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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 1-6351
---
ELI LILLY AND COMPANY
(Exact name of Registrant as specified in its charter)
INDIANA 35-0470950
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
LILLY CORPORATE CENTER, INDIANAPOLIS, INDIANA 46285
(Address of principal executive offices)
Registrant's telephone number, including area
code (317) 276-2000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- -----
The number of shares of common stock outstanding as of
July 31, 1996:
Class Number of Shares Outstanding
----- ----------------------------
Common 546,920,227
1
PART I FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
---------------------------------
(Dollars in millions except per-share data)
Net sales .................. $1,698.3 $1,614.8 $3,481.6 $3,332.1
Cost of sales .............. 505.1 459.4 1,023.1 971.9
Research & development ..... 273.4 260.5 549.4 497.2
Marketing & administrative . 479.0 436.3 939.0 843.5
Interest expense ........... 75.5 72.3 145.4 138.5
Other income - net ......... (100.0) (50.3) (164.4) (83.5)
------ ------ ------ -------
1,233.0 1,178.2 2,492.5 2,367.6
Income from continuing operations
before income taxes ..... 465.3 436.6 989.1 964.5
Income taxes ............... 119.6 126.6 254.2 279.7
----- ----- ----- -------
Income from continuing
operations .............. 345.7 310.0 734.9 684.8
Income from discontinued - 17.1 - 35.5
operations, net of tax .. ----- ----- ----- -----
Net income ................. $345.7 $327.1 $734.9 $720.3
===== ===== ===== =====
Earnings per share:
Income from continuing
operations ............ $ .63 $ .54 $1.34 $1.19
Income from discontinued
operations ........... - .03 - .06
---- ---- ---- ----
Net income .............. $ .63 $ .57 $1.34 $1.25
==== ==== ==== ====
Dividends paid per share ... $.3425 $.3225 $.685 $.645
See Notes to Consolidated Condensed Financial Statements.
2
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
Eli Lilly and Company and Subsidiaries
June 30, December 31,
1996 1995
-------------------------
(Millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents............... $1,125.0 $999.5
Short-term investments.................. 95.1 84.6
Accounts receivable, net of allowances
of $64.7 (1996) and $55.1 (1995)........ 1,435.9 1,520.5
Other receivables....................... 246.0 287.9
Inventories............................. 870.4 839.6
Deferred income taxes................... 134.7 259.2
Prepaid expenses........................ 151.8 147.3
------- -------
TOTAL CURRENT ASSETS.................... 4,058.9 4,138.6
OTHER ASSETS
Prepaid retirement...................... 504.3 484.2
Investments............................. 422.6 573.8
Goodwill and other intangibles, net of
allowances for amortization of
$251.5 (1996) and $192.2 (1995)...... 4,084.6 4,105.2
Sundry.................................. 947.7 871.4
------- -------
5,959.2 6,034.6
PROPERTY AND EQUIPMENT
Land, buildings, equipment, and
construction-in-progress............. 6,886.4 6,828.3
Less allowances for depreciation........ 2,645.7 2,589.0
------- -------
4,240.7 4,239.3
------- -------
$14,258.8 $14,412.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings................... $1,951.2 $1,908.8
Accounts payable........................ 845.9 1,018.0
Employee compensation................... 241.8 316.0
Dividends payable....................... - 189.1
Income taxes payable.................... 656.4 660.5
Other liabilities....................... 821.9 874.6
------- -------
TOTAL CURRENT LIABILITIES............... 4,517.2 4,967.0
LONG-TERM DEBT............................. 2,586.9 2,592.9
DEFERRED INCOME TAXES...................... 306.3 295.5
RETIREE MEDICAL BENEFIT OBLIGATION......... 138.1 147.8
OTHER NONCURRENT LIABILITIES............... 816.6 976.7
COMMITMENTS AND CONTINGENCIES.............. - -
SHAREHOLDERS' EQUITY
Common stock............................ 355.6 355.6
Additional paid-in capital.............. 212.6 418.3
Retained earnings....................... 7,014.2 6,484.3
Deferred costs-ESOP..................... (192.3) (199.5)
Currency translation adjustments........ (68.0) (0.6)
------- ------
7,322.1 7,058.1
Less cost of common stock in treasury... 1,428.4 1,625.5
------- -------
5,893.7 5,432.6
------- -------
$14,258.8 $14,412.5
========= ========
See Notes to Consolidated Condensed Financial Statements.
