Pfizer Earnings 2019-03-31

PFE 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 pfe-03312019x10q.htm 10-Q Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

TRANSITION REPORT PURSUANT TO SECTION 13

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

COMMISSION FILE NUMBER 1-3619

----

PFIZER INC.

(Exact name of registrant as specified in its charter)



DELAWARE (State of Incorporation)	13-5315170 (I.R.S. Employer Identification No.)

235 East 42^nd Street, New York, New York 10017

(Address of principal executive offices) (zip code)

(212) 733-2323

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



YES X	NO ___

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



YES X	NO ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated filer X Accelerated filer ___ Non-accelerated filer ___ Smaller reporting company ___ Emerging growth company ___

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



YES ____	NO X



Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.05 par value	PFE	New York Stock Exchange
0.000% Notes due 2020	PFE20A	New York Stock Exchange
0.250% Notes due 2022	PFE22	New York Stock Exchange
1.000% Notes due 2027	PFE27	New York Stock Exchange

At May 6, 2019, 5,559,929,190 shares of the issuer’s voting common stock were outstanding.

Table of Contents



PART I. FINANCIAL INFORMATION	Page

Item 1.
Financial Statements

Condensed Consolidated Statements of Income for the three months ended March 31, 2019 and April 1, 2018	5

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 and April 1, 2018	6

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	7

Condensed Consolidated Statements of Equity for the three months ended March 31, 2019 and April 1, 2018	8

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and April 1, 2018	9

Notes to Condensed Consolidated Financial Statements	10

Review Report of Independent Registered Public Accounting Firm	43

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.
Quantitative and Qualitative Disclosures About Market Risk	93

Item 4.
Controls and Procedures	93

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings	94

Item 1A.
Risk Factors	94

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	95

Item 3.
Defaults Upon Senior Securities	95

Item 4.
Mine Safety Disclosures	95

Item 5.
Other Information	95

Item 6.
Exhibits	96

Signature	97

GLOSSARY OF DEFINED TERMS

Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q (defined below) refer to Pfizer Inc. and its subsidiaries. We also have used several other terms in this Quarterly Report on Form 10-Q, most of which are explained or defined below:



2018 Financial Report	Financial Report for the fiscal year ended December 31, 2018, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018
2018 Form 10-K	Annual Report on Form 10-K for the fiscal year ended December 31, 2018
ACA (Also referred to as U.S. Healthcare Legislation)	U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
ACIP	Advisory Committee on Immunization Practices
ALK	anaplastic lymphoma kinase
Alliance revenues	Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us
Allogene	Allogene Therapeutics, Inc.
Anacor	Anacor Pharmaceuticals, Inc.
AOCI	Accumulated Other Comprehensive Income
Astellas	Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc.
Bamboo	Bamboo Therapeutics, Inc.
Biopharma	Pfizer Biopharmaceuticals Group
BMS	Bristol-Myers Squibb Company
BRCA	BReast CAncer susceptibility gene
CAR T	chimeric antigen receptor T cell
CDC	U.S. Centers for Disease Control and Prevention
cGMP	current Good Manufacturing Practices
Citibank	Citibank, N.A.
Developed Markets	U.S., Western Europe, Japan, Canada, South Korea, Australia, Scandinavian countries, Finland and New Zealand
EEA	European Economic Area
EGFR	epidermal growth factor receptor
EH	Essential Health
EMA	European Medicines Agency
Emerging Markets	Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Eastern Europe, the Middle East, Africa, Central Europe and Turkey
EPS	earnings per share
EU	European Union
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FDA	U.S. Food and Drug Administration
GAAP	Generally Accepted Accounting Principles
GIST	gastrointestinal stromal tumors
GPD	Global Product Development organization
GSK	GlaxoSmithKline plc
GS&Co.	Goldman, Sachs & Co. LLC
HER2-	human epidermal growth factor receptor 2-negative
hGH-CTP	human growth hormone
HIS	Hospira Infusion Systems
Hisun Pfizer	Hisun Pfizer Pharmaceuticals Company Limited
Hospira	Hospira, Inc.
HR+	hormone receptor-positive
ICU Medical	ICU Medical, Inc.
IH	Innovative Health
IPR&D	in-process research and development
IRS	U.S. Internal Revenue Service
IV	intravenous
Janssen	Janssen Biotech Inc.
J&J	Johnson & Johnson
King	King Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.)



LDL	low density lipoprotein
LEP	Legacy Established Products
LIBOR	London Interbank Offered Rate
Lilly	Eli Lilly & Company
LOE	loss of exclusivity
MCC	Merkel cell carcinoma
MCO	managed care organization
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Medivation	Medivation LLC (formerly Medivation, Inc.)
Merck	Merck & Co., Inc.
Meridian	Meridian Medical Technologies, Inc.
Moody’s	Moody’s Investors Service
NDA	new drug application
NSCLC	non-small cell lung cancer
NYSE	New York Stock Exchange
OPKO	OPKO Health, Inc.
OTC	over-the-counter
PARP	poly ADP ribose polymerase
PBM	pharmacy benefit manager
Pharmacia	Pharmacia Corporation
PP&E	property, plant & equipment
PsA	psoriatic arthritis
Quarterly Report on Form 10-Q	Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019
RA	rheumatoid arthritis
RCC	renal cell carcinoma
R&D	research and development
ROU	right of use
Sandoz	Sandoz, Inc., a division of Novartis AG
SBS	short bowel syndrome
SEC	U.S. Securities and Exchange Commission
SFJ	SFJ Pharmaceuticals Group
Shire	Shire International GmbH
SI&A	selling, informational and administrative
SIP	sterile injectable pharmaceuticals
S&P	Standard and Poor’s
Tax Cuts and Jobs Act or TCJA	legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017
Therachon	Therachon Holding AG
UC	ulcerative colitis
U.K.	United Kingdom
U.S.	United States
ViiV	ViiV Healthcare Limited
WRDM	Worldwide Research, Development and Medical

