v3.20.2
Financial Instruments (Tables)
 9 Months Ended
Sep. 27, 2020
Fair Value Disclosures [Abstract]  
Schedule of Financial Assets and Liabilities Measured At Fair Value On a Recurring Basis
Financial Assets and Liabilities Measured at Fair Value using a Market Approach on a Recurring Basis and Fair Value Hierarchy:
September 27, 2020December 31, 2019
(MILLIONS OF DOLLARS)TotalLevel 1Level 2TotalLevel 1Level 2
Financial assets:
Short-term investments
Classified as equity securities with readily determinable fair values:
Money market funds(a)
$12,273 $— $12,273 $705 $— $705 
Classified as available-for-sale debt securities:
Government and agency—non-U.S.
5,906 — 5,906 4,863 — 4,863 
Government and agency—U.S.
582 — 582 811 — 811 
Corporate and other
1,371 — 1,371 1,013 — 1,013 
7,859 — 7,859 6,687 — 6,687 
Total short-term investments20,132 — 20,132 7,392 — 7,392 
Other current assets
Derivative assets:
Interest rate contracts
16 — 16 53 — 53 
Foreign exchange contracts
321 — 321 413 — 413 
Total other current assets337 — 337 465 — 465 
Long-term investments
Classified as equity securities with readily determinable fair values(b)
2,092 2,063 28 1,902 1,863 39 
Classified as available-for-sale debt securities:
Government and agency—U.S.
142 — 142 303 — 303 
Corporate and other
7 — 7 11 — 11 
149 — 149 315 — 315 
Total long-term investments2,241 2,063 178 2,216 1,863 354 
Other noncurrent assets
Derivative assets:
Interest rate contracts
131 — 131 266 — 266 
Foreign exchange contracts
100 — 100 261 — 261 
Total derivative assets231 — 231 526 — 526 
Insurance contracts(c)
626 — 626 575 — 575 
Total other noncurrent assets857 — 857 1,102 — 1,102 
Total assets$23,567 $2,063 $21,504 $11,176 $1,863 $9,313 
Financial liabilities:
Other current liabilities
Derivative liabilities:
Foreign exchange contracts
$464 $— $464 $114 $— $114 
Total other current liabilities464 — 464 114 — 114 
Other noncurrent liabilities
Derivative liabilities:
Foreign exchange contracts
808 — 808 604 — 604 
Total other noncurrent liabilities808 — 808 604 — 604 
Total liabilities$1,272 $— $1,272 $718 $— $718 
(a)As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.
(b)As of September 27, 2020, long-term equity securities of $181 million and as of December 31, 2019, long-term equity securities of $176 million were held in restricted trusts for employee benefit plans.
(c)Includes life insurance policies held in restricted trusts attributable to the funding of various U.S. non-qualified employee benefit plans. The underlying invested assets in these insurance contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net in the condensed consolidated statements of income (see Note 4).
Schedule of Financial Liabilities Not Measured At Fair Value On a Recurring Basis
The following summarizes the financial liabilities not measured at fair value on a recurring basis, including the carrying values and estimated fair values using a market approach:
September 27, 2020December 31, 2019
Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
(MILLIONS OF DOLLARS)TotalLevel 2TotalLevel 2
Financial Liabilities
Long-term debt, excluding the current portion(a)
$49,785 $59,073 $59,073 $35,955 $40,842 $40,842 
(a)As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.
Investments by Classification Type
The following summarizes our investments by classification type:
(MILLIONS OF DOLLARS)September 27, 2020December 31, 2019
Short-term investments
Equity securities with readily determinable fair values(a)
$12,273 $705 
Available-for-sale debt securities7,859 6,687 
Held-to-maturity debt securities193 1,133 
Total Short-term investments$20,325 $8,525 
Long-term investments
Equity securities with readily determinable fair values$2,092 $1,902 
Available-for-sale debt securities149 315 
Held-to-maturity debt securities37 42 
Private equity securities at cost780 756 
Total Long-term investments$3,059 $3,014 
Equity-method investments15,949 17,133 
Total long-term investments and equity-method investments$19,008 $20,147 
Held-to-maturity cash equivalents$130 $163 
(a)As of September 27, 2020 and December 31, 2019, included money market funds primarily invested in U.S. Treasury and government debt. As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.
Schedule of Held-to-maturity Securities
At September 27, 2020, our investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at September 27, 2020 and December 31, 2019 is as follows, including the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities as of September 27, 2020:
September 27, 2020December 31, 2019
Gross UnrealizedMaturities (in Years)Gross Unrealized
(MILLIONS OF DOLLARS)Amortized CostGainsLossesFair ValueWithin 1Over 1
to 5		Over 5TotalAmortized CostGainsLossesFair Value
Available-for-sale debt securities
Government and agency––non-U.S.
