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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000927016-01-001193.txt : 20010307
<SEC-HEADER>0000927016-01-001193.hdr.sgml : 20010307
ACCESSION NUMBER: 0000927016-01-001193
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010305
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: RAYTHEON CO/
CENTRAL INDEX KEY: 0001047122
STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812]
IRS NUMBER: 951778500
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-13699
FILM NUMBER: 1561090
BUSINESS ADDRESS:
STREET 1: 141 SPRING STREET
STREET 2: C/O RAYTHEON CO
CITY: LEXINGTON
STATE: MA
ZIP: 02421
BUSINESS PHONE: 7818626600
MAIL ADDRESS:
STREET 1: 141 SPRING STREET
STREET 2: BLDG CO1/MS A114
CITY: LEXINGTON
STATE: MA
ZIP: 02421
FORMER COMPANY:
FORMER CONFORMED NAME: HE HOLDINGS INC
DATE OF NAME CHANGE: 19971001
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2000.
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from............... to
..............
Commission File Number 1-13699
RAYTHEON COMPANY
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 95-1778500
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
141 SPRING STREET, LEXINGTON, MASSACHUSETTS 02421
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (781) 862-6600
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of Each Class Name of Each Exchange on Which Registered
<S> <C>
Class A Common Stock, $.01 par value New York Stock Exchange
Class B Common Stock, $.01 par value Chicago Stock Exchange
Series A Junior Participating Preferred Pacific Exchange
Stock purchase rights
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes .X. No ...
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of January 28, 2001, was approximately $11,461,645,787. For
purposes of this disclosure, non-affiliates are deemed to be all persons other
than members of the Board of Directors of the Registrant.
Number of shares of Common Stock outstanding as of January 28, 2001:
341,012,000, consisting of 100,805,000 shares of Class A Common Stock and
240,207,000 shares of Class B Common Stock.
Documents incorporated by reference and made a part of this Form 10-K:
<TABLE>
<S> <C>
Portions of Raytheon's Annual Report to Stockholders Part I, Part II, Part IV
for the fiscal year ended December 31, 2000
Portions of the Proxy Statement for Raytheon's Part III
2000 Annual Meeting which will be filed with the Commission within
120 days after the close of Raytheon's fiscal year
</TABLE>
<PAGE>
PART I
Item 1. Business
GENERAL
Raytheon Company ("Raytheon" or the "Company") is a leader in defense
electronics, including missiles; radar; sensors and electro-optics;
intelligence, surveillance and reconnaissance; command, control, communication
and information systems; naval systems; air traffic control systems; aircraft
integration systems; and technical services, with worldwide 2000 sales of $16.9
billion. Raytheon's commercial electronics businesses leverage defense
technologies in commercial markets. Raytheon Aircraft is one of the leading
providers of business and special mission aircraft and delivers a broad line of
jet, turboprop, and piston-powered airplanes to corporate and government
customers world-wide.
The Company, formerly known as HE Holdings, Inc. ("HE Holdings"), is the
surviving company of the December 17, 1997 merger (the "Hughes Merger") of HE
Holdings, Inc. and Raytheon Company, a Delaware corporation ("Former Raytheon").
At the effective time of the Hughes Merger, the separate legal existence of
Former Raytheon ceased and HE Holdings was renamed "Raytheon Company." Although,
from a legal point of view, HE Holdings, Inc. is the surviving company of the
Hughes Merger, the Company's business is largely conducted in the same manner as
and under the senior management of Former Raytheon. Accordingly, the historical
disclosures in this Form 10-K for years prior to 1998 and any year-to-year
comparisons contained herein for years prior to 1998, unless otherwise
specifically noted, relate to the operations of Former Raytheon, as a
predecessor to the Company by merger, and not to HE Holdings, Inc. as it existed
prior to the Hughes Merger.
BUSINESS SEGMENTS
Electronic Systems. The Electronic Systems segment ("ES") focuses on anti-
ballistic missile systems; air defense; air-to-air, surface-to-air, and air-to-
surface missiles; naval and maritime systems; ship self-defense systems;
torpedoes; strike, interdiction and cruise missiles; and advanced munitions. ES
also specializes in radar, electronic warfare, infrared, laser, and GPS
technologies with programs focusing on land, naval, airborne and spaceborne
systems used for surveillance, reconnaissance, targeting, navigation, commercial
and scientific applications.
ES produces the Patriot ground-based air defense missile system, which is
capable of tracking and intercepting enemy aircraft, cruise missiles, and
tactical ballistic missiles. In addition to the U.S., eight nations have
selected Patriot as an integral part of their air defense systems. Since the end
of the Gulf War in 1991, Raytheon has received
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approximately $3.5 billion in international orders for Patriot equipment and
services. In addition, ES leads Raytheon's efforts as the prime contractor for
the Hawk ground-launched missile, which is in service with the U.S. and 18
allied nations.
ES develops ground-based phased-array radars, including the X-Band Radar
(XBR) and Upgrade Early Warning Radar (UEWR) for National Missile Defense, as
well as the Ground-Based Radar (GBR) for the Theater High Altitude Area Defense
(THAAD) system, part of the U.S. Army's Theater Missile Defense Program. It also
is developing next-generation theater missile interceptors for the Navy Area
Defense (NAD) and Navy Theater Wide (NTW) systems and the Exoatmospheric Kill
Vehicle (EKV) for National Missile Defense.
ES manufactures the primary air-to-air missile for the U.S. Air Force and
Navy fighter aircraft - the Advanced Medium Range Air-to-Air Missile (AMRAAM),
and is developing the AIM-9X (short-range air-to-air missile). Other missiles
produced by ES include Tomahawk, TOW, Stinger, Maverick, Standard, the High
Speed Anti-Radiation Missile (HARM), Paveway laser-guided bombs, Extended Range
Guided Munitions (ERGM), XM-982, Joint Stand Off Weapon (JSOW), and Javelin
(pursuant to a joint venture with Lockheed Martin Corporation).
ES also leads Raytheon's efforts as the prime contractor for the NATO Sea-
Sparrow Surface to Air Missile System (NSSMS), as well as producing the air-and
surface-launched versions of the Sparrow missile for both the U.S. and foreign
Navies. ES produces Phalanx and the Rolling Airframe Missile (RAM), which the
U.S. and foreign Navies use as part of the ship self-defense system. ES develops
sonars, combat control systems, mine hunting equipment and torpedoes for
submarines and ships in U.S. and allied fleets, in addition to designing
unmanned underwater vehicles and laser sensors. ES produces a variety of
shipboard radar systems. ES also leads Raytheon's development efforts on the
U.S. Navy's next generation of surface combatant ships, the DD-21.
ES airborne radars are deployed on four operational tactical fighter
aircraft operated by U.S. forces (the F-14, F-15, F/A-18, and the AV-8B) and
international customers, as well as radars for the AC-130U gunship and the B-2
Stealth Bomber. ES is also part of a joint venture with Northrop Grumman
Corporation providing the next generation airborne radar for the F-22 aircraft.
The segment provides the Forward Looking Infrared (FLIR) and designation system
for the F-117 Stealth Fighter, the infrared subsystem for the F/A-18 targeting
pod, and is developing the Advanced Targeting FLIR for the F/A-18.
ES supplies integrated sensor suites for applications such as the U.S.
Department of Defense's ("DoD") Global Hawk Unmanned Aerial Vehicle
Reconnaissance System, which includes a synthetic aperture radar and electro-
optical/infrared sensors. ES
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surveillance and reconnaissance systems are used on a variety of aircraft, such
as the British Tornado, the U.S. Air Force U-2 and the U.S. Navy P-3 Orion. ES
also provides space sensors for defense and scientific applications.
ES night vision and fire control systems equip combat vehicles like the M1
Abrams tank, Bradley Fighting Vehicle and a host of light armored vehicles,
ships and submarines, and aircraft. The segment also puts state of the art
technology in the hands of the infantry. Its sensor and electronic systems are
used for law enforcement, security, oil spill response, search and rescue and
many other commercial and industrial applications. One commercial night vision
application is a night driving safety option on the model year 2000 Cadillac(R)
DeVille(R)/1/.
The segment's surface radar products include radars for intelligence/data
collection, spacetrack, deep space surveillance, missile warning and imaging and
command and control radars. Tactical radars include battlefield radars for
Forward Area Air Defense Systems and hostile weapons locating radars.
Command, Control, Communication and Information Systems. The Command,
Control, Communication and Information Systems segment ("C3I") is involved in
command, control and communication systems; air traffic control systems;
tactical radios; satellite communication ground control terminals; wide area
surveillance systems; ground-based information processing systems; image
processing; large scale information retrieval, processing and distribution
systems; and global broadcast systems.
An example of C3I's capabilities in the area of advanced information
integration is the U.S. Navy's Cooperative Engagement Capability (CEC) program.
CEC integrates sensor information from multiple sources to provide ships,
aircraft and land-based installations an integrated air picture. The system has
now successfully completed many years of comprehensive at-sea testing, including
several live fire tests, and is now facing the challenges of integration into
the fleet.
C3I led Raytheon's role as the prime contractor for the Brazilian System
for the Vigilance of the Amazon (SIVAM) program, which calls for the delivery of
an integrated information network linking numerous sensors to regional and
national coordination centers. Information will be used to enable the Brazilian
Government to protect the environment, improve air safety and weather forecasts,
help control epidemics, manage land occupation and usage and ensure effective
law enforcement and border control.
C3I also designs and installs air traffic control (ATC) and weather
systems at airports worldwide. One example is the Federal Aviation
Administration (FAA)/DoD's
_________________________
/1/ Cadillac and DeVille are registered trademarks of General Motors
Corporation.
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<PAGE>
Standard Terminal Automation Replacement System (STARS) program, which will
modernize and upgrade approximately 331 air traffic control sites across the
United States. Some of the countries Raytheon is providing ATC systems and
radars for include: Australia, Canada, Cyprus, Germany, Hong Kong, India,
Jamaica, The Netherlands, Norway, Oman, the People's Republic of China,
Switzerland and Taiwan.
Aircraft Integration Systems. The Aircraft Integration Systems segment
("AIS") focuses on integration of airborne surveillance and intelligence systems
and aircraft modifications.
AIS specializes in developing and integrating complex electronic systems
for airborne Intelligence, Surveillance, and Reconnaissance (ISR) missions. AIS
provides signals intelligence, air-ground surveillance, maritime surveillance,
and airborne command post systems to both U.S. Government and foreign customers.
In addition, AIS modernizes aging aircraft through structural refurbishment and
avionics upgrades including completely new "glass" cockpits with the latest
display technologies and FAA-required air traffic management systems that
enhance air safety. The segment also designs and installs interiors for
executive aircraft and performs Special Operations Forces Support Activity
(SOFSA).
Raytheon Technical Services Company. Raytheon Technical Services Company
("RTSC") provides technical services; training programs; and logistics and base
operations support throughout the U.S. and in 37 other countries.
RTSC performs complete engineering and depot-level cradle-to-grave support
to Raytheon-manufactured equipment and to various commercial and military
customers. Services provided include installation and test of upgrades to
deployed systems; engineering design, planning, and testing; repair and
refurbishment of DoD equipment; software engineering support; data management;
preparation of technical manuals; training for allied forces; system and
facility installations; field testing and evaluation; field engineering; and
system operation and maintenance.
RTSC is a world leader in providing and supporting range instrumentation
systems and bases worldwide for the DoD. It also provides missile range
calibration services for the U.S. Air Force, trains U.S. Army personnel in
battlefield tactics and supports undersea testing and evaluation for the U.S.
Navy. RTSC provides operations and engineering support to the Atlantic
Underwater Test and Evaluation Center, range technical support, and facilities
maintenance at several DoD facilities, including the U.S. Army's missile testing
range in the Kwajalein Atoll. It also provides base operations support to DoD
facilities on Guam, Johnston Atoll and other locations.
RTSC supplies professional services to a broad range of customers in the
areas of space and earth sciences, scientific data management, transportation
management, remote
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sensing, and computer networking. RTSC also supports the U.S. Government's
demilitarization activities in countries of the former Soviet Union and the
development and operation of Space Shuttle and Space Station simulators for
NASA's Johnson Space Center. It also provides logistics and science support for
the National Science Foundation's Antarctica program.
Commercial Electronics. Raytheon's commercial electronics businesses
produce, among other things, thin film filters for optical communications
products, gallium arsenide MMIC components for direct broadcast satellite
television receivers, gallium arsenide power amplifiers for wireless
communications products, wireless broadband solutions, thermal imaging products,
automobile radar systems, marine electronics for the commercial and military
marine market, and other electronic components for a wide range of applications.
Aircraft. Raytheon Aircraft offers a broad product line of aircraft and
aviation services in the general aviation market. Raytheon Aircraft
manufactures, markets and supports piston-powered aircraft, turboprops and
business jets for the world's commercial, regional airlines and military
aircraft markets.
Raytheon Aircraft's piston-powered aircraft line includes the single-engine
Beech Bonanza and the twin-engine Beech Baron aircraft for business and personal
flying. The segment's King Air turboprop series includes the Beech King Air
C90B, B200, and 350. The jet line includes the Beechjet 400A lightjet and the
Hawker 800XP midsize business jet. Raytheon Aircraft also produces a 19-
passenger regional airliner. The Raytheon Premier I entry-level business jet is
currently completing a certification test program. A new super midsize business
jet, the Hawker Horizon, is currently in development, leading to anticipated
airplane certification and delivery in 2003. Raytheon Aircraft also has
announced the Hawker 450, a light midsize jet.
The segment supplies aircraft training systems, including the T-6A trainer
selected as the next-generation trainer for the U.S. Air Force and Navy under
the Joint Primary Aircraft Training System (JPATS). Raytheon Aircraft produces
special mission aircraft, including militarized versions of the King Airs and
the U-125 search-and-rescue variant of the Hawker 800.
Raytheon Aerospace manages approximately 1,600 aircraft at over 260 sites
around the world and provides contractor logistics and training support for
military and government aircraft. Raytheon Aircraft Services operates a network
of business aviation service operations at airports across the U.S., and in the
U.K. and Mexico.
Raytheon Travel Air sells fractional shares in aircraft and provides
aircraft management and transportation services for the owners of the shares.
The Travel Air program includes the Hawker 800XP, Beechjet 400A and the King Air
B200. Raytheon
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Aircraft Charter and Management offers aircraft charter and management services
to the U.S. market.
Engineering and Construction
In April 2000, the Company announced its intention to sell its Raytheon
Engineers & Constructors subsidiary and discontinue its engineering and
construction operating segment. The summary of operating results from
discontinued operations, a description of the terms of the sale and information
regarding certain ongoing liabilities related to the former engineering and
construction segment is contained in the Company's Annual Report to Stockholders
for the year ended December 31, 2000 on pages 26 through 31 and in the Notes to
the Company's Financial Statements for the years ended December 31, 2000, 1999
and 1998 and is incorporated herein by reference.
Divestitures
Consistent with Raytheon's strategy of divesting non-core assets to focus
and streamline core businesses and pay down debt, the Company divested a number
of business units in 2000. Excluding the sale of RE&C, cash proceeds from
divestitures and sales of investments totaled $330 million.
SALES TO THE UNITED STATES GOVERNMENT
Sales to the United States Government (the "Government"), principally to the
Department of Defense, were $11.1 billion in 2000 and $11.7 billion in 1999,
representing 65.8% of total sales in 2000 and 67.9% in 1999. Of these sales,
$0.5 billion in 2000 and $0.7 billion in 1999 represented purchases made by the
Government on behalf of foreign governments.
GOVERNMENT CONTRACTS
The Company and various subsidiaries act as a prime contractor or major
subcontractor for many different Government programs, including those that
involve the development and production of new or improved weapons or other types
of electronics systems or major components of such systems. Over its lifetime,
a program may be implemented by the award of many different individual contracts
and subcontracts. The funding of Government programs is subject to
congressional appropriations. Although multi-year contracts may be authorized
in connection with major procurements, Congress generally appropriates funds on
a fiscal year basis even though a program may continue for many years.
Consequently, programs are often only partially funded initially, and additional
funds are committed only as Congress makes further appropriations. The
Government is required to adjust equitably a contract price for additions or
reductions in scope or other changes ordered by it.
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Generally, Government contracts are subject to oversight audits by
Government representatives, and, in addition, they include provisions permitting
termination, in whole or in part, without prior notice at the Government's
convenience upon the payment of compensation only for work done and commitments
made at the time of termination. In the event of termination for convenience,
the contractor will receive some allowance for profit on the work performed. The
right to terminate for convenience has not had any significant effect upon
Raytheon's business in light of its total Government business.
The Company's Government business is performed under both cost
reimbursement and fixed price prime contracts and subcontracts. Cost
reimbursement contracts provide for the reimbursement of allowable costs plus
the payment of a fee. These contracts fall into three basic types: (i) cost
plus fixed fee contracts which provide for the payment of a fixed fee
irrespective of the final cost of performance; (ii) cost plus incentive fee
contracts which provide for increases or decreases in the fee, within specified
limits, based upon actual results as compared to contractual targets relating to
such factors as cost, performance and delivery schedule; and (iii) cost plus
award fee contracts which provide for the payment of an award fee determined at
the discretion of the customer based upon the performance of the contractor
against pre-established criteria. Under cost reimbursement type contracts,
Raytheon is reimbursed periodically for allowable costs and is paid a portion of
the fee based on contract progress. Some costs incident to performing contracts
have been made partially or wholly unallowable by statute or regulation.
Examples are charitable contributions, certain merger and acquisition costs,
lobbying costs and certain litigation defense costs.
The Company's fixed-price contracts are either firm fixed-price contracts
or fixed-price incentive contracts. Under firm fixed-price contracts, Raytheon
agrees to perform a specific scope of work for a fixed price and as a result
benefits from cost savings and carries the burden of cost overruns. Under
fixed-price incentive contracts, Raytheon shares with the Government savings
accrued from contracts performed for less than target costs and costs incurred
in excess of targets up to a negotiated ceiling price (which is higher than the
target cost) and carries the entire burden of costs exceeding the negotiated
ceiling price. Accordingly under such incentive contracts, the Company's profit
may also be adjusted up or down depending upon whether specified performance
objectives are met. Under firm fixed-price and fixed-price incentive type
contracts, the Company usually receives progress payments monthly from the
Government generally in amounts equaling 75% and 80% of costs incurred under (i)
DoD contracts and (ii) all other Government contracts, respectively. The
remaining amount, including profits or incentive fees, is billed upon delivery
and final acceptance of end items under the contract.
The Company's Government business is subject to specific procurement
regulations and a variety of socio-economic and other requirements. Failure to
comply
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with such regulations and requirements could lead to suspension or debarment,
for cause, from Government contracting or subcontracting for a period of time.
Among the causes for debarment are violations of various statutes, including
those related to procurement integrity, export control, government security
regulations, employment practices, the protection of the environment, the
accuracy of records and the recording of costs.
Under many Government contracts, the Company is required to maintain
facility and personnel security clearances complying with DoD requirements.
Companies which are engaged in supplying defense-related equipment to the
Government are subject to certain business risks, some of which are peculiar to
that industry. Among these are: the cost of obtaining trained and skilled
employees; the uncertainty and instability of prices for raw materials and
supplies; the problems associated with advanced designs, which may result in
unforeseen technological difficulties and cost overruns; and the intense
competition and the constant necessity for improvement in facilities and
personnel training. Sales to the Government may be affected by changes in
procurement policies, budget considerations, changing concepts of national
defense, political developments abroad and other factors. See "Item 1. Factors
that Could Affect Future Results" for a description of additional business
risks.
See "Item 1. Sales to the United States Government" for information
regarding the percentage of the Company's revenues generated from sales to the
Government.
BACKLOG
The Company's backlog of orders at December 31, 2000 was $26.5 billion
compared with $25.0 billion at the end of 1999. The 2000 amount includes funded
backlog of $17.4 billion from the Government compared with $15.2 billion at the
end of 1999.
Approximately $4.3 billion of the overall backlog figure represents the
unperformed portion of direct orders from foreign governments. Approximately
$2.1 billion of the overall backlog represents non-government foreign backlog.
Approximately $14.5 billion of the $26.5 billion 2000 year-end backlog is
not expected to be filled during the following twelve months.
RESEARCH AND DEVELOPMENT
During 2000, Raytheon expended $526.3 million on research and development
efforts compared with $508.5 million in 1999 and $582.1 million in 1998. These
expenditures principally have been for product development for the Government
and for
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aircraft products. In addition, Raytheon conducts funded research and
development activities under Government contracts which is included in net
sales.
SUPPLIERS
Delivery of raw materials and supplies to Raytheon is generally
satisfactory. Raytheon is sometimes dependent, for a variety of reasons, upon
sole-source suppliers for procurement requirements. However, Raytheon has
experienced no significant difficulties in meeting production and delivery
obligations because of delays in delivery or reliance on such suppliers.
COMPETITION
The Company's defense electronics businesses are direct participants in
most major areas of development in the defense, space, information gathering,
data reduction and automation fields. Technical superiority and reputation,
price, delivery schedules, financing, and reliability are among the principal
competitive factors considered by electronics customers. The on-going
consolidation of the U.S. and global defense, space and aerospace industries
continues to intensify competition. Consolidation among U.S. defense, space and
aerospace companies has resulted in three principal prime contractors for the
DoD, including the Company. As a result of this consolidation, the Company
frequently partners on various programs with its major suppliers, some of whom
are, from time to time, competitors on other programs.
The Aircraft segment competes primarily with four other companies in the
business aviation industry. The principal factors for competition in the
industry are price, financing, operating costs, product reliability, cabin size
and comfort, product quality, travel range and speed, and product support. The
Company believes we possess competitive advantages in the breadth of our product
line, the performance of our product line, and the strength of our product
support.
PATENTS AND LICENSES
Raytheon has long been an innovative leader in the development of new
products and manufacturing technologies. Raytheon and its subsidiaries own a
large intellectual property portfolio which includes, by way of example, United
States and foreign patents, unpatented know-how, trademarks and copyrights, all
of which contribute significantly to the preservation of the Company's strong
competitive position in the market. In certain instances, Raytheon has
augmented its technology base by licensing the proprietary intellectual property
of others. Although these patents and licenses are, in the aggregate, important
to the operation of the Company's business, no existing patent, license, or
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similar intellectual property right is of such importance that its loss or
termination would, in the opinion of management, have a material effect on the
Company's business.
Raytheon's patent position and intellectual property portfolio is deemed
adequate for the conduct of its businesses. It is Raytheon's policy to enforce
its own intellectual property rights and to respect the rights of others.
Incidental to the normal course of business, infringement claims may arise or
may be threatened both by and against Raytheon. In the opinion of management,
these claims will not have a material adverse effect on the Company's
operations.
EMPLOYMENT
As of December 31, 2000, Raytheon had approximately 93,700 employees
compared with approximately 105,300 employees at the end of 1999. The decrease
is mainly due to the divestiture during 2000 of Raytheon Engineers &
Constructors and other divestitures.
Raytheon considers its union-management relationships to be positive, with
few exceptions. In 2000, Raytheon successfully reached agreement on 15 labor
contracts, with one work stoppage of six weeks involving less than 3% of the
workforce.
INTERNATIONAL SALES
Raytheon's sales to customers outside the United States (including foreign
military sales) were 21% of total sales in 2000 and 23% of total sales in 1999
and 1998. These sales were principally in the fields of air defense systems,
air traffic control systems, sonar systems, aircraft products, electronic
equipment, computer software and systems, personnel training, equipment
maintenance and microwave communication. Foreign subsidiary working capital
requirements generally are financed in the countries concerned. Sales and
income from international operations are subject to changes in currency values,
domestic and foreign government policies (including requirements to expend a
portion of program funds in-country) and regulations, embargoes and
international hostilities. Exchange restrictions imposed by various countries
could restrict the transfer of funds between countries and between Raytheon and
its subsidiaries. Raytheon generally has been able to protect itself against
most undue risks through insurance, foreign exchange contracts, contract
provisions, government guarantees or progress payments.
Raytheon utilizes the services of sales representatives and distributors in
connection with foreign sales. Normally representatives are paid commissions
and distributors are granted resale discounts in return for services rendered.
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The export from the U.S. of many of Raytheon's products may require the
issuance of a license by the Department of State under the Arms Export Control
of 1976, as amended (formerly the Foreign Military Sales Act); or by the
Department of Commerce under the Export Administration Act as kept in force by
the International Emergency Economic Powers Act of 1977, as amended ("IEEPA");
or by the Treasury Department under IEEPA or the Trading with the Enemy Act of
1917, as amended. Such licenses may be denied for reasons of U.S. national
security or foreign policy. In the case of certain exports of defense equipment
and services, the Department of State must notify Congress at least 15 or 30
days (depending on the identity of the country that will utilize the equipment
and services) prior to authorizing such exports. During that time, Congress may
take action to block a proposed export by joint resolution which is subject to
Presidential veto.
FACTORS THAT COULD AFFECT FUTURE RESULTS
This filing and the information we are incorporating by reference contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts included in this filing and the information incorporated by
reference, that we expect or anticipate will or may occur in the future,
including statements regarding our financial position, business strategy and
measures to implement that strategy, such as changes to operations, competitive
strengths, goals, expansion and growth of our business and operations, plans,
references to future success and other such matters, are forward-looking
statements. These statements are based on assumptions and analyses made by us
in light of our experience and our perception of historical trends, current
conditions and expected future developments as well as other factors we believe
are appropriate in the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to a
number of risks and uncertainties, including the factors discussed below, as
well as other factors which might be described from time to time in our filings
with the Securities and Exchange Commission.
All of the forward-looking statements we make in this filing and the
information we are incorporating by reference are qualified by these cautionary
statements. There can be no assurance that the actual results or developments
anticipated by us will be realized or, even if substantially realized, that they
will have the expected consequences to or effects on our business and
operations. We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following are some of the factors we think could cause our actual results to
differ materially from expected and historical results. Other factors besides
those listed here could also adversely affect the Company. All subsequent
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by the factors
described below and in the documents containing such forward-looking statements.
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<PAGE>
Because we have recently sold a number of our business units, our business is
less diversified, which could reduce our earnings and might make us more
susceptible to negative conditions in our remaining businesses.
Consistent with our strategy of focusing on and streamlining our core
businesses and paying down our debt, during 1998, 1999 and 2000, we divested
several non-core business units. As a result of these divestitures, we no longer
receive revenues from these operations and, without offsetting increases in
revenues in our other businesses, our overall revenues would decrease, which
would have a negative affect on our financial condition.
In addition, as a result of these divestitures, our business is now less
diversified and thus more dependent on our remaining businesses. As a result, we
are now more sensitive to conditions and trends in the remaining industries in
which we operate. Negative conditions and trends in these remaining industries
could cause our financial condition and results of operations to suffer more
heavily than would occur when our business lines were more diversified. Our
inability to overcome these negative conditions and trends could have a negative
impact on our financial condition.
We heavily depend on our government contracts, which are only partially funded,
subject to immediate termination and heavily regulated and audited, and the
termination or failure to fund one or more of these contracts could have a
negative impact on our operations.
We act as prime contractor or major subcontractor for many different
government programs. Over its lifetime, a program may be implemented by the
award of many different individual contracts and subcontracts. The funding of
government programs is subject to congressional appropriations. Although multi-
year contracts may be authorized in connection with major procurements, Congress
generally appropriates funds on a fiscal year basis even though a program may
continue for several years. Consequently, programs are often only partially
funded initially, and additional funds are committed only as Congress makes
further appropriations. The termination of funding for a government program
would result in a loss of anticipated future revenues attributable to that
program. That could have a negative impact on our operations. In addition, the
termination of a program or failure to commit additional funds to a program
already started could increase our overall costs of doing business.
Generally, government contracts are subject to oversight audits by
government representatives and contain provisions permitting termination, in
whole or in part, without prior notice at the government's convenience upon the
payment of compensation only for work done and commitments made at the time of
termination. We can give no assurance that one or more of our government
contracts will not be terminated under these circumstances. Also, we can give no
assurance that we would be able to procure new
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government contracts to offset the revenues lost as a result of any termination
of our contracts. As our revenues are dependent on our procurement, performance
and payment under our contracts, the loss of one or more critical contracts
could have a negative impact on our financial condition.
Our government business is also subject to specific procurement regulations
and a variety of socio-economic and other requirements. These requirements,
although customary in government contracts, increase our performance and
compliance costs. These costs might increase in the future, reducing our
margins, which could have a negative effect on our financial condition. Failure
to comply with these regulations and requirements could lead to suspension or
debarment, for cause, from government contracting or subcontracting for a period
of time. Among the causes for debarment are violations of various statutes,
including those related to:
. procurement integrity
. export control
. government security regulations
. employment practices
. protection of the environment
. accuracy of records and the recording of costs
The termination of a government contract or relationship as a result of any
of these acts would have a negative impact on our operations and could have a
negative effect on our reputation and ability to procure other government
contracts in the future.
In addition, sales to the government may be affected by:
. changes in procurement policies
. budget considerations
. changing concepts of national defense
. political developments abroad
The influence of any of these factors, which are largely beyond our
control, could also negatively impact our financial condition. We also may
experience problems associated with advanced designs required by the government
which may result in unforeseen technological difficulties and cost overruns.
Failure to overcome these technological difficulties and the occurrence of cost
overruns would have a negative impact on our results.
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<PAGE>
We depend on the U.S. Government for a significant portion of our sales, and the
loss of this relationship or a shift in Government funding could have severe
consequences on the financial condition of Raytheon.
Approximately 66% of our net sales in 2000 were to the U.S. Government.
Therefore, any significant disruption or deterioration of our relationship with
the U.S. Government would significantly reduce our revenues. Our U.S. Government
programs must compete with programs managed by other defense contractors for a
limited number of programs and for uncertain levels of funding. Our competitors
continuously engage in efforts to expand their business relationships with the
U.S. Government at our expense and are likely to continue these efforts in the
future. The U.S. Government may choose to use other defense contractors for its
limited number of defense programs. In addition, the funding of defense programs
also competes with non-defense spending of the U.S. Government. Budget decisions
made by the U.S. Government are outside of our control and have long-term
consequences for the size and structure of Raytheon. A shift in government
defense spending to other programs in which we are not involved or a reduction
in U.S. Government defense spending generally could have severe consequences for
our results of operations.
We derive a significant portion of our revenues from international sales and are
subject to the risks of doing business in foreign countries.
In 2000, sales to international customers accounted for approximately 21%
of our net sales. We expect that international sales will continue to account
for a substantial portion of our net sales for the foreseeable future. As a
result, we are subject to risks of doing business internationally, including:
. changes in regulatory requirements
. domestic and foreign government policies, including requirements to expend a
portion of program funds locally and governmental industrial cooperation
requirements
. fluctuations in foreign currency exchange rates
. delays in placing orders
. the complexity and necessity of using foreign representatives and consultants
. the uncertainty of adequate and available transportation
. the uncertainty of the ability of foreign customers to finance purchases
. uncertainties and restrictions concerning the availability of funding credit
or guarantees
. imposition of tariffs or embargoes, export controls and other trade
restrictions
. the difficulty of management and operation of an enterprise spread over
various countries
. compliance with a variety of foreign laws, as well as U.S. laws affecting the
activities of U.S. companies abroad
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<PAGE>
. general economic and geopolitical conditions, including international
hostilities, inflation, trade relationships and military and political
alliances
While these factors or the impact of these factors are difficult to
predict, any one or more of these factors could adversely affect our operations
in the future.
We may not be successful in obtaining the necessary licenses to conduct
operations abroad, and Congress may prevent proposed sales to foreign
governments.
Licenses are required from government agencies under the Export
Administration Act, the Trading with the Enemy Act of 1917 and the Arms Export
Control Act of 1976 for export of many of our products. We can give no assurance
that we will be successful in obtaining these necessary licenses in order to
conduct business abroad. In the case of certain sales of defense equipment and
services to foreign governments, the U.S. Government's Executive Branch must
notify Congress at least 15 to 30 days, depending on the location of the sale,
prior to authorizing these sales. During that time, Congress may take action to
block the proposed sale.
Competition within our markets may reduce our procurement of future contracts
and our sales.
The military and commercial industries in which we operate are highly
competitive. Our competitors range from highly resourceful small concerns, which
engineer and produce specialized items, to large, diversified firms. Several
established and emerging companies offer a variety of products for applications
similar to those of our products. Our competitors may have more extensive or
more specialized engineering, manufacturing and marketing capabilities than we
do in some areas. There can be no assurance that we can continue to compete with
these firms. In addition, some of our largest customers could develop the
capability to manufacture products similar to products that we manufacture. This
would result in these customers supplying their own products and competing
directly with us for sales of these products, all of which could significantly
reduce our revenues and seriously harm our business.
Furthermore, we are facing increased international competition and cross-
border consolidation of competition. There can be no assurance that we will be
able to compete successfully against our current or future competitors or that
the competitive pressures we face will not result in reduced revenues and market
share or seriously harm our business.
Our future success will depend on our ability to develop new technologies that
achieve market acceptance.
Both our commercial and defense markets are characterized by rapidly
changing
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<PAGE>
technologies and evolving industry standards. Accordingly, our future
performance depends on a number of factors, including our ability to:
. identify emerging technological trends in our target markets
. develop and maintain competitive products
. enhance our products by adding innovative features that differentiate our
products from those of our competitors
. manufacture and bring products to market quickly at cost-effective prices
Specifically, at Raytheon Aircraft Company, our future success is dependent
on our ability to meet scheduled timetables for the development, certification
and delivery of new product offerings.
