- Reports Revenue of $1.5 Billion, Growing 7%, and Net Income of $312 Million, or $0.65 per Diluted Share, Decreasing 11% and 10%, respectively, on a Reported Basis for First Quarter 2019
- Reports Adjusted Net Income of $424 Million, or Adjusted Diluted EPS of $0.88, for First Quarter 2019
- Delivers 11% Operational Growth in Revenue and 18% Operational Growth in Adjusted Net Income for First Quarter 2019
- Updates Full Year 2019 Revenue Guidance to $6.100 - $6.225 Billion and Diluted EPS of $2.79 - $2.93 on a Reported Basis, or $3.42 - $3.52 on an Adjusted Basis
PARSIPPANY, N.J.--(BUSINESS WIRE)--Zoetis
Inc. (NYSE: ZTS) today reported its financial results for the first
quarter of 2019 and updated its guidance for full year 2019.
The company reported revenue of $1.5 billion for the first quarter of
2019, an increase of 7% compared with the first quarter of 2018. Net
income for the first quarter of 2019 was $312 million, or $0.65 per
diluted share, a decrease of 11% and 10%, respectively, on a reported
basis.
Adjusted net income1 for the first quarter of 2019 was $424
million, or $0.88 per diluted share, an increase of 16% and 17%,
respectively, on a reported basis. Adjusted net income for the first
quarter of 2019 excludes the net impact of $112 million for purchase
accounting adjustments, acquisition-related costs and certain
significant items.
On an operational2 basis, revenue for the first quarter of
2019 increased 11%, excluding the impact of foreign currency. Adjusted
net income for the first quarter of 2019 increased 18% operationally,
excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“We are off to a solid start for the year, with 11% operational growth
in the first quarter,” said Juan Ramόn Alaix, Chief Executive Officer at
Zoetis. “Our companion animal portfolio is leading the way, driven by
diagnostic sales from the acquisition of Abaxis, as well as strong
global sales of our parasiticides and key dermatology products. We were
able to achieve double-digit growth this quarter, even as we faced
challenges in certain swine and cattle markets. This quarter’s
performance once again highlights the benefits of our diverse product
portfolio, which we believe provides long-term stability to our business
in this dynamic and global industry.”
“Despite these temporary challenges, we remain confident in our
projections for the year, and we are maintaining our guidance for
operational revenue growth and adjusted EPS targets,” said Alaix.
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across two
regional segments: 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 first quarter of 2019:
-
Revenue in the U.S. segment was $718 million, an increase of
13% compared with the first quarter of 2018. Sales of companion animal
products grew 30% driven primarily by the acquisition of Abaxis,
parasiticides (mainly Revolution® Plus for cats and
Simparica® for dogs), and key dermatology products. Sales
of livestock products declined 7% in the quarter, with declines in
cattle and swine more than offsetting growth in poultry. Our cattle
and swine product sales were impacted by the timing of distributor
purchasing patterns for medicated feed additive products. Poultry
growth was largely due to increased sales of our portfolio of
alternatives to antibiotics in medicated feed additives.
-
Revenue in the International segment was $718 million, a
decrease of 1% on a reported basis and an increase of 7%
operationally, compared with the first quarter of 2018. Sales of
companion animal products grew 15% on a reported basis and 23% on an
operational basis. Growth resulted primarily from increased sales
across our key dermatology portfolio, the acquisition of Abaxis, and
Simparica. Sales of livestock products declined 9% on a reported basis
and 1% operationally, due to the negative impact of African Swine
Fever in China, as well as the divestiture of certain agribusiness
products in Japan; this decline was partially offset by growth across
poultry, fish and sheep.
INVESTMENTS IN GROWTH
As the world leader in animal health, Zoetis continues to invest in
strengthening its diverse portfolio of solutions across the continuum of
animal healthcare to help veterinarians and farmers predict, prevent,
detect and treat disease.
Since our last quarterly earnings announcement, Zoetis received approval
of Apoquel
®
(oclacitinib tablet) in China, one
of Zoetis’ largest companion animal markets. Other key companion animal
products, including Cytopoint
®
(lokivetmab) and Simparica
(sarolaner) for dogs, and Revolution Plus
(selamectin
and sarolaner topical solution) for cats, continued to gain approvals in
markets outside the U.S. Additionally, Core EQ Innovator
™
,
the first and only combination vaccine to offer protection against five
core equine diseases, was approved in Canada. In livestock, Zoetis
launched Clarifide
®
Plus for Jersey
cattle in the U.S., the first genomic test for this specific breed that
provides direct indication of the genetic risk factors for seven of the
most common and costly adult cow diseases.
