a6393130.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 4, 2010

OR

TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

COMMISSION FILE NUMBER 1-3619

____
 
 
PFIZER INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
(State of Incorporation)
13-5315170
(I.R.S. Employer Identification No.)
 
235 East 42nd Street, New York, New York  10017
(Address of principal executive offices)  (zip code)
(212) 733-2323
(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
YES x                  NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
YES x                  NO o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
 
Large Accelerated filer x  Accelerated filer o  Non-accelerated filer o Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o                   NO x

At August 9, 2010, 8,038,278,387 shares of the issuer’s voting common stock were outstanding.
 
 
 
 

 
FORM 10-Q
 
For the Quarter Ended
July 4, 2010
 
Table of Contents
 
 
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2

 
 
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
   
Three Months Ended
   
Six Months Ended
 
(MILLIONS, EXCEPT PER COMMON SHARE DATA)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
 
   
                       
Revenues
  $ 17,327     $ 10,984     $ 34,077     $ 21,851  
                                 
Costs and expenses:
                               
Cost of sales(a)
    3,795       1,756       8,101       3,164  
Selling, informational and administrative expenses(a)
    4,807       3,350       9,243       6,226  
Research and development expenses(a)
    2,187       1,695       4,413       3,400  
Amortization of intangible assets
    1,407       583       2,816       1,161  
Acquisition-related in-process research and development charges
    ––       20       74       20  
Restructuring charges and certain acquisition-related costs
    886       459       1,592       1,013  
Other deductions––net
    271       72       685       15  
                                 
Income from continuing operations before provision for taxes on income
    3,974       3,049       7,153       6,852  
                                 
Provision for taxes on income
    1,488       786       2,634       1,860  
                                 
Income from continuing operations
    2,486       2,263       4,519       4,992  
                                 
Discontinued operations––net of tax
    (1 )     3       1       4  
                                 
Net income before allocation to noncontrolling interests
    2,485       2,266       4,520       4,996  
                                 
Less: Net income attributable to noncontrolling interests
    10       5       19       6  
                                 
Net income attributable to Pfizer Inc.
  $ 2,475     $ 2,261     $ 4,501     $ 4,990  
                                 
Earnings per share––basic:
                               
Income from continuing operations attributable to Pfizer Inc.
       common shareholders
  $ 0.31     $ 0.34     $ 0.56     $ 0.74  
Discontinued operations––net of tax
    ––       ––       ––        
Net income attributable to Pfizer Inc. common shareholders
  $ 0.31     $ 0.34     $ 0.56     $ 0.74  
                                 
Earnings per share––diluted:
                               
Income from continuing operations attributable to Pfizer Inc.
       common shareholders
  $ 0.31     $ 0.34     $ 0.56     $ 0.74  
Discontinued operations––net of tax
    ––       ––       ––        
Net income attributable to Pfizer Inc. common shareholders
  $ 0.31     $ 0.34     $ 0.56     $ 0.74  
                                 
Weighted-average shares used to calculate earnings per common share:
                               
Basic
    8,046       6,728       8,053       6,726  
Diluted
    8,072       6,752       8,085       6,752  
                                 
Cash dividends paid per common share
  $ 0.18     $ 0.16     $ 0.36     $ 0.48  
(a) 
Exclusive of amortization of intangible assets, except as disclosed inNote 9B. Goodwill and Other Intangible Assets: Other Intangible Assets.
 
See accompanying Notes to Condensed Consolidated Financial Statements.
 
 
3

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(millions of dollars)
 
July 4,
2010*
   
Dec. 31,
2009**
 
Assets
           
Cash and cash equivalents
  $ 1,877     $ 1,978  
Short-term investments
    17,391       23,991  
Accounts receivable, less allowance for doubtful accounts
    14,012       14,645  
Short-term loans
    515       1,195  
Inventories
    9,511       12,403  
Current deferred tax assets and other current assets
    7,113       6,962  
Assets held for sale
    682       496  
Total current assets
    51,101       61,670  
Long-term investments and loans
    10,524       13,122  
Property, plant and equipment, less accumulated depreciation
    20,041       22,780  
Goodwill
    43,142       42,376  
Identifiable intangible assets, less accumulated amortization
    62,231       68,015  
Noncurrent deferred tax assets and other noncurrent assets
    4,032       4,986  
Total assets
  $ 191,071     $ 212,949  
                 
Liabilities and Shareholders’ Equity
               
Short-term borrowings, including current portion of long-term debt
  $ 5,509     $ 5,469  
Accounts payable
    3,078       4,370  
Dividends payable
    1,450       1,454  
Income taxes payable
    727       10,107  
Accrued compensation and related items
    1,789       2,242  
Current deferred tax liabilities and other current liabilities
    12,128       13,583  
Total current liabilities
    24,681       37,225  
                 
Long-term debt
    37,765       43,193  
Pension benefit obligations
    5,969       6,392  
Postretirement benefit obligations
    3,246       3,243  
Noncurrent deferred tax liabilities
    17,344       17,839  
Other taxes payable
    9,538       9,000  
Other noncurrent liabilities
    5,650       5,611  
Total liabilities
    104,193       122,503  
                 
Preferred stock
    56       61  
Common stock
    443       443  
Additional paid-in capital
    70,568       70,497  
Employee benefit trusts
    (25 )     (333 )
Treasury stock
    (22,206 )     (21,632 )
Retained earnings
    42,010       40,426  
Accumulated other comprehensive (loss)/income
    (4,407 )     552  
Total Pfizer Inc. shareholders’ equity
    86,439       90,014  
Equity attributable to noncontrolling interests
    439       432  
Total shareholders’ equity
    86,878       90,446  
Total liabilities and shareholders’ equity
  $ 191,071     $ 212,949  
Unaudited.
** 
Condensed from audited financial statements.

