Core Insights - Elanco Animal Health has appointed Dr. Stacey Ma to its Board of Directors, effective immediately, enhancing the company's expertise in biopharmaceutical development and manufacturing [1][2]. Company Overview - Elanco Animal Health is a global leader in animal health, dedicated to innovating and delivering products and services to prevent and treat diseases in farm animals and pets, with nearly 70 years of heritage in the industry [6]. Leadership and Expertise - Dr. Ma brings extensive global leadership experience in biopharmaceutical development and manufacturing, currently serving as Executive Vice President at Gilead Sciences, where she oversees product and portfolio strategy, technical development, supply chain, quality, CMC regulatory, and manufacturing operations [3][5]. - Dr. Ma has held leadership positions at Sana Biotechnology and Genentech/Roche, contributing significantly to product development and technical innovation [3][4]. Strategic Contributions - Dr. Ma's expertise in Chemistry, Manufacturing and Controls (CMC) strategy and technical operations is expected to be valuable as Elanco transitions significant products from research to manufacturing scale-up [5]. - Her role will also support Elanco's Innovation, Portfolio and Productivity (IPP) strategy, aimed at developing a consistent flow of high-impact innovations in the company's next-generation pipeline [5].

NEW YORK, Nov. 10, 2024 (GLOBE NEWSWIRE) -- Leading securities law firm Bleichmar Fonti & Auld LLP announces that a lawsuit has been filed against Elanco Animal Health Incorporated (NYSE:ELAN) and certain of the Company’s senior executives for potential violations of the federal securities laws. If you invested in Elanco, you are encouraged to obtain additional information by visiting https://www.bfalaw.com/cases-investigations/elanco-animal-health-incorporated. Investors have until December 6, 2024 to ask ...

NEW YORK, Nov. 08, 2024 (GLOBE NEWSWIRE) -- Leading securities law firm Bleichmar Fonti & Auld LLP announces that a lawsuit has been filed against Elanco Animal Health Incorporated (NYSE:ELAN) and certain of the Company’s senior executives for potential violations of the federal securities laws. If you invested in Elanco, you are encouraged to obtain additional information by visiting https://www.bfalaw.com/cases-investigations/elanco-animal-health-incorporated. Investors have until December 6, 2024 to ask ...

SAN FRANCISCO, Nov. 07, 2024 (GLOBE NEWSWIRE) -- A federal lawsuit has been filed in the U.S. District Court of Maryland against Elanco Animal Health Inc. and specific executives, accusing them of making false and misleading statements between November 7, 2023, and June 26, 2024. Hagens Berman urges Elanco Animal Health Incorporated (NYSE: ELAN) investors who suffered substantial losses to submit your losses now. Class Period: Nov. 7, 2023 – June 26, 2024Lead Plaintiff Deadline: Dec. 6, 2024 Visit: www.hbss ...

2024 Earnings – Third Quarter November 7, 2024 2024 | Q3 Earnings 2 Notices and Disclaimers Forward-Looking Statements. This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements concerning product launches and revenue from such products, our 2024 full year and fourth quarter guidance, 2025 outlook and long-term expectations, our expectations regarding debt levels, and expectations regarding our industry and our operati ...

Elanco Animal Health Incorporated (NYSE:ELAN) Q3 2024 Earnings Conference Call November 7, 2024 8:00 AM ET Company Participants Katy Grissom - Head, Investor Relations Jeff Simmons - President & CEO Todd Young - EVP & CFO Conference Call Participants Michael Ryskin - Bank of America Merrill Lynch Jonathan Block - Stifel Erin Wright - Morgan Stanley Brandon Vazquez - William Blair Balaji Prasad - Barclays Chris Schott - JPMorgan Mike DiFiore - Evercore ISI David Westenberg - Piper Sandler Navann Ty - BNP Par ...

For the quarter ended September 2024, Elanco Animal Health Incorporated (ELAN) reported revenue of $1.03 billion, down 3.6% over the same period last year. EPS came in at $0.13, compared to $0.18 in the year-ago quarter.The reported revenue represents a surprise of -0.37% over the Zacks Consensus Estimate of $1.03 billion. With the consensus EPS estimate being $0.12, the EPS surprise was +8.33%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expec ...

PHILADELPHIA, Nov. 07, 2024 (GLOBE NEWSWIRE) -- A securities class action lawsuit has been filed against Elanco Animal Health Inc. (“Elanco” or the “Company”) (NYSE: ELAN). The lawsuit has been filed on behalf of purchasers of ELANCO securities between November 7, 2023 and June 26, 2024, inclusive (the “Class Period”). CLICK HERE TO LEARN MORE ABOUT THIS LAWSUIT. Investors who purchased or acquired ELANCO securities during the Class Period may, no later than DECEMBER 6, 2024, seek to be appointed as a lead ...

