<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 22, 2000
PFIZER INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Delaware 1-3619 13-5315170
---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
235 East 42nd Street 10017
New York, New York
- -------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (212) 573-2323
--------------
</TABLE>
N/A
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) The following exhibit is filed with this report:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Pfizer Inc.'s Consolidated Balance Sheets as of December
31, 1999, 1998 and 1997, and Consolidated Statements of
Income, Shareholders' Equity and Cash Flows for the years
ended December 31, 1999, 1998 and 1997, and related notes
thereto.
</TABLE>
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: /s/ Margaret M. Foran
-------------------------
Name: Margaret M. Foran
Title: Vice President-Corporate
Governance
Dated: February 22, 2000
3
<PAGE> 4
EXHIBIT INDEX
99.1 Pfizer Inc.'s Consolidated Balance Sheets as of
December 31, 1999, 1998 and 1997, and Consolidated
Statements of Income, Shareholders' Equity and Cash
Flows for the years ended December 31, 1999, 1998,
and 1997, and related notes thereto.
<PAGE> 1
Independent Auditors' Report
[KPMG LOGO]
To the Shareholders and Board of Directors of Pfizer Inc:
We have audited the accompanying consolidated balance sheets of Pfizer Inc and
subsidiary companies as of December 31, 1999, 1998 and 1997 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Pfizer Inc
and subsidiary companies at December 31, 1999, 1998 and 1997, and the results of
their operations and their cash flows for each of the years then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, NY
February 14, 2000
<PAGE> 2
Pfizer Inc and Subsidiary Companies
Consolidated Statement of Income
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Year ended December 31
---------------------------------------
(millions, except per share data) 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 14,133 $ 12,677 $ 10,739
Alliance revenue 2,071 867 316
- -------------------------------------------------------------------------------------------------
Total revenues 16,204 13,544 11,055
Costs and expenses:
Cost of sales 2,528 2,094 1,776
Selling, informational and administrative expenses 6,351 5,568 4,401
Research and development expenses 2,776 2,279 1,805
Other deductions -- net 101 1,009 206
- -------------------------------------------------------------------------------------------------
Income from continuing operations before provision
for taxes on income and minority interests 4,448 2,594 2,867
Provision for taxes on income 1,244 642 775
Minority interests 5 2 10
- -------------------------------------------------------------------------------------------------
Income from continuing operations 3,199 1,950 2,082
Discontinued operations -- net of tax (20) 1,401 131
- -------------------------------------------------------------------------------------------------
Net income $ 3,179 $ 3,351 $ 2,213
- -------------------------------------------------------------------------------------------------
Earnings per common share -- basic
Income from continuing operations $ .85 $ .51 $ .55
Discontinued operations -- net of tax (.01) .37 .04
- -------------------------------------------------------------------------------------------------
Net income $ .84 $ .88 $ .59
- -------------------------------------------------------------------------------------------------
Earnings per common share -- diluted
Income from continuing operations $ .82 $ .49 $ .53
Discontinued operations -- net of tax -- .36 .04
- -------------------------------------------------------------------------------------------------
Net income $ .82 $ .85 $ .57
- -------------------------------------------------------------------------------------------------
Weighted average shares -- basic 3,775 3,789 3,771
Weighted average shares -- diluted 3,884 3,945 3,909
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE> 3
Pfizer Inc and Subsidiary Companies
Consolidated Balance Sheet
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
December 31
----------------------------------------
(millions, except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 739 $ 1,552 $ 877
Short-term investments 3,703 2,377 712
Accounts receivable, less allowance for doubtful accounts:
1999 -- $68; 1998 -- $67; 1997 -- $35 3,864 2,914 2,220
Short-term loans 273 150 115
Inventories
Finished goods 650 697 442
Work in process 711 890 808
Raw materials and supplies 293 241 211
- -----------------------------------------------------------------------------------------------------------------------------
Total inventories 1,654 1,828 1,461
- -----------------------------------------------------------------------------------------------------------------------------
Prepaid expenses and taxes 958 1,110 637
Net assets of discontinued operations -- -- 1,420
- -----------------------------------------------------------------------------------------------------------------------------
Total current assets 11,191 9,931 7,442
Long-term loans and investments 1,721 1,756 1,330
Property, plant and equipment, less accumulated depreciation 5,343 4,415 3,793
Goodwill, less accumulated amortization:
1999 -- $129; 1998 -- $109; 1997 -- $90 763 813 989
Other assets, deferred taxes and deferred charges 1,556 1,387 1,437
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $ 20,574 $ 18,302 $ 14,991
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Short-term borrowings, including current portion of long-term debt $ 5,001 $ 2,729 $ 2,251
Accounts payable 951 971 660
Dividends payable 349 285 --
Income taxes payable 869 1,162 729
Accrued compensation and related items 669 614 456
Other current liabilities 1,346 1,431 898
- -----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 9,185 7,192 4,994
Long-term debt 525 527 725
Postretirement benefit obligation other than pension plans 346 359 394
Deferred taxes on income 301 197 127
Other noncurrent liabilities 1,330 1,217 818
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 11,687 9,492 7,058
- -----------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock, without par value; 12 shares authorized, none issued -- -- --
Common stock, $.05 par value; 9,000 shares authorized;
issued: 1999 -- 4,260; 1998 -- 4,222; 1997 -- 4,165 213 210 207
Additional paid-in capital 5,416 5,506 3,101
Retained earnings 13,396 11,439 9,349
Accumulated other comprehensive expense (399) (234) (85)
Employee benefit trusts (2,888) (4,200) (2,646)
Treasury stock, at cost:
1999 -- 413; 1998 -- 339; 1997 -- 283 (6,851) (3,911) (1,993)
- -----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 8,887 8,810 7,933
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 20,574 $ 18,302 $ 14,991
=============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE> 4
Pfizer Inc and Subsidiary Companies
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Employee
Common Stock Additional Benefit Trusts Treasury Stock
------------------ Paid-In -------------------- ---------------- Retained
(millions) Shares Par Value Capital Shares Fair Value Shares Cost Earnings
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1997 1,378 $ 69 $1,693 (36) $(1,488) (87) $(1,482) $ 8,017
Restatement for the 1999 stock split 2,756 138 (138) (72) -- (175) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 1997, as restated 4,134 207 1,555 (108) (1,488) (262) (1,482) 8,017
Comprehensive income:
Net income 2,213
Other comprehensive expense --
net of tax:
Currency translation adjustment
Net unrealized gain on available-
for-sale securities
Minimum pension liability
Total other comprehensive expense
Total comprehensive income
Cash dividends declared (881)
Stock option transactions 29 -- 343 13 68
Purchases of common stock (34) (586)
Employee benefit trusts
transactions -- net 1,177 1 (1,158) -- 7
Other 2 -- 26
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 4,165 207 3,101 (107) (2,646) (283) (1,993) 9,349
Comprehensive income:
Net income 3,351
Other comprehensive expense --
net of tax:
Currency translation adjustment
Net unrealized loss on available-
for-sale securities
Minimum pension liability
Total other comprehensive expense
Total comprehensive income
Cash dividends declared (1,261)
Stock option transactions 55 3 745 -- (18)
Purchases of common stock (58) (1,912)
Employee benefit trusts
transactions -- net 1,633 5 (1,554) 2 12
Other 2 -- 27
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 4,222 210 5,506 (102) (4,200) (339) (3,911) 11,439
Comprehensive income:
Net income 3,179
Other comprehensive expense --
net of tax:
Currency translation adjustment
Net unrealized gain on available-
for-sale securities
Minimum pension liability
Total other comprehensive expense
Total comprehensive income
Cash dividends declared (1,222)
Stock option transactions 35 3 526 -- (16)
Purchases of common stock (66) (2,500)
Employee benefit trusts
transactions -- net (735) 13 1,312 (8) (424)
Other 3 -- 119
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999 4,260 $213 $5,416 (89) $(2,888) (413) $(6,851) $13,396
- -----------------------------------------------------------------------------------------------------------------------------------
Accum.
