Raytheon 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 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 135

  • 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
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135

Raytheon 2010 Annual Report
Raytheon 2010 Annual Report

Table of contents

  • Page 1
    Raytheon 2010 Annual Report Raytheon 2010 Annual Report

  • Page 2
    INNOVATION IN ALL DOMAINS AIR LAND SEA SPACE CYBER RAYTHEON INNOVATION SPANS ALL DOMAINS, DELIVERING PROVEN SUCCESS FOR CUSTOMERS AROUND THE WORLD. SCAN THE QR CODE TO THE LEFT WITH YOUR SMARTPHONE TO SEE MORE.

  • Page 3
    ...10 YEARS ENDED DECEMBER 31 In millions, except per share amounts and percentages 2008 2009 2010 Net Sales Operating Income Adjusted Income1 Adjusted EPS1 Operating Cash Flow from Continuing Operations Dividends Declared per Share Debt to Capital Return on Invested Capital (ROIC)2 $23,174 2,620...

  • Page 4
    ...of dividend increases, and the discretionary pension contribution, underscored our approach. We increased long-term value generation in 2010 through strategic acquisition activity. We acquired Technology Associates, Trusted Computer Solutions and substantially all the assets of an Australian company...

  • Page 5
    ...the Aerospace Components Category. KEEPING US ON TRACK: OUR VISION, STRATEGY, GOALS AND VALUES As a technology leader, Raytheon needs to be at the forefront of innovation. Our contract research and development (CRAD) bookings were up in 2010 by 28 percent, while sales on these programs increased by...

  • Page 6
    2010 FORM 10-K

  • Page 7
    ...) 95-1778500 (I.R.S. 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...

  • Page 8
    ... with Accountants on Accounting and Financial Disclosure ...116 Controls and Procedures ...116 Other Information ...116 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 9
    ... grown internally and through a number of acquisitions. We are incorporated in the state of Delaware. Our principal executive offices are located at 870 Winter Street, Waltham, Massachusetts 02451. In this section, we describe our business, including our business segments, product lines, customers...

  • Page 10
    ...-agencies and international partners which enable warfighters to sense, detect and engage threats through air and ground-based sensors and command and control systems as well as joint system solutions and intelligence support for air and ballistic missile defense. NTSP produces systems and solutions...

  • Page 11
    ... the company, embedding information assurance technologies and know-how into many of its core solutions and products. ISS provides high-level cyber security support to the Defense Intelligence Systems Agency on the Insider Threat Focused Observation Tool program and manages information assurance for...

  • Page 12
    ...protection solutions, information operations/information assurance (IO/IA), high-power microwave, high-energy laser systems, space applications, and counterterrorism solutions. Network Centric Systems (NCS)-NCS, headquartered in McKinney, Texas, is a leading provider of net-centric mission solutions...

  • Page 13
    ...(C2S)-C2S develops, delivers and supports domestic and international military and civil customers, including the FAA, Department of Transportation and DoD, with integrated networked command and control (C2) systems encompassing ground, air, space and security systems. Command and control systems are...

  • Page 14
    ... intelligence, surveillance and reconnaissance (ISR), precision engagement, unmanned aerial operations and space. Leveraging advanced concepts, state-of-the-art technologies and mission systems knowledge, SAS provides electrooptical/infrared sensors, airborne radars for surveillance and fire control...

  • Page 15
    ... customers worldwide. It specializes in training, logistics, engineering services and solutions, product support and operational support services. TS provides solutions for mission support, homeland security, space, civil aviation, counterproliferation and counterterrorism markets. Key customers...

  • Page 16
    ... risks associated with U.S. Government program funding and appropriations and government contracts and with supplying technologically-advanced, cutting edge defense-related products and services to the U.S. Government. U.S. Government contracts generally are subject to the Federal Acquisition...

  • Page 17
    ... standards. The DCAA also reviews the adequacy of and a contractor's compliance with its internal control systems and policies, including the contractor's purchasing, property, estimating, compensation and management information systems. For a discussion of certain risks associated with compliance...

  • Page 18
    .... International sales were principally in the fields of air defense systems, missile systems, airborne radars, naval systems, air traffic control systems, missile defense systems, electronic equipment, computer software and systems, homeland security solutions, personnel training, equipment...

  • Page 19
    ...space, information technology and technical services and support markets. Technical superiority, reputation, price, past performance, delivery schedules, financing and reliability are among the principal competitive factors considered by customers in these markets. We compete worldwide with a number...

