Raytheon 2012 Annual Report Download - page 113

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
105
At December 31, 2012, there was $171 million of compensation expense related to nonvested awards not yet recognized
which is expected to be recognized over a weighted-average period of 1.6 years.
At December 31, 2012, we had stock-based compensation awards outstanding under a number of stock plans, including our
2010 Stock Plan. Future grants of awards will be made from the 2010 Stock Plan and not from our prior plans.
Shares issued as a result of stock awards, stock option exercises or conversion of restricted stock unit awards will be funded
through the issuance of new shares. Of the 41.8 million shares authorized under our stock plans, there were 8.3 million shares
available for awards under such plans as of December 31, 2012.
Restricted Stock
The 2010 Stock Plan provides for the award of restricted stock awards, restricted stock units and stock appreciation rights to
our employees, officers, nonemployee directors and consultants. Awards of restricted stock, restricted stock units and stock
appreciation rights generally are made by the Management Development and Compensation Committee of our Board of
Directors (MDCC) and are compensatory in nature. These awards vest over a specified period of time as determined by the
MDCC, generally four years for employee awards and one year for nonemployee directors. Restricted stock awards entitle
the recipient to full dividend and voting rights beginning on the date of grant. Non-vested shares are restricted as to disposition
and subject to forfeiture under certain circumstances. At the date of award each share of restricted stock is credited to common
stock at par value. The fair value of restricted stock, calculated under the intrinsic value method at the date of award, is charged
to income as compensation expense over the vesting period with a corresponding credit to additional paid-in capital.
Restricted stock activity was as follows:
Shares
(in thousands)
Weighted-
Average
Grant Date
Fair Value
Outstanding at December 31, 2009 5,593 $ 51.78
Granted 1,932 52.37
Vested (1,697) 54.02
Forfeited (385) 51.62
Outstanding at December 31, 2010 5,443 51.30
Granted 2,089 49.63
Vested (1,701) 52.25
Forfeited (292) 51.25
Outstanding at December 31, 2011 5,539 50.38
Granted 2,370 50.38
Vested (1,733) 51.78
Forfeited (338) 50.07
Outstanding at December 31, 2012 5,838 $ 49.98
Long-Term Performance Plan (LTPP)
In 2004, we established the LTPP, which provides for restricted stock unit awards granted from our stock plans to our senior
leadership. These awards vest at the end of a three-year performance cycle based upon the achievement of specific pre-
established levels of performance.
The performance goals for the three outstanding performance cycles at December 31, 2012, are independent of each other
and based on three metrics, as defined in the 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 (CFCF), weighted at 25%.
The ultimate award, which is determined at the end of each of the three-year performance cycles, can range from zero to
200% of the target award and also includes dividend equivalents, which are not included in the table below. Compensation
expense for the awards is recognized over the performance period based upon the value determined under the intrinsic value
method for the CFCF and ROIC portions of the award and the Monte Carlo simulation method for the TSR portion of the
award using historic volatility. Compensation expense for the CFCF and ROIC portions of the awards will be adjusted based