- Reports Revenue of $2.0 Billion, Growing 11%, and Net Income
of $552 Million, or $1.16 per Diluted Share, Increasing 15% and
16%, Respectively, on a Reported Basis for Third Quarter
2021
- Reports Adjusted Net Income of $597 Million, or Adjusted
Diluted EPS of $1.25, for Third Quarter 2021
- Delivers 10% Operational Growth in Revenue and 10%
Operational Growth in Adjusted Net Income for Third Quarter
2021
- Increases Full Year 2021 Revenue Guidance to $7.700 -
$7.750 Billion and Diluted EPS of $4.23 - $4.29 on a Reported
Basis, or $4.62 - $4.67 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the third quarter of 2021 and increased its guidance for full year
2021.
The company reported revenue of $2.0 billion for the third
quarter of 2021, an increase of 11% compared with the third quarter
of 2020. Net income for the third quarter of 2021 was $552 million,
or $1.16 per diluted share, an increase of 15% and 16%,
respectively, on a reported basis.
Adjusted net income1 for the third quarter of 2021 was $597
million, or $1.25 per diluted share, both increasing 14% on a
reported basis. Adjusted net income for the third quarter of 2021
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 2021
increased 10%, excluding the impact of foreign currency. Adjusted
net income for the third quarter of 2021 increased 10%
operationally, excluding the impact of foreign currency.
EXECUTIVE COMMENTARY
“We delivered strong results again this quarter with 10%
operational growth for both revenue and adjusted net income, driven
by our innovative portfolio of petcare parasiticides, including
Simparica Trio®, as well as dermatology products,” said Kristin
Peck, Chief Executive Officer of Zoetis. “Additionally, the first
full-quarter sales of Librela® and Solensia®, our new monoclonal
antibody (mAb) therapies for osteoarthritis (OA) pain in dogs and
cats, exceeded our expectations, with both products receiving very
positive feedback in the markets where they were launched."
“We remain on track for a record-setting year, with updated
guidance for operational revenue growth in the range of 14% to
14.5% and adjusted net income in the range of 16.5% to 18% for
2021. We see positive market trends, especially in petcare,
continuing into 2022, and we will continue to invest in the
innovations and digital solutions that are needed by our customers
across the continuum of care,” 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 2021:
- Revenue in the U.S. segment was $1.065 billion, an
increase of 7% compared with the third quarter of 2020. Growth was
impacted by unfavorable comparisons to the third quarter of 2020,
which benefited from a rapid market recovery related to COVID-19
disruptions earlier that year. Sales of companion animal products
increased 17%, driven by growth across the parasiticides portfolio,
including Simparica Trio for dogs. The company’s key dermatology
portfolio also significantly contributed to growth across both the
Apoquel® and Cytopoint® brands. Sales of livestock products
declined 13% in the quarter, driven by a decrease in cattle product
sales as a result of generic competition, an early fall cattle run
that favorably impacted the third quarter of 2020, and continued
weakness in cattle and dairy markets. Sales of poultry products
declined due to the expanded use of lower cost alternatives and
generic competition. Sales of swine products declined due to
pricing pressure on anti-infectives and vaccines.
- Revenue in the International segment was $904 million,
an increase of 18% on a reported basis and an increase of 14%
operationally compared with the third quarter of 2020. Sales of
companion animal products increased 29% on a reported basis and 24%
operationally. Growth resulted from increased sales of key
dermatology products across both the Apoquel and Cytopoint brands.
The company’s parasiticides portfolio, including the Simparica® and
Revolution®/Stronghold® franchises, also contributed to growth, as
well as the first full quarter of sales of Librela and Solensia,
the recently launched monoclonal antibody products for
osteoarthritis pain. Sales of the broader in-line portfolio, which
benefited from increased pet ownership and standards of care, also
grew. Sales of livestock products grew 9% on a reported basis and
7% operationally. Sales of cattle products grew due to key account
penetration, favorable export market conditions in Brazil, and
favorable market conditions in other emerging markets. Growth in
the fish portfolio resulted primarily from increased sales of the
Alpha Flux® sea lice treatment product and the Alpha Ject LiVac®
SRS vaccine in Chile. Sales of both swine and poultry products grew
as a result of key account growth and market expansion across parts
of Asia, Brazil and Russia.
