- First Quarter 2014 Revenue of $1.1 Billion Increased 1%, Compared to First Quarter 2013
- First Quarter 2014 Reported Net Income of $155 Million, or Diluted EPS of $0.31, Increased 11%, Compared to First Quarter 2013
- First Quarter 2014 Adjusted Net Income of $191 Million, or Adjusted Diluted EPS1 of $0.38, Increased 7% and 6%, Respectively, Compared to First Quarter 2013
- Company Reaffirms Full-Year 2014 Adjusted Diluted EPS1 Guidance of $1.48 - $1.54
Zoetis Inc. (NYSE:ZTS) today reported its financial results for the
first quarter of 2014. The company reported revenue of $1.1 billion for
the first quarter of 2014, an increase of 1% from the first quarter of
2013. Revenue reflected an operational2 increase of
4%, with foreign currency having a negative impact of 3 percentage
points.
Net income for the first quarter of 2014 was $155 million, or $0.31 per
diluted share, an increase of 11%, compared to the first quarter of
2013. Adjusted net income1 for the first quarter of 2014 was
$191 million, or $0.38 per diluted share, an increase of 7% and 6%,
respectively, compared to the first quarter of 2013. Adjusted net income1
for the first quarter of 2014 excludes the net impact of $36 million, or
$0.07 per diluted share, for purchase accounting adjustments,
acquisition-related costs and certain significant items.
EXECUTIVE COMMENTARY
"We began the year with 4% operational growth in revenue, adjusted net
income growing faster than sales, and we remain confident in meeting our
financial objectives for the year," said Zoetis Chief Executive Officer
Juan Ramón Alaix. “Despite some challenges in the first quarter, we grew
sales operationally in three of our regional segments and across all our
major species. Our performance in the U.S. and across emerging markets
helped offset an operational decline in certain developed markets in
Europe and Asia-Pacific," said Alaix.
“The depth and diversity of our product portfolio remain core strengths
of our business, helping to minimize any challenges that may occur
within a single species, geography, product line or therapeutic area,”
said Alaix. “With our focus on innovative new medicines and product
lifecycle development, we have seen continued adoption of new products
and services in a number of new markets.”
“In the first quarter, we continued to demonstrate an ability to grow
adjusted earnings faster than sales despite a higher tax rate, cold
weather in the U.S. impacting sales, and increased interest expense,”
said Glenn David, Senior Vice President of Finance Operations and Acting
Chief Financial Officer of Zoetis. “Given our continued confidence in
our business model, we are reaffirming our guidance for the full year.”
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its business across four regional operating
segments: the United States (U.S.); Europe/Africa/Middle East (EuAfME);
Canada/Latin America (CLAR); and Asia/Pacific (APAC). Within each of
these regional segments, the company delivers a diverse portfolio of
products for livestock and companion animals tailored to local trends
and customer needs.
Effective this quarter, the company realigned its segment reporting with
respect to its Client Supply Services organization (CSS), which provides
contract manufacturing services to third parties. The revenue and
earnings associated with CSS are now reported within other business
activities, separate from the four reportable segments. In 2013, CSS
results were reported in the EuAfME segment. The current presentation of
segments is more reflective of the company’s commercial business since
CSS operates differently from the company’s commercial operations within
the geographic segments. First quarter results for 2014 and 2013 reflect
the new segment structure.
In the first quarter of 2014:
-
Revenue in the U.S. was $479 million, an increase of 6% compared to
the first quarter of 2013. Sales of livestock products grew 7%. Cattle
products showed a significant increase during the quarter based on
improved market conditions. Poultry product sales grew across the
therapeutic areas and benefited from new vaccines. And, swine products
benefited from continued growth in new products, tempered by the
effect of Porcine Epidemic Diarrhea virus (PEDv). Sales of companion
animal products grew 3% driven by the introduction of APOQUEL®;
this growth was tempered by a reduced number of pet owners visiting
clinics due to extreme winter weather, as well as a favorable impact
in the year-ago quarter due to a competitor supply issue.
