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FINANCIALS
48
Product Liability and Other Special Charges
As a result of our product liability exposures, the substantial majority of which were related to Zyprexa, we record-
ed net pretax charges of $111.9 million and $494.9 million in 2007 and 2006, respectively. These charges, which
are net of anticipated insurance recoveries, include the costs of product liability settlements and related defense
costs, reserves for product liability exposures and defense costs regarding known product liability claims, and
expected future claims to the extent we could formulate a reasonable estimate of the probable number and cost of
the claims. See Note 14 for further discussion.
Note 6: Financial Instruments and Investments
Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-
bearing investments. Wholesale distributors of life-sciences products and managed care organizations account
for a substantial portion of trade receivables; collateral is generally not required. The risk associated with this
concentration is mitigated by our ongoing credit review procedures and insurance. We place substantially all of
our interest-bearing investments with major fi nancial institutions, in U.S. government securities, or with top-rated
corporate issuers. At December 31, 2008, our investments in debt securities were comprised of 41 percent corpo-
rate securities, 34 percent asset-backed securities, and 25 percent U.S. government securities. In accordance with
documented corporate policies, we limit the amount of credit exposure to any one fi nancial institution or corporate
issuer. We are exposed to credit-related losses in the event of nonperformance by counterparties to fi nancial
instruments but do not expect any counterparties to fail to meet their obligations given their high credit ratings.
Fair Value of Financial Instruments
The following table summarizes certain fair value information at December 31 for assets and liabilities measured
at fair value on a recurring basis, as well as the carrying amount of certain other investments:
2008 2007
Fair Value Measurements Using
Quoted
Prices in
Active Signifi cant
Markets for Other Signifi cant
Identical Observable Unobservable
Carrying Assets Inputs Inputs Fair Carrying Fair
Description Amount (Level 1) (Level 2) (Level 3) Value Amount Value
Short-term investments
Debt securities . . . . . . . . . . $ 429.4 $212.3 $ 217.1 $ – $ 429.4 $ 1,610.7 $ 1,610.7
Long-term investments
Debt securities . . . . . . . . . . $ 1,194.9 $179.2 $ 1,004.6 $ 11.1 $ 1,194.9 $ 408.3 $ 408.3
Marketable equity . . . . . . . . 221.9 221.9 — — 221.9 70.0 70.0
Equity method and other
investments . . . . . . . . . . . . . 127.8 NA 98.8 NA
. . . . . . . . . . . . . . . . . . . . . $ 1,544.6 $ 577.1
Long-term debt, including
current portion . . . . . . . . . . $(5,036.1) — $(5,180.1) — $(5,180.1) $(4,988.6) $(5,056.9)
Risk-management
instruments—asset . . . . . . 455.0 — 455.0 — 455.0 23.6 23.6
NA—Not available
We determine fair values based on a market approach using quoted market values, signifi cant other observable
inputs for identical or comparable assets or liabilities, or discounted cash fl ow analyses, principally for long-term
debt. The fair value of equity method and other investments is not readily available. Approximately $1.1 billion of our
investments in debt securities mature within fi ve years.