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11/05/2020

Zoetis Announces Third Quarter 2020 Results

  • Reports Revenue of $1.8 Billion, Growing 13%, and Net Income of $479 Million, or $1.00 per Diluted Share, Both Increasing 11% on a Reported Basis, for Third Quarter 2020
  • Reports Adjusted Net Income of $524 Million, or Adjusted Diluted EPS of $1.10 for Third Quarter 2020
  • Delivers 15% Operational Growth in Revenue and 20% Operational Growth in Adjusted Net Income for Third Quarter 2020
  • Increases Full Year 2020 Revenue Guidance to $6.550 - $6.625 Billion and Diluted EPS of $3.38 - $3.45 on a Reported Basis, or $3.76 - $3.81 on an Adjusted Basis

PARSIPPANY, N.J.--(BUSINESS WIRE)-- Zoetis Inc. (NYSE: ZTS) today reported its financial results for the third quarter of 2020 and increased its guidance for full year 2020.

The company reported revenue of $1.8 billion for the third quarter of 2020, an increase of 13% compared with the third quarter of 2019. Net income for the third quarter of 2020 was $479 million, or $1.00 per diluted share, both increasing 11% on a reported basis.

Adjusted net income1 for the third quarter of 2020 was $524 million, or $1.10 per diluted share, an increase of 15%, on a reported basis. Adjusted net income for the third quarter of 2020 excludes the net impact of $45 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational2 basis, revenue for the third quarter of 2020 increased 15%, excluding the impact of foreign currency. Adjusted net income for the third quarter of 2020 increased 20% operationally, excluding the impact of foreign currency.

EXECUTIVE COMMENTARY

“Thanks to the resilience of our customers and the commitment of our colleagues during this ongoing pandemic, we generated better than expected results in the third quarter, with 15% operational growth in revenue and 20% operational growth in adjusted net income,” said Kristin Peck, Chief Executive Officer of Zoetis. “Our diverse and innovative portfolio drove strong sales, especially across our companion animal business, where parasiticides, vaccines, key dermatology products and diagnostics performed very well. We also saw growth in livestock this quarter, largely due to sales growth in both the U.S. cattle market and China’s swine market.”

“Looking ahead, we continue to see future growth being driven by companion animal products, particularly Simparica Trio® and the expansion of our other parasiticides and key dermatology portfolio. We will continue to invest in opportunities that can deliver the most value and impact for our customers. Given our strong performance over the past nine months – and despite expectations for a more modest fourth quarter – we are increasing our guidance to reflect our outlook for the remainder of the year,” said Peck.

QUARTERLY HIGHLIGHTS

Zoetis organizes and manages its commercial operations across two segments: United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for companion animals and livestock, tailored to local trends and customer needs. In the third quarter of 2020:

  • Revenue in the U.S. segment was $996 million, an increase of 18% compared with the third quarter of 2019. Sales of companion animal products increased 21% driven primarily by growth in Simparica Trio, the recently launched triple combination parasiticide for dogs, as well as the company’s key dermatology portfolio across both the Cytopoint® and Apoquel® brands. Also contributing to growth were sales of vaccines and diagnostic products, resulting from the continued recovery of vet clinic businesses following the impact of social distancing restrictions earlier in the year. Companion animal product sales also benefited from the acquisition of a number of regional diagnostic reference labs in late 2019. Sales of livestock products increased 13% in the quarter due to a return to historical buying patterns following the impact of COVID-19 in the second quarter of this year, as well as an earlier fall cattle run compared to the same period last year. U.S. cattle growth was partially offset by modest declines in both the poultry and swine product portfolios.
  • Revenue in the International segment was $767 million, an increase of 6% on a reported basis and an increase of 11% operationally compared with the third quarter of 2019. Sales of companion animal products grew 17% on a reported basis and 20% on an operational basis. Growth was driven by increased sales across the company’s companion animal portfolio in China as a result of favorable market conditions and additional promotional and educational efforts. Also contributing to growth in the quarter was the Simparica franchise, including Simparica Trio, which was recently launched in the EU, Canada and Australia, as well as the company’s key dermatology portfolio across both the Apoquel and Cytopoint brands. Sales of companion animal products, including vaccines, also benefited as clinics expanded their operations following less COVID-19-related restrictions. Sales of livestock products were flat on a reported basis and grew 6% operationally. Sales of swine products grew as a result of expanding herd production in key accounts and increased biosecurity measures in the wake of African Swine Fever in China. In other key global swine markets, vaccine sales increased as a result of favorable market conditions including increased production and export opportunities. Growth in the company’s fish portfolio was driven primarily by increased market share for salmon vaccines and the acquisition of Fish Vet Group. The company’s cattle portfolio grew modestly based on a strong performance in Brazil, while poultry product sales remained flat versus the same period in the prior year.