FINANCIAL GUIDANCE
Zoetis is updating its full year 2019 guidance, primarily to reflect
changes in foreign currency, which includes:
-
Revenue between $6.100 billion and $6.225 billion
-
Reported diluted EPS between $2.79 and $2.93
-
Adjusted diluted EPS between $3.42 and $3.52
This guidance reflects foreign exchange rates as of late April.
Additional details on guidance are 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 first quarter 2019 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 May 2,
2019.
About Zoetis
Zoetis
is the leading animal health company, dedicated to supporting its
customers and their businesses. Building on more than 65 years of
experience in animal health, Zoetis discovers, develops, manufactures
and commercializes medicines, vaccines and diagnostic products, which
are complemented by biodevices, genetic tests 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 2018, the company generated annual revenue
of $5.8 billion with approximately 10,000 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 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, expectations
regarding the performance of acquired companies and our ability to
integrate new businesses, expectations regarding the financial impact of
acquisitions, 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,
2018, 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)
|
|
|
|
|
|
|
First Quarter
|
|
|
2019
|
|
2018
|
|
% Change
|
Revenue
|
|
$
|
1,455
|
|
|
$
|
1,366
|
|
|
7
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Cost of sales
|
|
518
|
|
|
447
|
|
|
16
|
|
Selling, general and administrative expenses
|
|
369
|
|
|
338
|
|
|
9
|
|
Research and development expenses
|
|
102
|
|
|
97
|
|
|
5
|
|
Amortization of intangible assets
|
|
38
|
|
|
23
|
|
|
65
|
|
Restructuring charges and certain acquisition-related costs
|
|
5
|
|
|
2
|
|
|
*
|
|
Interest expense
|
|
56
|
|
|
47
|
|
|
19
|
|
Other (income)/deductions–net
|
|
(14
|
)
|
|
(5
|
)
|
|
*
|
|
Income before provision for taxes on income
|
|
381
|
|
|
417
|
|
|
(9
|
)
|
Provision for taxes on income
|
|
69
|
|
|
67
|
|
|
3
|
|
Net income before allocation to noncontrolling interests
|
|
312
|
|
|
350
|
|
|
(11
|
)
|
Less: Net income/(loss) attributable to noncontrolling interests
|
|
—
|
|
|
(2
|
)
|
|
(100
|
)
|
Net income attributable to Zoetis
|
|
$
|
312
|
|
|
$
|
352
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Earnings per share—basic
|
|
$
|
0.65
|
|
|
$
|
0.72
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
Earnings per share—diluted
|
|
$
|
0.65
|
|
|
$
|
0.72
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
Weighted-average shares used to calculate earnings per share
|
|
|
|
|
|
|
|
Basic
|
|
479.6
|
|
|
485.9
|
|
|
|
|
Diluted
|
|
483.1
|
|
|
489.8
|
|
|
|
|
|
|
(a)
|
|
The condensed consolidated statements of income present the first
quarter ended March 31, 2019 and March 31, 2018. Subsidiaries
operating outside the United States are included for the first
quarter ended February 28, 2019 and February 28, 2018.
|
|
|
|
*
|
|
Calculation not meaningful.
