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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Elanco Animal Health Incorporated | NYSE:ELAN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.19 | -1.43% | 13.07 | 13.22 | 13.00 | 13.15 | 120,421 | 15:04:24 |
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INDIANA
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82-5497352
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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Page
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Condensed Consolidated and Combined Statements of Operations
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Condensed Consolidated and Combined Statements of Comprehensive Income (Loss)
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Condensed Consolidated and Combined Balance Sheets
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Condensed Consolidated and Combined Statements of Equity
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Condensed Consolidated and Combined Statements of Cash Flows
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Notes to Condensed Consolidated and Combined Financial Statements
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Overview
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Results of Operations
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Summary of Changes
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Liquidity and Capital
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Contractual Obligations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Item 3.
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Defaults Upon Senior Securities
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Other Information
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•
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heightened competition, including from new innovation or generics;
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•
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the impact of disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein;
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•
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changes in regulatory restrictions on the use of antibiotics in food animals, as well as changing market demand regarding the use of antibiotics and productivity products;
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•
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our ability to implement our business strategies or achieve targeted cost efficiencies and gross margin improvements;
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•
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consolidation of our customers and distributors;
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•
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the success of our R&D, acquisition and licensing efforts;
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•
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unanticipated safety, quality or efficacy concerns associated with our products;
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•
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the impact of weather conditions and the availability of natural resources;
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•
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changes in U.S. foreign trade policy, imposition of tariffs or trade disputes;
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•
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the impact of global macroeconomic conditions; and
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•
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the effect on our business of the transactions involving the separation of our business from that of Eli Lilly & Co. (Lilly) and distribution of Lilly's interest in us to its shareholders, if consummated.
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Three Months Ended September 30,
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Nine Months Ended September 30,
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||||||||||||
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2018
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2017
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2018
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2017
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||||||||
Revenue
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$
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761.1
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$
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697.1
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$
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2,267.5
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$
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2,134.7
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Costs, expenses and other:
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||||||||
Cost of sales
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369.8
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376.2
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1,161.3
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1,088.9
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||||
Research and development
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58.9
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61.9
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185.5
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189.7
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Marketing, selling and administrative
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179.0
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194.7
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550.1
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583.0
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Amortization of intangible assets
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48.7
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51.6
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147.3
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161.0
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Asset impairments, restructuring and other special charges (Note 6)
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12.4
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23.7
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82.8
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189.3
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Other–net, (income) expense
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13.5
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(1.9
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)
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24.2
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—
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||||
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682.3
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706.2
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2,151.2
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2,211.9
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Income (loss) before income taxes
|
78.8
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(9.1
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)
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116.3
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(77.2
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)
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||||
Income tax expense
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18.6
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11.6
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46.2
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72.0
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Net income (loss)
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$
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60.2
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$
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(20.7
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)
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$
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70.1
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$
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(149.2
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)
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Earnings (loss) per share:
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Basic and diluted
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$
