Pfizer Earnings Call Insights: Tax Rate Guidance and Bolt-On Acquisitions

Pfizer Inc (NYSE:PFE) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Tax Rate Guidance

Tim Anderson – Sanford Bernstein: On your tax rate guidance in 2013, can you say will it be without (certain) accounting of R&D tax credit and you had a one-time – excess time the life merger suggested a long term rate of maybe 30% seeing what Bristol Myer’s has done on lowering its tax rate remarkably, I’m wondering if you have any ability to restructure any of your legal entities as well? Then a second question and obviously a one that you get asked about a lot, but can you give us your latest thoughts on potentially carving out the drug side of the business in the two truly separate companies like you’re doing with Zoetis, you’ve been alluding this for – for this possibility for quite some time now but I think investors don’t really know what sort of odds to do it. So would you say it’s higher probability, is it (indiscernible)?

Ian Read – Chairman and CEO: I’d ask Frank to take care of the tax rate guidance and explain the 30% tax rate and any other comments you want to make on tax.

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Frank D’Amelio – EVP, CFO and Business Operations: Sure. So, Tim on the 28% which is down from 29.3% in 2012, even if we didn’t have I’ll call it the double benefit of the R&D tax credit in 2013 our tax rate would be closer to 28% then to 29%. So, that’s the way to think about it. By the way what will happen in 2013 is we will record the 2012 benefit in Q1 and then 2013 benefit will record throughout the year just in terms of the accounting mechanics of the R&D tax credit. In terms of the legal entity restructuring the way I think about that is our tax planning. We do tax planning all the time. If you look at our tax rate over the last couple of years it’s gone from 30% to last year’s slightly higher than 29% and now our guidance for this year is approximately 28%. We’ll obviously continue to do tax planning but the one thing I will say is trying to project tax rates beyond 2013 giving everything that’s going on and with the uncertainty which is corporate tax reform, I think is not a prudent thing to do. So, our current guidance is approximately 28% and obviously we will do everything we can to meet or exceed that guidance.

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