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



	Three Months Ended
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	March 31, 2019		April 1, 2018
Revenues	$	13,118	$	12,906
Costs and expenses:
Cost of sales^(a)	2,433		2,563
Selling, informational and administrative expenses^(a)	3,339		3,412
Research and development expenses^(a)	1,703		1,743
Amortization of intangible assets	1,183		1,196
Restructuring charges and certain acquisition-related costs	46		43
Other (income)/deductions––net	92		(178		)
Income from continuing operations before provision for taxes on income	4,323		4,127
Provision for taxes on income	433		556
Income from continuing operations	3,889		3,571
Discontinued operations––net of tax	—		(1		)
Net income before allocation to noncontrolling interests	3,889		3,570
Less: Net income attributable to noncontrolling interests	6		9
Net income attributable to Pfizer Inc.	$	3,884	$	3,561

Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.69	$	0.60
Discontinued operations––net of tax	—		—
Net income attributable to Pfizer Inc. common shareholders	$	0.69	$	0.60

Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.68	$	0.59
Discontinued operations––net of tax	—		—
Net income attributable to Pfizer Inc. common shareholders	$	0.68	$	0.59

Weighted-average shares––basic	5,635		5,957
Weighted-average shares––diluted	5,750		6,057


^(a)	Excludes amortization of intangible assets, except as disclosed in Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets.

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2019			April 1, 2018
Net income before allocation to noncontrolling interests	$	3,889		$	3,570

Foreign currency translation adjustments, net	324			758
Reclassification adjustments	2			15
	326			773
Unrealized holding gains/(losses) on derivative financial instruments, net	267			(114		)
Reclassification adjustments for (gains)/losses included in net income^(a)	(263		)	44
	4			(69		)
Unrealized holding gains on available-for-sale securities, net	40			160
Reclassification adjustments for (gains)/losses included in net income^(a)	11			(174		)
Reclassification adjustments for unrealized gains included in Retained earnings^(b)	—			(462		)
	51			(476		)
Benefit plans: actuarial gains, net	—			163
Reclassification adjustments related to amortization	60			62
Reclassification adjustments related to settlements, net	—			37
Other	(23		)	(86		)
	37			175
Reclassification adjustments related to amortization of prior service costs and other, net	(46		)	(46		)
Reclassification adjustments related to curtailments of prior service costs and other, net	—			(7		)
Other	—			2
	(46		)	(51		)
Other comprehensive income, before tax	372			352
Tax provision on other comprehensive income	25			432
Other comprehensive income/(loss) before allocation to noncontrolling interests	$	348		$	(80	)

Comprehensive income before allocation to noncontrolling interests	$	4,237		$	3,490
Less: Comprehensive income attributable to noncontrolling interests	1			10
Comprehensive income attributable to Pfizer Inc.	$	4,236		$	3,480


^(a)	Reclassified into Other (income)/deductions—net and Cost of sales in the condensed consolidated statements of income. For additional information on amounts reclassified into Cost of sales, see Note 7E. Financial Instruments: Derivative Financial Instruments and Hedging Activities.


^(b)	For additional information, see Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS



(MILLIONS OF DOLLARS)	March 31, 2019			December 31, 2018
	(Unaudited)
Assets
Cash and cash equivalents	$	1,937		$	1,139
Short-term investments	9,682			17,694
Trade accounts receivable, less allowance for doubtful accounts: 2019—$538; 2018—$541	9,599			8,025
Inventories	8,029			7,508
Current tax assets	3,598			3,374
Other current assets	2,567			2,461
Assets held for sale	9,877			9,725
Total current assets	45,290			49,926
Long-term investments	2,859			2,767
Property, plant and equipment, less accumulated depreciation: 2019—$16,158; 2018—$16,591	13,467			13,385
Identifiable intangible assets, less accumulated amortization	34,039			35,211
Goodwill	53,487			53,411
Noncurrent deferred tax assets and other noncurrent tax assets	1,946			1,924
Other noncurrent assets	4,333			2,799
Total assets	$	155,421		$	159,422

Liabilities and Equity
Short-term borrowings, including current portion of long-term debt: 2019—$4,471; 2018—$4,776	$	9,410		$	8,831
Trade accounts payable	4,156			4,674
Dividends payable	—			2,047
Income taxes payable	1,849			1,265
Accrued compensation and related items	1,797			2,397
Other current liabilities	10,276			10,753
Liabilities held for sale	1,935			1,890
Total current liabilities	29,423			31,858

Long-term debt	35,733			32,909
Pension benefit obligations, net	5,125			5,272
Postretirement benefit obligations, net	1,332			1,338
Noncurrent deferred tax liabilities	3,591			3,700
Other taxes payable	14,712			14,737
Other noncurrent liabilities	6,346			5,850
Total liabilities	96,263			95,664

