Zoetis (ZTS) 10-Q 8 Aug 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jul. 02, 2017	Aug. 02, 2017
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 2, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2
Trading Symbol	ZTS
Entity Registrant Name	Zoetis Inc.
Entity Central Index Key	1,555,280
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity common Stock, Shares Outstanding		489,111,671

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Millions, $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Income Statement [Abstract]
Revenue		$ 1,269	$ 1,208	$ 2,500	$ 2,370
Costs and expenses:
Cost of Sales	[1]	440	399	883	788
Selling, general and administrative expenses	[1]	336	343	645	658
Research and development expenses	[1]	86	88	176	178
Amortization of intangible assets	[1]	23	22	45	43
Restructuring charges/(reversals) and certain acquisition-related costs		0	(21)	(1)	(19)
Interest expense, net of capitalized interest		41	41	82	84
Other (income)/deductions—net		(2)	4	(12)	(26)
Income before provision for taxes on income	[2]	345	332	682	664
Provision for taxes on income		98	108	196	236
Net income before allocation to noncontrolling interests		247	224	486	428
Less: Net income attributable to noncontrolling interests		0	0	1	0
Net income attributable to Zoetis Inc.		$ 247	$ 224	$ 485	$ 428
Earnings per share attributable to Zoetis Inc. stockholders:
Basic (in dollars per share)		$ 0.50	$ 0.45	$ 0.99	$ 0.86
Diluted (in dollars per share)		$ 0.50	$ 0.45	$ 0.98	$ 0.86
Weighted-average common shares outstanding:
Basic (in shares)		490.8	496.3	491.6	496.9
Diluted (in shares)		494	498.8	494.6	499.2
Dividends paid per common share (in dollars per share)		$ 0.105	$ 0.095	$ 0.21	$ 0.190
[1]	Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, general and administrative expenses or Research and development expenses, as appropriate, in the condensed consolidated statements of income.
[2]	Defined as income before provision for taxes on income.

CONDENSED CONSOLIDATED STATEME3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Statement of Comprehensive Income [Abstract]
Net income before allocation to noncontrolling interests		$ 247	$ 224	$ 486	$ 428
Unrealized losses on derivatives, net	[1]	(1)	(3)	(1)	(3)
Other comprehensive income/(loss), net of taxes and reclassification adjustments:
Foreign currency translation adjustments, net		12	63	56	65
Benefit plans: Actuarial (losses)/gains, net	[1]	(1)	2	1	3
Total other comprehensive income/(loss), net of tax		10	62	56	65
Comprehensive income before allocation to noncontrolling interests		257	286	542	493
Less: Comprehensive income/(loss) attributable to noncontrolling interests		0	0	1	(1)
Comprehensive income attributable to Zoetis Inc.		$ 257	$ 286	$ 541	$ 494
[1]	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 condensed consolidated statements of income.

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Millions		Jul. 02, 2017	Dec. 31, 2016
Assets
Cash and cash equivalents	[1]	$ 705	$ 727
Restricted cash		7
Accounts receivable, less allowance for doubtful accounts of $31 in 2017 and $30 in 2016		975	913
Inventories		1,498	1,502
Assets held for sale		53
Other current assets		353	248
Total current assets		3,584	3,390
Property, plant and equipment, less accumulated depreciation of $1,397 in 2017 and $1,358 in 2016		1,355	1,381
Goodwill		1,495	1,481
Identifiable intangible assets, less accumulated amortization		1,210	1,228
Deferred tax assets		93	96
Other noncurrent assets		65	73
Total assets		7,802	7,649
Liabilities and Equity
Short-term borrowings		100
Current portion of long-term debt		750	0
Accounts payable		199	265
Dividends payable		52	52
Accrued expenses		406	464
Accrued compensation and related items		163	224
Income taxes payable		82	71
Liabilities associated with assets held for sale		4
Other current liabilities		28	41
Total current liabilities		1,784	1,117
Long-term debt, net of discount and issuance costs		3,719	4,468
Deferred tax liabilities		261	244
Other taxes payable		83	73
Other noncurrent liabilities		209	248
Total liabilities		6,056	6,150
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value: 1,000,000,000 authorized, none issued		0	0
Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 489,659,511 and 492,855,297 shares outstanding at July 2, 2017, and December 31, 2016, respectively		5	5
Treasury stock, at cost, 12,231,732 and 9,035,946 shares of common stock at July 2, 2017, and December 31, 2016, respectively		(615)	(421)
Additional paid-in capital		1,024	1,024
Retained earnings		1,843	1,477
Accumulated other comprehensive loss		(542)	(598)
Total Zoetis Inc. equity		1,715	1,487
Equity attributable to noncontrolling interests		31	12
Total equity		1,746	1,499
Total liabilities and equity		$ 7,802	$ 7,649
[1]	As of July 2, 2017, includes $7 million of restricted cash.

CONDENSED CONSOLIDATED BALANCE5

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (PARENTHETICAL) - USD ($) $ in Millions		Jul. 02, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts		$ 31	$ 30
Accumulated depreciation		$ 1,397	$ 1,358
Preferred stock, par value (in dollars per share)		$ 0.01	$ 0.01
Preferred stock, shares authorized		1,000,000,000	1,000,000,000
Preferred stock, shares issued		0	0
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01
Common stock, shares authorized		6,000,000,000	6,000,000,000
Common stock issued, shares	[1]	501,891,243	501,891,243
Common stock, shares outstanding		489,659,511	492,855,297
Treasury stock, shares	[1]	12,231,732	9,035,946
[1]	Shares may not add due to rounding.

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) - USD ($) $ in Millions		Total	Common Stock	[1]	Treasury Stock	[1]	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Equity Attributable to Noncontrolling Interests
Beginning balance at Dec. 31, 2015		$ 1,091	$ 5		$ (203)		$ 1,012	$ 876	$ (622)	$ 23
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		428						428
Other comprehensive income/(loss)		65							66	(1)
Share-based compensation awards	[2]	37			60		(3)	(20)
Treasury stock acquired	[3]	(151)			(151)
Employee benefit plan contribution from Pfizer Inc.	[4]	1					1
Divestitures	[5]	(6)							2	(8)
Dividends declared		(94)						(94)
Ending balance at Jul. 03, 2016		1,371	5		(294)		1,010	1,190	(554)	14
Beginning balance at Dec. 31, 2016		1,499	5		(421)		1,024	1,477	(598)	12
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		486						485		1
Other comprehensive income/(loss)		56							56
Consolidation of a noncontrolling interest	[6]	18								18
Share-based compensation awards	[2]	39			56		(1)	(16)
Treasury stock acquired	[3]	(250)			(250)
Employee benefit plan contribution from Pfizer Inc.	[4]	1					1
Dividends declared		(103)						(103)
Ending balance at Jul. 02, 2017		$ 1,746	$ 5		$ (615)		$ 1,024	$ 1,843	$ (542)	$ 31
[1]	As of July 2, 2017, and July 3, 2016, there were 489,659,511 and 495,389,702 outstanding shares of common stock, respectively, and 12,231,732 and 6,501,541 shares of treasury stock, respectively. Treasury stock is recognized at the cost to reacquire the shares. For additional information, see Note 13. Stockholders' Equity.
[2]	Includes the issuance of shares of Zoetis Inc. common stock and the reissuance of treasury stock in connection with the vesting of employee share-based awards. Upon reissuance of treasury stock, differences between the proceeds from reissuance and the cost of the treasury stock that result in gains are recorded in Additional paid-in capital. Losses are recorded in Additional paid-in capital to the extent that they can offset previously recorded gains. If no such credit exists, the differences are recorded in Retained earnings. Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information, see Note 12. Share-Based Payments and Note. 13. Stockholders' Equity.
[3]	Reflects the acquisition of treasury shares in connection with the share repurchase program. For additional information, see Note 13. Stockholders' Equity.
[4]	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 11. Benefit Plans.
[5]	Reflects the divestiture of our share of our Taiwan joint venture. See Note 4. Acquisitions and Divestitures: Divestitures.
[6]	Represents the consolidation of a European livestock monitoring company, a variable interest entity of which Zoetis is the primary beneficiary.

CONDENSED CONSOLIDATED STATEME7

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) (PARENTHETICAL) - shares		Jul. 02, 2017	Dec. 31, 2016	Jul. 03, 2016	Dec. 31, 2015
Statement of Stockholders' Equity [Abstract]
Common stock, shares outstanding		489,659,511	492,855,297	495,389,702
Treasury stock, shares	[1]	12,231,732	9,035,946	6,501,541	4,410,000
[1]	Shares may not add due to rounding.

CONDENSED CONSOLIDATED STATEME8

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Millions		6 Months Ended
		Jul. 02, 2017		Jul. 03, 2016
Operating Activities
Net income before allocation to noncontrolling interests		$ 486		$ 428
Adjustments to reconcile net income before noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization expense	[1],[2]	121		117
Share-based compensation expense		22		19
Restructuring		(1)		(19)
Net loss/(gain) on sale of assets		2		(27)
Provision for losses on inventory		40		35
Deferred taxes		13		17
Employee benefit plan contribution from Pfizer Inc.		1		1
Other non-cash adjustments		0		9
Other changes in assets and liabilities, net of acquisitions and divestitures
Accounts receivable		(41)		53
Inventories		(46)		(87)
Other assets		(106)		(72)
Accounts payable		(66)		(71)
Other liabilities		(147)		(254)
Other tax accounts, net		21		39
Net cash provided by operating activities		299		188
Investing Activities
Purchases of property, plant and equipment		(93)		(99)
Acquisitions		(3)		(20)
Net proceeds from sales of assets		1		88
Other investing activities		7		0
Net cash used in investing activities		(88)		(31)
Financing Activities
Decrease in short-term borrowings, net		0		(1)
Issuance of commercial paper		100		0
Principal payments on long-term debt		0		(400)
Payment of contingent consideration related to previously acquired assets		(5)		(22)
Share-based compensation-related proceeds, net of taxes paid on withholding shares		18		17
Purchases of treasury stock	[3]	(250)		(151)
Cash dividends paid		(103)		(94)
Net cash used in financing activities		(240)		(651)
Effect of exchange-rate changes on cash and cash equivalents		7		(2)
Net decrease in cash and cash equivalents		(22)		(496)
Cash and cash equivalents at beginning of period		727	[4]	1,154
Cash and cash equivalents at end of period		705	[4]	658
Cash paid during the period for:
Income taxes		256		215
Interest, net of capitalized interest		82		84
Non-cash transactions:
Purchases of property, plant and equipment		3		6
Contingent purchase price consideration	[5]	0		27
Dividends declared, not paid		$ 52		$ 47
[1]	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.
[2]	Defined as income before provision for taxes on income.
[3]	Reflects the acquisition of treasury shares in connection with the share repurchase programs. For additional information, see Note 13. Stockholders' Equity.
[4]	As of July 2, 2017, includes $7 million of restricted cash.
[5]	For 2016, relates primarily to the non-cash portion of the acquisition of a livestock business in South America.

Organization

Organization	6 Months Ended
	Jul. 02, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization	Organization Zoetis Inc. (including its subsidiaries, collectively, Zoetis, the company, we, us or our) is a global leader in the discovery, development, manufacture and commercialization of animal health medicines and vaccines, with a focus on both livestock and companion animals. We organize and operate our business in two geographic regions: the United States (U.S.) and International. We directly market our products in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America. Our products are sold in more than 100 countries, including developed markets and emerging markets. We have a diversified business, marketing products across eight core species: cattle, swine, poultry, sheep and fish (collectively, livestock) and dogs, cats and horses (collectively, companion animals); and within five major product categories: anti-infectives, vaccines, parasiticides, medicated feed additives and other pharmaceuticals.

Basis of Presentation

Basis of Presentation	6 Months Ended
	Jul. 02, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the United States are as of and for the three and six-month periods ended May 28, 2017 , and May 29, 2016 . Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year. We are responsible for the unaudited condensed consolidated financial statements included in this Form 10-Q. The condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The information included in this interim report should be read in conjunction with the financial statements and accompanying notes included in our 2016 Annual Report on Form 10-K.

Significant Accounting Policies

Significant Accounting Policies	6 Months Ended
	Jul. 02, 2017
Accounting Policies [Abstract]
Significant Accounting Policies	Significant Accounting Policies Recently Adopted Accounting Standards In January 2017, the Financial Accounting Standards Board (FASB) issued an accounting standards update which clarifies the definition of a business. Under the new guidance, a set of integrated activities and assets is a business only if it has, at a minimum, an input and substantive process that together significantly contribute to the ability to create outputs. The update also introduces the concept of an initial screening or “Step 1” which requires companies to first determine if substantially all of the fair value of the gross assets acquired is concentrated in a single (or group of similar) identifiable assets. Transactions that pass the Step 1 screening will be considered a business if they contain an input and substantive process and either; (1) an output or (2) an organized workforce with skills critical to the ability to create outputs and inputs that can be utilized to create the outputs. Companies will no longer be required to evaluate whether a market participant could replace any missing inputs or processes, instead focusing on the substance of what was acquired. The provisions of the new standard are effective, on a prospective basis, beginning January 1, 2018, for annual and interim reporting periods and may be adopted early for any transactions not yet reported in issued financial statements. We elected to early adopt the new standard for any new transactions occurring on or after January 1, 2017. In July 2015, the FASB issued an accounting standards update to simplify the measurement of inventory by requiring that inventory be measured at the lower of cost or net realizable value, rather than at the lower of cost or market, with market being defined as either replacement cost, net realizable value or net realizable value less a normal profit margin. We adopted this guidance as of January 1, 2017. This guidance did not have a significant impact on our condensed consolidated financial statements. Recently Issued Accounting Standards In March 2017, the FASB issued an accounting standards update to simplify and improve the reporting of net periodic pension benefit cost by requiring only present service cost to be presented in the same line item as other current employee compensation costs while remaining components of net periodic benefit cost would be presented within Other (income)/deductions—net outside of operations. We plan to adopt this guidance as of January 1, 2018, the required effective date, and do not expect the new standard will have a significant impact on our consolidated financial statements. In October 2016, the FASB issued an accounting standards update that will require the recognition of the income tax consequences of an intra-entity asset transfer, other than inventory, when the transfer occurs as opposed to when the asset is sold to an outside third party. The provisions of the new standard are effective beginning January 1, 2018, for annual and interim reporting periods. Early adoption is permitted beginning on January 1, 2017. We plan to adopt this guidance as of January 1, 2018, the required effective date, and do not expect the new standard will have a significant impact on our consolidated financial statements. In February 2016, the FASB issued an accounting standards update which requires lessees to recognize most leases on the balance sheet with a corresponding right of use asset. Leases will be classified as financing or operating which will drive the expense recognition pattern. For lessees, the income statement presentation and expense recognition pattern for financing and operating leases is similar to the current model for capital and operating leases, respectively. Companies may elect to exclude short-term leases. The update also requires additional disclosures that will better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We plan to adopt this guidance as of January 1, 2019, the required effective date, for annual and interim reporting periods. The new standard requires a modified retrospective adoption approach, at the beginning of the earliest comparative period presented in the financial statements. We continue to assess the potential impact that adopting this new guidance will have on our consolidated financial statements. In May 2014, the FASB issued an accounting standards update that outlines a new, single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. This update supersedes most current revenue recognition guidance under U.S. GAAP. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance includes a five-step model for determining how, when and how much revenue should be recognized. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We plan to adopt this guidance as of January 1, 2018, the required effective date, using the modified retrospective transition method. Under the modified retrospective method, the cumulative effect of applying the new standard will be recognized as of the date of initial application with disclosure of results under both the new and prior standards. We continue to assess the impact of the new standard on our current policies, procedures, and disclosures related to revenue recognition. Based on the work performed to date, we do not believe that the adoption will have a material impact on our consolidated financial statements. While implementation procedures are still ongoing, we have evaluated the impact on our primary revenue stream, product sales, in both the United States and our key international markets and no matters have currently been identified individually or in the aggregate that would have a material impact on the timing or amount of revenue recognition based on the provisions of the new standard.