-
Revenue in EuAfME was $270 million, a decrease of 4% operationally
compared to the first quarter of 2013. Sales of livestock products
decreased 6% operationally. This is primarily driven by a decline in
the UK associated with one-time impacts in the quarter; a decline in
poultry products related to regulatory issues that have been resolved;
and a decline in swine products linked to reductions in the use of
anti-infectives. These overall livestock declines were partially
offset by growth of cattle products in emerging markets. Sales of
companion animal products increased 1% operationally, primarily driven
by the launch of APOQUEL® in Germany and the UK, and the
sale of parasiticides in France, Italy and emerging markets.
-
Revenue in CLAR was $168 million, an increase of 10% operationally
compared to the first quarter of 2013. Sales of livestock products
grew 9% operationally, driven largely by poultry products in Brazil,
and cattle and swine product sales across other Latin American
markets. Sales of companion animal products grew 15% operationally,
primarily related to the continued increase in medicalization rates in
Brazil, Mexico and Argentina.
-
Revenue in APAC was $169 million, an increase of 4% operationally
compared to the first quarter of 2013. Sales of livestock products
grew 7% operationally, driven primarily by sales of swine products in
China and Japan, poultry products in India, and cattle products in
China; this growth was slightly offset by a decline in cattle product
sales in Japan, New Zealand and Australia. Sales of companion animal
products declined 2% operationally largely due to declines in
Australia.
Zoetis continues to drive demand and strengthen its diverse portfolio of
products through product lifecycle development, strong customer
relationships and access to new markets and technologies. The company is
focused on improving the performance and delivery of its current product
lines; expanding product indications across species; pursuing approvals
in new geographies; and developing innovative medicines, treatments and
solutions for emerging diseases and unmet customer needs. Some recent
examples include:
-
Expanding the portfolio’s reach – Zoetis
continues to support the launch of new products in new markets and to
expand the geographic reach and lifecycle of its portfolio. APOQUEL®
(oclacitinib tablet) continues its rollout in the U.S., UK,
Germany and certain other markets. The product is approved for the
control of pruritus associated with allergic dermatitis and the
control of atopic dermatitis in dogs at least 12 months of age. Strong
customer demand has been outpacing initial supply and the company has
implemented plans to manage the situation. Separately, recently
launched vaccines like BOVISHIELD GOLD ONESHOT™, which helps prevent
certain bovine respiratory diseases, and FOSTERA™ PCV and FOSTERA™
PRRS, which help prevent certain diseases in swine, expanded into new
geographies in Canada, Latin America, and Thailand, respectively, in
the first quarter.
-
Advancing standards of care – As a world
leader in animal health, Zoetis continues to partner with
organizations that are advancing and harmonizing the standard of care
in markets around the world. In April, Zoetis joined with the World
Small Animal Veterinary Association to form the African Small
Companion Animal Network (AFSCAN). AFSCAN will strive to build a
network of companion animal veterinarians, associations and specialist
groups working together to improve veterinary care in sub-Saharan
Africa. Zoetis became the sole animal health industry member of the
AFSCAN Board.
FINANCIAL GUIDANCE AND COMMENTARY
Zoetis's guidance for full-year 2014 reflects the company's confidence
in the diversity of its portfolio, the strength of its business model,
and its view of the evolving market conditions for animal health
products this year.
Zoetis reaffirmed its financial guidance for full year 2014:
-
Revenue of between $4.65 billion to $4.75 billion
-
Reported diluted EPS for the full year of between $1.15 to $1.21 per
share
-
Adjusted diluted EPS1 for the full year between $1.48 to
$1.54 per share
Additional guidance on other items such as expenses and effective 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. (EDT) today,
during which company executives will review first quarter financial
results and respond to questions from financial analysts. Investors and
the public may access the live webcast by visiting the Zoetis website at http://www.zoetis.com/events-and-presentations.
A replay of the webcast will be archived and made available on May 6,
2014.