INVESTMENTS IN GROWTH
Zoetis continues to enhance its key dermatology portfolio with
market expansions and lifecycle innovations. Since its last
quarterly earnings announcement, the company received approval in
China for Cytopoint (lokivetmab), an injectable monoclonal
antibody therapy for atopic dermatitis in dogs. Zoetis also
received a positive opinion from the European Medicines Agency’s
Committee for Medicinal Products for Veterinary Use (CVMP) for a
new chewable version of Apoquel, the company’s
industry-leading Janus kinase inhibitor which was first introduced
in 2013. Upon amendment of the marketing authorization in the
European Union (EU), Apoquel chewable tablets will provide
veterinarians with a new palatable treatment option for dogs
suffering from pruritus associated with allergic dermatitis and
clinical manifestations of atopic dermatitis. In other petcare
product market expansions, Zoetis received approval in Brazil for
Vanguard® I-III (known as Vanguard Intranasal Rapid RESP 3
in other markets). This vaccine helps protect dogs from key
pathogens associated with Canine Infectious Respiratory Disease
(CIRD), including Bordetella bronchiseptica (Bb), canine
parainfluenza virus (CPiV) and canine adenovirus type 2
(CAV-2).
In diagnostics, the company recently added digital cytology
testing to its Vetscan Imagyst™ platform in the U.S., U.K.,
Canada, Australia and New Zealand. With the launch of digital
cytology, Vetscan Imagyst now offers a network of expert remote
pathologists in addition to Artificial Intelligence (AI) technology
for fecal testing. As Zoetis continues to develop additional
innovative applications for Vetscan Imagyst, it plans to seamlessly
integrate even more new capabilities into the platform, helping
veterinarians provide the best possible care for dogs and cats.
On the livestock side of the business, Zoetis enhanced its
aquaculture portfolio with the approval of Alpha Ject Micro®
2000 in the EU. This new micro-dose vaccine has been
optimized for use in sea bass to provide robust protection against
classical vibriosis and pasteurellosis, two common bacterial
infections.
FINANCIAL GUIDANCE
Zoetis is increasing its full year 2021 guidance, which
includes:
- Revenue between $7.700 billion and $7.750 billion
- Reported diluted EPS between $4.23 and $4.29
- Adjusted diluted EPS between $4.62 and $4.67
This guidance reflects foreign exchange rates as of mid-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
2021 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. 4, 2021.
About Zoetis
As the world’s leading animal health company, Zoetis is driven
by a singular purpose: to nurture our world and humankind by
advancing care for animals. After nearly 70 years innovating ways
to predict, prevent, detect, and treat animal illness, Zoetis
continues to stand by those raising and caring for animals
worldwide -- from livestock farmers to veterinarians and pet
owners. The company’s leading portfolio and pipeline of medicines,
vaccines, diagnostics and technologies make a difference in over
100 countries. A Fortune 500 company, Zoetis generated revenue of
$6.7 billion in 2020 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 and reported diluted earnings per share,
excluding purchase accounting adjustments, acquisition-related
costs and certain significant items. 2 Operational 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, supply chain, 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, 2020, 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
most directly comparable 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-COR ZTS-IR ZTS-FIN
ZOETIS INC.
