Cover page
Cover page - shares | 3 Months Ended | |
Mar. 31, 2021 | May 03, 2021 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-38661 | |
Entity Registrant Name | Elanco Animal Health Inc | |
Entity Incorporation, State or Country Code | IN | |
Entity Tax Identification Number | 82-5497352 | |
Entity Address, Address Line One | 2500 INNOVATION WAY | |
Entity Address, City or Town | GREENFIELD | |
Entity Address, State or Province | IN | |
Entity Address, Postal Zip Code | 46140 | |
City Area Code | 877 | |
Local Phone Number | 352-6261 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 472,995,963 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001739104 | |
Current Fiscal Year End Date | --12-31 | |
Common stock, no par value | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Common stock, no par value | |
Trading Symbol | ELAN | |
Security Exchange Name | NYSE | |
5.00% Tangible Equity Units | ||
Document Information [Line Items] | ||
Title of 12(b) Security | 5.00% Tangible Equity Units | |
Trading Symbol | ELAT | |
Security Exchange Name | NYSE |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||
Revenue | $ 1,242 | $ 658 |
Costs, expenses and other: | ||
Cost of sales | 569 | 333 |
Research and development | 89 | 67 |
Marketing, selling and administrative | 348 | 182 |
Amortization of intangible assets | 147 | 52 |
Asset impairment, restructuring and other special charges | 108 | 75 |
Interest expense, net of capitalized interest | 61 | 16 |
Other expense, net | 0 | 1 |
Costs, expenses and other | 1,322 | 726 |
Loss before income taxes | (80) | (68) |
Income tax benefit | (19) | (19) |
Net loss | $ (61) | $ (49) |
Loss per share: | ||
Basic (usd per share) | $ (0.12) | $ (0.12) |
Diluted (usd per share) | $ (0.12) | $ (0.12) |
Weighted average shares outstanding: | ||
Basic (in shares) | 486.7 | 403.9 |
Diluted (in shares) | 486.7 | 403.9 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (61) | $ (49) |
Other comprehensive income (loss): | ||
Unrealized gain (loss) on derivatives for cash flow hedges, net of taxes | 53 | (39) |
Foreign currency translation | (466) | (29) |
Defined benefit pension and retiree health benefit plans, net of taxes | 8 | (1) |
Other comprehensive loss, net of taxes | (405) | (69) |
Comprehensive loss | $ (466) | $ (118) |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
Current Assets | ||
Cash and cash equivalents | $ 515 | $ 495 |
Accounts receivable, net of allowances of $9 (2021) and $9 (2020) | 1,028 | 872 |
Other receivables | 104 | 205 |
Inventories | 1,424 | 1,578 |
Prepaid expenses and other | 273 | 256 |
Restricted cash | 0 | 11 |
Total current assets | 3,344 | 3,417 |
Noncurrent Assets | ||
Goodwill | 6,016 | 6,225 |
Other intangibles, net | 6,032 | 6,387 |
Other noncurrent assets | 325 | 348 |
Property and equipment, net of accumulated depreciation of $1,060 (2021) and $1,038 (2020) | 1,271 | 1,316 |
Total assets | 16,988 | 17,693 |
Current Liabilities | ||
Accounts payable | 411 | 501 |
Employee compensation | 114 | 144 |
Sales rebates and discounts | 331 | 295 |
Current portion of long-term debt | 605 | 555 |
Other current liabilities | 573 | 582 |
Total current liabilities | 2,034 | 2,077 |
Noncurrent Liabilities | ||
Long-term debt | 5,556 | 5,572 |
Accrued retirement benefits | 316 | 346 |
Deferred taxes | 828 | 900 |
Other noncurrent liabilities | 247 | 322 |
Total liabilities | 8,981 | 9,217 |
Commitments and Contingencies | 0 | 0 |
Equity | ||
Preferred stock, no par value, 1,000,000,000 shares authorized; none issued | 0 | 0 |
Common stock, no par value, 5,000,000,000 shares authorized, 472,968,567 and 471,921,116 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 0 | 0 |
Additional paid-in capital | 8,647 | 8,650 |
Accumulated deficit | (538) | (477) |
Accumulated other comprehensive income (loss) | (102) | 303 |
Total equity | 8,007 | 8,476 |
Total liabilities and equity | $ 16,988 | $ 17,693 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowances | $ 9 | $ 9 |
Property and equipment, net of accumulated depreciation | $ 1,060 | $ 1,038 |
Preferred stock, shares authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, shares authorized (in shares) | 5,000,000,000 | 5,000,000,000 |
Common stock, shares issued (in shares) | 472,968,567 | 471,921,116 |
Common stock, shares outstanding (in shares) | 472,968,567 | 471,921,116 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Equity (Unaudited) - USD ($) shares in Millions, $ in Millions | Total | Cumulative Effect, Period of Adoption, Adjustment | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Retained Earnings (Accumulated Deficit)Cumulative Effect, Period of Adoption, Adjustment | Accumulated Other Comprehensive Income (Loss) | Cash Flow Hedge Gain (Loss) | Foreign Currency Translation | Defined Benefit Pension and Retiree Health Benefit Plans | |
Balance at beginning of period (in shares) at Dec. 31, 2019 | 373 | ||||||||||
Balance at beginning of period at Dec. 31, 2019 | $ 5,546 | $ (1) | $ 0 | $ 5,636 | $ 84 | $ (1) | $ (174) | $ (199) | $ 25 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net loss | (49) | (49) | |||||||||
Other comprehensive loss, net of tax | (69) | (69) | $ (39) | (29) | (1) | ||||||
Separation activities | [1] | 16 | 16 | ||||||||
Stock compensation | 11 | 11 | |||||||||
Issuance of stock under employee stock plans, net (in shares) | 1 | ||||||||||
Issuance of stock under employee stock plans, net | (13) | (13) | |||||||||
Issuance of common stock, net of issuance costs (in shares) | 25 | ||||||||||
Issuance of common stock, net of issuance costs | 768 | 768 | |||||||||
Issuance of tangible equity units, net of issuance costs | 452 | 452 | |||||||||
Balance at end of period (in shares) at Mar. 31, 2020 | 399 | ||||||||||
Balance at end of period at Mar. 31, 2020 | 6,661 | $ 0 | 6,870 | 34 | (243) | (39) | (228) | 24 | |||
Balance at beginning of period (in shares) at Dec. 31, 2020 | 472 | ||||||||||
Balance at beginning of period at Dec. 31, 2020 | 8,476 | $ 0 | 8,650 | (477) | 303 | (61) | 360 | 4 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net loss | (61) | (61) | |||||||||
Other comprehensive loss, net of tax | (405) | (405) | 53 | (466) | 8 | ||||||
Stock compensation | 15 | 15 | |||||||||
Issuance of stock under employee stock plans, net (in shares) | 1 | ||||||||||
Issuance of stock under employee stock plans, net | (18) | (18) | |||||||||
Balance at end of period (in shares) at Mar. 31, 2021 | 473 | ||||||||||
Balance at end of period at Mar. 31, 2021 | $ 8,007 | $ 0 | $ 8,647 | $ (538) | $ (102) | $ (8) | $ (106) | $ 12 | |||
[1] | Represent amounts associated with transactions between us and Lilly, related primarily to the completion of the local country asset purchases, the finalization of assets and liabilities associated with the legal separation from Lilly, centralized cash management, and resulting impacts on deferred tax assets, that occurred subsequent to our initial public offering. |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash Flows from Operating Activities | ||
Net loss | $ (61) | $ (49) |
Adjustments to reconcile net loss to cash flows from operating activities: | ||
Depreciation and amortization | 202 | 82 |
Change in deferred income taxes | (32) | (25) |
Stock-based compensation expense | 15 | 11 |
Asset impairment charges | 9 | 0 |
Gain on sale of assets | 0 | (4) |
Inventory fair value step-up amortization | 62 | 0 |
Changes in operating assets and liabilities, net of acquisitions | (183) | (10) |
Other non-cash operating activities, net | 10 | (1) |
Net Cash Provided by Operating Activities | 22 | 4 |
Cash Flows from Investing Activities | ||
Net purchases of property and equipment | (18) | (13) |
Cash paid for acquisitions, net of cash acquired | 73 | 0 |
Proceeds from settlement of net investment hedges | 0 | 25 |
Purchases of intangible assets | (33) | 0 |
Purchases of software | (5) | (32) |
Other investing activities, net | (7) | 0 |
Net Cash Provided by (Used for) Investing Activities | 10 | (20) |
Cash Flows from Financing Activities | ||
Repayments of borrowings | (20) | (371) |
Net proceeds from revolving credit facility | 50 | 0 |
Proceeds from issuance of long-term debt | 0 | 79 |
Proceeds from issuance of common stock and tangible equity units | 0 | 1,220 |
Debt issuance costs | 0 | (3) |
Other net financing transactions with Lilly | (11) | (15) |
Other financing activities, net | (17) | (13) |
Net Cash Provided by Financing Activities | 2 | 897 |
Effect of exchange rate changes on cash and cash equivalents | (25) | (9) |
Net increase in cash, cash equivalents and restricted cash | 9 | 872 |
Cash, cash equivalents and restricted cash at beginning of period | 506 | 345 |
Cash, cash equivalents and restricted cash at end of period | 515 | 1,217 |
Cash, cash equivalents and restricted cash | $ 515 | $ 1,217 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Note 1. Basis of Presentation and Summary of Significant Accounting Policies Elanco was formed as a wholly-owned subsidiary of Eli Lilly and Company (Lilly). Elanco Parent was formed in May 2018 to serve as the ultimate parent company of substantially all of the animal health businesses of Lilly. In September 2018, Elanco Parent completed an initial public offering (IPO). 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. The disposition of Elanco shares by Lilly was completed in March 2019, which resulted in the full separation of Elanco. We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the United States (U.S.) Securities and Exchange Commission (SEC) requirements for interim reporting. As permitted under those rules, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. (GAAP) have been condensed or omitted. 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, 2020 included in our Annual Report on Form 10-K filed with the SEC on March 1, 2021. In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for 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 significant accounting policies set forth in Note 4 to the consolidated and combined financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 appropriately represent, in all material respects, the current status of our accounting policies, except as it relates to the adoption of the standard that was effective January 1, 2021 as described in Note 2: Implementation of New Financial Accounting Pronouncements. On August 1, 2020, we completed the previously announced acquisition of Bayer Animal Health. See Note 4: Acquisitions and Divestitures for additional information. |
Implementation of New Financial
Implementation of New Financial Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Changes and Error Corrections [Abstract] | |
Implementation of New Financial Accounting Pronouncements | Note 2. Implementation of New Financial Accounting Pronouncements The following table provides a brief description of an accounting standard that was effective January 1, 2021 and was adopted on that date: Standard Description Effect on the financial statements or other significant matters Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes The amendments in this update include simplifications related to accounting for income taxes including removing certain exceptions related to the approach for intraperiod tax allocation and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material impact on our consolidated financial statements. The following table provides a brief description of an accounting standard that is applicable to us but has not yet been adopted: Standard Description Effective Date Effect on the financial statements or other significant matters ASU 2020-04, Reference rate reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting; ASU 2021-01, Reference Rate Reform (Topic 848): Scope ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2021-01 clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions. These standards were effective as of March 12, 2020 through December 31, 2022 and adoption is permitted at any time during the period on a prospective basis. We are currently in the process of evaluating the impact of the London Interbank Offered Rate (LIBOR) on our existing contracts and may elect optional expedients in future periods as reference rate reform activities occur. We do not expect that these updates will have a material impact on our consolidated financial statements. |
Revenue
