Pfizer 2006 Annual Report Download - page 54

52 2006 Financial Report
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
C. Long-Term Debt
Information about our long-term debt as of December 31 follows:
(MILLIONS OF DOLLARS)
MATURITY DATE 2006 2005
Senior unsecured notes:
6.60% December 2028 $ 735 $761
4.50% February 2014 720 728
5.63% April 2009 609 618
0.80% Japanese yen March 2008 506 513
1.21% Japanese yen February 2011 504 —
1.85% Japanese yen February 2016 461 —
6.50% December 2018 506 520
3.30% March 2009 290 288
4.65% March 2018 288 293
6.00% January 2008 252 255
2.50% March 2007 — 682
LIBOR-based floating-rate January 2007 — 1,000
Other:
Debentures, notes,
borrowings and mortgages 675 689
Total long-term debt $5,546 $6,347
Current portion not included above $ 712 $ 778
In May 2006, we decided to exercise Pfizer’s option to call, at par-
value plus accrued interest, $1 billion of senior unsecured floating-
rate notes, which were included in Long-term debt as of
December 31, 2005. Notice to call was given to the Trustees and
the notes were redeemed early in the third quarter of 2006.
Long-term debt outstanding as of December 31, 2006, matures in
the following years:
AFTER
(MILLIONS OF DOLLARS) 2008 2009 2010 2011 2012
Maturities $1,067 $923 $2 $512 $3,042
At February 27, 2007, we had the ability to borrow approximately
$1 billion by issuing debt securities under a debt shelf registration
statement filed with the SEC in November 2002.
D. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk—A significant portion of revenues,
earnings and net investments in foreign affiliates is exposed to
changes in foreign exchange rates. We seek to manage our
foreign exchange risk in part through operational means,
including managing expected same currency revenues in relation
to same currency costs and same currency assets in relation to same
currency liabilities. Depending on market conditions, foreign
exchange risk is also managed through the use of derivative
financial instruments and foreign currency debt. These financial
instruments serve to protect net income and net investments
against the impact of the translation into U.S. dollars of certain
foreign exchange denominated transactions.
We entered into financial instruments to hedge or offset by the
same currency an appropriate portion of the currency risk and the
timing of the hedged or offset item. As of December 31, 2006 and
2005, the more significant financial instruments employed to
manage foreign exchange risk follow:
PRIMARY
NOTIONAL AMOUNT
BALANCE SHEET HEDGE
(MILLIONS OF DOLLARS)
MATURITY________________________________
INSTRUMENT
(a)
CAPTION
(b)
TYPE
(c)
HEDGED OR OFFSET ITEM 2006 2005 DATE
Forward OCL — Short-term foreign currency assets and liabilities
(d)
$7,939 $ — 2007
Forward OCL — Short-term foreign currency assets and liabilities
(d)
— 6,509 2006
Swaps ONCL NI Swedish krona net investments
(e)
7,759 — 2008
Swaps ONCL CF Swedish krona intercompany loan 4,759 — 2008
Forward OCL — Short-term intercompany foreign currency loans
(f)
3,484 — 2007
ST yen borrowings STB NI Yen net investments 1,598 — 2007
ST yen borrowings STB NI Yen net investments — 1,620 2006
Swaps OCL NI Euro net investments 1,369 — 2007
Swaps OCL NI Euro net investments — 1,233 2006
Forward Prepaid CF Yen available-for-sale investments 1,135 — 2007
Swaps OCL CF U.K. pound intercompany loan 811 717 2007
Swaps OCL NI Yen net investments 653 — 2007
Swaps OCL NI Yen net investments — 662 2006
LT yen debt LTD NI Yen net investments 547 — After 2011
Forward OCL CF Euro intercompany loan 542 — 2007
LT yen debt LTD NI Yen net investments 506 512 2008
LT yen debt LTD NI Yen net investments 504 — 2011
Forward OCL CF Euro available-for-sale investments 444 — 2007
Forward Prepaid CF Euro available-for-sale investments — 7,371 2006
Forward Prepaid CF Danish krone available-for-sale investments — 810 2006
Forward OCL CF Swedish krona available-for-sale investments — 486 2006
(a)
Forward = Forward-exchange contracts; ST yen borrowings = Short-term yen borrowings; LT yen debt = Long-term yen debt.
(b)
The primary balance sheet caption indicates the financial statement classification of the fair value amount associated with the financial
instrument used to hedge or offset foreign exchange risk. The abbreviations used are defined as follows: Prepaid = Prepaid expenses and taxes;
STB = Short-term borrowings, including current portion of long-term debt; OCL = Other current liabilities; LTD = Long-term debt; and ONCL =
Other noncurrent liabilities.
(c)
CF = Cash flow hedge; NI = Net investment hedge.
(d)
Forward-exchange contracts used to offset short-term foreign currency assets and liabilities were primarily for intercompany transactions in
euros, U.K. pounds, Australian dollars, Canadian dollars, Japanese yen and Swedish krona for the year ended December 31, 2006, and in euros,
U.K. pounds, Australian dollars, Canadian dollars, Swedish krona, Japanese yen and Swiss francs for the year ended December 31, 2005.
(e)
Reflects an increase in Swedish krona net investments due to the receipt of proceeds related to the sale of our Consumer Healthcare business in
Sweden.
(f)
Forward-exchange contracts used to offset foreign currency loans for intercompany contracts arising from the sale of our Consumer Healthcare
business, primarily in Canadian dollars, U.K. pounds and euros.