Pfizer 2009 Annual Report Download - page 32

Financial Review
Pfizer Inc. and Subsidiary Companies
We incurred the following costs in connection with our cost-reduction initiatives and the Wyeth acquisition:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Transaction costs(a) $ 768 $—$—
Integration costs and other(b) 569 49 11
Restructuring charges(c) 3,000 2,626 2,523
Restructuring charges and certain acquisition-related costs 4,337 2,675 2,534
Additional depreciation—asset restructuring(d) 241 786 788
Implementation costs(e) 250 819 601
Total $4,828 $4,280 $3,923
(a) Transaction costs represent external costs directly related to effecting the acquisition of Wyeth and primarily include expenditures for banking, legal,
accounting and other similar services. Substantially all of the costs incurred are fees related to a $22.5 billion bridge term loan credit agreement
entered into with certain financial institutions on March 12, 2009, to partially fund our acquisition of Wyeth. The bridge term loan credit agreement
was terminated in June 2009 as a result of our issuance of approximately $24.0 billion of senior unsecured notes in the first half of 2009. All bridge
term loan commitment fees have been expensed, and we are no longer subject to the covenants under that agreement (see Notes to Consolidated
Financial Statements—Note 9D. Financial Instruments: Long-Term Debt).
(b) Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for
consulting and systems integration.
(c) Restructuring charges include the following:
ACTIVITY ACCRUAL
COSTS INCURRED
THROUGH
DECEMBER 31,
AS OF
DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007 2005-2009 2009(1) 2009(2)
Employee termination costs $2,571 $2,004 $2,034 $7,721 $4,488 $3,233
Asset impairments 159 543 260 1,452 1,452 —
Other 270 79 229 710 577 133
Total $3,000 $2,626 $2,523 $9,883 $6,517 $3,366
(1) Includes adjustments for foreign currency translation.
(2) Included in Current deferred tax liabilities and other current liabilities ($2,520 million) and Other noncurrent liabilities ($846 million).
From the beginning of our cost-reduction and transformation initiatives in 2005 through December 31, 2009, Employee termination costs
represent the expected reduction of the workforce by approximately 40,000 employees, mainly in manufacturing, sales and research; and
approximately 25,700 of these employees have been terminated as of December 31, 2009. Employee termination costs are generally recorded
when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may
be paid out during periods after termination. Asset impairments primarily includes charges to write down property, plant and equipment to fair
value. Other primarily includes costs to exit certain assets and activities.
(d) Additional depreciation—asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring
actions and are included in our consolidated statements of income as follows:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Cost of Sales $133 $596 $571
Selling, informational and administrative expenses 53 19 1
Research and development expenses 55 171 216
Total $241 $786 $788
(e) Implementation costs represent external, incremental costs directly related to implementing cost-reduction initiatives and primarily include
expenditures related to system and process standardization and the expansion of shared services. Implementation costs relate to costs incurred for
our cost-reduction initiatives prior to our acquisition of Wyeth on October 15, 2009. Costs related to our cost-reduction initiatives incurred after the
Wyeth acquisition, other than additional depreciation––asset restructuring, are included in Restructuring charges and acquisition-related costs.
Implementation costs are included in our consolidated statements of income as follows:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Cost of sales $42 $149 $129
Selling, informational and administrative expenses 166 394 333
Research and development expenses 36 262 200
Other (income)/deductions—net 614 (61)
Total $250 $819 $601
30 2009 Financial Report