3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Eli Lilly and Company and Subsidiaries
Six Months Ended
June 30,
1996 1995
---------------------
(Millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................... $734.9 $720.3
Adjustments to reconcile net income to cash
flows from operating activities:
Changes in operating assets and liabilities ... (176.4) (252.6)
Change in deferred taxes ...................... 151.3 105.1
Depreciation and amortization ................. 268.9 279.3
Other items, net .............................. (171.1) (105.3)
----- -----
NET CASH FLOWS FROM OPERATING ACTIVITIES ...... 807.6 746.8
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property and equipment ....... (232.8) (245.7)
Additions to sundry assets and intangibles .... (19.8) (8.9)
Reduction of investments ...................... 248.4 229.6
Additions to investments ...................... (121.7) (203.3)
Acquisitions .................................. (89.1) (48.4)
----- -----
NET CASH USED FOR INVESTING ACTIVITIES ........ (215.0) (276.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ................................ (375.1) (373.4)
Purchase of common stock and other capital
transactions ................................ (69.7) (65.0)
Net additions(reductions) to short-term
borrowings .................................. 19.7 (105.7)
Net additions to long-term debt ............... - 486.3
----- -----
NET CASH USED FOR FINANCING ACTIVITIES ........ (425.1) (57.8)
Effect of exchange rate changes on cash ....... ( 42.0) 40.5
----- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS ..... 125.5 452.8
Cash and cash equivalents at January 1 ........ 999.5 536.9
----- -----
CASH AND CASH EQUIVALENTS AT JUNE 30 .......... $1,125.0 $989.7
======= =====
See Notes to Consolidated Condensed Financial Statements.
4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the requirements
of Form 10-Q and therefore do not include all information and
footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity
with generally accepted accounting principles. In the opinion of
management, the financial statements reflect all adjustments
(consisting only of normal recurring accruals) that are necessary
for a fair presentation of the results for the periods shown. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, expenses and related disclosures
at the date of the financial statements and during the reporting
period. Actual results could differ from those estimates.
As a consequence of the 1995 divestiture, the operating results
of the Medical Device and Diagnostics businesses have been
reflected as "discontinued operations" in the Company's 1995
financial statements and have been excluded from consolidated
sales and expenses reflected therein.
As presented herein, sales include sales of the Company's life-
sciences products and service revenue from PCS Health Systems,
Inc. (PCS) and Integrated Medical Systems, Inc. (IMS).
CONTINGENCIES
The Company has been named as a defendant in numerous product
liability lawsuits involving primarily two products,
diethylstilbestrol and ProzacR. The Company has accrued for its
estimated exposure, including costs of litigation, with respect
to all current product liability claims. In addition, the
Company has accrued for certain future anticipated product
liability claims to the extent the Company can formulate a
reasonable estimate of their costs. The Company's estimates of
these expenses are based primarily on historical claims
experience and data regarding product usage. The Company expects
the cash amounts related to the accruals to be paid out over the
next several years. The majority of costs associated with
defending and disposing of these suits are covered by insurance.
The Company's estimate of insurance recoveries is based on
existing deductibles, coverage limits, and the existing and
projected future level of insolvencies among its insurance
carriers.
Under the Comprehensive Environmental Response, Compensation, and
Liability Act, commonly known as Superfund, the Company has been
designated as one of several potentially responsible parties with
respect to certain sites. Under Superfund, each responsible
party may be jointly and severally liable for the entire amount
of the cleanup. The Company also continues remediation of
certain of its own sites. The Company has accrued for estimated
Superfund cleanup costs, remediation, and certain other
environmental matters, taking into account, as applicable,
available information regarding site conditions, potential
cleanup methods, estimated costs, and the extent to which other
parties can be expected to contribute to payment of those costs.
