- For Third Quarter 2016, Zoetis Reports Revenue of $1.2 Billion, Growing 2%, and Net Income of $239 Million, or $0.48 per Diluted Share, Growing 26% on a Reported Basis
- Reports Adjusted Net Income of $258 Million, or Adjusted Diluted EPS of $0.52, for Third Quarter 2016
- Delivers 4% Operational Growth in Revenue and 6% Operational Growth in Adjusted Net Income, Excluding Foreign Exchange, for Third Quarter 2016
- Updates Full Year 2016 Revenue Guidance to $4.850 - $4.900 Billion and Increases Diluted EPS to $1.66 - $1.75 on a Reported Basis, or $1.91 - $1.96 on an Adjusted Basis
- Updates Full Year 2017 Revenue Guidance to $5.150 - $5.275 Billion, with Diluted EPS of $2.10 - $2.22 on a Reported Basis, or $2.28 - $2.38 on an Adjusted Basis
Zoetis
Inc. (NYSE:ZTS) today reported its financial results for the third
quarter of 2016 and updated its guidance for full year 2016 and 2017.
The company reported revenue of $1.2 billion for the third quarter of
2016, an increase of 2% compared with the third quarter of 2015. Net
income for the third quarter of 2016 was $239 million, or $0.48 per
diluted share, an increase of 26% to both on a reported basis.
Adjusted net income1 for the third quarter of 2016 was $258
million, or $0.52 per diluted share, an increase of 2% and 4%,
respectively. Adjusted net income for the third quarter of 2016 excludes
the net impact of $19 million for purchase accounting adjustments,
acquisition-related costs and certain significant items.
On an operational2 basis, revenue for the third quarter of
2016 increased 4%, excluding the impact of foreign currency. Adjusted
net income for the third quarter of 2016 increased 6% operationally,
excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“In the third quarter, we grew revenue 4% operationally, with particular
strength in our companion animal portfolio due to increased global sales
of APOQUEL and other new products,” said Zoetis Chief Executive Officer
Juan Ramón Alaix. “The livestock portfolio also showed positive
operational growth in the quarter, excluding the impact of product
rationalizations -- a testament to the value of our diversification.”
“Our operational efficiency initiative as well as recent product
launches are having clear benefits on our profitability, while we
continue to invest in our business to sustain and grow our market
leadership over the long term,” said Alaix.
“We continue to deliver solid operational revenue growth, while reducing
our costs and improving margins. We are effectively implementing our
operational efficiency initiative and are on target to exceed $300
million in savings in 2017,” said Glenn David, Executive Vice President
and Chief Financial Officer of Zoetis. “We remain committed to
allocating resources to the most promising opportunities and returning
excess capital to our shareholders. Based on our strong performance
through the first nine months, we are raising our earnings guidance for
2016 and improving our earnings guidance for 2017 despite the impact of
foreign currency.”
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across two
regional segments: the United States (U.S.) and International. Within
these segments, the company delivers a diverse portfolio of products for
livestock and companion animals tailored to local trends and customer
needs. In the third quarter of 2016:
-
Revenue in the U.S. segment was $640 million, an increase of 1%
compared with the third quarter of 2015. Sales of companion animal
products grew 5%, driven by increased sales of APOQUEL® and
several other new product launches, which were partially offset by
declines in the company’s surgical fluid products. Sales of livestock
products declined 2%, primarily due to product rationalizations as
part of the company’s operational efficiency initiative, which
impacted both poultry and swine. Swine also declined due to increased
competition. The declines were partially offset by increased sales of
cattle products due to promotional activities.
-
Revenue in the International segment was $585 million, an
increase of 3% on a reported basis and an increase of 6%
operationally, compared with the third quarter of 2015. Growth was
partially offset by product rationalizations as a result of the
company’s operational efficiency initiative and business changes in
Venezuela and India. Sales of companion animal products grew 14% on a
reported basis and 15% operationally, driven primarily from increased
sales of APOQUEL, due in part to initial customer purchases in Japan,
and other new product launches. In addition, sales grew in China,
primarily in the vaccine portfolio, due to increased field force
expansions and positive medicalization trends. Sales of livestock
products declined 2% on a reported basis and grew 2% operationally,
driven primarily by the acquisition of PHARMAQ, with sales primarily
in Chile and Norway. Growth also resulted from an increase in sales of
cattle products in Brazil and swine products in China.
Zoetis continues to drive demand and strengthen its diverse portfolio of
products through lifecycle innovations, 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 and marketing innovative medicines,
treatments and solutions for emerging diseases and unmet customer needs.
As part of the company’s focus on lifecycle innovation, Zoetis received
approvals for new indications and formulations of key livestock products.
-
For swine, the company obtained approvals in the U.S. for new
combinations of its FLUSURE XP
®
vaccine,
which now helps guard against additional flu strains threatening swine
herd health. Zoetis also expanded the breadth of its FOSTERA
®
swine vaccine franchise. In Mexico, the FOSTERA porcine reproductive
and respiratory (PRRS) vaccine received an additional approval for
reproductive protection, helping to prevent loss of piglets in utero
due to PRRS infection. The company continued to bring its FOSTERA PCV
MH vaccine to key markets with approvals in Brazil and Korea. This
combination vaccine helps protect swine from porcine
circovirus-associated disease and enzootic pneumonia caused by
Mycoplasma hyopneumoniae.
-
DRAXXIN
®
, an injectable anti-infective to
control and treat bovine respiratory disease, was approved for use in
cattle in Japan, and it received an additional approval in Canada for
use in pre-ruminating calves and veal cattle. Zoetis also obtained
approval in Japan for BOPRIVA
®, a unique vaccine
that temporarily reduces testosterone in bulls, providing farmers with
a highly effective therapy to manage aggressive behavior in cattle
herds.
Zoetis continued to grow its diagnostics business through both an
acquisition and the expansion of products into new markets.
-
In August, Zoetis acquired Scandinavian Micro Biodevices, a
pioneer in developing and manufacturing microfluidic “lab on a chip”
diagnostic analyzers and tests for veterinary point-of-care services.
The acquisition gives the company an expanded and promising pipeline
in this fast-growing segment of the animal health industry.
-
Zoetis also obtained new approvals for its WITNESS
™
,
SERELISA
®
and PROFLOK
® lines
of diagnostic test kits in new markets such as Mexico, Japan and
Korea. WITNESS diagnostic test kits help detect parvovirus in dogs.
SERELISA PRV and PROFLOK diagnostic test kits help detect Aujeszky’s
disease in swine and various diseases in poultry, respectively.
FINANCIAL GUIDANCE
Zoetis' guidance for the full year 2016 has been updated to reflect the
company’s strong performance throughout the year, the continued strength
of its business model, and its confidence in the outlook for the
remainder of the year. The company’s guidance for the full year 2016 is
the following:
-
Revenue of between $4.850 billion to $4.900 billion
-
Reported diluted EPS for the full year of between $1.66 to $1.75 per
share
-
Adjusted diluted EPS for the full year between $1.91 to $1.96 per share
Zoetis is improving its adjusted earnings guidance for 2017 despite the
negative impact of foreign currency. The company’s guidance for the full
year 2017 is as follows:
-
Revenue of between $5.150 billion to $5.275 billion
-
Reported diluted EPS for the full year of between $2.10 to $2.22 per
share
-
Adjusted diluted EPS for the full year between $2.28 to $2.38 per share
Additional guidance on other items such as expenses and tax rate is
included in the financial tables and will be discussed on the company's
conference call this morning. This guidance reflects foreign exchange
rates as of late October.
