SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report:
November 13, 2003
Date of earliest event reported:
November 13, 2003
PFIZER INC.
(Exact name of registrant as specified in its charter)
Delaware 001-03619 13-5315170
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(State or other jurisdiction Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
235 East 42nd Street, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(212) 573-2323
(Former name or former address, if changed since last report.)
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
1. Unaudited Pro Forma Condensed Combined Statement of Income for the nine
months ended September 28, 2003
PFIZER INC
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME
On April 16, 2003, Pfizer Inc ("Pfizer") completed its acquisition of Pharmacia
Corporation ("Pharmacia") and Pfizer and Pharmacia combined operations. The
acquisition is being accounted for as a purchase business combination.
Accordingly, Pfizer has recorded the fair value of the assets acquired and
liabilities assumed from Pharmacia.
The following unaudited pro forma condensed combined statement of income
combines the historical consolidated statements of income of Pfizer and
Pharmacia, giving effect to the merger as if it had occurred on January 1, 2003.
We have adjusted the historical consolidated financial information to give
effect to pro forma events that are (1) directly attributable to the
acquisition, (2) factually supportable, and (3) expected to have a continuing
impact on the combined results. These pro forma adjustments are more fully
discussed in Note 4 to the Unaudited Pro Forma Condensed Combined Statement of
Income. You should read this information in conjunction with the:
o accompanying Notes to the Unaudited Pro Forma Condensed Combined
Statement of Income;
o Pfizer's Quarterly Report on Form 10-Q for nine months ended September
28, 2003;
o separate historical Unaudited Pro Forma Condensed Combined Financial
Statements of Pfizer and Pharmacia as of and for the year ended December
31, 2002 included in Pfizer's Form 8-K/A dated June 30, 2003;
o separate historical financial statements of Pfizer as of and for the
year ended December 31, 2002 included in Pfizer's Annual Report on Form
10-K for the year ended December 31, 2002; and
o separate historical financial statements of Pharmacia as of and for the
year ended December 31, 2002 included in Pharmacia's Annual Report on
Form 10-K for the year ended December 31, 2002.
PFIZER INC
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME
We present the unaudited pro forma condensed combined statement of income for
informational purposes only. The pro forma data is not necessarily indicative of
what our results of operations actually would have been had we completed the
merger at the dates indicated. In addition, the unaudited pro forma condensed
combined statement of income does not purport to project the future operating
results of the combined company.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Pharmacia Pro Forma Pro Forma
Pfizer Inc(1) Corporation(2) Adjustments Note 4 Combined
------------- --------------- ------------- ---------- -------------
Revenues $ 31,022 $ 4,046 $ (340) (a) $ 34,728
Costs and expenses:
Cost of sales 6,459 1,029 (1,698) (a),(c),(e) 5,790
Selling, informational and administrative
expenses 10,560 1,716 (291) (a),(c) 11,985
Research and development expenses 4,813 705 12 (a),(c) 5,530
Merger-related in-process research and
development charge 5,043 -- (5,043) (e) --
Merger-related costs 680 55 735
Other (income)/deductions - net 1,155 26 819 (a),(b),(c) 2,000
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Income from continuing operations before
provision for taxes on income, minority
interests and cumulative effect of a
change in accounting principle 2,312 515 5,861 8,688
Provision for taxes 1,286 113 244 (d) 1,643
Minority interests 1 -- -- 1
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Income from continuing operations before
cumulative effect of a change in
accounting principle $ 1,025 $ 402 $ 5,617 $ 7,044
========== ========== ============ =========
Income from continuing operations before
cumulative effect of a change in
accounting principle per common share-basic $ .14 $ .31 $ .90
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Income from continuing operations before
cumulative effect of a change in
accounting principle per common
share-diluted $ .14 $ .30 $ .89
=========== ========== =========
Weighted average shares used to calculate
earnings per common share amounts:
Basic 7,089 1,295 (568) (f) 7,816
=========== ========== ============ =========
Diluted 7,161 1,317 (584) (f) 7,894
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Cash dividends paid per common share $ .45 $ --
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(1) Represents Pfizer's results of operations for the nine months ended
September 28, 2003. These results include the results of operations of
Pharmacia from April 16, 2003 through September 28, 2003.
(2) Represents Pharmacia's results of operations for the period January 1,
2003 through April 15, 2003.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Statement
of Income, which are an integral part of the statement.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
1. DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
On April 16, 2003, Pfizer acquired Pharmacia Corporation for an estimated
purchase price of approximately $56 billion, which includes Pfizer common stock
valued at $54.2 billion, options on Pfizer common stock valued at $1.1 billion,
Pfizer convertible perpetual preferred stock valued at $.5 billion, and vested
share awards valued at $.1 billion, as well as transaction costs of $90 million.
Under the terms of the Merger Agreement, each outstanding share of Pharmacia
common stock was exchanged for 1.4 shares of Pfizer common stock in a tax-free
transaction. Each share of Pharmacia Series C convertible perpetual preferred
stock was exchanged for a newly created class of Pfizer Series A convertible
perpetual preferred stock with rights substantially similar to the rights of
the Pharmacia Series C convertible perpetual preferred stock.
