Pfizer 2011 Annual Report Download - page 40

Financial Review
Pfizer Inc. and Subsidiary Companies
Adjusted income, as shown above, excludes the following items:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2011 2010 2009
Purchase accounting adjustments:
Amortization, depreciation and other(a) $ 5,563 $ 5,228 $ 2,743
Cost of sales, primarily related to fair value adjustments of acquired inventory 1,238 2,904 976
In-process research and development charges(b) —125 68
Total purchase accounting adjustments, pre-tax 6,801 8,257 3,787
Income taxes (1,769) (2,148) (1,154)
Total purchase accounting adjustments—net of tax 5,032 6,109 2,633
Acquisition-related costs:
Transaction costs(c) 30 22 768
Integration costs(c) 730 1,004 569
Restructuring charges(c) 598 2,175 2,607
Additional depreciation—asset restructuring(d) 625 788 81
Total acquisition-related costs, pre-tax 1,983 3,989 4,025
Income taxes (525) (1,092) (1,167)
Total acquisition-related costs—net of tax 1,458 2,897 2,858
Discontinued operations:
Loss/(income) from operations—net of tax (8) (88) (97)
(Gain)/loss on sale of discontinued operations (1,304) 11 (17)
Total discontinued operations—net of tax (1,312) (77) (114)
Certain significant items:
Restructuring charges(e) 1,576 — 386
Implementation costs and additional depreciation—asset restructuring(f) 961 — 410
Certain legal matters(g) 828 1,703 294
Net interest expense(h) —— 589
Certain asset impairment charges(i) 848 2,151 294
Inventory write-off(j) 8212 —
Gain related to ViiV(k) —— (482)
Other 133 (102) 20
Total certain significant items, pre-tax 4,354 3,964 1,511
Income taxes(l) (1,324) (3,265) (1,428)
Total certain significant items—net of tax 3,030 699 83
Total purchase accounting adjustments, acquisition-related costs, discontinued
operations and certain significant items—net of tax $ 8,208 $ 9,628 $ 5,460
(a) Included primarily in Amortization of intangible assets (see Notes to Consolidated Financial Statements—Note 10. Goodwill and Other Intangible
Assets).
(b) Included in Acquisition-related in-process research and development charges (see Notes to Consolidated Financial Statements—Note 2.
Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments).
(c) Included in Restructuring charges and certain acquisition-related costs (see Notes to Consolidated Financial Statements—Note 3. Restructuring
Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).
(d) Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions. For 2011, included
in Cost of sales ($557 million), Selling, informational and administrative expenses ($45 million) and Research and development expenses
($23 million). For 2010, included in Cost of sales ($527 million), Selling, informational and administrative expenses ($227 million) and Research and
development expenses ($34 million). For 2009, included in Cost of sales ($31 million), Selling, informational and administrative expenses
($37 million) and Research and development expenses ($13 million).
(e) Represents restructuring charges incurred for our cost-reduction and productivity initiatives. Included in Restructuring charges and certain
acquisition-related costs (see Notes to Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with
Acquisitions and Cost-Reduction/Productivity Initiatives).
(f) Amounts primarily relate to our cost-reduction and productivity initiatives (see Notes to Consolidated Financial Statements—Note 3. Restructuring
Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For 2011, included in Cost of sales ($250
million), Selling, informational and administrative expenses ($55 million), Research and development expenses ($656 million). For 2009, included in
Cost of sales ($148 million), Selling, informational and administrative expenses ($175 million), Research and development expenses ($78 million)
and Other deductions—net ($9 million).
(g) Included in Other deductions—net. For 2011, includes approximately $700 million related to hormone-replacement therapy litigation. For 2010,
includes an additional $1.3 billion charge for asbestos litigation related to our wholly owned subsidiary Quigley Company, Inc. (for additional
information, see Notes to Consolidated Financial Statements Note 17. Commitments and Contingencies).
(h) Included in Other deductions—net. Includes interest expense on the senior unsecured notes issued in connection with our acquisition of Wyeth, less
interest income earned on the proceeds of the notes.
(i) Included in Other deductions—net. In 2011 and 2010, the majority relates to certain Wyeth intangible assets, including IPR&D intangible assets. In
2011, also includes a charge related to our indefinite-lived brand asset, Xanax. In 2010, also includes a charge related to an intangible asset
associated with our product, Thelin.In 2009, primarily relates to certain materials used in our research and development activities that were no
longer considered recoverable. (See also the “Other (Income)/Deductions—Net” section of this Financial Review and Notes to Consolidated
Financial Statements—Note 4. Other Deductions—Net.)
2011 Financial Report 39