- Reports Revenue of $2.0 Billion, Growing 1%, and Net Income
of $529 Million, or $1.13 per Diluted Share, Decreasing 4% and 3%,
Respectively, on a Reported Basis for Third Quarter 2022
- Delivers 5% Operational Growth in Revenue and 2% Operational
Growth in Adjusted Net Income for Third Quarter 2022
- Reports Adjusted Net Income of $566 Million, or Adjusted
Diluted EPS of $1.21, for Third Quarter 2022
- Lowers Full Year 2022 Revenue Guidance to $8.000 - $8.075
Billion, with Diluted EPS of $4.51 to $4.59 on a Reported Basis, or
$4.83 to $4.90 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the third quarter of 2022 and lowered its guidance for full year
2022 to reflect lower than expected sales due to continued supply
constraints, veterinary workforce challenges, and the negative
impact of recent changes to foreign exchange rates.
The company reported revenue of $2.0 billion for the third
quarter of 2022, an increase of 1% compared with the third quarter
of 2021. Net income for the third quarter of 2022 was $529 million,
or $1.13 per diluted share, a decrease of 4% and 3%, respectively,
on a reported basis.
On an operational1 basis, revenue for the third quarter of 2022
increased 5%, excluding the impact of foreign currency. Adjusted
net income for the third quarter of 2022 increased 2%
operationally, excluding the impact of foreign currency.
Adjusted net income2 for the third quarter of 2022 was $566
million, or $1.21 per diluted share, which declined 5% and 3%,
respectively, on a reported basis. Adjusted net income for the
third quarter of 2022 excludes the net impact of $37 million for
purchase accounting adjustments, acquisition-related costs and
certain significant items.
EXECUTIVE COMMENTARY
"As the world continues to face dynamic market conditions and
uncertainty in the global economy, our business has been tested and
continues to perform well based on our diverse, durable product
portfolio and global scale,” said Kristin Peck, Chief Executive
Officer of Zoetis. "In the third quarter, we delivered 5%
operational revenue growth, reflecting steady performance across
our innovation-driven companion animal portfolio, especially
internationally. We reported 2% operational growth in adjusted net
income this quarter. This lower than usual growth on the bottom
line was due primarily to a more favorable tax rate in the year-ago
quarter.”
“While we remain confident in the strength and growth drivers of
our business, we are lowering 2022 guidance to reflect lower than
expected sales in the second half of the year related to continued
supply constraints, veterinary workforce challenges and 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 third quarter of 2022:
- Revenue in the U.S. segment was $1.090 billion, an
increase of 2% compared with the third quarter of 2021. Sales of
companion animal products increased 6%, driven by growth in the
company’s parasiticide portfolio, primarily Simparica Trio®, which
were tempered by supply constraints. The company’s key 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®. Sales of poultry products 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 decreased as a result of
increased competition for vaccines.
- Revenue in the International segment was $889 million, a
decrease of 2% on a reported basis and an increase of 8%
operationally compared with the third quarter of 2021. Sales of
companion animal products grew 6% on a reported basis and 17%
operationally. Growth resulted from increased sales of the
company’s recently launched monoclonal antibody products for
osteoarthritis pain, Librela® and Solensia®, as well as increased
sales in the key dermatology portfolio across both the Apoquel and
Cytopoint brands, including the recently launched chewable version
of Apoquel. Companion animal vaccines and Simparica Trio also
contributed to growth in the quarter. Sales of livestock products
declined 8% on a reported basis and were flat operationally. Growth
in the company’s fish portfolio was primarily the result of
increased sales of vaccines across key salmon markets, including
Norway and Chile. Sales of sheep products grew due to favorable
market conditions and new product launches in Australia, while
sales of the company’s poultry portfolio grew due to market growth
and demand generation efforts across Latin America. Growth in fish,
sheep and poultry was offset by reduced sales in the company’s
swine and cattle portfolios. Sales of swine products decreased in
the quarter due to supply constraints across international markets,
as well as lower sales across Europe due to reduced exports to
China and higher input costs for producers. The company’s cattle
portfolio declined primarily due to supply constraints and an
unfavorable macro environment for producers in Brazil.
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 Japan and Australia
for Librela (bedinvetmab), the first injectable mAb for
alleviation of pain associated with OA in dogs. Librela is also
approved in the European Union (EU), Canada, Brazil, Chile and
other international markets. Additionally, Solensia
(frunevetmab), the first injectable mAb for the alleviation of pain
associated with OA in cats, was approved in Japan and Chile. It is
also approved in the U.S., the EU, Canada, Australia and other
international markets. In dermatology, Zoetis received approval in
Australia, Canada and Japan for Apoquel Chewable Tablets.
