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•	economic differences, such as standards of living in developed markets as compared to emerging markets;

•	cultural differences, such as dietary preferences for different animal proteins, pet ownership preferences and pet care standards;

•	epidemiological differences, such as the prevalence of certain bacterial and viral strains and disease dynamics;

•	treatment differences, such as utilization of different types of medicines and vaccines, as well as the pace of adoption of new technologies;

•	environmental differences, such as seasonality, climate and the availability of arable land and fresh water; and

•	regulatory differences, such as standards for product approval and manufacturing.

•	United States with revenue of $2,328 million, or 49% of total revenue for the year ended December 31, 2015; and

•	International with revenue of $2,386 million, or 50% of total revenue for the year ended December 31, 2015.

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•	anti-infectives: products that prevent, kill or slow the growth of bacteria, fungi or protozoa;

•	vaccines: biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response;

•	parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms;

•	medicated feed additives: products added to animal feed that provide medicines to livestock; and

•	other pharmaceutical products: pain and sedation, oncology, antiemetic, allergy and dermatology, and reproductive products.

•	Simparica® Chewables, a monthly chewable tablet for dogs to control fleas and ticks which was approved in the European Union and New Zealand in 2015. Other markets, including the United States, are expected to follow.

•	Improvac®/Improvest®/Vivax®, a protein product that works like an immunization, is currently the only product that provides a safe and effective alternative to physical castration to manage unpleasant aromas that can occur when cooking pork; launched in Australia and New Zealand in 2004, in Brazil in 2007, in certain European countries beginning in 2008, and in the United States in 2011;

•	Convenia®, the first single-injection anti-infective for common bacterial skin infections in cats and dogs, launched in 2006;

•

Cerenia®, the first and only product on the market to prevent vomiting due to motion sickness in dogs, was first launched in Europe in 2006, followed by the United States in 2007; it was approved to prevent vomiting in cats in 2012 in the United States and European countries. In January 2016, it was approved in the United States for intravenous administration in dogs and cats four months of age and older and for the prevention of vomiting caused by emetogenic or chemotherapeutic agents in dogs four months of age or older;

•	Palladia®, the first drug to be approved by the U.S. Food and Drug Administration (FDA) for treating cancer in dogs, launched in 2009;

•	Inforce®3, the first vaccine for cattle that prevents respiratory disease caused by bovine respiratory syncytial virus (BRSV) while also aiding in the prevention of infectious bovine rhinotracheitis (IBR) and parainfluenza3 (PI3), launched in 2010;

•	Fostera® PCV MH was introduced in November 2013 in the United States and approved in the European Union in 2015. It was developed to help protect pigs from PCVAD and enzootic pneumonia caused by M. hyopneumoniae. The one-bottle formulation of Fostera PCV MH allows the convenience of a one-dose program or the flexibility of a two-dose program; and

•	Apoquel®, the first Janus kinase inhibitor for use in veterinary medicine, was approved for the control of pruritus associated with allergic dermatitis and the control of atopic dermatitis in dogs at least 12 months of age. Since January 2014, we launched Apoquel in key markets including the United States, United Kingdom, Germany, Italy and Spain, and expect other market launches to follow.

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(1)	This site is owned by us and leased back to Pfizer, pursuant to an arrangement by which Pfizer operates the manufacturing operations at the site for a period of time. We expect Pfizer to transfer the site back to us in 2016. See Item 13. Certain Relationships and Related Transactions, and Director Independence—Relationship with Pfizer—Brazil lease agreements.

(2)	We are in the process of exiting this site as a result of our operational efficiency initiative and supply network strategy.

(3)	This site is operated by the China joint venture, Jilin Zoetis Guoyuan Animal Health Company, Ltd.

(4)	In August 2015, Zoetis acquired KL Products, Inc., a leading Canadian manufacturer of automation systems for the poultry industry. The systems are manufactured in London, Ontario, Canada.

(5)	In November 2015, Zoetis acquired Pharmaq, the global leader in vaccines and innovation for health products in aquaculture. The vaccines are manufactured in Overhalla, Norway.

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•	livestock producers tend to be loyal to medicines and vaccines that have been demonstrated to be efficacious because medicines and vaccines are a small portion of a livestock producer's total production costs and ineffective medicines and vaccines could result in the loss of animals, causing disproportionate harm to such producer's investment;

•	livestock producers value the technical assistance provided through our veterinary operations' support of our products and field force; and

•	the importance of reliable supply.

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•	Establish and implement harmonized technical requirements for the registration of veterinary medicinal products in the VICH regions, which meet high quality, safety and efficacy standards and minimize the use of test animals and costs of product development.

•	Provide a basis for wider international harmonization of registration requirements through the VICH Outreach Forum.

•	Monitor and maintain existing VICH guidelines, taking particular note of the ICH work program and, where necessary, update these VICH guidelines.

•	Ensure efficient processes for maintaining and monitoring consistent interpretation of data requirements following the implementation of VICH guidelines.

•	By means of a constructive dialogue between regulatory authorities and industry, provide technical guidance enabling response to significant emerging global issues and science that impact on regulatory requirements within the VICH regions.

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•	environmental-related capital expenditures - $1 million; and

•	other environmental-related expenditures - $12 million.

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•	our historical combined financial data does not reflect the Separation;

•

our historical combined financial data reflects expense allocations for certain support functions that are provided on a centralized basis within Pfizer, such as expenses for business technology, facilities, legal, finance, human resources, business development, public affairs and procurement, as well as certain manufacturing and supply costs incurred by manufacturing sites that are shared with other Pfizer business units that may be higher or lower than the comparable expenses we would have actually incurred, or will incur, as an independent company;

•	our cost of debt and our capital structure is different from that reflected in our historical combined financial statements;

•	significant increases may occur in our cost structure as a result of our being an independent public company, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act); and

•	loss of economies of scale as a result of our no longer being a part of Pfizer.

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•	the failure of us or any of our vendors or suppliers, including logistical service providers, to comply with applicable regulations and quality assurance guidelines;

•	construction delays;

•	equipment malfunctions;

•	shortages of materials;

•	labor problems;

•	natural disasters;

•	power outages;

•	criminal and terrorist activities;

•	changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, shipping distributions or physical limitations; and

•	the outbreak of any highly contagious diseases near our production sites.

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•	volatility in the international financial markets;

•	compliance with governmental controls;

•	difficulties enforcing contractual and intellectual property rights;

•	parallel trade in our products (importation of our products from European Union countries where our products are sold at lower prices into European Union countries where the products are sold at higher prices);

•	compliance with a wide variety of laws and regulations, such as the FCPA and similar non-U.S. laws and regulations;

•	compliance with foreign labor laws;

•	burdens to comply with multiple and potentially conflicting foreign laws and regulations, including those relating to environmental, health and safety requirements;

•	changes in laws, regulations, government controls or enforcement practices with respect to our business and the businesses of our customers, including the imposition of limits on our profitability (e.g., the Venezuelan Law on Fair Pricing);

•	political and social instability, including crime, civil disturbance, terrorist activities and armed conflicts;

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•	trade restrictions and restrictions on direct investments by foreign entities, including restrictions administered by the OFAC and the European Union, in relation to our products or the products of farmers and other customers (e.g., restrictions on the importation of agricultural products from the European Union to Russia);

•	changes in tax laws, challenges brought against our incentive tax rulings, and tariffs;

•	imposition of antidumping and countervailing duties or other trade-related sanctions;

•	costs and difficulties in staffing, managing and monitoring international operations;

•	longer payment cycles and increased exposure to counterparty risk; and

•	additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.

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•	pay monetary damages;

•	obtain a license in order to continue manufacturing or marketing the affected products, which may not be available on commercially reasonable terms, or at all; or

•	stop activities, including any commercial activities, relating to the affected products, which could include a recall of the affected products and/or a cessation of sales in the future.

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•	making it more difficult for us to satisfy our obligations with respect to our debt;

•	limiting our ability to obtain additional financing to fund future working capital, capital expenditures, business development or other general corporate requirements, including dividends;

•	increasing our vulnerability to general adverse economic and industry conditions;

•	exposing us to the risk of increased interest rates as certain of our borrowings are and may in the future be at variable rates of interest;

•	limiting our flexibility in planning for and reacting to changes in the animal health industry;

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•	placing us at a competitive disadvantage to other, less leveraged competitors;

•	impacting our effective tax rate; and

•	increasing our cost of borrowing.

