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Table of Contents

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, 2020
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
At July 31, 2020, there were 475,144,704 shares of common stock outstanding.



Table of Contents
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)
Review Report of Independent Registered Public Accounting Firm
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.




Table of Contents
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)2020201920202019
Revenue$1,548  $1,547  $3,082  $3,002  
Costs and expenses:
Cost of sales
451  465  910  983  
Selling, general and administrative expenses
393  406  782  775  
Research and development expenses
111  111  218  213  
Amortization of intangible assets
40  39  80  77  
Restructuring charges and certain acquisition-related costs8  22  17  27  
Interest expense, net of capitalized interest
58  55  111  111  
Other (income)/deductions—net
5  (6) (15) (20) 
Income before provision for taxes on income482  455  979  836  
Provision for taxes on income106  84  180  153  
Net income before allocation to noncontrolling interests376  371  799  683  
Less: Net loss attributable to noncontrolling interests(1)   (1)   
Net income attributable to Zoetis Inc.$377  $371  $800  $683  
Earnings per share attributable to Zoetis Inc. stockholders:
 Basic$0.79  $0.77  $1.68  $1.43  
 Diluted$0.79  $0.77  $1.67  $1.41  
Weighted-average common shares outstanding:
 Basic475.3  478.8  475.4  479.2  
 Diluted478.1  482.3  478.6  482.7  
Dividends declared per common share$0.200  $0.164  $0.400  $0.328  

See notes to condensed consolidated financial statements.
1 |

Table of Contents
ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

Three Months EndedSix Months Ended
June 30,June 30,
(MILLIONS OF DOLLARS)2020201920202019
Net income before allocation to noncontrolling interests$376  $371  $799  $683  
Other comprehensive loss, net of taxes:
Unrealized (losses)/gains on derivatives for cash flow hedges, net
(4) 1  (32) 1  
Unrealized (losses)/gains on derivatives for net investment hedges, net
(14) (4) 3  4  
Foreign currency translation adjustments, net
(57) (68) (101) (45) 
Total other comprehensive loss, net of tax(75) (71) (130) (40) 
Comprehensive income before allocation to noncontrolling interests301  300  669  643  
Less: Comprehensive loss attributable to noncontrolling interests(1)   (1)   
Comprehensive income attributable to Zoetis Inc.$302  $300  $670  $643  



See notes to condensed consolidated financial statements.
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Table of Contents
ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,December 31,
20202019
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)(Unaudited)
Assets
Cash and cash equivalents(a)
$3,353  $1,934  
Accounts receivable, less allowance for doubtful accounts of $20 in 2020 and $21 in 2019984  1,086  
Inventories1,584  1,410  
Other current assets364  318  
Total current assets6,285  4,748  
Property, plant and equipment, less accumulated depreciation of $1,818 in 2020 and $1,737 in 20192,011  1,940  
Operating lease right of use assets181  189  
Goodwill2,629  2,592  
Identifiable intangible assets, less accumulated amortization1,783  1,890  
Noncurrent deferred tax assets88  88  
Other noncurrent assets92  98  
Total assets$13,069  $11,545  
Liabilities and Equity
Short-term borrowings$1  $  
Current portion of long-term debt500  500  
Accounts payable335  301  
Dividends payable95  95  
Accrued expenses475  543  
Accrued compensation and related items170  276  
Income taxes payable170  36  
Other current liabilities65  55  
Total current liabilities1,811  1,806  
Long-term debt, net of discount and issuance costs7,194  5,947  
Noncurrent deferred tax liabilities395  434  
Operating lease liabilities155  164  
Other taxes payable256  257  
Other noncurrent liabilities271  229  
Total liabilities10,082  8,837  
Commitments and contingencies (Note 16)
Stockholders' equity:
Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 474,999,478 and 475,528,210 shares outstanding at June 30, 2020, and December 31, 2019, respectively5  5  
Treasury stock, at cost, 26,891,765 and 26,363,033 shares of common stock at June 30, 2020, and December 31, 2019, respectively(2,245) (2,042) 
Additional paid-in capital
1,030  1,044  
Retained earnings
5,048  4,427  
Accumulated other comprehensive loss
(856) (726) 
Total Zoetis Inc. equity2,982  2,708  
Equity attributable to noncontrolling interests5    
Total equity2,987  2,708  
Total liabilities and equity$13,069  $11,545  
(a) As of June 30, 2020, and December 31, 2019, includes $0 million and $2 million, respectively, of restricted cash.
See notes to condensed consolidated financial statements.
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ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
Three months ended June 30, 2020
Zoetis
AccumulatedEquity
AdditionalOtherAttributable to
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, March 31, 2020501.9  $5  27.0  $(2,252) $1,017  $4,764  $(781) $  $2,753  
Net income—  —  —  —  —  377  —  (1) 376  
Other comprehensive loss—  —  —  —  —  —  (75) —  (75) 
Consolidation of noncontrolling interests—  —  —  —  —  —  —  6  6  
Share-based compensation awards (b)
—  —  (0.1)  13  2  —  —  22  
Dividends declared—  —  —  —  —  (95) —  —  (95) 
Balance, June 30, 2020501.9  $5  26.9  $(2,245) $1,030  $5,048  $(856) $5  $2,987  
Three months ended June 30, 2019
Zoetis
AccumulatedEquity
AdditionalOtherAttributable to
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, March 31, 2019501.9  $5  22.9  $(1,593) $1,008  $3,495  $(598) $  $2,317  
Net income—  —  —  —  —  371  —  —  371  
Other comprehensive loss—  —  —  —  —  —  (71) —  (71) 
Share-based compensation awards (b)
—  —  (0.2) 11  11  —  —  —  22  
Treasury stock acquired (c)
—  —  1.4  (150) —  —  —  —  (150) 
Dividends declared—  —  —  —  —  (78) —  —  (78) 
Balance, June 30, 2019501.9  $5  24.1  $(1,732) $1,019  $3,788  $(669) $  $2,411  
(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.
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ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - Continued
(UNAUDITED)
Six months ended June 30, 2020
Zoetis
AccumulatedEquity
AdditionalOtherAttributable to
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance December 31, 2019501.9  $5  26.4  $(2,042) $1,044  $4,427  $(726) $  $2,708  
Net income—  —  —  —  —  800  —  (1) 799  
Other comprehensive loss—  —  —  —  —  —  (130)   (130) 
Consolidation of noncontrolling interests
—  —  —  —  —  —  —    
Share-based compensation awards (b)
—  —  (1.3) 47  (15) 11  —  —  43  
Treasury stock acquired (c)
—  —  1.8  (250) —  —  —  —  (250) 
Employee benefit plan contribution from Pfizer Inc. (d)
—  —  —  —  1  —  —  —  1  
Dividends declared—  —  —  —  —  (190) —  —  (190) 
Balance, June 30, 2020501.9  $5  26.9  $(2,245) $1,030  $5,048  $(856) $5  $2,987