- Reports Flat Revenue of $1.5 Billion, and Net Income of $377
Million, or $0.79 per Diluted Share, Increasing 2% and 3%,
Respectively, on a Reported Basis for Second Quarter 2020
- Reports Adjusted Net Income of $427 Million, or Adjusted
Diluted EPS of $0.89 for Second Quarter 2020
- Delivers 4% Operational Growth in Revenue and 4% Operational
Growth in Adjusted Net Income for Second Quarter 2020
- Raises and Narrows Full Year 2020 Revenue Guidance to $6.300
- $6.475 Billion and Diluted EPS of $3.14 - $3.32 on a Reported
Basis, or $3.52 - $3.68 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the second quarter of 2020 and raised and narrowed its guidance for
full year 2020 to reflect the company’s current view of the
estimated full-year impact of the COVID-19 pandemic and foreign
currency headwinds.
The company reported revenue of $1.5 billion for the second
quarter of 2020, which is flat compared with the second quarter of
2019. Net income for the second quarter of 2020 was $377 million,
or $0.79 per diluted share, an increase of 2% and 3%, respectively,
on a reported basis.
Adjusted net income1 for the second quarter of 2020 was $427
million, or $0.89 per diluted share, a decrease of 2%, on a
reported basis. Adjusted net income for the second quarter of 2020
excludes the net impact of $50 million for purchase accounting
adjustments, acquisition-related costs and certain significant
items.
On an operational2 basis, revenue for the second quarter of 2020
increased 4%, excluding the impact of foreign currency. Adjusted
net income for the second quarter of 2020 increased 4%
operationally, excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“As an essential business supporting the global food supply and
the care of people’s pets during the pandemic, Zoetis demonstrated
greater resiliency than expected in the second quarter, with 4%
operational growth in revenue and 4% operational growth in adjusted
net income,” said Kristin Peck, Chief Executive Officer of Zoetis.
“Our strong companion animal portfolio, based on our internal
innovations, helped offset some of the deeper challenges in the
livestock market today.”
“Looking ahead, we expect our overall revenue growth for the
remainder of the year to be driven largely by companion animal
products, especially parasiticides and our key dermatology
portfolio, and we are raising our guidance to reflect our current
outlook for the year. We will continue to invest in products that
will strengthen the innovations and digital solutions that are
needed by our customers across the continuum of care – from
prediction and prevention to detection and treatment of diseases,”
said Peck.
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across
two segments: United States (U.S.) and International. Within these
segments, the company delivers a diverse portfolio of products for
companion animals and livestock, tailored to local trends and
customer needs. In the second quarter of 2020:
- Revenue in the U.S. segment was $823 million, an
increase of 6% compared with the second quarter of 2019. Sales of
companion animal products increased 19% driven primarily by growth
in the Simparica® franchise, including the continued launch of
Simparica Trio®, the company’s new triple combination parasiticide
for dogs. Also contributing to growth was the company’s key
dermatology portfolio across both the Cytopoint® and Apoquel®
brands. Additionally, companion animal sales benefited from the
recent acquisitions of Platinum Performance and its nutritional
product formulas, as well as a number of regional diagnostic
reference labs. Sales of livestock products decreased 18% in the
quarter. Disruptions in the food supply chain including reduced
producer processing capacity and continued channel migration from
dining out to preparing food at home impacted producer
profitability and resulted in a decline across each of the cattle,
swine and poultry portfolios. The decline in the cattle portfolio
was also the result of continued unfavorable market conditions in
beef and dairy, while swine product sales were negatively impacted
by increased competition.
- Revenue in the International segment was $708 million, a
decrease of 5% on a reported basis and an increase of 3%
operationally compared with the second quarter of 2019. Sales of
companion animal products declined 3% on a reported basis and grew
2% on an operational basis. Growth resulted from increased sales of
the company’s key dermatology portfolio across both the Apoquel and
Cytopoint brands, as well as the Simparica franchise, including the
launch of Simparica Trio in Canada and certain markets in the EU.
