- Reports Revenue of $2.1 Billion, Growing 5%, and Net Income
of $529 Million, or $1.12 per Diluted Share, Increasing 3% and 5%,
Respectively, on a Reported Basis for Second Quarter 2022
- Delivers 8% Operational Growth in Revenue and 9% Operational
Growth in Adjusted Net Income for Second Quarter 2022
- Reports Adjusted Net Income of $567 Million, or Adjusted
Diluted EPS of $1.20, for Second Quarter 2022
- Updates Full Year 2022 Revenue Guidance to $8.225 - $8.325
Billion, with Diluted EPS of $4.65 to $4.75 on a Reported Basis, or
$4.97 to $5.05 on an Adjusted Basis
Zoetis Inc.(NYSE: ZTS) today reported its financial results for
the second quarter of 2022 and updated its guidance for full year
2022 to reflect its positive outlook for the remainder of the year,
as well as the negative impact of recent changes to foreign
exchange rates.
The company reported revenue of $2.1 billion for the second
quarter of 2022, an increase of 5% compared with the second quarter
of 2021. Net income for the second quarter of 2022 was $529
million, or $1.12 per diluted share, an increase of 3% and 5%,
respectively, on a reported basis.
On an operational1 basis, revenue for the second quarter of 2022
increased 8%, excluding the impact of foreign currency. Adjusted
net income for the second quarter of 2022 increased 9%
operationally, excluding the impact of foreign currency.
Adjusted net income2 for the second quarter of 2022 was $567
million, or $1.20 per diluted share, which was flat and an increase
of 1%, respectively, on a reported basis. Adjusted net income for
the second quarter of 2022 excludes the net impact of $38 million
for purchase accounting adjustments, acquisition-related costs and
certain significant items.
EXECUTIVE COMMENTARY
“Zoetis delivered another strong quarter, with 8% operational
revenue growth and 9% operational growth in adjusted net income,
driven once again by the strength of our companion animal
portfolio,” said Zoetis Chief Executive Officer Kristin Peck. “Our
diversity and strength across parasiticides, dermatology products,
vaccines and monoclonal antibodies for pain continue to demonstrate
people’s desire for innovative and effective care for their
pets."
“Our business remains strong thanks to the durability of our
global portfolio and a steady pipeline of new products. Even as we
face uncertain macroeconomic conditions, continued supply
constraints, generic competition and the war in Ukraine, we remain
confident in the resilience of our business and colleagues. As we
look at the rest of the year, we are updating and narrowing our
guidance to reflect our positive outlook for the remainder of the
year, as well as recent changes to foreign exchange rates."
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across
two segments: United States (U.S.) and International. Within these
segments, the company delivers a diverse portfolio of products for
companion animals and livestock, tailored to local trends and
customer needs. In the second quarter of 2022:
- Revenue in the U.S. segment was $1.091 billion, an
increase of 9% compared with the second quarter of 2021. Sales of
companion animal products increased 13%, driven by growth across
the company’s parasiticide portfolio, primarily Simparica Trio® for
dogs. The company's dermatology portfolio also contributed to
growth across both the Apoquel® and Cytopoint® brands. Sales of
livestock products declined 7% in the quarter. Sales of cattle
products declined as a result of generic competition for Draxxin®
and continued weakness in beef and dairy markets. The company’s
poultry portfolio declined due to the expanded use of lower cost
alternatives and generic competition for Zoamix®, the company’s
alternative to antibiotics in medicated feed additives. Sales of
swine products grew primarily from higher disease prevalence and
favorable market conditions for producers.
- Revenue in the International segment was $943 million,
an increase of 2% on a reported basis and an increase of 8%
operationally compared with the second quarter of 2021. Growth
across species was impacted by lower sales due to the war in
Ukraine. Sales of companion animal products grew 8% on a reported
basis and 16% operationally. Growth resulted from increased sales
of the company’s recently launched monoclonal antibody (mAb)
products for osteoarthritis pain, Librela® and Solensia®, as well
as the key dermatology portfolio across both the Apoquel and
Cytopoint brands. The Simparica® portfolio, including Simparica
Trio, also contributed to growth in the quarter. Sales of livestock
products declined 3% on a reported basis and grew 2% operationally.
