Zoetis Inc

Previous wording

A summary of our 2024 performance compared with the comparable 2023 period follows:

Current wording

A summary of our 2024 performance compared with the comparable 2023 periods follows:

Previous wording

Our quarterly financial results are subject to variability related to a number of factors including, but not limited to: the decline in global macroeconomic conditions, inflation, Russia’s invasion of Ukraine, the regional conflict in the Middle East, geopolitical tensions with and economic uncertainty in China, global supply chain disruption, variability in distributor inventory stocking levels as a result of expected demand and promotional activities, weather patterns, herd management decisions, regulatory actions, competitive dynamics, disease outbreaks, product and geographic mix, timing of price increases and timing of investment decisions.

Current wording

Our quarterly financial results are subject to variability related to a number of factors including, but not limited to: the decline in global macroeconomic conditions, the regional conflict in the Middle East, geopolitical tensions with and economic uncertainty in China, Russia’s invasion of Ukraine, inflation, global supply chain disruption, variability in distributor inventory stocking levels as a result of expected demand and promotional activities, weather patterns, herd management decisions, regulatory actions, competitive dynamics, disease outbreaks, product and geographic mix, timing of price increases and timing of investment decisions.

Previous wording

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 three months ended March 31, 2024, approximately 43% of our revenue was denominated in foreign currencies. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. As we operate in multiple foreign currencies, including the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese renminbi, euro and other currencies, changes in those currencies relative to the U.S. dollar, including, for example the devaluation of the Argentine peso, will impact our revenue, cost of goods and expenses, and consequently, net income. 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 three months ended March 31, 2024, approximately 57% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was unfavorably impacted by approximately 2% from changes in foreign currency values relative to the U.S. dollar. For operations in highly inflationary economies, we translate monetary items at rates in effect at the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net, and we translate non-monetary items at historical rates.

Current wording

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 six months ended June 30, 2024, approximately 42% of our revenue was denominated in foreign currencies. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. As we operate in multiple foreign currencies, including the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese renminbi, euro and other currencies, changes in those currencies relative to the U.S. dollar will impact our revenue, cost of goods and expenses, and consequently, net income. 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 six months ended June 30, 2024, approximately 58% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was unfavorably impacted by approximately 3% from changes in foreign currency values relative to the U.S. dollar. For operations in highly inflationary economies, we translate monetary items at rates in effect at the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net, and we translate non-monetary items at historical rates.

Previous wording

Adjusted net income and the corresponding adjusted earnings per share (EPS) are non-GAAP financial measures of performance used by management. We believe these financial measures are useful supplemental information to investors when considered together with our U.S. GAAP financial measures. 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.

Current wording

Adjusted net income and the corresponding adjusted earnings per share (EPS) are non-GAAP financial measures of performance used by management. We believe these financial measures are useful supplemental information to investors when considered together with our U.S. GAAP financial measures. 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 and divestiture-related costs and certain significant items.

Previous wording

We recognize that, as an internal measure of performance, the adjusted net income and adjusted EPS measures have limitations, and we do not restrict our performance management process solely to these metrics. A limitation of the adjusted net income and adjusted EPS measures is that they provide a view of our operations without including all events during a period, such as the effects of an acquisition or amortization of purchased intangibles, and do not provide a comparable view of our performance to other companies. The adjusted net income and adjusted EPS measures are not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis and reported EPS. See the Adjusted Net Income section below for more information.

Current wording

We recognize that, as an internal measure of performance, the adjusted net income and adjusted EPS measures have limitations, and we do not restrict our performance management process solely to these metrics. A limitation of the adjusted net income and adjusted EPS measures is that they provide a view of our operations without including all events during a period, such as the effects of an acquisition, divestiture or amortization of purchased intangibles, and do not provide a comparable view of our performance to other companies. The adjusted net income and adjusted EPS measures are not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis and reported EPS. See the Adjusted Net Income section below for more information.

