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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2001.
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from....... to
........
Commission File Number 1-13699
RAYTHEON COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-1778500
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
141 SPRING STREET, LEXINGTON, MASSACHUSETTS 02421
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (781) 862-6600
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Common Stock, $.01 par value Which Registered
Series A Junior Participating New York Stock Exchange
Preferred Stock Purchase Rights Chicago Stock Exchange
Pacific Exchange
Equity Security Units New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of February 24, 2002, was approximately $14.9 billion.
Number of shares of Common Stock outstanding as of February 24, 2002:
396,744,000.
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Documents incorporated by reference and made a part of this Form 10-K:
Portions of Raytheon's Annual Report to Stockholders Part I, Part II, Part IV
for the fiscal year ended December 31, 2001
Portions of the Proxy Statement for Raytheon's Part III
2002 Annual Meeting which will be filed with the Commission within
120 days after the close of Raytheon's fiscal year
PART I
Item 1. Business
GENERAL
Raytheon Company ("Raytheon" or the "Company"), with worldwide 2001 sales of
$16.9 billion, is a leader in defense electronics, including missiles; radar;
sensors and electro-optics; intelligence, surveillance and reconnaissance;
command, control, communication and information systems; naval systems; air
traffic control systems; aircraft integration systems; and technical services.
Raytheon's commercial electronics businesses leverage defense technologies in
commercial markets. Raytheon Aircraft is one of the leading providers of
business and special mission aircraft and delivers a broad line of jet,
turboprop, and piston-powered airplanes to corporate and government customers
world-wide.
BUSINESS SEGMENTS
Electronic Systems. The Electronic Systems segment ("ES") focuses on
anti-ballistic missile systems; air defense; air-to-air, surface-to-air, and
air-to-surface missiles; naval and maritime systems; ship self-defense systems;
torpedoes; strike, interdiction and cruise missiles; and advanced munitions. ES
also specializes in radar, electronic warfare, infrared, laser, and GPS
technologies with programs focusing on land, naval, airborne and spaceborne
systems used for surveillance, reconnaissance, targeting, navigation, commercial
and scientific applications.
ES produces the Patriot ground-based air defense missile system, which is
capable of tracking and intercepting enemy aircraft, cruise missiles, and
tactical ballistic missiles. In addition to the U.S., eight nations have
selected Patriot as an integral part of their air defense systems. Since the end
of the Gulf War in 1991, Raytheon has received approximately $3.5 billion in
international orders for Patriot equipment and services. In addition, ES leads
Raytheon's efforts as the prime contractor for the Hawk ground-launched missile,
which is in service with the U.S. and 18 allied nations.
ES develops ground-based phased-array radars, including the X-Band Radar (XBR)
and Upgrade Early Warning Radar (UEWR) for Ground-based Midcourse Defense (GMD),
as well as the Ground-Based Radar (GBR) for the Theater High Altitude Area
Defense (THAAD) system, part of the U.S. Army's Theater Missile Defense Program.
It also is developing next-generation theater missile interceptors for the Navy
Theater Wide (NTW) systems and the Exoatmospheric Kill Vehicle (EKV) for the GMD
program.
ES manufactures the primary air-to-air missile for the U.S. Air Force and Navy
fighter aircraft - the Advanced Medium Range Air-to-Air Missile (AMRAAM), and is
developing the AIM-9X (short-range air-to-air missile). Other missiles produced
by ES include Tomahawk, TOW, Stinger, Maverick, Standard, the High Speed
Anti-Radiation Missile (HARM), Paveway laser-guided bombs, Extended Range Guided
Munitions (ERGM), XM-982, Joint Stand Off Weapon (JSOW), and Javelin (as part of
a joint venture).
ES also leads Raytheon's efforts as the prime contractor for the NATO
Sea-Sparrow Surface to Air Missile System (NSSMS), as well as producing the
air-and surface-launched versions of the Sparrow missile for both the U.S. and
foreign Navies. ES produces Phalanx and the Rolling Airframe Missile (RAM),
which the U.S. and foreign Navies use as part of the ship self-defense system.
ES develops sonars, combat control systems, mine hunting equipment and torpedoes
for submarines and ships in U.S. and allied fleets, in addition to designing
unmanned underwater
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vehicles. ES produces a variety of shipboard radar systems. ES also leads
Raytheon's development efforts on the U.S. Navy's next generation of surface
combatant ships, the DD-X.
ES airborne radars are deployed on four operational tactical fighter aircraft
operated by U.S. forces (the F-14, F-15, F/A-18, and the AV-8B) and
international customers, as well as radars for the AC-130U gunship and the B-2
Stealth Bomber. ES is also part of a joint venture providing the next generation
airborne radar for the F-22 aircraft. The segment provides the Forward Looking
Infrared (FLIR) and designation system for the F-117 Stealth Fighter, the
infrared subsystem for the F/A-18 targeting pod, and the Advanced Targeting FLIR
for the F/A-18.
ES supplies integrated sensor suites for applications such as the Global Hawk
Unmanned Aerial Vehicle Reconnaissance System, which includes a synthetic
aperture radar and electro-optical/infrared sensors. ES surveillance and
reconnaissance systems are used on a variety of aircraft, such as the British
Tornado, the U.S. Air Force U-2 and the U.S. Navy P-3 Orion. Through a joint
venture, ES is developing next generation airborne ground surveillance radar,
which will be scalable for multiple platforms. ES also provides space sensors
for defense and scientific applications.
ES night vision and fire control systems equip combat vehicles like the M1
Abrams tank, Bradley Fighting Vehicle and a host of light armored vehicles,
ships and submarines, and aircraft. The segment also puts state of the art
technology in the hands of the infantry.
The segment's surface radar products include radars for intelligence/data
collection, spacetrack, deep space surveillance, missile warning and imaging and
command and control radars. Tactical radars include battlefield radars for
Forward Area Air Defense Systems and hostile weapons locating radars.
Command, Control, Communication and Information Systems. The Command, Control,
Communication and Information Systems segment ("C3I") is classified into five
principal businesses. They are: Intelligence, Surveillance, Reconnaissance
("ISR"), Air Traffic Management ("ATM"), Command and Control / Battle Management
("C2BM"), Communications and Information Technology / Information Systems.