[Preliminary Information](index=1&type=section&id=Preliminary%20Information) [SEC Filing Information](index=1&type=section&id=SEC%20Filing%20Information) This section provides basic filing information for Elanco Animal Health Incorporated's Form 10-Q for the quarter ended September 30, 2024 - Elanco Animal Health Incorporated filed Form 10-Q for the quarter ended September 30, 2024[3](index=3&type=chunk) - The company is a large accelerated filer and has filed all required reports and interactive data files[3](index=3&type=chunk) | Metric | Value | | :--- | :--- | | Trading Symbol | ELAN | | Exchange | New York Stock Exchange | | Shares Outstanding (Nov 4, 2024) | 494,352,808 | [Forward-Looking Statements and Risk Factor Summary](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS%20AND%20RISK%20FACTOR%20SUMMARY) [Overview of Forward-Looking Statements and Risks](index=4&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factor%20Summary_Overview) Forward-looking statements are subject to inherent uncertainties and risks, including competitive industry, R&D, regulatory changes, manufacturing, and geopolitical factors - Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, potentially causing actual results to differ materially[6](index=6&type=chunk) - Key risk factors include operating in a highly competitive industry, success of R&D and licensing efforts, impact of disruptive innovations, competition from generic products, and changes in regulatory restrictions[6](index=6&type=chunk) - Other significant risks involve manufacturing problems, fluctuations in inventory, risks related to AI use, dependence on IT systems, substantial indebtedness, and foreign market exposures[6](index=6&type=chunk) [PART I. Financial Information](index=6&type=section&id=PART%20I.%20Financial%20Information) [Financial Statements](index=6&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) Elanco presents unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and detailed notes on accounting policies and key events [Condensed Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(UNAUDITED)) Elanco reported a significant net income turnaround for Q3 and nine months 2024, driven by a divestiture gain, despite slight revenue changes **Three Months Ended September 30, 2024 vs. 2023:** | Metric | 2024 (Millions $) | 2023 (Millions $) | Change (Millions $) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,030 | 1,068 | (38) | (4)% | | Cost of Sales | 492 | 487 | 5 | 1% | | R&D | 87 | 86 | 1 | 1% | | Marketing, Selling & Admin | 323 | 313 | 10 | 3% | | Amortization of Intangible Assets | 133 | 140 | (7) | (5)% | | Asset Impairment, Restructuring & Other Special Charges | 17 | 16 | 1 | 6% | | Goodwill Impairment | — | 1,042 | (1,042) | NM | | Gain on Divestiture | (640) | — | (640) | NM | | Interest Expense, Net | 58 | 72 | (14) | (19)% | | Other Expense, Net | 1 | 9 | (8) | (89)% | | Income (Loss) Before Income Taxes | 559 | (1,097) | 1,656 | NM | | Income Tax Expense (Benefit) | 195 | (1) | 196 | NM | | Net Income (Loss) | 364 | (1,096) | 1,460 | NM | | Basic EPS | 0.74 | (2.22) | 2.96 | NM | | Diluted EPS | 0.73 | (2.22) | 2.95 | NM | **Nine Months Ended September 30, 2024 vs. 2023:** | Metric | 2024 (Millions $) | 2023 (Millions $) | Change (Millions $) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 3,419 | 3,382 | 37 | 1% | | Cost of Sales | 1,502 | 1,415 | 87 | 6% | | R&D | 263 | 248 | 15 | 6% | | Marketing, Selling & Admin | 1,014 | 993 | 21 | 2% | | Amortization of Intangible Assets | 397 | 410 | (13) | (3)% | | Asset Impairment, Restructuring & Other Special Charges | 143 | 91 | 52 | 57% | | Goodwill Impairment | — | 1,042 | (1,042) | NM | | Gain on Divestiture | (640) | — | (640) | NM | | Interest Expense, Net | 189 | 210 | (21) | (10)% | | Other Expense, Net | 12 | 41 | (29) | (71)% | | Income (Loss) Before Income Taxes | 539 | (1,068) | 1,607 | NM | | Income Tax Expense (Benefit) | 193 | 22 | 171 | NM | | Net Income (Loss) | 346 | (1,090) | 1,436 | NM | | Basic EPS | 0.70 | (2.21) | 2.91 | NM | | Diluted EPS | 0.70 | (2.21) | 2.91 | NM | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)%20(UNAUDITED)) Elanco reported significant comprehensive income for Q3 and nine months 2024, a substantial improvement from prior year losses, driven by net income and foreign currency adjustments **Comprehensive Income (Loss) (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | 364 | (1,096) | 346 | (1,090) | | Cash flow hedges, net of taxes | (81) | — | (58) | (19) | | Foreign currency translation, net of taxes | 283 | (197) | (10) | (65) | | Defined benefit plans, net of taxes | 1 | (4) | (5) | (6) | | Other comprehensive income (loss), net of taxes | 203 | (201) | (73) | (90) | | Comprehensive income (loss) | 567 | (1,297) | 273 | (1,180) | [Condensed Consolidated Balance Sheets](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Elanco's total assets decreased to **$13,283 million** as of September 30, 2024, driven by reduced goodwill and intangibles, while liabilities decreased, increasing total equity **Condensed Consolidated Balance Sheets (Millions $):** | Asset/Liability/Equity | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 490 | 352 | | Accounts receivable, net | 840 | 842 | | Inventories | 1,632 | 1,735 | | Total current assets | 3,366 | 3,407 | | Goodwill | 4,625 | 5,094 | | Other intangibles, net | 4,011 | 4,494 | | Total assets | 13,283 | 14,362 | | **Liabilities** | | | | Accounts payable | 259 | 270 | | Current portion of long-term debt | 44 | 38 | | Total current liabilities | 1,321 | 1,241 | | Long-term debt | 4,313 | 5,736 | | Total liabilities | 6,760 | 8,139 | | **Equity** | | | | Total equity | 6,523 | 6,223 | - Goodwill decreased by **$469 million** and other intangibles decreased by **$483 million** from December 31, 2023, to September 30, 2024[12](index=12&type=chunk) - Long-term debt significantly decreased by **$1,423 million**, contributing to a stronger equity position[13](index=13&type=chunk) [Condensed Consolidated Statements of Equity (Unaudited)](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY%20(UNAUDITED)) Elanco's total equity increased to **$6,523 million** by September 30, 2024, driven by net income and stock-based compensation, partially offset by comprehensive losses **Changes in Total Equity (Millions $):** | Period | Total Equity | | :--- | :--- | | December 31, 2023 | 6,223 | | Net income (9 months ended Sep 30, 2024) | 346 | | Other comprehensive (loss) income, net of