Growth in the company’s fish portfolio was primarily the result of
increased sales of vaccines across key salmon markets, including
Chile and Norway. Sales of cattle products grew due to favorable
market conditions and price in key and emerging markets, including
Australia, Turkey, China and the U.K. Sales of sheep products grew
as a result of favorable market conditions and new product launches
in Australia. Sales of swine products decreased in the quarter due
to lower pork prices and COVID-related lockdowns in China, which
temporarily impacted the company’s supply chain in the market, as
well as an exceptionally strong comparative period versus the
second quarter of last year. The poultry products portfolio
declined due to the unfavorable impact of producer rotational
programs with certain medicated feed additives in Europe and
reduced flock sizes in Latin American markets.
INVESTMENTS IN GROWTH AND
SUSTAINABILITY
Zoetis continues to gain market approvals and introduce
lifecycle innovations for key brands. On the companion animal side
of the business, the company received approval in Mexico and New
Zealand for Apoquel Chewable Tablets. Previously approved in
the EU and the U.K., the new chewable version of Apoquel
(oclacitinib) provides veterinarians and pet owners with a
convenient solution to quickly and safely stop the cycle of
pruritus in allergic dogs and clinical signs of atopic dermatitis
in dogs. In parasiticides, a new label indication for Simparica
Trio (sarolaner/moxidectin/pyrantel chewable tablets) was
approved in Canada. The label expansion now includes the reduction
of infections that may cause Lyme disease in dogs by killing deer
ticks, also called black-legged ticks, as well as approval for the
treatment and control of certain hookworms.
On the livestock side of the business, Zoetis expanded its
poultry vaccine portfolio in the U.S. with the approval of
Poulvac® Procerta® HVT-IBD-ND, an advanced trivalent vector
vaccine that delivers powerful early protection against Marek’s
disease, infectious bursal disease and Newcastle disease in one
dose. This is the third recombinant vector vaccine from Zoetis,
following the introduction of Poulvac® Procerta® HVT-ND in
2020 and Poulvac® Procerta® HVT-IBD in 2021.
In Business Development news, Zoetis acquired Basepaws, a
privately held petcare genetics company, in June. Basepaws provides
pet owners with genetic tests, analytics and early health risk
assessments, which help pet owners and veterinarians understand an
individual pet’s risk for disease and can lead to more meaningful
engagements and increased likelihood of early detection and
treatment of disease. The acquisition of Basepaws enhances the
company’s portfolio in the precision animal health space and will
help inform its future pipeline of petcare innovations.
In terms of Sustainability, Zoetis continues to advance its
Driven To Care goals that were established last year. In
June, the company published its 2021 Progress Update and
Environmental, Social and Governance (ESG) metrics, highlighting
achievements toward the company’s Diversity, Equity & Inclusion
(DE&I) aspirations, expanded climate goals and support for the
veterinary profession – underscoring its commitment to be the most
sustainable animal health company in the world.
FINANCIAL GUIDANCE
Zoetis is updating its full year 2022 guidance due to the
positive outlook for the remainder of the year, as well as the
negative impact of recent changes to foreign exchange rates. This
includes:
- Revenue between $8.225 billion to $8.325 billion
- Reported diluted EPS between $4.65 to $4.75
- Adjusted diluted EPS between $4.97 to $5.05
This guidance reflects foreign exchange rates as of late July.
Additional details on guidance are included in the financial tables
and will be discussed on the company's conference call this
morning.
WEBCAST & CONFERENCE CALL
DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (ET)
today, during which company executives will review second quarter
2022 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 August 4, 2022.
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 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
$7.8 billion in 2021 with approximately 12,100 employees. For more
information, visit www.zoetis.com.
1 Operational growth (a non-GAAP financial measure) is defined
as growth excluding the impact of foreign exchange.
2 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.
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; disruptions in our global supply
chain; R&D costs; timing and likelihood of success;
expectations regarding products, product approvals or products
under development, expected timing of product launches; the impact
of the coronavirus (COVID-19) global 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, dividend
payments and share repurchases; 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, 2021, 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 global 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. Reconciliations of non-GAAP financial measures and
the 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)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
% Change
2022
2021
% Change
Revenue
$
2,052
$
1,948
5
$
4,038
$
3,819
6
Costs and expenses:
Cost of sales
625
568
10
1,194
1,117
7
Selling, general and administrative
expenses
529
495
7
994
904
10
Research and development expenses
135
120
13
257
238
8
Amortization of intangible assets
37
41
(10
)
78
81
(4
)
Restructuring charges and certain
acquisition-related costs
1
21
(95
)
3
30
(90
)
Interest expense, net of capitalized
interest
53
57
(7
)
106
114
(7
)
Other (income)/deductions–net
2
10
(80
)
9
12
(25
)
Income before provision for taxes on
income
670
636
5
1,397
1,323
6
Provision for taxes on income
141
125
13
274
254
8
Net income before allocation to
noncontrolling interests
529
511
4
1,123
1,069
5
Less: Net loss attributable to
noncontrolling interests
—
(1
)
*
(1
)
(2
)
(50
)
Net income attributable to Zoetis Inc.
