Full Press Release Details
The financial tables in this Exhibit 99.1 reflect the revisions
to previously reported financial results related to the identified immaterial errors as noted in the Form 8-K/A filed March 1,
2023 (the "Form 8-K/A").
Revised Financial Highlights
The table below includes the following pet health revenue revisions:
fourth quarter of 2022 was decreased by $3 million and fourth quarter of 2021 decreased by $1 million. There was no change to farm animal
or contract manufacturing revenue.
| Fourth Quarter Results (dollars in millions, except per share amounts) | 2022 | 2021 | Change (%) | CER (1) Change (%) | ||||||||||||
| Pet Health | $ | 420 | $ | 493 | (15 | )% | (11 | )% | ||||||||
| Farm Animal | $ | 552 | $ | 604 | (9 | )% | (3 | )% | ||||||||
| Cattle | $ | 222 | $ | 245 | (9 | )% | (5 | )% | ||||||||
| Poultry | $ | 187 | $ | 208 | (10 | )% | (4 | )% | ||||||||
| Swine | $ | 100 | $ | 118 | (15 | )% | (10 | )% | ||||||||
| Aqua | $ | 43 | $ | 33 | 30 | % | 42 | % | ||||||||
| Contract Manufacturing | $ | 13 | $ | 15 | (13 | )% | (5 | )% | ||||||||
| Total Revenue | $ | 985 | $ | 1,112 | (11 | )% | (7 | )% | ||||||||
| Reported Net Loss | $ | (55 | ) | $ | (105 | ) | 48 | % | ||||||||
| Adjusted EBITDA | $ | 172 | $ | 213 | (19 | )% | ||||||||||
| Reported EPS | $ | (0.11 | ) | $ | (0.22 | ) | 50 | % | ||||||||
| Adjusted EPS | $ | 0.19 | $ | 0.20 | (5 | )% |
The table below includes the following pet health revenue revisions:
full year 2022 was decreased by $7 million and full year 2021 decreased by $1 million. There was no change to farm animal or contract
manufacturing revenue.
| Full Year Results (dollars in millions, except per share amounts) | 2022 | 2021 | Change (%) | CER (1) Change (%) | ||||||||||||
| Pet Health | $ | 2,138 | $ | 2,350 | (9 | )% | (5 | )% | ||||||||
| Farm Animal | $ | 2,219 | $ | 2,332 | (5 | )% | 0 | % | ||||||||
| Cattle | $ | 944 | $ | 980 | (4 | )% | 0 | % | ||||||||
| Poultry | $ | 716 | $ | 744 | (4 | )% | 2 | % | ||||||||
| Swine | $ | 384 | $ | 464 | (17 | )% | (13 | )% | ||||||||
| Aqua | $ | 175 | $ | 144 | 22 | % | 32 | % | ||||||||
| Contract Manufacturing | $ | 54 | $ | 82 | (34 | )% | (29 | )% | ||||||||
| Total Revenue | $ | 4,411 | $ | 4,764 | (7 | )% | (3 | )% | ||||||||
| Reported Net Loss | $ | (78 | ) | $ | (482 | ) | 84 | % | ||||||||
| Adjusted EBITDA | $ | 1,017 | $ | 1,059 | (4 | )% | ||||||||||
| Reported EPS | $ | (0.16 | ) | $ | (0.99 | ) | 84 | % | ||||||||
| Adjusted EPS | $ | 1.11 | $ | 1.07 | 4 | % |
(1) CER = Constant Exchange Rate, representing the
growth rate excluding the impact of foreign exchange rates.
Certain reclassifications of prior year farm animal species revenue
have been made to conform to the current year's presentation.
Certain prior period amounts reflect revisions primarily relating to
tax valuation allowance adjustments and other immaterial revisions as detailed in the Company's February 21, 2023 earnings release
Numbers may not add due to rounding.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as revenue growth excluding
the impact of foreign exchange rate effects, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net (income) loss, adjusted EPS,
adjusted gross profit and adjusted gross margin and net debt leverage to assess and analyze our operational results and trends as explained
in more detail in the reconciliation tables later in this Form 8-K/A.
