FORM 10-Q

For the Quarter Ended
September 28, 2003

Table of Contents

 

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

		Three Months Ended					Nine Months Ended
(millions of dollars, except per common share data)		Sept. 28,  2003		Sept. 29,  2002			Sept. 28,  2003		Sept. 29,  2002
Revenues	$	12,504	$	7,996		$	31,022	$	23,039
Costs and expenses:
Cost of sales		3,366		1,026			6,459		2,867
Selling, informational and administrative expenses		4,043		2,657			10,560		7,864
Research and development expenses		1,879		1,245			4,813		3,665
Merger-related in-process research and development charge		(87)		--			5,043		--
Merger-related costs		303		114			680		387
Other (income)/deductions-net		506		54			1,155		(77)
Income from continuing operations before provision for taxes on income, minority interests and cumulative effect of change in accounting principles		2,494		2,900			2,312		8,333
Provision for taxes on income		253		630			1,286		1,859
Minority interests		2		1			1		1
Income from continuing operations before cumulative effect of change in accounting principles		2,239		2,269			1,025		6,473
Discontinued operations:
Income/(loss) from operations of discontinued businesses/product lines-net of tax		(4)		81			28		207
Gains on sales of discontinued businesses/product lines-net of tax		--		--			2,285		--
Discontinued operations-net of tax		(4)		81			2,313		207
Income before cumulative effect of change in accounting principles		2,235		2,350			3,338		6,680
Cumulative effect of change in accounting principles-net of tax		--		--			(30)		(410)
Net income	$	2,235	$	2,350		$	3,308	$	6,270
Earnings per common share - Basic:
Income from continuing operations before cumulative effect of change in accounting principles	$	.29	$	.38		$	.14	$	1.06
Discontinued operations:
Income/(loss) from operations of discontinued businesses/product lines-net of tax		--		.01			--		.03
Gains on sales of discontinued businesses/product lines-net of tax		--		--			.33		--
Discontinued operations-net of tax		--		.01			.33		.03
Income before cumulative effect of change in accounting principles		.29		.39			.47		1.09
Cumulative effect of change in accounting principles-net of tax		--		--			--		(.07)
Net income	$	.29	$	.39		$	.47	$	1.02
Earnings per common share - Diluted:
Income from continuing operations before cumulative effect of change in accounting principles	$	.29	$	.37		$	.14	$	1.04
Discontinued operations:
Income/(loss) from operations of discontinued businesses/product lines-net of tax		--		.01			--		.03
Gains on sales of discontinued businesses/product lines-net of tax		--		--			.32		--
Discontinued operations-net of tax		--		.01			.32		.03
Income before cumulative effect of change in accounting principles		.29		.38			.46		1.07
Cumulative effect of change in accounting principles-net of tax		--		--			--		(.07)
Net income	$	.29	$	.38		$	.46	$	1.00
Weighted average shares used to calculate earnings per common share:
Basic		7,710.7		6,126.3			7,088.5		6,172.3
Diluted		7,791.2		6,202.2			7,160.7		6,262.2
Cash dividends paid per common share	$	.15	$	.13		$	.45	$	.39

See accompanying Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBISIDARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)

(in millions)		Sept. 28,  2003*		Dec. 31,  2002**
ASSETS
Current Assets
Cash and cash equivalents	$	1,610	$	1,878
Short-term investments		12,807		10,673
Accounts receivable, less allowance for doubtful accounts: $190 and $122		8,626		5,785
Short-term loans		340		399
Inventories
Finished goods		2,035		1,133
Work in process		3,318		1,142
Raw materials and supplies		1,348		403
Total inventories		6,701		2,678
Prepaid expenses and taxes		2,983		1,797
Assets of discontinued businesses held for sale		--		1,571
Total current assets		33,067		24,781
Long-term loans and investments		5,962		5,161
Property, plant and equipment, less accumulated depreciation: $6,377 and $5,431		17,961		10,712
Goodwill		22,972		1,200
Identifiable intangible assets, net		34,179		921
Other assets, deferred taxes and deferred charges		5,917		3,581
Total assets	$	120,058	$	46,356
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings, including current portion of long-term debt: $115 and $256	$	9,396	$	8,669
Accounts payable		1,998		1,620
Income taxes payable		3,678		2,231
Accrued compensation and related items		1,539		1,084
Other current liabilities		5,049		4,374
Liabilities of discontinued businesses held for sale		--		577
Total current liabilities		21,660		18,555
Long-term debt		6,439		3,140
Pension benefit obligations		2,634		910
Postretirement benefit obligations other than pension plans		1,417		623
Deferred taxes on income		14,880		364
Other noncurrent liabilities		4,497		2,814
Total liabilities		51,527		26,406
Shareholders' Equity
Preferred stock		229		--
Common stock		434		341
Additional paid-in capital		65,918		9,368
Retained earnings		31,191		30,243
Accumulated other comprehensive expense		(1,434)		(1,875)
Employee benefit trust		(1,626)		(1,786)
Treasury stock, at cost		(26,181)		(16,341)
Total shareholders' equity		68,531		19,950
Total liabilities and shareholders' equity	$	120,058	$	46,356

*    Unaudited.

**  Condensed from audited financial statements.

See accompanying Notes to Condensed Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