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 third quarter 2016 results,
discuss financial guidance and respond to questions from financial
analysts. Investors and the public may access the live webcast by
visiting the Zoetis website at http://investor.zoetis.com/events-presentations.
A replay of the webcast will be archived and made available on Nov. 2,
2016.
About Zoetis
Zoetis
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. Zoetis serves veterinarians, livestock producers and people
who raise and care for farm and companion animals with sales of its
products in more than 100 countries. In 2015, the company generated
annual revenue of $4.8 billion with approximately 9,000 employees. For
more information, visit
www.zoetis.com
.
1
Adjusted net income and its components and
adjusted diluted earnings per share (non-GAAP financial measures) are
defined as reported net income attributable to Zoetis and reported
diluted earnings per share, excluding purchase accounting adjustments,
acquisition-related costs and certain significant items.
2
Operational revenue growth (a non-GAAP financial
measure) is defined as revenue growth excluding the impact of foreign
exchange.
DISCLOSURE NOTICES
Forward-Looking Statements
: This
press release contains forward-looking statements, which reflect the
current views of Zoetis with respect to business plans or prospects,
future operating or financial performance, future guidance, future
operating models, expectations regarding products, future use of cash
and dividend payments, tax rate and tax regimes, changes in the tax
regimes and laws in other jurisdictions, and other future events. These
statements are not guarantees of future performance or actions.
Forward-looking statements are subject to risks and uncertainties. If
one or more of these risks or uncertainties materialize, or if
management's underlying assumptions prove to be incorrect, actual
results may differ materially from those contemplated by a
forward-looking statement. Forward-looking statements speak only as of
the date on which they are made. Zoetis expressly disclaims any
obligation to update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise. A further list
and description of risks, uncertainties and other matters can be found
in our Annual Report on Form 10-K for the fiscal year ended December 31,
2015, 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,
adjusted diluted earnings per share and operational results (which
exclude the impact of foreign exchange), to assess and analyze our
results and trends and to make financial and operational decisions. We
believe these non-GAAP financial measures are also useful to investors
because they provide greater transparency regarding our operating
performance. The non-GAAP financial measures included in this press
release should not be considered alternatives to measurements required
by GAAP, such as net income, operating income, and earnings per share,
and should not be considered measures of liquidity. These non-GAAP
financial measures are unlikely to be comparable with non-GAAP
information provided by other companies. Reconciliation of non-GAAP
financial measures and GAAP financial measures are included in the
tables accompanying this press release and are posted on our website at
www.zoetis.com
.
Internet Posting of Information
:
We routinely post information that may be important to investors in the
'Investors' section of our website at
www.zoetis.com
,
on our Facebook page at
http://www.facebook.com/zoetis
and on Twitter @zoetis. We encourage investors and potential investors
to consult our website regularly and to follow us on Facebook and
Twitter for important information about us.
|
|
|
ZOETIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)
(UNAUDITED)
(millions
of dollars, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
2016
|
|
|
2015
|
|
|
% Change
|
|
Revenue
|
|
$
|
1,241
|
|
|
$
|
1,214
|
|
|
2
|
|
$
|
3,611
|
|
|
$
|
3,491
|
|
|
3
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(b)
|
|
410
|
|
|
421
|
|
|
(3)
|
|
1,198
|
|
|
1,242
|
|
|
(4)
|
|
Selling, general and administrative expenses(b)
|
|
345
|
|
|
374
|
|
|
(8)
|
|
1,003
|
|
|
1,107
|
|
|
(9)
|
|
Research and development expenses(b)
|
|
90
|
|
|
91
|
|
|
(1)
|
|
268
|
|
|
255
|
|
|
5
|
|
Amortization of intangible assets(c)
|
|
21
|
|
|
15
|
|
|
40
|
|
64
|
|
|
45
|
|
|
42
|
|
Restructuring charges/(benefits) and certain acquisition-related
costs
|
|
4
|
|
|
13
|
|
|
(69)
|
|
(15
|
)
|
|
280
|
|
|
*
|
|
Interest expense
|
|
41
|
|
|
29
|
|
|
41
|
|
125
|
|
|
86
|
|
|
45
|
|
Other (income)/deductions–net
|
|
(3
|
)
|
|
(2
|
)
|
|
50
|
|
(29
|
)
|
|
—
|
|
|
*
|
|
Income before provision for taxes on income
|
|
333
|
|
|
273
|
|
|
22
|
|
997
|
|
|
476
|
|
|
*
|
|
Provision for taxes on income
|
|
96
|
|
|
83
|
|
|
16
|
|
332
|
|
|
157
|
|
|
*
|
|
Net income before allocation to noncontrolling interests
|
|
237
|
|
|
190
|
|
|
25
|
|
665
|
|
|
319
|
|
|
*
|
|
Less: Net (loss)/income attributable to noncontrolling interests
|
|
(2
|
)
|
|
1
|
|
|
*
|
|
(2
|
)
|
|
2
|
|
|
*
|
|
Net income attributable to Zoetis
|
|
$
|
239
|
|
|
$
|
189
|
|
|
26
|
|
$
|
667
|
|
|
$
|
317
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—basic
|
|
$
|
0.48
|
|
|
$
|
0.38
|
|
|
26
|
|
$
|
1.34
|
|
|
$
|
0.63
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share—diluted
|
|
$
|
0.48
|
|
|
$
|
0.38
|
|
|
26
|
|
$
|
1.34
|
|
|
$
|
0.63
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to calculate earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
495.2
|
|
|
499.2
|
|
|
|
|
496.3
|
|
|
500.2
|
|
|
|
|
Diluted
|
|
497.9
|
|
|
501.7
|
|
|
|
|
498.8
|
|
|
502.5
|
|
|
|
|
|
|
* Calculation not meaningful.
|
|
|
|
(a)
|
|
The condensed consolidated statements of income present the three
and nine months ended October 2, 2016, and September 27, 2015.
Subsidiaries operating outside the United States are included for
the three and nine months ended August 28, 2016 and August 23, 2015.
|
|
|
|
|
|
(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 finite-lived acquired
intangible assets that are associated with a single function is
included in Cost of sales, Selling, general and administrative
expenses or Research and development expenses, as
appropriate.