Revenue | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Note 3. Revenue Our sales rebates are based on specific agreements. The most significant of our sales rebate programs in terms of accrual and payment amounts, percentage of our products that are sold via these programs, and level of judgment required in estimating the appropriate transaction price, relate to our programs in the U.S., France and the United Kingdom (U.K.). As of March 31, 2021 and 2020, the aggregate liability for sales rebates for these countries represented approximately 76% and 82%, respectively, of our total liability with the next largest country representing approximately 4% and 6%, respectively, of our total liability. The following table summarizes the activity in the sales rebates liability in the U.S., France, and the U.K.: Three Months Ended March 31, 2021 2020 Beginning balance $ 217 $ 176 Reduction of revenue 142 71 Payments (106) (87) Foreign currency translation adjustments (2) (1) Ending balance $ 251 $ 159 Adjustments to revenue recognized as a result of changes in estimates for the judgments described above during the three months ended March 31, 2021 and 2020 for product shipped in previous periods were not material. Actual global product returns were approximately 1% and 2% of net revenue for the three months ended March 31, 2021 and 2020, respectively. Disaggregation of Revenue In the first quarter of 2021, management revisited how it analyzes revenue, both internally and externally, and determined that disaggregation by major product line provides a more meaningful view of our results. Accordingly, we updated our disaggregated revenue presentation from the previous five categories (i.e., pet health disease prevention, pet health therapeutics, farm animal future protein & health, farm animal ruminants & swine, and contract manufacturing) to the following: Three Months Ended March 31, 2021 2020 Pet Health $ 645 $ 206 Farm Animal 578 433 Contract Manufacturing (1) 19 19 Revenue $ 1,242 $ 658 |
Acquisitions and Divestitures
Acquisitions and Divestitures | 3 Months Ended |
Mar. 31, 2021 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | Note 4. Acquisitions and Divestitures Bayer Animal Health Acquisition On August 1, 2020, we completed our previously announced acquisition of Bayer Animal Health, a provider of products intended to improve the health and well-being of pets and farm animals, in a cash and stock transaction. The transaction was accounted for as a business combination under the acquisition method of accounting. The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The determination of estimated fair value requires management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of Bayer Animal Health are included in our condensed consolidated financial statements from the date of acquisition. The acquisition has expanded our pet health product category, advancing our planned portfolio mix transformation and creating a better balance between our farm animal and pet health product categories. Our existing product portfolio and pipeline have been enhanced by the addition of Bayer Animal Health, which complements our commercial operations and international infrastructure while expanding our direct to retailer/e-commerce presence. Total consideration transferred to Bayer and its subsidiaries for the acquisition is summarized as follows: Cash consideration (1) $ 5,058 Fair value of Elanco common stock (2) 1,724 Fair value of total consideration transferred (3) $ 6,782 (1) Includes initial cash consideration of $5,170 million less working capital and tax adjustments of $112 million. (2) Represents the acquisition date fair value of 73 million shares of Elanco common stock at $23.64 per share. Per the terms of the stock and asset purchase agreement, the number of shares was based on approximately $2.3 billion divided by the 20-day volume-weighted average stock price as of the last day of trading before the closing of the acquisition (but subject to a 7.5% symmetrical collar centered on the baseline share number of approximately $2.3 billion divided by an initial share price of $33.60). (3) The purchase price is preliminary and subject to certain minor customary purchase price adjustments. We recognized transaction costs related to the acquisition of Bayer Animal Health of $3 million and $20 million during the three months ended March 31, 2021 and 2020, respectively. These costs were primarily associated with financial advisory, legal and other professional services related to the acquisition and are reflected within asset impairment, restructuring and other special charges in our condensed consolidated statements of operations. The amount of revenue attributable to Bayer Animal Health included in our condensed consolidated statement of operations for the three months ended March 31, 2021 is $559 million. Based on our current operational structure, we have not recorded standalone costs for Bayer Animal Health after the date of the acquisition. As a result, we are unable to accurately determine earnings or loss attributable to Bayer Animal Health since the date of acquisition. The valuation of assets acquired and liabilities assumed has not yet been finalized as of March 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of inventories, property and equipment, intangible assets, income taxes and goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. During the three months ended March 31, 2021, we recorded immaterial measurement period adjustments which were made to reflect the facts and circumstances in existence as of the acquisition date. These adjustments primarily related to changes in inventory balances and gross margin assumptions as well as minor working capital adjustments. The fair values in the table below have been updated to reflect these measurement period adjustments. Finalization of the valuation during the measurement period could result in additional changes in the amounts recorded for the acquisition date fair value. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at August 1, 2020 Cash and cash equivalents $ 169 Accounts receivable 9 Inventories 487 Prepaid expenses and other current assets 57 Property and equipment 347 Intangible assets: Acquired in-process research and development 65 Marketed products 3,930 Assets held for sale 138 Accounts payable and accrued liabilities (240) Accrued retirement benefits (217) Other noncurrent assets and liabilities, net (894) Total identifiable net assets 3,851 Goodwill 2,931 Total consideration transferred $ 6,782 Inventories comprised of $314 million, $79 million, $94 million in finished products, work in process, and raw materials, respectively. The preliminary estimate of fair value of finished products was determined based on net realizable value adjusted for the costs to complete the sales process, a reasonable profit allowance from the sales process, and estimated holding costs. The preliminary estimate of fair value of work in process was determined based on net realizable value adjusted for costs to complete the manufacturing process, costs of the sales process, a reasonable profit allowance for the remaining manufacturing and sales process effort, and an estimate of holding costs. The fair value of raw materials was determined to approximate book value. The net fair value step-up adjustment to inventories of $148 million has been amortized to cost of sales as the inventory is sold to customers. As of March 31, 2021, the fair value step-up adjustment has been fully amortized. Property and equipment is mostly composed of land, buildings, equipment (including machinery, furniture and fixtures, and computer equipment), and construction in progress. The preliminary estimate of fair value of real property was determined using the sales comparison data valuation technique and the preliminary estimate of fair value of personal property was determined using the direct replacement cost method. The recorded fair value of property and equipment located at the Shawnee, Kansas site is currently equal to its net book value at the time of the acquisition, as we are in the process of gathering information to finalize our fair value assessment. Intangible assets relate to $65 million of in-process research and development (IPR&D) and $3,930 million of marketed products. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 10 years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of sales, R&D expenses, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of March 31, 2021 is based on preliminary assumptions which are subject to change as we complete our valuation procedures. Assets held for sale include $133 million of intangible assets, consisting of marketed products and IPR&D, and $5 million of inventory related to the divestitures of Drontal ™, Profender ™ and other products. In order to secure the necessary regulatory clearances for the acquisition of Bayer Animal Health, we signed agreements to divest the rights to the Drontal and Profender product families within the United Kingdom and European Economic Area as well as other IPR&D. We completed the transactions, which were accounted for as asset divestitures, in the third quarter of 2020. Accrued retirement benefits primarily relate to certain Bayer Animal Health international subsidiaries that have underfunded defined benefit pension plans. We have recorded the fair value of these plans using assumptions and accounting policies similar to those disclosed in Note 19: Retirement Benefits to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020. Upon acquisition, the excess of projected benefit obligation over the fair value of plan assets was recognized as a liability and previously existing deferred actuarial gains and losses and unrecognized service costs or benefits were eliminated. The goodwill recognized from this acquisition represents the value of additional growth platforms and an expanded revenue base as well as anticipated operational synergies and cost savings from the creation of a single combined global organization. The majority of goodwill associated with this acquisition is not deductible for tax purposes. Pro forma financial information (unaudited) The following table presents the estimated unaudited pro forma combined results of Elanco and Bayer Animal Health for the three months ended March 31, 2020 as if the acquisition of Bayer Animal Health had occurred on January 1, 2020: Revenue $ 1,170 Loss before income taxes (67) The supplemental pro forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of Elanco and Bayer Animal Health. The supplemental pro forma financial information does not necessarily represent what the combined companies' revenue or results of operations would have been had the acquisition been completed on January 1, 2020, nor is it intended to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining Elanco and Bayer Animal Health. The unaudited supplemental pro forma financial information reflects primarily pro forma adjustments related to divestitures, fair value estimates for intangibles and inventory, and interest expense and amortization of debt issuance costs for the debt issuance to finance the acquisition of Bayer Animal Health. The unaudited supplemental pro forma financial information includes transaction charges associated with the acquisition. There are no material, nonrecurring pro forma adjustments directly attributable to the acquisition included in the reported pro forma revenue and loss before income taxes. Divestitures and Assets Held For Sale In connection with advancing our efforts to secure the necessary regulatory clearances for our acquisition of Bayer Animal Health, we signed agreements in 2020 to divest the rights to manufacture and commercialize certain products, including currently marketed products and certain IPR&D assets. As part of those transactions, we signed an agreement to divest the worldwide rights to the legacy Elanco products Itrafungol ™ and Clomicalm ™ in connection with the required disposal of an early-stage IPR&D asset. We also made a payment during the three months ended March 31, 2021 and accrued for future amounts we are required to pay to the buyer of the IPR&D asset to help fund their development costs for a set period of time. The related assets met the assets held for sale criteria as of December 31, 2020. The divestiture closed during the three months ended March 31, 2021. There were no proceeds received from the disposition of these assets and the resulting immaterial impact was recorded in other expense, net in our condensed consolidated statement of operations. Assets and liabilities considered held for sale in connection with the above divestiture were included in the respective line items on the consolidated balance sheet as follows: December 31, 2020 Inventories $ 2 Other intangibles, net 4 Property and equipment, net — Deferred tax asset 1 Total assets held for sale $ 7 |
Asset Impairment, Restructuring
Asset Impairment, Restructuring and Other Special Charges | 3 Months Ended |
Mar. 31, 2021 | |
Restructuring and Related Activities [Abstract] | |