Previous wording

Total revenue increased by $190 million, or 10%, in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, an increase of $239 million, or 12%, on an operational basis. Operational revenue growth was comprised primarily of the following:

Current wording

Total revenue increased by $181 million, or 8%, in the three months ended June 30, 2024, compared with the three months ended June 30, 2023, an increase of $243 million, or 11%, on an operational basis. Operational revenue growth was comprised primarily of the following:

Previous wording

•volume growth from key dermatology products of approximately 3%,

Current wording

•volume growth from key dermatology products of approximately 2%,

Previous wording

Foreign exchange decreased reported revenue growth by approximately 2%.

Current wording

Foreign exchange decreased reported revenue growth by approximately 3%.

Previous wording

Cost of sales as a percentage of revenue remained flat at 29.4% in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, primarily as a result of:

Current wording

Cost of sales as a percentage of revenue was 28.3% in the three months ended June 30, 2024, compared with 27.8% in the three months ended June 30, 2023. The increase was primarily as a result of:

Previous wording

SG&A expenses increased by $42 million, or 8%, in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, primarily as a result of:

Current wording

SG&A expenses increased by $25 million, or 4%, in the three months ended June 30, 2024, compared with the three months ended June 30, 2023, primarily as a result of:

Previous wording

•higher selling and distribution costs; and

Current wording

•higher selling and distribution costs;

Previous wording

R&D expenses increased by $20 million, or 14%, in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, primarily as a result of:

Current wording

R&D expenses increased by $25 million, or 17%, in the three months ended June 30, 2024, compared with the three months ended June 30, 2023, primarily as a result of:

Previous wording

•higher spend in project investments; and

Current wording

•higher spend in project investments;

Previous wording

•increased costs due to recent acquisitions;

Current wording

•increased costs due to recent acquisitions; and

Previous wording

For the three months ended March 31, 2023, primarily consisted of employee termination costs related to organizational structure refinements.

Current wording

Restructuring charges and certain acquisition and divestiture-related costs were $42 million and $8 million in the three months ended June 30, 2024 and 2023, respectively. Restructuring charges and certain acquisition and divestiture-related costs for the three months ended June 30, 2024 primarily consisted of employee termination costs related to organizational structure refinements, as well as costs related to the planned sale of our medicated feed additive product portfolio, certain water soluble products and related assets. Restructuring charges and certain acquisition and divestiture-related costs in the three months ended June 30, 2023 primarily consisted of employee termination costs related to organizational structure refinements and costs related to the acquisition of Jurox.

Previous wording

Restructuring charges and certain acquisition-related costs were $4 million and $21 million in the three months ended March 31, 2024 and 2023, respectively. Restructuring charges and certain acquisition-related costs for the three months ended March 31, 2024 primarily consisted of employee termination costs related to organizational structure refinements, partially offset by a reversal of certain employee termination costs as a result of a change in strategy from our 2015 operational efficiency initiative. Restructuring charges and certain acquisition-related costs in the three months ended March 31, 2023 primarily consisted of employee termination costs related to organizational structure refinements.

Current wording

Restructuring charges and certain acquisition and divestiture-related costs were $46 million and $29 million in the six months ended June 30, 2024 and 2023, respectively. Restructuring charges and certain acquisition and divestiture-related costs for the six months ended June 30, 2024 primarily consisted of employee termination costs related to organizational structure refinements, as well as costs related to the planned sale of our medicated feed additive product portfolio, certain water soluble products and related assets, partially offset by a reversal of certain employee termination costs as a result of a change in strategy from our 2015 operational efficiency initiative. Restructuring charges and certain acquisition and divestiture-related

Previous wording

Interest expense, net of capitalized interest, decreased in the three months ended March 31, 2024 versus the comparable prior year period. Thedecreasewas primarily as a result of a higher debt balance during a portion of the prior year period.

Current wording

Interest expense, net of capitalized interest, decreased in the six months ended June 30, 2024 versus the comparable prior year period. The decrease was primarily as a result of a higher debt balance during a portion of the prior year period.

Previous wording

The change in Other (income)/deductions—netin the three months ended March 31, 2024 versus the comparable prior year period was primarily as a result of royalty-related income in the prior year period that was predominantly associated with a settlement received from a third-party for underpayment of royalties related to prior periods, as well as higher foreign currency losses in the current period.

