- Third Quarter 2014 Revenue of $1.2 Billion Increased 10%, Compared to Third Quarter 2013
- Third Quarter 2014 Reported Net Income of $166 Million, or Diluted EPS of $0.33, Increased 27%, Compared to Third Quarter 2013
- Third Quarter 2014 Adjusted Net Income of $207 Million, or Adjusted Diluted EPS1 of $0.41, Increased 20% and 21%, Respectively, Compared to Third Quarter 2013
- Company Reaffirms Full-Year 2014 Adjusted Diluted EPS1 Guidance of $1.50 - $1.54
Zoetis Inc. (NYSE:ZTS) today reported its financial results for the
third quarter of 2014. The company reported revenue of $1.2 billion for
the third quarter of 2014, an increase of 10% from the third quarter of
2013. Revenue reflected an operational2 increase of
10%, with foreign currency having no material impact on revenue growth
this quarter.
Net income for the third quarter of 2014 was $166 million, or $0.33 per
diluted share, an increase of 27%, compared to the third quarter of
2013. Adjusted net income1 for the third quarter of 2014 was
$207 million, or $0.41 per diluted share, an increase of 20% and 21%,
respectively, compared to the third quarter of 2013. Adjusted net income
for the third quarter of 2014 excludes the net impact of $41 million, or
$0.08 per diluted share, for purchase accounting adjustments,
acquisition-related costs and certain significant items. On an
operational2 basis, adjusted net income for the third quarter
of 2014 increased 21%, with foreign currency having a negative impact of
1 percentage point.
EXECUTIVE COMMENTARY
"In the third quarter, we generated 10% operational growth in revenue
and 21% in adjusted net income, continuing to demonstrate our long-term
value proposition of growing adjusted earnings faster than sales,” said
Zoetis Chief Executive Officer Juan Ramón Alaix. “This quarter’s
performance was driven largely by 13% operational revenue growth in our
livestock products and continued discipline around our operating
expenses.”
“All of our geographical segments benefited from the strong sales of
livestock products in the quarter. We saw an increase in the use of our
premium cattle products in key markets, as well as continued acceptance
of new products in our swine and poultry portfolios," said Alaix. “Our
overall companion animal product sales grew 5% operationally, reflecting
strong sales of Apoquel in the U.S. and certain European markets.
Meanwhile, we experienced increased competition and weaker performance
in other companion animal products in the U.S., which somewhat
offset double-digit operational growth for companion animal products in
the CLAR and EuAfME segments.”
“Year to date, we have grown revenue at 6% and adjusted net income at
13% on an operational basis, and we are tracking in line with our
full-year expectations,” said Paul Herendeen, Executive Vice President
and Chief Financial Officer of Zoetis. “We didn’t see a material impact
from foreign currency in our third quarter results, but we do expect to
see a negative impact from foreign currency in the fourth quarter and
into 2015, given the recent strengthening of the dollar against most
major currencies. We remain confident about the remainder of 2014,
despite the currency trends, and we are reaffirming our full-year
guidance for adjusted earnings per share and narrowing our revenue
guidance toward the high end of the range.”
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 third quarter of 2014:
-
Revenue in the U.S. was $532 million, an increase of 7% compared to
the third quarter of 2013. Sales of livestock products grew 12%, with
cattle and swine being the main contributors. Growth in cattle
products benefited from higher demand for our premium products as
producers continued to see strong market conditions. Swine product
sales were driven primarily by the successful launch of new products,
which was slightly offset by the continued impact of Porcine Epidemic
Diarrhea virus (PEDv). Sales of companion animal products grew 2%
driven by APOQUEL® and other key brands, but this growth
was offset by increased competition in vaccines, pain products and
parasiticides.
-
Revenue in EuAfME was $293 million, an increase of 12% operationally
compared to the third quarter of 2013. Sales of livestock products
increased 13% operationally as the region delivered positive results
in France and the UK as well as emerging markets. The livestock growth
was driven by increased sales across all species, with particular
advances coming from cattle and poultry products. Sales of companion
animal products increased 11% operationally, driven by sales of APOQUEL®
in Germany and the UK, as well as growth in parasiticides.
