QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
or | |||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from __________ to __________ |
Commission File Number: |
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company |
Page | ||||||||||||||
Item 1. | ||||||||||||||
Condensed Consolidated Statements of Income (Unaudited) | ||||||||||||||
Condensed Consolidated Statements of Comprehensive Income (Unaudited) | ||||||||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||||||||
Condensed Consolidated Statements of Equity (Unaudited) | ||||||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||||||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | ||||||||||||||
Review Report of Independent Registered Public Accounting Firm | ||||||||||||||
Item 2. | ||||||||||||||
Item 3. | ||||||||||||||
Item 4. | ||||||||||||||
Item 1. | ||||||||||||||
Item 1A. | ||||||||||||||
Item 2. | ||||||||||||||
Item 3. | Defaults Upon Senior Securities | |||||||||||||
Item 4. | Mine Safety Disclosures | |||||||||||||
Item 5. | Other Information | |||||||||||||
Item 6. | ||||||||||||||
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) | 2021 | 2020 | ||||||||||||
Revenue | $ | $ | ||||||||||||
Costs and expenses: | ||||||||||||||
Cost of sales | ||||||||||||||
Selling, general and administrative expenses | ||||||||||||||
Research and development expenses | ||||||||||||||
Amortization of intangible assets | ||||||||||||||
Restructuring charges and certain acquisition-related costs | ||||||||||||||
Interest expense, net of capitalized interest | ||||||||||||||
Other (income)/deductions—net | ( | |||||||||||||
Income before provision for taxes on income | ||||||||||||||
Provision for taxes on income | ||||||||||||||
Net income before allocation to noncontrolling interests | ||||||||||||||
Less: Net loss attributable to noncontrolling interests | ( | |||||||||||||
Net income attributable to Zoetis Inc. | $ | $ | ||||||||||||
Earnings per share attributable to Zoetis Inc. stockholders: | ||||||||||||||
Basic | $ | $ | ||||||||||||
Diluted | $ | $ | ||||||||||||
Weighted-average common shares outstanding: | ||||||||||||||
Basic | ||||||||||||||
Diluted | ||||||||||||||
Dividends declared per common share | $ | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Net income before allocation to noncontrolling interests | $ | $ | ||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||
Unrealized gains/(losses) on derivatives for cash flow hedges, net | ( | |||||||||||||
Unrealized gains on derivatives for net investment hedges, net | ||||||||||||||
Foreign currency translation adjustments, net | ( | |||||||||||||
Total other comprehensive income (loss), net of tax | ( | |||||||||||||
Comprehensive income before allocation to noncontrolling interests | ||||||||||||||
Less: Comprehensive loss attributable to noncontrolling interests | ( | |||||||||||||
Comprehensive income attributable to Zoetis Inc. | $ | $ |
March 31, | December 31, | |||||||||||||
2021 | 2020 | |||||||||||||
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA) | (Unaudited) | |||||||||||||
Assets | ||||||||||||||
Cash and cash equivalents(a) | $ | $ | ||||||||||||
Accounts receivable, less allowance for doubtful accounts of $ | ||||||||||||||
Inventories | ||||||||||||||
Other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Property, plant and equipment, less accumulated depreciation of $ | ||||||||||||||
Operating lease right of use assets | ||||||||||||||
Goodwill | ||||||||||||||
Identifiable intangible assets, less accumulated amortization | ||||||||||||||
Noncurrent deferred tax assets | ||||||||||||||
Other noncurrent assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Liabilities and Equity | ||||||||||||||
Short-term borrowings | $ | $ | ||||||||||||
Current portion of long-term debt | ||||||||||||||
Accounts payable | ||||||||||||||
Dividends payable | ||||||||||||||
Accrued expenses | ||||||||||||||
Accrued compensation and related items | ||||||||||||||
Income taxes payable | ||||||||||||||
Other current liabilities | ||||||||||||||
Total current liabilities | ||||||||||||||
Long-term debt, net of discount and issuance costs | ||||||||||||||
Noncurrent deferred tax liabilities | ||||||||||||||
Operating lease liabilities | ||||||||||||||
Other taxes payable | ||||||||||||||
Other noncurrent liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Commitments and contingencies (Note 15) | ||||||||||||||
Stockholders' equity: | ||||||||||||||
Common stock, $ | ||||||||||||||
Treasury stock, at cost, | ( | ( | ||||||||||||
Additional paid-in capital | ||||||||||||||
Retained earnings | ||||||||||||||
Accumulated other comprehensive loss | ( | ( | ||||||||||||
Total Zoetis Inc. equity | ||||||||||||||
Equity attributable to noncontrolling interests | ||||||||||||||
Total equity | ||||||||||||||
Total liabilities and equity | $ | $ |
Three months ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Zoetis | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | Attributable to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Paid-in | Retained | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS AND SHARES) | Shares (a) | Amount | Shares (a) | Amount | Capital | Earnings | Loss | Interests | Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation awards (b) | — | — | ( | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired (c) | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Employee benefit plan contribution from Pfizer Inc. (d) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Zoetis | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | Attributable to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Paid-in | Retained | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS AND SHARES) | Shares (a) | Amount | Shares (a) | Amount | Capital | Earnings | Loss | Interests | Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation awards (b) | — | — | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired (c) | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Employee benefit plan contribution from Pfizer Inc.(d) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Operating Activities | ||||||||||||||
Net income before allocation to noncontrolling interests | $ | $ | ||||||||||||
Adjustments to reconcile net income before noncontrolling interests to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization expense | ||||||||||||||
Share-based compensation expense | ||||||||||||||
Asset write-offs and asset impairments | ||||||||||||||
Net gain on sale of assets | ( | |||||||||||||
Provision for losses on inventory | ||||||||||||||
Deferred taxes | ( | ( | ||||||||||||
Employee benefit plan contribution from Pfizer Inc. | ||||||||||||||
Other non-cash adjustments | ||||||||||||||
Other changes in assets and liabilities, net of acquisitions and divestitures: | ||||||||||||||
Accounts receivable | ( | |||||||||||||
Inventories | ( | ( | ||||||||||||
Other assets | ( | |||||||||||||
Accounts payable | ( | ( | ||||||||||||
Other liabilities | ( | ( | ||||||||||||
Other tax accounts, net | ||||||||||||||
Net cash provided by operating activities | ||||||||||||||
Investing Activities | ||||||||||||||
Capital expenditures | ( | ( | ||||||||||||
Other acquisitions | ( | ( | ||||||||||||
Settlement on swaps designated as net investment hedges | ||||||||||||||
Net proceeds from sale of assets | ||||||||||||||
Other investing activities | ( | |||||||||||||
Net cash used in investing activities | ( | ( | ||||||||||||
Financing Activities | ||||||||||||||
Share-based compensation-related proceeds, net of taxes paid on withholding shares | ( | |||||||||||||
Purchases of treasury stock | ( | ( | ||||||||||||
Cash dividends paid | ( | ( | ||||||||||||
Net cash used in financing activities | ( | ( | ||||||||||||
Effect of exchange-rate changes on cash and cash equivalents | ( | |||||||||||||
Net (decrease)/increase in cash and cash equivalents | ( | |||||||||||||
Cash and cash equivalents at beginning of period | ||||||||||||||
Cash and cash equivalents at end of period | $ | $ | ||||||||||||
Supplemental cash flow information | ||||||||||||||
Cash paid during the period for: | ||||||||||||||
Income taxes | $ | $ | ||||||||||||
Interest, net of capitalized interest | ||||||||||||||
Amounts included in the measurement of lease liabilities | ||||||||||||||
Non-cash transactions: | ||||||||||||||
Capital expenditures | ||||||||||||||
Lease obligations obtained in exchange for right-of-use assets | ||||||||||||||
Dividends declared, not paid |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
United States | $ | $ | ||||||||||||
Australia | ||||||||||||||
Brazil | ||||||||||||||
Canada | ||||||||||||||
Chile | ||||||||||||||
China | ||||||||||||||
France | ||||||||||||||
Germany | ||||||||||||||
Italy | ||||||||||||||
Japan | ||||||||||||||
Mexico | ||||||||||||||
Spain | ||||||||||||||
United Kingdom | ||||||||||||||
Other developed markets | ||||||||||||||
Other emerging markets | ||||||||||||||
Contract manufacturing & human health | ||||||||||||||
Total Revenue | $ | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
U.S. | ||||||||||||||
Companion animal | $ | $ | ||||||||||||
Livestock | ||||||||||||||
International | ||||||||||||||
Companion animal | ||||||||||||||
Livestock | ||||||||||||||
Contract manufacturing & human health | ||||||||||||||
Total Revenue | $ | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Companion Animal: | ||||||||||||||
Dogs and Cats | $ | $ | ||||||||||||
Horses | ||||||||||||||
Livestock: | ||||||||||||||
Cattle | ||||||||||||||
Swine | ||||||||||||||
Poultry | ||||||||||||||
Fish | ||||||||||||||
Sheep and other | ||||||||||||||
Contract manufacturing & human health | ||||||||||||||
Total Revenue | $ | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Vaccines | $ | $ | ||||||||||||
Parasiticides | ||||||||||||||
Anti-infectives | ||||||||||||||
Dermatology | ||||||||||||||
Other pharmaceuticals | ||||||||||||||
Medicated feed additives | ||||||||||||||
Animal health diagnostics | ||||||||||||||
Other non-pharmaceuticals | ||||||||||||||
Contract manufacturing & human health | ||||||||||||||
Total Revenue | $ | $ | ||||||||||||
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Restructuring charges and certain acquisition-related costs: | ||||||||||||||
Integration costs(a) | $ | $ | ||||||||||||
Restructuring charges(b): | ||||||||||||||
Employee termination costs | ||||||||||||||
Exit costs | ||||||||||||||
Total Restructuring charges and certain acquisition-related costs | $ | $ |
(MILLIONS OF DOLLARS) | Accrual(a) | ||||
Balance, December 31, 2020(b) | $ | ||||
Provision | |||||
Utilization and other(c) | ( | ||||
Balance, March 31, 2021(b) | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Royalty-related income | $ | ( | $ | ( | ||||||||||
Interest income | ( | ( | ||||||||||||
Net gain on sale of assets(a) | ( | |||||||||||||
Foreign currency loss(b) | ||||||||||||||
Other, net | ( | |||||||||||||
Other (income)/deductions—net | $ | $ | ( |
March 31, | December 31, | |||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
2018 floating rate (three-month USD LIBOR plus | $ | $ | ||||||||||||
Unamortized debt discount / debt issuance costs | ( | ( | ||||||||||||
Less current portion of long-term debt | ||||||||||||||
Cumulative fair value adjustment for interest rate swap contracts | ||||||||||||||
Long-term debt, net of discount and issuance costs | $ | $ |
After | ||||||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2022 | 2023 | 2024 | 2025 | 2025 | Total | |||||||||||||||||||||||||||||||||||||
Maturities | $ | $ | $ | $ | $ | $ | $ |
Notional | ||||||||||||||
March 31, | December 31, | |||||||||||||
(MILLIONS) | 2021 | 2020 | ||||||||||||
Foreign currency forward-exchange contracts | $ | $ | ||||||||||||
Cross-currency interest rate swap contracts (in foreign currency): | ||||||||||||||
Euro | ||||||||||||||
Danish krone | ||||||||||||||
Swiss franc | ||||||||||||||
Forward-starting interest rate swaps | $ | $ | ||||||||||||
Fixed-to-floating interest rate swap contracts | $ | $ | ||||||||||||
Fair Value of Derivatives | ||||||||||||||
March 31, | December 31, | |||||||||||||
(MILLIONS OF DOLLARS) | Balance Sheet Location | 2021 | 2020 | |||||||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||||||
Foreign currency forward-exchange contracts | Other current assets | $ | $ | |||||||||||
Foreign currency forward-exchange contracts | Other current liabilities | ( | ( | |||||||||||
Total derivatives not designated as hedging instruments | $ | ( | $ | ( | ||||||||||
Derivatives Designated as Hedging Instruments: | ||||||||||||||
Forward-starting interest rate swap contracts | Other noncurrent assets | $ | $ | |||||||||||
Forward-starting interest rate swap contracts | Other noncurrent liabilities | ( | ||||||||||||
Cross-currency interest rate swap contracts | Other current assets | |||||||||||||
Cross-currency interest rate swap contracts | Other noncurrent assets | |||||||||||||
Cross-currency interest rate swap contracts | Other current liabilities | ( | ( | |||||||||||
Fixed-to-floating interest rate swap contracts | Other noncurrent assets | |||||||||||||
Total derivatives designated as hedging instruments | ( | |||||||||||||
Total derivatives | $ | $ | ( |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Foreign currency forward-exchange contracts | $ | ( | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Forward-starting interest rate swap contracts | $ | $ | ( | |||||||||||
Cross-currency interest rate swap contracts | $ | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Cross-currency interest rate swap contracts | $ | $ | ||||||||||||
March 31, | December 31, | |||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Finished goods | $ | $ | ||||||||||||
Work-in-process | ||||||||||||||
Raw materials and supplies | ||||||||||||||
Inventories | $ | $ |
(MILLIONS OF DOLLARS) | U.S. | International | Total | |||||||||||||||||
Balance, December 31, 2020 | $ | $ | $ | |||||||||||||||||
Adjustments | ( | |||||||||||||||||||
Other(a) | ||||||||||||||||||||
Balance, March 31, 2021 | $ | $ | $ |
As of March 31, 2021 | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||
