Zoetis announces first quarter 2017 results
Parsippany, n.j.--(business wire)--zoetis inc. (nyse:zts) today reported its financial results for the first quarter of 2017 and reaffirmed its guidance for full year 2017. the company reported revenue of $1.2 billion for the first quarter of 2017, an increase of 6% compared with the first quarter of 2016. net income for the first quarter of 2017 was $238 million, or $0.48 per diluted share, an increase of 17% on a reported basis. adjusted net income1 for the first quarter of 2017 was $261 million, or $0.53 per diluted share, an increase of 9% and 10%, respectively, on a reported basis. adjusted net income for the first quarter of 2017 excludes the net impact of $23 million for purchase accounting adjustments, acquisition-related costs and certain significant items. on an operational2 basis, revenue for the first quarter of 2017 increased 6%, excluding the impact of foreign currency. adjusted net income for the first quarter of 2017 increased 10% operationally, excluding the impact of foreign currency. executive commentary “in the first quarter of 2017, we continue to see positive results from our diverse portfolio, innovative new companion animal products, and a more efficient cost structure,” said juan ramÓn alaix, chief executive officer at zoetis. “our revenue grew 6% operationally in the first quarter, driven largely by sales of companion animal products such as simparica, apoquel and cytopoint, and our livestock portfolio featured growth in swine, cattle and fish across our international markets. we posted 10% operational growth in adjusted net income – once again faster than revenue growth – as we continue delivering steady profitable results.” “as costs for our one-time initiatives are largely complete, we were able to deliver 17% growth in reported eps and continue to focus our investments on the ongoing business,” said glenn david, executive vice president and chief financial officer at zoetis. “we see a good runway for continued growth, based on our diverse portfolio and recently launched products, and we are reaffirming our full-year 2017 guidance.” quarterly highlights zoetis organizes and manages its commercial operations across two regional segments: the united states (u.s.) and international. within these segments, the company delivers a diverse portfolio of products for livestock and companion animals tailored to local trends and customer needs. in the first quarter of 2017: revenue in the u.s. segment was $605 million, an increase of 4% compared with the first quarter of 2016. sales of companion animal products grew 10%, driven primarily by new product launches, particularly simparica® and cytopoint™, and increased sales of apoquel®. this growth was tempered by the prior year’s initial sales of other products into expanded distribution relationships. sales of livestock products declined 2% due to decreased sales of swine and cattle products. sales of swine products were impacted by timing of customer purchases and increased competition, while cattle product sales were impacted by lower disease risk and incidence in the feedlot sector due to mild weather and heavier animals. both cattle and swine feed additive product sales were negatively impacted by livestock producers’ implementation of the veterinary feed directive in the first quarter. increased sales of poultry medicated feed additives partially offset this decline. revenue in the international segment was $615 million, an increase of 8% on a reported basis and 9% operationally compared with the first quarter of 2016. sales of companion animal products grew 13% on a reported basis and 15% operationally, primarily due to increased sales of apoquel, in addition to new product launches, particularly simparica. sales also benefited from increased demand for the company’s companion animal vaccines portfolio in china as a result of field force expansion and increasing medicalization rates. sales of livestock products grew 7% both on a reported and operational basis driven primarily by increased sales of swine products in china and vietnam, and cattle products in brazil. favorable market conditions contributed to swine performance in china as well as cattle product sales in brazil, while swine product sales in vietnam were driven by timing of customer purchases. poultry and swine product sales were negatively impacted by product rationalizations, which partially offset the overall growth of livestock products. zoetis continues to drive demand and strengthen its diverse portfolio through the introduction of new products, lifecycle innovations, business development initiatives, strong customer relationships and entry into new markets and technologies. in the first quarter of 2017: the company strengthened its canine dermatology portfolio with the approval of cytopoint in the european union (april 2017) and canada (march 2017). cytopoint is the first monoclonal antibody (mab) therapy approved to help provide a reduction in the clinical signs associated with atopic dermatitis such as itching in dogs. the product was first approved in the u.s. in december 2016. zoetis received european commission approval for stronghold® plus (selamectin/sarolaner), a topical combination product that treats ticks, fleas, ear mites, lice and gastrointestinal worms and prevents heartworm disease in cats. this product builds on the company’s sarolaner platform in the $4.2 billion global companion animal parasiticide market.3 zoetis announced an agreement to purchase nexvet biopharma plc, an innovator in monoclonal antibody therapies for companion animals in management of chronic pain and other therapeutic areas. the acquisition is expected to strengthen zoetis’ r&d pipeline in monoclonal antibodies and help sustain the company’s category leadership in chronic pain management for companion animals, an area poised for innovation with