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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number:001-35797
Zoetis Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
46-0696167
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
10 Sylvan Way,
Parsippany,
New Jersey
07054
(Address of principal executive offices)(Zip Code)
(973) 822-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareZTSNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of July 29, 2022, there were 468,138,568 shares of common stock outstanding.



TABLE OF CONTENTS
Page
Item 1.
Condensed Consolidated Statements of Income (Unaudited)
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Statements of Equity (Unaudited)
Condensed Consolidated Statements of Cash Flows (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.




PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements

ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months EndedSix Months Ended
June 30,June 30,
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)2022202120222021
Revenue$2,052 $1,948 $4,038 $3,819 
Costs and expenses:
Cost of sales
625 568 1,194 1,117 
Selling, general and administrative expenses
529 495 994 904 
Research and development expenses
135 120 257 238 
Amortization of intangible assets
37 41 78 81 
Restructuring charges and certain acquisition-related costs1 21 3 30 
Interest expense, net of capitalized interest
53 57 106 114 
Other (income)/deductions—net
2 10 9 12 
Income before provision for taxes on income670 636 1,397 1,323 
Provision for taxes on income141 125 274 254 
Net income before allocation to noncontrolling interests529 511 1,123 1,069 
Less: Net loss attributable to noncontrolling interests (1)(1)(2)
Net income attributable to Zoetis Inc.$529 $512 $1,124 $1,071 
Earnings per share attributable to Zoetis Inc. stockholders:
 Basic$1.13 $1.08 $2.39 $2.25 
 Diluted$1.12 $1.07 $2.38 $2.24 
Weighted-average common shares outstanding:
 Basic470.0 474.8 471.1 475.2 
 Diluted471.5 477.0 472.8 477.5 
Dividends declared per common share$0.325 $0.250 $0.650 $0.500 

See notes to condensed consolidated financial statements.
1 |

ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months EndedSix Months Ended
June 30,June 30,
(MILLIONS OF DOLLARS)2022202120222021
Net income before allocation to noncontrolling interests$529 $511 $1,123 $1,069 
Other comprehensive (loss)/income, net of tax(a):
Unrealized gains/(losses) on derivatives for cash flow hedges, net of tax of $7 and $(5) for the three months ended June 30, 2022 and 2021; and $14 and $6 for the six months ended June 30, 2022 and 2021, respectively
22 (19)48 20 
Unrealized gains/(losses) on derivatives for net investment hedges, net of tax of $9 and $(2) for the three months ended June 30, 2022 and 2021; and $13 and $5 for the six months ended June 30, 2022 and 2021, respectively
33 (8)45 17 
Foreign currency translation adjustments(73)37 (52)70 
Benefit plans: Actuarial gain, net of tax(b)
  1  
Total other comprehensive (loss)/income, net of tax(18)10 42 107 
Comprehensive income before allocation to noncontrolling interests511 521 1,165 1,176 
Less: Comprehensive loss attributable to noncontrolling interests (1)(1)(2)
Comprehensive income attributable to Zoetis Inc.$511 $522 $1,166 $1,178 
(a) Presented net of reclassification adjustments, which are not significant in any period presented.
(b) Presented net of tax impacts, which are not significant in any period presented.


See notes to condensed consolidated financial statements.
2 |

ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,December 31,
20222021
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)(Unaudited)
Assets
Cash and cash equivalents(a)
$2,652 $3,485 
Accounts receivable, less allowance for doubtful accounts of $24 in 2022 and $17 in 2021
1,291 1,133 
Inventories2,205 1,923 
Other current assets503 389 
Total current assets6,651 6,930 
Property, plant and equipment, less accumulated depreciation of $2,193 in 2022 and $2,072 in 2021
2,559 2,422 
Operating lease right of use assets193 181 
Goodwill2,720 2,682 
Identifiable intangible assets, less accumulated amortization1,390 1,474 
Noncurrent deferred tax assets110 100 
Other noncurrent assets147 111 
Total assets$13,770 $13,900 
Liabilities and Equity
Short-term borrowings$2 $ 
Current portion of long-term debt1,350  
Accounts payable430 436 
Dividends payable153 154 
Accrued expenses696 710 
Accrued compensation and related items237 392 
Income taxes payable68 38 
Other current liabilities115 67 
Total current liabilities3,051 1,797 
Long-term debt, net of discount and issuance costs5,221 6,592 
Noncurrent deferred tax liabilities274 320 
Operating lease liabilities161 151 
Other taxes payable250 257 
Other noncurrent liabilities233 239 
Total liabilities9,190 9,356 
Commitments and contingencies (Note 15)
Stockholders' equity:
Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 468,613,448 and 472,574,090 shares outstanding at June 30, 2022, and December 31, 2021, respectively
5 5 
Treasury stock, at cost, 33,277,795 and 29,317,153 shares of common stock at June 30, 2022 and December 31, 2021, respectively
(3,766)(2,952)
Additional paid-in capital1,059 1,068 
Retained earnings8,004 7,186 
Accumulated other comprehensive loss(722)(764)
Total Zoetis Inc. equity4,580 4,543 
Equity attributable to noncontrolling interests 1 
Total equity4,580 4,544 
Total liabilities and equity$13,770 $13,900 
(a)    As of June 30, 2022 and December 31, 2021, includes $4 million and $3 million of restricted cash, respectively.
See notes to condensed consolidated financial statements.
3 |

ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
Three months ended June 30, 2022
Zoetis
AccumulatedEquity
AdditionalOtherAttributable to
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, March 31, 2022501.9 $5 30.7 $(3,317)$1,046 $7,628 $(704)$ $4,658 
Net income     529   529 
Other comprehensive loss      (18) (18)
Share-based compensation awards (b)
   2 13    15 
Treasury stock acquired (c)
  2.6 (451)    (451)
Dividends declared     (153)  (153)
Balance, June 30, 2022501.9 $5 33.3 $(3,766)$1,059 $8,004 $(722)$ $4,580 
Three months ended June 30, 2021
Zoetis
AccumulatedEquity
AdditionalOtherAttributable to
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, March 31, 2021501.9 $5 26.9 $(2,412)$1,030 $6,099 $(633)$3 $4,092 
Net income/(loss)— — — — — 512 — (1)511 
Other comprehensive income— — — — — — 10 — 10 
Share-based compensation awards (b)
— — (0.2)10 14 — — — 24 
Treasury stock acquired (c)
— — 1.0 (166)— — — — (166)
Dividends declared— — — — — (119)— — (119)
Balance, June 30, 2021501.9 $5 27.7 $(2,568)$1,044 $6,492 $(623)$2 $4,352 
(a)    Shares may not add due to rounding.
(b)    Includes the issuance of shares of Zoetis Inc. common stock and the reacquisition of shares of treasury stock associated with exercises of employee share-based awards. Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information, see Note 12. Share-based Payments and Note 13. Stockholders' Equity.
(c)    Reflects the acquisition of treasury shares in connection with the share repurchase program. For additional information, see Note 13. Stockholders' Equity.








See notes to condensed consolidated financial statements.
4 |

ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - Continued
(UNAUDITED)
Six months ended June 30, 2022
Zoetis
AccumulatedEquity
AdditionalOtherAttributable to
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, December 31, 2021501.9 $5 29.3 $(2,952)$1,068 $7,186 $(764)$1 $4,544 
Net income/(loss)     1,124  (1)1,123 
Other comprehensive income      42  42 
Share-based compensation awards (b)
  (0.5)(2)(10)   (12)
Treasury stock acquired (c)
  4.5 (812)    (812)
Employee benefit plan contribution from Pfizer Inc. (d)
    1    1 
Dividends declared     (306)  (306)
Balance, June 30, 2022501.9 $5 33.3 $(3,766)$1,059 $8,004 $(722)$ $4,580 
Six months ended June 30, 2021
Zoetis
AccumulatedEquity
AdditionalOtherAttributable to
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, December 31, 2020501.9 $5 26.6 $(2,230)$1,065 $5,659 $(730)$4 $3,773 
Net income/(loss)— — — — — 1,071 — (2)1,069 
Other comprehensive income— — — — — — 107 — 107 
Share-based compensation awards (b)
— — (1.0)9 (22) — — (13)
Treasury stock acquired (c)
— — 2.1 (347)— — — — (347)
Employee benefit plan contribution from Pfizer Inc.(d)
— — — — 1 — — — 1 
Dividends declared— — — — — (238)— — (238)
Balance, June 30, 2021501.9 $5 27.7 $(2,568)$1,044 $6,492 $(623)$2 $4,352 
(a)    Shares may not add due to rounding.
(b)    Includes the issuance of shares of Zoetis Inc. common stock and the reacquisition of shares of treasury stock associated with exercises of employee share-based awards. Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information, see Note 12. Share-based Payments and Note 13. Stockholders' Equity.
(c)    Reflects the acquisition of treasury shares in connection with the share repurchase program. For additional information, see Note 13. Stockholders' Equity.
(d)    Represents contributed capital from Pfizer Inc. associated with service credit continuation for certain Zoetis Inc. employees in Pfizer Inc.'s U.S. qualified defined benefit and U.S. retiree medical plans.