Acquisitions and Divestitures

Acquisitions and Divestitures	6 Months Ended
	Jul. 02, 2017
Business Combinations [Abstract]
Acquisitions and Divestitures	Acquisitions and Divestitures Assets and Liabilities Held for Sale On March 30, 2017, as part of our supply network strategy, we announced an agreement with the Brazilian-based pharmaceutical company União Química (UQ) to sell our manufacturing site in Guarulhos, Brazil, and we met the criteria for held for sale classification. The agreement also includes entering into a five -year manufacturing and supply agreement with UQ to begin upon closing of the transaction. As of July 2, 2017, recorded assets and liabilities held for sale are summarized below: July 2, (MILLIONS OF DOLLARS) 2017 Assets held for sale Inventories $ 12 Property, plant and equipment 26 Deferred tax assets 4 Other current assets 8 Goodwill 3 Total $ 53 Liabilities associated with assets held for sale Accounts payable $ 3 Other current liabilities 1 Total $ 4 We expect to complete this transaction during the second half of 2017. Divestitures On May 11, 2017, we completed the sale of our manufacturing site in Shenzhou, China. We had previously exited operations at this site during the second quarter of 2015 as part of our operational efficiency program. We received total cash proceeds of approximately $3 million and recorded a net pre-tax gain of approximately $2 million within Other (income)/deductions—net . Additionally, in the second quarter of 2017, we recorded a $4 million expense within Other (income)/deductions—net related to the prior year sale of the U.S. manufacturing sites noted below. On April 28, 2016, we completed the sale of our 55 percent ownership share of a Taiwan joint venture, including a manufacturing site in Hsinchu, Taiwan to Yung Shin Pharmaceutical Industrial Co., Ltd., a pharmaceutical company with an animal health business and headquarters in Taiwan. The sale also included a portfolio of products in conjunction with our comprehensive operational efficiency program. These products include medicated feed additives, anti-infective medicines and nutritional premixes for livestock, sold primarily in Taiwan and in international markets. We received $13 million in cash upon closing. On February 17, 2016, we completed the sale of our manufacturing site in Haridwar, India to the India-based pharmaceutical company Zydus Cadila (Cadila Healthcare Ltd.). The agreement also included the sale of a portfolio of our products in conjunction with our comprehensive operational efficiency program. On February 12, 2016, we completed the sale of two of our manufacturing sites in the United States: Laurinburg, North Carolina, and Longmont, Colorado, to Huvepharma NV (Huvepharma), a European animal health company. Huvepharma also assumed the assets and operations and the lease of our manufacturing and distribution site in Van Buren, Arkansas. The agreement included the sale of a portfolio of products in conjunction with our comprehensive operational efficiency program. During the first six months of 2016, we received total cash proceeds of approximately $88 million related to the divestitures of the India and U.S. manufacturing sites noted above. During the first quarter of 2016, we recognized a net pre-tax gain of approximately $33 million , partially offset by a net pre-tax loss of approximately $6 million recognized during the second quarter of 2016. Gains and losses related to divestitures are recorded within Other (income)/deductions—net .

Restructuring Charges and Other

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives	6 Months Ended
	Jul. 02, 2017
Restructuring and Related Activities [Abstract]
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives	Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems. In connection with our acquisition activity, we typically incur costs and charges associated with executing the transactions, integrating the acquired operations, which may include expenditures for consulting and the integration of systems and processes, product transfers and restructuring. This may include charges related to employees, assets and activities that will not continue. All operating functions can be impacted by these actions, including sales and marketing, manufacturing and research and development (R&D), as well as functions such as business technology, shared services and corporate operations. The components of costs incurred in connection with restructuring initiatives, acquisitions and cost-reduction/productivity initiatives are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Restructuring charges/(reversals) and certain acquisition-related costs: Integration costs (a) $ 2 $ 2 $ 2 $ 2 Restructuring charges/(reversals) (b) : Employee termination costs (3 ) (24 ) (4 ) (23 ) Exit costs 1 1 1 2 Total Restructuring charges/(reversals) and certain acquisition-related costs $ — $ (21 ) $ (1 ) $ (19 ) (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) The restructuring charges/(reversals) for the three months ended July 2, 2017 , are associated with the following: U.S. ( $1 million reversal), International ( $1 million ) and Manufacturing/research/corporate ( $2 million reversal). The restructuring charges/(reversals) for the six months ended July 2, 2017 , are associated with the following: International ( $1 million reversal) and Manufacturing/research/corporate ( $2 million reversal). The restructuring charges/(reversals) for the three months ended July 3, 2016 , are associated with the following: U.S. ( $1 million reversal), International ( $14 million reversal) and Manufacturing/research/corporate ( $8 million reversal). The restructuring charges/(reversals) for the six months ended July 3, 2016 , are associated with the following: U.S. ( $2 million reversal), International ( $15 million reversal) and Manufacturing/research/corporate ( $4 million reversal). During 2015, we launched a comprehensive operational efficiency program, which was incremental to the previously announced supply network strategy. These initiatives have focused on reducing complexity in our product portfolios through the elimination of approximately 5,000 product stock keeping units (SKUs), changing our selling approach in certain markets, reducing our presence in certain countries, and planning to sell or exit 10 manufacturing sites over a long term period. As of July 2, 2017 , we divested or exited three U.S. manufacturing sites, three international manufacturing sites, and our 55 percent ownership share of a Taiwan joint venture, inclusive of its related manufacturing site. We are also continuing to optimize our resource allocation and efficiency by reducing resources associated with non-customer facing activities and operating more efficiently as a result of less internal complexity and more standardization of processes. As part of these initiatives, we planned to reduce certain positions through divestitures, normal attrition and involuntary terminations by approximately 2,000 to 2,500 , subject to consultations with works councils and unions in certain countries. In 2016, the operations of the Guarulhos, Brazil manufacturing site, including approximately 300 employees, were transferred to us from Pfizer, which increased our range of planned reduction in certain positions to 2,300 to 2,800 . Including divestitures, as of July 2, 2017 , approximately 2,200 positions have been eliminated and the comprehensive operational efficiency program is substantially complete. We expect additional reductions through divestitures related to our supply network strategy over the next several years. Charges related to the operational efficiency initiative and supply network strategy are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Restructuring charges/(reversals) and certain acquisition-related costs: Operational efficiency initiative Employee termination costs (a) $ 2 $ (30 ) $ 1 $ (29 ) Exit costs 1 2 1 3 3 (28 ) 2 (26 ) Supply network strategy: Employee termination costs (5 ) 6 (5 ) 6 (5 ) 6 (5 ) 6 Total restructuring charges/(reversals) related to the operational efficiency initiative and supply network strategy (2 ) (22 ) (3 ) (20 ) Other operational efficiency initiative charges Selling, general and administrative expenses: Accelerated depreciation — 1 — 1 Consulting fees 1 4 1 7 Other (income)/deductions—net: Net loss/(gain) on sale of assets (b) 2 6 2 (27 ) Total other operational efficiency initiative charges 3 11 3 (19 ) Other supply network strategy charges Cost of sales: Accelerated depreciation 1 1 2 2 Consulting fees — 1 2 3 Total other supply network strategy charges 1 2 4 5 Total charges associated with the operational efficiency initiative and supply network strategy $ 2 $ (9 ) $ 4 $ (34 ) (a) For the three and six months ended July 3, 2016, includes a reduction in employee termination accruals primarily as a result of higher than expected voluntary attrition rates experienced in the first half of 2016. (b) For the three months ended July 3, 2016, primarily represents the net loss on the sale of our share of our Taiwan joint venture as part of our operational efficiency initiative. For the six months ended July 3, 2016, represents the net gain on the sale of certain manufacturing sites and products, partially offset by the loss on the sale of our share of our Taiwan joint venture, as part of our operational efficiency initiative. The components of, and changes in, our restructuring accruals are as follows: Employee Termination Exit (MILLIONS OF DOLLARS) Costs Costs Accrual (a) Balance, December 31, 2016 (a) $ 90 $ — $ 90 Provision (4 ) 1 (3 ) Utilization and other (b) (36 ) (1 ) (37 ) Balance, July 2, 2017 (a) $ 50 $ — $ 50 (a) At July 2, 2017 , and December 31, 2016 , included in Accrued expenses ( $29 million and $61 million , respectively) and Other noncurrent liabilities ( $21 million and $29 million , respectively). (b) Includes adjustments for foreign currency translation.

Other (Income)_Deductions - Net

Other (Income)/Deductions - Net	6 Months Ended
	Jul. 02, 2017
Other Income and Expenses [Abstract]
Other (Income)/Deductions - Net	Other (Income)/Deductions—Net The components of Other (income)/deductions—net are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Royalty-related income $ (5 ) $ (5 ) $ (12 ) $ (12 ) Net loss/(gain) on sale of assets (a) 2 6 2 (27 ) Certain legal and other matters, net (b) (4 ) — (4 ) — Foreign currency loss (c) 8 8 10 17 Other, net (d) (3 ) (5 ) (8 ) (4 ) Other (income)/deductions—net $ (2 ) $ 4 $ (12 ) $ (26 ) (a) For the three and six months ended July 2, 2017 , represents the net loss related to sales of certain manufacturing sites and products as part of our operational efficiency initiative. For the three months ended July 3, 2016, primarily represents the net loss on the sale of our share of our Taiwan joint venture as part of our operational efficiency initiative. For the six months ended July 3, 2016, represents the net gain on the sale of certain manufacturing sites and products, partially offset by the loss on the sale of our share of our Taiwan joint venture, as part of our operational efficiency initiative. (b) For the three and six months ended July 2, 2017 , represents income associated with an insurance recovery related to commercial settlements in Mexico recorded in 2014 and 2016. (c) Primarily driven by costs related to hedging and exposures to certain emerging market currencies. (d) Includes interest income and other miscellaneous income. For the six months ended July 2, 2017, also includes a settlement refund and reimbursement of legal fees related to costs incurred by Pharmaq prior to the acquisition in 2015. For the three and six months ended July 3, 2016, also includes income associated with certain state business employment tax incentive credits.

Income Taxes

Income Taxes	6 Months Ended
	Jul. 02, 2017
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes A. Taxes on Income The effective tax rate was 28.4% for the three months ended July 2, 2017 , compared with 32.5% for the three months ended July 3, 2016 . The lower effective tax rate for the three months ended July 2, 2017 , was primarily attributable to: • changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and operating fluctuations in the normal course of business and the impact of non-deductible items; • a $2 million discrete tax benefit related to the excess tax benefits for share-based payments recognized as a component of Provision for taxes on income ; and • a $3 million net discrete tax expense recorded in the second quarter of 2016, related to changes in uncertain tax positions due to the impact of the European Commission’s negative decision on the excess profits rulings in Belgium, partially offset by a revaluation of the company's deferred tax assets and liabilities using the Belgium tax rates expected to be in place going forward as a result of the decision. The effective tax rate was 28.7% for the six months ended July 2, 2017 , compared wit h 35.5% for the six months ended July 3, 2016 . The lower effective tax rate for the six months ended July 2, 2017 , was primarily attributable to: • a $38 million net discrete tax expense recorded in the first half of 2016, related to changes in uncertain tax positions due to the impact of the European Commission’s negative decision on the excess profits rulings in Belgium, partially offset by a revaluation of the company's deferred tax assets and liabilities using the Belgium tax rates expected to be in place going forward as a result of the decision; • changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and operating fluctuations in the normal course of business and the impact of non-deductible items; • a $7 million and $5 million discrete tax benefit recorded in the first half of 2017 and 2016, respectively, related to the excess tax benefits for share-based payments recognized as a component of Provision for taxes on income ; and • a $3 million and $10 million discrete tax benefit recorded in the first quarter of 2017 and 2016, respectively, related to a revaluation of deferred taxes as a result of a change in statutory tax rates. B. Deferred Taxes As of July 2, 2017 , the total net deferred income tax liability of $168 million is included in Deferred tax assets ( $93 million ) and Deferred tax liabilities ( $261 million ). As of December 31, 2016 , the total net deferred income tax liability of $148 million is included in Deferred tax assets ( $96 million ) and Deferred tax liabilities ( $244 million ). C. Tax Contingencies As of July 2, 2017 , the tax liabilities associated with uncertain tax positions of $75 million (exclusive of interest and penalties related to uncertain tax positions of $11 million ) are included in Deferred tax assets ( $4 million ) and Other taxes payable ( $71 million ). As of December 31, 2016 , the tax liabilities associated with uncertain tax positions of $68 million (exclusive of interest and penalties related to uncertain tax positions of $10 million ) are included in Deferred tax assets ( $3 million ) and Other taxes payable ( $65 million ). Our tax liabilities for uncertain tax positions relate primarily to issues common among multinational corporations. Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. We do not expect that within the next twelve months any of our uncertain tax positions could significantly decrease as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of uncertain tax positions and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.