Commitments and Contingencies

Preferred stock	19			19
Common stock	468			467
Additional paid-in capital	86,635			86,253
Treasury stock	(110,781		)	(101,610		)
Retained earnings	93,388			89,554
Accumulated other comprehensive loss	(10,923		)	(11,275		)
Total Pfizer Inc. shareholders’ equity	58,806			63,407
Equity attributable to noncontrolling interests	352			351
Total equity	59,158			63,758
Total liabilities and equity	$	155,421		$	159,422

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY



	PFIZER INC. SHAREHOLDERS
	Preferred Stock				Common Stock						Treasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)	Shares		Stated Value		Shares	Par Value		Add’l Paid-In Capital			Shares		Cost			Retained Earnings			Accum. Other Comp. Loss			Share- holders’ Equity			Non-controlling interests			Total Equity
Balance, January 1, 2019	478		$	19	9,332	$	467	$	86,253		(3,615	)	$	(101,610	)	$	89,554		$	(11,275	)	$	63,407		$	351		$	63,758
Net income																3,884						3,884			6			3,889
Other comprehensive income/(loss), net of tax																			353			353			(4		)	348
Cash dividends declared:
Common stock																(68		)				(68		)				(68		)
Preferred stock																—						—						—
Noncontrolling interests																						—			—			—
Share-based payment transactions					26	1		383			(7	)	(306		)							78						78
Purchases of common stock											(180	)	(8,865		)							(8,865		)				(8,865		)
Preferred stock conversions and redemptions	(12	)	—					(1		)	—		—									(1		)				(1		)
Other^(a)			—			—		—			—		—			19			—			19			—			19
Balance, March 31, 2019	466		$	19	9,358	$	468	$	86,635		(3,801	)	$	(110,781	)	$	93,388		$	(10,923	)	$	58,806		$	352		$	59,158



	PFIZER INC. SHAREHOLDERS
	Preferred Stock				Common Stock						Treasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)	Shares		Stated Value		Shares	Par Value		Add’l Paid-In Capital			Shares		Cost			Retained Earnings			Accum. Other Comp. Loss			Share- holders’ Equity			Non-controlling interests		Total Equity
Balance, January 1, 2018	524		$	21	9,275	$	464	$	84,278		(3,296	)	$	(89,425	)	$	85,291		$	(9,321	)	$	71,308		$	348	$	71,656
Net income																3,561						3,561			9		3,570
Other comprehensive income/(loss), net of tax																			(81		)	(81		)	1		(80		)
Cash dividends declared:
Common stock																(65		)				(65		)			(65		)
Preferred stock																—						—					—
Noncontrolling interests																						—			—		—
Share-based payment transactions					24	1		321			3		29									351					351
Purchases of common stock											(145	)	(6,063		)							(6,063		)			(6,063		)
Preferred stock conversions and redemptions	(11	)	—					(1		)	—		—									(1		)			(1		)
Other^(b)			—			—		—			—		—			1,175			—			1,175			—		1,175
Balance, April 1, 2018	513		$	21	9,299	$	465	$	84,599		(3,437	)	$	(95,460	)	$	89,961		$	(9,402	)	$	70,184		$	358	$	70,541


^(a)	Represents the cumulative effect of the adoption of a new accounting standard in the first quarter of 2019 for leases. For additional information, see Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards.

^(b)

Represents the cumulative effect of the adoption of new accounting standards in the first quarter of 2018 for revenues, financial assets and liabilities, income tax accounting, and the reclassification of certain tax effects from Accumulated other comprehensive income. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in Pfizer’s 2018 Financial Report.

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2019			April 1, 2018
Operating Activities
Net income before allocation to noncontrolling interests	$	3,889		$	3,570
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	1,545			1,567
Asset write-offs and impairments	155			7
TCJA impact^(a)	(131		)	(68		)
Deferred taxes from continuing operations	(60		)	294
Share-based compensation expense	185			182
Benefit plan contributions in excess of expense	(151		)	(692		)
Other adjustments, net	(236		)	(161		)
Other changes in assets and liabilities, net of acquisitions and divestitures	(3,498		)	(2,715		)
Net cash provided by operating activities	1,698			1,983

Investing Activities
Purchases of property, plant and equipment	(460		)	(386		)
Purchases of short-term investments	(1,402		)	(913		)
Proceeds from redemptions/sales of short-term investments	3,601			6,463
Net proceeds from redemptions/sales of short-term investments with original maturities of three months or less	5,941			4,507
Purchases of long-term investments	(84		)	(605		)
Proceeds from redemptions/sales of long-term investments	44			576
Acquisitions of intangible assets	(158		)	(32		)
Other investing activities, net	67			57
Net cash provided by investing activities	7,550			9,667

Financing Activities
Proceeds from short-term borrowings	609			428
Principal payments on short-term borrowings	(1,766		)	(2,493		)
Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less	2,032			(83		)
Proceeds from issuance of long-term debt	4,942			—
Principal payments on long-term debt	(3,004		)	(355		)
Purchases of common stock	(8,865		)	(6,063		)
Cash dividends paid	(2,045		)	(2,032		)
Proceeds from exercise of stock options	126			372
Other financing activities, net	(495		)	(495		)
Net cash used in financing activities	(8,467		)	(10,720		)
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents	12			55
Net increase in cash and cash equivalents and restricted cash and cash equivalents	792			985
Cash and cash equivalents and restricted cash and cash equivalents, beginning	1,225			1,431
Cash and cash equivalents and restricted cash and cash equivalents, end	$	2,018		$	2,416

Supplemental Cash Flow Information
Cash paid (received) during the period for:
Income taxes	$	235		$	257
Interest paid	385			259
Interest rate hedges	(33		)	20

^(a)

As a result of the enactment of the TCJA in December 2017, Pfizer’s Provision for taxes on income for (i) the three months ended March 31, 2019 was favorably impacted by approximately $131 million, primarily as a result of additional guidance issued by the U.S. Department of Treasury and (ii) the three months ended April 1, 2018 was favorably impacted by approximately $68 million, primarily related to certain tax initiatives associated with the lower U.S. tax rate as a result of the TCJA.

