Summary of LILLY ELI & CO - Yahoo! Finance

Item 2.02. Results of Operations and Financial Condition
On October 21, 2009, we issued a press release announcing our results of operations for the quarter and nine months ended September 30, 2009, including, among other things, an income statement for those periods. In addition, on the same day we held a teleconference for analysts and media to discuss those results. The teleconference was web cast on our web site. The press release and related financial statements are attached to this Form 8-K as Exhibit 99.1. For the third quarter 2009, the press release attached as Exhibit 99.1 includes a pro forma non-GAAP presentation of our results. We use non-GAAP financial measures, such as pro forma non-GAAP net income and pro forma non-GAAP earnings per share, that differ from financial statements reported in conformity to U.S. generally accepted accounting principles ("GAAP"). In the press release attached as Exhibit 99.1, we used non-GAAP financial measures in comparing the financial results for the third quarter and first nine months of 2009 with the same periods of 2008. Those measures include total revenue, operating income, income before taxes, income taxes, effective tax rate, net income, and earnings per share adjusted to exclude the effect of the following items (described in more detail in the press release attached as Exhibit 99.1):
Х The following item in the third quarter of 2009:

Х Asset impairments and restructuring primarily related to the sale of our Tippecanoe, Indiana site.

Х A charge related to settlements and potential settlements with the attorneys general of several states of claims related to Zyprexa.

Х The following item in the second quarter of 2009:

Х A charge related to the potential settlement with the attorneys general of several states of claims related to Zyprexa.

Х The following items in the third quarter of 2008:

Х Charges related to Zyprexa investigations with the U.S. Attorney for the Eastern District of Pennsylvania, as well as the resolution of a multi-state investigation regarding Zyprexa involving 32 states and the District of Columbia.

Х Asset impairments and restructuring primarily driven by the sale of our Greenfield, Indiana site.

Х Acquired in-process research and development associated with the SGX acquisition.

Х The following items in the second quarter of 2008:

Х Restructuring and other special charges primarily related to the termination of the company's AIR Insulin program.

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Х Asset impairments associated with certain manufacturing operations (included in cost of sales).

Х In-process research and development (IPR&D) charges associated with a licensing arrangement with TransPharma Medical Ltd.

Х The following items in the first quarter of 2008:

Х A tax benefit from resolution of a substantial portion of an IRS audit of the company's federal income tax returns for the years 2001 to 2004.

Х Asset impairments, restructuring, and other special charges primarily related to the termination of the company's AIR Insulin program.

Х In-process research and development charges associated with an in-licensing transaction with BioMS Medical.

In addition, the pro forma non-GAAP presentation assumes that the acquisition of ImClone Systems Incorporated ("ImClone") was completed on January 1, 2008, and includes adjustments to the first three quarters of 2008 for the ImClone acquisition. We also provide certain operating results, including earnings-per-share growth, without the impact of changes in foreign exchange rates for the third quarter and first nine months of 2009 compared to the same periods in 2008.
In the press release attached as Exhibit 99.1, we provided financial expectations for 2009. We provided earnings per share, revenue, research and development expenses, and our effective tax rate expectations on both a GAAP basis and a pro forma non-GAAP basis. In order to provide additional insight into the earnings-per-share growth comparison between 2008 results and expected 2009 results, we adjusted 2008 earnings per share for the 2008 items described above and for the items described below for the balance of 2008. We presented 2008 as if the ImClone acquisition were completed on January 1, 2008.
Х In the fourth quarter of 2008:

Х Charges related to the acquisition of ImClone Systems, including in-process research and development, as well as ImClone operating results subsequent to the acquisition, incremental interest costs and amortization of the intangible asset associated with Erbituxо.

Х Asset impairments, restructuring and other special charges.

Х A tax benefit based upon the determination at final resolution of the agreement that a portion of the EDPA settlement charge, taken in the third quarter of 2008, is tax deductible.

The items that we exclude when we provide adjusted results or adjusted expectations are typically highly variable, difficult to predict, and of a size that could have a substantial impact on our reported operations for a period. We believe that these non-GAAP measures provide useful

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information to investors. Among other things, they may help investors evaluate our ongoing operations. They can assist in making meaningful period-over-period comparisons and in identifying operating trends that would otherwise be masked or distorted by the items subject to the adjustments. Management uses these non-GAAP measures internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets.
Investors should consider these non-GAAP measures in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. For the reasons described above for use of non-GAAP measures, our prospective earnings guidance is subject to adjustment for certain future matters, similar to those identified above, as to which prospective quantification generally is not feasible.
In accordance with GAAP, we have provided pro forma results in order to help investors make meaningful comparisons of 2009 results and expections to 2008 results and identify underlying operating trends that might otherwise be masked by the inclusion of ImClone results in a part of 2008.
The information in this Item 2.02 and the press release attached as Exhibit 99.1 are considered furnished to the Commission and are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Item 9.01. Financial Statements and Exhibits

Exhibit Number Description
99.1 Press release dated October 21, 2009, together with related attachments

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