- First-Quarter 2013 Revenues of $1.09 Billion Increased 4% Compared to First Quarter 2012
- First-Quarter 2013 Reported Net Income of $140 Million, or Diluted EPS of $0.28, Increased 26% and 27%, respectively, Compared to First Quarter 2012
- First-Quarter 2013 Adjusted Net Income1 of $179 Million, or Adjusted Diluted EPS1 of $0.36, Increased 18% and 20%, respectively, Compared to First Quarter 2012
- Company Provides Full-Year 2013 Adjusted Diluted EPS1 Guidance of $1.36 - $1.42
ZoetisTM (NYSE: ZTS), formerly the animal health business of
Pfizer Inc., today reported its financial results for the first quarter
of 2013. The company reported revenues of $1.09 billion for the first
quarter, an increase of 4% from the first quarter of 2012. Revenues
reflected an operational2 increase of 5%, with foreign
currency having a negative impact of 1%.
Net income for the first quarter of 2013 was $140 million, or $0.28 per
diluted share, an increase of 26% and 27%, respectively, compared to the
first quarter of 2012. Adjusted net income1 for the first
quarter of 2013 excludes the net impact of $39 million, or $0.08 per
diluted share, for purchase accounting adjustments, acquisition-related
costs and certain significant items. Adjusted net income1 for
the first quarter of 2013 was $179 million, or $0.36 per diluted share,
an increase of 18% and 20%, respectively, compared to the first quarter
of 2012.
EXECUTIVE COMMENTARY
“At Zoetis, we are committed to delivering high-quality medicines and
vaccines to the veterinarians and livestock producers we serve around
the world, and building on our premier commercial, R&D and manufacturing
capabilities to maintain our market leadership,” said Juan Ramón Alaix,
chief executive officer of Zoetis. “As a newly formed standalone
company, we are singularly focused on the animal health industry to
improve our ability to serve those who raise and care for animals.”
“During the first quarter, we reported operational sales growth across
all of our regions, reflecting global demand for our diverse portfolio
of livestock and companion animal health products,” said Alaix. “We also
increased our earnings at a faster rate than sales, as we continue to
grow Zoetis profitably through appropriate allocation of resources and
the pursuit of our growth strategies. Our diverse portfolio, strength in
R&D, and direct presence in global markets continue to provide a solid
foundation for our business performance.”
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its business across four regional operating
segments: the United States (U.S.); Europe/Africa/Middle East (EuAfME);
Canada/Latin America (CLAR); and Asia/Pacific (APAC). Within each of
these regional segments, the company offers a diverse portfolio of
products for livestock and companion animals tailored to local trends
and customer needs.
In the first quarter of 2013:
-
Revenues in the U.S. were $454 million, an increase of 7% over the
first quarter of 2012. Results were driven by strong growth in sales
of companion animal products in the region. While sales of livestock
products increased, they were tempered by the continuing drought in
North America and its impact on livestock producers, particularly
cattle.
-
Revenues in EuAfME were $290 million, an increase of 4% operationally
over the first quarter of 2012. Growth drivers included sales of
companion animal products, and increased sales of livestock products,
especially in swine and poultry across the European Union.
-
Revenues in CLAR were $171 million, an increase of 4% operationally
over the first quarter of 2012. Sales of livestock products for swine,
cattle and poultry contributed to the region's growth, especially in
Brazil and Canada; meanwhile, sales of companion animal products
decreased in the region.
-
Revenues in APAC were $175 million, an increase of 2% operationally
over the first quarter of 2012. Results were driven by the sales of
livestock products, especially swine, with growth in Australia, New
Zealand and Southeast Asia, while sales of companion animal products
increased.
Zoetis continues to drive demand and strengthen its diverse portfolio of
products through brand lifecycle management, strong customer
relationships and access to new markets and technologies. With an
expansive and diverse product portfolio, the company focuses on
improving the performance and delivery of current product lines;
expanding product indications across species; and pursuing approvals
across new geographies. Some recent highlights include:
-
In Japan, for example, the company recently achieved registration of
Fostera™ PCV and also launched Draxxin® for swine. Fostera
PCV is a vaccine, preventing Porcine Circovirus Type 2 (PCV2) viremia
with the convenience of a single dose; it helps limit the very costly
consequences of disease that could compromise herd health and
performance. The company's PCV vaccine was first approved in the U.S.
in 2006, under the Suvaxyn® brand, and is currently
commercialized in 23 countries worldwide. Draxxin is an injectable
antibiotic for livestock that delivers a full course of therapy in one
dose to fight respiratory disease and other susceptible bacterial
infections in cattle and swine. Draxxin was first approved in Europe
in 2003 and is now one of Zoetis' top-selling products, marketed in 69
countries around the world.