-
Revenue in CLAR was $194 million, an increase of 17% operationally
compared to the third quarter of 2013. Overall for the segment, sales
of livestock products grew 16% operationally and sales of companion
animal products grew 19% operationally. The CLAR segment results were
largely driven by growth in Venezuela, Brazil, Argentina and Canada.
Sales in Venezuela and Argentina grew significantly across all
species. In Brazil, there was significant growth driven primarily by
sales of cattle products and companion animal products. Meanwhile,
growth in Canada was primarily driven by sales of companion animal
products as well as cattle and swine products.
-
Revenue in APAC was $179 million, an increase of 7% operationally
compared to the third quarter of 2013. Sales of livestock products
grew 9% operationally, driven primarily by growth of swine products in
Southeast Asia and sales of cattle products in Australia. Sales of
companion animal products were flat operationally due to an inventory
buyback related to the termination of a distributor agreement in
Japan. Excluding this event, operational growth for companion animal
products would have been 8%, driven by sales of parasiticides across
the region, equine vaccines in Australia, and increased sales of
vaccines in China.
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
highlights include:
Continuous innovation -- Zoetis continues
to advance animal health science through innovations that address unmet
market needs or improve veterinarians’ approach to treatment.
-
In the third quarter, the U.S. Department of Agriculture (USDA)
granted Zoetis a conditional license for a vaccine to help fight porcine
epidemic diarrhea virus (PEDv) in pigs. The two-dose, inactivated
vaccine is designed to help healthy pregnant female pigs develop
antibodies that can be transferred to their newborn piglets. Zoetis
began supplying the vaccine to veterinarians and pig farmers in
September.3
-
Zoetis also received a full license from the USDA for its POULVAC®
Bron GA 08 vaccine for poultry, the first commercially available
vaccine to help reduce disease caused by the Georgia 2008 Type
infectious bronchitis virus. The vaccine had been conditionally
licensed last fall, and advanced to full licensure in August.
-
The company also received approval of Versican®
Plus across the European Union. This combination vaccine for dogs
contains nine vaccine antigens helping to protect against ten key
canine diseases in one vaccine dose. Based upon its combination of
antigens and adjuvant, Versican® Plus will help provide comprehensive
protection for dogs in Europe and be a more convenient option for
veterinarians than the currently available products. Versican®
Plus is expected to be launched in the European Union in 2015.
Expanding the portfolio’s reach – Zoetis
continues to receive approvals that help expand its key products into
new markets or with new formulations.
-
DRAXXIN® 25, an injectable anti-infective, which was first
approved in the U.S. in November 2013 and has tapped an important
market for swine, has now been approved in Canada and across the
European Union. DRAXXIN 25 offers a convenient tool to fight swine
respiratory disease (SRD) in nursery pigs by providing a lower
concentration of DRAXXIN, making it optimized for use in small pigs to
treat and control SRD.
-
EXCENEL® RTU EZ, a reformulated anti-infective that is easier
to use and first approved in the U.S. in July 2013, has now been
approved in Canada.
-
The POULVAC® E. coli vaccine for poultry, which was the first
E. coli vaccine in Europe and first approved in May 2012, continues to
perform well and was recently approved for use in the Ukraine.
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 adjusted earnings per share guidance for full year
2014 and narrowed its revenue guidance toward the higher end of the
range. Full-year 2014 guidance includes:
-
Revenue of between $4.70 billion to $4.75 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. (EST) today,
during which company executives will review third 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 Nov. 4,
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.
3 This product license is conditional. Efficacy and
potency studies are in progress.