About Zoetis
Zoetis
(zô-EH-tis) 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 and genetic tests and supported by a range of
services. In 2013, the company generated annual revenue of $4.6 billion.
With approximately 9,800 employees worldwide at the beginning of 2014,
Zoetis has a local presence in approximately 70 countries, including 28
manufacturing facilities in 11 countries. Its products serve
veterinarians, livestock producers and people who raise and care for
farm and companion animals in 120 countries. For more information, visit www.zoetis.com.
1 Adjusted net income and adjusted diluted earnings
per share (non-GAAP financial measures) are defined as reported net
income attributable to Zoetis and reported diluted earnings per share,
excluding purchase accounting adjustments, acquisition-related costs and
certain significant items.
2 Operational revenue growth is defined as revenue
growth excluding the impact of foreign exchange.
DISCLOSURE NOTICES
Forward-Looking Statements: This
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, expectations regarding
products, future use of cash and dividend payments, 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, 2013, including in the sections thereof captioned
“Forward-Looking Information 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 and
adjusted diluted earnings per share, to assess and analyze our
operational results and trends and to make financial and operational
decisions. We believe these non-GAAP financial measures are also
useful to investors because they provide greater transparency regarding
our operating performance. The non-GAAP financial measures
included in this 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
|
|
% Incr./
|
|
|
2014
|
|
2013
|
|
(Decr.)
|
|
Revenue
|
|
$
|
1,097
|
|
$
|
1,090
|
|
1
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Cost of sales(b)
|
|
379
|
|
402
|
|
(6
|
)
|
|
Selling, general and administrative expenses(b)
|
|
356
|
|
357
|
|
—
|
|
|
Research and development expenses(b)
|
|
87
|
|
90
|
|
(3
|
)
|
|
Amortization of intangible assets(c)
|
|
15
|
|
15
|
|
—
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
3
|
|
7
|
|
(57
|
)
|
|
Interest expense
|
|
29
|
|
22
|
|
32
|
|
|
Other (income)/deductions–net
|
|
1
|
|
5
|
|
(80
|
)
|
|
Income before provision for taxes on income
|
|
227
|
|
192
|
|
18
|
|
|
Provision for taxes on income
|
|
72
|
|
52
|
|
38
|
|
|
Net income before allocation to noncontrolling interests
|
|
155
|
|
140
|
|
11
|
|
|
Less: Net income/(loss) attributable to noncontrolling interests
|
|
—
|
|
—
|
|
—
|
|
|
Net income attributable to Zoetis
|
|
$
|
155
|
|
$
|
140
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—basic
|
|
$
|
0.31
|
|
$
|
0.28
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—diluted
|
|
$
|
0.31
|
|
$
|
0.28
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to calculate earnings per share (in
thousands)
|
|
|
|
|
|
|
|
Basic
|
|
500,231
|
|
500,000
|
|
|
|
Diluted
|
|
500,702
|
|
500,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The condensed consolidated statements of income present the three
months ended March 30, 2014 and March 31, 2013. Subsidiaries
operating outside the United States are included for the three
months ended February 23, 2014 and February 24, 2013.
|
|
|
|
|
|
(b)
|
|
Exclusive of amortization of intangible assets, except as discussed
in footnote (c) below.
|
|
|
|
|
|
(c)
|
|
Amortization expense related to finite-lived acquired intangible
assets that contribute to our ability to sell, manufacture,
research, market and distribute products, compounds and
intellectual property is included in Amortization of intangible
assets as these intangible assets benefit multiple business
functions. Amortization expense related to acquired intangible
assets that are associated with a single function is included in Cost
of sales, Selling, general and administrative expenses or
Research and development expenses, as appropriate.