C3I products include command, control and communication systems; air traffic
control automation and radar systems; tactical radios; satellite communication
and ground control terminals; wide area surveillance systems; ground-based
information processing systems; image processing; large scale information
retrieval, processing and distribution systems; global broadcast systems and
secure information technology solutions.
In the ISR business, C3I is a leading provider of remote sensing and processing
for national intelligence systems as well as control and mission management
systems for Unmanned Aerial Vehicles (UAVs). C3I designed and developed systems
that provide real-time battlefield information, signal intelligence and
multi-source intelligence integration to the US Air Force and several Government
agencies. C3I also participates in the commercial ISR marketplace as the prime
contractor for the Brazilian System for the Vigilance of the Amazon (SIVAM)
program, which will provide an integrated information network that will be used
to enable the Brazilian Government to protect the environment, improve air
safety and weather forecasting, manage land occupation and usage, and enable
effective law enforcement and border control.
C3I designs and installs air traffic and weather management systems around the
world, including large-scale software based control automation systems and
stand-alone radar. C3I is the largest air traffic automation and radar systems
supplier to the Federal Aviation Administration (FAA). Internationally, Raytheon
has installed numerous air traffic control systems and is currently providing
ATM systems and radar for: Australia, Canada, Cyprus, Germany, Hong Kong, India,
Indonesia, Norway, the People's Republic of China, Switzerland and Taiwan.
In communications, C3I is a leading supplier of battlefield tactical radios and
satellite ground terminals. The C3I Satcom programs group supplies Satcom
terminals to the Navy, the Army and Air Force. C3I's C2BM programs group
designs, develops and delivers tactical command and control systems that provide
the means to effectively execute conventional and special operations missions.
C2BM addresses market segments of fire control, joint command and control,
sensor networking, modeling and simulation, command centers, sensor fusion and
correlation, and command vehicles for a variety of military and non-military
users.
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C3I also performs contracts involving information technology, for several U.S.
Government Departments and Agencies including Energy, Education, the Army and
Navy as well as NASA. C3I efforts in this regard involve providing for
information assurance, knowledge management, data storage and retrieval systems,
web-based information systems and high performance computing.
Raytheon Technical Services Company. Raytheon Technical Services Company
("RTSC") provides technical services, training programs, and logistics and base
operations support throughout the U.S. and in 22 other countries.
RTSC performs complete engineering and depot-level cradle-to-grave support for
Raytheon-manufactured equipment and for various commercial and military
customers. Services provided include installation and test of upgrades to
deployed systems; engineering design, planning, and testing; repair and
refurbishment of U.S. Department of Defense ("DoD") equipment; software
engineering support; data management; preparation of technical manuals; training
for allied forces; system and facility installations; field testing and
evaluation; field engineering; and system operation and maintenance.
RTSC is a world leader in providing and supporting range instrumentation systems
and bases worldwide for the DoD. It also provides missile range calibration
services for the U.S. Air Force, trains U.S. Army personnel in battlefield
tactics and supports undersea testing and evaluation for the U.S. Navy. RTSC
provides operations and engineering support to the Atlantic Underwater Test and
Evaluation Center, range technical support, and facilities maintenance at
several DoD facilities, including the U.S. Army's missile testing range in the
Kwajalein Atoll. It also provides base operations support to DoD facilities on
Guam, Johnston Atoll and other locations.
RTSC supplies professional services to a broad range of customers in the areas
of space and earth sciences, scientific data management, transportation
management, remote sensing, and computer networking. RTSC also supports the U.S.
Government's demilitarization activities in countries of the former Soviet Union
and the development and operation of Space Shuttle and Space Station simulators
for NASA's Johnson Space Center. It also provides logistics and science support
for the National Science Foundation's Antarctica program.
Aircraft Integration Systems. The Aircraft Integration Systems segment ("AIS")
focuses on the integration of airborne surveillance and intelligence systems and
aircraft modifications. AIS develops and integrates complex electronic systems
for airborne Intelligence, Surveillance, and Reconnaissance missions. In
addition, AIS modernizes aging aircraft through structural refurbishment and
electronics upgrades. AIS also provides support to Special Operations forces. In
March 2002, the Company sold AIS.
Commercial Electronics. Raytheon's commercial electronics businesses produce,
among other things, thin film filters for optical communications products,
gallium arsenide MMIC components for direct broadcast satellite television
receivers, gallium arsenide power amplifiers for wireless communications
products, wireless broadband solutions, thermal imaging products for the public
safety, industrial and automotive markets, automobile radar systems, marine
electronics for the commercial and military marine market, and other electronic
components for a wide range of applications.
Aircraft. Raytheon Aircraft offers a broad product line of aircraft and aviation
services in the general aviation market. Raytheon Aircraft manufactures, markets
and supports piston-powered aircraft, turboprops and business jets for the
world's commercial, regional airlines and military aircraft markets.
Raytheon Aircraft's piston-powered aircraft line includes the single-engine
Beech Bonanza and the twin-engine Beech Baron aircraft for business and personal
flying. The segment's King Air turboprop series includes the Beech King Air
C90B, B200, and 350. The jet line includes the Premier I entry-level jet,
Beechjet 400A lightjet and the Hawker 800XP midsize business jet. Raytheon
Aircraft also produces a 19-passenger regional airliner. A new super midsize
business jet, the Hawker Horizon, is currently in development, with anticipated
airplane certification and delivery in 2003.
The segment supplies aircraft training systems, including the T-6A trainer
selected as the next-generation trainer for the U.S. Air Force and Navy under
the Joint Primary Aircraft Training System (JPATS). Raytheon Aircraft produces
special mission aircraft, including militarized versions of the King Airs and
the U-125 search-and-rescue
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variant of the Hawker 800.
During 2001, the Company divested a 74 percent interest in Raytheon Aerospace
which provides contractor logistics and training support for military and
government aircraft around the world. Raytheon Aircraft Services operates a
network of business aviation service operations at airports across the U.S., in
the U.K. and Mexico. Raytheon Aircraft Parts and Inventory Distribution (RAPID)
is Raytheon Aircraft's exclusive world-wide parts wholesale distributor.
Raytheon Aircraft Charter and Management offers aircraft charter and management
services to the U.S. market.
