This summary is based on the third quarter fiscal 2007 earnings call conducted by Pfizer Inc. (PFE) on October 18, 2007.
Management:
SVP of IR: Amal Naj
Chairman and CEO: Jeff Kindler
Vice Chairman: David Shedlarz
CFO: Frank D''Amelio
Key Investors Issues
- EPS were 11 cents per share compared to 46 cents per share last year.
- Net income was $761 million compared to $3.36 billion a year earlier.
- Revenue was $11.99 million compared to $12.28 million a year ago.
Third Quarter Highlights
Revenues were $12 billion, a 2% decrease from the same quarter of last year.
The decline reflects the loss of US exclusivity of Zoloft and Norvasc.
Zoloft lost US exclusivity in June 2006, a generic competition did not enter the marketplace until August of 2006, while Norvasc lost U.S. exclusivity in March of 2007, six months earlier than expected.
In addition, Lipitor revenues declined modestly, as the product continues to experience intense competition from branded and generic products in the statin market.
- On a positive note, revenues were favorably impacted by the strong results of new products, as well as, foreign exchange, which added approximately $300 million to top-line.
- Also from a comparison perspective, in the third quarter of 2006, the company had a one-time reversal of the sales deduction accrual of approximately $170 million. This was due to a favorable development and a pricing dispute in US, which was noted in third quarter last year.
Reported net income of $761 million was down 77% from last year.
- EPS of 11 cents per share was down 76% from last year''s 46 cents per share.
- Adjusted income was $4 billion up 1% from the same period last year and adjusted EPS was up 7% to 58 cents per share from 54 cents per share last year. The sharp decline in third quarter 2007 reported net income is primarily a result of the items impacting revenue, as well as, $2.8 billion of pre-tax charges related to the write-off of intangibles, inventory, and fixed assets associated with exiting Exubera, as well as, the accrual of other exit.
- Reported net income and reported EPS were negatively impacted by cost incurred in connection with cost-reduction initiatives, including restructuring and implementation cost in the creating of more efficient, effective and aligned global organization.
- On an adjusted basis, which has reported income and EPS, excluding purchase accounting adjustments, acquisition-related cost, discontinued operations, and certain items, third quarter earnings performance improved despite the revenue decline given year-over-year decrease in total cost, higher interest income the favorable impact foreign exchange.
- Adjusted EPS was favorably impacted by share purchase program.
The company incurred $437 million restructuring charges compared to $245 million last year.
These costs are primarily associated with employee termination cost and asset impairments.
Additionally, the company incurred $373 million in implementation cost compared to $182 million last year. These costs are primarily associated with sites that will be closing and are recorded in cost of sales, research and development, and SI&A expenses. These are more fully detailed in the supplemental information that accompanies the earnings release.
Specific cost reduction initiatives are varied and stand most divisions, functions, markets and sites across Pfizer, broad categories of activity, sales force reductions, manufacturing and research site closures and off-shoring and out-sourcing.
The company reduced US sales force by about 20% and is implementing similar reductions in most markets.
Sales force restructurings have been completed in a host of other markets as well.