Sales of companion animal products in China continued to grow
rapidly driven by strong underlying market dynamics. Growth in
companion animal products was partially offset by the impact of
COVID-19 and social distancing measures in certain EU markets and
in Latin America, including Brazil, that resulted in decreased
veterinary clinic traffic. Sales of livestock products declined 5%
on a reported basis and grew 4% operationally. Sales of swine
products grew as a result of expanding herd production in key
accounts and increased biosecurity measures in the wake of African
Swine Fever in China. The timing of seasonal vaccination protocols
in key salmon markets and the recently launched parasiticide Alpha
Flux® were the primary drivers of growth in fish. Growth in our
poultry portfolio was the result of increased sales of medicated
feed additives and sales of biodevices. Sales of cattle products
declined in the quarter due to the impact of COVID-19 in certain
markets as well as the discontinuation of non-core products in
Brazil.
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 pet owners, veterinarians and farmers that
span the continuum of animal care - helping to predict, prevent,
detect and treat diseases.
Since our last quarterly earnings announcement, Zoetis continued
to bring leading products into new markets. In Brazil, Zoetis
received approval for Vanguard® B Oral, a vaccine that aids
in preventing kennel cough in dogs, as well as Excenel® RTU
EZ (ceftiofur hydrochloride), an anti-infective that treats
respiratory diseases in cattle and swine. Additionally, Fostera®
Gold PCV MH was approved in Australia. This vaccine provides
livestock farmers with greater options and flexibility to reduce
the clinical symptoms in pigs associated with porcine circovirus
(PCV2) and Mycoplasma hyopneumoniae (M. hyo). Fostera Gold
PCV Metastim was also approved in Australia to reduce
the clinical symptoms associated with PCV2.
In addition to new product approvals and lifecycle innovations,
Zoetis continues to support future growth through business
development activities. In July, the company acquired Fish Vet
Group as a strategic addition to its Pharmaq business, which
develops and commercializes fish vaccines and offers services in
vaccination and diagnostics for aquaculture. Adding Fish Vet Group
grows the geographic reach and enhances the diagnostics expertise
and testing services for fish farmers in major aquaculture
markets.
FINANCIAL GUIDANCE
Zoetis is raising and narrowing its full year 2020 guidance,
which includes:
- Revenue between $6.300 billion and $6.475 billion
- Reported diluted EPS between $3.14 and $3.32
- Adjusted diluted EPS between $3.52 and $3.68
This guidance reflects foreign exchange rates as of mid-July.
Additional details on guidance are included in the financial tables
and will be discussed on the company's conference call this
morning.
WEBCAST & CONFERENCE CALL
DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (ET)
today, during which company executives will review second quarter
2020 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, 2020.
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 precision livestock farming.
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 2019, the company generated
annual revenue of $6.3 billion with approximately 10,600 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; the potential impact of the coronavirus
(COVID-19) pandemic on our business, suppliers, customers and
employees; expectations regarding the performance of acquired
companies and our ability to integrate new businesses; expectations
regarding the financial impact of acquisitions; future use of cash
and dividend payments; tax rate and tax regimes; 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, 2019,
including in the sections thereof captioned “Forward-Looking
Statements and Factors That May Affect Future Results” and “Item
1A. Risk Factors,” in our Quarterly Reports on Form 10-Q and in our
Current Reports on Form 8-K. Such risks and uncertainties may be
amplified by the coronavirus (COVID-19) pandemic and its potential
impact on the global economy and our business. These filings and
subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as adjusted net income,
adjusted diluted earnings per share and operational results (which
exclude the impact of foreign exchange), to assess and analyze our
results and trends and to make financial and operational decisions.
We believe these non-GAAP financial measures are also useful to
investors because they provide greater transparency regarding our
operating performance. The non-GAAP financial measures included in
this press release should not be considered alternatives to
measurements required by GAAP, such as net income, operating
income, and earnings per share, and should not be considered
measures of liquidity. These non-GAAP financial measures are
unlikely to be comparable with non-GAAP information provided by
other companies. Reconciliation of non-GAAP financial measures and
GAAP financial measures are included in the tables accompanying
this press release and are posted on our website at www.zoetis.com.
Internet Posting of Information: We
routinely post information that may be important to investors in
the 'Investors' section of our website at www.zoetis.com, on our Facebook page at
http://www.facebook.com/zoetis and on
Twitter@zoetis. We encourage investors and potential investors to
consult our website regularly and to follow us on Facebook and
Twitter for important information about us.
