Pfizer 2009 Annual Report Download - page 37

Financial Review
Pfizer Inc. and Subsidiary Companies
(m) In 2008, these charges primarily relate to the exit of a manufacturing plant in Italy and are included in Other (income)/deductions—net. In 2007,
these charges primarily relate to the decision to exit Exubera and include approximately $1.1 billion of intangible asset impairments, $661 million of
inventory write-offs, $454 million of fixed asset impairments and $578 million of other exit costs and are included in Cost of sales ($2.6 billion),
Selling, informational and administrative expenses ($85 million), and Research and development expenses ($100 million) for 2007 (see Notes to
Consolidated Financial Statements—Note 3F. Other Significant Transactions and Events: Exubera).
(n) Included in Provision for taxes on income and includes tax benefits of approximately $556 million related to the sale of one of our biopharmaceutical
companies, Vicuron, which were recorded in the fourth quarter of 2009, and $174 million related to the final resolution of the investigations
concerning Bextra and various other products referred to above in footnote (h) to this table, which were recorded in the third quarter of 2009. This
resolution resulted in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax position.
Also includes tax benefits of approximately $426 million recorded in 2008 related to the sale of one of our biopharmaceutical companies (Esperion
Therapeutics, Inc.). 2008 also reflects the impact of the provisions regarding the resolution of the investigations concerning Bextra and various other
products referred to above in footnote (h) to this table, which were either not deductible or deductible at lower tax rates.
Financial Condition, Liquidity and Capital Resources
Net Financial Assets/(Liabilities) as shown below:
AS OF DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008
Financial assets:
Cash and cash equivalents $ 1,978 $ 2,122
Short-term investments 23,991 21,609
Short-term loans 1,195 824
Long-term investments and loans 13,122 11,478
Total financial assets $40,286 $36,033
Debt:
Short-term borrowings, including current portion of long-term debt $ 5,469 $ 9,320
Long-term debt 43,193 7,963
Total debt $48,662 $17,283
Net financial assets/(liabilities) $ (8,376) $18,750
We rely largely on operating cash flow, short-term investments, short-term commercial paper borrowings and long-term debt 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. The overall decrease in Net financial
assets/(liabilities) in 2009, as shown above, reflects cash flows from operating activities, which were more than offset by the
issuance of senior unsecured notes of which virtually all of the proceeds were used to partially finance the Wyeth acquisition. We
believe we have the flexibility to allocate our significant operating cash flows with a continued focus on seeking to provide the
highest return for our shareholders, such as potential dividend increases, share repurchases, investments in our business, or by
paying down outstanding debt. The significant changes in the components of Net financial assets/(liabilities), as shown above, are
as follows:
•We issued $13.5 billion of senior unsecured notes on March 24, 2009 and approximately $10.5 billion of senior unsecured notes on
June 3, 2009, of which virtually all of the proceeds were used to partially finance our acquisition of Wyeth on October 15, 2009. Our
long-term debt increased in 2009, primarily as a result of the issuances of these senior unsecured notes and the addition of an
aggregate principle amount of $10.3 billion of legacy Wyeth debt.
•Our short-term and long-term investments increased primarily due to the investment of cash generated from operations and consist
primarily of high-quality, investment grade available-for-sale debt securities. 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.
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 by these rating agencies to our
commercial paper and senior unsecured non-credit enhanced long-term debt issued by us:
COMMERCIAL
PAPER
LONG-TERM DEBT DATE OF LAST
ACTIONNAME OF RATING AGENCY RATING OUTLOOK
Moody’s P-1 A1 Stable October 2009
S&P A1+ AA Stable October 2009
As expected, on October 15, 2009, Moody’s downgraded our long-term-debt credit rating to A1, its fifth-highest investment grade
rating. Moody’s indicated that the downgrade reflects the strategic benefits of the Wyeth acquisition offset by higher financial
leverage in the transaction. Also as expected, on October 16, 2009, S&P downgraded our long-term-debt credit rating to AA, its
2009 Financial Report 35