The Company has reached a settlement with its liability insurance
carriers providing for coverage for certain environmental
liabilities. However, because of uncertainties with respect to
the timing and ultimate realization of recoveries under the
policies, the Company has not recorded any environmental
insurance recoverables.
The Company has been named, along with numerous other U.S.
prescription drug manufacturers, as a defendant in a large number
of related actions brought by retail pharmacies alleging
violations of federal and state antitrust and pricing laws. The
federal suits include a class action on behalf of the majority of
U.S. retail pharmacies. The Company and several other
manufacturers agreed to settle the federal class action case and
the anticipated settlement was accrued in the fourth quarter of
1995. The settlement has been approved by the U.S. District
Court. Other related suits,
5
brought in federal and several state courts by several thousand
pharmacies, involve claims of price discrimination or claims
under other pricing laws. Additional cases have been brought on
behalf of consumers in eight states.
The environmental liabilities and litigation accruals have been
reflected in the Company's consolidated balance sheet at the
gross amount of approximately $290.8 million at June 30, 1996.
Estimated insurance recoverables have been reflected as assets in
the consolidated balance sheet of approximately $120.6 million at
June 30, 1996.
Barr Laboratories, Inc. (Barr) has asserted a claim that the U.S.
patents covering Prozac, which are material to the Company, are
invalid and unenforceable. The Company has filed suit in federal
court in Indianapolis seeking a ruling that Barr's challenge to
Lilly's patents is without merit. While the Company believes
Barr's claims are without merit, there can be no assurance that
the Company will prevail. An unfavorable outcome of this claim
could have a material adverse effect on the Company's
consolidated financial position, liquidity, or results of
operations.
While it is not possible to predict or determine the outcome of
the product liability, antitrust, patent, or other legal actions
brought against the Company, or the ultimate cost of
environmental matters, the Company believes that except as noted
above, the costs associated with all such matters will not have a
material adverse effect on its consolidated financial position or
liquidity but could possibly be material to the consolidated
results of operations in any one accounting period.
EARNINGS PER SHARE
Earnings per share are calculated based on the weighted-average
number of outstanding common shares. The number of shares of
common stock and per-share data have been restated for previously
reported periods to reflect the impact of the Company's two-for-
one stock split in the fourth quarter of 1995.
ACCOUNTING CHANGES
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". This statement requires that impairments,
measured using fair market value, are recognized whenever events
or changes in circumstances indicate that the carrying amount of
long-lived assets may not be recoverable and the future
undiscounted cash flows attributable to the asset are less than
its carrying value. Adoption of this statement did not impact
the Company's consolidated results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 123,
"Stock Based Compensation". This statement requires a company to
choose between two different methods of accounting for stock
options. The statement defines a fair-value-based method of
accounting for stock options but allows an entity to continue to
measure compensation cost for stock options using the accounting
prescribed by APB No. 25 (APB 25), "Accounting for Stock Issued
to Employees". The Company has elected to continue applying
accounting prescribed by APB No. 25.
6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OPERATING RESULTS OF CONTINUING OPERATIONS:
The Company's sales for the second quarter of 1996 increased 5
percent compared to the second quarter of 1995. Sales inside the
United States increased 9 percent while sales outside the United
States increased 1 percent. Compared with the second quarter of
1995, volume increased sales 10 percent but was offset in part by
a 3 percent decrease from unfavorable foreign exchange rates and
a 2 percent decrease in global selling prices.
The Company's sales for the first six months of 1996 increased 4
percent compared with the same period in 1995. Sales outside the
United States increased 5 percent, while sales in the United
States increased 4 percent. Compared with the first six months
of 1995, volume increased sales 6 percent, while foreign exchange
rates and selling prices each decreased sales 1 percent.
