- Reports Revenue of $1.4 Billion,
Growing 11%, and Net Income of $352 Million, or $0.72 per Diluted
Share, Growing 48% and 50%, respectively, on a Reported Basis for
First Quarter 2018
- Reports Adjusted Net Income of $365
Million, or Adjusted Diluted EPS of $0.75, for First Quarter
2018
- Delivers 7% Operational Growth in
Revenue and 34% Operational Growth in Adjusted Net Income for First
Quarter 2018
- Reaffirms Full Year 2018 Revenue
Guidance of $5.675 - $5.800 Billion and Diluted EPS of $2.77 -
$2.93 on a Reported Basis, or $2.96 - $3.10 on an Adjusted
Basis
Zoetis Inc. (NYSE:ZTS) today reported its financial results for
the first quarter of 2018 and reaffirmed its guidance for full year
2018.
The company reported revenue of $1.4 billion for the first
quarter of 2018, an increase of 11% compared with the first quarter
of 2017. Net income for the first quarter of 2018 was $352 million,
or $0.72 per diluted share, an increase of 48% and 50%,
respectively, on a reported basis. This increase includes the
benefit of a lower effective tax rate in 2018 as a result of the
new tax legislation enacted in the U.S. last year.
Adjusted net income1 for the first quarter of 2018 was $365
million, or $0.75 per diluted share, an increase of 40% and 42%,
respectively, on a reported basis. Adjusted net income for the
first quarter of 2018 excludes the net impact of $13 million for
purchase accounting adjustments, acquisition-related costs and
certain significant items.
On an operational2 basis, revenue for the first quarter of 2018
increased 7%, excluding the impact of foreign currency. Adjusted
net income for the first quarter of 2018 increased 34%
operationally, excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“We continue generating profitable revenue growth thanks to the
quality and diversity of our portfolio, the innovations we bring to
the market and the value we deliver to our customers,” said Juan
Ramón Alaix, Chief Executive Officer of Zoetis. “We remain
confident in the strength of our company and our ability to offer
customers more integrated solutions across the entire cycle of
healthcare -- from prediction and prevention to detection and
treatment. With this approach and our proven business model, we can
generate long-term growth for Zoetis and value for our
shareholders.”
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 2018:
- Revenue in the International
segment was $726 million, an increase of 18% on a reported
basis and 11% operationally compared with the first quarter of
2017. Sales of companion animal products grew 28% on a reported
basis and 19% on an operational basis, resulting primarily from
increased sales across multiple international markets of our
dermatology portfolio and new products including Simparica®
(sarolaner), our oral parasiticide, as well as growth in vaccines
in China. Sales of livestock products grew 14% on a reported basis
and 7% on an operational basis, driven by strong performance in
poultry and cattle. Growth in poultry products was driven by
increased sales of medicated feed additives, primarily in emerging
markets. Cattle products grew due to the colder weather increasing
treatments and strong demand for vaccines in Mexico. Strong demand
in other emerging markets also contributed to growth.
- Revenue in the U.S. segment was
$634 million, an increase of 5% compared with the first quarter of
2017. Sales of companion animal products grew 6% driven by
increased sales in our dermatology portfolio, as well as new
products. This growth was partially offset by lower sales of
certain in-line products due to expected competition. Sales of
livestock products grew 4%, led by cattle and poultry and a return
to growth in our swine business. Growth of cattle products was
driven by favorable conditions in the beef market, including higher
feedlot placements and variable weather conditions, which drove
higher disease risk and incidence. Growth was partially offset by
unfavorable market conditions in dairy, including declining
producer profitability due to low milk prices. For poultry
products, growth was driven by increased sales of medicated feed
additive 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 2018:
- Zoetis broadened its Fostera®
swine vaccine franchise with approval in the U.S. of Fostera
Gold PCV MH. This is the first vaccine to contain both
genotypes of porcine circovirus type 2 (PCV2) – 2a and 2b – and a
study showed it provided cross protection against the leading 2d
genotype. It also provides 23 weeks of immunity for PCV and
Mycoplasma hyopneumoniae (M. hyo), the longest duration for
commercial PCV2 combination vaccines.
