- Second Quarter 2014 Revenue of $1.2 Billion Increased 4%, Compared to Second Quarter 2013
- Second Quarter 2014 Reported Net Income of $136 Million, or Diluted EPS of $0.27, Increased 6% and 4%, respectively, Compared to Second Quarter 2013
- Second Quarter 2014 Adjusted Net Income of $189 Million, or Adjusted Diluted EPS1 of $0.38, Increased 6% Compared to Second Quarter 2013
- Company Narrows Full-Year 2014 Adjusted Diluted EPS1 Guidance to $1.50 - $1.54
Zoetis Inc. (NYSE:ZTS) today reported its financial results for the
second quarter of 2014. The company reported revenue of $1.2 billion for
the second quarter of 2014, an increase of 4% from the second quarter of
2013. Revenue reflected an operational2 increase of
6%, with foreign currency having a negative impact of 2 percentage
points.
Net income for the second quarter of 2014 was $136 million, or $0.27 per
diluted share, an increase of 6% and 4%, respectively, compared to the
second quarter of 2013. Adjusted net income1 for the second
quarter of 2014 was $189 million, or $0.38 per diluted share, an
increase of 6% compared to the second quarter of 2013. Adjusted net
income for the second quarter of 2014 excludes the net impact of $53
million, or $0.11 per diluted share, for purchase accounting
adjustments, acquisition-related costs and certain significant items. On
an operational2 basis, adjusted net income for the second
quarter of 2014 increased 11%, with foreign currency having a negative
impact of 5 percentage points.
EXECUTIVE COMMENTARY
"In the second quarter, we generated 6% operational growth in revenue,
based on the strong performance of our livestock products,” said Zoetis
Chief Executive Officer Juan Ramón Alaix. “We benefited from positive
economic conditions for livestock producers versus the year-ago quarter,
especially in the U.S., Canada and Brazil. This performance helped
offset the impact of the PED virus in swine and slower growth in
companion animal products. Sales of Apoquel, which continues to have
limited supply, contributed to our growth in companion animal revenue
and were somewhat offset by increased competition in other product
areas.”
“We also saw operational growth in revenue across all our geographical
segments in the quarter, reflecting the strength and balance of our
diverse portfolio," Alaix said. “Our continued focus on building strong
customer relationships, bringing new products to market while managing
product lifecycles, and producing high-quality products with reliable
supply, all remain fundamental strengths of our business model.”
“In the second quarter, we grew adjusted earnings faster than sales,
while facing higher expense growth driven primarily by the ramp-up of
our corporate functions and timing of our promotional activities,” said
Glenn David, Senior Vice President of Finance Operations and Acting
Chief Financial Officer of Zoetis. “We continue making progress on
establishing our Zoetis systems and infrastructure as we complete our
stand-up programs. We remain confident in our business model and
outlook, and we are increasing the lower end of the guidance range for
revenue and adjusted EPS for the full year 2014.”
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.
In the second quarter of 2014:
-
Revenue in the U.S. was $459 million, an increase of 5% compared to
the second quarter of 2013. Sales of livestock products grew 10% with
contributions across cattle, poultry and swine. Cattle products showed
a significant increase based on improved market conditions from the
year-ago quarter. Poultry product sales grew, benefiting from new
vaccines and growth in medicated feed additives. 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 1% driven by APOQUEL®, but this was
partially offset by declines due to increased competition in vaccines
and for RIMADYL®.
-
Revenue in EuAfME was $284 million, an increase of 4% operationally
compared to the second quarter of 2013. Sales of livestock products
increased 5% operationally as the region experienced more positive
results in Germany, the UK and Spain, but this was slightly offset by
declines in France. The livestock growth was primarily driven by
increased sales in poultry and cattle products, which were slightly
offset by a decline in swine products for the quarter. Sales of
companion animal products increased 2% operationally, primarily driven
by sales of APOQUEL® in the UK and Germany and growth in
emerging markets; this growth was somewhat offset by declines in
France and southern Europe due to increased competition in
parasiticides.
-
Revenue in CLAR was $214 million, an increase of 11% operationally
compared to the second quarter of 2013. Overall for the segment, sales
of livestock products grew 13% operationally and sales of companion
animal products grew 6% operationally. The CLAR segment results were
largely driven by growth in its two largest markets, Brazil and
Canada, as well as Venezuela and Argentina. In Brazil, there was
significant growth driven primarily by sales of cattle and poultry
products as well as companion animal products. Meanwhile, the company
generated increased sales of cattle products in Canada, as higher
prices for cattle led to increased treatments. Canada also saw an
increase in sales of swine products such as anti-infectives and
vaccines, while it posted a slight decline in poultry products.
