Raytheon 2011 Annual Report Download

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RAYTHEON 2011 ANNUAL REPORT

Table of contents

  • Page 1
    R A Y T H E O N 2 0 1 1 A N N U A L R E P O R T

  • Page 2
    ... 2009 2010 2011 Net Sales Adjusted Income Adjusted EPS 1 1 $24,881 1,894 4.79 2,745 1.24 $25,183 2,077 5.51 1,931 1.50 $24,857 2,086 5.90 2,156 1.72 Operating Cash Flow from Continuing Operations Dividends Declared per Share In billions, except per share amounts NET SALES ADJUSTED INCOME1...

  • Page 3
    ... the full-year 2010. We had strong operating cash ï¬,ow from continuing operations of $2.2 billion in 2011, compared to $1.9 billion in 2010. Both 2011 and 2010 included $750 million in discretionary cash contributions to the company's pension plans. We reported strong bookings of $26.6 billion in...

  • Page 4
    ... warfare markets. The constantly changing global threat environment drives demand for our ISR capabilities across military, border control and humanitarian missions. We also strengthened our advanced global ISR solutions with the acquisition of Applied Signal Technology, Inc. As the electronic...

  • Page 5
    ...in Europe and Asia. CONTROLLING WHAT WE CAN CONTROL integrated enterprise platform of common processes and systems spans all major functions: Finance, Supply Chain, Contracts and Human Resources, as well as Manufacturing and Engineering. This emphasis on efficiencies is not new. It has been part of...

  • Page 6
    .... OUR VISION, STRATEGY, GOALS AND VALUES: CONSISTENT AND PROVEN all we accomplished during the year. Our VSGVs also are a path for action - a vital compass to guide us as we create and embrace new opportunities. As we approach the 90th anniversary of our company in 2012, Raytheon remains strong...

  • Page 7
    ... (State or Other Jurisdiction of Incorporation or Organization) 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...

  • Page 8
    ... with Accountants on Accounting and Financial Disclosure ...Controls and Procedures...Other Information... 25 27 28 72 73 121 121 121 Directors, Executive Officers and Corporate Governance...Executive Compensation...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 9
    ... of defense and related programs for government customers. We were founded in 1922 and have 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...

  • Page 10
    ... detection range and powerful discrimination accuracy. Intelligence and Information Systems (IIS)-IIS, headquartered in Garland, Texas, is a leader in intelligence, surveillance and reconnaissance (ISR), advanced cyber solutions, and U.S. Department of Defense (DoD) space, weather and environmental...

  • Page 11
    ...a new generation of special missions. It applies advanced technology and special skills to address complex problems for U.S. intelligence and operational commands. SMT solutions enable advanced technical intelligence as well as Human Intelligence (HUMINT), Open Source Intelligence (OSINT), and close...

  • Page 12
    ... 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 enabled mission solutions for federal, state and local government, and civil customers. NCS...

  • Page 13
    .... Security and Transportation Solutions (STS)-STS develops, delivers and supports domestic and international defense, federal and civil customers with integrated, networked, actionable command and control (C2) transportation and security systems. STS is the leading provider of Air Traffic Management...

  • Page 14
    ...actionable information and mission assurance. TAS provides sensors and integrated sensor systems with advanced fire control radars, electronic warfare and processor technologies to customers including the U.S. Navy, Marine Corps, and Air Force and international governments. TAS produces radars using...

  • Page 15
    ... Air Force and Navy, and provides a wide range of state-of-the art product families and engineering services in support of the DoD's need to respond to a dynamic threat environment. RAST provides advanced ISR solutions to enhance global security. Technical Services (TS)-TS, headquartered in Dulles...

  • Page 16
    ...-cycle support for air, sea and land-based electronics and weapons. For the V-22 Osprey aircraft program, CEDS manages the Systems Integration Lab, leads the software support activity, performs updates to operational flight program software and provides mission planning software and training devices...