We believe that, in order to remain competitive in the future, we will need
to continue to develop new products, which will require the investment of
significant financial resources in new product development. The need to make
these expenditures could divert our attention and resources from other projects,
and we cannot be sure that these expenditures will ultimately lead to the timely
development of new technology. Due to the design complexity of our products, we
may in the future experience delays in completing development and introduction
of new products. Any delays could result in increased costs of development or
deflect resources from other projects. In addition, there can be no assurance
that the market for our products will develop or continue to expand as we
currently anticipate. The failure of our technology to gain market acceptance
could significantly reduce our revenues and harm our business. Furthermore, we
cannot be sure that our competitors will not develop competing technology which
gains market acceptance in advance of our products. The possibility that our
competitors might develop new technology or products might cause our existing
technology and products to become obsolete. If we fail in our new product
development efforts or our products fail to achieve market acceptance more
rapidly than our competitors, our revenues will decline and our business,
financial condition and results of operations will be negatively affected.
Our financial performance is significantly dependent on the timely and
successful conversion of our defense products into commercial markets.
In order to leverage technology that we develop for defense applications,
we frequently strive to adapt existing defense technology for commercial
markets. We may not be successful, however, in converting our defense systems
and devices into commercially viable products, and the market for such products
may be limited. Any of these results could have a negative impact on our future
revenues.
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<PAGE>
We enter into fixed-price contracts which could subject us to losses in the
event that we have cost overruns.
Sometimes we enter into contracts on a firm, fixed-price basis. This allows
us to benefit from cost savings, but carries the burden of cost overruns. If our
initial estimates are incorrect, we can lose money on these contracts. In
addition, some of our contracts have provisions relating to cost controls and
audit rights, and if we fail to meet the terms specified in those contracts then
we may not realize their full benefits. Our financial condition is dependent on
our ability to maximize our earnings from our contracts. Lower earnings caused
by cost overruns and cost controls would have a negative impact on our financial
results. As previously disclosed, during 2000 our financial results were
negatively impacted by cost overruns on certain fixed price contracts.
In connection with the sale of RE&C on July 7, 2000, the Company has retained
certain liabilities and risks.
The retained liabilities and risks include the following:
o Raytheon has retained responsibility for the performance of four large,
fixed price international turnkey projects that are close to completion
and partially indemnified the buyer on the completion of one other
existing contract. The ultimate cost to complete these projects may be
higher than the Company has estimated.
o Raytheon has retained certain assets and liabilities of its engineering
and construction business, the ultimate value of which may differ from
the amount recorded at December 31, 2000.
o Raytheon has continuing exposure under existing guarantees, surety
bonds and letters of credit related to a number of ongoing projects.
The ultimate impact of these potential obligations on the Company's
financial condition is uncertain.
o The purchase and sale agreement provides for a purchase price
adjustment based on a cut-off date balance sheet that has not yet been
finalized. Any disputes related to a purchase price adjustment are
subject to binding arbitration.
While these risks or the impact of these risks are difficult to predict,
any one or more of these factors could have a material adverse impact on our
financial condition.
We depend on the recruitment and retention of qualified personnel, and our
failure to attract and retain personnel could seriously harm our business.
Due to the specialized nature of our businesses, our future performance is
highly dependent upon the continued services of our key engineering personnel
and executive officers. Our prospects depend upon our ability to attract and
retain qualified engineering, manufacturing, marketing, sales and management
personnel for our operations. Competition for personnel is intense, and we may
not be successful in attracting or retaining qualified personnel. Our failure to
compete for these personnel could seriously harm our business, results of
operations and financial condition.
A significant portion of our labor force is unionized, and our failure to
maintain stable relationships with our unions could seriously harm our business.
Approximately 16,000 of our employees are unionized, which represented
approximately 18% of our employees at December 31, 2000. As a result, we may
experience work stoppages from time to time, and we are vulnerable to the
demands imposed by our collective bargaining relationships. We cannot predict
how stable these relationships, currently with 10 different U.S. labor
organizations and 4 different non-U.S. labor organizations, will be or whether
we will be able to meet the requirements of these unions without impacting the
financial condition of Raytheon. In addition, the presence of unions may limit
our flexibility in dealing with our workforce. Work
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<PAGE>
stoppages and instability in our union relationships could negatively impact our
ability to manufacture our products on a timely basis, resulting in strain on
our relationships with our customers, as well as a loss of revenues. That would
adversely affect our results of operations.
We may be unable to adequately protect our intellectual property rights, which
could affect our ability to compete.
Protecting our intellectual property rights is critical to our ability to
compete and succeed as a company. We own a large number of United States and
foreign patents and patent applications, as well as trademark, copyright and
semiconductor chip mask work registrations which are necessary and contribute
significantly to the preservation of our competitive position in the market.
There can be no assurance that any of these patents and other intellectual
property will not be challenged, invalidated or circumvented by third parties.
In some instances, we have augmented our technology base by licensing the
proprietary intellectual property of others. In the future, we may not be able
to obtain necessary licenses on commercially reasonable terms. We enter into
confidentiality and invention assignment agreements with our employees, and
enter into non-disclosure agreements with our suppliers and appropriate
customers so as to limit access to and disclosure of our proprietary
information. These measures may not suffice to deter misappropriation or
independent third party development of similar technologies. Moreover, the
protection provided to our intellectual property by the laws and courts of
foreign nations may not be as advantageous to us as the remedies available under
United States law.
Our operations expose us to the risk of material environmental liabilities.
Because we use and generate large quantities of hazardous substances and
wastes in our manufacturing operations, we are subject to potentially material
liabilities related to personal injuries or property damages that may be caused
by hazardous substance releases and exposures. For example, we are investigating
and remediating contamination related to our current or past practices at
numerous properties and, in some cases, have been named as a defendant in
related personal injury or "toxic tort" claims.
We are also subject to increasingly stringent laws and regulations that
impose strict requirements for the proper management, treatment, storage and
disposal of hazardous substances and wastes, restrict air and water emissions
from our manufacturing operations, and require maintenance of a safe workplace.
These laws and regulations can impose substantial fines and criminal sanctions
for violations, and require the installation of costly pollution control
equipment or operational changes to limit pollution emissions and/or decrease
the likelihood of accidental hazardous substance releases. We incur, and
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<PAGE>
expect to continue to incur, substantial capital and operating costs to comply
with these laws and regulations. In addition, new laws and regulations, stricter
enforcement of existing laws and regulations, the discovery of previously
unknown contamination or the imposition of new clean-up requirements could
require us to incur costs in the future that would have a negative effect on our
financial condition or results of operations.
Provisions in our charter documents and rights agreement could make it more
difficult to acquire Raytheon and may reduce the market price of our stock.
Our certificate of incorporation and by-laws contain certain provisions,
such as a classified board of directors, a provision prohibiting stockholder
action by written consent, a provision prohibiting stockholders from calling
special meetings and a provision authorizing our Board of Directors to consider
factors other than stockholders' short-term interests in evaluating an offer
involving a change in control. Also, we have a rights plan, which limits the
ability of anyone to acquire more than 15% of our Class A or Class B Common
Stock. These provisions could have the effect of delaying or preventing a change
in control of Raytheon or the removal of Raytheon management, of deterring
potential acquirers from making an offer to our stockholders and of limiting any
opportunity to realize premiums over prevailing market prices for Raytheon
common stock. Provisions of the Shareholder Rights Agreement and the Hughes
Separation Agreement, both of which are incorporated as exhibits to this filing,
could also have the effect of deterring changes of control of Raytheon.
We depend on component availability, subcontractor performance and our key
suppliers to manufacture and deliver our products and services.
Our manufacturing operations are highly dependent upon the delivery of
materials by outside suppliers in a timely manner. In addition, we depend in
part upon subcontractors to assemble major components and subsystems used in our
products in a timely and satisfactory manner. While we enter into long-term or
volume purchase agreements with a few of our suppliers, we cannot be sure that
materials, components, and subsystems will be available in the quantities we
require, if at all. We are dependent for some purposes on sole-source suppliers.
If any of them fails to meet our needs, we may not have readily available
alternatives. Our inability to fill our supply needs would jeopardize our
ability to satisfactorily and timely complete our obligations under government
and other contracts. This might result in reduced sales, termination of one or
more of these contracts and damage to our reputation and relationships with our
customers. All of these events could have a negative effect on our financial
condition.
Our dual class capital structure may depress the value of your Class B Common
Stock.
We have two distinct classes of common stock - Class A Common Stock and
Class B Common Stock. With respect to all actions other than the election or
removal of
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<PAGE>
directors, holders of Class A Common Stock and Class B Common Stock have equal
voting rights. With respect to the election or removal of directors only,
holders of Class A Common Stock have 80.1% of the total voting power. Holders of
Class B Common Stock have the remaining 19.9% of the voting power. If you hold
Class B Common Stock, the value of your securities may be depressed by the
disparity in voting power. Furthermore, while shares of both our Class A and
Class B Common Stock currently trade on the New York Stock Exchange, the Chicago
Stock Exchange and the Pacific Exchange, the listing policies of each of these
exchanges with respect to corporations with dual-class capitalizations may
change in the future, and in the future such policies may not allow for the
continued listing of both our Class A and Class B Common Stock.
The Company has announced plans to eliminate the dual class capital
structure and reclassify the Class A and Class B Common Stock into a single new
class of common stock. The proposed elimination of the dual class capital
structure has been approved by the Company's Board of Directors and is subject
to approval by majority vote of the outstanding Class A and Class B shares, with
each voting class voting separately. Accordingly, there can be no assurance that
the proposed elimination will happen.
The unpredictability of our results may harm the trading price of our
securities, or contribute to volatility.
Our operating results may vary significantly over time for a variety of
reasons, many of which are outside of our control, and any of which may harm our
business. The value of our securities may fluctuate as a result of
considerations that are difficult to forecast, such as:
. volume and timing of product orders received and delivered
. levels of product demand
. consumer and government spending patterns
. the timing of contract receipt and funding
. our ability and the ability of our key suppliers to respond to changes in
customer orders
. timing of our new product introductions and the new product introductions of
our competitors
. changes in the mix of our products
. cost and availability of components and subsystems
. price erosion
. adoption of new technologies and industry standards
. competitive factors, including pricing, availability and demand for competing
products
. fluctuations in foreign currency exchange rates
. conditions in the capital markets and the availability of project financing
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. the impact on recourse obligations at Raytheon Aircraft due to changes in the
collateral value of financed aircraft
. regulatory developments
. general economic conditions, particularly the cyclical nature of the general
aviation and engineering and construction markets in which we participate
Item 2. Properties
The Company and its subsidiaries operate in a number of plants,
laboratories, warehouses and office facilities in the United States and abroad.
At December 31, 2000, the Company utilized approximately 47 million square
feet of floor space for manufacturing, engineering, research, administration,
sales and warehousing, approximately 97% of which was located in the United
States. Of such total, approximately 32% was owned, approximately 63% was
leased, and approximately 5% was made available under facilities contracts for
use in the performance of United States Government contracts. At December 31,
2000 the Company had approximately 2.2 million square feet of additional floor
space that was not in use, including approximately 1.4 million square feet in
Company-owned facilities.
There are no major encumbrances on any of the Company's plants or equipment
other than financing arrangements which in the aggregate are not material. In
the opinion of management, the Company's properties have been well maintained,
are in sound operating condition and contain all equipment and facilities
necessary to operate at present levels.
At December 31, 2000, our business segments had major operations at the
following locations:
. Electronic Systems -- E. Camden, AZ; Tucson, AZ; El Segundo, CA; Goleta,
CA; Long Beach, CA; Louisville, KY; Andover, MA; Bedford, MA; Sudbury,
MA; Tewksbury, MA; Portsmouth, RI; Dallas, TX; Plano, TX; and Sherman,
TX;
. Command, Control, Communication & Information Systems -- Fullerton, CA;
Aurora, CO; St. Petersburg, FL; Ft. Wayne, IN; Landover, MD; Townson,
MD; Marlboro, MA; State College, PA; Garland, TX; and Falls Church, VA;
. Aircraft Integration Systems -- Lexington, KY; Greenville, TX; and Waco,
TX;
. Raytheon Technical Services Company -- Chula Vista, CA; Long Beach, CA;
Indianapolis, IN; Burlington, MA; and Norfolk and Reston, VA;
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. Commercial Electronics -- Andover, MA; Kiel, Germany; Portsmouth, UK;
and Malaga, Spain; and Midland, Ontario;
. Aircraft -- Selma, AL; Salina, KS; and Wichita, KS;
. Corporate -- Lexington, MA.
A summary of the utilized floor space at December 31, 2000, by business
segment, follows:
(in square feet with 000's omitted)
<TABLE>
<CAPTION>
Leased Owned Gov't Owned Total
------------------------------------------------------
<S> <C> <C> <C> <C>
Electronic Systems 14,523 6,827 1,551 22,901
Command, Control, Communication 3,360 2,763 10 6,133
& Information Systems
Aircraft Integration Systems 4,593 216 964 5,773
Raytheon Technical Services 3,067 76 34 3,177
Commercial Electronics 274 618 0 892
Aircraft 3,219 3,945 0 7,164
Corporate (includes domestic and 328 258 0 586
international sales offices)
- ---------------------------------------------------------------------------------------
TOTAL 29,364 14,703 2,559 46,626
</TABLE>
See "Item 1. Factors that Could Affect Future Results" above and "Item 3.
Legal Proceedings" below. Additional information regarding the effect of
compliance with environmental protection requirements and the resolution of
environmental claims against the Company and its operations is contained in the
Company's Annual Report to Stockholders for the year ended December 31, 2000 on
page 30 and in Note K to the Company's Financial Statements, respectively, and
is incorporated herein by reference.
Item 3. Legal Proceedings
The Company is primarily engaged in providing products and services under
contracts with the U.S. Government and, to a lesser degree, under direct foreign
sales contracts, some of which are funded by the U.S. Government. These
contracts are subject to extensive legal and regulatory requirements and, from
time to time, agencies of the U.S. Government investigate whether the Company's
operations are being conducted in accordance with these requirements. U.S.
Government investigations of the Company,
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whether relating to these contracts or conducted for other reasons, could result
in administrative, civil or criminal liabilities, including repayments, fines or
penalties being imposed upon the Company, or could lead to suspension or
debarment from future U.S. Government contracting. U.S. Government
investigations often take years to complete and many result in no adverse action
against the Company.
During October, November and December 1999, the Company and two of its
officers were named as defendants in purported class action lawsuits filed in
the United States District Court for the District of Massachusetts on October
14, 1999 by Merrill Roth (No. 99-12143NG), on October 15, 1999 by Robert Johnson
(No. 99-12146PBS) and Jeffrey Gelfand (No. 99-121954JLT), on October 18, 1999 by
Sidney Meisel (No. 99-12142PBS) and A. Richard Albrecht (No. 99-12178PBS), on
October 19, 1999 by Barbara Rice (No. 99-12185NG), on October 26, 1999 by David
DeForrest (No. 99-12222PBS) and Maureen Rocks (No. 99-12225PBS), on November 3,
1999 by Deborah Isaac (No. 99-12297PBS), on November 8, 1999 by Jay Fleishman
(No. 99-12339PBS), on December 1, 1999 by Lasensky Paper Stock PSP (No. 99-
12463NG), and on December 10, 1999 by Osprey Partners Investment Management, LLC
(No. 99-12539-PB); in the United States District Court for the Southern District
of New York on October 25, 1999 by Raymond Masri (No. 99-10789); and in the
United States District Court for the District of Maryland on October 21, 1999 by
Edwin Hankin (No. S-99-3211) (collectively the "Complaints"). The Complaints
have been consolidated in the United States District Court for the District of
Massachusetts (the "Court"). The Court appointed a lead plaintiff and, on June
12, 2000, a Consolidated and Amended Class Action Complaint (the "Consolidated
Complaint") was filed, naming four additional former or present officers as
defendants and alleging a purported class period of October 7, 1998 through
October 12, 1999. On September 8, 2000, the Company and the individual
defendants filed a motion to dismiss the Consolidated Complaint, which the
plaintiffs opposed. The Court heard argument on the motion to dismiss on
February 9, 2001 and has taken the motion under advisement.
The Company also was named as a nominal defendant and all of its directors
at the time (except one) were named as defendants in purported derivative
lawsuits filed on October 25, 1999 in the Court of Chancery of the State of
Delaware in and for New Castle County by Ralph Mirarchi and others (No. 17495-
NC), and on November 24, 1999 in Middlesex
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County, Massachusetts, Superior Court by John Chevedden (No. 99-5782). On
February 28, 2000, Mr. Chevedden filed another derivative action in the Delaware
Chancery Court entitled John Chevedden v. Daniel P. Burnham, et al (No. 17838-
NC) and on March 22, 2000, Mr. Chevedden's Massachusetts derivative action was
dismissed. The Company anticipates that the two Delaware actions (collectively,
the "Derivative Complaints") will be consolidated in the future. The Derivative
Complaints contain allegations similar to those included in the Complaints and
further allege that the defendants purportedly breached fiduciary duties to the
Company and allegedly failed to exercise due care and diligence in the
management and administration of the affairs of the Company.
Although the Company believes that it and the other defendants have
meritorious defenses to the claims made in both the Consolidated Complaint and
the Derivative Complaints and intends to contest the lawsuits vigorously, an
adverse resolution of the lawsuits could have a material adverse effect on the
Company's financial position and results of operations in the period in which
the lawsuits are resolved. The Company is not presently able to reasonably
estimate potential losses, if any, related to the lawsuits.
Defense contractors are subject to many levels of audit and investigation.
Agencies which oversee contract performance include: the Defense Contract Audit
Agency, the Department of Defense Inspector General, the General Accounting
Office, the Department of Justice and Congressional Committees. The Department
of Justice from time to time has convened grand juries to investigate possible
irregularities by the Company in governmental contracting.
The U.S. Customs Service has concluded its investigation of the
contemplated sale by Raytheon Canada Ltd., a subsidiary of the Company, of
troposcatter radio equipment to a customer in Pakistan. The Company has produced
documents in response to grand jury subpoenas, and grand jury appearances have
taken place. The Company has cooperated fully with the investigation. The
Government has not reached a final decision with respect to this matter. An
adverse decision relating to this matter ultimately could have a material
adverse effect on the Company's results of operations or financial condition.
In November 1999, the Company filed a complaint against Towers, Perrin,
Forster & Crosby (TPF&C) in the U.S. District Court for the District of
Massachusetts. The complaint arises out of a series of events concerning certain
Hughes Electronics pension plans (the "Hughes Plans"), portions of which were
acquired by the Company in connection with the merger with Hughes Defense.
Specifically, the complaint alleges that the Company was damaged by (i) false
representations made to the Company by TPF&C regarding the amount of surplus in
the Hughes Plans and (ii) errors committed by TPF&C in providing administrative
services to the Hughes Plans. The complaint seeks damages in an amount to be
determined at trial. This matter has been transferred to the U.S. District Court
for the Central District of California.
The description of the Company's disputes with Hughes Electronics regarding
(i) the determination of the final purchase price for Hughes Defense and (ii) a
claim by the Company against Hughes Electronics concerning the accuracy and
completeness of disclosures made by Hughes Electronics prior to the merger of
Raytheon Company and HE Holdings, Inc. contained in the Company's Annual Report
to Stockholders for the year ended December 31, 2000 at pages 26-31 and in Note
K to the Company's Financial Statements, respectively, is incorporated herein by
reference.
-25-
<PAGE>
The Company is involved in various stages of investigation and cleanup
relative to remediation of various environmental sites. All appropriate costs
incurred in connection therewith have been accrued. Due to the complexity of
environmental laws and regulations, the varying costs and effectiveness of
alternative cleanup methods and technologies, the uncertainty of insurance
coverage and the unresolved extent of the Company's responsibility, it is
difficult to determine the ultimate outcome of these matters. However, in the
opinion of management, any liability will not have a material effect on the
Company's financial position, liquidity or results of operations after giving
effect to provisions already recorded.
Accidents involving personal injuries and property damage occur in general
aviation travel. When permitted by appropriate government agencies, Raytheon
Aircraft investigates accidents related to its products involving fatalities or
serious injuries. Through a relationship with FlightSafety International,
Raytheon Aircraft provides initial and recurrent pilot and maintenance training
services to reduce the frequency of accidents involving its products.
Raytheon Aircraft is a defendant in a number of product liability lawsuits
which allege personal injury and property damage and seek substantial recoveries
including, in some cases, punitive and exemplary damages. Raytheon Aircraft
maintains partial insurance coverage against such claims and maintains a level
of uninsured risk determined by management to be prudent. Additional information
regarding aircraft product liability insurance is contained in Note K to the
Company's Financial Statements included in the Company's Annual Report to
Stockholders for the year ended December 31, 2000, and is incorporated herein by
reference.
The insurance policies for product liability coverage held by Raytheon
Aircraft do not exclude punitive damages, and it is the position of Raytheon
Aircraft and its counsel that punitive damage claims are therefore covered.
Historically, the defense of punitive damage claims has been undertaken and paid
by insurance carriers. Under the law of some states, however, insurers are not
required to respond to judgments for punitive damages. Nevertheless, to date no
judgments for punitive damages have been sustained.
Various claims and legal proceedings generally incidental to the normal
course of business are pending or threatened against the Company. While the
Company cannot
-26-
<PAGE>
predict the outcome of these matters, in the opinion of management, any
liability arising from them will not have a material effect on the Company's
financial position, liquidity or results of operations after giving effect to
provisions already recorded.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 4(A). Executive Officers of the Registrant
The executive officers of the Company are listed below. Each executive
officer was elected by the Board of Directors to serve for a term of one year
and until his or her successor is elected and qualified or until his or her
earlier removal, resignation or death.
Daniel P. Burnham: Chairman and Chief Executive Officer since July 31, 1999.
Prior thereto, Mr. Burnham served as President and Chief Executive Officer from
December 1, 1998 to July 31, 1999 and as President and Chief Operating Officer
from July 1, 1998 to December 1, 1998. Prior to joining the Company, Mr. Burnham
was Vice Chairman of AlliedSignal, Inc. from October 1997 and President of
AlliedSignal Aerospace and an Executive Vice President of AlliedSignal, Inc.
from 1992 until becoming Vice Chairman in 1997. Age: 54
Franklyn A. Caine: Senior Vice President and Chief Financial Officer since April
1999. Prior to assuming his present position, Mr. Caine was Executive Vice
President and Chief Financial Officer of Wang Laboratories, Inc. from 1994. Age:
51
Philip W. Cheney: Vice President - Engineering since May 1998. Prior to assuming
his present position, Dr. Cheney was Vice President - Commercial Electronics
from July 1994. Prior thereto, Dr. Cheney was Vice President - Engineering from
February 1990. Age: 65
Kenneth C. Dahlberg: Executive Vice President - Business Development and
President, Raytheon International, Inc. since January 2000. Prior to assuming
his present positions, Mr. Dahlberg was Executive Vice President and President
and Chief Operating Officer of Raytheon Systems Company since December 1997.
Prior thereto, Mr. Dahlberg was Senior Vice President of Hughes Aircraft Company
from September 1994 and Vice President of Hughes Electronics Corporation from
May 1993. Age: 56
Dennis M. Donovan: Senior Vice President - Human Resources since October 1998.
Prior to assuming his present position, Mr. Donovan was Vice President - Human
Resources of GE Power Systems from 1991. Age: 52
-27-
<PAGE>
Richard A. Goglia: Vice President and Treasurer since January 1999. Prior to
assuming such position, Mr. Goglia was Director, International Finance from
March 1997; and Senior Vice President--Corporate Finance, GE Capital Corporation
from 1989. Age: 49
Thomas D. Hyde: Senior Vice President and General Counsel since January 2000.
Prior to assuming his present position, Mr. Hyde was Senior Vice President,
Secretary and General Counsel from September 1998; Senior Vice President and
General Counsel from February 1998; and Vice President and General Counsel from
February 1994. Age: 52
James L. Infinger: Vice President and Chief Information Officer since October
1997. Prior to assuming his present position Mr. Infinger was Senior Vice
President and Chief Information Officer of CompUSA, Inc. from June 1994. Age: 43
Francis S. Marchilena: Executive Vice President and President - Command,
Control, Communication & Information Systems since June, 2000. Prior to assuming
his present position Mr. Marchilena was Senior Vice President and General
Manager of the Command, Control and Communication Systems Segment of the former
Raytheon Systems Company. Age: 55
Edward S. Pliner: Vice President and Corporate Controller since April 2000.
Prior to assuming his present position, Mr. Pliner was Partner of
PricewaterhouseCoopers LLP from September 1995. Age: 43
William H. Swanson: Executive Vice President and President - Electronic Systems
since January 2000. Prior to assuming his present position, Mr. Swanson was
Executive Vice President and Chairman and Chief Executive Officer of Raytheon
Systems Company from December 1997; Executive Vice President and General
Manager - Raytheon Electronic Systems Division from March 1995; and Senior Vice
President and General Manager - Missile Systems Division from 1990. Age: 52
Hansel E. Tookes, II: Executive Vice President and Chairman and Chief Executive
Officer of Raytheon Aircraft Company since August 2000. Prior to assuming his
present position, Mr. Tookes was President and Chief Executive Officer of
Raytheon Aircraft Company from January 2000 and President and Chief Operating
Officer of Raytheon Aircraft Company from September 1999. Prior thereto, Mr.
Tookes was President of Pratt & Whitney's Large Military Engines group from 1996
and Executive Vice President of Aircraft Products of Hamilton Standard from
1994. Age: 53
-28-
<PAGE>
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
At December 31, 2000, there were 249,475 record holders of the Company's
Class A common stock and 17,689 record holders of the Company's Class B common
stock. Additional information required by this Item 5 is contained on page 52 of
Raytheon's Annual Report to Stockholders for the year ended December 31, 2000
and in Note O to Raytheon's Financial Statements for the years ended December
31, 2000, 1999 and 1998 and is incorporated herein by reference.
On March 7, 2000 the Company issued an aggregate $2.25 billion of notes
consisting of the following: $200 million principal face amount floating rate
notes due 2002 (the "Floating Rate Notes"); an aggregate $800 million principal
face amount notes due 2003 (the "7.90% Notes"); an aggregate $850 million
principal face amount notes due 2006 (the "8.20% Notes"); an aggregate $400
million principal face amount notes due 2010 (the "8.30% Notes" and, together
with the Floating Rate Notes, 7.90% Notes and 8.20% Notes the "Notes"). The
group of underwriters of the Notes was lead by Credit Suisse First Boston and
Morgan Stanley Dean Witter. The offering price of the Floating Rate Notes was
100%, resulting in proceeds to the Company of 99.75% ($199,500,000) after
underwriting discounts and commissions of .250% ($500,000). The offering price
of the 7.90% Notes was 99.830%, resulting in proceeds to the Company of 99.480%
($795,840,000) after underwriting discounts and commissions of .520%
($4,160,000). The offering price of the 8.20% Notes was 99.979%, resulting in
proceeds to the Company of 99.379% ($844,721,500) after underwriting discounts
and commissions of .621% ($5,278,500). The offering price of the 8.30% Notes was
99.862%, resulting in proceeds to the Company of 99.212% ($396,848,000) after
underwriting discounts and commissions of .788% ($3,152,000).
The Notes were offered and sold to (i) Qualified Institutional Buyers as
defined in Rule 144A of the Securities Act in transactions exempt from
registration pursuant to Rule 144A, (ii) a limited number of other institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under
Regulation D of the Securities Act in private sales exempt from registration
under the Securities Act in minimum denominations of $100,000, and/or (iii) to
non-U.S. persons outside the United States in reliance on Regulation S of the
Securities Act in transactions meeting the requirements of Regulation S. The
proceeds of the Notes were used to reduce commercial paper and bank borrowings
with various maturities and bearing interest at various rates.
Pursuant to the terms of a Registration Rights Agreement executed in
connection with the issuance of the Debentures, the Company filed an exchange
offer registration statement on Form S-4 in July 2000 covering the offer by the
Company to exchange
-29-
<PAGE>
floating rate exchange notes due 2002, 7.90% exchange notes due 2003, 8.20%
exchange notes due 2006 and 8.30% exchange notes due 2010 registered under the
Securities Act of 1933 for the outstanding Floating Rate Notes, 7.90% Notes,
8.20% Notes and 8.30% Notes, respectively.
Item 6. Selected Financial Data
The information required by this Item 6 is included in the "Five Year
Statistical Summary" contained in the Company's Annual Report to Stockholders
for the year ended December 31, 2000 on page 25 and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item 7 is contained in the Company's
Annual Report to Stockholders for the year ended December 31, 2000 on pages 26
through 31 and is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item 7A is contained in the Company's
Annual Report to Stockholders for the year ended December 31, 2000 on pages 30
and 31 and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Selected quarterly financial data and the financial statements and
supplementary data of the Registrant are contained in the Company's Annual
Report to Stockholders for the year ended December 31, 2000 in Note O and on
pages 32 through 50, respectively, and are incorporated herein by reference.
Schedules required under Regulation S-X are filed as "Financial Statement
Schedules" pursuant to Item 14 hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
-30-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the directors of the Company is contained in the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on April 25, 2001 under the captions "The Board of Directors and Board
Committees" and "Election of Directors" and is incorporated herein by reference.
Information regarding the executive officers of the Company is contained in Part
I, Item 4(A) of this Form 10-K.
Item 11. Executive Compensation
This information is contained in the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held on April 25, 2001 under the
caption "Executive Compensation" and, except for the information required by
Items 402(k) and 402(l) of Regulation S-K, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is contained in the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held on April 25, 2001 under the
caption "Stock Ownership" and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
This information is contained in the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held on April 25, 2001 under the
caption "Certain Relationships and Related Transactions" and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
(1) The following financial statements of Raytheon Company and
Subsidiaries Consolidated, as contained in Raytheon's 2000 Annual
Report to Stockholders, are hereby incorporated by reference:
Balance Sheets at December 31, 2000 and 1999
Statements of Income for the Years Ended
-31-
<PAGE>
December 31, 2000, 1999 and 1998
Statements of Stockholders' Equity for the Years Ended
December 31, 2000, 1999 and 1998
Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998
(2) The following financial statement schedule is included herein:
Schedule II, Reserves for the Three Years Ended
December 31, 2000
Schedules I, III and IV are omitted because they are not
required, not applicable or the information is otherwise
included.
(b) Reports on Form 8-K
Raytheon Company Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 25, 2000
Raytheon Company Current Report on Form 8-K filed with the Securities
and Exchange Commission on December 1, 2000
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of January 16, 1997 by and
between Raytheon Company and HE Holdings, Inc., filed as an
exhibit to Former Raytheon's Current Report on Form 8-K filed
with the Securities and Exchange Commission on January 17, 1997,
is hereby incorporated by reference.
2.2 Hughes Spin-Off Separation Agreement dated as of December 17,
1997 by and between HE Holdings, Inc. and General Motors
Corporation filed as an exhibit to the Company's Registration
Statement on Form S-3, File No. 333-44321, is hereby incorporated
by reference.
3.1 Raytheon Company Restated Certificate of Incorporation, restated
as of February 11, 1998 filed as an exhibit to Raytheon's Annual
Report on Form 10-K for the year ended December 31, 1997, is
hereby incorporated by reference.
-32-
<PAGE>
3.2 Raytheon Company Amended and Restated By-Laws, as amended through
January 28, 1998 filed as an exhibit to Raytheon's Annual Report
on Form 10-K for the year ended December 31, 1997, is hereby
incorporated by reference.
4.1 Indenture dated as of July 3, 1995 between Raytheon Company and
The Bank of New York, Trustee, filed as an exhibit to Former
Raytheon's Registration Statement on Form S-3, File No. 33-59241,
is hereby incorporated by reference.
4.2 Supplemental Indenture dated as of December 17, 1997 between
Raytheon Company and The Bank of New York, Trustee filed as an
exhibit to Raytheon's Annual Report on Form 10-K for the year
ended December 31, 1997, is hereby incorporated by reference.
4.3 Rights Agreement dated as of December 15, 1997 between the
Company and State Street Bank and Trust Company, as Rights Agent,
filed as an exhibit to the Company's Registration Statement on
Form 8-A, File No. 1-13699, is hereby incorporated by reference.
10.1 Raytheon Company 1976 Stock Option Plan, as amended, filed as an
exhibit to the Company's Registration Statement on Form S-8, File
No. 333-45629, is hereby incorporated by reference.
10.2 Raytheon Company 1991 Stock Plan, as amended, filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter
ended July 4, 1999, is hereby incorporated by reference.
10.3 Raytheon Company 1995 Stock Option Plan, as amended, filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 4, 1999, is hereby incorporated by reference.
10.4 Plan for Granting Stock Options in Substitution for Stock Options
Granted by Texas Instruments Incorporated, filed as an exhibit to
the Company's Registration Statement on Form S-8, File No. 333-
45629, is hereby incorporated by reference.
10.5 Plan for Granting Stock Options in Substitution for Stock Options
Granted by Hughes Electronics Corporation, filed as an exhibit to
the Company's Registration Statement on Form S-8, File No. 333-
45629, is hereby incorporated by reference.
-33-
<PAGE>
10.6 Raytheon Company 1997 Nonemployee Directors Restricted Stock
Plan, filed as an exhibit to the Company's Registration
Statement on Form S-8, File No. 333-45629, is hereby
incorporated by reference.
10.7 Raytheon Company Deferral Plan for Directors, filed as an
exhibit to Former Raytheon's Registration Statement on Form S-8,
File No. 333-22969, is hereby incorporated by reference.
10.8 Form of Raytheon Company Change in Control Severance Agreement,
filed as an exhibit to Former Raytheon's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, is hereby
incorporated by reference. The Company has entered into Change
in Control Severance Agreements in the form of Agreement filed
as Exhibit 10.8 with each of the following executives: Franklyn
A. Caine, Francis S. Marchilena and William H. Swanson. The
agreements are designed to provide the executive with certain
severance benefits following a termination, all as more fully
described in the form of Agreement. The Company has also entered
into Change in Control Severance Agreements in the form of
Agreement filed as Exhibit 10.8 with six other executives, but
which are immaterial to the Company. The agreements are designed
to provide the executive with certain severance benefits
following a termination, all as more fully described in the form
of Agreement.
