Eli Lilly 2007 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2007 Eli Lilly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

FINANCIALS
42
Note 6: Borrowings
Long-term debt at December 31 consisted of the following:
2007 2006
4.50 to 7.13 percent notes (due 2012-2037) . . . . . . . . . . . . . . . . . . . . . . $3,987.4 $1,487.4
2.90 percent notes (due 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300.0 300.0
Floating rate extendible notes (due 2008) . . . . . . . . . . . . . . . . . . . . . . — 1,000.0
Floating rate bonds (due 2037). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400.0 400.0
Private placement bonds (due 2007 and 2008). . . . . . . . . . . . . . . . . . . 72.1 266.3
6.55 percent ESOP debentures (due 2017) . . . . . . . . . . . . . . . . . . . . . . 90.6 91.6
Other, including capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59.3 109.9
SFAS 133 fair value adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.2 50.0
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,988.6 3,705.2
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (395.1) (210.8)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,593.5 $3,494.4
In March 2007, we issued $2.50 billion of fi xed-rate notes ($1.00 billion at 5.20 percent due in 2017; $700.0 mil-
lion at 5.50 percent due in 2027; and $800.0 million at 5.55 percent due in 2037).
In August 2005, Eli Lilly Services, Inc. (ELSI), our indirect wholly-owned fi nance subsidiary, issued $1.50 billion
of 13-month fl oating rate extendible notes. These notes paid interest at essentially a rate equivalent to LIBOR. We
repaid $500.0 million of the notes in December 2006 and the remaining $1.00 billion of the notes in March 2007.
The $400.0 million of fl oating rate bonds outstanding at December 31, 2007 are due in 2037 and have variable
interest rates at LIBOR plus our six-month credit spread, adjusted semiannually (total of 4.99 percent at December
31, 2007). The interest was to accumulate over the life of the bonds and be payable upon maturity. We had an option
to begin periodic interest payments at any time. We exercised this option in November 2006 and paid all previously
accrued interest on the bonds.
Principal and interest on the private placement bonds are due semiannually over the remaining terms of each
of these notes. In conjunction with these bonds, we entered into interest rate swap agreements with the same
fi nancial institution, which converts the fi xed rate into a variable rate of interest at essentially LIBOR over the term
of the bonds.
The 6.55 percent Employee Stock Ownership Plan (ESOP) debentures are obligations of the ESOP but are
shown on the consolidated balance sheet because we guarantee them. The principal and interest on the debt are
funded by contributions from us and by dividends received on certain shares held by the ESOP. Because of the am-
ortizing feature of the ESOP debt, bondholders will receive both interest and principal payments each quarter.
The aggregate amounts of maturities on long-term debt for the next fi ve years are as follows: 2008, $395.1 mil-
lion; 2009, $31.1 million; 2010, $16.7 million; 2011, $11.2 million; and 2012, $510.9 million.
At December 31, 2007 and 2006, short-term borrowings included $18.6 million and $8.6 million, respectively,
of notes payable to banks and commercial paper. At December 31, 2007, we have $1.24 billion of unused commit-
ted bank credit facilities, $1.20 billion of which backs our commercial paper program. Compensating balances
and commitment fees are not material, and there are no conditions that are probable of occurring under which the
lines may be withdrawn.
We have converted approximately 40 percent of all fi xed-rate debt to fl oating rates through the use of interest
rate swaps. The weighted-average effective borrowing rates based on debt obligations and interest rates at Decem-
ber 31, 2007 and 2006, including the effects of interest rate swaps for hedged debt obligations, were 5.47 percent
and 5.89 percent, respectively.
In 2007, 2006, and 2005, cash payments of interest on borrowings totaled $159.2 million, $305.7 million, and
$38.2 million, respectively, net of capitalized interest.
In accordance with the requirements of SFAS 133, the portion of our fi xed-rate debt obligations that is hedged
is refl ected in the consolidated balance sheets as an amount equal to the sum of the debt’s carrying value plus the
fair value adjustment representing changes in fair value of the hedged debt attributable to movements in market
interest rates subsequent to the inception of the hedge.