Raytheon 2004 Annual Report Download - page 94

76
Notes to Consolidated Financial Statements (Continued)
and whose assets consist solely of subordinated notes receivable issued by the Company. RCTI is considered to be a
variable interest entity and because the preferred stock was a part of the equity security units issued by the
Company, the Company is not considered the primary beneficiary of RCTI. As a result, RCTI is not consolidated
by the Company. The Company has a $27 million investment in RCTI which represents all of the common stock of
RCTI and is included in other noncurrent assets. The Company owes $27 million to RCTI (included in
subordinated notes payable) in connection with this investment.
The subordinated notes payable paid a quarterly distribution, which was included in interest expense, of 7.0% per
year. The terms of the equity security units required that the mandatorily redeemable equity securities be remarketed.
On February 11, 2004, the mandatorily redeemable equity securities were remarketed and the quarterly distribution
rate on the mandatorily redeemable equity securities and the subordinated notes payable were reset at 7.0%. Neither
the Company nor RCTI received any proceeds from the remarketing. The proceeds were pledged to collateralize the
holders’ obligations under the contract to purchase the Company’s common stock on May 15, 2004.
In 2004, subordinated notes payable with a par value of $481 million were repurchased at a loss of $32 million
pretax, which was included in other expense.
Cash paid for the quarterly distribution on the subordinated notes payable was $47 million in 2004 and $60
million in 2003 and 2002.
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The changes in shares of common stock outstanding were as follows:
(In thousands)
Balance at December 31, 2001 395,432
Issuance of common stock 9,218
Common stock plan activity 3,638
Treasury stock activity (79)
Balance at December 31, 2002 408,209
Issuance of common stock 8,977
Common stock plan activity 1,021
Treasury stock activity (71)
Balance at December 31, 2003 418,136
Issuance of common stock 29,472
Common stock plan activity 5,715
Treasury stock activity (227)
Balance at December 31, 2004 453,096
The Company issued 2,325,000; 6,486,000; and 5,100,000 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 the issuance of 134,000; 2,491,000; and 4,118,000 shares of common
stock in 2004, 2003, and 2002, respectively.
Basic earnings per share (EPS) is computed by dividing net income by the weighted-average 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.