-
The company launched Convenia®, an antibiotic for companion
animals, in China this March. Convenia is the first anti-infective for
common bacterial skin infections in dogs and cats that provides an
entire course of therapy in one injection without the difficulty of
administering daily pills. It was first approved in the European Union
in 2006 and now marketed in 50 countries; it has become one of the
company's premier companion animal products.
-
Zoetis also signed an agreement with a large dairy cattle partner in
Argentina to perform genomic tests on their herds, using Clarifide®,
a novel technological tool that is being tailored to meet the farming
needs of this customer in Argentina. Through the use of these tests,
Zoetis helps producers make informed decisions, manage their livestock
more effectively, and increase the yields from their herds.
FINANCIAL GUIDANCE AND COMMENTARY
“Our guidance for full-year 2013 is provided at current exchange rates
and reflects our confidence in the diversity of our portfolio, the
strength of our business model, and our view of the evolving market
conditions for animal health products this year,” said Rick Passov,
executive vice president and chief financial officer of Zoetis. “While
we believe the fundamentals of the animal health industry remain strong,
the key factors that could impact future results continue to be the
evolving macroeconomic conditions, weather-related challenges and
potential disease outbreaks. We rely on our global scale, local presence
and innovations to enable us to best adapt to changes in our operating
environment.”
Zoetis provided its financial guidance for full-year 2013, including
revenues of between $4.425 billion to $4.525 billion. The company also
expects to achieve diluted EPS for the full year of between $1.00 to
$1.06 per share, which includes the impact of nonrecurring costs of $200
million to $240 million, primarily associated with becoming a standalone
public company. Adjusted diluted EPS1 for the full year is
expected to be between $1.36 to $1.42 per share, excluding purchase
accounting adjustments, acquisition-related costs and certain
significant items. The 2013 financial guidance reflects exchange rates
as of mid-April 2013. Additional guidance on other items such as tax
rate and expenses are included in the financial tables and will be
discussed on the company's conference call.
WEBCAST & CONFERENCE CALL DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (EDT) today,
during which company executives will review first-quarter financial
results, discuss 2013 financial guidance, and respond to questions from
financial analysts. Investors and the public may access the live webcast
by visiting the Zoetis website at http://www.zoetis.com/events-and-presentations.
A replay of the webcast will be archived and made available on April 30.
ABOUT ZOETIS
Zoetis (zô-EH-tis) is the leading animal health company, dedicated to
supporting customers and businesses focused on raising and caring for
livestock and companion animals. Building on a 60-year history as the
animal health business of Pfizer, Zoetis discovers, develops,
manufactures and markets veterinary vaccines and medicines, complemented
by diagnostic products and genetic tests and supported by a range of
services. The company generated annual revenues of $4.3 billion in 2012.
It has more than 9,300 employees worldwide and a local presence in
approximately 70 countries, including 29 manufacturing facilities in 11
countries. Its products serve veterinarians, livestock producers and
people who raise and care for livestock and companion animals in 120
countries. For more information, visit www.zoetis.com.
1 Adjusted net income and adjusted diluted earnings
per share (non-GAAP financial measures) are defined as reported net
income attributable to Zoetis and reported diluted earnings per share,
excluding purchase accounting adjustments, acquisition-related costs and
certain significant items.
2 Operational revenue growth is defined as revenue
growth excluding the impact of foreign exchange.
DISCLOSURE NOTICES
Forward-Looking Statements: This
news release contains forward-looking statements. These
forward-looking statements address various matters including our 2013
financial guidance and forecast future business performance. Each
forward-looking statement contained in this news release is subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by such statement. Applicable
risks and uncertainties include, among others, regulatory actions, such
as restrictions on use of antibacterials and timing of any new product
approvals; perceived adverse effects on human health linked to animals
that use our products; outbreaks of infectious diseases in animals that
use our products, such as the incidence of H7N9 bird flu in China;
competitive pressures, including from manufacturers of generic products;
international economic developments, including fluctuations in exchange
rates; environmental trends and conditions; and the risks identified
under the heading "Risk Factors" in our Annual Report on Form 10-K for
2012, which was filed with the Securities and Exchange Commission on
March 28, 2013, as well as the other information we file with the SEC.
