- Reports Revenue of $1.9 Billion, Growing 26%, and Net Income
of $512 Million, or $1.07 per Diluted Share, Increasing 36% and
35%, Respectively, on a Reported Basis for Second Quarter
2021
- Reports Adjusted Net Income of $566 Million, or Adjusted
Diluted EPS of $1.19, for Second Quarter 2021
- Delivers 22% Operational Growth in Revenue and 28%
Operational Growth in Adjusted Net Income for Second Quarter
2021
- Increases Full Year 2021 Revenue Guidance to $7.625 -
$7.700 Billion and Diluted EPS of $4.09 - $4.19 on a Reported
Basis, or $4.47 - $4.55 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the second quarter of 2021 and increased its guidance for full year
2021.
The company reported revenue of $1.9 billion for the second
quarter of 2021, an increase of 26% compared with the second
quarter of 2020. Net income for the second quarter of 2021 was $512
million, or $1.07 per diluted share, an increase of 36% and 35%,
respectively, on a reported basis.
Adjusted net income1 for the second quarter of 2021 was $566
million, or $1.19 per diluted share, an increase of 33% and 34%
respectively, on a reported basis. Adjusted net income for the
second quarter of 2021 excludes the net impact of $54 million for
purchase accounting adjustments, acquisition-related costs and
certain significant items.
On an operational2 basis, revenue for the second quarter of 2021
increased 22%, excluding the impact of foreign currency. Adjusted
net income for the second quarter of 2021 increased 28%
operationally, excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
"We achieved strong results once again this quarter with 22%
operational revenue growth and 28% growth in adjusted net income,
driven by our petcare parasiticides, key dermatology products,
vaccines and diagnostics," said Kristin Peck, Chief Executive
Officer of Zoetis. "Our triple combination parasiticide Simparica
Trio® continues exceeding our launch expectations and strengthening
our overall position in this competitive market, and we remain very
positive about further uptake of our petcare innovations in
monoclonal antibodies and diagnostics."
"We are raising guidance for revenue and adjusted net income for
the full year to reflect our confidence in Zoetis and the
underlying growth drivers of our business, even while we continue
to expect more modest growth rates in the second half of 2021. We
remain in a strong position to invest both internally and
externally in the innovations, market expansion and
direct-to-consumer promotions that can support future growth," said
Peck.
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across
two segments: United States (U.S.) and International. Within these
segments, the company delivers a diverse portfolio of products for
companion animals and livestock, tailored to local trends and
customer needs. In the second quarter of 2021:
- Revenue in the U.S. segment was $1.0 billion, an
increase of 22% compared with the second quarter of 2020. This
growth is inclusive of the market recovery from COVID-19 impacts in
the same quarter of the prior year. Sales of companion animal
products increased 34%, driven by growth across the parasiticides
portfolio including Simparica Trio, our new triple combination
parasiticide for dogs. Other flea, tick and heartworm brands
contributing to growth were ProHeart® and Revolution Plus®. The
company’s key dermatology portfolio also significantly contributed
to growth across both Apoquel® and Cytopoint®. Increased sales of
companion animal vaccines and diagnostics, including the new
cloud-based Vetscan Imagyst™ platform, also added to growth. Sales
of livestock products declined 8% in the quarter. Sales of cattle
products declined as a result of a promotion that ran in the first
quarter of this year, increased generic competition and challenges
in the beef and dairy end-markets due to rising input costs. The
company’s poultry portfolio declined as a result of decreasing
disease pressure that is resulting in the expanded use of lower
cost alternatives to Zoetis’ premium products, as well as generic
competition for Zoamix®, the company’s alternative to antibiotics
in medicated feed additives. Sales of swine products were
essentially flat in the quarter.
- Revenue in the International segment was $924 million,
an increase of 31% on a reported basis and an increase of 22%
operationally compared with the second quarter of 2020. This growth
is inclusive of the market recovery from COVID-19 impacts in the
second quarter of the prior year. Sales of companion animal
products increased 51% on a reported basis and 41% operationally.
Growth resulted from increased sales of the company’s parasiticides
portfolio including the Simparica®and Revolution®/Stronghold®
franchises. Growth also resulted from sales across the broader
in-line portfolio, which benefited from increased pet ownership and
standards of care. The key dermatology platform across both Apoquel
and Cytopoint also contributed to growth. Sales of livestock
products grew 16% on a reported basis and 10% operationally. Sales
of cattle products grew due to marketing campaigns, favorable
export market conditions in Brazil, and favorable conditions in
other emerging markets. Sales of swine products grew as a result of
the continued expansion of production in key accounts in China.