Previously approved in the EU, Mexico and other international
markets, the new chewable version of Apoquel (oclacitinib) provides
veterinarians and pet owners with a palatable, convenient solution
to quickly and safely stop the cycle of pruritus in allergic dogs
and clinical signs of atopic dermatitis in dogs.
On the livestock side of the business, Zoetis gained approval in
the U.S. for Valcor™, a broad spectrum combination
endectocide for the treatment of internal and external parasites in
cattle. Additionally, Zoetis enhanced its swine vaccine portfolio
in the U.S. with the approval of Lawsotek™, a vaccine that
helps protect healthy pigs three weeks of age or older against
disease caused by the common bacterium Lawsonia intracellularis.
The company also received an expanded label approval from the U.S.
Food and Drug Administration (FDA) on three beef implant products.
Synovex Choice®, Synovex Plus® and Synovex® One
Feedlot are now approved for reimplanting programs, providing
beef producers with enhanced flexibility to more broadly use these
technologies to help them meet their productivity goals.
In Business Development news, Zoetis completed its acquisition
of Jurox, a privately held animal health company based in
Australia. The acquisition brings Zoetis a range of companion
animal and livestock products primed for global expansion, and
provides the company with future growth opportunities,
manufacturing capacity and increased capabilities in Australia, its
fourth largest market based on 2021 revenue. Additionally,
Basepaws, a privately held petcare genetics company acquired
by Zoetis in June, recently launched a comprehensive portfolio
exclusively for veterinary professionals. The portfolio consists of
genetic tests that screen for 64 feline health markers and over 210
canine health markers, the business’ first entry into canine
genetics.
FINANCIAL GUIDANCE
Zoetis is lowering its full year 2022 guidance to reflect lower
than expected sales due to continued supply constraints, veterinary
workforce challenges, as well as the negative impact of recent
changes to foreign exchange rates. This includes:
- Revenue between $8.000 billion to $8.075 billion
- Reported diluted EPS between $4.51 to $4.59
- Adjusted diluted EPS between $4.83 to $4.90
This guidance reflects foreign exchange rates as of late
October. Additional details on guidance are included in the
financial tables and will be discussed on the company's conference
call this morning.
WEBCAST & CONFERENCE CALL
DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (ET)
today, during which company executives will review third quarter
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 November 3,
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
Nine Months Ended
September 30,
September 30,
2022
2021
% Change
2022
2021
% Change
Revenue
$
2,002
$
1,990
1
$
6,040
$
5,809
4
Costs and expenses:
Cost of sales
607
586
4
1,801
1,703
6
Selling, general and administrative
expenses
501
504
(1
)
1,495
1,408
6
Research and development expenses
134
132
2
391
370
6
Amortization of intangible assets
37
40
(8
)
115
121
(5
)
Restructuring charges and certain
acquisition-related costs
6
9
(33
)
9
39
(77
)
Interest expense, net of capitalized
interest
53
56
(5
)
159
170
(6
)
Other (income)/deductions–net
(3
)
4
*
6
16
(63
)
Income before provision for taxes on
income
667
659
1
2,064
1,982
4
Provision for taxes on income
139
107
30
413
361
14
Net income before allocation to
noncontrolling interests
528
552
(4
)
1,651
1,621
2
Less: Net loss attributable to
noncontrolling interests
(1
)
—
*
(2
)
(2
)
—
Net income attributable to Zoetis Inc.
