Eli Lilly 2010 Annual Report Download - page 68

FORM 10-K
losses primarily relate to credit losses on certain mortgage-backed securities. The amount of credit losses
represents the difference between the present value of cash flows expected to be collected on these securities and
the amortized cost. Factors considered in assessing the credit loss were the position in the capital structure, vintage
and amount of collateral, delinquency rates, current credit support, and geographic concentration.
The securities in an unrealized loss position are comprised of fixed-rate debt securities of varying maturities. The
value of fixed income securities is sensitive to changes to the yield curve and other market conditions which led to a
decline in value during 2008. Approximately 80 percent of the securities in a loss position are investment-grade debt
securities. The majority of these securities first moved into an unrealized loss position during 2008. At this time,
there is no indication of default on interest or principal payments for debt securities other than those for which an
other-than-temporary impairment charge has been recorded. We do not intend to sell and it is not more likely than
not we will be required to sell the securities in a loss position before the market values recover or the underlying
cash flows have been received, and we have concluded that no additional other-than-temporary loss is required to
be charged to earnings as of December 31, 2010.
The net adjustment to unrealized gains and losses (net of tax) on available-for-sale securities increased (decreased)
other comprehensive income (loss) by $53.5 million, $186.6 million, and $(125.8) million in 2010, 2009, and 2008,
respectively. Activity related to our available-for-sale investment portfolio was as follows:
2010 2009 2008
Proceeds from sales ......................................................... $760.3 $1,227.4 $1,876.4
Realized gross gains on sales ................................................. 110.7 68.9 45.7
Realized gross losses on sales ................................................ 4.8 6.8 8.7
Note 7: Goodwill and Other Intangibles
Goodwill at December 31 was as follows:
2010 2009
Goodwill ........................................................................... $1,423.9 $1,175.0
Substantially all of our goodwill balance is attributable to the human pharmaceutical business segment. See Note 3
for a further discussion of goodwill resulting from recent business combinations. No impairments occurred with
respect to the carrying value of goodwill in 2010, 2009, or 2008.
The components of other intangible assets at December 31 were as follows:
2010 2009
Description
Carrying
Amount—
Gross Accumulated Amortization
Carrying
Amount—
Net
Carrying
Amount—
Gross Accumulated Amortization
Carrying
Amount—
Net
Finite-lived intangible assets
Developed product technology ........... $3,206.3 $ (890.3) $2,316.0 $3,101.2 $(621.0) $2,480.2
Marketing rights ....................... 575.9 (117.1) 458.8 24.1 (9.2) 14.9
Other ................................. 69.4 (47.3) 22.1 68.5 (38.8) 29.7
Total finite-lived intangible assets .......... 3,851.6 (1,054.7) 2,796.9 3,193.8 (669.0) 2,524.8
Indefinite-lived intangible assets
In-process research and development ..... 598.0 0.0 598.0 0.0 0.0 0.0
Total other intangible assets ............... $4,449.6 $(1,054.7) $3,394.9 $3,193.8 $(669.0) $2,524.8
Developed product technology consists of marketed assets acquired through business combinations and certain
capitalized milestone payments. Marketing rights consists of acquired marketing rights to products in certain
jurisdictions. Other intangibles consist primarily of licensed platform technologies that have alternative future uses
in research and development. IPR&D consists of the acquisition date fair value of intangible assets acquired in
business combinations which have not yet achieved regulatory approval for marketing. See Note 3 for a further
discussion of indefinite-lived intangible assets acquired in recent business combinations.
The remaining weighted-average amortization period for finite-lived intangible assets is approximately 9 years.
Amortization expense for 2010, 2009, and 2008 was $385.7 million, $277.0 million, and $193.4 million, respectively.
The estimated amortization expense for finite-lived intangible assets for each of the five succeeding years
approximates $440 million in 2011, $440 million in 2012, $440 million in 2013, $430 million in 2014, and $390 million
in 2015. Amortization expense is included in either cost of sales or marketing, selling, and administrative depending
on the nature of the intangible asset being amortized.
No impairments occurred with respect to the carrying value of other intangible assets in 2010, 2009, or 2008.
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