Raytheon Travel Air sells fractional shares in aircraft and provides aircraft
management and transportation services for the owners of the shares. The Travel
Air program includes the Hawker 800XP, Beechjet 400A and the King Air B200. The
company has announced its intention to combine the Raytheon Travel Air
fractional aircraft business with Flight Options in a transaction which is
expected to close during the first quarter of 2002.
Divestitures
Consistent with Raytheon's strategy of focusing on and streamlining core
businesses and paying down debt, the Company divested a number of business units
in 2001. Cash proceeds from divestitures and sales of investments totaled $266
million.
SALES TO THE UNITED STATES GOVERNMENT
Sales to the United States Government (the "Government"), principally to the
Department of Defense, were $12.0 billion in 2001 and $11.1 billion in 2000,
representing 71% of total sales in 2001 and 66% of total sales in 2000. Of these
sales, $0.6 billion in 2001 and $0.5 billion in 2000 represented purchases made
by the Government on behalf of foreign governments.
GOVERNMENT CONTRACTS
The Company and its various subsidiaries act as a prime contractor or major
subcontractor for many different Government programs, including those that
involve the development and production of new or improved weapons or other types
of electronic systems or major components of such systems. Over its lifetime, a
program may be implemented by the award of many different individual contracts
and subcontracts. The funding of Government programs is subject to congressional
appropriations. Although multi-year contracts may be authorized in connection
with major procurements, Congress generally appropriates funds on a fiscal year
basis even though a program may continue for many years. Consequently, programs
are often only partially funded initially, and additional funds are committed
only as Congress makes further appropriations. The Government is required to
adjust equitably a contract price for additions or reductions in scope or other
changes ordered by it.
Generally, Government contracts are subject to oversight audits by Government
representatives, and, in addition, they include provisions permitting
termination, in whole or in part, without prior notice at the Government's
convenience upon the payment of compensation only for work done and commitments
made at the time of termination. In the event of termination for convenience,
the contractor will receive some allowance for profit on the work performed. The
right to terminate for convenience has not had any material adverse effect upon
Raytheon's business in light of its total Government business.
The Company's Government business is performed under both cost reimbursement and
fixed price prime contracts and subcontracts. Cost reimbursement contracts
provide for the reimbursement of allowable costs plus the payment of a fee.
These contracts fall into three basic types: (i) cost plus fixed fee contracts
which provide for the payment of a fixed fee irrespective of the final cost of
performance; (ii) cost plus incentive fee contracts which provide for increases
or decreases in the fee, within specified limits, based upon actual results as
compared to contractual targets relating to such factors as cost, performance
and delivery schedule; and (iii) cost plus award fee contracts which provide for
the payment of an award fee determined at the discretion of the customer based
upon the performance of the contractor against pre-established criteria. Under
cost reimbursement type contracts, Raytheon is reimbursed periodically for
allowable costs and is paid a portion of the fee based on contract progress.
Some costs incident to performing contracts have been made partially or wholly
unallowable by statute or regulation. Examples are
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charitable contributions, certain merger and acquisition costs, lobbying costs
and certain litigation defense costs.
The Company's fixed-price contracts are either firm fixed-price contracts or
fixed-price incentive contracts. Under firm fixed-price contracts, Raytheon
agrees to perform a specific scope of work for a fixed price and as a result
benefits from cost savings and carries the burden of cost overruns. Under
fixed-price incentive contracts, Raytheon shares with the Government savings
accrued from contracts performed for less than target costs and costs incurred
in excess of targets up to a negotiated ceiling price (which is higher than the
target cost) and carries the entire burden of costs exceeding the negotiated
ceiling price. Accordingly under such incentive contracts, the Company's profit
may also be adjusted up or down depending upon whether specified performance
objectives are met. Under firm fixed-price and fixed-price incentive type
contracts, the Company usually receives either milestone payments equaling 90%
of the contract price or monthly progress payments from the Government generally
in amounts equaling 75% or 80% of costs incurred under Government contracts. The
remaining amount, including profits or incentive fees, is billed upon delivery
and final acceptance of end items under the contract.
The Company's Government business is subject to specific procurement regulations
and a variety of socio-economic and other requirements. Failure to comply with
such regulations and requirements could lead to suspension or debarment, for
cause, from Government contracting or subcontracting for a period of time. Among
the causes for debarment are violations of various statutes, including those
related to procurement integrity, export control, government security
regulations, employment practices, the protection of the environment, the
accuracy of records and the recording of costs.
Under many Government contracts, the Company is required to maintain facility
and personnel security clearances complying with DoD requirements.
Companies which are engaged in supplying defense-related equipment to the
Government are subject to certain business risks, some of which are peculiar to
that industry. Among these are: the cost of obtaining trained and skilled
employees; the uncertainty and instability of prices for raw materials and
supplies; the problems associated with advanced designs, which may result in
unforeseen technological difficulties and cost overruns; and the intense
competition and the constant necessity for improvement in facilities and
personnel training. Sales to the Government may be affected by changes in
procurement policies, budget considerations, changing concepts of national
defense, political developments abroad and other factors. See the "Risk Factors"
section beginning on page 8 of this Report, for a description of additional
business risks.
See "Sales to the United States Government" on page 5 of this Report for
information regarding the percentage of the Company's revenues generated from
sales to the Government.
BACKLOG
The Company's backlog of orders at December 31, 2001 and 2000 was $26.5 billion.
The 2001 amount includes backlog of approximately $17.8 billion from the
Government compared with $17.4 billion at the end of 2000.
Approximately $4.4 billion of the overall backlog figure represents the
unperformed portion of direct orders from foreign governments. Approximately
$2.3 billion of the overall backlog represents non-government foreign backlog.
Approximately $14.7 billion of the $26.5 billion 2001 year-end backlog is not
expected to be filled during the following twelve months. For additional
information related to backlog figures, see Management's Discussion and Analysis
of Financial Condition and Results of Operations - Segment Results on page 28 of
the Company's 2001 Annual Report to Stockholders.
RESEARCH AND DEVELOPMENT
During 2001, Raytheon expended $475 million on research and development efforts
compared with $526 million in 2000 and $508 million in 1999. These expenditures
principally have been for product development for the Government and for
aircraft products. In addition, Raytheon conducts funded research and
development activities under Government contracts which is included in net
sales. For additional information related to research and
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development efforts, see Note A to the Company's Financial Statements on page 38
of the Company's 2001 Annual Report to Stockholders.
