Pfizer 2007 Annual Report Download - page 31

Financial Condition, Liquidity and
Capital Resources
Net Financial Assets
Our net financial asset position as of December 31 follows:
(MILLIONS OF DOLLARS) 2007 2006
Financial assets:
Cash and cash equivalents $ 3,406 $ 1,827
Short-term investments 22,069 25,886
Short-term loans 617 514
Long-term investments and loans 4,856 3,892
Total financial assets 30,948 32,119
Debt:
Short-term borrowings, including
current portion of long-term debt 5,825 2,434
Long-term debt 7,314 5,546
Total debt 13,139 7,980
Net financial assets $17,809 $24,139
Short-term investments as of December 31, 2006, reflect the
receipt of proceeds of $16.6 billion from the sale of our Consumer
Healthcare business on December 20, 2006.
We rely largely on operating cash flow, short-term investments,
long-term debt and short-term commercial paper borrowings to
provide for the working capital needs of our operations, including
our R&D activities. We believe that we have the ability to obtain
both short-term and long-term debt to meet our financing needs
for the foreseeable future.
Investments
Our short-term and long-term investments consist primarily of
high-quality, investment-grade available-for-sale debt securities.
Our long-term investments include debt securities that totaled $2.6
billion as of December 31, 2007, which have maturities ranging
substantially from one to five years. Wherever possible, cash
management is centralized and intercompany financing is used
to provide working capital to our operations. Where local
restrictions prevent intercompany financing, working capital
needs are met through operating cash flows and/or external
borrowings. Our portfolio of short-term investments as of
December 31, 2006, reflects the receipt of proceeds from the
sale of our Consumer Healthcare business of $16.6 billion. Our
portfolio of short-term investments was reduced in 2007 and the
proceeds were used to fund items such as the taxes due on the
gain from the sale of our Consumer Healthcare business,
completed in December 2006, share repurchases, dividends and
capital expenditures in 2007.
Long-Term Debt Issuance
On December 10, 2007, we issued the following notes to be used
for general corporate purposes, including the payment of
maturing debt:
•$1.3 billion equivalent, senior, unsecured, euro-denominated
notes, due December 15, 2014, which pay interest annually,
beginning December 15, 2008, at a fixed rate of 4.75%.
On May 11, 2007, we issued the following notes to be used for
general corporate purposes:
•$1.2 billion equivalent, senior, unsecured, euro-denominated
notes, due May 15, 2017, which pay interest annually, beginning
May 15, 2008, at a fixed rate of 4.55%.
The notes were issued under a securities registration statement
filed with the Securities and Exchange Commission (SEC) in March
2007.
Credit Ratings
Two major corporate debt-rating organizations, Moody’s Investors
Service (Moody’s) and Standard & Poor’s (S&P), assign ratings to
our short-term and long-term debt. The following chart reflects
the current ratings assigned to our senior, unsecured non-credit
enhanced long-term debt and commercial paper issued directly
by us by each of these agencies:
NAME OF COMMERCIAL LONG-TERM DEBT DATE OF LAST______________________
RATING AGENCY PAPER RATING OUTLOOK ACTION
Moody’s P-1 Aa1 Negative October 2007
S&P A1+ AAA Negative December 2006
On October 19, 2007, Moody’s affirmed our Aa1 rating, its second-
highest investment grade rating, but revised our ratings outlook
to negative from stable. Moody’s cited: (i) our announcement on
October 18, 2007, related to recorded charges totaling $2.8 billion
($2.1 billion, net of tax), associated with the impairment of
Exubera assets and other exit costs associated with Exubera (see
the “Our 2007 Performance: Decision to Exit Exubera” section of
this Financial Review); (ii) continuing pressure on U.S. Lipitor
sales and market share; and (iii) the loss of U.S. exclusivity for
Lipitor in either 2010 or 2011. The negative outlook reflects
Moody’s assessment of challenges we face as we head into the
2010-2012 period when the U.S. patents on certain key products
expire.
Our access to financing at favorable rates would be affected by
a substantial downgrade in our credit ratings.
Debt Capacity
We have available lines of credit and revolving-credit agreements
with a group of banks and other financial intermediaries. We
maintain cash and cash equivalent balances and short-term
investments in excess of our commercial paper and other short-
term borrowings. As of December 31, 2007, we had access to $3.7
billion of lines of credit, of which $1.5 billion expire within one
year. Of these lines of credit, $3.6 billion are unused, of which our
lenders have committed to loan us $2.1 billion at our request. $2.0
billion of the unused lines of credit, which expire in 2012, may be
used to support our commercial paper borrowings.
In March 2007, we filed a securities registration statement with
the SEC. This registration statement was filed under the automatic
shelf registration process available to well-known seasoned issuers
and is effective for three years. We can issue securities of various
types under that registration statement at any time, subject to
approval by our Board of Directors in certain circumstances.
2007 Financial Report 29
Financial Review
Pfizer Inc and Subsidiary Companies