See notes to condensed consolidated financial statements.
5 |

ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
(MILLIONS OF DOLLARS)20222021
Operating Activities
Net income before allocation to noncontrolling interests$1,123 $1,069 
Adjustments to reconcile net income before noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization expense231 221 
Share-based compensation expense31 29 
Asset write-offs and asset impairments2 14 
Net loss on sale of assets 3 
Provision for losses on inventory31 25 
Deferred taxes(76)(24)
Employee benefit plan contribution from Pfizer Inc.1 1 
Other non-cash adjustments13 7 
Other changes in assets and liabilities, net of acquisitions and divestitures:
    Accounts receivable(182)(149)
    Inventories(312)(206)
    Other assets(34)(36)
    Accounts payable(6)(91)
    Other liabilities(206)21 
    Other tax accounts, net29 (3)
Net cash provided by operating activities645 881 
Investing Activities
Capital expenditures(261)(190)
Acquisitions(93)(14)
Purchase of investments(7) 
Settlement on swaps designated as net investment hedges40 2 
Net cash used in investing activities(321)(202)
Financing Activities
Increase in short-term borrowings, net2  
Payment of consideration related to previous acquisitions (5)
Share-based compensation-related proceeds, net of taxes paid on withholding shares(38)(39)
Purchases of treasury stock(812)(347)
Cash dividends paid(307)(238)
Net cash used in financing activities(1,155)(629)
Effect of exchange-rate changes on cash and cash equivalents(2)4 
Net (decrease)/increase in cash and cash equivalents(833)54 
Cash and cash equivalents at beginning of period3,485 3,604 
Cash and cash equivalents at end of period$2,652 $3,658 
Supplemental cash flow information
Cash paid during the period for:
  Income taxes$316 $315 
  Interest, net of capitalized interest121 127 
 Amounts included in the measurement of lease liabilities25 23 
Non-cash transactions:
     Capital expenditures5 4 
     Lease obligations obtained in exchange for right-of-use assets41 7 
  Dividends declared, not paid153 119 
See notes to condensed consolidated financial statements.
6 |

ZOETIS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization
Zoetis Inc. (including its subsidiaries, collectively, Zoetis, the company, we, us or our) is a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests and precision animal health technology. We organize and operate our business in two geographic regions: the United States (U.S.) and International.
We directly market our products in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America. Our products are sold in more than 100 countries, including developed markets and emerging markets. We have a diversified business, marketing products across eight core species: dogs, cats and horses (collectively, companion animals) and cattle, swine, poultry, fish and sheep (collectively, livestock); and within seven major product categories: parasiticides, vaccines, dermatology, other pharmaceutical products, anti-infectives, animal health diagnostics and medicated feed additives.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three and six months ended May 31, 2022 and May 31, 2021.
Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.
We are responsible for the unaudited condensed consolidated financial statements included in this Form 10-Q. The condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The information included in this interim report should be read in conjunction with the financial statements and accompanying notes included in our 2021 Annual Report on Form 10-K.
3. Accounting Standards
Recently Issued Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, it issued a subsequent amendment to the initial guidance: ASU No. 2021-01, Reference Rate Reform (Topic 848). The new guidance provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Adoption of the guidance is optional and effective as of March 12, 2020, but only available through December 31, 2022. We currently have a revolving credit facility and various hedging transactions that reference LIBOR. We will make specific amendments to our affected contracts and hedge documentation to adopt these standards as of December 31, 2022 and we do not expect these changes to have a material impact on our consolidated financial statements or related disclosures.
4. Revenue
A. Revenue from Product Sales
We offer a diversified portfolio of products which allows us to capitalize on local and regional customer needs. Generally, our products are promoted to veterinarians and livestock producers by our sales organization which includes sales representatives and technical and veterinary operations specialists, and then sold directly by us or through distributors, retailers or e-commerce outlets. The depth of our product portfolio enables us to address the varying needs of customers in different species and geographies. Many of our top-selling product lines are distributed across both of our operating segments, leveraging our research and development (R&D) operations and manufacturing and supply chain network.
Over the course of our history, we have focused on developing a diverse portfolio of animal health products, including medicines, vaccines and diagnostics, complemented by biodevices, genetic tests and a range of services. We refer to all different brands or a particular product, or its dosage forms for all species, as a product line. We have approximately 300 comprehensive product lines, including products for both companion animals and livestock within each of our major product categories.
Our major product categories are:
parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms;
vaccines