RAW MATERIALS, SUPPLIERS AND SEASONALITY
Delivery of raw materials and supplies to Raytheon is generally satisfactory.
Raytheon is sometimes dependent, for a variety of reasons, upon sole-source
suppliers for procurement requirements. However, Raytheon has experienced no
significant difficulties in meeting production and delivery obligations because
of delays in delivery or reliance on such suppliers. In recent years, revenues
in the second half of the year have generally exceeded revenues in the first
half. The timing of Government awards, the availability of Government funding,
product deliveries and customer acceptance are among the factors affecting the
periods in which revenues are recorded. Management expects this trend to
continue in 2002.
COMPETITION
The Company's defense electronics businesses are direct participants in most
major areas of development in the defense, space, information gathering, data
reduction and automation fields. Technical superiority and reputation, price,
delivery schedules, financing, and reliability are among the principal
competitive factors considered by electronics customers. The on-going
consolidation of the U.S. and global defense, space and aerospace industries
continues to intensify competition. Consolidation among U.S. defense, space and
aerospace companies has resulted in a reduction in the number of principal prime
contractors. As a result of this consolidation, the Company frequently partners
on various programs with its major suppliers, some of whom are, from time to
time, competitors on other programs.
The Aircraft segment competes primarily with four other companies in the
business aviation industry. The principal factors for competition in the
industry are price, financing, operating costs, product reliability, cabin size
and comfort, product quality, travel range and speed, and product support. The
Company believes it possesses competitive advantages in the breadth of our
product line, the performance of our product line, and the strength of our
product support.
PATENTS AND LICENSES
Raytheon and its subsidiaries own a large intellectual property portfolio which
includes, by way of example, United States and foreign patents, unpatented
know-how, trademarks and copyrights, all of which contribute significantly to
the preservation of the Company's competitive position in the market. In certain
instances, Raytheon has augmented its technology base by licensing the
proprietary intellectual property of others. Although these patents and licenses
are, in the aggregate, important to the operation of the Company's business, no
existing patent, license, or similar intellectual property right is of such
importance that its loss or termination would, in the opinion of management,
have a material effect on the Company's business. Raytheon's patent position and
intellectual property portfolio is deemed adequate for the conduct of its
businesses.
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EMPLOYMENT
As of December 31, 2001, Raytheon had approximately 87,200 employees compared
with approximately 93,700 employees at the end of 2000. The decrease is mainly
due to divestitures during 2001.
Raytheon considers its union-management relationships to be positive, with few
exceptions. In 2001, Raytheon successfully reached agreement on 8 labor
contracts, with no work stoppages.
INTERNATIONAL SALES
Raytheon's sales to customers outside the United States (including foreign
military sales) were 21% of total sales in 2001 and 2000 and 23% of total sales
in 1999. These sales were principally in the fields of air defense systems, air
traffic control systems, sonar systems, aircraft products, electronic equipment,
computer software and systems, personnel training, equipment maintenance and
microwave communication. Foreign subsidiary working capital requirements
generally are financed in the countries concerned. Sales and income from
international operations are subject to changes in currency values, domestic and
foreign government policies (including requirements to expend a portion of
program funds in-country) and regulations, embargoes and international
hostilities. Exchange restrictions imposed by various countries could restrict
the transfer of funds between countries and between Raytheon and its
subsidiaries. Raytheon generally has been able to protect itself against most
undue risks through insurance, foreign exchange contracts, contract provisions,
government guarantees or progress payments.
Raytheon utilizes the services of sales representatives and distributors in
connection with foreign sales. Normally representatives are paid commissions and
distributors are granted resale discounts in return for services rendered.
The export from the U.S. of many of Raytheon's products may require the issuance
of a license by the Department of State under the Arms Export Control Act of
1976, as amended (formerly the Foreign Military Sales Act); or by the Department
of Commerce under the Export Administration Act as kept in force by the
International Emergency Economic Powers Act of 1977, as amended ("IEEPA"); or by
the Treasury Department under IEEPA or the Trading with the Enemy Act of 1917,
as amended. Such licenses may be denied for reasons of U.S. national security or
foreign policy. In the case of certain exports of defense equipment and
services, the Department of State must notify Congress at least 15 or 30 days
(depending on the identity of the country that will utilize the equipment and
services) prior to authorizing such exports. During that time, Congress may take
action to block a proposed export by joint resolution which is subject to
Presidential veto.
RISK FACTORS
The following are some of the factors the Company believes could cause its
actual results to differ materially from expected and historical results. Other
factors besides those listed here could also adversely affect the Company.
Because we have sold a number of our business units in recent years, our
business is less diversified, which could reduce our earnings and might make us
more susceptible to negative conditions in our remaining businesses.
Consistent with our strategy of focusing on and streamlining our core businesses
and paying down our debt, during 1999, 2000 and 2001, we divested several
non-core business units. In addition, in March 2002, we sold our Aircraft
Integration Systems business. As a result of these divestitures, we no longer
receive revenues from these operations and, without offsetting increases in
revenues in our other businesses, our overall revenues would decrease, which
would have a negative effect on our financial condition.
In addition, as a result of these divestitures, our business is now less
diversified and thus more dependent on our remaining businesses. As a result, we
are now more sensitive to conditions and trends in the remaining industries in
which we operate. Negative conditions and trends in these remaining industries
could cause our financial condition and results of operations to suffer more
heavily than would occur when our business lines were more diversified. Our
inability to overcome these negative conditions and trends could have a negative
impact on our financial condition.
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We heavily depend on our government contracts, which are only partially funded,
subject to immediate termination and heavily regulated and audited, and the
termination or failure to fund one or more of these contracts could have a
negative impact on our operations.
We act as prime contractor or major subcontractor for many different government
programs. Over its lifetime, a program may be implemented by the award of many
different individual contracts and subcontracts. The funding of government
programs is subject to congressional appropriations. Although multi-year
contracts may be authorized in connection with major procurements, Congress
generally appropriates funds on a fiscal year basis even though a program may
continue for several years. Consequently, programs are often only partially
funded initially, and additional funds are committed only as Congress makes
further appropriations. The termination of funding for a government program
would result in a loss of anticipated future revenues attributable to that
program. That could have a negative impact on our operations. In addition, the
termination of a program or failure to commit additional funds to a program
already started could increase our overall costs of doing business.
