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Segment Information
 6 Months Ended
Jun. 30, 2021
Segment Reporting [Abstract]  
Segment Information
16. Segment Information
Operating Segments
We manage our operations through two geographic operating segments: the U.S. and International. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including parasiticides, vaccines, anti-infectives, dermatology, medicated feed additives, animal health diagnostics and other pharmaceuticals, for both livestock and companion animal customers. Our chief operating decision maker uses the revenue and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation.
Beginning in the first quarter of 2021, certain costs associated with information technology that specifically support our global manufacturing operations, which were previously reported in Other unallocated, are now reported in Corporate. In addition, in the first quarter of 2021, the company realigned certain management responsibilities. These changes did not impact the determination of our operating segments, however they resulted in the reallocation of certain costs between segments. These changes primarily include the following: (i) certain diagnostics costs, which were previously reported in Corporate, are now reported in our U.S. results; and (ii) certain other miscellaneous costs, which were previously reported in our U.S. results, are now reported in Corporate.
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, includes our Client Supply Services (CSS) contract manufacturing results, our human health business, and 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. Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the international commercial segment.
•    Corporate, includes platform functions such as information technology, facilities, legal, finance, human resources, business development, certain diagnostic costs and communications, 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 associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs; and (iii) Certain significant items, which comprise 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 as restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition, certain asset impairment charges, certain legal and commercial settlements and the impact of divestiture-related gains and losses.
•Other unallocated includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) procurement costs.
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.
Selected Statement of Income Information            
Earnings
Depreciation and Amortization(a)
Three Months EndedThree Months Ended
June 30,June 30,
(MILLIONS OF DOLLARS)2021202020212020
U.S.
Revenue$1,004 $823 
Cost of sales192 154 
Gross profit812 669 
    Gross margin80.9 %81.3 %
Operating expenses170 136 
Other (income)/deductions-net1 3 
U.S. Earnings641 530 $14 $12 
International
Revenue(b)
924 708 
Cost of sales278 228 
Gross profit646 480 
    Gross margin69.9 %67.8 %
Operating expenses147 117 
Other (income)/deductions-net— 1 
International Earnings499 362 18 12 
Total operating segments1,140 892 32 24 
Other business activities
(98)(90)7 7 
Reconciling Items:
Corporate
(262)(194)28 26 
Purchase accounting adjustments
(44)(53)44 53 
Acquisition-related costs
(2)(7)— — 
Certain significant items(c)
(24)(6)— — 
Other unallocated
(74)(60)1 1 
Total Earnings(d)
$636 $482 $112 $111 
(a)    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.
(b)    Revenue denominated in euros was $209 million and $161 million for the three months ended June 30, 2021 and 2020, respectively.
(c)    For the three months ended June 30, 2021, primarily represents asset impairment charges related to the consolidation of manufacturing sites in China, employee termination costs related to cost-reduction and productivity initiatives and a net loss related to the sale of certain assets of our poultry automation business located in the U.S. and Canada.
For the three months ended June 30, 2020, primarily represents CEO transition-related costs of $5 million.
(d)    Defined as income before provision for taxes on income.
Earnings
Depreciation and Amortization(a)
Six Months EndedSix Months Ended
June 30,June 30,
(MILLIONS OF DOLLARS)2021202020212020
U.S.
Revenue$1,937 $1,609 
Cost of sales376 321 
Gross profit1,561 1,288 
    Gross margin80.6 %80.0 %
Operating expenses301 261 
Other (income)/deductions-net2 4 
U.S. Earnings1,258 1,023 $27 $25 
International
Revenue(b)
1,846 1,436 
Cost of sales560 452 
Gross profit1,286 984 
    Gross margin69.7 %68.5 %
Operating expenses277 242 
Other (income)/deductions-net— 1 
International Earnings1,009 741 35 26 
Total operating segments2,267 1,764 62 51 
Other business activities
(195)(177)14 13 
Reconciling Items:
Corporate
(492)(381)55 48 
Purchase accounting adjustments
(88)(107)88 107 
Acquisition-related costs
(7)(14)— — 
Certain significant items(c)
(32)5 — — 
Other unallocated
(130)(111)2 2 
Total Earnings(d)
$1,323 $979 $221 $221 
(a)    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.
(b)    Revenue denominated in euros was $401 million and $331 million for the six months ended June 30, 2021 and 2020, respectively.
(c)    For the six months ended June 30, 2021, primarily represents asset impairment charges related to the consolidation of manufacturing sites in China, employee termination costs related to cost-reduction and productivity initiatives and a net loss related to the sale of certain assets of our poultry automation business located in the U.S. and Canada.
For the six months ended June 30, 2020, primarily represents a net gain resulting from a cash payment received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites of $17 million, partially offset by CEO transition-related costs of $9 million.
(d)    Defined as income before provision for taxes on income.