DELAWARE (State of Incorporation) | 13-5315170 (I.R.S. Employer Identification No.) |
YES X | NO ___ |
YES X | NO ___ |
YES ____ | NO X |
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Condensed Consolidated Statements of Income for the three and nine months ended October 2, 2016 and September 27, 2015 | |
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 2, 2016 and September 27, 2015 | |
Condensed Consolidated Balance Sheets as of October 2, 2016 and December 31, 2015 | |
Condensed Consolidated Statements of Cash Flows for the nine months ended October 2, 2016 and September 27, 2015 | |
2015 Financial Report | Financial Report for the fiscal year ended December 31, 2015, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 |
2015 Form 10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 2015 |
AAV | Adeno-Associated Virus |
ACA | U.S. Patient Protection and Affordable Care Act, as amended by the Health Care Reconciliation Act |
ACIP | Advisory Committee on Immunization Practices |
ALK | anaplastic lymphoma kinase |
Allergan | Allergan plc |
Alliance revenues | revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us |
AM-Pharma | AM-Pharma B.V. |
Anacor | Anacor Pharmaceuticals, Inc. |
Astellas | Astellas Pharma Inc. |
ASU | Accounting Standards Update |
ATM-AVI | aztreonam-avibactam |
Bamboo | Bamboo Therapeutics, Inc. |
Baxter | Baxter International Inc. |
BMS | Bristol-Myers Squibb Company |
CDC | U.S. Centers for Disease Control and Prevention |
Celltrion | Celltrion Inc. and Celltrion Healthcare, Co., Ltd. (collectively) |
Developed Markets | U.S., Western Europe, Japan, Canada, Australia, Scandinavia, South Korea, Finland and New Zealand |
DEUs | Dividend Equivalent Units |
DVT | deep vein thrombosis |
EEA | European Economic Area |
EH | Essential Health |
EMA | European Medicines Agency |
Emerging Markets | Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey |
EPS | earnings per share |
EU | European Union |
Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
FDA | U.S. Food and Drug Administration |
GAAP | Generally Accepted Accounting Principles |
GHD | growth hormone deficiency |
GIST | gastrointestinal stromal tumors |
GIP | Global Innovative Pharmaceutical segment |
GPD | Global Product Development organization |
GS&Co. | Goldman, Sachs & Co. |
HER2- | human epidermal growth factor receptor 2-negative |
hGH-CTP | human growth hormone |
HIS | Hospira Infusion Systems |
Hisun Pfizer | Hisun Pfizer Pharmaceuticals Company Limited |
Hospira | Hospira, Inc. |
HR+ | hormone receptor-positive |
ICU Medical | ICU Medical Inc. |
IH | Innovative Health |
InnoPharma | InnoPharma, Inc. |
IPR&D | in-process research and development |
IRC | Internal Revenue Code |
IRS | U.S. Internal Revenue Service |
Janssen | Janssen Biotech Inc. |
King | King Pharmaceuticals, Inc. |
LDL | low density lipoprotein |
Lilly | Eli Lilly & Company |
LOE | loss of exclusivity |
MCO | managed care organization |
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
MDV | multi-dose vial |
Medivation | Medivation, Inc. |
Moody’s | Moody’s Investors Service |
mRCC | metastatic renal cell carcinoma |
NDA | new drug application |
NOAC | Novel Oral Anticoagulant |
NovaQuest | NovaQuest Co-Investment Fund II, L.P. or NovaQuest Co-Investment Fund V, L.P., as applicable |
NSCLC | non-small cell lung cancer |
NYSE | New York Stock Exchange |
OPKO | OPKO Health, Inc. |
OTC | over-the-counter |
PBM | Pharmacy Benefit Manager |
PCS | Pfizer CenterOne (previously known as Pfizer CentreSource) |
PDUFA | Prescription Drug User Fee Act |
PE | pulmonary embolism |
PGS | Pfizer Global Supply |
Pharmacia | Pharmacia Corporation |
PP&E | Property, plant & equipment |
PTUs | Profit Units |
Quarterly Report on Form 10-Q | Quarterly Report on Form 10-Q for the quarterly period ended October 2, 2016 |
RAR | Revenue Agent’s Report |
RCC | renal cell carcinoma |
recAP | recombinant human Alkaline Phosphatase |
R&D | research and development |
RPI | RPI Finance Trust |
Sandoz | Sandoz, Inc., a division of Novartis AG |
SEC | U.S. Securities and Exchange Commission |
SGA | small for gestational age |
S&P | Standard and Poor’s |
Teuto | Laboratório Teuto Brasileiro S.A. |
TSRUs | Total Shareholder Return Units |
U.K. | United Kingdom |
U.S. | United States |
VAT | value added tax |
VOC | Global Vaccines, Oncology and Consumer Healthcare segment |
WRD | Worldwide Research and Development |
Zoetis | Zoetis Inc. |
Three Months Ended | Nine Months Ended | |||||||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Revenues | $ | 13,045 | $ | 12,087 | $ | 39,196 | $ | 34,804 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales(a) | 3,085 | 2,219 | 9,111 | 6,238 | ||||||||||||
Selling, informational and administrative expenses(a) | 3,559 | 3,270 | 10,414 | 9,761 | ||||||||||||
Research and development expenses(a) | 1,881 | 1,722 | 5,360 | 5,342 | ||||||||||||
Amortization of intangible assets | 968 | 937 | 2,934 | 2,748 | ||||||||||||
Restructuring charges and certain acquisition-related costs | 531 | 581 | 988 | 727 | ||||||||||||
Other (income)/deductions––net | 1,417 | 661 | 2,815 | 670 | ||||||||||||
Income from continuing operations before provision for taxes on income | 1,604 | 2,697 | 7,575 | 9,319 | ||||||||||||
Provision for taxes on income | 284 | 567 | 1,194 | 2,178 | ||||||||||||
Income from continuing operations | 1,320 | 2,130 | 6,380 | 7,141 | ||||||||||||
Discontinued operations––net of tax | — | 8 | — | 14 | ||||||||||||
Net income before allocation to noncontrolling interests | 1,319 | 2,139 | 6,380 | 7,155 | ||||||||||||