INVESTMENTS IN GROWTH

Zoetis diversifies and grows its business through the introduction of new products, lifecycle innovations, business development initiatives, and entries into new markets and technologies. The company is increasingly focused on developing integrated solutions for veterinarians, farmers and pet owners, which span the continuum of animal care - helping to predict, prevent, detect and treat diseases.

Since our last quarterly earnings announcement, Zoetis received a positive scientific opinion from the European Medicines Agency’s Committee for Medicinal Products for Veterinary Use (CVMP) for Librela® (bedinvetmab), an important milestone in the company’s innovative pipeline for pain management in pets. Librela will be the first injectable monoclonal antibody (mAb) licensed for alleviation of pain associated with osteoarthritis (OA) in dogs, pending final authorization from the European Commission.

Zoetis continued to bring leading products into new markets and enhance current products through lifecycle innovation. On the companion animal side, Simparica® (sarolaner) Chewable Tablets was approved in China, and other key products including Cytopoint (lokivetmab) and Revolution Plus® (selamectin and sarolaner topical solution) gained approvals in Asia and Latin America respectively. In livestock, the company received approval in Japan for two of its well-known swine vaccines – Fostera® Gold PCV MH and Fostera Gold PCV – which give producers greater options to reduce the clinical symptoms in pigs associated with porcine circovirus (PCV2) and the flexibility to include Mycoplasma hyopneumoniae (M. hyo). In Europe, Zoetis enhanced its Rispoval® vaccine franchise with the approval for Rispoval RS+Pi3 IntraNasal, which helps protect cattle of all ages against two of the most common causes of viral pneumonia.

In Diagnostics portfolio advancements, the company launched Vetscan Imagyst™ in Australia, Ireland, New Zealand, the UK, and the U.S. Imagyst uses a combination of image recognition technology, algorithms and cloud-based artificial intelligence to deliver rapid testing results to veterinary clinics. Its first indication is for testing fecal samples for parasites, with the potential for broader applications to different types of testing in the future.

FINANCIAL GUIDANCE

Zoetis is increasing its full year 2020 guidance, which includes:

  • Revenue between $6.550 billion and $6.625 billion
  • Reported diluted EPS between $3.38 and $3.45
  • Adjusted diluted EPS between $3.76 and $3.81

This guidance reflects foreign exchange rates as of late-October. 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 third quarter 2020 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 Nov. 5, 2020.

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 precision livestock farming. 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 2019, the company generated annual revenue of $6.3 billion with approximately 10,600 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, product approvals or products under development; expected timing of product launches; the impact of the coronavirus (COVID-19) pandemic and any recovery therefrom on our business, suppliers, customers and employees; 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 rates and tax regimes and any changes thereto; 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, 2019, 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. Such risks and uncertainties may be amplified by the coronavirus (COVID-19) pandemic and its potential impact on the global economy and our business. 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.

ZTS-IR
ZTS-FIN

 

ZOETIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)

(UNAUDITED)

(millions of dollars, except per share data)

 

 

Quarter Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

Revenue

$

1,786

 

 

$

1,584

 

 

13

 

$

4,868

 

 

$

4,586

 

 

6

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

546

 

 

479

 

 

14

 

1,456

 

 

1,462

 

 

Selling, general and administrative expenses

424

 

 

391

 

 

8

 

1,206

 

 

1,166

 

 

3

Research and development expenses

112

 

 

112

 

 

 

330

 

 

325

 

 

2

Amortization of intangible assets

40

 

 

38

 

 

5

 

120

 

 

115

 

 

4

Restructuring charges and certain acquisition-related costs

5

 

 

6

 

 

(17)

 

22

 

 

33

 

 

(33)

Interest expense, net of capitalized interest

62

 

 

56

 

 

11

 

173

 

 

167

 

 

4

Other (income)/deductions—net

 

 

(26)

 

 

*

 

(15)

 

 

(46)

 

 

(67)

Income before provision for taxes on income

597

 

 

528

 

 

13

 

1,576

 

 

1,364

 

 

16

Provision for taxes on income

118

 

 

95

 

 

24

 

298

 

 

248

 

 

20

Net income before allocation to noncontrolling interests

479

 

 

433

 

 

11

 

1,278

 

 

1,116

 

 

15

Less: Net loss attributable to noncontrolling interests

 

 

 

 

*

 