  • Page 17
    ... 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 with U.S. Government contract regulations and...

  • Page 18
    .... International sales were principally in the areas 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
    ... are important to the operation of Raytheon, we do not believe that any particular trade secret, patent, license or other intellectual property right is of such importance that its loss or termination would have a material adverse effect on our business. Employment As of December 31, 2011, we had...

  • Page 21
    ... Activities 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
    ... impact our results of operations and financial 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...

  • Page 23
    ... differ from U.S. Government regulations, including regulations relating to import-export control, investments, exchange controls and repatriation of earnings, as well as to varying currency, geo-political and economic risks. International contract laws, regulations and contractual terms differ from...

  • Page 24
    ... contractors, for information technology and other support work. If we are unable to continue to compete successfully against our current or future competitors, we may experience declines in revenues and market share which could negatively impact our results of operations and financial condition...

  • Page 25
    ... 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 costs...

  • Page 26
    ... or circumstances, our pension and other benefit plans' expense and funded status, and our cash contributions to such plans could negatively change which would negatively impact our results of operations. In addition, differences between our actual investment returns and our long-term ROA assumption...

  • Page 27
    ... or classified information, and threats to physical security. Our information technology networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations. Cybersecurity threats, such as computer viruses, attempts...

  • 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
    ... Waltham, MA; Garland, TX; Plano, TX; Arlington, VA; and Dulles, VA. A summary of the space owned, leased and/or utilized by us as of December 31, 2011, by business segment is as follows: Government Owned(2) Leased Owned(1) Total(3) Integrated Defense Systems Intelligence and Information Systems...

  • Page 30
    ... condition, results of operations or liquidity. On August 18, 2010, the U.K. Border Agency (UKBA) initiated arbitration proceedings in the London Court of International Arbitration against Raytheon Systems Limited (RSL) in connection with the parties' dispute with respect to the UKBA's termination...

  • Page 31
    ..., Sales and Service, and President of Government Operations. Prior to joining Allied Signal, he held executive positions at McDonnell Douglas Corporation. Age 60. Lynn A. Dugle Ms. Dugle has served as Vice President of Raytheon Company and President of the Intelligence and Information Systems (IIS...

  • Page 32
    ... 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 60. 24

  • Page 33
    ... on the New York Stock Exchange under the symbol "RTN". For information concerning stock prices and dividends paid during the past two years, see Note 17: Quarterly Operating Results (Unaudited) within Item 8 of this Form 10-K. Securities Authorized for Issuance Under Equity Compensation Plans The...

  • Page 34
    ...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 Plans (2) October (October 3, 2011-October 30, 2011...

  • Page 35
    ... by (used in) investing activities from continuing operations Net cash provided by (used in) financing activities from continuing operations Bookings Total backlog Dividends declared per share Total employees from continuing operations $ 2,156 (1,051) (694) 26,555 35,312 $ 1.72 71,000 $ 1,931...

  • Page 36
    ... defense and related programs for primarily government customers. We operate in six business segments: Integrated Defense Systems (IDS), Intelligence and Information Systems (IIS), Missile Systems (MS), Network Centric Systems (NCS), Space and Airborne Systems (SAS) and Technical Services (TS). For...

  • Page 37
    ...defense products and services and homeland security solutions. In North Asia, both short and long-term security concerns are increasing demand for air and missile defense, air/naval modernization, maritime security, homeland security and air traffic management. In the Middle East, threats from state...

  • Page 38
    ... In 2011, we acquired California-based Applied Signal Technology, Inc., which specializes in signals intelligence and processing of electromagnetic spectrum information to provide situational awareness to warfighters and the intelligence community. Mission Support-We are focused on enabling customer...

  • Page 39
    ... 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 40
    ..., acquisitions, and research and development; prudently managing our balance sheet, including debt repayments and pension contributions; and returning cash to our stockholders, including dividend payments and share repurchases. Bookings were $26.6 billion, $24.4 billion and $25.1 billion in 2011...