Finally, Venezuela and Argentina grew sales of livestock products,
reflecting price increases in these high inflationary markets.
-
Revenue in APAC was $185 million, an increase of 5% operationally
compared to the second quarter of 2013. Sales of livestock products
grew 7% operationally, driven primarily by sales of cattle products in
New Zealand and Australia; growth of swine products in China; and
growth of poultry products in Australia and India. This livestock
growth was offset by declines in Japan and Korea. Meanwhile, sales of
companion animal products increased 1% operationally largely due to an
increase in equine products in Australia, which was offset by declines
in companion animal products in Japan.
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.
One example of a new product introduction in the quarter was for
ACTOGAIN™ (ractopamine hydrochloride). The company launched ACTOGAIN in
the U.S. after receiving regulatory approvals to use it in combination
with other products. ACTOGAIN is the company’s second branded generic
ractopamine product and adds to its strong portfolio for cattle.
Ractopamine is an active ingredient in feed additive products that help
cattle and pigs direct their food energy toward producing high-quality
lean meat rather than fat.
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 narrowed its revenue and adjusted earnings guidance for full year
2014, raising the lower end of previous ranges for both items. The
company also revised its reported diluted EPS guidance to account for a
one-time charge related to a commercial settlement with customers in
Mexico that impacted this quarter. Full-year 2014 guidance includes:
-
Revenue of between $4.675 billion to $4.750 billion
-
Reported diluted EPS for the full year of between $1.16 to $1.20 per
share
-
Adjusted diluted EPS1 for the full year between $1.50 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 second 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 Aug. 5,
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 27
manufacturing facilities in 10 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 growth 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, 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 web site at www.zoetis.com,
on our Facebook page at http://www.facebook.com/zoetis
and on Twitter @zoetis. We encourage investors and potential investors
to consult our website regularly and to follow us on Facebook and
Twitter for important information about us.
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ZOETIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)
(UNAUDITED)
(millions of dollars, except per share data)
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Second Quarter
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Six Months
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2014
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2013
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% Change
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2014
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2013
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% Change
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Revenue
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$
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1,158
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$
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1,114
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4
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$
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2,255
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$
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2,204
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2
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Costs and expenses:
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Cost of sales(b)
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413
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416
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(1
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)
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792
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818
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(3
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)
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Selling, general and administrative expenses(b)
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396
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399
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(1
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)
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752
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756
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(1
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)
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Research and development expenses(b)
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92
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|
|
|
95
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(3
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)
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179
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185
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(3
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)
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Amortization of intangible assets(c)
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15
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15
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—
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30
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30
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—
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Restructuring charges and certain acquisition-related costs
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5
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(20
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)
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*
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8
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(13
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)
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*
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Interest expense
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29
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32
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(9
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)
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58
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54
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7
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Other (income)/deductions–net
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8
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(10
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)
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*
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9
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(5
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)
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*
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Income before provision for taxes on income
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200
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187
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7
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427
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379
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13
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Provision for taxes on income
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61
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59
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3
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133
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111
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20
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Net income before allocation to noncontrolling interests
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139
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128
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9
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294
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268
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|
10
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Less: Net income attributable to noncontrolling interests
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3
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|
|
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—
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*
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3
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—
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*
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Net income attributable to Zoetis
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$
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136
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|
$
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128
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6
|
|
|
|
$
|
291
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|
|
|
$
|
268
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|
9
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Earnings per share—basic
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$
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0.27
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$
|
0.26
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4
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$
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0.58
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$
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0.54
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7
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Earnings per share—diluted
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$
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0.27
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$
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0.26
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4
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$
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0.58
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$
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0.54
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7
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Weighted-average shares used to calculate earnings per share (in
thousands)
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Basic
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500,975
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500,000
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500,603
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500,000
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Diluted
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501,684
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500,217
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501,193
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500,164
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*Calculation not meaningful
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(a)
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The condensed consolidated statements of income present the three
and six months ended June 29, 2014 and June 30, 2013. Subsidiaries
operating outside the United States are included for the three and
six months ended May 25, 2014 and May 26, 2013.
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(b)
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Exclusive of amortization of intangible assets, except as
discussed in footnote (c) below.
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(c)
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Amortization expense related to finite-lived acquired intangible
assets that contribute to our ability to sell, manufacture,
research, market and distribute products, compounds and
intellectual property is included in Amortization of intangible
assets as these intangible assets benefit multiple business
functions. Amortization expense related to acquired intangible
assets that are associated with a single function is included in
Cost of sales, Selling, general and administrative expenses or
Research and development expenses, as appropriate.
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Certain amounts and percentages may reflect rounding adjustments.