Identifiable | Identifiable | |||||||||||||||||||||||||||||||||||||
Gross | Intangible Assets | Gross | Intangible Assets | |||||||||||||||||||||||||||||||||||
Carrying | Accumulated | Less Accumulated | Carrying | Accumulated | Less Accumulated | |||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Amount | Amortization | Amortization | Amount | Amortization | Amortization | ||||||||||||||||||||||||||||||||
Finite-lived intangible assets: | ||||||||||||||||||||||||||||||||||||||
Developed technology rights | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Brands and tradenames | ( | ( | ||||||||||||||||||||||||||||||||||||
Other | ( | ( | ||||||||||||||||||||||||||||||||||||
Total finite-lived intangible assets | ( | ( | ||||||||||||||||||||||||||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||||||||||||||||||||||
Brands and tradenames | — | — | ||||||||||||||||||||||||||||||||||||
In-process research and development | — | — | ||||||||||||||||||||||||||||||||||||
Product rights | — | — | ||||||||||||||||||||||||||||||||||||
Total indefinite-lived intangible assets | — | — | ||||||||||||||||||||||||||||||||||||
Identifiable intangible assets | $ | $ | ( | $ | $ | $ | ( | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Stock options / stock appreciation rights | $ | $ | ||||||||||||
RSUs / DSUs | ||||||||||||||
PSUs | ||||||||||||||
Share-based compensation expense—total(a) | $ | $ |
Currency Translation Adjustments | ||||||||||||||||||||||||||||||||
Other Currency | Accumulated Other | |||||||||||||||||||||||||||||||
Cash Flow | Net Investment | Translation | Comprehensive | |||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Hedges | Hedges | Adjustments | Benefit Plans | Loss | |||||||||||||||||||||||||||
Balance, December 31, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | $ | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
Other comprehensive (loss)/income, net of tax | ( | ( | ( | |||||||||||||||||||||||||||||
Balance, March 31, 2020 | $ | ( | $ | $ | ( | $ | ( | $ | ( |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) | 2021 | 2020 | ||||||||||||
Numerator | ||||||||||||||
Net income before allocation to noncontrolling interests | $ | $ | ||||||||||||
Less: Net loss attributable to noncontrolling interests | ( | |||||||||||||
Net income attributable to Zoetis Inc. | $ | $ | ||||||||||||
Denominator | ||||||||||||||
Weighted-average common shares outstanding | ||||||||||||||
Common stock equivalents: stock options, RSUs, PSUs and DSUs | ||||||||||||||
Weighted-average common and potential dilutive shares outstanding | ||||||||||||||
Earnings per share attributable to Zoetis Inc. stockholders—basic | $ | $ | ||||||||||||
Earnings per share attributable to Zoetis Inc. stockholders—diluted | $ | $ |
Earnings | Depreciation and Amortization(a) | |||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||
March 31, | March 31, | |||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
U.S. | ||||||||||||||||||||||||||
Revenue | $ | $ | ||||||||||||||||||||||||
Cost of sales | ||||||||||||||||||||||||||
Gross profit | ||||||||||||||||||||||||||
Gross margin | % | % | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||
Other (income)/deductions-net | ||||||||||||||||||||||||||
U.S. Earnings | $ | $ | ||||||||||||||||||||||||
International | ||||||||||||||||||||||||||
Revenue(b) | ||||||||||||||||||||||||||
Cost of sales | ||||||||||||||||||||||||||
Gross profit | ||||||||||||||||||||||||||
Gross margin | % | % | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||
Other (income)/deductions-net | ||||||||||||||||||||||||||
International Earnings | ||||||||||||||||||||||||||
Total operating segments | ||||||||||||||||||||||||||
Other business activities | ( | ( | ||||||||||||||||||||||||
Reconciling Items: | ||||||||||||||||||||||||||
Corporate | ( | ( | ||||||||||||||||||||||||
Purchase accounting adjustments | ( | ( | ||||||||||||||||||||||||
Acquisition-related costs | ( | ( | ||||||||||||||||||||||||
Certain significant items(c) | ( | |||||||||||||||||||||||||
Other unallocated | ( | ( | ||||||||||||||||||||||||
Total Earnings(d) | $ | $ | $ | $ |
% Change | ||||||||||||||||||||||||||||||||
Three Months Ended | Related to | |||||||||||||||||||||||||||||||
March 31, | Foreign | |||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Total | Exchange | Operational(a) | |||||||||||||||||||||||||||
Revenue | $ | 1,871 | $ | 1,534 | 22 | 1 | 21 | |||||||||||||||||||||||||
Net income attributable to Zoetis | 559 | 423 | 32 | (2) | 34 | |||||||||||||||||||||||||||
Adjusted net income(a) | 603 | 455 | 33 | (1) | 34 |
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Revenue | $ | 1,871 | $ | 1,534 | 22 | |||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales | 549 | 459 | 20 | |||||||||||||||||
% of revenue | 29.3 | % | 29.9 | % | ||||||||||||||||
Selling, general and administrative expenses | 409 | 389 | 5 | |||||||||||||||||
% of revenue | 22 | % | 25 | % | ||||||||||||||||
Research and development expenses | 118 | 107 | 10 | |||||||||||||||||
% of revenue | 6 | % | 7 | % | ||||||||||||||||
Amortization of intangible assets | 40 | 40 | — | |||||||||||||||||
Restructuring charges and certain acquisition-related costs | 9 | 9 | — | |||||||||||||||||
Interest expense, net of capitalized interest | 57 | 53 | 8 | |||||||||||||||||
Other (income)/deductions—net | 2 | (20) | * | |||||||||||||||||
Income before provision for taxes on income | 687 | 497 | 38 | |||||||||||||||||
% of revenue | 37 | % | 32 | % | ||||||||||||||||
Provision for taxes on income | 129 | 74 | 74 | |||||||||||||||||
Effective tax rate | 18.8 | % | 14.9 | % | ||||||||||||||||
Net income before allocation to noncontrolling interests | 558 | 423 | 32 | |||||||||||||||||
Less: Net loss attributable to noncontrolling interests | (1) | — | — | |||||||||||||||||
Net income attributable to Zoetis Inc. | $ | 559 | $ | 423 | 32 | |||||||||||||||
% of revenue | 30 | % | 28 | % |
Cost of sales | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Cost of sales | $ | 549 | $ | 459 | 20 | |||||||||||||||
% of revenue | 29.3 | % | 29.9 | % |
Selling, general and administrative expenses | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Selling, general and administrative expenses | $ | 409 | $ | 389 | 5 | |||||||||||||||
% of revenue | 22 | % | 25 | % |
Research and development expenses | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Research and development expenses | $ | 118 | $ | 107 | 10 | |||||||||||||||
% of revenue | 6 | % | 7 | % |
Amortization of intangible assets | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Amortization of intangible assets | $ | 40 | $ | 40 | — |
Restructuring charges and certain acquisition-related costs | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Restructuring charges and certain acquisition-related costs | $ | 9 | $ | 9 | — |
Interest expense, net of capitalized interest | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Interest expense, net of capitalized interest | $ | 57 | $ | 53 | 8 |
Other (income)/deductions—net | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Other (income)/deductions—net | $ | 2 | $ | (20) | * |
Provision for taxes on income | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Provision for taxes on income | $ | 129 | $ | 74 | 74 | |||||||||||||||
Effective tax rate | 18.8 | % | 14.9 | % |
% Change | |||||||||||||||||||||||||||||||||||
Three Months Ended | Related to | ||||||||||||||||||||||||||||||||||
March 31, | Foreign | ||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Total | Exchange | Operational | ||||||||||||||||||||||||||||||
U.S. | |||||||||||||||||||||||||||||||||||
Companion animal | $ | 658 | $ | 499 | 32 | — | 32 | ||||||||||||||||||||||||||||
Livestock | 275 | 287 | (4) | — | (4) | ||||||||||||||||||||||||||||||
933 | 786 | 19 | — | 19 | |||||||||||||||||||||||||||||||
International | |||||||||||||||||||||||||||||||||||
Companion animal | 418 | 298 | 40 | 3 | 37 | ||||||||||||||||||||||||||||||
Livestock | 504 | 430 | 17 | — | 17 | ||||||||||||||||||||||||||||||
922 | 728 | 27 | 2 | 25 | |||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||
Companion animal | 1,076 | 797 | 35 | 1 | 34 | ||||||||||||||||||||||||||||||
Livestock | 779 | 717 | 9 | 1 | 8 | ||||||||||||||||||||||||||||||
Contract manufacturing & human health | 16 | 20 | (20) | 5 | (25) | ||||||||||||||||||||||||||||||
$ | 1,871 | $ | 1,534 | 22 | 1 | 21 |
% Change | |||||||||||||||||||||||||||||||||||
Three Months Ended | Related to | ||||||||||||||||||||||||||||||||||
March 31, | Foreign | ||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Total | Exchange | Operational | ||||||||||||||||||||||||||||||
U.S.: | |||||||||||||||||||||||||||||||||||
Revenue | $ | 933 | $ | 786 | 19 | — | 19 | ||||||||||||||||||||||||||||
Cost of Sales | 184 | 167 | 10 | — | 10 | ||||||||||||||||||||||||||||||
Gross Profit | 749 | 619 | 21 | — | 21 | ||||||||||||||||||||||||||||||
Gross Margin | 80.3 | % | 78.8 | % | |||||||||||||||||||||||||||||||
Operating Expenses | 131 | 125 | 5 | — | 5 | ||||||||||||||||||||||||||||||
Other (income)/deductions-net | 1 | 1 | — | — | — | ||||||||||||||||||||||||||||||
U.S. Earnings | 617 | 493 | 25 | — | 25 | ||||||||||||||||||||||||||||||
International: | |||||||||||||||||||||||||||||||||||
Revenue | 922 | 728 | 27 | 2 | 25 | ||||||||||||||||||||||||||||||
Cost of Sales | 282 | 224 | 26 | — | 26 | ||||||||||||||||||||||||||||||
Gross Profit | 640 | 504 | 27 | 2 | 25 | ||||||||||||||||||||||||||||||
Gross Margin | 69.4 | % | 69.2 | % | |||||||||||||||||||||||||||||||
Operating Expenses | 130 | 125 | 4 | 3 | 1 | ||||||||||||||||||||||||||||||
Other (income)/deductions-net | — | — | * | * | * | ||||||||||||||||||||||||||||||
International Earnings | 510 | 379 | 35 | 3 | 32 | ||||||||||||||||||||||||||||||
Total operating segments | 1,127 | 872 | 29 | 1 | 28 | ||||||||||||||||||||||||||||||
Other business activities | (97) | (87) | 11 | ||||||||||||||||||||||||||||||||
Reconciling Items: | |||||||||||||||||||||||||||||||||||
Corporate | (230) | (187) | 23 | ||||||||||||||||||||||||||||||||
Purchase accounting adjustments | (44) | (54) | (19) | ||||||||||||||||||||||||||||||||
Acquisition-related costs | (5) | (7) | (29) | ||||||||||||||||||||||||||||||||
Certain significant items | (8) | 11 | * | ||||||||||||||||||||||||||||||||
Other unallocated | (56) | (51) | 10 | ||||||||||||||||||||||||||||||||
Total Earnings | $ | 687 | $ | 497 | 38 |
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
GAAP reported net income attributable to Zoetis | $ | 559 | $ | 423 | 32 | |||||||||||||||
Purchase accounting adjustments—net of tax | 34 | 32 | 6 | |||||||||||||||||
Acquisition-related costs—net of tax | 4 | 8 | (50) | |||||||||||||||||
Certain significant items—net of tax | 6 | (8) | * | |||||||||||||||||
Non-GAAP adjusted net income(a) | $ | 603 | $ | 455 | 33 |
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
2021 | 2020 | Change | ||||||||||||||||||
Earnings per share—diluted(a): | ||||||||||||||||||||
GAAP reported EPS attributable to Zoetis —diluted | $ | 1.17 | $ | 0.88 | 33 | |||||||||||||||
Purchase accounting adjustments—net of tax | 0.07 | 0.07 | — | |||||||||||||||||
Acquisition-related costs—net of tax | 0.01 | 0.02 | (50) | |||||||||||||||||
Certain significant items—net of tax | 0.01 | (0.02) | * | |||||||||||||||||
Non-GAAP adjusted EPS—diluted | $ | 1.26 | $ | 0.95 | 33 |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Interest expense, net of capitalized interest | $ | 57 | $ | 53 | ||||||||||
Interest income | 1 | 6 | ||||||||||||
Income taxes | 142 | 92 | ||||||||||||
Depreciation | 56 | 47 | ||||||||||||
Amortization | 9 | 9 |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Purchase accounting adjustments: | ||||||||||||||
Amortization and depreciation(a) | $ | 44 | $ | 54 | ||||||||||
Total purchase accounting adjustments—pre-tax | 44 | 54 | ||||||||||||
Income taxes(b) | 10 | 22 | ||||||||||||
Total purchase accounting adjustments—net of tax | 34 | 32 | ||||||||||||
Acquisition-related costs: | ||||||||||||||
Integration costs | 3 | 6 | ||||||||||||
Restructuring costs | 2 | 1 | ||||||||||||
Total acquisition-related costs—pre-tax | 5 | 7 | ||||||||||||
Income taxes(b) | 1 | (1) | ||||||||||||
Total acquisition-related costs—net of tax | 4 | 8 | ||||||||||||
Certain significant items: | ||||||||||||||
Operational efficiency initiative(c) | — | (17) | ||||||||||||
Supply network strategy(d) | 1 | 2 | ||||||||||||
Other restructuring charges and cost-reduction/productivity initiatives(e) | 6 | 2 | ||||||||||||
Certain asset impairment charges | 1 | — | ||||||||||||
Other(f) | — | 2 | ||||||||||||
Total certain significant items—pre-tax | 8 | (11) | ||||||||||||
Income taxes(b) | 2 | (3) | ||||||||||||
Total certain significant items—net of tax | 6 | (8) | ||||||||||||
Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax | $ | 44 | $ | 32 |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | ||||||||||||
Cost of sales: | ||||||||||||||
Purchase accounting adjustments | $ | 2 | $ | 2 | ||||||||||
Inventory write-offs | 1 | — | ||||||||||||
Consulting fees | — | 2 | ||||||||||||
Other | 3 | — | ||||||||||||
Total Cost of sales | 6 | 4 | ||||||||||||
Selling, general & administrative expenses: | ||||||||||||||
Purchase accounting adjustments | 8 | 18 | ||||||||||||
Other | — | 2 | ||||||||||||
Total Selling, general & administrative expenses | 8 | 20 | ||||||||||||
Amortization of intangible assets: | ||||||||||||||
Purchase accounting adjustments | 34 | 34 | ||||||||||||
Total Amortization of intangible assets | 34 | 34 | ||||||||||||
Restructuring charges/(reversals) and certain acquisition-related costs: | ||||||||||||||
Integration costs | 3 | 6 | ||||||||||||
Employee termination costs | 4 | 3 | ||||||||||||
Exit costs | 2 | — | ||||||||||||
Total Restructuring charges/(reversals) and certain acquisition-related costs | 9 | 9 | ||||||||||||
Other (income)/deductions—net: | ||||||||||||||
Net gain on sale of assets | — | (17) | ||||||||||||
Total Other (income)/deductions—net | — | (17) | ||||||||||||
Provision for taxes on income | 13 | 18 | ||||||||||||
Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax | $ | 44 | $ | 32 |
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | Change | |||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||
Operating activities | $ | 400 | $ | 408 | (2) | |||||||||||||||
Investing activities | (63) | (57) | 11 | |||||||||||||||||
Financing activities | (339) | (328) | 3 | |||||||||||||||||
Effect of exchange-rate changes on cash and cash equivalents | — | (6) | * | |||||||||||||||||
Net (decrease)/increase in cash and cash equivalents | $ | (2) | $ | 17 | * |
March 31, | December 31, | ||||||||||
(MILLIONS OF DOLLARS) | 2021 | 2020 | |||||||||
Cash and cash equivalents | $ | 3,602 | $ | 3,604 | |||||||
Accounts receivable, net(a) | 1,125 | 1,013 | |||||||||
Short-term borrowings | 4 | 4 | |||||||||
Current portion of long-term debt | 600 | 600 | |||||||||
Long-term debt, net of discount and issuance costs | 6,587 | 6,595 | |||||||||
Working capital | 4,728 | 4,441 | |||||||||
Ratio of current assets to current liabilities | 3.29:1 | 3.05:1 | |||||||||
Description | Principal Amount | Interest Rate | Terms | ||||||||
2018 Floating Rate Senior Notes due 2021 | $300 million | Three-month USD LIBOR plus 0.44% | Interest due quarterly, not subject to amortization, aggregate principal due on August 20, 2021 | ||||||||
2018 Senior Notes due 2021 | $300 million | 3.250% | Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2021 | ||||||||
2013 Senior Notes due 2023 | $1,350 million | 3.250% | Interest due semi annually, not subject to amortization, aggregate principal due on February 1, 2023 | ||||||||
2015 Senior Notes due 2025 | $750 million | 4.500% | Interest due semi annually, not subject to amortization, aggregate principal due on November 13, 2025 | ||||||||
2017 Senior Notes due 2027 | $750 million | 3.000% | Interest due semi annually, not subject to amortization, aggregate principal due on September 12, 2027 | ||||||||
2018 Senior Notes due 2028 | $500 million | 3.900% | Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2028 | ||||||||
2020 Senior Notes due 2030 | $750 million | 2.000% | Interest due semi annually, not subject to amortization, aggregate principal due on May 15, 2030 | ||||||||
2013 Senior Notes due 2043 | $1,150 million | 4.700% | Interest due semi annually, not subject to amortization, aggregate principal due on February 1, 2043 | ||||||||
2017 Senior Notes due 2047 | $500 million | 3.950% | Interest due semi annually, not subject to amortization, aggregate principal due on September 12, 2047 | ||||||||
2018 Senior Notes due 2048 | $400 million | 4.450% | Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2048 | ||||||||
2020 Senior Notes due 2050 | $500 million | 3.000% | Interest due semi annually, not subject to amortization, aggregate principal due on May 15, 2050 |
Commercial | ||||||||||||||||||||||||||
Paper | Long-term Debt | Date of | ||||||||||||||||||||||||
Name of Rating Agency | Rating | Rating | Outlook | Last Action | ||||||||||||||||||||||
Moody’s | P-2 | Baa1 | Stable | August 2017 | ||||||||||||||||||||||
S&P | A-2 | BBB | Stable | December 2016 |
Issuer Purchases of Equity Securities | ||||||||||||||
Total Number of Shares Purchased(a) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs(b) | Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs | |||||||||||
January 1 - January 31, 2021 | 399,256 | $161.79 | 212,073 | $1,390,188,505 | ||||||||||
February 1 - February 28, 2021 | 588,188 | $162.33 | 367,495 | $1,331,493,170 | ||||||||||
March 1 - March 31, 2021 | 580,338 | $151.90 | 579,859 | $1,243,201,592 | ||||||||||
1,567,782 | $158.33 | 1,159,427 | $1,243,201,592 |
Accountants' Acknowledgment | ||||||||
Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302 | ||||||||
Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302 | ||||||||
Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906 | ||||||||
Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906 | ||||||||
EX-101.INS | Inline XBRL INSTANCE DOCUMENT | |||||||
Inline XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT | ||||||||
EX-104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Zoetis Inc. | ||||||||
May 6, 2021 | By: | /S/ KRISTIN C. PECK | ||||||
Kristin C. Peck | ||||||||
Chief Executive Officer and Director | ||||||||
May 6, 2021 | By: | /S/ GLENN DAVID | ||||||
Glenn David | ||||||||
Executive Vice President and Chief Financial Officer |
May 6, 2021 | By: | /s/ KRISTIN C. PECK | ||||||
Kristin C. Peck | ||||||||
Chief Executive Officer |
May 6, 2021 | By: | /s/ GLENN DAVID | ||||||
Glenn David | ||||||||
Executive Vice President and | ||||||||
Chief Financial Officer |
May 6, 2021 | By: | /s/ KRISTIN C. PECK | ||||||
Kristin C. Peck | ||||||||
Chief Executive Officer |
May 6, 2021 | By: | /s/ GLENN DAVID | ||||||
Glenn David | ||||||||
Executive Vice President and | ||||||||
Chief Financial Officer |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income before allocation to noncontrolling interests | $ 558 | $ 423 |
Other comprehensive income (loss), net of tax: | ||
Unrealized gains/(losses) on derivatives for cash flow hedges, net | 39 | (28) |
Unrealized gains on derivatives for net investment hedges, net | 25 | 17 |
Foreign currency translation adjustments, net | 33 | (44) |
Other comprehensive income, net of tax | 97 | (55) |
Comprehensive income before allocation to noncontrolling interests | 655 | 368 |
Less: Comprehensive loss attributable to noncontrolling interests | (1) | 0 |
Comprehensive income attributable to Zoetis Inc. | $ 656 | $ 368 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
||
---|---|---|---|---|
Assets | ||||
Cash and cash equivalents | [1] | $ 3,602 | $ 3,604 | |
Accounts receivable, less allowance for doubtful accounts of $18 in 2021 and $20 in 2020 | 1,125 | 1,013 | ||
Inventories | 1,700 | 1,628 | ||
Other current assets | 367 | 366 | ||
Total current assets | 6,794 | 6,611 | ||
Property, plant and equipment, less accumulated depreciation of $2,012 in 2021 and $1,952 in 2020 | 2,227 | 2,202 | ||
Operating lease right of use assets | 189 | 192 | ||
Goodwill | 2,707 | 2,694 | ||
Identifiable intangible assets, less accumulated amortization | 1,671 | 1,710 | ||
Noncurrent deferred tax assets | 100 | 94 | ||
Other noncurrent assets | 108 | 106 | ||
Total assets | 13,796 | 13,609 | ||
Liabilities and Equity | ||||
Short-term borrowings | 4 | 4 | ||
Current portion of long-term debt | 600 | 600 | ||
Accounts payable | 346 | 457 | ||
Dividends payable | 119 | 119 | ||
Accrued expenses | 570 | 556 | ||
Accrued compensation and related items | 243 | 295 | ||
Income taxes payable | 113 | 46 | ||
Other current liabilities | 71 | 93 | ||
Total current liabilities | 2,066 | 2,170 | ||
Long-term debt, net of discount and issuance costs | 6,587 | 6,595 | ||
Noncurrent deferred tax liabilities | 393 | 378 | ||
Operating lease liabilities | 159 | 163 | ||
Other taxes payable | 264 | 260 | ||
Other noncurrent liabilities | 235 | 270 | ||
Total liabilities | 9,704 | 9,836 | ||
Commitments and Contingencies | ||||
Stockholders' equity: | ||||
Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 474,973,405 and 475,317,751 shares outstanding at March 31, 2021, and December 31, 2020, respectively | 5 | 5 | ||
Treasury stock, at cost, 26,917,838 and 26,573,492 shares of common stock at March 31, 2021, and December 31, 2020, respectively | (2,412) | (2,230) | ||
Additional paid-in capital | 1,030 | 1,065 | ||
Retained earnings | 6,099 | 5,659 | ||
Accumulated other comprehensive loss | (633) | (730) | ||
Total Zoetis Inc. equity | 4,089 | 3,769 | ||
Equity attributable to noncontrolling interests | 3 | 4 | ||
Total equity | 4,092 | 3,773 | ||
Total liabilities and equity | $ 13,796 | $ 13,609 | ||
|
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (PARENTHETICAL) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 18 | $ 20 |
Accumulated depreciation | $ 2,012 | $ 1,952 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 6,000,000,000 | 6,000,000,000 |
Common stock issued, shares | 501,891,243 | 501,891,243 |
Common stock, shares outstanding | 474,973,405 | 475,317,751 |
Treasury stock, shares | 26,917,838 | 26,573,492 |
Restricted cash | $ 2 | $ 2 |
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) - USD ($) $ in Millions |
Total |
Common Stock |
Treasury Stock |
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Equity Attributable to Noncontrolling Interests |
Share Repurchase Program
Treasury Stock
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2019 | [1] | 501,900,000 | ||||||||||||||||
Beginning balance at Dec. 31, 2019 | $ 2,708 | $ 5 | $ (2,042) | $ 1,044 | $ 4,427 | $ (726) | $ 0 | |||||||||||
Treasury stock, beginning balance (in shares) at Dec. 31, 2019 | [1] | 26,400,000 | ||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||
Net income | 423 | 423 | ||||||||||||||||
Other comprehensive income | (55) | (55) | ||||||||||||||||
Treasury stock acquired, shares | [1] | (1,800,000) | [2] | (1,200,000) | [3] | |||||||||||||
Share-based compensation awards | [3] | 21 | $ 40 | (28) | 9 | |||||||||||||
Treasury stock acquired | [2] | (250) | (250) | |||||||||||||||
Employee benefit plan contribution from Pfizer Inc. | [4] | 1 | 1 | |||||||||||||||
Dividends declared | $ (95) | (95) | ||||||||||||||||
Ending balance (in shares) at Mar. 31, 2020 | [1] | 501,900,000 | ||||||||||||||||
Treasury stock, ending balance (in shares) at Mar. 31, 2020 | [1] | 27,000,000.0 | ||||||||||||||||
Ending balance at Mar. 31, 2020 | $ 2,753 | 5 | (2,252) | 1,017 | 4,764 | (781) | 0 | |||||||||||
Beginning balance (in shares) at Dec. 31, 2020 | 501,891,243 | |||||||||||||||||
Beginning balance at Dec. 31, 2020 | $ 3,773 | 5 | $ (2,230) | 1,065 | 5,659 | (730) | 4 | |||||||||||
Treasury stock, beginning balance (in shares) at Dec. 31, 2020 | 26,573,492 | 26,600,000 | ||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||
Net income | $ 558 | 559 | (1) | |||||||||||||||
Other comprehensive income | 97 | 97 | ||||||||||||||||
Treasury stock acquired, shares | (1,100,000) | (800,000) | ||||||||||||||||
Share-based compensation awards | (37) | $ (1) | (36) | 0 | ||||||||||||||
Treasury stock acquired | (181) | $ (181) | ||||||||||||||||
Employee benefit plan contribution from Pfizer Inc. | 1 | 1 | ||||||||||||||||
Dividends declared | $ (119) | (119) | ||||||||||||||||
Ending balance (in shares) at Mar. 31, 2021 | 501,891,243 | |||||||||||||||||
Treasury stock, ending balance (in shares) at Mar. 31, 2021 | 26,917,838 | 26,900,000 | ||||||||||||||||
Ending balance at Mar. 31, 2021 | $ 4,092 | $ 5 | $ (2,412) | $ 1,030 | $ 6,099 | $ (633) | $ 3 | |||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
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Operating Activities | |||||||
Net income before allocation to noncontrolling interests | $ 558 | $ 423 | |||||
Adjustments to reconcile net income before noncontrolling interests to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 109 | 110 | [1],[2] | ||||
Share-based compensation expense | 13 | 16 | |||||
Asset write-offs and asset impairments | 1 | 0 | |||||
Net gain on sale of assets | 0 | 17 | |||||
Provision for losses on inventory | 11 | 13 | |||||
Deferred taxes | (13) | (9) | |||||
Employee benefit plan contribution from Pfizer Inc. | 1 | 1 | |||||
Other non-cash adjustments | 4 | 0 | |||||
Other changes in assets and liabilities, net of acquisitions and divestitures: | |||||||
Accounts receivable | (108) | 109 | |||||
Inventories | (84) | (97) | |||||
Other assets | 24 | (65) | |||||
Accounts payable | (112) | (35) | |||||
Other liabilities | (72) | (128) | |||||
Other tax accounts, net | 68 | 87 | |||||
Net cash provided by operating activities | 400 | 408 | |||||
Investing Activities | |||||||
Capital expenditures | (77) | (94) | |||||
Other acquisitions | (3) | (6) | |||||
Settlement on swaps designated as net investment hedges | 17 | 24 | |||||
Net proceeds from sale of assets | 0 | 20 | |||||
Other investing activities | 0 | (1) | |||||
Net cash used in investing activities | (63) | (57) | |||||
Financing Activities | |||||||
Share-based compensation-related proceeds, net of taxes paid on withholding shares | (39) | 17 | |||||
Purchases of treasury stock | (181) | (250) | |||||
Cash dividends paid | (119) | (95) | |||||
Net cash used in financing activities | (339) | (328) | |||||
Effect of exchange-rate changes on cash and cash equivalents | 0 | (6) | |||||
Net (decrease)/increase in cash and cash equivalents | (2) | 17 | |||||
Cash and cash equivalents at beginning of period | 3,604 | 1,934 | |||||
Cash and cash equivalents at end of period | 3,602 | 1,951 | |||||
Cash paid during the period for: | |||||||
Income taxes | 32 | 22 | |||||
Interest, net of capitalized interest | 94 | 95 | |||||
Amounts included in the measurement of lease liabilities | 11 | 11 | |||||
Non-cash transactions: | |||||||
Capital expenditures | 3 | 2 | |||||
Lease obligations obtained in exchange for right-of-use assets | 7 | $ 4 | |||||
Dividends declared, not paid | $ 119 | ||||||
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Organization |
3 Months Ended |
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Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | 1. Organization Zoetis Inc. (including its subsidiaries, collectively, Zoetis, the company, we, us or our) is a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products, biodevices, genetic tests and precision livestock farming technology. We organize and operate our business in two geographic regions: the United States (U.S.) and International. We directly market our products in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America. Our products are sold in more than 100 countries, including developed markets and emerging markets. We have a diversified business, marketing products across eight core species: dogs, cats and horses (collectively, companion animals) and cattle, swine, poultry, fish and sheep (collectively, livestock); and within seven major product categories: vaccines, parasiticides, anti-infectives, dermatology, other pharmaceutical products, medicated feed additives and animal health diagnostics.
