- Reports Revenue of $1.5 Billion, Growing 9%, and Net Income
of $371 Million, or $0.77 per Diluted Share, Decreasing 3%, on a
Reported Basis for Second Quarter 2019
- Reports Adjusted Net Income of $436 Million, or Adjusted
Diluted EPS of $0.90, for Second Quarter 2019
- Delivers 14% Operational Growth in Revenue and 17%
Operational Growth in Adjusted Net Income for Second Quarter
2019
- Raises Full Year 2019 Revenue Guidance to $6.175 - $6.275
Billion and Diluted EPS of $2.93 - $3.04 on a Reported Basis, or
$3.53 - $3.60 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the second quarter of 2019 and raised its guidance for full year
2019.
The company reported revenue of $1.5 billion for the second
quarter of 2019, an increase of 9% compared with the second quarter
of 2018. Net income for the second quarter of 2019 was $371
million, or $0.77 per diluted share, a decrease of 3%, on a
reported basis.
Adjusted net income1 for the second quarter of 2019 was $436
million, or $0.90 per diluted share, an increase of 16% and 17%,
respectively, on a reported basis. Adjusted net income for the
second quarter of 2019 excludes the net impact of $65 million for
purchase accounting adjustments, acquisition-related costs and
certain significant items.
On an operational2 basis, revenue for the second quarter of 2019
increased 14%, excluding the impact of foreign currency. Adjusted
net income for the second quarter of 2019 increased 17%
operationally, excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“We continued our strong performance through the first half of
the year, with 14% operational revenue growth in the second
quarter,” said Juan Ramón
Alaix, Chief Executive Officer at Zoetis. “Our companion animal
portfolio is continuing its positive momentum, with 22% operational
revenue growth, based on diagnostic sales from the Abaxis
acquisition, strong sales of our key dermatology products, and
parasiticides. Livestock product sales returned to growth in the
second quarter at 3% operationally, with increases across all
species.”
“We remain confident that our latest innovations combined with
our core business will spur future growth and profitability, and I
am pleased to report that we have increased our full-year guidance
for 2019,” said Alaix.
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
livestock and companion animals, tailored to local trends and
customer needs. In the second quarter of 2019:
- Revenue in the U.S. segment was $780 million, an
increase of 15% compared with the second quarter of 2018. Sales of
companion animal products grew 23% driven primarily by the
acquisition of Abaxis, key dermatology products, and a number of
our in-line products including Simparica®, Clavamox®, Cerenia® and
ProHeart® 6. Sales of livestock products grew 3% in the quarter,
driven primarily by poultry products from increased sales of
alternatives to antibiotics in medicated feed additives.
Promotional activity resulted in modest growth in our swine
portfolio, which was offset by a modest decline in cattle products
due to continued weakness in both the dairy and beef sectors.
- Revenue in the International segment was $742 million,
an increase of 2% on a reported basis and an increase of 10%
operationally, compared with the second quarter of 2018. Sales of
companion animal products grew 12% on a reported basis and 21% on
an operational basis. Growth resulted primarily from increased
sales across our key dermatology portfolio, parasiticides,
including Simparica and Stronghold® Plus, and the acquisition of
Abaxis. Sales of livestock products declined 4% on a reported
basis, but increased 4% operationally. Growth in our poultry
portfolio was driven by increased sales of vaccines and medicated
feed additives. Growth in cattle product sales was the result of a
favorable comparison to the prior year which was negatively
impacted by a national trucking strike in Brazil. Sales of swine
products were flat compared to the prior year, with growth in
vaccines, including new products, offset by the ongoing impact of
African Swine Fever in China.
INVESTMENTS IN GROWTH
Zoetis diversifies and grows its business through the
introduction of new products, lifecycle innovations, business
development initiatives, and entries into new markets and
technologies. The company is increasingly focused on developing
integrated solutions for veterinarians and farmers that span the
continuum of animal healthcare – helping to predict, prevent,
detect and treat diseases.