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP
ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions
of dollars, except per share data)
|
|
|
|
|
|
|
Quarter ended October 2, 2016
|
|
|
|
|
GAAP
Reported
(a)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(1)
|
|
Certain
Significant
Items(2)
|
|
Non-GAAP
Adjusted(b)
|
|
Cost of sales(c)
|
|
|
$
|
410
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
403
|
|
|
Gross profit
|
|
|
831
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
838
|
|
|
Selling, general and administrative expenses(c)
|
|
|
345
|
|
|
(1
|
)
|
|
—
|
|
|
(11
|
)
|
|
333
|
|
|
Research and development expenses(c)
|
|
|
90
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
Amortization of intangible assets(d)
|
|
|
21
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring charges/(benefits) and certain acquisition-related
costs
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
|
(4
|
)
|
|
—
|
|
|
Other (income)/deductions–net
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(4
|
)
|
|
Income before provision for taxes on income
|
|
|
333
|
|
|
25
|
|
|
—
|
|
|
16
|
|
|
374
|
|
|
Provision for taxes on income
|
|
|
96
|
|
|
7
|
|
|
—
|
|
|
15
|
|
|
118
|
|
|
Net income attributable to Zoetis
|
|
|
239
|
|
|
18
|
|
|
—
|
|
|
1
|
|
|
258
|
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
|
0.48
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended September 27, 2015
|
|
|
|
|
GAAP
Reported
(a)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(1)
|
|
Certain
Significant
Items(2)
|
|
Non-GAAP
Adjusted(b)
|
|
Cost of sales(c)
|
|
|
$
|
421
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
(10
|
)
|
|
$
|
409
|
|
|
Gross profit
|
|
|
793
|
|
|
2
|
|
|
—
|
|
|
10
|
|
|
805
|
|
|
Selling, general and administrative expenses(c)
|
|
|
374
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
346
|
|
|
Research and development expenses(c)
|
|
|
91
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91
|
|
|
Amortization of intangible assets(d)
|
|
|
15
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
13
|
|
|
—
|
|
|
(5
|
)
|
|
(8
|
)
|
|
—
|
|
|
Other (income)/deductions–net
|
|
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(3
|
)
|
|
Income before provision for taxes on income
|
|
|
273
|
|
|
13
|
|
|
6
|
|
|
46
|
|
|
338
|
|
|
Provision for taxes on income
|
|
|
83
|
|
|
4
|
|
|
—
|
|
|
(2
|
)
|
|
85
|
|
|
Net income attributable to Zoetis
|
|
|
189
|
|
|
9
|
|
|
6
|
|
|
48
|
|
|
252
|
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
|
0.38
|
|
|
0.02
|
|
|
0.01
|
|
|
0.09
|
|
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 October 2, 2016
|
|
|
|
|
GAAP
Reported
(a)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(1)
|
|
Certain
Significant
Items(2)
|
|
Non-GAAP
Adjusted(b)
|
|
Cost of sales(c)
|
|
|
$
|
1,198
|
|
|
$
|
(22
|
)
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
1,169
|
|
|
Gross profit
|
|
|
2,413
|
|
|
22
|
|
|
—
|
|
|
7
|
|
|
2,442
|
|
|
Selling, general and administrative expenses(c)
|
|
|
1,003
|
|
|
(4
|
)
|
|
—
|
|
|
(35
|
)
|
|
964
|
|
|
Research and development expenses(c)
|
|
|
268
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
267
|
|
|
Amortization of intangible assets(d)
|
|
|
64
|
|
|
(52
|
)
|
|
—
|
|
|
—
|
|
|
12
|
|
|
Restructuring charges/(benefits) and certain acquisition-related
costs
|
|
|
(15
|
)
|
|
—
|
|
|
(2
|
)
|
|
|
17
|
|
|
—
|
|
|
Other (income)/deductions–net
|
|
|
(29
|
)
|
|
—
|
|
|
(1
|
)
|
|
26
|
|
|
(4
|
)
|
|
Income before provision for taxes on income
|
|
|
997
|
|
|
79
|
|
|
3
|
|
|
(1
|
)
|
|
1,078
|
|
|
Provision for taxes on income
|
|
|
332
|
|
|
34
|
|
|
(1
|
)
|
|
(28
|
)
|
|
337
|
|
|
Net income attributable to Zoetis
|
|
|
667
|
|
|
45
|
|
|
4
|
|
|
27
|
|
|
743
|
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
|
1.34
|
|
|
0.09
|
|
|
0.01
|
|
|
0.05
|
|
|
1.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 27, 2015
|
|
|
|
|
GAAP
Reported
(a)
|
|
Purchase
Accounting
Adjustments
|
|
Acquisition-
Related
Costs(1)
|
|
Certain
Significant
Items(2)
|
|
Non-GAAP
Adjusted(b)
|
|
Cost of sales(c)
|
|
|
$
|
1,242
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
(35
|
)
|
|
$
|
1,200
|
|
|
Gross profit
|
|
|
2,249
|
|
|
7
|
|
|
—
|
|
|
35
|
|
|
2,291
|
|
|
Selling, general and administrative expenses(c)
|
|
|
1,107
|
|
|
—
|
|
|
—
|
|
|
(98
|
)
|
|
1,009
|
|
|
Research and development expenses(c)
|
|
|
255
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
254
|
|
|
Amortization of intangible assets(d)
|
|
|
45
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
12
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
280
|
|
|
—
|
|
|
(9
|
)
|
|
(271
|
)
|
|
—
|
|
|
Other (income)/deductions–net
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
Income before provision for taxes on income
|
|
|
476
|
|
|
41
|
|
|
11
|
|
|
406
|
|
|
934
|
|
|
Provision for taxes on income
|
|
|
157
|
|
|
14
|
|
|
(2
|
)
|
|
88
|
|
|
257
|
|
|
Net income attributable to Zoetis
|
|
|
317
|
|
|
27
|
|
|
13
|
|
|
318
|
|
|
675
|
|
|
Earnings per common share attributable to Zoetis–diluted
|
|
|
0.63
|
|
|
0.05
|
|
|
0.03
|
|
|
0.63
|
|
|
1.34
|
|
|
(a)
|
|
The condensed consolidated statements of income present the three
and nine months ended October 2, 2016, and September 27, 2015.
Subsidiaries operating outside the United States are included for
the three and nine months ended August 28, 2016 and August 23, 2015.
|
|
|
|
|
|
(b)
|
|
Non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are not, and should not be viewed as,
substitutes for U.S. GAAP net income and its components and diluted
EPS. Despite the importance of these measures to management in goal
setting and performance measurement, non-GAAP adjusted net income
and its components and non-GAAP adjusted diluted EPS are non-GAAP
financial measures that have no standardized meaning prescribed by
U.S. GAAP and, therefore, have limits in their usefulness to
investors. Because of the non-standardized definitions, non-GAAP
adjusted net income and its components and non-GAAP adjusted diluted
EPS (unlike U.S. GAAP net income and its components and diluted EPS)
may not be comparable to the calculation of similar measures of
other companies. Non-GAAP adjusted net income and its components,
and non-GAAP adjusted diluted EPS are presented solely to permit
investors to more fully understand how management assesses
performance.
|
|
|
|
|
|
(c)
|
|
Exclusive of amortization of intangible assets, except as discussed
in footnote (d) below.
|
|
|
|
|
|
(d)
|
|
Amortization expense related to finite-lived acquired intangible
assets that contribute to our ability to sell, manufacture,
research, market and distribute products, compounds and
intellectual property is included in Amortization of intangible
assets as these intangible assets benefit multiple business
functions. Amortization expense related to finite-lived acquired
intangible assets that are associated with a single function is
included in Cost of sales, Selling, general and administrative
expenses or Research and development expenses, as
appropriate.
|
|
|
|
|
|
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
|
|
|
|
Certain amounts may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
NOTES TO RECONCILIATION OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions
of dollars)
|
|
|
|
(1) Acquisition-related costs include the following:
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
2016
|
|
|
2015
|
|
|
Integration costs(a)
|
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
|
$
|
2
|
|
|
$
|
9
|
|
|
Other(b)
|
|
|
|
—
|
|
|
1
|
|
|
|
1
|
|
|
2
|
|
|
Total acquisition-related costs—pre-tax
|
|
|
|
—
|
|
|
6
|
|
|
|
3
|
|
|
11
|
|
|
Income taxes(c)
|
|
|
|
—
|
|
|
—
|
|
|
|
(1
|
)
|
|
(2
|
)
|
|
Total acquisition-related costs—net of tax
|
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
|
$
|
4
|
|
|
$
|
13
|
|
|
|
|
|
|
(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/(benefits) and
certain acquisition-related costs.
|
|
|
|
|
|
(b)
|
|
Included in Other (income)/deductions—net.
