INDIANA | 82-5497352 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, no par value | ELAN | New York Stock Exchange |
Large accelerated filer o | Accelerated filer o | |||||
Non-accelerated filer ý | Smaller reporting company o | |||||
Emerging growth company o |
Page | ||||
Unaudited Condensed Consolidated and Combined Statements of Operations | ||||
Unaudited Condensed Consolidated and Combined Statements of Comprehensive Income (Loss) | ||||
Unaudited Condensed Consolidated Balance Sheets | ||||
Unaudited Condensed Consolidated and Combined Statements of Equity | ||||
Unaudited Condensed Consolidated and Combined Statements of Cash Flows | ||||
Notes to Unaudited Condensed Consolidated and Combined Financial Statements | ||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | ||||
Overview | ||||
Results of Operations | ||||
Summary of Changes | ||||
Liquidity and Capital Resources | ||||
Contractual Obligations | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||
Item 4. | Controls and Procedures | |||
Item 3. | Defaults Upon Senior Securities | |||
Item 4. | Mine Safety Disclosures | |||
Item 5. | Other Information | |||
• | heightened competition, including from innovation or generics; |
• | the impact of disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein; |
• | changes in regulatory restrictions on the use of antibiotics in food animals; |
• | our ability to implement our business strategies or achieve targeted cost efficiencies and gross margin improvements; |
• | consolidation of our customers and distributors; |
• | an outbreak of infectious disease carried by food animals; |
• | the success of our R&D and licensing efforts; |
• | our ability to complete acquisitions and successfully integrate the businesses we acquire; |
• | misuse, off-label or counterfeiting use of our products; |
• | unanticipated safety, quality or efficacy concerns associated with our products; |
• | the impact of weather conditions and the availability of natural resources; |
• | risks related to our presence in emerging markets; |
• | changes in U.S. foreign trade policy, imposition of tariffs or trade disputes; |
• | the impact of global macroeconomic conditions; and |
• | the effect on our business resulting from our separation from Eli Lilly & Co. (Lilly), including the various costs associated with transition to a stand alone entity. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | $ | 781.6 | $ | 770.2 | $ | 1,512.7 | $ | 1,506.4 | |||||||
Costs, expenses and other: | |||||||||||||||
Cost of sales | 356.0 | 431.5 | 699.8 | 791.5 | |||||||||||
Research and development | 68.8 | 61.4 | 132.9 | 126.6 | |||||||||||
Marketing, selling and administrative | 200.9 | 191.1 | 382.0 | 371.1 | |||||||||||
Amortization of intangible assets | 49.3 | 49.4 | 98.3 | 98.6 | |||||||||||
Asset impairment, restructuring and other special charges (Note 6) | 31.8 | 68.0 | 56.7 | 70.4 | |||||||||||
Interest expense, net of capitalized interest | 20.7 | — | 41.5 | — | |||||||||||
Other–net, expense | 3.9 | 8.8 | 6.5 | 10.7 | |||||||||||
731.4 | 810.2 | 1,417.7 | 1,468.9 | ||||||||||||
Income (loss) before income taxes | 50.2 | (40.0 | ) | 95.0 | 37.5 | ||||||||||
Income tax expense | 14.3 | 22.8 | 27.6 | 27.6 | |||||||||||
Net income (loss) | $ | 35.9 | $ | (62.8 | ) | $ | 67.4 | $ | 9.9 | ||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.10 | $ | (0.21 | ) | $ | 0.18 | $ | 0.03 | ||||||
Diluted | $ | 0.10 | $ | (0.21 | ) | $ | 0.18 | $ | 0.03 | ||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 365.7 | 293.3 | 365.7 | 293.3 | |||||||||||
Diluted | 367.0 | 293.3 | 366.5 | 293.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) | $ | 35.9 | $ | (62.8 | ) | $ | 67.4 | $ | 9.9 | ||||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation | 35.4 | (224.9 | ) | 5.2 | (105.7 | ) | |||||||||
Defined benefit pension and retiree health benefit plans, net of taxes | 0.2 | 2.0 | 2.2 | 1.4 | |||||||||||
Other comprehensive income (loss), net of tax | 35.6 | (222.9 | ) | 7.4 | (104.3 | ) | |||||||||
Comprehensive income (loss) | $ | 71.5 | $ | (285.7 | ) | $ | 74.8 | $ | (94.4 | ) |
June 30, 2019 | December 31, 2018 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 385.1 | $ | 474.8 | |||
Accounts receivable, net of allowances of $5.7 (2019) and $8.4 (2018) | 757.2 | 651.8 | |||||
Other receivables | 74.3 | 57.6 | |||||
Inventories (Note 7) | 1,053.1 | 1,004.1 | |||||
Prepaid expenses and other | 102.3 | 113.9 | |||||
Restricted cash (Note 15) | 11.5 | 202.7 | |||||
Total current assets | 2,383.5 | 2,504.9 | |||||
Noncurrent Assets | |||||||
Goodwill | 2,959.6 | 2,958.0 | |||||
Other intangibles, net | 2,352.8 | 2,453.0 | |||||
Other noncurrent assets | 229.9 | 118.4 | |||||
Property and equipment, net of accumulated depreciation of $921.2 (2019) and $878.6 (2018) | 931.1 | 922.4 | |||||
Total assets | $ | 8,856.9 | $ | 8,956.7 | |||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 242.9 | $ | 205.2 | |||
Employee compensation | 67.3 | 98.9 | |||||
Sales rebates and discounts | 176.0 | 169.9 | |||||
Current portion of long-term debt (Note 8) | 27.1 | 29.0 | |||||
Other current liabilities | 205.4 | 199.0 | |||||
Payable to Lilly (Note 15) | 58.8 | 268.7 | |||||
Total current liabilities | 777.5 | 970.7 | |||||
Noncurrent Liabilities | |||||||
Long-term debt (Note 8) | 2,382.0 | 2,443.3 | |||||
Accrued retirement benefits | 108.4 | 109.1 | |||||
Deferred taxes (Note 11) | 147.8 | 114.6 | |||||
Other noncurrent liabilities | 175.7 | 121.5 | |||||
Total liabilities | 3,591.4 | 3,759.2 | |||||
Commitments and Contingencies (Note 12) | — | — | |||||
Equity | |||||||
Common stock, no par value, 5,000,000,000 shares authorized, 365,707,233 and 365,643,911 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively | — | — | |||||
Additional paid-in capital | 5,396.5 | 5,403.3 | |||||
Retained earnings | 83.8 | 16.4 | |||||
Accumulated other comprehensive loss | (214.8 | ) | (222.2 | ) | |||
Total equity | 5,265.5 | 5,197.5 | |||||
Total liabilities and equity | $ | 8,856.9 | $ | 8,956.7 |
Common Stock | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Net Parent Company Investment | Retained Earnings | Foreign Currency Translation | Defined Benefit Pension and Retiree Health Benefit Plans | Total | Total Equity | ||||||||||||||||||||||||||
December 31, 2017 | 293.3 | $ | — | $ | — | $ | 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 | — | — | — | 72.7 | — | — | — | — | 72.7 | |||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | 119.2 | (0.6 | ) | 118.6 | 118.6 | ||||||||||||||||||||||||
Transfers (to)/from Lilly, net(1) | — | — | — | (69.2 | ) | — | — | — | — | (69.2 | ) | |||||||||||||||||||||||
March 31, 2018 | 293.3 | $ | — | $ | — | $ | 8,040.1 | $ | — | $ | (108.0 | ) | $ | (30.0 | ) | $ | (138.0 | ) | $ | 7,902.1 | ||||||||||||||
Net income | — | — | — | (62.8 | ) | — | — | — | — | (62.8 | ) | |||||||||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | (224.9 | ) | 2.0 | (222.9 | ) | (222.9 | ) | ||||||||||||||||||||||
Transfers (to)/from Lilly, net(1) | — | — | — | (40.3 | ) | — | — | — | (40.3 | ) | ||||||||||||||||||||||||
June 30, 2018 | 293.3 | $ | — | $ | — | $ | 7,937.0 | $ | — | $ | (332.9 | ) | $ | (28.0 | ) | $ | (360.9 | ) | $ | 7,576.1 | ||||||||||||||
December 31, 2018 | 365.6 | $ | — | $ | 5,403.3 | $ | — | $ | 16.4 | $ | (218.2 | ) | $ | (4.0 | ) | $ | (222.2 | ) | $ | 5,197.5 | ||||||||||||||
Net income | — | — | — | — | 31.5 | — | — | — | 31.5 | |||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | (30.2 | ) | 2.0 | (28.2 | ) | (28.2 | ) | ||||||||||||||||||||||
Separation activities(1) | — | — | (7.0 | ) | — | — | — | — | — | (7.0 | ) | |||||||||||||||||||||||
Stock compensation | — | — | 2.4 | — | — | — | — | — | 2.4 | |||||||||||||||||||||||||
Issuance of stock under employee stock plans, net | 0.1 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
March 31, 2019 | 365.7 | $ | — | $ | 5,398.7 | $ | — | $ | 47.9 | $ | (248.4 | ) | $ | (2.0 | ) | $ | (250.4 | ) | $ | 5,196.2 | ||||||||||||||
Net income | — | — | — | — | 35.9 | — | — | — | 35.9 | |||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | 35.4 | 0.2 | 35.6 | 35.6 | |||||||||||||||||||||||||
Separation activities(1) | — | — | (18.4 | ) | — | — | — | — | — | (18.4 | ) | |||||||||||||||||||||||
Stock compensation | — | — | 14.3 | — | — | — | — | — | 14.3 | |||||||||||||||||||||||||
Other | — | — | 1.9 | — | — | — | — | — | 1.9 | |||||||||||||||||||||||||
June 30, 2019 | 365.7 | $ | — | $ | 5,396.5 | $ | — | $ | 83.8 | $ | (213.0 | ) | $ | (1.8 | ) | $ | (214.8 | ) | $ | 5,265.5 |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 67.4 | $ | 9.9 | |||
Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: | |||||||
Depreciation and amortization | 152.4 | 149.6 | |||||
Change in deferred income taxes | 40.3 | 10.8 | |||||
Stock-based compensation expense | 21.9 | 13.3 | |||||
Asset impairment charges | 4.0 | 97.9 | |||||
Changes in operating assets and liabilities | (205.2 | ) | (98.3 | ) | |||
Other non-cash operating activities, net | (22.6 | ) | 0.7 | ||||
Net Cash Provided by Operating Activities | 58.2 | 183.9 | |||||
Cash Flows from Investing Activities | |||||||
Net purchases of property and equipment | (51.8 | ) | (56.5 | ) | |||
Other investing activities, net | (25.7 | ) | (1.0 | ) | |||
Net Cash Used for Investing Activities | (77.5 | ) | (57.5 | ) | |||
Cash Flows from Financing Activities | |||||||
Repayments of borrowings (Note 8) | (65.0 | ) | — | ||||
Consideration paid to Lilly in connection with the Separation (Note 1) | (191.2 | ) | — | ||||
Other net financing transactions with Lilly | 5.0 | (122.8 | ) | ||||
Other financing activities, net | 1.4 | (0.9 | ) | ||||
Net Cash Used for Financing Activities | (249.8 | ) | (123.7 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (11.8 | ) | (5.1 | ) | |||
Net decrease in cash, cash equivalents and restricted cash | (280.9 | ) | (2.4 | ) | |||
Cash, cash equivalents and restricted cash at January 1 | 677.5 | 323.4 | |||||
Cash, cash equivalents and restricted cash at June 30 | $ | 396.6 | $ | 321.0 |
June 30, | |||||||
2019 | 2018 | ||||||
Cash and cash equivalents | $ | 385.1 | $ | 321.0 | |||
Restricted cash (Note 15) | 11.5 | — | |||||
Cash, cash equivalents and restricted cash at June 30 | $ | 396.6 | $ | 321.0 |
Standard | Description | 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 previous GAAP, on the balance sheet and requiring additional disclosures about leasing arrangements. | We adopted the standard on January 1, 2019 using the modified retrospective approach, applied at the beginning of the period of adoption, and we elected the package of transition practical expedients. Upon adoption of the standard, we recorded $84.9 million of right-of-use assets and $85.3 million of operating lease liabilities on our consolidated balance sheet. Adoption of this standard did not have a material impact on our consolidated statement of operations for the six months ended June 30, 2019. See Note 10: Leases for further information. |
Standard | Description | Effective Date | Effect on the financial statements or other significant matters | |||
Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | This standard modifies the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. | This standard is effective January 1, 2020, with early adoption permitted. We intend to adopt this standard on that date. | We are currently evaluating the effect of this standard on our financial statements. | |||
Accounting Standards Update 2018-15, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract | This guidance aligns the requirements for capitalizing implementation costs incurred in a cloud-based hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. | This standard is effective January 1, 2020, with early adoption permitted. We intend to adopt this standard on that date. | We are currently evaluating the effect of this standard on our financial statements. |
• | 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. 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 programs at the time the sale is recorded, the rebate related to that sale is typically paid up to six months after the rebate or incentive period expires. Because of this time lag, in any particular period rebate adjustments may incorporate revisions of accruals for several periods. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Beginning balance | $ | 120.0 | $ | 91.1 | $ | 118.5 | $ | 114.8 | |||||||
Reduction of revenue | 80.6 | 56.2 | 146.3 | 100.7 | |||||||||||
Payments | (68.5 | ) | (48.2 | ) | (132.7 | ) | (116.4 | ) | |||||||
Ending balance | $ | 132.1 | $ | 99.1 | $ | 132.1 | $ | 99.1 |
• | 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 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Companion Animal Disease Prevention | $ | 223.4 | $ | 214.0 | $ | 409.3 | $ | 415.3 | |||||||
Companion Animal Therapeutics | 83.4 | 68.3 | 164.8 | 130.6 | |||||||||||
Food Animal Future Protein & Health | 175.8 | 172.6 | 343.0 | 339.3 | |||||||||||
Food Animal Ruminants & Swine | 271.5 | 297.1 | 545.6 | 579.6 | |||||||||||
Strategic Exits(1) | 27.5 | 18.2 | 50.0 | 41.6 | |||||||||||
Revenue | $ | 781.6 | $ | 770.2 | $ | 1,512.7 | $ | 1,506.4 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cash expense (income): | |||||||||||||||