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Basis of Presentation |
3 Months Ended |
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Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 2. Basis of Presentation The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three-month periods ended February 28, 2021 and February 29, 2020. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year. Certain reclassifications of prior year information have been made to conform to the current year's presentation. We are responsible for the unaudited condensed consolidated financial statements included in this Form 10-Q. The condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The information included in this interim report should be read in conjunction with the financial statements and accompanying notes included in our 2020 Annual Report on Form 10-K.
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Accounting Standards |
3 Months Ended |
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Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Accounting Standards | 3. Accounting Standards Recently Issued Accounting Standards In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and effective as of March 12, 2020, but only available through December 31, 2022. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements and related disclosures, as well as the timing of the potential adoption.
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Revenue |
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Revenue Recognition and Deferred Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 4. Revenue A. Revenue from Product Sales We offer a diversified portfolio of products which allows us to capitalize on local and regional customer needs. Generally, our products are promoted to veterinarians and livestock producers by our sales organization which includes sales representatives and technical and veterinary operations specialists, and then sold directly by us or through distributors, retailers and e-commerce outlets. The depth of our product portfolio enables us to address the varying needs of customers in different species and geographies. Many of our top selling product lines are distributed across both of our operating segments, leveraging our research and development (R&D) operations and manufacturing and supply chain network. Over the course of our history, we have focused on developing a diverse portfolio of animal health products, including medicines, vaccines and diagnostics, complemented by biodevices, genetic tests and a range of services. We refer to a single product in all brands, or its dosage forms for all species, as a product line. We have approximately 300 comprehensive product lines, including products for both companion animals and livestock across each of our major product categories. Our major product categories are: •vaccines: biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response; •parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms; •anti-infectives: products that prevent, kill or slow the growth of bacteria, fungi or protozoa; •dermatology products: products that relieve itch associated with allergic conditions and atopic dermatitis; •other pharmaceutical products: pain and sedation, antiemetic, reproductive, and oncology products; •medicated feed additives: products added to animal feed that provide medicines to livestock; and •animal health diagnostics: portable blood and urine analysis systems and point-of-care diagnostic products, including instruments and reagents, rapid immunoassay tests, reference laboratory kits, blood glucose monitors and reference laboratory services. Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals and agribusiness, as well as products and services in biodevices, genetic tests and precision livestock farming. Our companion animal products help extend and improve the quality of life for pets; increase convenience and compliance for pet owners; and help veterinarians improve the quality of their care and the efficiency of their businesses. Growth in the companion animal medicines, vaccines and diagnostics sector is driven by economic development, related increases in disposable income and increases in pet ownership and spending on pet care. Companion animals are also living longer, deepening the human-animal bond, receiving increased medical treatment and benefiting from advances in animal health medicine, vaccines and diagnostics. Our livestock products primarily help prevent or treat diseases and conditions to allow veterinarians and producers to care for their animals and to enable the cost-effective production of safe, high-quality animal protein. Human population growth and increasing standards of living are important long-term growth drivers for our livestock products in three major ways. First, population growth and increasing standards of living drive demand for improved nutrition, particularly through increased consumption of animal protein. Second, population growth leads to greater natural resource constraints driving a need for enhanced productivity. Finally, as standards of living improve and the global food chain faces increased scrutiny, there is more focus on food quality, safety, and reliability of supply. The following tables present our revenue disaggregated by geographic area, species, and major product category: Revenue by geographic area
Revenue by major species
Revenue by species
Revenue by major product category
B. Revenue from Contracts with Customers Contract liabilities reflected within Other current liabilities as of December 31, 2020 and December 31, 2019, and subsequently recognized as revenue during the first three months of 2021 and 2020 were approximately $3 million. Contract liabilities as of March 31, 2021 and December 31, 2020 were approximately $14 million and $13 million, respectively. Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of March 31, 2021 is not material.
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Acquisitions and Divestitures |
3 Months Ended |
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Mar. 31, 2021 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | 5. Acquisitions and Divestitures A. Acquisitions Other Acquisitions During 2020, we completed the acquisitions of Fish Vet Group, a diagnostics company for aquaculture, Virtual Recall, a veterinary engagement software company, Performance Livestock Analytics, a cloud-based technology company in the precision livestock business, and Ethos Diagnostic Science, a veterinary reference laboratory business with labs across the U.S. We also entered into an option purchase agreement as part of a research and development arrangement with a Belgian company, a variable interest entity of which Zoetis is the primary beneficiary and now consolidating within our results. These transactions did not have a significant impact on our consolidated financial statements. B. Divestitures During the three months ended March 31, 2020, we received cash proceeds of $20 million resulting from a payment received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites.
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Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives | 6. Restructuring Charges and Other Costs Associated with Acquisitions, Cost-Reduction and Productivity Initiatives In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems. In connection with our acquisition activity, we typically incur costs and charges associated with executing the transactions, integrating the acquired operations, which may include expenditures for consulting and the integration of systems and processes, product transfers and restructuring the consolidated company, which may include charges related to employees, assets and activities that will not continue in the consolidated company. All operating functions can be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as functions such as information technology, shared services and corporate operations. The components of costs incurred in connection with restructuring initiatives, acquisitions and cost-reduction/productivity initiatives are as follows:
(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, as well as product transfer costs. (b) The restructuring charges for the three months ended March 31, 2021 primarily relate to employee termination and exit costs associated with cost-reduction and productivity initiatives and CEO transition-related costs. The restructuring charges for the three months ended March 31, 2020 primarily relate to CEO transition-related costs which are associated with Manufacturing/research/corporate.
(a) Changes in our restructuring accrual represents employee termination and exit costs. (b) At March 31, 2021, and December 31, 2020, included in Accrued expenses ($6 million) and Other noncurrent liabilities ($16 million and $15 million, respectively). (c) Includes adjustments for foreign currency translation.
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Other (Income)/Deductions - Net |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (Income)/Deductions - Net | 7. Other (Income)/Deductions—Net The components of Other (income)/deductions—net are as follows:
(a) For the three months ended March 31, 2020, represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. (b) Primarily driven by costs related to hedging and exposures to certain emerging and developed market currencies.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes A. Taxes on Income Our effective tax rate was 18.8% for the three months ended March 31, 2021, compared with 14.9% for the three months ended March 31, 2020. The higher effective tax rate for the three months ended March 31, 2021, was primarily attributable to: •a $13 million and a $23 million discrete tax benefit recorded in the three months ended March 31, 2021 and 2020, respectively, related to the excess tax benefits for share-based payments; •a $6 million discrete tax benefit recorded in the three months ended March 31, 2020 related to a remeasurement of deferred taxes resulting from the integration of acquired businesses; and •a $1 million discrete tax expense and a $3 million discrete tax benefit recorded in the three months ended March 31, 2021 and 2020, respectively, related to a remeasurement of deferred taxes as a result of changes in statutory tax rates, partially offset by: •changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items. B. Deferred Taxes As of March 31, 2021, the total net deferred income tax liability of $293 million is included in Noncurrent deferred tax assets ($100 million) and Noncurrent deferred tax liabilities ($393 million). As of December 31, 2020, the total net deferred income tax liability of $284 million is included in Noncurrent deferred tax assets ($94 million) and Noncurrent deferred tax liabilities ($378 million). C. Tax Contingencies As of March 31, 2021, the net tax liabilities associated with uncertain tax positions of $192 million (exclusive of interest and penalties related to uncertain tax positions of $15 million) are included in Noncurrent deferred tax assets and Other noncurrent assets ($2 million) and Other taxes payable ($190 million). As of December 31, 2020, the net tax liabilities associated with uncertain tax positions of $188 million (exclusive of interest and penalties related to uncertain tax positions of $14 million) are included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($187 million). Our tax liabilities for uncertain tax positions relate primarily to issues common among multinational corporations. Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. We do not expect that within the next twelve months any of our uncertain tax positions could significantly decrease as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of uncertain tax positions and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.