$
529
$
552
(4
)
$
1,653
$
1,623
2
Earnings per share—basic
$
1.13
$
1.16
(3
)
$
3.52
$
3.42
3
Earnings per share—diluted
$
1.13
$
1.16
(3
)
$
3.51
$
3.40
3
Weighted-average shares used to calculate
earnings per share
Basic
467.8
474.0
470.0
474.8
Diluted
469.1
476.3
471.6
477.1
(a) The condensed consolidated statements
of income present the three and nine months ended September 30,
2022 and 2021. Subsidiaries operating outside the United States are
included for the three and nine months ended August 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 September 30,
2022
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
607
$
(1
)
$
—
$
(1
)
$
605
Gross profit
1,395
1
—
1
1,397
Selling, general and administrative
expenses
501
(8
)
—
—
493
Amortization of intangible assets
37
(31
)
—
—
6
Restructuring charges and certain
acquisition-related costs
6
—
(1
)
(5
)
—
Income before provision for taxes on
income
667
40
1
6
714
Provision for taxes on income
139
9
—
1
149
Net income attributable to Zoetis
529
31
1
5
566
Earnings per common share attributable to
Zoetis–diluted
1.13
0.07
—
0.01
1.21
Three 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
$
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
(a) The condensed
consolidated statements of income present the three months ended
September 30, 2022 and 2021. Subsidiaries operating outside the
United States are included for the three months ended August 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)
Nine Months Ended September 30,
2022
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,801
$
(3
)
$
—
$
(8
)
$
1,790
Gross profit
4,239
3
—
8
4,250
Selling, general and administrative
expenses
1,495
(22
)
—
—
1,473
Amortization of intangible assets
115
(95
)
—
—
20
Restructuring charges and certain
acquisition-related costs
9
—
(4
)
(5
)
—
Other (income)/deductions–net
6
—
—
3
9
Income before provision for taxes on
income
2,064
120
4
10
2,198
Provision for taxes on income
413
28
1
—
442
Net income attributable to Zoetis
1,653
92
3
10
1,758
Earnings per common share attributable to
Zoetis–diluted
3.51
0.20
—
0.02
3.73
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
(a) The condensed consolidated statements
of income present the nine months ended September 30, 2022 and
2021. Subsidiaries operating outside the United States are included
for the nine months ended August 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
Nine Months Ended
September 30,
September 30,
2022
2021
2022
2021
Integration costs(a)
$
1
$
1
$
4
$
6
Restructuring charges(b)
—
—
—
2
Total acquisition-related
costs—pre-tax
1
1
4
8
Income taxes(c)
—
—
1
1
Total acquisition-related costs—net of
tax
$
1
$
1
$
3
$
7
(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
Nine Months Ended
September 30,
September 30,
2022
2021
2022
2021
Other restructuring charges and
cost-reduction/productivity initiatives(a)
$
4
$
7
$
7
$
22
Certain asset impairment charges(b)
2
5
6
19
Net loss on sale of assets(c)
—
—
—
3
Other
—
—
(3
)
—
Total certain significant
items—pre-tax
6
12
10
44
Income taxes(d)
1
3
—
11
Total certain significant items—net of
tax
$
5
$
9
$
10
$
33
(a) For the three and nine months ended
September 30, 2022, primarily represents employee termination and
exit costs associated with cost-reduction and productivity
initiatives in certain international markets, included in
Restructuring charges and certain acquisition-related costs, as
well as product transfer costs, included in Cost of sales.
For the three months 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 the realignment of our international operations and
other costs associated with cost-reduction and productivity
initiatives, included in Restructuring charges and certain
acquisition-related costs. (b) For the three and nine months ended
September 30, 2022, represents inventory and certain asset
impairment charges primarily related to the consolidation of
manufacturing sites in China, included in Cost of sales and
Restructuring charges and certain acquisition-related costs,
respectively. For the three months 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.
(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 nine
months ended September 30, 2022.
ZOETIS INC.
ADJUSTED SELECTED COSTS, EXPENSES
AND INCOME(a)
(UNAUDITED)
(millions of dollars)
Three Months Ended
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
605
$
583
4
%
(2
) %
6
%
as a percent of revenue
30.2
%
29.3
%
NA
NA
NA
Adjusted SG&A expenses
493
496
(1
) %
(4
) %
3
%
Adjusted R&D expenses
134
132
2
%
(2
) %
4
%
Adjusted net income attributable to
Zoetis
566
597
(5
) %
(7
) %
2
%
Nine Months Ended
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
1,790
$
1,691
6
%
(1
) %
7
%
as a percent of revenue
29.6
%
29.1
%
NA
NA
NA
Adjusted SG&A expenses
1,473
1,385
6
%
(3
) %
9
%
Adjusted R&D expenses
391
369
6
%
(2
) %
8
%
Adjusted net income attributable to
Zoetis
1,758
1,766
—
%
(6
) %
6
%
(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
$8,000 to $8,075
Operational growth(a)
7% to 8%
Adjusted cost of sales as a percentage of
revenue(b)
Approximately 30%
Adjusted SG&A expenses(b)
$1,970 to $2,000
Adjusted R&D expenses(b)
$530 to $540
Adjusted interest expense and other
(income)/deductions-net(b)
Approximately $215
Effective tax rate on adjusted
income(b)
Approximately 20%
Adjusted diluted EPS(b)
$4.83 to $4.90
Adjusted net income(b)
$2,270 to $2,310
Operational growth(a)(c)
9% to 11%
Certain significant items and
acquisition-related costs(d)
$20 to $25
The guidance reflects foreign exchange rates as of late October
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
~ 30.2%
~ (0.1)%
~ (0.1)%
~ 30.0%
SG&A expenses
$2,000 to $2,030
~ $(30)
$1,970 to $2,000
R&D expenses
$531 to $541
~ $(1)
$530 to $540
Interest expense and other
(income)/deductions-net
~ $215
~ $215
Effective tax rate
~ 20%
~ 20%
Diluted EPS
$4.51 to $4.59
$0.04 to $0.05
~ $0.27
$4.83 to $4.90
Net income attributable to Zoetis
$2,120 to $2,165
$20 to $25
~ $125
$2,270 to $2,310
(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
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
1,271
$
1,202
6
%
(4
) %
10
%
Livestock
708
767
(8
) %
(5
) %
(3
) %
Contract Manufacturing & Human
Health
23
21
10
%
(5
) %
15
%
Total Revenue
$
2,002
$
1,990
1
%
(4
) %
5
%
U.S.
