- Reports Revenue of $1.8 Billion, Growing 13%, and Net Income
of $479 Million, or $1.00 per Diluted Share, Both Increasing 11% on
a Reported Basis, for Third Quarter 2020
- Reports Adjusted Net Income of $524 Million, or Adjusted
Diluted EPS of $1.10 for Third Quarter 2020
- Delivers 15% Operational Growth in Revenue and 20%
Operational Growth in Adjusted Net Income for Third Quarter
2020
- Increases Full Year 2020 Revenue Guidance to $6.550 - $6.625
Billion and Diluted EPS of $3.38 - $3.45 on a Reported Basis, or
$3.76 - $3.81 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the third quarter of 2020 and increased its guidance for full year
2020.
The company reported revenue of $1.8 billion for the third
quarter of 2020, an increase of 13% compared with the third quarter
of 2019. Net income for the third quarter of 2020 was $479 million,
or $1.00 per diluted share, both increasing 11% on a reported
basis.
Adjusted net income1 for the third quarter of 2020 was $524
million, or $1.10 per diluted share, an increase of 15%, on a
reported basis. Adjusted net income for the third quarter of 2020
excludes the net impact of $45 million for purchase accounting
adjustments, acquisition-related costs and certain significant
items.
On an operational2 basis, revenue for the third quarter of 2020
increased 15%, excluding the impact of foreign currency. Adjusted
net income for the third quarter of 2020 increased 20%
operationally, excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“Thanks to the resilience of our customers and the commitment of
our colleagues during this ongoing pandemic, we generated better
than expected results in the third quarter, with 15% operational
growth in revenue and 20% operational growth in adjusted net
income,” said Kristin Peck, Chief Executive Officer of Zoetis. “Our
diverse and innovative portfolio drove strong sales, especially
across our companion animal business, where parasiticides,
vaccines, key dermatology products and diagnostics performed very
well. We also saw growth in livestock this quarter, largely due to
sales growth in both the U.S. cattle market and China’s swine
market.”
“Looking ahead, we continue to see future growth being driven by
companion animal products, particularly Simparica Trio® and the
expansion of our other parasiticides and key dermatology portfolio.
We will continue to invest in opportunities that can deliver the
most value and impact for our customers. Given our strong
performance over the past nine months – and despite expectations
for a more modest fourth quarter – we are increasing our guidance
to reflect our outlook for the remainder of the year,” 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 third quarter of 2020:
- Revenue in the U.S. segment was $996 million, an
increase of 18% compared with the third quarter of 2019. Sales of
companion animal products increased 21% driven primarily by growth
in Simparica Trio, the recently launched triple combination
parasiticide for dogs, as well as the company’s key dermatology
portfolio across both the Cytopoint® and Apoquel® brands. Also
contributing to growth were sales of vaccines and diagnostic
products, resulting from the continued recovery of vet clinic
businesses following the impact of social distancing restrictions
earlier in the year. Companion animal product sales also benefited
from the acquisition of a number of regional diagnostic reference
labs in late 2019. Sales of livestock products increased 13% in the
quarter due to a return to historical buying patterns following the
impact of COVID-19 in the second quarter of this year, as well as
an earlier fall cattle run compared to the same period last year.
U.S. cattle growth was partially offset by modest declines in both
the poultry and swine product portfolios.
- Revenue in the International segment was $767 million,
an increase of 6% on a reported basis and an increase of 11%
operationally compared with the third quarter of 2019. Sales of
companion animal products grew 17% on a reported basis and 20% on
an operational basis. Growth was driven by increased sales across
the company’s companion animal portfolio in China as a result of
favorable market conditions and additional promotional and
educational efforts. Also contributing to growth in the quarter was
the Simparica franchise, including Simparica Trio, which was
recently launched in the EU, Canada and Australia, as well as the
company’s key dermatology portfolio across both the Apoquel and
Cytopoint brands. Sales of companion animal products, including
vaccines, also benefited as clinics expanded their operations
following less COVID-19-related restrictions. Sales of livestock
products were flat on a reported basis and grew 6% 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. In other key global swine
markets, vaccine sales increased as a result of favorable market
conditions including increased production and export opportunities.
