Cover Page
Cover Page - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2021 | Feb. 23, 2022 | Jun. 30, 2021 | |
Entity Information [Line Items] | |||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2021 | ||
Current Fiscal Year End Date | --12-31 | ||
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 Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
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 | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 16.4 | ||
Entity Common Stock, Shares Outstanding | 473,186,752 | ||
Documents Incorporated by Reference | Portions of the registrant's definitive proxy materials for its 2022 Annual Meeting of Shareholders are incorporated by reference into Part III hereof. | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2021 | ||
Document Fiscal Period Focus | FY | ||
Entity Central Index Key | 0001739104 | ||
Common Stock | |||
Entity Information [Line Items] | |||
Title of 12(b) Security | Common Stock, no par value | ||
Trading Symbol | ELAN | ||
Security Exchange Name | NYSE | ||
TEU Amortizing Notes | |||
Entity Information [Line Items] | |||
Title of 12(b) Security | 5.00% Tangible Equity Units | ||
Trading Symbol | ELAT | ||
Security Exchange Name | NYSE |
Audit Information
Audit Information | 12 Months Ended |
Dec. 31, 2021 | |
Audit Information [Abstract] | |
Auditor Name | Ernst & Young LLP |
Auditor Location | Indianapolis, Indiana |
Auditor Firm ID | 42 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | |||
Revenue | $ 4,765 | $ 3,273 | $ 3,071 |
Costs, expenses and other: | |||
Cost of sales | 2,134 | 1,667 | 1,470 |
Research and development | 369 | 327 | 270 |
Marketing, selling and administrative | 1,404 | 996 | 760 |
Amortization of intangible assets | 556 | 360 | 200 |
Asset impairment, restructuring and other special charges | 628 | 623 | 186 |
Interest expense, net of capitalized interest | 236 | 150 | 79 |
Other (income) expense, net | 5 | (178) | 28 |
Costs, expenses and other | 5,332 | 3,945 | 2,993 |
Income (loss) before income taxes | (567) | (672) | 78 |
Income tax expense (benefit) | (95) | (112) | 10 |
Net income (loss) | $ (472) | $ (560) | $ 68 |
Earnings (loss) per share: | |||
Basic (usd per share) | $ (0.97) | $ (1.27) | $ 0.18 |
Diluted (usd per share) | $ (0.97) | $ (1.27) | $ 0.18 |
Weighted average shares outstanding: | |||
Basic (in shares) | 487.2 | 441.4 | 369 |
Diluted (in shares) | 487.2 | 441.4 | 370.3 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | |||
Net income (loss) | $ (472) | $ (560) | $ 68 |
Other comprehensive income (loss) | |||
Unrealized gain (loss) on derivatives for cash flow hedges, net of taxes | 86 | (61) | 0 |
Foreign currency translation | (613) | 558 | 20 |
Defined benefit pension and retiree health benefit plans, net of taxes | 15 | (21) | 29 |
Other comprehensive income (loss), net of taxes | (512) | 476 | 49 |
Comprehensive income (loss) | $ (984) | $ (84) | $ 117 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Current Assets | ||
Cash and cash equivalents | $ 638 | $ 495 |
Accounts receivable, net of allowances of $12 (2021) and $9 (2020) | 833 | 872 |
Other receivables | 195 | 205 |
Inventories | 1,373 | 1,578 |
Prepaid expenses and other | 237 | 256 |
Restricted cash | 0 | 11 |
Total current assets | 3,276 | 3,417 |
Noncurrent Assets | ||
Goodwill | 6,172 | 6,225 |
Other intangibles, net | 5,587 | 6,387 |
Other noncurrent assets | 387 | 348 |
Property and equipment, net | 1,061 | 1,316 |
Total assets | 16,483 | 17,693 |
Current Liabilities | ||
Accounts payable | 418 | 501 |
Employee compensation | 185 | 144 |
Sales rebates and discounts | 316 | 295 |
Current portion of long-term debt | 294 | 555 |
Other current liabilities | 430 | 582 |
Total current liabilities | 1,643 | 2,077 |
Noncurrent Liabilities | ||
Long-term debt | 6,025 | 5,572 |
Accrued retirement benefits | 271 | 346 |
Deferred taxes | 745 | 900 |
Other noncurrent liabilities | 261 | 322 |
Total liabilities | 8,945 | 9,217 |
Commitments and Contingencies | ||
Equity | ||
Preferred stock, 1,000,000,000 shares authorized, no par value; none issued | 0 | 0 |
Common stock, 5,000,000,000 shares authorized, no par value; 473,119,786 and 471,921,116 shares issued and outstanding as of December 31, 2021 and 2020, respectively | 0 | 0 |
Additional paid-in capital | 8,696 | 8,650 |
Accumulated deficit | (949) | (477) |
Accumulated other comprehensive income (loss) | (209) | 303 |
Total equity | 7,538 | 8,476 |
Total liabilities and equity | $ 16,483 | $ 17,693 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowances | $ 12 | $ 9 |
Preferred stock authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Preferred stock issued (in shares) | 0 | 0 |
Common stock authorized (in shares) | 5,000,000,000 | 5,000,000,000 |
Common stock issued (in shares) | 473,119,786 | 471,921,116 |
Common stock outstanding (in shares) | 473,119,786 | 471,921,116 |
Consolidated Statements of Equi
Consolidated Statements of Equity - 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 | Cash Flow Hedge | Foreign Currency Translation | Defined Benefit Pension and Retiree Health Benefit Plans | Total | TotalCumulative Effect, Period of Adoption, Adjustment | |
Accounting Standards Update [Extensible List] | Accounting Standards Update 2016-13 [Member] | |||||||||||
Balance at beginning of period (in shares) at Dec. 31, 2018 | 365.6 | |||||||||||
Balance at beginning of period at Dec. 31, 2018 | $ 5,197 | $ 0 | $ 5,403 | $ 16 | $ 0 | $ (218) | $ (4) | $ (222) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income (loss) | 68 | 68 | ||||||||||
Other comprehensive income (loss), net of tax | 49 | 20 | 29 | 49 | ||||||||
Separation adjustments | [1] | (51) | (51) | 0 | ||||||||
Stock compensation | 41 | 41 | ||||||||||
Issuance of stock under employee stock plans, net (in shares) | 0.1 | |||||||||||
Issuance of shares for acquisition (in shares) | 7.2 | |||||||||||
Issuance of shares for acquisition | 238 | 238 | ||||||||||
Accelerated vesting of equity awards (in shares) | 0.1 | |||||||||||
Accelerated vesting of equity awards | 3 | 3 | ||||||||||
Other | 2 | 2 | ||||||||||
Balance at end of period (in shares) at Dec. 31, 2019 | 373 | |||||||||||
Balance at end of period at Dec. 31, 2019 | 5,547 | $ (1) | $ 0 | 5,636 | 84 | $ (1) | 0 | (198) | 25 | (173) | $ 0 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income (loss) | (560) | (560) | ||||||||||
Other comprehensive income (loss), net of tax | 476 | (61) | 558 | (21) | 476 | |||||||
Separation adjustments | [1] | 38 | 38 | |||||||||
Stock compensation | 48 | 48 | ||||||||||
Issuance of stock under employee stock plans, net (in shares) | 1 | |||||||||||
Issuance of stock under employee stock plans, net | (15) | (15) | ||||||||||
Issuance of common stock and tangible equity units, net of issuance costs (in shares) | 25 | |||||||||||
Issuance of common stock and tangible equity units, net of issuance costs | 1,220 | 1,220 | ||||||||||
Issuance of shares for acquisition (in shares) | 72.9 | |||||||||||
Issuance of shares for acquisition | 1,723 | 1,723 | ||||||||||
Balance at end of period (in shares) at Dec. 31, 2020 | 471.9 | |||||||||||
Balance at end of period at Dec. 31, 2020 | 8,476 | $ 0 | 8,650 | (477) | (61) | 360 | 4 | 303 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income (loss) | (472) | (472) | ||||||||||
Other comprehensive income (loss), net of tax | (512) | 86 | (613) | 15 | (512) | |||||||
Stock compensation | 66 | 66 | ||||||||||
Issuance of stock under employee stock plans, net (in shares) | 1.2 | |||||||||||
Issuance of stock under employee stock plans, net | (20) | (20) | ||||||||||
Balance at end of period (in shares) at Dec. 31, 2021 | 473.1 | |||||||||||
Balance at end of period at Dec. 31, 2021 | $ 7,538 | $ 0 | $ 8,696 | $ (949) | $ 25 | $ (253) | $ 19 | $ (209) | ||||
[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. |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Cash Flows from Operating Activities | |||
Net income (loss) | $ (472) | $ (560) | $ 68 |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||
Depreciation and amortization | 716 | 517 | 314 |
Deferred income tax benefit | (154) | (125) | 0 |
Stock-based compensation expense | 66 | 48 | 49 |
Asset impairment and write-down charges | 339 | 25 | 33 |
Loss (gain) on sale of assets | 4 | (51) | 0 |
Loss (gain) on divestitures | 1 | (170) | 0 |
Inventory fair value step-up amortization | 64 | 90 | 1 |
Other non-cash operating activities, net | 6 | 20 | (13) |
Other changes in operating assets and liabilities, net of acquisitions and divestitures: | |||
Receivables | (25) | 14 | (172) |
Inventories | 27 | (95) | (34) |
Other assets | 22 | (123) | 7 |
Accounts payable and other liabilities | (120) | 369 | (29) |
Other changes in operating assets and liabilities | 9 | 0 | 0 |
Net Cash Provided by (Used for) Operating Activities | 483 | (41) | 224 |
Cash Flows from Investing Activities | |||
Purchases of property and equipment | (126) | (135) | (140) |
Disposals of property and equipment | 17 | 72 | 0 |
Purchases of software | (33) | (176) | (57) |
Purchases of intangible assets | (38) | 0 | 0 |
Cash paid for acquisitions, net of cash acquired | (342) | (5,001) | (33) |
Divestiture proceeds | 0 | 435 | 0 |
Other investing activities, net | (8) | 26 | (5) |
Net Cash Used for Investing Activities | (530) | (4,779) | (235) |
Cash Flows from Financing Activities | |||
Proceeds from issuance of long-term debt | 500 | 4,804 | 0 |
Proceeds from revolving credit facility | 500 | 0 | 0 |
Repayments of long-term borrowings | (573) | (952) | (121) |
Repayments of revolving credit facility | (250) | 0 | 0 |
Proceeds from issuance of common stock and tangible equity units | 0 | 1,220 | 0 |
Debt issuance costs | (2) | (102) | 0 |
Consideration paid to Lilly in connection with the separation | 0 | 0 | (192) |
Funding related to construction of corporate headquarters | 64 | 0 | 0 |
Other financing activities, net | (29) | (16) | 8 |
Net Cash Provided by (Used for) Financing Activities | 210 | 4,954 | (305) |
Effect of exchange rate changes on cash and cash equivalents | (31) | 27 | (17) |
Net increase (decrease) in cash, cash equivalents and restricted cash | 132 | 161 | (333) |
Cash, cash equivalents and restricted cash at beginning of period | 506 | 345 | 678 |
Cash, cash equivalents and restricted cash at end of period | $ 638 | $ 506 | $ 345 |
Background
Background | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background | Background Elanco is a global animal health company that innovates, develops, manufactures and markets products for pets and farm animals. We offer a portfolio of approximately 200 brands to pet owners, veterinarians and farm animal producers in more than 90 countries. Our products are generally sold worldwide directly to wholesalers, distributors, and independent retailers. Certain products are also sold directly to farm animal producers and veterinarians. We have a diversified business of products across species consisting of: dogs and cats (collectively, pet health) and cattle, poultry, swine and aqua (collectively, farm animal). Elanco was incorporated in Indiana on September 18, 2018, and prior to that was a business unit of Lilly. On August 1, 2020 and August 27, 2021, we completed the acquisitions of Bayer Animal Health and KindredBio, respectively. See Note 5: Acquisitions and Divestitures for additional information. |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States (GAAP). In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for fair presentation of the results of operations for the periods shown. All intercompany balances and transactions have been eliminated. 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. We issued our financial statements by filing with the Securities and Exchange Commission and have evaluated subsequent events up to the time of the filing. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Revenue We recognize revenue primarily from product sales to customers. Revenue from sales of products is recognized at the point where the customer obtains control of the goods and we satisfy our performance obligation, which generally is at the time we ship the product to the customer. Payment terms differ by jurisdiction and customer, but payment terms in most of our major jurisdictions typically range from 30 to 120 days from date of shipment. Revenue for our product sales has not been adjusted for the effects of a financing component as we expect, at contract inception, that the period between when we transfer control of the product and when we receive payment will be one year or less. Any exceptions are either not material or we collect interest for payments made after the due date. For contract manufacturing organization (CMO) arrangements, we recognize revenue over time or at a point in time depending on our evaluation of when the customer obtains control of the promised goods or service. Revenue is recognized over time when we are creating or enhancing an asset that the customer controls. In this instance revenue is recognized as the asset is created or enhanced or our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed. Provisions for rebates and discounts, as well as returns are established in the same period the related sales are recognized. We generally ship product shortly after orders are received; therefore, we generally only have a few days of orders received but not yet shipped at the end of any reporting period. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are imposed on our sales of product and collected from a customer. Significant judgments must be made in determining the transaction price for sales of products related to anticipated rebates, discounts and returns. The following describe the most significant of these judgments: Sales Rebates and Discounts - Background and Uncertainties • Many of our products are sold to wholesale distributors. We initially invoice our customers contractual list prices. Contracts with direct and indirect customers may provide for various rebates and discounts that may differ in each contract. As a consequence, to determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we must estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Judgments are required in making these estimates. • The rebate and discount amounts are recorded as a deduction to arrive at our net product sales. We estimate these accruals using an expected value approach. • In determining the appropriate accrual amount, we consider our historical experience with similar incentives programs and current sales data and estimates of inventory levels at our channel distributors to evaluate the impact of such programs on revenue and continually monitor the impact of this experience and adjust as necessary. Although we accrue a liability for rebates related to these programs at the time the sale is recorded, the rebate related to that sale is typically paid up to six months after the rebate or incentive period expires. Because of this time lag, in any particular period rebate adjustments may incorporate revisions of accruals for several periods. Sales Returns - Background and Uncertainties • We estimate a reserve for future product returns related to product sales using an expected value approach. This estimate is based on several factors, including: local returns policies and practices; returns as a percentage of revenue; an understanding of the reasons for past returns; estimated shelf life by product; and estimate of the amount of time between shipment and return. Adjustments to the returns reserve have been and may in the future be required based on revised estimates to our assumptions, which would have an impact on our consolidated results of operations. We record the return amounts as a deduction to arrive at our net product sales. Research and Development Expenses and Acquired In-Process Research and Development Research and development expenses include the following: • Research and development costs, which are expensed as incurred; • Milestone payment obligations incurred prior to regulatory approval of the product, which are accrued when the event requiring payment of the milestone occurs; and • Acquired in-process research and development (IPR&D) expense, which includes the initial costs of IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use. Advertising Expenses Costs associated with advertising are generally expensed as incurred and are included in marketing, selling and administrative expenses in the consolidated statements of operations. The costs of TV, radio, and other electronic media and publications are expensed when the related advertising occurs. Advertising and promotion expenses totaled approximately $248 million in 2021. Expenses increased significantly in 2021 as compared to prior years due to the 2020 acquisition of Bayer Animal Health. Foreign Currency Translation Operations in our subsidiaries outside the U.S. are recorded in the functional currency of each subsidiary which is determined by a review of the environment where each subsidiary primarily generates and expends cash. The results of operations for our subsidiaries outside the U.S., where the U.S. dollar is not the functional currency, are translated from functional currencies into U.S. dollars using the weighted average currency rate for the period. Assets and liabilities are translated using the period end exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries are recorded in other comprehensive income (loss). Other Significant Accounting Policies Our other significant accounting policies are described in the remaining appropriate notes to the consolidated financial statements. 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 brief descriptions of the accounting standards applicable to us that have 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. ASU 2021-10, Government Assistance (Topic 832) The amendments in this update require annual disclosure of transactions with governments that are accounted for by applying a grant or contribution model. The new pronouncement requires entities to provide information about the nature, terms and conditions associated with the transactions and the financial statement line items affected. We adopted this standard on January 1, 2022. The adoption of this guidance did not have a material impact on our consolidated financial statements. |
Revenue
Revenue | 12 Months Ended |
Dec. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue Our sales rebates and discounts are based on specific agreements. The most significant of our sales rebate and discount 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 U.K. As of December 31, 2021 and 2020, the aggregate liability for sales rebates and discounts for these countries represented approximately 75% and 73%, respectively, of our total liability. The following table summarizes the activity in our global sales rebates liability: Year Ended December 31, 2021 2020 Beginning balance $ 295 $ 211 Reduction of revenue 671 471 Payments (650) (461) Additions related to the Bayer Animal Health acquisition — 74 Ending balance $ 316 $ 295 Adjustments to revenue recognized as a result of changes in estimates for the judgments described above during the years ended December 31, 2021, 2020, and 2019 for product shipped in previous periods were not material. Actual global product returns were approximately 1% of net revenue for the years ended December 31, 2021, 2020, and 2019. 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: 2021 2020 2019 Pet Health $ 2,351 $ 1,358 $ 1,136 Farm Animal 2,332 1,835 1,855 Contract Manufacturing (1) 82 80 80 Revenue $ 4,765 $ 3,273 $ 3,071 (1) Represents revenue from arrangements in which we manufacture products on behalf of a third party, including supply agreements associated with divestitures of products related to the acquisition of Bayer Animal Health. |
Acquisitions and Divestitures
Acquisitions and Divestitures | 12 Months Ended |
Dec. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Acquisitions and Divestitures | Acquisitions and DivestituresDuring 2021 and 2020, we completed the acquisitions of KindredBio and Bayer Animal Health, respectively. During 2019, we completed the acquisitions of all outstanding shares of Aratana Therapeutics, Inc. (Aratana) and Prevtec Microbia Inc. (Prevtec). These transactions were accounted for as business combinations 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 these acquisitions are included in the consolidated financial statements from the dates of acquisition. KindredBio Acquisition On August 27, 2021, we acquired KindredBio, a publicly traded biopharmaceutical company that develops innovative biologics focused on saving and improving the lives of pets. The acquisition further accelerates our pet health expansion, particularly by expanding our presence in dermatology. In connection with the merger agreement, we acquired all outstanding stock of KindredBio for $9.25 per share, or an aggregate cash purchase consideration of $444 million. We utilized our revolving credit facility and cash on hand to finance the acquisition. Refer to Note 9: Debt for further details. On May 5, 2021, we signed an agreement with KindredBio to acquire exclusive global rights to KIND-030, a monoclonal antibody that is being developed for the treatment and prevention of canine parvovirus. We calculated the fair value of the liability associated with that agreement using an income approach leveraging the estimated sales royalty, sales milestone and technical milestone payments avoided, and settled the $26 million liability upon the closing of our acquisition of KindredBio. Refer to Note 6: Asset Impairment, Restructuring and Other Special Charges for further discussion. We incurred transaction costs in connection with the KindredBio acquisition of $6 million during the year ended December 31, 2021. Transaction costs were primarily associated with legal and other professional services related to the acquisition and are reflected within asset impairment, restructuring and other special charges in the consolidated statements of operations. Revenue and loss from KindredBio included in the consolidated statements of operations since the date of acquisition were immaterial. The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at August 27, 2021 Cash and cash equivalents $ 31 Other net working capital 9 Property and equipment 33 Intangible assets, primarily acquired in-process research and development (IPR&D) 334 Deferred income taxes, net (22) Total identifiable net assets 385 Goodwill 33 Settlement of liability related to previous license agreement 26 Total consideration transferred $ 444 The accounting for this acquisition is substantially complete, with the exception of the finalization of the valuation of intangible assets, tax-related amounts and minor working capital adjustments. The measurement period adjustments recorded during 2021, which were made to reflect the facts and circumstances in existence as of the acquisition date, primarily related to the finalization of our fair value assessment of property and equipment, revised cash flow assumptions for acquired IPR&D, and minor tax and working capital adjustments. The net impact of these adjustments was an increase of $3 million to goodwill. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. The completion of the valuation will occur no later than one year from the acquisition date. Property and equipment is mostly comprised of land, buildings, equipment (including laboratory equipment, furniture and fixtures, and computer equipment), and construction in progress. The estimated fair value of real and personal property was determined using the sales comparison data valuation technique, to the extent that market data for similar assets was available. When market pricing data was not available for a given asset or asset class, the direct replacement cost method was used. The estimated fair values of acquired IPR&D 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 (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 goodwill recognized from this acquisition is primarily attributable to KindredBio's assembled workforce and expected synergies. The majority of goodwill associated with this acquisition is not deductible for tax purposes. Bayer Animal Health Acquisition On August 1, 2020, we completed the acquisition of Bayer Animal Health. 