Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-Based Compensation Expenses

Components of stock-based compensation expense and related tax benefit for the years ended December 31 were as follows:

	2022		2021		2020
Total stock-based compensation expense (1)	$	59	$	66	$	47
Related tax benefit	(3)		(11)		(8)

(1)Substantially all of our stock-based compensation expense relates to RSUs and PAs.

Schedule of Restricted Stock Unit Activity

RSUs granted to employees for the years ended December 31 were as follows:

(Units in millions)	2022		2021		2020
Granted units	1.3		1.1		1.3
Weighted-average fair value	$	28.17	$	33.57	$	27.44

Changes in the nonvested portion of RSUs for 2022 are summarized below:

(Shares in millions)	Shares	Weighted-Average Grant Date Fair Value
Nonvested units at January 1, 2022	2.2	$	30.87
Granted	1.3	28.17
Vested	(1.1)	30.51
Forfeited	(0.4)	30.39
Nonvested units at December 31, 2022	2.0	29.40

Schedule of Performance Awards Activity

PA activity during the year ended December 31, 2022 is summarized below:

(Shares in millions)	Shares	Weighted-Average Grant Date Fair Value
Nonvested awards at January 1, 2022	1.0	$	30.53
Granted	0.5	28.94
Vested	(1.0)	33.45
Forfeited	0.0	31.40
Nonvested awards at December 31, 2022	0.5	28.94

Schedule of Assumptions Used

The Black-Scholes-Merton model incorporates a number of valuation assumptions, which are noted in the following table, shown at their weighted-average values for the year ended December 31:

	2022
Expected dividend yield (1)	—	%
Risk-free interest rate (2)	1.59	%
Expected stock price volatility (3)	36.5	%
Expected term (4) (years)	6

(1)We have never declared nor paid any dividends on our common stock, and we do not anticipate paying dividends on our common stock for the foreseeable future.

(2)Determined using the term-matched, zero-coupon risk-free rate from the Treasury Constant Maturity yield curve, continuously compounded

(3)Determined using a leverage-adjusted historical volatility of peer companies

(4)Determined using SEC safe harbor approach, based on a 3-year cliff vesting schedule and 10-year contractual term.

Schedule of Stock Option Activity

Stock option activity during the year ended December 31, 2022 is summarized below:

(Shares in millions)	Shares of Common Stock Attributable to Options	Weighted-Average Exercise Price of Options		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value(1)
Outstanding at January 1, 2022	0.3	$	31.61
Granted	0.5	28.94
Exercised	—	—
Forfeited or expired	—	—
Outstanding at December 31, 2022	0.8	$	30.11	7.7	$	—
Exercisable at December 31, 2022	0.3	31.61		5.8	—

(1)Market price of underlying Elanco common stock less exercise price. Options do not have an intrinsic value unless the market price exceeds the exercise price.