Pfizer 2006 Annual Report Download - page 48

46 2006 Financial Report
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
The following amounts, primarily related to our Consumer
Healthcare business, have been segregated from continuing
operations and included in Discontinued operations—net of tax
in the consolidated statements of income:
YEAR ENDED DEC. 31,
_____________________________________________________
(MILLIONS OF DOLLARS) 2006 2005 2004
Revenues $ 4,044 $ 3,948 $ 3,933
Pre-tax income $ 643 $ 695 $ 563
Provision for taxes
on income
(a)
(210) (244) (189)
Income from operations
of discontinued
businesses—net of tax 433 451 374
Pre-tax gains on sales of
discontinued businesses 10,243 77 75
Provision for taxes
on gains
(b)
(2,363) (30) (24)
Gains on sales of discontinued
businesses—net of tax 7,880 47 51
Discontinued operations—
net of tax $ 8,313 $ 498 $ 425
(a)
Includes a deferred tax expense of $24 million in 2006 and $25
million in 2005 and a deferred tax benefit of $15 million in 2004.
(b)
Includes a deferred tax benefit of $444 million in 2006, and nil in
2005 and 2004.
The following assets and liabilities have been segregated and
included in Assets of discontinued operations and other assets
held for sale and Liabilities of discontinued operations and other
liabilities held for sale, as appropriate, in the consolidated balance
sheet as of December 31, 2005, and primarily relate to our Consumer
Healthcare business (amounts in 2006 were not significant):
AS OF
DEC. 31,
(MILLIONS OF DOLLARS) 2005
Accounts receivable, less allowance
for doubtful accounts $ 661
Inventories 561
Prepaid expenses and taxes 71
Property, plant and equipment,
less accumulated depreciation 1,002
Goodwill 2,789
Identifiable intangible assets,
less accumulated amortization 1,557
Other assets, deferred taxes and deferred charges 18
Assets of discontinued operations
and other assets held for sale $6,659
Current liabilities $ 538
Other 689
Liabilities of discontinued operations
and other liabilities held for sale $1,227
Net cash flows of our discontinued operations from each of the
categories of operating, investing and financing activities were
not significant for 2006, 2005 and 2004.
4.
Adapting to Scale Productivity Initiative
In the first quarter of 2005, we launched our multi-year
productivity initiative, called Adapting to Scale (AtS), to increase
efficiency and streamline decision-making across the company. This
initiative, announced in April 2005 and broadened in October
2006, follows the integration of Warner-Lambert and Pharmacia.
The integration of those two companies resulted in the
achievement of significant annual cost savings.
We incurred the following costs in connection with our AtS
productivity initiative:
YEAR ENDED DEC. 31,
__________________________________
(MILLIONS OF DOLLARS) 2006 2005
Implementation costs
(a)
$ 788 $325
Restructuring charges
(b)
1,296 438
Total AtS costs $2,084 $763
(a)
For 2006, included in Cost of sales ($392 million), Selling,
informational and administrative expenses ($243 million),
Research and development expenses ($176 million) and in Other
(income)/deductions—net ($23 million income). For 2005, included
in Cost of sales ($124 million), Selling, informational and
administrative expenses ($151 million), and Research and
development expenses ($50 million).
(b)
Included in Restructuring charges and acquisition-related costs.
Included in Discontinued operations—net of tax are additional
pre-tax AtS costs of $35 million and $17 million in 2006 and 2005.
Through December 31, 2006, the restructuring charges primarily
relate to our plant network optimization efforts and the
restructuring of our U.S. marketing and worldwide research and
development operations, while the implementation costs primarily
relate to system and process standardization, as well as the
expansion of shared services.
The components of restructuring charges associated with AtS
follow:
UTILIZATION ACCRUAL
THROUGH AS OF
COSTS INCURRED DEC. 31, DEC. 31,
_________________________ ___________________
(MILLIONS OF DOLLARS) 2006 2005 TOTAL 2006 2006
(a)
Employee
termination
costs $ 809 $303 $1,112 $ 749 $363
Asset impairments 368 122 490 490 —
Other 119 13 132 93 39
$1,296 $438 $1,734 $1,332 $402
(a)
Included in Other current liabilities.
Through December 31, 2006, Employee termination costs
represent the approved reduction of the workforce by 8,274
employees, mainly in manufacturing, sales and research. We
notified affected individuals and 5,732 employees were terminated
as of December 31, 2006. Employee termination costs are recorded
as incurred and include accrued severance benefits, pension and
postretirement benefits. Asset impairments primarily include
charges to write down property, plant and equipment. Other
primarily includes costs to exit certain activities.