Zoetis Inc.ZTS

Zoetis Inc. Leases Disclosure

10-KFiled Feb 12, 20262 min read
10. Leases
We have facilities and vehicles under various non-cancellable operating leases with third parties and an equipment finance lease with a third party. The operating leases generally have remaining terms ranging from 1 to 14 years, inclusive of renewal options that are reasonably certain of exercise. The finance lease has a remaining term of 28 years.
Supplemental information for our lease portfolio is as follows:
As of December 31,
(MILLIONS OF DOLLARS, EXCEPT LEASE TERM AND DISCOUNT RATE AMOUNTS)20252024
Supplemental Balance Sheet information:
Operating lease right-of-use assets$288 $219 
Finance lease right of use assets (in Other noncurrent assets)
9 9 
Total lease assets$297 $228 
Lease liabilities:
Operating lease liabilities - current (in Other current liabilities)
$52 $51 
Finance lease liabilities - current (in Other current liabilities)
1 1 
Operating lease liabilities - noncurrent196 174 
Finance lease liabilities - noncurrent (in Other noncurrent liabilities)
6 7 
Total lease liabilities$255 $233 
Weighted-average remaining lease term—operating leases (years)6.876.57
Weighted-average remaining lease term—finance leases (years)27.9029.19
Weighted-average discount rate—operating leases3.91 %3.65 %
Weighted-average discount rate—finance leases4.97 %4.97 %
Year Ended December 31,
(MILLIONS OF DOLLARS)202520242023
Supplemental Income Statement information for operating leases:
Operating lease expense$68 $59 $56 
Variable lease costs28 18 20 
Short-term lease costs not included in the measurement of lease liabilities14 13 11 
Supplemental Income Statement information for finance leases:
Amortization of right-of-use assets1 1 1 
Total lease costs$111 $91 $88 
Supplemental Cash Flow information for leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases$67 $61 $57 
Financing cash flows – finance leases2 1 — 
Lease obligations obtained in exchange for right-of-use assets - operating (non-cash)76 46 73 
Lease obligations obtained in exchange for right-of-use assets – finance (non-cash)1 — 9 
Future minimum lease payments under non-cancellable lease contracts as of December 31, 2025 are as follows:
TotalLess:
AfterLeaseImputed
(MILLIONS OF DOLLARS)202620272028202920302030PaymentsInterestTotal
Operating leases$60 $51 $41 $29 $21 $83 $285 $(37)$248 
Finance leases$1 $1 $1 $1 $1 $5 $10 $(3)$7 
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About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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