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•	our operating performance and the performance of our competitors;

•	our or our competitors' press releases, other public announcements and filings with the SEC regarding new products or services, enhancements, significant contracts, acquisitions or strategic investments;

•	changes in earnings estimates or recommendations by securities analysts, if any, who cover our common stock;

•	changes in our investor base;

•	failures to meet external expectations or management guidance;

•	fluctuations in our financial results or the financial results of companies perceived to be similar to us;

•	changes in our capital structure or dividend policy, future issuances of securities, sales of large blocks of common stock by our stockholders or the incurrence of additional debt;

•	reputational issues;

•	changes in general economic and market conditions in any of the regions in which we conduct our business;

•	the arrival or departure of key personnel;

•	the actions of speculators and financial arbitrageurs (such as hedge funds);

•	changes in applicable laws, rules or regulations and other dynamics; and

•	other developments or changes affecting us, our industry or our competitors.

•	a Board of Directors that is divided into three classes with staggered terms;

•	rules regarding how our stockholders may present proposals or nominate directors for election at stockholder meetings;

•	the right of our Board of Directors to issue preferred stock without stockholder approval; and

•	limitations on the right of stockholders to remove directors.

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Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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(a)	Starting in 2015, includes the acquisitions of Pharmaq and certain assets from Abbott Animal Health. See Notes to Consolidated Financial Statements— Note 5A. Acquisitions, Divestitures and Certain Investments: Acquisition of Pharmaq and Acquisition of Abbott Animal Health.

(b)	In 2011 and 2012, primarily includes an allocation of Pfizer debt that was issued to partially finance the acquisition of Wyeth (including FDAH) in 2009. The debt has been allocated on a pro-rata basis using the deemed acquisition cost of FDAH as a percentage of the total acquisition cost of Wyeth.

(c)

Adjusted net income (a non-GAAP financial measure) is defined as reported net income attributable to Zoetis excluding purchase accounting adjustments, acquisition-related costs and certain significant items. Management uses adjusted net income, among other factors, to set performance goals and to measure the performance of the overall company, as described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Adjusted net income. We believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. Reconciliations of U.S. GAAP reported net income attributable to Zoetis to non-GAAP adjusted net income for the years ended December 31, 2015, 2014, and 2013 are provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Adjusted net income. The adjusted net income measure is not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis.

(d)	The weighted average shares outstanding for both basic and diluted earnings per share for the years ended December 31, 2012 and 2011 were calculated using 500 million shares of common stock outstanding, which was the number of Zoetis Inc. shares outstanding at the time of the IPO, which was completed on February 6, 2013.

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(a)	Adjusted net income is a non-GAAP financial measure. See the Adjusted net income section of this MD&A for more information.

•	human population growth and increasing standards of living, particularly in many emerging markets;

•	increasing demand for improved nutrition, particularly animal protein;

•	natural resource constraints, such as scarcity of arable land, fresh water and increased competition for cultivated land, resulting in fewer resources that will be available to meet this increased demand for animal protein; and

•	increased focus on food safety.

•	economic development and related increases in disposable income, particularly in many emerging markets;

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•	increasing pet ownership; and

•	companion animals living longer, increasing medical treatment of companion animals and advances in companion animal medicines and vaccines.

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•	leverage our direct local presence and strong customer relationships—Through our direct selling commercial model, we can deepen our understanding of our customers’ businesses and can encourage the adoption of more sophisticated animal health products;

•	further penetrate emerging markets—We seek to maximize our presence where economic development is driving increased demand for animal protein and increased demand for and spending on companion animals;

•	pursue new product research and development and value-added product lifecycle innovation to extend our product portfolio—New product R&D and product lifecycle innovation enable us to deliver products to address unmet needs and evolve our product lines so they remain relevant for our customers. We leverage our strong direct presence in many regions and cost-effectively develop new products;

•	remain the partner of choice for access to new products and technologies—We support cutting-edge research and secure the right to develop and commercialize new products and technologies;

•	continue to provide high-quality products and improve manufacturing production margins—We believe our manufacturing and supply chain provides us with a global platform for continued expansion, including in emerging markets, and that our quality and reliability differentiate us from our competitors; and

•	expand into complementary businesses to become a more complete, trusted partner in providing solutions—We believe we have the potential to generate incremental and complementary revenue, in the areas of diagnostics, genetics, devices, dairy data management, e-learning and professional consulting, which could also enhance the loyalty of our customer base and may lead to increased product sales.

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for sales returns, we perform calculations in each market that incorporate the following, as appropriate: local returns policies and practices; returns as a percentage of revenue; an understanding of the reasons for past returns; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, product recalls, discontinuation of products or a changing competitive environment; and

•	for revenue incentives, we use our historical experience with similar incentives programs to estimate the impact of such programs on revenue.

•	a significant adverse change in the extent or manner in which an asset is used. For example, restrictions imposed by the regulatory authorities could affect our ability to manufacture or sell a product, and

•	a projection or forecast that demonstrates losses or reduced profits associated with an asset. This could result, for example, from the introduction of a competitor’s product that results in a significant loss of market share or the inability to achieve the previously projected revenue growth, or from the lack of acceptance of a product by customers.

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•	In 2015, the intangible asset impairment charges reflect (i) approximately $27 million of developed technology rights due to product rationalization decisions associated with our operational efficiency initiative; and (ii) approximately $2 million of acquired in-process research and development (IPR&D) assets related to the termination of a canine oncology project.

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In 2014, the intangible asset impairment charges reflect (i) approximately $6 million of IPR&D assets related to a pharmaceutical product for dogs acquired with the FDAH acquisition in 2009, as a result of the termination of the development program due to a re-assessment of economic viability; and (ii) approximately $1 million related to finite-lived developed technology rights and IPR&D due to negative market conditions and the re-assessment of economic viability.

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In 2013, the intangible asset impairment charges reflect (i) approximately $2 million of finite-lived developed technology rights due to a re-assessment of economic viability; (ii) approximately $2 million of finite-lived developed technology rights and IPR&D as a result of exiting a combined manufacturing and R&D facility; and (iii) approximately $2 million related to acquired IPR&D as a result of the termination of certain development programs due to a re-assessment of their economic viability.

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(a)	Exclusive of amortization of intangible assets, except as disclosed in Notes to Consolidated Financial Statements—Note 4. Significant Accounting Policies—Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets.

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(a)	Allocation of corporate enabling functions were $3 million in 2013.

•	an increase in sales volume of products with less favorable margins;

•	higher global manufacturing and supply costs;

•	charges related to our operational efficiency initiative; and

•	charges reflecting the fair value adjustments to inventory acquired from Abbott Animal Health and Pharmaq,

•	favorable foreign exchange.

•	an increase in sales volume;

•	incremental global manufacturing and supply spending associated with the build-up of our operations in 2013, which is now impacting our 2014 cost of sales; and

•	an increase in inventory obsolescence, scrap and other charges,

•	favorable foreign exchange.

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(a)	Allocation of corporate enabling functions were $24 million in 2013.

•	favorable foreign exchange; and

•	a reduction in marketing and other spending driven by our operational efficiency initiative,

•	higher costs associated with our enabling functions, including higher business technology costs; and

•	an increase in bad debt expense.

•	increased field selling and distribution expenses in certain regions due to higher sales and increased costs associated with delivering our products to customers; and

•	additional costs due to the build-up of our supply chain and logistics organization and enabling functions and related costs post-separation from Pfizer,

•	a reduction in the amount of additional costs related to becoming an independent public company, including the nonrecurrence of additional costs in 2013 due to the accelerated vesting of stock options and associated expenses related to certain Pfizer equity awards as a result of the Separation;

•	favorable foreign exchange; and

•	lower direct marketing spending.

•	favorable foreign exchange;

•	a reduction in spending driven by our operational efficiency initiative; and

•	lower expenses associated with our business development activities.

•	the nonrecurrence of additional costs in 2013 due to the accelerated vesting of stock options and associated expenses related to certain Pfizer equity awards as a result of the Separation;

•	savings associated with the closure of two R&D sites; and

•	favorable foreign exchange,

•	higher salary-related expenses.

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•	a decrease in asset impairment charges due to the exiting of one of our manufacturing facilities in 2013; and

•	a decrease in integration costs related to the KAH and FDAH acquisitions,

•	an increase in employee termination costs primarily due to a reversal in 2013 related to a previously established termination reserve that was reversed in the second quarter of 2013 related to our operations in Europe.

