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What changed in Zoetis's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Zoetis's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+305 added−322 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-13)

Top changes in Zoetis's 2024 10-K

305 paragraphs added · 322 removed · 280 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

102 edited+15 added−12 removed69 unchanged
Biggest changeCompanion animal $ 3,529 $ 3,341 $ 2,990 6 — 6 12 — 12 Livestock 1,026 972 1,052 6 — 6 (8) — (8) 4,555 4,313 4,042 6 — 6 7 — 7 International Companion animal 2,047 1,862 1,699 10 (2) 12 10 (9) 19 Livestock 1,864 1,819 1,953 2 (5) 7 (7) (7) — 3,911 3,681 3,652 6 (3) 9 1 (8) 9 Total Companion animal 5,576 5,203 4,689 7 (1) 8 11 (3) 14 Livestock 2,890 2,791 3,005 4 (2) 6 (7) (5) (2) Contract manufacturing & human health 78 86 82 (9) 1 (10) 5 (2) 7 $ 8,544 $ 8,080 $ 7,776 6 (1) 7 4 (4) 8 Earnings by segment and the operational and foreign exchange changes versus the comparable prior year period were as follows: % Change 23/22 22/21 Related to Related to Year Ended December 31, Foreign Exchange Foreign Exchange (MILLIONS OF DOLLARS) 2023 2022 2021 Total Operational Total Operational U.S. $ 2,863 $ 2,763 $ 2,569 4 — 4 8 — 8 International 2,037 1,990 1,948 2 (2) 4 2 (10) 12 Total reportable segments 4,900 4,753 4,517 3 (1) 4 5 (5) 10 Other business activities (496) (424) (406) 17 4 Reconciling Items: Corporate (1,042) (1,073) (1,052) (3) 2 Purchase accounting adjustments (159) (160) (175) (1) (9) Acquisition-related costs (9) (5) (12) 80 (58) Certain significant items 33 (56) (73) * (23) Other unallocated (291) (379) (311) (23) 22 Income before income taxes $ 2,936 $ 2,656 $ 2,488 11 7 * Calculation not meaningful. 2023 vs. 2022 U.S. operating segment U.S. segment revenue increased by $242 million, or 6%, in 2023 compared with 2022, of which $188 million resulted from growth in companion animal products and $54 million growth in livestock products. 41 | Table of Contents • Companion animal revenue growth was primarily due to our mAb products for OA pain, Librela and Solensia, as well as increased sales of key dermatology, small animal parasiticides, small animal vaccines and small animal diagnostics, partially offset by lower sales of anti-infective products.
Biggest changeCompanion animal $ 4,054 $ 3,529 $ 3,341 15 — 15 6 — 6 Livestock 1,020 1,026 972 (1) — (1) 6 — 6 5,074 4,555 4,313 11 — 11 6 — 6 International Companion animal 2,224 2,047 1,862 9 (4) 13 10 (2) 12 Livestock 1,878 1,864 1,819 1 (7) 8 2 (5) 7 4,102 3,911 3,681 5 (5) 10 6 (3) 9 Total Companion animal 6,278 5,576 5,203 13 (1) 14 7 (1) 8 Livestock 2,898 2,890 2,791 — (5) 5 4 (2) 6 Contract manufacturing & human health 80 78 86 3 — 3 (9) 1 (10) $ 9,256 $ 8,544 $ 8,080 8 (3) 11 6 (1) 7 40 | Table of Contents Earnings by segment and the operational and foreign exchange changes versus the comparable prior year period were as follows: % Change 24/23 23/22 Related to Related to Year Ended December 31, Foreign Exchange Foreign Exchange (MILLIONS OF DOLLARS) 2024 2023 2022 Total Operational Total Operational U.S. $ 3,336 $ 2,863 $ 2,763 17 — 17 4 — 4 International 2,118 2,037 1,990 4 (7) 11 2 (2) 4 Total reportable segments 5,454 4,900 4,753 11 (3) 14 3 (1) 4 Other business activities (562) (496) (424) 13 17 Reconciling Items: Corporate (1,213) (1,042) (1,073) 16 (3) Purchase accounting adjustments (140) (159) (160) (12) (1) Acquisition and divestiture-related costs (18) (9) (5) * 80 Certain significant items (79) 33 (56) * * Other unallocated (309) (291) (379) 6 (23) Income before income taxes $ 3,133 $ 2,936 $ 2,656 7 11 * Calculation not meaningful. 2024 vs. 2023 U.S. operating segment U.S. segment revenue increased by $519 million, or 11%, in 2024 compared with 2023, of which $525 million resulted from growth in companion animal products and $6 million decline in livestock products. • Companion animal revenue growth was primarily due to growth in sales of Simparica Trio, our mAb products for OA pain, Librela and Solensia, and key dermatology products, partially offset by lower sales of our small animal vaccines. • Livestock revenue declined due to the impact of the divestiture of our medicated feed additive product portfolio, certain water soluble products and related as sets, partially offset by higher sales of cattle products, driven by timing of supply and strong demand for our ceftiofur product line.
For example: • for sales returns, we perform calculations in each market that incorporate the following, as appropriate: local returns policies and practices; returns as a percentage of revenue; an understanding of the reasons for past returns; 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 example: • for sales returns, we perform calculations in each market that incorporate the following, as appropriate: local returns policies and practices; past returns as a percentage of revenue; an understanding of the reasons for past returns; 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.
We test goodwill for impairment on at least an annual basis, or more frequently if necessary, 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.
We test goodwill for impairment on at least an annual basis, or more frequently if necessary, 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.
While not all-inclusive, examples of items that could be included as certain significant items would be costs related to a major non-acquisition-related restructuring charge and associated implementation costs for a program that is specific in nature with a defined term, such as those related to our non-acquisition-related cost-reduction and productivity initiatives; amounts related to disposals of products or facilities that do not qualify as discontinued operations as defined by U.S.
While not all-inclusive, examples of items that could be included as certain significant items would be costs related to a major non-acquisition or divestiture-related restructuring charge and associated implementation costs for a program that is specific in nature with a defined term, such as those related to our non-acquisition or divestiture-related cost-reduction and productivity initiatives; amounts related to disposals of products or facilities that do not qualify as discontinued operations as defined by U.S.
We generally identify forward-looking statements by using words such as “anticipate,” “estimate,” “could,” “expect,” “intend,” “project,” “plan,” “predict,” “believe,” “seek,” “continue,” “outlook,” “objective,” “target,” “may,” “might,” “will,” “should,” “can have,” “likely” or the negative version of these words or comparable words or by using future dates in connection with any discussion of future performance, actions or events.
We generally identify forward-looking statements by using words such as “anticipate,” “estimate,” “could,” “expect,” “intend,” “project,” “plan,” “predict,” “believe,” “seek,” “continue,” “outlook,” “forecast,” “objective,” “target,” “may,” “might,” “will,” “should,” “can have,” “likely” or the negative version of these words or comparable words or by using future dates in connection with any discussion of future performance, actions or events.
Significant Accounting Policies . We believe that the following accounting policies are critical to an understanding of our consolidated financial statements as they require the application of the most difficult, subjective and complex judgments and, therefore, could have the greatest impact on our financial statements: (i) fair value; (ii) revenue; (iii) asset impairment reviews; and (iv) contingencies.
We believe that the following accounting policies are critical to an understanding of our consolidated financial statements as they require the application of the most difficult, subjective and complex judgments and, therefore, could have the greatest impact on our financial statements: (i) fair value; (ii) revenue; (iii) asset impairment reviews; and (iv) contingencies.
The lower effective tax rate for 2023, compared with 2022, was primarily attributable to a higher benefit in the U.S. related to foreign-derived intangible income, a more favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs), partially offset by a higher net discrete tax expense in 2023, mainly related to changes to prior years’ tax positions.
The lower effective tax rate for 2023, as compared to 2022, was primarily attributable to a higher benefit in the U.S. related to foreign-derived intangible income, a more favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs), partially offset by a higher net discrete tax expense in 2023, mainly related to changes to prior years’ tax positions.
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. In addition, the credit facility contains other customary covenants. We were in compliance with all financial covenants as of December 31, 2023 and December 31, 2022.
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. In addition, the credit facility contains other customary covenants. We were in compliance with all financial covenants as of December 31, 2024 and December 31, 2023.
Significant Accounting Policies in the Notes to Consolidated Financial Statements for discussion of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects or expected effects on our consolidated financial position, results of operations and cash flows. 50 | Table of Contents Forward-looking statements and factors that may affect future results This report contains “forward-looking” statements.
Significant Accounting Policies in the Notes to Consolidated Financial Statements for discussion of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects or expected effects on our consolidated financial position, results of operations and cash flows. 49 | Table of Contents Forward-looking statements and factors that may affect future results This report contains “forward-looking” statements.
Unrealized gains/(losses) on the changes in the fair value of derivative instruments are recorded within Accumulated other comprehensive income/(loss) and reclassified into earnings depending on the nature and purpose of the financial instrument, as described in Note 9. Financial Instruments of the Notes to Consolidated Financial Statements. Analysis of the Consolidated Balance Sheets December 31, 2023 vs.
Unrealized gains/(losses) on the changes in the fair value of derivative instruments are recorded within Accumulated other comprehensive income/(loss) and reclassified into earnings depending on the nature and purpose of the financial instrument, as described in Note 9. Financial Instruments of the Notes to Consolidated Financial Statements. Analysis of the Consolidated Balance Sheets December 31, 2024 vs.
There were no amounts drawn under the credit facility as of December 31, 2023 or December 31, 2022. 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.
There were no amounts drawn under the credit facility as of December 31, 2024 or December 31, 2023. 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.
The increase in operating cash flows was primarily attributable to higher net income as adjusted by non-cash items, higher inventory build-up of certain products in the prior year period for increased demand and to mitigate potential supply constraints and the timing of receipts and payments in the ordinary course of business.
The increase in operating cash flows was primarily attributable to higher inventory build-up of certain products in the prior period for increased demand and to mitigate potential supply constraints and the timing of receipts and payments in the ordinary course of business, as well as higher net income adjusted by non-cash items.
For the years ended December 31, 2023 and 2022, the number of days that accounts receivables were outstanding have remained within this range. We regularly monitor our accounts receivable for collectability, particularly in markets where economic conditions remain uncertain. We believe that our allowance for doubtful accounts is appropriate.
For the years ended December 31, 2024 and 2023, the number of days that accounts receivables were outstanding have remained within this range. We regularly monitor our accounts receivable for collectability, particularly in markets where economic conditions remain uncertain. We believe that our allowance for doubtful accounts is appropriate.
In particular, forward-looking statements include statements relating to our future actions, business plans or prospects, prospective products, product approvals or products under development, product and supply chain disruptions, R&D costs, timing and likelihood of success, future operating or financial performance, future results of current and anticipated products and services, strategies, sales efforts, expenses, production efficiencies, production margins, anticipated timing of generic market entries, integration of acquired businesses, interest rates, tax rates, changes in tax regimes and laws, foreign exchange rates, growth in emerging markets, the outcome of contingencies, such as legal proceedings, plans related to share repurchases and dividends, government regulation and financial results.
In particular, forward-looking statements include statements relating to our future actions, business plans or prospects, prospective products, product approvals or products under development, product and supply chain disruptions, R&D costs, timing and likelihood of success, future operating or financial performance, future results of current and anticipated products and services, strategies, sales efforts, expenses, production efficiencies, production margins, anticipated timing of generic market entries, integration of acquired businesses, anticipated impact or timing of divestitures, interest rates, tax rates, tariffs, changes in tax regimes and laws, foreign exchange rates, growth in emerging markets, the outcome of contingencies, such as legal proceedings, plans related to share repurchases and dividends, government regulation, taxes and financial results.
December 31, 2022 For a discussion about the changes in Cash and cash equivalents , Short-term borrowings, Current portion of long-term debt and Long-term debt, net of discount and issuance costs , see “Analysis of financial condition, liquidity and capital resources” below.
December 31, 2023 For a discussion about the changes in Cash and cash equivalents , Short-term borrowings, Current portion of long-term debt and Long-term debt, net of discount and issuance costs , see “Analysis of financial condition, liquidity and capital resources” below.
For a description of our accounting policy, see Notes to Consolidated Financial Statements— Note 3. Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets . Contingencies For a discussion about income tax contingencies, see Notes to Consolidated Financial Statements— Note 8D. Tax Matters: Tax Contingencies .
For a description of our accounting policy, see Notes to Consolidated Financial Statements— Note 3. Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets . Contingencies For a discussion about income tax contingencies, see Notes to Consolidated Financial Statements— Note 8C. Tax Matters: Tax Contingencies .
Historically, we have not paid significant amounts under these provisions and, as of December 31, 2023 and 2022, recorded amounts for the estimated fair value of these indemnifications are not material. New accounting standards See Note 3.
Historically, we have not paid significant amounts under these provisions and, as of December 31, 2024 and 2023, recorded amounts for the estimated fair value of these indemnifications are not material. New accounting standards See Note 3.
The decrease was primarily as a result of: • price increases; • lower freight costs; and • favorable foreign exchange, partially offset by: • unfavorable manufacturing and other costs; • inventory obsolescence, scrap and other charges; and • unfavorable product mix.
The decrease was primarily as a result of: • price increases; • favorable product mix; • lower inventory charges; and • lower freight costs, partially offset by: • unfavorable manufacturing and other costs; and • unfavorable foreign exchange.
Impairments of identifiable intangible assets other than goodwill, are recorded in Restructuring charges and certain acquisition-related costs and Other (income)/deductions—net , as applicable. We did not have any material intangible asset impairment charges for the years ended December 31, 2023, 2022 and 2021.
Impairments of identifiable intangible assets other than goodwill, are recorded in Restructuring charges and certain acquisition and divestiture-related costs and Other (income)/deductions—net , as applicable. We did not have any material intangible asset impairment charges for the years ended December 31, 2024, 2023 and 2022.
In 2023, we performed a qualitative impairment assessment as of September 30, 2023, which did not result in the impairment of goodwill associated with any of our reporting units. In 2022, we performed a periodic quantitative impairment assessment as of September 30, 2022, which did not result in the impairment of goodwill associated with any of our reporting units.
In 2024, we performed a periodic quantitative impairment assessment as of September 30, 2024, which did not result in the impairment of goodwill associated with any of our reporting units. In 2023, we performed a qualitative impairment assessment as of September 30, 2023, which did not result in the impairment of goodwill associated with any of our reporting units.
Benefit Plans and Note 8. Tax Matters for further information on material cash requirements from known contractual and other obligations. Debt securities On November 8, 2022, we issued $1.35 billion aggregate principal amount of our senior notes (2022 senior notes), with an original issue discount of $2 million.
Tax Matters for further information on material cash requirements from known contractual and other obligations. Debt securities On November 8, 2022, we issued $1.35 billion aggregate principal amount of our senior notes (2022 senior notes), with an original issue discount of $2 million.
Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors and may not be comparable to the calculation of similar measures of other 37 | Table of Contents companies.
Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors and may not be comparable to the calculation of similar measures of other companies.
Our normal, ongoing defense costs or settlements of and accruals on legal matters made in the normal course of our business would not be considered certain significant items. 43 | Table of Contents Reconciliation A reconciliation of net income attributable to Zoetis, as reported under U.S.
Our normal, ongoing defense costs or settlements of and accruals on legal matters made in the normal course of our business would not be considered certain significant items. Reconciliation A reconciliation of net income attributable to Zoetis, as reported under U.S.
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.
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 35 | Table of Contents 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.
Consequently, you should not consider the above to be a complete discussion of all potential risks or uncertainties. 51 | Table of Contents
Consequently, you should not consider the above to be a complete discussion of all potential risks or uncertainties. 50 | Table of Contents
While all identifiable intangible assets can be impacted by events and thus lead to impairment, in general, identifiable intangible assets that are at the highest risk of impairment include IPR&D assets ($141 million as of December 31, 2023). IPR&D assets are higher-risk assets given the uncertain nature of R&D activity.
While all identifiable intangible assets can be impacted by events and thus lead to impairment, in general, identifiable intangible assets that are at the highest risk of impairment include IPR&D assets ($136 million as of December 31, 2024). IPR&D assets are higher-risk assets given the uncertain nature of R&D activity.
Operating Segment Results The mix of revenue between companion animal and livestock products was as follows: % Change 23/22 22/21 Related to Related to Year Ended December 31, Foreign Exchange Foreign Exchange (MILLIONS OF DOLLARS) 2023 2022 2021 Total Operational Total Operational U.S.
Operating Segment Results The mix of revenue between companion animal and livestock products was as follows: % Change 24/23 23/22 Related to Related to Year Ended December 31, Foreign Exchange Foreign Exchange (MILLIONS OF DOLLARS) 2024 2023 2022 Total Operational Total Operational U.S.
We believe that viewing income prior to considering these charges provides investors with a useful additional perspective because the significant costs incurred in a business combination result primarily from the need to eliminate duplicate assets, activities or employees––a natural result of acquiring a fully integrated set of activities.
