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Segment and Other Revenue Information (Notes)
 12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
Segment and Other Revenue Information
Segment, Geographic and Other Revenue Information
A.
Segment Information
The animal health medicines and vaccines industry is characterized by meaningful differences in customer needs across different regions. As a result of these differences, among other things, we manage our operations through four geographic regions. Each operating segment has responsibility for its commercial activities. Within each of these regional operating segments, we offer a diversified product portfolio, including vaccines, parasiticides, anti-infectives, medicated feed additives and other pharmaceuticals, for both livestock and companion animal customers.
Operating Segments
•
The United States (U.S.).
•
Europe/Africa/Middle East (EuAfME)—Includes, among others, the United Kingdom, Germany, France, Italy, Spain, Northern Europe and Central Europe as well as Russia, Turkey and South Africa.
•
Canada/Latin America (CLAR)––Includes Canada, Brazil, Mexico, Central America and Other South America.
•
Asia/Pacific (APAC)––Includes Australia, Japan, New Zealand, South Korea, India, China/Hong Kong, Northeast Asia, Southeast Asia and South Asia.
Our chief operating decision maker uses the revenue and earnings of the four operating segments, among other factors, for performance evaluation and resource allocation.
Other Costs and Business Activities
Certain costs are not allocated to our operating segment results, such as costs associated with the following:
•
Other business activities, which includes certain Research & development (R&D) expenses associated with our dedicated veterinary medicine research and development organization, research alliances, U.S regulatory affairs and other operations focused on the development of our products not charged to our operating segments.
•
Corporate, which is responsible for platform functions such as business technology, facilities, legal, finance, human resources, business development, public affairs and procurement, among others. These costs also include compensation costs and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense.
•
Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) acquisition-related activities, where we incur costs for restructuring and integration; and (iii) certain significant items, which include non-acquisition-related restructuring charges, certain asset impairment charges and costs associated with cost reduction/productivity initiatives.
Segment Assets
We manage our assets on a total company basis, not by operating segment. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were approximately $6.6 billion and $6.3 billion at December 31, 2013 and 2012, respectively.

Selected Statement of Income Information                                 
 
 
 
 
 
 
Depreciation
(MILLIONS OF DOLLARS)
 
Revenue(a)
 
Earnings(b)
 
and Amortization(c)
Year Ended December 31, 2013
 
 
 
 
 
 
U.S.
 
$
1,902

 
$
1,045

 
$
43

EuAfME
 
1,168

 
420

 
25

CLAR
 
778

 
266

 
18

APAC
 
713

 
271

 
13

Total reportable segments
 
4,561

 
2,002

 
99

Other business activities(d)
 
—

 
(320
)
 
25

Reconciling Items:
 
 
 
 
 
 
Corporate(e)
 
—

 
(567
)
 
23

Purchase accounting adjustments(f)
 
—

 
(48
)
 
48

Acquisition-related costs(g)
 
—

 
(22
)
 
—

Certain significant items(h)
 
—

 
(240
)
 
5

Other unallocated(i)
 
—

 
(115
)
 
9

 
 
$
4,561

 
$
690

 
$
209

 
 
 
 
 
 
 
Year Ended December 31, 2012
 
 
 
 
 
 
U.S.
 
$
1,776

 
$
921

 
$
28

EuAfME
 
1,096

 
375

 
28

CLAR
 
769

 
253

 
23

APAC
 
695

 
236

 
17

Total reportable segments
 
4,336

 
1,785

 
96

Other business activities(d)
 
—

 
(275
)
 
16

Reconciling Items:
 
 
 
 
 
 
Corporate(e)
 
—

 
(506
)
 
25

Purchase accounting adjustments(f)
 
—

 
(52
)
 
52

Acquisition-related costs(g)
 
—

 
(53
)
 
10

Certain significant items(h)
 
—

 
(96
)
 
1

Other unallocated(i)
 
—

 
(93
)
 
—

 
 
$
4,336

 
$
710

 
$
200

 
 
 
 
 
 
 
Year Ended December 31, 2011
 
 
 
 
 
 
U.S.
 
$
1,659

 
$
820

 
$
26

EuAfME
 
1,144

 
365

 
25

CLAR
 
788

 
275

 
25

APAC
 
642

 
196

 
15

Total reportable segments
 
4,233

 
1,656

 
91

Other business activities(d)
 
—

 
(279
)
 
15

Reconciling Items:
 
 
 
 
 
 
Corporate(e)
 
—

 
(504
)
 
31

Purchase accounting adjustments(f)
 
—

 
(82
)
 
59

Acquisition-related costs(g)
 
—

 
(122
)
 
6

Certain significant items(h)
 
—

 
(172
)
 
3

Other unallocated(i)
 
—

 
(103
)
 
—

 
 