Growth in the fish portfolio resulted primarily from increased
sales of the Alpha Flux® sea lice treatment product and the recent
acquisition of Fish Vet Group. The company’s poultry products
portfolio grew modestly versus the same period in the prior
year.
INVESTMENTS IN GROWTH
Zoetis continues to gain market approvals for its innovative
monoclonal antibody (mAb) therapies. Since its last quarterly
earnings announcement, the company received approval in Canada for
Solensia® (frunevetmab), the first injectable mAb for the
alleviation of pain associated with osteoarthritis (OA) in cats; it
is also approved in the European Union and Switzerland.
Additionally, Zoetis enhanced its parasiticide offering with a new
label indication in the U.S. and Canada for Simparica
(sarolaner) chewables. Approved for dogs six months of age
and older, this new claim is for the prevention of infection with
Borrelia burgdorferi — the pathogen responsible for Lyme disease --
by killing deer ticks. In China, the company’s second largest
market for revenue, Zoetis received approval for Cerenia®
(maropitant citrate) injectable for cats, which aids in the
prevention and treatment of vomiting and nausea.
On the livestock side of the business, Zoetis expanded its
Draxxin® franchise for cattle with approval of Draxxin
KP (tulathromycin ketoprofen) in the U.S. and Canada. This
injectable for the treatment of bovine respiratory disease (known
as Draxxin Plus in some European markets) is also approved in the
European Union, Australia and Mexico. It combines the antimicrobial
properties of Draxxin with the nonsteroidal anti-inflammatory
(NSAID) Ketoprofen to rapidly reduce fever in a single dose. In
poultry, the company gained approval in Canada for Poulvac®
Procerta™ HVT-IBD. Also approved in the U.S., this recombinant
vector vaccine provides early protection against Marek’s disease
and the contemporary infectious bursal disease (IBD) viruses in
chickens.
Yesterday, Zoetis also announced plans to acquire Jurox,
a privately held animal health company based in Australia. The
acquisition will provide Zoetis with future growth opportunities,
manufacturing capacity and increased capabilities in Australia, the
company’s fifth largest market, and also bring the company a range
of companion animal and livestock products primed for global
expansion.
The company remains committed to investing internally and
externally in its portfolio of new medicines, vaccines and
diagnostics; supporting market expansion plans; and using
direct-to-consumer promotions that will drive future growth.
FINANCIAL GUIDANCE
Zoetis is increasing its full year 2021 guidance, which
includes:
- Revenue between $7.625 billion and $7.700 billion
- Reported diluted EPS between $4.09 and $4.19
- Adjusted diluted EPS between $4.47 and $4.55
This guidance reflects foreign exchange rates as of mid-July.
Additional details on guidance are included in the financial tables
and will be discussed on the company's conference call this
morning.
WEBCAST & CONFERENCE CALL
DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (ET)
today, during which company executives will review second quarter
2021 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 Aug. 5, 2021.
About Zoetis
As the world’s leading animal health company, Zoetis is driven
by a singular purpose: to nurture our world and humankind by
advancing care for animals. After nearly 70 years innovating ways
to predict, prevent, detect, and treat animal illness, Zoetis
continues to stand by those raising and caring for animals
worldwide -- from livestock farmers to veterinarians and pet
owners. The company’s leading portfolio and pipeline of medicines,
vaccines, diagnostics and technologies make a difference in over
100 countries. In 2020, Zoetis generated revenue of $6.7 billion
with approximately 11,300 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 and reported diluted earnings per share,
excluding purchase accounting adjustments, acquisition-related
costs and certain significant items.
2 Operational revenue growth (a non-GAAP financial measure) is
defined as growth excluding the impact of foreign exchange.
