Cover
Cover - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Feb. 11, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Document Annual Report | true | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2020 | ||
Entity Registrant Name | Zoetis Inc. | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Entity Incorporation, State or Country Code | DE | ||
Title of 12(b) Security | Common Stock, $0.01 par value per share | ||
Trading Symbol | ZTS | ||
Security Exchange Name | NYSE | ||
Entity Central Index Key | 0001555280 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 475,166,373 | ||
Entity Interactive Data Current | Yes | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 65,094 | ||
Entity File Number | 001-35797 | ||
Entity Tax Identification Number | 46-0696167 | ||
Entity Address, Address Line One | 10 Sylvan Way, | ||
Entity Address, City or Town | Parsippany, | ||
Entity Address, State or Province | NJ | ||
Entity Address, Postal Zip Code | 07054 | ||
City Area Code | 973 | ||
Local Phone Number | 822-7000 | ||
Document Transition Report | false |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Income Statement [Abstract] | ||||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 | |
Costs and expenses: | ||||
Cost of Sales | [1] | 2,057 | 1,992 | 1,911 |
Selling, general and administrative expenses | [1] | 1,726 | 1,638 | 1,484 |
Research and development expenses | [1] | 463 | 457 | 432 |
Amortization of intangible assets | 160 | 155 | 117 | |
Restructuring charges and certain acquisition-related costs | 25 | 51 | 68 | |
Interest expense, net of capitalized interest | 231 | 223 | 206 | |
Other (income)/deductions––net | 17 | (57) | (83) | |
Income before provision for taxes on income | [2] | 1,996 | 1,801 | 1,690 |
Provision for taxes on income | [3],[4] | 360 | 301 | 266 |
Net income before allocation to noncontrolling interests | 1,636 | 1,500 | 1,424 | |
Less: Net loss attributable to noncontrolling interests | (2) | 0 | (4) | |
Net income attributable to Zoetis | $ 1,638 | $ 1,500 | $ 1,428 | |
Earnings per share attributable to Zoetis Inc. stockholders: | ||||
Basic (in dollars per share) | $ 3.44 | $ 3.14 | $ 2.96 | |
Diluted (in dollars per share) | $ 3.42 | $ 3.11 | $ 2.93 | |
Weighted-average common shares outstanding: | ||||
Basic (in shares) | 475,502 | 478,128 | 483,063 | |
Diluted (in shares) | 478,569 | 481,787 | 486,898 | |
Dividends declared per common share | $ 0.850 | $ 0.692 | $ 0.542 | |
[1] | Exclusive of amortization of intangible assets, except as disclosed in Note 3. Significant Accounting Policies—Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets. | |||
[2] | Defined as income before provision for taxes on income. | |||
[3] | In 2020, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies); • a $29 million discrete tax benefit recorded in 2020 related to the excess tax benefits for share-based payments; • a $19 million net discrete tax benefit recorded in 2020 related to changes in various other tax items; • a $7 million discrete tax benefit recorded in 2020 related to the remeasurement of deferred taxes resulting from the integration of acquired businesses; • a $5 million discrete tax expense related to the changes in valuation allowances; • a $4 million discrete tax benefit recorded in 2020 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates; and • a $4 million net discrete tax benefit recorded in 2020 related to the effective settlement of certain issues with tax authorities. (b) In 2019, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ); • the impact of the GILTI tax, a new provision of the Tax Act, which became effective for the company in the first quarter of 2019; • a $20 million discrete tax benefit recorded in 2019 related to the excess tax benefits for share-based payments; • an $18 million discrete tax benefit related to the changes in valuation allowances; • a $14 million net discrete tax benefit recorded in the third quarter of 2019 due to a change in tax basis related to purchase accounting; • a $12 million net discrete tax benefit recorded in 2019 related to changes in various other tax items; • a $10 million net discrete tax benefit recorded in 2019 related to the effective settlement of certain issues with tax authorities; and • an $8 million discrete tax benefit recorded in 2019 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. | |||
[4] | In 2018 , the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S Research and Development Tax Credit; • tax expense related to the changes in valuation allowances and the resolution of other tax items; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ): • the reduction of the U.S. federal corporate income tax rate, from 35% to 21%, effective January 1, 2018, pursuant to the Tax Act; • a $45 million net tax benefit recorded in 2018 associated with a measurement-period adjustment to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings pursuant to the Tax Act; • a $23 million discrete tax benefit recorded in 2018 related to the favorable impact of certain tax accounting method changes; • a $15 million discrete tax benefit recorded in 2018 related to the excess tax benefits for share-based payments; and • a $5 million discrete tax benefit recorded in 2018 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Statement of Comprehensive Income [Abstract] | ||||
Net income before allocation to noncontrolling interests | $ 1,636 | $ 1,500 | $ 1,424 | |
Other comprehensive loss, net of tax and reclassification adjustments: | ||||
Unrealized (loss)/gain on derivatives, net | [1] | (58) | 12 | 9 |
Foreign currency translation adjustments, net | 69 | (104) | (134) | |
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), before Reclassification, after Tax | [1] | (15) | 4 | (1) |
Benefit plans: Actuarial gain/(loss), net | [1] | 0 | (9) | 2 |
Total other comprehensive loss, net of tax | (4) | (97) | (124) | |
Comprehensive income before allocation to noncontrolling interests | 1,632 | 1,403 | 1,300 | |
Comprehensive loss attributable to noncontrolling interests | (2) | 0 | (4) | |
Comprehensive income attributable to Zoetis | $ 1,634 | $ 1,403 | $ 1,304 | |
[1] | Presented net of reclassification adjustments and tax impacts, which are not significant in any period presented. Reclassification adjustments related to benefit plans are generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, general and administrative expenses, and/or Research and development expenses, as appropriate, in the Consolidated Statements of Income. |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | |
Assets | |||
Cash and cash equivalents | [1] | $ 3,604 | $ 1,934 |
Accounts receivable, less allowance for doubtful accounts of $20 in 2020 and $21 in 2019 | 1,013 | 1,086 | |
Inventories | 1,628 | 1,410 | |
Other current assets | 366 | 318 | |
Total current assets | 6,611 | 4,748 | |
Property, plant and equipment, less accumulated depreciation of $1,952 in 2020 and $1,737 in 2019 | 2,202 | 1,940 | |
Operating Lease, Right-of-Use Asset | 192 | 189 | |
Goodwill | 2,694 | 2,592 | |
Identifiable intangible assets, less accumulated amortization | 1,710 | 1,890 | |
Noncurrent deferred tax assets | 94 | 88 | |
Other noncurrent assets | 106 | 98 | |
Total assets | 13,609 | 11,545 | |
Liabilities and Equity | |||
Short-term borrowings | 4 | 0 | |
Current portion of long term debt | 600 | 500 | |
Accounts payable | 457 | 301 | |
Dividends payable | 119 | 95 | |
Accrued expenses | 556 | 543 | |
Accrued compensation and related items | 295 | 276 | |
Income taxes payable | 46 | 36 | |
Other current liabilities | 93 | 55 | |
Total current liabilities | 2,170 | 1,806 | |
Long-term debt, net of discount and issuance costs | 6,595 | 5,947 | |
Noncurrent deferred tax liabilities | 378 | 434 | |
Operating Lease, Liability, Noncurrent | 163 | 164 | |
Other taxes payable | 260 | 257 | |
Other noncurrent liabilities | 270 | 229 | |
Total liabilities | 9,836 | 8,837 | |
Common stock, $0.01 par value: 6,000,000,000 authorized, 501,891,243 and 501,891,243 shares issued; 475,317,751 and 475,528,210 shares outstanding at December 31, 2020 and 2019, respectively | 5 | 5 | |
Treasury stock, at cost, 26,573,492 and 26,363,033 shares of common stock at December 31, 2020 and 2019, respectively | (2,230) | (2,042) | |
Additional paid-in capital | 1,065 | 1,044 | |
Retained earnings | 5,659 | 4,427 | |
Accumulated other comprehensive loss | (730) | (726) | |
Stockholders' Equity Attributable to Parent | 3,769 | 2,708 | |
Stockholders' Equity Attributable to Noncontrolling Interest | 4 | 0 | |
Total equity | 3,773 | 2,708 | |
Total liabilities and equity | 13,609 | 11,545 | |
Restricted cash | $ 2 | $ 2 | |
[1] | As of December 31, 2020 and 2019, includes $2 million of restricted cash. |
CONSOLIDATED BALANCE SHEETS (PA
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 20 | $ 21 |
Accumulated depreciation | $ 1,952 | $ 1,737 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 6,000,000,000 | 6,000,000,000 |
Common stock, shares issued | 501,891,243 | 501,891,243 |
Common stock, shares outstanding | 475,317,751 | 475,528,210 |
Treasury shares | 26,573,492 | 26,363,022 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Millions | Total | Common Stock | [1] | Treasury Stock | [1] | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Equity Attributable to Noncontrolling Interests | Share Repurchase Program | |
Treasury shares | 15,800,000 | ||||||||||
Common stock, shares outstanding | 501,900,000 | ||||||||||
Beginning balance at Dec. 31, 2017 | $ 1,786 | $ 5 | $ (852) | $ 1,013 | $ 2,109 | $ (505) | $ 16 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income/(loss) | 1,424 | 1,428 | (4) | ||||||||
Other comprehensive loss | $ (124) | (124) | 0 | ||||||||
Stock-based compensation | 0 | ||||||||||
Treasury Stock, Shares, Acquired | 1,700,000 | 8,200,000 | |||||||||
The fair value of our noncontrolling interest in a VIE | $ 26 | 12 | |||||||||
Share-based compensation awards | [2] | $ 81 | 63 | 24 | (6) | ||||||
Share repurchase program | 0 | ||||||||||
Treasury stock acquired | [3] | $ (698) | (698) | ||||||||
Employee benefit plan contribution from Pfizer Inc. | [4] | 3 | 3 | ||||||||
Dividends declared | (261) | (261) | |||||||||
Ending balance at Dec. 31, 2018 | $ 2,185 | 5 | (1,487) | 1,026 | 3,270 | (629) | |||||
Treasury shares | 22,300,000 | ||||||||||
Common stock, shares outstanding | 501,900,000 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income/(loss) | $ 1,500 | 1,500 | 0 | ||||||||
Other comprehensive loss | $ (97) | (97) | 0 | ||||||||
Stock-based compensation | 0 | ||||||||||
Treasury Stock, Shares, Acquired | 1,800,000 | 5,800,000 | |||||||||
Share-based compensation awards | [2] | $ 73 | 71 | 15 | (13) | ||||||
Share repurchase program | 0 | ||||||||||
Treasury stock acquired | [3] | $ (626) | (626) | ||||||||
Employee benefit plan contribution from Pfizer Inc. | [4] | 3 | 3 | ||||||||
Dividends declared | (330) | (330) | |||||||||
Ending balance at Dec. 31, 2019 | $ 2,708 | 5 | (2,042) | 1,044 | 4,427 | (726) | 0 | ||||
Treasury shares | 26,363,022 | ||||||||||
Common stock, shares outstanding | 501,891,243 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income/(loss) | $ 1,636 | (2) | |||||||||
Other comprehensive loss | $ (4) | (4) | 0 | ||||||||
Treasury Stock, Shares, Acquired | 1,600,000 | 1,800,000 | |||||||||
Consolidation of a noncontrolling interest | [4] | $ 6 | 6 | ||||||||
Share-based compensation awards | [2] | 78 | 62 | 18 | (2) | ||||||
Treasury stock acquired | [3] | (250) | (250) | ||||||||
Employee benefit plan contribution from Pfizer Inc. | [4] | 3 | 3 | ||||||||
Dividends declared | (404) | (404) | |||||||||
Ending balance at Dec. 31, 2020 | $ 3,773 | $ 5 | $ (2,230) | $ 1,065 | $ 5,659 | $ (730) | $ 4 | ||||
Treasury shares | 26,573,492 | ||||||||||
Common stock, shares outstanding | 501,891,243 | ||||||||||
[1] | For the twelve months ended December 31, 2018, represents the acquisition of a European livestock monitoring company. | ||||||||||
[2] | Includes the issuance of shares of Zoetis Inc. common stock and the reacquisition of shares of treasury stock associated with exercises of employee share-based awards. Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information, see Note 15. Share-based Payments and Note 16. Stockholders' Equity. | ||||||||||
[3] | Reflects the acquisition of treasury shares in connection with the share repurchase program. For additional information, see Note 16. Stockholders' Equity . | ||||||||||
[4] | Represents contributed capital from Pfizer Inc. associated with service credit continuation for certain Zoetis Inc. employees in Pfizer Inc.'s U.S. qualified defined benefit and U.S. retiree medical plans. See Note 14. Benefit Plans. |
CONSOLIDATED STATEMENTS OF EQ_2
CONSOLIDATED STATEMENTS OF EQUITY (PARENTHETICAL) - shares | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Stockholders' Equity [Abstract] | ||||
Common stock, shares outstanding | 475,317,751 | 475,528,210 | ||
Treasury shares | 26,573,492 | 26,363,022 | 22,300,000 | 15,800,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||||
Operating Activities | ||||||
Net income before allocation to noncontrolling interests | $ 1,636 | $ 1,500 | $ 1,424 | |||
Adjustments to reconcile net income before noncontrolling interests to net cash provided by/(used in) operating activities | ||||||
Depreciation and amortization expense | [1],[2] | 441 | 412 | 308 | ||
Share-based compensation expense | 59 | 67 | 53 | |||
Asset write-offs and asset impairments | 43 | 7 | 4 | |||
Net gain on sales of assets | (19) | (20) | (42) | |||
Provision for losses on inventory | 105 | 68 | 54 | |||
Deferred taxes(a) | [3] | (62) | (79) | (112) | ||
Employee benefit plan contribution from Pfizer Inc. | 3 | 3 | 3 | |||
Other non-cash adjustments | 11 | (12) | (14) | |||
Other changes in assets and liabilities, net of acquisitions and divestitures | ||||||
Accounts receivable | 74 | (69) | (67) | |||
Inventories | (346) | (104) | 61 | |||
Other assets | (68) | (51) | (42) | |||
Accounts payable | 147 | (10) | 37 | |||
Other liabilities | 91 | 91 | 56 | |||
Other tax accounts, net | 17 | (8) | 67 | |||
Net cash provided by operating activities | 2,126 | 1,795 | 1,790 | |||
Investing Activities | ||||||
Capital expenditures | (453) | (460) | (338) | |||
Acquisition of Abaxis, net of cash acquired | 0 | 0 | (1,884) | |||
Other acquisitions | (113) | (195) | (114) | |||
Net proceeds from sale of assets | 21 | 21 | 56 | |||
Proceeds from maturities and redemptions of investments | 0 | 101 | 28 | |||
Net proceeds on swaps designated as net investment hedges | (27) | 37 | 0 | |||
Other investing activities | 0 | (8) | (7) | |||
Net cash used in investing activities | (572) | (504) | (2,259) | |||
Financing Activities | ||||||
Increase/(decrease) in short-term borrowings, net | 4 | (9) | 8 | |||
Principal payments on long-term debt | (500) | 0 | 0 | |||
Proceeds from issuance of long-term debt—senior notes, net of discount and fees | 1,240 | 0 | 1,496 | |||
Payment of contingent consideration related to previously acquired assets | (2) | (9) | (12) | |||
Share-based compensation-related proceeds, net of taxes paid on withholding shares and excess tax benefits | 20 | 7 | 19 | |||
Purchases of treasury stock | (250) | (626) | (698) | |||
Cash dividends paid | (380) | (314) | (243) | |||
Acquisition of a noncontrolling interest, net of cash acquired | 3 | 0 | (26) | |||
Net cash provided by/(used in) financing activities | 123 | (951) | 533 | |||
Effect of exchange-rate changes on cash and cash equivalents | (7) | (8) | (26) | |||
Net increase in cash and cash equivalents | 1,670 | 332 | 38 | |||
Cash and cash equivalents at beginning of period | 3,604 | [4] | 1,934 | [4] | 1,602 | |
Cash paid during the period for: | ||||||
Income taxes | 418 | 418 | 336 | |||
Interest, net of capitalized interest | 257 | 247 | 190 | |||
Non-cash transactions: | ||||||
Capital expenditures | 3 | 7 | 7 | |||
Contingent purchase price consideration | 0 | 23 | 0 | |||
Dividends payable | 119 | 95 | 79 | |||
Payments to Settle Derivative Instruments | (6) | 0 | 0 | |||
Payments of Debt Issuance Costs | $ (12) | $ 0 | $ (11) | |||
[1] | 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. | |||||
[2] | Defined as income before provision for taxes on income. | |||||
[3] | For 2018, reflects the reclassification of the one-time deemed repatriation tax from Noncurrent deferred tax liabilities to Income taxes payable and Other taxes payable to properly reflect the liability, which became a fixed obligation in 2018, payable over eight years. | |||||
[4] | As of December 31, 2020 and 2019, includes $2 million of restricted cash. |
Business Description
Business Description | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Description | etis Inc. (including its subsidiaries, collectively, Zoetis, the company, we, us or our) is a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products, biodevices, genetic tests and precision livestock farming technology. We organize and operate our business in two geographic regions: the United States (U.S.) and International. We directly market our products in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America. Our products are sold in more than 100 countries, including developed markets and emerging markets. We have a diversified business, marketing products across eight core species: dogs, cats and horses (collectively, companion animals) and cattle, swine, poultry, fish and sheep (collectively, livestock); and within seven major product categories: vaccines, anti-infectives, parasiticides, dermatology, other pharmaceutical products, medicated feed additives and animal health diagnostics. We were incorporated in Delaware in July 2012 and prior to that the company was a business unit of Pfizer Inc. (Pfizer). |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 2. Basis of Presentation The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). For subsidiaries operating outside the United States, the consolidated financial information is included as of and for the fiscal year ended November 30 for each year presented. All significant intercompany balances and transactions between the legal entities that comprise Zoetis have been eliminated. For those subsidiaries included in these consolidated financial statements where our ownership is less than 100%, including a variable interest entity consolidated by Zoetis as the primary beneficiary, the noncontrolling interests have been shown in equity as Equity attributable to noncontrolling interests |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | ecently Adopted Accounting Standards In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Topic 350-40), an accounting standards update which expands the scope of costs associated with cloud computing arrangements that must be capitalized. Under the new guidance, costs associated with implementing a cloud computing arrangement that is a service contract must be capitalized and expensed over the term of the hosting arrangement. We adopted this guidance as of January 1, 2020, the required effective date, on a prospective basis. The adoption did not have a significant impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), an accounting standards update which requires an entity to measure and recognize expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. We adopted this guidance as of January 1, 2020, the required effective date, on a prospective basis. The adoption did not have a significant impact on our consolidated financial statements. Recently Issued Accounting Standards In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . The new guidance provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and effective as of March 12, 2020, but is only available through December 31, 2022. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements and related disclosures, as well as the timing of the potential adoption. Estimates and Assumptions In preparing the consolidated financial statements, we use certain estimates and assumptions that affect reported amounts and disclosures, including amounts recorded in connection with acquisitions. These estimates and underlying assumptions can impact all elements of our consolidated financial statements. For example, in the Consolidated Statements of Income, estimates are used when accounting for deductions from revenue (such as rebates, sales allowances, product returns and discounts), determining cost of sales, allocating cost in the form of depreciation and amortization, and estimating restructuring charges and the impact of contingencies. On the Consolidated Balance Sheets, estimates are used in determining the valuation and recoverability of assets, such as accounts receivables, inventories, fixed assets, goodwill and other identifiable intangible assets, and estimates are used in determining the reported amounts of liabilities, such as taxes payable, uncertain tax positions, benefit obligations, the impact of contingencies, deductions from revenue and restructuring reserves, all of which also impact the Consolidated Statements of Income. Our estimates are often based on complex judgments, probabilities and assumptions that we believe to be reasonable but that can be inherently uncertain and unpredictable. If our estimates and assumptions are not representative of actual outcomes, our results could be materially impacted. As future events and their effects cannot be determined with precision, our estimates and assumptions may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. We are subject to risks and uncertainties that may cause actual results to differ from estimated amounts, such as changes in competition, litigation, legislation and regulations. We regularly evaluate our estimates and assumptions using historical experience and expectations about the future. We adjust our estimates and assumptions when facts and circumstances indicate the need for change. Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required to be treated retrospectively under relevant accounting standards. It is possible that others, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. Acquisitions Our consolidated financial statements include the operations of acquired businesses from the date of acquisition. We account for acquired businesses using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date and that the fair value of acquired in-process research and development (IPR&D) be recorded on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. When we acquire net assets that do not constitute a business as defined in U.S. GAAP, no goodwill is recognized. Amounts recorded for acquisitions can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions . Leases We determine if a contract contains a lease at inception. Our current portfolio includes only operating leases which are recorded as a right of use asset, as of the lease commencement date, in an amount equal to the present value of future payments over the lease term. We have elected not to recognize right of use assets and lease liabilities for short-term leases of vehicles and equipment with a lease term of twelve months or less. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. A corresponding lease liability is recorded within Other current liabilities and Operating lease liabilities . The present value of future payments is discounted using the rate implicit in the lease, when available. When the implicit rate is not available, as is frequently the case with our lease portfolio, the present value is calculated using our incremental borrowing rate, which is determined on the commencement date. The incremental borrowing rate represents the rate of interest that we would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. As we do not borrow on a collateralized basis, our non-collateralized borrowing rate is used as an input in deriving the incremental borrowing rate. Fixed lease payments are recognized on straight-line basis over the lease term, while variable payments are recognized in the period incurred. Variable lease payments include real estate taxes and charges for other non-lease services due to lessors that are not dependent on an index or rate and utilization based charges associated with fleet vehicles. Our real estate and fleet lease contracts may include fixed consideration attributable to both lease and non-lease components, including non-lease services provided by the vendor, which are accounted for as a single fixed minimum payment. For leases of certain classes of machinery and equipment, contract consideration is allocated to lease and non-lease components on the basis of relative standalone price. Foreign Currency Translation For most of our international operations, local currencies have been determined to be the functional currencies. We translate functional currency assets and liabilities to their U.S. dollar equivalents at exchange rates in effect at the balance sheet date and we translate functional currency income and expense amounts to their U.S. dollar equivalents at average exchange rates for the period. The U.S. dollar effects that arise from changing translation rates are recorded in Other comprehensive income/(loss), net of tax. The effects of converting non-functional currency assets and liabilities into the functional currency are recorded in Other (income)/deductions––net. For operations in highly inflationary economies, we translate monetary items at rates in effect at the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net , and we translate non-monetary items at historical rates. Revenue, Deductions from Revenue and the Allowance for Doubtful Accounts We recognize revenue from product sales when control of the goods has transferred to the customer, which is typically once the goods have shipped and the customer has assumed title. Revenue reflects the total consideration to which we expect to be entitled (i.e., the transaction price), in exchange for products sold, after considering various types of variable consideration including rebates, sales allowances, product returns and discounts. Variable consideration is estimated and recorded at the time that related revenue is recognized. Our estimates reflect the amount by which we expect variable consideration to impact revenue recognized and are generally based on contractual terms or historical experience, adjusted as necessary to reflect our expectations about the future. Our customer payment terms generally range from 45 to 75 days. Estimates of variable consideration utilize a complex series of judgments and assumptions to determine the amount by which we expect revenue to be reduced, for example; • for sales returns, we perform calculations in each market that incorporate the following, as appropriate: local returns policies and practices; historic returns as a percentage of revenue; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, product recalls, discontinuation of products or a changing competitive environment; and • for revenue incentives, we use our historical experience with similar incentives programs to estimate the impact of such programs on revenue for the current period. Although the amounts recorded for these deductions from revenue are dependent on estimates and assumptions, historically our adjustments to actual results have not been material. The sensitivity of our estimates can vary by program, type of customer and geographic location. Accruals for deductions from revenue are recorded as either a reduction in Accounts receivable or within Accrued expenses , depending on the nature of the contract and method of expected payment. Amounts recorded as a reduction in Accounts receivable as of December 31, 2020 and 2019 are approximately $185 million and $169 million, respectively. As of December 31, 2020, and 2019, accruals for deductions from revenue included in Accrued expenses are approximately $226 million and $190 million, respectively. A deferral of revenue may be required in the event that we have not satisfied all customer obligations for which we have been compensated. The transaction price is allocated to the individual performance obligations on the basis of relative stand-alone selling price, which is typically based on actual sales prices. Revenue associated with unsatisfied performance obligations are contract liabilities, is recorded within Other current liabilities and Other noncurrent liabilities , and is recognized once control of the underlying products has transferred to the customer. Contract liabilities reflected within Other current liabilities as of December 31, 2019 and subsequently recognized as revenue during 2020 were approximately $8 million. Contract liabilities as of December 31, 2020 were approximately $13 million. We do not disclose the transaction price allocated to unsatisfied performance obligations related to contracts with an original expected duration of one year or less, or for contracts for which we recognize revenue in line with our right to invoice the customer. Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of December 31, 2020 is not material. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from Revenue. Shipping and handling costs incurred after control of the purchased product has transferred to the customer are accounted for as a fulfillment cost, within Selling, general and administrative expenses. We also record estimates for bad debts. We periodically assess the adequacy of the allowance for doubtful accounts by evaluating the collectability of outstanding receivables based on factors such as past due history, historical and expected collection patterns, the financial condition of our customers, the robust nature of our credit and collection practices and the economic environment. Amounts recorded for sales deductions and bad debts can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions. Cost of Sales and Inventories Inventories are carried at the lower of cost or net realizable value. The cost of finished goods, work-in-process and raw materials is determined using average actual cost. We regularly review our inventories for impairment and adjustments are recorded when necessary. Selling, General and Administrative Expenses Selling, general and administrative costs are expensed as incurred. Among other things, these expenses include the internal and external costs of marketing, advertising, and shipping and handling as well as certain costs related to business technology, facilities, legal, finance, human resources, business development, public affairs and procurement, among others. Advertising expenses relating to production costs are expensed as incurred, and the costs of space in publications are expensed when the related advertising occurs. Advertising and promotion expenses totaled approximately $233 million in 2020, $167 million in 2019 and $158 million in 2018. Shipping and handling costs totaled approximately $66 million in 2020, $59 million in 2019 and $56 million in 2018. Research and Development Expenses Research and development (R&D) costs are expensed as incurred. Research is the effort associated with the discovery of new knowledge that will be useful in developing a new product or in significantly improving an existing product. Development is the implementation of the research findings. Before a compound receives regulatory approval, we record upfront and milestone payments made by us to third parties under licensing arrangements as expense. Upfront payments are recorded when incurred, and milestone payments are recorded when the specific milestone has been achieved. Once a compound receives regulatory approval in a major market, we record any milestone payments in Identifiable intangible assets, less accumulated amortization and, unless the assets are determined to have an indefinite life, we amortize them on a straight-line basis over the remaining agreement term or the expected product life cycle, whichever is shorter. Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets Long-lived assets include: • Goodwill —goodwill represents the excess of the consideration transferred for an acquired business over the assigned values of its net assets. Goodwill is not amortized. • Identifiable intangible assets, less accumulated amortization —these acquired assets are recorded at our cost. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Identifiable intangible assets with indefinite lives that are associated with marketed products are not amortized until a useful life can be determined. Identifiable intangible assets associated with IPR&D projects are not amortized until regulatory approval is obtained. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated. • Property, plant and equipment, less accumulated depreciation ––these assets are recorded at our cost and are increased by the cost of any significant improvements after purchase. Property, plant and equipment assets, other than land and construction-in-progress, are depreciated on a straight-line basis over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws. Amortization expense related to finite-lived identifiable intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property are included in Amortization of intangible assets as they benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function and depreciation of property, plant and equipment are included in Cost of sales , Selling, general and administrative expenses and Research and development expenses , as appropriate. We review all of our long-lived assets for impairment indicators throughout the year and we perform detailed testing whenever impairment indicators are present. In addition, we perform impairment testing for goodwill and indefinite-lived assets at least annually. When necessary, we record charges for impairments. Specifically: • For finite-lived identifiable intangible assets, such as developed technology rights, and for other long-lived assets, such as property, plant and equipment, whenever impairment indicators are present, we calculate the undiscounted value of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate. • For indefinite-lived identifiable intangible assets, such as brands and IPR&D assets, we test for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the indefinite-lived intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized. We record an impairment loss, if any, for the excess of book value over fair value. In addition, in all cases of an impairment review other than for IPR&D assets, we re-evaluate whether continuing to characterize the asset as indefinite-lived is appropriate. • For goodwill, we test for impairment on at least an annual basis, or more frequently if impairment indicators exist, either by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or by performing a periodic quantitative assessment. If we choose to perform a qualitative analysis and conclude it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. We determine the implied fair value of goodwill by subtracting the fair value of all the identifiable net assets other than goodwill from the fair value of the reporting unit and record an impairment loss for the excess, if any, of book value of goodwill over the implied fair value. In 2020, we performed a periodic quantitative impairment assessment as of September 30, 2020, which did not result in the impairment of goodwill associated with any of our reporting units. In 2019, we performed a qualitative impairment assessment as of September 30, 2019, which did not result in the impairment of goodwill associated with any of our reporting units. Impairment reviews can involve a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions. Software Capitalization and Depreciation We capitalize certain costs incurred in connection with obtaining or developing internal-use software, including payroll and payroll-related costs for employees who are directly associated with the internal-use software project, external direct costs of materials and services and interest costs while developing the software. Capitalized software costs are included in Property, plant and equipment and are amortized using the straight-line method over the estimated useful life of 5 to 10 years. Capitalization of such costs ceases when the project is substantially complete and ready for its intended purpose. Costs incurred during the preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed in the period in which they are incurred. The company capitalized $59 million and $74 million of internal-use software for the years ended December 31, 2020 and 2019, respectively. Depreciation expense for capitalized software was $46 million in 2020 , $27 million in 2019 and $23 million in 2018. Restructuring Charges and Certain Acquisition-Related Costs We may incur restructuring charges in connection with acquisitions when we implement plans to restructure and integrate the acquired operations or in connection with cost-reduction and productivity initiatives. Included in Restructuring charges and certain acquisition-related costs are all restructuring charges and certain costs associated with acquiring and integrating an acquired business. Transaction costs and integration costs are expensed as incurred. Termination costs are a significant component of restructuring charges and are generally recorded when the actions are probable and estimable. Amounts recorded for restructuring charges and other associated costs can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions . Earnings per Share Basic earnings per share is computed by dividing net income attributable to Zoetis by the weighted-average number of common shares outstanding during the period. Diluted earnings per share adjusts the weighted-average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options, restricted stock units, and performance-vesting restricted stock units) were exercised or converted into common stock, calculated using the treasury stock method. Cash Equivalents Cash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased. Fair Value Certain assets and liabilities are required to be measured at fair value, either upon initial recognition or for subsequent accounting or reporting. For example, we use fair value extensively in the initial recognition of net assets acquired in a business combination. Fair value is estimated using an exit price approach, which requires, among other things, that we determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of assets and, for liabilities, assuming that the risk of non-performance will be the same before and after the transfer. When estimating fair value, depending on the nature and complexity of the asset or liability, we may use one or all of the following approaches: • Income approach, which is based on the present value of a future stream of net cash flows. • Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities. • Cost approach, which is based on the cost to acquire or construct comparable assets less an allowance for functional and/or economic obsolescence. These fair value methodologies depend on the following types of inputs: • Quoted prices for identical assets or liabilities in active markets (Level 1 inputs). • Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable (Level 2 inputs). • Unobservable inputs that reflect estimates and assumptions (Level 3 inputs). A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions . Accounts Receivable The recorded amounts of accounts receivable approximate fair value because of their relatively short-term nature. As of December 31, 2020 and 2019, Accounts receivable, less allowance for doubtful accounts, of $1,013 million and $1,086 million, respectively, includes approximately $48 million and $37 million, respectively, of other receivables, such as trade notes receivable and royalty receivables, among others. Deferred Tax Assets and Liabilities and Income Tax Contingencies Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws. We provide a valuation allowance when we believe that our deferred tax assets are not recoverable based on an assessment of estimated future taxable income that incorporates ongoing, prudent and feasible tax planning strategies. We account for income tax contingencies using a benefit recognition model. If we consider that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. Under the benefit recognition model, if the initial assessment fails to result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to more likely than not; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. We regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase or decrease the technical merits of a position relative to the “more-likely-than-not” standard. Liabilities associated with uncertain tax positions are classified as current only when we expect to pay cash within the next 12 months. Interest and penalties, if any, are recorded in Provision for taxes on income and are classified on our Consolidated Balance Sheets with the related tax liability. Amounts recorded for valuation allowances and income tax contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions. Benefit Plans All dedicated benefit plans are pension plans. For our dedicated benefit plans, we recognize the overfunded or underfunded status of defined benefit plans as an asset or liability on the Consolidated Balance Sheets and the obligations generally are measured at the actuarial present value of all benefits attributable to employee service rendered, as provided by the applicable benefit formula. Pension obligations may include assumptions such as long-term rate of return on plan assets, expected employee turnover, participant mortality, and future compensation levels. Plan assets are measured at fair value. Net periodic benefit costs are recognized, as required, into Cost of sales, Selling, general and administrative expenses and Research and development expenses , as appropriate. Amounts recorded for benefit plans can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions. Asset Retirement Obligations We record accruals for the legal obligations associated with the retirement of tangible long-lived assets, including obligations under the doctrine of promissory estoppel and those that are conditioned upon the occurrence of future events. These obligations generally result from the acquisition, construction, development and/or normal operation of long-lived assets. We recognize the fair value of these obligations in the period in which they are incurred by increasing the carrying amount of the related asset. Over time, we recognize expense for the accretion of the liability and for the amortization of the asset. As of December 31, 2020 and 2019, accruals for asset retirement obligations are $25 million and $23 million, respectively, and are primarily included in Other noncurrent liabilities. Amounts recorded for asset retirement obligations can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions. Legal and Environmental Contingencies We are subject to numerous contingencies arising in the ordinary course of business, such as product liability and other product-related litigation, commercial litigation, patent litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications. We record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. We record anticipated recoveries under existing insurance contracts when recovery is assured. Amounts recorded for contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions. Share-Based Payments Our compensation programs can include share-based payment plans. All grants under share-based payment programs are accounted for at fair value and such amounts generally are amortized on a straight-line basis over the vesting term to Cost of sales, Selling, general and administrative expenses, and Research and development expenses , as appropriate. We include the impact of estimated forfeitures when determining share-based compensation expense. Amounts recorded for share-based compensation can result from a complex series of judgments about future events and uncertainties and can rely on estimates and a |
Revenue
Revenue | 12 Months Ended |
Dec. 31, 2020 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Revenue | A. Revenue from Product Sales We offer a diversified portfolio of products which allows us to capitalize on local and regional customer needs. Generally, our products are promoted to veterinarians and livestock producers by our sales organization which includes sales representatives and technical and veterinary operations specialists, and then sold directly by us or through distributors, retailers or e-commerce outlets. The depth of our product portfolio enables us to address the varying needs of customers in different species and geographies. Many of our top selling product lines are distributed across both of our operating segments, leveraging our R&D operations and manufacturing and supply chain network. Over the course of our history, we have focused on developing a diverse portfolio of animal health products, including medicines, vaccines and diagnostics, complemented by biodevices, genetic tests and a range of services. We refer to all different brands of a particular product, or its dosage forms for all species, as a product line. We have approximately 300 comprehensive product lines, including products for both companion animals and livestock within each of our major product categories. Our major product categories are: • vaccines : biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response; • anti-infectives : products that prevent, kill or slow the growth of bacteria, fungi or protozoa; • parasiticides : products that prevent or eliminate external and internal parasites such as fleas, ticks and worms; • dermatology products: products that relieve itch associated with allergic conditions and atopic dermatitis; • other pharmaceutical products : pain and sedation, antiemetic, reproductive, and oncology products; • medicated feed additives : products added to animal feed that provide medicines to livestock; and • animal health diagnostics : portable blood and urine analysis systems and point-of-care diagnostic products, including instruments and reagents, rapid immunoassay tests, reference laboratory kits, blood glucose monitors and reference laboratory services. Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals and agribusiness, as well as products and services in biodevices, genetic tests and precision livestock farming. Our companion animal products help extend and improve the quality of life for pets; increase convenience and compliance for pet owners; and help veterinarians improve the quality of their care and the efficiency of their businesses. Growth in the companion animal medicines, vaccines and diagnostics sector is driven by economic development, related increases in disposable income and increases in pet ownership and spending on pet care. Companion animals are also living longer, deepening the human-animal bond, receiving increased medical treatment and benefiting from advances in animal health medicine, vaccines and diagnostics. Our livestock products primarily help prevent or treat diseases and conditions to allow veterinarians and producers to care for their animals and to enable the cost-effective production of safe, high-quality animal protein. Human population growth and increasing standards of living are important long-term growth drivers for our livestock products in three major ways. First, population growth and increasing standards of living drive demand for improved nutrition, particularly through increased consumption of animal protein. Second, population growth leads to greater natural resource constraints driving a need for enhanced productivity. Finally, as standards of living improve and the global chain faces increased scrutiny, there is more focus on food quality, safety, and reliability of supply. The following tables present our revenue disaggregated by geographic area, species, and major product category: Revenue by geographic area Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 United States $ 3,557 $ 3,203 $ 2,877 Australia 207 196 189 Brazil 258 293 295 Canada 210 206 203 Chile 100 91 76 China 266 200 211 France 118 117 130 Germany 159 153 147 Italy 90 112 104 Japan 177 158 149 Mexico 116 117 100 Spain 112 114 110 United Kingdom 178 198 181 Other developed markets 388 370 361 Other emerging markets 656 647 634 6,592 6,175 5,767 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 Revenue exceeded $100 million in eleven countries outside the U.S. in 2020 and 2019, and ten countries outside the U.S. in 2018. The U.S. was the only country to contribute more than 10% of total revenue in each year. Revenue by major species Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 U.S. Companion animal $ 2,391 $ 1,984 $ 1,608 Livestock 1,166 1,219 1,269 3,557 3,203 2,877 International Companion animal 1,261 1,161 1,005 Livestock 1,774 1,811 1,885 3,035 2,972 2,890 Total Companion animal 3,652 3,145 2,613 Livestock 2,940 3,030 3,154 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 Revenue by species Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Companion Animal: Dogs and Cats $ 3,437 $ 2,950 $ 2,445 Horses 215 195 168 3,652 3,145 2,613 Livestock: Cattle 1,558 1,654 1,754 Swine 621 611 663 Poultry 537 559 522 Fish 148 134 132 Sheep and other 76 72 83 2,940 3,030 3,154 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 Revenue by product category Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Vaccines $ 1,476 $ 1,483 $ 1,488 Anti-infectives 1,206 1,254 1,280 Parasiticides 1,173 966 836 Dermatology 941 770 607 Other pharmaceuticals 821 780 765 Medicated feed additives 460 470 485 Animal health diagnostics 305 268 136 Other non-pharmaceuticals 210 184 170 6,592 6,175 5,767 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 B. Other Revenue Information Significant Customers We sell our companion animal products primarily to veterinarians who then sell the products to pet owners. We sell our livestock products primarily to veterinarians and livestock producers as well as third-party veterinary distributors, and retail outlets who generally sell the products to livestock producers. Sales to our largest customer, a U.S. veterinary distributor, represented approximately 14%, 15% and 13% of total revenue for 2020, 2019, and 2018, respectively. |
Acquisitions and Divestitures
Acquisitions and Divestitures | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | On July 31, 2018, we completed the acquisition of Abaxis, Inc. (Abaxis), a California corporation and a leader in the development, manufacture and marketing of diagnostic instruments for veterinary point-of-care services. We acquired all of the outstanding common shares of Abaxis for $83.00 per share in cash resulting in Abaxis becoming our wholly owned subsidiary. The acquisition enhances our presence in animal health diagnostics. The acquisition date fair value of the consideration transferred was approximately $1,962 million, which consisted of the following: (MILLIONS OF DOLLARS) Amounts Cash paid to Abaxis' shareholders (a) $ 1,898 Cash paid for equity awards attributable to pre-merger services (b) 54 Fair value of Zoetis equity awards issued in exchange for outstanding Abaxis equity awards pertaining to pre-merger service (c) 10 Total consideration $ 1,962 (a) Represents cash paid for cancellation and conversion of each outstanding share of Abaxis' common stock at the acquisition date. (b) Represents cash paid for cancellation and settlement of restricted stock awards that fully vested in July 2018 as a result of service or pre-existing change-in-control provisions and termination provisions. Includes certain awards that will be settled in cash during 2019, reflected in Other current liabilities within the Consolidated Balance Sheets. (c) Represents the fair value of replacement awards issued for Abaxis equity awards outstanding immediately before the acquisition and attributable to the service period prior to the acquisition. The previous Abaxis equity awards were converted into the Zoetis equity awards at an exchange ratio based on the closing prices of shares of Zoetis Common Stock and Abaxis Common Stock for ten full trading days before the closing of the acquisition. The acquisition has been accounted for as a business combination with the assets acquired and liabilities assumed measured at estimated fair values as of the acquisition date, primarily using Level 3 inputs, except for investments in debt securities which were valued using Level 2 inputs. During the three months ended December 31, 2018, the company recorded measurement period adjustments to reflect the facts and circumstances in existence as of the acquisition date. These adjustments primarily include an increase to Property, plant and equipment of $5 million, a reduction to Identifiable intangible assets of $3 million, an increase to Other current liabilities of $4 million, and a corresponding decrease to Goodwill of $6 million. These measurement period adjustments primarily related to changes in valuation assumptions, including market participant estimates of cash flows, as well as other initial estimates. During the first half of 2019, the company recorded additional measurement period adjustments which were made to reflect the facts and circumstances in existence as of the acquisition date. These adjustments include a reduction to Identifiable intangible assets and Noncurrent deferred tax liabilities of $1 million each with a corresponding offset to goodwill. These measurement period adjustments were primarily attributable to changes in valuation assumptions, including market participant estimates of cash flows as well as other initial estimates and the finalization of legal entity fair values. The valuation was finalized during the second quarter of 2019. The final fair values allocated to Abaxis' assets and liabilities as of the acquisition date, are reflected in the table below. (MILLIONS OF DOLLARS) Amounts Cash and cash equivalents $ 64 Short term investments (a) 107 Accounts receivable (b) 30 Inventories (c) 79 Other current assets 6 Property, plant and equipment (d) 54 Identifiable intangible assets (e) 894 Other noncurrent assets 29 Accounts payable (21) Accrued compensation and related items (10) Other current liabilities (22) Other noncurrent liabilities (11) Noncurrent deferred tax liabilities (f) (214) Total net assets acquired 985 Goodwill (g) 977 Total consideration $ 1,962 (a) Short term investments include investments in debt securities that are classified as available-for-sale and measured at fair value. (b) The fair value approximates the gross contractual amount of accounts receivable. The contractual amount not expected to be collected is immaterial. (c) Acquired inventory is comprised of finished goods, work in process and raw materials. The fair value of finished goods was determined based on net realizable value adjusted for the costs of the selling effort, a reasonable profit allowance for the selling effort, and estimated holding costs. The fair value of work in process was determined based on net realizable value adjusted for costs to complete the manufacturing process, costs of the selling effort, a reasonable profit allowance for the remaining manufacturing and selling effort, and an estimate of holding costs. The fair value of raw materials was determined to approximate book value. (d) Property, plant and equipment is comprised of machinery and equipment, furniture and fixtures, computer equipment, leasehold improvements and construction in progress. The fair value was primarily determined using a reproduction/replacement cost approach which measures the value of an asset by estimating the cost to acquire or construct comparable assets adjusted for age and condition of the asset. (e) Identifiable intangible assets primarily consist of developed technology rights, customer relationships, and trademarks and tradenames. The fair value of identifiable intangible assets was determined using the income approach, which includes a forecast of expected future cash flows. For additional information regarding identifiable intangible assets, see Note 13. Goodwill and Other Intangible Assets . (f) The acquisition was structured as a stock purchase and therefore we assumed the historical tax basis of Abaxis' assets and liabilities. The estimate of deferred tax effects resulting from the acquisition include the expected federal, state, and foreign tax consequences associated with temporary differences between the fair values of the assets acquired and liabilities assumed and the respective tax basis. The components of the Abaxis net deferred tax liability are included within amounts reported in Note 8. Tax Matters . (g) Goodwill represents the excess of consideration transferred over the fair values of the assets acquired and liabilities assumed. It is allocated to our existing reportable segments and is primarily attributable to the future potential of the technology platforms, as well as cost and revenue synergies including market share capture, elimination of cost redundancies and gain of cost efficiencies, and intangible assets such as assembled workforce which are not separately recognizable. The primary strategic purpose of the acquisition was to enhance the company’s existing product portfolio by strengthening Zoetis’ presence in veterinary diagnostics. The goodwill recorded is not deductible for tax purposes. The Company incurred acquisition-related costs of approximately $18 million, $43 million and $61 million for 2020, 2019 and 2018, respectively, which are included within Restructuring charges and certain acquisition-related costs on our Consolidated Statements of Income. Supplemental Pro Forma Information (Unaudited): The following table provides unaudited supplemental pro forma financial information as if the acquisition of Abaxis had occurred on January 1, 2017. Year Ended December 31, (MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) 2018 2017 Revenue $ 5,980 $ 5,542 Net income attributable to Zoetis Inc. 1,402 706 The supplemental pro forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of Zoetis and Abaxis. The supplemental pro forma financial information does not necessarily represent what the combined company’s revenue or results of operations would have been had the acquisition been completed on January 1, 2017, nor do they intend to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining Zoetis and Abaxis. The unaudited supplemental pro forma financial information reflects primarily the following pro forma adjustments: • Acquisition-related costs incurred by Zoetis and Abaxis of $82 million have been removed for the year ended December 31, 2018. Acquisition-related costs of $60 million are assumed to be have been incurred during the year ended December 31, 2017. • Additional amortization expense of $77 million for the year ended December 31, 2018, and $130 million for the year ended December 31, 2017, related to the fair value of identified intangible assets acquired. • Additional depreciation expense of $2 million for the year ended December 31, 2018, and $3 million for the year ended December 31, 2017, related to the fair value adjustments to property, plant and equipment acquired. • Adjustment related to the non-recurring fair value adjustment to acquisition date inventory estimated to have been sold, resulting in $18 million removed for the year ended December 31, 2018, and $33 million added for the year ended December 31, 2017. • Additional interest expense and amortization of debt issuance costs for the debt issuance to finance the acquisition, resulting in $36 million added for the year ended December 31, 2018, and $57 million added for the year ended December 31, 2017. • Adjustments related to the post merger share-based compensation expense of the replacement awards are $4 million for the year ended December 31, 2018, and $13 million for the year ended December 31, 2017. • Applicable tax impact of the above adjustments based on the statutory tax rates in the various jurisdictions where the adjustments are expected to be incurred. Other Acquisitions During 2020, we completed the acquisitions of Fish Vet Group, a diagnostics company for aquaculture, Virtual Recall, a veterinary engagement software company, Performance Livestock Analytics, a cloud-based technology company in the precision livestock business, and Ethos Diagnostic Science, a veterinary reference laboratory business with labs across the U.S. We also entered into an option purchase agreement as part of a research and development arrangement with a Belgian company, a variable interest entity of which Zoetis is the primary beneficiary and now consolidating within our results. These transactions did not have a significant impact on our consolidated financial statements. During 2019, we completed the acquisitions of Platinum Performance, a nutrition-focused animal health business for companion animals, and Phoenix Lab and ZNLabs, both full service veterinary reference laboratory companies with networks of labs across the U.S. These transactions did not have a significant impact on our consolidated financial statements. During 2018, we completed the acquisition of a manufacturing business in Ireland and the noncontrolling interest of a European livestock monitoring company. These transactions did not have a significant impact on our consolidated financial statements. B. Divestitures In 2020 and 2019, we received cash proceeds of $20 million resulting from payments received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. In September 2018, we received total cash proceeds of approximately $47 million related to the divestiture of certain agribusiness products within our international segment. During the fourth quarter of 2018, we recorded a net pre-tax gain of approximately $42 million within Other (income)/deductions— net , related to this divestiture. |
Restructuring Charges and Other
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives | 12 Months Ended |
Dec. 31, 2020 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives | n connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems. In connection with our acquisition activity, we typically incur costs and charges associated with executing the transactions, integrating the acquired operations, which may include expenditures for consulting and the integration of systems and processes, product transfers and restructuring the consolidated company, which may include charges related to employees, assets and activities that will not continue in the consolidated company. All operating functions can be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as functions such as business technology, shared services and corporate operations. The components of costs incurred in connection with restructuring initiatives, acquisitions and cost-reduction/productivity initiatives are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Restructuring charges and certain acquisition-related costs: Integration costs (a) $ 17 $ 18 $ 21 Transaction costs (b) — — 21 Restructuring charges (c)(d) : Employee termination costs/(reversals) 8 33 25 Exit costs — — 1 Total Restructuring charges and certain acquisition-related costs $ 25 $ 51 $ 68 (a) Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes, as well as product transfer costs. (b) Transaction costs represent external costs directly related to acquiring businesses and primarily include expenditures for banking, legal, accounting and other similar services. (c) The restructuring charges for the year ended December 31, 2020 are primarily related to CEO transition-related costs and other cost-reduction and productivity initiatives. The restructuring charges for the year ended December 31, 2019 are primarily related to the acquisition of Abaxis and CEO transition-related costs. The restructuring charges for the year ended December 31, 2018 are primarily related to: • employee termination costs of $7 million in Europe as a result of initiatives to better align our organizational structure; • employee termination costs of $21 million related to the acquisition of Abaxis; and • a net reversal of employee termination costs of $3 million, and exit costs of $1 million as a result of our operational efficiency initiative and supply network strategy initiative launched in 2015. (d) The restructuring charges are associated with the following: • For the year ended December 31, 2020, Manufacturing/research/corporate of $8 million. • For the year ended December 31, 2019, International of $2 million, and Manufacturing/research/corporate of $31 million. • For the year ended December 31, 2018, International of $7 million, and Manufacturing/research/corporate of $19 million. The components of, and changes in, our restructuring accruals are as follows: Employee Termination Exit (MILLIONS OF DOLLARS) Costs Costs Accrual Balance, December 31, 2017 $ 41 $ — $ 41 Provision 25 1 26 Utilization and other (a) (21) (1) (22) Balance, December 31, 2018 $ 45 $ — $ 45 Provision 33 — 33 Utilization and other (a) (33) — (33) Balance, December 31, 2019 (b) $ 45 $ — $ 45 Provision 8 — 8 Utilization and other (a) (32) — (32) Balance, December 31, 2020 (b) $ 21 $ — $ 21 (a) Includes adjustments for foreign currency translation. (b) At December 31, 2020 and 2019, included in Accrued Expenses ($6 million and $23 million, respectively) and Other noncurrent liabilities |
Other (Income)_Deductions - Net
Other (Income)/Deductions - Net | 12 Months Ended |
Dec. 31, 2020 | |
Other Income and Expenses [Abstract] | |
Other (Income)/Deductions - Net | he components of Other (income)/deductions—net follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Royalty-related income $ (12) $ (16) $ (28) Interest income (12) (37) (31) Identifiable intangible asset impairment charges (a) 26 — — Net gain on sale of assets (b) (19) (20) (40) Impairment of an equity investment 4 — — Other asset impairment charges 4 — — Foreign currency loss (c) 21 16 31 Other, net (d) 5 — (15) Other (income)/deductions—net $ 17 $ (57) $ (83) (a) Primarily represents asset impairment charges related to developed technology rights in our precision livestock farming and aquatic health businesses. (b) For 2020 and 2019, represents income resulting from a payment received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. For 2018, represents a gain on the divestiture of certain agribusiness products within our International segment, and a net loss related to sales of certain manufacturing sites and products as part of our supply network strategy initiative. (c) Primarily driven by costs related to hedging and exposures to certain emerging market currencies. |
Tax Matters
Tax Matters | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Tax Matters | The income tax provision in the Consolidated Statements of Income includes tax costs and benefits, such as uncertain tax positions, repatriation decisions and audit settlements, among others. The components of Income before provision for taxes on income follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 United States $ 1,109 $ 965 $ 937 International 887 836 753 Income before provision for taxes on income $ 1,996 $ 1,801 $ 1,690 The components of Provision for taxes on income based on the location of the taxing authorities follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 United States: Current income taxes: Federal $ 232 $ 192 $ 199 State and local 36 28 32 Deferred income taxes: Federal (29) (5) (107) State and local (14) (15) 3 Total U.S. tax provision 225 200 127 International: Current income taxes 154 161 148 Deferred income taxes (19) (60) (9) Total international tax provision 135 101 139 Provision for taxes on income (a)(b)(c) $ 360 $ 301 $ 266 (a) In 2020, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies); • a $29 million discrete tax benefit recorded in 2020 related to the excess tax benefits for share-based payments; • a $19 million net discrete tax benefit recorded in 2020 related to changes in various other tax items; • a $7 million discrete tax benefit recorded in 2020 related to the remeasurement of deferred taxes resulting from the integration of acquired businesses; • a $5 million discrete tax expense related to the changes in valuation allowances; • a $4 million discrete tax benefit recorded in 2020 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates; and • a $4 million net discrete tax benefit recorded in 2020 related to the effective settlement of certain issues with tax authorities. (b) In 2019, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ); • the impact of the GILTI tax, a new provision of the Tax Act, which became effective for the company in the first quarter of 2019; • a $20 million discrete tax benefit recorded in 2019 related to the excess tax benefits for share-based payments; • an $18 million discrete tax benefit related to the changes in valuation allowances; • a $14 million net discrete tax benefit recorded in the third quarter of 2019 due to a change in tax basis related to purchase accounting; • a $12 million net discrete tax benefit recorded in 2019 related to changes in various other tax items; • a $10 million net discrete tax benefit recorded in 2019 related to the effective settlement of certain issues with tax authorities; and • an $8 million discrete tax benefit recorded in 2019 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. ◦ (c) In 2018 , the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S Research and Development Tax Credit; • tax expense related to the changes in valuation allowances and the resolution of other tax items; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ): • the reduction of the U.S. federal corporate income tax rate, from 35% to 21%, effective January 1, 2018, pursuant to the Tax Act; • a $45 million net tax benefit recorded in 2018 associated with a measurement-period adjustment to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings pursuant to the Tax Act; • a $23 million discrete tax benefit recorded in 2018 related to the favorable impact of certain tax accounting method changes; • a $15 million discrete tax benefit recorded in 2018 related to the excess tax benefits for share-based payments; and • a $5 million discrete tax benefit recorded in 2018 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. Tax Rate Reconciliation The reconciliation of the U.S. statutory income tax rate to our effective tax rate follows: Year Ended December 31, 2020 2019 2018 U.S. statutory income tax rate 21 % 21 % 21 % State and local taxes, net of federal benefits 0.9 0.6 1.8 Unrecognized tax benefits and tax settlements and resolution of certain tax positions (a) 0.1 0.5 1.2 Impact of the Tax Act (b) — — (3.9) Impact of Tax Accounting Method Changes — — (1.3) U.S. Research and Development Tax Credit and U.S. Domestic Production Activities deduction (0.7) (0.7) (0.5) Share-based payments (1.3) (1.0) (0.8) Non-deductible / non-taxable items 0.4 (0.2) (1.6) Taxation of non-U.S. operations (c)(d) (1.6) (3.1) (0.3) All other—net (0.8) (0.4) 0.1 Effective tax rate 18.0 % 16.7 % 15.7 % (a) For a discussion about unrecognized tax benefits and tax settlements and resolution of certain tax positions, see above in this section and D. Tax Contingencies . (b) In 2018, the rate impact related to the Tax Act was a decrease to our effective tax rate. This tax benefit represents the measurement-period adjustment related to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings. (c) In all years, the rate impact of taxation of non-U.S. operations was a decrease to our effective tax rate due to the jurisdictional mix of earnings. (d) In 2020, the rate impact of non-U.S. operations also includes (i) a $5 million discrete tax expense related to the charges in valuation allowances, and (ii) an $8 million net discrete tax benefit related to changes in various other tax items. In 2019, the rate impact of non-U.S. operations also includes (i) an $18 million discrete tax benefit related to the changes in valuation allowances, (ii) a $14 million net discrete tax benefit due to a change in tax basis related to purchase accounting, and (iii) a $10 million discrete tax benefit related to the effective settlement of certain issues with non-U.S. tax authorities. B. Tax Matters Agreement In connection with the separation from Pfizer in 2013, we entered into a tax matters agreement with Pfizer that governs the parties' respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. In general, under the agreement: • Pfizer will be responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments and including those taxes attributable to our business) reportable on a consolidated, combined or unitary return that includes Pfizer or any of its subsidiaries (and us and/or any of our subsidiaries) for any periods or portions thereof ending on or prior to December 31, 2012. We will be responsible for the portion of any such taxes for periods or portions thereof beginning on or after January 1, 2013, as would be applicable to us if we filed the relevant tax returns on a standalone basis. • We will be responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments) that are reportable on returns that include only us and/or any of our subsidiaries, for all tax periods whether before or after the completion of the separation from Pfizer. • Pfizer will be responsible for certain specified foreign taxes directly resulting from certain aspects of the separation from Pfizer. We will not generally be entitled to receive payment from Pfizer in respect of any of our tax attributes or tax benefits or any reduction of taxes of Pfizer. Neither party's obligations under the agreement will be limited in amount or subject to any cap. The agreement also assigns responsibilities for administrative matters, such as the filing of returns, payment of taxes due, retention of records and conduct of audits, examinations or similar proceedings. In addition, the agreement provides for cooperation and information sharing with respect to tax matters. Pfizer is primarily responsible for preparing and filing any tax return with respect to the Pfizer affiliated group for U.S. federal income tax purposes and with respect to any consolidated, combined, unitary or similar group for U.S. state or local or foreign income tax purposes or U.S. state or local non-income tax purposes that includes Pfizer or any of its subsidiaries, including those that also include us and/or any of our subsidiaries. We are generally responsible for preparing and filing any tax returns that include only us and/or any of our subsidiaries. The party responsible for preparing and filing a given tax return will generally have exclusive authority to control tax contests related to any such tax return. C. Deferred Taxes Deferred taxes arise as a result of basis differentials between financial statement accounting and tax amounts. The components of our deferred tax assets and liabilities follow: As of December 31, 2020 2019 (MILLIONS OF DOLLARS) Assets (Liabilities) Prepaid/deferred items $ 64 $ 42 Inventories 15 (1) Intangibles (237) (296) Property, plant and equipment (168) (149) Employee benefits 59 61 Restructuring and other charges 3 4 Legal and product liability reserves 15 14 Net operating loss/credit carryforwards 127 122 Unremitted earnings (6) (6) All other 1 (1) Subtotal (127) (210) Valuation allowance (157) (136) Net deferred tax liability (a)(b) $ (284) $ (346) (a) The decrease in the total net deferred tax liability from December 31, 2019 to December 31, 2020 is primarily attributable to a decrease in deferred tax liabilities related to intangibles, partially offset by an increase in valuation allowances representing the amounts determined to be unrecoverable, and deferred tax liabilities related to property, plant and equipment. In addition, the decrease in the total net deferred tax liability was also attributable to an increase in deferred tax assets related to prepaid/deferred items, inventory, net operation loss/credit carry forwards, partially offset by a decrease in employee benefits. (b) In 2020, included in Noncurrent deferred tax assets ($94 million) and Noncurrent deferred tax liabilities ($378 million). In 2019, included in Noncurrent deferred tax assets ($88 million) and Noncurrent deferred tax liabilities ($434 million). We have carryforwards, primarily related to net operating losses, which are available to reduce future foreign, U.S. federal, and U.S. state income taxes payable with either an indefinite life or expiring at various times from 2021 to 2040. Valuation allowances are provided when we believe that our deferred tax assets are not recoverable based on an assessment of estimated future taxable income that incorporates ongoing, prudent and feasible tax planning strategies. On the basis of this evaluation, as of December 31, 2020 and December 31, 2019, a valuation allowance of $157 million and $136 million, respectively, has been recorded to reflect only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth. In general, it is our practice and intention to permanently reinvest the majority of the earnings of the company’s non-U.S. subsidiaries. As of December 31, 2020, the cumulative amount of such undistributed earnings was approximately $6.2 billion, for which we have not provided U.S. and local income taxes, such as U.S. state income taxes, local withholding taxes, and taxes on currency gains and losses. Since these earnings are intended to be indefinitely reinvested overseas as of December 31, 2020, we cannot predict the time or manner of a potential repatriation. As such, other than the deferred tax liability associated with the one-time mandatory deemed repatriation tax on such undistributed earnings imposed by the Tax Act, it is not practicable to estimate the additional deferred tax liability associated with the potential repatriation of the unremitted earnings due to the complexity of the hypothetical calculation. D. Tax Contingencies We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statute of limitations expire. We treat these events as discrete items in the period of resolution. For a description of our accounting policies associated with accounting for income tax contingencies, see Note 3. Significant Accounting Policies: Deferred Tax Assets and Liabilities and Income Tax Contingencies. For a description of the risks associated with estimates and assumptions, see Note 3. Significant Accounting Policies: Estimates and Assumptions. Uncertain Tax Positions As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon audit. As of December 31, 2020 , 2019 and 2018, we had approximately $187 million , $180 million and $182 million, respectively, in net liabilities associated with uncertain tax positions, excluding associated interest: • Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction. As of December 31, 2020, 2019 and 2018, we had approximately $3 million, $3 million and $3 million, respectively, in assets associated with uncertain tax positions recorded in Noncurrent deferred tax assets and Other noncurrent assets . • Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. These unrecognized tax benefits relate primarily to issues common among multinational corporations. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows: (MILLIONS OF DOLLARS) 2020 2019 2018 Balance, January 1 $ (182) $ (185) $ (164) Increases based on tax positions taken during a prior period (a)(b) (6) (3) (24) Decreases based on tax positions taken during a prior period (a)(c) 6 12 6 Increases based on tax positions taken during the current period (a)(d) (9) (8) (11) Settlements (e) — — 6 Lapse in statute of limitations 3 2 2 Balance, December 31 (f) $ (188) $ (182) $ (185) (a) Primarily included in Provision for taxes on income. (b) In 2020 and 2019, the increases are primarily related to movements on prior year positions. In 2018, the increases are primarily related to the impact of the Tax Act and movements on prior year positions. (c) In 2020, the decreases are primarily related to effective settlement of certain issues with tax authorities. In 2019, the decreases are primarily related to movements on prior year positions and effective settlement of certain issues with tax authorities, including movements in foreign translation adjustments on prior year positions. In 2018, the decreases are primarily related to movements on prior year positions and closure of audits with tax authorities, including movements in foreign translation adjustments on prior year positions . (d) In 2020, 2019 and 2018, the increases are primarily related to movements on current year positions. (e) In 2018, the decreases are due to settlements with tax authorities. See A. Taxes on Income. (f) In 2020, included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($187 million). In 2019, included in Noncurrent deferred tax assets and Other noncurrent assets ($2 million) and Other taxes payable ($180 million). In 2018, included in Noncurrent deferred tax assets and Other noncurrent assets ($3 million) and Other taxes payable ($182 million). • Interest related to our unrecognized tax benefits is recorded in accordance with the laws of each jurisdiction and is recorded in Provision for taxes on income in our Consolidated Statements of Income. In 2020, we recorded a net interest expense of $2 million; in 2019, we recorded a net interest expense of $2 million; and in 2018, we recorded a net interest expense of $1 million. Gross accrued interest totaled $11 million, $9 million and $8 million as of December 31, 2020, 2019 and 2018, respectively, and were included in Other taxes payable . Gross accrued penalties totaled $3 million, $3 million and $3 million as of December 31, 2020, 2019 and 2018, respectively, and were included in Other taxes payable . Status of Tax Audits and Potential Impact on Accruals for Uncertain Tax Positions We are subject to taxation in the U.S. including various states, and foreign jurisdictions. The U.S. is one of our major tax jurisdictions, and we are currently under audit for tax years 2015 through 2018. For U.S. Federal and state tax purposes, the tax years 2015 through 2020 are open for examination (see B. Tax Matters Agreement for years prior to 2013). In addition to the open audit years in the U.S., we have open audit years in other major foreign tax jurisdictions, such as Canada (2016-2020), Asia-Pacific (2011-2020, primarily reflecting Australia , China and Japan), Europe (2012-2020, primarily reflecting France, Germany, Italy, Spain and the United Kingdom) and Latin America (2006-2020, primarily reflecting Brazil and Mexico). |
Financial Instruments
Financial Instruments | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Financial Instruments | A. Debt Credit Facilities In December 2016, we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.0 billion senior unsecured revolving credit facility (the credit facility). In December 2018, the maturity for the amended and restated credit facility was extended through December 2023. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition. The credit facility also contains a clause which adds back to Adjusted Consolidated EBITDA, any operational efficiency restructuring charge (defined as charges recorded by the company during the period commencing on October 1, 2016 and ending December 31, 2019, related to operational efficiency initiatives), provided that for any twelve-month period such charges added back to Adjusted Consolidated EBITDA shall not exceed $100 million in the aggregate. The credit facility also contains a financial covenant requiring that we maintain a minimum interest coverage ratio (the ratio of EBITDA at the end of the period to interest expense for such period) of 3.50:1. In addition, the credit facility contains other customary covenants. We were in compliance with all financial covenants as of December 31, 2020 and December 31, 2019. There were no amounts drawn under the credit facility as of December 31, 2020 or December 31, 2019. We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of December 31, 2020, we had access to $79 million of lines of credit which expire at various times through 2021, and are generally renewed annually. As of December 31, 2020 we had $4 million of borrowings outstanding related to these facilities and did not have any borrowings outstanding related to these facilities as of December 31, 2019. Commercial Paper Program In February 2013, we entered into a commercial paper program with a capacity of up to $1.0 billion. As of December 31, 2020 and 2019, there was no commercial paper outstanding under this program. Senior Notes and Other Long-Term Debt On May 12, 2020, we issued $1.25 billion aggregate principal amount of our senior notes (2020 senior notes), with an original issue discount of $10 million. These notes are comprised of $750 million aggregate principal amount of 2.000% 2020 senior notes due 2030 and $500 million aggregate principal amount of 3.000% senior notes due 2050. On October 13, 2020, the net proceeds were used to repay the $500 million aggregate principal amount of 3.450% 2015 senior notes due 2020 and the remainder will be used for general corporate purposes. On August 20, 2018, we issued $1.5 billion aggregate principal amount of our senior notes (2018 senior notes), with an original issue discount of $4 million. On September 12, 2017, we issued $1.25 billion aggregate principal amount of our senior notes (2017 senior notes), with an original issue discount of $7 million. On November 13, 2015, we issued $1.25 billion aggregate principal amount of our senior notes (2015 senior notes), with an original issue discount of $2 million. On January 28, 2013, we issued $3.65 billion aggregate principal amount of our senior notes (the 2013 senior notes offering) in a private placement, with an original issue discount of $10 million. The 2013, 2015, 2017, 2018 and 2020 senior notes are governed by an indenture and supplemental indenture (collectively, the indenture) between us and Deutsche Bank Trust Company Americas, as trustee. The indenture contains certain covenants, including limitations on our and certain of our subsidiaries' ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which the 2013, 2015, 2017, 2018 and 2020 senior notes may be declared immediately due and payable. Pursuant to the indenture, we are able to redeem the 2013, 2015, 2017 and 2020 senior notes and the 2018 fixed rate senior notes or any series, in whole or in part, at any time by paying a “make whole” premium, plus accrued and unpaid interest to, but excluding, the date of redemption. The 2018 floating rate senior notes are not redeemable at our option prior to their maturity date. Pursuant to our tax matters agreement with Pfizer, we will not be permitted to redeem the 2013 senior notes due 2023 pursuant to this optional redemption provision, except under limited circumstances. Upon the occurrence of a change of control of us and a downgrade of the 2013, 2015, 2017, 2018 and 2020 senior notes below an investment grade rating by each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, we are, in certain circumstances, required to make an offer to repurchase all of the outstanding 2013, 2015, 2017, 2018 and 2020 senior notes at a price equal to 101% of the aggregate principal amount of the 2013, 2015, 2017, 2018 and 2020 senior notes together with accrued and unpaid interest to, but excluding, the date of repurchase. The components of our long-term debt are as follows: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 3.450% 2015 senior notes due 2020 $ — $ 500 2018 floating rate (three-month USD LIBOR plus 0.44%) senior notes due 2021 300 300 3.250% 2018 senior notes due 2021 300 300 3.250% 2013 senior notes due 2023 1,350 1,350 4.500% 2015 senior notes due 2025 750 750 3.000% 2017 senior notes due 2027 750 750 3.900% 2018 senior notes due 2028 500 500 2.000% 2020 senior notes due 2030 750 — 4.700% 2013 senior notes due 2043 1,150 1,150 3.950% 2017 senior notes due 2047 500 500 4.450% 2018 senior notes due 2048 400 400 3.000% 2020 senior notes due 2050 500 — 7,250 6,500 Unamortized debt discount / debt issuance costs (66) (51) Less current portion of long-term debt 600 500 Cumulative fair value adjustment for interest rate swap contracts 11 (2) Long-term debt, net of discount and issuance costs $ 6,595 $ 5,947 The fair value of our long-term debt was $7,835 million and $6,587 million as of December 31, 2020, and December 31, 2019, respectively, and has been determined using a third-party matrix-pricing model that uses significant inputs derived from, or corroborated by, observable market data and Zoetis’ credit rating (Level 2 inputs). See Note 3. Significant Accounting Policies— Fair Value. The principal amount of debt outstanding as of December 31, 2020, matures in the following years: After (MILLIONS OF DOLLARS) 2021 2022 2023 2024 2025 2025 Total Maturities $ 600 $ — $ 1,350 $ — $ 750 $ 4,550 $ 7,250 Interest Expense Interest expense, net of capitalized interest, was $231 million for 2020, $223 million for 2019 and $206 million for 2018. Capitalized interest expense was $17 million for 2020, $13 million for 2019, and $9 million for 2018. B. Investments As part of the acquisition of Abaxis, we acquired short and long-term investments in debt securities (see Note 5. Acquisitions and Divestitures ). These investments were classified as available-for-sale securities and, therefore, are measured at fair value at each reporting date. The changes in fair value are recognized in Accumulated other comprehensive income/(loss) . We utilized Level 2 inputs such as observable quoted prices for similar assets and liabilities in active markets and observable quoted prices for identical or similar assets in markets that are not very active. See Note 3. Significant Accounting Policies— Fair Value. At December 31, 2019, all of the available-for-sale securities had been sold or matured. The net gains/(losses) were immaterial to our financial results for 2019. C. Derivative Financial Instruments Foreign Exchange Risk A significant portion of our revenue, earnings and net investment in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk is also managed through the use of various derivative financial instruments. These derivative financial instruments serve to manage the exposure of our net investment in certain foreign operations to changes in foreign exchange rates and protect net income against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions. All derivative financial instruments used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the Consolidated Balance Sheets. The derivative financial instruments primarily offset exposures in the Australian dollar, British pound, Canadian dollar, Chinese yuan, euro, and Japanese yen. Changes in fair value are reported in earnings or in Accumulated other comprehensive income/(loss) , depending on the nature and purpose of the financial instrument, as follows: • For foreign exchange contracts not designated as hedging instruments, we recognize the gains and losses on forward-exchange contracts that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. The vast majority of the foreign exchange derivative financial instruments mature within 60 days and all mature within three years. • For cross-currency interest rate swaps, which are designated as a hedge against our net investment in foreign operations, changes in the fair value are deferred as a component of cumulative translation adjustment within Accumulated other comprehensive loss and reclassified into earnings when the foreign investment is sold or substantially liquidated. Gains and losses excluded from the assessment of hedge effectiveness are recognized in earnings ( Interest expense—net of capitalized interest ). The cash flows from these contracts are reflected within the investing section of our Consolidated Statements of Cash Flows . The cross-currency interest rate swap contracts have varying maturities of up to six years. Interest Rate Risk The company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rates and to reduce its overall cost of borrowing. • In anticipation of issuing fixed-rate debt, we may use forward-starting interest rate swaps that are designated as cash flow hedges to hedge against changes in interest rates that could impact expected future issuances of debt. Unrealized gains or losses on the forward-starting interest rate swaps are reported in Accumulated other comprehensive loss and are recognized in earnings over the life of the future fixed-rate notes. When the company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur within the originally expected period of execution, or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings. During 2020, we entered into treasury lock trades with an aggregate notional value of $600 million. We designated these treasury locks as cash flow hedges against interest rate exposure related to the issuance of fixed-rate debt in the second quarter of 2020. Of the aggregate notional value of $600 million, four treasury locks with a total notional amount of $425 million were designated as hedges against the ten-year fixed rate debt maturing in 2030, and two treasury locks with a total notional amount of $175 million were designated as hedges against the thirty-year note maturing in 2050. Upon issuance of our 2020 senior notes, we terminated the treasury locks and paid $6 million in cash to the counterparties for settlement. The settlement amount, which represents the fair value of the contracts at the time of termination, was recorded in Accumulated other comprehensive loss, and will be amortized into income over the life of the 2020 senior notes. For the twelve months ended December 31, 2020, we entered into interest rate swaps having an effective date and mandatory termination date in March 2023. We designated these swaps as cash flow hedges against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 3.250% 2013 senior notes due 2023 and a forward-starting interest rate swap, having an effective date and mandatory termination date in March 2026, to hedge against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 4.500% 2015 senior notes due 2025. • We may use fixed-to-floating interest rate swaps that are designated as fair value hedges to hedge against changes in the fair value of certain fixed-rate debt attributable to changes in the benchmark LIBOR rate. These derivative instruments effectively convert a portion of the company’s long-term debt from fixed rate to floating rate debt based on three-month LIBOR plus a spread. Gains or losses on the fixed to floating interest rate swaps due to changes in LIBOR are recorded in Interest expense, net of capitalized interest . Changes in the fair value of the fixed-to-floating interest rate swaps are offset by changes in the fair value of the underlying fixed rate debt. As of December 31, 2020, we had an outstanding fixed-to-floating interest rate swap which corresponds to a portion of the 3.900% 2018 senior notes due 2028. During 2018, we entered into forward starting interest rate swaps with an aggregate notional value of $350 million. In addition, we entered into treasury lock trades with an aggregate notional value of $350 million. We designated these swaps and treasury locks (contracts) as cash flow hedges against interest rate exposure related principally to the issuance of fixed-rate debt to be used primarily to fund the acquisition of Abaxis in 2018 and to refinance our 1.875% 2013 senior notes due 2018. Upon issuance of our 2018 senior notes, we terminated the contracts we entered into in 2018 and paid $2 million in cash to the counterparties for settlement. In addition, in previous years we had entered into various forward-starting interest rate swap contracts that were designated as cash flow hedges and that were terminated upon issuance of fixed-rate notes. The settlement amounts, which represent the fair value of the contracts at the time of termination, were recorded in Accumulated other comprehensive loss , and will be amortized into income over the life of the 2018 senior notes. Outstanding Positions The aggregate notional amount of derivative instruments are as follows: Notional As of December 31, (MILLIONS) 2020 2019 Foreign currency forward-exchange contracts $ 1,633 $ 1,364 Cross-currency interest rate swap contracts (in foreign currency): euro 650 650 Danish krone 600 600 Swiss franc 25 25 Forward-starting interest rate swaps $ 550 $ 250 Fixed-to-floating interest rate swap contracts $ 150 $ 150 Fair Value of Derivative Instruments The classification and fair values of derivative instruments are as follows: Fair Value of Derivatives As of December 31, (MILLIONS OF DOLLARS) Balance Sheet Location 2020 2019 Derivatives Not Designated as Hedging Instruments: Foreign currency forward-exchange contracts Other current assets $ 10 $ 7 Foreign currency forward-exchange contracts Other current liabilities (16) (5) Total derivatives not designated as hedging instruments (6) 2 Derivatives Designated as Hedging Instruments: Forward starting interest rate swap contracts Other non-current assets $ 6 $ 5 Forward starting interest rate swap contracts Other non-current liabilities (17) (1) Cross-currency interest rate swap contracts Other current assets 2 4 Cross-currency interest rate swap contracts Other non-current assets 5 20 Cross-currency interest rate swap contracts Other current liabilities (21) (3) Fixed to floating interest rate swap contracts Other non-current assets/(liabilities) 11 (2) Total derivatives designated as hedging instruments (14) 23 Total derivatives $ (20) $ 25 The company’s cross-currency interest rate swaps are subject to master netting arrangements to mitigate credit risk by permitting net settlement of transactions with the same counterparty. We may also enter into collateral security arrangements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative instruments fluctuates from contractually established thresholds. At December 31, 2020, there was $8 million of collateral received related to the long-term cross-currency interest rate swaps. We use a market approach in valuing financial instruments on a recurring basis. Our derivative financial instruments are measured at fair value on a recurring basis using Level 2 inputs in the calculation of fair value. See Note 3. Significant Accounting Policies— Fair Value. The amounts of net losses on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions - net, are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Foreign currency forward-exchange contracts $ (2) $ — These amounts were substantially offset in Other (income)/deductions—net by the effect of changing exchange rates on the underlying foreign currency exposures. The amounts of unrecognized net (losses)/gains on interest rate swap contracts, recorded, net of tax, in Accumulated other comprehensive income/(loss) , are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Forward starting interest rate swap contracts $ (11) $ 3 Cross-currency interest rate swap contracts $ (58) $ 12 Gains on interest rate swap contracts, recognized within Interest expense, net of capitalized interest, are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Cross-currency interest rate swap contracts $ 18 $ 19 The net amount of deferred gains/(losses) related to derivative instruments designated as cash flow hedges that is expected to be reclassified from Accumulated other comprehensive loss into earnings over the next 12 months is insignificant. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Leases | 10. Leases We have facilities, vehicles and equipment under various non-cancellable operating leases with third parties. These leases generally have remaining terms ranging from 1 to 14 years, inclusive of renewal options that are reasonably certain of exercise. Supplemental information for operating leases is as follows: (MILLIONS OF DOLLARS, EXCEPT LEASE TERM AND DISCOUNT RATE AMOUNTS) As of December 31, 2020 As of December 31, 2019 Supplemental Balance Sheet information for operating leases Operating lease right of use assets $ 192 $ 189 Operating lease liabilities Operating lease liabilities - current (in Other current liabilities ) $ 40 $ 35 Operating lease liabilities - noncurrent 163 164 Total operating lease liabilities $ 203 $ 199 Weighted-average remaining lease term—operating leases (years) 6.59 7.12 Weighted-average discount rate—operating leases 3.12 % 3.67 % (MILLIONS OF DOLLARS) Year Ended Year Ended Supplemental Income Statement information for operating leases Operating lease expense $ 46 $ 40 Variable lease payments not included in the measurement of lease liabilities 20 21 Short-term lease payments not included in the measurement of lease liabilities 7 9 Supplemental Cash Flow information for operating leases Cash paid for amounts included in the measurement of lease liabilities $ 42 $ 42 Lease obligations obtained in exchange for right-of-use assets (non-cash) 47 241 Future minimum lease payments under non-cancellable operating lease contracts as of December 31, 2020 are as follows: Total Less: After Lease Imputed (MILLIONS OF DOLLARS) 2021 2022 2023 2024 2025 2025 Payments Interest Total Maturities $ 46 $ 39 $ 32 $ 27 $ 21 $ 57 $ 222 $ (19) $ 203 Total rent expense, net of sublease rental income, in accordance with the superceded leasing standard, was approximately $45 million in 2018. |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | 11. Inventories The components of inventory follow: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 Finished goods $ 805 $ 701 Work-in-process 594 511 Raw materials and supplies 229 198 Inventories $ 1,628 $ 1,410 |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, Plant and Equipment The components of property, plant and equipment follow: Useful Lives As of December 31, (MILLIONS OF DOLLARS) (Years) 2020 2019 Land — $ 22 $ 22 Buildings 33 1 / 3 - 50 1,019 983 Machinery, equipment and fixtures 3 - 20 2,440 2,119 Construction-in-progress — 673 553 4,154 3,677 Less: Accumulated depreciation 1,952 1,737 Property, plant and equipment $ 2,202 $ 1,940 Depreciation expense was $211 million in 2020, $175 million in 2019 and $152 million in 2018. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | he components of, and changes in, the carrying amount of goodwill follow: (MILLIONS OF DOLLARS) U.S. International Total Balance, December 31, 2018 $ 1,265 $ 1,254 $ 2,519 Additions / Adjustments (a) 102 — 102 Other (b) — (29) (29) Balance, December 31, 2019 $ 1,367 $ 1,225 $ 2,592 Additions / Adjustments (a) 58 17 75 Other (b) — 27 27 Balance, December 31, 2020 $ 1,425 $ 1,269 $ 2,694 (a) For 2020, primarily relates to the acquisitions of Performance Livestock Analytics, Fish Vet Group and Virtual Recall. See Note 5. Acquisitions and Divestitures. For 2019, primarily relates to the acquisitions of Platinum Performance, Phoenix Lab and ZNLabs. See Note 5. Acquisitions and Divestitures. (b) Includes adjustments for foreign currency translation. The gross goodwill balance was $3,230 million as of December 31, 2020, and $3,128 million as of December 31, 2019. Accumulated goodwill impairment losses (generated entirely in fiscal 2002) was $536 million as of December 31, 2020 and 2019. B. Other Intangible Assets The components of identifiable intangible assets follow: As of December 31, 2020 As of December 31, 2019 Identifiable Identifiable Gross Intangible Assets, Gross Intangible Assets, Carrying Accumulated Less Accumulated Carrying Accumulated Less Accumulated (MILLIONS OF DOLLARS) Amount Amortization Amortization Amount Amortization Amortization Finite-lived intangible assets: Developed technology rights (a) $ 1,968 $ (809) $ 1,159 $ 1,938 $ (657) $ 1,281 Brands and tradenames (a) 427 (243) 184 424 (223) 201 Other (a) 474 (306) 168 441 (249) 192 Total finite-lived intangible assets 2,869 (1,358) 1,511 2,803 (1,129) 1,674 Indefinite-lived intangible assets: Brands and tradenames 104 — 104 104 — 104 In-process research and development 88 — 88 105 — 105 Product rights 7 — 7 7 — 7 Total indefinite-lived intangible assets 199 — 199 216 — 216 Identifiable intangible assets $ 3,068 $ (1,358) $ 1,710 $ 3,019 $ (1,129) $ 1,890 (a) In 2020, additions included intangible assets associated with the acquisitions of Performance Livestock Analytics, Virtual Recall, Ethos Diagnostic Science and Fish Vet Group. See Note 5. Acquisitions and Divestitures . Developed Technology Rights Developed technology rights represent the amortized cost associated with developed technology, which has been acquired from third parties and which can include the right to develop, use, market, sell and/or offer for sale the product, compounds and intellectual property that we have acquired with respect to products, compounds and/or processes that have been completed. These assets include technologies related to the care and treatment of dogs, cats, horses, cattle, swine, poultry, fish and sheep. Brands and Tradenames Brands and tradenames represent the amortized or unamortized cost associated with product name recognition, as the products themselves do not receive patent protection and legal trademark and tradenames. The more significant finite-lived brands are Platinum Performance, Excenel, and Lutalyse and the more significant indefinite-lived brands are the Linco family products and Mastitis. The more significant finite-lived trademarks and tradenames are finite-lived trademarks and tradenames acquired from Abaxis. The more significant components of indefinite-lived trademarks and tradenames are indefinite-lived trademarks and tradenames acquired from SmithKlineBeecham. In-Process Research and Development IPR&D assets represent R&D assets that have not yet received regulatory approval in a major market. The majority of these IPR&D assets were acquired in connection with our acquisition of an Irish biologic therapeutics company. IPR&D assets are required to be classified as indefinite-lived assets until the successful completion or abandonment of the associated R&D effort. Accordingly, during the development period after the date of acquisition, these assets will not be amortized until approval is obtained in a major market, typically either the U.S. or the EU, or in a series of other countries, subject to certain specified conditions and management judgment. At that time, we will determine the useful life of the asset, reclassify the asset out of IPR&D and begin amortization. If the associated R&D effort is abandoned, the related IPR&D assets will be written-off, and we will record an impairment charge. There can be no certainty that IPR&D assets ultimately will yield a successful product. Product Rights Product rights represent product registration and application rights that were acquired from Pfizer in 2014. C. Amortization The weighted average life of our total finite-lived intangible assets is approximately 10 years. Total amortization expense for finite-lived intangible assets was $230 million in 2020, $237 million in 2019, and $157 million in 2018. The annual amortization expense expected for the years 2021 through 2025 is as follows: (MILLIONS OF DOLLARS) 2021 2022 2023 2024 2025 Amortization expense $ 203 $ 191 $ 183 $ 164 $ 149 |
Benefit Plans
Benefit Plans | 12 Months Ended |
Dec. 31, 2020 | |
Retirement Benefits [Abstract] | |
Benefit Plans | employees ceased to participate in the Pfizer U.S. qualified defined benefit and U.S. retiree medical plans effective December 31, 2012, and liabilities associated with our employees under these plans were retained by Pfizer. Pfizer continued to credit certain employees' service with Zoetis generally through December 31, 2017 (or termination of employment from Zoetis, if earlier) for certain early retirement benefits with respect to Pfizer's U.S. defined benefit pension and retiree medical plans. In connection with an employee matters agreement between Pfizer and Zoetis, Zoetis is responsible for payment of three-fifths of the total cost of the service credit continuation (approximately $38 million) for these plans and Pfizer is responsible for the remaining two-fifths of the total cost (approximately $25 million). The $25 million capital contribution from Pfizer and corresponding contra-equity account (which is being reduced as the service credit continuation is incurred) is included in Employee benefit plan contribution from Pfizer Inc. in the Consolidated Statements of Equity. The balance in the contra-equity account was approximately $5 million and $8 million as of December 31, 2020 and 2019, respectively. The amount of the service cost continuation payment to be paid by Zoetis to Pfizer was determined and fixed based on an actuarial assessment of the value of the grow-in benefits and is being paid in equal installments over a period of 10 years. Pension and postretirement benefit expense associated with the extended service for certain employees in the U.S. plans totaled approximately $6 million per year in 2020 and 2019. A. International Pension Plans Information about the dedicated pension plans, including the plans transferred to us as part of the separation from Pfizer, is provided in the tables below. Obligations and Funded Status––Dedicated Plans The following table provides an analysis of the changes in the benefit obligations, plan assets and funded status of our dedicated pension plans (including those transferred to us): As of and for the Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Change in benefit obligation: Projected benefit obligation, beginning $ 144 $ 123 Service cost 8 6 Interest cost 2 3 Changes in actuarial assumptions and other 1 19 Settlements and curtailments — (1) Benefits paid (2) (2) Adjustments for foreign currency translation 12 (3) Other––net (1) (1) Benefit obligation, ending 164 144 Change in plan assets: Fair value of plan assets, beginning 72 65 Actual return on plan assets 4 7 Company contributions 5 5 Settlements and curtailments — (1) Benefits paid (2) (2) Adjustments for foreign currency translation 6 (2) Fair value of plan assets, ending 85 72 Funded status—Projected benefit obligation in excess of plan assets at end of year (a) $ (79) $ (72) (a) Included in Other noncurrent liabilities . Losses related to changes in the benefit obligation were $1 million and $19 million in 2020 and 2019, respectively. The 2019 loss was primarily related to the decrease in discount rates. Actuarial losses were approximately $32 million ($22 million, net of tax) at December 31, 2020, and $32 million ($22 million, net of tax) at December 31, 2019. The actuarial gains and losses primarily represent the cumulative difference between the actuarial assumptions and actual return on plan assets, changes in discount rates and changes in other assumptions used in measuring the benefit obligations. These actuarial gains and losses are recognized in Accumulated other comprehensive income/(loss) . The actuarial losses will be amortized into net periodic benefit costs over an average period of 11.1 years. Information related to the funded status of selected plans follows: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 Pension plans with an accumulated benefit obligation in excess of plan assets: Fair value of plan assets $ 77 $ 65 Accumulated benefit obligation 131 113 Pension plans with a projected benefit obligation in excess of plan assets: Fair value of plan assets 83 66 Projected benefit obligation 162 138 Net Periodic Benefit Costs––Dedicated Plans The following table provides the net periodic benefit cost associated with dedicated pension plans (including those transferred to us): Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Service cost $ 8 $ 6 $ 7 Interest cost 2 3 3 Expected return on plan assets (3) (3) (3) Amortization of net (gains) / losses 2 1 1 Settlement and curtailments (gains) / losses — — (1) Net periodic benefit cost $ 9 $ 7 $ 7 Actuarial Assumptions––Dedicated Plans The following table provides the weighted average actuarial assumptions for the dedicated pension plans (including those transferred to us): As of December 31, (PERCENTAGES) 2020 2019 2018 Weighted average assumptions used to determine benefit obligations: Discount rate 1.2 % 1.3 % 2.3 % Rate of compensation increase 3.1 % 3.1 % 3.0 % Cash balance credit interest rate 1.5 % 1.5 % 1.7 % Weighted average assumptions used to determine net benefit cost for the year ended December 31: Discount rate 1.3 % 2.3 % 2.2 % Expected return on plan assets 3.8 % 4.1 % 4.4 % Rate of compensation increase 3.1 % 3.0 % 3.0 % Cash balance credit interest rate 1.5 % 1.7 % 1.7 % The assumptions above are used to develop the benefit obligations at the end of the year and to develop the net periodic benefit cost for the following year. Therefore, the assumptions used to determine the net periodic benefit cost for each year are established at the end of each previous year, while the assumptions used to determine the benefit obligations are established at each year-end. The net periodic benefit cost and the benefit obligations are based on actuarial assumptions that are reviewed on an annual basis. The assumptions are revised based on an annual evaluation of long-term trends, as well as market conditions that may have an impact on the cost of providing retirement benefits. Actuarial and other assumptions for pension plans can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For a description of the risks associated with estimates and assumptions, see Note 3. Significant Accounting Policies—Estimates and Assumptions . Plan Assets—Dedicated Plans The components of plan assets follow: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 Cash and cash equivalents $ 1 $ 1 Equity securities: Equity commingled funds 31 27 Debt securities: Government bonds 43 36 Other investments 10 8 Total (a) $ 85 $ 72 (a) Fair values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see Note 3. Significant Accounting Policies—Fair Value ). Investment plan assets are valued using Level 1 or Level 2 inputs. A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Note 3. Significant Accounting Policies—Estimates and Assumptions. Specifically, the following methods and assumptions were used to estimate the fair value of our pension assets: • Equity commingled funds––observable market prices. • Government bonds and other investments––principally observable market prices. The long-term target asset allocations and the percentage of the fair value of plans assets for dedicated benefit plans follow: As of December 31, Target allocation percentage Percentage of Plan Assets (PERCENTAGES) 2020 2020 2019 Cash and cash equivalents 0-10% 1.2 % 1.7 % Equity securities 0-60% 37.0 % 36.9 % Debt securities 15-100% 50.2 % 49.7 % Other investments 0-100% 11.6 % 11.7 % Total 100 % 100 % 100 % Zoetis utilizes long-term asset allocation ranges in the management of our plans’ invested assets. Long-term return expectations are developed with input from outside investment consultants based on the company’s investment strategy, which takes into account historical experience, as well as the impact of portfolio diversification, active portfolio management, and the investment consultant’s view of current and future economic and financial market conditions. As market conditions and other factors change, the targets may be adjusted accordingly and actual asset allocations may vary from the target allocations. The long-term asset allocation ranges reflect the asset class return expectations and tolerance for investment risk within the context of the respective plans’ long-term benefit obligations. These ranges are supported by an analysis that incorporates historical and expected returns by asset class, as well as volatilities and correlations across asset classes and our liability profile. This analysis, referred to as an asset-liability analysis, also provides an estimate of expected returns on plan assets, as well as a forecast of potential future asset and liability balances. The investment consultants review investment performance with Zoetis on a quarterly basis in total, as well as by asset class, relative to one or more benchmarks. Cash Flows—Dedicated Plans Our plans are generally funded in amounts that are at least sufficient to meet the minimum requirements set forth in applicable employee benefit laws and local tax and other laws. We expect to contribute approximately $7 million to our dedicated pension plans in 2021. Benefit payments are expected to be approximately $3 million for 2021, $6 million for 2022, $4 million for 2023, $6 million for 2024 and $6 million for 2025. Benefit payments are expected to be approximately $52 million in the aggregate for the five years thereafter. These expected benefit payments reflect the future plan benefits subsequent to 2021 projected to be paid from the plans or from the general assets of Zoetis entities under the current actuarial assumptions used for the calculation of the projected benefit obligation and, therefore, actual benefit payments may differ from projected benefit payments. B. Postretirement Plans Postretirement benefit expense associated with these U.S. retiree medical plans totaled approximately $4 million per year in 2020, 2019 and 2018 (inclusive of service cost grow-in benefits discussed above). The expected benefit payments for each of the next two years is approximately $4 million per year. C. Defined Contribution Plans Zoetis has a voluntary defined contribution plan (Zoetis Savings Plan) that allows participation by substantially all U. S. employees. Zoetis matches 100% of employee contributions, up to a maximum of 5% of each employee’s eligible compensation. The Zoetis Savings Plan also includes a profit-sharing feature that provides for an additional contribution ranging between 0 and 8 percent of each employee’s eligible compensation. All eligible employees receive the profit-sharing contribution regardless of the amount they choose to contribute to the Zoetis Savings Plan. The profit-sharing contribution is a discretionary amount provided by Zoetis and is determined on an annual basis. Employees can direct their contributions and the company's matching and profit-sharing contributions into any of the funds offered. These funds provide participants with a cross section of investing options, including the Zoetis stock fund. The matching and profit-sharing contributions are cash funded. When the Abaxis acquisition closed on July 31, 2018, we assumed Abaxis’ legacy defined contribution plan, the Abaxis 401(k) Plan. On June 24, 2019, the Abaxis 401(k) Plan was merged into the Zoetis Savings Plan. Employees are permitted to diversify all or any portion of their company matching or profit-sharing contribution. Once the contributions have been paid, Zoetis has no further payment obligations. Contribution expense, associated with the Zoetis Savings Plan, totaled approximately $48 million in 2020, $46 million in 2019 and $43 million in 2018. Employees in the U.S. who meet certain eligibility requirements participate in a supplemental (non-qualified) savings plan sponsored by Zoetis. The cost of the supplemental savings plan was $11 million and $12 million in 2020 and 2019, respectively. |