We believe that viewing income prior to considering these charges provides investors with a useful additional perspective because the significant costs incurred in a business combination, net asset acquisition or divestiture result primarily from the need to eliminate duplicate assets, activities or employees––a natural result of acquiring or disposing of a fully integrated set of activities.
The integration costs associated with a business combination may occur over several years, with the more significant impacts generally ending within three years of the transaction. Because of the need for certain external approvals for some actions, the span of time needed to achieve certain restructuring and integration activities can be lengthy.
The integration and disintegration costs associated with a business combination, asset acquisition or divestiture may occur over several years, with the more significant impacts generally ending within three years of the transaction. Because of the need for certain external approvals for some actions, the span of time needed to achieve certain restructuring and integration or disintegration activities can be lengthy.
There can be no assurance that a challenging economic environment or an economic downturn would not impact our ability to obtain financing in the future. Contractual obligations In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future.
There can be no assurance that a challenging economic environment or an economic downturn will not impact our liquidity or our ability to obtain financing in the future. 47 | Table of Contents Contractual obligations In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future.
These obligations include long-term debt, including interest obligations, purchase obligations, lease commitments, other liabilities, benefit plan obligations and uncertain tax positions. See Notes to Consolidated Financial Statements— Note 9. Financial Instruments , Note 18. Commitments and Contingencies, Note 10. Leases , Note 6. Restructuring Charges and Other Costs Associated with Acquisitions, Cost-Reduction and Productivity Initiatives, Note 14.
These obligations include long-term debt, including interest obligations, purchase obligations, lease commitments, other liabilities, benefit plan obligations and uncertain tax positions. See Notes to Consolidated Financial Statements— Note 9. Financial Instruments , Note 18. Commitments and Contingencies, Note 10. Leases , Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Divestitures, Note 14. Benefit Plans and Note 8.
Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following: • the possible impact and timing of competing products, including generic alternatives, on our products and our ability to compete against such products; • unanticipated safety, quality or efficacy concerns or issues about our products; • the decline in global economic conditions, including the conflict between Israel and Hamas (including any escalation or expansion), economic weakness in China and inflation; • the economic, political, legal and business environment of the foreign jurisdictions in which we do business; • consolidation of our customers and distributors; • changes in the distribution channel for companion animal products; • disruptive innovations and advances in medical practices and technologies; • an outbreak of infectious disease carried by animals; • failure to successfully acquire businesses, license rights or products, integrate businesses, form and manage alliances or divest businesses; • restrictions and bans on the use of and consumer preferences regarding antibacterials in food-producing animals; • perceived adverse effects linked to the consumption of food derived from animals that utilize our products or animals generally; • increased regulation or decreased governmental support relating to the raising, processing or consumption of food-producing animals; • adverse weather conditions and the availability of natural resources; • the impact of climate change on our activities and the activities of our customers and suppliers, including, for example, altered distribution and intensity of rainfall, prolonged droughts or flooding, increased frequency of wildfires and other natural disasters, rising sea levels, and rising heat index; • product launch delays, inventory shortages, recalls or unanticipated costs caused by manufacturing problems and capacity imbalances; • failure of our R&D, acquisition and licensing efforts to generate new products and product lifecycle innovations; • difficulties or delays in the development or commercialization of new products; • illegal distribution and/or sale of our products or the misuse or off-label use of our products; • legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental concerns, laws and regulations regarding data privacy, commercial disputes and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products; • fluctuations in foreign exchange rates and potential currency controls; • governmental laws and regulations affecting domestic and foreign operations, including without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending or possible future proposals; • failure to protect our intellectual property rights or to operate our business without infringing the intellectual property rights of others; • a cyberattack, information security breach or other misappropriation of our data; • failure to generate sufficient cash to service our substantial indebtedness; and • the other factors set forth under “Risk Factors” in Item 1A of Part I of this 2023 Annual Report.
Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following: • the possible impact and timing of competing products, including generic alternatives, on our products and our ability to compete against such products; • unanticipated safety, quality or efficacy concerns or issues about our products; • the economic, political, legal and business environment of the foreign jurisdictions in which we do business; • the decline in global economic conditions, including the regional conflict in the Middle East, economic weakness in China and inflation; • consolidation of our customers and distributors; • changes in the distribution channel for companion animal products; • an outbreak of infectious disease carried by animals; • disruptive innovations and advances in medical practices and technologies; • failure to successfully acquire businesses, license rights or products, integrate businesses, form and manage alliances or divest businesses; • restrictions and bans on the use of and consumer preferences regarding antibacterials in food-producing animals; • perceived adverse effects linked to the consumption of food derived from animals that utilize our products or animals generally; • increased regulation or decreased governmental support relating to the raising, processing or consumption of food-producing animals; • modification of foreign trade policy by the U.S. or other countries or the imposition of tariffs on imported or exported goods; • adverse weather conditions and the availability of natural resources; • the impact of climate change on our activities and the activities of our customers and suppliers; • an inability to hire and retain executive officers and other key personnel; • product launch delays, inventory shortages, recalls or unanticipated costs caused by manufacturing problems and capacity imbalances; • failure of our R&D, acquisition and licensing efforts to generate new products and product lifecycle innovations; • difficulties or delays in the development or commercialization of new products; • illegal distribution and/or sale of our products or the misuse or off-label use of our products; • legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental concerns, laws and regulations regarding data privacy, commercial disputes and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products; • fluctuations in foreign exchange rates and potential currency controls; • a cyberattack, information security breach or other misappropriation of our data; • governmental laws and regulations affecting domestic and foreign operations, including without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending or possible future proposals; • failure to protect our intellectual property rights or to operate our business without infringing the intellectual property rights of others; • failure to generate sufficient cash to service our substantial indebtedness; and • the other factors set forth under “Risk Factors” in Item 1A of Part I of this 2024 Annual Report.
Income taxes in Certain significant items also includes: • For 2023, a benefit from the tax loss on the divestiture of Performance Livestock Analytics, partially offset by a tax expense related to changes to prior years’ tax positions with regard to the one-time mandatory deemed repatriation tax under the Tax Cuts and Jobs Act. • For 2022, a tax expense related to changes in valuation allowances related to impairments of certain assets and changes in uncertain tax positions.
Income taxes in Certain significant items also includes: • For 2024, a tax expense related to the divestiture of the medicated feed additive product portfolio, certain water soluble products and related assets. • For 2023, a benefit from the tax loss on the divestiture of Performance Livestock Analytics, partially offset by a tax expense related to changes to prior years’ tax positions with regard to the one-time mandatory deemed repatriation tax under the Tax Cuts and Jobs Act. • For 2022, a tax expense related to changes in valuation allowances related to impairments of certain assets and changes in uncertain tax positions.
(d) Primarily represents a net gain on the sale of a majority interest in our pet insurance business. 45 | Table of Contents The classification of the above items excluded from adjusted net income are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2023 2022 2021 Cost of sales: Purchase accounting adjustments $ 10 $ 6 $ 6 Inventory write-offs 2 4 2 Other 1 4 6 Total Cost of sales 13 14 14 Selling, general & administrative expenses: Purchase accounting adjustments 21 29 30 Total Selling, general & administrative expenses 21 29 30 Research & development expenses: Purchase accounting adjustments 1 1 1 Total Research & development expenses 1 1 1 Amortization of intangible assets: Purchase accounting adjustments 127 124 138 Total Amortization of intangible assets 127 124 138 Restructuring charges and certain acquisition-related costs: Integration costs 3 4 10 Transaction costs 4 1 — Employee termination costs 41 3 17 Asset impairments 1 2 13 Exit costs 4 1 3 Total Restructuring charges and certain acquisition-related costs 53 11 43 Other (income)/deductions—net: Net loss on sale of assets — — 3 Asset impairments 21 41 31 Net gain on sale of businesses (101) — — Other — 1 — Total Other (income)/deductions—net (80) 42 34 Provision for taxes on income 22 38 57 Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax $ 113 $ 183 $ 203 Analysis of the Consolidated Statements of Comprehensive Income Changes in other comprehensive income for the periods presented are primarily related to foreign currency translation adjustments and unrealized gains/(losses) on derivative instruments.
For 2023, primarily represents a net gain on the sale of a majority interest in our pet insurance business. 44 | Table of Contents The classification of the above items excluded from adjusted net income are as follows: Year Ended December 31, (MILLIONS OF DOLLARS) 2024 2023 2022 Cost of sales: Purchase accounting adjustments $ 4 $ 10 $ 6 Inventory write-offs — 2 4 Other 1 1 4 Total Cost of sales 5 13 14 Selling, general & administrative expenses: Purchase accounting adjustments 11 21 29 Other 6 — — Total Selling, general & administrative expenses 17 21 29 Research & development expenses: Purchase accounting adjustments 2 1 1 Total Research & development expenses 2 1 1 Amortization of intangible assets: Purchase accounting adjustments 123 127 124 Total Amortization of intangible assets 123 127 124 Restructuring charges and certain acquisition and divestiture-related costs: Acquisition-related costs 1 7 5 Divestiture-related costs 16 — — Employee termination costs 36 41 3 Asset impairments — 1 2 Exit costs — 4 1 Total Restructuring charges and certain acquisition and divestiture-related costs 53 53 11 Other (income)/deductions—net: Asset impairments 11 21 41 Net loss/(gain) on sale of businesses 25 (101) — Other 1 — 1 Total Other (income)/deductions—net 37 (80) 42 Provision for taxes on income 30 22 38 Total purchase accounting adjustments, acquisition and divestiture-related costs, and certain significant items—net of tax $ 207 $ 113 $ 183 Analysis of the Consolidated Statements of Comprehensive Income Changes in other comprehensive income for the periods presented are primarily related to foreign currency translation adjustments and unrealized gains/(losses) on derivative instruments.
As of December 31, 2023, we had access to $56 million of lines of credit which expire at various times and are generally renewed annually. There were $3 million of borrowings outstanding related to these facilities as of December 31, 2023 and $2 million borrowings outstanding related to these facilities as of December 31, 2022.
As of December 31, 2024, we had access to $50 million of lines of credit which expire at various times and are generally renewed annually. There were no borrowings outstanding related to these facilities as of December 31, 2024 and $3 million of borrowings outstanding related to these facilities as of December 31, 2023.
Costs and Expenses Cost of sales Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Cost of sales $ 2,561 $ 2,454 $ 2,303 4 7 % of revenue 30.0 % 30.4 % 29.6 % 2023 vs. 2022 Cost of sales as a percentage of revenue was 30.0% in 2023, compared with 30.4% in 2022.
Costs and Expenses Cost of sales Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Cost of sales $ 2,719 $ 2,561 $ 2,454 6 4 % of revenue 29.4 % 30.0 % 30.4 % 2024 vs. 2023 Cost of sales as a percentage of revenue was 29.4% in 2024, compared with 30.0% in 2023.
Accrued compensation and related items increased primarily due to the accrual of 2023 annual incentive bonuses, sales incentive bonuses and savings plan contributions to eligible employees, as well as the timing of the bi-weekly payroll, partially offset by the payments of 2022 annual incentive bonuses and sales incentive bonuses, as well as savings plan contributions to eligible employees.
Accrued compensation and related items increased primarily due to the accrual of 2024 annual incentive bonuses, sales incentive bonuses and savings plan contributions to eligible employees, partially offset by the payments of 2023 annual incentive bonuses and sales incentive bonuses, as well as savings plan contributions to eligible employees.
The net cash used in financing activities for 2022 was primarily attributable to the purchase of treasury shares, the payment of dividends and taxes paid on withholding shares, partially offset by proceeds from the issuance of senior notes in November 2022 and proceeds in connection with the issuance of common stock under our equity incentive plan.
The net cash used in financing activities for 2024 was primarily attributable to the purchase of treasury shares and related payment of excise taxes, the payment of dividends and taxes paid on withholding shares, partially offset by proceeds in connection with the issuance of common stock under our equity incentive plan.
Significant accounting policies and application of critical accounting estimates In presenting our financial statements in conformity with U.S. GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. For a description of our significant accounting policies, see Notes to Consolidated Financial Statements— Note 3.
GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. For a description of our significant accounting policies, see Notes to Consolidated Financial Statements— Note 3. Significant Accounting Policies .
Operational revenue growth was primarily due to the following: • price growth of approximately 5%; and • volume growth from new products of approximately 2%. Foreign exchange decreased our reported revenue growth by approximately 1%.
Operational revenue growth was primarily due to the following: • price growth of approximately 6%; • volume growth from new products of approximately 3%; and • volume growth from key dermatology products of approximately 2%. Foreign exchange decreased our reported revenue growth by approximately 3%.
These costs also include certain compensation costs, certain procurement costs, and other miscellaneous operating expenses that are not charged to our operating segments, as well as interest income and expense; • Certain transactions and events such as Purchase accounting adjustments , Acquisition-related activities and Certain significant items , which are defined below; and • Other unallocated , which includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) certain procurement costs. 2023 vs. 2022 Corporate expenses decreased by $31 million, or 3%, in 2023 compared with 2022, primarily associated with favorable foreign exchange, higher interest income and a settlement received from a third-party for underpayment of royalties related to prior periods, partially offset by higher compensation-related costs, investments in information technology and higher interest expense.
These costs also include certain compensation costs, certain procurement costs, and other miscellaneous operating expenses that are not charged to our operating segments, as well as interest income and expense; 41 | Table of Contents • Certain transactions and events such as Purchase accounting adjustments , Acquisition and divestiture-related activities and Certain significant items , which are defined below; and • Other unallocated , which includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) certain procurement costs. 2024 vs. 2023 Corporate expenses increased by $171 million, or 16%, in 2024 compared with 2023, primarily due to higher compensation-related costs, a settlement received from a third-party for underpayment of royalties in the prior year period, investments in information technology and unfavorable foreign exchange.
Restructuring charges and certain acquisition-related costs Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Restructuring charges and certain acquisition-related costs $ 53 $ 11 $ 43 * (74) * Calculation not meaningful. 2023 vs. 2022 Restructuring charges and certain acquisition-related costs were $53 million and $11 million in 2023 and 2022, respectively.
Restructuring charges and certain acquisition and divestiture-related costs Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Restructuring charges and certain acquisition and divestiture-related costs $ 53 $ 53 $ 11 — * * Calculation not meaningful. 2024 vs. 2023 Restructuring charges and certain acquisition and divestiture-related costs were $53 million in 2024 and 2023.
International segment earnings increased by $47 million, or 2%, in 2023 compared with 2022. Operational earnings growth was $88 million, or 4%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses.
International segment earnings increased by $81 million, or 4%, in 2024 compared with 2023. Operational earnings growth was $230 million, or 11%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses.
GAAP, to non-GAAP adjusted diluted EPS follows: Year Ended December 31, % Change 2023 2022 2021 23/22 22/21 Earnings per share—diluted (a) : GAAP reported EPS attributable to Zoetis—diluted $ 5.07 $ 4.49 $ 4.27 13 5 Purchase accounting adjustments—net of tax 0.28 0.26 0.29 8 (10) Acquisition-related costs—net of tax 0.02 0.01 0.02 * (50) Certain significant items—net of tax (0.05) 0.12 0.12 * — Non-GAAP adjusted EPS—diluted $ 5.32 $ 4.88 $ 4.70 9 4 * Calculation not meaningful.
GAAP, to non-GAAP adjusted diluted EPS follows: Year Ended December 31, % Change 2024 2023 2022 24/23 23/22 Earnings per share—diluted (a) : GAAP reported EPS attributable to Zoetis—diluted $ 5.47 $ 5.07 $ 4.49 8 13 Purchase accounting adjustments—net of tax 0.24 0.28 0.26 (14) 8 Acquisition and divestiture-related costs—net of tax 0.03 0.02 0.01 50 * Certain significant items—net of tax 0.18 (0.05) 0.12 * * Non-GAAP adjusted EPS—diluted $ 5.92 $ 5.32 $ 4.88 11 9 * Calculation not meaningful.
(b) For 2023, primarily represents employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives. For 2022, primarily represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, as well as product transfer costs.
For 2023, primarily represents employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives. For 2022, primarily represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, as well as product transfer costs. (d) For 2024, represents certain asset impairment charges related to our aquaculture business.
Adjusted net income includes the following for each of the periods presented: Year Ended December 31, (MILLIONS OF DOLLARS) 2023 2022 2021 Interest expense, net of capitalized interest $ 239 $ 221 $ 224 Interest income (103) (50) (6) Income taxes 618 583 511 Depreciation 302 266 236 Amortization 36 40 37 44 | Table of Contents Adjusted net income, as shown above, excludes the following items: Year Ended December 31, (MILLIONS OF DOLLARS) 2023 2022 2021 Purchase accounting adjustments: Amortization and depreciation $ 153 $ 160 $ 175 Cost of sales 6 — — Total purchase accounting adjustments—pre-tax 159 160 175 Income taxes (a) 32 40 39 Total purchase accounting adjustments—net of tax 127 120 136 Acquisition-related costs: Integration costs 3 4 10 Transaction costs 4 1 — Restructuring costs 2 — 2 Total acquisition-related costs—pre-tax 9 5 12 Income taxes (a) 2 1 2 Total acquisition-related costs—net of tax 7 4 10 Certain significant items: Other restructuring charges and cost-reduction/productivity initiatives (b) 44 8 24 Certain asset impairment charges (c) 24 47 46 Net loss on sale of assets — — 3 Net gain on sale of businesses (d) (101) — — Other — 1 — Total certain significant items—pre-tax (33) 56 73 Income taxes (a) (12) (3) 16 Total certain significant items—net of tax (21) 59 57 Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax $ 113 $ 183 $ 203 (a) Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate.