(1)

 

 

 

 

*

Net income attributable to Zoetis

$

479

 

 

$

433

 

 

11

 

$

1,279

 

 

$

1,116

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share—basic

$

1.01

 

 

$

0.91

 

 

11

 

$

2.69

 

 

$

2.33

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share—diluted

$

1.00

 

 

$

0.90

 

 

11

 

$

2.67

 

 

$

2.31

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used to calculate earnings per share

 

 

 

 

 

 

 

 

 

 

 

Basic

475.5

 

 

477.8

 

 

 

 

475.5

 

 

478.7

 

 

 

Diluted

478.5

 

 

481.5

 

 

 

 

478.5

 

 

482.3

 

 

 

(a)

The condensed consolidated statements of income present the quarter and nine months ended September 30, 2020 and September 30, 2019. Subsidiaries operating outside the United States are included for the quarter and nine months ended August 31, 2020 and August 31, 2019.

* Calculation not meaningful.
 

ZOETIS INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS

(UNAUDITED)

(millions of dollars, except per share data)

 

 

 

Quarter Ended September 30, 2020

 

 

GAAP
Reported(a)

 

Purchase
Accounting
Adjustments

 

Acquisition-
Related
Costs(1)

 

Certain
Significant
Items(2)

 

Non-GAAP
Adjusted(b)

Cost of sales

 

$

546

 

 

$

(2)

 

 

$

 

 

$

(1)

 

 

$

543

 

Gross profit

 

1,240

 

 

2

 

 

 

 

1

 

 

1,243

 

Selling, general and administrative expenses

 

424

 

 

(12)

 

 

 

 

(5)

 

 

407

 

Amortization of intangible assets

 

40

 

 

(34)

 

 

 

 

 

 

6

 

Restructuring charges and certain acquisition-related costs

 

5

 

 

 

 

(1)

 

 

(4)

 

 

 

Other (income)/deductions–net

 

 

 

 

 

 

 

1

 

 

1

 

Income before provision for taxes on income

 

597

 

 

48

 

 

1

 

 

9

 

 

655

 

Provision for taxes on income

 

118

 

 

11

 

 

 

 

2

 

 

131

 

Net income attributable to Zoetis

 

479

 

 

37

 

 

1

 

 

7

 

 

524

 

Earnings per common share attributable to Zoetis–diluted

 

1.00

 

 

0.08

 

 

 

 

0.02

 

 

1.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended September 30, 2019

 

 

GAAP
Reported(a)

 

Purchase
Accounting
Adjustments

 

Acquisition-
Related
Costs(1)

 

Certain
Significant
Items(2)

 

Non-GAAP
Adjusted(b)

Cost of sales

 

$

479

 

 

$

(3)

 

 

$

 

 

$

(3)

 

 

$

473

 

Gross profit

 

1,105

 

 

3

 

 

 

 

3

 

 

1,111

 

Selling, general and administrative expenses

 

391

 

 

(18)

 

 

 

 

 

 

373

 

Amortization of intangible assets

 

38

 

 

(34)

 

 

 

 

 

 

4

 

Restructuring charges and certain acquisition-related costs

 

6

 

 

 

 

(6)

 

 

 

 

 

Other (income)/deductions–net

 

(26)

 

 

 

 

 

 

20

 

 

(6)

 

Income before provision for taxes on income

 

528

 

 

55

 

 

6

 

 

(17)

 

 

572

 

Provision for taxes on income

 

95

 

 

26

 

 

1

 

 

(5)

 

 

117

 

Net income attributable to Zoetis

 

433

 

 

29

 

 

5

 

 

(12)

 

 

455

 

Earnings per common share attributable to Zoetis–diluted

 

0.90

 

 

0.06

 

 

0.01

 

 

(0.03)

 

 

0.94

 

(a)

The condensed consolidated statements of income present the quarter and nine months ended September 30, 2020 and September 30, 2019. Subsidiaries operating outside the United States are included for the third quarter ended August 31, 2020 and August 31, 2019.

(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.

See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).
 