Growth in the company’s fish portfolio was driven primarily by
increased market share for salmon vaccines and the acquisition of
Fish Vet Group. The company’s cattle portfolio grew modestly based
on a strong performance in Brazil, while poultry product sales
remained flat versus the same period in the prior year.
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, farmers and pet owners,
which span the continuum of animal care - helping to predict,
prevent, detect and treat diseases.
Since our last quarterly earnings announcement, Zoetis received
a positive scientific opinion from the European Medicines Agency’s
Committee for Medicinal Products for Veterinary Use (CVMP) for
Librela® (bedinvetmab), an important milestone in the
company’s innovative pipeline for pain management in pets. Librela
will be the first injectable monoclonal antibody (mAb) licensed for
alleviation of pain associated with osteoarthritis (OA) in dogs,
pending final authorization from the European Commission.
Zoetis continued to bring leading products into new markets and
enhance current products through lifecycle innovation. On the
companion animal side, Simparica® (sarolaner) Chewable
Tablets was approved in China, and other key products including
Cytopoint (lokivetmab) and Revolution Plus®
(selamectin and sarolaner topical solution) gained approvals in
Asia and Latin America respectively. In livestock, the company
received approval in Japan for two of its well-known swine vaccines
– Fostera® Gold PCV MH and Fostera Gold PCV – which
give producers greater options to reduce the clinical symptoms in
pigs associated with porcine circovirus (PCV2) and the flexibility
to include Mycoplasma hyopneumoniae (M. hyo). In Europe, Zoetis
enhanced its Rispoval® vaccine franchise with the approval
for Rispoval RS+Pi3 IntraNasal, which helps protect cattle of all
ages against two of the most common causes of viral pneumonia.
In Diagnostics portfolio advancements, the company launched
Vetscan Imagyst™ in Australia, Ireland, New Zealand, the UK,
and the U.S. Imagyst uses a combination of image recognition
technology, algorithms and cloud-based artificial intelligence to
deliver rapid testing results to veterinary clinics. Its first
indication is for testing fecal samples for parasites, with the
potential for broader applications to different types of testing in
the future.
FINANCIAL GUIDANCE
Zoetis is increasing its full year 2020 guidance, which
includes:
- Revenue between $6.550 billion and $6.625 billion
- Reported diluted EPS between $3.38 and $3.45
- Adjusted diluted EPS between $3.76 and $3.81
This guidance reflects foreign exchange rates as of
late-October. 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 third 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 Nov. 5, 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 impact of the coronavirus (COVID-19) pandemic
and any recovery therefrom on our business, suppliers, customers
and employees; expectations regarding the performance of acquired
companies and our ability to integrate new businesses; expectations
regarding the financial impact of acquisitions; future use of cash
and dividend payments; tax rates and tax regimes and any changes
thereto; and other future events. These statements are not
guarantees of future performance or actions. Forward-looking
statements are subject to risks and uncertainties. If one or more
of these risks or uncertainties materialize, or if management's
underlying assumptions prove to be incorrect, actual results may
differ materially from those contemplated by a forward-looking
statement. Forward-looking statements speak only as of the date on
which they are made. Zoetis expressly disclaims any obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise. A further list and
description of risks, uncertainties and other matters can be found
in our Annual Report on Form 10-K for the fiscal year ended
December 31, 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
