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Share-based Payments Share-based Payments (Tables)
 12 Months Ended
Dec. 31, 2014
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)
 
2014

 
2013

 
2012

Stock options / stock appreciation rights
 
$
18

 
$
9

 
$
—

RSUs / DSUs
 
14

 
9

 
—

Pfizer stock benefit plans—direct
 
—

 
25

 
28

Share-based compensation expense—direct
 
32

 
43

 
28

Share-based compensation expense—indirect
 
—

 
—

 
5

Share-based compensation expense—total
 
$
32

 
$
43

 
$
33

Tax benefit for share-based compensation expense
 
(8
)
 
(6
)
 
(10
)
Share-based compensation expense, net of tax
 
$
24

 
$
37

 
$
23
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,
 
 
2014

 
2013

Expected dividend yield(a)
 
0.93
%
 
1.00
%
Risk-free interest rate(b)
 
2.01
%
 
1.30
%
Expected stock price volatility(c)
 
24.72
%
 
28.21
%
Expected term(d) (years)
 
6.5

 
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, 2014:
 
 
 
 
 
 
Weighted-Average
 
 
 
 
 
 
Weighted-Average

 
Remaining
 
Aggregate

 
 
 
 
Exercise Price

 
Contractual Term
 
Intrinsic Value(a)

 
 
Shares

 
Per Share

 
(Years)
 
(MILLIONS)

Outstanding, December 31, 2013
 
2,879,564

 
$
26.11

 
 
 
 
Granted
 
3,006,351

 
30.97

 
 
 
 
Exercised
 
(58,536
)
 
26.00

 
 
 
 
Forfeited
 
(286,066
)
 
29.75

 
 
 
 
Outstanding, December 31, 2014
 
5,541,313

 
$
28.56

 
8.7
 
$
66

Exercisable, December 31, 2014
 
63,751

 
$
27.39

 
8.4
 
$
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 December 31,
(MILLIONS OF DOLLARS, EXCEPT PER STOCK OPTION AMOUNTS)
 
2014

 
2013

Weighted-average grant date fair value per stock option
 
$
8.01

 
$
7.05

Aggregate intrinsic value on exercise
 
1

 
—

Cash received upon exercise
 
2

 
—

Tax benefits realized related to exercise
 
1

 
—

Total compensation cost related to nonvested stock options not yet recognized, pre-tax
 
17

 
11

Weighted-average period over which stock option compensation is expected to be recognized (years)
 
1.8

 
2.0
Restricted Stock Units (RSUs)
The following table provides an analysis of RSU activity for the year ended December 31, 2014:
 
 
 
 
Weighted-Average

 
 
 
 
Grant Date Fair Value

 
 
Shares

 
Per Share

Nonvested, December 31, 2013
 
949,370

 
$
26.82

Granted
 
844,079

 
31.03

Vested
 
(58,306
)
 
27.81

Reinvested dividend equivalents
 
10,545

 
28.92

Forfeited
 
(122,714
)
 
28.77

Nonvested, December 31, 2014
 
1,622,974

 
$
28.85

The follow table provides data related to RSU activity:
 
 
Year Ended/As of December 31,
(MILLIONS OF DOLLARS)
 
2014

 
2013

Total compensation cost related to nonvested RSU awards not yet recognized, pre-tax
 
$
24

 
$
17

Weighted-average period over which RSU cost is expected to be recognized (years)
 
1.8

 
2.1