We believe these non-GAAP financial measures are useful to investors
because they provide greater transparency regarding our operating performance. Reconciliation of non-GAAP financial measures and reported
GAAP financial measures are included in the tables accompanying this Form 8-K/A and are posted on our website at www.elanco.com. The
primary material limitations associated with the use of such non-GAAP measures as compared to U.S. GAAP results include the following:
(i) they may not be comparable to similarly titled measures used by other companies, including those in our industry, (ii) they
exclude financial information and events, such as the effects of an acquisition or amortization of intangible assets, that some may consider
important in evaluating our performance, value or prospects for the future, (iii) they exclude items or types of items that may
continue to occur from period to period in the future and (iv) they may not exclude all unusual or non-recurring items, which could
increase or decrease these measures, which investors may consider to be unrelated to our long-term operations. These non-GAAP measures
are not, and should not be viewed as, substitutes for U.S. GAAP reported measures. We encourage investors to review our unaudited consolidated
financial statements in their entirety and caution investors to use U.S. GAAP measures as the primary means of evaluating our performance,
value and prospects for the future, and non-GAAP measures as supplemental measures.
Elanco Animal Health Incorporated
Consolidated Statements of Operations
(Dollars and shares in millions, except per
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | 985 | $ | 1,112 | $ | 4,411 | $ | 4,764 | ||||||||
| Costs, expenses, and other: | ||||||||||||||||
| Cost of sales | 448 | 512 | 1,913 | 2,132 | ||||||||||||
| Research and development | 80 | 92 | 321 | 369 | ||||||||||||
| Marketing, selling, and administrative | 302 | 327 | 1,265 | 1,403 | ||||||||||||
| Amortization of intangible assets | 130 | 139 | 528 | 556 | ||||||||||||
| Asset impairment, restructuring, and other special charges | 32 | 110 | 183 | 634 | ||||||||||||
| Interest expense, net of capitalized interest | 62 | 55 | 241 | 236 | ||||||||||||
| Other (income) expense, net | 21 | (3 | ) | 32 | 5 | |||||||||||
| Loss before income taxes | $ | (90 | ) | $ | (120 | ) | $ | (72 | ) | $ | (571 | ) | ||||
| Income taxes | (35 | ) | (15 | ) | 6 | (88 | ) | |||||||||
| Net loss | $ | (55 | ) | $ | (105 | ) | $ | (78 | ) | $ | (483 | ) | ||||
| Loss per share: | ||||||||||||||||
| Basic | $ | (0.11 | ) | $ | (0.22 | ) | $ | (0.16 | ) | $ | (0.99 | ) | ||||
| Diluted | $ | (0.11 | ) | $ | (0.22 | ) | $ | (0.16 | ) | $ | (0.99 | ) | ||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 488.5 | 487.4 | 488.3 | 487.2 | ||||||||||||
| Diluted | 488.5 | 487.4 | 488.3 | 487.2 |
Elanco Animal Health Incorporated
Tables Reflecting Revisions to Previously Reported
Financial Statements
(Dollars and shares in millions, except per
The tables below reflect the revisions to reported financial results
for the nine months ended September 30, 2022, the three months and year ended December 31, 2022, and the three months and year
ended December 31, 2021 for the identified immaterial errors as noted in the Form 8-K/A:
| Nine Months Ended September 30, 2022 | ||||||||||||
| As Revised 2/21/23 | Revisions | As Revised 3/1/23 | ||||||||||
| Revenue | $ | 3,430 | $ | (3 | ) | $ | 3,427 | |||||
| Cost of sales | 1,465 | - | 1,465 | |||||||||
| Research and development | 241 | - | 241 | |||||||||
| Marketing, selling, and administrative | 963 | - | 963 | |||||||||
| Amortization of intangible assets | 398 | - | 398 | |||||||||
| Asset impairment, restructuring and other special charges | 152 | - | 152 | |||||||||
| Interest expense, net of capitalized interest | 179 | - | 179 | |||||||||
| Other expense, net | 11 | - | 11 | |||||||||
| Income before taxes (1) | $ | 21 | $ | (3 | ) | $ | 18 | |||||
| Provision for taxes (2) | 43 | (1 | ) | 42 | ||||||||
| Net loss | $ | (22 | ) | $ | (2 | ) | $ | (24 | ) | |||
| Loss per share: | ||||||||||||
| basic | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.05 | ) | |||
| diluted | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.05 | ) | |||
| Weighted average shares outstanding: | ||||||||||||
| basic | 488.3 | 488.3 | 488.3 | |||||||||
| diluted | 488.3 | 488.3 | 488.3 |
Numbers may not add due to rounding.
