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) | ||||||||||||||
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) | 2023 | 2022 | ||||||||||||
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) | 2023 | 2022 | ||||||||||||
Net income before allocation to noncontrolling interests | $ | $ | ||||||||||||
Other comprehensive (loss)/income, net of tax(a): | ||||||||||||||
Unrealized (losses)/gains on derivatives for cash flow hedges, net of tax of $( | ( | |||||||||||||
Unrealized (losses)/gains on derivatives for net investment hedges, net of tax of $( | ( | |||||||||||||
Foreign currency translation adjustments | ( | |||||||||||||
Benefit plans: Actuarial gain, net of tax of $ | ||||||||||||||
Total other comprehensive (loss)/income, 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, | |||||||||||||
2023 | 2022 | |||||||||||||
(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 | ||||||||||||||
Noncontrolling interests | ( | ( | ||||||||||||
Total equity | ||||||||||||||
Total liabilities and equity | $ | $ |
Three months ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Zoetis | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Paid-in | Retained | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS AND SHARES) | Shares | Amount | Shares | Amount | Capital | Earnings | Loss | Interests | Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | ( | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
Net income/(loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation awards (a) | — | — | ( | ( | (1) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired (b) | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | ( | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
Three months ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Zoetis | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Paid-in | Retained | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS AND SHARES) | Shares | Amount | Shares | Amount | Capital | Earnings | Loss | Interests | Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Net income/(loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation awards (a) | — | — | ( | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired (b) | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Employee benefit plan contribution from Pfizer Inc.(c) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
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 | ||||||||||||||
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 | ( | ( | ||||||||||||
Acquisitions | ( | ( | ||||||||||||
Purchase of investments | ( | ( | ||||||||||||
Proceeds on derivative instrument activity, net | ||||||||||||||
Net proceeds from sale of assets | ||||||||||||||
Net cash used in investing activities | ( | ( | ||||||||||||
Financing Activities | ||||||||||||||
Increase in short-term borrowings, net | ||||||||||||||
Principal payments on long-term debt | ( | |||||||||||||
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 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 | ||||||||||||||
Excise tax accrued on net share repurchases, not paid | ||||||||||||||
Lease obligations obtained in exchange for right-of-use assets | ||||||||||||||
Dividends declared, not paid |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
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) | 2023 | 2022 | ||||||||||||
U.S. | ||||||||||||||
Companion animal | $ | $ | ||||||||||||
Livestock | ||||||||||||||
International | ||||||||||||||
Companion animal | ||||||||||||||
Livestock | ||||||||||||||
Total | ||||||||||||||
Companion animal | ||||||||||||||
Livestock | ||||||||||||||
Contract manufacturing & human health | ||||||||||||||
Total Revenue | $ | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
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) | 2023 | 2022 | ||||||||||||
Parasiticides | $ | $ | ||||||||||||
Vaccines | ||||||||||||||
Other pharmaceuticals | ||||||||||||||
Dermatology | ||||||||||||||
Anti-infectives | ||||||||||||||
Animal health diagnostics | ||||||||||||||
Medicated feed additives | ||||||||||||||
Other non-pharmaceuticals | ||||||||||||||
Contract manufacturing & human health | ||||||||||||||
Total Revenue | $ | $ | ||||||||||||
(MILLIONS OF DOLLARS) | Amounts | ||||
Cash and cash equivalents | $ | ||||
Accounts receivable | |||||
Inventories(a) | |||||
Other current assets | |||||
Property, plant and equipment(b) | |||||
Identifiable intangible assets(c) | |||||
Other noncurrent assets | |||||
Accounts payable | |||||
Other current liabilities | |||||
Total net assets acquired | |||||
Goodwill(d) | |||||
Total consideration | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Restructuring charges and certain acquisition-related costs: | ||||||||||||||
Integration costs(a) | $ | $ | ||||||||||||
Restructuring charges(b): | ||||||||||||||
Employee termination costs | ||||||||||||||
Total Restructuring charges and certain acquisition-related costs | $ | $ |
(MILLIONS OF DOLLARS) | Accrual | ||||
Balance, December 31, 2022(a) | $ | ||||
Provision | |||||
Utilization and other(b) | ( | ||||
Balance, March 31, 2023(a) | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Royalty-related income(a) | $ | ( | $ | ( | ||||||||||
Interest income | ( | ( | ||||||||||||
Foreign currency loss(b) | ||||||||||||||
Other, net | ( | |||||||||||||
Other (income)/deductions—net | $ | ( | $ |
March 31, | December 31, | |||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
$ | $ | |||||||||||||
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) | 2023 | 2024 | 2025 | 2026 | 2027 | 2027 | Total | |||||||||||||||||||||||||||||||||||||
Maturities | $ | $ | $ | $ | $ | $ | $ |
Notional | ||||||||||||||
March 31, | December 31, | |||||||||||||
(MILLIONS) | 2023 | 2022 | ||||||||||||
Derivatives not Designated as Hedging Instruments | ||||||||||||||
Foreign currency forward-exchange contracts | $ | $ | ||||||||||||
Derivatives Designated as Hedging Instruments | ||||||||||||||
Foreign exchange derivative instruments (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 | 2023 | 2022 | |||||||||||
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 | $ | $ | |||||||||||
Foreign exchange derivative instruments | Other current assets | |||||||||||||
Foreign exchange derivative instruments | Other noncurrent assets | |||||||||||||
Foreign exchange derivative instruments | Other current liabilities | ( | ( | |||||||||||
Foreign exchange derivative instruments | Other noncurrent liabilities | ( | ( | |||||||||||
Fixed-to-floating interest rate swap contracts | Other noncurrent liabilities | ( | ( | |||||||||||
Total derivatives designated as hedging instruments | ( | |||||||||||||
Total derivatives | $ | ( | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Foreign currency forward-exchange contracts | $ | ( | $ | ( |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Forward-starting interest rate swap contracts | $ | ( | $ | |||||||||||
Foreign exchange derivative instruments | $ | ( | $ |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Foreign exchange derivative instruments | $ | $ | ||||||||||||
March 31, | December 31, | |||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Finished goods | $ | $ | ||||||||||||
Work-in-process | ||||||||||||||
Raw materials and supplies | ||||||||||||||
Inventories | $ | $ |
(MILLIONS OF DOLLARS) | U.S. | International | Total | |||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | |||||||||||||||||
Adjustments | ( | ( | ||||||||||||||||||
Other(a) | ( | ( | ||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ |
As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||||||||
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) | 2023 | 2022 | ||||||||||||
Stock options / stock appreciation rights | $ | $ | ||||||||||||
RSUs / DSUs | ||||||||||||||
PSUs | ||||||||||||||
Share-based compensation expense—total(a) | $ | $ |
Currency Translation Adjustments | ||||||||||||||||||||||||||||||||
Other Currency | Benefit Plans | Accumulated Other | ||||||||||||||||||||||||||||||
Cash Flow | Net Investment | Translation | Actuarial | Comprehensive | ||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Hedges | Hedges | Adjustments | (Losses)/Gains | Loss | |||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
Other comprehensive (loss)/income, net of tax | ( | ( | ( | ( | ||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( |
Three Months Ended | ||||||||||||||
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) | March 31, | |||||||||||||
2023 | 2022 | |||||||||||||