Other Com-
prehensive
(millions) Inc./(Exp.) Total
- ----------------------------------------------------------------
<S> <C> <C>
Balance January 1, 1997 $145 $6,954
Restatement for the 1999 stock split -- --
- ----------------------------------------------------------------
Balance January 1, 1997, as restated 145 6,954
Comprehensive income:
Net income 2,213
Other comprehensive expense --
net of tax:
Currency translation adjustment (253) (253)
Net unrealized gain on available-
for-sale securities 20 20
Minimum pension liability 3 3
----------------------
Total other comprehensive expense (230) (230)
----------------------
Total comprehensive income 1,983
Cash dividends declared (881)
Stock option transactions 411
Purchases of common stock (586)
Employee benefit trusts
transactions -- net 26
Other 26
- ----------------------------------------------------------------
Balance December 31, 1997 (85) 7,933
Comprehensive income:
Net income 3,351
Other comprehensive expense --
net of tax:
Currency translation adjustment (74) (74)
Net unrealized loss on available-
for-sale securities (2) (2)
Minimum pension liability (73) (73)
----------------------
Total other comprehensive expense (149) (149)
----------------------
Total comprehensive income 3,202
Cash dividends declared (1,261)
Stock option transactions 730
Purchases of common stock (1,912)
Employee benefit trusts
transactions -- net 91
Other 27
- ----------------------------------------------------------------
Balance December 31, 1998 (234) 8,810
Comprehensive income:
Net income 3,179
Other comprehensive expense --
net of tax:
Currency translation adjustment (222) (222)
Net unrealized gain on available-
for-sale securities 81 81
Minimum pension liability (24) (24)
----------------------
Total other comprehensive expense (165) (165)
----------------------
Total comprehensive income 3,014
Cash dividends declared (1,222)
Stock option transactions 513
Purchases of common stock (2,500)
Employee benefit trusts
transactions -- net 153
Other 119
- ----------------------------------------------------------------
Balance December 31, 1999 $(399) $8,887
- ----------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE> 5
Pfizer Inc and Subsidiary Companies
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year ended December 31
--------------------------------------
(millions of dollars) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Income from continuing operations $ 3,199 $ 1,950 $ 2,082
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 542 489 428
Trovan inventory write-off 310 -- --
Asset impairments and restructuring charges -- 323 --
Deferred taxes and other 286 22 83
Changes in assets and liabilities, net of effect of businesses divested:
Accounts receivable (978) (765) (477)
Inventories (240) (439) (350)
Prepaid and other assets 68 (350) (128)
Accounts payable and accrued liabilities 61 628 (63)
Income taxes payable (179) 951 (54)
Other deferred items 7 473 59
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,076 3,282 1,580
- -----------------------------------------------------------------------------------------------------------------------
Investing Activities
Purchases of property, plant and equipment (1,561) (1,198) (878)
Proceeds from disposals of property, plant and equipment 71 79 47
Purchases net of maturities of short-term investments (8,633) (5,845) (221)
Proceeds from redemptions of short-term investments 7,309 4,209 28
Proceeds from sales of businesses -- net 26 3,059 21
Purchases of long-term investments (322) (752) (74)
Other investing activities 342 113 114
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,768) (335) (963)
- -----------------------------------------------------------------------------------------------------------------------
Financing Activities
Repayments of long-term debt (4) (202) (269)
Increase in short-term debt -- net 2,083 402 325
Proceeds from stock issuances 62 -- --
Purchases of common stock (2,500) (1,912) (586)
Cash dividends paid (1,148) (976) (881)
Stock option transactions and other 380 411 430
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (1,127) (2,277) (981)
- -----------------------------------------------------------------------------------------------------------------------
Net cash (used in)/provided by discontinued operations (20) 4 118
- -----------------------------------------------------------------------------------------------------------------------
Effect of exchange-rate changes on cash and cash equivalents 26 1 (27)
- -----------------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in cash and cash equivalents (813) 675 (273)
Cash and cash equivalents at beginning of year 1,552 877 1,150
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 739 $ 1,552 $ 877
- -----------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes $ 1,293 $ 1,073 $ 809
Interest 238 155 149
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
<PAGE> 6
Pfizer Inc and Subsidiary Companies
Notes to Consolidated Financial Statements
1 Significant Accounting Policies
A -- Consolidation and Basis of Presentation
The consolidated financial statements include the parent company and all
significant subsidiaries, including those operating outside the U.S. Balance
sheet amounts for the international operations are as of November 30 of each
year and income statement amounts are for the full-year periods ending on the
same date. Substantially all unremitted earnings of international subsidiaries
are free of legal and contractual restrictions. All significant transactions
among our businesses have been eliminated. We made certain reclassifications to
the 1998 and 1997 financial statements to conform to the 1999 presentation.
In preparing the financial statements, we must use some estimates and
assumptions that may affect reported amounts and disclosures. Estimates are used
when accounting for depreciation, amortization, employee benefits and asset
valuation allowances. We are also subject to risks and uncertainties that may
cause actual results to differ from estimated results, such as changes in the
health care environment, competition, foreign exchange and legislation.
B -- Cash Equivalents
Cash equivalents include items almost as liquid as cash, such as
certificates of deposit and time deposits with maturity periods of three months
or less when purchased. If items meeting this definition are part of a larger
investment pool, we classify them as Short-term investments.
C -- Inventories
We value inventories at cost or fair value, if lower. Cost is determined as
follows:
- finished goods and work-in-process at average actual cost
- raw materials and supplies at average or latest actual cost
In 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 the 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.
The change in the method of inventory costing resulted in a pre-tax benefit of
$6.6 million included in Cost of sales for 1999.
D -- Long-Lived Assets
Long-lived assets include:
- property, plant and equipment -- These assets are recorded at original
cost and increased by the cost of any significant improvements after
purchase. We depreciate the cost evenly over the assets' estimated
useful lives. For tax purposes, accelerated depreciation methods are
used as allowed by tax laws.
- goodwill -- Goodwill represents the difference between the purchase
price of acquired businesses and the fair value of their net assets
when accounted for by the purchase method. We amortize goodwill evenly
over periods not exceeding 40 years. The average amortization period
is 37 years.
- other intangible assets -- Other intangible assets are included in
Other assets, deferred taxes and deferred charges. We amortize these
assets evenly over their estimated useful lives.
We review long-lived assets to assess recoverability from future operations
using undiscounted cash flows. When necessary, we record charges for impairments
of long-lived assets for the amount by which the present value of future cash
flows exceeds the carrying value of these assets.
E -- Foreign Currency Translation
For most international operations, local currencies are considered their
functional currencies. We translate assets and liabilities to their U.S. dollar
equivalents at rates in effect at the balance sheet date and record translation
adjustments in Shareholders' Equity. We translate Statement of Income accounts
at average rates for the period. Transaction adjustments are recorded in Other
deductions -- net.
For operations in highly inflationary economies, we translate the balance
sheet items as follows:
- monetary items (that is, assets and liabilities that will be settled
for cash) at rates in effect at the balance sheet date, with
translation adjustments recorded in Other deductions -- net
- non-monetary items at historical rates (that is, those rates in effect
when the items were first recorded)
<PAGE> 7
Pfizer Inc and Subsidiary Companies
F -- Product Alliances
We have agreements to promote pharmaceutical products developed by other
companies. Alliance revenue represents revenue recorded under these co-promotion
agreements and is derived from the sale of products. The revenue is earned when
our co-promotion partners ship the related goods and the sale is consummated
with a third party. Such revenue is based in most cases upon a percentage of our
co-promotion partners' net sales. Selling, informational and administrative
expenses in most cases includes other expenses for selling and marketing these
products.
We have license agreements in certain foreign countries for these products.
When products are sold under license agreements, we record Net sales instead of
Alliance revenue and record related costs and expenses in the appropriate
caption in the Statement of Income.
G -- Stock-Based Compensation
In accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, we elected to account for our
stock-based compensation under Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.
The exercise price of stock options granted equals the market price on the
date of grant. In general, there is no recorded expense related to stock
options.
H -- Advertising Expense
We record advertising expense as follows:
- production costs as incurred
- costs of radio time, television time and space in publications are
deferred until the advertising first occurs
Advertising expense totaled $1,310 million in 1999, $1,139 million in 1998,
and $898 million in 1997.
2 Discontinued Operations
In 1999, we agreed to pay a fine of $20 million to settle antitrust charges
involving our former Food Science Group, divested in 1996. For additional
details, see note 18, "Litigation."
In 1998, we completed the sale of the Medical Technology Group (MTG)
segment. Accordingly, the consolidated financial statements and related notes
reflect the results of operations and net assets of the MTG businesses --
Valleylab, Schneider, American Medical Systems (AMS), Howmedica and
Strato/Infusaid -- as discontinued operations. We completed the sales of:
- Howmedica to Stryker Corporation in December for $1.65 billion in cash
- Schneider to Boston Scientific Corporation in September for $2.1
billion in cash
- AMS to E.M. Warburg, Pincus & Co., LLC in September for $130 million
in cash
- Valleylab to U.S. Surgical Corporation in January for $425 million in
cash
In 1997, we sold Strato/Infusaid to Horizon Medical Products and Arrow
International for $21 million in cash.
The contractual net assets identified as part of the disposition of
Valleylab, Schneider, AMS and Howmedica are recorded as Net assets of
discontinued operations at December 31, 1997. The net cash flows of our
discontinued operations are reported as Net cash (used in)/provided by
discontinued operations.
Net assets of discontinued operations consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1997
- --------------------------------------------------------------------------------
<S> <C>
Net current assets $ 397
Property, plant and equipment -- net 383
Other net noncurrent assets
and liabilities 640
- --------------------------------------------------------------------------------
Net assets of discontinued operations $1,420
- --------------------------------------------------------------------------------
</TABLE>
Discontinued operations -- net of tax were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ -- $ 1,160 $ 1,449
- -----------------------------------------------------------------------------------
Pre-tax income/(loss) $ (20) $ 92 $ 232
Provision for taxes on income -- 57 93
- -----------------------------------------------------------------------------------
Income/(loss) from operations of
discontinued businesses -- net of tax (20) 35 139
- -----------------------------------------------------------------------------------
Pre-tax gain/(loss) on disposal of
discontinued businesses -- 2,504 (11)
Provision/(benefit) for taxes on
gain/(loss) -- 1,138 (3)
- -----------------------------------------------------------------------------------
Gain/(loss) on disposal of discontinued
businesses -- net of tax -- 1,366 (8)
- -----------------------------------------------------------------------------------
Discontinued operations -- net of tax $ (20) $ 1,401 $ 131
- -----------------------------------------------------------------------------------
</TABLE>
3 Financial Subsidiaries
Our financial subsidiaries include Pfizer International Bank Europe (PIBE) and a
small captive insurance company. PIBE periodically adjusts its loan portfolio to
meet its business needs. Information about these subsidiaries follows:
Condensed Balance Sheet
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and interest-bearing deposits $114 $103 $115
Loans -- net 380 433 408
Other assets 13 15 8
- --------------------------------------------------------------------------------
Total assets $507 $551 $531
- --------------------------------------------------------------------------------
Certificates of deposit and
other liabilities $ 24 $ 97 $ 73
Shareholders' equity 483 454 458
- --------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $507 $551 $531
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
Pfizer Inc and Subsidiary Companies
Condensed Statement of Income
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 27 $ 30 $ 29
Interest expense (2) (2) (2)
Other income -- net 8 1 13
- --------------------------------------------------------------------------------
Net income $ 33 $ 29 $ 40
- --------------------------------------------------------------------------------
</TABLE>
4 Financial Instruments
Most of our financial instruments are recorded in the Balance Sheet. Several
"derivative" financial instruments are "off-balance-sheet" items.
