Pfizer 2013 Annual Report Download - page 38

Financial Review
Pfizer Inc. and Subsidiary Companies
2013 Financial Report 37
The integration and restructuring costs associated with a business combination may occur over several years, with the more significant
impacts ending within three years of the transaction. Because of the need for certain external approvals for some actions, the span of time
needed to achieve certain restructuring and integration activities can be lengthy. For example, due to the 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 and/or other global regulatory authorities.
Discontinued Operations
Adjusted income is calculated prior to considering the results of operations included in discontinued operations, as well as any related gains
or losses on the disposal of such operations such as the gains on the full disposition of our former Animal Health business (Zoetis) in June
2013, the sale of our former Nutrition business in November 2012 and the sale of our former Capsugel business in August 2011. We believe
that this presentation is meaningful to investors because, while we review our businesses and product lines for strategic fit with our
operations, we do not build or run our businesses with the intent to sell them. Restatements due to discontinued operations do not impact
compensation or change the Adjusted income measure for the compensation in respect of the restated periods, but are presented in this
Financial Review for consistency across all periods.
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; amounts related to certain disposals of
businesses, products or facilities that do not qualify as discontinued operations under U.S. GAAP; amounts associated with transitional
service, manufacturing and supply 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; or charges
related to certain 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 for legal matters made in the normal course of our business would not
be considered certain significant items.
Reconciliation
The following table provides a reconciliation of Net income attributable to Pfizer Inc., as reported under U.S. GAAP, and Non-GAAP
Adjusted income:
Year Ended December 31, % Change
(MILLIONS OF DOLLARS) 2013 2012 2011 13/12 12/11
GAAP Reported net income attributable to Pfizer Inc. $22,003 $14,570 $10,009 51 46
Purchase accounting adjustments—net of tax 3,146 3,562 4,946 (12)(28)
Acquisition-related costs—net of tax 383 743 1,415 (48)(47)
Discontinued operations—net of tax (10,623)(5,577) (2,189) 90 *
Certain significant items—net of tax 379 2,451 2,964 (85)(17)
Non-GAAP Adjusted income(a) $15,288 $15,749 $17,145 (3) (8)
(a) The effective tax rate on Non-GAAP Adjusted income was 27.5% in 2013, 28.7% in 2012 and 29.3% in 2011. The effective tax rate for 2013 compared with 2012
was favorably impacted by the increase in tax benefits related to audit settlements with foreign jurisdictions and the expiration of certain statutes of limitations in
multiple jurisdictions covering various periods, as well as the extension of the U.S. R&D tax credit that was signed into law in January 2013. The effective tax
rate for 2012 compared with 2011 reflects the impact of the change in the jurisdictional mix of earnings, the expiration of the U.S. R&D tax credit on December
31, 2011 and the favorable impact of the resolution of certain prior-period tax positions in 2012 with various foreign tax authorities and the expiration of certain
statutes of limitations.
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.