Zoetis is strengthening its parasiticide portfolio for companion
animals with new internal innovations. In July, the company
received a positive opinion from the European Medicines Agency's
Committee for Medicinal Products for Veterinary Use (CVMP) for our
three-way combination parasiticide for dogs, and looks
forward to the final decision from the European Commission later
this year. Regulatory reviews are also underway in the U.S.,
Canada, Australia, Brazil and Japan, with further submissions
expected in China and Mexico this year. If approved, Zoetis
anticipates this product coming to market in Europe and the U.S. in
2020. The company also recently gained U.S. Food and Drug
Administration (FDA) approval of ProHeart 12 (moxidectin),
the industry’s only once-yearly injection to prevent heartworm
disease in dogs 12 months of age and older.
In the second quarter, Zoetis expanded its Fostera® swine
vaccine franchise with approvals of different formulations in new
geographies. Fostera Gold PCV MH was approved in Brazil.
This vaccine, currently commercially available in the U.S., Canada
and several other markets, provides livestock farmers with greater
options and flexibility in protecting pigs from porcine circovirus
(PCV2) and Mycoplasma hyopneumoniae (M. hyo). Fostera PCV, a
single-dose vaccine that aids in the prevention of PCV2, was also
approved in China.
In addition to new product approvals and lifecycle innovations,
Zoetis continues to support future growth through business
development activities. The company recently announced plans to
acquire Platinum Performance, a privately held,
nutrition-focused animal heath company. Platinum’s premium
nutritional product formulas and unique approach to the field of
scientific wellness for horses, dogs and cats will further
strengthen and diversify Zoetis’ portfolio in the equine and
petcare markets. The acquisition is expected to be completed in the
third quarter of 2019 after customary closing conditions are met.
The company also signed an agreement with Colorado State
University (CSU) to establish a research lab at CSU that will
explore the livestock immune system and target new immunotherapies
that could serve as alternatives to antibiotics in food production
animals.
FINANCIAL GUIDANCE
Zoetis is raising its full year 2019 guidance, which
includes:
- Revenue between $6.175 billion and $6.275 billion
- Reported diluted EPS between $2.93 and $3.04
- Adjusted diluted EPS between $3.53 and $3.60
This increased guidance reflects the ongoing strength and
performance of our business, as well as foreign exchange rates as
of late 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
2019 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. 6, 2019.
About Zoetis
Zoetis is the leading animal health company, dedicated to
supporting its customers and their businesses. Building on more
than 65 years of experience in animal health, Zoetis discovers,
develops, manufactures and commercializes medicines, vaccines and
diagnostic products, which are complemented by biodevices, genetic
tests 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 2018, the company generated annual revenue of $5.8
billion with approximately 10,000 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,
product approvals or products under development, expected timing of
product launches, 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,
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, 2018, 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)
Quarter Ended
Six Months Ended
June 30,
June 30,
2019
2018
% Change
2019
2018
% Change
Revenue
$
1,547
$
1,415
9
$
3,002
$
2,781
8
Costs and expenses:
Cost of sales
465
447
4
983
894
10
Selling, general and administrative
expenses
406
359
13
775
697
11
Research and development expenses
111
102
9
213
199
7
Amortization of intangible assets
39
23
70
77
46
67
Restructuring charges and certain
acquisition-related costs
22
5
*
27
7
*
Interest expense
55
46
20
111
93
19
Other (income)/deductions–net
(6
)
(4
)
50
(20
)
(9
)
*
Income before provision for taxes on
income
455
437
4
836
854
(2)
Provision for taxes on income
84
55
53
153
122
25
Net income before allocation to
noncontrolling interests
371
382
(3)
683
732
(7)
Less: Net loss attributable to
noncontrolling interests
—
(2
)
(100)
—
(4
)
(100)
Net income attributable to Zoetis
$
371
$
384
(3)
$
683
$
736
(7)
Earnings per share—basic
$
0.77
$
0.79
(3)
$
1.43
$
1.52
(6)
Earnings per share—diluted
$
0.77
$
0.79
(3)
$
1.41
$
1.51
(7)
Weighted-average shares used to calculate
earnings per share
Basic
478.8
483.8
479.2
484.8
Diluted
482.3
487.5
482.7
488.6
(a)
The condensed consolidated statements of
income present the quarter and six months ended June 30, 2019 and
June 30, 2018. Subsidiaries operating outside the United States are
included for the quarter and six months ended May 31, 2019 and May
31, 2018.