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0.16
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$
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(0.06
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)
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$
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0.19
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$
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(0.41
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)
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Weighted average shares outstanding:
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||||||||
Basic and diluted
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365.6
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365.6
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365.6
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365.6
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Three Months Ended September 30,
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Nine Months Ended September 30,
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||||||||||||
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2018
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2017
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2018
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2017
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||||||||
Net income (loss)
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$
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60.2
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$
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(20.7
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)
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$
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70.1
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$
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(149.2
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)
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Other comprehensive income (loss), net of tax
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94.5
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(4.0
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)
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(9.8
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)
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231.8
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Comprehensive income (loss)
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$
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154.7
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$
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(24.7
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)
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$
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60.3
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$
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82.6
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September 30, 2018
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December 31, 2017
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Assets
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(Unaudited)
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Current Assets
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Cash and cash equivalents
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$
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300.0
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$
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323.4
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Accounts receivable, net of allowances of $8.8 (2018) and $9.8 (2017)
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606.1
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567.4
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Other receivables
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30.8
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34.5
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Inventories (Note 7)
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1,008.7
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1,062.3
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Prepaid expenses and other
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123.2
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136.1
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Restricted cash (Note 14)
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634.9
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—
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Total current assets
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2,703.7
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2,123.7
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Noncurrent Assets
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Investments (Note 9)
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14.9
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12.3
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Goodwill
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2,968.8
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2,969.2
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Other intangibles, net
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2,514.8
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2,672.8
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Other noncurrent assets
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100.0
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242.0
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Property and equipment, net of accumulated depreciation $894.5 (2018) and $834.1 (2017)
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909.3
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920.3
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Total assets
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$
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9,211.5
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$
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8,940.3
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Liabilities and Equity
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Current Liabilities
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Accounts payable
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$
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202.7
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$
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203.8
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Employee compensation
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81.3
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89.3
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Sales rebates and discounts
|
147.9
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165.5
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Other current liabilities
|
178.6
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184.5
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Payable to Lilly (Note 14)
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634.9
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—
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Total current liabilities
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1,245.4
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643.1
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Noncurrent Liabilities
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Long-term debt (Note 8)
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2,478.5
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—
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Accrued retirement benefits
|
136.0
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139.0
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Deferred taxes
|
125.0
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251.9
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|
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Other noncurrent liabilities
|
89.5
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126.0
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Total liabilities
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4,074.4
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1,160.0
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Commitments and Contingencies (Note 11)
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Equity
|
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|
||||
Net parent company investment
|
—
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8,036.9