		Nine Months Ended
(in millions)		Sept. 28,   2003		Sept. 29,  2002
Operating Activities:
Net income	$	3,308	$	6,270
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Cumulative effect of change in accounting principles		30		410
Income from operations of discontinued businesses		(28)		(207)
Depreciation and amortization		2,327		736
Merger-related in-process research and development charge		5,043		--
Charge for fair value mark-up of acquired inventory		1,712		--
Charges to write-down equity investments		8		28
Gains on sales of discontinued businesses and product lines, net of tax		(2,285)		--
Gains on sales of products		(87)		(20)
Other		(311)		(17)
Changes in assets and liabilities (net of business acquired)		(2,388)		(939)
Net cash provided by continuing operating activities		7,329		6,261
Investing Activities:
Purchases of property, plant and equipment		(1,862)		(1,172)
Purchases of short-term investments		(10,455)		(12,133)
Proceeds from redemptions of short-term investments		10,029		9,124
Purchases of long-term investments		(1,240)		(2,533)
Proceeds from redemptions of long-term investments		351		2,907
Purchases of other assets		(425)		(101)
Proceeds from sales of other assets		226		180
Proceeds from the sales of businesses and product lines		5,600		6
Cash and cash equivalents acquired through acquisition of Pharmacia		1,789		--
Other investment activities		(74)		20
Net cash provided by/(used in) investing activities		3,939		(3,702)
Financing Activities:
Increase in short-term borrowings-net		814		4,657
Principal payments on short-term borrowings-net		(280)		(442)
Proceeds from issuances of long-term debt		600		600
Principal payments on long-term debt		(436)		(212)
Proceeds from common stock issuances		73		53
Purchases of common stock		(9,873)		(4,726)
Cash dividends paid		(3,276)		(2,382)
Stock option transactions and other		854		496
Net cash used in financing activities		(11,524)		(1,956)
Net cash provided by discontinued operations		14		139
Effect of exchange-rate changes on cash and cash equivalents		(26)		(4)
Net increase/(decrease) in cash and cash equivalents		(268)		738
Cash and cash equivalents at beginning of period		1,878		1,036
Cash and cash equivalents at end of period	$	1,610	$	1,774
Supplemental Cash Flow Information:
Cash paid during the period for:
Income taxes	$	2,108	$	1,089
Interest		235		208
Non-cash transactions:
Issuance of common stock, preferred stock and stock options related to acquisition of Pharmacia, net of transaction costs	$	55,872	$	--

See accompanying Notes to Condensed Financial Statements.

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 (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 nine-month periods ended August 24, 2003 and August 25, 2002. We made certain reclassifications to the 2002 condensed consolidated financial statements to conform to the 2003 presentation.

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.

On April 16, 2003, we completed our acquisition of Pharmacia Corporation (Pharmacia) in a stock for stock transaction accounted for under the purchase method of accounting - see note 2, "Pharmacia Acquisition". Commencing with the date of acquisition, April 16, 2003, the Pharmacia assets acquired and liabilities assumed, as well as the results of Pharmacia's operations are included in our condensed consolidated financial statements. About 4 1/2 months of results of operations of Pharmacia's international operations and about 5 1/2 months of results of operations of Pharmacia's U.S. operations are included in our condensed consolidated financial statements for the nine-month period ended September 28, 2003.

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 as those for the full year.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with:

• consolidated financial statements and accompanying notes included in Pfizer's Annual Report on Form 10-K for the year ended December 31, 2002;
• consolidated financial statements and accompanying notes included in Pharmacia's Annual Report on Form 10-K for the year ended December 31, 2002; and
• unaudited pro forma condensed combined financial statements and accompanying notes as of and for the year ended December 31, 2002 included in Pfizer's Current Report on Form 8-K/A dated June 30, 2003.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, we elected to account for our stock-based compensation under Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees. The exercise price of stock options granted equals the market price on the date of grant. There is no recorded expense related to grants of stock options.

The weighted-average fair value per stock option granted was $8.46 for the three months ended September 28, 2003, $8.78 for the three months ended September 29, 2002, $7.35 for the nine months ended September 28, 2003 and $12.58 for the nine months ended September 29, 2002. We estimated the fair values, as required under GAAP, using the Black-Scholes option-pricing model, modified for dividends and using the assumptions below. The Black-Scholes model is a trading option-pricing model that neither considers the non-traded nature of employee stock options, nor the restrictions on trading, the lack of transferability or the ability of employees to forfeit the options prior to expiry. If the model adequately permitted considerations of the unique characteristics of employee stock options, the resulting estimate of the fair value of the stock options could be different.

	Three Months Ended			Nine Months Ended
	Sept. 28, 2003	Sept. 29, 2002		Sept. 28, 2003		Sept. 29, 2002
Expected dividend yield	2.81%	2.71%		3.15%		1.90%
Risk-free interest rate	3.27%	3.86%		2.75%		4.35%
Expected stock price volatility	33.08%	32.93%		33.05%		32.41%
Expected term until exercise (years)	5.46	5.50		5.58		5.30

 

The following table summarizes our results for the three months and nine months ended September 28, 2003 and September 29, 2002 as if we had recorded compensation expense for the options grants:

			Three Months Ended					Nine Months Ended
(millions of dollars, except per common share data)			Sept. 28,  2003		Sept. 29,  2002			Sept. 28,  2003		Sept. 29,  2002
Net income available to common shareholders used in the calculation of basic earnings per common share:
As reported under GAAP*		$	2,234	$	2,350		$	3,306	$	6,270
Compensation expense			(143)		(160)			(394)		(380)
Pro forma		$	2,091	$	2,190		$	2,912	$	5,890
Basic earnings per common share:
As reported under GAAP*		$	.29	$	.39		$	.47	$	1.02
Compensation expense			(.02)		(.03)			(.06)		(.07)
Pro forma		$	.27	$	.36		$	.41	$	.95
Net income available to common shareholders used in the calculation of diluted earnings per common share:
As reported under GAAP*		$	2,234	$	2,350		$	3,306	$	6,270
Compensation expense			(143)		(160)			(394)		(380)
Pro forma		$	2,091	$	2,190		$	2,912	$	5,890
Diluted earnings per common share:
As reported under GAAP*		$	.29	$	.38		$	.46	$	1.00
Compensation expense			(.02)		(.03)			(.05)		(.06)
Pro forma		$	.27	$	.35		$	.41	$	.94
*	Includes stock based compensation expense, net of related tax effects, of $28 million for the nine months ended September 28, 2003 ($1 million income for the three months ended September 28, 2003) and $10 million for the nine months ended September 29, 2002 ($6 million income for the three months ended September 29, 2002).

Net income available to common shareholders used in the calculation of basic earnings per common share represents net income reduced by preferred stock dividends-net of tax. Net income available to common shareholders used in the calculation of diluted earnings per common share represents net income reduced by the incremental contribution to the Employee Stock Ownership Plan (ESOP), acquired as part of the Pharmacia acquisition.

Note 2:  Pharmacia Acquisition

On April 16, 2003, Pfizer acquired Pharmacia for a purchase price of approximately $56 billion, which includes Pfizer common stock valued at $54.2 billion, options on Pfizer common stock valued at $1.1 billion, Pfizer convertible perpetual preferred stock valued at $.5 billion, and vested share awards valued at $.1 billion, as well as transaction costs of $90 million.