The acquisition has been accounted for as a purchase business combination by
Pfizer under accounting principles generally accepted in the United States of
America. Under the purchase method of accounting, the assets acquired and
liabilities assumed of Pharmacia have been recorded as of April 16, 2003, at
their respective fair values. Financial statements and reported results of
operations of Pfizer issued after April 16, 2003 reflect these values, but will
not be restated retroactively to reflect the historical financial position or
results of operations of Pharmacia.
2. ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS
Pfizer is currently reviewing accounting policies and financial statement
classifications used by Pharmacia. As a result of this review, it may become
necessary to make certain reclassifications to the combined company's financial
statements to conform to those accounting policies and classifications of
Pfizer.
3. INTERCOMPANY TRANSACTIONS
Transactions between Pfizer and Pharmacia before the acquisition were primarily
limited to the Celebrex and Bextra marketing agreements. Upon completion of the
acquisition, transactions that occur in connection with these arrangements would
be considered intercompany transactions. All significant transactions related to
these arrangements have been eliminated from the Unaudited Pro Forma Condensed
Combined Statement of Income.
4. PRO FORMA ADJUSTMENTS
Adjustments included in the column under the heading "Pro Forma Adjustments"
primarily relate to the following:
a. To eliminate transactions between Pfizer and Pharmacia occurring prior to
April 16, 2003. The majority of these transactions occurred under the
Celebrex and Bextra marketing agreements.
Increase/
(decrease)
----------------
($ in millions)
Revenues $(340)
Cost of sales 5
Selling, informational and
administrative expenses (300)
Research and development expenses 9
Other (income)/deductions-net 2
The entries include:
o the elimination of certain sales, alliance revenue and certain
co-promotion expenses; and the elimination of the impact of milestone
payments made by Pfizer to Pharmacia.
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b. To eliminate amortization expense recorded by Pharmacia related to
definite-lived intangible assets of approximately $15 million in 2003
included in "Other (income)/deductions-net".
c. To record the incremental impact of certain purchase accounting adjustments
relating to the period January 1, 2003 through April 15, 2003:
o to decrease interest expense by $11 million ($27 million in total in the
first nine months of 2003) related to the estimated fair value step-up
of long-term debt - amount included in "Other (income)/deductions-net";
o additional amortization expense related to the estimated value of
identifiable intangible assets from the purchase price allocation which
are being amortized over their estimated useful lives over a range of 2
to 40 years of approximately $843 million ($2,069 million in total in
the first nine months of 2003) - amount is included in "Other
(income)/deductions-net"; and
o additional depreciation expense related to the estimated fair value
step-up of the property, plant and equipment from the purchase price
allocation, which is being depreciated over its estimated useful life,
of approximately $21 million ($97 million in total in the first nine
months of 2003) in 2003 - amount is included in "Cost of sales"- $9
million; "Selling, informational and administrative expenses"- $9
million and "Research and development expenses" - $3 million.
d. To adjust income taxes for pro forma adjustments.
e. To eliminate certain non-recurring charges resulting from purchase
accounting adjustments related to purchased IPR&D charges of $5,043 million
and charges of $1,712 million reported in "Cost of Sales" for the workdown
of purchased inventory that was written up to fair value.
f. The pro forma combined basic and diluted earnings per share for the period
presented are based on the combined basic and diluted weighted average
shares of Pfizer and Pharmacia. The historical basic and diluted weighted
average shares of Pharmacia were converted at the exchange ratio of 1.4
shares of Pfizer common stock for each Pharmacia common stock equivalent.
The pro forma condensed combined financial statements do not present a combined
dividend per share amount. Pfizer's quarterly common stock dividend in 2003 was
$.15 per share ($.45 per share for the nine months ended September 28, 2003).
Pharmacia did not declare a dividend in 2003. The future dividend policy of the
combined company will be determined by Pfizer's board of directors and is
subject to future approval and declaration by Pfizer's board of directors.
Certain restructuring and integration charges will be recorded subsequent to
April 16, 2003 that, under purchase accounting, will not be treated as part of
the Pharmacia purchase price. These costs, estimated to range between $2.5 and
$3.0 billion (on a pre-tax basis), have not been reflected in the unaudited pro
forma condensed combined income statement because they are not expected to have
a continuing impact on the combined results.
The unaudited pro forma condensed combined financial statements do not reflect
the expected realization of annual cost savings of about $4.0 billion by 2005 as
compared to the aggregate expenses of Pfizer and Pharmacia on a stand-alone
basis. These savings are expected to result from, among other things, the
reduction of overhead expenses, changes in corporate infrastructure, the
elimination of duplicative facilities and the leveraging of the combined annual
external purchases. Although management expects that cost savings will result
from the merger, there can be no assurance that all or any material part of
these cost savings will be achieved.
As a result of the acquisition, regulatory authorities required us to divest
several products and a product candidate. These unaudited pro forma condensed
combined financial statements do not reflect the impact of these divestitures.
Such divestitures did not have a material impact on our operations.
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SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, the registrant
has caused this report to be signed on its behalf by the authorized undersigned.
PFIZER INC.
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(Registrant)
/s/ Margaret M. Foran
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Date: November 13, 2003 Name: Margaret M. Foran
Title: Vice President - Corporate Governance
and Secretary
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