$5,743 $164 $(1)$5,906 $5,906 $— $— $5,906 $4,895 $6 $(38)$4,863 
Government and agency––U.S.
726 — (1)725 582 142 — 725 1,120 — (6)1,114 
Corporate and other(a)
1,379 3 (5)1,378 1,371 7 — 1,378 1,027 — (2)1,025 
Held-to-maturity debt securities
Time deposits and other
290 — — 290 258 10 23 290 535 — — 535 
Government and agency––non-U.S.
70 — — 70 65 — 5 70 803 — — 803 
Total debt securities$8,208 $168 $(7)$8,369 $8,182 $159 $28 $8,369 $8,380 $6 $(47)$8,340 
(a)Primarily issued by a diverse group of corporations.
Schedule of Available-for-sale Securities
At September 27, 2020, our investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at September 27, 2020 and December 31, 2019 is as follows, including the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities as of September 27, 2020:
September 27, 2020December 31, 2019
Gross UnrealizedMaturities (in Years)Gross Unrealized
(MILLIONS OF DOLLARS)Amortized CostGainsLossesFair ValueWithin 1Over 1
to 5		Over 5TotalAmortized CostGainsLossesFair Value
Available-for-sale debt securities
Government and agency––non-U.S.
$5,743 $164 $(1)$5,906 $5,906 $— $— $5,906 $4,895 $6 $(38)$4,863 
Government and agency––U.S.
726 — (1)725 582 142 — 725 1,120 — (6)1,114 
Corporate and other(a)
1,379 3 (5)1,378 1,371 7 — 1,378 1,027 — (2)1,025 
Held-to-maturity debt securities
Time deposits and other
290 — — 290 258 10 23 290 535 — — 535 
Government and agency––non-U.S.
70 — — 70 65 — 5 70 803 — — 803 
Total debt securities$8,208 $168 $(7)$8,369 $8,182 $159 $28 $8,369 $8,380 $6 $(47)$8,340 
(a)Primarily issued by a diverse group of corporations.
Contractual Maturities of Available-for-sale and Held-to-maturity Debt Securities
At September 27, 2020, our investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at September 27, 2020 and December 31, 2019 is as follows, including the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities as of September 27, 2020:
September 27, 2020December 31, 2019
Gross UnrealizedMaturities (in Years)Gross Unrealized
(MILLIONS OF DOLLARS)Amortized CostGainsLossesFair ValueWithin 1Over 1
to 5		Over 5TotalAmortized CostGainsLossesFair Value
Available-for-sale debt securities
Government and agency––non-U.S.
$5,743 $164 $(1)$5,906 $5,906 $— $— $5,906 $4,895 $6 $(38)$4,863 
Government and agency––U.S.
726 — (1)725 582 142 — 725 1,120 — (6)1,114 
Corporate and other(a)
1,379 3 (5)1,378 1,371 7 — 1,378 1,027 — (2)1,025 
Held-to-maturity debt securities
Time deposits and other
290 — — 290 258 10 23 290 535 — — 535 
Government and agency––non-U.S.
70 — — 70 65 — 5 70 803 — — 803 
Total debt securities$8,208 $168 $(7)$8,369 $8,182 $159 $28 $8,369 $8,380 $6 $(47)$8,340 
(a)Primarily issued by a diverse group of corporations.
Schedule of Gains and Losses on Investment Securities
The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity method investments, still held at the reporting date:
Three Months EndedNine Months Ended
(MILLIONS OF DOLLARS)September 27,
2020		September 29,
2019		September 27,
2020		September 29,
2019
Net (gains)/losses recognized during the period on equity securities(a)
$70 $(6)$(408)$(153)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period2 (3)(16)(13)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)
$68 $(3)$(391)$(140)
(a)Reported in Other (income)/deductions––net. See Note 4.
(b)Included in net unrealized gains are observable price changes on equity securities without readily determinable fair values. Since January 1, 2018, there were cumulative impairments and downward adjustments of $82 million and upward adjustments of $63 million. Impairments, downward and upward adjustments were not significant in the third quarters and the first nine months of 2020 and 2019.
Schedule of Short-term Borrowings
Short-term borrowings include:
(MILLIONS OF DOLLARS)September 27,
2020		December 31, 2019
Commercial paper$10,990 $13,915 
Current portion of long-term debt, principal amount2,152 1,458 
Other short-term borrowings, principal amount(a)
226 860 
Total short-term borrowings, principal amount
13,367 16,233 
Net fair value adjustments related to hedging and purchase accounting— 5 
Net unamortized discounts, premiums and debt issuance costs(4)(43)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted
$13,363 $16,195 
(a)Other short-term borrowings primarily include cash collateral. See Note 7E.
