Eli Lilly 2003 Annual Report Download - page 39

Download and view the complete annual report

Please find page 39 of the 2003 Eli Lilly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

FINANCIALS
37
funds to assist us in meeting our obligations under various employee benefi t plans. The funding had no net impact
on shareholders’ equity as we consolidated the employee benefi t trust. The cost basis of the shares held in the
trust was $2.64 billion and is shown as a reduction in shareholders’ equity, which offset the resulting increases of
$2.61 billion in additional paid-in capital and $25 million in common stock. Any dividend transactions between us
and the trust are eliminated. Stock held by the trust is not considered outstanding in the computation of earnings
per share. The assets of the trust were not used to fund any of our obligations under these employee benefi t plans
in 2003, 2002, or 2001.
We have an ESOP as a funding vehicle for the existing employee savings plan. The ESOP used the proceeds of a
loan from us to purchase shares of common stock from the treasury. The ESOP issued $200 million of third-party
debt, repayment of which was guaranteed by us (see Note 6). The proceeds were used to purchase shares of our
common stock on the open market. Shares of common stock held by the ESOP will be allocated to participating
employees annually through 2017 as part of our savings plan contribution. The fair value of shares allocated each
period is recognized as compensation expense.
Under a Shareholder Rights Plan adopted in 1998, all shareholders receive, along with each common share
owned, a preferred stock purchase right entitling them to purchase from the company one one-thousandth of
a share of Series B Junior Participating Preferred Stock (the Preferred Stock) at a price of $325. The rights are
exercisable only after the Distribution Date, which is generally the 10th business day after the date of a public an-
nouncement that a person (the Acquiring Person) has acquired ownership of 15 percent or more of our common
stock. We may redeem the rights for $.005 per right up to and including the Distribution Date. The rights will expire
on July 28, 2008, unless we redeem them earlier.
The plan provides that, if an Acquiring Person acquires 15 percent or more of our outstanding common stock
and our redemption right has expired, generally each holder of a right (other than the Acquiring Person) will have
the right to purchase at the exercise price the number of shares of our common stock that have a value of two
times the exercise price.
Alternatively, if, in a transaction not approved by the board of directors, we are acquired in a business combi-
nation transaction or sell 50 percent or more of our assets or earning power after a Distribution Date, generally
each holder of a right (other than the Acquiring Person) will have the right to purchase at the exercise price the
number of shares of common stock of the acquiring company that have a value of two times the exercise price.
At any time after an Acquiring Person has acquired 15 percent or more but less than 50 percent of our out-
standing common stock, the board of directors may exchange the rights (other than those owned by the Acquiring
Person) for our common stock or Preferred Stock at an exchange ratio of one common share (or one one-thou-
sandth of a share of Preferred Stock) per right.
Note 10: Earnings per Share
The following is a reconciliation of the denominators used in computing earnings per share:
2003 2002 2001
(Shares in thousands)
Income available to common shareholders . . . . . . . . . . . . . . . . . . . . . $2,560.8 $2,707.9 $2,780.0
Basic earnings per share
Weighted-average number of common shares
outstanding, including incremental shares . . . . . . . . . . . . . . . . 1,076,547 1,076,922 1,077,497
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.38 $ 2.51 $ 2.58
Diluted earnings per share
Weighted-average number of common
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,076,547 1,076,873 1,077,390
Stock options and other incremental shares. . . . . . . . . . . . . . . . . . 5,683 8,215 13,403
Weighted-average number of common
shares outstanding—diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,082,230 1,085,088 1,090,793
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.37 $ 2.50 $ 2.55