Raytheon 2004 Annual Report Download

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Focused
on the
Customer
Focused
on the
Customer
    

Table of contents

  • Page 1
    Focused on the Customer

  • Page 2
    "2004 was a strong year with record orders of $25.7 billion; sales of $20.2 billion - a 12% increase over 2003; record backlog of $32.5 billion; $2.1 billion of net debt reduction; and 32% total return for our shareholders." Chairman and CEO

  • Page 3
    ... yearend 2003. Raytheon Aircraft's performance was much improved, reï¬,ecting a continued focus on the fundamentals, a better general aviation market and a renewed luster to the Beechcraft® and Hawker® aircraft brands. While Raytheon's income from continuing operations was lower in 2004 than 2003...

  • Page 4
    ... better together, allowing us to be a trusted partner on any mission. • Technology leadership. Raytheon engineers and scientists are working on an incredible range of exciting solutions, from an X-band thin radar aperture for advanced airborne systems to research into fields that would once have...

  • Page 5
    ... President of American University whose important contributions to our world and our company are an enduring legacy. "Hooks" Burr was a prominent attorney and community supporter who left an indelible mark on institutions such as Massachusetts General Hospital, Harvard University and our company. It...

  • Page 6
    .... This comes from our vast domain knowledge across the full spectrum of defense and space platforms and our customer-centric approach to Mission Support solutions that ensure customer success. Supporting the men and women in uniform, and all who rely on our aircraft and systems, is our priority.

  • Page 7
    Technology Leadership Technical excellence has been a cornerstone of Raytheon's success for over 80 years. Our four mission areas are developing next-generation technologies in Radio Frequency (RF); Electro-Optics (EO); Missile Technologies; and Command and Control, Communications, Computers and ...

  • Page 8
    ... we are developing systems to defend the world from missile attack; securing our borders and protecting homelands; providing persistent intelligence, surveillance and reconnaissance; weaving distributed and seamless command and control environments to enable network centric operations; or providing...

  • Page 9
    ... technological expertise in modeling and simulation, supply chain management, performance-based logistics, training and obsolescence management. We are delivering comprehensive, innovative solutions to our customers' ever-changing challenges. These solutions transcend support of Raytheon's products...

  • Page 10
    ...commitment to meld our technology into the most reliable integrated mission systems in the world to address urgent defense, security and aircraft needs. The people of Raytheon understand how to use our cutting-edge process knowledge to provide Mission Assurance for our customers. When members of the...

  • Page 11
    ...™ Raytheon Aircraft Company d g Integrated Defense Systems Raytheon Technical Space and Services Airborne Company  Systems f h Network Centric Systems A Vision of Diversity "Raytheon is a company that values inclusiveness. It's a company where people want to work...

  • Page 12
    ... The two businesses also have developed an innovative program with the U.K. Ministry of Defence to reduce Britain's ownership cost of air-launched munitions. Also, in early 2004, MS and Diehl Stiftung  Co. of Nürnberg, Germany, formed Diehl Raytheon Missile Systeme to modernize and market legacy...

  • Page 13
    ...-leading mission systems integrator in 2004. Significant awards and solid performance on existing programs contributed strongly to the performance of the business. The first production of the Terminal HighAltitude Area Defense (THAAD) radar was delivered to the Missile Defense Agency and tested...

  • Page 14
    ... needs. IIS customers include government and military clients. For more than 50 years, some of the most important agencies in the world have relied on IIS to deliver unparalleled technical and operational performance. IIS expanded its homeland security business to help protect borders as part of the...

  • Page 15
    ... depend on SAS systems and solutions for success in the unforgiving environment of air and space. The people of SAS are equally demanding of themselves in performing on programs and promises in order to deliver products and services that work every time and meet projected costs and schedules...

  • Page 16
    ... joint battlefield command, control and communications capabilities, and networked data that provides an integrated air and ground picture. NCS systems have performed with pinpoint accuracy and saved the lives of countless soldiers. The NCS Airspace Management and Homeland Security business...

  • Page 17
    ... Services Company LLC (RTSC), with 2004 sales of $2.1 billion, provides technology solutions for defense, federal and commercial customers worldwide. The business emphasizes Mission Support and engineering product and service solutions. In 2004, the U.S. Army extended RTSC's contract for training...