  • Page 20
    ...,000 employees. Approximately 8% of our employees are unionized. We consider our union-management relationships to be generally satisfactory. Environmental Regulation Our operations are subject to and affected by a variety of international, federal, state and local environmental protection laws and...

  • Page 21
    ...Public Affairs Committee of the Board of Directors and our code of ethics entitled "Code of Conduct". Stockholders may request free copies of these documents from our Investor Relations Department by writing to Raytheon Company, Investor Relations, 870 Winter Street, Waltham, MA 02451, or by calling...

  • Page 22
    ... condition. Furthermore, we can give no assurance that we would be awarded new U.S. Government contracts to offset the revenues lost as a result of termination of any of our contracts. The funding of U.S. Government programs is subject to congressional appropriations. Congress generally appropriates...

  • Page 23
    ... and financial condition. Our international sales are also subject to local government laws, regulations and procurement policies and practices which may differ from U.S. Government regulations, including regulations relating to import-export control, investments, exchange controls and repatriation...

  • Page 24
    ... and compliance with applicable laws, regulations and standards. The DCAA also reviews the adequacy of and a contractor's compliance with its internal control systems and policies, including the contractor's purchasing, property, estimating, compensation and management information systems. Any...

  • Page 25
    ... those related to procurement integrity, export control, government security regulations, employment practices, protection of the environment, accuracy of records and the recording of costs, and foreign corruption. The termination of a government contract as a result of any of these acts could...

  • Page 26
    ...such as discount rates and assumed long-term return on assets (ROA), as well as our actual investment returns on our pension plan assets, and other factors could affect our earnings, equity and pension contributions in future periods. We must determine our pension and other benefit plans' expense or...

  • Page 27
    ... business, our future performance is highly dependent upon the continued services of our key engineering personnel and executive officers, the development of additional management personnel and the hiring of new qualified engineering, manufacturing, marketing, sales and management personnel for our...

  • Page 28
    ... and technology systems and products. New technologies may be untested or unproven. In addition, we may incur significant liabilities that are unique to our products and services, including missile systems, command and control systems, border security systems, and air traffic management systems. In...

  • Page 29
    ...College, PA; Garland, TX; Dulles, VA; Reston, VA; Springfield, VA; and Uxbridge, England; ‫ מ‬Missile Systems-East Camden, AR; Tucson, AZ; Rancho Cucamonga, CA; Louisville, KY; and Farmington, NM; ‫ מ‬Network Centric Systems-Fullerton, CA; Goleta, CA; Largo, FL; Ft. Wayne, IN; Marlboro, MA...

  • Page 30
    ... Item 8 of this Form 10-K. On July 22, 2010, Raytheon Systems Limited (RSL) was notified by the UK Border Agency that it had been terminated for cause on a program. The termination notice included allegations that RSL had failed to perform on certain key milestones and other matters in addition to...

  • Page 31
    ... a global security and information technology company. From June 2010 to November 2010, Mr. Crowley served as chief operating officer of Lockheed Martin Corporation's Aeronautics business unit and from May 2005 to June 2010, he served as executive vice president and general manager of the F-35 Joint...

  • Page 32
    ... Airborne Systems (SAS) business unit, and from May 2003 to July 2007 was Vice President of the Mission System Integration product line within the SAS business unit. Mr. Kennedy joined Raytheon in 1983 and has held positions of increasing responsibility as a new business leader and program manager...

  • Page 33
    ... as Vice President of the Integrated Air Defense product line of the IDS business unit. Mr. Yuse joined Raytheon in 1976 and has held positions of increasing responsibility on a variety of programs ranging from system architecture and design to flight test director and program manager. Age 59. 25

  • Page 34
    PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES At February 11, 2011, there were 34,217 record holders of our common stock. Our common stock is traded on the New York Stock Exchange under the symbol "RTN". For information ...

  • Page 35
    ... the Standard & Poor's 500 Stock Index and the Standard & Poor's Aerospace & Defense Index. Total Return To Shareholders (Includes reinvestment of dividends) Annual Return Percentage Years Ending 12/31/2006 12/31/2007 12/31/2008 12/31/2009 Company / Index 12/31/2010 Raytheon Common Stock S&P 500...

  • Page 36
    ...Purchases of Equity Securities Total Number of Shares Purchased as Part of Publicly Announced Plans Period Total Number of Shares Purchased(1) Average Price Paid per Share Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan(2) October (September 27, 2010-October 24, 2010...

