| | | |
Dr. José Manuel Correia de Simas Executive Vice President,U.S. Farm Animal Business
| 53 |
| | José Manuel Correia deDr. Simas, PhD has served55, serves as anour Executive Vice President, U.S. Farm Animal Business since April 2020. Previously,Business. Dr. Simas servedrejoined Elanco in this role in April 2020, after serving as President of Trouw Nutrition USA, an animal nutrition company, from 2018 to March 2020. In this role, he led its strategic change agenda to improve business quality and manufacturing productivity while building key capabilities in marketing, innovation, manufacturing and commercial excellence. Dr. Simas originally joined Elanco (then-owned by Lilly) in 2000 as product manager for the company’sour Rumensin product. Throughoutproduct and throughout his career Dr. Simas has served in key roles within Elanco’s business,in the U.S. and Internationally, including senior director of Latin America and Global Aquaculture, from 2017 to 2018, senior director of Knowledge Solutions and Global B2B Accounts in 2016, senior director for Market Access, Regulatory and Knowledge Solutions in 2015, as well as senior directorour U.S. Beef Business,business and area director for Central, Eastern Europe, North Africa and Middle East, among others.East. He received a bachelor’s degree from the Federal University of Lavras in Brazil and holds a master’s degree and a doctorate in animal nutrition and physiology from the University of Arizona, as well as a post doctorate from the University of São Paulo, Brazil. | |
| | | |
David A. Urbanek
| |
| | Mr. Urbanek, 56, serves as our Executive Vice President, Manufacturing and Quality | 54 | David A. Urbanek has served as Elanco’s Executive Vice President, Manufacturing and Quality since July 2018.Quality. In this role, Mr. Urbanek served asand his team have led the rightsizing of our manufacturing footprint and centralization of resources. During his nearly 35-year career with Elanco and our former parent company, Lilly, he has held multiple leadership roles in pharmaceutical manufacturing in both drug product and bulk manufacturing. Mr. Urbanek became our Vice President of Manufacturing at the Elanco Animal Health Manufacturing in February 2017. Before joining Elanco, he held leadership roles in Lilly’s manufacturing division, including senior director of Lilly from November 2017 to September 2018.emerging markets manufacturing, senior director of global diabetes manufacturing and senior director of external drug products operations. Prior to that,those roles, Mr. Urbanek servedwas the general manager of operations for Lilly divisions in various leadership roles for Lilly’s Manufacturing division, including Senior DirectorIreland, England, Germany and the U.S. He received his bachelor’s degree in mechanical engineering from the Rose-Hulman Institute of Emerging Markets ManufacturingTechnology and obtained his Master of Business Administration from 2013 to 2017, Senior Director of Global Diabetes Manufacturing from 2011 to 2013, and Senior Director of External Drug Products Operations from 2009 to 2011.Indiana University. | |
ELANCO ANIMAL HEALTH INCORPORATED – Proxy Statement | 23 |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This compensation discussion and analysis (“CD&A”) provides detailed information regarding the 2020 compensation for Elanco’s Chief Executive Officer, Chief Financial Officer and three most highly compensated executive officers in 2020 who are named below (collectively, the “Named Executive Officers”):
Name | | Title |
Jeffrey N. Simmons | | President, Chief Executive Officer and Director |
| Todd S. Young | |
| | Mr. Young, 51, serves as our Executive Vice President and Chief Financial Officer, |
Aaron L. Schacht | | Executive Vice President, Innovation, Regulatory and Business Development |
Sarena Lin (1) | | Former Executive Vice President, Transformation and Technology |
Michael-Bryant Hicks (2) | | Former Executive Vice President, General Counsel and Corporate Secretary |
This CD&A discusses the compensation programs applicable to the Named Executive Officers and their compensation thereunder in 2020, including a description of Elanco’s compensation philosophy, the elements of each compensation program, the factors that the Compensation Committee considered in setting compensation, and how the company’s financial results affected payouts under the 2020 short-term and long-term incentive plans for each of the Named Executive Officers.
(1) Sarena Lin resigned from Elanco on January 22, 2021.
(2) Michael-Bryant Hicks resigned from Elanco on March 2, 2021.
CD&A Executive Summary
Our market-competitive executive compensation program attracts and retains executives who perform at a high level and contribute to the success of the company. It also provides strong financial incentives for the NEOs to increase shareholder value. To accomplish this, the company pays its NEOs a base salary in cash; a bonus in cash in the event the metrics of the Elanco Bonus Plan are met; equity in the form of service-based awards and performance-based awards; and other employment benefits. All of these are more fully described in this CD&A and in the narrative and tables included herein.
Company Performance in the Year Ended December 31, 2020
Elanco gathered momentum moving through 2020, ending the year on a strong note. Fourth quarter revenue surpassed our guidance, with U.S. Pet Health, U.S. Farm Animal, and China swine outperforming our expectations. Adjusted EPS in the fourth quarter came in at the high-end of the guidance range with our productivity agenda intact, partly offsetting what were largely one-time and targeted investments in our future growth and our people.
For the full year 2020, total revenue was $3,273.3 million, or an increase of 7% over the previous year, including the addition of $591.9 million of Bayer Animal Health product revenue. Gross margin decreased 300 basis points to 49.1% of revenue primarily due to amortization of inventory fair value adjustments recorded from the acquisition of Bayer Animal Health, unfavorable product mix, and deleverage of fixed manufacturing costs across the lower legacy Elanco revenue base, more than offsetting the benefit from inclusion of the acquired gross profit, price improvement for legacy Elanco, and continued improvements in manufacturing productivity. Adjusted gross margin2 decreased 10 basis points to 52.0% of revenue, driven by unfavorable product mix and deleverage of fixed manufacturing costs across the lower legacy Elanco revenue base, more than offsetting the benefit from inclusion of the acquired gross profit from Bayer Animal Health, price improvement for legacy Elanco products, and continued improvements in manufacturing productivity. Legacy Elanco's manufacturing organization captured $115 million in cost savings and avoidance in 2020. Since 2018, the team has delivered $250 million in cost savings and avoidance, and most recently contributing to the fourth quarter gross margin performance.
| 2
| Please see Appendix A to this Proxy Statement for a reconciliation of non-GAAP information to GAAP information. |
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EXECUTIVE COMPENSATION
Full year 2020 reported net loss and loss per share were $560.1 million and $1.27, respectively. Net income and earnings per share, on a non-GAAP basis,3 were $206.7 million and $0.47 per share, respectively. Adjusted EBITDA4 was $528.5 million for the full year 2020, which represents 16.1% of total revenue compared with 21.6% for the full year 2019. For more information, please review the company’s Annual Report on Form 10-K for fiscal year 2020 and this proxy statement.