Less: Net income attributable to noncontrolling interests | — | 9 | 25 | 23 | ||||||||||||
Net income attributable to Pfizer Inc. | $ | 1,320 | $ | 2,130 | $ | 6,355 | $ | 7,132 | ||||||||
Earnings per common share––basic: | ||||||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.22 | $ | 0.34 | $ | 1.04 | $ | 1.15 | ||||||||
Discontinued operations––net of tax | — | — | — | — | ||||||||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 0.22 | $ | 0.35 | $ | 1.04 | $ | 1.15 | ||||||||
Earnings per common share––diluted: | ||||||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.22 | $ | 0.34 | $ | 1.03 | $ | 1.14 | ||||||||
Discontinued operations––net of tax | — | — | — | — | ||||||||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 0.21 | $ | 0.34 | $ | 1.03 | $ | 1.14 | ||||||||
Weighted-average shares––basic | 6,066 | 6,168 | 6,095 | 6,176 | ||||||||||||
Weighted-average shares––diluted | 6,138 | 6,243 | 6,164 | 6,259 | ||||||||||||
Cash dividends paid per common share | $ | 0.30 | $ | 0.28 | $ | 0.90 | $ | 0.84 |
(a) | Excludes amortization of intangible assets, except as disclosed in Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets. |
Three Months Ended | Nine Months Ended | |||||||||||||||
(MILLIONS OF DOLLARS) | October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Net income before allocation to noncontrolling interests | $ | 1,319 | $ | 2,139 | $ | 6,380 | $ | 7,155 | ||||||||
Foreign currency translation adjustments, net | 418 | (535 | ) | 999 | (2,170 | ) | ||||||||||
418 | (535 | ) | 999 | (2,170 | ) | |||||||||||
Unrealized holding losses on derivative financial instruments, net | (126 | ) | (217 | ) | (970 | ) | (80 | ) | ||||||||
Reclassification adjustments for realized (gains)/losses(a) | 150 | (35 | ) | 280 | (545 | ) | ||||||||||
24 | (251 | ) | (690 | ) | (625 | ) | ||||||||||
Unrealized holding gains/(losses) on available-for-sale securities, net | 261 | 25 | 740 | (502 | ) | |||||||||||
Reclassification adjustments for realized (gains)/losses(a) | (112 | ) | 69 | (129 | ) | 815 | ||||||||||
149 | 94 | 611 | 312 | |||||||||||||
Benefit plans: actuarial losses, net | (82 | ) | (144 | ) | (101 | ) | (122 | ) | ||||||||
Reclassification adjustments related to amortization(b) | 140 | 140 | 418 | 409 | ||||||||||||
Reclassification adjustments related to settlements, net(b) | 28 | 36 | 76 | 98 | ||||||||||||
Other | 69 | (10 | ) | 51 | 120 | |||||||||||
155 | 23 | 444 | 506 | |||||||||||||
Benefit plans: prior service credits and other, net | 95 | — | 182 | 506 | ||||||||||||
Reclassification adjustments related to amortization(b) | (45 | ) | (46 | ) | (127 | ) | (115 | ) | ||||||||
Reclassification adjustments related to curtailments, net(b) | (8 | ) | (4 | ) | (14 | ) | (21 | ) | ||||||||
Other | 6 | (1 | ) | 12 | (3 | ) | ||||||||||
48 | (51 | ) | 54 | 366 | ||||||||||||
Other comprehensive income/(loss), before tax | 794 | (721 | ) | 1,418 | (1,611 | ) | ||||||||||
Tax provision/(benefit) on other comprehensive income/(loss)(c) | 116 | (65 | ) | 111 | 267 | |||||||||||
Other comprehensive income/(loss) before allocation to noncontrolling interests | $ | 678 | $ | (656 | ) | $ | 1,307 | $ | (1,878 | ) | ||||||
Comprehensive income before allocation to noncontrolling interests | $ | 1,997 | $ | 1,483 | $ | 7,687 | $ | 5,277 | ||||||||
Less: Comprehensive income/(loss) attributable to noncontrolling interests | — | 2 | 24 | (1 | ) | |||||||||||
Comprehensive income attributable to Pfizer Inc. | $ | 1,997 | $ | 1,481 | $ | 7,664 | $ | 5,278 |
(a) | Reclassified into Other (income)/deductions—net in the condensed consolidated statements of income. |
(b) | Generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, in the condensed consolidated statements of income. For additional information, see Note 10. Pension and Postretirement Benefit Plans. |
(c) | See Note 5C. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Income/(Loss). |
(MILLIONS OF DOLLARS) | October 2, 2016 | December 31, 2015 | ||||||
(Unaudited) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 2,094 | $ | 3,641 | ||||
Short-term investments | 12,277 | 19,649 | ||||||
Trade accounts receivable, less allowance for doubtful accounts: 2016—$672; 2015—$384 | 9,836 | 8,176 | ||||||
Inventories | 7,507 | 7,513 | ||||||
Current tax assets | 2,825 | 2,662 | ||||||
Other current assets | 2,843 | 2,154 | ||||||
Assets held for sale | 1,119 | 9 | ||||||
Total current assets | 38,501 | 43,804 | ||||||
Long-term investments | 9,507 | 15,999 | ||||||
Property, plant and equipment, less accumulated depreciation: 2016—$14,838; 2015—$13,502 | 13,284 | 13,766 | ||||||
Identifiable intangible assets, less accumulated amortization | 54,238 | 40,356 | ||||||
Goodwill | 56,281 | 48,242 | ||||||
Noncurrent deferred tax assets and other noncurrent tax assets | 1,859 | 1,794 | ||||||
Other noncurrent assets | 4,759 | 3,420 | ||||||
Total assets | $ | 178,430 | $ | 167,381 | ||||
Liabilities and Equity | ||||||||
Short-term borrowings, including current portion of long-term debt | $ | 13,633 | $ | 10,159 | ||||
Trade accounts payable | 3,476 | 3,620 | ||||||
Dividends payable | 1,821 | 1,852 | ||||||
Income taxes payable | 1,158 | 418 | ||||||
Accrued compensation and related items | 2,048 | 2,359 | ||||||
Other current liabilities | 12,623 | 10,990 | ||||||
Total current liabilities | 34,759 | 29,399 | ||||||
Long-term debt | 30,437 | 28,740 | ||||||
Pension benefit obligations, net | 5,312 | 6,310 | ||||||
Postretirement benefit obligations, net | 1,808 | 1,809 | ||||||