  • Page 37
    ... per share amounts and total employees) Results of Operations 2010 2009 2008 2007 2006 Total net sales Operating income Interest expense, net Income from continuing operations Income (loss) from discontinued operations, net of tax Net income Net income attributable to Raytheon Company Net cash...

  • Page 38
    ... Introduction Raytheon Company develops technologically advanced, integrated products, services and solutions in four core defense markets, sensing, effects, command, control, communications and intelligence (C3I), and mission support, as well as the cybersecurity and homeland security markets. We...

  • Page 39
    ...contracts with a wide range of U.S. Government agencies, including the Department of Homeland Security (DHS), the Department of Justice (DoJ), the Department of State, the Department of Energy, the Intelligence Community, the National Aeronautics and Space Administration (NASA), the Federal Aviation...

  • Page 40
    ... key strategic pursuits, technology and Mission Assurance to protect and grow our position in four core defense markets: Sensing, Effects, C3I and Mission Support. ‫ מ‬Leverage our domain knowledge in these core markets as well as the Homeland Security and Cybersecurity markets. ‫ מ‬Expand...

  • Page 41
    ... domestic and international homeland security markets, focusing on transportation security, immigration control/identity management, critical infrastructure protection, maritime security, energy security, intelligence program support, law enforcement solutions and emergency preparedness and response...

  • Page 42
    ..., acquisitions, and research and development; managing our balance sheet, including debt repayments and pension contributions; and returning cash to our stockholders, including dividend payments and share repurchases. Bookings were $24.4 billion, $25.1 billion and $26.8 billion in 2010, 2009...

  • Page 43
    ... quarter of 2010, RSL was notified of its termination on the UK Border Agency program, which resulted in a net backlog adjustment of $556 million at IIS. In the second quarter of 2009, Kinetic Energy Interceptor (KEI), a developmental program with the Missile Defense Agency (MDA), was terminated for...

  • Page 44
    ... one unit of accounting, we recognize revenue for each deliverable based on the revenue recognition policies described above. Other Considerations-The majority of our sales are driven by pricing based on costs incurred to produce products or perform services under contracts with the U.S. Government...

  • Page 45
    ..., while both CAS and FAS use long-term assumptions in their calculation methodologies, each method results in different calculated amounts of pension cost. In addition, the cash funding requirements for our pension plans are determined under the Employee Retirement Income Security Act of 1974 (ERISA...

  • Page 46
    ...current market conditions. In validating the 2010 long-term ROA assumption, we also reviewed our pension plan asset performance since 1986. Our average actual annual rate of return since 1986 has exceeded our estimated 8.75% assumed annual return. Based upon these analyses and our internal investing...

  • Page 47
    ... under FAS over the average future working lifetime of the eligible employee population of approximately 11 years, and are amortized under CAS over a 15-year period. In accordance with both FAS and CAS, a "market-related value" of our plan assets is used to calculate the amount of deferred asset...

  • Page 48
    ... pension and other postretirement plans' investments are stated at fair value. Investments in equity securities (common and preferred) are valued at the last reported sales price when an active market exists. Investments in fixedincome securities are generally valued using methods based upon market...

  • Page 49
    ...partially offset by lower external net sales of $442 million at IIS. The increase in external net sales at TS was primarily due to higher net sales from growth on TS' training programs. The increase in external net sales at SAS was primarily due to higher volume, as planned, as work increased on 41

  • Page 50
    ... and the Advanced Medium Range Air-to-Air Missile (AMRAAM) program. The decrease in external net sales at IIS was primarily due to $385 million of lower net sales on a UK Border Agency Program, on which RSL was notified of its termination in the second quarter of 2010 (UK Border Agency Program), as...

  • Page 51
    ... UK Border Agency Program, as described in Commitments and Contingencies on page 64, driven principally by the $395 million adjustment recorded in the second quarter of 2010 from a change in our estimated revenue and costs and higher expense of $257 million related to the FAS/CAS Pension Adjustment...

  • Page 52
    ... differences between book and tax reporting, including domestic manufacturing tax benefits, tax benefits related to certain refund claims, including $26 million of benefits primarily related to certain U.S. and foreign research tax incentives and employee stock ownership plan dividend deductions...