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ZOETIS INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per share data)
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Quarter ended June 29, 2014
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Purchase
|
|
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Acquisition-
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|
|
Certain
|
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|
|
|
|
|
|
GAAP
|
|
|
Accounting
|
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Related
|
|
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Significant
|
|
|
Non-GAAP
|
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|
|
Reported(1)
|
|
|
Adjustments
|
|
|
Costs(2)
|
|
|
Items(3)
|
|
|
Adjusted(a)
|
|
Revenue
|
|
|
$
|
1,158
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
1,158
|
|
|
Cost of sales(b)
|
|
|
413
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
405
|
|
|
Gross profit
|
|
|
745
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|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
753
|
|
|
Selling, general and administrative expenses(b)
|
|
|
396
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(31
|
)
|
|
|
364
|
|
|
Research and development expenses(b)
|
|
|
92
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
91
|
|
|
Amortization of intangible assets(c)
|
|
|
15
|
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
5
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
—
|
|
|
Interest expense
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
|
Other (income)/deductions–net
|
|
|
8
|
|
|
|
—
|
|
|
|
—
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|
|
|
(11
|
)
|
|
|
(3
|
)
|
|
Income before provision for taxes on income
|
|
|
200
|
|
|
|
13
|
|
|
|
2
|
|
|
|
53
|
|
|
|
268
|
|
|
Provision for taxes on income
|
|
|
61
|
|
|
|
5
|
|
|
|
—
|
|
|
|
10
|
|
|
|
76
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|
|
Income from continuing operations
|
|
|
139
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|
|
|
8
|
|
|
|
2
|
|
|
|
43
|
|
|
|
192
|
|
|
Net income attributable to noncontrolling interests
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Net income attributable to Zoetis
|
|
|
136
|
|
|
|
8
|
|
|
|
2
|
|
|
|
43
|
|
|
|
189
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
|
0.27
|
|
|
|
0.02
|
|
|
|
—
|
|
|
|
0.09
|
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended June 30, 2013
|
|
|
|
|
|
|
|
Purchase
|
|
|
Acquisition-
|
|
|
Certain
|
|
|
|
|
|
|
|
GAAP
|
|
|
Accounting
|
|
|
Related
|
|
|
Significant
|
|
|
Non-GAAP
|
|
|
|
|
Reported(1)
|
|
|
Adjustments
|
|
|
Costs(2)
|
|
|
Items(3)
|
|
|
Adjusted(a)
|
|
Revenue
|
|
|
$
|
1,114
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
1,114
|
|
|
Cost of sales(b)
|
|
|
416
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(13
|
)
|
|
|
400
|
|
|
Gross profit
|
|
|
698
|
|
|
|
1
|
|
|
|
2
|
|
|
|
13
|
|
|
|
714
|
|
|
Selling, general and administrative expenses(b)
|
|
|
399
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(60
|
)
|
|
|
339
|
|
|
Research and development expenses(b)
|
|
|
95
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
91
|
|
|
Amortization of intangible assets(c)
|
|
|
15
|
|
|
|
(12
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
(20
|
)
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
27
|
|
|
|
—
|
|
|
Interest expense
|
|
|
32
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32
|
|
|
Other (income)/deductions–net
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
(3
|
)
|
|
Income before provision for taxes on income
|
|
|
187
|
|
|
|
13
|
|
|
|
9
|
|
|
|
43
|
|
|
|
252
|
|
|
Provision for taxes on income
|
|
|
59
|
|
|
|
4
|
|
|
|
3
|
|
|
|
8
|
|
|
|
74
|
|
|
Net income attributable to Zoetis
|
|
|
128
|
|
|
|
9
|
|
|
|
6
|
|
|
|
35
|
|
|
|
178
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
|
0.26
|
|
|
|
0.02
|
|
|
|
0.01
|
|
|
|
0.07
|
|
|
|
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.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per share data)
|
|
|
|
|
|
|
|
|
|
Six Months ended June 29, 2014
|
|
|
|
|
|
|
|
Purchase
|
|
|
Acquisition-
|
|
|
Certain
|
|
|
|
|
|
|
|
GAAP
|
|
|
Accounting
|
|
|
Related
|
|
|
Significant
