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 QUARTER ENDED SEPTEMBER 30, 1994
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
October 31, 1994:
Class Number of Shares Outstanding
----- ----------------------------
Common 292,204,808
<page 1>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
ELI LILLY AND COMPANY AND SUBSIDIARIES
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
-----------------------------------------
(Dollars in millions except per-share data)
<S> <C> <C> <C> <C>
Net Sales $1,817.4 $1,530.6 $5,132.9 $4,651.6
Cost of sales 578.1 467.4 1,620.5 1,383.5
Research & development 260.6 232.5 738.4 679.7
Acquired research 58.4 - 58.4 -
Marketing & administrative 455.2 417.6 1,257.6 1,210.3
Special charges - - 66.0 -
Other (income) deductions - net (0.2) (4.5) (62.0) (61.2)
------- ------- ------- -------
1,352.1 1,113.0 3,678.9 3,212.3
------- ------- ------- -------
Income before income taxes and
cumulative effect of changes in
accounting principles 465.3 417.6 1,454.0 1,439.3
Income taxes 146.6 123.2 458.0 424.6
----- ----- ------- -------
Income before cumulative effect of
changes in accounting principles 318.7 294.4 996.0 1,014.7
Cumulative effect of changes in
accounting principles (net of taxes) - - - (10.9)
------ ----- ----- ------
Net Income $318.7 $294.4 $996.0 $1,003.8
===== ===== ===== =======
Earnings per share:
Before cumulative effect of changes
in accounting principles $1.10 $1.00 $3.44 $3.46
Net income $1.10 $1.00 $3.44 $3.42
Dividends paid per share $ .625 $ .605 $1.875 $1.815
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<page 2>
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
Eli Lilly and Company and Subsidiaries
September 30, December 31,
1994 1993
-----------------------------
(Millions)
<TABLE>
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $999.6 $539.6
Short-term investments 461.9 447.5
Accounts receivable, net of allowances of
$38.4 (1994) and $32.3 (1993) 1,090.1 950.1
Inventories 1,041.9 1,103.0
Deferred income taxes 243.8 334.0
Other current assets 339.4 322.9
------- -------
TOTAL CURRENT ASSETS 4,176.7 3,697.1
OTHER ASSETS
Prepaid retirement 405.9 266.0
Investments 297.9 221.7
Goodwill and other intangibles, net of
allowances for amortization of
$311.1 (1994) and $289.9 (1993) 400.5 405.0
Sundry 934.1 833.6
------- -------
2,038.4 1,726.3
PROPERTY AND EQUIPMENT
Land, buildings, equipment, and
construction-in-progress 6,880.3 6,566.5
Less allowances for depreciation 2,587.7 2,366.3
------- -------
4,292.6 4,200.2
------- -------
$10,507.7 $9,623.6
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $738.5 $524.8
Accounts payable 207.6 329.6
Employee compensation 279.3 328.6
Dividends payable - 183.3
Other liabilities 1,020.7 1,115.7
Income taxes payable 476.7 446.0
------- -------
TOTAL CURRENT LIABILITIES 2,722.8 2,928.0
LONG-TERM DEBT 1,174.4 835.2
DEFERRED INCOME TAXES 164.2 127.5
RETIREE MEDICAL BENEFIT OBLIGATION 198.7 183.9
OTHER NONCURRENT LIABILITIES 932.9 980.2
SHAREHOLDERS' EQUITY
Common stock 183.0 183.0
Additional paid-in capital 281.0 294.6
Retained earnings 5,144.3 4,500.9
Deferred costs-ESOP (226.3) (242.8)
Currency translation adjustments (35.5) (163.5)
------- -------
5,346.5 4,572.2
Less cost of common stock in treasury 31.8 3.4
------- -------
5,314.7 4,568.8
------- -------
$10,507.7 $9,623.6
======== =======
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<page 3>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Eli Lilly and Company and Subsidiaries
Nine Months Ended
September 30,
1994 1993
------------------
(Millions)
<TABLE>
<C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $996.0 $1,003.8
Adjustments to Reconcile Net Income to
Cash Flows from Operating Activities:
Changes in operating assets and liabilities (410.2) (288.4)
Change in deferred taxes 127.7 53.4
Acquired research 58.4 -
Other items, net 217.7 208.9
Cumulative effect of accounting changes - 10.9
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 989.6 988.6
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property and equipment (348.4) (421.1)
Additions to intangibles and other assets (65.3) (53.6)
Reduction of investments 938.1 598.6
Additions to investments (992.8) (559.0)
Acquisitions (74.9) (31.0)
------ ------
NET CASH USED BY INVESTING ACTIVITIES (543.3) (466.1)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (542.3) (531.3)
Purchase of common stock and other capital
transactions (42.0) (8.2)
Net additions(reductions) to short-term borrowings 219.8 (126.1)
Net additions to long-term debt 346.1 361.1
------ ------
NET CASH USED BY FINANCING ACTIVITIES (18.4) (304.5)
Effect of exchange rate changes on cash 32.1 (14.3)
------ ------
NET INCREASE IN CASH AND CASH EQUIVALENTS 460.0 203.7
Cash and cash equivalents at January 1 539.6 432.4
------ ------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $999.6 $636.1
====== ======
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<page 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 flow 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 to a fair statement of the
results for the periods shown.