Severance and other costs | $ | (1.3 | ) | $ | (2.7 | ) | $ | (0.8 | ) | $ | (2.6 | ) | |||
Integration and acquisition costs | 33.1 | 2.8 | 53.5 | 5.6 | |||||||||||
Facility exit costs | — | 10.2 | — | 9.7 | |||||||||||
Total cash expense | 31.8 | 10.3 | 52.7 | 12.7 | |||||||||||
Non-cash expense: | |||||||||||||||
Asset impairment | — | 57.7 | 4.0 | 57.7 | |||||||||||
Total non-cash expense | — | 57.7 | 4.0 | 57.7 | |||||||||||
Total expense | $ | 31.8 | $ | 68.0 | $ | 56.7 | $ | 70.4 |
Facility exit costs | Severance | Total | |||||||||
Balance at December 31, 2017 | $ | 34.9 | $ | 43.1 | $ | 78.0 | |||||
Charges | 21.2 | — | 21.2 | ||||||||
Reserve adjustments | (11.5 | ) | (2.6 | ) | (14.1 | ) | |||||
Cash paid | (9.9 | ) | (28.4 | ) | (38.3 | ) | |||||
Balance at June 30, 2018 | $ | 34.7 | $ | 12.1 | $ | 46.8 | |||||
Balance at December 31, 2018 | $ | 9.3 | $ | 35.1 | $ | 44.4 | |||||
Charges | — | 2.5 | 2.5 | ||||||||
Reserve adjustments | — | (3.3 | ) | (3.3 | ) | ||||||
Cash paid | (1.7 | ) | (13.8 | ) | (15.5 | ) | |||||
Balance at June 30, 2019 | $ | 7.6 | $ | 20.5 | $ | 28.1 |
June 30, 2019 | December 31, 2018 | ||||||
Finished products | $ | 412.4 | $ | 400.7 | |||
Work in process | 610.2 | 570.4 | |||||
Raw materials and supplies | 72.7 | 80.4 | |||||
Total (approximates replacement cost) | 1,095.3 | 1,051.5 | |||||
Decrease to LIFO cost | (42.2 | ) | (47.4 | ) | |||
Inventories | $ | 1,053.1 | $ | 1,004.1 |
June 30, 2019 | December 31, 2018 | ||||||
Term credit facility | $ | 427.5 | $ | 492.5 | |||
3.912% Senior Notes due 2021 | 500.0 | 500.0 | |||||
4.272% Senior Notes due 2023 | 750.0 | 750.0 | |||||
4.900% Senior Notes due 2028 | 750.0 | 750.0 | |||||
Other obligations | 0.3 | 0.5 | |||||
Unamortized debt issuance costs | (18.7 | ) | (20.7 | ) | |||
Total debt | 2,409.1 | 2,472.3 | |||||
Less current portion of long-term debt | 27.1 | 29.0 | |||||
Total long-term debt | $ | 2,382.0 | $ | 2,443.3 |
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 | ||||||||||||||
June 30, 2019 | |||||||||||||||||||
Other current liabilities - contingent consideration | $ | (9.1 | ) | $ | — | $ | — | $ | (9.1 | ) | $ | (9.1 | ) | ||||||
Other noncurrent liabilities - contingent consideration | (68.1 | ) | — | — | (68.1 | ) | (68.1 | ) | |||||||||||
Other noncurrent assets/(liabilities) - cross currency interest rate contracts designated as net investment hedges | (0.5 | ) | — | (0.5 | ) | — | (0.5 | ) | |||||||||||
Long-term debt - senior notes | (2,000.0 | ) | — | (2,137.0 | ) | — | (2,137.0 | ) | |||||||||||
December 31, 2018 | |||||||||||||||||||
Other current liabilities - contingent consideration | $ | (5.1 | ) | $ | — | $ | — | $ | (5.1 | ) | $ | (5.1 | ) | ||||||
Other noncurrent liabilities - contingent consideration | (69.0 | ) | — | — | (69.0 | ) | (69.0 | ) | |||||||||||
Other noncurrent assets/(liabilities) - cross currency interest rate contracts designated as net investment hedges | (7.4 | ) | — | (7.4 | ) | — | (7.4 | ) | |||||||||||
Long-term debt - senior notes | (2,000.0 | ) | — | (2,005.0 | ) | — | (2,005.0 | ) |
Three months ended June 30, 2019 | Six months ended June 30, 2019 | ||||||
Lease cost | |||||||
Operating lease cost | $ | 6.6 | $ | 12.3 | |||
Short-term lease cost | 0.2 | 0.4 | |||||
Variable lease cost | 0.6 | 1.1 | |||||
Total lease cost | $ | 7.4 | $ | 13.8 | |||
Other information | |||||||
Operating cash outflows from operating leases | $ | 11.8 | |||||
Right-of-use assets obtained in exchange for new operating lease liabilities | — | ||||||
Weighted-average remaining lease term - operating leases | 5 years | ||||||
Weighted-average discount rate - operating leases | 4.2 | % |
Balance Sheet Classification | June 30, 2019 | ||||
Right-of-use assets | Other noncurrent assets | $ | 81.3 | ||
Current operating lease liabilities | Other current liabilities | 23.3 | |||
Non-current operating lease liabilities | Other noncurrent liabilities | 58.3 |
Year 1 | $ | 24.8 | |
Year 2 | 19.6 | ||
Year 3 | 11.9 | ||
Year 4 | 9.2 | ||
Year 5 | 7.4 | ||
After Year 5 | 15.1 | ||
Total lease payments | 88.0 | ||
Less imputed interest | (6.4 | ) | |
Total | $ | 81.6 |
Provision for Taxes on Income | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Provision for Taxes on Income | $ | 14.3 | $ | 22.8 | $ | 27.6 | $ | 27.6 | ||||||||
Effective Tax Rate | 28.5 | % | (57.0 | )% | 29.0 | % | 73.6 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue—to unaffiliated customers(1) | |||||||||||||||
United States | $ | 395.0 | $ | 366.4 | $ | 778.9 | $ | 726.4 | |||||||
International | 386.6 | 403.8 | 733.8 | 780.0 | |||||||||||
Revenue | $ | 781.6 | $ | 770.2 | $ | 1,512.7 | $ | 1,506.4 |
June 30, 2019 | December 31, 2018 | ||||||
Long-lived assets(2) | |||||||
United States | $ | 637.0 | $ | 602.6 | |||
United Kingdom | 185.0 | 187.5 | |||||
Other foreign countries | 200.4 | 195.8 | |||||
Long-lived assets | $ | 1,022.4 | $ | 985.9 |
June 30, 2019 | December 31, 2018 | ||||||
TSA | $ | (18.6 | ) | $ | (28.0 | ) | |
Other activities | (28.7 | ) | (38.0 | ) | |||
Local country asset purchases | (11.5 | ) | (202.7 | ) | |||
Total receivable from/(payable to) Lilly | $ | (58.8 | ) | $ | (268.7 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cost of sales | $ | — | $ | 7.3 | $ | — | $ | 14.8 | |||||||
Research and development | — | 0.7 | — | 1.5 | |||||||||||
Marketing, selling and administrative | — | 27.5 | — | 54.8 | |||||||||||
Total | $ | — | $ | 35.5 | $ | — | $ | 71.1 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||
Revenue | $ | 781.6 | $ | 770.2 | 1 | % | $ | 1,512.7 | $ | 1,506.4 | — | % | |||||||||
Costs, expenses and other: | |||||||||||||||||||||
Cost of sales | 356.0 | 431.5 | (17 | )% | 699.8 | 791.5 | (12 | )% | |||||||||||||
% of revenue | 46 | % | 56 | % | (10 | )% | 46 | % | 53 | % | (7 | )% | |||||||||
Research and development | 68.8 | 61.4 | 12 | % | 132.9 | 126.6 | 5 | % | |||||||||||||
% of revenue | 9 | % | 8 | % | 1 | % | 9 | % | 9 | % | — | % | |||||||||
Marketing, selling and administrative | 200.9 | 191.1 | 5 | % | 382.0 | 371.1 | 3 | % | |||||||||||||
% of revenue | 26 | % | 25 | % | 1 | % | 25 | % | 25 | % | — | % | |||||||||
Amortization of intangible assets | 49.3 | 49.4 | — | % | 98.3 | 98.6 | — | % | |||||||||||||
% of revenue | 6 | % | 6 | % | — | % | 6 | % | 7 | % | — | % | |||||||||
Asset impairment, restructuring and other special charges | 31.8 | 68.0 | (53 | )% | 56.7 | 70.4 | (19 | )% | |||||||||||||
Interest expense, net of capitalized interest | 20.7 | — | 100 | % | 41.5 | — | 100 | % | |||||||||||||
Other - net, expense | 3.9 | 8.8 | NM | 6.5 | 10.7 | NM | |||||||||||||||
Income (loss) before taxes | 50.2 | (40.0 | ) | NM | 95.0 | 37.5 | NM | ||||||||||||||
% of revenue | 6 | % | (5 | )% | 11 | % | 6 | % | 2 | % | 4 | % | |||||||||
Income tax expense | 14.3 | 22.8 | (37 | )% | 27.6 | 27.6 | — | % | |||||||||||||
Net income (loss) | $ | 35.9 | $ | (62.8 | ) | NM | $ | 67.4 | $ | 9.9 | NM |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||
CA Disease Prevention | $ | 223.4 | $ | 214.0 | 4 | % | $ | 409.3 | $ | 415.3 | (1 | )% | |||||||||
CA Therapeutics | 83.4 | 68.3 | 22 | % | 164.8 | 130.6 | 26 | % | |||||||||||||
FA Future Protein & Health | 175.8 | 172.6 | 2 | % | 343.0 | 339.3 | 1 | % | |||||||||||||
FA Ruminants & Swine | 271.5 | 297.1 | (9 | )% | 545.6 | 579.6 | (6 | )% | |||||||||||||
Subtotal | 754.1 | 752.0 | — | % | 1,462.7 | 1,464.8 | — | % | |||||||||||||
Strategic Exits(1) | 27.5 | 18.2 | 51 | % | 50.0 | 41.6 | 20 | % | |||||||||||||
Total | $ | 781.6 | $ | 770.2 | 1 | % | $ | 1,512.7 | $ | 1,506.4 | — | % |
• | an increase in revenue of $12.8 million or 6% from CA Disease Prevention products, excluding the impact of foreign exchange rates; |
• | an increase in revenue of $17.8 million or 26% from CA Therapeutics products, excluding the impact of foreign exchange rates; |
• | an increase in revenue of $12.1 million or 7% from FA Future Protein & Health products, excluding the impact of foreign exchange rates; and |
• | an increase in revenue of $9.5 million or 52% from Strategic Exits, excluding the impact of foreign exchange rates. |
• | a decrease in revenue of $17.8 million or 6% from FA Ruminants & Swine products, excluding the impact of foreign exchange rates; and |
• | a decrease in revenue of $23.0 million due to the negative impact of foreign exchange rates. |
• | CA Disease Prevention revenue increased by $9.4 million or 4% for the quarter, driven by both increased volume and price, partially offset by an unfavorable impact from foreign exchange rates. The increase was driven by the continued uptake of Interceptor Plus® and Credelio®, partially offset by declines in certain older generation parasiticides. |
• | CA Therapeutics revenue increased by $15.1 million or 22% for the quarter, driven by increased volume and to a lesser extent price, partially offset by the impact of foreign exchange rates. The revenue increase was driven by increased demand for products across the therapeutics portfolio, primarily Galliprant®. |
• | FA Future Protein & Health revenue increased by $3.2 million or 2% for the quarter, driven by both increased volume and price, partially offset by an unfavorable impact from foreign exchange rates. Growth was driven by the aqua portfolio, and to a lesser extent, the poultry portfolio and nutritional health products. |
• | FA Ruminants & Swine revenue decreased by $25.6 million or 9% driven by a decline in volume and to a lesser extent unfavorable impact from foreign exchange rates. The decline in revenue was driven by challenges in the international business, primarily softness in swine products due to African Swine Fever, particularly in Asia, the continued implementation of antimicrobial policies in certain Asian countries, and product rationalizations aligned with our productivity agenda. In the United States, unfavorable purchasing patterns for Rumensin® and a disruption of global supply of certain cattle products due to production issues at a contract manufacturer were partially offset by favorable purchasing patterns in other cattle products, primarily Optaflexx®. |
• | Strategic Exits revenue increased by $9.3 million to $27.5 million and represented 4% of total revenue. The increase is due to higher contract manufacturing demand for companion animal vaccines and a favorable comparison in the second quarter related to the manufacturing of human growth hormone for Lilly, as this contract manufacturing agreement was not in place until the fourth quarter of 2018. |
• | an increase in revenue of $39.2 million or 30% from CA Therapeutics products, excluding the impact of foreign exchange rates; |
• | an increase in revenue of $20.4 million or 6% from FA Future Protein & Health products, excluding the impact of foreign exchange rates; and |
• | an increase in revenue of $8.3 million or 20% from Strategic Exits, excluding the impact of foreign exchange rates. |
• | a decrease in revenue of $17.4 million or 3% from FA Ruminants & Swine products, excluding the impact of foreign exchange rates; and |
• | a decrease in revenue of $44.2 million due to the negative impact of foreign exchange rates. |
• | CA Disease Prevention revenue decreased by $6.0 million or 1%, primarily driven by an unfavorable impact from foreign exchange rates with no offset from price and volume. Declines in older generation parasiticide products and Companion Animal vaccines were partially offset by continued growth in Credelio®, Interceptor Plus® and certain other parasiticide products. |
• | CA Therapeutics revenue increased by $34.2 million or 26%, driven by increased volume and to a lesser extent price, partially offset by the impact of foreign exchange rates. The revenue increase was driven by increased demand for products across the therapeutics portfolio, primarily Galliprant®. |
• | FA Future Protein & Health revenue increased $3.7 million or 1%, driven by both increased volume and price, partially offset by an unfavorable impact from foreign exchange rates. Growth was driven by the aqua portfolio and, to a lesser extent, nutritional health products, partially offset by timing of international purchasing patterns for poultry feed additives portfolio. |
• | FA Ruminants & Swine revenue decreased by $34.0 million or 6% driven by a decline in volume and to a lesser extent the unfavorable impact from foreign exchange rates and price. The decline in revenue was driven by challenges in the international business, primarily softness in swine products due to African Swine Fever, particularly in Asia, the continued implementation of antimicrobial policies in certain Asian countries, and product rationalizations aligned with our productivity agenda. In the United States, unfavorable purchasing patterns for Rumensin® were partially offset by favorable purchasing patterns |
• | Strategic Exits revenue increased by $8.4 million to $50.0 million and represented 3% of total revenue. |
Six Months Ended June 30, | % | |||||||||
Net cash provided by (used for): | 2019 | 2018 | Change | |||||||
Operating activities | $ | 58.2 | $ | 183.9 | (68 | )% | ||||
Investing activities | (77.5 | ) | (57.5 | ) | 35 | % | ||||
Financing activities | (249.8 | ) | (123.7 | ) | 102 | % | ||||
