REG-Pfizer Inc Pfizer Reports Third-Quarter 2009 Results
http://www.businesswire.com/news/home/20091020005846/en
* Third-Quarter 2009 Revenues of $11.6 Billion
* Third-Quarter 2009 Reported Diluted EPS(1) of $0.43, Adjusted Diluted EPS(2)
of $0.51
* Continues to Execute on Financial and Strategic Commitments; Commenced Wyeth
Integration on October 16, 2009 Following Completion of the Acquisition
* Updates Full-Year 2009 Revenue, Reported Diluted EPS(1) and Adjusted Diluted
EPS(2) Guidance to Reflect Wyeth Acquisition
NEW YORK--(Business Wire)--
Pfizer Inc. (NYSE: PFE):
($ in millions, except per share amounts)
Third-Quarter Year-to-Date
2009 2008 Change 2009 2008 Change
Reported Revenues $ 11,621 $ 11,973 (3 %) $ 33,472 $ 35,950 (7 %)
Reported Net Income(1) 2,878 2,278 26 % 7,868 7,838 --
Reported Diluted EPS(1) 0.43 0.34 26 % 1.16 1.16 --
Adjusted Income(2) 3,461 4,180 (17 %) 10,377 11,977 (13 %)
Adjusted Diluted EPS(2) 0.51 0.62 (18 %) 1.54 1.77 (13 %)
See end of text prior to tables for notes.
Pfizer Inc. (NYSE: PFE) today reported financial results for third-quarter 2009.
Revenues were $11.6 billion, a decrease of 3% compared with $12.0 billion in the
year-ago quarter. Revenues for third-quarter 2009 compared with the year-ago
quarter were unfavorably impacted by approximately $610 million, or 5%, due to
foreign exchange and were favorably impacted by $217 million, or 2%, due to a
one-time adjustment in the year-ago period for prior years` liabilities for
product returns. For third-quarter 2009, U.S. revenues were $4.8 billion, a
decrease of 2% compared with the year-ago quarter. International revenues were
$6.8 billion, a decrease of 4% compared with the prior-year quarter, and
reflected 5% operational growth and a 9% unfavorable impact of foreign exchange.
U.S. revenues represented 41% of the total, while international revenues
represented 59% of the total, both comparable with the year-ago quarter.
For the first nine months of 2009, revenues were $33.5 billion, a decrease of 7%
compared with $36.0 billion in the same period in 2008. Foreign exchange
unfavorably impacted revenues by approximately $2.3 billion or 6%. U.S. revenues
were $14.3 billion, a decrease of 6% compared with the first nine months of
2008. International revenues were $19.2 billion, a decrease of 8% compared with
the same period last year, and reflected 3% operational growth and an 11%
unfavorable impact of foreign exchange. U.S. revenues represented 43% of the
total compared with 42% in the year-ago period, and international revenues
represented 57% of the total compared with 58% of the total of the first nine
months of 2008.
Business Revenues
Effective January 1, 2009, Pfizer expanded its operating model within the
Pharmaceutical business to include five customer-focused units, in addition to
its Animal Health business. During third-quarter 2009, the Specialty Care,
Emerging Markets and Oncology Pharmaceutical units and Animal Health generated
revenue growth on a constant currency basis. The Primary Care unit was flat on a
constant currency basis while the Established Products unit, which manages a
portfolio of products that have generally lost patent protection or marketing
exclusivity and that have an expected decline in revenues at this stage in their
lifecycle, declined 9% on a constant currency basis.
Third-Quarter
Foreign
($ in millions) 2009 2008 Change Exchange Operational
Primary Care(3) $ 5,511 $ 5,769 (4 %) (4 %) --
Specialty Care(4) 1,573 1,529 3 % (3 %) 6 %
Oncology(5) 371 389 (5 %) (7 %) 2 %
Established Products(6) 1,618 1,834 (12 %) (3 %) (9 %)
Emerging Markets(7) 1,604 1,672 (4 %) (13 %) 9 %
Returns Adjustment -- (217 ) * * *
Total Pharmaceutical 10,677 10,976 (3 %) (5 %) 2 %
Animal Health(8) 678 708 (4 %) (6 %) 2 %
Other(9) 266 289 (8 %) (3 %) (5 %)
Total $ 11,621 $ 11,973 (3 %) (5 %) 2 %
See end of text prior to tables for notes.
* Calculation not meaningful
Primary Care revenues for third-quarter 2009 were $5.5 billion, a decline of 4%
compared with $5.8 billion in the year-ago quarter. Operationally, Primary Care
revenues were flat, as the strong international performance of Lyrica and
Lipitor was offset primarily by lower Lipitor revenues in the U.S. Operational
performance was offset by the unfavorable impact of foreign exchange.
Specialty Care revenues for third-quarter 2009 were $1.6 billion, an increase of
3% compared with $1.5 billion in the same period last year. Operational growth
of 6%, largely driven by the solid performance of Rebif and Revatio, was
partially offset by the unfavorable impact of foreign exchange.
Oncology revenues for third-quarter 2009 were $371 million, a decrease of 5%
compared with $389 million in the prior-year quarter. Operational growth of 2%,
primarily due to the strong performance of Sutent, was partially offset by the
unfavorable impact of the loss of exclusivity of Camptosar in Europe in July
2009. The operational growth was more than offset by the unfavorable impact of
foreign exchange.
Established Products revenues for third-quarter 2009 were $1.6 billion, a
decline of 12% compared with $1.8 billion in the year-ago quarter, comprised of
a 9% operational decline and the unfavorable impact of foreign exchange.
Emerging Markets revenues for third-quarter 2009 were $1.6 billion, a decrease
of 4% compared with $1.7 billion in third-quarter 2008. These results included
revenue from both established products and patent-protected products sold in
emerging markets. Operational growth of 9%, largely attributable to strong
growth in high-priority countries, notably China and India, was more than offset
by the unfavorable impact of foreign exchange.
Animal Health revenues for third-quarter 2009 were $678 million, a decline of 4%
compared with $708 million in the year-ago quarter. Operational growth of 2%,
primarily driven by the solid performance in emerging markets and for certain
new products worldwide, was more than offset by the unfavorable impact of
foreign exchange.
Reported Net Income(1)and Reported Diluted EPS(1)
For third-quarter 2009, Pfizer posted reported net income(1) of $2.9 billion, an
increase of 26% compared with $2.3 billion in the prior-year quarter, and
reported diluted EPS(1) of $0.43, an increase of 26% compared with $0.34 in the
prior-year quarter. Results for third-quarter 2009 compared with the same period
in 2008 were favorably impacted by the non-recurrence of the after-tax charge of
$640 million resulting from agreements to resolve certain litigation involving
the Company`s non-steroidal anti-inflammatory (NSAID) pain medicines in the
year-ago quarter, lower costs associated with our cost-reduction initiatives and
savings generated from those initiatives. These factors were partially offset by
the decrease in revenues, unfavorable impact of foreign exchange, higher
interest expense as a result of the issuance of notes to partially finance the
Wyeth acquisition as well as an increase in the effective tax rate on reported
results to approximately 28% in third-quarter 2009 from approximately 17% in
third-quarter 2008. This increase in the effective tax rate on reported results
was primarily due to the increased tax cost associated with certain business
decisions executed to finance the Wyeth acquisition.