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Significant Accounting Policies

A. Basis of Presentation

See the Glossary of Defined Terms at the beginning of this Quarterly Report on Form 10-Q for terms used throughout the condensed consolidated financial statements and related notes in this Quarterly Report on Form 10-Q.

We prepared the condensed consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted.

The financial information included in our condensed consolidated financial statements for subsidiaries operating outside the U.S. is as of and for the three months ended February 24, 2019 and February 25, 2018. The financial information included in our condensed consolidated financial statements for U.S. subsidiaries is as of and for the three months ended March 31, 2019 and April 1, 2018.

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

We are responsible for the unaudited financial statements included in this Quarterly Report on Form 10-Q. The interim financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods presented. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2018 Financial Report.

At the beginning of our 2019 fiscal year, we began to manage our commercial operations through a new global structure consisting of three business segments––Pfizer Biopharmaceuticals Group (Biopharma), Upjohn and Consumer Healthcare. Biopharma and Upjohn are the only reportable segments. We have revised prior-period segment information to reflect the reorganization. For additional information, see Note 13.

Certain amounts in the condensed consolidated financial statements and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.

In the first quarter of 2019, as of January 1, 2019, we adopted four new accounting standards. See Note 1B for further information.

Our recent significant business development activities include:

•

For additional information, see Note 2 and Notes to Consolidated Financial Statements––Note 2. Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment in Pfizer’s 2018 Financial Report.

B. Adoption of New Accounting Standards

On January 1, 2019, we adopted four new accounting standards.

Leases––On January 1, 2019, we adopted a new accounting standard for leases and changed our lease policies accordingly. Under the new standard, the most significant change is the requirement of balance sheet recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. We adopted the new accounting standard utilizing the modified retrospective method using a simplified transition approach, and, therefore, no adjustments were made to our prior period financial statements. We have elected the package of practical expedients for transition which are permitted in the new standard. Accordingly, we did not reassess whether (i) any expired or existing contracts are or contain leases under the new standard, (ii) classification of leases as operating leases or capital leases would be different under the new standard, or (iii) any initial direct costs would have met the definition of initial direct costs under the new standard. Additionally, we did not elect to

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

use hindsight in determining the lease term for existing leases as of January 1, 2019. We recorded noncurrent ROU assets of $1.4 billion and current and noncurrent operating lease liabilities of $1.4 billion as of January 1, 2019. We also recorded the cumulative effect of adopting the standard as an adjustment to increase the opening balance of Retained earnings by $30 million on a pre-tax basis ($20 million after-tax), relating to previously deferred sale-leaseback gains that can be recognized under the new rules.



Adopting the standard related to leases impacted our prior period condensed consolidated balance sheet as follows:
(MILLIONS OF DOLLARS)	As Previously Reported Balance at December 31, 2018		Effect of Change Higher/(Lower)			Balance at January 1, 2019
Other current assets	$	2,461	$	(1	)	$	2,460
Noncurrent deferred tax assets and other noncurrent tax assets	1,924		(11		)	1,913
Other noncurrent assets	2,799		1,351			4,149
Other current liabilities	10,753		258			11,011
Other noncurrent liabilities	5,850		1,060			6,910
Retained earnings	89,554		20			89,574

Adoption of the standard related to leases did not have a material impact on our condensed consolidated statements of income or condensed consolidated statements of cash flows for the quarter ended March 31, 2019. For additional information, see Note 1D.

Amortization Period for Certain Callable Debt Securities Held at a Premium––We prospectively adopted the standard, which shortens the amortization period for certain callable debt securities held at a premium. The new guidance requires the premium to be amortized to the earliest call date. We do not have any investments with features subject to this standard and, therefore, there was no impact to our condensed consolidated financial statements from the adoption of this new standard.

Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity and Accounting for Certain Financial Instruments with Down Round Features––We prospectively adopted the standard, which changes the accounting for warrants or convertible instruments that include a down round feature. We do not have any financial instruments with features subject to this standard and, therefore, there was no impact to our condensed consolidated financial statements from the adoption of this new standard.

Accounting for Share-Based Payments to Nonemployees––We prospectively adopted the standard, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. We do not have any share-based awards issued to nonemployees and, therefore, there was no impact to our condensed consolidated financial statements from the adoption of this new standard.

On January 1, 2018, we adopted eleven new accounting standards. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 included in our 2018 Financial Report.

C. Revenues and Trade Accounts Receivable

Our accruals for Medicare rebates, Medicaid and related state program rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts totaled $5.5 billion as of March 31, 2019 and $5.4 billion as of December 31, 2018.