Financial Instruments

Financial Instruments	6 Months Ended
	Jul. 02, 2017
Financial Instruments [Abstract]
Financial Instruments	Financial Instruments A. Debt Credit Facilities In December 2016 , we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a five -year $1.0 billion senior unsecured revolving credit facility (the credit facility), which expires in December 2021. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion . The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1 . Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1 , and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition. The credit facility also contains a clause which adds back to Adjusted Consolidated EBITDA, any operational efficiency restructuring charge (defined as charges recorded by the company during the period commencing on October 1, 2016 and ending December 31, 2019, related to operational efficiency initiatives), provided that for any twelve-month period such charges added back to Adjusted Consolidated EBITDA shall not to exceed $100 million in the aggregate. The credit facility also contains a financial covenant requiring that we maintain a minimum interest coverage ratio (the ratio of EBITDA at the end of the period to interest expense for such period) of 3.50:1 . In addition, the credit facility contains other customary covenants. We were in compliance with all financial covenants as of July 2, 2017 , and December 31, 2016 . There were no amounts drawn under the credit facility as of July 2, 2017 , or December 31, 2016 . We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of July 2, 2017 , we had access to $75 million of lines of credit which expire at various times throughout 2017 and 2018 and are generally renewed annually. We did not have any borrowings outstanding related to these facilities as of July 2, 2017 , and December 31, 2016 . Commercial Paper Program and Other Short-Term Borrowings In February 2013 , we entered into a commercial paper program with a capacity of up to $1.0 billion . As of July 2, 2017 , there was $100 million of commercial paper borrowings outstanding, with a weighted average interest rate of 1.4% . As of December 31, 2016 , there was no commercial paper issued under this program. As of July 2, 2017 , and December 31, 2016 , we did not have any other short-term borrowings outstanding. Senior Notes and Other Long-Term Debt On November 13, 2015, we issued $1.25 billion aggregate principal amount of our senior notes (2015 senior notes), with an original issue discount of $2 million . On January 28, 2013, we issued $3.65 billion aggregate principal amount of our senior notes (the 2013 senior notes offering) in a private placement, with an original issue discount of $10 million . The current portion of long-term debt was $750 million as of July 2, 2017 , with a weighted-average interest rate of 1.875% . There was no current portion of long-term debt as of December 31, 2016 . The 2013 and 2015 senior notes are governed by an indenture and supplemental indenture (collectively, the indenture) between us and Deutsche Bank Trust Company Americas, as trustee. The indenture contains certain covenants, including limitations on our, and certain of our subsidiaries' ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which the 2013 and 2015 senior notes may be declared immediately due and payable. Pursuant to the indenture, we are able to redeem the 2013 and 2015 senior notes, in whole or in part, at any time by paying a “make whole” premium, plus accrued and unpaid interest to, but excluding, the date of redemption. Pursuant to our tax matters agreement with Pfizer, we will not be permitted to redeem the 2013 senior notes due 2023 pursuant to this optional redemption provision, except under limited circumstances. Upon the occurrence of a change of control of us and a downgrade of the 2013 and 2015 senior notes below an investment grade rating by each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, we are, in certain circumstances, required to make an offer to repurchase all of the outstanding 2013 and 2015 senior notes at a price equal to 101% of the aggregate principal amount of the 2013 and 2015 senior notes together with accrued and unpaid interest to, but excluding, the date of repurchase. The components of our long-term debt are as follows: July 2, December 31, (MILLIONS OF DOLLARS) 2017 2016 1.875% 2013 senior notes due 2018 $ 750 $ 750 3.450% 2015 senior notes due 2020 500 500 3.250% 2013 senior notes due 2023 1,350 1,350 4.500% 2015 senior notes due 2025 750 750 4.700% 2013 senior notes due 2043 1,150 1,150 4,500 4,500 Unamortized debt discount / debt issuance costs (31 ) (32 ) Less current portion of long-term debt (750 ) — Long-term debt, net of discount and issuance costs $ 3,719 $ 4,468 The fair value of our long-term debt, including the current portion of long-term debt, was $4,773 million and $4,565 million as of July 2, 2017 , and December 31, 2016 , respectively, and has been determined using a third-party matrix-pricing model that uses significant inputs derived from, or corroborated by, observable market data and Zoetis’ credit rating (Level 2 inputs). The principal amount of long-term debt outstanding, as of July 2, 2017 , matures in the following years: After (MILLIONS OF DOLLARS) 2018 2019 2020 2021 2021 Total Maturities $ 750 $ — $ 500 $ — $ 3,250 $ 4,500 Interest Expense Interest expense, net of capitalized interest, was $41 million and $82 million for the three and six months ended July 2, 2017, respectively, and $41 million and $84 million for the three and six months ended July 3, 2016 , respectively. Capitalized interest was $1 million and $2 million for each of the three and six months ended July 2, 2017 , and July 3, 2016 , respectively. B. Derivative Financial Instruments Foreign Exchange Risk A significant portion of our revenue, earnings and net investment in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk is also managed through the use of derivative financial instruments. These financial instruments serve to protect net income against the impact of the translation into U.S. dollars of certain foreign exchange-denominated transactions. The aggregate notional amount of foreign exchange derivative financial instruments offsetting foreign currency exposures was $1.1 billion and $1.2 billion , as of July 2, 2017 , and December 31, 2016 , respectively. The derivative financial instruments primarily offset exposures in the Australian dollar, Brazilian real, Canadian dollar, Chinese yuan, euro, and Japanese yen. The vast majority of the foreign exchange derivative financial instruments mature within 60 days and all mature within 180 days. All derivative contracts used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the condensed consolidated balance sheet. The company has not designated the foreign currency forward-exchange contracts as hedging instruments. We recognize the gains and losses on forward-exchange contracts that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. Interest Rate Risk The company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rates and to reduce its overall cost of borrowing. In anticipation of issuing fixed-rate debt, we may use forward-starting interest rate swaps that are designated as cash flow hedges to hedge against changes in interest rates that could impact expected future issuances of debt. To the extent these hedges of cash flows related to anticipated debt are effective, any unrealized gains or losses on the forward-starting interest rate swaps are reported in Accumulated other comprehensive loss and are recognized in income over the life of the future fixed-rate notes. When the company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur within the originally expected period of execution, or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings. For the six months ended July 2, 2017 , we entered into interest rate swaps with an aggregate notional value of $200 million , having a term of 10 years and an effective date and mandatory termination date in December 2017. In 2016, we entered into interest rate swaps with an aggregate notional value of $250 million , having a term of 10 years and an effective date and mandatory termination date in December 2017. We designated these swaps as cash flow hedges against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 1.875% 2013 senior note due in 2018. In addition, in previous years we had entered into various forward-starting interest rate swap contracts that were designated as cash flow hedges and that were terminated upon issuance of fixed-rate notes. The deferred gains or losses related to the settlement of these contracts are reclassified from Accumulated other comprehensive loss into income over the period during which the hedged transactions affects earnings. Fair Value of Derivative Instruments The classification and fair values of derivative instruments are as follows: Fair Value of Derivatives July 2, December 31, (MILLIONS OF DOLLARS) Balance Sheet Location 2017 2016 Derivatives Not Designated as Hedging Instruments Foreign currency forward-exchange contracts Other current assets $ 6 $ 12 Foreign currency forward-exchange contracts Other current liabilities (8 ) (8 ) Total derivatives not designated as hedging instruments (2 ) 4 Derivatives Designated as Hedging Instruments: Interest rate swap contracts Other current assets 14 17 Total derivatives designated as hedging instruments 14 17 Total derivatives $ 12 $ 21 We use a market approach in valuing financial instruments on a recurring basis. Our derivative financial instruments are measured at fair value on a recurring basis using Level 2 inputs in the calculation of fair value. The amounts of net gains/(losses) on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions—net , are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Foreign currency forward-exchange contracts $ 7 $ (13 ) $ (22 ) $ (12 ) These amounts were substantially offset in Other (income)/deductions—net by the effect of changing exchange rates on the underlying foreign currency exposures. The amounts of unrecognized net losses on derivative instruments designated as cash flow hedges, recorded, net of tax, in Other comprehensive income/(loss) , are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Interest rate swaps $ (1 ) $ (3 ) $ (1 ) $ (3 ) The net amount of deferred gains/(losses) that is expected to be reclassified from Accumulated other comprehensive loss into earnings over the next 12 months is insignificant.

Inventories

Inventories	6 Months Ended
	Jul. 02, 2017
Inventory Disclosure [Abstract]
Inventories	Inventories The components of inventory are as follows: July 2, December 31, (MILLIONS OF DOLLARS) 2017 2016 Finished goods $ 784 $ 799 Work-in-process 534 499 Raw materials and supplies 180 204 Inventories $ 1,498 $ 1,502

Goodwill and Other Intangible A

Goodwill and Other Intangible Assets	6 Months Ended
	Jul. 02, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill and Other Intangible Assets	Goodwill and Other Intangible Assets A. Goodwill The components of, and changes in, the carrying amount of goodwill are as follows: (MILLIONS OF DOLLARS) U.S. International Total Balance, December 31, 2016 $ 661 $ 820 $ 1,481 Additions (a) 5 5 10 Other (b) — 4 4 Balance, July 2, 2017 $ 666 $ 829 $ 1,495 (a) Represents the consolidation of a European livestock monitoring company, a variable interest entity of which Zoetis is the primary beneficiary. (b) Includes adjustments for foreign currency translation, partially offset by the reclassification of $3 million to Assets Held for Sale relating to our manufacturing site in Guarulhos, Brazil. For additional information, see Note 4. Acquisitions and Divestitures: Assets Held for Sale . The gross goodwill balance was $2,031 million and $2,017 million as of July 2, 2017 , and December 31, 2016 , respectively. Accumulated goodwill impairment losses were $536 million as of July 2, 2017 , and December 31, 2016 . B. Other Intangible Assets The components of identifiable intangible assets are as follows: As of July 2, 2017 As of December 31, 2016 Identifiable Identifiable Gross Intangible Assets Gross Intangible Assets Carrying Accumulated Less Accumulated Carrying Accumulated Less Accumulated (MILLIONS OF DOLLARS) Amount Amortization Amortization Amount Amortization Amortization Finite-lived intangible assets: Developed technology rights (a)(b) $ 1,167 $ (385 ) $ 782 $ 1,064 $ (342 ) $ 722 Brands 213 (138 ) 75 213 (132 ) 81 Trademarks and trade names 62 (46 ) 16 62 (44 ) 18 Other 225 (137 ) 88 222 (130 ) 92 Total finite-lived intangible assets 1,667 (706 ) 961 1,561 (648 ) 913 Indefinite-lived intangible assets: Brands 37 — 37 37 — 37 Trademarks and trade names 67 — 67 66 — 66 In-process research and development (b) 137 — 137 204 — 204 Product rights 8 — 8 8 — 8 Total indefinite-lived intangible assets 249 — 249 315 — 315 Identifiable intangible assets $ 1,916 $ (706 ) $ 1,210 $ 1,876 $ (648 ) $ 1,228 (a) Includes the consolidation of a European livestock monitoring company, a variable interest entity of which Zoetis is the primary beneficiary, and intangible assets associated with the purchase of a Norwegian fish vaccination company, both during the first quarter of 2017. (b) In the first quarter of 2017, certain intangible assets, acquired in 2015 as part of the Pharmaq acquisition, were placed into service. C. Amortization Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as it benefits multiple business functions. Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, general and administrative expenses or Research and development expenses , as appropriate. Total amortization expense for finite-lived intangible assets was $24 million and $49 million for the three and six months ended July 2, 2017 , respectively, and $24 million and $48 million for the three and six months ended July 3, 2016 , respectively.

Benefit Plans

Benefit Plans	6 Months Ended
	Jul. 02, 2017
Retirement Benefits [Abstract]
Benefit Plans	Benefit Plans Our employees ceased to participate in the Pfizer, Inc. U.S. qualified defined benefit plans and the U.S. retiree medical plan effective December 31, 2012, and liabilities associated with our employees under these plans were retained by Pfizer. Pfizer is continuing to credit certain employees' service with Zoetis generally through December 31, 2017 (or termination of employment from Zoetis, if earlier) for certain early retirement benefits with respect to Pfizer's U.S. defined benefit pension and retiree medical plans. Pension and postretirement benefit expense associated with the extended service for certain employees in the U.S. plans totaled approximately $1 million for each of the three month periods ended July 2, 2017 , and July 3, 2016 , and $3 million for each of the six month periods ended July 2, 2017 , and July 3, 2016 . The following table provides the net periodic benefit cost associated with our international defined benefit pension plans: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Service cost $ 1 $ 2 $ 3 $ 4 Interest cost — 1 1 2 Expected return on plan assets — — (1 ) (1 ) Amortization of net actuarial loss 1 — 1 — Curtailment and settlement (gain)/loss — (1 ) 1 (1 ) Net periodic benefit cost $ 2 $ 2 $ 5 $ 4 Total company contributions to the international pension plans were $1 million and $4 million for the three and six months ended July 2, 2017 , respectively, and $3 million and $6 million for the three and six months ended July 3, 2016 , respectively. We expect to contribute a total of approximately $7 million to these plans in 2017.

Share-Based Payments

Share-Based Payments	6 Months Ended
	Jul. 02, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Share-Based Payments	Share-Based Payments The company may grant a variety of share-based payments under the Zoetis 2013 Equity and Incentive Plan (the Equity Plan) to our employees and non-employee directors. The principal types of share-based awards available under the Equity Plan may include, but are not limited to, stock options, restricted stock and restricted stock units (RSUs), deferred stock units (DSUs), performance-vesting restricted stock units (PSUs) and other equity-based or cash-based awards. The components of share-based compensation expense are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Stock options / stock appreciation rights $ 2 $ 3 $ 5 $ 5 RSUs / DSUs 7 6 13 12 PSUs 2 1 4 2 Share-based compensation expense—total (a)(b) $ 11 $ 10 $ 22 $ 19 (a) For the three and six months ended July 2, 2017 , and July 3, 2016 , amounts capitalized to inventory were insignificant. (b) For the three and six months ended July 2, 2017 , and three months ended July 3, 2016 , the additional share-based compensation expense as a result of accelerated vesting of the outstanding stock options and the settlement, on a pro-rata basis, of other equity awards of terminated employees in connection with our operational efficiency initiative and supply network strategy, which is included in Restructuring charges/(reversals) and certain acquisition-related costs , were insignificant. For the six months ended July 3, 2016, additional share-based compensation expense was approximately $1 million . During the six months ended July 2, 2017 , the company granted 712,112 stock options with a weighted-average exercise price of $55.09 per stock option and a weighted-average fair value of $14.30 per stock option. The fair-value based method for valuing each Zoetis stock option grant on the grant date uses the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions. The weighted-average fair value was estimated based on the following assumptions: risk-free interest rate of 2.3% ; expected dividend yield of 0.76% ; expected stock price volatility of 23.28% ; and expected term of 6.5 years. In general, stock options vest after three years of continuous service and the values determined through this fair-value based method generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate. During the six months ended July 2, 2017 , the company granted 529,932 RSUs with a weighted-average grant date fair value of $ 55.04 per RSU. RSUs are accounted for using a fair-value-based method that utilizes the closing price of Zoetis common stock on the date of grant. In general, RSUs vest after three years of continuous service from the grant date and the values generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate. During the six months ended July 2, 2017 , the company granted 136,964 PSUs with a weighted-average grant date fair value of $74.28 per PSU. PSUs are accounted for using a Monte Carlo simulation model. The units underlying the PSUs will be earned and vested over a three -year performance period, based upon the total shareholder return of the company in comparison to the total shareholder return of the companies comprising the S&P 500 index at the start of the performance period (Relative TSR). The weighted-average fair value was estimated based on volatility assumptions of Zoetis common stock and an average of the S&P 500 companies, which were 23.1% and 25.5% , respectively. Depending on the company’s Relative TSR performance at the end of the performance period, the recipient may earn between 0% and 200% of the target number of units. Vested units are settled in shares of the company’s common stock. PSU values are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate.

Stockholders' Equity

Stockholders' Equity	6 Months Ended
	Jul. 02, 2017
Equity [Abstract]
Stockholders' Equity	Stockholders' Equity Zoetis is authorized to issue 6 billion shares of common stock and 1 billion shares of preferred stock. In November 2014, the company's Board of Directors authorized a $500 million share repurchase program. This program was substantially completed as of December 31, 2016. In December 2016, the company's Board of Directors authorized an additional $1.5 billion share repurchase program. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs. As of July 2, 2017 , there was approximately $1.3 billion remaining under these authorizations. Changes in common shares and treasury stock were as follows: (MILLIONS) Common Shares Issued (a) Treasury Stock (a) Balance, December 31, 2015 501.81 4.41 Share-based compensation (b) 0.08 (1.29 ) Share repurchase program — 3.38 Balance, July 3, 2016 501.89 6.50 Balance, December 31, 2016 501.89 9.04 Share-based compensation (b) — (1.25 ) Share repurchase program — 4.45 Balance, July 2, 2017 501.89 12.23 (a) Shares may not add due to rounding. (b) Includes the issuance of shares of common stock and the reissuance of shares from treasury stock in connection with the vesting of employee share-based awards. Treasury stock also includes the reacquisition of shares associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information regarding share-based compensation, see Note 12. Share-Based Payments . Changes, net of tax, in accumulated other comprehensive loss, excluding noncontrolling interest, are as follows: Currency Translation Derivatives Adjustment Benefit Plans Accumulated Other Net Unrealized Net Unrealized Actuarial Comprehensive (MILLIONS OF DOLLARS) Gains/(Losses) Gains/(Losses) Gains/(Losses) Loss Balance, December 31, 2015 $ (2 ) $ (604 ) $ (16 ) $ (622 ) Other comprehensive (loss)/income, net of tax (3 ) 66 3 66 Divestiture of noncontrolling interest (a) — 2 — 2 Balance, July 3, 2016 $ (5 ) $ (536 ) $ (13 ) $ (554 ) Balance, December 31, 2016 $ 8 $ (583 ) $ (23 ) $ (598 ) Other comprehensive income, net of tax (1 ) 56 1 56 Balance, July 2, 2017 $ 7 $ (527 ) $ (22 ) $ (542 ) (a) Reflects the divestiture of our share of our Taiwan joint venture. See Note 4. Acquisitions and Divestitures: Divestitures.