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) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
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) | 2023 | 2022 | Total | Exchange | Operational(a) | |||||||||||||||||||||||||||
Revenue | $ | 2,000 | $ | 1,986 | 1 | (3) | 4 | |||||||||||||||||||||||||
Net income attributable to Zoetis | 552 | 595 | (7) | — | (7) | |||||||||||||||||||||||||||
Adjusted net income(a) | 607 | 625 | (3) | — | (3) |
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Revenue | $ | 2,000 | $ | 1,986 | 1 | |||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales | 588 | 569 | 3 | |||||||||||||||||
% of revenue | 29.4 | % | 28.7 | % | ||||||||||||||||
Selling, general and administrative expenses | 505 | 465 | 9 | |||||||||||||||||
% of revenue | 25 | % | 23 | % | ||||||||||||||||
Research and development expenses | 142 | 122 | 16 | |||||||||||||||||
% of revenue | 7 | % | 6 | % | ||||||||||||||||
Amortization of intangible assets | 37 | 41 | (10) | |||||||||||||||||
Restructuring charges and certain acquisition-related costs | 21 | 2 | * | |||||||||||||||||
Interest expense, net of capitalized interest | 63 | 53 | 19 | |||||||||||||||||
Other (income)/deductions—net | (53) | 7 | * | |||||||||||||||||
Income before provision for taxes on income | 697 | 727 | (4) | |||||||||||||||||
% of revenue | 35 | % | 37 | % | ||||||||||||||||
Provision for taxes on income | 146 | 133 | 10 | |||||||||||||||||
Effective tax rate | 20.9 | % | 18.3 | % | ||||||||||||||||
Net income before allocation to noncontrolling interests | 551 | 594 | (7) | |||||||||||||||||
Less: Net loss attributable to noncontrolling interests | (1) | (1) | — | |||||||||||||||||
Net income attributable to Zoetis Inc. | $ | 552 | $ | 595 | (7) | |||||||||||||||
% of revenue | 28 | % | 30 | % |
Cost of sales | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Cost of sales | $ | 588 | $ | 569 | 3 | |||||||||||||||
% of revenue | 29.4 | % | 28.7 | % |
Selling, general and administrative expenses | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Selling, general and administrative expenses | $ | 505 | $ | 465 | 9 | |||||||||||||||
% of revenue | 25 | % | 23 | % |
Research and development expenses | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Research and development expenses | $ | 142 | $ | 122 | 16 | |||||||||||||||
% of revenue | 7 | % | 6 | % |
Amortization of intangible assets | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Amortization of intangible assets | $ | 37 | $ | 41 | (10) |
Restructuring charges and certain acquisition-related costs | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Restructuring charges and certain acquisition-related costs | $ | 21 | $ | 2 | * |
Interest expense, net of capitalized interest | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Interest expense, net of capitalized interest | $ | 63 | $ | 53 | 19 |
Other (income)/deductions—net | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Other (income)/deductions—net | $ | (53) | $ | 7 | * |
Provision for taxes on income | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Provision for taxes on income | $ | 146 | $ | 133 | 10 | |||||||||||||||
Effective tax rate | 20.9 | % | 18.3 | % |
% Change | |||||||||||||||||||||||||||||||||||
Three Months Ended | Related to | ||||||||||||||||||||||||||||||||||
March 31, | Foreign | ||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Total | Exchange | Operational | ||||||||||||||||||||||||||||||
U.S. | |||||||||||||||||||||||||||||||||||
Companion animal | $ | 721 | $ | 774 | (7) | — | (7) | ||||||||||||||||||||||||||||
Livestock | 284 | 246 | 15 | — | 15 | ||||||||||||||||||||||||||||||
1,005 | 1,020 | (1) | — | (1) | |||||||||||||||||||||||||||||||
International | |||||||||||||||||||||||||||||||||||
Companion animal | 504 | 489 | 3 | (7) | 10 | ||||||||||||||||||||||||||||||
Livestock | 474 | 459 | 3 | (7) | 10 | ||||||||||||||||||||||||||||||
978 | 948 | 3 | (7) | 10 | |||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||
Companion animal | 1,225 | 1,263 | (3) | (3) | — | ||||||||||||||||||||||||||||||
Livestock | 758 | 705 | 8 | (4) | 12 | ||||||||||||||||||||||||||||||
Contract manufacturing & human health | 17 | 18 | (6) | (2) | (4) | ||||||||||||||||||||||||||||||
$ | 2,000 | $ | 1,986 | 1 | (3) | 4 |
% Change | |||||||||||||||||||||||||||||||||||
Three Months Ended | Related to | ||||||||||||||||||||||||||||||||||
March 31, | Foreign | ||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Total | Exchange | Operational | ||||||||||||||||||||||||||||||
U.S. | |||||||||||||||||||||||||||||||||||
Revenue | $ | 1,005 | $ | 1,020 | (1) | — | (1) | ||||||||||||||||||||||||||||
Cost of Sales | 203 | 185 | 10 | — | 10 | ||||||||||||||||||||||||||||||
Gross Profit | 802 | 835 | (4) | — | (4) | ||||||||||||||||||||||||||||||
Gross Margin | 79.8 | % | 81.9 | % | |||||||||||||||||||||||||||||||
Operating Expenses | 188 | 165 | 14 | — | 14 | ||||||||||||||||||||||||||||||
Other (income)/deductions-net | — | — | * | * | * | ||||||||||||||||||||||||||||||
U.S. Earnings | 614 | 670 | (8) | — | (8) | ||||||||||||||||||||||||||||||
International | |||||||||||||||||||||||||||||||||||
Revenue | 978 | 948 | 3 | (7) | 10 | ||||||||||||||||||||||||||||||
Cost of Sales | 291 | 265 | 10 | (10) | 20 | ||||||||||||||||||||||||||||||
Gross Profit | 687 | 683 | 1 | (5) | 6 | ||||||||||||||||||||||||||||||
Gross Margin | 70.2 | % | 72.0 | % | |||||||||||||||||||||||||||||||
Operating Expenses | 151 | 145 | 4 | (7) | 11 | ||||||||||||||||||||||||||||||
Other (income)/deductions-net | 1 | — | * | * | * | ||||||||||||||||||||||||||||||
International Earnings | 535 | 538 | (1) | (5) | 4 | ||||||||||||||||||||||||||||||
Total operating segments | 1,149 | 1,208 | (5) | (2) | (3) | ||||||||||||||||||||||||||||||
Other business activities | (114) | (98) | 16 | ||||||||||||||||||||||||||||||||
Reconciling Items: | |||||||||||||||||||||||||||||||||||
Corporate | (208) | (259) | (20) | ||||||||||||||||||||||||||||||||
Purchase accounting adjustments | (42) | (40) | 5 | ||||||||||||||||||||||||||||||||
Acquisition-related costs | (1) | (2) | (50) | ||||||||||||||||||||||||||||||||
Certain significant items | (22) | — | * | ||||||||||||||||||||||||||||||||
Other unallocated | (65) | (82) | (21) | ||||||||||||||||||||||||||||||||
Total Earnings | $ | 697 | $ | 727 | (4) |
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
GAAP reported net income attributable to Zoetis | $ | 552 | $ | 595 | (7) | |||||||||||||||
Purchase accounting adjustments—net of tax | 34 | 30 | 13 | |||||||||||||||||
Acquisition-related costs—net of tax | 1 | 1 | — | |||||||||||||||||
Certain significant items—net of tax | 20 | (1) | * | |||||||||||||||||
Non-GAAP adjusted net income(a) | $ | 607 | $ | 625 | (3) |
Three Months Ended | ||||||||||||||||||||
March 31, | % | |||||||||||||||||||
2023 | 2022 | Change | ||||||||||||||||||
Earnings per share—diluted(a): | ||||||||||||||||||||
GAAP reported EPS attributable to Zoetis —diluted | $ | 1.19 | $ | 1.26 | (6) | |||||||||||||||
Purchase accounting adjustments—net of tax | 0.07 | 0.06 | 17 | |||||||||||||||||
Acquisition-related costs—net of tax | — | — | * | |||||||||||||||||
Certain significant items—net of tax | 0.05 | — | * | |||||||||||||||||
Non-GAAP adjusted EPS—diluted | $ | 1.31 | $ | 1.32 | (1) |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Interest expense, net of capitalized interest | $ | 63 | $ | 53 | ||||||||||
Interest income | 33 | 2 | ||||||||||||
Income taxes | 156 | 145 | ||||||||||||
Depreciation | 72 | 61 | ||||||||||||
Amortization | 9 | 13 |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Purchase accounting adjustments: | ||||||||||||||
Amortization and depreciation | $ | 39 | $ | 40 | ||||||||||
Cost of sales | 3 | — | ||||||||||||
Total purchase accounting adjustments—pre-tax | 42 | 40 | ||||||||||||
Income taxes(a) | 8 | 10 | ||||||||||||
Total purchase accounting adjustments—net of tax | 34 | 30 | ||||||||||||
Acquisition-related costs: | ||||||||||||||
Integration costs | 1 | 2 | ||||||||||||
Total acquisition-related costs—pre-tax | 1 | 2 | ||||||||||||
Income taxes(a) | — | 1 | ||||||||||||
Total acquisition-related costs—net of tax | 1 | 1 | ||||||||||||
Certain significant items: | ||||||||||||||
Other restructuring charges and cost-reduction/productivity initiatives(b) | 20 | 2 | ||||||||||||
Other | 2 | (2) | ||||||||||||
Total certain significant items—pre-tax | 22 | — | ||||||||||||
Income taxes(a) | 2 | 1 | ||||||||||||
Total certain significant items—net of tax | 20 | (1) | ||||||||||||
Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax | $ | 55 | $ | 30 |
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | ||||||||||||
Cost of sales: | ||||||||||||||
Purchase accounting adjustments | $ | 4 | $ | 1 | ||||||||||
Other | — | 3 | ||||||||||||
Total Cost of sales | 4 | 4 | ||||||||||||
Selling, general & administrative expenses: | ||||||||||||||
Purchase accounting adjustments | 7 | 7 | ||||||||||||
Total Selling, general & administrative expenses | 7 | 7 | ||||||||||||
Amortization of intangible assets: | ||||||||||||||
Purchase accounting adjustments | 31 | 32 | ||||||||||||
Total Amortization of intangible assets | 31 | 32 | ||||||||||||
Restructuring charges and certain acquisition-related costs: | ||||||||||||||
Integration costs | 1 | 2 | ||||||||||||
Employee termination costs | 20 | — | ||||||||||||
Total Restructuring charges and certain acquisition-related costs | 21 | 2 | ||||||||||||
Other (income)/deductions—net: | ||||||||||||||
Other | 2 | (3) | ||||||||||||
Total Other (income)/deductions—net | 2 | (3) | ||||||||||||
Provision for taxes on income | 10 | 12 | ||||||||||||
Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax | $ | 55 | $ | 30 |
Three Months Ended | ||||||||||||||||||||
March 31, | $ | |||||||||||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | Change | |||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||
Operating activities | $ | 549 | $ | 309 | $ | 240 | ||||||||||||||
Investing activities | (216) | (118) | (98) | |||||||||||||||||
Financing activities | (1,802) | (545) | (1,257) | |||||||||||||||||
Effect of exchange-rate changes on cash and cash equivalents | (3) | 4 | (7) | |||||||||||||||||
Net decrease in cash and cash equivalents | $ | (1,472) | $ | (350) | $ | (1,122) |
March 31, | December 31, | ||||||||||
(MILLIONS OF DOLLARS) | 2023 | 2022 | |||||||||
Cash and cash equivalents | $ | 2,109 | $ | 3,581 | |||||||
Accounts receivable, net(a) | 1,186 | 1,215 | |||||||||
Short-term borrowings | 3 | 2 | |||||||||
Current portion of long-term debt | — | 1,350 | |||||||||
Long-term debt | 6,559 | 6,552 | |||||||||
Working capital | 4,354 | 4,339 | |||||||||
Ratio of current assets to current liabilities | 3.27:1 | 2.37:1 | |||||||||
Description | Principal Amount | Interest Rate | Terms | ||||||||
2015 Senior Notes due 2025 | $750 million | 4.500% | Interest due semi annually, not subject to amortization, aggregate principal due on November 13, 2025 | ||||||||
2022 Senior Notes due 2025 | $600 million | 5.400% | Interest due semi annually, not subject to amortization, aggregate principal due on November 14, 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 | ||||||||
2022 Senior Notes due 2032 | $750 million | 5.600% | Interest due semi annually, not subject to amortization, aggregate principal due on November 16, 2032 | ||||||||
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 Last Action | ||||||||||||||||||||||||
Name of Rating Agency | Rating | Rating | Outlook | |||||||||||||||||||||||
Moody’s | P-2 | Baa1 | Stable | August 2017 | ||||||||||||||||||||||
S&P | A-2 | BBB | Stable | December 2016 |
Issuer Purchases of Equity Securities(b) | |||||||||||||||||||||||
Total Number of Shares Purchased(a) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs | ||||||||||||||||||||
January 1 - January 31, 2023 | 358,928 | $160.29 | 358,212 | $2,529,622,653 | |||||||||||||||||||
February 1 - February 28, 2023 | 653,804 | $164.83 | 575,956 | $2,434,189,959 | |||||||||||||||||||
March 1 - March 31, 2023 | 795,412 | $165.08 | 787,494 | $2,303,728,782 | |||||||||||||||||||
1,808,144 | $164.04 | 1,721,662 | $2,303,728,782 |
Form of Non-Employee Director Restricted Stock Unit Award Agreement, effective as of February 8, 2023* | ||||||||
Form of Cash Restricted Stock Unit Award Agreement, effective as of February 8, 2023* | ||||||||
Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302 | ||||||||
Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302 | ||||||||
Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906 | ||||||||
Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906 | ||||||||
EX-101.INS | Inline XBRL INSTANCE DOCUMENT | |||||||
Inline XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT | ||||||||
Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT | ||||||||
EX-104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Zoetis Inc. | ||||||||
May 4, 2023 | By: | /S/ KRISTIN C. PECK | ||||||
Kristin C. Peck | ||||||||
Chief Executive Officer and Director | ||||||||
May 4, 2023 | By: | /S/ WETTENY JOSEPH | ||||||
Wetteny Joseph | ||||||||
Executive Vice President and Chief Financial Officer |
4144-2615-3251.3 |
4125-8275-9715.3 |
May 4, 2023 | By: | /s/ KRISTIN C. PECK | ||||||
Kristin C. Peck | ||||||||
Chief Executive Officer |
May 4, 2023 | By: | /s/ WETTENY JOSEPH | ||||||
Wetteny Joseph | ||||||||
Executive Vice President and Chief Financial Officer |
May 4, 2023 | By: | /s/ KRISTIN C. PECK | ||||||
Kristin C. Peck | ||||||||
Chief Executive Officer |
May 4, 2023 | By: | /s/ WETTENY JOSEPH | ||||||
Wetteny Joseph | ||||||||
Executive Vice President and Chief Financial Officer |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
Net income before allocation to noncontrolling interests | $ 551 | $ 594 | ||
Other comprehensive (loss)/income, net of tax(a): | ||||
Foreign currency translation adjustments | [1] | (7) | 21 | |
Benefit plans: Actuarial gain, net of tax of $1 and $0 for the three months ended March 31, 2023 and 2022, respectively | [1] | 4 | 1 | |
Other comprehensive (loss)/income, net of tax | (11) | 60 | ||
Comprehensive income before allocation to noncontrolling interests | 540 | 654 | ||
Less: Comprehensive loss attributable to noncontrolling interests | (1) | (1) | ||
Comprehensive income attributable to Zoetis Inc. | 541 | 655 | ||
Cash Flow Hedging | ||||
Other comprehensive (loss)/income, net of tax(a): | ||||
Unrealized gains on derivatives for cash flow hedges, net and net investment hedges | [1] | (2) | 26 | |
Net Investment Hedging | ||||
Other comprehensive (loss)/income, net of tax(a): | ||||
Unrealized gains on derivatives for cash flow hedges, net and net investment hedges | [1] | $ (6) | $ 12 | |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Other Comprehensive Income (Loss), Defined Benefit Plan, Gain (Loss), Reclassification Adjustment from AOCI, Tax | $ 1,000 | $ 0 |
Cash Flow Hedging | ||
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax | (1,000) | 7,000 |
Net Investment Hedging | ||
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax | $ (2,000) | $ 4,000 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
||
---|---|---|---|---|
Assets | ||||
Cash and cash equivalents | [1] | $ 2,109 | $ 3,581 | |
Accounts receivable, less allowance for doubtful accounts of $20 in 2023 and $19 in 2022 | 1,186 | 1,215 | ||
Inventories | 2,563 | 2,345 | ||
Other current assets | 411 | 365 | ||
Total current assets | 6,269 | 7,506 | ||
Property, plant and equipment, less accumulated depreciation of $2,374 in 2023 and $2,297 in 2022 | 2,913 | 2,753 | ||
Operating lease right of use assets | 216 | 220 | ||
Goodwill | 2,738 | 2,746 | ||
Identifiable intangible assets, less accumulated amortization | 1,314 | 1,380 | ||
Noncurrent deferred tax assets | 161 | 173 | ||
Other noncurrent assets | 143 | 147 | ||
Total assets | 13,754 | 14,925 | ||
Liabilities and Equity | ||||
Short-term borrowings | 3 | 2 | ||
Current portion of long-term debt | 0 | 1,350 | ||
Accounts payable | 424 | 405 | ||
Dividends payable | 174 | 174 | ||
Accrued expenses | 701 | 682 | ||
Accrued compensation and related items | 232 | 300 | ||
Income taxes payable | 277 | 157 | ||
Other current liabilities | 104 | 97 | ||
Total current liabilities | 1,915 | 3,167 | ||
Long-term debt, net of discount and issuance costs | 6,559 | 6,552 | ||
Noncurrent deferred tax liabilities | 131 | 142 | ||
Operating lease liabilities | 180 | 186 | ||
Other taxes payable | 262 | 258 | ||
Other noncurrent liabilities | 216 | 217 | ||
Total liabilities | 9,263 | 10,522 | ||
Commitments and contingencies (Note 15) | ||||
Stockholders' equity: | ||||
Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 462,495,343 and 463,808,059 shares outstanding at March 31, 2023, and December 31, 2022, respectively | 5 | 5 | ||
Treasury stock, at cost, 39,395,900 and 38,083,184 shares of common stock at March 31, 2023 and December 31, 2022, respectively | (4,807) | (4,539) | ||
Additional paid-in capital | 1,079 | 1,088 | ||
Retained earnings | 9,045 | 8,668 | ||