|
|
|
|
|
|
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 30, 2014
|
|
|
|
GAAP
Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenue
|
|
$
|
1,097
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,097
|
|
|
Cost of sales(b)
|
|
379
|
|
|
(1
|
)
|
|
—
|
|
|
(3
|
)
|
|
375
|
|
|
Gross profit
|
|
718
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|
722
|
|
|
Selling, general and administrative expenses(b)
|
|
356
|
|
|
1
|
|
|
—
|
|
|
(30
|
)
|
|
327
|
|
|
Research and development expenses(b)
|
|
87
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
87
|
|
|
Amortization of intangible assets(c)
|
|
15
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
3
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
3
|
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
Interest expense
|
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
Other (income)/deductions–net
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|
Income before provision for taxes on income
|
|
227
|
|
|
12
|
|
|
2
|
|
|
36
|
|
|
277
|
|
|
Provision for taxes on income
|
|
72
|
|
|
4
|
|
|
1
|
|
|
9
|
|
|
86
|
|
|
Net income attributable to Zoetis
|
|
155
|
|
|
8
|
|
|
1
|
|
|
27
|
|
|
191
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
0.31
|
|
|
0.02
|
|
|
—
|
|
|
0.05
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2013
|
|
|
|
GAAP
Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenue
|
|
$
|
1,090
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,090
|
|
|
Cost of sales(b)
|
|
402
|
|
|
(1
|
)
|
|
—
|
|
|
(3
|
)
|
|
398
|
|
|
Gross profit
|
|
688
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|
692
|
|
|
Selling, general and administrative expenses(b)
|
|
357
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
322
|
|
|
Research and development expenses(b)
|
|
90
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
Amortization of intangible assets(c)
|
|
15
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
7
|
|
|
—
|
|
|
(6
|
)
|
|
(1
|
)
|
|
—
|
|
|
Interest expense
|
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
Other (income)/deductions–net
|
|
5
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
2
|
|
|
Income before provision for taxes on income
|
|
192
|
|
|
12
|
|
|
6
|
|
|
42
|
|
|
252
|
|
|
Provision for taxes on income
|
|
52
|
|
|
4
|
|
|
2
|
|
|
15
|
|
|
73
|
|
|
Net income attributable to Zoetis
|
|
140
|
|
|
8
|
|
|
4
|
|
|
27
|
|
|
179
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
0.28
|
|
|
0.02
|
|
|
0.01
|
|
|
0.05
|
|
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are not, and should not be viewed as,
substitutes for U.S. GAAP net income and its components and diluted
EPS. Despite the importance of these measures to management in goal
setting and performance measurement, non-GAAP adjusted net income
and its components and non-GAAP adjusted diluted EPS are non-GAAP
financial measures that have no standardized meaning prescribed by
U.S. GAAP and, therefore, have limits in their usefulness to
investors. Because of the non-standardized definitions, non-GAAP
adjusted net income and its components and non-GAAP adjusted diluted
EPS (unlike U.S. GAAP net income and its components and diluted EPS)
may not be comparable to the calculation of similar measures of
other companies. Non-GAAP adjusted net income and its components and
non-GAAP adjusted diluted EPS are presented solely to permit
investors to more fully understand how management assesses
performance.
|
|
|
|
|
|
(b)
|
|
Exclusive of amortization of intangible assets, except as discussed
in footnote (c) below.
|
|
|
|
|
|
(c)
|
|
Amortization expense related to finite-lived acquired intangible
assets that contribute to our ability to sell, manufacture,
research, market and distribute products, compounds and
intellectual property is included in Amortization of intangible
assets as these intangible assets benefit multiple business
functions. Amortization expense related to acquired intangible
assets that are associated with a single function is included in Cost
of sales, Selling, general and administrative expenses or Research
and development expenses, as appropriate.
|
|
|
|
|
|
(d)
|
|
EPS amounts may not add due to rounding.
|
|
|
|
|
|
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1), (2) and (3).
|
|
|
|
Certain amounts may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
|
|
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED
INFORMATION
|
|
CERTAIN LINE ITEMS
|
|
(UNAUDITED)
|
|
(millions of dollars)
|
|
|
|
(1)
|
|
The condensed consolidated statements of income present the three
months ended March 30, 2014 and March 31, 2013. Subsidiaries
operating outside the United States are included for the three
months ended February 23, 2014 and February 24, 2013.