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 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) $ 5,054 Fair value of Elanco common stock (2) 1,724 Fair value of total consideration transferred $ 6,778 (1) Includes initial cash consideration of $5,170 million less working capital and tax adjustments of $116 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). We recognized transaction costs related to the acquisition of Bayer Animal Health of $3 million, $267 million, and $43 million for the years ended December 31, 2021, 2020, and 2019 respectively. These costs were primarily associated with legal and professional services related to the acquisition and are reflected within asset impairment, restructuring and other special charges in the consolidated statements of operations. The amount of revenue attributable to Bayer Animal Health included in the consolidated statements of operations since the date of acquisition for the years ended December 31, 2021 and 2020 is $1,903 million and $592 million, respectively. 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 following table summarizes the 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 10 Inventories 487 Prepaid expenses and other current assets 60 Property and equipment 315 Intangible assets: Acquired in-process research and development 65 Marketed products 3,740 Assets held for sale 138 Accounts payable and accrued liabilities (237) Accrued retirement benefits (220) Other noncurrent assets and liabilities - net (878) Total identifiable net assets 3,649 Goodwill 3,129 Total consideration transferred $ 6,778 The valuation of assets acquired and liabilities assumed was finalized during the second quarter of 2021. The measurement period adjustments recorded during 2021, which were made to reflect the facts and circumstances in existence as of the acquisition date, primarily related to the finalization of our fair value assessment of property and equipment located at the Shawnee, Kansas site (Shawnee), revised cash flow assumptions for marketed products, adjustments related to changes in inventory balances and gross margin assumptions, tax adjustments, and minor working capital adjustments. These adjustments resulted in a decrease to marketed products intangible assets of $210 million, a decrease to property and equipment of $32 million, a net increase to working capital accounts and other non-current assets and liabilities of $26 million, and an increase to goodwill of $207 million. Inventories comprised of $311 million, $81 million, and $95 million in finished products, work in process, and raw materials, respectively. The 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 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 $152 million has been amortized to cost of sales as the inventory is sold to customers. As of December 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 estimated fair value of real property was determined using the sales comparison data valuation technique and personal property was determined using the direct replacement cost method. The estimated fair value of property and equipment located at the Shawnee, Kansas site was determined using the income approach. Intangible assets relate to $65 million of IPR&D and $3,740 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. 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. 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. See the Divestitures section below for further details. 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 18: Retirement Benefits. 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. 2019 Acquisitions Aratana Therapeutics, Inc. On July 18, 2019, we acquired Aratana, a pet therapeutics company focused on innovative therapies for dogs and cats, for stock and cash-based contingent value rights. Aratana is the creator of the canine osteoarthritis medicine, Galliprant , the rights to which we acquired in 2016. The acquisition enhances our presence in the areas of appetite stimulants in dogs, pain relief in dogs and cats, and treatments of other conditions in the U.S. and internationally. In connection with the acquisition, we issued approximately 7 million shares with a value of $238 million to Aratana shareholders, based on our stock price on the last trading day immediately prior to the closing date. The purchase consideration also included up to $12 million in contingent value rights, which represent the rights of Aratana shareholders to receive a contingent payment of $0.25 per share in cash upon the achievement of a specified milestone as outlined in the merger agreement. We calculated an immaterial fair value for the contingent value rights using the Monte Carlo simulation model. See Note 10: Financial Instruments and Fair Value for further discussion. Contingent consideration liabilities that we previously recorded for future royalty and milestone payments in relation to the 2016 acquisition of rights to Galliprant were settled upon the closing of our acquisition of Aratana. The liabilities were valued at $85 million as of the acquisition date using the Monte Carlo simulation model. The resulting $8 million loss upon settlement was recorded in other (income) expense, net in the consolidated statements of operations for the year ended December 31, 2019. The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at July 18, 2019 Cash and cash equivalents $ 26 Inventories 10 Acquired in-process research and development 32 Marketed products (1) 37 Other intangible assets (1) 13 Other assets and liabilities - net 4 Total identifiable net assets 122 Goodwill (2) 31 Settlement of existing contingent consideration liabilities 85 Total consideration transferred $ 238 (1) These intangible assets, which are being amortized on a straight-line basis over their estimated useful lives, are expected to have a weighted average useful life of approximately 13 years. (2) The goodwill recognized from this acquisition is attributable primarily to expected synergies from combining the operations of Aratana with our legacy business. The majority of goodwill associated with this acquisition is not deductible for tax purposes. The accounting for this acquisition is complete. A $20 million measurement period adjustment was recorded primarily to establish a deferred tax liability for the preexisting Galliprant contingent consideration liability during the year ended December 31, 2020. We issued 0.1 million shares and recorded $4 million of stock-based compensation expense for the vesting of Aratana equity awards that was accelerated upon the closing of the acquisition during 2019. Prevtec Microbia Inc . On July 31, 2019, we acquired Prevtec in a cash transaction for approximately $60 million, inclusive of certain post-closing adjustments. Prevtec is a Canadian biotechnology company specializing in the development of vaccines intended to help prevent bacterial diseases in farm animals. The acquisition allows us to expand on our previous distribution arrangement for Coliprotec™ and is consistent with our efforts to explore innovative antibiotic alternatives. The purchase consideration included up to $16 million in additional cash consideration, contingent upon the achievement of specific sales milestones by December 31, 2021. We recorded a $5 million liability on the consolidated balance sheet as of the acquisition date based on the fair value of the contingent consideration as calculated using the Monte Carlo simulation model. See Note 10: Financial Instruments and Fair Value for further discussion. A previously existing $1 million receivable owed from Prevtec to Elanco Animal Health UK Limited was settled upon the closing of our acquisition of Prevtec. The resulting immaterial gain upon settlement was recorded in other (income) expense, net in the consolidated statements of operations for the year ended December 31, 2019. The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at July 31, 2019 Cash and cash equivalents $ 1 Acquired in-process research and development 3 Marketed products (1) 59 Other intangible assets 1 Other assets and liabilities - net (9) Total identifiable net assets 55 Goodwill (2) 10 Total consideration transferred $ 65 (1) These intangible assets, which are being amortized on a straight-line basis over their estimated useful lives, are expected to have a weighted average useful life of 10 years. (2) The goodwill recognized from this acquisition is attributable primarily to expected synergies from combining the operations of Prevtec with our legacy business and future unidentified projects and products. The goodwill associated with this acquisition is not deductible for tax purposes. The accounting for this acquisition is complete. An immaterial measurement period adjustment to deferred taxes was recorded during the year ended December 31, 2020. Pro forma financial information (unaudited) The following table presents the estimated unaudited pro forma combined results of Elanco, Bayer Animal Health and Aratana for the years ended December 31, 2020 and 2019 as if the acquisitions had occurred on January 1, 2019: Year Ended December 31, 2020 2019 Revenue $ 4,441 $ 4,691 Loss before income taxes (675) (160) 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, Bayer Animal Health and Aratana. The supplemental pro forma financial information does not necessarily represent what the combined companies' revenue or results of operations would have been had the acquisitions been completed on January 1, 2019, 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, Bayer Animal Health and Aratana. The unaudited supplemental pro forma financial information reflects primarily pro forma adjustments related to divestitures, fair value estimates for intangibles, property and equipment, 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 Shawnee and Speke divestitures In the second quarter of 2021, as part of our strategy to optimize our manufacturing footprint, we announced an agreement with TriRx Pharmaceuticals (TriRx) to sell our manufacturing sites in Shawnee and Speke, U.K. (Speke), including the planned transfer of approximately 600 employees. In connection with these arrangements, we also entered into long-term manufacturing and supply agreements, under which TriRx will manufacture existing Elanco products at both sites upon the closing of the transactions. During the year ended December 31, 2021, we recorded a $273 million pre-tax charge to reduce the carrying value of the disposal groups to an amount equal to fair value less costs to sell in asset impairment, restructuring, and other special charges in the consolidated statements of operations. Our fair value less costs to sell assessment includes the fair value of the favorable manufacturing and supply agreements, estimated using a combined income and market approach which incorporated Level 3 inputs. On August 1, 2021, we completed the sale of our Shawnee site and expect to receive gross cash proceeds of $51 million over a period of three years based on the terms of the agreement, beginning in the second half of 2022. We completed the sale of our Speke site on February 1, 2022; therefore, the related assets are classified as held for sale as of December 31, 2021. See Note 6: Asset Impairment, Restructuring and Other Special Charges for further information. Elanco and Bayer Animal Health product divestitures 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 legacy Elanco products. In 2020, we signed agreements to divest the worldwide rights to Osurnia ™ and Vecoxan ™ and the U.S. rights to Capstar ™ . In July 2020, we completed these sales, along with certain other immaterial divestitures. The transactions were accounted for as asset divestitures. In 2020, we also 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 year ended December 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 divestiture closed during 2021. There were no proceeds received from the disposition of these assets and the resulting immaterial impact was recorded in other (income) expense, net in the consolidated statements of operations. The related assets met the assets held for sale criteria as of December 31, 2020. To allow the Bayer Animal Health acquisition to close on a timely basis, we signed agreements to divest the rights to the legacy Bayer Animal Health products Drontal and Profender within the U.K. and European Economic Area as well as other IPR&D. We completed the transactions, which were accounted for as asset divestitures, in August 2020. Drontal , Profender , and the IPR&D rights were acquired as part of the Bayer Animal Health acquisition. The related assets were classified as held for sale on the balance sheet as of the acquisition date and measured at fair value at the time of the acquisition; therefore, no gains were recognized on the sales. During the year ended December 31, 2020, a loss of $7 million was recorded on the sale of IPR&D as recognition of the potential income from the divestiture was constrained by revenue accounting standards. There were additional marketed and pipeline products that we were required to dispose of in order to comply with regulatory requirements. These divestitures did not have a material effect on our operations, cash flows or financial position. During the year ended December 30, 2020, we received gross cash proceeds of $435 million and recognized pre-tax gains of $156 million (net of transaction costs of $13 million) relating to the product divestitures described above. Pre-tax gains were included in other (income) expense, net in the consolidated statements of operations. Assets Held For Sale Assets and liabilities considered held for sale in connection with the above divestitures were included in the respective line items on the consolidated balance sheet as follows: December 31, 2021 December 31, 2020 Inventories $ 31 $ 2 Other intangibles, net — 4 Property and equipment, net 50 — Deferred tax asset — 1 Total assets held for sale $ 81 $ 7 Other intangibles, net classified as held for sale primarily consisted of marketed products. Microbiome R&D platform carve-out On October 5, 2021, we announced our intention to carve out our microbiome R&D platform, aiming to create a privately funded, independent, biopharmaceutical company focused on developing solutions for animal and human health. We are exploring structures with both strategic and financial sponsors, and may retain a minority stake in this new entity. The potential carve-out is expected to be executed in the first half of 2022 and the assets to be transferred are not expected to be material. We determined that the disposal of the related net assets does not qualify for reporting as a discontinued operation because it does not represent a strategic shift that has or will have a major effect on our operations and financial results. |
Asset Impairment, Restructuring
Asset Impairment, Restructuring and Other Special Charges | 12 Months Ended |
Dec. 31, 2021 | |
Restructuring and Related Activities [Abstract] | |
Asset Impairment, Restructuring and Other Special Charges | 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. As discussed further below, 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 assets 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 2: Basis of Presentation and Note 3: Summary of Significant Accounting Policies for discussion regarding estimates and assumptions. 2021 Restructuring Programs In 2021, we announced two separate restructuring programs to improve operating efficiencies. The actions proposed in January 2021 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 closed our R&D sites in Manukau, New Zealand and Cuxhaven, Germany. We have also reduced duplication and optimized structures in U.S. operations, marketing, manufacturing and quality central functions, and administrative areas. The restructuring resulted in the elimination of approximately 315 positions around the world. Activities related to this initiative resulted in net charges of $43 million during the year ended December 31, 2021, primarily consisting of severance costs and other cash charges. Restructuring charges under this program were substantially complete at the end of 2021. The program announced in November 2021 includes initiatives to consolidate certain international commercial operations into one organization, integrate our centralized global marketing organization into country level commercial organizations, transform and simplify our R&D organizational structure, and other organizational adjustments. In connection with the proposed restructuring, we expect to eliminate approximately 380 positions. Activities related to this initiative resulted in charges of approximately $86 million in the fourth quarter of 2021, consisting of severance costs. Restructuring charges under this program were substantially complete at the end of 2021; however, we may continue to make adjustments to our severance accruals to reflect changes in estimates resulting from ongoing negotiations. 2020 Restructuring Program 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 years ended December 30, 2021 and 2020 we recorded favorable adjustments of $15 million and charges of $162 million, respectively. The favorable adjustments reflect adjustments to severance accruals resulting from favorable negotiations and certain restructured employees filling open positions. Charges in 2020 primarily related to severance and asset write-down expenses. Restructuring charges under this program were substantially complete at the end of 2021. Components of asset impairment, restructuring and other special charges for the years ended December 31 are as follows: 2021 2020 2019 Restructuring charges (credits): Severance and other costs (1) $ 110 $ 155 $ 8 Facility exit costs (credits) (1) — (3) — Acquisition related charges: Transaction and integration costs (2) 162 424 145 Non-cash and other items: Asset impairment (3) 66 17 16 Asset write-down (4) 278 19 17 Gain on sale of fixed assets — (4) — Net periodic benefit cost (credits) (Note 18) (29) — — Settlements and other (5) 41 15 — Total expense $ 628 $ 623 $ 186 (1) 2021 charges mainly represent employee termination costs for restructuring programs announced and initiated in January 2021 and November 2021. These costs were partially offset by the reversal of severance accruals associated with the January 2021 and September 2020 programs during the period. See below for further details. 2020 restructuring charges mainly represent employee termination costs for cost-reduction and productivity initiatives related to a restructuring program initiated following the acquisition of Bayer Animal Health, partially offset by a favorable true-up of a lease termination related to a previous restructuring program. 2019 charges primarily relate to employee termination costs from exiting R&D operations in Prince Edward Island, Canada, ceasing certain manufacturing operations in Wusi, China, and streamlining operations in Speke, England. (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 acquisitions of KindredBio and Bayer Animal Health (e.g., expenditures for consulting, system and process integration, and product transfers), as well as independent company stand-up costs related to the implementation of new systems, programs, and processes. (3) Represents the impact of adjustments to fair value of property and equipment, IPR&D assets, and marketed products that were subject to product rationalization. See Note 11: Goodwill and Intangibles for further information. (4) Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions. 2021 also includes adjustments recorded to write down the Shawnee and Speke assets classified as held for sale as of June 30, 2021 to an amount equal to estimated fair value less costs to sell. See Note 5: Acquisitions and Divestitures for further discussion. (5) 2021 includes a charge associated with the settlement of a liability for future royalty and milestone payments triggered in connection with our acquisition of KindredBio as discussed further in Note 5: Acquisitions and Divestitures, accounting and advisory fees related to the sale of our manufacturing site in Shawnee, and $10 million of litigation settlements, partially offset by a gain recorded on the divestiture of an early-stage IPR&D asset acquired as part of the Bayer Animal Health acquisition. 2020 charges relate to a non-recurring litigation settlement for a matter that originated prior to our separation from Lilly and a one-time expense associated with our agreement to build a new corporate headquarters. The following table summarizes the activity in our reserves established in connection with restructuring activities: Exit costs Severance Total Balance at December 31, 2019 $ 5 $ 16 $ 21 Charges 1 156 157 Reserve adjustment (3) (1) (4) Cash paid (3) (41) (44) Balance at December 31, 2020 — 130 130 Charges — 126 126 Reserve adjustment — (16) (16) Cash paid — (114) (114) Balance at December 31, 2021 $ — $ 126 $ 126 |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2021 | |
Inventory Disclosure [Abstract] | |
Inventories | 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 at December 31 consisted of the following: 2021 2020 Finished products $ 598 $ 772 Work in process 565 625 Raw materials and supplies 256 210 Total 1,419 1,607 Decrease to LIFO cost (46) (29) Inventories $ 1,373 $ 1,578 |
Equity
Equity | 12 Months Ended |
Dec. 31, 2021 | |
Equity [Abstract] | |
Equity | 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 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 | 12 Months Ended |
Dec. 31, 2021 | |
Debt Disclosure [Abstract] | |
Debt | Debt Long-term debt as of December 31 consisted of the following: 2021 2020 Incremental Term Facility $ 499 $ — Term Loan B 4,118 4,164 Revolving Credit Facility 250 — 3.912% Senior Notes due 2021 — 500 4.272% Senior Notes due 2023 750 750 4.900% Senior Notes due 2028 750 750 TEU Amortizing Notes 34 60 Other obligations — 1 Unamortized debt issuance costs (82) (98) 6,319 6,127 Less current portion of long-term debt 294 555 Total long-term debt $ 6,025 $ 5,572 Maturities on long-term debt consisted of the following: As of and for the years ending December 31 2022 $ 308 2023 805 2024 48 2025 135 2026 48 2027 and thereafter 5,057 Total obligations and commitments 6,401 Unamortized debt issuance costs (82) Total debt $ 6,319 Cash payments for interest during the years ended December 31 were as follows: 2021 2020 2019 Interest paid $ 221 $ 131 $ 104 Farm Credit Agreement On August 12, 2021, we entered into a new debt financing arrangement with Farm Credit Mid-America, PCA (Farm Credit) for a $500 million credit facility, consisting of a senior secured term loan (Incremental Term Facility) to retire our existing Senior Notes due August 27, 2021. The Incremental Term Facility bears interest at a floating rate of LIBOR plus 175 basis points and is payable in quarterly installments of principal and interest with a final balloon payment due on August 12, 2028. The terms of the Incremental Term Facility, including pledged collateral and financial maintenance covenants, are generally consistent with the terms of our existing term loan B credit facility (Term Loan B) and revolving credit facility. 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 facility. The Term Loan B bears interest at a floating rate of LIBOR plus 175 basis points and is payable in quarterly installments through August 1, 2027. In January 2022, we paid $70 million of the outstanding balance on our Term Loan B. 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-year term. The revolving credit facility bears interest at LIBOR plus an applicable margin ranging between 1.50% and 2.25% per annum based on our corporate family rating or corporate credit rating. During 2021, we drew down $500 million on the revolving credit facility for working capital needs and to partially fund the acquisition of KindredBio. We subsequently repaid $250 million during the year ended December 31, 2021. In 2020, we drew down and subsequently repaid $450 million on the revolving credit facility to fund local country asset purchases in connection with our acquisition of Bayer Animal Health subsidiaries. In February 2022, we paid $163 million of the outstanding balance on our revolving credit facility. 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 December 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 December 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, which were fully repaid as part of the Farm Credit refinancing, $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 that limit our, and certain of our subsidiaries' ability, 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 December 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 $28 million representing partial payment of principal and interest on the TEU amortizing notes during the year ended December 31, 2021. See Note 8: Equity for further information. Debt Extinguishment On January 31, 2020, we repaid indebtedness outstanding under our existing term loan facility. We paid $372 million in cash, composed of $371 million of principal and $1 million of accrued interest, resulting in a debt extinguishment loss of $1 million (recognized in interest expense, net of capitalized interest in the consolidated statements of operations for the year ended December 31, 2020), primarily related to the write-off of deferred debt issuance costs. |