Current wording

The change in Other (income)/deductions—netin the six months ended June 30, 2024 versus the comparable prior year period was primarily as a result of a gain on the sale of a majority interest in our pet insurance business, royalty-related income in the prior year period that was predominantly associated with a settlement received from a third-party for underpayment of royalties related to prior periods, a loss on assets held for sale related to the planned sale of our medicated feed additive product portfolio, certain water soluble products and related assets, as well as higher foreign currency losses and certain asset impairment charges related to our aquaculture business in the current period, partially offset by certain asset impairment charges related to our precision animal health business in the prior year period.

Previous wording

The global minimum tax provisions (Pillar Two) resulting from the OECD Base Erosion and Profit Shifting project are effective beginning in 2024 and the impact of these provisions is included in our effective tax rate for the three months ended March 31, 2024.

Current wording

The global minimum tax provisions (Pillar Two) resulting from the OECD Base Erosion and Profit Shifting project are effective beginning in 2024 and the impact of these provisions is included in our effective tax rate for the three and six months ended June 30, 2024.

Previous wording

Our effective tax rate was 19.8% and 20.9% for the three months ended March 31, 2024 and 2023, respectively. The lower effective tax rate for the three months ended March 31, 2024, compared with the three months ended March 31, 2023, was primarily attributable to a higher benefit in the U.S. related to foreign-derived intangible income and a more favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs). 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.

Current wording

Our effective tax rate was 20.0% and 23.2% for the three months ended June 30, 2024 and 2023, respectively. The lower effective tax rate for the three months ended June 30, 2024, compared with the three months ended June 30, 2023, was primarily attributable to lower net discrete tax expenses, a higher benefit in the U.S. related to foreign-derived intangible income and a more favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs). 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.

Previous wording

•Livestock revenue declined due to declines in sales of cattle, swine and poultry products. Sales of cattle products declined due to price and timing of prior year supply. Sales of swine products declined due to lower sales of vaccines, anti-infectives and price. Sales of products in our poultry portfolio declined due to lower sales of medicated feed additives, vaccines and biodevices.

Current wording

•Livestock growth was due to increased sales of cattle and swine products, partially offset by lower sales of poultry products. Sales of cattle and swine products grew due to supply availability in the current year compared to the prior year period. Sales of products in our poultry portfolio declined due to lower sales of medicated feed additives.

Previous wording

International segment revenue increased by $29 million, or 3%, in the three months ended March 31, 2024, compared with the three months ended March 31, 2023. Operational revenue increased by $79 million, or 8%, driven by growth of $70 million in companion animal products and $9 million in livestock products.

Current wording

International segment revenue increased by $40 million, or 4%, in the three months ended June 30, 2024, compared with the three months ended June 30, 2023. Operational revenue increased by $101 million, or 10%, driven by growth of $62 million in companion animal products and $39 million in livestock products.

Previous wording

•Companion animal operational revenue growth was driven primarily by the growth in sales of our mAb products for OA pain, Librela and Solensia, as well as growth in sales of key dermatology, vaccine products and small animal parasiticides.

Current wording

•Companion animal operational revenue growth was driven primarily by the growth in sales of key dermatology products, our mAb products for OA pain, Librela and Solensia, vaccine products and small animal parasiticides.

Previous wording

•Livestock operational revenue growth was due to increased sales of cattle and poultry products, partially offset by declines in sheep, swine and fish products. Sales of cattle products grew due to price, partially offset by volume declines as compared to the prior year period and unfavorable market conditions. Sales of products in our poultry portfolio grew due to price and demand generation efforts in key poultry

Current wording

•Livestock operational revenue growth was due to increased sales of cattle, poultry and fish products, partially offset by declines in sheep products. Sales of cattle products grew primarily due to price and improved market conditions, partially offset by prior year supply recoveries. Sales of products in our poultry portfolio grew primarily due to price and demand generation efforts in key poultry markets. Sales of products in our fish portfolio grew due to increased vaccine sales in Norway, partially offset by lower sales of anti-infective products in Chile. Sales of sheep products declined due to supply constraints.

Previous wording

•Additionally, International segment revenue was unfavorably impacted by foreign exchange which decreased revenue by $50 million, or 5%, primarily driven by the Argentinian peso, Turkish lira, Japanese yen, Chinese renminbi and Russian ruble.

