Pfizer 2005 Annual Report Download - page 56

2005 Financial Report 55
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
Pharmacia) and Macugen. These rights are all subject to our
impairment review process explained in Note 1K, Amortization
of Intangible Assets, Depreciation and Certain Long-Lived Assets.
The weighted-average life of our total finite-lived intangible
assets is approximately 9 years, which includes developed
technology rights at 9 years. Total amortization expense for
finite-lived intangible assets was $3.5 billion in 2005, $3.4 billion
in 2004 and $2.4 billion in 2003.
Brands represent the amortized value associated with tradenames,
as the products themselves no longer receive patent protection.
Most of these assets are associated with our Human Health and
Consumer Healthcare segments and the significant components
include values determined for Depo-Provera contraceptive, Xanax,
Medrol and tobacco dependence products.
In 2005, we recorded an impairment charge of $1.1 billion in Other
(income)/deductions—net related to the developed technology
rights for Bextra, a selective COX-2 inhibitor (included in our
Human Health segment) in connection with the decision to
suspend sales and marketing of Bextra. This decision resulted
from an April 7, 2005 request from the FDA, as part of its safety
review of all selective COX-2 medicines. In addition, in connection
with the suspension, we also recorded $5 million related to the
write-off of machinery and equipment included in Other
(income)/deductions—net, $73 million in write-offs of inventory
and exit costs, included in Cost of sales; $8 million related to the
costs of administering the suspension of sales, included in Selling,
informational and administrative expenses; and $212 million for
an estimate of customer returns, primarily included against
Revenues.
In 2004, we recorded an impairment charge of $691 million in
Other (income)/deductions—net related to the Depo-Provera
brand (included in our Human Health segment), a contraceptive
injection, due to the unexpected entrance of a generic competitor
in the U.S. market and an adverse labeling change. In addition,
the asset was reclassified as a finite-lived intangible asset.
The annual amortization expense expected for the years 2006
through 2010 is as follows:
(MILLIONS OF DOLLARS) 2006 2007 2008 2009 2010
Amortization expense $3,343 $3,299 $2,646 $2,371 $2,363
13. Benefit Plans
We provide defined benefit pension plans and defined
contribution plans for the majority of our employees worldwide.
In the U.S., we have both qualified and supplemental (non-
qualified) defined benefit plans. A qualified plan meets the
requirements of certain sections of the Internal Revenue Code and,
generally, contributions to qualified plans are tax deductible. A
qualified plan typically provides benefits to a broad group of
employees and may not discriminate in favor of highly
compensated employees in its coverage, benefits or contributions.
We also provide benefits through supplemental (non-qualified)
retirement plans to certain employees. In addition, we provide
medical and life insurance benefits to retirees and their eligible
dependents through our postretirement plans.
We use a measurement date of December 31 for a majority of our
U.S. pension and postretirement plans and November 30 for a
majority of our international plans. In December 2003, the
Medicare Prescription Drug Improvement and Modernization
Act of 2003 (the Act) was enacted. The Act introduced a
prescription drug benefit under Medicare (Medicare Part D) as well
as a federal subsidy to sponsors of retiree healthcare benefit
plans that provide a benefit that is at least actuarially equivalent
to Medicare Part D. During the third quarter of 2004, in accordance
with FASB Staff Position No.106-2 (FSP 106-2), Accounting and
Disclosure Requirements Related to the Medicare Prescription
Drug Improvement and Modernization Act of 2003, the Company
began accounting for the effect of the federal subsidy under
the Act; the associated reduction to the benefit obligations of
certain of our postretirement benefit plans and the related
benefit cost was not significant.
A. Acquisitions and Divestitures
We acquired certain pension and postretirement plans from
Pharmacia on April 16, 2003. The related obligations and plan
assets acquired at fair value included global pension benefit
obligations of $3.7 billion and pension plan assets of $1.9 billion
and other postretirement benefit obligations of $966 million
and postretirement plan assets of $172 million.
During 2003, pursuant to the divestitures of the Adams, Schick-
Wilkinson Sword and Tetra businesses, pension plan assets and
accumulated benefit obligations were transferred to the
purchasers of those businesses.
B. Components of Net Periodic Benefit Costs
The annual cost of the U.S. qualified and international pension plans and the postretirement plans for the years ended December 31,
2005, 2004 and 2003, follow:
PENSION PLANS
U.S. QUALIFIED INTERNATIONAL POSTRETIREMENT PLANS
(MILLIONS OF DOLLARS) 2005 2004 2003 2005 2004 2003 2005 2004 2003
Service cost $318 $277 $ 229 $293 $264 $ 212 $38 $39 $31
Interest cost 410 391 354 309 288 224 113 113 101
Expected return on plan assets (594) (569) (384) (297) (278) (213) (23) (20) (11)
Amortization of:
Prior service costs/(gains) 10 17 17 (2) 571114
Net transition obligation ——— 111———
Actuarial losses 101 99 115 95 59 43 21 15 20
Curtailments and settlements—net 12 37 6 19 (9) 13 ——1
Special termination benefits 5—— 29 21 — 2(1) —
Net periodic benefit costs $262 $252 $ 337 $447 $351 $ 287 $152 $147(a) $156
(a) Includes a credit of $21 million relating to the adoption of FSP 106-2 in 2004.