Noncurrent deferred tax liabilities | 31,687 | 26,877 | ||||||
Other taxes payable | 4,767 | 3,992 | ||||||
Other noncurrent liabilities | 6,059 | 5,257 | ||||||
Total liabilities | 114,829 | 102,384 | ||||||
Commitments and Contingencies | ||||||||
Preferred stock | 25 | 26 | ||||||
Common stock | 461 | 459 | ||||||
Additional paid-in capital | 82,534 | 81,016 | ||||||
Treasury stock | (84,346 | ) | (79,252 | ) | ||||
Retained earnings | 72,846 | 71,993 | ||||||
Accumulated other comprehensive loss | (8,214 | ) | (9,522 | ) | ||||
Total Pfizer Inc. shareholders’ equity | 63,306 | 64,720 | ||||||
Equity attributable to noncontrolling interests | 294 | 278 | ||||||
Total equity | 63,601 | 64,998 | ||||||
Total liabilities and equity | $ | 178,430 | $ | 167,381 |
Nine Months Ended | ||||||||
(MILLIONS OF DOLLARS) | October 2, 2016 | September 27, 2015 | ||||||
Operating Activities | ||||||||
Net income before allocation to noncontrolling interests | $ | 6,380 | $ | 7,155 | ||||
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,208 | 3,733 | ||||||
Asset write-offs and impairments | 1,146 | 864 | ||||||
Write-down of HIS net assets to fair value less estimated costs to sell | 1,422 | — | ||||||
Deferred taxes from continuing operations | (1,335 | ) | (165 | ) | ||||
Share-based compensation expense | 532 | 488 | ||||||
Benefit plan contributions in excess of expense | (775 | ) | (804 | ) | ||||
Other adjustments, net | 68 | (184 | ) | |||||
Other changes in assets and liabilities, net of acquisitions and divestitures | (1,718 | ) | (1,297 | ) | ||||
Net cash provided by operating activities | 9,929 | 9,790 | ||||||
Investing Activities | ||||||||
Purchases of property, plant and equipment | (1,134 | ) | (786 | ) | ||||
Purchases of short-term investments | (15,170 | ) | (21,068 | ) | ||||
Proceeds from redemptions/sales of short-term investments | 20,685 | 33,609 | ||||||
Net proceeds from redemptions/sales of short-term investments with original maturities of three months or less | 6,485 | 5,557 | ||||||
Purchases of long-term investments | (4,771 | ) | (6,578 | ) | ||||
Proceeds from redemptions/sales of long-term investments | 6,915 | 4,535 | ||||||
Acquisitions of businesses, net of cash acquired | (17,679 | ) | (16,322 | ) | ||||
Acquisitions of intangible assets | (96 | ) | (48 | ) | ||||
Other investing activities, net | 60 | 346 | ||||||
Net cash used in investing activities | (4,704 | ) | (756 | ) | ||||
Financing Activities | ||||||||
Proceeds from short-term borrowings | 6,397 | 2,022 | ||||||
Principal payments on short-term borrowings | (3,321 | ) | (16 | ) | ||||
Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less | (963 | ) | 1,907 | |||||
Proceeds from issuance of long-term debt | 5,031 | — | ||||||
Principal payments on long-term debt | (4,317 | ) | (2,994 | ) | ||||
Purchases of common stock | (5,000 | ) | (6,160 | ) | ||||
Cash dividends paid | (5,496 | ) | (5,211 | ) | ||||
Proceeds from exercise of stock options | 946 | 1,165 | ||||||
Other financing activities, net | 29 | 171 | ||||||
Net cash used in financing activities | (6,693 | ) | (9,115 | ) | ||||
Effect of exchange-rate changes on cash and cash equivalents | (79 | ) | (162 | ) | ||||
Net decrease in cash and cash equivalents | (1,547 | ) | (244 | ) | ||||
Cash and cash equivalents, beginning | 3,641 | 3,343 | ||||||
Cash and cash equivalents, end | $ | 2,094 | $ | 3,099 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | 1,430 | $ | 1,414 | ||||
Interest | 1,177 | 1,162 |
• | Quoted prices for identical assets or liabilities in active markets (Level 1 inputs). |
• | Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs). |
• | Unobservable inputs that reflect estimates and assumptions (Level 3 inputs). |
(MILLIONS OF DOLLARS) | Amounts Recognized as of Acquisition Date (as previously reported as of December 31, 2015) | Measurement Period Adjustments(a) | Amounts Recognized as of Acquisition Date (as adjusted) Final | |||||||||
Working capital, excluding inventories | $ | 274 | $ | 68 | $ | 342 | ||||||
Inventories | 1,924 | (23 | ) | 1,901 | ||||||||
PP&E | 2,410 | (57 | ) | 2,352 | ||||||||
Identifiable intangible assets, excluding IPR&D | 8,270 | 20 | 8,290 | |||||||||
IPR&D | 995 | 35 | 1,030 | |||||||||
Other noncurrent assets | 408 | (46 | ) | 362 | ||||||||
Long-term debt | (1,928 | ) | — | (1,928 | ) | |||||||
Benefit obligations | (117 | ) | — | (117 | ) | |||||||
Net income tax accounts | (3,394 | ) | 14 | (3,380 | ) | |||||||
Other noncurrent liabilities | (39 | ) | (23 | ) | (61 | ) | ||||||
Total identifiable net assets | 8,803 | (12 | ) | 8,791 | ||||||||
Goodwill | 7,284 | 12 | 7,295 | |||||||||
Net assets acquired/total consideration transferred | $ | 16,087 | $ | — | $ | 16,087 |
(a) | The changes in the estimated fair values are primarily to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date. The measurement period adjustments did not result from intervening events subsequent to the acquisition date. |
• | 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. The contingencies for environmental matters are not significant to Pfizer’s financial statements. |
• | 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. Net liabilities for income taxes approximate $3.4 billion as of the acquisition date, which includes $109 million for uncertain tax positions. The net tax liability includes the recording of additional adjustments of approximately $3.2 billion for the tax impact of fair value adjustments and approximately $719 million for income tax matters that we intend to resolve in a manner different from what Hospira had planned or intended. For example, because we plan to repatriate certain overseas funds, we provided deferred taxes on Hospira’s unremitted earnings for which no taxes have been previously provided by Hospira as it was Hospira’s intention to indefinitely reinvest those earnings. |