* Calculation not meaningful.
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 June 30, 2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
465
$
(5
)
$
—
$
(3
)
$
457
Gross profit
1,082
5
—
3
1,090
Selling, general and administrative
expenses
406
(18
)
—
—
388
Research and development expenses
111
(1
)
—
—
110
Amortization of intangible assets
39
(34
)
—
—
5
Restructuring charges and certain
acquisition-related costs
22
—
(22
)
—
—
Income before provision for taxes on
income
455
58
22
3
538
Provision for taxes on income
84
13
4
1
102
Net income attributable to Zoetis
371
45
18
2
436
Earnings per common share attributable to
Zoetis–diluted
0.77
0.09
0.04
—
0.90
Quarter Ended June 30, 2018
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
447
$
(2
)
$
—
$
(2
)
$
443
Gross profit
968
2
—
2
972
Selling, general and administrative
expenses
359
(2
)
—
—
357
Amortization of intangible assets
23
(19
)
—
—
4
Restructuring charges and certain
acquisition-related costs
5
—
—
(5
)
—
Income before provision for taxes on
income
437
23
—
7
467
Provision for taxes on income
55
4
—
35
94
Net income attributable to Zoetis
384
19
—
(28
)
375
Earnings per common share attributable to
Zoetis–diluted
0.79
0.04
—
(0.06
)
0.77
(a)
The condensed consolidated statements of
income present the quarter and six months ended June 30, 2019 and
June 30, 2018. Subsidiaries operating outside the United States are
included for the quarter and six months ended May 31, 2019 and May
31, 2018.
(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).
Certain amounts may reflect rounding
adjustments.
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED
TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS -
Continued
(UNAUDITED)
(millions of dollars, except per
share data)
Six Months Ended June 30,
2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
983
$
(19
)
$
—
$
(73
)
$
891
Gross profit
2,019
19
—
73
2,111
Selling, general and administrative
expenses
775
(36
)
—
—
739
Research and development expenses
213
(1
)
—
—
212
Amortization of intangible assets
77
(68
)
—
—
9
Restructuring charges and certain
acquisition-related costs
27
—
(27
)
—
—
Income before provision for taxes on
income
836
124
27
73
1,060
Provision for taxes on income
153
33
5
9
200
Net income attributable to Zoetis
683
91
22
64
860
Earnings per common share attributable to
Zoetis–diluted
1.41
0.19
0.05
0.13
1.78
Six Months Ended June 30,
2018
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
894
$
(4
)
$
—
$
(3
)
$
887
Gross profit
1,887
4
—
3
1,894
Selling, general and administrative
expenses
697
(3
)
—
(1
)
693
Research and development expenses
199
(1
)
—
—
198
Amortization of intangible assets
46
(38
)
—
—
8
Restructuring charges and certain
acquisition-related costs
7
—
(1
)
(6
)
—
Income before provision for taxes on
income
854
46
1
10
911
Provision for taxes on income
122
15
—
38
175
Net income attributable to Zoetis
736
31
1
(28
)
740
Earnings per common share attributable to
Zoetis–diluted
1.51
0.06
—
(0.06
)
1.51
(a)
The condensed consolidated statements of
income present the quarter and six months ended June 30, 2019 and
June 30, 2018. Subsidiaries operating outside the United States are
included for the quarter and six months ended May 31, 2019 and May
31, 2018.
(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).
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:
Quarter Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Integration costs(a)
$
8
$
—
$
9
$
1
Restructuring charges(b)
14
—
18
—
Total acquisition-related
costs—pre-tax
22
—
27
1
Income taxes(c)
4
—
5
—
Total acquisition-related costs—net of
tax
$
18
$
—
$
22
$
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 and certain acquisition-related costs.
(b)
Represents 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.
Certain amounts may reflect rounding
adjustments.
