Pfizer 2012 Annual Report Download - page 70

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2012 Financial Report 69
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-
Reduction/Productivity Initiatives
We incur significant costs in connection with acquiring, integrating and restructuring businesses and in connection with our global cost-
reduction and productivity initiatives. For example:
• In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired
operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the
combined company (which may include charges related to employees, assets and activities that will not continue in the combined
company); and
• In connection with our cost-reduction and productivity initiatives, we typically incur costs and charges associated with site closings
and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of
global systems.
All of our businesses and functions may be impacted by these actions, including sales and marketing, manufacturing and research and
development, as well as groups such as information technology, shared services and corporate operations. Since the acquisition of Wyeth on
October 15, 2009, our cost-reduction initiatives announced on January 26, 2009, but not completed as of December 31, 2009, were
incorporated into a comprehensive plan to integrate Wyeth’s operations to generate cost savings and to capture synergies across the
combined company. In addition, among our ongoing cost reduction/productivity initiatives, on February 1, 2011, we announced a new
productivity initiative to accelerate our strategies to improve innovation and productivity in R&D by prioritizing areas that we believe have the
greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas that we believe have the highest
potential to deliver value in the near term and over time.
The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
Year Ended December 31,
(MILLIONS OF DOLLARS) 2012 2011 2010
Transaction costs(a) $1$30$22
Integration costs(b) 405 725 1,001
Restructuring charges:(c)
Employee termination costs 997 1,794 1,062
Asset impairments 328 256 869
Exit costs 149 125 191
Restructuring charges and certain acquisition-related costs 1,880 2,930 3,145
Additional depreciation––asset restructuring recorded in our
consolidated statements of income as follows:(d)
Cost of sales 267 555 520
Selling, informational and administrative expenses 20 75 227
Research and development expenses 296 605 34
Total additional depreciation––asset restructuring 583 1,235 781
Implementation costs recorded in our consolidated
statements of income as follows:(e)
Cost of sales 31 250 —
Selling, informational and administrative expenses 129 25 —
Research and development expenses 232 72 —
Total implementation costs 392 347 —
Total costs associated with acquisitions and cost-reduction/productivity initiatives $2,855 $4,512 $3,926
(a) Transaction costs represent external costs directly related to acquired businesses and primarily include expenditures for banking, legal, accounting and other
similar services.
(b) Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and
the integration of systems and processes.
(c) From the beginning of our cost-reduction and transformation initiatives in 2005 through December 31, 2012, Employee termination costs represent the expected
reduction of the workforce by approximately 62,200 employees, mainly in manufacturing, sales and research, of which approximately 51,700 employees have
been terminated as of December 31, 2012. In 2012, substantially all employee termination costs represent additional costs with respect to approximately 4,800
employees.
The restructuring charges in 2012 are associated with the following:
• Primary Care operating segment ($295 million), Specialty Care and Oncology operating segment ($175 million), Established Products and Emerging
Markets operating segment ($125 million), Animal Health operating segment ($59 million), Consumer Healthcare operating segment ($45 million),
research and development operations ($6 million income), manufacturing operations ($265 million) and Corporate ($516 million).