Worldwide sales of pharmaceutical products increased 5 percent
and 4 percent for the second quarter and six months,
respectively, as compared with the same periods of 1995.
HumulinR, ReoProTM and ProzacR were the major contributors to the
growth for both periods. This growth was partially offset by
reduced anti-infective sales. Worldwide Prozac sales improved 5
percent to $537 million for the second quarter of 1996 and 15
percent to $1.1 billion for the six months despite the
introduction of generic Prozac in Canada and other competitive
pressures, particularly in France. Humulin sales increased 23
percent to $212 million for the second quarter and 9 percent to
$420 million for the first six months of the year. ReoPro, a
cardiovascular product launched in February 1995, experienced
strong growth with sales of $37 million for the quarter. Among
other major products, cefaclor sales declined 19 percent to $124
million for the second quarter; AxidR sales for the quarter were
$118 million, a decline of 5 percent; and HumatropeR sales were
$67 million, a 5 percent decline. The Company anticipates that
Axid sales for 1996 will likely reflect a decline as the product
faces increased competitive pressure. Health care management
service revenues were $95 million for the quarter, an increase of
63 percent. Sales of GemzarR, an oncolytic product launched in
the U.S. in May 1996, also contributed to growth for the quarter.
U.S. pharmaceutical sales growth of 9 percent during the quarter
was attributed to increased volume and reflects a 35 percent
increase in Humulin sales and a 4 percent increase in Prozac
sales, as well as improved health care management service
revenues and very strong sales of ReoPro ($34 million). The
increase in Humulin sales for the second quarter reflected a
shift in U.S. wholesaler purchasing patterns which contributed to
a decline in sales during the prior quarter. Year-to-date
Humulin sales in the U.S. improved 5 percent to $270 million.
Prozac sales growth in the second quarter was achieved despite a
shift in wholesaler purchasing patterns that had a positive
impact on Prozac sales in the first quarter of 1996. New
prescriptions of Prozac rose at a higher rate this quarter
compared to the previous two quarters. These sales increases
were partially offset by a 70 percent decline in cefaclor sales
compared to the second quarter of the previous year as a result
of continued generic competition. Several companies have been
marketing generic forms of cefaclor in the United States since
May 1995. The Company expects that generic cefaclor competition,
when coupled with strong competition from other anti-infectives,
will result in declining U.S. cefaclor sales through the
remainder of 1996. Although the impact of competition cannot be
predicted with certainty, it is not expected to have a material
adverse effect on the Company's 1996 consolidated results of
operations.
International pharmaceutical sales volume growth of 10 percent
for the second quarter was substantially offset by unfavorable
foreign exchange rates and reduced selling prices, resulting in
sales growth of only 1 percent. For the six months,
international pharmaceutical sales reflected a 5 percent
increase. International sales volume growth was largely the
result of the Company's continued globalization efforts.
7
Worldwide sales of animal health products remained flat compared
to the second quarter of 1995, but reflected an increase of 5
percent for the first six months of 1996 compared to 1995. For
both periods, international sales improved while U.S. sales
declined partially due to unfavorable weather patterns in the
southwestern U.S.
Cost of sales was 29.7 percent of sales for the second quarter as
compared with 28.4 percent for the second quarter of 1995. Cost
of sales for the first six months of 1996 was 29.4 percent of
sales as compared to 29.2 percent in the prior year. The
increases for both periods reflect the net impact of a sales mix
that included increased revenues from both lower margin product
lines, such as ReoPro, and health care management services, which
have lower margins than pharmaceuticals, offset in part by
continued productivity improvements.
Operating expenses increased 8 percent and 11 percent for the
second quarter and year-to-date periods, respectively. Research
and development grew 5 percent and 10 percent for the second
quarter and six months, respectively, over the same periods in
1995. The large number of compounds in the later and most
expensive phases of clinical trials, primarily raloxifene, drove
the increase in research and development expenses for both
periods. Assuming business conditions remain stable, the Company
expects spending in research and development to increase
approximately 15 to 17 percent for the year compared with 1995.