|
|
|
|
|
|
(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, as well as a tax charge related to the acquisition of
certain assets of Abbott Animal Health.
|
|
|
|
|
|
Certain amounts may reflect rounding adjustments.
|
|
|
|
|
|
(2) Certain significant items include the following:
|
|
|
|
|
|
|
Third Quarter
|
|
|
Nine Months
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
2016
|
|
|
2015
|
|
Operational efficiency initiative(a)
|
|
|
$
|
9
|
|
|
$
|
21
|
|
|
|
$
|
(36
|
)
|
|
$
|
294
|
|
Supply network strategy(b)
|
|
|
2
|
|
|
3
|
|
|
|
13
|
|
|
23
|
|
Other restructuring charges and cost-reduction/productivity
initiatives(c)
|
|
|
—
|
|
|
—
|
|
|
|
(1
|
)
|
|
—
|
|
Certain asset impairment charges(d)
|
|
|
1
|
|
|
—
|
|
|
|
1
|
|
|
2
|
|
Stand-up costs(e)
|
|
|
1
|
|
|
22
|
|
|
|
18
|
|
|
84
|
|
Other(f)
|
|
|
3
|
|
|
—
|
|
|
|
4
|
|
|
3
|
|
Total certain significant items—pre-tax
|
|
|
16
|
|
|
46
|
|
|
|
(1
|
)
|
|
406
|
|
Income taxes(g)
|
|
|
15
|
|
|
(2
|
)
|
|
|
(28
|
)
|
|
88
|
|
Total certain significant items—net of tax
|
|
|
$
|
1
|
|
|
$
|
48
|
|
|
|
$
|
27
|
|
|
$
|
318
|
|
(a)
|
|
For the three months ended October 2, 2016, represents an increase
in employee termination accruals ($3 million) and exit costs ($1
million), included in Restructuring charges/(benefits) and
certain acquisition-related costs, inventory write-offs of $1
million, included in Cost of sales, and consulting fees of
$4 million, included in Selling, general and administrative
expenses. For the nine months ended October 2, 2016,
represents a reduction in employee termination accruals ($26
million benefit) and an increase in exit costs ($4 million),
included in Restructuring charges/(benefits) and certain
acquisition-related costs, inventory write-offs of $1 million,
included in Cost of sales, accelerated depreciation of $1
million and consulting fees of $11 million, included in Selling,
general and administrative expenses, and a $27 million net
gain related to divestitures, included in Other
(income)/deductions—net.
|
|
|
|
|
|
|
|
For the three months ended September 27, 2015, includes
restructuring charges of $8 million related to asset impairments,
included in Restructuring charges/(benefits) and certain
acquisition-related costs. For the nine months ended September
27, 2015, includes restructuring charges of $261 million related
to employee termination costs ($228 million) and asset impairments
($33 million), included in Restructuring charges/(benefits) and
certain acquisition-related costs. Additionally, the three and
nine months ended September 27, 2015 include inventory write-offs
of $5 million included in Cost of sales, and consulting
fees of $8 million and $28 million, respectively, included in Selling,
general and administrative expenses.
|
|
|
|
|
|
(b)
|
|
For the three months ended October 2, 2016, represents accelerated
depreciation charges of $2 million, included in Cost of sales.
For the nine months ended October 2, 2016, represents
restructuring charges of $6 million related to employee
termination costs, included in Restructuring charges/(benefits)
and certain acquisition-related costs, and accelerated
depreciation charges of $4 million and consulting fees of $3
million, included in Cost of sales.
|
|
|
|
|
|
|
|
For the nine months ended September 27, 2015, represents
restructuring charges of $10 million related to employee
termination costs ($9 million) and asset impairments ($1 million),
included in Restructuring charges/(benefits) and certain
acquisition-related costs. Additionally, the three and nine
months ended September 27, 2015, includes consulting fees of $3
million and $13 million, respectively, included in Cost of sales.
|
|
|
|
|
|
(c)
|
|
Included in Restructuring charges/(benefits) and certain
acquisition-related costs.
|
|
|
|
|
|
(d)
|
|
For the three and nine months ended October 2, 2016, represents an
impairment of finite-lived trademarks related to a canine pain
management product. For the nine months ended September 27, 2015,
represents an impairment of IPR&D assets related to the
termination of a canine oncology project. Included in Other
(income)/deductions—net.
|
|
|
|
|
|
(e)
|
|
Represents certain nonrecurring costs related to becoming an
independent public company, such as the creation of standalone
systems and infrastructure, site separation, new branding
(including changes to the manufacturing process for required new
packaging), and certain legal registration and patent assignment
costs. For the three and nine months ended October 2, 2016,
included in Cost of sales ($3 million benefit and $1
million benefit, respectively) and Selling, general and
administrative expenses ($4 million and $19 million,
respectively).
|
|
|
|
|
|
|
|
For the three and nine months ended September 27, 2015, included
in Cost of sales ($2 million and $16 million, respectively)
and Selling, general and administrative expenses ($20
million and $68 million, respectively).
|
|
|
|
|
|
(f)
|
|
The three and nine months ended October 2, 2016, represents costs
associated with changes to our operating model in Selling,
general and administrative expenses.
|
|
|
|
|
|
|
|
The nine months ended September 27, 2015, represents charges due
to unusual investor-related activities in Selling, general and
administrative expenses.
|
|
|
|
|
|
(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. The nine months ended October 2, 2016, includes (i) a net
tax benefit of approximately $7 million related to a revaluation
of the company’s deferred tax assets and liabilities using the tax
rates expected to be in place going forward as a result of the
implementation of certain operational changes and (ii) a net tax
charge of approximately $38 million related to the impact of the
European Commission’s negative decision on the excess profits
rulings in Belgium. This net charge represents the recovery of
prior tax benefits for the periods 2013 through 2015 offset by the
revaluation of the company’s deferred tax assets and liabilities,
using the rates expected to be in place at the time of the
reversal, and does not include any benefits associated with a
successful appeal of the decision.
|
|
|
|
|
|
|
|
The nine months ended September 27, 2015, includes a net tax benefit
related to the revaluation of deferred taxes and other deferred tax
adjustments.
|
|
|
|
|
|
Certain amounts may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES AND INCOME (a)
(UNAUDITED)
(millions
of dollars)
|
|
|
|
|
|
|
|
Third Quarter
|
|
% Change
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(b)
|
|
Adjusted cost of sales
|
|
|
|
$
|
403
|
|
|
$
|
409
|
|
|
(1)%
|
|
|
1%
|
|
(2)%
|
|
as a percent of revenue
|
|
|
|
32.5
|
%
|
|
33.7
|
%
|
|
NA
|
|
|
NA
|
|
NA
|
|
Adjusted SG&A expenses
|
|
|
|
333
|
|
|
346
|
|
|
(4)%
|
|
|
(1)%
|
|
(3)%
|
|
Adjusted R&D expenses
|
|
|
|
90
|
|
|
91
|
|
|
(1)%
|
|
|
1%
|
|
(2)%
|
|
Adjusted net income attributable to Zoetis
|
|
|
|
258
|
|
|
252
|
|
|
2%
|
|
|
(4)%
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
% Change
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(b)
|
|
Adjusted cost of sales
|
|
|
|
$
|
1,169
|
|
|
$
|
1,200
|
|
|
(3)%
|
|
|
(2)%
|
|
(1)%
|
|
as a percent of revenue
|
|
|
|
32.4
|
%
|
|
34.4
|
%
|
|
NA
|
|
|
NA
|
|
NA
|
|
Adjusted SG&A expenses
|
|
|
|
964
|
|
|
1,009
|
|
|
(4)%
|
|
|
(2)%
|
|
(2)%
|
|
Adjusted R&D expenses
|
|
|
|
267
|
|
|
254
|
|
|
5%
|
|
|
(1)%
|
|
6%
|
|
Adjusted net income attributable to Zoetis
|
|
|
|
743
|
|
|
675
|
|
|
10%
|
|
|
(8)%
|
|
18%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted cost of sales, adjusted selling, general, and
administrative (SG&A) expenses, adjusted research and development
(R&D) expenses, and adjusted net income attributable to Zoetis
(non-GAAP financial measures) are defined as the corresponding
reported U.S. 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 October 2, 2016, and September 27, 2015,
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. For the corresponding GAAP line items, see Condensed
Consolidated Statements of Operations and Reconciliation of GAAP
Reported to Non-GAAP Adjusted Information.
|
|
|
|
|
|
(b)
|
|
Operational growth (a non-GAAP financial measure) is defined as
growth excluding the impact of foreign exchange.
|
|
|
|
|
|
|
|
ZOETIS INC.