Generally, government contracts are subject to oversight audits by government
representatives and contain provisions permitting termination, in whole or in
part, without prior notice at the government's convenience upon the payment of
compensation only for work done and commitments made at the time of termination.
We can give no assurance that one or more of our government contracts will not
be terminated under these circumstances. Also, we can give no assurance that we
would be able to procure new government contracts to offset the revenues lost as
a result of any termination of our contracts. As our revenues are dependent on
our procurement, performance and payment under our contracts, the loss of one or
more critical contracts could have a negative impact on our financial condition.
Our government business is also subject to specific procurement regulations and
a variety of socio-economic and other requirements. These requirements, although
customary in government contracts, increase our performance and compliance
costs. These costs might increase in the future, reducing our margins, which
could have a negative effect on our financial condition. Failure to comply with
these regulations and requirements could lead to suspension or debarment, for
cause, from government contracting or subcontracting for a period of time. Among
the causes for debarment are violations of various statutes, including those
related to:
. procurement integrity
. export control
. government security regulations
. employment practices
. protection of the environment
. accuracy of records and the recording of costs
The termination of a government contract or relationship as a result of any of
these acts would have a negative impact on our operations and could have a
negative effect on our reputation and ability to procure other government
contracts in the future.
In addition, sales to the government may be affected by:
. changes in procurement policies
. budget considerations
. unexpected developments such as the terrorist attacks of September 11,
2001, which change concepts of national defense
. political developments abroad, such as those occurring in the wake of the
September 11 attacks
The influence of any of these factors, which are largely beyond our control,
could also negatively impact our financial condition. We also may experience
problems associated with advanced designs required by the government which may
result in unforeseen technological difficulties and cost overruns. Failure to
overcome these technological difficulties and the occurrence of cost overruns
would have a negative impact on our results.
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We depend on the U.S. Government for a significant portion of our sales, and the
loss of this relationship or a shift in Government funding could have severe
consequences on the financial condition of Raytheon.
Approximately 71% of our net sales in 2001 were to the U.S. Government.
Therefore, any significant disruption or deterioration of our relationship with
the U.S. Government would significantly reduce our revenues. Our U.S. Government
programs must compete with programs managed by other defense contractors for a
limited number of programs and for uncertain levels of funding. Our competitors
continuously engage in efforts to expand their business relationships with the
U.S. Government at our expense and are likely to continue these efforts in the
future. The U.S. Government may choose to use other defense contractors for its
limited number of defense programs. In addition, the funding of defense programs
also competes with non-defense spending of the U.S. Government. Budget decisions
made by the U.S. Government are outside of our control and have long-term
consequences for the size and structure of Raytheon. A shift in government
defense spending to other programs in which we are not involved or a reduction
in U.S. Government defense spending generally could have severe consequences for
our results of operations.
We derive a significant portion of our revenues from international sales and are
subject to the risks of doing business in foreign countries.
In 2001, sales to international customers accounted for approximately 21% of our
net sales. We expect that international sales will continue to account for a
significant portion of our revenues for the foreseeable future. As a result, we
are subject to risks of doing business internationally, including:
. changes in regulatory requirements
. domestic and foreign government policies, including requirements to expend
a portion of program funds locally and governmental industrial cooperation
requirements
. fluctuations in foreign currency exchange rates
. delays in placing orders
. the complexity and necessity of using foreign representatives and
consultants
. the uncertainty of adequate and available transportation
. the uncertainty of the ability of foreign customers to finance purchases
. uncertainties and restrictions concerning the availability of funding
credit or guarantees
. imposition of tariffs or embargoes, export controls and other trade
restrictions
. the difficulty of management and operation of an enterprise spread over
various countries
. compliance with a variety of foreign laws, as well as U.S. laws affecting
the activities of U.S. companies abroad
. economic and geopolitical developments and conditions, including
international hostilities, acts of terrorism and governmental reactions,
inflation, trade relationships and military and political alliances
While these factors or the impact of these factors are difficult to predict, any
one or more of these factors could adversely affect our operations in the
future.
We may not be successful in obtaining the necessary licenses to conduct
operations abroad, and Congress may prevent proposed sales to foreign
governments.
Licenses are required from government agencies under the Export Administration
Act, the Trading with the Enemy Act of 1917 and the Arms Export Control Act of
1976 for export of many of our products. We can give no assurance that we will
be successful in obtaining these necessary licenses in order to conduct business
abroad. In the case of certain sales of defense equipment and services to
foreign governments, the U.S. Government's Executive Branch must notify Congress
at least 15 to 30 days, depending on the location of the sale, prior to
authorizing these sales. During that time, Congress may take action to block the
proposed sale.
Competition within our markets may reduce our procurement of future contracts
and our sales.
The military and commercial industries in which we operate are highly
competitive. Our competitors range from highly resourceful small concerns, which
engineer and produce specialized items, to large, diversified firms. Several
10
established and emerging companies offer a variety of products for applications
similar to those of our products. Our competitors may have more extensive or
more specialized engineering, manufacturing and marketing capabilities than we
do in some areas. There can be no assurance that we can continue to compete
effectively with these firms. In addition, some of our largest customers could
develop the capability to manufacture products similar to products that we
manufacture. This would result in these customers supplying their own products
and competing directly with us for sales of these products, all of which could
significantly reduce our revenues and seriously harm our business.
Furthermore, we are facing increased international competition and cross-border
consolidation of competition. There can be no assurance that we will be able to
compete successfully against our current or future competitors or that the
competitive pressures we face will not result in reduced revenues and market
share or seriously harm our business.
Our future success will depend on our ability to develop new technologies that
achieve market acceptance.
Both our commercial and defense markets are characterized by rapidly changing
technologies and evolving industry standards. Accordingly, our future
performance depends on a number of factors, including our ability to:
. identify emerging technological trends in our target markets
. develop and maintain competitive products.
. enhance our products by adding innovative features that differentiate our
products from those of our competitors
. manufacture and bring products to market quickly at cost-effective prices
. effectively structure our businesses, through the use of joint ventures,
teaming agreements, and other forms of alliances, to the competitive
environment
Specifically, at Raytheon Aircraft Company, our future success is dependent on
our ability to meet scheduled timetables for the development, certification and
delivery of new product offerings.