- The company continued to bring leading
companion animal products to new markets. Cytopoint®
(lokivetmab), part of Zoetis’ canine dermatology portfolio, was
approved in Mexico and Switzerland. Additionally, Simparica,
an oral parasiticide, was approved in Thailand and Serbia.
Simparica delivers fast and persistent protection from fleas and
ticks in dogs, with effectiveness that lasts for a full 35 days,
without losing efficacy at the end of the month.
- Zoetis also received approvals in new
geographies for several major cattle products. Inforce™ 3,
the first and only intranasal vaccine that prevents respiratory
disease caused by Bovine Respiratory Syncytial Virus while also
aiding in the prevention of Infectious Bovine Rhinotracheitis and
Parainfluenza Virus 3, was approved in Korea and Egypt.
Additionally, Spectramast® DC, which helps
treat mastitis in dairy cows, was approved in China.
FINANCIAL GUIDANCE
Zoetis is reaffirming its full year 2018 guidance, which
includes:
- Revenue between $5.675 billion to
$5.800 billion
- Reported diluted EPS between $2.77 to
$2.93
- Adjusted diluted EPS between $2.96 to
$3.10
This guidance reflects foreign exchange rates as of mid-April.
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 first quarter
2018 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 2, 2018.
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 2017, the company generated annual revenue of $5.3
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 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, 2017,
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 2018 2017 % Change Revenue $ 1,366 $
1,231 11 Costs and expenses: Cost of sales(b) 447 443 1 Selling,
general and administrative expenses(b) 338 309 9 Research and
development expenses(b) 97 90 8 Amortization of intangible
assets(c) 23 22 5 Restructuring charges/(reversals) and certain
acquisition-related costs 2 (1 ) * Interest expense 47 41 15 Other
(income)/deductions–net (5 ) (10 ) (50) Income before provision for
taxes on income 417 337 24 Provision for taxes on income 67
98 (32) Net income before allocation to noncontrolling
interests 350 239 46 Less: Net loss attributable to noncontrolling
interests (2 ) 1 * Net income attributable to Zoetis $ 352
$ 238 48 Earnings per share—basic $ 0.72
$ 0.48 50 Earnings per share—diluted $ 0.72
$ 0.48 50 Weighted-average shares used to
calculate earnings per share Basic 485.9 492.4
Diluted 489.8 495.3 * Calculation not meaningful.
(a) The condensed consolidated statements of income
present the first quarter ended March 31, 2018, and April 2, 2017.
Subsidiaries operating outside the United States are included for
the first quarter ended February 28, 2018 and February 26, 2017.
(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 March 31, 2018
GAAPReported(a)
PurchaseAccountingAdjustments
Acquisition-RelatedCosts(1)
CertainSignificantItems(2)
Non-GAAPAdjusted(b)
Cost of sales(c)
$ 447 $ (2 ) $ — $ (1 ) $ 444 Gross
profit
919 2 — 1 922 Selling, general and administrative
expenses(c)
338 (1 ) — (1 ) 336 Research and development
expenses(c)
97 (1 ) — — 96 Amortization of intangible
assets(d)
23 (19 ) — — 4 Restructuring charges/(reversals)
and certain acquisition-related costs
2 — (1 ) (1 ) — Other
(income)/deductions–net
(5 ) — — — (5 ) Income before
provision for taxes on income
417 23 1 3 444 Provision for
taxes on income
67 11 — 3 81 Net income attributable to
Zoetis
352 12 1 — 365 Earnings per common share attributable
to Zoetis–diluted
0.72 0.03 — — 0.75 Quarter ended
April 2, 2017
GAAPReported(a)
PurchaseAccountingAdjustments
Acquisition-RelatedCosts(1)
CertainSignificantItems(2)
Non-GAAPAdjusted(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
(a) The condensed consolidated statements of income present
the first quarter ended March 31, 2018, and April 2, 2017.
Subsidiaries operating outside the United States are included for
the first quarter ended February 28, 2018 and February 26, 2017.
(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 2018 2017
Integration costs(a) $ 1 $ — Total acquisition-related
costs—pre-tax 1 — Income taxes(b) — — Total
acquisition-related costs—net of tax $ 1 $ — (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/(reversals) and certain acquisition-related costs.
