Zoetis Inc.
For the period ended Jun 30, 2025. Filed Aug 5, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 5, 2025
ZTS$79.40-3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-06.
0001555280-25-000203
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-05.
0001555280-25-000261
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 195 previous paragraphs and 235 current paragraphs.
142 unchanged; 42 reworded; 28 added; 8 removed; 3 previous and 23 current paragraphs rearranged.
Tables are not compared: 21 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
•price growth of approximately 4%;
Current report
Cost of sales as a percentage of revenue was 27.2% in the six months ended June 30, 2025, compared with 28.8% in the six months ended June 30, 2024. The decrease was primarily a result of:
Current report
•price increases,
Current report
•unfavorable manufacturing and other costs.
Current report
•higher other general and administrative costs,
Current report
•lower bad debt expense; and
Current report
SG&A expenses increased by $52 million, or 5%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, primarily as a result of:
Current report
•higher advertising and promotion expenses;
Current report
•higher other general and administrative costs,
Current report
•lower bad debt expense.
Current report
•higher depreciation expense.
Current report
U.S. operating segment
Current report
U.S. segment revenue increased by $68 million, or 3%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, reflecting an increase of $171 million in companion animal products, partially offset by a $103 million reduction in livestock products.
Current report
International operating segment
Current report
International segment revenue increased by $36 million in the six months ended June 30, 2025 compared with the six months ended June 30, 2024. Operational revenue increased by $122 million, or 6%, driven by growth of $100 million in companion animal products and $22 million in livestock products.
Current report
Corporate expenses increased by $5 million, or 1%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, primarily due to increased investments in information technology.
Current report
(b) For the three and six months ended June 30, 2025, primarily consisted of employee termination costs related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site.
Current report
(c)Represents costs related to our multi-year business process transformation program, which includes the implementation of a new enterprise resource planning (ERP) system, related digital technology solutions and other related costs. This comprehensive program is a major global and cross-functional company-wide effort that we believe will transform how we work across our business and contribute to all of our strategic priorities. Due to the nature, scope and magnitude of this investment, these costs are incremental transformational costs that are far in excess of the historical normal level of spending to support operations and are not expected to recur in the foreseeable future.
Current report
(d)For the three and six months ended June 30, 2025, represents certain asset impairment charges related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site, as well as charges related to our aquaculture product portfolio.
Current report
For the three and six months ended June 30, 2024, represents certain asset impairment charges related to our aquaculture product portfolio.
Current report
(e) Represents a net loss related to the sale of our medicated feed additive product portfolio, certain water soluble products and related assets sold in 2024.
Current report
Accounts receivable, less allowance for doubtful accounts increased primarily as a result of higher net sales in the period.
Current report
Inventories increased as a result of inventory build-up to support production for the forecasted demand of certain products.
Current report
Other current assets increased primarily due to the timing of income taxes paid and 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 adjustments of derivative instruments.
Current report
The increase in Operating lease right-of-use assets reflects assets acquired through new and amended lease agreements, partially offset by lease amortization, while the increase in Operating lease liabilities primarily reflects an amended lease obligation in the current period, partially offset by lease payments.
Current report
Other noncurrent assets increased primarily due to capitalized cloud computing arrangements implementation costs, partially offset by the mark-to-market adjustments of derivative instruments.
Current report
Accounts payable increased as a result of the timing of vendor and value-added tax payments.
Current report
Other noncurrent liabilities increased primarily due to the mark-to-market adjustments of derivative instruments.
Removed paragraphs (8)
Previous report
partially offset by
Previous report
•favorable foreign exchange,
Previous report
•higher inventory charges.
Previous report
•higher professional and consulting fees,
Previous report
*Calculation not meaningful
Previous report
Other current assets increased primarily due to higher prepaid expenses 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 adjustments of derivative instruments.
Previous report
Other noncurrent assets decreased primarily due to the mark-to-market adjustments of derivative instruments.
Previous report
Other current liabilities decreased primarily due to a decrease in collateral received related to derivative contracts, partially offset by the mark-to-market adjustments of derivative instruments.