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•	charges of $89 million related to the revaluation of the net monetary assets in Venezuela;

•	impairment charges of $6 million related to assets held by our joint venture in Taiwan, currently classified as held for sale; and

•	an impairment of IPR&D assets related to the impairment of a canine oncology project,

•	lower charges for legal and other matters as a result of the commercial settlement of $13 million in Mexico in 2014; and

•	lower foreign currency losses primarily as a result of the depreciation of the Argentine peso in the first quarter of 2014.

•	a charge associated with a commercial settlement and recall in Mexico of $13 million, partially offset by the related insurance recovery of $1 million;

•	higher foreign currency losses of $8 million, primarily driven by costs related to hedging and exposures to certain emerging market currencies, as well as losses related to the depreciation of the Argentine peso in the first quarter of 2014;

•	an impairment charge related to IPR&D assets acquired with the FDAH acquisition in 2009, as a result of the termination of the development program due to a re-assessment of economic viability; and

•	a pension plan settlement charge related to the divestiture of a manufacturing facility,

•	an insurance recovery of litigation related charges.

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the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from (i) operations and (ii) restructuring charges related to the operational efficiency initiative and supply network strategy, as well as repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and as a result of operating fluctuations in the normal course of business, the impact of non-deductible items and the extent and location of other income and expense items, such as restructuring charges/(benefits), asset impairments and gains and losses on asset divestitures;

•	changes in valuation allowances and resolution of other tax items;

•	the tax expense related to changes in uncertain tax positions, see Notes to Consolidated Financial Statements— Note 9D. Tax Matters: Tax Contingencies;

•	a $9 million discrete tax benefit recorded in the first quarter of 2015 related to a revaluation of deferred taxes as a result of a change in tax rates;

•	a $6 million discrete tax benefit recorded in the second quarter of 2015 related to prior period tax adjustments; and

•	the tax expense related to the non-deductible revaluation of the net monetary assets in Venezuela to the SIMADI exchange rate recorded in the fourth quarter of 2015.

•

the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings as well as repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and as a result of operating fluctuations in the normal course of business, the impact of non-deductible items and the extent and location of other income and expense items, such as restructuring charges/(benefits), asset impairments and gains and losses on asset divestitures;

•	changes in valuation allowances and resolution of other tax items;

•	the tax cost related to changes in uncertain tax positions, see Notes to Consolidated Financial Statements— Note 9D. Tax Matters: Tax Contingencies; and

•	an $8 million discrete tax expense during the first quarter of 2014 related to an intercompany inventory adjustment.

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Livestock revenue growth was driven by increased sales across the cattle, poultry, and swine portfolios. Sales of cattle products grew across multiple categories, including premium brands, as a result of favorable market conditions. Cattle sales also benefited from new product launches. Growth in sales of poultry products was driven by the re-introduction of a medicated feed additive. Sales of swine products grew due to the continued recovery in the pig population following the PEDv outbreak in the previous year.

•	Companion animal revenue growth was driven by the addition of products acquired from Abbott Animal Health, as well as the solid performance of Apoquel®. This growth was partially offset by competitive pressure in other parts of the companion animal portfolio.

•	Livestock revenue growth was driven primarily by sales of swine products, particularly in China due to favorable market conditions. Sales of cattle products benefited from growth in Brazil and Mexico, partially offset by the impact of business reduction decisions in Venezuela. Livestock revenue in France also declined due to the anti-infective legislative changes in 2014.

•	Companion animal revenue growth resulted from increased sales of Apoquel®, the addition of products acquired from Abbott Animal Health, and the non-recurrence of a prior year inventory buyback related to the termination of a distributor agreement in Japan.

•

Livestock revenue growth was driven by increased sales across the cattle, swine, and poultry portfolios. Strong growth in sales of cattle products was primarily due to higher demand for our premium products as a result of improved market conditions, driven by higher cattle prices and lower costs of feed, compared with 2013. Growth in swine products was due to the successful launch of new products, tempered by the impact of PEDv on the number of treatable animals. Sales of poultry products benefited from new vaccines and growth in medicated feed additives.

•	Companion animal revenue growth was driven by the introduction of Apoquel® as well as sales growth in other key brands. Results were partially offset by competitive pressures in our vaccine and pain portfolios and were tempered by competition in our parasiticides portfolio.

•

Livestock revenue growth benefited from growth across all segments, mostly notably in cattle and swine. Sales of cattle products were driven by price increases from inflationary pressures in Venezuela, in addition to solid performance in Brazil and Canada. In swine, growth was driven by China, Brazil, and Canada. Sales of poultry products grew primarily from performance in India, as well as higher prices in Argentina.

•	Companion animal revenue growth was driven by the introduction of Apoquel®, primarily in Germany and the United Kingdom. Growth was partially offset by performance in the vaccines and parasiticides portfolio.

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•	Corporate, which includes costs associated with business technology, facilities, legal, finance, human resources, business development, 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;

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Certain transactions and events such as (i) Purchase accounting adjustments, which includes expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition-related activities, which includes costs for restructuring and integration; and (iii) Certain significant items, which includes non-acquisition-related restructuring charges, certain asset impairment charges, stand-up costs, certain legal and and commercial settlements, and costs associated with cost reduction/productivity initiatives; and

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Other unallocated, which includes certain overhead expenses associated with our global manufacturing operations not charged to our operating segments. Effective January 1, 2014, Other unallocated also includes certain costs associated with business technology and finance that specifically support our global manufacturing operations, as well as procurement costs. These costs were previously reported in Corporate. Also, beginning in the first quarter of 2014, certain supply chain and global logistics costs that were previously reported in the reportable segments are reported in Other unallocated. This presentation better reflects how we measure the performance of the global manufacturing organization.

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•	senior management receives a monthly analysis of our operating results that is prepared on an adjusted net income basis;

•	our annual budgets are prepared on an adjusted net income basis; and

•	other goal setting and performance measurements.

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(a)

The effective tax rate on adjusted pretax income is 26.8%, 26.8% and 29.2% for full year 2015, 2014 and 2013, respectively. The change in the effective tax rate in 2015 compared to 2014 is primarily due to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings as well as repatriation costs, changes in valuation allowances and resolution of other tax items. The lower effective tax rate in 2014 compared to 2013 is primarily due to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings as well as repatriation costs, changes in valuation allowances and resolution of other tax items. In addition, we recognized an $8 million discrete tax expense during the first quarter of 2014 related to an intercompany inventory adjustment.

(b)

The impact of the incentive tax rulings in Belgium and in Singapore continued to be a component of the 2015 effective tax rate, as well as the 2015 U.S. Research and Development Tax Credit which was permanently extended on December 18, 2015. For additional information on the impact of the European Commission’s negative decision on the Belgium excess profits ruling on January 11, 2016, see Note 22. Subsequent Events.

(a)	Diluted earnings per share was computed using the weighted-average common shares outstanding during the period plus the common stock equivalents related to stock options, RSUs, DSUs and PSUs.

(b)	EPS amounts may not add due to rounding.

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(a)

Amortization and depreciation expense related to purchase accounting adjustments with respect to identifiable intangible assets and property, plant and equipment were distributed as follows in 2015, 2014 and 2013, respectively: $46 million, $45 million, and $46 million included in Amortization of intangible assets; $0 million, $0 million, and $1 million income included in Selling, general and administrative expenses; and $2 million, $2 million, and $1 million included in Research and development expenses.

(b)	Amortization and depreciation expense, as well as fair value adjustments to acquired inventory, included in Cost of sales.

(c)

Included in Provision for taxes on income. Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate. Income taxes in Purchase accounting adjustments for 2015, includes a tax benefit related to the revaluation of deferred taxes as a result of a change in tax rates. Income taxes in Acquisition-related costs for 2015, includes a tax charge related to the acquisition of certain assets of Abbott Animal Health. Income taxes in Certain significant items for 2015, includes a net tax benefit related to the revaluation of deferred taxes and other deferred tax adjustments.

(d)	Included in Restructuring charges and certain acquisition-related costs. See Notes to Consolidated Financial Statements—Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives for more information.

(e)	Included in Other (income)/deductions—net.

(f)

Represents restructuring charges of $291 million related to employee termination costs ($253 million) and asset impairments ($38 million), included in Restructuring charges and certain acquisition-related costs, inventory write-offs of $13 million, included in Cost of sales, accelerated depreciation of $2 million, included in Research and development expenses, and $40 million primarily related to consulting fees, included in Selling, general and administrative expenses.

(g)	Represents restructuring charges of $10 million related to employee termination costs ($9 million) and asset impairments ($1 million), included in Restructuring charges and certain acquisition-related costs, accelerated depreciation of $1 million, included in Cost of sales, and $16 million primarily related to consulting fees, included in Cost of sales.