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Financial Instruments |
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Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | 9. Financial Instruments A. Debt Credit Facilities In December 2016, we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.0 billion senior unsecured revolving credit facility (the credit facility). In December 2018, the maturity for the amended and restated revolving credit agreement was extended through December 2023. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition. The credit facility also contains a financial covenant requiring that we maintain a minimum interest coverage ratio (the ratio of EBITDA at the end of the period to interest expense for such period) of 3.50:1. In addition, the credit facility contains other customary covenants. We were in compliance with all financial covenants as of March 31, 2021 and December 31, 2020. There were no amounts drawn under the credit facility as of March 31, 2021 or December 31, 2020. We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of March 31, 2021, we had access to $80 million of lines of credit which expire at various times through 2021 and are generally renewed annually. There were $4 million of borrowings outstanding related to these facilities as of March 31, 2021 and December 31, 2020. Commercial Paper Program In February 2013, we entered into a commercial paper program with a capacity of up to $1.0 billion. As of March 31, 2021 and December 31, 2020, there was no commercial paper outstanding under this program. Senior Notes and Other Long-Term Debt On May 12, 2020, we issued $1.25 billion aggregate principal amount of our senior notes (2020 senior notes), with an original issue discount of $10 million. These notes are comprised of $750 million aggregate principal amount of 2.000% senior notes due 2030 and $500 million aggregate principal amount of 3.000% senior notes due 2050. On October 13, 2020, the net proceeds were used to repay in full the aggregate principal amount of our 3.450% 2015 senior notes due 2020 and the remainder will be used for general corporate purposes. On August 20, 2018, we issued $1.5 billion aggregate principal amount of our senior notes (2018 senior notes), with an original issue discount of $4 million. On September 12, 2017, we issued $1.25 billion aggregate principal amount of our senior notes (2017 senior notes), with an original issue discount of $7 million. On November 13, 2015, we issued $1.25 billion aggregate principal amount of our senior notes (2015 senior notes), with an original issue discount of $2 million. On January 28, 2013, we issued $3.65 billion aggregate principal amount of our senior notes (2013 senior notes) in a private placement, with an original issue discount of $10 million. The 2013, 2015, 2017, 2018 and 2020 senior notes are governed by an indenture and supplemental indenture (collectively, the indenture) between us and Deutsche Bank Trust Company Americas, as trustee. The indenture contains certain covenants, including limitations on our and certain of our subsidiaries' ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which the 2013, 2015, 2017, 2018 and 2020 senior notes may be declared immediately due and payable. Pursuant to the indenture, we are able to redeem the 2013, 2015, 2017 and 2020 senior notes and the 2018 fixed rate senior notes or any series, in whole or in part, at any time by paying a “make whole” premium, plus accrued and unpaid interest to, but excluding, the date of redemption. The 2018 floating rate senior notes are not redeemable at our option prior to their maturity date. Pursuant to our tax matters agreement with Pfizer, we will not be permitted to redeem the 2013 senior notes due 2023 pursuant to this optional redemption provision, except under limited circumstances. Upon the occurrence of a change of control of us and a downgrade of the 2013, 2015, 2017, 2018 and 2020 senior notes below an investment grade rating by each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, we are, in certain circumstances, required to make an offer to repurchase all of the outstanding 2013, 2015, 2017, 2018 and 2020 senior notes at a price equal to 101% of the aggregate principal amount of the 2013, 2015, 2017, 2018 and 2020 senior notes together with accrued and unpaid interest to, but excluding, the date of repurchase. The components of our long-term debt are as follows:
The fair value of our long-term debt was $7,272 million and $7,835 million as of March 31, 2021, and December 31, 2020, respectively, and has been determined using a third-party matrix-pricing model that uses significant inputs derived from, or corroborated by, observable market data and Zoetis’ credit rating (Level 2 inputs). The principal amount of long-term debt outstanding, as of March 31, 2021, matures in the following years:
Interest Expense Interest expense, net of capitalized interest, was $57 million and $53 million for the three months ended March 31, 2021 and 2020, respectively. Capitalized interest expense was $5 million and $4 million for the three months ended March 31, 2021 and 2020, respectively. B. Derivative Financial Instruments Foreign Exchange Risk A significant portion of our revenue, earnings and net investment in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk is also managed through the use of various derivative financial instruments. These derivative financial instruments serve to manage the exposure of our net investment in certain foreign operations to changes in foreign exchange rates and protect net income against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions. All derivative financial instruments used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the condensed consolidated balance sheet. The derivative financial instruments primarily offset exposures in the British pound, Canadian dollar, Chinese yuan, Danish krone, euro, and Japanese yen. Changes in fair value are reported in earnings or in Accumulated other comprehensive income/(loss), depending on the nature and purpose of the financial instrument, as follows: •For foreign exchange contracts not designated as hedging instruments, we recognize the gains and losses on forward-exchange contracts that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. The vast majority of the foreign exchange derivative financial instruments mature within 60 days and all mature within three years. •For cross-currency interest rate swaps, which are designated as a hedge against our net investment in foreign operations, changes in the fair value are recorded as a component of cumulative translation adjustment within Accumulated other comprehensive income/(loss) and reclassified into earnings when the foreign investment is sold or substantially liquidated. Gains and losses excluded from the assessment of hedge effectiveness are recognized in earnings (Interest expense—net of capitalized interest). The cash flows from these contracts are reflected within the investing section of our Condensed Consolidated Statement of Cash Flows. The cross-currency interest rate swap contracts have varying maturities of up to five years. Interest Rate Risk The company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rates and to reduce its overall cost of borrowing. •In anticipation of issuing fixed-rate debt, we may use forward-starting interest rate swaps that are designated as cash flow hedges to hedge against changes in interest rates that could impact expected future issuances of debt. Unrealized gains or losses on the forward-starting interest rate swaps are reported in Accumulated other comprehensive loss and are recognized in earnings over the life of the future fixed rate notes. When the company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur within the originally expected period of execution, or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings. •As of March 31, 2021, we had outstanding forward-starting interest rate swaps, having an effective date and mandatory termination date in March 2023, to hedge against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 3.250% 2013 senior notes due 2023, and a forward-starting interest rate swap, having an effective date and mandatory termination date in March 2026, to hedge against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 4.500% senior notes due 2025. •We may use fixed-to-floating interest rate swaps that are designated as fair value hedges to hedge against changes in the fair value of certain fixed-rate debt attributable to changes in the benchmark LIBOR rate. These derivative instruments effectively convert a portion of the company’s long-term debt from fixed rate to floating rate debt based on three-month LIBOR plus a spread. Gains or losses on the fixed to floating interest rate swaps due to changes in LIBOR are recorded in Interest expense, net of capitalized interest. Changes in the fair value of the fixed-to-floating interest rate swaps are offset by changes in the fair value of the underlying fixed rate debt. As of March 31, 2021, we had an outstanding fixed-to-floating interest rate swap that corresponds to a portion of the 3.900% 2018 senior notes due 2028. The amounts recorded during the three months ended March 31, 2021 for changes in the fair value of this hedge are not material to our consolidated financial statements. Outstanding Positions The aggregate notional amounts of derivative instruments are as follows:
Fair Value of Derivative Instruments The classification and fair values of derivative instruments are as follows:
The company’s cross-currency interest rate swaps are subject to master netting arrangements to mitigate credit risk by permitting net settlement of transactions with the same counterparty. We may also enter into collateral security arrangements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative instruments fluctuates from contractually established thresholds. At March 31, 2021, there was $30 million of collateral received related to forward-starting interest rate swap contracts and long-term cross-currency interest rate swaps recorded in Other noncurrent assets. We use a market approach in valuing financial instruments on a recurring basis. Our derivative financial instruments are measured at fair value on a recurring basis using Level 2 inputs in the calculation of fair value. The amounts of net (losses)/gains on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions—net, are as follows:
These amounts were substantially offset in Other (income)/deductions—net by the effect of changing exchange rates on the underlying foreign currency exposures. The amounts of unrecognized net gains/(losses) on interest rate swap contracts, recorded, net of tax, in Accumulated other comprehensive income/(loss), are as follows:
Gains on cross-currency interest rate swap contracts, recognized within Interest expense, net of capitalized interest, are as follows:
The net amount of deferred losses related to derivative instruments designated as cash flow hedges that is expected to be reclassified from Accumulated other comprehensive income/(loss) into earnings over the next 12 months is $1 million.
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Inventories |
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Inventories | 10. Inventories The components of inventory are as follows:
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Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | 11. Goodwill and Other Intangible Assets A. Goodwill The components of, and changes in, the carrying amount of goodwill are as follows:
(a) Includes adjustments for foreign currency translation. The gross goodwill balance was $3,243 million and $3,230 million as of March 31, 2021 and December 31, 2020, respectively. Accumulated goodwill impairment losses were $536 million as of March 31, 2021 and December 31, 2020. B. Other Intangible Assets The components of identifiable intangible assets are as follows:
C. Amortization Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as it benefits multiple business functions. Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, general and administrative expenses or Research and development expenses, as appropriate. Total amortization expense for finite-lived intangible assets was $51 million and $62 million for the three months ended March 31, 2021 and 2020, respectively.
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Share-Based Payments |
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Share-Based Payments | 12. Share-based Payments The Zoetis 2013 Equity and Incentive Plan (the Equity Plan) provides long-term incentives to our employees and non-employee directors. The principal types of share-based awards available under the Equity Plan may include, but are not limited to, stock options, restricted stock and restricted stock units (RSUs), deferred stock units (DSUs), performance-vesting restricted stock units (PSUs) and other equity-based or cash-based awards. The components of share-based compensation expense are as follows:
(a) Amounts capitalized to inventory were insignificant for the three months ended March 31, 2021 and 2020. During the three months ended March 31, 2021, the company granted 281,675 stock options with a weighted-average exercise price of $160.62 per stock option and a weighted-average fair value of $37.82 per stock option. The fair-value based method for valuing each Zoetis stock option grant on the grant date uses the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions. The weighted-average fair value was estimated based on the following assumptions: risk-free interest rate of 0.53%; expected dividend yield of 0.62%; expected stock price volatility of 27.97%; and expected term of 5.0 years. In general, stock options vest after three years of continuous service and the values determined through this fair-value based method generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate. During the three months ended March 31, 2021, the company granted 225,525 RSUs, with a weighted-average grant date fair value of $160.58 per RSU. RSUs are accounted for using a fair-value-based method that utilizes the closing price of Zoetis common stock on the date of grant. In general, RSUs vest after three years of continuous service from the grant date and the values generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate. During the three months ended March 31, 2021, the company granted 103,759 PSUs with a weighted-average grant date fair value of $208.81 per PSU. PSUs are accounted for using a Monte Carlo simulation model. The units underlying the PSUs will be earned and vested over a three-year performance period, based upon the total shareholder return of the company in comparison to the total shareholder return of the companies comprising the S&P 500 stock market index at the start of the performance period, excluding companies that during the performance period are acquired or no longer publicly traded (Relative TSR). The weighted-average fair value was estimated based on volatility assumptions of Zoetis common stock and an average of the S&P 500 companies, which were 28.9% and 38.1%, respectively. Depending on the company’s Relative TSR performance at the end of the performance period, the recipient may earn from 0% to 200% of the target number of units. Vested units are settled in shares of the company’s common stock. PSU values are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate.
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Stockholders' Equity |
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Stockholders' Equity | 13. Stockholders' Equity Zoetis is authorized to issue 6 billion shares of common stock and 1 billion shares of preferred stock. In December 2018, the company's Board of Directors authorized a $2.0 billion share repurchase program. As of March 31, 2021, there was approximately $1.2 billion remaining under this authorization. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs. The company temporarily suspended share repurchases beginning in the second quarter of 2020. In January 2021, the company resumed share repurchases under its share repurchase program. Accumulated other comprehensive loss Changes, net of tax, in accumulated other comprehensive loss, were as follows:
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Earnings per Share |
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Earnings per Share | 14. Earnings per Share The following table presents the calculation of basic and diluted earnings per share:
The number of stock options outstanding under the company's Equity Plan that were excluded from the computation of diluted earnings per share, as the effect would have been antidilutive, were de minimis for the three months ended March 31, 2021 and 2020.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 15. Commitments and Contingencies We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our tax contingencies, see Note 8. Income Taxes. A. Legal Proceedings Our non-tax contingencies include, among others, the following: • Product liability and other product-related litigation, which can include injury, consumer, off-label promotion, antitrust and breach of contract claims. • Commercial and other matters, which can include product-pricing claims and environmental claims and proceedings. • Patent litigation, which typically involves challenges to the coverage and/or validity of our patents or those of third parties on various products or processes. • Government investigations, which can involve regulation by national, state and local government agencies in the U.S. and in other countries. Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial. We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid. We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. The principal matters to which we are a party are discussed below. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent. Ulianopolis, Brazil In February 2012, the Municipality of Ulianopolis (State of Para, Brazil) filed a complaint against Fort Dodge Saúde Animal Ltda. (FDSAL), a Zoetis entity, and five other large companies alleging that waste sent to a local waste incineration facility for destruction, but that was not ultimately destroyed as the facility lost its operating permit, caused environmental impacts requiring cleanup. The Municipality is seeking recovery of cleanup costs purportedly related to FDSAL's share of all waste accumulated at the incineration facility awaiting destruction, and compensatory damages to be allocated among the six defendants. We believe we have strong arguments against the claim, including defense strategies against any claim of joint and several liability. At the request of the Municipal prosecutor, in April 2012, the lawsuit was suspended for one year. Since that time, the prosecutor has initiated investigations into the Municipality's actions in the matter as well as the efforts undertaken by the six defendants to remove and dispose of their individual waste from the incineration facility. On October 3, 2014, the Municipal prosecutor announced that the investigation remained ongoing and outlined the terms of a proposed Term of Reference (a document that establishes the minimum elements to be addressed in the preparation of an Environmental Impact Assessment), under which the companies would be liable to withdraw the waste and remediate the area. On March 5, 2015, we presented our response to the prosecutor’s proposed Term of Reference, arguing that the proposed terms were overly general in nature and expressing our interest in discussing alternatives to address the matter. The prosecutor agreed to consider our request to engage a technical consultant to conduct an environmental diagnostic of the contaminated area. On May 29, 2015, we, in conjunction with the other defendant companies, submitted a draft cooperation agreement to the prosecutor, which outlined the proposed terms and conditions for the engagement of a technical consultant to conduct the environmental diagnostic. On August 19, 2016, the parties and the prosecutor agreed to engage the services of a third-party consultant to conduct a limited environmental assessment of the site. The site assessment was conducted during June 2017, and a written report summarizing the results of the assessment was provided to the parties and the prosecutor in November 2017. The report noted that waste is still present on the site and that further (Phase II) environmental assessments are needed before a plan to manage that remaining waste can be prepared. On April 1, 2019, the defendants met with the Prosecutor to discuss the conclusions set forth in the written report. Following that discussion, on April 10, 2019, the Prosecutor issued a procedural order requesting that the defendants prepare and submit a technical proposal outlining the steps needed to conduct the additional Phase II environmental assessments. The defendants presented the technical proposal to the Prosecutor on October 21, 2019. On March 3, 2020, the Prosecutor notified the defendants that he submitted the proposal to the Ministry of the Environment for its review and consideration by the Prosecutor. On July 15, 2020, the Prosecutor recommended certain amendments to the proposal for the Phase II testing. On September 28, 2020, the parties and the Prosecutor agreed to the final terms and conditions concerning the cooperation agreement with respect to the Phase II testing. We anticipate that the Phase II testing will begin in the latter part of this year or sometime next year. Lascadoil Contamination in Animal Feed An investigation by the U.S. Food and Drug Administration (FDA) and the Michigan Department of Agriculture into the alleged contamination of the feed supply of certain turkey and hog feed mills in Michigan led to the recall of certain batches of soy oil (intended for use as an animal feed additive) that had originated with Shur-Green Farms LLC, a producer of soy oil, and that had been contaminated with lascadoil, an industrial by-product of certain Zoetis manufacturing processes. The contaminated feed is believed to have caused the deaths of approximately 50,000 turkeys and the contamination (but not death) of at least 20,000 hogs in August 2014. The investigation posited that Shur-Green inadvertently contaminated soy oil with lascadoil which it purchased from Zoetis for use as a bio-fuel ingredient, and then sold the contaminated soy oil to fat recycling vendors, who in turn unknowingly sold to feed mills for use in animal feed. During the course of its investigation, the FDA identified the process used to manufacture Zoetis’ Avatec® (lasalocid sodium) and Bovatec® (lasalocid sodium) products as the possible source of the lascadoil, since lascadoil contains small amounts of lasalocid, the active ingredient found in both products. Zoetis sold the industrial lascadoil byproduct to Shur-Green, through its broker, Heritage Interactive Services, LLC. Under the terms of the sale agreement, the lascadoil could only be incinerated or resold for use in biofuel and the agreement expressly prohibited the reselling of lascadoil for use as a component in food. The FDA inspected the Zoetis site where Avatec and Bovatec are manufactured, and found no evidence that Zoetis was involved in the contamination of the animal feed. On March 10, 2015, plaintiffs Restaurant Recycling, LLC (Restaurant Recycling) and Superior Feed Ingredients, LLC (Superior), both of whom are in the fat recycling business, filed a complaint in the Seventeenth Circuit Court for the State of Michigan against Shur-Green Farms alleging negligence and breach of warranty claims arising from their purchase of soy oil allegedly contaminated with lascadoil. Plaintiffs resold the allegedly contaminated soy oil to turkey feed mills for use in feed ingredient. Plaintiffs also named Zoetis as a defendant in the complaint alleging that Zoetis failed to properly manufacture its products and breached an implied warranty that the soy oil was fit for use at turkey and hog mills. Zoetis was served with the complaint on June 3, 2015, and we filed our answer, denying all allegations, on July 15, 2015. On August 10, 2015, several of the turkey feed mills filed a joint complaint against Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence, misrepresentation, and breach of warranty, arising out of their alleged purchase and use of the contaminated soy oil. The complaint raises only one count against Zoetis for negligence. We filed an answer to the complaint on November 2, 2015, denying the allegation. On May 16, 2016, two additional turkey producers filed a complaint in the Seventeenth Circuit Court for the State of Michigan against the company, Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence and breach of warranties. We filed an answer to the complaint on June 20, 2016, denying the allegations. The Court has consolidated all three cases in Michigan for purposes of discovery and disposition. On July 28, 2017, we filed a motion for summary disposition on the grounds that no genuine issues of material fact exist and that Zoetis is entitled to judgment as a matter of law. On October 19, 2017, the Court granted our motion and dismissed all claims against Zoetis. On October 31, 2017, the plaintiffs filed motions for reconsideration of the Court's decision granting summary disposition. The Court, denied all such motions on December 6, 2017, for the same reasons cited in the Court’s original decision. On December 27, 2017, the plaintiffs filed a request with the Michigan Court of Appeals seeking an interlocutory (or interim) appeal of the lower Court’s decision, which we opposed on January 17, 2018. On July 5, 2018, the Court of Appeals denied the plaintiffs’ request for an interlocutory appeal. The case was remanded back to the lower Court, where it was scheduled to proceed to trial by jury. We have been advised that the remaining parties have reached an agreement to settle the dispute, and on June 24, 2020, the remaining parties jointly stipulated to the dismissal of all remaining claims. On July 13, 2020, Plaintiffs filed a claim of appeal with Michigan State Circuit Court seeking reversal of the lower Court’s decision granting Zoetis’ motion for summary disposition. Plaintiffs’ filed their appeal brief on October 29, 2020, and we filed our reply brief on December 3, 2020. This appeal remains pending before the Circuit Court. Belgium Excess Profit Tax Regime On February 14, 2019, the General Court of the European Union (General Court) annulled the January 11, 2016 decision of the European Commission (EC) that selective tax advantages granted by Belgium under its "excess profit" tax scheme constitute illegal state aid. On May 8, 2019, the EC filed an appeal to the decision of the General Court. On September 16, 2019, the EC opened separate in-depth investigations to assess whether Belgium excess profit rulings granted to 39 multinational companies, including Zoetis, constituted state aid for those companies. Due to the uncertainty with respect to the outcome of the appeal to be filed by the EC, the company has not reflected any potential benefits associated with the decision of the General Court in its consolidated financial statements as of March 31, 2021. We will continue to monitor the developments of the appeal and its ultimate resolution. Alpharma The EC published a decision on alleged competition law infringements by several human health pharmaceutical companies on June 19, 2013. One of the involved legal entities is Alpharma LLC (previously having the name Zoetis Products LLC). Alpharma LLC's involvement is solely related to its human health activities prior to Pfizer's acquisition of King/Alpharma. Zoetis paid a fine in the amount of euro 11 million (approximately $14 million) and was reimbursed in full by Pfizer in accordance with the Global Separation Agreement between Pfizer and Zoetis, which provides that Pfizer is obligated to indemnify Zoetis for any liabilities arising out of claims not related to its animal health assets. We filed an appeal of the decision on September 6, 2013, to the General Court of the European Union. On September 8, 2016, the General Court upheld the decision of the European Commission. On November 25, 2016, we filed an appeal to the Court of Justice of the European Union. On January 24, 2019, the Court heard oral argument on the merits of the appeal. On June 4, 2020, the Advocate General issued his non-binding opinion, which largely confirmed the decision of the General Court. On March 25, 2021, the Court of Justice affirmed the decision of the General Court. Since the penalty has already been paid, no further action is needed, and the proceedings involving the EC are now concluded. B. Guarantees and Indemnifications In the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of March 31, 2021, recorded amounts for the estimated fair value of these indemnifications were not significant.