Accumulated other comprehensive loss | (828) | (817) | ||
Total Zoetis Inc. equity | 4,494 | 4,405 | ||
Noncontrolling interests | (3) | (2) | ||
Total equity | 4,491 | 4,403 | ||
Total liabilities and equity | $ 13,754 | $ 14,925 | ||
|
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (PARENTHETICAL) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 20 | $ 19 |
Accumulated depreciation | $ 2,374 | $ 2,297 |
Common stock, par value (in dollars per share) | $ 0.01 | |
Common stock, shares authorized | 6,000,000,000 | |
Common stock issued, shares | 501,891,243 | 501,891,243 |
Common stock, shares outstanding | 462,495,343 | 463,808,059 |
Treasury stock, shares | 39,395,900 | 38,083,184 |
Restricted cash | $ 4 | $ 4 |
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) - USD ($) $ in Millions |
Total |
Common Stock |
Treasury Stock |
Treasury Stock
Share Repurchase Program
|
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Equity Attributable to Noncontrolling Interests |
||
---|---|---|---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2021 | 501,900,000 | |||||||||
Beginning balance at Dec. 31, 2021 | $ 4,544 | $ 5 | $ (2,952) | $ 1,068 | $ 7,186 | $ (764) | $ 1 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | 594 | 595 | (1) | |||||||
Other comprehensive (loss)/income, net of tax | 60 | 60 | ||||||||
Treasury stock, beginning balance (in shares) at Dec. 31, 2021 | 29,300,000 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Treasury stock acquired, shares | (1,900,000) | (500,000) | ||||||||
Share-based compensation awards | (27) | $ (4) | (23) | 0 | ||||||
Treasury stock acquired | (361) | (361) | ||||||||
Employee benefit plan contribution from Pfizer Inc. | [1] | 1 | 1 | |||||||
Dividends, Common Stock | (153) | (153) | ||||||||
Ending balance (in shares) at Mar. 31, 2022 | 501,900,000 | |||||||||
Ending balance at Mar. 31, 2022 | $ 4,658 | $ 5 | $ (3,317) | 1,046 | 7,628 | (704) | 0 | |||
Treasury stock, ending balance (in shares) at Mar. 31, 2022 | 30,700,000 | |||||||||
Beginning balance (in shares) at Dec. 31, 2022 | 501,891,243 | 501,900,000 | ||||||||
Beginning balance at Dec. 31, 2022 | $ 4,403 | $ 5 | $ (4,539) | 1,088 | 8,668 | (817) | (2) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | 551 | 552 | (1) | |||||||
Other comprehensive (loss)/income, net of tax | $ (11) | (11) | ||||||||
Treasury stock, beginning balance (in shares) at Dec. 31, 2022 | 38,083,184 | 38,100,000 | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Treasury stock acquired, shares | (1,700,000) | (400,000) | ||||||||
Share-based compensation awards | $ 7 | $ 17 | (9) | |||||||
Treasury stock acquired | (285) | (285) | ||||||||
Dividends, Common Stock | $ (174) | (174) | ||||||||
Ending balance (in shares) at Mar. 31, 2023 | 501,891,243 | 501,900,000 | ||||||||
Ending balance at Mar. 31, 2023 | $ 4,491 | $ 5 | $ (4,807) | $ 1,079 | $ 9,045 | $ (828) | $ (3) | |||
Treasury stock, ending balance (in shares) at Mar. 31, 2023 | 39,395,900 | 39,400,000 | ||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||||
Operating Activities | ||||||
Net income before allocation to noncontrolling interests | $ 551 | $ 594 | ||||
Adjustments to reconcile net income before noncontrolling interests to net cash provided by operating activities: | ||||||
Depreciation and amortization expense | [1],[2] | 120 | 114 | |||
Share-based compensation expense | 9 | 16 | ||||
Asset write-offs and asset impairments | 1 | 1 | ||||
Provision for losses on inventory | 16 | 9 | ||||
Deferred taxes | 8 | (45) | ||||
Employee benefit plan contribution from Pfizer Inc. | 0 | 1 | ||||
Other non-cash adjustments | (1) | 4 | ||||
Other changes in assets and liabilities, net of acquisitions and divestitures: | ||||||
Accounts receivable | 27 | (102) | ||||
Inventories | (235) | (146) | ||||
Other assets | (24) | (1) | ||||
Accounts payable | 22 | (31) | ||||
Other liabilities | (63) | (222) | ||||
Other tax accounts, net | 118 | 117 | ||||
Net cash provided by operating activities | 549 | 309 | ||||
Investing Activities | ||||||
Capital expenditures | (223) | (115) | ||||
Acquisitions | (7) | (4) | ||||
Purchase of investments | (1) | (5) | ||||
Proceeds on derivative instrument activity, net | 13 | 6 | ||||
Net proceeds from sale of assets | 2 | 0 | ||||
Net cash used in investing activities | (216) | (118) | ||||
Financing Activities | ||||||
Increase in short-term borrowings, net | 1 | 0 | ||||
Principal payments on long-term debt | (1,350) | 0 | ||||
Share-based compensation-related proceeds, net of taxes paid on withholding shares | 4 | (30) | ||||
Purchases of treasury stock | (283) | (361) | ||||
Cash dividends paid | (174) | (154) | ||||
Net cash used in financing activities | (1,802) | (545) | ||||
Effect of exchange-rate changes on cash and cash equivalents | (3) | 4 | ||||
Net decrease in cash and cash equivalents | (1,472) | (350) | ||||
Cash and cash equivalents at beginning of period | 3,581 | 3,485 | ||||
Cash and cash equivalents at end of period | 2,109 | 3,135 | ||||
Cash paid during the period for: | ||||||
Income taxes | 20 | 26 | ||||
Interest, net of capitalized interest | 89 | 89 | ||||
Amounts included in the measurement of lease liabilities | 14 | 13 | ||||
Non-cash transactions: | ||||||
Capital expenditures | 3 | 4 | ||||
Excise tax accrued on net share repurchases, not paid | 2 | 0 | ||||
Lease obligations obtained in exchange for right-of-use assets | 13 | $ 19 | ||||
Dividends declared, not paid | $ 174 | |||||
|
Organization |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
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 and services, biodevices, genetic tests and precision animal health 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, commercializing 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: parasiticides, vaccines, other pharmaceutical products, dermatology, anti-infectives, medicated feed additives and animal health diagnostics.
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Basis of Presentation |
3 Months Ended |
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Mar. 31, 2023 | |
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 months ended February 28, 2023 and February 28, 2022. 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. 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 2022 Annual Report on Form 10-K.
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Accounting Standards |
3 Months Ended |
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Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Accounting Standards | 3. Accounting Standards Recently Adopted Accounting Standards
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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 or 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 all different brands of a particular product, 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 within each of our major product categories. Our major product categories are: •parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms; •vaccines: biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response; •other pharmaceutical products: pain and sedation, antiemetic, reproductive, and oncology products; •dermatology products: products that relieve itch associated with allergic conditions and atopic dermatitis; •anti-infectives: products that prevent, kill or slow the growth of bacteria, fungi or protozoa; •animal health diagnostics: testing and analysis of blood, urine and other animal samples and related products and services, including point-of-care diagnostic products, instruments and reagents, rapid immunoassay tests, reference laboratory kits and services and blood glucose monitors; and •medicated feed additives: products added to animal feed that provide medicines to livestock. Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals, as well as products and services in biodevices, genetic tests and precision animal health. 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, 2022 and 2021, and subsequently recognized as revenue during the first three months of 2023 and 2022 were $1 million and $2 million, respectively. Contract liabilities as of March 31, 2023 and December 31, 2022 were $14 million. Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of March 31, 2023 is not material.
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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 business 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, 2023 primarily consisted of employee termination costs related to organizational structure refinements.