Adjusted net income includes the following for each of the periods presented: Year Ended December 31, (MILLIONS OF DOLLARS) 2024 2023 2022 Interest expense, net of capitalized interest $ 225 $ 239 $ 221 Interest income (106) (103) (50) Income taxes 667 618 583 Depreciation 323 302 266 Amortization 34 36 40 43 | Table of Contents Adjusted net income, as shown above, excludes the following items: Year Ended December 31, (MILLIONS OF DOLLARS) 2024 2023 2022 Purchase accounting adjustments: Amortization and depreciation $ 140 $ 153 $ 160 Cost of sales — 6 — Total purchase accounting adjustments—pre-tax 140 159 160 Income taxes (a) 31 32 40 Total purchase accounting adjustments—net of tax 109 127 120 Acquisition and divestiture-related costs: Acquisition-related costs 1 7 5 Divestiture-related costs (b) 16 — — Restructuring costs 1 2 — Total acquisition and divestiture-related costs—pre-tax 18 9 5 Income taxes (a) 4 2 1 Total acquisition and divestiture-related costs—net of tax 14 7 4 Certain significant items: Other restructuring charges and cost-reduction/productivity initiatives (c) 35 44 8 Certain asset impairment charges (d) 11 24 47 Net loss/(gain) on sale of businesses (e) 25 (101) — Other 8 — 1 Total certain significant items—pre-tax 79 (33) 56 Income taxes (a) (5) (12) (3) Total certain significant items—net of tax 84 (21) 59 Total purchase accounting adjustments, acquisition and divestiture-related costs, and certain significant items—net of tax $ 207 $ 113 $ 183 (a) Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate.
Investing activities 2023 vs. 2022 Net cash used in investing activities was $777 million in 2023 compared with $883 million in 2022.
Investing activities 2024 vs. 2023 Net cash used in investing activities was $315 million in 2024 compared with $777 million in 2023.
Below are some of our more critical accounting estimates. See also Notes to Consolidated Financial Statements— Note 3. Significant Accounting Policies: Estimates and Assumptions for a discussion about the risks associated with estimates and assumptions.
Below are some of our more critical accounting estimates. See Notes to Consolidated Financial Statements— Note 3. Significant Accounting Policies: Estimates and Assumptions for a discussion about the risks associated with estimates and assumptions. Fair value For a discussion about the application of fair value to our long-term debt and financial instruments, see Notes to Consolidated Financial Statements— Note 9.
GAAP, to adjusted net income follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 GAAP reported net income attributable to Zoetis $ 2,344 $ 2,114 $ 2,037 11 4 Purchase accounting adjustments—net of tax 127 120 136 6 (12) Acquisition-related costs—net of tax 7 4 10 75 (60) Certain significant items—net of tax (21) 59 57 * 4 Non-GAAP adjusted net income (a) $ 2,457 $ 2,297 $ 2,240 7 3 * Calculation not meaningful.
GAAP, to adjusted net income follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 GAAP reported net income attributable to Zoetis $ 2,486 $ 2,344 $ 2,114 6 11 Purchase accounting adjustments—net of tax 109 127 120 (14) 6 Acquisition and divestiture-related costs—net of tax 14 7 4 * 75 Certain significant items—net of tax 84 (21) 59 * * Non-GAAP adjusted net income (a) $ 2,693 $ 2,457 $ 2,297 10 7 * Calculation not meaningful.
(a) The effective tax rate on adjusted pretax income was 20.1%, 20.3% and 18.6% in 2023, 2022 and 2021, respectively.
(a) The effective tax rate on adjusted pretax income was 19.8%, 20.1% and 20.3% in 2024, 2023 and 2022, respectively.
Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Revenue $ 8,544 $ 8,080 $ 7,776 6 4 Costs and expenses: Cost of sales (a) 2,561 2,454 2,303 4 7 % of revenue 30.0 % 30.4 % 29.6 % Selling, general and administrative expenses (a) 2,151 2,009 2,001 7 — % of revenue 25 % 25 % 26 % Research and development expenses (a) 614 539 508 14 6 % of revenue 7 % 7 % 7 % Amortization of intangible assets (a) 149 150 161 (1) (7) Restructuring charges and certain acquisition-related costs 53 11 43 * (74) Interest expense, net of capitalized interest 239 221 224 8 (1) Other (income)/deductions—net (159) 40 48 * (17) Income before provision for taxes on income 2,936 2,656 2,488 11 7 % of revenue 34 % 33 % 32 % Provision for taxes on income 596 545 454 9 20 Effective tax rate 20.3 % 20.5 % 18.2 % Net income before allocation to noncontrolling interests 2,340 2,111 2,034 11 4 Less: Net loss attributable to noncontrolling interests (4) (3) (3) 33 — Net income attributable to Zoetis $ 2,344 $ 2,114 $ 2,037 11 4 % of revenue 27 % 26 % 26 % * Calculation not meaningful.
Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Revenue $ 9,256 $ 8,544 $ 8,080 8 6 Costs and expenses: Cost of sales (a) 2,719 2,561 2,454 6 4 % of revenue 29.4 % 30.0 % 30.4 % Selling, general and administrative expenses (a) 2,318 2,151 2,009 8 7 % of revenue 25 % 25 % 25 % Research and development expenses (a) 686 614 539 12 14 % of revenue 7 % 7 % 7 % Amortization of intangible assets (a) 141 149 150 (5) (1) Restructuring charges and certain acquisition and divestiture-related costs 53 53 11 — * Interest expense, net of capitalized interest 225 239 221 (6) 8 Other (income)/deductions—net (19) (159) 40 (88) * Income before provision for taxes on income 3,133 2,936 2,656 7 11 % of revenue 34 % 34 % 33 % Provision for taxes on income 637 596 545 7 9 Effective tax rate 20.3 % 20.3 % 20.5 % Net income before allocation to noncontrolling interests 2,496 2,340 2,111 7 11 Less: Net gain/(loss) attributable to noncontrolling interests 10 (4) (3) * 33 Net income attributable to Zoetis $ 2,486 $ 2,344 $ 2,114 6 11 % of revenue 27 % 27 % 26 % * Calculation not meaningful.
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.
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.
Segment Information for further information. 42 | Table of Contents Adjusted net income General description of adjusted net income (a non-GAAP financial measure) Adjusted net income is an alternative view of performance used by management, and we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure.
Adjusted net income General description of adjusted net income (a non-GAAP financial measure) Adjusted net income is an alternative view of performance used by management, and we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. The adjusted net income measure is an important internal measurement for us.
Fair value For a discussion about the application of fair value to our long-term debt and financial instruments, see Notes to Consolidated Financial Statements— Note 9. Financial Instruments . For a discussion about the application of fair value to our business combinations, see Notes to Consolidated Financial Statements— Note 3. Significant Accounting Policies: Fair Value .
Financial Instruments . For a discussion about the application of fair value to our business combinations, see Notes to Consolidated Financial Statements— Note 3. Significant Accounting Policies: Fair Value . For a discussion about the application of fair value to our asset impairment reviews, see Asset impairment reviews below .
For 2022, primarily represents asset impairment charges related to: • Customer relationships, developed technology rights and property, plant and equipment in our diagnostics, poultry, cattle and swine businesses included in Other (income)/deductions-net; and • Inventory and other charges related to the consolidation of manufacturing sites in China, included in Cost of sales and Restructuring charges and certain acquisition related costs.
For 2023, primarily represents certain asset impairment charges related to our precision animal health and diagnostics businesses. For 2022, primarily represents asset impairment charges related to: • Customer relationships, developed technology rights and property, plant and equipment in our diagnostics, poultry, cattle and swine businesses; and • Inventory and other charges related to the consolidation of manufacturing sites in China.
Operational revenue growth was $346 million, or 9%, reflecting growth of $228 million in companion animal products and $118 million in livestock products. • Companion animal operational revenue growth was primarily due to increased sales of our mAb products for OA pain, Librela and Solensia, as well as small animal parasiticides and key dermatology, partially offset by lower sales of vaccine products. • Livestock operational revenue growth was due to increased sales of cattle, poultry, fish and sheep products.
Operational revenue growth was $401 million, or 10%, reflecting growth of $257 million in companion animal products and $144 million in livestock products. • Companion animal operational revenue growth was driven primarily by the growth in sales of our key dermatology products, mAb products for OA pain, Librela and Solensia, small animal parasiticides and vaccine products. • Livestock operational revenue growth was due to increased sales of cattle, poultry and fish products, partially offset by a decline in sales of sheep products.
Tax Matters . Global economic conditions Challenging economic conditions in recent years have not had, nor do we anticipate that it will have, a significant impact on our liquidity.
Tax Matters . Global economic conditions Global financial markets may be impacted by macroeconomic, business and financial volatility. Challenging economic conditions in recent years have not had, nor do we anticipate that it will have, a significant impact on our liquidity.
The lower effective tax rate for 2023 was primarily attributable to a higher benefit in the U.S. related to foreign-derived intangible income, a more favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs), partially offset by a higher net discrete tax expense in 2023, mainly related to changes to prior years' tax positions.
The lower effective tax rate for 2024, as compared to 2023, was primarily attributable to a higher benefit in the U.S. related to foreign-derived intangible income and lower net discrete tax expenses, partially offset by a less favorable jurisdictional mix of earnings (which includes the impact of the location of earnings, repatriation costs and Pillar Two global minimum tax).
Analysis of the Consolidated Statements of Cash Flows Year Ended December 31, $ Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Net cash provided by (used in): Operating activities $ 2,353 $ 1,912 $ 2,213 $ 441 $ (301) Investing activities (777) (883) (458) 106 (425) Financing activities (3,109) (904) (1,862) (2,205) 958 Effect of exchange-rate changes on cash and cash equivalents (7) (29) (12) 22 (17) Net (decrease)/increase in cash and cash equivalents $ (1,540) $ 96 $ (119) $ (1,636) $ 215 Operating activities 2023 vs. 2022 Net cash provided by operating activities was $2,353 million in 2023 compared with $1,912 million in 2022.
Analysis of the Consolidated Statements of Cash Flows Year Ended December 31, $ Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Net cash provided by (used in): Operating activities $ 2,953 $ 2,353 $ 1,912 $ 600 $ 441 Investing activities (315) (777) (883) 462 106 Financing activities (2,660) (3,109) (904) 449 (2,205) Effect of exchange-rate changes on cash and cash equivalents (32) (7) (29) (25) 22 Net (decrease)/increase in cash and cash equivalents $ (54) $ (1,540) $ 96 $ 1,486 $ (1,636) Operating activities 2024 vs. 2023 Net cash provided by operating activities was $2,953 million in 2024 compared with $2,353 million in 2023.
Restructuring charges and certain acquisition-related costs in 2023 primarily consisted of employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives, as well as costs related to recent acquisitions.
Restructuring charges and certain acquisition and divestiture-related costs in 2023 primarily consisted of employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives, as well as costs related to recent acquisitions. For additional information regarding restructuring charges and acquisition and divestiture-related costs, see Notes to Consolidated Financial Statements— Note 6.
Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the International segment. 2023 vs. 2022 Other business activities net loss increased by $72 million, or 17%, in 2023 compared with 2022, reflecting an increase in R&D costs due to an increase in certain compensation-related costs to support innovation, an increase in operating costs and higher project investments, as well as lower earnings in our human health business, partially offset by favorable foreign exchange.
Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the International segment. 2024 vs. 2023 Other business activities net loss increased by $66 million, or 13%, in 2024 compared with 2023, reflecting an increase in R&D costs due to an increase in higher project investments, certain compensation-related costs to support innovation, acquisitions and other operating costs.
Amortization of intangible assets Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Amortization of intangible assets $ 149 $ 150 $ 161 (1) (7) 2023 vs. 2022 Amortization of intangible assets decreased in 2023 compared with 2022 primarily due t o asset impairments taken in 2023 and 2022, as well as assets that became fully amortized in the current year, partially offset by intangible assets acquired during 2023 and 2022.
Amortization of intangible assets Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Amortization of intangible assets $ 141 $ 149 $ 150 (5) (1) 2024 vs. 2023 Amortization of intangible assets decreased in 2024 compared with 2023 primarily due to asset impairments taken in 2024 and 2023, as well as assets that became fully amortized, partially offset by intangible assets placed in service in 2024 and 2023.
For example, due to the regulated nature of the animal health medicines, vaccines and diagnostic business, the closure of excess facilities can take several years, as all manufacturing changes are subject to extensive validation and testing and must be approved by the FDA and/or other regulatory authorities. Certain significant items Adjusted net income is calculated excluding certain significant items.
For example, due to the regulated nature of the animal health medicines, vaccines and diagnostic business, the closure of excess facilities can take several years, as all manufacturing changes are subject to extensive validation and testing and must be approved by the U.S.
Other (income)/deductions—net Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Other (income)/deductions—net $ (159) $ 40 $ 48 * (17) * Calculation not meaningful. 2023 vs. 2022 The change in Other (income)/deductions—net is primarily as a result of higher interest income in the current period due to higher interest rates on cash balances denominated in the U.S. dollar, a gain on the sale of a majority interest in our pet insurance business and royalty-related income that was predominantly associated with a settlement received from a third-party for underpayment of royalties related to prior periods, partially offset by higher foreign currency losses and certain asset impairment charges primarily related to our precision animal health and diagnostics businesses. 40 | Table of Contents Provision for taxes on income Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Provision for taxes on income $ 596 $ 545 $ 454 9 20 Effective tax rate 20.3 % 20.5 % 18.2 % 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. 2023 vs. 2022 Our effective tax rate was 20.3% for 2023, compared with 20.5% for 2022.
Other (income)/deductions—net Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Other (income)/deductions—net $ (19) $ (159) $ 40 (88) * * Calculation not meaningful. 2024 vs. 2023 The change in Other (income)/deductions—net is primarily as a result of a gain on the sale of a majority interest in our pet insurance business in the prior period, royalty-related income in the prior period that was predominantly associated with a settlement received from a third-party for underpayment of royalties related to prior periods and a loss on the sale of our medicated feed additive product portfolio, certain water soluble products and related assets in the current period, partially offset by lower asset impairment charges in the current period. 39 | Table of Contents Provision for taxes on income Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Provision for taxes on income $ 637 $ 596 $ 545 7 9 Effective tax rate 20.3 % 20.3 % 20.5 % 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. 2024 vs. 2023 Our effective tax rate was 20.3% for 2024 and 2023.
Other unallocated expenses decreased by $88 million, or 23%, in 2023 compared with 2022, primarily due to lower manufacturing costs and freight charges, partially offset by unfavorable foreign exchange, as well as inventory obsolescence, scrap and other charges. See Notes to Consolidated Financial Statements— Note 19.
Other unallocated expenses increased by $18 million, or 6%, in 2024 compared with 2023, primarily due to higher manufacturing costs and unfavorable foreign exchange, partially offset by lower freight charges and lower inventory obsolescence. See Notes to Consolidated Financial Statements— Note 19. Segment Information for further information.
Risks to our meeting future funding requirements are described in Global economic conditions below. 47 | Table of Contents Selected measures of liquidity and capital resources Certain relevant measures of our liquidity and capital resources follow: December 31, (MILLIONS OF DOLLARS) 2023 2022 Cash and cash equivalents $ 2,041 $ 3,581 Accounts receivable, net (a) 1,304 1,215 Short-term borrowings 3 2 Current portion of long-term debt — 1,350 Long-term debt 6,564 6,552 Working capital 4,454 4,339 Ratio of current assets to current liabilities 3.36:1 2.37:1 (a) Accounts receivable are usually collected over a period of 45 to 75 days .
Selected measures of liquidity and capital resources Certain relevant measures of our liquidity and capital resources follow: December 31, (MILLIONS OF DOLLARS) 2024 2023 Cash and cash equivalents $ 1,987 $ 2,041 Accounts receivable, net (a) 1,316 1,304 Short-term borrowings — 3 Current portion of long-term debt 1,350 — Long-term debt 5,220 6,564 Working capital 2,574 4,454 Ratio of current assets to current liabilities 1.75:1 3.36:1 (a) Accounts receivable are usually collected over a period of 45 to 75 days .
Our impairment reviews of most of our long-lived assets depend on the determination of fair value, as defined by U.S. GAAP, and these judgments can materially impact our results of operations.
Our impairment reviews of most of our long-lived assets depend on the determination of fair value, as defined by U.S. GAAP, and these judgments can materially impact our results of operations. 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.
