- Reports Revenue of $1.2 Billion,
Growing 6%, and Net Income of $238 Million, or $0.48 per Diluted
Share, Growing 17% on a Reported Basis for First Quarter
2017
- Reports Adjusted Net Income of $261
Million, or Adjusted Diluted EPS of $0.53, for First Quarter
2017
- Delivers 6% Operational Growth in
Revenue and 10% Operational Growth in Adjusted Net Income,
Excluding Foreign Exchange, for First Quarter 2017
- Reaffirms Full Year 2017 Revenue
Guidance of $5.100 - $5.225 Billion and Diluted EPS of $2.08 -
$2.20 on a Reported Basis, or $2.26 - $2.36 on an Adjusted
Basis
Zoetis Inc. (NYSE:ZTS) today reported its financial results for
the first quarter of 2017 and reaffirmed its guidance for full year
2017.
The company reported revenue of $1.2 billion for the first
quarter of 2017, an increase of 6% compared with the first quarter
of 2016. Net income for the first quarter of 2017 was $238 million,
or $0.48 per diluted share, an increase of 17% on a reported
basis.
Adjusted net income1 for the first quarter of 2017 was $261
million, or $0.53 per diluted share, an increase of 9% and 10%,
respectively, on a reported basis. Adjusted net income for the
first quarter of 2017 excludes the net impact of $23 million for
purchase accounting adjustments, acquisition-related costs and
certain significant items.
On an operational2 basis, revenue for the first quarter of 2017
increased 6%, excluding the impact of foreign currency. Adjusted
net income for the first quarter of 2017 increased 10%
operationally, excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“In the first quarter of 2017, we continue to see positive
results from our diverse portfolio, innovative new companion animal
products, and a more efficient cost structure,” said Juan Ramón
Alaix, Chief Executive Officer at Zoetis. “Our revenue grew 6%
operationally in the first quarter, driven largely by sales of
companion animal products such as Simparica, Apoquel and Cytopoint,
and our livestock portfolio featured growth in swine, cattle and
fish across our international markets. We posted 10% operational
growth in adjusted net income – once again faster than revenue
growth – as we continue delivering steady profitable results.”
“As costs for our one-time initiatives are largely complete, we
were able to deliver 17% growth in reported EPS and continue to
focus our investments on the ongoing business,” said Glenn David,
Executive Vice President and Chief Financial Officer at Zoetis. “We
see a good runway for continued growth, based on our diverse
portfolio and recently launched products, and we are reaffirming
our full-year 2017 guidance.”
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 first quarter of 2017:
- Revenue in the U.S. segment was
$605 million, an increase of 4% compared with the first quarter of
2016. Sales of companion animal products grew 10%, driven primarily
by new product launches, particularly Simparica® and Cytopoint™,
and increased sales of Apoquel®. This growth was tempered by the
prior year’s initial sales of other products into expanded
distribution relationships. Sales of livestock products declined 2%
due to decreased sales of swine and cattle products. Sales of swine
products were impacted by timing of customer purchases and
increased competition, while cattle product sales were impacted by
lower disease risk and incidence in the feedlot sector due to mild
weather and heavier animals. Both cattle and swine feed additive
product sales were negatively impacted by livestock producers’
implementation of the Veterinary Feed Directive in the first
quarter. Increased sales of poultry medicated feed additives
partially offset this decline.
- Revenue in the International
segment was $615 million, an increase of 8% on a reported basis
and 9% operationally compared with the first quarter of 2016. Sales
of companion animal products grew 13% on a reported basis and 15%
operationally, primarily due to increased sales of Apoquel, in
addition to new product launches, particularly Simparica. Sales
also benefited from increased demand for the company’s companion
animal vaccines portfolio in China as a result of field force
expansion and increasing medicalization rates. Sales of livestock
products grew 7% both on a reported and operational basis driven
primarily by increased sales of swine products in China and
Vietnam, and cattle products in Brazil. Favorable market conditions
contributed to swine performance in China as well as cattle product
sales in Brazil, while swine product sales in Vietnam were driven
by timing of customer purchases. Poultry and swine product sales
were negatively impacted by product rationalizations, which
partially offset the overall growth of livestock products.