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Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 16. Segment Information Operating Segments We manage our operations through two geographic operating segments: the U.S. and International. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including vaccines, parasiticides, anti-infectives, dermatology, medicated feed additives, animal health diagnostics and other pharmaceuticals, for both livestock and companion animal customers. Our chief operating decision maker uses the revenue and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation. Beginning in the first quarter of 2021, certain costs associated with information technology that specifically support our global manufacturing operations, which were previously reported in Other unallocated, are now reported in Corporate. In addition, in the first quarter of 2021, the company realigned certain management responsibilities. These changes did not impact the determination of our operating segments, however they resulted in the reallocation of certain costs between segments. These changes primarily include the following: (i) certain diagnostics costs, which were previously reported in Corporate, are now reported in our U.S. results; and (ii) certain other miscellaneous costs, which were previously reported in our U.S. results, are now reported in Corporate. Other Costs and Business Activities Certain costs are not allocated to our operating segment results, such as costs associated with the following: • Other business activities, includes our Client Supply Services (CSS) contract manufacturing results, our human health business, and expenses associated with our dedicated veterinary medicine research and development organization, research alliances, U.S. regulatory affairs and other operations focused on the development of our products. Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the international commercial segment. • Corporate, includes platform functions such as information technology, facilities, legal, finance, human resources, business development, certain diagnostic costs and communications, among others. These costs also include compensation costs and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense. •Certain transactions and events such as (i) Purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition-related activities, where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs; and (iii) Certain significant items, which comprise 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 as restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition, certain asset impairment charges, certain legal and commercial settlements and the impact of divestiture-related gains and losses. •Other unallocated includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) procurement costs. Segment Assets We manage our assets on a total company basis, not by operating segment. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Selected Statement of Income Information
(a) Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized. (b) Revenue denominated in euros was $192 million and $170 million for the three months ended March 31, 2021 and 2020, respectively. (c) For the three months ended March 31, 2021, primarily represents employee termination costs related to cost-reduction and productivity initiatives, as well as product transfer costs related to cost-reduction and productivity initiatives. For the three months ended March 31, 2020, primarily represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites of $17 million, partially offset by CEO transition-related costs of $4 million. (d) Defined as income before provision for taxes on income.
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Accounting Standards (Policies) |
3 Months Ended |
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Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three-month periods ended February 28, 2021 and February 29, 2020. |
Recently Adopted Accounting Standards and Recently Issued Accounting Standards | Recently Issued Accounting StandardsIn March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and effective as of March 12, 2020, but only available through December 31, 2022. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements and related disclosures, as well as the timing of the potential adoption |
Tax Contingencies | Our tax liabilities for uncertain tax positions relate primarily to issues common among multinational corporations. Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. We do not expect that within the next twelve months any of our uncertain tax positions could significantly decrease as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of uncertain tax positions and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant. |
Legal Proceedings | A. Legal Proceedings Our non-tax contingencies include, among others, the following: • Product liability and other product-related litigation, which can include injury, consumer, off-label promotion, antitrust and breach of contract claims. • Commercial and other matters, which can include product-pricing claims and environmental claims and proceedings. • Patent litigation, which typically involves challenges to the coverage and/or validity of our patents or those of third parties on various products or processes. • Government investigations, which can involve regulation by national, state and local government agencies in the U.S. and in other countries. Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial. We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid. We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. The principal matters to which we are a party are discussed below. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent.
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Guarantees and Indemnifications | B. Guarantees and IndemnificationsIn the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of March 31, 2021, recorded amounts for the estimated fair value of these indemnifications were not significant. |
Segment Information | Operating Segments We manage our operations through two geographic operating segments: the U.S. and International. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including vaccines, parasiticides, anti-infectives, dermatology, medicated feed additives, animal health diagnostics and other pharmaceuticals, for both livestock and companion animal customers. Our chief operating decision maker uses the revenue and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation. Beginning in the first quarter of 2021, certain costs associated with information technology that specifically support our global manufacturing operations, which were previously reported in Other unallocated, are now reported in Corporate. In addition, in the first quarter of 2021, the company realigned certain management responsibilities. These changes did not impact the determination of our operating segments, however they resulted in the reallocation of certain costs between segments. These changes primarily include the following: (i) certain diagnostics costs, which were previously reported in Corporate, are now reported in our U.S. results; and (ii) certain other miscellaneous costs, which were previously reported in our U.S. results, are now reported in Corporate. Other Costs and Business Activities Certain costs are not allocated to our operating segment results, such as costs associated with the following: • Other business activities, includes our Client Supply Services (CSS) contract manufacturing results, our human health business, and expenses associated with our dedicated veterinary medicine research and development organization, research alliances, U.S. regulatory affairs and other operations focused on the development of our products. Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the international commercial segment. • Corporate, includes platform functions such as information technology, facilities, legal, finance, human resources, business development, certain diagnostic costs and communications, among others. These costs also include compensation costs and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense. •Certain transactions and events such as (i) Purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition-related activities, where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs; and (iii) Certain significant items, which comprise 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 as restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition, certain asset impairment charges, certain legal and commercial settlements and the impact of divestiture-related gains and losses. •Other unallocated includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) procurement costs. Segment Assets We manage our assets on a total company basis, not by operating segment. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment.
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Revenue Revenue Recognition and Deferred Revenue (Tables) |
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Revenue Recognition and Deferred Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from External Customers by Geographic Areas | The following tables present our revenue disaggregated by geographic area, species, and major product category: Revenue by geographic area
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Revenue from External Customers by Major Species | Revenue by major species
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Revenue from External Customers by Species | Revenue by species
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Schedule of Significant Product Revenues | Revenue by major product category
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Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs | The components of costs incurred in connection with restructuring initiatives, acquisitions and cost-reduction/productivity initiatives are as follows:
(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, as well as product transfer costs. (b) The restructuring charges for the three months ended March 31, 2021 primarily relate to employee termination and exit costs associated with cost-reduction and productivity initiatives and CEO transition-related costs. The restructuring charges for the three months ended March 31, 2020 primarily relate to CEO transition-related costs which are associated with Manufacturing/research/corporate.
(a) Changes in our restructuring accrual represents employee termination and exit costs. (b) At March 31, 2021, and December 31, 2020, included in Accrued expenses ($6 million) and Other noncurrent liabilities ($16 million and $15 million, respectively). (c) Includes adjustments for foreign currency translation.
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Other (Income)/Deductions - Net (Tables) |
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Components of Other (Income)/Deductions—Net | The components of Other (income)/deductions—net are as follows:
(a) For the three months ended March 31, 2020, represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. (b) Primarily driven by costs related to hedging and exposures to certain emerging and developed market currencies.
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Financial Instruments (Tables) |
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The components of our long-term debt are as follows:
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Schedule of Maturities of Long-term Debt | The principal amount of long-term debt outstanding, as of March 31, 2021, matures in the following years:
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Schedule of Derivative Instruments | The aggregate notional amounts of derivative instruments are as follows:
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The classification and fair values of derivative instruments are as follows:
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Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location | The amounts of net (losses)/gains on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions—net, are as follows:
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Schedule of Net Investment Hedges in Accumulated Other Comprehensive Income (Loss) | The amounts of unrecognized net gains/(losses) on interest rate swap contracts, recorded, net of tax, in Accumulated other comprehensive income/(loss), are as follows:
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Schedule of Net Investment Hedges, Statements of Financial Performance and Financial Position, Location | Gains on cross-currency interest rate swap contracts, recognized within Interest expense, net of capitalized interest, are as follows:
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Inventories (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventory | The components of inventory are as follows:
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Goodwill and Other Intangible Assets (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the Carrying Amount of Goodwill | The components of, and changes in, the carrying amount of goodwill are as follows:
(a) Includes adjustments for foreign currency translation.
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Components of Identifiable Intangible Assets | The components of identifiable intangible assets are as follows:
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Share-Based Payments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Share-based Compensation Expense | The components of share-based compensation expense are as follows:
(a) Amounts capitalized to inventory were insignificant for the three months ended March 31, 2021 and 2020.