Reworded paragraphs (42)
Previous wording
Our quarterly financial results are subject to variability related to a number of factors including, but not limited to: tariffs and other trade protection measures, the decline in global macroeconomic conditions, competitive dynamics, geopolitical tensions with and economic uncertainty in China, 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, 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: tariffs and other trade protection measures, the decline in global macroeconomic conditions, competitive dynamics, geopolitical tensions with and economic uncertainty in certain markets, 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, disease outbreaks, product and geographic mix, timing of price increases and timing of investment decisions.
Previous wording
Our business is subject to risks related to, among other factors, tariffs and other trade protection measures put in the place by the United States or other countries, as well as U.S. international trade relations, including those with China, Canada and the European Union. Starting in early 2025, the United States government announced additional tariffs on certain goods imported into the U.S. from numerous countries and multiple nations countered with reciprocal tariffs and other actions in response. While the final tariffs and other measures to be imposed, and their applicability to our business, remain uncertain, such actions may negatively impact demand and result in an increase in some product costs. We will continue to actively monitor the situation and evaluate actions that can be taken to moderate and/or minimize its effects. For further information regarding the impact of potential additional tariffs and trade protection measures on the Company, see Part II., Item 1A, Risk Factors in this Quarterly Report on Form 10-Q.
Current wording
United States government announced additional tariffs on certain goods imported into the U.S. from numerous countries and multiple nations countered with reciprocal tariffs and other actions in response. While the final tariffs and other measures to be imposed, and their applicability to our business, remain uncertain, such actions may negatively impact demand and result in an increase in some product costs. We will continue to actively monitor the situation and evaluate actions that can be taken to moderate and/or minimize its effects. For further information regarding the impact of potential additional tariffs and trade protection measures on the Company, see Part II., Item 1A, Risk Factors in this Quarterly Report on Form 10-Q.
Previous wording
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. Outbreaks of disease may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our products. Also, the outbreak of any highly contagious
Current wording
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. Outbreaks of disease may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our products. Also, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere. Alternatively, sales of products that treat specific disease outbreaks may increase.
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, 2025, 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 three months ended March 31, 2025, approximately 58% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was unfavorably impacted by approximately 4% 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, 2025, approximately 41% 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, 2025, approximately 59% 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.
Previous wording
Total revenue increased by $30 million, or 1%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, an increase of $103 million, or 5%, on an operational basis. Operational revenue growth was primarily due to the following:
Current wording
Total revenue increased by $99 million, or 4%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, an increase of $113, or 5%, on an operational basis. Operational revenue growth was primarily due to the following:
Previous wording
•volume growth from key franchises of approximately 4%; and
Current wording
•volume growth from key franchises of approximately 3%; and
Previous wording
•volume growth from other in-line products of approximately 1%,
Current wording
•volume growth from other in-line products of approximately 2%,
Previous wording
Foreign exchange decreased reported revenue growth by approximately 4%.
Current wording
Foreign exchange decreased reported revenue growth by approximately 1%.
Previous wording
Cost of sales as a percentage of revenuewas 28.0% in the three months ended March 31, 2025, compared with 29.4% in the three months ended March 31, 2024. The decrease was primarily a result of:
Current wording
Cost of sales as a percentage of revenue was 26.4% in the three months ended June 30, 2025, compared with 28.3% in the three months ended June 30, 2024. The decrease was primarily a result of:
Previous wording
•unfavorable manufacturing and other costs; and
Current wording
•unfavorable manufacturing and other costs.
Previous wording
SG&A expenses increased by $16 million, or 3%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, primarily as a result of:
Current wording
SG&A expenses increased by $36 million, or 6%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, primarily as a result of:
Previous wording
R&D expenses decreased by $5 million, or 3%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, primarily as a result of:
Current wording
R&D expenses decreased by $4 million, or 1%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, primarily as a result of:
Previous wording
Amortization of intangible assets decreased in the three months ended versus the comparable prior year period primarily due to assets that became fully amortized in the prior year.
Current wording
Amortization of intangible assets decreased in the three and six months ended June 30, 2025 and 2024 versus the comparable prior year periods primarily due to assets that became fully amortized in the prior year.