10.9 Restricted Unit Award Agreement between the Company and Dennis
J. Picard, filed as an exhibit to Former Raytheon's Quarterly
Report on Form 10-Q for the quarter ended June 29, 1997, is
hereby incorporated by reference.
10.10 Form of Executive Change in Control Severance Agreement, filed
as an exhibit to the Company's Registration Statement on Form S-
4, File No. 333-37223, is incorporated herein by reference. The
Company has entered into Executive Change in Control Severance
Agreements in the form of Agreement filed as Exhibit 10.10 with
each of the following executives: Kenneth C. Dahlberg, Louise L.
Francesconi, Robert L. Horowitz, Donald R. Infante and Jack O.
Pearson. Such agreements are designed to provide the executive
with certain payments if still employed by the Company at the
end of the second and third years after the Spin-Off Merger
Effective Time, all as more fully described in the form of
Agreement.
-34-
<PAGE>
10.11 Form of Executive Retention Agreement, filed as an exhibit to
the Company's Registration Statement on Form S-4, File No. 333-
37223, is incorporated herein by reference. The Company has
entered into Executive Retention Agreements in the form of
Agreement filed as Exhibit 10.11 with each of the following
executives: Kenneth C. Dahlberg, Louise L. Francesconi, Robert
L. Horowitz, Donald R. Infante, and Jack O. Pearson. Such
agreements are designed to provide the executive with certain
payments if still employed by the Company at the end of the
second and third years after the Spin-Off Merger Effective
Time, all as more fully described in the form of Agreement.
10.12 Agreement dated as of June 15, 1998 between Raytheon Company
and Daniel P. Burnham, filed as an exhibit to Raytheon's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, is hereby incorporated by reference.
10.13 Agreement dated February 22, 1999 between Raytheon Company and
Franklyn A. Caine, filed as an exhibit to Raytheon's Quarterly
Report on Form 10-Q for the quarter ended April 4, 1999, is
hereby incorporated by reference.
10.14 Amendment dated December 17, 1999 to William H. Swanson's
Change in Control Severance Agreement, filed as an exhibit to
Raytheon's Annual Report on Form 10-K for the year ended
December 31, 1999, is hereby incorporated by reference.
10.15 Retention Agreement between Raytheon Company and Hansel E.
Tookes, II dated as of April 7, 2000.*
10.16 Raytheon Company $4 billion Credit Facility -- Five Year
Competitive Advance and Revolving Credit Facility, filed as an
exhibit to Former Raytheon's Quarterly Report on Form 10-Q for
the quarter ended March 30, 1997, is hereby incorporated by
reference.
10.17 HE Holdings, Inc. $3 billion Credit Facility - Five Year
Competitive Advance and Revolving Credit Facility, filed as an
exhibit to the Company's Registration Statement on Form S-4,
File No. 333-37223, is hereby incorporated by reference.
10.18 Amended and Restated Purchase and Sale Agreement dated as of
March 18, 1999 among Raytheon Aircraft Credit Corporation,
Raytheon Aircraft Receivables Corporation and the Purchasers
named therein, filed as an exhibit to Raytheon's Annual Report
on Form 10-K for the year ended December 31, 1998, is hereby
incorporated by reference.
-35-
<PAGE>
10.19 Amendment and Restatement dated as of November 9, 1999 to the Amended and
Restated Purchase and Sale Agreement dated as of March 18, 1999 among
Raytheon Aircraft Credit Corporation, Raytheon Aircraft Receivables
Corporation and the Purchasers named therein, filed as an exhibit to
Raytheon's Annual Report on Form 10-K for the year ended December 31,
1999 and incorporated by reference.
10.20 Reaffirmation of Amended and Restated Repurchase Agreement dated as of
March 10, 2000 of the Amended and Restated Repurchase Agreement, dated as
of March 18, 1999 made by Raytheon Aircraft Company.*
10.21 First Amendment, dated as of June 27, 2000, to the Second Amended and
Restated Purchase and Sale Agreement, dated as of March 10, 2000, among
Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit
Corporation, Bank of America, N.A., The Chase Manhattan Bank, Citibank,
N.A. and Credit Suisse First Boston.*
10.22 Second Amendment, dated as of October 31, 2000, to the Second Amended and
Restated Purchase and Sale Agreement, dated as of March 10, 2000, among
Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit
Corporation, the Bank of America, N.A., the Chase Manhattan Bank,
Citibank, N.A. and Credit Suisse First Boston.*
10.23 Amended and Restated Guarantee dated as of March 18, 1999, made by
Raytheon Company in favor of the Purchasers named therein and Bank of
America National Trust and Savings Association, as Managing Facility
Agent, filed as an exhibit to Raytheon's Annual Report on Form 10-K for
the year ended December 31, 1998, is hereby incorporated by reference.
10.24 Reaffirmation of Amended and Restated Guarantee dated as of March 10,
2000, of the Amended and Restated Guarantee, dated as of March 18, 1999
made by Raytheon Company.*
10.25 Raytheon Savings and Investment Plan, as amended and restated effective
January 1, 1999, filed as an exhibit to Raytheon's Annual Report on Form
10-K for the year ended December 31, 1999 and incorporated by reference.
10.26 Raytheon Employee Savings and Investment Plan, as amended and restated
effective January 1, 1999, filed as an exhibit to Raytheon's Annual
Report on Form 10-K for the year ended December 31, 1999 and incorporated
by reference.
10.27 Raytheon Excess Savings Plan, filed as an exhibit to Post-Effective
Amendment No. 1 to the Company's Registration Statement on Form S-8, File
No. 333-56117, is hereby incorporated by reference.
10.28 Raytheon Deferred Compensation Plan, filed as an exhibit to Post-
Effective Amendment No. 1 to the Company's Registration Statement on Form
S-8, File No. 333-56117, is hereby incorporated by reference.
13 Raytheon Company 2000 Annual Report to Stockholders (furnished for the
information of the Commission and not to be deemed "filed" as part of
this Report except to the extent that portions thereof are expressly
incorporated herein by reference).*
21 Subsidiaries of Raytheon Company.*
-36-
<PAGE>
23.1 Consent of Independent Accountants.*
23.2 Reports of Independent Accountants.*
(Exhibits marked with an asterisk (*) are filed electronically herewith.)
-37-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RAYTHEON COMPANY
/s/ Franklyn A. Caine
Franklyn A. Caine
Senior Vice President and Chief Financial
Officer for the Registrant
Dated: March 5, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Daniel P. Burnham Chairman and Chief Executive March 5, 2001
- --------------------- Officer (Principal Executive
Daniel P. Burnham Officer)
/s/ Barbara M. Barrett Director March 5, 2001
- ----------------------
Barbara M. Barrett
/s/ Ferdinand Colloredo-Mansfeld Director March 5, 2001
- --------------------------------
Ferdinand Colloredo-Mansfeld
/s/ John M. Deutch Director March 5, 2001
- ------------------
John M. Deutch
Director
- ----------------------
Thomas E. Everhart
/s/ John R. Galvin Director March 5, 2001
- ------------------
John R. Galvin
-38-
<PAGE>
/s/ L. Dennis Kozlowski Director March 5, 2001
- -----------------------
L. Dennis Kozlowski
/s/ Henrique de Campos Meirelles Director March 5, 2001
- --------------------------------
Henrique de Campos Meirelles
/s/ Dennis J. Picard Director March 5, 2001
- --------------------
Dennis J. Picard
/s/ Frederic M. Poses Director March 5, 2001
- ---------------------
Frederic M. Poses
/s/ Warren B. Rudman Director March 5, 2001
- --------------------
Warren B. Rudman
Director
- ------------------------
Michael C. Ruettgers
/s/ William R. Spivey Director March 5, 2001
- ---------------------
William R. Spivey
Director
- -------------------
Alfred M. Zeien
/s/ Edward S. Pliner Vice President and Corporate March 5, 2001
- -------------------- Controller (Chief Accounting
Edward S. Pliner Officer)
-39-
<PAGE>
RAYTHEON COMPANY
----------------
SCHEDULE II - RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
-------------------------------------------
(In millions)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
Balance at Balance at
beginning Charged to costs Charged to other Deductions end of
Description of period and expenses accounts Note (1) period
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31 2000:
Allowance for doubtful
accounts receivable $26.6 $3.9 - $7.6 $22.9
Year ended December 31 1999:
Allowance for doubtful
accounts receivable $20.8 $8.3 - $2.5 $26.6
Year ended December 31 1998:
Allowance for doubtful
accounts receivable $21.7 $3.6 - $4.5 $20.8
</TABLE>
Note (1) - Uncollectible accounts and adjustments, less recoveries
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated as of January 16, 1997 by and
between Raytheon Company and HE Holdings, Inc., filed as an
exhibit to Former Raytheon's Current Report on Form 8-K filed
with the Securities and Exchange Commission on January 17, 1997,
is hereby incorporated by reference.
2.2 Hughes Spin-Off Separation Agreement dated as of December 17,
1997 by and between HE Holdings, Inc. and General Motors
Corporation filed as an exhibit to the Company's Registration
Statement on Form S-3, File No. 333-44321, is hereby incorporated
by reference.
3.1 Raytheon Company Restated Certificate of Incorporation, restated
as of February 11, 1998 filed as an exhibit to Raytheon's Annual
Report on Form 10-K for the year ended December 31, 1997, is
hereby incorporated by reference.
3.2 Raytheon Company Amended and Restated By-Laws, as amended through
January 28, 1998 filed as an exhibit to Raytheon's Annual Report
on Form 10-K for the year ended December 31, 1997, is hereby
incorporated by reference.
4.1 Indenture dated as of July 3, 1995 between Raytheon Company and
The Bank of New York, Trustee, filed as an exhibit to Former
Raytheon's Registration Statement on Form S-3, File No. 33-59241,
is hereby incorporated by reference.
4.2 Supplemental Indenture dated as of December 17, 1997 between
Raytheon Company and The Bank of New York, Trustee filed as an
exhibit to Raytheon's Annual Report on Form 10-K for the year
ended December 31, 1997, is hereby incorporated by reference.
4.3 Rights Agreement dated as of December 15, 1997 between the
Company and State Street Bank and Trust Company, as Rights Agent,
filed as an exhibit to the Company's Registration Statement on
Form 8-A, File No. 1-13699, is hereby incorporated by reference.
10.1 Raytheon Company 1976 Stock Option Plan, as amended, filed as an
exhibit to the Company's Registration Statement on Form S-8, File
No. 333-45629, is hereby incorporated by reference.
10.2 Raytheon Company 1991 Stock Plan, as amended, filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter
ended July 4, 1999, is hereby incorporated by reference.
10.3 Raytheon Company 1995 Stock Option Plan, as amended, filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 4, 1999, is hereby incorporated by reference.
10.4 Plan for Granting Stock Options in Substitution for Stock Options
Granted by Texas Instruments Incorporated, filed as an exhibit to
the Company's Registration Statement on Form S-8, File No. 333-
45629, is hereby incorporated by reference.
10.5 Plan for Granting Stock Options in Substitution for Stock Options
Granted by Hughes Electronics Corporation, filed as an exhibit to
the Company's Registration Statement on Form S-8, File No. 333-
45629, is hereby incorporated by reference.
<PAGE>
10.6 Raytheon Company 1997 Nonemployee Directors Restricted Stock
Plan, filed as an exhibit to the Company's Registration
Statement on Form S-8, File No. 333-45629, is hereby
incorporated by reference.
10.7 Raytheon Company Deferral Plan for Directors, filed as an
exhibit to Former Raytheon's Registration Statement on Form S-8,
File No. 333-22969, is hereby incorporated by reference.
10.8 Form of Raytheon Company Change in Control Severance Agreement,
filed as an exhibit to Former Raytheon's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, is hereby
incorporated by reference. The Company has entered into Change
in Control Severance Agreements in the form of Agreement filed
as Exhibit 10.8 with each of the following executives: Franklyn
A. Caine, Francis S. Marchilena and William H. Swanson. The
agreements are designed to provide the executive with certain
severance benefits following a termination, all as more fully
described in the form of Agreement. The Company has also entered
into Change in Control Severance Agreements in the form of
Agreement filed as Exhibit 10.8 with six other executives, but
which are immaterial to the Company. The agreements are designed
to provide the executive with certain severance benefits
following a termination, all as more fully described in the form
of Agreement.
10.9 Restricted Unit Award Agreement between the Company and Dennis
J. Picard, filed as an exhibit to Former Raytheon's Quarterly
Report on Form 10-Q for the quarter ended June 29, 1997, is
hereby incorporated by reference.
10.10 Form of Executive Change in Control Severance Agreement, filed
as an exhibit to the Company's Registration Statement on Form S-
4, File No. 333-37223, is incorporated herein by reference. The
Company has entered into Executive Change in Control Severance
Agreements in the form of Agreement filed as Exhibit 10.10 with
each of the following executives: Kenneth C. Dahlberg, Louise L.
Francesconi, Robert L. Horowitz, Donald R. Infante and Jack O.
Pearson. Such agreements are designed to provide the executive
with certain payments if still employed by the Company at the
end of the second and third years after the Spin-Off Merger
Effective Time, all as more fully described in the form of
Agreement.
<PAGE>
10.11 Form of Executive Retention Agreement, filed as an exhibit to
the Company's Registration Statement on Form S-4, File No. 333-
37223, is incorporated herein by reference. The Company has
entered into Executive Retention Agreements in the form of
Agreement filed as Exhibit 10.11 with each of the following
executives: Kenneth C. Dahlberg, Louise L. Francesconi, Robert
L. Horowitz, Donald R. Infante, and Jack O. Pearson. Such
agreements are designed to provide the executive with certain
payments if still employed by the Company at the end of the
second and third years after the Spin-Off Merger Effective
Time, all as more fully described in the form of Agreement.
10.12 Agreement dated as of June 15, 1998 between Raytheon Company
and Daniel P. Burnham, filed as an exhibit to Raytheon's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, is hereby incorporated by reference.
10.13 Agreement dated February 22, 1999 between Raytheon Company and
Franklyn A. Caine, filed as an exhibit to Raytheon's Quarterly
Report on Form 10-Q for the quarter ended April 4, 1999, is
hereby incorporated by reference.
10.14 Amendment dated December 17, 1999 to William H. Swanson's
Change in Control Severance Agreement, filed as an exhibit to
Raytheon's Annual Report on Form 10-K for the year ended
December 31, 1999, is hereby incorporated by reference.
10.15 Retention Agreement between Raytheon Company and Hansel E.
Tookes, II dated as of April 7, 2000.*
10.16 Raytheon Company $4 billion Credit Facility -- Five Year
Competitive Advance and Revolving Credit Facility, filed as an
exhibit to Former Raytheon's Quarterly Report on Form 10-Q for
the quarter ended March 30, 1997, is hereby incorporated by
reference.
10.17 HE Holdings, Inc. $3 billion Credit Facility - Five Year
Competitive Advance and Revolving Credit Facility, filed as an
exhibit to the Company's Registration Statement on Form S-4,
File No. 333-37223, is hereby incorporated by reference.
10.18 Amended and Restated Purchase and Sale Agreement dated as of
March 18, 1999 among Raytheon Aircraft Credit Corporation,
Raytheon Aircraft Receivables Corporation and the Purchasers
named therein, filed as an exhibit to Raytheon's Annual Report
on Form 10-K for the year ended December 31, 1998, is hereby
incorporated by reference.
<PAGE>
10.19 Amendment and Restatement dated as of November 9, 1999 to the Amended and
Restated Purchase and Sale Agreement dated as of March 18, 1999 among
Raytheon Aircraft Credit Corporation, Raytheon Aircraft Receivables
Corporation and the Purchasers named therein, filed as an exhibit to
Raytheon's Annual Report on Form 10-K for the year ended December 31,
1999 and incorporated by reference.
10.20 Reaffirmation of Amended and Restated Repurchase Agreement dated as of
March 10, 2000 of the Amended and Restated Repurchase Agreement, dated as
of March 18, 1999 made by Raytheon Aircraft Company.*
10.21 First Amendment, dated as of June 27, 2000, to the Second Amended and
Restated Purchase and Sale Agreement, dated as of March 10, 2000, among
Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit
Corporation, Bank of America, N.A., The Chase Manhattan Bank, Citibank,
N.A. and Credit Suisse First Boston.*
10.22 Second Amendment, dated as of October 31, 2000, to the Second Amended and
Restated Purchase and Sale Agreement, dated as of March 10, 2000, among
Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit
Corporation, the Bank of America, N.A., the Chase Manhattan Bank,
Citibank, N.A. and Credit Suisse First Boston.*
10.23 Amended and Restated Guarantee dated as of March 18, 1999, made by
Raytheon Company in favor of the Purchasers named therein and Bank of
America National Trust and Savings Association, as Managing Facility
Agent, filed as an exhibit to Raytheon's Annual Report on Form 10-K for
the year ended December 31, 1998, is hereby incorporated by reference.
10.24 Reaffirmation of Amended and Restated Guarantee dated as of March 10,
2000, of the Amended and Restated Guarantee, dated as of March 18, 1999
made by Raytheon Company.*
10.25 Raytheon Savings and Investment Plan, as amended and restated effective
January 1, 1999, filed as an exhibit to Raytheon's Annual Report on Form
10-K for the year ended December 31, 1999 and incorporated by reference.
10.26 Raytheon Employee Savings and Investment Plan, as amended and restated
effective January 1, 1999, filed as an exhibit to Raytheon's Annual
Report on Form 10-K for the year ended December 31, 1999 and incorporated
by reference.
10.27 Raytheon Excess Savings Plan, filed as an exhibit to Post-Effective
Amendment No. 1 to the Company's Registration Statement on Form S-8, File
No. 333-56117, is hereby incorporated by reference.
10.28 Raytheon Deferred Compensation Plan, filed as an exhibit to Post-
Effective Amendment No. 1 to the Company's Registration Statement on Form
S-8, File No. 333-56117, is hereby incorporated by reference.
13 Raytheon Company 2000 Annual Report to Stockholders (furnished for the
information of the Commission and not to be deemed "filed" as part of
this Report except to the extent that portions thereof are expressly
incorporated herein by reference).*
21 Subsidiaries of Raytheon Company.*
23.1 Consent of Independent Accountants.*
23.2 Reports of Independent Accountants.*
(Exhibits marked with an asterisk (*) are filed electronically herewith.)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>HANSEL TOOKES RETENTION AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.15
Raytheon Keith J. Peden Raytheon Company
Vice President and Deputy Executive Offices
Director Human Resources 141 Spring Street
781 860 2380 Lexington, Massachusetts
781 860 2912 fax 02421 USA
April 7, 2000
Mr. Hansel Tookes II
834 Glenmoor
Wichita, KS 67206
Re: Retention Bonus
---------------
Dear Hansel:
Raytheon Company ("Raytheon") is exploring various alternatives with
respect to Raytheon Aircraft Company ( "RAC") which may include a Change In
Control ("CIC"). This letter sets forth the special incentive arrangement and
conditions for which you will be eligible in connection with your continued
employment and cooperation in the event of a CIC as that term is defined below.
Raytheon will decide in its sole discretion if and when it will proceed
with a restructuring or transaction that may involve a CIC, and the terms and
conditions of such a transaction. Nothing contained herein shall obligate
Raytheon to enter into any transaction at this or any other time.
1. Change In Control. For the purposes of this Retention Bonus
-----------------
Agreement, a "Change In Control" is defined exclusively as the consummation of:
(i) the sale of more than fifty percent (50%) of the gross asset value of
RAC, or
(ii) any consolidation or merger of RAC or sale of voting securities of
RAC, other than a consolidation or merger with or sale of voting
securities to Raytheon or an Affiliate of Raytheon (a "Stock
Transaction"), such that, after any such Stock Transaction, Raytheon,
or an Affiliate of Raytheon, owns less than 50% of the combined voting
power of the voting securities of RAC outstanding immediately after
such stock transaction, provided, however, that any spin-out, spin-
off, initial public offering or similar transaction involving RAC
shall not constitute a Stock Transaction.
For purposes hereof, "Affiliate" shall mean, with respect to any specified
person, a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
person specified, and the term "control" and any term derived therefrom shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contract, or otherwise.
<PAGE>
-2-
2. You agree to assist and fully cooperate with Raytheon and RAC in all
matters related to Raytheon's efforts to effect a CIC, and to do and perform all
tasks reasonably requested of you to support and bring about such CIC.
3. 2000 Results Based Incentive ("RBI") Bonus. You shall be eligible for
------------------------------------------
an RBI Bonus consistent with the terms of the performance measures of the 2000
RBI Bonus Plan, as adjusted if the CIC occurs during the RBI measuring period.
4. Transaction Incentive: At this point, the Company is exploring a
----------------------
number of possibilities regarding the future of RAC. We believe that the success
of any such transaction will be positively influenced by your efforts. Set forth
below is a summary of the incentives the Company commits to related to the
impact of a CIC on your personal circumstances.
(a) CIC Event and You Remain With Raytheon: If the transaction involving
--------------------------------------
RAC constitutes a CIC as defined in Paragraph 1(i) and after the
Closing Date you continue as an executive of Raytheon, you will be
entitled to the following:
(i) three (3) times the sum of your annual base salary and targeted
2000 RBI Bonus pursuant to the terms of your offer letter
[Note: payment of this bonus is in lieu of the
severance/retirement transition payment set forth in your offer
letter]; and
(ii) payment of the Transaction Value Incentive ("TVI") pursuant to
the schedule in Paragraph 5 below.
(b) CIC Event and Raytheon Has No Continuing Interest in New Entity: If
---------------------------------------------------------------
the transaction involving RAC constitutes a CIC as defined in
Paragraph 1(i), you are no longer an executive with Raytheon or an
Affiliate after the Closing Date, and Raytheon does not have a
financial interest in the new entity, you shall be entitled to the
following:
(i) three (3) times the sum of your annual base salary and targeted
2000 RBI Bonus pursuant to the terms of your offer letter
[Note: payment of this bonus is in lieu of the
severance/retirement transition payment set forth in your offer
letter];
(ii) the retirement benefit provision of your offer letter,
including an offset of any pension benefit accrued from the new
entity;
(iii) the restrictions on your restricted shares shall lapse as of
the Closing Date and be payable within twenty (20) days of that
date; and
(iv) payment of the TVI pursuant to the schedule in Paragraph 5
below.
(c) CIC Event and Raytheon Has a Continuing Interest in New Entity: If the
--------------------------------------------------------------
transaction involving RAC constitutes a CIC as defined in Paragraph
1(ii),
<PAGE>
-3-
and Raytheon continues to have a financial interest in the new
entity, and you are assigned to a position with the new entity
comparable to the one you currently hold, you shall be entitled to the
following:
(i) three (3) times the sum of your annual base salary and targeted
2000 RBI Bonus pursuant to the terms of your offer letter [Note:
payment of this bonus is in lieu of the severance/retirement
transition payment set forth in your offer letter];
(ii) the retirement benefit provision of your offer letter, including
an offset of any additional pension benefit accrued from the new
entity;
(iii) the restrictions on your current restricted shares shall lapse
according to the following schedule:
(A) the restrictions on twenty-five percent (25%) of these
shares shall lapse on the Closing Date and be valued as of
the closing price on that date, and will be paid within
twenty (20) days thereafter;
(B) the restrictions on twenty-five percent (25%) of these
shares shall lapse as of the first anniversary of the
Closing Date and be valued at the closing price on that
date, and will be paid within twenty (20) days thereafter;
and
(C) the restrictions on fifty percent (50%) of these shares
shall lapse as of the second anniversary of the Closing Date
and be valued as of the closing price on that date, and will
be paid within twenty (20) days thereafter.
(iv) payment of the TVI pursuant to the schedule in Paragraph 5
below.
If at the Closing Date you refuse an offer of a comparable position
with the new entity and do not remain as an executive of Raytheon, you
will be entitled to only the benefits set forth in Paragraphs 4(b)(i),
(ii) and (iv).
If, prior to the second anniversary of the Closing Date, you are
terminated by the new entity without cause, or you voluntarily leave
the employment of the new entity as a direct result of a significant
reduction in the duties, responsibilities and reporting requirements
from the position you are assigned immediately following the Closing
Date, the restrictions on the remaining shares shall lapse effective
the last day worked, valued as of the closing price on that date and
paid within twenty (20) days thereafter.
For purposes of this paragraph, "cause" is defined as:
(i) failure to perform any of the material duties of the position
with the acquiring entity, including special projects and
assignments, after notice and a reasonable opportunity to
correct performance; or
<PAGE>
-4-
(ii) breach of any material provision of the acquiring entity's
standards of business behavior and ethics; or
(iii) conviction of, or plea of nolo contendere to, any felony or
misdemeanor which has a material impact on your ability to
perform the duties of your position.
(d) CIC Event and You Are Offered a Non-Comparable Position With New
----------------------------------------------------------------
Entity: If the RAC transaction constitutes a CIC as defined in
------
Paragraph 1(i), and Raytheon continues to have a financial interest in
the new entity, and you are assigned to a position with the new entity
that is not comparable to the one you currently hold, you will be
entitled to the benefits set forth in Paragraph 4(b) above.
5. Transaction Value Incentive. In addition to the Retention Bonus set
---------------------------
forth in Paragraph 4, you shall also be eligible for a TVI award based on the
following schedule:
Aggregate Consideration ("AC") TVI
------------------------------ ---
$100,000.00
$200,000.00
$300,000.00
$400,000.00
$500,000.00
For purposes of this Agreement, the term "Aggregate Consideration" shall mean
the total fair market value (at the time of closing) of all consideration
(including cash, securities, property, any debt on the Company's financial
statements at closing and other indebtedness and obligations assumed by the new
entity and any other form of consideration) paid or payable, or otherwise to be
distributed, directly or indirectly, to Raytheon or RAC in connection with the
sale.
6. Excise Tax Payment. In the event that you are subject to federal
------------------
excise tax as a result of receipt of the payments set forth in Paragraphs 4
and/or 5, you shall receive the benefits outlined in Attachment A related to
excise tax treatment.
7. Confidentiality. You agree to keep confidential this agreement and
----------------
not to disclose either the fact of the agreement or the terms thereof, except
where necessary to members of your immediate family, tax or legal advisors, and
as required in response to a valid subpoena or court order.
8. Arbitration of Claims. The parties agree that any disputes arising
----------------------
during the term of your employment with Raytheon and/or RAC, including but not
limited to any claims arising under the terms of this Agreement, shall be
subject to final and binding arbitration as the sole and exclusive forum for
dispute resolution. Arbitration under this section shall be conducted pursuant
to the rules of the American Arbitration Association applicable to employment
disputes.
<PAGE>
-5-
Please acknowledge your acceptance of the terms and conditions of this
Retention Bonus Agreement by signing below.
Very truly yours,
Raytheon Company
By /s/ Keith J. Peden
--------------------------------------
Keith J. Peden
Vice President and Deputy Director
Human Resources
AGREED AND ACCEPTED:
/s/ Hansel Tookes II Date: 22 August 2000
- -------------------------------------- -------------------------
Hansel Tookes II
<PAGE>
ATTACHMENT A
TAX PAYMENTS
------------
1 Excise Tax Payments. (i) If it is determined that any payment by the
-------------------
Company to you pursuant to Paragraphs 4 and/or 5 of the foregoing letter
agreement ( "Payment") would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by you with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
you shall be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by you of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions, if it is determined that you are
entitled to a Gross-Up Payment, but that, after taking into account the Payments
and the Gross-Up Payment, you would not receive a net after-tax benefit of at
least $50,000 (taking into account both income taxes and any Excise Tax) as
compared to the net after-tax proceeds to you resulting from an elimination of
the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to you, and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.
(ii) Subject to the provisions of Subsection (iii), all determinations required
to be made under this Section, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers or such other certified public accounting firm as may be
designated by you (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and you within 15 business days of
the receipt of notice from you that there has been a Payment, or such earlier
time as is requested by the Company. If the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, you shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section, shall be paid to you by the Company within
five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and you.
As a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. If the Company exhausts its remedies pursuant to
Subsection (iii) and you thereafter are required to make a payment of any Excise
Tax,
<PAGE>
-2-
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to you
or for your benefit.
(iii) You shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given to the Senior Vice
President, Human Resources, 141 Spring Street, Lexington, MA 02421, as soon as
practicable but no later than ten business days after you are informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. You shall not pay such
claim prior to the expiration of the 30-day period following the date on which
it gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company
notifies you in writing prior to the expiration of such period that it desires
to contest such claim, you shall:
(a) give the Company any information reasonable requested by the Company
relating to such claim,
(b) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(c) cooperate with the Company in good faith in order effectively to
contest such claim, and
(d) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold you harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Subsection
(iii), the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct you to pay the
tax claimed and sue for a refund or to contest the claim in any permissible
manner, and you agree to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs you to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to you, on an interest-free basis, and shall
indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties
<PAGE>
-3-
with respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for your
taxable year with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder, and you shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(iv) If, after the receipt by you of an amount advanced by the Company pursuant
to Subsection (iii), you become entitled to receive any refund with respect to
such claim, you shall (subject to the Company's complying with the requirements
of Subsection (iii) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If after the receipt by you of an amount advanced by the Company
pursuant to Subsection (iii), a determination is made that you shall not be
entitled to any refund with respect to such claim and the Company does not
notify you in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
2 Tax Withholding. The Company may withhold from any amounts payable under
---------------
the foregoing letter agreement such federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>REAFFIRMATION OF AMENDED & RESTATED REPURCHASE AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.20
REAFFIRMATION OF
AMENDED AND RESTATED REPURCHASE AGREEMENT
REAFFIRMATION OF AMENDED AND RESTATED REPURCHASE AGREEMENT, dated as
of March 10, 2000, (this "Reaffirmation") of the Amended and Restated Repurchase
-------------
Agreement, dated as of March 18, 1999 (the "Repurchase Agreement"), made by
--------------------
Raytheon Aircraft Company, a Kansas corporation ("RAC"), in favor of the
---
Purchasers referred to therein and Bank of America National Trust and Savings
Association, as managing facility agent (in such capacity, the "Managing
--------
Facility Agent") for such Purchasers.
- --------------
WHEREAS, pursuant to the Amended and Restated Purchase and Sale
Agreement, dated as of March 18, 1999 (as hereto amended, modified or otherwise
supplemented) (the "Purchase Agreement"), among Raytheon Aircraft Receivables
------------------
Corporation, a Kansas corporation (the "Seller"), Raytheon Aircraft Credit
------
Corporation ("Raytheon Credit"), as Servicer (as defined therein), the financial
---------------
institutions and special purpose corporations from time to time parties thereto
(the "Purchasers"), Bank of America National Trust and Savings Association, as
----------
Managing Facility Agent (in such capacity, the "Managing Facility Agent") and
-----------------------
Documentation Agent for the Purchasers, Bank of America National Trust and
Savings Association and the Chase Manhattan Bank, as Co-Administrative Agents
for the Purchasers (each in such capacity, a "Co-Administrative Agent"), The
-----------------------
Chase Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication
-----------
Agent"), Citibank, N.A. and Credit Suisse First Boston, as Co-Syndication Agents
- -----
(each in such capacity, a "Co-Syndication Agent"), and each Administrative Agent
--------------------
referred to therein, RAC entered into the Repurchase Agreement;
WHEREAS, the Purchase Agreement is being amended and restated by the
Second Amended and Restated Purchase and Sale Agreement (the "Amended Purchase
----------------
Agreement"), dated as of March 10, 2000, among Raytheon Aircraft Receivables
- ---------
Corporation, a Kansas corporation (the "Seller"), Raytheon Aircraft Credit
------
Corporation ("Raytheon Credit"), as Servicer (as defined therein), the financial
---------------
institutions and special purpose corporations from time to time parties thereto
(the "Purchasers"), Bank of America, N.A., formerly known as Bank of America
----------
National Trust and Savings Association, as Managing Facility Agent for the
Purchasers (in such capacity, the "Managing Facility Agent"), The Chase
-----------------------
Manhattan Bank and Bank of America, N.A., as Co-Administrative Agents for the
Purchasers (in such capacity, a "Co-Administrative Agent"), The Chase Manhattan
-----------------------
Bank, as Syndication Agent (in such capacity, the "Syndication Agent"),
-----------------
Citibank, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (in such
capacity, a "Co-Syndication Agent") and each Administrative Agent referred
--------------------
therein;
WHEREAS, it is a condition precedent to the effectiveness of the
Amended Purchase Agreement that RAC shall have executed and delivered this
Reaffirmation to the Managing Facility Agent;
WHEREAS, RAC desires to consent to the amendments to the Purchase
Agreement and to reaffirm its obligations under the Repurchase Agreement;
NOW THEREFORE, in consideration of the foregoing and to induce the
Managing Facility Agent, the Co-Agents, the Agents and the Purchasers to enter
into the Second
<PAGE>
2
Amended and Restated Purchase and Sale Agreement and to induce the Purchasers to
make their respective purchasers from the Seller under the Second Amended and
Restated Purchase and Sale Agreement, RAC hereby agrees as follows:
1. Defined Terms. Capitalized terms used herein but not defined shall
-------------
have the meanings given to such terms in the Repurchase Agreement.
2. Consent and Reaffirmation. RAC hereby consents to the amendments to
-------------------------
the Purchase Agreement and to the execution of the Amended Purchase Agreement by
Raytheon Credit and the Seller and hereby reaffirms it obligations under the
Repurchase Agreement.
3. Amendment to Section 3. Section 3 of the Repurchase Agreement is
----------------------
hereby amended by deleting "tenth" from the first sentence of such section and
inserting in lieu thereof "twentieth".
