- Reports Revenue of $1.3 Billion, Growing 5%, and Net Income of $247 Million, or $0.50 per Diluted Share, Growing 10% and 11%, respectively, on a Reported Basis for Second Quarter 2017
- Reports Adjusted Net Income of $261 Million, or Adjusted Diluted EPS of $0.53, for Second Quarter 2017
- Delivers 6% Operational Growth in Revenue and 11% Operational Growth in Adjusted Net Income, Excluding Foreign Exchange, for Second Quarter 2017
- Increases Full Year 2017 Revenue Guidance to $5.150 - $5.250 Billion and Diluted EPS to $2.12 - $2.21 on a Reported Basis, or $2.30 - $2.37 on an Adjusted Basis
Zoetis
Inc. (NYSE:ZTS) today reported its financial results for the second
quarter of 2017 and increased its full year guidance for revenue and net
income.
The company reported revenue of $1.3 billion for the second quarter of
2017, an increase of 5% compared with the second quarter of 2016. Net
income for the second quarter of 2017 was $247 million, or $0.50 per
diluted share, an increase of 10% and 11%, respectively, on a reported
basis.
Adjusted net income1 for the second quarter of 2017 was $261
million, or $0.53 per diluted share, an increase of 6% and 8%,
respectively, on a reported basis. Adjusted net income for the second
quarter of 2017 excludes the net impact of $14 million for purchase
accounting adjustments, acquisition-related costs and certain
significant items.
On an operational2 basis, revenue for the second quarter of
2017 increased 6%, excluding the impact of foreign currency. Adjusted
net income for the second quarter of 2017 increased 11% operationally,
excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“As in previous quarters, the consistency of our financial results is
supported by the innovations we bring to the market and the diversity of
our portfolio across geographies, species and therapeutic areas,” said
Juan Ramón Alaix, Chief Executive Officer at Zoetis. “Zoetis was able to
generate an 11% operational increase in adjusted net income on 6%
operational growth in revenue in the second quarter. Our companion
animal business remains the largest driver of our growth, supported by
the continued adoption of products like Apoquel, Cytopoint and
Simparica, while our livestock portfolio continues to grow based on the
breadth of our solutions and global presence.”
“Based on recent foreign exchange rates and continued confidence in our
performance for the year, we are improving our full year guidance for
revenue and net income,” said Glenn David, Executive Vice President and
Chief Financial Officer at Zoetis. “We will continue to build on our
foundation for sustainable long term growth, allocating cash and other
resources to support new products, lifecycle innovation, market
expansion and business development opportunities.”
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across two
regional segments: the United States (U.S.) and International. Within
these segments, the company delivers a diverse portfolio of products for
livestock and companion animals tailored to local trends and customer
needs. In the second quarter of 2017:
-
Revenue in the U.S. segment was $623 million, an increase of 5%
compared with the second quarter of 2016. Sales of companion animal
products grew 7%, driven by increased sales in our dermatology
portfolio, in addition to several other new product launches. Growth
was partially offset by lower sales of our pain products due to
competition and timing of promotional campaigns. Sales of livestock
products grew 3% driven primarily by increased sales of cattle and
poultry products. Growth was partially offset by lower sales of swine
products. In addition, certain medicated feed additive products for
cattle and swine were negatively impacted by livestock producers’
implementation of the Veterinary Feed Directive.
-
Revenue in the International segment was $634 million, an increase of
5% on a reported basis and 7% operationally compared with the second
quarter of 2016. Sales of companion animal products grew 12% on a
reported basis and 15% operationally, resulting primarily from
increased sales of Apoquel®, in addition to new product
launches, primarily Simparica®. Sales of livestock products
grew 2% on a reported basis and 3% on an operational basis, driven
primarily by increased sales of cattle and swine products. In cattle,
growth was due to higher sales in Brazil and other Latin American
markets, with increased demand in Brazil as a result of field force
expansion, while swine was driven by growth in China. Growth was
partially offset by product rationalizations as a result of our
operational efficiency initiative.
Zoetis continues to drive demand and strengthen its diverse portfolio
through the introduction of new products, lifecycle innovations,
business development initiatives, strong customer relationships and
entry into new markets and technologies. In the second quarter of 2017:
-
In a prime example of lifecycle innovation to keep brand product
franchises delivering value to customers, Zoetis received approval in
May from the U.S. Food and Drug Administration (FDA) for the company’s Clavamox
®
Chewable (amoxicillin/clavulanate potassium tablets) for use in
dogs. This leading anti-infective, first approved in the U.S. in 1984,
provides a broad spectrum of treatment for skin infections in dogs and
cats, periodontal infections in dogs and urinary tract infections
in cats. Clavamox Chewables join the original tablet and liquid drop
formulations, which Zoetis will continue to market.
-
Zoetis continued to extend its dermatology portfolio to new markets
with approvals of Apoquel
(oclacitinib tablet) in
Vietnam and Cytopoint
®
(lokivetmab) in New
Zealand. Apoquel, first approved in 2013, is indicated for the control
of pruritus (itching) associated with allergic dermatitis and control
of atopic dermatitis in dogs at least 12 months of age. Monoclonal
antibody therapy Cytopoint, fully licensed in the United States in
2016 and in Europe and Canada earlier this year, aids in the reduction
of clinical signs associated with atopic dermatitis in dogs. The
company also continued expanding the availability of its oral flea and
tick medication Simparica (sarolaner) Chewables with an
approval in Peru. Simparica received its first approval in 2015. It
delivers fast and persistent protection from fleas and ticks in dogs,
with effectiveness that lasts for a full 35 days, without losing
efficacy at the end of the month.
-
On July 31, Zoetis completed the acquisition of Nexvet Biopharma plc,
an innovator in monoclonal antibody therapies for companion animals in
management of chronic pain and other therapeutic areas. The
acquisition strengthens Zoetis’ R&D pipeline in monoclonal antibodies
and helps sustain the company’s leadership in chronic pain management
for companion animals, an area poised for innovation with new
monoclonal antibody therapies.