(a) At March 31, 2023 and December 31, 2022, included in Accrued expenses ($22 million and $5 million, respectively) and Other noncurrent liabilities ($10 million). (b) 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, 2023, predominantly associated with a settlement for underpayment of royalties in prior periods. (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 |
---|---|
Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes A. Taxes on Income Our effective tax rate was 20.9% for the three months ended March 31, 2023, compared with 18.3% for the three months ended March 31, 2022. The higher effective tax rate for the three months ended March 31, 2023, was attributable to lower net discrete tax benefits for the three months ended March 31, 2023 and a less favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs), partially offset by a higher benefit in the U.S. related to foreign-derived intangible income for the three months ended March 31, 2023. Jurisdictional mix of earnings can vary depending on repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items. In 2022, the company implemented an initiative to maximize its cash position in the U.S. This initiative resulted in a tax benefit in the U.S. in connection with a prepayment from a related foreign entity in Belgium which qualifies as foreign-derived intangible income; however, this income tax benefit was deferred for 2022. A portion of this benefit was recognized during the three months ended March 31, 2023. B. Deferred Taxes As of March 31, 2023, the total net deferred income tax asset of $30 million is included in Noncurrent deferred tax assets ($161 million) and Noncurrent deferred tax liabilities ($131 million). As of December 31, 2022, the total net deferred income tax asset of $31 million is included in Noncurrent deferred tax assets ($173 million) and Noncurrent deferred tax liabilities ($142 million). C. Tax Contingencies As of March 31, 2023, the net tax liabilities associated with uncertain tax positions of $196 million (exclusive of interest and penalties related to uncertain tax positions of $21 million) are included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($195 million). As of December 31, 2022, the net tax liabilities associated with uncertain tax positions of $194 million (exclusive of interest and penalties related to uncertain tax positions of $19 million) are included in Noncurrent deferred tax assets and Other noncurrent assets ($2 million) and Other taxes payable ($192 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 | 9. Financial Instruments A. Debt Credit Facilities In December 2022, 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), which expires in December 2027. The credit facility replaced the company's existing revolving credit facility dated as of December 2016. 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. In addition, the credit facility contains other customary covenants. We were in compliance with all financial covenants as of March 31, 2023 and December 31, 2022. There were no amounts drawn under the credit facility as of March 31, 2023 or December 31, 2022. 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, 2023, we had access to $51 million of lines of credit which expire at various times and are generally renewed annually. There were $3 million of borrowings outstanding related to these facilities as of March 31, 2023 and $2 million of borrowings outstanding related to these facilities as of December 31, 2022. 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, 2023 and December 31, 2022, there was no commercial paper outstanding under this program. Senior Notes and Other Long-Term Debt On November 8, 2022, we issued $1.35 billion aggregate principal amount of our senior notes (2022 senior notes), with an original issue discount of $2 million. These notes are comprised of $600 million aggregate principal amount of 5.400% senior notes due 2025 and $750 million aggregate principal amount of 5.600% senior notes due 2032. On February 1, 2023, the net proceeds were used to redeem in full, upon maturity, the $1.35 billion aggregate principal amount of our 3.250% 2013 senior notes due 2023. Our senior notes are governed by an indenture and supplemental indentures (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 senior notes may be declared immediately due and payable. Pursuant to the indenture, we are able to redeem the senior notes of 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. Upon the occurrence of a change of control of us and a downgrade of the 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 senior notes at a price equal to 101% of the aggregate principal amount of the 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 $6,273 million and $6,108 million as of March 31, 2023 and December 31, 2022, 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, 2023, matures in the following years:
Interest Expense Interest expense, net of capitalized interest, was $63 million and $53 million for the three months ended March 31, 2023 and 2022, respectively. Capitalized interest expense was $6 million and $5 million for the three months ended March 31, 2023 and 2022, 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 Sheets. The derivative financial instruments primarily offset exposures in the British pound, Canadian dollar, Chinese yuan, euro, Japanese yen and Norwegian krone. 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 currency forward-exchange contracts not designated as hedging instruments, we recognize the gains and losses 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 currency forward-exchange contracts mature within 60 days and all mature within three years. •For foreign exchange derivative instruments that are designated as hedging instruments 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. These instruments include cross-currency interest rate swaps and foreign currency forward-exchange contracts. 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 Statements of Cash Flows. These contracts have varying maturities of up to three 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. •During the period from 2019 to 2022, we entered into forward-starting interest rate swaps with an aggregate notional value of $650 million. We designated these swaps as cash flow hedges against interest rate exposure related principally to the issuance of fixed-rate debt to refinance our 3.250% 2013 senior notes due 2023. Upon issuance of our 2022 senior notes, we terminated these contracts and received $114 million in cash from the counterparties for settlement, included in Net cash provided by operating activities in the Consolidated Statements of Cash Flows. The settlement amount, which represented the fair value of the contracts at the time of termination, was recorded in Accumulated other comprehensive loss, and will be amortized into income (offset to Interest expense, net of capitalized interest) over the life of the 5.600% 2022 senior notes due 2032. •As of March 31, 2023, we had outstanding 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% 2015 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 the Secured Overnight Financing Rate (SOFR). These derivative instruments effectively convert a portion of the company’s long-term debt from fixed-rate to floating-rate debt based on the daily SOFR rate plus a spread. Gains or losses on the fixed-to-floating interest rate swaps due to changes in SOFR 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, 2023, we had outstanding fixed-to-floating interest rate swaps that correspond to a portion of the 3.900% 2018 senior notes due 2028 and the 2.000% senior notes due 2030. The amounts recorded during the three months ended March 31, 2023 for changes in the fair value of these hedges are not material to our condensed consolidated financial statements. During the first quarter of 2023, we executed amendments to certain of our interest rate swap contracts, which changed the floating rate index from LIBOR to SOFR. These amendments did not have a material impact on our condensed consolidated financial statements. Outstanding Positions The aggregate notional amount 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 derivative transactions are subject to master netting agreements that mitigate credit risk by permitting net settlement of transactions with the same counterparty. The company also has collateral security agreements with certain of its counterparties. Under these collateral security agreements either party is required to post cash collateral when the net fair value of derivative instruments covered by the collateral agreement exceeds contractually established thresholds. At March 31, 2023, there was $6 million of collateral received and $21 million of collateral posted related to derivative instruments recorded in Other current liabilities and Other current assets, respectively. At December 31, 2022, there was $8 million of collateral received and $21 million of collateral posted related to derivative instruments recorded in Other current liabilities and Other current assets, respectively. 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 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 (losses)/gains on interest rate swap contracts, recorded, net of tax, in Accumulated other comprehensive loss, are as follows:
Gains on interest rate swap contracts, recognized within Interest expense, net of capitalized interest, are as follows:
The net amount of deferred gains related to derivative instruments designated as cash flow hedges that is expected to be reclassified from Accumulated other comprehensive loss into earnings over the next 12 months is not material.
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Inventories | 10. Inventories The components of inventory are as follows:
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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 $3,274 million and $3,282 million as of March 31, 2023 and December 31, 2022, respectively. Accumulated goodwill impairment losses (generated entirely in fiscal 2002) were $536 million as of March 31, 2023 and December 31, 2022. 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 $47 million and $52 million for the three months ended March 31, 2023 and 2022, respectively.
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Share-Based Payments |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payments | 12. Share-based Payments The Zoetis 2013 Equity and Incentive Plan (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) For the three months ended March 31, 2023 and 2022, we capitalized less than $1 million of share-based compensation expense to inventory. During the three months ended March 31, 2023, the company granted 268,008 stock options with a weighted-average exercise price of $162.07 per stock option and a weighted-average fair value of $43.56 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 3.84%; expected dividend yield of 0.92%; expected stock price volatility of 28.63%; and expected term of 4.2 years. In general, stock options granted prior to 2023 vest after three years of continuous service, while stock options granted in 2023 are subject to graded vesting over three years. 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, 2023, the company granted 262,508 RSUs, with a weighted-average grant date fair value of $162.08 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 granted prior to 2023 vest after three years of continuous service from the grant date while RSUs granted in 2023 are subject to graded vesting over three years. 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, 2023, the company granted 99,626 PSUs with a weighted-average grant date fair value of $238.24 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 31.8% and 40.9%, 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 2021, our Board of Directors authorized a $3.5 billion share repurchase program. As of March 31, 2023, there was $2.3 billion remaining under this authorization. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs. 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 not material for the three months ended March 31, 2023 and 2022.
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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. Due to the ongoing issues presented by the coronavirus (COVID-19) pandemic, the parties have been unable to secure a start date for the Phase II testing and have no timeline at this point when testing will begin. 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. As a result of the 2016 decision, the company recorded a net tax charge of approximately $35 million in the first half of 2016. 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. On September 16, 2021, the European Court of Justice upheld the EC’s decision that the Belgium excess profit ruling system is considered an aid scheme and referred the case back to the General Court to rule on open questions. On May 24, 2022, the General Court resumed all proceedings involved with the Excess Profit Rulings cases, including Zoetis. On June 23, 2022, as requested by the General Court, the company provided observations in relations to (i) the impact of the Court of Justice’s decision that the Belgium excess profit ruling system is considered an aid scheme and (ii) the impact of recent case laws by the General Court with regards to the existence of a selective advantage. On December 16, 2022, the company submitted observations on the conclusions drawn from the November 8, 2022 Fiat Chrysler Finance Europe and Ireland v Commission judgement, as requested by the General Court. A hearing by the General Court took place on February 15, 2023 and we are now awaiting a decision on our plea. The company has not reflected any potential benefits in its condensed consolidated financial statements as of March 31, 2023 as a result of the 2019 annulment. We will continue to monitor the developments of the appeal and its ultimate resolution. 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, 2023, recorded amounts for the estimated fair value of these indemnifications were not material.
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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 parasiticides, vaccines, other pharmaceutical products, dermatology, anti-infectives, medicated feed additives and animal health diagnostics, for both companion animal and livestock 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. 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 enabling 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 $204 million and $203 million for the three months ended March 31, 2023 and 2022, respectively. (c) For the three months ended March 31, 2023, primarily consisted of employee termination costs related to organizational structure refinements. For the three months ended March 31, 2022, primarily consisted of product transfer costs offset by other items. (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, 2023 | |
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 months ended February 28, 2023 and February 28, 2022. |
Recently Adopted Accounting Standards and Recently Issued Accounting Standards | Recently Adopted Accounting Standards |
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, 2023, recorded amounts for the estimated fair value of these indemnifications were not material. |
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 parasiticides, vaccines, other pharmaceutical products, dermatology, anti-infectives, medicated feed additives and animal health diagnostics, for both companion animal and livestock 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. 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 enabling 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, 2023 primarily consisted of employee termination costs related to organizational structure refinements.
(a) At March 31, 2023 and December 31, 2022, included in Accrued expenses ($22 million and $5 million, respectively) and Other noncurrent liabilities ($10 million). (b) Includes adjustments for foreign currency translation.
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Other (Income)/Deductions - Net (Tables) |
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Other Income and Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Other (Income)/Deductions—Net | The components of Other (income)/deductions—net are as follows:
(a) For the three months ended March 31, 2023, predominantly associated with a settlement for underpayment of royalties in prior periods. (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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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, 2023, matures in the following years:
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Schedule of Derivative Instruments | The aggregate notional amount 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 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 (losses)/gains on interest rate swap contracts, recorded, net of tax, in Accumulated other comprehensive loss, are as follows:
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Schedule of Net Investment Hedges, Statements of Financial Performance and Financial Position, Location | Gains on 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, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Share-based Compensation Expense | The components of share-based compensation expense are as follows:
(a) For the three months ended March 31, 2023 and 2022, we capitalized less than $1 million of share-based compensation expense to inventory.