  • Page 18
    ...Raytheon Aircraft Company's largest commercial customer, NetJets® Inc., the world's leading fractional aircraft provider, continued to show confidence in Hawker business jets and customer support. Following an order for 50 Hawker 400XP light jets and eight Hawker 800XP mid-size jets in late 2003...

  • Page 19
    ... Employer Identification No.) 870 WINTER STREET, WALTHAM, MASSACHUSETTS 02451 (Address of Principal Executive Offices) (Zip Code) (781) 522-3000 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange...

  • Page 20
    ... on Accounting and Financial Disclosure Controls and Procedures Other Information 31 32 33 51 52 97 97 97 Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. PART III Item 10. Item 11. Item 12. Directors and Executive Officers of the Registrant Executive Compensation Security Ownership of...

  • Page 21
    ... special mission aircraft and delivers a broad line of jet, turboprop, and piston-powered airplanes to individual, corporate and government customers world-wide. The Company's principal executive offices are located at 870 Winter Street, Waltham, Massachusetts 02451. The Company's Internet address...

  • Page 22
    ... Low Altitude Weapon System (CLAWS), Common Aviation Command & Control System (CAC2S) and Affordable Ground Based Radar (AGBR). International Integrated Air Defense (IIAD) - The IIAD business area provides integrated air and missile defense solutions and support to foreign customers. IIAD, in...

  • Page 23
    ... ballistic missile protection. The U.S. Air Force Space Surveillance Sensor Program tracks objects orbiting the earth. Production and whole life support services for a number of legacy radar and fire control systems is included in the business area, specifically, AEGIS Weapon System radar equipment...

  • Page 24
    ... Department of Education. Space Systems (SS) - The SS business is focused on satellites and the support required for satellites. SS develops satellite command and control software and provides mission and resource management, end-to-end information and network management, and modeling and simulation...

  • Page 25
    ... Energy Weapons Product Line (AMD DEW) - This business area was created to pursue growth opportunities in the missile defense and directed energy markets. It includes concept and development of new kill vehicles, space applications, discrimination, high power microwave and high energy laser systems...

  • Page 26
    ...Air Space Management and Homeland Security (AMHS) - AMHS is a key participant in designing future air traffic solutions in partnership with the Multi-Agency Joint Planning and Development Office. AMHS integrates ground-to-ground management of both civil and military markets in more than 50 countries...

  • Page 27
    ... Space and Airborne Systems (SAS) business, headquartered in El Segundo, California, provides electro-optic/infrared sensors, airborne radars, solid-state high energy lasers, precision guidance systems, electronic warfare systems, and space-qualified systems for civil and military applications. SAS...

  • Page 28
    ... and commercial customers worldwide. RTSC is organized into the following business areas: System and Product Support Solutions; Depot Operations; Engineering & Production Support; and Logistics and Training Systems. Products and services span integrated logistics support and full life-cycle design...

  • Page 29
    ... Premier 1 entry level business jet; • Development of a new super mid-size business jet, the Hawker Horizon, which received provisional type certification in December 2004; • Marketing, production and support of special mission aircraft including military versions of the Beechcraft King Air...

  • Page 30
    ..., 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...

  • Page 31
    ... of Raytheon Aircraft, production of certain aircraft and spare parts are dependent on the successful performance of suppliers under international supply contracts. In recent years, revenues in the second half of the year have generally exceeded revenues in the first half. The timing of Government...

  • Page 32
    ...overall business growth in multiple market sectors and on multiple programs during 2004. Raytheon considers its union-management relationships to be generally satisfactory. In 2004, there were no work stoppages at any of the Company's sites. INTERNATIONAL SALES Raytheon's sales to customers outside...

  • Page 33
    ... are granted resale discounts in return for services rendered. The export from the U.S. of many of Raytheon's products may require the issuance of a license by the U.S. Department of State under the Arms Export Control Act of 1976, as amended (formerly the Foreign Military Sales Act); or by the...

  • Page 34
    ... 10-K, before purchasing our securities. This filing and the information we are incorporating by reference, including any statements relating to the Company's future plans, objectives, and projected future financial performance, contain or are based on, forwardlooking statements within the meaning...

  • Page 35
    ...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...

  • Page 36
    ... 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...

  • Page 37
    ... • develop and manufacture and bring products to market quickly at cost-effective prices • effectively structure our businesses, through the use of joint ventures, teaming agreements, and other forms of alliances, to the competitive environment Specifically, at Raytheon Aircraft Company, our...