Schedule of Principal Amounts of Senior Unsecured Long-Term Debt and Adjustments
In the second quarter of 2020, we issued the following senior unsecured notes:
(MILLIONS OF DOLLARS)
Principal
Interest RateMaturity DateAs of
September 27, 2020
Pfizer Inc.(a)
0.800%May 28, 2025$750 
1.700%May 28, 20301,000 
2.550%May 28, 20401,000 
2.700%May 28, 20501,250 
$4,000 
Upjohn Inc., a wholly-owned subsidiary of Pfizer Inc.(b)
1.125%June 22, 2022$1,000 
1.650%June 22, 2025750 
2.300%June 22, 2027750 
2.700%June 22, 20301,450 
3.850%June 22, 20401,500 
4.000%June 22, 20502,000 
$7,450 
Upjohn Finance B.V., a wholly-owned subsidiary of Upjohn Inc.(b)
0.816%June 23, 2022€750 
1.023%June 23, 2024750 
1.362%June 23, 2027850 
1.908%June 23, 20321,250 
€3,600 
(a)The notes may be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest. The weighted-average effective interest rate for the notes at issuance was 2.11%.
(b)In June 2020, Upjohn Inc. and Upjohn Finance B.V. completed privately placed debt offerings in connection with the previously announced proposed Reverse Morris Trust transaction that will ultimately combine Upjohn and Mylan to form a new company, Viatris. The notes may be redeemed by Upjohn Inc. and Upjohn Finance B.V., as applicable, at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest. The weighted-average effective interest rates at issuance were 2.95% for the $7.45 billion notes and 1.37% for the €3.60 billion notes. If the proposed transaction with Mylan does not close on or prior to February 1, 2021, or if, prior to such date, Upjohn Inc. and Mylan notify the trustee that the business combination agreement for the proposed transaction with Mylan is terminated, or the transaction will not otherwise be pursued, the notes must be redeemed at redemption prices equal to 101% of their respective principal amounts, plus accrued and unpaid interest. Pfizer has guaranteed these notes, and such guarantees will automatically and unconditionally terminate without the consent of holders of the notes upon the proposed distribution to Pfizer’s stockholders of all of the issued and outstanding shares of Upjohn Inc.’s common stock held by Pfizer (the Distribution). Upjohn Inc. has guaranteed the notes issued by Upjohn Finance B.V., and Upjohn Inc. will remain a guarantor of such notes post Distribution. Following the separation, Upjohn Inc. and Upjohn Finance B.V., as applicable, will remain the obligor. The proceeds from the financings will be used in part to fund a cash distribution from Upjohn Inc. to Pfizer immediately prior to the Distribution. In the interim, the $11.4 billion of proceeds are classified as Restricted short-term investments in the condensed consolidated balance sheet as of September 27, 2020 pursuant to the terms of the transaction agreements.
In the first quarter of 2020, we issued the following senior unsecured notes at a weighted average effective interest rate of 2.67%:
(MILLIONS OF DOLLARS)Principal
Interest RateMaturity DateAs of
September 27, 2020
2.625%(a)
April 1, 2030$1,250 
(a)The notes may be redeemed by us at any time, in whole, or in part, at a redemption price plus accrued and unpaid interest.
The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt:
(MILLIONS OF DOLLARS)September 27,
2020		December 31, 2019
Total long-term debt, principal amount(a)
$48,473 $34,820 
Net fair value adjustments related to hedging and purchase accounting1,621 1,305 
Net unamortized discounts, premiums and debt issuance costs(314)(176)
Other long-term debt5 5 
Total long-term debt, carried at historical proceeds, as adjusted$49,785 $35,955 
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above)
$2,149 $1,462 
(a)As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.
Schedule of Derivative Instruments
The following summarizes the fair value of the derivative financial instruments and the notional amounts:
(MILLIONS OF DOLLARS)September 27, 2020December 31, 2019
Fair ValueFair Value
NotionalAssetLiabilityNotionalAssetLiability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)
$24,545 $346 $1,187 $25,193 $591 $662 
Interest rate contracts
1,995 147 — 6,645 318 — 
493 1,187 909 662 
Derivatives not designated as hedging instruments:
Foreign exchange contracts
$16,084 75 85 $19,623 82 55 
Total$568 $1,272 $992 $718 
(a)The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.1 billion as of September 27, 2020 and $5.9 billion as of December 31, 2019.
