SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report:
June 30, 2003
Date of earliest event reported:
April 16, 2003
PFIZER INC.
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(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
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(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
As reported on Form 8-K dated April 16, 2003, Pfizer Inc. ("Pfizer") issued a
press release announcing that it had completed its merger with Pharmacia
Corporation ("Pharmacia") and that Pfizer and Pharmacia had combined operations.
Under the Agreement and Plan of Merger dated as of July 13, 2002 (the "Merger
Agreement") among Pfizer, Pharmacia and Pilsner Acquisition Sub Corp., a
wholly-owned subsidiary of Pfizer ("Merger Sub"), on closing of the merger,
Merger Sub was merged with and into Pharmacia. Pharmacia survived the merger as
a wholly owned subsidiary of Pfizer.
Under the Merger Agreement, as a result of the merger, each share of Pharmacia
common stock, par value $2.00 per share, issued and outstanding, other than
shares owned or held directly or indirectly by Pfizer or by Pharmacia, was
converted into the right to receive 1.4 shares of Pfizer common stock, par value
$0.05 per share. In addition, each share of Pharmacia Series C convertible
perpetual preferred stock, par value $0.01 per share (which was received by the
holders of such stock in exchange for their Pharmacia Series B convertible
perpetual preferred stock, par value $0.01 per share, prior to the completion of
the merger) was converted into one share of Pfizer Series A convertible
perpetual preferred stock, no par value, having the same conversion and other
rights and privileges as the Pharmacia Series C convertible perpetual preferred
stock.
This Form 8-K/A amends the current report on Form 8-K dated April 16, 2003 (as
amended on April 28, 2003) to include Item 7 (b) Pro Forma Financial Information
as of and for the year ended December 31, 2002.
2
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
(1) Unaudited Pro Forma Condensed Combined Statement of Income for the
year ended December 31, 2002
(2) Unaudited Pro Forma Condensed Combined Balance Sheet at December 31,
2002
(3) Notes to Unaudited Condensed Combined Pro Forma Financial
Information
PFIZER INC
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
On April 16, 2003, Pfizer Inc. ("Pfizer") completed its merger with Pharmacia
Corporation ("Pharmacia") and Pfizer and Pharmacia combined operations.
The following pro forma condensed combined financial statements are presented to
illustrate the effects of the merger on the historical financial position and
operating results of Pfizer and Pharmacia. The 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, 2002. The unaudited pro forma condensed combined balance
sheet combines the historical consolidated balance sheets of Pfizer and
Pharmacia, giving effect to the merger as if it had occurred on December 31,
2002. We have adjusted the historical consolidated financial information to give
effect to pro forma events that are (1) directly attributable to the merger, (2)
factually supportable, and (3) with respect to the statement of income, expected
to have a continuing impact on the combined results. You should read this
information in conjunction with the:
- accompanying Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements;
- 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
- 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.
We prepared the unaudited pro forma condensed combined financial information
using the purchase method of accounting with Pfizer treated as the acquirer.
Accordingly, Pfizer's estimated cost to acquire Pharmacia of approximately $56
billion has been allocated to the assets acquired and liabilities assumed
according to their estimated fair values at the date of acquisition. Any excess
of the purchase price over the estimated fair value of the net assets acquired
has been recorded as goodwill. Independent valuation specialists are currently
assisting management in determining the fair values of a significant portion of
these net assets. The preliminary work performed by the independent valuation
specialists has been considered by management in estimating the fair values
reflected in these unaudited pro forma condensed combined financial statements.
The final determination of these fair values will be completed as soon as
possible but no later than one year from the acquisition date.
3
PFIZER INC
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
This final valuation will be based on the actual assets acquired and liabilities
assumed at the acquisition date and management's consideration of the
independent valuation work. Although the final determination may result in asset
and liability fair values that are different than the preliminary estimates of
these amounts included herein, it is not expected that those differences will be
material to an understanding of the impact of this transaction to Pfizer.
We present the unaudited pro forma condensed combined financial information for
informational purposes only. The pro forma data is not necessarily indicative of
what our financial position or results of operations actually would have been
had we completed the merger at the dates indicated. In addition, the unaudited
pro forma condensed combined financial information does not purport to project
the future financial position or operating results of the combined company.