Other current assets increased primarily due to the recognition of the deferral of a prepaid tax benefit in connection with a prepayment from a related foreign entity in Belgium, the jurisdictional netting of income taxes receivable and income taxes payable, as well as an increase in collateral posted related to derivative contracts, partially offset by the mark-to-market adjustment of derivative instruments. 46 | Table of Contents Property, plant and equipment less accumulated depreciation increased primarily as a result of capital spending, partially offset by depreciation expense.
Other current assets decreased primarily due to lower value-added tax receivables for our international markets and the deferral of a prepaid tax benefit in connection with a prepayment from a related foreign entity in Belgium, partially offset by the mark-to-market adjustment of derivative instruments and the jurisdictional netting of income taxes receivable and income taxes payable. 45 | Table of Contents Property, plant and equipment less accumulated depreciation increased primarily as a result of capital spending, partially offset by depreciation expense, as well as the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets.
In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the senior notes may be declared immediately due and payable.
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 senior notes may be declared immediately due and payable.
Selling, general and administrative expenses Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Selling, general and administrative expenses $ 2,151 $ 2,009 $ 2,001 7 — % of revenue 25 % 25 % 26 % 2023 vs. 2022 SG&A expenses increased by $142 million, or 7%, in 2023 compared with 2022, primarily as a result of: • compensation-related costs and the resulting increases in office expenses and travel and entertainment expenses; • higher charitable contributions; • higher freight and logistics costs due to increased sales volume; and • technology project investments, partially offset by: • favorable foreign exchange; and • the reduced impact of purchase accounting adjustments. 39 | Table of Contents Research and development expenses Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Research and development expenses $ 614 $ 539 $ 508 14 6 % of revenue 7 % 7 % 7 % 2023 vs. 2022 R&D expenses increased by $75 million, or 14%, in 2023 compared with 2022, primarily as a result of: • an increase in certain compensation-related costs to support innovation and portfolio progression; • higher other operating costs; and • higher spend in project investments.
Selling, general and administrative expenses Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Selling, general and administrative expenses $ 2,318 $ 2,151 $ 2,009 8 7 % of revenue 25 % 25 % 25 % 2024 vs. 2023 SG&A expenses increased by $167 million, or 8%, in 2024 compared with 2023, primarily as a result of: • an increase in certain compensation-related costs; • higher selling and distribution costs; • higher advertising and promotion expenses; • higher professional and consulting fees; and • higher travel and entertainment expenses, partially offset by: • favorable foreign exchange; • the reduced impact of purchase accounting adjustments; and • lower other general and administrative expenses. 38 | Table of Contents Research and development expenses Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Research and development expenses $ 686 $ 614 $ 539 12 14 % of revenue 7 % 7 % 7 % 2024 vs. 2023 R&D expenses increased by $72 million, or 12%, in 2024 compared with 2023, primarily as a result of: • an increase in certain compensation-related costs to support innovation and portfolio progression; • higher spend in project investments; and • higher depreciation expense.
For a discussion about the application of fair value to our asset impairment reviews, see Asset impairment reviews below . Revenue Our gross product revenue is subject to deductions that are generally estimated and recorded in the same period that the revenue is recognized and primarily represents sales returns and revenue incentives.
Revenue Our gross product revenue is subject to deductions that are generally estimated and recorded in the same period that the revenue is recognized and primarily represents sales returns and revenue incentives.
Dividends payable increased as a result of an increase in the dividend rate for the first quarter 2024 dividend, which was declared on December 7, 2023.
Accounts payable increased as a result of the timing of vendor and value-added tax payments. Dividends payable increased as a result of an increase in the dividend rate for the first quarter 2025 dividend, which was declared on December 12, 2024.
Jurisdictional mix of earnings can vary depending on repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items.
Jurisdictional mix of earnings can vary depending on repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items. Pillar Two was effective beginning in 2024 and the impact of these provisions is included in our effective tax rate for 2024.
The higher effective tax rate for 2022, compared with 2021, was attributable to a less favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs), a lower benefit in the U.S. related to foreign-derived intangible income and lower net discrete tax benefits in 2022.
The effective tax rate for 2024, as compared to 2023, was primarily attributable to the favorable impact of a higher benefit in the U.S. related to foreign-derived intangible income and lower net discrete tax expenses, offset by a less favorable jurisdictional mix of earnings (which includes the impact of the location of earnings, repatriation costs and the Organisation for Economic Co-operation and Development (OECD) global minimum tax provision (Pillar Two)).
The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured non-credit-enhanced long-term debt: Commercial Paper Long-term Debt Date of Last Action Name of Rating Agency Rating Rating Outlook Moody’s P-2 Baa1 Stable August 2017 S&P A-2 BBB Stable December 2016 Pension obligations Our 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.
The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured non-credit-enhanced long-term debt: Commercial Paper Long-term Debt Date of Last Action Name of Rating Agency Rating Rating Outlook Moody’s P-2 A3 Stable January 2025 S&P A-2 BBB Stable December 2016 Pension obligations As part of the separation from Pfizer, Pfizer transferred to us the net pension obligations associated with certain international defined benefit plans.
Property, Plant and Equipment The net changes in Noncurrent deferred tax assets, Noncurrent deferred tax liabilities, Income taxes payable and Other taxes payable primarily reflect adjustments to the accrual for the income tax provision, the timing of income tax payments, the tax impact of various acquisitions and the impact of the remeasurement of deferred tax assets and liabilities as a result of changes in tax rates.
The net changes in Noncurrent deferred tax assets, Noncurrent deferred tax liabilities, Income taxes payable and Other taxes payable primarily reflect adjustments to the accrual for the income tax provision, the timing of income tax payments and the tax impact of various acquisitions and divestitures. Other noncurrent assets increased primarily due to capitalized cloud computing arrangements implementation costs.
Certain significant items represent substantive, unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual nature.
Food and Drug Administration and/or other regulatory authorities. 42 | Table of Contents Certain significant items Adjusted net income is calculated excluding certain significant items. Certain significant items represent substantive, unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual nature.
We report adjusted net income to portray the results of our major operations, and the discovery, development, manufacture and commercialization of our products, prior to considering certain income statement elements. We define adjusted net income and adjusted EPS as net income attributable to Zoetis and EPS before the impact of purchase accounting adjustments, acquisition-related costs and certain significant items.
We define adjusted net income and adjusted EPS as net income attributable to Zoetis and EPS before the impact of purchase accounting adjustments, acquisition and divestiture-related costs and certain significant items.
Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in Cost of sales , Selling, general and administrative expenses or Research and development expenses , as appropriate. 38 | Table of Contents Revenue Total revenue by operating segment was as follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 U.S. $ 4,555 $ 4,313 $ 4,042 6 7 International 3,911 3,681 3,652 6 1 Total operating segments 8,466 7,994 7,694 6 4 Contract manufacturing & human health 78 86 82 (9) 5 Total Revenue $ 8,544 $ 8,080 $ 7,776 6 4 On a global basis, the mix of revenue between companion animal and livestock products was as follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Companion animal $ 5,576 $ 5,203 $ 4,689 7 11 Livestock 2,890 2,791 3,005 4 (7) Contract manufacturing & human health 78 86 82 (9) 5 Total Revenue $ 8,544 $ 8,080 $ 7,776 6 4 2023 vs. 2022 Total revenue increased by $464 million, or 6%, in 2023 compared with 2022 reflecting operational revenue growth of $579 million, or 7%.
Revenue Total revenue by operating segment was as follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 U.S. $ 5,074 $ 4,555 $ 4,313 11 6 International 4,102 3,911 3,681 5 6 Total operating segments 9,176 8,466 7,994 8 6 Contract manufacturing & human health 80 78 86 3 (9) Total Revenue $ 9,256 $ 8,544 $ 8,080 8 6 37 | Table of Contents On a global basis, the mix of revenue between companion animal and livestock products was as follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Companion animal $ 6,278 $ 5,576 $ 5,203 13 7 Livestock 2,898 2,890 2,791 — 4 Contract manufacturing & human health 80 78 86 3 (9) Total Revenue $ 9,256 $ 8,544 $ 8,080 8 6 2024 vs. 2023 Total revenue increased by $712 million, or 8%, in 2024 compared with 2023 reflecting operational revenue growth of $921 million, or 11%.
This measure provides information on the change in revenue and earnings as if foreign currency exchange rates had not changed between the current and prior periods to facilitate a period-to-period comparison. We believe this non-GAAP measure provides a useful comparison to previous periods for the company and investors, but should not be viewed as a substitute for U.S.
This measure provides information on the change in revenue and earnings as if foreign currency exchange rates had not changed between the current and prior periods to facilitate a 36 | Table of Contents period-to-period comparison.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeActual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, could affect the market prices of our securities and increase our borrowing costs. 26 | Table of Contents We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Biggest changeOur credit ratings may not reflect all risks of an investment in our senior notes. Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, could affect the market prices of our securities and increase our borrowing costs.
In recent years, there has been an increase in consolidation in the animal health industry, which could result in existing competitors realizing additional efficiencies or improving portfolio bundling opportunities, thereby potentially increasing their market share and pricing power, which could lead to a decrease in our revenue and profitability and an increase in competition.
In recent years, there has been an increase in consolidation in the animal health industry, which could result in existing competitors realizing additional efficiencies or improving portfolio bundling opportunities, thereby potentially increasing their market share and pricing power, which could lead to an increase in competition and a decrease in our revenue and profitability.
Failure to successfully manage these risks in the implementation or acquisition of new lines of business or the offering of new products or services could have a material adverse effect on our reputation, business, results of operations, and financial condition. Restrictions and bans on the use of and consumer preferences regarding antibacterials in food-producing animals may become more prevalent.
Failure to successfully manage these risks in the implementation or acquisition of new lines of business or the offering of new products or services could have a material adverse effect on our reputation, business, results of operations, and financial condition. Restrictions and bans on the use of and/or consumer preferences regarding antibacterials in food-producing animals may become more prevalent.
We operate in many regions, countries and communities around the world where our businesses, and our activities and the activities of our customers and suppliers, could be disrupted by climate change.
We operate in many regions, countries and communities around the world where our businesses, our activities and the activities of our customers and suppliers, could be disrupted by climate change.
For example, during the COVID-19 pandemic we have experienced challenges in manufacturing certain products including Simparica Trio, and the component parts of certain products including Librela and Solensia, that have impacted our ability to meet customer demand.
For example, during the COVID-19 pandemic we experienced challenges in manufacturing certain products including Simparica Trio, and the component parts of certain products including Librela and Solensia, that have impacted our ability to meet customer demand.
As a result, we have had to take certain measures including placing limits on the amounts of product veterinarians could purchase and delayed the launch of the product in certain markets. Our manufacturing network, including our CMOs, may be unable to meet the demand for our products or we may have excess capacity if demand for our products changes.
As a result, we had to take certain measures including placing limits on the amounts of product veterinarians could purchase and delayed the launch of the product in certain markets. Our manufacturing network, including our CMOs, may be unable to meet the demand for our products or we may have excess capacity if demand for our products changes.
Changes in applicable federal, state, local and foreign laws and regulations could have a material adverse effect on our operating results and financial condition. We may incur substantial costs and receive adverse outcomes in litigation and other legal matters. Our operating results, financial condition and liquidity could be materially adversely affected by unfavorable results in pending or future litigation matters.
Changes in applicable federal, state, local and foreign laws and regulations could have a material adverse effect on our operating results and financial condition. We may incur substantial costs and receive adverse outcomes in litigation and/or other legal matters. Our operating results, financial condition and liquidity could be materially adversely affected by unfavorable results in pending or future litigation matters.
Furthermore, we have seen the expansion of larger cross-border corporate customers and an increase in the consolidation of buying groups (cooperatives of veterinary practices that leverage volume to pursue discounts from manufacturers). If these trends towards consolidation continue, these customers and distributors could attempt to improve their profitability by leveraging their buying power to obtain favorable pricing.
Furthermore, we have seen the expansion of larger cross-border corporate customers and an increase in the consolidation of buying groups (cooperatives of veterinary practices that leverage volume to pursue discounts from manufacturers). If these trends continue, these customers and distributors could attempt to improve their profitability by leveraging their buying power to obtain favorable pricing.
In addition, a number of factors could cause production interruptions, including: • the failure of us or any of our vendors or suppliers, including logistical service providers, to comply with applicable regulations and quality assurance guidelines, including any changes to Good Manufacturing Practices (GMP); • the failure to accurately forecast demand for our products; • mislabeling; • construction delays; • equipment malfunctions; • shortages of materials; • labor problems, including any COVID-related impacts; • delays in receiving any required governmental authorizations or regulatory approvals, including as a result of any prolonged shutdown of the U.S. government; • natural disasters and adverse weather conditions; • power outages; • criminal and terrorist activities; • changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, shipping distributions or physical limitations; and • the outbreak of any highly contagious diseases at or near our production sites.
In addition, a number of factors could cause production interruptions, including: • the failure of us or any of our vendors or suppliers, including logistical service providers, to comply with applicable regulations and quality assurance guidelines, including any changes to Good Manufacturing Practices (GMP); • the failure to accurately forecast demand for our products; • mislabeling; • construction delays; • equipment malfunctions; • shortages of materials; • labor problems, including any pandemic-related impacts; • delays in receiving any required governmental authorizations or regulatory approvals, including as a result of any prolonged shutdown of the U.S. government; • natural disasters and adverse weather conditions; • power outages; • criminal and terrorist activities; • changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, shipping distributions or physical limitations; and • the outbreak of any highly contagious diseases at or near our production sites.
Our R&D relies on evaluations in animals, which may become subject to bans or additional restrictive regulations. The evaluation of our existing and new medicines and vaccines for animals is required in order to develop and commercialize them. Animal testing in certain countries has been the subject of increased regulation, controversy and adverse publicity.
Our R&D relies on evaluations in animals, which may become subject to bans or additional restrictive regulations. The evaluation of our existing and new medicines and vaccines for animals is required in order to develop and commercialize them. Animal testing in certain countries and states has been the subject of increased regulation, controversy and adverse publicity.
Adverse weather events and natural disasters may also interfere with and negatively impact operations at our manufacturing sites, research and development facilities and office buildings, which could have a material adverse effect on our operating results and financial condition, especially if such interruptions to regular operations are frequent or prolonged.
Adverse weather events and natural disasters may interfere with and negatively impact operations at our manufacturing sites, research and development facilities and office buildings, which could have a material adverse effect on our operating results and financial condition, especially if such interruptions to regular operations are frequent or prolonged.
The EU recently adopted the European Sustainability Reporting Standards (ESRS) and the Corporate Sustainability Reporting Directive (CSRD) that will require disclosure by EU entities, including certain EU subsidiaries of non-EU entities, regarding the risks and opportunities arising from environmental, social and corporate governance issues, and on the impact of companies' activities on people and the environment.
The EU adopted the European Sustainability Reporting Standards (ESRS) and the Corporate Sustainability Reporting Directive (CSRD) that will require disclosure by EU entities, including certain EU subsidiaries of non-EU entities, regarding the risks and opportunities arising from environmental, social and corporate governance issues, and on the impact of companies' activities on people and the environment.
We are also subject to chemical regulation in the United States and internationally. For example, governmental authorities in the United States are increasingly focused on preventing environmental contamination from per and polyfluoroalkyl substances (PFAS), which may be contained in certain of our products.
We are also subject to chemical regulation in the United States and internationally. For example, governmental authorities in the EU and the United States are increasingly focused on preventing environmental contamination from per and polyfluoroalkyl substances (PFAS), which may be contained in certain of our products.
Infectious disease outbreaks, pandemics, sanctions, geopolitical instability and widespread fear of spreading disease through human contact can cause disruptions to or negatively impact our customers’ and our distributors’ business operations, which could materially adversely affect our operating results.
Infectious disease outbreaks, pandemics, sanctions, geopolitical instability and widespread fear of spreading disease through human contact can cause disruptions to or negatively impact our customers’, our suppliers’ and our distributors’ business operations, which could materially adversely affect our operating results.
From time to time, we may implement new business lines or offer new products and services within existing lines of business. There may be substantial risks and uncertainties associated with these efforts. We may invest significant time and resources in developing, marketing, or acquiring new lines of business and/or offering new products and services.
From time to time, we may implement new business lines or offer new products and services within existing lines of business. There may be substantial risks and uncertainties associated with these efforts. We may invest significant time and resources in researching, developing, marketing, or acquiring new lines of business and/or offering new products and services.
If Pfizer fails to fulfill its obligations or chooses to not enforce the licensed patents under this agreement, we may not be able to prevent competitors from making, using and selling competitive products, which could have an adverse effect on our business. 27 | Table of Contents Item 1B. Unresolved Staff Comments. None.
If Pfizer fails to fulfill its obligations or chooses to not enforce the licensed patents under this agreement, we may not be able to prevent competitors from making, using and selling competitive products, which could have an adverse effect on our business. 26 | Table of Contents Item 1B. Unresolved Staff Comments. None.