|
|
|
Non-GAAP
|
|
|
|
|
Reported(1)
|
|
|
Adjustments
|
|
|
Costs(2)
|
|
|
Items(3)
|
|
|
Adjusted(a)
|
|
Revenue
|
|
|
$
|
2,255
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
2,255
|
|
|
Cost of sales(b)
|
|
|
792
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
780
|
|
|
Gross profit
|
|
|
1,463
|
|
|
|
1
|
|
|
|
—
|
|
|
|
11
|
|
|
|
1,475
|
|
|
Selling, general and administrative expenses(b)
|
|
|
752
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(61
|
)
|
|
|
691
|
|
|
Research and development expenses(b)
|
|
|
179
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
178
|
|
|
Amortization of intangible assets(c)
|
|
|
30
|
|
|
|
(23
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
8
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
—
|
|
|
Interest expense
|
|
|
58
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
58
|
|
|
Other (income)/deductions–net
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
(4
|
)
|
|
Income before provision for taxes on income
|
|
|
427
|
|
|
|
25
|
|
|
|
4
|
|
|
|
89
|
|
|
|
545
|
|
|
Provision for taxes on income
|
|
|
133
|
|
|
|
9
|
|
|
|
1
|
|
|
|
19
|
|
|
|
162
|
|
|
Income from continuing operations
|
|
|
294
|
|
|
|
16
|
|
|
|
3
|
|
|
|
70
|
|
|
|
383
|
|
|
Net income attributable to noncontrolling interests
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Net income attributable to Zoetis
|
|
|
291
|
|
|
|
16
|
|
|
|
3
|
|
|
|
70
|
|
|
|
380
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
|
0.58
|
|
|
|
0.03
|
|
|
|
0.01
|
|
|
|
0.14
|
|
|
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months ended June 30, 2013
|
|
|
|
|
|
|
|
Purchase
|
|
|
Acquisition-
|
|
|
Certain
|
|
|
|
|
|
|
|
GAAP
|
|
|
Accounting
|
|
|
Related
|
|
|
Significant
|
|
|
Non-GAAP
|
|
|
|
|
Reported(1)
|
|
|
Adjustments
|
|
|
Costs(2)
|
|
|
Items(3)
|
|
|
Adjusted(a)
|
|
Revenue
|
|
|
$
|
2,204
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
2,204
|
|
|
Cost of sales(b)
|
|
|
818
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(16
|
)
|
|
|
798
|
|
|
Gross profit
|
|
|
1,386
|
|
|
|
2
|
|
|
|
2
|
|
|
|
16
|
|
|
|
1,406
|
|
|
Selling, general and administrative expenses(b)
|
|
|
756
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(95
|
)
|
|
|
661
|
|
|
Research and development expenses(b)
|
|
|
185
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
181
|
|
|
Amortization of intangible assets(c)
|
|
|
30
|
|
|
|
(23
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
26
|
|
|
|
—
|
|
|
Interest expense
|
|
|
54
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
54
|
|
|
Other (income)/deductions–net
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
Income before provision for taxes on income
|
|
|
379
|
|
|
|
25
|
|
|
|
15
|
|
|
|
85
|
|
|
|
504
|
|
|
Provision for taxes on income
|
|
|
111
|
|
|
|
8
|
|
|
|
5
|
|
|
|
23
|
|
|
|
147
|
|
|
Net income attributable to Zoetis
|
|
|
268
|
|
|
|
17
|
|
|
|
10
|
|
|
|
62
|
|
|
|
357
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
|
0.54
|
|
|
|
0.03
|
|
|
|
0.02
|
|
|
|
0.12
|
|
|
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
and six months ended June 29, 2014 and June 30, 2013. Subsidiaries
operating outside the United States are included for the three and
six months ended May 25, 2014 and May 26, 2013.
|
|
|
|
|
|
|
(2)
|
|
|
Acquisition-related costs include the following:
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2013
|
|
Integration costs(a)
|
|
|
$
|
2
|
|
|
|
$
|
10
|
|
|
|
$
|
4
|
|
|
|
$
|
14
|
|
Restructuring charges(b)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
1
|
|
Total acquisition-related costs—pre-tax
|
|
|
2
|
|
|
|
9
|
|
|
|
4
|
|
|
|
15
|
|
Income taxes(c)
|
|
|
—
|
|
|
|
3
|
|
|
|
1
|
|
|
|
5
|
|
Total acquisition-related costs—net of tax
|
|
|
$
|
2
|
|
|
|
$
|
6
|
|
|
|
$
|
3
|
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 for the three and six months ended June
29, 2014. Included in Cost of sales ($2 million and $2 million)
and Restructuring charges and certain acquisition-related costs
($8 million and $12 million) for the three and six months ended
June 30, 2013, respectively.
|
|
|
|
|
|
|
(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. 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.