  • Page 41
    ..., and the related changes in estimates of revenues and costs. The risks and opportunities include management's judgment about the ability and cost to achieve the schedule (for example, the number and type of milestone events), technical requirements (for example, a newly-developed product versus...

  • Page 42
    ... 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. Cost-based pricing is determined under...

  • Page 43
    ..., while both CAS and FAS use longterm 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 44
    ... equities International equities Fixed-income securities Cash and cash equivalents Other (including private equity, real estate and absolute return funds) 25% - 40% 10% - 30% 25% - 40% 3% - 15% 0% - 20% In validating the 2011 long-term ROA assumption, we reviewed our pension plan asset performance...

  • Page 45
    ... securities which are generally recognized by institutional traders. Investments in private equity funds, hedge funds and private real estate funds are estimated at fair market value which primarily utilizes net asset values reported by the investment manager or fund administrator. The pension...

  • Page 46
    ... accumulated other comprehensive loss related to our pension and other postretirement benefit plans at December 31, 2011 and 2010, respectively, composed primarily of differences between actual and expected asset returns, changes in discount rates, changes in plan provisions and differences between...

  • Page 47
    ... and per share data) 2011 2010 2009 2011 2010 2009 Net sales $ 20,786 Products 4,071 Services 24,857 Total net sales Operating expenses Cost of sales 16,275 Products 3,422 Services 19,697 Total cost of sales 1,678 Administrative and selling expenses 625 Research and development expenses 22...

  • Page 48
    ... 2011, higher volume on intelligence, surveillance and reconnaissance systems programs due to increased bookings over the last few years driven by customer demand for these capabilities, and higher volume, as production work increased, as planned, on an international airborne tactical radar program...

  • Page 49
    ... the activity on RAST programs, the intelligence, surveillance and reconnaissance systems programs, and the international airborne tactical radar program described above in Total Net Sales, and $150 million of higher expense in 2011 compared to 2010 related to the FAS/CAS Adjustment described below...

  • Page 50
    ... activity on TS' training programs and the programs with the Transportation Security Administration (TSA) described above in Total Net Sales, and higher expense of $267 million related to the FAS/CAS Adjustment described below in Segment Results. Products and Services Cost of Sales - 2010 vs. 2009...

  • Page 51
    ...statutory rate adjusted for various permanent differences between book and tax reporting. As of December 31, 2011, the Internal Revenue Service (IRS) had completed their examination of our tax returns through 2008. During 2011, we received final approval from the IRS and the U.S. Congressional Joint...

  • Page 52
    ... operations attributable to Raytheon Company $ 1,867 353.6 $ 5.28 $ 1,804 377.0 $ 4.79 $ 1,936 395.7 $ 4.89 The changes in diluted weighted average shares were driven by the common stock share activity below. (Shares in millions) 2011 2010 2009 Beginning balance Warrants exercised Stock plan...

  • Page 53
    ... at the U.S. statutory rate of 35%. Adjusted EPS was as follows: 2011 2010 2009 Diluted EPS from continuing operations attributable to Raytheon Company common stockholders Earnings per share impact of the FAS/CAS Adjustment Earnings per share impact of the UKBA Program Adjustment Earnings per...

  • Page 54
    ...overall margin for the segment. Changes in net EAC adjustments typically relate to the current period impact of revisions to total estimated revenues and costs at completion. These changes reflect improved or deteriorated operating performance or award fee rates. Raytheon has a Company-wide standard...

  • Page 55
    ...series of related changes, materially driving a segment's change in operating income or operating margin percentage. Backlog-We disclose period ending backlog for each segment. Backlog represents the dollar value of contracts awarded for which work has not been performed. Backlog generally increases...

  • Page 56
    ... 3,161 (1,974) $ 24,881 Operating Income (In millions) 2011 2010 2009 Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services FAS/CAS Adjustment Corporate and Eliminations Total $ 836 159 693 667 717...