|
|
|
|
|
|
(2)
|
|
Acquisition-related costs include the following:
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
|
2014
|
|
2013
|
|
Integration costs(a)
|
|
$
|
2
|
|
$
|
4
|
|
Restructuring charges(b)
|
|
—
|
|
2
|
|
Total acquisition-related costs—pre-tax
|
|
2
|
|
6
|
|
Income taxes(c)
|
|
1
|
|
2
|
|
Total acquisition-related costs—net of tax
|
|
$
|
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 charges and certain
acquisition-related costs.
|
|
|
|
|
|
(b)
|
|
Restructuring charges are associated with employees, assets and
activities that will not continue with the company. Included in Restructuring
charges and certain acquisition-related costs.
|
|
|
|
|
|
(c)
|
|
Included in Provision for taxes on income.
|
|
|
|
|
|
(3)
|
|
Certain significant items include the following:
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
|
2014
|
|
2013
|
|
Restructuring charges(a)
|
|
$
|
—
|
|
$
|
1
|
|
Implementation costs and additional depreciation—asset restructuring(b)
|
|
1
|
|
2
|
|
Certain asset impairment charges(c)
|
|
—
|
|
1
|
|
Stand-up costs(d)
|
|
33
|
|
34
|
|
Other(e)
|
|
2
|
|
4
|
|
Total certain significant items—pre-tax
|
|
36
|
|
42
|
|
Income taxes(f)
|
|
9
|
|
15
|
|
Total certain significant items—net of tax
|
|
$
|
27
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents restructuring charges incurred for our
cost-reduction/productivity initiatives. Included in Restructuring
charges and certain acquisition-related costs.
|
|
|
|
|
|
(b)
|
|
Related to our cost-reduction/productivity initiatives. Included
in Restructuring charges and certain acquisition-related costs
for the three months ended March 30, 2014 and included in Selling,
general and administrative expenses for the three months ended
March 31, 2013.
|
|
|
|
|
|
(c)
|
|
Included in Other (income)/deductions—net.
|
|
|
|
|
|
(d)
|
|
Represents certain nonrecurring costs related to becoming an
independent public company, such as new branding (including
changes to the manufacturing process for required new packaging),
the creation of standalone systems and infrastructure, site
separation, and certain legal registration and patent assignment
costs. Included in Cost of sales ($3 million) and Selling,
general and administrative expenses ($30 million) for the
three months ended March 30, 2014. Included in Cost of sales
($2 million) and Selling, general and administrative expenses
($32 million) for the three months ended March 31, 2013.
|
|
|
|
|
|
(e)
|
|
For the three months ended March 30, 2014, represents a pension plan
settlement charge related to the divestiture of a manufacturing
plant ($4 million) partially offset by an insurance recovery of
litigation related charges ($2 million income). For the three months
ended March 31, 2013, primarily relates to a change in estimate
related to transitional manufacturing purchase agreements associated
with divestitures.
|
|
|
|
|
|
(f)
|
|
Included in Provision for taxes on income. Income taxes
include the tax effect of the associated pre-tax amounts,
calculated by determining the jurisdictional location of the
pre-tax amounts and applying that jurisdiction's applicable tax
rate.
|
|
|
|
|
|
ZOETIS INC.