|
|
|
|
|
|
|
(3)
|
|
|
Certain significant items include the following:
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2013
|
|
|
Restructuring charges(a)
|
|
|
$
|
3
|
|
|
|
$
|
(27
|
)
|
|
|
$
|
3
|
|
|
|
$
|
(26
|
)
|
|
Implementation costs and additional depreciation—asset restructuring(b)
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
|
Certain asset impairment charges(c)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Net gain on sale of assets(d)
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
Stand-up costs(e)
|
|
|
41
|
|
|
|
77
|
|
|
|
74
|
|
|
|
111
|
|
|
Other(f)
|
|
|
12
|
|
|
|
(2
|
)
|
|
|
14
|
|
|
|
2
|
|
|
Total certain significant items—pre-tax
|
|
|
53
|
|
|
|
43
|
|
|
|
89
|
|
|
|
85
|
|
|
Income taxes(g)
|
|
|
10
|
|
|
|
8
|
|
|
|
19
|
|
|
|
23
|
|
|
Total certain significant items—net of tax
|
|
|
$
|
43
|
|
|
|
$
|
35
|
|
|
|
$
|
70
|
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
Represents restructuring charges incurred for our
cost-reduction/productivity initiatives. For the three and six
months ended June 30, 2013, includes a decrease in employee
termination expenses relating to the reversal of a previously
established termination reserve related to our operations in
Europe. 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 six months ended June 29, 2014. Included in Cost of sales for
the three months ended June 30, 2013. Included in Cost of sales
($1 million) and Selling, general and administrative expenses ($2
million) for the six months ended June 30, 2013.
|
|
|
|
|
|
|
(c)
|
|
|
Included in Other (income)/deductions—net.
|
|
|
|
|
|
|
(d)
|
|
|
For the three and six months ended June 29, 2014, represents the
Zoetis portion of a net gain on the sale of land in our Taiwan
joint venture. For the three and six months ended June 30, 2013,
represents the net gain on the government-mandated sale of certain
product rights in Brazil that were acquired with the FDAH
acquisition in 2009. Included in Other (income)/deductions—net.
|
|
|
|
|
|
|
(e)
|
|
|
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, as well as, restructuring, certain legal and commercial
settlements, and other charges. Included in Cost of sales ($8
million and $11 million), Selling, general and administrative
expenses ($31 million and $61 million), and Other
(income)/deductions—net ($2 million and $2 million) for the three
and six months ended June 29, 2014, respectively. Included in Cost
of sales ($13 million and $15 million), Selling, general and
administrative expenses ($60 million and $92 million), and
Research and development expenses ($4 million and $4 million) for
the three and six months ended June 30, 2013, respectively.
|
|
|
|
|
|
|
(f)
|
|
|
For the three and six months ended June 29, 2014, primarily
includes a reserve associated with a commercial settlement in
Mexico ($13 million). The six months ended June 29, 2014 also
includes 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).
|
|
|
|
|
|
|
(g)
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
Second Quarter
|
|
|
(Favorable)/Unfavorable
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
Total
|
|
|
|
Foreign Exchange
|
|
|
Operational
|
|
Adjusted cost of sales
|
|
|
$
|
405
|
|
|
|
$
|
400
|
|
|
|
1
|
%
|
|
|
|
(3
|
)%
|
|
|
4
|
%
|
|
as a percent of revenue
|
|
|
35.0
|
%
|
|
|
35.9
|
%
|
|
|
NA
|
|
|
|
|
NA
|
|
|
|
NA
|
|
|
Adjusted SG&A expenses
|
|
|
364
|
|
|
|
339
|
|
|
|
7
|
%
|
|
|
|
(2
|
)%
|
|
|
9
|
%
|
|
Adjusted R&D expenses
|
|
|
91
|
|
|
|
91
|
|
|
|
—
|
%
|
|
|
|
(1
|
)%
|
|
|
1
|
%
|
|
Adjusted net income attributable to Zoetis
|
|
|
189
|
|
|
|
178
|
|
|
|
6
|
%
|
|
|
|
(5
|
)%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
Six Months
|
|
|
(Favorable)/Unfavorable
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
Total
|
|
|
|
|
Foreign Exchange
|
|
|
Operational
|
|
|
Adjusted cost of sales
|
|
|
$
|
780
|
|
|
|
$
|
798
|
|
|
|
(2
|
)%
|
|
|
|
(3
|
)%
|
|
|
1
|
%
|
|
as a percent of revenue
|
|
|
34.6
|
%
|
|
|
36.2
|
%
|
|
|
NA
|
|
|
|
|
NA
|
|
|
|
NA
|
|
|
Adjusted SG&A expenses
|
|
|
691
|
|
|
|
661
|
|
|
|
5
|
%
|
|
|
|
(2
|
)%
|
|
|
7
|
%
|
|
Adjusted R&D expenses
|
|
|
178
|
|
|
|
181
|
|
|
|
(2
|
)%
|
|
|
|
(2
|
)%
|
|
|
—
|
%
|
|
Adjusted net income attributable to Zoetis
|
|
|
380
|
|
|
|
357
|
|
|
|
6
|
%
|
|
|
|
(4
|
)%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
Adjusted cost of sales, adjusted selling, general, and
administrative (SG&A) expenses, adjusted research and development
(R&D) expenses, and adjusted net income 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 and six months ended June 29, 2014 and
June 30, 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
|
|
|
|
$4,675 to $4,750 million
|
|
Adjusted cost of sales as a percentage of revenue(a)
|
|
|
|
Approximately 35.5%
|
|
Adjusted SG&A expenses(a)
|
|
|
|
$1,440 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)
|
|
|
|
$1.50 to $1.54
|
|
Certain significant items(b) and acquisition-related costs
|
|
|
|
$175 to $195 million
|
|
Reported diluted EPS
|
|
|
|
$1.16 to $1.20
|
|
|
|
|
|
|
In updating our guidance for full-year 2014, we have considered current
exchange rates and other factors.
