Zoetis Inc. (NYSE:ZTS) provided the following statement concerning the
European Commission’s decision regarding existing tax rulings in
Belgium, and gave its implications for the company’s financial guidance
for 2016 and 2017:
Zoetis is disappointed with the European Commission’s announcement
regarding Belgium’s tax rulings and its implications for Zoetis. The
company complies with all tax laws and has relied on these long-standing
agreements in Belgium for its financial plans and business operations,
including supply chain, manufacturing, R&D and international sales
organizations in Belgium. Zoetis disagrees with the decision and plans
to appeal.
Preliminary Update on Financial Impact to Guidance for 2016 and 2017
As
a result of the decision by the European Commission, Zoetis is providing
a preliminary view of its impact on Zoetis, if it is upheld on appeal.
Zoetis does not expect the European Commission’s decision to have an
impact on the company’s 2015 results. However, as a result of the
ruling, the company expects to record a one-time, net tax charge in the
first quarter of 2016, which is expected to be approximately $35 million
to $45 million, based on preliminary estimates. This estimate does not
include any benefits associated with a successful appeal of the
decision, nor does it reflect guidance we expect to receive from the
Belgian government on the methodology or timing of the recovery of prior
tax benefits. This net tax charge relates to the periods 2013 through
2015, which includes the revaluation of the company’s deferred tax
assets and liabilities using the rates expected to be in place at the
time of the reversal.
In addition, the company’s effective tax rate on adjusted income would
now be expected to increase from its prior guidance of 28% in 2016 to
approximately 33% in 2016. As a result of this change, the company is
updating certain elements of its 2016 and 2017 guidance solely to
reflect the Commission’s decision:
-
Increases Effective Tax Rate on Adjusted Income from 28% to
approximately 33% for 2016
-
Reduces Adjusted Diluted EPS by $0.13 for 2016
-
Reduces GAAP Reported Diluted EPS by a range of $0.20 - $0.22 for
2016, reflecting the expected net tax charge
Zoetis has been aware of the European Commission’s review of such
arrangements in Belgium since the Commission’s investigation began in
early 2015. While the company did not expect such a negative decision,
it has been assessing options to mitigate the potential impact on
Zoetis. The company expects its guidance for 2017 to reflect the benefit
of certain actions that could mitigate this impact on future results:
-
For 2017, the company expects an effective tax rate on adjusted income
of approximately 30% and a reduction in its GAAP reported and adjusted
EPS guidance range of approximately $0.06 per share to reflect the
Commission’s decision.
Zoetis will provide a full update of its 2016 and 2017 guidance when it
reports fourth quarter and full year 2015 results on February 16, 2016.
About Zoetis
Zoetis (zô-EH-tis) is the leading animal health
company, dedicated to supporting its customers and their businesses.
Building on more than 60 years of experience in animal health, Zoetis
discovers, develops, manufactures and markets veterinary vaccines and
medicines, complemented by diagnostic products and genetic tests and
supported by a range of services. In 2014, the company generated annual
revenue of $4.8 billion. With approximately 10,000 employees worldwide
at the beginning of 2015, Zoetis serves veterinarians, livestock
producers and people who raise and care for farm and companion animals
with sales of its products in 120 countries. For more information, visit www.zoetis.com.
DISCLOSURE NOTICES
Forward-Looking Statements: This
press release contains forward-looking statements, which reflect the
current views of Zoetis with respect to business plans or prospects,
future operating or financial performance, future guidance, future
operating models, expectations regarding products, future use of cash
and dividend payments, tax rate, and other future events. In particular,
this press release contains forward looking statements that reflect the
current views of Zoetis with respect to our tax rate and tax regimes,
changes in the tax regimes in other jurisdictions and challenges to our
efforts to mitigate the impact of tax decisions such as the recent one
by the European Commission. These statements are not guarantees of
future performance or actions. Forward-looking statements are subject to
risks and uncertainties. If one or more of these risks or uncertainties
materialize, or if management's underlying assumptions prove to be
incorrect, actual results may differ materially from those contemplated
by a forward-looking statement. Forward-looking statements speak only as
of the date on which they are made. Zoetis expressly disclaims any
obligation to update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise. A
further list and description of risks, uncertainties and other matters
can be found in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2014, including in the sections thereof captioned
“Forward-Looking Information and Factors That May Affect Future Results”
and “Item 1A. Risk Factors,” in our Quarterly Reports on Form 10-Q and
in our Current Reports on Form 8-K. These filings and subsequent filings
are available online at www.sec.gov,
www.zoetis.com,
or on request from Zoetis.
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