  • Page 57
    Funded Backlog Backlog at December 31 (In millions) 2011 2010 2009 2011 Total Backlog 2010 2009 Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Total $ 7,100 829 6,205 3,267 3,104 1,957 $ 22,462...

  • Page 58
    ... world leader in large-scale radar development, technology and production. Key customers include the U.S. Navy, Army, Air Force, and Missile Defense Agency (MDA) and numerous international customers. Total Net Sales-The decrease in net sales of $512 million in 2011 compared to 2010 was primarily due...

  • Page 59
    ... million for Joint Land Attack Cruise Missile Defense Elevated Netted Sensor Systems (JLENS) for the U.S. Army. Intelligence and Information Systems % Change 2011 compared to 2010 2010 compared to 2009 (In millions, except percentages) 2011 2010 2009 $ 3,015 Total Net Sales Operating Expenses...

  • Page 60
    ... cyber solutions, and U.S. Department of Defense (DoD) space, weather and environmental solutions. Approximately half of its business is for classified customers. Key customers include the U.S. Intelligence Community, DoD agencies, the National Oceanic and Atmospheric Administration, the Department...

  • Page 61
    ... a number of classified contracts described above, in 2009, IIS booked $158 million on a contract to provide ISR support to the U.S. Air Force. Missile Systems % Change 2011 compared to 2010 2010 compared to 2009 (In millions, except percentages) 2011 2010 2009 $ 5,590 Total Net Sales Operating...

  • Page 62
    ... in our air warfare systems product line due to the mix of contracts completing and new contract awards. The increase in operating margin in 2010 compared to 2009 was primarily due to the change in contract mix and other performance described above. Backlog and Bookings-Backlog remained relatively...

  • Page 63
    ... international and domestic homeland security, civil communications, and transportation solutions. NCS customers include the Department of Defense (DoD) and other U.S. Government customers, as well as numerous international customers. Total Net Sales-The decrease in net sales of $421 million in 2011...

  • Page 64
    ...$28 million relating to an infrastructure protection program as a result of a change in our estimated revenue and costs due to the termination of a subcontractor and the Company's subsequent direct assumption of that subcontractor's scope of work. The increase in operating margin in 2011 compared to...

  • Page 65
    ... 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 applications, lasers, precision guidance systems, processors, electronic warfare systems...

  • Page 66
    ... net sales on a multi-spectral targeting system program driven by increased planned production efforts to meet the program delivery schedule and $75 million of higher net sales from higher volume, as planned, as production work increased on an international airborne tactical radar program awarded...

  • Page 67
    ..., logistics, engineering services and solutions, product and operational support services for the mission support, homeland security, space, civil aviation, counter proliferation and counterterrorism markets. Key customers include all branches of the U.S. Armed Forces, as well as the Department of...

  • Page 68
    ...Total Net Sales. Operating Income and Margin-The increase in operating income of $15 million 2011 compared to 2010 was primarily due to a change in contract mix and other performance of $13 million, primarily driven by cost efficiencies and higher award fees associated with various training programs...

  • Page 69
    ... our annual update, generally planned in the third quarter, of our actuarial estimate of the unfunded benefit obligation for both FAS and CAS for final 2011 census data. After 2012, the FAS/CAS Pension Adjustment is more difficult to predict because future FAS and CAS expense is based on a number of...

  • Page 70
    ... part of management's evaluation of reportable segment operating performance, including the net costs associated with our residual commuter aircraft portfolio. The components of total net sales related to Corporate and Eliminations were as follows: (In millions) 2011 2010 2009 Intersegment sales...

  • Page 71
    ... 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 for, cost of and access to funds are dependent on future operating results, as well as other external conditions...

