What drove the revenue growth in the first quarter of 2016?

Revenue growth was primarily driven by operational revenue, which increased by 12% excluding the impact of foreign exchange. Key contributors included recent acquisitions (Pharmaq and Abbott Animal Health assets), increased sales volume for in-line products and Apoquel®, and price increases. The company also benefited from six additional calendar days in the quarter compared to the prior year.

Why did the effective tax rate increase significantly in Q1 2016?

The effective tax rate increased from 28.3% in Q1 2015 to 38.6% in Q1 2016. This was mainly due to changes in the jurisdictional mix of earnings, a discrete tax expense related to the European Commission's decision on excess profits rulings in Belgium, partially offset by a discrete tax benefit from revaluation of deferred taxes and a benefit from adopting a new accounting standard for share-based payments.

What is the impact of the operational efficiency initiative on the company's results?

The operational efficiency initiative aims to reduce complexity and costs. It contributed to a 7% decline in reported revenue due to product and market rationalization. However, it also helped drive down Cost of Sales by 1% and Selling, General, and Administrative expenses by 11%, as well as reducing the number of product stock-keeping units and planning to exit manufacturing sites.

How did acquisitions contribute to the financial results?

Acquisitions, particularly Pharmaq and certain assets of Abbott Animal Health, contributed approximately 4% to the operational revenue growth. They also influenced research and development expenses, which increased by 13% due to these acquisitions and the timing of project spend. The balance sheet reflects the acquired assets and goodwill from these transactions.

ZTS 10-Q Quarterly Report Q2 FY2016 — Revenue, Net Income, EPS

Summary

Zoetis Inc. reported a 5% increase in total revenue to $1,162 million for the first quarter of 2016, compared to $1,102 million in the prior year period. This growth was primarily driven by operational revenue, which increased by 12% excluding the impact of foreign exchange, fueled by contributions from recent acquisitions, increased volume in key products like Apoquel®, and price increases. Net income attributable to Zoetis Inc. also saw a significant increase of 24%, reaching $204 million, or $0.41 per diluted share, up from $165 million, or $0.33 per diluted share, in the prior year. The company continued its operational efficiency initiatives, which involved reducing product SKUs and exiting manufacturing sites, contributing to cost savings. However, a notable factor impacting profitability was a higher effective tax rate of 38.6% in the current quarter, compared to 28.3% in the prior year, largely due to changes in the jurisdictional mix of earnings and a discrete tax expense related to European Commission decisions on excess profits rulings. Despite this, the company demonstrated strong operational performance and a healthy balance sheet, with cash and cash equivalents increasing to $675 million.

Financial Highlights

53 data points

Beta

Revenue

$1.16B

0.7% Gross Margin

Net Income

$204.00M

0.2% Net Margin

EPS (Diluted)

$0.41

Total Assets

$7.45B

Cash & Equivalents

$675.00M

Free Cash Flow

$6.00M

Financial Statements

Beta

Revenue	$1.16B
Cost of Revenue	$389.00M
Gross Profit	$773.00M
SG&A Expenses	$315.00M
Operating Expenses	$828.00M
Interest Expense	$43.00M
Net Income	$204.00M
EPS (Basic)	$0.41
EPS (Diluted)	$0.41
Shares Outstanding (Basic)	497.40M
Shares Outstanding (Diluted)	499.50M

Key Highlights

1Total revenue increased by 5% to $1,162 million for Q1 2016 compared to Q1 2015.
2Net income attributable to Zoetis Inc. rose by 24% to $204 million.
3Diluted EPS grew by 24% to $0.41.
4Operational revenue (excluding foreign exchange) increased by 12%, driven by acquisitions, volume growth, and price increases.
5Selling, general, and administrative expenses decreased by 11% due to operational efficiencies and favorable foreign exchange.
6Research and development expenses increased by 13%, partly due to acquisitions and timing of projects.
7The effective tax rate increased significantly to 38.6% from 28.3% year-over-year, impacting net income.

Zoetis Inc. Quarterly Report for Q2 Ended Apr 3, 2016

Summary

Financial Highlights

Key Highlights

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