For the first nine months of 2009, Pfizer posted reported net income(1) of $7.9
billion, and reported diluted EPS(1) of $1.16, both comparable with the first
nine months of 2008. These results were impacted by the aforementioned factors
as well as costs incurred to prepare for the Wyeth acquisition and lower
in-process research and development charges. The increase in the effective tax
rate on reported results to approximately 27% in the first nine months of 2009
from approximately 14% in the first nine months of 2008 was primarily due to the
increased tax cost as discussed above. Additionally, the 2008 effective tax rate
was positively impacted by favorable income tax adjustments.
Adjusted Income(2) and Adjusted Diluted EPS(2)
Third-quarter 2009 adjusted income(2) was $3.5 billion, a decrease of 17%
compared with $4.2 billion in the year-ago quarter, and adjusted diluted EPS(2)
was $0.51, a decrease of 18% compared with $0.62 in the year-ago quarter. For
the first nine months of 2009, adjusted income(2) was $10.4 billion, a decrease
of 13% compared with $12.0 billion in the first nine months of 2008, and
adjusted diluted EPS(2) was $1.54, a decrease of 13% compared with $1.77 in the
year-ago period. Both adjusted income(2) and adjusted diluted EPS(2) were
negatively impacted by lower revenues and by an increase in the effective tax
rate on adjusted income(2) to approximately 32% in third-quarter 2009 from
approximately 22% in third-quarter 2008, and to approximately 30% in the first
nine months of 2009 from approximately 21% in the first nine months of 2008.
These increases in the effective tax rate were primarily due to the increased
tax cost associated with certain business decisions executed to finance the
Wyeth acquisition. In addition, the effective tax rate for the first nine months
of 2008 was positively impacted by a favorable income tax adjustment. These
factors were partially offset by savings from various cost-reduction initiatives
across all aspects of the business, which decreased adjusted total costs(10) by
approximately $210 million in third-quarter 2009 and $950 million in the first
nine months of 2009.
In third-quarter 2009, adjusted cost of sales(2) as a percentage of revenues was
15.4% compared with 14.5% in third-quarter 2008. This increase primarily
reflects the negative impact of foreign exchange, which was partially offset by
the favorable impact of our cost-reduction initiatives. Excluding the impact of
foreign exchange, adjusted cost of sales(2) as a percentage of revenues was
14.3% in third-quarter 2009.
Adjusted selling, informational and administrative (SI&A) expenses(2) were $3.2
billion in third-quarter 2009, a decrease of 6% compared with $3.4 billion in
the prior-year quarter. The decrease was attributable to the favorable impact of
cost-reduction initiatives as well as the favorable impact of foreign exchange,
which reduced third-quarter 2009 adjusted SI&A expenses(2) by $126 million
compared with the year-ago quarter.
Adjusted research and development (R&D) expenses(2) were $1.6 billion in
third-quarter 2009, a decrease of 8% compared with $1.8 billion in the
prior-year period. The decrease was due to the favorable impact of
cost-reduction initiatives as well as the favorable impact of foreign exchange,
which reduced third-quarter 2009 adjusted R&D expenses(2) by $36 million
compared with the year-ago quarter.
Overall, operational improvements resulting from cost-reduction initiatives
decreased adjusted total costs(10) by approximately $210 million, or 3%, in
third-quarter 2009 compared with the prior-year period, and foreign exchange
decreased adjusted total costs(10) by approximately $120 million, or 2%, in
third-quarter 2009 compared with the prior-year period. The operational
improvements were driven partially by the reduction in workforce to
approximately 75,400 at the end of third-quarter 2009, a decline of 1,100
compared with the end of the second-quarter 2009, and a decline of 11,200 since
the beginning of 2008, as well as manufacturing and research and development
site exits. In fourth-quarter 2009, a portion of the operational cost reductions
achieved in the first nine months of 2009 is expected to be invested in
high-growth opportunities.
Executive Commentary
"We are pleased with our results this quarter and in our ability to once again
deliver solid operational performance in an environment that continues to be
challenging. Excluding foreign exchange, our five Pharmaceutical units and
Animal Health business continued to perform well enabling us to continue to meet
our commitments," stated Jeff Kindler, Chairman and Chief Executive Officer.
Kindler continued, "The completion of the Wyeth acquisition represents a
significant milestone in the transformation of Pfizer. We are beginning to
implement our integration plan in order to quickly maximize the value of our
expanded and more diversified global product portfolio in key high-growth areas.
With customer-centric businesses, supported by research organizations, Pfizer is
now well positioned to deliver greater value to patients and shareholders."
Frank D`Amelio, Chief Financial Officer, stated, "During the first nine months
of 2009, we have continued to deliver on our 2009 financial commitments and our
longer-term cost-reduction target. Completion of both the Wyeth acquisition and
associated integration plans is a testament to the hard work and dedication of
talented colleagues throughout the organization. Looking ahead, we anticipate
that our broad portfolio of products and increased investment in high-growth
opportunities will better position us to generate consistent earnings growth and
continue to deliver on our commitments."
Financial Guidance
Pfizer has updated its 2009 full-year financial guidance, at current exchange
rates(11), as detailed below to reflect the acquisition of Wyeth on October 15,
2009. This guidance incorporates Wyeth`s operations from the acquisition closing
date through Pfizer`s international and domestic year-ends (see note 12 below).
The Company will provide full-year 2010 financial guidance in conjunction with
its fourth-quarter 2009 earnings release in January 2010.
2009 Guidance(12)
Reported Revenues $49.0 to $50.0 billion
(previously $45.0 to $46.0 billion)
Reported Diluted EPS(1) $1.45 to $1.50
(previously $1.30 to $1.45)
Adjusted Diluted EPS(2) $2.00 to $2.05
(previously $1.90 to $2.00)
For additional details, please see the attached financial schedules, product
revenue tables, supplemental information and disclosure notice.
(1) "Reported Net Income" is defined as net income attributable to Pfizer Inc. in accordance with U.S. generally accepted accounting principles. "Reported Diluted EPS" is
defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. generally accepted accounting principles.
(2) "Adjusted income" and its components and "adjusted diluted earnings per share (EPS)" are defined as reported net income(1) and its components and reported diluted EPS(1)
excluding purchase-accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. Adjusted Cost of Sales, Adjusted SI&A
expenses and Adjusted R&D expenses are income statement line items prepared on the same basis, and therefore, components of the overall adjusted income measure. As
described under Adjusted Income in the Management`s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer's Form 10-Q for the fiscal
quarter ended June 28, 2009, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We
believe that investors' understanding of our performance is enhanced by disclosing this measure. Reconciliations of third-quarter 2009 and 2008 and first nine-months 2009
and 2008 adjusted income and its components and adjusted diluted EPS to reported net income(1) and its components and reported diluted EPS(1), as well as reconciliations
of full-year 2009 adjusted income and adjusted diluted EPS guidance to full-year 2009 reported net income(1) and reported diluted EPS(1) guidance, are provided in the
materials accompanying this report. The adjusted income and its components and adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S.
GAAP net income and its components and diluted EPS.