INVENTORIES
Inventories consisted of the following:
September 30, December 31,
1994 1993
------------- -----------
Finished products $ 291.5 $ 272.5
Work in process 555.2 667.7
Raw materials and supplies 282.9 271.5
------- -------
1,129.6 1,211.7
Less reduction to LIFO cost (87.7) (108.7)
------- -------
$1,041.9 $1,103.0
======= =======
CONTINGENCIES
The Company has been named as a defendant in numerous product liability
lawsuits involving primarily two products, diethylstilbestrol and Prozac(R).
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.
The Company is a party to various patent litigation matters involving
Humatrope(R), Humulin(R), bovine somatotropin, and various products within the
Medical Devices and Diagnostics Division. Based upon historical and industry
data, the Company has accrued for the anticipated cost of resolution of the
claims.
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
<page 5>
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 those costs. The Company has
reserved its right to pursue claims for insurance (and in one instance has
initiated litigation against its insurance carrier) with respect to certain
environmental liabilities. However, because of uncertainties with respect to
the timing and ultimate realization of those claims, the Company has not
recorded any environmental insurance recoverables.
The product, patent, and environmental liabilities have been reflected in the
Company's consolidated balance sheets at their gross amounts (approximately
$455 million at September 30, 1994). Estimated insurance recoverables appear
as assets in the consolidated balance sheets (approximately $160 million at
September 30, 1994).
While it is not possible to predict or determine the outcome of the patent,
product liability, or other legal actions brought against the Company, or the
ultimate cost of environmental matters, the Company continues to believe the
costs associated with all such matters will not have a material adverse effect
on its consolidated financial position.
EARNINGS PER SHARE
Earnings per share for 1994 are calculated based on the average number of
outstanding common shares. For 1993 earnings per share were calculated on a
fully diluted basis based on the average number of outstanding common shares
and common share equivalents (primarily stock options). The difference in
earnings per share calculated under these methods is not material.
ACCOUNTING CHANGES
During the first quarter of 1994, the Company adopted two new accounting
pronouncements. Effective January 1, 1994, the Company's debt and equity
investments have been accounted for under the provisions of FAS 115,
"Accounting For Certain Investments in Debt and Equity Securities". All
"available-for-sale" securities have been marked to market with unrealized
holding gains and losses reported as a net amount in shareholders' equity.
There was no income statement impact of this accounting change.
Also, beginning in 1994, the Company implemented the provisions of AICPA
Statement of Position 93-6, "Employers' Accounting For Employee Stock
Ownership Plans". The principal impact of the adoption was to reduce the
average shares outstanding for the quarter by 3.0 million which represents
shares owned by the ESOP that have not been allocated to participants'
accounts.
Effective January 1, 1993, the Company elected the early adoption of FAS 112,
"Employers' Accounting for Postemployment Benefits." FAS 112 requires
employers to recognize currently the obligation to provide postemployment
benefits to former or inactive employees and others. Prior to 1993, the
Company expensed these obligations when paid.
SPECIAL CHARGES
During the first six months the Company incurred $66 million of pre-tax
charges associated with the March 31 voluntary recall of three of the
Company's liquid oral antibiotics. The recall, which was initiated by the
Company after consultation with the FDA, was made after four instances were
reported of small plastic caps being found in the antibiotics. Shipments of
these products were resumed during the second and third quarters.