| (1) | Revisions to components of Income before taxes relate to an immaterial amount of estimated sales rebates and discounts that was not recorded correctly in a Western Europe affiliate. | |
| (2) | Revisions to Provision for taxes are composed of the tax impact of other revisions. |
| Three Months Ended December 31, 2022 | ||||||||||||
| As Reported on 2/21/23 | Revisions | As Revised 3/1/23 | ||||||||||
| Revenue | $ | 988 | $ | (3 | ) | $ | 985 | |||||
| Cost of sales | 448 | - | 448 | |||||||||
| Research and development | 80 | - | 80 | |||||||||
| Marketing, selling, and administrative | 303 | (1 | ) | 302 | ||||||||
| Amortization of intangible assets | 130 | - | 130 | |||||||||
| Asset impairment, restructuring and other special charges | 32 | - | 32 | |||||||||
| Interest expense, net of capitalized interest | 62 | - | 62 | |||||||||
| Other expense, net | 21 | - | 21 | |||||||||
| Income before taxes (1) | $ | (88 | ) | $ | (2 | ) | $ | (90 | ) | |||
| Provision for taxes (2) | (34 | ) | (1 | ) | (35 | ) | ||||||
| Net loss | $ | (54 | ) | $ | (1 | ) | $ | (55 | ) | |||
| Loss per share: | ||||||||||||
| basic | $ | (0.11 | ) | $ | - | $ | (0.11 | ) | ||||
| diluted | $ | (0.11 | ) | $ | - | $ | (0.11 | ) | ||||
| Weighted average shares outstanding: | ||||||||||||
| basic | 488.5 | 488.5 | 488.5 | |||||||||
| diluted | 488.5 | 488.5 | 488.5 |
Numbers may not add due to rounding.
| (1) | Revisions to components of Income before taxes relate to an immaterial amount of estimated sales rebates and discounts that was not recorded correctly in a Western Europe affiliate and the associated reductions to the Company's management incentive plan associated with the revision to Revenue. | |
| (2) | Revisions to Provision for taxes are composed of the tax impact of other revisions. |
| Year Ended December 31, 2022 | ||||||||||||
| As Reported on 2/21/23 | Revisions | As Revised 3/1/23 | ||||||||||
| Revenue | $ | 4,418 | $ | (7 | ) | $ | 4,411 | |||||
| Cost of sales | 1,913 | - | 1,913 | |||||||||
| Research and development | 321 | - | 321 | |||||||||
| Marketing, selling, and administrative | 1,266 | (1 | ) | 1,265 | ||||||||
| Amortization of intangible assets | 528 | - | 528 | |||||||||
| Asset impairment, restructuring and other special charges | 183 | - | 183 | |||||||||
| Interest expense, net of capitalized interest | 241 | - | 241 | |||||||||
| Other (income) expense, net | 32 | - | 32 | |||||||||
| Income before taxes (1) | $ | (66 | ) | $ | (6 | ) | $ | (72 | ) | |||
| Provision for taxes (2) | 8 | (2 | ) | 6 | ||||||||
| Net income (loss) | $ | (74 | ) | $ | (4 | ) | $ | (78 | ) | |||
| Loss per share: | ||||||||||||
| basic | $ | (0.15 | ) | $ | (0.01 | ) | $ | (0.16 | ) | |||
| diluted | $ | (0.15 | ) | $ | (0.01 | ) | $ | (0.16 | ) | |||
| Weighted average shares outstanding: | ||||||||||||
| basic | 488.3 | 488.3 | 488.3 | |||||||||
| diluted | 488.3 | 488.3 | 488.3 |
Numbers may not add due to rounding.