  • Page 53
    ... tax years, the earnings per share impact of the UK Border Agency Program, and the make-whole provision on the early repurchase of debt, all previously described, and the impact of the acceleration of deferred gains related to the terminated interest rate swaps on the retired debt. Our 2008 Adjusted...

  • Page 54
    ... Defense Systems (IDS), Intelligence and Information Systems (IIS), Missile Systems (MS), Network Centric Systems (NCS), Space and Airborne Systems (SAS) and Technical Services (TS). The following provides some context for viewing our segment performance through the eyes of management. Given...

  • Page 55
    ... $24,881 $23,174 2010 2009 2008 Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services FAS/CAS Pension Adjustment Corporate and Eliminations Total Bookings (In millions) 879 $ 859 $ 870 (150) 259 253 654...

  • Page 56
    ... at December 31 (In millions) Funded Backlog 2010 2009 2008 2010 Total Backlog 2009 2008 Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Total $ 6,433 $ 5,595 $ 4,802 $ 8,473 $10,665 725...

  • Page 57
    ...IDS booked $400 million to provide advanced Patriot air and missile defense capability for an international customer, $271 million on the Zumwalt-class destroyer program for the U.S. Navy, $228 million on the Aegis weapon system for the U.S. Navy, $222 million to provide engineering services support...

  • Page 58
    ... driven by additional task orders from expanded customer scope, partially offset by $98 million of lower net sales on an international advanced border control and security program, principally from lower volume as subcontractor work related to the initial development phase was completed in June 2009...

  • Page 59
    ... systems, including missiles, smart munitions, close-in weapon systems, projectiles, kinetic kill vehicles and directed energy effectors. Key customers include the U.S. Navy, Army, Air Force and Marine Corps, the MDA, and the armed forces of more than 40 allied nations. Total Net Sales and Total...

  • Page 60
    ... for the production of the AMRAAM program for international customers and the U.S. Air Force, $577 million on Standard Missile Development and Production, and $478 million for the production of Tactical Tomahawk cruise missiles for the U.S. Navy. Network Centric Systems % Change 2010 2009 compared...

  • Page 61
    ...due to the improved program performance described above. Backlog and Bookings-The decrease in backlog of $589 million at December 31, 2010 compared to December 31, 2009 was primarily due to external sales in excess of bookings in 2010, principally within our Combat Systems product line. The decrease...

  • Page 62
    ...intelligence, surveillance and reconnaissance (ISR), precision engagement, unmanned aerial operations and space. Leveraging advanced concepts, state-of-the-art technologies and mission systems knowledge, SAS provides electro-optical/infrared sensors, airborne radars for surveillance and fire control...

  • Page 63
    ... customers worldwide. It specializes in training, logistics, engineering services and solutions, product support and operational support services. TS provides solutions for mission support, homeland security, space, civil aviation, counterproliferation and counterterrorism markets. Key customers...

  • Page 64
    ...from growth on TS' training programs, principally domestic and foreign training programs supporting the U.S. Army's Warfighter FOCUS activities due to an increase in customer determined activity levels, and $53 million of higher net sales from programs with the Transportation Security Administration...

  • Page 65
    ...order to more clearly show each business' underlying operational performance, we began treating for management reporting purposes the amounts related to the FAS/CAS Post Retirement benefit (FAS/CAS PRB Adjustment) consistent with the FAS/CAS Pension Adjustment. Also beginning in 2011, we changed our...

  • Page 66
    ... with our internal management reporting and performance evaluation. The components of the adjustment were as follows: (In millions) Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Total $20 7 14...

  • Page 67
    ...for growing our business, including capital expenditures, acquisitions and research and development; managing our balance sheet, including debt repayments and pension contributions; and returning cash to our stockholders, including dividend payments and share repurchases, as outlined below. Our need...

  • Page 68
    ... of lower pension and other postretirement benefit payments described below; and $37 million of proceeds from the termination of our interest rate swap agreements. The remainder of the increase in net cash was primarily due to an increase in net cash receipts in line with total net sales growth. Tax...

  • Page 69
    ... agreement dated December 18, 2010. Acquisitions-In 2010, we acquired Trusted Computer Solutions Inc., Technology Associates Inc. and substantially all of the assets of an Australian company, Compucat Research Pty. Ltd, for a total amount for all three of $152 million in cash, net of cash acquired...

