and expenses associated with system and process standardization and the expansion of shared services.

We incurred the following costs in connection with our AtS initiative, which was launched in the first quarter of 2005:

Through December 31, 2005, the restructuring charges primarily relate to employee termination costs at our manufacturing facilities in North America and in our U.S. marketing and worldwide research and development operations, and the implementation costs primarily relate to system and process standardization, as well as the expansion of shared services.

The components of restructuring charges associated with AtS follow:

On January 25, 2006, the Company was notified by the IRS Appeals Division that a resolution had been reached on one matter that we were in the process of appealing related to the tax deductibility of a breakup fee paid by the Warner-Lambert Company in 2000. As a result, in the first quarter of 2006, we will record favorable adjustments of approximately $450 million.

On January 23, 2006, the IRS issued final regulations on Statutory Mergers and Consolidations, which impact certain prior period transactions. The regulations could result in benefits ranging from approximately $75 million to $214 million in the first quarter of 2006 subject to certain management decisions.

Discontinued Operations

See our discussion in the “Acquisitions and Dispositions” section of this Financial Review for a complete discussion of dispositions. The following amounts have been segregated from continuing operations and reported as discontinued operations, and in 2003, primarily related to the disposition of the Adams confectionery products business and the Schick-Wilkinson Sword business:

  COSTS

Through December 31, 2005, Employee termination costs represent the approved reduction of the workforce by 2,602 employees, mainly in manufacturing, sales and research. We notified affected individuals and 2,425 employees were terminated as of December 31, 2005. Employee termination costs are recorded as incurred and include accrued severance benefits, pension and postretirement benefits. Asset impairments primarily include charges to write off inventory and write down property, plant and equipment. Other primarily includes costs to exit certain activities.

Other (Income)/Deductions — Net

In 2005, Pfizer recorded impairment charges of $1.1 billion related to the developed technology rights for Bextra, a selective COX- 2 inhibitor, and $5 million related to the write-off of machinery and equipment. In 2004, we recorded an impairment charge of $691 million related to the Depo-Provera brand and a litigation- related charge of $369 million related to the resolution of claims against Quigley Company, Inc., a wholly-owned subsidiary of Pfizer. In 2003, we recorded charges totaling $1.4 billion to cover the resolution of two legacy Warner-Lambert legal matters relating to Rezulin personal injury claims and a government investigation of marketing practices relating to Neurontin. See also Notes to Consolidated Financial Statements—Note 6, Other (Income)/Deductions—Net.

Taxes on Income

In 2005, we recorded an income tax charge of $1.7