FINANCIAL GUIDANCE
Zoetis updated its guidance for the full year 2017, which includes:
-
Revenue between $5.150 billion to $5.250 billion
-
Reported diluted EPS between $2.12 to $2.21 per share
-
Adjusted diluted EPS between $2.30 to $2.37 per share
This guidance reflects foreign exchange rates as of late July.
Additional guidance on other items such as expenses and tax rate is
included in the financial tables and will be discussed on the company's
conference call this morning.
WEBCAST & CONFERENCE CALL DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (ET) today,
during which company executives will review second quarter 2017 results,
discuss 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://investor.zoetis.com/events-presentations.
A replay of the webcast will be archived and made available on August 8,
2017.
About Zoetis
Zoetis
(NYSE: ZTS) is the leading animal health company, dedicated to
supporting its customers and their businesses. Building on more than 60
years of experience in animal health, Zoetis discovers, develops,
manufactures and markets veterinary vaccines and medicines, complemented
by diagnostic products, genetic tests, biodevices and a range of
services. Zoetis serves veterinarians, livestock producers and people
who raise and care for farm and companion animals with sales of its
products in more than 100 countries. In 2016, the company generated
annual revenue of $4.9 billion with approximately 9,000 employees. For
more information, visit www.zoetis.com.
1
Adjusted net income and its components 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 (a non-GAAP financial
measure) is defined as revenue growth excluding the impact of foreign
exchange.
DISCLOSURE NOTICES
Forward-Looking Statements
: This
press release contains forward-looking statements, which reflect the
current views of Zoetis with respect to business plans or prospects,
future operating or financial performance, future guidance, future
operating models, expectations regarding products, future use of cash
and dividend payments, tax rate and tax regimes, changes in the tax
regimes and laws in other jurisdictions, and other future events. These
statements are not guarantees of future performance or actions.
Forward-looking statements are subject to risks and uncertainties. If
one or more of these risks or uncertainties materialize, or if
management's underlying assumptions prove to be incorrect, actual
results may differ materially from those contemplated by a
forward-looking statement. Forward-looking statements speak only as of
the date on which they are made. Zoetis expressly disclaims any
obligation to update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise. A further list
and description of risks, uncertainties and other matters can be found
in our Annual Report on Form 10-K for the fiscal year ended December 31,
2016, including in the sections thereof captioned “Forward-Looking
Statements and Factors That May Affect Future Results” and “Item 1A.
Risk Factors,” in our Quarterly Reports on Form 10-Q and in our Current
Reports on Form 8-K. These filings and subsequent filings are available
online at
www.sec.gov
,
www.zoetis.com
,
or on request from Zoetis.
Use of Non-GAAP Financial Measures
:
We use non-GAAP financial measures, such as adjusted net income,
adjusted diluted earnings per share and operational results (which
exclude the impact of foreign exchange), to assess and analyze our
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 press
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 press 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 website 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 website regularly and to follow us on Facebook and
Twitter for important information about us.
|
ZOETIS INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)
|
(UNAUDITED)
|
(millions of dollars, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
Revenue
|
|
$
|
1,269
|
|
|
$
|
1,208
|
|
|
5
|
|
$
|
2,500
|
|
|
$
|
2,370
|
|
|
5
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(b)
|
|
440
|
|
|
399
|
|
|
10
|
|
883
|
|
|
788
|
|
|
12
|
Selling, general and administrative expenses(b)
|
|
336
|
|
|
343
|
|
|
(2)
|
|
645
|
|
|
658
|
|
|
(2)
|
Research and development expenses(b)
|
|
86
|
|
|
88
|
|
|
(2)
|
|
176
|
|
|
178
|
|
|
(1)
|
Amortization of intangible assets(c)
|
|
23
|
|
|
22
|
|
|
5
|
|
45
|
|
|
43
|
|
|
5
|
Restructuring charges/(reversals) and certain acquisition-related
costs
|
|
—
|
|
|
(21
|
)
|
|
(100)
|
|
(1
|
)
|
|
(19
|
)
|
|
(95)
|
Interest expense
|
|
41
|
|
|
41
|
|
|
—
|
|
82
|
|
|
84
|
|
|
(2)
|
Other (income)/deductions–net
|
|
(2
|
)
|
|
4
|
|
|
*
|
|
(12
|
)
|
|
(26
|
)
|
|
(54)
|
Income before provision for taxes on income
|
|
345
|
|
|
332
|
|
|
4
|
|
682
|
|
|
664
|
|
|
3
|
Provision for taxes on income
|
|
98
|
|
|
108
|
|
|
(9)
|
|
196
|
|
|
236
|
|
|
(17)
|
Net income before allocation to noncontrolling interests
|
|
247
|
|
|
224
|
|
|
10
|
|
486
|
|
|
428
|
|
|
14
|
Less: Net income attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
*
|
|
1
|
|
|
—
|
|
|
*
|
Net income attributable to Zoetis
|
|
$
|
247
|
|
|
$
|
224
|
|
|
10
|
|
$
|
485
|
|
|
$
|
428
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—basic
|
|
$
|
0.50
|
|
|
$
|
0.45
|
|
|
11
|
|
$
|
0.99
|
|
|
$
|
0.86
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—diluted
|
|
$
|
0.50
|
|
|
$
|
0.45
|
|
|
11
|
|
$
|
0.98
|
|
|
$
|
0.86
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to calculate earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
490.8
|
|
|
496.3
|
|
|
|
|
491.6
|
|
|
496.9
|
|
|
|
Diluted
|
|
494.0
|
|
|
498.8
|
|
|
|
|
494.6
|
|
|
499.2
|
|
|
|
* Calculation not meaningful.
|
|
|
|
(a)
|
|
The condensed consolidated statements of income present the three
and six months ended July 2, 2017, and July 3, 2016. Subsidiaries
operating outside the United States are included for the three and
six months ended May 28, 2017 and May 29, 2016.
|
(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 finite-lived 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.
