardia XL decreased due in part to the increasing usage and
medical acceptance of Norvasc.
- -- Cardura's sales increased as the group of drugs it belongs to, alpha
blockers, is recognized as an effective therapy for the treatment of high
blood pressure and enlarged prostate. Cardura XL is a dosage form that uses
the GITS delivery system and may reduce the need for dose alterations. We are
currently selling Cardura XL in Germany, Norway and Denmark.
- -- Zithromax's sales increased as a result of increased physician recognition
of the product's effectiveness, convenient dosage and favorable side-effect
profile.
- -- Sales growth of Diflucan reflects the product's continuing acceptance as
the therapy of choice for a wide range of fungal infections.
- -- Trovan's sales continue to increase as a result of increasing physician
recognition in the U.S.
- -- Viagra, the first effective oral treatment for erectile dysfunction,
reported sales in the first quarter of 1999 of $193 million including $149
million in the U.S. and $44 million in international markets. Viagra is
available in most large markets, including the U.S., the U.K., Germany,
France, Italy, Spain, Brazil and Australia. Second quarter sales will include
the impact of recent launches in Japan and Canada.
- -- Zoloft continues to benefit from introductions in international markets,
new uses and increased sales force and selling efforts.
- -- Zyrtec is the first once-daily prescription antihistamine for the treatment
of seasonal and year-round allergies and hives in children ages 2 to 5. It was
previously approved for these uses in patients over the age of 5. The product
provides strong, rapid and long-lasting relief for seasonal and year-round
allergies and hives with once-daily dosing.
Alliance revenue reflects revenue associated with the copromotion of Lipitor,
Aricept and Celebrex. Alliance revenue increased 168% due to recent
introductions of Lipitor and Aricept in international markets as well as the
U.S. introduction of Celebrex.
In March 1999, we received an approvable letter from the U.S. Food and Drug
Administration (FDA) to market Tikosyn for use in the treatment of atrial
fibrillation, a type of heart rhythm disorder. Regulatory review in Europe is
continuing.
Animal Health
Animal Health sales for the first quarter decreased 1%. Overall performance
was negatively affected by a difficult operating environment, including a weak
livestock market in the U.S. and Europe, as well as foreign exchange. Sales of
virginiamycin, an antibiotic for poultry, cattle and swine, decreased as a
result of an impending ban of the product in the European Union. Sales of
companion animal products rose 12% in the quarter.
Revenues by Country
Total revenues in the U.S. increased largely due to pharmaceutical sales
growth and alliance revenue, as described above. Total revenues by country
were as follows:
<TABLE>
<CAPTION>
(millions of dollars)
First Quarter
% of % of
Total Total
1999 Revenues 1998 Revenues* % Change
<S> <C> <C> <C> <C>
$2,463 62.7 $1,845 60.8 United States 33
272 6.9 230 7.6 Japan 18
1,192 30.4 961 31.6 All Other 24
$3,927 100.0 $3,036 100.0 Consolidated 29
</TABLE>
*Percentages may reflect rounding adjustments.
COSTS AND EXPENSES
During the fourth quarter 1998, we recorded restructuring charges of $177
million. These charges provided for plant and product line rationalizations,
including the exit from certain product lines associated with our animal
health business and certain of our fermentation businesses. During the first
quarter 1999, cash outlays associated with these charges were $9 million. The
components of the charges for the activities under the restructuring program
and the subsequent utilization through the end of the first quarter of 1999
follow:
<TABLE>
<CAPTION>
Utilization
Charges First Reserve
in Quarter April 4,
1998 1998 1999 1999
<S> <C> <C> <C> <C>
Property, plant and equipment $ 49 $ 49 $-- $--
Write-down of intangibles 44 44 -- --
Employee termination costs 40 12 6 22
Other 44 11 3 30
$177 $116 $ 9 $52
</TABLE>
We expect to complete the restructuring activities by the end of 1999.
As a result of the restructuring, the work force will be reduced by 520
manufacturing, sales and corporate personnel. Notifications to personnel have
been made. Cumulative terminations were 134 at December 31, 1998 and 196 at
the end of the first quarter 1999.
Cost of Sales
Cost of sales increased 23% in the first quarter of 1999 over the prior year
period. The increase in cost of sales is primarily due to the increase in
sales and the impact of foreign exchange. The first quarter of 1999 reflected
the strengthening of the Japanese yen relative to the U.S. dollar. Included in
cost of sales in the first quarter of 1999 is a benefit of $6.6 million
related to the change in accounting for inventories from LIFO to FIFO.
Excluding the impact of foreign exchange and the benefit from the accounting
change, cost of sales increased 19% in the first quarter of 1999 over the
prior year period.
Selling, Informational and Administrative Expenses
Selling, informational and administrative expenses in the first quarter of
1999 increased 31% over the prior year period. Support for previously
introduced products and launches of new products led to the increase. This
support includes substantial global investments in our pharmaceutical sales
force such as the creation of a new primary-care sales force, a new specialty
sales force dedicated to rheumatology and personnel increases in other
specialty sales forces. About 3,000 Pfizer and G.D. Searle sales
representatives are involved in the U.S. launch of Celebrex.
Research and Development Expenses
Research and development expenses increased 36% in the first quarter of 1999
over the prior year period. We expect total spending to be about $2.8 billion
in 1999 to discover new chemical compounds and advance others in development
which include:
- -- Relpax, for the treatment of migraine headaches. Regulatory review is
advancing in Europe and the U.S.;
- -- Alond, for the treatment of nervous system, kidney and cardiovascular
disorders related to diabetes;
- -- voriconazole and UK-292,663, for the treatment of fungal infections;
- -- darifenacin, for the treatment of urinary urge incontinence;
- -- droloxifene and lasofoxifene (CP 336,156) for prevention and
treatment of osteoporosis, treatment of atherosclerosis and prevention
of breast cancer;
- -- ezlopitant, for the treatment of chemotherapy-induced nausea and
vomiting in cancer patients;
- -- Zeldox, for the treatment of psychotic disorders. As previously
announced, we are undertaking additional clinical work on this product
to answer questions raised by the FDA in its nonapprovable letter;
- -- an inhaled form of insulin under codevelopment with Hoechst Marion
Roussel and Inhale Therapeutic Systems and
- -- valdecoxib, a second-generation arthritis compound under
codevelopment with G.D. Searle.
We are also developing new uses or dosages for Norvasc, Zyrtec, Zoloft,
Lipitor, Zithromax, Trovan, Viagra and Celebrex.
Other (income)/deductions-net
The following components were included in "Other deductions-net" in the first
quarters of 1999 and 1998:
<TABLE>
<CAPTION>
(millions of dollars) First Quarter %
1999 1998 Change*
<S> <C> <C> <C>
Interest income $(66) $(36) 84
Interest expense 41 27 50
Copromotion payments to Searle -- 100 --
Brand-name prescription drug
antitrust litigation settlement 2 40 (94)
Amortization of goodwill
and other intangibles 11 12 (10)
Foreign exchange (7) (5) 49
Other, net 26 33 (20)
Other deductions-net $ 7 $171 (96)
</TABLE>
* Percentages may reflect rounding adjustments.
Interest income increased in the first quarter of 1999 as a result of an
increase in short-term investments purchased in large part from cash received
from the MTG divestiture. Interest expense increased as a result of a higher
average level of short-term borrowings in the first quarter of 1999.
INCOME BEFORE TAXES
Income before taxes increased 55% in the first quarter of 1999. Excluding
certain 1998 significant charges, income before taxes increased 28% in the
first quarter of 1999. These charges consist of:
- -- payments to G.D. Searle of $100 million related to the development
and copromotion of Celebrex and its second-generation compound for the
treatment of arthritis and pain
- -- legal settlements of $40 million involving the brand-name
prescription drug antitrust litigation
- -- other charges of $15 million
TAXES ON INCOME
The estimated full-year 1999 effective tax rate of 29% is higher than the 28%
rate recorded for full-year 1998 results excluding the impact of certain
significant charges and the MTG divestiture, due largely to the expiration of
the R&D tax credit in June 1999.
Discontinued Operations
For the quarter ended April 4, 1999, we recorded no income from discontinued
operations. In the comparable period of the prior year, we reported income
from discontinued operations of $157 million-net of tax, consisting of:
- -- $140 million gain-net of tax on disposal of Valleylab
- -- $ 17 million income from operations of discontinued businesses-net
of tax
The income from operations of discontinued businesses consisted of the results
of the Valleylab (prior to its sale in the first quarter of 1998), Schneider,
American Medical Systems and Howmedica businesses, which comprised MTG.
NET INCOME
Net income for the first quarter of 1999 increased 18% over the prior year
period. First quarter 1999 diluted earnings per share were $.62, an increase
of 17% over the prior year period. If the discontinued operations-net of tax
and certain 1998 significant charges were excluded, the following would have
been the net income and diluted earnings per share:
<TABLE>
<CAPTION>
First Quarter
1999 1998
<S> <C> <C>
Net income as reported $815 $692
Excluding effects of:
Discontinued operations-net of tax -- (157)
Certain significant charges-net of tax* -- 106
Net income from continuing operations
excluding discontinued operations and
certain significant charges $815 $641
Diluted earnings per share on the same basis $.62 $.49
</TABLE>
*Consists of payments to G.D. Searle for Celebrex, legal settlements
involving the brand-name prescription drug antitrust litigation and other
charges.
OUTLOOK
Our financial performance for 1999 will depend on such factors as the sales of
new, existing and alliance products; the size and timing of investments; the
impact of foreign exchange; the effective tax rate; and changes in trade
buying patterns, including the potential impact of buying patterns which could
be impacted by the Year 2000 issue.
Our rate of earnings growth in the second quarter compared to the same period
in 1998 will be significantly affected by the large initial trade stocking and
sales of Viagra, which occurred in the second quarter of 1998 when the product
was first launched and continued strong investment in R&D and product support.
Despite the unique circumstances that we believe will affect second-quarter
growth, our full-year 1999 growth prospects remain solid.
For the full year 1999, we are comfortable with the current range of the
majority of analysts' estimates for diluted earnings per share of $2.40 to
$2.50 for the year, representing 20% to 25% growth relative to 1998 diluted
earnings per share excluding the impact of certain significant charges and the
MTG divestiture.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The net financial asset position was as follows:
<TABLE>
<CAPTION>
(millions of dollars) April 4, Dec. 31, March 29,
1999 1998 1998
<S> <C> <C> <C>
Financial assets* $6,078 $5,835 $3,297
Short-term borrowings and
long-term debt 4,821 3,256 3,232
Net financial assets $1,257 $2,579 $ 65
</TABLE>
* Consists of cash and cash equivalents, short-term investments and
loans and long-term loans and investments.
To fund investing and financing activities, commercial paper and short-term
borrowings are used to complement operating cash flows. In maintaining this
financial flexibility, levels of debt and investments will vary depending on
operating results.
Selected measures of our financial strength are as follows:
<TABLE>
<CAPTION>
April 4, Dec. 31, March 29,
1999 1998 1998
<S> <C> <C> <C>
Working capital (millions of dollars) $ 2,997 $ 2,739 $ 2,615
Current ratio 1.39:1 1.38:1 1.49:1
Debt to total capitalization
(percentage)* 35% 27% 28%
Shareholders' equity per
common share** $ 7.18 $ 7.00 $ 6.49
</TABLE>
* Represents total short-term borrowings and long-term debt divided by
the sum of total short-term borrowings, long-term debt and total
shareholders' equity.
** Represents total shareholders' equity divided by the actual number of
common shares outstanding.