4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2002
(IN MILLIONS, EXCEPT PER SHARE DATA)
Pharmacia Pro Forma Pro Forma
Pfizer Inc. Corporation Adjustments Note 5 Combined
---------- ----------- ----------- ----------- --------
Revenues $ 32,373 $ 13,993 $ (1,368) (a) $ 44,998
Costs and expenses:
Cost of sales 4,045 3,077 47 (a),(c) 7,169
Selling, informational and
administrative expenses 10,846 6,179 (1,315) (a),(c) 15,710
Research and development expenses 5,176 2,359 44 (a),(c) 7,579
Merger-related costs 630 68 698
Other (income)/deductions - net (120) (996) 2,729 (a),(b),(c) 1,613
-------- -------- --------- --------
Income from continuing operations
before provision for taxes on income, minority
interests and cumulative effect of a change
in accounting principle 11,796 3,306 (2,873) 12,229
Provision for taxes 2,609 869 (856) (d) 2,622
Minority interests 6 -- 6
-------- -------- --------- --------
Income from continuing operations before
cumulative effect of a change in accounting
principle $ 9,181 $ 2,437 $ (2,017) $ 9,601
======== ======== ========= ========
Income from continuing operations before
cumulative effect of a change in accounting
principle per common share-basic $ 1.49 $ 1.88 $ 1.21
======== ======== ========
Income from continuing operations before
cumulative effect of a change in accounting
principle per common share-diluted $ 1.47 $ 1.84 $ 1.19
======== ======== ========
Weighted average shares used to calculate
earnings per common share amounts:
Basic 6,156 1,293 517 (e) 7,966
======== ======== ========= ========
Diluted 6,241 1,315 526 (e) 8,082
======== ======== ========= ========
Cash dividends paid per common share $ .52 $ .54
======== ========
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
5
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2002
(IN MILLIONS)
Pfizer Pharmacia Pro Forma Pro Forma
Inc. Corporation Adjustments Note 5 Combined
----------- -------------- -------------- ------- ---------------
ASSETS
Current Assets
Cash and cash equivalents $ 1,878 $ 2,241 $ $ 4,119
Short-term investments 10,673 469 11,142
Accounts receivable, less allowance 5,785 2,457 (366) (a) 7,876
Short-term loans 399 - 399
Inventories 2,678 2,177 1,630 (c) 6,485
Prepaid expenses and taxes 1,797 1,936 583 (a),(d) 4,316
Assets of discontinued businesses 1,571 - 1,571
----------- -------------- -------------- ---------------
Total current assets 24,781 9,280 1,847 35,908
Long-term loans and investments 5,161 287 40 (c) 5,488
Property, plant and equipment, less accumulated
depreciation 10,712 5,683 811 (c) 17,206
Goodwill 1,200 1,150 21,678 (b),(c) 24,028
(a),(b)
Other assets, deferred taxes and deferred charges 4,502 2,117 35,847 (c),(d) 42,466
----------- -------------- -------------- ---------------
Total assets $ 46,356 $ 18,517 $ 60,223 $ 125,096
=========== ============== ============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings, including current
portion of long-term debt $ 8,669 $ 854 $ $ 9,523
Accounts payable 1,620 780 2,400
Dividends payable 926 179 1,105
Income taxes payable 2,231 740 2,971
Accrued compensation and related items 1,084 576 1,660
(a),(c)
Other current liabilities 3,448 1,851 2,425 (d),(f) 7,724
Liabilities of discontinued businesses held for
sale 577 - 577
----------- -------------- -------------- ---------------
Total current liabilities 18,555 4,980 2,425 25,960
Long-term debt 3,140 2,585 370 (c) 6,095
Postretirement benefit obligation other than
pension plans 623 1,213 292 (c) 2,128
Deferred taxes on income 364 299 13,460 (b),(d) 14,123
Other noncurrent liabilities 3,724 1,457 1,265 (c) 6,446
----------- -------------- -------------- ---------------
Total liabilities 26,406 10,534 17,812 54,752
----------- -------------- -------------- ---------------
Shareholders' Equity
Preferred stock - 247 - (f) 247
Common stock 341 2,970 (2,879) (f) 432
Additional paid-in capital 9,368 3,656 51,893 (f) 64,917
Employee benefit trust (1,786) - (1,786)
Treasury stock, at cost (16,341) (3,257) 3,257 (f) (16,341)
Retained earnings 30,243 6,950 (12,227) (f) 24,966
ESOP-related accounts - (216) - (f) (216)
Accumulated other comprehensive expense (1,875) (2,367) 2,367 (f) (1,875)
----------- -------------- -------------- ---------------