  • Page 72
    ...BBN Technologies Corp. and related entities in the fourth quarter of 2009 in which we paid $334 million, net of cash acquired, offset by 2010 acquisitions of $152 million, net of cash acquired, described below. Additions to property plant and equipment and capitalized internal use software-Additions...

  • Page 73
    ... management incentive payments. RAST provides advanced intelligence, surveillance, and reconnaissance (ISR) solutions to enhance global security. The acquisition is part of our strategy to extend and enhance our Space and Airborne Systems (SAS) offerings related to certain classified and Department...

  • Page 74
    .... In March 2010, our Board of Directors authorized a 21% increase in our annual dividend payout rate from $1.24 to $1.50 per share. Dividends are subject to quarterly approval by our Board of Directors. CAPITAL RESOURCES Total debt was $4.6 billion at December 31, 2011, $3.6 billion at December 31...

  • Page 75
    ... lines of credit at December 31, 2011 and December 31, 2010. 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 76
    ...31: (In millions, except percentages) 2011 2010 Total remediation costs-undiscounted Weighted average risk-free rate Total remediation costs-discounted Recoverable portion $ 227 5.6% $ 152 105 $ 225 5.6% $ 152 107 We also lease certain government-owned properties and are generally not liable for...

  • Page 77
    ... Government related to Network Centric Systems' System for the Vigilance of the Amazon (SIVAM) program. Loan repayments by the Brazilian Government were current at December 31, 2011. We have entered into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition...

  • Page 78
    ... the Securities and Exchange Commission and the Department of Justice. Based on the information available to date, we do not believe that the results of this review will have a material adverse effect on our financial condition, results of operations or liquidity. On July 22, 2010, Raytheon Systems...

  • Page 79
    ... position, results of operations or liquidity. ACCOUNTING STANDARDS In June 2011, the Financial Accounting Standards Board (FASB) issued a new accounting standard that eliminates the option to present other comprehensive income (OCI) in the statement of stockholders' equity and instead requires net...

  • Page 80
    ... tables provide information as of December 31, 2011 and December 31, 2010 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 81
    ...transactions are 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...

  • Page 82
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Raytheon Company: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income, of equity, and of cash flows present ...

  • Page 83
    ... 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, $0.01 per share...

  • Page 84
    RAYTHEON COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Years Ended December 31: 2011 2010 2009 Net sales Products Services Total net sales Operating expenses Cost of sales-products Cost of sales-services Administrative and selling expenses Research and ...

  • Page 85
    ...: 2011 2010 2009 $ 1,896 Net income Other comprehensive income (loss), before tax: (3) Foreign exchange translation (9) Cash flow hedges and interest rate locks 3 Unrealized gains on investments and other Pension and other employee benefit plans: 4 Net change initial net obligation 45 Prior service...

  • Page 86
    ... Noncontrolling interests in subsidiaries Total equity Balance at December 31, 2008 Net income Other comprehensive income (loss) Dividends declared Distributions and other activity related to noncontrolling interests Common stock plans activity Treasury stock activity Balance at December 31, 2009...

  • Page 87
    ...to property, plant and equipment Proceeds from sales of property, plant and equipment Additions to capitalized internal use software Change in other assets Payments for purchases of acquired companies, net of cash received Net cash provided by (used in) investing activities Cash flows from financing...

  • Page 88
    ...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 89
    ...are accounted for as contract costs as the work is performed and included in contracts in process in our consolidated balance sheets. Bid and proposal costs were between 40% and 50% of total research and development expenses in 2011, 2010 and 2009. Federal, Foreign and State Income Taxes-The Company...

  • Page 90
    ... analysis that considers current inventory levels, historical usage patterns, future sales expectations and salvage value. Inventories consisted of the following at December 31: (In millions) 2011 2010 Materials and purchased parts Work in process Finished goods Total $ $ 60 264 12 336 $ $ 63...