$
529
$
512
3
$
1,124
$
1,071
5
Earnings per share—basic
$
1.13
$
1.08
5
$
2.39
$
2.25
6
Earnings per share—diluted
$
1.12
$
1.07
5
$
2.38
$
2.24
6
Weighted-average shares used to calculate
earnings per share
Basic
470.0
474.8
471.1
475.2
Diluted
471.5
477.0
472.8
477.5
(a) The condensed consolidated statements of income present the
three and six months ended June 30, 2022 and 2021. Subsidiaries
operating outside the United States are included for the three and
six months ended May 31, 2022 and 2021.
* 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)
Three Months Ended June 30,
2022
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
625
$
(1
)
$
—
$
(4
)
$
620
Gross profit
1,427
1
—
4
1,432
Selling, general and administrative
expenses
529
(7
)
—
—
522
Amortization of intangible assets
37
(32
)
—
—
5
Restructuring charges and certain
acquisition-related costs
1
—
(1
)
—
—
Income before provision for taxes on
income
670
40
1
4
715
Provision for taxes on income
141
9
—
(2
)
148
Net income attributable to Zoetis
529
31
1
6
567
Earnings per common share attributable to
Zoetis–diluted
1.12
0.07
—
0.01
1.20
Three Months Ended June 30,
2021
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
568
$
(1
)
$
—
$
(2
)
$
565
Gross profit
1,380
1
—
2
1,383
Selling, general and administrative
expenses
495
(7
)
—
—
488
Research and development expenses
120
(1
)
—
—
119
Amortization of intangible assets
41
(35
)
—
—
6
Restructuring charges and certain
acquisition-related costs
21
—
(2
)
(19
)
—
Other (income)/deductions–net
10
—
—
(3
)
7
Income before provision for taxes on
income
636
44
2
24
706
Provision for taxes on income
125
10
—
6
141
Net income attributable to Zoetis
512
34
2
18
566
Earnings per common share attributable to
Zoetis–diluted
1.07
0.08
—
0.04
1.19
(a) The condensed consolidated statements of income present the
three months ended June 30, 2022 and 2021. Subsidiaries operating
outside the United States are included for the three months ended
May 31, 2022 and 2021.
(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)
Six Months Ended June 30,
2022
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,194
$
(2
)
$
—
$
(7
)
$
1,185
Gross profit
2,844
2
—
7
2,853
Selling, general and administrative
expenses
994
(14
)
—
—
980
Amortization of intangible assets
78
(64
)
—
—
14
Restructuring charges and certain
acquisition-related costs
3
—
(3
)
—
—
Other (income)/deductions–net
9
—
—
3
12
Income before provision for taxes on
income
1,397
80
3
4
1,484
Provision for taxes on income
274
19
1
(1
)
293
Net income attributable to Zoetis
1,124
61
2
5
1,192
Earnings per common share attributable to
Zoetis–diluted
2.38
0.13
—
0.01
2.52
Six Months Ended June 30,
2021
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,117
$
(3
)
$
—
$
(6
)
$
1,108
Gross profit
2,702
3
—
6
2,711
Selling, general and administrative
expenses
904
(15
)
—
—
889
Research and development expenses
238
(1
)
—
—
237
Amortization of intangible assets
81
(69
)
—
—
12
Restructuring charges and certain
acquisition-related costs
30
—
(7
)
(23
)
—
Other (income)/deductions–net
12
—
—
(3
)
9
Income before provision for taxes on
income
1,323
88
7
32
1,450
Provision for taxes on income
254
20
1
8
283
Net income attributable to Zoetis
1,071
68
6
24
1,169
Earnings per common share attributable to
Zoetis–diluted
2.24
0.15
0.01
0.05
2.45
(a) The condensed consolidated statements of income present the
six months ended June 30, 2022 and 2021. Subsidiaries operating
outside the United States are included for the six months ended May
31, 2022 and 2021.