A -- Investments in Debt and Equity Securities
Information about our investments follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Trading securities $ 113 $ 99 $ --
- --------------------------------------------------------------------------------
Amortized cost and fair value of
held-to-maturity debt securities:*
Corporate debt 3,624 2,306 626
Certificates of deposit 445 670 655
Municipals -- -- 56
Other 19 21 104
- --------------------------------------------------------------------------------
Total held-to-maturity debt securities 4,088 2,997 1,441
- --------------------------------------------------------------------------------
Cost and fair value of available-for-
sale debt securities* 686 686 686
- --------------------------------------------------------------------------------
Cost of available-for-sale equity
securities 60 54 81
Gross unrealized gains 230 106 106
Gross unrealized losses -- (8) (4)
- --------------------------------------------------------------------------------
Fair value of available-for-sale
equity securities 290 152 183
- --------------------------------------------------------------------------------
Total investments $ 5,177 $ 3,934 $ 2,310
- --------------------------------------------------------------------------------
</TABLE>
*Gross unrealized gains and losses are not significant.
These investments are in the following captions in the Balance Sheet:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 443 $ 660 $ 636
Short-term investments 3,703 2,377 712
Long-term loans and investments 1,031 897 962
- --------------------------------------------------------------------------------
Total investments $5,177 $3,934 $2,310
- --------------------------------------------------------------------------------
</TABLE>
The contractual maturities of the held-to-maturity and available-for-sale
debt securities as of December 31, 1999, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Years
----------------------------------------------
Over 1 Over 5
(millions of dollars) Within 1 to 5 to 10 Over 10 Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Held-to-maturity
debt securities:
Corporate debt $3,590 $ 34 $ -- $ -- $3,624
Certificates of deposit 443 2 -- -- 445
Other -- 2 8 9 19
Available-for-sale
debt securities:
Certificates of deposit -- 370 75 -- 445
Corporate debt -- 91 150 -- 241
- -------------------------------------------------------------------------------------------
Total debt securities $4,033 $ 499 $ 233 $ 9 $4,774
Available-for-sale
equity securities 290
Trading securities 113
- -------------------------------------------------------------------------------------------
Total investments $5,177
- -------------------------------------------------------------------------------------------
</TABLE>
B -- Short-Term Borrowings
The weighted average effective interest rate on short-term borrowings
outstanding at December 31 was 4.3% in 1999, 3.7% in 1998 and 2.9% in 1997. We
had approximately $1.5 billion available to borrow under lines of credit at
December 31, 1999.
C -- Long-Term Debt
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Floating-rate unsecured notes $491 $491 $686
Other borrowings and mortgages 34 36 39
- --------------------------------------------------------------------------------
Total long-term debt $525 $527 $725
- --------------------------------------------------------------------------------
Current portion not included above $ 2 $ 4 $ 4
- --------------------------------------------------------------------------------
</TABLE>
The floating-rate unsecured notes mature on various dates from 2001 to 2005
and bear interest at a defined variable rate based on the commercial paper
borrowing rate. The weighted average interest rate was 6.1% at December 31,
1999. These notes minimize credit risk on certain available-for-sale debt
securities that may be used to satisfy the notes at maturity. In September 1998,
we repaid $195 million of the outstanding floating-rate unsecured notes prior to
their scheduled maturity by using the proceeds from the issuance of short-term
commercial paper.
Long-term debt outstanding at December 31, 1999, matures as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
After
(millions of dollars) 2001 2002 2003 2004 2004
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maturities $131 $161 $-- $-- $233
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
Pfizer Inc and Subsidiary Companies
D -- Derivative Financial Instruments
Purpose
"Forward-exchange contracts," "currency swaps" and "purchased currency options"
are used to reduce exposure to foreign exchange risks. Also, "interest rate
swap" contracts are used to adjust interest rate exposures.
Accounting Policies
We consider derivative financial instruments to be "hedges" (that is, an offset
of foreign exchange and interest rate risks) when certain criteria are met.
Under hedge accounting for a purchased currency option, its impact on earnings
is deferred until the recognition of the underlying hedged item (inventory) in
earnings. We recognize the earnings impact of the other instruments during the
terms of the contracts, along with the earnings impact of the items they offset.
Purchased currency options are recorded at cost and amortized evenly to
operations through the expected inventory delivery date. Gains at the
transaction date are included in the cost of the related inventory purchased.
As interest rates change, we accrue the difference between the debt
interest rates recognized in the Statement of Income and the amounts payable to
or receivable from counterparties under interest rate swap contracts. Likewise,
amounts arising from currency swap contracts are accrued as exchange rates
change.
The financial statements include the following items related to derivative
and other financial instruments serving as hedges or offsets:
Prepaid expenses and taxes includes:
- purchased currency options
Other current liabilities includes:
- fair value of forward-exchange contracts
- net amounts payable related to interest rate swap contracts
Other noncurrent liabilities includes:
- net amounts payable related to currency swap contracts
Accumulated other comprehensive expense includes changes in the:
- foreign exchange translation of currency swaps and foreign debt
- fair value of forward-exchange contracts for net investment hedges
Other deductions -- net includes:
- changes in the fair value of foreign exchange contracts and changes in
foreign currency assets and liabilities
- payments under swap contracts to offset, primarily, interest expense
or, to a lesser extent, net foreign exchange losses
- amortization of discounts or premiums on currencies sold under
forward-exchange contracts
Our criteria to qualify for hedge accounting are:
Foreign currency instruments must:
- relate to a foreign currency asset, liability or
an anticipated transaction that is probable and whose characteristics
and terms have been identified
- involve the same currency as the hedged item
- reduce the risk of foreign currency exchange movements on our
operations
Interest rate instruments must:
- relate to an asset or a liability
- change the character of the interest rate by converting a
variable rate to a fixed rate or vice versa
The following table summarizes the exposures hedged or offset by the
various instruments we use:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Maximum Maturity in Years
-------------------------
Instrument Exposure 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forward-exchange Foreign currency
contracts assets and liabilities .5 .5 .5
- --------------------------------------------------------------------------------
Currency swaps Net investments 4 5 --
Loans .3 1 2
- --------------------------------------------------------------------------------
Purchased Inventory purchases
currency options and sales .9 1 1
- --------------------------------------------------------------------------------
Interest rate swaps Debt interest 4 5 1
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
Pfizer Inc and Subsidiary Companies
Instruments Outstanding
The notional amounts of derivative financial instruments, except for currency
swaps, do not represent actual amounts exchanged by the parties, but instead
represent the amount of the item on which the contracts are based.
The notional amounts of our foreign currency and interest rate contracts
follow:
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Foreign currency contracts:
Commitments to sell foreign
currencies, primarily in exchange
for U.S. dollars:
Euro* $1,050 $ -- $ --
U.K. pounds 781 482 548
Japanese yen 412 298 224
Irish punt* 91 61 107
Australian dollars 76 98 59
German marks* 39 50 158
Netherlands guilders* -- 316 4
French francs* -- 216 134
Other currencies 192 201 240
Commitments to purchase foreign
currencies, primarily in exchange
for U.S. dollars:
Euro* 339 -- --
U.K. pounds 101 53 60
Irish punt* 50 532 92
German marks* 47 67 73
Netherlands guilders* -- 156 4
Swiss francs -- 8 187
Other currencies 196 144 136
- --------------------------------------------------------------------------------
Total forward-exchange contracts $3,374 $2,682 $2,026
- --------------------------------------------------------------------------------
Currency swaps:
Japanese yen $ 829 $ 754 $ --
U.K. pounds 40 40 40
- --------------------------------------------------------------------------------
Total currency swaps $ 869 $ 794 $ 40
- --------------------------------------------------------------------------------
Purchased currency options,
primarily for U.S. dollars:
Japanese yen $ 393 $ 364 $ 198
German marks -- -- 130
French francs -- -- 46
Belgian francs -- -- 29
Other currencies 30 25 61
- --------------------------------------------------------------------------------
Total purchased currency options $ 423 $ 389 $ 464
- --------------------------------------------------------------------------------
Interest rate swap contracts:
Japanese yen $ 353 $ 321 $ 814
Swiss francs -- -- 405
- --------------------------------------------------------------------------------
Total interest rate swaps $ 353 $ 321 $1,219
- --------------------------------------------------------------------------------
</TABLE>
*On January 1, 1999, members of the European Monetary Union were permitted to
use the new currency, the euro, or their old currency.