  • Page 38
    ... related to outstanding letters of credit, surety bonds and guarantees (Support Agreements) provided in connection with a number of contracts and leases of our engineering and construction business unit (E&C Business), which we sold to Washington Group International in July 2000. In meeting...

  • Page 39
    ... 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...

  • Page 40
    ... 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. The level of returns and the discount rate on pension and retirement plan assets could...

  • Page 41
    ...Ontario, Canada; • Raytheon Aircraft - Little Rock, AR; Salina, KS; Wichita, KS; and Dallas, TX; • Space and Airborne Systems - El Segundo, CA; Goleta, CA; Forest, MS; and Dallas, TX; • Integrated Defense Systems - San Diego, CA; Andover, MA; Woburn, MA; Sudbury, MA; Tewksbury, MA; Waltham, MA...

  • Page 42
    ..., by business segment, follows: (in square feet with 000's omitted) Network Centric Systems Raytheon Aircraft Company Space and Airborne Systems Integrated Defense Systems Missile Systems Raytheon Technical Services Company LLC Intelligence and Information Systems Administration and Services Flight...

  • Page 43
    ... reported, in June 2001, a class action lawsuit entitled, Muzinich & Co., Inc. et al v. Raytheon Company, et. al., (Civil Action No. 01-0284-S-BLW) was filed in federal court in Boise, Idaho allegedly on behalf of all purchasers of common stock or senior notes of Washington Group International...

  • Page 44
    ... court in Boston, Massachusetts on behalf of participants in the Company's savings and investment plans who invested in the Company's stock between August 19, 1999 and May 27, 2003. The two class action complaints are brought pursuant to the Employee Retirement Income Security Act (ERISA). Both...

  • Page 45
    ... certain outstanding Company guarantees or other support agreements in connection with the Jindal, Posven, Ratchaburi, Saltend, Ilijan and Red Oak construction contracts of the former Raytheon Engineers & Constructors businesses (RE&C) that the Company sold to Washington Group International, Inc...

  • Page 46
    ... Support business unit in Indianapolis, formerly the Naval Air Warfare Center, from 1999 to 2001. From 1998 to 1999, Mr. Even was Director of East Coast Depot Operations for RTSC. Prior thereto, he was the Deputy General Manager of the Engineering and Depots Group of Raytheon Service Company...

  • Page 47
    ... Raytheon Test Systems Design Center. Age 47. Colin Schottlaender: Vice President of Raytheon Company and President of the Network Centric Systems (NCS) business unit since September 2002. From November 1999 to September 2002, Mr. Schottlaender was Vice President and General Manager of the Tactical...

  • Page 48
    ... responsibility in domestic and international business development, program management, quality assurance, test engineering and product design/manufacture. Age 49. James E. Schuster: Executive Vice President of Raytheon Company and Chief Executive Officer of Raytheon Aircraft Company since May 2001...

  • Page 49
    ... New York Stock Exchange was issued on May 28, 2004. For information concerning stock prices and dividends paid during the past two years, see "Note P - Quarterly Operating Results (unaudited)" within Item 8 of this Form 10-K. Total Number of Shares Purchased as Part of Publicly Announced Plan...

  • Page 50
    ... shares outstanding (in thousands) Financial Position at Year-End Cash and cash equivalents Current assets Property, plant, and equipment, net Total assets Current liabilities Long-term liabilities (excluding debt) Long-term debt Subordinated notes payable Total debt Stockholders' equity General...

  • Page 51
    ...-optics; precision weapons; and command, control, communications, and information systems. In all of these markets, the Company provides full life-cycle services to its customers, including product design, delivery, and support. Raytheon Aircraft is a leading provider of business and special mission...

  • Page 52
    ... are increasingly looking for mission solutions that address the need to operate jointly (across services and between allied forces), work in a new net-centric paradigm, minimize collateral damage, and strike time sensitive targets. The Company's precision engagement systems include: F-15 and F/A-18...

  • Page 53
    ... judgment. The Company believes its judgments related to these accounting policies are appropriate. Sales under long-term government contracts are recorded under the percentage of completion method. Incurred costs and estimated gross margins are recorded as sales when work is performed based on the...

  • Page 54
    ...The Company determines lot size based on several factors, including the size of firm backlog, market and competitive conditions, the expected annual production for the aircraft, and experience on similar new aircraft. The size of the initial lot for the Beechcraft Premier I is 200 units. The size of...