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME(a)
(UNAUDITED)
(millions of dollars, except per
share data)
Third Quarter Ended
Nine Months Ended
September 30,
September 30,
2021
2020
% Change
2021
2020
% Change
Revenue
$
1,990
$
1,786
11
$
5,809
$
4,868
19
Costs and expenses:
Cost of sales
586
546
7
1,703
1,456
17
Selling, general and administrative
expenses
504
424
19
1,408
1,206
17
Research and development expenses
132
112
18
370
330
12
Amortization of intangible assets
40
40
—
121
120
1
Restructuring charges and certain
acquisition-related costs
9
5
80
39
22
77
Interest expense
56
62
(10)
170
173
(2)
Other (income)/deductions–net
4
—
*
16
(15
)
*
Income before provision for taxes on
income
659
597
10
1,982
1,576
26
Provision for taxes on income
107
118
(9)
361
298
21
Net income before allocation to
noncontrolling interests
552
479
15
1,621
1,278
27
Less: Net loss attributable to
noncontrolling interests
—
—
—
(2
)
(1
)
*
Net income attributable to Zoetis
$
552
$
479
15
$
1,623
$
1,279
27
Earnings per share—basic
$
1.16
$
1.01
15
$
3.42
$
2.69
27
Earnings per share—diluted
$
1.16
$
1.00
16
$
3.40
$
2.67
27
Weighted-average shares used to calculate
earnings per share
Basic
474.0
475.5
474.8
475.5
Diluted
476.3
478.5
477.1
478.5
(a)
The condensed consolidated
statements of income present the third quarter and nine months
ended September 30, 2021 and September 30, 2020. Subsidiaries
operating outside the United States are included for the third
quarter and nine months ended August 31, 2021 and August 31,
2020.
* 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)
Third Quarter Ended September 30,
2021
GAAP
Reported(a)
Purchase
Accounting
Adjustments
Acquisition-
Related
Costs(1)
Certain
Significant
Items(2)
Non-GAAP
Adjusted(b)
Cost of sales
$
586
$
(2
)
$
—
$
(1
)
$
583
Gross profit
1,404
2
—
1
1,407
Selling, general and administrative
expenses
504
(8
)
—
—
496
Amortization of intangible assets
40
(35
)
—
—
5
Restructuring charges and certain
acquisition-related costs
9
—
(1
)
(8
)
—
Other (income)/deductions–net
4
—
—
(3
)
1
Income before provision for taxes on
income
659
45
1
12
717
Provision for taxes on income
107
10
—
3
120
Net income attributable to Zoetis
552
35
1
9
597
Earnings per common share attributable to
Zoetis–diluted
1.16
0.07
—
0.02
1.25
Third 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
(a)
The condensed consolidated
statements of income present the third quarter ended September 30,
2021 and September 30, 2020. Subsidiaries operating outside the
United States are included for the third quarter ended August 31,
2021 and August 31, 2020.
(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)
Nine months ended September 30,
2021
GAAP
Reported(a)
Purchase
Accounting
Adjustments
Acquisition-
Related
Costs(1)
Certain
Significant
Items(2)
Non-GAAP
Adjusted(b)
Cost of sales
$
1,703
$
(5
)
$
—
$
(7
)
$
1,691
Gross profit
4,106
5
—
7
4,118
Selling, general and administrative
expenses
1,408
(23
)
—
—
1,385
Research and development expenses
370
(1
)
—
—
369
Amortization of intangible assets
121
(104
)
—
—
17
Restructuring charges and certain
acquisition-related costs
39
—
(8
)
(31
)
—
Other (income)/deductions–net
16
—
—
(6
)
10
Income before provision for taxes on
income
1,982
133
8
44
2,167
Provision for taxes on income
361
30
1
11
403
Net income attributable to Zoetis
1,623
103
7
33
1,766
Earnings per common share attributable to
Zoetis–diluted
3.40
0.22
0.01
0.07
3.70
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
(a)
The condensed consolidated
statements of income present the nine months ended September 30,
2021 and September 30, 2020. Subsidiaries operating outside the
United States are included for the nine months ended August 31,
2021 and August 31, 2020.
(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:
Third Quarter Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Integration costs(a)
$
1
$
3
$
6
$
15
Restructuring charges(b)
—
(2
)
2
—
Total acquisition-related
costs—pre-tax
1
1
8
15
Income taxes(c)
—
—
1
—
Total acquisition-related costs—net of
tax
$
1
$
1
$
7
$
15
(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 exit and 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:
Third Quarter Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Operational efficiency initiative(a)
$
—
$
(1
)
$
—
$
(18
)
Supply network strategy(b)
—
1
2
4
Other restructuring charges and
cost-reduction/productivity initiatives(c)
7
4
20
7
Certain asset impairment charges(d)
5
—
19
—
Net loss on sale of assets(e)
—
—
3
—
Other(f)
—
5
—
11
Total certain significant
items—pre-tax
12
9
44
4
Income taxes(g)
3
2
11
—
Total certain significant items—net of
tax
$
9
$
7
$
33
$
4
(a)
For the nine months ended
September 30, 2020, represents a net gain resulting from a cash
payment received pursuant to an agreement related to the 2016 sale
of certain U.S. manufacturing sites, included in Other
(income)/deductions-net.