We caution investors not to place considerable reliance on the
forward-looking statements contained in this news release. You
are encouraged to read our filings with the SEC, available at www.sec.gov,
for a discussion of these and other risks and uncertainties. The
forward-looking statements in this news release speak only as of the
date of this document, and we undertake no obligation to update or
revise any of these statements. Our business is subject to substantial
risks and uncertainties, including those referenced above. Investors,
potential investors, and others should give careful consideration to
these risks and uncertainties.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as adjusted net income and
adjusted diluted earnings per share, to assess and analyze our
operational results and trends and to make financial and operational
decisions. We believe these non-GAAP financial measures are also
useful to investors because they provide greater transparency regarding
our operating performance. The non-GAAP financial measures
included in this news release should not be considered alternatives to
measurements required by GAAP, such as net income, operating income, and
earnings per share, and should not be considered measures of liquidity.
These non-GAAP financial measures are unlikely to be comparable with
non-GAAP information provided by other companies. Reconciliation
of non-GAAP financial measures and GAAP financial measures are included
in the tables accompanying this news release and are posted on our
website at www.zoetis.com.
Internet Posting of Information:
We routinely post information that may be important to investors in
the 'Investors' section of our web site at www.zoetis.com,
on our Facebook page at http://www.facebook.com/zoetis
and on Twitter@zoetis. We encourage investors and potential investors to
consult our web site regularly and to follow us on Facebook and Twitter
for important information about us.
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ZOETIS INC.
CONSOLIDATED STATEMENTS OF INCOME(a)
(UNAUDITED)
(millions
of dollars, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
% Incr./
|
|
|
|
|
2013
|
|
|
2012
|
|
|
(Decr.)
|
|
Revenues
|
|
|
|
$
|
|
|
1,090
|
|
|
$
|
|
|
1,047
|
|
|
4
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales(b)
|
|
|
|
402
|
|
|
393
|
|
|
2
|
|
Selling, general and administrative expenses(b)
|
|
|
|
357
|
|
|
338
|
|
|
6
|
|
Research and development expenses(b)
|
|
|
|
90
|
|
|
102
|
|
|
(12)
|
|
Amortization of intangible assets(c)
|
|
|
|
15
|
|
|
16
|
|
|
(6)
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
|
7
|
|
|
25
|
|
|
(72)
|
|
Interest expense
|
|
|
|
22
|
|
|
8
|
|
|
175
|
|
Other (income)/deductions–net
|
|
|
|
5
|
|
|
(6
|
)
|
|
(183)
|
|
Income before provision for taxes on income
|
|
|
|
192
|
|
|
171
|
|
|
12
|
|
Provision for taxes on income
|
|
|
|
52
|
|
|
59
|
|
|
(12)
|
|
Net income before allocation to noncontrolling interests
|
|
|
|
140
|
|
|
112
|
|
|
25
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
—
|
|
|
1
|
|
|
(100)
|
|
Net income attributable to Zoetis
|
|
|
|
$
|
|
|
140
|
|
|
$
|
|
|
111
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—basic
|
|
|
|
$
|
|
|
0.28
|
|
|
$
|
|
|
0.22
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—diluted
|
|
|
|
$
|
|
|
0.28
|
|
|
$
|
|
|
0.22
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to calculate earnings per share (in
thousands)
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|
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|
|
|
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Basic
|
|
|
|
500,000
|
|
|
500,000
|
|
|
|
|
Diluted
|
|
|
|
500,111
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
(a)
|
|
The consolidated statements of income present the three months ended
March 31, 2013 and April 1, 2012. Subsidiaries operating outside the
United States are included for the three months ended February 24,
2013 and February 26, 2012.
|
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(b)
|
|
Exclusive of amortization of intangible assets, except as discussed
in footnote (c) below.
|
|
(c)
|
|
Amortization expense related to finite-lived acquired intangible
assets that contribute to our ability to sell, manufacture,
research, market and distribute products, compounds and
intellectual property is included in Amortization of intangible
assets as these intangible assets benefit multiple business
functions. Amortization expense related to acquired intangible
assets that are associated with a single function is included in Cost
of sales, Selling, general and administrative expenses
or Research and development expenses, as appropriate.
|
|
|
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|
|
Certain amounts and percentages may reflect rounding adjustments.