(End of Page)
<PAGE>
3
IN WITNESS WHEREOF, RAC has caused this Reaffirmation to be duly
executed and delivered by its proper and duly authorized officer as of the day
and year first written above.
RAYTHEON AIRCRAFT COMPANY
By:____________________________
Name:
Title:
Acknowledged By:
BANK OF AMERICA, N.A.,
as Managing Facility Agent
By:____________________________
Name:
Title
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>1ST AMENDMENT TO 2ND AMENDED & RESTATED P&S AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.21
EXECUTION COPY
--------------
FIRST AMENDMENT
FIRST AMENDMENT, dated as of June 27, 2000 (this "Amendment"), to the
---------
SECOND AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT, dated as of March 10,
2000 (the "Purchase and Sale Agreement"), among RAYTHEON AIRCRAFT RECEIVABLES
---------------------------
CORPORATION, a Kansas corporation (the "Seller"), RAYTHEON AIRCRAFT CREDIT
------
CORPORATION ("Raytheon Credit"), as Servicer (as defined herein), the financial
---------------
institutions and special purpose corporations from time to time parties thereto
(the "Purchasers"), BANK OF AMERICA, N.A., as Managing Facility Agent for the
----------
Purchasers (in such capacity, the "Managing Facility Agent"), THE CHASE
-----------------------
MANHATTAN BANK and BANK OF AMERICA, N.A., as Co-Administrative Agents for the
Purchasers (each in such capacity, a "Co-Administrative Agent"), THE CHASE
-----------------------
MANHATTAN BANK, as Syndication Agent (in such capacity, the "Syndication
-----------
Agent"), CITIBANK, N.A. and CREDIT SUISSE FIRST BOSTON, as Co-Syndication Agents
- -----
(each in such capacity, a "Co-Syndication Agent") and each Administrative Agent
--------------------
referred to therein.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Purchase and Sale Agreement, the Purchasers have
agreed to purchase, and have purchased, certain Receivables from the Seller;
WHEREAS, the Seller has requested that the Purchasers and the Managing
Facility Agent amend the Purchase and Sale Agreement in certain ways; and
WHEREAS, the Purchasers, the Seller, the Servicer, the Managing Facility
Agent, RAC and Raytheon desire to amend the Purchase and Sale Agreement in the
manner specified herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
Defined Terms. Terms defined in the Purchase and Sale Agreement and
-------------
used herein shall have the meanings given to them in the Purchase and
Sale Agreement.
Amendments to Definition of Consolidated Net Income (Subsection 1.1 of
----------------------------------------------------------------------
the Purchase and Sale Agreement). The definition of "Consolidated Net
--------------------------------
Income" appearing in subsection 1.1 of the Purchase and Sale Agreement
is hereby amended by (i) deleting the word "and" appearing before the
third clause thereof and by inserting, in lieu thereof, a comma and
(ii) by adding to the end thereof, before the period mark, the
following:
"and (iv) for the fiscal quarter of Raytheon and its consolidated
Subsidiaries ending July 2, 2000, such Consolidated Net Income shall be
increased by $191,000,000 representing one-time charges recorded in
connection with Raytheon Engineers and Constructors".
3. Affirmation of Repurchase Agreement. RAC hereby consents to the
-----------------------------------
foregoing amendment to the Purchase and Sale Agreement set forth herein and
reaffirms its obligations under the Repurchase Agreement.
<PAGE>
4. Affirmation of Guarantee. The Guarantor hereby consents to
------------------------
the foregoing amendment to the Purchase and Sale Agreement set forth herein and
reaffirms its obligations under the Guarantee.
5. Conditions to Effectiveness. This Amendment shall become
---------------------------
effective on the date (the "Amendment Effective Date") on which the Seller, the
------------------------
Servicer, RAC, Raytheon, the Managing Facility Agent, each Co-Administrative
Agent and the Majority Purchasers shall have executed and delivered this
Amendment to the Managing Facility Agent.
6. Representation and Warranties. (a) By the Seller. To induce
----------------------------- -------------
the Managing Facility Agent, the Co-Administrative Agent and the Purchasers to
enter into this Amendment, the Seller hereby represents and warrants to the
Managing Facility Agent, the Co-Administrative Agents and the Purchasers as of
the Amendment Effective Date that:
Reaffirmation. As of the date hereof and after giving effect
to this Amendment, the representations and warranties set
forth in Section 4 of the Purchase and Sale Agreement and
Sections 3.1(b) and 3.2 of the Intercompany Purchase Agreement
are true and correct in all material respects; and
No Amortization Event. After giving effect to this Amendment,
no Amortization Event shall have occurred and be continuing.
By the Servicer. To induce the Managing Facility Agent, the Co-
---------------
Administrative Agent and the Purchasers to enter into this
Amendment, the Servicer hereby represents and warrants to the
Managing Facility Agent, the Co-Administrative Agents and the
Purchasers as of the Amendment Effective Date that:
Reaffirmation. As of the date hereof and after giving effect
to this Amendment, the representations and warranties set
forth in Section 4 of the Purchase and Sale Agreement and
Sections 3.1(b) and 3.2 of the Intercompany Purchase Agreement
are true and correct in all material respects; and
No Amortization Event. After giving effect to this Amendment,
no Amortization Event shall have occurred and be continuing.
By RAC. To induce the Managing Facility Agent, the Co-
------
Administrative Agent and the Purchasers parties hereto to enter
into this Amendment, RAC hereby represents and warrants to the
Managing Facility Agent, the Co-Administrative Agents and the
Purchasers as of the Amendment Effective Date that as of the date
hereof and after giving effect to this Amendment, the
representations and warranties set forth in Section 9 of the
Repurchase Agreement are true and correct in all material
respects.
<PAGE>
By Raytheon. To induce the Managing Facility Agent, the Co-
-----------
Administrative Agent and the Purchasers to enter into this
Amendment, Raytheon hereby represents and warrants to the
Managing Facility Agent, the Co-Administrative Agents and the
Purchasers as of the Amendment Effective Date that as of the date
hereof and after giving effect to this Amendment, the
representations and warranties set forth in Section 9 of the
Guarantee are true and correct in all material respects.
2. Payment of Expenses. Raytheon agrees to pay or reimburse the
--------------------
Managing Facility Agent and each Co-Administrative Agent for all its respective
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Amendment and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Managing Facility Agent and the Co-
Administrative Agents.
3. Counterparts. This Amendment may be executed by one or more
-------------
of the parties to this Amendment on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the Seller and the Managing Facility Agent.
4. Severability; Headings. Any provision of this Amendment
----------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. The section and
subsection headings used in this Amendment are for convenience of reference only
and are not to affect the construction hereof or to be taken into consideration
in the interpretation hereof.
10. Continuing Effect of Other Documents. This Amendment shall
------------------------------------
not constitute an amendment or waiver of any other provision of the Purchase and
Sale Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of the Seller or
the Servicer that would require a waiver or consent of the Purchasers, the
Managing Facility Agent or the Co-Administrative Agents. Except as expressly
amended, modified and supplemented hereby, the provisions of each Purchase
Document and the other documents executed pursuant to the Purchase Documents are
and shall remain in full force and effect.
11. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
RAYTHEON AIRCRAFT RECEIVABLES CORPORATION,
as Seller
By:
Name:
Title:
RAYTHEON AIRCRAFT CREDIT CORPORATION,
as Servicer
By:
Name:
Title:
BANK OF AMERICA, N.A.,
as Managing Facility Agent and Co-Administrative
Agent
By:
Name:
Title: Vice President
THE CHASE MANHATTAN BANK,
as Co-Administrative Agent and Syndication Agent
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
UBS AG, STAMFORD BRANCH,
solely as Administrative Agent
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANK HAPOALIM
By:
Name:
Title:
By:
Name:
Title
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: RECEIVABLES CAPITAL CORPORATION
By:
Name:
Title:
SPC BANK: BANK OF AMERICA, N.A.
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANK OF NOVA SCOTIA
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
THE BANK OF NEW YORK
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: BANNER RECEIVABLES CORPORATION
By:
Name:
Title:
SPC BANK: BANK OF TOKYO - MITSUBISHI, LTD.
By:
Name:
Title:
BAYERISCHE LANDESBANK
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
By:
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
THE CHASE MANHATTAN BANK
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
SPC: CHARTA CORPORATION
By: CITICORP NORTH AMERICA, INC.,
as Attorney-in-Fact
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
SPC BANK: CITIBANK, N.A.
By:
Name:
Title:
SPC: FOUR WINDS FUNDING CORPORATION
By: Commerzbank AG, New York Branch,
as Attorney-in-Fact
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
SPC BANK: COMMERZBANK AG, NEW YORK BRANCH
By:
Name:
Title:
By:
Name:
Title:
SPC: ALPINE SECURITIZATION CORP.
By: CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH, as Attorney-in-Fact
By:
Name:
Title:
By:
Name:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
Title:
SPC BANK: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH
By:
Name:
Title:
By:
Name:
Title:
DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS
BRANCH
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: FALCON ASSET SECURITIZATION CORPORATION
By:
Name:
Title:
SPC BANK: BANK ONE, NA
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: THREE RIVERS FUNDING CORPORATION
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
NATIONAL WESTMINSTER BANK Plc
NEW YORK BRANCH
By:
Name:
Title:
NATIONAL WESTMINSTER BANK Plc
NASSAU BRANCH
By:
Name:
Title:
WACHOVIA BANK, N.A.
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: QUINCY CAPITAL CORPORATION
By:
Name:
Title:
SPC BANK: WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By:
Name:
Title:
By:
Name:
Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
SPC: EAGLEFUNDING CAPITAL CORP.
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
SPC BANK: FLEETBOSTON
By:
Name:
Title:
SOCIETE GENERALE
By:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
Name:
Title:
SPC: VARIABLE FUNDING CAPITAL CORPORATION
By: First Union Capital Markets, a division of Wheat First Security Inc., as
attorney-in-fact
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
SPC BANK: FIRST UNION NATIONAL BANK
By:
Name:
Title:
SPC: ATLANTIC ASSET SECURITIZATION CORP.
By: CREDIT LYONNAIS NEW YORK BRANCH,
as Attorney-in-Fact
By:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
Name:
Title:
SPC BANK: CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:
KBC BANK NV
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
SPC: BAVARIA UNIVERSAL FUNDING CORPORATION
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC BANK: BAYERISCHE HYPO-UND VEREINSBANK AG
By:
Name:
Title:
By:
Name:
Title:
DEUTSCHE BANK AG, NEW YORK A/O CAYMAN ISLAND BRANCHES
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
By:
Name:
Title:
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By:
Name:
Title:
By:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
Name:
Title:
BANCA POPOLARE DI MILANO
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANCA NATIONALE DEL LAVORO
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BNP PARIBAS
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
THE FUJI BANK, LIMITED
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
RAYTHEON COMPANY
By:
Name:
Title:
<PAGE>
First Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
RAYTHEON COMPANY
By:
Name:
Title:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>2ND AMENDMENT TO THE 2ND AMENDED & RESTATED P&S AG
<TEXT>
<PAGE>
EXHIBIT 10.22
EXECUTION COPY
--------------
SECOND AMENDMENT
SECOND AMENDMENT, dated as of October 31, 2000 (this "Amendment"), to the
---------
SECOND AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT, dated as of March 10,
2000 (the "Purchase and Sale Agreement"), among RAYTHEON AIRCRAFT RECEIVABLES
---------------------------
CORPORATION, a Kansas corporation (the "Seller"), RAYTHEON AIRCRAFT CREDIT
------
CORPORATION ("Raytheon Credit"), as Servicer (as defined herein), the financial
---------------
institutions and special purpose corporations from time to time parties thereto
(the "Purchasers"), BANK OF AMERICA, N.A., as Managing Facility Agent for the
----------
Purchasers (in such capacity, the "Managing Facility Agent"), THE CHASE
-----------------------
MANHATTAN BANK and BANK OF AMERICA, N.A., as Co-Administrative Agents for the
Purchasers (each in such capacity, a "Co-Administrative Agent"), THE CHASE
-----------------------
MANHATTAN BANK, as Syndication Agent (in such capacity, the "Syndication
-----------
Agent"), CITIBANK, N.A. and CREDIT SUISSE FIRST BOSTON, as Co-Syndication Agents
- -----
(each in such capacity, a "Co-Syndication Agent") and each Administrative Agent
--------------------
referred to therein.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Purchase and Sale Agreement, the Purchasers have
agreed to purchase, and have purchased, certain Receivables from the Seller;
WHEREAS, the Seller has requested that the Purchasers purchase Receivables
the maturity date of which and the date of delivery of the Financed Aircraft
related thereto are no later than six months after the invoice date for such
Receivable; and
WHEREAS, Purchasers are agreeable to such request provided that the
aggregate outstanding Principal Balances of such Receivables shall not exceed
$75,000,000 on any Settlement Date.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Purchase and Sale Agreement and
-------------
used herein shall have the meanings given to them in the Purchase and Sale
Agreement.
2. Amendment to Definition of Eligible Receivable (Subsection 1.1 of the
---------------------------------------------------------------------
Purchase and Sale Agreement). The definition of "Eligible Receivable"
- ----------------------------
appearing in subsection 1.1 of the Purchase and Sale Agreement is hereby amended
by (i) deleting "December 31, 2000" where it appears at the end of clause
(g)(ii) and clause (t)(ii) of such definition and (ii) inserting, in lieu
thereof, "six months after the invoice date for such Receivable".
<PAGE>
3. Amendment to Concentration Limits (Section 2.7 of the Purchase
--------------------------------------------------------------
and Sale Agreement). Section 2.7(a) of the Purchase and Sale Agreement is hereby
- ------------------
amended by (i) deleting "." at the end of clause (xvii) thereof and (ii)
inserting, in lieu thereof, the following:
; or
(xviii) the aggregate outstanding Principal Balances of Receivables
referred to in clause (g)(ii) of the definition of "Eligible
Receivable" would exceed $75,000,000 on such Settlement Date.
4. Amendment to Definition of Eligible Receivable (Subsection 1.1 of
-----------------------------------------------------------------
the Intercompany Purchase Agreement). The definition of "Eligible Receivable"
- ------------------------------------
appearing in subsection 1.1 of the Intercompany Purchase Agreement is hereby
amended by inserting at the end thereof the following:
To the extent not otherwise provided for in this definition of
"Eligible Receivable", any Receivable which qualifies as an "Eligible
Receivable" as such term is defined in the Purchase and Sale Agreement
shall be an "Eligible Receivable" for purposes of this Agreement.
5. Affirmation of Repurchase Agreement. RAC hereby consents to the
-----------------------------------
foregoing amendments to the Purchase and Sale Agreement set forth herein and
reaffirms its obligations under the Repurchase Agreement.
6. Affirmation of Guarantee. The Guarantor hereby consents to the
------------------------
foregoing amendments to the Purchase and Sale Agreement set forth herein and
reaffirms its obligations under the Guarantee.
7. Conditions to Effectiveness. This Amendment shall become
----------------------------
effective on the date (the "Amendment Effective Date") on which the Seller, the
------------------------
Servicer, RAC, Raytheon, the Managing Facility Agent, each Co-Administrative
Agent and the Majority Purchasers shall have executed and delivered this
Amendment to the Managing Facility Agent.
8. Representation and Warranties. (a) By the Seller. To induce
----------------------------- -------------
the Managing Facility Agent, the Co-Administrative Agents and the Purchasers to
enter into this Amendment, the Seller hereby represents and warrants to the
Managing Facility Agent, the Co-Administrative Agents and the Purchasers as of
the Amendment Effective Date that:
(i) Reaffirmation. As of the date hereof and after giving effect
to this Amendment, the representations and warranties set
forth in Section 4 of the Purchase and Sale Agreement and
Sections 3.1(b) and 3.2 of the Intercompany Purchase
Agreement are true and correct in all material respects; and
(ii) No Amortization Event. After giving effect to this
Amendment, no Amortization Event shall have occurred and be
continuing.
-2-
<PAGE>
(b) By the Servicer. To induce the Managing Facility Agent, the Co-
----------------
Administrative Agents and the Purchasers to enter into this Amendment, the
Servicer hereby represents and warrants to the Managing Facility Agent, the Co-
Administrative Agents and the Purchasers as of the Amendment Effective Date
that:
(i) Reaffirmation. As of the date hereof and after giving effect
to this Amendment, the representations and warranties set
forth in Section 4 of the Purchase and Sale Agreement and
Sections 3.1(b) and 3.2 of the Intercompany Purchase
Agreement are true and correct in all material respects; and
(ii) No Amortization Event. After giving effect to this
Amendment, no Amortization Event shall have occurred and be
continuing.
(c) By RAC. To induce the Managing Facility Agent, the Co-
------
Administrative Agents and the Purchasers parties hereto to enter into this
Amendment, RAC hereby represents and warrants to the Managing Facility Agent,
the Co-Administrative Agents and the Purchasers as of the Amendment Effective
Date that as of the date hereof and after giving effect to this Amendment, the
representations and warranties set forth in Section 9 of the Repurchase
Agreement are true and correct in all material respects.
(d) By Raytheon. To induce the Managing Facility Agent, the Co-
-----------
Administrative Agents and the Purchasers to enter into this Amendment, Raytheon
hereby represents and warrants to the Managing Facility Agent, the Co-
Administrative Agents and the Purchasers as of the Amendment Effective Date that
as of the date hereof and after giving effect to this Amendment, the
representations and warranties set forth in Section 9 of the Guarantee are true
and correct in all material respects.
9. Payment of Expenses. Raytheon agrees to pay or reimburse the
------------------------
Managing Facility Agent and each Co-Administrative Agent for all its respective
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Amendment and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Managing Facility Agent and the Co-
Administrative Agents.
10. Counterparts. This Amendment may be executed by one or more of
-----------------
the parties to this Amendment on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the Seller and the Managing Facility Agent.
11. Severability; Headings. Any provision of this Amendment which is
---------------------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The section and
subsection
-3-
<PAGE>
headings used in this Amendment are for convenience of reference only and are
not to affect the construction hereof or to be taken into consideration in the
interpretation hereof.
12. Continuing Effect of Other Documents. This Amendment shall not
-----------------------------------------
constitute an amendment or waiver of any other provision of the Purchase and
Sale Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of the Seller or
the Servicer that would require a waiver or consent of the Purchasers, the
Managing Facility Agent or the Co-Administrative Agents. Except as expressly
amended, modified and supplemented hereby, the provisions of each Purchase
Document and the other documents executed pursuant to the Purchase Documents are
and shall remain in full force and effect.
13. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
------------------
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(End of Page)
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
RAYTHEON AIRCRAFT RECEIVABLES CORPORATION,
as Seller
By: ________________________________________
Name:
Title:
RAYTHEON AIRCRAFT CREDIT CORPORATION,
as Seller
By: ________________________________________
Name:
Title:
BANK OF AMERICA, N.A.,
as Managing Facility Agent and Co-Administrative Agent
By: ________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Co-Administrative Agent and Syndication Agent
By: ________________________________________
Name:
Title:
-5-
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
UBS AG, STAMFORD BRANCH,
solely as Administrative Agent
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANK HAPOALIM
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: RECEIVABLES CAPITAL CORPORATION
By: __________________________________
Name:
Title:
SPC BANK: BANK OF AMERICA, N.A.
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANK OF NOVA SCOTIA
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
THE BANK OF NEW YORK
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: BANNER RECEIVABLES CORPORATION
By: __________________________________
Name:
Title:
SPC BANK: BANK OF TOKYO - MITSUBISHI, LTD.
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BAYERISCHE LANDESBANK
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
THE CHASE MANHATTAN BANK
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: CHARTA CORPORATION
By: CITICORP NORTH AMERICA, INC.,
as Attorney-in-Fact
By: __________________________________
Name:
Title:
SPC BANK: CITIBANK, N.A.
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: FOUR WINDS FUNDING CORPORATION
By: Commerzbank AG, New York Branch,
as Attorney-in-Fact
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
SPC BANK: COMMERZBANK AG, NEW YORK BRANCH
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: ALPINE SECURITIZATION CORP.
By: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Attorney-in-Fact
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
SPC BANK: CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS
BRANCH
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: FALCON ASSET SECURITIZATION CORPORATION
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
SPC BANK: BANK ONE, NA
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: THREE RIVERS FUNDING CORPORATION
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
NATIONAL WESTMINSTER BANK Plc
NEW YORK BRANCH
By: __________________________________
Name:
Title:
NATIONAL WESTMINSTER BANK Plc
NASSAU BRANCH
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
WACHOVIA BANK, N.A.
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: QUINCY CAPITAL CORPORATION
By: __________________________________
Name:
Title:
SPC BANK: WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: __________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: EAGLEFUNDING CAPITAL CORP.
By:
==================================
Name:
Title:
SPC BANK: FLEETBOSTON
By:
==================================
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SOCIETE GENERALE
By:
==================================
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: VARIABLE FUNDING CAPITAL CORPORATION
By: First Union Capital Markets, a division of Wheat First
Security Inc., as attorney-in-fact
By:
=========================================
Name:
Title:
SPC BANK: FIRST UNION NATIONAL BANK
By:
=============================================
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: ATLANTIC ASSET SECURITIZATION CORP.
By: CREDIT LYONNAIS NEW YORK BRANCH,
as Attorney-in-Fact
By: __________________________________
Name:
Title:
SPC BANK: CREDIT LYONNAIS NEW YORK BRANCH
By:
======================================
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
KBC BANK NV
By: _________________________________
Name:
Title:
By:
=================================
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
SPC: BAVARIA UNIVERSAL FUNDING CORPORATION
By: _________________________________
Name:
Title:
SPC BANK: BAYERISCHE HYPO-UND VEREINSBANK
AG
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
DEUTSCHE BANK AG, NEW YORK A/O CAYMAN
ISLAND BRANCHES
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANCA COMMERCIALE ITALIANA, NEW YORK
BRANCH
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANCA POPOLARE DI MILANO
By: _________________________________
Name:
Title:
By:
==================================
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BANCA NATIONALE DEL LAVORO
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
BNP PARIBAS
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
THE FUJI BANK, LIMITED
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
RAYTHEON COMPANY
By: _________________________________
Name:
Title:
<PAGE>
Second Amendment to the
Second Amended and Restated
Purchase and Sale Agreement
RAYTHEON AIRCRAFT COMPANY
By: _________________________________
Name:
Title:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>REAFFIRMATION OF AMENDED & RESTATED GUARANTEE
<TEXT>
<PAGE>
EXHIBIT 10.24
REAFFIRMATION OF AMENDED AND RESTATED GUARANTEE
REAFFIRMATION OF AMENDED AND RESTATED GUARANTEE, dated as of March 10,
2000, (this "Reaffirmation") of the Amended and Restated Guarantee, dated as of
-------------
March 18, 1999 (the "Guarantee"), made by Raytheon Company, a Delaware
---------
corporation ("Raytheon", together with its successors and assigns permitted
--------
therein, the "Guarantor"), in favor of the Purchasers referred to therein and
---------
Bank of America National Trust Association, as managing facility agent (in such
capacity, the "Managing Facility Agent") for such Purchasers.
-----------------------
WHEREAS, pursuant to the Amended and Restated Purchase and Sale
Agreement, dated as of March 18, 1999 (as hereto amended, modified or otherwise
supplemented) (the "Purchase Agreement"), among Raytheon Aircraft Receivables
------------------
Corporation, a Kansas corporation (the "Seller"), Raytheon Aircraft Credit
------
Corporation ("Raytheon Credit"), as Servicer (as defined therein), the financial
---------------
institutions and special purpose corporations from time to time parties thereto
(the "Purchasers"), Bank of America National Trust and Savings Association, as
----------
Managing Facility Agent (in such capacity, the "Managing Facility Agent") and
-----------------------
Documentation Agent for the Purchasers, Bank of America National Trust and
Savings Association and The Chase Manhattan Bank, as Co-Administrative Agents
for the Purchasers (each in such capacity, a "Co-Administrative Agent"), The
-----------------------
Chase Manhattan Bank, as Syndication Agent (in such capacity, the "Syndication
-----------
Agent"), Citibank, N.A. and Credit Suisse First Boston, as Co-Syndication Agents
- -----
(each in such capacity, a "Co-Syndication Agent"), and each Administrative Agent
--------------------
referred to therein, Raytheon entered into the Guarantee;
WHEREAS, the Purchase Agreement is being amended and restated by the
Second Amended and Restated Purchase and Sale Agreement (the "Amended Purchase
----------------
Agreement"), dated as of March 10, 2000, among Raytheon Aircraft Receivables
- ---------
Corporation, a Kansas corporation (the "Seller"), Raytheon Aircraft Credit
------
Corporation ("Raytheon Credit"), as Servicer (as defined therein), the financial
---------------
institutions and special purpose corporations from time to time parties thereto
(the "Purchasers"), Bank of America, N.A., formerly known as Bank of America
----------
National Trust and Savings Association, as Managing Facility Agent for the
Purchasers (in such capacity, the "Managing Facility Agent"), The Chase
-----------------------
Manhattan Bank and Bank of America, N.A., as Co-Administrative Agents for the
Purchasers (in such capacity, a "Co-Administrative Agent"), The Chase Manhattan
-----------------------
Bank, as Syndication Agent (in such capacity, the "Syndication Agent"),
Citibank, N.A. and Credit Suisse First Boston, as Co-Syndication Agents (in such
capacity, a "Co-Syndication Agent") and each Administrative Agent referred
--------------------
therein;
WHEREAS, it is a condition precedent to the effectiveness of the
Amended Purchase Agreement that Raytheon shall have executed and delivered this
Reaffirmation to the Managing Facility Agent;
WHEREAS, Raytheon desires to consent to the amendments to the Purchase
Agreement and to reaffirm its obligations under the Guarantee;
NOW THEREFORE, in consideration of the foregoing and to induce the
Managing Facility Agent, the Co-Agents, the Agents and the Purchasers to enter
into the Second Amended and Restated Purchase and Sale Agreement and to induce
the Purchasers to make their respective purchasers from the Seller under the
Second Amended and Restated Purchase and Sale Agreement, Raytheon hereby agrees
as follows:
<PAGE>
2
1. Defined Terms. Capitalized terms used herein but not defined shall
-------------
have the meanings given to such terms in the Guarantee.
2. Consent and Reaffirmation. Raytheon hereby consents to the
-------------------------
amendments to the Purchase Agreement and to the execution of the Amended
Purchase Agreement by Raytheon Credit and the Seller and hereby reaffirms it
obligations under the Guarantee.
(End of Page)
<PAGE>
3
IN WITNESS WHEREOF, Raytheon has caused this Reaffirmation to be duly
executed and delivered by its proper and duly authorized officer as of the day
and year first written above.
RAYTHEON COMPANY
By:____________________________
Name:
Title:
Acknowledged By:
BANK OF AMERICA, N.A.,
as Managing Facility Agent
By:____________________________
Name:
Title:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>RAYTHEON COMPANY 2000 ANNUAL REPORT TO STOCKHOLDER
<TEXT>
<PAGE>
Exhibit 13
Five-Year Statistical Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In millions except share amounts and total employees) 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
Results of Operations
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 16,895 $ 17,201/(1)/ $ 17,364 $ 11,537 $ 10,122
Operating income 1,625 1,592/(2)/ 2,259/(4)/ 1,040/(6)/ 1,014/(8)/
Interest expense, net 736 703 697 343 142
Income from continuing operations 498 502/(3)/ 1,019/(5)/ 507/(7)/ 649/(8)/
Net income 141 404/(3)/ 844/(5)/ 511/(7)/ 757/(8)/
Diluted earnings per share from continuing operations $ 1.46 $ 1.47/(3)/ $ 2.98/(5)/ $ 2.10/(7)/ $ 2.70/(8)/
Diluted earnings per share 0.41 1.19/(3)/ 2.47/(5)/ 2.11/(7)/ 3.15/(8)/
Dividends declared per share 0.80 0.80 0.80 0.80 0.80
Average diluted shares outstanding (in thousands) 341,118 340,784 341,861 241,886 240,165
- ---------------------------------------------------------------------------------------------------------------------------------
Financial Position at Year-End
- ---------------------------------------------------------------------------------------------------------------------------------
Current assets $ 8,013 $ 8,602 $ 8,464 $ 8,911 $ 5,560
Property, plant, and equipment, net 2,491 2,387 2,237 2,812 1,697
Total assets 26,777 27,289 27,223 27,668 10,623
Current liabilities 4,865 7,133 6,114 10,380 4,178
Long-term liabilities (excluding debt) 2,035 1,899 2,149 2,496 370
Long-term debt 9,054 7,298 8,163 4,406 1,500
Total debt 9,931 9,769 8,988 10,050 3,715
Stockholders' equity 10,823 10,959 10,797 10,386 4,575
- ---------------------------------------------------------------------------------------------------------------------------------
General Statistics
- ---------------------------------------------------------------------------------------------------------------------------------
Total backlog $ 26,530 $ 24,978 $ 20,157/(9)/ $ 18,615 $ 8,942
U.S. government backlog included above 17,374 15,239 13,472/(9)/ 12,360 5,614
Capital expenditures 431 524 468 441 379
Depreciation and amortization 694 699 734 424 345
Total employees 93,700 97,600 99,500 109,600 65,600
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has restated its financial statements for discontinued operations as
more fully discussed in Note B to the financial statements. During 2000, the
Company recorded favorable adjustments to restructuring-related reserves and net
gains on sales of operating units that were more than offset by restructuring
charges and unfavorable contract adjustments.
(1) Includes charges of $180 million.
(2) Includes charges of $195 million and restructuring and special charges of
$197 million, offset by $65 million of favorable adjustments to
restructuring-related reserves.
(3) Includes charges of $195 million pretax and restructuring and special
charges of $211 million pretax, offset by favorable adjustments to
restructuring-related reserves of $65 million pretax and a net gain on
sales of operating units and investments of $23 million pretax. The impact
of these items combined was a net charge of $195 million after-tax, or
$0.57 per diluted share.
(4) Includes special charges of $167 million.
(5) Includes special charges of $167 million pretax and a net gain on sales of
operating units of $141 million pretax. The impact of these items combined
was a net charge of $41 million after-tax, or $0.12 per diluted share.
(6) Includes restructuring and special charges of $370 million.
(7) Includes restructuring and special charges of $370 million pretax and a net
gain on sales of operating units of $72 million pretax. The impact of these
items combined was a net charge of $194 million after-tax, or $0.80 per
diluted share.
(8) Includes a special charge of $34 million pretax, $22 million after-tax, or
$0.09 per diluted share.
(9) During 1998, the Company changed its method of reporting backlog at certain
locations in order to provide a consistent method of reporting across and
within the Company's businesses. Backlog includes the full value of
contract awards when received, excluding awards and options expected in
future periods. Prior to the change, contract values which were awarded but
incrementally funded were excluded from reported backlog for some parts of
the business. The one-time impact of this change was a $1.1 billion
increase to backlog, related principally to U.S. government contracts.
Prior periods have not been restated for this change.
Certain prior year amounts have been reclassified to conform to the current year
presentation. The Company acquired Texas Instruments' defense business in July
1997 and merged with the defense business of Hughes Electronics Corporation
(Hughes Defense) in December 1997. In December 1997, the Company issued 102.6
million shares of Class A common stock and converted each share of Raytheon
common stock into one share of Class B common stock in connection with the
merger with Hughes Defense.
-1-
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Overview
Raytheon Company (the "Company") is a leader in defense electronics, including
missiles; radar; sensors and electro-optics; intelligence, surveillance, and
reconnaissance; command, control, communication, and information systems; naval
systems; air traffic control systems; aircraft integration systems; and
technical services. Raytheon's commercial electronics businesses leverage
defense technologies in commercial markets. Raytheon Aircraft is one of the
leading providers of business and special mission aircraft and delivers a broad
line of jet, turboprop, and piston-powered airplanes to corporate and government
customers worldwide.
Consolidated Results of Operations
Net sales were $16.9 billion in 2000, $17.2 billion in 1999, and $17.4 billion
in 1998. Sales to the U.S. Department of Defense were 57 percent of sales in
2000, 56 percent in 1999, and 61 percent in 1998. Total sales to the U.S.
government, including foreign military sales, were 66 percent of sales in 2000,
68 percent in 1999, and 72 percent in 1998. International sales, including
foreign military sales, were 21 percent of sales in 2000 and 23 percent in 1999
and 1998.
Gross margin was $3.4 billion in 2000, $3.5 billion in 1999, and $4.4
billion in 1998, or 19.9 percent of sales in 2000, 20.4 percent in 1999, and
25.3 percent in 1998. Excluding the restructuring and special charges described
below of $123 million, net in 1999 ($188 million of restructuring and special
charges offset by $65 million of favorable adjustments to restructuring-related
reserves), gross margin was $3.6 billion. Excluding the 1999 charges, gross
margin was 19.9 percent of sales in 2000, 21.2 percent in 1999, and 25.3 percent
in 1998. The decrease in gross margin as a percent of sales in 2000 was
primarily due to a decline in higher margin foreign direct programs, lower
volume from missile and missile defense systems, and lower margins at Raytheon
Aircraft. The decrease in gross margin as a percent of sales in 1999 was
primarily due to competitive pricing pressures.
In 2000, the Company determined that the cost of the restructuring
initiatives described below would be lower than originally planned and recorded
$74 million of favorable adjustments to cost of sales that were more than offset
by unfavorable contract adjustments. In addition, the Company recorded a $12
million reduction in goodwill related to the restructuring initiatives. The
estimate for employee-related exit costs decreased by $45 million due to lower
than anticipated costs for severance as a result of higher employee attrition
and transfers within the Company during the year. The estimate for
facility-related exit costs decreased by $41 million due to more rapid exit from
facilities, including two facilities sold during 2000 in connection with the
divestiture of non-core business operations, and the identification of
alternative uses for facilities originally identified for disposition. Also in
2000, the Company recorded an $8 million restructuring charge, which was
included in cost of sales, in connection with a workforce reduction, primarily
at a foreign location.