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
ZOETIS INC.
|
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
|
CERTAIN LINE ITEMS
|
(UNAUDITED)
|
(millions of dollars, except per share data)
|
|
|
|
Quarter ended July 2, 2017
|
|
|
GAAP
Reported
(a)
|
|
Purchase Accounting Adjustments
|
|
Acquisition- Related Costs(1)
|
|
Certain Significant Items(2)
|
|
Non-GAAP Adjusted(b)
|
Cost of sales(c)
|
|
$
|
440
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
437
|
|
Gross profit
|
|
829
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
832
|
|
Selling, general and administrative expenses(c)
|
|
336
|
|
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|
333
|
|
Amortization of intangible assets(d)
|
|
23
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
Restructuring charges/(reversals) and certain acquisition-related
costs
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
—
|
|
Other (income)/deductions–net
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Income before provision for taxes on income
|
|
345
|
|
|
21
|
|
|
2
|
|
|
(1
|
)
|
|
367
|
|
Provision for taxes on income
|
|
98
|
|
|
6
|
|
|
1
|
|
|
1
|
|
|
106
|
|
Net income attributable to Zoetis
|
|
247
|
|
|
15
|
|
|
1
|
|
|
(2
|
)
|
|
261
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
0.50
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended July 3, 2016
|
|
|
GAAP
Reported
(a)
|
|
Purchase Accounting Adjustments
|
|
Acquisition- Related Costs(1)
|
|
Certain Significant Items(2)
|
|
Non-GAAP Adjusted(b)
|
Cost of sales(c)
|
|
$
|
399
|
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
388
|
|
Gross profit
|
|
809
|
|
|
8
|
|
|
—
|
|
|
3
|
|
|
820
|
|
Selling, general and administrative expenses(c)
|
|
343
|
|
|
(2
|
)
|
|
—
|
|
|
(10
|
)
|
|
331
|
|
Amortization of intangible assets(d)
|
|
22
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
Restructuring charges/(reversals) and certain acquisition-related
costs
|
|
(21
|
)
|
|
—
|
|
|
(2
|
)
|
|
23
|
|
|
—
|
|
Other (income)/deductions–net
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(2
|
)
|
Income before provision for taxes on income
|
|
332
|
|
|
28
|
|
|
2
|
|
|
(4
|
)
|
|
358
|
|
Provision for taxes on income
|
|
108
|
|
|
10
|
|
|
1
|
|
|
(7
|
)
|
|
112
|
|
Net income attributable to Zoetis
|
|
224
|
|
|
18
|
|
|
1
|
|
|
3
|
|
|
246
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
0.45
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
|
0.49
|
|
|
|
|
|
|
Six months ended July 2, 2017
|
|
|
GAAP
Reported
(a)
|
|
Purchase Accounting Adjustments
|
|
Acquisition- Related Costs(1)
|
|
Certain Significant Items(2)
|
|
Non-GAAP Adjusted(b)
|
Cost of sales(c)
|
|
$
|
883
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
875
|
|
Gross profit
|
|
1,617
|
|
|
3
|
|
|
—
|
|
|
5
|
|
|
1,625
|
|
Selling, general and administrative expenses(c)
|
|
645
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
639
|
|
Research and development expenses(c)
|
|
176
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
175
|
|
Amortization of intangible assets(d)
|
|
45
|
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
9
|
|
Restructuring charges/(reversals) and certain acquisition-related
costs
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|
3
|
|
|
—
|
|
Other (income)/deductions–net
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(10
|
)
|
Income before provision for taxes on income
|
|
682
|
|
|
43
|
|
|
2
|
|
|
3
|
|
|
730
|
|
Provision for taxes on income
|
|
196
|
|
|
9
|
|
|
1
|
|
|
1
|
|
|
207
|
|
Net income attributable to Zoetis
|
|
485
|
|
|
34
|
|
|
1
|
|
|
2
|
|
|
522
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
0.98
|
|
|
0.07
|
|
|
—
|
|
|
0.01
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 3, 2016
|
|
|
GAAP
Reported
(a)
|
|
Purchase Accounting Adjustments
|
|
Acquisition- Related Costs(1)
|
|
Certain Significant Items(2)
|
|
Non-GAAP Adjusted(b)
|
Cost of sales(c)
|
|
$
|
788
|
|
|
$
|
(15
|
)
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
766
|
|
Gross profit
|
|
1,582
|
|
|
15
|
|
|
—
|
|
|
7
|
|
|
1,604
|
|
Selling, general and administrative expenses(c)
|
|
658
|
|
|
(3
|
)
|
|
—
|
|
|
(24
|
)
|
|
631
|
|
Research and development expenses(c)
|
|
178
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
177
|
|
Amortization of intangible assets(d)
|
|
43
|
|
|
(35
|
)
|
|
—
|
|
|
—
|
|
|
8
|
|
Restructuring charges/(reversals) and certain acquisition-related
costs
|
|
(19
|
)
|
|
—
|
|
|
(2
|
)
|
|
21
|
|
|
—
|
|
Other (income)/deductions–net
|
|
(26
|
)
|
|
—
|
|
|
(1
|
)
|
|
27
|
|
|
—
|
|
Income before provision for taxes on income
|
|
664
|
|
|
54
|
|
|
3
|
|
|
(17
|
)
|
|
704
|
|
Provision for taxes on income
|
|
236
|
|
|
27
|
|
|
(1
|
)
|
|
(43
|
)
|
|
219
|
|
Net income attributable to Zoetis
|
|
428
|
|
|
27
|
|
|
4
|
|
|
26
|
|
|
485
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
0.86
|
|
|
0.05
|
|
|
0.01
|
|
|
0.05
|
|
|
0.97
|
|
(a)
|
|
The condensed consolidated statements of income present the three
and six months ended July 2, 2017, and July 3, 2016. Subsidiaries
operating outside the United States are included for the three and
six months ended May 28, 2017 and May 29, 2016.
|
(b)
|
|
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.
|
(c)
|
|
Exclusive of amortization of intangible assets, except as discussed
in footnote (d) below.
|
(d)
|
|
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 finite-lived 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.
|
|
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
|
|
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) Acquisition-related costs include the following:
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Integration costs(a)
|
|
$
|
2
|
|
|
|
$
|
2
|
|
|
|
$
|
2
|
|
|
|
$
|
2
|
|
|
Other(b)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Total acquisition-related costs—pre-tax
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
3
|
|
|
Income taxes(c)
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
Total acquisition-related costs—net of tax
|
|
$
|
1
|
|
|
|
$
|
1
|
|
|
|
$
|
1
|
|
|
|
$
|
4
|
|
|
(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. Included in Restructuring (benefits)/charges and
certain acquisition-related costs.
