Zoetis Reports Second Quarter 2013 Results
Zoetis Reports Second Quarter 2013 Results
- Second Quarter 2013 Revenue of $1.11 Billion Increased 2% Compared to Second Quarter 2012
- Second Quarter 2013 Reported Net Income of $128 Million, or Diluted EPS of $0.26, Decreased 26%, Compared to Second Quarter 2012
- Second Quarter 2013 Adjusted Net Income of $178 Million, or Adjusted Diluted EPS1of $0.36, Increased 1% and 3%, respectively, Compared to Second Quarter 2012
- Reaffirms Full-Year 2013 Adjusted Diluted EPS1Guidance of $1.36 - $1.42
FLORHAM PARK, N.J.--(BUSINESS WIRE)-- Zoetis Inc. (NYS: ZTS) , a former business unit of Pfizer Inc., today reported its financial results for the second quarter of 2013. The company reported revenue of $1.11 billion for the second quarter, an increase of 2% from the second quarter of 2012. Revenue reflected an operational2 increaseof 4%, with foreign currency having a negative impact of 2 percentage points.
Net income for the second quarter of 2013 was $128 million, or $0.26 per diluted share, a decrease of 26%, compared to the second quarter of 2012. Adjusted net income1 for the second quarter of 2013 was $178 million, or $0.36 per diluted share, an increase of 1% and 3%, respectively, compared to the second quarter of 2012. Adjusted net income1 for the second quarter of 2013 excludes the net impact of $50 million, or $0.10 per diluted share, for purchase accounting adjustments, acquisition-related costs and certain significant items.
"In the second quarter, we achieved positive financial results while we completed our separation from Pfizer and continued delivering product innovations such as the approval of APOQUEL in the U.S.," said Zoetis Chief Executive Officer Juan Ramón Alaix. "Our global scale, local presence and diverse portfolio again helped us deliver growth in sales and adjusted earnings, despite ongoing weather-related challenges and economic issues."
"The company performance - both for the quarter and year-to-date - further illustrates the commitment and talent of our people and the strength of our business model," said Alaix. "As we look ahead, we remain confident in our ability to fully stand up our new company, while meeting our customers' needs for innovative animal health medicines and vaccines."
"This quarter, we have made good progress on building out our infrastructure. I am pleased with our financial results year-to-date, and we are reaffirming our guidance for full year 2013," said Rick Passov, Executive Vice President and Chief Financial Officer of Zoetis.
Zoetis organizes and manages its business across four regional operating segments: the United States (U.S.); Europe/Africa/Middle East (EuAfME); Canada/Latin America (CLAR); and Asia/Pacific (APAC). Within each of these regional segments, the company delivers a diverse portfolio of products for livestock and companion animals tailored to local trends and customer needs.
In the second quarter of 2013:
- Revenue in the U.S. was $437 million, an increase of 4% over the second quarter of 2012. Growth in sales of livestock products was driven by cattle, swine and poultry. Growth in sales of companion animal products was driven by increases in small animal products, partially offset by continued contraction in the equine market.
- Revenue in EuAfME was $278 million, an increase of 1% operationally over the second quarter of 2012. Sales of companion animal products benefited from increased sales associated with third-party manufacturing agreements; excluding these sales, companion animal product sales were relatively flat.Sales of livestock products declined, due primarily to lower sales of cattle products resulting from cold weather conditions and overall economic weakness in Europe, partially offset by growth in swine and poultry products.
- Revenue in CLAR was $213 million, an increase of 4% operationally over the second quarter of 2012. Sales of companion animal products increased in the quarter, largely due to increased demand and marketing programs, primarily in Brazil and Mexico, and were slightly offset by lower sales in Canada. Growth in sales of livestock products was driven primarily by poultry and swine, while sales of cattle products declined.
- Revenue in APAC was $186 million, an increase of 7% operationally over the second quarter of 2012. Sales of companion animal products were favorably impacted by the continued introduction of new products. Growth of livestock product sales was driven by swine products and the continued launch of new vaccines, while drought conditions continued to negatively impact the sale of cattle products in Australia.