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|
|
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|
|
|
|
|
|
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ZOETIS INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP
ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions
of dollars, except per share data)
|
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|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2013
|
|
|
|
|
|
GAAP
Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenues
|
|
|
|
$
|
|
|
1,090
|
|
|
$
|
|
|
—
|
|
|
$
|
|
|
—
|
|
|
$
|
|
|
—
|
|
|
$
|
|
|
1,090
|
|
|
Cost of sales(b)
|
|
|
|
402
|
|
|
(1
|
)
|
|
—
|
|
|
(3
|
)
|
|
398
|
|
|
Gross profit
|
|
|
|
688
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|
692
|
|
|
Selling, general and administrative expenses(b)
|
|
|
|
357
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
322
|
|
|
Research and development expenses(b)
|
|
|
|
90
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
Amortization of intangible assets(c)
|
|
|
|
15
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
|
7
|
|
|
—
|
|
|
(6
|
)
|
|
(1
|
)
|
|
—
|
|
|
Interest expense
|
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
Other (income)/deductions–net
|
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
2
|
|
|
Income before provision for taxes on income
|
|
|
|
192
|
|
|
12
|
|
|
6
|
|
|
42
|
|
|
252
|
|
|
Provision for taxes on income
|
|
|
|
52
|
|
|
4
|
|
|
2
|
|
|
15
|
|
|
73
|
|
|
Net income attributable to Zoetis
|
|
|
|
140
|
|
|
8
|
|
|
4
|
|
|
27
|
|
|
179
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
|
|
0.28
|
|
|
0.02
|
|
|
0.01
|
|
|
0.05
|
|
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended April 1, 2012
|
|
|
|
|
|
GAAP
Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenues
|
|
|
|
$
|
|
|
1,047
|
|
|
$
|
|
|
—
|
|
|
$
|
|
|
—
|
|
|
$
|
|
|
—
|
|
|
$
|
|
|
1,047
|
|
|
Cost of sales(b)
|
|
|
|
393
|
|
|
(1
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
388
|
|
|
Gross profit
|
|
|
|
654
|
|
|
1
|
|
|
3
|
|
|
1
|
|
|
659
|
|
|
Selling, general and administrative expenses(b)
|
|
|
|
338
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
331
|
|
|
Research and development expenses(b)
|
|
|
|
102
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
93
|
|
|
Amortization of intangible assets(c)
|
|
|
|
16
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
|
25
|
|
|
—
|
|
|
(11
|
)
|
|
(14
|
)
|
|
—
|
|
|
Interest expense
|
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
Other (income)/deductions–net
|
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
Income before provision for taxes on income
|
|
|
|
171
|
|
|
13
|
|
|
14
|
|
|
31
|
|
|
229
|
|
|
Provision for taxes on income
|
|
|
|
59
|
|
|
4
|
|
|
5
|
|
|
8
|
|
|
76
|
|
|
Income from continuing operations
|
|
|
|
112
|
|
|
9
|
|
|
9
|
|
|
23
|
|
|
153
|
|
|
Net income attributable to noncontrolling interests
|
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Net income attributable to Zoetis
|
|
|
|
111
|
|
|
9
|
|
|
9
|
|
|
23
|
|
|
152
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
|
|
0.22
|
|
|
0.02
|
|
|
0.02
|
|
|
0.05
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are not, and should not be viewed as,
substitutes for U.S. GAAP net income and its components and diluted
EPS. Despite the importance of these measures to management in goal
setting and performance measurement, non-GAAP adjusted net income
and its components and non-GAAP adjusted diluted EPS are non-GAAP
financial measures that have no standardized meaning prescribed by
U.S. GAAP and, therefore, have limits in their usefulness to
investors. Because of the non-standardized definitions, non-GAAP
adjusted net income and its components and non-GAAP adjusted diluted
EPS (unlike U.S. GAAP net income and its components and diluted EPS)
may not be comparable to the calculation of similar measures of
other companies. Non-GAAP adjusted net income and its components and
non-GAAP adjusted diluted EPS are presented solely to permit
investors to more fully understand how management assesses
performance.
|
|
(b)
|
|
Exclusive of amortization of intangible assets, except as discussed
in footnote (c) below.
|
|
(c)
|
|
Amortization expense related to finite-lived acquired intangible
assets that contribute to our ability to sell, manufacture,
research, market and distribute products, compounds and
intellectual property is included in Amortization of intangible
assets as these intangible assets benefit multiple business
functions. Amortization expense related to acquired intangible
assets that are associated with a single function is included in Cost
of sales, Selling, general and administrative expenses or Research
and development expenses, as appropriate.
|
|
(d)
|
|
EPS amounts may not add due to rounding.
|
|
|
|
|
|
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1), (2) and (3).
|
|
|
|
|
|
Certain amounts may reflect rounding adjustments.
|
|
|
|
|
|
|
|
|
|
ZOETIS INC.
