v3.22.2.2
Segment Information
 9 Months Ended
Sep. 30, 2022
Segment Reporting [Abstract]  
Segment Information
16. Segment Information
Operating Segments
We manage our operations through two geographic operating segments: the U.S. and International. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including parasiticides, vaccines, dermatology, anti-infectives, other pharmaceuticals, animal health diagnostics and medicated feed additives, for both companion animal and livestock customers. Our chief operating decision maker uses the revenue and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation.
Other Costs and Business Activities
Certain costs are not allocated to our operating segment results, such as costs associated with the following:
•    Other business activities, includes our Client Supply Services (CSS) contract manufacturing results, our human health business, and expenses associated with our dedicated veterinary medicine research and development organization, research alliances, U.S. regulatory affairs and other operations focused on the development of our products. Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the international commercial segment.
•    Corporate, includes enabling functions such as information technology, facilities, legal, finance, human resources, business development, certain diagnostic costs and communications, among others. These costs also include compensation costs and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense.
•Certain transactions and events such as (i) Purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition-related activities, where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs; and (iii) Certain significant items, which comprise substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis, such as restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition, certain asset impairment charges, certain legal and commercial settlements and the impact of divestiture-related gains and losses.
•Other unallocated includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) procurement costs.
Segment Assets
We manage our assets on a total company basis, not by operating segment. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment.
Selected Statement of Income Information    
Earnings
Depreciation and Amortization(a)
Three Months EndedThree Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
U.S.
Revenue$1,090 $1,065 
Cost of sales204 199 
Gross profit886 866 
    Gross margin81.3 %81.3 %
Operating expenses206 183 
Other (income)/deductions-net1 — 
U.S. Earnings679 683 $12 $13 
International
Revenue(b)
889 904 
Cost of sales256 273 
Gross profit633 631 
    Gross margin71.2 %69.8 %
Operating expenses150 152 
Other (income)/deductions-net(3)(4)
International Earnings486 483 21 17 
Total operating segments1,165 1,166 33 30 
Other business activities
(106)(106)7 6 
Reconciling Items:
Corporate
(245)(252)33 29 
Purchase accounting adjustments
(40)(45)40 45 
Acquisition-related costs
(1)(1)— — 
Certain significant items(c)
(6)(12)— — 
Other unallocated
(100)(91)2 — 
Total Earnings(d)
$667 $659 $115 $110 
(a)    Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized.
(b)    Revenue denominated in euros was $183 million and $204 million for the three months ended September 30, 2022 and 2021, respectively.
(c)    For the three months ended September 30, 2022, primarily represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, as well as asset impairment charges related to the consolidation of manufacturing sites in China.
For the three months ended September 30, 2021, primarily represents employee termination costs associated with the realignment of our international operations and asset impairment charges related to a dairy product termination.
(d)    Defined as income before provision for taxes on income.
Earnings
Depreciation and Amortization(a)
Nine Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
U.S.
Revenue$3,201 $3,002 
Cost of sales587 575 
Gross profit2,614 2,427 
    Gross margin81.7 %80.8 %
Operating expenses578 484 
Other (income)/deductions-net(6)2 
U.S. Earnings2,042 1,941 $40 $40 
International
Revenue(b)
2,780 2,750 
Cost of sales809 833 
Gross profit1,971 1,917 
    Gross margin70.9 %69.7 %
Operating expenses456 429 
Other (income)/deductions-net(5)(4)
International Earnings1,520 1,492 62 52 
Total operating segments3,562 3,433 102 92 
Other business activities
(315)(301)21 20 
Reconciling Items:
Corporate
(771)(744)99 84 
Purchase accounting adjustments
(120)(133)120 133 
Acquisition-related costs
(4)(8)— — 
Certain significant items(c)
(10)(44)— — 
Other unallocated
(278)(221)4 2 
Total Earnings(d)
$2,064 $1,982 $346 $331 
(a)    Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized.
(b)    Revenue denominated in euros was $590 million and $605 million for the nine months ended September 30, 2022 and 2021, respectively.
(c)    For the nine months ended September 30, 2022, primarily represents inventory and asset impairment charges related to the consolidation of manufacturing sites in China, as well as employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets.
For the nine months ended September 30, 2021, primarily represents asset impairment charges related to the consolidation of manufacturing sites in China and a dairy product termination, as well as employee termination costs associated with our international operations and other costs associated with cost-reduction and productivity initiatives.
(d)    Defined as income before provision for taxes on income.