DISCLOSURE NOTICES
Forward-Looking Statements: This
press release contains forward-looking statements, which reflect
the current views of Zoetis with respect to: business plans or
prospects, future operating or financial performance, future
guidance, future operating models; expectations regarding products,
product approvals or products under development, expected timing of
product launches; the impact of the coronavirus (COVID-19) pandemic
and any recovery therefrom on our business, suppliers, customers
and employees; expectations regarding the performance of acquired
companies and our ability to integrate new businesses; expectations
regarding the financial impact of acquisitions; future use of cash
and dividend payments; tax rate and tax regimes and any changes
thereto; and other future events. These statements are not
guarantees of future performance or actions. Forward-looking
statements are subject to risks and uncertainties. If one or more
of these risks or uncertainties materialize, or if management's
underlying assumptions prove to be incorrect, actual results may
differ materially from those contemplated by a forward-looking
statement. Forward-looking statements speak only as of the date on
which they are made. Zoetis expressly disclaims any obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise. A further list and
description of risks, uncertainties and other matters can be found
in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2020, including in the sections thereof captioned
“Forward-Looking Statements and Factors That May Affect Future
Results” and “Item 1A. Risk Factors,” in our Quarterly Reports on
Form 10-Q and in our Current Reports on Form 8-K. Such risks and
uncertainties may be amplified by the COVID-19 pandemic and its
potential impact on the global economy and our business. These
filings and subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as adjusted net income,
adjusted diluted earnings per share and operational results (which
exclude the impact of foreign exchange), to assess and analyze our
results and trends and to make financial and operational decisions.
We believe these non-GAAP financial measures are also useful to
investors because they provide greater transparency regarding our
operating performance. The non-GAAP financial measures included in
this press release should not be considered alternatives to
measurements required by GAAP, such as net income, operating
income, and earnings per share, and should not be considered
measures of liquidity. These non-GAAP financial measures are
unlikely to be comparable with non-GAAP information provided by
other companies. Reconciliation of non-GAAP financial measures and
most directly comparable GAAP financial measures are included in
the tables accompanying this press release and are posted on our
website at www.zoetis.com.
Internet Posting of Information: We
routinely post information that may be important to investors in
the 'Investors' section of our website at www.zoetis.com, on our Facebook page at
http://www.facebook.com/zoetis and on
Twitter@zoetis. We encourage investors and potential investors to
consult our website regularly and to follow us on Facebook and
Twitter for important information about us.
ZTS-COR ZTS-IR ZTS-FIN
ZOETIS INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME(a) (UNAUDITED) (millions of
dollars, except per share data)
Second Quarter Ended
Six Months Ended
June 30,
June 30,
2021
2020
% Change
2021
2020
% Change
Revenue
$
1,948
$
1,548
26
$
3,819
$
3,082
24
Costs and expenses:
Cost of sales
568
451
26
1,117
910
23
Selling, general and administrative
expenses
495
393
26
904
782
16
Research and development expenses
120
111
8
238
218
9
Amortization of intangible assets
41
40
3
81
80
1
Restructuring charges and certain
acquisition-related costs
21
8
*
30
17
76
Interest expense
57
58
(2)
114
111
3
Other (income)/deductions–net
10
5
*
12
(15)
*
Income before provision for taxes on
income
636
482
32
1,323
979
35
Provision for taxes on income
125
106
18
254
180
41
Net income before allocation to
noncontrolling interests
511
376
36
1,069
799
34
Less: Net loss attributable to
noncontrolling interests
(1)
(1)
—
(2)
(1)
*
Net income attributable to Zoetis
$
512
$
377
36
$
1,071
$
800
34
Earnings per share—basic
$
1.08
$
0.79
37
$
2.25
$
1.68
34
Earnings per share—diluted
$
1.07
$
0.79
35
$
2.24
$
1.67
34
Weighted-average shares used to calculate
earnings per share
Basic
474.8
475.3
475.2
475.4
Diluted
477.0
478.1
477.5
478.6
(a)
The condensed consolidated statements of
income present the second quarter and six months ended June 30,
2021 and June 30, 2020. Subsidiaries operating outside the United
States are included for the second quarter and six months ended May
31, 2021 and May 31, 2020.
* Calculation not meaningful.