Earnings per Share

Earnings per Share	6 Months Ended
	Jul. 02, 2017
Earnings Per Share [Abstract]
Earnings per Share	Earnings per Share The following table presents the calculation of basic and diluted earnings per share: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) 2017 2016 2017 2016 Numerator Net income before allocation to noncontrolling interests $ 247 $ 224 $ 486 $ 428 Less: net income attributable to noncontrolling interests — — 1 — Net income attributable to Zoetis Inc. $ 247 $ 224 $ 485 $ 428 Denominator Weighted-average common shares outstanding 490.8 496.3 491.6 496.9 Common stock equivalents: stock options, RSUs, PSUs and DSUs 3.2 2.5 3.0 2.3 Weighted-average common and potential dilutive shares outstanding 494.0 498.8 494.6 499.2 Earnings per share attributable to Zoetis Inc. stockholders—basic $ 0.50 $ 0.45 $ 0.99 $ 0.86 Earnings per share attributable to Zoetis Inc. stockholders—diluted $ 0.50 $ 0.45 $ 0.98 $ 0.86 There were approximately 1 million stock options outstanding for each of the three and six months ended July 2, 2017 , and approximately 2 million stock options outstanding for each of the three and six months ended July 3, 2016 , under the company’s Equity Plan that were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jul. 02, 2017
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our tax contingencies, see Note 7. Income Taxes . A. Legal Proceedings Our non-tax contingencies include, among others, the following: • 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. Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial. We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid. We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. The principal matters to which we are a party are discussed below. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent. PregSure ® We have approximately 264 claims in Europe and New Zealand seeking damages related to calves claimed to have died of Bovine Neonatal Pancytopenia (BNP) on farms where PregSure BVD, a vaccine against Bovine Virus Diarrhea (BVD), was used. BNP is a rare syndrome that first emerged in cattle in Europe in 2006. Studies of BNP suggest a potential association between the administration of PregSure and the development of BNP, although no causal connection has been established. The cause of BNP is not known. In 2010 , we voluntarily stopped sales of PregSure BVD in Europe, and recalled the product at wholesalers while investigations into possible causes of BNP continued. In 2011 , after incidences of BNP were reported in New Zealand, we voluntarily withdrew the marketing authorization for PregSure throughout the world. We have settled approximately 168 of these claims for amounts that are not material individually or in the aggregate. Investigations into possible causes of BNP continue and these settlements may not be representative of any future claims resolutions. Ulianopolis, Brazil In February 2012, the Municipality of Ulianopolis (State of Para, Brazil) filed a complaint against Fort Dodge Saúde Animal Ltda. (FDSAL), a Zoetis entity, and five other large companies alleging that waste sent to a local waste incineration facility for destruction, but that was not ultimately destroyed as the facility lost its operating permit, caused environmental impacts requiring cleanup. The Municipality is seeking recovery of cleanup costs purportedly related to FDSAL's share of all waste accumulated at the incineration facility awaiting destruction, and compensatory damages to be allocated among the six defendants. We believe we have strong arguments against the claim, including defense strategies against any claim of joint and several liability. At the request of the Municipal prosecutor, in April 2012, the lawsuit was suspended for one year. Since that time, the prosecutor has initiated investigations into the Municipality's actions in the matter as well as the efforts undertaken by the six defendants to remove and dispose of their individual waste from the incineration facility. On October 3, 2014, the Municipal prosecutor announced that the investigation remained ongoing and outlined the terms of a proposed Term of Reference (a document that establishes the minimum elements to be addressed in the preparation of an Environmental Impact Assessment), under which the companies would be liable to withdraw the waste and remediate the area. On March 5, 2015, we presented our response to the prosecutor’s proposed Term of Reference, arguing that the proposed terms were overly general in nature and expressing our interest in discussing alternatives to address the matter. The prosecutor agreed to consider our request to engage a technical consultant to conduct an environmental diagnostic of the contaminated area. On May 29, 2015, we, in conjunction with the other defendant companies, submitted a draft cooperation agreement to the prosecutor, which outlined the proposed terms and conditions for the engagement of a technical consultant to conduct the environmental diagnostic. On August 19, 2016, the parties entered into a cooperation agreement with the prosecutor, pursuant to which a third-party consultant will conduct a limited environmental assessment of the site. We currently await the results of the technical assessment. Lascadoil Contamination in Animal Feed An investigation by the U.S. Food and Drug Administration (FDA) and the Michigan Department of Agriculture is ongoing to determine how lascadoil, oil for industrial use, made its way into the feed supply of certain turkey and hog feed mills in Michigan. The contaminated feed is believed to have caused the deaths of approximately 50,000 turkeys and the contamination (but not death) of at least 20,000 hogs in August 2014. While it remains an open question as to how the lascadoil made its way into the animal feed, the allegations are that lascadoil intended to be sold for reuse as biofuel was inadvertently sold to producers of soy oil, who in turn, unknowingly sold the contaminated soy oil to fat recycling vendors, who then sold the contaminated soy oil to feed mills for use in animal feed. Indeed, related to the FDA investigation, Shur-Green Farms LLC, a producer of soy oil, recalled certain batches of soy oil allegedly contaminated with lascadoil on October 13, 2014. During the course of its investigation, the FDA identified the process used to manufacture Zoetis’ Avatec® (lasalocid sodium) and Bovatec® (lasalocid sodium) products as one possible source of the lascadoil, since lascadoil contains small amounts of lasalocid, the active ingredient found in both products. Zoetis has historically sold any and all industrial lascadoil byproduct to an environmental company specializing in waste disposal. The environmental company is contractually obligated to incinerate the lascadoil or resell it for use in biofuel. Under the terms of the agreement, the environmental company is expressly prohibited from reselling the lascadoil to be used as a component in food. The FDA inspected the Zoetis site where Avatec and Bovatec are manufactured, and found no evidence that Zoetis was involved in the contamination of the animal feed. On March 10, 2015, plaintiffs Restaurant Recycling, LLC (Restaurant Recycling) and Superior Feed Ingredients, LLC (Superior), both of whom are in the fat recycling business, filed a complaint in the Seventeenth Circuit Court for the State of Michigan against Shur-Green Farms alleging negligence and breach of warranty claims arising from their purchase of soy oil allegedly contaminated with lascadoil. Plaintiffs resold the allegedly contaminated soy oil to turkey feed mills for use in feed ingredient. Plaintiffs also named Zoetis as a defendant in the complaint alleging that Zoetis failed to properly manufacture its products and breached an implied warranty that the soy oil was fit for use at turkey and hog mills. Zoetis was served with the complaint on June 3, 2015, and we filed our answer, denying all allegations, on July 15, 2015. On August 10, 2015, several of the turkey feed mills filed a joint complaint against Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence, misrepresentation, and breach of warranty, arising out of their alleged purchase and use of the contaminated soy oil. The complaint raises only one count against Zoetis for negligence. We filed an answer to the complaint on November 2, 2015, denying the allegation. On May 16, 2016, two additional turkey producers filed a complaint in the Seventeenth Circuit Court for the State of Michigan against the company, Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence and breach of warranties. We filed an answer to the complaint on June 20, 2016, denying the allegations. The Court has consolidated all three cases in Michigan for purposes of discovery and disposition. We believe we have strong arguments against all claims. Other Matters The European Commission published a decision on alleged competition law infringements by several human health pharmaceutical companies on June 19, 2013. One of the involved legal entities is Alpharma LLC. Alpharma LLC's involvement is solely related to its human health activities prior to Pfizer's acquisition of King/Alpharma. Under the Global Separation Agreement between Pfizer and Zoetis, Pfizer is obligated to indemnify Zoetis for any liabilities arising out of claims not related to its animal health assets. We filed an appeal of the decision on September 6, 2013, to the General Court of the European Union. On September 8, 2016, the General Court upheld the decision of the European Commission. On November 25, 2016, we filed an appeal to the Court of Justice of the European Union and are awaiting a ruling. B. Guarantees and Indemnifications In the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of July 2, 2017 , recorded amounts for the estimated fair value of these indemnifications were not significant.

Segment and Other Revenue Infor

Segment and Other Revenue Information	6 Months Ended
	Jul. 02, 2017
Segment Reporting [Abstract]
Segment and Other Revenue Information	Segment and Other Revenue Information A. Segment Information Operating Segments We manage our operations through two geographic operating segments: the United States and International. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including vaccines, parasiticides, anti-infectives, medicated feed additives and other pharmaceuticals, for both livestock and companion animal customers. Our chief operating decision maker uses the revenue and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation. Other Costs and Business Activities Certain costs are not allocated to our operating segment results, such as costs associated with the following: • Other business activities includes our Client Supply Services (CSS) contract manufacturing results, 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, certain procurement costs, and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense. • Certain transactions and events such as (i) Purchase accounting adjustments , where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition-related activities , where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs; and (iii) Certain significant items , which comprise substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis, such as 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) certain procurement costs. Segment Assets We manage our assets on a total company basis, not by operating segment. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were approximately $ 7.8 billion at July 2, 2017 , and $7.6 billion at December 31, 2016 . Selected Statement of Income Information Earnings Depreciation and Amortization (a) July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Three months ended U.S. Revenue $ 623 $ 594 Cost of sales 134 134 Gross profit 489 460 Gross margin 78.5 % 77.4 % Operating expenses 113 100 Other (income)/deductions — — U.S. Earnings 376 360 $ 7 $ 7 International Revenue (b) 634 602 Cost of sales 219 201 Gross profit 415 401 Gross margin 65.5 % 66.6 % Operating expenses 126 124 Other (income)/deductions 2 1 International Earnings 287 276 11 11 Total operating segments 663 636 18 18 Other business activities (73 ) (74 ) 6 6 Reconciling Items: Corporate (151 ) (171 ) 13 12 Purchase accounting adjustments (21 ) (28 ) 21 21 Acquisition-related costs (2 ) (2 ) — — Certain significant items (c) 1 4 — 2 Other unallocated (72 ) (33 ) 1 1 Total Earnings (d) $ 345 $ 332 $ 59 $ 60 Earnings Depreciation and Amortization (a) July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Six months ended U.S. Revenue $ 1,228 $ 1,176 Cost of sales 271 265 Gross profit 957 911 Gross margin 77.9 % 77.5 % Operating expenses 209 192 Other (income)/deductions — — U.S. Earnings 748 719 $ 14 $ 13 International Revenue (b) 1,249 1,169 Cost of sales 432 397 Gross profit 817 772 Gross margin 65.4 % 66.0 % Operating expenses 240 233 Other (income)/deductions (1 ) 3 International Earnings 578 536 22 22 Total operating segments 1,326 1,255 36 35 Other business activities (147 ) (148 ) 12 12 Reconciling Items: Corporate (294 ) (340 ) 25 22 Purchase accounting adjustments (43 ) (54 ) 43 43 Acquisition-related costs (2 ) (3 ) — — Certain significant items (c) (3 ) 17 2 3 Other unallocated (155 ) (63 ) 3 2 Total Earnings (d) $ 682 $ 664 $ 121 $ 117 (a) Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized. (b) Revenue denominated in euros was $155 million and $303 million for the three and six months ended July 2, 2017 , respectively, and $158 million and $312 million for the three and six months ended July 3, 2016 , respectively . (c) For the three months ended July 2, 2017 , Certain significant items primarily includes: (i) a reversal of previously accrued employee termination costs of $3 million , exit costs of $1 million , accelerated depreciation of $1 million , consulting fees of $1 million , and a net loss on sales of certain manufacturing sites and products of $2 million related to our operational efficiency initiative and supply network strategy, (ii) charges of $1 million associated with changes to our operating model, and (iii) income of $4 million related to an insurance recovery from commercial settlements in Mexico recorded in 2014 and 2016. For the three months ended July 3, 2016 , Certain significant items primarily includes: (i) Zoetis stand-up costs of $5 million ; (ii) a net loss of $6 million related to sales of certain manufacturing sites and products as a result of our operational efficiency initiative; (iii) a $24 million net reduction in certain employee termination accruals, partially offset by exit costs of $1 million , accelerated depreciation of $2 million , and consulting fees of $5 million , related to our operational efficiency initiative, supply network strategy, and other restructuring activities, and (iv) charges of $1 million associated with changes to our operating model. Stand-up costs include certain nonrecurring costs related to becoming an independent public company, such as the creation of standalone systems and infrastructure, site separation, new branding (including changes to the manufacturing process for required new packaging), and certain legal registration and patent assignment costs. For the six months ended July 2, 2017 , Certain significant items primarily includes: (i) a reversal of previously accrued employee termination costs of $4 million , exit costs of $1 million , accelerated depreciation charges of $2 million , consulting fees of $3 million , and a net loss related to sales of certain manufacturing sites and products of $2 million , related to our operational efficiency initiative and supply network strategy, (ii) charges of $3 million associated with changes to our operating model, and (iii) income of $4 million related to an insurance recovery from commercial settlements in Mexico recorded in 2014 and 2016. For the six months ended July 3, 2016 , Certain significant items primarily includes: (i) Zoetis stand-up costs of $17 million ; (ii) a net gain of $27 million related to sales of certain manufacturing sites and products as a result of our operational efficiency initiative, (iii) a $23 million net reduction in certain employee termination accruals, partially offset by exit costs of $2 million , accelerated depreciation of $3 million and consulting fees of $10 million related to our operational efficiency initiative, supply network strategy and other restructuring activities, and (iv) charges of $1 million associated with changes to our operating model. (d) Defined as income before provision for taxes on income. B. Other Revenue Information Revenue by Species Species revenue are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Livestock: Cattle $ 382 $ 366 $ 768 $ 743 Swine 148 150 308 296 Poultry 122 118 238 240 Fish 19 22 40 39 Other 18 17 38 38 689 673 1,392 1,356 Companion Animal: Horses 35 36 70 75 Dogs and Cats 533 487 1,015 914 568 523 1,085 989 Contract Manufacturing 12 12 23 25 Total revenue $ 1,269 $ 1,208 $ 2,500 $ 2,370 Revenue by Major Product Category Revenue by major product category are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Anti-infectives $ 278 $ 272 $ 546 $ 563 Vaccines 324 310 643 611 Parasiticides 206 189 390 334 Medicated feed additives 121 128 244 266 Other pharmaceuticals 282 248 554 469 Other non-pharmaceuticals 46 49 100 102 Contract manufacturing 12 12 23 25 Total revenue $ 1,269 $ 1,208 $ 2,500 $ 2,370

