Pfizer Provides Historical Consolidated Statements of Income with the Animal Health Business (Zoetis) Reported as a Discontinued Operation

Tue Jul 23, 2013 5:02pm EDT

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Pfizer Provides Historical Consolidated Statements of Income with the Animal Health Business (Zoetis) Reported as a Discontinued Operation

Statements Include First Quarter of 2013 and First and Second Quarters of 2012

For the information of investors, Pfizer Inc. (NYSE:PFE) is providing the unaudited condensed consolidated statements of income (statements of income) of Pfizer for the three months ended March 31, 2013, July 1, 2012 and April 1, 2012, with the financial results of its Animal Health business reported as a discontinued operation for all periods presented. These statements were derived from the historical statements of income of Pfizer for the respective periods. Pfizer’s press release announcing its financial results for the three months ended June 30, 2013 will be issued on July 30, 2013.

On June 24, 2013, Pfizer completed the full disposition of Zoetis Inc. (Zoetis), which was achieved through a series of steps, including the formation of Zoetis, a separate company to which Pfizer transferred substantially all of its animal health assets and liabilities, an initial public offering of a 19.8% interest in Zoetis and an exchange offer for the remaining 80.2% interest. The financial results of Zoetis, the standalone public company, may differ from the financial results of the Animal Health business reflected in Pfizer’s statements of income as a discontinued operation, as the components of this business differed from Zoetis.

This financial information is provided for informational purposes only and should be read in conjunction with Pfizer’s statements of income and the accompanying notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Pfizer’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2013, July 1, 2012 and April 1, 2012.

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(1)
(UNAUDITED)
(millions, except per common share data)
             
First-Quarter Second-Quarter
2013 2012 2012
Revenues $    

12,410

 

$    

13,845

 

$

13,968

 

Costs and expenses:
Cost of sales(2) 2,263 2,383 2,376
Selling, informational and administrative expenses(2) 3,217 3,678 3,665
Research and development expenses(2) 1,710 1,974 1,600
Amortization of intangible assets(3) 1,219 1,403 1,275
Restructuring charges and certain acquisition-related costs 131 589 184
Other deductions––net       145         1,639    

688

 

Income from continuing operations before provision for taxes on income

3,725 2,179

4,180

Provision for taxes on income       1,109         625    

1,180

 
Income from continuing operations 2,616 1,554

3,000

Discontinued operations––net of tax       149         249    

260

 
Net income before allocation to noncontrolling interests 2,765 1,803 3,260
Less: Net income attributable to noncontrolling interests       15         9     7  
Net income attributable to Pfizer Inc. $     2,750   $     1,794   $ 3,253  
Earnings per common share––basic:

Income from continuing operations attributable to Pfizer Inc. common shareholders

$ 0.36 $ 0.20 $

0.40

Discontinued operations––net of tax       0.02         0.03    

0.03

 
Net income attributable to Pfizer Inc. common shareholders $     0.38   $     0.24   $ 0.44  
Earnings per common share––diluted:

Income from continuing operations attributable to Pfizer Inc. common shareholders

$ 0.36 $ 0.20 $

0.40

Discontinued operations––net of tax       0.02         0.03    

0.03

 
Net income attributable to Pfizer Inc. common shareholders $     0.38   $     0.24   $ 0.43  
 
Weighted-average shares used to calculate earnings per common share:
Basic       7,187         7,537     7,476  
Diluted       7,269         7,598     7,537  
 
EPS amounts may not add due to rounding.
(1) These financial statements present the three months ended March 31, 2013, April 1, 2012 and July 1, 2012. Subsidiaries operating outside the United States are included for the three months ended February 24, 2013, February 26, 2012 and May 27, 2012.
 
On June 24, 2013, we completed the full disposition of our Animal Health business (Zoetis). The operating results of this business are reported as Discontinued operations––net of tax for all periods presented.
 
On November 30, 2012, we completed the sale of our Nutrition business. The operating results of this business are reported as Discontinued operations––net of tax for the three months ended April 1, 2012 and July 1, 2012.
 
(2) Exclusive of amortization of intangible assets, except as discussed in footnote (3) below.
 
(3) Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate.
   