The following table provides supplemental pro forma information as if the acquisition of Hospira had occurred on January 1, 2014: | ||||||||
Unaudited Supplemental Pro Forma Consolidated Results | ||||||||
Three Months Ended | Nine Months Ended | |||||||
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) | September 27, 2015 | September 27, 2015 | ||||||
Revenues | $ | 12,957 | $ | 38,034 | ||||
Net income attributable to Pfizer Inc. common shareholders | 2,513 | 7,577 | ||||||
Diluted EPS attributable to Pfizer Inc. common shareholders | 0.40 | 1.21 |
• | Elimination of Hospira’s historical intangible asset amortization expense (approximately $9 million in the third quarter of 2015 and $33 million in the first nine months of 2015). |
• | Additional amortization expense (approximately $70 million in the third quarter of 2015 and $321 million in the first nine months of 2015) related to the fair value of identifiable intangible assets acquired. |
• | Additional depreciation expense (approximately $14 million in the third quarter of 2015 and $57 million in the first nine months of 2015) related to the fair value adjustment to PP&E acquired. |
• | Adjustment related to the non-recurring fair value adjustment to acquisition-date inventory estimated to have been sold (the elimination of $75 million of charges in the third quarter of 2015 and $66 million of charges in the first nine months of 2015). |
• | Adjustment to decrease interest expense (approximately $3 million in the third quarter of 2015 and $23 million in the first nine months of 2015) related to the fair value adjustment of Hospira debt. |
• | Adjustment for non-recurring acquisition-related costs directly attributable to the acquisition (the elimination of $680 million of charges in the third quarter of 2015 and $724 million of charges in the first nine months of 2015), reflecting non-recurring charges incurred by both Hospira and Pfizer, which would have been recorded in 2014 under the pro forma assumption that the Hospira acquisition was completed on January 1, 2014. |
(MILLIONS OF DOLLARS) | October 2, 2016 | December 31, 2015 | ||||||
Assets Held for Sale | ||||||||
Inventories | $ | 369 | $ | — | ||||
Property, plant and equipment | 441 | — | ||||||
Identifiable intangible assets | 1,322 | — | ||||||
Goodwill | 243 | — | ||||||
Other assets | 60 | — | ||||||
Less: adjustment to HIS assets for net realizable value(a) | (1,394 | ) | — | |||||
Total HIS assets held for sale | 1,042 | — | ||||||
Other assets held for sale(b) | 77 | 9 | ||||||
Assets held for sale | $ | 1,119 | $ | 9 | ||||
Liabilities Held for Sale | ||||||||
Accrued compensation and related items | $ | 42 | $ | — | ||||
Other liabilities | 68 | — | ||||||
Total HIS liabilities held for sale | $ | 110 | $ | — |
(a) | For the quarter ending October 2, 2016, we recorded an adjustment to HIS assets for net realizable value of $1,394 million plus estimated costs to sell of $28 million for a total impairment on HIS net assets of $1,422 million. |
(b) | Other assets held for sale consist primarily of property, plant and equipment and other assets. |
• | In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and |
• | In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems. |
• | Manufacturing plant network rationalization and optimization, where execution timelines are necessarily long. Our plant network strategy is expected to result in the exit of seven sites over the next several years. In connection with these activities, during 2014-2016, we expect to incur costs of approximately $400 million associated with prior acquisition activity and costs of approximately $1.1 billion associated with new non-acquisition-related cost-reduction initiatives. Through October 2, 2016, we incurred approximately $365 million and $828 million, respectively, associated with these initiatives. |
• | The 2014 global commercial structure reorganization, which primarily includes the streamlining of certain functions, the realignment of regional locations and colleagues to support the businesses, as well as implementing the necessary system changes to support different reporting requirements. Through October 2, 2016, we incurred costs of approximately $219 million and have completed this initiative. |
• | Other new cost-reduction/productivity initiatives, primarily related to commercial property rationalization and other consolidation and savings opportunities. In connection with these cost-reduction activities, during 2014-2016, we expect to incur costs of approximately $1.3 billion. Through October 2, 2016, we incurred approximately $895 million associated with these initiatives. |
The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(MILLIONS OF DOLLARS) | October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Restructuring charges(a): | ||||||||||||||||
Employee terminations | $ | 347 | $ | 241 | $ | 464 | $ | 306 | ||||||||
Asset impairments | 27 | 198 | 45 | 209 | ||||||||||||
Exit costs | 29 | 30 | 64 | 40 | ||||||||||||
Total restructuring charges | 404 | 469 | 574 | 555 | ||||||||||||
Transaction costs(b) | 54 | 64 | 114 | 70 | ||||||||||||
Integration costs(c) | 74 | 48 | 300 | 102 | ||||||||||||
Restructuring charges and certain acquisition-related costs | 531 | 581 | 988 | 727 | ||||||||||||
