10-KPeriod: FY2018

Zoetis Inc. Annual Report, Year Ended Dec 31, 2018

Filed February 14, 2019For Securities:ZTS

Summary

Zoetis Inc. reported strong financial performance for the fiscal year ended December 31, 2018, with total revenue reaching $5.825 billion, a 10% increase year-over-year. This growth was driven by a balanced performance across both its U.S. and International segments, with revenues of $2.877 billion and $2.890 billion, respectively. The company saw robust growth in its companion animal segment, up 17% to $2.613 billion, largely attributed to its key dermatology products and the strategic acquisition of Abaxis. The livestock segment also contributed positively, growing 4% to $3.154 billion, benefiting from demand for alternatives to antibiotic medicated feed additives and new product introductions. Net income attributable to Zoetis was $1.428 billion, a significant 65% increase from the previous year, bolstered by strong revenue growth and improved operational efficiencies. The company also benefited from a lower effective tax rate in 2018, following the enactment of the Tax Cuts and Jobs Act, which reduced the U.S. federal corporate tax rate. Zoetis continued its commitment to shareholder returns through share repurchases, authorizing an additional $2.0 billion, indicating confidence in its ongoing business strategy and future prospects.

Financial Highlights

56 data points
Beta

Revenue

$5.83B

67.2% Gross Margin

Net Income

$1.42B

24.4% Net Margin

EPS (Diluted)

$2.93

Total Assets

$10.78B

Cash & Equivalents

$1.60B

Free Cash Flow

$1.45B

Financial Statements
Beta
Revenue$5.83B
Cost of Revenue$1.91B
Gross Profit$3.91B
SG&A Expenses$1.48B
Interest Expense$206.00M
Net Income$1.42B
EPS (Basic)$2.96
EPS (Diluted)$2.93
Shares Outstanding (Basic)483.06M
Shares Outstanding (Diluted)486.90M

Key Highlights

  • 1Total revenue grew 10% to $5.825 billion in 2018, driven by broad-based growth across segments.
  • 2Companion animal segment revenue increased by 17% to $2.613 billion, supported by strong performance in dermatology products and the Abaxis acquisition.
  • 3Livestock segment revenue increased by 4% to $3.154 billion, benefiting from products addressing antibiotic alternatives and new vaccine launches.
  • 4Net income attributable to Zoetis surged by 65% to $1.428 billion.
  • 5The effective tax rate decreased significantly due to the Tax Cuts and Jobs Act.
  • 6The company completed the acquisition of Abaxis in July 2018, strengthening its position in the veterinary diagnostics market.
  • 7Zoetis announced a new $2.0 billion share repurchase program, demonstrating its commitment to returning capital to shareholders.

Frequently Asked Questions

Zoetis reported total revenue of $5.825 billion, a 10% increase compared to the prior year. Net income attributable to Zoetis was $1.428 billion, marking a 65% increase. The company's U.S. operations generated $2.877 billion in revenue, while International operations brought in $2.890 billion.

Revenue growth was driven by strong performance in both companion animal products (up 17% to $2.613 billion), fueled by dermatology products and the Abaxis acquisition, and the livestock segment (up 4% to $3.154 billion), which benefited from demand for alternatives to antibiotic medicated feed additives and new product introductions.

The acquisition of Abaxis, completed in July 2018, contributed approximately 2% to the company's overall revenue growth. It enhanced Zoetis's presence in the veterinary diagnostics market and added approximately $1.962 billion to the consideration transferred for assets and liabilities, including significant goodwill and intangible assets.

The Tax Cuts and Jobs Act, enacted in December 2017, reduced the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018. This reduction, along with other adjustments related to the Act, led to a significantly lower effective tax rate for Zoetis in 2018 compared to 2017, contributing to the substantial increase in net income.

Zoetis actively engages in share repurchases. In December 2018, the company announced a new share repurchase program of up to an additional $2.0 billion, following the substantial completion of a previous $1.5 billion program. While the company currently pays a quarterly cash dividend, it reserves the right to change its dividend policy.