Current wording

•Additionally, International segment revenue was unfavorably impacted by foreign exchange which decreased revenue by $61 million, or 6%, primarily driven by the Argentinian peso, Turkish lira, Japanese yen, Chinese renminbi and Russian ruble.

Previous wording

International segment earnings were flat in the three months ended March 31, 2024, compared with the three months ended March 31, 2023. Operational earnings growth was $46 million, or 9%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses.

Current wording

International segment earnings increased by $3 million, or 1%, in the three months ended June 30, 2024, compared with the three months ended June 30, 2023. Operational earnings growth was $57 million, or 11%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses.

Previous wording

•Companion animal revenue increased due to growth in sales of Simparica Trio, key dermatology, our mAb products for osteoarthritis (OA) pain, Librela and Solensia and small animal vaccines, partially offset by lower sales of small animal diagnostics and our small animal antiemetic product, Cerenia. Growth in the quarter was also due in part to a favorable comparative period in the prior year that was negatively impacted by distributor de-stocking, timing of promotional activity and pricing dynamics.

Current wording

•Companion animal revenue increased 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 antiemetic product, Cerenia, and small animal diagnostics.

Previous wording

25 | markets. Sales of sheep products declined primarily as a result of unfavorable weather and supply constraints. Sales of swine products declined due to lower sales in China and generic competition, partially offset by price. The decline in our fish portfolio was primarily as a result of lower sales of anti-infective products in Chile, partially offset by increased vaccine sales in Norway.

Current wording

•Livestock operational revenue growth was due to increased sales of cattle, poultry and fish products, partially offset by declines in sheep and swine products. Sales of cattle products grew due to price, partially offset by volume declines as compared to the prior year period due to prior year supply recoveries. Sales of products in our poultry portfolio grew due to price and demand generation efforts in key poultry markets. Sales of our fish portfolio grew due to increased vaccine sales in Norway, partially offset by lower sales of anti-infective products in Chile. Sales of sheep products declined primarily due to supply constraints. Sales of swine products declined due to lower sales in China, partially offset by price.

Previous wording

U.S. segment earnings increased by $142 million, or 23%, in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses.

Current wording

International segment earnings increased by $3 million, or 0%, in the six months ended June 30, 2024, compared with the six months ended June 30, 2023. Operational earnings growth was $103 million, or 10%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses.

Previous wording

Other business activities net loss increased by $18 million in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, reflecting an increase in R&D costs due to an increase in certain compensation-related costs to support innovation, higher project investments and other operating costs.

Current wording

Other business activities net loss increased by $26 million in the three months ended June 30, 2024, compared with the three months ended June 30, 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.

Previous wording

•Certain transactions and events such as Purchase accounting adjustments, Acquisition-related activities and Certain significant items, which are defined below; and

Current wording

•Certain transactions and events such as Purchase accounting adjustments, Acquisition and divestiture-related costs and Certain significant items, which are defined below; and

Previous wording

Other unallocated expenses increased by $16 million, or 25%, in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, primarily due to unfavorable foreign exchange and higher manufacturing costs, partially offset by lower freight charges and lower inventory obsolescence, scrap and other charges.

Current wording

Other unallocated expenses increased by $6 million, or 11%, in the three months ended June 30, 2024, compared with the three months ended June 30, 2023, primarily due to unfavorable foreign exchange, higher manufacturing costs, higher inventory obsolescence, scrap and other charges, partially offset by lower freight charges.

Previous wording

Corporate expenses increased by $80 million, or 38%, in the three months ended March 31, 2024, compared with the three months ended March 31, 2023, primarily associated with a settlement received from a third-party for underpayment of royalties in the prior year period, higher compensation-related costs, unfavorable foreign exchange and investments in information technology.

Current wording

Corporate expenses increased by $123 million, or 27%, in the six months ended June 30, 2024, compared with the six months ended June 30, 2023, primarily due to higher compensation-related costs, a settlement received from a third-party for underpayment of royalties in the prior year period, unfavorable foreign exchange and investments in information technology.