The increase in marketing and administrative expenses (10 percent
for the second quarter and 11 percent for the six months compared
to the same periods in 1995) reflects higher costs associated
with new product launches of Gemzar and HumalogTM and anticipated
launches of other products. The Company's efforts to expand
products globally, particularly in emerging markets, as well as
increased information technology capabilities also contributed to
the increase. The Company is in the process of implementing
cost-containment programs designed to reduce the overall rate of
expense growth while directing greater funding to new product
launches and globalization efforts.
Other income for the second quarter and six months was $49.7
million and $80.9 million higher, respectively, than the same
periods in 1995. The second quarter increases were driven by
non-recurring income received under a royalty contract, the sale
of marketing rights for ReoPro in Japan and the sale of certain
equity securities held by the Company. In addition, the six-
month increase reflects non-recurring income received under a co-
development and co-marketing contract and the sale of U.S.
marketing rights to TapazoleR.
The Company's estimated tax rate for both the second quarter and
six months of 1996 was 25.7 percent compared to 29 percent for
the same periods in 1995. The decline is primarily the result of
increased earnings in jurisdictions with lower tax rates and the
effectiveness of various tax strategies. The estimated effective
tax rate for the first six months of 1996 essentially equals the
annual 1995 rate of 26 percent. The Company expects current tax
strategies will allow its 1996 effective tax rate to remain
approximately the same as the 1995 annual rate.
For both the second quarter and first six months of 1996,
operating expenses grew at a faster rate than sales, but the
negative income impact was more than offset by the reduced
estimated tax rate and increased other income. As a consequence,
compared to the second quarter of 1995, income and earnings per
share from continuing operations for the second quarter increased
12 percent and 17 percent to $345.7 million and $0.63,
respectively. For the six months, income from continuing
operations grew 7 percent to $734.9 million and earnings per
share from continuing operations grew 13 percent to $1.34
compared to the same period in 1995. After considering the
impact of income from discontinued operations during 1995, net
income increased 6 percent and 2 percent for the three-month and
six-month periods, respectively. Earnings per share increased 11
percent and 7 percent for the three-month and six-month periods,
respectively. Earnings per share calculations for both the
quarter and year-to-date periods benefited by a reduction of
approximately 32 million shares of stock outstanding as a result
of the Guidant split-off completed in September 1995.
8
FINANCIAL CONDITION:
As of June 30, 1996, cash, cash equivalents and short-term
investments totaled $1,220.1 million as compared with $1,084.1
million at December 31, 1995. Total debt at June 30, 1996, was
$4,538.1 million, an increase of $36.4 million from December 31,
1995. The additional borrowings were necessary to fund normal
seasonal operating needs. Short-term debt aggregating $1,951.2
million consisted primarily of commercial paper.
The Company believes that cash generated from operations in 1996,
along with available cash and cash equivalents, will be
sufficient to fund essentially all of the 1996 operating needs,
including debt service, capital expenditures, and dividends. The
Company anticipates that amounts available through existing
commercial paper programs should be adequate to fund maturities
of short-term borrowings. The outstanding commercial paper is
supported by committed bank credit facilities.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
Under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions investors
that any forward-looking statements or projections made by the
Company are subject to risks and uncertainties which may cause
actual results to differ materially from those projected.
Economic, competitive, governmental, technological and other
factors which may affect the Company's operations are discussed
in Exhibit 99 to this Form 10-Q filing.
9
PART II OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
Reference is made to the discussion of product liability
litigation contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 ("1995 10-K") under Part I,
Item 3, "Legal Proceedings". In the DES purported class action
case in the Eastern District of New York discussed therein, the
plaintiffs have filed an amended complaint restricting the
alleged class to New York residents rather than the nationwide
class that was originally sought.
Reference is made to the discussion of the antitrust litigation
brought by retail pharmacies against the Company and numerous
other U.S. prescription pharmaceutical manufacturers, contained
in the Company's 1995 10-K under Part I, Item 3, "Legal
Proceedings", and in the Company's Form 10-Q for the quarter
ended March 31, 1996, under Part II, Item 1, "Legal Proceedings".