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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) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Selected Income Statement Information by Segment |
(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 $204 million and $203 million for the three months ended March 31, 2023 and 2022, respectively. (c) For the three months ended March 31, 2023, primarily consisted of employee termination costs related to organizational structure refinements. For the three months ended March 31, 2022, primarily consisted of product transfer costs offset by other items. (d) Defined as income before provision for taxes on income.
|
Organization (Details) |
Mar. 31, 2023
specie
productCategory
country
geographicRegion
|
---|---|
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 |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023
USD ($)
product_category
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
Revenue Recognition and Deferred Revenue [Abstract] | |||
Number of major product lines | product_category | 300 | ||
Contract liabilities, revenue recognized | $ 1 | $ 2 | |
Contract liabilities | $ 14 | $ 14 |
Revenue - Revenue by Geographic Area (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Revenue from External Customer [Line Items] | ||
Revenue | $ 2,000 | $ 1,986 |
United States | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,005 | 1,020 |
Australia | ||
Revenue from External Customer [Line Items] | ||
Revenue | 82 | 65 |
Brazil | ||
Revenue from External Customer [Line Items] | ||
Revenue | 84 | 77 |
Canada | ||
Revenue from External Customer [Line Items] | ||
Revenue | 50 | 49 |
Chile | ||
Revenue from External Customer [Line Items] | ||
Revenue | 39 | 41 |
China | ||
Revenue from External Customer [Line Items] | ||
Revenue | 102 | 103 |
France | ||
Revenue from External Customer [Line Items] | ||
Revenue | 34 | 32 |
Germany | ||
Revenue from External Customer [Line Items] | ||
Revenue | 45 | 43 |
Italy | ||
Revenue from External Customer [Line Items] | ||
Revenue | 26 | 30 |
Japan | ||
Revenue from External Customer [Line Items] | ||
Revenue | 39 | 59 |
Mexico | ||
Revenue from External Customer [Line Items] | ||
Revenue | 39 | 35 |
Spain | ||
Revenue from External Customer [Line Items] | ||
Revenue | 33 | 33 |
United Kingdom | ||
Revenue from External Customer [Line Items] | ||
Revenue | 68 | 64 |
Other developed markets | ||
Revenue from External Customer [Line Items] | ||
Revenue | 122 | 115 |
Other emerging markets | ||
Revenue from External Customer [Line Items] | ||
Revenue | 215 | 202 |
Total geographical area | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,983 | 1,968 |
Contract manufacturing & human health | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 17 | $ 18 |
Revenue - Revenue by Major Species (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
Revenue from External Customer [Line Items] | ||||
Revenue | $ 2,000 | $ 1,986 | ||
Contract manufacturing & human health | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 17 | 18 | ||
Companion animal | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 1,225 | 1,263 | ||
Companion animal | U.S. | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 721 | 774 | ||
Companion animal | International | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 504 | 489 | ||
Livestock | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 758 | 705 | ||
Livestock | U.S. | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 284 | 246 | ||
Livestock | International | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 474 | 459 | ||
Operating Segments | U.S. | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 1,005 | 1,020 | ||
Operating Segments | International | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | [1] | $ 978 | $ 948 | |
|
Revenue - Revenue by Species (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Revenue from External Customer [Line Items] | ||
Revenue | $ 2,000 | $ 1,986 |
Contract manufacturing & human health | ||
Revenue from External Customer [Line Items] | ||
Revenue | 17 | 18 |
Dogs and Cats | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,153 | 1,199 |
Horses | ||
Revenue from External Customer [Line Items] | ||
Revenue | 72 | 64 |
Cattle | ||
Revenue from External Customer [Line Items] | ||
Revenue | 399 | 364 |
Swine | ||
Revenue from External Customer [Line Items] | ||
Revenue | 142 | 154 |
Poultry | ||
Revenue from External Customer [Line Items] | ||
Revenue | 139 | 124 |
Fish | ||
Revenue from External Customer [Line Items] | ||
Revenue | 49 | 44 |
Sheep and other | ||
Revenue from External Customer [Line Items] | ||
Revenue | 29 | 19 |
Livestock | ||
Revenue from External Customer [Line Items] | ||
Revenue | 758 | 705 |
Companion animal | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,225 | 1,263 |
Other pharmaceuticals | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 294 | $ 254 |
Revenue - Revenue by Product (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Revenue from External Customer [Line Items] | ||
Revenue | $ 2,000 | $ 1,986 |
Contract manufacturing & human health | ||
Revenue from External Customer [Line Items] | ||
Revenue | 17 | 18 |
Vaccines | ||
Revenue from External Customer [Line Items] | ||
Revenue | 429 | 405 |
Parasiticides | ||
Revenue from External Customer [Line Items] | ||
Revenue | 432 | 459 |
Anti-infectives | ||
Revenue from External Customer [Line Items] | ||
Revenue | 288 | 285 |
Dermatology | ||
Revenue from External Customer [Line Items] | ||
Revenue | 292 | 311 |
Other pharmaceuticals | ||
Revenue from External Customer [Line Items] | ||
Revenue | 294 | 254 |
Medicated feed additives | ||
Revenue from External Customer [Line Items] | ||
Revenue | 87 | 98 |
Animal health diagnostics | ||
Revenue from External Customer [Line Items] | ||
Revenue | 93 | 98 |
Other non-pharmaceuticals | ||
Revenue from External Customer [Line Items] | ||
Revenue | 68 | 58 |
Total products and services | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 1,983 | $ 1,968 |
Acquisitions and Divestitures (Details) - Jurox - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Sep. 30, 2022 |
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Business Combinations [Abstract] | |||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | ||
Asset Acquisition [Line Items] | |||
Cash and cash equivalents | $ 20 | ||
Accounts receivable | 8 | ||
Inventories | 21 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Other | 1 | ||
Property, plant and equipment | 25 | ||
Identifiable intangible assets | 135 | ||
Other noncurrent assets | 1 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Accounts Payable | 2 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Other | 12 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net | 197 | ||
Goodwill, Acquired During Period | 43 | ||
Payments to Acquire Businesses, Gross | 240 | ||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | ||
Business Combination, Consideration Transferred, Before Adjustments | $ 226 | ||
Business Combination, Consideration Transferred, Outstanding | $ 5 |
Acquisitions and Divestitures - Consideration Transferred (Details) - Jurox - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2022 |
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Business Acquisition [Line Items] | |||
Payments to Acquire Businesses, Gross | $ 240 | ||
Business Combination, Consideration Transferred | 240 | ||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | ||
Business Combination, Consideration Transferred, Before Adjustments | $ 226 | ||
Acquisition of a noncontrolling interest, net of cash acquired | $ 215 | ||
Business Combination, Consideration Transferred, Outstanding | $ 5 |
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Details) - USD ($) $ in Millions |
3 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||
Asset write-offs and asset impairments | $ 1 | $ 1 | ||||||||||
Total Restructuring charges and certain acquisition-related costs | 21 | 2 | ||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||||
Restructuring accrual balance | [1],[2] | 15 | ||||||||||
Restructuring charges (reversals) | 20 | |||||||||||
Utilization and other | [1],[3] | (3) | ||||||||||
Restructuring accrual balance | [1],[2] | 32 | ||||||||||
Other current liabilities | ||||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||||
Accrued expenses | 22 | $ 5 | ||||||||||
Other noncurrent liabilities | ||||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||||
Other noncurrent liabilities | 10 | $ 10 | ||||||||||
Employee Termination Costs | ||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||
Severance Costs | 20 | 0 | ||||||||||
Direct Cost | ||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||
Integration costs | $ 1 | $ 2 | [4] | |||||||||
|
Other (Income)/Deductions - Net (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Royalty-related income(a) | $ (34) | $ (1) | ||
Interest income | (33) | (2) | ||
Foreign currency loss | [1] | 9 | 11 | |
Other, net | 5 | (1) | ||
Other (income)/deductions—net | $ (53) | $ 7 | ||
|
Income Taxes - Taxes on Income (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate for income from continuing operations | 20.90% | 18.30% |
Income Taxes - Deferred Taxes (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Noncurrent deferred tax liabilities | $ 30 | $ 31 |
Noncurrent deferred tax assets | 161 | 173 |
Noncurrent deferred tax liabilities | $ 131 | $ 142 |
Income Taxes - Tax Contingencies (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Income Tax Contingency [Line Items] | ||
Liabilities associated with uncertain tax positions | $ 196 | $ 194 |
Unrecognized tax benefits, income tax penalties and interest accrued | 21 | 19 |
Noncurrent Deferred Tax Assets | ||
Income Tax Contingency [Line Items] | ||
Liabilities associated with uncertain tax positions | 1 | 2 |
Other Taxes Payable | ||
Income Tax Contingency [Line Items] | ||
Liabilities associated with uncertain tax positions | $ 195 | $ 192 |