Asset Impairment, Restructuring and Other Special Charges | Note 5. Asset Impairment, Restructuring and Other Special Charges In recent years, we have incurred substantial costs associated with restructuring programs and cost-reduction initiatives designed to achieve a flexible and competitive cost structure. Restructuring activities primarily include charges associated with facility rationalization and workforce reductions. In connection with our recent acquisitions, including the acquisition of Bayer Animal Health, we have also incurred costs associated with executing transactions and integrating acquired operations, which may include expenditures for banking, legal, accounting, and other similar services. In addition, we have incurred costs to stand up our organization as an independent company. All operating functions can be impacted by these actions; therefore, non-cash expenses associated with our tangible and intangible assets can be incurred as a result of revised fair value projections and/or determinations to no longer utilize certain assets in the business on an ongoing basis. For finite-lived intangible asset and other long-lived assets, whenever impairment indicators are present, we calculate the undiscounted value of projected cash flows associated with the asset, or group of assets, and compare it to the carrying amount. If the carrying amount is greater, we record an impairment loss for the excess of book value over fair value. Determinations of fair value can result from a complex series of judgments and rely on estimates and assumptions. See Note 1: Basis of Presentation and Summary of Significant Accounting Policies for discussion regarding estimates and assumptions. Components of asset impairment, restructuring and other special charges are as follows: Three Months Ended March 31, 2021 2020 Restructuring charges: Severance and other costs (1) $ 26 $ 1 Facility exit costs (1) — 1 Acquisition related charges: Transaction and integration costs (2) 81 76 Non-cash and other items: Asset impairment (3) 9 — Asset write-down (4) 2 1 Gain on sale of fixed assets (5) — (4) Settlements and other (6) (10) — Total expense $ 108 $ 75 (1) For the three months ended March 31, 2021, these charges primarily relate to a restructuring program announced and initiated in January 2021. These costs were partially offset by the reversal of severance accruals under the September 2020 program that are no longer needed. See below for further details. For the three months ended March 31, 2020, these charges primarily relate to the announced 2019 program to streamline operations in Speke, England as well as the remaining costs to close the Larchwood, Iowa facility. (2) Transaction costs represent external costs directly related to acquiring businesses and primarily include expenditures for banking, legal, accounting and other similar services. Integration costs represent internal and external incremental costs directly related to integrating acquired businesses, including the acquisition of Bayer Animal Health (e.g., expenditures for consulting, system and process integration, and product transfers), as well as stand-up costs related to the implementation of new systems, programs, and processes. (3) Asset impairment charges for the three months ended March 31, 2021 related to an adjustment to fair value of intangible assets that were subject to product rationalization. (4) Asset write-down expenses for the three months ended March 31, 2021 resulted from adjustments recorded to write assets classified as held and used down to their current fair value. These included charges related to fixed assets in Basel, Switzerland; Cuxhaven, Germany; and Manukau, New Zealand in connection with announced restructuring programs. Asset write-down expenses for the three months ended March 31, 2020 resulted from adjustments recorded to write assets classified as held and used down to their current fair value. These charges primarily related to fixed assets in Wusi, China in connection with the announced 2019 program to streamline operations. (5) Represents a gain on the disposal from the sale of an R&D facility in Prince Edward Island, Canada. (6) As a result of workforce reductions in connection with our September 2020 and January 2021 restructuring programs, we remeasured the impacted pension benefit obligations as of March 31, 2021, which resulted in a curtailment gain. See Note 13: Retirement Benefits for further information. This amount also includes the gain recorded on the divestiture of an early-stage IPR&D asset acquired as part of the Bayer Animal Health acquisition. In January 2021, we announced a restructuring aligned with our ongoing efforts to improve operating efficiencies. The proposed actions are focused on streamlining processes and delivering increased efficiency in functional areas, while improving the productivity of our investments in innovation. As part of the restructuring plan, we intend to close R&D sites in Manukau, New Zealand and Cuxhaven, Germany. We will also reduce duplication and optimize structures in U.S. operations, marketing, manufacturing and quality central functions, and administrative areas. The restructuring will result in the elimination of approximately 330 positions around the world. Charges related to this initiative were approximately $41 million for the three months ended March 31, 2021. The overall project is expected to be substantially complete by the end of 2021. In September 2020, following the closing of the Bayer Animal Health acquisition, we implemented a restructuring program designed to reduce duplication, drive efficiency and optimize our footprint in key geographies. As part of the restructuring plan, we have eliminated approximately 900 positions across 40 countries, primarily in the commercial and marketing functions, but also in R&D, manufacturing and quality, and back office support functions. During the three months ended March 31, 2021 we recorded a favorable adjustment of $13 million as a change in estimate related to this initiative, which reflects adjustments to severance accruals resulting from favorable negotiations and certain restructured employees filling open positions. The overall project is expected to be substantially complete by the end of 2021. The following table summarizes the activity in our reserves established in connection with restructuring activities: Facility exit costs Severance Total Balance at December 31, 2019 $ 5 $ 16 $ 21 Charges 1 1 2 Reserve adjustments — (1) (1) Cash paid (1) (10) (11) Balance at March 31, 2020 $ 5 $ 6 $ 11 Balance at December 31, 2020 $ — $ 130 $ 130 Charges — 39 39 Reserve adjustments — (13) (13) Cash paid — (38) (38) Balance at March 31, 2021 $ — $ 118 $ 118 These reserves are included in other current and noncurrent liabilities on the consolidated balance sheets. Substantially all of the reserves are expected to be paid in the next 18 months primarily due to certain country negotiations and regulations. We believe that the reserves are adequate. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2021 | |
Inventory Disclosure [Abstract] | |
Inventories | Note 6. 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 or the weighted average cost method. Inventories consisted of the following: March 31, 2021 December 31, 2020 Finished products $ 613 $ 772 Work in process 630 625 Raw materials and supplies 211 210 Total 1,454 1,607 Decrease to LIFO cost (30) (29) Inventories $ 1,424 $ 1,578 |
Equity
Equity | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Equity | Note 7. Equity Common Stock Offering On January 22, 2020, we entered into an underwriting agreement in which we agreed to sell approximately 23 million shares of our common stock at a public offering price of $32.00 per share. In connection with the offering, we granted the underwriters an option to purchase up to an additional 2 million shares, which was exercised in full on January 23, 2020. As a result, we issued and sold a total of approximately 25 million shares of our common stock for $768 million, after issuance costs. Tangible Equity Unit (TEU) Offering On January 22, 2020, we also completed our offering of 11 million, 5.00% TEUs. Total proceeds, net of issuance costs, were $528 million. Each TEU, which has a stated amount of $50, is comprised of a prepaid stock purchase contract (prepaid stock) and a senior amortizing note due February 1, 2023. Subsequent to issuance, each TEU may be legally separated into the two components. The prepaid stock is considered a freestanding financial instrument, indexed to Elanco common stock, and meets the conditions for equity classification. The value allocated to the prepaid stock is reflected net of issuance costs in additional paid-in capital. The value allocated to the senior amortizing notes is reflected in long-term debt on the consolidated balance sheet, with payments expected in the next twelve months reflected in current portion of long-term debt. Issuance costs related to the amortizing notes are reflected as a reduction of the carrying amount and will be amortized through the maturity date using the effective interest rate method. The proceeds from the issuance were allocated to equity and debt based on the relative fair value of the respective components of each TEU as follows: Equity Component Debt Component Total Fair value per unit $ 42.80 $ 7.20 $ 50.00 Gross proceeds $ 471 $ 79 $ 550 Less: Issuance costs 19 3 22 Net proceeds $ 452 $ 76 $ 528 The senior amortizing notes have an aggregate principal amount of $79 million and bear interest at 2.75% per year. On each February 1, May 1, August 1, and November 1 until the maturity date, we will pay equal quarterly cash installments of $0.6250 per each amortizing note with an initial principal amount of $7.2007 (except for the first installment payment of $0.6528 per amortizing note paid on May 1, 2020). Each installment constitutes a payment of interest and partial payment of principal, and in the aggregate will be equivalent to 5.00% per year with respect to the $50 stated amount per TEU. Unless settled early at the holder’s or our election, each prepaid stock purchase contract will automatically settle on February 1, 2023 (the mandatory settlement date) for a number of shares of common stock per contract based on the average of the volume-weighted average trading prices during the 20 consecutive trading day period beginning on, and including the 21st scheduled trading day immediately preceding February 1, 2023 (applicable market value) with reference to the following settlement rates: Applicable Market Value Common Stock Issued Equal to or greater than $38.40 1.3021 shares (minimum settlement rate) Less than $38.40, but greater than $32.00 $50 divided by applicable market value Less than or equal to $32.00 1.5625 (maximum settlement rate) The prepaid stock purchase contracts are mandatorily convertible into a minimum of 14 million shares or a maximum of 17 million shares of our common stock on the mandatory settlement date (unless redeemed by us or settled earlier at the unit holder's option). The 14 million minimum shares are included in the calculation of basic weighted average shares outstanding. The difference between the minimum and maximum shares represents potentially dilutive securities, which are included in the calculation of diluted weighted average shares outstanding on a pro rata basis to the extent that the average applicable market value is higher than $32.00 but is less than $38.40 during the period. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Debt | Note 8. Debt Long-term debt consisted of the following: March 31, 2021 December 31, 2020 Term loan B credit facility $ 4,151 $ 4,164 Revolving credit facility 50 — 3.912% Senior Notes due 2021 500 500 4.272% Senior Notes due 2023 750 750 4.900% Senior Notes due 2028 750 750 TEU amortizing notes 53 60 Other obligations — 1 Unamortized debt issuance costs (93) (98) 6,161 6,127 Less current portion of long-term debt 605 555 Total long-term debt $ 5,556 $ 5,572 Bayer Animal Health Related Financing In connection with the acquisition of Bayer Animal Health, on August 1, 2020, we borrowed $4,275 million under a term loan B credit facility. The term loan B facility bears interest at a floating rate of LIBOR plus 175 basis points over a seven Simultaneously, we entered into a revolving credit facility providing up to $750 million (with incremental capacity available if certain conditions are met) and maturing over a five These senior secured first lien credit facilities are secured by a significant portion of our assets. They include two financial maintenance covenants which are solely for the benefit of lenders under the revolving credit facility. There are no financial maintenance covenants for the benefit of the term loan B facility. The lenders under the term loan B facility have no enforcement rights with respect to the financial maintenance covenants for the revolving credit facility. The first financial maintenance covenant for the revolving credit facility requires us to maintain a net total leverage ratio level (which is not subject to step-downs) as of the end of each quarter. The required level of this covenant is based on closing date pro forma net leverage and pro forma adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) not exceeding 7.71 to 1.00 of our pro forma adjusted EBITDA for the four fiscal quarters ended March 31, 2021. The second financial maintenance covenant for the revolving credit facility requires us to maintain a ratio of pro forma adjusted EBITDA to cash interest expense of no less than 2.00 to 1.00, tested as of the end of each fiscal quarter. We were in compliance with all covenants under the credit facility as of March 31, 2021. Senior Notes In August 2018, we issued $2 billion of senior notes (Senior Notes). The Senior Notes comprised of $500 million of 3.912% Senior Notes due August 27, 2021, $750 million of 4.272% Senior Notes due August 28, 2023, and $750 million of 4.900% Senior Notes due August 28, 2028. The interest rate payable on each series of Senior Notes is subject to adjustment if Moody's Investor Services, Inc. or Standard & Poor's Financial Services LLC downgrades, or subsequently upgrades, its ratings on the respective series of Senior Notes. The indenture that governs the Senior Notes contains covenants, including limitations on our ability, and certain of our subsidiaries, to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets, in addition, to other customary terms. We were in compliance with all such covenants under the indenture governing the Senior Notes as of March 31, 2021. TEU Amortizing Notes On January 22, 2020, we issued $550 million in TEUs. We offered 11 million, 5.00% TEUs at the stated amount of $50 per unit, comprised of prepaid stock purchase contracts and a senior amortizing note due February 1, 2023 (the mandatory settlement date). Total cash of $528 million was received, comprised of $452 million of prepaid stock purchase contracts and $76 million of senior amortizing notes, net of issuance costs. We paid $7 million representing partial payment of principal and interest on the TEU amortizing notes during the three months ended March 31, 2021. See Note 7: Equity for further information. Debt Extinguishment |