tax (9 months ended Sep 30, 2024) | (73) | | Stock-based compensation activity, net (9 months ended Sep 30, 2024) | 27 | | September 30, 2024 | 6,523 | - The company issued approximately **17 million** shares of common stock on February 1, 2023, due to the conversion of Tangible Equity Units (TEUs)[15](index=15&type=chunk)[40](index=40&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) Elanco generated significant cash from operations and investing (due to aqua divestiture) for the nine months ended September 30, 2024, largely used for debt repayments, resulting in a net cash increase **Cash Flows (Millions $):** | Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 364 | 114 | | Net Cash Provided by (Used for) Investing Activities | 1,248 | (134) | | Net Cash (Used for) Provided by Financing Activities | (1,460) | 56 | | Effect of exchange rate changes on cash | (14) | (12) | | Net increase in cash and cash equivalents | 138 | 24 | | Cash and cash equivalents – end of period | 490 | 369 | - Cash provided by investing activities increased significantly by **$1,382 million**, primarily due to **$1,294 million** in proceeds from the aqua business divestiture[16](index=16&type=chunk)[96](index=96&type=chunk) - Cash used for financing activities was **$1,460 million**, mainly due to **$1,587 million** in term loan debt repayments and **$200 million** in net repayments on the Revolving Credit Facility[16](index=16&type=chunk)[97](index=97&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) These notes provide detailed disclosures for the financial statements, covering accounting policies, new pronouncements, revenue, acquisitions, divestitures, asset impairment, debt, and legal matters [Note 1. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Unaudited condensed consolidated financial statements adhere to SEC interim reporting and GAAP, with interim results not indicative of full-year performance - Financial statements are unaudited and prepared per SEC interim reporting rules, condensing certain GAAP disclosures[17](index=17&type=chunk) - Interim results are not indicative of full-year performance, and estimates and assumptions are used, which may differ from actual results[17](index=17&type=chunk) [Note 2. New Financial Accounting Pronouncements](index=11&type=section&id=Note%202.%20New%20Financial%20Accounting%20Pronouncements) Elanco is assessing new accounting standards (ASU 2023-07, 2023-09, 2024-03) to enhance disclosures on segment reporting, income taxes, and expense disaggregation, with various effective dates **New Financial Accounting Pronouncements:** | Standard | Description | Effective Date | Effect on Financial Statements | | :--- | :--- | :--- | :--- | | ASU 2023-07, Segment Reporting | Improves disclosures about significant segment expenses provided to CODM. Applies to entities with a single reportable segment. | Fiscal years beginning after Dec 31, 2023 (interim periods after Dec 15, 2024). Retrospective application. | Currently assessing impact on consolidated financial statements and footnote disclosures. | | ASU 2023-09, Income Taxes | Enhances transparency of income tax disclosures. | Fiscal years beginning after Dec 31, 2024. Prospective application allowed. | Currently assessing impact on consolidated financial statements, including Income Taxes footnote. | | ASU 2024-03, Expense Disaggregation Disclosures | Provides more detailed information about specified expense categories (inventory purchases, employee compensation, depreciation, amortization). | Fiscal years beginning after Dec 15, 2026 (interim periods after Dec 15, 2027). Prospective or retrospective application. | Currently assessing impact on consolidated financial statements, including our footnote disclosures. | [Note 3. Revenue](index=12&type=section&id=Note%203.%20Revenue) Elanco recognizes revenue from product sales, with total revenue increasing **1% to $3,419 million** for the nine months ended September 30, 2024, driven by modest growth in Pet Health and Farm Animal categories - Revenue from product sales is recognized when the customer obtains control of goods, generally upon shipment[21](index=21&type=chunk) **Global Sales Rebates and Discounts Liability (Millions $):** | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Beginning balance | 367 | 324 | | Reduction of revenue | 620 | 558 | | Payments | (656) | (522) | | Foreign currency translation adjustments | 2 | (4) | | Ending balance | 333 | 356 | **Revenue by Product Category (Millions $):** | Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Pet Health | 486 | 495 | 1,704 | 1,688 | | Farm Animal | 530 | 561 | 1,680 | 1,661 | | Contract Manufacturing | 14 | 12 | 35 | 33 | | **Total Revenue** | **1,030** | **1,068** | **3,419** | **3,382** | - A single customer accounted for approximately **11%** of revenue for the nine months ended September 30, 2024[25](index=25&type=chunk) [Note 4. Acquisitions, Divestitures and Other Arrangements](index=13&type=section&id=Note%204.%20Acquisitions%2C%20Divestitures%20and%20Other%20Arrangements) Elanco completed NutriQuest acquisitions in 2023 and divested its aqua business in 2024 for **$1,294 million**, generating a **$640 million** pre-tax gain and enabling significant debt repayment, while also impairing a contract asset due to supplier insolvency - Acquired NutriQuest for **$59 million** in January 2023, expanding swine, poultry, and cattle nutritional health products[26](index=26&type=chunk)[27](index=27&type=chunk) - Divested aqua business on July 9, 2024, for **$1,294 million** cash, primarily used for term loan debt repayment, resulting in a pre-tax gain of **$640 million** and **$171 million** in income tax expense[31](index=31&type=chunk)[32](index=32&type=chunk) **Assets Derecognized from Aqua Business Divestiture (Millions $):** | Asset Category | Amount | | :--- | :--- | | Inventories | 43 | | Goodwill | 458 | | Other intangibles, net | 51 | | Property and equipment, net | 68 | | Other assets | 14 | | **Total assets** | **634** | - Impaired a **$12 million** contract asset in September 2024 due to the insolvency of TriRx Speke Ltd, a contract manufacturing supply partner[34](index=34&type=chunk) [Note 5. Asset Impairment, Restructuring and Other Special Charges](index=15&type=section&id=Note%205.