The increase in working capital from December 31, 1998 to April 4, 1999 was
primarily due to the following:
- -- an increase in accounts receivable, which includes higher alliance
revenue receivables, due to growth in sales volume and the
contractual payment terms of alliance revenue receivables
- -- a decrease in accounts payable primarily due to the timing of payments
- -- lower compensation-related accruals
offset by:
- -- an increase in short-term borrowings to fund common stock purchases
and dividends
The increase in working capital from March 29, 1998 to April 4, 1999 was
primarily due to the following:
- -- an increase in cash and cash equivalents and short-term investments due
to the receipt of cash from the MTG divestiture
- -- an increase in accounts receivable, which includes higher alliance
revenue receivables, due to growth in sales volume and the
contractual payment terms of alliance revenue receivables
offset by:
- -- a decrease in net assets of discontinued operations due to the sale of
the MTG businesses
- -- an increase in short-term borrowings due to an increase in funding for
common stock purchases at a higher average price
Net Cash Used in/Provided by Operating Activities
During the first quarter of 1999, operating activities used net cash of $124
million, an increase of $319 million from the 1998 period. The change was
primarily due to an increase in certain working capital items.
Net Cash Used in/Provided by Investing Activities
In the first quarter of 1999, investing activities used net cash of $1,023
million, an increase of $1,182 million over the 1998 period. This change was
primarily attributable to short-term investments primarily purchased with cash
from foreign operations, an increase in capital expenditures and an absence of
proceeds from the sale of businesses in 1999.
Net Cash Provided by/Used in Financing Activities
In the first quarter of 1999, net cash provided by financing activities was
$771 million, an increase of $860 million over the 1998 period. This was
primarily due to an increase in short-term borrowings, the proceeds of which
were partially used to purchase common stock. We purchased approximately 5.2
million shares of common stock on the open market at an average price of about
$132 per share. Through the end of the first quarter 1999, we purchased
approximately 10.1 million shares at a total cost of about $1.2 billion under
the current share-purchase program. Dividends paid increased due to the
increase in the first quarter 1999 dividend per common share compared to the
prior year period.
During the first quarter 1999, we increased our available lines of credit by
$200 million, for a total of $1.5 billion in major unused lines of credit.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
Our disclosure and analysis in this report contain some "forward-looking
statements". Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact
that they do not relate strictly to historic or current facts. They use words
such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe," and other words and terms of similar meaning in connection with any
discussion of future operating or financial performance. In particular, these
include statements relating to future actions, prospective products or product
approvals, future performance or results of current and anticipated products,
sales efforts, expenses, the outcome of contingencies, such as legal
proceedings, and financial results. From time to time, we also may provide
oral or written forward-looking statements in other materials we release to
the public. Any or all of our forward-looking statements in this report and
in any other public statements we make may turn out to be wrong. They can be
affected by inaccurate assumptions we might make or by known or unknown risks
and uncertainties. Consequently, no forward-looking statement can be
guaranteed. Actual results may vary materially.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related
subjects in our 10-Q, 8-K and 10-K reports to the SEC. Our Form 10-K filing
for the 1998 fiscal year listed various important factors that could cause
actual results to differ materially from expected and historic results. We
note these factors for investors as permitted by the Private Securities
Litigation Reform Act of 1995. Readers can find them in Part I of that filing
under the heading "Cautionary Factors That May Affect Future Results." We
incorporate that section of that Form 10-K in this filing and investors should
refer to it. You should understand that it is not possible to predict or
identify all such factors. Consequently, you should not consider any such
list to be a complete set of all potential risks or uncertainties.
YEAR 2000 COMPUTER SYSTEMS COMPLIANCE
Many older computer software programs refer to years in terms of their final
two digits only. Such programs may interpret the year 2000 to mean the year
1900, or another year instead. If not corrected, those programs could cause
date-related or operational transaction failures. We developed a Compliance
Assurance Process to address the Year 2000 issue in four phases: Inventory,
Assessment and Planning, Implementation and Certification. No significant
information technology projects have been deferred as a result of our efforts
on Year 2000.
Phase Status at End of First Quarter 1999
Inventory Completed
Assessment & Planning Completed
Implementation 80% complete (will overlap with
certification phase)
-- Critical systems - substantially
remediated or replaced
-- Remaining systems (including
embedded systems) - will be
modified by the end of the
third quarter of 1999
Certification Critical systems - expect to
substantially complete testing
by June 30, 1999
Remaining systems (embedded technology) -
expect to substantially complete testing
by end of the third quarter of 1999
Because the company's Year 2000 compliance is dependent upon key third parties
also being Year 2000 compliant on a timely basis, there can be no guarantee
that the company's efforts will prevent a material adverse impact on its
results of operations, financial condition or cash flows. We have requested
our critical vendors, major customers, service suppliers, communication
providers, product alliance partners and banks to verify their Year 2000
readiness. We continue to monitor the readiness of our critical trading
partners. If our systems or those of key third parties are not fully Year 2000
functional, we estimate that up to a two-week disruption in operations could
occur. Such a disruption could result in delays in the distribution of
finished goods or receipt of raw materials, errors in customer order taking,
disruption of clinical activities or delays in product development. These
consequences could have a material adverse impact on our results of
operations, financial condition and cash flows if we are unable to
substantially conduct our business in the ordinary course. We believe that our
efforts, including the development of a contingency plan, will significantly
reduce the adverse impact that any disruption in business might have.
As part of the contingency plan being developed, Business Continuity Plans
(the Plans) will address critical areas of our business. The Plans will be
designed to mitigate serious disruptions to our business flow beyond the end
of 1999 and operate independent of our external providers' Year 2000
compliance. The Plans will likely provide for maintaining increased inventory
to meet customer needs, an analysis of changes in buying patterns, protecting
the integrity of ongoing activities, identifying and securing alternate
sources of critical services, materials and utilities when possible and
establishing crisis teams to address unexpected problems. Preliminary plans
are essentially complete and we expect to complete final plans by the end of
the second quarter of 1999.
Since we completed our preliminary Business Continuity Plans, we now estimate
that the total cost involved in our Year 2000 program is approximately $150
million, of which $60 million has been incurred to date. The total project
cost reflects an increase in costs associated with business continuity plans
and embedded technology. The remaining costs are associated with the final
stages of our Year 2000 project which include business continuity planning,
embedded technology and final implementation, testing and certification of
systems. These costs are expensed as incurred, except for capitalizable
hardware of $5 million in 1998, $2.6 million in the first quarter of 1999 and
$8.9 million estimated for the remainder of 1999, and are being funded through
operating cash flows. Such costs do not include normal system upgrades and
replacements.
Both our cost estimates and completion timeframes will be influenced by our
ability to successfully identify Year 2000 problems, the nature and amount of
programming required to fix the programs, the availability and cost of
personnel trained in this area and the Year 2000 compliance success that key
third parties attain. As the development of contingency plans continues, the
costs to complete our Year 2000 program may increase. While these and other
unforeseen factors could have a material adverse impact on our results of
operations or financial condition, we believe that our ongoing efforts to
address the Year 2000 issue will minimize possible negative consequences to
our company.
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. In addition, from time to time the Company is involved in, or is the
subject of, various governmental or agency inquiries or investigations
relating to its businesses.
On June 9, 1997, the Company received notice of the filing of an Abbreviated
New Drug Application (ANDA) by Mylan Pharmaceuticals for a sustained-release
nifedipine product asserted to be bioequivalent to Procardia XL. Mylan's
notice asserted that the proposed formulation does not infringe relevant
licensed Alza and Bayer patents and thus that approval of their ANDA should be
granted before patent expiration. On July 18, 1997, the Company, together with
Bayer AG and Bayer Corporation, filed a patent-infringement suit against Mylan
Pharmaceuticals Inc. and Mylan Laboratories Inc. in the United States District
Court for the Western District of Pennsylvania with respect to Mylan's ANDA.
Suit was filed under Bayer AG's U.S. Patent No. 5,264,446, licensed to the
Company, relating to nifedipine of a specified particle size range. Mylan has
filed its answer denying infringement and a scheduling order has been entered.
Final discovery has been extended to May 3, 1999, with dispositive motions to
be filed by May 21, 1999. On March 15, 1999, Mylan received tentative approval
from the FDA for its 30 mg. extended release nifedipine tablet. On March 16,
1999, the United States District Court granted Mylan's motion to file an
amended answer and antitrust counterclaims. All discovery on the antitrust
counterclaims in stayed pending resolution of the patent misuse claims. On
March 29, 1999, Mylan filed a motion for summary judgment based on an adverse
decision against Bayer in Bayer's litigation against Elan which involved the
same nifedipine particle size patent. On or about February 23, 1998, Bayer AG
received notice that Biovail Laboratories Incorporated had filed an ANDA for a
sustained-release nifedipine product asserted to be bioequivalent to one
dosage strength (60 mg.) of Procardia XL. The notice was subsequently received
by the Company as well. The notice asserts that the Biovail product does not
infringe Bayer's U.S. Patent No. 5,264,446. On March 26, 1998, the Company
received notice of the filing of an ANDA by Biovail Laboratory of a 30 mg.
dosage formulation of nifedipine alleged to be bioequivalent to Procardia XL.
On April 2, 1998, Bayer and Pfizer filed a patent-infringement action against
Biovail, relating to their 60 mg. nifedipine product, in the United States
District Court for the District of Puerto Rico. On May 6, 1998, Bayer and
Pfizer filed a second patent infringement action in Puerto Rico against
Biovail under the same patent with respect to Biovail's 30 mg. nifedipine
product. These actions have been consolidated for discovery and trial. On
April 24, 1998, Biovail Laboratories Inc. brought suit in the United States
District Court for the Western District of Pennsylvania against the Company
and Bayer seeking a declaratory judgment of invalidity of and/or non-
infringement of the 5,264,446 nifedipine patent as well as a finding of
violation of the antitrust laws. Biovail has also moved to transfer the patent
infringement actions from Puerto Rico to the Western District of Pennsylvania.
Pfizer has opposed this motion to transfer and on June 19, 1998, moved to
dismiss Biovail's declaratory judgment action and antitrust action in the
Western District of Pennsylvania, or in the alternative to stay the action
pending the outcome of the infringement actions in Puerto Rico. On January 4,
1999, the District Court in Pennsylvania granted Pfizer's motion for a stay of
the antitrust action pending the outcome of the infringement actions in Puerto
Rico. On January 29, 1999, the District Court in Puerto Rico denied Biovail's
motion to transfer the patent infringement actions from Puerto Rico to the
Western District of Pennsylvania. On April 12, 1999, Biovail filed a motion
for summary judgment also based in part on the summary judgment motion granted
to Elan in the Bayer vs. Elan litigation in the Northern District of Georgia.
Pfizer and Bayer's response was filed on April 26, 1999.
On April 2, 1998, the Company received notice from Lek U.S.A. Inc. of its
filing of an ANDA for a 60 mg. formulation of nifedipine alleged to be
bioequivalent to Procardia XL. On May 14, 1998, Bayer and Pfizer commenced
suit against Lek for infringement of Bayer's U.S. Patent No. 5,264,446, as
well as for infringement of a second Bayer patent, No. 4,412,986 relating to
combinations of nifedipine with certain polymeric materials. On September 14,
1998, Lek was served with the summons and complaint. Plaintiffs amended the
complaint on November 10, 1998, limiting the action to infringement of U.S.
Patent 4,412,986. On January 19, 1999, Lek filed a motion to dismiss the
complaint alleging infringement of U.S. Patent 4,412,986. Pfizer responded to
this motion and oral argument is scheduled for May 10, 1999.
On February 10, 1999, the Company received a notice from Lek U.S.A. of its
filing of an ANDA for a 90 mg. forumlation of nifedipine alleged to be
bioequivalent to Procardia XL. On March 25, 1999, Bayer and Pfizer commenced
suit against Lek for infringement of the same two Bayer patents originally
asserted against Lek's 60 mg. formulation.