ZOETIS INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS - Continued

(UNAUDITED)

(millions of dollars, except per share data)

 

 

 

Nine Months Ended September 30, 2020

 

 

GAAP
Reported(a)

 

Purchase
Accounting
Adjustments

 

Acquisition-
Related
Costs(1)

 

Certain
Significant
Items(2)

 

Non-GAAP
Adjusted(b)

Cost of sales

 

$

1,456

 

 

$

(6)

 

 

$

 

 

$

(4)

 

 

$

1,446

 

Gross profit

 

3,412

 

 

6

 

 

 

 

4

 

 

3,422

 

Selling, general and administrative expenses

 

1,206

 

 

(47)

 

 

 

 

(11)

 

 

1,148

 

Research and development expenses

 

330

 

 

(1)

 

 

 

 

 

 

329

 

Amortization of intangible assets

 

120

 

 

(101)

 

 

 

 

 

 

19

 

Restructuring charges and certain acquisition-related costs

 

22

 

 

 

 

(15)

 

 

(7)

 

 

 

Other (income)/deductions–net

 

(15)

 

 

 

 

 

 

18

 

 

3

 

Income before provision for taxes on income

 

1,576

 

 

155

 

 

15

 

 

4

 

 

1,750

 

Provision for taxes on income

 

298

 

 

47

 

 

 

 

 

 

345

 

Net income attributable to Zoetis

 

1,279

 

 

108

 

 

15

 

 

4

 

 

1,406

 

Earnings per common share attributable to Zoetis–diluted

 

2.67

 

 

0.23

 

 

0.03

 

 

0.01

 

 

2.94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

 

 

GAAP
Reported(a)

 

Purchase
Accounting
Adjustments

 

Acquisition-
Related
Costs(1)

 

Certain
Significant
Items(2)

 

Non-GAAP
Adjusted(b)

Cost of sales

 

$

1,462

 

 

$

(22)

 

 

$

 

 

$

(76)

 

 

$

1,364

 

Gross profit

 

3,124

 

 

22

 

 

 

 

76

 

 

3,222

 

Selling, general and administrative expenses

 

1,166

 

 

(54)

 

 

 

 

 

 

1,112

 

Research and development expenses

 

325

 

 

(1)

 

 

 

 

 

 

324

 

Amortization of intangible assets

 

115

 

 

(102)

 

 

 

 

 

 

13

 

Restructuring charges and certain acquisition-related costs

 

33

 

 

 

 

(33)

 

 

 

 

 

Other (income)/deductions–net

 

(46)

 

 

 

 

 

 

20

 

 

(26)

 

Income before provision for taxes on income

 

1,364

 

 

179

 

 

33

 

 

56

 

 

1,632

 

Provision for taxes on income

 

248

 

 

59

 

 

6

 

 

4

 

 

317

 

Net income attributable to Zoetis

 

1,116

 

 

120

 

 

27

 

 

52

 

 

1,315

 

Earnings per common share attributable to Zoetis–diluted

 

2.31

 

 

0.25

 

 

0.06

 

 

0.11

 

 

2.73

 

(a)

The condensed consolidated statements of income present the quarter and nine months ended September 30, 2020 and September 30, 2019. Subsidiaries operating outside the United States are included for the third quarter ended August 31, 2020 and August 31, 2019.

(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.

See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).
 

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:

 

 

Quarter Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

Integration costs(a)

$

3

 

 

$

4

 

 

$

15

 

 

$

13

 

Restructuring charges(b)

(2)

 

 

2

 

 

 

 

20

 

Total acquisition-related costs—pre-tax

1

 

 

6

 

 

15

 

 

33

 

Income taxes(c)

 

 

1

 

 

 

 

6

 

Total acquisition-related costs—net of tax

$

1

 

 

$

5

 

 

$

15

 

 

$

27

 

(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. For the nine months ended September 30, 2020, also includes a tax charge related to a remeasurement of deferred taxes resulting from the integration of acquired businesses.

(2) Certain significant items include the following:

 

 

Quarter Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

Operational efficiency initiative(a)

$

(1)

 

 

$

(20)

 

 

$

(18)

 

 

$

(20)

 

Supply network strategy(b)

1

 

 

2

 

 

4

 

 

7

 

Other restructuring charges and cost-reduction/productivity initiatives(c)

4

 

 

 

 

7

 

 

 

Other(d)

5

 

 

1

 

 

11

 

 

69

 

Total certain significant items—pre-tax

9

 

 

(17)

 

 

4

 

 

56

 

Income taxes(e)

2

 

 

(5)

 

 

 

 

4

 

Total certain significant items—net of tax

$

7

 

 

$

(12)

 

 

$

4

 

 

$

52

 

(a)

Represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites, included in Other (income)/deductions-net.

(b)

Represents consulting fees, included in Cost of sales, related to cost-reduction and productivity initiatives.

(c)

Represents employee termination costs incurred as a result of the CEO transition and other cost-reduction and productivity initiatives, included in Restructuring charges and certain acquisition-related costs.