  • Page 55
    ... decrease in gross margin as a percent of sales in 2004 and 2003 was due to the increase in the FAS/CAS Pension Adjustment. Also included in gross margin in 2003 were charges of $237 million at Network Centric Systems and $39 million at Technical Services. Statement of Financial Accounting Standards...

  • Page 56
    ... shares outstanding in 2004 was due to common stock issued in connection with the Company's equity security units described below in Capital Structure and Resources. The increase in average shares outstanding in 2003 was due to benefit plan-related activity. The loss from discontinued operations...

  • Page 57
    ... Corporate and Eliminations Total Operating Income (In millions) Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Aircraft Other FAS/CAS Pension Adjustment Corporate and Eliminations Total 2004 2003...

  • Page 58
    ... in 2003 were charges resulting in a reduction in sales and operating income of $228 million and $237 million, respectively, related to performance issues on certain NCS programs. Space and Airborne Systems (SAS) provides electro-optical/infrared sensors, airborne radars, solid state high energy...

  • Page 59
    ... support for business jets, turbo-props, and piston-powered aircraft for the world's commercial, fractional ownership, and military aircraft markets. RAC had 2004 sales of $2.4 billion versus $2.1 billion in 2003 and $2.0 billion in 2002. The increase in sales in 2004 was primarily due to higher new...

  • Page 60
    ...Defense Systems and Missile Systems. In 2000, the Company sold its Raytheon Engineers & Constructors businesses (RE&C) to Washington Group International, Inc. (WGI). In May 2001, WGI filed for bankruptcy protection. As a result, the Company was required to perform under various contract and lease...

  • Page 61
    ... million in 2004 versus $513 million in 2003 and $1,129 million in 2002. In 2002, the Company sold its Aircraft Integration Systems business (AIS) for $1,123 million, net, subject to purchase price adjustments. The Company is currently involved in a purchase price dispute related to the sale of AIS...

  • Page 62
    ..., 2003, and 2002. Beginning in 2005, the Company plans to increase the quarterly dividend rate to $0.22 per share. Although the Company does not have a formal dividend policy, management believes that a reasonable dividend payout ratio based on the current industry environment and market conditions...

  • Page 63
    ... securities, and/or stock purchase contracts, under which $1.3 billion remained outstanding at December 31, 2004. A substantial portion of the remaining availability under the shelf registration is expected to be used in connection with the settlement of the class action lawsuit, described...

  • Page 64
    ...) program being performed by the Company's Network Centric Systems segment In 2002, the Company formed a joint venture, Flight Options LLC (FO), whereby the Company contributed its Raytheon Travel Air fractional ownership business and loaned the new entity $20 million. In June 2003, the Company...

  • Page 65
    ...centers, radars, and communication networks. HRL Laboratories is a scientific research facility whose staff engages in the areas of space and defense technologies. Indra develops flight data processors for air traffic control automation systems. TelASIC Communications delivers high performance, cost...

  • Page 66
    ... the Company's financial position or results of operations. The Company continues to cooperate with the staff of the Securities and Exchange Commission (SEC) on a formal investigation related to the Company's accounting practices primarily related to the commuter aircraft business and the timing of...

  • Page 67
    ... 2003, two purported class action lawsuits were filed on behalf of participants in the Company's savings and investment plans who invested in the Company's stock between August 19, 1999 and May 27, 2003. The two class action complaints are brought pursuant to the Employee Retirement Income Security...

  • Page 68
    ... pricing of products and services to the U.S. government. These unconditional purchase obligations are not included in the table above. In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payments...

  • Page 69
    ... exchange rates. 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 with commercial and investment banks to manage interest rates associated with the Company...

  • Page 70
    ... public accounting firm, was selected by the Board of Directors to audit the Company's financial statements and management's assessment of the Company's internal control over financial reporting and their report is below. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management...

  • Page 71
    ...REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Raytheon Company: We have completed an integrated audit of Raytheon Company's 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and...

  • Page 72
    ... or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of...

  • Page 73
    ... 2004 and 2003, respectively Additional paid-in capital Unearned compensation Accumulated other comprehensive income Treasury stock, at cost Retained earnings Total stockholders' equity Total liabilities and stockholders' equity The accompanying notes are an integral part of the financial statements...