Effect of exchange-rate changes on cash and cash equivalents | (11.8 | ) | (5.1 | ) | 131 | % | ||||
Net decrease in cash, cash equivalents and restricted cash | $ | (280.9 | ) | $ | (2.4 | ) | 11,604 | % |
Exhibit Number | Description | |
2.1 | Agreement and Plan of Merger, dated as of April 26, 2019, by and among Elanco Animal Health Incorporated, Elanco Athens Inc. and Aratana Therapeutics, Inc. (including the Form of Contingent Value Rights Agreement) (filed with 8-K on April 26, 2019 as Exhibit 2.1) | |
10.1 | Elanco Animal Health Incorporated Executive Deferral Plan (filed herewith). | |
31.1 | 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). | |
31.2 | 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). | |
32 | 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. |
Exhibit Number | Description |
2.1 | |
10.1* | |
31.1* | |
31.2* | |
32* | |
101 | Interactive Data Files. |
* | Filed herewith. |
** | Furnished herewith |
ELANCO ANIMAL HEALTH INCORPORATED | ||
(Registrant) | ||
Date: | August 13, 2019 | /s/ Jeffrey N. Simmons |
Jeffrey N. Simmons | ||
President and Chief Executive Officer | ||
Date: | August 13, 2019 | /s/ Todd S. Young |
Todd S. Young | ||
Executive Vice President, Chief Financial Officer |
ARTICLE I |
ARTICLE III |
ARTICLE V |
ARTICLE VII |
ARTICLE IX |
ARTICLE XI |
ARTICLE XIII |
ARTICLE XIV |
ARTICLE XVI |
ARTICLE XVIII |
Date: | August 13, 2019 | ||
By: | /s/ | Jeff Simmons | |
Jeff Simmons | |||
President and Chief Executive Officer |
Date: | August 13, 2019 | ||
By: | /s/ | Todd Young | |
Todd Young | |||
Executive Vice President and Chief Financial Officer |
Date: | August 13, 2019 | /s/ | Jeff Simmons |
Jeff Simmons | |||
President, and Chief Executive Officer | |||
Date: | August 13, 2019 | /s/ | Todd Young |
Todd Young | |||
Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Aug. 09, 2019 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Elanco Animal Health Inc. | |
Entity Central Index Key | 0001739104 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 372,996,341 |
Unaudited Condensed Consolidated and Combined Statements of Operations - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Statement [Abstract] | ||||
Revenue | $ 781.6 | $ 770.2 | $ 1,512.7 | $ 1,506.4 |
Costs, expenses and other: | ||||
Cost of sales | 356.0 | 431.5 | 699.8 | 791.5 |
Research and development | 68.8 | 61.4 | 132.9 | 126.6 |
Marketing, selling and administrative | 200.9 | 191.1 | 382.0 | 371.1 |
Amortization of intangible assets | 49.3 | 49.4 | 98.3 | 98.6 |
Asset impairment, restructuring and other special charges (Note 6) | 31.8 | 68.0 | 56.7 | 70.4 |
Interest expense, net of capitalized interest | 20.7 | 0.0 | 41.5 | 0.0 |
Other–net, expense | 3.9 | 8.8 | 6.5 | 10.7 |
Costs, expenses and other | 731.4 | 810.2 | 1,417.7 | 1,468.9 |
Income (loss) before income taxes | 50.2 | (40.0) | 95.0 | 37.5 |
Income tax expense | 14.3 | 22.8 | 27.6 | 27.6 |
Net income (loss) | $ 35.9 | $ (62.8) | $ 67.4 | $ 9.9 |
Earnings (loss) per share: | ||||
Basic (usd per share) | $ 0.10 | $ (0.21) | $ 0.18 | $ 0.03 |
Diluted (usd per share) | $ 0.10 | $ (0.21) | $ 0.18 | $ 0.03 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 365.7 | 293.3 | 365.7 | 293.3 |
Diluted (in shares) | 367.0 | 293.3 | 366.5 | 293.3 |
Unaudited Condensed Consolidated and Combined Statements of Comprehensive Income (Loss) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 35.9 | $ (62.8) | $ 67.4 | $ 9.9 |
Other comprehensive income (loss): | ||||
Foreign currency translation | 35.4 | (224.9) | 5.2 | (105.7) |
Defined benefit pension and retiree health benefit plans, net of taxes | 0.2 | 2.0 | 2.2 | 1.4 |
Other comprehensive income (loss), net of tax | 35.6 | (222.9) | 7.4 | (104.3) |
Comprehensive income (loss) | $ 71.5 | $ (285.7) | $ 74.8 | $ (94.4) |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Receivables, Net, Current [Abstract] | ||
Accounts receivable, allowances | $ 5.7 | $ 8.4 |
Property and equipment, accumulated depreciation | $ 921.2 | $ 878.6 |
Common stock, shares authorized | 5,000,000,000 | 5,000,000,000 |
Common stock, shares issued | 365,707,233 | 365,643,911 |
Common stock, shares outstanding | 365,707,233 | 365,643,911 |
Unaudited Condensed Consolidated and Combined Statements of Cash Flows - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Cash Flows from Operating Activities | ||
Net income (loss) | $ 67.4 | $ 9.9 |
Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: | ||
Depreciation and amortization | 152.4 | 149.6 |
Change in deferred income taxes | 40.3 | 10.8 |
Stock-based compensation expense | 21.9 | 13.3 |
Asset impairment charges | 4.0 | 97.9 |
Changes in operating assets and liabilities | (205.2) | (98.3) |
Other non-cash operating activities, net | (22.6) | 0.7 |
Net Cash Provided by Operating Activities | 58.2 | 183.9 |
Cash Flows from Investing Activities | ||
Net purchases of property and equipment | (51.8) | (56.5) |
Other investing activities, net | (25.7) | (1.0) |
Net Cash Used for Investing Activities | (77.5) | (57.5) |
Cash Flows from Financing Activities | ||
Repayments of borrowings (Note 8) | (65.0) | 0.0 |
Consideration paid to Lilly in connection with the Separation (Note 1) | (191.2) | 0.0 |
Other net financing transactions with Lilly | 5.0 | (122.8) |
Other financing activities, net | 1.4 | (0.9) |
Net Cash Used for Financing Activities | (249.8) | (123.7) |
Effect of exchange rate changes on cash and cash equivalents | (11.8) | (5.1) |
Net decrease in cash, cash equivalents and restricted cash | (280.9) | (2.4) |
Cash, cash equivalents and restricted cash at beginning of period | 677.5 | 323.4 |
Cash, cash equivalents and restricted cash at end of period | 396.6 | 321.0 |
Cash, cash equivalents and restricted cash at end of period | $ 677.5 | $ 323.4 |
Nature of Business and Organization |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Organization | Note 1. Nature of Business and Organization Nature of Business Elanco Animal Health Incorporated (Elanco Parent) and its subsidiaries (collectively, Elanco, the Company, we, us or our) was formed as a wholly-owned subsidiary of Eli Lilly and Company (Lilly). Elanco is a global animal health company that innovates, develops, manufactures and markets products for companion and food animals. We offer a diverse portfolio of more than 125 brands to veterinarians and food animal producers in more than 90 countries. Organization Elanco Parent was formed in 2018, as a wholly-owned subsidiary of Lilly, to serve as the ultimate parent company of substantially all of the animal health businesses of Lilly. On September 24, 2018, Elanco Parent completed an initial public offering resulting in the issuance of 72.3 million shares of its common stock (including shares issued pursuant to the underwriters’ option to purchase additional shares), which represented 19.8% of the outstanding shares, at $24 per share (IPO) resulting in total net proceeds, after underwriting discounts and commissions, of $1.7 billion. In connection with the completion of the IPO, through a series of equity and other transactions, Lilly transferred to Elanco Parent the animal health businesses that form its business going forward. In exchange Elanco Parent has paid, or will pay, to Lilly approximately $4.2 billion, which includes the net proceeds from the IPO, the net proceeds from the debt offering completed by Elanco Parent in August 2018 and the term loan facility entered into by Elanco Parent in September 2018 (see Note 8: Debt). These transactions are collectively referred to herein as the Separation. On February 8, 2019, Lilly announced an exchange offer whereby Lilly shareholders could exchange all or a portion of Lilly common stock for shares of Elanco common stock owned by Lilly. The disposition of Elanco shares was completed on March 11, 2019 and resulted in the full separation of Elanco and disposal of Lilly's entire ownership and voting interest in Elanco. |
Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Note 2. Basis of Presentation We have prepared the accompanying unaudited condensed consolidated and combined financial statements in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (GAAP). In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for a fair presentation of the results of operations for the periods shown. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated and combined financial statements and accompanying notes for the year ended December 31, 2018 included in our Annual Report on Form 10-K filed with the SEC on February 20, 2019. For the periods after Separation, the financial statements are prepared on a consolidated basis and reflect the results of operations, comprehensive income, financial position, equity and cash flows resulting from our operations as an independent company. For periods prior to the Separation, our financial statements are combined, have been prepared on a standalone basis, and are derived from Lilly's consolidated financial statements and accounting records. The consolidated and combined financial statements reflect the financial position, results of operations and cash flows related to the animal health businesses that were transferred to Elanco Parent and are prepared in conformity with GAAP. The combined financial statements include the attribution of certain assets and liabilities that historically have been held at the Lilly corporate level but which are specifically identifiable or attributable to the businesses that have been transferred to Elanco Parent. All intercompany transactions and accounts within Elanco have been eliminated. All transactions between us and Lilly are considered to be effectively settled in the combined financial statements at the time the intercompany transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the condensed consolidated and combined statement of equity as net parent company investment. Prior to Separation, these combined financial statements include an allocation of expenses related to certain Lilly corporate functions, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations, prior to IPO. These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue, headcount and other measures. We consider the expenses methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for the periods presented. It is impractical to estimate what the standalone costs of Elanco would have been in the historical periods. After the Separation, a Transitional Services Agreement (TSA) between Lilly and Elanco went into effect. Under the terms of the TSA, we will be able to use these Lilly services for a fixed term established on a service-by-service basis. We are paying Lilly mutually agreed upon fees for the Lilly services provided under the TSA. Our consolidated and combined financial statements reflect the charges for Lilly services after the IPO. See Note 15: Related Party Agreements and Transactions for additional details. The income tax amounts in the combined financial statements have been calculated based on a separate return methodology and presented as if our operations were separate taxpayers in the respective jurisdictions. We file income tax returns in the United States (U.S.) federal jurisdiction and various state, local and non-U.S. jurisdictions. Prior to full separation, certain of these income tax returns were filed on a consolidated or combined basis with Eli Lilly and Company and/or its subsidiaries. Prior to Separation, Lilly maintained various benefit and combined stock-based compensation plans at a corporate level and other benefit plans at a country level. Our employees participated in such programs and the portion of the cost of those plans related to our employees is included in our financial statements. However, the condensed balance sheets do not include any equity issued related to stock-based compensation plans or any net benefit plan obligations unless the benefit plan covers only our dedicated employees or where the legal obligation associated with the benefit plan transferred to Elanco. Upon Lilly's full divestiture of Elanco in March 2019, all Lilly share-based awards held by our employees were converted into awards that will be settled in Elanco shares. Prior to Separation, the equity balance in the combined financial statements represents the excess of total assets over liabilities, including intercompany balances between Elanco and Lilly (net parent company investment) and accumulated other comprehensive income/(loss). Net parent company investment is primarily impacted by contributions from Lilly which are the result of treasury activities and net funding provided by or distributed to Lilly. See Note 15: Related Party Agreements and Transactions for further information. |
Impact of Separation |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Equity [Abstract] | |
Impact of Separation | Note 3. Impact of Separation In connection with the Separation, we issued $2.0 billion aggregate principal amount of senior notes in a private placement, and we also entered into a $750.0 million senior unsecured revolving credit facility and $500.0 million senior unsecured term credit facility. In connection with the Separation, we entered into various agreements with Lilly, including a master separation agreement, a tax matters agreement and the TSA. We will also continue to have certain ongoing relationships with Lilly as described in Note 15: Related Party Agreements and Transactions. |