Share-Based Payments
Share-Based Payments | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Share-Based Payments | The Zoetis 2013 Equity and Incentive Plan (Equity Plan) provides long-term incentives to our employees and non-employee directors. The principal types of share-based awards available under the Equity Plan may include, but are not limited to, stock options, restricted stock and restricted stock units (RSUs), deferred stock units (DSUs), performance-vesting restricted stock units (PSUs), and other equity-based or cash-based awards. Twenty-five million shares of stock were approved and registered with the Securities and Exchange Commission for grants to participants under the Equity Plan. The shares reserved may be used for any type of award under the Equity Plan. At December 31, 2020, the aggregate number of remaining shares available for future grant under the Equity Plan was approximately 11 million shares. A. Share-Based Compensation Expense In connection with the acquisition of Abaxis, in August 2018, the company issued 502,766 restricted stock units (replacement awards) with a weighted average grant date fair value of $85.26 per RSU, per the terms of the merger agreement between Zoetis and Abaxis, in connection with unvested Abaxis employee equity awards. The Abaxis unvested equity awards were canceled and exchanged for the replacement awards using a conversion ratio stated in the merger agreement. The grant date fair value of the replacement awards that is attributable to pre-merger service is $10 million and is part of the consideration transferred in exchange for the acquisition of Abaxis. The fair value of the replacement awards attributable to post merger service is $33 million and will be recorded over future vesting periods. The replacements awards vest over varying terms of continuous service up to four years from the grant date and the values are amortized on a straight-line basis over the vesting term. For additional information see Note 5. Acquisitions and Divestitures. The components of share-based compensation expense follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Stock options / stock appreciation rights $ 9 $ 10 $ 10 RSUs / DSUs (a) 31 43 34 PSUs 19 14 9 Share-based compensation expense—total (b) $ 59 $ 67 $ 53 Tax benefit for share-based compensation expense (7) (10) (7) Share-based compensation expense, net of tax $ 52 $ 57 $ 46 (a) For the year ended December 31, 2018, includes share-based compensation expense of $7 million related to the acquisition of Abaxis, for the post-merger service period. For additional details see Note 5. Acquisitions and Divestitures. (b) For each of the years ended December 31, 2020, 2019 and 2018, we capitalized approximately $1 million of share-based compensation expense to inventory. B. Stock Options Stock options represent the right to purchase shares of our common stock within a specified period of time at a specified price. The exercise price for a stock option will be not less than 100% of the fair market value of the common stock on the date of grant. Stock options granted may include those intended to be “incentive stock options” within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986 (the Code). Stock options are accounted for using a fair-value-based method at the date of grant in the Consolidated Statements of Income. The values determined through this fair-value-based method generally are amortized on a straight-line basis over the vesting term. Eligible employees may receive Zoetis stock option awards. Zoetis stock option awards generally vest after three years of continuous service from the date of grant and have a contractual term of 10 years. The fair-value-based method for valuing each Zoetis stock option grant on the grant date uses the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions noted in the following table, shown at their weighted-average values: Year Ended December 31, 2020 2019 2018 Expected dividend yield (a) 0.55 % 0.75 % 0.69 % Risk-free interest rate (b) 1.41 % 2.56 % 2.74 % Expected stock price volatility (c) 24.33 % 23.08 % 23.61 % Expected term (d) (years) 5.5 5.7 6.5 (a) Determined using a constant dividend yield during the expected term of the Zoetis stock option. (b) Determined using the interpolated yield on U.S. Treasury zero-coupon issues. (c) Determined using an equal weighting between historical volatility of the Zoetis stock price and implied volatility. The selection of the blended historical and implied volatility approach was based on our assessment that this calculation of expected volatility is more representative of future stock price trends. (d) Determined using expected exercise and post-vesting termination patterns. The following table provides an analysis of stock option activity for the year ended December 31, 2020: Weighted-Average Remaining Aggregate Weighted-Average Contractual Term Intrinsic Value (a) Shares Exercise Price (Years) (MILLIONS) Outstanding, December 31, 2019 3,463,624 $ 51.64 Granted 309,974 144.13 Exercised (1,201,072) 47.80 Forfeited (18,075) 65.81 Outstanding, December 31, 2020 2,554,451 $ 64.43 5.7 $ 258 Exercisable, December 31, 2020 1,378,614 $ 37.05 3.7 $ 177 (a) Market price of underlying Zoetis common stock less exercise price. As of December 31, 2020, there was approximately $8 million of unrecognized compensation costs related to nonvested stock options, which will be recognized over an expected remaining weighted-average period of 1 year. The following table summarizes data related to stock option activity: Year Ended/As of December 31, (MILLIONS OF DOLLARS, EXCEPT PER STOCK OPTION AMOUNTS) 2020 2019 2018 Weighted-average grant date fair value per stock option $ 34.22 $ 21.84 $ 20.30 Aggregate intrinsic value on exercise 114 76 66 Cash received upon exercise 57 39 36 Tax benefits realized related to exercise 39 31 23 C. Restricted Stock Units (RSUs) Restricted stock units represent the right to receive a share of our common stock that is subject to a risk of forfeiture until the restrictions lapse at the end of the vesting period subject to the recipient's continued employment. RSUs accrue dividend equivalent units and are paid in shares of our common stock upon vesting (or cash determined by reference to the value of our common stock). RSUs are accounted for using a fair-value-based method that utilizes the closing price of Zoetis common stock on the date of grant. Zoetis RSUs generally vest after three years of continuous service from the grant date and the values are amortized on a straight-line basis over the vesting term. The following table provides an analysis of RSU activity for the year ended December 31, 2020: Weighted-Average RSUs Grant Date Fair Value Nonvested, December 31, 2019 1,460,535 $ 72.93 Granted 239,745 144.06 Vested (627,818) 61.94 Reinvested dividend equivalents 6,511 83.26 Forfeited (95,507) 88.69 Nonvested, December 31, 2020 983,466 $ 95.82 As of December 31, 2020, there was approximately $39 million of unrecognized compensation costs related to nonvested RSUs, which will be recognized over an expected remaining weighted-average period of 1 year. D. Deferred Stock Units (DSUs) Deferred stock units, which were granted to non-employee compensated Directors in 2013 and 2014, represent the right to receive shares of our common stock at a future date. The DSU awards will be automatically settled and paid in shares within 60 days following the Director’s separation from service on the Board of Directors. DSUs are accounted for using a fair-value-based method that utilizes the closing price of Zoetis common stock on the date of grant. DSUs vested immediately as of the grant date and the values were expensed at the time of grant into Selling, general and administrative expenses . For the years ended December 31, 2020 and 2019, there were no DSUs granted. As of December 31, 2020 and 2019, there were 74,688 and 74,273 DSUs outstanding, respectively, including dividend equivalents. E. Performance-Vesting Restricted Stock Units (PSUs) Performance-vesting restricted stock units, which are granted to eligible senior management, represent the right to receive a share of our common stock that is subject to a risk of forfeiture until the restrictions lapse, which include continued employment through the end of the vesting period and the attainment of performance goals. PSUs represent the right to receive shares of our common stock in the future (or cash determined by reference to the value of our common stock). PSUs are accounted for using a Monte Carlo simulation model. The units underlying the PSUs will be earned and vested over a three-year performance period, based upon the total shareholder return of the company in comparison to the total shareholder return of the companies comprising the S&P 500 index at the start of the performance period, excluding companies that during the performance period are acquired or are no longer publicly traded (Relative TSR). The weighted-average fair value was estimated based on volatility assumptions of Zoetis common stock and an average of peer companies, which were 20.2% and 24.8%, respectively, in 2020, and 20.3% and 25.3%, respectively, in 2019. Depending on the company’s Relative TSR performance at the end of the performance period, the recipient may earn between 0% and 200% of the target number of units. Vested units, including dividend equivalent units, are paid in shares of the company’s common stock. PSU values are amortized on a straight-line basis over the vesting term. On October 3, 2019, the Company announced the retirement of Juan Ramón Alaix as Chief Executive Officer (“CEO”) effective December 31, 2019 . As a result of Mr. Alaix’s retirement as CEO, a transition services letter agreement was entered into between the Company and Mr. Alaix. The letter agreement stipulates that any nonvested equity awards as of his retirement date would continue to vest according to their original vesting schedule. As a result of this change, 37,265 of nonvested PSUs granted as part of his 2018 and 2019 equity grants were modified resulting in $8 million to be recognized through December 31, 2020. During the years ended December 31, 2020 and 2019, the company recognized $6 million and $2 million, respectively, of expense related to share-based compensation in connection with Mr. Alaix's retirement. The following table provides an analysis of PSU activity for the year ended December 31, 2020: Weighted-Average PSUs Grant Date Fair Value Nonvested, December 31, 2019 419,396 $ 93.19 Granted 85,279 217.49 Vested (141,594) 77.69 Reinvested dividend equivalents 2,671 106.27 Forfeited (21,481) 110.43 Nonvested, December 31, 2020 344,271 $ 129.38 Shares issued, December 31, 2020 276,199 $ 74.32 As of December 31, 2020, there was approximately $18 million of unrecognized compensation costs related to nonvested PSUs, which will be recognized over an expected remaining weighted-average period of 1.1 years. F. Other Equity-Based or Cash-Based Awards Our Compensation Committee is authorized to grant awards in the form of other equity-based awards or other cash-based awards, as deemed to be consistent with the purposes of the Equity Plan. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders' Equity Attributable to Parent [Abstract] | |
Stockholders' Equity | Zoetis is authorized to issue 6 billion shares of common stock and 1 billion shares of preferred stock. In December 2016, the company's Board of Directors authorized a $1.5 billion share repurchase program. This program was completed as of December 31, 2019. In December 2018, the company's Board of Directors authorized an additional $2.0 billion share repurchase program. As of December 31, 2020, there was approximately $1.4 billion remaining under this authorization. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs. The company temporarily suspended share repurchases beginning in the second quarter of 2020. In January 2021, the company resumed share repurchases under its share repurchase program. Accumulated other comprehensive loss Changes, net of tax, in accumulated other comprehensive loss, excluding noncontrolling interest, follow: Currency Translation Adjustments Benefit Plans Accumulated Other Cash Flow Net Investment Other Currency Actuarial Comprehensive (MILLIONS OF DOLLARS) Hedges Hedges Translation Adj (Losses)/Gains Loss Balance, December 31, 2017 $ (3) $ — $ (487) $ (15) $ (505) Other comprehensive (loss)/gain, net of tax (1) 9 (133) 1 (124) Balance, December 31, 2018 (4) 9 (620) (14) (629) Other comprehensive gain/(loss), net of tax 4 12 (104) (9) (97) Balance, December 31, 2019 — 21 (724) (23) (726) Other comprehensive (loss)/gain, net of tax (15) (58) 69 — (4) Balance, December 31, 2020 $ (15) $ (37) $ (655) $ (23) $ (730) |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings per Share | following table presents the calculation of basic and diluted earnings per share: Year Ended December 31, (MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) 2020 2019 2018 Numerator Net income before allocation to noncontrolling interests $ 1,636 $ 1,500 $ 1,424 Less: net loss attributable to noncontrolling interests (2) — (4) Net income attributable to Zoetis Inc. $ 1,638 $ 1,500 $ 1,428 Denominator Weighted-average common shares outstanding 475.502 478.128 483.063 Common stock equivalents: stock options, RSUs, DSUs and PSUs 3.067 3.659 3.835 Weighted-average common and potential dilutive shares outstanding 478.569 481.787 486.898 Earnings per share attributable to Zoetis Inc. stockholders—basic $ 3.44 $ 3.14 $ 2.96 Earnings per share attributable to Zoetis Inc. stockholders—diluted $ 3.42 $ 3.11 $ 2.93 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our tax contingencies, see Note 8. Tax Matters . A. Legal Proceedings Our non-tax contingencies include, among others, the following: • Product liability and other product-related litigation, which can include injury, consumer, off-label promotion, antitrust and breach of contract claims. • Commercial and other matters, which can include product-pricing claims and environmental claims and proceedings. • Patent litigation, which typically involves challenges to the coverage and/or validity of our patents or those of third parties on various products or processes. • Government investigations, which can involve regulation by national, state and local government agencies in the U.S. and in other countries. Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial. We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid. We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. The principal matters to which we are a party are discussed below. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent. Ulianopolis, Brazil In February 2012, the Municipality of Ulianopolis (State of Para, Brazil) filed a complaint against Fort Dodge Saúde Animal Ltda. (FDSAL), a Zoetis entity, and five other large companies alleging that waste sent to a local waste incineration facility for destruction, but that was not ultimately destroyed as the facility lost its operating permit, caused environmental impacts requiring cleanup. The Municipality is seeking recovery of cleanup costs purportedly related to FDSAL's share of all waste accumulated at the incineration facility awaiting destruction, and compensatory damages to be allocated among the six defendants. We believe we have strong arguments against the claim, including defense strategies against any claim of joint and several liability. At the request of the Municipal prosecutor, in April 2012, the lawsuit was suspended for one year. Since that time, the prosecutor has initiated investigations into the Municipality's actions in the matter as well as the efforts undertaken by the six defendants to remove and dispose of their individual waste from the incineration facility. On October 3, 2014, the Municipal prosecutor announced that the investigation remained ongoing and outlined the terms of a proposed Term of Reference (a document that establishes the minimum elements to be addressed in the preparation of an Environmental Impact Assessment), under which the companies would be liable to withdraw the waste and remediate the area. On March 5, 2015, we presented our response to the prosecutor’s proposed Term of Reference, arguing that the proposed terms were overly general in nature and expressing our interest in discussing alternatives to address the matter. The prosecutor agreed to consider our request to engage a technical consultant to conduct an environmental diagnostic of the contaminated area. On May 29, 2015, we, in conjunction with the other defendant companies, submitted a draft cooperation agreement to the prosecutor, which outlined the proposed terms and conditions for the engagement of a technical consultant to conduct the environmental diagnostic. On August 19, 2016, the parties and the prosecutor agreed to engage the services of a third-party consultant to conduct a limited environmental assessment of the site. The site assessment was conducted during June 2017, and a written report summarizing the results of the assessment was provided to the parties and the prosecutor in November 2017. The report noted that waste is still present on the site and that further (Phase II) environmental assessments are needed before a plan to manage that remaining waste can be prepared. On April 1, 2019, the defendants met with the Prosecutor to discuss the conclusions set forth in the written report. Following that discussion, on April 10, 2019, the Prosecutor issued a procedural order requesting that the defendants prepare and submit a technical proposal outlining the steps needed to conduct the additional Phase II environmental assessments. The defendants presented the technical proposal to the Prosecutor on October 21, 2019. On March 3, 2020, the Prosecutor notified the defendants that he submitted the proposal remains underto the Ministry of the Environment for its review and consideration by the Prosecutor. On July 15, 2020, the Prosecutor recommended certain amendments to the proposal for the Phase II testing. On September 28, 2020, the parties and the Prosecutor agreed to the final terms and conditions concerning the cooperation agreement with respect to the Phase II testing. We anticipate that the Phase II testing will begin in March 2021. Lascadoil Contamination in Animal Feed An investigation by the U.S. Food and Drug Administration (FDA) and the Michigan Department of Agriculture into the alleged contamination of the feed supply of certain turkey and hog feed mills in Michigan led to the recall of certain batches of soy oil (intended for use as an animal feed additive) that had originated with Shur-Green Farms LLC, a producer of soy oil, and that had been contaminated with lascadoil, an industrial by-product of certain Zoetis manufacturing processes. The contaminated feed is believed to have caused the deaths of approximately 50,000 turkeys and the contamination (but not death) of at least 20,000 hogs in August 2014. The investigation posited that Shur-Green inadvertently contaminated soy oil with lascadoil which it purchased from Zoetis for use as a bio-fuel ingredient, and then sold the contaminated soy oil to fat recycling vendors, who in turn unknowingly sold to feed mills for use in animal feed. During the course of its investigation, the FDA identified the process used to manufacture Zoetis’ Avatec® (lasalocid sodium) and Bovatec® (lasalocid sodium) products as the possible source of the lascadoil, since lascadoil contains small amounts of lasalocid, the active ingredient found in both products. Zoetis sold the industrial lascadoil byproduct to Shur-Green, through its broker, Heritage Intreractive Services, LLC. Under the terms of the sale agreement, the lascadoil could only be incinerated or resold for use in biofuel, and the agreement expressly prohibited the reselling of lascadoil for use as a component in food. The FDA inspected the Zoetis site where Avatec and Bovatec are manufactured, and found no evidence that Zoetis was involved in the contamination of the animal feed. On March 10, 2015, plaintiffs Restaurant Recycling, LLC (Restaurant Recycling) and Superior Feed Ingredients, LLC (Superior), both of whom are in the fat recycling business, filed a complaint in the Seventeenth Circuit Court for the State of Michigan against Shur-Green Farms alleging negligence and breach of warranty claims arising from their purchase of soy oil allegedly contaminated with lascadoil. Plaintiffs resold the allegedly contaminated soy oil to turkey feed mills for use in feed ingredient. Plaintiffs also named Zoetis as a defendant in the complaint alleging that Zoetis failed to properly manufacture its products and breached an implied warranty that the soy oil was fit for use at turkey and hog mills. Zoetis was served with the complaint on June 3, 2015, and we filed our answer, denying all allegations, on July 15, 2015. On August 10, 2015, several of the turkey feed mills filed a joint complaint against Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence, misrepresentation, and breach of warranty, arising out of their alleged purchase and use of the contaminated soy oil. The complaint raises only one count against Zoetis for negligence. We filed an answer to the complaint on November 2, 2015, denying the allegation. On May 16, 2016, two additional turkey producers filed a complaint in the Seventeenth Circuit Court for the State of Michigan against the company, Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence and breach of warranties. We filed an answer to the complaint on June 20, 2016, denying the allegations. The Court has consolidated all three cases in Michigan for purposes of discovery and disposition. On July 28, 2017, we filed a motion for summary disposition on the grounds that no genuine issues of material fact exist and that Zoetis is entitled to judgment as a matter of law. On October 19, 2017, the Court granted our motion and dismissed all claims against Zoetis. On October 31, 2017, the plaintiffs filed motions for reconsideration of the Court’s decision granting summary disposition. The Court denied all such motions on December 6, 2017, for the same reasons cited in the Court’s original decision. On December 27, 2017, the plaintiffs filed a request with the Michigan Court of Appeals seeking an interlocutory (or interim) appeal of the lower Court’s decision, which we opposed on January 17, 2018. On July 5, 2018, the Court of Appeals denied the plaintiffs’ request for an interlocutory appeal. The case was remanded back to the lower Court, where it was scheduled to proceed to trial by jury. We have been advised that the remaining parties have reached an agreement to settle the dispute, and on June 24, 2020, the remaining parties jointly stipulated to the dismissal of all remaining claims. On July 13, 2020, Plaintiffs filed a claim of appeal with Michigan State Circuit Court seeking reversal of the lower Court’s decision granting Zoetis’ motion for summary disposition. Plaintiffs’ filed their appeal brief on October 29, 2020, and we filed our reply brief on December 3, 2020. This appeal remains pending before the Circuit Court. Other Matters On February 14, 2019, the General Court of the European Union (General Court) annulled the January 11, 2016 decision of the European Commission (EC) that selective tax advantages granted by Belgium under its "excess profit" tax scheme constitute illegal state aid. On May 8, 2019, the EC filed an appeal to the decision of the General Court. On September 16, 2019, the EC opened separate in-depth investigations to assess whether Belgium excess profit rulings granted to 39 multinational companies, including Zoetis, constituted state aid for those companies. Due to the uncertainty with respect to the outcome of the appeal to be filed by the EC, the company has not reflected any potential benefits associated with the decision of the General Court in its consolidated financial statements as of December 31, 2020. We will continue to monitor the developments of the appeal and its ultimate resolution. The EC published a decision on alleged competition law infringements by several human health pharmaceutical companies on June 19, 2013. One of the involved legal entities is Alpharma LLC (previously having the name Zoetis Products LLC). Alpharma LLC’s involvement is solely related to its human health activities prior to Pfizer's acquisition of King/Alpharma. Zoetis paid a fine in the amount of euro 11 million (approximately $14 million) and was reimbursed in full by Pfizer in accordance with the Global Separation Agreement between Pfizer and Zoetis, which provides that Pfizer is obligated to indemnify Zoetis for any liabilities arising out of claims not related to its animal health assets. We filed an appeal of the decision on September 6, 2013 to the General Court of the European Union. On September 8, 2016, the General Court upheld the decision of the European Commission. On November 25, 2016, we filed an appeal to the Court of Justice of the European Union. On January 24, 2019, the Court heard oral argument on the merits of the appeal. On June 4, 2020, the Advocate General issued his non-binding opinion, which largely confirmed the decision of the General Court. We now await the Court’s decision which is expected to be issued on March 25, 2021. B. Guarantees and Indemnifications In the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of December 31, 2020, recorded amounts for the estimated fair value of these indemnifications were not significant. C. Purchase Commitments |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2020 | |
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 vaccines, parasiticides, anti-infectives, medicated feed additives, animal health diagnostics and other pharmaceuticals, for both companion animal and livestock customers. In 2020, we 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) R&D costs related to our aquaculture business, which were previously reported in our international commercial segment, are now reported in Other business activities; (ii) certain other miscellaneous costs, which were previously reported in international commercial segment results, are now reported in Corporate; and (iii) certain diagnostic and other miscellaneous costs, which were previously reported in our U.S. results, are now reported in Corporate. 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 platform functions such as business technology, facilities, legal, finance, human resources, business development, 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 certain costs related to becoming an independent public company, 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 business technology and 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. Total assets were approximately $13.6 billion and $11.5 billion at December 31, 2020 and 2019, respectively. Selected Statement of Income Information Earnings Depreciation and Amortization (a) Year Ended December 31, Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 2020 2019 2018 U.S. Revenue $ 3,557 $ 3,203 $ 2,877 Cost of Sales 709 655 606 Gross Profit 2,848 2,548 2,271 Gross Margin 80.1 % 79.6 % 78.9 % Operating Expenses 602 543 456 Other (income)/deductions 7 — — U.S. Earnings 2,239 2,005 1,815 $ 55 $ 44 $ 34 International Revenue (b) 3,035 2,972 2,890 Cost of Sales 971 925 929 Gross Profit 2,064 2,047 1,961 Gross Margin 68.0 % 68.9 % 67.9 % Operating Expenses 510 560 559 Other (income)/deductions 7 — 3 International Earnings 1,547 1,487 1,399 56 53 48 Total operating segments 3,786 3,492 3,214 111 97 82 Other business activities (372) (348) (337) 27 24 23 Reconciling Items: Corporate (820) (707) (666) 101 69 59 Purchase accounting adjustments (198) (234) (162) 199 219 143 Acquisition-related costs (18) (43) (63) — — — Certain significant items (c) (43) (67) 43 — — — Other unallocated (339) (292) (339) 3 3 1 Total Earnings (d) $ 1,996 $ 1,801 $ 1,690 $ 441 $ 412 $ 308 (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 $718 million in 2020, $742 million in 2019, and $745 million in 2018. (c) For 2020, certain significant items primarily included certain asset impairment charges of $37 million and CEO transition-related costs of $16 million, partially offset by a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites of $18 million. For 2019, certain significant items primarily includes: (i) a change in estimate related to inventory costing of $69 million, (ii) CEO transition-related costs of $10 million, (iii) consulting fees, product transfer costs, employee termination costs and exit costs related to cost-reduction and productivity initiatives of $7 million, and (iv) income of $20 million resulting from a payment received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. For 2018, certain significant items primarily includes: (i) a net gain of $42 million related to the divestiture of certain agribusiness products within our International segment, (ii) a net gain of $18 million related to the relocation of a manufacturing site in China, (iii) charges related to our operational efficiency initiative and supply network strategy initiative of $9 million; and (iv) employee termination costs in Europe of $7 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) 2020 2019 U.S. $ 1,486 $ 1,342 International 716 598 Property, plant and equipment, less accumulated depreciation $ 2,202 $ 1,940 |
Schedule II - Valuation and Qua
Schedule II - Valuation and Qualifying Accounts | 12 Months Ended |
Dec. 31, 2020 | |
Receivables [Abstract] | |
Schedule II - Valuation and Qualifying Accounts | Schedule II—Valuation and Qualifying Accounts Balance, Balance, Beginning of End of (MILLIONS OF DOLLARS) Period Additions Deductions Period Year Ended December 31, 2020 Allowance for doubtful accounts $ 21 $ 3 $ (4) $ 20 Year Ended December 31, 2019 Allowance for doubtful accounts $ 24 $ 3 $ (6) $ 21 Year Ended December 31, 2018 Allowance for doubtful accounts $ 25 $ 2 $ (3) $ 24 |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Standards and Recently Issued Accounting Standards | Recently Adopted Accounting Standards In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Topic 350-40), an accounting standards update which expands the scope of costs associated with cloud computing arrangements that must be capitalized. Under the new guidance, costs associated with implementing a cloud computing arrangement that is a service contract must be capitalized and expensed over the term of the hosting arrangement. We adopted this guidance as of January 1, 2020, the required effective date, on a prospective basis. The adoption did not have a significant impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), an accounting standards update which requires an entity to measure and recognize expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. We adopted this guidance as of January 1, 2020, the required effective date, on a prospective basis. The adoption did not have a significant impact on our consolidated financial statements. Recently Issued Accounting Standards In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . The new guidance provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and effective as of March 12, 2020, but is only available through December 31, 2022. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements and related disclosures, as well as the timing of the potential adoption. |
Estimates and Assumptions | Estimates and Assumptions In preparing the consolidated financial statements, we use certain estimates and assumptions that affect reported amounts and disclosures, including amounts recorded in connection with acquisitions. These estimates and underlying assumptions can impact all elements of our consolidated financial statements. For example, in the Consolidated Statements of Income, estimates are used when accounting for deductions from revenue (such as rebates, sales allowances, product returns and discounts), determining cost of sales, allocating cost in the form of depreciation and amortization, and estimating restructuring charges and the impact of contingencies. On the Consolidated Balance Sheets, estimates are used in determining the valuation and recoverability of assets, such as accounts receivables, inventories, fixed assets, goodwill and other identifiable intangible assets, and estimates are used in determining the reported amounts of liabilities, such as taxes payable, uncertain tax positions, benefit obligations, the impact of contingencies, deductions from revenue and restructuring reserves, all of which also impact the Consolidated Statements of Income. Our estimates are often based on complex judgments, probabilities and assumptions that we believe to be reasonable but that can be inherently uncertain and unpredictable. If our estimates and assumptions are not representative of actual outcomes, our results could be materially impacted. As future events and their effects cannot be determined with precision, our estimates and assumptions may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. We are subject to risks and uncertainties that may cause actual results to differ from estimated amounts, such as changes in competition, litigation, legislation and regulations. We regularly evaluate our estimates and assumptions using historical experience and expectations about the future. We adjust our estimates and |
