ELAN Elanco Animal Health Incorporated

Item 2.05.          Costs Associated with Exit or Disposal Activities.

On September 29, 2020, the Board of Directors of Elanco Animal Health Incorporated (the “Company”) authorized a restructuring program to reduce duplication, drive efficiency and optimize the company’s footprint in key geographies following the acquisition of Bayer Animal Health. As part of the restructuring program, the Company intends to eliminate approximately 900 positions across nearly 40 countries, primarily in commercial and marketing, but also R&D, manufacturing and quality, and back office support functions.

The proposed restructuring is expected to lead to total restructuring charges of approximately $190 million to $210 million, with approximately $170 million to $190 million in severance and approximately $20 million in other costs, including lease termination, fixed asset write-down and removal costs. An estimated restructuring charge of $130 million to $145 million will be incurred in the third quarter of 2020 along with an estimated $40 million to $45 million incurred in the fourth quarter of 2020 and the remaining estimated $20 million to be incurred in 2021. The Company anticipates these costs will result in approximately $180 million to 190 million in cash expenditures.

Cautionary Statement Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Such statements include, without limitation, statements concerning the anticipated charges relating to the restructuring program and the expected completion date of the program.  Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market, and regulatory conditions, and other factors described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the subsequent Quarterly Reports on Form 10-Q and the Company’s other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.