  • Page 74
    56 RAYTHEON COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In millions except per share amounts) Years Ended December 31: 2004 2003 2002 Net sales Cost of sales Administrative and selling expenses Research and development expenses Total operating expenses Operating income Interest expense ...

  • Page 75
    ... Interest rate lock Comprehensive income Dividends declared-$0.80 per share Issuance of common stock Common stock plan activity Trust preferred security distributions Treasury stock activity Balance at December 31, 2003 Net income Other comprehensive income Minimum pension liability Foreign exchange...

  • Page 76
    ... on sales of operating units and investments Savings and investment plan activity Decrease (increase) in accounts receivable Change in contracts in process and advance payments and billings in excess of costs incurred Decrease in inventories (Increase) decrease in prepaid expenses and other current...

  • Page 77
    ...long-term contracts are accounted for as contract costs as the work is performed. The estimation of these costs is an integral part of the determination of the pricing of the Company's products and services. Warranty provisions related to aircraft sales are determined based upon an estimate of costs...

  • Page 78
    ... of lot accounting is discontinued. The Company determines lot size based on several factors, including the size of firm backlog, the expected annual production on the aircraft, and experience on similar new aircraft. The size of the initial lot for the Beechcraft Premier I and the Hawker Horizon is...

  • Page 79
    ... million related to its former Aircraft Integration Systems business (AIS) as a cumulative effect of change in accounting principle. The fair value of AIS was determined based upon the proceeds received by the Company in connection with the sale, as described in Note B, Discontinued Operations. Due...

  • Page 80
    ... assets. COMPUTER SOFTWARE Internal use computer software, which consists primarily of an integrated financial package, is stated at cost less accumulated amortization and is amortized using the straight-line method over its estimated useful life, generally 10 years. INVESTMENTS Investments, which...

  • Page 81
    ... relates to its investment in Thales-Raytheon Systems Co. Ltd., described in Note G, Other Assets, and is included in other expense, net. EMPLOYEE STOCK PLANS In 2004, the Company changed the general form of its broad-based equity compensation. Prior to 2004, the Company primarily issued stock...

  • Page 82
    ... then-current market values of the underlying stock as well as the expected achievement of performance levels. 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...

  • Page 83
    ...other factors. 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...

  • Page 84
    ... its Raytheon Engineers & Constructors businesses (RE&C) to Washington Group International, Inc. (WGI). In May 2001, WGI filed for bankruptcy protection. As a result, the Company was required to perform various contract and lease obligations in connection with a number of different projects under...

  • Page 85
    ...of goodwill (at Space and Airborne Systems) in connection with this acquisition. In 2004, the Company sold its commercial infrared business for $43 million and recorded a pretax gain of $10 million which is included in other income. In 2003, the Company acquired Solipsys Corporation for $170 million...

  • Page 86
    ..., the Company formed a joint venture with Flight Options, Inc. whereby the Company contributed its Raytheon Travel Air fractional ownership business and loaned the new entity $20 million. In June 2003, the Company participated in a financial recapitalization of Flight Options LLC (FO) and exchanged...

  • Page 87
    69 Notes to Consolidated Financial Statements (Continued) Contracts in process consisted of the following at December 31, 2004: (In millions) Cost Type Fixed Price Total U.S. government end-use contracts Billed Unbilled Less progress payments Other customers Billed Unbilled Less progress ...

  • Page 88
    ... 31: (In millions) 2004 2003 Finished goods Work in process Materials and purchased parts Total $ 553 938 254 $1,745 $ 669 1,023 306 $1,998 Inventories at Raytheon Aircraft, Flight Options, and Raytheon Airline Aviation Services totaled $1,420 million at December 31, 2004 (consisting of $537...

  • Page 89
    ... 2007 Sales-type leases, due in installments to 2011 Computer software, net Pension-related intangible asset Investments Other noncurrent assets Total $ 315 70 86 479 186 149 705 $1,990 $ 464 40 50 456 199 146 498 $1,853 The Company provides long-term financing to its aircraft customers. The...

  • Page 90
    ... investors. The Company retained responsibility for the collection and administration of receivables. The Company continues to service the sold receivables and charges the third party conduit a monthly servicing fee at market rates. The Company accounted for the sale under Statement of Financial...

  • Page 91
    ...centers, radars, and communication networks. HRL Laboratories is a scientific research facility whose staff engages in the areas of space and defense technologies. Indra develops flight data processors for air traffic control automation systems. TelASIC Communications delivers high performance, cost...