Administrative and selling expenses were $1,214 million in 2000, $1,417
million in 1999, and $1,550 million in 1998. Excluding the restructuring charge
of $9 million in 1999 and the special charges of $167 million in 1998, described
below, administrative and selling expenses decreased to 7.2 percent of sales in
2000 from 8.2 percent in 1999 and 8.0 percent in 1998. The decrease in
administrative and selling expenses in 2000 was the result of the Company's
ongoing cost reduction initiatives.
Research and development expenses were $526 million or 3.1 percent of sales
in 2000, $508 million or 3.0 percent of sales in 1999, and $582 million or 3.4
percent of sales in 1998. The increase in research and development expenses in
2000 was due primarily to new program investments made during 2000. The decrease
in research and development expenses in 1999 was due primarily to the
elimination of duplicate research and development processes as a result of the
restructuring actions described below.
Operating income was $1,625 million or 9.6 percent of sales in 2000, $1,592
million or 9.3 percent of sales in 1999, and $2,259 million or 13.0 percent of
sales in 1998. Excluding the restructuring and special charges described below
of $132 million, net in 1999 ($197 million of restructuring and special charges
offset by $65 million of favorable adjustments to restructuring-related
reserves) and $167 million in 1998, operating income as a percent of sales was
10.0 percent and 14.0 percent in 1999 and 1998, respectively. The changes in
operating income by segment are discussed below.
Interest expense, net was $736 million in 2000, $703 million in 1999, and
$697 million in 1998. The increase was primarily due to higher weighted-average
interest rates resulting from the Company's issuance of long-term debt to
replace short-term borrowings. The weighted average cost of borrowing was 7.3
percent in 2000, 6.9 percent in 1999, and 6.8 percent in 1998.
Other expense, net was $12 million in 2000 versus other income of $9
million in 1999 and $145 million in 1998 which included a $141 million net gain
on sales of operating units.
The effective tax rate was 43.2 percent in 2000, 44.1 percent in 1999, and
40.3 percent in 1998. The effective tax rate reflects primarily the U.S.
statutory rate of 35 percent reduced by foreign sales corporation tax credits
and research and development tax credits applicable to certain government
contracts, increased by non-deductible amortization of goodwill.
Income from continuing operations was $498 million or $1.46 per diluted
share on 341.1 million average shares outstanding in 2000, $502 million or $1.47
per diluted share on 340.8 million average shares outstanding in 1999, and
$1,019 million or $2.98 per diluted share on 341.9 million average shares
outstanding in 1998.
In 2000, the Company sold its Raytheon Engineers & Constructors (RE&C)
subsidiary for $73 million in cash, net to Washington Group International, Inc.
(WGI), formerly known as Morrison Knudsen. The Company also retained
approximately $30 million of cash on the balance sheet of RE&C at closing. The
Company retained the responsibility for performance of four large, fixed price
international turnkey projects that are close to completion, partially
indemnified the buyer on the completion of one other existing project, and
retained certain significant assets and liabilities, including certain letters
of credit, performance bonds, and parent guarantees outstanding at the time of
sale. The Company will continue to monitor the cost estimates for these five
projects as well as the other retained assets and liabilities on a quarterly
basis. The Company originally recorded a loss on disposal of discontinued
operations of $191 million after-tax which included a gain on curtailment of the
RE&C pension plans of $35 million. The Company subsequently increased the loss
on disposal of discontinued operations to $287 million after-tax, due in part to
the recognition of additional losses on the retained projects. The total loss
from discontinued operations of $357 million after-tax, or $1.05 per diluted
share, included the $287 million after-tax loss on disposal of discontinued
operations and a $70 million after-tax loss from discontinued operations. The
sale of RE&C is subject to a purchase price adjustment based upon an
April 30, 2000 cut-off date balance sheet that has not yet been completed. The
Company does not believe a material purchase price adjustment will be required.
See the discussion of Financial Condition and Liquidity below for additional
information.
In 1999, the Company adopted the American Institute of Certified Public
Accountants Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities (SOP 98-5). This accounting standard requires that certain start-up
and pre-contract costs be expensed as incurred. The Company recorded a charge of
$53 million after-tax reflecting the initial application of SOP 98-5 and the
cumulative effect of the change in accounting principle.
Net income was $141 million or $0.41 per diluted share in 2000, $404
million or $1.19 per diluted share in 1999, and $844 million or $2.47 per
diluted share in 1998.
Total employment related to continuing operations was approximately 93,700
at December 31, 2000, approximately 97,600 at December 31, 1999, and
approximately 99,500 at December 31, 1998. The decreases were primarily a result
of divestitures and continuing restructuring initiatives, primarily at the
Company's defense electronics businesses.
Prior Year Charges
The Company acquired Texas Instruments' defense business (TI Defense) on July
11, 1997, merged with the defense business of Hughes Electronics Corporation
(Hughes Defense) on December 17, 1997, and created Raytheon Systems Company
(RSC) in December 1997. In
-2-
<PAGE>
conjunction with the formation of RSC, the Company recorded a $220 million
restructuring charge to reduce the then newly formed RSC workforce by 12,800
employees and reduce space by approximately 11 million square feet at 34
facilities through sales, subleases, and lease terminations. The Company also
accrued $584 million as liabilities assumed in connection with the acquisition
of TI Defense and the merger with Hughes Defense and recorded this amount as an
increase to goodwill. The principal actions involved the consolidation of
missile and other electronics systems' manufacturing and engineering, as well as
the consolidation of certain component manufacturing into Centers of Excellence.
In 1998, the estimated number of employee terminations increased by
approximately 1,200 employees, primarily comprised of manufacturing employees,
however, the actual cost of termination per employee was lower than the original
estimate. As a result of these changes in estimate, the total cost of employee
severance decreased by $37 million. The Company also determined that facilities
exit costs would be lower than the original estimate by $30 million because many
of the facility actions were progressing ahead of the original schedule,
reducing the amount of rent and occupancy costs, and costs to return certain
facilities to the required condition were less than originally planned. Also in
1998, the Company committed to close two additional facilities and further
reduce employment by approximately 1,400 positions. The total program cost of
the actions was estimated at $67 million, comprised of $14 million of severance
and other employee-related costs and $53 million of facility closure and related
costs.
The Company recorded a $102 million restructuring charge in the third
quarter of 1999, of which $93 million was included in cost of sales and $9
million was included in administrative and selling expenses, to further reduce
the workforce by 2,200 employees and vacate and dispose of an additional 2.7
million square feet of facility space, primarily at the Company's defense
electronics businesses. Employee-related exit costs of $55 million included
severance and other termination benefit costs for manufacturing, engineering,
and administrative employees. Facility-related exit costs of $47 million
included the costs for lease termination, building closure and disposal, and
equipment disposition. The Company also recorded a $35 million restructuring
charge in the third quarter of 1999, which was included in cost of sales, for
higher than originally estimated exit costs related to the TI Defense and Hughes
Defense actions. The estimate for employee-related exit costs increased by $27
million for higher than planned severance and other termination benefit costs.
The estimate for facility-related exit costs increased by $8 million for
additional lease termination costs expected to be incurred. The Company also
accrued $12 million of exit costs as liabilities assumed in connection with a
minor acquisition in 1999 and recorded this amount as an increase to goodwill.
In the fourth quarter of 1999, the Company determined that the cost of the
restructuring initiatives would be $65 million lower than originally planned and
recorded a favorable adjustment to the original $220 million restructuring
charge, which was included in cost of sales. The reduction in the estimated
costs related to lower than anticipated costs for severance and facilities. The
primary reasons for the reduction in severance costs included a shift in the
composition of severed employees, higher attrition resulting in the need for
fewer severed employees, and more employees transferring to other locations
within the Company. The estimated costs related to facilities were lower than
anticipated due to the identification of alternative uses for assets originally
identified for disposition, lower de-installation costs, and more rapid exit
from facilities.
The total cost of all restructuring actions discussed above are currently
estimated at $1.3 billion, of which $810 million pertains to exit costs. The
balance pertains to capital expenditures and period expenses related to
restructuring and consolidation activities. Approximately $422 million of the
exit costs relate to employee severance and $388 million relate to facilities.
Through December 31, 2000, employment had been reduced by approximately 12,500
people and 12.3 million square feet had been vacated. The Company essentially
completed all restructuring actions during 2000. While these actions were
intended to improve the Company's competitive position, there can be no
assurances as to their ultimate success or that additional restructuring actions
will not be required.
In 1999, the Company recorded the following restructuring charges and
favorable adjustments to restructuring-related reserves, discussed above, and
special charges, discussed below, which were included in the statements of
income and classified as a reduction in net sales or included in cost of sales,
administrative and selling expenses, or other expense as indicated below:
<TABLE>
<CAPTION>
Admin.
Net Cost and Selling Other
(In millions) Sales of Sales Expenses Expense Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Restructuring charges $128 $ 9 $137
Favorable adjustments to
restructuring-related
reserves (65) (65)
Special charges
Iridium LLC $15 6 $14 35
Korean business venture 33 33
Exit PRT business 6 6
- -------------------------------------------------------------------------------------
Total $15 $108 $ 9 $14 $146
=====================================================================================
</TABLE>
In 1999, the Company recorded a $35 million special charge to write down its
minority investment in and receivables related to Iridium LLC, which filed for
Chapter 11 bankruptcy protection from creditors on August 13, 1999. The Company
also recorded an additional $33 million special charge to further write down
inventory and receivables related to a Korean business venture and a $6 million
special charge to exit the personal rapid transit (PRT) business, including the
costs to dispose of a test track. At December 31, 2000, the remaining assets
related to the Korean business venture consisted of a $5 million receivable.
In 1999, the Company recorded a $195 million contract-related operating
charge of which $165 million was recorded as a reduction to net sales and $30
million was included in cost of sales. Approximately $130 million related to
changes in estimates on three contracts, two of which were fixed price U.S.
government contracts that were in loss positions. One had been expected to
realize certain efficiencies that did not materialize and the other had
completed the development phase at higher than expected costs which resulted in
a higher loss than originally anticipated, therefore, additional loss provisions
were recorded. The third was a fixed price commercial program in a new line of
business on which costs were running higher than the initial projections,
therefore, a loss provision was recorded.
In 1998, the Company recorded special charges of $167 million, which were
included in administrative and selling expenses, as follows. The Company
recorded a $125 million special charge to exit a line of business, which
included writing off its investment in a Korean business venture. The Company
also recorded a $42 million special charge to write down the assets of two
operations that the Company had decided to sell, to estimated fair value of
approximately $125 million. One sale was completed during 1998 and the other
during 1999. The operating results, which were not material, were included in
the Company's results of operations through the date of sale.
-3-
<PAGE>
Segment Results
The Company operates in six segments: Electronic Systems; Command, Control,
Communication and Information Systems; Technical Services; Aircraft Integration
Systems; Commercial Electronics; and Aircraft. Segment financial results were as
follows:
Net Sales (In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Electronic Systems $ 7,584 $ 8,001 $ 8,294
Command, Control, Communication
and Information Systems 3,419 3,767 3,741
Technical Services 1,810 1,885 1,771
Aircraft Integration Systems 1,220 1,094 1,197
Commercial Electronics 666 749 866
Aircraft 3,220 2,709 2,543
Corporate and Eliminations (1,024) (1,004) (1,048)
- --------------------------------------------------------------------------------
Total $ 16,895 $ 17,201 $ 17,364
- --------------------------------------------------------------------------------
Operating Income (In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Electronic Systems $ 1,039 $ 1,156 $ 1,448
Command, Control, Communication
and Information Systems 358 374 386
Technical Services 124 122 160
Aircraft Integration Systems 48 (61) 203
Commercial Electronics (4) (30) (157)
Aircraft 164 163 227
Corporate and Eliminations (104) (132) (8)
- --------------------------------------------------------------------------------
Total $ 1,625 $ 1,592 $ 2,259
- --------------------------------------------------------------------------------
Certain prior year amounts were reclassified to conform to the current year
presentation; in addition, the Engineering and Construction segment was
discontinued.
Electronic Systems had 2000 sales of $7.6 billion versus $8.0 billion in 1999
and $8.3 billion in 1998. The decrease in sales in 2000 was due to a decrease in
volume from missiles and missile defense systems. The 2000 sales included $120
million from the Company's optical systems business, which was sold in December
2000. Operating income was $1.0 billion in 2000 versus $1.2 billion in 1999 and
$1.4 billion in 1998. Included in the 2000 results were $63 million of favorable
adjustments to restructuring-related reserves. Included in the 1999 results were
charges of $95 million, net ($164 million of operating charges and restructuring
and special charges offset by $69 million of favorable adjustments to
restructuring-related reserves). The decrease in operating income in 2000 was
due to a decline in higher margin foreign direct programs and lower volume from
missiles and missile defense systems. The decrease in operating income in 1999
was primarily due to the 1999 charges and higher margin programs completed in
the prior year.
Command, Control, Communication and Information Systems (C3I) had 2000
sales of $3.4 billion versus $3.8 billion in 1999 and $3.7 billion in 1998. The
decrease in sales in 2000 was due to the divestiture of the flight simulation
business, the planned wind-down of certain international projects, and lower
volume from air traffic control programs. Operating income was $358 million in
2000 versus $374 million in 1999 and $386 million in 1998. Included in the 1999
results were charges of $71 million. The decrease in operating income in 2000
was due to lower volume and a net $25 million write-down which included negative
contract adjustments on several communications-related programs partially offset
by favorable adjustments. The decrease in operating income in 1999 was primarily
due to the 1999 charges. The Company will continue to monitor the cost estimates
for the communications-related programs on a quarterly basis given the risks
inherent in fixed price development contracts.
Through C3I, the Company has an investment in Space Imaging LLC. The
Company continues to guarantee certain borrowings of Space Imaging. The amount
of borrowings outstanding at December 31, 2000 for which the Company was
guarantor was approximately $120 million. The Company expects to continue to
provide debt guarantees of up to $150 million in connection with a new loan
facility which Space Imaging is negotiating. At December 31, 2000, the Company's
investment in and other assets related to Space Imaging totaled approximately
$91 million. Also through C3I, the Company has entered into an agreement with
Thales (formerly Thomson-CSF) to form an equally-owned transatlantic joint
venture encompassing air defense/command and control centers and ground-based
air surveillance and weapons-locating radars.
Technical Services had 2000 sales of $1.8 billion versus $1.9 billion in
1999 and $1.8 billion in 1998. The decrease in sales in 2000 was due to the
divestiture of the flight simulation business. Operating income was $124 million
in 2000 versus $122 million in 1999 and $160 million in 1998. Included in the
1999 results were charges of $6 million.
Aircraft Integration Systems had 2000 sales of $1.2 billion versus $1.1
billion in 1999 and $1.2 billion in 1998. Sales from the Airborne Standoff Radar
(ASTOR) contract accounted for the increase in sales in 2000. Operating income
was $48 million in 2000 versus an operating loss of $61 million in 1999 and
operating income of $203 million in 1998. Included in the 1999 results were
charges of $107 million. The decrease in operating income in 1999 was primarily
due to the 1999 charges and higher margin programs completed in the prior year.
The Company recorded contract write downs on the Boeing Business Jet (BBJ)
programs of $67 million in 2000 and $53 million in 1999, of which $25 million
was included in the $107 million of 1999 charges described above. The Company
will continue to monitor the cost estimates for the BBJ programs on a quarterly
basis given the risks inherent in fixed price custom aircraft completion
contracts.
Commercial Electronics had 2000 sales of $666 million versus $749 million
in 1999 and $866 million in 1998. The decrease in sales in 2000 was primarily
due to the divestiture of the Company's Cedarapids subsidiary in the third
quarter of 1999. The 2000 sales included $141 million from the Company's
recreational marine business, which was sold in January 2001. The operating loss
of $4 million in 2000 compared to an operating loss of $30 million in 1999 and
an operating loss of $157 million in 1998. Contributing to the loss in 2000 was
an $8 million restructuring charge at Raytheon Marine's high seas division
combined with lower volume at that division, the divestiture of Cedarapids, and
investments in new technology ventures offset by a $21 million favorable
settlement on a commercial training contract. Included in the 1999 results were
charges of $44 million. Included in the 1998 results were charges of $159
million.
Raytheon Aircraft (RAC) had 2000 sales of $3.2 billion versus $2.7 billion
in 1999 and $2.5 billion in 1998. The increase in sales was driven by higher
aircraft deliveries. Operating income was $164 million in 2000 versus $163
million in 1999 and $227 million in 1998. Operating income as a percent of sales
was down in 2000 due to a $19 million contract adjustment on a fixed price T-6A
military trainer option exercised by the customer in 2000, higher production
costs, pricing pressure on commuter aircraft, the sale of finance receivables,
narrower spreads on customer financing due to higher interest rates, and the
impact of SAP implementation on certain RAC customer support operations. The
decline in operating income as a percent of sales in 1999 was due to increased
development and start-up costs for the Premier I, Hawker Horizon, and T-6A
aircraft, higher production costs, and commuter valuation costs. The Company
will continue to monitor cost estimates for the T-6A program on a quarterly
basis given the risks inherent in longer-term fixed price purchase options and
watch for any indications of a downturn in demand for RAC's aircraft. The
Company also continues to monitor the cost estimates and schedule for its three
new development programs at RAC: the certification schedule for the Premier I
aircraft, the first-flight schedule for the Horizon aircraft, and cost
management issues related to roll-out of the T-6A aircraft.
-4-
<PAGE>
Backlog consisted of the following at December 31:
(In millions) 2000 1999 1998
- ---------------------------------------------------------------------
Electronic Systems $11,968 $10,681 $ 9,807
Command, Control, Communication
and Information Systems 5,396 5,135 4,339
Technical Services 2,135 2,029 1,782
Aircraft Integration Systems 2,120 2,335 1,233
Commercial Electronics 513 516 487
Aircraft 4,398 4,282 2,509
- ---------------------------------------------------------------------
Total $26,530 $24,978 $20,157
- ---------------------------------------------------------------------
U.S. government backlog
included above $17,374 $15,239 $13,472
- ---------------------------------------------------------------------
The increase in backlog in 1999 was due primarily to the receipt of several
significant orders at the Company's defense electronics businesses and Raytheon
Aircraft.
Financial Condition and Liquidity
Net cash provided by operating activities in 2000 was $960 million versus net
cash used of $317 million in 1999 and net cash provided of $994 million in 1998.
Net cash provided by operating activities from continuing operations was $1,060
million in 2000 versus net cash used of $96 million in 1999 and net cash
provided of $747 million in 1998. The increase in cash provided by operating
activities in 2000 was due to better collection practices and working capital
management, accelerated collections on several large programs, and lower
restructuring expenditures. The decrease in cash provided by operating
activities in 1999 was due principally to increased working capital requirements
and restructuring spending. Net cash used in operating activities from
discontinued operations was $100 million in 2000 versus $221 million in 1999 and
net cash provided of $247 million in 1998. In 2000, 1999, and 1998, the Company
incurred cash expenditures of $118 million, $373 million, and $234 million,
respectively, on restructuring and exit costs and $131 million, $265 million,
and $56 million, respectively, of capital expenditures and period costs related
to restructuring and consolidation activities. The Company expects to spend
approximately $75 million on exit costs, capital expenditures, and period costs
related to restructuring actions in 2001.
The Company maintains an ongoing program under which it sells general
aviation and commuter aircraft long-term receivables. During 1998, the Company
initiated a program under which it sold short-term government receivables.
Proceeds from the sale of short-term government receivables were $225 million in
1998. During 1999 and 2000, the Company reduced the outstanding balance of
receivables sold under this facility by $74 million and $126 million,
respectively. During the first quarter of 2001, the Company terminated its
short-term government receivables facility.
Net cash used in investing activities was $213 million in 2000 and $399
million in 1999 versus net cash provided of $617 million in 1998. Origination of
financing receivables was $969 million in 2000, $1,438 million in 1999, and
$1,339 million in 1998. Sale of financing receivables was $776 million in 2000,
$1,239 million in 1999, and $1,105 million in 1998. Capital expenditures were
$431 million in 2000, $524 million in 1999, and $468 million in 1998. Capital
expenditures in 2001 are expected to approximate $560 million.
Proceeds from the sales of property, plant, and equipment were $40 million
in 2000, $102 million in 1999, and $649 million in 1998. The proceeds in 1998
included $490 million sold into a five-year operating lease facility to
diversify the Company's sources of funding and extend the term of a portion of
the Company's financing obligations. Remaining lease payments under the lease
facility approximate $74 million in 2001, $61 million in 2002, and $201 million
in 2003. The lease facility contains covenants that are substantially similar to
those in the Company's senior credit facilities.
In 2000, the Company sold RE&C for $73 million in cash, net to WGI. The
Company also retained approximately $30 million of cash on the balance sheet of
RE&C at closing. The sale of RE&C is subject to a purchase price adjustment
based upon an April 30, 2000 cut-off date balance sheet that has not yet been
completed. The Company does not believe a material purchase price adjustment
will be required. On March 2, 2001, WGI announced that they faced severe near-
term liquidity problems and discussed, among other alternatives, a potential
bankruptcy filing. In the event of a bankruptcy filing by WGI or one or more of
its subsidiaries, the beneficiaries of the Company's guarantees and other
support agreements may seek recourse under those agreements. See Note K,
Commitments and Contingencies, of the Notes to Consolidated Financial Statements
included in this Annual Report for additional information. The Company has
significant guarantees and support agreements related to twelve ongoing WGI
projects. In the event of a bankruptcy filing and non-performance by WGI or one
or more of its subsidiaries on these projects, based in part on information
provided by WGI, the Company's preliminary estimate of the potential range of
exposure is $0 to $450 million over several years, due in large part to the
timing of receipts vs. disbursements on these projects. Based on the information
available to date, the Company believes that no amount in the range is more
likely than any other, therefore, no liability related to this exposure has been
recorded. In addition, a bankruptcy filing by WGI may impact the collectibility
of certain retained assets, which are carried at a net realizable value of $136
million.
In 2000, the Company also sold its flight simulation business for $160
million, its optical systems business for $153 million, and other non-core
business operations for $17 million. Total sales and operating income related to
these divested businesses were $166 million and $2 million, respectively, in
2000. The Company is currently involved in a dispute related to the sale of its
flight simulation business.
In 1999, the Company sold its Cedarapids subsidiary for $170 million, other
non-core business operations for $49 million in cash and $3 million in
securities, and securities received as partial payment for previously divested
businesses for $32 million. Total sales and operating income related to these
divested businesses were $130 million and $6 million, respectively, in 1999.
In 1998, the Company sold its commercial laundry business unit for $315
million in cash and $19 million in securities, its Raytheon Aircraft Montek
subsidiary for $160 million, and other non-core business operations for $273
million. Total sales and operating income related to these divested businesses
were $372 million and $8 million, respectively, in 1998. In 1998, the Company
made net payments for the purchase of acquired companies of $96 million,
including $63 million for the acquisition of AlliedSignal's Communications
Systems business.
The Company merged with Hughes Defense in December 1997. Pursuant to the
terms of the Master Separation Agreement (the "Separation Agreement"), which
requires an adjustment based on net assets, the final purchase price for Hughes
Defense has not been determined. Based on the terms and conditions of the
Separation Agreement, the Company believes that it is entitled to a reduction in
the purchase price, a position that Hughes Electronics disputes. Although the
Company and Hughes Electronics have been engaged in discussions in an attempt to
resolve this dispute, it now appears as though a negotiated settlement is not
likely in the foreseeable future based on the current position of the parties.
The only alternative to a negotiated settlement is binding arbitration, as
provided in the Separation Agreement. Concurrent with the negotiations, the
parties are in the process of selecting a neutral arbitrator. While the Company
expects a reduction in purchase price from the original terms of the agreement,
the amount, timing, and effect on the Company's financial position are
uncertain. As a result of this uncertainty, no amounts have been recorded in the
financial statements related to this expected reduction in purchase price. Any
payment received from Hughes Electronics as a result of a reduction in purchase
price will result in a corresponding reduction in goodwill and not be reflected
in the income statement unless the reduction in goodwill results in lower
amortization in future periods.
In March 2000, the Company and Hughes Electronics participated
unsuccessfully in a voluntary mediation pursuant to the alternative dispute
resolution process set forth in the Separation Agreement in connection with a
separate claim against Hughes Electronics concerning the accuracy and
completeness of disclosures made by Hughes Electronics to the Company prior to
the merger. The Company and Hughes Electronics have selected arbitrators to
resolve the claim through binding arbitration pursuant to the Separation
Agreement. The arbitration is scheduled for May 2001.
In November 1999, the Company filed a complaint against Towers, Perrin,
Forster & Crosby (TPF&C). The complaint arises out of a series of events
concerning certain Hughes Electronics pension plans (the "Hughes Plans"),
portions of which were acquired by the Company in connection with the merger
with Hughes Defense. Specifically, the complaint alleges that the Company was
damaged by false representations made to the Company by TPF&C regarding the
amount of surplus in the Hughes Plans and errors made by TPF&C in providing
administrative services to the Hughes Plans. The complaint seeks damages in an
amount to be determined at trial. The Company has also alleged a claim against
Hughes Electronics pursuant to the terms of the Separation Agreement seeking to
recover costs incurred by the Company resulting from errors in the
administration of the Hughes Plans which Hughes Electronics failed to disclose
to the Company prior to the merger.
-5-
<PAGE>
Defense contractors are subject to many levels of audit and investigation.
Among agencies that oversee contract performance are the Defense Contract Audit
Agency, the Inspector General, the Defense Criminal Investigative Service, the
General Accounting Office, the Department of Justice, and Congressional
Committees. Over recent years, the Department of Justice has convened grand
juries from time to time to investigate possible irregularities by the Company
in government contracting. Such investigations, except as noted in the following
paragraph, individually and in the aggregate, are not expected to have a
material adverse effect on the Company's financial position or results of
operations.
The U.S. Customs Service has concluded its investigation of the
contemplated sale by the Company of troposcatter radio equipment to a customer
in Pakistan. The Company has produced documents in response to grand jury
subpoenas and grand jury appearances have taken place. The Company has
cooperated fully with the investigation. The government has not reached a final
decision with respect to this matter. An adverse decision in this matter could
have a material adverse effect on the Company's financial position and results
of operations.
The Company is involved in various stages of environmental investigation
and clean-up related to remediation of various sites. All appropriate costs
expected to be incurred in connection therewith, on a discounted basis, have
been accrued at December 31, 2000. Due to the complexity of environmental laws
and regulations, the varying costs and effectiveness of alternative clean-up
methods and technologies, the uncertainty of insurance coverage, and the
unresolved extent of the Company's responsibility, it is difficult to determine
the ultimate outcome of these matters, however, any additional liability is not
expected to have a material adverse effect on the Company's financial position
or results of operations after giving effect to provisions previously recorded.
Net cash used in financing activities was $106 million in 2000 versus net
cash provided of $525 million in 1999 and net cash used of $1,486 million in
1998. Dividends paid to stockholders were $272 million in 2000, $269 million in
1999, and $271 million in 1998. The quarterly dividend rate was $0.20 per share
for each of the four quarters of 2000, 1999, and 1998. Outstanding shares were
reduced by the repurchase of 2.6 million shares for $150 million in 1999 and 4.6
million shares for $247 million in 1998. There were no shares repurchased during
2000.
Total debt was $9.9 billion at December 31, 2000 and $9.8 billion at
December 31, 1999. Cash and cash equivalents were $871 million at December 31,
2000 and $230 million at December 31, 1999. The Company's outstanding debt has
interest rates ranging from 5.7% to 8.3% and matures at various dates through
2028. Total debt as a percentage of total capital was 47.9 percent and 47.1
percent at December 31, 2000 and 1999, respectively.
In 2000, the Company issued $2.25 billion of long-term debt to repay
outstanding short-term debt, extending the maturity of the Company's debt
obligations. The Company has on file a shelf registration with the Securities
and Exchange Commission registering the issuance of up to $3.0 billion in debt
and/or equity securities. In 2000, the Company issued $350 million of floating
rate notes due in 2001 under this registration statement to partially refinance
$500 million of long-term debt that matured in 2000.
The Company issued $3.8 billion of long-term debt in 1998 to refinance a
portion of the debt associated with the merger with Hughes Defense and the
acquisition of TI Defense and to take advantage of favorable long-term interest
rates in order to reduce short-term borrowings.
The Company's most restrictive bank agreement covenant is an interest
coverage ratio that currently requires earnings before interest, taxes,
depreciation, and amortization (EBITDA) to be at least 2.5 times net interest
expense for the prior four quarters. The Company was in compliance with the
interest coverage ratio covenant during 2000, 1999, and 1998.
Credit ratings for the Company were established by Moody's at P-2 for
short-term borrowing and Baa2 for senior debt, Standard and Poor's at A-3 for
short-term borrowing and BBB- for senior debt, and Fitch's at F3 for short-term
borrowing and BBB- for senior debt.
Lines of credit with certain commercial banks exist primarily as standby
facilities to support the issuance of commercial paper by the Company. These
lines of credit bear interest based upon LIBOR and mature in 2002. The lines of
credit were $3.0 billion and $4.1 billion at December 31, 2000 and 1999,
respectively. There were no borrowings outstanding under these lines of credit
at December 31, 2000 versus $1.4 billion outstanding at December 31, 1999.
The Company has two classes of common stock--Class A and Class B. The
Company plans to eliminate its dual class capital structure and reclassify its
Class A and Class B common stock into a single new class of common stock.
The Company also plans to effect a 20-for-1 reverse-forward stock split
that will result in holders of fewer than 20 shares of common stock being cashed
out of their holdings. The reverse-forward stock split will be accomplished
immediately prior to the elimination of the Company's dual class capital
structure in a two step transaction. In the first step, the reverse stock split,
each share of Class A or Class B common stock will become 1/20th of a share of
the same class. Stockholders with fewer than 20 shares of either class before
the reverse split will be left with less than a whole share of that class and
will receive a cash payment equal to the fair value of their fractional
interest.
Immediately following the reverse split, the Company will effect a 20-for-1
forward stock split. The forward stock split will restore stockholders with 20
or more shares of either class to their original position. The Company believes
that this action will significantly reduce expenses for stockholder record
keeping and mailings.
The proposed elimination of the dual class capital structure and reverse-
forward stock split have been approved by the Board of Directors and are subject
to approval by a majority vote of the outstanding Class A and Class B shares,
with each class voting separately, at the Company's 2001 annual meeting.
The Company's need for, cost of, and access to funds are dependent on
future operating results, as well as conditions external to the Company. The
Company believes that its financial position will be sufficient to maintain
access to the capital markets to support current operations.
Quantitative and Qualitative Disclosures About Financial Market Risks
The following discussion covers quantitative and qualitative disclosures
about the Company's market risk. The Company's primary market exposures are to
interest rates and foreign exchange rates.
The Company meets its working capital requirements with a combination of
variable and fixed rate short and long-term financing. The Company enters into
interest rate swap agreements or treasury rate locks with commercial and
investment banks primarily to reduce the impact of changes in interest rates on
financing arrangements. The Company also enters into foreign currency forward
contracts with commercial banks to minimize fluctuations in the value of
payments to international vendors and the value of foreign currency denominated
receipts. The market-risk sensitive instruments used by the Company for hedging
are entered into with commercial and investment banks and are directly related
to a particular asset, liability, or transaction for which a firm commitment is
in place. The Company also sells receivables through various special purpose
entities and retains a partial interest that may include servicing rights,
interest only strips, and subordinated certificates.
Financial instruments held by the Company which are subject to interest
rate risk include notes payable, commercial paper, long-term debt, long-term
receivables, investments, and interest rate swap agreements. The aggregate
hypothetical loss in earnings for one year of those financial instruments held
by the Company at December 31, 2000, 1999, and 1998, which are subject to
interest rate risk resulting from a hypothetical increase in interest rates of
10 percent, was $3 million, $6 million, and $1 million, respectively, after-tax.
The hypothetical loss was determined by calculating the aggregate impact of a 10
percent increase in the interest rate of each variable rate financial instrument
held by the Company at December 31, 2000, 1999, and 1998, which was subject to
interest rate risk. Fixed rate financial instruments were not evaluated as the
risk exposure is not material.
-6-
<PAGE>
The Company's outstanding foreign currency forward contracts include
contracts to buy and/or sell British Pounds, Swiss Francs, European Euros, and
German Marks. All foreign exchange contracts were related to specific
transactions for which a firm commitment existed, therefore, the associated
market risk of these financial instruments and the underlying firm commitments
in the aggregate is not material.
Accounting Standards
In September 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, a replacement of FASB
Statement No. 125 (SFAS No. 140). This accounting standard, which carries over
most of the provisions of FASB Statement No. 125, outlines the accounting
requirements for transfers and servicing of financial assets, among other
guidance, and is effective for transfers and servicing of financial assets
occurring after March 31, 2001. The standard contains specific guidelines to
distinguish transfers of financial assets that are sales from transfers that are
secured borrowings. The adoption of SFAS No. 140 is not expected to have a
material effect on the Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133). This accounting standard, which is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000,
requires that all derivatives be recognized as either assets or liabilities at
estimated fair value. In June 2000, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment of
SFAS No. 133. This accounting standard amended the accounting and reporting
standards of SFAS No. 133 for certain derivative instruments and hedging
activities. The January 1, 2001 adoption of SFAS No. 133, as amended, is not
expected to have a material effect on the Company's financial position or
results of operations.
Forward-Looking Statements
Certain statements made in this Annual Report contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
regarding the Company's future plans, objectives, and expected performance.