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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|
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|
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|
|
|
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|
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Third Quarter
|
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Nine Months
|
|
|
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2014
|
|
|
2013
|
|
|
% Change
|
|
2014
|
|
|
2013
|
|
|
% Change
|
|
Revenue
|
|
$
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1,210
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|
|
$
|
1,103
|
|
|
10
|
|
$
|
3,465
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|
|
$
|
3,307
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|
|
5
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(b)
|
|
434
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|
|
385
|
|
|
13
|
|
1,226
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|
|
1,203
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|
|
2
|
|
Selling, general and administrative expenses(b)
|
|
394
|
|
|
399
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|
|
(1)
|
|
1,146
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|
|
1,155
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|
|
(1)
|
|
Research and development expenses(b)
|
|
93
|
|
|
93
|
|
|
—
|
|
272
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|
|
278
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|
|
(2)
|
|
Amortization of intangible assets(c)
|
|
16
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|
|
15
|
|
|
7
|
|
46
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|
|
45
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|
|
2
|
|
Restructuring charges and certain acquisition-related costs
|
|
2
|
|
|
3
|
|
|
(33)
|
|
10
|
|
|
(10
|
)
|
|
*
|
|
Interest expense
|
|
29
|
|
|
29
|
|
|
—
|
|
87
|
|
|
83
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|
|
5
|
|
Other (income)/deductions–net
|
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4
|
|
|
(6
|
)
|
|
*
|
|
13
|
|
|
(11
|
)
|
|
*
|
|
Income before provision for taxes on income
|
|
238
|
|
|
185
|
|
|
29
|
|
665
|
|
|
564
|
|
|
18
|
|
Provision for taxes on income
|
|
71
|
|
|
54
|
|
|
31
|
|
204
|
|
|
165
|
|
|
24
|
|
Net income before allocation to noncontrolling interests
|
|
167
|
|
|
131
|
|
|
27
|
|
461
|
|
|
399
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|
|
16
|
|
Less: Net income attributable to noncontrolling interests
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|
1
|
|
|
—
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|
|
*
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|
4
|
|
|
—
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|
|
*
|
|
Net income attributable to Zoetis
|
|
$
|
166
|
|
|
$
|
131
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|
|
27
|
|
$
|
457
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|
|
$
|
399
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|
|
15
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|
|
|
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|
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|
|
Earnings per share—basic
|
|
$
|
0.33
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|
|
$
|
0.26
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|
|
27
|
|
$
|
0.91
|
|
|
$
|
0.80
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|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Earnings per share—diluted
|
|
$
|
0.33
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|
|
$
|
0.26
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|
|
27
|
|
$
|
0.91
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|
|
$
|
0.80
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|
|
14
|
|
|
|
|
|
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Weighted-average shares used to calculate earnings per share (in
thousands)
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Basic
|
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501,453
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|
500,000
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|
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|
|
500,887
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500,000
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Diluted
|
|
502,445
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500,354
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|
|
|
|
501,610
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|
|
500,227
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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 nine months ended September 28, 2014 and September 29, 2013.
Subsidiaries operating outside the United States are included for
the three and nine months ended August 24, 2014 and August 25, 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 September 28, 2014
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|
GAAP Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenue
|
|
$
|
1,210
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,210
|
|
|
Cost of sales(b)
|
|
434
|
|
|
(2
|
)
|
|
—
|
|
|
(3
|
)
|
|
429
|
|
|
Gross profit
|
|
776
|
|
|
2
|
|
|
—
|
|
|
3
|
|
