8-K

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): September 29, 2020

Elanco Animal Health Incorporated

(Exact name of registrant as specified in its charter)

Indiana	001-38661	82-5497352
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2500 Innovation Way Greenfield, Indiana (Address of principal executive offices) 46140 (Zip Code)

Registrant’s telephone number, including area code: (877) 352-6261

Not Applicable

(Former Name or Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	ELAN	New York Stock Exchange
5.00% Tangible Equity Units	ELAT	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

¨ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.05.          Costs Associated with Exit or Disposal Activities.

On September 29, 2020, the Board of Directors of Elanco Animal Health Incorporated (the “Company”) authorized a restructuring program to reduce duplication, drive efficiency and optimize the company’s footprint in key geographies following the acquisition of Bayer Animal Health. As part of the restructuring program, the Company intends to eliminate approximately 900 positions across nearly 40 countries, primarily in commercial and marketing, but also R&D, manufacturing and quality, and back office support functions.

The proposed restructuring is expected to lead to total restructuring charges of approximately $190 million to $210 million, with approximately $170 million to $190 million in severance and approximately $20 million in other costs, including lease termination, fixed asset write-down and removal costs. An estimated restructuring charge of $130 million to $145 million will be incurred in the third quarter of 2020 along with an estimated $40 million to $45 million incurred in the fourth quarter of 2020 and the remaining estimated $20 million to be incurred in 2021. The Company anticipates these costs will result in approximately $180 million to 190 million in cash expenditures.

Cautionary Statement Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Such statements include, without limitation, statements concerning the anticipated charges relating to the restructuring program and the expected completion date of the program.  Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market, and regulatory conditions, and other factors described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the subsequent Quarterly Reports on Form 10-Q and the Company’s other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Item 7.01.          Regulation FD Disclosure.

On September 30, 2020, the Company issued a press release announcing the restructuring program described under Item 2.05 above.  A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1. The information contained in the accompanying Exhibit 99.1 is being furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information contained in the press release shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01           Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Press Release issued by Elanco Animal Health Incorporated, dated September 30, 2020.
104.1	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Elanco Animal Health Incorporated
Date: September 30, 2020	By:	/s/ Michael-Bryant Hicks
		Name:  Michael-Bryant Hicks
		Title:  Executive Vice President, General Counsel and Corporate Secretary

EX-99.1

Exhibit 99.1

Media: Colleen Parr Dekker +1.317.989.7011 colleen_parr_dekker@elanco.com

Investor Relations: Tiffany Kanaga +1.302.897.0668 kanaga_tiffany@elanco.com

Elanco Announces Restructuring to Drive Synergies from Bayer Animal Health Acquisition

Initial Actions Expected to Create at Least $100 Million in Annual Savings

De-Leveraging Begins with $100 Million Term Loan Repayment

GREENFIELD, Ind. (September 30, 2020) Elanco Animal Health Incorporated (NYSE: ELAN) today announced its first business restructuring just two months following the closing of its acquisition of Bayer Animal Health. The company also noted it has started to de-lever by making a $100 million payment on its term loan.

Elanco leadership has quickly evaluated the capabilities, structure and staffing of the combined business required to meet its goal of being an agile, fit-for-purpose global leader dedicated exclusively to animal health. As part of this effort, today the company is announcing its intent to eliminate more than 900 positions across nearly 40 countries, primarily in Sales and Marketing, but also R&D, Manufacturing and Quality, and back office support. These actions begin to reduce duplication, drive efficiency and optimize the company’s footprint across geographies, particularly Basel, Switzerland.

The outlined initiatives are the first phase of Elanco’s disciplined process to capture greater value. These efforts build on Elanco’s productivity agenda in its Innovation, Portfolio and Productivity (IPP) Strategy, which has included consolidating suppliers and contract manufacturers.

“The team has rapidly applied our historic integration experience to move with speed and decisiveness and capture initial synergies even during the continued challenges created by the COVID-19 pandemic,” said Jeff Simmons, president and CEO of Elanco. “After our early view of the combined business, we have full confidence in delivering $275 million to $300 million in synergies, with the first two-thirds coming in the first 30 months. Today’s actions will reduce duplication and increase efficiency within our global footprint, while the team builds longer term plans around procurement savings, SKU optimization and streamlining manufacturing processes. While decisions that affect our employees are always difficult, we remain committed to treating affected employees with our guiding value of respect and following all local consultation processes.”

The cost of the proposed actions is expected to be between $190 million and $210 million with approximately $170 million to $190 million in severance and approximately $20 million in asset impairments and other charges. As part of the transaction with Bayer A.G., $35 million was reflected in the purchase price attributable to Elanco’s restructuring costs. Cash severance payments will be distributed over the next two years. Elanco expects to incur a restructuring charge of $130 million to $145 million in Q3 2020 along with $40 million to $45 million in Q4 2020. The remaining estimated $20 million will be incurred in 2021. Elanco expects to realize at least $100 million of annual compensation and benefits savings toward the planned synergy goal of $275 million to $300 million.

“We see the deal rationale coming to life as we bring together our longstanding focus on the veterinarian with Bayer’s direct-to-consumer expertise to open new opportunities, particularly given pet owners’ increased desire to access care and products via online, retail, telemedicine, and direct to the doorstep channels,” Simmons said. “Our team is focused on making the tough decisions that drive value quickly while enabling our innovation and growth strategies. Most importantly, moving so fast in our commercial areas means we now have a larger, stronger team in place supporting customers to enhance our overall commercial competitiveness. Today’s proposed actions will ultimately better position us to advocate for our customers, and to deliver solutions to their greatest unmet needs.”

De-Leveraging Begins

Elanco has also started repayment against its loan that funded the Bayer Animal Health acquisition. On September 25, Elanco repaid $100 million of its $4.275 billion Term Loan B.

“With the acquisition closed and working capital needs established, we have sufficient liquidity to begin de-leveraging thanks to strong cash flow in Q2 2020,” said Todd Young, executive vice president and CFO of Elanco. “We will continue to repay debt from our operating cash flow in 2021 with a focus on our $500 million note, which is due in August 2021.”

ABOUT ELANCO

Elanco Animal Health Incorporated (NYSE: ELAN) is a global leader in animal health dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets, creating value for farmers, pet owners, veterinarians, stakeholders, and society as a whole. With nearly 70 years of animal health heritage, we are committed to helping our customers improve the health of animals in their care, while also making a meaningful impact on our local and global communities. At Elanco, we are driven by our vision of Food and Companionship Enriching life and our Elanco Healthy Purpose™ CSR framework – all to advance the health of animals, people and the planet. Learn more at www.elanco.com.

This press release contains forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) about the anticipated cost savings, our ability to capture synergies as a result of our recent acquisition of Bayer Animal Health, and anticipated charges relating to the restructuring, and reflects Elanco’s current belief. Forward-looking statements are based on our current expectations and assumptions regarding our business and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. For further discussion of these and other risks and uncertainties, see Elanco’s most recent filings with the United States Securities and Exchange Commission. Except as required by law, Elanco undertakes no duty to update forward-looking statements to reflect events after the date of this release.

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