2016 GUIDANCE
|
|
|
|
Selected Line Items
(millions of dollars, except per share
amounts)
|
|
|
Full Year 2016
|
|
Revenue
|
|
|
$4,850 to $4,900
|
|
Operational growth
(a)
|
|
|
4% to 5%
|
|
Adjusted cost of sales as a percentage of revenue(b)
|
|
|
Approximately 32.5% to 33%
|
|
Adjusted SG&A expenses(b)
|
|
|
$1,305 to $1,330
|
|
Adjusted R&D expenses(b)
|
|
|
$365 to $375
|
|
Adjusted interest expense and other (income)/deductions(b)
|
|
|
Approximately $165
|
|
Adjusted EBIT margin(b)
|
|
|
Approximately 32%
|
|
Effective tax rate on adjusted income(b)
|
|
|
Approximately 32%
|
|
Adjusted diluted EPS(b)
|
|
|
$1.91 to $1.96
|
|
Adjusted net income(b)
|
|
|
$955 to $980
|
|
Operational growth
(a)(c)
|
|
|
12% to 15%
|
|
Certain significant items(d) and acquisition-related costs
|
|
|
$30 to $50
|
|
|
|
|
|
The guidance reflects foreign exchange rates as of late October 2016.
Reconciliations of 2016 reported guidance to 2016 adjusted guidance
follows:
|
|
|
|
|
|
|
|
|
|
|
(millions of dollars, except per share amounts)
|
|
Reported
|
|
Certain significant
items(d) and
acquisition-related
costs
|
|
Purchase accounting
|
|
Adjusted(b)
|
|
|
|
|
|
|
Cost of sales as a percentage of revenue
|
|
~ 33.5%
|
|
(0.25%)
|
|
(0.5%)
|
|
~ 32.5% to 33%
|
|
SG&A expenses
|
|
$1,350 to $1,375
|
|
($40)
|
|
($5)
|
|
$1,305 to $1,330
|
|
R&D expenses
|
|
$365 to $375
|
|
|
|
|
|
$365 to $375
|
|
Interest expense and other (income)/deductions
|
|
~ $135
|
|
$30
|
|
|
|
~ $165
|
|
EBIT margin
|
|
~ 29% to 29.5%
|
|
0.5% to 1%
|
|
2%
|
|
~ 32%
|
|
Effective tax rate
|
|
~ 34%
|
|
(2.5%)
|
|
0.5%
|
|
~ 32%
|
|
Diluted EPS
|
|
$1.66 to $1.75
|
|
$0.09 to $0.13
|
|
$0.12
|
|
$1.91 to $1.96
|
|
Net income attributable to Zoetis
|
|
$830 to $875
|
|
$45 to $65
|
|
$60
|
|
$955 to $980
|
|
(a)
|
|
Operational growth (a non-GAAP financial measure) excludes the
impact of foreign exchange.
|
|
|
|
|
|
(b)
|
|
Adjusted net income and its components and adjusted diluted EPS are
defined as reported U.S. 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. Adjusted earnings before interest
and taxes (EBIT) is defined as reported EBIT excluding purchase
accounting adjustments, acquisition-related costs and certain
significant items. Despite the importance of these measures to
management in goal setting and performance measurement, adjusted net
income and its components and adjusted diluted EPS are non-GAAP
financial measures that have no standardized meaning prescribed by
U.S. GAAP and, therefore, have limits in their usefulness to
investors. Because of the non-standardized definitions, adjusted net
income and its components and adjusted diluted EPS (unlike U.S. GAAP
net income and its components and diluted EPS) may not be comparable
to the calculation of similar measures of other companies. Adjusted
net income and its components and adjusted diluted EPS are presented
solely to permit investors to more fully understand how management
assesses performance. Adjusted net income and its components and
adjusted diluted EPS are not, and should not be viewed as,
substitutes for U.S. GAAP net income and its components and diluted
EPS.
|
|
|
|
|
|
(c)
|
|
We do not provide a reconciliation of forward-looking non-GAAP
adjusted net income operational growth to the most directly
comparable GAAP Reported financial measure because we are unable to
calculate with reasonable certainty the foreign exchange impact of
unusual gains and losses, acquisition-related expenses, potential
future asset impairments and other certain significant items,
without unreasonable effort. The foreign exchange impacts of these
items are uncertain, depend on various factors, and could have a
material impact on GAAP Reported results for the guidance period.
|
|
|
|
|
|
(d)
|
|
Primarily includes certain nonrecurring costs related to
restructuring, net gains/losses on sales of assets, and other
charges for the operational efficiency initiative and supply network
strategy, becoming an independent public company, such as the
creation of standalone systems and infrastructure, site separation,
new branding (including changes to the manufacturing process for
required new packaging), and certain legal registration and patent
assignment costs.
|
|
|
|
|
|
|
|
ZOETIS INC.
2017 GUIDANCE
|
|
|
|
Selected Line Items
(millions of dollars, except per share
amounts)
|
|
|
Full Year 2017
|
|
Revenue
|
|
|
$5,150 to $5,275
|
|
Operational growth
(a)
|
|
|
6% to 8%
|
|
Adjusted cost of sales as a percentage of revenue(b)
|
|
|
32% to 33%
|
|
Adjusted SG&A expenses(b)
|
|
|
$1,280 to $1,340
|
|
Adjusted R&D expenses(b)
|
|
|
$360 to $380
|
|
Adjusted interest expense and other (income)/deductions(b)
|
|
|
Approximately $160
|
|
Adjusted EBIT margin(b)
|
|
|
34% to 35%
|
|
Effective tax rate on adjusted income(b)
|
|
|
Approximately 30%
|
|
Adjusted diluted EPS(b)
|
|
|
$2.28 to $2.38
|
|
Adjusted net income(b)
|
|
|
$1,135 to $1,190
|
|
Operational growth
(a)(c)
|
|
|
17% to 23%
|
|
Certain significant items(d) and acquisition-related costs
|
|
|
$30 to $50
|
|
|
|
|
|
The guidance reflects foreign exchange rates as of late October 2016.