NOTES TO RECONCILIATION OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions
of dollars)
|
|
|
|
|
|
(1)
|
|
The consolidated statements of income present the three months ended
March 31, 2013 and April 1, 2012. Subsidiaries operating outside the
United States are included for the three months ended February 24,
2013 and February 26, 2012.
|
|
(2)
|
|
Acquisition-related costs include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Integration costs(a)
|
|
|
|
|
$
|
|
|
|
4
|
|
|
$
|
|
|
|
9
|
|
|
Restructuring charges(a)
|
|
|
|
|
2
|
|
|
2
|
|
|
Additional depreciation—asset restructuring(b)
|
|
|
|
|
—
|
|
|
3
|
|
|
Total acquisition-related costs—pre-tax
|
|
|
|
|
6
|
|
|
14
|
|
|
Income taxes(c)
|
|
|
|
|
2
|
|
|
5
|
|
|
Total acquisition-related costs—net of tax
|
|
|
|
|
$
|
|
|
|
4
|
|
|
$
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Integration costs represent external, incremental costs directly
related to integrating acquired businesses and primarily include
expenditures for consulting and the integration of systems and
processes. Restructuring charges are associated with employees,
assets and activities that will not continue with the company. All
of these costs are included in Restructuring charges and
certain acquisition-related costs.
|
|
(b)
|
|
Represents the impact of changes in the estimated lives of assets
involved in restructuring actions. Included in Cost of sales
for the three months ended April 1, 2012.
|
|
(c)
|
|
Included in Provision for taxes on income.
|
|
|
|
|
|
(3)
|
|
Certain significant items include the following:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Restructuring charges(a)
|
|
|
$
|
|
|
|
1
|
|
|
$
|
|
|
|
14
|
|
|
Implementation costs and additional depreciation—asset restructuring(b)
|
|
|
2
|
|
|
10
|
|
|
Certain asset impairment charges(c)
|
|
|
1
|
|
|
—
|
|
|
Stand-up costs(d)
|
|
|
34
|
|
|
6
|
|
|
Other(e)
|
|
|
4
|
|
|
1
|
|
|
Total certain significant items—pre-tax
|
|
|
42
|
|
|
31
|
|
|
Income taxes(f)
|
|
|
15
|
|
|
8
|
|
|
Total certain significant items—net of tax
|
|
|
$
|
|
|
|
27
|
|
|
$
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents restructuring charges incurred for our
cost-reduction/productivity initiatives. Included in Restructuring
charges and certain acquisition-related costs.
|
|
(b)
|
|
Related to our cost-reduction/productivity initiatives. Included
in Selling, general and administrative expenses for the
three months ended March 31, 2013. Included in Research and
development expenses ($9 million) and Selling, general and
administrative expenses ($1 million) for the three months
ended April 1, 2012.
|
|
(c)
|
|
Included in Other (income)/deductions—net for the three
months ended March 31, 2013.
|
|
(d)
|
|
Represents certain nonrecurring costs related to becoming a
standalone public company, such as new branding (including changes
to the manufacturing process for required new packaging), the
creation of standalone systems and infrastructure, site separation
and certain legal registration and patent assignment costs.
Included in Selling, general and administrative expenses
($32 million) and Cost of sales ($2 million) for the three
months ended March 31, 2013. Included in Selling, general and
administrative expenses for the three months ended April 1,
2012.
|
|
(e)
|
|
For the three months ended March 31, 2013, primarily relates to a
change in estimate with respect to transitional manufacturing
agreements associated with divestitures.
|
|
(f)
|
|
Included in Provision for taxes on income. Income taxes
include the tax effect of the associated pre-tax amounts,
calculated by determining the jurisdictional location of the
pre-tax amounts and applying that jurisdiction's applicable tax
rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZOETIS INC.