(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:
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Integration costs(a)
$
1
$
2
$
3
$
5
Restructuring charges(b)
—
—
—
2
Total acquisition-related
costs—pre-tax
1
2
3
7
Income taxes(c)
—
—
1
1
Total acquisition-related costs—net of
tax
$
1
$
2
$
2
$
6
(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.
(2) Certain significant items include the
following:
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Other restructuring charges and
cost-reduction/productivity initiatives(a)
$
1
$
8
$
3
$
15
Certain asset impairment charges(b)
4
13
4
14
Net loss on sale of assets(c)
—
3
—
3
Other
(1
)
—
(3
)
—
Total certain significant
items—pre-tax
4
24
4
32
Income taxes(d)
(2
)
6
(1
)
8
Total certain significant items—net of
tax
$
6
$
18
$
5
$
24
(a) For the three and six months ended June 30, 2022, primarily
represents product transfer costs, included in Cost of sales.
For the three months ended June 30, 2021, primarily represents
employee termination costs related to cost-reduction and
productivity initiatives, included in Restructuring charges and
certain acquisition-related costs. For the six months ended June
30, 2021, primarily represents employee termination costs and
product transfer costs related to cost-reduction and productivity
initiatives and the CEO transition, included in Restructuring
charges and certain acquisition-related costs.
(b) For the three and six months ended June 30, 2022, primarily
represents inventory charges related to the consolidation of
manufacturing sites in China, included in Cost of sales.
For the three and six months ended June 30, 2021, primarily
represents asset impairment charges related to the consolidation of
manufacturing sites in China, as well as charges related to our
poultry automation business located in the U.S. and Canada,
included in Restructuring charges and certain acquisition-related
costs. For the six months ended June 30, 2021, also includes asset
impairment charges related to inventory in our precision livestock
farming business, included in Cost of sales.
(c) 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.
(d) Included in Provision for taxes on income. Income taxes
include the tax effect of the associated pre-tax amounts,
calculated by determining the jurisdictional location of the
pre-tax amounts and applying that jurisdiction's applicable tax
rate. Income taxes also includes tax expense related to changes in
valuation allowances for the three and six months ended June 30,
2022.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES
AND INCOME(a)
(UNAUDITED)
(millions of dollars)
Three Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
620
$
565
10
%
2
%
8
%
as a percent of revenue
30.2
%
29.0
%
NA
NA
NA
Adjusted SG&A expenses
522
488
7
%
(1
) %
8
%
Adjusted R&D expenses
135
119
13
%
(3
) %
16
%
Adjusted net income attributable to
Zoetis
567
566
—
%
(9
) %
9
%
Six Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
1,185
$
1,108
7
%
(1
) %
8
%
as a percent of revenue
29.3
%
29.0
%
NA
NA
NA
Adjusted SG&A expenses
980
889
10
%
(2
) %
12
%
Adjusted R&D expenses
257
237
8
%
(2
) %
10
%
Adjusted net income attributable to
Zoetis
1,192
1,169
2
%
(6
) %
8
%
(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.
2022 GUIDANCE
Selected Line Items
(millions of dollars, except per share
amounts)
Full Year 2022
Revenue
$8,225 to $8,325
Operational growth(a)
9.5% to 10.5%
Adjusted cost of sales as a percentage of
revenue(b)
29.0% - 29.5%
Adjusted SG&A expenses(b)
$2,065 to $2,100
Adjusted R&D expenses(b)
$545 to $555
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $230
Effective tax rate on adjusted
income(b)
Approximately 20%
Adjusted diluted EPS(b)
$4.97 to $5.05
Adjusted net income(b)
$2,350 to $2,390
Operational growth(a)(c)
11% to 13%
Certain significant items and
acquisition-related costs(d)
$20 to $30
The guidance reflects foreign exchange rates as of late July
2022.
Reconciliations of 2022 reported guidance to 2022 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
29.2% to 29.7%
~ (0.1)%
~ (0.1)%
29.0% to 29.5%
SG&A expenses
$2,095 to $2,130
~ $(30)
$2,065 to $2,100
R&D expenses
$547 to $557
~ $(2)
$545 to $555
Interest expense and other
(income)/deductions-net
~ $230
~ $230
Effective tax rate
~ 20%
~ 20%
Diluted EPS
$4.65 to $4.75
$0.04 to $0.06
~ $0.26
$4.97 to $5.05
Net income attributable to Zoetis
$2,195 to $2,245
$20 to $30
~ $125
$2,350 to $2,390
(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)
Three Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
1,366
$
1,229
11
%
(3
) %
14
%
Livestock
668
699
(4
) %
(3
) %
(1
) %
Contract Manufacturing & Human
Health
18
20
(10
) %
4
%
(14
) %
Total Revenue
$
2,052
$
1,948
5
%
(3
) %
8
%
U.S.