|
|
|
|
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 March 31, 2019
|
|
|
GAAP
Reported
(a)
|
|
Purchase Accounting Adjustments
|
|
Acquisition- Related Costs(1)
|
|
Certain Significant Items(2)
|
|
Non-GAAP Adjusted(b)
|
Cost of sales(c)
|
|
$
|
518
|
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
$
|
(70
|
)
|
|
$
|
434
|
Gross profit
|
|
937
|
|
|
14
|
|
|
—
|
|
|
70
|
|
|
1,021
|
Selling, general and administrative expenses(c)
|
|
369
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
351
|
Amortization of intangible assets(d)
|
|
38
|
|
|
(34
|
)
|
|
—
|
|
|
—
|
|
|
4
|
Restructuring charges and certain acquisition-related costs
|
|
5
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
Income before provision for taxes on income
|
|
381
|
|
|
66
|
|
|
5
|
|
|
70
|
|
|
522
|
Provision for taxes on income
|
|
69
|
|
|
20
|
|
|
1
|
|
|
8
|
|
|
98
|
Net income attributable to Zoetis
|
|
312
|
|
|
46
|
|
|
4
|
|
|
62
|
|
|
424
|
Earnings per common share attributable to Zoetis–diluted
|
|
0.65
|
|
|
0.09
|
|
|
0.01
|
|
|
0.13
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2018
|
|
|
GAAP
Reported
(a)
|
|
Purchase Accounting Adjustments
|
|
Acquisition- Related Costs(1)
|
|
Certain Significant Items(2)
|
|
Non-GAAP Adjusted(b)
|
Cost of sales(c)
|
|
$
|
447
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
444
|
Gross profit
|
|
919
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|
922
|
Selling, general and administrative expenses(c)
|
|
338
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
336
|
Research and development expenses(c)
|
|
97
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
96
|
Amortization of intangible assets(d)
|
|
23
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
4
|
Restructuring charges and certain acquisition-related costs
|
|
2
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
Income before provision for taxes on income
|
|
417
|
|
|
23
|
|
|
1
|
|
|
3
|
|
|
444
|
Provision for taxes on income
|
|
67
|
|
|
11
|
|
|
—
|
|
|
3
|
|
|
81
|
Net income attributable to Zoetis
|
|
352
|
|
|
12
|
|
|
1
|
|
|
—
|
|
|
365
|
Earnings per common share attributable to Zoetis–diluted
|
|
0.72
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The condensed consolidated statements of income present the first
quarter ended March 31, 2019 and March 31, 2018. Subsidiaries
operating outside the United States are included for the first
quarter ended February 28, 2019 and February 28, 2018.
|
|
|
|
(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:
|
|
|
|
|
First Quarter
|
|
|
2019
|
|
2018
|
Integration costs(a)
|
|
$
|
1
|
|
|
$
|
1
|
Restructuring charges(b)
|
|
4
|
|
|
—
|
Total acquisition-related costs—pre-tax
|
|
5
|
|
|
1
|
Income taxes(c)
|
|
1
|
|
|
—
|
Total acquisition-related costs—net of tax
|
|
$
|
4
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
(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 charges and certain
acquisition-related costs.
|
|
|
|
(b)
|
|
Represents employee termination costs, included in Restructuring
charges and certain acquisition-related costs.
|
|
|
|
(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.
|
Certain amounts may reflect rounding adjustments.
|
(2) Certain significant items include the following:
|
|
|
|
|
|
First Quarter
|
|
|
|
|
|
2019
|
|
2018
|
Supply network strategy(a)
|
|
|
|
|
$
|
2
|
|
|
$
|
2
|
Other(b)
|
|
|
|
|
68
|
|
|
1
|
Total certain significant items—pre-tax
|
|
|
|
|
70
|
|
|
3
|
Income taxes(c)
|
|
|
|
|
8
|
|
|
3
|
Total certain significant items—net of tax
|
|
|
|
|
$
|
62
|
|
|
$
|
—
|
(a)
|
|
Represents consulting fees, included in Cost of sales,
related to cost-reduction and productivity initiatives.
|
|
|
|
(b)
|
|
For the three months ended March 31, 2019, represents a change in
estimate related to inventory costing, included in Cost of sales.
|
|
|
|
(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.
|
|
|
|
|
|
For the first quarter ended March 31, 2018, also includes a net
tax benefit related to a measurement-period adjustment to the
provisional one-time mandatory deemed repatriation tax on the
company's undistributed non-U.S. earnings pursuant to the Tax Cuts
and Jobs Act.
|
|
|
|
Certain amounts may reflect rounding adjustments.
|
|
|
ZOETIS INC.
|
ADJUSTED SELECTED COSTS, EXPENSES AND INCOME(a)
|
(UNAUDITED)
|
(millions of dollars)
|
|
|
|
|
|
|
First Quarter
|
|
% Change
|
|
|
2019
|
|
2018
|
|
Total
|
|
|
Foreign Exchange
|
|
Operational(b)
|
Adjusted cost of sales
|
|
$
|
434
|
|
|
$
|
444
|
|
|
(2
|
)%
|
|
|
(6
|
)%
|
|
4
|
%
|
as a percent of revenue
|
|
29.8
|
%
|
|
32.5
|
%
|
|
NA
|
|
|
NA
|
NA
|
Adjusted SG&A expenses
|
|
351
|
|
|
336
|
|
|
4
|
%
|
|
|
(4
|
)%
|
|
8
|
%
|
Adjusted R&D expenses
|
|
102
|
|
|
96
|
|
|
6
|
%
|
|
|
(2
|
)%
|
|
8
|
%
|
Adjusted net income attributable to Zoetis
|
|
424
|
|
|
365
|
|
|
16
|
%
|
|
|
(2
|
)%
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. These adjusted income statement line item
measures are not, and should not be viewed as, substitutes for the
corresponding U.S. GAAP line items. The corresponding GAAP line
items and reconciliations of reported to adjusted information are
provided in 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.
