Segment Information

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Segment Information

We manage our operations through two geographic regions. 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, anti-infectives, animal health diagnostics and medicated feed additives, for both companion animal and livestock customers.

Operating Segments

Our operating segments are the U.S. and International. 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 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. Total assets were approximately $14.3 billion and $14.9 billion at December 31, 2023 and 2022, respectively.

Selected Statement of Income Information                                 

	Earnings									Depreciation and Amortization(a)
	Year Ended December 31,									Year Ended December 31,
(MILLIONS OF DOLLARS)	2023			2022			2021			2023		2022		2021
U.S.
Revenue	$	4,555		$	4,313		$	4,042
Cost of Sales	900			803			788
Gross Profit	3,655			3,510			3,254
Gross Margin	80.2		%	81.4		%	80.5		%
Operating Expenses	786			765			681
Other (income)/deductions-net	6			(18)			4
U.S. Earnings	2,863			2,763			2,569			$	80	$	55	$	54
International
Revenue(b)	3,911			3,681			3,652
Cost of Sales	1,234			1,083			1,106
Gross Profit	2,677			2,598			2,546
Gross Margin	68.4		%	70.6		%	69.7		%
Operating Expenses	638			611			602
Other (income)/deductions-net	2			(3)			(4)
International Earnings	2,037			1,990			1,948			92		86		74
Total operating segments	4,900			4,753			4,517			172		141		128
Other business activities	(496)			(424)			(406)			33		28		28
Reconciling Items:
Corporate	(1,042)			(1,073)			(1,052)			128		132		115
Purchase accounting adjustments	(159)			(160)			(175)			153		159		175
Acquisition-related costs	(9)			(5)			(12)			—		—		—
Certain significant items(c)	33			(56)			(73)			—		—		—
Other unallocated	(291)			(379)			(311)			5		5		2
Total Earnings(d)	$	2,936		$	2,656		$	2,488		$	491	$	465	$	448

(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 $853 million in 2023, $774 million in 2022 and $814 million in 2021.

(c)    For 2023, certain significant items primarily consisted of a gain on the sale of a majority interest in our pet insurance business of $101 million, partially offset by employee termination and exit costs related to organizational structure refinements of $43 million and certain asset impairment charges primarily related to our precision animal health and diagnostics businesses of $24 million.

For 2022, certain significant items primarily represents inventory and asset impairment charges related to customer relationships, developed technology rights and property, plant and equipment in our diagnostics, poultry, cattle and swine businesses and the consolidation of manufacturing sites in China of $47 million, as well as employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets of $4 million.

For 2021, certain significant items primarily included certain asset impairment charges of $46 million, as well as employee termination costs associated with our international operations and other costs associated with cost-reduction and productivity initiatives of $24 million.

(d)    Defined as income before provision for taxes on income.

B. Geographic Information

Property, plant and equipment, less accumulated depreciation, by geographic region follow:

	As of December 31,
(MILLIONS OF DOLLARS)	2023		2022
U.S.	$	2,092	$	1,820
International	1,112		933
Property, plant and equipment, less accumulated depreciation	$	3,204	$	2,753