Nine Months Ended
September 30,
September 30,
2020
2019
% Change
2020
2019
% Change
Revenue
$
1,786
$
1,584
13
$
4,868
$
4,586
6
Costs and expenses:
Cost of sales
546
479
14
1,456
1,462
—
Selling, general and administrative
expenses
424
391
8
1,206
1,166
3
Research and development expenses
112
112
—
330
325
2
Amortization of intangible assets
40
38
5
120
115
4
Restructuring charges and certain
acquisition-related costs
5
6
(17)
22
33
(33)
Interest expense, net of capitalized
interest
62
56
11
173
167
4
Other (income)/deductions—net
—
(26)
*
(15)
(46)
(67)
Income before provision for taxes on
income
597
528
13
1,576
1,364
16
Provision for taxes on income
118
95
24
298
248
20
Net income before allocation to
noncontrolling interests
479
433
11
1,278
1,116
15
Less: Net loss attributable to
noncontrolling interests
—
—
*
(1)
—
*
Net income attributable to Zoetis
$
479
$
433
11
$
1,279
$
1,116
15
Earnings per share—basic
$
1.01
$
0.91
11
$
2.69
$
2.33
15
Earnings per share—diluted
$
1.00
$
0.90
11
$
2.67
$
2.31
16
Weighted-average shares used to calculate
earnings per share
Basic
475.5
477.8
475.5
478.7
Diluted
478.5
481.5
478.5
482.3
(a)
The condensed consolidated statements of
income present the quarter and nine months ended September 30, 2020
and September 30, 2019. Subsidiaries operating outside the United
States are included for the quarter and nine months ended August
31, 2020 and August 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 September 30,
2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
546
$
(2)
$
—
$
(1)
$
543
Gross profit
1,240
2
—
1
1,243
Selling, general and administrative
expenses
424
(12)
—
(5)
407
Amortization of intangible assets
40
(34)
—
—
6
Restructuring charges and certain
acquisition-related costs
5
—
(1)
(4)
—
Other (income)/deductions–net
—
—
—
1
1
Income before provision for taxes on
income
597
48
1
9
655
Provision for taxes on income
118
11
—
2
131
Net income attributable to Zoetis
479
37
1
7
524
Earnings per common share attributable to
Zoetis–diluted
1.00
0.08
—
0.02
1.10
Quarter Ended September 30,
2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
479
$
(3)
$
—
$
(3)
$
473
Gross profit
1,105
3
—
3
1,111
Selling, general and administrative
expenses
391
(18)
—
—
373
Amortization of intangible assets
38
(34)
—
—
4
Restructuring charges and certain
acquisition-related costs
6
—
(6)
—
—
Other (income)/deductions–net
(26)
—
—
20
(6)
Income before provision for taxes on
income
528
55
6
(17)
572
Provision for taxes on income
95
26
1
(5)
117
Net income attributable to Zoetis
433
29
5
(12)
455
Earnings per common share attributable to
Zoetis–diluted
0.90
0.06
0.01
(0.03)
0.94
(a)
The condensed consolidated statements of
income present the quarter and nine months ended September 30, 2020
and September 30, 2019. Subsidiaries operating outside the United
States are included for the third quarter ended August 31, 2020 and
August 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)
Nine Months Ended September 30,
2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,456
$
(6)
$
—
$
(4)
$
1,446
Gross profit
3,412
6
—
4
3,422
Selling, general and administrative
expenses
1,206
(47)
—
(11)
1,148
Research and development expenses
330
(1)
—
—
329
Amortization of intangible assets
120
(101)
—
—
19
Restructuring charges and certain
acquisition-related costs
22
—
(15)
(7)
—
Other (income)/deductions–net
(15)
—
—
18
3
Income before provision for taxes on
income
1,576
155
15
4
1,750
Provision for taxes on income
298
47
—
—
345
Net income attributable to Zoetis
1,279
108
15
4
1,406
Earnings per common share attributable to
Zoetis–diluted
2.67
0.23
0.03
0.01
2.94
Nine Months Ended September 30,
2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,462
$
(22)
$
—
$
(76)
$
1,364
Gross profit
3,124
22
—
76
3,222
Selling, general and administrative
expenses
1,166
(54)
—
—
1,112
Research and development expenses
325
(1)
—
—
324
Amortization of intangible assets
115
(102)
—
—
13
Restructuring charges and certain