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Common stock, no par value, 5,000,000,000 shares authorized 365,625,000 shares issued and outstanding as of September 30, 2018
|
—
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—
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Additional paid-in capital
|
5,347.4
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—
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Accumulated other comprehensive loss
|
(210.3
|
)
|
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(256.6
|
)
|
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Total equity
|
5,137.1
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|
7,780.3
|
|
||
Total liabilities and equity
|
$
|
9,211.5
|
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|
$
|
8,940.3
|
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Common Stock
|
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Accumulated Other Comprehensive Income (Loss)
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|||||||||||||||||||||
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Shares
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Amount
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Additional Paid-in Capital
|
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Net Parent Company Investment
|
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Foreign Currency Translation
|
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Defined Benefit Pension and Retiree Health Benefit Plans
|
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Total
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Total Equity
|
|||||||||||||||
December 31, 2016
|
—
|
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$
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—
|
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$
|
—
|
|
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$
|
7,474.3
|
|
|
$
|
(437.3
|
)
|
|
$
|
(19.6
|
)
|
|
$
|
(456.9
|
)
|
|
$
|
7,017.4
|
|
Net loss
|
—
|
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|
—
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|
|
—
|
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(149.2
|
)
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—
|
|
|
—
|
|
|
—
|
|
|
(149.2
|
)
|
|||||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
228.1
|
|
|
3.7
|
|
|
231.8
|
|
|
231.8
|
|
|||||||
Transfers (to)/from Lilly, net
|
—
|
|
|
—
|
|
|
—
|
|
|
862.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
862.7
|
|
|||||||
September 30, 2017
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,187.8
|
|
|
$
|
(209.2
|
)
|
|
$
|
(15.9
|
)
|
|
$
|
(225.1
|
)
|
|
$
|
7,962.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|||||||||||||||
December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,036.9
|
|
|
$
|
(227.2
|
)
|
|
$
|
(29.4
|
)
|
|
$
|
(256.6
|
)
|
|
$
|
7,780.3
|
|
Adoption of Accounting Standards Update 2016-16
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
70.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70.1
|
|
|||||||
Other comprehensive income (loss), net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20.6
|
)
|
|
10.8
|
|
|
(9.8
|
)
|
|
(9.8
|
)
|
|||||||
Transfers (to)/from Lilly, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(226.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(226.3
|
)
|
|||||||
Separation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
|
56.1
|
|
|
—
|
|
|
56.1
|
|
|
58.3
|
|
|||||||
Issuance of common stock
|
365.6
|
|
|
—
|
|
|
1,659.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,659.7
|
|
|||||||
Consideration to Lilly in connection with the Separation
|
—
|
|
|
—
|
|
|
(4,194.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,194.9
|
)
|
|||||||
Reclassification of net parent company investment
|
—
|
|
|
—
|
|
|
7,882.6
|
|
|
(7,882.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
September 30, 2018
|
365.6
|
|
|
$
|
—
|
|
|
$
|
5,347.4
|
|
|
$
|
—
|
|
|
$
|
(191.7
|
)
|
|
$
|
(18.6
|
)
|
|
$
|
(210.3
|
)
|
|
$
|
5,137.1
|
|
|
Nine Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash Flows from Operating Activities
|
|
||||||
Net income (loss)
|
$
|
70.1
|
|
|
$
|
(149.2
|
)
|
Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities:
|
|
|
|
||||
Depreciation and amortization
|
222.3
|
|
|
231.3
|
|
||
Change in deferred income taxes
|
12.6
|
|
|
(7.0
|
)
|
||
Stock-based compensation expense
|
20.2
|
|
|
18.7
|
|
||
Asset impairment charges
|
102.5
|
|
|
43.8
|
|
||
Gain on sale of assets
|
—
|
|
|
(16.0
|
)
|
||
Other changes in operating assets and liabilities, net of acquisitions and divestitures
|
(83.4
|
)
|
|
42.7
|
|
||
Other non-cash operating activities, net
|
3.5
|
|
|
2.8
|
|
||
Net Cash Provided by Operating Activities
|
347.8
|
|
|
167.1
|
|
||
Cash Flows from Investing Activities
|
|
|
|
||||
Net purchases of property and equipment
|
(74.3
|
)
|
|
(31.7
|
)
|
||
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
(882.1
|
)
|
||
Other investing activities, net
|
(4.6
|
)
|
|
(15.3
|
)
|
||
Net Cash Used for Investing Activities
|
(78.9
|
)
|
|
(929.1
|
)
|
||
Cash Flows from Financing Activities
|
|
|
|
||||
Proceeds from issuance of long-term debt (Note 8)
|
2,477.7
|
|
|
—
|
|
||
Proceeds from issuance of common stock (Note 1)
|
1,659.7
|
|
|
—
|
|
||
Consideration paid to Lilly in connection with the Separation (Note 1)
|
(3,559.1
|
)
|
|
—
|
|
||
Other financing activities, net
|
(3.7
|
)
|
|
(0.5
|
)
|
||
Other net transactions with Lilly
|
(247.4
|
)
|
|
844.0
|
|
||
Net Cash Provided by Financing Activities
|
327.2
|
|
|
843.5
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
15.4
|
|
|
3.3
|
|
||
Net increase in cash, cash equivalents and restricted cash
|
611.5
|
|
|
84.8
|
|
||
Cash, cash equivalents and restricted cash at January 1
|
323.4
|
|
|
258.8
|
|
||
Cash, cash equivalents and restricted cash at September 30
|
$
|
934.9
|
|
|
$
|
343.6
|
|
|
September 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash and cash equivalents
|
$
|
300.0
|
|
|
$
|
343.6
|
|
Restricted cash (Note 14)
|
634.9
|
|
|
—
|
|
||
Cash, cash equivalents and restricted cash at September 30
|
$
|
934.9
|
|
|
$
|
343.6
|
|
Standard
|
|
Description
|
|
Effect on the financial statements or other significant matters
|
Accounting Standards Update 2014-09 and various other related updates,
Revenue from Contracts with Customers
|
|
This standard replaced existing revenue recognition standards and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity can apply the new revenue standard retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. We applied the latter approach.
|
|
Application of the new standard to applicable contracts had no impact to net parent company investment as of January 1, 2018. Disclosures required by the new standard are included in Note 5.
|
Accounting Standards Update 2016-16,
Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory
|
|
This standard requires entities to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of transfer. This standard requires a modified retrospective approach to adoption.
|
|
Upon adoption, the cumulative effect of applying the standard resulted in a decrease to net parent company investment of approximately $0.3 million. Adoption of this standard did not result in a material change in net income for the three and nine months ended September 30, 2018.
|
Accounting Standards Update 2017-07,
Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
|
|
This standard was issued to improve the transparency and comparability among organizations by requiring entities to separate their net periodic pension cost and net periodic postretirement benefit cost into a service cost component and other components. Previously, the costs of the other components along with the service cost component were classified based upon the function of the employee. This standard requires entities to classify the service cost component in the same financial statement line item or items as other compensation costs arising from services rendered by pertinent employees. The other components of net benefit cost are now presented separately from the line items that include the service cost component. When applicable, the service cost component is now the only component eligible for capitalization. An entity should apply the new standard retrospectively for the classification of the service cost and other components and prospectively for the capitalization of the service cost component.
|
|
Upon adoption of this standard, pension and postretirement benefit cost components other than service costs are presented in other–net, (income) expense. Retrospective application was not material to the combined statement of operations for the three and nine months ended September 30, 2017. We do not expect application of the new standard to have a material impact on an ongoing basis.