|
|
ADJUSTED SELECTED COSTS AND EXPENSES(a)
|
|
(UNAUDITED)
|
|
(millions of dollars)
|
|
|
|
|
|
|
|
% Change
|
|
|
|
First Quarter
|
|
(Favorable)/Unfavorable
|
|
|
|
2014
|
|
2013
|
|
Total
|
|
Foreign
Exchange
|
|
Operational
|
|
Adjusted cost of sales(a)
|
|
$
|
375
|
|
|
$
|
398
|
|
|
(6
|
)%
|
|
(4
|
)%
|
|
(2
|
)%
|
|
As a percent of revenue
|
|
34.2
|
%
|
|
36.5
|
%
|
|
NA
|
|
NA
|
|
NA
|
|
Adjusted SG&A expenses(a)
|
|
327
|
|
|
322
|
|
|
2
|
%
|
|
(2
|
)%
|
|
4
|
%
|
|
Adjusted R&D expenses(a)
|
|
87
|
|
|
90
|
|
|
(3
|
)%
|
|
(1
|
)%
|
|
(2
|
)%
|
|
Total
|
|
$
|
789
|
|
|
$
|
810
|
|
|
(3
|
)%
|
|
(3
|
)%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted cost of sales, adjusted selling, general, and
administrative (SG&A) expenses and adjusted research and development
(R&D) expenses are defined as the corresponding reported U.S.
generally accepted accounting principles (GAAP) income statement
line items excluding purchase accounting adjustments,
acquisition-related costs, and certain significant items.
Reconciliations of certain reported to adjusted information for the
three months ended March 30, 2014 and March 31, 2013 are provided in
the materials accompanying this report. These adjusted income
statement line item measures are not, and should not be viewed as,
substitutes for the corresponding U.S. GAAP line items.
|
|
|
|
|
|
ZOETIS INC.
|
|
2014 GUIDANCE
|
|
|
|
Selected Line Items
|
|
|
|
Revenue
|
|
$4,650 to $4,750 million
|
|
Adjusted cost of sales as a percentage of revenue(a)
|
|
Approximately 35.5%
|
|
Adjusted SG&A expenses(a)
|
|
$1,430 to $1,480 million
|
|
Adjusted R&D expenses(a)
|
|
$390 to $405 million
|
|
Adjusted interest expense and other (income)/deductions(a)
|
|
Approximately $105 million
|
|
Effective tax rate on adjusted income(a)
|
|
Approximately 29%
|
|
Adjusted diluted EPS(a)
|
|
$1.48 to $1.54
|
|
Certain significant items(b) and acquisition-related costs
|
|
$165 to $185 million
|
|
Reported diluted EPS
|
|
$1.15 to $1.21
|
|
|
|
|
|
|
|
A reconciliation of 2014 adjusted net income and adjusted diluted
EPS guidance to 2014 reported net income attributable to Zoetis and
reported diluted EPS attributable to Zoetis common shareholders
guidance follows:
|
|
|
|
|
|
|
|
|
|
Full-Year 2014 Guidance
|
|
(millions of dollars, except per share amounts)
|
|
Net Income
|
|
Diluted EPS
|
|
Adjusted net income/diluted EPS(a) guidance
|
|
~$740 - $770
|
|
~$1.48 - $1.54
|
|
Purchase accounting adjustments
|
|
~(30)
|
|
~(0.06)
|
|
Certain significant items(b) and acquisition-related costs
|
|
~(125 - 140)
|
|
~(0.25 - 0.28)
|
|
Reported net income attributable to Zoetis/diluted EPS guidance
|
|
~$580 - $610
|
|
~$1.15 - $1.21
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted net income and its components and adjusted diluted EPS
are defined as reported U.S. generally accepted accounting
principles (GAAP) net income and its components and reported
diluted EPS excluding purchase accounting adjustments,
acquisition-related costs and certain significant items. Adjusted
cost of sales, adjusted selling, general and administrative (SG&A)
expenses, adjusted research and development (R&D) expenses,
adjusted interest expense and adjusted other (income)/deductions
are income statement line items prepared on the same basis, and,
therefore, components of the overall adjusted income measure.
Despite the importance of these measures to management in goal
setting and performance measurement, adjusted net income and its
components and adjusted diluted EPS are non-GAAP financial
measures that have no standardized meaning prescribed by U.S. GAAP
and, therefore, have limits in their usefulness to investors.
Because of the non-standardized definitions, adjusted net income
and its components and adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable
to the calculation of similar measures of other companies.
