Segment Information

3 Months Ended

Mar. 31, 2025

Segment Reporting [Abstract]

Segment Information

16. Segment Information

Operating Segments

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, anti-infectives, pain and sedation, other pharmaceutical and animal health diagnostics for both companion animal and livestock customers.

On October 31, 2024, we completed the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets, and, as a result, our major product categories no longer include the category of medicated feed additives. See Note 5. Divestitures.

Our operating segments are the U.S. and International. The chief operating decision maker (CODM), our Chief Executive Officer and Chief Financial Officer, uses the information provided to compare segment performance with segment resource requests and allocates human and capital resources based on segment’s actual results and expected future results.

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 CODM 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 Ended						Three Months Ended
	March 31,						March 31,
(MILLIONS OF DOLLARS)	2025			2024			2025		2024
U.S.
Revenue	$	1,183		$	1,163
Cost of sales	199			217
Gross profit	984			946
Gross margin	83.2		%	81.3		%
Operating expenses(b)	205			190
Other (income)/deductions-net	—			—
U.S. Earnings	779			756			$	23	$	24
International
Revenue(c)	1,008			1,007
Cost of sales	302			313
Gross profit	706			694
Gross margin	70.0		%	68.9		%
Operating expenses(b)	154			159
Other (income)/deductions-net	1			—
International Earnings	551			535			23		23
Total operating segments	1,330			1,291			46		47
Other business activities	(129)			(132)			11		9
Reconciling Items:
Corporate	(271)			(288)			29		32
Purchase accounting adjustments	(32)			(37)			32		37
Certain significant items	(6)			(6)			—		—
Other unallocated	(82)			(81)			1		1
Total Earnings(d)	$	810		$	747		$	119	$	126

(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)    Operating expenses primarily consisted of field selling, other marketing expenses, advertising and promotions, and freight and logistics costs.

(c)    Revenue denominated in euros was $227 million and $223 million for the three months ended March 31, 2025 and 2024, respectively.

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