Significant Accounting Polici25

Significant Accounting Policies (Policies)	6 Months Ended
	Jul. 02, 2017
Accounting Policies [Abstract]
Basis of Presentation	The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the United States are as of and for the three and six-month periods ended May 28, 2017 , and May 29, 2016 .
Recently Adopted Accounting Standards and Recently Issued Accounting Standards	Recently Adopted Accounting Standards In January 2017, the Financial Accounting Standards Board (FASB) issued an accounting standards update which clarifies the definition of a business. Under the new guidance, a set of integrated activities and assets is a business only if it has, at a minimum, an input and substantive process that together significantly contribute to the ability to create outputs. The update also introduces the concept of an initial screening or “Step 1” which requires companies to first determine if substantially all of the fair value of the gross assets acquired is concentrated in a single (or group of similar) identifiable assets. Transactions that pass the Step 1 screening will be considered a business if they contain an input and substantive process and either; (1) an output or (2) an organized workforce with skills critical to the ability to create outputs and inputs that can be utilized to create the outputs. Companies will no longer be required to evaluate whether a market participant could replace any missing inputs or processes, instead focusing on the substance of what was acquired. The provisions of the new standard are effective, on a prospective basis, beginning January 1, 2018, for annual and interim reporting periods and may be adopted early for any transactions not yet reported in issued financial statements. We elected to early adopt the new standard for any new transactions occurring on or after January 1, 2017. In July 2015, the FASB issued an accounting standards update to simplify the measurement of inventory by requiring that inventory be measured at the lower of cost or net realizable value, rather than at the lower of cost or market, with market being defined as either replacement cost, net realizable value or net realizable value less a normal profit margin. We adopted this guidance as of January 1, 2017. This guidance did not have a significant impact on our condensed consolidated financial statements. Recently Issued Accounting Standards In March 2017, the FASB issued an accounting standards update to simplify and improve the reporting of net periodic pension benefit cost by requiring only present service cost to be presented in the same line item as other current employee compensation costs while remaining components of net periodic benefit cost would be presented within Other (income)/deductions—net outside of operations. We plan to adopt this guidance as of January 1, 2018, the required effective date, and do not expect the new standard will have a significant impact on our consolidated financial statements. In October 2016, the FASB issued an accounting standards update that will require the recognition of the income tax consequences of an intra-entity asset transfer, other than inventory, when the transfer occurs as opposed to when the asset is sold to an outside third party. The provisions of the new standard are effective beginning January 1, 2018, for annual and interim reporting periods. Early adoption is permitted beginning on January 1, 2017. We plan to adopt this guidance as of January 1, 2018, the required effective date, and do not expect the new standard will have a significant impact on our consolidated financial statements. In February 2016, the FASB issued an accounting standards update which requires lessees to recognize most leases on the balance sheet with a corresponding right of use asset. Leases will be classified as financing or operating which will drive the expense recognition pattern. For lessees, the income statement presentation and expense recognition pattern for financing and operating leases is similar to the current model for capital and operating leases, respectively. Companies may elect to exclude short-term leases. The update also requires additional disclosures that will better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We plan to adopt this guidance as of January 1, 2019, the required effective date, for annual and interim reporting periods. The new standard requires a modified retrospective adoption approach, at the beginning of the earliest comparative period presented in the financial statements. We continue to assess the potential impact that adopting this new guidance will have on our consolidated financial statements. In May 2014, the FASB issued an accounting standards update that outlines a new, single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. This update supersedes most current revenue recognition guidance under U.S. GAAP. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance includes a five-step model for determining how, when and how much revenue should be recognized. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We plan to adopt this guidance as of January 1, 2018, the required effective date, using the modified retrospective transition method. Under the modified retrospective method, the cumulative effect of applying the new standard will be recognized as of the date of initial application with disclosure of results under both the new and prior standards. We continue to assess the impact of the new standard on our current policies, procedures, and disclosures related to revenue recognition. Based on the work performed to date, we do not believe that the adoption will have a material impact on our consolidated financial statements. While implementation procedures are still ongoing, we have evaluated the impact on our primary revenue stream, product sales, in both the United States and our key international markets and no matters have currently been identified individually or in the aggregate that would have a material impact on the timing or amount of revenue recognition based on the provisions of the new standard.
Tax Contingencies	Our tax liabilities for uncertain tax positions relate primarily to issues common among multinational corporations. Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. We do not expect that within the next twelve months any of our uncertain tax positions could significantly decrease as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of uncertain tax positions and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.
Foreign Exchange and Interest Rate Risk	A significant portion of our revenue, earnings and net investment in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk is also managed through the use of derivative financial instruments. These financial instruments serve to protect net income against the impact of the translation into U.S. dollars of certain foreign exchange-denominated transactions. The aggregate notional amount of foreign exchange derivative financial instruments offsetting foreign currency exposures was $1.1 billion and $1.2 billion , as of July 2, 2017 , and December 31, 2016 , respectively. The derivative financial instruments primarily offset exposures in the Australian dollar, Brazilian real, Canadian dollar, Chinese yuan, euro, and Japanese yen. The vast majority of the foreign exchange derivative financial instruments mature within 60 days and all mature within 180 days. All derivative contracts used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the condensed consolidated balance sheet. The company has not designated the foreign currency forward-exchange contracts as hedging instruments. We recognize the gains and losses on forward-exchange contracts that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. Interest Rate Risk The company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rates and to reduce its overall cost of borrowing. In anticipation of issuing fixed-rate debt, we may use forward-starting interest rate swaps that are designated as cash flow hedges to hedge against changes in interest rates that could impact expected future issuances of debt. To the extent these hedges of cash flows related to anticipated debt are effective, any unrealized gains or losses on the forward-starting interest rate swaps are reported in Accumulated other comprehensive loss and are recognized in income over the life of the future fixed-rate notes. When the company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur within the originally expected period of execution, or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings. For the six months ended July 2, 2017 , we entered into interest rate swaps with an aggregate notional value of $200 million , having a term of 10 years and an effective date and mandatory termination date in December 2017. In 2016, we entered into interest rate swaps with an aggregate notional value of $250 million , having a term of 10 years and an effective date and mandatory termination date in December 2017. We designated these swaps as cash flow hedges against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 1.875% 2013 senior note due in 2018. In addition, in previous years we had entered into various forward-starting interest rate swap contracts that were designated as cash flow hedges and that were terminated upon issuance of fixed-rate notes. The deferred gains or losses related to the settlement of these contracts are reclassified from Accumulated other comprehensive loss into income over the period during which the hedged transactions affects earnings.
Legal Proceedings	Legal Proceedings Our non-tax contingencies include, among others, the following: • 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. Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial. We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid. We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. The principal matters to which we are a party are discussed below. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent.
Guarantees and Indemnifications	Guarantees and Indemnifications In the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of July 2, 2017 , recorded amounts for the estimated fair value of these indemnifications were not significant.
Segment Information	Segment Information Operating Segments We manage our operations through two geographic operating segments: the United States and International. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including vaccines, parasiticides, anti-infectives, medicated feed additives and other pharmaceuticals, for both livestock and companion animal customers. Our chief operating decision maker uses the revenue and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation. Other Costs and Business Activities Certain costs are not allocated to our operating segment results, such as costs associated with the following: • Other business activities includes our Client Supply Services (CSS) contract manufacturing results, 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, certain procurement costs, and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense. • Certain transactions and events such as (i) Purchase accounting adjustments , where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition-related activities , where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs; and (iii) Certain significant items , which comprise substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis, such as 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) certain procurement costs. Segment Assets We manage our assets on a total company basis, not by operating segment. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were approximately $ 7.8 billion at July 2, 2017 , and $7.6 billion at December 31, 2016 .

Acquisitions and Divestitures (

Acquisitions and Divestitures (Tables)	6 Months Ended
	Jul. 02, 2017
Business Combinations [Abstract]
Schedule of Assets and Liabilities Held for Sale	As of July 2, 2017, recorded assets and liabilities held for sale are summarized below: July 2, (MILLIONS OF DOLLARS) 2017 Assets held for sale Inventories $ 12 Property, plant and equipment 26 Deferred tax assets 4 Other current assets 8 Goodwill 3 Total $ 53 Liabilities associated with assets held for sale Accounts payable $ 3 Other current liabilities 1 Total $ 4

Restructuring Charges and Oth27

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Tables)	6 Months Ended
	Jul. 02, 2017
Restructuring and Related Activities [Abstract]
Restructuring and Related Costs	The components of costs incurred in connection with restructuring initiatives, acquisitions and cost-reduction/productivity initiatives are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Restructuring charges/(reversals) and certain acquisition-related costs: Integration costs (a) $ 2 $ 2 $ 2 $ 2 Restructuring charges/(reversals) (b) : Employee termination costs (3 ) (24 ) (4 ) (23 ) Exit costs 1 1 1 2 Total Restructuring charges/(reversals) and certain acquisition-related costs $ — $ (21 ) $ (1 ) $ (19 ) (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) The restructuring charges/(reversals) for the three months ended July 2, 2017 , are associated with the following: U.S. ( $1 million reversal), International ( $1 million ) and Manufacturing/research/corporate ( $2 million reversal). The restructuring charges/(reversals) for the six months ended July 2, 2017 , are associated with the following: International ( $1 million reversal) and Manufacturing/research/corporate ( $2 million reversal). The restructuring charges/(reversals) for the three months ended July 3, 2016 , are associated with the following: U.S. ( $1 million reversal), International ( $14 million reversal) and Manufacturing/research/corporate ( $8 million reversal). The restructuring charges/(reversals) for the six months ended July 3, 2016 , are associated with the following: U.S. ( $2 million reversal), International ( $15 million reversal) and Manufacturing/research/corporate ( $4 million reversal). Charges related to the operational efficiency initiative and supply network strategy are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Restructuring charges/(reversals) and certain acquisition-related costs: Operational efficiency initiative Employee termination costs (a) $ 2 $ (30 ) $ 1 $ (29 ) Exit costs 1 2 1 3 3 (28 ) 2 (26 ) Supply network strategy: Employee termination costs (5 ) 6 (5 ) 6 (5 ) 6 (5 ) 6 Total restructuring charges/(reversals) related to the operational efficiency initiative and supply network strategy (2 ) (22 ) (3 ) (20 ) Other operational efficiency initiative charges Selling, general and administrative expenses: Accelerated depreciation — 1 — 1 Consulting fees 1 4 1 7 Other (income)/deductions—net: Net loss/(gain) on sale of assets (b) 2 6 2 (27 ) Total other operational efficiency initiative charges 3 11 3 (19 ) Other supply network strategy charges Cost of sales: Accelerated depreciation 1 1 2 2 Consulting fees — 1 2 3 Total other supply network strategy charges 1 2 4 5 Total charges associated with the operational efficiency initiative and supply network strategy $ 2 $ (9 ) $ 4 $ (34 ) (a) For the three and six months ended July 3, 2016, includes a reduction in employee termination accruals primarily as a result of higher than expected voluntary attrition rates experienced in the first half of 2016. (b) For the three months ended July 3, 2016, primarily represents the net loss on the sale of our share of our Taiwan joint venture as part of our operational efficiency initiative. For the six months ended July 3, 2016, represents the net gain on the sale of certain manufacturing sites and products, partially offset by the loss on the sale of our share of our Taiwan joint venture, as part of our operational efficiency initiative. The components of, and changes in, our restructuring accruals are as follows: Employee Termination Exit (MILLIONS OF DOLLARS) Costs Costs Accrual (a) Balance, December 31, 2016 (a) $ 90 $ — $ 90 Provision (4 ) 1 (3 ) Utilization and other (b) (36 ) (1 ) (37 ) Balance, July 2, 2017 (a) $ 50 $ — $ 50 (a) At July 2, 2017 , and December 31, 2016 , included in Accrued expenses ( $29 million and $61 million , respectively) and Other noncurrent liabilities ( $21 million and $29 million , respectively). (b) Includes adjustments for foreign currency translation.

Other (Income)_Deductions - N28

Other (Income)/Deductions - Net (Tables)	6 Months Ended
	Jul. 02, 2017
Other Income and Expenses [Abstract]
Components of Other (Income)/Deductions—Net	The components of Other (income)/deductions—net are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Royalty-related income $ (5 ) $ (5 ) $ (12 ) $ (12 ) Net loss/(gain) on sale of assets (a) 2 6 2 (27 ) Certain legal and other matters, net (b) (4 ) — (4 ) — Foreign currency loss (c) 8 8 10 17 Other, net (d) (3 ) (5 ) (8 ) (4 ) Other (income)/deductions—net $ (2 ) $ 4 $ (12 ) $ (26 ) (a) For the three and six months ended July 2, 2017 , represents the net loss related to sales of certain manufacturing sites and products as part of our operational efficiency initiative. For the three months ended July 3, 2016, primarily represents the net loss on the sale of our share of our Taiwan joint venture as part of our operational efficiency initiative. For the six months ended July 3, 2016, represents the net gain on the sale of certain manufacturing sites and products, partially offset by the loss on the sale of our share of our Taiwan joint venture, as part of our operational efficiency initiative. (b) For the three and six months ended July 2, 2017 , represents income associated with an insurance recovery related to commercial settlements in Mexico recorded in 2014 and 2016. (c) Primarily driven by costs related to hedging and exposures to certain emerging market currencies. (d) Includes interest income and other miscellaneous income. For the six months ended July 2, 2017, also includes a settlement refund and reimbursement of legal fees related to costs incurred by Pharmaq prior to the acquisition in 2015. For the three and six months ended July 3, 2016, also includes income associated with certain state business employment tax incentive credits.

Financial Instruments (Tables)

Financial Instruments (Tables)	6 Months Ended
	Jul. 02, 2017
Financial Instruments [Abstract]
Schedule of Long-term Debt Instruments	The components of our long-term debt are as follows: July 2, December 31, (MILLIONS OF DOLLARS) 2017 2016 1.875% 2013 senior notes due 2018 $ 750 $ 750 3.450% 2015 senior notes due 2020 500 500 3.250% 2013 senior notes due 2023 1,350 1,350 4.500% 2015 senior notes due 2025 750 750 4.700% 2013 senior notes due 2043 1,150 1,150 4,500 4,500 Unamortized debt discount / debt issuance costs (31 ) (32 ) Less current portion of long-term debt (750 ) — Long-term debt, net of discount and issuance costs $ 3,719 $ 4,468
Schedule of Maturities of Long-term Debt	The principal amount of long-term debt outstanding, as of July 2, 2017 , matures in the following years: After (MILLIONS OF DOLLARS) 2018 2019 2020 2021 2021 Total Maturities $ 750 $ — $ 500 $ — $ 3,250 $ 4,500
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value	The classification and fair values of derivative instruments are as follows: Fair Value of Derivatives July 2, December 31, (MILLIONS OF DOLLARS) Balance Sheet Location 2017 2016 Derivatives Not Designated as Hedging Instruments Foreign currency forward-exchange contracts Other current assets $ 6 $ 12 Foreign currency forward-exchange contracts Other current liabilities (8 ) (8 ) Total derivatives not designated as hedging instruments (2 ) 4 Derivatives Designated as Hedging Instruments: Interest rate swap contracts Other current assets 14 17 Total derivatives designated as hedging instruments 14 17 Total derivatives $ 12 $ 21
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location	The amounts of net gains/(losses) on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions—net , are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Foreign currency forward-exchange contracts $ 7 $ (13 ) $ (22 ) $ (12 )
Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)	The amounts of unrecognized net losses on derivative instruments designated as cash flow hedges, recorded, net of tax, in Other comprehensive income/(loss) , are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Interest rate swaps $ (1 ) $ (3 ) $ (1 ) $ (3 )

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Jul. 02, 2017
Inventory Disclosure [Abstract]
Components of Inventory	The components of inventory are as follows: July 2, December 31, (MILLIONS OF DOLLARS) 2017 2016 Finished goods $ 784 $ 799 Work-in-process 534 499 Raw materials and supplies 180 204 Inventories $ 1,498 $ 1,502

Goodwill and Other Intangible31

Goodwill and Other Intangible Assets (Tables)	6 Months Ended
	Jul. 02, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Changes in the Carrying Amount of Goodwill	The components of, and changes in, the carrying amount of goodwill are as follows: (MILLIONS OF DOLLARS) U.S. International Total Balance, December 31, 2016 $ 661 $ 820 $ 1,481 Additions (a) 5 5 10 Other (b) — 4 4 Balance, July 2, 2017 $ 666 $ 829 $ 1,495 (a) Represents the consolidation of a European livestock monitoring company, a variable interest entity of which Zoetis is the primary beneficiary. (b) Includes adjustments for foreign currency translation, partially offset by the reclassification of $3 million to Assets Held for Sale relating to our manufacturing site in Guarulhos, Brazil. For additional information, see Note 4. Acquisitions and Divestitures: Assets Held for Sale .
Components of Identifiable Intangible Assets	The components of identifiable intangible assets are as follows: As of July 2, 2017 As of December 31, 2016 Identifiable Identifiable Gross Intangible Assets Gross Intangible Assets Carrying Accumulated Less Accumulated Carrying Accumulated Less Accumulated (MILLIONS OF DOLLARS) Amount Amortization Amortization Amount Amortization Amortization Finite-lived intangible assets: Developed technology rights (a)(b) $ 1,167 $ (385 ) $ 782 $ 1,064 $ (342 ) $ 722 Brands 213 (138 ) 75 213 (132 ) 81 Trademarks and trade names 62 (46 ) 16 62 (44 ) 18 Other 225 (137 ) 88 222 (130 ) 92 Total finite-lived intangible assets 1,667 (706 ) 961 1,561 (648 ) 913 Indefinite-lived intangible assets: Brands 37 — 37 37 — 37 Trademarks and trade names 67 — 67 66 — 66 In-process research and development (b) 137 — 137 204 — 204 Product rights 8 — 8 8 — 8 Total indefinite-lived intangible assets 249 — 249 315 — 315 Identifiable intangible assets $ 1,916 $ (706 ) $ 1,210 $ 1,876 $ (648 ) $ 1,228 (a) Includes the consolidation of a European livestock monitoring company, a variable interest entity of which Zoetis is the primary beneficiary, and intangible assets associated with the purchase of a Norwegian fish vaccination company, both during the first quarter of 2017. (b) In the first quarter of 2017, certain intangible assets, acquired in 2015 as part of the Pharmaq acquisition, were placed into service.