(h)

Represents charges incurred for restructuring and cost-reduction/productivity initiatives. In 2014, primarily represents employee termination costs in Europe and our global manufacturing operations. In 2013, primarily represents a $27 million decrease in employee termination costs related to the reversal of a previously established termination reserve related to our operation in Europe, partially offset by accelerated depreciation related to the exiting of certain leased manufacturing and research facilities. Included in Restructuring charges and certain acquisition-related costs. See Notes to Consolidated Financial Statements— Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives for more information.

(i)

In 2015, represents impairment charges related to assets held by our joint venture in Taiwan, currently classified as held for sale, and an impairment of IPR&D assets related to the termination of a canine oncology project. In 2014, amounts primarily represent an impairment charge related to an IPR&D project acquired with the FDAH acquisition in 2009 and were included in Other (income)/deductions—net. In 2013, amounts primarily relate to restructuring initiatives in 2013 and

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(j)

In 2014, primarily represents the Zoetis portion of a net gain on the sale of land by our Taiwan joint venture and the net gain on the government-mandated sale of certain product rights in Argentina that were acquired with the FDAH acquisition in 2009. In 2013, represents the net gain on the government-mandated sale of certain product rights in Brazil in 2013 that were acquired with the FDAH acquisition in 2009. Included in Other (income)/deductions—net. See Notes to Consolidated Financial Statements— Note 7. Other (Income)/Deductions—Net for more information.

(k)

Certain non-recurring costs related to becoming an independent public company, such as new branding (including changes to the manufacturing process for required new packaging), the creation of standalone systems and infrastructure, site separation, accelerated vesting and associated cash payment related to certain Pfizer equity awards, and certain legal registration and patent assignment costs which were distributed as follows in 2015, 2014 and 2013, respectively: $27 million, $32 million and $21 million included in Cost of sales; $90 million, $131 million and $177 million included in Selling, general and administrative expenses, $0 million, $0 million and $7 million included in Research and development expenses, and $1 million, $5 million and $1 million included in Other (income)/deductions—net.

(l)	For additional information, see Notes to Consolidated Financial Statements— Note 8. Foreign Currency Losses Related to Venezuela Revaluation.

(m)

Amounts relate to write-offs of inventory and intercompany accounts that were transferred to us as part of the Separation from Pfizer and were distributed as follows: $19 million included in Cost of sales and $5 million included in Selling, general and administrative expenses. Because these expenses relate primarily to the periods prior to our initial public offering, we do not consider them to be reflective of our current operations and we have therefore, excluded them from our Adjusted earnings non-GAAP measure. Although fully written off in the current period, all of the adjustments relate back several years.

(n)

For 2015, represents charges due to unusual investor-related activities. For 2014, primarily includes a charge associated with a commercial settlement in Mexico ($13 million), partially offset by the insurance recovery ($1 million income), charges due to unusual investor-related activities ($5 million), a pension plan settlement charge related to the divestiture of a manufacturing plant ($4 million), and an insurance recovery of other litigation related charge ($2 million income). For 2013, primarily includes litigation-related charges ($5 million) and charges related to transitional manufacturing purchase agreements associated with divestitures ($1 million).

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(a)

Accounts receivable are usually collected over a period of 60 to 90 days. For the year ended December 31, 2015, compared to the year ended December 31, 2014, the number of days that accounts receivables are outstanding remained approximately the same. 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.

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(a)	Long-term debt consists of senior notes and other notes. Our calculations of expected interest payments incorporate only current period assumptions for interest rates, foreign currency translation rates and Zoetis hedging strategies. See Notes to Consolidated Financial Statements— Note 10A. Financial Instruments: Debt.

(b)

Includes expected payments to Pfizer related to the transfer of certain product registration and application rights associated with our operations in Indonesia, expected payment to Abbott related to the acquisition of certain assets of Abbott Animal Health, expected employee termination payments that represent contractual obligations, expected payments related to our unfunded U.S. supplemental (non-qualified) savings plans, deferred compensation and expected payments relating to our future benefit payments net of plan assets (included in the determination of the projected benefit obligation) for pension plans that are dedicated to Zoetis employees and those transferred to us from Pfizer. See Notes to Consolidated Financial Statements— Note 5. Acquisitions, Divestitures and Certain Investments, Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives and Note 14. Benefit Plans. Excludes approximately $134 million of noncurrent liabilities related to legal and environmental accruals, certain employee termination and exit costs, deferred income and other accruals, most of which do not represent contractual obligations. See Notes to Consolidated Financial Statements— Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives and Note 18. Commitments and Contingencies.

(c)	Includes agreements to purchase goods and services that are enforceable and legally binding and includes amounts relating to advertising, information technology services, employee benefit administration services and potential milestone payments deemed reasonably likely to occur.

(d)	Includes the cost of service credit continuation for certain Zoetis employees in the Pfizer U.S. qualified defined benefit pension and U.S. retiree medical plans, in accordance with the employee matters agreement. See Notes to Consolidated Financial Statements— Note 14. Benefit Plans.

(e)	Except for amounts reflected in Income taxes payable, we are unable to predict the timing of tax settlements, as tax audits can involve complex issues and the resolution of those issues may span multiple years, particularly if subject to negotiation or litigation.

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•	emerging restrictions and bans on the use of antibacterials in food-producing animals;

•	perceived adverse effects on human health linked to the consumption of food derived from animals that utilize our products;

•	increased regulation or decreased governmental support relating to the raising, processing or consumption of food-producing animals;

•	fluctuations in foreign exchange rates and potential currency controls;

•	changes in tax laws, regulations, and challenges brought against our incentive tax rulings;

•	legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental concerns, commercial disputes and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products;

•	failure to protect our intellectual property rights or to operate our business without infringing the intellectual property rights of others;

•	an outbreak of infectious disease carried by animals;

•	adverse weather conditions and the availability of natural resources;

•	adverse global economic conditions;

•	failure of our R&D, acquisition and licensing efforts to generate new products;

•	the possible impact of competing products, including generic alternatives, on our products and our ability to compete against such products;

•	quarterly fluctuations in demand and costs;

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•	governmental laws and regulations affecting domestic and foreign operations, including without limitation, tax obligations and changes affecting the tax treatment by the United States of income earned outside the United States that may result from pending and possible future proposals; and

•	governmental laws and regulations affecting our interactions with veterinary healthcare providers.

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.

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(a)	Exclusive of amortization of intangible assets, except as disclosed in Note 4. Significant Accounting Policies—Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets.

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(a)	Presented net of reclassification adjustments and tax impacts, which are not significant in any period presented. Reclassification adjustments related to benefit plans are generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, general and administrative expenses, and/or Research and development expenses, as appropriate, in the consolidated statements of income.

(b)	Reflects the 2014 settlement charge associated with the 2012 sale of our Netherlands manufacturing facility which was recorded to Other (income)/deductions—net. See Note 14. Benefit Plans for additional information.

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(a)	As of December 31, 2015 and 2014, respectively, there were 497,400,113 and 501,327,524 outstanding shares of common stock and 4,408,116 and 14,743 shares or treasury stock. Treasury stock is recognized at the cost to reacquire the shares. For additional information, see Note 16. Stockholders' Equity.

(b)	All amounts associated with Business Unit Equity relate to periods prior to the Separation. See Note 2A. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: The Separation.

(c)

Includes the issuance of shares of Zoetis Inc. common stock and the reacquisition of shares of treasury stock associated with exercises of employee share-based awards. Treasury shares are reacquired from employees for withholding tax purposes in connection with the vesting and exercise of awards under our equity compensation plan. For additional information, see Note 15. Share-Based Payments and Note 16. Stockholders' Equity.

(d)	For additional information, see Note 2B. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: Adjustments Associated with the Separation.

(e)	Represents contributed capital from Pfizer Inc. associated with service credit continuation for certain Zoetis Inc. employees in Pfizer Inc.'s U.S. qualified defined benefit and U.S. retiree medical plans. See Note 14. Benefit Plans.

(f)	Represents the reclassification of the Receivable from Pfizer Inc. and the Payable to Pfizer Inc. from Business Unit Equity as of the Separation date. See Note 2A. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: The Separation.

(g)	Reflects the Separation transaction. See Note 2A. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: The Separation.

(h)	Reflects company matching and profit-sharing contributions funded through the issuance of shares of Zoetis Inc. common stock for the year ended December 31, 2014. For additional information, see Note 16. Stockholders' Equity.