Total shareholders' equity 19,950 7,983 42,411 70,344
----------- -------------- -------------- ---------------
Total liabilities and shareholders' equity $ 46,356 $ 18,517 $ 60,223 $ 125,096
=========== ============== ============== ===============
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
6
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 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 $.2 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. Pfizer did not issue fractional shares in the merger. As a result,
the total number of shares of Pfizer common stock that each Pharmacia
shareholder received in the merger was rounded down to the nearest, whole
number, and each Pharmacia shareholder received a cash payment for the remaining
fraction of a share of Pfizer common stock that he or she would otherwise have
received, if any, based on the market value of Pfizer common stock at the close
of business at the date the merger became effective. 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 identical to the rights of the Pharmacia Series C convertible
perpetual preferred stock.
The merger has been accounted for as a purchase by Pfizer under accounting
principles generally accepted in the United States of America. Under the
purchase method of accounting, the assets and liabilities of Pharmacia are
recorded as of completion of the merger, at their respective fair values, and
added to those of Pfizer. Financial statements and reported results of
operations of Pfizer issued after completion of the merger will reflect these
values, but will not be restated retroactively to reflect the historical
financial position or results of operations of Pharmacia.
7
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
2. PURCHASE PRICE
The following is an estimate of the purchase price for Pharmacia, as of
December 31, 2002:
COMMON STOCK
Number of shares of Pharmacia common stock outstanding as of
December 31, 2002 (in thousands) 1,293,293
Exchange ratio 1.4
---------
1,810,610
Multiplied by Pfizer's average stock price for the period two days before
through two days after the July 15, 2002 announcement of the merger
agreement $ 29.81 $53,974 million
---------
PREFERRED STOCK
Number of shares of Pharmacia Series B preferred stock to be exchanged for
substantially similar Pharmacia Series C preferred stock, outstanding and
convertible into common stock as of December 31, 2002 6,130.324
Conversion feature 1,839.19
---------
Number of shares of Pharmacia common stock issuable
upon conversion (in thousands) 11,274.831
Exchange ratio 1.4
---------
15,784.763
Multiplied by Pfizer's average stock price for the period two days before
through two days after the July 15, 2002 announcement of the merger
agreement $ 29.81 471 million
---------
STOCK OPTIONS
Estimated fair value of 180,468 Pfizer stock options (in thousands) to be issued
as of April 16, 2003 in exchange for 128,906 Pharmacia outstanding stock options
(in thousands), calculated using the Black-Scholes option pricing model,
modified for dividends, with model assumptions estimated as of April 16, 2003
and a Pfizer stock price of $29.81, which represented the average stock price
for the period two days before through two days after the July 15, 2002
announcement of the merger agreement
1,102 million
VESTED SHARE AWARD PROGRAMS
Share awards became fully vested in connection with the acquisition. The
fair value of unissued shares of fully vested awards is based on the same
exchange ratio as the common stock and a Pfizer stock price of $29.81.
Awards can be settled in cash or shares, at the election of the program
participant 130 million
OTHER TRANSACTION COSTS 90 million
---------------
TOTAL ESTIMATED PURCHASE PRICE $55,767 million
===============
8
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
For the purpose of this pro forma analysis, the above estimated purchase price
has been preliminarily allocated based on an estimate of the fair value of
assets and liabilities acquired. The final valuation of net assets is expected
to be completed as soon as possible but no later than one year from the
acquisition date. To the extent that our estimates need to be adjusted, we will
do so.