Specifically, statements that are not historical facts, including statements
accompanied by words such as "believe," "expect," "estimate," "intend," or
"plan" are intended to identify forward-looking statements and convey the
uncertainty of future events or outcomes. The Company cautions readers that any
such forward-looking statements are based on assumptions that the Company
believes are reasonable, but are subject to a wide-range of risks, and actual
results may differ materially. Important factors that could cause actual results
to differ include, but are not limited to: differences in anticipated and actual
program results; risks inherent with large long-term fixed price contracts,
particularly the ability to contain cost growth; the ultimate resolution of
contingencies and legal matters; the ability to realize anticipated cost
efficiencies; timely development and certification of new aircraft; the effect
of market conditions, particularly in relation to the general aviation and
commuter aircraft markets; the impact on recourse obligations of Raytheon
Aircraft due to changes in the collateral values of financed aircraft,
particularly commuter aircraft; the ability to finance ongoing operations at
attractive rates; government customers' budgetary constraints; government import
and export policies; termination of government contracts; financial and
governmental risks related to international transactions; delays and
uncertainties regarding the timing of the award of international programs; the
integration of acquisitions; the impact of competitive products and pricing; the
Company's stockholders may not approve and/or the Company may not implement the
reclassification of its Class A and Class B common stock into a single new class
of common stock and/or the 20-for-1 reverse-forward stock split; and risks
associated with the continuing project obligations and retained assets and
liabilities of Raytheon Engineers & Constructors, among other things. Further
information regarding the factors that could cause actual results to differ
materially from projected results can be found in the Company's reports filed
with the Securities and Exchange Commission, including "Item 1-Business" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
-7-
<PAGE>
<TABLE>
<CAPTION>
Raytheon Company Consolidated Balance Sheets
====================================================================================================================================
(In millions except share amounts) December 31, 2000 December 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
====================================================================================================================================
Current assets
Cash and cash equivalents $ 871 $ 230
Accounts receivable, less allowance for doubtful accounts of $23 in 2000 and
$27 in 1999 505 819
Contracts in process 4,061 4,348
Inventories 1,908 1,950
Deferred federal and foreign income taxes 476 490
Prepaid expenses and other current assets 178 192
Net assets from discontinued operations 14 573
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 8,013 8,602
Property, plant, and equipment, net 2,491 2,387
Goodwill, net of accumulated amortization of $1,285 in 2000 and $918 in 1999 13,281 13,596
Other assets, net 2,992 2,704
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 26,777 $ 27,289
====================================================================================================================================
Liabilities and Stockholders' Equity
====================================================================================================================================
Current liabilities
Notes payable and current portion of long-term debt $ 877 $ 2,471
Advance payments, less contracts in process of $1,699 in 2000 and $1,332 in 1999 1,135 1,245
Accounts payable 1,099 1,204
Accrued salaries and wages 549 497
Other accrued expenses 1,205 1,716
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,865 7,133
Accrued retiree benefits and other long-term liabilities 1,262 1,411
Deferred federal and foreign income taxes 773 488
Long-term debt 9,054 7,298
Commitments and contingencies (note K)
Stockholders' equity
Preferred stock, par value $0.01 per share,
200,000,000 shares authorized, none outstanding in 2000 and 1999
Class A common stock, par value $0.01 per share,
450,000,000 shares authorized, 100,805,000 shares outstanding in 2000 and
1999 after deducting 1,537,000 treasury shares in 2000 and 1999 1 1
Class B common stock, par value $0.01 per share,
1,000,000,000 shares authorized, 239,815,000 and 237,955,000 shares
outstanding in 2000 and 1999, respectively, after deducting
5,319,000 and 5,842,000 treasury shares in 2000 and 1999, respectively 2 2
Additional paid-in capital 6,477 6,475
Accumulated other comprehensive income (106) (69)
Treasury stock, at cost (382) (413)
Retained earnings 4,831 4,963
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 10,823 10,959
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 26,777 $ 27,289
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-8-
<PAGE>
Raytheon Company Consolidated Statements of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In millions except per share amounts) Years Ended December 31: 2000 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 16,895 $ 17,201 $ 17,364
- --------------------------------------------------------------------------------------------------
Cost of sales 13,530 13,684 12,973
Administrative and selling expenses 1,214 1,417 1,550
Research and development expenses 526 508 582
- --------------------------------------------------------------------------------------------------
Total operating expenses 15,270 15,609 15,105
- --------------------------------------------------------------------------------------------------
Operating income 1,625 1,592 2,259
- --------------------------------------------------------------------------------------------------
Interest expense, net 736 703 697
Other expense (income), net 12 (9) (145)
- --------------------------------------------------------------------------------------------------
Non-operating expense, net 748 694 552
- --------------------------------------------------------------------------------------------------
Income from continuing operations before taxes 877 898 1,707
Federal and foreign income taxes 379 396 688
- --------------------------------------------------------------------------------------------------
Income from continuing operations 498 502 1,019
- --------------------------------------------------------------------------------------------------
Discontinued operations
Loss from discontinued operations, net of tax (70) (45) (175)
Loss on disposal of discontinued operations, net of tax (287) -- --
- --------------------------------------------------------------------------------------------------
(357) (45) (175)
- --------------------------------------------------------------------------------------------------
Income before accounting change 141 457 844
Cumulative effect of change in accounting principle, net of tax -- (53) --
- --------------------------------------------------------------------------------------------------
Net income $ 141 $ 404 $ 844
- --------------------------------------------------------------------------------------------------
Earnings per share from continuing operations
Basic $ 1.47 $ 1.49 $ 3.02
Diluted 1.46 1.47 2.98
- --------------------------------------------------------------------------------------------------
Loss per share from discontinued operations
Basic $ (1.05) $ (0.13) $ (0.52)
Diluted (1.05) (0.13) (0.51)
- --------------------------------------------------------------------------------------------------
Earnings per share before accounting change
Basic $ 0.42 $ 1.35 $ 2.50
Diluted 0.41 1.34 2.47
- --------------------------------------------------------------------------------------------------
Earnings per share
Basic $ 0.42 $ 1.20 $ 2.50
Diluted 0.41 1.19 2.47
- --------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-9-
<PAGE>
Raytheon Company Consolidated Statements of Stockholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Years Ended December 31, 2000, 1999, and 1998 Additional Compre- Compre- Total
(In millions except per share amounts) Common Stock Paid-in hensive Treasury Retained hensive Stockholders'
Class A Class B Capital Income Stock Earnings Income Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 1 $ 2 $ 6,151 $ (23) $ 4,255 $ 10,386
Net income 844 $ 844 844
Other comprehensive income
Foreign exchange translation adjustments (9) (9)
Unrealized losses on investments (6) (6)
Pension adjustment (12) (12)
Other comprehensive income (27) (27)
Comprehensive income--1998 $ 817
Dividends declared--$0.80 per share (270) (270)
Common stock plan activity 121 121
Treasury stock activity $ (257) (257)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 1 2 6,272 (50) (257) 4,829 10,797
Net income 404 $ 404 404
Other comprehensive income
Foreign exchange translation adjustments (13) (13)
Unrealized losses on investments (6) (6)
Other comprehensive income (19) (19)
Comprehensive income--1999 $ 385
Dividends declared--$0.80 per share (270) (270)
Common stock plan activity 203 203
Treasury stock activity (156) (156)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 1 2 6,475 (69) (413) 4,963 10,959
Net income 141 $ 141 141
Other comprehensive income
Foreign exchange translation adjustments (36) (36)
Unrealized losses on investments (1) (1)
Other comprehensive income (37) (37)
Comprehensive income--2000 $ 104
Dividends declared--$0.80 per share (273) (273)
Common stock plan activity 17 17
Treasury stock activity (15) 31 16
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 $ 1 $ 2 $ 6,477 $ (106) $ (382) $ 4,831 $ 10,823
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-10-
<PAGE>
Raytheon Company Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In millions) Years Ended December 31: 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Income from continuing operations after accounting change $ 498 $ 449 $ 1,019
Adjustments to reconcile income from continuing operations after accounting change to net
cash from operating activities, net of the effect of acquisitions and divestitures
Depreciation and amortization 694 699 734
Net gain on sales of operating units and investments (35) (23) (141)
Decrease (increase) in accounts receivable 311 (277) 218
Decrease (increase) in contracts in process 21 (377) (920)
Increase in inventories (78) (178) (248)
Decrease in deferred federal and foreign income taxes 14 350 816
Decrease (increase) in prepaid expenses and other current assets 38 16 (105)
(Decrease) increase in advance payments (114) 313 186
(Decrease) increase in accounts payable (167) (372) 335
Increase (decrease) in accrued salaries and wages 59 (153) 22
Decrease in other accrued expenses (222) (419) (701)
Other adjustments, net 41 (124) (468)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities from continuing operations 1,060 (96) 747
Net cash (used in) provided by operating activities from discontinued operations (100) (221) 247
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 960 (317) 994
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Sale of financing receivables 776 1,239 1,105
Origination of financing receivables (969) (1,438) (1,339)
Collection of financing receivables not sold 101 83 60
Expenditures for property, plant, and equipment (431) (524) (468)
Proceeds from sales of property, plant, and equipment 40 102 649
Increase in other assets (130) (121) (52)
Proceeds from sales of operating units and investments 330 251 748
Payment for purchase of acquired companies, net of cash received -- -- (96)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities from continuing operations (283) (408) 607
Net cash provided by investing activities from discontinued operations 70 9 10
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (213) (399) 617
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Dividends (272) (269) (271)
(Decrease) increase in short-term debt (2,093) 771 (4,818)
Increase in long-term debt 2,255 10 3,757
Proceeds under common stock plans 4 164 103
Purchase of treasury stock -- (150) (247)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities from continuing operations (106) 526 (1,476)
Net cash used in financing activities from discontinued operations -- (1) (10)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (106) 525 (1,486)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 641 (191) 125
Cash and cash equivalents at beginning of year 230 421 296
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 871 $ 230 $ 421
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-11-
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note A: Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Raytheon Company
(the "Company") and all majority-owned domestic and foreign subsidiaries. All
material intercompany transactions have been eliminated. The financial
statements for all periods presented have been restated to reflect the
disposition of Raytheon Engineers & Constructors (RE&C) as disclosed in Note B,
Discontinued Operations. Certain prior year amounts have been reclassified to
conform with the current year presentation.
Revenue Recognition
Sales under long-term contracts are recorded under the percentage of completion
method. Costs and estimated gross margins are recorded as sales as work is
performed based on the percentage that incurred costs bear to estimated total
costs utilizing the most recent estimates of costs and funding. Some contracts
contain incentive provisions based upon performance in relation to established
targets which are recognized in the contract estimates when deemed realizable.
Since many contracts extend over a long period of time, revisions in cost and
funding estimates during the progress of work have the effect of adjusting
earnings applicable to performance in prior periods in the current period. When
the current contract estimate indicates a loss, provision is made for the total
anticipated loss in the current period.
Revenue from sales of products and services into commercial markets are
recognized at the time the products are shipped or the services are rendered.
Revenue from aircraft sales are recognized at the time of physical delivery
of the aircraft. Revenue from certain qualifying non-cancelable aircraft lease
contracts are accounted for as sales-type leases. The present value of all
payments, net of executory costs, are recorded as revenue, and the related costs
of the aircraft are charged to cost of sales. Associated interest, using the
interest method, is recorded over the term of the lease agreements. All other
leases for aircraft are accounted for under the operating method wherein revenue
is recorded as earned over the rental aircraft lives. Service revenue is
recognized ratably over contractual periods or as services are performed.
Research and Development Expenses
Expenditures for company-sponsored research and development projects are
expensed as incurred. Customer-sponsored research and development projects
performed under contracts are accounted for as contract costs as the work is
performed.
Federal and Foreign Income Taxes
The Company and its domestic subsidiaries provide for federal income taxes on
pretax accounting income at rates in effect under existing tax law. Foreign
subsidiaries have recorded provisions for income taxes at applicable foreign tax
rates in a similar manner.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term, highly liquid
investments with original maturities of 90 days or less.
Contracts in Process
Contracts in process are stated at cost plus estimated profit but not in excess
of realizable value.
Inventories
Inventories at Raytheon Aircraft are stated at the lower of cost (principally
last-in, first-out) or market. All other inventories are stated at cost
(principally first-in, first-out or average cost) but not in excess of
realizable value.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Major improvements are
capitalized while expenditures for maintenance, repairs, and minor improvements
are charged to expense. When assets are retired or otherwise disposed of, the
assets and related accumulated depreciation and amortization are eliminated from
the accounts and any resulting gain or loss is reflected in income.
Provisions for depreciation are generally computed on a combination of
accelerated and straight line methods. Depreciation provisions are based on
estimated useful lives as follows: buildings--20 to 45 years, machinery and
equipment--3 to 10 years, and equipment leased to others--5 to 10 years.
Leasehold improvements are amortized over the lesser of the remaining life of
the lease or the estimated useful life of the improvement.
Goodwill
Goodwill is amortized using the straight-line method over its estimated useful
life, principally 40 years.
Computer Software
Internal use computer software is stated at cost less accumulated amortization
and is amortized using the straight-line method over its estimated useful life
ranging from 4 to 10 years.
Impairment of Long-lived Assets
Upon indication of possible impairment, the Company evaluates the recoverability
of long-lived assets by measuring the carrying amount of the assets against the
related estimated undiscounted future cash flows. When an evaluation indicates
that the future undiscounted cash flows are not sufficient to recover the
carrying value of the asset, the asset is adjusted to its estimated fair value.
Investments
Investments, which are included in other assets, include equity ownership of 20
percent to 50 percent in affiliated companies and of less than 20 percent in
other companies. Investments in affiliated companies are accounted for under the
equity method, wherein the Company's share of earnings and income taxes
applicable to the assumed distribution of such earnings are included in net
income. Investments with readily determinable market prices are stated at fair
value. Other investments are stated at cost.
Comprehensive Income
Comprehensive income and its components are presented in the statement of
stockholders' equity. The unrealized losses on investments are shown net of tax
benefits of $3 million in both 1999 and 1998. The pension adjustment is shown
net of tax benefits of $6 million in 1998.
Translation of Foreign Currencies
Assets and liabilities of foreign subsidiaries are translated at current
exchange rates and the effects of these translation adjustments are reported as
a component of accumulated other comprehensive income in stockholders' equity.
The net unrealized foreign exchange translation loss at December 31, 2000 and
1999, was $85 million and $49 million, respectively. Foreign exchange
transaction gains and losses in 2000, 1999, and 1998 were not material.
Pension Costs
The Company has several pension and retirement plans covering the majority of
employees, including certain employees in foreign countries. Annual charges to
income are made for the cost of the plans, including current service costs,
interest on projected benefit obligations, and net amortization and deferrals,
increased or reduced by the return on assets. Unfunded accumulated benefit
obligations are accounted for as a long-term liability. The Company funds
annually those pension costs which are calculated in accordance with Internal
Revenue Service regulations and standards issued by the Cost Accounting
Standards Board.
-12-
<PAGE>
Interest Rate and Foreign Currency Contracts
The Company meets its working capital requirements with a combination of
variable rate short-term and fixed rate long-term financing. The Company enters
into interest rate swap agreements or treasury rate locks with commercial and
investment banks primarily to reduce the impact of changes in interest rates on
financing arrangements. Settlement accounting is used for interest rate swap
agreements and treasury rate locks. The Company also enters into foreign
currency forward contracts with commercial banks to minimize fluctuations in the
value of payments due to international vendors and the value of foreign currency
denominated receipts. The hedges used by the Company are transaction driven and
are directly related to a particular asset, liability, or firm commitment. Hedge
accounting is used for foreign currency forward contracts with commercial banks.
Unrealized gains and losses are classified in the same manner as the item being
hedged and are recognized in income when the transaction is complete. Interest
rate swap agreements, treasury rate locks, and foreign currency forward
contracts are held to maturity. Cash flows are recognized in the statement of
cash flows in the same category as the related item. The impact on the Company's
financial position and results of operations from likely changes in foreign
exchange rates and interest rates is not material due to the minimizing of risk
through the hedging of transactions related to specific assets, liabilities, or
firm commitments.
Fair Value of Financial Instruments
The carrying value of certain financial instruments, including cash, cash
equivalents, and short-term debt approximates fair value due to their short
maturities and varying interest rates. The carrying value of notes receivable
approximates fair value based principally on the underlying interest rates and
terms, maturities, collateral, and credit status of the receivables. The
carrying value of investments with readily determinable market prices, other
than those accounted for under the equity method, are based on quoted market
prices which approximate fair value. Unrealized gains and losses on securities
classified as available for sale are reported as a component of accumulated
other comprehensive income in stockholders' equity. The net unrealized loss on
securities classified as available for sale at December 31, 2000 and 1999, was
$21 million and $20 million, respectively. The carrying value of long-term debt,
which approximates fair value, is based on current rates offered to the Company
for similar debt with the same remaining maturities.
Employee Stock Plans
Proceeds from the exercise of stock options under employee stock plans are
credited to common stock at par value and the excess is credited to additional
paid-in capital. There are no charges or credits to income for stock options.
The fair value at the date of award of restricted stock is credited to common
stock at par value and the excess is credited to additional paid-in capital. The
fair value is charged to compensation expense over the vesting period. Income
tax benefits arising from employees' premature disposition of stock option
shares and exercise of nonqualified stock options are credited to additional
paid-in capital. The pro forma net income and earnings per share effect of the
fair value based method of accounting for employee stock options are disclosed
in Note L, Employee Stock Plans.
Accounting Standards
In September 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, a replacement of FASB
Statement No. 125 (SFAS No. 140). This accounting standard, which carries over
most of the provisions of FASB Statement No. 125, outlines the accounting and
disclosure requirements for transfers and servicing of financial assets, among
other guidance. The accounting provisions of SFAS No. 140 are effective for
transfers and servicing of financial assets occurring after March 31, 2001. The
standard contains specific guidelines to distinguish transfers of financial
assets that are sales from transfers that are secured borrowings. The adoption
of SFAS No. 140 is not expected to have a material effect on the Company's
financial position or results of operations. The disclosure provisions
of SFAS No. 140 were effective for fiscal years ending after December 15, 2000
and are included in Note H, Other Assets.
Effective January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants Statement of Position 98-5, Reporting on the Costs
of Start-Up Activities (SOP 98-5). This accounting standard requires that
certain start-up and pre-contract costs be expensed as incurred. The Company
reported a first quarter 1999 charge of $53 million after-tax, or $0.16 per
diluted share, reflecting the initial application of SOP 98-5 and the cumulative
effect of the change in accounting principle as of January 1, 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133). This accounting standard, which is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000,
requires that all derivatives be recognized as either assets or liabilities at
estimated fair value. In June 2000, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment of
SFAS No. 133. This accounting standard amended the accounting and reporting
standards of SFAS No. 133 for certain derivative instruments and hedging
activities. The January 1, 2001 adoption of SFAS No. 133, as amended, is not
expected to have a material effect on the Company's financial position or
results of operations.
Risks and Uncertainties
The Company is engaged in supplying defense-related equipment to the government
and is subject to certain business risks peculiar to that industry. Sales to the
government may be affected by changes in procurement policies, budget
considerations, changing concepts of national defense, political developments
abroad, and other factors.
The Company also leverages its defense technologies in commercial markets.
Risks inherent in the commercial marketplace include development of competing
products, technological feasibility, market acceptance, and product
obsolescence.
The highly competitive market for business and special mission aircraft is
also subject to certain business risks. These risks include timely development
and certification of new product offerings, the current state of the general
aviation and commuter aircraft markets, and government regulations affecting
commuter aircraft.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Note B: Discontinued Operations
In 2000, the Company sold RE&C for $73 million in cash, net to Washington Group
International, Inc. (WGI), formerly known as Morrison Knudsen. The Company also
retained approximately $30 million of cash on the balance sheet of RE&C at
closing. The Company retained the responsibility for performance of four large,
fixed price international turnkey projects that are close to completion,
partially indemnified the buyer on the completion of one other existing project,
and retained certain significant assets and liabilities, including certain
letters of credit, performance bonds, and parent guarantees outstanding at the
time of sale. The Company originally recorded a loss on disposal of discontinued
operations of $270 million pretax, or $191 million after-tax which included a
gain on curtailment of the RE&C pension plans of $35 million. The Company
subsequently increased the loss on disposal of discontinued operations to a
total of $415 million pretax, or $287 million after-tax, due in part to the
recognition of additional losses on the retained projects. The sale of RE&C is
subject to a purchase price adjustment based upon an April 30, 2000 cut-off date
balance sheet that has not yet been completed. The Company does not believe a
material purchase price adjustment will be required.
On March 2, 2001, WGI announced that they faced severe near-term liquidity
problems and discussed, among other alternatives, a potential bankruptcy filing.
In the event of a bankruptcy filing by WGI or one or more of its subsidiaries,
the beneficiaries of the Company's guarantees and other support agreements may
seek recourse under those agreements. See Note K, Commitments and Contingencies,
for additional information. The Company has significant guarantees and support
agreements related to twelve ongoing WGI projects. In the event of a bankruptcy
filing and non-performance by WGI or one or more of its subsidiaries on these
projects, based in part on information provided by WGI, the Company's
preliminary estimate of the potential range of exposure is $0 to $450 million
over several years, due in large part to the timing of receipts vs.
disbursements on these projects. Based on the information available to date, the
Company believes that no amount in the range is more likely than any other,
therefore, no liability related to this exposure has been recorded. In addition,
a bankruptcy filing by WGI may impact the collectibility of certain retained
assets, which are carried at a net realizable value of $136 million.
-13-
<PAGE>
The summary of operating results from discontinued operations is as follows:
(In millions) 2000 1999 1998
- ----------------------------------------------------------------------------
Net sales $ 1,426 $ 2,640 $ 2,055
Operating expenses 1,515 2,705 2,308
- ----------------------------------------------------------------------------
Operating loss (89) (65) (253)
Other expense, net 9 5 17
- ----------------------------------------------------------------------------
Loss before taxes (98) (70) (270)
Federal and foreign income tax benefit (28) (25) (95)
- ----------------------------------------------------------------------------
Loss from discontinued operations $ (70) $ (45) $ (175)
============================================================================
Net assets from discontinued operations consisted of the following at December
31:
(In millions) 2000 1999
- ----------------------------------------------------------------------------
Current assets $ 164 $ 902
Noncurrent assets -- 492
Current liabilities (150) (753)
Noncurrent liabilities -- (68)
- ----------------------------------------------------------------------------
Total $ 14 $ 573
============================================================================
Note C: Acquisitions and Divestitures
In 2000, the Company sold its flight simulation business for $160 million, its
optical systems business for $153 million, and other non-core business
operations for $17 million. The net gain resulting from these dispositions was
$35 million. The Company is currently involved in a dispute related to the sale
of its flight simulation business.
In 1999, the Company sold its Cedarapids, Inc. subsidiary for $170 million,
other non-core business operations for $49 million in cash and $3 million in
securities, and securities received as partial payment for previously divested
businesses for $32 million. The net gain resulting from these dispositions was
$23 million.
In 1998, the Company acquired AlliedSignal's Communications Systems
business for $63 million. Also in 1998, the Company sold its commercial laundry
business unit for $315 million in cash and $19 million in securities, its
Raytheon Aircraft Montek subsidiary for $160 million, and other non-core
business operations for $273 million. The net gain resulting from these
dispositions was $141 million.
Note D: Restructuring and Special Charges
Restructuring charges and exit costs recognized in connection with business
combinations include the cost of involuntary employee termination benefits and
related employee severance costs, facility closures, and other costs associated
with the Company's approved plans. Employee termination benefits include
severance, wage continuation, medical, and other benefits. Facility closure and
related costs include disposal costs of property, plant, and equipment, lease
payments, lease termination costs, and net gain or loss on sales of closed
facilities.
In 1999, the Company recorded the following restructuring charges, favorable
adjustments to restructuring-related reserves, and special charges which were
included in the statements of income and classified as a reduction in net sales
or included in cost of sales, administrative and selling expenses, or other
expense as indicated below:
Admin.
Net Cost and Selling Other
(In millions) Sales of Sales Expenses Expense Total
- --------------------------------------------------------------------------------
Restructuring charges $128 $9 $137
Favorable adjustments to
restructuring-related
reserves (65) (65)
Special charges
Iridium LLC $15 6 $14 35
Korean business venture 33 33
Exit PRT business 6 6
- --------------------------------------------------------------------------------
Total $15 $108 $9 $14 $146
================================================================================
In 1998, the Company recorded special charges of $167 million which were
included in administrative and selling expenses.
Exit Costs and Restructuring Charges
The Company acquired Texas Instruments' defense business (TI Defense) on July
11, 1997, merged with the defense business of Hughes Electronics Corporation
(Hughes Defense) on December 17, 1997, and created Raytheon Systems Company
(RSC) in December 1997. In conjunction with the formation of RSC, the Company
recorded a $220 million restructuring charge, which is included in cost of
sales, to reduce the then newly formed RSC workforce by 12,800 employees and
reduce space by approximately 11 million square feet at 34 facilities through
sales, subleases, and lease terminations. In connection with these actions, the
Company also accrued $584 million as liabilities assumed in connection with the
acquisition of TI Defense and the merger with Hughes Defense and recorded this
amount as an increase to goodwill. The principal actions involved the
consolidation of missile and other electronics systems' manufacturing and
engineering, as well as the consolidation of certain component manufacturing
into Centers of Excellence.
In 1998, the estimated number of employee terminations increased by
approximately 1,200 employees, primarily comprised of manufacturing employees,
however, the actual cost of termination per employee was lower than the original
estimate. As a result of these changes in estimate, the total cost of employee
severance decreased by $37 million. The Company also determined that facilities
exit costs would be lower than the original estimate by $30 million because many
of the facility actions were progressing ahead of the original schedule,
reducing the amount of rent and occupancy costs, and costs to return certain
facilities to the required condition were less than originally planned. Also in
1998, the Company committed to close two additional facilities and further
reduce employment by approximately 1,400 positions. The total program cost of
the actions was estimated at $67 million, comprised of $14 million of severance
and other employee-related costs and $53 million of facility closure and related
costs.
-14-
<PAGE>
The Company recorded a $102 million restructuring charge in the third
quarter of 1999, of which $93 million was included in cost of sales and $9
million was included in administrative and selling expenses, to further reduce
the workforce by 2,200 employees and vacate and dispose of an additional 2.7
million square feet of facility space, primarily at the Company's defense
electronics businesses. Employee-related exit costs of $55 million include
severance and other termination benefit costs for manufacturing, engineering,
and administrative employees. Facility-related exit costs of $47 million include
the costs for lease termination, building closure and disposal, and equipment
disposition. The Company also recorded a $35 million restructuring charge in the
third quarter of 1999, which was included in cost of sales, for higher than
originally estimated exit costs related to the TI Defense and Hughes Defense
actions. The estimate for employee-related exit costs increased by $27 million
for higher than planned severance and other termination benefit costs. The
estimate for facility-related exit costs increased by $8 million for additional
lease termination costs expected to be incurred. The Company also accrued $12
million of exit costs as liabilities assumed in connection with a minor
acquisition in 1999 and recorded this amount as an increase to goodwill.
In the fourth quarter of 1999, the Company determined that the cost of the
restructuring initiatives would be $65 million lower than originally planned and
recorded a favorable adjustment to the original $220 million restructuring
charge, which was included in cost of sales. The reduction in the estimated
costs related to lower than anticipated costs for severance and facilities. The
primary reasons for the reduction in severance costs included a shift in the
composition of severed employees, higher attrition resulting in the need for
fewer severed employees, and more employees transferring to other locations
within the Company. The estimated costs related to facilities were lower than
anticipated due to the identification of alternative uses for assets originally
identified for disposition, lower de-installation costs, and more rapid exit
from facilities.
In 2000, the Company determined that the cost of the restructuring
initiatives would be lower than originally planned and recorded a $74 million
favorable adjustment to cost of sales and a $12 million reduction to goodwill.
The estimate for employee-related exit costs decreased by $45 million due to
lower than anticipated costs for severance as a result of higher employee
attrition and transfers within the Company during the year. The estimate for
facility-related exit costs decreased by $41 million due to more rapid exit from
facilities, including two facilities sold during 2000 in connection with the
divestiture of non-core business operations, and the identification of
alternative uses for facilities originally identified for disposition. Also
during 2000, the Company recorded an $8 million restructuring charge, which is
included in cost of sales, in connection with a workforce reduction primarily at
a foreign location.
The restructuring and exit costs discussed above originally provided for
severance and related benefits for approximately 17,600 employees and costs to
vacate and dispose of approximately 14 million square feet of facility space.
The Company is exiting facility space and terminating employees made redundant
as a result of the acquisition of TI Defense and the merger with Hughes Defense
and the subsequent reorganization of RSC. There were no major activities that
will not be continued as a result of these actions. Employee-related exit costs
include severance and other termination benefit costs for employees in various
functional areas including manufacturing, engineering, and administration.
Facility-related exit costs include the costs for lease termination, building
closure and disposal, and equipment disposition. Exit costs accrued in
connection with the acquisition of TI Defense and the merger with Hughes Defense
also include employee relocation and program moves. Owned facilities that will
be vacated in connection with the restructuring activities will be sold. The
Company will terminate leases or sublease space for non-owned facilities vacated
in connection with restructuring. The Company essentially completed all
restructuring actions during 2000. While these actions are intended to improve
the Company's competitive position, there can be no assurances as to their
ultimate success or that additional restructuring actions will not be required.
<TABLE>
<CAPTION>
Exit Costs
- ----------------------------------------------------------------------------------
(In millions except employee data) 2000 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Accrued liability at beginning of year $ 144 $ 399 $ 300
- ----------------------------------------------------------------------------------
Charges and liabilities accrued
Severance and other employee-related costs -- 33 58
Facility closure and related costs -- 14 226
- ----------------------------------------------------------------------------------
-- 47 284
- ----------------------------------------------------------------------------------
Change in estimate
Severance and other employee-related costs (7) -- --
Facility closure and related costs (5) -- --
- ----------------------------------------------------------------------------------
(12) -- --
- ----------------------------------------------------------------------------------
Costs incurred
Severance and other employee-related costs 62 130 51
Facility closure and related costs 29 172 134
- ----------------------------------------------------------------------------------
91 302 185
- ----------------------------------------------------------------------------------
Accrued liability at end of year $ 41 $ 144 $ 399
- ----------------------------------------------------------------------------------
Cash expenditures $ 91 $ 302 $ 178
Number of employee terminations due to
restructuring actions 900 3,300 3,600
Number of square feet exited due to
restructuring actions 1.6 4.6 2.4
- ----------------------------------------------------------------------------------
Restructuring
- ----------------------------------------------------------------------------------
(In millions except employee data) 2000 1999 1998
- ----------------------------------------------------------------------------------
Accrued liability at beginning of year $ 130 $ 164 $ 220
- ----------------------------------------------------------------------------------
Charges and liabilities accrued
Severance and other employee-related costs 8 55 14
Facility closure and related costs -- 47 53
- ----------------------------------------------------------------------------------
8 102 67
- ----------------------------------------------------------------------------------
Changes in estimate
Severance and other employee-related costs (38) (20) (37)
Facility closure and related costs (36) (45) (30)
- ----------------------------------------------------------------------------------
(74) (65) (67)
- ----------------------------------------------------------------------------------
Costs incurred
Severance and other employee-related costs 16 36 53
Facility closure and related costs 11 35 3
- ----------------------------------------------------------------------------------
27 71 56
- ----------------------------------------------------------------------------------
Accrued liability at end of year $ 37 $ 130 $ 164
- ----------------------------------------------------------------------------------
Cash expenditures $ 27 $ 71 $ 56
Number of employee terminations due to
restructuring actions 700 1,000 3,000
Number of square feet exited due to
restructuring actions 1.2 1.6 0.9
- ----------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
In addition to the $118 million, $373 million, and $241 million of restructuring
and exit costs incurred in 2000, 1999, and 1998, respectively, the Company also
incurred $131 million, $265 million, and $56 million of capital expenditures and
period expenses in 2000, 1999, and 1998, respectively, related to restructuring
and consolidation activities. Note N, Business Segment Reporting, contains
additional disclosures related to restructuring and exit costs and activities by
segment.
The cumulative number of employee terminations due to restructuring actions
for exit costs and restructuring was 7,800 and 4,700, respectively. The
cumulative number of square feet exited due to restructuring actions for exit
costs and restructuring was 8.6 million and 3.7 million, respectively.
Special Charges
In 1999, the Company recorded a $35 million special charge to write down its
minority investment and receivables related to Iridium LLC, which filed for
Chapter 11 bankruptcy protection from creditors on August 13, 1999. The Company
also recorded an additional $33 million special charge to further write down
inventory and receivables related to a Korean business venture and a $6 million
special charge to exit the personal rapid transit (PRT) business, including the
costs to dispose of a test track. At December 31, 2000, the remaining assets
related to the Korean business venture consisted of a $5 million receivable.
In 1998, the Company recorded a $125 million special charge to exit a line
of business, which included writing off its investment in a Korean business
venture. The Company's partner in this business venture filed for company
reorganization, the Korean equivalent of Chapter 11 bankruptcy protection from
creditors, therefore the Company does not expect to realize any future benefits
from its remaining partnership interest in this business venture. Additionally,
any remaining exposure related to the operations of the business venture is not
expected to have a material adverse effect on the Company's financial position
or results of operations. The Company also recorded a $42 million special charge
to write down the assets of two operations that the Company had decided to sell
to estimated fair value of approximately $125 million. One sale was completed
during 1998 and the other during 1999. The operating results, which were not
material, were included in the Company's results of operations through the date
of sale.