|
781
|
|
|
Selling, general and administrative expenses(b)
|
|
394
|
|
|
1
|
|
|
—
|
|
|
(29
|
)
|
|
366
|
|
|
Research and development expenses(b)
|
|
93
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
93
|
|
|
Amortization of intangible assets(c)
|
|
16
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
2
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
Interest expense
|
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
Other (income)/deductions–net
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(1
|
)
|
|
Income before provision for taxes on income
|
|
238
|
|
|
13
|
|
|
1
|
|
|
38
|
|
|
290
|
|
|
Provision for taxes on income
|
|
71
|
|
|
4
|
|
|
1
|
|
|
6
|
|
|
82
|
|
|
Income from continuing operations
|
|
167
|
|
|
9
|
|
|
—
|
|
|
32
|
|
|
208
|
|
|
Net income attributable to noncontrolling interests
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Net income attributable to Zoetis
|
|
166
|
|
|
9
|
|
|
—
|
|
|
32
|
|
|
207
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
0.33
|
|
|
0.02
|
|
|
—
|
|
|
0.06
|
|
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended September 29, 2013
|
|
|
|
GAAP
Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenue
|
|
$
|
1,103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,103
|
|
|
Cost of sales(b)
|
|
385
|
|
|
—
|
|
|
2
|
|
|
(4
|
)
|
|
383
|
|
|
Gross profit
|
|
718
|
|
|
—
|
|
|
(2
|
)
|
|
4
|
|
|
720
|
|
|
Selling, general and administrative expenses(b)
|
|
399
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
359
|
|
|
Research and development expenses(b)
|
|
93
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
91
|
|
|
Amortization of intangible assets(c)
|
|
15
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
3
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
Interest expense
|
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
Other (income)/deductions–net
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(7
|
)
|
|
Income before provision for taxes on income
|
|
185
|
|
|
12
|
|
|
1
|
|
|
46
|
|
|
244
|
|
|
Provision for taxes on income
|
|
54
|
|
|
4
|
|
|
1
|
|
|
13
|
|
|
72
|
|
|
Net income attributable to Zoetis
|
|
131
|
|
|
8
|
|
|
—
|
|
|
33
|
|
|
172
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
0.26
|
|
|
0.02
|
|
|
—
|
|
|
0.06
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
Nine Months ended September 28, 2014
|
|
|
|
GAAP
Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenue
|
|
$
|
3,465
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,465
|
|
|
Cost of sales(b)
|
|
1,226
|
|
|
(3
|
)
|
|
—
|
|
|
(14
|
)
|
|
1,209
|
|
|
Gross profit
|
|
2,239
|
|
|
3
|
|
|
—
|
|
|
14
|
|
|
2,256
|
|
|
Selling, general and administrative expenses(b)
|
|
1,146
|
|
|
1
|
|
|
—
|
|
|
(90
|
)
|
|
1,057
|
|
|
Research and development expenses(b)
|
|
272
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
271
|
|
|
Amortization of intangible assets(c)
|
|
46
|
|
|
(35
|
)
|
|
—
|
|
|
—
|
|
|
11
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
10
|
|
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
|
—
|
|
|
Interest expense
|
|
87
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
87
|
|
|
Other (income)/deductions–net
|
|
13
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(5
|
)
|
|
Income before provision for taxes on income
|
|
665
|
|
|
38
|
|
|
5
|
|
|
127
|
|
|
835
|
|
|
Provision for taxes on income
|
|
204
|
|
|
13
|
|
|
2
|
|
|
25
|
|
|
244
|
|
|
Income from continuing operations
|
|
461
|
|
|
25
|
|
|
3
|
|
|
102
|
|
|
591
|
|
|
Net income attributable to noncontrolling interests
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Net income attributable to Zoetis
|
|
457
|
|
|
25
|
|
|
3
|
|
|
102
|
|
|
587
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
0.91
|
|
|
0.05
|
|
|
0.01
|
|
|
0.20
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months ended September 29, 2013
|
|
|
|
GAAP
Reported(1)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(2)
|
|
Certain
Significant
Items(3)
|
|
Non-GAAP
Adjusted(a)
|
|
Revenue
|
|
$
|
3,307
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,307
|
|
|
Cost of sales(b)
|
|
1,203
|
|
|
(2
|
)
|
|
—
|
|
|
(20
|
)
|
|
1,181
|
|
|
Gross profit
|
|
2,104
|
|
|
2
|
|
|
—
|
|
|
20
|
|
|
2,126
|
|
|
Selling, general and administrative expenses(b)
|
|
1,155
|
|
|
—
|
|
|
—
|
|
|
(135
|
)
|
|
1,020
|
|
|
Research and development expenses(b)
|
|
278
|
|
|
(1
|
)
|
|
—
|
|
|
(5
|
)
|
|
272
|
|
|
Amortization of intangible assets(c)
|
|
45
|
|
|
(34
|
)
|
|
—
|
|
|
—
|
|
|
11
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
(10
|
)
|
|
—
|
|
|
(17
|
)
|
|
27
|
|
|
—
|
|
|
Interest expense
|
|
83
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|
Other (income)/deductions–net
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
3
|
|
|
(8
|
)
|
|
Income before provision for taxes on income
|
|
564
|
|
|
37
|
|
|
17
|
|
|
130
|
|
|
748
|
|
|
Provision for taxes on income
|
|
165
|
|
|
12
|
|
|
6
|
|
|
36
|
|
|
219
|
|
|
Net income attributable to Zoetis
|
|
399
|
|
|
25
|
|
|
11
|
|
|
94
|
|
|
529
|
|
|
Earnings per common share attributable to Zoetis–diluted(d)
|
|
0.80
|
|
|
0.05
|
|
|
0.02
|
|
|
0.19
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 nine months ended September 28, 2014 and September 29, 2013.