Actions in 2020 to Contribute to Future Revenue and Earnings Growth
We believe Elanco is entering 2021 with good momentum. We are advancing our Innovation, Portfolio, and Productivity (IPP) strategy in driving shareholder value and continue to have confidence in our underlying fundamentals and market positioning.
| · | Innovation is progressing as outlined atposition he has held since he joined Elanco in November 2018. Mr. Young oversees our December Investor Day, and our eight launches planned for 2021 are on track. We are advancing key development programs that we expect to deliver a consistent 2 to 3 percentage point contribution to average annual growth, representing a reliable driver of our long-term growth algorithm. |
| · | The 14 legacy Elanco products launched or acquired since 2015 grew 5% in 2020, excluding divestitures and despite COVID related pressures. Many of these recent innovations have transitioned into our focus brands which will drive our sales growth in 2021 and the years to come. We are a strategic global leader with a robust, diverse, durable portfolio with more access to the world's animals than at any point in Elanco’s history. Our balance across brands, species, channels, and geographies will allow us to maximize value and deliver on our sales growth expectations. |
| · | We are rapidly executing on the necessary actions to drive synergies from the Bayer Animal Health acquisition, taking important steps toward being an agile, fit-for-purpose animal health leader. In total, we expect $160 to $175 million of cumulative synergies to be achieved in 2021, progressing to the anticipated $300 million outlined by the end of 2023. |
Shareholder Engagement and Consideration of Prior Year’s Say on Pay Vote
We are committed to engagement with our shareholders on executive compensation and corporate governance matters and review all shareholder input and feedback.
At the 2020 annual meeting, the vote on "Say on Pay" regarding Named Executive Officer compensation garnered shareholder support of 95% of the votes cast. The Compensation Committee reviewed shareholder and other stakeholder feedback along with the results of each of these votes and incorporated it when making compensation decisions.
Our Philosophy on Compensation
Our compensation programs are designed to help achieve the goals of attracting, engaging, and retaining highly talented individuals who are committed to our core values of integrity, excellence and respect for people, while balancing the long-term interests of our shareholders and customers.
Our compensation and benefits programs are based on the following objectives:
| ● | Attract, retain, motivate, and reward top talent. Programs have clear line-of-sight to financial and operational goals that support the business strategy of innovation and profitable growth. |
| ● | Pay for performance. Programs provide the opportunity to earn above median compensation if superior results are achieved and below median compensation if below target results are achieved. |
| ● | Create sustained long-term stakeholder value. Programs emphasize sustainable performance, such that our executives’ interests are aligned with those of our stakeholders. |
We will achieve these objectives by:
| ● | Providing a compensation program that includes base salaries, and short-term and long-term incentive plans that are generally provided to other Elanco employees or similarly situated executives in our competitive talent market. |
| 3
| Please see Appendix A to this Proxy Statement for a reconciliation of non-GAAP information to GAAP information. |
| 4
| Please see Appendix A to this Proxy Statement for a reconciliation of non-GAAP information to GAAP information. |
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EXECUTIVE COMPENSATION
| ● | Generally targeting compensation levels, in aggregate, at the median (50th percentile) of the competitive market, which is comprised of similarly sized companies within the life sciences industry, with consideration of other industries, as appropriate. |
| ● | In certain situations, where there is scarcity of talent for a critical role and we need to offer a more competitive compensation package to attract such scarce talent, we may exceed the targeted median positioning of the market. In comparison to our peer group, however, the Total Direct Compensation (“TDC”) of our named executive officers in 2020 ranged from 67% to 91% of the median TDC paid to the executives in our peer group. |
| ● | Delivering senior executive pay with a greater emphasis on equity and lower weighting on cash to promote an ownership mentality and ensure stakeholder alignment. |
| ● | Promoting a team mentality through the alignment of pay with company results while enabling leadership to differentiate pay throughout the year to recognize performance. |
| ● | Requiring that senior executives maintain a meaningful stock ownership interest to align their financial interests with those of our stakeholders. |
| ● | Limiting perquisites and other non-performance-based elements of the compensation program. |
| ● | Ensuring the compensation program does not incentivize excessive risk-taking. |
| ● | Considering stakeholder feedback through annual say-on-pay results and other sources when designing Elanco’s compensation and benefit programs. |
| ● | Designing the program with consideration of the industry in which Elanco operates and the impact of market conditions. |
| | | | |
Participants in Executive Compensation Design and Decision-Making Process
Role of the Compensation Committee
The Compensation Committee determines our compensation philosophy, program design and is the decision-making body on all matters relating to the compensation paid to our Named Executive Officers. The Compensation Committee has the sole authority to retain and terminate a compensation consultant to assist with its responsibilities as well as the sole authority to approve the compensation consultant’s fees, which the company pays. For more information about the Compensation Committee, its members and its duties as set forth in its charter, please refer to the section entitled “Election of Directors - Committees of the Board of Directors” beginning on page 13 of this proxy statement.
Role of the Compensation Consultant
The Compensation Committee directly engages a compensation consultant, WTW, to advise it on competitive pay practices, determine our peers for compensation purposes, provide market data and assist us in the analysis of that data. WTW is independent of the company and does not perform any services for the company or any of its executive officers or other employees.
Role of the CEO
Our Compensation Committee works with our executive management, including our CEO, to oversee our executive compensation program. Our CEO plays a key role in the process as it relates to executive officers other than himself. For the Named Executive Officers other than himself, our CEO:
| · | recommends adjustments to annual base salaries and target amounts under the Elanco Bonus Plan; |
| · | recommends equity incentive awards under our long-term incentive plans; |
| · | prepares an evaluation of each executive officer; and |
| · | prepares an analysis of performance objective achievements and recommends annual bonus amounts. |
With respect to our CEO, the Compensation Committee determines and approves (subject to ratification by the independent members of the Board) each element of the CEO’s compensation.
Compensation Processes and Analysis
Process for Setting Compensation
The Compensation Committee considered individual performance assessments, compensation recommendations from senior leadership, Elanco’s company performance, Elanco’s peer group data, input from its compensation consultant and its own judgment when determining compensation for Elanco’s executive officers. When determining the compensation for employees who were not executive officers of Elanco, Elanco’s senior management considered similar factors consistent with Elanco’s philosophy, focusing on individual performance assessments, compensation recommendations from senior leadership, Elanco’s performance, and their own judgment.