Financial Instruments and Fair
Financial Instruments and Fair Value | 12 Months Ended |
Dec. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Financial Instruments and Fair Value | 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. We had investments without readily determinable fair values and equity method investments included in other noncurrent assets on the consolidated balance sheets totaling $22 million and $24 million as of December 31, 2021 and 2020 , respectively. We recorded a net unrealized loss of $10 million and a net unrealized gain of $11 million in other (income) expense, net in the consolidated statements of operations for the years ended December 31, 2021 and 2020 , respectively. Unrealized net losses in 2019 were immaterial. The following table summarizes the fair value information at December 31, 2021 and 2020 for foreign exchange contract assets (liabilities), investments, 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 Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs Significant Unobservable Inputs Fair Value December 31, 2021 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 19 $ — $ 19 $ — $ 19 Other noncurrent assets - investments 13 13 — — 13 Other noncurrent assets - forward-starting interest rate contracts designated as cash flow hedges 8 — 8 — 8 Other current liabilities - foreign exchange contracts not designated as hedging instruments (20) — (20) — (20) Long-term debt, including current portion (6,401) — (6,518) — (6,518) December 31, 2020 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 36 $ — $ 36 $ — $ 36 Other noncurrent assets - investments 9 9 — — 9 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, including current portion (6,225) — (6,420) — (6,420) 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 December 31, 2020 related to the acquisitions of Aratana and Prevtec during 2019. For Aratana, we were contracted to pay up to $12 million in contingent value rights dependent on the achievement of a specified milestone by December 31, 2021 as outlined in the merger agreement. For Prevtec, based on the terms of the purchase agreement, we were contracted to pay $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. The milestones for Aratana and Prevtec were not achieved, and therefore, our remaining liability was written off during the year ended December 31, 2021. The resulting gain of $1 million was recognized in other (income) expense, net in the consolidated statements of operations. During the year ended December 31, 2020, primarily as a result of a decrease in forecasted revenues related to Coliprotec , we decreased the fair value of the contingent consideration liability associated with the Prevtec acquisition by $4 million and recognized the gain in other (income) expense, net in the consolidated statements of operations. See Note 5: Acquisitions and Divestitures for further discussion. 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. Derivative cash flows, with the exception of net investment hedges, are principally classified in the operating activities section of the consolidated statements of cash flows, consistent with the underlying hedged item. Cash flows related to net investment hedges are classified in the investing activities section of the consolidated statements of cash flows. 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 Euro, British pound, Swiss franc (CHF), Brazilian real, Australian dollar, Japanese yen, Canadian dollar, 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 (income) expense, net in the consolidated statements of operations. Forward contracts generally have maturities not exceeding 12 months. At December 31, 2021 and December 31, 2020, we had outstanding foreign exchange contracts with aggregate notional amounts of $1,212 million and $1,391 million, respectively. The amount of net losses on derivative instruments not designated as hedging instruments, recorded in other (income) expense, net were as follows: For the Year Ended December 31, 2021 2020 2019 Foreign exchange forward contracts (1) $ (35) $ (4) $ (5) (1) These amounts were substantially offset in other (income) 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-year cross-currency fixed interest rate swap with a 750 million CHF notional amount, which was designated as a net investment hedge against CHF denominated assets (the fair value of which was estimated based on quoted market values of similar hedges and was classified as Level 2). During the year ended December 31, 2020, we fully liquidated our cross currency interest rate swaps for a cash benefit of $35 million (including $2 million in interest). Notwithstanding settlement, gains and losses within accumulated other comprehensive income (loss) will remain in accumulated other comprehensive income (loss) until either the sale or substantial liquidation of the hedged subsidiary. Gains on the net investment hedge, recognized within interest expense, net of capitalized interest, were as follows: For the Year Ended December 31, 2021 2020 2019 Cross-currency interest rate swap contracts $ — $ 6 $ 25 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 other comprehensive income (loss), were as follows: For the Year Ended December 31, 2021 2020 2019 Cross-currency interest rate swap contracts $ — $ 24 $ 8 We are subject to interest rate risk with regard to our existing floating-rate debt, and we utilize interest rate swap contracts to mitigate the variability in cash flows by effectively converting the floating-rate debt into fixed-rate debt. We recognize any differences between the variable interest rate payments and the fixed interest rate settlements with the swap counterparties as an adjustment to interest expense, net of capitalized interest over the life of the swaps. We have designated these swaps as cash flow hedges and record them at fair value on the consolidated balance sheets. Changes in the fair value of the hedges 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. In March 2020, as a means of mitigating interest rate risk associated with the Term Loan B issuance, we executed forward-starting interest rate swaps with a $4.1 billion notional amount, which were designated as cash flow hedges and had maturity dates ranging between 2022 and 2025. In October 2021, six of the existing interest rate swap positions with maturities in 2025 and an aggregate notional value of $2.1 billion were terminated and replaced with 24 new interest rate swaps. The new swaps have maturities ranging between 2022 and 2025 with an aggregate notional amount of $2.1 billion. The new interest rate swaps qualified as effective cash flow hedges at inception and are recorded at fair value. An immaterial amount of cash was exchanged between Elanco and the counterparties; therefore, the transactions did not significantly impact the consolidated statements of cash flows. The amount of unrealized gains recorded in accumulated other comprehensive income (loss) related to the terminated interest rate swaps at the time of termination was $2 million. This amount will be amortized to interest expense over the remaining term of the original interest rate swaps. The amounts of net gains (losses) on cash flow hedges, recorded, net of tax, in other comprehensive income (loss), were as follows: For the Year Ended December 31, 2021 2020 2019 Forward-starting interest rate swaps, net of tax benefit of $0, $15, and $0, respectively $ 86 $ (61) $ — There was no tax effect for the year ended December 31, 2021 after the application of the U.S. valuation allowance. See Note 15: Income Taxes for further discussion. Over the next 12 months we expect to recognize charges of $2 million in interest expense, net of capitalized interest due to swap settlements. During the years ended December 31, 2021 and 2020, we recognized $28 million and $7 million, respectively, of net losses into interest expense. |
Goodwill and Intangibles
Goodwill and Intangibles | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangibles | Goodwill and Intangibles Goodwill Goodwill was $6.2 billion as of December 31, 2021 and 2020. Goodwill results from excess consideration in a business combination over the fair value of identifiable net assets acquired. Goodwill is not amortized but is reviewed for impairment at least annually and when impairment indicators are present. Goodwill may be impaired if the carrying amount of a reporting unit exceeds the fair value of that reporting unit, calculated as based on discounted cash flows. An impairment charge would be recorded for the excess, if any, of the reporting unit's carrying amount over its fair value, but not to exceed the total amount of goodwill allocated to the reporting unit. The estimated fair value is based on a number of assumptions, including current market capitalization as corroboration of fair value. See Note 5: Acquisitions and Divestitures for further discussion of goodwill resulting from recent business combinations and changes in the carrying amount of goodwill. The following table summarizes the changes in the carrying amount of goodwill during the period: Balance as of December 31, 2020 $ 6,225 Bayer Animal Health measurement period adjustments 207 Additions related to the KindredBio acquisition 33 Goodwill associated with Shawnee, Speke and other divestitures (64) Foreign currency translation adjustments (229) Balance as of December 31, 2021 $ 6,172 No impairments occurred with respect to the carrying value of goodwill for the years ended December 31, 2021, 2020 and 2019. Other Intangibles The components of intangible assets other than goodwill as of December 31 were as follows: 2021 2020 Description Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Finite-lived intangible assets: Marketed products $ 6,828 $ (1,837) $ 4,991 $ 7,394 $ (1,342) $ 6,052 Software 285 (77) 208 346 (108) 238 Other 47 (28) 19 62 (40) 22 Total finite-lived intangible assets 7,160 (1,942) 5,218 7,802 (1,490) 6,312 Indefinite-lived intangible assets: Acquired in-process research and development 369 — 369 75 — 75 Other intangibles $ 7,529 $ (1,942) $ 5,587 $ 7,877 $ (1,490) $ 6,387 Marketed products consist of the amortized cost of the rights to assets acquired in business combinations and approved for marketing in a significant global jurisdiction. Also included in this category are post-approval milestone payments from transactions other than a business combination. Software consists of certain costs incurred in connection with obtaining or developing internal-use software, including payroll and payroll-related costs for employees directly associated with the internal-use software projects and direct costs of external resources. These costs include software classified as "in process" until the project is substantially complete and the software is ready for its intended purpose, at which point the costs are amortized on a straight-line basis over the estimated useful life. Depreciation expense includes $52 million in 2021, $35 million in 2020, and $20 million in 2019 for amortization of software. Other finite-lived intangibles consist primarily of the amortized cost of licensed platform technologies that have alternative future uses in research and development, manufacturing technologies and customer relationships from business combinations. Acquired IPR&D consists of the related costs capitalized, adjusted for subsequent impairments, if any. The costs of acquired IPR&D projects acquired directly in a transaction other than a business combination are capitalized if the projects have an alternative future use; otherwise, they are expensed immediately. The fair values of acquired IPR&D projects acquired in business combinations are capitalized as other intangible assets. Several methods may be used to determine the estimated fair value of marketed products, IPR&D, and other finite-lived intangibles acquired in a business combination. We utilize the "income method" for these intangibles. This method is a Level 3 fair value measurement and applies a probability weighting that considers the risk of development and commercialization to the estimated future net cash flows that are derived from projected revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each group of assets independently. The acquired IPR&D assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are tested for impairment and amortized over the remaining useful life or written off, as appropriate. During 2021, we added approximately $334 million of IPR&D as a result of the KindredBio acquisition. During 2020, after considering measurement period adjustments, we added approximately $65 million of IPR&D and $3,740 million of marketed products as a result of the Bayer Animal Health acquisition. See Note 5: Acquisitions and Divestitures for further discussion of intangible assets acquired in recent business combinations. Indefinite-lived intangible assets are reviewed for impairment at least annually and when impairment indicators are present. The fair value of the indefinite lived intangible assets (acquired IPR&D) is estimated using the same assumptions as used for goodwill and by applying a probability weighting that reflects the risk of development and commercialization to the estimated future net cash flows that are derived from projected revenues and estimated costs. Finite-lived intangible assets are reviewed for impairment when an indicator of impairment is present. We compare the carrying amounts of the assets with the estimated undiscounted future cash flows. In the event the carrying amount exceeds the undiscounted cash flows, an impairment charge is recorded for the amount by which the carrying amount of the asset exceeds the estimated fair value, which is determined based on discounted future cash flows. Impairment charges related to our other intangibles were as follows: 2021 2020 2019 Asset impairment, restructuring and other special charges $ 66 $ 17 $ 11 During 2021, we recorded impairment charges comprised of $55 million for acquired IPR&D and $11 million for marketed products. The impairments to acquired IPR&D primarily related to adjustments to the fair value of IPR&D assets that were subject to product rationalization, including a decision by management to terminate a project and fully impair the related asset associated with a farm animal parasiticide. The decision was prompted by unfavorable efficacy results observed during the year. The impairments of marketed products related to a full impairment based on a reassessment of competitive viability and project priority for an approved asset and an adjustment to the fair value of a mature brand that is subject to near-term product rationalization. During 2020, we recorded impairment charges comprised of $9 million for acquired IPR&D and $8 million for marketed products. The impairment to acquired IPR&D related to reassessments of geographic viability and project priority, which was partially prompted by the addition of the Bayer Animal Health IPR&D pipeline. The impairment of marketed products related to adjustments made to record assets classified as held for sale at the lower of their carrying amounts or fair values less costs to sell. During 2019, we recorded impairment charges of $11 million for indefinite-lived intangible assets, primarily related to product rationalization. Intangible assets with finite lives are capitalized and are amortized over their estimated useful lives, ranging from 3 to 20 years. As of December 31, 2021, the remaining weighted-average amortization periods for finite-lived intangible assets are as follows: Weighted Average Life (Years) Marketed products 10 Software 6 Other 7 The estimated amortization expense for each of the next five years associated with our finite-lived intangible assets as of December 31, 2021 is as follows: 2022 2023 2024 2025 2026 Estimated amortization expense $ 559 $ 559 $ 555 $ 537 $ 534 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment is stated on the basis of cost. Provisions for depreciation of buildings and equipment are computed generally by the straight-line method at rates based on their estimated useful lives (12 to 50 years for buildings and 3 to 25 years for equipment). We review the carrying value of long-lived assets for potential impairment on a periodic basis and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Impairment is determined by comparing projected undiscounted cash flows to be generated by the asset to its carrying value. If an impairment is identified, a loss is recorded equal to the excess of the asset's net book value over its fair value utilizing a discounted cash flow analysis, and the cost basis is adjusted. At December 31, property and equipment consisted of the following: 2021 2020 Land $ 42 $ 46 Buildings 549 756 Equipment 1,354 1,360 Construction in progress 157 191 Finance lease asset — 1 2,102 2,354 Less accumulated depreciation (1,041) (1,038) Property and equipment, net $ 1,061 $ 1,316 The following provides property and equipment, less accumulated depreciation by geographic area: 2021 2020 United States $ 557 $ 673 Germany 211 221 United Kingdom 65 194 France 54 59 Other foreign countries 174 169 Property and equipment, net $ 1,061 $ 1,316 Depreciation expense related to property and equipment was as follows: 2021 2020 2019 Depreciation expense $ 108 $ 122 $ 94 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2021 | |
Leases [Abstract] | |
Leases | Leases We determine if an arrangement is a lease at inception. We have operating leases for corporate offices, research and development facilities, vehicles, and equipment. We generally have remaining lease terms ranging from one Right-of-use assets included in noncurrent assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. The right-of-use asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option. Operating lease expense for right-of-use assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. We elected not to apply the recognition requirements of ASC 842, Leases , to short-term leases, which are deemed to be leases with a lease term of 12 months or less. Instead, we recognize lease payments in the consolidated statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. We elected this policy for all classes of underlying assets. We elected not to apply the practical expedient related to the separation of lease and non-lease components or the practical expedient which allows entities to use hindsight when determining lease term. The impact of operating leases to the consolidated financial statements for the years ended December 31, was as follows: 2021 2020 2019 Lease cost Operating lease cost $ 43 $ 38 $ 26 Short-term lease cost 1 1 1 Variable lease cost 4 3 2 Total lease cost $ 48 $ 42 $ 29 Other information Operating cash outflows from operating leases $ 40 $ 36 $ 24 Right-of-use assets obtained in exchange for new operating lease liabilities (1) 36 138 20 Weighted-average remaining lease term - operating leases 7 years 8 years 5 years Weighted-average discount rate - operating leases 3.8 % 3.8 % 3.6 % (1) 2020 includes approximately $16 million of right-of-use assets acquired in the Bayer Animal Health acquisition. Supplemental balance sheet information related to our operating leases is as follows: Asset/Liability Balance Sheet Classification December 31, 2021 December 31, 2020 Right-of-use assets Other noncurrent assets $ 161 $ 187 Current operating lease liabilities Other current liabilities 34 37 Non-current operating lease liabilities Other noncurrent liabilities 127 151 As of December 31, 2021, the annual minimum lease payments of our operating lease liabilities were as follows: 2022 $ 41 2023 32 2024 24 2025 19 2026 15 2027 and thereafter 59 Total lease payments 190 Less imputed interest (29) Total $ 161 Lease contracts that have been executed but have not yet commenced are excluded from the tables above. As of December 31, 2021, we have an additional lease commitment that has not yet commenced for our new corporate headquarters in Indianapolis, Indiana. Total minimum lease payments are estimated to be approximately $310 million over a term of 25 years, excluding extensions. Final lease payments may vary depending on the actual cost of certain construction activities. Lease commencement is expected in 2024. Australia Sale-Leaseback On June 26, 2020, our wholly-owned subsidiary, Elanco Australasia PTY LTD, sold land and an R&D facility located in New South Wales, Australia, for aggregate proceeds of $55 million, and leased the property back for an initial term of 15 years through a sale-leaseback transaction. Under the terms of the purchase and sale agreement, we determined that control of the assets was relinquished to the buyer-lessor. Therefore, we recognized a pre-tax gain on the sale of $46 million in other (income) expense, net in the consolidated statements of operations during the year ended December 31, 2020. Operating lease right-of-use assets and liabilities include the present value of $28 million for the associated lease payments, which are presented in other noncurrent assets and other noncurrent liabilities and other current liabilities on the consolidated balance sheet. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based CompensationThe 2018 Elanco Stock Plan (Plan) provides long-term incentives to attract, motivate and retain employees and non-employee directors. The types of stock-based awards available include, but are not limited to, restricted stock units (RSUs), performance-based awards (PAs), and stock options. Our practices and policies specify that stock-based compensation awards are approved by the Compensation Committee of the Board of Directors. The total number of shares authorized for stock-based compensation awards under the plan was 11 million. As of December 31, 2021, the aggregate number of remaining shares available for future grant was approximately 9 million. Stock-Based Compensation Expense We measure compensation expense for stock-based awards based on grant date fair value and the estimated number of awards that are expected to vest. For purposes of measuring stock-based compensation expense, we consider whether an adjustment to the observable market price is necessary to reflect material nonpublic information that is known to us at the time the award is granted. No adjustments were deemed necessary for the years ended December 31, 2021, 2020, or 2019. Forfeitures are estimated based on historical experience at the time of grant and are revised in subsequent periods if actual forfeitures differ from those estimates. Components of stock-based compensation expense and related tax benefit for the years ended December 31 were as follows: 2021 2020 2019 Total stock-based compensation expense (1) $ 66 $ 48 $ 41 Related tax benefit (11) (8) (10) (1) Substantially all of our stock-based compensation expense relates to RSUs and PAs. Restricted Stock Units RSUs are granted to certain employees and are settled in shares of our common stock. RSU shares are accounted for at fair value based upon the closing stock price on the date of the grant. The corresponding expense is amortized over the vesting period, typically three years. The number of shares ultimately issued for the RSU program remains constant with the exception of forfeitures. RSUs granted to employees for the years ended December 31 were as follows: (Units in millions) 2021 2020 2019 Granted units 1.1 1.3 2.9 Weighted-average fair value $ 33.57 $ 27.44 $ 31.22 Changes in the nonvested portion of RSUs for 2021 are summarized below: (Shares in millions) Shares Weighted-Average Grant Date Fair Value Nonvested units at January 1, 2021 2.4 $ 28.90 Granted 1.1 33.57 Vested (0.9) 29.84 Forfeited (0.4) 30.58 Nonvested units at December 31, 2021 2.2 30.87 The fair market value of RSUs vesting in 2021, 2020, and 2019 was $30 million, $33 million, and $23 million, respectively. As of December 31, 2021 the total remaining unrecognized stock-based compensation expense related to nonvested RSUs was $26 million, which is expected to be amortized over a weighted-average remaining requisite service period of 17 months. Performance-Based Awards PAs, which are granted to eligible officers and management, represent the right to receive a share of our common stock and are subject to forfeiture until restrictions lapse (including continued employment through the end of the vesting period and achievement of certain pre-established metrics). Payouts can vary depending on achievement. PA shares are accounted for at fair value based upon the closing stock price on the date of grant and fully vest at the end of the measurement period. Stock-based compensation expense for PAs is recognized only if it is deemed probable that the performance condition will be achieved. PA activity during the year ended December 31, 2021 is summarized below: (Shares in millions) Shares Weighted-Average Grant Date Fair Value Nonvested awards at January 1, 2021 1.2 $ 26.63 Granted 0.6 32.70 Vested (0.7) 30.96 Forfeited (0.1) 29.66 Nonvested awards at December 31, 2021 1.0 30.53 The fair market value of PAs vesting in 2021 and 2020 was $22 million and $2 million, respectively. No PAs vested in 2019. As of December 31, 2021, the total remaining unrecognized stock-based compensation expense related to nonvested PAs was $17 million, which is expected to be amortized over a weighted-average remaining requisite service period of 12 months. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our income tax provision for the years ended December 31, 2021 and 2020 includes income tax costs and benefits such as valuation allowances, uncertain tax positions, audit settlements, and other items. We are included in Lilly's U.S. tax examinations by the Internal Revenue Service through the full separation date of March 11, 2019. Pursuant to the tax matters agreement we executed with Lilly in connection with the IPO, the potential liabilities or potential refunds attributable to pre-IPO periods in which Elanco was included in a Lilly consolidated or combined tax return remain with Lilly. The U.S. examination of tax years 2016 through 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. Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 requires the capitalization of research and development costs for tax purposes, which can then be amortized over five years and 15 years for domestic and foreign costs, respectively. Congress has proposed tax legislation to delay the effective date of this change to 2025, but it is uncertain whether the proposed delay will ultimately be enacted into law. Management is currently evaluating the potential impact on our cash flows from operations. Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Following is the composition of income (loss) before income tax expense (benefit): 2021 2020 2019 Federal $ (341) $ (495) $ 55 Foreign (226) (177) 23 Income (loss) before income taxes $ (567) $ (672) $ 78 Following is the composition of income tax expense (benefit): 2021 2020 2019 Current: Federal $ — $ (36) $ (5) Foreign 58 56 13 State 1 (7) 2 Total current tax expense 59 13 10 Deferred: Federal (9) (8) 15 Foreign (144) (125) (8) State (1) 8 (7) Total deferred tax expense (benefit) (154) (125) — Income tax expense (benefit) $ (95) $ (112) $ 10 Significant components of our deferred tax assets and liabilities as of December 31 are as follows: 2021 2020 Deferred tax assets: Compensation and benefits $ 58 $ 69 Accruals and reserves 57 89 Tax credit carryovers 53 34 Tax loss carryovers 291 168 Inventories 18 18 Restructuring and other reserves 31 33 Operating lease liabilities 42 48 Other 71 25 Total gross deferred tax assets 621 484 Valuation allowances (162) (94) Total deferred tax assets 459 390 Deferred tax liabilities: Right-of-use assets (42) (48) Intangibles (976) (1,044) Property and equipment (80) (115) Other — — Total deferred tax liabilities (1,098) (1,207) Deferred tax liabilities - net $ (639) $ (817) The deferred tax assets and related valuation allowance amounts for net operating losses and tax credits shown above have been adjusted for differences between financial reporting and tax return filings. At December 31, 2021, we have tax credit carryovers of $53 million available to reduce future income taxes. The amount is comprised of foreign, U.S. federal and state credits. The foreign credits total $7 million and if unused, will begin to expire in 2036. The U.S. federal credits total $32 million and if unused, will begin to expire in 2030. The state credits total $14 million and if unused, will begin to expire in 2022. The U.S. federal credits are subject to a partial valuation allowance and state credits are subject to a full valuation allowance. At December 31, 2021, we have net operating loss carryovers and other carryovers for foreign, U.S. federal and state income tax purposes of $291 million. $91 million will expire between 2022 and 2042, and $200 million of the carryovers have an indefinite carryforward period. Net operating losses and other carryovers for foreign, U.S. federal and state income tax purposes are subject to full and partial valuation allowances. The movements in the valuation allowance are as follows: 2021 2020 January 1 $ (94) $ (32) Increase (74) (75) Release 6 13 December 31 $ (162) $ (94) The increase in the valuation allowance during 2021 is primarily attributable to the realizability of U.S. federal and state deferred tax assets as a result of U.S. pre-tax losses. Deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the U.S. because it is expected that these earnings will be reinvested indefinitely. For the amount considered to be indefinitely reinvested, it is not practicable to determine the amount of the related deferred income tax liability due to the complexities in the tax laws and assumptions we would be required to make. Deferred taxes, including U.S. or foreign withholding taxes, would be provided when we no longer consider our subsidiary earnings to be permanently invested, such as in situations where our subsidiaries plan to make future dividend distributions. In accordance with the 2017 Tax Act, we treat taxes due on future Global Intangible Low-Taxed Income (GILTI) inclusions in U.S. taxable income as a current period expense when incurred. Cash payments of income taxes were as follows: 2021 2020 2019 Cash payments of income taxes $ 151 $ 97 $ 43 The following is a reconciliation of the income tax expense (benefit) applying the U.S. federal statutory rate to income before income taxes to reported income tax expense: 2021 2020 2019 Income tax expense (benefit) at the U.S. federal statutory tax rate $ (119) $ (141) $ 16 Add (deduct): Taxation of international operations (16) (15) 21 State taxes (8) (10) 3 Income tax credits (14) (24) (10) Non-deductible employee compensation 4 1 4 Other permanent adjustments (2) 18 (4) Change in uncertain tax positions (2) (7) (15) Change in valuation allowance 62 66 (5) Income tax expense (benefit) $ (95) $ (112) $ 10 A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: 2021 2020 2019 Beginning balance at January 1 $ 3 $ 8 $ 15 Adjustments related to the separation from Lilly — — (2) Adjusted beginning balance at January 1 3 8 13 Additions based on tax positions related to the current year — — 1 Changes for tax positions of prior years (1) (2) (1) Additions related to acquisition 4 — — Settlements — (3) (5) Ending balance at December 31 $ 6 $ 3 $ 8 The total amount of unrecognized tax benefits that, if recognized, would affect tax expense was $6 million and $3 million at December 31, 2021 and 2020, respectively. Adjustments related to the separation from Lilly represent unrecognized tax benefits assumed by Lilly and have no impact on income tax expense in the consolidated financial statements. Additions related to acquisition represent unrecognized tax benefits related to the KindredBio acquisition that were recorded on the opening balance sheet. We file income tax returns in the U.S. federal jurisdiction and various state, local and non-U.S. jurisdictions. Prior to our full separation from Lilly, certain of these income tax returns were filed on a consolidated or combined basis with Lilly. We recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense (benefit). We recognized income tax expense (benefit) related to interest and penalties as follows: 2021 2020 2019 Income tax benefit $ (1) $ (2) $ (11) At December 31, 2021 and 2020, our accruals for the payment of interest and penalties totaled $1 million. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 and certain executives. On September 3, 2020, the Court appointed a lead plaintiff, and on November 9, 2020, the lead plaintiff filed an amended complaint adding additional claims against Elanco, certain executives, and other individuals. 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. 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. Claims seeking actual damages, injunctive relief, and/or restitution for allegedly deceptive marketing have been made against Elanco Animal Health Inc. and Bayer HealthCare LLC, along with other Elanco and Bayer entities, arising out of the use of Seresto , a non-prescription flea and tick collar for cats and dogs. During 2021, putative 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. One plaintiff filed a petition before the Judicial Panel on Multidistrict Litigation (JPML). The hearing on the JPML petition took place on July 29, 2021, and a decision was reached to consolidate and transfer all pending lawsuits to the federal court in the Northern District of Illinois. We continue to receive information with respect to potential litigation costs, and we will be taking appropriate steps to defend these class action lawsuits. Further, a U.S. House of Representative subcommittee chair requested that Elanco produce certain documents and information related to the Seresto collar and further made a request to temporarily recall Seresto collars from the market. We are continuing to cooperate with the subcommittee and have produced information pursuant to the request. Seresto is a pesticide registered with the Environmental Protection Agency (EPA). A non-profit organization submitted a petition to the EPA requesting that the agency take action to cancel Seresto’s pesticide registration and suspend the registration pending cancellation. The EPA is considering this petition and asked for public comment. We submitted a comment to the EPA supporting 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, recall, or cancellation of the pesticide registration 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 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 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 December 31, 2021 and 2020, we had no material liabilities established related to litigation as there were no significant claims which were probable and estimable. We are not currently subject to a significant claim other than the lawsuits noted above. Regulatory Matters |
Geographic Information
Geographic Information | 12 Months Ended |
Dec. 31, 2021 | |
Segment Reporting [Abstract] | |
Geographic Information | Geographic Information We operate as a single operating segment engaged in the development, manufacturing, marketing and sales of animal health products worldwide for both pets and farm animals. Consistent with our operational structure, our President and Chief Executive Officer (CEO), as the chief operating decision maker, makes resource allocation and business process decisions globally across our consolidated business. Strategic decisions are managed globally with global functional leaders responsible for determining significant 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 AviPro, Baytril, Cydectin, Catosal, Denagard, Maxiban, Rumensin , Pulmotil , and other products for livestock and poultry, as well as Advantage, Advantix, Advocate (collectively referred to as the Advantage Family), Credelio, Duramune , Galliprant, Interceptor Plus, Seresto, Trifexis , and other products for pets. We have a single customer that accounted for 10%, 11% and 13% of revenue for the years ended December 31, 2021, 2020 and 2019, respectively. The product sales resulted in accounts receivable with this customer of $74 million and $87 million as of December 31, 2021 and 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: 2021 2020 2019 United States $ 2,124 $ 1,475 $ 1,525 International 2,641 1,798 1,546 Revenue $ 4,765 $ 3,273 $ 3,071 |
Retirement Benefits
Retirement Benefits | 12 Months Ended |
Dec. 31, 2021 | |
Retirement Benefits [Abstract] | |
Retirement Benefits | Retirement Benefits Pension Plans There are certain defined benefit pension plans that our employees participate in that are either dedicated to our employees or where the plan assets and liabilities that relate to our employees were legally required to transfer to Elanco at the time of our separation from Lilly. Our plans in Switzerland and Germany represent approximately 92% of our global benefit obligation. We use a measurement date of December 31 to develop the change in benefit obligation, change in plan assets, funded status and amounts recognized in the consolidated balance sheets at December 31 for our defined benefit pension plans, which were as follows: 2021 2020 Change in benefit obligation: Benefit obligation at beginning of year $ 560 $ 224 Service cost 18 14 Interest cost 2 2 Additions related to the Bayer Animal Health acquisition — 265 Actuarial loss (gain) (25) 18 Benefits paid (4) (8) Curtailment gain (19) — Settlements (38) (1) Foreign currency exchange rate changes and other adjustments (32) 46 Benefit obligation at end of year 462 560 Change in plan assets: Fair value of plan assets at beginning of year 234 149 Actual return on plan assets 13 5 Employer contribution 12 9 Additions related to the Bayer Animal Health acquisition — 61 Benefits paid (4) (8) Settlements (38) (1) Foreign currency exchange rate changes and other adjustments (10) 19 Fair value of plan assets at end of year 207 234 Funded status (255) (326) Unrecognized net actuarial loss 13 67 Unrecognized prior service cost (34) (73) Net amount recognized $ (276) $ (332) Amounts recognized in the consolidated balance sheet consisted of: Other current liabilities $ (1) $ (2) Accrued retirement benefits (254) (324) Accumulated other comprehensive income before income taxes (21) (6) Net amount recognized $ (276) $ (332) The unrecognized net actuarial loss and unrecognized prior service cost for these pension plans have not yet been recognized in net periodic pension costs and are included in accumulated other comprehensive income (loss) at December 31, 2021. Pension plan amendment In September 2019, we signed agreements under which certain defined pension benefits in Switzerland transferred from the previous Lilly pension fund as of December 31, 2019 to a new Elanco pension fund effective January 1, 2020. This resulted in a plan amendment during the period. The plan amendment decreased our pension benefit obligation by approximately $21 million, consisting primarily of a decrease in prior service costs of approximately $75 million, partially offset by a loss of approximately $54 million driven by changes in certain assumptions. The net impact to accumulated other comprehensive income was a gain of approximately $21 million, which will be amortized over the average remaining service period of employees expected to receive benefits under the plans. We do not expect any plan assets to be returned to us in 2022. The following represents our weighted-average assumptions related to these pension plans as of December 31: (Percentages) 2021 2020 2019 Discount rate for benefit obligation 1.1 % 0.6 % 0.6 % Discount rate for net benefit costs 0.6 0.6 1.4 Rate of compensation increase for benefit obligation 2.7 3.1 2.3 Rate of compensation increase for net benefit costs 3.1 2.3 2.2 Expected return on plan assets for net benefit costs 2.9 3.2 4.0 The assumptions above are used to estimate our pension benefit obligations at year-end, which are reviewed on at least an annual basis. We revise these assumptions based on a yearly evaluation of long-term trends and market conditions that may impact the cost of providing retirement benefits. The weighted-average discount rates for our defined benefit plans are set by benchmarking against investment grade corporate bonds where available, including, when there is sufficient data, a yield curve approach. For countries that lack a sufficient corporate bond market, a government bond index is used to establish the discount rate. Overall, the yield curves used to measure the benefit obligations as of December 31, 2021 resulted in higher discount rates as compared to the prior year. In evaluating the expected rate of return, we consider many factors, with a primary analysis of current and projected market conditions; asset returns and asset allocations; and the views of leading financial advisers and economists. We may also review our historical assumptions compared with actual results, as well as the assumptions and trend rates utilized by similar plans, where applicable. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows: 2022 2023 2024 2025 2026 2027-2031 Benefit payments $ 12 $ 13 $ 13 $ 14 $ 15 $ 84 Amounts relating to these pension plans with projected benefit obligations in excess of plan assets were as follows at December 31: 2021 2020 Projected benefit obligation $ 455 $ 545 Fair value of plan assets 200 220 Amounts relating to these defined benefit pension plans with accumulated benefit obligations in excess of plan assets were as follows at December 31: 2021 2020 Accumulated benefit obligation $ 441 $ 521 Fair value of plan assets 200 220 The total accumulated benefit obligation for these defined benefit pension plans was $446 million and $534 million at December 31, 2021 and 2020, respectively. Net pension expense (benefit) related to these plans included the following components: 2021 2020 2019 Service cost $ 18 $ 14 $ 9 Interest cost 2 2 2 Expected return on plan assets (6) (6) (4) Amortization of prior service cost (6) (8) (2) Amortization of net actuarial loss 2 3 1 Net curtailments and settlements (Note 6) (29) — — Net pension expense (benefit) $ (19) $ 5 $ 6 The components of net periodic benefit cost other than service cost and net curtailments and settlements are included in other (income) expense, net in the consolidated statements of operations. Net curtailments and settlements relate to the remeasurement of our pension benefit obligation as a result of workforce reductions in connection with our restructuring programs. See Note 6: Asset Impairment, Restructuring and Other Special Charges for further information. The following represents the amounts recognized for these plans in other comprehensive income (loss): 2021 2020 2019 Actuarial gain (loss) arising during period $ 29 $ (18) $ (46) Prior year service cost during the year — — 75 Amortization of prior service cost, including settlements, in net loss (36) (8) (2) Amortization of net actuarial loss, including curtailments, in net loss 22 3 1 Foreign currency exchange rate changes and other — 1 1 Total other comprehensive income (loss) during period $ 15 $ (22) $ 29 Benefit Plan Investments Our benefit plan investment policies are set with specific consideration of return and risk requirements in relationship to the respective liabilities. Our plan assets in our Switzerland and German pension plans represent approximately 88% of our plan assets for these pension plans. Given the long-term nature of our liabilities, these plans have the flexibility to manage an above-average degree of risk in the asset portfolios. At the investment-policy level, there are no specifically prohibited investments. However, within individual investment manager mandates, restrictions and limitations are contractually set to align with our investment objectives, ensure risk control and limit concentrations. We manage our portfolio to minimize concentration of risk by allocating funds within asset categories. In addition, within a category we use different managers with various management objectives to eliminate any significant concentration of risk. The investment strategy for the legacy Elanco plans is to diversify in five major categories with a designated percentage invested in each including 36% fixed-income securities, 32% equity securities, a share of 21% in real estate and 11% in other alternative investments. The acquired Bayer Animal Health plans are managed separately. The underlying investments are classified in the same categories with designated percentages in each of the following: 44% fixed-income securities, 28% equity securities and 28% in other alternative investments Each category is diversified and comprised of the following: • Fixed-income securities - Swiss bonds, global aggregates, global aggregate corporates, global government bonds, emerging market local currencies and emerging markets hard currencies. • Equity securities - Swiss equities, global equities, low volatility equities (to reduce risk), and emerging market equities. • Real estate - Swiss real estate and global real estate funds. • Other alternative investments - cash, cash equivalents and investments in senior secured loans. We determine the fair value of the investments based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities. Real estate is mostly comprised of public holdings. Real estate investments in registered investment companies that trade on an exchange are classified as Level 1 on the fair value hierarchy. Other real estate investments are marked to fair value using models that are supported by observable market-based data (Level 2). The fair values of these pension plan assets as of December 31, 2021 by asset category are as follows: Fair Value Measurements Using Asset Class Total Quoted Prices in Active Markets for Identical Assets Significant Observable Significant Unobservable Inputs Investments Valued at NAV (1) Public equity securities 63 60 — — 3 Fixed income: Developed markets 76 75 — — 1 Emerging markets 11 11 — — — Real estate 26 21 5 — — Other 31 26 5 — — Total $ 207 $ 193 $ 10 $ — $ 4 (1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2021. The fair values of these pension plan assets as of December 31, 2020 by asset category are as follows: Fair Value Measurements Using Asset Class Total Quoted Prices in Active Markets for Identical Assets Significant Observable Significant Unobservable Inputs Investments Valued at NAV (1) Public equity securities 69 67 — — 2 Fixed income: Developed markets 87 86 — — 1 Emerging markets 13 13 — — — Real estate 29 26 3 — — Other 36 31 5 — — Total $ 234 $ 223 $ 8 $ — $ 3 (1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2020. Contributions of $10 million to these pension plans are expected in 2022. Retiree Health Benefit Plan There are two retiree health benefit plans where the plan liabilities that relate to our employees were legally required to transfer to Elanco at the time of our separation from Lilly. The accrued retirement benefits for these plans were $4 million as of December 31, 2021 and 2020. Defined Contribution Plans Elanco has defined contribution savings plans that include certain employees worldwide. The purpose of these plans is generally to provide additional financial security during retirement by providing employees with an incentive to save. Our contributions to the plans are based on our employee contributions and the level of our match. Expenses related to our employees under the plans totaled $39 million, $35 million and $32 million for the years ended December 31, 2021, 2020, and 2019, respectively. Multiemployer Plans Through the acquisition of Bayer Animal Health, we acquired participation in certain multiemployer arrangements with Bayer-Pensionskasse VVaG, Leverkusen (Germany) (Bayer-Pensionskasse) and Rheinishche Pensionskasse VVaG, Leverkusen (Germany) (Rheinishche Pensionskasse). These plans provide for basic pension benefits to the majority of our employees in Germany. Up to a certain salary level, the benefit obligations are covered by our contributions and the contributions from employees to the plan. Contributions made to the multi-employer plan are expensed as incurred and were as follows: 2021 2020 Bayer-Pensionskasse $ 3 $ 1 Rheinische-Pensionskasse 1 1 Total $ 4 $ 2 The Company-specific plan information for the Bayer-Pensionskasse and Rheinische-Pensionskasse is not publicly available, and the plans are not subject to a collective-bargaining agreement. The plans provide fixed, monthly retirement payments on the basis of the credits earned by the participating employees. To the extent that the Bayer-Pensionskasse or Rheinische-Pensionskasse is underfunded, the future contributions to the plan may increase and may be used to fund retirement benefits for employees related to other employers. The Bayer-Pensionskasse financial statements for the years ended December 31, 2020 and 2019 indicated total assets of $11,476 million and $10,381 million, respectively; total actuarial present value of accumulated plan benefits of $10,950 million and $9,895 million, respectively; and total contributions for all participating employers of $134 million and $138 million, respectively. Our plan contributions in 2021 and 2020 did not exceed 5% of the total contributions. The Rheinische-Pensionskasse financial statements for the years ended December 31, 2020 and 2019 indicated total assets of $1,026 million and $825 million, respectively; total actuarial present value of accumulated plan benefits of $972 million and $782 million, respectively; and total contributions for all participating employers of $52 million and $48 million, respectively. Our plan contributions in 2021 and 2020 did not exceed 5% of the total contributions. Contributing to these types of plans creates risk that differs from providing benefits under our sponsored plans, in that if another participating employer ceases to contribute to a multiemployer plan, additional unfunded obligations may need to be funded over time by remaining participating employers. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 12 Months Ended |