<page 6>
PROPOSED ACQUISITION
In July, 1994, the Company announced that it had entered into a definitive
agreement with McKesson Corporation for the Company to purchase PCS Health
Systems, Inc. (PCS), McKesson's pharmacy benefit management business, for $4
billion in cash. The acquisition is subject to acceptance of a tender offer
by the holders of a majority of the shares of McKesson common stock and
certain other conditions. The Company expects the acquisition to close in
November, 1994. Prior to the completion of the tender offer, McKesson will
spin off to its shareholders all of its businesses other than the pharmacy
benefit management business. The Company plans to finance the acquisition
initially by borrowing $4 billion in short-term and intermediate-term debt.
The pharmacy benefit management business of McKesson, which is conducted
primarily through PCS, had revenues of $102.5 million and net income of $12.8
million for the six months ended June 30, 1994.
<page 7>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS:
The Company's sales for the third quarter increased 19 percent from the third
quarter of 1993. Sales increased 17 percent inside the United States and 22
percent outside the United States. Compared with the third quarter of 1993,
volume increased 17 percent and global selling prices and exchange rate
comparisons each contributed 1 percent.
The Company's sales for the first nine months of 1994 increased 10 percent
over the same period in 1993. Sales in the United States increased 9
percent, while sales outside the United States increased 13 percent. Volume
increased 12 percent and changes in foreign exchange rates and selling prices
combined to decrease sales by 2 percent over the same period in 1993.
Worldwide sales of pharmaceutical products increased 25 percent in the third
quarter and 12 percent in the first nine months compared with the same
periods last year. Pharmaceutical sales for the quarter increased 25 percent
both inside and outside the United States, with especially strong unit
volumes in both markets. The sales growth was led by very strong Prozac
sales, due in part to an accumulation of U.S. wholesaler inventories,
presumably in anticipation of a price increase that was announced on
September 21. Products also contributing to the strong worldwide volume
growth for the quarter included Axid(R) and Humulin(R). Anti-infective sales
rose slightly as strong international growth offset a decline in the U.S. due
to continued competitive pressures. U.S. pharmaceutical sales growth
continues to be negatively affected by federally-mandated rebates on sales to
Medicaid recipients and increased participation in managed-care programs.
Sales of Ceclor(R) in the United States (which accounted for approximately 5
percent of the Company's worldwide sales in the first nine months of 1994)
declined in both 1993 and the first nine months of 1994 primarily as a result
of intense competition from other anti-infective products. These competitive
pressures are expected to continue to negatively affect Ceclor sales. In
addition, the U.S. product patent for Ceclor expired in 1992 and a patent on
a key intermediate in Lilly's manufacturing process for the compound expires
in December 1994. To date, the Company has experienced only limited
competition from generic cefaclor in markets outside the United States and is
not aware that any competitor has received U.S. FDA approval to market
generic cefaclor. However, the Company expects that within the near term
competitors will be entering the U.S. market with generic cefaclor. The
Company believes that the quantity of available competitive product will be
limited initially by manufacturing capacity constraints but that those
constraints are likely to lessen over time.
In response to these competitive challenges, on October 10, 1994, the
Company, on behalf of its subsidiary STC Pharmaceuticals, Inc., announced an
agreement with Mylan Pharmaceuticals, Inc. to market and distribute a generic
form of cefaclor in the United States. This arrangement is intended to
enhance cefaclor's competitiveness in the U.S. anti-infective marketplace and
to position the Company as the leading supplier to the market for generic
cefaclor after the introduction of the product by other manufacturers. The
Company anticipates that the combined impact in the United States of the
continued competition from other anti-infectives and the introduction of
generic cefaclor could have a material adverse effect on the Company's 1995
consolidated results of operations. However, this estimated impact was taken
into account in the Company's earlier projection that its 1995 earnings from
core pharmaceutical operations would be approximately $4.00 per share
(excluding the effect of the pending PCS acquisition).
