Eli Lilly 2011 Annual Report Download - page 65

FORM 10-K
During 2011, we recorded impairment charges of $151.5 million due primarily to the partial impairment of the IPR&D
assets related to Amyvid and liprotamase. The impairment of Amyvid was due to a delay in product launch and lower
sales projections during the early part of the product’s expected life cycle. In April 2011, we received a complete
response letter from the FDA for the NDA for liprotamase, which communicated the need for us to conduct an
additional clinical trial prior to a re-submission, resulting in an impairment of liprotamase.
No impairments occurred with respect to the carrying value of other intangible assets for the years ended
December 31, 2010 and 2009.
Note 8: Borrowings
Long-term debt at December 31 consisted of the following:
2011 2010
3.55 to 7.13 percent notes (due 2012-2037) ............................................. $ 6,387.4 $6,387.4
Other, including capitalized leases .................................................... 37.6 97.2
Fair value adjustment ............................................................... 556.5 304.1
6,981.5 6,788.7
Less current portion ................................................................ (1,516.8) (18.2)
Long-term debt .................................................................... $ 5,464.7 $6,770.5
In March 2009, we issued $2.40 billion of fixed-rate notes with interest to be paid semi-annually.
The 6.55 percent Employee Stock Ownership Plan (ESOP) debentures were repaid in full during the year ended
December 31, 2011. The balance was $63.7 million at December 31, 2010, and is included in Other in the table above.
The aggregate amounts of maturities on long-term debt for the next five years are as follows: 2012, $1.51 billion;
2013, $10.2 million; 2014, $1.01 billion; 2015, $5.3 million; and 2016, $201.2 million.
At December 31, 2011 and 2010, short-term borrowings included $5.5 million and $137.8 million, respectively, of
notes payable to banks. At December 31, 2011, we have $1.24 billion of unused committed bank credit facilities,
$1.20 billion of which backs our commercial paper program and matures in April 2015. There were no amounts
outstanding under the facility as of or during the year ended December 31, 2011. 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may be withdrawn.
In September 2010, we borrowed $125.0 million of short-term floating-rate debt, which was repaid in full during the
year ended December 31, 2011.
We have converted approximately 70 percent of all fixed-rate debt to floating rates through the use of interest rate
swaps. The weighted-average effective borrowing rates based on debt obligations and interest rates at December 31,
2011 and 2010, including the effects of interest rate swaps for hedged debt obligations, were 3.00 percent and
2.87 percent, respectively.
For the years ended December 31, 2011, 2010, and 2009, cash payments of interest on borrowings totaled
$167.4 million, $176.3 million, and $205.9 million, respectively, net of capitalized interest.
In accordance with the requirements of derivatives and hedging guidance, the portion of our fixed-rate debt
obligations that is hedged is reflected 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.
Note 9: Stock-Based Compensation
Stock-based compensation expense in the amount of $147.4 million, $231.0 million, and $368.5 million was
recognized for the years ended December 31, 2011, 2010, and 2009, respectively, as well as related tax benefits of
$51.6 million, $80.8 million, and $128.9 million, respectively. Our stock-based compensation expense consists
primarily of performance awards (PAs), shareholder value awards (SVAs), and restricted stock units (RSUs). We
recognize the stock-based compensation expense over the requisite service period of the individual grantees, which
generally equals the vesting period. We provide newly issued shares and treasury stock to satisfy stock option
exercises and for the issuance of PA, SVA, and RSU shares. We classify tax benefits resulting from tax deductions in
excess of the compensation cost recognized for exercised stock options as a financing cash flow in the consolidated
statements of cash flows.
At December 31, 2011, additional stock-based compensation awards may be granted under the 2002 Lilly Stock Plan
for not more than 93.0 million shares.
Performance Award Program
PAs are granted to officers and management and are payable in shares of our common stock. The number of PA
shares actually issued, if any, varies depending on the achievement of certain pre-established earnings-per-share
targets over a two-year period. In 2009, we granted both a one-year and a two-year award to all global management
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