01—Abstract
Summary
Summary of the 10-K/A filed March 1, 2013. Cited figures are marked; the original filing is the authoritative source.
This filing is Amendment No. 1 (Form 10-K/A) to Pfizer's 2012 Annual Report, filed March 1, 2013.
It was filed solely to correct typographical errors in the headers of Exhibit 13 (the 2012 Financial Report) on the cover page and pages 49-120; it does not change any financial results or other information in the original 10-K filed February 28, 2013. The substantive content therefore is the 2012 Financial Report included in the exhibit. For investors, the key figures are: 2012 revenues of $59.0 billiona (down 10% from $65.3 billion, driven by roughly $7.7 billion, or 12%, of revenue lost to loss of exclusivity, most notably Lipitor), reported net income attributable to Pfizer of $14.6 billion (EPS of $1.94 diluted, boosted by a roughly $4.8 billion after-tax gain on the sale of the Nutrition business to Nestlé for $11.85 billion), and non-GAAP Adjusted diluted EPS of $2.19 (down from $2.27).
Management guided 2013 to revenues of $56.2b-58.2 billion, reported diluted EPS of $1.50-1.65, and Adjusted diluted EPS of $2.20-2.30, and said it would update guidance in April 2013 to reflect the February 2013 IPO of about 19.8% of Zoetis, the animal health unit. Pfizer retains roughly 80% of Zoetis and has said it may later distribute the remaining stake tax-free. Cash from operations fell to $17.1 billion from $20.2 billion.
The company repurchased about $8.2 billionc of stock in 2012 and holds a new $10 billion buyback authorization, with roughly $11.8 billion of total remaining authorization at year-end. The quarterly dividend was raised to $0.24 for Q1 2013 from $0.22.
Investors should also note the large 2013-2016 pipeline of patent expirations (Aricept, Spiriva, Enbrel's U.S. and Canada co-promotion ending October 2013, Rebif, Detrol LA and others) and significant legal charges in 2012 (about $2.2 billiond in certain legal matters, including Rapamune, Celebrex/BYU, and Chantix), plus continuing exposure to asbestos (Quigley), hormone-replacement therapy, and Lipitor antitrust litigation. Long-term debt was $31.0 billion, against $81.3 billion of Pfizer shareholders' equity.
02—Key points
Key Highlights
- 2012 revenues fell 10% to $59.0 billion, with about $7.7 billion (12%) of lost revenue from loss of exclusivity, principally Lipitor (U.S. Lipitor sales fell sharply after generic entry in May 2012).
- Reported net income attributable to Pfizer was $14.6 billion ($1.94 diluted EPS), inflated by the Nutrition divestiture gain (about $4.8 billion after tax); non-GAAP Adjusted diluted EPS was $2.19, down 4% from $2.27.
- 2013 guidance: revenues of $56.2-58.2 billion, reported diluted EPS of $1.50-1.65, Adjusted diluted EPS of $2.20-2.30; update planned for April 2013 to reflect the Zoetis IPO.
- Zoetis IPO completed February 6, 2013 (19.8% sold, about $2.5 billion of proceeds used to retire commercial paper; roughly $6.1 billion of total cash received, of which about $2.5 billion is restricted to debt repayment, dividends or buybacks through mid-2014).
- Capital returns: $8.2 billion of share repurchases and $6.5 billion of dividends in 2012; new $10 billion buyback authorized November 2012; quarterly dividend raised to $0.24 for Q1 2013.
- Cash from operations declined to $17.1 billion from $20.2 billion, reflecting Lipitor-related lost revenue and legal payments; balance sheet remained strong with $10.4 billion cash, $22.3 billion short-term and $14.1 billion long-term investments, and investment-grade ratings (A1/AA).
- Amendment purpose: this 10-K/A corrects only typographical errors in Exhibit 13 headers; no financial figures were changed.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Pfizer Inc kept $0.27.
- Revenue$54.66B100.0%
- Cost of revenue−$9.82B18.0%
- Gross profit$44.84B82.0%
- Operating costs−$35.84B65.6%
- Operating income$8.99B16.5%
- Interest, other & tax$5.58B10.2%
- Net income$14.57B26.7%
Where FY2012 revenue went
$54.66B- Other operating costs: $20.67B, 38% of revenue
- SG&A: $15.17B, 28% of revenue
- Cost of revenue: $9.82B, 18% of revenue
- Operating income: $8.99B, 16% of revenue
Kept 16% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2012filed March 1, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $54.66B$61.03B | −10.4% |
| Cost of Revenue | $9.82B$12.50B | −21.4% |
| Gross Profit | $44.84B$48.53B | −7.6% |
| SG&A Expenses | $15.17B$17.58B | −13.7% |
| Operating Income | $8.99B$7.82B | +15.0% |
| Interest Expense | $1.52B$1.68B | −9.5% |
| Net Income | $14.57B$10.01B | +45.6% |
| EPS (Basic) | $1.96$1.28 | +53.1% |
| EPS (Diluted) | $1.94$1.27 | +52.8% |
| Shares Outstanding (Basic) | 7.44B7.82B | −4.8% |
| Shares Outstanding (Diluted) | 7.51B7.87B | −4.6% |
05—Questions
Frequently Asked Questions
Does this amendment change Pfizer's reported 2012 financial results?
No. The amendment was filed solely to fix typographical errors in the headers of Exhibit 13 (the 2012 Financial Report) on the cover page and pages 49-120. It states that it does not amend or update any other information in the original 10-K filed February 28, 2013, so the financial results are the same as originally reported.
Why did Pfizer's revenue and earnings decline in 2012?
Revenues fell 10% to $59.0 billion, mainly because of loss of exclusivity on products such as Lipitor, which accounted for about $5.6 billion of the decline in that product alone, plus unfavorable foreign exchange of about $1.5 billion. Adjusted EPS fell 4% to $2.19 despite lower costs, while reported net income rose sharply due to the one-time gain on the Nutrition sale.
What is the outlook for 2013 and how might the Zoetis IPO affect it?
Pfizer guided 2013 revenues of $56.2-58.2 billion, reported diluted EPS of $1.50-1.65, and Adjusted diluted EPS of $2.20-2.30. The guidance includes a full year of Zoetis, and Pfizer said it would update the guidance in April 2013 to reflect the February 2013 IPO of about 19.8% of Zoetis. Investors should expect the guidance to change because Zoetis is now partly outside Pfizer's ownership.
What are the biggest upcoming revenue risks for Pfizer?
Key risks include Aricept's 23mg tablet losing U.S. exclusivity in July 2013, the Enbrel U.S./Canada co-promotion ending in October 2013 followed by a 36-month royalty period, the Rebif co-promotion (disputed with Serono, expiring end of 2013 or 2015), Spiriva's graduated decline through 2016, and generic Detrol LA in early 2014. Management also cites pricing pressure in Europe and Japan and U.S. healthcare reform effects.
How much cash is Pfizer returning to shareholders and what is the balance sheet position?
In 2012 Pfizer repurchased about $8.2 billion of stock and paid $6.5 billion in dividends. A new $10 billion buyback became effective November 30, 2012, leaving about $11.8 billion of total authorization at year-end. Long-term debt was $31.0 billion against $81.3 billion of Pfizer shareholders' equity, and the company held $46.9 billion in cash and investments, with long-term debt rated A1 (Moody's) and AA (S&P).
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