Schedule of Derivative Assets
The following summarizes the fair value of the derivative financial instruments and the notional amounts:
(MILLIONS OF DOLLARS)September 27, 2020December 31, 2019
Fair ValueFair Value
NotionalAssetLiabilityNotionalAssetLiability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)
$24,545 $346 $1,187 $25,193 $591 $662 
Interest rate contracts
1,995 147 — 6,645 318 — 
493 1,187 909 662 
Derivatives not designated as hedging instruments:
Foreign exchange contracts
$16,084 75 85 $19,623 82 55 
Total$568 $1,272 $992 $718 
(a)The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.1 billion as of September 27, 2020 and $5.9 billion as of December 31, 2019.
Schedule of Derivative Liabilities
The following summarizes the fair value of the derivative financial instruments and the notional amounts:
(MILLIONS OF DOLLARS)September 27, 2020December 31, 2019
Fair ValueFair Value
NotionalAssetLiabilityNotionalAssetLiability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)
$24,545 $346 $1,187 $25,193 $591 $662 
Interest rate contracts
1,995 147 — 6,645 318 — 
493 1,187 909 662 
Derivatives not designated as hedging instruments:
Foreign exchange contracts
$16,084 75 85 $19,623 82 55 
Total$568 $1,272 $992 $718 
(a)The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.1 billion as of September 27, 2020 and $5.9 billion as of December 31, 2019.
Information about Gains/(Losses) Incurred to Hedge or Offset Operational Foreign Exchange or Interest Rate Risk
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
 
Amount of
Gains/(Losses)
Recognized in OID(a)
Amount of
Gains/(Losses)
Recognized in OCI(a), (b)
Amount of Gains/(Losses)
Reclassified from
OCI into OID and COS(a)
(MILLIONS OF DOLLARS)Sept. 27, 2020Sept. 29, 2019Sept. 27, 2020Sept. 29, 2019Sept. 27, 2020Sept. 29, 2019
Three Months Ended      
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(c)
$— $— $(379)$131 $(149)$7 
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach(d)
— — 7 21 7 22 
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts
(9)378 — — — — 
Hedged item
9 (378)— — — — 
Derivative Financial Instruments in Net Investment Hedge Relationships:
      
Foreign exchange contracts
— — (257)112 — — 
The portion on foreign exchange contracts excluded from the assessment of hedge effectiveness(d)
— — 9 43 38 45 
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
      
Foreign currency short-term borrowings(e)
— — — 45 — — 
Foreign currency long-term debt(e)
— — (72)79 — — 
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts
255 (77)— — — — 
All other net(d)
— — — (1)— — 
 $255 $(77)$(692)$429 $(104)$74 
Amount of
Gains/(Losses)
Recognized in OID(a)
Amount of
Gains/(Losses)
Recognized in OCI(a), (b)
Amount of Gains/(Losses)
Reclassified from
OCI into OID and COS(a)
(MILLIONS OF DOLLARS)Sept. 27, 2020Sept. 29, 2019Sept. 27, 2020Sept. 29, 2019Sept. 27, 2020Sept. 29, 2019
Nine Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships:
      
Foreign exchange contracts(c)
$— $— $(721)$137 $(23)$265 
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach(d)
— — 49 105 48 108 
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts
383 1,191 — — — — 
Hedged item
(383)(1,191)— — — — 
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts
— — (17)87 — — 
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(d)
— — 185 136 122 99 
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings(e)
— — 8 65 — — 
Foreign currency long-term debt(e)
— — (69)89 — — 
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts
205 (201)— — — — 
All other net(d)
— — 12 — (1)— 
$205 $(201)$(553)$617 $147 $472 
(a)OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income.
(b)For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the gains and losses are included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.
(c)The amounts reclassified from OCI into COS were:
•a net gain of $34 million in the third quarter of 2020;
•a net gain of $184 million in the first nine months of 2020;
•a net gain of $66 million in the third quarter of 2019; and
•a net gain of $169 million in the first nine months of 2019.
The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax loss of $192 million within the next 12 months into income. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $1.8 billion U.K. pound debt maturing in 2043.
(d)The amounts reclassified from OCI were reclassified into OID.
(e)Long-term debt includes foreign currency borrowings with carrying values of $2.0 billion as of September 27, 2020, which are used as hedging instruments in net investment hedge relationships.
Schedule of Total Amount of Each Income and Expense Line in which Results of Fair Value Hedges are Recorded
The following summarizes the amounts recorded in our condensed consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
September 27, 2020December 31, 2019
Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to
Carrying Amount		Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to
Carrying Amount
(MILLIONS OF DOLLARS)
Carrying Amount of Hedged Assets/Liabilities(a)
Active Hedging RelationshipsDiscontinued Hedging Relationships
Carrying Amount of Hedged Assets/Liabilities(a)
Active Hedging RelationshipsDiscontinued Hedging Relationships
Short-term investments$45 $— $— $— $— $— 
Long-term investments— — — 45 — — 
Long-term debt2,019 131 1,165 7,092 266 690
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.