Summary
Zoetis Inc. (ZTS) filed an 8-K on January 8, 2018, to disclose preliminary information regarding the impact of the Tax Cuts and Jobs Act (Tax Act) enacted on December 22, 2017. The Tax Act significantly reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. Zoetis is still analyzing the full impact of this legislation, which involves complex changes to the U.S. tax code. Based on a preliminary review, Zoetis anticipates a net reduction to its U.S. GAAP net income in the fourth quarter of 2017, not expected to exceed $350 million. This charge is primarily driven by a repatriation tax, partially offset by the remeasurement of deferred tax assets and liabilities at the new lower corporate tax rate. Importantly, this charge will not affect the company's adjusted net income for 2017. For the full year 2018, Zoetis projects its non-GAAP adjusted effective tax rate to be between 21% and 22%, though actual rates may vary.
Key Highlights
- 1Disclosure of preliminary impact of the Tax Cuts and Jobs Act (Tax Act) enacted on December 22, 2017.
- 2Federal corporate tax rate reduced from 35% to 21% effective January 1, 2018.
- 3Anticipates a net reduction to Q4 2017 GAAP net income not exceeding $350 million due to repatriation tax and remeasurement of deferred tax items.
- 4The Q4 2017 charge will NOT impact Zoetis's adjusted net income for 2017.
- 5Projects a non-GAAP adjusted effective tax rate of 21%-22% for full-year 2018.
- 6Emphasizes that current estimates are preliminary and actual impacts could differ materially.
- 7Information furnished under Regulation FD and not deemed 'filed' for Section 18 purposes.