In addition, concerns regarding greenhouse gas emissions and other potential environmental impacts of livestock production have led to some consumers opting to limit or avoid consuming animal products. If such events affect our customers’ businesses, they may purchase fewer Zoetis products, and our revenues may be negatively impacted.
In addition, concerns regarding greenhouse gas emissions and other potential environmental impacts from livestock production have led to some consumers opting to limit or avoid consuming animal products. If such events affect our customers’ businesses, they may purchase fewer Zoetis products, and our revenues may be negatively impacted.
In addition, despite our efforts to protect sensitive, confidential or personal data or information, we (or our third party partners) may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could potentially lead to the compromise of sensitive, confidential or personal data or information, improper use of our systems or networks, unauthorized access, use, disclosure, modification or 25 | Table of Contents destruction of information (including confidential business information, trade secrets, intellectual property and corporate strategic plans), defective products, production downtimes and operational disruptions.
In addition, despite our efforts to protect sensitive, confidential or personal data or information, we (or our third party partners) may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could potentially lead to the compromise of sensitive, confidential or personal data or information, improper use of our systems or networks, unauthorized access, use, disclosure, modification or destruction of information (including confidential business information, trade secrets, intellectual property and corporate strategic plans), defective products, production downtimes and operational disruptions.
We also sell certain nutritional and diagnostic products used in human health that could increase the scope of our liability. Litigation matters, regardless of their merits or their ultimate outcomes, are costly, divert management's attention and may materially adversely affect our reputation and demand for our products.
We also sell certain in vitro diagnostic products used in human health that could increase the scope of our liability. Litigation matters, regardless of their merits or their ultimate outcomes, are costly, divert management's attention and may materially adversely affect our reputation and demand for our products.
In particular, forward-looking statements include statements relating to our future actions, business plans or prospects, prospective products, product approvals or products under development, product and supply chain disruptions, R&D costs, timing and likelihood of success, future operating or financial performance, future results of current and anticipated products and services, strategies, sales efforts, expenses, production efficiencies, production margins, anticipated timing of generic market entries, integration of acquired businesses, interest rates, tax rates, changes in tax regimes and laws, foreign exchange rates, growth in emerging markets, the outcome of contingencies, such as legal proceedings, plans related to share repurchases and dividends, government regulation and financial results.
In particular, forward-looking statements include statements relating to our future actions, business plans or prospects, prospective products, product approvals or products under development, product and supply chain disruptions, R&D costs, timing and likelihood of success, future operating or financial performance, future results of current and anticipated products and services, strategies, sales efforts, expenses, production efficiencies, production margins, anticipated timing of generic market entries, integration of acquired businesses, anticipated impact or timing of divestitures, interest rates, tax rates, tariffs, changes in tax regimes and laws, foreign exchange rates, growth in emerging markets, the outcome of contingencies, such as legal proceedings, plans related to share repurchases and dividends, government regulation, taxes and financial results.
While our evaluation of any potential transaction includes business, legal and financial due diligence with the goal of identifying and evaluating the material risks involved, our due diligence reviews may not identify all of the issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions or fines resulting from an acquisition target's previous activities, inadequate controls, or costs associated with any quality issues with an acquisition target’s legacy products.
While our evaluation of any 17 | Table of Contents potential transaction includes business, legal and financial due diligence with the goal of identifying and evaluating the material risks involved, our due diligence reviews may not identify all of the issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions or fines resulting from an acquisition target's previous activities, inadequate controls, or costs associated with any quality issues with an acquisition target’s legacy products.
Item 1A. Risk Factors. In addition to the other information set forth in this 2023 Annual Report, any of the factors described below could materially adversely affect our operating results, financial condition and liquidity, which could cause the trading price of our securities to decline.
Item 1A. Risk Factors. In addition to the other information set forth in this 2024 Annual Report, any of the factors described below could materially adversely affect our operating results, financial condition and liquidity, which could cause the trading price of our securities to decline.
Our processes and controls may not always align with evolving standards for identifying, measuring and reporting ESG metrics, our interpretation of reporting standards that may be required by the SEC, European Union and other regulators may differ from those of others and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals.
Our processes and controls may not always align with evolving standards for identifying, measuring and reporting ESG metrics, our interpretation of reporting standards that may be required by the SEC, EU and other regulators may differ from those of others and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals.
We may not be able to pass all or a material portion of any higher product, material, transportation or labor costs on to our customers, which could materially adversely affect our operating results and financial condition. Certain third-party suppliers are the sole or exclusive source of certain products, materials and services necessary for production of our products.
We may not be able to pass all or a material portion of any higher product, material, transportation or labor costs on to our customers, which could materially adversely affect our operating results and financial condition. 19 | Table of Contents Certain third-party suppliers are the sole or exclusive source of certain products, materials and services necessary for production of our products.
As a result, they may be able to devote more resources to developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions or other opportunities.
As a result, they may be able to devote more resources to researching, developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions, collaborations or other opportunities.
Adverse consumer views related to the use of one or more of our products in livestock also may result in a decrease in the use of such products and could materially adversely affect our operating results and financial condition.
Adverse consumer views related to the use of one or more of our products, including vaccines, in livestock also may result in a decrease in the use of such products and could materially adversely affect our operating results and financial condition.
Developing and commercializing new products subjects us to inherent risks and uncertainties, including (i) delayed or denied regulatory approvals, (ii) delays or challenges with producing products in accordance with regulatory requirements, on a commercial scale and at a reasonable cost; (iii) failure to accurately predict the market for new products; and (iv) efficacy and safety concerns.
Developing and commercializing new products subjects us to inherent risks and uncertainties, including (i) delayed or denied regulatory approvals or label changes, (ii) delays or challenges with producing products in accordance with regulatory requirements, on a commercial scale and at a reasonable cost; (iii) failure to accurately predict the market for new products; and (iv) efficacy, quality and safety concerns.
Such regulation could take several forms that could result in additional costs in the form of investments of capital to maintain compliance with laws and regulations and taxes. Climate change regulation continues to evolve, and it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation.
Any new regulation could take several forms that could result in additional costs in the form of investments of capital to maintain compliance with laws and regulations and taxes. Climate change regulation continues to evolve, and it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation.
We could experience a disruption of our operations or higher ongoing labor costs, which could have a material adverse effect on our operating results and financial condition, potentially resulting in canceled orders by customers, unanticipated inventory accumulation or shortages and reduced revenue and net income.
We could experience a disruption of our operations or higher ongoing labor costs, which 18 | Table of Contents could have a material adverse effect on our operating results and financial condition, potentially resulting in canceled orders by customers, unanticipated inventory accumulation or shortages and reduced revenue and net income.
Any one of these consequences could materially adversely affect our operating results and financial condition. In addition, we will not be able to market new products unless and until we have obtained all required regulatory approvals in each jurisdiction where we propose to market those products.
Any one of these consequences could materially adversely affect our operating results and financial condition. In addition, we will not be able to market new products unless and until we have obtained all required regulatory approvals in each jurisdiction where 20 | Table of Contents we propose to market those products.
In addition, because our financial statements are reported in U.S. dollars, changes in currency exchange rates, including changes in countries with highly inflationary economies, between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations.
In addition, because our financial statements are reported in U.S. dollars, changes in currency exchange rates, 23 | Table of Contents including changes in countries with highly inflationary economies, between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations.
We rely and expect to continue to rely on a combination of intellectual property, including patent, trademark, trade dress, copyright, trade secret, data protection, and domain name protection laws, as well as confidentiality and license agreements with our employees and others, to protect our intellectual property and proprietary rights.
We rely and expect to continue to rely on a combination of intellectual property, including patent, trademark, trade dress, copyright, trade secret, data protection, and domain name protection 24 | Table of Contents laws, as well as confidentiality and license agreements with our employees and others, to protect our intellectual property and proprietary rights.
We may experience difficulties or delays in the development and commercialization of new products. New products may appear promising in development but fail to reach the market within the expected or optimal timeframe, or at all. In addition, product extensions or additional indications may not be approved.
We may experience difficulties or delays in the development and commercialization of new products. New products may appear promising in development but fail to reach the market within the expected or optimal timeframe, or at all. In addition, product extensions or additional indications may not be approved by government regulators.
Our lack of experience or knowledge, as well as external factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the success of an acquisition or the implementation of a new line of business or a new product or service.
Our lack of experience or knowledge, as well as external factors, such as compliance with new or evolving regulations, legislative changes, competitive alternatives and shifting market preferences, may also impact the success of an acquisition or the implementation of a new line of business or a new product or service.
Bribery Act of 2010 and similar anti-bribery and corruption-related laws globally, including labor laws, tax laws, tariffs and those relating to environmental, health and safety requirements; • political and social instability, including crime, civil disturbance, terrorist activities and armed conflicts; • trade restrictions and restrictions on direct investments by foreign entities, including restrictions administered by OFAC and the EU, in relation to our products or the products of farmers and other customers (e.g., restrictions on the importation of agricultural products from the EU to Russia); • government limitations on foreign ownership or government takeover or nationalization of our business; • imposition of anti-dumping and countervailing duties or other trade-related sanctions; • costs and difficulties and compliance risks in staffing, managing and monitoring international operations, including the use of overseas third-party goods and service providers; • longer payment cycles and increased exposure to counterparty risk; and • additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.
Bribery Act of 2010 and similar anti-bribery and corruption-related laws globally; • political and social instability, including crime, civil disturbance, terrorist activities and armed conflicts; • trade restrictions and restrictions on direct investments by foreign entities, including restrictions administered by OFAC and the EU, in relation to our products or the products of farmers and other customers (e.g., restrictions on the importation of agricultural products from the EU to Russia); • government limitations on foreign ownership or government takeover or nationalization of our business; • imposition of anti-dumping and countervailing duties or other trade-related sanctions; • costs and difficulties and compliance risks in staffing, managing and monitoring international operations, including the use of overseas third-party goods and service providers; • longer payment cycles and increased exposure to counterparty risk; and • additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.
In 2023, we generated approximately 43% of our revenue in currencies other than the U.S. dollar, principally the euro, Brazilian real, Australian dollar, Chinese renminbi, British pound and Canadian dollar. We are subject to currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenue.
In 2024, we generated approximately 41% of our revenue in currencies other than the U.S. dollar, principally the euro, Brazilian real, Australian dollar, British pound, Canadian dollar and Chinese renminbi. We are subject to currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenue.
We generally identify forward-looking statements by words such as “anticipate,” “estimate,” “could,” “expect,” “intend,” “project,” “plan,” “predict,” “believe,” “seek,” “continue,” “outlook,” "objective," "target," “may,” “might,” “will,” “should,” “can have,” “likely” or the negative version of these words or comparable words or by using future dates in connection with any discussion of future performance, actions or events.
We generally identify forward-looking statements by using words such as “anticipate,” “estimate,” “could,” “expect,” “intend,” “project,” “plan,” “predict,” “believe,” “seek,” “continue,” “outlook,” “forecast,” “objective,” “target,” “may,” “might,” “will,” “should,” “can have,” “likely” or the negative version of these words or comparable words or by using future dates in connection with any discussion of future performance, actions or events.
Under accounting principles generally accepted in the United States of America (U.S. GAAP), if we determine goodwill or identifiable intangible assets are impaired, we will be required to write down these assets and record a non-cash impairment charge. As of December 31, 2023, we had goodwill of $2.8 billion and identifiable intangible assets, less accumulated amortization, of $1.3 billion.
Under accounting principles generally accepted in the United States of America (U.S. GAAP), if we determine goodwill or identifiable intangible assets are impaired, we will be required to write down these assets and record a non-cash impairment charge. As of December 31, 2024, we had goodwill of $2.7 billion and identifiable intangible assets, less accumulated amortization, of $1.1 billion.
These types of projects are subject to risks of delay or cost overruns inherent in any large construction project, and require licensure by various regulatory authorities. Significant cost overruns or delays in completing these projects could have an adverse effect on the Company’s return on investment.
These types of projects are subject to risks of delay or cost overruns inherent in any large construction project, and require licensure and/or inspection by various regulatory authorities. Significant cost overruns or delays in completing these projects could have an adverse effect on our return on investment.
Because we primarily market our companion animal products through the veterinarian distribution channel, any decrease in visits to veterinarians by companion animal owners could reduce our market share for such products and materially adversely affect our operating results and financial condition.
Because we primarily market our companion animal products through the veterinarian distribution channel, any decrease in reliance on veterinarians by companion animal owners could reduce our market share for such products and materially adversely affect our operating results and financial condition.
In recent years, outbreaks of various diseases, including African Swine Fever, avian influenza, foot-and-mouth disease, bovine spongiform 17 | Table of Contents encephalopathy (otherwise known as BSE or mad cow disease) and porcine epidemic diarrhea virus (otherwise known as PEDv), have impacted the animal health business.
In recent years, outbreaks of various diseases, including African Swine Fever, avian influenza and highly pathogenic avian influenza, foot-and-mouth disease, bovine spongiform encephalopathy (otherwise known as BSE or mad cow disease) and porcine epidemic diarrhea virus (otherwise known as PEDv), have impacted the animal health business.
We are regularly party to patent litigation and other intellectual property rights claims that are expensive and time consuming, and if resolved adversely, could have a significant impact on our business and financial condition.
We are regularly party to patent litigation and other intellectual property rights claims that are expensive and time consuming, and if resolved adversely, could have a significant impact on our business and financial condition. Risks related to our indebtedness We have substantial indebtedness.
The discovery of additional cases of any of these, or new diseases may result in additional restrictions on animal proteins, reduced herd sizes, or reduced demand for animal protein, which may have a material adverse effect on our operating results and financial condition.
The discovery of additional or more severe cases of any of these, or new diseases may 16 | Table of Contents result in additional restrictions on animal proteins, reduced herd sizes, or reduced demand for animal protein, which may have a material adverse effect on our operating results and financial condition.
Veterinarians and livestock producers are our primary customers. In recent years, there has been a trend towards the concentration of veterinarians in large clinics and hospitals. In addition, livestock producers, particularly swine and poultry producers, and our distributors, have seen consolidation in their industries.
Consolidation of our customers and distributors could negatively affect the pricing of our products. Veterinarians and livestock producers are our primary customers. In recent years, there has been a trend towards the concentration of veterinarians in large clinics and hospitals. In addition, livestock producers, particularly swine and poultry producers, and our distributors, have seen consolidation in their industries.
Macroeconomic, business, political and financial disruptions, including public health crises or pandemics, such as COVID-19, could have a material adverse effect on our operating results, financial condition and liquidity.
Macroeconomic, business, political and financial disruptions, including public health crises or pandemics, could have a material adverse effect on our operating results, financial condition and liquidity.
Our failure, or the failure of third parties we rely on, including CMOs, to comply with these regulatory requirements, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer could result in, among other things, inspection observation notices, warning letters or similar regulatory correspondence, fines, a partial or total shutdown of production in one or more of our facilities while an alleged violation is remediated, withdrawals or suspensions of current 21 | Table of Contents products from the market, and civil or criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims.
Our failure, or the failure of third parties we rely on, including CMOs, to comply with these regulatory requirements, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer could result in, among other things, inspectional observation notices, label changes, untitled or warning letters or other public regulatory communications or correspondence, fines, a partial or total shutdown of production in one or more of our facilities while an alleged violation is remediated, withdrawals or suspensions of current products from the market, product seizures, injunctions and civil or criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims.
New product R&D leverages discoveries of pharmaceutical and biotechnology R&D. We have and expect to continue to enter into collaboration or licensing arrangements with third parties to provide us with access to molecules, compounds and other technology for purposes of our business. Such agreements are typically complex and require time to negotiate and implement.
We have and expect to continue to enter into collaboration or licensing arrangements with third parties to provide us with access to molecules, compounds and other technology for purposes of our business. Such agreements are typically complex and require time to negotiate and implement.
Similarly, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will impose broad climate-related disclosure obligations on certain companies doing business in California, including us, starting in 2026.
Similarly, the State of California passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that imposes broad climate-related disclosure obligations on certain companies doing business in California, including us.
To the extent that any of our competitors are more successful with respect to any key competitive factor or we are forced to reduce, or are unable to raise, the price of any of our products in order to remain competitive, our operating results and financial condition could be materially adversely affected.
See "--Generic and other products may be viewed as more cost-effective than our products." To the extent that any of our competitors are more successful with respect to any key competitive factor or we are forced to reduce, or are unable to raise, the price of any of our products in order to remain competitive, our operating results and financial condition could be materially adversely affected.
If any of our top-selling products or product lines experience issues, such as loss of patent protection, material product liability litigation, new or unexpected side effects, manufacturing or supply chain disruptions, regulatory proceedings, labeling changes, negative publicity, changes to veterinarian or customer preferences, and/or disruptive innovations or the introduction of competing and/or more effective products, our revenues could be negatively impacted, perhaps significantly.
If any of our top-selling products or product lines experience issues, such as loss of patent protection, material product liability litigation, new or unexpected side effects (or an increased frequency of serious, expected adverse events), manufacturing or supply chain disruptions, regulatory proceedings or enforcement, labeling changes, public regulatory communications, negative publicity or social media attention, changes to veterinarian or customer preferences, and/or disruptive innovations or the introduction of competing and/or more effective products, our revenues could be negatively impacted, perhaps significantly.
