Item 2.05 Costs Associated with Exit or Disposal Activities
On December 10, 2018, the Board of Directors (the Board) of Elanco Animal Health Incorporated (the Company) authorized a restructuring program to streamline its international operations, including shifting focus and resources to priority areas. Among other actions, the restructuring reflects a change from having a physical location to a distribution model in certain countries in connection with the separation of the Companys business from that of Eli Lilly & Company following the Companys initial public offering. Additionally, as a part of the Companys ongoing efforts in connection with its separation from Eli Lilly and Company, the Board authorized the write-off of certain assets that will not be utilized in the business on an ongoing basis. The Company expects to substantially complete the restructuring actions by December 2019. The Company intends to comply with all applicable regulations in connection with the restructuring program, including timely information and consultation of employees and organizations, where applicable.
The proposed restructuring is expected to lead to a charge of approximately $37 million in the fourth quarter of fiscal year 2018, consisting of approximately $19 million in severance costs and approximately $18 million in asset write-off expenses. The total cash expenditures associated with the program are expected to be approximately $20 million, consisting primarily of severance costs.
Cautionary Statement Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (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 Companys 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 Companys 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 risk factors described in documents filed with the Securities and Exchange Commission, including in the Risk Factors section of the Companys prospectus relating to its initial public offering filed on September 21, 2018, its most recent report on Form 10-Q and current reports on Form 8-K that the Company may file from time to time. 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.
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