|
(b)
|
|
Included in Other (income)/deductions—net.
|
(c)
|
|
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. The six months ended July 3, 2016, also includes a tax
charge related to the acquisition of certain assets of Abbott
Animal Health.
|
|
Certain amounts may reflect rounding adjustments.
|
|
(2) Certain significant items include the following:
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Operational efficiency initiative(a)
|
|
$
|
6
|
|
|
|
$
|
(17
|
)
|
|
|
$
|
5
|
|
|
|
$
|
(45
|
)
|
|
Supply network strategy(b)
|
|
(4
|
)
|
|
|
8
|
|
|
|
(1
|
)
|
|
|
11
|
|
|
Other restructuring charges and cost-reduction/productivity
initiatives(c)
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Stand-up costs(d)
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
17
|
|
|
Other(e)
|
|
(3
|
)
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
Total certain significant items—pre-tax
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
3
|
|
|
|
(17
|
)
|
|
Income taxes(f)
|
|
1
|
|
|
|
(7
|
)
|
|
|
1
|
|
|
|
(43
|
)
|
|
Total certain significant items—net of tax
|
|
$
|
(2
|
)
|
|
|
$
|
3
|
|
|
|
$
|
2
|
|
|
|
$
|
26
|
|
|
(a)
|
|
For the three months ended July 2, 2017, represents consulting
fees of $1 million, included in Selling, general and
administrative expenses, restructuring charges of $3 million
related to employee termination costs ($2 million) and exit costs
($1 million), included in Restructuring charges/(reversals),
and a net loss related to sales of certain manufacturing sites and
products of $2 million, included in Other
(income)/deductions—net. For the six months ended July 2,
2017, represents consulting fees of $1 million, included in Selling,
general and administrative expenses, restructuring charges of
$2 million related to employee termination costs ($1 million) and
exit costs ($1 million), included in Restructuring
charges/(reversals), and a net loss related to sales of
certain manufacturing sites and products of $2 million, included
in Other (income)/deductions—net.
|
|
|
For the three months ended July 3, 2016, represents a reversal of
previously accrued employee terminations costs ($30 million), and
an increase in exit costs ($2 million), included in Restructuring
charges/(reversals) and certain acquisition-related costs,
accelerated depreciation of $1 million, and consulting fees of $4
million, included in Selling, general and administrative
expenses, and a $6 million net loss on sales of certain
manufacturing sites and products, included in Other
(income)/deductions—net. For the six months ended July 3,
2016, represents a reversal of previously accrued employee
terminations costs ($29 million), and an increase in exit costs
($3 million), included in Restructuring charges/(reversals) and
certain acquisition-related costs, accelerated depreciation of
$1 million, and consulting fees of $7 million, included in Selling,
general and administrative expenses, and a $27 million net
gain on sales of certain manufacturing sites and products,
included in Other (income)/deductions—net.
|
(b)
|
|
For the three months ended July 2, 2017, represents accelerated
depreciation of $1 million, included in Cost of sales, and
a reversal of previously accrued employee terminations costs of $5
million, included in Restructuring charges/(reversals). For
the six months ended July 2, 2017, represents accelerated
depreciation of $2 million, and consulting fees of $2 million,
included in Cost of sales, and a reversal of previously
accrued employee terminations costs of $5 million, included in Restructuring
charges/(reversals).
|
|
|
For the three months ended July 3, 2016, represents accelerated
depreciation charges of $1 million, and consulting fees of $1
million, included in Cost of sales, and restructuring
charges of $6 million related to employee termination costs,
included in Restructuring charges/(reversals) and certain
acquisition-related costs. For the six months ended July 3,
2016, represents accelerated depreciation charges of $2 million,
and consulting fees of $3 million, included in Cost of sales,
and restructuring charges of $6 million related to employee
termination costs, included in Restructuring
charges/(reversals) and certain acquisition-related costs.
|
(c)
|
|
Included in Restructuring charges/(reversals) and certain
acquisition-related costs.
|
(d)
|
|
Represents certain nonrecurring costs related to becoming an
independent public company, such as the creation of standalone
systems and infrastructure, site separation, new branding
(including changes to the manufacturing process for required new
packaging), and certain legal registration and patent assignment
costs. For the three and six months ended July 3, 2016, included
in Cost of sales ($1 million and $2 million, respectively)
and Selling, general and administrative expenses ($4
million and $15 million, respectively).
|
(e)
|
|
For the three months ended July 2, 2017, represents costs
associated with changes to our operating model of $1 million,
included in Cost of sales, and income of $4 million related
to an insurance recovery from commercial settlements in Mexico
recorded in 2014 and 2016, included in Other
(income)/deductions—net. For the six months ended July 2,
2017, represents costs associated with changes to our operating
model of $1 million, included in Cost of sales and $2 million,
included in Selling, general and administrative expenses,
as well as income of $4 million related to insurance recovery from
commercial settlements in Mexico recorded in 2014 and 2016,
included in Other (income)/deductions—net. The three and
six months ended July 3, 2016, represents costs associated with
changes to our operating model, included in Selling, general
and administrative expenses.
|
(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. For the six months ended July 2, 2017, also includes a net
tax charge of approximately $1 million, related to the revaluation
of the company's deferred tax assets and liabilities, using the
rates expected to be in place at the time of the reversal. The
three and six months ended July 3, 2016, also includes a net tax
charge of approximately $3 million and $38 million, respectively,
related to the impact of the European Commission’s negative
decision on the excess profits rulings in Belgium. These net
charges relate to the Belgium government's recovery of prior tax
benefits for the periods 2013 through 2015 offset by the
revaluation of the company’s deferred tax assets and liabilities
using the rates expected to be in place at the time of the
reversal. These net charges do not include any benefits associated
with a successful appeal of the decision.
|
|
Certain amounts may reflect rounding adjustments.
|
|
|
ZOETIS INC.
