Pfizer 2011 Annual Report Download - page 31

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Financial Review
Pfizer Inc. and Subsidiary Companies
COSTS AND EXPENSES
Cost of Sales
YEAR ENDED DECEMBER 31, INCR./(DECR.)
(MILLIONS OF DOLLARS) 2011 2010 2009 11/10 10/09
Cost of sales $15,085 $15,838 $8,459 (5)% 87%
2011 vs. 2010
Cost of sales decreased 5% in 2011, compared to 2010, primarily as a result of:
•lower purchase accounting charges of $1.7 billion, primarily reflecting the fair value adjustments to acquired inventory from Wyeth that
was subsequently sold; and
•savings associated with our cost-reduction and productivity initiatives,
partially offset by:
•the addition of costs from legacy King’s operations;
•the Puerto Rico excise tax (for additional information, see the “Provision for Taxes on Income” section of this Financial Review);
•a shift in geographic and business mix; and
•the unfavorable impact of foreign exchange of 2% in 2011
2010 vs. 2009
Cost of sales increased 87% in 2010, compared to 2009, primarily as a result of:
•purchase accounting charges of approximately $2.9 billion in 2010, compared to approximately $970 million in 2009, primarily reflecting
the fair value adjustments to inventory acquired from Wyeth that was subsequently sold;
•a write-off of inventory of $212 million (which includes a purchase accounting fair value adjustment of $104 million), primarily related to
biopharmaceutical inventory acquired from Wyeth that became unusable after the acquisition date;
•the inclusion of Wyeth’s manufacturing operations for a full year in 2010, compared to part of the year in 2009; and
•the change in the mix of products and businesses as a result of the Wyeth acquisition,
partially offset by:
•lower costs as a result of our cost-reduction and productivity initiatives.
Foreign exchange had a minimal impact on cost of sales during 2010.
Selling, Informational and Administrative (SI&A) Expenses
YEAR ENDED DECEMBER 31, INCR./(DECR.)
(MILLIONS OF DOLLARS) 2011 2010 2009 11/10 10/09
Selling, informational and administrative expenses $19,468 $19,480 $14,752 —32%
2011 vs. 2010
SI&A expenses were largely unchanged in 2011, compared to 2010, primarily as a result of:
•the fee provided for under the U.S. Healthcare Legislation beginning in 2011;
•the addition of legacy King operating costs; and
•the unfavorable impact of foreign exchange of 2%,
offset by:
•savings associated with our cost-reduction and productivity initiatives.
2010 vs. 2009
SI&A expenses increased 32% in 2010, compared to 2009, primarily as a result of:
•the inclusion of Wyeth operating costs for a full year in 2010, compared to part of the year in 2009; and
•the unfavorable impact of foreign exchange of $236 million.
30 2011 Financial Report