  • Page 70
    ... management's discretion depending on market conditions. In May 2010, our stockholders approved the Raytheon 2010 Stock Plan (the "Plan"). Under the Plan, we may grant restricted stock awards, restricted stock units, stock grants, stock options and stock appreciation rights. Cash Dividends-Our Board...

  • Page 71
    ... lines of credit at December 31, 2010 and December 31, 2009. Compensating balance arrangements are not material. Credit Ratings-Three major corporate debt rating organizations, Fitch Ratings (Fitch), Moody's Investors Service (Moody's) and Standard & Poor's (S&P), assign ratings to our short-term...

  • Page 72
    ...millions, except percentages) 2010 2009 Total remediation costs-undiscounted Weighted average risk-free rate Total remediation costs - discounted Recoverable portion $225 $208 5.6% 5.7% $152 $139 107 97 We also lease certain government-owned properties and are generally not liable for remediation...

  • Page 73
    ...less than the carrying value. In 1997, we provided a first loss guarantee of $133 million on $1.3 billion of U.S. Export-Import Bank loans (maturing in 2015) to the Brazilian Government related to Network Centric Systems' System for the Vigilance of the Amazon (SIVAM) program. Loan repayments by the...

  • Page 74
    ..., results of operations or liquidity. On July 22, 2010, Raytheon Systems Limited (RSL) was notified by the UK Border Agency that it had been terminated for cause on a program. The termination notice included allegations that RSL had failed to perform on certain key milestones and other matters in...

  • Page 75
    ...RSL performed well and delivered substantial capabilities to the UK Border Agency under the program, which has been operating successfully and providing actionable information since live operations began in May 2009. On July 29, 2010, RSL filed a dispute notice on the grounds that the termination by...

  • Page 76
    ... tables provide information as of December 31, 2010 and December 31, 2009 about our market risk exposure associated with changing interest and exchange rates. For long-term debt obligations, the table presents principal cash flows by maturity date and average interest rates related to outstanding...

  • Page 77
    ... properly executed and recorded. The system includes policies and procedures, internal audits and our officers' reviews. Our Audit Committee of our Board of Directors is composed solely of directors who are independent under applicable SEC and New York Stock Exchange rules. Our Audit Committee meets...

  • Page 78
    ... statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain...

  • Page 79
    ...incurred Accounts payable Accrued employee compensation Other accrued expenses Total current liabilities Accrued retiree benefits and other long-term liabilities Deferred taxes Long-term debt Commitments and contingencies (note 11) Equity Raytheon Company stockholders' equity Common stock, par value...

  • Page 80
    RAYTHEON COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Years Ended December 31: 2010 2009 2008 Net sales Products Services Total net sales Operating expenses Cost of sales-products Cost of sales-services Administrative and selling expenses Research and ...

  • Page 81
    ... projected benefit obligation Foreign exchange translation Cash flow hedges Comprehensive (loss) income Dividends declared Impact to adopt new accounting standard (Note 12) Distributions and other activity related to noncontrolling interests Common stock plans activity Treasury stock activity...

  • Page 82
    ... internal use software Change in other assets Proceeds from sales of discontinued operations, net Payments for purchases of acquired companies, net of cash received Net cash provided by (used in) investing activities Cash flows from financing activities Dividends paid Issuance of long-term...

  • Page 83
    ...our consolidated financial statements. Revenue Recognition-We account for our long-term contracts associated with the design, development, manufacture, or modification of complex aerospace or electronic equipment and related services, such as certain cost-plus service contracts, using the percentage...

  • Page 84
    ... the revenue recognition policies described above. Research and Development Expenses-Expenditures for Company-sponsored research and development projects and bid and proposal costs are expensed as incurred. Customer-sponsored research and development projects performed under contracts are accounted...

  • Page 85
    ...of products and services to the U.S. Government. For all other sales or asset retirements, the assets and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in income. Provisions for depreciation are generally computed using...

  • Page 86
    ... are accounted for at average price. Upon retirement the excess over par value is charged against additional paid-in capital. The remaining treasury stock activity primarily relates to stock-based compensation awards and the related shares withheld to settle employee tax obligations. Pension Costs...

  • Page 87
    ... or hedge components excluded from the assessment of effectiveness are recognized currently in cost of sales or net sales. We also periodically enter into pay-variable, receive-fixed interest rate swaps to manage interest rate risk associated with our fixed-rate financing obligations. We account for...

  • Page 88
    ..., generally the vesting period of the award. The expense is amortized over the service period using the graded vesting method for our restricted stock and restricted stock units and the straight line amortization method for our Long-Term Performance Plan (LTPP). The related gross excess tax benefit...