| (1) | Revisions to components of Income before taxes relate to an immaterial amount of estimated sales rebates and discounts that was not recorded correctly in a Western Europe affiliate and the associated reductions to the Company's management incentive plan associated with the revision to Revenue. | |
| (2) | Revisions to Provision for taxes are composed of the tax impact of other revisions. |
| Three Months Ended December 31, 2021 | Year Ended December 31, 2021 | |||||||||||||||||||||||
| As Revised 2/21/23 | Revisions | As Revised 3/1/23 | As Revised 2/21/23 | Revisions | As Revised 3/1/23 | |||||||||||||||||||
| Revenue | $ | 1,113 | $ | (1 | ) | $ | 1,112 | $ | 4,765 | $ | (1 | ) | $ | 4,764 | ||||||||||
| Cost of sales | 512 | - | 512 | 2,132 | - | 2,132 | ||||||||||||||||||
| Research and development | 92 | - | 92 | 369 | - | 369 | ||||||||||||||||||
| Marketing, selling, and administrative | 327 | - | 327 | 1,403 | - | 1,403 | ||||||||||||||||||
| Amortization of intangible assets | 139 | - | 139 | 556 | - | 556 | ||||||||||||||||||
| Asset impairment, restructuring and other special charges | 110 | - | 110 | 634 | - | 634 | ||||||||||||||||||
| Interest expense, net of capitalized interest | 55 | - | 55 | 236 | - | 236 | ||||||||||||||||||
| Other (income) expense, net | (3 | ) | - | (3 | ) | 5 | - | 5 | ||||||||||||||||
| Income (loss) before taxes (1) | $ | (119 | ) | $ | (1 | ) | $ | (120 | ) | $ | (570 | ) | $ | (1 | ) | $ | (571 | ) | ||||||
| Provision for taxes (2) | (15 | ) | - | (15 | ) | (88 | ) | - | (88 | ) | ||||||||||||||
| Net loss | $ | (104 | ) | $ | (1 | ) | $ | (105 | ) | $ | (482 | ) | $ | (1 | ) | $ | (483 | ) | ||||||
| Loss per share: | ||||||||||||||||||||||||
| basic | $ | (0.21 | ) | $ | (0.01 | ) | $ | (0.22 | ) | $ | (0.99 | ) | $ | - | $ | (0.99 | ) | |||||||
| diluted | $ | (0.21 | ) | $ | (0.01 | ) | $ | (0.22 | ) | $ | (0.99 | ) | $ | - | $ | (0.99 | ) | |||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||
| basic | 487.4 | 487.4 | 487.4 | 487.2 | 487.2 | 487.2 | ||||||||||||||||||
| diluted | 487.4 | 487.4 | 487.4 | 487.2 | 487.2 | 487.2 |
Numbers may not add due to rounding.
| (1) | Revisions to components of Income before taxes in the three months and year ended December 31, 2021 relate to an immaterial amount of estimated sales rebates and discounts that was not recorded correctly in a Western Europe affiliate. | |
| (2) | Revisions to Provision for taxes in the three months and year ended December 31, 2021 are composed of the tax impact of other revisions. |
Elanco Animal Health Incorporated
Reconciliation of GAAP Reported to Selected
Non-GAAP Adjusted Information
(Dollars and shares in millions, except per
We define adjusted net income as net income (loss) excluding amortization
of intangible assets, purchase accounting adjustments to inventory, integration costs of acquisitions, severance, asset impairment, gain
on sale of assets, facility exit costs, tax valuation allowances and other specified significant items, such as unusual or non-recurring
items that are unrelated to our long-term operations adjusted for income tax expense associated with the excluded financial items.