We believe that, in order to remain competitive in the future, we will need to
continue to develop new products, which will require the investment of
significant financial resources. The need to make these expenditures could
divert our attention and resources from other projects, and we cannot be sure
that these expenditures will ultimately lead to the timely development of new
technology. Due to the design complexity of our products, we may in the future
experience delays in completing development and introduction of new products.
Any delays could result in increased costs of development or deflect resources
from other projects. In addition, there can be no assurance that the market for
our products will develop or continue to expand as we currently anticipate. The
failure of our technology to gain market acceptance could significantly reduce
our revenues and harm our business. Furthermore, we cannot be sure that our
competitors will not develop competing technologies which gain market acceptance
in advance of our products. The possibility that our competitors might develop
new technology or products might cause our existing technology and products to
become obsolete. If we fail in our new product development efforts or our
products fail to achieve market acceptance more rapidly than our competitors,
our revenues will decline and our business, financial condition and results of
operations will be negatively affected.
Our financial performance is dependent on the timely and successful conversion
of our defense products into commercial markets.
In order to leverage technology that we develop for defense applications, we
frequently strive to adapt existing defense technology for commercial markets.
We may not be successful, however, in converting our defense systems and devices
into commercially viable products, and the market for such products may be
limited. Any of these results could have a negative impact on our future
revenues.
We enter into fixed-price contracts which could subject us to losses in the
event that we have cost overruns.
Generally we enter into contracts on a firm, fixed-price basis. This allows us
to benefit from cost savings, but we carry the burden of cost overruns. If our
initial estimates are incorrect, we can lose money on these contracts. In
addition, some of our contracts have provisions relating to cost controls and
audit rights, and if we fail to meet the terms specified in those contracts then
we may not realize their full benefits. Our financial condition is dependent on
our ability to maximize our earnings from our contracts. Lower earnings caused
by cost overruns and cost controls
11
would have a negative impact on our financial results.
We may incur additional charges in connection with the sale of Raytheon
Engineers & Constructors to Washington Group International, Inc. ("WGI").
We have significant letters of credit, surety bonds, guarantees and other
support agreements in place related to a number of leases and other agreements
of our Raytheon Engineers & Constructors business unit, which we sold to WGI in
July 2000. Many of these relate to ongoing engineering and construction
projects, including two large power plants being built in Massachusetts that WGI
has abandoned. We have recorded losses of $814 million on these two projects in
2001. Also during 2001, we recorded losses of $156 million related to other
construction projects. The cost to complete all of these projects may ultimately
be higher than our estimates. As a result of the sale of our engineering and
construction business to WGI, we have become more heavily dependent upon third
parties, including WGI, to perform construction management and other tasks which
require industry expertise that we no longer possess. Also in connection with
the sale of our engineering and construction business to WGI, we retained
certain liabilities and risks. Some of these liabilities and risks were affected
by the bankruptcy filing of WGI and a settlement (the "WGI Settlement") we
entered into with WGI.
In the course of the bankruptcy proceeding, WGI rejected some ongoing
construction projects. To the extent the Company has outstanding support
agreements, the Company has honored those agreements and is working on those
projects. There are risks that the costs incurred on these projects will
increase beyond the Company's estimates because of factors such as labor
productivity and availability of labor, the nature and complexity of the work to
be performed, the impact of change orders, the recoverability of claims included
in the estimate to complete and the outcome of defending claims asserted against
the Company.
The WGI Settlement provides that WGI is responsible for certain payments and is
required to assume certain obligations in connection with projects that WGI
assumed in its bankruptcy proceeding. If WGI is unwilling or unable to perform
these responsibilities, its obligations could become obligations of the Company
because of the Company's guarantees, surety bonds and letters of credit.
While these potential obligations, liabilities and risks or the impact of them
are difficult to predict, any one or more of these factors could have a material
adverse impact on our financial condition.
The outcome of litigation in which we have been named as a defendant is
unpredictable and an adverse decision in any such matter could have a material
adverse affect on our financial position and results of operations.
We are defendants in a number of litigation matters. These claims may divert
financial and management resources that would otherwise be used to benefit our
operations. Although we believe that we have meritorious defenses to the claims
made in each and all of the litigation matters to which we have been named a
party, and intend to contest each lawsuit vigorously, no assurances can be given
that the results of these matters will be favorable to us. An adverse resolution
of any of these lawsuits could have a material adverse affect on our financial
position and results of operations.
We depend on the recruitment and retention of qualified personnel, and our
failure to attract and retain such personnel could seriously harm our business.
Due to the specialized nature of our businesses, our future performance is
highly dependent upon the continued services of our key engineering personnel
and executive officers. Our prospects depend upon our ability to attract and
retain qualified engineering, manufacturing, marketing, sales and management
personnel for our operations. Competition for personnel is intense, and we may
not be successful in attracting or retaining qualified personnel. Our failure to
compete for these personnel could seriously harm our business, results of
operations and financial condition.
12
Some of our workforce is represented by labor unions.
Approximately 13,200 of our employees are unionized, which represented
approximately 15% of our employees at December 31, 2001. As a result, we may
experience prolonged work stoppages, which could adversely affect our business,
and we are vulnerable to the demands imposed by our collective bargaining
relationships. We cannot predict how stable these relationships, currently with
10 different U.S. labor organizations and 4 different non-U.S. labor
organizations, will be or whether we will be able to meet the requirements of
these unions without impacting the financial condition of Raytheon. In addition,
the presence of unions may limit our flexibility in dealing with our workforce.
Work stoppages and instability in our union relationships could negatively
impact our ability to manufacture our products on a timely basis, resulting in
strain on our relationships with our customers, as well as a loss of revenues.
That would adversely affect our results of operations.
We may be unable to adequately protect our intellectual property rights, which
could affect our ability to compete.
Protecting our intellectual property rights is critical to our ability to
compete and succeed as a company. We own a large number of United States and
foreign patents and patent applications, as well as trademark, copyright and
semiconductor chip mask work registrations which are necessary and contribute
significantly to the preservation of our competitive position in the market.