Zoetis continues to drive demand and strengthen its diverse
portfolio through the introduction of new products, lifecycle
innovations, business development initiatives, strong customer
relationships and entry into new markets and technologies. In the
first quarter of 2017:
- The company strengthened its canine
dermatology portfolio with the approval of Cytopoint in the
European Union (April 2017) and Canada (March 2017). Cytopoint is
the first monoclonal antibody (mAb) therapy approved to help
provide a reduction in the clinical signs associated with atopic
dermatitis such as itching in dogs. The product was first approved
in the U.S. in December 2016.
- Zoetis received European Commission
approval for Stronghold® Plus
(selamectin/sarolaner), a topical combination product that treats
ticks, fleas, ear mites, lice and gastrointestinal worms and
prevents heartworm disease in cats. This product builds on the
company’s sarolaner platform in the $4.2 billion global companion
animal parasiticide market.3
- Zoetis announced an agreement to
purchase Nexvet Biopharma plc, an innovator in monoclonal
antibody therapies for companion animals in management of chronic
pain and other therapeutic areas. The acquisition is expected to
strengthen Zoetis’ R&D pipeline in monoclonal antibodies and
help sustain the company’s category leadership in chronic pain
management for companion animals, an area poised for innovation
with new mAb therapies.
- In its pursuit of lifecycle
innovations, Zoetis received approvals for new indications and
formulations of key livestock products, and expanded major products
into new geographies.
- In Canada, the company received
approvals for Bovi-Shield® IBR, which helps prevent
respiratory disease caused by infectious bovine rhinotracheitis
(IBR) virus in cattle, and Lutalyse® HighCon, a
reproductive product for use in both beef and dairy cattle.
Bovi-Shield IBR was first approved in the U.S. in 1998, and
Lutalyse HighCon was first approved in the U.S. in 2015.
- In Japan, Zoetis expanded its
injectable line of anti-infectives with approvals of
Excenel® (ceftiofur hydrochloride) RTU for use
in cattle and swine and Excede® (ceftiofur crystalline free
acid) for use in swine. Excenel RTU was first approved in the U.S.
in 2004, and Excede was first approved in the U.S. in 2003.
- The company also grew its
Fostera® swine vaccine franchise with the approval of the
Fostera Porcine Reproductive and Respiratory Syndrome (PRRS)
vaccine in Taiwan. Fostera PRRS was first approved in the U.S. in
2012.
- Zoetis also continued to grow its
diagnostics business with new approvals in the U.S. for its
Witness® and Serelisa® lines of
diagnostic test kits. Witness Lepto is a rapid, point-of-care test
that detects leptospirosis, a zoonotic, infectious disease of dogs.
Serelisa diagnostic test kits help detect gastrointestinal viruses
in both cattle and swine, allowing our customers to better detect
these life-threatening infections.
FINANCIAL GUIDANCE
Zoetis reaffirmed its guidance for the full year 2017, which
includes:
- Revenue of between $5.100 billion to
$5.225 billion
- Reported diluted EPS for the full year
of between $2.08 to $2.20 per share
- Adjusted diluted EPS for the full year
between $2.26 to $2.36 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.
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 first quarter
2017 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 May 4, 2017.
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, genetic tests, biodevices and 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 2016, the company generated annual
revenue of $4.9 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.