(i)	Reflects the 2014 transfers of defined benefit pension plans from Pfizer Inc. and the associated reclassification from Additional Paid in Capital to Accumulated Other Comprehensive Loss. See Note 14. Benefit Plans.

(j)	Reflects the acquisition of treasury shares in connection with the Share Repurchase Program. For additional information, see Note 16. Stockholders' Equity.

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(a)	Reflects the Separation transaction. Amount is net of the non-cash portion. See Note 2A. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: The Separation.

(b)	Reflects the non-cash portion of the acquisition of product registration and application rights from Pfizer. See Note 20. Transactions and Agreements with Pfizer.

(c)	Relates primarily to the non-cash portion of the acquisition of certain assets of Abbott Animal Health. See Note 5A. Acquisitions, Divestitures and Certain Investments: Acquisitions.

(d)	Reflects the non-cash portion of the Separation transaction. See Note 2A. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: The Separation.

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2.	The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer

A.	The Separation

B.	Adjustments Associated with the Separation

•	The removal of inventories (approximately $74 million), property, plant and equipment (approximately $28 million) and miscellaneous other net liabilities (approximately $21 million) associated with certain non-dedicated manufacturing sites that were retained by Pfizer;

•	The addition of property, plant and equipment (approximately $56 million) associated with a non-dedicated manufacturing site that was transferred to us by Pfizer (and then leased back to Pfizer under operating leases), and the removal of the inventory (approximately $46 million) and net other assets (approximately $4 million) at that site as these assets were retained by Pfizer;

•	The addition of net defined benefit plan liabilities (approximately $21 million) and deferred compensation liabilities (approximately $4 million);

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The elimination of (i) noncurrent deferred tax assets (some of which were included within noncurrent deferred tax liabilities due to jurisdictional netting) related to net operating loss and tax credit carryforwards; (ii) net tax liabilities associated with uncertain tax positions; (iii) noncurrent deferred tax liabilities related to deferred income taxes on unremitted earnings; and (iv) other allocated net tax assets, all of which (approximately $49 million in net tax asset accounts) were retained by Pfizer;

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The addition of (i) noncurrent deferred tax assets (approximately $8 million, some of which were included within noncurrent deferred tax liabilities due to jurisdictional netting) related to net benefit plan liabilities transferred to us by Pfizer; (ii) noncurrent deferred tax assets (approximately $2 million) related to net operating loss and tax credit carryforwards; and (iii) noncurrent deferred tax liabilities (approximately $2 million) related to property, plant and equipment transferred to us by Pfizer;

•	The elimination of allocated long-term debt (approximately $582 million), allocated accrued interest payable (approximately $16 million) and allocated unamortized deferred debt issuance costs (approximately $2 million) that were retained by Pfizer;

•	Certain net financial assets retained by Pfizer (approximately $45 million);

•	The removal of cash (approximately $7 million), inventories (approximately $5 million), property, plant and equipment (approximately $8 million), miscellaneous other assets (approximately $3 million) and other miscellaneous liabilities (approximately $2 million) associated with non-U.S. Pfizer businesses that did not transfer to us from Pfizer;

•	The addition of net receivables from Pfizer (approximately $5 million) associated with certain foreign taxes directly resulting from certain aspects of the Separation that were the responsibility of Pfizer under the terms of the tax matters agreement, see Note 9B. Tax Matters: Tax Matters Agreement;

•	The addition of (i) inventory (approximately $15 million); (ii) net deferred tax assets (approximately $1 million); and (iii) miscellaneous other assets (approximately $5 million) transferred to us by Pfizer, and the removal of (i) property, plant and equipment (approximately $2

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•	The addition of net benefit plan liabilities (approximately $21 million) associated with certain international plans that transferred from Pfizer to Zoetis in 2014. See Note 14. Benefit Plans.

C.	Senior Notes Offering

D.	Initial Public Offering (IPO)

E.	Exchange Offer

3.	Basis of Presentation

A.	Basis of Presentation Prior to the Separation

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The pre-Separation period included in the consolidated statement of income for the year ended December 31, 2013, include allocations from certain support functions (Enabling Functions) that are provided on a centralized basis within Pfizer, such as expenses for business technology, facilities, legal, finance, human resources, and, to a lesser extent, business development, public affairs and procurement, among others, as Pfizer did not routinely allocate these costs to any of its business units. These allocations were based on either a specific identification basis or, when specific identification is not practicable, proportional allocation methods (e.g., using third-party sales, headcount, etc.), depending on the nature of the services.

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The pre-Separation period included in the consolidated statement of income for the year ended December 31, 2013, includes allocations of certain manufacturing and supply costs incurred by manufacturing plants that were shared with other Pfizer business units, Pfizer's global external supply group and Pfizer's global logistics and support group (collectively, Pfizer Global Supply, or PGS). These costs may include manufacturing variances and changes in the standard costs of inventory, among others, as Pfizer did not routinely allocate these costs to any of its business units. These allocations were based on either a specific identification basis or, when specific identification is not practicable, proportional allocation methods, such as animal health identified manufacturing costs, depending on the nature of the costs.

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The pre-Separation period included in the consolidated statement of income for the year ended December 31, 2013, also includes allocations from the Enabling Functions and PGS for restructuring charges, integration costs, additional depreciation associated with asset restructuring and implementation costs, as Pfizer did not routinely allocate these costs to any of its business units. For additional information about allocations of restructuring charges and other costs associated with acquisitions and cost-reduction/productivity initiatives, see Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

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The pre-Separation period included in the consolidated statement of income for the year ended December 31, 2013, includes an allocation of share-based compensation expense and certain other compensation expense items, such as certain fringe benefit expenses, maintained on a centralized basis within Pfizer, as Pfizer does not routinely allocate these costs to any of its business units. For additional information about allocations of share-based payments, see Note 15. Share-Based Payments.

•	Enabling Functions operating expenses––$11 million in Selling, general and administrative expenses.

•	Other costs associated with cost reduction/productivity initiatives—additional depreciation associated with asset restructuring—$2 million in Selling, general and administrative expenses.

•	Other costs associated with cost reduction/productivity initiatives—implementation costs—$1 million in Selling, general and administrative expenses.

•	Share-based compensation expense—$3 million ($1 million in Cost of sales and $2 million in Selling, general and administrative expenses.

•	Compensation-related expenses—$1 million in Selling, general and administrative expenses.

•	Interest expense—$2 million.

B.	Basis of Presentation After the Separation

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•	Goodwill—goodwill represents the excess of the consideration transferred for an acquired business over the assigned values of its net assets. Goodwill is not amortized.

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Identifiable intangible assets, less accumulated amortization—these acquired assets are recorded at our cost. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Identifiable intangible assets with indefinite lives that are associated with marketed products are not amortized until a useful life can be determined. Identifiable intangible assets associated with IPR&D projects are not amortized until regulatory approval is obtained. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.

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Property, plant and equipment, less accumulated depreciation––these assets are recorded at our cost and are increased by the cost of any significant improvements after purchase. Property, plant and equipment assets, other than land and construction-in-progress, are depreciated on a straight-line basis over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.

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For finite-lived identifiable intangible assets, such as developed technology rights, and for other long-lived assets, such as property, plant and equipment, whenever impairment indicators are present, we calculate the undiscounted value of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we

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For indefinite-lived identifiable intangible assets, such as brands and IPR&D assets, we test for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the indefinite-lived intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized. We record an impairment loss, if any, for the excess of book value over fair value. In addition, in all cases of an impairment review other than for IPR&D assets, we re-evaluate whether continuing to characterize the asset as indefinite-lived is appropriate.

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For goodwill, we test for impairment on at least an annual basis, or more frequently if impairment indicators exist, either by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or by performing a quantitative assessment. If we choose to perform a qualitative analysis and conclude it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. We determine the implied fair value of goodwill by subtracting the fair value of all the identifiable net assets other than goodwill from the fair value of the reporting unit and record an impairment loss for the excess, if any, of book value of goodwill over the implied fair value. In 2015 and 2014, we quantitatively assessed, as of September 27, 2015,and September 28, 2014, respectively, the fair value of each of our reporting units using the income approach. The fair value of each reporting unit was found to exceed its respective carrying value, therefore no impairments were recorded.

•	Income approach, which is based on the present value of a future stream of net cash flows.

•	Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.

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•	Cost approach, which is based on the cost to acquire or construct comparable assets less an allowance for functional and/or economic obsolescence.

•	Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).

•	Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable (Level 2 inputs).

•	Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).

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A.	Acquisitions

(a)	Accounts receivable were measured at fair value as of the acquisition date and are substantially comprised of gross trade receivables of $21 million, $1 million of which is expected to be uncollectible.