  • Page 89
    ... intangible assets, primarily related to technology, contractual backlog and trade name with a weighted-average life of eight years. In 2008, we acquired Telemus Solutions, Inc. and SI Government Solutions at IIS for a total of $52 million in cash. In connection with these acquisitions, we recorded...

  • Page 90
    ... as follows: Integrated Defense Systems Intelligence and Information Systems Network Centric Systems Space and Airborne Systems (In millions) Missile Systems Technical Services Total Balance at December 31, 2008 Adjustment for acquisitions Effect of foreign exchange rates and other Balance at...

  • Page 91
    ... 31: (In millions) Cost-Type 2010 2009 Fixed-Price 2010 2009 Total 2010 2009 U.S. Government end-use contracts: Billed Unbilled Progress payments Other customers: Billed Unbilled Progress payments Total contracts in process Allowance for doubtful accounts Total contracts in process, net $ 428...

  • Page 92
    ...) 2010 2009 Long-term receivables Due from customers in installments to 2015 Other Computer software, net Investments Prepaid retiree benefits Other noncurrent assets, net Total 46 $ 23 21 23 372 392 82 67 105 111 820 764 $1,446 $1,380 $ We previously sold undivided interests in general aviation...

  • Page 93
    ...67 In 2001, we formed a joint venture, TRS, which we account for using the equity method. TRS is a system of systems integrator and provides fully customized solutions through the integration of command and control centers, radars and communication networks. We record our share of the TRS income or...

  • Page 94
    ... of sales $(1) (4) $- 4 In October 2010, we issued $2.0 billion of fixed rate long-term debt with maturities ranging from 5 to 30 years. In conjunction with the debt issuance, we entered into interest rate lock agreements with a total notional value of $1,550 million to manage interest rate risk...

  • Page 95
    .... Assets and liabilities measured at fair value on a recurring basis consisted of the following at December 31: (In millions) Level 1 Level 2 Level 3 Total 2010 Assets Marketable securities Foreign currency forward contracts Liabilities Deferred compensation Foreign currency forward contracts (In...

  • Page 96
    ... adopted new accounting standards in January 2010 resulting in the consolidation of our QSPE, GARC. As a result, we removed our retained interest in general aviation finance receivables from our balance sheet resulting in the elimination of the Level 3 measure noted above. Note 10: Notes Payable and...

  • Page 97
    ... to provide them with a limited amount of short-term liquidity, including the $150 million Raytheon United Kingdom Limited facility described above. In addition, other uncommitted bank lines totaled approximately $2 million and $15 million at December 31, 2010 and December 31, 2009, respectively...

  • Page 98
    ... millions, except percentages) 2010 2009 Total remediation costs-undiscounted Weighted average risk-free rate Total remediation costs-discounted Recoverable portion $225 $208 5.6% 5.7% $152 $139 107 97 We also lease certain government-owned properties and are generally not liable for remediation...

  • Page 99
    ... market conditions and the U.S. Government budget for the Essential Air Service program. Based on recent economic trends, including tightening credit markets and volatile fuel costs, these companies may increasingly experience difficulties meeting their financial commitments. At December 31, 2010...

  • Page 100
    ... to many levels of audit and investigation. Agencies that oversee contract performance include: the Defense Contract Audit Agency, the Defense Contract Management Agency, the Inspector General of the Department of Defense and other departments and agencies, the Government Accountability Office, the...

  • Page 101
    ... FINANCIAL STATEMENTS (CONTINUED) On July 22, 2010, Raytheon Systems Limited ("RSL") was notified by the UK Border Agency that it had been terminated for cause on a program. The termination notice included allegations that RSL had failed to perform on certain key milestones and other matters in...

  • Page 102
    ... at management's discretion depending on market conditions. Included in treasury shares at December 31, 2010 were 149,916 shares with a cost basis of $5.7 million which are held in a rabbi trust related to the Company's non-qualified deferred compensation plans. Our Board of Directors declared cash...

  • Page 103
    ...excluded from the calculation of EPS (anti-dilutive) 6.5 - 8.7 - 10.1 2.4 Our Board of Directors is authorized to issue up to 200 million shares of preferred stock, $0.01 par value per share, in multiple series with terms as determined by our Board of Directors. There were no shares of preferred...