%20Asset%20Impairment%2C%20Restructuring%20and%20Other%20Special%20Charges) Asset impairment, restructuring, and other special charges increased to **$17 million** for Q3 and **$143 million** for the nine months ended September 30, 2024, including impairments from supplier issues, IPR&D write-offs, restructuring, and divestiture costs **Asset Impairment, Restructuring and Other Special Charges (Millions $):** | Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Restructuring charges | 2 | — | 45 | — | | Acquisition and divestiture-related charges | — | 11 | 17 | 86 | | Asset impairments | 15 | 5 | 76 | 5 | | Other | — | — | 5 | — | | **Total expense** | **17** | **16** | **143** | **91** | - Restructuring charges in 2024 primarily relate to a program approved in February 2024 to reallocate international resources from farm animal to pet health and changes in operations in markets like Argentina[36](index=36&type=chunk) - Asset impairments in 2024 included a **$53 million** write-off of an IL-4R IPR&D asset and **$15 million** related to the financial difficulties of contract manufacturing partner TriRx[36](index=36&type=chunk) [Note 6. Inventories](index=16&type=section&id=Note%206.%20Inventories) Elanco's total inventories decreased from **$1,735 million** to **$1,632 million** by September 30, 2024, with reductions across all categories **Inventories (Millions $):** | Category | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Finished products | 811 | 857 | | Work in process | 779 | 814 | | Raw materials and supplies | 105 | 128 | | Total | 1,695 | 1,799 | | Decrease to LIFO cost | (63) | (64) | | **Inventories** | **1,632** | **1,735** | [Note 7. Equity](index=16&type=section&id=Note%207.%20Equity) In February 2023, Elanco's Tangible Equity Units (TEUs) were converted into approximately **17 million** shares of common stock at the maximum settlement rate - On February 1, 2023, **11 million** TEUs were converted into approximately **17 million** shares of common stock at the maximum settlement rate[40](index=40&type=chunk) [Note 8. Debt](index=16&type=section&id=Note%208.%20Debt) Elanco's long-term debt decreased significantly to **$4,313 million** by September 30, 2024, driven by **$1,587 million** in term loan repayments from the aqua divestiture, and the company remained compliant with debt covenants **Long-term Debt (Millions $):** | Debt Instrument | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Incremental Term Facility due 2025 | — | 175 | | Incremental Term Facility due 2028 | 371 | 489 | | Incremental Term Facility due 2029 | 188 | 247 | | Incremental Term Facility due 2031 | 350 | — | | Term Loan B due 2027 | 2,603 | 3,838 | | Revolving Credit Facility | — | 200 | | Securitization Facility | 125 | 125 | | 4.900% Senior Notes due 2028 | 750 | 750 | | Unamortized debt issuance costs | (30) | (50) | | **Total long-term debt** | **4,313** | **5,736** | - Repaid **$1,587 million** of term loan debt during the nine months ended September 30, 2024, primarily using proceeds from the aqua business sale[46](index=46&type=chunk) - Entered into a new **$350 million** Incremental Term Facility due 2031, with proceeds used to repay the 2025 facility and for general corporate purposes[45](index=45&type=chunk) - As of September 30, 2024, approximately **81%** of long-term indebtedness bears interest at a fixed rate, and the company was in compliance with all debt covenants[46](index=46&type=chunk) [Note 9. Financial Instruments](index=17&type=section&id=Note%209.%20Financial%20Instruments) Elanco uses derivative instruments to manage market risks, including foreign currency contracts and **$2,800 million** in interest rate swaps, with a **$9 million** net gain from foreign currency derivatives in Q3 2024 and **$1,000 million** in settled swaps - Utilizes foreign currency exchange forward or option contracts to reduce effects of fluctuating foreign currency exchange rates, with **$726 million** notional amount outstanding as of September 30, 2024[48](index=48&type=chunk) **Net Gains on Derivative Instruments Not Designated as Hedges (Millions $):** | Instrument | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Foreign exchange forward contracts | 9 | 1 | 3 | 2 | - Interest rate swaps with a notional amount of **$2,800 million** were outstanding as of September 30, 2024, used to convert variable-rate debt to fixed-rate debt[51](index=51&type=chunk) - Settled **$1,000 million** of interest rate swaps in July 2024, receiving **$5 million** in cash proceeds, following the aqua business sale and debt pay down[51](index=51&type=chunk) [Note 10. Fair Value](index=18&type=section&id=Note%2010.%20Fair%20Value) Elanco measures financial assets and liabilities at fair value using a hierarchy (Level 1, 2, or 3), with derivatives primarily Level 2 and contingent consideration as Level 3, estimated via Monte Carlo simulation - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant observable inputs), and Level 3 (unobservable inputs)[53](index=53&type=chunk)[54](index=54&type=chunk) **Fair Value Measurements (Millions $):** | Financial Statement Line Item | Carrying Amount (Sep 30, 2024) | Fair Value (Sep 30, 2024) | | :--- | :--- | :--- | | Prepaid expenses and other - derivative instruments | 28 | 28 | | Other current liabilities - derivative instruments | (22) | (22) | | Other current liabilities - contingent consideration | (20) | (20) | | Other noncurrent liabilities - derivative instruments | (131) | (131) | | Other noncurrent liabilities - contingent consideration | (16) | (16) | | Long-term debt, including current portion | (4,387) | (4,413) | - Contingent consideration liabilities are estimated using a Monte Carlo simulation model, classified as Level 3 measurements[55](index=55&type=chunk) [Note 11. Goodwill](index=19&type=section&id=Note%2011.%20Goodwill) Goodwill decreased to **$4,625 million** by September 30, 2024, primarily due to **$458 million** derecognition from the aqua business divestiture, with no impairments in the current period, unlike the **$1,042 million** charge in Q3 2023 **Changes in Goodwill Carrying Amount (Millions $):** | Metric | Amount | | :--- | :--- | | December 31, 2023 (net) | 5,094 | | Divestiture | (458) | | Foreign currency translation adjustments | (11) | | **September 30, 2024 (net)** | **4,625** | - A **$1,042 million** pre-tax goodwill impairment charge was recorded in Q3 2023, driven by an increased discount rate assumption[56](index=56&type=chunk) - No goodwill impairments were recorded during the three or nine months ended September 30, 2024[56](index=56&type=chunk) [Note 12. Income Taxes](index=20&type=section&id=Note%2012.