ADJUSTED SELECTED COSTS AND EXPENSES(a)
(UNAUDITED)
(millions
of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
% Change
|
|
|
|
|
(Favorable)/Unfavorable
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Total
|
|
Foreign
exchange
|
|
Operational
|
|
Adjusted cost of sales(a)
|
|
|
|
|
$
|
|
|
|
398
|
|
|
$
|
|
|
|
388
|
|
|
3
|
%
|
|
1
|
%
|
|
2
|
%
|
|
As a percent of revenues
|
|
|
|
|
36.5
|
%
|
|
37.1
|
%
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
Adjusted SG&A expenses(a)
|
|
|
|
|
322
|
|
|
331
|
|
|
(3
|
)%
|
|
(1
|
)%
|
|
(2
|
)%
|
|
Adjusted R&D expenses(a)
|
|
|
|
|
90
|
|
|
93
|
|
|
(3
|
)%
|
|
—
|
|
|
(3
|
)%
|
|
Total
|
|
|
|
|
$
|
|
|
|
810
|
|
|
$
|
|
|
|
812
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted cost of sales, adjusted selling, general, and
administrative (SG&A) expenses and adjusted research and development
(R&D) expenses are defined as the corresponding reported U.S.
generally accepted accounting principles (GAAP) income statement
line items excluding purchase accounting adjustments,
acquisition-related costs, and certain significant items.
Reconciliations of certain reported to adjusted information for the
three months ended March 31, 2013 and April 1, 2012 are provided in
the materials accompanying this report. These adjusted income
statement line item measures are not, and should not be viewed as,
substitutes for the corresponding U.S. GAAP line items.
|
|
|
|
|
|
|
|
ZOETIS INC.
2013 GUIDANCE
|
|
|
|
|
|
|
|
|
|
|
Selected Line Items
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
$4,425 to $4,525 million
|
|
Adjusted cost of sales as a percentage of revenues(a)
|
|
|
|
|
|
|
35% to 36%
|
|
Adjusted SG&A expenses(a)
|
|
|
|
|
|
|
$1,385 to $1,435 million
|
|
Adjusted R&D expenses(a)
|
|
|
|
|
|
|
$385 to $415 million
|
|
Adjusted interest expense(a)
|
|
|
|
|
|
|
Approximately $115 million
|
|
Adjusted other(income)/deductions(a)
|
|
|
|
|
|
|
Approximately $20 million income
|
|
Effective tax rate on adjusted net income(a)
|
|
|
|
|
|
|
Approximately 29.5%
|
|
Reported diluted EPS
|
|
|
|
|
|
|
$1.00 to $1.06
|
|
Adjusted diluted EPS(a)
|
|
|
|
|
|
|
$1.36 to $1.42
|
|
Certain significant items(b) and acquisition-related costs
|
|
|
|
|
|
|
$200 to $240 million
|
Full-year 2013 guidance assumes a blend of the actual exchange rates in
effect during the first quarter of 2013 and a mid-April exchange rate
for the remainder of the year.
A reconciliation of 2013 adjusted net income and adjusted diluted EPS
guidance to 2013 reported net income attributable to Zoetis and reported
diluted EPS attributable to Zoetis common shareholders guidance follows:
|
|
|
|
|
|
|
Full-Year 2013 Guidance
|
|
(millions of dollars, except per share amounts)
|
|
Net Income
|
|
Diluted EPS
|
|
Adjusted net income/diluted EPS(a) guidance
|
|
~$680 - $710
|
|
~$1.36 - $1.42
|
|
Purchase accounting adjustments
|
|
(35)
|
|
(0.07)
|
|
Certain significant items(b) and acquisition-related costs
|
|
(130 - 160)
|
|
(0.26 - 0.32)
|
|
Reported net income attributable to Zoetis/diluted EPS guidance
|
|
~$500 - $530
|
|
~$1.00 - $1.06
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted net income and its components and adjusted diluted EPS are
defined as reported U.S. generally accepted accounting principles
(GAAP) net income and its components and reported diluted EPS
excluding purchase accounting adjustments, acquisition-related costs
and certain significant items. Adjusted cost of sales, adjusted
selling, general and administrative (SG&A) expenses, adjusted
research and development (R&D) expenses, adjusted interest expense
and adjusted other(income)/deductions are income statement line
items prepared on the same basis, and, therefore, components of the
overall adjusted income measure. Despite the importance of these
measures to management in goal setting and performance measurement,
adjusted net income and its components and adjusted diluted EPS are
non-GAAP financial measures that have no standardized meaning
prescribed by U.S. GAAP and, therefore, have limits in their
usefulness to investors. Because of the non-standardized
definitions, adjusted net income and its components and adjusted
diluted EPS (unlike U.S. GAAP net income and its components and
diluted EPS) may not be comparable to the calculation of similar
measures of other companies. Adjusted net income and its components
and adjusted diluted EPS are presented solely to permit investors to
more fully understand how management assesses performance. Adjusted
net income and its components and adjusted diluted EPS are not, and
should not be viewed as, substitutes for U.S. GAAP net income and
its components and diluted EPS.