  • Page 91
    ... Amount (In millions) Year Ended December 31, 2011 Foreign exchange translation Cash flow hedges and interest rate locks Unrealized gains on investments and other Pension and other employee benefit plans: Net change initial net obligation Prior service cost arising during period Net loss arising...

  • Page 92
    ... 2011 2010 Defined benefit pension and other employee benefit plans Foreign exchange translation Cash flow hedges and interest rate locks Unrealized gains on investments and other Total $ (7,008) 25 (13) (5) $ (7,001) $ (5,156) 28 (7) (11) $ (5,146) The defined benefit pension and other employee...

  • Page 93
    ... are spread over 3 years to develop a market-related value of the assets. We recognize the funded status of a postretirement benefit plan (defined benefit pension and other benefits) as an asset or liability on our consolidated balance sheets. Funded status represents the difference between the...

  • Page 94
    .... Common stock and unvested share-based payment awards earn dividends equally. Employee Stock Plans-Stock-based compensation cost is measured at the grant date based on the calculated fair value of the award. The expense is recognized over the employees' requisite service period, generally the...

  • Page 95
    ... management incentive payments. RAST provides advanced intelligence, surveillance, and reconnaissance (ISR) solutions to enhance global security. The acquisition is part of our strategy to extend and enhance our Space and Airborne Systems (SAS) offerings related to certain classified and Department...

  • Page 96
    ... acquired. These acquisitions enhance our cybersecurity and information assurance capabilities at Intelligence and Information Systems (IIS). In connection with these acquisitions, we recorded $125 million of goodwill, primarily related to expected synergies from combining operations and the value...

  • Page 97
    ... as follows: Intelligence and Information Systems Space and Airborne Systems (In millions) Integrated Defense Systems Missile Systems Network Centric Systems Technical Services Total Balance at December 31, 2009 $ Increase for acquisitions Effect of foreign exchange rates and other Balance at...

  • Page 98
    ... in 2012 and the balance thereafter. Note 6: Property, Plant and Equipment, Net Property, plant and equipment, net consisted of the following at December 31: (In millions) 2011 2010 Land Buildings and leasehold improvements Machinery and equipment Accumulated depreciation and amortization Total...

  • Page 99
    ... the following at December 31: (In millions) 2011 2010 Long-term receivables Computer software, net Other intangible assets, net Marketable securities held in trust Investments Prepaid retiree benefits Other noncurrent assets, net Total Computer software, net consisted of the following at December...

  • Page 100
    ...) 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 101
    ... of sales $ - - $ (1) (4) In November 2011, we issued $1.0 billion of fixed rate long-term debt with maturities ranging from 3 to 30 years. In conjunction with the debt issuance, we entered into interest rate lock agreements with a total notional value of $575 million to manage interest rate...

  • Page 102
    ... 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 2011 Assets Marketable securities held in trust Foreign currency forward contracts Liabilities Deferred compensation Foreign currency forward contracts...

  • Page 103
    ... and December 31, 2010. There were no amounts outstanding under these lines of credit at December 31, 2011 and December 31, 2010. Compensating balance arrangements are not material. Total cash paid for interest on notes payable and long-term debt was $167 million, $134 million and $147 million in...

  • Page 104
    ... 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. At December 31, 2011, we had commitments under agreements to outsource a portion of our information...

  • Page 105
    ... 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 106
    ... actionable information since live operations began in May 2009. As a result of the termination notice, we adjusted our estimated amount of revenue and costs under the program in the second quarter of 2010. The impact of the UKBA Program Adjustment reduced IIS' total net sales and operating income...

  • Page 107
    ...of these costs is integral in determining the price of the related long-term contracts. The table above excludes these costs. Note 12: Stockholders' Equity The changes in shares of our common stock outstanding were as follows: (In millions) Balance at December 31, 2008 Stock plans activity Treasury...

  • Page 108
    ... are held in a rabbi trust related to the Company's non-qualified deferred compensation plans. In March 2011, our Board of Directors authorized a 15% increase to our annual dividend payout rate from $1.50 to $1.72 per share. Our Board of Directors declared cash dividends of $1.72, $1.50 and $1.24...

