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Share-based Payments Share-based Payments (Tables)
 12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Components of Share-based Compensation Expense
The components of share-based compensation expense follow:
 
 
Year Ended December 31,
(MILLIONS OF DOLLARS)
 
2013

 
2012

 
2011

Stock option expense
 
$
9

 
$
—

 
—

RSU / DSU expense
 
9

 
—

 
—

Pfizer stock benefit plans—direct
 
25

 
28

 
19

Share-based compensation expense—direct
 
43

 
28

 
19

Share-based compensation expense—indirect
 
—

 
5

 
6

Share-based compensation expense—total
 
$
43

 
$
33

 
25

Tax benefit for share-based compensation expense
 
(6
)
 
(10
)
 
(6
)
Share-based compensation expense, net of tax
 
$
37

 
$
23

 
$
19
Share-based Payment Awards, Stock Options, Valuation Assumptions
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 noted in the following table, shown at their weighted-average values:
 
 
Year Ended

 
 
December 31, 2013

Expected dividend yield(a)
 
1.0
%
Risk-free interest rate(b)
 
1.30
%
Expected stock price volatility(c)
 
28.21
%
Expected term(d) (years)
 
6.5

(a) 
Determined using a constant dividend yield during the expected term of the Zoetis stock option.
(b)
Determined using the interpolated yield on U.S. Treasury zero-coupon issues.
(c)
Determined using implied volatility.
(d)
Determined using expected exercise and post-vesting termination patterns.
Stock Option Activity
The following table provides an analysis of stock option activity for the year ended December 31, 2013:
 
 
 
 
 
 
Weighted-Average
 
 
 
 
 
 
Weighted-Average

 
Remaining
 
Aggregate

 
 
 
 
Exercise Price

 
Contractual Term
 
Intrinsic Value(a)

 
 
Shares

 
Per Share

 
(Years)
 
(MILLIONS)

Outstanding, December 31, 2012
 
—

 
$
—

 
 
 
 
Granted
 
2,994,295

 
26.11

 
 
 
 
Exercised
 
(6,419
)
 
26.00

 
 
 
 
Forfeited
 
(108,312
)
 
26.01

 
 
 
 
Outstanding, December 31, 2013
 
2,879,564

 
$
26.11

 
9.1
 
$
19

Exercisable, December 31, 2013
 
22,388

 
$
26.00

 
9.1
 
$
—

(a) 
Market price of underlying Zoetis common stock less exercise price.
The following table summarizes data related to stock option activity:
 
 
Year Ended/As of

(MILLIONS OF DOLLARS, EXCEPT PER STOCK OPTION AMOUNTS)
 
December 31, 2013

Weighted-average grant date fair value per stock option
 
$
7.05

Aggregate intrinsic value on exercise
 
—

Cash received upon exercise
 
—

Tax benefits realized related to exercise
 
—

Total compensation cost related to nonvested stock options not yet recognized, pre-tax
 
11

Weighted-average period over which stock option compensation is expected to be recognized (years)
 
2.0
Restricted Stock Units (RSUs)
The following table provides an analysis of RSU activity for the year ended December 31, 2013:
 
 
 
 
Weighted-Average

 
 
 
 
Grant Date

 
 
 
 
Fair Value

 
 
Shares

 
Per Share

Nonvested, December 31, 2012
 
—

 
$
—

Granted
 
980,093

 
26.79

Vested
 
(2,669
)
 
26.00

Reinvested dividend equivalents
 
7,484

 
26.53

Forfeited
 
(35,538
)
 
26.13

Nonvested, December 31, 2013
 
949,370

 
$
26.82

The follow table provides data related to RSU activity:
 
 
Year Ended/As of

(MILLIONS OF DOLLARS)
 
December 31, 2013

Total compensation cost related to nonvested RSU awards not yet recognized, pre-tax
 
$
17

Weighted-average period over which RSU cost is expected to be recognized (years)
 
2.1