Implementation of New Financial Accounting Pronouncements |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Implementation of New Financial Accounting Pronouncements | Note 4. Implementation of New Financial Accounting Pronouncements The following table provides a brief description of an accounting standard that was effective January 1, 2019 and was adopted on that date:
The following table provides a brief description of the accounting standards that have not yet been adopted and could have a material effect on the consolidated financial statements:
|
Revenue |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Note 5. Revenue Product Sales We recognize revenue primarily from product sales to customers. Revenue from sales of products is recognized at the point where the customer obtains control of the goods and we satisfy our performance obligation, which generally is at the time we ship the product to the customer. Payment terms differ by jurisdiction and customer, but payment terms in most of our major jurisdictions typically range from 30 to 100 days from date of shipment. Revenue for our product sales has not been adjusted for the effects of a financing component as we expect, at contract inception, that the period between when we transfer control of the product and when we receive payment will be one year or less. Any exceptions are either not material or we collect interest for payments made after the due date. Provisions for rebates and discounts, and returns are established in the same period the related sales are recognized. We generally ship product shortly after orders are received; therefore, we generally only have a few days of orders received but not yet shipped at the end of any reporting period. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are imposed on our sales of product and collected from a customer. Significant judgments must be made in determining the transaction price for sales of products related to anticipated rebates and discounts, and returns. The following describe the most significant of these judgments: Sales Rebates and Discounts - Background and Uncertainties
Our sales rebates and discounts are based on specific agreements and the majority relate to sales in the U.S. As of June 30, 2019 and 2018, the liability for sales rebates and discounts in the U.S. represents approximately 75% and 70%, respectively, of our total liability with the next largest country representing approximately 5% and 6%, respectively, of our total liability. The following table summarizes the activity in the sales rebates and discounts liability in the U.S.:
Adjustments to revenue recognized as a result of changes in estimates for the judgments described above during the three and six months ended June 30, 2019 and 2018 for product shipped in previous periods were not material. Sales Returns - Background and Uncertainties
Actual product returns were less than 0.1% and approximately 0.2% of net revenue for the three and six months ended June 30, 2019 and 0.6% and 0.4% for the three and six months ended June 30, 2018, respectively, and have not fluctuated significantly as a percentage of revenue. Disaggregation of Revenue The following table summarizes our revenue disaggregated by product category:
(1) Represents revenue from business activities we have either exited or made a strategic decision to exit. |
Asset Impairment, Restructuring and Other Special Charges |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Impairment, Restructuring and Other Special Charges | Note 6. Asset Impairment, Restructuring and Other Special Charges Our total charges related to asset impairment, restructuring and other special charges, including integration of acquired businesses, in the unaudited condensed consolidated and combined statements of operations consisted of the following:
Restructuring We historically participated in Lilly's cost-reduction initiatives, which resulted in restructuring charges in the period prior to our IPO. The restructuring costs include severance and other costs incurred as a result of actions taken to reduce our cost structure. Integration and acquisition costs Integration and acquisition costs primarily represent charges and costs related to our integration efforts as a result of our acquired businesses, external costs directly related to acquiring businesses, including expenses for banking, legal, accounting, and other similar services, and costs to stand our organization up to be an independent company. Facility exit costs Facility exit costs primarily represent contract termination costs and reserves for costs related to facilities which we have exited. Asset impairment Asset impairment recognized during the six months ended June 30, 2019 resulted from the adjustment to fair value of intangible assets that were subject to product rationalization. The following table summarizes the activity in our reserves established in connection with these restructuring activities:
Substantially all of the reserves are expected to be utilized in the next twelve months. We believe that the reserves are adequate. |
Inventories |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Note 7. Inventories We state all inventories at the lower of cost or net realizable value. We use the last-in, first-out (LIFO) method for a portion of our inventories located in the continental U.S. Other inventories are valued by the first-in, first-out (FIFO) method. FIFO cost approximates current replacement cost. Inventories consisted of the following:
|
Debt |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Note 8. Debt Long-term debt consisted of the following:
On June 26, 2019, we completed an exchange offer pursuant to which privately issued Senior Notes were exchanged for publicly registered Senior Notes having substantially identical terms. |
Financial Instruments and Fair Value |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments and Fair Value | Note 9. Financial Instruments and Fair Value Financial instruments that are potentially subject to credit risk consist principally of trade receivables. Collateral is generally not required. The risk associated with this concentration is mitigated by our ongoing credit-review procedures and insurance. A large portion of our cash is held in a few major financial institutions. We monitor the exposure with these institutions and do not expect any of these institutions to fail to meet their obligations. All highly liquid investments with a maturity of three months or less from the date of purchase are considered to be cash equivalents. The cost of these investments approximates fair value. We also consider the carrying value of restricted cash balances to be representative of its fair value. As of June 30, 2019 and December 31, 2018, we had $16.3 million and $15.3 million, respectively, of equity method investments included in other noncurrent assets in our condensed consolidated balance sheet. The following table summarizes the fair value information at June 30, 2019 and December 31, 2018 for contingent consideration liabilities, the net investment hedge liability and long-term debt measured at fair value on a recurring basis in the respective balance sheet line items:
We determine our Level 2 fair value measurements based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analysis. Contingent consideration liabilities relate to Galliprant® for which the fair value was estimated using a discounted cash flow analysis and Level 3 inputs, including projections representative of a market participant view for the probability of achieving potential future payments to Aratana Therapeutics, Inc. and an estimated discount rate. The amount to be paid as of June 30, 2019 was dependent upon certain development, success-based regulatory, and sales-based milestones. In addition, the amount of royalties to be paid is calculated as a percentage of net sales dependent upon the timing and geography and will, therefore, vary directly with increases and decreases in net sales of Galliprant®. There is no cap on the amount that may be paid pursuant to this arrangement. These liabilities were settled upon the closing of our acquisition of Aratana Therapeutics, Inc. on July 18, 2019. See Note 16: Subsequent Events for further discussion. The Senior Notes are comprised of $500.0 million of 3.912% Senior Notes due August 27, 2021, $750.0 million of 4.272% Senior Notes due August 28, 2023, and $750.0 million of 4.900% Senior Notes due August 28, 2028. We have a term credit facility of $427.5 million and $492.5 million, respectively, recorded at amortized cost in our condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018. We consider the carrying value of the term credit facility to be representative of its fair value as of June 30, 2019 and December 31, 2018. The fair value of this term credit facility is estimated based on quoted market prices of similar liabilities and is classified as Level 2. In October 2018, we entered into a cross-currency fixed interest rate swap, 5-year, 750 million Swiss franc (CHF), which is designated as a net investment hedge (NIH) against CHF denominated assets for which the fair value was estimated based on quoted market values of similar hedges and is classified as Level 2. The NIH is expected to generate approximately $25 million in cash and an offset to interest expense on an annual basis. During the three and six months ended June 30, 2019, our interest expense was offset by $6.1 million and $12.2 million, respectively, as a result of the NIH. Over the life of the derivative, gains or losses due to spot rate fluctuations are recorded in cumulative translation adjustment. During the three months ended June 30, 2019, we recorded a $6.8 million loss, net of tax, on the NIH, which is included in the change in the cumulative translation adjustment in other comprehensive income. There is a potential for significant 2023 settlement exposure as the U.S. dollar fluctuates against the Swiss franc. The risk management objective is to manage foreign currency risk relating to net investments in certain CHF denominated assets. Changes in fair value of the derivative instruments are recognized in a component of Accumulated Other Comprehensive Loss to offset the changes in the values of the net investments being hedged. |
Leases |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Note 10. Leases We determine if an arrangement is a lease at inception. We have operating leases for corporate offices, research and development facilities, vehicles, and equipment. Our leases have remaining lease terms of one to 10 years, some of which have options to extend or terminate the leases. Finance leases are included in property and equipment, current portion of long-term debt, and long-term debt in our condensed consolidated balance sheets. Finance leases are not material to our condensed consolidated statements of operations, condensed consolidated balance sheets, or condensed consolidated statements of cash flows. Beginning January 1, 2019, operating leases are included in noncurrent assets, other current liabilities, and other noncurrent liabilities in our consolidated balance sheets. Right-of-use assets included in noncurrent assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. The right-of-use asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option. Operating lease expense for right-of-use assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. We elected not to apply the recognition requirements of ASC 842, Leases, to short-term leases, which are deemed to be leases with a lease term of 12 months or less. Instead, we recognized lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. We elected this policy for all classes of underlying assets. We elected not to apply the practical expedient related to the separation of lease and non-lease components or the practical expedient which allows entities to use hindsight when determining lease term. The impact of operating leases to our condensed consolidated financial statements was as follows:
Supplemental balance sheet information related to our operating leases is as follows:
As of June 30, 2019, the annual minimum lease payments of our operating lease liabilities were as follows:
|
Income Taxes |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Note 11. Income Taxes