|
2019 GUIDANCE
|
|
Selected Line Items
(millions of dollars, except per share amounts)
|
|
Full Year 2019
|
Revenue
|
|
$6,100 to $6,225
|
Operational growth
(a)
|
|
7.5% to 9.5%
|
Organic operational growth
(b)
|
|
4.5% to 6.5%
|
Adjusted cost of sales as a percentage of revenue(c)
|
|
31% to 32%
|
Adjusted SG&A expenses(c)
|
|
$1,450 to $1,500
|
Adjusted R&D expenses(c)
|
|
$445 to $465
|
Adjusted interest expense and other (income)/deductions(c)
|
|
Approximately $200
|
Effective tax rate on adjusted income(c)
|
|
20% to 21%
|
Adjusted diluted EPS(c)
|
|
$3.42 to $3.52
|
Adjusted net income(c)
|
|
$1,650 to $1,700
|
Operational growth
(a)(d)
|
|
8% to 11%
|
Certain significant items and acquisition-related costs(e)
|
|
$130 to $150
|
|
|
|
The guidance reflects foreign exchange rates as of late April 2019.
Reconciliations of 2019 reported guidance to 2019 adjusted guidance
follows:
(millions of dollars, except per share amounts)
|
|
Reported
|
|
Certain significant items and acquisition-related costs(e)
|
|
Purchase accounting
|
|
Adjusted(c)
|
Cost of sales as a percentage of revenue
|
|
32.8
|
% - 33.8%
|
|
~ (1.3%)
|
|
~ (0.5%)
|
|
31
|
% - 32%
|
SG&A expenses
|
|
$1,525 to $1,575
|
|
|
|
|
($75
|
)
|
|
$1,450 to $1,500
|
R&D expenses
|
|
$447 to $467
|
|
|
|
|
($2
|
)
|
|
$445 to $465
|
Interest expense and other (income)/deductions
|
|
~ $200
|
|
|
|
|
|
~ $200
|
Effective tax rate
|
|
20% to 21%
|
|
|
|
|
|
20% to 21%
|
Diluted EPS
|
|
$2.79 to $2.93
|
|
$0.22 to $0.26
|
|
$
|
0.37
|
|
|
$3.42 to $3.52
|
Net income attributable to Zoetis
|
|
$1,345 to $1,415
|
|
$105 to $125
|
|
~ $180
|
|
$1,650 to $1,700
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Operational growth (a non-GAAP financial measure) excludes the
impact of foreign exchange.
|
|
|
|
(b)
|
|
Organic operational growth (a non-GAAP financial measure) excludes
the impact of the acquisition of Abaxis as well as foreign exchange.
|
|
|
|
(c)
|
|
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, and adjusted interest
expense and 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.
|
|
|
|
(d)
|
|
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.
|
|
|
|
(e)
|
|
Primarily includes certain nonrecurring costs related to the
acquisition of Abaxis and other charges.
|
|
|
|
|
ZOETIS INC.
