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Segment Information
 9 Months Ended
Sep. 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 vaccines, parasiticides, anti-infectives, dermatology, medicated feed additives, animal health diagnostics and other pharmaceuticals, for both companion animal and livestock 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
September 30,September 30,
(MILLIONS OF DOLLARS)2021202020212020
U.S.
Revenue$1,065 $996 
Cost of sales199 194 
Gross profit866 802 
    Gross margin81.3 %80.5 %
Operating expenses183 157 
Other (income)/deductions-net— — 
U.S. Earnings683 645 $13 $15 
International
Revenue(b)
904 767 
Cost of sales273 245 
Gross profit631 522 
    Gross margin69.8 %68.1 %
Operating expenses152 122 
Other (income)/deductions-net(4)— 
International Earnings483 400 17 15 
Total operating segments1,166 1,045 30 30 
Other business activities
(106)(87)6 6 
Reconciling Items:
Corporate
(252)(222)29 27 
Purchase accounting adjustments
(45)(48)45 48 
Acquisition-related costs
(1)(1)— — 
Certain significant items(c)
(12)(9)— — 
Other unallocated
(91)(81)— — 
Total Earnings(d)
$659 $597 $110 $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 $204 million and $186 million for the three months ended September 30, 2021 and 2020, respectively.
(c)    For the three months ended September 30, 2021, primarily represents employee termination costs associated with the realignment of our international operations and asset impairment charges related to a dairy product termination.
For the three months ended September 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)
Nine Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2021202020212020
U.S.
Revenue$3,002 $2,605 
Cost of sales575 515 
Gross profit2,427 2,090 
    Gross margin80.8 %80.2 %
Operating expenses484 418 
Other (income)/deductions-net2 4 
U.S. Earnings1,941 1,668 $40 $40 
International
Revenue(b)
2,750 2,203 
Cost of sales833 697 
Gross profit1,917 1,506 
    Gross margin69.7 %68.4 %
Operating expenses429 364 
Other (income)/deductions-net(4)1 
International Earnings1,492 1,141 52 41 
Total operating segments3,433 2,809 92 81 
Other business activities
(301)(264)20 19 
Reconciling Items:
Corporate
(744)(603)84 75 
Purchase accounting adjustments
(133)(155)133 155 
Acquisition-related costs
(8)(15)— — 
Certain significant items(c)
(44)(4)— — 
Other unallocated
(221)(192)2 2 
Total Earnings(d)
$1,982 $1,576 $331 $332 
(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 $605 million and $517 million for the nine months ended September 30, 2021 and 2020, respectively.
(c)    For the nine months ended September 30, 2021, primarily represents primarily represents asset impairment charges related to the consolidation of manufacturing sites in China and a dairy product termination, as well as employee termination costs associated with our international operations and other costs associated with cost-reduction and productivity initiatives.
For the nine months ended September 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 $18 million, partially offset by CEO transition-related costs of $14 million.
(d)    Defined as income before provision for taxes on income.