%20Income%20Taxes) Elanco recognized **$195 million** in income tax expense for Q3 and **$193 million** for the nine months ended September 30, 2024, with **$171 million** related to the aqua business divestiture gain, resulting in a **34.8%** effective tax rate for Q3 2024 **Income Tax Expense (Benefit) and Effective Tax Rate:** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Income tax expense (benefit) (Millions $) | 195 | (1) | 193 | 22 | | Effective tax rate | 34.8% | 0.2% | 35.8% | (2.0)% | - Of the total income tax expense for the three and nine months ended September 30, 2024, **$171 million** was associated with the taxable gain on the aqua business divestiture[57](index=57&type=chunk) - The effective tax rate for Q3 2024 (**34.8%**) was primarily impacted by the divestiture gain and jurisdictional earnings mix, while Q3 2023 (**0.2%**) was affected by a non-deductible goodwill impairment charge[57](index=57&type=chunk) [Note 13. Commitments and Contingencies](index=20&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) Elanco faces legal actions, including a **$15 million** Seresto™ class action settlement and new lawsuits regarding Zenrelia and Credelio Quattro. The company also accrued a **$15 million** SEC liability and has a significant lease commitment for a new headquarters - A **$15 million** charge was recorded in Q3 2023 for a potential settlement of Seresto™ class action lawsuits, with final court approval expected in December 2024 and payment in Q1 2025[58](index=58&type=chunk)[59](index=59&type=chunk) - New securities class action and shareholder derivative lawsuits were filed in late 2024, alleging false/misleading statements regarding Zenrelia and Credelio Quattro product safety and launch timelines[60](index=60&type=chunk) - Reached an agreement in principle with the SEC regarding channel inventory and sales practices, accruing a **$15 million** liability, subject to SEC approval[62](index=62&type=chunk) - Has a lease commitment of approximately **$378 million** over **25 years** for a new corporate headquarters in Indianapolis, expected to commence in 2025, partially funded by a **$64 million** TIF incentive[63](index=63&type=chunk) [Note 14. Earnings Per Share](index=22&type=section&id=Note%2014.%20Earnings%20Per%20Share) Elanco calculates basic and diluted EPS, with diluted weighted-average shares outstanding at **497.7 million** for Q3 and **496.9 million** for the nine months ended September 30, 2024 - Basic EPS is calculated using actual weighted-average common shares, while diluted EPS includes potential common stock equivalents from equity awards[64](index=64&type=chunk) **Weighted-Average Shares Outstanding (Millions):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Basic weighted-average common shares outstanding | 494.3 | 492.7 | 493.9 | 492.1 | | Assumed conversion of dilutive common stock equivalents | 3.4 | — | 3.0 | — | | **Diluted weighted-average shares outstanding** | **497.7** | **492.7** | **496.9** | **492.1** | - Approximately **0.9 million** and **0.7 million** potential common shares were excluded from diluted EPS calculation for the three and nine months ended September 30, 2024, respectively, as they were anti-dilutive[66](index=66&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Elanco's financial performance, condition, and key business developments, analyzing revenue, operating expenses, liquidity, and cash flows, with emphasis on the aqua business divestiture and debt reduction [Business Overview](index=24&type=section&id=Business%20Overview) Elanco is a global animal health leader, providing products and services for farm animals and pets across over **90** countries, operating as a single segment with an expanding omnichannel presence - Elanco is a global leader in animal health, innovating products and services for farm animals and pets in over **90** countries[69](index=69&type=chunk) - The company operates as a single segment, with a diverse portfolio of approximately **200** brands, and has expanded its omnichannel presence in veterinary, retail, and e-commerce markets[69](index=69&type=chunk) [Product Development and Regulatory Update](index=24&type=section&id=Product%20Development%20and%20Regulatory%20Update) Elanco drives revenue growth through product innovation, with recent FDA approvals for Bovaer (methane-reducing feed), Zenrelia (canine atopic dermatitis), and Credelio Quattro (parasite protection), with launches in Q3 2024 and Q1 2025 - Bovaer (3-NOP), a methane-reducing feed ingredient for dairy cattle, received U.S. FDA approval in May 2024 and launched in Q3 2024[70](index=70&type=chunk) - Zenrelia, a JAK inhibitor for canine pruritus and atopic dermatitis, received final FDA approval in September 2024 and launched shortly after[70](index=70&type=chunk) - Credelio Quattro, a monthly chewable for dogs protecting against multiple parasites, received final FDA approval in October 2024, with launch expected in Q1 2025[70](index=70&type=chunk) [Other Key Trends and Factors Affecting Our Results of Operations](index=25&type=section&id=Other%20Key%20Trends%20and%20Factors%20Affecting%20Our%20Results%20of%20Operations) Key factors impacting Elanco include the **$1,294 million** aqua business divestiture, a restructuring plan for **$30-35 million** in annualized savings, challenges from a contract manufacturer's insolvency, and ongoing global macroeconomic pressures - Divestiture of aqua business on July 9, 2024, for **$1,294 million** in cash, used to repay term loan debt, strategically prioritizing investments in larger markets[72](index=72&type=chunk)[73](index=73&type=chunk) - Restructuring plan approved in February 2024 to improve operational efficiencies, reallocate resources to pet health, and reduce foreign currency exposure, with expected annualized net savings of **$30 to $35 million**[73](index=73&type=chunk) - Insolvency of contract manufacturing partner TriRx Speke Ltd in September 2024 led to increased operational costs and a **$12 million** impairment of a contract asset[73](index=73&type=chunk) - Ongoing global macroeconomic factors (Russia-Ukraine conflict, supply chain disruption, higher interest rates, foreign currency volatility, inflation) continue to impact operations[73](index=73&type=chunk) [Results of Operations](index=25&type=section&id=RESULTS%20OF%20OPERATIONS) Elanco's Q3 2024 revenue decreased **4% to $1,030 million**, while nine-month revenue increased **1% to $3,419 million**. Net income significantly improved due to a **$640 million** divestiture gain and no goodwill