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Analysis of Debt

Difficulty: Advanced


Total Debt (Carrying Amount)

Pfizer Inc., Statement of Financial Position, Debt

USD $ in millions

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Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Short-term borrowings, including current portion of long-term debt 9,953  10,688  10,160  5,141  6,027 
Long-term debt, excluding current portion 33,538  31,398  28,818  31,541  30,462 
Total debt (carrying amount) 43,491  42,086  38,978  36,682  36,489 

Source: Based on data from Pfizer Inc., Annual Reports

Item Description The company
Total debt (carrying amount) Sum of the carrying values as of the balance sheet date of all debt plus capital lease obligations. Pfizer Inc.'s total debt increased from 2015 to 2016 and from 2016 to 2017.

Total Debt (Fair Value)

Microsoft Excel LibreOffice Calc
Dec 31, 2017
Selected Financial Data (USD $ in millions)
Short-term borrowings, including current portion of long-term debt 9,953 
Long-term debt, excluding current portion 37,253 
Total debt (fair value) 47,206 
Ratio
Debt, fair value to carrying amount 1.09

Source: Based on data from Pfizer Inc., Annual Reports


Weighted-average Interest Rate on Debt

Weighted-average interest rate on debt: 3.31%

Interest Rate Debt Amount1 Interest Rate × Debt Amount Weighted-average Interest Rate2
1.30% 4,848  63 
1.10% 1,528  17 
3.50% 3,550  124 
0.30% 1,199 
4.30% 1,592  68 
3.50% 6,259  219 
5.70% 4,886  279 
5.20% 5,606  292 
4.20% 3,315  139 
1.36% 6,100  83 
Total 38,883  1,287  3.31%

Source: Based on data from Pfizer Inc., Annual Reports

1 USD $ in millions

2 Weighted-average interest rate = 100 × 1,287 ÷ 38,883 = 3.31%


Interest Costs Incurred

Pfizer Inc.

USD $ in millions

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12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Interest expense 1,270  1,186  1,199  1,360  1,414 
Capitalized interest expense 72  61  32  41  32 
Interest costs incurred 1,342  1,247  1,231  1,401  1,446 

Source: Based on data from Pfizer Inc., Annual Reports

Item Description The company
Interest expense Represents the portion of interest incurred in the period on debt arrangements that was charged against earnings. Pfizer Inc.'s interest expense declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Capitalized interest expense The amount of interest that was capitalized during the period. Pfizer Inc.'s capitalized interest expense increased from 2015 to 2016 and from 2016 to 2017.
Interest costs incurred Total interest costs incurred during the period and either capitalized or charged against earnings. Pfizer Inc.'s interest costs incurred increased from 2015 to 2016 and from 2016 to 2017.

Adjusted Interest Coverage Ratio

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Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Net income attributable to Pfizer Inc. 21,308  7,215  6,960  9,135  22,003 
Add: Net income attributable to noncontrolling interest 47  31  26  33  69 
Less: Discontinued operations, net of tax 17  11  49  10,662 
Add: Income tax expense (9,048) 1,122  1,990  3,121  4,306 
Add: Interest expense 1,270  1,186  1,199  1,360  1,414 
Earnings before interest and tax (EBIT) 13,575  9,537  10,164  13,600  17,130 
 
Interest costs incurred 1,342  1,247  1,231  1,401  1,446 
Ratio With and Without Capitalized Interest
Interest coverage ratio (excluding capitalized interest)1 10.69 8.04 8.48 10.00 12.11
Adjusted interest coverage ratio (including capitalized interest)2 10.12 7.65 8.26 9.71 11.85

2017 Calculations

1 Interest coverage ratio (excluding capitalized interest) = EBIT ÷ Interest expense
= 13,575 ÷ 1,270 = 10.69

2 Adjusted interest coverage ratio (including capitalized interest) = EBIT ÷ Interest costs incurred
= 13,575 ÷ 1,342 = 10.12

Ratio Description The company
Adjusted interest coverage ratio A solvency ratio calculated as EBIT divided by interest payments (including capitalized interest). Pfizer Inc.'s adjusted interest coverage ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.