Estimated Purchase Price: ($ in millions)
---------------
Book value of net assets acquired ........................ $ 7,983
Adjusted for write-off of existing goodwill
and other intangible assets ............................ 1,422
--------
Adjusted book value of net assets acquired ............... $ 6,561
Remaining allocation:
Increase inventory to fair value (1) ................... 1,630
Increase long-term investments to fair value (2) ....... 40
Increase property, plant and equipment to fair value (3) 811
Record in-process research and development charge ...... 5,277
Record identifiable intangible assets (4) .............. 35,720
Increase other current liabilities to fair value (5) ... (142)
Increase long-term debt to fair value .................. (370)
Increase benefit plan liabilities to fair value (6) .... (1,414)
Increase other noncurrent liabilities to fair value (7) (143)
Restructuring costs (8) ................................ (2,135)
Deferred taxes (9) ..................................... (12,896)
Goodwill ............................................... 22,828
--------
Estimated purchase price ................................. $ 55,767
========
(1) Components of the increase to fair value for acquired inventory is as
follows:
($ in millions)
---------------
Finished goods ......... $ 361
Work in process ........ 1,000
Reversal of LIFO Reserve 269
------
Total .................. $1,630
======
Pfizer will no longer use the LIFO method of inventory valuation for these
inventories.
(2) Primarily related to one publicly-traded, equity-method investment
adjusted to fair value. The basis for the valuation was the quoted market
price from the Stockholm Exchange.
(3) Components of the increase to fair value for acquired property, plant and
equipment is as follows:
($ in millions)
---------------
Land ................... $ (25)
Buildings .............. 892
Machinery and equipment 26
Construction in progress (82)
-----
Total ................... $ 811
=====
9
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(4) Adjustment to record acquired intangible assets at fair value. Intangible
assets are included in "Other assets, deferred taxes and deferred
charges". A preliminary list of the acquired identifiable intangible
assets is as follows:
a. Completed technology
b. Core technology including patents, patent applications
and unpatented know-how/process
c. Trademark/Brand names
d. Customer lists/relationships
e. Distribution agreements
f. Supply agreements
The acquired identifiable intangible assets are attributable to the
following categories:
Useful
($ in millions) Lives (years)
--------------- -------------
Product rights .................. $23,781 3 - 13
Brands (finite-lived assets) .... 141 40
Brands (indefinite-lived assets) 9,780
Core technology ................. 1,216 3 - 20
Other (finite-lived assets) ..... 233 2 - 20
Other (indefinite-lived assets) . 569
-------
Total ........................... $35,720
=======
(5) Includes accruals for legal liabilities of $120 million that Pfizer
intends to settle in a manner demonstrably different from the manner in
which Pharmacia had planned to do so. Also includes obligations to
Pharmacia customers of $22 million, that Pfizer has decided to honor in
all cases.
(6) Adjust benefit plan liabilities to fair value. Adjustment is included in
"Postretirement benefit obligation other than pension plans" - $292
million and "Other noncurrent liabilities" - $1,122 million for pension
obligations.
(7) Includes accruals for legal and environmental matters that Pfizer intends
to settle in a manner demonstrably different from the manner in which
Pharmacia had planned to do so. Also includes accruals for unfavorable
leases and for award programs which became fully vested in connection with
the acquisition as well as the reversal of Pharmacia deferred income that
no longer represents a performance obligation to third parties.
(8) Included in "Other current liabilities" is an estimate of restructuring
costs that includes only those costs that will impact goodwill. In other
words, this is the estimate of those costs that are associated with legacy
Pharmacia employees, assets or activities that are expected to occur in
the first year post-acquisition date.
(9) Reflects the estimated tax effects of the acquisition, including a
provision for taxes on unremitted earnings of international Pharmacia
subsidiaries that are not expected to be permanently reinvested overseas.
In accordance with the requirements of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets", the goodwill and the
acquired indefinite-lived intangibles associated with the merger will not be
amortized.