The Japanese yen for U.S. dollar currency swaps require that we make
interim payments of a fixed rate of 1.1% on the Japanese yen payable and have
interim receipts of a variable rate based on a commercial paper rate on the U.S.
dollar receivable. These currency swaps replaced $625 million of Japanese yen
debt, which previously served as a hedge of our net investments in Japan, as
well as related interest rate swaps.
The Japanese yen and Swiss franc interest rate swaps effectively fixed the
interest rate on floating rate debt as follows:
- the Japanese yen debt at 1.4% in 1999, 1998 and 1997
- the Swiss franc debt at 2.1% in 1997
The floating interest rates were based on "LIBOR" rates related to the
contract currencies. In connection with the sale of the Schneider Swiss
subsidiary in 1998, we terminated the Swiss franc interest rate swap contracts
and ceased borrowing Swiss francs.
E -- Fair Value
The following methods and assumptions were used to estimate the fair value of
derivative and other financial instruments at the balance sheet date:
- short-term financial instruments (cash equivalents, accounts
receivable and payable, forward-exchange contracts, short-term
investments and borrowings) -- cost approximates fair value because of
the short maturity period
- loans -- cost approximates fair value because of the short interest
reset period
- long-term investments, long-term debt, forward-exchange contracts and
purchased currency options -- fair value is based on market or dealer
quotes
- interest rate and currency swap agreements -- fair value is based on
estimated cost to terminate the agreements (taking into account broker
quotes, current interest rates and the counterparties'
creditworthiness)
The differences between fair and carrying values of our derivative and
other financial instruments were not material at December 31, 1999, 1998 and
1997, except for a difference of $230 million at December 31, 1999 for
available-for-sale equity securities.
F -- Credit Risk
We periodically review the creditworthiness of counterparties to foreign
exchange and interest rate agreements and do not expect to incur a loss from
failure of any counterparties to perform under the agreements. In general, there
is no requirement for collateral from customers. There are no significant
concentrations of credit risk related to our financial instruments. No
individual counterparty credit exposure exceeded 10% of our consolidated
Shareholders' Equity at December 31, 1999.
<PAGE> 11
Pfizer Inc and Subsidiary Companies
5 Comprehensive Income
Changes in accumulated other comprehensive income/(expense) follow:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Net Accumulated
Unrealized Other Com-
Currency Gain/(Loss) on Minimum prehensive
Translation Available-For- Pension Income/
(millions of dollars) Adjustment Sale Securities Liability (Expense)*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance
January 1, 1997 $ 174 $ 40 $ (69) $ 145
Period change (253) 20 3 (230)
- -----------------------------------------------------------------------------------
Balance
December 31, 1997 (79) 60 (66) (85)
Period change (74) (2) (73) (149)
- -----------------------------------------------------------------------------------
Balance
December 31, 1998 (153) 58 (139) (234)
Period change (222) 81 (24) (165)
- -----------------------------------------------------------------------------------
Balance
December 31, 1999 $(375) $ 139 $(163) $(399)
- -----------------------------------------------------------------------------------
</TABLE>
* Income tax benefit for other comprehensive expense was $76 million in 1997,
$116 million in 1998 and $33 million in 1999.
6 Inventories
In June 1999, the European Union's Committee for Proprietary Medicinal Products
suspended the European Union licenses of the oral and intravenous formulations
of Trovan for 12 months. Based on our evaluation of these events and related
matters, we determined that it was unlikely that certain Trovan inventories of
finished goods, bulk, work-in-process, and raw materials will be used.
Accordingly, in the third quarter of 1999, we recorded a charge of $310 million
($205 million after-tax, or $.05 after-tax per diluted share) in Cost of sales
to write off Trovan inventories in excess of the amount required to support
expected sales.
7 Property, Plant and Equipment
The major categories of property, plant and equipment follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Useful
Lives
(millions of dollars) (years) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land -- $ 174 $ 151 $ 126
Buildings 33 1/3 2,008 1,669 1,534
Machinery and
equipment 8-20 3,040 2,685 2,459
Furniture, fixtures
and other 3-12 1/2 1,618 1,383 1,232
Construction in
progress -- 1,197 956 516
- --------------------------------------------------------------------------------
8,037 6,844 5,867
Less: accumulated
depreciation 2,694 2,429 2,074
- --------------------------------------------------------------------------------
Total property, plant
and equipment $ 5,343 $ 4,415 $3,793
- --------------------------------------------------------------------------------
</TABLE>
8 Other Deductions -- Net
The components of other deductions -- net follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $(301) $ (185) $(156)
Interest expense 236 143 149
Interest expense capitalized (13) (7) (2)
- --------------------------------------------------------------------------------
Net interest income (78) (49) (9)
Co-promotion payments to Searle -- 240 --
Contribution to The
Pfizer Foundation -- 300 --
Legal settlements involving the
brand-name prescription drug
antitrust litigation 2 57 --
Amortization of goodwill and other
intangibles 43 45 48
Net exchange (gains)/losses (20) (16) 26
Other, net 154 432 141
- --------------------------------------------------------------------------------
Other deductions -- net $ 101 $ 1,009 $ 206
- --------------------------------------------------------------------------------
</TABLE>
In 1999, we substantially completed the actions under the restructuring
plans announced in 1998.
In 1998, we recorded charges for the restructuring in addition to charges
for certain asset impairments. The components of these pre-tax charges follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) Total COS* SI&A* R&D OD*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Restructuring charges $177 $68 $17 $1 $ 91
Asset impairments 213 18 -- -- 195
- --------------------------------------------------------------------------------
</TABLE>
* COS -- Cost of sales; SI&A -- Selling, informational and administrative
expenses; OD -- Other deductions-net.
<PAGE> 12
Pfizer Inc and Subsidiary Companies
The components of the 1998 restructuring charges follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Utilization
------------------------------
(millions of dollars) Charges in 1998 1998 1999 Beyond
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property, plant
and equipment $ 49 $ 49 $ -- $ --
Write-down of intangibles 44 44 -- --
Employee termination costs 40 12 28 --
Other 44 11 17 16
- --------------------------------------------------------------------------------
Total $177 $116 $ 45 $ 16
- --------------------------------------------------------------------------------
</TABLE>
These charges resulted from a review of our global operations to increase
efficiencies and return on assets, thereby resulting in plant and product line
rationalizations. In addition to the disposition of our MTG businesses, we
exited certain product lines including certain lines associated with our animal
health business and certain of our fermentation operations.
We wrote off assets related to the product lines we exited, including
inventory, intangible assets -- primarily goodwill -- as well as certain
buildings, machinery and equipment which we do not plan to use or sell.
As a result of the restructuring, our work force was reduced by
approximately 500 manufacturing, sales and corporate personnel. Employee
termination costs represent payments for severance, outplacement counseling
fees, medical and other benefits and a $5 million noncash charge for the
acceleration of nonvested employee stock options.
Other restructuring charges consist of charges for inventory for product
lines we have exited -- $12 million, contract termination payments -- $9
million, facility closure costs -- $7 million and environmental remediation
costs associated with the disposal of certain facilities -- $16 million.
In 1998, we recorded an impairment charge of $110 million in the
pharmaceutical segment to adjust intangible asset values, primarily goodwill and
trademarks, related to consumer health care product lines. These charges
resulted from significant changes in the marketplace and a revision of our
strategies, including:
- the decision to redeploy resources from personal care and minor
brands to over-the-counter switches of prescription products
- the withdrawal of one of our major over-the-counter products in
Italy
- an acquired product line which experienced declines in market
share
In 1998, our animal health antibiotic feed additive, Stafac, was banned,
effective in mid-1999, throughout the European Union, resulting in asset
impairment charges of $103 million ($85 million was to adjust intangible asset
values, primarily goodwill and trademarks, and $18 million was to adjust the
carrying value of machinery and equipment in the pharmaceutical segment).
9 Taxes on Income
Income from continuing operations before taxes consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $2,557 $1,184 $1,215
International 1,891 1,410 1,652
- --------------------------------------------------------------------------------
Total income from continuing
operations before taxes $4,448 $2,594 $2,867
- --------------------------------------------------------------------------------
</TABLE>
The provision for taxes on income from continuing operations consisted of
the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
United States:
Taxes currently payable:
Federal $ 621 $ 344 $ 344
State and local 38 24 9
Deferred income taxes (72) (162) (23)
- --------------------------------------------------------------------------------
Total U.S. tax provision 587 206 330
- --------------------------------------------------------------------------------
International:
Taxes currently payable 606 550 462
Deferred income taxes 51 (114) (17)
- --------------------------------------------------------------------------------
Total international tax provision 657 436 445
- --------------------------------------------------------------------------------
Total provision for taxes on income $1,244 $ 642 $ 775
- --------------------------------------------------------------------------------
</TABLE>
Amounts are reflected in the preceding tables based on the location of the
taxing authorities. As of December 31, 1999, we have not made a U.S. tax
provision of approximately $1.9 billion for approximately $8.2 billion of
unremitted earnings of our international subsidiaries. These earnings are
expected, for the most part, to be reinvested overseas.