Acquisitions | Acquisitions Our consolidated financial statements include the operations of acquired businesses from the date of acquisition. We account for acquired businesses using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date and that the fair value of acquired in-process research and development (IPR&D) be recorded on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. When we acquire net assets that do not constitute a business as defined in U.S. GAAP, no goodwill is recognized. Amounts recorded for acquisitions can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions |
Lessee, Leases [Policy Text Block] | Leases We determine if a contract contains a lease at inception. Our current portfolio includes only operating leases which are recorded as a right of use asset, as of the lease commencement date, in an amount equal to the present value of future payments over the lease term. We have elected not to recognize right of use assets and lease liabilities for short-term leases of vehicles and equipment with a lease term of twelve months or less. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. A corresponding lease liability is recorded within Other current liabilities and Operating lease liabilities . The present value of future payments is discounted using the rate implicit in the lease, when available. When the implicit rate is not available, as is frequently the case with our lease portfolio, the present value is calculated using our incremental borrowing rate, which is determined on the commencement date. The incremental borrowing rate represents the rate of interest that we would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. As we do not borrow on a collateralized basis, our non-collateralized borrowing rate is used as an input in deriving the incremental borrowing rate. Fixed lease payments are recognized on straight-line basis over the lease term, while variable payments are recognized in the period incurred. Variable lease payments include real estate taxes and charges for other non-lease services due to lessors that are not dependent on an index or rate and utilization based charges associated with fleet vehicles. |
Foreign Currency Translation | Foreign Currency Translation For most of our international operations, local currencies have been determined to be the functional currencies. We translate functional currency assets and liabilities to their U.S. dollar equivalents at exchange rates in effect at the balance sheet date and we translate functional currency income and expense amounts to their U.S. dollar equivalents at average exchange rates for the period. The U.S. dollar effects that arise from changing translation rates are recorded in Other comprehensive income/(loss), net of tax. The effects of converting non-functional currency assets and liabilities into the functional currency are recorded in Other (income)/deductions––net. For operations in highly inflationary economies, we translate monetary items at rates in effect at the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net |
Revenue, Deductions form Revenue and the Allowance for Doubtful Accounts | Revenue, Deductions from Revenue and the Allowance for Doubtful Accounts We recognize revenue from product sales when control of the goods has transferred to the customer, which is typically once the goods have shipped and the customer has assumed title. Revenue reflects the total consideration to which we expect to be entitled (i.e., the transaction price), in exchange for products sold, after considering various types of variable consideration including rebates, sales allowances, product returns and discounts. Variable consideration is estimated and recorded at the time that related revenue is recognized. Our estimates reflect the amount by which we expect variable consideration to impact revenue recognized and are generally based on contractual terms or historical experience, adjusted as necessary to reflect our expectations about the future. Our customer payment terms generally range from 45 to 75 days. Estimates of variable consideration utilize a complex series of judgments and assumptions to determine the amount by which we expect revenue to be reduced, for example; • for sales returns, we perform calculations in each market that incorporate the following, as appropriate: local returns policies and practices; historic returns as a percentage of revenue; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, product recalls, discontinuation of products or a changing competitive environment; and • for revenue incentives, we use our historical experience with similar incentives programs to estimate the impact of such programs on revenue for the current period. Although the amounts recorded for these deductions from revenue are dependent on estimates and assumptions, historically our adjustments to actual results have not been material. The sensitivity of our estimates can vary by program, type of customer and geographic location. Accruals for deductions from revenue are recorded as either a reduction in Accounts receivable or within Accrued expenses , depending on the nature of the contract and method of expected payment. Amounts recorded as a reduction in Accounts receivable as of December 31, 2020 and 2019 are approximately $185 million and $169 million, respectively. As of December 31, 2020, and 2019, accruals for deductions from revenue included in Accrued expenses are approximately $226 million and $190 million, respectively. A deferral of revenue may be required in the event that we have not satisfied all customer obligations for which we have been compensated. The transaction price is allocated to the individual performance obligations on the basis of relative stand-alone selling price, which is typically based on actual sales prices. Revenue associated with unsatisfied performance obligations are contract liabilities, is recorded within Other current liabilities and Other noncurrent liabilities , and is recognized once control of the underlying products has transferred to the customer. Contract liabilities reflected within Other current liabilities as of December 31, 2019 and subsequently recognized as revenue during 2020 were approximately $8 million. Contract liabilities as of December 31, 2020 were approximately $13 million. We do not disclose the transaction price allocated to unsatisfied performance obligations related to contracts with an original expected duration of one year or less, or for contracts for which we recognize revenue in line with our right to invoice the customer. Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of December 31, 2020 is not material. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from Revenue. Shipping and handling costs incurred after control of the purchased product has transferred to the customer are accounted for as a fulfillment cost, within Selling, general and administrative expenses. We also record estimates for bad debts. We periodically assess the adequacy of the allowance for doubtful accounts by evaluating the collectability of outstanding receivables based on factors such as past due history, historical and expected collection patterns, the financial condition of our customers, the robust nature of our credit and collection practices and the economic environment. |
Cost of Sales and Inventories | Cost of Sales and InventoriesInventories are carried at the lower of cost or net realizable value. The cost of finished goods, work-in-process and raw materials is determined using average actual cost. We regularly review our inventories for impairment and adjustments are recorded when necessary. |
Selling, General and Administrative Expenses | Selling, General and Administrative Expenses Selling, general and administrative costs are expensed as incurred. Among other things, these expenses include the internal and external costs of marketing, advertising, and shipping and handling as well as certain costs related to business technology, facilities, legal, finance, human resources, business development, public affairs and procurement, among others. Advertising expenses relating to production costs are expensed as incurred, and the costs of space in publications are expensed when the related advertising occurs. Advertising and promotion expenses totaled approximately $233 million in 2020, $167 million in 2019 and $158 million in 2018. |
Research and Development Expenses | Research and Development Expenses Research and development (R&D) costs are expensed as incurred. Research is the effort associated with the discovery of new knowledge that will be useful in developing a new product or in significantly improving an existing product. Development is the implementation of the research findings. Before a compound receives regulatory approval, we record upfront and milestone payments made by us to third parties under licensing arrangements as expense. Upfront payments are recorded when incurred, and milestone payments are recorded when the specific milestone has been achieved. Once a compound receives regulatory approval in a major market, we record any milestone payments in Identifiable intangible assets, less accumulated amortization |
Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets | Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets Long-lived assets include: • Goodwill —goodwill represents the excess of the consideration transferred for an acquired business over the assigned values of its net assets. Goodwill is not amortized. • Identifiable intangible assets, less accumulated amortization —these acquired assets are recorded at our cost. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Identifiable intangible assets with indefinite lives that are associated with marketed products are not amortized until a useful life can be determined. Identifiable intangible assets associated with IPR&D projects are not amortized until regulatory approval is obtained. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated. • Property, plant and equipment, less accumulated depreciation ––these assets are recorded at our cost and are increased by the cost of any significant improvements after purchase. Property, plant and equipment assets, other than land and construction-in-progress, are depreciated on a straight-line basis over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws. Amortization expense related to finite-lived identifiable intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property are included in Amortization of intangible assets as they benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function and depreciation of property, plant and equipment are included in Cost of sales , Selling, general and administrative expenses and Research and development expenses , as appropriate. We review all of our long-lived assets for impairment indicators throughout the year and we perform detailed testing whenever impairment indicators are present. In addition, we perform impairment testing for goodwill and indefinite-lived assets at least annually. When necessary, we record charges for impairments. Specifically: • For finite-lived identifiable intangible assets, such as developed technology rights, and for other long-lived assets, such as property, plant and equipment, whenever impairment indicators are present, we calculate the undiscounted value of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate. • For indefinite-lived identifiable intangible assets, such as brands and IPR&D assets, we test for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the indefinite-lived intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized. We record an impairment loss, if any, for the excess of book value over fair value. In addition, in all cases of an impairment review other than for IPR&D assets, we re-evaluate whether continuing to characterize the asset as indefinite-lived is appropriate. • For goodwill, we test for impairment on at least an annual basis, or more frequently if impairment indicators exist, either by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or by performing a periodic quantitative assessment. If we choose to perform a qualitative analysis and conclude it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. We determine the implied fair value of goodwill by subtracting the fair value of all the identifiable net assets other than goodwill from the fair value of the reporting unit and record an impairment loss for the excess, if any, of book value of goodwill over the implied fair value. In 2020, we performed a periodic quantitative impairment assessment as of September 30, 2020, which did not result in the impairment of goodwill associated with any of our reporting units. In 2019, we performed a qualitative impairment assessment as of September 30, 2019, which did not result in the impairment of goodwill associated with any of our reporting units. |
Software Capitalization and Depreciation | Software Capitalization and Depreciation We capitalize certain costs incurred in connection with obtaining or developing internal-use software, including payroll and payroll-related costs for employees who are directly associated with the internal-use software project, external direct costs of materials and services and interest costs while developing the software. Capitalized software costs are included in Property, plant and equipment and are amortized using the straight-line method over the estimated useful life of 5 to 10 years. Capitalization of such costs ceases when the project is substantially complete and ready for its intended purpose. Costs incurred during the preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed in the period in which they are incurred. The company capitalized $59 million and $74 million of internal-use software for the years ended December 31, 2020 and 2019, respectively. Depreciation expense for capitalized software was $46 million in 2020 , $27 million in 2019 and $23 million in |
Restructuring Charges and Certain Acquisition-Related Costs | Restructuring Charges and Certain Acquisition-Related Costs We may incur restructuring charges in connection with acquisitions when we implement plans to restructure and integrate the acquired operations or in connection with cost-reduction and productivity initiatives. Included in Restructuring charges and certain acquisition-related costs are all restructuring charges and certain costs associated with acquiring and integrating an acquired business. Transaction costs and integration costs are expensed as incurred. Termination costs are a significant component of restructuring charges and are generally recorded when the actions are probable and estimable. Amounts recorded for restructuring charges and other associated costs can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions . |
Earnings per Share | Earnings per Share Basic earnings per share is computed by dividing net income attributable to Zoetis by the weighted-average number of common shares outstanding during the period. Diluted earnings per share adjusts the weighted-average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options, restricted stock units, and performance-vesting restricted stock units) were exercised or converted into common stock, calculated using the treasury stock method. |
Cash Equivalents | Cash EquivalentsCash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased. |
Fair Value | Fair Value Certain assets and liabilities are required to be measured at fair value, either upon initial recognition or for subsequent accounting or reporting. For example, we use fair value extensively in the initial recognition of net assets acquired in a business combination. Fair value is estimated using an exit price approach, which requires, among other things, that we determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of assets and, for liabilities, assuming that the risk of non-performance will be the same before and after the transfer. When estimating fair value, depending on the nature and complexity of the asset or liability, we may use one or all of the following approaches: • Income approach, which is based on the present value of a future stream of net cash flows. • Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities. • Cost approach, which is based on the cost to acquire or construct comparable assets less an allowance for functional and/or economic obsolescence. These fair value methodologies depend on the following types of inputs: • Quoted prices for identical assets or liabilities in active markets (Level 1 inputs). • Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable (Level 2 inputs). • Unobservable inputs that reflect estimates and assumptions (Level 3 inputs). A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions . |
Accounts Receivable | Accounts Receivable The recorded amounts of accounts receivable approximate fair value because of their relatively short-term nature. As of December 31, 2020 and 2019, Accounts receivable, less allowance for doubtful accounts, |
Deferred Tax Assets and Liabilities and Income Tax Contingencies | ferred Tax Assets and Liabilities and Income Tax Contingencies Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws. We provide a valuation allowance when we believe that our deferred tax assets are not recoverable based on an assessment of estimated future taxable income that incorporates ongoing, prudent and feasible tax planning strategies. We account for income tax contingencies using a benefit recognition model. If we consider that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. Under the benefit recognition model, if the initial assessment fails to result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to more likely than not; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. We regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase or decrease the technical merits of a position relative to the “more-likely-than-not” standard. Liabilities associated with uncertain tax positions are classified as current only when we expect to pay cash within the next 12 months. Interest and penalties, if any, are recorded in Provision for taxes on income and are classified on our Consolidated Balance Sheets with the related tax liability. Amounts recorded for valuation allowances and income tax contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions. |
Benefit Plans | Benefit Plans All dedicated benefit plans are pension plans. For our dedicated benefit plans, we recognize the overfunded or underfunded status of defined benefit plans as an asset or liability on the Consolidated Balance Sheets and the obligations generally are measured at the actuarial present value of all benefits attributable to employee service rendered, as provided by the applicable benefit formula. Pension obligations may include assumptions such as long-term rate of return on plan assets, expected employee turnover, participant mortality, and future compensation levels. Plan assets are measured at fair value. Net periodic benefit costs are recognized, as required, into Cost of sales, Selling, general and administrative expenses and Research and development expenses , as appropriate. |
Asset Retirement Obligations | Asset Retirement Obligations We record accruals for the legal obligations associated with the retirement of tangible long-lived assets, including obligations under the doctrine of promissory estoppel and those that are conditioned upon the occurrence of future events. These obligations generally result from the acquisition, construction, development and/or normal operation of long-lived assets. We recognize the fair value of these obligations in the period in which they are incurred by increasing the carrying amount of the related asset. Over time, we recognize expense for the accretion of the liability and for the amortization of the asset. As of December 31, 2020 and 2019, accruals for asset retirement obligations are $25 million and $23 million, respectively, and are primarily included in Other noncurrent liabilities. |
Legal and Environmental Contingencies | Legal and Environmental Contingencies We are subject to numerous contingencies arising in the ordinary course of business, such as product liability and other product-related litigation, commercial litigation, patent litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications. We record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. We record anticipated recoveries under existing insurance contracts when recovery is assured. Our non-tax contingencies include, among others, the following: • Product liability and other product-related litigation, which can include injury, consumer, off-label promotion, antitrust and breach of contract claims. • Commercial and other matters, which can include product-pricing claims and environmental claims and proceedings. • Patent litigation, which typically involves challenges to the coverage and/or validity of our patents or those of third parties on various products or processes. • Government investigations, which can involve regulation by national, state and local government agencies in the U.S. and in other countries. Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial. We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid. We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. |
Share-Based Payments | Share-Based Payments Our compensation programs can include share-based payment plans. All grants under share-based payment programs are accounted for at fair value and such amounts generally are amortized on a straight-line basis over the vesting term to Cost of sales, Selling, general and administrative expenses, and Research and development expenses , as appropriate. We include the impact of estimated forfeitures when determining share-based compensation expense. Amounts recorded for share-based compensation can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Estimates and Assumptions |
Foreign Exchange and Interest Rate Risk | A significant portion of our revenue, earnings and net investment in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk is also managed through the use of various derivative financial instruments. These derivative financial instruments serve to manage the exposure of our net investment in certain foreign operations to changes in foreign exchange rates and protect net income against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.For foreign exchange contracts not designated as hedging instruments, we recognize the gains and losses on forward-exchange contracts that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. The vast majority of the foreign exchange derivative financial instruments mature within 60 days and all mature within three years. • For cross-currency interest rate swaps, which are designated as a hedge against our net investment in foreign operations, changes in the fair value are deferred as a component of cumulative translation adjustment within Accumulated other comprehensive loss and reclassified into earnings when the foreign investment is sold or substantially liquidated. Gains and losses excluded from the assessment of hedge effectiveness are recognized in earnings ( Interest expense—net of capitalized interest |
Guarantees and Indemnifications | In the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of December 31, 2020, recorded amounts for the estimated fair value of these indemnifications were not significant. |
Tax Matters Accounting Policy (
Tax Matters Accounting Policy (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Tax Uncertainties, Policy [Policy Text Block] | We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statute of limitations expire. We treat these events as discrete items in the period of resolution. For a description of our accounting policies associated with accounting for income tax contingencies, see Note 3. Significant Accounting Policies: Deferred Tax Assets and Liabilities and Income Tax Contingencies. For a description of the risks associated with estimates and assumptions, see |
Revenue (Tables)
Revenue (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Revenue from External Customers by Geographic Areas | Revenue by geographic area Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 United States $ 3,557 $ 3,203 $ 2,877 Australia 207 196 189 Brazil 258 293 295 Canada 210 206 203 Chile 100 91 76 China 266 200 211 France 118 117 130 Germany 159 153 147 Italy 90 112 104 Japan 177 158 149 Mexico 116 117 100 Spain 112 114 110 United Kingdom 178 198 181 Other developed markets 388 370 361 Other emerging markets 656 647 634 6,592 6,175 5,767 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 |
Revenue from External Customers by Major Species | Revenue by major species Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 U.S. Companion animal $ 2,391 $ 1,984 $ 1,608 Livestock 1,166 1,219 1,269 3,557 3,203 2,877 International Companion animal 1,261 1,161 1,005 Livestock 1,774 1,811 1,885 3,035 2,972 2,890 Total Companion animal 3,652 3,145 2,613 Livestock 2,940 3,030 3,154 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 |
Revenue from External Customers by Species | Revenue by species Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Companion Animal: Dogs and Cats $ 3,437 $ 2,950 $ 2,445 Horses 215 195 168 3,652 3,145 2,613 Livestock: Cattle 1,558 1,654 1,754 Swine 621 611 663 Poultry 537 559 522 Fish 148 134 132 Sheep and other 76 72 83 2,940 3,030 3,154 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 |
Schedule of Significant Product Revenues | Revenue by product category Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Vaccines $ 1,476 $ 1,483 $ 1,488 Anti-infectives 1,206 1,254 1,280 Parasiticides 1,173 966 836 Dermatology 941 770 607 Other pharmaceuticals 821 780 765 Medicated feed additives 460 470 485 Animal health diagnostics 305 268 136 Other non-pharmaceuticals 210 184 170 6,592 6,175 5,767 Contract manufacturing & human health 83 85 58 Total Revenue $ 6,675 $ 6,260 $ 5,825 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | On July 31, 2018, we completed the acquisition of Abaxis, Inc. (Abaxis), a California corporation and a leader in the development, manufacture and marketing of diagnostic instruments for veterinary point-of-care services. We acquired all of the outstanding common shares of Abaxis for $83.00 per share in cash resulting in Abaxis becoming our wholly owned subsidiary. The acquisition enhances our presence in animal health diagnostics. The acquisition date fair value of the consideration transferred was approximately $1,962 million, which consisted of the following: (MILLIONS OF DOLLARS) Amounts Cash paid to Abaxis' shareholders (a) $ 1,898 Cash paid for equity awards attributable to pre-merger services (b) 54 Fair value of Zoetis equity awards issued in exchange for outstanding Abaxis equity awards pertaining to pre-merger service (c) 10 Total consideration $ 1,962 (a) Represents cash paid for cancellation and conversion of each outstanding share of Abaxis' common stock at the acquisition date. (b) Represents cash paid for cancellation and settlement of restricted stock awards that fully vested in July 2018 as a result of service or pre-existing change-in-control provisions and termination provisions. Includes certain awards that will be settled in cash during 2019, reflected in Other current liabilities within the Consolidated Balance Sheets. (c) Represents the fair value of replacement awards issued for Abaxis equity awards outstanding immediately before the acquisition and attributable to the service period prior to the acquisition. The previous Abaxis equity awards were converted into the Zoetis equity awards at an exchange ratio based on the closing prices of shares of Zoetis Common Stock and Abaxis Common Stock for ten full trading days before the closing of the acquisition. The acquisition has been accounted for as a business combination with the assets acquired and liabilities assumed measured at estimated fair values as of the acquisition date, primarily using Level 3 inputs, except for investments in debt securities which were valued using Level 2 inputs. During the three months ended December 31, 2018, the company recorded measurement period adjustments to reflect the facts and circumstances in existence as of the acquisition date. These adjustments primarily include an increase to Property, plant and equipment of $5 million, a reduction to Identifiable intangible assets of $3 million, an increase to Other current liabilities of $4 million, and a corresponding decrease to Goodwill of $6 million. These measurement period adjustments primarily related to changes in valuation assumptions, including market participant estimates of cash flows, as well as other initial estimates. During the first half of 2019, the company recorded additional measurement period adjustments which were made to reflect the facts and circumstances in existence as of the acquisition date. These adjustments include a reduction to Identifiable intangible assets and Noncurrent deferred tax liabilities of $1 million each with a corresponding offset to goodwill. These measurement period adjustments were primarily attributable to changes in valuation assumptions, including market participant estimates of cash flows as well as other initial estimates and the finalization of legal entity fair values. The valuation was finalized during the second quarter of 2019. The final fair values allocated to Abaxis' assets and liabilities as of the acquisition date, are reflected in the table below. (MILLIONS OF DOLLARS) Amounts Cash and cash equivalents $ 64 Short term investments (a) 107 Accounts receivable (b) 30 Inventories (c) 79 Other current assets 6 Property, plant and equipment (d) 54 Identifiable intangible assets (e) 894 Other noncurrent assets 29 Accounts payable (21) Accrued compensation and related items (10) Other current liabilities (22) Other noncurrent liabilities (11) Noncurrent deferred tax liabilities (f) (214) Total net assets acquired 985 Goodwill (g) 977 Total consideration $ 1,962 (a) Short term investments include investments in debt securities that are classified as available-for-sale and measured at fair value. (b) The fair value approximates the gross contractual amount of accounts receivable. The contractual amount not expected to be collected is immaterial. (c) Acquired inventory is comprised of finished goods, work in process and raw materials. The fair value of finished goods was determined based on net realizable value adjusted for the costs of the selling effort, a reasonable profit allowance for the selling effort, and estimated holding costs. The fair value of work in process was determined based on net realizable value adjusted for costs to complete the manufacturing process, costs of the selling effort, a reasonable profit allowance for the remaining manufacturing and selling effort, and an estimate of holding costs. The fair value of raw materials was determined to approximate book value. (d) Property, plant and equipment is comprised of machinery and equipment, furniture and fixtures, computer equipment, leasehold improvements and construction in progress. The fair value was primarily determined using a reproduction/replacement cost approach which measures the value of an asset by estimating the cost to acquire or construct comparable assets adjusted for age and condition of the asset. (e) Identifiable intangible assets primarily consist of developed technology rights, customer relationships, and trademarks and tradenames. The fair value of identifiable intangible assets was determined using the income approach, which includes a forecast of expected future cash flows. For additional information regarding identifiable intangible assets, see Note 13. Goodwill and Other Intangible Assets . (f) The acquisition was structured as a stock purchase and therefore we assumed the historical tax basis of Abaxis' assets and liabilities. The estimate of deferred tax effects resulting from the acquisition include the expected federal, state, and foreign tax consequences associated with temporary differences between the fair values of the assets acquired and liabilities assumed and the respective tax basis. The components of the Abaxis net deferred tax liability are included within amounts reported in Note 8. Tax Matters . |
Restructuring Charges and Oth_2
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Restructuring and Related Costs | The components of costs incurred in connection with restructuring initiatives, acquisitions and cost-reduction/productivity initiatives are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Restructuring charges and certain acquisition-related costs: Integration costs (a) $ 17 $ 18 $ 21 Transaction costs (b) — — 21 Restructuring charges (c)(d) : Employee termination costs/(reversals) 8 33 25 Exit costs — — 1 Total Restructuring charges and certain acquisition-related costs $ 25 $ 51 $ 68 (a) Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes, as well as product transfer costs. (b) Transaction costs represent external costs directly related to acquiring businesses and primarily include expenditures for banking, legal, accounting and other similar services. (c) The restructuring charges for the year ended December 31, 2020 are primarily related to CEO transition-related costs and other cost-reduction and productivity initiatives. The restructuring charges for the year ended December 31, 2019 are primarily related to the acquisition of Abaxis and CEO transition-related costs. The restructuring charges for the year ended December 31, 2018 are primarily related to: • employee termination costs of $7 million in Europe as a result of initiatives to better align our organizational structure; • employee termination costs of $21 million related to the acquisition of Abaxis; and • a net reversal of employee termination costs of $3 million, and exit costs of $1 million as a result of our operational efficiency initiative and supply network strategy initiative launched in 2015. (d) The restructuring charges are associated with the following: • For the year ended December 31, 2020, Manufacturing/research/corporate of $8 million. • For the year ended December 31, 2019, International of $2 million, and Manufacturing/research/corporate of $31 million. • For the year ended December 31, 2018, International of $7 million, and Manufacturing/research/corporate of $19 million. The components of, and changes in, our restructuring accruals are as follows: Employee Termination Exit (MILLIONS OF DOLLARS) Costs Costs Accrual Balance, December 31, 2017 $ 41 $ — $ 41 Provision 25 1 26 Utilization and other (a) (21) (1) (22) Balance, December 31, 2018 $ 45 $ — $ 45 Provision 33 — 33 Utilization and other (a) (33) — (33) Balance, December 31, 2019 (b) $ 45 $ — $ 45 Provision 8 — 8 Utilization and other (a) (32) — (32) Balance, December 31, 2020 (b) $ 21 $ — $ 21 (a) Includes adjustments for foreign currency translation. (b) At December 31, 2020 and 2019, included in Accrued Expenses ($6 million and $23 million, respectively) and Other noncurrent liabilities |
Other (Income)_Deductions - N_2
Other (Income)/Deductions - Net Other (Income)/Deductions - Net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Other Income and Expenses [Abstract] | |
Components of Other (Income)/Deductions—Net | The components of Other (income)/deductions—net follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Royalty-related income $ (12) $ (16) $ (28) Interest income (12) (37) (31) Identifiable intangible asset impairment charges (a) 26 — — Net gain on sale of assets (b) (19) (20) (40) Impairment of an equity investment 4 — — Other asset impairment charges 4 — — Foreign currency loss (c) 21 16 31 Other, net (d) 5 — (15) Other (income)/deductions—net $ 17 $ (57) $ (83) (a) Primarily represents asset impairment charges related to developed technology rights in our precision livestock farming and aquatic health businesses. (b) For 2020 and 2019, represents income resulting from a payment received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. For 2018, represents a gain on the divestiture of certain agribusiness products within our International segment, and a net loss related to sales of certain manufacturing sites and products as part of our supply network strategy initiative. (c) Primarily driven by costs related to hedging and exposures to certain emerging market currencies. |
Tax Matters (Tables)
Tax Matters (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income before Income Tax, Domestic and Foreign | The components of Income before provision for taxes on income follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 United States $ 1,109 $ 965 $ 937 International 887 836 753 Income before provision for taxes on income $ 1,996 $ 1,801 $ 1,690 |