Adjusted net income and its components and adjusted diluted EPS
are presented solely to permit investors to more fully understand
how management assesses performance. Adjusted net income and its
components and adjusted diluted EPS are not, and should not be
viewed as, substitutes for U.S. GAAP net income and its components
and diluted EPS.
|
|
|
|
|
|
(b)
|
|
Primarily includes certain nonrecurring costs related to becoming an
independent public company, such as new branding (including changes
to the manufacturing process for required new packaging), the
creation of standalone systems and infrastructure, site separation,
certain legal registration and patent assignment costs, and
restructuring and other charges.
|
|
|
|
|
|
ZOETIS INC.
|
|
CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES
|
|
(UNAUDITED)
|
|
(millions of dollars)
|
|
|
|
|
|
First Quarter
|
|
% Change
|
|
|
|
2014
|
|
2013
|
|
Total
|
|
Foreign
Exchange
|
|
Operational
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
706
|
|
$
|
703
|
|
—
|
%
|
|
(4
|
)%
|
|
4
|
%
|
|
Companion Animal
|
|
380
|
|
376
|
|
1
|
%
|
|
(2
|
)%
|
|
3
|
%
|
|
Contract Manufacturing
|
|
11
|
|
11
|
|
—
|
%
|
|
(3
|
)%
|
|
3
|
%
|
|
Total Revenue
|
|
$
|
1,097
|
|
$
|
1,090
|
|
1
|
%
|
|
(3
|
)%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
263
|
|
$
|
245
|
|
7
|
%
|
|
—
|
%
|
|
7
|
%
|
|
Companion Animal
|
|
216
|
|
209
|
|
3
|
%
|
|
—
|
%
|
|
3
|
%
|
|
Total U.S. Revenue
|
|
$
|
479
|
|
$
|
454
|
|
6
|
%
|
|
—
|
%
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EuAfME
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
181
|
|
$
|
192
|
|
(6
|
)%
|
|
—
|
%
|
|
(6
|
)%
|
|
Companion Animal
|
|
89
|
|
87
|
|
2
|
%
|
|
1
|
%
|
|
1
|
%
|
|
Total EuAfME Revenue
|
|
$
|
270
|
|
$
|
279
|
|
(3
|
)%
|
|
1
|
%
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLAR
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
135
|
|
$
|
139
|
|
(3
|
)%
|
|
(12
|
)%
|
|
9
|
%
|
|
Companion Animal
|
|
33
|
|
32
|
|
3
|
%
|
|
(12
|
)%
|
|
15
|
%
|
|
Total CLAR Revenue
|
|
$
|
168
|
|
$
|
171
|
|
(2
|
)%
|
|
(12
|
)%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APAC
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
127
|
|
$
|
127
|
|
—
|
%
|
|
(7
|
)%
|
|
7
|
%
|
|
Companion Animal
|
|
42
|
|
48
|
|
(13
|
)%
|
|
(11
|
)%
|
|
(2
|
)%
|
|
Total APAC Revenue
|
|
$
|
169
|
|
$
|
175
|
|
(3
|
)%
|
|
(7
|
)%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
$
|
391
|
|
$
|
390
|
|
—
|
%
|
|
(3
|
)%
|
|
3
|
%
|
|
Swine
|
|
160
|
|
155
|
|
3
|
%
|
|
(3
|
)%
|
|
6
|
%
|
|
Poultry
|
|
135
|
|
133
|
|
2
|
%
|
|
(4
|
)%
|
|
6
|
%
|
|
Other
|
|
20
|
|
25
|
|
(20
|
)%
|
|
(8
|
)%
|
|
(12
|
)%
|
|
Total Livestock Revenue
|
|
$
|
706
|
|
$
|
703
|
|
—
|
%
|
|
(4
|
)%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
$
|
43
|
|
$
|
42
|
|
2
|
%
|
|
(5
|
)%
|
|
7
|
%
|
|
Dogs and Cats
|
|
337
|
|
334
|
|
1
|
%
|
|
(1
|
)%
|
|
2
|
%
|
|
Total Companion Animal Revenue
|
|
$
|
380
|
|
$
|
376
|
|
1
|
%
|
|
(2
|
)%
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Note 18A to Zoetis's
consolidated and combined financial statements included in Zoetis's
Form 10-K for the year ended December 31, 2013. Beginning in the
first quarter of 2014, contract manufacturing is presented
separately and we have revised our segment results for the
comparable 2013 period.