|
|
(b)
|
|
Includes certain nonrecurring costs related to becoming a standalone
public company, such as new branding (including changes to the
manufacturing process for required new packaging), the creation of
standalone systems and infrastructure, site separation and certain
legal registration and patent assignment costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZOETIS INC.
CONSOLIDATED REVENUES BY SEGMENT(a)
AND SPECIES
(UNAUDITED)
(millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
% Change
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Total
|
|
Foreign
exchange
|
|
Operational
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
|
$
|
|
|
|
706
|
|
|
$
|
|
|
|
691
|
|
|
2
|
%
|
|
(1
|
)%
|
|
3
|
%
|
|
Companion Animal
|
|
|
|
384
|
|
|
356
|
|
|
8
|
%
|
|
—
|
|
|
8
|
%
|
|
Total Revenues
|
|
|
|
$
|
|
|
|
1,090
|
|
|
$
|
|
|
|
1,047
|
|
|
4
|
%
|
|
(1
|
)%
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
|
$
|
|
|
|
245
|
|
|
$
|
|
|
|
240
|
|
|
2
|
%
|
|
—
|
|
|
2
|
%
|
|
Companion Animal
|
|
|
|
209
|
|
|
185
|
|
|
13
|
%
|
|
—
|
|
|
13
|
%
|
|
Total U.S. Revenues
|
|
|
|
$
|
|
|
|
454
|
|
|
$
|
|
|
|
425
|
|
|
7
|
%
|
|
—
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EuAfME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
|
$
|
|
|
|
195
|
|
|
$
|
|
|
|
187
|
|
|
4
|
%
|
|
1
|
%
|
|
3
|
%
|
|
Companion Animal
|
|
|
|
95
|
|
|
88
|
|
|
8
|
%
|
|
2
|
%
|
|
6
|
%
|
|
Total EuAfME Revenues
|
|
|
|
$
|
|
|
|
290
|
|
|
$
|
|
|
|
275
|
|
|
5
|
%
|
|
1
|
%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
|
$
|
|
|
|
139
|
|
|
$
|
|
|
|
138
|
|
|
1
|
%
|
|
(5
|
)%
|
|
6
|
%
|
|
Companion Animal
|
|
|
|
32
|
|
|
35
|
|
|
(9
|
)%
|
|
(4
|
)%
|
|
(5
|
)%
|
|
Total CLAR Revenues
|
|
|
|
$
|
|
|
|
171
|
|
|
$
|
|
|
|
173
|
|
|
(1
|
)%
|
|
(5
|
)%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
|
$
|
|
|
|
127
|
|
|
$
|
|
|
|
126
|
|
|
1
|
%
|
|
(2
|
)%
|
|
3
|
%
|
|
Companion Animal
|
|
|
|
48
|
|
|
48
|
|
|
—
|
|
|
(2
|
)%
|
|
2
|
%
|
|
Total APAC Revenues
|
|
|
|
$
|
|
|
|
175
|
|
|
$
|
|
|
|
174
|
|
|
1
|
%
|
|
(1
|
)%
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
|
|
$
|
|
|
|
390
|
|
|
$
|
|
|
|
400
|
|
|
(3
|
)%
|
|
(1
|
)%
|
|
(2
|
)%
|
|
Swine
|
|
|
|
158
|
|
|
143
|
|
|
10
|
%
|
|
(1
|
)%
|
|
11
|
%
|
|
Poultry
|
|
|
|
133
|
|
|
121
|
|
|
10
|
%
|
|
(2
|
)%
|
|
12
|
%
|
|
Other
|
|
|
|
25
|
|
|
27
|
|
|
(7
|
)%
|
|
(4
|
)%
|
|
(3
|
)%
|
|
Total Livestock Revenues
|
|
|
|
$
|
|
|
|
706
|
|
|
$
|
|
|
|
691
|
|
|
2
|
%
|
|
(1
|
)%
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
|
|
$
|
|
|
|
42
|
|
|
$
|
|
|
|
45
|
|
|
(7
|
)%
|
|
1
|
%
|
|
(8
|
)%
|
|
Dogs and Cats
|
|
|
|
342
|
|
|
311
|
|
|
10
|
%
|
|
—
|
|
|
10
|
%
|
|
Total Companion Animal Revenues
|
|
|
|
$
|
|
|
|
384
|
|
|
$
|
|
|
|
356
|
|
|
8
|
%
|
|
—
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Note 17A to Zoetis' combined
financial statements included in Zoetis' Form 10-K for the year
ended December 31, 2012.