 
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per common share data)
       
 

Three Months Ended March 31, 2013

Purchase Acquisition- Certain
GAAP Accounting Related Discontinued Significant Non-GAAP

Reported(1)

Adjustments

Costs(2)

Operations

Items(3)

Adjusted(4)

Revenues $

12,410

 

$ - $ - $ - $ - $

12,410

 

Cost of sales(5) 2,263 5 (33 ) - (6 ) 2,229
Selling, informational and administrative expenses(5) 3,217 5 (2 ) - (42 ) 3,178
Research and development expenses(5) 1,710 1 - - (93 ) 1,618
Amortization of intangible assets(6) 1,219 (1,180 ) - - - 39
Restructuring charges and certain acquisition-related costs 131 - (55 ) - (76 ) -
Other deductions––net 145 (50 ) - - 129 224
Income from continuing operations before provision for taxes on income 3,725 1,219 90 - 88 5,122
Provision for taxes on income 1,109 334 26 - (96 ) 1,373
Income from continuing operations 2,616 885 64 - 184 3,749
Discontinued operations––net of tax 149 - - (149 ) - -
Net income attributable to noncontrolling interests 15 - - (6 ) - 9
Net income attributable to Pfizer Inc. 2,750 885 64 (143 ) 184 3,740
Earnings per common share attributable to Pfizer Inc.––diluted 0.38 0.12 0.01 (0.02 ) 0.03 0.51
 
 

Three Months Ended April 1, 2012

GAAP
Reported(1)

Purchase
Accounting
Adjustments

Acquisition-
Related
Costs(2)

Discontinued
Operations

Certain
Significant
Items(3)

Non-GAAP
Adjusted(4)

Revenues $ 13,845 $ - $ - $ - $ - $ 13,845
Cost of sales(5) 2,383 (7 ) (76 ) - - 2,300
Selling, informational and administrative expenses(5) 3,678 3 (1 ) - (16 ) 3,664
Research and development expenses(5) 1,974 1 (5 ) - (302 ) 1,668
Amortization of intangible assets(6) 1,403 (1,339 ) - - - 64
Restructuring charges and certain acquisition-related costs 589 - (91 ) - (498 ) -
Other deductions––net 1,639 (91 ) - - (1,244 ) 304
Income from continuing operations before provision for taxes on income 2,179 1,433 173 - 2,060 5,845
Provision for taxes on income 625 380 63 - 613 1,681
Income from continuing operations 1,554 1,053 110 - 1,447 4,164
Discontinued operations––net of tax 249 - - (249 ) - -
Net income attributable to noncontrolling interests 9 - - - - 9
Net income attributable to Pfizer Inc. 1,794 1,053 110 (249 ) 1,447 4,155
Earnings per common share attributable to Pfizer Inc.––diluted 0.24 0.14 0.01 (0.03 ) 0.19 0.55
 
 

Three Months Ended July 1, 2012

GAAP
Reported(1)

Purchase
Accounting
Adjustments
Acquisition-
Related
Costs(2)
Discontinued
Operations
Certain
Significant
Items(3)
Non-GAAP
Adjusted(4)
Revenues $ 13,968 $ - $ - $ - $ - $ 13,968
Cost of sales(5) 2,376 (2 ) (54 ) - (27 ) 2,293
Selling, informational and administrative expenses(5) 3,665 2 (4 ) - (15 ) 3,648
Research and development expenses(5) 1,600 2 - - (37 ) 1,565
Amortization of intangible assets(6) 1,275 (1,214 ) - - - 61
Restructuring charges and certain acquisition-related costs 184 - (170 ) - (14 ) -
Other deductions––net

688

59 - - (579 )

168

Income from continuing operations before provision for taxes on income

4,180

1,153 228 - 672

6,233

Provision for taxes on income

1,180

310 50 - 237

1,777

Income from continuing operations

3,000

843 178 - 435

4,456

Discontinued operations––net of tax

260

- -

(260

) - -
Net income attributable to noncontrolling interests 7 - - - - 7
Net income attributable to Pfizer Inc. 3,253 843 178

(260

) 435

4,449

Earnings per common share attributable to Pfizer Inc.––diluted 0.43 0.11 0.02

(0.03

) 0.06 0.59
 

See end of tables for notes (1) through (6).

Certain amounts may reflect rounding adjustments.

EPS amounts may not add due to rounding.

