Raytheon 2007 Annual Report Download - page 78

commencing in 2006. This program was completed during the second quarter of 2007. In November 2004, our Board of
Directors authorized the repurchase of up to $700 million of our outstanding common stock. This program was
completed during the third quarter of 2006.
Dividends. We paid dividends to stockholders of $440 million in 2007, $420 million in 2006 and $387 million in 2005.
Our quarterly dividend rate was $0.255 per share in 2007, compared to $0.24 in 2006 and $0.22 in 2005. Although we do
not have a formal dividend policy, management believes that a reasonable dividend payout ratio based on the current
industry environment and market conditions is approximately one third of our economic earnings (income excluding the
FAS/CAS Pension Adjustment). Dividends are subject to quarterly approval by our Board of Directors.
CAPITAL RESOURCES
Total debt was $2.3 billion at December 31, 2007 and $4.0 billion at December 31, 2006. Our outstanding debt bears
interest at fixed interest rates ranging from 4.9% to 7.2% and matures at various dates through 2028. However, we
entered into various interest rate swaps that correspond to a portion of our fixed rate debt in order to effectively hedge
interest rate risk by converting that portion of our total fixed-rate debt to variable-rate debt based on LIBOR. The
notional value of interest rate swaps outstanding was $575 million at December 31, 2007 and $600 million at
December 31, 2006. Total debt as a percentage of total capital was 15.3% and 26.3% at December 31, 2007 and 2006,
respectively.
Cash and cash equivalents. Cash and cash equivalents were $2.7 billion at December 31, 2007 and $2.5 billion at
December 31, 2006. Our cash is invested directly in commercial paper of financial institutions and corporations with
AA-/Aa3 or better long-term and A-1+/P-1 short-term debt ratings, AAA/Aaa U.S. Treasury money market funds and in
interest bearing bank accounts.
Credit Facilities. We have a $2.2 billion bank revolving credit facility under which we can draw down on lines of credit
and use the credit facility to support letters of credit and commercial paper that we may issue for short-term liquidity.
The credit facility matures in March 2010. Borrowings under the credit facility bear interest based on LIBOR. As of
December 31, 2007 and December 31, 2006, there were no borrowings under the credit facility. We had, however,
approximately $60 million and $70 million of outstanding letters of credit at December 31, 2007 and 2006, respectively,
which effectively reduced our borrowing capacity under the credit facility by that same amount at each of the respective
dates.
Under the credit facility, we must comply with certain covenants, including the ratio of total debt to total capitalization of
no more than 50% and the ratio of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA)
to consolidated net interest expense, for any period of four consecutive fiscal quarters, of no less than 3.0 to 1.0. We were
in compliance with the covenants during 2007 and 2006, and expect to continue to be in compliance throughout 2008.
Certain of our foreign subsidiaries maintain revolving bank lines of credit to provide them with a limited amount of
short-term liquidity. In 2005, Raytheon United Kingdom Limited, a U.K. subsidiary, entered into a $150 million
committed multicurrency revolving credit facility. There were no borrowings under the facility at December 31, 2007 and
December 31, 2006. In addition, other uncommitted bank lines totaled approximately $15 million at December 31, 2007
and 2006. There were no amounts outstanding under these lines of credit at December 31, 2007 and 2006. Compensating
balance arrangements are not material.
Credit Ratings. At December 31, 2007, our credit ratings consisted of the following:
Fitch Moody’s
Standard &
Poor’s
Short-term debt F2 P-2 A-2
Long-term senior debt BBB+ Baa1 BBB+
In March 2007, Moody’s upgraded our long-term senior unsecured debt rating from Baa2 to Baa1 and affirmed our
short-term debt rating of P-2. In January 2007, Fitch upgraded our long-term senior unsecured debt rating from BBB to
BBB+ and affirmed our short-term debt rating of F2. In December 2006, Standard & Poor’s upgraded our long-term
senior unsecured debt rating from BBB to BBB+ and affirmed our short-term debt rating of A-2.
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