The fair value of Pfizer common stock was derived using an average market price per share of Pfizer common stock of $29.81, which was based on Pfizer's average stock price for the period two days before through two days after the terms of the acquisition were agreed to and announced on July 15, 2002.

Under the terms of the merger agreement, each outstanding share of Pharmacia common stock was exchanged for 1.4 shares of Pfizer common stock in a tax-free transaction. Each share of Pharmacia Series C convertible perpetual preferred stock was exchanged for a newly created class of Pfizer Series A convertible perpetual preferred stock with rights substantially similar to the rights of the Pharmacia Series C convertible perpetual preferred stock.

The acquisition has been accounted for as a purchase business combination. Under the purchase method of accounting, the assets acquired and liabilities assumed from Pharmacia are recorded at the date of acquisition, at their respective fair values. The consolidated financial statements and reported results of operations of Pfizer issued after completion of the acquisition will reflect these values, but will not be restated retroactively to reflect the historical financial position or results of operations of Pharmacia.

The following is an estimate of the purchase price for Pharmacia, as of April 16, 2003:

Common Stock
Number of shares of Pharmacia common stock outstanding as of April 16, 2003 (in thousands)		1,298,157
Exchange ratio		1.4
		1,817,420
Multiplied by Pfizer's average stock price for the period two days before through two days after the July 15, 2002 announcement of the merger agreement	$	29.81		$	54,177 million
Preferred Stock
Number of shares of Pharmacia Series B perpetual  preferred stock to be exchanged for substantially similar Pharmacia Series C perpetual preferred stock, outstanding and convertible into common stock as of April 16, 2003		6,028.931
Conversion feature		1,839.19
Number of shares of Pharmacia common stock issuable upon conversion (in thousands)		11,088,350
Exchange ratio		1.4
		15,523,690
Multiplied by Pfizer's average stock price for the period two days before through two days after the July 15, 2002 announcement of the merger agreement	$	29.81			463 million
Stock Options
Estimated fair value of 180,068 Pfizer stock options (in thousands) issued as of April 16, 2003 in exchange for 128,906 Pharmacia outstanding stock options (in thousands), calculated using the Black-Scholes option pricing model, modified for dividends, with model assumptions estimated as of April 16, 2003 and a Pfizer stock price of $29.81, which represented the average stock price for the period two days before through two days after the July 15, 2002 announcement of the merger agreement					1,102 million
Vested Share Award Programs
Share awards became fully vested in connection with the acquisition. The fair value of unissued shares of fully vested awards is based on the same exchange ratio as the common stock and a Pfizer stock price of $29.81. Awards can be settled in cash or shares, at the election of the program participant					130 million
Other transaction costs					90 million
Total estimated purchase price				$	55,962 million

 

The above purchase price has been preliminarily allocated based on an estimate of the fair value of assets acquired and liabilities assumed. The final valuation of net assets is expected to be completed as soon as possible, but no later than one year from the acquisition date in accordance with GAAP. To the extent that our estimates need to be adjusted, we will do so.

(in millions)
Estimated book value of net assets acquired		$	8,684
Adjusted for write-off of existing goodwill and other intangible assets			1,448
Adjusted estimated book value of net assets acquired			7,236
Remaining allocation:
Increase inventory to fair value (a)			3,324
Increase long-term investments to fair value (b)			40
Increase property, plant and equipment to fair value (c)			775
Record in-process research and development charge (d)			5,043
Record identifiable intangible assets (e)			34,540
Increase long-term debt to fair value			(370)
Increase benefit plan liabilities to fair value (f)			(1,349)
Increase other noncurrent liabilities to fair value (g)			(307)
Restructuring costs incurred through September 28, 2003 (h)			(1,319)
Deferred taxes (i)			(13,388)
Goodwill (j)			21,737
Estimated purchase price		$	55,962

^(a) Components of the increase to fair value for acquired inventory is as follows:

(in millions)
Finished goods	$		362
Work in process			2,693
Reversal of LIFO Reserve			269
Total	$		3,324

We have conformed Pharmacia inventory valuation methods to Pfizer's methodology, and as such, will no longer use the LIFO method of inventory valuation for these inventories.

^(b) Primarily related to one publicly-traded, equity-method investment adjusted to fair value. The basis for the valuation was the quoted market price from the Stockholm Exchange.

^(c) Components of the increase to fair value for acquired property, plant and equipment is as follows:

(in millions)
Land	$	(27)
Buildings		789
Machinery and equipment		13
Total	$	775

^(d) As required by Financial Accounting Standards Board Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method (FIN 4), we recorded a charge of $5,043 million for the preliminary estimate of the portion of the purchase price allocated to acquired in-process research and development.

A project-by-project valuation using the guidance in SFAS No. 141, Business Combinations and the AICPA Practice Aid Assets Acquired in a Business Combination to be Used in Research and Development Activities: A Focus on Software, Electronic Devices and Pharmaceutical Industries (Practice Aid) is being performed by independent valuation specialists to determine the fair value of research and development projects of Pharmacia which were in-process, but not yet completed (collectively, In-Process Research and Development or IPR&D).

The fair value is determined using the income approach on a project-by-project basis. This method starts with a forecast of the expected future net cash flows.  These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the project's stage of completion and other risk factors. (These other risk factors can include the nature of the product, the scientific data associated with the technology, the current patent situation and market competition.) 

The forecast of future cash flows required the following assumptions to be made:

• Revenue that is reasonably likely to result from specific in-process research and development projects, if they are successful, including the estimated number of units to be sold, estimated selling prices, estimated market penetration and estimated market share and year-over-year growth rates over the product life cycles.
• Cost of sales related to the potential products using historical data, industry data or other sources of market data.
• Sales and marketing expense using historical data, industry data or other sources of market data.
• General and administrative expenses.
• Research and development (R&D) expenses.

In addition, we considered:

• The project's stage of completion
• The costs incurred to date
• The projected costs to complete
• The contribution, if any, of developed technology
• The projected launch date of the potential product
• The estimated life of the potential product.

To the extent that the IPR&D project is expected to utilize developed technology, the value of the in-process research and development project has been reduced to reflect this contribution. Developed technology represents the technical processes, intellectual property, and institutional understanding that were acquired from Pharmacia with respect to products, compounds and/or processes that have been completed and that may aid in the development of future products or processes.