Schedule Of Components Of Provision For Income Taxes | The components of Provision for taxes on income based on the location of the taxing authorities follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 United States: Current income taxes: Federal $ 232 $ 192 $ 199 State and local 36 28 32 Deferred income taxes: Federal (29) (5) (107) State and local (14) (15) 3 Total U.S. tax provision 225 200 127 International: Current income taxes 154 161 148 Deferred income taxes (19) (60) (9) Total international tax provision 135 101 139 Provision for taxes on income (a)(b)(c) $ 360 $ 301 $ 266 (a) In 2020, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies); • a $29 million discrete tax benefit recorded in 2020 related to the excess tax benefits for share-based payments; • a $19 million net discrete tax benefit recorded in 2020 related to changes in various other tax items; • a $7 million discrete tax benefit recorded in 2020 related to the remeasurement of deferred taxes resulting from the integration of acquired businesses; • a $5 million discrete tax expense related to the changes in valuation allowances; • a $4 million discrete tax benefit recorded in 2020 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates; and • a $4 million net discrete tax benefit recorded in 2020 related to the effective settlement of certain issues with tax authorities. (b) In 2019, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ); • the impact of the GILTI tax, a new provision of the Tax Act, which became effective for the company in the first quarter of 2019; • a $20 million discrete tax benefit recorded in 2019 related to the excess tax benefits for share-based payments; • an $18 million discrete tax benefit related to the changes in valuation allowances; • a $14 million net discrete tax benefit recorded in the third quarter of 2019 due to a change in tax basis related to purchase accounting; • a $12 million net discrete tax benefit recorded in 2019 related to changes in various other tax items; • a $10 million net discrete tax benefit recorded in 2019 related to the effective settlement of certain issues with tax authorities; and • an $8 million discrete tax benefit recorded in 2019 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. ◦ (c) In 2018 , the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S Research and Development Tax Credit; • tax expense related to the changes in valuation allowances and the resolution of other tax items; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ): • the reduction of the U.S. federal corporate income tax rate, from 35% to 21%, effective January 1, 2018, pursuant to the Tax Act; • a $45 million net tax benefit recorded in 2018 associated with a measurement-period adjustment to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings pursuant to the Tax Act; • a $23 million discrete tax benefit recorded in 2018 related to the favorable impact of certain tax accounting method changes; • a $15 million discrete tax benefit recorded in 2018 related to the excess tax benefits for share-based payments; and • a $5 million discrete tax benefit recorded in 2018 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. |
Schedule of Effective Income Tax Rate Reconciliation | The reconciliation of the U.S. statutory income tax rate to our effective tax rate follows: Year Ended December 31, 2020 2019 2018 U.S. statutory income tax rate 21 % 21 % 21 % State and local taxes, net of federal benefits 0.9 0.6 1.8 Unrecognized tax benefits and tax settlements and resolution of certain tax positions (a) 0.1 0.5 1.2 Impact of the Tax Act (b) — — (3.9) Impact of Tax Accounting Method Changes — — (1.3) U.S. Research and Development Tax Credit and U.S. Domestic Production Activities deduction (0.7) (0.7) (0.5) Share-based payments (1.3) (1.0) (0.8) Non-deductible / non-taxable items 0.4 (0.2) (1.6) Taxation of non-U.S. operations (c)(d) (1.6) (3.1) (0.3) All other—net (0.8) (0.4) 0.1 Effective tax rate 18.0 % 16.7 % 15.7 % (a) For a discussion about unrecognized tax benefits and tax settlements and resolution of certain tax positions, see above in this section and D. Tax Contingencies . (b) In 2018, the rate impact related to the Tax Act was a decrease to our effective tax rate. This tax benefit represents the measurement-period adjustment related to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings. (c) In all years, the rate impact of taxation of non-U.S. operations was a decrease to our effective tax rate due to the jurisdictional mix of earnings. |
Schedule of Deferred Tax Assets and Liabilities | The components of our deferred tax assets and liabilities follow: As of December 31, 2020 2019 (MILLIONS OF DOLLARS) Assets (Liabilities) Prepaid/deferred items $ 64 $ 42 Inventories 15 (1) Intangibles (237) (296) Property, plant and equipment (168) (149) Employee benefits 59 61 Restructuring and other charges 3 4 Legal and product liability reserves 15 14 Net operating loss/credit carryforwards 127 122 Unremitted earnings (6) (6) All other 1 (1) Subtotal (127) (210) Valuation allowance (157) (136) Net deferred tax liability (a)(b) $ (284) $ (346) (a) The decrease in the total net deferred tax liability from December 31, 2019 to December 31, 2020 is primarily attributable to a decrease in deferred tax liabilities related to intangibles, partially offset by an increase in valuation allowances representing the amounts determined to be unrecoverable, and deferred tax liabilities related to property, plant and equipment. In addition, the decrease in the total net deferred tax liability was also attributable to an increase in deferred tax assets related to prepaid/deferred items, inventory, net operation loss/credit carry forwards, partially offset by a decrease in employee benefits. (b) In 2020, included in Noncurrent deferred tax assets ($94 million) and Noncurrent deferred tax liabilities ($378 million). In 2019, included in Noncurrent deferred tax assets ($88 million) and Noncurrent deferred tax liabilities |
Schedule of Unrecognized Tax Benefits Roll Forward | The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows: (MILLIONS OF DOLLARS) 2020 2019 2018 Balance, January 1 $ (182) $ (185) $ (164) Increases based on tax positions taken during a prior period (a)(b) (6) (3) (24) Decreases based on tax positions taken during a prior period (a)(c) 6 12 6 Increases based on tax positions taken during the current period (a)(d) (9) (8) (11) Settlements (e) — — 6 Lapse in statute of limitations 3 2 2 Balance, December 31 (f) $ (188) $ (182) $ (185) (a) Primarily included in Provision for taxes on income. (b) In 2020 and 2019, the increases are primarily related to movements on prior year positions. In 2018, the increases are primarily related to the impact of the Tax Act and movements on prior year positions. (c) In 2020, the decreases are primarily related to effective settlement of certain issues with tax authorities. In 2019, the decreases are primarily related to movements on prior year positions and effective settlement of certain issues with tax authorities, including movements in foreign translation adjustments on prior year positions. In 2018, the decreases are primarily related to movements on prior year positions and closure of audits with tax authorities, including movements in foreign translation adjustments on prior year positions . (d) In 2020, 2019 and 2018, the increases are primarily related to movements on current year positions. (e) In 2018, the decreases are due to settlements with tax authorities. See A. Taxes on Income. (f) In 2020, included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($187 million). In 2019, included in Noncurrent deferred tax assets and Other noncurrent assets ($2 million) and Other taxes payable ($180 million). In 2018, included in Noncurrent deferred tax assets and Other noncurrent assets ($3 million) and Other taxes payable ($182 million). |
Financial Instruments (Tables)
Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | The components of our long-term debt are as follows: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 3.450% 2015 senior notes due 2020 $ — $ 500 2018 floating rate (three-month USD LIBOR plus 0.44%) senior notes due 2021 300 300 3.250% 2018 senior notes due 2021 300 300 3.250% 2013 senior notes due 2023 1,350 1,350 4.500% 2015 senior notes due 2025 750 750 3.000% 2017 senior notes due 2027 750 750 3.900% 2018 senior notes due 2028 500 500 2.000% 2020 senior notes due 2030 750 — 4.700% 2013 senior notes due 2043 1,150 1,150 3.950% 2017 senior notes due 2047 500 500 4.450% 2018 senior notes due 2048 400 400 3.000% 2020 senior notes due 2050 500 — 7,250 6,500 Unamortized debt discount / debt issuance costs (66) (51) Less current portion of long-term debt 600 500 Cumulative fair value adjustment for interest rate swap contracts 11 (2) Long-term debt, net of discount and issuance costs $ 6,595 $ 5,947 |
Schedule of Maturities of Long-term Debt | The principal amount of debt outstanding as of December 31, 2020, matures in the following years: After (MILLIONS OF DOLLARS) 2021 2022 2023 2024 2025 2025 Total Maturities $ 600 $ — $ 1,350 $ — $ 750 $ 4,550 $ 7,250 |
Schedule of Derivative Instruments | The aggregate notional amount of derivative instruments are as follows: Notional As of December 31, (MILLIONS) 2020 2019 Foreign currency forward-exchange contracts $ 1,633 $ 1,364 Cross-currency interest rate swap contracts (in foreign currency): euro 650 650 Danish krone 600 600 Swiss franc 25 25 Forward-starting interest rate swaps $ 550 $ 250 Fixed-to-floating interest rate swap contracts $ 150 $ 150 |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The classification and fair values of derivative instruments are as follows: Fair Value of Derivatives As of December 31, (MILLIONS OF DOLLARS) Balance Sheet Location 2020 2019 Derivatives Not Designated as Hedging Instruments: Foreign currency forward-exchange contracts Other current assets $ 10 $ 7 Foreign currency forward-exchange contracts Other current liabilities (16) (5) Total derivatives not designated as hedging instruments (6) 2 Derivatives Designated as Hedging Instruments: Forward starting interest rate swap contracts Other non-current assets $ 6 $ 5 Forward starting interest rate swap contracts Other non-current liabilities (17) (1) Cross-currency interest rate swap contracts Other current assets 2 4 Cross-currency interest rate swap contracts Other non-current assets 5 20 Cross-currency interest rate swap contracts Other current liabilities (21) (3) Fixed to floating interest rate swap contracts Other non-current assets/(liabilities) 11 (2) Total derivatives designated as hedging instruments (14) 23 Total derivatives $ (20) $ 25 |
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location | The amounts of net losses on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions - net, are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Foreign currency forward-exchange contracts $ (2) $ — |
Schedule of Net Investment Hedges in Accumulated Other Comprehensive Income (Loss) | The amounts of unrecognized net (losses)/gains on interest rate swap contracts, recorded, net of tax, in Accumulated other comprehensive income/(loss) , are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Forward starting interest rate swap contracts $ (11) $ 3 Cross-currency interest rate swap contracts $ (58) $ 12 |
Schedule of Net Investment Hedges, Statements of Financial Performance and Financial Position, Location | Gains on interest rate swap contracts, recognized within Interest expense, net of capitalized interest, are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Cross-currency interest rate swap contracts $ 18 $ 19 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Lease, Cost [Table Text Block] | Supplemental information for operating leases is as follows: (MILLIONS OF DOLLARS, EXCEPT LEASE TERM AND DISCOUNT RATE AMOUNTS) As of December 31, 2020 As of December 31, 2019 Supplemental Balance Sheet information for operating leases Operating lease right of use assets $ 192 $ 189 Operating lease liabilities Operating lease liabilities - current (in Other current liabilities ) $ 40 $ 35 Operating lease liabilities - noncurrent 163 164 Total operating lease liabilities $ 203 $ 199 Weighted-average remaining lease term—operating leases (years) 6.59 7.12 Weighted-average discount rate—operating leases 3.12 % 3.67 % (MILLIONS OF DOLLARS) Year Ended Year Ended Supplemental Income Statement information for operating leases Operating lease expense $ 46 $ 40 Variable lease payments not included in the measurement of lease liabilities 20 21 Short-term lease payments not included in the measurement of lease liabilities 7 9 Supplemental Cash Flow information for operating leases Cash paid for amounts included in the measurement of lease liabilities $ 42 $ 42 Lease obligations obtained in exchange for right-of-use assets (non-cash) 47 241 |
Lessee, Operating Lease, Liability, Maturity [Table Text Block] | Future minimum lease payments under non-cancellable operating lease contracts as of December 31, 2020 are as follows: Total Less: After Lease Imputed (MILLIONS OF DOLLARS) 2021 2022 2023 2024 2025 2025 Payments Interest Total Maturities $ 46 $ 39 $ 32 $ 27 $ 21 $ 57 $ 222 $ (19) $ 203 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Components of Inventory | The components of inventory follow: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 Finished goods $ 805 $ 701 Work-in-process 594 511 Raw materials and supplies 229 198 Inventories $ 1,628 $ 1,410 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | The components of property, plant and equipment follow: Useful Lives As of December 31, (MILLIONS OF DOLLARS) (Years) 2020 2019 Land — $ 22 $ 22 Buildings 33 1 / 3 - 50 1,019 983 Machinery, equipment and fixtures 3 - 20 2,440 2,119 Construction-in-progress — 673 553 4,154 3,677 Less: Accumulated depreciation 1,952 1,737 Property, plant and equipment $ 2,202 $ 1,940 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Changes in the Carrying Amount of Goodwill | The components of, and changes in, the carrying amount of goodwill follow: (MILLIONS OF DOLLARS) U.S. International Total Balance, December 31, 2018 $ 1,265 $ 1,254 $ 2,519 Additions / Adjustments (a) 102 — 102 Other (b) — (29) (29) Balance, December 31, 2019 $ 1,367 $ 1,225 $ 2,592 Additions / Adjustments (a) 58 17 75 Other (b) — 27 27 Balance, December 31, 2020 $ 1,425 $ 1,269 $ 2,694 (a) For 2020, primarily relates to the acquisitions of Performance Livestock Analytics, Fish Vet Group and Virtual Recall. See Note 5. Acquisitions and Divestitures. For 2019, primarily relates to the acquisitions of Platinum Performance, Phoenix Lab and ZNLabs. See Note 5. Acquisitions and Divestitures. |
Components of Identifiable Intangible Assets | The components of identifiable intangible assets follow: As of December 31, 2020 As of December 31, 2019 Identifiable Identifiable Gross Intangible Assets, Gross Intangible Assets, Carrying Accumulated Less Accumulated Carrying Accumulated Less Accumulated (MILLIONS OF DOLLARS) Amount Amortization Amortization Amount Amortization Amortization Finite-lived intangible assets: Developed technology rights (a) $ 1,968 $ (809) $ 1,159 $ 1,938 $ (657) $ 1,281 Brands and tradenames (a) 427 (243) 184 424 (223) 201 Other (a) 474 (306) 168 441 (249) 192 Total finite-lived intangible assets 2,869 (1,358) 1,511 2,803 (1,129) 1,674 Indefinite-lived intangible assets: Brands and tradenames 104 — 104 104 — 104 In-process research and development 88 — 88 105 — 105 Product rights 7 — 7 7 — 7 Total indefinite-lived intangible assets 199 — 199 216 — 216 Identifiable intangible assets $ 3,068 $ (1,358) $ 1,710 $ 3,019 $ (1,129) $ 1,890 (a) In 2020, additions included intangible assets associated with the acquisitions of Performance Livestock Analytics, Virtual Recall, Ethos Diagnostic Science and Fish Vet Group. See Note 5. Acquisitions and Divestitures . |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The annual amortization expense expected for the years 2021 through 2025 is as follows: (MILLIONS OF DOLLARS) 2021 2022 2023 2024 2025 Amortization expense $ 203 $ 191 $ 183 $ 164 $ 149 |
Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block] | The components of identifiable intangible assets follow: As of December 31, 2020 As of December 31, 2019 Identifiable Identifiable Gross Intangible Assets, Gross Intangible Assets, Carrying Accumulated Less Accumulated Carrying Accumulated Less Accumulated (MILLIONS OF DOLLARS) Amount Amortization Amortization Amount Amortization Amortization Finite-lived intangible assets: Developed technology rights (a) $ 1,968 $ (809) $ 1,159 $ 1,938 $ (657) $ 1,281 Brands and tradenames (a) 427 (243) 184 424 (223) 201 Other (a) 474 (306) 168 441 (249) 192 Total finite-lived intangible assets 2,869 (1,358) 1,511 2,803 (1,129) 1,674 Indefinite-lived intangible assets: Brands and tradenames 104 — 104 104 — 104 In-process research and development 88 — 88 105 — 105 Product rights 7 — 7 7 — 7 Total indefinite-lived intangible assets 199 — 199 216 — 216 Identifiable intangible assets $ 3,068 $ (1,358) $ 1,710 $ 3,019 $ (1,129) $ 1,890 (a) In 2020, additions included intangible assets associated with the acquisitions of Performance Livestock Analytics, Virtual Recall, Ethos Diagnostic Science and Fish Vet Group. See Note 5. Acquisitions and Divestitures . |
Benefit Plans (Tables)
Benefit Plans (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Retirement Benefits [Abstract] | |
Changes in Projected Benefit Obligations, Fair Value of Plan Assets, and Funded Status of Plan | The following table provides an analysis of the changes in the benefit obligations, plan assets and funded status of our dedicated pension plans (including those transferred to us): As of and for the Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 Change in benefit obligation: Projected benefit obligation, beginning $ 144 $ 123 Service cost 8 6 Interest cost 2 3 Changes in actuarial assumptions and other 1 19 Settlements and curtailments — (1) Benefits paid (2) (2) Adjustments for foreign currency translation 12 (3) Other––net (1) (1) Benefit obligation, ending 164 144 Change in plan assets: Fair value of plan assets, beginning 72 65 Actual return on plan assets 4 7 Company contributions 5 5 Settlements and curtailments — (1) Benefits paid (2) (2) Adjustments for foreign currency translation 6 (2) Fair value of plan assets, ending 85 72 Funded status—Projected benefit obligation in excess of plan assets at end of year (a) $ (79) $ (72) (a) Included in Other noncurrent liabilities |
Schedule of Benefit Obligations in Excess of Fair Value of Plan Assets | Information related to the funded status of selected plans follows: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 Pension plans with an accumulated benefit obligation in excess of plan assets: Fair value of plan assets $ 77 $ 65 Accumulated benefit obligation 131 113 Pension plans with a projected benefit obligation in excess of plan assets: Fair value of plan assets 83 66 Projected benefit obligation 162 138 |
Schedule of Net Benefit Costs | The following table provides the net periodic benefit cost associated with dedicated pension plans (including those transferred to us): Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Service cost $ 8 $ 6 $ 7 Interest cost 2 3 3 Expected return on plan assets (3) (3) (3) Amortization of net (gains) / losses 2 1 1 Settlement and curtailments (gains) / losses — — (1) Net periodic benefit cost $ 9 $ 7 $ 7 |
Schedule of Assumptions Used | The following table provides the weighted average actuarial assumptions for the dedicated pension plans (including those transferred to us): As of December 31, (PERCENTAGES) 2020 2019 2018 Weighted average assumptions used to determine benefit obligations: Discount rate 1.2 % 1.3 % 2.3 % Rate of compensation increase 3.1 % 3.1 % 3.0 % Cash balance credit interest rate 1.5 % 1.5 % 1.7 % Weighted average assumptions used to determine net benefit cost for the year ended December 31: Discount rate 1.3 % 2.3 % 2.2 % Expected return on plan assets 3.8 % 4.1 % 4.4 % Rate of compensation increase 3.1 % 3.0 % 3.0 % Cash balance credit interest rate 1.5 % 1.7 % 1.7 % |
Schedule of Allocation of Plan Assets | The components of plan assets follow: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 Cash and cash equivalents $ 1 $ 1 Equity securities: Equity commingled funds 31 27 Debt securities: Government bonds 43 36 Other investments 10 8 Total (a) $ 85 $ 72 (a) Fair values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see Note 3. Significant Accounting Policies—Fair Value ). Investment plan assets are valued using Level 1 or Level 2 inputs. |
Schedule Of Percentage Of Allocation Of Plan Assets | The long-term target asset allocations and the percentage of the fair value of plans assets for dedicated benefit plans follow: As of December 31, Target allocation percentage Percentage of Plan Assets (PERCENTAGES) 2020 2020 2019 Cash and cash equivalents 0-10% 1.2 % 1.7 % Equity securities 0-60% 37.0 % 36.9 % Debt securities 15-100% 50.2 % 49.7 % Other investments 0-100% 11.6 % 11.7 % Total 100 % 100 % 100 % |
Share-Based Payments (Tables)
Share-Based Payments (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Components of Share-based Compensation Expense | The components of share-based compensation expense follow: Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 Stock options / stock appreciation rights $ 9 $ 10 $ 10 RSUs / DSUs (a) 31 43 34 PSUs 19 14 9 Share-based compensation expense—total (b) $ 59 $ 67 $ 53 Tax benefit for share-based compensation expense (7) (10) (7) Share-based compensation expense, net of tax $ 52 $ 57 $ 46 (a) For the year ended December 31, 2018, includes share-based compensation expense of $7 million related to the acquisition of Abaxis, for the post-merger service period. For additional details see Note 5. Acquisitions and Divestitures. (b) For each of the years ended December 31, 2020, 2019 and 2018, we capitalized approximately $1 million of share-based compensation expense to inventory. |
Share-based Payment Awards, Stock Options, Valuation Assumptions | The fair-value-based method for valuing each Zoetis stock option grant on the grant date uses the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions noted in the following table, shown at their weighted-average values: Year Ended December 31, 2020 2019 2018 Expected dividend yield (a) 0.55 % 0.75 % 0.69 % Risk-free interest rate (b) 1.41 % 2.56 % 2.74 % Expected stock price volatility (c) 24.33 % 23.08 % 23.61 % Expected term (d) (years) 5.5 5.7 6.5 (a) Determined using a constant dividend yield during the expected term of the Zoetis stock option. (b) Determined using the interpolated yield on U.S. Treasury zero-coupon issues. (c) Determined using an equal weighting between historical volatility of the Zoetis stock price and implied volatility. The selection of the blended historical and implied volatility approach was based on our assessment that this calculation of expected volatility is more representative of future stock price trends. |
Stock Option Activity | The following table provides an analysis of stock option activity for the year ended December 31, 2020: Weighted-Average Remaining Aggregate Weighted-Average Contractual Term Intrinsic Value (a) Shares Exercise Price (Years) (MILLIONS) Outstanding, December 31, 2019 3,463,624 $ 51.64 Granted 309,974 144.13 Exercised (1,201,072) 47.80 Forfeited (18,075) 65.81 Outstanding, December 31, 2020 2,554,451 $ 64.43 5.7 $ 258 Exercisable, December 31, 2020 1,378,614 $ 37.05 3.7 $ 177 (a) Market price of underlying Zoetis common stock less exercise price. As of December 31, 2020, there was approximately $8 million of unrecognized compensation costs related to nonvested stock options, which will be recognized over an expected remaining weighted-average period of 1 year. The following table summarizes data related to stock option activity: Year Ended/As of December 31, (MILLIONS OF DOLLARS, EXCEPT PER STOCK OPTION AMOUNTS) 2020 2019 2018 Weighted-average grant date fair value per stock option $ 34.22 $ 21.84 $ 20.30 Aggregate intrinsic value on exercise 114 76 66 Cash received upon exercise 57 39 36 Tax benefits realized related to exercise 39 31 23 |
Restricted Stock Units (RSUs) | The following table provides an analysis of RSU activity for the year ended December 31, 2020: Weighted-Average RSUs Grant Date Fair Value Nonvested, December 31, 2019 1,460,535 $ 72.93 Granted 239,745 144.06 Vested (627,818) 61.94 Reinvested dividend equivalents 6,511 83.26 Forfeited (95,507) 88.69 Nonvested, December 31, 2020 983,466 $ 95.82 |
Performance-based Units Activity (PSUs) | The following table provides an analysis of PSU activity for the year ended December 31, 2020: Weighted-Average PSUs Grant Date Fair Value Nonvested, December 31, 2019 419,396 $ 93.19 Granted 85,279 217.49 Vested (141,594) 77.69 Reinvested dividend equivalents 2,671 106.27 Forfeited (21,481) 110.43 Nonvested, December 31, 2020 344,271 $ 129.38 Shares issued, December 31, 2020 276,199 $ 74.32 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders' Equity Attributable to Parent [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | Changes, net of tax, in accumulated other comprehensive loss, excluding noncontrolling interest, follow: Currency Translation Adjustments Benefit Plans Accumulated Other Cash Flow Net Investment Other Currency Actuarial Comprehensive (MILLIONS OF DOLLARS) Hedges Hedges Translation Adj (Losses)/Gains Loss Balance, December 31, 2017 $ (3) $ — $ (487) $ (15) $ (505) Other comprehensive (loss)/gain, net of tax (1) 9 (133) 1 (124) Balance, December 31, 2018 (4) 9 (620) (14) (629) Other comprehensive gain/(loss), net of tax 4 12 (104) (9) (97) Balance, December 31, 2019 — 21 (724) (23) (726) Other comprehensive (loss)/gain, net of tax (15) (58) 69 — (4) Balance, December 31, 2020 $ (15) $ (37) $ (655) $ (23) $ (730) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Earnings Per Share | The following table presents the calculation of basic and diluted earnings per share: Year Ended December 31, (MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) 2020 2019 2018 Numerator Net income before allocation to noncontrolling interests $ 1,636 $ 1,500 $ 1,424 Less: net loss attributable to noncontrolling interests (2) — (4) Net income attributable to Zoetis Inc. $ 1,638 $ 1,500 $ 1,428 Denominator Weighted-average common shares outstanding 475.502 478.128 483.063 Common stock equivalents: stock options, RSUs, DSUs and PSUs 3.067 3.659 3.835 Weighted-average common and potential dilutive shares outstanding 478.569 481.787 486.898 Earnings per share attributable to Zoetis Inc. stockholders—basic $ 3.44 $ 3.14 $ 2.96 Earnings per share attributable to Zoetis Inc. stockholders—diluted $ 3.42 $ 3.11 $ 2.93 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Selected Income Statement Information by Segment | Selected Statement of Income Information Earnings Depreciation and Amortization (a) Year Ended December 31, Year Ended December 31, (MILLIONS OF DOLLARS) 2020 2019 2018 2020 2019 2018 U.S. Revenue $ 3,557 $ 3,203 $ 2,877 Cost of Sales 709 655 606 Gross Profit 2,848 2,548 2,271 Gross Margin 80.1 % 79.6 % 78.9 % Operating Expenses 602 543 456 Other (income)/deductions 7 — — U.S. Earnings 2,239 2,005 1,815 $ 55 $ 44 $ 34 International Revenue (b) 3,035 2,972 2,890 Cost of Sales 971 925 929 Gross Profit 2,064 2,047 1,961 Gross Margin 68.0 % 68.9 % 67.9 % Operating Expenses 510 560 559 Other (income)/deductions 7 — 3 International Earnings 1,547 1,487 1,399 56 53 48 Total operating segments 3,786 3,492 3,214 111 97 82 Other business activities (372) (348) (337) 27 24 23 Reconciling Items: Corporate (820) (707) (666) 101 69 59 Purchase accounting adjustments (198) (234) (162) 199 219 143 Acquisition-related costs (18) (43) (63) — — — Certain significant items (c) (43) (67) 43 — — — Other unallocated (339) (292) (339) 3 3 1 Total Earnings (d) $ 1,996 $ 1,801 $ 1,690 $ 441 $ 412 $ 308 (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 $718 million in 2020, $742 million in 2019, and $745 million in 2018. (c) For 2020, certain significant items primarily included certain asset impairment charges of $37 million and CEO transition-related costs of $16 million, partially offset by a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites of $18 million. For 2019, certain significant items primarily includes: (i) a change in estimate related to inventory costing of $69 million, (ii) CEO transition-related costs of $10 million, (iii) consulting fees, product transfer costs, employee termination costs and exit costs related to cost-reduction and productivity initiatives of $7 million, and (iv) income of $20 million resulting from a payment received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. For 2018, certain significant items primarily includes: (i) a net gain of $42 million related to the divestiture of certain agribusiness products within our International segment, (ii) a net gain of $18 million related to the relocation of a manufacturing site in China, (iii) charges related to our operational efficiency initiative and supply network strategy initiative of $9 million; and (iv) employee termination costs in Europe of $7 million. (d) Defined as income before provision for taxes on income. |
Long-lived Assets by Geographic Areas | Property, plant and equipment, less accumulated depreciation, by geographic region follow: As of December 31, (MILLIONS OF DOLLARS) 2020 2019 U.S. $ 1,486 $ 1,342 International 716 598 Property, plant and equipment, less accumulated depreciation $ 2,202 $ 1,940 |
Business Description (Details)
Business Description (Details) | Dec. 31, 2020countryregionspeciesproduct_category |
Product Information [Line Items] | |
Number of regional segments | region | 2 |
Number of countries in which entity markets products | 45 |
Number of core animal species | species | 8 |
Number of major product categories | product_category | 7 |
Product | |
Product Information [Line Items] | |
Number of countries in which entity markets products | 100 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Significant Accounting Policies [Line Items] | ||||
Operating lease right of use assets | $ 192 | $ 189 | ||
Operating Lease, Right-of-Use Asset | 203 | 199 | ||
Contract liabilities, current | 8 | |||
Contract liabilities | 13 | |||
Advertising and promotion expenses | 233 | 167 | $ 158 | |
Cost of sales | [1] | 2,057 | 1,992 | 1,911 |
Capitalized internal use software | 59 | 74 | ||
Depreciation expense | 46 | 27 | 23 | |
Accounts receivable, less allowance for doubtful accounts | 1,013 | 1,086 | ||
Other receivables | $ 48 | 37 | ||
Percentage of being realized upon settlement | 50.00% | |||
Accruals for asset retirement obligations, non current | $ 25 | 23 | ||
Accounts Receivable | ||||
Significant Accounting Policies [Line Items] | ||||
Accruals for sales deductions | 185 | 169 | ||
Other current liabilities | ||||
Significant Accounting Policies [Line Items] | ||||
Accruals for sales deductions | 226 | 190 | ||
Shipping and Handling [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Cost of sales | $ 66 | $ 59 | $ 56 | |
[1] | Exclusive of amortization of intangible assets, except as disclosed in Note 3. Significant Accounting Policies—Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets. |
Revenue - Revenue by Geographic
Revenue - Revenue by Geographic Area (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020USD ($)country | Dec. 31, 2019USD ($)country | Dec. 31, 2018USD ($)country | |
Revenue from External Customer [Line Items] | |||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 |
Revenue by country, exceeded | $ 100 | $ 100 | |
Revenue by country, exceeded, number of countries | country | 11,000,000 | 11,000,000 | 10,000,000 |
Contract Manufacturing and Human Health Diagnostics [Member] | |||
Revenue from External Customer [Line Items] | |||
Revenues | $ 83 | $ 85 | $ 58 |
United States | |||
Revenue from External Customer [Line Items] | |||
Revenues | 3,557 | 3,203 | 2,877 |
AUSTRALIA | |||
Revenue from External Customer [Line Items] | |||
Revenues | 207 | 196 | 189 |
BRAZIL | |||
Revenue from External Customer [Line Items] | |||
Revenues | 258 | 293 | 295 |
CANADA | |||
Revenue from External Customer [Line Items] | |||
Revenues | 210 | 206 | 203 |
CHILE | |||
Revenue from External Customer [Line Items] | |||
Revenues | 100 | 91 | 76 |
CHINA | |||
Revenue from External Customer [Line Items] | |||
Revenues | 266 | 200 | 211 |
FRANCE | |||
Revenue from External Customer [Line Items] | |||
Revenues | 118 | 117 | 130 |
GERMANY | |||
Revenue from External Customer [Line Items] | |||
Revenues | 159 | 153 | 147 |
ITALY | |||
Revenue from External Customer [Line Items] | |||
Revenues | 90 | 112 | 104 |
JAPAN | |||
Revenue from External Customer [Line Items] | |||
Revenues | 177 | 158 | 149 |
MEXICO | |||
Revenue from External Customer [Line Items] | |||
Revenues | 116 | 117 | 100 |
SPAIN | |||
Revenue from External Customer [Line Items] | |||
Revenues | 112 | 114 | 110 |
UNITED KINGDOM | |||
Revenue from External Customer [Line Items] | |||
Revenues | 178 | 198 | 181 |
Other developed markets | |||
Revenue from External Customer [Line Items] | |||
Revenues | 388 | 370 | 361 |
Other emerging markets | |||
Revenue from External Customer [Line Items] | |||
Revenues | 656 | 647 | 634 |
Total Geographical Area | |||
Revenue from External Customer [Line Items] | |||
Revenues | $ 6,592 | $ 6,175 | $ 5,767 |
Revenue - Revenue by Major Spec
Revenue - Revenue by Major Species (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Revenue from External Customer [Line Items] | ||||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 | |
Operating Segments | United States Segment | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | 3,557 | 3,203 | 2,877 | |
Operating Segments | International Segment | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | [1] | 3,035 | 2,972 | 2,890 |
Livestock | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | 2,940 | 3,030 | 3,154 | |
Livestock | United States Segment | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | 1,166 | 1,219 | 1,269 | |
Livestock | International Segment | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | 1,774 | 1,811 | 1,885 | |
Companion Animal | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | 3,652 | 3,145 | 2,613 | |
Companion Animal | United States Segment | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | 2,391 | 1,984 | 1,608 | |
Companion Animal | International Segment | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | 1,261 | 1,161 | 1,005 | |
Contract Manufacturing and Human Health Diagnostics [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Revenues | $ 83 | $ 85 | $ 58 | |
[1] | Revenue denominated in euros was $718 million in 2020, $742 million in 2019, and $745 million in 2018. |
Revenue - Revenue by Species (D
Revenue - Revenue by Species (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue from External Customer [Line Items] | |||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 |
Cattle | |||
Revenue from External Customer [Line Items] | |||
Revenues | 1,558 | 1,654 | 1,754 |
Swine | |||
Revenue from External Customer [Line Items] | |||
Revenues | 621 | 611 | 663 |
Poultry | |||
Revenue from External Customer [Line Items] | |||
Revenues | 537 | 559 | 522 |
Fish | |||
Revenue from External Customer [Line Items] | |||
Revenues | 148 | 134 | 132 |
Other | |||
Revenue from External Customer [Line Items] | |||
Revenues | 76 | 72 | 83 |
Livestock | |||
Revenue from External Customer [Line Items] | |||
Revenues | 2,940 | 3,030 | 3,154 |
Dogs and Cats | |||
Revenue from External Customer [Line Items] | |||
Revenues | 215 | 195 | 168 |
Horses | |||
Revenue from External Customer [Line Items] | |||
Revenues | 3,437 | 2,950 | 2,445 |
Companion Animal | |||
Revenue from External Customer [Line Items] | |||
Revenues | 3,652 | 3,145 | 2,613 |
Contract Manufacturing and Human Health Diagnostics [Member] | |||
Revenue from External Customer [Line Items] | |||
Revenues | $ 83 | $ 85 | $ 58 |
Revenue - Revenue by Product (D
Revenue - Revenue by Product (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue from External Customer [Line Items] | |||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 |
Vaccines | |||
Revenue from External Customer [Line Items] | |||
Revenues | 1,476 | 1,483 | 1,488 |
Other pharmaceuticals | |||
Revenue from External Customer [Line Items] | |||
Revenues | 821 | 780 | 765 |
Dermatology [Member] | |||
Revenue from External Customer [Line Items] | |||
Revenues | 941 | 770 | 607 |
Anti-infectives | |||
Revenue from External Customer [Line Items] | |||
Revenues | 1,206 | 1,254 | 1,280 |
Parasiticides | |||
Revenue from External Customer [Line Items] | |||
Revenues | 1,173 | 966 | 836 |
Other non-pharmaceuticals | |||
Revenue from External Customer [Line Items] | |||
Revenues | 210 | 184 | 170 |
Medicated feed additives | |||
Revenue from External Customer [Line Items] | |||
Revenues | 460 | 470 | 485 |
Animal health diagnostics | |||
Revenue from External Customer [Line Items] | |||
Revenues | 305 | 268 | 136 |
Total Products and Services | |||
Revenue from External Customer [Line Items] | |||
Revenues | 6,592 | 6,175 | 5,767 |
Contract Manufacturing and Human Health Diagnostics [Member] | |||
Revenue from External Customer [Line Items] | |||
Revenues | $ 83 | $ 85 | $ 58 |
Revenue - Other Revenue Informa
Revenue - Other Revenue Information (Details) - product_category | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue Recognition and Deferred Revenue [Abstract] | |||
Number of Comprehensive Product Lines | 300 | ||
Concentration risk, percentage | 14.00% | 15.00% | 13.00% |
Acquisitions and Divestitures_2
Acquisitions and Divestitures (Details) - USD ($) $ / shares in Units, $ in Millions | Jul. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2020 | Sep. 30, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2020 | |||
Business Acquisition [Line Items] | |||||||||||
Business acquisition, name of acquired entity | Abaxis, Inc. (Abaxis), a California corporation and a leader in the development, manufacture and marketing of diagnostic instruments for veterinary point-of-care services | ||||||||||
Proceeds from Sale of Property, Plant, and Equipment | $ 21 | $ 21 | $ 56 | ||||||||
Gain (Loss) on Disposition of Assets | $ 19 | 20 | [1] | $ 40 | [1] | ||||||
Abaxis Inc | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Share price of acquisition (in dollars per share) | $ 83 | ||||||||||
Cash and cash equivalents | $ 64 | ||||||||||
Short term investments | 107 | ||||||||||
Accounts receivable | 30 | ||||||||||
Inventories | 79 | ||||||||||
Other current assets | 6 | ||||||||||
Property, plant and equipment | 54 | ||||||||||
Identifiable intangible assets | 894 | ||||||||||