Financial Instruments - Credit Facilities (Details) |
Mar. 31, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
---|---|---|
Line of Credit Facility [Line Items] | ||
Line of credit facility, maximum borrowing capacity | $ 51,000,000 | |
Foreign exchange derivative instruments | Derivatives Designated as Hedging Instruments: | ||
Line of Credit Facility [Line Items] | ||
Collateral posted | $ 21,000,000 | $ 21,000,000 |
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 | |
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, 2023 |
Dec. 31, 2022 |
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 |
Financial Instruments - Senior Notes Offering and Other Long-Term Debt (Details) - USD ($) $ in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Feb. 01, 2023 |
Dec. 31, 2022 |
Nov. 08, 2022 |
Jan. 28, 2013 |
|
Debt Instrument [Line Items] | ||||||
Repayments of long-term debt | $ 1,350 | $ 0 | ||||
Debt, principal amount | 6,650 | $ 8,000 | ||||
Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Debt, purchase price percent due to downgrade of investment grade | 101.00% | |||||
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% | |||||
Senior Notes | 2022 Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Debt, principal amount | $ 1,350 | |||||
Debt, unamortized discount | $ 2 | |||||
Senior Notes | 5.400% Senior Notes Due 2025 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, principal amount | $ 600 | 600 | ||||
Interest rate percentage | 5.40% | |||||
Senior Notes | 5.600% Senior Notes Due 2032 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, principal amount | 750 | 750 | ||||
Interest rate percentage | 5.60% | |||||
Senior Notes | 3.250% 2013 senior notes due 2023 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, principal amount | $ 0 | $ 1,350 | $ 1,350 | |||
Interest rate percentage | 3.25% |
Financial Instruments - Schedule of Long-term Debt (Details) - USD ($) $ in Millions |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Feb. 01, 2023 |
Dec. 31, 2022 |
Nov. 08, 2022 |
|
Debt Instrument [Line Items] | |||||
Debt, principal amount | $ 6,650 | $ 8,000 | |||
Unamortized debt discount / debt issuance costs | (65) | (66) | |||
Current portion of long-term debt | 0 | 1,350 | |||
Hedged Liability, Fair Value Hedge, Cumulative Increase (Decrease) | (26) | (32) | |||
Long-term debt, net of discount and issuance costs | 6,559 | 6,552 | |||
Capitalized interest | $ 6 | $ 5 | |||
Senior Notes | 3.250% 2013 senior notes due 2023 | |||||
Debt Instrument [Line Items] | |||||
Interest rate percentage | 3.25% | ||||
Debt, principal amount | $ 0 | $ 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 | |||
Senior Notes | 5.400% Senior Notes Due 2025 | |||||
Debt Instrument [Line Items] | |||||
Interest rate percentage | 5.40% | ||||
Debt, principal amount | 600 | 600 | |||
Senior Notes | 5.600% Senior Notes Due 2032 | |||||
Debt Instrument [Line Items] | |||||
Interest rate percentage | 5.60% | ||||
Debt, principal amount | $ 750 | $ 750 |
Financial Instruments - Fair Value of Debt (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Senior Notes | Fair Value, Inputs, Level 2 | ||
Debt Instrument [Line Items] | ||
Fair value, debt instrument | $ 6,273 | $ 6,108 |
Financial Instruments - Long-term Debt Maturity (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Financial Instruments [Abstract] | |||
2023 | $ 0 | ||
2024 | 0 | ||
2025 | 1,350,000,000 | ||
2026 | 0 | ||
2027 | 750,000,000 | ||
After 2025 | 4,550,000,000 | ||
Total long-term debt | 6,650,000,000 | $ 8,000,000,000 | |
Interest expense, net of capitalized interest | 63,000,000 | $ 53,000,000 | |
Capitalized interest | 6,000,000 | $ 5,000,000 | |
Line Of Credit For General Corporate Purpose | |||
Line of Credit Facility [Line Items] | |||
Line of credit facility | $ 3,000,000 | $ 2,000,000 |
Financial Instruments - Foreign Exchange Risk (Details) |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
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 | Foreign exchange derivative instruments | |
Derivative [Line Items] | |
Maturity period (in years) | 3 years |
Financial Instruments - Interest Rate Risk (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
Nov. 08, 2022 |
|
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Derivative, Cash Received on Hedge | $ 114 | ||
Forward-starting interest rate swaps | Derivatives Designated as Hedging Instruments: | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Derivative notional amount | $ 50 | $ 50 | |
Senior Notes | Forward-starting interest rate swaps | Derivatives Designated as Hedging Instruments: | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Derivative notional amount | $ 650 | ||
Senior Notes | 3.250% 2013 senior notes due 2023 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Interest rate percentage | 3.25% | ||
Senior Notes | 4.500% 2015 senior notes due 2025 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Interest rate percentage | 4.50% | ||
Senior Notes | 5.600% Senior Notes Due 2032 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Interest rate percentage | 5.60% | ||
Senior Notes | 3.900% 2018 senior notes due 2028 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Interest rate percentage | 3.90% | ||
Senior Notes | 2.000% 2020 senior notes due 2030 | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Interest rate percentage | 2.00% |
Financial Instruments Derivative Notional Amounts (Details) € in Millions, kr in Millions, SFr in Millions, $ in Millions |
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
EUR (€)
|
Mar. 31, 2023
DKK (kr)
|
Mar. 31, 2023
CHF (SFr)
|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2022
EUR (€)
|
Dec. 31, 2022
DKK (kr)
|
Dec. 31, 2022
CHF (SFr)
|
---|---|---|---|---|---|---|---|---|
Foreign exchange derivative instruments | ||||||||
Derivative [Line Items] | ||||||||
Derivative notional amount | $ 250 | € 650 | kr 600 | SFr 25 | $ 250 | € 650 | kr 600 | SFr 25 |
Derivatives Not Designated as Hedging Instruments | Foreign currency forward-exchange contracts | ||||||||
Derivative [Line Items] | ||||||||
Derivative notional amount | 1,716 | 1,753 | ||||||
Derivatives Designated as Hedging Instruments: | Forward-starting interest rate swaps | ||||||||
Derivative [Line Items] | ||||||||
Derivative notional amount | $ 50 | $ 50 |
Financial Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Derivatives, Fair Value [Line Items] | |||
Total derivatives | $ (8) | $ 6 | |
Derivatives Designated as Hedging Instruments: | |||
Derivatives, Fair Value [Line Items] | |||
Total derivatives | (9) | 5 | |
Foreign currency forward-exchange contracts | Derivatives Not Designated as Hedging Instruments | |||
Derivatives, Fair Value [Line Items] | |||
Total derivatives | 1 | 1 | |
Foreign currency forward-exchange contracts | (16) | $ (6) | |
Foreign currency forward-exchange contracts | Derivatives Not Designated as Hedging Instruments | Other current assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 16 | 22 | |
Foreign currency forward-exchange contracts | Derivatives Not Designated as Hedging Instruments | Other current liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liabilities | (15) | (21) | |
Forward-starting interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other noncurrent assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 9 | 10 | |
Foreign exchange derivative instruments | Derivatives Designated as Hedging Instruments: | |||
Derivatives, Fair Value [Line Items] | |||
Collateral received | 6 | ||
Collateral posted | 21 | 21 | |
Additional Collateral, Aggregate Fair Value | 8 | ||
Foreign exchange derivative instruments | Derivatives Designated as Hedging Instruments: | Other current assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 11 | 21 | |
Foreign exchange derivative instruments | Derivatives Designated as Hedging Instruments: | Other current liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liabilities | 14 | 9 | |
Foreign exchange derivative instruments | Derivatives Designated as Hedging Instruments: | Other noncurrent assets | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | 17 | 19 | |
Foreign exchange derivative instruments | Derivatives Designated as Hedging Instruments: | Other noncurrent liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative liabilities | 6 | 4 | |
Fixed-to-floating interest rate swap contracts | Derivatives Designated as Hedging Instruments: | Other noncurrent liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Derivative assets | $ (26) | $ (32) |
Financial Instruments Cross-currency forward-exchange contracts (Details) - Derivatives Designated as Hedging Instruments: - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Forward-starting interest rate swap contracts | ||
Foreign Currency Fair Value Hedge Derivative [Line Items] | ||
Unrealized (losses)/gains on derivatives for net investment hedges, net of tax of $(2) and $4 for the three months ended March 31, 2023 and 2022, respectively | $ (1) | $ 26 |
Foreign exchange derivative instruments | ||
Foreign Currency Fair Value Hedge Derivative [Line Items] | ||
Unrealized (losses)/gains on derivatives for net investment hedges, net of tax of $(2) and $4 for the three months ended March 31, 2023 and 2022, respectively | $ (6) | $ 12 |
Financial Instruments Cross-currency interest rate swap contracts (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Foreign exchange derivative instruments | 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 | $ 5 | $ 3 |
Inventories (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 1,065 | $ 1,090 |
Work-in-process | 999 | 825 |
Raw materials and supplies | 499 | 430 |
Inventories | $ 2,563 | $ 2,345 |
Goodwill and Other Intangible Assets - Goodwill (Details) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023
USD ($)
| ||||
Goodwill [Roll Forward] | ||||
Beginning Balance | $ 2,746 | |||
Adjustments | (1) | |||
Other | (7) | [1] | ||
Ending Balance | 2,738 | |||
United States (U.S.) | ||||