We operate a manufacturing subsidiary in Puerto Rico that benefits from a
Puerto Rican incentive grant in effect through the end of 2002. Under this
grant, we are partially exempt from income, property and municipal taxes.
<PAGE> 13
Pfizer Inc and Subsidiary Companies
Reconciliation of the U.S. statutory income tax rate to our effective tax
rate for continuing operations follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(percentages) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory income tax rate 35.0 35.0 35.0
Effect of partially tax-exempt
operations in Puerto Rico (1.5) (2.2) (1.8)
Effect of international operations (4.8) (5.5) (5.0)
All other -- net (0.7) (2.5) (1.2)
- --------------------------------------------------------------------------------
Effective tax rate for continuing
operations 28.0 24.8 27.0
- --------------------------------------------------------------------------------
</TABLE>
Deferred taxes arise because of different treatment between financial
statement accounting and tax accounting, known as "temporary differences." We
record the tax effect of these temporary differences as "deferred tax assets"
(generally items that can be used as a tax deduction or credit in future
periods) and "deferred tax liabilities" (generally items that we received a tax
deduction for, but have not yet been recorded in the Statement of Income).
The tax effects of the major items recorded as deferred tax assets and
liabilities are:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1999 1998 1997
Deferred Tax Deferred Tax Deferred Tax
------------------ ------------------ ----------------
(millions of dollars) Assets Liabs. Assets Liabs. Assets Liabs.
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prepaid/deferred items $ 361 $ 197 $ 411 $ 169 $ 252 $ 189
Inventories 471 109 322 72 218 60
Property, plant and
equipment 22 514 39 433 30 350
Employee benefits 544 131 391 97 297 113
Restructurings and
special charge* 244 -- 301 -- 133 --
Foreign tax credit
carryforwards 181 -- 117 -- 159 --
Other carryforwards 165 -- 97 -- 135 --
Unremitted earnings -- 335 -- 335 -- --
All other 121 170 169 73 119 76
- -----------------------------------------------------------------------------------
Subtotal 2,109 1,456 1,847 1,179 1,343 788
Valuation allowance (27) -- (30) -- (27) --
- -----------------------------------------------------------------------------------
Total deferred taxes $ 2,082 $ 1,456 $ 1,817 $ 1,179 $ 1,316 $ 788
- -----------------------------------------------------------------------------------
Net deferred tax asset $ 626 $ 638 $ 528
- -----------------------------------------------------------------------------------
</TABLE>
* Includes tax effect of the 1991 charge for potential future Shiley C/C heart
valve fracture claims.
These amounts, netted by taxing location, are in the following captions in
the Balance Sheet:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Prepaid expenses and taxes $ 744 $ 809 $ 425
Other assets, deferred taxes and
deferred charges 183 26 230
Deferred taxes on income (301) (197) (127)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 626 $ 638 $ 528
- --------------------------------------------------------------------------------
</TABLE>
A valuation allowance is recorded because some items recorded as foreign
deferred tax assets may not be deductible or creditable. The "foreign tax credit
carryforwards" were generated from dividends paid or deemed to be paid by
subsidiaries to the parent company between 1997 and 1999. We can carry these
credits forward for five years from the year of actual payment and apply them to
certain U.S. tax liabilities.
The Internal Revenue Service (IRS) has completed and closed its audits of
our tax returns through 1992. The IRS completed its audits in January 2000 of
our tax returns for 1993 through 1995. We are awaiting the agent's final report
for those years. We do not expect any material adjustments to be proposed.
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 the Belgian tax laws and the written opinions of
outside counsel, we believe that the assessments are without merit.
We believe that our accrued tax liabilities are adequate for all years.
10 Benefit Plans
Our pension plans cover most employees worldwide. Our postretirement plans
provide medical and life insurance benefits to retirees and their eligible
dependents.
Information regarding our pension and postretirement benefit obligation
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Pension Postretirement
------------------------ ------------------------
(percentages) 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average
assumptions:
Discount rate:
U.S. plans 7.5 6.8 7.0 7.5 6.8 7.0
International plans 5.1 5.3 5.9
Rate of compensation
increase:
U.S. plans 4.5 4.5 4.5
International plans 3.7 3.4 3.9
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
The following tables present reconciliations of the benefit obligation of
the plans; the plan assets of the pension plans and the funded status of the
plans:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Pension Postretirement
----------------------------- -----------------------------
(millions of dollars) 1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Change in benefit
obligation
Benefit obligation at
beginning of year $ 3,177 $ 2,674 $ 2,130 $ 286 $ 287 $ 285
Service cost 169 151 105 7 10 7
Interest cost 192 181 145 18 20 19
Employee
contributions 9 6 6
Plan amendments 13 15 274 2 -- --
Plan net (gains)/losses 87 354 240 (30) (3) (7)
Foreign exchange
impact 28 36 (103)
Acquisitions -- -- 3 -- -- --
Divestitures (42) (26) -- -- -- --
Curtailments -- (26) (1) -- (10) --
Settlements (1) (10) (1) -- -- --
Benefits paid (221) (178) (124) (20) (18) (17)
- -----------------------------------------------------------------------------------------
Benefit obligation at
end of year $ 3,411 $ 3,177 $ 2,674 $ 263 $ 286 $ 287
- -----------------------------------------------------------------------------------------
Change in
plan assets
Fair value of plan
assets at beginning
of year $ 3,194 $ 2,793 $ 2,410
Actual return on plan
assets 464 530 491
Company
contributions 76 63 50
Employee
contributions 9 6 6
Foreign exchange
impact 26 3 (57)
Acquisitions -- -- 1
Divestitures (34) (23) --
Settlements (1) (13) (1)
Benefits paid (206) (165) (107)
- -----------------------------------------------------------------------------------------
Fair value of plan
assets at end of year $ 3,528 $ 3,194 $ 2,793
- -----------------------------------------------------------------------------------------
Funded status:
Plan assets in excess
of/(less than)
benefit
obligation $ 117 $ 17 $ 119 $ (263) $ (286) $ (287)
Unrecognized:
Net transition asset (4) (4) (10) -- -- --
Net (gains)/
losses (75) 1 (86) (56) (26) (24)
Prior service
costs/(gains) 240 248 310 (27) (47) (83)
- -----------------------------------------------------------------------------------------
Net amount
recognized $ 278 $ 262 $ 333 $ (346) $ (359) $ (394)
- -----------------------------------------------------------------------------------------
</TABLE>
The components in the balance sheet consist of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Pension Postretirement
------------------------- -----------------------
(millions of dollars) 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prepaid benefit cost $ 537 $ 504 $ 499 $ -- $ -- $ --
Accrued benefit
liability (655) (562) (362) (346) (359) (394)
Intangible asset 79 71 53 -- -- --
Accumulated other
comprehensive
income 317 249 143 -- -- --
- --------------------------------------------------------------------------------
Net amount
recognized $ 278 $ 262 $ 333 $(346) $(359) $(394)
- --------------------------------------------------------------------------------
</TABLE>
Information related primarily to International plans:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Pension
-------------------------
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Pension plans with an accumulated benefit
obligation in excess of plan assets:
Fair value of plan assets $400 $323 $294
Accumulated benefit obligation 752 693 553
Pension plans with a benefit
obligation in excess of plan assets:
Fair value of plan assets $496 $435 $422
Benefit obligation 949 901 774
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, the major U.S. pension plan held approximately 6.8
million shares of our common stock with a fair value of approximately $220
million. The Plan received approximately $2 million in dividends on these shares
in 1999.
The assumptions used and the annual cost related to these plans follow:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Pension Postretirement
------------------------ ----------------------
(percentages) 1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted average
assumptions:
Expected return on plan assets:
U.S. plans 10.0 10.0 10.0
International plans 7.3 8.1 7.5
- ---------------------------------------------------------------------------------------
(millions of dollars)
- ---------------------------------------------------------------------------------------
Service cost $ 169 $ 151 $ 105 $ 7 $ 10 $ 7
Interest cost 192 181 145 18 20 19
Expected return on
plan assets (275) (249) (208)
Amortization of:
Prior service costs/
(gains) 19 24 34 (18) (24) (24)
Net transition asset (5) (6) (5) -- -- --
Net losses/(gains) 12 10 2 -- (1) (1)
Curtailments and
settlements -- net* -- 28 -- -- (22) --
- ---------------------------------------------------------------------------------------
Net periodic benefit
cost/(gain) $ 112 $ 139 $ 73 $ 7 $ (17) $ 1
- ---------------------------------------------------------------------------------------
</TABLE>
*Includes approximately $12 million of special termination pension benefits for
certain MTG employees in 1998.
<PAGE> 15
Pfizer Inc and Subsidiary Companies
An average increase of 6.9% in the cost of health care benefits was assumed
for 2000 and is projected to decrease over the next five years to 5.2% and to
then remain at that level.
A 1% change in the medical trend rate assumed for postretirement benefits
would have the following effects at December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars) 1% Increase 1% Decrease
- --------------------------------------------------------------------------------
<S> <C> <C>
Total of service and interest
cost components $ 1 $ (1)
Postretirement benefit obligation 13 (12)
- --------------------------------------------------------------------------------
</TABLE>
We have savings and investment plans for most employees in the U.S., Puerto
Rico, the U.K. and Ireland. Employees may contribute a portion of their salaries
to the plans and we match a portion of the employee contributions. Our
contributions were $50 million in 1999, $48 million in 1998 and $43 million in
1997.
