Pfizer 2012 Annual Report Download - page 43

Financial Review
Pfizer Inc. and Subsidiary Companies
42
2012 Financial Report
The following table provides the current ratings assigned by these rating agencies to the Zoetis commercial paper and senior unsecured non-
credit-enhanced long-term debt:
NAME OF RATING AGENCY
Zoetis
Commercial Paper
Zoetis
Long-term Debt
Date of ActionRating Rating Outlook
Moody’s P-2 Baa2 Stable January 2013
S&P A-3 BBB- Stable January 2013
Domestic and International Short-Term Funds
Many of our operations are conducted outside the U.S., and significant portions of our cash, cash equivalents and short-term investments are
held internationally. We generally hold approximately 10%-30% of these short-term funds in U.S. tax jurisdictions. The amount of funds held in
U.S. tax jurisdictions can fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons,
such as business-development activities. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and
international cash flows (both inflows and outflows). Repatriation of overseas funds can result in additional U.S. federal, state and local income
tax payments. We record U.S. deferred tax liabilities for certain unremitted earnings, but when amounts earned overseas are expected to be
indefinitely reinvested outside the U.S., no accrual for U.S. taxes is provided.
A substantial portion of the proceeds related to the sale of our Nutrition business to Nestlé is located outside the U.S. We have provided
deferred taxes on certain current-year funds earned outside the U.S. that will not be indefinitely reinvested. We expect that the proceeds from
the sale will primarily be used for share repurchases, as well as other value-creating opportunities. For additional information regarding our
sale of the Nutrition business to Nestlé, see Notes to Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative
Arrangements and Equity-Method Investments: Divestitures.
Accounts Receivable
We continue to monitor developments regarding government and government agency receivables in several European markets where
economic conditions remain challenging and uncertain. Historically, payments from a number of these European governments and
government agencies extend beyond the contractual terms of sale and the year-over-year trend is worsening.
We believe that our allowance for doubtful accounts is appropriate. Our assessment is based on an analysis of the following: (i) payments
received to date; (ii) the consistency of payments from customers; (iii) direct and observed interactions with the governments (including court
petitions) and with market participants (for example, the factoring industry); and (iv) various third-party assessments of repayment risk (for
example, rating agency publications and the movement of rates for credit default swap instruments).
As of December 31, 2012, we had about $1.2 billion in aggregate gross accounts receivable from governments and/or government agencies in
Italy, Spain, Greece, Portugal and Ireland, where economic conditions remain challenging and uncertain. Such receivables in excess of one
year from the invoice date, totaling $274 million, were as follows: $128 million in Italy; $105 million in Greece; $25 million in Portugal; $10
million in Spain; and $6 million in Ireland.
Although certain European governments and government agencies sometimes delay payments beyond the contractual terms of sale, we seek
to appropriately balance repayment risk with the desire to maintain good relationships with our customers and to ensure a humanitarian
approach to local patient needs.
We will continue to closely monitor repayment risk and, when necessary, we will continue to adjust our allowance for doubtful accounts.
Our assessments about the recoverability of accounts receivables can result from a complex series of judgments about future events and
uncertainties and can rely heavily on estimates and assumptions. For information about the risks associated with estimates and assumptions,
see Notes to Consolidated Financial Statements––Note 1C. Basis of Presentation and Significant Accounting Policies: Estimates and
Assumptions.
Credit Ratings
Two major corporate debt-rating organizations, Moody’s and S&P, assign ratings to Pfizer short-term and long-term debt. A security rating is
not a recommendation to buy, sell or hold securities and the rating is subject to revision or withdrawal at any time by the rating organization.
Each rating should be evaluated independently of any other rating.