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d): | ||||||||||||||||
Cost of sales | 46 | 23 | 145 | 67 | ||||||||||||
Research and development expenses | 1 | 1 | 5 | 3 | ||||||||||||
Total additional depreciation––asset restructuring | 47 | 24 | 151 | 71 | ||||||||||||
Implementation costs recorded in our condensed consolidated statements of income as follows(e): | ||||||||||||||||
Cost of sales | 46 | 23 | 127 | 64 | ||||||||||||
Selling, informational and administrative expenses | 23 | 16 | 56 | 55 | ||||||||||||
Research and development expenses | 8 | 2 | 17 | 13 | ||||||||||||
Other (income)/deductions––net | 1 | 2 | 2 | 3 | ||||||||||||
Total implementation costs | 78 | 42 | 202 | 135 | ||||||||||||
Total costs associated with acquisitions and cost-reduction/productivity initiatives | $ | 655 | $ | 647 | $ | 1,341 | $ | 933 |
(a) | In the nine months ended October 2, 2016, Employee terminations represent the expected reduction of the workforce by approximately 2,100 employees, mainly in manufacturing, sales, research and corporate. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination. |
• | For the third quarter of 2016, the IH segment ($148 million); the EH segment ($28 million); WRD, GPD and Medical (M) (WRD/GPD/M) ($52 million); manufacturing operations ($108 million); and Corporate ($67 million). |
• | For the first nine months of 2016, IH ($162 million); EH ($19 million); WRD/GPD/M ($104 million); manufacturing operations ($181 million); and Corporate ($107 million). |
• | For the third quarter of 2015, IH ($9 million); EH ($280 million); WRD/GPD/M ($50 million); manufacturing operations ($26 million); and Corporate ($104 million). |
• | For the first nine months of 2015, IH ($55 million); EH ($288 million); WRD/GPD/M ($66 million); manufacturing operations ($18 million); and Corporate ($127 million). |
(b) | Transaction costs represent external costs for banking, legal, accounting and other similar services, most of which in the third quarter of 2016 are directly related to our acquisition of Medivation, and most of which in the first nine months of 2016 are directly related to our acquisitions of Medivation and Anacor, and the terminated transaction with Allergan. Transaction costs in 2015 represent external costs directly related to the acquisition of Hospira and primarily include expenditures for banking, legal, accounting and other similar services. |
(c) | Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. In the third quarter of 2016, integration costs mostly relate to our acquisition of Hospira and for the first nine months of 2016, integration costs mostly relate to our acquisition of Hospira and the terminated transaction with Allergan. Integration costs in 2015 represent external incremental costs directly related to our acquisition of Hospira. |
(d) | Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions. |
(e) | Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives. |
The following table provides the components of and changes in our restructuring accruals: | ||||||||||||||||
(MILLIONS OF DOLLARS) | Employee Termination Costs | Asset Impairment Charges | Exit Costs | Accrual | ||||||||||||
Balance, December 31, 2015(a) | $ | 1,109 | $ | — | $ | 48 | $ | 1,157 | ||||||||
Provision | 464 | 45 | 64 | 574 | ||||||||||||
Utilization and other(b) | (360 | ) | (45 | ) | (50 | ) | (455 | ) | ||||||||
Balance, October 2, 2016(c) | $ | 1,213 | $ | — | $ | 62 | $ | 1,275 |
(a) | Included in Other current liabilities ($776 million) and Other noncurrent liabilities ($381 million). |
(b) | Includes adjustments for foreign currency translation. |
(c) | Included in Other current liabilities ($714 million) and Other noncurrent liabilities ($561 million). |
The following table provides components of Other (income)/deductions––net: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(MILLIONS OF DOLLARS) | October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Interest income(a) | $ | (123 | ) | $ | (121 | ) | $ | (357 | ) | $ | (332 | ) | ||||
Interest expense(a) | 291 | 278 | 889 | 864 | ||||||||||||
Net interest expense | 168 | 157 | 532 | 533 | ||||||||||||
Royalty-related income | (233 | ) | (204 | ) | (695 | ) | (683 | ) | ||||||||
Certain legal matters, net(b) | (40 | ) | — | 494 | 99 | |||||||||||
Net gains on asset disposals(c) | (47 | ) | (35 | ) | (81 | ) | (230 | ) | ||||||||
Impairment on remeasurement of HIS net assets(d) | 1,422 | — | 1,422 | — | ||||||||||||
Certain asset impairments(e) | 133 | 633 | 1,080 | 658 | ||||||||||||
Business and legal entity alignment costs(f) | 69 | 60 | 180 | 224 | ||||||||||||
Other, net(g) | (55 | ) | 50 | (117 | ) | 70 | ||||||||||
Other (income)/deductions––net | $ | 1,417 | $ | 661 | $ | 2,815 | $ | 670 |
(a) | Interest income increased in the first nine months of 2016, primarily due to higher investment returns. Interest expense increased in the third quarter and first nine months of 2016, primarily due to interest on legacy Hospira debt acquired in September 2015 and the addition of new fixed rate debt in the second quarter of 2016, partially offset by the maturity of other fixed rate debt in the second quarter of 2016. |
(b) | In the first nine months of 2016, primarily includes amounts to resolve a Multi-District Litigation relating to Celebrex and Bextra pending against the Company in New York federal court for $486 million, which is subject to final court approval, partially offset by the reversal of a legal accrual where a loss is no longer deemed probable. In addition, the first nine months of 2016 includes a settlement related to a patent matter. See Note 12A2 for additional information. |