Previous wording
Restructuring charges and certain acquisition and divestiture-related costs were $4 million in the three months ended March 31, 2024. Restructuring charges and certain acquisition and divestiture-related costs for the three months ended March 31, 2024 primarily consisted of employee termination
Current wording
Restructuring charges and certain acquisition and divestiture-related costs in the three and six months ended June 30, 2025 primarily consisted of asset impairment charges and employee termination costs related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site.
Previous wording
22 | 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.
Current wording
Restructuring charges and certain acquisition and divestiture-related costs in the three and six months ended June 30, 2024 primarily consisted of employee termination costs related to organizational structure refinements, as well as costs related to the MFA divestiture. Restructuring charges and certain acquisition and divestiture-related costs for the six months ended June 30, 2024 were partially offset by a reversal of certain employee termination costs as a result of a change in strategy from our 2015 operational efficiency initiative.
Previous wording
Interest expense, net of capitalized interest, decreased by $4 million, or 7%, in the three months ended March 31, 2025 versus the comparable prior year period primarily as a result of higher capitalized interest in the current period associated with capital projects to support our future growth.
Current wording
Interest expense, net of capitalized interest, decreased in the three and six months ended June 30, 2025 versus the comparable prior year periods primarily as a result of higher capitalized interest in the current periods associated with capital projects to support our future growth.
Previous wording
The change in Other (income)/deductions—netin the three months ended March 31, 2025 versus the comparable prior year period was primarily as a result of lower foreign currency losses in the current period, partially offset by lower interest income in the current period.
Current wording
The change in Other (income)/deductions—netin the three and six months ended June 30, 2025 versus the comparable prior year periods was primarily as a result of the net loss on the sale of our medicated feed additive product portfolio, certain water soluble products and related assets sold in 2024 and lower foreign currency losses in the current periods, partially offset by lower interest income in the current periods.
Previous wording
Our effective tax rate was 22.1% and 19.8% for the three months ended March 31, 2025 and 2024, respectively. The higher effective tax rate for the three months ended March 31, 2025, compared with the three months ended March 31, 2024, was primarily attributable to higher net discrete tax expenses, less favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs) and a lower benefit in the U.S. related to foreign-derived intangible income. 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 20.4% and 20.0% for the three months ended June 30, 2025 and 2024, respectively, and 21.2% and 19.9% for the six months ended June 30, 2025 and 2024, respectively. The higher effective tax rate for the three and six months ended June 30, 2025, compared with the three and six months ended June 30, 2024, was primarily attributable to a lower benefit in the U.S. related to foreign-derived intangible income, higher net discrete tax expenses, partially offset by a more favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions).
Previous wording
U.S. segment revenue increased by $20 million, or 2%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, reflecting an increase of $75 million in companion animal products, partially offset by a $55 million reduction in livestock products.
Current wording
U.S. segment revenue increased by $48 million, or 4%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, reflecting an increase of $96 million in companion animal products, partially offset by a $48 million reduction in livestock products.
Previous wording
•Companion animal revenue growth was primarily due to increased sales of Simparica Trio®, small animal diagnostics, key dermatology products and our mAb products for OA pain, Librela® and Solensia®, partially offset by lower sales of our small animal vaccines.
Current wording
•Companion animal revenue increased primarily due to increased sales of Simparica Trio®, key dermatology products and small animal vaccines, partially offset by lower sales of our mAb products for OA pain, Librela® and Solensia®.
Previous wording
U.S. segment earnings increased by $23 million, or 3%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, primarily due to higher revenue and lower cost of sales, partially offset by higher operating expenses, as well as the impact of the MFA divestiture.
Current wording
U.S. segment earnings increased by $58 million, or 7%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, primarily due to higher revenue and lower cost of sales, partially offset by higher operating expenses, as well as the impact of the MFA divestiture.
Previous wording
International segment revenue was relatively flat in the three months ended March 31, 2025 compared with the three months ended March 31, 2024. Operational revenue increased by $73 million, or 7%, driven by growth of $56 million in companion animal products and $17 million in livestock products.