Companion Animal
$
819
$
775
6
%
—
%
6
%
Livestock
271
290
(7
) %
—
%
(7
) %
Total U.S. Revenue
$
1,090
$
1,065
2
%
—
%
2
%
International
Companion Animal
$
452
$
427
6
%
(11
) %
17
%
Livestock
437
477
(8
) %
(8
) %
—
%
Total International Revenue
$
889
$
904
(2
) %
(10
) %
8
%
Companion Animal:
Dogs and Cats
$
1,213
$
1,142
6
%
(4
) %
10
%
Horses
58
60
(3
) %
(4
) %
1
%
Total Companion Animal Revenue
$
1,271
$
1,202
6
%
(4
) %
10
%
Livestock:
Cattle
$
371
$
403
(8
) %
(4
) %
(4
) %
Swine
129
153
(16
) %
(5
) %
(11
) %
Poultry
116
124
(6
) %
(4
) %
(2
) %
Fish
60
56
7
%
(12
) %
19
%
Sheep and other
32
31
3
%
(9
) %
12
%
Total Livestock Revenue
$
708
$
767
(8
) %
(5
) %
(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
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Nine Months Ended
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
Revenue:
Companion Animal
$
3,900
$
3,507
11
%
(3
) %
14
%
Livestock
2,081
2,245
(7
) %
(4
) %
(3
) %
Contract Manufacturing & Human
Health
59
57
4
%
(1
) %
5
%
Total Revenue
$
6,040
$
5,809
4
%
(3
) %
7
%
U.S.
Companion Animal
$
2,488
$
2,227
12
%
—
%
12
%
Livestock
713
775
(8
) %
—
%
(8
) %
Total U.S. Revenue
$
3,201
$
3,002
7
%
—
%
7
%
International
Companion Animal
$
1,412
$
1,280
10
%
(8
) %
18
%
Livestock
1,368
1,470
(7
) %
(6
) %
(1
) %
Total International Revenue
$
2,780
$
2,750
1
%
(7
) %
8
%
Companion Animal:
Dogs and Cats
$
3,715
$
3,319
12
%
(3
) %
15
%
Horses
185
188
(2
) %
(4
) %
2
%
Total Companion Animal Revenue
$
3,900
$
3,507
11
%
(3
) %
14
%
Livestock:
Cattle
$
1,063
$
1,144
(7
) %
(4
) %
(3
) %
Swine
427
504
(15
) %
(3
) %
(12
) %
Poultry
361
389
(7
) %
(4
) %
(3
) %
Fish
151
132
14
%
(8
) %
22
%
Sheep and other
79
76
4
%
(7
) %
11
%
Total Livestock Revenue
$
2,081
$
2,245
(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
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(a)
Total International
$
888.8
$
903.4
(2
) %
(10
) %
8
%
Australia
79.5
69.8
14
%
(8
) %
22
%
Brazil
70.6
78.1
(10
) %
(1
) %
(9
) %
Canada
56.5
55.3
2
%
(4
) %
6
%
Chile
30.9
32.6
(5
) %
(2
) %
(3
) %
China
92.1
71.5
29
%
(6
) %
35
%
France
27.8
30.7
(9
) %
(13
) %
4
%
Germany
43.3
47.4
(9
) %
(15
) %
6
%
Italy
23.6
30.4
(22
) %
(12
) %
(10
) %
Japan
37.0
43.3
(15
) %
(20
) %
5
%
Mexico
32.6
31.3
4
%
(1
) %
5
%
Spain
28.6
32.3
(11
) %
(13
) %
2
%
United Kingdom
59.7
61.1
(2
) %
(14
) %
12
%
Other developed markets
120.5
126.4
(5
) %
(13
) %
8
%
Other emerging markets
186.1
193.2
(4
) %
(11
) %
7
%
Nine Months Ended
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(a)
Total International
$
2,779.5
$
2,749.6
1
%
(7
) %
8
%
Australia
224.5
196.0
15
%
(7
) %
22
%
Brazil
233.3
227.4
3
%
3
%
—
%
Canada
172.3
168.5
2
%
(2
) %
4
%
Chile
106.3
100.2
6
%
(5
) %
11
%
China
291.0
288.9
1
%
(1
) %
2
%
France
91.0
97.7
(7
) %
(10
) %
3
%
Germany
132.3
135.0
(2
) %
(11
) %
9
%
Italy
85.6