 ^(e) Adjustment to record acquired identifiable intangible assets at fair value. A preliminary list of the acquired identifiable intangible assets is as follows:

a.	Developed technology
b.	Trademark/Brand names
c.	Customer lists/relationships
d.	Distribution agreements
e.	Supply agreements

The acquired identifiable intangible assets are attributable to the following categories:

	(in millions)		Useful Lives (years)
Developed technology rights	$24,871		3 - 20
Brands (finite-lived assets)	100		40
Brands (indefinite-lived assets)	8,917
Other (finite-lived assets)	143		2 - 20
Other (indefinite-lived assets)	509
Total	$34,540

Acquired identifiable intangible assets have been substantially allocated to the pharmaceutical segment ($32.3 billion).

Developed technology rights represent the value associated with developed technology to which Pfizer has all associated rights.  These rights can include the right to develop, use, market, sell and/or offer for sale the technical processes, intellectual property and institutional understanding (including the way in which compounds react in body, an understanding of the mechanisms of action which allows the compound to work and the knowledge related to the associated clinical and marketing studies performed for these compounds) that were acquired from Pharmacia with respect to products, compounds and/or processes that have been completed.  The valuation of these developed technology rights is derived from multiple cash flow streams, some of which are more certain than others.  For example, the valuation of Pharmacia's second-generation COX-2 inhibitor, valdecoxib, includes the cash flows associated with the sale of Bextra, the product line approved by regulators for the treatment of osteo and rheumatoid arthritis, as well as the value associated with using the developed technology (valdecoxib) in future IPR&D projects.  In this situation, the cash flows of the approved indications are more likely to be achieved than the potential cash flows associated with the R&D projects for the currently unapproved indications.  The unequal probability of realizing these cash flow streams reflects the uncertainty associated with the future benefits of individual R&D projects, even those that leverage the benefits of developed technology.  Of the value allocated to developed technology rights, approximately 95% is derived from regulatory-approved uses and indications.

Brands with indefinite-life treatment represent the value associated with tradenames, as the products themselves no longer receive patent protection.

The fair value of all of these intangible assets is determined using an income approach on a project-by-project basis.  This method starts with a forecast of all of the expected future net cash flows associated with the developed technology (both approved and unapproved uses), the brands and the other intangible assets.  These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.

The forecast of future cash flows requires the following assumptions to be made:

• Revenue that is reasonably likely to result from the approved and unapproved uses, if they are successful, including the estimated number of units to be sold, estimated selling prices, estimated market penetration and estimated market share and year-over-year growth rates over the product life cycles,
• Cost of sales related to the potential products using historical data, industry data or other sources of market data,
• Sales and marketing expense using historical data, industry data or other sources of market data,
• General and administrative expenses,
• Research and development (R&D) expenses, and
• The estimated life of the potential product.

The valuations are based on the information that is currently available and the expectations and assumptions that have been deemed reasonable by our management.  No assurance can be given, however, that the underlying assumptions or events associated with such assets will occur as projected.  For these reasons, among others, the actual results may vary from the projected results.

At least annually, we will evaluate all of these intangible assets for impairment. For developed technology rights, an element of the impairment review process will include an evaluation of the status of the various R&D programs that were a part of the fair valuation process. Given the general uncertainty of success that is associated with R&D projects in the pharmaceutical industry, the realization of these cash flow streams (those associated with unapproved indication) are not assured.

 ^(f) Adjust benefit plan liabilities to fair value.  Adjustment is included in Postretirement benefit obligation other than pension plans - $292 million and Pension benefit obligations - $1,057 million for pension obligations.

^(g) Includes accruals for legal and environmental matters that we intend to resolve in a manner different from the manner Pharmacia had planned. Also, includes accruals for unfavorable leases and award programs which became fully vested in connection with the acquisition as well as the reversal of Pharmacia deferred income that no longer represents a performance obligation to third parties.

^(h) Included in Other current liabilities are restructuring costs that impacted goodwill.  These exit costs are associated with Pharmacia employees, assets or activities and were recorded as a liability in conjunction with recording the initial purchase of Pharmacia.

⁽ⁱ⁾ Reflects the estimated tax effects of the acquisition, including a provision for taxes on unremitted earnings of international Pharmacia subsidiaries that are not expected to be permanently reinvested overseas.

^(j) In accordance with the requirements of SFAS No. 142, Goodwill and Other Intangible Assets, the goodwill and the acquired indefinite-lived intangibles associated with the merger will not be amortized. Goodwill resulting from this acquisition has been preliminarily allocated to the pharmaceutical segment ($20.0 billion) and the consumer healthcare segment ($1.7 billion).

The following unaudited pro forma financial information presents the combined results of operations of Pfizer and Pharmacia as if the acquisition had occurred as of the beginning of the periods presented. The unaudited pro forma financial information is not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition at the dates indicated.  In addition, the unaudited pro forma financial information does not purport to project the future results of operations of the combined company.

		Three Months Ended					Nine Months Ended
		Sept. 28, 2003		Sept. 29, 2002			Sept. 28, 2003		Sept. 29, 2002
(in millions, except per common share amounts)		(unaudited)					(unaudited)
Revenues	$	12,504	$	11,209		$	34,728	$	32,331
Income from continuing operations before cumulative effect of change in accounting principles		3,067		2,370			7,044		6,833
Net income		3,063		1,430			9,248		4,806
Per share amounts:
Income from continuing operations before cumulative effect of change in accounting principles per common share-basic		.40		.30			.90		.86
Net income per common share-basic		.40		.18			1.18		.60
Income from continuing operations before cumulative effect of change in accounting principles per common share-diluted		.39		.30			.89		.84
Net income per common share-diluted		.39		.18			1.17		.59

The unaudited pro forma financial information above reflects the following:

1. The elimination of balances and transactions between Pfizer and Pharmacia, which upon completion of the merger would be considered intercompany balances and transactions.  The majority of these transactions occurred under the Celebrex and Bextra marketing agreements. The entries include:
• the elimination of certain sales, alliance revenue and certain co-promotion expenses; and
• the elimination of the impact of milestone payments made by Pfizer to Pharmacia.
2. The elimination of historical amortization expense recorded by legacy Pharmacia related to definite-lived intangible assets.
3. A decrease in interest expense of $9 million and $27 million in the third quarter and first nine months of 2003 and $9 million and $29 million in the third quarter and first nine months of 2002 related to the estimated fair value adjustment of long-term debt from the purchase price allocation.
4. Additional amortization expense related to the estimated fair value of identifiable intangible assets from the purchase price allocation, which are being amortized over their estimated useful lives over a range of 2 to 40 years, of approximately $655 million and $2,069 million in the third quarter and first nine months of 2003 and $703 million and $2,108 million in the third quarter and first nine months of 2002.
5. Additional depreciation expense related to the estimated fair value step-up of the property, plant and equipment from the purchase price allocation, which is being depreciated over its estimated useful life of approximately $49 million and $97 million in the third quarter and first nine months of 2003 and $17 million and $51 million in the third quarter and first nine months of 2002.