impairment, despite increased operating expenses **Revenue and Net Income (Loss) Overview (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,030 | 1,068 | 3,419 | 3,382 | | Net income (loss) | 364 | (1,096) | 346 | (1,090) | - Approximately **53%** of revenue for the nine months ended September 30, 2024 and 2023, was denominated in foreign currencies, making revenue susceptible to foreign currency exchange rate changes[74](index=74&type=chunk) [Revenue](index=25&type=section&id=Revenue) Q3 2024 total revenue decreased **4% to $1,030 million** due to aqua divestiture and lower pet health volumes, while nine-month revenue increased **1% to $3,419 million** from pricing and non-aqua farm animal volumes **Revenue by Product Category (Millions $):** | Category | Three Months Ended Sep 30, 2024 | % of Total Revenue 2024 | Three Months Ended Sep 30, 2023 | % of Total Revenue 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Pet Health | 486 | 47% | 495 | 46% | (9) | (2)% | | Farm Animal | 530 | 52% | 561 | 53% | (31) | (6)% | | Contract Manufacturing | 14 | 1% | 12 | 1% | 2 | 17% | | **Total** | **1,030** | **100%** | **1,068** | **100%** | **(38)** | **(4)%** | **Revenue Drivers - Three Months Ended Sep 30, 2024 (% Change):** | Category | Price | FX Rate | Volume | Divestiture | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Pet Health | 2% | —% | (4)% | —% | (2)% | | Farm Animal | 3% | (1)% | —% | (8)% | (6)% | | Contract Manufacturing | 6% | (1)% | 12% | —% | 17% | | **Total** | **2%** | **(1)%** | **(1)%** | **(4)%** | **(4)%** | - Pet health revenue decreased **2%** for the three months, driven by lower volumes due to competitive pressure in the U.S. veterinary channel and vaccine supply volatility, partially offset by new products and improved retail parasiticide demand[78](index=78&type=chunk) - Farm animal revenue decreased **6%** for the three months, primarily due to the aqua business divestiture, partially offset by a **3%** price increase. Non-aqua volumes were flat, with strength in U.S. cattle and poultry offset by weakness in Australian sheep products and Kexxtone recall impact[78](index=78&type=chunk) [Cost of Sales](index=27&type=section&id=Cost%20of%20Sales) Cost of sales increased **1%** for Q3 and **6%** for the nine months ended September 30, 2024, rising to **48%** and **44%** of revenue respectively, due to inflation, unfavorable manufacturing, and product mix changes **Cost of Sales (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Cost of sales | 492 | 487 | 1,502 | 1,415 | | % of revenue | 48% | 46% | 44% | 42% | - Gross margin was unfavorably impacted by inflation, unfavorable manufacturing performance, and product mix changes from the aqua business divestiture[79](index=79&type=chunk) [Research and Development](index=28&type=section&id=Research%20and%20Development) R&D expenses increased **$1 million (1%)** for Q3 and **$15 million (6%)** for the nine months ended September 30, 2024, driven by higher employee-related expenses and project timing **Research and Development Expenses (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | R&D | 87 | 86 | 263 | 248 | | % of revenue | 8% | 8% | 8% | 7% | - Increase in R&D expenses driven by higher employee-related expenses and timing of project costs[80](index=80&type=chunk) [Marketing, Selling and Administrative](index=28&type=section&id=Marketing%2C%20Selling%20and%20Administrative) Marketing, selling, and administrative expenses increased **$10 million (3%)** for Q3 and **$21 million (2%)** for the nine months ended September 30, 2024, primarily due to higher employee-related expenses and U.S. pet health investments **Marketing, Selling and Administrative Expenses (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Marketing, selling & admin | 323 | 313 | 1,014 | 993 | | % of revenue | 31% | 29% | 30% | 29% | - Increase driven by higher employee-related expenses and investments in the U.S. pet health business, and global pet health marketing and promotional spend[81](index=81&type=chunk) [Amortization of Intangible Assets](index=28&type=section&id=Amortization%20of%20Intangible%20Assets) Amortization of intangible assets decreased **$7 million (5%)** for Q3 and **$13 million (3%)** for the nine months ended September 30, 2024, due to foreign currency changes and cessation of amortization for divested aqua business assets **Amortization of Intangible Assets (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Amortization of intangible assets | 133 | 140 | 397 | 410 | - Decrease in amortization driven by foreign currency exchange rate changes and the elimination of amortization for aqua business intangible assets following their divestiture[82](index=82&type=chunk) [Asset Impairment, Restructuring and Other Special Charges](index=28&type=section&id=Asset%20Impairment%2C%20Restructuring%20and%20Other%20Special%20Charges_MD%26A) Asset impairment, restructuring, and other special charges increased to **$17 million** for Q3 and **$143 million** for the nine months ended September 30, 2024, including impairments from supplier issues, IPR&D write-offs, restructuring, and divestiture costs **Asset Impairment, Restructuring and Other Special Charges (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Asset impairment, restructuring and other special charges | 17 | 16 | 143 | 91 | - Nine-month charges include a **$53 million** impairment of a pet health IPR&D asset, **$45 million** for the 2024 restructuring plan, and **$17 million** for aqua business divestiture transaction costs[85](index=85&type=chunk) [Gain on Divestiture](index=29&type=section&id=Gain%20on%20Divestiture) Elanco recorded a pre-tax gain of **$640 million** on the divestiture of its aqua business during the three months ended September 30, 2024 **Gain on Divestiture (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Gain on divestiture | (640) | — | (640) | — | - The **$640 million** pre-tax gain resulted from the sale of the aqua business[86](index=86&type=chunk) [Goodwill Impairment](index=29&type=section&id=Goodwill%20Impairment_MD%26A) No goodwill impairment was recorded in Q3 or nine months 2024, contrasting with a **$1,042 million** pre-tax charge in Q3 2023 due to an increased discount rate assumption **Goodwill Impairment (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Goodwill impairment | — | 1,042 | — | 1,042 | - A **$1,042 million** pre-tax goodwill impairment charge was recorded in Q3 2023 due to an increased discount rate assumption[90](index=90&type=chunk) [Interest