Eli Lilly 2004 Annual Report Download - page 43

FINANCIALS
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As of December 31, 2004, we have purchased $2.08 billion of our announced $3.0 billion share repurchase
program. During 2004, we did not repurchase any stock pursuant to this program. We acquired approximately 3.0
million and 4.5 million shares in 2003 and 2002, respectively, under our share repurchase program. As previously
disclosed, in connection with the share repurchase program, we entered into agreements to purchase shares of
our stock. During the second quarter of 2003, we satisfi ed all our remaining obligations under the agreements.
We have 5 million authorized shares of preferred stock. As of December 31, 2004 and 2003, no preferred stock
has been issued.
We have funded an employee benefi t trust with 40 million shares of Lilly common stock to provide a source of
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 offsets 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 2004, 2003, or 2002.
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
announcement that a person (the Acquiring Person) has acquired ownership of 15 percent or more of our com-
mon 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 rights 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 com-
bination 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.