Pfizer 2011 Annual Report Download - page 66

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
•the expected synergies and other benefits that we believed would result from combining the operations of Wyeth with the operations of
Pfizer;
•any intangible assets that did not qualify for separate recognition, as well as future, as yet unidentified projects and products; and
•the value of the going-concern element of Wyeth’s existing businesses (the higher rate of return on the assembled collection of net
assets versus if Pfizer had acquired all of the net assets separately).
Goodwill is not amortized and is not deductible for tax purposes (see Note 10A. Goodwill and Other Intangible Assets: Goodwill for
additional information).
Actual and Pro Forma Impact of Acquisition
The revenue and earnings of Wyeth included in Pfizer’s consolidated statements of income follow:
(MILLIONS OF DOLLARS)
WYETH’S OPERATIONS
INCLUDED IN PFIZER’s 2009
RESULTS(a)
Revenues $ 3,303
Loss from continuing operations attributable to Pfizer Inc. common shareholders(b) (2,191)
(a) The results of Wyeth are included from the acquisition date of October 15, 2009.
(b) Includes purchase accounting adjustments related to the fair value adjustments for acquisition-date inventory that has been sold ($904 million
pre-tax), amortization of identifiable intangible assets acquired from Wyeth ($512 million pre-tax), and restructuring charges and additional
depreciation—asset restructuring ($2.1 billion pre-tax).
Supplemental pro forma information follows:
UNAUDITED PRO FORMA
CONSOLIDATED RESULTS(a)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) YEAR ENDED DECEMBER 31,2009
Revenues $67,859
Income from continuing operations attributable to Pfizer Inc. common shareholders 11,436
Diluted earnings per common share attributable to Pfizer Inc. common shareholders 1.41
(a) The pro forma information assumes that the acquisition of Wyeth had occurred on January 1, 2009 for the year ended December 31, 2009.
The unaudited pro forma consolidated results were prepared using the acquisition method of accounting and are based on the
historical financial information of Pfizer and Wyeth, reflecting Pfizer and Wyeth results of operations for a 12 month period. The
historical financial information has been adjusted to give effect to the pro forma events that are: (i) directly attributable to the
acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro
forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been
had we completed the acquisition on January 1, 2009. In addition, the unaudited pro forma consolidated results do not purport to
project the future results of operations of the combined company nor do they reflect the expected realization of any cost savings
associated with the acquisition. The unaudited pro forma consolidated results reflect primarily the following pro forma pre-tax
adjustments:
•Elimination of Wyeth’s historical intangible asset amortization expense (approximately $88 million).
•Additional amortization expense (approximately $2.4 billion) related to the fair value of identifiable intangible assets acquired.
•Additional depreciation expense (approximately $200 million) related to the fair value adjustment to property, plant and equipment
acquired.
•Additional interest expense (approximately $316 million) associated with the incremental debt we issued in 2009 to partially finance the
acquisition and a reduction of interest income (approximately $320 million) associated with short-term investments under the
assumption that a portion of these investments would have been used to partially fund the acquisition. In addition, a reduction in interest
expense (approximately $129 million) related to the fair value adjustment of Wyeth debt.
•Elimination of $904 million related to the fair value adjustments to acquisition-date inventory that has been sold, which is considered
non-recurring. There is no long-term continuing impact of the fair value adjustments to acquisition-date inventory, and, as such, the
impact of those adjustments is not reflected in the unaudited pro forma operating results.
•Elimination of $834 million of costs which are directly attributable to the acquisition, and which do not have a continuing impact on the
combined company’s operating results. Included in these costs are advisory, legal and regulatory costs incurred by both legacy Pfizer
and legacy Wyeth and costs related to a bridge term loan credit agreement with certain financial institutions that has been terminated.
In addition, all of the above adjustments were adjusted for the applicable tax impact. The taxes associated with the fair value
adjustments for acquired intangible assets, property, plant and equipment and legacy Wyeth debt, as well as the elimination of the
impact of the fair value step-up of acquired inventory reflect the statutory tax rates in the various jurisdictions where the fair value
adjustments occurred. The taxes associated with incremental debt to partially finance the acquisition reflect a 38.3% tax rate since
the debt is an obligation of a U.S. entity and is taxed at the combined effective U.S. federal statutory and state rate. The taxes
associated with the elimination of the costs directly attributable to the acquisition reflect a 28.4% effective tax rate since the costs
were incurred in the U.S. and were either taxed at the combined effective U.S. federal statutory and state rate or not deductible for
tax purposes depending on the type of expenditure.
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