Zoetis reports second quarter 2015 results
Florham park, n.j.--(business wire)--zoetis inc. (nyse:zts) today reported its financial results for the second quarter of 2015 and updated its full year 2015 guidance. the company reported revenue of $1.2 billion for the second quarter of 2015, which increased 1% compared to the second quarter of 2014. revenue reflected an operational2 increase of 11%, excluding the impact of foreign exchange. the net loss for the second quarter of 2015 was $37 million, or $0.07 per diluted share, which includes $263 million in pre-tax charges related to the company’s previously announced comprehensive operational efficiency initiative. adjusted net income1 for the second quarter of 2015 was $216 million, or $0.43 per diluted share, an increase of 14% and 13%, respectively. adjusted net income for the second quarter of 2015 excludes the net impact of $253 million, or $0.50 per diluted share, for purchase accounting adjustments, acquisition-related costs and certain significant items. on an operational basis, adjusted net income for the second quarter of 2015 increased 20%, with foreign currency having a negative impact of 6 percentage points. executive commentary “in the second quarter, we generated operational revenue growth of 11% based on the strength and diversity of our business. our adjusted net income grew 20% operationally, and we continue delivering our long-term value proposition to shareholders -- growing adjusted net income faster than sales,” said zoetis chief executive officer juan ramÓn alaix. “the growth this quarter was driven by the positive performance of our portfolio in both companion animal and livestock products, the addition of abbott animal health products, the growth of apoquel® and other new products, and the continued discipline on operating expenses.” “our broad portfolio, proven business model and dedicated zoetis colleagues enabled us to deliver these results as we began implementing significant changes to become more competitive and profitable,” said alaix. “we remain committed to maintaining our commercial, r&d and manufacturing strengths, while reducing complexity in our business and achieving our efficiency goals.” “with our operational efficiency initiative, we have begun the process to re-shape our business around the key products, markets and manufacturing sites that will make us an even stronger and more profitable leader in animal health. execution of these plans is underway,” said zoetis chief financial officer paul herendeen. “we are pleased to see continued efficiency and expense control in this quarter’s results, along with excellent sales growth, and we are updating our full year guidance for 2015 and reaffirming our long-term goals for 2016 and 2017.” quarterly highlights zoetis organizes and manages its business across two regional operating 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 second quarter of 2015: revenue in the u.s. segment was $539 million, an increase of 17% compared to the second quarter of 2014. sales of livestock products grew 14% with balanced growth across cattle, swine and poultry. favorable market conditions drove growth in cattle across multiple categories, including premium brands, as well as vaccines and reproductive products. cattle also benefited from new product growth, primarily actogain®. sales of swine products delivered broad growth due to the continued recovery in the pig population following the pedv outbreak, as well as new product introductions. growth in sales of poultry products was driven by the re-introduction of zoamix® and increased volumes in other medicated feed additives. companion animal product sales grew 20%, driven by the addition of products acquired from abbott animal health, as well as significant growth of apoquel®. revenue in the international segment was $622 million, an increase of 6% operationally compared to the second quarter of 2014. growth was driven by performance in livestock, which increased 6% operationally, with higher sales of cattle and swine products offset by lower sales of poultry products. continued favorable market conditions and new product launches in brazil drove growth of the cattle portfolio. the performance of our portfolio in china and other asian markets helped drive increased sales of swine products, which are also benefiting from better market conditions. companion animal products grew 8% operationally, primarily from sales of apoquel®, as well as sales of parasiticide products in key markets in western europe, australia, canada and china. performance was also supported by strong vaccine sales in china. zoetis continues to drive demand and strengthen its diverse portfolio of products through product lifecycle developments, strong customer relationships and access to new markets and technologies. the company is focused on improving the performance and delivery of its current product lines; expanding product indications across species; pursuing approvals in new geographies; and developing innovative medicines, treatments and solutions for emerging diseases and unmet customer needs. some recent highlights include: new product innovations – zoetis continues to advance animal health science through innovations that address unmet market needs or improve veterinarians’ approach to prevention and treatment. the u.s. department of agriculture (usda) granted zoetis a conditional license for a first-of-its-kind antibody therapy that targets interleukin-31 (il-31) to help reduce clinical signs associated with atopic dermatitis in dogs. it represents another major breakthrough to emerge from the proprietary research and development platform zoetis has built based on new scientific insights into the pathway of allergic skin conditions. portfolio lifecycle development – as part of enhancing the lifecycle of its products, zoetis continues to receive approvals for new indications and formulations of key products. the company has also expanded major products into new markets. in the second quarter, for example: zoetis received approval of new label claims in the u.s. and european union (eu) for cerenia® (maropitant citrate), an antiemetic to treat and prevent acute vomiting in dogs and cats. in the u.s., the revised label now allows for once-daily tablet administration until resolution of acute vomiting for dogs seven months of age and older. in the eu, the injectable form of cerenia has been approved for intravenous use in dogs and cats. both approvals offer veterinarians greater latitude to treat each patient individually. the company is also expanding the breadth of its fostera® swine vaccine franchise. in canada, zoetis gained label claims for its fostera porcine reproductive and respiratory (prrs) vaccine for swine, with reproductive protection and one-day-of-age administration. the company continued to bring its fostera pcv mh vaccine to latin american countries with approval in ecuador. the combination vaccine helps protect swine from porcine circovirus-associated disease and enzootic pneumonia caused by mycoplasma hyopneumoniae. draxxin® 25, an injectable anti-infective, which has tapped an important market for swine, was launched in spain, italy, portugal and greece. draxxin 25 offers a convenient tool to fight swine respiratory disease (srd) in nursery pigs by providing a lower concentration, making it optimized for use in small pigs. financial guidance zoetis narrowed its revenue and earnings per share guidance for full year 2015 toward the higher end of its previous ranges to reflect its year-to-date performance and outlook for the remainder of 2015. full year 2015 guidance includes: revenue of between $4.700 billion to $4.775 billion reported diluted eps of between $0.81 to $1.02 per share adjusted diluted eps1 of between $1.63 to $1.68 per share the company also reaffirmed its long-term outlook for 2016 and 2017. additional guidance on other items for 2015, 2016 and 2017 such as expenses and tax rate are 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. (edt) today, during which company executives will review second quarter financial results, discuss 2015 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. 