The following table provides information about the balance sheet classification of these accruals:
(MILLIONS OF DOLLARS)	March 31, 2019		December 31, 2018
Reserve against Trade accounts receivable, less allowance for doubtful accounts	$	1,232	$	1,288

Other current liabilities:
Accrued rebates	3,344		3,208
Other accruals	559		531

Other noncurrent liabilities	410		399
Total accrued rebates and other accruals	$	5,544	$	5,426

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

D. Leases

On January 1, 2019, we adopted a new accounting standard for leases. For further information, see Note 1B.

We lease real estate, fleet, and equipment for use in our operations. Our leases generally have lease terms of 1 to 30 years, some of which include options to terminate or extend leases for up to 5 to 10 years or on a month-to-month basis. We include options that are reasonably certain to be exercised as part of the determination of lease terms. We may negotiate termination clauses in anticipation of any changes in market conditions, but generally these termination options are not exercised. Residual value guarantees are generally not included within our operating leases with the exception of some fleet leases. In addition to base rent payments, the leases may require us to pay directly for taxes and other non-lease components, such as insurance, maintenance and other operating expenses, which may be dependent on usage or vary month-to-month. Variable lease payments amounted to $59 million for the three months ended March 31, 2019. We have elected the practical expedient in the new standard to not separate non-lease components from lease components in calculating the amounts of ROU assets and lease liabilities for all underlying asset classes.

We determine if an arrangement is a lease at inception of the contract in accordance with guidance detailed in the new standard and we perform the lease classification test as of the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.



For operating leases, the ROU assets and liabilities are presented in our condensed consolidated balance sheet as follows:
(MILLIONS OF DOLLARS)	Balance Sheet Classification	Balance at March 31, 2019
ROU assets	Other noncurrent assets	$	1,280
Lease liabilities (short-term)	Other current liabilities	253
Lease liabilities (long-term)	Other noncurrent liabilities	1,043



Our total lease costs are as follows:
	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2019
Operating lease cost	$	100
Variable lease cost	59
Sublease income	(10		)
Total lease cost	$	149



Other supplemental information includes the following:
(MILLIONS OF DOLLARS)	Weighted-Average Remaining Contractual Lease Term (Years)	Three Months Ended
(MILLIONS OF DOLLARS)	Weighted-Average Remaining Contractual Lease Term (Years)	March 31, 2019
Operating leases	7.5
Weighted-average discount rate:
Operating leases		3.7	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		78
ROU assets obtained in exchange for new operating lease liabilities		46

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the condensed consolidated balance sheet as of March 31, 2019:
(MILLIONS OF DOLLARS)
Period	Operating Lease Liabilities
Next one year^(a)	$	287
1-2 years	241
2-3 years	207
3-4 years	175
4-5 years	144
Thereafter	435
Total undiscounted lease payments	1,489
Less: Imputed interest	193
Present Value of Minimum Lease Payments	1,296
Less: Current portion	253
Noncurrent portion	$	1,043


^(a)	Reflects lease payments due within 12 months subsequent to the balance sheet date.

In April 2018, we entered an agreement to lease space in an office building in New York City. We will relocate our global headquarters to this property with commencement expected in 2022. Our future minimum rental commitment under this 20-year lease is approximately $1.7 billion.

Prior to our adoption of the new lease standard, rental expense, net of sublease income, was $301 million in 2018, $314 million in 2017 and $292 million in 2016.



As of December 31, 2018, the future minimum rental commitments under non-cancelable operating leases follow:
(MILLIONS OF DOLLARS)	2019		2020		2021		2022		2023		After 2023
Lease commitments	$	300	$	252	$	210	$	267	$	248	$	2,040

Note 2. Assets and Liabilities Held for Sale

On December 19, 2018, we announced that we entered into a definitive agreement with GSK under which we and GSK have agreed to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture that will operate globally under the GSK Consumer Healthcare name. In exchange for contributing our Consumer Healthcare business, we will receive a 32% equity stake in the new company and GSK will own the remaining 68%. The transaction is expected to close in the second half of 2019, subject to customary closing conditions, including GSK shareholder approval, which occurred on May 8, 2019, and required regulatory approvals. Upon the closing of the transaction, we will deconsolidate our Consumer Healthcare business and recognize a gain for the difference in the fair value of our 32% equity stake in the new company and the carrying value of our Consumer Healthcare business. We will account for our 32% equity stake in the new company after closing of the transaction as an equity-method investment. Assets and liabilities associated with our Consumer Healthcare business were reclassified as held for sale in the consolidated balance sheets as of March 31, 2019 and December 31, 2018. The Consumer Healthcare business assets held for sale are reported in Assets held for sale and Consumer Healthcare business liabilities held for sale are reported in Liabilities held for sale. This includes the Consumer Healthcare business tax assets and liabilities related to fully dedicated consumer healthcare subsidiaries. The amounts associated with the Consumer Healthcare business, as well as other assets classified as held for sale consisted of the following:

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



(MILLIONS OF DOLLARS)	March 31, 2019		December 31, 2018
Assets Held for Sale
Cash and cash equivalents	$	61	$	32
Trade accounts receivable, less allowance for doubtful accounts	550		532
Inventories	563		538
Other current assets	57		56
PP&E	687		675
Identifiable intangible assets, less accumulated amortization	5,776		5,763
Goodwill	1,972		1,972
Noncurrent deferred tax assets and other noncurrent tax assets	59		54
Other noncurrent assets	105		57
Total Consumer Healthcare assets held for sale	9,830		9,678
Other assets held for sale^(a)	47		46
Assets held for sale	$	9,877	$	9,725

Liabilities Held for Sale

Trade accounts payable	$	335	$	406
Income taxes payable	55		39
Accrued compensation and related items	140		93
Other current liabilities	371		353
Pension benefit obligations, net	39		39
Postretirement benefit obligations, net	33		33
Noncurrent deferred tax liabilities	884		870
Other noncurrent liabilities	78		56
Total Consumer Healthcare liabilities held for sale	$	1,935	$	1,890


^(a)	Other assets held for sale consist of PP&E.