11 Lease Commitments
We lease properties for use in our operations. In addition to rent, the leases
require us to pay directly for taxes, insurance, maintenance and other operating
expenses, or to pay higher rent when operating expenses increase. Rental
expense, net of sublease income, was $158 million in 1999, $131 million in 1998
and $127 million in 1997. This table shows future minimum rental commitments
under noncancellable leases at December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
After
(millions of dollars) 2000 2001 2002 2003 2004 2004
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lease commitments $54 $45 $40 $29 $27 $286
- --------------------------------------------------------------------------------
</TABLE>
12 Common Stock
We effected a three-for-one stock split of our common stock in the form of a
200% stock dividend in 1999 and a two-for-one split of our common stock in the
form of a 100% stock dividend in 1997. All share and per share information in
this report reflects both splits. Per share data may reflect rounding
adjustments as a result of the three-for-one split.
Under the current share-purchase program begun in September 1998, we are
authorized to purchase up to $5 billion of our common stock. In 1999, we
purchased approximately 65.6 million shares of our common stock in the open
market at an average price of $38 per share. Since the beginning of this
program, we have purchased 80.4 million shares of our common stock for
approximately $3 billion. In September 1998, we completed a program under which
we purchased 79.2 million shares of our common stock at a total cost of $2
billion. In 1998, we purchased approximately 57.8 million shares of our common
stock at an average price of $33 per share under these share-purchase programs.
Of the 57.8 million shares repurchased in 1998, 14.8 million shares were
repurchased under the share-purchase program which started in September 1998,
for a total cost of $525 million.
13 Preferred Stock Purchase Rights
Preferred Stock Purchase Rights have a scheduled term through October 2007,
although the term may be extended or the Rights may be redeemed prior to
expiration. One right was issued for each share of common stock issued by our
company. These rights are not exercisable unless certain change-in-control
events transpire, such as a person acquiring or obtaining the right to acquire
beneficial ownership of 15% or more of our outstanding common stock or an
announcement of a tender offer for at least 30% of our stock. The rights are
evidenced by corresponding common stock certificates and automatically trade
with the common stock unless an event transpires that makes them exercisable. If
the rights become exercisable, separate certificates evidencing the rights will
be distributed and each right will entitle the holder to purchase a new series
of preferred stock at a defined price from our company. The preferred stock, in
addition to preferred dividend and liquidation rights, will entitle the holder
to vote with the company's common stock.
The rights are redeemable by us at a fixed price until 10 days, or longer
as determined by the Board, after certain defined events, or at any time prior
to the expiration of the rights.
We have reserved 3.0 million preferred shares to be issued pursuant to
these rights. No such shares have yet been issued. At the present time, the
rights have no dilutive effect on the earnings per common share calculation.
14 Employee Benefit Trusts
In 1993, we sold 120 million shares of treasury stock to the Pfizer Inc. Grantor
Trust in exchange for a $600 million note. The Trust was established primarily
to fund our employee benefit plans. In February 1999, the Trust transferred 10
million shares to us to satisfy the balance due on its note and contributed its
remaining 90 million shares to the newly established Pfizer Inc. Employee
Benefit Trust (EBT). The Grantor Trust was then dissolved and the shares of the
EBT will now be used to fund employee benefit plans. The Balance Sheet reflects
the fair value of the shares owned by the EBT as a reduction of Shareholders'
Equity.
<PAGE> 16
Pfizer Inc and Subsidiary Companies
15 Earnings Per Share
The weighted average common shares used in the computations of basic earnings
per common share and earnings per common share assuming dilution were as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions, except per share data) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings:
Income from continuing operations $ 3,199 $ 1,950 $ 2,082
Discontinued operations -- net of tax (20) 1,401 131
- --------------------------------------------------------------------------------
Net income $ 3,179 $ 3,351 $ 2,213
- --------------------------------------------------------------------------------
Basic:
Weighted average number of
common shares outstanding 3,775 3,789 3,771
- --------------------------------------------------------------------------------
Earnings per common share
Income from continuing operations $ .85 $ .51 $ .55
Discontinued operations -- net of tax (.01) .37 .04
- --------------------------------------------------------------------------------
Net income $ .84 $ .88 $ .59
- --------------------------------------------------------------------------------
Diluted:
Weighted average number of
common shares outstanding 3,775 3,789 3,771
Common share equivalents --
stock options and stock issuable
under employee compensation plans 109 156 138
- --------------------------------------------------------------------------------
Weighted average number of
common shares and common
share equivalents 3,884 3,945 3,909
- --------------------------------------------------------------------------------
Earnings per common share
Income from continuing operations $ .82 $ .49 $ .53
Discontinued operations -- net of tax -- .36 .04
- --------------------------------------------------------------------------------
Net income $ .82 $ .85 $ .57
================================================================================
</TABLE>
Options to purchase 115 million shares were outstanding during 1999 but
were not included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of the
common shares.
16 Stock Option and Performance Awards
We may grant stock options to any employee, including officers, under our Stock
and Incentive Plan. Options are exercisable after five years or less, subject to
continuous employment and certain other conditions and expire 10 years after the
grant date. Once exercisable, the employee can purchase shares of our common
stock at the market price on the date we granted the option.
The Plan also allows for stock appreciation rights, stock awards and
performance awards. In 1999, shareholders approved amendments to increase the
shares available in the Plan and to extend its term through 2008.
The following table summarizes information concerning options outstanding
under the Plan at December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(thousands
of shares) Options Outstanding Options Exercisable
- --------------------------------------------------------- --------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/99 Term (years) Price at 12/31/99 Price
- ------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
$ 0 - $ 10 85,308 4.0 $ 6.40 84,401 $ 6.38
10 - 15 36,677 6.6 12.42 34,439 12.42
15 - 20 35,486 7.7 18.34 21,145 18.35
20 - 40 48,730 8.7 35.18 14,114 35.18
over 40 66,904 9.2 42.07 -- --
================================================================================
</TABLE>
The following table summarizes the activity for the Plan:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Under Option
---------------------------
Shares Weighted
Available for Average Exercise
(thousands of shares) Grant Shares Price Per Share
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance January 1, 1997 105,042 259,284 $ 7.21
Granted (42,612) 42,612 18.35
Exercised -- (46,983) 5.38
Cancelled 1,959 (2,016) 12.89
- -------------------------------------------------------------------------------
Balance December 31, 1997 64,389 252,897 9.39
Granted (52,860) 52,860 35.21
Exercised -- (54,888) 7.04
Cancelled 1,212 (1,257) 19.91
- -------------------------------------------------------------------------------
Balance December 31, 1998 12,741 249,612 15.32
Authorized 165,000 -- --
Granted (67,963) 67,963 42.07
Exercised -- (41,524) 9.57
Cancelled 2,928 (2,946) 35.41
- -------------------------------------------------------------------------------
Balance December 31, 1999 112,706 273,105 22.63
===============================================================================
</TABLE>
Options granted in 1999 include options for 450 shares granted to every eligible
employee worldwide in celebration of our 150th Anniversary.
The tax benefits related to certain stock option transactions were $228 million
in 1999, $274 million in 1998 and $88 million in 1997.
The weighted-average fair value per stock option granted was $13.57 for
1999 options, $11.31 for 1998 options and $5.59 for the 1997 options. We
estimated the fair values using the Black-Scholes option pricing model, modified
for dividends and using the following assumptions:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected dividend yield 1.02% 1.02% 1.76%
Risk-free interest rate 5.26% 5.23% 6.23%
Expected stock price volatility 25.98% 26.29% 25.56%
Expected term until exercise (years) 5.75 5.75 5.50
===============================================================================
</TABLE>
<PAGE> 17
Pfizer Inc and Subsidiary Companies
The following table summarizes results as if we had recorded compensation
expense for the 1999, 1998 and 1997 option grants:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(millions of dollars,
except per share data) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income:
As reported $ 3,179 $ 3,351 $ 2,213
Pro forma 2,750 3,149 2,087
Basic earnings per share:
As reported $ .84 $ .88 $ .59
Pro forma .73 .83 .55
Diluted earnings per share:
As reported $ .82 $ .85 $ .57
Pro forma .71 .80 .53
- --------------------------------------------------------------------------------
</TABLE>
The Performance-Contingent Share Award Program was established effective in
1993 to provide executives and other key employees the right to earn common
stock awards. We determine the award payouts after the performance period ends,
based on specific performance criteria. Under the Program, up to 120 million
shares may be awarded. We awarded approximately 2,276,000 shares in 1999,
approximately 1,959,000 shares in 1998 and approximately 1,347,000 shares in
1997. At December 31, 1999, program participants had the right to earn up to
12.3 million additional shares. Compensation expense related to the Program was
$64 million in 1999, $202 million in 1998 and $74 million in 1997.
We entered into two forward-purchase contracts in 1998 and on maturity they
were extended. These contracts offset the potential impact on net income of our
liability under the Program. At settlement date we will, at the option of the
counterparty to the contract, either receive our own stock or settle the
contracts for cash. Other contract terms are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Maximum Maturity
in Years
-------------------------
Number of Shares (thousands) Per Share 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
3,000 $33.73 -- .9
3,017 33.75 .9 --
- --------------------------------------------------------------------------------
</TABLE>
The financial statements include the following items related to these
contracts:
Prepaid expenses and taxes includes:
- fair value of these contracts
Other deductions -- net includes:
- changes in the fair value of these contracts
17 Insurance
We maintain insurance coverage adequate for our needs. Under our insurance
contracts, we usually accept self-insured retentions appropriate for our
specific business risks.