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EXECUTIVE COMPENSATION
| · | Assessment of individual performance. The applicable Named Executive Officer’s individual performance assessment was based on achievement of objectives established at the start of each year, including the demonstration of Elanco’s values and leadership behaviors. |
| · | Assessment of company performance. Elanco company performance was considered in two ways: |
| · | Overall performance in the prior year based on a variety of metrics, which was a factor in establishing target compensation. |
| · | Specific performance goals were established at the beginning of the performance period, which if met, will determine payouts under cash and equity incentive programs. |
| · | Peer group analysis. Elanco used data from its peer group to benchmark compensation decisions, but did not use this data as the sole basis for its compensation targets. |
| · | Input from an independent compensation consultant concerning executive pay. The Compensation Committee received the advice of its independent compensation consultant, Willis Towers Watson, when setting the compensation for Elanco’s executive officers. |
Elanco Peer Group and Benchmarking
Elanco’s peer group for 2020 was comprised of companies that were direct competitors of Elanco, operated in a similar business model and employed people with the unique skills required to operate an established biopharmaceutical company. The Compensation Committee selected a peer group whose median revenues were broadly similar to that of Elanco’s, with none being larger than 3.2 times Elanco’s revenue. Based on the advice of Willis Towers Watson, the following group of 19 companies were identified as Elanco’s peers for 2020:
Agilent Technologies, Inc. | Hologic, Inc. | Perrigo Company plc |
Alexion Pharmaceuticals, Inc. | IDEXX Laboratories, Inc. | STERIS plc |
BioMarin Pharmaceutical | Incyte Corporation | United Therapeutics |
Bio-Rad Laboratories | Jazz Pharmaceuticals plc | Varian Medical Systems, Inc. |
DENTSPLY SIRONA Inc. | Mettler-Toledo International | West Pharmaceutical Services |
Edwards Lifesciences Corporation | PerkinElmer | Zoetis Inc. |
Endo International plc | | |
Elanco’s peer group for setting 2021 compensation was revised in August 2020 due to the Bayer Animal Health acquisition to better reflect companies that were direct competitors of Elanco, operated in a similar business model and employed people with the unique skills required to operate an established biopharmaceutical company. The Compensation Committee selected a peer group whose median revenues were broadly similar to that of Elanco’s, with none being larger in size than 2.4 times Elanco’s. Executive compensation was not adjusted upon the finalization of the Bayer Animal Health acquisition. Based on the advice of Willis Towers Watson, the following group of 18 companies were identified as Elanco’s peers for 2021:
Agilent Technologies, Inc. | Edwards Lifesciences Corporation | Perrigo Company plc |
Alexion Pharmaceuticals, Inc. | Endo International plc | Regeneron Pharmaceuticals, Inc. |
Baxter International Inc. | Hologic, Inc. | STERIS plc |
Boston Scientific Corporation | IDEXX Laboratories, Inc. | Varian Medical Systems, Inc. |
Charles River Laboratories International, Inc. | Incyte Corporation | Zimmer Biomet Holdings, Inc. |
DENTSPLY SIRONA Inc. | Jazz Pharmaceuticals plc | Zoetis Inc. |
The Compensation Committee periodically reviews Elanco’s peer group and adds or removes companies in the peer group when appropriate to ensure the companies in the peer group are similar in size to the company and appropriately reflect the company and how it conducts its business.
To determine the elements of Elanco’s compensation programs for its Named Executive Officers, the Board approved compensation derived from the following benchmarks, among others:
| · | When comparable positions are disclosed, proxy statement data for the above peer group as disclosed in each company’s prior year Compensation Discussion and Analysis and executive compensation tables; and |
| · | Willis Towers Watson survey data for similarly sized companies in the life sciences industry. |
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EXECUTIVE COMPENSATION
Components of Executive Compensation
Elanco’s 2020 executive compensation program, in which certain key employees participate, including the Named Executive Officers, was primarily comprised of base salary, annual cash bonus and long-term equity awards.
| · | 2020 annual cash bonus program included: |
| · | Elanco’s Corporate Bonus Plan (the “Elanco Bonus Plan”), under which bonuses are calculated based on Elanco’s performance as compared to Elanco’s internal targets for revenue and earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and Elanco’s innovation progress. |
| · | 2020 equity incentive program included: |
| · | Elanco PAs, which are Elanco equity awards with a performance component measuring Elanco’s reported two-year Net Income. |
| · | Elanco RSUs, which are Elanco time-vesting equity awards issued to certain executive officers and key employees of Elanco,operations, including our Named Executive Officers. |
Elanco employees, which included the Named Executive Officers, also received a company benefits package, described below under “Other Elanco Compensation Practices and Information — Employee Benefits.”
Base salaries for Elanco employees, including for the Named Executive Officers, are reviewed and established annually by Elanco and may be adjusted upon promotion, following a change in job responsibilities or to maintain market competitiveness. Salaries are based on each person’s level of contribution, responsibility, expertise, and competitiveness with respect to Elanco peer group data.
Base salary increases for 2020 were established based upon our corporate budget for salary increases, which were set considering our performance over the prior year, expected performance for the following year and general external trends. In setting salaries, Elanco seeks to retain, motivate and reward successful performers, while maintaining affordability within the company’s business plan.
During 2020, the base salaries of certain of the Named Executive Officers were adjusted as described in the table below. As such, the table below reflects the actual annual salary earned by the Named Executive Officers in 2019 and 2020. See also the Summary Compensation Table in the section entitled “Executive Compensation Tables” below.
| Name | | 2019 Annual
Base Salary | | 2020 Annual
Base Salary |
| Mr. Simmons | | $1,000,000 | | $1,025,000 |
| Mr. Young | | $550,000 | | $568,000 |
| Mr. Schacht | | $434,167(1) | | $597,000 |
| Ms. Lin | | $530,000 | | $550,000 |
| Mr. Hicks | | - (2) | | $519,000 |
| (1) | Effective March 1, 2019, Mr. Schacht’s salary was adjusted from $355,000 to $450,000. |
| (2) | Mr. Hicks was not a named executive officertreasury, investor relations and tax functions, information technology, and transformation. He brings significant financial leadership experience in 2019. |
The Named Executive Officers participated in the Elanco Bonus Plan during 2020. The Elanco Bonus Plan for 2020 was designed to reward the achievement of Elanco’s financial goals and innovation objectives for the year. The bonus was based on three areas that are measured relative to internal targets: revenue, adjusted EBITDA, and certain innovation targets set by Elanco (“Elanco innovation progress”).
Elanco’s performance goals under the Elanco Bonus Plan and individual bonus targets are set at the beginning of each year. Actual payout can range from 0% to 200% of an individual’s bonus target. The Elanco Bonus Plan for 2020 allowed for adjustments to Elanco’s 2020 fiscal performance based on unforeseen events, which adjustments needed to be recommended by management for consideration and approval by the Compensation Committee.
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EXECUTIVE COMPENSATION
In late 2019, the Compensation Committee of the Board of Directors approved a recommendation from management to reset bonus plan targets in August 2020 due to the acquisition of the Bayer Animal Health business. This strategic decision was approved to be implemented upon the completion of the acquisition, since the resulting combined company would increase revenue, leading to likely overperformance on Elanco-only targets. Management neither sought nor received any relief specific to the impact of COVID-19 on our business during 2020 for either half of the bonus plan.
Performance targets and the assessment of the relative weighting for each objective is based upon annual operating plans with a threshold, target and maximum set for each objective (with straight line interpolation for achievement between relevant levels). The 2020 weightings were as follows:
Elanco Bonus Plan
Elanco Goals | | Weighting |
Elanco revenue performance | | 30% |
Elanco adjusted EBITDA performance | | 40% |
Elanco innovation progress | | 30% |
Based on this weighting, the Elanco Bonus Plan multiple is calculated as follows:
(0.30 × revenue multiple) + (0.40 × adjusted EBITDA multiple) + (0.30 × innovation progress multiple) = Elanco Bonus Plan multiple
The annual Elanco Bonus Plan payout for each individual is calculated as follows:
Elanco Bonus Plan multiple × individual bonus target × base salary = payout
Bonus targets for 2019 and 2020 are shown in the table below as a percentage of the Named Executive Officer’s actual base salary earnings.
| Name | | 2019 Bonus
Target | | 2020 Bonus
Target |
| Mr. Simmons | | 120% | | 120% |
| Mr. Young | | 70% | | 70% |
| Mr. Schacht | | 60% | | 65% |
| Ms. Lin | | 60% | | 60% |
| Mr. Hicks | | - (1) | | 65% |
| (1) | Mr. Hicks was not a named executive officer in 2019. |
The 2020 results described below reflect Elanco’s 2020 performance with respect to the Elanco Bonus Plan targets and are not presented on the same basis as, and are not directly comparable to, our combined financial results presented in our financial statements included in our Annual Report on Form 10-K.