As a global company, we are faced with the challenge of how to manage a diverse patchwork of laws, rules, regulations and industry standards, including, but not limited to, the California Consumer Privacy Act, the EU's General Data Protection Regulation, the U.K.'s General Data Protection Regulation, the Brazilian General Data Protection Law, and China’s Personal Information Protection Law.
As a global company, we are faced with the challenge of how to manage a patchwork of laws, rules, regulations and industry standards, including, but not limited to, a growing number of U.S state privacy laws, the EU's General Data Protection Regulation, the U.K.'s General Data Protection Regulation, the Brazilian General Data Protection Law, China’s Personal Information Protection Law and India's Digital Personal data Protection (DPDP) Act.
Generic and other products may be viewed as more cost-effective than our products. We face competition from products produced by other companies, including generic alternatives to our products. We depend on patents and regulatory data exclusivity periods to provide us with exclusive marketing rights for some of our products.
We face competition from products produced by other companies, including generic alternatives to our products. We depend on patents and regulatory data exclusivity periods to provide us with exclusive marketing rights for some of our products.
In addition, since we depend on positive perceptions of the safety, quality and efficacy of our products, and animal health products generally, by our customers, veterinarians and end-users, any concerns as to the safety, quality or efficacy of our products, whether actual or perceived, may harm our reputation or materially adversely affect our operating results and financial condition, regardless of whether such concerns are accurate.
In addition, since we depend on positive perceptions of the safety, quality and efficacy of our products, and animal health products generally, by our customers, veterinarians and end-users, any concerns as to the safety, quality or efficacy of our products, whether actual or perceived, may harm our reputation or materially adversely affect our operating results and financial condition, regardless of whether such concerns are accurate. 15 | Table of Contents Our business is subject to risk based on global economic and political conditions.
In order to sell our products, we must be able to produce and ship our products in sufficient quantities. On December 31, 2023, we had a global manufacturing network consisting of 29 manufacturing sites located in 12 countries. We also employ a network of 109 third-party CMOs.
In order to sell our products, we must be able to produce and ship our products in sufficient quantities. On December 31, 2024, we had a global manufacturing network consisting of 22 manufacturing sites located in 11 countries. We also employ a network of over 110 third-party CMOs.
Companion animal owners increasingly have the option to purchase animal health products and, in some cases, veterinary services from sources other than veterinarians, such as internet-based retailers, “big-box” retail stores or other over-the-counter distribution channels.
Companion animal owners increasingly have the option to purchase animal health products and, in some cases, veterinary services from sources other than veterinarians, such as internet-based retailers, “big-box” retail stores or other over-the-counter distribution channels. Companion animal owners also could decrease their reliance on veterinarians as they rely more on internet-based animal health information.
For example, our five top-selling products and product lines, Simparica/Simparica Trio, Apoquel/Apoquel Chewable, Cytopoint, Revolution/Revolution Plus/Stronghold and ceftiofur line, contributed approximately 37% of our revenue in 2023, and any issues with these top-selling products and product lines would have a more significant impact to our results of operations. Our products are subject to unanticipated safety, quality or efficacy concerns.
For example, our five top-selling products and product lines, Simparica/Simparica Trio, Apoquel/Apoquel Chewable, Cytopoint, Librela and our ceftiofur line, contributed approximately 41% of our revenue in 2024, and certain issues with these top-selling products and product lines could have a more significant impact to our results of operations. Our products are subject to unanticipated safety, quality or efficacy concerns.
Unanticipated safety, quality or efficacy concerns can arise with respect to our products, whether or not scientifically or clinically supported, which can lead to product recalls, withdrawals or suspended or declining sales, as well as product liability and other claims.
Unanticipated safety, quality or efficacy concerns can arise with respect to our products, whether or not scientifically or clinically supported, which can lead to product recalls, label changes, public regulatory communications, negative publicity or social media attention, withdrawals or suspended or declining sales, as well as product liability and other claims.
Russia’s invasion of Ukraine, the conflict between Israel and Hamas (including any escalation or expansion), economic weakness in China, the COVID-19 pandemic, as well as inflation, are examples of recent global economic conditions that could have an adverse effect on our operating results, financial condition and liquidity.
Russia’s invasion of Ukraine, the regional conflict in the Middle East, economic weakness in China, the COVID-19 pandemic, as well as inflation, are examples of recent global economic conditions that could have an adverse effect on our operating results, financial condition and liquidity.
If we cannot effectively recruit and retain qualified executives and employees, we may not be able to maintain or expand our operations, or our business could be otherwise adversely affected and could, at least temporarily, have a material adverse effect on our operating results and financial condition. We may be required to write down goodwill or identifiable intangible assets.
If we cannot effectively recruit and retain qualified executives and employees, we may not be able to maintain or expand our operations, or our business could be otherwise adversely affected and could, at least temporarily, have a material adverse effect on our operating results and financial condition. Our business could be adversely affected by labor disputes, strikes or work stoppages.
Our efforts to accomplish and accurately report on these goals and objectives present numerous operational, reputational, financial, legal and other risks, any of which could have a material negative impact, including on our reputation.
Our efforts to accomplish and accurately report on these goals and objectives present numerous operational, reputational, financial, legal and other risks, any of which could have a material negative impact, including on our reputation. Our ability to achieve any goal or objective is subject to numerous risks, many of which are outside of our control.
Risks related to legal matters and regulation Our business is subject to substantial regulation. As a global company, we are subject to various state, federal and international laws and regulations, including regulations relating to the development, quality assurance, manufacturing, importation, distribution, marketing and sale of our products. In addition, our manufacturing facilities are subject to periodic inspections by regulatory agencies.
Risks related to legal matters and regulation Our business is subject to substantial regulation. As a global company, we are subject to various state, federal and international laws and regulations, including regulations relating to the research, development, quality assurance, manufacturing, importation, exportation, distribution, marketing and sale of our products, including our in vitro diagnostic products used in human health.
The extent of protection afforded by our patents varies from country to country and is limited by the scope of the claimed 16 | Table of Contents subject matter of our patents, the term of the patent and the availability and enforcement of legal remedies in the applicable country.
The extent of protection afforded by our patents varies from country to country and is limited by the scope of the claimed subject matter of our patents, the term of the patent and the availability and enforcement of legal remedies in the applicable country and potential legislative or regulatory changes to the underlying patent framework.
Examples of such risks include: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) evolving regulatory requirements and rulings affecting ESG and diversity standards or disclosures, (3) our ability to recruit, develop and retain diverse talent in our labor markets, and (4) the impact of our organic growth and acquisitions or dispositions of businesses or operations.
Examples of such risks include: (i) the availability and cost of low- or non-carbon-based energy sources and technologies, (ii) evolving regulatory requirements and rulings affecting ESG and diversity standards or disclosures, (iii) our ability to recruit, develop and retain talent in our labor markets, (iv) the impact of our organic growth and acquisitions or dispositions of businesses or operations and (v) potential negative publicity from diversity and inclusion matters.
The materials used to manufacture our products may be subject to availability constraints and price volatility caused by changes in demand, weather conditions, supply conditions, government regulations, economic climate and other factors, including any impacts caused by the COVID-19 pandemic.
The materials used to manufacture our products may be subject to availability constraints and price volatility caused by changes in demand, weather conditions, supply conditions, government regulations, economic climate and other factors. In addition, labor costs may be subject to volatility caused by the supply of labor, governmental regulations, economic climate and other factors.
The company’s future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.
Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. The company’s future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.
As of December 31, 2023, we had approximately $6.7 billion of total unsecured indebtedness outstanding. In addition, we currently have agreements for a multi-year revolving credit facility and a commercial paper program, each with a capacity of up to $1.0 billion.
We have a significant amount of indebtedness, which could materially adversely affect our operating results, financial condition and liquidity. As of December 31, 2024, we had approximately $6.7 billion of total unsecured indebtedness outstanding. In addition, we currently have agreements for a multi-year revolving credit facility and a commercial paper program, each with a capacity of up to $1.0 billion.
In addition, we have been investing in data and digital capabilities and have expanded our diagnostics portfolio. As a result, we possess and process an increasing amount of personal data. Our customers, employees and suppliers expect that we will adequately protect their data.
In addition, we have been investing in data and digital capabilities and have expanded our diagnostics portfolio. Our customers, employees and suppliers expect that we will adequately protect their data.
The issue of the potential transfer of increased antibacterial resistance in bacteria from food-producing animals to human pathogens, and the causality of that transfer, continue to be the subject of global scientific and regulatory discussion.
The issue of the potential transfer of increased antibacterial resistance in bacteria from food-producing animals to human pathogens, and the causality of that transfer, continue to be the subject of global scientific and regulatory discussion. In some countries, this issue has led to government restrictions and bans on the use of specific antibacterials in some food-producing animals.
Over time we may be unable to sustain our current margins due to the increased purchasing power of such retailers as compared to traditional veterinary practices. Any of these events could materially adversely affect our operating results and financial condition. Disruptive innovations and advances in medical practices and technologies could negatively affect the market for our products.
Over time we may be unable to sustain our current margins due to the increased purchasing power of such retailers as compared to traditional veterinary practices. Any of these events could materially adversely affect our operating results and financial condition. An outbreak of infectious disease carried by animals could negatively affect the sale and production of our products.
Our aspirations, goals and disclosures related to environmental, social and governance (“ESG”) matters expose us to numerous risks, including risks to our reputation. Our Driven to Care sustainability program includes various ESG aspirations and goals. These goal statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.
Our Driven to Care sustainability program includes various ESG aspirations and goals. These goal statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.
In addition, federal and state governments and agencies are in various stages of considering and/or implementing laws and regulations requiring the reporting, restriction and/or phase-out of PFAS products.
Federal and state governments and regulatory agencies, like the European Chemicals Agency, are in various stages of considering and/or implementing laws and regulations requiring the reporting, restriction and/or phase-out of PFAS products (subject to applicable product exceptions).
Cyberattacks could include wrongful conduct by hostile foreign governments, industrial espionage, the deployment of harmful malware, ransomware, denial-of-service attacks, and other means to threaten data confidentiality, integrity and availability.
Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyberattacks could include wrongful conduct by hostile foreign governments, industrial espionage, the deployment of harmful malware, ransomware, denial-of-service attacks, and other means to 22 | Table of Contents threaten data confidentiality, integrity and availability.
We cannot predict with certainty the eventual outcome of pending or future litigation matters. An adverse outcome of litigation or legal matters could result in our being responsible for significant damages.
We cannot predict with certainty the eventual outcome of pending or future litigation matters. An adverse outcome of litigation or legal matters could result in our being responsible for significant damages. Any of these negative effects resulting from litigation matters could materially adversely affect our operating results and financial condition.
Problems in any one or more of these areas could have a material adverse effect on our operating results and financial condition and could damage our reputation. Risks related to our indebtedness We have substantial indebtedness. We have a significant amount of indebtedness, which could materially adversely affect our operating results, financial condition and liquidity.
Problems in any one or more of these areas could have a material adverse effect on our operating results and financial condition and could damage our reputation.
While we have procedures to monitor and limit exposure to credit and collectability risk and have defensive measures in place to prevent and mitigate cyberattacks, there can be no assurances that such procedures and measures will effectively limit such risks and avoid losses. Consolidation of our customers and distributors could negatively affect the pricing of our products.
While we have procedures to monitor and limit exposure to credit and collectability risk and have defensive measures in place to prevent and mitigate cyberattacks, there can be no assurances that such procedures and measures will effectively limit such risks and avoid losses. Generic and other products may be viewed as more cost-effective than our products.
In the event we believe or have reason to believe our employees have or may have violated applicable laws or regulations, we may be subject to investigation costs, potential penalties and other related costs which in turn could negatively affect our reputation and our results of operations. 24 | Table of Contents Risks related to tax matters The Company could be subject to changes in its tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities.
In the event we believe or have reason to believe our employees have or may have violated applicable laws or regulations, we may be subject to investigation costs, potential penalties and other related costs which in turn could negatively affect our reputation and our results of operations.
While the scope and duration of these and any future tariffs remains uncertain, tariffs imposed by the U.S. or other governments on our products or the active pharmaceutical ingredients or other components thereof could negatively impact our financial condition and results of operations. Our business is subject to risk based on customer exposure to rising costs and reduced customer income.
While the scope and duration of these and any future tariffs remains uncertain, tariffs imposed by the U.S. or other governments on our products or the active pharmaceutical ingredients or other components thereof could negatively impact our financial condition and results of operations. Our business may be negatively affected by weather conditions, natural disasters and the availability of natural resources.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our operating results, financial condition and liquidity and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our operating results, financial condition and liquidity and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock. 25 | Table of Contents We may not have the funds necessary to finance the change of control offer required by the indenture governing our senior notes.
In addition, certain emerging markets have currencies that fluctuate substantially, which may impact our financial performance. For example, in the past, our revenue in certain emerging markets in Latin America has been adversely impacted by currency fluctuations and devaluations. In addition, certain emerging markets have legal systems that are less developed or familiar to us.
For example, in the past, our revenue in certain emerging markets in Latin America has been adversely impacted by currency fluctuations and devaluations. In addition, certain emerging markets have legal systems that are less developed or familiar to us. Compliance with myriad legal requirements is costly and time-consuming and requires significant resources.
Furthermore, the use of our products for indications other than those indications for which our products have been approved may not be effective, which could harm our reputation and lead to an increased risk of litigation.
Drug Enforcement Administration as controlled substances because of their potential to be misused or abused by humans, which could expose us to liability. Furthermore, the use of our products for indications other than those indications for which our products have been approved may not be effective, which could harm our reputation and lead to an increased risk of litigation.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Audit Committee also regularly reviews certain data privacy and cybersecurity metrics as part of the compliance update presented to the Audit Committee. 28 | Table of Contents In addition, the Chief Information Security Officer presents updates at least annually to the Board of Directors with respect to the information security program, including the results of our independent, third-party assessment.
Biggest changeIn addition, the Chief Information Security Officer presents updates at least annually to the Board of Directors with respect to the information security program, including the results of our independent, third-party assessment. The Board of Directors also participates in annual table-top exercises involving simulated data security incidents and the Company’s responses to those incidents. 27 | Table of Contents
Management’s Role in Risk Oversight Our information security team includes our Executive Vice President, Chief Digital & Technology Officer; our Vice President, Chief Information Officer; and our Head of Technology Risk, Compliance and Chief Information Security Officer. Our Executive Vice President, Chief Digital and Technology Officer has over 20 years of information technology experience.
Management’s Role in Risk Oversight Our information security team includes our Executive Vice President, Chief Digital & Technology Officer and our Head of Technology Risk, Compliance and Chief Information Security Officer. Our Executive Vice President, Chief Digital and Technology Officer has over 20 years of information technology experience.
In addition, we have been expanding our data and digital capabilities including in our diagnostics portfolio, and as a result, there could be an increased likelihood of a cyberattack or breach of security that could negatively impact us or our customers.
In addition, we have expanded our data and digital capabilities including in our diagnostics portfolio, and as a result, there could be an increased likelihood of a cyberattack or breach of security that could negatively impact us or our customers.
For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K. Cybersecurity Program As part of our risk management processes, we have an enterprise-wide cybersecurity program aligned to the NIST Cybersecurity Framework.
For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under P art 1. Item 1A. Risk Factors in this Annual Report on Form 10-K.
Third Party Onboarding We depend on third parties and applications on virtualized (cloud) infrastructure to operate and support our information systems and have a third-party risk management program and assessment process for onboarding third parties.
While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. Third Party Onboarding We depend on third parties and applications on virtualized (cloud) infrastructure to operate and support our information systems and have a third-party risk management program and assessment process for onboarding third parties.
At least twice annually, the Zoetis information security team presents updates to the Audit Committee with respect to the information security program, including the status of our security measures and our efforts to identify and mitigate information security risks.
The Zoetis information security team regularly presents updates to the Audit Committee with respect to the information security program, including the status of our security measures and our efforts to identify and mitigate information security risks. The Audit Committee also regularly reviews certain data privacy and cybersecurity metrics as part of the compliance update presented to the Audit Committee.
Training We have an information security training program that includes: monthly awareness articles, a phishing training program (with reports reviewed by the Executive Team), a Security Ambassador program for additional training and awareness for individuals in high risk roles, required and optional training modules in our Learning Management System, and quarterly security-focused podcasts.
Training We have an information security training program that includes: monthly awareness articles, a phishing training program (with reports reviewed by the Executive Team), and required and optional training modules in our Learning Management System. Incident Response Procedure We have a 24/7 managed Security Operations Center (SOC) for escalation of any critical events, including cybersecurity incidents.
Our Head of Technology Risk, Compliance and Chief Information Security Officer has over 20 years of experience in information security, and holds a bachelor’s degrees in computer science and biology. We have established a cybersecurity governance program with clear roles for the executive management team as well as oversight by the Board of Directors and the Audit Committee.