ZOETIS INC. RECONCILIATION OF
GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION CERTAIN LINE ITEMS
(UNAUDITED) (millions of dollars, except per share data)
Second Quarter Ended June 30,
2021
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
568
$
(1)
$
—
$
(2)
$
565
Gross profit
1,380
1
—
2
1,383
Selling, general and administrative
expenses
495
(7)
—
—
488
Research and development expenses
120
(1)
—
—
119
Amortization of intangible assets
41
(35)
—
—
6
Restructuring charges and certain
acquisition-related costs
21
—
(2)
(19)
—
Other (income)/deductions–net
10
—
—
(3)
7
Income before provision for taxes on
income
636
44
2
24
706
Provision for taxes on income
125
10
—
6
141
Net income attributable to Zoetis
512
34
2
18
566
Earnings per common share attributable to
Zoetis–diluted
1.07
0.08
—
0.04
1.19
Second Quarter Ended June 30,
2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
451
$
(2)
$
—
$
(1)
$
448
Gross profit
1,097
2
—
1
1,100
Selling, general and administrative
expenses
393
(17)
—
(4)
372
Research and development expenses
111
(1)
—
—
110
Amortization of intangible assets
40
(33)
—
—
7
Restructuring charges and certain
acquisition-related costs
8
—
(7)
(1)
—
Income before provision for taxes on
income
482
53
7
6
548
Provision for taxes on income
106
14
1
1
122
Net income attributable to Zoetis
377
39
6
5
427
Earnings per common share attributable to
Zoetis–diluted
0.79
0.08
0.01
0.01
0.89
(a)
The condensed consolidated statements of
income present the second quarter ended June 30, 2021 and June 30,
2020. Subsidiaries operating outside the United States are included
for the second quarter ended May 31, 2021 and May 31, 2020.
(b)
Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS. Despite the importance of these
measures to management in goal setting and performance measurement,
non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the
non-standardized definitions, non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable to
the calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
ZOETIS INC. RECONCILIATION OF
GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION CERTAIN LINE ITEMS
(UNAUDITED) (millions of dollars, except per share data)
Six months ended June 30,
2021
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,117
$
(3)
$
—
$
(6)
$
1,108
Gross profit
2,702
3
—
6
2,711
Selling, general and administrative
expenses
904
(15)
—
—
889
Research and development expenses
238
(1)
—
—
237
Amortization of intangible assets
81
(69)
—
—
12
Restructuring charges and certain
acquisition-related costs
30
—
(7)
(23)
—
Other (income)/deductions–net
12
—
—
(3)
9
Income before provision for taxes on
income
1,323
88
7
32
1,450
Provision for taxes on income
254
20
1
8
283
Net income attributable to Zoetis
1,071
68
6
24
1,169
Earnings per common share attributable to
Zoetis–diluted
2.24
0.15
0.01
0.05
2.45
Six months ended June 30,
2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
910
$
(4)
$
—
$
(3)
$
903
Gross profit
2,172
4
—
3
2,179
Selling, general and administrative
expenses
782
(35)
—
(6)
741
Research and development expenses
218
(1)
—
—
217
Amortization of intangible assets
80
(67)
—
—
13
Restructuring charges and certain
acquisition-related costs
17
—
(14)
(3)
—
Other (income)/deductions–net
(15)
—
—
17
2
Income before provision for taxes on
income
979
107
14
(5)
1,095
Provision for taxes on income
180
36
—
(2)
214
Net income attributable to Zoetis
800
71
14
(3)
882
Earnings per common share attributable to
Zoetis–diluted
1.67
0.15
0.03
(0.01)
1.84
(a)
The condensed consolidated statements of
income present the six months ended June 30, 2021 and June 30,
2020. Subsidiaries operating outside the United States are included
for the six months ended May 31, 2021 and May 31, 2020.
(b)
Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS. Despite the importance of these
measures to management in goal setting and performance measurement,
non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the
non-standardized definitions, non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable to
the calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
ZOETIS INC. NOTES TO
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS (UNAUDITED) (millions of dollars)
(1) Acquisition-related costs include the
following:
Second Quarter Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Integration costs(a)
$
2
$
6
$
5
$
12
Restructuring charges(b)
—
1
2
2
Total acquisition-related
costs—pre-tax
2
7
7
14
Income taxes(c)
—
1
1
—
Total acquisition-related costs—net of
tax
$
2
$
6
$
6
$
14
(a)
Integration costs represent external,
incremental costs directly related to integrating acquired
businesses and primarily include expenditures for consulting and
the integration of systems and processes. Included in Restructuring
charges and certain acquisition-related costs.
(b)
Represents exit and employee termination
costs, included in Restructuring charges and certain
acquisition-related costs.
