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Segment Information
 9 Months Ended
Sep. 30, 2023
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, dermatology, other pharmaceutical products, anti-infectives, animal health diagnostics and medicated feed additives, 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.
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 enabling functions such as information technology, facilities, legal, finance, human resources, business development, certain diagnostic costs and communications, among others. These costs also include certain compensation costs, certain procurement 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) certain 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)2023202220232022
U.S.
Revenue$1,174 $1,090 
Cost of sales228 204 
Gross profit946 886 
    Gross margin80.6 %81.3 %
Operating expenses202 206 
Other (income)/deductions-net— 1 
U.S. Earnings744 679 $19 $12 
International
Revenue(b)
956 889 
Cost of sales306 256 
Gross profit650 633 
    Gross margin68.0 %71.2 %
Operating expenses156 150 
Other (income)/deductions-net1 (3)
International Earnings493 486 24 21 
Total operating segments1,237 1,165 43 33 
Other business activities
(124)(106)9 7 
Reconciling Items:
Corporate
(258)(245)33 33 
Purchase accounting adjustments
(39)(40)39 40 
Acquisition-related costs
(3)(1)— — 
Certain significant items(c)
(23)(6)— — 
Other unallocated
(73)(100)— 2 
Total Earnings(d)
$717 $667 $124 $115 
(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 $206 million and $183 million for the three months ended September 30, 2023 and 2022, respectively.
(c)    For the three months ended September 30, 2023, primarily consisted of employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives, as well as certain asset impairment charges related to our diagnostics and precision animal health businesses.
For the three months ended September 30, 2022, primarily represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, as well as asset impairment charges related to the consolidation of manufacturing sites in China.
(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)2023202220232022
U.S.
Revenue$3,344 $3,201 
Cost of sales645 587 
Gross profit2,699 2,614 
    Gross margin80.7 %81.7 %
Operating expenses602 578 
Other (income)/deductions-net— (6)
U.S. Earnings2,097 2,042 $58 $40 
International
Revenue(b)
2,929 2,780 
Cost of sales912 809 
Gross profit2,017 1,971 
    Gross margin68.9 %70.9 %
Operating expenses473 456 
Other (income)/deductions-net1 (5)
International Earnings1,543 1,520 67 62 
Total operating segments3,640 3,562 125 102 
Other business activities
(354)(315)24 21 
Reconciling Items:
Corporate
(722)(771)95 99 
Purchase accounting adjustments
(124)(120)118 120 
Acquisition-related costs
(8)(4)— — 
Certain significant items(c)
45 (10)— — 
Other unallocated
(191)(278)3 4 
Total Earnings(d)
$2,286 $2,064 $365 $346 
(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 $627 million and $590 million for the nine months ended September 30, 2023 and 2022, respectively.
(c)    For the nine months ended September 30, 2023, primarily consisted of a gain on the sale of a majority interest in our pet insurance business, partially offset by employee termination costs related to organizational structure refinements and certain asset impairment charges related to our precision animal health and diagnostics businesses.
For the nine months ended September 30, 2022, primarily represents inventory and asset impairment charges related to the consolidation of manufacturing sites in China as well as employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets.
(d)    Defined as income before provision for taxes on income.