See accompanying Notes to Condensed Consolidated Financial Statements.
 
 
4

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Six Months Ended
 
(millions of dollars)
 
July 4,
2010
   
June 28,
2009
 
             
Operating Activities:
           
Net income before allocation to noncontrolling interests
  $ 4,520     $ 4,996  
Adjustments to reconcile net income before allocation to noncontrolling interests to net
  cash (used in)/provided by operating activities:
               
Depreciation and amortization
    4,264       2,014  
Share-based compensation expense
    243       169  
Asset write-offs and impairment charges
    833       270  
     Acquisition-related in-process research and development charges
    74       20  
     Deferred taxes from continuing operations
    1,610       731  
Other non-cash adjustments
    (92 )     (292 )
Changes in assets and liabilities, net of acquisitions and divestitures
    (12,939 )     (247 )
                 
Net cash (used in)/provided by operating activities
    (1,487 )     7,661  
                 
Investing Activities:
               
Purchases of property, plant and equipment
    (678 )     (522 )
Purchases of short-term investments
    (3,531 )     (38,900 )
Proceeds from redemptions and sales of short-term investments
    11,048       14,251  
Purchases of long-term investments
    (1,481 )     (5,266 )
Proceeds from redemptions and sales of long-term investments
    3,156       3,484  
Other investing activities
    519       346  
                 
Net cash provided by/(used in) investing activities
    9,033       (26,607 )
                 
Financing Activities:
               
Increase in short-term borrowings
    3,169       21,754  
Principal payments on short-term borrowings
    (7,321 )     (22,493 )
Proceeds from issuances of long-term debt
    ––       23,996  
Principal payments on long-term debt
    (2 )     (908 )
Purchases of common stock
    (500 )     ––  
Cash dividends paid
    (2,995 )     (3,200 )
Other financing activities
    77       (106 )
                 
Net cash (used in)/provided by financing activities
    (7,572 )     19,043  
Effect of exchange-rate changes on cash and cash equivalents
    (75 )     25  
Net (decrease)/increase in cash and cash equivalents
    (101 )     122  
Cash and cash equivalents at beginning of period
    1,978       2,122  
                 
Cash and cash equivalents at end of period
  $ 1,877     $ 2,244  
                 
Supplemental Cash Flow Information:
               
Cash paid during the period for:
               
Income taxes
  $ 11,311     $ 1,109  
Interest
    1,342       299  

See accompanying Notes to Condensed Consolidated Financial Statements.
 
 
5

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Note 1. Basis of Presentation

We prepared the condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three-month and six-month periods ended May 30, 2010, and May 24, 2009.

On October 15, 2009, we completed our acquisition of Wyeth and, commencing from the acquisition date, our financial statements include the assets, liabilities, operating results and cash flows of Wyeth. As a result, legacy Wyeth operations are reflected in our results of operations for the second-quarter and six-month 2010 periods, but not for the second-quarter and six-month 2009 periods. Also, legacy Wyeth cash flows are reflected for the six-month period in 2010, but not for the six-month period in 2009.

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

We are responsible for the unaudited financial statements included in this document.  The financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2009.

Note 2. Adoption of New Accounting Policies
 
The provisions of the following new accounting standards were adopted as of January 1, 2010 and did not have a significant impact on our consolidated financial statements:

An amendment to the recognition and measurement guidance for the transfers of financial assets.

An amendment to the guidelines for determining the primary beneficiary in a variable interest entity.

Note 3. Acquisition of Wyeth
 
On October 15, 2009 (the acquisition date), we acquired all of the outstanding equity of Wyeth in a cash-and-stock transaction, valued at the acquisition date at approximately $68 billion. While Wyeth now is a wholly owned subsidiary of Pfizer, the merger of local Pfizer and Wyeth entities may be pending or delayed in various international jurisdictions and integration in these jurisdictions is subject to completion of various local legal and regulatory obligations.
 
Recording of Assets Acquired and Liabilities Assumed

The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of the acquisition date, as well as adjustments made in the first six months of 2010 to the amounts initially recorded in 2009 (measurement period adjustments). The measurement period adjustments did not have a significant impact on our consolidated statements of income, balance sheets or cash flows in any period and, therefore, we have not retrospectively adjusted our financial statements. Certain 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, but no later than one year from the acquisition date.

 
6

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
 (millions of dollars)
 
Amounts Recognized
as of Acquisition
Date(a)
   
Measurement
Period
Adjustments
   
Amounts Recognized
as of Acquisition Date
(as adjusted)
 
                   
Working capital, excluding inventories
  $ 16,342     $ 73     $ 16,415  
Inventories
    8,388       (172 )     8,216  
Property, plant and equipment
    10,054       (198 )     9,856  
Identifiable intangible assets, excluding
in-process research and development(b)
    37,595       (517 )     37,078  
In-process research and development(b)
    14,918       (875 )     14,043  
Other noncurrent assets
    2,394       ––       2,394  
Long-term debt
    (11,187 )     ––       (11,187 )
Benefit obligations
    (3,211 )     36       (3,175 )
Net tax accounts(c)
    (24,773 )     (105 )     (24,878 )
Other noncurrent liabilities
    (1,908 )     (75 )     (1,983 )
Total identifiable net assets
    48,612       (1,833 )     46,779  
Goodwill(d)
    19,954       1,833       21,787  
Net assets acquired
    68,566       ––       68,566  
Less: Amounts attributable to
noncontrolling interests
    (330 )     ––       (330 )
Total consideration transferred
  $ 68,236     $ ––     $ 68,236  
(a)
As previously reported in Pfizer’s 2009 Annual Report on Form 10-K.
(b)
The measurement period adjustments for Identifiable intangible assets primarily consist of adjustments recorded to reflect changes in the estimated fair value of certain acquired intangibles, principally in-process research and development assets. These adjustments were made largely 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.
(c)
The measurement period adjustments for Net tax accounts primarily reflect the tax impact of the pre-tax measurement period adjustments offset by adjustments to uncertain tax positions following receipt of additional information from taxing authorities 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.
(d)
Goodwill recognized as of the acquisition date (as adjusted) totaled $18,670 million for our Biopharmaceutical segment and $3,117 million for our Diversified segment. These amounts are not yet finalized and are subject to change.