Performance targets for the Elanco Bonus Plan were based on Elanco’s 2020 operating plan. Elanco’s performance compared to the 2020 targets for revenue, adjusted EBITDA, and Elanco innovation progress, as well as the resulting bonus multiple, is set forth below.
As mentioned above, in August 2020 the Compensation Committee reset the Bonus Targets for 2020, in order to compensate for the likely over-performance that would have resulted had the original, full year 2020 targets been maintained. The prior, full year target was halved to create a revised first half target, and new targets were set for the second half. While the performance periods were split into first half (January – June) and second half (July – August), the weighting on the periods was set at 7/12 for first half, to align with the 7 months of the year pre-acquisition, and 5/12 for second half, to align with the 5 months of the year post-acquisition. Adjustments were made to the second half 2020 results to rationalize what ended up being stronger than mid-year projections anticipated. COVID-19 pandemic was expected to have a severe impact on our second half 2020 revenue and earnings, but instead the business showed resiliency. The resiliency of our business was particularly present with a stronger and faster COVID recovery in our U.S. Farm Animal businesspharmaceutical and healthcare as well as a sustained U.S. Pet Health Retail business that was strengthened due to COVID-related purchasing behavior and overall increased attention to pets. Another adjustment was to reduce investment income related to Tarsus Bio-Pharma (an investment where in exchange, in part, for equity in Tarsus Bio-Pharma we granted licenses for the development and marketing of lotilaner for applications in humans) where the returns on this investment exceeded expectations that were not part of our core business.
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EXECUTIVE COMPENSATION
| | 2020 First Half
Elanco Target | 2020 First Half
Elanco
Results/Multiple | 2020 Second Half
Elanco Target | 2020 Second Half
Elanco
Results/Multiple | Resulting Multiple |
| Revenue | $1.54B | $1.244B/0% | $1.914B | 1.940B/111% | 0.14 |
| EBITDA | $363M | $205M/0% | $161M | $239M/193.08% | 0.32 |
| Innovation Progress | 100% | 118% | 100% | 145% | 0.39 |
Resulting Full Year 2020 Bonus Multiple | | | | | 0.85 |
Elanco’s 2020 first half innovation progress target was 3.0 on a scale of 1.0 to 5.0. Elanco’s innovation progress multiple was comprised of the following factors: (i) achievement of certain product approvals and submissions; (ii) increase of pipeline value; (iii) launch equivalents; and (iv) a qualitative assessment of overall performance by Aaron Schacht, Elanco’s Executive Vice President, Innovation, Regulatory and Business Development. Based on the weighted outcomes of these factors, Elanco achieved a 3.70 score, which correlates to a 1.18 innovation progress multiple for use in the calculation of the first half of the 2020 Elanco Bonus Plan.
Elanco’s 2020 second half innovation progress target was 3.0 on a scale of 1.0 to 5.0. Elanco’s innovation progress multiple was comprised of the following factors: (i) achievement of certain product approvals and submissions, (ii) increase of pipeline value, (iii) launch equivalents, and (iv) a qualitative assessment of overall performance by Aaron Schacht, Elanco’s Executive Vice President, Innovation, Regulatory and Business Development. Based on the weighted outcomes of these factors, Elanco achieved a 3.90 score, which correlates to a 1.45 innovation progress multiple for use in the calculation of the second half of the 2020 Elanco Bonus Plan.
When combined, Elanco’s revenue, adjusted EBITDA, and innovation multiples yielded a 2020 Elanco Bonus Plan multiple of:
First Half (0.30 × 0) + (0.40 × 0) + (0.30 × 1.18) = 0.35 bonus multiple
Second Half (0.30 × 1.11) + (0.40 × 1.9308) + (0.30 × 1.45) = 1.54 bonus multiple
(7/12 * 0.35) + (5/12 *1.54) = 0.85 full year bonus multiple
The 2020 bonuses paid to the Named Executive Officers under the 2020 Elanco Bonus Plan are as follows:
Name | | 2020 Bonus ($) |
Mr. Simmons | | $1,045,500 |
Mr. Young | | $337,960 |
Mr. Schacht | | $329,843 |
Ms. Lin | | $280,500 |
Mr. Hicks | | $286,748 |
| 3. | Equity Incentives Under Elanco’s 2020 Long-Term Incentive Plan |
Elanco primarily grants two types of equity incentives to executives and certain other employees under its long-term incentive plans — Elanco Performance Awards (Elanco PAs) and Elanco Restricted Stock Units (Elanco RSUs). Elanco PAs are designed to focus leaders on achieving certain determined company financial performance objectives. Equity issued under our long-term incentive plans are issued pursuant to the terms of the 2018 Elanco Stock Plan (the “Elanco Stock Plan”). The Compensation Committee has the discretion to adjust downward (but not upward) any equity award payout, including executive officers’ payout from the amount yielded by the applicable formula.
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EXECUTIVE COMPENSATION
Performance Awards (Elanco PAs)
All of our Named Executive Officers received Elanco PAs under Elanco’s 2020 Long-Term Incentive Plan that vest over a two-year performance period. In February 2020 the Compensation Committee established two one-year Net Income targets for the 2020-2021 performance period, based on Elanco’s business plan at that time. As mentioned above, in August 2020 the Compensation Committee reset the Long-Term Incentive for 2020, in order to compensate for the likely over-performance that would have resulted had the original full year 2020 targets been maintained. While the 2020 performance periods were split into first half (January – June) and second half (July – August), the weighting on the periods was set at 7/12 for first half, to align with the 7 months of the year pre-acquisition, and 5/12 for second half, to align with the 5 months of the year post-acquisition. The 2021 performance period, of a full year, was approved in December 2020, upon finalization of the 2021 business plan.
The Net Income target is subject to adjustments which may include impacts of divestitures, acquisitions, non-GAAP adjustments, or other adjustments approved by the Compensation Committee over the two-year performance period. These awards do not accumulate dividends. The Compensation Committee believes that Net Income is an effective measure of long-term earnings, including management of expenses, interest incurred on outstanding debt and gross margin expansion.
Payouts for the 2020-2021 Elanco PAs range from 0% to 200% of the target, based on the achievement of the Net Income targets, which we believe to be rigorous and challenging. The specific Net Income metrics and the range of awards related to the achievement of such metrics are reflective of Elanco’s confidential business plan, the disclosure of which would cause Elanco competitive harm.
Performance-Based Equity Incentives Under Elanco’s 2019 Long-Term Incentive Plan
All of our Named Executive Officers received Elanco PAs under Elanco’s 2019 Long-Term Incentive Plan that vest over a two-year performance period. In November 2018, the Compensation Committee established two one-year EBIT targets for the 2019-2020 performance period, based on Elanco’s business plan at that time. The EBIT target is subject to adjustments which may include impacts of divestitures, acquisitions, non-GAAP adjustments, or other adjustments approved by the Compensation Committee over the two-year performance period. These awards do not accumulate dividends.
