Pfizer 2015 Annual Report Download - page 79

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
78
2015 Financial Report
Hospira’s principal business was the development, manufacture, marketing and distribution of generic acute-care and oncology injectables,
biosimilars and integrated infusion therapy and medication management systems. Hospira’s broad portfolio of products is used by hospitals
and alternate site providers, such as clinics, home healthcare providers and long-term care facilities. We believe our acquisition of Hospira has
strengthened our GEP business, as GEP now has a broadened portfolio of generic and branded sterile injectables, marketed biosimilars,
medication management systems and biosimilars in development.
The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of the acquisition date. The
estimated values are not yet finalized (see below) and are subject to change, which could be significant. We will finalize the amounts
recognized as we obtain the information necessary to complete the analyses. We expect to finalize these amounts as soon as possible but no
later than one year from the acquisition date.
(MILLIONS OF DOLLARS)
Amounts Recognized
as of Acquisition Date
(Provisional)
Working capital, excluding inventories(a) $274
Inventories 1,924
Property, plant and equipment 2,410
Identifiable intangible assets, excluding in-process research and development(b) 8,270
In-process research and development 995
Other noncurrent assets 408
Long-term debt (1,928)
Benefit obligations (117)
Net income tax accounts(c) (3,394)
Other noncurrent liabilities (39)
Total identifiable net assets 8,803
Goodwill 7,284
Net assets acquired/total consideration transferred $16,087
(a) Includes cash and cash equivalents, short-term investments, accounts receivable, other current assets, assets held for sale, accounts payable and other current
liabilities.
(b) Comprised of finite-lived developed technology rights with a weighted-average life of approximately 17 years ($7.7 billion) and other finite-lived identifiable
intangible assets with a weighted-average life of approximately 12 years ($550 million).
(c) As of the acquisition date, included in Current tax assets ($79 million), Noncurrent deferred tax assets and other noncurrent tax assets ($25 million), Income
taxes payable ($5 million), Noncurrent deferred tax liabilities ($3.4 billion) and Other taxes payable ($114 million, including accrued interest of $5 million).
The following items are subject to change:
• Amounts for certain balances included in working capital (excluding inventories), certain investments and certain legal contingencies,
pending receipt of certain information that could affect provisional amounts recorded. We do not believe any adjustments for legal
contingencies will have a material impact on our consolidated financial statements.
• Amounts for intangibles, inventory and property, plant and equipment, pending finalization of valuation efforts for acquired intangible
assets as well as the completion of certain physical inventory counts and the confirmation of the physical existence and condition of
certain property, plant and equipment assets.
• Amounts for income tax assets, receivables and liabilities, pending the filing of Hospira pre-acquisition tax returns and the receipt of
information including but not limited to that from taxing authorities, which may change certain estimates and assumptions used.
As of the acquisition date, the fair value of accounts receivable approximated the book value acquired. The gross contractual amount
receivable was $570 million, of which $7 million was not expected to be collected.
In the ordinary course of business, Hospira incurs liabilities for environmental, legal and tax matters, as well as guarantees and
indemnifications. These matters may include contingencies. Except as specifically excluded by the relevant accounting standard,
contingencies are required to be measured at fair value as of the acquisition date if the acquisition-date fair value of the asset or liability arising
from a contingency can be determined. If the acquisition-date fair value of the asset or liability cannot be determined, the asset or liability
would be recognized at the acquisition date if both of the following criteria are met: (i) it is probable that an asset existed or that a liability had
been incurred at the acquisition date, and (ii) the amount of the asset or liability can be reasonably estimated.
• Environmental Matters—In the ordinary course of business, Hospira incurs liabilities for environmental matters such as remediation work,
asset retirement obligations and environmental guarantees and indemnifications.
• Legal Matters—Hospira is involved in various legal proceedings, including product liability, patent, commercial, antitrust and environmental
matters and government investigations, of a nature considered normal to its business. The contingencies arising from legal matters are not
significant to Pfizer’s financial statements.
• Tax Matters—In the ordinary course of business, Hospira incurs liabilities for income taxes. Income taxes are exceptions to both the
recognition and fair value measurement principles associated with the accounting for business combinations. Reserves for income tax
contingencies continue to be measured under the benefit recognition model as previously used by Hospira (see Note 1O). Net liabilities for
income taxes approximated $3.4 billion as of the acquisition date, which includes $112 million for uncertain tax positions. The net tax liability
includes the recording of additional adjustments of approximately $3.3 billion for the tax impact of fair value adjustments and approximately
$744 million for income tax matters that we intend to resolve in a manner different from what Hospira had planned or intended. For