On November 9, 1998, Pfizer received an ANDA notice letter from Martec
Pharmaceutical, Inc. for generic versions (30 mg., 60 mg., 90 mg.) of
Procardia XL. On or about December 18, 1998, Pfizer received a new ANDA
certification letter stating that the ANDA had actually been filed in the name
of Martec Scientific, Inc. On December 23, 1998, Pfizer brought an action
against Martec Pharmaceutical, Inc. and Martec Scientific, Inc. in the Western
District of Missouri for infringement of Bayer's patent relating to nifedipine
of a specific particle size. On January 26, 1999, a second complaint was filed
against Martec Scientific in the Western District of Missouri based on
Martec's new ANDA certification letter.
Pfizer filed suit on July 8, 1997, against the FDA in the United States
District Court for the District of Columbia, seeking a declaratory judgment
and injunctive relief enjoining the FDA from processing Mylan's ANDA or any
other ANDA submission referencing Procardia XL that uses a different extended-
release mechanism. Pfizer's suit alleges that extended-release mechanisms that
are not identical to the osmotic pump mechanism of Procardia XL constitute
different dosage forms requiring the filing and approval of suitability
petitions under the Food Drug and Cosmetics Act before the FDA can accept an
ANDA for filing. Mylan intervened in Pfizer's suit. On March 31, 1998, the
U.S. District Judge granted the government's motion for summary judgment
against the Company. Pfizer has appealed that decision to the D.C. Court of
Appeals and arguments in the case were heard on February 1, 1999. We are
awaiting the decision.
On March 31, 1999, the Company received notice from TorPharm of its filing,
through its U.S. agent Apotex Corp., of an ANDA for 1 mg., 2 mg., 4 mg. and 8
mg. tablets alleged to be bioequivalent to Cardura (doxazosin mesylate). That
notice is under review.
As previously disclosed, a number of lawsuits and claims have been brought
against the Company and Shiley Incorporated, a wholly owned subsidiary,
alleging either personal injury from fracture of 60 or 70 Shiley Convexo
Concave ("C/C") heart valves, or anxiety that properly functioning implanted
valves might fracture in the future, or 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
established a worldwide settlement class of people with C/C heart valves and
their spouses, except those who elected to exclude themselves. The settlement
provided for a Consultation Fund of $90 million, which was fixed by the number
of claims filed, from which valve recipients received 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
established 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, and all appeals have been exhausted.
Generally, the plaintiffs in all of the pending heart valve litigations seek
money damages. Based on the experience of the Company in defending these
claims to date, including insurance proceeds 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. Litigation
involving insurance coverage for the Company's heart valve liabilities has
been resolved.
The Company's operations are subject to federal, state, local and foreign
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, local and foreign 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.
The Company has entered into a consent decree, which has been approved by the
court, settling all matters with the United States Environmental Protection
Agency-Region I and the Department of Justice arising primarily out of a
December 1993 multimedia environmental inspection, as well as certain state
inspections, of the Company's Groton, Connecticut facility. The settlement
provides for the payment of $625,000 in fines, undertaking of an environmental
project at a cost of $150,000 and certain other operational provisions, the
implementation of which will not have a material adverse effect on the
operations of the Company.
Through the early 1970s, Pfizer Inc. (Minerals Division) and Quigley Company,
Inc. ("Quigley"), 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 of nineteen defendants
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. A number of cases alleging property damage from asbestos-containing
products installed in buildings have also been brought against the Company,
but most have been resolved.
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 members of the CCR (the "Future Claims Settlement").
The District Court determined that the Future Claims Settlement was fair and
reasonable. Subsequently, the United States Court of Appeals for the Third
Circuit reversed the order of the District Court and on June 27, 1997, the
U.S. Supreme Court affirmed the Third Circuit's order and decertified the
class. The overturning of the settlement is not expected to have a material
impact on the Company's exposure or on the availability of insurance for the
vast majority of such cases. It is expected, too, that the CCR will attempt to
resolve cases in the same manner as heretofore.
At approximately the time it filed the Future Claims Settlement class action,
the CCR settled approximately 16,360 personal injury cases on behalf of its
members, including the Company and Quigley. The CCR has continued to settle
remaining and opt-out cases and claims on a similar basis to past settlements.
As of March 27, 1999, there were 61,298 personal injury claims pending against
Quigley (excluding those which are inactive or have been settled in
principle), 35,265 such claims against the Company, and 67 talc cases against
the Company.
The Company believes that its costs incurred in defending and ultimately
disposing of the asbestos personal injury claims, as well as the property
damage and talc claims, will be largely covered by insurance policies issued
by several primary insurance carriers and a number of excess carriers that
have agreed to provide coverage, subject to deductibles, exclusions,
retentions and policy limits. Litigation is pending against several excess
insurance carriers seeking damages and/or declaratory relief to secure their
coverage obligations. 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.
The Company was named, together with numerous other manufacturers of brand-
name prescription drugs and certain companies that distribute brand-name
prescription drugs, in suits in federal and state courts brought by various
groups of retail pharmacy companies. The federal cases consist principally of
a class action by retail pharmacies (including approximately 30 named
plaintiffs), as well as additional actions by approximately 3,500 individual
retail pharmacies and a group of chain and supermarket pharmacies (the
"individual actions"). These cases, which were transferred to the United
States District Court for the Northern District of Illinois and coordinated
for pretrial purposes, allege that the defendant drug manufacturers violated
the Sherman Act by unlawfully agreeing with each other (and, as alleged in
some cases, with wholesalers) not to extend to retail pharmacy companies the
same discounts allegedly extended to mail order pharmacies, managed care
companies and certain other customers, and by unlawfully discriminating
against retail pharmacy companies by not extending them such discounts. On
November 15, 1994, the federal court certified a class (the "Federal Class
Action") consisting of all persons or entities who, since October 15, 1989,
bought brand-name prescription drugs from any manufacturer or wholesaler
defendant, but specifically excluding government entities, mail order
pharmacies, HMOs, hospitals, clinics and nursing homes. Fifteen manufacturer
defendants, including the Company, agreed to settle the Federal Class Action
subject to court approval. The Company's share pursuant to an Agreement as of
January 31, 1996, was $31.25 million, payable in four annual installments
without interest. The Company continues to believe that there was no
conspiracy and specifically denied liability in the Settlement Agreement, but
had agreed to settle to avoid the monetary and other costs of litigation. The
settlement was filed with the Court on February 9, 1996 and went through
preliminary and final fairness hearings. By orders of April 4, 1996, the
Court: (1) rejected the settlement; (2) denied the motions of the
manufacturers (including the Company) for summary judgment; (3) granted the
motions of the wholesalers for summary judgment; and (4) denied the motion to
exclude purchases by other than direct purchasers. On August 15, 1997, the
Court of Appeals (1) reversed the denial of summary judgment for the
manufacturers excluding purchases by other than direct purchasers; (2)
reversed the grant of summary judgment dismissing the wholesalers; and (3)
took action regarding Alabama state cases, and DuPont-Merck. In May 1996,
thirteen manufacturer defendants, including the Company, entered into an
Amendment to the Settlement Agreement which was filed with the Court on May 6,
1996. The Company's financial obligations under the Settlement Agreement were
not increased. The Settlement Agreement, as amended, received final approval
on June 21, 1996. Appeals from this decision were dismissed by the U.S. Court
of Appeals for the Seventh Circuit in May 1997. Trial began in September 1998
for the class case against the non-settlers, and the District Court also
permitted the opt-out plaintiffs to add the wholesalers as named defendants in
their cases. The District Court dismissed the case at the close of the
plaintiffs' evidence. The plaintiffs have appealed.
Retail pharmacy cases have also been filed in state courts in Alabama,
California, Minnesota, Mississippi and Wisconsin. Pharmacy classes have been
certified in California. The Company's motion to dismiss was granted in the
Wisconsin case, and that dismissal is under appeal.
Consumer class actions have been filed in Alabama, Arizona, California, the
District of Columbia, Florida, Kansas, Maine, Michigan, Minnesota, New York,
North Carolina, North Dakota, Tennessee, Washington and Wisconsin alleging
injury to consumers from the failure to give discounts to retail pharmacy
companies. The New York and Washington state cases were dismissed, and an
appeal is pending in New York. A case filed in Colorado state court was
dismissed without appeal. A consumer class has been certified in California,
and a limited consumer class has been certified in the District of Columbia.
Class certification was denied in the Michigan state case, and plaintiffs'
subsequent petition for review was denied. Class certification also was denied
in the Maine case.
In addition to its settlement of the retailer Federal Class Action (see
above), the Company has also settled several major opt-out retail cases, and
along with other manufacturers: (1) has entered into an agreement to settle
all outstanding consumer class actions (except Alabama, California and North
Dakota), which settlement is going through the approval process in the various
courts in which the actions are pending; and (2) has entered into an agreement
to settle the California consumer case, which has been approved by the Court
there.
The Company believes that these brand-name prescription drug antitrust cases,
which generally seek damages and certain injunctive relief, are without merit.
The Federal Trade Commission is conducting an investigation focusing on the
pricing practices at issue in the above pharmacy antitrust litigation. In July
1996, the Commission issued a subpoena for documents to the Company, among
others, to which the Company has responded. A second subpoena was issued to
the Company for documents in May 1997 and the Company has responded. This
investigation continues.
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 Committee has
issued a draft report recommending that plaque removal claims should not be
permitted in the absence of data establishing efficacy against gingivitis. The
process of incorporating the Advisory Committee recommendations into a final
monograph is expected to take several years. If the draft recommendation is
ultimately accepted in the final monograph, although it would have a negative
impact on sales of Plax, it will not have a material adverse effect on the
sales, financial position or operations of the Company.
On January 15, 1997, an action was filed in Circuit Court, Chambers County,
Alabama, purportedly on behalf of a class of consumers, variously defined by
the laws or types of laws governing their rights and encompassing residents of
up to 47 states. The complaint alleges that the Company's claims for Plax were
untrue, entitling them to a refund of their purchase price for purchases since
1988. A hearing on Plaintiffs' motion to certify the class was held on June 2,
1998. We are awaiting the Court's decision. The Company believes the complaint
is without merit.
The Federal Trade Commission conducted an investigation of the advertising of
Rid, which was resolved by a Consent Decree made final in December, 1998. At
the same time, the New York State Attorney General's office is investigating
the same or similar matters.
Since December 1998, three actions have been filed, in state courts in
Houston, San Francisco, and Chicago, purportedly on behalf of statewide
(California) or nationwide (Houston) classes of consumers who allege that the
Company's and other manufacturers' advertising and promotional claims for Rid
and other pediculicides were untrue, entitling them to refunds, other damages
and/or injunctive relief. The Houston and San Francisco cases have been
removed to federal court; no proceedings have yet occurred in the other cases.
The Company believes the complaints are without merit.
In March 1999, the Company received notice from a California public interest
group alleging that the labeling of Desitin violates California's "Proposition
65" by failing to warn of the presence of lead, which is alleged to be a
contaminant in the product. Several other manufacturers of zinc oxide-
containing topical diaper rash products have received similar notices. Any
public prosecutor in California has the option to take over the case. If no
public prosecutor does so within a specific period, the public interest group
may maintain an action in the public interest. The Company believes that the
labeling for Desitin complies with applicable legal requirements.
In April 1996, the Company received a Warning Letter from the FDA relating to
the timeliness and completeness of required post-marketing reports for
pharmaceutical products. The letter did not raise any safety issue about
Pfizer drugs. The Company has been implementing remedial actions designed to
remedy the issues raised in the letter. During 1997, the Company met with the
FDA to apprise them of the scope and status of these activities. A full
examination of the progress made by the Company in this area will occur in
1999.
