Pfizer 2015 Annual Report Download - page 54

Financial Review
Pfizer Inc. and Subsidiary Companies
2015 Financial Report
53
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. Specifically, we have received limited payments in 2015 from the Greek government on
outstanding receivables; the majority of such receivables pertain to 2015 revenues. Also, the Greek government has restructured its debt to
other third parties in the third quarter of 2015. Accordingly, we have adjusted our allowance for doubtful accounts to reflect these events, and
have $50 million in net receivables as of December 31, 2015. Reported revenues from Greece for the year ended December 31, 2015 were
$233 million.
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, 2015, we had about $772 million in aggregate gross accounts receivable from governments and/or government agencies in
Italy, Spain, Greece and Portugal where economic conditions remain challenging and uncertain. Such receivables in excess of one year from
the invoice date, totaling $66 million, were as follows: $39 million in Italy; $12 million in Portugal; $8 million in Greece; and $7 million in Spain.
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 our 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. The pending combination with Allergan could result in a downgrade of our ratings.
The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured non-credit-
enhanced long-term debt:
NAME OF RATING AGENCY
Pfizer
Commercial Paper
Pfizer
Long-Term Debt
Date of Last Rating ChangeRating Rating Outlook
Moody’s P-1 A1 Stable October 2009
S&P A-1+ AA Negative Watch November 2015
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, 2015, we had access to $8.1 billion of lines of credit, of which $687 million expire within one year. Of these lines of credit, $7.9
billion are unused, of which our lenders have committed to loan us $7.1 billion at our request. Also, $7.0 billion of our unused lines of credit, all
of which expire in 2020, may be used to support our commercial paper borrowings. Under the terms of a substantial majority of our line of credit
agreements, upon the merger with Allergan, the lenders under the agreements may elect to require immediate repayment of any amounts then
outstanding and cancel the outstanding lines of credit. We expect to either amend the existing credit agreements or secure new credit
agreements to replace these agreements.
Global Economic Conditions––General
The global economic environment has not had, nor do we anticipate it will have, a material impact on our liquidity or capital resources. Due to
our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we
continue to believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future. As markets conditions
change, we continue to monitor our liquidity position.
Global Economic Conditions––Venezuela Operations
Our Venezuela operations continue to operate with the U.S. dollar as the functional currency due to the hyperinflationary status of the
Venezuelan economy.
On February 13, 2013, the Venezuelan government devalued its currency from a rate of 4.3 to 6.3 of Venezuelan currency to the U.S. dollar.
We incurred a foreign currency loss of $80 million immediately on the devaluation as a result of remeasuring the local balance sheets.