Current wording
International segment revenue increased by $35 million in the three months ended June 30, 2025 compared with the three months ended June 30, 2024. Operational revenue increased by $49 million, or 5%, driven by growth of $44 million in companion animal products and $5 million in livestock products.
Previous wording
•Additionally, International segment revenue was unfavorably impacted by foreign exchange which decreased revenue by $72 million, or 7%, primarily driven by the Brazilian real, euro, Mexican peso, Argentinian peso and Turkish lira.
Current wording
•Additionally, International segment revenue was unfavorably impacted by foreign exchange which decreased revenue by $14 million, or 2%, primarily driven by the Brazilian real, Mexican peso, Argentinian peso and Turkish lira.
Previous wording
International segment earnings increased by $16 million, or 3%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024. Operational earnings growth was $35 million, or 7%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses, as well as the impact of the MFA divestiture.
Current wording
International segment earnings increased by $65 million, or 13%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024. Operational earnings growth was $41 million, or 8%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses, as well as the impact of the MFA divestiture.
Previous wording
•Livestock operational revenue growth was due to increased sales in our cattle and fish products, partially offset by lower sales of poultry products. Excluding the impact of the MFA divestiture, sales of cattle products grew largely due to price and sales of poultry products grew due to demand generation efforts in key poultry markets and price. Sales of our fish products grew due to increased vaccine sales in Norway.
Current wording
•Livestock operational revenue growth was due to increased sales in our cattle and fish products, partially offset by lower sales of poultry products. Excluding the impact of the MFA divestiture, livestock revenue increased across all species. Sales of cattle products grew largely due to price and sales of poultry products grew due to higher demand for vaccines in key poultry markets and price. Sales of our fish products grew due to increased vaccine sales in Norway and Chile. Sales of swine products increased due to timing of the expected impact of macroenvironment conditions, primarily in China.
Previous wording
Other business activities net loss decreased by $3 million in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, reflecting a decrease in R&D costs primarily due to timing of spend related to projects and other strategic investments, partially offset by an increase in certain compensation-related costs and depreciation expense.
Current wording
Other business activities net loss decreased by $8 million in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, reflecting a decrease in R&D costs primarily due to timing of spend related to projects and other strategic investments, partially offset by an increase in certain compensation-related costs and depreciation expense.
Previous wording
Corporate expenses decreased by $17 million, or 6%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, primarily due to favorable foreign exchange and lower compensation-related costs, partially offset by increased investments in information technology.
Current wording
Corporate expenses increased by $22 million, or 7%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, primarily due to increased investments in information technology and higher compensation related costs, partially offset by favorable foreign exchange.
Previous wording
Other unallocated expenses increased by $1 million, or 1%, in the three months ended March 31, 2025, compared with the three months ended March 31, 2024, primarily due to higher manufacturing costs and higher inventory obsolescence, scrap and other charges, partially offset by lower freight charges and favorable foreign exchange.
Current wording
Other unallocated expenses increased by $16 million, or 27%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, primarily due to higher manufacturing costs and other charges, partially offset by lower inventory obsolescence, freight charges and favorable foreign exchange.
Previous 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
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 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.
Current wording
31 | 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; costs related to our business process transformation program; amounts related to disposals of products or facilities that do not qualify as discontinued operations as defined by U.S. GAAP; certain asset impa irment 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 21.9% and 19.7% for the three months ended March 31, 2025 and 2024, respectively.
Current wording
(a)The effective tax rate on adjusted pre-tax income was 20.3% and 20.1% for the three months ended June 30, 2025 and 2024, respectively, and 21.1% and 19.9% for the six months ended June 30, 2025 and 2024, respectively.
Previous wording
The higher effective tax rate for the three months ended March 31, 2025, compared with the three months ended March 31, 2024, was primarily attributable to higher net discrete tax expenses, less favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs) and a lower benefit in the U.S. related to foreign-derived intangible income. 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 higher effective tax rate for the three and six months ended June 30, 2025, compared with the three and six months ended June 30, 2024, was primarily attributable to a lower benefit in the U.S related to foreign-derived intangible income, higher net discrete tax expenses, partially offset by a more favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, tax impact of permanent differences and repatriation decisions).