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
|
|
|
|
~$750 - $770
|
|
|
~$1.50 - $1.54
|
|
Purchase accounting adjustments
|
|
|
|
~(30)
|
|
|
~(0.06)
|
|
Certain significant items(b) and acquisition-related costs
|
|
|
|
~(130 - 145)
|
|
|
~(0.26 - 0.29)
|
|
Reported net income attributable to Zoetis/diluted EPS guidance
|
|
|
|
~$580 - $600
|
|
|
~$1.16 - $1.20
|
|
|
|
|
|
|
|
|
|
|
(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, as well as, restructuring, certain legal and commercial
settlements, and other charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZOETIS INC.
CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
% Change
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
Total
|
|
|
Foreign Exchange
|
|
|
Operational
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
703
|
|
|
|
$
|
667
|
|
|
|
5
|
%
|
|
|
(4
|
)%
|
|
|
9
|
%
|
|
Companion Animal
|
|
|
439
|
|
|
|
435
|
|
|
|
1
|
%
|
|
|
(1
|
)%
|
|
|
2
|
%
|
|
Contract Manufacturing
|
|
|
16
|
|
|
|
12
|
|
|
|
33
|
%
|
|
|
6
|
%
|
|
|
27
|
%
|
|
Total Revenue
|
|
|
$
|
1,158
|
|
|
|
$
|
1,114
|
|
|
|
4
|
%
|
|
|
(2
|
)%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
224
|
|
|
|
$
|
204
|
|
|
|
10
|
%
|
|
|
—
|
%
|
|
|
10
|
%
|
|
Companion Animal
|
|
|
235
|
|
|
|
233
|
|
|
|
1
|
%
|
|
|
—
|
%
|
|
|
1
|
%
|
|
Total U.S. Revenue
|
|
|
$
|
459
|
|
|
|
$
|
437
|
|
|
|
5
|
%
|
|
|
—
|
%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EuAfME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
193
|
|
|
|
$
|
181
|
|
|
|
7
|
%
|
|
|
2
|
%
|
|
|
5
|
%
|
|
Companion Animal
|
|
|
91
|
|
|
|
85
|
|
|
|
7
|
%
|
|
|
5
|
%
|
|
|
2
|
%
|
|
Total EuAfME Revenue
|
|
|
$
|
284
|
|
|
|
$
|
266
|
|
|
|
7
|
%
|
|
|
3
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
156
|
|
|
|
$
|
153
|
|
|
|
2
|
%
|
|
|
(11
|
)%
|
|
|
13
|
%
|
|
Companion Animal
|
|
|
58
|
|
|
|
60
|
|
|
|
(3
|
)%
|
|
|
(9
|
)%
|
|
|
6
|
%
|
|
Total CLAR Revenue
|
|
|
$
|
214
|
|
|
|
$
|
213
|
|
|
|
—
|
%
|
|
|
(11
|
)%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
130
|
|
|
|
$
|
129
|
|
|
|
1
|
%
|
|
|
(6
|
)%
|
|
|
7
|
%
|
|
Companion Animal
|
|
|
55
|
|
|
|
57
|
|
|
|
(4
|
)%
|
|
|
(5
|
)%
|
|
|
1
|
%
|
|
Total APAC Revenue
|
|
|
$
|
185
|
|
|
|
$
|
186
|
|
|
|
(1
|
)%
|
|
|
(6
|
)%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
|
$
|
379
|
|
|
|
$
|
355
|
|
|
|
7
|
%
|
|
|
(3
|
)%
|
|
|
10
|
%
|
|
Swine
|
|
|
157
|
|
|
|
154
|
|
|
|
2
|
%
|
|
|
(3
|
)%
|
|
|
5
|
%
|
|
Poultry
|
|
|
146
|
|
|
|
137
|
|
|
|
7
|
%
|
|
|
(4
|
)%
|
|
|
11
|
%
|
|
Other
|
|
|
21
|
|
|
|
21
|
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
Total Livestock Revenue
|
|
|
$
|
703
|
|
|
|
$
|
667
|
|
|
|
5
|
%
|
|
|
(4
|
)%
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
|
$
|
46
|
|
|
|
$
|
45
|
|
|
|
2
|
%
|
|
|
—
|
%
|
|
|
2
|
%
|
|
Dogs and Cats
|
|
|
393
