- For Fourth Quarter 2020, Zoetis Reports Revenue of $1.8
Billion, Growing 8%, and Net Income of $359 Million, or $0.75 per
Diluted Share, on a Reported Basis
- Reports Adjusted Net Income of $438 Million, or Adjusted
Diluted EPS of $0.91, for Fourth Quarter 2020
- Delivers 9% Operational Growth in Revenue and 3% Operational
Growth in Adjusted Net Income for Fourth Quarter 2020
- For Full Year 2020, Zoetis Reports Revenue of $6.7 Billion,
Growing 7%, and Net Income of $1.6 Billion, or $3.42 per Diluted
Share, on a Reported Basis
- Reports Adjusted Net Income of $1.8 Billion, or Adjusted
Diluted EPS of $3.85 for Full Year 2020
- Delivers 9% Operational Growth in Revenue and 10%
Operational Growth in Adjusted Net Income for Full Year
2020
- Provides Full Year 2021 Revenue Guidance of $7.400 - $7.550
Billion, with Diluted EPS of $4.02 - $4.14 on a Reported Basis, or
$4.36 - $4.46 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the fourth quarter and full year 2020 and provided full year
guidance for 2021.
The company reported revenue of $1.8 billion for the fourth
quarter of 2020, which was an increase of 8% compared with the
fourth quarter of 2019. Net income for the fourth quarter of 2020
was $359 million, or $0.75 per diluted share, compared with $384
million, or $0.80 per diluted share, in the fourth quarter of
2019.
Adjusted net income1 for the fourth quarter of 2020 was $438
million, relatively flat compared with the fourth quarter of 2019,
or $0.91 per diluted share, a decrease of 1%. Adjusted net income
for the fourth quarter of 2020 excludes the net impact of $79
million for purchase accounting adjustments, acquisition-related
costs and certain significant items.
On an operational2 basis, revenue for the fourth quarter of
2020, excluding the impact of foreign exchange, increased 9%
compared with the fourth quarter of 2019. Adjusted net income for
the fourth quarter of 2020 increased 3% operationally, excluding
the impact of foreign exchange.
For full year 2020, the company reported revenue of $6.7
billion, an increase of 7% compared with full year 2019. Net income
for full year 2020 was $1.6 billion, or $3.42 per diluted share, an
increase of 9% and 10%, respectively.
Adjusted net income for full year 2020 was $1.8 billion, or
$3.85 per diluted share, an increase of 5% and 6%, respectively.
Adjusted net income for full year 2020 excludes the net impact of
$206 million for purchase accounting adjustments,
acquisition-related costs and certain significant items.
On an operational basis, revenue for full year 2020 increased
9%, excluding the impact of foreign exchange. Adjusted net income
for full year 2020 increased 10% operationally, excluding the
impact of foreign exchange.
EXECUTIVE COMMENTARY
“In 2020, Zoetis delivered another year of strong growth and
market leadership thanks to our diverse and durable portfolio, our
commitment to continuous innovation and the essential nature of our
business,” said Kristin Peck, Chief Executive Officer of Zoetis.
“We grew revenue 9% operationally, which is once again above market
growth in a competitive, global sector. We also grew our adjusted
net income faster than revenue, at 10% operationally."
"Looking forward, we believe this momentum sets us up for a
strong 2021, even amidst ongoing COVID-19 uncertainty. We expect to
continue growing revenue faster than the market in 2021 driven by
continued strength in petcare; ongoing expansion in markets outside
the U.S., most notably China; and acceleration of our diagnostics
portfolio penetration. As a result, we are guiding to full-year
operational growth of 9% to 11% in revenue," said Peck.
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across
two regional segments: the United States (U.S.) and International.
Within these segments, the company delivers a diverse portfolio of
products for companion animals and livestock tailored to local
trends and customer needs. In the fourth quarter of 2020:
- Revenue in the U.S. segment was $952 million, an
increase of 11% compared with the fourth quarter of 2019. Sales of
companion animal products increased 30% 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 Apoquel® and Cytopoint® brands. The
diagnostic portfolio also contributed to growth based on the
continued recovery of veterinary clinic business following the
impact of social distancing restrictions earlier in the year and
the acquisition of a number of regional diagnostic reference labs
in late 2019. Sales of livestock products decreased 15% in the
quarter. Sales of cattle products declined as a result of an
earlier fall cattle run than the same period in the prior year,
supply constraints on vaccines and generic competition. Sales of
both swine and poultry products also declined in the quarter due to
unfavorable market conditions related to the COVID-19
pandemic.
