Pfizer and AbbVie have announced near-term capital-allocation plans, including increased investment for manufacturing projects in the US. The companies made the announcements in their full-year and fourth quarter 2017 earnings reports.
Pfizer said it plans to invest approximately $5 billion in capital projects in the US over the next five years, which includes the strengthening of Pfizer’s manufacturing presence in the US. Over the next five years, AbbVie plans to invest approximately $2.5 billion in capital projects in the US and said it is currently evaluating additional expansion of its US facilities.
“The new US tax code helps level the playing field with our foreign competitors, and we are currently reviewing our capital allocation opportunities under the new tax code,” noted Pfizer Chairman and Ian Read in a company presentation of its 2017 results. In late December 2017, tax reform legislation in the US was signed into law that among other measures, reduced the federal corporate income tax rate from 35% to 21%.
Pfizer outlined further investment in the US. Pfizer plans to make a $500-million contribution to its US pension plan in 2018 and has allocated approximately $100 million for a special, one-time bonus to be paid to all non-executive Pfizer employees in the first-quarter 2018. In the fourth-quarter 2017, following the passage of US tax reform, Pfizer made a $200-million charitable contribution to the Pfizer Foundation, an organization that provides grant and investment funding to support organizations and social entrepreneurs for improve healthcare delivery.
AbbVie also outlined further investment in the US. AbbVie plans to make a one-time charitable contribution of approximately $350 million to select not-for-profit organizations based in the US, which includes contributions toward re-building efforts in Puerto Rico following Hurricanes Irma and Maria. The company also plans to accelerate pension funding by $750 million as well as enhance non-executive employee compensation.
In its earnings release, Pfizer said that its effective tax rate on adjusted income is expected to be approximately 17.0% in 2018, lower than the approximately 23.0% that the company had anticipated for full-year 2017, prior to the enactment of tax reform. The company anticipates repatriation tax liability to the US of approximately $15 billion over the next eight years due to tax reform.
Source: AbbVie (earnings report) and Pfizer