(c)
Included in Provision for taxes on income.
Income taxes include the tax effect of the associated pre-tax
amounts, calculated by determining the jurisdictional location of
the pre-tax amounts and applying that jurisdiction's applicable tax
rate. For the six months ended June 30, 2020, also includes a tax
charge related to a remeasurement of deferred taxes resulting from
the integration of acquired businesses.
(2) Certain significant items include the
following:
Second Quarter Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Operational efficiency initiative(a)
$
—
$
—
$
—
$
(17)
Supply network strategy(b)
1
1
2
3
Other restructuring charges and
cost-reduction/productivity initiatives(c)
7
1
13
3
Certain asset impairment charges(d)
13
—
14
—
Net loss on sale of assets(e)
3
—
3
—
Other(f)
—
4
—
6
Total certain significant
items—pre-tax
24
6
32
(5)
Income taxes(g)
6
1
8
(2)
Total certain significant items—net of
tax
$
18
$
5
$
24
$
(3)
(a)
Represents a net gain resulting from a
cash payment received pursuant to an agreement related to the 2016
sale of certain U.S. manufacturing sites, included in Other
(income)/deductions-net.
(b)
Represents product transfer costs,
included in Cost of sales, related to cost-reduction and
productivity initiatives.
(c)
For the quarter ended June 30, 2021,
primarily represents employee termination costs related to
cost-reduction and productivity initiatives, included in
Restructuring charges and certain acquisition-related costs. For
the six months ended June 30, 2021, primarily represents employee
termination costs and product transfer costs related to
cost-reduction and productivity initiatives and the CEO transition,
included in Restructuring charges and certain acquisition-related
costs.
For the quarter and six months ended June
30, 2020, represents employee termination costs incurred as a
result of the CEO transition, included in Restructuring charges and
certain acquisition-related costs.
(d)
For the quarter ended June 30, 2021,
primarily represents asset impairment charges related to the
consolidation of manufacturing sites in China, as well as charges
related to our poultry automation business located in the U.S. and
Canada, included in Restructuring charges and certain
acquisition-related costs. For the six months ended June 30, 2021,
also includes asset impairment charges related to inventory in our
precision livestock farming business, included in Cost of
sales.
(e)
Represents a net loss related to the sale
of certain assets of our poultry automation business located in the
U.S. and Canada, included in Other (income)/deductions-net.
(f)
Represents the modification of share-based
compensation related to CEO transition costs, included 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.
ZOETIS INC. ADJUSTED SELECTED
COSTS, EXPENSES AND INCOME(a) (UNAUDITED) (millions of dollars)
Second Quarter Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
565
$
448
26%
4%
22%
as a percent of revenue
29.0
%
28.9
%
NA
NA
NA
Adjusted SG&A expenses
488
372
31%
3%
28%
Adjusted R&D expenses
119
110
8%
3%
5%
Adjusted net income attributable to
Zoetis
566
427
33%
5%
28%
Six Months Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
1,108
$
903
23%
4%
19%
as a percent of revenue
29.0
%
29.3
%
NA
NA
NA
Adjusted SG&A expenses
889
741
20%
2%
18%
Adjusted R&D expenses
237
217
9%
2%
7%
Adjusted net income attributable to
Zoetis
1,169
882
33%
2%
31%
(a)
Adjusted cost of sales, adjusted selling,
general, and administrative (SG&A) expenses, adjusted research
and development (R&D) expenses, and adjusted net income
(non-GAAP financial measures) are defined as the corresponding
reported U.S. GAAP income statement line items excluding purchase
accounting adjustments, acquisition-related costs, and certain
significant items. These adjusted income statement line item
measures are not, and should not be viewed as, substitutes for the
corresponding U.S. GAAP line items. The corresponding GAAP line
items and reconciliations of reported to adjusted information are
provided in Condensed Consolidated Statements of Income and
Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
ZOETIS INC. 2021 GUIDANCE
Selected Line Items
(millions of dollars, except per share
amounts)
Full Year 2021
Revenue
$7,625 to $7,700
Operational growth(a)
12.5% to 13.5%
Adjusted cost of sales as a percentage of
revenue(b)
Approximately 30%
Adjusted SG&A expenses(b)
$1,870 to $1,910
Adjusted R&D expenses(b)
$505 to $520
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $255
Effective tax rate on adjusted
income(b)
19% - 20%
Adjusted diluted EPS(b)
$4.47 to $4.55
Adjusted net income(b)
$2,135 to $2,175
Operational growth(a)(c)
13% to 15%
Certain significant items and
acquisition-related costs(d)
$35 - $45
The guidance reflects foreign exchange rates as of mid-July
2021.