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
         
(1) These financial statements present the three months ended March 31, 2013, April 1, 2012 and July 1, 2012. Subsidiaries operating outside the United States are included for the three months ended February 24, 2013, February 26, 2012 and May 27, 2012.
 
On June 24, 2013, we completed the full disposition of our Animal Health business (Zoetis). The operating results of this business are reported as Discontinued operations––net of tax for all periods presented.
 
On November 30, 2012, we completed the sale of our Nutrition business. The operating results of this business are reported as Discontinued operations––net of tax for the three months ended April 1, 2012 and July 1, 2012.
 
(2) Acquisition-related costs include the following:
 
First-Quarter Second-Quarter
(millions of dollars) 2013 2012 2012
 
Integration costs(a) $   36 $   95 $ 105
Restructuring charges(a) 19 (4 ) 65
Additional depreciation––asset restructuring(b)     35       82     58  
Total acquisition-related costs––pre-tax 90 173 228
Income taxes(c)     (26 )     (63 )   (50 )
Total acquisition-related costs––net of tax $   64   $   110   $ 178  
 
(a) Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations. All of these costs and charges are included in Restructuring charges and certain acquisition-related costs.
 
(b)

Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions. Included in Cost of sales ($33 million) and Selling, informational and administrative expenses ($2 million) for the three months ended March 31, 2013. Included in Cost of sales ($76 million), Research and development expenses ($5 million) and Selling, informational and administrative expenses ($1 million) for the three months ended April 1, 2012. Included in Cost of sales ($54 million) and Selling, informational and administrative expenses ($4 million) for the three months ended July 1, 2012.

 
(c) Included in Provision for taxes on income.
 
(3) Certain significant items include the following:
First-Quarter Second-Quarter
(millions of dollars) 2013 2012 2012
 
Restructuring charges(a) $ 76 $ 498 $ 14
Implementation costs and additional depreciation––asset restructuring(b) 139 318 56
Gain associated with the transfer of certain product rights to an equity-method investment(c) (490 ) - -
Certain legal matters(d) (87 ) 775 483
Certain asset impairment charges(e) 394 412 77
Costs associated with the Zoetis IPO(f) 18 32 29
Other    

38

      25     13  
Certain significant items––pre-tax

88

2,060 672
Income taxes(g)    

96

      (613 )   (237 )
Certain significant items––net of tax $   184   $   1,447   $ 435  
 
(a) Primarily relates to our cost-reduction and productivity initiatives. Included in Restructuring charges and certain acquisition-related costs.
 
(b) Primarily relates to our cost-reduction and productivity initiatives. Included in Research and development expenses ($93 million), Selling, informational and administrative expenses ($40 million) and Cost of sales ($6 million) for the three months ended March 31, 2013. Included in Research and development expenses ($302 million) and Selling, informational and administrative expenses ($16 million) for the three months ended April 1, 2012. Included in Cost of sales ($4 million), Selling, informational and administrative expenses ($15 million) and Research and development expenses ($37 million) for the three months ended July 1, 2012.
 
(c) Included in Other deductions––net. Represents the gain associated with the transfer of certain product rights to Pfizer's 49%-owned equity-method investment in China.
 
(d) Included in Other deductions––net. In first-quarter 2013, primarily includes an $80 million insurance recovery related to a certain litigation matter. In first-quarter 2012, primarily relates to a $450 million settlement of a lawsuit by Brigham Young University related to Celebrex and charges related to hormone-replacement therapy litigation. In second-quarter 2012, primarily includes charges related to hormone-replacement therapy litigation.
 
(e)

Included in Other deductions––net. In first-quarter 2013, significantly relates to developed technology, for use in the development of bone and cartilage and acquired in connection with our acquisition of Wyeth. In first-quarter 2012, primarily relates to an in-process research and development intangible asset compound targeting autoimmune diseases and acquired in connection with our acquisition of Wyeth, and certain other intangible asset impairments.

 
(f) Included in Other deductions––net. Costs incurred in connection with the initial public offering of an approximate 19.8% ownership interest in Zoetis. Includes expenditures for banking, legal, accounting and similar services.
 
(g) Included in Provision for taxes on income.
 
(4) Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are Non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
 
(5) Exclusive of amortization of intangible assets, except as discussed in footnote (6) below.
 
(6) Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate.

Pfizer Inc.
Media: Joan Campion, 212-733-2798
Investors: Suzanne Harnett, 212-733-8009

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