|
|
|
|
390
|
|
|
|
1
|
%
|
|
|
(1
|
)%
|
|
|
2
|
%
|
|
Total Companion Animal Revenue
|
|
|
$
|
439
|
|
|
|
$
|
435
|
|
|
|
1
|
%
|
|
|
(1
|
)%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
CONSOLIDATED REVENUE BY SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
% Change
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
Total
|
|
|
|
Foreign Exchange
|
|
|
Operational
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
1,409
|
|
|
|
$
|
1,370
|
|
|
|
3
|
%
|
|
|
|
(3
|
)%
|
|
|
6
|
%
|
|
Companion Animal
|
|
|
819
|
|
|
|
811
|
|
|
|
1
|
%
|
|
|
|
(1
|
)%
|
|
|
2
|
%
|
|
Contract Manufacturing
|
|
|
27
|
|
|
|
23
|
|
|
|
17
|
%
|
|
|
|
7
|
%
|
|
|
10
|
%
|
|
Total Revenue
|
|
|
$
|
2,255
|
|
|
|
$
|
2,204
|
|
|
|
2
|
%
|
|
|
|
(3
|
)%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
487
|
|
|
|
$
|
449
|
|
|
|
8
|
%
|
|
|
|
—
|
%
|
|
|
8
|
%
|
|
Companion Animal
|
|
|
451
|
|
|
|
442
|
|
|
|
2
|
%
|
|
|
|
—
|
%
|
|
|
2
|
%
|
|
Total U.S. Revenue
|
|
|
$
|
938
|
|
|
|
$
|
891
|
|
|
|
5
|
%
|
|
|
|
—
|
%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EuAfME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
374
|
|
|
|
$
|
373
|
|
|
|
—
|
%
|
|
|
|
1
|
%
|
|
|
(1
|
)%
|
|
Companion Animal
|
|
|
180
|
|
|
|
172
|
|
|
|
5
|
%
|
|
|
|
4
|
%
|
|
|
1
|
%
|
|
Total EuAfME Revenue
|
|
|
$
|
554
|
|
|
|
$
|
545
|
|
|
|
2
|
%
|
|
|
|
2
|
%
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
291
|
|
|
|
$
|
292
|
|
|
|
—
|
%
|
|
|
|
(11
|
)%
|
|
|
11
|
%
|
|
Companion Animal
|
|
|
91
|
|
|
|
92
|
|
|
|
(1
|
)%
|
|
|
|
(10
|
)%
|
|
|
9
|
%
|
|
Total CLAR Revenue
|
|
|
$
|
382
|
|
|
|
$
|
384
|
|
|
|
(1
|
)%
|
|
|
|
(11
|
)%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
257
|
|
|
|
$
|
256
|
|
|
|
—
|
%
|
|
|
|
(7
|
)%
|
|
|
7
|
%
|
|
Companion Animal
|
|
|
97
|
|
|
|
105
|
|
|
|
(8
|
)%
|
|
|
|
(7
|
)%
|
|
|
(1
|
)%
|
|
Total APAC Revenue
|
|
|
$
|
354
|
|
|
|
$
|
361
|
|
|
|
(2
|
)%
|
|
|
|
(7
|
)%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
|
$
|
770
|
|
|
|
$
|
745
|
|
|
|
3
|
%
|
|
|
|
(3
|
)%
|
|
|
6
|
%
|
|
Swine
|
|
|
317
|
|
|
|
314
|
|
|
|
1
|
%
|
|
|
|
(3
|
)%
|
|
|
4
|
%
|
|
Poultry
|
|
|
281
|
|
|
|
270
|
|
|
|
4
|
%
|
|
|
|
(5
|
)%
|
|
|
9
|
%
|
|
Other
|
|
|
41
|
|
|
|
41
|
|
|
|
—
|
%
|
|
|
|
(4
|
)%
|
|
|
4
|
%
|
|
Total Livestock Revenue
|
|
|
$
|
1,409
|
|
|
|
$
|
1,370
|
|
|
|
3
|
%
|
|
|
|
(3
|
)%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
|
$
|
89
|
|
|
|
$
|
87
|
|
|
|
2
|
%
|
|
|
|
(3
|
)%
|
|
|
5
|
%
|
|
Dogs and Cats
|
|
|
730
|
|
|
|
724
|
|
|
|
1
|
%
|
|
|
|
(1
|
)%
|
|
|
2
|
%
|
|
Total Companion Animal Revenue
|
|
|
$
|
819
|
|
|
|
$
|
811
|
|
|
|
1
|
%
|
|
|
|
(1
|
)%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
% Change
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
Total
|
|
|
|
Foreign Exchange
|
|
|
Operational
|
|
U.S.
