Pfizer 2009 Annual Report Download - page 30

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Financial Review
Pfizer Inc. and Subsidiary Companies
Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the “Our
Strategic Initiatives––Strategy and Recent Transactions: Acquisitions, Dispositions, Licensing and Collaborations” section of this
Financial Review.
Costs and Expenses
Cost of Sales
Cost of sales increased 10% in 2009, while revenues increased 4% in 2009, and cost of sales decreased 28% in 2008, while
revenues were flat in 2008. Cost of sales as a percentage of revenues increased in 2009 compared to 2008 and decreased in 2008
compared to 2007.
Cost of sales in 2009 increased compared to 2008 primarily as a result of:
•purchase accounting charges of approximately $970 million primarily related to the fair value adjustments to inventory acquired from
Wyeth that subsequently was sold;
•the addition of Wyeth’s operations; and
•the unfavorable impact of foreign exchange on cost of sales,
partially offset by:
•lower costs recorded in cost of sales related to our cost-reduction initiatives. Cost-reduction initiative charges incurred after the Wyeth
acquisition, other than additional depreciation related to asset restructuring, are included in Restructuring charges and certain
acquisition-related costs.
Cost of sales in 2008 decreased compared to 2007 primarily as a result of:
•asset impairment charges, write-offs and other exit costs associated with Exubera of $2.6 billion recorded in 2007;
•savings related to our cost-reduction initiatives; and
•the favorable impact of foreign exchange on cost of sales,
partially offset by:
•the impact of higher implementation costs associated with our cost-reduction initiatives of $745 million in 2008, compared to $700
million in 2007.
Selling, Informational and Administrative (SI&A) Expenses
SI&A expenses increased 2% in 2009 compared to 2008, primarily as a result of:
•the addition of Wyeth’s operating costs; and
•increased investment in potential high-growth and new opportunities for existing products,
partially offset by:
•the favorable impact of foreign exchange on SI&A expenses;
•certain insurance recoveries related to legal defense costs; and
•lower costs recorded in SI&A related to our cost-reduction initiatives. Cost-reduction initiative charges incurred after the Wyeth
acquisition, other than additional depreciation related to asset restructuring, are included in Restructuring charges and certain
acquisition-related costs.
SI&A expenses decreased 7% in 2008 compared to 2007, which reflects:
•savings related to our cost-reduction initiatives; and
•charges associated with Exubera of $85 million recorded in 2007,
partially offset by:
•the unfavorable impact of foreign exchange on SI&A expenses; and
•the impact of higher implementation costs associated with our cost-reduction initiatives of $413 million in 2008 compared to $334
million in 2007.
28 2009 Financial Report