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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | NOTE 19: STOCK-BASED COMPENSATION RTX’s long-term incentive plans authorize various types of market and performance based incentive awards that may be granted to officers and key employees. The RTX Corporation 2018 Long-Term Incentive Plan, as amended and restated (2018 LTIP) was approved by shareowners on April 26, 2021. A total of 156.3 million shares have been authorized for issuance pursuant to awards under the 2018 LTIP including shares assumed from predecessor plans and adjustments associated with the separation of Carrier and Otis. As of December 31, 2023, approximately 63.3 million shares remain available for awards under the 2018 LTIP. The 2018 LTIP does not contain aggregate annual award limits, however, it sets an annual award limit per participant. The 2018 LTIP will expire after all authorized shares have been awarded or April 26, 2031, whichever is sooner. Under the 2018 LTIP, the exercise price of awards is set on the grant date and may not be less than the fair market value per share on that date. Generally, stock appreciation rights and stock options have a term of ten years and a three-year vesting period, subject to limited exceptions. In the event of retirement, annual stock appreciation rights, stock options, and restricted stock units (RSUs) held for more than one year may become vested and exercisable, subject to certain terms and conditions. LTIP awards with performance-based vesting generally have a minimum three-year vesting period and vest based on actual performance against pre-established metrics. In the event of retirement, performance-based awards held for more than one year, remain eligible to vest based on actual performance relative to performance goals. We have historically repurchased shares of our common stock in an amount at least equal to the number of shares issued under our equity compensation arrangements and will continue to evaluate this policy in conjunction with our overall share repurchase program. We measure the cost of all share-based payments, including stock options and stock appreciation rights, at fair value on the grant date and recognize this cost in the Consolidated Statement of Operations, net of expected forfeitures, as follows:
(dollars in millions) | 2023 |  | 2022 |  | 2021
Total compensation cost recognized | $ | 425 |  |  | $ | 420 |  |  | $ | 442 |
The associated future income tax benefit recognized was $80 million, $91 million, and $83 million for the years ended December 31, 2023, 2022, and 2021, respectively. For the years ended December 31, 2023, 2022, and 2021, the amount of cash received from the exercise of stock options was $22 million, $20 million, and $7 million, respectively, with an associated tax benefit realized of $27 million, $32 million, and $42 million, respectively. In addition, for the years ended December 31, 2023, 2022, and 2021, the associated tax benefit realized from the vesting of performance share units (PSUs), restricted stock awards, and RSUs was $57 million, $80 million, and $44 million, respectively. At December 31, 2023, there was $298 million of total unrecognized compensation cost related to non-vested equity awards granted under long-term incentive plans. This cost is expected to be recognized ratably over a weighted-average period of 2.1 years. A summary of the transactions under our long-term incentive plans for the year ended December 31, 2023 follows.
| Stock Options |  | Stock Appreciation Rights |  | Performance Share Units |  | Restricted Stock and RSUs
(shares and units in thousands) | Shares |  | Average Price (1) |  | Shares |  | Average Price (1) |  | Units |  | Average Price (2) |  | Units |  | Average Price (2)
Outstanding at: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2022 | 1,657 |  |  | $ | 80.67 |  |  | 32,032 |  |  | $ | 81.04 |  |  | 2,150 |  |  | $ | 83.52 |  |  | 9,757 |  |  | $ | 78.40 |
Granted | 90 |  |  | 97.65 |  |  | 2,664 |  |  | 97.66 |  |  | 965 |  |  | 96.39 |  |  | 3,353 |  |  | 97.33 |
Exercised / earned | (271) |  |  | 79.80 |  |  | (3,190) |  |  | 80.97 |  |  | (3) |  |  | 87.36 |  |  | (2,789) |  |  | 70.13 |
Cancelled | (15) |  |  | 91.68 |  |  | (351) |  |  | 91.10 |  |  | (111) |  |  | 92.16 |  |  | (591) |  |  | 84.93 |
December 31, 2023 | 1,461 |  |  | $ | 81.72 |  |  | 31,155 |  |  | $ | 82.36 |  |  | 3,001 |  |  | $ | 87.33 |  |  | 9,730 |  |  | $ | 86.53 |
(1) Weighted-average exercise price per share. (2) Weighted-average grant date fair value per share. The weighted-average grant date fair value of stock options and stock appreciation rights granted during 2023, 2022, and 2021 was $24.66, $21.80, and $15.60, respectively. The weighted-average grant date fair value of performance share units, which vest upon achieving certain performance metrics, granted during 2023, 2022, and 2021 was $96.39, $96.15, and $73.75, respectively. The total fair value of awards vested during 2023, 2022, and 2021 was $273 million, $346 million, and $287 million, respectively. The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of stock options and stock appreciation rights exercised during 2023, 2022, and 2021 was $46 million, $110 million, and $54 million, respectively. The total intrinsic value (which is the stock price at vesting multiplied by the number of underlying shares) of performance share units and other restricted awards vested was $263 million, $427 million, and $256 million during 2023, 2022, and 2021, respectively. The following table summarizes information about equity awards outstanding that are vested and expected to vest as well as equity awards outstanding that are exercisable at December 31, 2023:
|  | Equity Awards Vested and Expected to Vest |  | Equity Awards That Are Exercisable
(shares in thousands; aggregate intrinsic value in millions) |  | Awards |  | Average Price (1) |  | Aggregate Intrinsic Value |  | Remaining Term (2) |  | Awards |  | Average Price (1) |  | Aggregate Intrinsic Value |  | Remaining Term (2)
Stock Options |  | 1,459 |  |  | $ | 81.69 |  |  | $ | 8 |  |  | 4.95 |  | 1,241 |  |  | $ | 80.18 |  |  | $ | 7 |  |  | 4.38
Stock Appreciation Rights |  | 31,037 |  |  | 82.31 |  |  | 166 |  |  | 5.20 |  | 24,430 |  |  | 80.04 |  |  | 150 |  |  | 4.37
Performance Share Units |  | 2,962 |  |  | 87.22 |  |  | 249 |  |  | 1.00 |  |  |  |  |  |  |  |
Restricted Stock and RSUs |  | 9,431 |  |  | 86.38 |  |  | 794 |  |  | 1.37 |  |  |  |  |  |  |  |
(1) Weighted-average exercise price per share. (2) Weighted-average contractual remaining term in years. The fair value of each option award is estimated on the date of grant using a binomial lattice model. The following table indicates the assumptions used in estimating fair value for awards granted during 2023, 2022, and 2021. Lattice-based option models incorporate ranges of assumptions for inputs; those ranges are as follows:
|  | 2023 |  | 2022 |  | 2021
Expected volatility |  | 26.2% |  | 27.9% |  | 29.9%
Weighted-average volatility |  | 26 | % |  | 28 | % |  | 30 | %
Expected term (in years) |  | 6.7 |  | 6.5 |  | 6.5
Expected dividend yield |  | 2.3 | % |  | 2.2 | % |  | 2.6 | %
Risk-free rate |  | 3.6% - 4.8% |  | 0.02% - 2.1% |  | 0.04% - 1.2%
Expected volatilities are based on the returns of our stock, including implied volatilities from traded options on our stock for the binomial lattice model. We use historical data to estimate equity award exercise and employee termination behavior within the valuation model. The expected term represents an estimate of the period of time equity awards are expected to remain outstanding. The risk-free rate is based on the term structure of interest rates at the time of equity award grant.

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