(d)

For the quarter and nine months ended September 30, 2020, primarily represents the modification of share-based compensation related to CEO transition costs, included in Selling, general and administrative expenses. For the nine months ended September 30, 2019, represents a change in estimate related to inventory costing, included in Cost of sales.

(e)

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, EXPENSES AND INCOME(a)

(UNAUDITED)

(millions of dollars)

 

 

 

 

 

 

 

Quarter Ended

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(b)

Adjusted cost of sales

 

$

543

 

 

$

473

 

 

15

%

 

 

1

%

 

14

%

as a percent of revenue

 

30.4

%

 

29.9

%

 

NA

 

 

NA

 

NA

Adjusted SG&A expenses

 

407

 

 

373

 

 

9

%

 

 

(2)

%

 

11

%

Adjusted R&D expenses

 

112

 

 

112

 

 

%

 

 

(1)

%

 

1

%

Adjusted net income attributable to Zoetis

 

524

 

 

455

 

 

15

%

 

 

(5)

%

 

20

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(b)

Adjusted cost of sales

 

$

1,446

 

 

$

1,364

 

 

6

%

 

 

(1)

%

 

7

%

as a percent of revenue

 

29.7

%

 

29.7

%

 

NA

 

 

NA

 

NA

Adjusted SG&A expenses

 

1,148

 

 

1,112

 

 

3

%

 

 

(2)

%

 

5

%

Adjusted R&D expenses

 

329

 

 

324

 

 

2

%

 

 

%

 

2

%

Adjusted net income attributable to Zoetis

 

1,406

 

 

1,315

 

 

7

%

 

 

(5)

%

 

12

%

(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 Income 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.

2020 GUIDANCE

 

Selected Line Items
(millions of dollars, except per share amounts)

Full Year 2020

Revenue

$6,550 to $6,625

Operational growth(a)

7% to 8%

Adjusted cost of sales as a percentage of revenue(b)

Approximately 30%

Adjusted SG&A expenses(b)

$1,615 to $1,645

Adjusted R&D expenses(b)

$455 to $465

Adjusted interest expense and other (income)/deductions-net(b)

Approximately $250

Effective tax rate on adjusted income(b)

19% to 20%

Adjusted diluted EPS(b)

$3.76 to $3.81

Adjusted net income(b)

$1,790 to $1,825

Operational growth(a)(c)

6% to 8%

Certain significant items and acquisition-related costs(d)

$25 to $35

 

 

The guidance reflects the current view of the estimated full year impact of the COVID-19 outbreak, recessionary conditions in the global economy and foreign exchange rates as of late October 2020.

Reconciliations of 2020 reported guidance to 2020 adjusted guidance follows:

(millions of dollars, except per share amounts)

Reported

Certain significant
items and
acquisition-related
costs(d)

Purchase
accounting

Adjusted(b)

Cost of sales as a percentage of revenue

~ 30.2%

~ (0.1)%

~ (0.1)%

~ 30%

SG&A expenses

$1,695 to $1,725

~ $(15)

~ $(65)

$1,615 to $1,645

R&D expenses

$457 to $467

 

~ $(2)

$455 to $465

Interest expense and other (income)/deductions-net

~ $232

~ $18

 

~ $250

Effective tax rate

18.5% to 19.5%

 

~ 0.5%

19% to 20%

Diluted EPS

$3.38 to $3.45

$0.05 to $0.07

~ $0.31

$3.76 to $3.81

Net income attributable to Zoetis

$1,605 to $1,650

$25 to $35

~ $150

$1,790 to $1,825

(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, and adjusted interest expense and other (income)/deductions-net 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.

(c)

We do not provide a reconciliation of forward-looking non-GAAP adjusted net income operational growth to the most directly comparable U.S. 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 U.S. GAAP reported results for the guidance period.

(d)

Primarily includes certain nonrecurring costs related to acquisitions and other charges.

 

ZOETIS INC.

CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES

(UNAUDITED)

(millions of dollars)

 

 

 

 

 

 

 

Quarter Ended

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(b)

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Companion Animal

 

$

995

 

 

$

834

 

 

19

%

 

 

(1)

%

 

20

%

Livestock

 

768

 

 

731

 

 

5

%

 

 

(4)

%

 

9

%

Contract Manufacturing & Human Health

 

23

 

 

19

 

 

21

%

 

 

%

 

21

%

Total Revenue

 

$

1,786

 

 

$

1,584

 

 

13

%

 

 

(2)

%

 

15

%

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

 

 

 

 

 

 

 

Companion Animal

 

$

664

 

 

$

550

 

 

21

%

 

 

%

 

21

%

Livestock

 

332

 

