Pfizer 2013 Annual Report Download - page 13

Financial Review
Pfizer Inc. and Subsidiary Companies
12
2013 Financial Report
The following table provides a reconciliation of 2014 Adjusted income and Adjusted diluted EPS guidance to the 2014 Reported net income
attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:
Full-Year 2014 Guidance
(BILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) Net Income(a) Diluted EPS(a)
Adjusted income/diluted EPS(b) guidance $14.1 - $14.8 $2.20 - $2.30
Purchase accounting impacts of transactions completed as of December 31, 2013 (2.8) (0.43)
Restructuring and implementation costs and other (1.0 - 1.3) (0.15 - 0.20)
Reported net income attributable to Pfizer Inc./diluted EPS guidance $10.0 - $11.0 $1.57 - $1.72
(a) Does not assume the completion of any business-development transactions not completed as of December 31, 2013, including any one-time upfront payments
associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of December 31,
2013.
(b) For an understanding of Adjusted income and Adjusted diluted EPS (which are non-GAAP financial measures), see the “Adjusted Income” section of this
Financial Review.
The exchange rates assumed in connection with the 2014 financial guidance are as of mid-January 2014.
Adjusted and Reported diluted EPS guidance assumes diluted weighted-average shares outstanding of approximately 6.4 billion shares.
In addition, revenues and cost of sales from the transitional manufacturing and supply agreements with Zoetis have been excluded from the
applicable Adjusted components of the financial guidance.
For additional information about our actual and anticipated costs and cost savings associated with our cost-reduction initiatives and our new
global commercial structure, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-
Reduction/Productivity Initiatives” section of this Financial Review.
Our 2014 financial guidance is subject to a number of factors and uncertainties—as described in the “Our Operating Environment”, “Our
Strategy” and “Forward-Looking Information and Factors That May Affect Future Results” sections of this Financial Review and Part I, Item 1A,
“Risk Factors,” of our 2013 Annual Report on Form 10-K.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING
ESTIMATES
For a description of our significant accounting policies, see Notes to Consolidated Financial Statements––Note 1. Basis of Presentation and
Significant Accounting Policies.
Of these policies, the following are considered critical to an understanding of Pfizer’s Consolidated Financial Statements as they require the
application of the most difficult, subjective and complex judgments: (i) Acquisitions (Note 1D); (ii) Fair Value (Note 1E); (iii) Revenues (Note
1G); (iv) Asset Impairments (Note 1K); (v) Benefit Plans (Note 1P); and (vi) Contingencies, including Tax Contingencies (Note 1O) and Legal
and Environmental Contingencies (Note 1Q).
Below are some of our critical accounting estimates. See also Estimates and Assumptions (Note 1C) for a discussion about the risks
associated with estimates and assumptions.
Acquisitions and Fair Value
For a discussion about the application of Fair Value to our recent acquisitions, see Notes to Consolidated Financial Statements—Note 2A.
Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.
For a discussion about the application of Fair Value to our investments, see Notes to Consolidated Financial Statements—Note 7A. Financial
Instruments: Selected Financial Assets and Liabilities.
For a discussion about the application of Fair Value to our benefit plan assets, see Notes to Consolidated Financial Statements––Note 11D.
Pension and Postretirement Benefit Plans and Defined Contribution Plans: Plan Assets.
For a discussion about the application of Fair Value to our asset impairments, see “Asset Impairment Reviews” below.
Revenues
As is typical in the biopharmaceutical industry, our gross product sales are subject to a variety of deductions that are generally estimated and
recorded in the same period that the revenues are recognized and primarily represent rebates and discounts to government agencies,
wholesalers, distributors and managed care organizations with respect to our pharmaceutical products. See also Notes to Consolidated
Financial Statements––Note 1G. Basis of Presentation and Significant Accounting Policies: Revenues for a detailed description of the nature
of our sales deductions and our procedures for estimating our obligations. For example:
• For Medicaid, Medicare and performance-based contract rebates, we use our experience ratio of rebates paid and actual prescriptions
written during prior quarters, which may be adjusted to better match our current experience or our expected future experience.