Goodwill [Roll Forward] | ||||
Beginning Balance | 1,485 | |||
Adjustments | 0 | |||
Other | 0 | [1] | ||
Ending Balance | 1,485 | |||
International | ||||
Goodwill [Roll Forward] | ||||
Beginning Balance | 1,261 | |||
Adjustments | (1) | |||
Other | (7) | [1] | ||
Ending Balance | $ 1,253 | |||
|
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Gross goodwill | $ 3,274 | $ 3,282 | |
Accumulated goodwill impairment losses | 536 | $ 536 | |
Amortization of intangible assets | $ 47 | $ 52 |
Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross carrying amount | $ 2,622 | $ 2,650 |
Finite-lived intangible assets, accumulated amortization | (1,483) | (1,445) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | 1,139 | 1,205 |
Total indefinite-lived intangible assets | 175 | 175 |
Intangible Assets, gross carrying amount | 2,797 | 2,825 |
Identifiable intangible assets, less accumulated amortization | 1,314 | 1,380 |
Brands and tradenames | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Total indefinite-lived intangible assets | 91 | 91 |
In-process research and development | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Total indefinite-lived intangible assets | 77 | 77 |
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 | 1,900 | 1,918 |
Finite-lived intangible assets, accumulated amortization | (1,006) | (975) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | 894 | 943 |
Brands and tradenames | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross carrying amount | 390 | 395 |
Finite-lived intangible assets, accumulated amortization | (239) | (237) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | 151 | 158 |
Other | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross carrying amount | 332 | 337 |
Finite-lived intangible assets, accumulated amortization | (238) | (233) |
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization | $ 94 | $ 104 |
Share-Based Payments - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2023
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, options granted, shares | shares | 268,008 |
Share-based compensation, weighted average exercise price (in dollars per share) | $ 162.07 |
Share-based compensation, Options, weighted average grant date fair value (in dollars per share) | $ 43.56 |
Share-based compensation, risk free interest rate | 3.84% |
Share-based compensation, expected dividend rate | 0.92% |
Share-based compensation, expected volatility rate | 28.63% |
Share-based compensation, expected term | 4 years 2 months 12 days |
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 Arrangement by Share-Based Payment Award, Award Graded Vesting Period | 3 years |
Share-based compensation, granted, shares | shares | 262,508 |
Share-based compensation, weighted average grant date fair value (in dollars per share) | $ 162.08 |
Performance Shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, expected volatility rate | 31.80% |
Share-based compensation, award vesting period | 3 years |
Share-based compensation, granted, shares | shares | 99,626 |
Share-based compensation, weighted average grant date fair value (in dollars per share) | $ 238.24 |
Performance Shares | PeerCompanies | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based compensation, expected volatility rate | 40.90% |
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, 2023 |
Mar. 31, 2022 |
|||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense—direct | [1] | $ 9 | $ 16 | |
Stock options / stock appreciation rights | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense—direct | 1 | 2 | ||
RSUs / DSUs | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense—direct | 7 | 9 | ||
PSUs | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense—direct | $ 1 | $ 5 | ||
|
Stockholders' Equity - Changes in Common Shares and Treasury Stock (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Class of Stock [Line Items] | ||
Common stock, shares authorized | 6,000,000,000 | |
Preferred stock, shares authorized | 1,000,000,000 | |
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased | 2,300,000,000 | |
December 2021 Share Repurchase Program | ||
Class of Stock [Line Items] | ||
Stock repurchase program, authorized amount | $ 3,500,000,000 |
Stockholders' Equity - Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | $ 4,403 | $ 4,544 |
Other comprehensive (loss)/income, net of tax | (11) | 60 |
Ending balance | 4,491 | 4,658 |
Accumulated Other Comprehensive Loss | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (817) | (764) |
Other comprehensive (loss)/income, net of tax | (11) | 60 |
Ending balance | (828) | (704) |
Derivatives Net Unrealized Gains/ (Losses) | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | 90 | 4 |
Other comprehensive (loss)/income, net of tax | (2) | 26 |
Ending balance | 88 | 30 |
Net Investment Hedges | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | 41 | 5 |
Other comprehensive (loss)/income, net of tax | (6) | 12 |
Ending balance | 35 | 17 |
Currency Translation Adjustment Net Unrealized Gain/(Losses) | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (944) | (756) |
Other comprehensive (loss)/income, net of tax | (7) | 21 |
Ending balance | (951) | (735) |
Benefit Plans Actuarial Gains/(Losses) | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (4) | (17) |
Other comprehensive (loss)/income, net of tax | 4 | 1 |
Ending balance | $ 0 | $ (16) |
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Numerator | ||
Net income before allocation to noncontrolling interests | $ 551 | $ 594 |
Less: Net loss attributable to noncontrolling interests | (1) | (1) |
Net income attributable to Zoetis Inc. | $ 552 | $ 595 |
Denominator | ||
Weighted-average common shares outstanding | 463,500,000 | 472,200,000 |
Common stock equivalents: stock options, RSUs, PSUs and DSUs | 1,100,000 | 1,900,000 |
Weighted-average common and potential dilutive shares outstanding | 464,600,000 | 474,100,000 |
Earnings per share attributable to Zoetis stockholders—basic (in dollars per share) | $ 1.19 | $ 1.26 |
Earnings per share attributable to Zoetis stockholders—diluted (in dollars per share) | $ 1.19 | $ 1.26 |
Antidilutive securities excluded from computation of earnings per share, amount | 0 | 0 |
Commitments and Contingencies (Details) $ in Millions |
1 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 16, 2019
Companies
|
Apr. 30, 2012 |
Jun. 30, 2016
USD ($)
|
Feb. 29, 2012
defendant
|
|
Loss Contingencies [Line Items] | ||||
Number of multinational companies | Companies | 39 | |||
Ulianopolis, Brazil | ||||
Loss Contingencies [Line Items] | ||||
Number of additional defendants | 5 | |||
Number of claims seeking damages | 6 | |||
Duration of suspension of lawsuit | 1 year | |||
European Commission | ||||
Loss Contingencies [Line Items] | ||||
Net tax charge | $ | $ 35 |
Segment Information (Details) |
3 Months Ended |
---|---|
Mar. 31, 2023
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment Information Selected Statement of Income (Details) - USD ($) $ in Millions |
3 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||||||||
Segment Reporting Information [Line Items] | ||||||||||
Revenue | $ 2,000 | $ 1,986 | ||||||||
Cost of sales | 588 | 569 | ||||||||
Other (income)/deductions—net | (53) | 7 | ||||||||
Income before provision for taxes on income | [1] | 697 | 727 | |||||||
Depreciation and amortization | [1],[2] | 120 | 114 | |||||||
Other business activities | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Income before provision for taxes on income | (114) | (98) | ||||||||
Depreciation and amortization | [2] | 8 | 7 | |||||||
Operating Segments | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Income before provision for taxes on income | 1,149 | 1,208 | ||||||||
Depreciation and amortization | [2] | 40 | 31 | |||||||
Operating Segments | U.S. | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Revenue | 1,005 | 1,020 | ||||||||
Cost of sales | 203 | 185 | ||||||||
Gross profit | $ 802 | $ 835 | ||||||||
Gross margin, percentage | 79.80% | 81.90% | ||||||||
Operating expenses | $ 188 | $ 165 | ||||||||
Other (income)/deductions—net | 0 | 0 | ||||||||
Income before provision for taxes on income | 614 | 670 | ||||||||
Depreciation and amortization | [2] | 19 | 13 | |||||||
Operating Segments | International | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Revenue | [3] | 978 | 948 | |||||||
Cost of sales | 291 | 265 | ||||||||
Gross profit | $ 687 | $ 683 | ||||||||
Gross margin, percentage | 70.20% | 72.00% | ||||||||
Operating expenses | $ 151 | $ 145 | ||||||||
Other (income)/deductions—net | 1 | 0 | ||||||||
Income before provision for taxes on income | 535 | 538 | ||||||||
Depreciation and amortization | [2] | 21 | 18 | |||||||
Corporate | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Income before provision for taxes on income | (208) | (259) | ||||||||
Depreciation and amortization | [2] | 32 | 35 | |||||||
Reconciling Items | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Depreciation and amortization | [2] | 0 | 0 | |||||||
Purchase accounting adjustments | (42) | (40) | ||||||||
Purchase accounting adjustments, Depreciation and Amortization | [2] | 39 | 40 | |||||||
Acquisition-related costs | (1) | (2) | ||||||||
Certain significant items, Earnings | [4] | (22) | 0 | |||||||
Certain significant items, Depreciation and Amortization | [2],[4] | 0 | 0 | |||||||
Other unallocated | (65) | (82) | ||||||||
Other Unallocated, Depreciation and Amortization | [2] | $ 1 | $ 1 | |||||||
|
Segment Information Selected Statement of Income Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 2,000 | $ 1,986 | ||
International | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | [1] | 978 | 948 | |
International | Operating Segments | Euro Member Countries, Euro | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 204 | $ 203 | ||
|
Label | Element | Value |
---|---|---|
Dividends Payable | us-gaap_DividendsPayableCurrentAndNoncurrent | $ 153,000,000 |
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