10-QPeriod: Q1 FY2014

Zoetis Inc. Quarterly Report for Q1 Ended Mar 30, 2014

Filed May 13, 2014For Securities:ZTS

Summary

Zoetis Inc. reported solid first-quarter 2014 results, demonstrating resilience despite a challenging economic environment. Revenue for the three months ended March 30, 2014, increased slightly to $1,097 million from $1,090 million in the prior year, marking a 1% increase. This growth was primarily driven by operational improvements, including volume and price increases, with notable strength in the U.S. and emerging markets like Brazil and China. Net income attributable to Zoetis Inc. rose 11% to $155 million from $140 million in the prior year, reflecting improved operational efficiencies and cost management. Despite currency headwinds, particularly the depreciation of the Brazilian Real and Japanese Yen, the company's diversified product portfolio and geographic presence supported its performance. Cost of sales decreased by 6% due to lower manufacturing and supply costs and favorable foreign exchange, contributing to an improved gross margin. While SG&A expenses remained relatively flat, R&D expenses saw a slight decrease. The company maintained a strong balance sheet with sufficient liquidity and a robust credit facility. Zoetis is well-positioned to navigate market dynamics and continue its growth trajectory.

Financial Statements
Beta
Revenue$1.10B
Cost of Revenue$379.00M
Gross Profit$718.00M
SG&A Expenses$356.00M
Operating Expenses$867.00M
Interest Expense$29.00M
Net Income$155.00M
EPS (Basic)$0.31
EPS (Diluted)$0.31
Shares Outstanding (Basic)500.23M
Shares Outstanding (Diluted)500.70M

Key Highlights

  • 1Revenue for Q1 2014 was $1,097 million, a slight increase of 1% from $1,090 million in Q1 2013, driven by operational growth.
  • 2Net income attributable to Zoetis Inc. increased by 11% to $155 million in Q1 2014, compared to $140 million in Q1 2013.
  • 3Earnings per share (diluted) rose to $0.31 in Q1 2014 from $0.28 in Q1 2013.
  • 4Cost of sales decreased by 6% due to lower global manufacturing and supply costs and favorable foreign exchange.
  • 5Selling, general and administrative (SG&A) expenses remained stable, reflecting effective cost management.
  • 6The company reported $506 million in cash and cash equivalents at the end of Q1 2014.
  • 7Zoetis continues to manage foreign exchange risk, with operational revenue growing 4% while total revenue was impacted by a 3% unfavorable foreign exchange effect.

Frequently Asked Questions

Zoetis reported a 1% increase in revenue, reaching $1,097 million for the three months ended March 30, 2014, up from $1,090 million in the prior year's first quarter. This modest growth was primarily attributed to operational improvements, including increased volume and pricing, with positive contributions from the U.S. and emerging markets, partially offset by unfavorable foreign exchange.

Net income attributable to Zoetis Inc. saw a significant increase of 11%, rising to $155 million in the first quarter of 2014 from $140 million in the first quarter of 2013. Correspondingly, diluted earnings per share increased to $0.31 from $0.28 year-over-year.

The 6% decrease in Cost of Sales was primarily driven by lower global manufacturing and supply costs compared to the prior year, favorable foreign exchange impacts, and a beneficial product and geographic mix. These factors were partially offset by an increase in inventory obsolescence reserves.

Zoetis maintained a strong liquidity position, with $506 million in cash and cash equivalents at the end of the first quarter of 2014. The company also has a $1 billion revolving credit facility and adheres to its financial covenants, indicating sound financial management.