- Revenue in the International segment was $832 million,
an increase of 5% on a reported basis and an increase of 7%
operationally compared with the fourth quarter of 2019. Sales of
companion animal products grew 17% on a reported and operational
basis. Growth resulted from increased sales across the broader
in-line portfolio and with key accounts. Also contributing to
growth in the quarter was the Simparica® franchise, including
Simparica Trio, which was recently launched in Australia, the
European Union (EU) and Canada, as well as the company’s key
dermatology portfolio across both the Apoquel and Cytopoint brands.
Sales of livestock products decreased 2% on a reported basis and
increased 2% operationally. Sales of swine products grew in China
as a result of expanding herd production in key accounts and
increased biosecurity measures in the wake of African Swine Fever.
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 remained flat, while poultry product sales
decreased versus the same period due to rotation programs and
COVID-19 restrictions.
INVESTMENTS IN GROWTH
Zoetis continues to pave the way in the development of
monoclonal antibody (mAb) therapies to treat osteoarthritis (OA)
pain in dogs and cats. Since its last quarterly earnings
announcement, the company received approval in the EU, Brazil,
Canada and Switzerland for Librela® (bedinvetmab), the first
injectable mAb licensed for alleviation of pain associated with OA
in dogs. Similarly, Zoetis received approval in Switzerland for
Solensia® (frunevetmab), the first injectable mAb for the
treatment of pain associated with OA in cats, a condition that is
vastly underdiagnosed and treated in felines today.
In other companion animal product advancements, the company
gained approval in the EU for an extended claim for
Cytopoint (lokivetmab), an injectable monoclonal antibody
therapy for dogs. The new claim, which is already approved in the
U.S., includes the treatment of pruritus associated with allergic
dermatitis, in addition to the original claim of clinical
manifestations of atopic dermatitis. Zoetis also expanded the
geographic reach of key parasiticide products, with approvals of
Simparica Trio (sarolaner, moxidectin, pyrantel chewable
tablets) for dogs in Latin America and Revolution Plus®
(selamectin and sarolaner topical solution) for cats in Asia.
In livestock, Zoetis received approval in the EU for
CircoMax® Myco (also known as Fostera® Gold PCV MH
outside of the EU), a one-shot vaccine for pigs that offers the
longest lasting combined protection on the EU market against
porcine circovirus type 2 (PCV2) and Mycoplasma hyopneumoniae
infections. In poultry, the company expanded its line of
recombinant vector vaccines with the approval of Poulvac®
Procerta™ HVT-IBD in the U.S., which provides early protection
against the contemporary infectious bursal disease (IBD) viruses in
chickens.
FINANCIAL GUIDANCE
Zoetis is providing full year 2021 guidance, which includes:
- Revenue between $7.400 billion to $7.550 billion
- Reported diluted EPS between $4.02 to $4.14
- Adjusted diluted EPS between $4.36 to $4.46
This guidance reflects foreign exchange rates as of late
January. 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 fourth quarter
and full year 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 Feb. 16, 2021.
About Zoetis
Zoetis is the leading animal health company, dedicated to
supporting its customers and their businesses in advancing care for
animals. Building on more than 65 years of experience in animal
health, Zoetis discovers, develops, manufactures and commercializes
medicines, vaccines, diagnostics, technologies and services,
including 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 2020, the company
generated annual revenue of $6.7 billion with approximately 11,300
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 basis and operational revenue growth (non-GAAP
financial measures) are defined as growth excluding the impact of
foreign exchange.
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 rate 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 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)
Fourth Quarter
Full Year
2020
2019
% Change
2020
2019
% Change
Revenue
$
1,807
$
1,674
8
$
6,675
$
6,260
7
Costs and expenses:
Cost of sales
601
530
13
2,057
1,992
3
Selling, general and administrative
expenses
520
472
10
1,726
1,638
5
Research and development expenses
133
132
1
463
457
1
Amortization of intangible assets
40
40
—
160
155
3
Restructuring charges and certain
acquisition-related costs
3
18
(83)
25
51
(51)
Interest expense
58
56
4
231
223
4
Other (income)/deductions–net
32
(11
)
*
17
(57
)
*
Income before provision for taxes on
income
420
437
(4)
1,996
1,801
11
Provision for taxes on income
62
53
17
360
301
20
Net income before allocation to
noncontrolling interests
358
384
(7)
1,636
1,500
9
Less: Net loss attributable to
noncontrolling interests
(1
)
—
*
(2
)
—
*
Net income attributable to Zoetis
$
359
$
384
(7)
$
1,638
$
1,500
9
Earnings per share—basic
$
0.75
$
0.81
(7)
$
3.44
$
3.14
10
Earnings per share—diluted
$
0.75
$
0.80
(6)
$
3.42
$
3.11
10
Weighted-average shares used to calculate
earnings per share
Basic
475.6
476.4
475.5
478.1
Diluted
478.7
480.2
478.6
481.8
(a)
The Condensed Consolidated
Statements of Income present the three and twelve months ended
December 31, 2020 and 2019. Subsidiaries operating outside the U.S.