Financial Instruments and Fair
Financial Instruments and Fair Value | 3 Months Ended |
Mar. 31, 2021 | |
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. We evaluate the creditworthiness of our customers on a regular basis, monitor economic conditions, and calculate allowances for estimated credit losses on our trade receivables on a quarterly basis using an expected credit loss model. We assess whether collectability is probable at the time of sale and on an ongoing basis. Collateral is generally not required. The risk associated with this concentration is mitigated by our ongoing credit-review procedures. A large portion of our cash is held by 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 March 31, 2021 and December 31, 2020, we had $34 million and $33 million, respectively, of investments included in other noncurrent assets on our condensed consolidated balance sheet. These include investments with readily determinable fair values, investments without readily determinable fair values, and equity method investments. Unrealized net gains and losses during the three months ended March 31, 2021 and March 31, 2020 were immaterial. The following table summarizes the fair value information at March 31, 2021 and December 31, 2020 for foreign exchange contract assets (liabilities), contingent consideration liabilities, and cash flow hedge assets (liabilities) measured at fair value on a recurring basis in the respective balance sheet line items, as well as long-term debt (including TEU amortizing notes) for which fair value is disclosed on a recurring basis: Fair Value Measurements Using Financial statement line item Carrying Quoted Prices in Active Markets for Identical Assets Significant Significant Fair March 31, 2021 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 22 $ — $ 22 $ — $ 22 Other current liabilities - foreign exchange contracts not designated as hedging instruments (45) — (45) — (45) Other noncurrent liabilities - contingent consideration (1) — — (1) (1) Other noncurrent liabilities - forward-starting interest rate contracts designated as cash flow hedges (23) — (23) — (23) Long-term debt - senior notes (2,000) — (2,171) — (2,171) TEU amortizing note (53) — (49) — (49) Term loan B (4,151) — (4,125) — (4,125) Revolving credit facility (1) (50) — (50) — (50) December 31, 2020 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 36 $ — $ 36 $ — $ 36 Other current liabilities - foreign exchange contracts not designated as hedging instruments (36) — (36) — (36) Other noncurrent liabilities - contingent consideration (1) — — (1) (1) Other noncurrent liabilities - forward-starting interest rate contracts designated as cash flow hedges (76) — (76) — (76) Long-term debt - senior notes (2,000) — (2,218) — (2,218) TEU amortizing notes (60) — (58) — (58) Term loan B (4,164) — (4,144) — (4,144) (1) We consider the carrying value to be representative of its fair value due to the short-term nature of this instrument. We determine our Level 2 fair value measurements based on a market approach using quoted market values or significant other observable inputs for identical or comparable assets or liabilities. Contingent consideration liabilities as of March 31, 2021 and December 31, 2020 related to contingent consideration associated with the acquisitions of Aratana Therapeutics, Inc. (Aratana) and Prevtec Microbia Inc. (Prevtec) during 2019. For Aratana, we will pay up to $12 million in contingent value rights that are dependent on the achievement of a specified milestone as outlined in the merger agreement. For Prevtec, based on the terms of the purchase agreement, we will pay up to $16 million contingent upon the achievement of specific Coliprotec sales milestones by December 31, 2021. The fair value of both contingent consideration liabilities was estimated using the Monte Carlo simulation model and Level 3 inputs including historical revenue, discount rate, asset volatility, and revenue volatility. Derivative Instruments and Hedging Activities We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures, we have entered into various derivative transactions. We formally assess, designate and document, as a hedge of an underlying exposure, each qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess, both at inception and at least quarterly thereafter, whether the financial instruments used in the hedging transaction are effective at offsetting changes in either the fair values or cash flows of the underlying exposures. Derivatives Not Designated as Hedges We may enter into foreign exchange forward or option contracts to reduce the effect of fluctuating currency exchange rates. These derivative financial instruments primarily offset exposures in the British pound, Canadian dollar, Euro, Japanese yen, Swiss franc (CHF), and Chinese yuan. Foreign currency derivatives used for hedging are put in place using the same or like currencies and duration as the underlying exposures and are recorded at fair value with the gain or loss recognized in other expense, net in the condensed consolidated statement of operations. Forward contracts generally have maturities not exceeding 12 months. At March 31, 2021 and December 31, 2020, we had outstanding foreign exchange contracts with aggregate notional amounts of $1,503 million and $1,391 million, respectively. The amount of net gain on derivative instruments not designated as hedging instruments, recorded in other expense, net are as follows: Three Months Ended March 31, 2021 2020 Foreign exchange forward contracts (1) $ 34 $ 28 (1) These amounts were substantially offset in other expense, net by the effect of changing exchange rates on the underlying foreign currency exposures. Derivatives Designated as Hedges In October 2018, as a means of mitigating the impact of currency fluctuations on our operations in Switzerland, we entered into a five Gains on the NIH, recognized within interest expense, net of capitalized interest, are as follows: Three Months Ended March 31, 2021 2020 Cross-currency interest rate swap contracts $ — $ 6 Over the life of the derivative, gains or losses due to spot rate fluctuations were recorded in cumulative translation adjustment in other comprehensive income (loss). The amounts of net gains on interest rate swap contracts, recorded, net of tax, in accumulated other comprehensive income (loss), are as follows: Three Months Ended March 31, 2021 2020 Cross-currency interest rate swap contracts $ — $ 23 Separately, in March 2020, as a means of mitigating variability in cash flows associated with the anticipated term loan B issuance, we executed forward-starting interest rate swaps with a $4.1 billion notional amount, which are designated as cash flow hedges and have maturity dates ranging between 2022 and 2025. These instruments effectively convert floating-rate debt to fixed-rate debt. The cash flow hedges are recorded at fair value on our condensed consolidated balance sheet, while changes in the fair value of the hedge are recognized in other comprehensive income (loss). Fair value is estimated based on quoted market values of similar hedges and is classified as Level 2. Amounts recorded in accumulated other comprehensive income (loss) will be recognized in earnings in interest expense, net of capitalized interest when the hedged transaction affects earnings (i.e., when interest payments are accrued on the term loan B). During the three months ended March 31, 2021 and 2020 we recorded a gain of $53 million (net of tax expense of $0 after valuation allowance) and a loss of $39 million (net of tax benefit of $11 million), respectively, on the cash flow hedges in other comprehensive loss. Over the next 12 months we expect to reclassify $28 million from accumulated other comprehensive income (loss) to interest expense, net of capitalized interest due to the amortization of net losses on the interest rate swaps. During the three months ended March 31, 2021, we reclassified $7 million of net losses into interest expense. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 10. Income Taxes Income Tax Benefit Three Months Ended March 31, 2021 2020 Income tax benefit $ (19) $ (19) Effective tax rate 23.5 % 27.6 % We were 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. The U.S. examination of tax years 2016 - 2018 began in the fourth quarter of 2019 and remains ongoing; therefore, the resolution of this audit period will likely extend beyond the next 12 months. For the three months ended March 31, 2021, we recognized an income tax benefit of $19 million. Our effective tax rate of 23.5% differs from the statutory income tax rate primarily due to tax-exempt interest income in certain foreign jurisdictions. Income tax benefit was partially offset by a $2 million increase to the valuation allowance on our U.S. federal and state deferred tax assets during the period. For the three months ended March 31, 2020, we recognized an income tax benefit of $19 million. The effective tax of 27.6% differs from the statutory income tax rate primarily due to a pre-tax loss mainly driven by acquisition and integration costs. In addition, a discrete income tax benefit of $2 million was recognized related to the excess tax benefits for stock-based compensation that vested in the three months ended March 31, 2020. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 11. Commitments and Contingencies Legal Matters On May 20, 2020, a shareholder class action lawsuit captioned Hunter v. Elanco Animal Health Inc., et al. was filed in the United States District Court for the Southern District of Indiana (the Court) against Elanco, Jeffrey Simmons and Todd Young. On September 3, 2020, the Court appointed a lead plaintiff, and on November 9, 2020, the lead plaintiff filed an amended complaint. The lawsuit alleges, in part, that Elanco and certain of its executives made materially false and/or misleading statements and/or failed to disclose certain facts about Elanco’s supply chain, inventory, revenue and projections. The lawsuit seeks unspecified monetary damages and purports to represent purchasers of Elanco securities between September 30, 2018 and May 6, 2020, and purchasers of Elanco common stock issued in connection with Elanco's acquisition of Aratana Therapeutics, Inc. We filed a motion to dismiss on January 13, 2021. The timing of the Court's decision is uncertain. We believe the claims made in the case are meritless, and we intend to vigorously defend our position. The process of resolving these matters is inherently uncertain and may develop over an extended period of time; therefore, at this time, the ultimate resolution cannot be predicted. On October 16, 2020, a shareholder class action lawsuit captioned Safron Capital Corporation v. Elanco Animal Health Inc., et al. was filed in the Marion Superior Court of Indiana against Elanco, certain executives, and other individuals. On December 23, 2020, the plaintiffs filed an amended complaint adding an additional plaintiff. The lawsuit alleges, in part, that Elanco and certain of its executives made materially false and/or misleading statements and/or failed to disclose certain facts about Elanco’s relationships with third party distributors and revenue attributable to those distributors within the registration statement on Form S-3 dated January 21, 2020 and accompanying prospectus filed in connection