Zoetis Inc 10-Q for FY2021 Q1

Zoetis Inc. (ZTS)

10-Q 2021-05-06 For: 2021-03-31

Added on April 10, 2026

About this 10-Q

Zoetis Inc filed this 10-Q on May 6, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.87B; up 22.0% from $1.53B a year earlier
Net income: $559M; up 32.2% from net income of $423M a year earlier
Diluted EPS: $1.17; up 33.0% from $0.88 a year earlier

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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended
			March 31, 2021
			or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the transition period from __________ to __________


	Three Months Ended
	March 31,
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)		2021		2020
Revenue		$	1,871	$	1,534
Costs and expenses:
Cost of sales		549		459
Selling, general and administrative expenses		409		389
Research and development expenses		118		107
Amortization of intangible assets		40		40
Restructuring charges and certain acquisition-related costs		9		9
Interest expense, net of capitalized interest		57		53
Other (income)/deductions—net		2		(20)
Income before provision for taxes on income		687		497
Provision for taxes on income		129		74
Net income before allocation to noncontrolling interests		558		423
Less: Net loss attributable to noncontrolling interests		(1)		—
Net income attributable to Zoetis Inc.		$	559	$	423
Earnings per share attributable to Zoetis Inc. stockholders:
Basic		$	1.18	$	0.89
Diluted		$	1.17	$	0.88
Weighted-average common shares outstanding:
Basic		475.5		475.6
Diluted		477.9		479.0
Dividends declared per common share		$	0.250	$	0.200


	Three Months Ended
	March 31,
(MILLIONS OF DOLLARS)		2021		2020
Net income before allocation to noncontrolling interests		$	558	$	423
Other comprehensive income (loss), net of tax:
Unrealized gains/(losses) on derivatives for cash flow hedges, net		39		(28)
Unrealized gains on derivatives for net investment hedges, net		25		17
Foreign currency translation adjustments, net		33		(44)

Total other comprehensive income (loss), net of tax		97		(55)
Comprehensive income before allocation to noncontrolling interests		655		368
Less: Comprehensive loss attributable to noncontrolling interests		(1)		—
Comprehensive income attributable to Zoetis Inc.		$	656	$	368


	March 31,		December 31,
	2021		2020
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)	(Unaudited)
Assets
Cash and cash equivalents(a)	$	3,602	$	3,604

Accounts receivable, less allowance for doubtful accounts of $18 in 2021 and $20 in 2020	1,125		1,013
Inventories	1,700		1,628

Other current assets	367		366
Total current assets	6,794		6,611
Property, plant and equipment, less accumulated depreciation of $2,012 in 2021 and $1,952 in 2020	2,227		2,202
Operating lease right of use assets	189		192
Goodwill	2,707		2,694
Identifiable intangible assets, less accumulated amortization	1,671		1,710
Noncurrent deferred tax assets	100		94
Other noncurrent assets	108		106
Total assets	$	13,796	$	13,609

Liabilities and Equity
Short-term borrowings	$	4	$	4
Current portion of long-term debt	600		600
Accounts payable	346		457
Dividends payable	119		119
Accrued expenses	570		556
Accrued compensation and related items	243		295
Income taxes payable	113		46
Other current liabilities	71		93
Total current liabilities	2,066		2,170
Long-term debt, net of discount and issuance costs	6,587		6,595
Noncurrent deferred tax liabilities	393		378
Operating lease liabilities	159		163
Other taxes payable	264		260
Other noncurrent liabilities	235		270
Total liabilities	9,704		9,836
Commitments and contingencies (Note 15)
Stockholders' equity:

Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 474,973,405 and 475,317,751 shares outstanding at March 31, 2021, and December 31, 2020, respectively	5		5
Treasury stock, at cost, 26,917,838 and 26,573,492 shares of common stock at March 31, 2021, and December 31, 2020, respectively	(2,412)		(2,230)
Additional paid-in capital	1,030		1,065
Retained earnings	6,099		5,659
Accumulated other comprehensive loss	(633)		(730)
Total Zoetis Inc. equity	4,089		3,769
Equity attributable to noncontrolling interests	3		4
Total equity	4,092		3,773
Total liabilities and equity	$	13,796	$	13,609