are included for the three and twelve months ended November 30,
2020 and 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 December 31,
2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
601
$
(2
)
$
—
$
(15
)
$
584
Gross profit
1,206
2
—
15
1,223
Selling, general and administrative
expenses
520
(7
)
—
(2
)
511
Research and development expenses
133
—
—
—
133
Amortization of intangible assets
40
(34
)
—
—
6
Restructuring charges and certain
acquisition-related costs
3
—
(3
)
—
—
Other (income)/deductions–net
32
—
—
(22
)
10
Income before provision for taxes on
income
420
43
3
39
505
Provision for taxes on income
62
9
(1
)
(2
)
68
Net income attributable to Zoetis
359
34
4
41
438
Earnings per common share attributable to
Zoetis–diluted
0.75
0.07
0.01
0.08
0.91
Quarter Ended December 31,
2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
530
$
(2
)
$
—
$
(1
)
$
527
Gross profit
1,144
2
—
1
1,147
Selling, general and administrative
expenses
472
(18
)
—
(2
)
452
Research and development expenses
132
(1
)
—
—
131
Amortization of intangible assets
40
(34
)
—
—
6
Restructuring charges and certain
acquisition-related costs
18
—
(10
)
(8
)
—
Other (income)/deductions–net
(11
)
—
—
—
(11
)
Income before provision for taxes on
income
437
55
10
11
513
Provision for taxes on income
53
19
1
—
73
Net income attributable to Zoetis
384
36
9
11
440
Earnings per common share attributable to
Zoetis–diluted
0.80
0.08
0.02
0.02
0.92
(a)
The Condensed Consolidated
Statements of Income present the quarter ended December 31, 2020
and 2019. Subsidiaries operating outside the U.S. are included for
the quarter ended November 30, 2020 and 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
(UNAUDITED)
(millions of dollars, except per
share data)
Twelve Months Ended December 31,
2020
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
2,057
$
(8
)
$
—
$
(19
)
$
2,030
Gross profit
4,618
8
—
19
4,645
Selling, general and administrative
expenses
1,726
(54
)
—
(13
)
1,659
Research and development expenses
463
(1
)
—
—
462
Amortization of intangible assets
160
(135
)
—
—
25
Restructuring charges and certain
acquisition-related costs
25
—
(18
)
(7
)
—
Other (income)/deductions–net
17
—
—
(4
)
13
Income before provision for taxes on
income
1,996
198
18
43
2,255
Provision for taxes on income
360
56
(1
)
(2
)
413
Net income attributable to Zoetis
1,638
142
19
45
1,844
Earnings per common share attributable to
Zoetis–diluted
3.42
0.30
0.04
0.09
3.85
Twelve Months Ended December 31,
2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,992
$
(24
)
$
—
$
(77
)
$
1,891
Gross profit
4,268
24
—
77
4,369
Selling, general and administrative
expenses
1,638
(72
)
—
(2
)
1,564
Research and development expenses
457
(2
)
—
—
455
Amortization of intangible assets
155
(136
)
—
—
19
Restructuring charges and certain
acquisition-related costs
51
—
(43
)
(8
)
—
Other (income)/deductions–net
(57
)
—
—
20
(37
)
Income before provision for taxes on
income
1,801
234
43
67
2,145
Provision for taxes on income
301
78
7
4
390
Net income attributable to Zoetis
1,500
156
36
63
1,755
Earnings per common share attributable to
Zoetis–diluted
3.11
0.32
0.08
0.13
3.64
(a)
The Condensed Consolidated
Statements of Income present the twelve months ended December 31,
2020 and 2019. Subsidiaries operating outside the U.S. are included
for the twelve months ended November 30, 2020 and 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. generally accepted
accounting principles (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:
Fourth Quarter
Full Year
2020
2019
2020
2019
Integration costs(a)
$
2
$
5
$
17
$
18
Restructuring charges(b)
1
5
1
