Pfizer 2007 Annual Report Download - page 49

2007 Financial Report 47
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
䡬certain manufacturing facility assets and liabilities, which
were previously part of our Pharmaceutical or Corporate/
Other segment but were included in the sale of our Consumer
Healthcare business. The net impact to the Pharmaceutical
segment was not significant.
The results of this business are included in Income from
discontinued operations—net of tax for 2006 and 2005.
Legal title to certain assets and legal control of the business in
certain non-U.S. jurisdictions did not transfer to the buyer on
the closing date of December 20, 2006, because the satisfaction
of specific local requirements was pending. These operations
represented a small portion of our former Consumer Healthcare
business and all of these transactions have now closed. In order
to ensure that the buyer was placed in the same economic
position as if the assets, operations and activities of those
businesses had been transferred on the same date as the rest
of the business, we entered into an agreement that passed the
risks and rewards of ownership to the buyer from December 20,
2006. We treated these delayed-close businesses as sold for
accounting purposes on December 20, 2006.
We continued during 2007, and we will continue for a period
of time, to generate cash flows and to report gross revenues,
income and expense activity that are associated with our
former Consumer Healthcare business, in continuing operations,
although at a substantially reduced level. After the transfer of
these activities, these cash flows and the income statement
activity reported in continuing operations will be eliminated.
The activities that give rise to these impacts are transitional in
nature and generally result from agreements that ensure and
facilitate the orderly transfer of business operations to the
new owner. For example, we entered into a number of
transition services agreements that allow the buyer sufficient
time to prepare for the transfer of activities and to limit the risk
of business disruption. The nature, magnitude and duration of
the agreements vary depending on the specific circumstances
of the service, location and/or business need. The agreements
can include the following: manufacturing and product supply,
logistics, customer service, support of financial processes,
procurement, human resources, facilities management, data
collection and information services. Most of these agreements
extend for periods generally less than 24 months, but because
of the inherent complexity of manufacturing processes and the
risk of product flow disruption, the product supply agreements
generally extend up to 36 months. Included in continuing
operations for 2007 were the following amounts associated
with these transition service agreements that will no longer
occur after the full transfer of activities to the new owner:
Revenues of $219 million; Cost of Sales of $194 million; Selling,
informational and administrative expenses of $15 million; and
Other (income)/deductions—net of $16 million in income.
None of these agreements confers upon us the ability to
influence the operating and/or financial policies of the
Consumer Healthcare business under its new ownership.
•In the third quarter of 2005, we sold the last of three European
generic pharmaceutical businesses, which we had included in
our Pharmaceutical segment, for 4.7 million euro (approximately
$5.6 million). This business became a part of Pfizer in April 2003
in connection with our acquisition of Pharmacia. We recorded
a loss of $3 million ($2 million, net of tax) in Gains on sales of
discontinued operations—net of tax in the consolidated
statement of income for 2005.
•In the first quarter of 2005, we sold the second of three
European generic pharmaceutical businesses, which we had
included in our Pharmaceutical segment, for 70 million euro
(approximately $93 million). This business became a part of
Pfizer in April 2003 in connection with our acquisition of
Pharmacia. We recorded a gain of $57 million ($36 million, net
of tax) in Gains on sales of discontinued operations—net of tax
in the consolidated statement of income for 2005. In addition,
we recorded an impairment charge of $9 million ($6 million, net
of tax) related to the third European generic business in Income
from discontinued operations—net of tax in the consolidated
statement of income for 2005.
The following amounts, primarily related to our former Consumer
Healthcare business, which was sold in December 2006 for $16.6
billion, have been segregated from continuing operations and
included in Discontinued operations—net of tax in the
consolidated statements of income:
YEAR ENDED DEC. 31,
_____________________________________________________
(MILLIONS OF DOLLARS) 2007 2006 2005
Revenues $— $ 4,044 $3,948
Pre-tax income/(loss) $ (5) $ 643 $ 695
Benefit/(provision) for
taxes(a) 2(210) (244)
Income/(loss) from operations
of discontinued businesses—
net of tax (3) 433 451
Pre-tax gains/(losses) on
sales of discontinued
businesses (168) 10,243 77
Benefit/(provision) for taxes(b) 102 (2,363) (30)
Gains/(losses) on sales of
discontinued businesses—
net of tax (66) 7,880 47
Discontinued operations—net
of tax $ (69) $ 8,313 $ 498
(a) Includes a deferred tax expense of nil in 2007, $24 million in 2006
and $25 million in 2005.
(b) Includes a deferred tax benefit of nil in 2007, $444 million in 2006
and nil in 2005.
Net cash flows of our discontinued operations from each of the
categories of operating, investing and financing activities were
not significant.
4. Asset Impairment Charges and Other Costs
Associated with Exiting Exubera
In the third quarter of 2007, after an assessment of the financial
performance of Exubera, an inhalable form of insulin for the
treatment of diabetes, as well as its lack of acceptance by patients,
physicians and payers, we decided to exit the product.