ZTS-IR ZTS-FIN
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,
2020
2019
% Change
2020
2019
% Change
Revenue
$
1,548
$
1,547
—
$
3,082
$
3,002
3
Costs and expenses:
Cost of sales
451
465
(3)
910
983
(7)
Selling, general and administrative
expenses
393
406
(3)
782
775
1
Research and development expenses
111
111
—
218
213
2
Amortization of intangible assets
40
39
3
80
77
4
Restructuring charges and certain
acquisition-related costs
8
22
(64)
17
27
(37)
Interest expense, net of capitalized
interest
58
55
5
111
111
—
Other (income)/deductions—net
5
(6)
*
(15)
(20)
(25)
Income before provision for taxes on
income
482
455
6
979
836
17
Provision for taxes on income
106
84
26
180
153
18
Net income before allocation to
noncontrolling interests
376
371
1
799
683
17
Less: Net loss attributable to
noncontrolling interests
(1)
—
*
(1)
—
*
Net income attributable to Zoetis
$
377
$
371
2
$
800
$
683
17
Earnings per share—basic
$
0.79
$
0.77
3
$
1.68
$
1.43
17
Earnings per share—diluted
$
0.79
$
0.77
3
$
1.67
$
1.41
18
Weighted-average shares used to calculate
earnings per share
Basic
475.3
478.8
475.4
479.2
Diluted
478.1
482.3
478.6
482.7
(a)
The condensed consolidated statements of
income present the quarter and six months ended June 30, 2020 and
June 30, 2019. Subsidiaries operating outside the United States are
included for the quarter and six months ended May 31, 2020 and May
31, 2019.
* Calculation not meaningful.
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED
TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per
share data)
Quarter Ended June 30, 2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
451
$
(2)
$
—
$
(1)
$
448
Gross profit
1,097
2
—
1
1,100
Selling, general and administrative
expenses
393
(17)
—
(4)
372
Research and development expenses
111
(1)
—
—
110
Amortization of intangible assets
40
(33)
—
—
7
Restructuring charges and certain
acquisition-related costs
8
—
(7)
(1)
—
Other (income)/deductions–net
5
—
—
—
5
Income before provision for taxes on
income
482
53
7
6
548
Provision for taxes on income
106
14
1
1
122
Net income attributable to Zoetis
377
39
6
5
427
Earnings per common share attributable to
Zoetis–diluted
0.79
0.08
0.01
0.01
0.89
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)
—
—
Other (income)/deductions–net
(6)
—
—
—
(6)
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
(a)
The condensed consolidated statements of
income present the quarter and six months ended June 30, 2020 and
June 30, 2019. Subsidiaries operating outside the United States are
included for the second quarter ended May 31, 2020 and May 31,
2019.
(b)
Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS. Despite the importance of these
measures to management in goal setting and performance measurement,
non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the
non-standardized definitions, non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable to
the calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED
TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS -
Continued
(UNAUDITED)
(millions of dollars, except per
share data)
Six Months Ended June 30,
2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
910
$
(4)
$
—
$
(3)
$
903
Gross profit
2,172
4
—
3
2,179
Selling, general and administrative
expenses
782
(35)
—
(6)
741
Research and development expenses
218
(1)
—
—
217
Amortization of intangible assets
80
(67)
—
—
13
Restructuring charges and certain
acquisition-related costs
17
—
(14)
(3)
—
Other (income)/deductions–net
(15)
—
—
17
2
Income before provision for taxes on
income
979
107
14
(5)
1,095
Provision for taxes on income
180
36
—
(2)
214
Net income attributable to Zoetis
800
71
14
(3)
882
Earnings per common share attributable to
Zoetis–diluted
1.67
0.15
0.03
(0.01)
1.84
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)
—
—
Other (income)/deductions–net
(20)
—
—
—
(20)
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
(a)
The condensed consolidated statements of
income present the quarter and six months ended June 30, 2020 and
June 30, 2019. Subsidiaries operating outside the United States are
included for the second quarter ended May 31, 2020 and May 31,
2019.
(b)
Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS. Despite the importance of these
measures to management in goal setting and performance measurement,
non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the
non-standardized definitions, non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable to
the calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
ZOETIS INC.