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(b)	Inventories recorded as of the acquisition date reflect fair value adjustments of $17 million which relates primarily to finished goods. The fair value was calculated based on estimated selling profit margin.

(c)

The acquisition date fair value of intangible assets acquired was determined using the income approach and consists of the following: $160 million related to currently marketed vaccine products, $30 million related to currently marketed therapeutics, $80 million related to customer relationships and $280 million related to IPR&D. The most significant IPR&D project acquired, with an acquisition date fair value of $150 million, relates to the SRS vaccine. The vaccine was commercially launched, subsequent to the acquisition, during November 2015. Other significant acquired IPR&D projects relate to a vaccine for pancreatic disease, “PD” and Alphaflux, a therapeutic drug for the treatment of sea lice and vaccine technology for new species including Tilapia and Pangasius, were assigned acquisition date fair values of $50 million, $40 million, and $40 million, respectively. Vaccine developed technology and customer relationships will be amortized over a 15 year useful life while therapeutic developed technology will be amortized over 10 years.

(d)	Pharmaq callable bonds and derivative contracts were recorded at acquisition date fair value and settled immediately following the closing.

(e)	The Pharmaq acquisition was structured as a stock purchase therefore we assumed the historical tax bases of its assets and liabilities. We also established net tax assets and liabilities associated with the fair value adjustments recorded as part of the opening balance sheet. The components of the Pharmaq net deferred tax liability are included within Note 9. Tax Matters.

(f)

Goodwill of $303 million, representing the excess of consideration transferred over the value of net assets acquired, was allocated to our existing reportable segments and is primarily attributable to corporate synergies related to platform functions. The primary strategic purpose of the acquisition was to enhance the company’s existing product portfolio by enabling Zoetis to further expand into aquaculture. The goodwill recorded is not deductible for tax purposes.

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6.	Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

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(a)	Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes, as well as product transfer costs.

(b)	Transaction costs represent external costs directly related to acquiring businesses and primarily include expenditures for banking, legal, accounting and other similar services.

(c)	The restructuring charges for the year ended December 31, 2015, are primarily related to the operational efficiency initiative and supply network strategy.

•	restructuring charges related to the exiting of certain leased manufacturing and research facilities consisting of employee termination expenses ($2 million), exit costs ($4 million), and accelerated depreciation ($5 million).

•	For the year ended December 31, 2015––U.S. ($31 million), International ($132 million) and manufacturing/research/corporate ($138 million).

•	For the year ended December 31, 2014—International ($12 million) and manufacturing/research/corporate ($5 million).

•	For the year ended December 31, 2013––International ($8 million), and manufacturing/research/corporate ($3 million income).

(d)	Represents inventory write-offs of $13 million, included in Cost of sales, consulting fees of $40 million, included in Selling, general and administrative expenses, and accelerated depreciation of $2 million, included in Research and development expenses, for the year ended December 31, 2015.

(e)	Represents consulting fees of $16 million and accelerated depreciation of $1 million, included in Cost of sales, for the year ended December 31, 2015.

(f)	Additional depreciation associated with asset restructuring represents the impact of changes in the estimated lives of assets involved in restructuring actions. In 2014, included in Research and development expenses. In 2013, included in Cost of sales ($1 million) and Selling, general and administrative expenses ($2 million).

(g)	Implementation costs—allocated represent external, incremental costs directly related to implementing cost reduction/productivity initiatives, and primarily include expenditures related to system and process standardization and the expansion of shared services. Included in Selling, general and administrative expenses.

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(a)	Includes adjustments for foreign currency translation.

(b)	See Note 2B. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: Adjustments Associated with the Separation.

(c)	At December 31, 2015 and 2014, included in Other current liabilities ($162 million and $13 million, respectively) and Other noncurrent liabilities ($60 million and $6 million, respectively).

7.	Other (Income)/Deductions—Net

(a)

In 2015, the intangible asset impairment charges primarily include acquired IPR&D assets related to the termination of a canine oncology project. In 2014, the intangible asset impairment charges primarily include (i) approximately $6 million of IPR&D assets related to a pharmaceutical product for dogs acquired with the FDAH acquisition in 2009, as a result of the termination of the development program due to a re-assessment of economic viability; and (ii) approximately $1 million related to finite-lived developed technology rights and IPR&D due to negative market conditions and the re-assessment of economic viability.

(b)	Represents impairment charges related to assets held by our joint venture in Taiwan, currently classified as held for sale. See Note 5B. Acquisitions, Divestitures and Certain Investments—Divestitures: Assets Held for Sale.

(c)

In 2014, represents the net gain on sale of land in our joint venture in Taiwan of $6 million and the net gain on the government-mandated sale of certain product rights in Argentina and China that were associated with the FDAH acquisition in 2009 of $3 million. In 2013, represents the net gain on the government-mandated sale of certain product rights in Brazil that were acquired with the FDAH acquisition in 2009.

(d)

In July 2014, we reached a commercial settlement with several large poultry customers in Mexico associated with specific lots of a Zoetis poultry vaccine. Although there have been no quality or efficacy issues with the manufacturing of this vaccine, certain shipments from several lots in Mexico may have experienced an issue in storage with a third party in Mexico that could have impacted their efficacy. We issued a recall of these lots in July 2014 and the product is currently unavailable in Mexico. For 2014, includes a $13 million charge recorded in the second quarter of 2014, which was partially offset by a $1 million insurance recovery recorded in the third quarter of 2014, related to the commercial settlement in Mexico. We do not expect any significant additional charges related to this issue. For 2014, also includes an insurance recovery of other litigation-related charges of $2 million.

(e)

For 2015, primarily driven by costs related to hedging and exposures to certain emerging market currencies. For 2014, primarily represents costs related to hedging and exposures to certain emerging market currencies, as well as losses related to the depreciation of the Argentine peso in the first quarter of 2014. For 2013, includes a foreign currency loss of $9 million incurred in the first quarter of 2013 related to the Venezuela currency devaluation in February 2013 and other foreign currency losses in the fourth quarter of 2013 primarily related to Argentina.

(f)	For additional information, see Note 8. Foreign Currency Loss Related to Venezuela Revaluation.

(g)	Includes interest income and other miscellaneous income and charges. For 2014, also includes a pension plan settlement charge related to the sale of a manufacturing plant of $4 million.

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8.	Foreign Currency Loss Related to Venezuela Revaluation

9.	Tax Matters

(a)	In 2015, the Provision for taxes on income reflects the following:

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the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from (i) operations and (ii) restructuring charges related to the operational efficiency initiative and supply network strategy, as well as repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and as a result of operating fluctuations in the normal course of business, the impact of non-deductible items and the extent and location of other income and expense items, such as restructuring charges/(benefits), asset impairments and gains and losses on asset divestitures;

•	U.S. tax benefit related to U.S. Research and Development Tax Credit which was permanently extended on December 18, 2015, and the U.S. Domestic Production Activities deduction;

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•	Tax expense related to the changes in valuation allowances and the resolution of other tax items;

•	Tax expense related to changes in uncertain tax positions (see D. Tax Contingencies);

•	a $9 million discrete tax benefit recorded in the first quarter of 2015 related to a revaluation of deferred taxes as a result of a change in tax rates;

•	a $6 million discrete tax benefit recorded in the second quarter of 2015 related to prior period tax adjustments; and

•	the tax expense related to the non-deductible revaluation of the net monetary assets in Venezuela to the SIMADI exchange rate recorded in the fourth quarter of 2015.

(b)	In 2014, the Provision for taxes on income reflects the following:

•	U.S. tax expense of approximately $2 million as a result of providing U.S. deferred income taxes on certain current-year income earned outside the United States that will not be indefinitely reinvested overseas (see C. Deferred Taxes);

•	U.S. tax benefit related to U.S. Research and Development Tax Credit which was extended on December 19, 2014, and the U.S. Domestic Production Activities deduction;

•	Tax benefit related to the changes in valuation allowances and the resolution of other tax items;

•	Tax expense related to an $8 million discrete tax item during the first quarter of 2014 related to an intercompany inventory adjustment; and

•	Tax cost related to changes in uncertain tax positions (see D. Tax Contingencies).

(c)	In 2013, the Provision for taxes on income reflects the following:

•	U.S. tax expense of approximately $3 million as a result of providing U.S. deferred income taxes on certain current-year income earned outside the United States that will not be indefinitely reinvested overseas (see C. Deferred Taxes);

•	U.S. tax benefit related to U.S. Research and Development Tax Credit which was retroactively extended on January 3, 2013, and the U.S. Domestic Production Activities deduction;

•	Tax expense of approximately $25 million related to the establishment of valuation allowance; and

•	Tax cost related to changes in uncertain tax positions (see D. Tax Contingencies).