Dec. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Earnings (Loss) Per Share We compute basic earnings (loss) per share by dividing net earnings (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 8: 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 earnings (loss) per share. Basic and diluted earnings (loss) per share are calculated as follows: 2021 2020 2019 Net earnings (loss) available to common shareholders $ (472) $ (560) $ 68 Determination of shares: Weighted average common shares outstanding 487.2 441.4 369.0 Assumed conversion of dilutive common stock equivalents (1) — — 1.3 Diluted weighted average shares outstanding 487.2 441.4 370.3 Earnings (Loss) per share (2) Basic $ (0.97) $ (1.27) $ 0.18 Diluted $ (0.97) $ (1.27) $ 0.18 (1) During the years ended December 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 years ended December 31, 2021, 2020, and 2019, approximately 1.8 million, 2.1 million, and 0.1 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, earnings (loss) per share may not recalculate precisely based on the amounts presented within this table. |
Related Party Agreements and Tr
Related Party Agreements and Transactions | 12 Months Ended |
Dec. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Agreements and Transactions | Related Party Agreements and Transactions 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 in 2021 and 2020 for these local country asset purchases was approximately $16 million and $633 million, respectively. All local country asset purchases have been completed as of December 31, 2021. Transactions and Agreements with Lilly Lilly is no longer considered a related party as of the completion of the exchange offer on March 11, 2019, whereby Lilly shareholders exchanged all or a portion of Lilly common stock for shares of Elanco common stock owned by Lilly, resulting in the full separation of Elanco and the disposal of Lilly's entire ownership and voting interest in Elanco. However, we had related party transactions with Lilly through the completion of the exchange offer. Activities while Lilly was a related party, as well as prior agreements with Lilly, are detailed below. TSA Historically, Lilly provided us significant shared services and resources related to corporate functions such as executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations, which we refer to collectively as the "Lilly Services." Under the terms of the TSA, we were able to use Lilly Services for a fixed term established on a service-by-service basis. We paid Lilly mutually agreed-upon fees for the Lilly Services provided under the TSA, which were based on Lilly's cost (including third-party costs) of providing the Lilly Services through March 31, 2021 and subject to a mark-up of 7% thereafter. All operations-focused TSAs that went into effect after our separation from Lilly were exited as planned during the first half of 2021. Separation Activities Subsequent to our initial public offering, there were transactions between us and Lilly related primarily to the completion of the local country asset purchases and finalization of assets and liabilities associated with the legal separation from Lilly, combined income tax returns and the impact of the tax matters agreement, historical Lilly retirement benefits, and centralized cash management. The most significant of these activities includes the finalization of the local country valuation of business and the resulting impact on deferred tax assets and the impact of combined tax returns. Other Activities We shared certain services and back-office functions with Lilly, which in certain instances resulted in Lilly paying costs for Elanco (e.g., utilities, local country operating costs, etc.) that were then passed through to Elanco for reimbursement. These amounts are included in cash flows from operating activities in the consolidated statements of cash flows. In addition, we operated through a single treasury settlement process and prior to the local country asset purchases (as described below) continued to transact through Lilly's processes in certain instances. As a result of these activities, there were certain amounts of financing that occurred between Lilly and Elanco during the years ended December 31, 2020 and 2019. These amounts are included in cash flows from financing activities in the consolidated statements of cash flows. Local Country Asset Purchases |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States (GAAP). In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for fair presentation of the results of operations for the periods shown. All intercompany balances and transactions have been eliminated. 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. We issued our financial statements by filing with the Securities and Exchange Commission and have evaluated subsequent events up to the time of the filing. |
Revenue | We recognize revenue primarily from product sales to customers. Revenue from sales of products is recognized at the point where the customer obtains control of the goods and we satisfy our performance obligation, which generally is at the time we ship the product to the customer. Payment terms differ by jurisdiction and customer, but payment terms in most of our major jurisdictions typically range from 30 to 120 days from date of shipment. Revenue for our product sales has not been adjusted for the effects of a financing component as we expect, at contract inception, that the period between when we transfer control of the product and when we receive payment will be one year or less. Any exceptions are either not material or we collect interest for payments made after the due date. For contract manufacturing organization (CMO) arrangements, we recognize revenue over time or at a point in time depending on our evaluation of when the customer obtains control of the promised goods or service. Revenue is recognized over time when we are creating or enhancing an asset that the customer controls. In this instance revenue is recognized as the asset is created or enhanced or our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed. Provisions for rebates and discounts, as well as returns are established in the same period the related sales are recognized. We generally ship product shortly after orders are received; therefore, we generally only have a few days of orders received but not yet shipped at the end of any reporting period. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are imposed on our sales of product and collected from a customer. Significant judgments must be made in determining the transaction price for sales of products related to anticipated rebates, discounts and returns. The following describe the most significant of these judgments: Sales Rebates and Discounts - Background and Uncertainties • Many of our products are sold to wholesale distributors. We initially invoice our customers contractual list prices. Contracts with direct and indirect customers may provide for various rebates and discounts that may differ in each contract. As a consequence, to determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we must estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Judgments are required in making these estimates. • The rebate and discount amounts are recorded as a deduction to arrive at our net product sales. We estimate these accruals using an expected value approach. • In determining the appropriate accrual amount, we consider our historical experience with similar incentives programs and current sales data and estimates of inventory levels at our channel distributors to evaluate the impact of such programs on revenue and continually monitor the impact of this experience and adjust as necessary. Although we accrue a liability for rebates related to these programs at the time the sale is recorded, the rebate related to that sale is typically paid up to six months after the rebate or incentive period expires. Because of this time lag, in any particular period rebate adjustments may incorporate revisions of accruals for several periods. Sales Returns - Background and Uncertainties • We estimate a reserve for future product returns related to product sales using an expected value approach. This estimate is based on several factors, including: local returns policies and practices; returns as a percentage of revenue; an understanding of the reasons for past returns; estimated shelf life by product; and estimate of the amount of time between shipment and return. Adjustments to the returns reserve have been and may in the future be required based on revised estimates to our assumptions, which would have an impact on our consolidated results of operations. We record the return amounts as a deduction to arrive at our net product sales. |
Research and Development Expenses and Acquired In-Process Research and Development | Research and development expenses include the following: • Research and development costs, which are expensed as incurred; • Milestone payment obligations incurred prior to regulatory approval of the product, which are accrued when the event requiring payment of the milestone occurs; and • Acquired in-process research and development (IPR&D) expense, which includes the initial costs of IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use. |
Foreign Currency Translation | Operations in our subsidiaries outside the U.S. are recorded in the functional currency of each subsidiary which is determined by a review of the environment where each subsidiary primarily generates and expends cash. The results of operations for our subsidiaries outside the U.S., where the U.S. dollar is not the functional currency, are translated from functional currencies into U.S. dollars using the weighted average currency rate for the period. Assets and liabilities are translated using the period end exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries are recorded in other comprehensive income (loss). |
Advertising Expenses | Advertising ExpensesCosts associated with advertising are generally expensed as incurred and are included in marketing, selling and administrative expenses in the consolidated statements of operations. The costs of TV, radio, and other electronic media and publications are expensed when the related advertising occurs. Advertising and promotion expenses totaled approximately $248 million in 2021. Expenses increased significantly in 2021 as compared to prior years due to the 2020 acquisition of Bayer Animal Health. |
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 brief descriptions of the accounting standards applicable to us that have 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. ASU 2021-10, Government Assistance (Topic 832) The amendments in this update require annual disclosure of transactions with governments that are accounted for by applying a grant or contribution model. The new pronouncement requires entities to provide information about the nature, terms and conditions associated with the transactions and the financial statement line items affected. We adopted this standard on January 1, 2022. The adoption of this guidance did not have a material impact on our consolidated financial statements. |
Income Tax | Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [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 brief descriptions of the accounting standards applicable to us that have 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. ASU 2021-10, Government Assistance (Topic 832) The amendments in this update require annual disclosure of transactions with governments that are accounted for by applying a grant or contribution model. The new pronouncement requires entities to provide information about the nature, terms and conditions associated with the transactions and the financial statement line items affected. We adopted this standard on January 1, 2022. The adoption of this guidance did not have a material impact on our consolidated financial statements. |
Revenue (Tables)
Revenue (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Summary of Activity in Sales Rebates and Discounts Liability | The following table summarizes the activity in our global sales rebates liability: Year Ended December 31, 2021 2020 Beginning balance $ 295 $ 211 Reduction of revenue 671 471 Payments (650) (461) Additions related to the Bayer Animal Health acquisition — 74 Ending balance $ 316 $ 295 |
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: 2021 2020 2019 Pet Health $ 2,351 $ 1,358 $ 1,136 Farm Animal 2,332 1,835 1,855 Contract Manufacturing (1) 82 80 80 Revenue $ 4,765 $ 3,273 $ 3,071 (1) Represents revenue from arrangements in which we manufacture products on behalf of a third party, including supply agreements associated with divestitures of products related to the acquisition of Bayer Animal Health. |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at August 27, 2021 Cash and cash equivalents $ 31 Other net working capital 9 Property and equipment 33 Intangible assets, primarily acquired in-process research and development (IPR&D) 334 Deferred income taxes, net (22) Total identifiable net assets 385 Goodwill 33 Settlement of liability related to previous license agreement 26 Total consideration transferred $ 444 The following table summarizes the 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 10 Inventories 487 Prepaid expenses and other current assets 60 Property and equipment 315 Intangible assets: Acquired in-process research and development 65 Marketed products 3,740 Assets held for sale 138 Accounts payable and accrued liabilities (237) Accrued retirement benefits (220) Other noncurrent assets and liabilities - net (878) Total identifiable net assets 3,649 Goodwill 3,129 Total consideration transferred $ 6,778 The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at July 18, 2019 Cash and cash equivalents $ 26 Inventories 10 Acquired in-process research and development 32 Marketed products (1) 37 Other intangible assets (1) 13 Other assets and liabilities - net 4 Total identifiable net assets 122 Goodwill (2) 31 Settlement of existing contingent consideration liabilities 85 Total consideration transferred $ 238 (1) These intangible assets, which are being amortized on a straight-line basis over their estimated useful lives, are expected to have a weighted average useful life of approximately 13 years. (2) The goodwill recognized from this acquisition is attributable primarily to expected synergies from combining the operations of Aratana with our legacy business. The majority of goodwill associated with this acquisition is not deductible for tax purposes. The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date: Estimated Fair Value at July 31, 2019 Cash and cash equivalents $ 1 Acquired in-process research and development 3 Marketed products (1) 59 Other intangible assets 1 Other assets and liabilities - net (9) Total identifiable net assets 55 Goodwill (2) 10 Total consideration transferred $ 65 (1) These intangible assets, which are being amortized on a straight-line basis over their estimated useful lives, are expected to have a weighted average useful life of 10 years. (2) The goodwill recognized from this acquisition is attributable primarily to expected synergies from combining the operations of Prevtec with our legacy business and future unidentified projects and products. The goodwill associated with this acquisition is not deductible for tax purposes. |
Purchase Consideration | Total consideration transferred to Bayer and its subsidiaries for the acquisition is summarized as follows: Cash consideration (1) $ 5,054 Fair value of Elanco common stock (2) 1,724 Fair value of total consideration transferred $ 6,778 (1) Includes initial cash consideration of $5,170 million less working capital and tax adjustments of $116 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). |
Pro Forma Information | The following table presents the estimated unaudited pro forma combined results of Elanco, Bayer Animal Health and Aratana for the years ended December 31, 2020 and 2019 as if the acquisitions had occurred on January 1, 2019: Year Ended December 31, 2020 2019 Revenue $ 4,441 $ 4,691 Loss before income taxes (675) (160) |
Divestitures Activities | Assets and liabilities considered held for sale in connection with the above divestitures were included in the respective line items on the consolidated balance sheet as follows: December 31, 2021 December 31, 2020 Inventories $ 31 $ 2 Other intangibles, net — 4 Property and equipment, net 50 — Deferred tax asset — 1 Total assets held for sale $ 81 $ 7 |
Asset Impairment, Restructuri_2
Asset Impairment, Restructuring and Other Special Charges (Tables) | 12 Months Ended |
Dec. 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 for the years ended December 31 are as follows: 2021 2020 2019 Restructuring charges (credits): Severance and other costs (1) $ 110 $ 155 $ 8 Facility exit costs (credits) (1) — (3) — Acquisition related charges: Transaction and integration costs (2) 162 424 145 Non-cash and other items: Asset impairment (3) 66 17 16 Asset write-down (4) 278 19 17 Gain on sale of fixed assets — (4) — Net periodic benefit cost (credits) (Note 18) (29) — — Settlements and other (5) 41 15 — Total expense $ 628 $ 623 $ 186 (1) 2021 charges mainly represent employee termination costs for restructuring programs announced and initiated in January 2021 and November 2021. These costs were partially offset by the reversal of severance accruals associated with the January 2021 and September 2020 programs during the period. See below for further details. 2020 restructuring charges mainly represent employee termination costs for cost-reduction and productivity initiatives related to a restructuring program initiated following the acquisition of Bayer Animal Health, partially offset by a favorable true-up of a lease termination related to a previous restructuring program. 2019 charges primarily relate to employee termination costs from exiting R&D operations in Prince Edward Island, Canada, ceasing certain manufacturing operations in Wusi, China, and streamlining operations in Speke, England. (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 acquisitions of KindredBio and Bayer Animal Health (e.g., expenditures for consulting, system and process integration, and product transfers), as well as independent company stand-up costs related to the implementation of new systems, programs, and processes. (3) Represents the impact of adjustments to fair value of property and equipment, IPR&D assets, and marketed products that were subject to product rationalization. See Note 11: Goodwill and Intangibles for further information. (4) Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions. 2021 also includes adjustments recorded to write down the Shawnee and Speke assets classified as held for sale as of June 30, 2021 to an amount equal to estimated fair value less costs to sell. See Note 5: Acquisitions and Divestitures for further discussion. (5) 2021 includes a charge associated with the settlement of a liability for future royalty and milestone payments triggered in connection with our acquisition of KindredBio as discussed further in Note 5: Acquisitions and Divestitures, accounting and advisory fees related to the sale of our manufacturing site in Shawnee, and $10 million of litigation settlements, partially offset by a gain recorded on the divestiture of an early-stage IPR&D asset acquired as part of the Bayer Animal Health acquisition. 2020 charges relate to a non-recurring litigation settlement for a matter that originated prior to our separation from Lilly and a one-time expense associated with our agreement to build a new corporate headquarters. |
Summary of Activity in Reserves | The following table summarizes the activity in our reserves established in connection with restructuring activities: Exit costs Severance Total Balance at December 31, 2019 $ 5 $ 16 $ 21 Charges 1 156 157 Reserve adjustment (3) (1) (4) Cash paid (3) (41) (44) Balance at December 31, 2020 — 130 130 Charges — 126 126 Reserve adjustment — (16) (16) Cash paid — (114) (114) Balance at December 31, 2021 $ — $ 126 $ 126 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories at December 31 consisted of the following: 2021 2020 Finished products $ 598 $ 772 Work in process 565 625 Raw materials and supplies 256 210 Total 1,419 1,607 Decrease to LIFO cost (46) (29) Inventories $ 1,373 $ 1,578 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 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 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) | 12 Months Ended |
Dec. 31, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | Long-term debt as of December 31 consisted of the following: 2021 2020 Incremental Term Facility $ 499 $ — Term Loan B 4,118 4,164 Revolving Credit Facility 250 — 3.912% Senior Notes due 2021 — 500 4.272% Senior Notes due 2023 750 750 4.900% Senior Notes due 2028 750 750 TEU Amortizing Notes 34 60 Other obligations — 1 Unamortized debt issuance costs (82) (98) 6,319 6,127 Less current portion of long-term debt 294 555 Total long-term debt $ 6,025 $ 5,572 |
Schedule of Maturities of Long-term Debt | Maturities on long-term debt consisted of the following: As of and for the years ending December 31 2022 $ 308 2023 805 2024 48 2025 135 2026 48 2027 and thereafter 5,057 Total obligations and commitments 6,401 Unamortized debt issuance costs (82) Total debt $ 6,319 |
Cash Payments of Interest Expense and Income Taxes | Cash payments for interest during the years ended December 31 were as follows: 2021 2020 2019 Interest paid $ 221 $ 131 $ 104 Cash payments of income taxes were as follows: 2021 2020 2019 Cash payments of income taxes $ 151 $ 97 $ 43 |
Financial Instruments and Fai_2
Financial Instruments and Fair Value (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Summary of Fair Value Information | The following table summarizes the fair value information at December 31, 2021 and 2020 for foreign exchange contract assets (liabilities), investments, 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 Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs Significant Unobservable Inputs Fair Value December 31, 2021 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 19 $ — $ 19 $ — $ 19 Other noncurrent assets - investments 13 13 — — 13 Other noncurrent assets - forward-starting interest rate contracts designated as cash flow hedges 8 — 8 — 8 Other current liabilities - foreign exchange contracts not designated as hedging instruments (20) — (20) — (20) Long-term debt, including current portion (6,401) — (6,518) — (6,518) December 31, 2020 Prepaid expenses and other - foreign exchange contracts not designated as hedging instruments $ 36 $ — $ 36 $ — $ 36 Other noncurrent assets - investments 9 9 — — 9 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, including current portion (6,225) — (6,420) — (6,420) |