NOTES TO RECONCILIATION OF GAAP
REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars)
(1) Acquisition-related costs include the
following:
Quarter Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Integration costs(a)
$
6
$
8
$
12
$
9
Restructuring charges(b)
1
14
2
18
Total acquisition-related
costs—pre-tax
7
22
14
27
Income taxes(c)
1
4
—
5
Total acquisition-related costs—net of
tax
$
6
$
18
$
14
$
22
(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. For the six months ended June 30, 2020, also includes a tax
charge related to a remeasurement of deferred taxes resulting from
the integration of acquired businesses.
(2) Certain significant items include the
following:
Quarter Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Operational efficiency initiative(a)
$
—
$
—
$
(17)
$
—
Supply network strategy(b)
1
3
3
5
Other restructuring charges and
cost-reduction/productivity initiatives(c)
1
—
3
—
Other(d)
4
—
6
68
Total certain significant
items—pre-tax
6
3
(5)
73
Income taxes(e)
1
1
(2)
9
Total certain significant items—net of
tax
$
5
$
2
$
(3)
$
64
(a)
Represents a net gain resulting from net
cash proceeds received pursuant to an agreement related to the 2016
sale of certain U.S. manufacturing sites, included in Other
(income)/deductions-net.
(b)
Represents consulting fees, included in
Cost of sales, related to cost-reduction and productivity
initiatives.
(c)
Represents employee termination costs
incurred as a result of the CEO transition, included in
Restructuring charges and certain acquisition-related costs.
(d)
For the quarter and six months ended June
30, 2020, primarily represents the modification of share-based
compensation related to CEO transition costs, included in Selling,
general and administrative expenses. For the six months ended June
30, 2019, represents a change in estimate related to inventory
costing, included in Cost of sales.
(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 pretax amounts and applying that jurisdiction's applicable tax
rate.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES
AND INCOME(a)
(UNAUDITED)
(millions of dollars)
Quarter Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
448
$
457
(2)
%
(2)
%
—
%
as a percent of revenue
28.9
%
29.5
%
NA
NA
NA
Adjusted SG&A expenses
372
388
(4)
%
(3)
%
(1)
%
Adjusted R&D expenses
110
110
—
%
(1)
%
1
%
Adjusted net income attributable to
Zoetis
427
436
(2)
%
(6)
%
4
%
Six Months Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
903
$
891
1
%
(2)
%
3
%
as a percent of revenue
29.3
%
29.7
%
NA
NA
NA
Adjusted SG&A expenses
741
739
—
%
(2)
%
2
%
Adjusted R&D expenses
217
212
2
%
(1)
%
3
%
Adjusted net income attributable to
Zoetis
882
860
3
%
(4)
%
7
%
(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 Income and Reconciliation of GAAP Reported to
Non-GAAP Adjusted Information.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
ZOETIS INC.
2020 GUIDANCE
Selected Line Items (millions of dollars,
except per share amounts)
Full Year 2020
Foreign exchange impact
compared to May 2020 guidance
Revenue
$6,300 to $6,475
~ $50
Operational growth(a)
3% to 6%
Adjusted cost of sales as a percentage of
revenue(b)
30% to 31%
Adjusted SG&A expenses(b)
$1,530 to $1,590
~ $10
Adjusted R&D expenses(b)
$440 to $465
~ $2
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $250
Effective tax rate on adjusted
income(b)
20% to 21%
Adjusted diluted EPS(b)
$3.52 to $3.68
~ $0.02
Adjusted net income(b)
$1,685 to $1,765
~ $10
Operational growth(a)(c)
1% to 5%
Certain significant items and
acquisition-related costs(d)
$25 to $35
The guidance reflects the current view of the estimated full
year impact of the COVID-19 outbreak, recessionary conditions in
the global economy and foreign exchange rates as of mid-July
2020.