|
CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES
|
(UNAUDITED)
|
(millions of dollars)
|
|
|
|
First Quarter
|
|
% Change
|
|
|
2019
|
|
2018
|
|
Total
|
|
|
Foreign Exchange
|
|
Operational(b)
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
707
|
|
|
$
|
770
|
|
|
(8
|
)%
|
|
|
(5
|
)%
|
|
(3
|
)%
|
Companion Animal
|
|
729
|
|
|
590
|
|
|
24
|
%
|
|
|
(3
|
)%
|
|
27
|
%
|
Contract Manufacturing & Human Health Diagnostics
|
|
19
|
|
|
6
|
|
|
*
|
|
|
*
|
|
*
|
Total Revenue
|
|
$
|
1,455
|
|
|
$
|
1,366
|
|
|
7
|
%
|
|
|
(4
|
)%
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
273
|
|
|
$
|
292
|
|
|
(7
|
)%
|
|
|
—
|
%
|
|
(7
|
)%
|
Companion Animal
|
|
445
|
|
|
342
|
|
|
30
|
%
|
|
|
—
|
%
|
|
30
|
%
|
Total U.S. Revenue
|
|
$
|
718
|
|
|
$
|
634
|
|
|
13
|
%
|
|
|
—
|
%
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
434
|
|
|
$
|
478
|
|
|
(9
|
)%
|
|
|
(8
|
)%
|
|
(1
|
)%
|
Companion Animal
|
|
284
|
|
|
248
|
|
|
15
|
%
|
|
|
(8
|
)%
|
|
23
|
%
|
Total International Revenue
|
|
$
|
718
|
|
|
$
|
726
|
|
|
(1
|
)%
|
|
|
(8
|
)%
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
$
|
380
|
|
|
$
|
416
|
|
|
(9
|
)%
|
|
|
(6
|
)%
|
|
(3
|
)%
|
Swine
|
|
149
|
|
|
175
|
|
|
(15
|
)%
|
|
|
(5
|
)%
|
|
(10
|
)%
|
Poultry
|
|
139
|
|
|
136
|
|
|
2
|
%
|
|
|
(5
|
)%
|
|
7
|
%
|
Fish
|
|
23
|
|
|
22
|
|
|
5
|
%
|
|
|
(4
|
)%
|
|
9
|
%
|
Other
|
|
16
|
|
|
21
|
|
|
(24
|
)%
|
|
|
(6
|
)%
|
|
(18
|
)%
|
Total Livestock Revenue
|
|
$
|
707
|
|
|
$
|
770
|
|
|
(8
|
)%
|
|
|
(5
|
)%
|
|
(3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
Dogs and Cats
|
|
$
|
688
|
|
|
$
|
549
|
|
|
25
|
%
|
|
|
(4
|
)%
|
|
29
|
%
|
Horses
|
|
41
|
|
|
41
|
|
|
—
|
%
|
|
|
(6
|
)%
|
|
6
|
%
|
Total Companion Animal Revenue
|
|
$
|
729
|
|
|
$
|
590
|
|
|
24
|
%
|
|
|
(3
|
)%
|
|
27
|
%
|
|
(a)
|
|
For a description of each segment, see Zoetis' most recent Annual
Report on Form 10-K.
|
(b)
|
|
Operational revenue growth (a non-GAAP financial measure) is defined
as revenue growth excluding the impact of foreign exchange.
|
*
|
|
Calculation not meaningful.
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
ZOETIS INC.
|
CONSOLIDATED REVENUE BY KEY INTERNATIONAL MARKETS
|
(UNAUDITED)
|
(millions of dollars)
|
|
|
|
First Quarter
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
Total
|
|
|
Foreign Exchange
|
|
Operational(a)
|
Total International
|
|
$
|
718.0
|
|
|
$
|
725.9
|
|
|
(1
|
)%
|
|
|
(8
|
)%
|
|
7
|
%
|
Australia
|
|
48.0
|
|
|
47.6
|
|
|
1
|
%
|
|
|
(9
|
)%
|
|
10
|
%
|
Brazil
|
|
60.1
|
|
|
69.6
|
|
|
(14
|
)%
|
|
|
(15
|
)%
|
|
1
|
%
|
Canada
|
|
41.1
|
|
|
40.2
|
|
|
2
|
%
|
|
|
(6
|
)%
|
|
8
|
%
|
China
|
|
59.5
|
|
|
63.9
|
|
|
(7
|
)%
|
|
|
(5
|
)%
|
|
(2
|
)%
|
France
|
|
32.3
|
|
|
33.2
|
|
|
(3
|
)%
|
|
|
(7
|
)%
|
|
4
|
%
|
Germany
|
|
36.5
|
|
|
37.5
|
|
|
(3
|
)%
|
|
|
(6
|
)%
|
|
3
|
%
|
Italy
|
|
28.1
|
|
|
27.1
|
|
|
4
|
%
|
|
|
(6
|
)%
|
|
10
|
%
|
Japan
|
|
37.3
|
|
|
40.9
|
|
|
(9
|
)%
|
|
|
—
|
%
|
|
(9
|
)%
|
Mexico
|
|
28.1
|
|
|
24.4
|
|
|
15
|
%
|
|
|
(3
|
)%
|
|
18
|
%
|
Spain
|
|
27.1
|
|
|
25.3
|
|
|
7
|
%
|
|
|
(6
|
)%
|
|
13
|
%
|
United Kingdom
|
|
56.7
|
|
|
52.1
|
|
|
9
|
%
|
|
|
(7
|
)%
|
|
16
|
%
|
Other developed markets
|
|
83.8
|
|
|
79.3
|
|
|
6
|
%
|
|
|
(6
|
)%
|
|
12
|
%
|
Other emerging markets
|
|
179.4
|
|
|
184.8
|
|
|
(3
|
)%
|
|
|
(11
|
)%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
% Change
|
|
|
2019
|
|
2018
|
|
Total
|
|
|
Foreign Exchange
|
|
Operational(b)
|
U.S.