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Stockholders' Equity (Tables) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes, Net of Tax, in Accumulated Other Comprehensive Loss | Changes, net of tax, in accumulated other comprehensive loss, were as follows:
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Earnings Per Share | The following table presents the calculation of basic and diluted earnings per share:
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Segment Information (Tables) |
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Selected Income Statement Information by Segment | Selected Statement of Income Information
(a) Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized. (b) Revenue denominated in euros was $192 million and $170 million for the three months ended March 31, 2021 and 2020, respectively. (c) For the three months ended March 31, 2021, primarily represents employee termination costs related to cost-reduction and productivity initiatives, as well as product transfer costs related to cost-reduction and productivity initiatives. For the three months ended March 31, 2020, primarily represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites of $17 million, partially offset by CEO transition-related costs of $4 million. (d) Defined as income before provision for taxes on income.
|
Organization (Details) |
Mar. 31, 2021
country
specie
geographicRegion
productCategory
|
---|---|
Product Information [Line Items] | |
Number of regional segments | geographicRegion | 2 |
Number of countries in which entity markets products | 45 |
Number of core animal species | specie | 8 |
Number of major product categories | productCategory | 7 |
Product | |
Product Information [Line Items] | |
Number of countries in which entity markets products | 100 |
Revenue - Narrative (Details) $ in Millions |
Mar. 31, 2021
USD ($)
product_category
|
Mar. 31, 2020
USD ($)
|
---|---|---|
Revenue Recognition and Deferred Revenue [Abstract] | ||
Number of major product lines | product_category | 300 | |
Other current liabilities | $ 3 | $ 3 |
Contract liabilities | $ 14 | $ 13 |
Revenue - Revenue by Geographic Area (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Revenue from External Customer [Line Items] | ||
Revenue | $ 1,871 | $ 1,534 |
United States | ||
Revenue from External Customer [Line Items] | ||
Revenue | 933 | 786 |
Australia | ||
Revenue from External Customer [Line Items] | ||
Revenue | 57 | 43 |
Brazil | ||
Revenue from External Customer [Line Items] | ||
Revenue | 74 | 63 |
Canada | ||
Revenue from External Customer [Line Items] | ||
Revenue | 46 | 40 |
Chile | ||
Revenue from External Customer [Line Items] | ||
Revenue | 34 | 23 |
China | ||
Revenue from External Customer [Line Items] | ||
Revenue | 123 | 66 |
France | ||
Revenue from External Customer [Line Items] | ||
Revenue | 35 | 29 |
Germany | ||
Revenue from External Customer [Line Items] | ||
Revenue | 38 | 34 |
Italy | ||
Revenue from External Customer [Line Items] | ||
Revenue | 25 | 21 |
Japan | ||
Revenue from External Customer [Line Items] | ||
Revenue | 47 | 41 |
Mexico | ||
Revenue from External Customer [Line Items] | ||
Revenue | 33 | 32 |
Spain | ||
Revenue from External Customer [Line Items] | ||
Revenue | 31 | 28 |
United Kingdom | ||
Revenue from External Customer [Line Items] | ||
Revenue | 69 | 55 |
Other developed markets | ||
Revenue from External Customer [Line Items] | ||
Revenue | 111 | 87 |
Other emerging markets | ||
Revenue from External Customer [Line Items] | ||
Revenue | 199 | 166 |
Total geographical area | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,855 | 1,514 |
Contract manufacturing & human health | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 16 | $ 20 |
Revenue - Revenue by Major Species (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|||
Revenue from External Customer [Line Items] | ||||
Revenue | $ 1,871 | $ 1,534 | ||
Contract manufacturing & human health | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 16 | 20 | ||
Companion animal | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 1,076 | 797 | ||
Companion animal | U.S. | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 658 | 499 | ||
Companion animal | International | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 418 | 298 | ||
Livestock | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 779 | 717 | ||
Livestock | U.S. | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 275 | 287 | ||
Livestock | International | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 504 | 430 | ||
Operating Segments | U.S. | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 933 | 786 | ||
Operating Segments | International | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | [1] | $ 922 | $ 728 | |
|
Revenue - Revenue by Species (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Revenue from External Customer [Line Items] | ||
Revenue | $ 1,871 | $ 1,534 |
Contract manufacturing & human health | ||
Revenue from External Customer [Line Items] | ||
Revenue | 16 | 20 |
Dogs and Cats | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,016 | 746 |
Horses | ||
Revenue from External Customer [Line Items] | ||
Revenue | 60 | 51 |
Cattle | ||
Revenue from External Customer [Line Items] | ||
Revenue | 399 | 370 |
Swine | ||
Revenue from External Customer [Line Items] | ||
Revenue | 190 | 157 |
Poultry | ||
Revenue from External Customer [Line Items] | ||
Revenue | 131 | 148 |
Fish | ||
Revenue from External Customer [Line Items] | ||
Revenue | 37 | 26 |
Sheep and other | ||
Revenue from External Customer [Line Items] | ||
Revenue | 22 | 16 |
Livestock | ||
Revenue from External Customer [Line Items] | ||
Revenue | 779 | 717 |
Companion animal | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,076 | 797 |
Other pharmaceuticals | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 226 | $ 197 |
Revenue - Revenue by Product (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Revenue from External Customer [Line Items] | ||
Revenue | $ 1,871 | $ 1,534 |
Contract manufacturing & human health | ||
Revenue from External Customer [Line Items] | ||
Revenue | 16 | 20 |
Vaccines | ||
Revenue from External Customer [Line Items] | ||
Revenue | 413 | 349 |
Parasiticides | ||
Revenue from External Customer [Line Items] | ||
Revenue | 390 | 255 |
Anti-infectives | ||
Revenue from External Customer [Line Items] | ||
Revenue | 321 | 280 |
Dermatology | ||
Revenue from External Customer [Line Items] | ||
Revenue | 248 | 197 |
Other pharmaceuticals | ||
Revenue from External Customer [Line Items] | ||
Revenue | 226 | 197 |
Medicated feed additives | ||
Revenue from External Customer [Line Items] | ||
Revenue | 112 | 125 |
Animal health diagnostics | ||
Revenue from External Customer [Line Items] | ||
Revenue | 89 | 60 |
Other non-pharmaceuticals | ||
Revenue from External Customer [Line Items] | ||
Revenue | 56 | 51 |
Total products and services | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 1,855 | $ 1,514 |
Acquisitions and Divestitures (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2020
USD ($)
| |
Business Combinations [Abstract] | |
Contingent payment received related to sale of certain U.S. manufacturing sites | $ 20 |
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Details) - USD ($) $ in Millions |
3 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||||
Exit costs | [1] | $ 2 | $ 0 | |||||||||||
Total Restructuring charges and certain acquisition-related costs | 9 | 9 | ||||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||||||
Restructuring accrual balance | [2],[3] | 21 | ||||||||||||
Provision | 6 | |||||||||||||
Utilization and other | [3],[4] | (5) | ||||||||||||
Restructuring accrual balance | [2],[3] | 22 | ||||||||||||
Other current liabilities | ||||||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||||||
Accrued expenses | 6 | |||||||||||||
Other noncurrent liabilities | ||||||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||||||
Other noncurrent liabilities | 16 | $ 15 | ||||||||||||
Employee Termination Costs | ||||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||||
Employee termination costs | [1] | 4 | 3 | |||||||||||
Direct Cost | ||||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||||
Integration costs | $ 3 | $ 6 | [5] | |||||||||||
|
Other (Income)/Deductions - Net (Details) - USD ($) $ in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Royalty-related income | $ (2) | $ (1) | ||||
Interest income | (1) | (6) | ||||
Foreign currency loss | [1] | 3 | 5 | |||
Other, net | 2 | (1) | ||||
Other (income)/deductions—net | 2 | (20) | ||||
Zoetis Initiatives | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Net (gain)/loss on sale of assets | (17) | |||||
Reconciling Items | Zoetis Initiatives | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Net (gain)/loss on sale of assets | [2] | $ 0 | $ (17) | |||
|
Income Taxes - Taxes on Income (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Income Tax Contingency [Line Items] | ||
Effective tax rate for income from continuing operations | 18.80% | 14.90% |
Share-based Payments | ||
Income Tax Contingency [Line Items] | ||
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | $ 13 | $ 23 |
Integration of Acquired Businesses | ||
Income Tax Contingency [Line Items] | ||
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | 6 | |
Change in Non-U.S. Statutory Tax Rates | ||
Income Tax Contingency [Line Items] | ||
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | $ (1) | $ 3 |
Income Taxes - Deferred Taxes (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Noncurrent deferred tax liabilities | $ 293 | $ 284 |
Noncurrent deferred tax assets | 100 | 94 |
Noncurrent deferred tax liabilities | $ 393 | $ 378 |
Income Taxes - Tax Contingencies (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Income Tax Contingency [Line Items] | ||
Liabilities associated with uncertain tax positions | $ 192 | $ 188 |
Unrecognized tax benefits, income tax penalties and interest accrued | 15 | 14 |
Noncurrent Deferred Tax Assets | ||
Income Tax Contingency [Line Items] | ||
Liabilities associated with uncertain tax positions | 2 | 1 |
Other Taxes Payable | ||
Income Tax Contingency [Line Items] | ||
Liabilities associated with uncertain tax positions | $ 190 | $ 187 |
Financial Instruments - Credit Facilities (Details) |
Mar. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
---|---|---|
Line of Credit Facility [Line Items] | ||
Line of credit facility, maximum borrowing capacity | $ 80,000,000 | |
Revolving credit facility, minimum interest coverage ratio | 3.50 | |
Line of credit facility | $ 4,000,000 | $ 4,000,000 |
Operational Efficiency | ||
Line of Credit Facility [Line Items] | ||
Maximum total leverage ratio | 3.50 | |
Maximum total leverage ratio, next 12 months | 4.00 | |
Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facility, current borrowing capacity | $ 1,000,000,000.0 | |
Line of credit facility, maximum borrowing capacity | 1,500,000,000 | |
Line of credit facility | $ 0 | $ 0 |
Financial Instruments - Commercial Paper Program (Details) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
Feb. 28, 2013 |
---|---|---|---|
Short-term Debt [Line Items] | |||
Commercial Paper | $ 0 | $ 0 | |
Commercial Paper | |||
Short-term Debt [Line Items] | |||
Capacity of commercial paper program | $ 1,000,000,000.0 |
Financial Instruments - Senior Notes Offering and Other Long-Term Debt (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
May 12, 2020 |
Aug. 20, 2018 |
Sep. 12, 2017 |
Nov. 13, 2015 |
Jan. 28, 2013 |
---|---|---|---|---|---|---|---|
Debt Instrument [Line Items] | |||||||
Debt, principal amount | $ 7,250 | $ 7,250 | |||||
Senior Notes | |||||||
Debt Instrument [Line Items] | |||||||
Debt, principal amount | $ 1,500 | $ 1,250 | $ 1,250 | $ 3,650 | |||
Debt, unamortized discount | $ 4 | $ 7 | $ 2 | $ 10 | |||
Debt, purchase price percent due to downgrade of investment grade | 101.00% | ||||||
Senior Notes | 2020 Senior Notes | |||||||
Debt Instrument [Line Items] | |||||||
Debt, principal amount | $ 1,250 | ||||||
Original issue discount | $ 10 | ||||||
Senior Notes | 2.000% 2020 senior notes due 2030 | |||||||
Debt Instrument [Line Items] | |||||||
Debt, principal amount | $ 750 | 750 | |||||
Interest rate percentage | 2.00% | ||||||
Senior Notes | 3.000% 2020 senior notes due 2050 | |||||||
Debt Instrument [Line Items] | |||||||
Debt, principal amount | $ 500 | $ 500 | |||||
Interest rate percentage | 3.00% |
Financial Instruments - Schedule of Long-term Debt (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
Aug. 20, 2018 |
Sep. 12, 2017 |
Nov. 13, 2015 |
Jan. 28, 2013 |
---|---|---|---|---|---|---|
Debt Instrument [Line Items] | ||||||
Debt, principal amount | $ 7,250 | $ 7,250 | ||||
Unamortized debt discount / debt issuance costs | (65) | (66) | ||||
Current portion of long-term debt | 600 | 600 | ||||
Hedged Liability, Fair Value Hedge, Cumulative Increase (Decrease) | 2 | 11 | ||||
Long-term debt, net of discount and issuance costs | 6,587 | 6,595 | ||||
Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Debt, principal amount | $ 1,500 | $ 1,250 | $ 1,250 | $ 3,650 | ||
Senior Notes | 2018 floating senior notes due 2021 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, principal amount | $ 300 | 300 | ||||
Senior Notes | 2018 floating senior notes due 2021 | LIBOR | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 0.44% | |||||
Senior Notes | 3.250% 2018 senior notes due 2021 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 3.25% | |||||
Debt, principal amount | $ 300 | 300 | ||||
Senior Notes | 3.250% 2013 senior notes due 2023 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 3.25% | |||||
Debt, principal amount | $ 1,350 | 1,350 | ||||
Senior Notes | 4.500% 2015 senior notes due 2025 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 4.50% | |||||
Debt, principal amount | $ 750 | 750 | ||||
Senior Notes | 3.000% 2017 senior notes due 2027 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 3.00% | |||||
Debt, principal amount | $ 750 | 750 | ||||
Senior Notes | 3.900% 2018 senior notes due 2028 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 3.90% | |||||
Debt, principal amount | $ 500 | 500 | ||||
Senior Notes | 2.000% 2020 senior notes due 2030 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 2.00% | |||||
Debt, principal amount | $ 750 | 750 | ||||
Senior Notes | 4.700% 2013 senior notes due 2043 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 4.70% | |||||
Debt, principal amount | $ 1,150 | 1,150 | ||||
Senior Notes | 3.950% 2017 senior notes due 2047 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 3.95% | |||||
Debt, principal amount | $ 500 | 500 | ||||
Senior Notes | 4.450% 2018 senior notes due 2048 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 4.45% | |||||
Debt, principal amount | $ 400 | 400 | ||||
Senior Notes | 3.000% 2020 senior notes due 2050 | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate percentage | 3.00% | |||||
Debt, principal amount | $ 500 | $ 500 |
Financial Instruments - Fair Value of Debt (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Senior Notes | Fair Value, Inputs, Level 2 | ||
Debt Instrument [Line Items] | ||
Fair value, debt instrument | $ 7,272 | $ 7,835 |
Financial Instruments - Long-term Debt Maturity (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Financial Instruments [Abstract] | |||
2021 | $ 600 | ||
2022 | 0 | ||
2023 | 1,350 | ||
2024 | 0 | ||
2025 | 750 | ||
After 2024 | 4,550 | ||
Total long-term debt | 7,250 | $ 7,250 | |
Interest expense, net of capitalized interest | 57 | $ 53 | |
Capitalized interest | $ 5 | $ 4 |
Financial Instruments - Foreign Exchange Risk (Details) |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Derivatives Not Designated as Hedging Instruments | Foreign currency forward-exchange contracts | |
Derivative [Line Items] | |
Maturity period (in years) | 60 days |
Derivatives Not Designated as Hedging Instruments | Maximum | Foreign currency forward-exchange contracts | |