(2) Certain significant items include the
following:
Quarter Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Operational efficiency initiative(a)
$
—
$
1
$
—
$
1
Supply network strategy(a)
3
3
5
5
Other restructuring charges and
cost-reduction/productivity initiatives(b)
—
3
—
3
Other(c)
—
—
68
1
Total certain significant
items—pre-tax
3
7
73
10
Income taxes(d)
1
35
9
38
Total certain significant items—net of
tax
$
2
$
(28
)
$
64
$
(28
)
(a)
Represents consulting fees and product
transfer costs, included in Cost of sales, and employee termination
costs and exit costs, included in Restructuring charges and certain
acquisition-related costs, related to cost-reduction and
productivity initiatives.
(b)
For the quarter and six months ended June
30, 2018, represents employee termination costs in Europe as a
result of initiatives to better align our organizational structure,
included in Restructuring charges and certain acquisition-related
costs.
(c)
For the six months ended June 30, 2019,
represents a change in estimate related to inventory costing,
included in Cost of sales.
(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 quarter and six months ended June 30, 2018, also
includes a net tax benefit related to a measurement-period
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.
Certain amounts may reflect rounding
adjustments.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES
AND INCOME(a)
(UNAUDITED)
(millions of dollars)
Quarter Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
457
$
443
3%
(9)%
12%
as a percent of revenue
29.5
%
31.3
%
NA
NA
NA
Adjusted SG&A expenses
388
357
9%
(3)%
12%
Adjusted R&D expenses
110
102
8%
(2)%
10%
Adjusted net income attributable to
Zoetis
436
375
16%
(1)%
17%
Six Months Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
891
$
887
—%
(8)%
8%
as a percent of revenue
29.7
%
31.9
%
NA
NA
NA
Adjusted SG&A expenses
739
693
7%
(3)%
10%
Adjusted R&D expenses
212
198
7%
(2)%
9%
Adjusted net income attributable to
Zoetis
860
740
16%
(2)%
18%
(a)
Adjusted cost of sales, adjusted selling,
general, and administrative (SG&A) expenses, adjusted research
and development (R&D) expenses, and adjusted net income
attributable to Zoetis (non-GAAP financial measures) are defined as
the corresponding reported U.S. 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.
2019 GUIDANCE
Selected Line Items
(millions of dollars, except per share
amounts)
Full Year 2019
Revenue
$6,175 to $6,275
Operational growth(a)
8.5% to 10.0%
Organic operational growth(b)
5.5% to 7.0%
Adjusted cost of sales as a percentage of
revenue(c)
30% to 31%
Adjusted SG&A expenses(c)
$1,505 to $1,545
Adjusted R&D expenses(c)
$450 to $465
Adjusted interest expense and other
(income)/deductions(c)
Approximately $190
Effective tax rate on adjusted
income(c)
Approximately 20%
Adjusted diluted EPS(c)
$3.53 to $3.60
Adjusted net income(c)
$1,700 to $1,735
Operational growth(a)(d)
9% to 12%
Certain significant items and
acquisition-related costs(e)
$110 to $130
The guidance reflects foreign exchange rates as of late July
2019.
Reconciliations of 2019 reported guidance to 2019 adjusted
guidance follows:
(millions of dollars, except per share
amounts)
Reported
Certain significant items and
acquisition-related costs(e)
Purchase accounting
Adjusted(c)
Cost of sales as a percentage of
revenue
31.8% - 32.8%
~ (1.3%)
~ (0.5%)
30% - 31%
SG&A expenses
$1,580 to $1,620
($75)
$1,505 to $1,545
R&D expenses
$452 to $467
($2)
$450 to $465
Interest expense and other
(income)/deductions
~ $190
~ $190
Effective tax rate
~ 20%
~ 20%
Diluted EPS
$2.93 to $3.04
$0.19 to $0.23
$0.37
$3.53 to $3.60
Net income attributable to Zoetis
$1,410 to $1,465
$90 to $110
~ $180
$1,700 to $1,735
(a)
Operational growth (a non-GAAP financial
measure) excludes the impact of foreign exchange.
(b)
Organic operational growth (a non-GAAP
financial measure) excludes the impact of the acquisition of Abaxis
as well as foreign exchange.
(c)
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.
(d)
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.