new mab therapies. in its pursuit of lifecycle innovations, zoetis received approvals for new indications and formulations of key livestock products, and expanded major products into new geographies. in canada, the company received approvals for bovi-shield® ibr, which helps prevent respiratory disease caused by infectious bovine rhinotracheitis (ibr) virus in cattle, and lutalyse® highcon, a reproductive product for use in both beef and dairy cattle. bovi-shield ibr was first approved in the u.s. in 1998, and lutalyse highcon was first approved in the u.s. in 2015. in japan, zoetis expanded its injectable line of anti-infectives with approvals of excenel® (ceftiofur hydrochloride) rtu for use in cattle and swine and excede® (ceftiofur crystalline free acid) for use in swine. excenel rtu was first approved in the u.s. in 2004, and excede was first approved in the u.s. in 2003. the company also grew its fostera® swine vaccine franchise with the approval of the fostera porcine reproductive and respiratory syndrome (prrs) vaccine in taiwan. fostera prrs was first approved in the u.s. in 2012. in canada, the company received approvals for bovi-shield® ibr, which helps prevent respiratory disease caused by infectious bovine rhinotracheitis (ibr) virus in cattle, and lutalyse® highcon, a reproductive product for use in both beef and dairy cattle. bovi-shield ibr was first approved in the u.s. in 1998, and lutalyse highcon was first approved in the u.s. in 2015. in japan, zoetis expanded its injectable line of anti-infectives with approvals of excenel® (ceftiofur hydrochloride) rtu for use in cattle and swine and excede® (ceftiofur crystalline free acid) for use in swine. excenel rtu was first approved in the u.s. in 2004, and excede was first approved in the u.s. in 2003. the company also grew its fostera® swine vaccine franchise with the approval of the fostera porcine reproductive and respiratory syndrome (prrs) vaccine in taiwan. fostera prrs was first approved in the u.s. in 2012. zoetis also continued to grow its diagnostics business with new approvals in the u.s. for its witness® and serelisa® lines of diagnostic test kits. witness lepto is a rapid, point-of-care test that detects leptospirosis, a zoonotic, infectious disease of dogs. serelisa diagnostic test kits help detect gastrointestinal viruses in both cattle and swine, allowing our customers to better detect these life-threatening infections. financial guidance zoetis reaffirmed its guidance for the full year 2017, which includes: revenue of between $5.100 billion to $5.225 billion reported diluted eps for the full year of between $2.08 to $2.20 per share adjusted diluted eps for the full year between $2.26 to $2.36 per share additional guidance on other items such as expenses and tax rate is included in the financial tables and will be discussed on the company's conference call this morning. webcast & conference call details zoetis will host a webcast and conference call at 8:30 a.m. (et) today, during which company executives will review first quarter 2017 results, discuss financial guidance and respond to questions from financial analysts. investors and the public may access the live webcast by visiting the zoetis website at http://investor.zoetis.com/events-presentations. a replay of the webcast will be archived and made available on may 4, 2017. about zoetis zoetis is the leading animal health company, dedicated to supporting its customers and their businesses. building on more than 60 years of experience in animal health, zoetis discovers, develops, manufactures and markets veterinary vaccines and medicines, complemented by diagnostic products, genetic tests, biodevices and a range of services. zoetis serves veterinarians, livestock producers and people who raise and care for farm and companion animals with sales of its products in more than 100 countries. in 2016, the company generated annual revenue of $4.9 billion with approximately 9,000 employees. for more information, visit www.zoetis.com. 1 adjusted net income and its components 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. 2 operational revenue growth (a non-gaap financial measure) is defined as revenue growth excluding the impact of foreign exchange. 3 vetnosis, animal health service: parasiticides report (sept. 2016) disclosure notices forward-looking statements: this press release contains forward-looking statements, which reflect the current views of zoetis with respect to business plans or prospects, future operating or financial performance, future guidance, future operating models, expectations regarding products, future use of cash and dividend payments, tax rate and tax regimes, changes in the tax regimes and laws in other jurisdictions, and other future events. these statements are not guarantees of future performance or actions. forward-looking statements are subject to risks and uncertainties. if one or more of these risks or uncertainties materialize, or if management's underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. forward-looking statements speak only as of the date on which they are made. zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. a further list and description of risks, uncertainties and other matters can be found in our annual report on form 10-k for the fiscal year ended december 31, 2016, including in the sections thereof captioned “forward-looking statements and factors that may affect future results” and “item 1a. risk factors,” in our quarterly reports on form 10-q and in our current reports on form 8-k. these filings and subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from zoetis. use of non-gaap financial measures: we use non-gaap financial measures, such as adjusted net income, adjusted diluted earnings per share and operational results (which exclude the impact of foreign exchange), to assess and analyze our results and trends and to make financial and operational decisions. we believe these non-gaap financial measures are also useful to investors because they provide greater transparency regarding our operating performance. the non-gaap financial measures included in this press release should not be considered alternatives to measurements required by gaap, such as net income, operating income, and earnings per share, and should not be considered measures of liquidity. these non-gaap financial measures are unlikely to be comparable with non-gaap information provided by other companies. 