Subsidiaries operating outside the United States are included for
the three and nine months ended August 24, 2014 and August 25, 2013.
|
|
(2)
|
|
Acquisition-related costs include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Integration costs(a)
|
|
|
$
|
1
|
|
|
|
$
|
1
|
|
|
|
$
|
5
|
|
|
|
$
|
16
|
|
|
Restructuring charges(b)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Total acquisition-related costs—pre-tax
|
|
|
1
|
|
|
|
1
|
|
|
|
5
|
|
|
|
17
|
|
|
Income taxes(c)
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
6
|
|
|
Total acquisition-related costs—net of tax
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
3
|
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 nine months ended
September 28, 2014. Included in Cost of sales ($2 million income)
and Restructuring charges and certain acquisition-related costs ($3
million) for the three months ended September 29, 2013. Included in
Restructuring charges and certain acquisition-related costs for the
nine months ended September 29, 2013.
|
|
(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:
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2013
|
|
|
Restructuring charges(a)
|
|
|
$
|
1
|
|
|
|
$
|
—
|
|
|
|
$
|
4
|
|
|
|
$
|
(27
|
)
|
|
Implementation costs and additional depreciation—asset restructuring(b)
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
3
|
|
|
Certain asset impairment charges(c)
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
1
|
|
|
Net gain on sale of assets(d)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
Stand-up costs(e)
|
|
|
32
|
|
|
|
41
|
|
|
|
106
|
|
|
|
152
|
|
|
Other(f)
|
|
|
(1
|
)
|
|
|
5
|
|
|
|
13
|
|
|
|
7
|
|
|
Total certain significant items—pre-tax
|
|
|
38
|
|
|
|
46
|
|
|
|
127
|
|
|
|
130
|
|
|
Income taxes(g)
|
|
|
6
|
|
|
|
13
|
|
|
|
25
|
|
|
|
36
|
|
|
Total certain significant items—net of tax
|
|
|
$
|
32
|
|
|
|
$
|
33
|
|
|
|
$
|
102
|
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents restructuring charges incurred for our
cost-reduction/productivity initiatives. For the three and nine
months ended September 28, 2014, represents employee severance costs
in Europe. For the nine months ended September 29, 2013, primarily
represents 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
nine months ended September 28, 2014. Included in Cost of sales ($1
million) and Selling, general and administrative expenses ($2
million) for the nine months ended September 29, 2013.
|
|
(c)
|
|
Included in Other (income)/deductions—net. For the three and nine
months ended September 28, 2014, represents an impairment charge
related to an IPR&D project acquired with the FDAH acquisition in
2009.
|
|
(d)
|
|
Included in Other (income)/deductions—net. For the nine months ended
September 28, 2014, represents the Zoetis portion of a net gain on
the sale of land by our Taiwan joint venture. For the nine months
ended September 29, 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.
|
|
(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. Included
in Cost of sales ($3 million and $14 million), Selling, general and
administrative expenses ($29 million and $90 million), and Other
(income)/deductions—net ($0 million and $2 million) for the three
and nine months ended September 28, 2014, respectively. Included in
Cost of sales ($3 million and $18 million), Selling, general and
administrative expenses ($38 million and $129 million), and Research
and development expenses ($0 million and $5 million) for the three
and nine months ended September 29, 2013, respectively.
|
|
(f)
|
|
For the nine months ended September 28, 2014, primarily includes a
charge associated with a commercial settlement in Mexico ($13
million), partially offset by the insurance recovery ($1 million
income). The nine months ended September 28, 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). For
the three and nine months ended September 29, 2013, primarily
includes litigation-related charges ($5 million) and charges
related to transitional manufacturing purchase agreements
associated with divestitures ($1 million).