<page 8>
Sales of the medical devices and diagnostics companies decreased 1 percent in
the third quarter, while increasing 7 percent in the first nine months of
1994 compared with the same periods last year. The division's sales growth
during these periods was negatively impacted primarily by the divestiture of
Physio Control Corporation in July, 1994. Strong sales growth at Cardiac
Pacemakers, Inc. (CPI) and IVAC Corporation was partially offset by declining
sales at Hybritech Incorporated. Sales growth at CPI can be attributed to
the Endotak(R) lead system and the U.S. launch of the Ventak(R) PRX(R) AICDTM
automatic implantable cardioverter defibrillator. IVAC benefited from sales
of its Medsystem IIITM infusion pump. Sales at the other companies within
the division showed modest growth.
Worldwide sales of animal health products increased 7 percent in the third
quarter and 6 percent in the first nine months compared with the same periods
last year. Worldwide sales growth for both the third quarter and first nine
months was led by Tylan.
Manufacturing costs of products sold increased in the third quarter to 31.8
percent of sales from 30.5 percent of sales in the same quarter of 1993.
During the first nine months, manufacturing costs increased to 31.6 percent
of sales compared with 29.7 percent for the same period in 1993. The
increases are due in part to a decision earlier this year to reduce certain
in-process inventory levels. The increases were partially offset by a
favorable product mix and continued reduction in spending.
Operating expenses excluding research expenditures rose 9.0 percent in the
third quarter and 3.9 percent in the nine months. The growth was attributed
to higher legal fees associated with pending litigation as well as the
expansion of sales forces in emerging international markets. In addition,
bonus accruals are higher due to more favorable overall results in 1994
compared with 1993.
Research expenses (excluding acquired research) rose 12 percent in the third
quarter and 9 percent in the nine months. Research expenditures continue to
increase due in part to the growth of global clinical trials to support the
Company's extensive pipeline of potential new products.
In addition, during the quarter the company completed the previously
announced acquisition of Sphinx Pharmaceuticals, Inc. The purchase price was
approximately $80.0 million. The transaction was accounted for using the
purchase method of accounting; consequently, after recording the net assets
at fair market value, the Company determined that $58.4 million of the
purchase price was associated with acquired in-process research which should
not be recorded as an intangible asset, therefore resulting in a charge
against earnings.
Net other income decreased in the third quarter and was essentially flat in
the first nine months compared with the same periods in 1993. The decrease
in the quarter was principally due to the higher donations of products for
relief efforts in Rwanda.
The Company's 1994 estimated tax rate was 31.5 percent in the third quarter
and the first nine months compared with a tax rate of 29.5 percent for the
year 1993. The Company's effective tax rate was affected by the Omnibus
Budget Reconciliation Act of 1993 causing a lower tax benefit from operations
in Puerto Rico.
<page 9>
The Company reported net income for the third quarter of $318.7 million
($1.10 per share) as compared with $294.4 million ($1.00 per share) for the
same period in 1993. The Company reported net income for the first nine
months of $996.0 million ($3.44 per share) as compared with $1,003.8 billion
million ($3.42 per share) for the same period in 1993. The 1994 results
benefited from both continued sales growth and operating expense reductions.
The year-to-year comparison also benefited from the impact of accounting
changes reflected in 1993 (an after-tax charge of $10.9 million). Net income
in the first nine months of 1994 was negatively affected by the antibiotic
recall, the Sphinx acquisition, and a higher effective tax rate.
FINANCIAL CONDITION:
As of September 30, 1994, cash, cash equivalents, and short-term securities
totaled $1,461.5 million as compared with $987.1 million at December 31,
1993. Total debt at September 30, 1994, was $1,912.9 million, an increase
from $1,360.0 million at December 31, 1993. The increase relates primarily
to bank borrowings by three of the Company's MDD subsidiaries totaling $318.5
million which were used to fund dividends to Lilly. The Company continues to
generate sufficient cash to fund its operating needs. Capital expenditures
continued to decline on a year-to-year comparative basis. The Company
expects capital expenditures for 1994 to be below the full year 1993 level.
In addition, in October 1994, the Company's long-term debt rating was lowered
from AAA to AA by Standard and Poor's, and in November from Aa1 to Aa3 by
Moody's. These actions were a direct result of the Company's plan to finance
the pending acquisition of PCS Health Systems by issuing $4.0 billion of
commercial paper, as well as the anticipated heightened competition for the
antibiotic Ceclor. The Company continues to believe it will have sufficient
cash flow from combined operations to fund operating needs and debt service.