(3) The Primary Care business unit includes revenues from human pharmaceutical products primarily prescribed by primary-care physicians, and may include, but is not limited
to, products in the following therapeutic and disease areas: Alzheimer`s disease, anxiety, cardiovascular (excluding pulmonary arterial hypertension), diabetes, pain,
genitourinary, obesity, osteoporosis and respiratory. Examples of products in this business unit include, but are not limited to, Lipitor, Lyrica, Celebrex and Viagra.
All revenues for such products are allocated to the Primary Care business unit, except those generated in emerging markets(7), and those that are managed by the
Established Products(6) business unit.
(4) The Specialty Care business unit includes revenues from human pharmaceutical products primarily prescribed by physicians who are specialists, and may include, but is not
limited to, products in the following therapeutic and disease areas: antibacterials, antifungals, antivirals, bone, inflammation, gastrointestinal, growth hormones,
multiple sclerosis, ophthalmology, pulmonary arterial hypertension and psychosis. Examples of products in this business unit include, but are not limited to, Xalatan,
Zyvox, Geodon and Genotropin. All revenues for such products are allocated to the Specialty Care business unit, except those generated in emerging markets(7), and those
that are managed by the Established Products(6) business unit.
(5) The Oncology business unit includes revenues from human oncology and oncology-related products. Examples of products in this business unit include, but are not limited
to, Sutent and Aromasin. All revenues for such products are allocated to the Oncology business unit, except those generated in emerging markets(7), and those that are
managed by the Established Products(6) business unit.
(6) The Established Products business unit generally includes revenues from human pharmaceutical products that have lost patent protection or marketing exclusivity in certain
countries and/or regions. In certain situations, products may be transferred to this unit before losing patent protection or marketing exclusivity in order to maximize
their value. This unit also excludes revenues generated in emerging markets(7). Examples of products in this business unit include, but are not limited to, Norvasc,
Relpax, Medrol and Arthrotec.
(7) The Emerging Markets business unit includes revenues from all human pharmaceutical products sold in emerging markets, including, but not limited to, Asia (excluding
Japan), Latin America, Middle East, Africa, Central and Eastern Europe, Russia and Turkey.
(8) The Animal Health business includes revenues from products to treat livestock and companion animals.
(9) Includes Consumer Healthcare business-transition activity, Capsugel and Pfizer Centersource.
(10) Represents the total of Adjusted Cost of Sales(2), Adjusted SI&A expenses(2) and Adjusted R&D expenses(2).
(11) Current exchange rates approximate rates at the time of the third-quarter 2009 earnings press release (October 2009).
(12) The financial guidance includes projected results of operations for Wyeth, in accordance with Pfizer's international and domestic year-ends. Therefore, the guidance
includes approximately one-and-a-half months of the fourth calendar quarter of 2009 in the case of Wyeth`s international operations and approximately two-and-a-half
months of the fourth calendar quarter of 2009 in the case of Wyeth`s U.S. operations. This guidance does not assume the completion of any other business-development
transactions, including divestitures not completed as of September 27, 2009, and excludes the potential effects of litigation-related matters not substantially resolved
as of September 27, 2009.
In addition, the reported financial guidance includes estimated amounts that are dependent upon certain valuations and other studies of the assets acquired and
liabilities assumed from Wyeth that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the
estimated purchase accounting impacts are preliminary and may not be indicative of actual amounts that will be recorded as additional information becomes available and as
additional analyses are performed. Differences between the preliminary estimates reflected in this reported guidance and the final acquisition accounting will likely
occur and could have a material impact on this guidance. The reported financial guidance also reflects certain costs incurred in connection with the Wyeth acquisition
since the announcement of the agreement to acquire Wyeth on January 26, 2009 through the acquisition close date including, but not limited to, pre-integration,
transaction and financing costs. Due to the recent timing of the acquisition close, the 2009 reported guidance does not reflect an estimate for any restructuring or
integration charges expected to be incurred in connection with the acquisition of Wyeth. The Company will include an estimate for acquisition-related restructuring and
integration costs in its full-year 2010 reported financial guidance in conjunction with its fourth-quarter 2009 earnings release in January 2010.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(millions, except per common share data)
Third Quarter % Incr. / Nine Months % Incr. /
(Decr.)
(Decr.)
2009 2008 2009 2008
Revenues $ 11,621 $ 11,973 (3 ) $ 33,472 $ 35,950 (7 )
Costs and expenses:
Cost of sales (a) 1,789 2,122 (16 ) 4,953 6,397 (23 )
Selling, informational and administrative expenses (a) 3,282 3,523 (7 ) 9,508 10,878 (13 )
Research and development expenses (a) 1,632 1,885 (13 ) 5,032 5,642 (11 )
Amortization of intangible assets 594 621 (4 ) 1,755 2,063 (15 )
Acquisition-related in-process research and development charges - 13 (100 ) 20 567 (96 )
Restructuring charges and acquisition-related costs 193 366 (47 ) 1,206 1,113 8
Other (income)/deductions--net 160 721 (78 ) 175 221 (21 )
Income from continuing operations before provision
for taxes on income 3,971 2,722 46 10,823 9,069 19
Provision for taxes on income 1,092 463 136 2,952 1,251 136
Income from continuing operations 2,879 2,259 27 7,871 7,818 1
Discontinued operations--net of tax 2 25 (90 ) 6 38 (84 )
Net income before allocation to noncontrolling interests 2,881 2,284 26 7,877 7,856 --
Less: Net income attributable to noncontrolling interests 3 6 (44 ) 9 18 (49 )
Net income attributable to Pfizer Inc. $ 2,878 $ 2,278 26 $ 7,868 $ 7,838 --
Earnings per share - basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 0.43 $ 0.34 26 $ 1.17 $ 1.16 1
Discontinued operations--net of tax - - -- - - --
Net income attributable to Pfizer Inc. common shareholders $ 0.43 $ 0.34 26 $ 1.17 $ 1.16 1
Earnings per share - diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 0.43 $ 0.33 30 $ 1.16 $ 1.16 --
Discontinued operations--net of tax - 0.01 (100 ) - - --
Net income attributable to Pfizer Inc. common shareholders $ 0.43 $ 0.34 26 $ 1.16 $ 1.16 --
Weighted-average shares used to calculate earnings per common share:
Basic 6,730 6,718 6,727 6,730
Diluted 6,762 6,736 6,758 6,750
(a) Exclusive of amortization of intangible assets, except as discussed in footnote 6 below.
Certain amounts and percentages may reflect rounding adjustments.
1. The above financial statements present the three-month and nine-month periods ended September 27, 2009 and September 28, 2008. Subsidiaries operating outside the United
States are included for the three-month and nine-month periods ended August 23, 2009 and August 24, 2008. The results of operations of Wyeth, which we acquired on October
15, 2009, are not included in the three-month and nine-month periods ended September 27, 2009.
2. The financial results for the three-month and nine-month periods ended September 27, 2009 are not necessarily indicative of the results which could ultimately be achieved
for the current year.
3. On January 1, 2009, we adopted the provisions of a new accounting standard issued by the Financial Accounting Standards Board (FASB) that provides guidance for the
accounting, reporting and disclosure of noncontrolling interests, previously referred to as minority interests. The adoption of these provisions resulted in
reclassifications of prior-period amounts to conform to the third-quarter and nine-month 2009 presentations, primarily related to the presentation of noncontrolling
interests.