87.3
(2
) %
(11
) %
9
%
Japan
137.0
139.9
(2
) %
(14
) %
12
%
Mexico
100.6
97.8
3
%
(1
) %
4
%
Spain
96.5
96.6
—
%
(11
) %
11
%
United Kingdom
174.2
173.2
1
%
(8
) %
9
%
Other developed markets
353.8
349.9
1
%
(10
) %
11
%
Other emerging markets
581.1
591.2
(2
) %
(11
) %
9
%
(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
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
1,090
$
1,065
2
%
—
%
2
%
Cost of Sales
204
199
3
%
—
%
3
%
Gross Profit
886
866
2
%
—
%
2
%
Gross Margin
81.3
%
81.3
%
Operating Expenses
206
183
13
%
—
%
13
%
Other (income)/deductions-net
1
—
*
*
*
U.S. Earnings
$
679
$
683
(1
) %
—
%
(1
) %
International:
Revenue
$
889
$
904
(2
) %
(10
) %
8
%
Cost of Sales
256
273
(6
) %
(7
) %
1
%
Gross Profit
633
631
—
%
(11
) %
11
%
Gross Margin
71.2
%
69.8
%
Operating Expenses
150
152
(1
) %
(10
) %
9
%
Other (income)/deductions-net
(3
)
(4
)
(25
) %
(5
) %
(20
) %
International Earnings
$
486
$
483
1
%
(11
) %
12
%
Total Reportable Segments
$
1,165
$
1,166
—
%
(5
) %
5
%
Other business activities(c)
(106
)
(106
)
—
%
Reconciling Items:
Corporate(d)
(245
)
(252
)
(3
) %
Purchase accounting adjustments(e)
(40
)
(45
)
(11
) %
Acquisition-related costs(f)
(1
)
(1
)
—
%
Certain significant items(g)
(6
)
(12
)
(50
) %
Other unallocated(h)
(100
)
(91
)
10
%
Total Earnings(i)
$
667
$
659
1
%
(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)
Nine Months Ended
September 30,
% Change
2022
2021
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
3,201
$
3,002
7
%
—
%
7
%
Cost of Sales
587
575
2
%
—
%
2
%
Gross Profit
2,614
2,427
8
%
—
%
8
%
Gross Margin
81.7
%
80.8
%
Operating Expenses
578
484
19
%
—
%
19
%
Other (income)/deductions-net
(6
)
2
*
*
*
U.S. Earnings
$
2,042
$
1,941
5
%
—
%
5
%
International:
Revenue
$
2,780
$
2,750
1
%
(7
) %
8
%
Cost of Sales
809
833
(3
) %
(5
) %
2
%
Gross Profit
1,971
1,917
3
%
(8
) %
11
%
Gross Margin
70.9
%
69.7
%
Operating Expenses
456
429
6
%
(7
) %
13
%
Other (income)/deductions-net
(5
)
(4
)
25
%
(12
) %
37
%
International Earnings
$
1,520
$
1,492
2
%
(9
) %
11
%
Total Reportable Segments
$
3,562
$
3,433
4
%
(4
) %
8
%
Other business activities(c)
(315
)
(301
)
5
%
Reconciling Items:
Corporate(d)
(771
)
(744
)
4
%
Purchase accounting adjustments(e)
(120
)
(133
)
(10
) %
Acquisition-related costs(f)
(4
)
(8
)
(50
) %
Certain significant items(g)
(10
)
(44
)
(77
) %
Other unallocated(h)
(278
)
(221
)
26
%
Total Earnings(i)
$
2,064
$
1,982
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 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/20221102005671/en/
Media: Bill Price 1-973-443-2742
(o) william.price@zoetis.com Kristen
Seely 1-973-443-2777 (o) kristen.seely@zoetis.com
Investor: Steve Frank
1-973-822-7141 (o) steve.frank@zoetis.com Nick Soonthornchai
1-973-443-2792 (o) nick.soonthornchai@zoetis.com
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