During 1998, the Company completed the sale of all of the businesses and
companies that were part of the Medical Technology Group. As part of the sale
provisions, the Company has retained responsibility for certain items,
including matters related to the sale of MTG products sold by the Company
before the sale of the MTG businesses. A number of cases have been brought
against Howmedica Inc. (some of which also name the Company) alleging that
P.C.A. one-piece acetabular hip prostheses sold from 1983 through 1990 were
defectively designed and manufactured and pose undisclosed risks to
implantees. The Company believes that most if not all of these cases are
without merit. Between 1994 and 1996, seven class actions alleging various
injuries arising from implantable penile prostheses manufactured by American
Medical Systems were filed and ultimately dismissed or discontinued.
Thereafter, between late 1996 and early 1998, approximately 700 former members
of one or more of the purported classes, represented by some of the same
lawyers who filed the class actions, filed individual suits in Circuit Court
in Minneapolis alleging damages from their use of implantable penile
prostheses. The Company believes that most if not all of these cases are
without merit.
In June 1993, the Ministry of Justice of the State of Sao Paulo, Brazil,
commenced a civil public action against the Company's Brazilian subsidiary,
Laboratorios Pfizer Ltda. ("Pfizer Brazil") asserting that during a period in
1991, Pfizer Brazil withheld sale of the pharmaceutical product Diabinese in
violation of antitrust and consumer protection laws. The action seeks the
award of moral, economic and personal damages to individuals and the payment
to a public reserve fund. On February 8, 1996, the trial court issued a
decision holding Pfizer Brazil liable. The award of damages to individuals and
the payment into the public reserve fund will be determined in a subsequent
phase of the proceedings. The trial court's opinion sets out a formula for
calculating the payment into the public reserve fund which could result in a
sum of approximately $88 million. The total amount of damages payable to
eligible individuals under the decision would depend on the number of persons
eventually making claims. Pfizer Brazil is appealing this decision. The
Company believes that this action is without merit and should not have a
material adverse effect on the financial position or the results of operations
of the Company.
Tax Matters
The Internal Revenue Service (IRS) has completed its examination of income tax
returns through 1992.
In November 1994, Belgian tax authorities notified Pfizer Research and
Development Company N.V./S.A. ("PRDCO"), an indirect wholly owned subsidiary
of our company, of a proposed adjustment to the taxable income of PRDCO for
fiscal year 1992. The proposed adjustment arises from an assertion by the
Belgian tax authorities of jurisdiction with respect to income resulting
primarily from certain transfers of property by our non-Belgian subsidiaries
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. In
January 1996, PRDCO received an assessment from the tax authorities, for
fiscal year 1993, for additional taxes and interest of approximately $86
million and $18 million, respectively. The additional assessment arises from
the same assertion by the Belgian tax authorities of jurisdiction with respect
to all income of the Irish branch of PRDCO. Based upon the relevant facts
regarding the Irish branch of PRDCO and the provisions of Belgian tax laws and
the written opinions of outside legal counsel, we believe that the assessments
are without merit.
We believe that our accrued tax liabilities are adequate for all years.
Item 4: Submission of Matters to a Vote of Security Holders
The shareholders of the Company voted on four items at the Annual Meeting of
Shareholders held on April 22, 1999:
1. the election of five directors, to terms ending in 2002;
2. a proposal to approve the appointment of KPMG LLP as independent
auditors for 1999;
3. a proposal to amend the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of the Company's common stock; and
4. a proposal to amend the Stock and Incentive Plan to increase the number
of shares of common stock authorized to be issued under the Plan and to extend
the term of the Plan to December 31, 2008.
Votes were cast for election of directors as follows:
Nominee Votes For Votes Withheld
Michael S. Brown 1,100,399,320 9,158,803
Constance J. Horner 1,103,372,223 6,185,900
Thomas G. Labrecque 1,100,490,277 9,067,846
Franklin D. Raines 1,102,941,082 6,617,041
Jean-Paul Valles 1,103,294,193 6,263,930
The appointment of KPMG LLP as auditors for 1999 was approved as
follows:
-- 1,103,069,167 votes for approval;
-- 2,085,400 votes against; and
-- 4,403,556 abstentions
The amendment of the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of the Company's common stock was
approved as follows:
-- 1,071,479,558 votes for approval;
-- 33,964,664 votes against; and
-- 4,113,901 abstentions
The amendment of the Stock and Incentive Plan to increase the number of
shares of common stock authorized to be issued under the Plan and to extend
the term of the Plan to December 31, 2008 was approved as follows:
-- 841,893,616 votes for approval;
-- 69,731,287 votes against;
-- 8,676,299 abstentions; and
-- 189,256,921 broker non-votes
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
1) Exhibit 3(i) - Restated Certificate of Incorporation
dated April 22, 1999
2) Exhibit 15 - Accountants' Acknowledgment
3) Exhibit 18 - Accountants Letter re: change in accounting
principle
4) Exhibit 27 - Financial Data Schedule
5) Exhibit 27.1 - Financial Data Schedule restated for period
ended March 29, 1998.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter ended
April 4, 1999.
PFIZER INC. AND SUBSIDIARY COMPANIES
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, this report was
signed on behalf of the Registrant by the authorized person named below.
Pfizer Inc.
(Registrant)
/s/ H. V. Ryan
Dated: May 18, 1999 H. V. Ryan, Vice President; Controller
(Principal Accounting Officer and
Duly Authorized Officer)
Exhibit 3(i)
RESTATED
CERTIFICATE OF INCORPORATION
OF
PFIZER INC.
Pfizer Inc., a corporation organized and existing under the laws of the
State of Delaware, HEREBY CERTIFIES AS FOLLOWS:
1. The name of the corporation is Pfizer Inc. The name under which it
was originally incorporated was Chas. Pfizer & Co., Inc. The date of filing
its original Certificate of Incorporation with the Secretary of State was June
2, 1942.
2. This Restated Certificate of Incorporation was duly adopted in
accordance with Section 245 of the General Corporation Law of Delaware.
3. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation as amended or supplemented heretofore and there is no
discrepancy between this Restated Certificate of Incorporation and the text of
the Certificate of Incorporation as amended or supplemented heretofore.
4. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes to read as herein set forth in full:
FIRST: The name of the Corporation is and shall be Pfizer Inc.
(hereinafter in this Restated Certificate of Incorporation called the
"Corporation").
SECOND: The principal office and place of business of the Corporation in
the State of Delaware is located at 1209 Orange Street, in the City of
Wilmington, County of New Castle; and the name and post office address of the
registered agent of the Corporation in the State of Delaware is The
Corporation Trust Company, 1209 Orange Street, in the City of Wilmington,
County of New Castle, Delaware.
THIRD: The nature of the business, or objects or purposes to be
transacted, promoted or carried on are as follows:
To carry on the business of chemists, druggists, chemical manufacturers,
importers, exporters, manufacturers of and dealers in chemical,
pharmaceutical, medicinal, and other preparations and chemicals.
To engage in, conduct, perform or participate in every kind of
commercial, agricultural, mercantile, manufacturing, mining, transportation,
industrial or other enterprise, business, work, contract, undertaking, venture
or operation.
To buy, sell, manufacture, refine, import, export and deal in all
products, goods, wares, merchandise, substances, apparatus, and property of
every kind, nature and description, and to construct, maintain, and alter any
buildings, works or mines.
To enter into, make and perform contracts of every kind with any person,
firm or corporation.
To take out patents, trade-marks, trade names and copyrights, acquire
those taken out by others, acquire or grant licenses in respect of any of the
foregoing, or work, transfer, or do whatever else with them may be thought
fit.
To acquire the good-will, property, rights, franchises, contracts and
assets of every kind and undertake the liabilities of any person, firm,
association or corporation, either wholly or in part, and pay for the same in
the stock, bonds or other obligations of the Corporation or otherwise.
To purchase, hold, own, sell, assign, transfer, mortgage, pledge or
otherwise dispose of shares of the capital stock of any other corporation or
corporations, association or associations, of any state, territory or country,
and while owner of such stock, to exercise all the rights, powers and
privileges of ownership including the right to vote thereon.
To issue bonds, debentures or obligations of the Corporation, at the
options of the Corporation, secure the same by mortgage, pledge, deed of trust
or otherwise, and dispose of and market the same.
To purchase, hold and re-issue the shares of its capital stock and its
bonds and other obligations.
To do all and everything necessary, suitable, convenient or proper for
the accomplishment of any of the purposes or the attainment of one or more of
the objects herein enumerated, or
of the powers herein named, or which shall at any time appear conducive to or
expedient for the protection, or benefit of the Corporation, either as holder
of, or interested in, any property or otherwise, to the same extent as natural
persons might or could do, in any part of the world.
To conduct any of its business in the State of Delaware and elsewhere,
including in the term "elsewhere" any of the states, districts, territories,
colonies or dependencies of the United States, and in any and all foreign
countries and to have one or more offices, and to hold, purchase, mortgage and
convey real
and personal property, without limit as to amount, within or
(except as and when forbidden by local laws) without the State of Delaware.
To carry on any other business to any extent and in any manner not
prohibited by the laws of Delaware or, where the Corporation may seek to do
such business elsewhere, by local laws.
The foregoing clauses shall be construed both as objects and powers, but
no recitation or declaration of specific or special objects or powers herein
enumerated shall be deemed to be exclusive; but in each and every instance it
is hereby expressly declared that all other powers, not inconsistent
therewith, now or hereafter permitted or granted under the laws of Delaware,
or by the laws of any other state or country into which the Corporation may go
or seek to do business, are hereby expressly included as if such other or
general powers were herein set forth.
FOURTH:
A. Authorized Shares and Classes of Stock.
The total number of shares and classes of stock that the Company shall
have authority to issue is nine billion twelve million (9,012,000,000) shares,
which shall be divided into two classes, as follows: twelve million
(12,000,000) shares of Preferred Stock, without par value, and nine billion
(9,000,000,000) shares of Common Stock of the par value of $.05 per share.
B. Designations, Powers, Preferences and Rights,
in Respect of the Shares of Preferred Stock.
(1) Shares of the Preferred Stock may be issued in one or more series
at such time or times and for such consideration or considerations as the
Board of Directors may determine. All shares of any one series shall be of
equal rank and identical in all respects.
(2) Authority is hereby expressly granted to the Board of Directors to
fix from time to time, by resolution or resolutions providing for the issue of
any series of Preferred Stock, the designation of such series, and the powers,
preferences and rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, including the following:
(a) The distinctive designation and number of shares comprising
such series, which number may (except where otherwise provided by the
Board of Directors in creating such series) be increased or decreased
(but not below the number of shares then outstanding) from time to time
by like action of the Board of Directors;
(b) The dividend rate or rates on the shares of such series and the
preferences, if any, over any other series (or of any other series over
such series) with respect to dividends, the terms and conditions upon
which and the periods in respect of which dividends shall be payable,
whether and upon what conditions such dividends shall be cumulative and,
if cumulative, the date or dates from which dividends shall accumulate;
(c) Whether or not the shares of such series shall be redeemable,
the limitations and restrictions with respect to such redemptions, the
time or times when, the price or prices at which and the manner in which
such shares shall be redeemable, including the manner of selecting
shares of such series for redemption if less than all shares are to be
redeemed;
(d) The rights to which the holders of shares and such series shall
be entitled, and the preferences, if any, over any other series (or of
any other series over such series), upon the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding-up of the
Corporation, which rights may vary depending on whether such
liquidation, dissolution, distribution or winding-up is voluntary or
involuntary, and, if voluntary, may vary at different dates;
(e) Whether or not the shares of such series shall be subject to
the operation of a purchase, retirement or sinking fund, and, if so,
whether and upon what conditions such purchase, retirement or sinking
fund shall be cumulative or noncumulative, the extent to which and the
manner in which such fund shall be applied to the purchase or redemption
of the shares of such series for retirement or to other corporate
purposes and the terms and provisions relative to the operation thereof;
(f) Whether or not the shares of such series shall be convertible
into or exchangeable for shares of stock of any other class or classes,
or any other series of the same class and, if so convertible or
exchangeable, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any other
terms and conditions of such conversion or exchange;
(g) The voting powers, full and/or limited, if any, of the shares
of such series; and whether or not and under what conditions the shares
of such series (alone or together with the shares of one or more other
series having similar provisions) shall be entitled to vote separately
as a single class, for the election of one or more additional directors
of the Corporation in case of dividend arrearages or other specified
events, or upon other matters;
(h) Whether or not the issuance of any additional shares of such
series, or of any shares of any other series, shall be subject to
restrictions as to issuance, or as to the powers, preferences or rights
of any such other series;
(i) Whether or not the holders of shares of such series shall be
entitled, as a matter of right, to subscribe for or purchase any part of
any new or additional issue of stock of any class or of securities
convertible into stock of any class and, if so entitled, the
qualifications, conditions, limitations and restrictions of such right;
and
(j) Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors
may deem advisable and as shall not be inconsistent with the provisions
of this Certificate of Incorporation.