4. Included in Restructuring charges and acquisition-related costs are transaction costs, such as banking, legal, accounting and other costs, directly related to our
acquisition of Wyeth of $19 million for the three-month period ended September 27, 2009 and $572 million for the nine-month period ended September 27, 2009.
5. In the first nine months of 2009, we recorded $20 million of Acquisition-related in-process research and development charges (IPR&D) due to the resolution of a
contingency associated with our 2008 acquisition of CovX. In the first nine months of 2008, we expensed $567 million of IPR&D, primarily related to our acquisitions of
Serenex, Inc., Encysive Pharmaceuticals, Inc., CovX, Coley Pharmaceutical Group, Inc. and two smaller acquisitions related to Animal Health. As a result of adopting the
provisions of a new accounting standard for business combinations issued by the FASB, beginning January 1, 2009, IPR&D related to acquisitions after adoption will be
recorded on our consolidated balance sheet as indefinite-lived intangible assets. We made no acquisitions in the first nine months of 2009.
6. Amortization expense related to acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute our products is included
in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to acquired 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.
7. Other (income)/deductions - net for the three-month and nine-month periods ended September 28, 2008 includes litigation-related charges of approximately $900 million
associated with the resolution of certain litigation involving our non-steroidal anti-inflammatory pain medicines.
8. Provision for taxes on income for the three-month and nine-month periods ended September 27, 2009 includes a tax benefit of approximately $174 million related to the
final resolution of a previously disclosed agreement-in-principle with the U.S. Department of Justice to settle investigations of past promotional practices and certain
other matters. This resulted in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax position. The
nine-month period ended September 28, 2008 includes tax benefits of approximately $305 million related to favorable tax settlements and of approximately $426 million
related to the sale of one of our biopharmaceutical companies (Esperion Therapeutics Inc.), both recorded in the second quarter of 2008.
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME ATTRIBUTABLE TO PFIZER INC. AND ITS COMPONENTS
AND REPORTED DILUTED EPS ATTRIBUTABLE TO PFIZER INC. COMMON SHAREHOLDERS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
(millions of dollars, except per common share data)
Quarter Ended September 27, 2009
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 11,621 $ - $ - $ - $ (18 ) $ 11,603
Costs and expenses:
Cost of sales (a) 1,789 - - - (2 ) 1,787
Selling, informational and administrative expenses (a) 3,282 3 - - (60 ) 3,225
Research and development expenses (a) 1,632 (8 ) - - (5 ) 1,619
Amortization of intangible assets 594 (560 ) - - - 34
Acquisition-related in-process research and development charges - - - - - -
Restructuring charges and acquisition-related costs 193 - (132 ) - (61 ) -
Other (income)/deductions--net 160 1 - - (303 ) (142 )
Income from continuing operations before provision for taxes on income 3,971 564 132 - 413 5,080
Provision for taxes on income 1,092 167 45 - 312 1,616
Income from continuing operations 2,879 397 87 - 101 3,464
Discontinued operations--net of tax 2 - - (2 ) - -
Net income before allocation to noncontrolling interests 2,881 397 87 (2 ) 101 3,464
Less: Net income attributable to noncontrolling interests 3 - - - - 3
Net income attributable to Pfizer Inc. $ 2,878 $ 397 $ 87 $ (2 ) $ 101 $ 3,461
Earnings per common share - diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 0.43 $ 0.06 $ 0.01 $ - $ 0.01 $ 0.51
Discontinued operations--net of tax - - - - - -
Net income attributable to Pfizer Inc. common shareholders $ 0.43 $ 0.06 $ 0.01 $ - $ 0.01 $ 0.51
Nine Months Ended September 27, 2009
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 33,472 $ - $ - $ - $ (58 ) $ 33,414
Costs and expenses:
Cost of sales (a) 4,953 - - - (166 ) 4,787
Selling, informational and administrative expenses (a) 9,508 9 - - (195 ) 9,322
Research and development expenses (a) 5,032 (22 ) - - (70 ) 4,940
Amortization of intangible assets 1,755 (1,656 ) - - - 99
Acquisition-related in-process research and development charges 20 (20 ) - - - -
Restructuring charges and acquisition-related costs 1,206 - (814 ) - (392 ) -
Other (income)/deductions--net 175 (2 ) - - (731 ) (558 )
Income from continuing operations before provision for taxes on income 10,823 1,691 814 - 1,496 14,824
Provision for taxes on income 2,952 524 290 - 672 4,438
Income from continuing operations 7,871 1,167 524 - 824 10,386
Discontinued operations--net of tax 6 - - (6 ) - -
Net income before allocation to noncontrolling interests 7,877 1,167 524 (6 ) 824 10,386
Less: Net income attributable to noncontrolling interests 9 - - - - 9
Net income attributable to Pfizer Inc. $ 7,868 $ 1,167 $ 524 $ (6 ) $ 824 $ 10,377
Earnings per common share - diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 1.16 $ 0.17 $ 0.08 $ - $ 0.13 $ 1.54
Discontinued operations--net of tax - - - - - -
Net income attributable to Pfizer Inc. common shareholders $ 1.16 $ 0.17 $ 0.08 $ - $ 0.13 $ 1.54
(a) Exclusive of amortization of intangible assets, except as discussed in note 1.
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME ATTRIBUTABLE TO PFIZER INC. AND ITS COMPONENTS
AND REPORTED DILUTED EPS ATTRIBUTABLE TO PFIZER INC. COMMON SHAREHOLDERS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
(millions of dollars, except per common share data)
Quarter Ended September 28, 2008
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 11,973 $ - $ - $ - $ 186 $ 12,159
Costs and expenses:
Cost of sales (a) 2,122 - - - (362 ) 1,760
Selling, informational and administrative expenses (a) 3,523 3 - - (97 ) 3,429
Research and development expenses (a) 1,885 (8 ) - - (108 ) 1,769
Amortization of intangible assets 621 (585 ) - - - 36
Acquisition-related in-process research and development charges 13 (13 ) - - - -
Restructuring charges and acquisition-related costs 366 - (28 ) - (338 ) -
Other (income)/deductions--net 721 (1 ) - - (940 ) (220 )
Income from continuing operations before provision for taxes on income 2,722 604 28 - 2,031 5,385
Provision for taxes on income 463 144 4 - 588 1,199
Income from continuing operations 2,259 460 24 - 1,443 4,186
Discontinued operations--net of tax 25 - - (25 ) - -
Net income before allocation to noncontrolling interests 2,284 460 24 (25 ) 1,443 4,186
Less: Net income attributable to noncontrolling interests 6 - - - - 6
Net income attributable to Pfizer Inc. $ 2,278 $ 460 $ 24 $ (25 ) $ 1,443 $ 4,180
Earnings per common share - diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 0.33 $ 0.07 $ - $ - $ 0.22 $ 0.62
Discontinued operations--net of tax 0.01 - - (0.01 ) - -
Net income attributable to Pfizer Inc. common shareholders $ 0.34 $ 0.07 $ - $ (0.01 ) $ 0.22 $ 0.62
Nine Months Ended September 28, 2008
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 35,950 $ - $ - $ - $ 80 $ 36,030
Costs and expenses:
Cost of sales (a) 6,397 - - - (801 ) 5,596
Selling, informational and administrative expenses (a) 10,878 9 - - (353 ) 10,534
Research and development expenses (a) 5,642 (22 ) - - (344 ) 5,276
Amortization of intangible assets 2,063 (1,965 ) - - - 98
Acquisition-related in-process research and development charges 567 (567 ) - - - -
Restructuring charges and acquisition-related costs 1,113 - (36 ) - (1,077 ) -
Other (income)/deductions--net 221 (3 ) - - (961 ) (743 )
Income from continuing operations before provision for taxes on income 9,069 2,548 36 - 3,616 15,269
Provision for taxes on income 1,251 550 6 - 1,467 3,274
Income from continuing operations 7,818 1,998 30 - 2,149 11,995
Discontinued operations--net of tax 38 - - (38 ) - -
Net income before allocation to noncontrolling interests 7,856 1,998 30 (38 ) 2,149 11,995
Less: Net income attributable to noncontrolling interests 18 - - - - 18
Net income attributable to Pfizer Inc. $ 7,838 $ 1,998 $ 30 $ (38 ) $ 2,149 $ 11,977
Earnings per common share - diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 1.16 $ 0.29 $ - $ - $ 0.32 $ 1.77
Discontinued operations--net of tax - - - - - -
Net income attributable to Pfizer Inc. common shareholders $ 1.16 $ 0.29 $ - $ - $ 0.32 $ 1.77
(a) Exclusive of amortization of intangible assets, except as discussed in note 1.