Benefit Plans (Tables)

Benefit Plans (Tables)	6 Months Ended
	Jul. 02, 2017
Retirement Benefits [Abstract]
Schedule of Net Benefit Costs	The following table provides the net periodic benefit cost associated with our international defined benefit pension plans: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Service cost $ 1 $ 2 $ 3 $ 4 Interest cost — 1 1 2 Expected return on plan assets — — (1 ) (1 ) Amortization of net actuarial loss 1 — 1 — Curtailment and settlement (gain)/loss — (1 ) 1 (1 ) Net periodic benefit cost $ 2 $ 2 $ 5 $ 4

Share-Based Payments (Tables)

Share-Based Payments (Tables)	6 Months Ended
	Jul. 02, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Components of Share-based Compensation Expense	The components of share-based compensation expense are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Stock options / stock appreciation rights $ 2 $ 3 $ 5 $ 5 RSUs / DSUs 7 6 13 12 PSUs 2 1 4 2 Share-based compensation expense—total (a)(b) $ 11 $ 10 $ 22 $ 19 (a) For the three and six months ended July 2, 2017 , and July 3, 2016 , amounts capitalized to inventory were insignificant. (b) For the three and six months ended July 2, 2017 , and three months ended July 3, 2016 , the additional share-based compensation expense as a result of accelerated vesting of the outstanding stock options and the settlement, on a pro-rata basis, of other equity awards of terminated employees in connection with our operational efficiency initiative and supply network strategy, which is included in Restructuring charges/(reversals) and certain acquisition-related costs , were insignificant. For the six months ended July 3, 2016, additional share-based compensation expense was approximately $1 million .

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	6 Months Ended
	Jul. 02, 2017
Equity [Abstract]
Changes in Common Shares and Treasury Stock	Changes in common shares and treasury stock were as follows: (MILLIONS) Common Shares Issued (a) Treasury Stock (a) Balance, December 31, 2015 501.81 4.41 Share-based compensation (b) 0.08 (1.29 ) Share repurchase program — 3.38 Balance, July 3, 2016 501.89 6.50 Balance, December 31, 2016 501.89 9.04 Share-based compensation (b) — (1.25 ) Share repurchase program — 4.45 Balance, July 2, 2017 501.89 12.23 (a) Shares may not add due to rounding. (b) Includes the issuance of shares of common stock and the reissuance of shares from treasury stock in connection with the vesting of employee share-based awards. Treasury stock also includes the reacquisition of shares associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information regarding share-based compensation, see Note 12. Share-Based Payments .
Changes, Net of Tax, in Accumulated Other Comprehensive Loss	Changes, net of tax, in accumulated other comprehensive loss, excluding noncontrolling interest, are as follows: Currency Translation Derivatives Adjustment Benefit Plans Accumulated Other Net Unrealized Net Unrealized Actuarial Comprehensive (MILLIONS OF DOLLARS) Gains/(Losses) Gains/(Losses) Gains/(Losses) Loss Balance, December 31, 2015 $ (2 ) $ (604 ) $ (16 ) $ (622 ) Other comprehensive (loss)/income, net of tax (3 ) 66 3 66 Divestiture of noncontrolling interest (a) — 2 — 2 Balance, July 3, 2016 $ (5 ) $ (536 ) $ (13 ) $ (554 ) Balance, December 31, 2016 $ 8 $ (583 ) $ (23 ) $ (598 ) Other comprehensive income, net of tax (1 ) 56 1 56 Balance, July 2, 2017 $ 7 $ (527 ) $ (22 ) $ (542 ) (a) Reflects the divestiture of our share of our Taiwan joint venture. See Note 4. Acquisitions and Divestitures: Divestitures.

Earnings per Share (Tables)

Earnings per Share (Tables)	6 Months Ended
	Jul. 02, 2017
Earnings Per Share [Abstract]
Basic and Diluted Earnings Per Share	The following table presents the calculation of basic and diluted earnings per share: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) 2017 2016 2017 2016 Numerator Net income before allocation to noncontrolling interests $ 247 $ 224 $ 486 $ 428 Less: net income attributable to noncontrolling interests — — 1 — Net income attributable to Zoetis Inc. $ 247 $ 224 $ 485 $ 428 Denominator Weighted-average common shares outstanding 490.8 496.3 491.6 496.9 Common stock equivalents: stock options, RSUs, PSUs and DSUs 3.2 2.5 3.0 2.3 Weighted-average common and potential dilutive shares outstanding 494.0 498.8 494.6 499.2 Earnings per share attributable to Zoetis Inc. stockholders—basic $ 0.50 $ 0.45 $ 0.99 $ 0.86 Earnings per share attributable to Zoetis Inc. stockholders—diluted $ 0.50 $ 0.45 $ 0.98 $ 0.86

Segment and Other Revenue Inf36

Segment and Other Revenue Information (Tables)	6 Months Ended
	Jul. 02, 2017
Segment Reporting [Abstract]
Schedule of Selected Income Statement Information by Segment	Earnings Depreciation and Amortization (a) July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Three months ended U.S. Revenue $ 623 $ 594 Cost of sales 134 134 Gross profit 489 460 Gross margin 78.5 % 77.4 % Operating expenses 113 100 Other (income)/deductions — — U.S. Earnings 376 360 $ 7 $ 7 International Revenue (b) 634 602 Cost of sales 219 201 Gross profit 415 401 Gross margin 65.5 % 66.6 % Operating expenses 126 124 Other (income)/deductions 2 1 International Earnings 287 276 11 11 Total operating segments 663 636 18 18 Other business activities (73 ) (74 ) 6 6 Reconciling Items: Corporate (151 ) (171 ) 13 12 Purchase accounting adjustments (21 ) (28 ) 21 21 Acquisition-related costs (2 ) (2 ) — — Certain significant items (c) 1 4 — 2 Other unallocated (72 ) (33 ) 1 1 Total Earnings (d) $ 345 $ 332 $ 59 $ 60 Earnings Depreciation and Amortization (a) July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Six months ended U.S. Revenue $ 1,228 $ 1,176 Cost of sales 271 265 Gross profit 957 911 Gross margin 77.9 % 77.5 % Operating expenses 209 192 Other (income)/deductions — — U.S. Earnings 748 719 $ 14 $ 13 International Revenue (b) 1,249 1,169 Cost of sales 432 397 Gross profit 817 772 Gross margin 65.4 % 66.0 % Operating expenses 240 233 Other (income)/deductions (1 ) 3 International Earnings 578 536 22 22 Total operating segments 1,326 1,255 36 35 Other business activities (147 ) (148 ) 12 12 Reconciling Items: Corporate (294 ) (340 ) 25 22 Purchase accounting adjustments (43 ) (54 ) 43 43 Acquisition-related costs (2 ) (3 ) — — Certain significant items (c) (3 ) 17 2 3 Other unallocated (155 ) (63 ) 3 2 Total Earnings (d) $ 682 $ 664 $ 121 $ 117 (a) Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized. (b) Revenue denominated in euros was $155 million and $303 million for the three and six months ended July 2, 2017 , respectively, and $158 million and $312 million for the three and six months ended July 3, 2016 , respectively . (c) For the three months ended July 2, 2017 , Certain significant items primarily includes: (i) a reversal of previously accrued employee termination costs of $3 million , exit costs of $1 million , accelerated depreciation of $1 million , consulting fees of $1 million , and a net loss on sales of certain manufacturing sites and products of $2 million related to our operational efficiency initiative and supply network strategy, (ii) charges of $1 million associated with changes to our operating model, and (iii) income of $4 million related to an insurance recovery from commercial settlements in Mexico recorded in 2014 and 2016. For the three months ended July 3, 2016 , Certain significant items primarily includes: (i) Zoetis stand-up costs of $5 million ; (ii) a net loss of $6 million related to sales of certain manufacturing sites and products as a result of our operational efficiency initiative; (iii) a $24 million net reduction in certain employee termination accruals, partially offset by exit costs of $1 million , accelerated depreciation of $2 million , and consulting fees of $5 million , related to our operational efficiency initiative, supply network strategy, and other restructuring activities, and (iv) charges of $1 million associated with changes to our operating model. Stand-up costs include certain nonrecurring costs related to becoming an independent public company, such as the creation of standalone systems and infrastructure, site separation, new branding (including changes to the manufacturing process for required new packaging), and certain legal registration and patent assignment costs. For the six months ended July 2, 2017 , Certain significant items primarily includes: (i) a reversal of previously accrued employee termination costs of $4 million , exit costs of $1 million , accelerated depreciation charges of $2 million , consulting fees of $3 million , and a net loss related to sales of certain manufacturing sites and products of $2 million , related to our operational efficiency initiative and supply network strategy, (ii) charges of $3 million associated with changes to our operating model, and (iii) income of $4 million related to an insurance recovery from commercial settlements in Mexico recorded in 2014 and 2016. For the six months ended July 3, 2016 , Certain significant items primarily includes: (i) Zoetis stand-up costs of $17 million ; (ii) a net gain of $27 million related to sales of certain manufacturing sites and products as a result of our operational efficiency initiative, (iii) a $23 million net reduction in certain employee termination accruals, partially offset by exit costs of $2 million , accelerated depreciation of $3 million and consulting fees of $10 million related to our operational efficiency initiative, supply network strategy and other restructuring activities, and (iv) charges of $1 million associated with changes to our operating model. (d) Defined as income before provision for taxes on income.
Schedule of Significant Product Revenues	Revenue by Species Species revenue are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Livestock: Cattle $ 382 $ 366 $ 768 $ 743 Swine 148 150 308 296 Poultry 122 118 238 240 Fish 19 22 40 39 Other 18 17 38 38 689 673 1,392 1,356 Companion Animal: Horses 35 36 70 75 Dogs and Cats 533 487 1,015 914 568 523 1,085 989 Contract Manufacturing 12 12 23 25 Total revenue $ 1,269 $ 1,208 $ 2,500 $ 2,370 Revenue by Major Product Category Revenue by major product category are as follows: Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, (MILLIONS OF DOLLARS) 2017 2016 2017 2016 Anti-infectives $ 278 $ 272 $ 546 $ 563 Vaccines 324 310 643 611 Parasiticides 206 189 390 334 Medicated feed additives 121 128 244 266 Other pharmaceuticals 282 248 554 469 Other non-pharmaceuticals 46 49 100 102 Contract manufacturing 12 12 23 25 Total revenue $ 1,269 $ 1,208 $ 2,500 $ 2,370

Organization (Details)

Organization (Details) product in Thousands	Jul. 02, 2017speciescountryregioncategory	May 05, 2015product
Product Information [Line Items]
Number of regional segments | region	2
Number of countries in which entity markets products	45
Number of core animal species | species	8
Number of major product categories	5	5
Product
Product Information [Line Items]
Number of countries in which entity markets products	100

Significant Accounting Polici38

Significant Accounting Policies Significant Accounting Policies (Details) $ in Millions	3 Months Ended
	Jul. 02, 2017USD ($)
Accounting Policies [Abstract]
Deferred tax benefit	$ 2

Acquisitions and Divestitures39

Acquisitions and Divestitures (Details) $ in Millions	May 11, 2017USD ($)	Apr. 28, 2016USD ($)	Jul. 02, 2017USD ($)	Jul. 03, 2016USD ($)	Apr. 03, 2016USD ($)	Jul. 02, 2017USD ($)	Jul. 03, 2016USD ($)	Feb. 12, 2016site
Disposal Group, Held-for-sale, Not Discontinued Operations | Guarulhos, Brazil [Member]
Business Acquisition [Line Items]
Inventories			$ 12			$ 12
Property, plant and equipment			26			26
Deferred tax assets			4			4
Other current assets			8			8
Goodwill			3			3
Total			53			53
Accounts payable			3			3
Other current liabilities			1			1
Total			4			$ 4
Disposal Group, Disposed of by Sale, Not Discontinued Operations
Business Acquisition [Line Items]
Total cash proceeds							$ 88
Net gain on sale of assets				$ (6)	$ (33)
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Shenzhou, China
Business Acquisition [Line Items]
Total cash proceeds	$ 3
Net gain on sale of assets	$ (2)
UNITED STATES | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Laurinburg, North Carolina and Longmont, Colorado Manufacturing Sites
Business Acquisition [Line Items]
Net gain on sale of assets			$ (4)
Number of manufacturing sites sold | site								2
TAIWAN, PROVINCE OF CHINA | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Taiwan Joint Venture
Business Acquisition [Line Items]
Total cash proceeds		$ 13
Ownership percentage share in Taiwan join venture		55.00%
Supply Network Strategy | Guarulhos, Brazil [Member]
Business Acquisition [Line Items]
Term of manufacturing and supply agreement						5 years

Restructuring Charges and Oth40

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Details) product in Thousands, $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017USD ($)sitecategory	Jul. 03, 2016USD ($)	Jul. 02, 2017USD ($)employeessitecategory	Jul. 03, 2016USD ($)	Dec. 31, 2016USD ($)	Apr. 28, 2016	May 05, 2015product
Restructuring Cost and Reserve [Line Items]
Exit costs		$ 1	$ 1	$ 1	$ 2
Total Restructuring charges/(reversals) and certain acquisition-related costs		$ 0	(21)	(1)	(19)
Restructuring charges (reversals)	[1]			$ (3)
Number of major product categories		5		5				5
Number sites planning to sell or exit | site				10
Number of sites divested or exited | site		3		3
Number of international manufacturing sites sold | site		3		3
Number of positions eliminated | employees				2,200
Consulting fees		$ 1	4	$ 1	7
Total charges associated with the operational efficiency initiative and supply network strategy		2	(9)	4	(34)
Restructuring Reserve [Roll Forward]
Restructuring accrual balance	[1]			90
Provision	[1]			(3)
Utilization and other	[1],[2]			(37)
Restructuring accrual balance	[1]	50		50
Other current liabilities
Restructuring Reserve [Roll Forward]
Accrued expenses		29		29		$ 61
Other Noncurrent Liabilities
Restructuring Reserve [Roll Forward]
Other noncurrent liabilities		21		21		$ 29
Employee Termination Costs
Restructuring Cost and Reserve [Line Items]
Employee termination costs	[3]	(3)	(24)	(4)	(23)
Restructuring charges (reversals)				(4)
Restructuring Reserve [Roll Forward]
Restructuring accrual balance	[1]			90
Provision				(4)
Utilization and other	[2]			(36)
Restructuring accrual balance	[1]	50		50
Exit Costs
Restructuring Cost and Reserve [Line Items]
Restructuring charges (reversals)				1
Restructuring Reserve [Roll Forward]
Restructuring accrual balance	[1]			0
Provision				1
Utilization and other	[2]			(1)
Restructuring accrual balance	[1]	0		0
Operational Efficiency
Restructuring Cost and Reserve [Line Items]
Exit costs		1	2	1	3
Restructuring charges (reversals)		3	(28)	2	(26)
Accelerated depreciation		0	1	0	1
Net loss/(gain) on sale of assets	[4]	2	6	2	(27)
Other cost reduction and cost productivity charges		3	11	3	(19)
Restructuring Reserve [Roll Forward]
Provision		3	(28)	2	(26)
Operational Efficiency | Employee Termination Costs
Restructuring Cost and Reserve [Line Items]
Employee termination costs	[5]	(2)	30	(1)	29
Supply Network Strategy
Restructuring Cost and Reserve [Line Items]
Employee termination costs		5	(6)	5	(6)
Restructuring charges (reversals)		(5)	6	(5)	6
Accelerated depreciation		1	1	2	2
Other cost reduction and cost productivity charges		1	2	4	5
Consulting fees		0	1	2	3
Restructuring Reserve [Roll Forward]
Provision		(5)	6	(5)	6
Zoetis Initiatives
Restructuring Cost and Reserve [Line Items]
Restructuring charges (reversals)		(2)	(22)	(3)	(20)
Restructuring Reserve [Roll Forward]
Provision		(2)	(22)	$ (3)	(20)
Minimum
Restructuring Cost and Reserve [Line Items]
Number of positions terminated | employees				2,000
Restructuring, new range of expected number of positions eliminated | employees				2,300
Maximum
Restructuring Cost and Reserve [Line Items]
Number of positions terminated | employees				2,500
Restructuring, new range of expected number of positions eliminated | employees				2,800
Taiwan Joint Venture
Restructuring Cost and Reserve [Line Items]
Ownership percentage share in Taiwan join venture							55.00%
UNITED STATES
Restructuring Cost and Reserve [Line Items]
Restructuring charges (reversals)		(1)	(1)		(2)
Restructuring Reserve [Roll Forward]
Provision		(1)	(1)		(2)
International
Restructuring Cost and Reserve [Line Items]
Restructuring charges (reversals)		1	(14)	$ (1)	(15)
Restructuring Reserve [Roll Forward]
Provision		1	(14)	(1)	(15)
Manufacturing, Research, Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring charges (reversals)		(2)	(8)	(2)	(4)
Restructuring Reserve [Roll Forward]
Provision		(2)	(8)	(2)	(4)
Direct Cost
Restructuring Cost and Reserve [Line Items]
Integration costs	[6]	$ 2	$ 2	$ 2	$ 2
Guarulhos, Brazil [Member]
Restructuring Cost and Reserve [Line Items]
Number of positions terminated | employees				300
[1]	At July 2, 2017, and December 31, 2016, included in Accrued expenses ($29 million and $61 million, respectively) and Other noncurrent liabilities ($21 million and $29 million, respectively).
[2]	Includes adjustments for foreign currency translation.
[3]	The restructuring charges/(reversals) for the three months ended July 2, 2017, are associated with the following: U.S. ($1 million reversal), International ($1 million) and Manufacturing/research/corporate ($2 million reversal). The restructuring charges/(reversals) for the six months ended July 2, 2017, are associated with the following: International ($1 million reversal) and Manufacturing/research/corporate ($2 million reversal). The restructuring charges/(reversals) for the three months ended July 3, 2016, are associated with the following: U.S. ($1 million reversal), International ($14 million reversal) and Manufacturing/research/corporate ($8 million reversal). The restructuring charges/(reversals) for the six months ended July 3, 2016, are associated with the following: U.S. ($2 million reversal), International ($15 million reversal) and Manufacturing/research/corporate ($4 million reversal).
[4]	For the three months ended July 3, 2016, primarily represents the net loss on the sale of our share of our Taiwan joint venture as part of our operational efficiency initiative. For the six months ended July 3, 2016, represents the net gain on the sale of certain manufacturing sites and products, partially offset by the loss on the sale of our share of our Taiwan joint venture, as part of our operational efficiency initiative.
[5]	For the three and six months ended July 3, 2016, includes a reduction in employee termination accruals primarily as a result of higher than expected voluntary attrition rates experienced in the first half of 2016.
[6]	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.