We have established a cybersecurity governance program with clear roles for the executive management team as well as oversight by the Board of Directors and the Audit Committee.
Our program is a risk-based program designed to protect our information systems through multiple defenses and layers of security, commonly referred to as a “Defense in Depth” approach. Key elements of our program include: Independent Third-Party Assessments We engage an independent third party to conduct assessments of our cybersecurity program approximately every 18 months.
Cybersecurity Program As part of our risk management processes, we have an enterprise-wide cybersecurity program aligned to the NIST Cybersecurity Framework (CSF). Our program is a risk-based program designed to protect our information systems through multiple defenses and layers of security, commonly referred to as a “Defense in Depth” approach.
Additionally, we have in place disaster recovery and business continuity practices designed to provide for continuous business operations for our customers in the event of a cybersecurity incident. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured.
In the event of an incident, we use an Incident Response procedure leveraging NIST Standard 800-61 standards that we have customized for Zoetis. Additionally, we have in place disaster recovery and business continuity practices designed to provide for continuous business operations for our customers in the event of a cybersecurity incident.
This independent third-party assessment includes an evaluation of our cybersecurity controls based on the NIST Cybersecurity Framework.
Key elements of our program include: Independent Third-Party Assessments We engage an independent third party to conduct comprehensive assessments of our cybersecurity program approximately every 18 months. This independent third-party assessment includes an evaluation of our cybersecurity controls based on the CSF.
She holds a master’s degree in computer science and a master’s degree in business applications of information and technology. Our Vice President, Chief Information Officer has over 20 years of experience in technology and digital leadership roles at large public companies and holds a bachelor’s degree in information systems.
Our Head of Technology Risk, Compliance and Chief Information Security Officer has 37 years of experience in Life Sciences Information Technology, including over 20 years of experience in information security and holds bachelor’s degrees in computer science and biology.
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Incident Response Procedure We have a 24/7 managed Security Operations Center (SOC) for escalation of any critical events, including cybersecurity incidents. In the event of an incident, we use an Incident Response procedure leveraging NIST Standard 800-61 standards that we have customized for Zoetis.
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Prior to Zoetis, he was the VP, Information Technology at Biogen, overseeing all aspects of Infrastructure, IT Operations, and Enterprise Architecture globally and held various corporate leadership roles at Eli Lilly and Company, including Head of IT Infrastructure and Enabling Functions. He holds a bachelor's degree in information systems and a master of business administration degree.
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She was the Chief Information Officer for key business units at an S&P 500 healthcare company, and was that company’s first Chief Information Security Officer, where she led the strategy and execution to secure products, devices, manufacturing systems and information across businesses.
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The Board of Directors also participates in annual table-top exercises involving simulated data security incidents and the Company’s responses to those incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur largest R&D facility is our owned U.S. research and development site located in Kalamazoo, Michigan, which represents approximately 1.6 million square feet. None of our other non-manufacturing sites are more than 0.3 million square feet. The largest manufacturing site in our global manufacturing network is our manufacturing site located in Kalamazoo, Michigan, which represents approximately 0.6 million square feet.
Biggest changeOur largest R&D and manufacturing facilities are located at our owned site located in Kalamazoo, Michigan, which represents approximately 1.6 million square feet. The site represents approximately 0.9 million square feet dedicated to R&D and approximately 0.7 million square feet for manufacturing. In addition, our global manufacturing network continues to be supplemented by over 110 CMOs.
Item 2. Properties. We have approximately 190 owned and leased properties, amounting to approximately 13.5 million square feet, around the world for sales and marketing, customer service, regulatory compliance, R&D, manufacturing and distribution, and administrative support functions. In many locations, operations are co-located to achieve synergies and operational efficiencies.
Item 2. Properties. We have approximately 184 owned and leased properties, amounting to approximately 11.4 million square feet, around the world for sales and marketing, customer service, regulatory compliance, R&D, manufacturing and distribution, and administrative support functions. In many locations, operations are co-located to achieve synergies and operational efficiencies.
We believe that our existing properties, as supplemented by sites operated by CMOs, are adequate for our current requirements and for our operations in the foreseeable future.
Our corporate headquarters are located at 10 Sylvan Way, Parsippany, New Jersey 07054. Our operations extend internationally to 57 countries. We believe that our existing properties, as supplemented by sites operated by CMOs, are adequate for our current requirements and for our operations in the foreseeable future.
Removed
No other site in our global manufacturing network is more than 0.6 million square feet. In addition, our global manufacturing network continues to be supplemented by 109 CMOs. Our corporate headquarters are located at 10 Sylvan Way, Parsippany, New Jersey 07054. Our operations extend internationally to 57 countries.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeCertain legal proceedings in which we are involved are discussed in Notes to Consolidated Financial Statements— Note 18. Commitments and Contingencies , and are incorporated by reference from such discussion. Item 4. Mine Safety Disclosures. Not applicable. 29 | Table of Contents PART II
Biggest changeCertain legal proceedings in which we are involved are discussed in Notes to Consolidated Financial Statements— Note 18. Commitments and Contingencies , and are incorporated by reference from such discussion. Item 4. Mine Safety Disclosures. Not applicable. 28 | Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 29 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 52 Item 8. Financial Statements and Supplementary Data 53
Biggest changeItem 4. Mine Safety Disclosures 28 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51 Item 8. Financial Statements and Supplementary Data 52

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCOMPARISON OF CUMULATIVE TOTAL RETURN Among Zoetis Inc., the S&P 500 Index and the S&P 500 Pharmaceuticals Index December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Zoetis Inc. $100 $155.71 $195.83 $290.34 $175.64 $238.70 S&P 500 Index $100 $131.49 $155.68 $200.37 $164.08 $207.21 S&P 500 Pharmaceuticals Index $100 $115.09 $123.75 $155.62 $168.77 $169.33 (a) This section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Zoetis under the Securities Act of 1933, as amended, or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language contained in any such filing. 31 | Table of Contents
Biggest changeCOMPARISON OF CUMULATIVE TOTAL RETURN Among Zoetis Inc., the S&P 500 Index and the S&P 500 Pharmaceuticals Index December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Zoetis Inc. $100 $125.76 $186.46 $112.80 $153.30 $127.80 S&P 500 Index $100 $118.40 $152.39 $124.79 $157.59 $197.02 S&P 500 Pharmaceuticals Index $100 $107.53 $135.22 $146.65 $147.13 $159.21 (a) This section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Zoetis under the Securities Act of 1933, as amended, or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language contained in any such filing. 30 | Table of Contents
The shareholder return shown on the graph is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future shareholder returns. The graph assumes an investment of $100 on December 31, 2018, in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index and assumes dividends, if any, were reinvested.
The shareholder return shown on the graph is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future shareholder returns. The graph assumes an investment of $100 on December 31, 2019, in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index and assumes dividends, if any, were reinvested.
Because we are a holding company, our ability to pay cash dividends on our common stock will depend on the receipt of dividends or other distributions from certain of our subsidiaries. 30 | Table of Contents Stock Performance Graph (a) The graph below compares the cumulative total shareholder return on an investment in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index for the five fiscal years beginning with the close of trading on December 31, 2018 and ending December 31, 2023.
Because we are a holding company, our ability to pay cash dividends on our common stock will depend on the receipt of dividends or other distributions from certain of our subsidiaries. 29 | Table of Contents Stock Performance Graph (a) The graph below compares the cumulative total shareholder return on an investment in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index for the five fiscal years beginning with the close of trading on December 31, 2019 and ending December 31, 2024.
As of February 9, 2024, there were 457,867,115 shares of our common stock outstanding, held by 1,574 shareholders of record. Additional information relating to our common stock is included in this Annual Report on Form 10-K in Notes to Consolidated Financial Statements— Note 16. Stockholders' Equity .
As of February 7, 2025, there were 447,791,917 shares of our common stock outstanding, held by 1,468 shareholders of record. Additional information relating to our common stock is included in this Annual Report on Form 10-K in Notes to Consolidated Financial Statements— Note 16. Stockholders' Equity .
Purchases of Equity Securities by the Issuer On December 7, 2021, our Board of Directors authorized a multi-year share repurchase program of up to $3.5 billion of our outstanding common stock. As of December 31, 2023, there was $1.5 billion remaining under this authorization. The program does not have a stated expiration date.
Purchases of Equity Securities by the Issuer On December 7, 2021, our Board of Directors authorized a multi-year share repurchase program of up to $3.5 billion of our outstanding common stock. This program was completed as of December 31, 2024.
Issuer purchases of equity securities for the three months ended December 31, 2023 were as follows: Issuer Purchases of Equity Securities (b) Total Number of Shares Purchased (a) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs October 1 - October 31, 2023 621,480 $167.90 619,842 $1,626,212,036 November 1 - November 30, 2023 312,415 $165.78 311,950 $1,574,494,738 December 1 - December 31, 2023 419,971 $189.76 418,966 $1,494,864,468 Total 1,353,866 $174.19 1,350,758 $1,494,864,468 (a) The company repurchased 3,108 shares during the three-month period ended December 31, 2023, that were not part of the publicly announced share repurchase authorization.
Issuer purchases of equity securities for the three months ended December 31, 2024 were as follows: Issuer Purchases of Equity Securities (b) Total Number of Shares Purchased (a) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs October 1 - October 31, 2024 406,138 $187.74 404,610 $6,123,583,633 November 1 - November 30, 2024 1,235,190 $175.49 1,234,001 $5,907,016,961 December 1 - December 31, 2024 1,475,700 $175.85 1,475,445 $5,647,168,628 Total 3,117,028 $177.26 3,114,056 $5,647,168,628 (a) The company repurchased 2,972 shares during the three-month period ended December 31, 2024, that were not part of the publicly announced share repurchase authorization.
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In August 2024, our Board of Directors authorized a new multi-year share repurchase program of up to $6 billion of our outstanding common stock. As of December 31, 2024, there was $5.6 billion remaining under this authorization. The program does not have a stated expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changePerceptions of product quality, safety and reliability We believe that animal health customers value high-quality manufacturing and reliability of supply. The importance of quality and safety concerns to pet owners, veterinarians and livestock producers also contributes to animal health brand loyalty, which often continues after the loss of patent-based and regulatory exclusivity.
Biggest changeThe importance of quality and safety concerns to pet owners, veterinarians and livestock producers also contributes to animal health brand loyalty, which often continues after the loss of patent-based and regulatory exclusivity. We depend on positive perceptions of the safety and quality of our products by our customers, veterinarians and end-users.
Factors influencing growth in demand for companion animal medicines, vaccines and diagnostics include: • economic development and related increases in disposable income, particularly in many emerging markets; • increasing pet ownership and pet owners’ commitment to the health and well-being of their pets; • companion animals living longer; • increasing medical treatment of companion animals; and • advances in companion animal medicines, vaccines and diagnostics.
Factors influencing growth in demand for companion animal medicines, vaccines and diagnostics include: • increasing pet owners’ commitment to the health and well-being of their pets; • economic development and related increases in disposable income, particularly in many emerging markets; • companion animals living longer; • increasing medical treatment of companion animals; and • advances in companion animal medicines, vaccines and diagnostics.
While we aim to improve our ability to predict, we more importantly aim to be proactive in how effectively we manage our resources and how quickly we can redeploy focus to emerging themes or priorities. We actively: (1) review and manage our resource; (2) continuously improve key operational processes; and (3) ensure strategic focus on our core business.
While we aim to improve our ability to predict, we more importantly aim to be proactive in how we effectively manage our resources and how quickly we can redeploy focus to emerging themes or priorities. We actively: (1) review and manage our resource allocation; (2) continuously improve key operational processes; and (3) ensure strategic focus on our core business.
The cost of medicines and vaccines to our livestock producer customers is small relative to other production costs, including feed, and the use of these products is intended to improve livestock producers’ economic outcomes. As a result, demand for our products has historically been more stable than demand for other production inputs.
Similarly, the cost of medicines and vaccines to our livestock producer customers is small relative to other production costs, including feed, and the use of these products is intended to improve livestock producers’ economic outcomes. As a result, demand for our products has historically been more stable than demand for other production inputs.
We believe that by focusing on colleague well-being and inclusion and providing all of our colleagues with supportive tools, training and environment that we are best positioned to succeed. With that, our colleagues are committed to our purpose, our customers and each other.
We believe that by focusing on colleague well-being and providing all of our colleagues with supportive tools, training and environment that we are best positioned to succeed. With that, our colleagues are committed to our purpose, our customers and each other.
We intend to grow our business by pursuing the following core strategies: • Lead through innovation across our diverse portfolio - We seek to define the future of animal health by delivering new products and solutions as well as lifecycle innovations across the continuum of care that spans from disease prediction and prevention to detection and treatment.
We intend to grow our business by pursuing the following core strategies: • Lead through innovation across our diverse portfolio - We seek to define the future of animal health by delivering new products and solutions as well as lifecycle innovations across the continuum of care that span from disease prediction and prevention to detection and treatment.
We are committed to maintaining a workplace culture that attracts, retains and develops the best talent in the industry; • Advance sustainability in animal health for a better future - As the world’s leading animal health company, our business purpose is well aligned with our social purpose.
We are committed to maintaining an inclusive workplace culture that attracts, retains and develops the best talent in the industry; • Advance sustainability in animal health for a better future - As the world’s leading animal health company, our business purpose is well aligned with our social purpose.
Factors influencing growth in demand for livestock medicines and vaccines include: • human population growth and increasing standards of living, particularly in many emerging markets; • increasing demand for improved nutrition, particularly animal protein; • natural resource constraints, such as scarcity of arable land, fresh water and increased competition for cultivated land, resulting in fewer resources that will be available to meet an increasing demand for animal protein; • increasing urbanization; and • increased focus on food safety and food security.
Factors influencing growth in demand for livestock medicines and vaccines 31 | Table of Contents include: • human population growth and increasing standards of living, particularly in many emerging markets; • increasing demand for improved nutrition, particularly animal protein; • natural resource constraints, such as scarcity of arable land, fresh water and increased competition for cultivated land, resulting in fewer resources that will be available to meet an increasing demand for animal protein; • increasing urbanization; and • increased focus on food safety and food security.
Risk Factors and Forward-looking statements and factors that may affect future results sections of this MD&A. A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 is presented below.
Risk Factors and Forward-looking statements and factors that may affect future results sections of this MD&A. A discussion regarding our financial condition and results of operations for fiscal 2024 compared to fiscal 2023 is presented below.
For over 70 years, we have been innovating ways to predict, prevent, detect, and treat animal illness, and continue to stand by those raising and caring for animals worldwide - from veterinarians and pet owners to livestock farmers and ranchers. We manage our operations through two geographic operating segments: the United States (U.S.) and International.
For over 70 years, we have been innovating ways to predict, prevent, detect, and treat animal illness, and continue to stand by those raising and caring for animals worldwide - from veterinarians and pet owners to livestock producers. We manage our operations through two geographic operating segments: the United States (U.S.) and International.
We believe the ability of pet owners to purchase our products online and from retail 33 | Table of Contents stores may increase pet owner compliance and result in increased sales. However, over time, we may be unable to sustain our current margins due to the increased purchasing power of such retailers as compared to traditional veterinary practices.
We believe the ability of pet owners to purchase our products online and from retail stores may increase pet owner compliance and result in increased sales. However, over time, we may be unable to sustain our current margins due to the increased purchasing power of such retailers as compared to traditional veterinary practices.
A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 14, 2023 (our “2022 Annual Report”), which is available free of charge on the SEC’s website at www.sec.gov.
A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 14, 2024 (our “2023 Annual Report”), which is available free of charge on the SEC’s website at www.sec.gov.
Exchange rate fluctuations may also have an impact beyond our reported financial results and directly impact operations. These fluctuations may affect the ability to buy and sell our goods and services between markets impacted by significant exchange rate variances. For the year ended December 31, 2023, approximately 57% of our total revenue was in U.S. dollars.
Exchange rate fluctuations may also have an impact beyond our reported financial results and directly impact operations. These fluctuations may affect the ability to buy and sell our goods and services between markets impacted by significant exchange rate variances. For the year ended December 31, 2024, approximately 59% of our total revenue was in U.S. dollars.
Our internal R&D capabilities are differentiators, but we also collaborate across both academia and industry to ensure we are bringing the best possible innovations to our customers; • Deliver an exceptional experience to delight our customers - We believe that our customers' success is our success and that the best way to realize that success is by enabling veterinarians, livestock producers and pet owners to provide the best possible care for animals.
Our internal R&D capabilities are differentiators, but we also collaborate across both academia and industry partners to ensure we are bringing the best possible innovations to our customers; 33 | Table of Contents • Deliver an exceptional experience to delight our customers - We believe that our customers' success is our success and that the best way to realize that success is by enabling veterinarians, livestock producers and pet owners to provide the best possible care for animals.
The primary livestock species for the production of animal protein are cattle (both beef and dairy), swine, poultry, fish and sheep. Livestock health 32 | Table of Contents and production are essential to meeting the growing demand for animal protein of a global population.