During the periods presented in the condensed consolidated and combined financial statements for the three and six months ended June 30, 2018, our operations were generally included in the tax grouping of other Lilly entities within the respective entity's tax jurisdiction; however, in certain jurisdictions, we filed separate tax returns. Our income taxes for the three- and six-month periods ended June 30, 2019 reflect the results on a stand-alone basis independent of Lilly, except for the period during which we were included in a combined tax return until full separation. In the jurisdictions in which we were included in a combined tax return, our income taxes were determined based on the tax matters agreement between us and Lilly. Prior to the Separation, the income tax expense included in these financial statements has been calculated using the separate return basis as if Elanco filed separate tax returns. In 2017, the U.S. enacted the Tax Cuts and Jobs Act (2017 Tax Act), which significantly revised U.S. tax law. Guidance related to the 2017 Tax Act, including Notices, Proposed Regulations, and Final Regulations, has been issued, and we expect additional guidance will be issued in 2019. This additional guidance could materially impact our assumptions and estimates used to record our U.S. federal and state income tax expense resulting from the 2017 Tax Act. We are included in Lilly's U.S. tax examinations by the Internal Revenue Service through the full separation date of March 11, 2019. Pursuant to the tax matters agreement we executed with Lilly in connection with the IPO, the potential liabilities or potential refunds attributable to pre-IPO periods in which Elanco was included in a Lilly consolidated or combined tax return remain with Lilly. Certain matters of Lilly’s U.S. examination of tax years 2013 - 2015 effectively settled during the three months ended June 30, 2019 and the resulting adjustments will not require any cash tax payments by Elanco. These adjustments are recorded in Separation activities within shareholders' equity. See Note 15: Related Party Agreements and Transactions for further information. As a result of Lilly's U.S. examination, there was a reduction of state net operating loss carryovers of $3.6 million gross, or $2.9 million, net of federal benefit. Additionally, associated valuation allowances were reduced by the same amount. The examination of tax year 2015 remains ongoing, and we believe it is reasonably possible that this examination could reach conclusion within the next twelve months. For the three and six months ended June 30, 2019, we incurred $14.3 million and $27.6 million, respectively, of income tax expense. For the three and six months ended June 30, 2019, our effective tax rate of 28.5% and 29.0%, respectively, differs from the statutory income tax rate primarily due to a one-time foreign exchange gain on the transfer of assets upon separation in addition to the impact of state income taxes. For the three and six months ended June 30, 2018, we incurred $22.8 million and $27.6 million, respectively of income tax expense. For the three and six months ended June 30, 2018, our effective tax rate differs from the statutory income tax rate primarily due to no benefits being recorded for losses incurred in the U.S. for asset impairments and contractual commitment charges associated with the suspension of commercial activities of Imrestor® due to full valuation allowances recorded in the U.S. |
Contingencies |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Note 12. Contingencies We are party to various legal actions in the normal course of business. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality. We record a liability for claims to the extent that we can formulate a reasonable estimate of their costs and there is a reasonable probability of incurring significant costs or expenses. At June 30, 2019 and December 31, 2018, we had no liabilities established related to litigation as there were no significant claims which were probable and estimable. We have not historically had any significant litigation expense and are not currently subject to a significant claim. |
Geographic Information |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic Information | Note 13. Geographic Information We operate as a single operating segment engaged in the development, manufacturing, marketing and sales of animal health products worldwide for both food animals and companion animals. Consistent with our operational structure, our President and Chief Executive Officer (CEO), as the chief operating decision maker, makes resource allocation and business process decisions globally across our consolidated business. Strategic decisions are managed globally with global functional leaders responsible for determining significant cost/investments and with regional leaders responsible for overseeing the execution of the global strategy. Our global research and development organization is responsible for development of new products. Our manufacturing organization is responsible for the manufacturing and supply of products and for the optimization of our supply chain. Regional leaders are responsible for the distribution and sale of our products and for local direct costs. The business is also supported by global corporate staff functions. Managing and allocating resources at the global corporate level enables our CEO to assess the overall level of resources available and how to best deploy these resources across functions, product types, regional commercial organizations and research and development projects in line with our overarching long-term corporate-wide strategic goals, rather than on a product or geographic basis. Consistent with this decision-making process, our CEO uses consolidated, single-segment financial information for purposes of evaluating performance, allocating resources, setting incentive compensation targets, as well as forecasting future period financial results. Our products include Rumensin®, Optaflexx®, Denagard®, Tylan®, Maxiban® and other products for livestock and poultry, as well as Trifexis®, Interceptor®, Comfortis®, Galliprant® and other products for companion animals. We have a single customer that accounted for 12.5% of revenue for each of the three months ended June 30, 2019 and 2018, respectively, and for 12.2% and 11.7% of revenue for the six months ended June 30, 2019 and 2018, respectively. The product sales resulted in accounts receivable with this customer of $98.1 million and $96.4 million as of June 30, 2019 and December 31, 2018, respectively. We are exposed to the risk of changes in social, political and economic conditions inherent in foreign operations and our results of operations and the value of our foreign assets are affected by fluctuations in foreign currency exchange rates. Selected geographic area information was as follows:
(1) Revenue is attributed to the countries based on the location of the customer. (2) Long-lived assets consist of property and equipment, net, and certain noncurrent assets. |
Earnings Per Share |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 14. Earnings Per Share As discussed in Note 1, Elanco Parent was formed for the purpose of facilitating the IPO. Lilly held all shares of Elanco Parent from the time of formation until the IPO. Prior to IPO, there were an aggregate of 293,290,000 shares of our common stock held by Lilly (which represents the 100 shares held by Lilly prior to giving effect to the 2,932,900-for-1 stock split that occurred on September 19, 2018). In connection with the completion of the IPO, an additional 72,335,000 shares were issued. Earnings per share was calculated based on the assumption that the shares held by Lilly were outstanding for all periods prior to IPO. We compute basic earnings per share by dividing net earnings available to common shareholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of unvested restricted stock units and stock options converted their holdings into common stock. Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive and as such, these shares are not included in the calculation of diluted earnings per share. For the three and six months ended June 30, 2019, approximately 0.1 million and 0.1 million shares, respectively, of potential common shares were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. |
Related Party Agreements and Transactions |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Agreements and Transactions | Note 15. Related Party Agreements and Transactions Transactions with Lilly Subsequent to Separation and Related to the Separation Amounts due from/(due to) Lilly in connection with the Separation and agreed upon services were as follows:
As described in Note 1, we completed an IPO in September 2018 and Lilly fully divested of all ownership of Elanco in March 2019. In connection with the Separation, we entered into various agreements with Lilly related to the form of our separation and certain ongoing activities that will continue for a period of time. These included, among others, a master separation agreement (MSA), a TSA and a tax matters agreement. In addition, there was a portion of our operations for which the legal transfer of our net assets did not occur prior to the Separation due to certain regulatory requirements in each of these countries. Transitional Services Agreement (TSA) Historically, Lilly has provided us significant shared services and resources related to corporate functions such as executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations, which we refer to collectively as the "Lilly Services." Under the terms of the TSA, we will be able to use Lilly Services for a fixed term established on a service-by-service basis. We will pay Lilly mutually agreed-upon fees for the Lilly Services provided under the TSA, which will be based on Lilly's cost (including third-party costs) of providing the Lilly Services through March 31, 2021, and subject to a mark-up of 7% thereafter, with additional inflation-based escalation beginning January 1, 2022. The fees under the TSA became payable for all periods beginning after October 1, 2018. Separation Activities Subsequent to our IPO, there continue to be transactions between us and Lilly related primarily to the completion of the local country asset purchases and finalization of assets and liabilities associated with the legal separation from Lilly, combined income tax returns and the impact of the tax matters agreement, historical Lilly retirement benefits, and centralized cash management. The net impact of these activities of $18.4 million and $25.4 million for the three and six months ended June 30, 2019 has been reflected as Separation Activities within shareholders' equity. The most significant of these activities includes the finalization of the local country valuation of business and the resulting impact on deferred tax assets and the impact of combined tax returns. Other Activities We continue to share certain services and back office functions with Lilly, which in certain instances result in Lilly paying costs for Elanco (e.g., utilities, local country operating costs, etc.) that are then passed through to Elanco for reimbursement. These amounts are included in cash flows from operating activities in our condensed consolidated and combined statements of cash flows. In addition, we operate through a single treasury settlement process and prior to the local country asset purchases (as described below) continued to transact through Lilly's processes in certain instances. As a result of these activities, there were certain amounts of financing that occurred between Lilly and Elanco during the six month periods ended June 30, 2019. These amounts are included in cash flows from financing activities in our condensed consolidated and combined statements of cash flows. Local Country Asset Purchases The legal transfer of certain of our net assets did not occur prior to the Separation due to certain regulatory requirements in each of these countries. The related assets, liabilities, and results of operations have been reported in our condensed consolidated and combined financial statements, as we are responsible for the business activities conducted by Lilly on our behalf and are subject to the risks and entitled to the benefits generated by these operations and assets under the terms of the MSA. We held restricted cash, and the associated payable to Lilly, at the date of Separation to fund the acquisition of these assets. As of June 30, 2019, the majority of these assets have been legally acquired and the remainder are expected to be purchased during 2019. Restricted cash and Payable to Lilly of $11.5 million are recorded in the condensed consolidated balance sheet for the remainder of the assets expected to be purchased by the end of 2019. Transactions with Lilly Prior to Separation Prior to the IPO, we did not operate as a standalone business and had various relationships with Lilly whereby Lilly provided services to us. The impact on our historical combined financial statements includes the following: Transfers to/from Lilly, net As discussed in Note 2: Basis of Presentation, net parent company investment is primarily impacted by contributions from Lilly which are the result of treasury activity and net funding provided by or distributed to Lilly. For the three and six months ended June 30, 2018, net transfers to Lilly were $40.3 million and $109.5 million, respectively. Activities that impacted the net transfers (to)/from Lilly include corporate overhead and other allocations, income taxes, retirement benefits, and centralized cash management. Corporate overhead and other allocations Prior to full separation, Lilly provided us certain services, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. We provide Lilly certain services related to manufacturing support. Our financial statements reflected an allocation of these costs. When specific identification is not practicable, the remainder have been allocated primarily on a proportional cost method on a basis of revenue or headcount. The allocations of services from Lilly to us were reflected as follows in the condensed consolidated and combined statements of operations:
We provide Lilly certain services related to manufacturing support. Allocations of manufacturing support from us to Lilly were $1.2 million and $2.4 million for the for the three and six months ended June 30, 2018, respectively which reduced cost of sales in the unaudited condensed consolidated and combined statements of operations. The financial information herein may not necessarily reflect our consolidated financial position, results of operations and cash flows in the future or what they would have been if we had been a separate, standalone entity during the periods presented. Management believes that the methods used to allocate expenses are reasonable. Stock-based Compensation Prior to full separation, our employees participated in Lilly stock-based compensation plans, the costs of which were allocated to us and recorded in cost of sales, research and development, and marketing, selling and administrative expenses in the unaudited condensed consolidated and combined statements of operations. The costs of such plans related to our employees were $5.1 million for the six months ended June 30, 2019. The costs of such plans related to our employees were $6.4 million and $13.3 million for the three and six months ended June 30, 2018, respectively. Retirement Benefits Prior to full separation, our employees participated in defined benefit pension and other post retirement plans sponsored by Lilly, the costs and benefits of which were recorded in the unaudited condensed consolidated and combined statement of operations in cost of sales, research and development, and marketing, selling and administrative expenses. For the three and six months ended June 30, 2018, the benefit of such plans related to our employees was $0.7 million and $1.3 million, respectively. Centralized Cash Management Lilly uses a centralized approach to cash management and financing of operations. Until Separation, the majority of our business was party to Lilly’s cash pooling arrangements to maximize Lilly's availability of cash for general operating and investing purposes. Under these cash pooling arrangements, cash balances were swept regularly from our accounts. Cash transfers to and from Lilly’s cash concentration accounts and the resulting balances at the end of each reporting period were reflected in net parent company investment in the condensed consolidated and combined statements of equity. Debt Lilly’s third-party debt and the related interest expense were not allocated to us for any of the periods presented as we were not the legal obligor of the debt and Lilly borrowings were not directly attributable to our business. |
Subsequent Events |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 16. Subsequent Events Aratana Acquisition On April 26, 2019, we entered into an agreement (the Merger Agreement) to acquire Aratana Therapeutics, Inc. (Aratana). Aratana is a pet therapeutics company focused on innovative therapies for dogs and cats, and creator of the canine osteoarthritis medicine, Galliprant®, the rights to which we acquired in 2016. Subject to the terms and conditions set forth in the Merger Agreement, upon the consummation of the merger, each share of Aratana common stock was converted into the right to receive 0.1481 shares of Elanco’s common stock plus one contingent value right, which represents the right to receive a contingent payment of $0.25 per share in cash upon the achievement of a specified milestone as outlined in the Merger Agreement. In connection with the transaction, we registered approximately 7.8 million shares of our stock during the three months ended June 30, 2019 for issuance to Aratana shareholders. Approximately 7.3 million shares were issued to previous Aratana shareholders upon closing, and the stock portion of the merger consideration represented $241.6 million. The maximum aggregate contingent payment is approximately $12 million. The transaction closed on July 18, 2019 and, as such, the accounting for this acquisition was incomplete at the time the condensed consolidated financial statements were issued. Prevtec Acquisition On July 31, 2019, we, through our wholly-owned subsidiary Elanco Canada Limited, acquired Prevtec Microbia, Inc. (“Prevtec”), pursuant to the terms of a share purchase agreement (the Share Purchase Agreement). Prevtec is a Canadian biotechnology company specializing in the development of vaccines intended to help prevent bacterial diseases in food animals. Prevtec is the maker of Coliprotec, a vaccine designed to protect pigs against post-weaning diarrhea and the effects of E. coli, which we were previously distributing in Europe and Canada. Pursuant to the terms and conditions of the Share Purchase Agreement, the total consideration to be paid is approximately CAD $78.5 million. We paid approximately CAD $40.0 million at closing, with the remainder to be paid on September 30, 2019, subject to certain post-closing adjustments. In addition to this consideration, the sellers may receive up to CAD $21.5 million in additional cash consideration, if specific sales milestones are achieved by December 31, 2021. Due to the timing, the accounting for this acquisition was incomplete at the time the condensed consolidated financial statements were issued. |
Basis of Presentation (Policies) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | We have prepared the accompanying unaudited condensed consolidated and combined financial statements in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (GAAP). In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for a fair presentation of the results of operations for the periods shown. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidation | For the periods after Separation, the financial statements are prepared on a consolidated basis and reflect the results of operations, comprehensive income, financial position, equity and cash flows resulting from our operations as an independent company. For periods prior to the Separation, our financial statements are combined, have been prepared on a standalone basis, and are derived from Lilly's consolidated financial statements and accounting records. The consolidated and combined financial statements reflect the financial position, results of operations and cash flows related to the animal health businesses that were transferred to Elanco Parent and are prepared in conformity with GAAP. The combined financial statements include the attribution of certain assets and liabilities that historically have been held at the Lilly corporate level but which are specifically identifiable or attributable to the businesses that have been transferred to Elanco Parent. All intercompany transactions and accounts within Elanco have been eliminated. All transactions between us and Lilly are considered to be effectively settled in the combined financial statements at the time the intercompany transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the condensed consolidated and combined statement of equity as net parent company investment. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allocation of Expenses | Prior to Separation, these combined financial statements include an allocation of expenses related to certain Lilly corporate functions, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations, prior to IPO. These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue, headcount and other measures. We consider the expenses methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for the periods presented. It is impractical to estimate what the standalone costs of Elanco would have been in the historical periods. After the Separation, a Transitional Services Agreement (TSA) between Lilly and Elanco went into effect. Under the terms of the TSA, we will be able to use these Lilly services for a fixed term established on a service-by-service basis. We are paying Lilly mutually agreed upon fees for the Lilly services provided under the TSA. Our consolidated and combined financial statements reflect the charges for Lilly services after the IPO. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax | The income tax amounts in the combined financial statements have been calculated based on a separate return methodology and presented as if our operations were separate taxpayers in the respective jurisdictions. We file income tax returns in the United States (U.S.) federal jurisdiction and various state, local and non-U.S. jurisdictions. Prior to full separation, certain of these income tax returns were filed on a consolidated or combined basis with Eli Lilly and Company and/or its subsidiaries. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit and Combined Stock-Based Compensation Plans | Prior to Separation, Lilly maintained various benefit and combined stock-based compensation plans at a corporate level and other benefit plans at a country level. Our employees participated in such programs and the portion of the cost of those plans related to our employees is included in our financial statements. However, the condensed balance sheets do not include any equity issued related to stock-based compensation plans or any net benefit plan obligations unless the benefit plan covers only our dedicated employees or where the legal obligation associated with the benefit plan transferred to Elanco. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Implementation of New Financial Accounting Pronouncements | The following table provides a brief description of an accounting standard that was effective January 1, 2019 and was adopted on that date:
The following table provides a brief description of the accounting standards that have not yet been adopted and could have a material effect on the consolidated financial statements:
|
Implementation of New Financial Accounting Pronouncements (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Accounting Standards Adopted and Not Yet Adopted | The following table provides a brief description of an accounting standard that was effective January 1, 2019 and was adopted on that date:
The following table provides a brief description of the accounting standards that have not yet been adopted and could have a material effect on the consolidated financial statements:
|
Revenue (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity in Sales Rebates and Discounts Liability | The following table summarizes the activity in the sales rebates and discounts liability in the U.S.:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table summarizes our revenue disaggregated by product category:
(1) Represents revenue from business activities we have either exited or made a strategic decision to exit. |
Asset Impairment, Restructuring and Other Special Charges (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Charges Related to Asset Impairment, Restructuring and Other Special Charges | Our total charges related to asset impairment, restructuring and other special charges, including integration of acquired businesses, in the unaudited condensed consolidated and combined statements of operations consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity in Reserves | The following table summarizes the activity in our reserves established in connection with these restructuring activities:
|
Inventories (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories | Inventories consisted of the following:
|
Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | Long-term debt consisted of the following:
|
Financial Instruments and Fair Value (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value Information | The following table summarizes the fair value information at June 30, 2019 and December 31, 2018 for contingent consideration liabilities, the net investment hedge liability and long-term debt measured at fair value on a recurring basis in the respective balance sheet line items:
|
Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of Operating Leases to Condensed Consolidated Financial Statements | The impact of operating leases to our condensed consolidated financial statements was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Balance Sheet Information Related to Operating Leases | Supplemental balance sheet information related to our operating leases is as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Minimum Lease Payments of Operating Lease Liabilities | As of June 30, 2019, the annual minimum lease payments of our operating lease liabilities were as follows:
|
Income Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for Taxes on Income |
|
Geographic Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue by Selected Geographic Area Information | Selected geographic area information was as follows:
(1) Revenue is attributed to the countries based on the location of the customer. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-lived Assets by Selected Geographic Area Information | (2) Long-lived assets consist of property and equipment, net, and certain noncurrent assets.