(c) | In the first nine months of 2016, includes gains on sales/out-licensing of product and compound rights (approximately $49 million). In the first nine months of 2015, primarily includes gains on sales/out-licensing of product and compound rights (approximately $76 million) and gains on sales of investments in equity securities (approximately $160 million). |
(d) | In the third quarter and first nine months of 2016, represents a charge related to the write-down of the HIS net assets to fair value less estimated costs to sell. In October 2016, ICU Medical and Pfizer announced that they entered into a definitive agreement under which ICU Medical will acquire all of Pfizer’s global infusion therapy net assets, HIS, for approximately $1 billion in cash and ICU Medical stock. HIS includes IV pumps, solutions and devices. See Note 2B for additional information. |
(e) | In the third quarter of 2016, primarily includes intangible asset impairment charges of $126 million, reflecting $97 million of sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma and $29 million of other IPR&D assets acquired in connection with our acquisition of King in 2011. The intangible asset impairment charges for the third quarter of 2016 are associated with the following: EH ($97 million) and IH ($29 million). In the first nine months of 2016, primarily includes intangible asset impairment charges of $767 million, reflecting (i) $331 million related to developed technology rights for a generic injectable antibiotic product for the treatment of bacterial infections; and (ii) $265 million related to an IPR&D compound for the treatment of anemia, both acquired in connection with our acquisition of Hospira; (iii) $97 million of sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma; and (iv) $74 million of other IPR&D assets, $45 million of which were acquired in connection with our acquisition of Hospira and $29 million of which were acquired in connection with our acquisition of King in 2011. The intangible asset impairment charges for the first nine months of 2016 are associated with the following: EH ($738 million) and IH ($29 million). In addition, the first nine months of 2016 includes an impairment loss of $211 million related to Pfizer’s |
(f) | In the third quarter and first nine months of 2016 and 2015, represents expenses for changes to our infrastructure to align our commercial operations, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business. |
(g) | In the first nine months of 2016, includes among other things, $150 million paid to Allergan for reimbursement of Allergan’s expenses associated with the terminated transaction (see Note 1A). The first nine months of 2016, also includes income of $116 million from resolution of a contract disagreement. |
The following table provides additional information about the intangible assets that were impaired during 2016 in Other (income)/deductions––net: | ||||||||||||||||||||
Fair Value(a) | Nine Months Ended October 2, 2016 | |||||||||||||||||||
(MILLIONS OF DOLLARS) | Amount | Level 1 | Level 2 | Level 3 | Impairment | |||||||||||||||
Intangible assets––IPR&D(b) | $ | 50 | $ | — | $ | — | $ | 50 | $ | 436 | ||||||||||
Intangible assets––Developed technology rights (b) | 66 | — | — | 66 | 331 | |||||||||||||||
Total | $ | 116 | $ | — | $ | — | $ | 116 | $ | 767 |
(a) | The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis. See also Note 1C. |
(b) | Reflects intangible assets written down to fair value in the first nine months of 2016. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product and the impact of technological risk associated with IPR&D assets; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows. |
• | a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; as well as |
• | an increase in benefits associated with the U.S. R&D tax credit, which was not in effect in the prior year quarter but was permanently extended on December 18, 2015, |
• | a decrease in benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations; as well as |
• | the unfavorable tax effects of an impairment charge related to the write-down of HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets. |
• | a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; |
• | benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax position; |
• | benefits associated with our Venezuela operations; as well as |
• | an increase in benefits associated with the U.S. R&D tax credit, which was not in effect in the first nine months of the prior year but was permanently extended on December 18, 2015, |
• | a decrease in benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations; as well as |
• | the unfavorable tax effects of an impairment charge related to the write-down of HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets. |
• | With respect to Pfizer, the IRS has issued a RAR for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014-2016 are open, but not under audit. All other tax years are closed. |
• | With respect to Hospira, the federal income tax audit of tax years 2010-2011 was effectively settled in the second quarter of 2016. The IRS is currently auditing tax years 2012-2013 and 2014 through short-year 2015. All other tax years are closed. The tax years under audit for Hospira are not considered material to Pfizer. |
• | With respect to Anacor and Medivation, the open tax years are not considered material to Pfizer. |