  • Page 109
    ...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 stock outstanding at December 31, 2011 and December 31, 2010. Warrants to purchase shares of our common stock with an exercise...

  • Page 110
    ...upon the achievement of specific preestablished levels of performance. The performance goals for the three outstanding performance cycles at December 31, 2011, are independent of each other and based on three metrics, as defined in the award agreements: return on invested capital (ROIC), weighted at...

  • Page 111
    ... (decrease) above relates to changes in the amount of expected awards as achievement is measured against performance goals. Stock Options In 2004, we changed the primary form of our broad-based equity compensation from stock options to restricted stock. There have been no stock options granted since...

  • Page 112
    ... 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 113
    ... 303 Defined-Benefit Retirement Plan Summary Financial Information 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. Components of Net Periodic Benefit Cost (In millions) 2011...

  • Page 114
    ... Other Benefits 2011 2010 Accumulated other comprehensive loss: Initial net obligation Prior service (cost) credit Net loss Accumulated other comprehensive loss Accumulated contributions in excess (below) net periodic benefit or cost Net amount recognized on the balance sheets Sources of Change in...

  • Page 115
    ..., funded status and related actuarial assumptions of our domestic and foreign Pension Benefits and Other Benefits plans. Change in Projected Benefit Obligation (In millions) December 31: Pension Benefits 2011 2010 Other Benefits 2011 2010 Projected benefit obligation at beginning of year Service...

  • Page 116
    ... locations where the Pension Benefits plans reside. Foreign pension assets do not make up a significant portion of the total assets for all of our Pension Benefits plans. The effect of a 1% increase or (decrease) in the assumed health care trend rate for each future year for the aggregate of service...

  • Page 117
    ... associated returns. The investment policy asset allocation ranges for the Plan, as set by the Investment Committee, for the year ended December 31, 2011 were as follows: Asset Category U.S. equities International equities Fixed-income securities Cash and cash equivalents Other (including private...

  • Page 118
    ... Note 1: Summary of Significant Accounting Policies) at December 31, 2011 and December 31, 2010 were as follows: Fair Value Measurements at December 31, 2011 (In millions) Total Level 1 Level 2 Level 3 U.S. equities All capitalization(1) International equities Developed markets(1) Emerging markets...

  • Page 119
    ...) Fair Value Measurements at December 31, 2010 (In millions) Total Level 1 Level 2 Level 3 U.S. equities All capitalization(1) International equities Developed markets(1) Emerging markets(1) International equity hedge funds(2) Fixed-income securities U.S. Government bonds or treasuries U.S. Agency...

  • Page 120
    ... return on plan assets(1) Purchases, issuances, settlements Transfers in and/or out of Level 3 Ending Balance at Dec 31, 2011 (In millions) Fixed-income securities Fixed-income hedge funds Other funds Absolute return funds Relative value Event driven Equity hedge Macro Private equity funds Private...

  • Page 121
    ... primarily of publicly-traded equity securities and publicly-traded fixed-income securities. Other Benefits Asset Information Asset category Percent of Plan Assets at Dec 31: 2011 2010 Fixed-income securities U.S. equities International equities Cash and cash equivalents Total Note 15: Income Taxes...

  • Page 122
    ... taxes in the U.S. and numerous foreign jurisdictions. The Internal Revenue Service (IRS) has completed their examination of our tax returns through 2008. During 2011, we received final approval from the IRS and the U.S. Congressional Joint Committee on Taxation of a Minimum Tax Refund claim for...

  • Page 123
    ... years which were not included as part of the 2011 Tax Settlement. We generally account for our state income tax expense as a deferred contract cost, as we can generally recover this expense through the pricing of our products and services to the U.S. Government. We include this deferred amount in...