Reconciliations of 2020 reported guidance to 2020 adjusted
guidance follows:
(millions of dollars, except per share
amounts)
Reported
Certain significant items and
acquisition-related costs(d)
Purchase accounting
Adjusted(b)
Cost of sales as a percentage of
revenue
30.2% to 31.2%
~ (0.1%)
~ (0.1%)
30.0% to 31.0%
SG&A expenses
$1,604 to $1,664
~ ($9)
~ ($65)
$1,530 to $1,590
R&D expenses
$442 to $467
~ ($2)
$440 to $465
Interest expense and other
(income)/deductions-net
~ $233
$17
~ $250
Effective tax rate
19.5% to 20.5%
~ 0.5%
20% to 21%
Diluted EPS
$3.14 to $3.32
$0.05 to $0.07
~ $0.31
$3.52 to $3.68
Net income attributable to Zoetis
$1,500 to $1,590
$25 to $35
~ $150
$1,685 to $1,765
(a)
Operational growth (a non-GAAP financial
measure) excludes the impact of foreign exchange.
(b)
Adjusted net income and its components and
adjusted diluted EPS are defined as reported U.S. GAAP net income
and its components and reported diluted EPS excluding purchase
accounting adjustments, acquisition-related costs and certain
significant items. Adjusted cost of sales, adjusted SG&A
expenses, adjusted R&D expenses, and adjusted interest expense
and other (income)/deductions-net are income statement line items
prepared on the same basis, and, therefore, components of the
overall adjusted income measure. Despite the importance of these
measures to management in goal setting and performance measurement,
adjusted net income and its components and adjusted diluted EPS are
non-GAAP financial measures that have no standardized meaning
prescribed by U.S. GAAP and, therefore, have limits in their
usefulness to investors. Because of the non-standardized
definitions, adjusted net income and its components and adjusted
diluted EPS (unlike U.S. GAAP net income and its components and
diluted EPS) may not be comparable to the calculation of similar
measures of other companies. Adjusted net income and its components
and adjusted diluted EPS are presented solely to permit investors
to more fully understand how management assesses performance.
Adjusted net income and its components and adjusted diluted EPS are
not, and should not be viewed as, substitutes for U.S. GAAP net
income and its components and diluted EPS.
(c)
We do not provide a reconciliation of
forward-looking non-GAAP adjusted net income operational growth to
the most directly comparable U.S. GAAP reported financial measure
because we are unable to calculate with reasonable certainty the
foreign exchange impact of unusual gains and losses,
acquisition-related expenses, potential future asset impairments
and other certain significant items, without unreasonable effort.
The foreign exchange impacts of these items are uncertain, depend
on various factors, and could have a material impact on U.S. GAAP
reported results for the guidance period.
(d)
Primarily includes certain nonrecurring
costs related to acquisitions and other charges.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Quarter Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
882
$
798
11
%
(2)
%
13
%
Livestock
649
724
(10)
%
(5)
%
(5)
%
Contract Manufacturing & Human
Health
17
25
(32)
%
1
%
(33)
%
Total Revenue
$
1,548
$
1,547
—
%
(4)
%
4
%
U.S.
Companion Animal
$
594
$
500
19
%
—
%
19
%
Livestock
229
280
(18)
%
—
%
(18)
%
Total U.S. Revenue
$
823
$
780
6
%
—
%
6
%
International
Companion Animal
$
288
$
298
(3)
%
(5)
%
2
%
Livestock
420
444
(5)
%
(9)
%
4
%
Total International Revenue
$
708
$
742
(5)
%
(8)
%
3
%
Companion Animal:
Dogs and Cats
$
831
$
754
10
%
(2)
%
12
%
Horses
51
44
16
%
(4)
%
20
%
Total Companion Animal Revenue
$
882
$
798
11
%
(2)
%
13
%
Livestock:
Cattle
$
320
$
379
(16)
%
(6)
%
(10)
%
Swine
146
158
(8)
%
(6)
%
(2)
%
Poultry
135
143
(6)
%
(5)
%
(1)
%
Fish
30
25
20
%
(7)
%
27
%
Sheep and other
18
19
(5)
%
(13)
%
8
%
Total Livestock Revenue
$
649
$
724
(10)
%
(5)
%
(5)
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES - Continued
(UNAUDITED)
(millions of dollars)
Six Months Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
1,679
$
1,527
10
%
(2)
%
12
%
Livestock
1,366
1,431
(5)
%
(4)
%
(1)
%
Contract Manufacturing & Human
Health
37
44
(16)
%
(1)
%
(15)
%
Total Revenue
$
3,082
$
3,002
3
%
(2)
%
5
%
U.S.