Note E: Contracts in Process
Contracts in process consisted of the following at December 31, 2000:
(In millions) Cost Type Fixed Price Total
- --------------------------------------------------------------------------------
U.S. government end-use contracts
Billed $ 293 $ 540 $ 833
Unbilled 1,007 3,604 4,611
Less progress payments (6) (1,957) (1,963)
- --------------------------------------------------------------------------------
1,294 2,187 3,481
- --------------------------------------------------------------------------------
Other customers
Billed 22 360 382
Unbilled 24 1,205 1,229
Less progress payments -- (1,031) (1,031)
- --------------------------------------------------------------------------------
46 534 580
- --------------------------------------------------------------------------------
Total $ 1,340 $ 2,721 $ 4,061
================================================================================
Contracts in process consisted of the following at December 31, 1999:
(In millions) Cost Type Fixed Price Total
- --------------------------------------------------------------------------------
U.S. government end-use contracts
Billed $ 390 $ 185 $ 575
Unbilled 958 3,930 4,888
Less progress payments (3) (1,869) (1,872)
- --------------------------------------------------------------------------------
1,345 2,246 3,591
- --------------------------------------------------------------------------------
Other customers
Billed 18 450 468
Unbilled 14 1,094 1,108
Less progress payments -- (819) (819)
- --------------------------------------------------------------------------------
32 725 757
- --------------------------------------------------------------------------------
Total $ 1,377 $ 2,971 $ 4,348
================================================================================
The U.S. government has title to the costs incurred underlying unbilled
amounts on contracts that provide for progress payments. Unbilled amounts are
primarily recorded on the percentage of completion method and are recoverable
from the customer upon shipment of the product, presentation of billings, or
completion of the contract.
Billed and unbilled contracts in process include retentions arising from
contractual provisions. At December 31, 2000, retentions amounted to $58 million
and are anticipated to be collected as follows: 2001--$49 million, 2002--$3
million, and the balance thereafter.
-16-
<PAGE>
Note F: Inventories
Inventories consisted of the following at December 31:
(In millions) 2000 1999
- --------------------------------------------------------------------------------
Finished goods $ 327 $ 280
Work in process 1,191 1,322
Materials and purchased parts 529 510
Excess of current cost over LIFO values (135) (140)
- --------------------------------------------------------------------------------
1,912 1,972
Less progress payments (4) (22)
- --------------------------------------------------------------------------------
Total $ 1,908 $ 1,950
================================================================================
The gross value of inventory maintained on a last-in, first-out (LIFO) basis was
$1,082 million and $1,009 million at December 31, 2000 and 1999, respectively.
The value of inventory maintained on a first-in, first-out or average cost basis
was $965 million and $1,103 million at December 31, 2000 and 1999, respectively.
During 2000, 1999, and 1998, the liquidation of certain LIFO layers decreased
cost of sales by $5 million, $8 million, and $6 million, respectively.
Note G: Property, Plant, and Equipment
Property, plant, and equipment consisted of the following at December 31:
(In millions) 2000 1999
- --------------------------------------------------------------------------------
Land $ 75 $ 74
Buildings and leasehold improvements 1,920 1,887
Machinery and equipment 2,522 2,297
Equipment leased to others 388 312
- --------------------------------------------------------------------------------
4,905 4,570
Less accumulated depreciation and amortization (2,414) (2,183)
- --------------------------------------------------------------------------------
Total $ 2,491 $ 2,387
================================================================================
Depreciation expense was $276 million, $283 million, and $367 million in 2000,
1999, and 1998, respectively. Accumulated depreciation of equipment leased to
others was $21 million and $19 million at December 31, 2000 and 1999,
respectively. Future minimum lease payments from non-cancelable aircraft
operating leases, which extend to 2014, amounted to $127 million.
At December 31, 2000, these payments were due as follows:
- --------------------------------------------------------------------------------
(In millions) 2001 $ 23
2002 20
2003 15
2004 12
2005 9
Thereafter 48
- --------------------------------------------------------------------------------
Note H: Other Assets
Other assets consisted of the following at December 31:
(In millions) 2000 1999
- --------------------------------------------------------------------------------
Computer software $ 245 $ 158
Investments 217 202
Long-term receivables
Due from customers in installments to 2015 197 274
Sales-type leases, due in installments to 2015 41 17
Other, principally due through 2008 12 22
Prepaid pension and other noncurrent assets 2,280 2,031
- --------------------------------------------------------------------------------
Total $ 2,992 $2,704
================================================================================
The Company capitalizes certain costs incurred in connection with the purchase
and development of internal use computer software. The Company capitalized $111
million, $110 million, and $50 million of computer software during 2000, 1999,
and 1998, respectively.
The Company provides long-term financing, principally to its aircraft
customers. Long-term receivables include commuter airline receivables of $115
million and $68 million at December 31, 2000 and 1999, respectively.
The Company sells receivables, including short-term government receivables
and general aviation and commuter aircraft long-term receivables, to a bank
syndicate and other financial institutions. The banks have a first priority
claim on all proceeds, including the underlying equipment and any insurance
proceeds, and have recourse against the Company, at varying percentages,
depending upon the character of the receivables sold. For the general aviation
and commuter aircraft long-term receivables, the underlying aircraft serve as
collateral for the aircraft receivables, and the future resale value of the
aircraft is an important consideration in the transaction. Based on experience
to date with resale activities and pricing and the Company's plan to continue
production into the foreseeable future, the Company believes that any liability
arising from these transactions will not have a material effect on the Company's
financial position, or results of operations.
When the Company sells receivables, it retains interest-only strips and
servicing rights (retained interests). Any gain or loss on the sale of
receivables depends, in part, on the carrying amount of the receivables sold
allocated between the receivables and the retained interests, based on their
relative fair value at the date of sale, and is recognized in the period in
which the sale occurs. The retained interests, which are not material, include
interest-only strips, servicing rights, and subordinated certificates and are
recorded at estimated fair value. The Company estimates fair value based on the
present value of expected future cash flows using the Company's best estimates
of the key assumptions commensurate with the risks involved including credit
losses, prepayment timing, forward yield curves, and discount rates. The bank
syndicate and other financial institutions have recourse against the Company for
failure of debtors to pay when due. The Company's retained interests are subject
to credit, prepayment, and interest rate risks on the receivables sold.
In connection with the sale of receivables, Raytheon Receivables, Inc. and
Raytheon Aircraft Receivables Corporation, special purpose entities, continued
in existence at December 31, 2000. The Company sells receivables through these
special purpose entities and receives a servicing fee which is recognized as
collected over the remaining term of the related receivables sold. No material
gain or loss resulted from the sales of receivables in 2000, 1999, or 1998. The
outstanding balance of receivables sold to banks or financial institutions was
$1,780 million and $2,828 million at December 31, 2000 and 1999, respectively.
-17-
<PAGE>
Note I: Notes Payable and Long-term Debt
Debt consisted of the following at December 31:
(In millions) 2000 1999
- --------------------------------------------------------------------------------
Notes payable at a weighted average interest
rate of 5.90% for 2000 and 6.03% for 1999 $ 26 $ 1,422
Commercial paper at a weighted average interest
rate of 6.53% for 1999 -- 173
Current portion of long-term debt 851 876
- --------------------------------------------------------------------------------
Notes payable and current portion of long-term debt 877 2,471
- --------------------------------------------------------------------------------
Notes due 2000, 6.30%, not redeemable prior to maturity -- 500
Notes due 2001, 5.95%, not redeemable prior to maturity 500 499
Notes due 2001, floating rate, 7.09%, not redeemable prior
to maturity 350 --
Notes due 2002, 6.45%, not redeemable prior to maturity 991 986
Notes due 2002, floating rate, 7.37%, not redeemable prior
to maturity 200 --
Notes due 2003, 5.70%, not redeemable prior to maturity 398 398
Notes due 2003, 7.90%, not redeemable prior to maturity 797 --
Notes due 2005, 6.30%, not redeemable prior to maturity 448 447
Notes due 2005, 6.50%, not redeemable prior to maturity 740 737
Notes due 2006, 8.20%, redeemable at any time 845 --
Notes due 2007, 6.75%, redeemable at any time 970 966
Notes due 2008, 6.15%, redeemable at any time 745 744
Notes due 2010, 6.00%, redeemable at any time 249 249
Notes due 2010, 6.55%, redeemable at any time 298 298
Notes due 2010, 8.30%, redeemable at any time 397 --
Debentures due 2018, 6.40%, redeemable at any time 544 543
Debentures due 2018, 6.75%, redeemable at any time 346 346
Debentures due 2025, 7.375%, redeemable after 2005 364 363
Debentures due 2027, 7.20%, redeemable at any time 467 466
Debentures due 2028, 7.00%, redeemable at any time 248 248
Commercial paper backed by five year fixed for
variable interest rate swap at 6.40% -- 375
Other notes with varying interest rates 8 9
Less installments due within one year (851) (876)
- --------------------------------------------------------------------------------
Long-term debt 9,054 7,298
- --------------------------------------------------------------------------------
Total $ 9,931 $ 9,769
================================================================================
In 2000, the Company issued $2.25 billion of long-term debt to repay outstanding
short-term debt, extending the maturity of the Company's debt obligations. The
Company has on file a shelf registration with the Securities and Exchange
Commission registering the issuance of up to $3.0 billion in debt and/or equity
securities. In 2000, the Company issued $350 million of floating rate notes due
in 2001 under this registration statement to partially refinance $500 million of
long-term debt that matured in 2000.
The Company issued $3.8 billion of long-term debt in 1998 to refinance a
portion of the debt associated with the acquisition of TI Defense and the merger
with Hughes Defense and to take advantage of favorable long-term interest rates
in order to reduce short-term borrowings.
Commercial paper in the amount of $375 million was classified as current
portion of long-term debt at December 31, 1999 due to Company borrowings of that
amount which were supported by a five-year Syndicated Bank Credit Agreement
combined with a five-year fixed for variable interest rate swap which matured in
2000.
The aggregate amounts of installments due on long-term debt for the next five
years are:
- --------------------------------------------------------------------------------
(In millions) 2001 $ 851
2002 1,202
2003 1,203
2004 --
2005 1,200
- --------------------------------------------------------------------------------
Lines of credit with certain commercial banks exist primarily as standby
facilities to support the issuance of commercial paper by the Company. These
lines of credit bear interest based upon LIBOR and mature in 2002. The lines of
credit were $3.0 billion and $4.1 billion at December 31, 2000 and 1999,
respectively. There were no borrowings outstanding under these lines of credit
at December 31, 2000 versus $1.4 billion outstanding at December 31, 1999.
Credit lines or commitments with banks were maintained by subsidiary companies
amounting to $147 million and $130 million at December 31, 2000 and 1999,
respectively. Compensating balance arrangements are not material.
The principal amounts of long-term debt were reduced by debt issue discounts and
interest rate hedging costs of $87 million and $105 million, respectively, on
the date of issuance, and are reflected as follows at December 31:
(In millions) 2000 1999
- --------------------------------------------------------------------------------
Principal $ 10,033 $ 8,309
Unamortized issue discounts (60) (57)
Unamortized interest rate hedging costs (68) (78)
Installments due within one year (851) (876)
- --------------------------------------------------------------------------------
Long-term debt $ 9,054 $ 7,298
================================================================================
The Company's most restrictive bank agreement covenant is an interest coverage
ratio that currently requires earnings before interest, taxes, depreciation, and
amortization (EBITDA) to be at least 2.5 times net interest expense for the
prior four quarters. Total cash paid for interest was $703 million, $700
million, and $762 million in 2000, 1999, and 1998, respectively.
-18-
<PAGE>
Note J: Federal and Foreign Income Taxes
Income reported for federal and foreign tax purposes differs from pretax
accounting income due to variations between Internal Revenue Code requirements
and the Company's accounting practices.
The provisions for federal and foreign income taxes consisted of the following:
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Current income tax expense
Federal $ 71 $ 53 $ 145
Foreign 9 6 7
Deferred income tax expense (benefit)
Federal 277 314 545
Foreign 22 23 (9)
- --------------------------------------------------------------------------------
Total $ 379 $ 396 $ 688
================================================================================
The provision for income taxes differs from the U.S. statutory rate due to the
following:
2000 1999 1998
- --------------------------------------------------------------------------------
Tax at statutory rate 35.0% 35.0% 35.0%
Goodwill amortization 11.5 11.1 6.6
Foreign sales corporation tax benefit (3.1) (2.4) (1.0)
Research and development tax credit (0.9) (0.6) (0.3)
Other, net 0.7 1.0 --
- --------------------------------------------------------------------------------
Total 43.2% 44.1% 40.3%
================================================================================
In 2000, 1999, and 1998, domestic income before taxes amounted to $788 million,
$816 million, and $1,671 million, respectively, and foreign income before taxes
amounted to $89 million, $82 million, and $36 million, respectively. Cash
refunds (payments) were $22 million, $(102) million, and $16 million in 2000,
1999, and 1998, respectively.
Deferred federal and foreign income taxes consisted of the following at December
31:
(In millions) 2000 1999
- --------------------------------------------------------------------------------
Current deferred tax assets (liabilities)
Contracts in process $ 142 $ 198
Inventories 80 80
Accrued salaries and wages 137 119
Other accrued expenses 117 274
Other -- (181)
- --------------------------------------------------------------------------------
Deferred federal and foreign income taxes--current $ 476 $ 490
================================================================================
Noncurrent deferred tax (liabilities) assets
Prepaid pension $(627) $(525)
Depreciation and amortization (418) (348)
Revenue on leases (124) (101)
Accrued retiree benefits 323 331
Foreign tax credit carryforwards 34 --
Other 39 155
- --------------------------------------------------------------------------------
Deferred federal and foreign income taxes--noncurrent $(773) $(488)
================================================================================
There were $25 million and $20 million of taxes refundable included in prepaid
expenses and other current assets at December 31, 2000 and 1999, respectively.
The foreign tax credit carryforwards expire in 2005.
Note K: Commitments and Contingencies
At December 31, 2000, the Company had commitments under long-term leases
requiring approximate annual rentals on a net lease basis as follows:
- --------------------------------------------------------------------------------
(In millions) 2001 $ 342
2002 278
2003 358
2004 147
2005 131
Thereafter 503
- --------------------------------------------------------------------------------
In 1998, the Company entered into a $490 million property sale and five-year
operating lease facility. Remaining lease payments under the lease facility,
which are included in the table above, approximate $74 million in 2001, $61
million in 2002, and $201 million in 2003. Rent expense in 2000, 1999, and 1998
was $292 million, $358 million, and $223 million, respectively. In 1999, the
Company entered into an agreement to outsource a significant portion of its
information technology function for a minimum of approximately $65 million per
year.
Defense contractors are subject to many levels of audit and investigation.
Among agencies that oversee contract performance are the Defense Contract Audit
Agency, the Inspector General, the Defense Criminal Investigative Service, the
General Accounting Office, the Department of Justice, and Congressional
Committees. Over recent years, the Department of Justice has convened grand
juries from time to time to investigate possible irregularities by the Company
in government contracting. Such investigations, except as noted in the following
paragraph, individually and in the aggregate, are not expected to have a
material adverse effect on the Company's financial position or results of
operations.
The U.S. Customs Service has concluded its investigation of the
contemplated sale by the Company of troposcatter radio equipment to a customer
in Pakistan. The Company has produced documents in response to grand jury
subpoenas and grand jury appearances have taken place. The Company has
cooperated fully with the investigation. The government has not reached a final
decision with respect to this matter. An adverse decision in this matter could
have a material adverse effect on the Company's financial position and results
of operations.
The Company self-insures for losses and expenses for aircraft product
liability up to a maximum of $10 million per occurrence and $50 million
annually. Insurance is purchased from third parties to cover excess aggregate
liability exposure from $50 million to $1.2 billion. This coverage also includes
the excess of liability over $10 million per occurrence. The aircraft product
liability reserve was $23 million and $24 million at December 31, 2000 and 1999,
respectively.
The Company is involved in various stages of environmental investigation
and clean-up related to remediation of various sites. All appropriate costs
expected to be incurred in connection therewith, on a discounted basis, have
been accrued at December 31, 2000. Due to the complexity of environmental laws
and regulations, the varying costs and effectiveness of alternative clean-up
methods and technologies, the uncertainty of insurance coverage, and the
unresolved extent of the Company's responsibility, it is difficult to determine
the ultimate outcome of these matters, however, any additional liability is not
expected to have a material adverse effect on the Company's financial position
or results of operations after giving effect to provisions previously recorded.
The Company has banks and insurance companies issue, on its behalf, letters
of credit to meet various bid, performance, warranty, retention, and advance
payment obligations. Approximately $1,330 million and $1,346 million of these
contingent obligations were outstanding at December 31, 2000 and 1999,
respectively. Of these contingent obligations, $297 million related to RE&C at
December 31, 2000. These instruments expire on various dates through 2006. In
the normal course of operations, the Company guarantees the performance of its
subsidiaries on certain contracts and projects directly or through surety
companies. A total of $1,912 million of guarantees and surety bonds related to
RE&C remained outstanding at December 31, 2000, however, additional guarantees
of project performance for which there is no
-19-
<PAGE>
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
stated value also remained outstanding on five large fixed price turnkey
projects sold to WGI, three of which are in the early stages of completion. See
Note B, Discontinued Operations, for additional disclosures related to RE&C
contingent obligations.
The Company has guaranteed the borrowings of several affiliated entities.
The amount of borrowings outstanding at December 31, 2000 and 1999, for which
the Company was guarantor, was approximately $251 million and $135 million,
respectively.
During October and November 1999, the Company and two of its officers were
named as defendants in class action lawsuits. In June 2000, four additional
former or present officers were named as defendants. The complaints principally
allege that the defendants violated federal securities laws by making false and
misleading statements and by failing to disclose material information concerning
the Company's financial performance, thereby causing the value of the Company's
stock to be artificially inflated. In September 2000, the Company and the
individual defendants filed a motion to dismiss, which the plaintifs opposed.
The Company was also named as a nominal defendant and all of its directors at
the time (except one) were named as defendants in derivative lawsuits. The
derivative complaints contain allegations similar to those included in the above
complaints and further allege that the defendants breached fiduciary duties to
the Company and allegedly failed to exercise due care and diligence in the
management and administration of the affairs of the Company. Although the
Company believes that it and the other defendants have meritorious defenses to
the claims made in both the derivative complaints and the other complaints and
intends to contest the lawsuits vigorously, an adverse resolution of the
lawsuits could have a material adverse affect on the Company's financial
position and results of operations in the period in which the lawsuits are
resolved. The Company is not presently able to reasonably estimate potential
losses, if any, related to the lawsuits.
The Company merged with Hughes Defense in December 1997. Pursuant to the
terms of the Master Separation Agreement (the "Separation Agreement"), which
requires an adjustment based on net assets, the final purchase price for Hughes
Defense has not been determined. Based on the terms and conditions of the
Separation Agreement, the Company believes that it is entitled to a reduction in
the purchase price, a position that Hughes Electronics disputes. Although the
Company and Hughes Electronics have been engaged in discussions in an attempt to
resolve this dispute, it now appears as though a negotiated settlement is not
likely in the foreseeable future based on the current position of the parties.
The only alternative to a negotiated settlement is binding arbitration, as
provided in the Separation Agreement. Concurrent with the negotiations, the
parties are in the process of selecting a neutral arbitrator. While the Company
expects a reduction in purchase price from the original terms of the agreement,
the amount, timing, and effect on the Company's financial position are
uncertain. As a result of this uncertainty, no amounts have been recorded in the
financial statements related to this expected reduction in purchase price. Any
payment received from Hughes Electronics as a result of a reduction in purchase
price will result in a corresponding reduction in goodwill and not be reflected
in the income statement unless the reduction in goodwill results in lower
amortization in future periods.
In March 2000, the Company and Hughes Electronics participated
unsuccessfully in a voluntary mediation pursuant to the alternative dispute
resolution process set forth in the Separation Agreement in connection with a
separate claim against Hughes Electronics concerning the accuracy and
completeness of disclosures made by Hughes Electronics to the Company prior to
the merger. The Company and Hughes Electronics have selected arbitrators to
resolve the claim through binding arbitration pursuant to the Separation
Agreement. The arbitration is scheduled for May 2001.
In November 1999, the Company filed a complaint against Towers, Perrin,
Forster & Crosby (TPF&C). The complaint arises out of a series of events
concerning certain Hughes Electronics pension plans (the "Hughes Plans"),
portions of which were acquired by the Company in connection with the merger
with Hughes Defense. Specifically, the complaint alleges that the Company was
damaged by false representations made to the Company by TPF&C regarding the
amount of surplus in the Hughes Plans and errors made by TPF&C in providing
administrative services to the Hughes Plans. The complaint seeks damages in an
amount to be determined at trial. The Company has also alleged a claim against
Hughes Electronics pursuant to the terms of the Separation Agreement seeking to
recover costs incurred by the Company resulting from errors in the
administration of the Hughes Plans which Hughes Electronics failed to disclose
to the Company, prior to the merger.
In addition, various claims and legal proceedings generally incidental to
the normal course of business are pending or threatened against the Company.
While the ultimate liability from these proceedings is presently indeterminable,
any additional liability is not expected to have a material adverse effect on
the Company's financial position or results of operations after giving effect to
provisions already recorded.
Note L: Employee Stock Plans
The 1976 Stock Option Plan provides for the grant of both incentive and
nonqualified stock options at an exercise price which is 100 percent of the fair
value on the date of grant. No further grants are allowed under this plan. The
1991 Stock Plan provides for the grant of incentive stock options at an exercise
price which is 100 percent of the fair value on the date of grant and
nonqualified stock options at an exercise price which may be less than the fair
value on the date of grant. The 1995 Stock Option Plan provides for the grant of
both incentive and nonqualified stock options at an exercise price which is not
less than 100 percent of the fair value on the date of grant.
All stock options generally may be exercised in their entirety from 1 to 6
years after the date of grant. Incentive stock options terminate 10 years from
the date of grant, and those stock options granted after December 31, 1986
become exercisable to a maximum of $100,000 per year. Nonqualified stock options
terminate 11 years from the date of grant, or 10 years and a day if issued
under the 1995 Stock Option Plan.
The 1991 Stock Plan also provides for the award of restricted stock and
restricted units. The 1997 Nonemployee Directors Restricted Stock Plan provides
for the award of restricted stock to nonemployee directors. Restricted stock and
restricted unit awards are determined by the Management Development and
Compensation Committee of the Board of Directors and are compensatory in nature.
Restricted stock and restricted unit awards vest over a specified period of time
of not less than one year and not more than 10 years. Restricted stock awards
entitle the participant to full dividend and voting rights. Unvested shares are
restricted as to disposition and subject to forfeiture under certain
circumstances. Compensation expense is recognized over the vesting period.
No further grants are allowed under the 1991 Stock Plan, 1995 Stock Option
Plan, and 1997 Nonemployee Directors Restricted Stock Plan after March 26, 2001,
March 21, 2005, and November 25, 2006, respectively.
Awards of 1,152,800, 849,900, and 541,100 shares of restricted stock and
restricted units were made to employees and directors at a weighted average fair
value at the grant date of $21.21, $45.68, and $57.21 in 2000, 1999, and 1998,
respectively. The required conditions for 140,900, 72,600, and 85,500 shares of
restricted stock and restricted units were satisfied during 2000, 1999, and
1998, respectively. There were 2,062,600, 1,336,600, and 834,900 shares of
restricted stock and restricted units outstanding at December 31, 2000, 1999,
and 1998, respectively. The amount of compensation expense recorded was $17
million, $16 million, and $15 million in 2000, 1999, and 1998, respectively. The
balance of unearned compensation was $30 million and $29 million at December 31,
2000 and 1999, respectively.
The 1976 Stock Option Plan, 1991 Stock Plan, 1995 Stock Option Plan, and
1997 Nonemployee Directors Restricted Stock Plan utilize the Company's Class B
common stock. There were 49.2 million, 51.0 million, and 53.7 million additional
shares of common stock (including shares held in treasury) authorized for stock
options and restricted stock awards at December 31, 2000, 1999, and 1998,
respectively.
-20-
<PAGE>
Stock option information for 2000, 1999, and 1998 follows:
Weighted Average
(Share amounts in thousands) Shares Option Price
- --------------------------------------------------------------------------------
Outstanding at
December 31, 1997 19,510 $ 40.87
Granted 6,945 55.54
Exercised (2,917) 35.44
Expired (816) 51.13
- --------------------------------------------------------------------------------
Outstanding at
December 31, 1998 22,722 $ 45.68
Granted 6,986 67.52
Exercised (4,176) 40.82
Expired (475) 55.13
- --------------------------------------------------------------------------------
Outstanding at
December 31, 1999 25,057 $ 52.40
Granted 12,565 19.81
Exercised (253) 18.81
Expired (3,276) 41.68
- --------------------------------------------------------------------------------
Outstanding at
December 31, 2000 34,093 $ 41.66
================================================================================
The following tables summarize information about stock options outstanding and
exercisable at December 31, 2000:
(Share amounts in thousands) Options Outstanding
- --------------------------------------------------------------------------------
Weighted Average Weighted
Shares Contractual Average
Exercise Outstanding at Remaining Exercise
Price Range December 31, 2000 Life Price
- --------------------------------------------------------------------------------
$14.51 to $29.63 12,643 8.2 years $ 20.27
$31.24 to $49.19 4,916 4.3 years $ 38.46
$51.06 to $59.44 11,031 5.4 years $ 54.22
$66.91 to $73.97 5,503 7.9 years $ 68.48
- --------------------------------------------------------------------------------
Total 34,093
================================================================================
(Share amounts in thousands) Options Exercisable
- --------------------------------------------------------------------------------
Weighted
Shares Average
Exercise Exercisable at Exercise
Price Range December 31, 2000 Price
- --------------------------------------------------------------------------------
$14.51 to $29.63 2,641 $ 22.03
$31.24 to $49.19 4,725 $ 38.42
$51.06 to $59.44 10,877 $ 54.17
$66.91 to $73.97 2,807 $ 68.49
- --------------------------------------------------------------------------------
Total 21,050
================================================================================
Shares exercisable at the corresponding weighted average exercise price at
December 31, 2000, 1999, and 1998, respectively, were 21.1 million at $48.51,
14.9 million at $45.14, and 14.9 million at $41.58.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations, in accounting for
its stock-based compensation plans. Accordingly, no compensation expense has
been recognized for its stock-based compensation plans other than for restricted
stock and restricted units. The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS No. 123). Had compensation expense for the
Company's stock option plans been determined based on the fair value at the
grant date for awards under these plans, consistent with the methodology
prescribed under SFAS No. 123, the Company's net income and earnings per share
would have approximated the pro forma amounts indicated below:
(In millions except per share amounts) 2000 1999 1998
- --------------------------------------------------------------------------------
Net income--as reported $ 141 $ 404 $ 844
Net income--pro forma 57 332 800
Basic earnings per share--
as reported 0.42 1.20 2.50
pro forma 0.17 0.98 2.37
Diluted earnings per share--
as reported 0.41 1.19 2.47
pro forma 0.17 0.97 2.34
- --------------------------------------------------------------------------------
The weighted average fair value of each stock option granted in 2000, 1999, and
1998 is estimated as $5.91, $22.25, and $10.40, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions:
2000 1999 1998
- --------------------------------------------------------------------------------
Expected life 4 years 4 years 4 years
Assumed annual dividend growth rate 1% 5% 6%
Expected volatility 40% 35% 15%
Assumed annual forfeiture rate 12% 5% 5%
- --------------------------------------------------------------------------------
The risk free interest rate (month-end yields on 4-year treasury strips
equivalent zero coupon) ranged from 5.3% to 6.6% in 2000, 4.6% to 6.2% in 1999,
and 4.4% to 5.7% in 1998. The decrease in the weighted average fair value of
stock options was primarily the result of the significant decline in the price
of the Company's stock during 1999. The effects of applying SFAS No. 123 in this
pro forma disclosure are not indicative of future amounts.
-21-
<PAGE>
Note M: Pension and Other Employee Benefits
The Company has pension and retirement plans covering the majority of its
employees, including certain employees in foreign countries. Total pension
expense includes foreign pension expense of $7 million in 2000 and $10 million
in 1999 and 1998. In addition to providing pension benefits, the Company
provides certain health care and life insurance benefits for retired employees.
Substantially all of the Company's U.S. employees may become eligible for these
benefits. The measurement date is October 31 and the information presented below
includes the effect of acquisitions and divestitures.
Plan assets consist primarily of equity securities (including 5,157,000
shares of the Company's Class A and Class B common stock combined, with a fair
value of $154 million at December 31, 2000) and fixed income securities
(including $25 million of the Company's 7.9% notes due in 2003 and $50 million
of the Company's 8.2% notes due in 2006, with a combined fair value of $79
million at December 31, 2000).
Change in Benefit Obligation
- --------------------------------------------------------------------------------
Pension Benefits Other Benefits
- --------------------------------------------------------------------------------
(In millions) December 31: 2000 1999 2000 1999
- --------------------------------------------------------------------------------
Benefit obligation at beginning
of year $ 10,629 $ 10,794 $ 1,276 $ 1,426
Service cost 320 365 20 29
Interest cost 763 720 92 97
Plan participants' contributions 23 28 -- --
Amendments 19 -- -- 1
Actuarial (gain) loss (294) (381) 19 (157)
Acquisitions -- 12 -- --
Divestitures (28) (53) (4) (3)
Curtailments (41) -- -- --
Benefits paid (922) (856) (115) (117)
- --------------------------------------------------------------------------------
Benefit obligation at end of year $ 10,469 $ 10,629 $ 1,288 $ 1,276
================================================================================
Change in Plan Assets
- --------------------------------------------------------------------------------
Pension Benefits Other Benefits
- --------------------------------------------------------------------------------
(In millions) December 31: 2000 1999 2000 1999
- --------------------------------------------------------------------------------
Fair value of plan assets at
beginning of year $ 13,522 $ 12,791 $ 387 $ 318
Actual return on plan assets 1,129 1,477 18 35
Acquisitions -- 23 -- --
Divestitures (30) (74) -- --
Company contribution 99 133 140 136
Plan participants' contributions 23 28 -- 15
Benefits paid (922) (856) (120) (117)
- --------------------------------------------------------------------------------
Fair value of plan assets at
end of year $ 13,821 $ 13,522 $ 425 $ 387
================================================================================
Funded Status--unrecognized components
- --------------------------------------------------------------------------------
Pension Benefits Other Benefits
- --------------------------------------------------------------------------------
(In millions) December 31: 2000 1999 2000 1999
- --------------------------------------------------------------------------------
Funded status $ 3,352 $ 2,893 $ (863) $ (889)
Unrecognized actuarial (gain) loss (1,811) (1,630) (119) (160)
Unrecognized transition (asset)
obligation (6) (12) 236 261
Unrecognized prior service cost 159 164 (7) (8)
- --------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ 1,694 $ 1,415 $ (753) $ (796)
================================================================================
Funded Status--recognized in balance sheets
- --------------------------------------------------------------------------------
Pension Benefits Other Benefits
- --------------------------------------------------------------------------------
(In millions) December 31: 2000 1999 2000 1999
- --------------------------------------------------------------------------------
Prepaid benefit cost $ 2,090 $ 1,815 $ 22 $ 17
Accrued benefit liability (429) (441) (775) (813)
Intangible asset 7 9 -- --
Accumulated other
comprehensive income 26 32 -- --
- --------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ 1,694 $ 1,415 $ (753) $ (796)
================================================================================
Components of Net Periodic Benefit (Income) Cost
- --------------------------------------------------------------------------------
Pension Benefits
- --------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Service cost $ 320 $ 365 $ 338
Interest cost 763 720 703
Expected return on plan assets (1,164) (1,090) (1,016)
Amortization of transition asset (6) (6) (7)
Amortization of prior service cost 18 18 19
Recognized net actuarial gain (81) (28) (30)
(Gain) loss due to curtailment/settlements (36) 6 --
- --------------------------------------------------------------------------------
Net periodic benefit (income) cost $ (186) $ (15) $ 7
================================================================================
The net periodic benefit (income) cost includes income from discontinued
operations, including curtailment, of $53 million, $14 million, and $8 million
in 2000, 1999, and 1998, respectively.
Components of Net Periodic Benefit Cost
- --------------------------------------------------------------------------------
Other Benefits
- --------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Service cost $ 20 $ 29 $ 30
Interest cost 92 97 98
Expected return on plan assets (31) (27) (25)
Amortization of transition obligation 25 25 25
Amortization of prior service cost (1) (1) (2)
Recognized net actuarial gain (7) (1) (1)
(Gain) loss due to curtailment/settlements -- (1) 1
- --------------------------------------------------------------------------------
Net periodic benefit cost $ 98 $ 121 $ 126
================================================================================
Weighted Average Assumptions
- --------------------------------------------------------------------------------
Pension Benefits Other Benefits
- --------------------------------------------------------------------------------
December 31: 2000 1999 2000 1999
- --------------------------------------------------------------------------------
Discount rate 7.75% 7.50 % 7.75% 7.50%
Expected return on plan assets 9.50% 9.375% 8.50% 8.50%
Rate of compensation increase 4.50% 4.50 % 4.50% 4.50%
Health care trend rate in the next year 8.25% 9.00%
Gradually declining to a trend rate of 5.0 % 5.0 %
In the years beyond 2006 2006
- --------------------------------------------------------------------------------
The effect of a one percent increase or decrease in the assumed health care
trend rate for each future year for the aggregate of service and interest cost
is $8 million and $(7) million, respectively, and for the accumulated
postretirement benefit obligation is $80 million and $(69) million,
respectively.
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $385 million, $363 million, and $72 million,
respectively, at December 31, 2000, and $405 million, $384 million, and $49
million, respectively, at December 31, 1999.
-22-
<PAGE>
Under the terms of various savings and investment plans (defined
contribution plans), covered employees are allowed to contribute up to a
specific percentage of their pay, generally limited to $30,000 per year. The
Company matches the employee's contribution, up to a maximum of generally
between three and four percent of the employee's pay. Total expense for defined
contribution plans was $176 million, $179 million, and $112 million in 2000,
1999, and 1998, respectively. The increase in 1999 was due to a plan change that
increased the Company match.
