Raytheon 2004 Annual Report Download - page 63

Download and view the complete annual report

Please find page 63 of the 2004 Raytheon annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 126

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126

45
earnings (income excluding FAS/CAS Pension Adjustment). Dividends are subject to approval by the Board of
Directors.
   
Total debt was $5.2 billion at December 31, 2004 and $7.4 billion at December 31, 2003. Cash and cash equivalents
were $556 million at December 31, 2004 and $661 million at December 31, 2003. The Company’s outstanding debt
has interest rates ranging from 4.5% to 8.3% and matures at various dates through 2028. Total debt as a percentage
of total capital was 32.8 percent and 44.7 percent at December 31, 2004 and 2003, respectively.
In 2004, the Company repurchased long-term debt and subordinated notes payable with a par value of $2,254
million.
In 2003, the Company issued $425 million of long-term debt and used the proceeds to reduce the amounts
outstanding under the Company’s lines of credit. Also in 2003, the Company issued $500 million of fixed rate long-
term debt and $200 million of floating rate notes and used the proceeds to partially fund the repurchase of long-
term debt with a par value of $924 million. The Company has on file a shelf registration with the Securities and
Exchange Commission for the issuance of up to $3.0 billion in debt securities, common or preferred stock, warrants
to purchase any of the aforementioned 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 below in
Commitments and Contingencies.
In 2002, the Company issued $575 million of long-term debt to reduce the amounts outstanding under the
Company’s lines of credit. Also in 2002, the Company repurchased debt with a par value of $96 million.
The Company enters into various interest rate swaps that correspond to a portion of the Company’s fixed rate
debt in order to effectively hedge interest rate risk. In 2002, the Company closed out certain of these interest rate
swaps and received proceeds of $95 million which are being amortized over the remaining life of the debt as a
reduction to interest expense. At December 31, 2004, the unamortized balance was $14 million. The $600 million
notional value of interest rate swaps that remained outstanding at December 31, 2004 effectively converted that
portion of the Company’s total debt to variable rate debt.
The Company’s most restrictive bank agreement covenant is an interest coverage ratio that currently requires
earnings before interest, taxes, depreciation, and amortization (EBITDA), excluding certain charges, to be at least
3.0 times net interest expense for the prior four quarters. In July 2003, the covenant was amended to exclude pretax
charges of $100 million related to RE&C and in October 2003, the covenant was further amended to exclude $226
million of pretax 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 and expects to continue to be in compliance throughout 2005.
Credit ratings for the Company were assigned by Fitch’s at F3 for short-term borrowing and BBB- for senior
debt, by Moody’s at P-3 for short-term borrowing and Baa3 for senior debt, and by Standard and Poor’s at A-3 for
short-term borrowing and BBB- for senior debt.
Lines of credit with certain commercial banks exist to provide short-term liquidity. The lines of credit bear
interest based upon LIBOR and were $2.3 billion at December 31, 2004, consisting of $1.0 billion which matures in
May 2005 and $1.3 billion which matures in 2006. The lines of credit were $2.7 billion at December 31, 2003. There
were no borrowings under the lines of credit at December 31, 2004, however, the Company had approximately
$100 million of outstanding letters of credit which effectively reduced the Company’s borrowing capacity under the
lines of credit to $2.2 billion. There were no borrowings under the lines of credit at December 31, 2003.
In 2001, the Company issued 17,250,000, 8.25% equity security units. Each equity security unit consisted of a
contract to purchase shares of the Company’s common stock on May 15, 2004 and a mandatorily redeemable
equity security, with a stated liquidation amount of $50 due on May 15, 2006, which will require a cash payment by