The unaudited pro forma financial information above excludes the following material, non-recurring charges in the three and nine month periods ended September 28, 2003:

• purchase accounting adjustments related to purchased IPR&D a credit of $87 million and charges of $5,043 million and charges of $1,304 million and $1,712 million reported in Cost of Sales for the workdown of purchased inventory that was written up to fair value.

Note 3:  Adoption of New Accounting Standards

Accounting for Asset Retirement Obligations

On January 1, 2003, we adopted the provisions of SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. As a result of adopting SFAS No. 143, we recorded a non-cash pre-tax charge of $47 million ($30 million net of tax) in the first quarter of 2003 for the change in accounting for costs associated with the eventual retirement of certain manufacturing and research facilities. This charge is reported as a one-time cumulative effect of a change in accounting principle as of the beginning of 2003. Our asset retirement obligations primarily relate to remediation and land restoration requirements.

Accounting for Costs Associated with Exit or Disposal Activities

On January 1, 2003, we adopted the provisions of SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 applies to costs associated with an exit activity that is not related to an entity newly acquired in a business combination. SFAS No. 146 amends existing accounting rules for these costs by requiring that a liability be recorded at fair value when incurred. The liability is subject to adjustment for the passage of time, timing of payments and changes in the estimated payments. SFAS No. 146 also provides specific guidance for lease termination costs and one-time employee termination benefits when incurred as part of an exit or disposal activity. SFAS No. 146 changes the measurement and timing of costs associated with exit and disposal activities initiated after December 31, 2002.

Note 4:  Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 28, 2003, by segment, follow:

(in millions)		Pharmaceutical		Consumer Healthcare		Other		Total
Balance, December 31, 2002	$	362	$	829	$	9	$	1,200
Goodwill - Pharmacia acquisition (preliminary estimate)		20,063		1,674		--		21,737
Other changes during the period*		30		5		--		35
Balance, September 28, 2003	$	20,455	$	2,508	$	9	$	22,972

*Primarily reflects the impact of foreign exchange.

			Gross Carrying Amount					Accumulated Amortization
(in millions)			Sept 28,  2003		Dec. 31,  2002			Sept. 28,  2003		Dec. 31,  2002
Amortized intangible assets:
Developed technology rights		$	24,871	$	--		$	(1,241)	$	--
Trademarks			139		133			(75)		(72)
License agreements			50		42			(11)		(25)
Patents			35		33			(29)		(24)
Product rights*			549		526			(108)		(72)
Noncompete agreements			49		48			(43)		(39)
Customer contracts			143		--			(15)		--
Other			187		78			(41)		(31)
Total amortized intangible assets			26,023		860			(1,563)		(263)
Unamortized identifiable intangible assets:
Brands acquired as part of the Pharmacia acquisition			8,917		--			--		--
License agreements			480		--			--		--
Trademarks			235		240			--		--
Pension asset			34		60			--		--
Other			53		24			--		--
Total unamortized intangible assets			9,719		324			--		--
Total identifiable intangible assets		$	35,742	$	1,184		$	(1,563)	$	(263)
*	Includes a post-approval milestone payment that we made during the first quarter of 2003 under our alliance agreement for Celebrex. Such payment was made prior to the completion of our acquisition of Pharmacia.

Total amortization expense for finite-lived intangible assets was $686 million for the three months ended September 28, 2003 and $1,308 million for the nine months ended September 28, 2003. Amortization expense for finite-lived intangible assets is recorded in various expenses in the condensed consolidated statement of income, including Cost of sales, Research and development expenses and Other (income)/deductions-net.

The annual amortization expense expected for the years 2003 through 2008 is as follows:

Note 5:  Financial Instruments

A.  Long-Term Debt

In February 2003, we issued:

• $300 million senior unsecured notes, due March 2009, which pay interest semi-annually, beginning on September 2, 2003, at a rate of 3.3%; and
• $300 million senior unsecured notes, due March 2018, which pay interest semi-annually, beginning on September 1, 2003, at a rate of 4.65%.

The notes were issued under a $5 billion debt shelf registration statement filed with the SEC in November 2002.

B.  Derivative Financial Instruments and Hedging Activities

During the first nine months of 2003, we entered into the following incremental or new derivative and hedging activities:

Foreign Exchange Risk

These foreign exchange financial instruments serve to protect net income against the impact of the translation into U.S. dollars of certain foreign currency denominated transactions (in millions):

Financial Instrument		Hedge Type		Hedged or Offset Item		Notional Amount		Maturity Date
Forward contracts		--		Short-term foreign currency assets and liabilities		$3,033		Through 2003
Forward contracts		Cash flow		Euro available-for-sale investments		1,950		Through 2003
Forward contracts		Cash flow		Australian dollar intercompany loan		281		Through 2003
Forward contracts		Cash flow		Swedish kroner intercompany deposit		209		Through 2003

Interest Rate Risk

The derivative financial instruments employed to manage interest rate risk follow (in millions):

Financial Instrument			Hedge Type		Hedged or Offset Item		Notional Amount		Maturity Date
Principal amortizing swaps			Fair value		U.S. dollar fixed rate debt (1)		$660		2028
Swaps			Fair value		U.S. dollar fixed rate investment (1)		500		2008
Principal amortizing swaps			Fair value		U.S. dollar fixed rate debt (1)		461		2018
Swaps			Fair value		U.S. dollar fixed rate debt (1)		375		2005
Swaps			Fair value		U.S. dollar fixed rate debt (1)		300		2009
Swaps			Fair value		U.S. dollar fixed rate debt (1)		300		2018
Swaps			Fair value		U.S. dollar fixed rate debt (1)		200		2008
Principal amortizing swaps			Fair value		U.S. dollar fixed rate debt (1)		200		2027
(1)	Serves to reduce exposure to long-term U.S. dollar interest rates by effectively converting fixed rates associated with long-term assets or debt obligations to floating rates.