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME ATTRIBUTABLE TO PFIZER INC. AND ITS COMPONENTS
AND REPORTED DILUTED EPS ATTRIBUTABLE TO PFIZER INC. COMMON SHAREHOLDERS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
1) Amortization expense related to acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute our products is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to acquired 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.
2) Acquisition-related costs includes the following:
Third Quarter Nine Months
(millions of dollars) 2009 2008 2009 2008
Transaction costs $ 19 $ - $ 572 $ -
Pre-Integration costs and other 113 28 242 36
Total acquisition-related costs -- pre-tax (a) 132 28 814 36
Income taxes(b) (45 ) (4 ) (290 ) (6 )
Total acquisition-related costs -- net of tax $ 87 $ 24 $ 524 $ 30
(a) Included in Restructuring charges and acquisition-related costs. Transaction costs include costs
directly related to our acquisition of Wyeth. Included in these costs are bridge term loan credit
agreement fees related to the bridge financing arranged with financial institutions in March 2009 to
partially fund our acquisition of Wyeth. The bridge commitment was terminated in June 2009 as a result
of our issuance of $24 billion in senior unsecured notes in the first half of 2009 and all associated
bridge commitment fees have been expensed. Pre-Integration costs represent external, incremental costs
incurred in 2009 directly related to our acquisition of Wyeth. 2008 amounts relate to other
restructuring charges.
(b) Included in Provision for taxes on income.
3) Certain significant items includes the following:
Third Quarter Nine Months
(millions of dollars) 2009 2008 2009 2008
Restructuring charges - Cost-reduction initiatives(a) $ 61 $ 338 $ 392 $ 1,077
Implementation costs - Cost-reduction initiatives(b) 80 378 410 1,140
Certain legal matters(c) 40 936 170 936
Net interest expense - Wyeth acquisition(d) 299 - 528 -
Returns liabilities adjustment(e) - 217 - 217
Other (f) (67 ) 162 (4 ) 246
Total certain significant items -- pre-tax 413 2,031 1,496 3,616
Income taxes(g) (312 ) (588 ) (672 ) (1,467 )
Total certain significant items -- net of tax $ 101 $ 1,443 $ 824 $ 2,149
(a) Included in Restructuring charges and acquisition-related costs.
(b) Included in Cost of sales ($23 million), Selling, informational and administrative expenses ($51 million), Research and
developmentexpenses ($5 million), and Other (income)/deductions - net ($1 million) for the three months ended September 27,
2009. Included in Cost of sales ($144 million), Selling, informational and administrative expenses ($182 million), Research and
development expenses ($78 million), and Other (income)/deductions - net ($6 million) for the nine months ended September 27,
2009. Included in Cost of sales ($172 million), Selling, informational and administrative expenses ($95 million), Research and
development expenses ($108 million), and Other (income)/deductions - net ($3 million) for the three months ended September 28,
2008. Included in Cost of sales ($520 million), Selling, informational and administrative expenses ($270 million), Research and
development expenses ($348 million), and Other (income)/deductions - net ($2 million) for the nine months ended September 28,
2008.
(c) Included in Other (income)/deductions - net and for the three-month and nine-month periods ended September 28, 2008 includes
litigation-related charges of approximately $900 million associated with the resolution of certain litigation involving our non
-steroidal anti-inflammatory pain medicines.
(d) Included in Other (income)/deductions - net. Includes interest expense on the senior unsecured notes issued in connection with
our acquisition of Wyeth less interest income earned on the proceeds of those notes.
(e) Included in Revenues and reflects an adjustment to the prior years' liabilities for product returns.
(f) Included in the three-month and nine-month periods ended September 28, 2008 are $115 million in asset impairment charges and
other associated costs.
(g) Included in Provision for taxes on income and includes a tax benefit of approximately $174 million in the three-month and nine
-month periods ended September 27, 2009 related to the final resolution of a previously disclosed agreement-in-principle with
the U.S. Department of Justice to settle investigations of past promotional practices and certain other matters. This resulted
in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax
position. Also includes a tax benefit of approximately $426 million in the first nine months of 2008 related to the sale of one
of our biopharmaceutical companies (Esperion Therapeutics Inc.).
PFIZER INC.