There can be no assurance that any of these patents and other intellectual
property will not be challenged, invalidated or circumvented by third parties.
In some instances, we have augmented our technology base by licensing the
proprietary intellectual property of others. In the future, we may not be able
to obtain necessary licenses on commercially reasonable terms. We enter into
confidentiality and invention assignment agreements with our employees, and
enter into non-disclosure agreements with our suppliers and appropriate
customers so as to limit access to and disclosure of our proprietary
information. These measures may not suffice to deter misappropriation or
independent third party development of similar technologies. Moreover, the
protection provided to our intellectual property by the laws and courts of
foreign nations may not be as advantageous to us as the remedies available under
United States law.
Our operations expose us to the risk of material environmental liabilities.
Because we use and generate large quantities of hazardous substances and wastes
in our manufacturing operations, we are subject to potentially material
liabilities related to personal injuries or property damages that may be caused
by hazardous substance releases and exposures. For example, we are investigating
and remediating contamination related to our current or past practices at
numerous properties and, in some cases, have been named as a defendant in
related personal injury or "toxic tort" claims.
We are also subject to increasingly stringent laws and regulations that impose
strict requirements for the proper management, treatment, storage and disposal
of hazardous substances and wastes, restrict air and water emissions from our
manufacturing operations, and require maintenance of a safe workplace. These
laws and regulations can impose substantial fines and criminal sanctions for
violations, and require the installation of costly pollution control equipment
or operational changes to limit pollution emissions and/or decrease the
likelihood of accidental hazardous substance releases. We incur, and expect to
continue to incur, substantial capital and operating costs to comply with these
laws and regulations. In addition, new laws and regulations, stricter
enforcement of existing laws and regulations, the discovery of previously
unknown contamination or the imposition of new clean-up requirements could
require us to incur costs in the future that would have a negative effect on our
financial condition or results of operations.
Provisions in our charter documents and rights agreement could make it more
difficult to acquire Raytheon and may reduce the market price of our stock.
Our certificate of incorporation and by-laws contain certain provisions, such as
a classified board of directors, a provision prohibiting stockholder action by
written consent, a provision prohibiting stockholders from calling special
meetings and a provision authorizing our Board of Directors to consider factors
other than stockholders' short-term interests in evaluating an offer involving a
change in control. Also, we have a shareholder rights plan, which limits the
ability of any person to acquire more than 15% of our common stock. These
provisions could have the effect of delaying or preventing a change in control
of Raytheon or the removal of Raytheon management, of
13
deterring potential acquirors from making an offer to our stockholders and of
limiting any opportunity to realize premiums over prevailing market prices for
Raytheon common stock. Provisions of the shareholder rights agreement, which is
incorporated as an exhibit to this filing, could also have the effect of
deterring changes of control of Raytheon.
We depend on component availability, subcontractor performance and our key
suppliers to manufacture and deliver our products and services.
Our manufacturing operations are highly dependent upon the delivery of materials
by outside suppliers in a timely manner. In addition, we depend in part upon
subcontractors to assemble major components and subsystems used in our products
in a timely and satisfactory manner. While we enter into long-term or volume
purchase agreements with a few of our suppliers, we cannot be sure that
materials, components, and subsystems will be available in the quantities we
require, if at all. We are dependent for some purposes on sole-source suppliers.
The recent economic downturn, especially in light of the terrorist attacks on
September 11, 2001, may materially adversely affect certain of these suppliers.
If any of them fails to meet our needs, we may not have readily available
alternatives. Our inability to fill our supply needs would jeopardize our
ability to satisfactorily and timely complete our obligations under government
and other contracts. This might result in reduced sales, termination of one or
more of these contracts and damage to our reputation and relationships with our
customers. All of these events could have a negative effect on our financial
condition.
The unpredictability of our results may harm the trading price of our
securities, or contribute to volatility.
Our operating results may vary significantly over time for a variety of reasons,
many of which are outside of our control, and any of which may harm our
business. The value of our securities may fluctuate as a result of
considerations that are difficult to forecast, such as:
. volume and timing of product orders received and delivered
. levels of product demand
. consumer and government spending patterns
. the timing of contract receipt and funding
. our ability and the ability of our key suppliers to respond to changes in
customer orders
. timing of our new product introductions and the new product introductions of
our competitors
. changes in the mix of our products
. cost and availability of components and subsystems
. price erosion
. adoption of new technologies and industry standards
. competitive factors, including pricing, availability and demand for
competing products
. fluctuations in foreign currency exchange rates
. conditions in the capital markets and the availability of project financing
. the impact on recourse obligations at Raytheon Aircraft due to changes in
the collateral value of financed aircraft
. regulatory developments
. general economic conditions, particularly the cyclical nature of the general
aviation market in which we participate
The long-range impact of terrorist attacks, such as those that occurred on
September 11, 2001, upon the markets in which we operate, our business
operations, and our expectations is uncertain.
There can be no assurance that the current armed hostilities will not increase
or that these terrorist attacks, or United States responses, will not lead to
further acts of terrorism and civil disturbances in the United States or
elsewhere, which may further contribute to the economic instability in the
United States. These attacks or armed conflicts may directly impact our physical
facilities or those of our suppliers or customers and could have an impact on
our domestic and international sales, our supply chain, our production
capability, our insurance premiums or the ability to purchase insurance and our
ability to deliver our products to our customers. Political and economic
instability in some regions of the world may also result and could negatively
impact our business. Although we believe we are
14
positioned well for defense priorities, that could well be offset by a decrease
in civilian use of air travel, adversely affecting civil aircraft sales. In
addition, the consequences of the terrorist attacks and armed conflicts are
unpredictable, and their long-term effect upon the Company is uncertain.
FORWARD-LOOKING STATEMENTS - SAFE HARBOR PROVISIONS
This filing and the information we are incorporating by reference, including any
statements relating to the Company's future plans, objectives, and projected
future financial performance, contain or are based on, forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Specifically, statements that are not historical facts, including
statements accompanied by words such as "believe," "expect," "estimate,"
"intend," or "plan," variations of these words, and similar expressions, are
intended to identify forward-looking statements and convey the uncertainty of
future events or outcomes. The Company cautions readers that any such
forward-looking statements are based on assumptions that the Company believes
are reasonable, but are subject to a wide range of risks, and actual results may
differ materially. Given these uncertainties, readers of this filing should not
rely on forward-looking statements. Forward-looking statements also represent
the Company's estimates and assumptions only as of the date that they were made.