(b)
Represents product transfer
costs, included in Cost of sales, related to cost-reduction and
productivity initiatives.
(c)
For the quarter ended September
30, 2021, primarily represents employee termination costs
associated with the realignment of our international operations,
included in Restructuring charges and certain acquisition-related
costs. For the nine months ended September 30, 2021, primarily
represents employee termination costs associated with our
international operations and other costs associated with
cost-reduction and productivity initiatives, included in
Restructuring charges and certain acquisition-related costs.
For the quarter and nine months
ended September 30, 2020, 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 ended September
30, 2021, primarily represents asset impairment charges related to
a dairy product termination, included in Other
(income)/deductions-net. For the nine months ended September 30,
2021, primarily represents asset impairment charges related to the
consolidation of manufacturing sites in China, included in
Restructuring charges and certain acquisition-related costs, and a
certain dairy product termination in Denmark, included in Other
(income)/deductions-net.
(e)
Represents a net loss related to
the sale of certain assets of our poultry automation business
located in the U.S. and Canada, included in Other
(income)/deductions-net.
(f)
Represents the modification of
share-based compensation related to CEO transition costs, included
in Selling, general and administrative expenses.
(g)
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)
Third Quarter Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(b)
Adjusted cost of sales
$
583
$
543
7
%
(2)
%
9
%
as a percent of revenue
29.3
%
30.4
%
NA
NA
NA
Adjusted SG&A expenses
496
407
22
%
2
%
20
%
Adjusted R&D expenses
132
112
18
%
1
%
17
%
Adjusted net income attributable to
Zoetis
597
524
14
%
4
%
10
%
Nine Months Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(b)
Adjusted cost of sales
$
1,691
$
1,446
17
%
2
%
15
%
as a percent of revenue
29.1
%
29.7
%
NA
NA
NA
Adjusted SG&A expenses
1,385
1,148
21
%
2
%
19
%
Adjusted R&D expenses
369
329
12
%
1
%
11
%
Adjusted net income attributable to
Zoetis
1,766
1,406
26
%
3
%
23
%
(a)
Adjusted cost of sales, adjusted
selling, general, and administrative (SG&A) expenses, adjusted
research and development (R&D) expenses, and adjusted net
income (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.
2021 GUIDANCE
Selected Line Items
(millions of dollars, except per share
amounts)
Full Year 2021
Revenue
$7,700 to $7,750
Operational growth(a)
14% to 14.5%
Adjusted cost of sales as a percentage of
revenue(b)
Approximately 30%
Adjusted SG&A expenses(b)
$1,910 to $1,940
Adjusted R&D expenses(b)
$500 to $510
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $240
Effective tax rate on adjusted
income(b)
Approximately 18.5%
Adjusted diluted EPS(b)
$4.62 to $4.67
Adjusted net income(b)
$2,200 to $2,225
Operational growth(a)(c)
16.5% to 18%
Certain significant items and
acquisition-related costs(d)
$45 - $50
The guidance reflects foreign exchange
rates as of mid-October 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(c)
Cost of sales as a percentage of
revenue
~ 30.2%
~ (0.1%)
~ (0.1%)
~ 30%
SG&A expenses
$1,940 to $1,970
~ $(30)
$1,910 to $1,940
R&D expenses
$502 to $512
~ $(2)
$500 to $510
Interest expense and other
(income)/deductions-net
~ $240
~ $240
Effective tax rate
~ 18%
~ 0.5%
~ 18.5%
Diluted EPS
$4.23 to $4.29
$0.09 to $0.10
~ $0.29
$4.62 to $4.67
Net income attributable to Zoetis
$2,010 to $2,040
$45 to $50
~ $140
$2,200 to $2,225
(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)
Third Quarter Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(b)
Revenue:
Companion Animal
$
1,202
$
995
21
%
2
%
19
%
Livestock
767
768
—
%
2
%
(2)
%
Contract Manufacturing & Human
Health
21
23
(9)
%
—
%
(9)
%
Total Revenue
$
1,990
$
1,786
11
%
1
%
10
%
U.S.
