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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2015 Financial Report
111
Note 13. Share-Based Payments
Our compensation programs can include share-based payments, in the form of Restricted Stock Units (RSUs), stock options, Portfolio
Performance Shares (PPSs), Total Shareholder Return Units (TSRUs), Performance Share Awards (PSAs) and restricted stock grants.
The 2014 Stock Plan (2014 Plan) replaced and superseded the 2004 Stock Plan (2004 Plan), as amended and restated. The 2014 Plan
provides for 520 million shares to be authorized for grants, plus any shares remaining available for grant under the 2004 Plan as of April 24,
2014 (the carryforward shares). In addition, the 2014 Plan provides that the number of stock options, Stock Appreciation Rights (SARs) (known
as TSRUs), RSUs, restricted stock awards or other performance-based awards that may be granted to any one individual during any 36-month
period is limited to 20 million shares, and that RSUs, PPSs, PSAs and restricted stock grants count as three shares, while stock options and
TSRUs count as one share, toward the maximum shares available under the 2014 plan. The 2004 Plan provided that the number of stock
options, TSRUs or other performance-based awards granted to any one individual during any 36-month period was limited to 8 million shares,
and that RSUs, PPSs, PSAs and restricted stock grants counted against the maximum available shares as two shares, while stock options and
TSRUs counted as one share. As of December 31, 2015, 494 million shares were available for award.
Although not required to do so, we have used authorized and unissued shares and, to a lesser extent, treasury stock to satisfy our obligations
under these programs.
A. Impact on Net Income
The following table provides the components of share-based compensation expense and the associated tax benefit (including those reported
as part of discontinued operations in 2013):
Year Ended December 31,
(MILLIONS OF DOLLARS) 2015 2014 2013
Restricted Stock Units $306 $270 $249
Stock Options 165 150 140
Portfolio Performance Shares 147 96 56
Total Shareholder Return Units 36 37 37
Performance Share Awards 11 30 34
Directors’ compensation 437
Share-based payment expense 669 586 523
Tax benefit for share-based compensation expense (198)(179)(173)
Share-based payment expense, net of tax $471 $407 $350
Amounts capitalized as part of inventory cost were not significant for any period presented.
B. Restricted Stock Units (RSUs)
RSUs are awarded to select employees and, when vested, entitle the holder to receive a specified number of shares of Pfizer common stock,
including shares resulting from dividend equivalents paid on such RSUs. For RSUs granted during the periods presented, in virtually all
instances, the units vest after three years of continuous service from the grant date.
We measure the value of RSU grants as of the grant date using the closing price of Pfizer common stock. The values determined through this
fair value methodology generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and
administrative expenses, and/or Research and development expenses, as appropriate.
The following table summarizes all RSU activity during 2015:
Shares
(Thousands)
Weighted-Average
Grant-Date Fair Value
Per Share
Nonvested, December 31, 2014 29,936 $26.99
Granted 10,602 34.40
Vested (10,802) 22.04
Reinvested dividend equivalents 961 34.08
Forfeited (1,562) 31.32
Nonvested, December 31, 2015 29,135 $31.53