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

9 Months Ended

Oct. 03, 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 and support model align appropriately with our new operating structure. 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. This program is primarily composed of the following three initiatives:

•We are taking steps to restructure our corporate enabling functions to appropriately support our business, R&D and PGS platform functions. We expect costs, primarily related to restructuring our corporate enabling functions, to total $1.6 billion, with substantially all costs to be cash expenditures. Actions 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.

•In addition, we are transforming our commercial go-to market model in the way we engage patients and physicians. We expect costs of $1.1 billion, with substantially all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.

•We are also optimizing our manufacturing network and incurring certain legacy cost-reduction initiatives related to our manufacturing business. We expect to incur costs of $500 million, with approximately 20% of the costs to be non-cash. The costs for this effort include, among other things, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.

The program costs discussed above are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.

From the start of this program in the fourth quarter of 2019 through October 3, 2021, we incurred costs of $2.0 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				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Restructuring charges/(credits):
Employee terminations	$	630	$	(15)	$	649	$	340
Asset impairments	10		20		9		43
Exit costs/(credits)	3		(11)		—		(10)
Restructuring charges/(credits)(a)	643		(5)		657		374
Transaction costs(b)	—		—		—		14
Integration costs and other(c)	3		7		11		29
Restructuring charges and certain acquisition-related costs	646		2		668		417
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net(d)	(63)		—		(51)		2
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	23		4		64		14
Selling, informational and administrative expenses	8		—		23		—
Research and development expenses	—		—		—		(3)
Total additional depreciation––asset restructuring	31		4		87		10
Implementation costs recorded in our condensed consolidated statements of income as follows(f):
Cost of sales	8		9		29		27
Selling, informational and administrative expenses	142		36		287		114
Research and development expenses	—		1		1		2

Total implementation costs	151		47		316		142
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	764	$	52	$	1,020	$	571

(a)Primarily represents cost reduction initiatives.

(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)Amounts for the three and nine months ended September 27, 2020 include 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	649		9		—		657
Utilization and other(b)	(306)		(9)		(5)		(319)
Balance, October 3, 2021(c)	$	1,125	$	—	$	10	$	1,135

(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 ($860 million) and Other noncurrent liabilities ($275 million).