|
ADJUSTED SELECTED COSTS, EXPENSES AND INCOME(a)
|
(UNAUDITED)
|
(millions of dollars)
|
|
|
|
Second Quarter
|
|
% Change
|
|
|
2017
|
|
2016
|
|
Total
|
|
|
Foreign Exchange
|
|
Operational(b)
|
Adjusted cost of sales
|
|
$
|
437
|
|
|
$
|
388
|
|
|
13%
|
|
|
3%
|
|
10%
|
as a percent of revenue
|
|
|
34.4
|
%
|
|
|
32.1
|
%
|
|
NA
|
|
|
NA
|
|
NA
|
Adjusted SG&A expenses
|
|
$
|
333
|
|
|
$
|
331
|
|
|
1%
|
|
|
—%
|
|
1%
|
Adjusted R&D expenses
|
|
|
86
|
|
|
|
88
|
|
|
(2)%
|
|
|
(1)%
|
|
(1)%
|
Adjusted net income attributable to Zoetis
|
|
|
261
|
|
|
|
246
|
|
|
6%
|
|
|
(5)%
|
|
11%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
% Change
|
|
|
2017
|
|
2016
|
|
Total
|
|
|
Foreign Exchange
|
|
Operational(b)
|
Adjusted cost of sales
|
|
$
|
875
|
|
|
$
|
766
|
|
|
14%
|
|
|
2%
|
|
12%
|
as a percent of revenue
|
|
|
35.0
|
%
|
|
|
32.3
|
%
|
|
NA
|
|
|
NA
|
|
NA
|
Adjusted SG&A expenses
|
|
$
|
639
|
|
|
$
|
631
|
|
|
1%
|
|
|
(1)%
|
|
2%
|
Adjusted R&D expenses
|
|
|
175
|
|
|
|
177
|
|
|
(1)%
|
|
|
—%
|
|
(1)%
|
Adjusted net income attributable to Zoetis
|
|
|
522
|
|
|
|
485
|
|
|
8%
|
|
|
(2)%
|
|
10%
|
(a)
|
|
Adjusted cost of sales, adjusted selling, general, and
administrative (SG&A) expenses, adjusted research and development
(R&D) expenses, and adjusted net income attributable to Zoetis
(non-GAAP financial measures) are defined as the corresponding
reported U.S. 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 and six months ended July 2, 2017, and
July 3, 2016, 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. For the corresponding GAAP line items, see
Condensed Consolidated Statements of Operations and Reconciliation
of GAAP Reported to Non-GAAP Adjusted Information.
|
(b)
|
|
Operational growth (a non-GAAP financial measure) is defined as
growth excluding the impact of foreign exchange.
|
|
|
ZOETIS INC.
|
2017 GUIDANCE
|
|
Selected Line Items
|
|
|
(millions of dollars, except per share amounts)
|
|
Full Year 2017
|
Revenue
|
|
$5,150 to $5,250
|
Operational growth
(a)
|
|
5.5% to 7.5%
|
Adjusted cost of sales as a percentage of revenue(b)
|
|
Approximately 33%
|
Adjusted SG&A expenses(b)
|
|
$1,285 to $1,325
|
Adjusted R&D expenses(b)
|
|
$365 to $385
|
Adjusted interest expense and other (income)/deductions(b)
|
|
Approximately $160
|
Adjusted EBIT margin(b)
|
|
34% to 35%
|
Effective tax rate on adjusted income(b)
|
|
Approximately 29%
|
Adjusted diluted EPS(b)
|
|
$2.30 to $2.37
|
Adjusted net income(b)
|
|
$1,140 to $1,175
|
Operational growth
(a)(c)
|
|
17% to 20%
|
Certain significant items(d) and acquisition-related costs
|
|
$30 to $50
|
|
|
|
The guidance reflects foreign exchange rates as of late July 2017.
Reconciliations of 2017 reported guidance to 2017 adjusted guidance
follows:
(millions of dollars, except per share amounts)
|
|
Reported
|
|
Certain significant items(d) and acquisition-related costs
|
|
Purchase accounting
|
|
Adjusted(b)
|
|
|
|
|
Cost of sales as a percentage of revenue
|
|
~ 33.5%
|
|
(0.5%)
|
|
|
|
~ 33%
|
SG&A expenses
|
|
$1,295 to $1,335
|
|
($5)
|
|
($5)
|
|
$1,285 to $1,325
|
R&D expenses
|
|
$365 to $385
|
|
|
|
|
|
$365 to $385
|
Interest expense and other (income)/deductions
|
|
~ $160
|
|
|
|
|
|
~ $160
|
EBIT margin
|
|
32% to 33%
|
|
0.5% to 1%
|
|
1.5%
|
|
34% to 35%
|
Effective tax rate
|
|
~ 29%
|
|
(0.5%)
|
|
0.5%
|
|
~ 29%
|
Diluted EPS
|
|
$2.12 to $2.21
|
|
$0.03 to $0.05
|
|
$0.13
|
|
$2.30 to $2.37
|
Net income attributable to Zoetis
|
|
$1,050 to $1,095
|
|
$15 to $25
|
|
$65
|
|
$1,140 to $1,175
|
(a)
|
|
Operational growth (a non-GAAP financial measure) excludes the
impact of foreign exchange.
|
(b)
|
|
Adjusted net income and its components and adjusted diluted EPS are
defined as reported U.S. 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 SG&A expenses, adjusted 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.