4, 2015. about zoetis zoetis (zÔ-eh-tis) 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 and genetic tests and supported by a range of services. in 2014, the company generated annual revenue of $4.8 billion. with approximately 10,000 employees worldwide at the beginning of 2015, zoetis serves veterinarians, livestock producers and people who raise and care for farm and companion animals with sales of its products in 120 countries. 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 is defined as revenue growth excluding the impact of foreign exchange. 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, expectations regarding products, future use of cash and dividend payments, 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, 2014, 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 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 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 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. condensed consolidated statements of operations(a) (a) the condensed consolidated statements of operations present the three and six months ended june 28, 2015 and june 29, 2014. subsidiaries operating outside the united states are included for the three and six months ended may 24, 2015 and may 25, 2014. (b) exclusive of amortization of intangible assets, except as discussed in footnote (c) below. (c) 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. gaapreported(a) purchaseaccountingadjustments acquisition-relatedcosts(1) certainsignificantitems(2) non-gaapadjusted(b) gaapreported(a) purchaseaccountingadjustments acquisition-relatedcosts(1) certainsignificantitems(2) non-gaapadjusted(b) gaapreported(a) purchaseaccountingadjustments acquisition-relatedcosts(1) certainsignificantitems(2) non-gaapadjusted(b) gaapreported(a) purchaseaccountingadjustments acquisition-relatedcosts(1) certainsignificantitems(2) non-gaapadjusted(b) 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. see notes to reconciliation of gaap reported to non-gaap adjusted information for notes (1) and (2). zoetis inc. (1) acquisition-related costs include the following: 4 (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. included in restructuring charges and certain acquisition-related costs. (b) included in other (income)/deductions—net. (c) 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, as well as a tax charge related to the acquisition of certain assets of abbott animal health. (2) certain significant items include the following: includes restructuring charges of $253 million related to employee termination costs ($228 million) and asset impairments ($25 million) for both the three and six months ended june 28, 2015, included in restructuring charges and certain acquisition-related costs. also includes other charges of $10 million and $20 million primarily related to consulting fees for the three and six months ended june 28, 2015, respectively, included in selling, general and administrative expenses. includes restructuring charges of $10 million related to employee termination costs ($9 million) and asset impairments ($1 million) for both the three and six months ended june 28, 2015, included in restructuring charges and certain acquisition-related costs. also includes other charges of $5 million and $10 million primarily related to consulting fees for the three and six months ended june 28, 2015, respectively, included in cost of sales. related to our cost-reduction/productivity initiatives and included in restructuring charges and certain acquisition-related costs. represents certain nonrecurring costs related to becoming an independent public company, such as new branding (including changes to the manufacturing process for required new packaging), the creation of standalone systems and infrastructure, site separation, and certain legal registration and patent assignment costs. included in cost of sales ($12 million and $14 million) and selling, general and administrative expenses ($27 million and $48 million) for the three and six months ended june 28, 2015, respectively. included in cost of sales ($8 million and $11 million) and selling, general and administrative expenses ($31 million and $61 million), and other (income)/deductions—net ($2 million and $2 million) for the three and six months ended june 29, 2014, respectively. the three and six months ended june 28, 2015, includes an impairment of ipr&d assets related to the termination of a canine oncology project ($2 million) in other (income)/deductions. the six months ended june 28, 2015 also includes charges due to unusual investor-related activities in selling, general and administrative expenses ($3 million). for the three and six months ended june 29, 2014, primarily includes a reserve associated with a commercial settlement in mexico ($13 million) in other (income)/deductions. the six months ended june 29, 2014 also includes a pension plan settlement charge related to the divestiture of a manufacturing plant ($4 million), partially offset by an insurance recovery of litigation related charges ($2 million income), both in other (income)/deductions. 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. zoetis inc. adjusted selected costs, expenses and income (a) foreignexchange (12)% as a percent of revenue (9)% (5)% (4)% (6)% foreignexchange (10)% (7)% (3)% (5)% (6)% (millions of dollars, except per share amounts) a reconciliation of 2015 adjusted net income and adjusted diluted eps guidance to 2015 reported net income attributable to zoetis and reported diluted eps attributable to zoetis common shareholders guidance follows: (millions of dollars, except per share amounts) a reconciliation of 2016 and 2017 adjusted net income and adjusted diluted eps guidance to 2016 and 2017 reported net income attributable to zoetis and reported diluted eps attributable to zoetis common shareholders guidance follows: consolidated revenue by segment(a) and species foreignexchange consolidated revenue by segment(a) and species foreignexchange foreignexchange foreignexchange segment(a) earnings foreignexchange u.s.: international: segment(a) earnings foreignexchange u.s.: international: certain amounts and percentages may reflect rounding adjustments.