with Elanco’s public offering which closed on or about January 27, 2020. The lawsuit seeks unspecified monetary damages and purports to represent purchasers of Elanco common stock or 5.00% TEUs issued in connection with the public offering. This case is currently stayed in deference to Hunter v. Elanco Animal Health Inc. We believe the claims made in the case are meritless, and we intend to vigorously defend our position. The process of resolving these matters is inherently uncertain and may develop over an extended period of time; therefore, at this time, the ultimate resolution cannot be predicted. Claims seeking actual damages, injunctive relief, and/or restitution for the allegedly deceptive marketing have been made against Elanco Animal Health Inc. and Bayer HealthCare LLC arising out of the use of Seresto™ , a non-prescription flea and tick collar for cats and dogs. In March, April, and May 2021, class action lawsuits were filed in state and federal courts in the U.S. alleging that the Seresto collars contain pesticides and other ingredients that can cause serious injury and death to cats and/or dogs wearing the product. The cases mention the existence of incident reports involving humans, but no plaintiff has claimed personal harm from the product. Further, a U.S. House of Representative subcommittee chair requested Elanco to produce certain documents and information related to the Seresto collar and further made a request to temporarily remove Seresto collars from the market. We are cooperating with the subcommittee and have produced information pursuant to the request. In addition, as Seresto is registered with the Environmental Protection Agency (EPA), we are providing information to the EPA regarding the safety profile of Seresto . All data and scientific evaluation used during the product registration process and through pharmacovigilance review supports the product’s positive safety profile and efficacy. Therefore, we believe no removal or recall is warranted, nor has it been suggested by any regulatory agency. We continue to stand behind the safety profile for Seresto, and it remains available to consumers globally. We continue to receive information with respect to potential litigation costs and the anticipated number of cases, and we will be taking appropriate steps to defend these class action lawsuits. We are party to various other 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 accrue for certain liability claims to the extent that it is probable we will incur a loss and we can formulate a reasonable estimate of the costs. As of March 31, 2021 and December 31, 2020, we had no material 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 other than the lawsuits noted above. |
Geographic Information
Geographic Information | 3 Months Ended |
Mar. 31, 2021 | |
Segment Reporting [Abstract] | |
Geographic Information | Note 12. Geographic Information We operate as a single operating segment engaged in the development, manufacturing, marketing and sales of animal health products worldwide for both farm animals and pets. 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 costs/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 Baycox™, Cydectin™, Denagard™, Maxiban™, Optaflexx™, Rumensin™ , Tylan™ , and other products for livestock and poultry, as well as Advantage™, Advantix™, Advocate™ (collectively referred to as the Advantage Family), Credelio™, Duramune™ , Galliprant™, Intercepto r ™ Plus, Seresto, Trifexis™ , and other products for pets. We have a single customer that accounted for 7% and 14% of revenue for the three months ended March 31, 2021 and 2020, respectively. Product sales with this customer resulted in accounts receivable of $75 million and $87 million as of March 31, 2021 and December 31, 2020, 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: Three Months Ended March 31, 2021 2020 Revenue—to unaffiliated customers (1) United States $ 533 $ 300 International 709 358 Revenue $ 1,242 $ 658 (1) Revenue is attributed to the countries based on the location of the customer. |
Retirement Benefits
Retirement Benefits | 3 Months Ended |
Mar. 31, 2021 | |
Retirement Benefits [Abstract] | |
Retirement Benefits | Note 13. Retirement Benefits The following table summarizes net periodic benefit cost relating to our defined benefit pension plans: Three Months Ended March 31, 2021 2020 Service cost $ 5 $ 3 Interest cost 1 — Expected return on plan assets (2) (1) Amortization of prior service cost (2) (2) Amortization of net actuarial loss 1 1 Curtailments (Note 5) (9) — Net periodic benefit cost $ (6) $ 1 The components of net periodic benefit cost other than service cost and curtailments are included in other expense, net in the condensed consolidated statements of operations. Curtailments are included in asset impairment, restructuring and other special charges, in the condensed consolidated statements of operations. |
Loss Per Share
Loss Per Share | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Loss Per Share | Note 14. Loss Per Share We compute basic loss per share by dividing net loss available to common shareholders by the actual weighted average number of common shares outstanding for the reporting period. Elanco has variable common stock equivalents relating to certain equity awards in stock-based compensation arrangements and the TEU prepaid stock purchase contracts (see Note 7: Equity for further discussion). Diluted earnings per share reflects the potential dilution that could occur if holders of the unvested equity awards and unsettled TEUs converted their holdings into common stock. The weighted average number of potentially dilutive shares outstanding is calculated using the treasury stock method. Potential common shares that would have the effect of increasing diluted earnings per share (or reducing loss per share) are considered to be anti-dilutive and as such, these shares are not included in the calculation of diluted loss per share. Basic and diluted loss per share are calculated as follows: Three Months Ended March 31, 2021 2020 Net loss available to common shareholders $ (61) $ (49) Determination of shares: Weighted average common shares outstanding 486.7 403.9 Assumed conversion of dilutive common stock equivalents (1) — — Diluted weighted average shares outstanding 486.7 403.9 Loss per share (2) Basic $ (0.12) $ (0.12) Diluted $ (0.12) $ (0.12) (1) During the three months ended March 31, 2021 and 2020, we reported a net loss. Therefore, dilutive common stock equivalents are not assumed to have been issued since their effect is anti-dilutive. As a result, basic and diluted weighted average shares are the same, causing diluted net loss per share to be equivalent to basic net loss per share. For the three months ended March 31, 2021 and 2020, approximately 1.6 million and 1.8 million, respectively, of potential common shares were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. (2) Due to rounding conventions, loss per share may not recalculate precisely based on the amounts presented within this table. |
Transactions and Agreements wit
Transactions and Agreements with Bayer | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Transactions and Agreements with Bayer | Note 15. Transactions and Agreements with Bayer While Bayer is no longer considered a related party, we have transacted with Bayer during the period after the acquisition of Bayer Animal Health, including the period in which Bayer was considered a principal owner of Elanco. These transactions primarily related to local country asset purchases and various transitional services agreements (TSAs), contract manufacturing arrangements, and certain lease agreements to ensure business continuity after the acquisition. For regulatory purposes in certain jurisdictions, consideration was required to be paid locally at closing in addition to amounts paid globally for the acquisition. Pursuant to the stock and asset purchase agreement, Bayer has provided a refund for payment amounts duplicated in these regions. The total amount paid to and received from Bayer during the three months ended March 31, 2021 for these local country asset purchases was approximately $16 million. All local country asset purchases have been completed as of March 31, 2021. |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the United States (U.S.) Securities and Exchange Commission (SEC) requirements for interim reporting. As permitted under those rules, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. (GAAP) have been condensed or omitted. 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, 2020 included in our Annual Report on Form 10-K filed with the SEC on March 1, 2021.In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for 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. |
Implementation of New Financial Accounting Pronouncements | The following table provides a brief description of an accounting standard that was effective January 1, 2021 and was adopted on that date: Standard Description Effect on the financial statements or other significant matters Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes The amendments in this update include simplifications related to accounting for income taxes including removing certain exceptions related to the approach for intraperiod tax allocation and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material impact on our consolidated financial statements. The following table provides a brief description of an accounting standard that is applicable to us but has not yet been adopted: Standard Description Effective Date Effect on the financial statements or other significant matters ASU 2020-04, Reference rate reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting; ASU 2021-01, Reference Rate Reform (Topic 848): Scope ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2021-01 clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions. These standards were effective as of March 12, 2020 through December 31, 2022 and adoption is permitted at any time during the period on a prospective basis. We are currently in the process of evaluating the impact of the London Interbank Offered Rate (LIBOR) on our existing contracts and may elect optional expedients in future periods as reference rate reform activities occur. We do not expect that these updates will have a material impact on our consolidated financial statements. |
Implementation of New Financi_2
Implementation of New Financial Accounting Pronouncements (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
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, 2021 and was adopted on that date: Standard Description Effect on the financial statements or other significant matters Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes The amendments in this update include simplifications related to accounting for income taxes including removing certain exceptions related to the approach for intraperiod tax allocation and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material impact on our consolidated financial statements. The following table provides a brief description of an accounting standard that is applicable to us but has not yet been adopted: Standard Description Effective Date Effect on the financial statements or other significant matters ASU 2020-04, Reference rate reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting; ASU 2021-01, Reference Rate Reform (Topic 848): Scope ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2021-01 clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions. These standards were effective as of March 12, 2020 through December 31, 2022 and adoption is permitted at any time during the period on a prospective basis. We are currently in the process of evaluating the impact of the London Interbank Offered Rate (LIBOR) on our existing contracts and may elect optional expedients in future periods as reference rate reform activities occur. We do not expect that these updates will have a material impact on our consolidated financial statements. |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
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 liability in the U.S., France, and the U.K.: Three Months Ended March 31, 2021 2020 Beginning balance $ 217 $ 176 Reduction of revenue 142 71 Payments (106) (87) Foreign currency translation adjustments (2) (1) Ending balance $ 251 $ 159 |
Disaggregation of Revenue | In the first quarter of 2021, management revisited how it analyzes revenue, both internally and externally, and determined that disaggregation by major product line provides a more meaningful view of our results. Accordingly, we updated our disaggregated revenue presentation from the previous five categories (i.e., pet health disease prevention, pet health therapeutics, farm animal future protein & health, farm animal ruminants & swine, and contract manufacturing) to the following: Three Months Ended March 31, 2021 2020 Pet Health $ 645 $ 206 Farm Animal 578 433 Contract Manufacturing (1) 19 19 Revenue $ 1,242 $ 658 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Business Combinations [Abstract] | |