18 Litigation
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.
In 1999, the Company pleaded guilty to one count of price fixing of sodium
erythorbate from July 1992 until December 1994, and one count of market
allocation of maltol from December 1989 until December 1995, and paid a total
fine of $20 million. The activities at issue involved the Company's former Food
Science Group, a division that manufactured food additives and that the Company
divested in 1996. The Department of Justice has stated that no further antitrust
charges will be brought against the Company relating to the former Food Science
Group, that no antitrust charges will be brought against any current director,
officer or employee of the Company for conduct related to the products of the
former Food Science Group, and that none of the Company's current directors,
officers or employees was aware of any aspect of the activity that gave rise to
the violations. Five purported class action suits involving these products have
been filed against the Company; two in California State Court, and three in New
York Federal Court. The Company does not believe that this plea and settlement,
or civil litigation involving these products, will have a material effect on its
business or results of operations.
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. On December 17, 1999, Mylan received final 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 is
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 Pharmaceutical Research Corp. which involved
the same nifedipine particle size
<PAGE> 18
Pfizer Inc and Subsidiary Companies
patent. Discovery has been essentially completed and the parties dispositive
motions were filed by an extended deadline of July 19, 1999, including Pfizer
and Bayer's summary judgment motion seeking to dismiss Mylan's patent misuse
defenses and counterclaims. On December 13, 1999, Mylan filed its opposition to
plaintiffs' motion for summary judgment dismissing Mylan's patent misuse defense
and counterclaim, and Bayer and the Company filed their opposition to Mylan's
motion for summary judgment of non-infringement. The parties reply memoranda in
support of their motions were filed on December 28, 1999.
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 Laboratories 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 v. Elan litigation in the Northern District of Georgia. Pfizer
and Bayer's response was filed on April 26, 1999. On September 20, 1999, the
United States District Court in Puerto Rico denied Biovail's motion for summary
judgment without prejudice to their refiling after completion of discovery in
the Procardia XL patent-infringement litigation. The court set an expedited
discovery schedule with a deadline of December 30, 1999, to complete discovery
of parties and fact witnesses and February 29, 2000, to complete discovery of
expert witnesses. On December 20, 1999, the court extended the date to complete
fact discovery to January 28, 2000, and that of expert discovery to March 15,
2000. A status conference with the court is scheduled for March 17, 2000.
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 has been held in abeyance pending a settlement
conference. In September 1999, a settlement agreement was entered into among the
parties staying this litigation until the expiration of U.S. Patent No.
4,412,986 on November 2, 2000.
On February 10, 1999, the Company received a notice from Lek U.S.A. of its
filing of an ANDA for a 90 mg. formulation 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. This case was also the subject of a
settlement conference. In September, 1999, a settlement agreement was entered
into among the parties staying this litigation until the expiration of U.S.
patent No. 4,412,986 on November 2, 2000.
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. Martec filed its response to this complaint on February
26, 1999. A hearing to determine claim scope is scheduled for June 1, 2000.
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
<PAGE> 19
Pfizer Inc and Subsidiary Companies
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. On July 16, 1999,
the D.C. Court of Appeals dismissed the appeal on the ground that since the FDA
had not approved any ANDA referencing Procardia XL that uses a different
extended-release mechanism than the osmotic pump mechanism of Procardia XL, it
was premature to maintain this action, stating that Pfizer has the right to
bring such an action if, and when, the FDA approves such an ANDA. Subsequent to
FDA's final approval of Mylan's ANDA, on December 18, 1999 Pfizer filed suit
against FDA in the United States District Court for the District of Delaware.
The suit alleges that FDA unlawfully approved Mylan's 30 mg. extended release
product because FDA had not granted an ANDA suitability petition reflecting a
difference in dosage form from Procardia XL.
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). The
notice letter alleges that Pfizer's patent on doxazosin is invalid in view of
certain prior art references. Following a review of these allegations, suit was
filed in the United States District Court for the Northern District of Illinois
against TorPharm and Apotex Corp. on May 14, 1999. The defendants requested a
90-day period in which to file their answer. The request was granted and
TorPharm/Apotex's answer was filed by August 19, 1999. Discovery is in progress.
On June 2, 1999, FDA was notified that given the patent litigation and pursuant
to provisions of the Federal Food Drug and Cosmetic Act, the FDA may not approve
the TorPharm application for thirty months from filing or resolution of the
litigation.
On May 5, 1999, the Company filed an action against Sibia Neurosciences,
Inc. in the United States District Court for the District of Delaware seeking a
declaratory judgment that two Sibia patents claiming reporter gene drug
screening assays are invalid, not infringed by the Company, and unenforceable
due to Sibia's misuse of its patent rights in seeking certain license terms. On
May 27, 1999, Sibia Neurosciences, Inc. filed an answer to the Company's
declaratory judgment action in which Sibia denies that a prior case or
controversy existed, but admits that a case or controversy does now exist
regarding at least one patent in suit, denies the invalidity, unenforceability
and non-infringement of the patents in suit, and asserts various jurisdictional
and equitable defenses, affirmative defenses, and lack of standing by the
Company to assert patent misuse. Sibia Neurosciences also filed a counterclaim
alleging willful infringement by the Company of one of the patents in suit. A
reply to that counterclaim denying Sibia's allegation has been filed. The
parties submitted a joint status report to the court on December 14, 1999, in
which the parties agreed to complete fact discovery by August 21, 2000, and
commence trial on January 8, 2001.
On May 19, 1999, Abbott Laboratories filed an action against the Company in
the United States District Court of the Northern District of Illinois alleging
that the Company's use, sale or manufacture of trovafloxacin infringes Abbott's
United States Patent No. 4,616,019 claiming naphthyriding antibiotics and
seeking a permanent injunction and damages. An answer denying these allegations
was filed on June 9, 1999. Discovery is in progress.
On December 17, 1999, the Company received notice of the filing of an
Abbreviated New Drug Application (ANDA) by Zenith Goldline Pharmaceuticals for
50 mg. and 100 mg. tablets of sertraline hydrocholoride alleged to be
bioequivalent to Zoloft. Zenith has certified to the FDA that it will not engage
in the manufacture, use or sale of sertraline hydrochloride until the expiration
of Pfizer's U.S. Patent 4,536,518, which covers sertraline per se and expires
December 30, 2005. Zenith has also alleged in its certification to the FDA that
the manufacture, use and sale of Zenith's product will not infringe Pfizer's
U.S. Patent 4,962,128, which covers methods of treating an anxiety-related
disorder or Pfizer's U.S. Patent 5,248,699, which covers a crystalline polymorph
of sertraline hydrochloride. These patents expire in November 2009 and August
2012, respectively. On January 28, 2000, the Company filed a patent infringement
action against Zenith Goldline and its parent Ivax Corporation in the United
States District Court for the District of New Jersey for infringement of the
'128 and '699 patents.
On February 1, 2000, the Company received notice of the filing of an
Abbreviated New Drug Application (ANDA) by Novopharm Limited for 50 mg, 100 mg,
150 mg and 200 mg tablets of fluconazole alleged to be bioequivalent to
DIFLUCAN. Novopharm has certified to the FDA its position that the Company's
U.S. Patent 4,404,216, which covers fluconazole, is invalid. This patent expires
in January 2004. The Company is evaluating Novopharm's notice.
In pre-existing litigation between Pioneer Hi-Bred International, Inc. and
DeKalb Genetics Corporation in the United States District Court for the Southern
District of Iowa, the court granted on October 8, 1999 Pioneer's motion to add
additional parties, including Pfizer Inc. and Monsanto Co. (the present owner of
DeKalb Genetics Corporation), as codefendant parties. The amended complaint,
which claims violations of the federal Lanham Act and Iowa state law stemming
from the codefendants' alleged use of Pioneer's corn seed germplasm in the
development of competitive corn seed products, was served on the Company on
October 19. The Company filed its answer on December 15, 1999.
On September 22, 1999, the jury in a trademark-infringement litigation
brought against the Company by Trovan Ltd. and Electronic Identification
Devices, Ltd. relating to use of the TROVAN mark for trovafloxacin issued a
verdict in favor of the plaintiffs with respect to liability, holding that the
Company had infringed Trovan Ltd.'s mark and had acted in bad faith. Following a
further damage trial, on October 12, 1999, the jury awarded Trovan Ltd. a total
of $143 million in
<PAGE> 20
Pfizer Inc and Subsidiary Companies
damages, comprised of $5 million actual damages, $3 million as a reasonable
royalty and $135 million in punitive damages. The court held a hearing on
December 27, 1999, on whether to award the plaintiffs profits based on the
Company's sales of Trovan and, if so, the amount of same. The Company's motion
for mistrial remains outstanding.
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(degree) or 70(degree) 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.
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 sixteen 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.
As of January 29, 2000, there were 57,328 personal injury claims pending
against Quigley and 26,890 such claims against the Company (excluding those that
are inactive or have been settled in principle), and 68 talc cases against the
Company.