Reconciliations of 2017 reported guidance to 2017 adjusted guidance
follows:
|
|
|
|
|
|
|
|
|
|
|
(millions of dollars. except per share amounts)
|
|
Reported
|
|
Certain significant
items(d) and
acquisition-related
costs
|
|
Purchase accounting
|
|
Adjusted(b)
|
|
|
|
|
|
|
Cost of sales as a percentage of revenue
|
|
33% to 34%
|
|
(1%)
|
|
|
|
32% to 33%
|
|
SG&A expenses
|
|
$1,290 to $1,350
|
|
($5)
|
|
($5)
|
|
$1,280 to $1,340
|
|
R&D expenses
|
|
$360 to $380
|
|
|
|
|
|
$360 to $380
|
|
Interest expense and other (income)/deductions
|
|
~ $160
|
|
|
|
|
|
~ $160
|
|
EBIT margin
|
|
~ 32% to 33%
|
|
0.5% to 1%
|
|
1.5%
|
|
34% to 35%
|
|
Effective tax rate
|
|
~ 30%
|
|
|
|
|
|
~ 30%
|
|
Diluted EPS
|
|
$2.10 to $2.22
|
|
$0.05 to $0.07
|
|
$0.11
|
|
$2.28 to $2.38
|
|
Net income attributable to Zoetis
|
|
$1,045 to $1,110
|
|
$25 to $35
|
|
$55
|
|
$1,135 to $1,190
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Operational growth (a non-GAAP financial measure) excludes the
impact of foreign exchange.
|
|
|
|
|
|
(b)
|
|
Adjusted net income and its components and adjusted diluted EPS are
defined as reported U.S. 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,
adjusted other (income)/deductions are income statement line items
prepared on the same basis, and, therefore, components of the
overall adjusted income measure. Adjusted earnings before interest
and taxes (EBIT) is defined as reported EBIT excluding purchase
accounting adjustments, acquisition-related costs and certain
significant items. Despite the importance of these measures to
management in goal setting and performance measurement, adjusted net
income and its components and adjusted diluted EPS are non-GAAP
financial measures that have no standardized meaning prescribed by
U.S. GAAP and, therefore, have limits in their usefulness to
investors. Because of the non-standardized definitions, adjusted net
income and its components and adjusted diluted EPS (unlike U.S. GAAP
net income and its components and diluted EPS) may not be comparable
to the calculation of similar measures of other companies. Adjusted
net income and its components and adjusted diluted EPS are presented
solely to permit investors to more fully understand how management
assesses performance. Adjusted net income and its components and
adjusted diluted EPS are not, and should not be viewed as,
substitutes for U.S. GAAP net income and its components and diluted
EPS.
|
|
|
|
|
|
(c)
|
|
We do not provide a reconciliation of forward-looking non-GAAP
adjusted net income operational growth to the most directly
comparable GAAP Reported financial measure because we are unable to
calculate with reasonable certainty the foreign exchange impact of
unusual gains and losses, acquisition-related expenses, potential
future asset impairments and other certain significant items,
without unreasonable effort. The foreign exchange impacts of these
items are uncertain, depend on various factors, and could have a
material impact on GAAP Reported results for the guidance period.
|
|
|
|
|
|
(d)
|
|
Primarily includes certain nonrecurring costs related to
restructuring, net gains/losses on sales of assets, and other
charges for the operational efficiency initiative and supply network
strategy, becoming an independent public company, such as the
creation of standalone systems and infrastructure, site separation,
new branding (including changes to the manufacturing process for
required new packaging), and certain legal registration and patent
assignment costs.
|
|
|
|
|
|
|
|
ZOETIS INC.
CONSOLIDATED REVENUE BY SEGMENT(a) AND
SPECIES
(UNAUDITED)
(millions of dollars)
|
|
|
|
|
|
|
Third Quarter
|
|
% Change
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(b)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
735
|
|
|
$
|
750
|
|
|
(2)%
|
|
|
(2)%
|
|
—%
|
|
Companion Animal
|
|
|
490
|
|
|
451
|
|
|
9%
|
|
|
—%
|
|
9%
|
|
Contract Manufacturing
|
|
|
16
|
|
|
13
|
|
|
23%
|
|
|
(3)%
|
|
26%
|
|
Total Revenue
|
|
|
$
|
1,241
|
|
|
$
|
1,214
|
|
|
2%
|
|
|
(2)%
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
341
|
|
|
$
|
348
|
|
|
(2)%
|
|
|
—%
|
|
(2)%
|
|
Companion Animal
|
|
|
299
|
|
|
284
|
|
|
5%
|
|
|
—%
|
|
5%
|
|
Total U.S. Revenue
|
|
|
$
|
640
|
|
|
$
|
632
|
|
|
1%
|
|
|
—%
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
394
|
|
|
$
|
402
|
|
|
(2)%
|
|
|
(4)%
|
|
2%
|
|
Companion Animal
|
|
|
191
|
|
|
167
|
|
|
14%
|
|
|
(1)%
|
|
15%
|
|
Total International Revenue
|
|
|
$
|
585
|
|
|
$
|
569
|
|
|
3%
|
|
|
(3)%
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
|
$
|
432
|
|
|
$
|
432
|
|
|
—%
|
|
|
(1)%
|
|
1%
|
|
Swine
|
|
|
145
|
|
|
163
|
|
|
(11)%
|
|
|
(2)%
|
|
(9)%
|
|
Poultry
|
|
|
111
|
|
|
132
|
|
|
(16)%
|
|
|
(2)%
|
|
(14)%
|
|
Fish
|
|
|
25
|
|
|
—
|
|
|
—%
|
|
|
—%
|
|
—%
|
|
Other
|
|
|
22
|
|
|
23
|
|
|
(4)%
|
|
|
(3)%
|
|
(1)%
|
|
Total Livestock Revenue
|
|
|
$
|
735
|
|
|
$
|
750
|
|
|
(2)%
|
|
|
(2)%
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
|
$
|
33
|
|
|
$
|
35
|
|
|
(6)%
|
|
|
(1)%
|
|
(5)%
|
|
Dogs and Cats
|
|
|
457
|
|
|
416
|
|
|
10%
|
|
|
—%
|
|
10%
|
|
Total Companion Animal Revenue
|
|
|
$
|
490
|
|
|
$
|
451
|
|
|
9%
|
|
|
—%
|
|
9%
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Note 19A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2015.
|
|
|
|
|
|
(b)
|
|
Operational revenue growth (a non-GAAP financial measure) is defined
as revenue growth excluding the impact of foreign exchange.