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the financial statements or other significant matters
|
Accounting Standards Update 2016-02,
Leases
|
|
This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities, including leases classified as operating leases under current GAAP, on the balance sheet and requiring additional disclosures about leasing arrangements. An entity can apply the new leases standard retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. We plan to use the latter approach.
|
|
This standard is effective January 1, 2019, with early adoption permitted. We intend to adopt this standard on that date.
|
|
We are in the process of determining the impact on our consolidated financial statements. We have selected a software solution to be compatible with our enterprise software system. Development of our selected solution is ongoing, as it is not yet fully compliant with the requirements of the standard. The timely readiness of the lease software system is critical to ensure an efficient and effective adoption of the standard.
|
•
|
Most of our products are sold to wholesale distributors. We initially invoice our customers contractual list prices. Contracts with direct and indirect customers may provide for various rebates and discounts that may differ in each contract. As a consequence, to determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we must estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Significant judgments are required in making these estimates.
|
•
|
The rebate and discount amounts are recorded as a deduction to arrive at our net product sales. We estimate these accruals using an expected value approach.
|
•
|
In determining the appropriate accrual amount, we consider our historical experience with similar incentives programs and current sales data to estimate the impact of such programs on revenue and continually monitor the impact of this experience and adjust as necessary. Although we accrue a liability for rebates related to these
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Beginning balance
|
$
|
99.1
|
|
|
$
|
118.7
|
|
|
$
|
114.8
|
|
|
$
|
116.1
|
|
Reduction of revenue
|
53.5
|
|
|
48.6
|
|
|
154.2
|
|
|
184.9
|
|
||||
Payments
|
(49.1
|
)
|
|
(49.6
|
)
|
|
(165.5
|
)
|
|
(183.3
|
)
|
||||
Ending balance
|
$
|
103.5
|
|
|
$
|
117.7
|
|
|
$
|
103.5
|
|
|
$
|
117.7
|
|
•
|
We estimate a reserve for future product returns related to product sales using an expected value approach. This estimate is based on several factors, including: local returns policies and practices; returns as a percentage of revenue; an understanding of the reasons for past returns; estimated shelf life by product; and estimate of the amount of time between shipment and return. Adjustments to the returns reserve have been and may in the future be required based on revised estimates to our assumptions, which would have an impact on our consolidated results of operations. We record the return amounts as a deduction to arrive at our net product sales.
|
•
|
Actual product returns have been approximately
1%
of net revenue for the
three and nine months ended
September 30, 2018
and
2017
and have not fluctuated significantly as a percentage of revenue.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Companion Animal Disease Prevention
|
$
|
188.6
|
|
|
$
|
140.4
|
|
|
$
|
603.9
|
|
|
$
|
519.7
|
|
Companion Animal Therapeutics
|
80.5
|
|
|
63.5
|
|
|
211.1
|
|
|
181.8
|
|
||||
Companion Animal Other
|
27.7
|
|
|
48.3
|
|
|
69.3
|
|
|
119.9
|
|
||||
Food Animal Future Protein & Health
|
162.8
|
|
|
164.5
|
|
|
502.1
|
|
|
456.0