Three months ended March 31, 2021
	Zoetis
												Accumulated		Equity
								Additional				Other		Attributable to
		Common Stock			Treasury Stock			Paid-in		Retained		Comprehensive		Noncontrolling		Total
(MILLIONS OF DOLLARS AND SHARES)		Shares (a)	Amount		Shares (a)	Amount		Capital		Earnings		Loss		Interests		Equity
Balance, December 31, 2020		501.9	$	5	26.6	$	(2,230)	$	1,065	$	5,659	$	(730)	$	4	$	3,773
Net income		—	—		—	—		—		559		—		(1)		558
Other comprehensive income		—	—		—	—		—		—		97		—		97

Share-based compensation awards (b)		—	—		(0.8)	(1)		(36)		—		—		—		(37)
Treasury stock acquired (c)		—	—		1.1	(181)		—		—		—		—		(181)
Employee benefit plan contribution from Pfizer Inc. (d)		—	—		—	—		1		—		—		—		1
Dividends declared		—	—		—	—		—		(119)		—		—		(119)
Balance, March 31, 2021		501.9	$	5	26.9	$	(2,412)	$	1,030	$	6,099	$	(633)	$	3	$	4,092

Three months ended March 31, 2020
	Zoetis
												Accumulated		Equity
								Additional				Other		Attributable to
		Common Stock			Treasury Stock			Paid-in		Retained		Comprehensive		Noncontrolling		Total
(MILLIONS OF DOLLARS AND SHARES)		Shares (a)	Amount		Shares (a)	Amount		Capital		Earnings		Loss		Interests		Equity
Balance, December 31, 2019		501.9	$	5	26.4	$	(2,042)	$	1,044	$	4,427	$	(726)	$	—	$	2,708
Net income		—	—		—	—		—		423		—		—		423
Other comprehensive loss		—	—		—	—		—		—		(55)		—		(55)

Share-based compensation awards (b)		—	—		(1.2)	40		(28)		9		—		—		21
Treasury stock acquired (c)		—	—		1.8	(250)		—		—		—		—		(250)
Employee benefit plan contribution from Pfizer Inc.(d)		—	—		—	—		1		—		—		—		1
Dividends declared		—	—		—	—		—		(95)		—		—		(95)
Balance, March 31, 2020		501.9	$	5	27.0	$	(2,252)	$	1,017	$	4,764	$	(781)	$	—	$	2,753


Zoetis Inc.
(Exact name of registrant as specified in its charter)



(MILLIONS OF DOLLARS)	Accrual(a)
Balance, December 31, 2020(b)	$	21
Provision	6

Utilization and other(c)	(5)

Balance, March 31, 2021(b)	$	22


											After
(MILLIONS OF DOLLARS)	2021		2022		2023		2024		2025		2025		Total
Maturities	$	600	$	—	$	1,350	$	—	$	750	$	4,550	$	7,250


	Notional
	March 31,		December 31,
(MILLIONS)	2021		2020
Foreign currency forward-exchange contracts	$	1,527	$	1,633

Cross-currency interest rate swap contracts (in foreign currency):
Euro	650		650
Danish krone	600		600
Swiss franc	25		25


Forward-starting interest rate swaps	$	550	$	550

Fixed-to-floating interest rate swap contracts	$	150	$	150


		Fair Value of Derivatives
		March 31,		December 31,
(MILLIONS OF DOLLARS)	Balance Sheet Location	2021		2020
Derivatives Not Designated as Hedging Instruments
Foreign currency forward-exchange contracts	Other current assets	$	7	$	10
Foreign currency forward-exchange contracts	Other current liabilities	(11)		(16)
Total derivatives not designated as hedging instruments		$	(4)	$	(6)