|
|
|
$
|
258
|
|
|
|
$
|
254
|
|
|
|
2
|
%
|
|
|
|
—
|
%
|
|
|
2
|
%
|
|
EuAfME
|
|
|
103
|
|
|
|
93
|
|
|
|
11
|
%
|
|
|
|
2
|
%
|
|
|
9
|
%
|
|
CLAR
|
|
|
88
|
|
|
|
78
|
|
|
|
13
|
%
|
|
|
|
(3
|
)%
|
|
|
16
|
%
|
|
APAC
|
|
|
72
|
|
|
|
71
|
|
|
|
1
|
%
|
|
|
|
(10
|
)%
|
|
|
11
|
%
|
|
Total Reportable Segments
|
|
|
521
|
|
|
|
496
|
|
|
|
5
|
%
|
|
|
|
(2
|
)%
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(b)
|
|
|
(74
|
)
|
|
|
(76
|
)
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(c)
|
|
|
(128
|
)
|
|
|
(137
|
)
|
|
|
(7
|
)%
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments(d)
|
|
|
(13
|
)
|
|
|
(13
|
)
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related costs(e)
|
|
|
(2
|
)
|
|
|
(9
|
)
|
|
|
(78
|
)%
|
|
|
|
|
|
|
|
|
|
|
Certain significant items(f)
|
|
|
(53
|
)
|
|
|
(43
|
)
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
Other unallocated(g)
|
|
|
(51
|
)
|
|
|
(31
|
)
|
|
|
65
|
%
|
|
|
|
|
|
|
|
|
|
|
Total Earnings(h)
|
|
|
$
|
200
|
|
|
|
$
|
187
|
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
% Change
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
Total
|
|
|
|
Foreign Exchange
|
|
|
Operational
|
|
U.S.
|
|
|
$
|
536
|
|
|
|
$
|
488
|
|
|
|
10
|
%
|
|
|
|
—
|
%
|
|
|
10
|
%
|
|
EuAfME
|
|
|
215
|
|
|
|
207
|
|
|
|
4
|
%
|
|
|
|
1
|
%
|
|
|
3
|
%
|
|
CLAR
|
|
|
152
|
|
|
|
130
|
|
|
|
17
|
%
|
|
|
|
3
|
%
|
|
|
14
|
%
|
|
APAC
|
|
|
138
|
|
|
|
146
|
|
|
|
(5
|
)%
|
|
|
|
(9
|
)%
|
|
|
4
|
%
|
|
Total Reportable Segments
|
|
|
1,041
|
|
|
|
971
|
|
|
|
7
|
%
|
|
|
|
(1
|
)%
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(b)
|
|
|
(146
|
)
|
|
|
(147
|
)
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(c)
|
|
|
(253
|
)
|
|
|
(253
|
)
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments(d)
|
|
|
(25
|
)
|
|
|
(25
|
)
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related costs(e)
|
|
|
(4
|
)
|
|
|
(15
|
)
|
|
|
(73
|
)%
|
|
|
|
|
|
|
|
|
|
|
Certain significant items(f)
|
|
|
(89
|
)
|
|
|
(85
|
)
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
Other unallocated(g)
|
|
|
(97
|
)
|
|
|
(67
|
)
|
|
|
45
|
%
|
|
|
|
|
|
|
|
|
|
|
Total Earnings(h)
|
|
|
$
|
427
|
|
|
|
$
|
379
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, certain legal and commercial settlements, 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.
|
|
|
|
|
|
|
(h)
|
|
|
Defined as income before provision for taxes on income.
|
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
Zoetis Inc.
Media:
Bill Price, 1-973-443-2742 (o)
william.price@zoetis.com
Elinore White, 1-973-443-2835 (o)
elinore.y.white@zoetis.com
or
Investors:
John O'Connor, 1-973-822-7088 (o)