25
Total acquisition-related
costs—pre-tax
3
10
18
43
Income taxes(c)
(1
)
1
(1
)
7
Total acquisition-related costs—net of
tax
$
4
$
9
$
19
$
36
(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 twelve months ended December 31, 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:
Fourth Quarter
Full Year
2020
2019
2020
2019
Operational efficiency initiative(a)
$
—
$
—
$
(18
)
$
(20
)
Supply network strategy(b)
—
—
4
7
Other restructuring charges and
cost-reduction/productivity initiatives(c)
—
8
7
8
Certain asset impairment charges(d)
37
—
37
—
Other(e)
2
3
13
72
Total certain significant
items—pre-tax
39
11
43
67
Income taxes(f)
(2
)
—
(2
)
4
Total certain significant items—net of
tax
$
41
$
11
$
45
$
63
(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 twelve months
ended December 31, 2020, primarily represents asset impairment
charges related to:
- Developed technology rights in
our precision livestock farming and aquatic health businesses,
included in Other (income)/deductions-net;
- Inventory in our precision
livestock farming business, included in Cost of sales; and
- Property, plant and equipment in
our precision livestock farming business, included in Other
(income)/deductions-net.
(e)
For the quarter and twelve months
ended December 31, 2020, primarily represents the modification of
share-based compensation related to CEO transition costs, included
in Selling, general and administrative expenses. For the twelve
months ended December 31, 2019, represents a change in estimate
related to inventory costing, included in Cost of sales.
(f)
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 twelve months ended
December 31, 2020, also includes a tax charge related to changes in
valuation allowance related to impairments of acquired
businesses.
ZOETIS INC.
ADJUSTED SELECTED COSTS AND
EXPENSES(a)
(UNAUDITED)
(millions of dollars)
Fourth Quarter
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
584
$
527
11%
—%
11%
As a percent of revenue
32.3
%
31.5
%
NA
NA
NA
Adjusted SG&A expenses
511
452
13%
—%
13%
Adjusted R&D expenses
133
131
2%
2%
—%
Adjusted net income attributable to
Zoetis
438
440
—%
(3)%
3%
Full Year
% Change
2020
2019
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
2,030
$
1,891
7%
(1)%
8%
As a percent of revenue
30.4
%
30.2
%
NA
NA
NA
Adjusted SG&A expenses
1,659
1,564
6%
(1)%
7%
Adjusted R&D expenses
462
455
2%
—%
2%
Adjusted net income attributable to
Zoetis
1,844
1,755
5%
(5)%
10%
(a)
Adjusted cost of sales, adjusted
selling, general, and administrative (SG&A) expenses, adjusted
research and development (R&D) expenses, and adjusted net
income attributable to Zoetis (non-GAAP financial measures) are
defined as the corresponding reported U.S. GAAP income statement
line items excluding purchase accounting adjustments,
acquisition-related costs, and certain significant items. 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 U.S. 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.
2021 GUIDANCE
Selected Line Items (millions of dollars,
except per share amounts)
Full Year 2021
Revenue
$7,400 to $7,550
Operational growth(a)
9% to 11%
Adjusted cost of sales as a percentage of
revenue(b)
Approximately 30%
Adjusted SG&A expenses(b)
$1,775 to $1,850
Adjusted R&D expenses(b)
$500 to $520
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $260
Effective tax rate on adjusted
income(b)
Approximately 20%
Adjusted diluted EPS(b)
$4.36 to $4.46
Adjusted net income(b)
$2,080 to $2,130
Operational growth(a)(c)
9% to 12%
Certain significant items and
acquisition-related costs(d)
$15 - $25
The guidance reflects foreign exchange
rates as of late January 2021.