There was no material ineffectiveness in any hedging relationship reported in earnings in the first nine months of 2003.

Note 6:  Merger-Related Costs

We incurred the following merger-related costs in connection with our merger with Warner-Lambert Company (Warner-Lambert) which was completed on June 19, 2000 and our acquisition of Pharmacia which was completed on April 16, 2003:

		Three Months Ended					Nine Months Ended
(in millions)		Sept. 28,  2003		Sept. 29,  2002			Sept. 28,  2003		Sept. 29,  2002
Integration costs - Warner-Lambert	$	2	$	99		$	23	$	276
Integration costs - Pharmacia		251		1			552		1
Restructuring charges - Warner-Lambert		(4)		14			(1)		110
Restructuring charges - Pharmacia		54		--			106		--
Total merger-related costs	$	303	$	114		$	680	$	387

Integration costs represent external, incremental costs directly related to our merger with Warner-Lambert and acquisition of Pharmacia, including expenditures for consulting and systems integration.

Restructuring Charges - Warner-Lambert

The components of the restructuring charges associated with the merger of the Warner-Lambert operations follow:

		Provisions
(in millions)		Year 2000		Year 2001		Year 2002		Nine Months Ended Sept. 28, 2003		Total			Utilization  Through  Sept. 28,  2003		Reserve* Sept. 28, 2003
Employee termination costs	$	850	$	249	$	170	$	(1)	$	1,268		$	(1,260)	$	8
Property, plant and equipment		46		84		4		--		134			(134)		--
Other		21		30		13		--		64			(64)		--
	$	917	$	363	$	187	$	(1)	$	1,466		$	(1,458)	$	8

*Included in Other current liabilities.

Through September 28, 2003, the charges for employee termination costs represent the approved reduction of our work force of our continuing businesses by 8,067 people, mainly in administrative functions for corporate, manufacturing, distribution, sales and research. We notified affected individuals and as of September 28, 2003, 7,697 employees were terminated. Employee termination costs include accrued severance benefits and costs associated with change-in-control provisions of certain Warner-Lambert employment contracts. Under the terms of Warner-Lambert employment contracts, certain terminated employees may elect to defer receipt of severance benefits. Severance benefits deferred for future payments were $230 million at September 28, 2003 and $218 million at December 31, 2002. The deferred severance benefits are considered utilized charges and are included in Other noncurrent liabilities in the condensed balance sheet.

Restructuring Charges - Pharmacia

During the second and third quarters of 2003, in connection with the acquisition of Pharmacia, Pfizer management approved and initiated plans to restructure the operations of both legacy Pfizer and legacy Pharmacia to eliminate duplicative facilities and reduce costs.

We recorded $106 million of restructuring costs associated primarily with exiting certain activities of legacy Pfizer, including severance, costs of vacating duplicative facilities and contract termination costs. These costs have been recorded as a charge to the results of operations through the nine months ended September 28, 2003 and are included in Merger-related costs. The components of the restructuring charges associated with the acquisition of Pharmacia which were expensed in 2003 follow:

		Provisions
(in millions)		Nine Months Ended Sept. 28, 2003		Total		Utilization  Through  Sept. 28, 2003		Reserve* Sept. 28, 2003
Employee termination costs	$	76	$	76	$	(44)	$	32
Asset impairments		15		15		(15)		--
Other		15		15		(4)		11
	$	106	$	106	$	(63)	$	43

*Included in Other current liabilities.

Through September 28, 2003, the charges for employee termination costs represent the approved reduction of the legacy Pfizer work force by 865 people, mainly in administrative functions for corporate, manufacturing, distribution, sales and research. We notified affected individuals and as of September 28, 2003, 706 employees were terminated. Asset impairments primarily include charges to write-down property, plant and equipment. Other primarily includes costs to exit certain activities of legacy Pfizer.

Pharmacia Acquisition-Related Restructuring Costs Capitalized in 2003 as a Cost of the Acquisition

We recorded $1,319 million of similar restructuring costs associated primarily with exiting certain activities of legacy Pharmacia.  These costs are accounted for under Emerging Issues Task Force (EITF) Issue No. 95-3, Recognition of Liabilities in Connection with Purchase Business Combinations, and were recognized as a liability assumed in the purchase business combination. Accordingly, these costs were included in the allocation of the cost to acquire Pharmacia and have been recorded as an increase to goodwill. In accordance with EITF 95-3, these restructuring costs also include costs associated with relocation. The restructuring liabilities are included in Other current liabilities. The components of the restructuring costs capitalized in 2003 as a cost of the acquisition of Pharmacia follow:

		Costs Incurred
(in millions)		Nine Months Ended Sept. 28, 2003		Total		Utilization  Through  Sept. 28,  2003		Reserve Sept. 28, 2003
Employee termination costs	$	1,065	$	1,065	$	(742)	$	323
Asset impairments		27		27		(27)		--
Relocation costs		96		96		(24)		72
Other		131		131		(11)		120
	$	1,319	$	1,319	$	(804)	$	515

Through September 28, 2003, the employee termination costs represent the approved reduction of the legacy Pharmacia work force by 9,425 people, mainly in corporate, manufacturing, distribution, sales and research. We notified affected individuals and as of September 28, 2003, 8,271 employees were terminated.  Employee termination costs include accrued severance benefits and costs associated with change in control provisions of certain Pharmacia employment contracts. Asset impairments primarily include charges to write-down property, plant and equipment. Other includes costs to exit certain activities of legacy Pharmacia.

Changes to the estimates of completing the currently approved restructuring plans or costs related to new restructuring initiatives will be recorded in results of operations for legacy Pfizer and will be recorded in goodwill for legacy Pharmacia for one year following the acquisition date of April 16, 2003.