Payouts for the 2019-2020 Elanco PAs range from 0% to 200% of the target, based on the achievement of the EBIT targets, which we believe to be rigorous and challenging. The specific EBIT metrics and the range of awards related to the achievement of such metrics are reflective of Elanco’s confidential business plan, the disclosure of which would cause Elanco competitive harm.
2019 Performance Period
The Elanco EBIT target for this performance period set by the Compensation Committee was $590 million, of which $589.5 million was attained. The Compensation Committee approved a period multiple of 0.9937 for the 2019 Performance Period on February 14, 2020.
2020 Performance Period
For the same reasons as set forth above regarding the adjustments to the Bonus Targets for 2020, the EBIT Targets for the 2020 Performance Period were also adjusted.
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EXECUTIVE COMPENSATION
2020 First Half
EBIT Target
| 2020 First Half
EBIT Results/ Multiple | 2020 Second Half
EBIT Target | 2020 Second Half
EBIT Results/ Multiple | Resulting Full Year 2020 Multiple |
$327M | $148M/0% | $86M | $156.4M/185.23% | 0.8827 |
For the Named Executive Officers who participated in these awards, the number of Elanco shares earned under the performance-based awards is set forth in the table below. Details on the vesting schedule of these awards appear below, in the section “Outstanding Equity Awards at December 31, 2020.”
| Name | | Target Shares | | Shares Paid Out |
| Mr. Simmons | | 101,849 | | 89,902 |
| Mr. Young | | 29,451 | | 25,996 |
| Mr. Schacht | | 15,953 | | 14,082 |
| Ms. Lin | | 18,407 | | 16,248 |
| Mr. Hicks | | 24,542 | | 21,663 |
Restricted Stock Unit Awards (Elanco RSUs)
All of our Named Executive Officers received Elanco RSUs under Elanco’s 2020 Long-Term Incentive Plan. These awards vest over a three-year period, with 33% of the award vesting on the first anniversary of the grant date, 33% of the award vesting on the second anniversary of the grant date, and 34% of the award vesting on the third anniversary of the grant date.
Elanco Equity Program — Target Grant Values
For the 2020 equity awards Elanco set the total target value for Messrs. Simmons, Young, Schacht, and Hicks, and Ms. Lin based on internal pay equity, Elanco performance, individual performance and Elanco peer group data. Total target values for the 2020 equity grants to the applicable Named Executive Officers were as follows:
Name | | 2020 Annual Grant
Equity
Grant |
Mr. Simmons | | $6,860,000 |
Mr. Young | | $1,649,000 |
Mr. Schacht | | $1,373,000 |
Ms. Lin | | $1,000,000 |
Mr. Hicks | | $1,000,000 |
ELANCO ANIMAL HEALTH INCORPORATED – Proxy Statement | 32 |
EXECUTIVE COMPENSATION
Other Elanco Compensation Practices and Information
Elanco Employee Benefits
Elanco offers core employee benefits coverage to:
| · | provide the Elanco workforce with a reasonable level of financial support in the event of illness or injury; |
| · | provide post-retirement income; and |
| · | enhance productivity and job satisfaction through benefit programs that focus on overall well-being. |
The benefits that were available to the Named Executive Officers during their employment with Elanco were generally the samestrategic and commercial decision-making to his position. Prior to joining Elanco, Mr. Young served as those available to all U.S. Elanco employees and included medical and dental insurance, disability insurance and life insurance. In addition, The Elanco Employee 401(k) plan (the “Elanco 401(k) Plan” or the “Plan”) provides U.S. Elanco employees a competitive level of retirement income reflecting employees’ careers with Elanco.
The Elanco 401(k) Plan and Other Retirement Benefits
Elanco provides retirement income to eligible employees, which includes the Named Executive Officers, through the Elanco 401(k) Plan, a defined contribution plan qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. Participants may elect to contribute a portion of their base salary to the plan, and Elanco provides matching contributions on employees’ contributions up to 6% of base salary up to IRS limits. In addition, Elanco provides a non-elective contribution in the amount of 3% of base salary earnings, pending active employment on December 31 of each year. The employee contributions, Elanco contributions and earnings thereon are paid out in accordance with elections made by the participant under the terms and conditions of the Plan.
The Elanco Deferred Compensation Plan
Elanco’s executive officers may defer receipt of all or part of their cash bonus under The Elanco Deferred Compensation Plan, which allows participants to save for retirement in a tax-effective way at minimal cost to Elanco. Under this unfunded plan, amounts deferred by the participant are credited at an interest rate of 120% of the applicable federal long-term rate, as described in more detail following the “Nonqualified Deferred Compensation in 2020” table.
Stock Ownership and Holding Guidelines
Elanco’s Board has adopted stock ownership guidelines for Elanco’s executive officers. These stock ownership guidelines require the Chief Executive Officer to hold the number of shares of Elanco common stock equal to six times (6x) his or her base salary, and other executive officers to hold the number of shares of Elanco common stock equal to three times (3x) their base salaries. The Named Executive Offers were compliant with the stock ownership guidelines with respect to the annual equity awards granted to them, which requires the retention of 50% of all equity awards granted until their stock ownership requirements are satisfied, as they each build toward their respective ownership requirements.
Hedging/Pledging Policy
Elanco’s Board adopted a hedging and pledging policy under which our non-employee directors and employees are not permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) or otherwise engage in transactions that hedge or offset any decrease in the market value of a company’s equity securities granted to the employee or director as compensation or held directly or indirectly by the employee or director.
Executive Compensation Recovery Policy
All Elanco incentive awards generally are subject to forfeiture upon termination of employment prior to the end of the performance or vesting period or for disciplinary reasons. In addition, the Compensation Committee has adopted an executive compensation recovery policy that gives the Compensation Committee broad discretion to claw back Elanco incentive payouts from any member of Elanco senior management, which includes our Named Executive Officers, whose misconduct results in a material violation of law or company policy that causes significant harm to Elanco or who fails in his or her supervisory responsibility to prevent such misconduct by others. The Elanco recovery policy covers any Elanco incentive compensation awarded or paid to an employee at a time when he or she is a member of Elanco senior management. Subsequent changes in status, including retirement or termination of employment, do not affect Elanco’s rights to recover compensation under the policy. Recoveries under the Elanco plan can extend back as far as three years.
ELANCO ANIMAL HEALTH INCORPORATED – Proxy Statement | 33 |
EXECUTIVE COMPENSATION
Executive Compensation Tables
All amounts included in the tables below represent compensation paid to or earned by the applicable Named Executive Officers in 2020 or the year indicated in the applicable table.