Derivatives Designated as Hedging Instruments:
Forward-starting interest rate swap contracts	Other noncurrent assets	$	39	$	6
Forward-starting interest rate swap contracts	Other noncurrent liabilities	—		(17)
Cross-currency interest rate swap contracts	Other current assets	20		2
Cross-currency interest rate swap contracts	Other noncurrent assets	10		5
Cross-currency interest rate swap contracts	Other current liabilities	(3)		(21)

Fixed-to-floating interest rate swap contracts	Other noncurrent assets	2		11
Total derivatives designated as hedging instruments		68		(14)
Total derivatives		$	64	$	(20)


(MILLIONS OF DOLLARS)	U.S.		International		Total
Balance, December 31, 2020	$	1,425	$	1,269	$	2,694
Adjustments	(1)		2		1
Other(a)	—		12		12
Balance, March 31, 2021	$	1,424	$	1,283	$	2,707


	As of March 31, 2021						As of December 31, 2020
					Identifiable						Identifiable
	Gross				Intangible Assets		Gross				Intangible Assets
	Carrying		Accumulated		Less Accumulated		Carrying		Accumulated		Less Accumulated
(MILLIONS OF DOLLARS)	Amount		Amortization		Amortization		Amount		Amortization		Amortization
Finite-lived intangible assets:
Developed technology rights	$	1,983	$	(853)	$	1,130	$	1,968	$	(809)	$	1,159
Brands and tradenames	428		(248)		180		427		(243)		184
Other	477		(315)		162		474		(306)		168
Total finite-lived intangible assets	2,888		(1,416)		1,472		2,869		(1,358)		1,511
Indefinite-lived intangible assets:
Brands and tradenames	104		—		104		104		—		104
In-process research and development	88		—		88		88		—		88
Product rights	7		—		7		7		—		7
Total indefinite-lived intangible assets	199		—		199		199		—		199
Identifiable intangible assets	$	3,087	$	(1,416)	$	1,671	$	3,068	$	(1,358)	$	1,710



			Currency Translation Adjustments
					Other Currency				Accumulated Other
	Cash Flow		Net Investment		Translation				Comprehensive
(MILLIONS OF DOLLARS)	Hedges		Hedges		Adjustments		Benefit Plans		Loss
Balance, December 31, 2020	$	(15)	$	(37)	$	(655)	$	(23)	$	(730)
Other comprehensive income, net of tax	39		25		33		—		97

Balance, March 31, 2021	$	24	$	(12)	$	(622)	$	(23)	$	(633)

Balance, December 31, 2019	$	—	$	21	$	(724)	$	(23)	$	(726)
Other comprehensive (loss)/income, net of tax	(28)		17		(44)		—		(55)

Balance, March 31, 2020	$	(28)	$	38	$	(768)	$	(23)	$	(781)


	Earnings						Depreciation and Amortization(a)
	Three Months Ended						Three Months Ended
	March 31,						March 31,
(MILLIONS OF DOLLARS)	2021			2020			2021		2020
U.S.
Revenue	$	933		$	786
Cost of sales	184			167
Gross profit	749			619
Gross margin	80.3		%	78.8		%
Operating expenses	131			125
Other (income)/deductions-net	1			1
U.S. Earnings	617			493			$	13	$	13

International
Revenue(b)	922			728
Cost of sales	282			224
Gross profit	640			504
Gross margin	69.4		%	69.2		%
Operating expenses	130			125
Other (income)/deductions-net	—			—
International Earnings	510			379			17		14

Total operating segments	1,127			872			30		27

Other business activities	(97)			(87)			7		6
Reconciling Items:
Corporate	(230)			(187)			27		22
Purchase accounting adjustments	(44)			(54)			44		54
Acquisition-related costs	(5)			(7)			—		—
Certain significant items(c)	(8)			11			—		—
Other unallocated	(56)			(51)			1		1
Total Earnings(d)	$	687		$	497		$	109	$	110