(a)	The rate impact of taxation of non-U.S. operations was a decrease to our effective tax rate in 2013 through 2015 due to (i) the jurisdictional mix of earnings as tax rates outside the United States are generally lower than the U.S. statutory income tax rate; and (ii) incentive tax rulings in Belgium and in Singapore.

(b)	In all years, the impact to the rate due to increases in uncertain tax positions was more than offset by the jurisdictional mix of earnings and other U.S. tax implications of our foreign operations described in the above footnotes.

(c)	For a discussion about unrecognized tax benefits and tax settlements and resolution of certain tax positions, see A. Taxes on Income and D. Tax Contingencies.

(d)	The rate impact related to the non-deductible revaluation of the net monetary assets in Venezuela to the SIMADI exchange rate was an increase to our effective tax rate in 2015.

(e)	In all years, the decrease in the rate was due to the benefit associated with the U.S. Research and Development Tax Credit and the U.S. Domestic Production Activities deduction.

(f)	Non-deductible items include meals and entertainment expenses.

B.	Tax Matters Agreement

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Pfizer will be responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments and including those taxes attributable to our business) reportable on a consolidated, combined or unitary return that includes Pfizer or any of its subsidiaries (and us and/or any of our subsidiaries) for any periods or portions thereof ending on or prior to December 31, 2012. We will be responsible for the portion of any such taxes for periods or portions thereof beginning on or after January 1, 2013, as would be applicable to us if we filed the relevant tax returns on a standalone basis.

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•	We will be responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments) that are reportable on returns that include only us and/or any of our subsidiaries, for all tax periods whether before or after the completion of the Separation.

•	Pfizer will be responsible for certain specified foreign taxes directly resulting from certain aspects of the Separation.

(a)

The increase in the total net deferred tax liability from December 31, 2014, to December 31, 2015, is primarily attributable to an increase in deferred tax liabilities related to intangibles and property, plant and equipment, partially offset by an increase in valuation allowances representing the amounts determined to be unrecoverable and an increase in deferred tax assets related to restructuring and other charges, employee benefits and net operating loss/credit carryforwards.

(b)

In 2015, included in Noncurrent deferred tax assets ($82 million) and Noncurrent deferred tax liabilities ($264 million). In 2014, included in Current deferred tax assets ($109 million), Noncurrent deferred tax assets ($54 million), Other current liabilities ($11 million) and Noncurrent deferred tax liabilities ($277 million). For 2015, amounts reflect the adoption of a new accounting standard requiring all deferred tax assets and liabilities to be classified as noncurrent. Prior periods were not retrospectively adjusted. See Note 4. Significant Accounting Policies— New Accounting Standards.

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Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction. As of December 31, 2015 and 2014, we had approximately $1 million and $1 million, respectively, in assets associated with uncertain tax positions recorded in Other noncurrent assets.

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Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. These unrecognized tax benefits relate primarily to issues common among multinational corporations. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate.

(a)

The significant decrease in the total gross unrecognized tax benefits from December 31, 2012, to December 31, 2013, is primarily attributable to the elimination of net tax liabilities associated with uncertain tax positions that were retained by Pfizer. See Note 2B. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: Adjustments Associated with the Separation.

(b)	Primarily included in Provision for taxes on income.

(c)	In 2015 and 2014, the decreases are primarily related to movements in foreign translation adjustments on prior year positions and effective settlement of certain issues with the U.S. tax authorities and foreign tax authorities. See A. Tax Matters—Taxes on Income.

(d)	In 2015, included in Noncurrent deferred tax assets ($6 million) and Other taxes payable ($55 million). In 2014, included in Noncurrent deferred tax assets ($6 million) and Other taxes payable ($48 million).

•

Interest related to our unrecognized tax benefits is recorded in accordance with the laws of each jurisdiction and is recorded in Provision for taxes on income in our consolidated statements of income. In 2015, we recorded a net interest expense of $1 million; in 2014, we recorded a net interest expense of $1 million; and in 2013, we recorded a net interest expense of $3 million. Gross accrued interest totaled $4 million and $4 million as of December 31, 2015 and 2014, respectively, and were included in Other taxes payable. Gross accrued penalties totaled $3 million and $4 million as of December 31, 2015 and 2014, respectively, and were included in Other taxes payable.

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10.	Financial Instruments

A.	Debt

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B.	Derivative Financial Instruments

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11.	Inventories

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13.	Goodwill and Other Intangible Assets

A.	Goodwill

B.	Other Intangible Assets

(a)

Includes the intangible assets associated with the acquisitions of Pharmaq and of certain assets of Abbott Animal Health (amounts recorded are preliminary and subject to final valuation), as well as the impact of foreign exchange. For additional information, see Note 5A. Acquisitions, Divestitures and Certain Investments—Acquisitions: Acquisition of Pharmaq and Acquisition of Abbott Animal Health.

(b)	Primarily includes customer relationships associated with the acquisition of Pharmaq.

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C.	Amortization

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(a)	Represents the benefit obligations and plan assets acquired in 2015 from Pharmaq (net obligation of approximately $2 million) and transferred to us in 2014 and 2013 from Pfizer as part of the Separation (net obligation of approximately $22 million and $21 million, respectively), as described above.

(b)	The 2014 settlements and curtailments reflect the impact of the sale of our Netherlands manufacturing facility.

(c)	Included in Other noncurrent liabilities.

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(a)	Fair values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see Note 4. Significant Accounting Policies—Fair Value). All investment plan assets are valued using Level 1 or Level 2 inputs.

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•	Equity commingled funds––observable market prices.

•	Government bonds and other investments––principally observable market prices.

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15.	Share-Based Payments

A.	Share-Based Compensation Expense

(a)	For the year ended December 31, 2015, we capitalized $1 million of share-based compensation expense to inventory.

B.	Stock Options

(a)	Determined using a constant dividend yield during the expected term of the Zoetis stock option.

(b)	Determined using the interpolated yield on U.S. Treasury zero-coupon issues.

(c)	For 2015, determined using a 2-year historical volatility of the Zoetis stock price and weighting it equally against the implied volatility. The selection of the blended historical and implied volatility approach was based on our assessment that this calculation of expected volatility is more representative of future stock price trends.

(d)	Determined using expected exercise and post-vesting termination patterns.

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(a)	Market price of underlying Zoetis common stock less exercise price.

C.	Restricted Stock Units (RSUs)

D.	Deferred Stock Units (DSUs)

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F.	Other Equity-Based or Cash-Based Awards.

G.	Accelerated Vesting of Outstanding Equity Awards

H.	Treatment of Outstanding Pfizer Equity Awards

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16.	Stockholders' Equity

(a)	Treasury shares associated with stock-based compensation are reacquired from employees to satisfy tax withholding requirements on the vesting and exercise of awards under our equity compensation plan. For additional information regarding share-based compensation, see Note 15. Share-Based Payments.

(b)

In November 2014, the company's Board of Directors authorized a $500 million share repurchase program. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs. As of December 31, 2015, there were approximately $301 million remaining under this authorization. There were no share repurchases under this program during the years ended December 31, 2014 and 2013.

(a)	See Note 2B. The Separation, Adjustments Associated with the Separation, Senior Notes Offering, Initial Public Offering and Exchange Offer: Adjustments Associated with the Separation.

(b)	Includes the 2014 settlement charge associated with the 2012 sale of our Netherlands manufacturing facility. See Note 14. Benefit Plans.

(c)	Relates to transfers of defined benefit pension plans from Pfizer Inc. and the reclassification from Additional Paid in Capital to Accumulated Other Comprehensive Loss. See Note 14. Benefit Plans.

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17.	Earnings per Share

18.	Commitments and Contingencies

A.	Legal Proceedings

•	Product liability and other product-related litigation, which can include injury, consumer, off-label promotion, antitrust and breach of contract claims.

•	Commercial and other matters, which can include product-pricing claims and environmental claims and proceedings.

•	Patent litigation, which typically involves challenges to the coverage and/or validity of our patents or those of third parties on various products or processes.

•	Government investigations, which can involve regulation by national, state and local government agencies in the United States and in other countries.