Note 7:  Comprehensive Income

		Three Months Ended						Nine Months Ended
(in millions)		Sept. 28,  2003			Sept. 29,  2002			Sept. 28,  2003			Sept. 29,  2002
Net income	$	2,235		$	2,350		$	3,308		$	6,270
Other comprehensive income/(expense):
Holding gain/(loss) on investment securities arising during period-net of tax		(12)			28			(157)			(43)
Reclassification adjustment-net of tax		--			--			5			--
Net gain/(loss) on investment securities		(12)			28			(152)			(43)
Currency translation adjustment and hedges		(806)			250			593			114
Total other comprehensive income/(expense)		(818)			278			441			71
Total comprehensive income	$	1,417		$	2,628		$	3,749		$	6,341

The change in currency translation adjustment and hedges included in Accumulated other comprehensive expense for the first nine months of 2003 was:

(in millions)		2003
Opening balance	$	(1,438)
Translation adjustments and hedges		593
Ending balance	$	(845)

 

Note 8:   Earnings Per Common Share

Basic and diluted earnings per common share (EPS) were computed using the following common share data:

		Three Months Ended					Nine Months Ended
(in millions)		Sept. 28,  2003		Sept. 29,  2002			Sept. 28,  2003		Sept. 29,  2002
EPS Numerator - Basic:
Income from continuing operations before cumulative effect of change in accounting principles	$	2,239	$	2,269		$	1,025	$	6,473
Less:  Preferred stock dividends - net of tax		1		--			2		--
Income available to common shareholders from continuing operations before cumulative effect of change in accounting principles		2,238		2,269			1,023		6,473
Discontinued operations:
Income/(loss) from operations of discontinued businesses/product lines-net of tax		(4)		81			28		207
Gains on sales of discontinued businesses/product lines-net of tax		--		--			2,285		--
Discontinued operations-net of tax		(4)		81			2,313		207
Income available to common shareholders before cumulative effect of change in accounting principles		2,234		2,350			3,336		6,680
Cumulative effect of change in accounting principles-net of tax		--		--			(30)		(410)
Net income available to common shareholders	$	2,234	$	2,350		$	3,306	$	6,270
EPS Denominator - Basic:
Weighted average number of common shares outstanding		7,710.7		6,126.3			7,088.5		6,172.3
EPS Numerator - Diluted:
Income from continuing operations before cumulative effect of change in accounting principles	$	2,239	$	2,269		$	1,025	$	6,473
Less:  ESOP contribution - net of tax		1		--			2		--
Income available to common shareholders from continuing operations before cumulative effect of change in accounting principles		2,238		2,269			1,023		6,473
Discontinued operations:
Income/(loss) from operations of discontinued businesses/product lines-net of tax		(4)		81			28		207
Gains on sales of discontinued businesses/product lines-net of tax		--		--			2,285		--
Discontinued operations-net of tax		(4)		81			2,313		207
Income available to common shareholders before cumulative effect of change in accounting principles		2,234		2,350			3,336		6,680
Cumulative effect of change in accounting principles-net of tax		--		--			(30)		(410)
Net income available to common shareholders	$	2,234	$	2,350		$	3,306	$	6,270
EPS Denominator - Diluted:
Weighted average number of common shares outstanding		7,710.7		6,126.3			7,088.5		6,172.3
Common share equivalents--stock options, stock issuable under employee compensation plans and convertible preferred stock		80.5		75.9			72.2		89.9
Weighted average number of common shares outstanding and common share equivalents		7,791.2		6,202.2			7,160.7		6,262.2

Stock options and stock issuable under employee compensation plans representing equivalents of 317 million and 336 million shares of common stock during the three months and nine months ended September 28, 2003 and 297 million and 204 million shares of common stock during the three months and nine months ended September 29, 2002 had exercise prices greater than the average market price of our common stock. These common stock equivalents were outstanding during the three months and nine months ended September 28, 2003 and September 29, 2002 but were excluded from the computation of diluted EPS for those periods because their inclusion would have had an antidulutive effect.

Also, in the diluted computation, income from continuing operations and net income are reduced by the incremental contribution to the ESOP, acquired as part of the Pharmacia acquisition. This contribution is the after-tax difference between the income that the ESOP would have received in preferred stock dividends and the dividend on the common shares assumed to have been outstanding.

Under GAAP, quarterly EPS computations must stand on their own and therefore, the sum of EPS for each of the first three quarters of 2003 does not equal the EPS for the first nine months of 2003. EPS for the third quarter of 2003 is computed using the weighted average number of common shares outstanding during the quarter while EPS for the first nine months of 2003 is computed using the weighted average number of common shares outstanding during the first nine months of 2003. The weighted average number of common shares outstanding is higher for the third quarter of 2003 than for the first nine months of 2003 as a result of issuing approximately 1.8 billion common shares to complete the Pharmacia acquisition on April 16, 2003. The significant increase in the number of common shares outstanding from the first quarter of 2003 has resulted in our having different bases of shares outstanding and therefore, the EPS results are not additive.

Note 9:  Stock Option and Performance Unit Awards

In connection with the Pharmacia acquisition on April 16, 2003, we issued approximately 180 million Pfizer stock options in exchange for Pharmacia outstanding stock options. The following table summarizes the activity for our stock and incentive plans related to employees during the first nine months of 2003:

	Under Option
(thousands of shares)	Shares			Weighted Average Exercise Price Per Share
Balance January 1, 2003	431,981			$31.45
Pharmacia Option Exchange	180,068			28.84
Granted	101,890			29.78
Exercised	(45,306)			18.59
Cancelled	(31,004)			36.64
Balance September 28, 2003	637,629			31.11

The tax benefits related to certain stock option transactions were $192 million during the nine months ended September 28, 2003.

Note 10:  Segment Information

We operate in the following three business segments:

Pharmaceutical

• The Pharmaceutical segment includes treatments for cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye disease, endocrine disorders and allergies.

Consumer Healthcare

• The Consumer Healthcare segment includes self medications for oral care, upper respiratory health, tobacco dependence, gastrointestinal health, skin care, eye care and hair growth.

Animal Health

• The Animal Health segment includes treatments for diseases in livestock and companion animals.

We operate several other businesses which include the manufacture of empty soft-gelatin capsules, contract manufacturing, bulk pharmaceutical chemicals and diagnostics. Due to the size of these businesses, they are grouped into the "Other" category.