 

294

 

 

13

%

 

 

%

 

13

%

Total U.S. Revenue

 

$

996

 

 

$

844

 

 

18

%

 

 

%

 

18

%

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

Companion Animal

 

$

331

 

 

$

284

 

 

17

%

 

 

(3)

%

 

20

%

Livestock

 

436

 

 

437

 

 

%

 

 

(6)

%

 

6

%

Total International Revenue

 

$

767

 

 

$

721

 

 

6

%

 

 

(5)

%

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

Companion Animal:

 

 

 

 

 

 

 

 

 

 

 

Dogs and Cats

 

$

947

 

 

$

789

 

 

20

%

 

 

(1)

%

 

21

%

Horses

 

48

 

 

45

 

 

7

%

 

 

%

 

7

%

Total Companion Animal Revenue

 

$

995

 

 

$

834

 

 

19

%

 

 

(1)

%

 

20

%

 

 

 

 

 

 

 

 

 

 

 

 

Livestock:

 

 

 

 

 

 

 

 

 

 

 

Cattle

 

$

417

 

 

$

389

 

 

7

%

 

 

(5)

%

 

12

%

Swine

 

151

 

 

142

 

 

6

%

 

 

(4)

%

 

10

%

Poultry

 

129

 

 

135

 

 

(4)

%

 

 

(2)

%

 

(2)

%

Fish

 

45

 

 

42

 

 

7

%

 

 

(3)

%

 

10

%

Sheep and other

 

26

 

 

23

 

 

13

%

 

 

5

%

 

8

%

Total Livestock Revenue

 

$

768

 

 

$

731

 

 

5

%

 

 

(4)

%

 

9

%

(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.

 

ZOETIS INC.

CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES - Continued

(UNAUDITED)

(millions of dollars)

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(b)

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Companion Animal

 

$

2,674

 

 

$

2,361

 

 

13

%

 

 

(2)

%

 

15

%

Livestock

 

2,134

 

 

2,162

 

 

(1)

%

 

 

(3)

%

 

2

%

Contract Manufacturing & Human Health

 

60

 

 

63

 

 

(5)

%

 

 

(1)

%

 

(4)

%

Total Revenue

 

$

4,868

 

 

$

4,586

 

 

6

%

 

 

(3)

%

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

 

 

 

 

 

 

 

Companion Animal

 

$

1,757

 

 

$

1,495

 

 

18

%

 

 

%

 

18

%

Livestock

 

848

 

 

847

 

 

%

 

 

%

 

%

Total U.S. Revenue

 

$

2,605

 

 

$

2,342

 

 

11

%

 

 

%

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

Companion Animal

 

$

917

 

 

$

866

 

 

6

%

 

 

(4)

%

 

10

%

Livestock

 

1,286

 

 

1,315

 

 

(2)

%

 

 

(6)

%

 

4

%

Total International Revenue

 

$

2,203

 

 

$

2,181

 

 

1

%

 

 

(5)

%

 

6

%

 

 

 

 

 

 

 

 

 

 

 

 

Companion Animal:

 

 

 

 

 

 

 

 

 

 

 

Dogs and Cats

 

$

2,524

 

 

$

2,231

 

 

13

%

 

 

(2)

%

 

15

%

Horses

 

150

 

 

130

 

 

15

%

 

 

(2)

%

 

17

%

Total Companion Animal Revenue

 

$

2,674

 

 

$

2,361

 

 

13

%

 

 

(2)

%

 

15

%

 

 

 

 

 

 

 

 

 

 

 

 

Livestock:

 

 

 

 

 

 

 

 

 

 

 

Cattle

 

$

1,107

 

 

$

1,148

 

 

(4)

%

 

 

(4)

%

 

%

Swine

 

454

 

 

449

 

 

1

%

 

 

(4)

%

 

5

%

Poultry

 

412

 

 

417

 

 

(1)

%

 

 

(3)

%

 

2

%

Fish

 

101

 

 

90

 

 

12

%

 

 

(4)

%

 

16

%

Sheep and other

 

60

 

 

58

 

 

3

%

 

 

(4)

%

 

7

%

Total Livestock Revenue

 

$

2,134

 

 

$

2,162

 

 

(1)

%

 

 

(3)

%

 

2

%

(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.

 

ZOETIS INC.