|
|
||||
Food Animal Ruminants & Swine
|
301.5
|
|
|
280.4
|
|
|
881.1
|
|
|
857.3
|
|
||||
Revenue
|
$
|
761.1
|
|
|
$
|
697.1
|
|
|
$
|
2,267.5
|
|
|
$
|
2,134.7
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cash expense:
|
|
|
|
|
|
|
|
||||||||
Severance
|
$
|
(0.2
|
)
|
|
$
|
5.8
|
|
|
$
|
(2.8
|
)
|
|
$
|
62.1
|
|
Integration and other
|
4.9
|
|
|
6.4
|
|
|
10.5
|
|
|
75.1
|
|
||||
Exit costs
|
1.5
|
|
|
11.5
|
|
|
11.2
|
|
|
24.3
|
|
||||
Total cash expense
|
6.2
|
|
|
23.7
|
|
|
18.9
|
|
|
161.5
|
|
||||
Non-cash expense
|
|
|
|
|
|
|
|
||||||||
Asset impairment
|
6.2
|
|
|
—
|
|
|
63.9
|
|
|
43.8
|
|
||||
Total non-cash expense
|
6.2
|
|
|
—
|
|
|
63.9
|
|
|
43.8
|
|
||||
Gain on sale of fixed assets
|
—
|
|
|
—
|
|
|
—
|
|
|
(16.0
|
)
|
||||
Total
|
$
|
12.4
|
|
|
$
|
23.7
|
|
|
$
|
82.8
|
|
|
$
|
189.3
|
|
|
Exit costs
|
|
Severance
|
|
Total
|
||||||
Balance at December 31, 2016
|
$
|
11.5
|
|
|
$
|
26.6
|
|
|
$
|
38.1
|
|
Charges
|
24.3
|
|
|
62.1
|
|
|
86.4
|
|
|||
Cash paid
|
(7.6
|
)
|
|
(61.8
|
)
|
|
(69.4
|
)
|
|||
Balance at September 30, 2017
|
$
|
28.2
|
|
|
$
|
26.9
|
|
|
$
|
55.1
|
|
|
|
|
|
|
|
||||||
Balance at December 31, 2017
|
$
|
34.9
|
|
|
$
|
43.1
|
|
|
$
|
78.0
|
|
Charges
|
11.2
|
|
|
(2.8
|
)
|
|
8.4
|
|
|||
Separation adjustment
|
(5.9
|
)
|
|
—
|
|
|
(5.9
|
)
|
|||
Cash paid
|
(10.9
|
)
|
|
(22.6
|
)
|
|
(33.5
|
)
|
|||
Balance at September 30, 2018
|
$
|
29.3
|
|
|
$
|
17.7
|
|
|
$
|
47.0
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Finished products
|
$
|
408.1
|
|
|
$
|
452.0
|
|
Work in process
|
572.3
|
|
|
580.0
|
|
||
Raw materials and supplies
|
71.4
|
|
|
70.4
|
|
||
Total (approximates replacement cost)
|
1,051.8
|
|
|
1,102.4
|
|
||
Decrease to LIFO cost
|
(43.1
|
)
|
|
(40.1
|
)
|
||
Inventories
|
$
|
1,008.7
|
|
|
$
|
1,062.3
|
|
|
September 30, 2018
|
|
|
Term credit facility
|
$
|
500.0
|
|
3.912% Senior Notes due 2021
|
500.0
|
|
|
4.272% Senior Notes due 2023
|
750.0
|
|
|
4.900% Senior Notes due 2028
|
750.0
|
|
|
Other obligations
|
0.2
|
|
|
Unamortized debt issuance costs
|
(21.7
|
)
|
|
Total long-term debt
|
2,478.5
|
|
|
Less current portion of long-term debt
|
—
|
|
|
|
$
|
2,478.5
|
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
Financial statement line item
|
Carrying
Amount
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant
Other Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||||
September 30, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
Other current liabilities- contingent consideration
|
$
|
17.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17.4
|
|
|
$
|
17.4
|
|
Other noncurrent liabilities- contingent consideration
|
41.4
|
|
|
—
|
|
|
—
|
|
|
41.4
|
|
|
41.4
|
|
|||||
December 31, 2017
|
|
|
|
|
|
|
|
|
|
||||||||||
Other current liabilities- contingent consideration
|
1.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
1.3
|
|
|||||
Other noncurrent liabilities- contingent consideration
|
45.2
|
|
|
—
|
|
|
—
|
|
|
45.2
|
|
|
45.2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue—to unaffiliated customers
(1)
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
382.2
|
|
|
$
|
321.4
|
|
|
$
|
1,108.6
|
|
|
$
|
1,054.6
|
|
International
|
378.9
|
|
|
375.7
|
|
|
1,158.9
|
|
|
1,080.1
|
|
||||
Revenue
|
$
|
761.1
|
|
|
$
|
697.1
|
|
|
$
|
2,267.5
|
|
|
$
|
2,134.7
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Long-lived assets
(2)
|
|
|
|
||||
United States
|
$
|
589.5
|
|
|
$
|
604.7
|
|
United Kingdom
|
195.9
|
|
|
204.4
|
|
||
Other foreign countries
|
190.5
|
|
|
190.2
|
|
||
Long-lived assets
|
$
|
975.9
|
|
|
$
|
999.3