SEGMENT/PRODUCT REVENUES
THIRD QUARTER 2009
(UNAUDITED)
(millions of dollars)
WORLDWIDE U.S. INTERNATIONAL
% % %
2009 2008 Change 2009 2008 Change 2009 2008 Change
TOTAL REVENUES 11,621 11,973 (3 ) 4,816 4,901 (2 ) 6,805 7,072 (4 )
PHARMACEUTICAL + 10,677 10,976 (3 ) 4,448 4,518 (2 ) 6,229 6,458 (4 )
- CARDIOVASCULAR AND METABOLIC DISEASES 4,024 4,537 (11 ) 1,641 1,903 (14 ) 2,383 2,634 (9 )
LIPITOR 2,853 3,142 (9 ) 1,379 1,567 (12 ) 1,474 1,575 (6 )
NORVASC 488 562 (13 ) 14 22 (34 ) 474 540 (12 )
CHANTIX / CHAMPIX 155 182 (15 ) 75 96 (22 ) 80 86 (7 )
CADUET 130 148 (12 ) 91 116 (21 ) 39 32 21
CARDURA 109 125 (14 ) 1 1 (5 ) 108 124 (14 )
REVATIO 111 95 18 71 61 18 40 34 17
- CENTRAL NERVOUS SYSTEM DISORDERS 1,504 1,556 (3 ) 679 723 (6 ) 825 833 (1 )
LYRICA 708 675 5 352 378 (7 ) 356 297 20
GEODON / ZELDOX 252 258 (2 ) 210 210 - 42 48 (10 )
ZOLOFT 128 135 (5 ) 19 27 (32 ) 109 108 2
ARICEPT** 108 131 (17 ) - 1 (100 ) 108 130 (17 )
NEURONTIN 82 102 (20 ) 16 20 (18 ) 66 82 (20 )
RELPAX 81 83 (2 ) 48 50 (3 ) 33 33 (2 )
XANAX / XANAX XR 81 91 (11 ) 13 15 (14 ) 68 76 (10 )
- ARTHRITIS AND PAIN 684 768 (11 ) 455 491 (7 ) 229 277 (18 )
CELEBREX 602 625 (4 ) 421 450 (6 ) 181 175 4
- INFECTIOUS AND RESPIRATORY DISEASES 877 989 (11 ) 268 317 (15 ) 609 672 (9 )
ZYVOX 271 281 (3 ) 146 161 (10 ) 125 120 6
VFEND 196 189 3 61 58 4 135 131 3
ZITHROMAX / ZMAX 85 91 (7 ) 2 1 43 83 90 (8 )
DIFLUCAN 93 93 (1 ) 3 3 (36 ) 90 90 -
- UROLOGY 773 820 (6 ) 433 435 (1 ) 340 385 (11 )
VIAGRA 466 509 (8 ) 232 235 (1 ) 234 274 (14 )
DETROL / DETROL LA 283 298 (5 ) 197 198 (1 ) 86 100 (13 )
- ONCOLOGY 575 645 (11 ) 123 112 10 452 533 (15 )
SUTENT 246 226 9 69 62 11 177 164 9
AROMASIN 123 121 1 40 39 4 83 82 -
CAMPTOSAR 82 122 (33 ) - (2 ) 100 82 124 (35 )
- OPHTHALMOLOGY 444 459 (3 ) 143 137 5 301 322 (7 )
XALATAN / XALACOM 436 450 (3 ) 143 137 5 293 313 (6 )
- ENDOCRINE DISORDERS 293 294 (1 ) 63 62 3 230 232 (2 )
GENOTROPIN 232 225 3 56 54 4 176 171 3
- ALL OTHER 811 337 140 221 12 * 590 325 81
ZYRTEC / ZYRTEC D - - - - - - - - -
- ALLIANCE REVENUE (Aricept, 692 571 21 422 326 30 270 245 10
Spiriva, Rebif and Exforge)
ANIMAL HEALTH 678 708 (4 ) 294 303 (3 ) 384 405 (5 )
OTHER *** 266 289 (8 ) 74 80 (8 ) 192 209 (8 )
+ - Revenues are presented by therapeutic area.
* - Calculation not meaningful.
** - Represents direct sales under license agreement with Eisai Co., Ltd.
*** - Includes Consumer Healthcare business transition activity, Capsugel and Pfizer Centersource.
Certain amounts and percentages may reflect rounding adjustments.
PFIZER INC.
SEGMENT/PRODUCT REVENUES
NINE MONTHS 2009
(UNAUDITED)
(millions of dollars)
WORLDWIDE U.S. INTERNATIONAL
% % %
2009 2008 Change 2009 2008 Change 2009 2008 Change
TOTAL REVENUES 33,472 35,950 (7 ) 14,309 15,161 (6 ) 19,163 20,789 (8 )
PHARMACEUTICAL + 30,842 32,933 (6 ) 13,347 14,024 (5 ) 17,495 18,909 (7 )
- CARDIOVASCULAR AND METABOLIC DISEASES 11,805 13,498 (13 ) 5,035 5,824 (14 ) 6,770 7,674 (12 )
LIPITOR 8,259 9,255 (11 ) 4,145 4,711 (12 ) 4,114 4,544 (9 )
NORVASC 1,487 1,702 (13 ) 49 57 (14 ) 1,438 1,645 (13 )
CHANTIX / CHAMPIX 524 666 (21 ) 303 398 (24 ) 221 268 (17 )
CADUET 392 441 (11 ) 294 352 (16 ) 98 89 10
CARDURA 330 378 (13 ) 4 4 (8 ) 326 374 (13 )
REVATIO 319 241 33 212 157 35 107 84 28
- CENTRAL NERVOUS SYSTEM DISORDERS 4,314 4,426 (3 ) 2,054 2,074 (1 ) 2,260 2,352 (4 )
LYRICA 2,020 1,871 8 1,094 1,064 3 926 807 15
GEODON / ZELDOX 713 731 (3 ) 597 594 - 116 137 (15 )
ZOLOFT 368 408 (10 ) 62 95 (35 ) 306 313 (2 )
ARICEPT** 311 356 (12 ) - 1 (100 ) 311 355 (12 )
NEURONTIN 242 295 (18 ) 51 53 (3 ) 191 242 (21 )
RELPAX 234 240 (2 ) 145 147 (1 ) 89 93 (4 )
XANAX / XANAX XR 230 267 (14 ) 41 47 (14 ) 189 220 (14 )
- ARTHRITIS AND PAIN 1,946 2,279 (15 ) 1,336 1,444 (7 ) 610 835 (27 )
CELEBREX 1,714 1,825 (6 ) 1,230 1,329 (7 ) 484 496 (3 )
- INFECTIOUS AND RESPIRATORY DISEASES 2,586 2,920 (11 ) 821 913 (10 ) 1,765 2,007 (12 )
ZYVOX 811 832 (2 ) 459 495 (7 ) 352 337 5
VFEND 555 547 1 177 166 6 378 381 (1 )
ZITHROMAX / ZMAX 299 320 (7 ) 10 7 38 289 313 (8 )
DIFLUCAN 244 280 (13 ) 7 7 (11 ) 237 273 (13 )
- UROLOGY 2,254 2,369 (5 ) 1,316 1,265 4 938 1,104 (15 )
VIAGRA 1,343 1,432 (6 ) 697 656 6 646 776 (17 )
DETROL / DETROL LA 845 901 (6 ) 600 603 (1 ) 245 298 (17 )
- ONCOLOGY 1,657 1,932 (14 ) 365 417 (12 ) 1,292 1,515 (15 )
SUTENT 671 627 7 192 188 2 479 439 9
AROMASIN 347 342 1 121 108 12 226 234 (4 )
CAMPTOSAR 276 451 (39 ) - 86 (100 ) 276 365 (25 )
- OPHTHALMOLOGY 1,261 1,316 (4 ) 414 389 6 847 927 (9 )
XALATAN / XALACOM 1,238 1,291 (4 ) 414 389 6 824 902 (9 )
- ENDOCRINE DISORDERS 805 857 (6 ) 180 191 (6 ) 625 666 (6 )
GENOTROPIN 636 669 (5 ) 160 170 (6 ) 476 499 (5 )
- ALL OTHER 2,342 1,714 37 693 573 21 1,649 1,141 44
ZYRTEC / ZYRTEC D - 125 (100 ) - 125 (100 ) - - -
- ALLIANCE REVENUE (Aricept, 1,872 1,622 15 1,133 934 21 739 688 7
Spiriva, Rebif and Exforge)
ANIMAL HEALTH 1,863 2,042 (9 ) 749 812 (8 ) 1,114 1,230 (9 )
OTHER *** 767 975 (21 ) 213 325 (34 ) 554 650 (15 )
+ - Revenues are presented by therapeutic area.
** - Represents direct sales under license agreement with Eisai Co., Ltd.
*** - Includes Consumer Healthcare business transition activity, Capsugel and Pfizer Centersource.
Certain amounts and percentages may reflect rounding adjustments.
