Pfizer 2006 Annual Report Download - page 15

Analysis of the Consolidated Statement of
Income
YEAR ENDED DEC. 31, % CHANGE
__________________________________________ _________________
(MILLIONS OF DOLLARS) 2006 2005 2004 06/05 05/04
Revenues $48,371 $47,405 $48,988 2 (3)
Cost of sales 7,640 7,232 6,391 6 13
% of revenues 15.8% 15.3% 13.0%
SI&A expenses 15,589 15,313 15,304 2 —
% of revenues 32.2% 32.3% 31.2%
R&D expenses 7,599 7,256 7,513 5 (3)
% of revenues 15.7% 15.3% 15.3%
Amortization of
intangible assets 3,261 3,399 3,352 (4) 1
% of revenues 6.7% 7.2% 6.8%
Acquisition-related
IPR&D charges 835 1,652 1,071 (49) 54
% of revenues 1.7% 3.5% 2.2%
Restructuring charges
and acquisition-
related costs 1,323 1,356 1,151 (2) 18
% of revenues 2.7% 2.9% 2.3%
Other (income)/
deductions—net (904) 397 803 * (51)
Income from
continuing
operations
(a)
13,028 10,800 13,403 21 (19)
% of revenues 26.9% 22.8% 27.4%
Provision for taxes
on income 1,992 3,178 2,460 (37) 29
Effective tax rate 15.3% 29.4% 18.4%
Minority interest 12 12 7 4 66
Discontinued
operations—net
of tax 8,313 498 425 M+ 17
Cumulative effect of
a change in
accounting
principles—net
of tax — (23) — * *
Net income $19,337 $ 8,085 $11,361 139 (29)
% of revenues 40.0% 17.1% 23.2%
(a)
Represents income from continuing operations before provision
for taxes on income, minority interests, discontinued operations
and cumulative effect of a change in accounting principles.
* Calculation not meaningful.
M+ Change greater than 1,000%.
Percentages in this table and throughout the Financial Review may
reflect rounding adjustments.
Revenues
Total revenues increased 2% to $48.4 billion in 2006, primarily due
to the solid aggregate performance in our broad portfolio of
patent-protected medicines and the revenues from new products
launched over the past three years. These increases were mostly
offset by the loss of U.S. exclusivity on Zithromax in November
2005 and Zoloft in June 2006, which resulted in a collective
decline in revenues of about $2.5 billion for these two products.
In 2006, Lipitor, Norvasc, Zoloft and Celebrex each delivered at
least $2 billion in revenues, while Lyrica, Viagra, Detrol/Detrol LA,
Xalatan/Xalacom and Zyrtec each surpassed $1 billion.
Total revenues decreased 3% to $47.4 billion in 2005, primarily due
to the loss of U.S. exclusivity of certain key products, the suspension
of the sales of Bextra and the uncertainty related to Celebrex. These
decreases were partially offset by the solid aggregate performance
in the balance of our broad portfolio of patent-protected
medicines. In 2005, Lipitor, Norvasc, Zoloft and Zithromax each
delivered at least $2 billion in revenues, while Celebrex, Viagra,
Xalatan/Xalacom and Zyrtec each surpassed $1 billion.
Changes in foreign exchange rates decreased total revenues in
2006 by $279 million, or 0.6%, compared to 2005, and increased
total revenues in 2005 by $869 million, or 1.8%, compared to 2004.
The foreign exchange impact on 2006 revenue growth was due
to the strengthening of the U.S. dollar relative to many foreign
currencies, especially the Japanese yen and the euro, partially
offset by the weakening of the U.S. dollar relative to the Canadian
dollar, the total of which accounted for about 96% of the impact
in 2006. The favorable impact of foreign exchange on 2005
revenue growth was due to the weakening of the U.S. dollar
relative to many foreign currencies, especially the euro which
accounted for about 36% of the impact in 2005. The revenues of
legacy Pharmacia products, recorded from the acquisition date of
April 16, 2003, until the anniversary date of the transaction in
2004, were treated as incremental volume and did not have a
significant foreign exchange impact.
Revenues exceeded $500 million in each of 10 countries outside
the U.S. in 2006 and in 2005. The U.S. was the only country to
contribute more than 10% of total revenues in each year.
Our policy relating to the supply of pharmaceutical inventory at
domestic wholesalers, and in major international markets, is to
maintain stocking levels under one month on average and to keep
monthly levels consistent from year to year based on patterns of
utilization. We have historically been able to closely monitor
these customer stocking levels by purchasing information from our
customers directly or by obtaining other third-party information.
We believe our data sources to be directionally reliable, but
cannot verify their accuracy. Further, as we do not control this
third-party data, we cannot be assured of continuing access.
Unusual buying patterns and utilization are promptly investigated.
Rebates reduced revenues, as follows:
YEAR ENDED DEC. 31,
_______________________________________
(BILLIONS OF DOLLARS) 2006 2005 2004
Medicaid and related state
program rebates $0.5 $1.3 $1.4
Medicare rebates 0.6 0.0 0.0
Performance-based contract
rebates 1.8 2.3 2.2
Total $2.9 $3.6 $3.6
The decline in total rebates for 2006 reflects:
•
The implementation of the Medicare Act, effective January 1,
2006, which caused a shift from Medicaid rebates to Medicare
rebates. The shift is a result of patients who are eligible for
Medicare and Medicaid and who now receive their prescription
drug benefits through Medicare instead of Medicaid, as well
as shifts to managed care.
2006 Financial Report 13
Financial Review
Pfizer Inc and Subsidiary Companies