As a part of Pfizer, pre-tax income on a management business unit basis for the Consumer Healthcare business was $281 million for the three months ended March 31, 2019 and $265 million for the three months ended 2018.

Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

We incur significant costs in connection with acquiring, integrating and restructuring businesses and in connection with our global cost-reduction/productivity initiatives. For example:

•

In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and


•	In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems.

All of our businesses and functions may be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as groups such as information technology, shared services and corporate operations.

2017-2019 Initiatives and Organizing for Growth

During 2018, as we reviewed our business opportunities and challenges and the way in which we think about our business operations, we determined that at the start of our 2019 fiscal year, we would begin operating under our new commercial structure, which reorganizes our operations into three businesses––Biopharma, a science-based innovative medicines business; Upjohn, a global, primarily off-patent branded and generic established medicines business; and a Consumer Healthcare business (see Note 13). To operate effectively in this structure and position ourselves for future growth, we are focused on creating a simpler, more efficient operating structure within each business as well as the functions that support them. Beginning in the fourth quarter of 2018, we reviewed previously planned initiatives and new initiatives to ensure that there was alignment around our new structure and combined the 2017-2019 initiatives with our current Organizing for Growth initiatives to form one cohesive plan. Initiatives for the combined program include activities related to the optimization of our manufacturing plant network, the centralization of our corporate and platform functions, and the simplification and optimization of our operating

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

business structure and functions that support them. Through March 31, 2019, we incurred approximately $735 million associated with manufacturing optimization, and approximately $793 million associated with other activities.

In 2019, we expect restructuring, implementation and additional depreciation charges of about $800 million and, of that amount, we expect approximately 20% of the total charges will be non-cash.

Current-Period Key Activities

For the first three months of 2019, we incurred costs of $92 million composed of $64 million associated with the 2017-2019 and Organizing for Growth initiatives, $25 million associated with the integration of Hospira and $3 million associated with all other acquisition-related initiatives.



The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2019			April 1, 2018
Restructuring charges/(credits):
Employee terminations	$	(2	)	$	(8	)
Asset impairments	9			2
Exit costs	3			(3		)
Restructuring charges/(credits)^(a)	10			(9		)
Integration costs^(b)	36			52
Restructuring charges and certain acquisition-related costs	46			43
Net periodic benefit costs recorded in Other (income)/deductions––net	6			32
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows^(c):
Cost of sales	9			17
Selling, informational and administrative expenses	1			—
Research and development expenses	3			—
Total additional depreciation––asset restructuring	13			17
Implementation costs recorded in our condensed consolidated statements of income as follows^(d):
Cost of sales	13			16
Selling, informational and administrative expenses	9			17
Research and development expenses	4			6
Total implementation costs	26			39
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	92		$	131

^(a)

In the first quarter of 2019, restructuring charges are primarily associated with cost reduction initiatives and mainly represent asset write downs, partially offset by the reversal of previously recorded accruals for employee termination costs and asset impairments related to our acquisition of Hospira. In the three months ended April 1, 2018, restructuring credits were primarily due to the reversal of previously recorded accruals for exit costs related to our acquisition of Hospira, as well as cost-reduction and productivity initiatives not associated with acquisitions.

The restructuring activities for the three months ended March 31, 2019 are associated with the following:


•	Biopharma ($13 million charge); Upjohn ($13 million credit); and Other ($10 million charge).

The restructuring activities for the three months ended April 1, 2018 are associated with the following:


•	Total reportable segments ($14 million credit); and Other ($4 million charge). At the beginning of fiscal 2019, we revised our operating segments and are unable to directly associate these prior-period restructuring charges with the new individual segments.


^(b)	Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. In the first quarter of 2019 and 2018, integration costs were primarily related to our acquisition of Hospira.


^(c)	Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.


^(d)	Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



The following table provides the components of and changes in our restructuring accruals:
(MILLIONS OF DOLLARS)	Employee Termination Costs			Asset Impairment Charges			Exit Costs			Accrual
Balance, December 31, 2018^(a)	$	1,203		$	—		$	49		$	1,252
Provision/(Credit)	(2		)	9			3			10
Utilization and other^(b)	(145		)	(9		)	(15		)	(169		)
Balance, March 31, 2019^(c)	$	1,057		$	—		$	37		$	1,093


^(a)	Included in Other current liabilities ($823 million) and Other noncurrent liabilities ($428 million).


^(b)	Includes adjustments for foreign currency translation.


^(c)	Included in Other current liabilities ($669 million) and Other noncurrent liabilities ($424 million).