PFIZER INC.
SUPPLEMENTAL INFORMATION
1. Impact of Foreign Exchange on Revenues
The strengthening of the U.S. dollar relative to other currencies, primarily the
euro, UK pound, Canadian dollar and Australian dollar, unfavorably impacted our
revenues by approximately $610 million, or 5%, in third-quarter 2009, compared
to the same period in 2008, and by approximately $2.3 billion, or 6%, in the
first nine months of 2009, compared to the same period in 2008.
2. Change in Cost of Sales
Reported cost of sales decreased 16% in the third quarter of 2009, compared to
the same period in 2008, and decreased 23% in first nine months of 2009,
compared to the same period in 2008. The decreases primarily reflect the savings
impact of our cost-reduction initiatives and lower related implementation costs,
partially offset by the unfavorable impact of foreign exchange.
Reported cost of sales included implementation charges related to our
cost-reduction initiatives of $23 million for the third quarter of 2009, $144
million for the first nine months of 2009, $172 million for the third quarter of
2008, and $520 million for the first nine months of 2008.
Reported cost of sales as a percentage of revenues decreased 2.3 percentage
points to 15.4% in third-quarter 2009, reflecting the favorable impact of our
cost-reduction initiatives and lower related implementation costs, partially
offset by the unfavorable impact of foreign exchange, compared to third-quarter
2008.
3. Change in Selling, Informational & Administrative (SI&A) Expenses, Research &
Development (R&D) Expenses and In-Process R&D Charges (IPR&D)
Reported SI&A expenses decreased 7% in the third quarter of 2009, compared to
the same period in 2008, and decreased 13% in first nine months of 2009,
compared to the same period in 2008. The decreases reflect savings associated
with our cost-reduction initiatives, lower related implementation costs, and the
favorable impact of foreign exchange. In addition, the first nine months of 2009
included certain insurance recoveries related to legal defense costs.
Reported SI&A expenses included implementation charges related to our
cost-reduction initiatives of $51 million for third-quarter 2009, $182 million
for the first nine months of 2009, $95 million for third-quarter 2008, and $270
million for the first nine months of 2008.
Reported R&D expenses, excluding IPR&D, decreased 13% in the third quarter of
2009, compared to the same period in 2008, and 11% in the first nine months of
2009, compared to the same period in 2008. The decreases were primarily due to
the realization of savings associated with our cost-reduction initiatives, lower
related implementation costs, and the favorable impact of foreign exchange. The
nine-month 2009 decrease was partially offset by a $150 million milestone
payment to Bristol-Myers Squibb in first-quarter 2009 in connection with the
collaboration on apixaban.
Reported R&D expenses included implementation charges related to our
cost-reduction initiatives of $5 million for third-quarter 2009, $78 million for
the first nine months of 2009, $108 million for third-quarter 2008, and $348
million for the first nine months of 2008.
IPR&D charges of $20 million for the first nine months of 2009 relate to the
resolution of a contingency associated with our 2008 acquisition of CovX. IPR&D
charges of $567 million for the first nine months of 2008 primarily relate to
the acquisitions of Serenex, Inc., Encysive Pharmaceuticals, Inc., CovX, Coley
Pharmaceutical Group, Inc. and two smaller acquisitions related to Animal
Health. As a result of adopting the provisions of a new accounting standard for
business combinations issued by the Financial Accounting Standards Board,
beginning January 1, 2009, IPR&D related to acquisitions after adoption will be
recorded on our consolidated balance sheet as indefinite-lived intangible
assets. We made no acquisitions in the first nine months of 2009.
4. Other (Income) and Other Deductions
Third Quarter Nine Months
($ in millions) 2009 2008 2009 2008
Interest Income $ (171 ) $ (307 ) $ (620 ) $ (921 )
Interest Expense 369 121 769 433
Net Interest (Income)/Expense(a) 198 (186 ) 149 (488 )
Royalty-Related Income (35 ) (59 ) (142 ) (194 )
Legal Matters, Net (b) 54 936 130 934
Other, Net (57 ) 30 38 (31 )
Other (Income)/Deductions-Net $ 160 $ 721 $ 175 $ 221
(a) Net interest expense was $198 million in third-quarter 2009 compared to net interest income of $186 million in the same period in 2008. The change is due primarily to net
interest expense recorded in third-quarter 2009 associated with our issuance of $13.5 billion of senior unsecured notes on March 24, 2009 and $10.5 billion of senior
unsecured notes on June 3, 2009, primarily related to the acquisition of Wyeth. In addition, lower interest rates, partially offset by higher cash balances, contributed
to the increased net interest expense compared to the year-ago quarter.
(b) In third-quarter 2008, we recorded litigation-related charges of approximately $900 million associated with the resolution of certain litigation involving our non
-steroidal anti-inflammatory pain medicines.
5. Effective Tax Rate
The effective tax rate on reported Income from continuing operations before
provision for taxes on income for third-quarter 2009 was 27.5%compared to 17.0%
in the third quarter of 2008, and in the first nine months of 2009 was 27.3%
compared to 13.8% in the first nine months of 2008. The higher tax rates for the
third quarter and first nine months of 2009 are primarily due to the increased
tax costs associated with certain business decisions executed to finance the
Wyeth acquisition and the change in geographic mix of expenses incurred to
execute our cost-reduction initiatives, partially offset by a tax benefit of
$174 million recorded in the third quarter of 2009 related to the final
resolution of a previously disclosed agreement-in-principle with the U.S.
Department of Justice to settle investigations of past promotional practices and
certain other matters. This resulted in the receipt of information that raised
our assessment of the likelihood of prevailing on the technical merits of our
tax position. The higher tax rates were also partially offset by the decrease in
IPR&D charges, which generally are not deductible for tax purposes. The lower
tax rate in the first nine months of 2008 reflects tax benefits of $305 million
related to favorable tax settlements for multiple tax years and $426 million
related to the sale of one of our biopharmaceutical companies, which were both
recorded in the second quarter of 2008.
The effective tax rate on adjusted income(1) was 31.8% in third quarter 2009,
29.9% in the first nine months of 2009, 22.3% in third-quarter 2008, and 21.4%
in the first nine months of 2008. The higher tax rates on adjusted income(1) in
2009 are primarily due to the increased tax costs associated with certain
business decisions executed to finance the Wyeth acquisition. The lower tax rate
in the first nine months of 2008 reflects $305 million in tax benefits related
to the resolution of tax issues noted above.
