Share-Based Payments (Tables)

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Components of Share-based Compensation Expense

The components of share-based compensation expense follow:

	Year Ended December 31,
(MILLIONS OF DOLLARS)	2023		2022		2021
Stock options / stock appreciation rights	$	8	$	10	$	9
RSUs / DSUs	37		34		33
PSUs	15		18		16
Share-based compensation expense—total(a)	$	60	$	62	$	58
Tax benefit for share-based compensation expense	(8)		(8)		(7)
Share-based compensation expense, net of tax	$	52	$	54	$	51

(a)    For each of the years ended December 31, 2023, 2022 and 2021, we capitalized up to $1 million of share-based compensation expense to inventory.

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,
	2023		2022		2021
Expected dividend yield(a)	0.92	%	0.64	%	0.62	%
Risk-free interest rate(b)	3.84	%	1.81	%	0.53	%
Expected stock price volatility(c)	28.63	%	27.64	%	27.94	%
Expected term(d) (years)	4.2		4.9		5.0

(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 an equal weighting between historical volatility of the Zoetis stock price and implied volatility. The selection of the blended historical and implied volatility approach was based on our assessment that this calculation of expected volatility is more representative of future stock price trends.

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

Stock Option Activity

The following table provides an analysis of stock option activity for the year ended December 31, 2023:

				Weighted-Average
				Remaining	Aggregate
		Weighted-Average		Contractual Term	Intrinsic Value(a)
	Shares	Exercise Price		(Years)	(Millions)
Outstanding, December 31, 2022	2,067,606	$	95.32
Granted	271,150	162.12
Exercised	(695,987)	59.89
Forfeited	(116,267)	150.66
Outstanding, December 31, 2023	1,526,502	$	119.13	5.5	$	120
Exercisable, December 31, 2023	858,314	$	77.31	3.5	$	103

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

As of December 31, 2023, there was approximately $10 million of unrecognized compensation costs related to nonvested stock options, which will be recognized over an expected remaining weighted-average period of nine months.

The following table summarizes data related to stock option activity:

	Year Ended/As of December 31,
(MILLIONS OF DOLLARS, EXCEPT PER STOCK OPTION AMOUNTS)	2023		2022		2021
Weighted-average grant date fair value per stock option	$	43.56	$	51.13	$	37.81
Aggregate intrinsic value on exercise	81		31		87
Cash received upon exercise	42		15		36
Tax benefits realized related to exercise	17		19		34

Restricted Stock Units (RSUs)

The following table provides an analysis of RSU activity for the year ended December 31, 2023:

		Weighted-Average
	RSUs	Grant Date Fair Value
Nonvested, December 31, 2022	620,598	$	169.24
Granted	275,664	162.63
Vested	(201,011)	145.80
Reinvested dividend equivalents	6,036	171.21
Forfeited	(45,436)	171.72
Nonvested, December 31, 2023	655,851	$	173.49

Performance-based Units Activity (PSUs)

The following table provides an analysis of PSU activity for the year ended December 31, 2023:

		Weighted-Average
	PSUs	Grant Date Fair Value
Nonvested, December 31, 2022	253,044	$	221.59
Granted	99,626	238.24
Vested	(65,578)	217.66
Reinvested dividend equivalents	2,392	226.48
Forfeited	(37,704)	223.30
Nonvested, December 31, 2023	251,780	$	228.99
Shares issued, December 31, 2023	64,673	$	217.49