acquisition-related costs
33
—
(33)
—
—
Other (income)/deductions–net
(46)
—
—
20
(26)
Income before provision for taxes on
income
1,364
179
33
56
1,632
Provision for taxes on income
248
59
6
4
317
Net income attributable to Zoetis
1,116
120
27
52
1,315
Earnings per common share attributable to
Zoetis–diluted
2.31
0.25
0.06
0.11
2.73
(a)
The condensed consolidated statements of
income present the quarter and nine months ended September 30, 2020
and September 30, 2019. Subsidiaries operating outside the United
States are included for the third quarter ended August 31, 2020 and
August 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
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Integration costs(a)
$
3
$
4
$
15
$
13
Restructuring charges(b)
(2)
2
—
20
Total acquisition-related
costs—pre-tax
1
6
15
33
Income taxes(c)
—
1
—
6
Total acquisition-related costs—net of
tax
$
1
$
5
$
15
$
27
(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 nine months ended September 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
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Operational efficiency initiative(a)
$
(1)
$
(20)
$
(18)
$
(20)
Supply network strategy(b)
1
2
4
7
Other restructuring charges and
cost-reduction/productivity initiatives(c)
4
—
7
—
Other(d)
5
1
11
69
Total certain significant
items—pre-tax
9
(17)
4
56
Income taxes(e)
2
(5)
—
4
Total certain significant items—net of
tax
$
7
$
(12)
$
4
$
52
(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 and other cost-reduction
and productivity initiatives, included in Restructuring charges and
certain acquisition-related costs.
(d)
For the quarter and nine months ended
September 30, 2020, primarily represents the modification of
share-based compensation related to CEO transition costs, included
in Selling, general and administrative expenses. For the nine
months ended September 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 pre-tax amounts and applying that jurisdiction's applicable tax
rate.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES
AND INCOME(a)
(UNAUDITED)
(millions of dollars)
Quarter Ended
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
543
$
473
15
%
1
%
14
%
as a percent of revenue
30.4
%
29.9
%
NA
NA
NA
Adjusted SG&A expenses
407
373
9
%
(2)
%
11
%
Adjusted R&D expenses
112
112
—
%
(1)
%
1
%
Adjusted net income attributable to
Zoetis
524
455
15
%
(5)
%
20
%
Nine Months Ended
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
1,446
$
1,364
6
%
(1)
%
7
%
as a percent of revenue
29.7
%
29.7
%
NA
NA
NA
Adjusted SG&A expenses
1,148
1,112
3
%
(2)
%
5
%
Adjusted R&D expenses
329
324
2
%
—
%
2
%
Adjusted net income attributable to
Zoetis
1,406
1,315
7
%
(5)
%
12
%
(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
Revenue
$6,550 to $6,625
Operational growth(a)
7% to 8%
Adjusted cost of sales as a percentage of
revenue(b)
Approximately 30%
Adjusted SG&A expenses(b)
$1,615 to $1,645
Adjusted R&D expenses(b)
$455 to $465
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $250
Effective tax rate on adjusted
income(b)
19% to 20%
Adjusted diluted EPS(b)
$3.76 to $3.81
Adjusted net income(b)
$1,790 to $1,825
Operational growth(a)(c)
6% to 8%
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 late October
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%
~ (0.1)%
~ (0.1)%
~ 30%
SG&A expenses
$1,695 to $1,725
~ $(15)
~ $(65)
$1,615 to $1,645
R&D expenses
$457 to $467
~ $(2)
$455 to $465
Interest expense and other
(income)/deductions-net
~ $232
~ $18
~ $250
Effective tax rate
18.5% to 19.5%
~ 0.5%
19% to 20%
Diluted EPS
$3.38 to $3.45
$0.05 to $0.07
~ $0.31
$3.76 to $3.81
Net income attributable to Zoetis
$1,605 to $1,650
$25 to $35
~ $150
$1,790 to $1,825
(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
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
995
$
834
19
%
(1)
%
20
%
Livestock
768
731
5
%
(4)
%
9
%
Contract Manufacturing & Human
Health
23
19
21
%
—
%
21
%
Total Revenue
$
1,786
$
1,584
13
%
(2)
%
15
%
U.S.