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 at www.zoetis.com. internet posting of information: we routinely post information that may be important to investors in the 'investors' section of our website at www.zoetis.com, on our facebook page at http://www.facebook.com/zoetis and on twitter @zoetis. we encourage investors and potential investors to consult our website regularly and to follow us on facebook and twitter for important information about us. zoetis inc. condensed consolidated statements of income(a) (unaudited) (millions of dollars, except per share data) * calculation not meaningful. 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 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. zoetis inc. reconciliation of gaap reported to non-gaap adjusted information certain line items (unaudited) (millions of dollars, except per share data) 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 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. see notes to reconciliation of gaap reported to non-gaap adjusted information for notes (1) and (2). certain amounts may reflect rounding adjustments. zoetis inc. notes to reconciliation of gaap reported to non-gaap adjusted information certain line items (unaudited) (millions of dollars) (1) acquisition-related costs include the following: included in other (income)/deductions—net. included in provision for taxes on income. income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate. for the first quarter of 2016, also includes a tax charge related to the acquisition of certain assets of abbott animal health. certain amounts may reflect rounding adjustments. (2) certain significant items include the following: for the first quarter ended april 2, 2017, represents a net reversal of previously accrued employee termination costs, included in restructuring charges/(reversals) and certain acquisition-related costs. for the first quarter ended april 3, 2016, represents restructuring charges of $2 million related to employee termination costs ($1 million) and exit costs ($1 million), included in restructuring charges/(reversals) and certain acquisition-related costs, consulting fees of $3 million, included in selling, general and administrative expenses, and a $33 million net gain related to the sale of certain manufacturing sites and products, included in other (income)/deductions—net. for the first quarter ended april 2, 2017, represents accelerated depreciation charges of $1 million and consulting fees of $2 million, included in cost of sales. for the first quarter ended april 3, 2016, represents accelerated depreciation charges of $1 million and consulting fees of $2 million, included in cost of sales. represents certain nonrecurring costs related to becoming an independent public company, such as the creation of standalone systems and infrastructure, site separation, new branding (including changes to the manufacturing process for required new packaging), and certain legal registration and patent assignment costs. for the first quarter ended april 3, 2016, included in cost of sales ($1 million), and selling, general and administrative expenses ($11 million). for the quarter ended april 2, 2017, represents costs associated with changes to our operating model, included in selling, general and administrative expenses. included in provision for taxes on income. income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate. for the first quarter ended april 2, 2017, also includes a net tax charge of approximately $1 million related to the revaluation of the company's deferred tax assets and liabilities, using the rates expected to be in place at the time of the reversal. for the first quarter ended april 3, 2016, also includes a net tax charge of approximately $35 million related to the impact of the european commission’s negative decision on the excess profits rulings in belgium. this net charge relates to the recovery of prior tax benefits for the periods 2013 through 2015 offset by the revaluation of the company’s deferred tax assets and liabilities, using the rates expected to be in place at the time of the reversal. this net tax charge does not include any benefits associated with a successful appeal of the decision, nor does it reflect guidance we expect to receive from the belgian government on the methodology and timing of the recovery of prior tax benefits. certain amounts may reflect rounding adjustments. zoetis inc. adjusted selected costs, expenses and income (a) (unaudited) (millions of dollars) foreignexchange zoetis inc. 2017 guidance (millions of dollars, except per share amounts) the guidance reflects foreign exchange rates as of late april 2017. reconciliations of 2017 reported guidance to 2017 adjusted guidance follows: zoetis inc. consolidated revenue by segment(a) and species (unaudited) (millions of dollars) foreignexchange certain amounts and percentages may reflect rounding adjustments. zoetis inc. consolidated revenue by key international markets (unaudited) (millions of dollars) foreignexchange certain amounts and percentages may reflect rounding adjustments. zoetis inc. segment(a) earnings (unaudited) (millions of dollars) foreignexchange u.s.: international: * * * * * * calculation not meaningful. certain amounts and percentages may reflect rounding adjustments.