Expense, Net of Capitalized Interest](index=29&type=section&id=Interest%20Expense%2C%20Net%20of%20Capitalized%20Interest) Interest expense, net, decreased **$14 million (19%)** for Q3 and **$21 million (10%)** for the nine months ended September 30, 2024, primarily due to lower average outstanding debt balances from repayments, partially offset by a **$12 million** non-cash charge **Interest Expense, Net of Capitalized Interest (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Interest expense, net of capitalized interest | 58 | 72 | 189 | 210 | - Decrease in interest expense driven by lower average outstanding debt balances due to current year debt repayment activity[90](index=90&type=chunk) - Partially offset by a **$12 million** non-cash charge for the write-off of previously deferred financing costs due to early debt repayments[90](index=90&type=chunk) [Other Expense, Net](index=29&type=section&id=Other%20Expense%2C%20Net) Other expense, net, decreased significantly by **$8 million (89%)** for Q3 and **$29 million (71%)** for the nine months ended September 30, 2024, primarily due to lower foreign currency losses and the absence of a **$15 million** Seresto settlement provision **Other Expense, Net (Millions $):** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Other expense, net | 1 | 9 | 12 | 41 | - Q3 2024 other expense primarily from foreign currency exchange losses and mark-to-market adjustments[90](index=90&type=chunk) - Q3 2023 other expense included foreign currency exchange losses and a **$15 million** settlement provision for Seresto class action lawsuits[90](index=90&type=chunk) [Income Tax Expense (Benefit)](index=29&type=section&id=Income%20Tax%20Expense%20(Benefit)) Elanco recognized **$195 million** in income tax expense for Q3 and **$193 million** for the nine months ended September 30, 2024, with **$171 million** from the aqua business divestiture gain, resulting in a **34.8%** effective tax rate for Q3 2024 **Income Tax Expense (Benefit) and Effective Tax Rate:** | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Income tax expense (benefit) (Millions $) | 195 | (1) | 193 | 22 | | Effective tax rate | 34.8% | 0.2% | 35.8% | (2.0)% | - The **$171 million** income tax expense for Q3 2024 was primarily due to the taxable gain on the aqua business divestiture, which exceeded the reported gain due to derecognition of non-deductible goodwill[91](index=91&type=chunk)[92](index=92&type=chunk) - The effective tax rate for Q3 2023 (**0.2%**) was primarily impacted by the non-deductible **$1,042 million** goodwill impairment charge[92](index=92&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Elanco maintains strong liquidity with **$490 million** cash and available credit, having made **$1,587 million** in debt repayments from aqua divestiture proceeds, significantly reducing leverage and ensuring compliance with debt covenants - Primary liquidity sources are cash on hand, cash flows from operations, and available credit facilities[93](index=93&type=chunk) **Liquidity Position (Millions $):** | Metric | Sep 30, 2024 | | :--- | :--- | | Cash and cash equivalents | 490 | | Unused Revolving Credit Facility capacity | 750 | | Undrawn Securitization Facility capacity | 93 | - Made **$1,587 million** in term loan debt repayments during the nine months ended September 30, 2024, primarily from aqua business divestiture proceeds, significantly reducing leverage[93](index=93&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) For the nine months ended September 30, 2024, operating activities provided **$364 million** cash, investing activities provided **$1,248 million** (aqua divestiture), and financing activities used **$1,460 million** (debt repayments), resulting in a **$138 million** net cash increase **Summary of Cash Flows (Millions $):** | Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Operating activities | 364 | 114 | 250 | | Investing activities | 1,248 | (134) | 1,382 | | Financing activities | (1,460) | 56 | (1,516) | | Effect of exchange-rate changes | (14) | (12) | (2) | | **Net increase in cash and cash equivalents** | **138** | **24** | **114** | [Operating Activities](index=31&type=section&id=Operating%20activities) Net cash provided by operating activities increased by **$250 million** to **$364 million** for the nine months ended September 30, 2024, driven by improvements in operating assets and liabilities - Cash provided by operating activities increased by **$250 million** to **$364 million** for the nine months ended September 30, 2024, due to improvements in operating assets and liabilities[95](index=95&type=chunk) [Investing Activities](index=31&type=section&id=Investing%20activities) Net cash provided by investing activities was **$1,248 million** for the nine months ended September 30, 2024, a significant increase primarily due to **$1,294 million** from the aqua business divestiture and **$66 million** from facility sales - Cash provided by investing activities was **$1,248 million**, a **$1,382 million** increase from the prior year, primarily due to **$1,294 million** from the aqua business divestiture[96](index=96&type=chunk) - Also includes **$66 million** from the collection of a receivable related to the previous divestiture of Shawnee and Speke facilities[96](index=96&type=chunk) [Financing Activities](index=31&type=section&id=Financing%20activities) Net cash used for financing activities was **$1,460 million** for the nine months ended September 30, 2024, primarily due to **$1,587 million** in term loan repayments and **$200 million** in Revolving Credit Facility repayments, partially offset by a **$350 million** new Incremental Term Facility - Cash used for financing activities was **$1,460 million**, primarily due to **$1,587 million** in gross repayments of term loan debt and **$200 million** in net repayments on the Revolving Credit Facility[97](index=97&type=chunk) - Partially offset by **$350 million** in proceeds from the issuance of the Incremental Term Facility due 2031[97](index=97&type=chunk) [Description of Indebtedness](index=31&type=section&id=Description%20of%20Indebtedness) This section refers to Note 8 for a complete description of existing debt and credit facilities, with new developments discussed in the current Form 10-Q - For a complete description of existing debt and credit facilities, refer to Note 8 of this Form 10-Q and Item 8 of the 2023 Form 10-K[98](index=98&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No