  • Page 124
    ..., engineering services and solutions, product and operational support services for the mission support, homeland security, space, civil aviation, counter proliferation and counterterrorism markets. Segment total net sales and operating income generally include intersegment sales and profit recorded...

  • Page 125
    ... Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Total $ 68 13 61 461 510 763 $ 1,876 $ 88 14 94 502 586 739 $ 2,023 $ 126 19 57 481 611 710 $ 2,004 We must calculate our pension and post retirement benefit...

  • Page 126
    ...75 45 53 85 84 16 62 420 2011 $ $ 68 43 55 77 82 17 60 402 2010 Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Centric Systems Space and Airborne Systems Technical Services Corporate Total United States Asia/ Pacific $ 1,909 2,442 5,214 4,242 4,700 1,399...

  • Page 127
    ...millions, except per share amounts, stock prices and workdays) 2011 First(3) Second Third(5) Fourth Total net sales Gross margin Income from continuing operations Net income attributable to Raytheon Company EPS from continuing operations attributable to Raytheon Company common stockholders(1) Basic...

  • Page 128
    ...of filing this Annual Report on Form 10-K with the SEC. In the first quarter of 2012, we completed the final wind down of our residual turbo-prop commuter aircraft portfolio (Raytheon Airline Aviation Services), including disposal or abandonment of the remaining individual assets, and all operations...

  • Page 129
    ... affect our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information regarding members of our Board of Directors is contained in our definitive proxy statement for the 2012 Annual Meeting of...

  • Page 130
    ... OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information regarding security ownership of certain beneficial owners and for directors and executive officers is contained in our definitive proxy statement for the 2012 Annual Meeting of Stockholders under the caption "Stock Ownership" and is...

  • Page 131
    ... By-Laws, as amended as 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...

  • Page 132
    ... 10% of the total assets of the Company on a consolidated basis. The Company agrees to furnish a copy of such instruments to the SEC upon request. 10.1 10.2 Raytheon Company 1991 Stock Plan, as amended on September 21, 2005, filed as an exhibit to the Company's Quarterly Report on Form 10-Q for...

  • Page 133
    ...by reference. Form of Change in Control Severance Agreement between the Company and certain executive officers (providing for benefits in the event of a qualified termination upon a change in control of three times base salary and bonus), filed as an exhibit to the Company's Annual Report on Form 10...

  • Page 134
    10.25 Form of Change in Control Severance Agreement between the Company and certain executive officers (providing for benefits in the event of a qualified termination upon a change in control of two times base salary and bonus), filed as an exhibit to the Company's Annual Report on Form 10-K for ...

  • Page 135
    .... Summary of 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...

  • Page 136
    ... 906 of the Sarbanes-Oxley Act of 2002.** The following materials from Raytheon Company's Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii...

  • Page 137
    ... behalf by the undersigned, thereunto duly authorized. RAYTHEON COMPANY /s/ Michael J. Wood Michael J. Wood Vice President, Controller and Chief Accounting Officer Dated: February 22, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 138
    ... M AT I O N GLOBAL HEADQUARTERS Raytheon Company 870 Winter Street Waltham, MA 02451 781.522.3000 WEBSITE Raytheon's website offers financial information and facts about the company, its products and services. We periodically add additional news and information. Raytheon's website address is http...

  • Page 139
    ... and Supply Chain Raytheon Company RICHARD R. YUSE President Technical Services President Space and Airborne Systems * Effective April 2012 Vice President and Chief Information Officer Raytheon Company MARK E. RUSSELL Vice President Engineering, Technology and Mission Assurance Raytheon Company

  • Page 140
    ... Follow us on: Raytheon Company 870 Winter Street Waltham, Massachusetts 02451-1449 USA www.raytheon.com Customer Success Is Our Mission and MathMovesU are registered trademarks of Raytheon Company. Patriot is a trademark of Raytheon Company. Copyright © 2012 Raytheon Company. All rights reserved...