Eli Lilly & Co. (LLY)

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread
Economic Profit Margin

Eli Lilly & Co., economic profit calculation

USD $ in thousands

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net operating profit after taxes (NOPAT)¹
Cost of capital²	%	%	%	%	%
Invested capital³

Economic profit⁴

Source: Based on data from Eli Lilly & Co. Annual Reports

2017 Calculations

¹ NOPAT. See Details »

² Cost of capital. See Details »

³ Invested capital. See Details »

⁴ Economic profit = NOPAT – Cost of capital × Invested capital
= hidden – hidden % × hidden = hidden

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Eli Lilly & Co.'s economic profit increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Eli Lilly & Co., NOPAT calculation

USD $ in thousands

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net income (loss)
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowances for doubtful accounts²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease obligations⁵
	Adjusted interest expense
	Tax benefit of interest expense⁶
	Adjusted interest expense, after taxes⁷
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	Net operating profit after taxes (NOPAT)

Source: Based on data from Eli Lilly & Co. Annual Reports

2017 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in allowances for doubtful accounts.

³ Addition of increase (decrease) in LIFO reserve. See Details »

⁴ Addition of increase (decrease) in equity equivalents to net income (loss).

⁵ Addition of interest expense on capitalized operating leases. See Details »

⁶ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 35% = hidden

⁷ Addition of after taxes interest expense to net income (loss).

⁸ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35% = hidden

⁹ Elimination of after taxes investment income.

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Eli Lilly & Co.'s NOPAT increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Eli Lilly & Co., cash operating taxes calculation

USD $ in thousands

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Income taxes
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense
	Less: Tax imposed on investment income
	Cash operating taxes

Source: Based on data from Eli Lilly & Co. Annual Reports

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Eli Lilly & Co.'s cash operating taxes declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Eli Lilly & Co., invested capital calculation (financing approach)

USD $ in thousands

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Short-term borrowings and current maturities of long-term debt
	Long-term debt, excluding current maturities
	PV of operating lease payments¹
	Total reported debt & leases
	Total Eli Lilly and Company shareholders' equity
	Net deferred tax (assets) liabilities²
	Allowances for doubtful accounts³
	LIFO reserve⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Noncontrolling interests
	Adjusted total Eli Lilly and Company shareholders' equity
	Construction in progress⁷
	Investments⁸
	Invested capital

Source: Based on data from Eli Lilly & Co. Annual Reports

¹ Addition of capitalized operating leases. See Details »

² Elimination of deferred taxes from assets and liabilities. See Details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See Details »

⁵ Addition of equity equivalents to total Eli Lilly and Company shareholders' equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ Subtraction of investments.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Eli Lilly & Co.'s invested capital increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

Eli Lilly & Co., cost of capital calculations


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Eli Lilly & Co. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Eli Lilly & Co. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Eli Lilly & Co. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Eli Lilly & Co. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Eli Lilly & Co. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »

Eli Lilly & Co., economic spread calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in thousands)
Economic profit¹
Invested capital²
Ratio
Economic spread³	%	%	%	%	%

Source: Based on data from Eli Lilly & Co. Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Invested capital. See Details »

³ Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden %

Ratio	Description	The company
Economic spread	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Eli Lilly & Co.'s economic spread improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

Eli Lilly & Co., economic profit margin calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in thousands)
Economic profit¹
Revenue
Ratio
Economic profit margin²	%	%	%	%	%

Source: Based on data from Eli Lilly & Co. Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × hidden ÷ hidden = hidden %

Ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company's profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Eli Lilly & Co.'s economic profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

	Eli Lilly & Co.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Dec 31, 2017

Dec 31, 2016

Dec 31, 2015

Dec 31, 2014

Dec 31, 2013

Economic Spread

Economic Profit Margin