Other (Income)_Deductions - N41

Other (Income)/Deductions - Net (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Other Income and Expenses [Abstract]
Royalty-related income		$ (5)	$ (5)	$ (12)	$ (12)
Certain legal and other matters, net		(4)	0	(4)
Foreign currency loss	[1]	8	8	10	17
Other, net	[2]	(3)	(5)	(8)	(4)
Other (income)/deductions—net		$ (2)	$ 4	$ (12)	$ (26)
[1]	Primarily driven by costs related to hedging and exposures to certain emerging market currencies.
[2]	Includes interest income and other miscellaneous income. For the six months ended July 2, 2017, also includes a settlement refund and reimbursement of legal fees related to costs incurred by Pharmaq prior to the acquisition in 2015. For the three and six months ended July 3, 2016, also includes income associated with certain state business employment tax incentive credits.

Income Taxes - Taxes on Income

Income Taxes - Taxes on Income (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Income Tax Contingency [Line Items]
Effective tax rate for income from continuing operations	28.40%	32.50%	28.70%	35.50%
Deferred tax benefit	$ 2
Discrete tax benefit related to change in statutory tax rates	3	$ 10	$ 7	$ 5
Belgium
Income Tax Contingency [Line Items]
Discrete tax benefit	$ 3		$ 38

Income Taxes - Deferred Taxes (

Income Taxes - Deferred Taxes (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Net deferred income tax liability	$ 168	$ 148
Deferred tax assets	93	96
Noncurrent deferred tax liabilities	$ 261	$ 244

Income Taxes - Tax Contingencie

Income Taxes - Tax Contingencies (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016
Income Tax Contingency [Line Items]
Liabilities associated with uncertain tax positions	$ 75	$ 68
Unrecognized tax benefits, income tax penalties and interest accrued	11	10
Noncurrent Deferred Tax Assets
Income Tax Contingency [Line Items]
Liabilities associated with uncertain tax positions	4	3
Other Taxes Payable
Income Tax Contingency [Line Items]
Liabilities associated with uncertain tax positions	$ 71	$ 65

Financial Instruments - Credit

Financial Instruments - Credit Facilities (Details)	1 Months Ended
	Dec. 31, 2016USD ($)	Jul. 02, 2017USD ($)
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity		$ 75,000,000
Revolving credit facility, minimum interest coverage ratio		3.50
Line of credit facility	$ 0	$ 0
Operational Efficiency
Line of Credit Facility [Line Items]
Aggregate amount of all charges	$ 100,000,000
Revolving Credit Facility
Line of Credit Facility [Line Items]
Revolving credit facility, term	5 years
Revolving credit facility, current borrowing capacity	$ 1,000,000,000
Line of credit facility, maximum borrowing capacity	$ 1,500,000,000
Revolving credit facility, covenant compliance ratio		3.50
Maximum total leverage ratio		4

Financial Instruments - Commerc

Financial Instruments - Commercial Paper Program (Details) - USD ($)	Jul. 02, 2017	Dec. 31, 2016	Feb. 28, 2013
Short-term Debt [Line Items]
Commercial paper		$ 0
Commercial Paper
Short-term Debt [Line Items]
Capacity of commercial paper program			$ 1,000,000,000
Commercial paper	$ 100,000,000
Weighted average interest rate	1.40%

Financial Instruments - Senior

Financial Instruments - Senior Notes Offering and Other Long-Term Debt (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016	Nov. 13, 2015	Jan. 28, 2013
Debt Instrument [Line Items]
Debt, principal amount	$ 4,500	$ 4,500
Long-term debt current portion	750	0
Senior Notes
Debt Instrument [Line Items]
Debt, principal amount			$ 1,250	$ 3,650
Debt, unamortized discount			$ 2	$ 10
Debt, purchase price percent due to downgrade of investment grade				101.00%
Senior Notes | 1.875% 2013 senior notes due 2018
Debt Instrument [Line Items]
Debt, principal amount	$ 750	$ 750
Derivatives Designated as Hedging Instruments: | Senior Notes | 1.875% 2013 senior notes due 2018 | Interest rate swaps
Debt Instrument [Line Items]
Interest rate percentage				1.875%

Financial Instruments - Schedul

Financial Instruments - Schedule of Long-term Debt (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016	Nov. 13, 2015	Jan. 28, 2013
Debt Instrument [Line Items]
Total long-term debt	$ 4,500	$ 4,500
Unamortized debt discount / debt issuance costs	(31)	(32)
Less current portion of long-term debt	(750)	0
Long-term debt, net of discount and issuance costs	3,719	4,468
Senior Notes
Debt Instrument [Line Items]
Total long-term debt			$ 1,250	$ 3,650
Senior Notes | 1.875% 2013 senior notes due 2018
Debt Instrument [Line Items]
Total long-term debt	750	750
Senior Notes | 3.450% 2015 senior notes due 2020
Debt Instrument [Line Items]
Interest rate percentage			3.45%
Total long-term debt	500	500
Senior Notes | 3.250% 2013 senior notes due 2023
Debt Instrument [Line Items]
Interest rate percentage				3.25%
Total long-term debt	1,350	1,350
Senior Notes | 4.500% 2015 senior notes due 2025
Debt Instrument [Line Items]
Interest rate percentage			4.50%
Total long-term debt	750	750
Senior Notes | 4.700% 2013 senior notes due 2043
Debt Instrument [Line Items]
Interest rate percentage				4.70%
Total long-term debt	$ 1,150	$ 1,150

Financial Instruments - Fair Va

Financial Instruments - Fair Value of Debt (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016
Senior Notes | Fair Value, Inputs, Level 2
Debt Instrument [Line Items]
Fair value, debt instrument	$ 4,773	$ 4,565

Financial Instruments - Long-te

Financial Instruments - Long-term Debt Maturity (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016	Dec. 31, 2016
Financial Instruments [Abstract]
2,018	$ 750		$ 750
2,019	0		0
2,020	500		500
2,021	0		0
After 2,021	3,250		3,250
Total long-term debt	4,500		4,500		$ 4,500
Interest expense, net of capitalized interest	41	$ 41	82	$ 84
Capitalized interest	$ 1	$ 1	$ 2

Financial Instruments - Foreign

Financial Instruments - Foreign Exchange Risk (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jul. 02, 2017	Dec. 31, 2016	Jan. 28, 2013
Derivatives Not Designated as Hedging Instruments | Foreign Exchange Contract
Derivative [Line Items]
Derivative notional amount	$ 1,100	$ 1,200
Maturity period	60 days
Derivatives Not Designated as Hedging Instruments | Maximum | Foreign Exchange Contract
Derivative [Line Items]
Maturity period	180 days
Derivatives Designated as Hedging Instruments: | Interest rate swaps
Derivative [Line Items]
Derivative notional amount	$ 200	$ 250
Maturity period	10 years	10 years
Derivatives Designated as Hedging Instruments: | Interest rate swaps | Senior Notes | 1.875% 2013 senior notes due 2018
Derivative [Line Items]
Interest rate percentage			1.875%

Financial Instruments - Fair 52

Financial Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016
Derivatives, Fair Value [Line Items]
Total derivatives	$ 12	$ 21
Foreign Exchange Forward | Derivatives Not Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Total derivatives	(2)	4
Foreign Exchange Forward | Derivatives Not Designated as Hedging Instruments | Other current assets
Derivatives, Fair Value [Line Items]
Derivative assets	6	12
Foreign Exchange Forward | Derivatives Not Designated as Hedging Instruments | Other current liabilities
Derivatives, Fair Value [Line Items]
Derivative liabilities	(8)	(8)
Interest rate swaps | Derivatives Designated as Hedging Instruments:
Derivatives, Fair Value [Line Items]
Total derivatives	14	17
Interest rate swaps | Derivatives Designated as Hedging Instruments: | Other current assets
Derivatives, Fair Value [Line Items]
Derivative assets	$ 14	$ 17

Financial Instruments - Interes

Financial Instruments - Interest Rate Risk (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Derivatives Not Designated as Hedging Instruments | Foreign Exchange Forward
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Foreign currency forward-exchange contracts	$ 7	$ (13)	$ (22)	$ (12)

Financial Instruments - Amounts

Financial Instruments - Amounts of net losses on derivative instruments designated as cash flow hedges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Derivatives Designated as Hedging Instruments: | Interest rate swaps
Derivative [Line Items]
Interest rate swaps	$ (1)	$ (3)	$ (1)	$ (3)

Inventories (Details)

Inventories (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Finished goods	$ 784	$ 799
Work-in-process	534	499
Raw materials and supplies	180	204
Inventories	$ 1,498	$ 1,502

Goodwill and Other Intangible56

Goodwill and Other Intangible Assets - Goodwill (Details) $ in Millions	6 Months Ended
	Jul. 02, 2017USD ($)
Goodwill [Roll Forward]
Beginning Balance	$ 1,481
Additions	10	[1]
Other	4	[2]
Ending Balance	1,495
Guarulhos, Brazil [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations
Goodwill [Roll Forward]
Ending Balance	3
United States (U.S.)
Goodwill [Roll Forward]
Beginning Balance	661
Additions	5	[1]
Other	0	[2]
Ending Balance	666
International
Goodwill [Roll Forward]
Beginning Balance	820
Additions	5	[1]
Other	4	[2]
Ending Balance	$ 829
[1]	Represents the consolidation of a European livestock monitoring company, a variable interest entity of which Zoetis is the primary beneficiary.
[2]	Includes adjustments for foreign currency translation, partially offset by the reclassification of $3 million to Assets Held for Sale relating to our manufacturing site in Guarulhos, Brazil. For additional information, see Note 4. Acquisitions and Divestitures: Assets Held for Sale.

Goodwill and Other Intangible57

Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Gross goodwill	$ 2,031		$ 2,031		$ 2,017
Accumulated goodwill impairment losses	536		536		$ 536
Amortization of intangible assets	$ 24	$ 24	$ 49	$ 48

Goodwill and Other Intangible58

Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016	Dec. 31, 2016
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount		$ 1,667		$ 1,667		$ 1,561
Finite-lived intangible assets, accumulated amortization		(706)		(706)		(648)
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization		961		961		913
Total indefinite-lived intangible assets		249		249		315
Intangible Assets, gross carrying amount		1,916		1,916		1,876
Identifiable intangible assets, less accumulated amortization		1,210		1,210		1,228
Amortization of intangible assets		24	$ 24	49	$ 48
Brands
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Total indefinite-lived intangible assets		37		37		37
Trademarks and Trade Names
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Total indefinite-lived intangible assets		67		67		66
In Process Research and Development
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Total indefinite-lived intangible assets	[1]	137		137		204
Product Rights
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Total indefinite-lived intangible assets		8		8		8
Developed Technology Rights
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount	[1],[2]	1,167		1,167		1,064
Finite-lived intangible assets, accumulated amortization	[1],[2]	(385)		(385)		(342)
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization	[1],[2]	782		782		722
Brands
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount		213		213		213
Finite-lived intangible assets, accumulated amortization		(138)		(138)		(132)
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization		75		75		81
Trademarks and Trade Names
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount		62		62		62
Finite-lived intangible assets, accumulated amortization		(46)		(46)		(44)
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization		16		16		18
Other Intangible Assets
Finite Lived and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount		225		225		222
Finite-lived intangible assets, accumulated amortization		(137)		(137)		(130)
Finite-lived intangible assets, identifiable intangible assets, less accumulated amortization		$ 88		$ 88		$ 92
[1]	In the first quarter of 2017, certain intangible assets, acquired in 2015 as part of the Pharmaq acquisition, were placed into service.
[2]	Includes the consolidation of a European livestock monitoring company, a variable interest entity of which Zoetis is the primary beneficiary, and intangible assets associated with the purchase of a Norwegian fish vaccination company, both during the first quarter of 2017.

Benefit Plans (Details)

Benefit Plans (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Service cost	$ 1	$ 2	$ 3	$ 4
Interest cost	0	1	1	2
Expected return on plan assets	0	0	(1)	(1)
Amortization of net actuarial loss	1	0	1
Curtailment and settlement (gain)/loss	0	(1)	1	(1)
Net periodic benefit cost	2	2	5	4
Domestic Plan
Defined Benefit Plan Disclosure [Line Items]
Pension and postretirement benefit expense	1	1	3	3
Foreign Plan
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Contributions to benefit plans	1	$ 3	4	$ 6
Expected future contributions to benefit plans	$ 7		$ 7

Share-Based Payments - Componen

Share-Based Payments - Components of Share-Based Compensation Expense (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense—direct	[1],[2]	$ 11	$ 10	$ 22	$ 19
Additional share-based compensation expense					1
Stock options / stock appreciation rights
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense—direct		2	3	5	5
RSUs / DSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense—direct		7	6	13	12
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense—direct		$ 2	$ 1	$ 4	$ 2
[1]	For the three and six months ended July 2, 2017, and July 3, 2016, amounts capitalized to inventory were insignificant.
[2]	For the three and six months ended July 2, 2017, and three months ended July 3, 2016, the additional share-based compensation expense as a result of accelerated vesting of the outstanding stock options and the settlement, on a pro-rata basis, of other equity awards of terminated employees in connection with our operational efficiency initiative and supply network strategy, which is included in Restructuring charges/(reversals) and certain acquisition-related costs, were insignificant. For the six months ended July 3, 2016, additional share-based compensation expense was approximately $1 million.