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
ZOETIS INC.
SEGMENT EARNINGS(a)
(UNAUDITED)
(millions
of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
% Change
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Total
|
|
Foreign
exchange
|
|
Operational
|
|
U.S.
|
|
$
|
|
|
|
234
|
|
|
$
|
|
|
|
217
|
|
|
8
|
%
|
|
—
|
|
|
8
|
%
|
|
EuAfME
|
|
117
|
|
|
104
|
|
|
13
|
%
|
|
(3
|
)%
|
|
16
|
%
|
|
CLAR
|
|
52
|
|
|
54
|
|
|
(4
|
)%
|
|
(13
|
)%
|
|
9
|
%
|
|
APAC
|
|
75
|
|
|
71
|
|
|
6
|
%
|
|
—
|
|
|
6
|
%
|
|
Total Reportable Segments
|
|
478
|
|
|
446
|
|
|
7
|
%
|
|
(3
|
)%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(b)
|
|
(74
|
)
|
|
(65
|
)
|
|
14
|
%
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(c)
|
|
(116
|
)
|
|
(129
|
)
|
|
(10
|
)%
|
|
|
|
|
|
Purchase accounting adjustments(d)
|
|
(12
|
)
|
|
(13
|
)
|
|
(8
|
)%
|
|
|
|
|
|
Acquisition-related costs(e)
|
|
(6
|
)
|
|
(14
|
)
|
|
(57
|
)%
|
|
|
|
|
|
Certain significant items(f)
|
|
(42
|
)
|
|
(31
|
)
|
|
35
|
%
|
|
|
|
|
|
Other unallocated(g)
|
|
(36
|
)
|
|
(23
|
)
|
|
57
|
%
|
|
|
|
|
|
Total Earnings(h)
|
|
$
|
|
|
|
192
|
|
|
$
|
|
|
|
171
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Note 17A to Zoetis' combined
financial statements included in Zoetis' Form 10-K for the year
ended December 31, 2012.
|
|
(b)
|
|
Other business activities reflect the research and development costs
managed by our Research and Development organization.
|
|
(c)
|
|
Corporate includes, among other things, administration expenses,
allocated interest expense, certain compensation and other costs not
charged to our operating segments.
|
|
(d)
|
|
Purchase accounting adjustments include certain charges related to
the fair value adjustments to inventory, intangible assets and
property, plant and equipment not charged to our operating segments.
|
|
(e)
|
|
Acquisition-related costs can include costs associated with
acquiring, integrating and restructuring newly acquired businesses,
such as allocated transaction costs, integration costs,
restructuring charges and additional depreciation associated with
asset restructuring.
|
|
(f)
|
|
Certain significant items are substantive, unusual items that,
either as a result of their nature or size, would not be expected to
occur as part of our normal business on a regular basis. Such items
primarily include restructuring charges and implementation costs
associated with our cost-reduction/productivity initiatives that are
not associated with an acquisition, the impact of
divestiture-related gains and losses and certain costs related to
becoming a standalone public company.
|
|
(g)
|
|
Includes overhead expenses associated with our manufacturing and
commercial operations not directly attributable to an operating
segment.
|
|
(h)
|
|
Defined as income before provision for taxes on income.
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
Zoetis
Media:
Bill Price, 1-973-660-5763 (o)
william.price@zoetis.com
or
Elinore White, 1-973-401-4044 (o)
elinore.y.white@zoetis.com
or
Investors:
Dina Fede, 1-973-660-5441 (o)
or
John O'Connor, 1-973-660-6964 (o)