The recorded amounts are provisional and subject to change. Specifically, the following items are subject to change:

Amounts for intangibles and inventory, pending finalization of valuation efforts.

Amounts for legal contingencies, pending the finalization of our examination and evaluation of the portfolio of filed cases.

Amounts for income tax assets, receivables and liabilities pending the filing of Wyeth pre-acquisition tax returns, including all required disclosures and documentation, as well as the receipt of information from taxing authorities, which may change certain estimates and assumptions used.

The allocation of goodwill among reporting units.

Note 4. Cost-Reduction Initiatives and Acquisition-Related Costs

We have incurred significant costs in connection with our cost-reduction initiatives (several programs initiated since 2005) and our acquisition of Wyeth on October 15, 2009.

Since the acquisition of Wyeth, our cost-reduction initiatives that were announced on January 26, 2009, but not completed as of December 31, 2009, have been incorporated into a comprehensive plan to integrate Wyeth’s operations, generate cost savings and capture synergies across the combined company. We are focusing our efforts on achieving an appropriate cost structure for the combined company.

 
7

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
We incurred the following costs in connection with all of our cost-reduction initiatives and the acquisition of Wyeth:
   
Three Months Ended
   
Six Months Ended
 
(millions of dollars)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
 
                         
Transaction costs(a)
  $ 4     $ 184     $ 13     $ 553  
Integration costs(b)
    211       101       419       129  
Restructuring charges(c)
    671       174       1,160       331  
Restructuring charges and certain acquisition-related costs
    886       459       1,592       1,013  
Additional depreciation––asset restructuring(d)
    215       61       308       151  
Implementation costs(e)
    ––       95       ––       179  
Total
  $ 1,101     $ 615     $ 1,900     $ 1,343  
(a)
Transaction costs represent external costs directly related to our acquisition of Wyeth and primarily include expenditures for banking, legal, accounting and other similar services. Substantially all of the costs incurred in the second quarter and first six months of 2009 were fees related to a $22.5 billion bridge term loan credit agreement entered into with certain financial institutions on March 12, 2009 to partially fund our acquisition of Wyeth. The bridge term loan credit agreement was terminated in June 2009 as a result of our issuance of approximately $24.0 billion of senior unsecured notes in the first half of 2009.
(b)
Integration costs represent external, incremental costs directly related to integrating Wyeth and primarily include expenditures for consulting and systems integration.

(c)
Restructuring charges include the following:
     
Costs Incurred
             
     
Three Months Ended
   
Six Months Ended
         
Activity
   
Accrual
 
 
(millions of dollars)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
      2005-2010    
Through
July 4,
2010(1)
   
As of
July 4,
2010(2)
 
                                               
 
Employee termination costs
  $ 118     $ 29     $ 576     $ 164     $ 8,297     $ 6,000     $ 2,297  
 
Asset impairments
    497       73       503       91       1,955       1,955       ––  
 
Other
    56       72       81       76       791       657       134  
 
Total restructuring charges
  $ 671     $ 174     $ 1,160     $ 331     $ 11,043     $ 8,612     $ 2,431  
     
(1) 
Includes adjustments for foreign currency translation.
 
(2) 
Included in Current deferred tax liabilities and other current liabilities ($1.6 billion) and Other noncurrent liabilities ($831 million).

Restructuring charges in 2010 are related to the integration of Wyeth. From the beginning of our cost-reduction initiatives in 2005 through July 4, 2010, Employee termination costs represent the expected reduction of the workforce by approximately 47,400 employees, mainly in manufacturing, sales and research, of which approximately 29,100 employees have been terminated as of July 4, 2010. 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. Asset impairments primarily include charges to write down property, plant and equipment to fair value. Other primarily includes costs to exit certain assets and activities.

(d)
Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions and are included in our condensed consolidated statements of income as follows:
     
Three Months Ended
   
Six Months Ended
 
 
(millions of dollars)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
 
                           
 
Cost of sales
  $ 113     $ 32     $ 126     $ 95  
 
Selling, informational and administrative expenses
    102       8       162       14  
 
Research and development expenses
    ––       21       20       42  
 
Total
  $ 215     $ 61     $ 308     $ 151  

(e)
Implementation costs in the three months and six months ended June 28, 2009 represent external, incremental costs directly related to implementing cost-reduction initiatives prior to our acquisition of Wyeth, and primarily include expenditures related to system and process standardization and the expansion of shared services. For the three months ended June 28, 2009, implementation costs are included in Cost of sales ($13 million), Selling, informational and administrative expenses ($77 million), Research and development expenses ($11 million) and Other deductions––net ($6 million income). For the six months ended June 28, 2009, implementation costs are included in Cost of sales ($26 million), Selling, informational and administrative expenses ($117 million), Research and development expenses ($31 million) and Other deductions––net ($5 million).
 