Previous wording

26 | any other differences in experience that might have occurred if we had discovered and developed those intangible assets on our own, and this approach does not intend to be representative of the results that would have occurred in those circumstances. For example, our R&D costs in total, and in the periods presented, may have been different; our speed to commercialization and resulting revenue, if any, may have been different; or our costs to manufacture may have been different. In addition, our marketing efforts may have been received differently by our customers. As such, in total, there can be no assurance that our adjusted net income amounts would have been the same as presented had we discovered and developed the acquired intangible assets.

Current wording

A completely accurate comparison of internally developed intangible assets and acquired intangible assets cannot be achieved through adjusted net income. These components of adjusted net income are derived solely from the impact of the items listed above. We have not factored in the impact of any other differences in experience that might have occurred if we had discovered and developed those intangible assets on our own, and this approach does not intend to be representative of the results that would have occurred in those circumstances. For example, our R&D costs in total, and in the periods presented, may have been different; our speed to commercialization and resulting revenue, if any, may have been different; or our costs to manufacture may have been different. In addition, our marketing efforts may have been received differently by our customers. As such, in total, there can be no assurance that our adjusted net income amounts would have been the same as presented had we discovered and developed the acquired intangible assets.

Previous wording

Adjusted net income is calculated prior to considering transaction and integration costs associated with significant business combinations or net asset acquisitions because these costs are unique to each transaction and represent costs that were incurred to acquire and integrate certain businesses as a result of the acquisition decision. We have made no adjustments for the resulting synergies.

Current wording

Adjusted net income is calculated prior to considering transaction, integration and disintegration costs associated with significant business combinations, net asset acquisitions and divestitures. These incremental costs are excluded as they are incurred to acquire and integrate, or dispose and disintegrate, certain businesses as a result of the acquisition or disposal decision and are unique to each transaction. We have made no adjustments for the resulting synergies from these transactions.

Previous wording

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. For this reason, we believe that the costs incurred to convert disparate systems, to close duplicative facilities or to eliminate duplicate positions (for example, in the context of a business combination) can be viewed differently from those costs incurred in the ordinary course of business.

Current wording

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. For this reason, we believe that the costs incurred to convert disparate systems, to close duplicative facilities or to eliminate duplicate positions (for example, in the context of a business combination) can be viewed differently from those costs incurred in the ordinary course of business.

Previous wording

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. 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. Food and Drug Administration and/or other regulatory authorities.

Current wording

32 | actions, the span of time needed to achieve certain restructuring, integration or disintegration activities can be lengthy. 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. Food and Drug Administration and/or other regulatory authorities.

Previous wording

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. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be nonrecurring; or items that relate to products that we no longer sell. 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. GAAP; certain asset impairment charges; adjustments related to the resolution of certain tax positions; significant currency devaluation; the impact of adopting certain significant, event-driven tax legislation; or charges related to legal matters. See Notes to Condensed Consolidated Financial Statements—Note 15. Commitments and Contingencies. 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.

Current wording

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. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be nonrecurring; or items that relate to products that we no longer sell. 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. GAAP; certain asset impairment charges; adjustments related to the resolution of certain tax positions; significant currency devaluation; the impact of adopting certain significant, event-driven tax legislation; or charges related to legal matters. See Notes to Condensed Consolidated Financial Statements—Note 15. Commitments and Contingencies. 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.

Previous wording

(a)The effective tax rate on adjusted pretax income was 19.7% and 20.5% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(a)The effective tax rate on adjusted pretax income was 20.1% and 21.5% for the three months ended June 30, 2024 and 2023, respectively, and 19.9% and 21.0% for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

The lower effective tax rate for the three months ended March 31, 2024, compared with the three months ended March 31, 2023, was primarily attributable to a higher benefit in the U.S. related to foreign-derived intangible income and a more favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs). Jurisdictional mix of earnings can vary depending on repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible and non-taxable items.

Current wording

The lower effective tax rate for the three and six months ended June 30, 2024, compared with the three and six months ended, June 30, 2023, was primarily attributable to lower net discrete tax expenses, a higher benefit in the U.S. related to foreign-derived intangible income and a more favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs). Jurisdictional mix of earnings can vary depending on repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible and non-taxable items.