The following table provides the components of Tax provision/(benefit) on other comprehensive income/(loss): | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(MILLIONS OF DOLLARS) | October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Foreign currency translation adjustments, net(a) | $ | — | $ | (7 | ) | $ | (15 | ) | $ | 90 | ||||||
Unrealized holding losses on derivative financial instruments, net | — | (57 | ) | (192 | ) | (160 | ) | |||||||||
Reclassification adjustments for realized (gains)/losses | 32 | 15 | 81 | 43 | ||||||||||||
32 | (42 | ) | (112 | ) | (117 | ) | ||||||||||
Unrealized holding gains/(losses) on available-for-sale securities, net | 40 | 6 | 106 | (63 | ) | |||||||||||
Reclassification adjustments for realized (gains)/losses | (14 | ) | 1 | (16 | ) | 63 | ||||||||||
26 | 7 | 90 | — | |||||||||||||
Benefit plans: actuarial losses, net | (31 | ) | (51 | ) | (39 | ) | (43 | ) | ||||||||
Reclassification adjustments related to amortization | 47 | 43 | 140 | 133 | ||||||||||||
Reclassification adjustments related to settlements, net | 10 | 12 | 27 | 35 | ||||||||||||
Other | 14 | (9 | ) | 5 | 29 | |||||||||||
40 | (4 | ) | 133 | 154 | ||||||||||||
Benefit plans: prior service credits and other, net | 35 | (4 | ) | 66 | 188 | |||||||||||
Reclassification adjustments related to amortization | (17 | ) | (36 | ) | (47 | ) | (42 | ) | ||||||||
Reclassification adjustments related to curtailments, net | (3 | ) | 18 | (5 | ) | (8 | ) | |||||||||
Other | 2 | 2 | 1 | 2 | ||||||||||||
18 | (19 | ) | 15 | 139 | ||||||||||||
Tax provision/(benefit) on other comprehensive income/(loss) | $ | 116 | $ | (65 | ) | $ | 111 | $ | 267 |
(a) | Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely. |
The following table provides the changes, net of tax, in Accumulated other comprehensive loss: | ||||||||||||||||||||||||
Net Unrealized Gains/(Losses) | Benefit Plans | |||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Foreign Currency Translation Adjustments | Derivative Financial Instruments | Available-For-Sale Securities | Actuarial Gains/(Losses) | Prior Service (Costs)/Credits and Other | Accumulated Other Comprehensive Loss | ||||||||||||||||||
Balance, December 31, 2015 | $ | (5,863 | ) | $ | 421 | $ | (227 | ) | $ | (4,733 | ) | $ | 880 | $ | (9,522 | ) | ||||||||
Other comprehensive income/(loss)(a) | 1,016 | (578 | ) | 522 | 310 | 39 | 1,308 | |||||||||||||||||
Balance, October 2, 2016 | $ | (4,847 | ) | $ | (157 | ) | $ | 295 | $ | (4,423 | ) | $ | 919 | $ | (8,214 | ) |
(a) | Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $1 million loss for the first nine months of 2016. |
The following table provides additional information about certain of our financial assets and liabilities: | ||||||||
(MILLIONS OF DOLLARS) | October 2, 2016 | December 31, 2015 | ||||||
Selected financial assets measured at fair value on a recurring basis(a) | ||||||||
Trading funds and securities(b) | $ | 304 | $ | 287 | ||||
Available-for-sale debt securities(c) | 17,522 | 32,078 | ||||||
Money market funds | 1,724 | 934 | ||||||
Available-for-sale equity securities(c) | 590 | 603 | ||||||
Derivative financial instruments in a receivable position(d): | ||||||||
Interest rate swaps | 1,923 | 837 | ||||||
Foreign currency swaps | 90 | 135 | ||||||
Foreign currency forward-exchange contracts | 186 | 559 | ||||||
22,340 | 35,433 | |||||||
Other selected financial assets | ||||||||
Held-to-maturity debt securities, carried at amortized cost(c), (e) | 1,270 | 1,388 | ||||||
Private equity securities, carried at equity-method or at cost(e), (f) | 1,003 | 1,336 | ||||||
2,272 | 2,724 | |||||||
Total selected financial assets | $ | 24,613 | $ | 38,157 | ||||
Selected financial liabilities measured at fair value on a recurring basis(a) | ||||||||
Derivative financial instruments in a liability position(g): | ||||||||
Interest rate swaps | $ | 3 | $ | 139 | ||||
Foreign currency swaps | 1,349 | 1,489 | ||||||
Foreign currency forward-exchange contracts | 503 | 81 | ||||||
1,855 | 1,709 | |||||||
Other selected financial liabilities | ||||||||
Short-term borrowings: | ||||||||
Principal amount | 13,602 | 10,160 | ||||||
Net fair value adjustments related to hedging and purchase accounting | 47 | 2 | ||||||
Net unamortized discounts, premiums and debt issuance costs(h) | (16 | ) | (3 | ) | ||||
Total short-term borrowings, carried at historical proceeds, as adjusted(e) | 13,633 | 10,159 | ||||||
Long-term debt: | ||||||||
Principal amount | 28,073 | 27,573 | ||||||
Net fair value adjustments related to hedging and purchase accounting | 2,447 | 1,294 | ||||||
Net unamortized discounts, premiums and debt issuance costs(h) | (83 | ) | (127 | ) | ||||
Total long-term debt, carried at historical proceeds, as adjusted(i) | 30,437 | 28,740 | ||||||
44,071 | 38,899 | |||||||
Total selected financial liabilities | $ | 45,926 | $ | 40,608 |
(a) | We use a market approach in valuing financial instruments on a recurring basis. For additional information, see Note 1C. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than 2% that use Level 1 inputs and money market funds measured at net asset value. |
(b) | As of October 2, 2016, trading funds and securities are composed of $196 million of trading equity funds, $12 million of trading securities and $96 million of trading debt funds. As of December 31, 2015, trading funds and securities are composed of $185 million of trading equity funds and $102 million of trading debt funds. As of October 2, 2016 and December 31, 2015, trading equity funds of $69 million and $85 million, respectively, are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan. |