Adjusted earnings before interest and taxes (EBIT) is defined as
reported EBIT excluding purchase accounting adjustments,
acquisition-related costs and certain significant items. Despite the
importance of these measures to management in goal setting and
performance measurement, adjusted net income and its components and
adjusted diluted earnings per share (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.
|
(c)
|
|
We do not provide a reconciliation of forward-looking non-GAAP
adjusted net income operational growth to the most directly
comparable GAAP reported financial measure because we are unable to
calculate with reasonable certainty the foreign exchange impact of
unusual gains and losses, acquisition-related expenses, potential
future asset impairments and other certain significant items,
without unreasonable effort. The foreign exchange impacts of these
items are uncertain, depend on various factors, and could have a
material impact on GAAP reported results for the guidance period.
|
(d)
|
|
Primarily includes certain nonrecurring costs related to
restructuring, net gains/losses on sales of assets, and other
charges for the operational efficiency initiative and supply network
strategy.
|
|
|
ZOETIS INC.
|
CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES
|
(UNAUDITED)
|
(millions of dollars)
|
|
|
|
Second Quarter
|
|
% Change
|
|
|
2017
|
|
|
2016
|
|
|
Total
|
|
Foreign Exchange
|
|
Operational(b)
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
689
|
|
|
$
|
673
|
|
|
2%
|
|
(1)%
|
|
3 %
|
Companion Animal
|
|
568
|
|
|
523
|
|
|
9%
|
|
(1)%
|
|
10 %
|
Contract Manufacturing
|
|
12
|
|
|
12
|
|
|
—%
|
|
3%
|
|
(3 )%
|
Total Revenue
|
|
$
|
1,269
|
|
|
$
|
1,208
|
|
|
5%
|
|
(1)%
|
|
6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
269
|
|
|
$
|
262
|
|
|
3%
|
|
—%
|
|
3 %
|
Companion Animal
|
|
354
|
|
|
332
|
|
|
7%
|
|
—%
|
|
7 %
|
Total U.S. Revenue
|
|
$
|
623
|
|
|
$
|
594
|
|
|
5%
|
|
—%
|
|
5 %
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
420
|
|
|
$
|
411
|
|
|
2%
|
|
(1)%
|
|
3 %
|
Companion Animal
|
|
214
|
|
|
191
|
|
|
12%
|
|
(3)%
|
|
15 %
|
Total International Revenue
|
|
$
|
634
|
|
|
$
|
602
|
|
|
5%
|
|
(2)%
|
|
7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
$
|
382
|
|
|
$
|
366
|
|
|
4%
|
|
—%
|
|
4 %
|
Swine
|
|
148
|
|
|
150
|
|
|
(1)%
|
|
(1)%
|
|
— %
|
Poultry
|
|
122
|
|
|
118
|
|
|
3%
|
|
(1)%
|
|
4 %
|
Fish
|
|
19
|
|
|
22
|
|
|
(14)%
|
|
(9)%
|
|
(5 )%
|
Other
|
|
18
|
|
|
17
|
|
|
6%
|
|
(2)%
|
|
8 %
|
Total Livestock Revenue
|
|
$
|
689
|
|
|
$
|
673
|
|
|
2%
|
|
(1)%
|
|
3 %
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
$
|
35
|
|
|
$
|
36
|
|
|
(3)%
|
|
(1)%
|
|
(2 )%
|
Dogs and Cats
|
|
533
|
|
|
487
|
|
|
9%
|
|
(1)%
|
|
10 %
|
Total Companion Animal Revenue
|
|
$
|
568
|
|
|
$
|
523
|
|
|
9%
|
|
(1)%
|
|
10 %
|
(a)
|
|
For a description of each segment, see Note 18A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2016.
|
(b)
|
|
Operational revenue growth (a non-GAAP financial measure) is defined
as revenue growth excluding the impact of foreign exchange.
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
Six Months
|
|
% Change
|
|
|
2017
|
|
|
2016
|
|
|
Total
|
|
Foreign Exchange
|
|
Operational(b)
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
1,392
|
|
|
$
|
1,356
|
|
|
3%
|
|
—%
|
|
3%
|
Companion Animal
|
|
1,085
|
|
|
989
|
|
|
10%
|
|
—%
|
|
10%
|
Contract Manufacturing
|
|
23
|
|
|
25
|
|
|
(8)%
|
|
(2)%
|
|
(6)%
|
Total Revenue
|
|
$
|
2,500
|
|
|
$
|
2,370
|
|
|
5%
|
|
(1)%
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
551
|
|
|
$
|
550
|
|
|
—%
|
|
—%
|
|
—%
|
Companion Animal
|
|
677
|
|
|
626
|
|
|
8%
|
|
—%
|
|
8%
|
Total U.S. Revenue
|
|
$
|
1,228
|
|
|
$
|
1,176
|
|
|
4%
|
|
—%
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
841
|
|
|
$
|
806
|
|
|
4%
|
|
(1)%
|
|
5%
|
Companion Animal
|
|
408
|
|
|
363
|
|
|
12%
|
|
(3)%
|
|
15%
|
Total International Revenue
|
|
$
|
1,249
|
|
|
$
|
1,169
|
|
|
7%
|
|
(1)%
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
$
|
768
|
|
|
$
|
743
|
|
|
3%
|
|
—%
|
|
3%
|
Swine
|
|
308
|
|
|
296
|
|
|
4%
|
|
—%
|
|
4%
|
Poultry
|
|
238
|
|
|
240
|
|
|
(1)%
|
|
(1)%
|
|
—%
|
Fish
|
|
40
|
|
|
39
|
|
|
3%
|
|
—%
|
|
3%
|
Other
|
|
38
|
|
|
38
|
|
|
—%
|
|
(1)%
|
|
1%
|
Total Livestock Revenue
|
|
$
|
1,392
|
|
|
$
|
1,356
|
|
|
3%
|
|
—%
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
$
|
70
|
|
|
$
|
75
|
|
|
(7)%
|
|
(1)%
|
|
(6)%
|
Dogs and Cats
|
|
1,015
|
|
|
914
|
|
|
11%
|
|
(1)%
|
|
12%
|
Total Companion Animal Revenue
|
|
$
|
1,085
|
|
|
$
|
989
|
|
|
10%
|
|
—%
|
|
10%
|
(a)
|
|
For a description of each segment, see Note 18A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2016.
|
(b)
|
|
Operational revenue growth (a non-GAAP financial measure) is defined
as revenue growth excluding the impact of foreign exchange.
