Pfizer 2009 Annual Report Download - page 62

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
We believe that the charges of approximately $745 million will be sufficient to resolve all known U.S. personal injury claims,
including those not yet settled. However, additional charges may have to be taken in the future in connection with certain pending
claims and unknown claims relating to Celebrex and Bextra (see Note 19B. Legal Proceedings and Contingencies: Product
Litigation).
E. Adjustment of Prior Years’ Liabilities for Product Returns
Revenues in 2008 include a reduction of $217 million, pre-tax, to adjust our prior years’ liabilities for product returns. After a detailed
review in 2008 of our returns experience, we determined that our previous accounting methodology for product returns needed to be
revised as the lag time between product sale and return was longer than we previously had assumed. Although fully recorded in
2008, virtually all of the adjustment relates back several years.
F. 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. In
connection with these actions, we recorded total pre-tax charges of $2.8 billion, virtually all of which were recorded in the third
quarter of 2007. These charges were included primarily in Cost of sales ($2.6 billion), Selling, informational and administrative
expenses ($85 million), and Research and development expenses ($100 million). The charges included asset write-offs of $2.2
billion (intangibles, inventory and fixed assets) and other exit costs, primarily severance, contract and other termination costs. The
exit costs resulted in cash expenditures in 2009, 2008 and 2007. As of December 31, 2009, the remaining accrual for other exit
costs is approximately $55 million and is primarily recorded in Current deferred tax liabilities and other current liabilities.
4. Cost-Reduction Initiatives and Acquisition-Related Costs
We have incurred significant costs in connection with our cost-reduction initiatives (several programs initiated since 2005) and our
acquisition of Wyeth on October 15, 2009.
Since the acquisition of Wyeth, our cost-reduction initiatives that were announced on January 26, 2009 have been incorporated into
a comprehensive plan to integrate Wyeth’s operations, generate cost savings and capture synergies across the combined company.
We are focusing our efforts on achieving an appropriate cost structure for the combined company.
We incurred the following costs in connection with our cost-reduction initiatives and the Wyeth acquisition:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Transaction costs(a) $ 768 $— $—
Integration costs and other(b) 569 49 11
Restructuring charges(c) 3,000 2,626 2,523
Restructuring charges and certain acquisition-related costs 4,337 2,675 2,534
Additional depreciation—asset restructuring(d) 241 786 788
Implementation costs(e) 250 819 601
Total $4,828 $4,280 $3,923
(a) Transaction costs represent external costs directly related to effecting the acquisition of Wyeth and primarily include expenditures for banking, legal,
accounting and other similar services. Substantially all of the costs incurred are fees related to a $22.5 billion bridge term loan credit agreement
entered into with certain financial institutions on March 12, 2009 to partially fund our acquisition of Wyeth. The bridge term loan credit agreement
was terminated in June 2009 as a result of our issuance of approximately $24.0 billion of senior unsecured notes in the first half of 2009. All bridge
term loan commitment fees have been expensed, and we no longer are subject to the covenants under that agreement (see Note 9D: Financial
Instruments: Long-Term Debt).
(b) Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for
consulting and systems integration.
(c) Restructuring charges include the following:
ACTIVITY ACCRUAL
COSTS INCURRED
THROUGH
DECEMBER 31,
AS OF
DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007 2005-2009 2009(1) 2009(2)
Employee termination costs $2,571 $2,004 $2,034 $7,721 $4,488 $3,233
Asset impairments 159 543 260 1,452 1,452 —
Other 270 79 229 710 577 133
Total $3,000 $2,626 $2,523 $9,883 $6,517 $3,366
(1) Includes adjustments for foreign currency translation.
(2) Included in Current deferred tax liabilities and other current liabilities ($2.5 billion) and Other noncurrent liabilities ($846 million).
60 2009 Financial Report