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19.	Segment, Geographic and Other Revenue Information

A.	Segment Information

•

Other business activities, includes our CSS contract manufacturing results, as well as 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, which is responsible for platform functions such as business technology, facilities, legal, finance, human resources, business development, 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, integrating and restructuring acquired businesses, such as transaction costs, integration costs and restructuring charges associated with asset restructuring; 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 certain costs related to becoming an independent public company, 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 business technology and finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) procurement costs.

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(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 were $593 million in 2015, $710 million in 2014, and $693 million in 2013.

(c)

For 2015, certain significant items primarily includes: (i) Zoetis stand up costs of $118 million; (ii) charges related to our operational efficiency initiative and supply network strategy of $373 million, (iii) charges of $93 million of foreign currency losses related to the Venezuela revaluation; (iv) impairment charges of $3 million related to assets held by our joint venture in Taiwan, currently classified as assets held for sale, and an impairment of IPR&D assets related to the termination of a canine oncology project of $2 million; and (v) charges due to unusual investor-related activities of $3 million. Stand-up costs include certain nonrecurring costs related to becoming an independent public company, such as new branding (including changes to the manufacturing process for required new packaging), the creation of standalone systems and infrastructure, site separation, accelerated vesting and associated cash payment related to certain Pfizer equity awards, and certain legal registration and patent assignment costs.

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(d)	Defined as income before provision for taxes on income.

C.	Other Revenue Information

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20.	Transactions and Agreements with Pfizer

A.	Pre-Separation Period

B.	Agreements with Pfizer

•	Global separation agreement. This agreement governs the relationship between Pfizer and us following the IPO and includes provisions related to the allocation of assets and liabilities, indemnification, delayed transfers and further assurances, mutual releases, insurance and certain covenants.

•	Transitional services agreement. This agreement grants us the right to continue to use certain of Pfizer's services and resources related to our corporate functions, such as business technology, facilities, finance, human resources, public affairs and procurement, in exchange for mutually agreed-upon fees based on Pfizer's costs of providing these services.

•

Tax matters agreement. This agreement governs ours and Pfizer's respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. Pursuant to this agreement, we have also agreed to certain covenants that contain restrictions intended to preserve the tax-free status of certain transactions, and we have agreed to indemnify Pfizer and its affiliates against any and all tax-related liabilities incurred by them relating to these transactions to the extent caused by an acquisition of our stock or assets or by any other action undertaken by us.

•	Research and development collaboration and license agreement. This agreement permits certain of our employees to be able to review a Pfizer database to identify compounds that may be of interest to the animal health field. Pfizer has granted to us an option to enter into a license agreement subject to certain restrictions and requirements and we will make payments to Pfizer.

•

Employee matters agreement. This agreement governs ours and Pfizer's respective rights, responsibilities and obligations with respect to the following matters: employees and former employees (and their respective dependents and beneficiaries) who are or were associated with Pfizer, us or the parties' respective subsidiaries or affiliates; the allocation of assets and liabilities generally relating to employees, employment or service-related matters and employee benefit plans; and other human resources, employment and employee benefits matters.

•

Master manufacturing and supply agreements. These two agreements govern our manufacturing and supply arrangements with Pfizer. Under one of these agreements, Pfizer will manufacture and supply us with animal health products. Under this agreement, our manufacturing and supply chain leadership will have oversight responsibility over product quality and other key aspects of the manufacturing process with respect to the Pfizer-supplied products. Under the other agreement, we will manufacture and supply certain human health products to Pfizer.

•

Environmental matters agreement. This agreement governs the performance of remedial actions for liabilities allocated to each party under the global separation agreement; addresses our substitution for Pfizer with respect to animal health assets and remedial actions allocated to us (including substitution related to, for example, permits, financial assurances and consent orders); allows our conditional use of Pfizer's consultants and contractors to assist in the conduct of remedial actions; and addresses the exchange of related information between the

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•	Screening services agreement. This agreement requires us to provide certain high throughput screening services to Pfizer's R&D organization for which Pfizer pays to us agreed-upon fees.

•

Intellectual property license agreements. Under these agreements (i) Pfizer and certain of its affiliates licensed to us and certain of our affiliates the right to use certain intellectual property rights in the animal health field; (ii) we licensed to Pfizer and certain of its affiliates certain rights to intellectual property in all fields outside the animal health field; and (iii) Pfizer granted us rights with respect to certain trademarks and copyrighted works.

•

Intellectual Property. As part of the Separation, Pfizer assigned to us ownership of certain animal health related patents, pending patent applications, and trademark applications and registrations. In addition, Pfizer licensed to us the right to use certain intellectual property rights in the animal health field. We licensed to Pfizer the right to use certain of our trademarks and substantially all of our other intellectual property rights in the human health field and all other fields outside of animal health. In addition, Pfizer granted us a transitional license to use certain of Pfizer's trademarks and we granted Pfizer a transitional license to use certain of our trademarks for a period of time following the completion of the IPO.

•

Manufacturing Facilities. Our global manufacturing network consists of 17 “anchor” manufacturing sites and 11 “satellite” manufacturing sites. Ownership of, or the existing leasehold interest in, these facilities were conveyed to us by Pfizer as part of the Separation. Among these 28 manufacturing sites is our facility in Guarulhos, Brazil, which we leased back to Pfizer. Certain of our products are currently manufactured at 11 manufacturing sites that were retained by Pfizer. The products manufactured by Pfizer at these sites and at our Guarulhos, Brazil facility continue to be supplied to us under the terms of a manufacturing and supply agreement we entered into with Pfizer.

•

R&D Facilities. We have R&D operations co-located with certain of our manufacturing sites in Australia, Belgium, Brazil, Spain and the United States to facilitate the efficient transfer of production processes from our laboratories to manufacturing sites. In addition, we maintain R&D operations at non-manufacturing locations in Belgium, Brazil, India and the United States. As part of the Separation, Pfizer conveyed to us its interest in each of these R&D facilities, with the exception of our Mumbai, India facility, which we expect Pfizer to transfer to us after the completion of the Separation for cash consideration to be agreed upon, and, in the interim, we are leasing this facility from Pfizer.

•

Employees. In general, as part of the Separation, employees of Pfizer who were substantially dedicated to the animal health business became our employees. However, labor and employment laws or other business considerations in some jurisdictions delayed Pfizer from transferring to us employees who are substantially dedicated to the animal health business. In those instances, to the extent permissible under applicable law, we and Pfizer entered into mutually-acceptable arrangements to provide for continued operation of the business until such time as the employees in those jurisdictions can be transferred to us.

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(a)	Costs and expenses in the fourth quarter reflect seasonal trends as well as the 2015 Venezuela revaluation. For additional information, see Note 8. Foreign Currency Loss Related to Venezuela Revaluation.

(b)	The second quarter of 2015 includes a charge for employee termination benefits associated with our operational efficiency initiative and supply network strategy.   For additional information, see Note 6. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

22.	Subsequent Events

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Item 9A.	Controls and Procedures

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Item 12.	Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters.

•	warranty obligations created as part of the animal health business;

•	product liability claims with respect to any animal health product;

•	environmental liabilities relating to the animal health business and environmental liabilities at the real property that we acquired from Pfizer;

•	liabilities related to animal health businesses or operations that were discontinued or divested by Pfizer;

•	litigation liabilities; and

•	our debt obligations, including under the senior notes offering.

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•

Pfizer is responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments and including those taxes attributable to our business) reportable on a consolidated, combined or unitary return that includes Pfizer or any of its subsidiaries (and us and/or any of our subsidiaries) for any periods or portions thereof ending on or prior to December 31, 2012. We are responsible for the portion of any such taxes for periods or portions thereof beginning on or after January 1, 2013, as would be applicable to us if we filed the relevant tax returns on a standalone basis.

•	We are responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments) that are reportable on returns that include only us and/or any of our subsidiaries, for all tax periods whether before or after the Separation date.

•	Pfizer is responsible for certain specified foreign taxes directly resulting from certain aspects of the Separation.

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•	issuance or sale of stock or other securities (including securities convertible into our stock but excluding certain compensatory arrangements);

•	sales of assets outside the ordinary course of business; and

•	entering into any other corporate transaction which would cause us to undergo a 40% or greater change in our stock ownership.

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•	employees and former employees (and their respective dependents and beneficiaries) who are or were associated with Pfizer, us or the parties' respective subsidiaries or affiliates;

•	the allocation of assets and liabilities generally relating to employees, employment or service-related matters and employee benefit plans; and

•	other human resources, employment and employee benefits matters.

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A.	(1)    The financial statements and notes to financial statements are filed as part of this report in Item 8. Financial Statements and Supplementary Data.

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