(3) The shares of each series of Preferred Stock shall entitle the
holders thereof to receive, when, as and if declared by the Board of Directors
out of funds legally available for dividends, cash dividends at the rate,
under the conditions, for the periods and on the dates fixed by the resolution
or resolutions of the Board of Directors pursuant to authority granted in this
Section B, for each series, and no more, before any dividends on the Common
Stock, other than dividends payable in Common Stock, shall be paid or set
apart for payment. No dividends shall be paid or declared or set apart for
payment on any particular series of Preferred Stock in respect of any period
unless dividends shall be or have been paid, or declared and set apart for
payment, pro rata on all shares of Preferred Stock at the time outstanding of
each other series which ranks equally as to dividends with such particular
series, so that the amount of dividends declared on such particular series
shall bear the same ratio to the amount declared on each such other series as
the dividend rate of such particular series shall bear to the dividend rate of
such other series. No dividends shall be deemed to have accrued on any share
of Preferred Stock of any series with respect to any period prior to the date
of original issue of such share or the dividend payment date immediately
preceding or following such date of original issue, as may be provided in the
resolution or resolutions creating such series. The Preferred Stock shall not
be entitled to participate in any dividends declared and paid on the Common
Stock, whether payable in cash, stock or otherwise. Accruals of dividends
shall not bear interest.
(4) Any redemption of Preferred Stock shall be effected by notice duly
given as hereinafter specified and by payment at the redemption price of the
Preferred Stock to be redeemed. In case of redemption of a part only of a
series of the Preferred Stock at the time outstanding, the selection of shares
for redemption may be made either by lot or pro rata or in such other manner
as shall be determined by the Board of Directors. Notice of every such
redemption, stating the redemption date and price, the place of payment, and
the expiration date of then existing rights, if any, of conversion or
exchange, shall be given by publication, not less than 30 nor more than 60
days prior to the date fixed for redemption, at least twice in a newspaper
customarily published at least once a day for at least five days in each
calendar week and of general circulation in New York, New York, whether or not
published on Saturdays, Sundays, or holidays. Notice of such redemption may
also be mailed not less than 30 nor more than 60 days prior to the date fixed
for redemption to the holders of record of the shares so to be redeemed at
their respective addresses as the same shall appear on the books of the
Corporation, but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of such redemption proceedings.
If
(a) such notice of redemption by publication shall have been duly
given or the Corporation shall have given to a bank or trust company in
New York, New York designated by the Board of Directors and having
capital and surplus of at least Two Million Dollars ($2,000,000),
irrevocable authorization promptly to give such notice; and
(b) on or before the redemption date specified in such notice the
funds or other property necessary for such redemption shall have been
deposited by the Corporation with such bank or trust company, designated
in such notice, in trust for the pro rata benefit of the holders of the
shares so called for redemption, then, notwithstanding that any
certificate for shares so called for redemption shall not have been
surrendered for cancellation, from and after the time of such deposit
all shares of the Preferred Stock so called for redemption shall no
longer be deemed to be outstanding and all rights with respect to such
shares shall forthwith cease and terminate, except only
(i) the right of the holders thereof to receive from such bank
or trust company the funds or other property so deposited, without
interest, upon surrender (and endorsement, if required by the
Board of Directors) of the certificates for such shares, and
(ii) the rights of conversion or exchange, if any, not
theretofore expired.
Any funds or other property so deposited and unclaimed at the end
of six years from such redemption date shall be released or repaid to
the Corporation, after which the holders of the shares so called for
redemption shall look only to the Corporation for payment thereof.
(5) Shares of Preferred Stock which have been redeemed or converted, or
which have been issued and reacquired in any manner and retired, shall have
the status of authorized and unissued Preferred Stock and may be reissued by
the Board of Directors as shares of the same or any other series.
(6) In the event of any voluntary or involuntary liquidation,
dissolution, distribution of assets or winding-up of the Corporation, the
holders of the shares of each series of Preferred Stock then outstanding shall
be entitled to receive out of the net assets of the Corporation, but only in
accordance with the preference, if any, provided for such series, before any
distribution or payment shall be made to the holders of the Common Stock, the
amount per share fixed by the resolution or resolutions of the Board of
Directors to be received by the holders of shares of each such series on such
voluntary or involuntary liquidation, dissolution, distribution of assets or
winding-up, as the case may be. If such payment shall have been made in full,
to the holders of all outstanding Preferred Stock of all series, or duly
provided for, the remaining assets of the Corporation shall be available for
distribution among the holders of the Common Stock. If upon any such
liquidation, dissolution, distribution, of assets or winding-up, the net
assets of the Corporation available for distribution among the holders of any
one or more series of the Preferred Stock which (a) are entitled to a
preference over the holders of the Common Stock upon such liquidation,
dissolution, distribution of assets or winding-up, and (b) rank equally in
connection therewith, shall be insufficient to make payment in full of the
preferential amount to which the holders of such shares shall be entitled,
then such assets shall be distributed among the holders of each such series of
the Preferred Stock ratably according to the respective amounts to which they
would be entitled in respect of the shares held by them upon such distribution
if all amounts payable on or with respect to such shares were paid in full.
Neither the consolidation or merger of the Corporation, nor the sale, lease or
conveyance of all or part of its assets, shall be deemed a liquidation,
dissolution, distribution of assets or winding-up of the Corporation within
the meaning of the foregoing provisions.
(7) Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors pursuant to this
Section B, the shares of Preferred Stock shall have no voting power with
respect to any matter whatsoever, including, but not limited to, any action to
(a) increase the authorized number of shares of the Preferred Stock
or of any series thereof,
(b) create shares of stock of any class ranking prior to or on a
parity with any series of the Preferred Stock with respect to any
preferences or voting powers, and
(c) authorize a new series of the Preferred Stock having
preferences or voting powers ranking prior to or on a parity with any
series of the Preferred Stock with respect to any preferences or voting
powers.
In no event shall the Preferred Stock be entitled to more than one vote in
respect of each share of stock.
C. Limitations, Relative Rights and Powers
in Respect of Shares of Common Stock.
(l) After the requirements with respect to preferential dividends, if
any, on the Preferred Stock (fixed pursuant to Section B) shall have been met
and after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as purchase, retirement or
sinking funds (fixed pursuant to Section B), then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as may be
declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if any, (fixed
pursuant to Section B) to be distributed to the holders of Preferred Stock in
the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding-up of the Corporation, the holders of the
Common Stock shall be entitled to receive all the remaining assets of the
Corporation of whatever kind available for the distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may be otherwise required by law or by this Certificate of
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by him on all matters voted upon by the stockholders.
D. Other Provisions.
(l) Except as may be provided in the resolution or resolutions of the
Board of Directors pursuant to Section B with respect to any series of
Preferred Stock, no holder of stock of any class of the Corporation shall be
entitled as of right to purchase or subscribe for any part of any unissued
stock of any class, or of any additional stock of any class of Capital Stock
of the Corporation, or to any bonds, certificates of indebtedness, debentures,
or other securities convertible into stock of the Corporation, now or
hereafter authorized, but any such stock or other securities convertible into
stock may be issued and disposed of pursuant to resolution by the Board of
Directors to such persons, firms, corporations or associations and upon such
terms and for such consideration as the Board of Directors in the exercise of
its discretion may determine and as may be permitted by law. Any and all
shares of stock so issued for which the consideration so fixed has been paid
or delivered to the Corporation shall be fully paid and not liable to any
further call.
(2) In no case shall fractions of shares of any class of stock be issued
by the Corporation, but in lieu thereof the Corporation shall, at its option,
make a cash adjustment or issue fractional Scrip Certificates, in such form
and in such denominations as shall from time to time be determined by the
Board of Directors. Such Scrip Certificates shall be exchangeable on or
before such date or dates as the Board of Directors may determine, when
surrendered with other similar Scrip Certificates in sufficient aggregate
amounts, for certificates for fully paid and non-assessable full shares of the
respective stocks for which such Scrip Certificates are exchangeable, and new
Scrip Certificates of a like tenor for the remaining fraction of a share, if
any. Such Scrip Certificates shall not entitle any holder thereof to voting
rights, dividend rights or any other rights of a stockholder or any rights
other than the rights therein set forth, and no dividend or interest shall be
payable or shall accrue with respect to Scrip Certificates or the interests
represented thereby. All such Scrip Certificates which are not surrendered in
exchange for shares of stock on or before their respective expiration dates
shall thereafter be void and of no effect whatever.
(3) The minimum amount of capital with which the Corporation will commence
business is $1,000.