 
8

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
Note 5. Taxes on Income

Our effective tax rate for continuing operations was 37.4% for the second quarter of 2010, compared to 25.8% for the second quarter of 2009, and 36.8% for the first six months of 2010, compared to 27.1% for the first six months of 2009. The higher tax rates in the second quarter and first six months of 2010 are primarily the result of:

higher charges, incurred as a result of our acquisition of Wyeth, and the mix of jurisdictions in which those charges were incurred, and

the expiration of the U.S. research and development tax credit.

The effective tax rate for the first six months of 2010 was additionally impacted by the write-off of the deferred tax asset of approximately $270 million related to the Medicare Part D subsidy for retiree prescription drug coverage, resulting from changes in the U.S. healthcare legislation enacted in March 2010 concerning the tax treatment of that subsidy effective for tax years beginning after December 31, 2012, partially offset by $410 million in tax benefits for the resolution of certain tax positions pertaining to prior years with various foreign tax authorities.

Note 6. Comprehensive Income/(Loss)

The components of comprehensive income/(loss) follow:
   
Three Months Ended
   
Six Months Ended
 
(millions of dollars)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
 
Net income before allocation to noncontrolling interests
  $ 2,485     $ 2,266     $ 4,520     $ 4,996  
Other comprehensive income/(loss):
                               
Currency translation adjustment and other
    (2,144 )     2,638       (4,891 )     2,254  
Net unrealized losses on derivative financial instruments
    (375 )     (144 )     (241 )     (167 )
Net unrealized gains/(losses) on available-for-sale securities
    (97 )     81       (112 )     226  
Benefit plan adjustments
    167       18       284       177  
Total other comprehensive income/(loss)
    (2,449 )     2,593       (4,960 )     2,490  
Total comprehensive income/(loss) before allocation to
noncontrolling interests
    36       4,859       (440 )     7,486  
Less: Comprehensive income attributable to
noncontrolling interests
    27       12       18       14  
Comprehensive income/(loss) attributable to Pfizer Inc.
  $ 9     $ 4,847     $ (458 )   $ 7,472  

 
9

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 

Note 7. Financial Instruments

A. Selected Financial Assets and Liabilities

Information about certain of our financial assets and liabilities follows:
(millions of dollars)
 
July 4,
2010
   
Dec. 31,
2009
 
Selected financial assets measured at fair value on a recurring basis(a) :
           
Trading securities(b)
  $ 162     $ 184  
Available-for-sale debt securities(c)
    24,110       32,338  
Available-for-sale money market funds(d)
    1,458       2,569  
Available-for-sale equity securities, excluding money market funds(c)
    183       281  
Derivative financial instruments in receivable positions(e):
               
Foreign currency swaps
    113       798  
Interest rate swaps
    534       276  
Foreign currency forward-exchange contracts
    404       502  
Total
    26,964       36,948  
Other selected financial assets(f):
               
Short-term loans, carried at cost(g)
    515       1,195  
Held-to-maturity debt securities, carried at amortized cost(c)
    1,351       812  
Private equity securities, carried at cost or equity method(h)
    830       811  
Long-term loans, carried at cost(g)
    925       784  
Total
    3,621       3,602  
Total selected financial assets(i)
  $ 30,585     $ 40,550  
Financial liabilities measured at fair value on a recurring basis(a):
               
Derivative financial instruments in a liability position(j):
               
Foreign currency swaps
  $ 1,555     $ 528  
Foreign currency forward-exchange contracts
    267       237  
Interest rate swaps
    4       25  
Total
    1,826       790  
Other financial liabilities(k):
               
Short-term borrowings, carried at historical proceeds, as adjusted(f), (l)
    5,509       5,469  
Long-term debt, carried at historical proceeds, as adjusted(m), (n)
    37,765       43,193  
Total
    43,274       48,662  
Total selected financial liabilities
  $ 45,100     $ 49,452  
(a)
Fair values are determined based on valuation techniques categorized as follows: Level 1 means the use of quoted prices for identical instruments in active markets; Level 2 means the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; Level 3 means the use of unobservable inputs. Virtually 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 that included in available-for-sale equity securities, excluding money market funds, are $83 million as of July 4, 2010 and $77 million as of December 31, 2009 of investments that use Level 1 inputs in the calculation of fair value. None of our financial assets and liabilities measured at fair value on a recurring basis are valued using Level 3 inputs as of July 4, 2010 or December 31, 2009.
(b)
Trading securities are held in trust for legacy business acquisition severance benefits.
(c)
Gross unrealized gains and losses are not significant.
(d)
Includes approximately $1.2 billion of money market funds held in escrow to secure certain of Wyeth’s payment obligations under its 1999 Nationwide Class Action Settlement Agreement, which relates to litigation against Wyeth concerning its former weight-loss products, Redux and Pondimin (see Note 7G. Financial Instruments: Guarantee).
(e)
Designated as hedging instruments, except for certain foreign currency contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $193 million as of July 4, 2010; and foreign currency swaps with fair values of $106 million and foreign currency forward-exchange contracts with fair values of $100 million as of December 31, 2009.
(f)
The differences between the estimated fair values and carrying values of our financial assets and liabilities not measured at fair value on a recurring basis were not significant as of July 4, 2010 or December 31, 2009.
(g) 
Our short-term and long-term loans are due from companies with highly rated securities (Standard & Poor’s (S&P) ratings of mostly AA or better).
(h) 
Our private equity securities represent investments in the life sciences sector.
(i)
The decrease in selected financial assets is primarily due to the use of proceeds of short-term investments for tax payments made in the first quarter of 2010, associated with certain business decisions executed to finance the Wyeth acquisition.
(j)
Designated as hedging instruments, except for certain foreign currency contracts used as offsets; namely, foreign currency swaps with fair values of $230 million and foreign currency forward-exchange contracts with fair values of $79 million as of July 4, 2010; and foreign currency forward-exchange contracts with fair values of $122 million and foreign currency swaps with fair values of $3 million as of December 31, 2009.
(k)
The carrying amounts may include adjustments for discount or premium amortization or for the effect of interest rate swaps designated as hedges.
(l)
Includes foreign currency borrowings with fair values of $1.8 billion as of July 4, 2010 and $1.1 billion as of December 31, 2009, which are used as hedging instruments.
 
