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Financial Review
Pfizer Inc. and Subsidiary Companies
34
2015 Financial Report
In connection with our acquisition of Hospira, we are focusing our efforts on achieving an appropriate cost structure for the combined
company. We expect to generate $800 million of annual cost synergies by 2018 in connection with the Hospira acquisition. Based on our past
experience, the one-time costs to generate the synergies are expected to be approximately $1 billion (not including costs of $215 million in
2015 associated with the return of acquired in-process research and development rights), incurred for up to a three-year period post-
acquisition.
In early 2014, we announced that we would be incurring costs in 2014-2016 related to new programs: our new global commercial structure
reorganization and additional cost-reduction/productivity initiatives. We also have an ongoing manufacturing plant network rationalization and
optimization initiative underway. For information about these programs and expected total costs, see Notes to Consolidated Financial
Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives. The
expected ongoing annual cost savings associated with the above-mentioned programs (but not including expected cost savings associated
with the Hospira acquisition), in the aggregate, are estimated to be approximately $2.4 billion by the end of 2016.
The expected costs and cost savings in 2016 associated with these activities, as well as the Hospira acquisition, are reflected in our financial
guidance for 2016. See also the “Our Financial Guidance for 2016” section of this Financial Review.
In addition to these major initiatives, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in
light of the losses of exclusivity and the expiration of collaborative arrangements for various products.
Other (Income)/Deductions––Net
Year Ended December 31, % Change
(MILLIONS OF DOLLARS) 2015 2014 2013 15/14 14/13
Other (income)/deductions—net $ 2,860 $ 1,009 $ (532) **
* Calculation not meaningful.
For information about the components of Other (income)/deductions—net, see Notes to Consolidated Financial Statements—Note 4. Other
(Income)/Deductions—Net.
See also the “Analysis of Operating Segment Information” section of this Financial Review.
PROVISION FOR TAXES ON INCOME
Year Ended December 31, % Change
(MILLIONS OF DOLLARS) 2015 2014 2013 15/14 14/13
Provision for taxes on income $1,990 $3,120 $4,306 (36)(28)
Effective tax rate on continuing operations 22.2%25.5%27.4%
In all three years presented, our effective tax rate on continuing operations was impacted by favorable audit settlements and from the
expiration of certain statutes of limitations in multiple jurisdictions covering various periods, among other factors. For details about these
discrete elements that impacted our tax provisions, see Notes to Consolidated Financial Statements—Note 5A. Tax Matters: Taxes on Income
from Continuing Operations.
2015 v. 2014
The lower effective tax rate in 2015 compared to 2014 was primarily the result of:
• the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business;
• the non-recurrence of the non-deductibility of the $215 million charge to account for an additional year of the Branded Prescription Drug
Fee in accordance with the final regulations issued in the third quarter of 2014 by the Internal Revenue Service (IRS); and
• the tax benefits associated with certain tax initiatives,
partially offset by:
• the non-deductibility of a foreign currency loss related to Venezuela; and
• the non-deductibility of a charge for the agreement in principle to resolve claims relating to Protonix.
2014 v. 2013
The lower effective tax rate in 2014 compared to 2013 was primarily the result of:
• the non-recurrence of the unfavorable tax rate associated with patent litigation settlement income of $1.3 billion recorded in 2013;
• the non-recurrence of the non-deductibility of the $292 million of goodwill derecognized and the jurisdictional mix of the other intangible
assets divested as part of the transfer of certain product rights to Hisun Pfizer recorded in 2013;
• the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; and