  • Page 104
    ... stock units and stock appreciation rights to our employees, officers, nonemployee directors and consultants. Awards of restricted stock awards, restricted stock units and stock appreciation rights generally are made by the Management Development and Compensation Committee of our Board of Directors...

  • Page 105
    ...using historic volatility. Compensation expense for the CFCF and ROIC portions of the awards will be adjusted based upon the expected achievement of those performance goals. LTPP activity related to the expected units was as follows: Weighted-Average Grant Date Fair Value (Unit amounts in thousands...

  • Page 106
    ... primary pension obligations relate to our domestic IRS qualified pension plans. We also provide certain health care and life insurance benefits to retired employees and to eligible employees upon retirement through other postretirement benefit plans (Other Benefits). The fair value of plan assets...

  • Page 107
    ... Defined-Benefit Retirement Plan Summary Financial Information $1,163 1,152 1,200 1,234 1,262 7,141 $ 64 63 63 63 63 308 The tables below outline the components of net periodic benefit cost and related actuarial assumptions of our domestic and foreign Pension Benefits and Other Benefits plans...

  • Page 108
    ...includes expense from foreign Pension Benefits plans of $21 million, $19 million and $20 million in 2010, 2009 and 2008, respectively. Components of Net Periodic Benefit Credit (In millions) Other Benefits 2010 2009 2008 Service cost Interest cost Expected return on plan assets Amounts reflected in...

  • Page 109
    ... Pension Benefits 2010 Other Benefits 2010 Net loss Transition obligation Prior service (cost) credit Total $(796) - (14) $(810) $ (3) (4) 10 $ 3 For our domestic qualified pension plans the projected benefit obligation (PBO), accumulated benefit obligation (ABO) and asset values for these plans...

  • Page 110
    ... Benefits 2010 2009 Other Benefits 2010 2009 Fair value of plan assets at beginning of year Actual return (loss) on plan assets Company contributions Plan participants' contributions Foreign exchange gain (loss) Benefits paid Net transfer in Fair value of plan assets at end of year Retirement Plan...

  • Page 111
    ... and total investment return over the long term while maintaining sufficient liquidity to pay the benefits of the Plan. Asset allocation ranges are set to produce the highest return on investment taking into account investment risks that are prudent and reasonable given prevailing market conditions...

  • Page 112
    ..., investment manager, sector or international location. The Plan's investments are stated at fair value. Investments in equity securities (common and preferred) are valued at the last reported sales price when an active market exists. Investments in fixed-income securities are generally valued using...

  • Page 113
    ... Accounting Policies) at December 31, 2010 and December 31, 2009 were as follows: Fair Value Measurements at December 31, 2010 (In millions) Total Level 1 Level 2 Level 3 U.S. equities All capitalization(1) U.S. equity hedge funds(2) International equities Developed markets(1) Emerging markets...

  • Page 114
    ... U.S. Government bonds or treasuries U.S. Agency securities Corporate bonds Investment grade bonds(3) Non-investment grade bonds(3) Emerging market debt Global multi-sector fixed income(5) Fixed income hedge funds(2) Cash and cash equivalents(6) Other funds Commodity Currency Private equity funds...

  • Page 115
    ...and by trustees with a combination of members representing plan participants and local management in the U.K. Investments in the non-U.S. Pension Benefits plans consist primarily of fixed-income securities and equity securities and had a fair market value of $597 million and $545 million at December...

  • Page 116
    ... are valued using quoted prices in active markets (Level 1) as well as significant observable inputs (Level 2). Investments with significant unobservable inputs (Level 3) are immaterial in the non-U.S. Pension Benefits plans. The fair market value of assets related to our Other Benefits was...

  • Page 117
    ... decrease in tax expense included $56 million related to interest. In addition, we filed an accounting method change related to the timing of certain compensation deductions with the IRS. As a result, we recorded a reduction in our unrecognized tax benefits from continuing operations of $104 million...

  • Page 118
    ...Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems and Technical Services. Integrated Defense Systems (IDS) is a leader in global capabilities integration, providing affordable, integrated solutions to a broad international and...

  • Page 119
    ... customers worldwide. It specializes in training, logistics, engineering services and solutions, product support and operational support services. TS provides solutions for mission support, homeland security, space, civil aviation, counterproliferation and counterterrorism markets. Segment total...