Reconciliations of 2021 reported guidance to 2021 adjusted
guidance follows:
(millions of dollars, except per share
amounts)
Reported
Certain significant items and
acquisition-related costs(d)
Purchase accounting
Adjusted(c)
Cost of sales as a percentage of
revenue
~ 30.2%
~ (0.1%)
~ (0.1%)
~ 30%
SG&A expenses
$1,900 to $1,940
~ $(30)
$1,870 to $1,910
R&D expenses
$506 to $521
~ $(1)
$505 to $520
Interest expense and other
(income)/deductions-net
~ $255
~ $255
Effective tax rate
~ 19% to 20%
~ 19% to 20%
Diluted EPS
$4.09 to $4.19
$0.07 to $0.09
~ $0.29
$4.47 to $4.55
Net income attributable to Zoetis
$1,950 to $2,000
$35 to $45
~ $140
$2,135 to $2,175
(a)
Operational growth (a non-GAAP financial
measure) excludes the impact of foreign exchange.
(b)
Adjusted net income and its
components and adjusted diluted EPS are defined as reported U.S.
GAAP net income and its components and reported diluted EPS
excluding purchase accounting adjustments, acquisition-related
costs and certain significant items. Adjusted cost of sales,
adjusted SG&A expenses, adjusted R&D expenses, and adjusted
interest expense and other (income)/deductions-net are income
statement line items prepared on the same basis, and, therefore,
components of the overall adjusted income measure. Despite the
importance of these measures to management in goal setting and
performance measurement, adjusted net income and its components and
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the
non-standardized definitions, adjusted net income and its
components and adjusted diluted EPS (unlike U.S. GAAP net income
and its components and diluted EPS) may not be comparable to the
calculation of similar measures of other companies. Adjusted net
income and its components and adjusted diluted EPS are presented
solely to permit investors to more fully understand how management
assesses performance. Adjusted net income and its components and
adjusted diluted EPS are not, and should not be viewed as,
substitutes for U.S. GAAP net income and its components and diluted
EPS.
(c)
We do not provide a reconciliation of
forward-looking non-GAAP adjusted net income operational growth to
the most directly comparable U.S. GAAP reported financial measure
because we are unable to calculate with reasonable certainty the
foreign exchange impact of unusual gains and losses,
acquisition-related expenses, potential future asset impairments
and other certain significant items, without unreasonable effort.
The foreign exchange impacts of these items are uncertain, depend
on various factors, and could have a material impact on U.S. GAAP
reported results for the guidance period.
(d)
Primarily includes certain nonrecurring
costs related to acquisitions and other charges.
ZOETIS INC. CONSOLIDATED REVENUE
BY SEGMENT(a) AND SPECIES (UNAUDITED) (millions of dollars)
Second Quarter Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
1,229
$
882
39
%
3
%
36
%
Livestock
699
649
8
%
5
%
3
%
Contract Manufacturing & Human
Health
20
17
18
%
(1)
%
19
%
Total Revenue
$
1,948
$
1,548
26
%
4
%
22
%
U.S.
Companion Animal
$
794
$
594
34
%
—
%
34
%
Livestock
210
229
(8)
%
—
%
(8)
%
Total U.S. Revenue
$
1,004
$
823
22
%
—
%
22
%
International
Companion Animal
$
435
$
288
51
%
10
%
41
%
Livestock
489
420
16
%
6
%
10
%
Total International Revenue
$
924
$
708
31
%
9
%
22
%
Companion Animal:
Dogs and Cats
$
1,161
$
831
40
%
4
%
36
%
Horses
68
51
33
%
4
%
29
%
Total Companion Animal Revenue
$
1,229
$
882
39
%
3
%
36
%
Livestock:
Cattle
$
342
$
320
7
%
4
%
3
%
Swine
161
146
10
%
4
%
6
%
Poultry
134
135
(1)
%
3
%
(4)
%
Fish
39
30
30
%
5
%
25
%
Sheep and other
23
18
28
%
19
%
9
%
Total Livestock Revenue
$
699
$
649
8
%
5
%
3
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC. CONSOLIDATED REVENUE
BY SEGMENT(a) AND SPECIES (UNAUDITED) (millions of dollars)
Six Months Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
2,305
$
1,679
37
%
2
%
35
%
Livestock
1,478
1,366
8
%
2
%
6
%
Contract Manufacturing & Human
Health
36
37
(3)
%
2
%
(5)
%
Total Revenue
$
3,819
$
3,082
24
%
2
%
22
%
U.S.