Companion Animal
$
775
$
664
17
%
—
%
17
%
Livestock
290
332
(13)
%
—
%
(13)
%
Total U.S. Revenue
$
1,065
$
996
7
%
—
%
7
%
International
Companion Animal
$
427
$
331
29
%
5
%
24
%
Livestock
477
436
9
%
2
%
7
%
Total International Revenue
$
904
$
767
18
%
4
%
14
%
Companion Animal:
Dogs and Cats
$
1,142
$
947
21
%
2
%
19
%
Horses
60
48
25
%
5
%
20
%
Total Companion Animal Revenue
$
1,202
$
995
21
%
2
%
19
%
Livestock:
Cattle
$
403
$
417
(3)
%
2
%
(5)
%
Swine
153
151
1
%
1
%
—
%
Poultry
124
129
(4)
%
1
%
(5)
%
Fish
56
45
24
%
3
%
21
%
Sheep and other
31
26
19
%
3
%
16
%
Total Livestock Revenue
$
767
$
768
—
%
2
%
(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
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Nine Months Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(b)
Revenue:
Companion Animal
$
3,507
$
2,674
31
%
2
%
29
%
Livestock
2,245
2,134
5
%
2
%
3
%
Contract Manufacturing & Human
Health
57
60
(5)
%
1
%
(6)
%
Total Revenue
$
5,809
$
4,868
19
%
2
%
17
%
U.S.
Companion Animal
$
2,227
$
1,757
27
%
—
%
27
%
Livestock
775
848
(9)
%
—
%
(9)
%
Total U.S. Revenue
$
3,002
$
2,605
15
%
—
%
15
%
International
Companion Animal
$
1,280
$
917
40
%
7
%
33
%
Livestock
1,470
1,286
14
%
3
%
11
%
Total International Revenue
$
2,750
$
2,203
25
%
5
%
20
%
Companion Animal:
Dogs and Cats
$
3,319
$
2,524
31
%
2
%
29
%
Horses
188
150
25
%
3
%
22
%
Total Companion Animal Revenue
$
3,507
$
2,674
31
%
2
%
29
%
Livestock:
Cattle
$
1,144
$
1,107
3
%
1
%
2
%
Swine
504
454
11
%
3
%
8
%
Poultry
389
412
(6)
%
1
%
(7)
%
Fish
132
101
31
%
4
%
27
%
Sheep and other
76
60
27
%
10
%
17
%
Total Livestock Revenue
$
2,245
$
2,134
5
%
2
%
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)
Third Quarter Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(a)
Total International
$
903.4
$
766.9
18
%
4
%
14
%
Australia
69.8
59.7
17
%
7
%
10
%
Brazil
78.1
62.2
26
%
4
%
22
%
Canada
55.3
49.7
11
%
8
%
3
%
Chile
32.6
23.4
39
%
2
%
37
%
China
71.5
65.6
9
%
8
%
1
%
France
30.7
29.7
3
%
3
%
—
%
Germany
47.4
38.5
23
%
4
%
19
%
Italy
30.4
27.1
12
%
4
%
8
%
Japan
43.3
39.0
11
%
(3)
%
14
%
Mexico
31.3
25.9
21
%
12
%
9
%
Spain
32.3
30.7
5
%
3
%
2
%
United Kingdom
61.1
44.8
36
%
10
%
26
%
Other developed markets
126.4
105.3
20
%
5
%
15
%
Other emerging markets
193.2
165.3
17
%
(3)
%
20
%
Nine Months Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(a)
Total International
$
2,749.6
$
2,202.6
25
%
5
%
20
%
Australia
196.0
153.8
27
%
14
%
13
%
Brazil
227.4
181.3
25
%
(12)
%
37
%
Canada
168.5
143.7
17
%
9
%
8
%
Chile
100.2
71.8
40
%
5
%
35
%
China
288.9
197.7
46
%
11
%
35
%
France
97.7
82.4
19
%
9
%
10
%
Germany
135.0
112.1
20
%
8
%
12
%
Italy
87.3
62.7
39
%
10
%
29
%
Japan
139.9
133.3
5
%
—
%
5
%
Mexico
97.8
83.6
17
%
7
%
10
%
Spain
96.6
82.7
17
%
8
%
9
%
United Kingdom
173.2
125.4
38
%
10
%
28
%
Other developed markets
349.9
282.3
24
%
9
%
15
%
Other emerging markets
591.2