Zoetis continues to drive demand and strengthen its diverse portfolio of products through brand lifecycle management, strong customer relationships and access to new markets and technologies. With an expansive and diverse product portfolio, the company focuses on improving the performance and delivery of current product lines; expanding product indications across species; and pursuing approvals across new geographies. Some recent highlights include:
- APOQUEL®, First approval of novel JAK-1 inhibitor -- The U.S. FDA approved APOQUEL (oclacitinib tablet) on May 16th for the control of pruritus associated with allergic dermatitis and the control of atopic dermatitis in dogs at least 12 months of age. Pruritus, or itching, is the most common sign of allergies in dogs. Developed by Zoetis, APOQUEL is the first Janus kinase (JAK) inhibitor approved for veterinary use that targets the itch and inflammation pathway and marks a significant improvement in the standard of care veterinarians can offer. APOQUEL provides fast-acting relief from itching and improves inflammation for the estimated 8.2 million dogs in the U.S. that suffer from short- and long-term allergic skin conditions. Meanwhile, in Europe, the CVMP (Committee for Veterinary Medicinal Products) has adopted a positive opinion recommending the granting of a market authorization for APOQUEL, an important step in the approval process with the EU Commission; the company also continues pursuing approvals of APOQUEL in additional markets.
- Progress with China Joint Venture -- Zoetis's joint venture in Jilin, China, has received approval for RUI LAN AN™ - a new high standard of innovation against highly pathogenic porcine reproductive and respiratory syndrome (HP PRRS). This vaccine is a key milestone for Zoetis's business in China. The vaccine combines the global expertise of Zoetis and a strong local vaccine development program to address vaccine needs of swine producers in China, the world's leading pork-producing nation. The joint venture was established in 2011 to develop, manufacture and distribute animal health vaccines in China.
- Managing Brand Lifecycles -- Zoetis continues strengthening its diverse portfolio of medicines and vaccines with new approvals in additional markets and new formulations for existing brands. For example, FOSTERA® PCV is a vaccine for swine and achieved its latest approvals in Brazil and Japan this quarter; it helps limit the very costly consequences of PCV-associated disease that could compromise herd health and performance. Meanwhile in poultry, the POULVAC® IB QX vaccine, which was first approved in France in 2010, was recently granted registration in the German market; it has also been registered in Romania, Bulgaria and South Africa. In the case of new formulations, DRAXXIN® is an anti-infective for livestock that was first approved in Europe in 2003, and this quarter the DRAXXIN® 25 (tulathromycin) Injectable Solution was approved in the U.S. at a new, lower concentration (of tulathromycin), which is more suitable for swine. BOVI-SHIELD GOLD ONE SHOT™ was also approved in the U.S. in July. It is a vaccine for cattle to help prevent certain respiratory diseases and gives the company a competitive combination product in this area.
FINANCIAL GUIDANCE AND COMMENTARY
Zoetis's guidance for full-year 2013 reflects the company's confidence in the diversity of its portfolio, the strength of its business model, and its view of the evolving market conditions for animal health products this year.
Zoetis reaffirmed its financial guidance for full-year 2013, including revenue of between $4.425 billion to $4.525 billion. The company also expects to achieve reported diluted EPS for the full year of between $1.00 to $1.06 per share, which includes the impact of nonrecurring costs of $200 million to $240 million, primarily associated with becoming a standalone public company. Adjusted diluted EPS1 for the full year is expected to be between $1.36 to $1.42 per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. Additional guidance on other items such as tax rate and expenses are included in the financial tables and will be discussed on the company's conference call.
WEBCAST & CONFERENCE CALL DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (EDT) today, during which company executives will review second quarter financial results, discuss 2013 financial guidance, and respond to questions from financial analysts. Investors and the public may access the live webcast by visiting the Zoetis website at http://www.zoetis.com/events-and-presentations. A replay of the webcast will be archived and made available on Aug. 6, 2013.