Purchase Consideration | Cash consideration (1) $ 5,058 Fair value of Elanco common stock (2) 1,724 Fair value of total consideration transferred (3) $ 6,782 (1) Includes initial cash consideration of $5,170 million less working capital and tax adjustments of $112 million. (2) Represents the acquisition date fair value of 73 million shares of Elanco common stock at $23.64 per share. Per the terms of the stock and asset purchase agreement, the number of shares was based on approximately $2.3 billion divided by the 20-day volume-weighted average stock price as of the last day of trading before the closing of the acquisition (but subject to a 7.5% symmetrical collar centered on the baseline share number of approximately $2.3 billion divided by an initial share price of $33.60). |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at August 1, 2020 Cash and cash equivalents $ 169 Accounts receivable 9 Inventories 487 Prepaid expenses and other current assets 57 Property and equipment 347 Intangible assets: Acquired in-process research and development 65 Marketed products 3,930 Assets held for sale 138 Accounts payable and accrued liabilities (240) Accrued retirement benefits (217) Other noncurrent assets and liabilities, net (894) Total identifiable net assets 3,851 Goodwill 2,931 Total consideration transferred $ 6,782 |
Pro Forma Information | The following table presents the estimated unaudited pro forma combined results of Elanco and Bayer Animal Health for the three months ended March 31, 2020 as if the acquisition of Bayer Animal Health had occurred on January 1, 2020: Revenue $ 1,170 Loss before income taxes (67) |
Divestitures Activities | Assets and liabilities considered held for sale in connection with the above divestiture were included in the respective line items on the consolidated balance sheet as follows: December 31, 2020 Inventories $ 2 Other intangibles, net 4 Property and equipment, net — Deferred tax asset 1 Total assets held for sale $ 7 |
Asset Impairment, Restructuri_2
Asset Impairment, Restructuring and Other Special Charges (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Restructuring and Related Activities [Abstract] | |
Total Charges Related to Asset Impairment, Restructuring and Other Special Charges | Components of asset impairment, restructuring and other special charges are as follows: Three Months Ended March 31, 2021 2020 Restructuring charges: Severance and other costs (1) $ 26 $ 1 Facility exit costs (1) — 1 Acquisition related charges: Transaction and integration costs (2) 81 76 Non-cash and other items: Asset impairment (3) 9 — Asset write-down (4) 2 1 Gain on sale of fixed assets (5) — (4) Settlements and other (6) (10) — Total expense $ 108 $ 75 (1) For the three months ended March 31, 2021, these charges primarily relate to a restructuring program announced and initiated in January 2021. These costs were partially offset by the reversal of severance accruals under the September 2020 program that are no longer needed. See below for further details. For the three months ended March 31, 2020, these charges primarily relate to the announced 2019 program to streamline operations in Speke, England as well as the remaining costs to close the Larchwood, Iowa facility. (2) Transaction costs represent external costs directly related to acquiring businesses and primarily include expenditures for banking, legal, accounting and other similar services. Integration costs represent internal and external incremental costs directly related to integrating acquired businesses, including the acquisition of Bayer Animal Health (e.g., expenditures for consulting, system and process integration, and product transfers), as well as stand-up costs related to the implementation of new systems, programs, and processes. (3) Asset impairment charges for the three months ended March 31, 2021 related to an adjustment to fair value of intangible assets that were subject to product rationalization. (4) Asset write-down expenses for the three months ended March 31, 2021 resulted from adjustments recorded to write assets classified as held and used down to their current fair value. These included charges related to fixed assets in Basel, Switzerland; Cuxhaven, Germany; and Manukau, New Zealand in connection with announced restructuring programs. Asset write-down expenses for the three months ended March 31, 2020 resulted from adjustments recorded to write assets classified as held and used down to their current fair value. These charges primarily related to fixed assets in Wusi, China in connection with the announced 2019 program to streamline operations. (5) Represents a gain on the disposal from the sale of an R&D facility in Prince Edward Island, Canada. (6) As a result of workforce reductions in connection with our September 2020 and January 2021 restructuring programs, we remeasured the impacted pension benefit obligations as of March 31, 2021, which resulted in a curtailment gain. See Note 13: Retirement Benefits for further information. This amount also includes the gain recorded on the divestiture of an early-stage IPR&D asset acquired as part of the Bayer Animal Health acquisition. |
Summary of Activity in Reserves | The following table summarizes the activity in our reserves established in connection with restructuring activities: Facility exit costs Severance Total Balance at December 31, 2019 $ 5 $ 16 $ 21 Charges 1 1 2 Reserve adjustments — (1) (1) Cash paid (1) (10) (11) Balance at March 31, 2020 $ 5 $ 6 $ 11 Balance at December 31, 2020 $ — $ 130 $ 130 Charges — 39 39 Reserve adjustments — (13) (13) Cash paid — (38) (38) Balance at March 31, 2021 $ — $ 118 $ 118 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following: March 31, 2021 December 31, 2020 Finished products $ 613 $ 772 Work in process 630 625 Raw materials and supplies 211 210 Total 1,454 1,607 Decrease to LIFO cost (30) (29) Inventories $ 1,424 $ 1,578 |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Schedule of Stockholders Equity | The proceeds from the issuance were allocated to equity and debt based on the relative fair value of the respective components of each TEU as follows: Equity Component Debt Component Total Fair value per unit $ 42.80 $ 7.20 $ 50.00 Gross proceeds $ 471 $ 79 $ 550 Less: Issuance costs 19 3 22 Net proceeds $ 452 $ 76 $ 528 Unless settled early at the holder’s or our election, each prepaid stock purchase contract will automatically settle on February 1, 2023 (the mandatory settlement date) for a number of shares of common stock per contract based on the average of the volume-weighted average trading prices during the 20 consecutive trading day period beginning on, and including the 21st scheduled trading day immediately preceding February 1, 2023 (applicable market value) with reference to the following settlement rates: Applicable Market Value Common Stock Issued Equal to or greater than $38.40 1.3021 shares (minimum settlement rate) Less than $38.40, but greater than $32.00 $50 divided by applicable market value Less than or equal to $32.00 1.5625 (maximum settlement rate) |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | Long-term debt consisted of the following: March 31, 2021 December 31, 2020 Term loan B credit facility $ 4,151 $ 4,164 Revolving credit facility 50 — 3.912% Senior Notes due 2021 500 500 4.272% Senior Notes due 2023 750 750 4.900% Senior Notes due 2028 750 750 TEU amortizing notes 53 60 Other obligations — 1 Unamortized debt issuance costs (93) (98) 6,161 6,127 Less current portion of long-term debt 605 555 Total long-term debt $ 5,556 $ 5,572 |
Financial Instruments and Fai_2
Financial Instruments and Fair Value (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Summary of Fair Value Information | The following table summarizes the fair value information at March 31, 2021 and December 31, 2020 for foreign exchange contract assets (liabilities), contingent consideration liabilities, and cash flow hedge assets (liabilities) measured at fair value on a recurring basis in the respective balance sheet line items, as well as long-term debt (including TEU amortizing notes) for which fair value is disclosed on a recurring basis: Fair Value Measurements Using Financial statement line item Carrying Quoted Prices in Active Markets for Identical Assets Significant Significant Fair March 31, 2021 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 22 $ — $ 22 $ — $ 22 Other current liabilities - foreign exchange contracts not designated as hedging instruments (45) — (45) — (45) Other noncurrent liabilities - contingent consideration (1) — — (1) (1) Other noncurrent liabilities - forward-starting interest rate contracts designated as cash flow hedges (23) — (23) — (23) Long-term debt - senior notes (2,000) — (2,171) — (2,171) TEU amortizing note (53) — (49) — (49) Term loan B (4,151) — (4,125) — (4,125) Revolving credit facility (1) (50) — (50) — (50) December 31, 2020 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 36 $ — $ 36 $ — $ 36 Other current liabilities - foreign exchange contracts not designated as hedging instruments (36) — (36) — (36) Other noncurrent liabilities - contingent consideration (1) — — (1) (1) Other noncurrent liabilities - forward-starting interest rate contracts designated as cash flow hedges (76) — (76) — (76) Long-term debt - senior notes (2,000) — (2,218) — (2,218) TEU amortizing notes (60) — (58) — (58) Term loan B (4,164) — (4,144) — (4,144) (1) We consider the carrying value to be representative of its fair value due to the short-term nature of this instrument. |
Net Gain/Loss on Derivative Instruments | The amount of net gain on derivative instruments not designated as hedging instruments, recorded in other expense, net are as follows: Three Months Ended March 31, 2021 2020 Foreign exchange forward contracts (1) $ 34 $ 28 (1) These amounts were substantially offset in other expense, net by the effect of changing exchange rates on the underlying foreign currency exposures. Gains on the NIH, recognized within interest expense, net of capitalized interest, are as follows: Three Months Ended March 31, 2021 2020 Cross-currency interest rate swap contracts $ — $ 6 Three Months Ended March 31, 2021 2020 Cross-currency interest rate swap contracts $ — $ 23 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Provision for Taxes on Income | Income Tax Benefit Three Months Ended March 31, 2021 2020 Income tax benefit $ (19) $ (19) Effective tax rate 23.5 % 27.6 % |
Geographic Information (Tables)
Geographic Information (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Segment Reporting [Abstract] | |
Revenue by Selected Geographic Area Information | Selected geographic area information was as follows: Three Months Ended March 31, 2021 2020 Revenue—to unaffiliated customers (1) United States $ 533 $ 300 International 709 358 Revenue $ 1,242 $ 658 (1) Revenue is attributed to the countries based on the location of the customer. |
Retirement Benefits (Tables)
Retirement Benefits (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Retirement Benefits [Abstract] | |
Schedule of Net Benefit Costs | The following table summarizes net periodic benefit cost relating to our defined benefit pension plans: Three Months Ended March 31, 2021 2020 Service cost $ 5 $ 3 Interest cost 1 — Expected return on plan assets (2) (1) Amortization of prior service cost (2) (2) Amortization of net actuarial loss 1 1 Curtailments (Note 5) (9) — Net periodic benefit cost $ (6) $ 1 |
Loss Per Share (Tables)
Loss Per Share (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | Basic and diluted loss per share are calculated as follows: Three Months Ended March 31, 2021 2020 Net loss available to common shareholders $ (61) $ (49) Determination of shares: Weighted average common shares outstanding 486.7 403.9 Assumed conversion of dilutive common stock equivalents (1) — — Diluted weighted average shares outstanding 486.7 403.9 Loss per share (2) Basic $ (0.12) $ (0.12) Diluted $ (0.12) $ (0.12) (1) During the three months ended March 31, 2021 and 2020, we reported a net loss. Therefore, dilutive common stock equivalents are not assumed to have been issued since their effect is anti-dilutive. As a result, basic and diluted weighted average shares are the same, causing diluted net loss per share to be equivalent to basic net loss per share. For the three months ended March 31, 2021 and 2020, approximately 1.6 million and 1.8 million, respectively, of potential common shares were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. (2) Due to rounding conventions, loss per share may not recalculate precisely based on the amounts presented within this table. |
Revenue - Narrative (Details)
Revenue - Narrative (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Geographic Concentration Risk | Contract With Customer Liability | United States | ||
Concentration Risk [Line Items] | ||
Concentration risk (less than 0.1%) | 76.00% | 82.00% |