Companion Animal
$
895
$
794
13
%
—
%
13
%
Livestock
196
210
(7
) %
—
%
(7
) %
Total U.S. Revenue
$
1,091
$
1,004
9
%
—
%
9
%
International
Companion Animal
$
471
$
435
8
%
(8
) %
16
%
Livestock
472
489
(3
) %
(5
) %
2
%
Total International Revenue
$
943
$
924
2
%
(6
) %
8
%
Companion Animal:
Dogs and Cats
$
1,303
$
1,161
12
%
(3
) %
15
%
Horses
63
68
(7
) %
(3
) %
(4
) %
Total Companion Animal Revenue
$
1,366
$
1,229
11
%
(3
) %
14
%
Livestock:
Cattle
$
328
$
342
(4
) %
(4
) %
—
%
Swine
144
161
(11
) %
(4
) %
(7
) %
Poultry
121
134
(10
) %
(4
) %
(6
) %
Fish
47
39
21
%
(3
) %
24
%
Sheep and other
28
23
22
%
(6
) %
28
%
Total Livestock Revenue
$
668
$
699
(4
) %
(3
) %
(1
) %
(a) For a description of each segment, see Zoetis' most recent
Annual Report on Form 10-K.
(b) Operational revenue growth (a non-GAAP financial measure) is
defined as revenue growth excluding the impact of foreign
exchange.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Six Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
2,629
$
2,305
14
%
(2
) %
16
%
Livestock
1,373
1,478
(7
) %
(4
) %
(3
) %
Contract Manufacturing & Human
Health
36
36
—
%
1
%
(1
) %
Total Revenue
$
4,038
$
3,819
6
%
(3
) %
9
%
U.S.
Companion Animal
$
1,669
$
1,452
15
%
—
%
15
%
Livestock
442
485
(9
) %
—
%
(9
) %
Total U.S. Revenue
$
2,111
$
1,937
9
%
—
%
9
%
International
Companion Animal
$
960
$
853
13
%
(6
) %
19
%
Livestock
931
993
(6
) %
(5
) %
(1
) %
Total International Revenue
$
1,891
$
1,846
2
%
(6
) %
8
%
Companion Animal:
Dogs and Cats
$
2,502
$
2,177
15
%
(2
) %
17
%
Horses
127
128
(1
) %
(3
) %
2
%
Total Companion Animal Revenue
$
2,629
$
2,305
14
%
(2
) %
16
%
Livestock:
Cattle
$
692
$
741
(7
) %
(4
) %
(3
) %
Swine
298
351
(15
) %
(3
) %
(12
) %
Poultry
245
265
(8
) %
(4
) %
(4
) %
Fish
91
76
20
%
(4
) %
24
%
Sheep and other
47
45
4
%
(7
) %
11
%
Total Livestock Revenue
$
1,373
$
1,478
(7
) %
(4
) %
(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)
Three Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(a)
Total International
$
943.2
$
923.9
2
%
(6
) %
8
%
Australia
80.1
69.1
16
%
(7
) %
23
%
Brazil
85.9
75.7
13
%
12
%
1
%
Canada
66.8
67.1
—
%
(2
) %
2
%
Chile
34.2
33.6
2
%
(4
) %
6
%
China
96.2
94.2
2
%
(1
) %
3
%
France
31.3
32.1
(2
) %
(10
) %
8
%
Germany
45.9
49.2
(7
) %
(11
) %
4
%
Italy
31.6
31.8
(1
) %
(11
) %
10
%
Japan
40.9
49.9
(18
) %
(11
) %
(7
) %
Mexico
33.2
33.3
—
%
1
%
(1
) %
Spain
34.5
33.1
4
%
(12
) %
16
%
United Kingdom
51.0
43.0
19
%
(9
) %
28
%
Other developed markets
118.1
112.3
5
%
(9
) %
14
%
Other emerging markets
193.5
199.5
(3
) %
(11
) %
8
%
Six Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(a)
Total International
$
1,890.7
$
1,846.2
2
%
(6
) %
8
%
Australia
145.0
126.2
15
%
(8
) %
23
%
Brazil
162.7
149.3
9
%
5
%
4
%
Canada
115.8
113.2
2
%
(2
) %
4
%
Chile
75.4
67.6
12
%
(5
) %
17
%
China
198.9
217.4
(9
) %
—
%
(9
) %
France
63.2
67.0
(6
) %
(9
) %
3
%
Germany
89.0
87.6
2
%
(9
) %
11
%
Italy
62.0
56.9
9
%
(10
) %
19
%
Japan
100.0
96.6
4
%
(11
) %
15
%
Mexico
68.0
66.5
2
%
(2
) %
4
%
Spain
67.9
64.3
6
%
(9
) %
15
%
United Kingdom
114.5
112.1
2
%
(5
) %
7
%
Other developed markets
233.3
223.5
4
%
(8
) %
12
%
Other emerging markets
395.0
398.0
(1
) %
(11
) %
10
%
(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)