Summary Compensation Table
Name and Principal
Position | | Year | | Salary
($) | | Bonus
($)(1) | | Stock
Awards
($)(2) | | Option
Awards
($)(3) | | Non-Equity
Incentive
Plan
Compensation
($)(4) | | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(5) | | All Other
Compensation
($)(6) | | Total
Compensation
($) |
Jeffrey Simmons
President and Chief Executive Officer | | 2020
2019
2018
| | $1,025,000
$1,000,000
$775,185
| | $0
$0
$0
| | $6,860,048
$13,534,347
$2,530,654
| | $0
$0
$1,119,445
| | $1,045,500
$1,248,000
$907,450
| | N/A
N/A
$0
| | $28,272
$19,422
$46,511
| | $8,958,820
$15,801,769
$5,379,245
|
Todd Young
Executive Vice President and Chief Financial Officer
| | 2020
2019
at ACADIA Pharmaceuticals Inc., a biopharmaceutical company, from August 2016 to October 2018, | | $568,000
$550,000
$91,667
| | $0
$0
$200,000
| | $1,649,020
$1,202,567
$300,032
| | $0
$0
$0
| | $337,960
$400,400
$79,567
| | N/A
N/A
$1,102
| | $28,960
$121,165
$8,285
| | $2,583,940
$2,274,132
$680,653
|
Aaron Schacht
Executive where he oversaw their financial functions as well as information technology and facilities. Prior to that, he served in roles of increasing responsibility at Baxter International Inc. and its spin-off company, Baxalta, a biopharmaceutical leader in hematology, immunology and oncology, most recently as Baxalta’s Senior Vice President Innovation, Regulatory and Business Development | | 2020
2019
2018
| | $597,000
$434,167
N/A
| | $0
$0
N/A
| | $1,373,054
$2,101,855
N/A
| | $0
$0
N/A
| | $329,843
$270,920
N/A
| | N/A
N/A
N/A
| | $28,472
$19,367
N/A
| | $2,328,369
$2,826,309
N/A
|
Sarena Lin
Former Executive Vice President, Transformation and Technology
| | 2020
2019
2018
| | $550,000
$530,000
$500,556
| | $0
$0
$500,000
| | $1,000,024
$750,034
$1,115,384
| | $0
$0
$215,288
| | $280,500
$330,720
$350,552
| | N/A
N/A
$5,742
| | $28,960
$28,096
$171,338
| | $1,859,484
$1,638,850
$2,858,860
|
Michael-Bryant Hicks
Former Executive Vice President, General Counsel and Corporate Secretary
| | 2020
2019
2018
| | $519,000
N/A
N/A
| | $0
N/A
N/A
| | $1,000,024
N/A
N/A
| | $0
N/A
N/A
| | $286,748
N/A
N/A
| | N/A
N/A
N/A
| | $29,173
N/A
N/A
| | $1,834,944
N/A
N/A
|
| (1) | Mr. Young and Ms. Lin received one-time cash bonus payments of $200,000 and $500,000, respectively, as part of their respective employment offers. |
| (2) | This column shows the grant date fair value of the Elanco RSUs, and Elanco PAs, and prior Lilly PAs, Executive Officer PAs, Lilly Shareholder Valve Awards (“SVAs”), Executive Officer SVAs, and Lilly RSUs, as applicable, awarded to the Named Executive Officers in 2017, 2018, and 2019, computed in accordance with FASB ASC Topic 718, based upon the probable outcome of the performance conditions as of the grant date and the assumptions in Note 14: Stock-Based Compensation to Elanco’s consolidated and combined financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020, filed by Elanco with the Securities and Exchange Commission on March 1, 2021. The grant date fair value for Elanco PAs included in the “Stock Awards” column are based on the probable payout outcome anticipated at the time of grant, which, for the Elanco PAs, was at target value. |
The “Stock Awards” column also includes one-time Elanco PAs and Elanco RSUs awards as follows:
| · | Messrs. Simmons and Schacht each received performance-based Replacement Awards on February 12, 2019, to replace previously unvested Lilly Performance Awards, that would have otherwise been forfeited at the time of separation. Of these awards, 40% of the amount of granted shares is subject to a one-year performance period. The remaining 60% of shares had been adjusted for the Lilly Performance from January 1, 2018 until the grant date. The grant date fair value for Mr. Simmons was $1,008,653. For Mr. Schacht the grant date fair value was $299,358. These Replacement Awards vested on February 14, 2020, for Mr. Schacht, and vested on February 1, 2021 for Mr. Simmons. |
| · | Messrs. Simmons and Schacht and Ms. Lin each received multiple Elanco RSUs as Replacement Awards on March 12, 2019, which replaced previously unvested Lilly SVAs and Lilly RSUs, that would have otherwise been forfeited at the time of separation. For Mr. Simmons, the grant date fair value was $8,375,677. For Mr. Schacht, the grant date fair value was $1,152,455. For Ms. Lin, the grant date fair value was $908,005. For Mr. Simmons, some awards vested on December 31, 2019, February 1, 2020, and December 31, 2020. For Mr. Schacht, some awards vested on December 31, 2019, September 1, 2020, and December 31, 2020. For Ms. Lin, some awards vested on February 1, 2020 and the remainder vested on February 1, 2021. |
| · | Treasurer. Mr. Young received an Elanco RSU award, which was granted on December 3, 2018, withhis bachelor’s degree in economics from Grinnell College and a grant date fair value of $300,032. He received this as a one-time award to partially offset compensation forfeited from a previous employer. One-half of this grant vested on December 3, 2019 and the remaining one-half vested on December 3, 2020. |
The “Stock Awards” column also includes Founders’ Award Elanco RSUs for Messrs. Simmons, Schacht, and Ms. Lin. These awards were granted on October 20, 2018, after the IPO, and will vest on October 20, 2021. The grant date fair values were $1,119,454 for Mr. Simmons and $215,302 for Mr. Schacht and Ms. Lin.
ELANCO ANIMAL HEALTH INCORPORATED – Proxy Statement | 34 |
EXECUTIVE COMPENSATION
The table below shows the target and maximum payouts for the 2020 Performance Awards included in this column of the “Summary Compensation Table.”
| Name | | Payout
Date | | Target
Payout | | Maximum
Payout |
| Mr. Simmons | | February 2022 | | $5,145,023 | | $10,290,046 |
| Mr. Young | | February 2022 | | $1,236,766 | | $2,473,532 |
| Mr. Schacht | | February 2022 | | $1,029,777 | | $2,059,554 |
| Ms. Lin | | February 2022 | | $750,004 | | $1,500,008 |
| Mr. Hicks | | February 2022 | | $750,004 | | $1,500,008 |
| (3) | The “Option Awards” column includes Founders’ Awards of Elanco options for Mr. Simmons and Ms. Lin. These nonqualified stock option awards were granted after our initial public offering on October 20, 2018. These options vest on the third anniversary of the grant date, followed by a seven-year exercise period. The grant date fair values were $1,119,445 for Mr. Simmons and $215,288 for Ms. Lin. The grant date fair value of such awards is based upon the assumptions described in Note 13: Stock Based Compensation to Elanco’s consolidated and combined financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018 filed by Elanco with the Securities and Exchange Commission on February 20, 2019. |
| (4) | This column shows payments under the Elanco Bonus Plan for performance in 2020 and 2019, and/or the Lilly Bonus Plan for performance in 2018. See “Components of Executive Compensation – Annual Cash Bonus” above for details on 2020 payouts for the Named Executive Officers under the 2020 Elanco Bonus Plan. |
| (5) | The amounts in this column represent information previously reported in Elanco’s 2019 proxy statement and represent changes in Lilly pension value, calculated by Lilly’s actuary, and are affected by additional service accruals and pay earned, as well as actuarial assumption changes. |
| (6) | The amounts in this column consist solely of Elanco’s matching contributions under the Elanco 401(k) for each Named Executive Officer, any recognition program awards, Imputed Life income, or Health Saving Account contributions. There were no reportable perquisites, personal benefits or tax reimbursements or gross-ups paid to any of the Named Executive Officers for 2020. |
Grants of Plan-Based Awards During 2020
The following table reflects grants of plan-based awards described in the CD&A under each of the following plans: the Elanco Bonus Plan (a non-equity incentive plan), and the Elanco Stock Plan, which provides for the grant of Elanco PA, Elanco RSUs, and Elanco stock options. To receive a payout under the Elanco PAs and Elanco RSUs, a participant must remain employed with Elanco through the end of the relevant performance period or vesting date (except in the case of death, disability, retirement or redundancy). No dividends accrue on either the Elanco PAs or the Elanco RSUs prior to payout or vesting, as applicable.