Geographic Concentration Risk | Contract With Customer Liability | Next Largest Country | ||
Concentration Risk [Line Items] | ||
Concentration risk (less than 0.1%) | 4.00% | 6.00% |
Product Return Concentration Risk | Net Revenue | ||
Concentration Risk [Line Items] | ||
Concentration risk (less than 0.1%) | 1.00% | 2.00% |
Revenue - Summary of Activity i
Revenue - Summary of Activity in Sales Rebates and Discounts Liability (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Change In Contract With Customer, Liability [Roll Forward] | ||
Beginning balance | $ 217 | $ 176 |
Reduction of revenue | 142 | 71 |
Payments | (106) | (87) |
Foreign currency translation adjustments | (2) | (1) |
Ending balance | $ 251 | $ 159 |
Revenue - Disaggregation of Rev
Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 1,242 | $ 658 |
Pet Health | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 645 | 206 |
Farm Animal | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 578 | 433 |
Contract Manufacturing | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 19 | $ 19 |
Acquisitions and Divestitures -
Acquisitions and Divestitures - Purchase Consideration (Details) $ / shares in Units, shares in Millions, $ in Millions | Aug. 01, 2020USD ($)$ / sharesshares |
Business Acquisition [Line Items] | |
Payments to acquire businesses, before working capital adjustment | $ 5,170 |
Working capital adjustments | 112 |
Bayer Animal Business | |
Business Acquisition [Line Items] | |
Cash consideration | 5,058 |
Fair value of Elanco common stock | 1,724 |
Fair value of total consideration transferred | $ 6,782 |
Shares issued to previous shareholders upon closing (in shares) | shares | 73 |
Common stock price (in dollars per share) | $ / shares | $ 23.64 |
Fair value used in estimate | $ 2,300 |
Volume weighted average stock price as of the last day of trading before the closing of the acquisition duration | 20 days |
Symmetrical collar (as a percent) | 7.50% |
Volume weighted average price for thirty trading days (usd per share) | $ / shares | $ 33.60 |
Acquisitions and Divestitures_2
Acquisitions and Divestitures - Narrative (Details) - USD ($) $ in Millions | Aug. 01, 2020 | Mar. 31, 2021 | Mar. 31, 2020 |
Business Acquisition [Line Items] | |||
Revenue | $ 1,242 | $ 658 | |
Inventory fair value step-up amortization | 62 | 0 | |
Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations | Rights To The Profender And Drontal | Marketed products | |||
Business Acquisition [Line Items] | |||
Assets held for sale | $ 133 | ||
Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations | Rights To The Profender And Drontal | Inventories | |||
Business Acquisition [Line Items] | |||
Assets held for sale | 5 | ||
Bayer Animal Business | |||
Business Acquisition [Line Items] | |||
Transaction costs | 3 | $ 20 | |
Revenue | $ 559 | ||
Inventories | 487 | ||
Inventory fair value step-up amortization | $ 148 | ||
Average useful life | 10 years | ||
Assets held for sale | $ 138 | ||
Bayer Animal Business | Marketed products | |||
Business Acquisition [Line Items] | |||
Finite lived intangible assets | 3,930 | ||
Bayer Animal Business | In-Process Research and Development | |||
Business Acquisition [Line Items] | |||
Acquired in-process research and development | 65 | ||
Bayer Animal Business | Finished Products | |||
Business Acquisition [Line Items] | |||
Inventories | 314 | ||
Bayer Animal Business | in Process | |||
Business Acquisition [Line Items] | |||
Inventories | 79 | ||
Bayer Animal Business | Raw Materials | |||
Business Acquisition [Line Items] | |||
Inventories | $ 94 |
Acquisitions and Divestitures_3
Acquisitions and Divestitures - Summary of Amounts Recognized for Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 | Aug. 01, 2020 |
Intangible assets: | |||
Goodwill | $ 6,016 | $ 6,225 | |
Bayer Animal Business | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalents | $ 169 | ||
Accounts receivable | 9 | ||
Inventories | 487 | ||
Prepaid expenses and other current assets | 57 | ||
Property and equipment | 347 | ||
Intangible assets: | |||
Assets held for sale | 138 | ||
Accounts payable and accrued liabilities | (240) | ||
Accrued retirement benefits | (217) | ||
Other noncurrent assets and liabilities, net | (894) | ||
Total identifiable net assets | 3,851 | ||
Goodwill | 2,931 | ||
Total consideration transferred | 6,782 | ||
Bayer Animal Business | Marketed products | |||
Intangible assets: | |||
Finite lived intangible assets | 3,930 | ||
Bayer Animal Business | In-Process Research and Development | |||
Intangible assets: | |||
Acquired in-process research and development | $ 65 |
Acquisitions and Divestitures_4
Acquisitions and Divestitures - Pro Forma Information (Details) - Bayer Animal Business $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Business Acquisition [Line Items] | |
Revenue | $ 1,170 |
Loss before income taxes | $ (67) |
Acquisitions and Divestitures_5
Acquisitions and Divestitures - Assets and Liabilities Held for Sale (Details) - Worldwide rights to Osurnia and U.S. rights to Capstar - Held for Sale $ in Millions | Dec. 31, 2020USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Inventories | $ 2 |
Other intangibles, net | 4 |
Property and equipment, net | 0 |
Deferred tax asset | 1 |
Total assets held for sale | $ 7 |
Asset Impairment, Restructuri_3
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 | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Restructuring charges: | ||
Severance and other costs | $ 26 | $ 1 |
Facility exit costs | 0 | 1 |
Acquisition related charges: | ||
Transaction and integration costs | 81 | 76 |
Non-cash and other items: | ||
Asset impairment | 9 | 0 |
Asset write-down | 2 | 1 |
Gain on sale of fixed assets | 0 | (4) |
Settlements and other | (10) | 0 |
Total expense | $ 108 | $ 75 |
Asset Impairment, Restructuri_4
Asset Impairment, Restructuring and Other Special Charges - Narrative (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2021USD ($)positioncountry | Mar. 31, 2020USD ($) | |
Restructuring Cost and Reserve [Line Items] | ||
Restructuring adjustments | $ | $ 13 | $ 1 |
Expected payment term | 18 months | |
2021 Restructuring Plan | ||
Restructuring Cost and Reserve [Line Items] | ||
Expected number of positions eliminated | position | 330 | |
Bayer Animal Business | ||
Restructuring Cost and Reserve [Line Items] | ||
Expected number of positions eliminated | position | 900 | |
Cost incurred to date | $ | $ 41 | |
Number of countries expected to eliminate positions | country | 40 |
Asset Impairment, Restructuri_5
Asset Impairment, Restructuring and Other Special Charges - Summary of Activity in Reserves (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | $ 130 | $ 21 |
Charges | 39 | 2 |
Reserve adjustments | (13) | (1) |
Cash paid | (38) | (11) |
Balance at end of period | 118 | 11 |
Facility exit costs | ||
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | 0 | 5 |
Charges | 0 | 1 |
Reserve adjustments | 0 | 0 |
Cash paid | 0 | (1) |
Balance at end of period | 0 | 5 |
Severance | ||
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | 130 | 16 |
Charges | 39 | 1 |
Reserve adjustments | (13) | (1) |
Cash paid | (38) | (10) |
Balance at end of period | $ 118 | $ 6 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 613 | $ 772 |
Work in process | 630 | 625 |
Raw materials and supplies | 211 | 210 |
Total | 1,454 | 1,607 |
Decrease to LIFO cost | (30) | (29) |
Inventories | $ 1,424 | $ 1,578 |
Equity - Narrative (Details)
Equity - Narrative (Details) | Jan. 23, 2020USD ($)shares | Jan. 22, 2020USD ($)tradingDay$ / sharesshares | Mar. 31, 2021USD ($) | Dec. 31, 2020USD ($) |
Class of Stock [Line Items] | ||||
Number of shares sold in public offering (in shares) | shares | 25,000,000 | |||
Proceeds after underwriting discounts and commissions | $ 768,000,000 | |||
Net proceeds | $ 6,161,000,000 | $ 6,127,000,000 | ||
Tangible Equity Unit (TEU) | ||||
Class of Stock [Line Items] | ||||
Number of shares sold in public offering (in shares) | shares | 11,000,000 | |||
Proceeds after underwriting discounts and commissions | $ 528,000,000 | |||
Offering price (usd per share) | $ / shares | $ 50 | |||
Tangible Equity Unit (TEU) | Minimum | ||||
Class of Stock [Line Items] | ||||
Shares issued upon conversion of prepaid stock purchase contracts (in shares) | shares | 14,000,000 | |||
Average applicable market value necessary to be included in calculation of diluted shares outstanding (usd per share) | $ / shares | $ 32 | |||
Tangible Equity Unit (TEU) | Maximum | ||||
Class of Stock [Line Items] | ||||
Shares issued upon conversion of prepaid stock purchase contracts (in shares) | shares | 17,000,000 | |||
Average applicable market value necessary to be included in calculation of diluted shares outstanding (usd per share) | $ / shares | $ 38.40 | |||
5.00% Tangible Equity Units | Senior Notes | ||||
Class of Stock [Line Items] | ||||
Interest rate on debt component | 5.00% | |||
Number of consecutive trading days | tradingDay | 20 | |||
2.75% Senior Amortizing Notes | Senior Notes | ||||
Class of Stock [Line Items] | ||||
Interest rate on debt component | 2.75% | |||
Net proceeds | $ 79,000,000 | |||
Quarterly cash installment per amortizing note | 0.6250 | |||
Initial principal amount | 7.2007 | |||
First installment payment per amortizing note | $ 0.6528 | |||
Common Stock Offering | ||||
Class of Stock [Line Items] | ||||
Number of shares sold in public offering (in shares) | shares | 23,000,000 | |||
Offering price (usd per share) | $ / shares | $ 32 | |||
Over-Allotment Option | ||||
Class of Stock [Line Items] | ||||
Number of shares sold in public offering (in shares) | shares | 2,000,000 | |||
Tangible Equity Unit (TEU) | ||||
Class of Stock [Line Items] | ||||
Offering price (usd per share) | $ / shares | $ 50 |
Equity - Schedule of Stockholde
Equity - Schedule of Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | Jan. 23, 2020 | Jan. 22, 2020 | Mar. 31, 2021 | Mar. 31, 2020 |
Class of Stock [Line Items] | ||||
Gross proceeds | $ 0 | $ 1,220 | ||
Net proceeds | $ 768 | |||
Equity Component | ||||
Class of Stock [Line Items] | ||||
Price per share (usd per share) | $ 42.80 | |||
Gross proceeds | $ 471 | |||
Less: Issuance costs | 19 | |||
Net proceeds | $ 452 | |||
Debt Component | ||||
Class of Stock [Line Items] | ||||
Price per share (usd per share) | $ 7.20 | |||
Gross proceeds | $ 79 | |||
Less: Issuance costs | 3 | |||
Net proceeds | $ 76 | |||
Tangible Equity Unit (TEU) | ||||
Class of Stock [Line Items] | ||||
Price per share (usd per share) | $ 50 | |||
Gross proceeds | $ 550 | |||
Less: Issuance costs | 22 | |||
Net proceeds | $ 528 | |||
Tangible Equity Unit (TEU) | Minimum | ||||
Class of Stock [Line Items] | ||||
Applicable Market Value (usd per share) | $ 32 | |||
Settlement rate | 130.21% | |||
Tangible Equity Unit (TEU) | Maximum | ||||
Class of Stock [Line Items] | ||||
Applicable Market Value (usd per share) | $ 38.40 | |||
Settlement rate | 156.25% |
Debt - Schedule of Long-term De
Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 | Jan. 22, 2020 | Aug. 31, 2018 |
Debt Instrument [Line Items] | ||||
Unamortized debt issuance costs | $ (93) | $ (98) | ||
Long-term Debt, Total | 6,161 | 6,127 | ||
Less current portion of long-term debt | 605 | 555 | ||
Total long-term debt | 5,556 | 5,572 | ||
Credit facility | Term loan B credit facility | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | 4,151 | 4,164 | ||
Credit facility | Revolving credit facility | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | $ 50 | 0 | ||
Senior Notes | 3.912% Senior Notes due 2021 | ||||
Debt Instrument [Line Items] | ||||
Interest rate | 3.912% | 3.912% | ||
Long-term debt, gross | $ 500 | 500 | ||
Senior Notes | 4.272% Senior Notes due 2023 | ||||
Debt Instrument [Line Items] | ||||
Interest rate | 4.272% | 4.272% | ||
Long-term debt, gross | $ 750 | 750 | ||
Senior Notes | 4.900% Senior Notes due 2028 | ||||
Debt Instrument [Line Items] | ||||
Interest rate | 4.90% | |||
Long-term debt, gross | $ 750 | 750 | ||
Senior Notes | TEU amortizing notes | ||||
Debt Instrument [Line Items] | ||||
Interest rate | 5.00% | |||
Long-term debt, gross | 53 | 60 | ||
Other obligations | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | $ 0 | $ 1 |
Debt - Narrative (Details)
Debt - Narrative (Details) | Aug. 01, 2020USD ($) | Jan. 31, 2020USD ($) | Jan. 23, 2020USD ($)shares | Jan. 22, 2020USD ($)$ / sharesshares | Apr. 30, 2021USD ($) | Mar. 31, 2021USD ($)covenant | Mar. 31, 2021USD ($)covenant | Mar. 31, 2020USD ($) | Aug. 31, 2018USD ($) |
Debt Instrument [Line Items] | |||||||||
Net proceeds from revolving credit facility | $ 50,000,000 | $ 0 | |||||||
Number of shares issued (in shares) | shares | 25,000,000 | ||||||||
Proceeds after underwriting discounts and commissions | $ 768,000,000 | ||||||||
Tangible Equity Unit (TEU) | |||||||||
Debt Instrument [Line Items] | |||||||||
Number of shares issued (in shares) | shares | 11,000,000 | ||||||||
Price per share (usd per share) | $ / shares | $ 50 | ||||||||
