Pfizer 2009 Annual Report Download - page 36

Financial Review
Pfizer Inc. and Subsidiary Companies
Adjusted income as shown above excludes the following items:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Purchase accounting adjustments:
Amortization, depreciation and other(a) $ 2,743 $ 2,546 $ 3,101
Cost of sales 976 ——
In-process research and development charges(b) 68 633 283
Total purchase accounting adjustments, pre-tax 3,787 3,179 3,384
Income taxes (1,154) (740) (873)
Total purchase accounting adjustments—net of tax 2,633 2,439 2,511
Acquisition-related costs:
Restructuring charges(c) 2,608 43 (6)
Transaction costs(c) 768 ——
Integration costs(c) 569 617
Additional depreciation—asset restructuring(d) 81 ——
Total acquisition-related costs, pre-tax 4,026 49 11
Income taxes (1,167) (10) (1)
Total acquisition-related costs—net of tax 2,859 39 10
Total discontinued operations—net of tax(e) (14) (78) 69
Certain significant items:
Restructuring charges—cost-reduction initiatives(f) 392 2,626 2,523
Implementation costs—cost-reduction initiatives(g) 410 1,605 1,389
Certain legal matters(h) 294 3,249 56
Net interest expense—Wyeth acquisition(i) 589 ——
Returns liabilities adjustment(j) —217 —
Gain related to ViiV(k) (482) ——
Asset impairment charges and other associated costs(l) 294 213 —
Other(m) 20 180 2,542
Total certain significant items, pre-tax 1,517 8,090 6,510
Income taxes(n) (1,428) (2,228) (2,131)
Total certain significant items—net of tax 89 5,862 4,379
Total purchase accounting adjustments, acquisition-related costs, discontinued
operations and certain significant items—net of tax $ 5,567 $ 8,262 $ 6,969
(a) Included primarily in Amortization of intangible assets (see Notes to Consolidated Financial Statements—Note 12. Goodwill and Other Intangible
Assets).
(b) Included in Acquisition-related in-process research and development charges (see Notes to Consolidated Financial Statements—Note 3B. Other
Significant Transactions and Events: Prior Period Acquisitions).
(c) Included in Restructuring charges and certain acquisition-related costs (see Notes to Consolidated Financial Statements—Note 4. Cost-Reduction
Initiatives).
(d) Amount relates to certain actions taken as a result of our acquisition of Wyeth. Prior to the acquisition of Wyeth on October 15, 2009, additional
depreciation for asset restructuring related to our cost-reduction initiatives was classified as a certain significant item and included in implementation
costs. For 2009, included in Cost of sales ($31 million), Selling, informational and administrative expenses ($37 million) and Research and
development expenses ($13 million).
(e) Discontinued operations—net of tax is primarily related to our former consumer healthcare business which we sold in 2006.
(f) Amounts relate to restructuring charges incurred for our cost-reduction initiatives prior to the acquisition of Wyeth on October 15, 2009. Included in
Restructuring charges and certain acquisition-related costs (see Notes to Consolidated Financial Statements—Note 4. Cost-Reduction Initiatives).
(g) Amounts relate to implementation costs incurred for our cost-reduction initiatives prior to the acquisition of Wyeth on October 15, 2009. Included in
Cost of sales ($144 million), Selling, informational and administrative expenses ($182 million), Research and development expenses ($78 million)
and Other (income)/deductions—net ($6 million) for 2009. Included in Cost of sales ($745 million), Selling, informational and administrative
expenses ($413 million), Research and development expenses ($433 million) and Other (income)/deductions—net ($14 million) for 2008. Included
in Cost of sales ($700 million), Selling, informational and administrative expenses ($334 million), Research and development expenses ($416
million) and Other (income)/deductions—net ($61 million income) for 2007 (see Notes to Consolidated Financial Statements—Note 4. Cost-
Reduction Initiatives). Includes additional depreciation for asset restructuring of $160 million in 2009, $786 million in 2008 and $788 million in 2007.
(h) Included in Other (income)/deductions—net and for 2008 includes approximately $2.3 billion in charges related to the resolution of certain
investigations concerning Bextra and various other products, and approximately $900 million in charges associated with the resolution of certain
litigation involving our NSAID pain medicines (see Notes to Consolidated Financial Statements—Note 3C. Other Significant Transactions and
Events: Bextra and Certain Other Investigations and Note 3D. Other Significant Transactions and Events: Certain Product Litigation––Celebrex and
Bextra).
(i) Includes interest expense through October 15, 2009, the Wyeth acquisition date, on the senior unsecured notes issued in connection with our
acquisition of Wyeth, less interest income earned on the proceeds of the notes.
(j) Included in Revenues and reflects an adjustment to the prior years’ liabilities for product returns (see Notes to Consolidated Financial Statements—
Note 3E. Other Significant Transactions and Events: Adjustment of Prior Years’ Liabilities for Product Returns).
(k) Included in Other (income)/deductions––net and represents a gain related to ViiV, a new equity method investment (see Notes to Consolidated
Financial Statements—Note 3A. Other Significant Transactions and Events: Formation of ViiV, an Equity Method Investment).
(l) 2009 amounts primarily included in Other (income)/deductions––net and primarily represent asset impairment charges associated with certain
materials used in our research and development activities that are no longer considered recoverable. 2008 amounts relate to asset impairment
charges and other associated costs primarily related to certain equity investments and the exit of our Exubera product.
34 2009 Financial Report