Derivative [Line Items] | |
Maturity period (in years) | 3 years |
Derivatives Designated as Hedging Instruments: | Maximum | Cross-currency interest rate swap contracts | |
Derivative [Line Items] | |
Maturity period (in years) | 5 years |
Financial Instruments - Interest Rate Risk (Details) - Senior Notes |
Mar. 31, 2021 |
---|---|
3.250% 2013 senior notes due 2023 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |
Interest rate percentage | 3.25% |
4.500% 2015 senior notes due 2025 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |
Interest rate percentage | 4.50% |
Senior notes due 2018 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |
Interest rate percentage | 3.90% |
Financial Instruments Derivative Notional Amounts (Details) € in Millions, kr in Millions, SFr in Millions, $ in Millions |
Mar. 31, 2021
USD ($)
|
Mar. 31, 2021
EUR (€)
|
Mar. 31, 2021
DKK (kr)
|
Mar. 31, 2021
CHF (SFr)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
EUR (€)
|
Dec. 31, 2020
DKK (kr)
|
Dec. 31, 2020
CHF (SFr)
|
---|---|---|---|---|---|---|---|---|
Cross-currency interest rate swap contracts | ||||||||
Derivative [Line Items] | ||||||||
Derivative notional amount | $ 150 | € 650 | kr 600 | SFr 25 | $ 150 | € 650 | kr 600 | SFr 25 |
Derivatives Not Designated as Hedging Instruments | Foreign currency forward-exchange contracts | ||||||||
Derivative [Line Items] | ||||||||
Derivative notional amount | 1,527 | 1,633 | ||||||
Derivatives Designated as Hedging Instruments: | Forward-starting interest rate swaps | ||||||||
Derivative [Line Items] | ||||||||
Derivative notional amount | $ 550 | $ 550 |
Financial Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Derivatives, Fair Value [Line Items] | |||
Total derivatives | $ 64 | $ (20) | |
Collateral received | 30 | ||
Cash flow hedges gain expected to be reclassified from AOCI into earnings over the next 12 months | 1 | ||
Derivatives Designated as Hedging Instruments: | |||
Derivatives, Fair Value [Line Items] | |||
Total derivatives | 68 | (14) | |
Foreign currency forward-exchange contracts | Derivatives Not Designated as Hedging Instruments | |||
Derivatives, Fair Value [Line Items] | |||
Total derivatives | (4) | (6) | |
Foreign currency forward-exchange contracts | (5) | $ 6 | |
Foreign currency forward-exchange contracts | Derivatives Not Designated as Hedging Instruments | Other current assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 7 | 10 | |
Foreign currency forward-exchange contracts | Derivatives Not Designated as Hedging Instruments | Other current liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liabilities | (11) | (16) | |
Forward-starting interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other noncurrent assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 39 | 6 | |
Forward-starting interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other noncurrent liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liabilities | 0 | 17 | |
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other current assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 20 | 2 | |
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other current liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liabilities | 3 | 21 | |
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other noncurrent assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 10 | 5 | |
Fixed-to-floating interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other noncurrent assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | $ 2 | $ 11 |
Financial Instruments Cross-currency forward-exchange contracts (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Foreign Currency Fair Value Hedge Derivative [Line Items] | ||
Unrealized gains on derivatives for net investment hedges, net | $ 25 | $ 17 |
Derivatives Designated as Hedging Instruments: | Forward-starting interest rate swap contracts | ||
Foreign Currency Fair Value Hedge Derivative [Line Items] | ||
Unrealized gains on derivatives for net investment hedges, net | 39 | (27) |
Derivatives Designated as Hedging Instruments: | Cross-currency interest rate swap contracts | ||
Foreign Currency Fair Value Hedge Derivative [Line Items] | ||
Unrealized gains on derivatives for net investment hedges, net | $ 25 | $ 17 |
Financial Instruments Cross-currency interest rate swap contracts (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments: | ||
Foreign Currency Fair Value Hedge Derivative [Line Items] | ||
Gain (Loss) on Components Excluded from Assessment of Interest Rate Fair Value Hedge Effectiveness | $ 3 | $ 6 |
Inventories (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 803 | $ 805 |
Work-in-process | 642 | 594 |
Raw materials and supplies | 255 | 229 |
Inventories | $ 1,700 | $ 1,628 |
Goodwill and Other Intangible Assets - Goodwill (Details) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2021
USD ($)
| ||||
Goodwill [Roll Forward] | ||||
Beginning Balance | $ 2,694 | |||
Adjustments | 1 | |||
Other | 12 | [1] | ||
Ending Balance | 2,707 | |||
United States (U.S.) | ||||
Goodwill [Roll Forward] | ||||
Beginning Balance | 1,425 | |||
Adjustments | (1) | |||
Other | 0 | [1] | ||
Ending Balance | 1,424 | |||
International | ||||
Goodwill [Roll Forward] | ||||
Beginning Balance | 1,269 | |||
Adjustments | 2 | |||
Other | 12 | [1] | ||
Ending Balance | $ 1,283 | |||
|
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Gross goodwill | $ 3,243 | $ 3,230 | |
Accumulated goodwill impairment losses | 536 | $ 536 | |
Amortization of intangible assets | $ 51 | $ 62 |
Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross carrying amount | $ 2,888 | $ 2,869 |
Finite-lived intangible assets, accumulated amortization | (1,416) | (1,358) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | 1,472 | 1,511 |
Total indefinite-lived intangible assets | 199 | 199 |
Intangible Assets, gross carrying amount | 3,087 | 3,068 |
Identifiable intangible assets, less accumulated amortization | 1,671 | 1,710 |
Brands and tradenames | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Total indefinite-lived intangible assets | 104 | 104 |
In-process research and development | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Total indefinite-lived intangible assets | 88 | 88 |
Product rights | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Total indefinite-lived intangible assets | 7 | 7 |
Developed technology rights | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross carrying amount | 1,983 | 1,968 |
Finite-lived intangible assets, accumulated amortization | (853) | (809) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | 1,130 | 1,159 |
Brands and tradenames | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross carrying amount | 428 | 427 |
Finite-lived intangible assets, accumulated amortization | (248) | (243) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | 180 | 184 |
Other | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross carrying amount | 477 | 474 |
Finite-lived intangible assets, accumulated amortization | (315) | (306) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | $ 162 | $ 168 |
Share-Based Payments - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2021
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, options granted, shares | shares | 281,675 |
Share-based compensation, weighted average exercise price (in dollars per share) | $ 160.62 |
Share-based compensation, Options, weighted average grant date fair value (in dollars per share) | $ 37.82 |
Share-based compensation, risk free interest rate | 0.53% |
Share-based compensation, expected dividend rate | 0.62% |
Share-based compensation, expected volatility rate | 27.97% |
Share-based compensation, expected term | 5 years |
Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, award vesting period | 3 years |
Restricted Stock Units (RSUs) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, award vesting period | 3 years |
Share-based compensation, granted, shares | shares | 225,525 |
Share-based compensation, weighted average grant date fair value (in dollars per share) | $ 160.58 |
Performance Shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, expected volatility rate | 28.90% |
Share-based compensation, award vesting period | 3 years |
Share-based compensation, granted, shares | shares | 103,759 |
Share-based compensation, weighted average grant date fair value (in dollars per share) | $ 208.81 |
Performance Shares | PeerCompanies | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, expected volatility rate | 38.10% |
Performance Shares | Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, target number of units percentage | 0.00% |
Performance Shares | Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, target number of units percentage | 200.00% |
Share-Based Payments - Components of Share-Based Compensation Expense (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense—direct | $ 13 | $ 16 |
Stock options / stock appreciation rights | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense—direct | 2 | 3 |
RSUs / DSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense—direct | 8 | 8 |
PSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense—direct | $ 3 | $ 5 |
Stockholders' Equity - Changes in Common Shares and Treasury Stock (Details) - USD ($) $ in Billions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Class of Stock [Line Items] | ||
Common stock, shares authorized | 6,000,000,000 | 6,000,000,000 |
Preferred stock, shares authorized | 1,000,000,000 | |
Stock repurchase program, remaining authorized repurchase amount | $ 1.2 | |
December 2018 Share Repurchase Program | ||
Class of Stock [Line Items] | ||
Stock repurchase program, authorized amount | $ 2.0 |
Stockholders' Equity - Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | $ 3,773 | $ 2,708 |
Other comprehensive income, net of tax | 97 | (55) |
Ending balance | 4,092 | 2,753 |
Accumulated Other Comprehensive Loss | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (730) | (726) |
Other comprehensive income, net of tax | 97 | (55) |
Ending balance | (633) | (781) |
Derivatives Net Unrealized Gains/ (Losses) | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (15) | 0 |
Other comprehensive income, net of tax | 39 | (28) |
Ending balance | 24 | (28) |
Net Investment Hedges | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (37) | 21 |
Other comprehensive income, net of tax | 25 | 17 |
Ending balance | (12) | 38 |
Currency Translation Adjustment Net Unrealized Gain/(Losses) | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (655) | (724) |
Other comprehensive income, net of tax | 33 | (44) |
Ending balance | (622) | (768) |
Benefit Plans Actuarial Gains/(Losses) | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (23) | (23) |
Other comprehensive income, net of tax | 0 | 0 |
Ending balance | $ (23) | $ (23) |
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Numerator | ||
Net income before allocation to noncontrolling interests | $ 558 | $ 423 |
Less: Net loss attributable to noncontrolling interests | (1) | 0 |
Net income attributable to Zoetis Inc. | $ 559 | $ 423 |
Denominator | ||
Weighted-average common shares outstanding | 475,500,000 | 475,600,000 |
Common stock equivalents: stock options, RSUs, PSUs and DSUs | 2,400,000 | 3,400,000 |
Weighted-average common and potential dilutive shares outstanding | 477,900,000 | 479,000,000.0 |
Earnings per share attributable to Zoetis stockholders—basic (in dollars per share) | $ 1.18 | $ 0.89 |
Earnings per share attributable to Zoetis stockholders—diluted (in dollars per share) | $ 1.17 | $ 0.88 |
Antidilutive securities excluded from computation of earnings per share, amount | 0 |
Commitments and Contingencies (Details) € in Millions, $ in Millions |
1 Months Ended | 3 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
May 16, 2016
producer
|
Jun. 03, 2015
count
|
Aug. 31, 2014
animal
|
Apr. 30, 2012 |
Mar. 31, 2021
customer
|
Jun. 19, 2013
EUR (€)
|
Jun. 19, 2013
USD ($)
|
Feb. 29, 2012
defendant
|
|
Ulianopolis, Brazil | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of additional defendants | defendant | 5 | |||||||
Number of claims seeking damages | defendant | 6 | |||||||
Duration of suspension of lawsuit | 1 year | |||||||
Lasadoil | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of deaths from contamination of animal feed | animal | 50,000 | |||||||
Number of contaminated animal from contamination of animal feed | animal | 20,000 | |||||||
Number of complaints | 2 | 1 | 3 | |||||
European Commission | ||||||||
Loss Contingencies [Line Items] | ||||||||
Amount reimbursed by Pfizer | € 11 | $ 14 |
Segment Information (Details) |
3 Months Ended |
---|---|
Mar. 31, 2021
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment Information Selected Statement of Income (Details) - USD ($) $ in Millions |
3 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Revenue | $ 1,871 | $ 1,534 | |||||||||
Cost of sales | 549 | 459 | |||||||||
Other (income)/deductions—net | 2 | (20) | |||||||||
Income before provision for taxes on income | [1] | 687 | 497 | ||||||||
Depreciation and amortization | 109 | 110 | [1],[2] | ||||||||
Other business activities | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Income before provision for taxes on income | (97) | (87) | |||||||||
Depreciation and amortization | [2] | 7 | 6 | ||||||||
Operating Segments | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Income before provision for taxes on income | 1,127 | 872 | |||||||||
Depreciation and amortization | [2] | 30 | 27 | ||||||||
Operating Segments | U.S. | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Revenue | 933 | 786 | |||||||||
Cost of sales | 184 | 167 | |||||||||
Gross profit | $ 749 | $ 619 | |||||||||
Gross margin, percentage | 80.30% | 78.80% | |||||||||
Operating expenses | $ 131 | $ 125 | |||||||||
Other (income)/deductions—net | 1 | 1 | |||||||||
Income before provision for taxes on income | 617 | 493 | |||||||||
Depreciation and amortization | [2] | 13 | 13 | ||||||||
Operating Segments | International | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Revenue | [3] | 922 | 728 | ||||||||
Cost of sales | 282 | 224 | |||||||||
Gross profit | $ 640 | $ 504 | |||||||||
Gross margin, percentage | 69.40% | 69.20% | |||||||||
Operating expenses | $ 130 | $ 125 | |||||||||
Other (income)/deductions—net | 0 | 0 | |||||||||
Income before provision for taxes on income | 510 | 379 | |||||||||
Depreciation and amortization | [2] | 17 | 14 | ||||||||
Corporate | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Income before provision for taxes on income | (230) | (187) | |||||||||
Depreciation and amortization | [2] | 27 | 22 | ||||||||
Reconciling Items | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Depreciation and amortization | [2] | 0 | 0 | ||||||||
Purchase accounting adjustments | (44) | (54) | |||||||||
Purchase accounting adjustments, Depreciation and Amortization | [2] | 44 | 54 | ||||||||
Acquisition-related costs | (5) | (7) | |||||||||
Certain significant items, Earnings | [4] | (8) | 11 | ||||||||
Certain significant items, Depreciation and Amortization | [2],[4] | 0 | 0 | ||||||||
Other unallocated | (56) | (51) | |||||||||
Other Unallocated, Depreciation and Amortization | [2] | $ 1 | $ 1 | ||||||||
|
Segment Information Selected Statement of Income Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 1,871 | $ 1,534 | ||
Zoetis Initiatives | ||||
Segment Reporting Information [Line Items] | ||||
Net (gain)/loss on sale of assets | (17) | |||
CEO Transition Costs | ||||
Segment Reporting Information [Line Items] | ||||
Restructuring and Other Cost Productivity Charges | 4 | |||
International | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | [1] | 922 | 728 | |
International | Operating Segments | Euro Member Countries, Euro | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 192 | $ 170 | ||
|
Label | Element | Value |
---|---|---|
Dividends Payable | us-gaap_DividendsPayableCurrentAndNoncurrent | $ 95,000,000 |
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