In June 1996, the U.S. District Court approved the revised
settlement of the Federal Class Action. However, the effective
date of the settlement has been delayed because certain
intervening class members have initiated an appeal of the
approval to the Seventh Circuit Court of Appeals. In addition,
one manufacturer defendant has filed a petition seeking a writ of
mandamus from the Seventh Circuit that would order the District
Court not to disapprove any settlement for the failure to include
certain future pricing commitments. Also, upon request of the
manufacturer defendants, the Seventh Circuit has agreed to review
the District Court's denial of summary judgment on certain issues
raised by those defendants. Finally, developments have occurred
in several of the related state court cases. In the Wisconsin
case brought on behalf of retail pharmacies, a class of Wisconsin
pharmacies has been certified against certain of the
manufacturer defendants, including Lilly. The Alabama consumer
case has been removed to federal court and transferred to the
Northern District of Illinois where numerous related suits are
pending. The dismissal with prejudice of the Colorado consumer
case is now final. The consumer case in Maine has been remanded
back to the state court.
In March 1996, the Federal Trade Commission (FTC) commenced a
non-public investigation focusing on the pricing practices at
issue in the retail pharmacies litigation described above. In
July 1996, the Company received a subpoena duces tecum from the
FTC requesting production of certain documents.
10
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on April 15,
1996. The following is a summary of the matters voted on at the
meeting.
(a) The four management nominees for Director were elected to
serve three-year terms ending in 1999, as follows:
Nominee For Withhold Vote
------- --- -------------
Alfred G.Gilman 499,778,227 4,639,315
Karen N. Horn 499,497,314 4,920,228
J. Clayburn La Force, Jr. 499,430,538 4,987,004
August M. Watanabe 499,871,485 4,546,057
(b) By the following vote, the shareholders approved amendments
to the Articles of Incorporation recommended by the Board of
Directors:
For: 354,035,418
Against: 120,619,499
Abstain: 2,606,018
Broker non-vote:27,156,607
(c) The appointment of Ernst & Young LLP as the Company's
principal independent auditors was ratified by the
following shareholder vote:
For: 502,164,312
Against: 972,597
Abstain: 1,280,633
(d) A shareholder proposal requesting a study committee
and report on the use of fetal tissue in research was
not approved, based on the following vote:
For: 26,600,112
Against: 415,002,682
Abstain: 31,441,809
Broker non-vote: 31,372,939
11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following documents are filed as exhibits to
this Report:
11. Statement re: Computation of Earnings Per Share on
Primary and Fully Diluted Bases
12. Statement re: Computation of Ratio of Earnings from
Continuing Operations to Fixed Charges
27. Financial Data Schedule
99. Cautionary Statement Under Private Securities
Litigation Reform Act of 1995 - "Safe Harbor" for
Forward Looking Disclosures
(b)Reports on Form 8-K. No reports on Form 8-K were filed
-------------------
during the second quarter of 1996.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
ELI LILLY AND COMPANY
---------------------
(Registrant)
Date August 9, 1996
-------------- s/Daniel P. Carmichael
---------------------------
Daniel P. Carmichael
Secretary and Deputy General Counsel
Date August 9, 1996
-------------- s/Arnold C. Hanish
-----------------------
Arnold C. Hanish, Director
Corporate Accounting and Chief
Accounting Officer
13
INDEX TO EXHIBITS
The following documents are filed as a part of this Report:
Exhibit Page
----
11. Statement re:
Computation of Earnings Per Share
on Primary and Fully Diluted Bases 15
12. Statement re:
Computation of Ratio of Earnings from
Continuing Operations to Fixed Charges 16
27. Financial Data Schedule 17-18
99. Cautionary Statement Under Private Securities
Litigation Reform Act of 1995 - "Safe Harbor"
for Forward Looking Disclosures 19
EXHIBIT 11. STATEMENT RE: COMPUTATION OF EARNINGS PER
SHARE ON PRIMARY AND FULLY DILUTED BASES (Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
----------------------------