10
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
As required by Financial Accounting Standards Board Interpretation No. 4,
"Applicability of FASB Statement No. 2 to Business Combinations Accounted for by
the Purchase Method" ("FIN 4"), the portion of the purchase price allocated to
in-process research and development of $5,277 million will be immediately
expensed. An adjustment for the estimated in-process research and development
charge to be incurred by Pfizer has not been included in the unaudited pro forma
condensed combined income statement since such adjustment is non-recurring in
nature. The preliminary estimate of the write-off of in-process research and
development and related disclosures will be included in the combined company's
quarterly report on Form 10-Q for the second quarter of 2003.
A project-by-project valuation using the guidance in Statement of Financial
Accounting Standards No. 141, "Business Combinations" and the AICPA Practice Aid
"Assets Acquired in a Business Combination to Be Used In Research and
Development Activities: A Focus on Software, Electronic Devices and
Pharmaceutical Industries" is being performed by independent valuation
specialists to determine the fair value of research and development projects of
Pharmacia which were in-process, but not yet completed.
The fair value was determined using the income approach on a project-by-project
basis. This method starts with a forecast of the expected future net cash flows.
These cash flows are then adjusted to present value by applying an appropriate
discount rate that reflects the project's stage of completion and other risk
factors. These other risk factors can include the nature of the product, the
scientific data associated with the technology, the current patent situation and
market competition.
The forecast of future cash flows required the following assumptions to be made:
- Revenue that is likely to result from specific in-process research
and development projects, including estimated number of units to be
sold, estimated selling prices, estimated market penetration and
estimated market share and year-over-year growth rates over the
product life cycles.
- Cost of sales related to the potential products using historical
data, industry data or other sources of market data.
- Sales and marketing expense using historical data, industry data or
other market data.
- General and administrative expenses
- R&D expenses
The final valuation is expected to be completed as soon as possible but no later
than one year from the acquisition date. To the extent that our estimates need
to be adjusted, we will do so.
3. 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 that are
determined to be more appropriate and or consistent with Pfizer's practices
according to accounting principles generally accepted in the United States of
America.
4. INTERCOMPANY TRANSACTIONS
Transactions between Pfizer and Pharmacia are primarily limited to the Celebrex
and Bextra marketing agreements. Upon completion of the merger, transactions
that occur in connection with these arrangements would be considered
intercompany transactions. All significant balances and transactions related to
these arrangements have been eliminated from the unaudited pro forma condensed
combined financial statements. Eliminations primarily relate to receivables and
payables between Pfizer and Pharmacia and are reflected as adjustments to
"Accounts receivable" and "Other current liabilities" in the unaudited pro forma
condensed combined balance sheet.
11
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
5. PRO FORMA ADJUSTMENTS
Adjustments included in the column under the heading "Pro Forma Adjustments"
primarily relate to the following:
(a) To eliminate balances and transactions between Pfizer and Pharmacia, which
upon completion of the merger would be considered intercompany balances
and transactions. The majority of these transactions occurred under the
Celebrex and Bextra marketing agreements.
Increase/(decrease) ($ in millions)
---------------
Revenues ......................... $(1,368)
Cost of sales .................... 17
Selling, informational and
administrative expenses ....... (1,345)
Research and development expenses 29
Other (income)/deductions-net .... 8
Accounts receivable, less allowance
for doubtful accounts ......... $ (366)
Prepaid expenses and taxes ........ (101)
Other assets, deferred taxes and
deferred charges ................ 30
Other current liabilities ......... (437)
The entries include:
- the elimination of certain sales, alliance revenue and certain
copromotion expenses;
- the elimination of the impact of milestone payments made by Pfizer
to Pharmacia; and
- the elimination of receivable and payable balances
(b) To eliminate acquired goodwill ($1,150 million) and acquired intangible
assets ($393 million included in historical "Other assets, deferred taxes
and deferred charges" and the associated deferred tax liabilities of $121
million included in historical "Deferred taxes on income"). Also to
eliminate amortization expense recorded by Pharmacia related to
definite-lived intangible assets of approximately $69 million in 2002
included in historical "Other (income)/deductions-net".