Three Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
1,091
$
1,004
9
%
—
%
9
%
Cost of Sales
198
192
3
%
—
%
3
%
Gross Profit
893
812
10
%
—
%
10
%
Gross Margin
81.9
%
80.9
%
Operating Expenses
207
170
22
%
—
%
22
%
Other (income)/deductions-net
(7
)
1
*
*
*
U.S. Earnings
$
693
$
641
8
%
—
%
8
%
International:
Revenue
$
943
$
924
2
%
(6
) %
8
%
Cost of Sales
288
278
4
%
—
%
4
%
Gross Profit
655
646
1
%
(9
) %
10
%
Gross Margin
69.5
%
69.9
%
Operating Expenses
161
147
10
%
(2
) %
12
%
Other (income)/deductions-net
(2
)
—
*
*
*
International Earnings
$
496
$
499
(1
) %
(11
) %
10
%
Total Reportable Segments
$
1,189
$
1,140
4
%
(5
) %
9
%
Other business activities(c)
(111
)
(98
)
13
%
Reconciling Items:
Corporate(d)
(267
)
(262
)
2
%
Purchase accounting adjustments(e)
(40
)
(44
)
(9
) %
Acquisition-related costs(f)
(1
)
(2
)
(50
) %
Certain significant items(g)
(4
)
(24
)
(83
) %
Other unallocated(h)
(96
)
(74
)
30
%
Total Earnings(i)
$
670
$
636
5
%
(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 includes 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 income and expense, certain compensation 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 cost-reduction/productivity initiatives that are not
associated with an acquisition and the impact of
divestiture-related gains and losses.
(h) Includes overhead expenses associated with our global
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)
Six Months Ended
June 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
2,111
$
1,937
9
%
—
%
9
%
Cost of Sales
383
376
2
%
—
%
2
%
Gross Profit
1,728
1,561
11
%
—
%
11
%
Gross Margin
81.9
%
80.6
%
Operating Expenses
372
301
24
%
—
%
24
%
Other (income)/deductions-net
(7
)
2
*
*
*
U.S. Earnings
$
1,363
$
1,258
8
%
—
%
8
%
International:
Revenue
$
1,891
$
1,846
2
%
(6
) %
8
%
Cost of Sales
553
560
(1
) %
(3
) %
2
%
Gross Profit
1,338
1,286
4
%
(7
) %
11
%
Gross Margin
70.8
%
69.7
%
Operating Expenses
306
277
10
%
(5
) %
15
%
Other (income)/deductions-net
(2
)
—
*
*
*
International Earnings
$
1,034
$
1,009
2
%
(8
) %
10
%
Total Reportable Segments
$
2,397
$
2,267
6
%
(3
) %
9
%
Other business activities(c)
(209
)
(195
)
7
%
Reconciling Items:
Corporate(d)
(526
)
(492
)
7
%
Purchase accounting adjustments(e)
(80
)
(88
)
(9
) %
Acquisition-related costs(f)
(3
)
(7
)
(57
) %
Certain significant items(g)
(4
)
(32
)
(88
) %
Other unallocated(h)
(178
)
(130
)
37
%
Total Earnings(i)
$
1,397
$
1,323
6
%
(a) For a description of each segment, see Zoetis' most recent
Annual Report on Form 10-K.
(b) Operational growth (a non-GAAP financial measure) is defined
as growth excluding the impact of foreign exchange.
(c) Other business activities includes 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 income and expense, certain compensation 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 cost-reduction/productivity initiatives that are not
associated with an acquisition and the impact of
divestiture-related gains and losses.
(h) Includes overhead expenses associated with our global
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/20220803005769/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 Contact: Steve Frank
1-973-822-7141 (o) steve.frank@zoetis.com
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