(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.
Certain amounts may reflect rounding adjustments.
(2) Certain significant items include the following:
First Quarter 2018 2017
Operational efficiency initiative(a) $ — $ (1 ) Supply network
strategy(b) 2 3 Other(c) 1 2 Total certain
significant items—pre-tax 3 4 Income taxes(d) 3 —
Total certain significant items—net of tax $ — $ 4
(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.
(b)
For the first quarter ended March 31,
2018, represents consulting fees of $1 million, included in Cost of
sales, and employee termination costs of $1 million, included in
Restructuring charges/(reversals) and certain acquisition-related
costs.
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.
(c) For the first quarter ended March 31, 2018, primarily
represents charges related to the implementation of new accounting
guidance as a result of the enactment of the Tax Cuts and Jobs Act.
For the first quarter ended April 2, 2017,
represents costs associated with changes to our operating model,
included in Selling, general and administrative expenses.
(d)
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 March 31, 2018, also includes a
net tax benefit of $2 million related to an adjustment to the
provisional one-time mandatory deemed repatriation tax on the
company's undistributed non-U.S. earnings pursuant to the Tax Cuts
and Jobs Act enacted on December 22, 2017.
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.
Certain amounts may reflect rounding
adjustments.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES AND
INCOME (a)
(UNAUDITED)
(millions of dollars)
First Quarter % Change 2018
2017 Total
ForeignExchange
Operational(b) Adjusted cost of sales $ 444 $
438 1 % 2 % (1 )% as a percent of revenue 32.5 % 35.6 % NA NA NA
Adjusted SG&A expenses $ 336 $ 306 10 % 4 % 6 % Adjusted
R&D expenses 96 89 8 % 2 % 6 % Adjusted net income attributable
to Zoetis 365 261 40 % 6 % 34 % (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. 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 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.
2018 GUIDANCE
Selected Line Items
(millions of dollars, except per share
amounts)
Full Year 2018 Revenue
$5,675 to $5,800 Operational growth(a)
5% to 7% Adjusted cost of sales as a percentage of revenue(b)
Approximately 32% Adjusted SG&A
expenses(b) $1,370 to $1,420 Adjusted R&D
expenses(b) $400 to $420 Adjusted interest
expense and other (income)/deductions(b)
Approximately $190 Effective tax rate on adjusted income(b)
21% to 22% Adjusted diluted EPS(b)
$2.96 to $3.10 Adjusted net income(b)
$1,450 to $1,520 Operational growth(a)(c) 20%
to 26% Certain significant items(d) and acquisition-related costs
$20 to $40
The guidance reflects foreign exchange rates as of mid-April
2018.
Reconciliations of 2018 reported guidance to 2018 adjusted
guidance follows:
(millions of dollars, except per share amounts) Reported
Certain significantitems(d)
andacquisition-relatedcosts
Purchaseaccounting
Adjusted(b) Cost of sales as a
percentage of revenue ~ 32.5% (0.5%)
~ 32% SG&A expenses $1,375 to $1,425
($5) $1,370 to $1,420 R&D expenses
$400 to $420 $400 to $420
Interest expense and other (income)/deductions ~ $190
~ $190 Effective tax rate 21% to
22% 21% to 22% Diluted EPS
$2.77 to $2.93 $0.04 to $0.06 $0.13
$2.96 to $3.10 Net income attributable to Zoetis $1,355 to
$1,435 $20 to $30 $65 $1,450 to $1,520 (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, and adjusted interest expense
and other (income)/deductions are income statement line items
prepared on the same basis, and, therefore, components of the
overall adjusted income measure. Despite the importance of these
measures to management in goal setting and performance measurement,
adjusted net income and its components and adjusted diluted EPS are
non-GAAP financial measures that have no standardized meaning
prescribed by U.S. GAAP and, therefore, have limits in their
usefulness to investors. Because of the non-standardized
definitions, adjusted net income and its components and adjusted
diluted EPS (unlike U.S. GAAP net income and its components and
diluted EPS) may not be comparable to the calculation of similar
measures of other companies. Adjusted net income and its components
and adjusted diluted EPS are presented solely to permit investors
to more fully understand how management assesses performance.