Share-Based Payments - Narrativ

Share-Based Payments - Narrative (Details)	6 Months Ended
	Jul. 02, 2017$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, options granted, shares | shares	712,112
Share-based compensation, weighted average exercise price (in dollars per share)	$ 55.09
Share-based compensation, Options, weighted average grant date fair value (in dollars per share)	$ 14.30
Share-based compensation, risk free interest rate	2.30%
Share-based compensation, expected dividend rate	0.76%
Share-based compensation, expected volatility rate	23.28%
Share-based compensation, expected term	6 years 6 months
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, award vesting period	3 years
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, award vesting period	3 years
Share-based compensation, granted, shares | shares	529,932
Share-based compensation, weighted average grant date fair value (in dollars per share)	$ 55.04
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, expected volatility rate	23.10%
Share-based compensation, award vesting period	3 years
Share-based compensation, granted, shares | shares	136,964
Share-based compensation, weighted average grant date fair value (in dollars per share)	$ 74.28
Performance Shares | PeerCompanies
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, expected volatility rate	25.50%
Performance Shares | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, target number of units percentage	0.00%
Performance Shares | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, target number of units percentage	200.00%

Stockholders' Equity - Changes

Stockholders' Equity - Changes in Common Shares and Treasury Stock (Details) - USD ($)		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Dec. 31, 2016	Nov. 30, 2014
Class of Stock [Line Items]
Common stock, shares authorized		6,000,000,000		6,000,000,000
Preferred stock, shares authorized		1,000,000,000		1,000,000,000
Stock repurchase program, remaining authorized repurchase amount		$ 1,300,000,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued, shares	[1]	501,891,243	501,810,000
Treasury stock, shares	[1]	9,035,946	4,410,000
Stock issued, employee stock purchase plans, shares	[1],[2]	0	80,000
Stock issued, employee benefit plan, shares	[1]	0	0
Common stock issued, shares	[1]	501,891,243	501,890,000
Treasury stock, shares	[1]	12,231,732	6,501,541
Stock Compensation Plan
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury stock acquired, shares	[1],[2]	(1,250,000)	(1,290,000)
Share Repurchase Program
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury stock acquired, shares	[1]	(4,450,000)	(3,380,000)
November 2014 Share Repurchase Program
Class of Stock [Line Items]
Stock repurchase program, authorized amount					$ 500,000,000
December 2016 Share Repurchase Program
Class of Stock [Line Items]
Stock repurchase program, authorized amount				$ 1,500,000,000
[1]	Shares may not add due to rounding.
[2]	Includes the issuance of shares of common stock and the reissuance of shares from treasury stock in connection with the vesting of employee share-based awards. Treasury stock also includes the reacquisition of shares associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information regarding share-based compensation, see Note 12. Share-Based Payments.

Stockholders' Equity - Change63

Stockholders' Equity - Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance				$ 1,499	$ 1,091
Other comprehensive income, net of tax		$ 10	$ 62	56	65
Ending balance		1,746	1,371	1,746	1,371
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance				(598)	(622)
Other comprehensive income, net of tax				56	66
Divestiture of noncontrolling interest	[1]				2
Ending balance		(542)	(554)	(542)	(554)
Derivatives Net Unrealized Gains/ (Losses)
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance				8	(2)
Other comprehensive income, net of tax				(1)	(3)
Ending balance		7	(5)	7	(5)
Currency Translation Adjustment Net Unrealized Gain/(Losses)
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance				(583)	(604)
Other comprehensive income, net of tax				56	66
Divestiture of noncontrolling interest	[1]				2
Ending balance		(527)	(536)	(527)	(536)
Benefit Plans Actuarial Gains/(Losses)
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance				(23)	(16)
Other comprehensive income, net of tax				1	3
Ending balance		$ (22)	$ (13)	$ (22)	$ (13)
[1]	Reflects the divestiture of our share of our Taiwan joint venture. See Note 4. Acquisitions and Divestitures: Divestitures.

Earnings per Share (Details)

Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Numerator
Net income before allocation to noncontrolling interests	$ 247	$ 224	$ 486	$ 428
Less: net income attributable to noncontrolling interests	0	0	1	0
Net income attributable to Zoetis Inc.	$ 247	$ 224	$ 485	$ 428
Denominator
Weighted-average common shares outstanding	490.8	496.3	491.6	496.9
Common stock equivalents: stock options, RSUs, PSUs and DSUs	3.2	2.5	3	2.3
Weighted-average common and potential dilutive shares outstanding	494	498.8	494.6	499.2
Earnings per share attributable to Zoetis stockholders—basic (in dollars per share)	$ 0.50	$ 0.45	$ 0.99	$ 0.86
Earnings per share attributable to Zoetis stockholders—diluted (in dollars per share)	$ 0.50	$ 0.45	$ 0.98	$ 0.86
Stock options
Denominator
Antidilutive securities excluded from computation of earnings per share, amount	1	2	1	2

Commitments and Contingencies (

Commitments and Contingencies (Details)	May 16, 2016producer	Jun. 03, 2015count	Aug. 31, 2014animal	Apr. 30, 2012	Jul. 02, 2017customerclaims	Feb. 29, 2012defendant
PregSure
Loss Contingencies [Line Items]
Number of claims seeking damages | claims					264
Number of claims settled | claims					168
Ulianopolis, Brazil
Loss Contingencies [Line Items]
Number of claims seeking damages | defendant						6
Number of additional defendants | defendant						5
Duration of suspension of lawsuit				1 year
Lasadoil
Loss Contingencies [Line Items]
Number of deaths from contamination of animal feed | animal			50,000
Number of contaminated animal from contamination of animal feed | animal			20,000
Number of complaints	2	1			3

Segment and Other Revenue Inf66

Segment and Other Revenue Information - Segment Information (Details)	6 Months Ended
	Jul. 02, 2017segment
Segment Reporting [Abstract]
Number of operating segments	2

Segment and Other Revenue Inf67

Segment and Other Revenue Information - Segment Assets (Details) - USD ($) $ in Millions	Jul. 02, 2017	Dec. 31, 2016
Segment Reporting [Abstract]
Assets	$ 7,802	$ 7,649

Segment and Other Revenue Inf68

Segment and Other Revenue Information - Statement of Income (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Segment Reporting Information [Line Items]
Revenue		$ 1,269	$ 1,208	$ 2,500	$ 2,370
Cost of Sales	[1]	440	399	883	788
Other (income)/deductions—net		(2)	4	(12)	(26)
Income before provision for taxes on income	[2]	345	332	682	664
Depreciation and amortization	[2],[3]	59	60	121	117
Other business activities
Segment Reporting Information [Line Items]
Income before provision for taxes on income		(73)	(74)	(147)	(148)
Depreciation and amortization	[3]	6	6	12	12
Operating Segments
Segment Reporting Information [Line Items]
Income before provision for taxes on income		663	636	1,326	1,255
Depreciation and amortization	[3]	18	18	36	35
Operating Segments | U.S.
Segment Reporting Information [Line Items]
Revenue		623	594	1,228	1,176
Cost of Sales		134	134	271	265
Gross Profit		$ 489	$ 460	$ 957	$ 911
Gross margin, percentage		78.50%	77.40%	77.90%	77.50%
Operating Expenses		$ 113	$ 100	$ 209	$ 192
Other (income)/deductions—net		0	0	0	0
Income before provision for taxes on income		376	360	748	719
Depreciation and amortization	[3]	7	7	14	13
Operating Segments | International
Segment Reporting Information [Line Items]
Revenue	[4]	634	602	1,249	1,169
Cost of Sales		219	201	432	397
Gross Profit		$ 415	$ 401	$ 817	$ 772
Gross margin, percentage		65.50%	66.60%	65.40%	66.00%
Operating Expenses		$ 126	$ 124	$ 240	$ 233
Other (income)/deductions—net		2	1	(1)	3
Income before provision for taxes on income		287	276	578	536
Depreciation and amortization	[3]	11	11	22	22
Corporate
Segment Reporting Information [Line Items]
Income before provision for taxes on income		(151)	(171)	(294)	(340)
Depreciation and amortization	[3]	13	12	25	22
Reconciling Items
Segment Reporting Information [Line Items]
Purchase accounting adjustments, Earnings		(21)	(28)	(43)	(54)
Purchase accounting adjustments, Depreciation and Amortization	[3]	21	21	43	43
Acquisition-related costs		(2)	(2)	(2)	(3)
Certain significant items, Earnings	[5]	1	4	(3)	17
Certain significant items, Depreciation and Amortization	[3],[5]	0	2	2	3
Other unallocated, Earnings		(72)	(33)	(155)	(63)
Other Unallocated, Depreciation and Amortization	[3]	$ 1	$ 1	$ 3	$ 2
[1]	Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, general and administrative expenses or Research and development expenses, as appropriate, in the condensed consolidated statements of income.
[2]	Defined as income before provision for taxes on income.
[3]	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.
[4]	Revenue denominated in euros was $155 million and $303 million for the three and six months ended July 2, 2017, respectively, and $158 million and $312 million for the three and six months ended July 3, 2016, respectively.
[5]	For the three months ended July 2, 2017, Certain significant items primarily includes: (i) a reversal of previously accrued employee termination costs of $3 million, exit costs of $1 million, accelerated depreciation of $1 million, consulting fees of $1 million, and a net loss on sales of certain manufacturing sites and products of $2 million related to our operational efficiency initiative and supply network strategy, (ii) charges of $1 million associated with changes to our operating model, and (iii) income of $4 million related to an insurance recovery from commercial settlements in Mexico recorded in 2014 and 2016. For the three months ended July 3, 2016, Certain significant items primarily includes: (i) Zoetis stand-up costs of $5 million; (ii) a net loss of $6 million related to sales of certain manufacturing sites and products as a result of our operational efficiency initiative; (iii) a $24 million net reduction in certain employee termination accruals, partially offset by exit costs of $1 million, accelerated depreciation of $2 million, and consulting fees of $5 million, related to our operational efficiency initiative, supply network strategy, and other restructuring activities, and (iv) charges of $1 million associated with changes to our operating model. Stand-up costs include certain nonrecurring costs related to becoming an independent public company, such as the creation of standalone systems and infrastructure, site separation, new branding (including changes to the manufacturing process for required new packaging), and certain legal registration and patent assignment costs. For the six months ended July 2, 2017, Certain significant items primarily includes: (i) a reversal of previously accrued employee termination costs of $4 million, exit costs of $1 million, accelerated depreciation charges of $2 million, consulting fees of $3 million, and a net loss related to sales of certain manufacturing sites and products of $2 million, related to our operational efficiency initiative and supply network strategy, (ii) charges of $3 million associated with changes to our operating model, and (iii) income of $4 million related to an insurance recovery from commercial settlements in Mexico recorded in 2014 and 2016. For the six months ended July 3, 2016, Certain significant items primarily includes: (i) Zoetis stand-up costs of $17 million; (ii) a net gain of $27 million related to sales of certain manufacturing sites and products as a result of our operational efficiency initiative, (iii) a $23 million net reduction in certain employee termination accruals, partially offset by exit costs of $2 million, accelerated depreciation of $3 million and consulting fees of $10 million related to our operational efficiency initiative, supply network strategy and other restructuring activities, and (iv) charges of $1 million associated with changes to our operating model.

Segment and Other Revenue Inf69

Segment and Other Revenue Information - Segment Income Narrative (Details) - USD ($) $ in Millions		3 Months Ended				6 Months Ended
		Jul. 02, 2017		Jul. 03, 2016		Jul. 02, 2017	Jul. 03, 2016
Segment Reporting Information [Line Items]
Revenue		$ 1,269		$ 1,208		$ 2,500	$ 2,370
Provision	[1]					(3)
Exit costs		1		1		1	2
Certain legal and other matters, net		(4)		0		(4)
Zoetis Initiatives
Segment Reporting Information [Line Items]
Provision		(2)		(22)		(3)	(20)
Employee Termination Costs
Segment Reporting Information [Line Items]
Provision						(4)
Reconciling Items
Segment Reporting Information [Line Items]
Charges with changes in operating model		1		1		3	1
Certain legal and other matters, net						4
Stand-up costs				5			17
Reconciling Items | Zoetis Initiatives
Segment Reporting Information [Line Items]
Exit costs		1		1		1	2
Accelerated depreciation		1		2		2	3
Consulting fees		1	[2]	5	[2]	3	10	[2]
Net gain on sale of assets		(2)		(6)		(2)	27	[2]
Reconciling Items | Employee Termination Costs | Zoetis Initiatives
Segment Reporting Information [Line Items]
Provision		3		24		4	23
International | Operating Segments
Segment Reporting Information [Line Items]
Revenue	[3]	634		602		1,249	1,169
International | Operating Segments | Euro Member Countries, Euro
Segment Reporting Information [Line Items]
Revenue		$ 155		$ 158		$ 303	$ 312
[1]	At July 2, 2017, and December 31, 2016, included in Accrued expenses ($29 million and $61 million, respectively) and Other noncurrent liabilities ($21 million and $29 million, respectively).
[2]	For the three and six months ended July 2, 2017, represents the net loss related to sales of certain manufacturing sites and products as part of our operational efficiency initiative. For the three months ended July 3, 2016, primarily represents the net loss on the sale of our share of our Taiwan joint venture as part of our operational efficiency initiative. For the six months ended July 3, 2016, represents the net gain on the sale of certain manufacturing sites and products, partially offset by the loss on the sale of our share of our Taiwan joint venture, as part of our operational efficiency initiative.
[3]	Revenue denominated in euros was $155 million and $303 million for the three and six months ended July 2, 2017, respectively, and $158 million and $312 million for the three and six months ended July 3, 2016, respectively.

Segment and Other Revenue Inf70

Segment and Other Revenue Information - Revenue by Species (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Revenue from External Customer [Line Items]
Revenue	$ 1,269	$ 1,208	$ 2,500	$ 2,370
Livestock:
Revenue from External Customer [Line Items]
Revenue	689	673	1,392	1,356
Cattle
Revenue from External Customer [Line Items]
Revenue	382	366	768	743
Swine
Revenue from External Customer [Line Items]
Revenue	148	150	308	296
Poultry
Revenue from External Customer [Line Items]
Revenue	122	118	238	240
Fish
Revenue from External Customer [Line Items]
Revenue	19	22	40	39
Other
Revenue from External Customer [Line Items]
Revenue	18	17	38	38
Companion Animal:
Revenue from External Customer [Line Items]
Revenue	568	523	1,085	989
Horses
Revenue from External Customer [Line Items]
Revenue	35	36	70	75
Dogs and Cats
Revenue from External Customer [Line Items]
Revenue	533	487	1,015	914
Contract Manufacturing
Revenue from External Customer [Line Items]
Revenue	$ 12	$ 12	$ 23	$ 25

Segment and Other Revenue Inf71

Segment and Other Revenue Information - Revenue by Major Product Category (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2017	Jul. 03, 2016	Jul. 02, 2017	Jul. 03, 2016
Revenue from External Customer [Line Items]
Revenue	$ 1,269	$ 1,208	$ 2,500	$ 2,370
Anti-infectives
Revenue from External Customer [Line Items]
Revenue	278	272	546	563
Vaccines
Revenue from External Customer [Line Items]
Revenue	324	310	643	611
Parasiticides
Revenue from External Customer [Line Items]
Revenue	206	189	390	334
Medicated feed additives
Revenue from External Customer [Line Items]
Revenue	121	128	244	266
Other pharmaceuticals
Revenue from External Customer [Line Items]
Revenue	282	248	554	469
Other non-pharmaceuticals
Revenue from External Customer [Line Items]
Revenue	46	49	100	102
Contract manufacturing
Revenue from External Customer [Line Items]
Revenue	$ 12	$ 12	$ 23	$ 25