Zoetis (zô-EH-tis) is the leading animal health company, dedicated to supporting its customers and their businesses. Building on a 60-year history as the animal health business of Pfizer, Zoetis discovers, develops, manufactures and markets veterinary vaccines and medicines, with a focus on both farm and companion animals. In 2012, the company generated annual revenues of $4.3 billion. With approximately 9,300 employees worldwide at the beginning of 2013, Zoetis has a local presence in approximately 70 countries, including 29 manufacturing facilities in 11 countries. Its products serve veterinarians, livestock producers and people who raise and care for farm and companion animals in 120 countries. For more information on the company, visit www.zoetis.com.
1Adjusted net income and adjusted diluted earnings per share (non-GAAP financial measures) are defined as reported net income attributable to Zoetis and reported diluted earnings per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items.
2Operational revenue growth is defined as revenue growth excluding the impact of foreign exchange.
Forward-Looking Statements:This press release contains forward-looking statements, which reflect Zoetis's current views with respect to business plans or prospects, future operating or financial performance, and other future events. These statements are not guarantees of future performance. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management's underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made. Zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, including in the sections thereof captioned "Forward-Looking Information and Factors That May Affect Future Results" and "Item 1A. Risk Factors," in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K. These filings and subsequent filings are available online atwww.sec.gov,www.zoetis.com, or on request from Zoetis.
Use of Non-GAAP Financial Measures:We use non-GAAP financial measures, such as adjusted net income and adjusted diluted earnings per share, to assess and analyze our operational results and trends and to make financial and operational decisions.We believe these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating performance.The non-GAAP financial measures included in this press release should not be considered alternatives to measurements required by GAAP, such as net income, operating income, and earnings per share, and should not be considered measures of liquidity.These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies.Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this press release and are posted on our website atwww.zoetis.com.
Internet Posting of Information:We routinely post information that may be important to investors in the 'Investors' section of our web site atwww.zoetis.com, on our Facebook page athttp://www.facebook.com/zoetisand on Twitter @zoetis. We encourage investors and potential investors to consult our website regularly and to follow us on Facebook and Twitter for important information about us.
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME(a)
(millions of dollars, except per share data)
|Costs and expenses:|
|Cost of sales(b)||416||378||10||818||771||6|
|Selling, general and administrative expenses(b)||399||344||16||756||682||11|
|Research and development expenses(b)||95||92||3||185||194||(5||)|
|Amortization of intangible assets(c)||15||16||(6||)||30||32||(6||)|
|Restructuring charges and certain acquisition-related costs||(20||)||24||*||(13||)||49||*|
|Income before provision for taxes on income||187||252||(26||)||379||423||(10||)|
|Provision for taxes on income||59||79||(25||)||111||138||(20||)|
|Net income before allocation to noncontrolling interests||128||173||(26||)||268||285||(6||)|
|Less: Net income attributable to noncontrolling interests||—||—||—||—||1||(100||)|
|Net income attributable to Zoetis||$||128||$||173||(26||)|
|Earnings per share—basic||$||0.26||$||0.35||(26||)|
|Earnings per share—diluted||$||0.26||$||0.35||(26||)|
|Weighted-average shares used to calculate earnings per share (in thousands)|
* Calculation not meaningful
|(a)||The condensed consolidated and combined statements of income present the three and six months ended June 30, 2013 and July 1, 2012. Subsidiaries operating outside the United States are included for the three and six months ended May 26, 2013 and May 27, 2012.|
|(b)||Exclusive of amortization of intangible assets, except as discussed in footnote (c) below.|
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 these intangible assets benefit multiple business functions. Amortization expense related to 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.
|Certain amounts and percentages may reflect rounding adjustments.|
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(millions of dollars, except per share data)
|Quarter ended June 30, 2013|
|Cost of sales(b)||416||(1||)||(2||)||(13||)||400|
|Selling, general and administrative expenses(b)||399||—||—||(60||)||339|
|Research and development expenses(b)||95||—||—||(4||)||91|
|Amortization of intangible assets(c)||15||(12||)||—||—||3|
|Restructuring charges and certain acquisition-related costs||(20||)||—||(7||)||27||—|
|Income before provision for taxes on income||187|