SERIES A JUNIOR PREFERRED STOCK
Pursuant to authority conferred by this Article FOURTH upon the Board of
Directors of the Corporation, the Board of Directors, pursuant to the Amended
and Restated Certificate of Designations filed in the Office of the Secretary
of State of the State of Delaware on October 9, 1997, has provided for a
series of Preferred Stock of the Corporation and has stated the designation
and number of shares, and has fixed the relative rights, preferences, and
limitations thereof as follows:
Series A Junior Preferred Stock:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series A Junior Preferred Stock"
(referred to herein as the "Series A Preferred Stock") and the
number of shares constituting such series shall be 3,000,000. The
Board of Directors of the Company may increase or decrease such
number form time to time as they deem appropriate, subject to the
then-current limitations of the Restated Certificate of
Incorporation and applicable law.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment
hereinafter set forth, the holders of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the
purpose, (i) in the event the Board of Directors of the Company
shall, at any time after the issuance of any share of Series A
Preferred Stock, declare a cash dividend payable on any class or
series of the Common Stock of the Company (the "Common Stock"), a
preferential cash dividend in an amount per share (rounded to the
nearest cent) equal to 1000 times the per share amount of such
cash dividend declared on a share of the Common Stock and (ii) a
preferential cash dividend (a "Preferential Dividend"), if any, on
the first day of January, April, July and October of each year
(each a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of
a share or fraction or a share of Series A Preferred Stock, in an
amount equal to $100 per share of Series A Preferred Stock less
the per share amount of all cash dividends declared on the Series
A Preferred Stock pursuant to clause (i) of this sentence since
the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share of Series A Preferred Stock. In the
event the Board of Directors of the Company shall, at any time
after the issuance of any share of Series A Preferred Stock,
declare a distribution on the shares of Common Stock of the
Company, whether by way of a dividend or a reclassification of
stock, a recapitalization, reorganization or partial liquidation
of the Company or otherwise, which is payable in cash or any debt
security, debt instrument, real or personal property or any other
property (other than cash dividends subject to the immediately
preceding sentence), a distribution of shares of Common Stock or
other capital stock of the Company or a distribution of rights or
warrants to acquire any such share (including any debt security
convertible into or exchangeable for any such share), at a price
less than the Fair Market Value of such share, then and in each
such event each holder of Series A Preferred Stock shall be
entitled to receive when, as and if declared by the Board of
Directors, out of funds and assets legally available for the
purpose, a preferential distribution on each then outstanding
share of Series A Preferred Stock of the Company, in like kind, in
an amount equal to 1000 times the amount of such distribution paid
on a share of Common Stock (subject to the provisions for
adjustment hereinafter set forth). The dividends and
distributions on the Series A Preferred Stock to which holders
thereof are entitled pursuant to clause (i) of the first sentence
of this paragraph and pursuant to the second sentence of this
paragraph are hereinafter referred to as "Series A Dividends" and
the multiple of such cash and non-cash dividends on the Common
Stock applicable to the determination of the Series A Dividends,
which shall be 1000 initially but shall be adjusted from time to
time as hereinafter provided, is hereinafter referred to as the
"Dividend Multiple". In the event the Company shall at any time
after October 5, 1997 declare or pay any dividend or make any
distribution on Common Stock payable in shares of Common Stock, or
effect a subdivision or split or a combination, consolidation or
reverse split of the outstanding shares of Common Stock into a
greater or lesser number of shares of Common Stock, then in each
such case the Dividend Multiple thereafter applicable to the
determination of the amount of the Series A Dividends which
holders of shares of Series A Preferred Stock shall be entitled to
receive shall be the Dividend Multiple applicable immediately
prior to such event multiplied by a fraction the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) So long as any shares of Series A Preferred
Stock are outstanding, no dividend or other distribution (other
than a dividend or distribution paid in shares of Common Stock)
shall be paid or set apart for payment by the Company on the
Common Stock, unless, in each case, the full dividends on all
outstanding shares of Series A Preferred Stock to which the
holders thereof are entitled shall have been paid. No dividends
shall be paid or declared or set apart for payment on the Series A
Preferred Stock in respect of any period unless dividends shall be
or have been paid, or declared and set apart for payment, pro rata
on all shares of Preferred Stock at the time outstanding of each
other series which ranks equally as to dividends with the Series A
Preferred Stock so that the amount of dividends declared on the
Series A Preferred Stock shall bear the same ratio to the amount
declared on each such other series as the accrued dividends on the
Series A Preferred Stock shall bear to the accrued dividends on
each such other series. Holders of shares of Series A Preferred
Stock shall not be entitled to any dividend, whether payable in
cash, property or stock, in excess of full dividends, as herein
provided, on shares of Series A Preferred Stock. Accruals of
dividends shall not bear interest.
(C) Preferential Dividends shall begin to
accrue on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issuance of any shares of Series A Preferred Stock. Accrued but
unpaid Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares
at the time outstanding.
Section 3. Voting Rights. The holders of shares of
Series A Preferred Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock
shall entitle the holder thereof to 1 vote on all matters
submitted to a vote of the stockholders of the Company. Except as
otherwise provided herein, in the Restated Certificate of
Incorporation or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(B) In the event that the Preferential
Dividends accrued on the Series A Preferred Stock for four or more
quarterly dividend periods, whether consecutive or not, shall not
have been declared and paid or set apart for payment, the holders
of record of the Series A Preferred Stock, together with any other
series of Preferred Stock in respect of which the following right
is expressly granted by the authorizing resolutions included in
the Certificate of Designations therefor, shall have the right, at
the next meeting of stockholders called for the election of
directors, to elect two members to the Board of Directors, which
directors shall be in addition to the number required by the By-
laws prior to such event, to serve until the next Annual Meeting
and until their successors are elected and qualified or their
earlier resignation, removal or incapacity or until such earlier
time as all accrued and unpaid Preferential Dividends upon the
outstanding shares of Series A Preferred Stock shall have been
paid (or set aside for payment) in full. The holders of shares of
Series A Preferred Stock shall continue to have the right to elect
directors as provided by the immediately preceding sentence until
all accrued and unpaid Preferential Dividends upon the outstanding
shares of Series A Preferred Stock shall have been paid (or set
aside for payment) in full. Such directors may be removed and
replaced by such stockholders, and vacancies in such directorships
may be filled only by such stockholders (or by the remaining
director elected by such stockholders, if there be one) in the
manner permitted by law; provided, however, that any such action
by stockholders shall be taken at a meeting of stockholders and
shall not be taken by written consent thereto.
(C) Except as otherwise required by the
Restated Certificate of Incorporation or by law or set forth
herein, holders of Series A Preferred Stock shall have no special
voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock
as set forth herein) for the taking of any corporate action.
Section 4. Certain Restrictions.
(A) Whenever Preferential Dividends or the
Series A Dividends are in arrears or the Company shall be in
default of payment thereof, thereafter and until all accrued and
unpaid Preferential Dividends and the Series A Dividends, whether
or not declared, on shares of Series A Preferred Stock outstanding
shall have been paid or set aside for payment in full, and in
addition to any and all other rights which any holder of shares of
Series A Preferred Stock may have in such circumstances, the
Company shall not:
(i) declare or pay dividends on, make any
other distributions on (other than a dividend or distribution paid
in shares of Common Stock), or redeem or purchase or otherwise
acquire for consideration, any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make
any other distributions on any shares of stock ranking on a parity
as to dividends with the Series A Preferred Stock, unless
dividends are paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled if the full dividends accrued thereon
were to be paid;
(iii) except as permitted by subparagraph
(iv) of this paragraph 4(A), redeem or purchase or otherwise
acquire for consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, provided that the
Company may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any
stock of the Company ranking junior (both as to dividends and upon
liquidation, dissolution or winding-up) to the Series A Preferred
Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock or any shares
of stock ranking on a parity with the Series A Preferred Stock
(either as to dividends or upon liquidation, dissolution or
winding up), except in accordance with a purchase offer made to
all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine will result in fair and
equitable treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary
(as hereinafter defined) of the Company to purchase or otherwise
acquire for consideration any shares of stock of the Company
unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such
manner. A "Subsidiary" of the Company shall mean any corporation
or other entity of which securities or other ownership interests
having ordinary voting power sufficient to elect a majority of the
board of directors or other persons performing similar functions
are beneficially owned, directly or indirectly, by the Company or
by any corporation or other entity that that is otherwise
controlled by the Company.
(C) The Company shall not issue any shares of
Series A Preferred Stock except upon exercise of Rights issued
pursuant to the Company's Rights Agreement dated as of October 6,
1997, as it may be amended and restated from time to time, a copy
of which as is then currently in effect shall kept on file with
the Secretary of the Company at its principal executive office and
shall be made available to stockholders of record without charge
upon written request therefor addressed to said Secretary.
Notwithstanding the foregoing sentence, nothing contained in the
provisions hereof shall prohibit or restrict the Company from
issuing for any purpose any series of Preferred Stock with rights
and privileges similar to, different from, or greater than, those
of the Series A Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and canceled promptly after
the acquisition thereof. All such shares upon their retirement
and cancellation shall become authorized but unissued shares of
Preferred Stock, without designation as to series, and such shares
maybe reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon
any voluntary or involuntary liquidation, dissolution or winding
up of the Company, no distribution shall be made (i) to the
holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless the holders of shares of Series A Preferred
Stock shall have received, subject to adjustment as hereinafter
provided, (A) $275 per one thousandth share plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, or (B) if greater
than the amount specified in clause (i)(A) of this sentence, an
amount equal to 1000 times the aggregate amount to be distributed
per share to holders of Common Stock, as the same may be adjusted
as hereinafter provided, and (ii) to the holders of stock ranking
on a parity upon liquidation, dissolution or winding up with the
Series A Preferred Stock, unless simultaneously therewith
distributions are made ratably on the Series A Preferred Stock and
all other shares of such parity stock in proportion to the total
amounts to which the holders of shares of Series A Preferred Stock
are entitled under clause (1)(A) of this sentence and to which the
holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which
holders of Series A Preferred Stock may be entitled upon
liquidation, dissolution or winding up of the Company pursuant to
clause (i)(B) of the foregoing sentence is hereinafter referred to
as the "Participating Liquidation Amount" and the multiple of the
amount to be distributed to holders of shares of Common Stock upon
the liquidation, dissolution or winding up of the Company
applicable pursuant to said clause to the determination of the
Participating Liquidation Amount, as said multiple may be adjusted
from time to time as hereinafter provided, is hereinafter referred
to as the "Liquidation Multiple". In the event the Company shall
at any time after October 5, 1997 declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse
split of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock, then in each such case,
the Liquidation Multiple thereafter applicable to the
determination of the Participating Liquidation Amount to which
holders of Series A Preferred Stock shall be entitled after such
event shall be the Liquidation Multiple applicable immediately
prior to such event multiplied by a fraction, the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Certain Reclassifications and other Events.
(A) In the event that holders of shares of
Common Stock of the Company receive after October 5, 1997 in
respect of their shares of Common Stock any share of capital stock
of the Company (other than any share of Common Stock of the
Company), whether by way of reclassification, recapitalization,
reorganization, dividends or other distribution or otherwise (a
"Transaction"), then and in each such event the dividend rights
and rights upon the liquidation, dissolution or winding up of the
Company of the shares of Series A Preferred Stock shall be
adjusted so that after such event the holders of Series A
Preferred Stock shall be entitled, in respect of each share of
Series A Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately
prior to such adjustment, to (i) such additional dividends as
equal the Dividend Multiple in effect immediately prior to such
Transaction multiplied by the additional dividends which the
holder of a share of Common Stock shall be entitled to receive by
virtue of the receipt in the Transaction of such capital stock and
(ii) such additional distributions upon liquidation, dissolution
or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such Transaction multiplied by the
additional amount which the holder of a share of Common Stock
shall be entitled to receive upon liquidation, dissolution or
winding up of the Company by virtue of the receipt in the
Transaction of such capital stock, as the case may be, all as
provided by the terms of such capital stock.
(B) In the event that holders of shares or
Common Stock of the Company receive after October 5, 1997 in
respect of their shares of Common Stock any right or warrant to
purchase Common Stock (including as such a right, for all purposes
of this paragraph, any security convertible into or exchangeable
for Common Stock) at a purchase price per share less than the Fair
Market Value (as hereinafter defined) of a share of Common Stock
on the date of issuance of such right or warrant, then and in each
such event the dividend rights and rights upon the liquidation,
dissolution or winding up of the Company of the shares of Series A
Preferred Stock shall each be adjusted so that after such event
the Dividend Multiple and the Liquidation Multiple shall each be
the product of the Dividend Multiple and the Liquidation Multiple,
as the case may be, in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of
shares of Common Stock which could be acquired upon exercise in
full of all such rights or warrants and the denominator of which
shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the
number of shares of Common Stock which could be purchased, at the
Fair Market Value of the Common Stock at the time of such
issuance, by the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants.
(C) In the event that holders of shares of
Common Stock of the Company receive after October 5, 1997 in
respect of their shares of Common Stock any right or warrant to
purchase capital stock of the Company (other than shares of Common
Stock), including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for
capital stock of the Company (other than Common Stock), at a
purchase price per share less than the Fair Market Value of such
shares of capital stock on the date of issuance of such right or
warrant, then and in each such event the dividend rights and
rights upon liquidation, dissolution or winding up of the Company
of the shares of Series A Preferred Stock shall each be adjusted
so that after such event each holder of a share of Series A
Preferred Stock shall be entitled, in respect of each share of
Series A Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately
prior to such event, to receive (i) such additional dividends as
equal the Dividend Multiple in effect immediately prior to such
event multiplied, first, by the additional dividends to which the
holder of a share of Common Stock shall be entitled upon exercise
of such right or warrant by virtue of the capital stock which
could be acquired upon such exercise and multiplied again by the
Discount Fraction (as hereinafter defined) and (ii) such
additional distributions upon liquidation, dissolution or winding
up of the Company as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the
additional amount which the holder of a share of Common Stock
shall be entitled to receive upon liquidation, dissolution or
winding up of the Company upon exercise of such right or warrant
by virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction. For
purposes of this paragraph, the "Discount Fraction" shall be a
fraction the numerator of which shall be the difference between
the Fair Market Value of a share of the capital stock subject to a
right or warrant distributed to holders of shares of Common Stock
of the Company as contemplated by this paragraph immediately after
the distribution thereof and the purchase price per share for such
share of capital stock pursuant to such right or warrant and the
denominator of which shall be the Fair Market Value of a share of
such capital stock immediately after the distribution of such
right or warrant.
