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Segment Information
 9 Months Ended
Sep. 30, 2024
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, anti-infectives, pain and sedation, other pharmaceutical, 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 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 and divestiture-related costs, where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs, as well as divestiture-related 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 or divestiture, 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)2024202320242023
U.S.
Revenue$1,346 $1,174 
Cost of sales258 228 
Gross profit1,088 946 
    Gross margin80.8 %80.6 %
Operating expenses199 202 
Other (income)/deductions-net— — 
U.S. Earnings889 744 $20 $19 
International
Revenue(b)
1,021 956 
Cost of sales321 306 
Gross profit700 650 
    Gross margin68.6 %68.0 %
Operating expenses157 156 
Other (income)/deductions-net1 1 
International Earnings542 493 25 24 
Total operating segments1,431 1,237 45 43 
Other business activities
(137)(124)9 9 
Reconciling Items:
Corporate
(306)(258)31 33 
Purchase accounting adjustments
(35)(39)35 39 
Acquisition and divestiture-related costs
(7)(3)— — 
Certain significant items(c)
(1)(23)— — 
Other unallocated
(71)(73)1 — 
Total Earnings(d)
$874 $717 $121 $124 
(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 $234 million and $206 million for the three months ended September 30, 2024 and 2023, 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.
(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)2024202320242023
U.S.
Revenue$3,817 $3,344 
Cost of sales707 645 
Gross profit3,110 2,699 
    Gross margin81.5 %80.7 %
Operating expenses593 602 
Other (income)/deductions-net— — 
U.S. Earnings2,517 2,097 $65 $58 
International
Revenue(b)
3,063 2,929 
Cost of sales976 912 
Gross profit2,087 2,017 
    Gross margin68.1 %68.9 %
Operating expenses491 473 
Other (income)/deductions-net1 1 
International Earnings1,595 1,543 73 67 
Total operating segments4,112 3,640 138 125 
Other business activities
(411)(354)29 24 
Reconciling Items:
Corporate
(893)(722)96 95 
Purchase accounting adjustments
(107)(124)107 118 
Acquisition and divestiture-related costs
(12)(8)— — 
Certain significant items(c)
(77)45 — — 
Other unallocated
(211)(191)4 3 
Total Earnings(d)
$2,401 $2,286 $374 $365 
(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 $694 million and $627 million for the nine months ended September 30, 2024 and 2023, respectively.
(c)    For the nine months ended September 30, 2024, primarily consisted of employee termination costs related to organizational structure refinements, a loss on assets held for sale related to the planned sale of our medicated feed additive product portfolio, certain water soluble products and related assets, as well as asset impairment charges related to our aquaculture business, partially offset by a reversal of certain employee termination costs as a result of a change in strategy from our 2015 operational efficiency initiative.
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.
(d)    Defined as income before provision for taxes on income.