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
CONSOLIDATED REVENUE BY SEGMENT(a) AND
SPECIES
(UNAUDITED)
(millions of dollars)
|
|
|
|
|
|
|
Nine Months
|
|
% Change
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(b)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
2,091
|
|
|
$
|
2,155
|
|
|
(3)%
|
|
|
(5)%
|
|
2%
|
|
Companion Animal
|
|
|
1,479
|
|
|
1,299
|
|
|
14%
|
|
|
(2)%
|
|
16%
|
|
Contract Manufacturing
|
|
|
41
|
|
|
37
|
|
|
11%
|
|
|
(2)%
|
|
13%
|
|
Total Revenue
|
|
|
$
|
3,611
|
|
|
$
|
3,491
|
|
|
3%
|
|
|
(4)%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
891
|
|
|
$
|
903
|
|
|
(1)%
|
|
|
—%
|
|
(1)%
|
|
Companion Animal
|
|
|
925
|
|
|
789
|
|
|
17%
|
|
|
—%
|
|
17%
|
|
Total U.S. Revenue
|
|
|
$
|
1,816
|
|
|
$
|
1,692
|
|
|
7%
|
|
|
—%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
|
$
|
1,200
|
|
|
$
|
1,252
|
|
|
(4)%
|
|
|
(8)%
|
|
4%
|
|
Companion Animal
|
|
|
554
|
|
|
510
|
|
|
9%
|
|
|
(5)%
|
|
14%
|
|
Total International Revenue
|
|
|
$
|
1,754
|
|
|
$
|
1,762
|
|
|
—%
|
|
|
(7)%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle
|
|
|
$
|
1,175
|
|
|
$
|
1,201
|
|
|
(2)%
|
|
|
(4)%
|
|
2%
|
|
Swine
|
|
|
441
|
|
|
495
|
|
|
(11)%
|
|
|
(4)%
|
|
(7)%
|
|
Poultry
|
|
|
351
|
|
|
399
|
|
|
(12)%
|
|
|
(4)%
|
|
(8)%
|
|
Fish
|
|
|
64
|
|
|
—
|
|
|
—%
|
|
|
—%
|
|
—%
|
|
Other
|
|
|
60
|
|
|
60
|
|
|
—%
|
|
|
(4)%
|
|
4%
|
|
Total Livestock Revenue
|
|
|
$
|
2,091
|
|
|
$
|
2,155
|
|
|
(3)%
|
|
|
(5)%
|
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companion Animal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horses
|
|
|
$
|
108
|
|
|
$
|
117
|
|
|
(8)%
|
|
|
(3)%
|
|
(5)%
|
|
Dogs and Cats
|
|
|
1,371
|
|
|
1,182
|
|
|
16%
|
|
|
(2)%
|
|
18%
|
|
Total Companion Animal Revenue
|
|
|
$
|
1,479
|
|
|
$
|
1,299
|
|
|
14%
|
|
|
(2)%
|
|
16%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Note 19A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2015.
|
|
|
|
|
|
(b)
|
|
Operational revenue growth (a non-GAAP financial measure) is defined
as revenue growth excluding the impact of foreign exchange.
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
CONSOLIDATED REVENUE BY KEY INTERNATIONAL MARKETS
(UNAUDITED)
(millions
of dollars)
|
|
|
|
|
|
Third Quarter
|
|
% Change
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(a)
|
|
Total International
|
|
$
|
585
|
|
|
$
|
569
|
|
|
3%
|
|
|
(3)%
|
|
6%
|
|
Australia
|
|
42
|
|
|
40
|
|
|
5%
|
|
|
—%
|
|
5%
|
|
Brazil
|
|
56
|
|
|
54
|
|
|
4%
|
|
|
(1)%
|
|
5%
|
|
Canada
|
|
39
|
|
|
35
|
|
|
11%
|
|
|
(1)%
|
|
12%
|
|
China
|
|
33
|
|
|
30
|
|
|
10%
|
|
|
(8)%
|
|
18%
|
|
France
|
|
28
|
|
|
24
|
|
|
17%
|
|
|
(1)%
|
|
18%
|
|
Germany
|
|
29
|
|
|
27
|
|
|
7%
|
|
|
(1)%
|
|
8%
|
|
Italy
|
|
21
|
|
|
21
|
|
|
—%
|
|
|
1%
|
|
(1)%
|
|
Japan
|
|
34
|
|
|
23
|
|
|
48%
|
|
|
18%
|
|
30%
|
|
Mexico
|
|
17
|
|
|
19
|
|
|
(11)%
|
|
|
(24)%
|
|
13%
|
|
Spain
|
|
20
|
|
|
21
|
|
|
(5)%
|
|
|
—%
|
|
(5)%
|
|
United Kingdom
|
|
35
|
|
|
43
|
|
|
(19)%
|
|
|
(11)%
|
|
(8)%
|
|
Other Developed
|
|
80
|
|
|
68
|
|
|
18%
|
|
|
2%
|
|
16%
|
|
Other Emerging
|
|
151
|
|
|
164
|
|
|
(8)%
|
|
|
(5)%
|
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
% Change
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(a)
|
|
Total International
|
|
$
|
1,754
|
|
|
$
|
1,762
|
|
|
—%
|
|
|
(7)%
|
|
7%
|
|
Australia
|
|
119
|
|
|
109
|
|
|
9%
|
|
|
(6)%
|
|
15%
|
|
Brazil
|
|
162
|
|
|
185
|
|
|
(12)%
|
|
|
(18)%
|
|
6%
|
|
Canada
|
|
120
|
|
|
117
|
|
|
3%
|
|
|
(7)%
|
|
10%
|
|
China
|
|
113
|
|
|
94
|
|
|
20%
|
|
|
(7)%
|
|
27%
|
|
France
|
|
89
|
|
|
77
|
|
|
16%
|
|
|
(2)%
|
|
18%
|
|
Germany
|
|
90
|
|
|
86
|
|
|
5%
|
|
|
(2)%
|
|
7%
|
|
Italy
|
|
63
|
|
|
66
|
|
|
(5)%
|
|
|
(2)%
|
|
(3)%
|
|
Japan
|
|
96
|
|
|
75
|
|
|
28%
|
|
|
10%
|
|
18%
|
|
Mexico
|
|
56
|
|
|
55
|
|
|
2%
|
|
|
(19)%
|
|
21%
|
|
Spain
|
|
62
|
|
|
60
|
|
|
3%
|
|
|
(1)%
|
|
4%
|
|
United Kingdom
|
|
112
|
|
|
122
|
|
|
(8)%
|
|
|
(8)%
|
|
—%
|
|
Other Developed
|
|
223
|
|
|
211
|
|
|
6%
|
|
|
(3)%
|
|
9%
|
|
Other Emerging
|
|
449
|
|
|
505
|
|
|
(11)%
|
|
|
(9)%
|
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Operational revenue growth (a non-GAAP financial measure) is defined
as revenue growth excluding the impact of foreign exchange.
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
SEGMENT(a) EARNINGS
(UNAUDITED)
(millions
of dollars)
|
|
|
|
|
|
|
Third Quarter
|
|
% Change
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(b)
|
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
640
|
|
|
$
|
632
|
|
|
1%
|
|
|
—%
|
|
1%
|
|
Cost of Sales
|
|
|
137
|
|
|
147
|
|
|
(7)%
|
|
|
—%
|
|
(7)%
|
|
Gross Profit
|
|
|
503
|
|
|
485
|
|
|
4%
|
|
|
—%
|
|
4%
|
|
Gross Margin
|
|
|
78.6
|
%
|
|
76.7
|
%
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
101
|
|
|
100
|
|
|
1%
|
|
|
—%
|
|
1%
|
|
Other (income)/deductions
|
|
|
—
|
|
|
(1
|
)
|
|
(100)%
|
|
|
—%
|
|
(100)%
|
|
U.S. Earnings
|
|
|
$
|
402
|
|
|
$
|
386
|
|
|
4%
|
|
|
—%
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
585
|
|
|
$
|
569
|
|
|
3%
|
|
|
(3)%
|
|
6%
|
|
Cost of Sales
|
|
|
201
|
|
|
209
|
|
|
(4)%
|
|
|
(5)%
|
|
1%
|
|
Gross Profit
|
|
|
384
|
|
|
360
|
|
|
7%
|
|
|
(2)%
|
|
9%
|
|
Gross Margin
|
|
|
65.6
|
%
|
|
63.3
|
%
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
128
|
|
|
137
|
|
|
(7)%
|
|
|
(2)%
|
|
(5)%
|
|
Other (income)/deductions
|
|
|
—
|
|
|
4
|
|
|
(100)%
|
|
|
(122)%
|
|
22%
|
|
International Earnings
|
|
|
$
|
256
|
|
|
$
|
219
|
|
|
17%
|
|
|
—%
|
|
17%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Reportable Segments
|
|
|
$
|
658
|
|
|
$
|
605
|
|
|
9%
|
|
|
—%
|
|
9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(c)
|
|
|
(71
|
)
|
|
(73
|
)
|
|
(3)%
|
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(d)
|
|
|
(159
|
)
|
|
(138
|
)
|
|
15%
|
|
|
|
|
|
|
Purchase accounting adjustments(e)
|
|
|
(25
|
)
|
|
(13
|
)
|
|
92%
|
|
|
|
|
|
|
Acquisition-related costs(f)
|
|
|
—
|
|
|
(6
|
)
|
|
(100)%
|
|
|
|
|
|
|
Certain significant items(g)
|
|
|
(16
|
)
|
|
(46
|
)
|
|
(65)%
|
|
|
|
|
|
|
Other unallocated(h)
|
|
|
(54
|
)
|
|
(56
|
)
|
|
(4)%
|
|
|
|
|
|
|
Total Earnings
(i)
|
|
|
$
|
333
|
|
|
$
|
273
|
|
|
22%
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
For a description of each segment, see Note 19A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2015.