We define adjusted EBITDA as net income (loss) adjusted for interest
expense (income), income tax expense (benefit), tax valuation allowances, and depreciation and amortization, further adjusted to exclude
purchase accounting adjustments to inventory, integration costs of acquisitions, severance, asset impairment, gain on sale of assets,
facility exit costs and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term
operations adjusted for income tax expense associated with the excluded financial items.
We define adjusted EPS as adjusted net income divided by the number
of weighted average shares outstanding as of December 31, 2022 and 2021.
The following is a reconciliation of GAAP Reported/Revised for the
three months ended December 31, 2022 and 2021 to selected Non-GAAP adjusted information:
| 2022 | 2021 | |||||||||||||||||||||||
| GAAP Revised | Adjusted Items (c) | Non- GAAP (b) | GAAP Revised (a) | Adjusted Items (c) | Non- GAAP (b) | |||||||||||||||||||
| Amortization of intangible assets | $ | 130 | $ | 130 | $ | - | $ | 139 | 139 | $ | - | |||||||||||||
| Asset impairment, restructuring and other special charges (1) (2) | $ | 32 | $ | 32 | $ | - | $ | 110 | $ | 110 | $ | - | ||||||||||||
| Interest expense, net of capitalized interest (3) | $ | 62 | $ | 1 | $ | 61 | $ | 55 | $ | - | $ | 55 | ||||||||||||
| Other (income) expense, net (4) (5) | $ | 21 | $ | 3 | $ | 18 | $ | (3 | ) | $ | (5 | ) | $ | 2 | ||||||||||
| Income (loss) before taxes | $ | (90 | ) | $ | 165 | $ | 76 | $ | (120 | ) | $ | 244 | $ | 124 | ||||||||||
| Provision for taxes (6) (7) | $ | (35 | ) | $ | (17 | ) | $ | (18 | ) | $ | (15 | ) | $ | (39 | ) | $ | 24 | |||||||
| Net income (loss) | $ | (55 | ) | $ | 148 | $ | 94 | $ | (105 | ) | $ | 205 | $ | 100 | ||||||||||
| Earnings (loss) per share: | ||||||||||||||||||||||||
| basic | $ | (0.11 | ) | $ | 0.30 | $ | 0.19 | $ | (0.22 | ) | $ | 0.42 | $ | 0.21 | ||||||||||
| diluted | $ | (0.11 | ) | $ | 0.30 | $ | 0.19 | $ | (0.22 | ) | $ | 0.42 | $ | 0.20 | ||||||||||
| Adjusted weighted average shares outstanding: | ||||||||||||||||||||||||
| basic | 488.5 | 488.5 | 488.5 | 487.4 | 487.4 | 487.4 | ||||||||||||||||||
| diluted (8) | 488.5 | 492.6 | 492.6 | 487.4 | 489.8 | 489.8 |
Numbers may not add due to rounding.
The table above reflects only line items with non-GAAP adjustments.