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
ZOETIS INC.
|
CONSOLIDATED REVENUE BY KEY INTERNATIONAL MARKETS
|
(UNAUDITED)
|
(millions of dollars)
|
|
|
|
Second Quarter
|
|
% Change
|
|
|
2017
|
|
|
2016
|
|
|
Total
|
|
Foreign Exchange
|
|
Operational(a)
|
Total International
|
|
$
|
634
|
|
|
$
|
602
|
|
|
5%
|
|
(2)%
|
|
7%
|
Australia
|
|
43
|
|
|
42
|
|
|
2%
|
|
2%
|
|
—%
|
Brazil
|
|
73
|
|
|
60
|
|
|
22%
|
|
14%
|
|
8%
|
Canada
|
|
49
|
|
|
48
|
|
|
2%
|
|
(3)%
|
|
5%
|
China
|
|
45
|
|
|
42
|
|
|
7%
|
|
(7)%
|
|
14%
|
France
|
|
26
|
|
|
25
|
|
|
4%
|
|
(2)%
|
|
6%
|
Germany
|
|
33
|
|
|
32
|
|
|
3%
|
|
(5)%
|
|
8%
|
Italy
|
|
21
|
|
|
22
|
|
|
(5)%
|
|
(6)%
|
|
1%
|
Japan
|
|
36
|
|
|
31
|
|
|
16%
|
|
(1)%
|
|
17%
|
Mexico
|
|
21
|
|
|
20
|
|
|
5%
|
|
(10)%
|
|
15%
|
Spain
|
|
23
|
|
|
23
|
|
|
—%
|
|
(4)%
|
|
4%
|
United Kingdom
|
|
26
|
|
|
27
|
|
|
(4)%
|
|
(16)%
|
|
12%
|
Other Developed
|
|
76
|
|
|
75
|
|
|
1%
|
|
(1)%
|
|
2%
|
Other Emerging
|
|
162
|
|
|
155
|
|
|
5%
|
|
(1)%
|
|
6%
|
|
|
|
|
|
|
|
Six Months
|
|
% Change
|
|
|
2017
|
|
|
2016
|
|
|
Total
|
|
Foreign Exchange
|
|
Operational(a)
|
Total International
|
|
$
|
1,249
|
|
|
$
|
1,169
|
|
|
7%
|
|
(1)%
|
|
8%
|
Australia
|
|
83
|
|
|
77
|
|
|
8%
|
|
3%
|
|
5%
|
Brazil
|
|
139
|
|
|
106
|
|
|
31%
|
|
20%
|
|
11%
|
Canada
|
|
83
|
|
|
81
|
|
|
2%
|
|
(1)%
|
|
3%
|
China
|
|
97
|
|
|
80
|
|
|
21%
|
|
(9)%
|
|
30%
|
France
|
|
55
|
|
|
61
|
|
|
(10)%
|
|
(4)%
|
|
(6)%
|
Germany
|
|
61
|
|
|
61
|
|
|
—%
|
|
(4)%
|
|
4%
|
Italy
|
|
43
|
|
|
42
|
|
|
2%
|
|
(4)%
|
|
6%
|
Japan
|
|
70
|
|
|
62
|
|
|
13%
|
|
1%
|
|
12%
|
Mexico
|
|
39
|
|
|
39
|
|
|
—%
|
|
(12)%
|
|
12%
|
Spain
|
|
43
|
|
|
42
|
|
|
2%
|
|
(5)%
|
|
7%
|
United Kingdom
|
|
69
|
|
|
77
|
|
|
(10)%
|
|
(14)%
|
|
4%
|
Other Developed
|
|
144
|
|
|
143
|
|
|
1%
|
|
—%
|
|
1%
|
Other Emerging
|
|
323
|
|
|
298
|
|
|
8%
|
|
(2)%
|
|
10%
|
(a)
|
|
Operational revenue growth (a non-GAAP financial measure) is defined
as revenue growth excluding the impact of foreign exchange.
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
ZOETIS INC.
|
SEGMENT(a) EARNINGS
|
(UNAUDITED)
|
(millions of dollars)
|
|
|
|
Second Quarter
|
|
% Change
|
|
|
2017
|
|
2016
|
|
Total
|
|
Foreign Exchange
|
|
Operational(b)
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
623
|
|
|
$
|
594
|
|
|
5%
|
|
—%
|
|
5%
|
Cost of Sales
|
|
134
|
|
|
134
|
|
|
—%
|
|
—%
|
|
—%
|
Gross Profit
|
|
489
|
|
|
460
|
|
|
6%
|
|
—%
|
|
6%
|
Gross Margin
|
|
78.5
|
%
|
|
77.4
|
%
|
|
|
|
|
|
|
Operating Expenses
|
|
113
|
|
|
100
|
|
|
13%
|
|
—%
|
|
13%
|
Other (income)/deductions
|
|
—
|
|
|
—
|
|
|
—%
|
|
—%
|
|
—%
|
U.S. Earnings
|
|
$
|
376
|
|
|
$
|
360
|
|
|
4%
|
|
—%
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
International:
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
634
|
|
|
$
|
602
|
|
|
5%
|
|
(2)%
|
|
7%
|
Cost of Sales
|
|
219
|
|
|
201
|
|
|
9%
|
|
1%
|
|
8%
|
Gross Profit
|
|
415
|
|
|
401
|
|
|
3%
|
|
(3)%
|
|
6%
|
Gross Margin
|
|
65.5
|
%
|
|
66.6
|
%
|
|
|
|
|
|
|
Operating Expenses
|
|
126
|
|
|
124
|
|
|
2%
|
|
(1)%
|
|
3%
|
Other (income)/deductions
|
|
2
|
|
|
1
|
|
|
*
|
|
*
|
|
*
|
International Earnings
|
|
$
|
287
|
|
|
$
|
276
|
|
|
4%
|
|
(3)%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
Total Reportable Segments
|
|
$
|
663
|
|
|
$
|
636
|
|
|
4%
|
|
(2)%
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(c)
|
|
(73
|
)
|
|
(74
|
)
|
|
(1)%
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
Corporate(d)
|
|
(151
|
)
|
|
(171
|
)
|
|
(12)%
|
|
|
|
|
Purchase accounting adjustments(e)
|
|
(21
|
)
|
|
(28
|
)
|
|
(25)%
|
|
|
|
|
Acquisition-related costs(f)
|
|
(2
|
)
|
|
(2
|
)
|
|
—%
|
|
|
|
|
Certain significant items(g)
|
|
1
|
|
|
4
|
|
|
(75)%
|
|
|
|
|
Other unallocated(h)
|
|
(72
|
)
|
|
(33
|
)
|
|
*
|
|
|
|
|
Total Earnings
(i)
|
|
$
|
345
|
|
|
$
|
332
|
|
|
4%
|
|
|
|
|
* Calculation not meaningful.