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of sales
|
$
|
7.0
|
|
|
$
|
7.7
|
|
|
$
|
21.8
|
|
|
$
|
23.0
|
|
Research and development
|
0.7
|
|
|
0.7
|
|
|
2.2
|
|
|
2.1
|
|
||||
Marketing, selling and administrative
|
26.4
|
|
|
27.7
|
|
|
81.2
|
|
|
82.7
|
|
||||
Total
|
$
|
34.1
|
|
|
$
|
36.1
|
|
|
$
|
105.2
|
|
|
$
|
107.8
|
|
|
Three Months Ended September 30,
|
|
%
|
|
Nine Months Ended September 30,
|
|
%
|
||||||||||||||
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
||||||||||
Revenue
|
$
|
761.1
|
|
|
$
|
697.1
|
|
|
9
|
%
|
|
$
|
2,267.5
|
|
|
$
|
2,134.7
|
|
|
6
|
%
|
Costs, expenses and other:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of sales
|
369.8
|
|
|
376.2
|
|
|
(2
|
)%
|
|
1,161.3
|
|
|
1,088.9
|
|
|
7
|
%
|
||||
% of revenue
|
49
|
%
|
|
54
|
%
|
|
(5
|
)%
|
|
51
|
%
|
|
51
|
%
|
|
—
|
%
|
||||
Research and development
|
58.9
|
|
|
61.9
|
|
|
(5
|
)%
|
|
185.5
|
|
|
189.7
|
|
|
(2
|
)%
|
||||
% of revenue
|
8
|
%
|
|
9
|
%
|
|
(1
|
)%
|
|
8
|
%
|
|
9
|
%
|
|
(1
|
)%
|
||||
Marketing, selling and administrative
|
179.0
|
|
|
194.7
|
|
|
(8
|
)%
|
|
550.1
|
|
|
583.0
|
|
|
(6
|
)%
|
||||
% of revenue
|
24
|
%
|
|
28
|
%
|
|
(4
|
)%
|
|
24
|
%
|
|
27
|
%
|
|
(3
|
)%
|
||||
Amortization of intangible assets
|
48.7
|
|
|
51.6
|
|
|
(6
|
)%
|
|
147.3
|
|
|
161.0
|
|
|
(9
|
)%
|
||||
% of revenue
|
6
|
%
|
|
7
|
%
|
|
(1
|
)%
|
|
6
|
%
|
|
8
|
%
|
|
(1
|
)%
|
||||
Asset impairment, restructuring and other special charges
|
12.4
|
|
|
23.7
|
|
|
(48
|
)%
|
|
82.8
|
|
|
189.3
|
|
|
(56
|
)%
|
||||
Other - (income) expense
|
13.5
|
|
|
(1.9
|
)
|
|
NM
|
|
|
24.2
|
|
|
—
|
|
|
NM
|
|
||||
Income (loss) before taxes
|
78.8
|
|
|
(9.1
|
)
|
|
NM
|
|
|
116.3
|
|
|
(77.2
|
)
|
|
NM
|
|
||||
% of revenue
|
10
|
%
|
|
(1
|
)%
|
|
11
|
%
|
|
5
|
%
|
|
(4
|
)%
|
|
NM
|
|
||||
Income tax expense
|
18.6
|
|
|
11.6
|
|
|
60
|
%
|
|
46.2
|
|
|
72.0
|
|
|
(36
|
)%
|
||||
Net income (loss)
|
$
|
60.2
|
|
|
$
|
(20.7
|
)
|
|
NM
|
|
|
$
|
70.1
|
|
|
$
|
(149.2
|
)
|
|
NM
|
|
|
Three Months Ended September 30,
|
|
%
|
|
Nine Months Ended September 30,
|
|
%
|
||||||||||||||
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
||||||||||
CA Disease Prevention
|
$
|
188.6
|
|
|
$
|
140.4
|
|
|
34
|
%
|
|
$
|
603.9
|
|
|
$
|
519.7
|
|
|
16
|
%
|
CA Therapeutics
|
80.5
|
|
|
63.5
|
|
|
27
|
%
|
|
211.1
|
|
|
181.8
|
|
|
16
|
%
|
||||
FA Future Protein & Health
|
162.8
|
|
|
164.5
|
|
|
(1
|
)%
|
|
502.1
|
|
|
456.0
|
|
|
10
|
%
|
||||
FA Ruminants & Swine
|
301.5
|
|
|
280.4
|
|
|
8
|
%
|
|
881.1
|
|
|
857.3
|
|
|
3
|
%
|
||||
Subtotal
|
733.4
|
|
|
648.8
|
|
|
13
|
%
|
|
2,198.2
|
|
|
2,014.8
|
|
|
9
|
%
|
||||
Strategic Exits
(1)
|
27.7
|
|
|
48.3
|
|
|
(42
|
)%
|
|
69.3
|
|
|
119.9
|
|
|
(42
|
)%
|
||||
Total
|
$
|
761.1
|
|
|
$
|
697.1
|
|
|
9
|
%
|
|
$
|
2,267.5
|
|
|
$
|
2,134.7
|
|
|
6
|
%
|
•
|
an increase in revenue of $49.4 million or 35% from CA Disease Prevention products, excluding the impact of foreign exchange rates;
|
•
|
an increase in revenue of $17.5 million or 28% from CA Therapeutics products, excluding the impact of foreign exchange rates;
|
•
|
an increase in revenue of $2.8 million or 2% from FA Future Protein & Health products, excluding the impact foreign exchange rates; and
|
•
|
an increase in revenue of $26.3 million or 10% from FA Ruminants & Swine products, excluding the impact of foreign exchange rates;
|
•
|
a decrease in revenue of $11.5 million due to the negative impact of foreign exchange rates; and
|
•
|
a decrease in revenue of $20.5 million from Strategic Exits, excluding the impact of foreign exchange rates.