 
10

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
(m)
Includes foreign currency debt with fair value of $820 million as of July 4, 2010 and $2.1 billion as of December 31, 2009, which is used as a hedging instrument.
(n)
The fair value of our long-term debt is $42.5 billion as of July 4, 2010 and $46.2 billion as of December 31, 2009.

We use a market approach to determine the fair value of our financial assets and liabilities and apply the following methods and assumptions:

Trading equity securities––quoted market prices.

Trading debt securities––observable market interest rates.

Available-for-sale debt securities––third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted interest rate yield curves.

Available-for-sale money market funds––observable Net Asset Value prices.

Available-for-sale equity securities, excluding money market funds––third-party pricing services that principally use a composite of observable prices.

Derivative financial instruments (assets and liabilities)––third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data. Where applicable, these models discount future cash flow amounts using market-based observable inputs including interest rate yield curves, foreign exchange rates, and forward and spot prices for currencies. The credit risk impact to our derivative financial instruments was not significant.

Held-to-maturity debt securities––third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted interest rate yield curves.

Short-term and long-term loans––third-party model that discounts future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
 
Private equity securities––application of the implied volatility associated with an observable biotech index to the carrying amount of our portfolio and, to a lesser extent, performance multiples of comparable securities adjusted for company-specific information.

Short-term borrowings and long-term debt––third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and our own credit rating.
 
In addition, we have long-term receivables where the determination of fair value uses discounted future cash flows, using current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

 
11

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
These selected financial assets and liabilities are presented in the condensed consolidated balance sheets as follows:
(millions of dollars)
 
July 4,
2010
   
Dec. 31,
2009
 
Assets
           
   Cash and cash equivalents
  $ 1,104     $ 666  
Short-term investments
    17,391       23,991  
Short-term loans
    515       1,195  
Long-term investments and loans
    10,524       13,122  
Current deferred tax assets and other current assets(a)
    411       526  
Noncurrent deferred tax assets and other noncurrent assets(b)
    640       1,050  
Total
  $ 30,585     $ 40,550  
Liabilities
               
Short-term borrowings, including current portion of long-term debt
  $ 5,509     $ 5,469  
Current deferred tax liabilities and other current liabilities(c)
    318       369  
Long-term debt
    37,765       43,193  
Other noncurrent liabilities(d)
    1,508       421  
Total
  $ 45,100     $ 49,452  
(a)
As of July 4, 2010, derivative instruments at fair value include foreign currency forward-exchange contracts ($404 million) and foreign currency swaps ($7 million) and as of December 31, 2009, include foreign currency forward-exchange contracts ($503 million) and foreign currency swaps ($23 million).
(b)
As of July 4, 2010, derivative instruments at fair value include interest rate swaps ($534 million) and foreign currency swaps ($106 million) and as of December 31, 2009, include foreign currency swaps ($774 million) and interest rate swaps ($276 million).
(c)
As of July 4, 2010, derivative instruments at fair value include foreign currency forward-exchange contracts ($267 million), foreign currency swaps ($47 million) and interest rate swaps ($4 million) and as of December 31, 2009, include foreign currency forward-exchange contracts ($237 million) and foreign currency swaps ($132 million).
(d)
As of July 4, 2010, derivative instruments at fair value include foreign currency swaps ($1.5 billion) and as of December 31, 2009, include foreign currency swaps ($396 million) and interest rate swaps ($25 million).

We regularly evaluate all of our financial assets for impairment. For investments in debt and equity securities, when a decline in fair value, if any, is determined to be other-than-temporary, an impairment charge is recorded, and a new cost basis in the investment is established. For loans, an impairment charge is recorded if it is probable that we will not be able to collect all amounts due according to the loan agreement. There were no significant impairments of financial assets recognized in the first six months of 2010 or the year ended December 31, 2009.

B. Investments in Debt and Equity Securities

The contractual maturities of the available-for-sale and held-to-maturity debt securities as of July 4, 2010, follow:
   
Years
       
(millions of dollars)
 
Within 1
   
Over 1
to 5
   
Total as of
July 4,
2010
 
Available-for-sale debt securities:
                 
Western European and other government debt
  $ 10,874     $ 2,499     $ 13,373  
Corporate debt(a)
    1,320       1,629       2,949  
Western European and other government agency debt
    2,317       176       2,493  
Federal Home Loan Mortgage Corporation and Federal National Mortgage
Association asset-backed securities
    ––       2,208       2,208  
Supranational debt
    1,368       150       1,518  
Reverse repurchase agreements(b)
    921       ––       921  
U.S. government Federal Deposit Insurance Corporation guaranteed debt
    ––       541       541  
Certificates of deposit
    56       ––       56  
Other asset-backed securities
    28       23       51  
Held-to-maturity debt securities:
                       
Certificates of deposit and other
    1,344       7       1,351  
Total debt securities
  $ 18,228     $ 7,233     $ 25,461  
Trading securities
                    162  
Available-for-sale money market funds(c)
                    1,458  
Available-for-sale equity securities, excluding money market funds
                    183  
Total
                  $ 27,264  
(a)
Largely issued by above-investment-grade institutions in the financial services sector.
(b)
Very short-term agreements involving U.S. government securities.
(c)
Consisting of securities issued by the U.S. government and its agencies or instrumentalities and reverse repurchase agreements involving the same investments held.
 