3 Vetnosis, Animal Health Service: Parasiticides Report (Sept.
2016)
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, 2016,
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. 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)
First Quarter 2017 2016 % Change
Revenue $ 1,231 $ 1,162 6 Costs and expenses: Cost of sales(b) 443
389 14 Selling, general and administrative expenses(b) 309 315 (2)
Research and development expenses(b) 90 90 — Amortization of
intangible assets(c) 22 21 5 Restructuring charges/(reversals) and
certain acquisition-related costs (1 ) 2 * Interest expense 41 43
(5) Other (income)/deductions–net (10 ) (30 ) (67) Income before
provision for taxes on income 337 332 2 Provision for taxes on
income 98 128 (23) Net income before allocation to
noncontrolling interests 239 204 17 Less: Net income attributable
to noncontrolling interests 1 — * Net income
attributable to Zoetis $ 238 $ 204 17 Earnings
per share—basic $ 0.48 $ 0.41 17 Earnings per
share—diluted $ 0.48 $ 0.41 17
Weighted-average shares used to calculate earnings per share Basic
492.4 497.4 Diluted 495.3 499.5
* Calculation not meaningful.
(a) The condensed consolidated statements of income
present the first quarter ended April 2, 2017, and April 3, 2016.
Subsidiaries operating outside the United States are included for
the first quarter ended February 26, 2017 and February 28, 2016.
(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 April 2, 2017
GAAP Reported(a)
Purchase Accounting Adjustments Acquisition- Related
Costs(1) Certain Significant Items(2) Non-GAAP
Adjusted(b) Cost of sales(c)
$ 443 $ (2 ) $ — $ (3 )
$ 438 Gross profit
788 2 — 3 793 Selling, general and
administrative expenses(c)
309 (1 ) — (2 ) 306 Research and
development expenses(c)
90 (1 ) — — 89 Amortization of
intangible assets(d)
22 (18 ) — — 4 Restructuring
charges/(reversals) and certain acquisition-related costs
(1
) — — 1 — Income before provision for taxes on income
337 22 — 4 363 Provision for taxes on income
98 3 — —
101 Net income attributable to Zoetis
238 19 — 4 261
Earnings per common share attributable to Zoetis–diluted
0.48 0.04 — 0.01 0.53 Quarter ended April 3, 2016
GAAP Reported(a) Purchase Accounting Adjustments
Acquisition- Related Costs(1) Certain Significant Items(2) Non-GAAP
Adjusted(b) Cost of sales(c)
$ 389 $ (7 ) $ — $ (4 )
$ 378 Gross profit
773 7 — 4 784 Selling, general and
administrative expenses(c)
315 (1 ) — (14 ) 300 Research and
development expenses(c)
90 (1 ) — — 89 Amortization of
intangible assets(d)
21 (17 ) — — 4 Restructuring
charges/(reversals) and certain acquisition-related costs
2
— — (2 ) — Other (income)/deductions–net
(30 ) — (1 )
33 2 Income before provision for taxes on income
332 26 1
(13 ) 346 Provision for taxes on income
128 17 (2 ) (36 )
107 Net income attributable to Zoetis
204 9 3 23 239
Earnings per common share attributable to Zoetis–diluted
0.41 0.02 0.01 0.04 0.48 (a) The condensed
consolidated statements of income present the first quarter ended
April 2, 2017, and April 3, 2016. Subsidiaries operating outside
the United States are included for the first quarter ended February
26, 2017 and February 28, 2016. (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:
First Quarter 2017 2016 Other(a) $ — $
1 Total acquisition-related costs—pre-tax — 1 Income
taxes(b) — (2 ) Total acquisition-related costs—net of tax $
— $ 3 (a)
Included in Other
(income)/deductions—net.
(b)
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 first quarter of 2016, also includes 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:
First Quarter 2017 2016
Operational efficiency initiative(a) $ (1 ) $ (28 ) Supply
network strategy(b) 3 3 Stand-up costs(c) — 12 Other(d) 2 —
Total certain significant items—pre-tax 4 (13 ) Income
taxes(e) — (36 ) Total certain significant items—net of tax
$ 4 $ 23 (a)
For the first quarter ended April 2, 2017,
represents a net reversal of previously accrued employee
termination costs, included in Restructuring charges/(reversals)
and certain acquisition-related costs.