6. Reconciliation of 2009 Adjusted Income(1) and Adjusted Diluted EPS(1)
Guidance to 2009 Reported Net Income Attributable to Pfizer Inc. and Reported
Diluted EPS Attributable to Pfizer Inc. Common Shareholders Guidance
Full-Year 2009 Guidance
($ billions, except per-share amounts) Net Income(a) Diluted EPS(a)
Income/(Expense)
Adjusted Income/Diluted EPS(1) Guidance ~$14.1 - $14.4 ~$2.00 - $2.05
Purchase Accounting Impacts from Wyeth Acquisition and Business Development Transactions Completed as of 12/31/08 (b) (2.5) (0.36)
Costs Related to Cost-Reduction Initiatives (c) (0.6) (0.08)
Wyeth Acquisition-Related Costs (d) (0.9) (0.12)
Other, Net 0.1 0.01
Reported Net Income Attributable to Pfizer Inc/Diluted EPS Guidance ~$10.2 - $10.5 ~$1.45 - $1.50
(a) Guidance in the table above includes projected results of operations for Wyeth, in accordance with Pfizer`s international and domestic year-ends. Therefore, the guidance
includes approximately one-and-a-half months of the fourth calendar quarter of 2009 in the case of Wyeth`s international operations and approximately two-and-a-half
months of the fourth calendar quarter of 2009 in the case of Wyeth`s U.S. operations. This guidance does not assume the completion of any other business-development
transactions, including divestitures, not completed as of September 27, 2009, and excludes the potential effects of litigation-related matters not substantially resolved
as of September 27, 2009.
(b) Includes estimated amounts that are dependent upon certain valuations and other studies of the assets acquired and liabilities assumed from Wyeth that have yet to
commence or progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the estimated purchase accounting impacts are preliminary
and may not be indicative of actual amounts that will be recorded as additional information becomes available and as additional analyses are performed. Differences
between the preliminary estimates reflected in this guidance and the final acquisition accounting will likely occur and could have a material impact on the guidance
presented above.
(c) Includes restructuring and implementation costs incurred for Pfizer legacy cost reduction initiatives through the closing date of the Wyeth acquisition. Does not reflect
an estimate for subsequent restructuring and implementation costs associated with Pfizer legacy cost reduction initiatives. The Company will include an estimate for
acquisition-related restructuring and integration costs in its full-year 2010 financial guidance in conjunction with its fourth-quarter 2009 earnings release in January
2010.
(d) Includes certain costs incurred in connection with the Wyeth acquisition since the announcement of the agreement to acquire Wyeth on January 26, 2009 through the
acquisition close date including, but not limited to, pre-integration, transaction and financing costs. Due to the recent timing of the acquisition close, the 2009
guidance does not reflect an estimate for any restructuring or integration charges expected to be incurred in connection with the acquisition of Wyeth. The Company will
include an estimate for acquisition-related restructuring and integration costs in its full-year 2010 financial guidance in conjunction with its fourth-quarter 2009
earnings release in January 2010.
________________
(1) "Adjusted income" and "adjusted diluted earnings per share (EPS)" are
defined as reported net income attributable to Pfizer Inc. and reported diluted
EPS attributable to Pfizer Inc. common shareholders excluding
purchase-accounting adjustments, acquisition-related costs, discontinued
operations and certain significant items. As described under Adjusted Income in
the Management`s Discussion and Analysis of Financial Condition and Results of
Operations section of Pfizer`s Form 10-Q for the fiscal quarter ended June 28,
2009, management uses adjusted income, among other factors, to set performance
goals and to measure the performance of the overall company. We believe that
investors` understanding of our performance is enhanced by disclosing this
measure. The adjusted income and adjusted diluted EPS measures are not, and
should not be viewed as, substitutes for U.S. GAAP net income and diluted EPS.
DISCLOSURE NOTICE: The information contained in this earnings release and the
attachments is as of October 20, 2009. The Company assumes no obligation to
update any forward-looking statements contained in this earnings release or the
attachments as a result of new information or future events or developments.
This earnings release and the attachments contain forward-looking information
about the Company`s financial results and estimates, business plans and
prospects, in-line products and product candidates that involve substantial
risks and uncertainties. You can identify these statements by the fact that they
use words such as "will," "anticipate," "estimate," "expect," "project,"
"intend," "plan," "believe," "target," "forecast" and other words and terms of
similar meaning in connection with any discussion of future operating or
financial performance or business plans and prospects.Among the factors that
could cause actual results to differ materially are the following: the success
of research and development activities; decisions by regulatory authorities
regarding whether and when to approve our drug applications as well as their
decisions regarding labeling and other matters that could affect the
availability or commercial potential of our products; the speed with which
regulatory authorizations, pricing approvals and product launches may be
achieved; the success of external business-development activities; competitive
developments, including with respect to competitor drugs and drug candidates
that treat diseases and conditions similar to those treated by our in-line drugs
and drug candidates; the ability to successfully market both new and existing
products domestically and internationally; difficulties or delays in
manufacturing; trade buying patterns; the ability to meet generic and branded
competition after the loss of patent protection for our products and competitor
products; the impact of existing and future legislation and regulatory
provisions on product exclusivity; trends toward managed care and healthcare
cost containment; U.S. legislation or regulatory action, including legislation
or regulatory action that may result from pending and possible future healthcare
reform proposals, affecting, among other things, pharmaceutical product pricing,
reimbursement or access, including under Medicaid, Medicare and other publicly
funded or subsidized health programs, the importation of prescription drugs from
outside the U.S. at prices that are regulated by governments of various foreign
countries, direct-to-consumer advertising and interactions with healthcare
professionals, and the use of comparative effectiveness methodologies that could
be implemented in a manner that focuses primarily on the cost differences and
minimizes the therapeutic differences among pharmaceutical products and
restricts access to innovative medicines; the impact of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003; legislation or
regulatory action in markets outside the U.S. affecting pharmaceutical product
pricing, reimbursement or access; contingencies related to actual or alleged
environmental contamination; claims and concerns that may arise regarding the
safety or efficacy of in-line products and product candidates; significant
breakdown, infiltration or interruption of our information technology systems
and infrastructure; legal defense costs, insurance expenses, settlement costs
and the risk of an adverse decision or settlement related to product liability,
patent protection, governmental investigations, ongoing efforts to explore
various means for resolving asbestos litigation, and other legal proceedings;
the Company`s ability to protect its patents and other intellectual property
both domestically and internationally; interest rate and foreign currency
exchange rate fluctuations; governmental laws and regulations affecting domestic
and foreign operations, including tax obligations and changes affecting the
taxation by the U.S. of income earned outside the U.S. that may result from
pending and possible future proposals; changes in U.S. generally accepted
accounting principles; uncertainties related to general economic, political,
business, industry, regulatory and market conditions including, without
limitation, uncertainties related to the impact on us, our lenders, our
customers, our suppliers and counterparties to our foreign-exchange and
interest-rate agreements of the global recession and recent and possible future
changes in global financial markets; any changes in business, political and
economic conditions due to actual or threatened terrorist activity in the U.S.
and other parts of the world, and related U.S. military action overseas; growth
in costs and expenses; changes in our product, segment and geographic mix; and
the impact of acquisitions, divestitures, restructurings, product withdrawals
and other unusual items, including our ability to realize the projected benefits
of our acquisition of Wyeth and of our cost-reduction initiatives. A further
list and description of risks, uncertainties, and other matters can be found in
the Company`s Annual Report on Form 10-K for the fiscal year ended December 31,
2008 and in its reports on Forms 10-Q and 8-K.
This earnings release may include discussion of certain clinical studies
relating to various in-line products and/or product candidates.These studies
typically are part of a larger body of clinical data relating to such products
or product candidates, and the discussion herein should be considered in the
context of the larger body of data.
Pfizer Inc.
Media
Joan Campion, 212-733-2798
or
Investors
Suzanne Harnett, 212-733-8009
Jennifer Davis, 212-733-0717
Pfizer Inc
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