Proceeds after underwriting discounts and commissions | $ 528,000,000 | ||||||||
Equity Component | |||||||||
Debt Instrument [Line Items] | |||||||||
Price per share (usd per share) | $ / shares | $ 42.80 | ||||||||
Proceeds after underwriting discounts and commissions | $ 452,000,000 | ||||||||
Debt Component | |||||||||
Debt Instrument [Line Items] | |||||||||
Price per share (usd per share) | $ / shares | $ 7.20 | ||||||||
Proceeds after underwriting discounts and commissions | $ 76,000,000 | ||||||||
Senior Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | $ 2,000,000,000 | ||||||||
Senior Notes | 3.912% Senior Notes due 2021 | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | $ 500,000,000 | ||||||||
Interest rate | 3.912% | 3.912% | 3.912% | ||||||
Senior Notes | 4.272% Senior Notes due 2023 | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | $ 750,000,000 | ||||||||
Interest rate | 4.272% | 4.272% | 4.272% | ||||||
Senior Notes | 4.900% Senior Notes Due 2028 | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | $ 750,000,000 | ||||||||
Interest rate | 4.90% | ||||||||
Senior Notes | TEUs | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | $ 550,000,000 | ||||||||
Interest rate | 5.00% | ||||||||
Partial payment on principal and interest | $ 7,000,000 | ||||||||
Term loan B credit facility | Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Number of financial covenants | covenant | 0 | 0 | |||||||
Revolving credit facility | Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Credit facility, maximum borrowing capacity | $ 750,000,000 | ||||||||
Debt maturity term | 5 years | ||||||||
Net proceeds from revolving credit facility | $ 150,000,000 | ||||||||
Repayments of Lines of Credit | $ 100,000,000 | ||||||||
Number of financial covenants | covenant | 2 | 2 | |||||||
Required ratio of pro forma net leverage and pro forma adjusted EBITDA | 7.71 | 7.71 | |||||||
Required ratio of pro forma adjusted EBITDA to cash interest expense (no less than) | 2 | 2 | |||||||
Revolving credit facility | Credit Facility | Subsequent Event | |||||||||
Debt Instrument [Line Items] | |||||||||
Repayments of Lines of Credit | $ 50,000,000 | ||||||||
Revolving credit facility | Credit Facility | Minimum | LIBOR | |||||||||
Debt Instrument [Line Items] | |||||||||
Basis spread on variable rate | 1.50% | ||||||||
Revolving credit facility | Credit Facility | Maximum | LIBOR | |||||||||
Debt Instrument [Line Items] | |||||||||
Basis spread on variable rate | 2.25% | ||||||||
Term Loan Facility | Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt repaid | $ 372,000,000 | ||||||||
Debt repaid, principal | 371,000,000 | ||||||||
Debt repaid, interest | 1,000,000 | ||||||||
Debt extinguishment loss | $ 1,000,000 | ||||||||
Bayer Animal Business | Term loan B credit facility | Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Credit facility, maximum borrowing capacity | $ 4,275,000,000 | ||||||||
Basis spread on variable rate | 1.75% | ||||||||
Debt maturity term | 7 years |
Financial Instruments and Fai_3
Financial Instruments and Fair Value - Narrative (Details) | 1 Months Ended | 3 Months Ended | |||||
Oct. 31, 2018CHF (SFr) | Mar. 31, 2021USD ($) | Mar. 31, 2020USD ($) | Mar. 31, 2021CHF (SFr) | Dec. 31, 2020USD ($) | Jul. 31, 2019USD ($) | Jul. 18, 2019USD ($) | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||||
Equity method investments | $ 34,000,000 | $ 33,000,000 | |||||
Gain (loss) on cash flow hedge, net of tax benefit | 53,000,000 | $ (39,000,000) | |||||
Tax expense (benefit) on loss on cash flow hedge | 0 | $ (11,000,000) | |||||
Expected reclassification from accumulated other comprehensive loss | 28,000,000 | ||||||
Reclassification from AOCI | 7,000,000 | ||||||
Aratana | |||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||||
Maximum aggregate contingent payment | $ 12,000,000 | ||||||
Prevtec | |||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||||
Maximum aggregate contingent payment | $ 16,000,000 | ||||||
Cross-currency fixed interest rate swap | Not Designated as Hedging Instrument | |||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||||
Notional amount (USD, CHF) | 1,503,000,000 | $ 1,391,000,000 | |||||
Cross-currency fixed interest rate swap | Net Investment Hedging | Designated as Hedging Instrument | |||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||||
Notional amount (USD, CHF) | SFr | SFr 750,000,000 | SFr 190,000,000 | |||||
Term of contract | 5 years | ||||||
Percent liquidated | 75.00% | ||||||
Cash benefit for liquidation | 27,000,000 | ||||||
Interest included in cash benefit | $ 2,000,000 | ||||||
Forward-starting interest rate contracts designated as cash flow hedges | Cash Flow Hedging | Designated as Hedging Instrument | |||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||||
Notional amount (USD, CHF) | $ 4,100,000,000 |
Financial Instruments and Fai_4
Financial Instruments and Fair Value - Summary of Fair Value Information (Details) - Recurring - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
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 |
TEU amortizing note | 0 | 0 |
Term loan B | 0 | 0 |
Credit facility | 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 | (2,171) | (2,218) |
TEU amortizing note | (49) | (58) |
Term loan B | (4,125) | (4,144) |
Credit facility | (50) | |
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 |
TEU amortizing note | 0 | 0 |
Term loan B | 0 | 0 |
Credit facility | 0 | |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (2,000) | (2,000) |
TEU amortizing note | (53) | (60) |
Term loan B | (4,151) | (4,164) |
Credit facility | (50) | |
Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (2,171) | (2,218) |
TEU amortizing note | (49) | (58) |
Term loan B | (4,125) | (4,144) |
Credit facility | (50) | |
Prepaid expenses and other | Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | 0 |
Prepaid expenses and other | Significant Other Observable Inputs (Level 2) | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 22 | 36 |
Prepaid expenses and other | Significant Unobservable Inputs (Level 3) | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | 0 |
Prepaid expenses and other | Carrying Amount | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 22 | 36 |
Prepaid expenses and other | Fair Value | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 22 | 36 |
Other current liabilities | Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | 0 |
Other current liabilities | Significant Other Observable Inputs (Level 2) | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | (45) | (36) |
Other current liabilities | Significant Unobservable Inputs (Level 3) | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | 0 |
Other current liabilities | Carrying Amount | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | (45) | (36) |
Other current liabilities | Fair Value | Foreign exchange contracts not designated as hedging instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | (45) | (36) |
Other noncurrent liabilities | 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 |
Other noncurrent liabilities | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0 | 0 |
Other noncurrent liabilities | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (1) | (1) |
Other noncurrent liabilities | Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (1) | (1) |
Other noncurrent liabilities | Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (1) | (1) |
Other noncurrent assets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Forward-starting interest rate contracts designated as cash flow hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | |
Other noncurrent assets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Cross currency interest rate contracts designated as net investment hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | |
Other noncurrent assets | Significant Other Observable Inputs (Level 2) | Forward-starting interest rate contracts designated as cash flow hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | (23) | |
Other noncurrent assets | Significant Other Observable Inputs (Level 2) | Cross currency interest rate contracts designated as net investment hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | (76) | |
Other noncurrent assets | Significant Unobservable Inputs (Level 3) | Forward-starting interest rate contracts designated as cash flow hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | |
Other noncurrent assets | Significant Unobservable Inputs (Level 3) | Cross currency interest rate contracts designated as net investment hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | |
Other noncurrent assets | Carrying Amount | Forward-starting interest rate contracts designated as cash flow hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | (23) | |
Other noncurrent assets | Carrying Amount | Cross currency interest rate contracts designated as net investment hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | (76) | |
Other noncurrent assets | Fair Value | Forward-starting interest rate contracts designated as cash flow hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | $ (23) | |
Other noncurrent assets | Fair Value | Cross currency interest rate contracts designated as net investment hedges | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | $ (76) |
Financial Instruments and Fai_5
Financial Instruments and Fair Value - Net Gain/Loss on Derivative Instruments (Details) - Cross-currency fixed interest rate swap - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Not Designated as Hedging Instrument | Other Operating Income (Expense) | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Net gain (loss) on derivative instruments | $ 34 | $ 28 |
Designated as Hedging Instrument | Net Investment Hedging | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Gain, net of tax | 0 | 23 |
Designated as Hedging Instrument | Interest Expense | Net Investment Hedging | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Amount offsetting interest expense | $ 0 | $ 6 |
Income Taxes - Provision for Ta
Income Taxes - Provision for Taxes on Income (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefit | $ (19) | $ (19) |
Effective tax rate | 23.50% | 27.60% |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefit | $ (19) | $ (19) |
Effective tax rate | 23.50% | 27.60% |
Valuation allowance, deferred tax asset, increase (decrease) | $ 2 | |
Share-based payment arrangement, tax benefit | $ 2 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 | Oct. 16, 2020 |
Commitments and Contingencies Disclosure [Abstract] | |||
Percent of TEUs issued involved in lawsuit | 5.00% | ||
Liabilities related to litigation | $ 0 | $ 0 |
Geographic Information - Narrat
Geographic Information - Narrative (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2021USD ($)segment | Mar. 31, 2020 | Dec. 31, 2020USD ($) | |
Segment Reporting [Abstract] | |||
Number of operating segments | segment | 1 | ||
Concentration Risk [Line Items] | |||
Accounts receivable | $ 1,028 | $ 872 | |
Product Sales | |||
Concentration Risk [Line Items] | |||
Accounts receivable | $ 75 | $ 87 | |
Customer Concentration Risk | Revenue | Single Customer | |||
Concentration Risk [Line Items] | |||
Concentration risk (as a percent) | 7.00% | 14.00% |
Geographic Information - Revenu
Geographic Information - Revenue by Selected Geographic Area Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenue | $ 1,242 | $ 658 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenue | 533 | 300 |
International | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenue | $ 709 | $ 358 |
Retirement Benefits (Details)
Retirement Benefits (Details) - Pension Plan - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Service cost | $ 5 | $ 3 |
Interest cost | 1 | 0 |
Expected return on plan assets | (2) | (1) |
Amortization of prior service cost | (2) | (2) |
Amortization of net actuarial loss | 1 | 1 |
Curtailments (Note 5) | (9) | 0 |
Net periodic benefit cost | $ (6) | $ 1 |
Loss Per Share (Details)
Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Earnings Per Share [Abstract] | ||
Net loss | $ (61) | $ (49) |
Weighted average common shares outstanding (in shares) | 486.7 | 403.9 |
Assumed conversion of dilutive common stock equivalents (in shares) | 0 | 0 |
Diluted weighted average shares outstanding (in shares) | 486.7 | 403.9 |
Basic (usd per share) | $ (0.12) | $ (0.12) |
Diluted (usd per share) | $ (0.12) | $ (0.12) |
Antidilutive shares not included in calculating diluted earnings per share (in shares) | 1.6 | 1.8 |
Transactions and Agreements w_2
Transactions and Agreements with Bayer - Narrative (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Bayer | |
Related Party Transaction [Line Items] | |
Asset purchase refund | $ 16 |
Uncategorized Items - elan-2021
Label | Element | Value |
Accounting Standards Update [Extensible List] | us-gaap_AccountingStandardsUpdateExtensibleList | us-gaap:AccountingStandardsUpdate201613Member |