CONSOLIDATED REVENUE BY KEY INTERNATIONAL MARKETS

(UNAUDITED)

(millions of dollars)

 

 

 

Quarter Ended

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(a)

Total International

 

$

766.9

 

 

$

720.7

 

 

6

%

 

 

(5)

%

 

11

%

Australia

 

59.7

 

 

52.7

 

 

13

%

 

 

2

%

 

11

%

Brazil

 

62.2

 

 

71.8

 

 

(13)

%

 

 

(31)

%

 

18

%

Canada

 

49.7

 

 

46.7

 

 

6

%

 

 

(2)

%

 

8

%

Chile

 

23.4

 

 

22.7

 

 

3

%

 

 

(5)

%

 

8

%

China

 

65.6

 

 

40.2

 

 

63

%

 

 

(1)

%

 

64

%

France

 

29.7

 

 

23.6

 

 

26

%

 

 

2

%

 

24

%

Germany

 

38.5

 

 

35.1

 

 

10

%

 

 

3

%

 

7

%

Italy

 

27.1

 

 

26.2

 

 

3

%

 

 

1

%

 

2

%

Japan

 

39.0

 

 

39.2

 

 

(1)

%

 

 

%

 

(1)

%

Mexico

 

25.9

 

 

29.2

 

 

(11)

%

 

 

(13)

%

 

2

%

Spain

 

30.7

 

 

29.1

 

 

5

%

 

 

2

%

 

3

%

United Kingdom

 

44.8

 

 

46.4

 

 

(3)

%

 

 

4

%

 

(7)

%

Other developed markets

 

105.3

 

 

97.5

 

 

8

%

 

 

1

%

 

7

%

Other emerging markets

 

165.3

 

 

160.3

 

 

3

%

 

 

(8)

%

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(a)

Total International

 

$

2,202.6

 

 

$

2,180.6

 

 

1

%

 

 

(5)

%

 

6

%

Australia

 

153.8

 

 

149.5

 

 

3

%

 

 

(4)

%

 

7

%

Brazil

 

181.3

 

 

206.1

 

 

(12)

%

 

 

(24)

%

 

12

%

Canada

 

143.7

 

 

141.5

 

 

2

%

 

 

(1)

%

 

3

%

Chile

 

71.8

 

 

64.4

 

 

11

%

 

 

(7)

%

 

18

%

China

 

197.7

 

 

155.7

 

 

27

%

 

 

(3)

%

 

30

%

France

 

82.4

 

 

83.0

 

 

(1)

%

 

 

(1)

%

 

%

Germany

 

112.1

 

 

110.7

 

 

1

%

 

 

(1)

%

 

2

%

Italy

 

62.7

 

 

81.9

 

 

(23)

%

 

 

%

 

(23)

%

Japan

 

133.3

 

 

117.6

 

 

13

%

 

 

2

%

 

11

%

Mexico

 

83.6

 

 

87.2

 

 

(4)

%

 

 

(10)

%

 

6

%

Spain

 

82.7

 

 

86.2

 

 

(4)

%

 

 

(1)

%

 

(3)

%

United Kingdom

 

125.4

 

 

145.4

 

 

(14)

%

 

 

%

 

(14)

%

Other developed markets

 

282.3

 

 

269.4

 

 

5

%

 

 

(2)

%

 

7

%

Other emerging markets

 

489.8

 

 

482.0

 

 

2

%

 

 

(6)

%

 

8

%

(a)

Operational revenue growth (a non-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange.

 

ZOETIS INC.

SEGMENT(a) EARNINGS

(UNAUDITED)

(millions of dollars)

 

 

 

 

 

 

 

Quarter Ended

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(b)

U.S.:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

996

 

 

$

844

 

 

18

%

 

 

%

 

18

%

Cost of Sales

 

194

 

 

163

 

 

19

%

 

 

%

 

19

%

Gross Profit

 

802

 

 

681

 

 

18

%

 

 

%

 

18

%

Gross Margin

 

80.5

%

 

80.7

%

 

 

 

 

 

 

 

Operating Expenses

 

157

 

 

130

 

 

21

%

 

 

%

 

21

%

Other (income)/deductions-net

 

 

 

 

 

*

 

 

*

 

*

U.S. Earnings

 

$

645

 

 

$

551

 

 

17

%

 

 

%

 

17

%

 

 

 

 

 

 

 

 

 

 

 

 

International:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

767

 

 

$

721

 

 

6

%

 

 

(5)

%

 

11

%

Cost of Sales

 

245

 

 

234

 

 

5

%

 

 

(3)

%

 

8

%

Gross Profit

 

522

 

 

487

 

 

7

%

 

 

(6)

%

 

13

%

Gross Margin

 

68.1

%

 

67.5

%

 

 

 

 

 

 

 

Operating Expenses

 

122

 

 

134

 

 

(9)

%

 