Net Gain/Loss on Derivative Instruments | The amount of net losses on derivative instruments not designated as hedging instruments, recorded in other (income) expense, net were as follows: For the Year Ended December 31, 2021 2020 2019 Foreign exchange forward contracts (1) $ (35) $ (4) $ (5) (1) These amounts were substantially offset in other (income) expense, net by the effect of changing exchange rates on the underlying foreign currency exposures. Gains on the net investment hedge, recognized within interest expense, net of capitalized interest, were as follows: For the Year Ended December 31, 2021 2020 2019 Cross-currency interest rate swap contracts $ — $ 6 $ 25 For the Year Ended December 31, 2021 2020 2019 Cross-currency interest rate swap contracts $ — $ 24 $ 8 The amounts of net gains (losses) on cash flow hedges, recorded, net of tax, in other comprehensive income (loss), were as follows: For the Year Ended December 31, 2021 2020 2019 Forward-starting interest rate swaps, net of tax benefit of $0, $15, and $0, respectively $ 86 $ (61) $ — |
Goodwill and Intangibles (Table
Goodwill and Intangibles (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table summarizes the changes in the carrying amount of goodwill during the period: Balance as of December 31, 2020 $ 6,225 Bayer Animal Health measurement period adjustments 207 Additions related to the KindredBio acquisition 33 Goodwill associated with Shawnee, Speke and other divestitures (64) Foreign currency translation adjustments (229) Balance as of December 31, 2021 $ 6,172 |
Components of Finite-Lived Intangible Assets | The components of intangible assets other than goodwill as of December 31 were as follows: 2021 2020 Description Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Finite-lived intangible assets: Marketed products $ 6,828 $ (1,837) $ 4,991 $ 7,394 $ (1,342) $ 6,052 Software 285 (77) 208 346 (108) 238 Other 47 (28) 19 62 (40) 22 Total finite-lived intangible assets 7,160 (1,942) 5,218 7,802 (1,490) 6,312 Indefinite-lived intangible assets: Acquired in-process research and development 369 — 369 75 — 75 Other intangibles $ 7,529 $ (1,942) $ 5,587 $ 7,877 $ (1,490) $ 6,387 |
Components of Indefinite-Lived Intangible Assets | The components of intangible assets other than goodwill as of December 31 were as follows: 2021 2020 Description Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Finite-lived intangible assets: Marketed products $ 6,828 $ (1,837) $ 4,991 $ 7,394 $ (1,342) $ 6,052 Software 285 (77) 208 346 (108) 238 Other 47 (28) 19 62 (40) 22 Total finite-lived intangible assets 7,160 (1,942) 5,218 7,802 (1,490) 6,312 Indefinite-lived intangible assets: Acquired in-process research and development 369 — 369 75 — 75 Other intangibles $ 7,529 $ (1,942) $ 5,587 $ 7,877 $ (1,490) $ 6,387 |
Schedule of Impaired Intangible Assets | Impairment charges related to our other intangibles were as follows: 2021 2020 2019 Asset impairment, restructuring and other special charges $ 66 $ 17 $ 11 |
Schedule of Weighted-Average Amortization Periods For Finite-Lived Intangible Assets | As of December 31, 2021, the remaining weighted-average amortization periods for finite-lived intangible assets are as follows: Weighted Average Life (Years) Marketed products 10 Software 6 Other 7 |
Estimated Amortization Expense | The estimated amortization expense for each of the next five years associated with our finite-lived intangible assets as of December 31, 2021 is as follows: 2022 2023 2024 2025 2026 Estimated amortization expense $ 559 $ 559 $ 555 $ 537 $ 534 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment and Depreciation Expense | At December 31, property and equipment consisted of the following: 2021 2020 Land $ 42 $ 46 Buildings 549 756 Equipment 1,354 1,360 Construction in progress 157 191 Finance lease asset — 1 2,102 2,354 Less accumulated depreciation (1,041) (1,038) Property and equipment, net $ 1,061 $ 1,316 The following provides property and equipment, less accumulated depreciation by geographic area: 2021 2020 United States $ 557 $ 673 Germany 211 221 United Kingdom 65 194 France 54 59 Other foreign countries 174 169 Property and equipment, net $ 1,061 $ 1,316 Depreciation expense related to property and equipment was as follows: 2021 2020 2019 Depreciation expense $ 108 $ 122 $ 94 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Leases [Abstract] | |
Impact of Operating Leases to Condensed Consolidated Financial Statements | The impact of operating leases to the consolidated financial statements for the years ended December 31, was as follows: 2021 2020 2019 Lease cost Operating lease cost $ 43 $ 38 $ 26 Short-term lease cost 1 1 1 Variable lease cost 4 3 2 Total lease cost $ 48 $ 42 $ 29 Other information Operating cash outflows from operating leases $ 40 $ 36 $ 24 Right-of-use assets obtained in exchange for new operating lease liabilities (1) 36 138 20 Weighted-average remaining lease term - operating leases 7 years 8 years 5 years Weighted-average discount rate - operating leases 3.8 % 3.8 % 3.6 % (1) 2020 includes approximately $16 million of right-of-use assets acquired in the Bayer Animal Health acquisition. |
Supplemental Balance Sheet Information Related to Operating Leases | Supplemental balance sheet information related to our operating leases is as follows: Asset/Liability Balance Sheet Classification December 31, 2021 December 31, 2020 Right-of-use assets Other noncurrent assets $ 161 $ 187 Current operating lease liabilities Other current liabilities 34 37 Non-current operating lease liabilities Other noncurrent liabilities 127 151 |
Annual Minimum Lease Payments of Operating Lease Liabilities | As of December 31, 2021, the annual minimum lease payments of our operating lease liabilities were as follows: 2022 $ 41 2023 32 2024 24 2025 19 2026 15 2027 and thereafter 59 Total lease payments 190 Less imputed interest (29) Total $ 161 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock-Based Compensation Expenses | Components of stock-based compensation expense and related tax benefit for the years ended December 31 were as follows: 2021 2020 2019 Total stock-based compensation expense (1) $ 66 $ 48 $ 41 Related tax benefit (11) (8) (10) |
Schedule of Restricted Stock Unit Activity | RSUs granted to employees for the years ended December 31 were as follows: (Units in millions) 2021 2020 2019 Granted units 1.1 1.3 2.9 Weighted-average fair value $ 33.57 $ 27.44 $ 31.22 Changes in the nonvested portion of RSUs for 2021 are summarized below: (Shares in millions) Shares Weighted-Average Grant Date Fair Value Nonvested units at January 1, 2021 2.4 $ 28.90 Granted 1.1 33.57 Vested (0.9) 29.84 Forfeited (0.4) 30.58 Nonvested units at December 31, 2021 2.2 30.87 |
Schedule of Performance Awards Activity | PA activity during the year ended December 31, 2021 is summarized below: (Shares in millions) Shares Weighted-Average Grant Date Fair Value Nonvested awards at January 1, 2021 1.2 $ 26.63 Granted 0.6 32.70 Vested (0.7) 30.96 Forfeited (0.1) 29.66 Nonvested awards at December 31, 2021 1.0 30.53 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Composition of Income (Loss) Before Income Tax Expense (Benefit) | Following is the composition of income (loss) before income tax expense (benefit): 2021 2020 2019 Federal $ (341) $ (495) $ 55 Foreign (226) (177) 23 Income (loss) before income taxes $ (567) $ (672) $ 78 |
Composition of Income Tax Expense (Benefit) | Following is the composition of income tax expense (benefit): 2021 2020 2019 Current: Federal $ — $ (36) $ (5) Foreign 58 56 13 State 1 (7) 2 Total current tax expense 59 13 10 Deferred: Federal (9) (8) 15 Foreign (144) (125) (8) State (1) 8 (7) Total deferred tax expense (benefit) (154) (125) — Income tax expense (benefit) $ (95) $ (112) $ 10 |
Significant Components of Deferred Tax Assets and Liabilities | Significant components of our deferred tax assets and liabilities as of December 31 are as follows: 2021 2020 Deferred tax assets: Compensation and benefits $ 58 $ 69 Accruals and reserves 57 89 Tax credit carryovers 53 34 Tax loss carryovers 291 168 Inventories 18 18 Restructuring and other reserves 31 33 Operating lease liabilities 42 48 Other 71 25 Total gross deferred tax assets 621 484 Valuation allowances (162) (94) Total deferred tax assets 459 390 Deferred tax liabilities: Right-of-use assets (42) (48) Intangibles (976) (1,044) Property and equipment (80) (115) Other — — Total deferred tax liabilities (1,098) (1,207) Deferred tax liabilities - net $ (639) $ (817) |
Movements in the Valuation Allowance | The movements in the valuation allowance are as follows: 2021 2020 January 1 $ (94) $ (32) Increase (74) (75) Release 6 13 December 31 $ (162) $ (94) |
Cash Payments of Interest Expense and Income Taxes | Cash payments for interest during the years ended December 31 were as follows: 2021 2020 2019 Interest paid $ 221 $ 131 $ 104 Cash payments of income taxes were as follows: 2021 2020 2019 Cash payments of income taxes $ 151 $ 97 $ 43 |
Reconciliation of Income Tax Expense (Benefit) | The following is a reconciliation of the income tax expense (benefit) applying the U.S. federal statutory rate to income before income taxes to reported income tax expense: 2021 2020 2019 Income tax expense (benefit) at the U.S. federal statutory tax rate $ (119) $ (141) $ 16 Add (deduct): Taxation of international operations (16) (15) 21 State taxes (8) (10) 3 Income tax credits (14) (24) (10) Non-deductible employee compensation 4 1 4 Other permanent adjustments (2) 18 (4) Change in uncertain tax positions (2) (7) (15) Change in valuation allowance 62 66 (5) Income tax expense (benefit) $ (95) $ (112) $ 10 |
Reconciliation of Gross Unrecognized Tax Benefits | A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: 2021 2020 2019 Beginning balance at January 1 $ 3 $ 8 $ 15 Adjustments related to the separation from Lilly — — (2) Adjusted beginning balance at January 1 3 8 13 Additions based on tax positions related to the current year — — 1 Changes for tax positions of prior years (1) (2) (1) Additions related to acquisition 4 — — Settlements — (3) (5) Ending balance at December 31 $ 6 $ 3 $ 8 |
Income Tax Expense (Benefit) Related to Interest and Penalties | We recognized income tax expense (benefit) related to interest and penalties as follows: 2021 2020 2019 Income tax benefit $ (1) $ (2) $ (11) |
Geographic Information (Tables)
Geographic Information (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Segment Reporting [Abstract] | |
Revenue by Selected Geographic Area Information | Selected geographic area information was as follows: 2021 2020 2019 United States $ 2,124 $ 1,475 $ 1,525 International 2,641 1,798 1,546 Revenue $ 4,765 $ 3,273 $ 3,071 |
Retirement Benefits (Tables)
Retirement Benefits (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Retirement Benefits [Abstract] | |
Change in Benefit Obligation, Change in Plan Assets, and Funded Status | We use a measurement date of December 31 to develop the change in benefit obligation, change in plan assets, funded status and amounts recognized in the consolidated balance sheets at December 31 for our defined benefit pension plans, which were as follows: 2021 2020 Change in benefit obligation: Benefit obligation at beginning of year $ 560 $ 224 Service cost 18 14 Interest cost 2 2 Additions related to the Bayer Animal Health acquisition — 265 Actuarial loss (gain) (25) 18 Benefits paid (4) (8) Curtailment gain (19) — Settlements (38) (1) Foreign currency exchange rate changes and other adjustments (32) 46 Benefit obligation at end of year 462 560 Change in plan assets: Fair value of plan assets at beginning of year 234 149 Actual return on plan assets 13 5 Employer contribution 12 9 Additions related to the Bayer Animal Health acquisition — 61 Benefits paid (4) (8) Settlements (38) (1) Foreign currency exchange rate changes and other adjustments (10) 19 Fair value of plan assets at end of year 207 234 Funded status (255) (326) Unrecognized net actuarial loss 13 67 Unrecognized prior service cost (34) (73) Net amount recognized $ (276) $ (332) |
Amounts Recognized in Combined Balance Sheet | Amounts recognized in the consolidated balance sheet consisted of: Other current liabilities $ (1) $ (2) Accrued retirement benefits (254) (324) Accumulated other comprehensive income before income taxes (21) (6) Net amount recognized $ (276) $ (332) |
Weighted-Average Assumptions Related to Pension Plans | The following represents our weighted-average assumptions related to these pension plans as of December 31: (Percentages) 2021 2020 2019 Discount rate for benefit obligation 1.1 % 0.6 % 0.6 % Discount rate for net benefit costs 0.6 0.6 1.4 Rate of compensation increase for benefit obligation 2.7 3.1 2.3 Rate of compensation increase for net benefit costs 3.1 2.3 2.2 Expected return on plan assets for net benefit costs 2.9 3.2 4.0 |
Schedule of Expected Benefit Payments | The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows: 2022 2023 2024 2025 2026 2027-2031 Benefit payments $ 12 $ 13 $ 13 $ 14 $ 15 $ 84 |
Projected Benefit Obligations in Excess of Plan Assets | Amounts relating to these pension plans with projected benefit obligations in excess of plan assets were as follows at December 31: 2021 2020 Projected benefit obligation $ 455 $ 545 Fair value of plan assets 200 220 |
Accumulated Benefit Obligations in Excess of Plan Assets | Amounts relating to these defined benefit pension plans with accumulated benefit obligations in excess of plan assets were as follows at December 31: 2021 2020 Accumulated benefit obligation $ 441 $ 521 Fair value of plan assets 200 220 |
Net Pension Expense (Benefit) | Net pension expense (benefit) related to these plans included the following components: 2021 2020 2019 Service cost $ 18 $ 14 $ 9 Interest cost 2 2 2 Expected return on plan assets (6) (6) (4) Amortization of prior service cost (6) (8) (2) Amortization of net actuarial loss 2 3 1 Net curtailments and settlements (Note 6) (29) — — Net pension expense (benefit) $ (19) $ 5 $ 6 |
Amounts Recognized in Other Comprehensive Income (Loss) | The following represents the amounts recognized for these plans in other comprehensive income (loss): 2021 2020 2019 Actuarial gain (loss) arising during period $ 29 $ (18) $ (46) Prior year service cost during the year — — 75 Amortization of prior service cost, including settlements, in net loss (36) (8) (2) Amortization of net actuarial loss, including curtailments, in net loss 22 3 1 Foreign currency exchange rate changes and other — 1 1 Total other comprehensive income (loss) during period $ 15 $ (22) $ 29 |
Fair Value of Pension Plan Assets | The fair values of these pension plan assets as of December 31, 2021 by asset category are as follows: Fair Value Measurements Using Asset Class Total Quoted Prices in Active Markets for Identical Assets Significant Observable Significant Unobservable Inputs Investments Valued at NAV (1) Public equity securities 63 60 — — 3 Fixed income: Developed markets 76 75 — — 1 Emerging markets 11 11 — — — Real estate 26 21 5 — — Other 31 26 5 — — Total $ 207 $ 193 $ 10 $ — $ 4 (1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair values of these pension plan assets as of December 31, 2020 by asset category are as follows: Fair Value Measurements Using Asset Class Total Quoted Prices in Active Markets for Identical Assets Significant Observable Significant Unobservable Inputs Investments Valued at NAV (1) Public equity securities 69 67 — — 2 Fixed income: Developed markets 87 86 — — 1 Emerging markets 13 13 — — — Real estate 29 26 3 — — Other 36 31 5 — — Total $ 234 $ 223 $ 8 $ — $ 3 (1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. |
Multiemployer Plan | Contributions made to the multi-employer plan are expensed as incurred and were as follows: 2021 2020 Bayer-Pensionskasse $ 3 $ 1 Rheinische-Pensionskasse 1 1 Total $ 4 $ 2 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings (Loss) Per Share, Basic and Diluted | Basic and diluted earnings (loss) per share are calculated as follows: 2021 2020 2019 Net earnings (loss) available to common shareholders $ (472) $ (560) $ 68 Determination of shares: Weighted average common shares outstanding 487.2 441.4 369.0 Assumed conversion of dilutive common stock equivalents (1) — — 1.3 Diluted weighted average shares outstanding 487.2 441.4 370.3 Earnings (Loss) per share (2) Basic $ (0.97) $ (1.27) $ 0.18 Diluted $ (0.97) $ (1.27) $ 0.18 (1) During the years ended December 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 years ended December 31, 2021, 2020, and 2019, approximately 1.8 million, 2.1 million, and 0.1 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, earnings (loss) per share may not recalculate precisely based on the amounts presented within this table. |
Background (Details)
Background (Details) | Dec. 31, 2021country |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of brands in diverse portfolio (approximately) | 200 |
Number of countries in which entity operates (more than) | 90 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2021USD ($) | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Rebate period | 6 months |
Advertising and promotion expenses | $ 248 |
Minimum | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Payment term | 30 days |
Maximum | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Payment term | 120 days |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - revenueStream | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | |||
Number of revenue categories | 5 | ||
Geographic Concentration Risk | Sales rebates and discounts, liability | United States | |||
Concentration Risk [Line Items] | |||
Concentration risk | 75.00% | 73.00% | |
Product Return Concentration Risk | Net revenue | Global Customers | |||
Concentration Risk [Line Items] | |||
Concentration risk | 1.00% | 1.00% | 1.00% |
Revenue - Summary of Activity i
Revenue - Summary of Activity in Sales Rebates and Discounts Liability (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Change In Contract With Customer, Liability [Roll Forward] | ||
Beginning balance | $ 295 | $ 211 |
Reduction of revenue | 671 | 471 |
Payments | (650) | (461) |
Additions related to the Bayer Animal Health acquisition | 0 | 74 |
Ending balance | $ 316 | $ 295 |
Revenue - Disaggregation of Rev
Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Disaggregation of Revenue [Line Items] | |||
Revenue | $ 4,765 | $ 3,273 | $ 3,071 |
Pet Health | |||
Disaggregation of Revenue [Line Items] | |||
Revenue | 2,351 | 1,358 | 1,136 |
Farm Animal | |||
Disaggregation of Revenue [Line Items] | |||
Revenue | 2,332 | 1,835 | 1,855 |
Contract Manufacturing | |||
Disaggregation of Revenue [Line Items] | |||
Revenue | $ 82 | $ 80 | $ 80 |
Acquisitions and Divestitures -
Acquisitions and Divestitures - Narrative (Details) $ / shares in Units, shares in Millions, $ in Millions | Aug. 27, 2021USD ($)$ / shares | Aug. 01, 2021USD ($) | Aug. 01, 2020USD ($)$ / sharesshares | Jul. 31, 2019USD ($) | Jul. 18, 2019USD ($)$ / sharesshares | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($)shares | Jun. 30, 2021employee | May 05, 2021USD ($) |
Business Acquisition [Line Items] | ||||||||||
Bayer Animal Health measurement period adjustments | $ 207 | |||||||||
Revenue | 4,765 | $ 3,273 | $ 3,071 | |||||||
Divestiture proceeds | 0 | 435 | 0 | |||||||
Gain (loss) on disposition of business | (1) | 170 | 0 | |||||||
Disposal group | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Number of employees transferred | employee | 600 | |||||||||
Asset write-down | 273 | |||||||||
Divestiture proceeds | 435 | |||||||||
Gain (loss) on disposition of business | 156 | |||||||||
Divestiture transaction costs | 13 | |||||||||
Disposal group | Rights To The Profender And Drontal | Inventories | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Assets held for sale | $ 5 | |||||||||
Disposal group | Rights To The Profender And Drontal | Marketed products | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Assets held for sale | $ 133 | |||||||||
Disposal group | Shawnee | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Divestiture proceeds | $ 51 | |||||||||
Acquired in-process research and development | Disposal group | Rights To The Profender And Drontal | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Gain (loss) on disposition of business | 7 | |||||||||
KindredBio | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Common stock price (in dollars per share) | $ / shares | $ 9.25 | |||||||||
Aggregate cash purchase consideration | $ 444 | |||||||||
Settlement of liability related to previous license agreement | $ 26 | |||||||||
Transaction costs | 6 | |||||||||
Bayer Animal Health measurement period adjustments | 3 | |||||||||
KindredBio | Acquired in-process research and development | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | $ 334 | |||||||||
Bayer Animal Business | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Common stock price (in dollars per share) | $ / shares | $ 23.64 | |||||||||
Aggregate cash purchase consideration | $ 5,054 | |||||||||
Transaction costs | 3 | 267 | $ 43 | |||||||
Intangible asset adjustment | 210 | |||||||||
Property, plant, and equipment, adjustments | 32 | |||||||||
Working capital and other adjustment | 26 | |||||||||
Bayer Animal Health measurement period adjustments | 207 | |||||||||
Revenue | $ 1,903 | 592 | ||||||||
Inventories | 487 | |||||||||
Business combination, inventories, step-up fair value adjustment | 152 | |||||||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | 65 | |||||||||
Marketed products | $ 3,740 | |||||||||
Average useful life | 10 years | |||||||||
Assets held for sale | $ 138 | |||||||||
Number of shares issued to previous shareholders upon closing (in shares) | shares | 73 | |||||||||
Value of shares issued as consideration | $ 1,724 | |||||||||
Consideration paid for acquisition | 6,778 | |||||||||
Bayer Animal Business | Marketed products | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Marketed products | 3,740 | |||||||||
Bayer Animal Business | Acquired in-process research and development | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | 65 | |||||||||
Bayer Animal Business | Finished Products | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Inventories | 311 | |||||||||
Bayer Animal Business | in Process | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Inventories | 81 | |||||||||
Bayer Animal Business | Raw Materials | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Inventories | $ 95 | |||||||||
Aratana | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Inventories | $ 10 | |||||||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | $ 32 | |||||||||
Average useful life | 13 years | |||||||||
Number of shares issued to previous shareholders upon closing (in shares) | shares | 7 | |||||||||
Value of shares issued as consideration | $ 238 | |||||||||
Contingent value rights included in purchase consideration | $ 12 | 12 | ||||||||
Contingent payment (usd per share) | $ / shares | $ 0.25 | |||||||||
Measurement period adjustment | 20 | |||||||||
Accelerated vesting of equity awards (in shares) | shares | 0.1 | |||||||||
Accelerated stock based compensation expense | $ 4 | |||||||||
Aratana | Marketed products | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Marketed products | $ 37 | |||||||||
Galliprant | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Contingent consideration liability | $ 85 | |||||||||
Loss upon settlement of contingent consideration liability | $ 8 | |||||||||
Prevtec | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | $ 3 | |||||||||
Marketed products | $ 59 | |||||||||
Average useful life | 10 years | |||||||||
Contingent value rights included in purchase consideration | $ 16 | 16 | ||||||||
Contingent consideration liability | 5 | |||||||||
Loss upon settlement of contingent consideration liability | $ 4 | |||||||||
Consideration paid for acquisition | 60 | |||||||||