|
|
|
|
(a)
|
|
For a description of each segment, see Note 18A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2016.
|
(b)
|
|
Operational growth (a non-GAAP financial measure) is defined as
growth excluding the impact of foreign exchange.
|
(c)
|
|
Other business activities reflect the research and development costs
managed by our Research and Development organization as well as our
contract manufacturing business.
|
(d)
|
|
Corporate includes, among other things, administration expenses,
interest expense, certain compensation costs, certain procurement
costs, and other costs not charged to our operating segments.
|
(e)
|
|
Purchase accounting adjustments include certain charges related to
the amortization of fair value adjustments to inventory, intangible
assets and property, plant and equipment not charged to our
operating segments.
|
(f)
|
|
Acquisition-related costs can include costs associated with
acquiring and integrating newly acquired businesses, such as
transaction costs and integration costs.
|
(g)
|
|
Certain significant items includes 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 certain costs related to becoming an independent
public company, restructuring charges and implementation costs
associated with our cost-reduction/productivity initiatives that are
not associated with an acquisition, costs associated with the
operational efficiency initiative and supply network strategy,
certain legal and commercial settlements, and the impact of
divestiture-related gains and losses.
|
(h)
|
|
Includes overhead expenses associated with our manufacturing and
supply operations not directly attributable to an operating segment,
as well as certain procurement costs.
|
(i)
|
|
Defined as income before provision for taxes on income.
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
Six Months
|
|
% Change
|
|
|
2017
|
|
|
2016
|
|
|
Total
|
|
Foreign Exchange
|
|
Operational(b)
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,228
|
|
|
$
|
1,176
|
|
|
4%
|
|
—%
|
|
4%
|
Cost of Sales
|
|
271
|
|
|
265
|
|
|
2%
|
|
—%
|
|
2%
|
Gross Profit
|
|
957
|
|
|
911
|
|
|
5%
|
|
—%
|
|
5%
|
Gross Margin
|
|
77.9
|
%
|
|
77.5
|
%
|
|
|
|
|
|
|
Operating Expenses
|
|
209
|
|
|
192
|
|
|
9%
|
|
—%
|
|
9%
|
Other (income)/deductions
|
|
—
|
|
|
—
|
|
|
—%
|
|
—%
|
|
—%
|
U.S. Earnings
|
|
$
|
748
|
|
|
$
|
719
|
|
|
4%
|
|
—%
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
International:
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,249
|
|
|
$
|
1,169
|
|
|
7%
|
|
(1)%
|
|
8%
|
Cost of Sales
|
|
432
|
|
|
397
|
|
|
9%
|
|
1%
|
|
8%
|
Gross Profit
|
|
817
|
|
|
772
|
|
|
6%
|
|
(1)%
|
|
7%
|
Gross Margin
|
|
65.4
|
%
|
|
66.0
|
%
|
|
|
|
|
|
|
Operating Expenses
|
|
240
|
|
|
233
|
|
|
3%
|
|
(1)%
|
|
4%
|
Other (income)/deductions
|
|
(1
|
)
|
|
3
|
|
|
*
|
|
*
|
|
*
|
International Earnings
|
|
$
|
578
|
|
|
$
|
536
|
|
|
8%
|
|
(2)%
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
Total Reportable Segments
|
|
$
|
1,326
|
|
|
$
|
1,255
|
|
|
6%
|
|
(1)%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(c)
|
|
(147
|
)
|
|
(148
|
)
|
|
(1)%
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
Corporate(d)
|
|
(294
|
)
|
|
(340
|
)
|
|
(14)%
|
|
|
|
|
Purchase accounting adjustments(e)
|
|
(43
|
)
|
|
(54
|
)
|
|
(20)%
|
|
|
|
|
Acquisition-related costs(f)
|
|
(2
|
)
|
|
(3
|
)
|
|
(33)%
|
|
|
|
|
Certain significant items(g)
|
|
(3
|
)
|
|
17
|
|
|
*
|
|
|
|
|
Other unallocated(h)
|
|
(155
|
)
|
|
(63
|
)
|
|
*
|
|
|
|
|
Total Earnings
(i)
|
|
$
|
682
|
|
|
$
|
664
|
|
|
3%
|
|
|
|
|
* Calculation not meaningful.
|
|
|
|
(a)
|
|
For a description of each segment, see Note 18A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2016.
|
(b)
|
|
Operational growth (a non-GAAP financial measure) is defined as
growth excluding the impact of foreign exchange.
|
(c)
|
|
Other business activities reflect the research and development costs
managed by our Research and Development organization as well as our
contract manufacturing business.
|
(d)
|
|
Corporate includes, among other things, administration expenses,
interest expense, certain compensation costs, certain procurement
costs, and other costs not charged to our operating segments.
|
(e)
|
|
Purchase accounting adjustments include certain charges related to
the amortization of fair value adjustments to inventory, intangible
assets and property, plant and equipment not charged to our
operating segments.
|
(f)
|
|
Acquisition-related costs can include costs associated with
acquiring and integrating newly acquired businesses, such as
transaction costs and integration costs.
|
(g)
|
|
Certain significant items includes 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 certain costs related to becoming an independent
public company, restructuring charges and implementation costs
associated with our cost-reduction/productivity initiatives that are
not associated with an acquisition, costs associated with the
operational efficiency initiative and supply network strategy,
certain legal and commercial settlements, and the impact of
divestiture-related gains and losses.
|
(h)
|
|
Includes overhead expenses associated with our manufacturing and
supply operations not directly attributable to an operating segment,
as well as certain procurement costs.
|
(i)
|
|
Defined as income before provision for taxes on income.
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
Zoetis Inc.
Media:
Bill Price, 1-973-443-2742 (o)
william.price@zoetis.com
or
Elinore White, 1-973-443-2835 (o)
elinore.y.white@zoetis.com
or
Investors:
Steve Frank, 1-973-822-7141 (o)
steve.frank@zoetis.com