Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

3 Months Ended

Apr. 04, 2021

Restructuring and Related Activities [Abstract]

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

A. Transforming to a More Focused Company Program

With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We have undertaken efforts to ensure our cost base aligns appropriately with our revenue base. While certain direct costs transferred to the Consumer Healthcare JV and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. In addition, we are taking steps to restructure our corporate enabling functions to appropriately support and drive the purpose of our business and R&D and PGS platform functions. The program costs discussed below are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.

We expect costs for this program, primarily related to corporate enabling functions, to total $1.6 billion on a pre-tax basis, with substantially all costs to be cash expenditures. Actions will include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.

Also, as part of this program, we expect to incur costs related to manufacturing network optimization, including certain legacy cost-reduction initiatives, of $500 million, with approximately 20% of the costs to be non-cash. The costs for this effort will include, among other things, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.

From the start of this program in the fourth quarter of 2019 through April 4, 2021, we incurred costs of $1.0 billion.

B. Key Activities


The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits, which are composed primarily of the Transforming to a More Focused Company program:
	Three Months Ended
(MILLIONS)	April 4, 2021		March 29, 2020
Restructuring charges/(credits):
Employee terminations	$	22	$	10
Asset impairments	(4)		31

Restructuring charges/(credits)(a)	18		41
Transaction costs(b)	—		3
Integration costs and other(c)	5		10
Restructuring charges and certain acquisition-related costs	23		54
Net periodic benefit costs recorded in Other (income)/deductions––net(d)	8		1
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	10		5

Research and development expenses	—		(5)
Total additional depreciation––asset restructuring	10		—
Implementation costs recorded in our condensed consolidated statements of income as follows(f):
Cost of sales	11		8
Selling, informational and administrative expenses	64		15


Total implementation costs	75		22
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	116	$	77

(a)Represents acquisition-related costs ($6 million credit in 2021) and cost-reduction/productivity initiatives ($25 million charge in 2021 and a $40 million charge in 2020).

(b)Represents external costs for banking, legal, accounting and other similar services.

(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs.

(d)Amount for the three months ended March 29, 2020 includes the impact of a change in accounting principle. See Note 1C.

(e)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(f)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.


The following summarizes the components and changes in restructuring accruals:
(MILLIONS)	Employee Termination Costs		Asset Impairment Charges		Exit Costs		Accrual
Balance, December 31, 2020(a)	$	782	$	—	$	15	$	798
Provision	22		(4)		—		18
Utilization and other(b)	(102)		4		—		(99)
Balance, April 4, 2021(c)	$	702	$	—	$	15	$	717

(a)Included in Other current liabilities ($628 million) and Other noncurrent liabilities ($169 million).

(b)Includes adjustments for foreign currency translation.

(c)Included in Other current liabilities ($561 million) and Other noncurrent liabilities ($156 million).