Settlement of accounts receivable | $ 1 |
Acquisitions and Divestitures_2
Acquisitions and Divestitures - Summary of Amounts Recognized for Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions | Aug. 01, 2020 | Jul. 31, 2019 | Jul. 18, 2019 | Dec. 31, 2021 | Aug. 27, 2021 | Dec. 31, 2020 |
Business Acquisition [Line Items] | ||||||
Goodwill | $ 6,172 | $ 6,225 | ||||
KindredBio | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | $ 31 | |||||
Other net working capital | 9 | |||||
Property and equipment | 33 | |||||
Deferred income taxes, net | (22) | |||||
Total identifiable net assets | 385 | |||||
Goodwill | 33 | |||||
Settlement of liability related to previous license agreement | 26 | |||||
Total consideration transferred | 444 | |||||
KindredBio | Acquired in-process research and development | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | $ 334 | |||||
Bayer Animal Business | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | $ 169 | |||||
Property and equipment | 315 | |||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | 65 | |||||
Accounts receivable | 10 | |||||
Inventories | 487 | |||||
Prepaid expenses and other current assets | 60 | |||||
Marketed products | 3,740 | |||||
Assets held for sale | 138 | |||||
Accounts payable and accrued liabilities | (237) | |||||
Accrued retirement benefits | (220) | |||||
Other noncurrent assets and liabilities - net | (878) | |||||
Total identifiable net assets | 3,649 | |||||
Goodwill | 3,129 | |||||
Total consideration transferred | $ 6,778 | |||||
Average useful life | 10 years | |||||
Bayer Animal Business | Marketed products | ||||||
Business Acquisition [Line Items] | ||||||
Marketed products | $ 3,740 | |||||
Bayer Animal Business | Acquired in-process research and development | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | $ 65 | |||||
Aratana | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | $ 26 | |||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | 32 | |||||
Inventories | 10 | |||||
Other assets and liabilities - net | 4 | |||||
Total identifiable net assets | 122 | |||||
Goodwill | 31 | |||||
Settlement of liability related to previous license agreement | 85 | |||||
Total consideration transferred | $ 238 | |||||
Average useful life | 13 years | |||||
Aratana | Marketed products | ||||||
Business Acquisition [Line Items] | ||||||
Marketed products | $ 37 | |||||
Aratana | Other | ||||||
Business Acquisition [Line Items] | ||||||
Marketed products | $ 13 | |||||
Prevtec | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | $ 1 | |||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | 3 | |||||
Marketed products | 59 | |||||
Other intangible assets | 1 | |||||
Other assets and liabilities - net | (9) | |||||
Total identifiable net assets | 55 | |||||
Goodwill | 10 | |||||
Total consideration transferred | $ 65 | |||||
Average useful life | 10 years |
Acquisitions and Divestitures_3
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 | 116 |
Bayer Animal Business | |
Business Acquisition [Line Items] | |
Cash consideration | 5,054 |
Fair value of Elanco common stock | 1,724 |
Fair value of total consideration transferred | $ 6,778 |
Number of 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_4
Acquisitions and Divestitures -Pro forma financial information (Details) - Bayer Animal Business - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Business Acquisition [Line Items] | ||
Revenue | $ 4,441 | $ 4,691 |
Loss before income taxes | $ (675) | $ (160) |
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 - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Inventories | $ 31 | $ 2 |
Other intangibles, net | 0 | 4 |
Property and equipment, net | 50 | 0 |
Deferred tax asset | 0 | 1 |
Total assets held for sale | $ 81 | $ 7 |
Asset Impairment, Restructuri_3
Asset Impairment, Restructuring and Other Special Charges - Additional Information (Details) $ in Millions | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2021USD ($) | Dec. 31, 2021USD ($)positioncountryrestructuringProgram | Dec. 31, 2020USD ($) | |
Restructuring Cost and Reserve [Line Items] | |||
Number of restructuring programs announced | restructuringProgram | 2 | ||
Restructuring reserve, accrual adjustment | $ 16 | $ 4 | |
Restructuring, expected payment term | 15 months | ||
January 2021 Restructuring Plan | |||
Restructuring Cost and Reserve [Line Items] | |||
Expected number of positions eliminated | position | 315 | ||
Restructuring costs | $ 43 | ||
November 2021 Restructuring Plan | |||
Restructuring Cost and Reserve [Line Items] | |||
Expected number of positions eliminated | position | 380 | ||
Restructuring costs | $ 86 | ||
Bayer Animal Business | |||
Restructuring Cost and Reserve [Line Items] | |||
Expected number of positions eliminated | position | 900 | ||
Restructuring reserve, accrual adjustment | $ 15 | $ 162 | |
Number of countries expected to eliminate positions | country | 40 |
Asset Impairment, Restructuri_4
Asset Impairment, Restructuring and Other Special Charges - Total Charges Related to Asset Impairment, Restructuring and Other Special Charges (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Restructuring charges (credits): | |||
Severance and other costs | $ 110 | $ 155 | $ 8 |
Facility exit costs | 0 | (3) | 0 |
Transaction and integration costs | 162 | 424 | 145 |
Non-cash and other items: | |||
Asset impairment | 66 | 17 | 16 |
Asset write-down | 278 | 19 | 17 |
Gain on sale of fixed assets | 0 | (4) | 0 |
Net periodic benefit cost (credits) | (29) | 0 | 0 |
Settlements and other | 41 | 15 | 0 |
Total expense | 628 | $ 623 | $ 186 |
Litigation settlement charges | $ 10 |
Asset Impairment, Restructuri_5
Asset Impairment, Restructuring and Other Special Charges - Summary of Activity in Reserves (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | $ 130 | $ 21 |
Charges | 126 | 157 |
Reserve adjustment | (16) | (4) |
Cash paid | (114) | (44) |
Balance at end of period | 126 | 130 |
Exit costs | ||
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | 0 | 5 |
Charges | 0 | 1 |
Reserve adjustment | 0 | (3) |
Cash paid | 0 | (3) |
Balance at end of period | 0 | 0 |
Severance | ||
Restructuring Reserve [Roll Forward] | ||
Balance at beginning of period | 130 | 16 |
Charges | 126 | 156 |
Reserve adjustment | (16) | (1) |
Cash paid | (114) | (41) |
Balance at end of period | $ 126 | $ 130 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 598 | $ 772 |
Work in process | 565 | 625 |
Raw materials and supplies | 256 | 210 |
Total | 1,419 | 1,607 |
Decrease to LIFO cost | (46) | (29) |
Inventories | $ 1,373 | $ 1,578 |
Inventories - Narrative (Detail
Inventories - Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Inventory Disclosure [Abstract] | ||
Inventories valued under the LIFO method | $ 243 | $ 234 |
Equity - Narrative (Details)
Equity - Narrative (Details) | Jan. 23, 2020USD ($)shares | Jan. 22, 2020USD ($)tradingDay$ / sharesshares | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) |
Class of Stock [Line Items] | ||||
Number of shares sold in public offering (in shares) | shares | 25,000,000 | |||
Total cash received upon sale closing | $ 768,000,000 | |||
Net proceeds | $ 6,319,000,000 | $ 6,127,000,000 | ||
Tangible Equity Unit | ||||
Class of Stock [Line Items] | ||||
Number of shares sold in public offering (in shares) | shares | 11,000,000 | |||
Offering price (usd per share) | $ / shares | $ 50 | |||
Total cash received upon sale closing | $ 528,000,000 | |||
Tangible Equity Unit | 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 | 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 | |||
TEU Amortizing Notes | 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 | ||||
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 |
Class of Stock [Line Items] | ||
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 | ||
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 | Minimum | ||
Class of Stock [Line Items] | ||
Applicable Market Value (usd per share) | $ 32 | |
Settlement rate | 130.21% | |
Tangible Equity Unit | 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 | Dec. 31, 2021 | Dec. 31, 2020 | Jan. 22, 2020 | Aug. 31, 2018 |
Debt Instrument [Line Items] | ||||
Long-term debt, gross | $ 6,401 | |||
Unamortized debt issuance costs | (82) | $ (98) | ||
Total debt | 6,319 | 6,127 | ||
Current portion of long-term debt | 294 | 555 | ||
Total long-term debt | 6,025 | 5,572 | ||
Credit Facility | Incremental Term Facility | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | 499 | 0 | ||
Credit Facility | Term B Loan Facility | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | 4,118 | 4,164 | ||
Credit Facility | Revolving credit facility | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | $ 250 | 0 | ||
Senior Notes | 3.912% Senior Notes due 2021 | ||||
Debt Instrument [Line Items] | ||||
Interest rate | 3.912% | 3.912% | ||
Long-term debt, gross | $ 0 | 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 | 34 | 60 | ||
Other obligations | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | $ 0 | $ 1 |
Debt - Maturity of Long-Term De
Debt - Maturity of Long-Term Debt (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Debt Disclosure [Abstract] | ||
2022 | $ 308 | |
2023 | 805 | |
2024 | 48 | |
2025 | 135 | |
2026 | 48 | |
2027 and thereafter | 5,057 | |
Total obligations and commitments | 6,401 | |
Unamortized debt issuance costs | (82) | |
Total debt | $ 6,319 | $ 6,127 |
Debt - Interest Paid (Details)
Debt - Interest Paid (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |||
Interest paid | $ 221 | $ 131 | $ 104 |
Debt - Narrative (Details)
Debt - Narrative (Details) | Aug. 12, 2021USD ($) | Sep. 25, 2020USD ($) | Aug. 01, 2020USD ($) | Jan. 31, 2020USD ($) | Jan. 23, 2020USD ($)shares | Jan. 22, 2020USD ($)$ / sharesshares | Feb. 25, 2022USD ($) | Jan. 31, 2022USD ($) | Dec. 31, 2021USD ($)covenant | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Aug. 31, 2018USD ($) |
Debt Instrument [Line Items] | ||||||||||||
Proceeds from revolving credit facility | $ 500,000,000 | $ 0 | $ 0 | |||||||||
Repayments of lines of credit | $ 250,000,000 | 0 | $ 0 | |||||||||
Number of shares issued (in shares) | shares | 25,000,000 | |||||||||||
Total net proceeds, after underwriting discounts and commissions | $ 768,000,000 | |||||||||||
Tangible Equity Unit | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Number of shares issued (in shares) | shares | 11,000,000 | |||||||||||
Price per share (usd per share) | $ / shares | $ 50 | |||||||||||
Total net proceeds, after underwriting discounts and commissions | $ 528,000,000 | |||||||||||
Equity Component | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Price per share (usd per share) | $ / shares | $ 42.80 | |||||||||||
Total net proceeds, after underwriting discounts and commissions | $ 452,000,000 | |||||||||||
Debt Component | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Price per share (usd per share) | $ / shares | $ 7.20 | |||||||||||
Total net proceeds, after underwriting discounts and commissions | $ 76,000,000 | |||||||||||
Senior Notes | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Aggregate principal amount | $ 2,000,000,000 | |||||||||||
Senior Notes | 3.912% Senior Notes due 2021 | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Aggregate principal amount | $ 500,000,000 | |||||||||||
Interest rate | 3.912% | 3.912% | ||||||||||
Senior Notes | 4.272% Senior Notes due 2023 | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Aggregate principal amount | $ 750,000,000 | |||||||||||
Interest rate | 4.272% | 4.272% | ||||||||||
Senior Notes | 4.900% Senior Notes Due 2028 | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Aggregate principal amount | $ 750,000,000 | |||||||||||
Interest rate | 4.90% | |||||||||||
Senior Notes | TEU Amortizing Notes | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Aggregate principal amount | $ 550,000,000 | |||||||||||
Interest rate | 5.00% | |||||||||||
Payment of principal and interest | $ 28,000,000 | |||||||||||
Farm Credit Term Loan Facility | Credit Facility | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Proceeds from revolving credit facility | $ 500,000,000 | |||||||||||
Basis points | 1.75% | |||||||||||
Term B Loan Facility | Credit Facility | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Number of financial covenants | covenant | 0 | |||||||||||
Repayments of long-term debt | $ 100,000,000 | |||||||||||
Loss on extinguishment of debt | $ 2,000,000 | |||||||||||
Revolving credit facility | Credit Facility | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Proceeds from revolving credit facility | $ 500,000,000 | |||||||||||
Credit facility, maximum borrowing capacity | $ 750,000,000 | |||||||||||
Debt maturity term | 5 years | |||||||||||
Repayments of lines of credit | $ 250,000,000 | $ 450,000,000 | ||||||||||
Number of financial covenants | covenant | 2 | |||||||||||
Required EBITDA leverage ratio | 7.71 | |||||||||||
Required EBITDA ratio to cash interest expense | 2 | |||||||||||
Revolving credit facility | Credit Facility | Subsequent Event | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Repayments of lines of credit | $ 163,000,000 | |||||||||||
Revolving credit facility | Credit Facility | LIBOR | Minimum | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Basis points | 1.50% | |||||||||||
Revolving credit facility | Credit Facility | LIBOR | Maximum | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Basis points | 2.25% | |||||||||||
Term credit facility | Credit Facility | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Repayments of debt, interest | $ 1,000,000 | |||||||||||
Repayments of debt | 372,000,000 | |||||||||||
Repayments of long-term debt | 371,000,000 | |||||||||||
Loss on extinguishment of debt | $ 1,000,000 | |||||||||||
Bayer Animal Business | Term B Loan Facility | Subsequent Event | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Repayments of lines of credit | $ 70,000,000 | |||||||||||
Bayer Animal Business | Term B Loan Facility | Credit Facility | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Credit facility, maximum borrowing capacity | $ 4,275,000,000 | |||||||||||
Bayer Animal Business | Term B Loan Facility | Credit Facility | LIBOR | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Basis points | 1.75% |
Financial Instruments and Fai_3
Financial Instruments and Fair Value - Narrative (Details) | 1 Months Ended | 12 Months Ended | ||||||
Oct. 31, 2021USD ($)derivative_instrument | Mar. 31, 2020USD ($) | Oct. 31, 2018CHF (SFr) | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Jul. 31, 2019USD ($) | Jul. 18, 2019USD ($) | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||
Equity method investments | $ 22,000,000 | $ 24,000,000 | ||||||
Net unrealized gain (loss) | (10,000,000) | 11,000,000 | $ 0 | |||||
Unrealized gain (loss) on derivatives for cash flow hedges, net of taxes | 86,000,000 | (61,000,000) | 0 | |||||
Interest rate swaps, tax | 0 | 15,000,000 | $ 0 | |||||
Expected reclassification from accumulated other comprehensive loss | 2,000,000 | |||||||
Reclassification from AOCI | 28,000,000 | 7,000,000 | ||||||
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) | 1,212,000,000 | 1,391,000,000 | ||||||
Cross-currency fixed interest rate swap | Designated as Hedging Instrument | Net Investment Hedging | ||||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||
Notional amount (USD, CHF) | SFr | SFr 750,000,000 | |||||||
Term of contract | 5 years | |||||||
Cash benefit for liquidation | 35,000,000 | |||||||
Interest included in cash benefit | 2,000,000 | |||||||
Forward-starting interest rate contracts designated as cash flow hedges | Designated as Hedging Instrument | Cash Flow Hedging | ||||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||
Notional amount (USD, CHF) | $ 2,100,000,000 | $ 4,100,000,000 | ||||||
Derivative, number of instruments terminated | derivative_instrument | 6 | |||||||
Derivative, notional amount of contracts terminated | $ 2,100,000,000 | |||||||
Derivative, number of instruments entered into | derivative_instrument | 24 | |||||||
Interest rate swaps, tax | 0 | |||||||
Terminated Interest Rate Swaps | ||||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||
Unrealized gain (loss) on derivatives for cash flow hedges, net of taxes | $ 2,000,000 | |||||||
Aratana | ||||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||
Maximum aggregate contingent payment | 12,000,000 | $ 12,000,000 | ||||||
Prevtec | ||||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||
Maximum aggregate contingent payment | 16,000,000 | $ 16,000,000 | ||||||
Decrease of fair value of contingent consideration liability | $ 4,000,000 | |||||||
Artana and Prevtec | ||||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||
Gain on writeoff of contingent consideration liability | $ 1,000,000 |
Financial Instruments and Fai_4
Financial Instruments and Fair Value - Summary of Fair Value Information (Details) - Recurring - USD ($) $ in Millions | Dec. 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 |
Significant Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (6,518) | (6,420) |
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 |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (6,401) | (6,225) |
Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt - senior notes | (6,518) | (6,420) |
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 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) | 19 | 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) | 19 | 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) | 19 | 36 |
Other noncurrent assets | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 13 | 9 |
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 | Significant Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | 0 |
Other noncurrent assets | Significant 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) | 8 | |
Other noncurrent assets | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 0 | 0 |
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 | Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 13 | 9 |
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) | 8 | |
Other noncurrent assets | Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative assets (liabilities) | 13 | 9 |
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) | 8 | |
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 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) | (20) | (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) | (20) | (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) | $ (20) | (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 | |
Other noncurrent liabilities | 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 liabilities | Significant Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0 | |
Other noncurrent liabilities | Significant 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) | (76) | |
Other noncurrent liabilities | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (1) | |
Other noncurrent liabilities | 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 liabilities | Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (1) | |
Other noncurrent liabilities | 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) | (76) | |
Other noncurrent liabilities | Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | (1) | |
Other noncurrent liabilities | 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) | $ (76) |
Financial Instruments and Fai_5
Financial Instruments and Fair Value - Net Gain/Loss on Derivative Instruments (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Interest rate swaps, tax | $ 0 | $ 15,000,000 | $ 0 |
Cross-currency fixed interest rate swap | 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 | (35,000,000) | (4,000,000) | (5,000,000) |
Cross-currency fixed interest rate swap | Designated as Hedging Instrument | Net Investment Hedging | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Gain, net of tax | 0 | 24,000,000 | 8,000,000 |
Cross-currency fixed interest rate swap | Designated as Hedging Instrument | Interest Expense | Net Investment Hedging | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Amount offsetting interest expense | 0 | 6,000,000 | 25,000,000 |
Forward-starting interest rate contracts designated as cash flow hedges | Designated as Hedging Instrument | Cash Flow Hedging | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Gain, net of tax | 86,000,000 | $ (61,000,000) | $ 0 |
Interest rate swaps, tax | $ 0 |
Goodwill and Intangibles - Narr
Goodwill and Intangibles - Narrative (Details) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Aug. 27, 2021 | Aug. 01, 2020 | |
Finite-Lived Intangible Assets [Line Items] | |||||
Goodwill | $ 6,172,000,000 | $ 6,225,000,000 | |||
Impairments with respect to the carrying value of goodwill | 0 | 0 | $ 0 | ||
Impairment charges | $ 66,000,000 | 17,000,000 | 11,000,000 | ||
Minimum | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Estimated useful lives | 3 years | ||||
Maximum | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Estimated useful lives | 20 years | ||||
KindredBio | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Goodwill | $ 33,000,000 | ||||
Bayer Animal Business | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Goodwill | $ 3,129,000,000 | ||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | 65,000,000 | ||||
Marketed products | 3,740,000,000 | ||||
Acquired in-process research and development | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Impairment charges | $ 55,000,000 | 9,000,000 | |||
Acquired in-process research and development | KindredBio | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | $ 334,000,000 | ||||
Acquired in-process research and development | Bayer Animal Business | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Intangible assets, primarily acquired in-process research and development (IPR&D) | $ 65,000,000 | ||||
Marketed products | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Impairment charges | 11,000,000 | 8,000,000 | |||
Software | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Amortization | $ 52,000,000 | $ 35,000,000 | $ 20,000,000 |
Goodwill and Intangibles - Good
Goodwill and Intangibles - Goodwill Activity (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 6,225 |
Bayer Animal Health measurement period adjustments | 207 |
Additions related to the KindredBio acquisition | 33 |
Goodwill associated with Shawnee, Speke and other divestitures | (64) |
Foreign currency translation adjustments | (229) |
Goodwill, ending balance | $ 6,172 |
Goodwill and Intangibles - Comp
Goodwill and Intangibles - Components of Intangible Assets Other Than Goodwill (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Finite-Lived Intangible Assets [Line Items] | ||
Carrying Amount, Gross | $ 7,160 | $ 7,802 |
Accumulated Amortization | (1,942) | (1,490) |
Carrying Amount, Net | 5,218 | 6,312 |
Other intangibles | ||
Carrying Amount, Gross | 7,529 | 7,877 |
Accumulated Amortization | (1,942) | (1,490) |
Carrying Amount, Net | 5,587 | 6,387 |
Acquired in-process research and development | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Indefinite-lived intangible assets | 369 | 75 |
Marketed products | ||
Finite-Lived Intangible Assets [Line Items] | ||
Carrying Amount, Gross | 6,828 | 7,394 |
Accumulated Amortization | (1,837) | (1,342) |
Carrying Amount, Net | 4,991 | 6,052 |
Other intangibles | ||
Accumulated Amortization | (1,837) | (1,342) |
Software | ||
Finite-Lived Intangible Assets [Line Items] | ||
Carrying Amount, Gross | 285 | 346 |
Accumulated Amortization | (77) | (108) |
Carrying Amount, Net | 208 | 238 |
Other intangibles | ||
Accumulated Amortization | (77) | (108) |
Other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Carrying Amount, Gross | 47 | 62 |
Accumulated Amortization | (28) | (40) |
Carrying Amount, Net | 19 | 22 |
Other intangibles | ||
Accumulated Amortization | $ (28) | $ (40) |
Goodwill and Intangibles - Impa
Goodwill and Intangibles - Impairment Charges (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Impairment charges | $ 66 | $ 17 | $ 11 |
Goodwill and Intangibles - Rema
Goodwill and Intangibles - Remaining Weighted Average Amortization Periods (Details) | 12 Months Ended |
Dec. 31, 2021 | |
Marketed products | |
Finite-Lived Intangible Assets [Line Items] | |
Remaining amortization period | 10 years |
Software | |