|
|
(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
|
|
|
|
Third Quarter
|
|
(Favorable)/Unfavorable
|
|
|
|
2014
|
|
|
2013
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational
|
|
Adjusted cost of sales
|
|
$
|
429
|
|
|
$
|
383
|
|
|
12
|
%
|
|
|
(1
|
)%
|
|
13
|
%
|
|
as a percent of revenue
|
|
35.5
|
%
|
|
34.7
|
%
|
|
NA
|
|
|
NA
|
|
NA
|
|
Adjusted SG&A expenses
|
|
366
|
|
|
359
|
|
|
2
|
%
|
|
|
—
|
%
|
|
2
|
%
|
|
Adjusted R&D expenses
|
|
93
|
|
|
91
|
|
|
2
|
%
|
|
|
2
|
%
|
|
—
|
%
|
|
Adjusted net income attributable to Zoetis
|
|
207
|
|
|
172
|
|
|
20
|
%
|
|
|
(1
|
)%
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
Nine Months
|
|
(Favorable)/Unfavorable
|
|
|
|
2014
|
|
|
2013
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational
|
|
Adjusted cost of sales
|
|
$
|
1,209
|
|
|
$
|
1,181
|
|
|
2
|
%
|
|
|
(3
|
)%
|
|
5
|
%
|
|
as a percent of revenue
|
|
34.9
|
%
|
|
35.7
|
%
|
|
NA
|
|
|
NA
|
|
NA
|
|
Adjusted SG&A expenses
|
|
1,057
|
|
|
1,020
|
|
|
4
|
%
|
|
|
(1
|
)%
|
|
5
|
%
|
|
Adjusted R&D expenses
|
|
271
|
|
|
272
|
|
|
—
|
%
|
|
|
—
|
%
|
|
—
|
%
|
|
Adjusted net income attributable to Zoetis
|
|
587
|
|
|
529
|
|
|
11
|
%
|
|
|
(2
|
)%
|
|
13
|
%
|
|
|
|
|
|
(a)
|
|
Adjusted cost of sales, adjusted selling, general, and
administrative (SG&A) expenses, adjusted research and development
(R&D) expenses, and adjusted net income attributable to Zoetis 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 nine months ended September
28, 2014 and September 29, 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
|
|
|
$4,700 to $4,750 million
|
|
Adjusted cost of sales as a percentage of revenue(a)
|
|
|
Approximately 35.5%
|
|
Adjusted SG&A expenses(a)
|
|
|
$1,460 to $1,480 million
|
|
Adjusted R&D expenses(a)
|
|
|
$385 to $395 million
|
|
Adjusted interest expense and other (income)/deductions(a)
|
|
|
Approximately $110 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
|
|
|
$180 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
|
|
|
|
~(135 - 145)
|
|
|
~(0.27 - 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)
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
% Change
|
|
|
|
2014
|
|
|
2013
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
790
|
|
|
$
|
702
|
|
|
13
|
%
|
|
|
—
|
%
|
|
13
|
%
|
|
Companion Animal
|
|
408
|
|
|
387
|
|
|
5
|
%
|
|
|
—
|
%
|
|
5
|
%
|
|
Contract Manufacturing
|
|
12
|
|
|
14
|
|
|
(14
|
)%
|
|
|
(3
|
)%
|
|
(11
|
)%
|
|
Total Revenue
|
|
$
|
1,210
|
|
|
$
|
1,103
|
|
|
10
|
%
|
|
|
—
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
308
|
|
|
$
|
275
|
|
|
12
|
%
|
|
|
—
|
%
|
|
12
|
%
|
|
Companion Animal
|
|
224
|
|
|
220
|
|
|
2
|
%
|
|
|
—
|
%
|
|
2
|
%
|
|
Total U.S. Revenue
|
|
$
|
532
|
|
|
$
|
495
|
|
|
7
|
%
|
|
|
—
|
%
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EuAfME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
199
|
|
|
$
|
174
|
|
|
14
|
%
|
|
|
1
|
%
|
|
13
|
%
|
|
Companion Animal
|
|
94
|
|
|
82
|
|
|
15
|
%
|
|
|
4
|
%
|
|
11
|
%
|
|
Total EuAfME Revenue
|
|
$
|
293
|
|
|
$
|
256
|
|
|
14
|
%
|
|
|
2
|
%
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
146
|
|
|
$
|
129
|
|
|
13
|
%
|
|
|
(3
|
)%
|
|
16
|
%
|
|
Companion Animal
|
|
48
|
|
|
42
|
|
|
14
|
%
|
|
|
(5
|
)%
|
|
19
|
%
|
|
Total CLAR Revenue
|
|
$
|
194
|
|
|
$
|
171
|