489.8
21
%
(3)
%
24
%
(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)
Third Quarter Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(b)
U.S.:
Revenue
$
1,065
$
996
7
%
—
%
7
%
Cost of Sales
199
194
3
%
—
%
3
%
Gross Profit
866
802
8
%
—
%
8
%
Gross Margin
81.3
%
80.5
%
Operating Expenses
183
157
17
%
—
%
17
%
Other (income)/deductions-net
—
—
*
*
*
U.S. Earnings
$
683
$
645
6
%
—
%
6
%
International:
Revenue
$
904
$
767
18
%
4
%
14
%
Cost of Sales
273
245
11
%
(1)
%
12
%
Gross Profit
631
522
21
%
5
%
16
%
Gross Margin
69.8
%
68.1
%
Operating Expenses
152
122
25
%
4
%
21
%
Other (income)/deductions-net
(4
)
—
*
*
*
International Earnings
$
483
$
400
21
%
6
%
15
%
Total Reportable Segments
$
1,166
$
1,045
12
%
3
%
9
%
Other business activities(c)
(106
)
(87
)
22
%
Reconciling Items:
Corporate(d)
(252
)
(222
)
14
%
Purchase accounting adjustments(e)
(45
)
(48
)
(6)
%
Acquisition-related costs(f)
(1
)
(1
)
—
%
Certain significant items(g)
(12
)
(9
)
33
%
Other unallocated(h)
(91
)
(81
)
12
%
Total Earnings(i)
$
659
$
597
10
%
(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, certain costs associated with information technology,
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 a
shift in our organizational structure and
cost-reduction/productivity initiatives that are not associated
with an acquisition, certain asset impairment charges, 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
(UNAUDITED)
(millions of dollars)
Nine Months Ended
September 30,
% Change
2021
2020
Total
Foreign
Exchange
Operational(b)
U.S.:
Revenue
$
3,002
$
2,605
15
%
—
%
15
%
Cost of Sales
575
515
12
%
—
%
12
%
Gross Profit
2,427
2,090
16
%
—
%
16
%
Gross Margin
80.8
%
80.2
%
Operating Expenses
484
418
16
%
—
%
16
%
Other (income)/deductions-net
2
4
(50)
%
—
%
(50)
%
U.S. Earnings
$
1,941
$
1,668
16
%
—
%
16
%
International:
Revenue
$
2,750
$
2,203
25
%
5
%
20
%
Cost of Sales
833
697
20
%
2
%
18
%
Gross Profit
1,917
1,506
27
%
5
%
22
%
Gross Margin
69.7
%
68.4
%
Operating Expenses
429
364
18
%
5
%
13
%
Other (income)/deductions-net
(4
)
1
*
*
*
International Earnings
$
1,492
$
1,141
31
%
6
%
25
%
Total Reportable Segments
$
3,433
$
2,809
22
%
2
%
20
%
Other business activities(c)
(301
)
(264
)
14
%
Reconciling Items:
Corporate(d)
(744
)
(603
)
23
%
Purchase accounting adjustments(e)
(133
)
(155
)
(14)
%
Acquisition-related costs(f)
(8
)
(15
)
(47)
%
Certain significant items(g)
(44
)
(4
)
*
Other unallocated(h)
(221
)
(192
)
15
%
Total Earnings(i)
$
1,982
$
1,576
26
%
(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, certain costs associated with information technology,
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 a shift in our organizational
structure and 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/20211104005597/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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