Companion Animal
$
1,093
$
945
16
%
—
%
16
%
Livestock
516
553
(7)
%
—
%
(7)
%
Total U.S. Revenue
$
1,609
$
1,498
7
%
—
%
7
%
International
Companion Animal
$
586
$
582
1
%
(4)
%
5
%
Livestock
850
878
(3)
%
(6)
%
3
%
Total International Revenue
$
1,436
$
1,460
(2)
%
(6)
%
4
%
Companion Animal:
Dogs and Cats
$
1,577
$
1,442
9
%
(2)
%
11
%
Horses
102
85
20
%
(2)
%
22
%
Total Companion Animal Revenue
$
1,679
$
1,527
10
%
(2)
%
12
%
Livestock:
Cattle
$
690
$
759
(9)
%
(4)
%
(5)
%
Swine
303
307
(1)
%
(3)
%
2
%
Poultry
283
282
—
%
(3)
%
3
%
Fish
56
48
17
%
(4)
%
21
%
Sheep and other
34
35
(3)
%
(10)
%
7
%
Total Livestock Revenue
$
1,366
$
1,431
(5)
%
(4)
%
(1)
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
CONSOLIDATED REVENUE BY KEY
INTERNATIONAL MARKETS
(UNAUDITED)
(millions of dollars)
Quarter Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(a)
Total International
$
707.3
$
741.9
(5)
%
(8)
%
3
%
Australia
50.8
48.8
4
%
(12)
%
16
%
Brazil
56.3
74.2
(24)
%
(26)
%
2
%
Canada
53.9
53.7
—
%
(5)
%
5
%
Chile
25.4
22.0
15
%
(8)
%
23
%
China
66.4
56.0
19
%
(5)
%
24
%
France
23.7
27.1
(13)
%
(2)
%
(11)
%
Germany
40.1
39.1
3
%
(2)
%
5
%
Italy
14.1
27.6
(49)
%
(1)
%
(48)
%
Japan
52.8
41.1
28
%
3
%
25
%
Mexico
25.5
29.9
(15)
%
(19)
%
4
%
Spain
23.9
30.0
(20)
%
(1)
%
(19)
%
United Kingdom
25.5
42.3
(40)
%
(4)
%
(36)
%
Other developed markets
90.3
88.1
2
%
(6)
%
8
%
Other emerging markets
158.6
162.0
(2)
%
(8)
%
6
%
Six Months Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(a)
Total International
$
1,435.7
$
1,460.2
(2)
%
(6)
%
4
%
Australia
94.1
96.8
(3)
%
(8)
%
5
%
Brazil
119.1
134.3
(11)
%
(19)
%
8
%
Canada
94.0
94.8
(1)
%
(2)
%
1
%
Chile
48.4
41.7
16
%
(7)
%
23
%
China
132.1
115.5
14
%
(4)
%
18
%
France
52.7
59.4
(11)
%
(2)
%
(9)
%
Germany
73.6
75.6
(3)
%
(3)
%
—
%
Italy
35.6
55.7
(36)
%
(2)
%
(34)
%
Japan
94.3
78.4
20
%
2
%
18
%
Mexico
57.7
58.0
(1)
%
(8)
%
7
%
Spain
52.0
57.1
(9)
%
(3)
%
(6)
%
United Kingdom
80.6
99.0
(19)
%
(1)
%
(18)
%
Other developed markets
177.0
171.9
3
%
(4)
%
7
%
Other emerging markets
324.5
322.0
1
%
(6)
%
7
%
(a)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
SEGMENT(a) EARNINGS
(UNAUDITED)
(millions of dollars)
Quarter Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
823
$
780
6
%
—
%
6
%
Cost of Sales
154
158
(3)
%
—
%
(3)
%
Gross Profit
669
622
8
%
—
%
8
%
Gross Margin
81.3
%
79.7
%
Operating Expenses
136
127
7
%
—
%
7
%
Other (income)/deductions-net
3
—
*
*
*
U.S. Earnings
$
530
$
495
7
%
—
%
7
%
International:
Revenue
$
708
$
742
(5)
%
(8)
%
3
%
Cost of Sales
228
218
5
%
(5)
%
10
%
Gross Profit
480
524
(8)
%
(9)
%
1
%
Gross Margin
67.8
%
70.6
%
Operating Expenses
117
146
(20)
%
(8)
%
(12)
%
Other (income)/deductions-net
1
—
*
*
*
International Earnings
$
362
$
378
(4)
%
(9)
%
5
%
Total Reportable Segments
$
892
$
873
2
%
(4)
%
6
%
Other business activities(c)
(90)
(79)
14
%
Reconciling Items:
Corporate(d)
(179)
(178)
1
%
Purchase accounting adjustments(e)
(53)
(58)
(9)
%
Acquisition-related costs(f)
(7)
(22)
(68)
%
Certain significant items(g)
(6)
(3)
*
Other unallocated(h)
(75)
(78)
(4)
%
Total Earnings(i)
$
482
$
455
6
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
(c)
Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing
business and human health business.
