Raytheon 2003 Annual Report Download - page 53

P51 333 RAYTHEON COMPANY 333
333NOTE L: FEDERAL AND
FOREIGN INCOME TAXES
The provision for federal and foreign income taxes consisted of
the following:
(In millions) 2003 2002 2001
Current income tax expense
Federal $130 $51 $87
Foreign 354
Deferred income tax expense (benefit)
Federal 94 243 (30)
Foreign —21 37
Total $227 $ 320 $ 98
The provision for state income taxes was included in general and
administrative expenses as these costs can generally be recovered
through the pricing of products and services to the U.S. government.
The provision for income taxes differs from the U.S. statutory
rate due to the following:
2003 2002 2001
Statutory tax rate 35.0% 35.0% 35.0%
Foreign sales corporation tax benefit (3.1) (3.5) (36.0)
ESOP dividend deduction benefit (1.7) (1.1) (11.0)
Research and development tax credit (0.8) (1.0) (5.0)
Goodwill amortization ——109.0
Other, net 0.4 0.3 6.0
Effective tax rate 29.8% 29.7% 98.0%
Effective January 1, 2002, the Company discontinued the amor-
tization of goodwill as required by SFAS No. 142, as described in
Note A, Accounting Policies, Impairment of Long-lived Assets. The
higher effective tax rate in 2001 resulted from the increased effect
of non-deductible amortization of goodwill on lower income before
taxes resulting primarily from the charges at Raytheon Airline
Aviation Services.
In 2003, 2002, and 2001, domestic income (loss) before taxes
was $493 million, $(12) million, and $(1,156) million, respectively,
and foreign income before taxes was $8 million, $75 million, and
$118 million, respectively. Income reported for federal and foreign tax
purposes differs from pretax accounting income due to differences
between U.S. Internal Revenue Code requirements and the Company’s
accounting practices. No provision has been made for deferred
taxes on undistributed earnings of non-U.S. subsidiaries as these
earnings have been indefinitely reinvested. Net cash (payments)
refunds were $(13) million, $145 million, and $27 million in 2003,
2002, and 2001, respectively.
Deferred federal and foreign income taxes consisted of the fol-
lowing at December 31:
(In millions) 2003 2002
Current deferred tax assets
Other accrued expenses $289 $ 378
Accrued salaries and wages 105 104
Contracts in process and inventories 72 119
Deferred federal and foreign income taxes—current $ 466 $601
Noncurrent deferred tax assets (liabilities)
Net operating loss and foreign tax
credit carryforwards $ 631 $ 533
Pension benefits 310 348
Other retiree benefits 226 235
Depreciation and amortization (703) (711)
Revenue on leases and other (127) (124)
Deferred federal and foreign income taxes-noncurrent $337 $ 281
There were $12 million and $1 million of taxes refundable
included in prepaid expenses and other current assets at
December 31, 2003 and 2002, respectively. Federal tax benefits
related to discontinued operations were $91 million in 2003 and
$126 million in 2002 and were included in deferred federal and for-
eign income taxes in the table above.
At December 31, 2003, the Company had net operating loss
carryforwards of $1.4 billion that expire in 2020 through 2023, for-
eign tax credit carryforwards of $41 million that expire in 2006
through 2008, and research tax credit carryforwards of $26 million
that expire in 2018 to 2023. The Company believes it will be able
to utilize all of these carryforwards over the next 3 to 4 years.
333NOTE M: COMMITMENTS AND
CONTINGENCIES
At December 31, 2003, the Company had commitments under
long-term leases requiring annual rentals on a net lease basis
as follows:
(In millions)
2004 $294
2005 271
2006 236
2007 198
2008 151
Thereafter 327
Rent expense in 2003, 2002, and 2001 was $441 million,
$449 million, and $276 million, respectively. In the normal course 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.