Eli Lilly 2015 Annual Report Download - page 84

F72
FINANCIAL REPORT
In March 2015, we issued $600.0 million of 1.25 percent fixed-rate notes due March 1, 2018, $800.0
million of 2.75 percent fixed-rate notes due June 1, 2025, and $800.0 million of 3.70 percent fixed-rate notes
due March 1, 2045 with interest to be paid semi-annually. The proceeds from the issuance of the notes were
used primarily to repay outstanding commercial paper issued in connection with our January 2015 acquisition
of Novartis AH.
In June 2015, we issued euro-denominated notes consisting of €600.0 million of 1.00 percent fixed-rate notes
due June 2, 2022, €750.0 million of 1.63 percent fixed-rate notes due June 2, 2026, and €750.0 million of 2.13
percent fixed-rate notes due June 3, 2030 with interest to be paid annually. The net cash proceeds of the
offering of $2.27 billion were used primarily to purchase and redeem certain higher interest rate U.S. dollar-
denominated notes and to repay outstanding commercial paper. We paid $1.95 billion to purchase and
redeem notes with an aggregate principal amount of $1.65 billion and a net carrying value of $1.78 billion in
June 2015, resulting in a pretax debt extinguishment loss of $166.7 million, which was included in other–net,
(income) expense in our consolidated statement of operations during the year ended December 31, 2015.
In February 2014, we issued $600.0 million of 1.95 percent and $400.0 million of 4.65 percent fixed-rate notes
with interest to be paid semi-annually and maturity dates of March 15, 2019, and June 15, 2044, respectively.
Current maturities of long-term notes of $1.00 billion were repaid in March 2014.
The aggregate amounts of maturities on long-term debt for the next five years are as follows:
2016 2017 2018 2019 2020
Maturities on long-term debt $ 6.1 $ 635.2 $ 803.2 $ 601.8 $ 0.6
We have converted approximately 40 percent of our long-term fixed-rate notes to floating rates through the
use of interest rate swaps. The weighted-average effective borrowing rates based on long-term debt
obligations and interest rates at December 31, 2015 and 2014, including the effects of interest rate swaps for
hedged debt obligations, were 2.67 percent and 3.69 percent, respectively.
The aggregate amount of cash payments for interest on borrowings, net of capitalized interest, are as follows:
2015 2014 2013
Cash payments for interest on borrowings $ 129.6 $ 140.4 $ 139.7
In accordance with the requirements of derivatives and hedging guidance, the portion of our fixed-rate debt
obligations that is hedged as a fair value hedge, 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 11: Stock-Based Compensation
Our stock-based compensation expense consists of performance awards (PAs), shareholder value awards
(SVAs), and restricted stock units (RSUs). We recognize the fair value of stock-based compensation as
expense over the requisite service period of the individual grantees, which generally equals the vesting
period. We provide newly issued shares of our common stock and treasury stock to satisfy the issuance of
PA, SVA, and RSU shares. We classify tax benefits resulting from tax deductions in excess of the
compensation cost recognized for stock-based compensation as a financing cash flow in the consolidated
statements of cash flows.
Stock-based compensation expense and the related tax benefits were as follows:
2015 2014 2013
Stock-based compensation expense $ 217.8 $ 156.0 $ 144.9
Tax benefit 76.2 54.6 50.7
At December 31, 2015, additional stock-based compensation awards may be granted under the 2002 Lilly
Stock Plan for not more than 100.6 million shares.