Adjusted net income and its components and adjusted diluted EPS are
not, and should not be viewed as, substitutes for U.S. GAAP net
income and its components and diluted EPS. (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 and other charges for the supply network strategy.
Excludes potential net gains/losses on sales of assets.
ZOETIS INC.
CONSOLIDATED REVENUE BY SEGMENT(a) AND
SPECIES
(UNAUDITED)
(millions of dollars)
First Quarter %
Change 2018 2017 Total
ForeignExchange
Operational(b)
Revenue: Livestock $ 770
$ 703 10% 4% 6% Companion Animal 590 517 14% 3% 11% Contract
Manufacturing 6 11 (45)% 10% (55)%
Total
Revenue $ 1,366 $ 1,231
11% 4% 7%
U.S. Livestock $ 292 $ 282 4% —% 4% Companion Animal 342
323 6% —% 6%
Total U.S. Revenue $
634 $ 605 5% —%
5% International Livestock $ 478 $ 421 14% 7%
7% Companion Animal 248 194 28% 9% 19%
Total
International Revenue $ 726 $
615 18% 7% 11%
Livestock: Cattle $ 416 $ 386 8% 3% 5% Swine 175 160
9% 5% 4% Poultry 136 116 17% 3% 14% Fish 22 21 5% 5% —% Other 21
20 5% 7% (2)%
Total Livestock Revenue $
770 $ 703 10% 4%
6% Companion Animal:
Dogs and Cats
549
482
14%
3%
11%
Horses
$ 41 $ 35 17% 5% 12%
Total Companion Animal Revenue $ 590
$ 517 14% 3% 11% (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, 2017. (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 2018 2017 Total
ForeignExchange
Operational(a)
Total International $ 726
$ 615 18% 7% 11%
Australia 48 40 20% 6% 14%
Brazil 70 66 6%
(1)% 7%
Canada 40 34 18% 5% 13%
China 64 52 23% 9%
14%
France 33 29 14% 15% (1)%
Germany 38 28 36% 19%
17%
Italy 27 22 23% 13% 10%
Japan 41 34 21% 4% 17%
Mexico 24 18 33% 10% 23%
Spain 25 20 25% 15% 10%
United Kingdom 52 43 21% 11% 10%
Other Developed
Markets 79 68 16% 9% 7%
Other Emerging Markets 185 161
15% 5% 10% (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 2018 2017 Total
ForeignExchange
Operational(b)
U.S.:
Revenue $ 634 $ 605 5 % —% 5% Cost of Sales 140 137 2
% —% 2% Gross Profit 494 468 6 % —% 6% Gross Margin 77.9 % 77.4 %
Operating Expenses 96 96 — % —% —% Other (income)/deductions —
— — % —% —%
U.S. Earnings $ 398
$ 372 7 % —% 7%
International:
Revenue $ 726 $ 615 18 % 7% 11% Cost of Sales 234 213
10 % 6% 4% Gross Profit 492 402 22 % 8% 14% Gross Margin 67.8 %
65.4 % Operating Expenses 133 114 17 % 8% 9% Other
(income)/deductions 1 (3 ) * * *
International
Earnings $ 358 $ 291 23
% 8% 15% Total Reportable
Segments $ 756 $ 663 14
% 3% 11% Other business activities(c)
(81 ) (74 ) 9 % Reconciling Items: Corporate(d) (153 ) (143 ) 7 %
Purchase accounting adjustments(e) (23 ) (22 ) 5 %
Acquisition-related costs(f) (1 ) — * Certain significant items(g)
(3 ) (4 ) (25 )% Other unallocated(h) (78 ) (83 ) (6 )%
Total
Earnings(i) $ 417 $
337 24 % * 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, 2017. (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 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20180502005720/en/
Zoetis Inc.MediaBill Price,
1-973-443-2742 (o)william.price@zoetis.comorElinore White,
1-973-443-2835 (o)elinore.y.white@zoetis.comorInvestorsSteve Frank, 1-973-822-7141
(o)steve.frank@zoetis.com
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