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
|
|
SEGMENT EARNINGS(a)
|
|
(UNAUDITED)
|
|
(millions of dollars)
|
|
|
|
|
|
First Quarter
|
|
% Change
|
|
|
|
2014
|
|
2013
|
|
Total
|
|
Foreign
Exchange
|
|
Operational
|
|
U.S.
|
|
$
|
278
|
|
|
$
|
234
|
|
|
19
|
%
|
|
—
|
%
|
|
19
|
%
|
|
EuAfME
|
|
112
|
|
|
114
|
|
|
(2
|
)%
|
|
—
|
%
|
|
(2
|
)%
|
|
CLAR
|
|
64
|
|
|
52
|
|
|
23
|
%
|
|
12
|
%
|
|
11
|
%
|
|
APAC
|
|
66
|
|
|
75
|
|
|
(12
|
)%
|
|
(10
|
)%
|
|
(2
|
)%
|
|
Total Reportable Segments
|
|
520
|
|
|
475
|
|
|
9
|
%
|
|
(1
|
)%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(b)
|
|
(72
|
)
|
|
(71
|
)
|
|
1
|
%
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(c)
|
|
(125
|
)
|
|
(116
|
)
|
|
8
|
%
|
|
|
|
|
|
Purchase accounting adjustments(d)
|
|
(12
|
)
|
|
(12
|
)
|
|
—
|
%
|
|
|
|
|
|
Acquisition-related costs(e)
|
|
(2
|
)
|
|
(6
|
)
|
|
(67
|
)%
|
|
|
|
|
|
Certain significant items(f)
|
|
(36
|
)
|
|
(42
|
)
|
|
(14
|
)%
|
|
|
|
|
|
Other unallocated(g)
|
|
(46
|
)
|
|
(36
|
)
|
|
28
|
%
|
|
|
|
|
|
Total Earnings(h)
|
|
$
|
227
|
|
|
$
|
192
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Note 18A to Zoetis's
consolidated and combined financial statements included in Zoetis's
Form 10-K for the year ended December 31, 2013. Beginning in the
first quarter of 2014, contract manufacturing is included in other
business activities and we have revised our segment results for the
comparable 2013 period.
|
|
|
|
|
|
(b)
|
|
Other business activities reflect the research and development costs
managed by our Research and Development organization as well as our
contract manufacturing business.
|
|
|
|
|
|
(c)
|
|
Corporate includes, among other things, administration expenses,
interest expense, certain compensation and other costs not charged
to our operating segments.
|
|
|
|
|
|
(d)
|
|
Purchase accounting adjustments include certain charges related to
intangible assets and property, plant and equipment not charged to
our operating segments.
|
|
|
|
|
|
(e)
|
|
Acquisition-related costs can include costs associated with
acquiring, integrating and restructuring newly acquired businesses,
such as transaction costs, integration costs, restructuring charges
and additional depreciation associated with asset restructuring.
|
|
|
|
|
|
(f)
|
|
Certain significant items are substantive, unusual items that,
either as a result of their nature or size, would not be expected
to occur as part of our normal business on a regular basis. Such
items primarily include 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 and the impact of divestiture-related gains
and losses.
|
|
|
|
|
|
(g)
|
|
Includes overhead expenses associated with our manufacturing
operations not directly attributable to an operating segment.
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|
|
|
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(h)
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Defined as income before provision for taxes on income.
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Certain amounts and percentages may reflect rounding adjustments.
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Zoetis Inc.
Media:
Bill Price, 1-973-443-2742
william.price@zoetis.com
or
Elinore White, 1-973-443-2835
elinore.y.white@zoetis.com
or
Investor:
John O'Connor, 1-973-822-7088