For the first quarter ended April 3, 2016,
represents restructuring charges of $2 million related to employee
termination costs ($1 million) and exit costs ($1 million),
included in Restructuring charges/(reversals) and certain
acquisition-related costs, consulting fees of $3 million, included
in Selling, general and administrative expenses, and a $33 million
net gain related to the sale of certain manufacturing sites and
products, included in Other (income)/deductions—net.
(b)
For the first quarter ended April 2, 2017,
represents accelerated depreciation charges of $1 million and
consulting fees of $2 million, included in Cost of sales.
For the first quarter ended April 3, 2016,
represents accelerated depreciation charges of $1 million and
consulting fees of $2 million, included in Cost of sales.
(c)
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 first quarter ended April 3, 2016,
included in Cost of sales ($1 million), and Selling, general and
administrative expenses ($11 million).
(d)
For the quarter ended April 2, 2017,
represents costs associated with changes to our operating model,
included in Selling, general and administrative expenses.
(e)
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 first quarter ended April 2, 2017, also includes a
net tax charge of approximately $1 million related to 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. For the first quarter ended April 3, 2016, also includes
a net tax charge of approximately $35 million related to the impact
of the European Commission’s negative decision on the excess
profits rulings in Belgium. This net charge relates to 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. This net tax charge does not include any benefits
associated with a successful appeal of the decision, nor does it
reflect guidance we expect to receive from the Belgian government
on the methodology and timing of the recovery of prior tax
benefits.
Certain amounts may reflect rounding
adjustments.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES AND
INCOME (a)
(UNAUDITED)
(millions of dollars)
First Quarter % Change 2017 2016 Total
ForeignExchange
Operational(b) Adjusted cost of sales $ 438 $ 378 16 % 2 %
14 % as a percent of revenue 35.6 % 32.5 % NA NA NA Adjusted
SG&A expenses 306 300 2 % — % 2 % Adjusted R&D expenses 89
89 — % — % — % Adjusted net income attributable to Zoetis 261 239 9
% (1 )% 10 % (a) Adjusted cost of sales, adjusted
selling, general, and administrative (SG&A) expenses, adjusted
research and development (R&D) expenses, and adjusted net
income attributable to Zoetis (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.
Reconciliations of certain reported to adjusted information for the
first quarter ended April 2, 2017, and April 3, 2016, 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.
2017 GUIDANCE
Selected Line Items
(millions of dollars, except per share
amounts)
Full Year 2017 Revenue
$5,100 to $5,225 Operational growth(a)
5.5% to 7.5% Adjusted cost of sales as a percentage of revenue(b)
32% to 33% Adjusted SG&A expenses(b)
$1,265 to $1,325 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)
$2.26 to $2.36 Adjusted net income(b) $1,120
to $1,170 Operational growth(a)(c) 15% to 20%
Certain significant items(d) and acquisition-related costs
$30 to $50
The guidance reflects foreign exchange rates as of late April
2017.
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 $1,275 to $1,335
($5) ($5)
$1,265 to $1,325 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 $2.08 to $2.20
$0.05 to $0.07 $0.11
$2.26 to $2.36 Net income attributable to Zoetis
$1,030 to $1,090 $25 to
$35 $55 $1,120 to $1,170
(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, 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 earnings per share (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.
ZOETIS INC.
CONSOLIDATED REVENUE BY SEGMENT(a) AND
SPECIES
(UNAUDITED)
(millions of dollars)
First Quarter % Change 2017 2016 Total
ForeignExchange
Operational(b)
Revenue: Livestock $ 703 $ 683
3 % — % 3 % Companion Animal 517 466 11 % (1 )% 12 % Contract
Manufacturing 11 13 (15 )% (7 )% (8 )%
Total
Revenue $ 1,231 $ 1,162
6 % — % 6 %
U.S. Livestock $ 282 $ 288 (2 )% — % (2 )%
Companion Animal 323 294 10 % — % 10 %
Total U.S.