The Company also makes an annual contribution to the Company stock fund of
the various savings and investment plans of approximately one-half of one
percent of salaries and wages, limited to $170,000 in 2000 and 1999 and $160,000
in 1998, of most U.S. salaried and hourly employees. Total expense for this
contribution was $26 million, $23 million, and $16 million and the number of
shares allocated to participant accounts was 1,455,000, 271,000, and 241,000 in
2000, 1999, and 1998, respectively. The increase in the number of shares
contributed in 2000 was primarily the result of the significant decline in the
price of the Company's stock during 1999.
Note N: Business Segment Reporting
Reportable segments have been determined based upon product lines and include
the following: Electronic Systems; Command, Control, Communication and
Information Systems; Technical Services; Aircraft Integration Systems;
Commercial Electronics; and Aircraft.
Segment net sales and operating income include intersegment sales and
profit recorded at cost plus a specified fee, which may differ from what the
selling entity would be able to obtain on external sales. Corporate and
Eliminations includes Company-wide accruals and over/under applied overhead that
have not been attributed to a particular segment and intersegment sales and
profit eliminations. Following is a brief description of each segment:
. Electronic Systems includes Missile Systems; Air Combat and Strike Systems;
Tactical Systems; Air/Missile Defense Systems; Naval & Maritime Integrated
Systems; and Surveillance & Reconnaissance Systems.
. Command, Control, Communication and Information Systems includes Command,
Control, and Communication Systems; Imagery and Geospatial Systems; and
Strategic Systems.
. Technical Services includes Scientific and Technical Services; Depot
Services; Installation Support Services; and Integrated Logistics.
. Aircraft Integration Systems includes Tactical Reconnaissance;
Airlift/Avionics Programs; Government and Commercial Programs; Air-Ground
Surveillance; Aircraft Early Warning and Control; and Joint Operations
Group.
. Commercial Electronics includes ELCAN Optical Technologies; RF Components;
Crosspan(TM) Network Access Technologies; Raytheon Commercial Infrared;
Raytheon Marine Company High Seas; and Raytheon Professional Services.
. Aircraft includes Business Jets and Turboprops; Regional Airliners;
Piston-Powered Aircraft; Special Mission Aircraft; Fractional Aircraft
Ownership; Service and Support; and Aircraft Charter and Management.
Segment financial results were as follows:
Net Sales
- --------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Electronic Systems $ 7,584 $ 8,001 $ 8,294
Command, Control, Communication
and Information Systems 3,419 3,767/(1)/ 3,741
Technical Services 1,810 1,885 1,771
Aircraft Integration Systems 1,220 1,094 1,197
Commercial Electronics 666 749 866
Aircraft 3,220 2,709 2,543
Corporate and Eliminations (1,024) (1,004) (1,048)
- --------------------------------------------------------------------------------
Total $ 16,895 $ 17,201 $ 17,364
================================================================================
(1) Includes a special charge of $15 million.
Operating Income
- --------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Electronic Systems $ 1,039 $ 1,156/(2)/ $ 1,448
Command, Control, Communication
and Information Systems 358 374/(3)/ 386
Technical Services 124 122/(4)/ 160
Aircraft Integration Systems 48 (61)/(5)/ 203
Commercial Electronics (4) (30)/(6)/ (157)
Aircraft 164 163 227/(7)/
Corporate and Eliminations (104) (132) (8)
- --------------------------------------------------------------------------------
Total $ 1,625 $ 1,592 $ 2,259
================================================================================
(2) Includes restructuring charges offset by favorable adjustments to
restructuring-related reserves of $41 million, net.
(3) Includes restructuring and special charges offset by favorable adjustments
to restructuring-related reserves of $28 million, net.
(4) Includes restructuring charges of $7 million.
(5) Includes restructuring charges of $11 million.
(6) Includes restructuring and special charges of $44 million.
(7) Includes special charges of $167 million.
Operating Cash Flow
- --------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Electronic Systems $ 611 $ (77) $ 108
Command, Control, Communication
and Information Systems 204 202 163
Technical Services 21 9 2
Aircraft Integration Systems 120 (138) 36
Commercial Electronics 63 (27) 32
Aircraft (372) (155) 127
Corporate (18) (434) (189)
- --------------------------------------------------------------------------------
Total $ 629 $(620) $ 279
================================================================================
Operating cash flow, as defined by the Company to evaluate cash flow performance
by the segments, includes capital expenditures.
-23-
<PAGE>
<TABLE>
<CAPTION>
Capital Expenditures
- --------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Electronic Systems $197 $287 $199
Command, Control, Communication
and Information Systems 70 77 74
Technical Services 5 7 15
Aircraft Integration Systems 10 17 12
Commercial Electronics 33 19 18
Aircraft 116 117 150
- --------------------------------------------------------------------------------
Total $431 $524 $468
- --------------------------------------------------------------------------------
<CAPTION>
Depreciation and Amortization
- --------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Electronic Systems $328 $ 333 $ 374
Command, Control, Communication
and Information Systems 160 173 163
Technical Services 35 37 38
Aircraft Integration Systems 52 57 46
Commercial Electronics 29 20 36
Aircraft 90 79 77
- --------------------------------------------------------------------------------
Total $694 $ 699 $ 734
- --------------------------------------------------------------------------------
<CAPTION>
Identifiable Assets at December 31:
- --------------------------------------------------------------------------------
(In millions) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Electronic Systems $11,356 $11,596
Command, Control, Communication
and Information Systems 5,117 5,368
Technical Services 1,611 1,584
Aircraft Integration Systems 1,712 1,852
Commercial Electronics 780 838
Aircraft 3,297 3,264
Corporate 2,890 2,214
- --------------------------------------------------------------------------------
Total $26,763 $26,716
- --------------------------------------------------------------------------------
</TABLE>
Intersegment sales in 2000, 1999, and 1998, respectively, were $205 million,
$194 million, and $496 million for Electronic Systems, $122 million, $189
million, and $209 million for Command, Control, Communication and Information
Systems, $496 million, $505 million, and $250 million for Technical Services,
$32 million, $22 million, and $17 million for Aircraft Integration Systems, $110
million, $81 million, and $64 million for Commercial Electronics, and $59
million, $13 million, and $12 million for Aircraft.
The following tables summarize information related to restructuring and exit
costs and activities by segment:
<TABLE>
<CAPTION>
Restructuring and Exit Costs
- --------------------------------------------------------------------------------
Charges Costs Ending
(In millions) Accrued Incurred Balance
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Electronic Systems $ 570 $ 524 $ 46
Command, Control, Communication
and Information Systems 129 114 15
Technical Services 43 37 6
Aircraft Integration Systems 12 12 --
Commercial Electronics 12 7 5
Corporate 44 38 6
- --------------------------------------------------------------------------------
Total $ 810 $ 732 $ 78
- --------------------------------------------------------------------------------
<CAPTION>
Restructuring and Exit Activities
- --------------------------------------------------------------------------------
Number of Square Feet
Employee Exited
Terminations (thousands)
- --------------------------------------------------------------------------------
<S> <C> <C>
Electronic Systems 7,300 8,800
Command, Control, Communication
and Information Systems 2,600 2,300
Technical Services 1,900 1,200
Aircraft Integration Systems 400 --
Commercial Electronics 200 --
Corporate 100 --
- --------------------------------------------------------------------------------
Total 12,500 12,300
- --------------------------------------------------------------------------------
The following table summarizes information related to operations by geographic
areas:
<CAPTION>
Operations by Geographic Areas
- --------------------------------------------------------------------------------
Outside United States
(In millions) United States (Principally Europe) Consolidated
- --------------------------------------------------------------------------------
Sales
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $13,847 $ 3,048 $16,895
1999 14,046 3,155 17,201
1998 14,903 2,461 17,364
Long-lived assets at
- --------------------------------------------------------------------------------
December 31, 2000 $18,558 $ 206 $18,764
December 31, 1999 18,497 190 18,687
- --------------------------------------------------------------------------------
</TABLE>
The country of origin was used to attribute sales to either United States or
Outside United States. Sales to major customers in 2000, 1999, and 1998, were:
U.S. government, including foreign military sales, $11,116 million, $11,685
million, and $12,569 million, respectively, and U.S. Department of Defense,
$9,601 million, $9,561 million, and $10,608 million, respectively.
-24-
<PAGE>
<TABLE>
<CAPTION>
Note O: Quarterly Operating Results (unaudited)
(In millions except per share amounts and stock prices)
- -------------------------------------------------------------------------------
2000 First Second Third Fourth
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 4,231 $ 4,124 $ 4,160 $ 4,380
Gross margin 750 835 843 937
Income from continuing
operations 80 95 133 190
Net income (loss) (181) 49 105 168
Earnings per share from
continuing operations
Basic 0.24 0.28 0.39 0.56
Diluted 0.24 0.28 0.39 0.55
Earnings (loss) per share
Basic (0.54) 0.14 0.31 0.50
Diluted (0.54) 0.14 0.31 0.49
Cash dividends per share
Declared 0.20 0.20 0.20 0.20
Paid 0.20 0.20 0.20 0.20
Common stock prices
Class A--High 27.63 25.25 28.13 33.25
Class A--Low 17.88 18.50 19.25 25.00
Class B--High 28.50 25.19 29.56 35.81
Class B--Low 17.50 18.06 19.50 26.63
- -------------------------------------------------------------------------------
<CAPTION>
1999 First Second Third Fourth
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 4,336 $ 4,565 $ 4,122 $ 4,178
Gross margin 995 1,125 545 852
Income (loss) from continuing
operations 240 277/(1)/ (89)/(2)/ 74/(3)/
Net income (loss) 205 290/(1)/ (163)/(2)/ 72/(3)/
Earnings (loss) per share from
continuing operations
Basic 0.71 0.82/(1)/ (0.26)/(2)/ 0.22/(3)/
Diluted 0.71 0.81/(1)/ (0.26)/(2)/ 0.22/(3)/
Earnings (loss) per share
Basic 0.61 0.86/(1)/ (0.48)/(2)/ 0.21/(3)/
Diluted 0.60 0.84/(1)/ (0.48)/(2)/ 0.21/(3)/
Cash dividends per share
Declared 0.20 0.20 0.20 0.20
Paid 0.20 0.20 0.20 0.20
Common stock prices
Class A--High 58.13 72.88 75.38 48.38
Class A--Low 50.75 57.38 43.75 21.25
Class B--High 58.88 74.63 76.56 49.88
Class B--Low 51.25 57.75 44.50 22.19
- -------------------------------------------------------------------------------
</TABLE>
(1) Includes net gain on sales of operating units and securities received as
partial payment for previously divested businesses of $5 million after-tax,
or $0.01 per share.
(2) Includes charges of $115 million after-tax, restructuring and special
charges of $137 million after-tax, and net gain on sales of operating units
and securities received as partial payment for previously divested
businesses of $8 million after-tax. The impact of these items combined was
a net charge of $244 million after-tax, or $0.72 per share.
(3) Includes favorable adjustments to restructuring-related reserves of $42
million after-tax and net gain on sales of operating units and securities
received as partial payment for previously divested businesses of $1
million after-tax. The impact of these items combined was a net gain of $43
million after-tax, or $0.13 per share.
Earnings per share are computed independently for each of the quarters
presented, therefore, the sum of the quarterly earnings per share may not equal
the total computed for the year.
Note P: Financial Instruments
The Company enters into interest rate swap agreements, treasury rate locks, and
foreign currency forward contracts to minimize or eliminate risks associated
with interest rate changes or foreign currency exchange rate fluctuations. All
of these financial instruments relate to specific transactions and particular
assets, liabilities, or firm commitments. These instruments are executed with
credit-worthy institutions and the majority of the foreign currencies are
denominated in currencies of major industrial countries.
The following table summarizes major currencies and the approximate contract
amounts associated with foreign exchange contracts at December 31:
<TABLE>
<CAPTION>
2000 1999
- ----------------------------------------------------------
(In millions) Buy Sell Buy Sell
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds $204 $ 1 $228 $ 7
Swiss Francs -- 29 2 43
European Euros 19 3 24 --
German Marks 6 -- 11 --
Netherlands Guilders -- -- 7 21
All other 8 3 15 10
- ----------------------------------------------------------
Total $237 $ 36 $287 $ 81
==========================================================
</TABLE>
Buy amounts represent the U.S. dollar equivalent of commitments to purchase
foreign currencies and sell amounts represent the U.S. dollar equivalent of
commitments to sell foreign currencies. Foreign exchange contracts that do not
involve U.S. dollars have been converted to U.S. dollars for disclosure
purposes. At December 31, 2000, the Company also had foreign exchange contracts
related to RE&C to buy $17 million Philippine Pesos and sell $2 million European
Euros which mature during 2001.
Interest rate swap agreements were $83 million and $381 million at December
31, 2000 and 1999, respectively. The agreement outstanding at December 31, 2000
matures in 2004. Under this agreement, the Company pays the counterparty
interest at a weighted average fixed rate of 6.2%, and the counterparty pays the
Company at a variable rate equal to one-month LIBOR, which was 6.8% at December
31, 2000.
Foreign currency forward contracts, used primarily to minimize fluctuations
in the values of foreign currency payments and receipts, have maturities at
various dates through August 2005 as follows: $217 million in 2001, $38 million
in 2002, and $18 million thereafter. Estimated fair values for the interest rate
swap agreement and foreign currency forward contracts, which were calculated
using the present value of the current net settlement amount, were not material
at December 31, 2000.
-25-
<PAGE>
Note Q: Stockholders' Equity
The Company has two classes of common stock--Class A and Class B. For all
matters other than the election and removal of directors, Class A and Class B
stockholders have equal voting rights. For the election or removal of directors
only, the Class A stockholders have 80.1 percent of the total voting power and
the Class B stockholders have the remaining 19.9 percent. Class A and Class B
stockholders are entitled to receive the same amount per share of any dividends
declared. Immediately following any dividend, split, subdivision, or other
distribution of shares of Class A or Class B common stock, the number of shares
must bear the same relationship to each other as immediately prior to such
distribution. Except as indicated above, the rights of Class A and Class B
stockholders are identical.
The Company plans to eliminate its dual class capital structure and
reclassify its Class A and Class B common stock into a single new class of
common stock.
The Company also plans to effect a 20-for-1 reverse-forward stock split
that will result in holders of fewer than 20 shares of common stock being cashed
out of their holdings. The reverse-forward stock split will be accomplished
immediately prior to the elimination of the Company's dual class capital
structure in a two step transaction. In the first step, the reverse stock split,
each share of Class A or Class B common stock will become 1/20th of a share of
the same class. Stockholders with fewer than 20 shares of either class before
the reverse split will be left with less than a whole share of that class and
will receive a cash payment equal to the fair value of their fractional
interest.
Immediately following the reverse split, the Company will effect a 20-for-1
forward stock split. The forward stock split will restore stockholders with 20
or more shares of either class to their original position. The Company believes
that this action will significantly reduce expenses for stockholder record
keeping and mailings.
The proposed elimination of the dual class capital structure and
reverse-forward stock split have been approved by the Board of Directors and are
subject to approval by a majority vote of the outstanding Class A and Class B
shares, with each class voting separately, at the Company's 2001 annual meeting.
In 1995, the Board of Directors authorized the repurchase of up to 12
million shares of the Company's common stock when warranted by market
conditions. In 1998, the Board of Directors ratified and reauthorized the
repurchase of 2.5 million shares that remained under the original authorization.
There have been 11.8 million shares repurchased under these authorizations
through December 31, 2000. There were no shares repurchased under this program
during 2000. There were 0.7 million and 1.7 million shares repurchased under
this program during 1999 and 1998, respectively. In 1999, the Board of Directors
authorized the repurchase of up to an additional 6 million shares of the
Company's common stock over the next three years. There have been no shares
repurchased under this program.
In 1998, the Board of Directors authorized the repurchase of up to 5
million shares of the Company's common stock per year to counter the dilution
due to the exercise of stock options. There were no shares repurchased under
this program during 2000. There were 1.9 million and 2.9 million shares
repurchased under this program during 1999 and 1998, respectively, to partially
offset 4.2 million and 2.9 million shares issued due to the exercise of stock
options during 1999 and 1998, respectively.
The changes in shares of Class A and Class B common stock outstanding during
2000 are as follows:
(In thousands) Class A Class B
- -------------------------------------------------------------------------
Balance at December 31, 1997 102,630 235,935
Common stock plan activity (288) 3,249
Treasury stock activity (839) (3,889)
- -------------------------------------------------------------------------
Balance at December 31, 1998 101,503 235,295
Common stock plan activity -- 4,613
Treasury stock activity (698) (1,953)
- -------------------------------------------------------------------------
Balance at December 31, 1999 100,805 237,955
Common stock plan activity -- 1,337
Treasury stock activity -- 523
- -------------------------------------------------------------------------
Balance at December 31, 2000 100,805 239,815
=========================================================================
The Company issued 547,000 shares out of treasury during 2000 to fund a portion
of the Company's match of employee contribution to the Company's savings and
investment plans.
Basic earnings per share (EPS) excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Class A and Class B
common stock have been aggregated in the computation of weighted average shares
outstanding for basic and diluted EPS, which follows:
(In thousands) 2000 1999 1998
- ---------------------------------------------------------------------------
Average common shares
outstanding for basic EPS 338,407 337,351 337,882
- ---------------------------------------------------------------------------
Dilutive effect of stock options
and restricted stock 2,711 3,433 3,979
- ---------------------------------------------------------------------------
Shares for diluted EPS 341,118 340,784 341,861
===========================================================================
Stock options to purchase 22.3 million, 12.5 million, and 6.7 million shares of
common stock outstanding at December 31, 2000, 1999, and 1998, respectively,
were not included in the computation of weighted average shares outstanding for
diluted EPS because the stock options' exercise price was greater than the
average market price of the Company's common stock during the year.
Note R: Subsequent Events
In January 2001, the Company sold its recreational marine business for $108
million.
-26-
<PAGE>
Company Responsibility for Financial Statements
- --------------------------------------------------------------------------------
The financial statements and related information contained in this Annual Report
have been prepared by and are the responsibility of the Company's management.
The Company's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America and
reflect judgments and estimates as to the expected effects of transactions and
events currently being reported. The Company's management is responsible for the
integrity and objectivity of the financial statements and other financial
information included in this Annual Report. To meet this responsibility, the
Company maintains a system of internal accounting controls to provide reasonable
assurance that assets are safeguarded and that transactions are properly
executed and recorded. The system includes policies and procedures, internal
audits, and Company officers' reviews.
The Audit Committee of the Board of Directors is composed solely of outside
directors. The Committee meets periodically and, when appropriate, separately
with representatives of the independent accountants, Company officers, and the
internal auditors to monitor the activities of each.
Upon recommendation of the Audit Committee, PricewaterhouseCoopers LLP,
independent accountants, were selected by the Board of Directors to audit the
Company's financial statements and their report follows.
/s/ Franklyn A. Caine /s/ Daniel P. Burnham
Senior Vice President and Chairman and
Chief Financial Officer Chief Executive Officer
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of Raytheon Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Raytheon Company and
its subsidiaries at December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note A to the financial statements, the Company adopted the
American Institute of Certified Public Accountants Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities, in 1999.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 2001, except for the information
in the second paragraph of Note B
as to which the date is March 2, 2001
-27-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>8
<FILENAME>0008.txt
<DESCRIPTION>SUBSIDIARIES OF RAYTHEON COMPANY
<TEXT>
<PAGE>
Page 1
EXHIBIT 21
Raytheon Company Organizational Chart
<TABLE>
Raytheon Company
<S> <C>
Advanced Electronics Systems International 100.000000% California
Amber Engineering, Inc. 100.000000% California
Thornwood Trust 100.000000% Massachusetts
Data Logic, Inc. 100.000000% Delaware
Electronica Nayarit, S.A. 100.000000% Mexico
EverythingAircraft LLC 100.000000% Delaware
HE Microwave LLC 50.000000% Delaware
HRL LLC 50.000000% Delaware
Hughes Research Analytics, Inc. 100.000000% Delaware
Holwood Realty Company 100.000000% Delaware
Hughes (U.K.) Limited 91.288720% England
Hughes Flight Training Limited 99.000000% England
Groom Aviation Limited 100.000000% England
Hughes Microelectronics Europa Limited 100.000000% United Kingdom
Hughes Microelectronics Europa Limited 100.000000% United Kingdom
Hughes Microelectronics Limited 100.000000% United Kingdom
Raytheon Microelectronics Espana, S.A. 99.999496% Spain
Hughes Aircraft Systems International 100.000000% California
Circuitos Binacionales de Tijuana S.A. de C.V. 96.000000% Mexico
Hughes Europe N.V. 0.100000% Belgium
Hughes Airport Development Corporation Sdn Bhd 100.000000% Malaysia
Hughes Asia Pacific Hong Kong Limited 0.100000% Hong Kong
Hughes Australia International PTY Limited 0.001667% Australia
Hughes Defence Systems Limited 100.000000% United Kingdom
Hughes Espana S.A. 99.999836% Spain
Hughes Europe N.V. 99.900000% Belgium
Hughes International Corporation 100.000000% Delaware
Circuitos Binacionales de Tijuana S.A. de C.V. 4.000000% Mexico
Hughes (U.K.) Limited 0.000005% England
Hughes Flight Training Limited 99.000000% England
Groom Aviation Limited 100.000000% England
Hughes Microelectronics Europa Limited 100.000000% United Kingdom
Hughes Microelectronics Europa Limited 100.000000% United Kingdom
Hughes Microelectronics Limited 100.000000% United Kingdom
Raytheon Microelectronics Espana, S.A. 99.999496% Spain
Hughes Asia Pacific Hong Kong Limited 99.900000% Hong Kong
Hughes Australia International PTY Limited 99.998333% Australia
MARCOS Vermogensverwaltung GmbH 100.000000% Germany
Raytheon Training International GmbH 100.000000% Germany
Hughes Nadge Corporation 100.000000% Delaware
Hughes Simulation International, Inc. 100.000000% California
Hughes Systems Management International 100.000000% California
Hughes Training Italia Srl 100.000000% Italy
International Electronics Systems, Inc. 100.000000% California
Marshall Insurance Group, Ltd. 100.000000% Bermuda
NEWCS, Inc. 100.000000% Delaware
Patriot Overseas Support Company 100.000000% Delaware
RAYCOM, INC. 51.000000% Korea
Raytag Limited 100.000000% Delaware
TAG Halbleiter GmbH 100.000000% Germany
Raytheon Advanced Systems Company 100.000000% Delaware
Raytheon Air Control Company 100.000000% Delaware
Raytheon Aircraft Holdings, Inc. 100.000000% Delaware
Raytheon Aerospace Company 100.000000% Kansas
</TABLE>
<PAGE>
Page 2
Raytheon Company Organizational Chart
<TABLE>
<S> <C>
Raytheon Aerospace Support Services Company 100.000000% Kansas
Raytheon Aircraft Charter & Managment, Inc. 100.000000% Kansas
Raytheon Aircraft Company 100.000000% Kansas
Arkansas Aerospace, Inc. 100.000000% Arkansas
Raytheon Aircraft (Bermuda) Ltd. 100.000000% Bermuda
Raytheon Aircraft Quality Support Company 100.000000% Kansas
Raytheon Aircraft Credit Corporation 100.000000% Kansas
Beech Aircraft Leasing, Inc. 100.000000% Kansas
Beech Airliner Lease Corporation 100.000000% Kansas
Beechcraft BB-209 Leasing, Inc. 100.000000% Kansas
Beechcraft Lease Corporation 100.000000% Kansas
Beechcraft Lease Special Purpose Company 100.000000% Kansas
Beechcraft UC-131 Leasing, Inc. 100.000000% Kansas
Beechcraft UC-134 Leasing, Inc. 100.000000% Kansas
Beechcraft UC-163 Leasing, Inc. 100.000000% Kansas
Beechcraft UC-58 Leasing, Inc. 100.000000% Kansas
Beechcraft UC-74 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-106 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-305 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-307 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-308 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-311 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-322 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-331 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-348 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-349 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-50 Leasing, Inc. 100.000000% Kansas
Beechcraft UE-54 Leasing, Inc. 100.000000% Kansas
Franco-American Lease Corporation 100.000000% Kansas
Franco-Kansas Lease Corporation 100.000000% Kansas
International Lease Corporation 100.000000% Kansas
Kansas Beechcraft Leasing, Inc. 100.000000% Kansas
Raytheon Aircraft Credit Lease Corporation 100.000000% Kansas
Raytheon Aircraft Credit Special Purpose Company 100.000000% Kansas
Raytheon Aircraft Lease Corporation 100.000000% Kansas
Raytheon Aircraft Lease Special Purpose Company 100.000000% Kansas
Raytheon Aircraft Leasing, Inc. 100.000000% Kansas
Raytheon Aircraft Receivables Corporation 100.000000% Kansas
Raytheon Aircraft Special Purpose Company 100.000000% Kansas
Raytheon Airliner Lease Corporation 100.000000% Kansas
Raytheon-Kansas Lease Corporation 100.000000% Kansas
UE-311 Leasing Corporation 100.000000% Kansas
Raytheon Aircraft Parts Inventory & Distribution Company 100.000000% Kansas
Raytheon Aircraft Regional Offices, Inc. 100.000000% Kansas
Raytheon Aircraft Services, Inc. 100.000000% Kansas
Raytheon Philippines, Inc. 99.980000% Republic of the
Philippines
Raytheon Travel Air Company 100.000000% Kansas
Travel Air Insurance Company Ltd. 100.000000% Kansas
Travel Air Insurance Company (Kansas) 100.000000% Kansas
Raytheon Appliances Asia, Inc. 100.000000% Delaware
Raytheon Brasil Sistemas De Integracao Ltda 99.999081% Brazil
Raytheon Charitable Foundation 100.000000% Massachusetts
Raytheon Commercial Ventures, Inc. 100.000000% Delaware
Raytheon Corporate Operations, Washington Inc. 100.000000% Delaware
Raytheon Credit Company 100.000000% Delaware
</TABLE>
<PAGE>
Page 3
Raytheon Company Organizational Chart
<TABLE>
<S> <C> <C>
Raytheon Deutschland GmbH 100.000000% Germany
Raytheon Marine G.m.b.H. 100.000000% Germany
Anschutz Japan Co. Ltd. 80.000000% Japan
Arbeitsmedizinische Betreuungsgesellschaft Kieler Betriebe mbH 39.000000% Germany
Raytheon E-Systems, Inc. 100.000000% Delaware
Constellation Communications, Inc. 31.900000% Delaware
E-Systems Technologies Holding, Inc. 100.000000% Delaware
E-Systems Technologies International, Inc. 100.000000% Virgin Islands
ESY Export Company, Inc. 100.000000% Delaware
Raytheon Australia Pty Ltd. 100.000000% Australia
Raytheon E-Systems Limited 100.000000% England
Space Imaging, Inc. 30.693069% Delaware
Raytheon ESSM Co. 100.000000% California
Raytheon Engineering and Maintenance Company 100.000000% Delaware
Raytheon Saudi Arabia Limited 35.000000% Saudi Arabia
Raytheon Engineers & Constructors International, Inc. 100.000000% Delaware
RE&C Receivables Corporation 100.000000% Delaware
Raytheon Espana Limited 100.000000% Delaware
Raytheon Europe International Company 100.000000% Delaware
Raytheon Europe Management Services Ltd. 100.000000% Delaware
Raytheon European Management Co., Inc. 100.000000% Delaware
Raytheon European Management and Systems Company 100.000000% Delaware
Raytheon Exchange Holdings II, Inc. 100.000000% Delaware
Raytheon Exchange Holdings III, Inc. 100.000000% Delaware
Raytheon Exchange Holdings IV, Inc. 100.000000% Delaware
Raytheon Exchange Holdings V, Inc. 100.000000% Delaware
Raytheon Exchange Holdings, Inc. 100.000000% Delaware
Raytheon Gulf Systems Company 100.000000% Delaware
Raytheon Hanford, Inc. 100.000000% Delaware
Raytheon Holding LLC 100.000000% Delaware
Raytheon International Support Company 100.000000% Delaware
Raytheon International Trade Ltd. 100.000000% Virgin Islands
Raytheon International, Inc. 100.000000% Delaware
Raytheon Do Brasil Ltda. 99.980000% Sao Paolo
Raytheon International Korea, Inc. 100.000000% Korea
Raytheon International, Mid-East Limited 100.000000% Delaware
Raytheon Investment Company 100.000000% Delaware
Raytheon Italy Liaison Company 100.000000% Delaware
Raytheon Korean Support Company 100.000000% Delaware
Raytheon Logistics Support & Training Company 100.000000% Delaware
Raytheon Logistics Support Company 100.000000% Delaware
Raytheon Marine Sales and Service Company 100.000000% Delaware
Raytheon Mediterranean Systems Company 100.000000% Delaware
Raytheon Middle East Systems Company 100.000000% Delaware
Raytheon Mideast Systems Company 100.000000% Delaware
Raytheon Overseas Limited 100.000000% Delaware
Raytheon Pacific Company 100.000000% Delaware
Raytheon Patriot Support Company 100.000000% Delaware
Raytheon Peninsula Systems Company 100.000000% Delaware
Raytheon Procurement Company, Inc. 100.000000% Delaware
Gesellschaft fuer Verteidgungs Systeme mbH 50.000000% Germany
Systems For Defense Company 50.000000% Delaware
Raytheon Radar Ltd. 100.000000% Delaware
Raytheon Receivables, Inc. 100.000000% Delaware
Raytheon STI Company 100.000000% Delaware
</TABLE>
<PAGE>
Raytheon Company Organizational Chart Page 4
<TABLE>
<S> <C>
Raytheon Seismic Company 100.000000% Delaware
Raytheon Southeast Asia Systems Company 100.000000% Delaware
Raytheon Spanish Support Company 100.000000% Delaware
Raytheon Systems Canada Ltd. 100.000000% Canada
Advanced Toll Managment Corp. 100.000000% Canada
Raytheon Systems Company LLC 100.000000% Delaware
Raytheon Systems Development Company 100.000000% Delaware
Raytheon Systems France S.A.R.L. 99.500000% France
Raytheon Systems International Company 100.000000% Delaware
Raytheon Brasil Sistemas De Integracao Ltda 0.000027% Brazil
Raytheon Systems Support Company 100.000000% Delaware
Raytheon Technical Services Company 100.000000% Delaware
Range Systems Engineering Company 100.000000% Delaware
Range Systems Engineering Support Company 100.000000% Delaware
Raytheon Canada Services Company Ltd. 100.000000% Canada
Raytheon Professional Services LLC 100.000000% Delaware
Shanghai Raytheon Professional Services Consulting Company Ltd. 100.000000% Peoples Republic of
China
Raytheon Services Company Puerto Rico 100.000000% Delaware
Raytheon Support Services Company 100.000000% Delaware
Raytheon Technical Services Guam, Inc. 99.700000% Guam
Raytheon Technical Services International Company 100.000000% Delaware
Raytheon Technical and Administration Services Ltd. 100.000000% Delaware
Raytheon Technologies Incorporated 100.000000% California
Raytheon United Kingdom Limited 100.000000% England
Computer Systems & Programming Limited 100.000000% England
Data Logic Altergo, Ltd. 100.000000% England
Data Logic Limited 100.000000% England
Data Logic Properties Limited 100.000000% England
Hallams (Electrical Contractors) Limited 100.000000% England
Penmar & Company Ltd. 100.000000% England
Raycab (North) Limited 100.000000% England
Raycab (South) Limited 100.000000% England
Raytheon Marine Europe Limited 100.000000% England
Raytheon Systems Ltd. 100.000000% England
Raytheon Aircraft Services Ltd. 100.000000% England
Raytheon Computer Products Europe Limited 99.000000% England
Raytheon TI Systems, Ltd. 100.000000% England
Raytheon-Tag Components Limited 100.000000% England
Square One Computer Services Limited 100.000000% England
Seismograph Service Corporation 100.000000% Delaware
Seismograph Service France 100.000000% France
Subsidiary X Company 100.000000% Delaware
Switchcraft de Mexico S.A. de C.V. 100.000000% Mexico
Systems Building Corp. 100.000000% Arizona
Thoray Electronics Corporation 50.000000% Delaware
Translant, Inc. 50.000000% Texas
Tube Holding Company, Inc. 100.000000% Connecticut
Xyplex Foreign Sales Corporation, Inc. 100.000000% Virgin Islands
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>0009.txt
<DESCRIPTION>CONSENT OF INDEPENDENT ACCOUNTANTS
<TEXT>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (File Nos. 333-82529; 33-59241; 333-27757 and 333-44321),
Form S-4 (File Nos. 333-40646 and 333-78219) and Form S-8 (File Nos. 333-56117;
333-52536; 333-45629) of Raytheon Company of our report dated January 25, 2001,
except for the information in the second paragraph on Note B as to which the
date is March 2, 2001 relating to the consolidated financial statements, which
appears in the 2000 Annual Report to Stockholders, which is included in Exhibit
13 on Form 10-K. We also consent to the incorporation by reference of our report
dated January 25, 2001 relating to the financial statement schedule, which
appears in Exhibit 13 in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 5, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>10
<FILENAME>0010.txt
<DESCRIPTION>REPORT OF INDEPENDENT ACCOUNTANTS
<TEXT>
<PAGE>
EXHIBIT 23.2
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders
of Raytheon Company:
Our audits of the consolidated financial statements referred to in our report
dated January 25, 2001, except for the information in the second paragraph of
Note B as to which the date is March 2, 2001, appearing in the 2000 Annual
Report to Stockholders of Raytheon Company which report and consolidated
financial statements are included in Exhibit 13 to Form 10-K also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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