|
•
|
CA Disease Prevention revenue increased by $48.2 million or 34% primarily driven by increases in volume and price, partially offset by an unfavorable impact from foreign exchange rates. Growth was primarily driven by higher realized price on Trifexis and a favorable comparison to prior year related to an anticipated stock out in third quarter of 2017 which shifted sales of Trifexis to the second quarter of 2017. Growth was also driven by the continued uptake of Interceptor Plus and Credelio, as well as increased sales of certain vaccines from new customer agreements.
|
•
|
CA Therapeutics revenue increased by $17.0 million or 27% due to volume and increased price, partially offset by the unfavorable impact of foreign exchange rates. Growth was primarily due to the re-introduction of Galliprant 100mg for dogs, continued uptake of the product and realized price increases across the category.
|
•
|
FA Future Protein & Health revenue decreased by $1.7 million or 1% due to unfavorable impact from foreign exchange rates and a decline in volume, partially offset by increased price. Volume growth in aqua, vaccines and nutritional health products was offset by international purchasing patterns in the current year for poultry which shifted sales from the third quarter of 2018 to the first half of 2018.
|
•
|
FA Ruminants & Swine revenue increased by $21.1 million or 8% due primarily to increases in volume partially offset by the unfavorable impact of foreign exchange rates. Growth was driven mainly by U.S. and international purchasing patterns in both the current and prior year which resulted in higher sales in third quarter of 2018.
|
•
|
Strategic Exits revenue decreased by $20.6 million or 42% due primarily to reduced revenue from a temporary contract manufacturing arrangement as part of the acquisition of the BI Vetmedica U.S. vaccines portfolio (BIVIVP), as well as the termination of two legacy U.S. distribution agreements acquired as part of our Novartis Animal Health acquisition.
|
•
|
an increase in revenue of $22.9 million due to the positive impact of foreign exchange rates;
|
•
|
an increase in revenue of $79.6 million or 15% from CA Disease Prevention products, excluding the impact foreign exchange rates;
|
•
|
an increase in revenue of $24.3 million or 13% from CA Therapeutics products, excluding the impact of foreign exchange rates;
|
•
|
an increase in revenue of $39.4 million or 9% from FA Future Protein & Health products, excluding the impact of foreign exchange rates;
|
•
|
an increase in revenue of $17.7 million or 2% from FA Ruminants & Swine, excluding the
|
•
|
a decrease in revenue of $51.1 million from Strategic Exits, excluding the impact of foreign exchange rates.
|
•
|
CA Disease Prevention revenue increased by $84.2 million or 16% due primarily to the continued uptake of Credelio and Interceptor Plus, as well as realized price increases primarily impacting Trifexis, Capstar and Comfortis, partially offset by competition in certain parasiticides, primarily impacting Trifexis and Comfortis.
|
•
|
CA Therapeutics revenue increased by $29.3 million or 16% due primarily to the continued uptake of Galliprant and Osurnia, as well as increased demand for Atopica and Onsior, partially offset by a temporary supply shortage of Percorten V used for the treatment of canine Addison’s Disease.
|
•
|
FA Future Protein & Health revenue increased by $46.1 million or 10% due primarily to the launch of Imvixa and the growth in poultry animal-only antibiotics and AviPro.
|
•
|
FA Ruminants & Swine revenue increased by $23.8 million or 3% due primarily to growth in animal-only and shared-class antibiotics, offset by competition from generic ractopamine based products.
|
•
|
Strategic Exits revenue decreased by $50.6 million or 42% due to reduced revenue from a temporary contract manufacturing arrangement as part of the acquisition of BIVIVP, as well as the termination in the third quarter of 2017 of a legacy U.S. distribution agreement acquired as part of our Novartis Animal Health acquisition.