|
Related Party Agreements and Transactions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amounts Due From/(Due To) Lilly and Allocations of Services | The allocations of services from Lilly to us were reflected as follows in the condensed consolidated and combined statements of operations:
Amounts due from/(due to) Lilly in connection with the Separation and agreed upon services were as follows:
|
Nature of Business and Organization (Details) $ / shares in Units, $ in Billions |
Sep. 24, 2018
USD ($)
$ / shares
shares
|
Jun. 30, 2019
USD ($)
brand
country
|
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Number of brands in diverse portfolio (more than) | brand | 125 | |
Number of countries in which entity operates (more than) | country | 90 | |
IPO | ||
Subsidiary, Sale of Stock [Line Items] | ||
Number of shares issued | shares | 72,335,000 | |
Percentage of total outstanding shares | 19.80% | |
Price per share (usd per share) | $ / shares | $ 24 | |
Total net proceeds, after underwriting discounts and commissions | $ 1.7 | |
Payments made to date | $ 4.2 |
Impact of Separation (Details) |
Sep. 24, 2018
USD ($)
|
---|---|
Senior Notes | |
Debt Instrument [Line Items] | |
Aggregate principal amount | $ 2,000,000,000 |
Credit Facility | Senior Unsecured Revolving Credit Facility | |
Debt Instrument [Line Items] | |
Credit facility, maximum borrowing capacity | 750,000,000 |
Credit Facility | Senior Unsecured Term Credit Facility | |
Debt Instrument [Line Items] | |
Credit facility, maximum borrowing capacity | $ 500,000,000 |
Implementation of New Financial Accounting Pronouncements (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Jan. 01, 2019 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right-of-use assets | $ 81.3 | |
Operating lease liabilities | $ 81.6 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right-of-use assets | $ 84.9 | |
Operating lease liabilities | $ 85.3 |
Revenue - Narrative (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Concentration Risk [Line Items] | ||||
Performance obligation, description of timing | Payment terms differ by jurisdiction and customer, but payment terms in most of our major jurisdictions typically range from 30 to 100 days from date of shipment. | |||
Rebate period | 6 months | |||
Geographic Concentration Risk | Contract With Customer Liability | United States | ||||
Concentration Risk [Line Items] | ||||
Concentration risk (less than for Product Returns for the three months ended June 30, 2019) | 75.00% | 70.00% | ||
Geographic Concentration Risk | Contract With Customer Liability | Next Largest Country | ||||
Concentration Risk [Line Items] | ||||
Concentration risk (less than for Product Returns for the three months ended June 30, 2019) | 5.00% | 6.00% | ||
Product Return Concentration Risk | Net Revenue | ||||
Concentration Risk [Line Items] | ||||
Concentration risk (less than for Product Returns for the three months ended June 30, 2019) | 0.10% | 0.60% | 0.20% | 0.40% |
Revenue - Summary of Activity in Sales Rebates and Discounts Liability (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Change In Contract With Customer, Liability [Roll Forward] | ||||
Beginning balance | $ 120.0 | $ 91.1 | $ 118.5 | $ 114.8 |
Reduction of revenue | 80.6 | 56.2 | 146.3 | 100.7 |
Payments | (68.5) | (48.2) | (132.7) | (116.4) |
Ending balance | $ 132.1 | $ 99.1 | $ 132.1 | $ 99.1 |
Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 781.6 | $ 770.2 | $ 1,512.7 | $ 1,506.4 |
Companion Animal Disease Prevention | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 223.4 | 214.0 | 409.3 | 415.3 |
Companion Animal Therapeutics | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 83.4 | 68.3 | 164.8 | 130.6 |
Food Animal Future Protein & Health | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 175.8 | 172.6 | 343.0 | 339.3 |
Food Animal Ruminants & Swine | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 271.5 | 297.1 | 545.6 | 579.6 |
Strategic Exits | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 27.5 | $ 18.2 | $ 50.0 | $ 41.6 |
Asset Impairment, Restructuring and Other Special Charges - Total Charges Related to Asset Impairment, Restructuring and Other Special Charges (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Cash expense (income): | ||||
Severance and other costs | $ (1.3) | $ (2.7) | $ (0.8) | $ (2.6) |
Integration and acquisition costs | 33.1 | 2.8 | 53.5 | 5.6 |
Facility exit costs | 0.0 | 10.2 | 0.0 | 9.7 |
Total cash expense | 31.8 | 10.3 | 52.7 | 12.7 |
Non-cash expense: | ||||
Asset impairment | 0.0 | 57.7 | 4.0 | 57.7 |
Total non-cash expense | 0.0 | 57.7 | 4.0 | 57.7 |
Total cash expense | $ 31.8 | $ 68.0 | $ 56.7 | $ 70.4 |
Asset Impairment, Restructuring and Other Special Charges - Summary of Activity in Reserves (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | $ 44.4 | $ 78.0 |
Charges | 2.5 | 21.2 |
Reserve adjustments | (3.3) | (14.1) |
Cash paid | (15.5) | (38.3) |
Balance at end of period | 28.1 | 46.8 |
Facility exit costs | ||
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | 9.3 | 34.9 |
Charges | 0.0 | 21.2 |
Reserve adjustments | (11.5) | |
Cash paid | (1.7) | (9.9) |
Balance at end of period | 7.6 | 34.7 |
Severance | ||
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | 35.1 | 43.1 |
Charges | 2.5 | 0.0 |
Reserve adjustments | (3.3) | (2.6) |
Cash paid | (13.8) | (28.4) |
Balance at end of period | $ 20.5 | $ 12.1 |
Inventories (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished products | $ 412.4 | $ 400.7 |
Work in process | 610.2 | 570.4 |
Raw materials and supplies | 72.7 | 80.4 |
Total (approximates replacement cost) | 1,095.3 | 1,051.5 |
Decrease to LIFO cost | (42.2) | (47.4) |
Inventories | $ 1,053.1 | $ 1,004.1 |
Debt (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Unamortized debt issuance costs | $ (18.7) | $ (20.7) |
Total debt | 2,409.1 | 2,472.3 |
Less current portion of long-term debt | 27.1 | 29.0 |
Total long-term debt, excluding current portion | 2,382.0 | 2,443.3 |
Credit facility | Term credit facility | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 427.5 | 492.5 |
Senior Notes | 3.912% Senior Notes due 2021 | ||
Debt Instrument [Line Items] | ||
Interest rate | 3.912% | |
Long-term debt, gross | $ 500.0 | 500.0 |
Senior Notes | 4.272% Senior Notes due 2023 | ||
Debt Instrument [Line Items] | ||
Interest rate | 4.272% | |
Long-term debt, gross | $ 750.0 | 750.0 |
Senior Notes | 4.900% Senior Notes due 2028 | ||
Debt Instrument [Line Items] | ||
Interest rate | 4.90% | |
Long-term debt, gross | $ 750.0 | 750.0 |
Other obligations | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 0.3 | $ 0.5 |
Financial Instruments and Fair Value - Narrative (Details) SFr in Millions |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Oct. 31, 2018
CHF (SFr)
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
Oct. 31, 2018
USD ($)
|
Sep. 24, 2018
USD ($)
|
|
Fair Value Disclosures [Abstract] | ||||||
Equity method investments | $ 16,300,000 | $ 16,300,000 | $ 15,300,000 | |||
Foreign Exchange Contract | Net Investment Hedging | Designated as Hedging Instrument | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Term of contract | 5 years | |||||
Notional amount | SFr | SFr 750 | |||||
Expected cash and contra interest per year | $ 25,000,000 | |||||
Loss, net of tax | 6,800,000 | |||||
Foreign Exchange Contract | Net Investment Hedging | Designated as Hedging Instrument | Interest Expense | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Contra interest expense | 6,100,000 | 12,200,000 | ||||
Amortized Cost | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Term credit facility | 427,500,000 | 427,500,000 | $ 492,500,000 | |||
Senior Notes | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Aggregate principal amount | $ 2,000,000,000 | |||||
Senior Notes | 3.912% Senior Notes due 2021 | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Aggregate principal amount | $ 500,000,000.0 | $ 500,000,000.0 | ||||
Interest rate | 3.912% | 3.912% | ||||
Senior Notes | 4.272% Senior Notes due 2023 | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Aggregate principal amount | $ 750,000,000.0 | $ 750,000,000.0 | ||||
Interest rate | 4.272% | 4.272% | ||||
Senior Notes | 4.900% Senior Notes due 2028 | ||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||
Aggregate principal amount | $ 750,000,000.0 | $ 750,000,000.0 | ||||
Interest rate | 4.90% | 4.90% |
Financial Instruments and Fair Value - Summary of Fair Value Information (Details) - Recurring - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | $ 0.0 | $ 0.0 |
Other noncurrent assets/(liabilities) - cross currency interest rate contracts designated as net investment hedges | 0.0 | 0.0 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (2,137.0) | (2,005.0) |
Other noncurrent assets/(liabilities) - cross currency interest rate contracts designated as net investment hedges | (0.5) | (7.4) |
Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | 0.0 | 0.0 |
Other noncurrent assets/(liabilities) - cross currency interest rate contracts designated as net investment hedges | 0.0 | 0.0 |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (2,000.0) | (2,000.0) |
Other noncurrent assets/(liabilities) - cross currency interest rate contracts designated as net investment hedges | (0.5) | (7.4) |
Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (2,137.0) | (2,005.0) |
Other noncurrent assets/(liabilities) - cross currency interest rate contracts designated as net investment hedges | (0.5) | (7.4) |
