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Stock-based Compensation Plans
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement, Noncash Expense [Abstract]  
Stock-based Compensation Plans Stock-based Compensation Plans
On May 30, 2019, our stockholders approved the Raytheon 2019 Stock Plan. The 2019 Stock Plan provides for stock-based awards to be issued as restricted stock, RSUs, stock grants, stock options or stock appreciation rights, including awards based on performance criteria. The plan authorizes the issuance of 2.7 million shares in addition to shares remaining available for awards under the Raytheon 2010 Stock Plan as of December 31, 2018. The total maximum number of shares originally authorized for issuance under the 2019 Stock Plan, the 2010 Stock Plan and other prior Raytheon plans is 44.5 million. The 2019 Stock Plan provides that awards to our officers, employees and consultants are generally granted by the Management Development and Compensation Committee (MDCC) of our Board of Directors and are compensatory in nature, while awards to our non-employee directors are granted by the Board’s Governance and Nominating Committee. Shares issued to fulfill the stock-based awards will be funded through the issuance of shares under the 2019 Stock Plan. Each stock-based award is subject to the change in control provision in the related agreement. At December 31, 2019, there were 8.0 million shares available for new awards and 2.8 million shares outstanding under the 2019 Stock Plan, the 2010 Stock Plan and other prior Raytheon plans.

Stock-based compensation expense and the associated tax benefit recognized were as follows:
(In millions)
2019

 
2018

 
2017

Stock-based compensation expense
 
 
 
 
 
Restricted stock expense
$
99

 
$
98

 
$
94

RSU expense
35

 
32

 
28

LTPP expense
37

 
36

 
38

Total stock-based compensation expense
$
171

 
$
166

 
$
160

Stock-based tax benefit recognized
35

 
29

 
30


 
At December 31, 2019, there was $186 million of compensation expense related to nonvested awards not yet recognized which is expected to be recognized over a weighted-average period of 1.5 years.
 
Restricted Stock and Restricted Stock Units
Shares of restricted stock vest over a specified period of time as determined by the MDCC, generally four years for employee awards and one year for non-employee directors. Recipients of restricted stock are entitled to full dividend and voting rights beginning on the date of grant. Non-vested shares of restricted stock are subject to forfeiture under certain circumstances and restricted as to disposition until vested. At the date of grant, each share of restricted stock is credited to common stock at par value. The fair value of restricted stock is calculated under the intrinsic value method at the date of grant and is charged to income as compensation expense generally over the vesting period with a corresponding credit to additional paid-in capital.
 
RSUs also vest over a specified period of time as determined by the MDCC, are compensatory in nature and are primarily awarded to retirement eligible employees. Retirement eligible recipients of RSUs are entitled to full dividend rights beginning on the date of grant. In addition, RSUs granted to retirement eligible employees continue to vest, but do not accelerate, on the scheduled vesting dates into retirement subject to the recipient’s compliance with certain post-employment covenants. Since recipients of RSUs with continued vesting provisions have satisfied the service requirement of the award at the date of grant, the Company recognizes all of the stock-based compensation expense associated with the RSUs awarded to retirement eligible employees in the period the award is granted. The expense is based on the fair value of the RSUs, calculated under the intrinsic value method at the date of grant.

Restricted stock and RSU activity was as follows: 
 
Shares/units
(in thousands)

 
Weighted-average grant date fair value per share

Outstanding at December 31, 2016
3,294

 
$
106.56

Granted
1,025

 
152.93

Vested
(1,194
)
 
91.77

Forfeited
(229
)
 
120.33

Outstanding at December 31, 2017
2,896

 
127.98

Granted
774

 
212.96

Vested
(977
)
 
112.54

Forfeited
(215
)
 
150.67

Outstanding at December 31, 2018
2,478

 
158.66

Granted
959

 
180.05

Vested
(882
)
 
130.35

Forfeited
(166
)
 
172.50

Outstanding at December 31, 2019
2,389

 
$
176.73



The total fair value of restricted stock and RSUs vested and the related tax benefit realized were as follows:
(In millions)
2019

 
2018

 
2017

Fair value of restricted stock and RSUs vested
$
160

 
$
206

 
$
193

Tax benefit realized related to vested restricted stock/RSUs(1)
30

 
39

 
63


(1)
Includes $11 million, $18 million and $29 million of excess tax benefits realized in 2019, 2018 and 2017, respectively.

Long-term Performance Plan
In 2004, we established the LTPP, which provides for restricted stock unit awards granted from our stock plans to our senior leadership. Recipients of LTPP awards have no voting rights and receive dividend equivalent units. The vesting of LTPP awards and related dividend equivalent units is based upon the achievement of specific pre-established levels of performance at the end of a three-year performance cycle. In the event of a retirement, vesting for LTPP awards will not accelerate and instead will vest in accordance with the original vesting conditions on a pro-rated basis.