|
|
Nine Months Ended September 30,
|
%
|
|||||||
Net cash provided by (used in):
|
2018
|
|
2017
|
Change
|
|||||
Operating activities
|
$
|
347.8
|
|
|
$
|
167.1
|
|
108
|
%
|
Investing activities
|
(78.9
|
)
|
|
(929.1
|
)
|
(92
|
)%
|
||
Financing activities
|
327.2
|
|
|
843.5
|
|
(61
|
)%
|
||
Effect of exchange-rate changes on cash and cash equivalents
|
15.4
|
|
|
3.3
|
|
367
|
%
|
||
Net increase in cash, cash equivalents and restricted cash
|
$
|
611.5
|
|
|
$
|
84.8
|
|
621
|
%
|
Exhibit Number
|
Description
|
3.1
|
Amended and Restated Articles of Incorporation of Elanco Animal Health Incorporated, effective September 18, 2018 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
3.2
|
Amended and Restated Bylaws of Elanco Animal Health Incorporated, effective September 19, 2018 (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
4.1
|
Form of Certificate of Common Stock (incorporated by reference to Exhibit 4.1 of Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-226536) filed with the SEC on September 6, 2018).
|
4.2
|
Indenture, dated August 28, 2018, between Elanco Animal Health Incorporated and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.2 of Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-226536) filed with the SEC on September 6, 2018).
|
4.3
|
First Supplemental Indenture, dated August 28, 2018, between Elanco Animal Health Incorporated and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.3 of Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-226536) filed with the SEC on September 6, 2018).
|
10.1
|
Registration Rights Agreement, dated August 28, 2018, between Elanco Animal Health Incorporated and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several initial purchasers (incorporated by reference to Exhibit 4.4 of Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-226536) filed with the SEC on September 6, 2018).
|
10.2
|
Master Separation Agreement, dated September 24, 2018, between Eli Lilly and Company and Elanco Animal Health Incorporated (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.3
|
Transitional Services Agreement, dated September 24, 2018, between Eli Lilly and Company and Elanco Animal Health Incorporated (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.4
|
Tax Matters Agreement, dated September 24, 2018, between Eli Lilly and Company and Elanco Animal Health Incorporated (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.5
|
Employee Matters Agreement, dated September 24, 2018, between Eli Lilly and Company and Elanco Animal Health Incorporated (incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.6
|
Toll Manufacturing and Supply Agreement, dated September 24, 2018, between Eli Lilly Export S.A. and Elanco UK AH Limited (incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.7
|
Registration Rights Agreement, dated September 24, 2018, between Eli Lilly and Company and Elanco Animal Health Incorporated (incorporated by reference to Exhibit 10.6 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.8
|
Transitional Trademark License Agreement, dated September 24, 2018, among Eli Lilly and Company, Elanco Animal Health Incorporated and Elanco US Inc. (incorporated by reference to Exhibit 10.7 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.9
|
Intellectual Property and Technology License Agreement, dated September 24, 2018, among Eli Lilly and Company, Elanco Animal Health Incorporated and Elanco US Inc. (incorporated by reference to Exhibit 10.8 of the Current Report on Form 8-K filed with the SEC on September 26, 2018).
|
10.10
|
Revolving Loan Credit Agreement, dated as of September 5, 2018, among Elanco Animal Health Incorporated, as borrower, JPMorgan Chase Bank, N.A., as administrative agent and the other Lenders party thereto (incorporated by reference to Exhibit 10.24 of Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-226536) filed with the SEC on September 6, 2018).
|
10.11
|
Term Loan Credit Agreement, dated as of September 5, 2018, among Elanco Animal Health Incorporated, as borrower, JPMorgan Chase Bank, N.A., as administrative agent and the other Lenders party thereto (incorporated by reference to Exhibit 10.25 of Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-226536) filed with the SEC on September 6, 2018).
|
10.12
|
2018 Elanco Stock Plan (incorporated by reference to Exhibit 4.3 of Registration Statement on Form S-8 (Registration No. 333-227447) filed with the SEC on September 20, 2018).
|
10.13
|
Elanco Animal Health Incorporated Directors’ Deferral Plan (incorporated by reference to Exhibit 4.4 of Registration Statement on Form S-8 (Registration No. 333-227447) filed with the SEC on September 20, 2018).
|
Section 302 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
Section 302 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
101
|
Interactive Data Files.
|
|
|
ELANCO ANIMAL HEALTH INCORPORATED
|
|
|
(Registrant)
|
|
|
|
Date:
|
November 8, 2018
|
/s/ Jeff Simmons
|
|
|
Jeff Simmons
|
|
|
President and Chief Executive Officer
|
Date:
|
November 8, 2018
|
/s/ James Meer
|
|
|
James Meer
|
|
|
Chief Accounting Officer
|
1 Year Elanco Animal Health Chart |
1 Month Elanco Animal Health Chart |
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