10-QPeriod: Q2 FY2013

Zoetis Inc. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 14, 2013For Securities:ZTS

Summary

Zoetis Inc. reported revenues of $1,114 million for the three months ended June 30, 2013, a slight increase of 2% compared to the same period in the prior year. Net income attributable to Zoetis Inc. for the quarter was $128 million, or $0.26 per diluted share, a decrease from $173 million, or $0.35 per diluted share, in the prior year. This decline was significantly influenced by increased Selling, General, and Administrative (SG&A) expenses, partially due to one-time costs associated with becoming a standalone public company. The six-month period ending June 30, 2013, showed a similar trend with revenues of $2,204 million, up 3% year-over-year, while net income attributable to Zoetis Inc. decreased to $268 million from $284 million in the prior year. The company's financial results are heavily impacted by its recent separation from Pfizer Inc., which included an Initial Public Offering (IPO) in February 2013 and a full separation via an exchange offer completed in June 2013. Significant costs related to this separation, including increased SG&A and restructuring charges, are influencing profitability, alongside operational growth in key segments like the U.S.

Financial Highlights

49 data points
Beta

Revenue

$1.11B

62.7% Gross Margin

Net Income

$128.00M

11.5% Net Margin

EPS (Diluted)

$0.26

Total Assets

$6.26B

Cash & Equivalents

$369.00M

Free Cash Flow

-$70.00M

Financial Statements
Beta
Revenue$1.11B
Cost of Revenue$416.00M
Gross Profit$698.00M
SG&A Expenses$399.00M
Operating Expenses$947.00M
Interest Expense$32.00M
Net Income$128.00M
EPS (Basic)$0.26
EPS (Diluted)$0.26
Shares Outstanding (Basic)500.00M
Shares Outstanding (Diluted)500.22M

Key Highlights

  • 1Revenue increased by 2% to $1,114 million for Q2 2013, and by 3% to $2,204 million for the first six months of 2013, driven by operational growth, particularly in the U.S. segment.
  • 2Net income attributable to Zoetis Inc. decreased by 26% to $128 million ($0.26/share) for Q2 2013 and by 6% to $268 million ($0.54/share) for the first six months of 2013, impacted by higher operating expenses.
  • 3Selling, General, and Administrative (SG&A) expenses rose significantly (16% for Q2, 11% for YTD) due to one-time costs associated with the company's transition to a standalone public entity.
  • 4The company completed its full separation from Pfizer Inc. in June 2013, following its Initial Public Offering (IPO) in February 2013.
  • 5Zoetis issued $3.65 billion in senior notes in January 2013 to fund its separation and capital structure.
  • 6Restructuring charges and acquisition-related costs showed a significant decrease, largely due to the reversal of a previously established reserve related to European operations.
  • 7The company continues to monitor potential impacts of environmental regulations and disease outbreaks on its business, particularly concerning antibacterial use in livestock.

Frequently Asked Questions

For the second quarter of 2013, Zoetis reported revenue of $1,114 million, a 2% increase year-over-year, with net income attributable to Zoetis Inc. of $128 million ($0.26 per diluted share). For the first six months of 2013, revenue was $2,204 million (up 3% year-over-year), and net income was $268 million ($0.54 per diluted share). The company experienced operational growth, particularly in the U.S. segment, but profitability was impacted by increased operating expenses related to its transition to a standalone company.

The separation from Pfizer, which included an IPO in February 2013 and a full separation in June 2013, led to significant one-time costs. These costs are reflected in higher Selling, General, and Administrative (SG&A) expenses, as well as other charges related to becoming a standalone public company. The company also issued $3.65 billion in senior notes in January 2013 as part of this transition.

Zoetis's revenue growth is driven by operational performance across its four geographic segments (U.S., Europe/Africa/Middle East, Canada/Latin America, and Asia/Pacific). The U.S. segment showed particular strength in both livestock and companion animal products. Growth is also supported by new product launches, targeted marketing initiatives, and price increases, alongside factors like increasing pet ownership and global demand for animal protein.

For the full year 2013, Zoetis guided for revenues between $4,425 million and $4,525 million. The company projected adjusted diluted EPS in the range of $1.36 to $1.42, and reported diluted EPS between $1.00 and $1.06. This guidance anticipates ongoing operational growth while also accounting for significant one-time separation and integration costs.