Pfizer 2005 Annual Report Download - page 26

2005 Financial Report 25
Financial Review
Pfizer Inc and Subsidiary Companies
highly regulated nature of the pharmaceutical business, the
closure of excess facilities can take several years as all
manufacturing changes are subject to extensive validation and
testing and must be approved by the FDA. In other situations, we
may be required by local laws to obtain approvals prior to
terminating certain employees. This approval process can delay
the termination action.
Discontinued Operations
Adjusted income is calculated prior to considering gains or losses
on the sale of businesses and product lines included in
discontinued operations as well as the related results of
operations. We believe that this presentation is meaningful to
investors because, while we review our businesses and product
lines periodically for strategic fit with our operations, we do not
build or run our businesses with an intent to sell them.
Cumulative Effect of a Change in Accounting Principles
Adjusted income is calculated prior to considering cumulative
effect of a change in accounting principles. The cumulative effect
of a change in accounting principles is generally one time in
nature and not expected to occur as part of our normal business
on a regular basis.
Certain Significant Items
Adjusted income is calculated prior to considering certain
significant items. Certain significant items represent substantive,
unusual items that are evaluated on an individual basis. Such
evaluation considers both the quantitative and the qualitative
aspect of their unusual nature. Unusual, in this context, may
represent items that are not part of our ongoing business; items
that, either as a result of their nature or size, we would not expect
to occur as part of our normal business on a regular basis; items
that would be non-recurring; or items that relate to products we
no longer sell. While not all-inclusive, examples of items that
could be included as certain significant items would be a major
non-acquisition-related restructuring charge and associated
implementation costs for a program which is specific in nature with
a defined term, such as those related to our AtS initiative; costs
associated with a significant recall of one of our products; charges
related to sales or disposals of products or facilities that do not
qualify as discontinued operations as defined by U.S. GAAP; certain
intangible asset impairments; adjustments related to the resolution
of certain tax positions; the impact of adopting certain significant,
event-driven tax legislation, such as charges attributable to the
repatriation of foreign earnings in accordance with the Jobs Act;
or possible charges related to legal matters, such as certain of those
discussed in Legal Proceedings in our Form 10-K and in Part II: Other
Information; Item 1, Legal Proceedings included in our Form 10-Q
filings. Normal, ongoing defense costs of the Company or
settlements and accruals on legal matters made in the normal
course of our business would not be considered a certain significant
item.
Reconciliation
A reconciliation between Net income, as reported under U.S.
GAAP, and Adjusted income follows:
YEAR ENDED DEC. 31, % CHANGE
__________________________________________ _________________
(MILLIONS OF DOLLARS) 2005 2004 2003 05/04 04/03
Reported net income $8,085 $11,361 $3,910 (29) 191
Purchase accounting
adjustments—
net of tax 3,973 3,389 8,666 17 (61)
Merger-related
costs—net of tax 624 786 659 (21) 19
Discontinued
operations—
net of tax (16) (29) (2,311) (45) (99)
Cumulative effect of
a change in
accounting
principles—
net of tax 25 —30**
Certain significant
items—net of tax 2,310 629 1,358 268 (54)
Adjusted income $15,001 $16,136 $12,312 (7) 31
*Calculation not meaningful.