The following is a reconciliation of GAAP Revised for the year ended
December 31, 2022 and 2021 to Selected Non-GAAP Adjusted information:
| 2022 | 2021 | |||||||||||||||||||||||
| GAAP Revised (a) | Adjusted Items (c) | Non- GAAP (b) | GAAP Revised (a) | Adjusted Items (c) | Non- GAAP (b) | |||||||||||||||||||
| Cost of sales (1) | $ | 1,913 | $ | - | $ | 1,913 | $ | 2,132 | $ | 64 | $ | 2,068 | ||||||||||||
| Amortization of intangible assets | $ | 528 | $ | 528 | $ | - | $ | 556 | $ | 556 | $ | - | ||||||||||||
| Asset impairment, restructuring and other special charges (2) (3) | $ | 183 | $ | 183 | $ | - | $ | 634 | $ | 634 | $ | - | ||||||||||||
| Interest expense, net of capitalized interest (4) | $ | 241 | $ | 20 | $ | 221 | $ | 236 | $ | - | $ | 236 | ||||||||||||
| Other (income) expense, net (5) (6) | $ | 32 | $ | 2 | $ | 30 | $ | 5 | $ | (14 | ) | $ | 19 | |||||||||||
| Income (loss) before taxes | $ | (72 | ) | $ | 733 | $ | 662 | $ | (571 | ) | $ | 1,240 | $ | 669 | ||||||||||
| Provision for taxes (7) (8) | $ | 6 | $ | (111 | ) | $ | 117 | $ | (88 | ) | $ | (236 | ) | $ | 147 | |||||||||
| Net income (loss) | $ | (78 | ) | $ | 622 | $ | 544 | $ | (483 | ) | $ | 1,004 | $ | 522 | ||||||||||
| Earnings (loss) per share: | ||||||||||||||||||||||||
| basic | $ | (0.16 | ) | $ | 1.27 | $ | 1.11 | $ | (0.99 | ) | $ | 2.06 | $ | 1.07 | ||||||||||
| diluted | $ | (0.16 | ) | $ | 1.26 | $ | 1.11 | $ | (0.99 | ) | $ | 2.06 | $ | 1.07 | ||||||||||
| Adjusted weighted average shares outstanding: | ||||||||||||||||||||||||
| basic | 488.3 | 488.3 | 488.3 | 487.2 | 487.2 | 487.2 | ||||||||||||||||||
| diluted (9) | 488.3 | 492.2 | 492.2 | 487.2 | 488.9 | 488.9 |
Numbers may not add due to rounding.
The table above reflects only line items with non-GAAP adjustments.
For the periods presented, we have not made adjustments
for all items that may be considered unrelated to our long-term operations. We believe adjusted EBITDA, when used in conjunction with
our results presented in accordance with U.S. GAAP and its reconciliation to net income, enhances investors' understanding of our performance,
valuation and prospects for the future. We also believe adjusted EBITDA is a measure used in the animal health industry by analysts as
a valuable performance metric for investors.
The following is a reconciliation of U.S. GAAP Net Income for the three
months ended and for the year ended December 31, 2022 and 2021 to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin, which is Adjusted
EBITDA divided by total Revenue, for the respective periods:
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revised net loss (1) | $ | (55 | ) | $ | (105 | ) | $ | (78 | ) | $ | (483 | ) | ||||
| Net interest expense | 62 | 55 | 241 | 236 | ||||||||||||
| Income tax expense (benefit) | (35 | ) | (15 | ) | 6 | (88 | ) | |||||||||
| Depreciation and amortization | 169 | 174 | 682 | 716 | ||||||||||||
| EBITDA | $ | 141 | $ | 109 | $ | 851 | $ | 381 | ||||||||
| Non-GAAP Adjustments: | ||||||||||||||||
| Cost of sales | $ | - | $ | - | $ | - | $ | 64 | ||||||||
| Asset impairment, restructuring and other special charges | 32 | 110 | 183 | 634 | ||||||||||||
| Accelerated depreciation (2) | (4 | ) | (1 | ) | (19 | ) | (6 | ) | ||||||||
| Other (income) expense, net | 3 | (5 | ) | 2 | (14 | ) | ||||||||||
| Adjusted EBITDA | $ | 172 | $ | 213 | $ | 1,017 | $ | 1,059 | ||||||||
| Adjusted EBITDA Margin | 17.5 | % | 19.2 | % | 23.1 | % | 22.2 | % |
Numbers may not add due to rounding.
(1) Net loss for the three months ended December 31, 2022
and 2021 and the years ended December 31, 2022 and 2021 reflect revisions recorded to prior period financial statement amounts, as
described in "Revision of Prior Period Financial Statements Primarily Relating to Tax Valuation Allowance Adjustment" in the
Company's February 21, 2023 earnings release and additional revisions as noted in the Form 8-K/A.
(2) Represents depreciation of certain assets that was accelerated
during the periods presented. This amount must be added back to arrive at Adjusted EBITDA because it is included in Asset impairment,