|
|
13
|
%
|
|
|
(4
|
)%
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
137
|
|
|
$
|
124
|
|
|
10
|
%
|
|
|
1
|
%
|
|
9
|
%
|
|
Companion Animal
|
|
42
|
|
|
43
|
|
|
(2
|
)%
|
|
|
(2
|
)%
|
|
—
|
%
|
|
Total APAC Revenue
|
|
$
|
179
|
|
|
$
|
167
|
|
|
7
|
%
|
|
|
—
|
%
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
$
|
437
|
|
|
$
|
387
|
|
|
13
|
%
|
|
|
—
|
%
|
|
13
|
%
|
|
Swine
|
|
179
|
|
|
154
|
|
|
16
|
%
|
|
|
(1
|
)%
|
|
17
|
%
|
|
Poultry
|
|
147
|
|
|
137
|
|
|
7
|
%
|
|
|
—
|
%
|
|
7
|
%
|
|
Other
|
|
27
|
|
|
24
|
|
|
13
|
%
|
|
|
—
|
%
|
|
13
|
%
|
|
Total Livestock Revenue
|
|
$
|
790
|
|
|
$
|
702
|
|
|
13
|
%
|
|
|
—
|
%
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
$
|
38
|
|
|
$
|
37
|
|
|
3
|
%
|
|
|
1
|
%
|
|
2
|
%
|
|
Dogs and Cats
|
|
370
|
|
|
350
|
|
|
6
|
%
|
|
|
—
|
%
|
|
6
|
%
|
|
Total Companion Animal Revenue
|
|
$
|
408
|
|
|
$
|
387
|
|
|
5
|
%
|
|
|
—
|
%
|
|
5
|
%
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
% Change
|
|
|
|
2014
|
|
|
2013
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
2,199
|
|
|
$
|
2,072
|
|
|
6
|
%
|
|
|
(2
|
)%
|
|
8
|
%
|
|
Companion Animal
|
|
1,227
|
|
|
1,198
|
|
|
2
|
%
|
|
|
(1
|
)%
|
|
3
|
%
|
|
Contract Manufacturing
|
|
39
|
|
|
37
|
|
|
5
|
%
|
|
|
3
|
%
|
|
2
|
%
|
|
Total Revenue
|
|
$
|
3,465
|
|
|
$
|
3,307
|
|
|
5
|
%
|
|
|
(1
|
)%
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
795
|
|
|
$
|
724
|
|
|
10
|
%
|
|
|
—
|
%
|
|
10
|
%
|
|
Companion Animal
|
|
675
|
|
|
662
|
|
|
2
|
%
|
|
|
—
|
%
|
|
2
|
%
|
|
Total U.S. Revenue
|
|
$
|
1,470
|
|
|
$
|
1,386
|
|
|
6
|
%
|
|
|
—
|
%
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EuAfME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
573
|
|
|
$
|
547
|
|
|
5
|
%
|
|
|
1
|
%
|
|
4
|
%
|
|
Companion Animal
|
|
274
|
|
|
254
|
|
|
8
|
%
|
|
|
4
|
%
|
|
4
|
%
|
|
Total EuAfME Revenue
|
|
$
|
847
|
|
|
$
|
801
|
|
|
6
|
%
|
|
|
2
|
%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
437
|
|
|
$
|
421
|
|
|
4
|
%
|
|
|
(9
|
)%
|
|
13
|
%
|
|
Companion Animal
|
|
139
|
|
|
134
|
|
|
4
|
%
|
|
|
(8
|
)%
|
|
12
|
%
|
|
Total CLAR Revenue
|
|
$
|
576
|
|
|
$
|
555
|
|
|
4
|
%
|
|
|
(8
|
)%
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
$
|
394
|
|
|
$
|
380
|
|
|
4
|
%
|
|
|
(3
|
)%
|
|
7
|
%
|
|
Companion Animal
|
|
139
|
|
|
148
|
|
|
(6
|
)%
|
|
|
(5
|
)%
|
|
(1
|
)%
|
|
Total APAC Revenue
|
|
$
|
533
|
|
|
$
|
528
|
|
|
1
|
%
|
|
|
(4
|
)%
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
$
|
1,207
|
|
|
$
|
1,132
|
|
|
7
|
%
|
|
|
(2
|
)%
|
|
9
|
%
|
|
Swine
|
|
496
|
|
|
463
|
|
|
7
|
%
|
|
|
(2
|
)%
|
|
9
|
%
|
|
Poultry
|
|
428
|
|
|
412
|
|
|
4
|
%
|
|
|
(3
|
)%
|
|
7
|
%
|
|
Other
|
|
68
|
|
|
65
|
|
|
5
|
%
|
|
|
(2
|
)%
|
|
7
|
%
|
|
Total Livestock Revenue
|
|
$
|
2,199
|
|
|
$
|
2,072
|
|
|
6
|
%
|
|
|
(2
|
)%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
$
|
127
|
|
|
$
|
124
|
|
|
2
|
%
|
|
|
(2
|
)%
|
|
4
|
%
|
|
Dogs and Cats
|
|
1,100
|
|
|
1,074
|
|
|
2
|
%
|
|
|
(1
|
)%
|
|
3
|
%
|
|
Total Companion Animal Revenue
|
|
$
|
1,227
|
|
|
$
|
1,198
|
|
|
2
|
%
|
|
|
(1
|
)%
|
|
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)
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
% Change
|
|
|
|
2014
|
|
|
2013
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational
|
|
U.S.
