Pfizer 2011 Annual Report Download - page 39

Financial Review
Pfizer Inc. and Subsidiary Companies
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 that is specific in nature with a defined term, such as those related to our non-acquisition-related cost-reduction and
productivity initiatives; charges related to certain sales or disposals of products or facilities that do not qualify as discontinued
operations as defined by U.S. GAAP; amounts associated with transition service agreements in support of discontinued operations
after sale; certain intangible asset impairments; adjustments related to the resolution of certain tax positions; the impact of adopting
certain significant, event-driven tax legislation; net interest expense incurred through the consummation date of the acquisition of
Wyeth on acquisition-related borrowings made prior to that date; or possible charges related to legal matters, such as certain of
those discussed in Notes to Consolidated Financial Statements—Note 17. Commitments and Contingencies and in Part II—Other
Information; Item 1. Legal Proceedings in our Quarterly Reports on Form 10-Q filings. Normal, ongoing defense costs of the
Company or settlements of and accruals on legal matters made in the normal course of our business would not be considered
certain significant items.
Reconciliation
A reconciliation of Net income attributable to Pfizer Inc., as reported under U.S. GAAP to Adjusted income follows:
YEAR ENDED DECEMBER 31, % CHANGE
(MILLIONS OF DOLLARS) 2011 2010 2009 11/10 10/09
Reported net income attributable to Pfizer Inc. $10,009 $ 8,257 $ 8,635 21 (4)
Purchase accounting adjustments—net of tax 5,032 6,109 2,633 (18) 132
Acquisition-related costs—net of tax 1,458 2,897 2,858 (50) 1
Discontinued operations—net of tax (1,312) (77) (114) *32
Certain significant items—net of tax 3,030 699 83 **
Adjusted income(a) $18,217 $17,885 $14,095 227
(a) The effective tax rate on Adjusted income was 29.5% in 2011, 29.7% in 2010 and 29.5% in 2009. The lower effective tax rate on Adjusted income in
2011 is primarily due to the change in the jurisdictional mix of earnings and the write-off in 2010 of the deferred tax asset of approximately $270
million related to the Medicare Part D subsidy for retiree prescription drug coverage resulting from the provisions of the U.S. Healthcare Legislation
concerning the tax treatment of that subsidy effective for tax years beginning after December 31, 2012, partially offset by $460 million in tax benefits
in 2010 for the resolution of certain tax positions pertaining to prior years with various foreign tax authorities.
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
A reconciliation of Reported diluted EPS, as reported under U.S. GAAP, to Adjusted diluted EPS follows:
YEAR ENDED DECEMBER 31, % CHANGE
2011 2010 2009 11/10 10/09
Earnings per common share—diluted:
Reported income from continuing operations attributable to Pfizer Inc.
common shareholders $ 1.11 $ 1.01 $ 1.21 10 (17)
Income from discontinued operations—net of tax 0.17 0.01 0.02 *(50)
Reported net income attributable to Pfizer Inc. common shareholders 1.27 1.02 1.23 25 (17)
Purchase accounting adjustments—net of tax 0.64 0.76 0.37 (16) 105
Acquisition-related costs—net of tax 0.19 0.36 0.41 (47) (12)
Discontinued operations—net of tax (0.17) (0.01) (0.02) *50
Certain significant items—net of tax 0.39 0.09 0.01 **
Adjusted Net income attributable to Pfizer Inc. common
shareholders(a) $ 2.31 $ 2.22 $ 2.00 411
(a) Reported and Adjusted diluted earnings per share in 2011 and 2010 were impacted by the decrease in the number of shares outstanding in
comparison with 2009, primarily due to the Company’s ongoing share repurchase program, offset by the impact of shares issued to partially fund
the Wyeth acquisition in 2009.
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
38 2011 Financial Report