Finite-Lived Intangible Assets [Line Items] | |
Remaining amortization period | 6 years |
Other | |
Finite-Lived Intangible Assets [Line Items] | |
Remaining amortization period | 7 years |
Goodwill and Intangibles - Esti
Goodwill and Intangibles - Estimated Amortization Expense (Details) $ in Millions | Dec. 31, 2021USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2022 | $ 559 |
2023 | 559 |
2024 | 555 |
2025 | 537 |
2026 | $ 534 |
Property and Equipment - Narrat
Property and Equipment - Narrative (Details) | 12 Months Ended |
Dec. 31, 2021 | |
Buildings | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 12 years |
Buildings | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 50 years |
Equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 3 years |
Equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 25 years |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Line Items] | ||
Finance lease asset | $ 0 | $ 1 |
Property, plant, equipment, and finance lease right-of-use assets, gross | 2,102 | 2,354 |
Less accumulated depreciation | (1,041) | (1,038) |
Property and equipment, net | 1,061 | 1,316 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 42 | 46 |
Buildings | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 549 | 756 |
Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,354 | 1,360 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 157 | $ 191 |
Property and Equipment- Schedul
Property and Equipment- Schedule of Property and Equipment Geographic Area (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | $ 1,061 | $ 1,316 |
United States | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | 557 | 673 |
Germany | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | 211 | 221 |
United Kingdom | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | 65 | 194 |
France | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | 54 | 59 |
Other foreign countries | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | $ 174 | $ 169 |
Property and Equipment - Deprec
Property and Equipment - Depreciation Expense and Rental Expense for All Leases (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 108 | $ 122 | $ 94 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Millions | Jun. 26, 2020 | Dec. 31, 2021 | Dec. 31, 2020 |
Lessee, Lease, Description [Line Items] | |||
Operating leases, not yet commenced, minimum lease payments | $ 310 | ||
Operating leases, not yet ommenced, term (in years) | 25 years | ||
Sale leaseback transaction, net proceeds | $ 55 | ||
Term of contract | 15 years | ||
Gain on sale | $ 46 | ||
Lease payments | $ 28 | ||
Minimum | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease term | 1 year | ||
Maximum | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease term | 15 years |
Leases - Impact of Operating Le
Leases - Impact of Operating Leases to Condensed Consolidated Financial Statements (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Lease cost | |||
Operating lease cost | $ 43 | $ 38 | $ 26 |
Short-term lease cost | 1 | 1 | 1 |
Variable lease cost | 4 | 3 | 2 |
Total lease cost | 48 | 42 | 29 |
Other information | |||
Operating cash outflows from operating leases | 40 | 36 | 24 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 36 | $ 138 | $ 20 |
Weighted-average remaining lease term - operating leases | 7 years | 8 years | 5 years |
Weighted-average discount rate - operating leases | 3.80% | 3.80% | 3.60% |
Bayer Animal Business | |||
Other information | |||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 16 |
Leases - Supplemental Balance S
Leases - Supplemental Balance Sheet Information Related to Operating Leases (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Leases [Abstract] | ||
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other Assets, Noncurrent | Other Assets, Noncurrent |
Right-of-use assets | $ 161 | $ 187 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Other current liabilities | Other current liabilities |
Current operating lease liabilities | $ 34 | $ 37 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other noncurrent liabilities | Other noncurrent liabilities |
Non-current operating lease liabilities | $ 127 | $ 151 |
Leases - Annual Minimum Lease P
Leases - Annual Minimum Lease Payments of Operating Lease Liabilities (Details) $ in Millions | Dec. 31, 2021USD ($) |
Leases [Abstract] | |
2022 | $ 41 |
2023 | 32 |
2024 | 24 |
2025 | 19 |
2026 | 15 |
2027 and thereafter | 59 |
Total lease payments | 190 |
Less imputed interest | (29) |
Total | $ 161 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) shares in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
RSUs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 3 years | ||
Vested in period, fair value | $ 30,000,000 | $ 33,000,000 | $ 23,000,000 |
Unrecognized compensation cost | $ 26,000,000 | ||
Weighted-average remaining requisite service period | 17 months | ||
PAs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vested in period, fair value | $ 22,000,000 | $ 2,000,000 | $ 0 |
Unrecognized compensation cost | $ 17,000,000 | ||
Weighted-average remaining requisite service period | 12 months | ||
Elanco Stock Compensation Plans | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares of common stock to be reserved for future issuance (in shares) | 11 | ||
Stock options granted (in shares) | 9 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Stock-Based Compensation Expenses (Details) - Elanco Stock Compensation Plans - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | $ 66 | $ 48 | $ 41 |
Related tax benefit | $ (11) | $ (8) | $ (10) |
Stock-Based Compensation - Sc_2
Stock-Based Compensation - Schedule of Restricted Stock Unit and Performance Award Activity (Details) - $ / shares shares in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
RSUs | |||
Outstanding Restricted Stock Units | |||
Beginning nonvested balance (in shares) | 2.4 | ||
Granted (in shares) | 1.1 | 1.3 | 2.9 |
Vested (in shares) | (0.9) | ||
Forfeited (in shares) | (0.4) | ||
Ending nonvested balance (in shares) | 2.2 | 2.4 | |
Weighted-Average Restricted Stock Unit Fair Value | |||
Beginning nonvested balance (in dollars per share) | $ 28.90 | ||
Granted (in dollars per share) | 33.57 | $ 27.44 | $ 31.22 |
Vested (in dollars per share) | 29.84 | ||
Forfeited (in dollars per share) | 30.58 | ||
Ending nonvested balance (in dollars per share) | $ 30.87 | $ 28.90 | |
PAs | |||
Outstanding Restricted Stock Units | |||
Beginning nonvested balance (in shares) | 1.2 | ||
Granted (in shares) | 0.6 | ||
Vested (in shares) | (0.7) | ||
Forfeited (in shares) | (0.1) | ||
Ending nonvested balance (in shares) | 1 | 1.2 | |
Weighted-Average Restricted Stock Unit Fair Value | |||
Beginning nonvested balance (in dollars per share) | $ 26.63 | ||
Granted (in dollars per share) | 32.70 | ||
Vested (in dollars per share) | 30.96 | ||
Forfeited (in dollars per share) | 29.66 | ||
Ending nonvested balance (in dollars per share) | $ 30.53 | $ 26.63 |
Income Taxes - Composition of I
Income Taxes - Composition of Income (Loss) Before Income Tax Expense (Benefit) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Federal | $ (341) | $ (495) | $ 55 |
Foreign | (226) | (177) | 23 |
Income (loss) before income taxes | $ (567) | $ (672) | $ 78 |
Income Taxes - Composition of_2
Income Taxes - Composition of Income Tax Expense (Benefit) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Current: | |||
Federal | $ 0 | $ (36) | $ (5) |
Foreign | 58 | 56 | 13 |
State | 1 | (7) | 2 |
Total current tax expense | 59 | 13 | 10 |
Deferred: | |||
Federal | (9) | (8) | 15 |
Foreign | (144) | (125) | (8) |
State | (1) | 8 | (7) |
Total deferred tax expense (benefit) | (154) | (125) | 0 |
Income tax expense (benefit) | $ (95) | $ (112) | $ 10 |
Income Taxes - Significant Comp
Income Taxes - Significant Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Deferred tax assets: | ||
Compensation and benefits | $ 58 | $ 69 |
Accruals and reserves | 57 | 89 |
Tax credit carryovers | 53 | 34 |
Tax loss carryovers | 291 | 168 |
Inventories | 18 | 18 |
Restructuring and other reserves | 31 | 33 |
Operating lease liabilities | 42 | 48 |
Other | 71 | 25 |
Total gross deferred tax assets | 621 | 484 |
Valuation allowances | (162) | (94) |
Total deferred tax assets | 459 | 390 |
Deferred tax liabilities: | ||
Right-of-use assets | (42) | (48) |
Intangibles | (976) | (1,044) |
Property and equipment | (80) | (115) |
Other | 0 | 0 |
Total deferred tax liabilities | (1,098) | (1,207) |
Deferred tax liabilities - net | $ (639) | $ (817) |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Operating Loss Carryforwards [Line Items] | ||
Tax credit carryovers | $ 53 | |
Net operating losses and other carryovers | 291 | $ 168 |
Unrecognized tax benefits that, if recognized, would affect effective tax rate | 6 | 3 |
Accruals for payment of interest and penalties | 1 | $ 1 |
Foreign | ||
Operating Loss Carryforwards [Line Items] | ||
Tax credit carryovers | 7 | |
Domestic Tax Authority | ||
Operating Loss Carryforwards [Line Items] | ||
Tax credit carryovers | 32 | |
State | ||
Operating Loss Carryforwards [Line Items] | ||
Tax credit carryovers | 14 | |
International, State and Federal | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating losses and other carryovers | 291 | |
Net operating loss carryforwards with indefinite carryforward period | 200 | |
International, State and Federal | 2020 To 2039 | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards that expire | $ 91 |
Income Taxes - Movements in the
Income Taxes - Movements in the Valuation Allowance (Details) - Valuation Allowance, Deferred Tax Asset - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Beginning balance | $ (94) | $ (32) |
Increase | (74) | (75) |
Release | 6 | 13 |
Ending balance | $ (162) | $ (94) |
Income Taxes - Cash Payments of
Income Taxes - Cash Payments of Income Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Cash payments of income taxes | $ 151 | $ 97 | $ 43 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of Income Tax Expense (Benefit) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Income tax expense (benefit) at the U.S. federal statutory tax rate | $ (119) | $ (141) | $ 16 |
Add (deduct): | |||
Taxation of international operations | (16) | (15) | 21 |
State taxes | (8) | (10) | 3 |
Income tax credits | (14) | (24) | (10) |
Non-deductible employee compensation | 4 | 1 | 4 |
Other permanent adjustments | (2) | 18 | (4) |
Change in uncertain tax positions | (2) | (7) | (15) |
Change in valuation allowance | 62 | 66 | (5) |
Income tax expense (benefit) | $ (95) | $ (112) | $ 10 |
Income Taxes - Reconciliation_2
Income Taxes - Reconciliation of Gross Unrecognized Tax Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Beginning balance | $ 3 | $ 8 | $ 13 |
Additions based on tax positions related to the current year | 0 | 0 | 1 |
Changes for tax positions of prior years | (1) | (2) | (1) |
Additions related to acquisition | 4 | 0 | 0 |
Settlements | 0 | (3) | (5) |
Ending balance | 6 | 3 | 8 |
Previously Reported | |||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Beginning balance | 3 | 8 | 15 |
Ending balance | 3 | 8 | |
Adjustment related to Separation | |||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Beginning balance | $ 0 | 0 | (2) |
Ending balance | $ 0 | $ 0 |
Income Taxes - Income Tax Expen
Income Taxes - Income Tax Expense (Benefit) Related to Interest and Penalties (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Income tax benefit | $ (1) | $ (2) | $ (11) |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) | Oct. 16, 2020 |
Commitments and Contingencies Disclosure [Abstract] | |
Percent of TEUs issued involved in lawsuit | 5.00% |
Geographic Information - Narrat
Geographic Information - Narrative (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021USD ($)segment | Dec. 31, 2020USD ($) | Dec. 31, 2019 | |
Segment Reporting [Abstract] | |||
Number of operating segments | segment | 1 | ||
Concentration Risk [Line Items] | |||
Accounts receivable | $ 833 | $ 872 | |
Product Sales | |||
Concentration Risk [Line Items] | |||
Accounts receivable | $ 74 | $ 87 | |
Customer Concentration Risk | Revenue | Single Customer | |||
Concentration Risk [Line Items] | |||
Concentration risk | 10.00% | 11.00% | 13.00% |
Geographic Information - Revenu
Geographic Information - Revenue and Long-lived Assets by Selected Geographic Area Information (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenue | $ 4,765 | $ 3,273 | $ 3,071 |
United States | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenue | 2,124 | 1,475 | 1,525 |
International | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenue | $ 2,641 | $ 1,798 | $ 1,546 |
Retirement Benefits - Narrative
Retirement Benefits - Narrative (Details) $ in Millions | 1 Months Ended | 12 Months Ended | ||
Sep. 30, 2019USD ($) | Dec. 31, 2021USD ($)plan | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Defined Benefit Plan Disclosure [Line Items] | ||||
Decrease in pension benefit obligation | $ 21 | |||
Decreased in prior service costs | 75 | |||
Decrease for plan amendment related to other costs and losses | 54 | |||
Accumulated other comprehensive income net impact | $ 21 | |||
Contributions expected in next fiscal year | $ 10 | |||
Accrued retirement benefits | 271 | $ 346 | ||
Expenses related to employees under defined contribution plans | 39 | 35 | $ 32 | |
Bayer-Pensionskasse | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Multiemployer plan, assets | 11,476 | 10,381 | ||
Multiemployer plan, obligation | 10,950 | 9,895 | ||
Multiemployer plan, contributions | 134 | 138 | ||
Rheinische-Pensionskasse | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Multiemployer plan, assets | 1,026 | 825 | ||
Multiemployer plan, obligation | 972 | 782 | ||
Multiemployer plan, contributions | 52 | $ 48 | ||
Pension Plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Total accumulated benefit obligation | 446 | 534 | ||
Accrued retirement benefits | $ 254 | 324 | ||
Pension Plans | Fixed Income Securities | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Designated percentage invested | 36.00% | |||
Pension Plans | Fixed Income Securities | Bayer Animal Business | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Designated percentage invested | 44.00% | |||
Pension Plans | Public equity securities | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Designated percentage invested | 32.00% | |||
Pension Plans | Public equity securities | Bayer Animal Business | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Designated percentage invested | 28.00% | |||
Pension Plans | Real estate | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Designated percentage invested | 21.00% | |||
Pension Plans | Other alternative investments | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Designated percentage invested | 11.00% | |||
Pension Plans | Other alternative investments | Bayer Animal Business | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Designated percentage invested | 28.00% | |||
Pension Plans | Switzerland | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Percentage of benefit obligation in Switzerland pension plans | 92.00% | |||
Percentage of plan assets in Switzerland pension plans | 88.00% | |||
Retiree Health Benefit Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Number of plans | plan | 2 | |||
Accrued retirement benefits | $ 4 | $ 4 |
Retirement Benefits - Change in
Retirement Benefits - Change in Benefit Obligation, Change in Plan Assets, and Funded Status (Details) - Pension Plans - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Change in benefit obligation: | |||
Benefit obligation at beginning of year | $ 560 | $ 224 | |
Service cost | 18 | 14 | $ 9 |
Interest cost | 2 | 2 | 2 |
Additions related to the Bayer Animal Health acquisition | 0 | 265 | |
Actuarial loss (gain) | (25) | 18 | |
Benefits paid | (4) | (8) | |
Curtailment gain | (19) | 0 | |
Settlements | (38) | (1) | |
Foreign currency exchange rate changes and other adjustments | (32) | 46 | |
Benefit obligation at end of year | 462 | 560 | 224 |
Change in plan assets: | |||
Fair value of plan assets at beginning of year | 234 | 149 | |
Actual return on plan assets | 13 | 5 | |
Employer contribution | 12 | 9 | |
Additions related to the Bayer Animal Health acquisition | 0 | 61 | |
Benefits paid | (4) | (8) | |
Settlements | (38) | (1) | |
Foreign currency exchange rate changes and other adjustments | (10) | 19 | |
Fair value of plan assets at end of year | 207 | 234 | $ 149 |
Funded status | (255) | (326) | |
Unrecognized net actuarial loss | 13 | 67 | |
Unrecognized prior service cost | (34) | (73) | |
Net amount recognized | $ (276) | $ (332) |
Retirement Benefits - Amounts R
Retirement Benefits - Amounts Recognized in Combined Balance Sheet (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Amounts recognized in the consolidated balance sheet consisted of: | ||
Accrued retirement benefits | $ (271) | $ (346) |
Pension Plans | ||
Amounts recognized in the consolidated balance sheet consisted of: | ||
Other current liabilities | (1) | (2) |
Accrued retirement benefits | (254) | (324) |
Accumulated other comprehensive income before income taxes | (21) | (6) |
Net amount recognized | $ (276) | $ (332) |
Retirement Benefits - Weighted-
Retirement Benefits - Weighted-Average Assumptions Related to Pension Plans (Details) - Pension Plans | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Discount rate for benefit obligation | 1.10% | 0.60% | 0.60% |
Discount rate for net benefit costs | 0.60% | 0.60% | 1.40% |
Rate of compensation increase for benefit obligation | 2.70% | 3.10% | 2.30% |
Rate of compensation increase for net benefit costs | 3.10% | 2.30% | 2.20% |
Expected return on plan assets for net benefit costs | 2.90% | 3.20% | 4.00% |
Retirement Benefits - Schedule
Retirement Benefits - Schedule of Expected Benefit Payments (Details) - Pension Plans $ in Millions | Dec. 31, 2021USD ($) |
Benefit payments | |
2022 | $ 12 |
2023 | 13 |
2024 | 13 |
2025 | 14 |
2026 | 15 |
2027-2031 | $ 84 |
Retirement Benefits - Projected
Retirement Benefits - Projected Benefit Obligations in Excess of Plan Assets (Details) - Pension Plans - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Defined Benefit Plan Disclosure [Line Items] | ||
Projected benefit obligation | $ 455 | $ 545 |
Fair value of plan assets | $ 200 | $ 220 |
Retirement Benefits - Accumulat
Retirement Benefits - Accumulated Benefit Obligations in Excess of Plan Assets (Details) - Pension Plans - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Defined Benefit Plan Disclosure [Line Items] | ||
Accumulated benefit obligation | $ 441 | $ 521 |
Fair value of plan assets | $ 200 | $ 220 |
Retirement Benefits - Net Pensi
Retirement Benefits - Net Pension Expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Net pension expense (benefit) | $ (29) | $ 0 | $ 0 |
Pension Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Service cost | 18 | 14 | 9 |
Interest cost | 2 | 2 | 2 |
Expected return on plan assets | (6) | (6) | (4) |
Amortization of prior service cost | (6) | (8) | (2) |
Amortization of net actuarial loss | 2 | 3 | 1 |
Net curtailments and settlements (Note 6) | (29) | 0 | 0 |
Net pension expense (benefit) | $ (19) | $ 5 | $ 6 |
Retirement Benefits - Amounts_2
Retirement Benefits - Amounts Recognized in Other Comprehensive Loss (Details) - Pension Plans - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Actuarial gain (loss) arising during period | $ 29 | $ (18) | $ (46) |
Prior year service cost during the year | 0 | 0 | 75 |
Amortization of prior service cost, including settlements, in net loss | (36) | (8) | (2) |
Amortization of net actuarial loss, including curtailments, in net loss | 22 | 3 | 1 |
Foreign currency exchange rate changes and other | 0 | 1 | 1 |
Total other comprehensive income (loss) during period | $ 15 | $ (22) | $ 29 |
Retirement Benefits - Fair Valu
Retirement Benefits - Fair Value of Pension Plan Assets (Details) - Pension Plans - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | $ 207 | $ 234 | $ 149 |
Public equity securities | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 63 | 69 | |
Developed markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 76 | 87 | |
Emerging markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 11 | 13 | |
Real estate | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 26 | 29 | |
Other | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 31 | 36 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 193 | 223 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Public equity securities | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 60 | 67 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Developed markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 75 | 86 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Emerging markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 11 | 13 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Real estate | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 21 | 26 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 26 | 31 | |
Significant Observable Inputs (Level 2) | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 10 | 8 | |
Significant Observable Inputs (Level 2) | Public equity securities | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Observable Inputs (Level 2) | Developed markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Observable Inputs (Level 2) | Emerging markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Observable Inputs (Level 2) | Real estate | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 5 | 3 | |
Significant Observable Inputs (Level 2) | Other | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 5 | 5 | |
Significant Unobservable Inputs (Level 3) | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Unobservable Inputs (Level 3) | Public equity securities | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Unobservable Inputs (Level 3) | Developed markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Unobservable Inputs (Level 3) | Emerging markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Unobservable Inputs (Level 3) | Real estate | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Significant Unobservable Inputs (Level 3) | Other | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Investments Valued at Net Asset Value | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 4 | 3 | |
Investments Valued at Net Asset Value | Public equity securities | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 3 | 2 | |
Investments Valued at Net Asset Value | Developed markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 1 | 1 | |
Investments Valued at Net Asset Value | Emerging markets | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Investments Valued at Net Asset Value | Real estate | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | 0 | 0 | |
Investments Valued at Net Asset Value | Other | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Fair value of plan assets | $ 0 | $ 0 |
Retirement Benefits - Multiempl
Retirement Benefits - Multiemployer Costs (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Multiemployer Plan [Line Items] | ||
Employer contribution, cost | $ 4 | $ 2 |
Bayer-Pensionskasse | ||
Multiemployer Plan [Line Items] | ||
Employer contribution, cost | 3 | 1 |
Rheinische-Pensionskasse | ||
Multiemployer Plan [Line Items] | ||
Employer contribution, cost | $ 1 | $ 1 |
Earnings (Loss) Per Share (Deta
Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |||
Net earnings (loss) available to common shareholders | $ (472) | $ (560) | $ 68 |
Basic (in shares) | 487.2 | 441.4 | 369 |
Assumed conversion of dilutive common stock equivalents (in shares) | 0 | 0 | 1.3 |
Diluted (in shares) | 487.2 | 441.4 | 370.3 |
Basic (usd per share) | $ (0.97) | $ (1.27) | $ 0.18 |
Diluted (usd per share) | $ (0.97) | $ (1.27) | $ 0.18 |
Antidilutive shares not included in calculation diluted earnings per share (in shares) | 1.8 | 2.1 | 0.1 |
Related Party Agreements and _2
Related Party Agreements and Transactions - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | |||
Restricted cash | $ 0 | $ 11 | $ 11 |
Bayer | |||
Related Party Transaction [Line Items] | |||
Asset purchase refund | $ 16 | $ 633 | |
Lilly | Transitional Services Agreement | |||
Related Party Transaction [Line Items] | |||
Mark-up rate | 7.00% |