  • Page 92
    ... and debentures redeemable at any time are at redemption prices equal to the present value of remaining principal and interest payments. Information about the subordinated notes payable is included in Note I, Equity Security Units. In 2004, the Company repurchased long-term debt with a par value of...

  • Page 93
    ... charges related to Network Centric Systems and Technical Services, and $78 million of pretax charges related to RE&C. The Company was in compliance with the interest coverage ratio covenant, as amended, during 2004. Lines of credit with certain commercial banks exist to provide short-term liquidity...

  • Page 94
    ... shares of common stock in 2004, 2003, and 2002 respectively, to fund the Company Match and Company Contributions, as described in Note N, Pension and Other Employee Benefits. In addition, employee-directed 401(k) plan purchases (Employee Contributions) of the Company stock fund were funded through...

  • Page 95
    ... 31, 2006, of up to $700 million of the Company's common stock. Purchases may take place from time to time at the Company's discretion depending on market conditions. There were no shares repurchased under this program during 2004. The Board of Directors is authorized to issue up to 200,000,000...

  • Page 96
    ...) 2004 2003 Current deferred tax assets Other accrued expenses Accrued salaries and wages Contracts in process and inventories Deferred federal and foreign income taxes-current Noncurrent deferred tax assets (liabilities) Net operating loss and foreign tax credit carryforwards Pension benefits...

  • Page 97
    ...of business, the Company leases equipment, office buildings, and other facilities under leases that include standard escalation clauses for adjusting rent payments to reflect changes in price indices, as well as renewal options. At December 31, 2004, the Company had commitments under an agreement to...

  • Page 98
    ...of $40 million primarily related to component parts for the Horizon aircraft with varying purchase quantities for up to 200 aircraft. In addition, the Company's defense businesses may enter into purchase commitments which can generally be recovered through the pricing of products and services to the...

  • Page 99
    ... the Company's financial position or results of operations. The Company continues to cooperate with the staff of the Securities and Exchange Commission (SEC) on a formal investigation related to the Company's accounting practices primarily related to the commuter aircraft business and the timing of...

  • Page 100
    ... 2003, two purported class action lawsuits were filed on behalf of participants in the Company's savings and investment plans who invested in the Company's stock between August 19, 1999 and May 27, 2003. The two class action complaints are brought pursuant to the Employee Retirement Income Security...

  • Page 101
    ...a maximum of $100,000 per year. Nonqualified stock options terminate 11 years from the date of grant, 10 years and a day if issued in connection with the 1995 Stock Option Plan, or as determined by the Management Development and Compensation Committee of the Board of Directors (MDCC) if issued under...

  • Page 102
    84 Notes to Consolidated Financial Statements (Continued) Stock option information for 2004, 2003, and 2002 follows: WeightedAverage Option Price (Share amounts in thousands) Shares Outstanding at December 31, 2001 Granted Exercised Expired Outstanding at December 31, 2002 Granted Exercised ...

  • Page 103
    ... Financial Statements (Continued) The Company has pension plans covering the majority of its employees, including certain employees in foreign countries (Pension Benefits). In addition to providing pension benefits, the Company provides certain health care and life insurance benefits to retired...

  • Page 104
    ... historical level of the risk premium associated with the other asset classes in which the Company has invested domestic Pension Benefits and Other Benefits plan assets, and the expectations for future returns of each asset class. Since the Company's investment policy is to employ active management...

  • Page 105
    ... Benefits plans. Change in Benefit Obligation (In millions) Pension Benefits 2004 2003 Other Benefits 2004 2003 Benefit obligation at beginning of year Service cost Interest cost Plan participants' contributions Amendments Actuarial loss Divestitures/transfers Foreign exchange Benefits paid Benefit...

  • Page 106
    ... cost Weighted-Average Year-End Benefit Obligation Assumptions December 31: $ 664 (2,317) 186 3,114 $ 1,647 $ 669 (2,378) 199 3,435 $ 1,925 $ 50 (680) - - $(630) $ 34 (682) - - $(648) Pension Benefits 2004 2003 Other Benefits 2004 2003 Discount rate Rate of compensation increase Health care...

  • Page 107
    ... Financial Statements (Continued) Net periodic benefit cost includes income from discontinued operations, including curtailments, of $47 million in 2002. Weighted-Average Net Periodic Benefit Cost Assumptions 2004 Pension Benefits 2003 2002 Discount rate Expected return on plan assets Rate...