Depending on market conditions, the Company expects over time to reduce the
amount of commercial paper outstanding by converting a portion to longer-term
debt or possibly through other techniques. The commercial paper is backed up
by committed bank credit facilities aggregating $4.0 billion.
<page 10>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, the Company has been named, together with numerous
other U.S. prescription pharmaceutical manufacturers and in some cases
wholesalers or distributors, as a defendant in many cases among a series of
related actions alleging violations of federal or state antitrust laws, or both.
The federal cases have been consolidated or coordinated for pretrial proceedings
in the Northern District of Illinois. A number of the federal suits purport to
be class actions on behalf of nearly all retail pharmacies in the United States
and allege an industry-wide agreement in violation of the Sherman Act to deny
favorable pricing on sales of brand-name prescription pharmaceuticals to certain
retail pharmacies in the United States. Others involve claims by a large number
of individual pharmacies alleging price discrimination in violation of the
Robinson Patman Act as well as Sherman Act claims. Defense motions to dismiss
have been denied and discovery has begun.
In addition, there are state court cases pending in California, Alabama, and
Wisconsin alleging violations of various state antitrust and pricing laws.
These cases purport to be class actions on behalf of retail pharmacies in all
three states and consumers in California.
The Company is defending these cases vigorously. While it is not possible to
predict or determine the outcome of the cases, based on the facts as known to
the Company, it is the Company's opinion that the cases will not ultimately
result in any liability that would have a material adverse effect on the
Company's consolidated financial position.
<page 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 to Fixed Charges
27. Financial Data Schedule
99. Attachment to Form 10-Q: Contingent Payment Obligation Units
(b) Reports on Form 8-K. During the quarter for which this Report on
-------------------
Form 10-Q is filed, the Registrant filed no report on Form 8-K.
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 November 10, 1994 s/Daniel P. Carmichael
----------------- ------------------------------------
Daniel P. Carmichael
Secretary and Deputy General Counsel
Date November 10, 1994 s/Arnold C. Hanish
----------------- ------------------------------------
Arnold C. Hanish
Director, Corporate Accounting and
Chief Accounting Officer
<page 12>
INDEX TO EXHIBITS
The following documents are filed as a part of this Report:
Exhibit Page
------- ----
11. Statement re: 14
Computation of Earnings Per Share
on Primary and Fully Diluted Bases
12. Statement re: 15
Computation of Ratio of Earnings
to Fixed Charges
27. Financial Data Schedule 16-17
99. Attachment to Form 10-Q: 18
Contingent Payment Obligation Units
<page 13>
EXHIBIT 11. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE ON
PRIMARY AND FULLY DILUTED BASES
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
-------------------------------------------
(Dollars in millions except per-share data)
(Shares in thousands)
<TABLE>
PRIMARY:
<S> <C> <C> <C> <C>
Net income $318.7 $294.4 $996.0 $1,003.8
Average number of common shares
outstanding 289,070 292,649 289,247 292,674
Add incremental shares:
Stock plans and contingent
payments 2,086 677 2,049 818
Adjusted average shares 291,156 293,326 291,296 293,492
Primary earnings per share $1.09 $1.00 3.42 $3.42
FULLY DILUTED:
Net income $318.7 $294.4 996.0 $1,003.8
Average number of common shares
outstanding 289,070 292,649 289,247 292,674
Add incremental shares:
Stock plans and contingent
payments 2,722 851 2,745 875
Adjusted average shares 291,792 293,500 291,992 293,549
Fully diluted earning
per share $1.09 $1.00 $3.41 $3.42
</TABLE>
Common stock equivalents are not materially dilutive and, accordingly, have
not been considered in the computation of reported net earnings per common
share.