Companion Animal
$
1,452
$
1,093
33
%
—
%
33
%
Livestock
485
516
(6)
%
—
%
(6)
%
Total U.S. Revenue
$
1,937
$
1,609
20
%
—
%
20
%
International
Companion Animal
$
853
$
586
46
%
7
%
39
%
Livestock
993
850
17
%
4
%
13
%
Total International Revenue
$
1,846
$
1,436
29
%
5
%
24
%
Companion Animal:
Dogs and Cats
$
2,177
$
1,577
38
%
2
%
36
%
Horses
128
102
25
%
2
%
23
%
Total Companion Animal Revenue
$
2,305
$
1,679
37
%
2
%
35
%
Livestock:
Cattle
$
741
$
690
7
%
1
%
6
%
Swine
351
303
16
%
4
%
12
%
Poultry
265
283
(6)
%
2
%
(8)
%
Fish
76
56
36
%
4
%
32
%
Sheep and other
45
34
32
%
14
%
18
%
Total Livestock Revenue
$
1,478
$
1,366
8
%
2
%
6
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC. CONSOLIDATED REVENUE
BY KEY INTERNATIONAL MARKETS (UNAUDITED) (millions of dollars)
Second Quarter Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(a)
Total International
$
923.9
$
707.3
31
%
9
%
22
%
Australia
69.1
50.8
36
%
24
%
12
%
Brazil
75.7
56.3
34
%
(6)
%
40
%
Canada
67.1
53.9
24
%
13
%
11
%
Chile
33.6
25.4
32
%
6
%
26
%
China
94.2
66.4
42
%
12
%
30
%
France
32.1
23.7
35
%
11
%
24
%
Germany
49.2
40.1
23
%
11
%
12
%
Italy
31.8
14.1
126
%
20
%
106
%
Japan
49.9
52.8
(5)
%
(1)
%
(4)
%
Mexico
33.3
25.5
31
%
17
%
14
%
Spain
33.1
23.9
38
%
11
%
27
%
United Kingdom
43.0
25.5
69
%
19
%
50
%
Other developed markets
112.3
90.3
24
%
12
%
12
%
Other emerging markets
199.5
158.6
26
%
1
%
25
%
Six Months Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(a)
Total International
$
1,846.2
$
1,435.7
29
%
5
%
24
%
Australia
126.2
94.1
34
%
20
%
14
%
Brazil
149.3
119.1
25
%
(19)
%
44
%
Canada
113.2
94.0
20
%
9
%
11
%
Chile
67.6
48.4
40
%
6
%
34
%
China
217.4
132.1
65
%
13
%
52
%
France
67.0
52.7
27
%
11
%
16
%
Germany
87.6
73.6
19
%
11
%
8
%
Italy
56.9
35.6
60
%
14
%
46
%
Japan
96.6
94.3
2
%
1
%
1
%
Mexico
66.5
57.7
15
%
4
%
11
%
Spain
64.3
52.0
24
%
11
%
13
%
United Kingdom
112.1
80.6
39
%
9
%
30
%
Other developed markets
223.5
177.0
26
%
11
%
15
%
Other emerging markets
398.0
324.5
23
%
(3)
%
26
%
(a)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC. SEGMENT(a) EARNINGS
(UNAUDITED) (millions of dollars)
Second Quarter Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
1,004
$
823
22%
—%
22%
Cost of Sales
192
154
25%
—%
25%
Gross Profit
812
669
21%
—%
21%
Gross Margin
80.9
%
81.3
%
Operating Expenses
170
136
25%
—%
25%
Other (income)/deductions-net
1
3
(67)%
—%
(67)%
U.S. Earnings
$
641
$
530
21 %
— %
21 %
International:
Revenue
$
924
$
708
31%
9%
22%
Cost of Sales
278
228
22%
5%
17%
Gross Profit
646
480
35%
10%
25%
Gross Margin
69.9
%
67.8
%
Operating Expenses
147
117
26%
10%
16%
Other (income)/deductions-net
—
1
*
*
*
International Earnings
$
499
$
362
38 %
10 %
28 %
Total Reportable Segments
$
1,140
$
892
28 %
4 %
24 %
Other business activities(c)
(98)
(90)
9%
Reconciling Items:
Corporate(d)
(262)
(194)
35%
Purchase accounting adjustments(e)
(44)
(53)
(17)%
Acquisition-related costs(f)
(2)
(7)
(71)%
Certain significant items(g)
(24)
(6)
*
Other unallocated(h)
(74)
(60)
23%
Total Earnings(i)
$
636
$
482
32%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
(c)
Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing
business and human health business.