					% Change
	Three Months Ended					Related to
	March 31,					Foreign
(MILLIONS OF DOLLARS)	2021		2020		Total	Exchange	Operational(a)
Revenue	$	1,871	$	1,534	22	1	21
Net income attributable to Zoetis	559		423		32	(2)	34
Adjusted net income(a)	603		455		33	(1)	34


Commission File Number:			001-35797


(Registrant’s telephone number, including area code)


	Three Months Ended
	March 31,
(MILLIONS OF DOLLARS)		2021		2020
United States		$	933	$	786
Australia		57		43
Brazil		74		63
Canada		46		40
Chile		34		23
China		123		66
France		35		29
Germany		38		34
Italy		25		21
Japan		47		41
Mexico		33		32
Spain		31		28
United Kingdom		69		55
Other developed markets		111		87
Other emerging markets		199		166
		1,855		1,514
Contract manufacturing & human health		16		20
Total Revenue		$	1,871	$	1,534


	Three Months Ended
	March 31,
(MILLIONS OF DOLLARS)		2021		2020
Companion Animal:
Dogs and Cats		$	1,016	$	746
Horses		60		51
		1,076		797
Livestock:
Cattle		399		370
Swine		190		157
Poultry		131		148
Fish		37		26
Sheep and other		22		16
		779		717
Contract manufacturing & human health		16		20
Total Revenue		$	1,871	$	1,534


Description	Principal Amount	Interest Rate	Terms
2018 Floating Rate Senior Notes due 2021	$300 million	Three-month USD LIBOR plus 0.44%	Interest due quarterly, not subject to amortization, aggregate principal due on August 20, 2021
2018 Senior Notes due 2021	$300 million	3.250%	Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2021
2013 Senior Notes due 2023	$1,350 million	3.250%	Interest due semi annually, not subject to amortization, aggregate principal due on February 1, 2023
2015 Senior Notes due 2025	$750 million	4.500%	Interest due semi annually, not subject to amortization, aggregate principal due on November 13, 2025
2017 Senior Notes due 2027	$750 million	3.000%	Interest due semi annually, not subject to amortization, aggregate principal due on September 12, 2027
2018 Senior Notes due 2028	$500 million	3.900%	Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2028
2020 Senior Notes due 2030	$750 million	2.000%	Interest due semi annually, not subject to amortization, aggregate principal due on May 15, 2030
2013 Senior Notes due 2043	$1,150 million	4.700%	Interest due semi annually, not subject to amortization, aggregate principal due on February 1, 2043
2017 Senior Notes due 2047	$500 million	3.950%	Interest due semi annually, not subject to amortization, aggregate principal due on September 12, 2047
2018 Senior Notes due 2048	$400 million	4.450%	Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2048
2020 Senior Notes due 2050	$500 million	3.000%	Interest due semi annually, not subject to amortization, aggregate principal due on May 15, 2050


	Issuer Purchases of Equity Securities
	Total Number of Shares Purchased(a)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Programs(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs
January 1 - January 31, 2021	399,256	$161.79	212,073	$1,390,188,505
February 1 - February 28, 2021	588,188	$162.33	367,495	$1,331,493,170
March 1 - March 31, 2021	580,338	$151.90	579,859	$1,243,201,592
	1,567,782	$158.33	1,159,427	$1,243,201,592


Exhibit 15						Accountants' Acknowledgment
Exhibit 31.1						Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302
Exhibit 31.2						Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302
Exhibit 32.1						Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906
Exhibit 32.2						Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906
EX-101.INS						Inline XBRL INSTANCE DOCUMENT
EX-101.SCH						Inline XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
EX-101.CAL						Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
EX-101.LAB						Inline XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
EX-101.PRE						Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT
EX-101.DEF						Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
EX-104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


	Zoetis Inc.

May 6, 2021	By:	/S/ KRISTIN C. PECK
		Kristin C. Peck
		Chief Executive Officer and Director

May 6, 2021	By:	/S/ GLENN DAVID
		Glenn David
		Executive Vice President and Chief Financial Officer