:
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
718
|
|
|
$
|
634
|
|
|
13
|
%
|
|
|
—
|
%
|
|
13
|
%
|
Cost of Sales
|
|
147
|
|
|
140
|
|
|
5
|
%
|
|
|
—
|
%
|
|
5
|
%
|
Gross Profit
|
|
571
|
|
|
494
|
|
|
16
|
%
|
|
|
—
|
%
|
|
16
|
%
|
Gross Margin
|
|
79.5
|
%
|
|
77.9
|
%
|
|
|
|
|
|
|
|
Operating Expenses
|
|
110
|
|
|
96
|
|
|
15
|
%
|
|
|
—
|
%
|
|
15
|
%
|
Other (income)/deductions
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
|
—
|
%
|
|
—
|
%
|
U.S. Earnings
|
|
$
|
461
|
|
|
$
|
398
|
|
|
16
|
%
|
|
|
—
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
International
:
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
718
|
|
|
$
|
726
|
|
|
(1
|
)%
|
|
|
(8
|
)%
|
|
7
|
%
|
Cost of Sales
|
|
210
|
|
|
234
|
|
|
(10
|
)%
|
|
|
(10
|
)%
|
|
—
|
%
|
Gross Profit
|
|
508
|
|
|
492
|
|
|
3
|
%
|
|
|
(7
|
)%
|
|
10
|
%
|
Gross Margin
|
|
70.8
|
%
|
|
67.8
|
%
|
|
|
|
|
|
|
|
Operating Expenses
|
|
132
|
|
|
133
|
|
|
(1
|
)%
|
|
|
(11
|
)%
|
|
10
|
%
|
Other (income)/deductions
|
|
—
|
|
|
1
|
|
|
*
|
|
|
*
|
|
*
|
International Earnings
|
|
$
|
376
|
|
|
$
|
358
|
|
|
5
|
%
|
|
|
(5
|
)%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Reportable Segments
|
|
$
|
837
|
|
|
$
|
756
|
|
|
11
|
%
|
|
|
(2
|
)%
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(c)
|
|
(80
|
)
|
|
(81
|
)
|
|
(1
|
)%
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(d)
|
|
(162
|
)
|
|
(153
|
)
|
|
6
|
%
|
|
|
|
|
|
Purchase accounting adjustments(e)
|
|
(66
|
)
|
|
(23
|
)
|
|
*
|
|
|
|
|
|
Acquisition-related costs(f)
|
|
(5
|
)
|
|
(1
|
)
|
|
*
|
|
|
|
|
|
Certain significant items(g)
|
|
(70
|
)
|
|
(3
|
)
|
|
*
|
|
|
|
|
|
Other unallocated(h)
|
|
(73
|
)
|
|
(78
|
)
|
|
(6
|
)%
|
|
|
|
|
|
Total Earnings
(i)
|
|
$
|
381
|
|
|
$
|
417
|
|
|
(9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Zoetis' most recent Annual
Report on Form 10-K.
|
|
|
|
(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 and human health diagnostic 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.
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(e)
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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.
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(f)
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Acquisition-related costs include costs associated with acquiring
and integrating newly acquired businesses, such as transaction costs
and integration costs.
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(g)
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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 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, and
the impact of divestiture-related gains and losses.
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(h)
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Includes overhead expenses associated with our manufacturing and
supply operations not directly attributable to an operating segment,
as well as certain procurement costs.
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(i)
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Defined as income before provision for taxes on income.
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*
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Calculation not meaningful.
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Certain amounts and percentages may reflect rounding adjustments.
Media:
Kristen Seely
1-973-443-2777 (o)
kristen.seely@zoetis.com
Elinore White
1-973-443-2835 (o)
elinore.y.white@zoetis.com
Investors:
Steve Frank
1-973-822-7141 (o)
steve.frank@zoetis.com
Marissa Patel
1-973-443-2996 (o)
marissa.patel@zoetis.com