(D) For purposes of this Section 7, the "Fair
Market Value" of a share of capital stock of the Company
(including a share of Common Stock) on any date shall be deemed to
be the average of the daily closing price per share thereof over
the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that,
in the event that such Fair Market Value or any such share or
capital stock is determined during a period which includes any
date that is within 30 Trading Days after (i) the ex-dividend date
for a dividend or distribution on stock payable in shares of such
stock or securities convertible into shares or such stock, or (ii)
the effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such
stock, then, and in each such case, the Fair Market Value shall be
appropriately adjusted by the Board or Directors of the Company to
take into account ex-dividend or post-effective date trading. The
closing price for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average
or the closing bid and asked prices, regular way (in either case,
as reported in the applicable transaction reporting system with
respect to securities listed or admitted to trading on the New
York Stock Exchange), or, if the shares are not listed or admitted
to trading on the New York Stock Exchange, as reported in the
applicable transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
shares are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other-system then in
use, or if on any such date the shares are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
shares selected by the Board of Directors of the Company. The
term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares are listed or
admitted to trading is open for the transaction of business or, if
the shares are not listed or admitted to trading on any national
securities exchange, on which the New York Stock Exchange or such
other national securities exchange as may be selected by the Board
of Directors of the Company is open. If the shares are not
publicly held or not so listed or traded on any day within the
period of 30 Trading Days applicable to the determination of Fair
Market Value thereof as aforesaid, "Fair Market Value" shall mean
the fair market value thereof per share as determined by the Board
of Directors of the Company. In either case referred to in the
foregoing sentence, the determination of Fair Market Value shall
be described in a statement filed with the Secretary of the
Company.
Section 8. Consolidation, Merger, etc. In case the
Company shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each outstanding
share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of
stock, securities, cash and/or other property (payable in like
kind), as the case may be, for which or into which each share of
Common Stock is changed or exchanged, multiplied by the higher of
the Dividend Multiple or the Liquidation Multiple in effect
immediately prior to such event.
Section 9. Effective Time of Adjustments.
(A) Adjustments to the Series A Preferred
Stock required by the provisions hereof shall be effective as of
the time at which the event requiring such adjustments occurs.
(B) The Company shall give prompt written
notice to each holder of a share of Series A Preferred Stock of
the effect of any adjustment to the dividend rights or rights upon
liquidation, dissolution or winding up of the Company of such
shares required by the provisions hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such notice
shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
Section 10. No Redemption. The shares of Series A
Preferred Stock shall not be redeemable at the option of the
Company or any holder thereof. Notwithstanding the foregoing
sentence of this Section, the Company may acquire shares of Series
A Preferred Stock in any other manner permitted by law, the
provisions hereof and the Restated Certificate of Incorporation of
the Company.
Section 11. Ranking. Unless otherwise provided in the
Restated Certificate of Incorporation of the Company or a
Certificate of Designations relating to a subsequent series of
preferred stock of the Company, the Series A Preferred Stock shall
rank junior to all other series of the Company's Preferred Stock
as to the payment or dividends and the distribution of assets on
liquidation, dissolution or winding up, and senior to the Common
Stock.
Section 12. Amendment. The provisions hereof and the
Restated Certificate of Incorporation of the Company shall not be
amended in any manner which would adversely affect the rights,
privileges or powers of the Series A Preferred Stock without, in
addition to any other vote of stockholders required by law, the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series A Preferred Stock, voting together as
a single class.
FIFTH: The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
SIXTH: The Corporation shall have perpetual existence.
SEVENTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and it is
expressly provided that the same are intended to be in furtherance and not in
limitation or exclusion of the powers conferred by statute:
(1) The number of directors of the Corporation (exclusive of directors
(the "Preferred Stock Directors") who may be elected by the holders of any one
or more series of Preferred Stock which may at any time be outstanding, voting
separately as a class or classes) shall not be less than ten nor more than
eighteen, the exact number within said limits to be fixed from time to time
solely by resolution of the Board of Directors, acting by not less than a
majority of the directors then in office.
(2) The Board of Directors (exclusive of Preferred Stock Directors)
shall be divided into three classes, with the term of office of one class
expiring each year. At the annual meeting of shareholders in 1985, five
directors of the first class shall be elected to hold office for a term
expiring at the annual meeting of shareholders in 1986, six directors of the
second class shall be elected to hold office for a term expiring at the annual
meeting of shareholders in 1987 and six directors of the third class shall be
elected to hold office for a term expiring at the annual meeting of
shareholders in 1988. Commencing with the annual meeting of shareholders in
1986, directors of each class the term of which shall then expire shall be
elected to hold office for a three-year term and until the election and
qualification of their respective successors in office. In case of any
increase in the number of directors (other than Preferred Stock Directors),
the number of directors in each class shall be as nearly equal as possible.
Election of directors need not be by ballot unless the By-laws so provide.
(3) Subject to the rights of the holders of any one or more series of
Preferred Stock then outstanding, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies in the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled solely by
the Board of Directors, acting by not less than a majority of the Directors
then in office. Any director so chosen shall hold office until the next
election of the class for which such directors shall have been chosen and
until his successor shall be elected and qualified. No decrease in the number
of directors shall shorten the term of any incumbent director.
(4) Subject to the rights of the holders of any one or more series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of at least 80% of all of the outstanding shares of
capital stock of the Corporation as are entitled to vote generally in the
election of directors ("Voting Stock"), voting together as a single class.
(5) The By-laws may prescribe the number of directors necessary to
constitute a quorum and such number may be less than a majority of the total
number of directors, but shall not be less than one-third of the total number
of directors.
(6) Both shareholders and directors shall have power, if the By-laws
of the Corporation so provide, to hold their meetings either within or without
the State of Delaware, to have one or more offices in addition to the
principal office in the State of Delaware, and to keep the books of the
Corporation (subject to the provisions of the statutes) outside of the State
of Delaware at such places as may from time to time be designated by them.
(7) The Board of Directors shall have power to determine from time to
time whether and if allowed under what conditions and regulations the
accounts, and except as otherwise provided by statute or by this Certificate
of Incorporation, the books of the Corporation shall be open to the inspection
of the shareholders, and the shareholders' rights in this respect are and
shall be restricted or limited accordingly, and no shareholder shall have any
right to inspect any account or book or document of the Corporation except as
conferred by statute or by this Certificate of Incorporation, or authorized by
the Board of Directors or by a resolution of the shareholders.
(8) The Board of Directors shall have the power to adopt, amend or
repeal the By-laws of the Corporation.
(9) The Board of Directors acting by a majority of the whole board
shall have power to appoint three or more of their number to constitute an
Executive Committee, which Committee shall, when the Board of Directors is not
in session and subject to the By-laws, have and exercise any or all of the
powers of the Board of Directors in the management of the business and affairs
of the Corporation and shall have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. The Board of
Directors acting by a majority of the whole board shall also have power to
appoint any other committee or committees, such committees to have and
exercise such powers as shall be conferred by the Board of Directors or be
authorized by the By-laws.
(10) Except as may be otherwise provided by statute or in this
Certificate of Incorporation, the business and affairs of this Corporation
shall be managed under the direction of the Board of Directors.
(11) Directors, for their services as such, may be paid such
compensation as may be fixed from time to time by the Board of Directors.
(12) The Board of Directors shall have power from time to time to fix
and determine and vary the amount of the working capital of the Corporation
and, subject to any restrictions contained in the Certificate of
Incorporation, to direct and determine the use and disposition of any surplus
over and above the capital stock paid in, and in its discretion to use and
apply any such surplus in purchasing or acquiring property, bonds or other
obligations of the Corporation or shares of its own capital stock, to such
extent and in such manner and upon such terms as the Board of Directors shall
deem expedient, but any shares of such capital stock so purchased or acquired
may be resold unless such shares shall have been retired in the manner
provided by law for the purpose of decreasing the Corporation's capital stock.
(13) Notwithstanding any other provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of
the holders of any particular class of Voting Stock required by law or this
Certificate of Incorporation, the affirmative vote of the holders of at least
80% of all of the then outstanding shares of Voting Stock, voting together as
a single class, shall be required to alter, amend or repeal paragraphs (1),
(2), (3), (4), (5), (8), (10) or this paragraph (13) of this Article SEVENTH.
(14) The liability of the Corporation's Directors to the Corporation
or its shareholders shall be eliminated to the fullest extent permitted by the
Delaware General Corporation Law as amended from time to time. No amendment
to or repeal of this paragraph (14) of Article SEVENTH shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
Notwithstanding any other provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class of Voting Stock required by law or this Certificate of
Incorporation, the affirmative vote of the holders of at least 80% of all of
the then outstanding shares of Voting Stock, voting together as a single
class, shall be required to alter, amend or repeal this paragraph (14) of this
Article SEVENTH.
(15) Any action required or permitted to be taken by the shareholders
of the Corporation must be effected solely at a duly called annual or special
meeting of such holders and may not be effected by any consent in writing by
such holders.
EIGHTH:
A. Applicability of Article.
Except as otherwise expressly provided in Section C of this Article
EIGHTH, none of the actions or transactions listed below shall be effected by
the Corporation, or approved by the Corporation as a shareholder of any
majority-owned subsidiary of the Corporation if, as of the record date for the
determination of the shareholders entitled to vote thereon, any Related Person
(as hereinafter defined) exists, unless the applicable requirements of
Sections B, C, D, E and F of this Article EIGHTH
are fully complied with:
(1) any merger or consolidation of the Corporation or any of its
subsidiaries into or with such Related Person;
(2) any sale, lease, exchange or other disposition of all or any
substantial part of the assets of the Corporation or any of its majority-owned
subsidiaries to or with such Related Person;
(3) the issuance or delivery of any Voting Stock, or securities
convertible into or exchangeable or exercisable for any Voting Stock, or of
voting securities of any of the Corporation's majority-owned subsidiaries to
such Related Person in exchange for cash, other assets or securities, or a
combination thereof; or
(4) any voluntary dissolution or liquidation of the Corporation.
B. Stockholder Vote Required.
The actions and transactions described in Section A of this Article
EIGHTH shall have been authorized by the affirmative vote of at least 80% of
all of the outstanding shares of Voting Stock, voting together as a single
class.
C. Minimum Price Required.
Notwithstanding Section B hereof, the 80% voting requirement shall not be
applicable if (1) any action or transaction specified in Section A hereof is
approved by the Corporation's Board of Directors and by a majority of the
Continuing Directors (as hereinafter defined); provided, however, that if
there are not at least five Continuing Directors this exception for approval
by the Board of Directors shall not be applicable or (2) in the case of any
action or transaction pursuant to which the holders of the capital stock of
the Corporation are entitled to receive cash, property, securities or other
consideration, the cash or fair market value of the property, securities or
other consideration to be received per share by holders of the capital stock
of the Corporation in such action or transaction is not less than the higher
of (a) the highest price per share paid by the Related Person in acquiring any
of its holdings of capital stock of the Corporation, or (b) the highest
closing sale price on any day either since the Related Person acquired its
first share of capital stock of the Corporation which it continues to own or
control or during the five years preceding the date of consideration of the
action or transaction by the Corporation's Board of Directors, whichever
period is shorter; such highest closing sale price shall be determined by the
reports of closing sale prices on the Composite Tape for New York Exchange
Listed Stocks or, if such stock is not quoted on the Composite Tape on the New
York Stock Exchange or other principal United States securities exchange on
which such stock is listed or, for any period when such stock is not listed on
any such exchange, the highest closing bid quotation with respect to a share
of such stock on the National Association of Securities Dealers, Inc.
