Pfizer 2008 Annual Report Download - page 58

Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
•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.
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 2008 and 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 extended for periods generally less than 24 months, but because of the inherent
complexity of manufacturing processes and the risk of product flow disruption, some manufacturing and product supply agreements
were extended to 36 months. Included in continuing operations for 2008 and 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: for 2008, included in
Revenues ($172 million), Cost of Sales ($162 million) and Selling,informational and administrative expenses ($3 million) and for
2007, included in Revenues ($219 million), Cost of Sales ($194 million), Selling, informational and administrative expenses ($15
million), and Other (income)/deductions—net ($16 million income).
None of these agreements confers upon us the ability to influence the operating and/or financial policies of our former Consumer
Healthcare business under its new ownership.
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 DECEMBER 31,
(MILLIONS OF DOLLARS) 2008 2007 2006
Revenues $— $ — $ 4,044
Pre-tax income/(loss) $ (3) $ (5) $ 643
Benefit/(provision) for taxes(a) 12 (210)
Income/(loss) from operations of discontinued businesses—net of tax (2) (3) 433
Pre-tax gains/(losses) on sales of discontinued businesses 6(168) 10,243
Benefit/(provision) for taxes(b) 74 102 (2,363)
Gains/(losses) on sales of discontinued businesses—net of tax 80 (66) 7,880
Discontinued operations—net of tax $78 $ (69) $ 8,313
(a) Includes a deferred tax expense of nil in 2008 and 2007 and $24 million in 2006.
(b) Includes a deferred tax benefit of nil in 2008 and 2007 and $444 million in 2006.
Net cash flows of our discontinued operations from each of the categories of operating, investing and financing activities were not
significant.
4. Certain Charges
A. Bextra and Certain Other Investigations
In January 2009, we entered into an agreement in principle with the U.S. Department of Justice to resolve the previously reported
investigation regarding allegations of past off-label promotional practices concerning Bextra, as well as certain other open
investigations. In connection with these actions, in the fourth quarter of 2008, we recorded a charge of $2.3 billion, pre-tax and after-
tax, in Other (income)/deductions—net and such amount is included in Other current liabilities. (See Note 19D. Legal Proceedings
and Contingencies: Government Investigations and Requests for Information.)
56 2008 Financial Report