$
4,233

 
$
394

 
$
205

(a) 
Revenue denominated in euros were $693 million in 2013, $639 million in 2012, and $710 million in 2011.
(b) 
Defined as income before provision for taxes on income.
(c) 
Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized.
(d) 
Other business activities reflects R&D costs managed by our Research and Development organization and not allocated to the operating segments.
(e) 
Corporate includes, among other things, administration expenses, interest expense, certain compensation and other costs not charged to our operating segments.
(f) 
Purchase accounting adjustments include certain charges related to intangible assets, property, plant and equipment not charged to our operating segments, and the fair value adjustments to inventory.
(g) 
Acquisition-related costs can include costs associated with acquiring, integrating and restructuring acquired businesses, such as allocated transaction costs, integration costs, restructuring charges and additional depreciation associated with asset restructuring. For additional information, see Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
(h) 
Certain significant items are substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items primarily include restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition, the impact of divestiture-related gains and losses and certain costs related to becoming an independent public company. For additional information, see Note 6. Restructuring Charges and Other Costs Associated with Acquisition and Cost-Reduction/Productivity Initiatives.
•
For 2013, certain significant items primarily includes: (i) Zoetis stand-up costs of $206 million; (ii) $20 million income primarily related to a reversal of certain employee termination expenses, partially offset by restructuring charges related to exiting certain manufacturing and research facilities; (iii) $6 million income on the government-mandated sale of certain product rights in Brazil that were acquired with the FDAH acquisition in 2009; (iv) asset impairment charges associated with asset restructuring of $19 million; (v) additional depreciation associated with asset restructuring of $8 million; (vi) write-offs of inventory and intercompany accounts that were transferred to us as part of the Separation from Pfizer of $24 million; and (vii) litigation-related charges of $5 million. Stand-up costs include certain nonrecurring costs related to becoming an independent public company, such as new branding (including changes to the manufacturing process for required new packaging), the creation of standalone systems and infrastructure, site separation, accelerated vesting and associated cash payment related to certain Pfizer equity awards, and certain legal registration and patent assignment costs.
•
For 2012, certain significant items includes: (i) $115 million for restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition; (ii) $14 million income related to a favorable legal settlement for an intellectual property matter; and (iii) $4 million income due to a change in estimate related to transitional manufacturing purchase agreements associated with divestitures.
•
In 2011, certain significant items includes: (i) $62 million for restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition; (ii) certain asset impairment charges of $69 million; (iii) certain charges to write-off inventory of $12 million; (iv) charges related to transitional manufacturing purchase agreements associated with divestitures of $27 million; and (v)other costs of $2 million.
(i) 
Includes overhead expenses associated with our manufacturing operations.
B. Geographic Information
Revenue exceeded $100 million in each of eight countries outside the United States in 2013, 2012 and 2011. The United States was the only country to contribute more than 10% of total revenue in each year.
Property, plant and equipment, less accumulated depreciation, by geographic region follow:
 
 
As of December 31,
(MILLIONS OF DOLLARS)
 
2013

 
2012

U.S.
 
$
827

 
$
788

EuAfME
 
233

 
224

CLAR
 
114

 
72

APAC
 
121

 
157

Property, plant and equipment, less accumulated depreciation
 
$
1,295

 
$
1,241


C.
Other Revenue Information
Significant Customers
We sell our livestock products primarily to veterinarians and livestock producers as well as third-party veterinary distributors, and retail outlets who generally sell the products to livestock producers. We sell our companion animal products primarily to veterinarians who then sell the products to pet owners. In 2013, sales to our largest U.S. veterinary distributor represented approximately 11% of total revenue. No single customer accounts for 10% or more of our total revenue in 2012 or 2011.
Revenue by Species
Significant species revenue are as follows:
 
 
Year Ended December 31,
(MILLIONS OF DOLLARS)
 
2013

 
2012

 
2011

Livestock:
 
 
 
 
 
 
Cattle
 
$
1,631

 
$
1,608

 
$
1,617

Swine
 
655

 
590

 
562

Poultry
 
541

 
501

 
501

Other
 
104

 
107

 
98

 
 
2,931

 
2,806

 
2,778

Companion Animal:
 
 
 
 
 
 
Horses
 
179

 
187

 
168

Dogs and Cats
 
1,451

 
1,343

 
1,287

 
 
1,630

 
1,530

 
1,455

Total revenue
 
$
4,561

 
$
4,336

 
$
4,233

Revenue by Major Product Category
Significant revenue by major product category are as follows:
 
 
Year Ended December 31,
(MILLIONS OF DOLLARS)
 
2013

 
2012

 
2011

Anti-infectives
 
$
1,295

 
$
1,268

 
$
1,311

Vaccines
 
1,201

 
1,117

 
1,077

Parasiticides
 
727

 
692

 
645

Medicated feed additives
 
446

 
403

 
347

Other pharmaceuticals
 
744

 
712

 
724

Other non-pharmaceuticals
 
148

 
144

 
129

Total revenue
 
$
4,561

 
$
4,336

 
$
4,233