Reconciliations of 2021 reported guidance
to 2021 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
~ 30.3%
~ (0.2%)
~ (0.1%)
~ 30%
SG&A expenses
$1,820 to $1,895
~ $(45)
$1,775 to $1,850
R&D expenses
$501 to $521
~ $(1)
$500 to $520
Interest expense and other
(income)/deductions
~ $260
~ $260
Effective tax rate
~ 20%
~ 20%
Diluted EPS
$4.02 to $4.14
$0.03 to $0.05
~ $0.29
$4.36 to $4.46
Net income attributable to Zoetis
$1,915 to $1,975
$15 to $25
~ $140
$2,080 to $2,130
(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 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)
Fourth Quarter
% Change
2020
2019
Total
Foreign
Exchange
Operational(b)
Revenue:
Companion Animal
$
978
$
784
25
%
—
%
25
%
Livestock
806
868
(7)
%
(2)
%
(5)
%
Contract Manufacturing & Human
Health
23
22
5
%
6
%
(1)
%
Total Revenue
$
1,807
$
1,674
8
%
(1)
%
9
%
U.S.
Companion Animal
$
634
$
489
30
%
—
%
30
%
Livestock
318
372
(15)
%
—
%
(15)
%
Total U.S. Revenue
$
952
$
861
11
%
—
%
11
%
International
Companion Animal
$
344
$
295
17
%
—
%
17
%
Livestock
488
496
(2)
%
(4)
%
2
%
Total International Revenue
$
832
$
791
5
%
(2)
%
7
%
Companion Animal:
Dogs and Cats
$
913
$
719
27
%
—
%
27
%
Horses
65
65
—
%
—
%
—
%
Total Companion Animal Revenue
$
978
$
784
25
%
—
%
25
%
Livestock:
Cattle
$
451
$
506
(11)
%
(3)
%
(8)
%
Swine
167
162
3
%
—
%
3
%
Poultry
125
142
(12)
%
(2)
%
(10)
%
Fish
47
44
7
%
—
%
7
%
Sheep and other
16
14
14
%
1
%
13
%
Total Livestock Revenue
$
806
$
868
(7)
%
(2)
%
(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
(UNAUDITED)
(millions of dollars)
Full Year
% Change
2020
2019
Total
Foreign
Exchange
Operational(b)
Revenue:
Companion Animal
$
3,652
$
3,145
16
%
(1)
%
17
%
Livestock
2,940
3,030
(3)
%
(3)
%
—
%
Contract Manufacturing & Human
Health
83
85
(2)
%
1
%
(3)
%
Total Revenue
$
6,675
$
6,260
7
%
(2)
%
9
%
U.S.
Companion Animal
$
2,391
$
1,984
21
%
—
%
21
%
Livestock
1,166
1,219
(4)
%
—
%
(4)
%
Total U.S. Revenue
$
3,557
$
3,203
11
%
—
%
11
%
International
Companion Animal
$
1,261
$
1,161
9
%
(3)
%
12
%
Livestock
1,774
1,811
(2)
%
(5)
%
3
%
Total International Revenue
$
3,035
$
2,972
2
%
(5)
%
7
%
Companion Animal:
Dogs and Cats
3,437
2,950
17
%
(1)
%
18
%
Horses
215
195
10
%
(1)
%
11
%
Total Companion Animal Revenue
$
3,652
$
3,145
16
%
(1)
%
17
%
Livestock:
Cattle
$
1,558
$
1,654
(6)
%
(4)
%
(2)
%
Swine
621
611
2
%
(2)
%
4
%
Poultry
537
559
(4)
%
(3)
%
(1)
%
Fish
148
134
10
%
(3)
%
13
%
Sheep and other
76
72
6
%
(2)
%
8
%
Total Livestock Revenue
$
2,940
$
3,030
(3)
%
(3)
%
—
%
(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)
Fourth Quarter
% Change
2020
2019
Total
Foreign
Exchange
Operational(a)
Total International
$
832.8
$
791.6
5
%
(2)
%
7
%
Australia
53.4
46.4
15
%
6
%
9
%
Brazil
77.0
86.9
(11)
%
(29)
%
18
%
Canada
66.1
64.9
2
%
—
%
2
%
Chile
28.3
26.5
7
%
(3)
%
10
%
China
68.0
44.4
53
%
8
%
45
%
France
35.3
33.7
5
%
7
%
(2)
%
Germany
46.5
42.6
9
%
7
%
2
%
Italy
27.8
30.1
(8)
%
6
%
(14)
%
Japan
43.9
40.5
8
%
3
%
5
%
Mexico
32.2
29.4
10
%
(9)
%
19
%
Spain
29.5
28.2
5
%
8
%
(3)
%
United Kingdom
52.5
52.7
—
%
4
%
(4)
%
Other Developed
105.9
100.7
5
%
4
%
1
%
Other Emerging
166.4
164.6
1
%
(6)
%
7
%
Full Year
% Change
2020
2019
Total
Foreign
Exchange
Operational(a)
Total International
$
3,035.4
$
2,972.2
2
