Pfizer 2010 Annual Report Download - page 70

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
4. Cost-Reduction Initiatives and Acquisition-Related Costs
We have incurred significant costs in connection with our cost-reduction initiatives (several programs initiated since 2005) and our
acquisition of Wyeth on October 15, 2009.
Since the acquisition of Wyeth, our cost-reduction initiatives that were announced on January 26, 2009 have been incorporated into
a comprehensive plan to integrate Wyeth’s operations, generate cost savings and capture synergies across the combined company.
We are focusing our efforts on achieving an appropriate cost structure for the combined company.
We incurred the following costs in connection with our cost-reduction initiatives and the acquisition of Wyeth:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2010 2009 2008
Transaction costs(a) $23 $ 768 $ —
Integration costs(b) 1,004 569 49
Restructuring charges(c)
Employee termination costs 1,125 2,571 2,004
Asset impairments 870 159 543
Other 192 270 79
Restructuring charges and certain acquisition-related costs $3,214 $4,337 $2,675
Additional depreciation—asset restructuring, recorded in our Consolidated Statements of
Income as follows(d):
Cost of Sales $ 526 $ 133 $ 596
Selling, informational and administrative expenses 227 53 19
Research and development expenses 34 55 171
Total additional depreciation––asset restructuring 787 241 786
Implementation costs(e) —250 819
Total $4,001 $4,828 $4,280
(a) Transaction costs represent external costs directly related to our acquisition of Wyeth and primarily include expenditures for banking, legal,
accounting and other similar services. Substantially all of the costs incurred in 2009 were 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.
(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 in 2010 are related to the integration of Wyeth. From the beginning of our cost-reduction and transformation initiatives in
2005 through December 31, 2010, Employee termination costs represent the expected reduction of the workforce by approximately 49,000
employees, mainly in manufacturing, sales and research, of which approximately 36,400 employees have been terminated as of December 31,
2010. 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 include charges
to write down property, plant and equipment to fair value. Other primarily includes costs to exit certain assets and activities. Substantially all of these
restructuring charges are associated with our Biopharmaceutical segment.
(d) Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring
actions.
(e) Implementation costs for the years ended December 31, 2009 and 2008, represent external, incremental costs directly related to implementing cost-
reduction initiatives prior to our acquisition of Wyeth, and primarily include expenditures related to system and process standardization and the
expansion of shared services. For the year ended December 31, 2009, implementation costs are included in Cost of sales ($42 million), Selling,
informational and administrative expenses ($166 million), Research and development expenses ($36 million) and Other deductions––net ($6
million). For the year ended December 31, 2008, implementation costs are included in Cost of sales ($149 million), Selling, informational and
administrative expenses ($394 million), Research and development expenses ($262 million) and Other deductions––net ($14 million).
The components of restructuring charges associated with all of our cost-reduction initiatives and the acquisition of Wyeth follow:
COSTS
INCURRED
ACTIVITY
THROUGH
DECEMBER 31,
ACCRUAL
AS OF
DECEMBER 31,
(MILLIONS OF DOLLARS) 2005-2010 2010(a) 2010(b)
Employee termination costs $ 8,846 $6,688 $2,158
Asset impairments 2,322 2,322 —
Other 902 801 101
Total $12,070 $9,811 $2,259
(a) Includes adjustments for foreign currency translation.
(b) Included in Other current liabilities ($1.6 billion) and Other noncurrent liabilities ($652 million).
5. Collaborative Arrangements
In the normal course of business, we enter into collaborative arrangements with respect to in-line medicines, as well as medicines in
development that require completion of research and regulatory approval. Collaborative arrangements are contractual agreements
with third parties that involve a joint operating activity, typically a research and/or commercialization effort, where both we and our
68 2010 Financial Report