(c) | Gross unrealized gains and losses are not significant. |
(d) | Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $91 million as of October 2, 2016; and foreign currency forward-exchange contracts with fair values of $136 million as of December 31, 2015. |
(e) | The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities at cost and short-term borrowings not measured at fair value on a recurring basis were not significant as of October 2, 2016 or December 31, 2015. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities carried at cost are based on Level 3 inputs. Short-term borrowings include foreign currency short-term borrowings with fair values of $547 million as of December 31, 2015, which are used as hedging instruments. |
(f) | Our private equity securities represent investments in the life sciences sector. |
(g) | Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency swaps with fair values of $211 million and foreign currency forward-exchange contracts with fair values of $145 million as of October 2, 2016; and foreign currency swaps with fair values of $234 million and foreign currency forward-exchange contracts with fair values of $59 million as of December 31, 2015. |
(h) | We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. See Note 1B for additional information. |
(i) | The fair value of our long-term debt (not including the current portion of long-term debt) was $34.3 billion as of October 2, 2016 and $32.7 billion as of December 31, 2015. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. Generally, the difference between the fair value of our long-term debt and the amount reported on the condensed consolidated balance sheet is due to a decline in relative market interest rates since the debt issuance. |
The following table provides the classification of these selected financial assets and liabilities in our condensed consolidated balance sheets: | ||||||||
(MILLIONS OF DOLLARS) | October 2, 2016 | December 31, 2015 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 628 | $ | 978 | ||||
Short-term investments | 12,277 | 19,649 | ||||||
Other current assets(a) | 293 | 587 | ||||||
Long-term investments | 9,507 | 15,999 | ||||||
Other noncurrent assets(b) | 1,907 | 944 | ||||||
$ | 24,613 | $ | 38,157 | |||||
Liabilities | ||||||||
Short-term borrowings, including current portion of long-term debt(c) | $ | 13,633 | $ | 10,159 | ||||
Other current liabilities(d) | 805 | 645 | ||||||
Long-term debt(c) | 30,437 | 28,740 | ||||||
Other noncurrent liabilities(e) | 1,050 | 1,064 | ||||||
$ | 45,926 | $ | 40,608 |
(a) | As of October 2, 2016, derivative instruments at fair value include interest rate swaps ($49 million), foreign currency swaps ($67 million) and foreign currency forward-exchange contracts ($177 million) and, as of December 31, 2015, include interest rate swaps ($2 million), foreign currency swaps ($46 million) and foreign currency forward-exchange contracts ($538 million). |
(b) | As of October 2, 2016, derivative instruments at fair value include interest rate swaps ($1.9 billion), foreign currency swaps ($23 million) and foreign currency forward-exchange contracts ($9 million) and, as of December 31, 2015, include interest rate swaps ($835 million), foreign currency swaps ($89 million) and foreign currency forward-exchange contracts ($20 million). |
(c) | We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. See Note 1B for additional information. |
(d) | As of October 2, 2016, derivative instruments at fair value include interest rate swaps ($1 million), foreign currency swaps ($320 million) and foreign currency forward-exchange contracts ($483 million) and, as of December 31, 2015, include interest rate swaps ($5 million), foreign currency swaps ($560 million) and foreign currency forward-exchange contracts ($80 million). |
(e) | As of October 2, 2016, derivative instruments at fair value include interest rate swaps ($2 million), foreign currency swaps ($1.0 billion) and foreign currency forward-exchange contracts ($20 million) and, as of December 31, 2015, include interest rate swaps ($134 million), foreign currency swaps ($928 million) and foreign currency forward-exchange contracts ($1 million). |
The following table provides the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities: | ||||||||||||||||||||
Years | October 2, 2016 | |||||||||||||||||||
(MILLIONS OF DOLLARS) | Within 1 | Over 1 to 5 | Over 5 to 10 | Over 10 | Total | |||||||||||||||
Available-for-sale debt securities | ||||||||||||||||||||
Corporate debt(a) | $ | 2,399 | $ | 3,824 | $ | 2,088 | $ | 25 | $ | 8,336 | ||||||||||
Western European, Asian, Scandinavian and other government debt(b) | 4,247 | 661 | 8 | — | 4,916 | |||||||||||||||
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities | 3 | 56 | 1 | — | 61 | |||||||||||||||
U.S. government debt | 702 | 93 | — | — | 795 | |||||||||||||||
Western European, Scandinavian and other government agency debt(b) | 1,245 | 137 | — | — | 1,383 | |||||||||||||||
Supranational debt(b) | 306 | 346 | — | — | 652 | |||||||||||||||
Other asset-backed debt(c) | 449 | 331 | 20 | 3 | 803 | |||||||||||||||
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities | 575 | 1 | — | — | 576 | |||||||||||||||
Held-to-maturity debt securities | ||||||||||||||||||||
Time deposits and other | 1,046 | 1 | — | — | 1,048 | |||||||||||||||
Western European government debt(b) | 222 | — | — | — | 222 | |||||||||||||||
Total debt securities | $ | 11,195 | $ | 5,451 | $ | 2,118 | $ | 29 | $ | 18,792 |