%
(5)
%
7
%
Australia
207.2
195.9
6
%
(2)
%
8
%
Brazil
258.3
293.0
(12)
%
(26)
%
14
%
Canada
209.8
206.4
2
%
(1)
%
3
%
Chile
100.1
90.9
10
%
(5)
%
15
%
China
265.7
200.1
33
%
(1)
%
34
%
France
117.7
116.7
1
%
1
%
—
%
Germany
158.6
153.3
3
%
1
%
2
%
Italy
90.5
112.0
(19)
%
1
%
(20)
%
Japan
177.2
158.1
12
%
2
%
10
%
Mexico
115.8
116.6
(1)
%
(10)
%
9
%
Spain
112.2
114.4
(2)
%
1
%
(3)
%
United Kingdom
177.9
198.1
(10)
%
1
%
(11)
%
Other Developed
388.2
370.1
5
%
—
%
5
%
Other Emerging
656.2
646.6
1
%
(7)
%
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)
Fourth Quarter
% Change
2020
2019
Total
Foreign
Exchange
Operational(b)
U.S.:
Revenue
$
952
$
861
11
%
—
%
11
%
Cost of sales
194
187
4
%
—
%
4
%
Gross profit
758
674
12
%
—
%
12
%
Gross margin
79.6
%
78.3
%
Operating expenses
184
176
5
%
—
%
5
%
Other (income)/deductions-net
3
—
*
*
*
U.S. Earnings
$
571
$
498
15
%
—
%
15
%
International:
Revenue
$
832
$
791
5
%
(2)
%
7
%
Cost of sales
274
263
4
%
(6)
%
10
%
Gross profit
558
528
6
%
—
%
6
%
Gross margin
67.1
%
66.8
%
Operating expenses
146
148
(1)
%
—
%
(1)
%
Other (income)/deductions-net
6
—
*
*
*
International Earnings
$
406
$
380
7
%
—
%
7
%
Total Reportable Segments
$
977
$
878
11
%
—
%
11
%
Other business activities(c)
(108)
(102)
6
%
Reconciling Items:
Corporate(d)
(261)
(195)
34
%
Purchase accounting adjustments(e)
(43)
(55)
(22)
%
Acquisition-related costs(f)
(3)
(10)
(70)
%
Certain significant items(g)
(39)
(11)
*
Other unallocated(h)
(103)
(68)
51
%
Total Earnings(i)
$
420
$
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 and
human health businesses.
(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
certain asset impairment charges and restructuring charges and
implementation costs associated with our
cost-reduction/productivity initiatives that are not associated
with an acquisition.
(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
(UNAUDITED)
(millions of dollars)
Full Year
% Change
2020
2019
Total
Foreign
Exchange
Operational(b)
U.S.:
Revenue
$
3,557
$
3,203
11
%
—
%
11
%
Cost of sales
709
655
8
%
—
%
8
%
Gross profit
2,848
2,548
12
%
—
%
12
%
Gross margin
80.1
%
79.6
%
Operating expenses
602
543
11
%
—
%
11
%
Other (income)/deductions-net
7
—
*
*
*
U.S. Earnings
$
2,239
$
2,005
12
%
—
%
12
%
International:
Revenue
$
3,035
$
2,972
2
%
(5)
%
7
%
Cost of sales
971
925
5
%
(4)
%
9
%
Gross profit
2,064
2,047
1
%
(4)
%
5
%
Gross margin
68.0
%
68.9
%
Operating expenses
510
560
(9)
%
(4)
%
(5)
%
Other (income)/deductions-net
7
—
*
*
*
International Earnings
$
1,547
$
1,487
4
%
(5)
%
9
%
Total Reportable Segments
$
3,786
$
3,492
8
%
(3)
%
11
%
Other business activities(c)
(372)
(348)
7
%
Reconciling Items:
Corporate(d)
(820)
(707)
16
%
Purchase accounting adjustments(e)
(198)
(234)
(15)
%
Acquisition-related costs(f)
(18)
(43)
(58)
%
Certain significant items(g)
(43)
(67)
(36)
%
Other unallocated(h)
(339)
(292)
16
%
Total Earnings(i)
$
1,996
$
1,801
11
%
(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 and
human health businesses.
(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
certain asset impairment charges, 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/20210216005661/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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