 

(3)

%

 

(6)

%

Other (income)/deductions-net

 

 

 

 

 

*

 

 

*

 

*

International Earnings

 

$

400

 

 

$

353

 

 

13

%

 

 

(7)

%

 

20

%

 

 

 

 

 

 

 

 

 

 

 

 

Total Reportable Segments

 

$

1,045

 

 

$

904

 

 

16

%

 

 

(2)

%

 

18

%

 

 

 

 

 

 

 

 

 

 

 

 

Other business activities(c)

 

(87)

 

 

(87)

 

 

%

 

 

 

 

 

Reconciling Items:

 

 

 

 

 

 

 

 

 

 

 

Corporate(d)

 

(207)

 

 

(172)

 

 

20

%

 

 

 

 

 

Purchase accounting adjustments(e)

 

(48)

 

 

(55)

 

 

(13)

%

 

 

 

 

 

Acquisition-related costs(f)

 

(1)

 

 

(6)

 

 

(83)

%

 

 

 

 

 

Certain significant items(g)

 

(9)

 

 

17

 

 

*

 

 

 

 

 

Other unallocated(h)

 

(96)

 

 

(73)

 

 

32

%

 

 

 

 

 

Total Earnings(i)

 

$

597

 

 

$

528

 

 

13

%

 

 

 

 

 

(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 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 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 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.

(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.

* Calculation not meaningful.

 

ZOETIS INC.

SEGMENT(a) EARNINGS - Continued

(UNAUDITED)

(millions of dollars)

 

 

 

Nine Months Ended

 

 

 

 

September 30,

 

% Change

 

 

2020

 

2019

 

Total

 

 

Foreign
Exchange

 

Operational(b)

U.S.:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,605

 

 

$

2,342

 

 

11

%

 

 

%

 

11

%

Cost of Sales

 

515

 

 

468

 

 

10

%

 

 

%

 

10

%

Gross Profit

 

2,090

 

 

1,874

 

 

12

%

 

 

%

 

12

%

Gross Margin

 

80.2

%

 

80.0

%

 

 

 

 

 

 

 

Operating Expenses

 

418

 

 

367

 

 

14

%

 

 

%

 

14

%

Other (income)/deductions-net

 

4

 

 

 

 

*

 

 

*

 

*

U.S. Earnings

 

$

1,668

 

 

$

1,507

 

 

11

%

 

 

%

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

International:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,203

 

 

$

2,181

 

 

1

%

 

 

(5)

%

 

6

%

Cost of Sales

 

697

 

 

662

 

 

5

%

 

 

(3)

%

 

8

%

Gross Profit

 

1,506

 

 

1,519

 

 

(1)

%

 

 

(6)

%

 

5

%

Gross Margin

 

68.4

%

 

69.6

%

 

 

 

 

 

 

 

Operating Expenses

 

364

 

 

412

 

 

(12)

%

 

 

(5)

%

 

(7)

%

Other (income)/deductions-net

 

1

 

 

 

 

*

 

 

*

 

*

International Earnings

 

$

1,141

 

 

$

1,107

 

 

3

%

 

 

(7)

%

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

Total Reportable Segments

 

$

2,809

 

 

$

2,614

 

 

7

%

 

 

(3)

%

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

Other business activities(c)

 

(264)

 

 

(246)

 

 

7

%

 

 

 

 

 

Reconciling Items:

 

 

 

 

 

 

 

 

 

 

 

Corporate(d)

 

(559)

 

 

(512)

 

 

9

%

 

 

 

 

 

Purchase accounting adjustments(e)

 

(155)

 

 

(179)

 

 

(13)

%

 

 

 

 

 

Acquisition-related costs(f)

 

(15)

 

 

(33)

 

 

(55)

%

 

 

 

 

 

Certain significant items(g)

 

(4)

 

 

(56)

 

 

(93)

%

 

 

 

 

 

Other unallocated(h)

 

(236)

 

 

(224)

 

 

5

%

 

 

 

 

 

Total Earnings(i)

 

$

1,576

 

 

$

1,364

 

 

16

%

 

 

 

 

 

(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 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 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 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.

(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.

* Calculation not meaningful.

 

Media Contacts:
Bill Price
1-973-443-2742 (o)
william.price@zoetis.com

Kristen Seely
1-973-443-2777 (o)
kristen.seely@zoetis.com

Investor Contacts:
Steve Frank
1-973-822-7141 (o)
steve.frank@zoetis.com

Keith Gaub
1-973-822-7154 (o)
keith.gaub@zoetis.com

Source: Zoetis Inc.

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