| | | | | | | Elanco
compensation
committee | | Estimated Future Payouts Under
Non-Equity Incentive
Plan Awards(1) | | Estimated Future Payouts
Under Equity Incentive
Plan Awards | | All
Other
Stock
Awards:
Number
of Shares
of Stock | | Grant
Date
Fair Value |
| Name | | Award | | Grant
Date(2) | | Action
Date | | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | or Units
(#) | | of Stock
Awards(5) |
| Mr. Simmons | | 2020 Elanco Bonus Plan | | | | | | $73,800 | | $1,230,000 | | $2,460,000 | | | | | | | | | | |
| | | 2020 Elanco PAs(3) | | 3/2/2020 | | 2/26/2020 | | | | | | | | 92,603 | | 185,206 | | 370,412 | | | | $5,145,023 |
| | | 2020 Elanco RSUs(4) | | 3/2/2020 | | 2/26/2020 | | | | | | | | | | | | | | 61,736 | | $1,715,026 |
| Mr. Young | | 2020 Elanco Bonus Plan | | | | | | $23,856 | | $397,600 | | $795,200 | | | | | | | | | | |
| | | 2020 Elanco PAs(3) | | 3/2/2020 | | 2/26/2020 | | | | | | | | 22,260 | | 44,520 | | 89,040 | | | | $1,236,766 |
| | | 2020 Elanco RSUs(4) | | 3/2/2020 | | 2/26/2020 | | | | | | | | | | | | | | 14,840 | | $412,255 |
| Mr. Schacht | | 2020 Elanco Bonus Plan | | | | | | $23,283 | | $388,050 | | $776,100 | | | | | | | | | | |
| | | 2020 Elanco PAs(3) | | 3/2/2020 | | 2/26/2020 | | | | | | | | 18,535 | | 37,069 | | 74,138 | | | | $1,029,777 |
| | | 2020 Elanco RSUs(4) | | 3/2/2020 | | 2/26/2020 | | | | | | | | | | | | | | 12,357 | | $343,277 |
| Ms. Lin | | 2020 Elanco Bonus Plan | | | | | | $19,800 | | $330,000 | | $660,000 | | | | | | | | | | |
| | | 2020 Elanco PAs(3) | | 3/2/2020 | | 2/26/2020 | | | | | | | | 13,499 | | 26,998 | | 53,996 | | | | $750,004 |
| | | 2020 Elanco RSUs(4) | | 3/2/2020 | | 2/26/2020 | | | | | | | | | | | | | | 9,000 | | $250,020 |
| Mr. Hicks | | 2020 Elanco Bonus Plan | | | | | | $20,241 | | $337,350 | | $674,700 | | | | | | | | | | |
| | | 2020 Elanco PAs(3) | | 3/2/2020 | | 2/26/2020 | | | | | | | | 13,499 | | 26,998 | | 53,996 | | | | $750,004 |
| | | 2020 Elanco RSUs(4) | | 3/2/2020 | | 2/26/2020 | | | | | | | | | | | | | | 9,000 | | $250,020 |
| (1) | These columns show the threshold, target and maximum payouts for performance under the 2020 Elanco Bonus Plan. Bonus payouts range from 0% to 200% of target. The threshold, target and maximum amounts represents a weighted average of the amounts approved by the Compensation Committee. |
| (2) | To assure grant timing is not manipulated for employee gain, the annual grant date for Elanco awards is established in advance of the grant date by the Compensation Committee. Elanco equity awards to new hires and other off-cycle grants are generally effective on the first trading day of the following quarter. |
| (3) | This row shows the range of payouts for 2020 Elanco Performance Awards. These performance awards will pay out in February 2022, with payouts ranging from 0% to 200%. The grant date fair value of the Elanco Replacement PAs is based on the probable payout outcome at the time of grant. The target and maximum values are listed for these awards in Note 2 to the Summary Compensation Table, above. |
| (4) | This row shows the shares underlying the Elanco RSUs granted under the 2020 Elanco Long-Term Incentive Plan. One third of these shares vested on March 2, 2021, one third of these shares will vest on March 2, 2022, and the remainder of these shares will vest on March 2, 2023. |
| (5) | This column shows the grant date fair value of the Elanco PAs computed in accordance with FASB ASC Topic 718, based upon the probable outcome of the performance conditions as of the grant date, as well as the grant date fair value of the Elanco RSUs. See also notes 3 through 4 of this table. |
ELANCO ANIMAL HEALTH INCORPORATED – Proxy Statement | 35 |
EXECUTIVE COMPENSATION
Outstanding Equity Awards at December 31, 2020
The closing price of Elanco’s common stock on December 31, 2020, which was $30.67, was used to calculate the values in the table below.