Other current liabilities - contingent consideration | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0.0 | 0.0 |
Other current liabilities - contingent consideration | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0.0 | 0.0 |
Other current liabilities - contingent consideration | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (9.1) | (5.1) |
Other current liabilities - contingent consideration | Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (9.1) | (5.1) |
Other current liabilities - contingent consideration | Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (9.1) | (5.1) |
Other noncurrent liabilities - contingent consideration | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0.0 | 0.0 |
Other noncurrent liabilities - contingent consideration | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0.0 | 0.0 |
Other noncurrent liabilities - contingent consideration | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (68.1) | (69.0) |
Other noncurrent liabilities - contingent consideration | Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (68.1) | (69.0) |
Other noncurrent liabilities - contingent consideration | Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | $ (68.1) | $ (69.0) |
Leases - Narrative (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease terms | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease terms | 10 years |
Leases - Impact of Operating Leases to Condensed Consolidated Financial Statements (Details) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
|
Lease cost | ||
Operating lease cost | $ 6.6 | $ 12.3 |
Short-term lease cost | 0.2 | 0.4 |
Variable lease cost | 0.6 | 1.1 |
Total lease cost | $ 7.4 | 13.8 |
Other information | ||
Operating cash outflows from operating leases | 11.8 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 0.0 | |
Weighted-average remaining lease term - operating leases | 5 years | 5 years |
Weighted-average discount rate - operating leases | 4.20% | 4.20% |
Leases - Supplemental Balance Sheet Information Related to Operating Leases (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Right-of-use assets | $ 81.3 |
Current operating lease liabilities | 23.3 |
Non-current operating lease liabilities | $ 58.3 |
Leases - Annual Minimum Lease Payments of Operating Lease Liabilities (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Year 1 | $ 24.8 |
Year 2 | 19.6 |
Year 3 | 11.9 |
Year 4 | 9.2 |
Year 5 | 7.4 |
After Year 5 | 15.1 |
Total lease payments | 88.0 |
Less imputed interest | (6.4) |
Total | $ 81.6 |
Income Taxes - Provision for Taxes on Income (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Tax Disclosure [Abstract] | ||||
Provision for Taxes on Income | $ 14.3 | $ 22.8 | $ 27.6 | $ 27.6 |
Effective Tax Rate | 28.50% | (57.00%) | 29.00% | 73.60% |
Income Taxes - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Operating Loss Carryforwards [Line Items] | ||||
Income tax expense | $ 14.3 | $ 22.8 | $ 27.6 | $ 27.6 |
Effective tax rate | 28.50% | (57.00%) | 29.00% | 73.60% |
State | Restatement Adjustment | ||||
Operating Loss Carryforwards [Line Items] | ||||
Net operating loss carryovers | $ 3.6 | $ 3.6 | ||
Net operating loss carryovers, net of federal benefit | $ 2.9 | $ 2.9 |
Contingencies (Details) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Liabilities related to litigation | $ 0 | $ 0 |
Geographic Information - Narrative (Details) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018 |
Jun. 30, 2019
USD ($)
segment
|
Jun. 30, 2018 |
Dec. 31, 2018
USD ($)
|
|
Segment Reporting [Abstract] | |||||
Number of operating segments | segment | 1 | ||||
Concentration Risk [Line Items] | |||||
Accounts receivable | $ 757.2 | $ 757.2 | $ 651.8 | ||
Product Sales | |||||
Concentration Risk [Line Items] | |||||
Accounts receivable | $ 98.1 | $ 98.1 | $ 96.4 | ||
Customer Concentration Risk | Revenue | Single Customer | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 12.50% | 12.50% | 12.20% | 11.70% |
Geographic Information - Revenue by Selected Geographic Area Information (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue | $ 781.6 | $ 770.2 | $ 1,512.7 | $ 1,506.4 |
United States | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue | 395.0 | 366.4 | 778.9 | 726.4 |
International | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenue | $ 386.6 | $ 403.8 | $ 733.8 | $ 780.0 |
Geographic Information - Long-lived Assets by Selected Geographic Area Information (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 1,022.4 | $ 985.9 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | 637.0 | 602.6 |
United Kingdom | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | 185.0 | 187.5 |
Other foreign countries | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 200.4 | $ 195.8 |
Earnings Per Share (Details) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 24, 2018
shares
|
Sep. 19, 2018 |
Jun. 30, 2019
shares
|
Jun. 30, 2019
shares
|
Sep. 18, 2018
shares
|
Dec. 31, 2017
shares
|
|
Subsidiary, Sale of Stock [Line Items] | ||||||
Stock split ratio | 2,932,900 | |||||
Antidilutive shares not included in calculating diluted earnings per share | 100,000 | 100,000 | ||||
IPO | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Number of shares issued | 72,335,000 | |||||
Elanco | Lilly | ||||||
Subsidiary, Sale of Stock [Line Items] | ||||||
Common shares outstanding | 100 | 293,290,000 |
Related Party Agreements and Transactions - Amounts Due From/(Due To) Lilly (Details) - Lilly - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Related Party Transaction [Line Items] | ||
Total receivable from/(payable to) Lilly | $ (58.8) | $ (268.7) |
TSA | ||
Related Party Transaction [Line Items] | ||
Total receivable from/(payable to) Lilly | (18.6) | (28.0) |
Other activities | ||
Related Party Transaction [Line Items] | ||
Total receivable from/(payable to) Lilly | (28.7) | (38.0) |
Local country asset purchases | ||
Related Party Transaction [Line Items] | ||
Total receivable from/(payable to) Lilly | $ (11.5) | $ (202.7) |
Related Party Agreements and Transactions - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
||||||
Related Party Transaction [Line Items] | ||||||||||||
Separation adjustments | [1] | $ 18.4 | $ 7.0 | |||||||||
Restricted cash and payable | 11.5 | $ 0.0 | $ 11.5 | $ 0.0 | $ 202.7 | |||||||
Net transfers to Lilly | [1] | 40.3 | $ 69.2 | |||||||||
Lilly | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Stock-based compensation | 6.4 | $ 5.1 | 13.3 | |||||||||
Costs of defined benefit pension plan | 0.7 | 1.3 | ||||||||||
Lilly | TSA | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Mark-up rate | 7.00% | |||||||||||
Lilly | Manufacturing Support | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Revenue from related parties | 1.2 | 2.4 | ||||||||||
Additional Paid-in Capital | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Separation adjustments | [1] | $ 18.4 | $ 7.0 | $ (25.4) | ||||||||
Net Parent Company Investment | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Net transfers to Lilly | $ 40.3 | [1] | $ 69.2 | [1] | $ 109.5 | |||||||
|
Related Party Agreements and Transactions - Allocations of Services (Details) - Lilly - Transitional Services Agreement - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Related Party Transaction [Line Items] | ||||
Allocation of services | $ 0.0 | $ 35.5 | $ 0.0 | $ 71.1 |
Cost of sales | ||||
Related Party Transaction [Line Items] | ||||
Allocation of services | 0.0 | 7.3 | 0.0 | 14.8 |
Research and development | ||||
Related Party Transaction [Line Items] | ||||
Allocation of services | 0.0 | 0.7 | 0.0 | 1.5 |
Marketing, selling and administrative | ||||
Related Party Transaction [Line Items] | ||||
Allocation of services | $ 0.0 | $ 27.5 | $ 0.0 | $ 54.8 |
Subsequent Events (Details) - Subsequent Event $ / shares in Units, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Jul. 31, 2019
CAD ($)
|
Jul. 18, 2019
USD ($)
shares
|
Jul. 18, 2019
USD ($)
right
$ / shares
shares
|
|
Aratana | |||
Subsequent Event [Line Items] | |||
Common stock right to receive converted shares (in shares) | shares | 0.1481 | ||
Number of contingent value rights | right | 1 | ||
Right to receive contingent payment (usd per share) | $ / shares | $ 0.25 | ||
Number of shares issued to previous shareholders upon closing (in shares) | shares | 7,300,000 | 7,800,000 | |
Stock portion of merger consideration | $ 241.6 | ||
Maximum aggregate contingent payment | $ 12.0 | $ 12.0 | |
Prevtec | |||
Subsequent Event [Line Items] | |||
Maximum aggregate contingent payment | $ 21,500,000.0 | ||
Total consideration | 78,500,000 | ||
Amount paid at closing | $ 40,000,000 |
Label | Element | Value |
---|---|---|
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (300,000) |
Net Parent Company Investment [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (300,000) |
,%T!';N'F$W@FT[A%GP
M'<'MBR(W@NT\A%FP'L%=CMPFQK;Y &;)%KC3D=O(.+%%_KO9$=SMR&UF['QA
M+F9)!&YXY+8S7EN_[1&S,IAV^&^G>+-)HMC>((+9;M10?C,;M_ *=F_-J6&V
M.AT.]MCL9G_@P\GB*^&WJA7>F4FU)YJ=Z\J8I"JC\$GE4JK#S#2IZ57J8:K&
M?-C1AXEDW7A:":8C4_X;4$L#!!0 ( &>"#4]0\27-+00 #\3 8
M>&PO=V]R:W-H965T+2W&4?\GN
M[\MKH]_\NY;]N9)U>U:UT\C#TGUASUO.>X$!\<]9WEKKV>FIO"GUK7_Y?;]T
M@]XB6[S&59]IJT'=^-4O>^9R]H/W]H_S*0UV3>BE;FJOSWO.].
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MT)8)*RMYYHR86E*+X^[@+'?=AO-G=3K!U0#(!DAFPCWG8F"@J?^">%YDU
M [%C[SL>GGA[2+ W97#&5L0[%._0>RFV^S1CET TQ1S'F&09,T"#4\%T7/HM $ -(# 9 >&PO=V]R:W-H965T
+)6O_N/?KI)D$:"]*\2#V]*W(JY>R/"5CW58)HX39:4.'1QDE?>
M96#O>7R3/^'3M'\5II&=)1=T_F5C_VM$!SZ5W8T?H=9_L,504+MPO/5G,XW9
M9#CLYQ_$EF]<_ 902P,$% @ 9X(-3_0[9!+% 0 -P0 !D !X;"]W
M;W)K
QU]%Z@XQA>/X^