|
|
|
|
|
|
(b)
|
|
Operational growth (a non-GAAP financial measure) is defined as
growth excluding the impact of foreign exchange.
|
|
|
|
|
|
(c)
|
|
Other business activities reflect the research and development costs
managed by our Research and Development organization as well as our
contract manufacturing business.
|
|
|
|
|
|
(d)
|
|
Corporate includes, among other things, administration expenses,
interest expense, certain compensation and other costs not charged
to our operating segments.
|
|
|
|
|
|
(e)
|
|
Purchase accounting adjustments include certain charges related to
the amortization of fair value adjustments to inventory, intangible
assets and property, plant and equipment not charged to our
operating segments.
|
|
|
|
|
|
(f)
|
|
Acquisition-related costs can include costs associated with
acquiring and integrating newly acquired businesses, such as
transaction costs and integration costs.
|
|
|
|
|
|
(g)
|
|
Certain significant items includes substantive, unusual items that,
either as a result of their nature or size, would not be expected to
occur as part of our normal business on a regular basis. Such items
primarily include 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, costs associated with the
operational efficiency initiative and supply network strategy,
certain legal and commercial settlements, and the impact of
divestiture-related gains and losses.
|
|
|
|
|
|
(h)
|
|
Includes overhead expenses associated with our manufacturing and
supply operations not directly attributable to an operating segment,
as well as procurement costs.
|
|
|
|
|
|
(i)
|
|
Defined as income before provision for taxes on income.
|
|
|
|
|
|
Certain amounts and percentages may reflect rounding adjustments.
|
|
|
|
|
|
ZOETIS INC.
SEGMENT(a) EARNINGS
(UNAUDITED)
(millions
of dollars)
|
|
|
|
|
|
|
Nine Months
|
|
% Change
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Total
|
|
|
Foreign
Exchange
|
|
Operational(b)
|
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
1,816
|
|
|
$
|
1,692
|
|
|
7%
|
|
|
—%
|
|
7%
|
|
Cost of Sales
|
|
|
402
|
|
|
399
|
|
|
1%
|
|
|
—%
|
|
1%
|
|
Gross Profit
|
|
|
1,414
|
|
|
1,293
|
|
|
9%
|
|
|
—%
|
|
9%
|
|
Gross Margin
|
|
|
77.9
|
%
|
|
76.4
|
%
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
293
|
|
|
274
|
|
|
7%
|
|
|
—%
|
|
7%
|
|
Other (income)/deductions
|
|
|
—
|
|
|
(1
|
)
|
|
(100)%
|
|
|
—%
|
|
(100)%
|
|
U.S. Earnings
|
|
|
$
|
1,121
|
|
|
$
|
1,020
|
|
|
10%
|
|
|
—%
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
1,754
|
|
|
$
|
1,762
|
|
|
—%
|
|
|
(7)%
|
|
7%
|
|
Cost of Sales
|
|
|
598
|
|
|
638
|
|
|
(6)%
|
|
|
(8)%
|
|
2%
|
|
Gross Profit
|
|
|
1,156
|
|
|
1,124
|
|
|
3%
|
|
|
(6)%
|
|
9%
|
|
Gross Margin
|
|
|
65.9
|
%
|
|
63.8
|
%
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
361
|
|
|
423
|
|
|
(15)%
|
|
|
(6)%
|
|
(9)%
|
|
Other (income)/deductions
|
|
|
3
|
|
|
10
|
|
|
(70)%
|
|
|
(65)%
|
|
(5)%
|
|
International Earnings
|
|
|
$
|
792
|
|
|
$
|
691
|
|
|
15%
|
|
|
(6)%
|
|
21%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Reportable Segments
|
|
|
$
|
1,913
|
|
|
$
|
1,711
|
|
|
12%
|
|
|
(2)%
|
|
14%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other business activities(c)
|
|
|
(219
|
)
|
|
(208
|
)
|
|
5%
|
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate(d)
|
|
|
(499
|
)
|
|
(392
|
)
|
|
27%
|
|
|
|
|
|
|
Purchase accounting adjustments(e)
|
|
|
(79
|
)
|
|
(41
|
)
|
|
93%
|
|
|
|
|
|
|
Acquisition-related costs(f)
|
|
|
(3
|
)
|
|
(11
|
)
|
|
(73)%
|
|
|
|
|
|
|
Certain significant items(g)
|
|
|
1
|
|
|
(406
|
)
|
|
*
|
|
|
|
|
|
|
Other unallocated(h)
|
|
|
(117
|
)
|
|
(177
|
)
|
|
(34)%
|
|
|
|
|
|
|
Total Earnings
(i)
|
|
|
$
|
997
|
|
|
$
|
476
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation not meaningful.
|
|
|
|
(a)
|
|
For a description of each segment, see Note 19A to Zoetis'
consolidated financial statements included in Zoetis' Form 10-K for
the year ended December 31, 2015.
|
|
|
|
|
|
(b)
|
|
Operational growth (a non-GAAP financial measure) is defined as
growth excluding the impact of foreign exchange.
|
|
|
|
|
|
(c)
|
|
Other business activities reflect the research and development costs
managed by our Research and Development organization as well as our
contract manufacturing business.
|
|
|
|
|
|
(d)
|
|
Corporate includes, among other things, administration expenses,
interest expense, certain compensation and other costs not charged
to our operating segments.
|
|
|
|
|
|
(e)
|
|
Purchase accounting adjustments include certain charges related to
the amortization of fair value adjustments to inventory, intangible
assets and property, plant and equipment not charged to our
operating segments.
|
|
|
|
|
|
(f)
|
|
Acquisition-related costs can include costs associated with
acquiring and integrating newly acquired businesses, such as
transaction costs and integration costs.
|
|
|
|
|
|
(g)
|
|
Certain significant items includes substantive, unusual items that,
either as a result of their nature or size, would not be expected to
occur as part of our normal business on a regular basis. Such items
primarily include 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, costs associated with the
operational efficiency initiative and supply network strategy,
certain legal and commercial settlements, and the impact of
divestiture-related gains and losses.
|
|
|
|
|
|
(h)
|
|
Includes overhead expenses associated with our manufacturing and
supply operations not directly attributable to an operating segment,
as well as procurement costs.
|
|
|
|
|
|
(i)
|
|
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
or
Elinore White, 1-973-443-2835 (o)
elinore.y.white@zoetis.com
or
Investors:
Steve Frank, 1-973-822-7141 (o)
steve.frank@zoetis.com