Eli Lilly & Co. (LLY)

Analysis of Investments

Difficulty: Advanced

Eli Lilly & Co., adjustment to Net Income (loss)

USD $ in thousands

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net income (loss) (as reported)	(204,100)	2,737,600	2,408,400	2,390,500	4,684,800
Add: Change in net unrealized gains and losses on securities	(126,300)	213,900	(89,600)	(105,500)	132,700
Net income (loss) (adjusted)	(330,400)	2,951,500	2,318,800	2,285,000	4,817,500

Eli Lilly & Co., adjusted ratios

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net Profit Margin
Reported net profit margin	-0.89%	12.90%	12.07%	12.19%	20.27%
Adjusted net profit margin	-1.44%	13.91%	11.62%	11.65%	20.84%
Return on Equity (ROE)
Reported ROE	-1.76%	19.54%	16.53%	15.55%	26.57%
Adjusted ROE	-2.85%	21.07%	15.91%	14.86%	27.32%
Return on Assets (ROA)
Reported ROA	-0.45%	7.05%	6.77%	6.43%	13.29%
Adjusted ROA	-0.73%	7.61%	6.52%	6.15%	13.67%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Eli Lilly & Co.'s adjusted net profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Eli Lilly & Co.'s adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Eli Lilly & Co.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
As Reported
Net income (loss) (USD $ in thousands)	(204,100)	2,737,600	2,408,400	2,390,500	4,684,800
Revenue (USD $ in thousands)	22,871,300	21,222,100	19,958,700	19,615,600	23,113,100

Net profit margin¹	-0.89%	12.90%	12.07%	12.19%	20.27%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) (USD $ in thousands)	(330,400)	2,951,500	2,318,800	2,285,000	4,817,500
Revenue (USD $ in thousands)	22,871,300	21,222,100	19,958,700	19,615,600	23,113,100

Adjusted net profit margin²	-1.44%	13.91%	11.62%	11.65%	20.84%

2017 Calculations

¹ Net profit margin = 100 × Net income (loss) ÷ Revenue
= 100 × -204,100 ÷ 22,871,300 = -0.89%

² Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Revenue
= 100 × -330,400 ÷ 22,871,300 = -1.44%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Eli Lilly & Co.'s adjusted net profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
As Reported
Net income (loss) (USD $ in thousands)	(204,100)	2,737,600	2,408,400	2,390,500	4,684,800
Total Eli Lilly and Company shareholders' equity (USD $ in thousands)	11,592,200	14,007,700	14,571,300	15,373,200	17,631,400

ROE¹	-1.76%	19.54%	16.53%	15.55%	26.57%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) (USD $ in thousands)	(330,400)	2,951,500	2,318,800	2,285,000	4,817,500
Total Eli Lilly and Company shareholders' equity (USD $ in thousands)	11,592,200	14,007,700	14,571,300	15,373,200	17,631,400

Adjusted ROE²	-2.85%	21.07%	15.91%	14.86%	27.32%

2017 Calculations

¹ ROE = 100 × Net income (loss) ÷ Total Eli Lilly and Company shareholders' equity
= 100 × -204,100 ÷ 11,592,200 = -1.76%

² Adjusted ROE = 100 × Adjusted net income (loss) ÷ Total Eli Lilly and Company shareholders' equity
= 100 × -330,400 ÷ 11,592,200 = -2.85%

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Eli Lilly & Co.'s adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
As Reported
Net income (loss) (USD $ in thousands)	(204,100)	2,737,600	2,408,400	2,390,500	4,684,800
Total assets (USD $ in thousands)	44,981,000	38,805,900	35,568,900	37,178,200	35,248,700

ROA¹	-0.45%	7.05%	6.77%	6.43%	13.29%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) (USD $ in thousands)	(330,400)	2,951,500	2,318,800	2,285,000	4,817,500
Total assets (USD $ in thousands)	44,981,000	38,805,900	35,568,900	37,178,200	35,248,700

Adjusted ROA²	-0.73%	7.61%	6.52%	6.15%	13.67%

2017 Calculations

¹ ROA = 100 × Net income (loss) ÷ Total assets
= 100 × -204,100 ÷ 44,981,000 = -0.45%

² Adjusted ROA = 100 × Adjusted net income (loss) ÷ Total assets
= 100 × -330,400 ÷ 44,981,000 = -0.73%

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Eli Lilly & Co.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.