|
|
$
|
313
|
|
|
$
|
285
|
|
|
10
|
%
|
|
|
—
|
%
|
|
10
|
%
|
|
EuAfME
|
|
116
|
|
|
90
|
|
|
29
|
%
|
|
|
1
|
%
|
|
28
|
%
|
|
CLAR
|
|
68
|
|
|
56
|
|
|
21
|
%
|
|
|
2
|
%
|
|
19
|
%
|
|
APAC
|
|
71
|
|
|
57
|
|
|
25
|
%
|
|
|
1
|
%
|
|
24
|
%
|
|
Total Reportable Segments
|
|
568
|
|
|
488
|
|
|
16
|
%
|
|
|
—
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(b)
|
|
(75
|
)
|
|
(78
|
)
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(c)
|
|
(145
|
)
|
|
(139
|
)
|
|
4
|
%
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments(d)
|
|
(13
|
)
|
|
(12
|
)
|
|
8
|
%
|
|
|
|
|
|
|
|
|
Acquisition-related costs(e)
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
%
|
|
|
|
|
|
|
|
|
Certain significant items(f)
|
|
(38
|
)
|
|
(46
|
)
|
|
(17
|
)%
|
|
|
|
|
|
|
|
|
Other unallocated(g)
|
|
(58
|
)
|
|
(27
|
)
|
|
*
|
|
|
|
|
|
|
|
|
Total Earnings(h)
|
|
$
|
238
|
|
|
$
|
185
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
% Change
|
|
|
|
2014
|
|
|
2013
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational
|
|
U.S.
|
|
$
|
849
|
|
|
$
|
773
|
|
|
10
|
%
|
|
|
—
|
%
|
|
10
|
%
|
|
EuAfME
|
|
331
|
|
|
297
|
|
|
11
|
%
|
|
|
—
|
%
|
|
11
|
%
|
|
CLAR
|
|
220
|
|
|
186
|
|
|
18
|
%
|
|
|
3
|
%
|
|
15
|
%
|
|
APAC
|
|
209
|
|
|
203
|
|
|
3
|
%
|
|
|
(7
|
)%
|
|
10
|
%
|
|
Total Reportable Segments
|
|
1,609
|
|
|
1,459
|
|
|
10
|
%
|
|
|
(1
|
)%
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(b)
|
|
(221
|
)
|
|
(225
|
)
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(c)
|
|
(398
|
)
|
|
(392
|
)
|
|
2
|
%
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments(d)
|
|
(38
|
)
|
|
(37
|
)
|
|
3
|
%
|
|
|
|
|
|
|
|
|
Acquisition-related costs(e)
|
|
(5
|
)
|
|
(17
|
)
|
|
(71
|
)%
|
|
|
|
|
|
|
|
|
Certain significant items(f)
|
|
(127
|
)
|
|
(130
|
)
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
Other unallocated(g)
|
|
(155
|
)
|
|
(94
|
)
|
|
65
|
%
|
|
|
|
|
|
|
|
|
Total Earnings(h)
|
|
$
|
665
|
|
|
$
|
564
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not meaningful
|
|
|
|
|
|
(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.
|
Media Contacts:
Bill Price, 973-443-2742
[email protected]
or
Elinore White, 973-443-2835
[email protected]
or
Investor Contact:
John O'Connor, 973-822-7088