(Dollars in millions except per-share data)
(Shares in thousands)
PRIMARY:
Net income ................. $345.7 $327.1 $734.9 $720.3
Preferred stock dividends .. (1.7) - (1.7) -
Adjusted net income ........ $344.0 $327.1 $733.2 $720.3
Average number of common
shares outstanding ....... 547,277 578,568 546,796 578,346
Add incremental shares:
Stock plans and contingent
payments ............... 12,695 7,802 13,301 7,478
------- ------- ------ -------
Adjusted average shares .... 559,972 586,370 560,097 585,824
======= ======= ======= =======
Primary earnings per share . $ .61 $ .56 $1.31 $1.23
FULLY DILUTED:
Net income ................. $345.7 $327.1 $734.9 $720.3
Preferred stock dividends (1.7) - (1.7) -
Adjusted net income ........ $344.0 $327.1 $733.2 $720.3
Average number of common
shares outstanding ......... 547,277 578,568 546,796 578,346
Add incremental shares:
Stock plans and contingent
payments ............. 14,036 8,770 15,956 9,844
-------- ------- ------ ------
Adjusted average shares .... 561,313 587,338 562,752 588,190
======= ======= ======= =======
Fully diluted earnings
per share ................ $ .61 $ .56 $1.30 $1.22
EXHIBIT 12. STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS
FROM CONTINUING OPERATIONS TO FIXED CHARGES (Unaudited)
Eli Lilly and Company and Subsidiaries
(Dollars in Millions)
EXHIBIT 99. CAUTIONARY STATEMENT UNDER PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 - "SAFE
HARBOR" FOR FORWARD LOOKING DISCLOSURES
Certain forward-looking statements are included in
this Form 10-Q and may be made by Company
spokespersons based on current expectations of
management. All forward-looking statements made by
the Company are subject to risks and uncertainties.
Certain factors, including, but not limited to those
listed below, may cause actual results to differ
materially from current expectations and historical
results.
- Economic factors over which the Company has no
control, including changes in inflation, interest
rates and foreign currency exchange rates.
- Competitive factors including generic competition
as patents on key products, such as Prozac,
expire; pricing pressures, both in the U.S. and
abroad, primarily from managed care groups and
government agencies; and technological advances
and patents obtained by competitors.
- Governmental factors including laws and
regulations and judicial decisions at the state
and federal level related to Medicare, Medicaid
and healthcare reform; and laws and regulations
affecting international operations.
- The difficulties and uncertainties inherent in
new product development. New product candidates
that appear promising in development may fail to
reach the market because of efficacy or safety
concerns, inability to obtain necessary
regulatory approvals, difficulty or excessive
costs to manufacture, or infringement of the
patents or intellectual property rights of
others.
- Delays and uncertainties in the FDA approval
process and the approval processes in other
countries, resulting in lost market opportunity.
- Unexpected safety or efficacy concerns arising
with respect to marketed products, whether or not
scientifically justified, leading to product
recalls, withdrawals or declining sales.
- Legal factors including unanticipated litigation
of product liability claims; antitrust
litigation; environmental matters; and patent
disputes with competitors which could preclude
commercialization of products or negatively
affect sales of existing products.
- Future difficulties obtaining or the inability to
obtain existing levels of product liability
insurance.
- Changes in tax laws, including the proposed
amendment by Congress to the Section 936 income
tax credit to eliminate the income-based tax
credit for companies with operations in Puerto
Rico, including Lilly. Future changes in tax
laws related to the remittance of foreign
earnings or investments in foreign countries with
favorable tax rates could materially impact the
Company's results.
- Changes in accounting standards promulgated by
the Financial Accounting Standards Board, the
Securities and Exchange Commission, and the
American Institute of Certified Public
Accountants which are adverse to the Company.
- Internal factors such as changes in business
strategies and the impact of restructurings and
business combinations.