 
12

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
C. Short-Term Borrowings
Short-term borrowings include amounts for commercial paper of $1.8 billion as of July 4, 2010 and $3.9 billion as of December 31, 2009.

D. Long-Term Debt
In March 2007, we filed a securities registration statement with the SEC. The registration statement was filed under the automatic shelf registration process available to “well-known seasoned issuers” and expired in March 2010. On March 24, 2009, in order to partially finance our acquisition of Wyeth, we issued $13.5 billion of senior unsecured notes under this registration statement. On June 3, 2009, also in order to partially finance our acquisition of Wyeth, we issued approximately $10.5 billion of senior unsecured notes in a private placement pursuant to Regulation S under the Securities Act of 1933, as amended (Securities Act of 1933). The notes issued on June 3, 2009 have not been and will not be registered under the Securities Act of 1933 and, subject to certain exceptions, may not be sold, offered or delivered within the U.S. to, or for the account or benefit of, U.S. persons.

E. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk—A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing expected same-currency revenues in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk also is managed through the use of derivative financial instruments and foreign currency debt. These financial instruments serve to protect net income and net investments against the impact of the translation into U.S. dollars of certain foreign exchange-denominated transactions. The aggregate notional amount of foreign exchange derivative financial instruments hedging or offsetting foreign currency exposures is $43.2 billion. The derivative financial instruments primarily hedge or offset exposures in euro, Japanese yen and U.K. pound. The maximum length of time over which we are hedging future foreign exchange cash flows relates to our $2.3 billion U.K. pound debt maturing in 2038.
 
Interest Rate Risk—Our interest-bearing investments, loans and borrowings are subject to interest rate risk. We seek to invest and loan primarily on a short-term or variable-rate basis; however, in light of current market conditions, we currently borrow primarily on a long-term, fixed-rate basis. From time to time, depending on market conditions, we will change the profile of our outstanding debt by entering into derivative financial instruments like interest rate swaps.
 
We entered into derivative financial instruments to hedge or offset the fixed interest rates on the hedged item, matching the amount and timing of the hedged item. The aggregate notional amount of interest rate derivative financial instruments is $11.1 billion. The derivative financial instruments hedge U.S. dollar and euro fixed-rate debt.

 
13

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Information about gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk is as follows:
   
Gains/(Losses)
 
   
Three Months Ended
   
Six Months Ended
 
(millions of dollars)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
 
Derivative Financial Instruments in Fair Value Hedge Relationships
                       
Interest rate swaps
                       
Recognized in OID(a)
  $ 1     $ (3 )   $ 1     $ (7 )
Foreign currency swaps
                               
Recognized in OID(a)
    1       1       ––       ––  
Derivative Financial Instruments in Cash Flow Hedge Relationships
                               
U.S. Treasury interest rate locks
                               
Recognized in OID(a)
  $ ––     $ ––     $ ––     $ (11 )
Recognized in OCI(a), (b)
    ––       ––       ––       (15 )
Reclassified from OCI to OID(a), (b)
    ––       ––       ––       ––  
Foreign currency swaps
                               
Recognized in OID(a)
    ––       ––       ––       ––  
Recognized in OCI(a), (b)
    (1,219 )     (66 )     (1,657 )     (85 )
Reclassified from OCI to OID(a), (b)
    (627 )     155       (1,255 )     155  
Foreign currency forward exchange contracts
                               
Recognized in OID(a)
    ––       ––       ––       ––  
Recognized in OCI(a), (b)
    (1 )     5       (1 )     8  
Reclassified from OCI to OID(a), (b)
    1       4       2       14  
Derivative Financial Instruments in Net Investment Hedge Relationships
                               
Foreign currency swaps
                               
Recognized in OID(a)
  $ (1 )   $ ––     $ (1 )   $ (1 )
Recognized in OCI(a), (b)
    (50 )     (15 )     (40 )     38  
Derivative Financial Instruments Not Designated as Hedges
                               
Foreign currency swaps
                               
Recognized in OID(a)
  $ (4 )   $ 18     $ ––     $ 13  
Foreign currency forward-exchange contracts
                               
Recognized in OID(a)
    (473 )     (185 )     (1,363 )     (441 )
Non-Derivative Financial Instruments in Net Investment Hedge Relationships
                               
Foreign currency short-term borrowings
                               
Recognized in OID(a)
  $ ––     $ ––     $ ––     $ ––  
Recognized in OCI(a), (b)
    (130 )     (23 )     (99 )     88  
Foreign currency long-term debt
                               
Recognized in OID(a)
    ––       ––       ––       ––  
Recognized in OCI(a), (b)
    (51 )     (46 )     (34 )     111  
(a)
OID = Other (income)/deductions––net. OCI = Other comprehensive income/(expense), included in the balance sheet account Accumulated other comprehensive (loss)/income.
(b)
Amounts presented represent the effective portion of the gain or loss. For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income/(expense) – Net unrealized gains/(losses) on derivative financial instruments. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income/(expense)––Currency translation adjustment.