(d)
Corporate includes, among other things,
certain costs associated with information technology,
administration expenses, interest expense, certain compensation
costs, certain procurement costs, and other costs not charged to
our operating segments.
(e)
Purchase accounting adjustments include
certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f)
Acquisition-related costs include costs
associated with acquiring and integrating newly acquired
businesses, such as transaction costs and integration costs.
(g)
Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include
restructuring charges and implementation costs associated with our
cost-reduction/productivity initiatives that are not associated
with an acquisition, costs associated with the operational
efficiency initiative and supply network strategy, and the impact
of divestiture-related gains and losses.
(h)
Includes overhead expenses associated with
our manufacturing and supply operations not directly attributable
to an operating segment, as well as certain procurement costs.
(i)
Defined as income before provision for
taxes on income.
*Calculation not meaningful.
ZOETIS INC. SEGMENT(a) EARNINGS
(UNAUDITED) (millions of dollars)
Six Months Ended
June 30,
% Change
2021
2020
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
1,937
$
1,609
20%
—%
20%
Cost of Sales
376
321
17%
—%
17%
Gross Profit
1,561
1,288
21%
—%
21%
Gross Margin
80.6
%
80.0
%
Operating Expenses
301
261
15%
—%
15%
Other (income)/deductions-net
2
4
(50)%
—%
(50)%
U.S. Earnings
$
1,258
$
1,023
23 %
— %
23 %
International:
Revenue
$
1,846
$
1,436
29%
5%
24%
Cost of Sales
560
452
24%
3%
21%
Gross Profit
1,286
984
31%
6%
25%
Gross Margin
69.7
%
68.5
%
Operating Expenses
277
242
14%
5%
9%
Other (income)/deductions-net
—
1
*
*
*
International Earnings
$
1,009
$
741
36 %
6 %
30 %
Total Reportable Segments
$
2,267
$
1,764
29 %
3 %
26 %
Other business activities(c)
(195)
(177)
10%
Reconciling Items:
Corporate(d)
(492)
(381)
29%
Purchase accounting adjustments(e)
(88)
(107)
(18)%
Acquisition-related costs(f)
(7)
(14)
(50)%
Certain significant items(g)
(32)
5
*
Other unallocated(h)
(130)
(111)
17%
Total Earnings(i)
$
1,323
$
979
35%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
(c)
Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing
business and human health business.
(d)
Corporate includes, among other things,
certain costs associated with information technology,
administration expenses, interest expense, certain compensation
costs, certain procurement costs, and other costs not charged to
our operating segments.
(e)
Purchase accounting adjustments include
certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f)
Acquisition-related costs include costs
associated with acquiring and integrating newly acquired
businesses, such as transaction costs and integration costs.
(g)
Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include
restructuring charges and implementation costs associated with our
cost-reduction/productivity initiatives that are not associated
with an acquisition, costs associated with the operational
efficiency initiative and supply network strategy, and the impact
of divestiture-related gains and losses.
(h)
Includes overhead expenses associated with
our manufacturing and supply operations not directly attributable
to an operating segment, as well as certain procurement costs.
(i)
Defined as income before provision for
taxes on income.
* Calculation not meaningful.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210805005561/en/
Media Contacts: Bill Price
1-973-443-2742 (o) william.price@zoetis.com Kristen Seely
1-973-443-2777 (o) kristen.seely@zoetis.com
Investor Contacts: Steve Frank 1-973-822-7141 (o)
steve.frank@zoetis.com Keith Gaub
1-973-822-7154 (o) keith.gaub@zoetis.com
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