Companion Animal
$
664
$
550
21
%
—
%
21
%
Livestock
332
294
13
%
—
%
13
%
Total U.S. Revenue
$
996
$
844
18
%
—
%
18
%
International
Companion Animal
$
331
$
284
17
%
(3)
%
20
%
Livestock
436
437
—
%
(6)
%
6
%
Total International Revenue
$
767
$
721
6
%
(5)
%
11
%
Companion Animal:
Dogs and Cats
$
947
$
789
20
%
(1)
%
21
%
Horses
48
45
7
%
—
%
7
%
Total Companion Animal Revenue
$
995
$
834
19
%
(1)
%
20
%
Livestock:
Cattle
$
417
$
389
7
%
(5)
%
12
%
Swine
151
142
6
%
(4)
%
10
%
Poultry
129
135
(4)
%
(2)
%
(2)
%
Fish
45
42
7
%
(3)
%
10
%
Sheep and other
26
23
13
%
5
%
8
%
Total Livestock Revenue
$
768
$
731
5
%
(4)
%
9
%
(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)
Nine Months Ended
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
2,674
$
2,361
13
%
(2)
%
15
%
Livestock
2,134
2,162
(1)
%
(3)
%
2
%
Contract Manufacturing & Human
Health
60
63
(5)
%
(1)
%
(4)
%
Total Revenue
$
4,868
$
4,586
6
%
(3)
%
9
%
U.S.
Companion Animal
$
1,757
$
1,495
18
%
—
%
18
%
Livestock
848
847
—
%
—
%
—
%
Total U.S. Revenue
$
2,605
$
2,342
11
%
—
%
11
%
International
Companion Animal
$
917
$
866
6
%
(4)
%
10
%
Livestock
1,286
1,315
(2)
%
(6)
%
4
%
Total International Revenue
$
2,203
$
2,181
1
%
(5)
%
6
%
Companion Animal:
Dogs and Cats
$
2,524
$
2,231
13
%
(2)
%
15
%
Horses
150
130
15
%
(2)
%
17
%
Total Companion Animal Revenue
$
2,674
$
2,361
13
%
(2)
%
15
%
Livestock:
Cattle
$
1,107
$
1,148
(4)
%
(4)
%
—
%
Swine
454
449
1
%
(4)
%
5
%
Poultry
412
417
(1)
%
(3)
%
2
%
Fish
101
90
12
%
(4)
%
16
%
Sheep and other
60
58
3
%
(4)
%
7
%
Total Livestock Revenue
$
2,134
$
2,162
(1)
%
(3)
%
2
%
(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
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(a)
Total International
$
766.9
$
720.7
6
%
(5)
%
11
%
Australia
59.7
52.7
13
%
2
%
11
%
Brazil
62.2
71.8
(13)
%
(31)
%
18
%
Canada
49.7
46.7
6
%
(2)
%
8
%
Chile
23.4
22.7
3
%
(5)
%
8
%
China
65.6
40.2
63
%
(1)
%
64
%
France
29.7
23.6
26
%
2
%
24
%
Germany
38.5
35.1
10
%
3
%
7
%
Italy
27.1
26.2
3
%
1
%
2
%
Japan
39.0
39.2
(1)
%
—
%
(1)
%
Mexico
25.9
29.2
(11)
%
(13)
%
2
%
Spain
30.7
29.1
5
%
2
%
3
%
United Kingdom
44.8
46.4
(3)
%
4
%
(7)
%
Other developed markets
105.3
97.5
8
%
1
%
7
%
Other emerging markets
165.3
160.3
3
%
(8)
%
11
%
Nine Months Ended
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(a)
Total International
$
2,202.6
$
2,180.6
1
%
(5)
%
6
%
Australia
153.8
149.5
3
%
(4)
%
7
%
Brazil
181.3
206.1
(12)
%
(24)
%
12
%
Canada
143.7
141.5
2
%
(1)
%
3
%
Chile
71.8
64.4
11
%
(7)
%
18
%
China
197.7
155.7
27
%
(3)
%
30
%
France
82.4