For information about the fair value of our derivative financial instruments, and the impact on our Condensed Consolidated Balance Sheets, see Note 7A. Financial Instruments: Selected Financial Assets and Liabilities. Certain of our derivative instruments are covered by associated credit-support agreements that have credit-risk-related contingent features designed to reduce our counterparties’ exposure to our risk of defaulting on amounts owed. The aggregate fair value of these derivative instruments that are in a liability position is $860 million, for which we have posted collateral of $869 million in the normal course of business. These features include the requirement to pay additional collateral in the event of a downgrade in our debt ratings. If there had been a downgrade to below an A rating by S&P or the equivalent rating by Moody’s Investors Service, on July 4, 2010, we would have been required to post an additional $54 million of collateral to our counterparties. The collateral advanced receivables are reported in Short-term loans.

 
14

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
F. Credit Risk
On an ongoing basis, we review the creditworthiness of counterparties to our foreign exchange and interest rate agreements and do not expect to incur a significant loss from failure of any counterparties to perform under the agreements. There are no significant concentrations of credit risk related to our financial instruments with any individual counterparty. As of July 4, 2010, we had $1.7 billion due from a well-diversified, highly rated group (S&P ratings of primarily A+ or better) of bank counterparties around the world. See Note 7B. Financial Instruments: Investment in Debt and Equity Securities for a distribution of our investments.

In general, there is no requirement for collateral from customers. However, derivative financial instruments are executed under master netting agreements with financial institutions. These agreements contain provisions that provide for the ability for collateral payments, depending on levels of exposure, our credit rating and the credit rating of the counterparty. As of July 4, 2010, we received cash collateral of $98 million against various counterparties. The collateral primarily supports the approximate fair value of our derivative contracts. The collateral received obligations are reported in Short-term borrowings, including current portion of long-term debt.

G. Guarantee
On April 15, 2010, Wyeth LLC (Wyeth), a wholly owned subsidiary of Pfizer Inc. (Pfizer), entered into the Tenth Amendment (Tenth Amendment) to the 1999 Diet Drug Nationwide Settlement Agreement (Settlement Agreement) related to the litigation against Wyeth concerning its former weight-loss products, Redux and Pondimin. Pursuant to the Tenth Amendment, Pfizer entered into an agreement to guarantee Wyeth's obligation to make certain payments under the Settlement Agreement up to a maximum amount of $1.5 billion (Guarantee). The Guarantee will remain in effect until the termination of Wyeth's long-term obligation to make such payments.  The Guarantee became a legal, valid and binding obligation of Pfizer on July 12, 2010, ten days after the approval of the Tenth Amendment by the United States District Court for the Eastern District of Pennsylvania.

Note 8. Inventories

The components of inventories follow:
(millions of dollars)
 
July 4,
2010
   
Dec. 31,
2009
 
             
Finished goods
  $ 4,230     $ 5,249  
Work-in-process
    4,083       5,776  
Raw materials and supplies
    1,198       1,378  
Total inventories(a)
  $ 9,511     $ 12,403  
(a)
The decrease in total inventories is primarily due to the inventory sold during the first six months of 2010 that was acquired from Wyeth and had been recorded at fair value, as well as operational reductions and the impact of foreign exchange. Certain amounts of inventories are in excess of one year’s supply.  These excess amounts are primarily attributable to biologics inventory acquired from Wyeth and recorded at fair value and the quantities are generally consistent with the normal operating cycle of such inventory. There are no recoverability issues associated with these quantities.

Note 9. Goodwill and Other Intangible Assets

A. Goodwill

The changes in the carrying amount of goodwill for the six months ended July 4, 2010, follow:
(millions of dollars)
 
Biopharmaceutical
   
Diversified
   
Other
 
(a)
 
Total
 
                           
Balance, December 31, 2009
  $ 22,165     $ 173     $ 20,038       $ 42,376  
Additions
    ––       19       1,833  
(b)
    1,852  
Other(c)
    (752 )     (7 )     (327 )       (1,086 )
Allocation of Other goodwill(a)
    18,435       3,109       (21,544 )       ––  
Balance, July 4, 2010
  $ 39,848     $ 3,294     $ ––       $ 43,142  
(a)
The Other goodwill relates to our acquisition of Wyeth and is subject to change until we complete the recording of the assets acquired and liabilities assumed from Wyeth (see Note 3. Acquisition of Wyeth). In the second quarter of 2010 the Wyeth goodwill was allocated among the Biopharmaceutical and Diversified segments. This allocation has not yet been finalized and is subject to change, which could be significant. We will finalize the allocation as we obtain the information necessary to complete the analyses, but no later than one year from the acquisition date.
(b) 
 Reflects the impact of measurement period adjustments (see Note 3. Acquisition of Wyeth).
(c) 
 Primarily reflects the impact of foreign exchange.
 
 
15

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
B. Other Intangible Assets

The components of identifiable intangible assets, primarily included in our Biopharmaceutical segment, follow:
   
July 4, 2010
   
December 31, 2009
 
(millions of dollars)
 
Gross
Carrying
Amount
   
Accumulated
Amortization
   
Identifiable
Intangible
Assets, less
Accumulated
Amortization
   
Gross
Carrying
Amount
   
Accumulated
Amortization
   
Identifiable
Intangible
Assets, less Accumulated
Amortization
 
                                     
Finite-lived intangible assets:
                                   
Developed technology rights
  $ 67,432     $ (23,393 )   $ 44,039     $ 68,870     $ (21,223 )   $ 47,647  
Brands
    1,620       (590 )     1,030       1,637       (535 )     1,102  
License agreements
    632       (190 )     442       622       (119 )     503  
Trademarks
    107       (70 )     37       113       (73 )     40  
Other
    424       (234 )     190       488       (231 )     257  
Total amortized finite-lived intangible assets
    70,215       (24,477 )     45,738       71,730       (22,181 )     49,549  
Indefinite-lived intangible assets:
                                               