Other noncurrent assets | 29 | ||||||||||
Accounts payable | (21) | ||||||||||
Accrued compensation and related items | (10) | ||||||||||
Other current liabilities | (22) | ||||||||||
Other noncurrent liabilities | (11) | ||||||||||
Noncurrent deferred tax liabilities | (214) | ||||||||||
Total net assets acquired | 985 | ||||||||||
Goodwill | 977 | ||||||||||
Total consideration | 1,962 | ||||||||||
Cash paid to shareholders | 1,898 | ||||||||||
Agribusiness Products | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Amount to be received under agreement | [2] | $ 47 | |||||||||
Gain (Loss) on Disposition of Assets | [2] | $ 42 | $ 42 | ||||||||
Measurement period adjustment [Member] | Abaxis Inc | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Property, plant and equipment | 5 | ||||||||||
Identifiable intangible assets | 3 | $ 1 | |||||||||
Other current liabilities | (4) | ||||||||||
Goodwill | $ 6 | ||||||||||
[1] | For 2018, represents a gain on the divestiture of certain agribusiness products within our International segment, and a net loss related to sales of certain manufacturing sites and products as part of our supply network strategy initiative. | ||||||||||
[2] | Includes adjustments for foreign currency translation. |
Acquisitions and Divestitures -
Acquisitions and Divestitures - Consideration Transferred (Details) - USD ($) $ in Millions | Jul. 31, 2018 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2020 |
Business Acquisition [Line Items] | |||||
Acquisition-related costs | $ 18 | $ 43 | $ 61 | ||
Abaxis Inc | |||||
Business Acquisition [Line Items] | |||||
Cash paid to shareholders | $ 1,898 | ||||
Cash paid for equity awards attributable to pre-merger services | 54 | ||||
Total consideration | 1,962 | ||||
Property, plant and equipment | 54 | ||||
Identifiable intangible assets | 894 | ||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Other | 22 | ||||
Goodwill | 977 | ||||
Business Combination Pre Merger Service | Abaxis Inc | |||||
Business Acquisition [Line Items] | |||||
Fair value of equity awards issued in exchange for outstanding equity awards pertaining to pre-merger service | 10 | ||||
Measurement period adjustment [Member] | Abaxis Inc | |||||
Business Acquisition [Line Items] | |||||
Property, plant and equipment | 5 | ||||
Identifiable intangible assets | 3 | $ 1 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Other | 4 | ||||
Goodwill | $ 6 |
Acquisitions and Divestitures_3
Acquisitions and Divestitures - Abaxis' Operations (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Employee Severance | Abaxis Inc | |
Business Acquisition [Line Items] | |
Severance Costs | $ 21 |
Acquisitions and Divestitures_4
Acquisitions and Divestitures - Supplemental Pro Forma Financial Information (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Business Acquisition [Line Items] | |||
Acquisition-related costs | $ 18 | $ 43 | $ 61 |
Amortization expense of finite-lived intangible assets | 230 | 237 | 157 |
Depreciation expense | 211 | 175 | 152 |
Interest expense, net of capitalized interest | 231 | 223 | 206 |
Share-based compensation expense | 59 | 67 | $ 53 |
Pro Forma [Member] | |||
Business Acquisition [Line Items] | |||
Acquisition-related costs | 82 | 60 | |
Amortization expense of finite-lived intangible assets | 77 | 130 | |
Depreciation expense | 2 | 3 | |
Adjustment to inventory | 18 | 33 | |
Interest expense, net of capitalized interest | 36 | 57 | |
Abaxis Inc | |||
Business Acquisition [Line Items] | |||
Revenue | 5,980 | 5,542 | |
Net income attributable to Zoetis Inc. | 1,402 | 706 | |
Share-based compensation expense | $ 4 | $ 13 |
Restructuring Charges and Oth_3
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives - Components of Costs Incurred (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Restructuring Cost and Reserve [Line Items] | ||||
Employee termination costs/(reversals) | $ 8 | $ 33 | $ 26 | |
Exit costs | [1],[2] | 0 | 0 | 1 |
Restructuring charges and certain acquisition-related costs | 25 | 51 | 68 | |
United States | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Employee termination costs/(reversals) | 2 | 7 | ||
International | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Employee termination costs/(reversals) | 31 | 19 | ||
Manufacturing, Research, Corporate | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Employee termination costs/(reversals) | 8 | |||
Employee Severance | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Employee termination costs/(reversals) | [1],[2] | 8 | 33 | 25 |
Employee Severance | Europe | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Employee termination costs/(reversals) | 7 | |||
Severance Costs | 7 | |||
Direct Cost | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Integration costs | [3] | 17 | 18 | 21 |
Transaction costs | [4] | $ 0 | $ 0 | 21 |
Operational efficiency initiative and supply network strategy | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Exit costs | 1 | |||
Operational efficiency initiative and supply network strategy | Employee Severance | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance Costs | 3 | |||
Abaxis Inc | Employee Severance | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance Costs | $ 21 | |||
[1] | The restructuring charges are associated with the following: • For the year ended December 31, 2020, Manufacturing/research/corporate of $8 million. • For the year ended December 31, 2019, International of $2 million, and Manufacturing/research/corporate of $31 million. • For the year ended December 31, 2018, International of $7 million, and Manufacturing/research/corporate of $19 million. | |||
[2] | The restructuring charges for the year ended December 31, 2020 are primarily related to CEO transition-related costs and other cost-reduction and productivity initiatives. The restructuring charges for the year ended December 31, 2019 are primarily related to the acquisition of Abaxis and CEO transition-related costs. The restructuring charges for the year ended December 31, 2018 are primarily related to: • employee termination costs of $7 million in Europe as a result of initiatives to better align our organizational structure; • employee termination costs of $21 million related to the acquisition of Abaxis; and • a net reversal of employee termination costs of $3 million, and exit costs of $1 million as a result of our operational efficiency initiative and supply network strategy initiative launched in 2015. | |||
[3] | Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes, as well as product transfer costs. | |||
[4] | Transaction costs represent external costs directly related to acquiring businesses and primarily include expenditures for banking, legal, accounting and other similar services. |
Restructuring Charges and Oth_4
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives - Restructuring Benefits and Charges (Details) - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||||
Restructuring Reserve [Roll Forward] | ||||||
Beginning balance | $ 45 | [1] | $ 45 | $ 41 | ||
Provision/(benefit) | 8 | 33 | 26 | |||
Utilization and other | [2] | (32) | (33) | (22) | ||
Ending balance | 21 | [1] | 45 | [1] | 45 | |
Other current liabilities | ||||||
Restructuring Reserve [Roll Forward] | ||||||
Accrued expenses | 6 | 23 | ||||
Other non-current liabilities | ||||||
Restructuring Reserve [Roll Forward] | ||||||
Other noncurrent liabilities | 15 | 22 | ||||
Employee Severance | ||||||
Restructuring Reserve [Roll Forward] | ||||||
Beginning balance | 45 | [1] | 45 | 41 | ||
Provision/(benefit) | [3],[4] | 8 | 33 | 25 | ||
Utilization and other | [2] | (32) | (33) | (21) | ||
Ending balance | 21 | [1] | 45 | [1] | 45 | |
Exit Costs | ||||||
Restructuring Reserve [Roll Forward] | ||||||
Beginning balance | 0 | [1] | 0 | 0 | ||
Provision/(benefit) | 0 | 0 | 1 | |||
Utilization and other | [2] | 0 | 0 | (1) | ||
Ending balance | $ 0 | [1] | $ 0 | [1] | $ 0 | |
[1] | At December 31, 2020 and 2019, included in Accrued Expenses ($6 million and $23 million, respectively) and Other noncurrent liabilities | |||||
[2] | Includes adjustments for foreign currency translation. | |||||
[3] | The restructuring charges are associated with the following: • For the year ended December 31, 2020, Manufacturing/research/corporate of $8 million. • For the year ended December 31, 2019, International of $2 million, and Manufacturing/research/corporate of $31 million. • For the year ended December 31, 2018, International of $7 million, and Manufacturing/research/corporate of $19 million. | |||||
[4] | The restructuring charges for the year ended December 31, 2020 are primarily related to CEO transition-related costs and other cost-reduction and productivity initiatives. The restructuring charges for the year ended December 31, 2019 are primarily related to the acquisition of Abaxis and CEO transition-related costs. The restructuring charges for the year ended December 31, 2018 are primarily related to: • employee termination costs of $7 million in Europe as a result of initiatives to better align our organizational structure; • employee termination costs of $21 million related to the acquisition of Abaxis; and • a net reversal of employee termination costs of $3 million, and exit costs of $1 million as a result of our operational efficiency initiative and supply network strategy initiative launched in 2015. |
Other (Income)_Deductions - N_3
Other (Income)/Deductions - Net Other (Income)/Deductions - Net (Details) - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||||
Other Income and Expenses [Abstract] | ||||||
Royalty-related income | $ 12 | $ 16 | $ 28 | |||
Interest income | (12) | (37) | (31) | |||
Identifiable intangible asset impairment charges | 26 | 0 | 0 | |||
Net gain on sale of assets | (19) | (20) | [1] | (40) | [1] | |
Impairment of an equity investment | 4 | 0 | 0 | |||
Other asset impairment charges | 4 | 0 | 0 | |||
Foreign currency loss | [2] | 21 | 16 | 31 | ||
Other, net | [3] | 5 | 0 | (15) | ||
Other (income)/deductions—net | $ 17 | $ (57) | $ (83) | |||
[1] | For 2018, represents a gain on the divestiture of certain agribusiness products within our International segment, and a net loss related to sales of certain manufacturing sites and products as part of our supply network strategy initiative. | |||||
[2] | Primarily driven by costs related to hedging and exposures to certain emerging market currencies. | |||||
[3] | For 2018, primarily includes a net gain related to the relocation of a manufacturing site in China. |
Tax Matters (Taxes on Income) (
Tax Matters (Taxes on Income) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Taxes on Income [Line Items] | ||||
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest | [1] | $ 1,996 | $ 1,801 | $ 1,690 |
Deferred income taxes: | ||||
Total U.S. tax provision | [2],[3] | $ 360 | $ 301 | $ 266 |
International: | ||||
U.S. statutory income tax rate | 21.00% | 21.00% | 21.00% | |
State and local taxes, net of federal benefits | 0.90% | 0.60% | 1.80% | |
Taxation of non-U.S. operations | [4] | (1.60%) | (3.10%) | (0.30%) |
Unrecognized tax benefits and tax settlements and resolution of certain tax positions | [5] | 0.10% | 0.50% | 1.20% |
Tax Cuts And Jobs Act of 2017 impact of change in tax law | [6] | 0.00% | 0.00% | 3.90% |
Impact of tax accounting method changes | 0.00% | 0.00% | 1.30% | |
U.S. Research and Development Tax Credit and U.S. Domestic Production Activities deduction | (0.70%) | (0.70%) | (0.50%) | |
Stock-based compensation | (1.30%) | (1.00%) | (0.80%) | |
Non-deductible / non-taxable items | 0.40% | (0.20%) | (1.60%) | |
All other—net | (0.80%) | (0.40%) | 0.10% | |
Effective tax rate | 18.00% | 16.70% | 15.70% | |
International | ||||
International: | ||||
Total international tax provision | $ 135 | $ 101 | $ 139 | |
United States | ||||
Deferred income taxes: | ||||
Total U.S. tax provision | 225 | 200 | 127 | |
United States | ||||
Taxes on Income [Line Items] | ||||
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest | 1,109 | 965 | 937 | |
Current income taxes: | ||||
Federal | 232 | 192 | 199 | |
State and local | 36 | 28 | 32 | |
Deferred income taxes: | ||||
Federal | (29) | (5) | (107) | |
State and local | (14) | (15) | 3 | |
International | ||||
Taxes on Income [Line Items] | ||||
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest | 887 | 836 | 753 | |
International: | ||||
Current income taxes | 154 | 161 | 148 | |
Deferred income taxes | (19) | (60) | (9) | |
Share-based Payments [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | 29 | 20 | 15 | |
Change in Valuation Allowances [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | 5 | 18 | ||
Change in Tax Basis [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | 14 | |||
Other Tax Items [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | 19 | 12 | ||
Statutory Tax Rates [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | 4 | 8 | 5 | |
Business Acquisitions [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | 7 | |||
Tax Settlements [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | $ 4 | $ 10 | ||
Tax Act [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | 45 | |||
Tax Accounting Method [Member] | ||||
International: | ||||
Discrete tax benefit related to revaluation of deferred taxes | $ 23 | |||
[1] | Defined as income before provision for taxes on income. | |||
[2] | In 2020, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies); • a $29 million discrete tax benefit recorded in 2020 related to the excess tax benefits for share-based payments; • a $19 million net discrete tax benefit recorded in 2020 related to changes in various other tax items; • a $7 million discrete tax benefit recorded in 2020 related to the remeasurement of deferred taxes resulting from the integration of acquired businesses; • a $5 million discrete tax expense related to the changes in valuation allowances; • a $4 million discrete tax benefit recorded in 2020 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates; and • a $4 million net discrete tax benefit recorded in 2020 related to the effective settlement of certain issues with tax authorities. (b) In 2019, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ); • the impact of the GILTI tax, a new provision of the Tax Act, which became effective for the company in the first quarter of 2019; • a $20 million discrete tax benefit recorded in 2019 related to the excess tax benefits for share-based payments; • an $18 million discrete tax benefit related to the changes in valuation allowances; • a $14 million net discrete tax benefit recorded in the third quarter of 2019 due to a change in tax basis related to purchase accounting; • a $12 million net discrete tax benefit recorded in 2019 related to changes in various other tax items; • a $10 million net discrete tax benefit recorded in 2019 related to the effective settlement of certain issues with tax authorities; and • an $8 million discrete tax benefit recorded in 2019 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. | |||
[3] | In 2018 , the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S Research and Development Tax Credit; • tax expense related to the changes in valuation allowances and the resolution of other tax items; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ): • the reduction of the U.S. federal corporate income tax rate, from 35% to 21%, effective January 1, 2018, pursuant to the Tax Act; • a $45 million net tax benefit recorded in 2018 associated with a measurement-period adjustment to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings pursuant to the Tax Act; • a $23 million discrete tax benefit recorded in 2018 related to the favorable impact of certain tax accounting method changes; • a $15 million discrete tax benefit recorded in 2018 related to the excess tax benefits for share-based payments; and • a $5 million discrete tax benefit recorded in 2018 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. | |||
[4] | he rate impact of taxation of non-U.S. operations was a decrease to our effective tax rate due to the jurisdictional mix of earnings. | |||
[5] | For a discussion about unrecognized tax benefits and tax settlements and resolution of certain tax positions, see above in this section and D. Tax Contingencies. | |||
[6] | In 2018, the rate impact related to the Tax Act was a decrease to our effective tax rate. This tax benefit represents the measurement-period adjustment related to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings. |
Tax Matters (Deferred Taxes) (D
Tax Matters (Deferred Taxes) (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||||
Taxes on Income [Line Items] | ||||||||
Unrecognized Tax Benefits | $ 188 | [1] | $ 182 | [1] | $ 185 | [1] | $ 164 | |
Prepaid/deferred items | 64 | 42 | ||||||
Inventories | 15 | |||||||
Inventories | (1) | |||||||
Intangibles | (237) | (296) | ||||||
Property, plant and equipment | (168) | (149) | ||||||
Employee benefits | 59 | 61 | ||||||
Restructuring and other charges | 3 | 4 | ||||||
Legal and product liability reserves | 15 | 14 | ||||||
Net operating loss/credit carryforwards | 127 | 122 | ||||||
Unremitted earnings | (6) | (6) | ||||||
All other | (1) | |||||||
All other | (1) | |||||||
Subtotal | (127) | (210) | ||||||
Valuation allowance | (157) | (136) | ||||||
Net deferred income tax liability | [2],[3] | (284) | (346) | |||||
Noncurrent deferred tax assets | 94 | 88 | ||||||
Noncurrent deferred tax liabilities | 378 | 434 | ||||||
Cumulative amount of undistributed earnings | 6,200 | |||||||
Noncurrent Deferred Tax Assets | ||||||||
Taxes on Income [Line Items] | ||||||||
Unrecognized Tax Benefits | 1 | 2 | 3 | |||||
Other Taxes Payable | ||||||||
Taxes on Income [Line Items] | ||||||||
Unrecognized Tax Benefits | $ 187 | $ 180 | $ 182 | |||||
[1] | In 2020, included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($187 million). In 2019, included in Noncurrent deferred tax assets and Other noncurrent assets ($2 million) and Other taxes payable ($180 million). In 2018, included in Noncurrent deferred tax assets and Other noncurrent assets ($3 million) and Other taxes payable ($182 million). | |||||||
[2] | In 2020, included in Noncurrent deferred tax assets ($94 million) and Noncurrent deferred tax liabilities ($378 million). In 2019, included in Noncurrent deferred tax assets ($88 million) and Noncurrent deferred tax liabilities | |||||||
[3] | The decrease in the total net deferred tax liability from December 31, 2019 to December 31, 2020 is primarily attributable to a decrease in deferred tax liabilities related to intangibles, partially offset by an increase in valuation allowances representing the amounts determined to be unrecoverable, and deferred tax liabilities related to property, plant and equipment. In addition, the decrease in the total net deferred tax liability was also attributable to an increase in deferred tax assets related to prepaid/deferred items, inventory, net operation loss/credit carry forwards, partially offset by a decrease in employee benefits. |
Tax Matters (Tax Contingencies)
Tax Matters (Tax Contingencies) (Details) - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||||
Income Tax Contingency [Line Items] | ||||||
Net liabilities associated with uncertain tax positions | $ 187 | $ 180 | $ 182 | |||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||||||
Balance, January 1 | (182) | [1] | (185) | [1] | (164) | |
Decreases based on tax positions taken during a prior period | [2],[3] | 6 | 12 | 6 | ||
Increases based on tax positions taken during the current period | [3] | (9) | (8) | (11) | ||
Lapse in statute of limitations | 3 | 2 | 2 | |||
Balance, December 31 | [1] | (188) | (182) | (185) | ||
Net interest expense | 2 | 2 | 1 | |||
Gross accrued interest | 11 | 9 | 8 | |||
Gross accrued penalties | 3 | 3 | 3 | |||
Other non-current assets | ||||||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||||||
Balance, January 1 | (3) | (3) | ||||
Balance, December 31 | (3) | (3) | (3) | |||
Noncurrent Deferred Tax Assets | ||||||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||||||
Balance, January 1 | (2) | (3) | ||||
Balance, December 31 | (1) | (2) | (3) | |||
Other Taxes Payable | ||||||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||||||
Balance, January 1 | (180) | (182) | ||||
Increases based on tax positions taken during a prior period | [3],[4] | (6) | (3) | (24) | ||
Balance, December 31 | (187) | (180) | (182) | |||
Belgium | ||||||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||||||
Settlements | [5] | $ 0 | $ 0 | $ 6 | ||
[1] | In 2020, included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($187 million). In 2019, included in Noncurrent deferred tax assets and Other noncurrent assets ($2 million) and Other taxes payable ($180 million). In 2018, included in Noncurrent deferred tax assets and Other noncurrent assets ($3 million) and Other taxes payable ($182 million). | |||||
[2] | In 2020, the decreases are primarily related to effective settlement of certain issues with tax authorities. In 2019, the decreases are primarily related to movements on prior year positions and effective settlement of certain issues with tax authorities, including movements in foreign translation adjustments on prior year positions. In 2018, the decreases are primarily related to movements on prior year positions and closure of audits with tax authorities, including movements in foreign translation adjustments on prior year positions . | |||||
[3] | Primarily included in Provision for taxes on income. | |||||
[4] | In 2020 and 2019, the increases are primarily related to movements on prior year positions. In 2018, the increases are primarily related to the impact of the Tax Act and movements on prior year positions. | |||||
[5] | In 2018, the decreases are due to settlements with tax authorities. See A. Taxes on Income. |
Financial Instruments (Credit F
Financial Instruments (Credit Facilities) (Details) | 12 Months Ended | |
Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Line of Credit Facility [Line Items] | ||
Line of credit facility, maximum borrowing capacity | $ 79,000,000 | |
Revolving credit facility, minimum interest coverage ratio | 3.50 | |
Borrowings outstanding | $ 4,000,000 | |
Short-term Debt | 4,000,000 | $ 0 |
Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facility, current borrowing capacity | 1,000,000,000 | |
Line of credit facility, maximum borrowing capacity | $ 1,500,000,000 | |
Maximum total leverage ratio | 3.50 | |
Revolving credit facility, covenant compliance ratio | 4 | |
Borrowings outstanding | $ 0 | |
Operational Efficiency | ||
Line of Credit Facility [Line Items] | ||
Charges add back | $ 100,000,000 |
Financial Instruments (Commerci
Financial Instruments (Commercial Paper Program and Other Short-Term Borrowings) (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 | Feb. 28, 2013 |
Short-term Debt [Line Items] | |||
Commercial paper issued under program | $ 0 | $ 0 | |
Commercial Paper | |||
Short-term Debt [Line Items] | |||
Capacity of commercial paper program | $ 1,000,000,000 |
Financial Instruments (Senior N
Financial Instruments (Senior Notes and Other Long-Term Debt) (Details) - USD ($) | Oct. 13, 2020 | Dec. 31, 2020 | May 12, 2020 | Dec. 31, 2019 | Aug. 20, 2018 | Sep. 12, 2017 | Nov. 13, 2015 | Jan. 28, 2013 |
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | $ 7,250,000,000 | $ 6,500,000,000 | ||||||
Current portion of long term debt | 600,000,000 | 500,000,000 | ||||||
Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | $ 1,500,000,000 | $ 1,250,000,000 | $ 1,250,000,000 | $ 3,650,000,000 | ||||
Debt, unamortized discount | $ 4,000,000 | $ 7,000,000 | $ 2,000,000 | $ 10,000,000 | ||||
Debt, purchase price percent due to downgrade of investment grade | 101.00% | |||||||
Senior Notes | 2018 floating rate (three-month USD LIBOR plus 0.44%) senior notes due 2021 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 300,000,000 | 300,000,000 | ||||||
Senior Notes | 3.250% 2018 senior notes due 2021 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 300,000,000 | 300,000,000 | ||||||
Debt, stated interest percentage rate | 3.25% | |||||||
Senior Notes | 3.900% 2018 senior notes due 2028 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 500,000,000 | 500,000,000 | ||||||
Debt, stated interest percentage rate | 3.90% | |||||||
Senior Notes | 4.450% 2018 senior notes due 2048 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 400,000,000 | 400,000,000 | ||||||
Debt, stated interest percentage rate | 4.45% | |||||||
Senior Notes | 3.000% 2017 senior notes due 2027 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 750,000,000 | 750,000,000 | ||||||
Debt, stated interest percentage rate | 3.00% | |||||||
Senior Notes | 4.450% 2018 senior notes due 2048 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 500,000,000 | 500,000,000 | ||||||
Debt, stated interest percentage rate | 3.95% | |||||||
Senior Notes | Senior Notes 2.000% Due 2030 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 750,000,000 | 0 | ||||||
Senior Notes | Senior Notes 3.000% Due 2050 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | 500,000,000 | 0 | ||||||
Senior Notes | 2020 Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | $ 1,250,000,000 | |||||||
Debt, unamortized discount | $ 10,000,000 | |||||||
Senior Notes | 3.450% 2015 senior notes due 2020 | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt, principal amount | $ 0 | $ 500,000,000 | ||||||
Debt, stated interest percentage rate | 3.45% | |||||||
Repayment of senior debt | $ 500,000,000 |
Financial Instruments (Schedule
Financial Instruments (Schedule of Long-term Debt) (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Aug. 20, 2018 | Sep. 12, 2017 | Nov. 13, 2015 | Jan. 28, 2013 |
Debt Instrument [Line Items] | ||||||
Total | $ 7,250 | $ 6,500 | ||||
Unamortized debt discount / debt issuance costs | (66) | (51) | ||||
Less current portion of long-term debt | 600 | 500 | ||||
Cumulative fair value adjustment for interest rate swap contracts | 11 | (2) | ||||
Long-term debt, net of discount and issuance costs | 6,595 | 5,947 | ||||
Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Total | $ 1,500 | $ 1,250 | $ 1,250 | $ 3,650 | ||
Senior Notes | 3.450% 2015 senior notes due 2020 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 3.45% | |||||
Total | 0 | 500 | ||||
Senior Notes | 2018 floating rate (three-month USD LIBOR plus 0.44%) senior notes due 2021 | ||||||
Debt Instrument [Line Items] | ||||||
Total | 300 | 300 | ||||
Senior Notes | 3.250% 2018 senior notes due 2021 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 3.25% | |||||
Total | 300 | 300 | ||||
Senior Notes | 3.250% 2013 senior notes due 2023 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 3.25% | |||||
Total | 1,350 | 1,350 | ||||
Senior Notes | 4.500% 2015 senior notes due 2025 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 4.50% | |||||
Total | 750 | 750 | ||||
Senior Notes | 3.000% 2017 senior notes due 2027 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 3.00% | |||||
Total | 750 | 750 | ||||
Senior Notes | 3.900% 2018 senior notes due 2028 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 3.90% | |||||
Total | 500 | 500 | ||||
Senior Notes | 4.700% 2013 senior notes due 2043 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 4.70% | |||||
Total | 1,150 | 1,150 | ||||
Senior Notes | 4.450% 2018 senior notes due 2048 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 3.95% | |||||
Total | 500 | 500 | ||||
Senior Notes | 4.450% 2018 senior notes due 2048 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, stated interest percentage rate | 4.45% | |||||
Total | 400 | 400 | ||||
Fair Value, Inputs, Level 2 | ||||||
Debt Instrument [Line Items] | ||||||
Fair value, debt instrument | $ 7,835 | $ 6,587 |
Financial Instruments (Fair Val
Financial Instruments (Fair Value of Debt) (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Fair Value, Inputs, Level 2 | ||
Debt Instrument [Line Items] | ||
Fair value, debt instrument | $ 7,835 | $ 6,587 |
Financial Instruments (Long-ter
Financial Instruments (Long-term Debt Maturity) (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
2021 | $ 600 | |
2022 | 0 | |
2023 | 1,350 | |
2024 | 0 | |
2025 | 750 | |
After 2025 | 4,550 | |
Total | $ 7,250 | $ 6,500 |
Financial Instruments (Interest
Financial Instruments (Interest Expense) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |||
Interest expense, net of capitalized interest | $ 231 | $ 223 | $ 206 |
Capitalized interest expense | $ 17 | $ 13 | $ 9 |
Financial Instruments (Foreign
Financial Instruments (Foreign Exchange Risk) (Details) € in Millions, kr in Millions, SFr in Millions, $ in Millions | Dec. 31, 2020USD ($) | Dec. 31, 2020EUR (€) | Dec. 31, 2020DKK (kr) | Dec. 31, 2020CHF (SFr) | Dec. 31, 2019USD ($) | Dec. 31, 2019EUR (€) | Dec. 31, 2019DKK (kr) | Dec. 31, 2019CHF (SFr) |
Cross-currency interest rate swap contracts | ||||||||
Derivative [Line Items] | ||||||||
Aggregate notional amount | $ 150 | € 650 | kr 600 | SFr 25 | $ 150 | € 650 | kr 600 | SFr 25 |
Derivatives Not Designated as Hedging Instruments | Foreign Exchange Forward | ||||||||
Derivative [Line Items] | ||||||||
Aggregate notional amount | $ 1,633 | $ 1,364 |
Financial Instruments (Intere_2
Financial Instruments (Interest Rate Risk) (Details) $ in Millions | 12 Months Ended | ||||||
Dec. 31, 2020USD ($) | Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($)swap | Aug. 20, 2018USD ($) | Sep. 12, 2017USD ($) | Nov. 13, 2015USD ($) | Jan. 28, 2013USD ($) | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Less current portion of long-term debt | $ 600 | $ 500 | |||||
Debt, principal amount | 7,250 | 6,500 | |||||
Senior Notes | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Debt, principal amount | $ 1,500 | $ 1,250 | $ 1,250 | $ 3,650 | |||
Senior Notes | 4.500% 2015 senior notes due 2025 | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Debt, stated interest percentage rate | 4.50% | ||||||
Debt, principal amount | 750 | 750 | |||||
Senior Notes | Senior Notes 2.000% Due 2030 | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Debt, principal amount | 750 | 0 | |||||
Senior Notes | Senior Notes 3.000% Due 2050 | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Debt, principal amount | 500 | 0 | |||||
Interest Rate Swap | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Aggregate notional amount | 550 | $ 250 | |||||
Treasury Lock | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Aggregate notional amount | 600 | ||||||
Amount of payment for settlement | 6 | ||||||
Derivatives Designated as Hedging Instruments | Interest Rate Swap | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Aggregate notional amount | 350 | ||||||
Amount of payment for settlement | 2 | ||||||
Number of derivative instruments | swap | 0 | ||||||
Derivatives Designated as Hedging Instruments | Interest Rate Swap | Senior Notes | 1.875% 2013 senior notes due 2018 | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Debt, stated interest percentage rate | 1.875% | ||||||
Derivatives Designated as Hedging Instruments | Treasury Lock | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Aggregate notional amount | $ 350 | ||||||
Derivatives Designated as Hedging Instruments | Treasury Lock | Senior Notes | Senior Notes 2.000% Due 2030 | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Aggregate notional amount | 425 | ||||||
Derivatives Designated as Hedging Instruments | Treasury Lock | Senior Notes | Senior Notes 3.000% Due 2050 | |||||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||||
Aggregate notional amount | $ 175 |
Financial Instruments (Derivati
Financial Instruments (Derivative Notional Amounts) (Details) € in Millions, kr in Millions, SFr in Millions, $ in Millions | Dec. 31, 2020USD ($) | Dec. 31, 2020EUR (€) | Dec. 31, 2020DKK (kr) | Dec. 31, 2020CHF (SFr) | Dec. 31, 2019USD ($) | Dec. 31, 2019EUR (€) | Dec. 31, 2019DKK (kr) | Dec. 31, 2019CHF (SFr) |
Foreign Exchange Forward | Derivatives Not Designated as Hedging Instruments | ||||||||
Derivative [Line Items] | ||||||||
Derivative, notional amount | $ 1,633 | $ 1,364 | ||||||
Cross-currency interest rate swap contracts | ||||||||
Derivative [Line Items] | ||||||||
Derivative, notional amount | 150 | € 650 | kr 600 | SFr 25 | 150 | € 650 | kr 600 | SFr 25 |
Interest Rate Swap | ||||||||
Derivative [Line Items] | ||||||||
Derivative, notional amount | 550 | $ 250 | ||||||
Interest Rate Swap | Derivatives Designated as Hedging Instruments | ||||||||
Derivative [Line Items] | ||||||||
Derivative, notional amount | $ 350 |
Financial Instruments (Fair V_2
Financial Instruments (Fair Value of Derivative Instruments) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Derivatives, Fair Value [Line Items] | ||
Total foreign currency forward-exchange contracts | $ 20 | $ (25) |
Foreign Exchange Forward | Derivatives Not Designated as Hedging Instruments | ||
Derivatives, Fair Value [Line Items] | ||
Total foreign currency forward-exchange contracts | 6 | (2) |
Gain (loss) on derivative contracts not designated as hedging instruments | (2) | 0 |
Foreign Exchange Forward | Derivatives Not Designated as Hedging Instruments | Other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency forward-exchange contracts | (10) | (7) |
Foreign Exchange Forward | Derivatives Not Designated as Hedging Instruments | Other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency forward-exchange contracts | (16) | (5) |
Forward Starting Interest Rate Swap Contract [Member] | Derivatives Designated as Hedging Instruments | Other non-current assets | ||
Derivatives, Fair Value [Line Items] | ||
Total foreign currency forward-exchange contracts | (6) | (5) |
Forward Starting Interest Rate Swap Contract [Member] | Derivatives Designated as Hedging Instruments | Other non-current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency forward-exchange contracts | (17) | (1) |
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments | ||
Derivatives, Fair Value [Line Items] | ||
Unrecognized net gains/(losses) on derivative instruments | (58) | 12 |
Gains/(losses) on derivative instruments | 18 | 19 |
Collateral received | 8 | |
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments | Other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Total foreign currency forward-exchange contracts | (2) | (4) |
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments | Other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Total foreign currency forward-exchange contracts | (21) | (3) |
Cross-currency interest rate swap contracts | Derivatives Designated as Hedging Instruments | Other non-current assets | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency forward-exchange contracts | (5) | (20) |
Fixed to Floating Interest Rate Swap [Member] | Derivatives Designated as Hedging Instruments | Other non-current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency forward-exchange contracts | 11 | (2) |
Forward starting interest rate swap contracts | Derivatives Designated as Hedging Instruments | ||
Derivatives, Fair Value [Line Items] | ||
Foreign currency forward-exchange contracts | (14) | 23 |
Unrecognized net gains/(losses) on derivative instruments | $ (11) | $ 3 |
Leases (Details)
Leases (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Lessee, Lease, Description [Line Items] | |||
Operating lease expense | $ 46 | $ 40 | |
Variable lease payments not included in the measurement of lease liabilities | 20 | 21 | |
Short-term lease payments not included in the measurement of lease liabilities | 7 | 9 | |
Cash paid for amounts included in the measurement of lease liabilities | 42 | 42 | |
Lease obligations obtained in exchange for right-of-use assets (non-cash) | 47 | 241 | |
Operating lease right of use assets | 192 | 189 | |
Operating lease liabilities - current (in Other current liabilities) | 40 | 35 | |
Operating lease liabilities - noncurrent | 163 | 164 | |
Total operating lease liabilities | $ 203 | $ 199 | |
Weighted-average remaining lease term—operating leases (years) | 6 years 7 months 2 days | 7 years 1 month 13 days | |
Weighted-average discount rate—operating leases | 3.12% | 3.67% | |
2021 | $ 46 | ||
2022 | 39 | ||
2023 | 32 | ||
2024 | 27 | ||
2025 | 21 | ||
After 2025 | 57 | ||
Total Lease Payments | 222 | ||
Less: Imputed Interest | (19) | ||
Total rent expense | $ 45 | ||
Debt, principal amount | $ 7,250 | $ 6,500 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilitiesCurrent | us-gaap:OtherLiabilitiesCurrent | |
Minimum | |||
Lessee, Lease, Description [Line Items] | |||
Lessee, Operating Lease, Term of Contract | 1 year | ||
Maximum | |||
Lessee, Lease, Description [Line Items] | |||
Lessee, Operating Lease, Term of Contract | 14 years |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 805 | $ 701 |
Work-in-process | 594 | 511 |
Raw materials and supplies | 229 | 198 |
Inventories | $ 1,628 | $ 1,410 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Line Items] | |||
Land | $ 22 | $ 22 | |
Buildings | 1,019 | 983 | |
Machinery, equipment and fixtures | 2,440 | 2,119 | |
Construction-in-progress | 673 | 553 | |
Total property, plant and equipment, gross | 4,154 | 3,677 | |
Accumulated depreciation | 1,952 | 1,737 | |
Property, plant and equipment | 2,202 | 1,940 | |
Depreciation expense | $ 211 | $ 175 | $ 152 |
Building | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated useful life (in years) | 33 years 3 months 18 days | ||
Building | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated useful life (in years) | 50 years | ||
Machinery and Equipment | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated useful life (in years) | 3 years | ||
Machinery and Equipment | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated useful life (in years) | 20 years |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets (Goodwill) (Details) - USD ($) $ in Millions | Jul. 31, 2018 | Dec. 31, 2020 | Dec. 31, 2019 | |