(e)
Primarily includes certain nonrecurring
costs related to the acquisition of Abaxis and other charges.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Quarter Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Revenue:
Livestock
$
724
$
734
(1)%
(4)%
3%
Companion Animal
798
671
19%
(3)%
22%
Contract Manufacturing & Human Health
Diagnostics
25
10
*
*
*
Total Revenue
$
1,547
$
1,415
9%
(5)%
14%
U.S.
Livestock
$
280
$
271
3%
—%
3%
Companion Animal
500
406
23%
—%
23%
Total U.S. Revenue
$
780
$
677
15%
—%
15%
International
Livestock
$
444
$
463
(4)%
(8)%
4%
Companion Animal
298
265
12%
(9)%
21%
Total International Revenue
$
742
$
728
2%
(8)%
10%
Livestock:
Cattle
$
379
$
396
(4)%
(5)%
1%
Swine
158
165
(4)%
(5)%
1%
Poultry
143
129
11%
(4)%
15%
Fish
25
24
4%
(2)%
6%
Other
19
20
(5)%
(5)%
—%
Total Livestock Revenue
$
724
$
734
(1)%
(4)%
3%
Companion Animal:
Dogs and Cats
$
754
$
630
20%
(3)%
23%
Horses
44
41
7%
(3)%
10%
Total Companion Animal Revenue
$
798
$
671
19%
(3)%
22%
(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.
*Calculation not meaningful.
Certain amounts and percentages may
reflect rounding adjustments.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES - Continued
(UNAUDITED)
(millions of dollars)
Six Months Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Revenue:
Livestock
$
1,431
$
1,504
(5)%
(5)%
—%
Companion Animal
1,527
1,261
21%
(4)%
25%
Contract Manufacturing & Human Health
Diagnostics
44
16
*
*
*
Total Revenue
$
3,002
$
2,781
8%
(4)%
12%
U.S.
Livestock
$
553
$
563
(2)%
—%
(2)%
Companion Animal
945
748
26%
—%
26%
Total U.S. Revenue
$
1,498
$
1,311
14%
—%
14%
International
Livestock
$
878
$
941
(7)%
(8)%
1%
Companion Animal
582
513
13%
(9)%
22%
Total International Revenue
$
1,460
$
1,454
—%
(8)%
8%
Livestock:
Cattle
$
759
$
812
(7)%
(6)%
(1)%
Swine
307
340
(10)%
(5)%
(5)%
Poultry
282
265
6%
(5)%
11%
Fish
48
46
4%
(3)%
7%
Other
35
41
(15)%
(6)%
(9)%
Total Livestock Revenue
$
1,431
$
1,504
(5)%
(5)%
—%
Companion Animal:
Dogs and Cats
$
1,442
$
1,179
22%
(4)%
26%
Horses
85
82
4%
(4)%
8%
Total Companion Animal Revenue
$
1,527
$
1,261
21%
(4)%
25%
(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.
*Calculation not meaningful.
Certain amounts and percentages may
reflect rounding adjustments.
ZOETIS INC.
