Bristol-Myers Squibb  $^{ }$Expenses Luftal , an antacid product, had 1.5 months of inventory on hand internationally at direct customers compared to 1.9 months of  inventory on hand at December 31, 2011. The level of inventory on hand was primarily due to government purchasing patterns in  Brazil.  In the U.S., for all products sold exclusively through wholesalers or through distributors, we generally determined our months on hand  estimates using inventory levels of product on hand and the amount of out-movement provided by our three largest wholesalers, which  account for approximately 90% of total gross sales of U.S. products, and provided by our distributors. Factors that may influence our  estimates include generic competition, seasonality of products, wholesaler purchases in light of increases in wholesaler list prices, new  product launches, new warehouse openings by wholesalers and new customer stockings by wholesalers. In addition, these estimates  are calculated using third-party data, which may be impacted by their recordkeeping processes.  For our businesses outside of the U.S., we have significantly more direct customers. Limited information on direct customer product  level inventory and corresponding out-movement information and the reliability of third-party demand information, where available,  varies widely. In cases where direct customer product level inventory, ultimate patient/consumer demand or out-movement data does  not exist or is otherwise not available, we have developed a variety of other methodologies to estimate such data, including using such  factors as historical sales made to direct customers and third-party market research data related to prescription trends and end-user  demand. Accordingly, we rely on a variety of methods to estimate direct customer product level inventory and to calculate months on  hand. Factors that may affect our estimates include generic competition, seasonality of products, direct customer purchases in light of  price increases, new product launches, new warehouse openings by direct customers, new customer stockings by direct customers and  expected direct customer purchases for governmental bidding situations.  Cost of products sold consists of material costs, internal labor and overhead from our owned manufacturing sites, third-party  processing costs, other supply chain costs and the settlement of foreign currency forward contracts that are used to hedge forecasted  intercompany inventory purchase transactions. Essentially all of these costs are managed by our global manufacturing and supply  organization. Cost of products also includes royalties and profit sharing attributed to licensed products and alliances, amortization of  acquired developed technology costs from business combinations and milestone payments that occur on or after regulatory approval.  **  Change is in excess of 100%.  $^{ }$Cost of products sold  $^{ }$Cost of products sold can vary between periods as a result of product mix (particularly resulting from royalties and profit sharing  expenses in connection with our alliances), price, inflation and costs attributed to the rationalization of manufacturing sites resulting in  accelerated depreciation, impairment charges and other stranded costs. In addition, changes in foreign currency may also provide  volatility given a high percentage of total costs are denominated in foreign currencies. Cost of products sold as a percentage of net  sales were 26.2% in 2012, 26.4% in 2011, and 27.1% in 2010.  $^{ }$The decrease in cost of products sold in 2012 was primarily attributed to lower sales volume following the loss of exclusivity of  Plavix and  Avapro / Avalide  which resulted in lower royalties in connection with our Sanofi alliance and favorable foreign exchange partially  offset by impairment charges discussed below and higher amortization costs resulting from the Amylin acquisition (net of the  amortization of the Amylin collaboration proceeds).  $^{ }$Impairment charges of $147 million were recognized in 2012, of which $120 million was related to a partial write-down to fair value  of developed technology costs related to a non-key product ( Recothrom ) acquired in the acquisition of ZymoGenetics, Inc.  (ZymoGenetics). The developed technology impairment charge resulted from continued competitive pricing pressures and a reduction  in the undiscounted projected cash flows to an amount less than the carrying value of the intangible asset. The impairment charge was  calculated as the difference between the fair value of the asset based on the discounted value of the estimated future cash flows and the  carrying value of the intangible asset. The remaining $27 million impairment charge related to the abandonment of a manufacturing  facility resulting from the outsourcing of a manufacturing process.  The increase in 2011 was primarily attributable to higher sales volume resulting in additional royalties, collaboration fees, and profit  sharing expense, and unfavorable foreign exchange.  14 % Change  Dollars in Millions 2012 2011 2010  2012 vs. 2011 2011 vs. 2010 Cost of products sold $  4,610 $  5,598 $  5,277  (18)% 6 % Marketing, selling and administrative   4,220  4,203  3,686 - % 14 Advertising and product promotion   797  957  977  (17)%  (2)% Research and development   3,904  3,839  3,566 2 % 8 % Impairment charge for BMS-986094 intangible asset   1,830  -  - N/A N/A Other (income)/expense   (80)  (334)  (93)   (76)% ** Total Expenses  $  15,281 $  14,263 $  13,413 7 % 6 %