Previous wording
(b) 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.
Current wording
For the three and six months ended June 30, 2024, primarily consisted of employee termination costs related to organizational structure refinements. For the six months ended June 30, 2024, charges were partially offset by a reversal of certain employee termination costs as a result of a change in strategy from our 2015 operational efficiency initiative.
Previous wording
Accrued compensation and related items decreased primarily due to the payments of 2024 annual incentive bonuses, savings plan contributions to eligible employees and payments for sales incentive bonuses, as well as the net timing of other payroll activity, partially offset by the accrual of 2025 annual incentive bonuses, sales incentive bonuses and savings plan contributions to eligible employees.
Current wording
Accrued compensation and related items decreased primarily due to the payments of 2024 annual incentive bonuses, savings plan contributions to eligible employees and payments for sales incentive bonuses, partially offset by the accrual of 2025 annual incentive bonuses, sales incentive bonuses and savings plan contributions to eligible employees.
Previous wording
Net cash provided by operating activities was $587 million for the three months ended March 31, 2025, compared with $595 million for the three months ended March 31, 2024. The decrease in operating cash flows was primarily attributable to timing of receipts and payments in the ordinary course of business, partially offset by higher net income adjusted by non-cash items.
Current wording
Net cash provided by operating activities was $1,073 million for the six months ended June 30, 2025, compared with $1,097 million for the six months ended June 30, 2024. The decrease in operating cash flows was primarily attributable to the timing of income taxes paid, the timing of receipts and payments in the ordinary course of business and higher inventory build-up of certain products due to increased demand, partially offset by higher net income adjusted by non-cash items.
Previous wording
Our net cash used in investing activities was $175 million for the three months ended March 31, 2025, compared with net cash used in investing activities of $131 million for the three months ended March 31, 2024. The net cash used in investing activities for the three months ended March 31, 2025 and 2024 was primarily due to capital expenditures.
Current wording
Our net cash used in investing activities was $422 million for the six months ended June 30, 2025, compared with net cash used in investing activities of $263 million for the six months ended June 30, 2024. The net cash used in investing activities for the six months ended June 30, 2025 was primarily due to capital expenditures and net payments of derivative instrument activity. The net cash used in investing activities for the six months ended June 30, 2024 was primarily due to capital expenditures, partially offset by net proceeds from derivative instrument activity.
Previous wording
Our net cash used in financing activities was $677 million for the three months ended March 31, 2025, compared with net cash used in financing activities of $524 million for the three months ended March 31, 2024. The net cash used in financing activities for the three months ended March 31, 2025 was primarily attributable to the purchase of treasury shares, 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. The net cash used in financing activities for the three months ended March 31, 2024 was primarily attributable to the purchase of treasury shares, the payment of dividends and taxes paid on withholding shares, partially offset by proceeds related to short-term borrowings and proceeds in connection with the issuance of common stock under our equity incentive plan.
Current wording
Our net cash used in financing activities was $1,241 million for the six months ended June 30, 2025, compared with net cash used in financing activities of $1,287 million for the six months ended June 30, 2024. The net cash used in financing activities for the six months ended June 30, 2025 and 2024 was primarily attributable to the purchase of treasury shares, 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.
Previous wording
(a) Accounts receivable are usually collected over a period of 45 to 75 days. For the three months ended March 31, 2025 and December 31, 2024, the number of days that accounts receivables were outstanding 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. Our assessment is based on such factors as past due aging, historical and expected collection patterns, the financial condition of our customers, the robust nature of our credit and collection practices and the economic environment.
Current wording
(a) Accounts receivable are usually collected over a period of 45 to 75 days. For the six months ended June 30, 2025 and December 31, 2024, the number of days that accounts receivables were outstanding 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. Our assessment is based on such factors as past due aging, historical and expected collection patterns, the financial condition of our customers, the robust nature of our credit and collection practices and the economic environment.
Previous wording
In December 2022, we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.0 billion senior unsecured revolving credit facility (the credit facility), which expires in December 2027. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1,
Current wording
In December 2022, we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.0 billion senior unsecured revolving credit facility (the credit facility), which expires in December 2027. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition. In addition, the credit facility contains other customary covenants.