Brands
    12,380       ––       12,380       12,562       ––       12,562  
In-process research and development(a)
    4,044       ––       4,044       5,834       ––       5,834  
Trademarks
    69       ––       69       70       ––       70  
Total indefinite-lived intangible assets
    16,493       ––       16,493       18,466       ––       18,466  
Total identifiable intangible assets(b)
  $ 86,708     $ (24,477 )   $ 62,231     $ 90,196     $ (22,181 )   $ 68,015  
(a)
Decrease is related to the impact of measurement period adjustments in the first six months of 2010 (see Note 3. Acquisition of Wyeth) and impairments recorded in the second quarter of 2010 related to IPR&D assets that we acquired as part of our acquisition of Wyeth. As a result of our review of the projects, based on developments in the second quarter of 2010, we recorded an impairment charge of $200 million ($125 million after-tax) in Other deductions––net.
(b)
Decrease is primarily related to amortization of finite-lived intangible assets, the impact of measurement period adjustments (see Note 3. Acquisition of Wyeth), and the impact of foreign exchange.

Amortization expense related to acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as it benefits multiple business functions. Amortization expense related to acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses and Research and development expenses, as appropriate. Total amortization expense for finite-lived intangible assets was $1.5 billion for the second quarter of 2010, $615 million for the second quarter of 2009, $2.9 billion for the first six months of 2010 and $1.2 billion for the first six months of 2009.

 
16

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Note 10. Pension and Postretirement Benefit Plans

The components of net periodic benefit costs of the U.S. and international pension plans and the postretirement plans, which provide medical and life insurance benefits to retirees and their eligible dependents, follow:
   
Pension Plans
       
   
U.S. Qualified
   
U.S. Supplemental
(Non-Qualified)
   
International
   
Postretirement
Plans
 
(millions of dollars)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
 
For the Three Months Ended:
                                               
Service cost
  $ 89     $ 52     $ 7     $ 5     $ 57     $ 42     $ 21     $ 7  
Interest cost
    188       116       21       12       105       77       54       31  
Expected return on plan assets
    (200 )     (116 )                 (107 )     (86 )     (8 )     (7 )
Amortization of:
                                                               
Actuarial losses
    38       53       8       8       16       6             5  
Prior service costs/(credits)
    1                         (1 )     (1 )     (5 )     (1 )
Curtailments and settlements––net
    (36 )     30       (8 )     6       (6 )     (1 )     (2 )      
Special termination benefits
    36       6       62             2       1       6       3  
Net periodic benefit costs
  $ 116     $ 141     $ 90     $ 31     $ 66     $ 38     $ 66     $ 38  
 
For the Six Months Ended:
                                                               
Service cost
  $ 183     $ 111     $ 15     $ 10     $ 117     $ 87     $ 43     $ 15  
Interest cost
    379       235       40       25       216       155       108       61  
Expected return on plan assets
    (402 )     (234 )                 (219 )     (172 )     (16 )     (13 )
Amortization of:
                                                               
Actuarial losses
    76       110       15       16       33       12             9  
Prior service costs/(credits)
    1       1       (1 )     (1 )     (2 )     (2 )     (9 )     (2 )
Curtailments and settlements––net
    (69 )     54       (9 )     13       (5 )     1       (2 )     5  
Special termination benefits
    50       19       152             3       2       12       15  
Net periodic benefit costs
  $ 218     $ 296     $ 212     $ 63     $ 143     $ 83     $ 136     $ 90  

The decrease in net periodic benefit costs in the first six months of 2010 compared to the first six months of 2009 for our U.S. qualified pension plans was primarily driven by curtailment gains associated with Wyeth-related restructuring initiatives.  The acquisition of Wyeth contributed to the increase in certain components of net periodic benefit costs, such as service cost and interest cost, offset by related expected return on plan assets.

The increase in net periodic benefit costs in the first six months of 2010 compared to the first six months of 2009 for our U.S. supplemental (non-qualified) pension plans was primarily driven by special termination benefits recognized for certain executives as part of Wyeth-related restructuring initiatives.

The increase in net periodic benefit costs in the first six months of 2010 compared to the first six months of 2009 for our international pension plans was primarily driven by the decrease in the discount rate and other differences in actuarial assumptions.

For the first six months of 2010, we contributed from our general assets $193 million to our international pension plans, $167 million to our U.S. supplemental (non-qualified) pension plans and $115 million to our postretirement plans. Contributions to our U.S. qualified pension plans in the first six months of 2010 were not significant.

During 2010, we expect to contribute from our general assets, a total of $907 million to our U.S. qualified pension plans, $453 million to our international pension plans, $245 million to our U.S. supplemental (non-qualified) pension plans, and $229 million to our postretirement plans. Contributions expected to be made during 2010 are inclusive of amounts contributed during the first six months of 2010. The international pension plan, U.S. supplemental (non-qualified) pension plan and postretirement plan contributions from our general assets include direct employer benefit payments.

 
17

 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Note 11. Earnings Per Share Attributable to Common Shareholders

Basic and diluted earnings per share (EPS) were computed using the following data:
   
Three Months Ended
   
Six Months Ended
 
(in millions)
 
July 4,
2010
   
June 28,
2009
   
July 4,
2010
   
June 28,
2009
 
EPS Numerator––Basic:
                       
Income from continuing operations attributable to Pfizer Inc.
  $ 2,476     $ 2,258     $ 4,500     $ 4,986  
Less: Preferred stock dividends––net of tax
    1       1       1       1  
Income from continuing operations attributable to Pfizer Inc. common
  shareholders
    2,475       2,257       4,499       4,985  
Discontinued operations––net of tax
  &#