Automated Quotation System; such price, in either case (a) or (b), to be
proportionately adjusted for any subsequent increase or decrease in the number
of issued shares of the Corporation's capital stock resulting from a
subdivision or consolidation of shares or any other capital adjustments, the
payment of a stock dividend, or other increase or decrease in such shares of
capital stock effected without receipt of consideration by the Corporation.
D. Restrictions on Certain Actions.
After becoming a Related Person and prior to consummation of such action
or transaction (1) such Related Person shall not have acquired from the
Corporation or any of its majority-owned subsidiaries any newly issued or
treasury shares of capital stock or any newly issued securities convertible
into or exchangeable for capital stock of the Corporation or any of its
majority-owned subsidiaries, directly or indirectly (except upon conversion or
exchange of convertible or exchangeable securities acquired by it prior to
becoming a Related Person or as a result of a pro rata stock dividend or stock
split or other distribution of stock to all shareholders pro rata); (2) such
Related Person shall not have received the benefit directly or indirectly
(except proportionately as a shareholder) of any loans, advances, guarantees,
pledges or other financial assistance or tax credits provided by the
Corporation or any of its majority-owned subsidiaries, or made any major
changes in the Corporation's or any of its majority-owned subsidiaries'
businesses or capital structures or reduced the current rate of dividends
payable on the Corporation's capital stock below the rate in effect
immediately prior to the time such Related Person became a Related Person (the
current rate of dividends being the ratio of the current dividend to the net
income of the Corporation for the full fiscal quarter immediately preceding
the quarter in which such dividend is paid; and the rate of dividends in
effect immediately prior to the time such Related Person became a Related
Person being the ratio of (a) the aggregate dividends paid during the four
full fiscal quarters immediately preceding the time such Related Person became
a Related Person to (b) the aggregate net income of the Corporation for the
four successive full fiscal quarters immediately preceding the last quarter in
which such dividends were paid); and (3) such Related Person shall have taken
all required actions to ensure that the Corporation's Board of Directors
includes representation by Continuing Directors (as hereinafter defined) at
least proportionate to the stockholdings of the Corporation's remaining public
shareholders (as hereinafter defined), with a Continuing Director to occupy
any Board position resulting from a fraction and, in any event, with at least
one Continuing Director to serve on the Board so long as there are any
remaining public shareholders.
E. Proxy Statement Required.
A proxy statement responsive to the requirements of the Securities
Exchange Act of 1934, as amended, whether or not the Corporation is then
subject to such requirements, shall be mailed to the shareholders of the
Corporation for the purpose of soliciting shareholder approval of such action
or transaction and shall contain at the front thereof, in a prominent place,
any recommendations as to the advisability or inadvisability of the action or
transaction which the Continuing Directors may choose to state.
F. Certain Definitions.
For the purpose of this Article EIGHTH, (1) the term "Related Person"
shall mean any other corporation, person or entity (including any Affiliate
thereof), other than this Corporation, any of its subsidiaries or any officer
or employee thereof who holds only voting power pursuant to proxies which
beneficially owns or controls, directly or indirectly, 10% or more of the
outstanding shares of Voting Stock, (2) a Related Person shall be deemed to
own or control, directly or indirectly, any outstanding shares of Voting Stock
owned by it of record or beneficially, including without limitation shares (a)
which it has the right to acquire pursuant to any agreement, or upon exercise
of conversion rights, warrants or options, or otherwise or (b) which are
beneficially owned, directly or indirectly (including shares deemed owned
through application of clause (a) above), by any other corporation, person or
other entity (x) with which it or its Affiliate or Associate (as hereinafter
defined) has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of Voting Stock or (y) which is its
"Affiliate" (other than the Corporation) or "Associate" (other than the
Corporation) as those terms are defined in the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended; (3) the term "Voting
Stock" shall mean such shares of capital stock of the Corporation as are
entitled to vote generally in the election of directors; (4) the term
"Continuing Director" shall mean a director who was a member of the Board of
Directors of the Corporation immediately prior to the time that any Related
Person involved in the proposed action or transaction became a Related Person
or a director nominated by a majority of the remaining Continuing Directors;
and (5) the term "remaining public shareholders" shall mean the holders of the
Corporation's capital stock other than the Related Person.
G. Determinations by the Board of Directors.
The Board of Directors of the Corporation shall have the power and duty
to determine for the purposes of this Article EIGHTH, on the basis of
information then known to the Board of Directors, whether (1) any Related
Person exists or is an Affiliate or an Associate of another and (2) any
proposed sale, lease, exchange, or other disposition of part of the assets of
the Corporation or any majority-owned subsidiary involves a substantial part
of the assets of the Corporation or any of its subsidiaries. Any such
determination by the Board of Directors shall be conclusive and binding for
all purposes.
H. Alteration, Amendment or Repeal.
Notwithstanding any other provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class of Voting Stock required by law or this Certificate of
Incorporation, the affirmative vote of the holders of at least 80% of all of
the then outstanding shares of Voting Stock, voting together as a single
class, shall be required to alter, amend or repeal this Article EIGHTH.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by statute and all rights conferred upon the
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, said PFIZER INC. has caused its corporate seal to be
hereunto affixed and this certificate to be signed by C. L. Clemente its
Senior Vice President and attested by Terence J. Gallagher, its Assistant
Secretary, this 22nd day of April, 1999.
PFIZER INC. PFIZER INC.
Corporate
Seal
1942
Delaware By: /s/ C. L. Clemente
--------------------------
Senior Vice President
ATTEST:
By: /s/ Terence J. Gallagher
- -----------------------------
Assistant Secretary
Exhibit 15
ACCOUNTANTS' ACKNOWLEDGMENT
To the Shareholders and Board of Directors of Pfizer Inc.:
We hereby acknowledge the incorporation by reference of our report dated
May 18, 1999, included within the Quarterly Report on Form 10Q of Pfizer Inc.
for the quarter ended April 4, 1999, in the following Registration Statements:
- - Form S-15 dated December 13, 1982 (File No. 2-80884),
- - Form S-8 dated October 27, 1983 (File No. 2-87473),
- - Form S-8 dated March 22, 1990 (File No. 33-34139),
- - Form S-8 dated January 24, 1991 (File No. 33-38708),
- - Form S-8 dated November 18, 1991 (File No. 33-44053),
- - Form S-3 dated May 27, 1993 (File No. 33-49629),
- - Form S-8 dated May 27, 1993 (File No. 33-49631),
- - Form S-8 dated May 19, 1994 (File No. 33-53713),
- - Form S-8 dated October 5, 1994 (File No. 33-55771),
- - Form S-3 dated November 14, 1994 (File No. 33-56435),
- - Form S-8 dated December 20, 1994 (File No. 33-56979),
- - Form S-4 dated February 14, 1995 (File No. 33-57709),
- - Form S-8 dated March 29, 1996 (File No. 33-02061),
- - Form S-8 dated September 25, 1997 (File No. 333-36371),
- - Form S-8 dated April 23, 1998 (File No. 333-50899), and
- - Form S-8 dated April 22, 1999 (File No. 333-76839)
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 LLP
New York, New York
May 18, 199
Exhibit 18
Pfizer Inc.
New York, NY
Ladies and Gentlemen:
We have been furnished with a copy of Form 10-Q of Pfizer Inc. for the
quarterly period ended April 4, 1999 and have read the Company's statements
contained in Note 3 to the condensed consolidated financial statements
included therein. As stated in Note 3, the Company changed all of its
remaining inventories previously on LIFO to the FIFO method. Those
inventories consisted of U.S. sourced pharmaceutical and part of animal health
inventories. The newly adopted accounting principle is preferable in the
circumstances because inventory costs are stable and substantially unaffected
by inflation. In accordance with your request, we have reviewed and discussed
with Company officials the circumstances and business judgment and planning
upon which the decision to make this change in the method of accounting was
based.
We have not audited any financial statements of the Company as of any date or
for any period subsequent to December 31, 1998, nor have we audited the
information set forth in the aforementioned Note 3 to the condensed
consolidated financial statements; accordingly, we do not express an opinion
concerning the factual information contained therein.
With regard to the aforementioned accounting change, authoritative criteria
have not been established for evaluating the preferability of one acceptable
method of accounting over another acceptable method. However, for purposes of
the Company's compliance with the requirements of the Securities and Exchange
Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's business
judgment and planning, we concur that the newly adopted method of accounting
is preferable in the Company's circumstances.
/s/ KPMG LLP
-----------------------------------------------------
KPMG LLP
Short Hills, NJ
May 11, 1999
- - 56 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PFIZER INC.
AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET FOR APRIL 4,
1999 AND CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED APRIL 4, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> APR-04-1999
<CASH> 1,166
<SECURITIES> 3,039
<RECEIVABLES> 3,543
<ALLOWANCES> (73)
<INVENTORY> 1,704
<CURRENT-ASSETS> 10,749
<PP&E> 7,024
<DEPRECIATION> (2,493)
<TOTAL-ASSETS> 19,025
<CURRENT-LIABILITIES> 7,752
<BONDS> 525
0
0
<COMMON> 71
<OTHER-SE> 18,585
<TOTAL-LIABILITY-AND-EQUITY> 19,025
<SALES> 3,524
<TOTAL-REVENUES> 3,927
<CGS> 546
<TOTAL-COSTS> 546
<OTHER-EXPENSES> 655
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 41
<INCOME-PRETAX> 1,149
<INCOME-TAX> 333
<INCOME-CONTINUING> 815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 815
<EPS-PRIMARY> .65 <F1>
<EPS-DILUTED> .62
<FN>
<F1>The information reported above under "EPS-PRIMARY" represents basic
earnings per share for the three months ended April 4, 1999.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PFIZER INC.AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET FOR
MARCH 29, 1998 AND CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE
MONTHS ENDED MARCH 29, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH INANCIAL STATEMENTS RESTATED AS DESCRIBED IN FOOTNOTE 1 BELOW.
</LEGEND>
<RESTATED>
<MULTIPLIER>1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-29-1998
<CASH> 1,053
<SECURITIES> 795
<RECEIVABLES> 2,648
<ALLOWANCES> (39)
<INVENTORY> 1,527
<CURRENT-ASSETS> 7,999
<PP&E> 5,943
<DEPRECIATION> (2,128)
<TOTAL-ASSETS> 15,622
<CURRENT-LIABILITIES> 5,384
<BONDS> 724
0
0
<COMMON> 70
<OTHER-SE> 13,922
<TOTAL-LIABILITY-AND-EQUITY> 15,622
<SALES> 2,886
<TOTAL-REVENUES> 3,036
<CGS> 443
<TOTAL-COSTS> 443
<OTHER-EXPENSES> 481
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 742
<INCOME-TAX> 206
<INCOME-CONTINUING> 535
<DISCONTINUED> 157
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 692
<EPS-PRIMARY> .55<F2>
<EPS-DILUTED> .53
<FN>
<F1>This restated schedule reflects the results of operations of the Medical
Technology Group businesses--Valleylab (prior to its sale in the first
quarter of 1998), Schneider, American Medical Systems (AMS) and
Howmedica--as well as the net assets of Schneider, AMS and Howmedica as
discontinued operations.
<F2>The information reported above under "EPS-PRIMARY" represents basic
earnings per share for the three months ended March 29, 1998.
</FN>
</TABLE>