EXHIBIT 12. STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Eli Lilly and Company and Subsidiaries
(Dollars in Millions)
<TABLE>
Nine Months
Ended
September 30, Years Ended December 31,
------------ -------------------------------------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Consolidated
Pretax Income before
Accounting Changes $1,454.0 $701.9 $1182.3 $1879.2 $1599.0 $1329.9
Interest 84.8 96.7 109.1 88.9 93.8 57.1
Less Interest Capitalized
during the Period (19.2) (25.5) (37.4) (49.1) (27.4) (15.8)
---- ---- ---- ---- ---- ----
Earnings $1,519.6 $773.1 $1254.0 $1919.0 $1665.4 $1371.2
======= ====== ====== ====== ====== ======
Fixed Charges:
Interest Expense $ 84.8 $ 96.7 $ 109.1 $ 88.9 $ 93.8 $ 57.1
======= ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges 17.9 8.0 11.5 21.6 17.8 24.0
==== === === ==== ==== ====
</TABLE>
EXHIBIT 99. ATTACHMENT TO FORM 10-Q: CONTINGENT PAYMENT OBLIGATION UNITS
In connection with the acquisition of Hybritech Incorporated by the Company
on March 18, 1986, the Company issued Contingent Payment Obligation Units
(CPUs). The following information is provided relative to the CPUs.
Hybritech Sales and Gross Profits (Unaudited)
- - ---------------------------------------------
THIRD QUARTER NINE MONTHS
------------- -----------
1994* 1993* 1992* 1994* 1993* 1992*
-----------------------------------------------
(Millions) (Millions)
Sales $29.8 $33.5 $39.7 $94.9 $113.9 $130.9
Gross profits $14.7 $16.2 $21.3 $46.8 $60.4 $74.8
*Includes Pacific Biotech, Inc., another subsidiary of Eli Lilly and Company.
Sales for the third quarter were $29.8 million compared with $33.5 million
during the same period in 1993, a decrease of 11 percent. Sales declines
were experienced in both domestic and international markets as the Company's
prostate cancer test, Tandem(R) Prostate Specific Antigen (PSA) continues to
experience increased competition.
Gross profits for the third quarter were $14.7 million compared with $16.2
million in the same period last year.
Computation of Contingent Payment Obligation Unit Payment
CPU holders are entitled to receive cash payments based upon the annual sales
and gross profits of Hybritech over the period ending December 31, 1995 if
certain performance criteria are achieved. The total amount payable for each
year will equal the sum of 6 percent of Hybritech's sales and 20 percent of
Hybritech's gross profits for that year, less a deductible amount. Sales is
defined in the Indenture governing the CPUs to include net sales of products
and royalties but to exclude contract revenues. Gross profits are the excess
of sales over costs of products sold and do not represent the net income of
Hybritech. The deductible amount was $11 million for 1986 and increases by
35 percent in each subsequent year. The deductible for 1994 is $121.4
million. The total amount payable, if any, is then divided by 12,933,894 to
determine the payment per CPU. The maximum payment that may be made on each
CPU if the criteria are achieved cannot, however, exceed $22. No payments
have been made to date.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE
($ Thousands)
(unaudited)
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> QTR-3 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 [BLANK]
<PERIOD-END> SEP-30-1994 [BLANK]
<CASH> 999,590 [BLANK]
<SECURITIES> 461,915 [BLANK]
<RECEIVABLES> 1,128,487 [BLANK]
<ALLOWANCES> 38,433 [BLANK]
<INVENTORY> 1,041,942 [BLANK]
<CURRENT-ASSETS> 4,176,738 [BLANK]
<PP&E> 6,880,289 [BLANK]
<DEPRECIATION> 2,587,737 [BLANK]
<TOTAL-ASSETS> 10,507,681 [BLANK]
<CURRENT-LIABILITIES> 2,722,838 [BLANK]
<BONDS> 1,174,441 [BLANK]
<COMMON> 183,005 [BLANK]
0 [BLANK]
0 [BLANK]
<OTHER-SE> 5,131,710 [BLANK]
<TOTAL-LIABILITY-AND-EQUITY> 10,507,681 [BLANK]
<SALES> 1,817,472 5,132,940
<TOTAL-REVENUES> 1,817,472 5,132,940
<CGS> 578,132 1,620,531
<TOTAL-COSTS> 578,132 1,620,531
<OTHER-EXPENSES> 774,241 2,054,376
<LOSS-PROVISION> 0<F1> 0<F1>
<INTEREST-EXPENSE> 29,958 65,620
<INCOME-PRETAX> 465,310 1,454,039
<INCOME-TAX> 146,572 458,022
<INCOME-CONTINUING> 318,738 996,017
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 318,738 996,017
<EPS-PRIMARY> 1.09 3.42
<EPS-DILUTED> 1.09 3.41
<FN>
<F1>The information called for is not given as the balances are not
individually significant.
</FN>
</TABLE>