The primary livestock species are cattle (both beef and dairy), swine, poultry, fish and sheep. Livestock health and production are essential to meeting the growing demand for animal protein of a global population.
We strive to make a meaningful difference in society through the three pillars of our sustainability approach: (1) by caring and collaborating with our customers, colleagues, and communities, and the animals that depend on them by improving access to care for animals and by supporting the veterinary profession; (2) by leveraging our innovation capabilities to develop solutions that improve productivity, keep animals healthy, and fight emerging infectious diseases; and (3) by taking actions to protect our planet that reduce our footprint on the environment; and • Perform with excellence and agility - We recognize the increasing uncertainty in our industry and more broadly across the world.
We strive to make a meaningful difference in society through the three pillars of our sustainability approach: (1) by improving access to care for animals and by supporting the veterinary profession; (2) by leveraging our innovation capabilities to develop solutions that improve productivity, keep animals healthy, and fight emerging infectious diseases; and (3) by taking actions to protect our planet that reduce our footprint on the environment; and • Perform with excellence and agility - We recognize the increasing uncertainty in our industry and more broadly across the world.
Similarly, industry sources have reported that pet owners indicated a preference for reducing spending on other aspects of their lifestyle, including entertainment, clothing and household goods, before reducing spending on pet care.
Industry sources have reported that pet owners indicated a preference for reducing spending on other aspects of their lifestyle, including entertainment, clothing and household goods, before reducing spending on pet healthcare.
Our ten top-selling products and product lines contributed 49% of our revenue. For additional information regarding our products, including descriptions of our product lines that each represented approximately 1% or more of our revenue in 2023, see
Our ten top-selling products and product lines contributed 55% of our revenue. For additional information regarding our products, including descriptions of our product lines that each represented approximately 1% or more of our revenue in 2024, see
Within each of these operating segments, we offer a diversified product portfolio for both companion animals and livestock customers in order to capitalize on local and regional trends and customer needs. See Notes to Consolidated Financial Statements— Note 19. Segment Information .
Within each of these operating segments, we offer diverse products for both companion animals and livestock customers in order to capitalize on local and regional trends and customer needs. See Notes to Consolidated Financial Statements— Note 19. Segment Information .
In addition to traditional medicines and vaccines, we develop products across additional categories to address the needs of veterinarians and producers to predict, prevent, detect and treat conditions in both companion animals and livestock, including products and services in diagnostics, genetics, precision animal health and digital and data analytics.
The majority of our R&D programs focus on new products. In addition to traditional medicines and vaccines, we develop products across additional categories to address the needs of veterinarians and producers to predict, prevent, detect and treat conditions in both companion animals and livestock, including products and services in diagnostics, genetics, precision animal health and digital and data analytics.
We are focused on providing greater value to our customers through the integration and connectedness of our portfolio and by reducing frictions in the way they engage with us and our products and solutions; • Power our business through digital solutions and data insights - We believe that digital and data have surpassed the stage of enablement and are now core decision drivers for the future of animal health.
We are focused on providing greater value to our customers through the integration and connectedness of our portfolio and by reducing frictions in the way they engage with us and our products and solutions; • Power our business through digital solutions and data insights - We believe that digital and data are no longer just enablers, but are core decision drivers for the future of animal health.
For example, Draxxin currently competes with generic products in key markets including the U.S., Europe, Canada, Mexico and Australia. Since 2021, the first year of generic competition, sales of Draxxin declined by 47% in the U.S., its largest market, and additional declines are expected in subsequent years.
For example, Draxxin currently competes with generic products in key markets including the U.S., Europe, Canada, Mexico and Australia. Since 2021, the first year of generic competition, sales of Draxxin declined by 49% in the U.S., its largest market.
Our products are sold in more than 100 countries and, as a result, our revenue is influenced by changes in foreign exchange rates. For the year ended December 31, 2023, approximately 43% of our revenue was denominated in foreign currencies.
Foreign exchange rates Significant portions of our revenue and costs are exposed to changes in foreign exchange rates. Our products are sold in more than 100 countries and, as a result, our revenue is influenced by changes in foreign exchange rates. For the year ended December 31, 2024, approximately 41% of our revenue was denominated in foreign currencies.
A summary of our 2023 performance compared with the comparable 2022 and 2021 periods follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2023 2022 2021 23/22 22/21 Revenue $ 8,544 $ 8,080 $ 7,776 6 4 Net income attributable to Zoetis 2,344 2,114 2,037 11 4 Adjusted net income (a) 2,457 2,297 2,240 7 3 (a) Adjusted net income is a non-GAAP financial measure.
A summary of our 2024 performance compared with the comparable 2023 and 2022 periods follows: Year Ended December 31, % Change (MILLIONS OF DOLLARS) 2024 2023 2022 24/23 23/22 Revenue $ 9,256 $ 8,544 $ 8,080 8 6 Net income attributable to Zoetis 2,486 2,344 2,114 6 11 Adjusted net income (a) 2,693 2,457 2,297 10 7 (a) Adjusted net income is a non-GAAP financial measure.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Introduction Our management’s discussion and analysis of financial condition and results of operations (MD&A) is provided to assist readers in understanding our performance, as reflected in the results of our operations, our financial condition and our cash flows.
Introduction Our management’s discussion and analysis of financial condition and results of operations (MD&A) is provided to assist readers in understanding our performance, as reflected in the results of our operations, our financial condition and our cash flows and should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included in Item 8.
For example, the issue of the potential transfer of increased antibacterial resistance in bacteria from food-producing animals to human pathogens, and the causality of that transfer, continue to be the subject of global scientific and regulatory discussion.
In addition, negative beliefs about animal health products generally could impact demand for our products. For example, the issue of the potential transfer of increased antibacterial resistance in bacteria from food-producing animals to human pathogens, and the causality of that transfer, continue to be the subject of global scientific and regulatory discussion.
In 2023, our two top-selling products and product lines, Simparica/Simparica Trio and Apoquel/Apoquel Chewable, each contributed approximately 13% and 10% of our revenue, respectively, and combined with our next three top-selling products and product lines, Cytopoint, Revolution/Revolution Plus/Stronghold and ceftiofur line, these five products and product lines contributed approximately 37% of our revenue.
In 2024, our two top-selling products and product lines, Simparica/Simparica Trio and Apoquel/Apoquel Chewable, contributed approximately 15% and 11% of our revenue, respectively, and combined with our next three top-selling products and product lines, Cytopoint, Librela and our ceftiofur line, these five products and product lines contributed approximately 41% of our revenue.
The unpredictability of a product's regulatory or commercial success or failure, the lead time necessary to construct highly technical and complex manufacturing sites, and shifting customer demand increase the potential for capacity imbalances.
The unpredictability of a product's regulatory or commercial success or failure, the lead time necessary to construct highly technical and complex manufacturing sites, and shifting customer demand increase the potential for capacity imbalances. Perceptions of product quality, safety and reliability We believe that animal health customers value high-quality manufacturing and reliability of supply.
This MD&A should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data . The discussion in this MD&A contains forward-looking statements that involve substantial risks and uncertainties.
Financial Statements and Supplementary Data . The discussion in this MD&A contains forward-looking statements that involve substantial risks and uncertainties.
However, we also continue to invest in lifecycle innovation, which is defined as R&D programs that leverage existing animal health products by adding new species or claims, achieving approvals in new markets or creating new combinations and reformulations.
We believe we are an industry leader in animal health R&D, with a track record of generating new products a nd product lifecycle innovation, which is defined as R&D programs that leverage existing animal health products by adding new species or claims, achieving approvals in new markets or creating new reformulations, modifications and combinations.
In addition, consumer preferences in some markets have impacted the use of antibacterials in food producing animals. Such restrictions and consumer preferences in some cases may negatively impact sales of our antibacterial products, but in other instances may increase sales of our products that can be used as antibacterial alternatives.
Such restrictions and consumer preferences in some cases may negatively impact sales of our antibacterial products, but in other instances may increase sales of our products that can be used as antibacterial alternatives. Our total revenue attributable to antibacterials for livestock was approximately $950 million for the year ended December 31, 2024.
Product development initiatives Our future success depends on both our existing product portfolio and our pipeline of new products, including new products that we may develop through joint ventures and products that we are able to obtain through license or acquisition.
However, we believe the impact of this trend is limited as the livestock industry is still expected to continue to grow in order to feed a growing global population. 32 | Table of Contents Product development initiatives Our future success depends on both our existing products and our pipeline of new products, including new products that we may develop through joint ventures and products that we are able to obtain through license or acquisition.
Our research and development (R&D) efforts enable us to deliver innovative products to address unmet needs and evolve our product lines so that they remain relevant for our customers.
Our research and development (R&D) efforts enable us to deliver innovative products to address unmet needs and evolve our products so that they remain relevant for our customers. We have approximately 300 product lines that we sell in over 100 countries for the prediction, prevention, detection and treatment of diseases and conditions that affect various companion animal and livestock species.
In some countries, this issue has led to government restrictions and bans on the use of specific antibacterials in some food-producing animals, regardless of the route of administration (in feed or injectable). These restrictions are more prevalent in countries where animal protein is plentiful and governments are willing to take action even when there is scientific uncertainty.
In some countries, this issue has led to government restrictions and bans on the use of specific antibacterials in some food-producing animals, regardless of the route of administration (in feed or injectable). In addition, consumer preferences in some markets have impacted the use of antibacterials in food producing animals.
Our total revenue attributable to antibacterials for livestock was less than $950 million for the year ended December 31, 2023. Similarly, concerns regarding greenhouse gas emissions and other potential environmental impacts of livestock production have led to some consumers opting to limit or avoid consuming animal products.
As a result of the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets, we anticipate our total revenues attributable to antibacterials for livestock will decrease. Similarly, concerns regarding greenhouse gas emissions and other potential environmental impacts of livestock production have led to some consumers opting to limit or avoid consuming animal products.
However, we believe the impact of this trend is limited as the livestock industry is still expected to continue to grow in order to feed a growing global population. Disease Outbreaks Sales of our livestock products have in the past, and may in the future be, adversely affected by the outbreak of disease carried by animals.
Disease Outbreaks Sales of our livestock products have in the past, and may in the future be, adversely affected by the outbreak of disease carried by animals.
Changes in water temperatures could affect the timing of reproduction and growth of various fish species, as well as trigger the outbreak of certain waterborne diseases. Foreign exchange rates Significant portions of our revenue and costs are exposed to changes in foreign exchange rates.
Adverse weather conditions, natural disasters and climate change may also impact the aquaculture business. Changes in water temperatures could affect the timing of reproduction and growth of various fish species, as well as trigger the outbreak of certain waterborne diseases.
Our year-over-year total revenue growth was unfavorably impacted by 1% from changes in foreign currency values relative to the U.S. dollar. 34 | Table of Contents Our strategic pillars Our vision is to be the most trusted and valued animal health company, shaping the future of animal care through our innovation, customer obsession and purpose-driven colleagues.
Our year-over-year total revenue growth was unfavorably impacted by 3% from changes in foreign currency values relative to the U.S. dollar.
We have a global presence in both developed and emerging markets and across eight core species.
Our strategic pillars Our vision is to be the most trusted and valued animal health company, shaping the future of animal care through our innovation, customer obsession and purpose-driven colleagues. We have a global presence in both developed and emerging markets and across eight core species.
We have approximately 300 product lines that we sell in over 100 countries for the prediction, prevention, detection and treatment of diseases and conditions that affect various companion animal and livestock species. The diversity of our product portfolio and our global operations provides stability to our overall business.
The diversity of our product portfolio and our global operations provides stability to our overall business.
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For instance, in livestock, impacts on our revenue that may result from disease outbreaks or weather conditions in a particular market or region are often offset by increased sales in other regions from exports and other species as consumers shift to other animal proteins.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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We believe we are an industry leader in animal health R&D, with a track record of generating new products and product lifecycle innovation. The majority of our R&D programs focus on new products.
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This trend has been demonstrated by the shift away from the veterinarian distribution channel in the sale of flea and tick products in recent years and has been accelerated by the increase in e-commerce during the COVID-19 pandemic.
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We depend on positive perceptions of the safety and quality of our products by our customers, veterinarians and end-users. In addition, negative beliefs about animal health products generally could impact demand for our products.
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Antibacterials refer to small molecules that can be used to treat or prevent bacterial infections and are a sub-categorization of the products that make up our anti-infectives and medicated feed additives portfolios.
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For example, drought conditions could negatively impact, among other things, the supply of corn and the availability of grazing pastures. A decrease in harvested corn results in higher corn prices, which could negatively impact the profitability of livestock producers of cattle, pork and poultry.
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Higher corn prices and reduced availability of grazing pastures contribute to reductions in herd or flock sizes that in turn result in less spending on animal health products. As such, a prolonged drought could have an adverse impact on our operating results and financial condition. Adverse weather conditions, natural disasters and climate change may also impact the aquaculture business.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 100-basis point increase or (decrease) in SOFR-based interest rates would have resulted in a increase or (decrease) in the fair value of our forward-starting interest rate swaps by $6 million and $(7) million, respectively at December 31, 2023. At December 31, 2023, our cash equivalents were primarily invested in money market funds.
Biggest changeA 100-basis point increase or (decrease) in SOFR-based interest rates would have resulted in a increase or (decrease) in the fair value of our forward-starting interest rate swaps by $20 million and $(23) million, respectively at December 31, 2024. At December 31, 2024, our cash equivalents were primarily invested in money market funds.
If the U.S. dollar were to strengthen or weaken against all other currencies by 10%, the fair value of these contracts would decrease or increase, respectively, by $11 million. The foreign currency gains and losses on the assets and liabilities are recorded in Other (income)/deductions-net . See Notes to Consolidated Financial Statements— Note 9. Financial Instruments: B.
If the U.S. dollar were to strengthen or weaken against all other currencies by 10%, the fair value of these contracts would decrease or increase, respectively, by $33 million. The foreign currency gains and losses on the assets and liabilities are recorded in Other (income)/deductions-net . See Notes to Consolidated Financial Statements— Note 9. Financial Instruments: B.
Additionally, as of December 31, 2023, because we held certain interest rate swap agreements that have the economic effect of modifying the fixed-interest obligations associated with our 3.900% Senior Notes due 2028 and our 2.00% Senior Notes due 2030, a portion of the fixed-rate interest payable on these senior notes effectively became variable based on SOFR.
Additionally, as of December 31, 2024, because we held certain interest rate swap agreements that have the economic effect of modifying the fixed-interest obligations associated with our 3.900% Senior Notes due 2028 and our 2.00% Senior Notes due 2030, a portion of the fixed-rate interest payable on these senior notes effectively became variable based on SOFR.
As of December 31, 2023, if SOFR-based interest rates would have been higher by 100 basis points, the change would have increased our interest expense annually by approximately $3 million, as it relates to our fixed to floating interest rate swap agreements. See Notes to Consolidated Financial Statements— Note 9. Financial Instruments .
As of December 31, 2024, if SOFR-based interest rates would have been higher by 100 basis points, the change would have increased our interest expense annually by approximately $3 million, as it relates to our fixed to floating interest rate swap agreements. See Notes to Consolidated Financial Statements— Note 9. Financial Instruments .
These contracts are used to offset the potential earnings effects from mostly intercompany short-term foreign currency assets and liabilities that arise from operations but are not designated as hedges. Our foreign currency forward-exchange contracts at December 31, 2023 were analyzed to determine their sensitivity to foreign exchange rate changes.
These contracts are used to offset the potential earnings effects from mostly intercompany short-term foreign currency assets and liabilities that arise from operations but are not designated as hedges. Our foreign currency forward-exchange contracts at December 31, 2024 were analyzed to determine their sensitivity to foreign exchange rate changes.
If the U.S. dollar were to strengthen or weaken against all other currencies by 10%, the amount recorded in cumulative translation adjustment (CTA) within Accumulated other comprehensive loss related to our net investment hedge would increase or decrease, respectively, by approximately $82 million.
If the U.S. dollar were to strengthen or weaken against all other currencies by 10%, the amount recorded in cumulative translation adjustment (CTA) within Accumulated other comprehensive loss related to our net investment hedge would increase or decrease, respectively, by approximately $91 million.
At December 31, 2023, there were no commercial paper borrowings outstanding and no outstanding principal balance under our revolving credit facility. By entering into the aforementioned swap arrangements, we have assumed risks associated with variable interest rates based upon SOFR.
At December 31, 2024, there were no commercial paper borrowings outstanding and no outstanding principal balance under our revolving credit facility. By entering into the aforementioned swap arrangements, we have assumed risks associated with variable interest rates based upon SOFR.
Our foreign exchange derivative instruments at December 31, 2023 were analyzed to determine their sensitivity to foreign exchange rate changes.
Our foreign exchange derivative instruments at December 31, 2024 were analyzed to determine their sensitivity to foreign exchange rate changes.
Interest paid on such funds fluctuates with the prevailing interest rate. 52 | Table of Contents
Interest paid on such funds fluctuates with the prevailing interest rate. 51 | Table of Contents

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