Eli Lilly 2012 Annual Report Download - page 135

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named executive officers who held them forfeited the awards having realized no value. These awards (and other
expired stock options) were not replaced.
Adjustments to Reported Results
Consistent with past practice, the committee adjusted the results on which 2011-2012 PAs and the 2012 bonus were
determined to eliminate the distorting effect of certain unusual income or expense items on year-over-year growth
percentages. The adjustments are intended to:
• align award payments with the underlying performance of the core business
• avoid volatile, artificial inflation or deflation of awards due to unusual items in either the award year or the
previous (comparator) year
• eliminate certain counterproductive short-term incentives—for example, incentives to refrain from acquiring
new technologies, to defer disposing of underutilized assets, or to defer settling legacy legal proceedings to
protect current bonus payments.
To assure the integrity of the adjustments, the committee establishes adjustment guidelines at the beginning of the
year. These guidelines are generally consistent with the company guidelines for reporting non-GAAP earnings to the
investment community, which are reviewed by the audit committee of the board. The adjustments apply equally to
income and expense items. The compensation committee reviews all adjustments and retains downward discretion,
i.e., discretion to reduce compensation below the amounts that are yielded by the adjustment guidelines.
Adjustments for 2012 Bonus Plan. For the 2012 bonus calculations, the committee made the following adjustments
to reported revenue and EPS:
• Neutralized the impact of the early payment by Bristol-Myers Squibb of Amylin's exenatide revenue-sharing
obligations by (i) eliminating the income recognized on the early payment and (ii) adjusting planned revenue and
EPS for exenatide to include the planned amounts for the portion of the year after the early payment.
• Eliminated the EPS impact of significant asset impairments and restructuring charges.
• Made additional reductions to "as reported" revenue and non-GAAP EPS in connection with the timing of certain
pricing actions that occurred earlier than anticipated. Because the increases had occurred at the time the
targets were being established, management recommended, and the committee agreed, to adjust the
incremental revenue and EPS out of the 2012 results for bonus purposes.
• Neutralized the impact of the delayed enactment of the American Taxpayer Relief Act of 2012, by adding the
expected amount of the delayed 2012 tax benefits to 2012 EPS, and increasing the 2013 bonus EPS goal by the
same amount to offset the benefit to be received in 2013.
Reconciliations of these adjustments to our reported revenue and EPS are below.
2012
Revenue as reported ($ millions) $22,603.4
Impact of certain pricing actions $(106.0)
Impact of Amylin pro-rata revenue $(9.0)
Revenue—adjusted $22,488.4
EPS as reported $3.66
Eliminate IPR&D charges for acquisitions and in-licensing transactions $0.00
Eliminate asset impairments, restructuring, and other special charges (including Xigris® withdrawal) $0.16
Eliminate impact of the early payment of Amylin financial obligation $(0.43)
Non-GAAP EPS $3.39
Xigris withdrawal adjustment $(0.01)
EPS impact of the timing of pricing actions $(0.06)
Pro-rata portion of Amylin net income $0.09
2012 R&D Tax Credit $0.07
Non-GAAP EPS—adjusted $3.48*
*Numbers may not add due to rounding
Adjustments for 2011-2012 PA. When the committee set EPS growth goals for the 2011-2012 PA, the termination of
our exenatide alliance with Amylin and the associated revenue-sharing obligation was not contemplated and
therefore, the 2011-2012 PA goals assumed ongoing net income from sales of exenatide. The committee decided to
neutralize the impact of the early payment. In addition, although the company excluded the impact of the Xigris®