Redeemable Noncontrolling Interests

12 Months Ended

Dec. 31, 2019

Forcepoint is a cybersecurity company that we created in May 2015 as a joint venture with Vista Equity Partners. The joint venture agreement between Raytheon and Vista Equity Partners provided Vista Equity Partners with the ability to liquidate its ownership through a put option, which became exercisable on May 29, 2017. The put option allowed Vista Equity Partners to require Raytheon to purchase all of Vista Equity Partners’ interest in Forcepoint for cash at a price equal to fair value as determined under the joint venture agreement. Vista Equity Partners’ interest in Forcepoint was presented as redeemable noncontrolling interest, outside of stockholders’ equity, in our consolidated balance sheets.

In October 2019, Vista Equity Partners formally exercised its put right to require Raytheon to purchase Vista Equity Partners’ interest in Forcepoint. As a result, the parties engaged in a formal process under the joint venture agreement to determine the fair value, as defined in the joint venture agreement, of such interest. On November 18, 2019, Raytheon completed the acquisition of Vista Equity Partners’ interest in Forcepoint for $588 million in cash. As part of the acquisition, we eliminated the historical adjustments to the carrying value of the redeemable noncontrolling interest of $128 million, with the offset to retained earnings. In addition, we eliminated the carrying value of the redeemable noncontrolling interest of $263 million and recognized a loss in additional paid-in capital of $324 million for the difference between the purchase price and the carrying value, excluding $1 million which was reclassed to AOCL. In addition, the related transaction costs of $4 million were charged to additional paid-in capital. Any reduction to additional paid-in capital in excess of zero was recorded as a reduction to retained earnings.

As discussed in “Note 4: Acquisitions, Divestitures and Goodwill,” in February 2019, we amended and restated the RGNext joint venture agreement and acquired an additional 10% equity ownership in the joint venture, increasing our equity ownership to 60% and giving us control of the operations, with GDIT obtaining only protective rights. As a result, we now consolidate the results of RGNext in our consolidated financial statements. The amendment to the RGNext joint venture agreement provides GDIT with the ability to liquidate its ownership and receive an amount equal to its contributed capital (the redemption value). As such, GDIT’s interest in RGNext is presented as redeemable noncontrolling interest, outside of stockholders’ equity, in our consolidated balance sheets, and is recorded at the greater of its carrying value or the redemption value.

A rollforward of redeemable noncontrolling interests was as follows:



(In millions)	Forcepoint			RGNext			Total
Balance at December 31, 2017	$	512		$	—		$	512
Net income (loss)	(27		)	—			(27		)
Other comprehensive income (loss), net of tax	(1		)	—			(1		)
Adjustment of noncontrolling interests to redemption value	(73		)	—			(73		)
Balance at December 31, 2018	411			—			411
RGNext initial recognition	—			32			32
Net income (loss)	(19		)	5			(14		)
Other comprehensive income (loss), net of tax⁽¹⁾	—			—			—
Distributions related to noncontrolling interest	—			(5		)	(5		)
Adjustment of noncontrolling interests to redemption value	(1		)	—			(1		)
Acquisition of noncontrolling interest in Forcepoint	(391		)	—			(391		)
Balance at December 31, 2019	$	—		$	32		$	32

(1)

Other comprehensive income (loss), net of tax, related to Forcepoint was income of less than $1 million in 2019.