CONSOLIDATED REVENUE BY KEY
INTERNATIONAL MARKETS
(UNAUDITED)
(millions of dollars)
Quarter Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(a)
Total International
$
741.9
$
727.9
2%
(8)%
10%
Australia
48.8
50.9
(4)%
(8)%
4%
Brazil
74.2
68.3
9%
(15)%
24%
Canada
53.7
55.6
(3)%
(4)%
1%
China
56.0
60.1
(7)%
(6)%
(1)%
France
27.1
29.5
(8)%
(8)%
—%
Germany
39.1
38.4
2%
(8)%
10%
Italy
27.6
26.1
6%
(8)%
14%
Japan
41.1
39.1
5%
(3)%
8%
Mexico
29.9
25.5
17%
(3)%
20%
Spain
30.0
30.0
—%
(8)%
8%
United Kingdom
42.3
36.1
17%
(7)%
24%
Other developed markets
88.1
88.9
(1)%
(6)%
5%
Other emerging markets
184.0
179.4
3%
(10)%
13%
Six Months Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(a)
Total International
$
1,459.9
$
1,453.8
—%
(8)%
8%
Australia
96.8
98.5
(2)%
(9)%
7%
Brazil
134.3
137.9
(3)%
(15)%
12%
Canada
94.8
95.8
(1)%
(5)%
4%
China
115.5
124.0
(7)%
(6)%
(1)%
France
59.4
62.7
(5)%
(7)%
2%
Germany
75.6
75.9
—%
(7)%
7%
Italy
55.7
53.2
5%
(7)%
12%
Japan
78.4
80.0
(2)%
(1)%
(1)%
Mexico
58.0
49.9
16%
(3)%
19%
Spain
57.1
55.3
3%
(7)%
10%
United Kingdom
99.0
88.2
12%
(8)%
20%
Other developed markets
171.9
168.2
2%
(6)%
8%
Other emerging markets
363.4
364.2
—%
(11)%
11%
(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)
Quarter Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
780
$
677
15%
—%
15%
Cost of Sales
158
140
13%
—%
13%
Gross Profit
622
537
16%
—%
16%
Gross Margin
79.7
%
79.3
%
Operating Expenses
127
116
9%
—%
9%
Other (income)/deductions
—
—
—%
—%
—%
U.S. Earnings
$
495
$
421
18%
—%
18%
International:
Revenue
$
742
$
728
2%
(8)%
10%
Cost of Sales
218
229
(5)%
(13)%
8%
Gross Profit
524
499
5%
(6)%
11%
Gross Margin
70.6
%
68.5
%
Operating Expenses
146
147
(1)%
(10)%
9%
Other (income)/deductions
—
2
*
*
*
International Earnings
$
378
$
350
8%
(4)%
12%
Total Reportable Segments
$
873
$
771
13%
(2)%
15%
Other business activities(c)
(79
)
(82
)
(4)%
Reconciling Items:
Corporate(d)
(178
)
(139
)
28%
Purchase accounting adjustments(e)
(58
)
(23
)
*
Acquisition-related costs(f)
(22
)
—
*
Certain significant items(g)
(3
)
(7
)
(57)%
Other unallocated(h)
(78
)
(83
)
(6)%
Total Earnings(i)
$
455
$
437
4%
(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 diagnostic 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 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.
Certain amounts and percentages may
reflect rounding adjustments.
ZOETIS INC.
SEGMENT(a) EARNINGS -
Continued
(UNAUDITED)
(millions of dollars)
Six Months Ended
June 30,
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
1,498
$
1,311
14%
—%
14%
Cost of Sales
305
280
9%
—%
9%
Gross Profit
1,193
1,031
16%
—%
16%
Gross Margin
79.6
%
78.6
%
Operating Expenses
237
212
12%
—%
12%
Other (income)/deductions
—
—
—%
—%
—%
U.S. Earnings
$
956
$
819
17%
—%
17%
International:
Revenue
$
1,460
$
1,454
—%
(8)%
8%
Cost of Sales
428
463
(8)%
(12)%
4%
Gross Profit
1,032
991
4%
(7)%
11%
Gross Margin
70.7
%
68.2
%
Operating Expenses
278
280
(1)%
(10)%
9%
Other (income)/deductions
—
3
*
*
*
International Earnings
$
754
$
708
6%
(5)%
11%
Total Reportable Segments
$
1,710
$
1,527
12%
(2)%
14%
Other business activities(c)
(159
)
(163
)
(2)%
Reconciling Items:
Corporate(d)
(340
)
(292
)
16%
Purchase accounting adjustments(e)
(124
)
(46
)
*
Acquisition-related costs(f)
(27
)
(1
)
*
Certain significant items(g)
(73
)
(10
)
*
Other unallocated(h)
(151
)
(161
)
(6)%
Total Earnings(i)
$
836
$
854
(2)%
(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 diagnostic 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 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.
Certain amounts and percentages may
reflect rounding adjustments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190806005485/en/
Media: Bill Price 1-973-443-2742
(o) william.price@zoetis.com
Kristen Seely 1-973-443-2777 (o) kristen.seely@zoetis.com
Investors: Steve Frank
1-973-822-7141 (o) steve.frank@zoetis.com
Marissa Patel 1-973-443-2996 (o) marissa.patel@zoetis.com
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