(d)
Corporate includes, among other things,
administration expenses, interest expense, certain compensation
costs, certain procurement costs, and other costs not charged to
our operating segments.
(e)
Purchase accounting adjustments include
certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f)
Acquisition-related costs include costs
associated with acquiring and integrating newly acquired
businesses, such as transaction costs and integration costs.
(g)
Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include
restructuring charges and implementation costs associated with our
cost-reduction/productivity initiatives that are not associated
with an acquisition, costs associated with the operational
efficiency initiative and supply network strategy, and the impact
of divestiture-related gains and losses.
(h)
Includes overhead expenses associated with
our manufacturing and supply operations not directly attributable
to an operating segment, as well as certain procurement costs.
(i)
Defined as income before provision for
taxes on income.
* Calculation not meaningful.
ZOETIS INC.
SEGMENT(a) EARNINGS -
Continued
(UNAUDITED)
(millions of dollars)
Six Months Ended
June 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
1,609
$
1,498
7
%
—
%
7
%
Cost of Sales
321
305
5
%
—
%
5
%
Gross Profit
1,288
1,193
8
%
—
%
8
%
Gross Margin
80.1
%
79.6
%
Operating Expenses
261
237
10
%
—
%
10
%
Other (income)/deductions-net
4
—
*
*
*
U.S. Earnings
$
1,023
$
956
7
%
—
%
7
%
International:
Revenue
$
1,436
$
1,460
(2)
%
(6)
%
4
%
Cost of Sales
452
428
6
%
(3)
%
9
%
Gross Profit
984
1,032
(5)
%
(7)
%
2
%
Gross Margin
68.5
%
70.7
%
Operating Expenses
242
278
(13)
%
(5)
%
(8)
%
Other (income)/deductions-net
1
—
*
*
*
International Earnings
$
741
$
754
(2)
%
(7)
%
5
%
Total Reportable Segments
$
1,764
$
1,710
3
%
(3)
%
6
%
Other business activities(c)
(177)
(159)
11
%
Reconciling Items:
Corporate(d)
(352)
(340)
4
%
Purchase accounting adjustments(e)
(107)
(124)
(14)
%
Acquisition-related costs(f)
(14)
(27)
(48)
%
Certain significant items(g)
5
(73)
*
Other unallocated(h)
(140)
(151)
(7)
%
Total Earnings(i)
$
979
$
836
17
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
(c)
Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing
business and human health business.
(d)
Corporate includes, among other things,
administration expenses, interest expense, certain compensation
costs, certain procurement costs, and other costs not charged to
our operating segments.
(e)
Purchase accounting adjustments include
certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f)
Acquisition-related costs include costs
associated with acquiring and integrating newly acquired
businesses, such as transaction costs and integration costs.
(g)
Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include
restructuring charges and implementation costs associated with our
cost-reduction/productivity initiatives that are not associated
with an acquisition, costs associated with the operational
efficiency initiative and supply network strategy, and the impact
of divestiture-related gains and losses.
(h)
Includes overhead expenses associated with
our manufacturing and supply operations not directly attributable
to an operating segment, as well as certain procurement costs.
(i)
Defined as income before provision for
taxes on income.
* Calculation not meaningful.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005457/en/
Media Contacts: Bill Price
1-973-443-2742 (o) william.price@zoetis.com
Kristen Seely 1-973-443-2777 (o) kristen.seely@zoetis.com
Investor Contacts: Steve Frank
1-973-822-7141 (o) steve.frank@zoetis.com
Keith Gaub 1-973-822-7154 (o) keith.gaub@zoetis.com
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