Previous wording
We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of March 31, 2025, we had access to $51 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 March 31, 2025 and December 31, 2024.
Current wording
We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of June 30, 2025, we had access to $53 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 June 30, 2025 and December 31, 2024.
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Current report — wording carried from elsewhere
Our business is subject to risks related to, among other factors, tariffs and other trade protection measures put in the place by the United States or other countries, as well as U.S. international trade relations, including those with China, Canada and the European Union. Starting in early 2025, the
Current report — wording carried from elsewhere
Total revenue increased by $129 million, or 3%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, an increase of $216 million, or 5%, on an operational basis. Operational revenue growth was primarily due to the following:
Current report — wording carried from elsewhere
•volume growth from key franchises of approximately 3%; and
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•volume growth from other in-line products of approximately 2%,
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•volume decrease related to the impact of the MFA divestiture of approximately 4%.
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Foreign exchange decreased reported revenue growth by approximately 2%.
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•favorable impact of the MFA divestiture;
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•an increase in certain compensation-related costs; and
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•an increase in certain significant items;
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•lower logistics and freight costs; and
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R&D expenses increased by $1 million, or 1%, in the three months ended June 30, 2025, compared with the three months ended June 30, 2024, primarily as a result of:
Current report — wording carried from elsewhere
•lower expenses due to timing of spend related to projects and other strategic investments,
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•an increase in certain compensation-related costs to support innovation and portfolio progression; and
Current report — wording carried from elsewhere
•Livestock revenue decreased primarily due to the impact of the MFA divestiture across cattle, poultry and swine products.
Current report — wording carried from elsewhere
•Companion animal operational revenue growth was driven primarily by increased sales of our key dermatology products and our Simparica® franchise products.
Current report — wording carried from elsewhere
•Livestock operational revenue growth was due to increased sales in our fish and swine products, partially offset by lower sales of poultry products. Excluding the impact of the MFA divestiture, livestock revenue increased across all species. Sales of swine products increased due to timing of the expected impact of macroenvironment conditions, primarily in China. Sales of our fish products grew due to increased vaccine sales in Norway and Chile. Sales of poultry products grew due to higher demand for vaccines in key poultry markets, as well as price, and sales of cattle products grew largely due to price.
Current report — wording carried from elsewhere
•Companion animal revenue growth was primarily due to increased sales of Simparica Trio, key dermatology products and small animal diagnostics, partially offset by lower sales of our small animal vaccines.
Current report — wording carried from elsewhere
U.S. segment earnings increased by $81 million, or 5%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, primarily due to higher revenue and lower cost of sales, partially offset by higher operating expenses, as well as the impact of the MFA divestiture.
Current report — wording carried from elsewhere
•Additionally, International segment revenue was unfavorably impacted by foreign exchange which decreased revenue by $86 million, or 4%, primarily driven by the Brazilian real, Mexican peso, Argentinian peso, Turkish lira, Australian dollar and Canadian dollar.
Current report — wording carried from elsewhere
International segment earnings increased by $81 million, or 8%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024. Operational earnings growth was $76 million, or 7%, primarily due to higher revenue, partially offset by higher cost of sales and operating expenses, as well as the impact of the MFA divestiture.
Current report — wording carried from elsewhere
Other business activities net loss decreased by $11 million in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, reflecting a decrease in R&D costs primarily due to timing of spend related to projects and other strategic investments, partially offset by an increase in certain compensation-related costs and depreciation expense.
Current report — wording carried from elsewhere
Other unallocated expenses increased by $17 million, or 12%, in the six months ended June 30, 2025, compared with the six months ended June 30, 2024, primarily due to higher manufacturing costs and other charges, partially offset by lower inventory obsolescence, freight charges and favorable foreign exchange.
Current report — wording carried from elsewhere
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
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
19 | disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere. Alternatively, sales of products that treat specific disease outbreaks may increase.
Previous report — wording carried elsewhere
25 | 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 report — wording carried elsewhere
29 | 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.