The performance goals for the three outstanding performance cycles at December 31, 2019 are independent of each other and based on three metrics, as defined in the LTPP award agreements: return on invested capital (ROIC), weighted at 50%; total shareholder return (TSR) relative to a peer group, weighted at 25%; and cumulative free cash flow from continuing operations (CFCF), weighted at 25%. The ultimate award, which is determined at the end of the three-year cycle, can range from zero to 200% of the target award and includes dividend equivalents, which are not included in the aggregate target award numbers.

Compensation expense for the LTPP awards is recognized on a straight-line basis from the grant date through the end of the performance period based upon the value determined under the intrinsic value method for the CFCF and ROIC portions of the LTPP award and the Monte Carlo simulation method for the TSR portion of the LTPP award. Compensation expense for the CFCF and ROIC portions of the awards will be adjusted based upon the expected achievement of those performance goals.

The assumptions used in the Monte Carlo model for the TSR portion of the LTPP awards granted during each year were as follows:
 
2019

 
2018

 
2017

Expected stock price volatility
18.48
%
 
16.87
%
 
18.74
%
Peer group stock price volatility
20.67
%
 
18.41
%
 
20.01
%
Correlations of returns
54.49
%
 
52.49
%
 
56.55
%
Risk free interest rate
2.49
%
 
2.21
%
 
1.53
%


LTPP award activity was as follows(1): 
 
Units
(in thousands)

 
Weighted-average grant date fair value per share

Outstanding at December 31, 2016
665

 
$
110.32

Granted
142

 
152.29

Increase due to expected performance
193

 
125.14

Vested
(273
)
 
97.59

Forfeited
(4
)
 
137.57

Outstanding at December 31, 2017
723

 
127.16

Granted
117

 
205.76

Increase due to expected performance
71

 
135.27

Vested
(303
)
 
112.15

Forfeited
(24
)
 
164.58

Outstanding at December 31, 2018
584

 
150.15

Granted
145

 
176.13

Increase due to expected performance
96

 
187.90

Vested
(236
)
 
120.52

Forfeited
(10
)
 
170.42

Outstanding at December 31, 2019
579

 
$
174.72


(1)
This table excludes dividend equivalent units outstanding of 33 thousand at both December 31, 2019 and December 31, 2018 and 28 thousand at December 31, 2017, based on expected performance at each reporting date.

The total fair value of LTPP awards vested and the related tax benefit realized were as follows:
(In millions)
2019

 
2018

 
2017

Fair value of LTPP awards vested
$
45

 
$
67

 
$
44

Tax benefit realized related to vested LTPP awards(1)
10

 
24

 
15


(1)
Includes $3 million, $13 million and $7 million of excess tax benefits realized in 2019, 2018 and 2017, respectively.

Forcepoint Plans
In 2015, Forcepoint established long-term incentive plans that provide for awards of unit appreciation rights and profits interests in the Forcepoint entity to its management and key employees. Awards are approved by the Board of Forcepoint. These awards vest over a specified period of time and settlement is subject to a liquidity event defined as either a change in control or an initial public offering of the entity. In 2019, Forcepoint issued 11 thousand unit appreciation rights, 8 thousand were forfeited, and 24 thousand were outstanding at December 31, 2019. Also in 2019, Forcepoint issued 37 thousand profits interests, 34 thousand were forfeited, and 119 thousand were outstanding at December 31, 2019. At December 31, 2019, there were 174 thousand and 29 thousand combined unit appreciation rights and/or profits interests authorized and available for issuance, respectively, under these plans. The fair value of the awards is determined using the Black-Scholes valuation model and compensation expense is recognized over the requisite service period when achievement of the liquidity event is considered probable. In certain limited circumstances other vesting conditions may apply and the impact attributable to these vesting conditions was expense of $13 million in 2019, income of $1 million in 2018 and expense of $13 million in 2017.

The weighted-average assumptions used in the Black-Scholes model and the weighted-average grant date fair value for the Forcepoint awards granted were as follows:
 
2019

 
2018

 
2017

Unit Price
$
1,244.48

 
$
1,508.01

 
$
1,101.31

Expected life (in years)
1.99

 
3.01

 
2.29

Expected unit price volatility
39.19
%
 
43.66
%
 
49.51
%
Risk free interest rate
2.06
%
 
2.69
%
 
1.46
%
Dividend yield
—
%
 
—
%
 
—
%
Grant date fair value
$
368.61

 
$
486.94

 
$
339.72