| | | | | Option Awards | | Stock Awards |
| Name | | Award | | Number of
Securities
Underlying
Options
Exercisable
(#) | | Number of
Securities
Underlying
Options
Unexercisable
(#) | | Option
Exercise
Price | | Option
Expiration
Date | | Number of
Shares
or Units of
Stock
That Have
Not Vested
(#) | | Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units,
or Other
Rights That
Have Not
Vested
(#) | | Equity
Incentive Plan
Awards:
Market or
Payout Value of
Unearned
Shares, Units,
or Other
Rights
That Have
Not Vested
($) |
| Mr. Simmons | | 2019 - 2020 Executive PAs(1) | |
| | | |
| |
| | 89,902
| | $2,757,254
| | | | |
| | | 2019 Elanco RSUs(2) | | | | | | | | | | 22,747 | | $697,651 | | | | |
|
| 2019 Elanco Replacement PAs(3) | | | | | | | | | |
| |
|
| 34,425 | | $1,055,815 |
| | | 2019 Elanco Replacement RSUs(4) | | | | | | | | | | 88,159 | | $2,703,837 | | | | |
| | | Elanco Founders RSUs(5) | | | | | |
| |
|
| 36,287
| | $1,112,922
| |
|
|
|
| | | Elanco Options(6) | | 109,642
| | |
| $31.61 | | 10/20/2028
| | | | | | | | |
| | | 2020 - 2021 Executive PAs(10) | | | | | | | | | | | | | | 185,206 | | $5,680,268 |
| | | 2020 Elanco RSUs(11) | | | | | | | | | | 61,736 | | $1,893,443 | | | | |
| | | | | | | | | | | | | | | | | | | |
| Mr. Young | | 2019 - 2020 Executive PAs(1) | | | | | | | | | | 25,996 | | $797,297 | |
| |
|
| | | 2019 Elanco RSUs(2) | | | | | | | | | | 6,578 | | $201,747 | |
| | |
| | | 2019 Own Our Future Award(7)
| | | | | | | | | | 83
| | $2,546
| | | | |
| | | 2020 - 2021 Executive PAs(10) | | | | | | | | | | | | | | 44,520 | | $1,365,428 |
| | | 2020 Elanco RSUs(11) | | | | | | | | | | 14,840 | | $455,143 | | | | |
| | | | | | | | | | | | | | | | | | | |
| Mr. Schacht | | 2019 - 2020 Executive PAs(1) | |
| | | |
| |
| | 14,082
| | $431,895
| | | | |
| | | 2019 Elanco RSUs(2) | | | | | | | | | | 3,564
| | $109,308
| | | | |
| | | Elanco Founders RSUs(5) | | | | | | | | | | 6,979
| | $214,046
| | | | |
| | | Elanco Options(6) | | 21,086
| | | | $31.61
| | 10/20/2028
| |
| |
| | | |
|
| | | 2019 Elanco Replacement RSUs(8) | | | | | | | | | | 12,773 | | $391,748 | | | | |
| | | 2020 - 2021 Executive PAs(10) | | | | | | | | | | | | | | 37,069 | | $1,136,906 |
| | | 2020 Elanco RSUs(11) | | | | | | | | | | 12,357 | | $378,989 | | | | |
| | | | | | | | | | | | | | | | | | | |
| Ms. Lin | | 2019 - 2020 Executive PAs(1) | |
| | | |
| |
| | 16,248
| | $498,326
| | | | |
| | | 2019 Elanco RSUs(2) | |
| | | |
| |
| | 4,112
| | $126,115
| | | | |
| | | Elanco Founders RSUs(5) | | | | | | | | | | 6,979 | | $214,046 | | | | |
| | | Elanco Options(6) | | 21,086
| | | | $31.61
| | 10/20/2028
| |
| |
| |
| |
|
| | | 2019 Elanco Replacement RSUs(9) | | | | | | | | | | 14,565 | | $446,709 | | | | |
| | | 2020 - 2021 Executive PAs(10) | | | | | | | | | | | | | | 26,998 | | $828,029 |
| | | 2020 Elanco RSUs(11) | | | | | | | | | | 9,000 | | $276,030 | | | | |
| | | | | | | | | | | | | | | | | | | |
| Mr. Hicks | | 2019 - 2020 Executive PAs(1) | |
| | | |
| |
| | 21,663
| | $664,404
| | | | |
| | | 2019 Elanco RSUs(2) | | | | | | | | | | 5,482 | | $168,133 | | | | |
| | | Elanco Founders RSUs(5) | |
| | | |
| |
| | 9,725
| | $298,266
| | | | |
| | | Elanco Options(6) | | 29,383
| | | | $31.61
| | 10/20/2028
| |
| |
| |
| |
|
| | | 2020 - 2021 Executive PAs(10) | | | | | | | | | | | | | | 26,998 | | $828,029 |
| | | 2020 Elanco RSUs(11) | | | | | | | | | | 9,000 | | $276,030 | | | | |
| (1) | Elanco PAs granted for the 2019-2020 performance period, to the extent earned, vested on February 22, 2021, after the finalization of the results by the Audit and Compensation Committees. The number of shares represented here reflects the final vested amounts, utilizing the close price on December 31, 2020, as indicated in the table. |
| (2) | Elanco RSUs granted on March 1, 2019. One third of the shares underlying this grant vested on March 1, 2020, one third of the shares vested on March 1, 2021, and the remainder of the shares will vest March 1, 2022. |
| (3) | For Mr. Simmons, this award represents a performance-based Replacement Award that was issued on February 12, 2019, with a one-year performance period from January 1, 2019 until December 31, 2019, to replace unvested Lilly Performance Award shares that would have otherwise been forfeited at the time of Elanco’s separation from Lilly. This award vested on February 1, 2021. The number of shares reflected in the table with respect to this Replacement Award is the actual amount of shares that vested on February 1, 2021, as the final performance metric was approved by the Compensation Committee on February 14, 2020. |
| (4) | Elanco RSUs granted on March 12, 2019, to replace the award of unvested Lilly RSUs. 88,159 shares underlying this award vested on December 31, 2020. |
| (5) | Elanco RSUs award granted after Elanco’s IPO, which award shall cliff vest on October 20, 2021. |
| (6) | An award of nonqualified stock options granted after Elanco’s IPO, which award shall vest on October 20, 2021 followed by a seven-year exercise period ending October 20, 2028. |
| (7) | Reflects the “all employee” award granted to Mr. Young on March 1, 2019. The award will cliff vest on March 1, 2022. |
| (8) | Elanco RSUs granted on March 12, 2019, to replace the award of unvested Lilly RSUs. 12,773 shares underlying this award vested on December 31, 2020. |
| (9) | Elanco RSUs granted on March 12, 2019, to replace the award of unvested Lilly RSUs. 14,565 shares underlying this award vested on December 31, 2020. |
| (10) | Elanco PAs granted for the 2020-2021 performance period, to the extent earned, are scheduled to vest as soon as administratively practicable following the close of the performance period. In accordance with the Securities and Exchange Commission’s regulations, the number of shares and payout value for the performance awards and restricted stock units reflect the target payout for this grant since the company’s performance over the two-year performance period cannot be determined at this time. |
| (11) | Elanco RSUs granted March 2, 2020. One third of the shares underlying this grant vested on March 2, 2021, one third of the shares will vest March 2, 2022, and the remainder of the shares will vest March 2, 2023. |
ELANCO ANIMAL HEALTH INCORPORATED – Proxy Statement | 36 |
EXECUTIVE COMPENSATION
Elanco Stock Vested in 2020
| | | Elanco Stock Awards | |
| Name | | Number of
Shares
Acquired on
Vesting (#) | | Value
Realized on
Vesting ($)(1) | |
| Mr. Simmons | | 97,426(2) | | $2,975,831 | |
| Mr. Young | | 5,521(3) | | $157,050 | |
| Mr. Schacht | | 28,003(4) | | $836,912 | |
| Ms. Lin | | 11,395(5) | | $347,048 | |
| Mr. Hicks | | 1,900(6) | | $52,060 | |
| (1) | Amounts reflect the market value of the Elanco’s common stock on the day the stock award vested. |
| (2) | For Mr. Simmons, this represents 6,320 shares vestedJuris Doctor from the first trancheUniversity of the on-cycle 2019 RSUs, vested March 1, 2020, 54,400 shares vested from Replacement RSU Awards issued in March 12, 2019 to replace unvested Lilly shares that would have otherwise been forfeited at the timeMichigan. | |