83.0
(1)
%
(1)
%
—
%
Germany
112.1
110.7
1
%
(1)
%
2
%
Italy
62.7
81.9
(23)
%
—
%
(23)
%
Japan
133.3
117.6
13
%
2
%
11
%
Mexico
83.6
87.2
(4)
%
(10)
%
6
%
Spain
82.7
86.2
(4)
%
(1)
%
(3)
%
United Kingdom
125.4
145.4
(14)
%
—
%
(14)
%
Other developed markets
282.3
269.4
5
%
(2)
%
7
%
Other emerging markets
489.8
482.0
2
%
(6)
%
8
%
(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
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
996
$
844
18
%
—
%
18
%
Cost of Sales
194
163
19
%
—
%
19
%
Gross Profit
802
681
18
%
—
%
18
%
Gross Margin
80.5
%
80.7
%
Operating Expenses
157
130
21
%
—
%
21
%
Other (income)/deductions-net
—
—
*
*
*
U.S. Earnings
$
645
$
551
17
%
—
%
17
%
International:
Revenue
$
767
$
721
6
%
(5)
%
11
%
Cost of Sales
245
234
5
%
(3)
%
8
%
Gross Profit
522
487
7
%
(6)
%
13
%
Gross Margin
68.1
%
67.5
%
Operating Expenses
122
134
(9)
%
(3)
%
(6)
%
Other (income)/deductions-net
—
—
*
*
*
International Earnings
$
400
$
353
13
%
(7)
%
20
%
Total Reportable Segments
$
1,045
$
904
16
%
(2)
%
18
%
Other business activities(c)
(87)
(87)
—
%
Reconciling Items:
Corporate(d)
(207)
(172)
20
%
Purchase accounting adjustments(e)
(48)
(55)
(13)
%
Acquisition-related costs(f)
(1)
(6)
(83)
%
Certain significant items(g)
(9)
17
*
Other unallocated(h)
(96)
(73)
32
%
Total Earnings(i)
$
597
$
528
13
%
(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)
Nine Months Ended
September 30,
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
2,605
$
2,342
11
%
—
%
11
%
Cost of Sales
515
468
10
%
—
%
10
%
Gross Profit
2,090
1,874
12
%
—
%
12
%
Gross Margin
80.2
%
80.0
%
Operating Expenses
418
367
14
%
—
%
14
%
Other (income)/deductions-net
4
—
*
*
*
U.S. Earnings
$
1,668
$
1,507
11
%
—
%
11
%
International:
Revenue
$
2,203
$
2,181
1
%
(5)
%
6
%
Cost of Sales
697
662
5
%
(3)
%
8
%
Gross Profit
1,506
1,519
(1)
%
(6)
%
5
%
Gross Margin
68.4
%
69.6
%
Operating Expenses
364
412
(12)
%
(5)
%
(7)
%
Other (income)/deductions-net
1
—
*
*
*
International Earnings
$
1,141
$
1,107
3
%
(7)
%
10
%
Total Reportable Segments
$
2,809
$
2,614
7
%
(3)
%
10
%
Other business activities(c)
(264)
(246)
7
%
Reconciling Items:
Corporate(d)
(559)
(512)
9
%
Purchase accounting adjustments(e)
(155)
(179)
(13)
%
Acquisition-related costs(f)
(15)
(33)
(55)
%
Certain significant items(g)
(4)
(56)
(93)
%
Other unallocated(h)
(236)
(224)
5
%
Total Earnings(i)
$
1,576
$
1,364
16
%
(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/20201105005544/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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