  • Page 108
    ... determined based upon product lines and include the following: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, Technical Services, Aircraft, and Other which is comprised of Flight Options LLC, Raytheon Airline...

  • Page 109
    ..., and directed energy weapons. Network Centric Systems provides network centric solutions to integrate sensors, communications, and command and control to manage the battlespace. Space and Airborne Systems provides electro-optical/infrared sensors, airborne radars, solid state high energy lasers...

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    ...to Flight Options until the underlying aircraft has been sold by Flight Options. Free Cash Flow (In millions) Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Aircraft Other Corporate Total 2004 2003...

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    ... and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Aircraft Other Corporate Discontinued Operations Total Operations by Geographic Areas (In millions) Net sales 2004 2003 2002 Long-lived assets at December 31, 2004 December 31, 2003 United...

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    ... Consolidated Financial Statements (Continued) NOTE P: QUARTERLY OPERATING RESULTS (UNAUDITED) First Second Third Fourth (In millions except per share amounts and stock prices) 2004 Net sales Gross margin Income (loss) from continuing operations Income (loss) before accounting change Net income...

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    ...Consolidated Financial Statements (Continued) At December 31, 2004, the Company recorded forward exchange contracts designated as cash flow hedges at their fair value. Unrealized gains of $106 million were included in noncurrent assets and unrealized losses of $50 million were included in current...

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    ...2002 Securities class action lawsuit settlement Loss (gain) on repurchases of long-term debt and subordinated notes payable Gain on sale of commercial infrared business Gain on sale of aviation support business Equity losses related to Flight Options Loss (gain) on sale of investments Space Imaging...

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    ..., an independent registered public accounting firm, as stated in their report which is set forth in Part II, Item 8 of this Annual Report on Form 10-K. Changes in Internal Controls - There were no changes in the Company's internal control over financial reporting that occurred during 2004 that have...

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    ... owners and for directors and executive officers is contained in the Company's definitive proxy statement for the 2005 Annual Meeting of Stockholders under the caption "Stock Ownership" and is incorporated herein by reference. Information regarding shares of the Company's common stock that may be...

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    99 Item 14. Principal Accountant Fees and Services This information is contained in the Company's definitive proxy statement for the 2005 Annual Meeting of Stockholders under the caption "Independent Auditor: Audit and Non-Audit Fees" and is incorporated herein by reference.

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    ... financial statements of Raytheon Company, supplemental information, and report of independent registered public accounting firm are included in this Form 10-K: Consolidated Balance Sheets at December 31, 2004 and 2003 Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003...

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    ... reference. 10.10 Raytheon Excess Pension Plan.* 10.11 Raytheon Supplemental Executive Retirement Plan (Revised Appendix A - Participant List).* 10.12 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...

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    ... of Performance Share Award Agreement under the Raytheon Company 2001 Stock Plan, filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 26, 2004, is hereby incorporated by reference. 10.19 Form of Executive Change in Control Severance Agreement between...

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    ... Policy.* 10.35 364 Day Competitive Advance and Revolving Credit Facility dated as of November 24, 2003, among Raytheon Company, as Borrower, Raytheon Technical Services Company and Raytheon Aircraft Company, as Guarantors, the lenders named therein, and J.P. Morgan Chase Bank as Administrative...

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    .... and Washington Group International, Inc. dated January 23, 2002, filed as an exhibit to Raytheon's Annual Report on Form 10-K for the year ended December 31, 2002, is hereby incorporated by reference. 10.46 Fifth Amended and Restated Purchase and Sale Agreement between General Aviation Receivables...

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    ...by the undersigned, thereunto duly authorized. RAYTHEON COMPANY /S/ BIGGS C. PORTER Biggs C. Porter Vice President and Corporate Controller (Principal Accounting Officer) Dated: March 15, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by...

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    Investor Information Raytheon Company, 870 Winter Street, Waltham, MA 02451 Telephone: 781.522.3000 Raytheon Company common stock is listed on the New York, Chicago and Pacific Stock exchanges. The stock symbol is: RTN Securities analysts, investors and other members of the fi...

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    ... Raytheon Aircraft Company Executive Vice President Business Development, RII Raytheon Company President Raytheon Technical Services Company LLC Design by Addison www.addison.com Vice President Internal Audit Raytheon Company President Space and Airborne Systems...

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