The Company believes that its costs incurred in defending
<PAGE> 21
Pfizer Inc and Subsidiary Companies
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 against excess insurance carriers
seeking damages and/or declaratory relief to secure their coverage obligations
has now been largely resolved, although claims against several of such insureds
do remain pending. Based on the Company's experience in defending the claims to
date and the amount of insurance coverage available, the Company is of the
opinion that the actions should not ultimately have a material adverse effect on
the financial position or the results of operations of the Company.
In 1993, 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, alleging that the manufacturers
violated the Sherman Act by agreeing not to give retailers certain discounts and
that the failure to give such discounts violated the Robinson Patman Act. A
class action was brought on the Sherman Act claim, as well as additional actions
by approximately 3,500 individual retail pharmacies and a group of chain and
supermarket pharmacies (the "individual actions") on both the Sherman Act and
Robinson Patman Act claims. A retailer class was certified in 1994 (the "Federal
Class Action"). In 1996, fifteen manufacturer defendants, including the Company,
settled the Federal Class Action. The Company's share was $31.25 million,
payable in four annual installments without interest. 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 appealed and, on July 13, 1999, the Court
of Appeals upheld most of the dismissal but remanded on one issue, while
expressing doubts that the plaintiffs could prove any damages.
Retail pharmacy cases also have been filed in state courts in five states,
and consumer class actions were filed in state courts in fourteen states and the
District of Columbia alleging injury to consumers from the failure to give
discounts to retail pharmacy companies.
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 opened 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 responded. A second subpoena was issued to the
Company for documents in May 1997 and the Company again responded. We are not
aware of any further activity.
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.
Since December 1998, four actions have been filed, in state courts in
Houston, San Francisco, Chicago and New Orleans, purportedly on behalf of
statewide (California) or nationwide (Houston, Chicago and New Orleans) 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 case has
been voluntarily dismissed and proceedings in the San Francisco, Chicago and New
Orleans cases are still in early stages of the proceedings. The Company believes
the complaints are without merit.
In December, 1999 and January, 2000, two suits were filed in California
state courts against the Company and other manufacturers of zinc
oxide-containing powders. The first suit was filed by the Center for
Environmental Health and the
<PAGE> 22
Pfizer Inc and Subsidiary Companies
second was filed by an individual plaintiff on behalf of a purported class of
purchasers of baby powder products. The suits generally allege that the label of
Desitin powder violates California's "Proposition 65" by failing to warn of the
presence of lead, which is alleged to be a carcinogen. In January, 2000, the
Company received a notice from a California environmental group alleging that
the labeling of Desitin ointment and powder violates Proposition 65 by failing
to warn of the presence of cadmium, which is alleged to be a carcinogen. Several
other manufacturers of zinc oxide-containing topical baby products have received
similar notices. 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 review of the
Company's new procedures was undertaken by FDA in 1999. The Company and Agency
met to review the findings of this review and agreed that commitments and
remedial measures undertaken by the Company related to the Warning Letter have
been accomplished. The Company agreed to keep the Agency informed of its
activities as it continues to modify its processes and procedures.
During May and June, 1999, the FDA and the European Union's Committee for
Proprietary Medicinal Products (CPMP) reconsidered the approvals to market
Trovan, a broad-spectrum antibiotic, following post-market reports of severe
adverse liver reactions to the drug. On June 9, the Company announced that,
regarding the marketing of Trovan in the United States, it had agreed to
restrict the indications, limit product distribution, make certain other
labeling changes and to communicate revised warnings to health care
professionals in the United States. On July 1, Pfizer received the opinion of
the CPMP recommending a one-year suspension of the licenses to market Trovan in
the European Union. The CPMP opinion has been finalized in a Final Decision by
the European Commission. Since June, 1999, three suits and several claims have
been received by the Company alleging liver injuries due to the ingestion of
Trovan. The majority of these claims have been resolved without litigation. In
June and July, 1999, two of the lawsuits were filed in the Circuit Court,
Hampton County, South Carolina on behalf of a purported class of all persons who
received Trovan, seeking compensatory and punitive damages and injunctive
relief. One of the suits, seeking injunctive relief, has been dismissed. No
substantitive proceedings have yet occurred in the other suit and the Company
believes that it is not properly maintainable as a class action, and will defend
against it accordingly.
In October 1999 the Company was sued in an action seeking unspecified
damages, costs and attorney's fees on behalf of a purported class of people
whose dogs had suffered injury or death after ingesting Rimadyl, an
antiarthritic medication for older dogs. The suit, which was filed in state
court in South Carolina, is in the early pretrial stages. The Company believes
it is without merit.
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. These cases have now
been resolved. 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. Most of these
claims, along with a number of filed and unfiled claims from other
jurisdictions, have now been resolved. 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 sought the award
of moral, economic and personal damages to individuals and the payment to a
public reserve fund. In February 1996, the trial court issued a decision holding
Pfizer Brazil liable. The trial court's opinion also established the amount of
moral damages for individuals who might make claims later in the proceeding and
set out a formula for calculating the payment into the public reserve fund which
could have resulted in a sum of approximately $88 million. Pfizer Brazil
appealed this decision. In September 1999, the appeals court issued a ruling
upholding the trial court's decision as to liability. However, the appeals court
decision overturned the trial court's decision concerning damages, ruling that
criteria to apply in the calculation of damages, both as to individuals and as
to payment of any amounts to the reserve fund, should be established only in a
later stage of the proceeding. The Company believes that this action should not
have a material adverse effect on the financial position or the results of
operations of the Company.
<PAGE> 23
Pfizer Inc and Subsidiary Companies
19 Segment Information and Geographic Data
We operate in the following two business segments:
- pharmaceutical -- including treatments for heart diseases, infectious
diseases, central nervous system disorders, diabetes, arthritis,
erectile dysfunction and allergies, as well as self-medications
- animal health -- products for food animals and companion animals,
including antibiotics, vaccines and other veterinary items
Each separately managed segment offers different products requiring
different marketing and distribution strategies.
We sell our products primarily to customers in the wholesale sector. In
1999, sales to our two largest wholesalers accounted for 14% and 12% of total
revenues. These sales were concentrated in the pharmaceutical segment.
Revenues were in excess of $100 million in each of 12 countries outside the
U.S. in 1999. The U.S. was the only country to contribute more than 10% to total
revenues. The following tables present segment and geographic information:
<TABLE>
<CAPTION>
Segment Information
- ---------------------------------------------------------------------------------------------------------------
Animal Corporate/
(millions of dollars) Pharmaceutical Health Other Consolidated
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues 1999 $ 14,859 $ 1,345 $ -- $ 16,204
1998 12,230 1,314 -- 13,544
1997 9,726 1,329 -- 11,055
- ---------------------------------------------------------------------------------------------------------------
Segment profit 1999 4,898(1) 67 (517)(2) 4,448(3)
1998 3,574 (77) (903)(2) 2,594(3)
1997 3,129 112 (374)(2) 2,867(3)
- ---------------------------------------------------------------------------------------------------------------
Identifiable assets(4) 1999 9,723 2,144 8,707 20,574
1998 7,987 2,109 8,206 18,302
1997 6,464 2,197 6,330(5) 14,991
- ---------------------------------------------------------------------------------------------------------------
Property, plant and equipment additions(4) 1999 1,387 90 84 1,561
1998 991 97 110 1,198
1997 687 69 122 878
- ---------------------------------------------------------------------------------------------------------------
Depreciation and amortization(4) 1999 438 74 30 542
1998 386 82 21 489
1997 337 75 16 428
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Geographic Data
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
All
United Other
(millions of dollars) States (6) Japan Countries Consolidated
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues 1999 $9,896 $1,249 $5,059 $16,204
1998 8,205 943 4,396 13,544
1997 6,089 949 4,017 11,055
Long-lived assets 1999 3,430 487 2,750 6,667
1998 2,905 369 2,499 5,773
1997 2,910 283 2,155 5,348
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $310 million charge to write off Trovan inventories.
(2) Includes interest income/(expense) and corporate expenses. Corporate
also includes other income/(expense) of the financial subsidiaries
(see note 3, "Financial Subsidiaries") and certain performance-based
compensation expenses not allocated to the operating segments.
(3) Consolidated total equals income from continuing operations before
provision for taxes on income and minority interests.
(4) Certain production facilities are shared by various segments.
Property, plant and equipment, as well as capital additions and
depreciation, are allocated based on physical production. Corporate
assets are primarily cash, short-term investments and long-term loans
and investments.
(5) Includes net assets of discontinued operations.
(6) Includes operations in Puerto Rico.
20 Subsequent Event
On February 7, 2000, we announced an agreement to merge with Warner-Lambert
Company (Warner-Lambert). Under terms of the merger agreement, which has been
approved by the Board of Directors of both Pfizer and Warner-Lambert, we will
exchange 2.75 shares of Pfizer voting common stock for each outstanding share of
Warner-Lambert voting common stock in a tax-free transaction valued at $98.31
per Warner-Lambert share, or an equity value of $90 billion based on the closing
price of our stock on February 4, 2000 of $35.75 per share. Customary and usual
provisions will be made for outstanding options and warrants.
This transaction is subject to customary conditions, including the use of
pooling-of-interests accounting, qualifying as a tax-free reorganization,
shareholder approval at both companies and usual regulatory approvals.
The transaction is expected to close in mid-2000.