Revenues and profits/(losses) by segment for the three months ended September 28, 2003 and September 29, 2002 were as follows:

(in millions)				Pharma- ceutical		Consumer Healthcare		Animal Health		Other	(a)		Consolidated
Revenues	2003		$	11,002	$	799	$	438	$	265		$	12,504
	2002			6,996		610		280		110			7,996
Segment profit/(loss)	2003		$	2,874	$	189	$	152	$	(721)	(b)	$	2,494	(c)
	2002			3,074		152		26		(352)	(b)		2,900	(c)

Revenues and profits/(losses) by segment for the nine months ended September 28, 2003 and September 29, 2002 were as follows:

(in millions)					Pharma- ceutical		Consumer Healthcare		Animal Health		Other	(a)		Consolidated
Revenues		2003		$	27,190	$	2,135	$	1,090	$	607		$	31,022
		2002			20,031		1,897		794		317			23,039
Segment profit/(loss)		2003		$	3,627	$	364	$	19	$	(1,698)	(b)	$	2,312	(c)
		2002			8,832		451		65		(1,015)	(b)		8,333	(c)
(a)	Includes Capsugel, Pfizer CentreSource, Diagnostics and Corporate/Other.
(b)	Includes interest income/(expense), corporate expenses, other income/(expense) of our banking and insurance subsidiaries, certain performance-based compensation expenses not allocated to the operating segments and merger-related costs.
(c)	Equals income from continuing operations before provision for taxes on income, minority interests and cumulative effect of change in accounting principles. In 2003, segment profit/(loss) includes the impact of purchase accounting for the Pharmacia acquisition.

On July 24, 2003, we announced that we are exploring strategic options for our surgical ophthalmology business, including its possible sale. The surgical ophthalmology business is included in our Pharmaceutical segment and became a part of Pfizer in April 2003 with our acquisition of Pharmacia.

On July 1, 2003, we announced that we are exploring strategic options for the Diagnostics business, including its possible sale. The Diagnostics business became a part of Pfizer in April 2003 with our acquisition of Pharmacia.

Revenues for each group of similar products are as follows:

		Three Months Ended							Nine Months Ended
(in millions)		Sept. 28, 2003		Sept. 29, 2002		% Change			Sept. 28, 2003		Sept. 29, 2002		% Change
PHARMACEUTICAL
Cardiovascular and metabolic diseases	$	4,298	$	3,429		25		$	11,450	$	9,761		17
Central nervous system disorders		1,993		1,411		41			5,181		4,056		28
Arthritis and pain		1,078		88		*			1,815		260		598
Infectious and respiratory diseases		1,095		807		36			3,084		2,450		26
Urology		701		437		60			1,700		1,244		37
Oncology		262		--		--			461		--		--
Ophthalmology		310		--		--			441		--		--
Endocrine disorders		216		--		--			323		--		--
All other		940		390		141			2,109		1,139		85
Alliance revenue		109		434		(75)			626		1,121		(44)
Total Pharmaceutical		11,002		6,996		57			27,190		20,031		36
CONSUMER HEALTHCARE		799		610		31			2,135		1,897		13
ANIMAL HEALTH		438		280		56			1,090		794		37
OTHER		265		110		144			607		317		91
Total revenues	$	12,504	$	7,996		56		$	31,022	$	23,039		35
*  Change greater than one thousand percent.

Note 11:  Discontinued Operations

We sold the following businesses and products that did not fit within our strategic plans:

• In April 2003, we completed the sale of the hormone replacement therapy femhrt, formerly part of our Pharmaceutical segment, to Galen Holdings plc for $160 million in cash with a right to receive up to $63.8 million contingent on femhrt retaining market exclusivity until the expiration of its patent. We recognized a gain on the sale of this product of $139 million ($83 million net of tax) in the consolidated statement of income for the first nine months of 2003.
• In March 2003, we sold the Adams confectionery products business, formerly part of our Consumer Healthcare segment, to Cadbury Schweppes plc for $4.2 billion in cash. We recognized a gain on the sale of this business of $3.091 billion ($1.824 billion net of tax) in the consolidated statement of income for the first nine months of 2003.
• In March 2003, we sold the Schick-Wilkinson Sword shaving products business, formerly part of our Consumer Healthcare segment, to Energizer Holdings, Inc., for $930 million in cash. We recognized a gain on the sale of this business of $462 million ($262 million net of tax) in the consolidated statement of income for the first nine months of 2003.
• In March 2003, we sold the oral contraceptives Estrostep and Loestrin, formerly part of our Pharmaceutical segment, to Galen Holdings plc for $197 million in cash with a right to receive up to $47.3 million contingent on Estrostep retaining market exclusivity until the expiration of its patent. We recognized a gain on the sale of these two products of $193 million ($116 million net of tax) in the consolidated statement of income for the first nine months of 2003.

These businesses and product lines are reflected as discontinued operations in all periods presented.

The following amounts related to the confectionery, shaving and fish-care product businesses, as well as the femhrt, Loestrin and Estrostep product lines, have been segregated from continuing operations and reflected as discontinued operations:

		Three Months Ended					Nine Months Ended
(in millions)		Sept. 28, 2003		Sept. 29, 2002			Sept. 28, 2003		Sept. 29, 2002
Revenues	$	(2)	$	730		$	763	$	2,138
Pre-tax income/(loss)	$	(7)	$	130		$	46	$	330
Provision (benefit) for taxes on income/(loss)		(3)		49			18		123
Income from operations of discontinued businesses/product lines-net of tax		(4)		81			28		207
Pre-tax gains on sales of discontinued businesses		--		--			3,885		--
Provision for taxes on gains		--		--			1,600		--
Gains on sales of discontinued businesses/product lines-net of tax		--		--			2,285		--
Discontinued operations-net of tax	$	(4)	$	81		$	2,313	$	207

Note 12:  Subsequent Events

On October 23, 2003, our board of directors declared a $.15 per share fourth-quarter 2003 cash dividend on our common stock, payable on December 4, 2003 to shareholders of record on November 14, 2003.

On October 23, 2003, our board of directors approved an amendment to our Shareholders' Rights Plan under which an existing "poison pill" provision will expire at the end of 2003.