Note 4. Other (Income)/Deductions—Net



The following table provides components of Other (income)/deductions––net:
	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2019			April 1, 2018
Interest income^(a)	$	(66	)	$	(77	)
Interest expense^(a)	361			310
Net interest expense	295			233
Royalty-related income	(89		)	(96		)
Net gains on asset disposals	(1		)	(7		)
Net gains recognized during the period on investments in equity securities^(b)	(111		)	(118		)
Net realized losses on sales of investments in debt securities	—			3
Income from collaborations, out-licensing arrangements and sales of compound/product rights^(c)	(82		)	(142		)
Net periodic benefit credits other than service costs^(d)	(40		)	(82		)
Certain legal matters, net	4			(19		)
Certain asset impairments^(e)	150			—
Business and legal entity alignment costs^(f)	119			3
Net losses on early retirement of debt^(g)	138			3
Other, net^(h)	(291		)	42
Other (income)/deductions––net	$	92		$	(178	)


^(a)	Interest income decreased in the first quarter of 2019, primarily driven by a lower investment balance. Interest expense increased in the first quarter of 2019, primarily as a result of higher interest rates.


^(b)	The net gains on investments in equity securities for the first quarter of 2019 include gains of $43 million related to our investment in Allogene. The first quarter of 2018 included gains of $61 million related to our investment in ICU Medical stock. For additional information, see Note 7B.

^(c)

Includes income from upfront and milestone payments from our collaboration partners and income from out-licensing arrangements and sales of compound/product rights. In the first quarter of 2019, primarily includes $60 million in milestone income from Mylan Pharmaceuticals Inc. related to the FDA’s approval and launch of Wixela Inhub^®, a generic of Advair Diskus^® (fluticasone propionate and salmeterol inhalation powder). In the first quarter of 2018, primarily includes, among other things, a $75 million milestone payment received from Shire related to their first dosing of a patient in a Phase III clinical trial of a compound out-licensed by Pfizer to Shire for the treatment of ulcerative colitis, and a $40 million milestone payment from Merck in conjunction with the approval of ertugliflozin in the EU.


^(d)	For additional information, see Note 10.

^(e)

In the first quarter of 2019, primarily includes intangible asset impairment charges of $130 million composed of: (i) $90 million related to WRDM IPR&D, which relates to a pre-clinical stage asset from our acquisition of Bamboo Therapeutics, Inc. (Bamboo) for gene therapies for the potential treatment of patients with certain rare diseases; and (ii) $40 million related to a Biopharma developed technology right, acquired in connection with our acquisition of King, for government defense products. The WRDM IPR&D intangible asset impairment charge was the result of a determination to not use certain Bamboo IPR&D acquired in future rare disease development. The intangible asset impairment charge related to the Biopharma developed technology right reflects, among other things, updated commercial forecasts including manufacturing cost assumptions. In addition, the first quarter of 2019 includes other asset impairments of $20 million.

^(f)

In the first quarter of 2019, represents incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services. In the first quarter of 2018, represents expenses for changes to our infrastructure to align our commercial operations that existed through December 31, 2018, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business.


^(g)	In first quarter of 2019, represents net losses due to the early retirement of debt, inclusive of the related termination of cross-currency swaps.

^(h)

In the first quarter of 2019, includes among other things, credits of $72 million, reflecting the change in the fair value of contingent consideration, and dividend income of $64 million from our investment in ViiV. In the first quarter of 2018, primarily includes, among other things, charges of $102 million, reflecting the change in the fair value of contingent consideration, partially offset by dividend income of $59 million from our investment in ViiV.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



The following table provides additional information about the intangible assets that were impaired in the first quarter of 2019 in Other (income)/deductions:
	Fair Value^(a)								Three Months Ended March 31, 2019
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––IPR&D^(b)	$	—	$	—	$	—	$	—	$	90
Intangible assets––Developed technology right^(b)	—		—		—		—		40
Total	$	—	$	—	$	—	$	—	$	130


^(a)	The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis.

^(b)

Reflects intangible assets written down to fair value in the first three months of 2019. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

Our effective tax rate for continuing operations was 10.0% for the first quarter of 2019, compared to 13.5% for the first quarter of 2018.

The lower effective tax rate for the first quarter of 2019 in comparison with the same period in 2018 was primarily due to:


•	the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the enactment of the TCJA;


•	the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, as well as


•	an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years, and the expiration of certain statutes of limitations.

Our estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings for which we plan to elect, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, payment over eight years through 2026 is reported in Income taxes payable ($750 million) and the remaining liability is reported in Other taxes payable in our consolidated balance sheet as of March 31, 2019. The first installment of $750 million was paid in April 2019.

B. Tax Contingencies

We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution.

The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2015 are currently under audit. Tax years 2016-2019 are open, but not under audit. All other tax years are closed.

In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (2013-2019), Japan (2017-2019), Europe (2011-2019, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America (1998-2019, primarily reflecting Brazil) and Puerto Rico (2011-2019).

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

C. Tax Provision on Other Comprehensive Income



The following table provides the components of Tax provision on other comprehensive income:
	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2019			April 1, 2018
Foreign currency translation adjustments, net^(a)	$	27		$	(34	)
Unrealized holding gains/(losses) on derivative financial instruments, net	59			(4		)
Reclassification adjustments for (gains)/losses included in net income	(55		)	(7		)
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)	—			1
	4			(9		)
Unrealized holding gains on available-for-sale securities, net	5			20
Reclassification adjustments for (gains)/losses included in net income	1			(22		)
Reclassification adjustments for tax on unrealized gains from AOCI to Retained earnings^(c)	—			(45		)
	7			(47		)
Benefit plans: actuarial gains, net	—			38
Reclassification adjustments related to amortization	3			14
Reclassification adjustments related to settlements, net	—			9
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)	—			637
Other	(5		)	(20		)
	(2		)	677
Reclassification adjustments related to amortization of prior service costs and other, net	(11		)	(11		)
Reclassification adjustments related to curtailments of prior service costs and other, net	—			(7		)
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)	—			(144		)
Other	—			6
	(11		)	(155		)
Tax provision on other comprehensive income	$	25		$	432


^(a)	Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.