  • Page 120
    ...Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services FAS/CAS Pension Adjustment Corporate and Eliminations Total $ 879 (150) 654 701 686 300 (230) (233) $2,607 $ 859 259 604 674 647 215 27 (243) $3,042 $ 870 253...

  • Page 121
    ... 2009 $ 63 24 52 85 58 12 10 $ 304 2008 Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Corporate Total Identifiable Assets (In millions) 75 $ 68 45 43 53 55 85 77 84 82 16 17 62 60 $ 420 $ 402...

  • Page 122
    ... in U.S. Government sales were sales to the U.S. Department of Defense of $21,333 million, $20,958 million and $19,231 million, in 2010, 2009 and 2008, respectively. United States All Other (Principally Europe) Long-lived Assets by Geographic Area (In millions) Total December 31, 2010 December 31...

  • Page 123
    ... the time of filing this Annual Report on Form 10-K with the SEC. On January 31, 2011, we completed the acquisition of Applied Signal Technology, Inc. (AST), pursuant to a definitive agreement dated December 18, 2010. We paid $38.00 per share of AST for an aggregate purchase price of approximately...

  • Page 124
    ...affect our internal control over financial reporting. Subsequent to the fourth quarter of 2010, our Technical Services segment migrated to the Company's common Enterprise Resource Planning (ERP) systems. ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE...

  • Page 125
    ... the caption "Stock Ownership" and is incorporated herein by reference. Information regarding securities authorized for issuance under our executive compensation plans is contained in Part II, Item 5 of this Annual Report on Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND...

  • Page 126
    ... of September 23, 2010, filed as an exhibit to the Company's Current Report on Form 8-K filed September 27, 2010, is hereby incorporated by reference. Indenture relating to Senior Debt Securities dated as of July 3, 1995 between Raytheon Company and The Bank of New York, Trustee, filed as an exhibit...

  • Page 127
    ... hereby incorporated by reference. Agreement of Resignation, Appointment and Acceptance, dated April 1, 2005, between Raytheon Company and The Bank of New York appointing Successor Trustee, Paying Agent and Registrar in connection with the 8.25% Equity Security Units originally authorized and issued...

  • Page 128
    ... Performance Stock Unit Award Agreement under the Raytheon 2011 Stock Plan, filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 26, 2010, is hereby incorporated by reference. Form of Restricted Stock Unit Agreement for U.K. employees under the Raytheon...

  • Page 129
    ... 24, 2003, is hereby incorporated by reference. Employment Agreement between Raytheon Company and Keith J. Peden, filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, is hereby incorporated by reference. Amendment dated February 5, 2010 to Employee...

  • Page 130
    ... the Raytheon Company Long-Term Performance Plan, filed as an exhibit to the Company's Current Report on Form 8-K filed December 14, 2006, is hereby incorporated by reference. Stock Purchase Agreement by and among, Hawker Beechcraft Corporation, Greenbulb Limited, Raytheon Company, Raytheon Aircraft...

  • Page 131
    ... Agents and Administrative Agent named therein, dated as of November 17, 2010, filed as an exhibit to the Company's Current Report on Form 8-K filed November 23, 2010, is hereby incorporated by reference. Form of Clawback Policy Acknowledgement, filed as an exhibit to the Company's Annual Report on...

  • Page 132
    ...its behalf by the undersigned, thereunto duly authorized. RAYTHEON COMPANY /s/ Michael J. Wood Michael J. Wood Vice President and Chief Accounting Officer Dated: February 23, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 133
    ... AT I O N GLOBAL HEADQUARTERS Raytheon Company 870 Winter Street Waltham, MA 02451 781.522.3000 COPIES OF REPORTS Copies of the company's annual reports, latest SEC filings, quarterly earnings reports and other information may be requested through the company's website at http://www.raytheon.com or...

  • Page 134
    ...PEDEN President Intelligence and Information Systems LAWRENCE J. HARRINGTON Senior Vice President Human Resources Raytheon Company REBECCA R. RHOADS Senior Vice President and Chief Financial Officer Raytheon Company PAMELA A. WICKHAM Vice President Internal Audit Raytheon Company JOHN D. HARRIS...

  • Page 135
    FOLLOW RAYTHEON COMPANY ON: Raytheon Company 870 Winter Street Waltham, Massachusetts 02451-1449 USA www.raytheon.com Customer Success Is Our Mission, MathMovesU, Applied Signal Technology, Trusted Computer Solutions and Technology Associates are registered trademarks of Raytheon Company. Raytheon...