significant changes or developments occurred in the application of critical accounting policies during the nine months ended September 30, 2024 - No significant changes or developments in the application of critical accounting policies during the nine months ended September 30, 2024[99](index=99&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Elanco is exposed to market risks from foreign currency and interest rate fluctuations, managed through derivatives, with hyperinflationary accounting applied to Argentina and Turkey, and reduced exposure to the Argentine peso [Foreign Exchange Risk](index=32&type=section&id=Foreign%20Exchange%20Risk) Elanco faces foreign currency exchange risk from global operations, applying hyperinflationary accounting to Argentina and Turkey, and has reduced exposure to the Argentine peso through a restructuring plan - Exposed to foreign currency exchange risk from operations in various currencies, including Euro, British pound, Swiss franc, Brazilian real, Australian dollar, Japanese yen, Canadian dollar, and Chinese yuan[100](index=100&type=chunk) - Applied hyperinflationary accounting for Argentina and Turkey subsidiaries since 2018 and 2022, respectively, changing their functional currencies to the U.S. dollar[100](index=100&type=chunk) - A February 2024 restructuring plan reduced foreign currency exposure to the Argentine peso by changing how the company operates and sells into that market[100](index=100&type=chunk) [Interest Risk](index=32&type=section&id=Interest%20Risk) As of September 30, 2024, Elanco held **$2,800 million** in interest rate swaps to convert variable-rate debt to fixed, resulting in approximately **81%** of long-term indebtedness bearing fixed interest, with additional **$850 million** swaps effective in 2026 - Held interest rate swap agreements with a notional value of **$2,800 million** as of September 30, 2024, effectively converting variable-rate debt to fixed-rate[101](index=101&type=chunk) - Approximately **81%** of long-term indebtedness bears interest at a fixed rate, including variable-rate debt converted via swaps[101](index=101&type=chunk) - Forward-starting interest rate swap agreements with a combined notional amount of **$850 million** will become effective in 2026[101](index=101&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Elanco's management, including the CEO and CFO, evaluated disclosure controls and procedures as effective as of September 30, 2024, with no material changes in internal control over financial reporting during Q3 2024 [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated Elanco's disclosure controls and procedures as effective as of September 30, 2024 - Disclosure controls and procedures were evaluated as effective by management, including the CEO and CFO, as of September 30, 2024[102](index=102&type=chunk) [Changes in Internal Controls](index=32&type=section&id=Changes%20in%20Internal%20Controls) No material changes in Elanco's internal control over financial reporting occurred during the third quarter of 2024 - No material changes in internal control over financial reporting occurred during the third quarter of 2024[102](index=102&type=chunk) [PART II. Other Information](index=33&type=section&id=PART%20II.%20Other%20Information) [Legal Proceedings](index=33&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 13 for a summary of Elanco's legal proceedings, to be read with the 2023 Form 10-K - A summary of legal proceedings is provided in Note 13 to the condensed consolidated financial statements[103](index=103&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20RISK%20FACTORS) This section highlights updated risk factors, specifically manufacturing problems and capacity imbalances, emphasizing that such issues, including those at contract manufacturers, can lead to product delays, shortages, and increased costs - No material changes to risk factors from the 2023 Form 10-K, except for revisions related to manufacturing problems and capacity imbalances[104](index=104&type=chunk) - Manufacturing problems, capacity imbalances, and supplier issues (e.g., TriRx Speke's insolvency) can cause product launch delays, inventory shortages, recalls, and unanticipated costs[104](index=104&type=chunk) - The company is making up-front prepayments to TriRx Speke to minimize supply disruption and is exploring options to maintain product supply[104](index=104&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered sales of equity securities or use of proceeds are reported for the period - No unregistered sales of equity securities and use of proceeds to report[106](index=106&type=chunk) [Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities are reported - No defaults upon senior securities to report[106](index=106&type=chunk) [Mine Safety Disclosures](index=34&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) No mine safety disclosures are reported - No mine safety disclosures to report[106](index=106&type=chunk) [Other Information](index=34&type=section&id=Item%205.%20OTHER%20INFORMATION) No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q3 2024 - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q3 2024[106](index=106&type=chunk) [Exhibits](index=35&type=section&id=Item%206.%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, CEO/CFO certifications, and Interactive Data Files (XBRL) - Includes Amendment No. 2 to the Credit Agreement (July 3, 2024) and Incremental Assumption Agreement (August 13, 2024)[107](index=107&type=chunk) - Contains Section 302 and Section 906 certifications from the Chief Executive Officer and Chief Financial Officer[107](index=107&type=chunk) - Interactive Data Files (Inline XBRL) are included as Exhibit 101 and 104[107](index=107&type=chunk) [Signatures](index=36&type=section&id=SIGNATURES) The report is signed by Jeffrey N. Simmons (President and CEO) and Todd S. Young (EVP and CFO) on November 7, 2024 - Report signed by Jeffrey N. Simmons (President and CEO) and Todd S. Young (EVP and CFO) on November 7, 2024[109](index=109&type=chunk)

Elanco Animal Health Incorporated (ELAN) came out with quarterly earnings of $0.13 per share, beating the Zacks Consensus Estimate of $0.12 per share. This compares to earnings of $0.18 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 8.33%. A quarter ago, it was expected that this company would post earnings of $0.24 per share when it actually produced earnings of $0.30, delivering a surprise of 25%.Over the last four quarters ...