(c) To record:
- the allocation of the estimated purchase price to reflect the
difference between the book value and the fair value of net assets
acquired. See also note 2 to the unaudited pro forma condensed
combined financial statements. Also to record accrual of estimated
other transaction costs of $90 million and Securities and Exchange
Commission (SEC) registration fees of $6 million (recorded in
"Additional paid-in capital");
- the adjustment to decrease interest expense by $40 million (included
in "Other (income)/deductions-net") related to the estimated fair
value adjustment of long-term debt;
- amortization expense related to the estimated fair 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 $2,830 million - amount is
included in "Other (income)/deductions-net"; and
- 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 as described below, of approximately $75 million in 2002 -
amount is included in "Cost of sales" - $30 million; "Selling,
informational and administrative expenses" - $30 million and
"Research and development expenses" - $15 million.
12
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
Useful Lives
(Years)
--------------
Buildings up to 30 years
Machinery and equipment up to 20 years
(d) To adjust income taxes for pro forma adjustments, included in the
following balance sheet captions:
Debit/(credit) ($ in millions)
---------------
Prepaid expenses and taxes . $ 684 million
Goodwill ................... 12,896 million
Other assets, deferred taxes
and deferred charges 490 million
Other current liabilities .. (489) million
Deferred taxes on income ... (13,581) million
(e) The combined basic and diluted weighted average shares of Pfizer and
Pharmacia represent the historical basic and diluted weighted average
shares of Pharmacia converted at the exchange ratio of 1.4 shares of
Pfizer common stock for each Pharmacia common stock equivalent.
(f) To adjust shareholders' equity for the following:
Preferred stock (net change zero) -
- To remove the historical (par value) balance of Pharmacia ($247
million decrease)
- To record the estimated par value of the shares to be issued by
Pfizer to effect the combination ($247 million increase)
Common stock ($2,879 million net decrease) -
- To remove the historical (par value) balance of Pharmacia ($2,970
million decrease)
- To record the estimated par value of the shares to be issued by
Pfizer to effect the combination ($91 million increase)
Additional paid-in capital ($51,893 million net increase) -
- To remove the historical balance of Pharmacia ($3,656 million
decrease)
- To record the purchase price of Pharmacia ($55,767 million net
increase) net of the amounts allocated to the par values of the
Preferred Stock ($247 million increase) and Common Stock ($91
million increase), accrued total transaction costs in "Other current
liabilities" ($96 million increase, including SEC registration fees
payable of $6 million) and ESOP-related accounts ($216 million
decrease)
Treasury stock at cost ($3,257 million increase) -
- To remove the historical balance of Pharmacia ($3,257 million
increase)
Retained earnings ($12,227 million decrease) -
- To remove the historical balance of Pharmacia ($6,950 million
decrease)
- To record the elimination of transactions between Pfizer and
Pharmacia - (see pro forma adjustments (a) - net change zero)
- To record the estimated write-off of in-process research and
development, as required by FIN 4 ($5,277 million decrease) - See
also Note 2 to the unaudited pro forma condensed combined financial
statements
13
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
ESOP-related accounts (net change zero) -
- To remove the historical balance of Pharmacia ($216 million
increase)
- To record the fair value of ESOP-related accounts ($216 million
decrease)
Accumulated other comprehensive income ($2,367 million increase) -
- To remove the historical balance of Pharmacia ($2,367 million
increase)
14
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The pro forma condensed combined financial statements do not present a combined
dividend per share amount. Pfizer's quarterly dividend in 2002 was $.13 ($.52
per share annualized) and is subject to future approval and declaration by
Pfizer's board of directors. Pharmacia's quarterly dividend in 2002 was $.13 1/2
($.54 per share annualized). The future dividend policy of the combined company
will be determined by its board of directors.
Certain restructuring and integration charges may be recorded subsequent to the
merger 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 $4 billion by 2005. 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 these cost savings will be achieved.
As a result of the merger, 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. We do not
expect such divestitures to have a material impact on our operations.
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.
--------------------------------
(Registrant)
Date: June 30, 2003 /s/ MARGARET M. FORAN
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Name: Margaret M. Foran
Title: Vice President -- Corporate
Governance and Secretary
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