Elanco plans job cuts, $37M restructuring charge

Newly public Elanco Animal Health said in a regulatory filing that it plans a restructuring of its international operations that will result in a $37 million charge in the fourth quarter, including $19 million in severance costs.

The Greenfield-based company—which employs about 5,880 workers, including 3,430 outside the United States—did not say how many jobs would be eliminated or where. An Elanco spokeswoman wouldn't provide specifics but said "the announcement is largely focused on our international business." The firm has about 800 workers in Greenfield and plans to keep its global headquarters there, the spokeswoman said.

In the filing, Elanco said its board earlier this month OK’d the plan “to streamline its international operations, including shifting focus and resources to priority areas.” The restructuring includes setting up a “distribution model” in certain countries where it previously had a physical location, as well the write-off of assets Elanco no longer will use.

The company disclosed the restructuring in a Friday regulatory filing. In a press release issued Tuesday, Elanco Chief Financial Officer Todd Young said: “We continue to drive efficiencies and productivity, as evidenced by our recently announced restructuring, which eliminates direct presence in 16 countries and creates a flatter, leaner, and more focused organization that positions leaders closer to the customer.”

Elanco’s belt-tightening isn’t coming as a surprise to analysts, who are excited by the company’s growth prospects but not its history of red ink. The firm—which makes products for food animals, such as livestock and chickens, as well as companion animals—lost more than $500 million from 2015 through 2017.

Through the first nine months of 2018, Elanco earned $70 million, or 19 cents per share, on revenue $2.3 billion. Because of the restructuring, however, Elanco now expects to report a loss in the fourth quarter, with earnings per share for the year estimated to be between 15 cents and 17 cents.

Elanco said it expects to wrap up the restructuring in December 2019. It's not clear whether the company anticipates additional charges in future quarters.

Elanco, founded in 1954, was wholly owned by Indianapolis-based Eli Lilly and Co. until September, when the pharmaceutical giant sold 72.3 million shares, or 20 percent of the company, in an initial public offering.

Out of the gate, the stock surged, trading as high as $37.61. It now trades for $31.10.

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