^(b)	For additional information on the adoption of a new accounting standard related to reclassification of certain tax effects from AOCI, see Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.


^(c)	For additional information on the adoption of a new accounting standard related to financial assets and liabilities, see Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.

Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests



The following table provides the changes, net of tax, in Accumulated other comprehensive loss:
	Net Unrealized Gains/(Losses)								Benefit Plans
(MILLIONS OF DOLLARS)	Foreign Currency Translation Adjustments			Derivative Financial Instruments		Available-For-Sale Securities			Actuarial Gains/(Losses)			Prior Service (Costs)/Credits and Other			Accumulated Other Comprehensive Income/(Loss)
Balance, December 31, 2018	$	(6,075	)	$	167	$	(68	)	$	(6,027	)	$	728		$	(11,275	)
Other comprehensive income/(loss)^(a)	304			—		44			40			(35		)	353
Balance, March 31, 2019	$	(5,772	)	$	167	$	(24	)	$	(5,986	)	$	693		$	(10,923	)


^(a)	Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $4 million loss for the first three months of 2019.

As of March 31, 2019, with respect to derivative financial instruments, the amount of unrealized pre-tax net gains on derivative financial instruments estimated to be reclassified into income within the next 12 months is approximately $345 million. The net gains are expected to be offset primarily by net losses from reclassification adjustments related to foreign currency exchange-denominated forecasted intercompany inventory sales and available-for-sale debt securities.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. Financial Instruments

A. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis



The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in Notes to Consolidated Financial Statements––Note 1E. Basis of Presentation and Significant Accounting Policies: Fair Value in Pfizer’s 2018 Financial Report:
	March 31, 2019						December 31, 2018
(MILLIONS OF DOLLARS)	Total		Level 1		Level 2		Total		Level 1		Level 2
Financial assets measured at fair value on a recurring basis:
Short-term investments
Classified as equity securities:
Money market funds	$	1,570	$	—	$	1,570	$	1,571	$	—	$	1,571
Equity^(a)	26		16		11		29		17		11
	1,597		16		1,581		1,600		17		1,583
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	5,406		—		5,406		9,609		—		9,609
Corporate and other	1,773		—		1,773		5,482		—		5,482
	7,180		—		7,180		15,091		—		15,091
Total short-term investments	8,776		16		8,760		16,691		17		16,674
Other current assets
Derivative assets:
Interest rate contracts	81		—		81		97		—		97
Foreign exchange contracts	482

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$40.64	5,552	$225,630

10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-07-01	Quarter: 2018-07-01
10-Q	2018-04-01	Quarter: 2018-04-01
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-10-01	Quarter: 2017-10-01
10-Q	2017-07-02	Quarter: 2017-07-02
10-Q	2017-04-02	Quarter: 2017-04-02
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-10-02	Quarter: 2016-10-02
10-Q	2016-07-03	Quarter: 2016-07-03
10-Q	2016-04-03	Quarter: 2016-04-03
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-27	Quarter: 2015-09-27
10-Q	2015-06-28	Quarter: 2015-06-28
10-Q	2015-03-29	Quarter: 2015-03-29
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-28	Quarter: 2014-09-28
10-Q	2014-06-29	Quarter: 2014-06-29
10-Q	2014-03-30	Quarter: 2014-03-30
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-06-27	Officers, Exhibits
8-K	2019-06-14	Regulation FD, Other Events, Exhibits
8-K	2019-04-30	Earnings, Exhibits
8-K	2019-04-25
8-K	2019-03-11	Other Events, Exhibits
8-K	2019-01-29	Earnings, Exhibits
8-K	2018-12-19	Enter Agreement
8-K	2018-12-07	Other Events
8-K	2018-10-30	Earnings, Exhibits
8-K	2018-09-27	Officers, Exhibits
8-K	2018-09-04	Other Events, Exhibits
8-K	2018-07-31	Earnings, Exhibits
8-K	2018-04-26
8-K	2018-03-02	Officers, Exhibits
8-K	2018-02-22	Officers, Exhibits
8-K	2018-01-30	Earnings, Exhibits

ULTA	Ulta Beauty	20,450
MAN	ManpowerGroup	5,540
FLNT	Fluent	540
LBY	Libbey	57
FSSN	Fision	0
DPWW	Diego Pellicer Worldwide	0
UGHL	Union Bridge Holdings	0
OW	Owens-Illinois Group	0
BWMG	Brownie's Marine Group	0
SKIN	Skinovation Pharmaceutical	0

EX-15	pfe-0331201910qxexhibit15.htm
EX-31.1	pfe-0331201910qxexhibit311.htm
EX-31.2	pfe-0331201910qxexhibit312.htm
EX-32.1	pfe-0331201910qxexhibit321.htm
EX-32.2	pfe-0331201910qxexhibit322.htm