Goodwill [Roll Forward] | ||||
Beginning balance | $ 2,592 | $ 2,519 | ||
Additions / Adjustments | 75 | 102 | ||
Other | [1] | 27 | (29) | |
Ending balance | 2,694 | 2,592 | ||
Abaxis Inc | ||||
Goodwill [Roll Forward] | ||||
Purchase price allocation amount | $ 977 | |||
United States | ||||
Goodwill [Roll Forward] | ||||
Beginning balance | 1,367 | 1,265 | ||
Additions / Adjustments | 58 | 102 | ||
Other | [1] | 0 | 0 | |
Ending balance | 1,425 | 1,367 | ||
International | ||||
Goodwill [Roll Forward] | ||||
Beginning balance | 1,225 | 1,254 | ||
Additions / Adjustments | 17 | 0 | ||
Other | [1] | 27 | (29) | |
Ending balance | $ 1,269 | $ 1,225 | ||
[1] | Includes adjustments for foreign currency translation. |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets (Narrative) (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Gross goodwill | $ 3,230 | $ 3,128 |
Accumulated goodwill impairment losses | $ 536 | $ 536 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets (Finite-lived and Indefinite-lived Intangible Assets) (Details) - USD ($) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Jul. 31, 2018 | ||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Finite-lived intangible assets, Gross Carrying Amount | $ 2,869 | $ 2,803 | |||
Finite-lived intangible assets, Accumulated Amortization | (1,358) | (1,129) | |||
Finite-lived intangible assets, Identifiable Intangible Assets, Less Accumulated Amortization | 1,511 | 1,674 | |||
Indefinite-lived intangible assets: | 199 | 216 | |||
Intangible Assets, Gross Carrying Amount | 3,068 | 3,019 | |||
Identifiable Intangible Assets, Less Accumulated Amortization | $ 1,710 | 1,890 | |||
Weighted average life our finite lived intangible assets | 10 years | ||||
Amortization expense of finite-lived intangible assets | $ 230 | 237 | $ 157 | ||
2019 | 203 | ||||
2020 | 191 | ||||
2021 | 183 | ||||
2022 | 164 | ||||
2023 | 149 | ||||
Brands and tradenames(a) | |||||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Indefinite-lived intangible assets: | 104 | 104 | |||
In Process Research and Development | |||||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Indefinite-lived intangible assets: | 88 | 105 | |||
Product rights | |||||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Indefinite-lived intangible assets: | 7 | 7 | |||
Developed Technology Rights | |||||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Finite-lived intangible assets, Gross Carrying Amount | [1] | 1,968 | 1,938 | ||
Finite-lived intangible assets, Accumulated Amortization | [1] | (809) | (657) | ||
Finite-lived intangible assets, Identifiable Intangible Assets, Less Accumulated Amortization | [1] | 1,159 | 1,281 | ||
Brands and tradenames(a) | |||||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Finite-lived intangible assets, Gross Carrying Amount | 427 | 424 | |||
Finite-lived intangible assets, Accumulated Amortization | (243) | (223) | |||
Finite-lived intangible assets, Identifiable Intangible Assets, Less Accumulated Amortization | 184 | 201 | |||
Other Intangible Assets | |||||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Finite-lived intangible assets, Gross Carrying Amount | 474 | 441 | |||
Finite-lived intangible assets, Accumulated Amortization | (306) | (249) | |||
Finite-lived intangible assets, Identifiable Intangible Assets, Less Accumulated Amortization | $ 168 | $ 192 | |||
Abaxis Inc | |||||
Finite Lived and Indefinite Lived Intangible Assets [Line Items] | |||||
Identifiable intangible assets | $ 894 | ||||
[1] | In 2020, additions included intangible assets associated with the acquisitions of Performance Livestock Analytics, Virtual Recall, Ethos Diagnostic Science and Fish Vet Group. See Note 5. Acquisitions and Divestitures . |
Benefit Plans (Details)
Benefit Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Employee benefit plan contribution from Pfizer Inc. | $ 5 | $ 8 | |
Pension and other postretirement benefit expense | 14 | 13 | $ 14 |
Actuarial losses | 32 | 32 | |
Actuarial losses, net of tax | 22 | 22 | |
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | |||
Service cost | 8 | 6 | 7 |
Interest cost | 2 | 3 | 3 |
Expected return on plan assets | (3) | (3) | (3) |
Amortization of net (gains) / losses | 2 | 1 | 1 |
Settlement and curtailments (gains) / losses | 0 | 0 | (1) |
Net periodic benefit cost | 9 | 7 | 7 |
Company contributions | 5 | 5 | |
Contribution expense | $ 48 | 46 | 43 |
Matching percentage | 100.00% | ||
Maximum matching percentage | 5.00% | ||
Additional contribution percentage, minimum | 0.00% | ||
Additional contribution percentage, maximum | 8.00% | ||
Other Pension Plan, Postretirement or Supplemental Plans | |||
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | |||
Contribution expense | $ 11 | 12 | |
United States | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Total cost of service credit continuation | $ 38 | ||
Installment period | 10 years | ||
Pension and other postretirement benefit expense | $ 6 | 6 | |
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | |||
2020 | 4 | ||
2021 | 4 | ||
2022 | 4 | ||
Postretirement benefit expense | 4 | $ 4 | $ 4 |
United States | Pfizer | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Remaining total cost | $ 25 | ||
Foreign Plan | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Period of amortization | 11 years 1 month 6 days | ||
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | |||
Expected contribution in 2020 | $ 7 | ||
2020 | 3 | ||
2021 | 6 | ||
2022 | 4 | ||
2023 | 6 | ||
2024 | 6 | ||
Thereafter | $ 52 |
Benefit Plans Changes in Projec
Benefit Plans Changes in Projected Benefit Obligations, Fair Value of Plan Assets, and Funded Status of Plan (Details) - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||||
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward] | ||||||
Projected benefit obligation, beginning | $ 144 | $ 123 | ||||
Service cost | 8 | 6 | $ 7 | |||
Interest cost | 2 | 3 | 3 | |||
Changes in actuarial assumptions and other | 1 | 19 | ||||
Settlements and curtailments | 0 | (1) | ||||
Benefits paid | (2) | (2) | ||||
Adjustments for foreign currency translation | 12 | (3) | ||||
Other––net | (1) | (1) | ||||
Benefit obligation, ending | 164 | 144 | 123 | |||
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] | ||||||
Fair value of plan assets, beginning | 72 | [1] | 65 | |||
Actual return on plan assets | 4 | 7 | ||||
Company contributions | 5 | 5 | ||||
Settlements and curtailments | 0 | (1) | ||||
Benefits paid | (2) | (2) | ||||
Adjustments for foreign currency translation | 6 | (2) | ||||
Fair value of plan assets, ending | 85 | [1] | 72 | [1] | $ 65 | |
Funded status—Projected benefit obligation in excess of plan assets at end of year | [2] | $ (79) | $ (72) | |||
[1] | Fair values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see Note 3. Significant Accounting Policies—Fair Value ). Investment plan assets are valued using Level 1 or Level 2 inputs. | |||||
[2] | Included in Other noncurrent liabilities. |
Benefit Plans Schedule of Benef
Benefit Plans Schedule of Benefit Obligations in Excess of Fair Value of Plan Assets (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Pension plans with an accumulated benefit obligation in excess of plan assets: | ||
Fair value of plan assets | $ 77 | $ 65 |
Accumulated benefit obligation | 131 | 113 |
Pension plans with a projected benefit obligation in excess of plan assets: | ||
Projected benefit obligation | 162 | 138 |
Pension Plan [Member] | ||
Pension plans with a projected benefit obligation in excess of plan assets: | ||
Fair value of plan assets | $ 83 | $ 66 |
Benefit Plans Schedule of Assum
Benefit Plans Schedule of Assumptions Used (Details) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Weighted average assumptions used to determine benefit obligations: [Abstract] | |||
Discount rate | 1.20% | 1.30% | 2.30% |
Rate of compensation increase | 3.10% | 3.10% | 3.00% |
Cash balance credit interest rate | 1.50% | 1.50% | 1.70% |
Weighted average assumptions used to determine net benefit cost for the year ended December 31: | |||
Discount rate | 1.30% | 2.30% | 2.20% |
Expected return on plan assets | 3.80% | 4.10% | 4.40% |
Rate of compensation increase | 3.10% | 3.00% | 3.00% |
Cash balance credit interest rate | 1.50% | 1.70% | 1.70% |
Benefit Plans Schedule of Alloc
Benefit Plans Schedule of Allocation of Plan Assets (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Defined Benefit Plan Disclosure [Line Items] | |||||
Plan assets | $ 85 | [1] | $ 72 | [1] | $ 65 |
Cash and cash equivalents | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Plan assets | 1 | 1 | |||
Equity securities: Equity commingled funds | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Plan assets | 31 | 27 | |||
Debt securities: Government bonds | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Plan assets | 43 | 36 | |||
Other investments | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Plan assets | $ 10 | $ 8 | |||
[1] | Fair values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see Note 3. Significant Accounting Policies—Fair Value ). Investment plan assets are valued using Level 1 or Level 2 inputs. |
Benefit Plans Schedule Of Perce
Benefit Plans Schedule Of Percentage Of Allocation Of Plan Assets Table (Details) | Dec. 31, 2020 | Dec. 31, 2019 |
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 100.00% | |
Cash and cash equivalents, percentage | 1.20% | 1.70% |
Equity securities, percentage | 37.00% | 36.90% |
Debt securities, percentage | 50.20% | 49.70% |
Other investments, percentage | 11.60% | 11.70% |
Total, percentage | 100.00% | 100.00% |
Maximum | Cash and cash equivalents | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 10.00% | |
Maximum | Equity securities: Equity commingled funds | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 60.00% | |
Maximum | Debt securities: Government bonds | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 100.00% | |
Maximum | Other investments | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 100.00% | |
Minimum | Cash and cash equivalents | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 0.00% | |
Minimum | Equity securities: Equity commingled funds | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 0.00% | |
Minimum | Debt securities: Government bonds | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 15.00% | |
Minimum | Other investments | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total, percentage | 0.00% |
Share-Based Payments (Narrative
Share-Based Payments (Narrative) (Details) - USD ($) | 12 Months Ended | 15 Months Ended | ||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2020 | Aug. 20, 2018 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares of stock approved and registered with the SEC | 25,000,000 | 25,000,000 | ||||
Shares available for future grant | 11,000,000 | 11,000,000 | ||||
Period following separation service | 60 days | |||||
Expected stock price volatility | [1] | 24.33% | 23.08% | 23.61% | ||
Stock Options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Exercise price percentage of the fair market value price at date of grant | 100.00% | |||||
Award vesting period (in years) | 3 years | |||||
Contractual term (in years) | 10 years | |||||
Total compensation cost related to nonvested RSU awards not yet recognized, pre-tax | $ 8,000,000 | $ 8,000,000 | ||||
Weighted-average period over which RSU cost is expected to be recognized (in years) | 1 year | |||||
Restricted Stock Units (RSUs) | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Award vesting period (in years) | 3 years | |||||
Total compensation cost related to nonvested RSU awards not yet recognized, pre-tax | $ 39,000,000 | $ 39,000,000 | ||||
Weighted-average period over which RSU cost is expected to be recognized (in years) | 1 year | |||||
Granted (in shares) | 239,745 | |||||
Shares outstanding | 627,818 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 144.06 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 983,466 | 1,460,535 | 983,466 | |||
Deferred Stock Units (DSUs) | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Granted (in shares) | 0 | |||||
Shares outstanding | 74,688 | 74,273 | ||||
PSUs | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Total compensation cost related to nonvested RSU awards not yet recognized, pre-tax | $ 18,000,000 | $ 18,000,000 | ||||
Weighted-average period over which RSU cost is expected to be recognized (in years) | 1 year 1 month 6 days | |||||
Granted (in shares) | 85,279 | |||||
Shares outstanding | 141,594 | |||||
Expected stock price volatility | 20.20% | 20.30% | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 217.49 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 344,271 | 419,396 | 344,271 | |||
PSUs | Peer Companies | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Expected stock price volatility | 24.80% | 25.30% | ||||
PSUs | Minimum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Percentage of target units | 0.00% | |||||
PSUs | Maximum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Percentage of target units | 200.00% | |||||
Chief Executive Officer [Member] | PSUs | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 37,265 | 37,265 | ||||
Share-based Goods and Nonemployee Services Transaction, Modification of Terms, Incremental Compensation Cost | $ 6,000,000 | $ 2,000,000 | $ 8,000,000 | |||
Abaxis Inc [Member] | Restricted Stock Units (RSUs) | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Granted (in shares) | 502,766 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 85.26 | |||||
Equity Issued in Business Combination, Fair Value Disclosure | $ 33,000,000 | $ 10,000,000 | ||||
[1] | Determined using an equal weighting between historical volatility of the Zoetis stock price and implied volatility. The selection of the blended historical and implied volatility approach was based on our assessment that this calculation of expected volatility is more representative of future stock price trends. |
Share-Based Payments (Component
Share-Based Payments (Components of share-based compensation expense) (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Jul. 31, 2018 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share-based compensation expense—total | [1] | $ 59 | $ 67 | $ 53 | |
Tax benefit for share-based compensation expense | (7) | (10) | (7) | ||
Share-based compensation expense, net of tax | 52 | 57 | 46 | ||
Share-based compensation expense | $ 1 | ||||
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ 144.13 | ||||
Deferred Stock Units (DSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in shares) | 0 | ||||
Stock options / stock appreciation rights | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share-based compensation expense | $ 9 | 10 | 10 | ||
RSUs / DSUs(a) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share-based compensation expense | [2] | $ 31 | 43 | 34 | |
PSUs | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in shares) | 85,279 | ||||
Share-based compensation expense | $ 19 | $ 14 | $ 9 | ||
Abaxis Inc | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share-based compensation expense | $ 7 | ||||
Business Combination Pre Merger Service | Abaxis Inc | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Fair value of equity awards issued in exchange for outstanding equity awards pertaining to pre-merger service | $ 10 | ||||
[1] | For each of the years ended December 31, 2020, 2019 and 2018, we capitalized approximately $1 million of share-based compensation expense to inventory | ||||
[2] | For the year ended December 31, 2018, includes share-based compensation expense of $7 million related to the acquisition of Abaxis, for the post-merger service period. For additional details see Note 5. Acquisitions and Divestitures. |
Share-Based Payments (Stock opt
Share-Based Payments (Stock option valuation assumptions) (Details) | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Share-based Payment Arrangement [Abstract] | ||||
Expected dividend yield | [1] | 0.55% | 0.75% | 0.69% |
Risk-free interest rate | [2] | 1.41% | 2.56% | 2.74% |
Expected stock price volatility | [3] | 24.33% | 23.08% | 23.61% |
Expected term (in years) | [4] | 5 years 6 months | 5 years 8 months 12 days | 6 years 6 months |
[1] | Determined using a constant dividend yield during the expected term of the Zoetis stock option. | |||
[2] | Determined using the interpolated yield on U.S. Treasury zero-coupon issues. | |||
[3] | Determined using an equal weighting between historical volatility of the Zoetis stock price and implied volatility. The selection of the blended historical and implied volatility approach was based on our assessment that this calculation of expected volatility is more representative of future stock price trends. | |||
[4] | Determined using expected exercise and post-vesting termination patterns. |
Share-Based Payments (Stock o_2
Share-Based Payments (Stock option activity) (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Shares | ||||
Outstanding, Beginning Balance (in shares) | 3,463,624 | |||
Granted (in shares) | 309,974 | |||
Exercised (in shares) | (1,201,072) | |||
Forfeited (in shares) | (18,075) | |||
Outstanding, Ending Balance (in shares) | 2,554,451 | 3,463,624 | ||
Weighted-average Exercise Price Per Share | ||||
Outstanding, Beginning Balance (in dollars per share) | $ 51.64 | |||
Granted (in dollars per share) | 144.13 | |||
Exercised (in dollars per share) | 47.80 | |||
Forfeited (in dollars per share) | 65.81 | |||
Outstanding, Ending Balance (in dollars per share) | $ 64.43 | $ 51.64 | ||
Outstanding, Weighted-average Remaining Contractual Term (in years) | 5 years 8 months 12 days | |||
Outstanding, Aggregate Intrinsic Value | [1] | $ 258 | ||
Exercisable, December 31, 2020 | 1,378,614 | |||
Exercisable, Weighted Average Exercise Price Per Share | $ 37.05 | |||
Exercisable, Weighted Average Remaining Contractual Term (in years) | 3 years 8 months 12 days | |||
Vested and expected to vest, Aggregate Intrinsic Value | [1] | $ 177 | ||
Weighted-average grant date fair value per stock option | $ 34.22 | $ 21.84 | $ 20.30 | |
Aggregate intrinsic value on exercise | $ 114 | $ 76 | $ 66 | |
Cash received upon exercise | 57 | 39 | 36 | |
Share-based Payment Arrangement, Exercise of Option, Tax Benefit | $ 39 | $ 31 | $ 23 | |
[1] | Market price of underlying Zoetis common stock less exercise price. |
Share-Based Payments (Nonvested
Share-Based Payments (Nonvested restricted stock activity) (Details) - Restricted Stock Units (RSUs) | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
RSUs | |
Nonvested, Beginning Balance (in shares) | shares | 1,460,535 |
Granted (in shares) | shares | 239,745 |
Vested (in shares) | shares | (627,818) |
Reinvested dividend equivalents (in shares) | shares | 6,511 |
Forfeited (in shares) | shares | (95,507) |
Nonvested, Ending Balance (in shares) | shares | 983,466 |
Weighted Average Grant Date Fair Value Per Share | |
Nonvested, Beginning Balance (in dollars per share) | $ / shares | $ 72.93 |
Granted (in dollars per share) | $ / shares | 144.06 |
Vested (in dollars per share) | $ / shares | 61.94 |
Reinvested dividend equivalents (in dollars per share) | $ / shares | 83.26 |
Forfeited (in dollars per share) | $ / shares | 88.69 |
Nonvested, Ending Balance (in dollars per share) | $ / shares | $ 95.82 |
Share-Based Payments (Performan
Share-Based Payments (Performance Share Awards (PSAs) Activity) (Details) - PSUs | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares, Issued | shares | 276,199 |
RSUs | |
Nonvested, Beginning Balance (in shares) | shares | 419,396 |
Granted (in shares) | shares | 85,279 |
Vested (in shares) | shares | (141,594) |
Reinvested dividend equivalents (in shares) | shares | 2,671 |
Forfeited (in shares) | shares | (21,481) |
Nonvested, Ending Balance (in shares) | shares | 344,271 |
Weighted Average Grant Date Fair Value Per Share | |
Nonvested, Beginning Balance (in dollars per share) | $ / shares | $ 93.19 |
Granted (in dollars per share) | $ / shares | 217.49 |
Vested (in dollars per share) | $ / shares | 77.69 |
Reinvested dividend equivalents (in dollars per share) | $ / shares | 106.27 |
Forfeited (in dollars per share) | $ / shares | 110.43 |
Nonvested, Ending Balance (in dollars per share) | $ / shares | 129.38 |
Share-based Compensation Arrangement by Share-based Payment Award, Per Share Weighted Average Price of Shares Purchased | $ / shares | $ 74.32 |
Stockholders' Equity - Changes
Stockholders' Equity - Changes in Common Shares and Treasury Stock (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Class of Stock [Line Items] | |||
Common stock, shares authorized | 6,000,000,000 | 6,000,000,000 | |
Preferred stock, authorized (in shares) | 1,000,000,000 | 1,000,000,000 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning Balance | 501,891,243 | 501,900,000 | 501,900,000 |
Beginning Balance | 26,363,022 | 22,300,000 | 15,800,000 |
Stock-based compensation | 0 | 0 | |
Share repurchase program | 0 | 0 | |
Treasury Stock | (1,600,000) | (1,800,000) | (1,700,000) |
Ending Balance | 501,891,243 | 501,891,243 | 501,900,000 |
Ending Balance | 26,573,492 | 26,363,022 | 22,300,000 |
December 2016 Share Repurchase Program | |||
Class of Stock [Line Items] | |||
Shares authorized under repurchase program | $ 1,500,000,000 | ||
December 2018 Share Repurchase Program | |||
Class of Stock [Line Items] | |||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 1,400,000,000 | ||
Shares authorized under repurchase program | $ 2,000,000,000 | ||
Share Repurchase Program | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Treasury Stock | (1,800,000) | (5,800,000) | (8,200,000) |
Stockholders' Equity - Accumula
Stockholders' Equity - Accumulated other comprehensive income/ (loss) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Beginning balance | $ (726) | |||
Other comprehensive (loss)/gain, net of tax | (4) | $ (97) | $ (124) | |
Ending balance | (730) | (726) | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 3,773 | 2,708 | 2,185 | $ 1,786 |
Accumulated Other Comprehensive (Loss)/ Income | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Other comprehensive (loss)/gain, net of tax | (4) | (97) | (124) | |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | (730) | (726) | (629) | (505) |
Derivatives Net Unrealized Losses | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Other comprehensive (loss)/gain, net of tax | (15) | 4 | (1) | |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | (15) | 0 | (4) | $ (3) |
Accumulated Other Comprehensive Income (Loss), Derivative Qualifying as Hedge, Excluded Component, Including Portion Attributable to Noncontrolling Interest [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Beginning balance | 21 | 9 | 0 | |
Other comprehensive (loss)/gain, net of tax | (58) | 12 | 9 | |
Ending balance | (37) | 21 | 9 | |
Currency Translation Adjustment, Net Unrealized Losses | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Beginning balance | (724) | (620) | (487) | |
Other comprehensive (loss)/gain, net of tax | 69 | (104) | (133) | |
Ending balance | (655) | (724) | (620) | |
Benefit Plans, Actuarial Gains/ (Losses) | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Beginning balance | (23) | (14) | (15) | |
Other comprehensive (loss)/gain, net of tax | 0 | (9) | 1 | |
Ending balance | $ (23) | $ (23) | $ (14) |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Numerator | |||
Net income before allocation to noncontrolling interests | $ 1,636 | $ 1,500 | $ 1,424 |
Less: net loss attributable to noncontrolling interests | (2) | 0 | (4) |
Net income attributable to Zoetis Inc. | $ 1,638 | $ 1,500 | $ 1,428 |
Denominator | |||
Weighted-average common shares outstanding | 475,502 | 478,128 | 483,063 |
Common stock equivalents: stock options, RSUs, DSUs and PSUs | 3,067 | 3,659 | 3,835 |
Weighted-average common and potential dilutive shares outstanding | 478,569 | 481,787 | 486,898 |
Earnings per share attributable to Zoetis Inc. stockholders—basic (in dollars per share) | $ 3.44 | $ 3.14 | $ 2.96 |
Earnings per share attributable to Zoetis stockholders—diluted (in dollars per share) | $ 3.42 | $ 3.11 | $ 2.93 |
Commitments and Contingencies (
Commitments and Contingencies (Details) € in Millions, $ in Millions | May 16, 2016producer | Jun. 03, 2015count | Aug. 31, 2014animal | Apr. 30, 2012 | Dec. 31, 2020customer | Jun. 19, 2013USD ($) | Jun. 19, 2013EUR (€) | Feb. 29, 2012defendant |
Loss Contingencies [Line Items] | ||||||||
Number of deaths from contamination of animal feed | animal | 50,000 | |||||||
Number of contaminated animal from contamination of animal feed | animal | 20,000 | |||||||
Number of claims filed | count | 1 | |||||||
Ulianopolis, Brazil | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of additional defendants | defendant | 5 | |||||||
Number of claims seeking damages | defendant | 6 | |||||||
Number of years lawsuit suspended | 1 year | |||||||
Lascadoil | ||||||||
Loss Contingencies [Line Items] | ||||||||
Number of claims filed | 2 | 3 | ||||||
European Commission | ||||||||
Loss Contingencies [Line Items] | ||||||||
Amount reimbursed by Pfizer | $ 14 | € 11 |
Commitments and Contingencies -
Commitments and Contingencies - Purchase Commitments (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Amount of agreements to purchase goods and services | $ 376 |
Commitments and Contingencies_2
Commitments and Contingencies - Commitments under Operating Leases (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Total rent expense, net of sublease rental income | $ 45 |
Segment Information (Details)
Segment Information (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2020USD ($)segment | Dec. 31, 2019USD ($) | |
Segment Reporting Information [Line Items] | ||
Inventory Adjustments | $ 69 | |
Number of Operating Segments | segment | 2 | |
Assets | $ 13,609 | $ 11,545 |
Proceeds from Sale of Buildings | 20 | |
CEO Transition Costs [Member] | ||
Segment Reporting Information [Line Items] | ||
Restructuring and Other Cost Productivity Charges | 10 | |
Segment Reconciling Items | Zoetis Initiatives | ||
Segment Reporting Information [Line Items] | ||
Restructuring and Other Cost Productivity Charges | $ 7 | 9 |
Employee Severance [Member] | Europe | ||
Segment Reporting Information [Line Items] | ||
Severance Costs | $ 7 |
Segment Information - Income St
Segment Information - Income Statement (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 | |
Cost of Sales | [1] | 2,057 | 1,992 | 1,911 |
Other (income)/deductions | 17 | (57) | (83) | |
Earnings | [2] | 1,996 | 1,801 | 1,690 |
Depreciation and Amortization | [2],[3] | 441 | 412 | 308 |
Acquisition-related costs, earnings | 18 | 43 | 61 | |
Property, plant and equipment, less accumulated depreciation | 2,202 | 1,940 | ||
Other business activities | ||||
Segment Reporting Information [Line Items] | ||||
Earnings | (372) | (348) | (337) | |
Depreciation and Amortization | [3] | 27 | 24 | 23 |
United States | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 3,557 | 3,203 | 2,877 | |
Property, plant and equipment, less accumulated depreciation | 1,486 | 1,342 | ||
International | ||||
Segment Reporting Information [Line Items] | ||||
Property, plant and equipment, less accumulated depreciation | 716 | 598 | ||
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Earnings | 3,786 | 3,492 | 3,214 | |
Depreciation and Amortization | [3] | 111 | 97 | 82 |
Operating Segments | United States Segment | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 3,557 | 3,203 | 2,877 | |
Cost of Sales | 709 | 655 | 606 | |
Gross Profit | $ 2,848 | $ 2,548 | $ 2,271 | |
Gross Margin | 80.10% | 79.60% | 78.90% | |
Operating Expenses | $ 602 | $ 543 | $ 456 | |
Other (income)/deductions | 7 | 0 | 0 | |
Earnings | 2,239 | 2,005 | 1,815 | |
Depreciation and Amortization | [3] | 55 | 44 | 34 |
Operating Segments | International Segment | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | [4] | 3,035 | 2,972 | 2,890 |
Cost of Sales | 971 | 925 | 929 | |
Gross Profit | $ 2,064 | $ 2,047 | $ 1,961 | |
Gross Margin | 68.00% | 68.90% | 67.90% | |
Operating Expenses | $ 510 | $ 560 | $ 559 | |
Other (income)/deductions | (7) | 0 | (3) | |
Earnings | 1,547 | 1,487 | 1,399 | |
Operating Segments | International | ||||
Segment Reporting Information [Line Items] | ||||
Depreciation and Amortization | [3] | 56 | 53 | 48 |
Corporate, Non-Segment | ||||
Segment Reporting Information [Line Items] | ||||
Earnings | (820) | (707) | (666) | |
Depreciation and Amortization | [3] | 101 | 69 | 59 |
Segment Reconciling Items | ||||
Segment Reporting Information [Line Items] | ||||
Depreciation and Amortization | [3] | 0 | 0 | 0 |
Purchase accounting adjustments, earnings | (198) | (234) | (162) | |
Purchase accounting adjustments, depreciation and amortization | [3] | 199 | 219 | 143 |
Acquisition-related costs, earnings | (18) | (43) | (63) | |
Certain significant items, earnings | [5] | (43) | (67) | 43 |
Certain significant items, depreciation and amortization | [3],[5] | 0 | 0 | 0 |
Other unallocated, earnings | (339) | (292) | (339) | |
Other unallocated, deprecation and amortization | [3] | $ 3 | $ 3 | $ 1 |
[1] | Exclusive of amortization of intangible assets, except as disclosed in Note 3. Significant Accounting Policies—Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets. | |||
[2] | Defined as income before provision for taxes on income. | |||
[3] | 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. | |||
[4] | Revenue denominated in euros was $718 million in 2020, $742 million in 2019, and $745 million in 2018. | |||
[5] | For 2020, certain significant items primarily included certain asset impairment charges of $37 million and CEO transition-related costs of $16 million, partially offset by a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites of $18 million. For 2019, certain significant items primarily includes: (i) a change in estimate related to inventory costing of $69 million, (ii) CEO transition-related costs of $10 million, (iii) consulting fees, product transfer costs, employee termination costs and exit costs related to cost-reduction and productivity initiatives of $7 million, and (iv) income of $20 million resulting from a payment received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites. For 2018, certain significant items primarily includes: (i) a net gain of $42 million related to the divestiture of certain agribusiness products within our International segment, (ii) a net gain of $18 million related to the relocation of a manufacturing site in China, (iii) charges related to our operational efficiency initiative and supply network strategy initiative of $9 million; and (iv) employee termination costs in Europe of $7 million. |
Segment Information - Income _2
Segment Information - Income Statement Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||
Dec. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||||
Segment Reporting Information [Line Items] | |||||||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 | ||||
Net gain on sale of assets | 19 | 20 | [1] | 40 | [1] | ||
Employee termination costs/(reversals) | 8 | 33 | 26 | ||||
Employee Severance | |||||||
Segment Reporting Information [Line Items] | |||||||
Employee termination costs/(reversals) | [2],[3] | 8 | 33 | 25 | |||
CHINA | |||||||
Segment Reporting Information [Line Items] | |||||||
Revenues | 266 | 200 | 211 | ||||
Net Gain on Relocation | 18 | ||||||
Europe | Employee Severance | |||||||
Segment Reporting Information [Line Items] | |||||||
Severance Costs | 7 | ||||||
Employee termination costs/(reversals) | 7 | ||||||
Segment Reconciling Items | Zoetis Initiatives | |||||||
Segment Reporting Information [Line Items] | |||||||
Restructuring and Other Cost Productivity Charges | 7 | 9 | |||||
Agribusiness Products | |||||||
Segment Reporting Information [Line Items] | |||||||
Net gain on sale of assets | [4] | $ 42 | 42 | ||||
International Segment | Operating Segments | |||||||
Segment Reporting Information [Line Items] | |||||||
Revenues | [5] | 3,035 | 2,972 | 2,890 | |||
International Segment | Euro Member Countries, Euro | Operating Segments | |||||||
Segment Reporting Information [Line Items] | |||||||
Revenues | $ 718 | $ 742 | $ 745 | ||||
[1] | For 2018, represents a gain on the divestiture of certain agribusiness products within our International segment, and a net loss related to sales of certain manufacturing sites and products as part of our supply network strategy initiative. | ||||||
[2] | The restructuring charges are associated with the following: • For the year ended December 31, 2020, Manufacturing/research/corporate of $8 million. • For the year ended December 31, 2019, International of $2 million, and Manufacturing/research/corporate of $31 million. • For the year ended December 31, 2018, International of $7 million, and Manufacturing/research/corporate of $19 million. | ||||||
[3] | The restructuring charges for the year ended December 31, 2020 are primarily related to CEO transition-related costs and other cost-reduction and productivity initiatives. The restructuring charges for the year ended December 31, 2019 are primarily related to the acquisition of Abaxis and CEO transition-related costs. The restructuring charges for the year ended December 31, 2018 are primarily related to: • employee termination costs of $7 million in Europe as a result of initiatives to better align our organizational structure; • employee termination costs of $21 million related to the acquisition of Abaxis; and • a net reversal of employee termination costs of $3 million, and exit costs of $1 million as a result of our operational efficiency initiative and supply network strategy initiative launched in 2015. | ||||||
[4] | Includes adjustments for foreign currency translation. | ||||||
[5] | Revenue denominated in euros was $718 million in 2020, $742 million in 2019, and $745 million in 2018. |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Quarterly Financial Information Disclosure [Abstract] | ||||
Revenues | $ 6,675 | $ 6,260 | $ 5,825 | |
Restructuring charges and certain acquisition-related costs | 25 | 51 | 68 | |
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest | [1] | 1,996 | 1,801 | 1,690 |
Provision for taxes on income | [2],[3] | 360 | 301 | 266 |
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | 1,636 | 1,500 | 1,424 | |
Less: net loss attributable to noncontrolling interests | (2) | 0 | (4) | |
Net Income (Loss) Attributable to Parent | $ 1,638 | $ 1,500 | $ 1,428 | |
Earnings Per Share, Basic | $ 3.44 | $ 3.14 | $ 2.96 | |
Earnings Per Share, Diluted | $ 3.42 | $ 3.11 | $ 2.93 | |
[1] | Defined as income before provision for taxes on income. | |||
[2] | In 2020, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies); • a $29 million discrete tax benefit recorded in 2020 related to the excess tax benefits for share-based payments; • a $19 million net discrete tax benefit recorded in 2020 related to changes in various other tax items; • a $7 million discrete tax benefit recorded in 2020 related to the remeasurement of deferred taxes resulting from the integration of acquired businesses; • a $5 million discrete tax expense related to the changes in valuation allowances; • a $4 million discrete tax benefit recorded in 2020 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates; and • a $4 million net discrete tax benefit recorded in 2020 related to the effective settlement of certain issues with tax authorities. (b) In 2019, the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S. Research and Development Tax Credit; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ); • the impact of the GILTI tax, a new provision of the Tax Act, which became effective for the company in the first quarter of 2019; • a $20 million discrete tax benefit recorded in 2019 related to the excess tax benefits for share-based payments; • an $18 million discrete tax benefit related to the changes in valuation allowances; • a $14 million net discrete tax benefit recorded in the third quarter of 2019 due to a change in tax basis related to purchase accounting; • a $12 million net discrete tax benefit recorded in 2019 related to changes in various other tax items; • a $10 million net discrete tax benefit recorded in 2019 related to the effective settlement of certain issues with tax authorities; and • an $8 million discrete tax benefit recorded in 2019 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. | |||
[3] | In 2018 , the Provision for taxes on income reflects the following: • the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business, the impact of non-deductible and non-taxable items, and the extent and location of other income and expense items, such as gains and losses on asset divestitures; • U.S. tax benefit related to U.S Research and Development Tax Credit; • tax expense related to the changes in valuation allowances and the resolution of other tax items; • tax expense related to changes in uncertain tax positions (see D. Tax Contingencies ): • the reduction of the U.S. federal corporate income tax rate, from 35% to 21%, effective January 1, 2018, pursuant to the Tax Act; • a $45 million net tax benefit recorded in 2018 associated with a measurement-period adjustment to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings pursuant to the Tax Act; • a $23 million discrete tax benefit recorded in 2018 related to the favorable impact of certain tax accounting method changes; • a $15 million discrete tax benefit recorded in 2018 related to the excess tax benefits for share-based payments; and • a $5 million discrete tax benefit recorded in 2018 related to a remeasurement of deferred tax assets and liabilities as a result of changes in statutory tax rates. |
Schedule II - Valuation and Q_2
Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Balance, Beginning of Period | $ 21 | $ 24 | $ 25 |
Additions | 3 | 3 | 2 |
Deductions | (4) | (6) | (3) |
Balance, End of Period | $ 20 | $ 21 | $ 24 |