Revenue $ 605 $ 582
4 % — % 4 %
International Livestock $ 421 $ 395 7 % — % 7 % Companion
Animal 194 172 13 % (2 )% 15 %
Total International
Revenue $ 615 $ 567
8 % (1 )% 9 %
Livestock: Cattle $ 386 $ 377 2 % (1 )% 3 %
Swine 160 146 10 % 1 % 9 % Poultry 116 122 (5 )% — % (5 )% Fish 21
17 24 % 10 % 14 % Other 20 21 (5 )% (1 )% (4 )%
Total Livestock Revenue $ 703 $
683 3 % — % 3
% Companion Animal: Horses $ 35 $ 39 (10 )% (2
)% (8 )% Dogs and Cats 482 427 13 % — % 13 %
Total
Companion Animal Revenue $ 517 $
466 11 % (1 )% 12
% (a) For a description of each segment, see
Note 18A to Zoetis' consolidated financial statements included in
Zoetis' Form 10-K for the year ended December 31, 2016. (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)
First Quarter % Change 2017 2016
Total
ForeignExchange
Operational(a)
Total International
$ 615 $ 567 8 % (1 )% 9 %
Australia 40 35 14 % 4 % 10 %
Brazil 66 46 43
% 28 % 15 %
Canada 34 33 3 % 3 % — %
China 52 38 37 %
(10 )% 47 %
France 29 36 (19 )% (4 )% (15 )%
Germany
28 29 (3 )% (2 )% (1 )%
Italy 22 20 10 % (1 )% 11 %
Japan 34 31 10 % 3 % 7 %
Mexico 18 19 (5 )% (15 )% 10
%
Spain 20 19 5 % (4 )% 9 %
United Kingdom 43 50 (14
)% (14 )% — %
Other Developed 68 68 — % 1 % (1 )%
Other
Emerging 161 143 13 % (1 )% 14 % (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)
First Quarter % Change 2017
2016 Total
ForeignExchange
Operational(b)
U.S.:
Revenue $ 605 $ 582 4 % — % 4 % Cost of Sales 137 131
5 % — % 5 % Gross Profit 468 451 4 % — % 4 % Gross Margin 77.4 %
77.5 % Operating Expenses 96 92 4 % — % 4 % Other
(income)/deductions — — — % — % — %
U.S.
Earnings $ 372 $ 359 4
% — % 4 %
International:
Revenue $ 615 $ 567 8 % (1 )% 9 % Cost of Sales 213 196
9 % — % 9 % Gross Profit 402 371 8 % (1 )% 9 % Gross Margin
65.4 % 65.4 % Operating Expenses 114 109 5 % 1 % 4 % Other
(income)/deductions (3 ) 2
*
*
*
International Earnings $ 291 $
260 12 % — % 12 %
Total Reportable Segments $ 663
$ 619 7 % — % 7
% Other business activities(c) (74 ) (74 ) — %
Reconciling Items: Corporate(d) (143 ) (169 ) (15 )% Purchase
accounting adjustments(e) (22 ) (26 ) (15 )% Acquisition-related
costs(f) — (1 ) (100 )% Certain significant items(g) (4 ) 13
*
Other unallocated(h) (83 ) (30 )
*
Total Earnings(i) $ 337 $
332 2 %
* Calculation not meaningful.
(a) For a description of each segment, see Note 18A to
Zoetis' consolidated financial statements included in Zoetis' Form
10-K for the year ended December 31, 2016. (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
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 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
certain procurement costs. (i) Defined as income before provision
for taxes on income.
Certain amounts and percentages may reflect rounding
adjustments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170504005697/en/
Media:Bill Price, 1-973-443-2742
(o)william.price@zoetis.comorElinore White, 1-973-443-2835
(o)elinore.y.white@zoetis.comorInvestors:Steve Frank,
1-973-822-7141 (o)steve.frank@zoetis.com
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