The Company expressly disclaims any current intention to provide updates to
forward-looking statements, and the estimates and assumptions associated with
them, after the date of this filing. Important factors that could cause actual
results to differ include, but are not limited to those discussed in the
immediately preceding section of this Item, under "Risk Factors."
Item 2. Properties
The Company and its subsidiaries operate in a number of plants, laboratories,
warehouses and office facilities in the United States and abroad.
At December 31, 2001, the Company utilized approximately 41 million square feet
of floor space for manufacturing, engineering, research, administration, sales
and warehousing, approximately 95% of which was located in the United States. Of
this total, approximately 38% was owned, approximately 57% was leased, and
approximately 5% was made available under facilities contracts for use in the
performance of U. S. Government contracts. At December 31, 2001 the Company had
approximately 1.1 million square feet of additional floor space that was not in
use, including approximately 418,000 square feet in Company-owned facilities.
There are no major encumbrances on any of the Company's facilities other than
financing arrangements which in the aggregate are not material. In the opinion
of management, the Company's properties have been well maintained, are in sound
operating condition and are adequate for the Company to operate at present
levels.
At December 31, 2001, our business segments had major operations at the
following locations:
. Electronic Systems -- E. Camden, AZ; Tucson, AZ; El Segundo, CA; Goleta, CA;
Long Beach, CA; Louisville, KY; Andover, MA; Bedford, MA; Sudbury, MA;
Tewksbury, MA; Portsmouth, RI; Dallas, TX; Plano, TX; and Sherman, TX;
. Command, Control, Communication and Information Systems -- Fullerton, CA;
Aurora, CO; Largo, FL; St. Petersburg, FL; Ft. Wayne, IN; Landover, MD;
Townson, MD; Marlboro, MA; State College, PA; Garland, TX; and Falls Church,
VA;
. Aircraft Integration Systems -- Lexington, KY; Greenville, TX; and Waco, TX;
. Raytheon Technical Services Company -- Chula Vista, CA; Long Beach, CA;
Indianapolis, IN; Burlington, MA; Norfolk and Reston, VA;
. Commercial Electronics -- Andover, MA; Kiel, Germany; and Midland, Ontario;
. Raytheon Aircraft Company -- Selma, AL; Little Rock, AR; Salina, KS;
and Wichita, KS;
15
. Administration and Services -- Lexington, MA; and
. Raytheon United Kingdom -- Harlow, England; and Glenrothes, Scotland;
A summary of the utilized floor space at December 31, 2001, by business
segment, follows:
(in square feet with 000's omitted)
Leased Owned Gov't Owned Total
------ ----- ----------- -----
Electronic Systems 9,484 7,079 1,296 17,859
Command, Control, Communication
and Information Systems 3,684 2,799 0 6,483
Aircraft Integration Systems 4,196 216 961 5,373
Raytheon Technical Services Company 3,076 98 0 3,174
Commercial Electronics 33 924 0 957
Raytheon Aircraft Company 2,643 3,918 0 6,561
Administration and Services (includes
domestic and international sales offices) 255 251 0 506
Raytheon International, Inc. 69 0 0 69
Raytheon United Kingdom 34 409 0 443
Discontinued Operations 0 0 0 0
- --------------------------------------------------------------------------------
TOTAL 23,474 15,694 2,257 41,425
Additional information regarding the effect of compliance with environmental
protection requirements and the resolution of environmental claims against the
Company and its operations is contained in the "Risk Factors" section beginning
on page 8 of this Report, in "Item 3. Legal Proceedings" immediately below, in
Management's Discussion and Analysis of Financial Condition and Results of
Operation - Commitments and Contingencies on page 31 of the Company's 2001
Annual Report to Stockholders and in Note M to the Company's Financial
Statements on page 48 of the Company's 2001 Annual Report to Stockholders.
Item 3. Legal Proceedings
The Company is primarily engaged in providing products and services under
contracts with the U.S. Government and, to a lesser degree, under direct foreign
sales contracts, some of which are funded by the U.S. Government. These
contracts are subject to extensive legal and regulatory requirements and, from
time to time, agencies of the U.S. Government investigate whether the Company's
operations are being conducted in accordance with these requirements. U.S.
Government investigations of the Company, whether relating to these contracts or
conducted for other reasons, could result in administrative, civil or criminal
liabilities, including repayments, fines or penalties being imposed upon the
Company, the suspension of government export licenses, or the suspension or
debarment from future U.S. Government contracting. U.S. Government
investigations often take years to complete and many result in no adverse action
against the Company.
As previously reported, during late 1999, the Company and two of its officers
were named as defendants in several purported class action lawsuits. These
lawsuits were consolidated into a single complaint in June 2000, when four
additional former or present officers were named as defendants in a Consolidated
and Amended Class Action Complaint (the "Consolidated Complaint") with the
caption, In Re Raytheon Securities Litigation (Civil Action No. 12142-PBS),
------------------------------------
filed in the U.S. District Court in Massachusetts. The Consolidated Complaint
principally alleges that the defendants violated federal securities laws by
purportedly making misleading statements and by failing to disclose material
information concerning the Company's financial performance during the purported
class period of October 7, 1998 through October 12, 1999. On September 8, 2000,
the Company and the individual defendants filed a motion to dismiss the
Consolidated Complaint. The plaintiffs opposed the motions. The court heard
arguments on February 9, 2001 and took the motions under advisement. In August
2001, the court issued an order dismissing
16
most of the claims asserted against the Company and the individual defendants.
Discovery is proceeding on the two circumstances that remain the subject of
claims.
As previously reported, the Company also was named as a nominal defendant and
all of its directors at the time (except one) were named as defendants in
purported derivative lawsuits filed on October 25, 1999 in the Court of Chancery
of the State of Delaware in and for New Castle County by Ralph Mirarchi and
others (No. 17495- NC), and on November 24, 1999 in Middlesex County,
Massachusetts, Superior Court by John Chevedden (No. 99-5782). On February 28,
2000, Mr. Chevedden filed another derivative action in the Delaware Chancery
Court entitled John Chevedden v. Daniel P. Burnham, et al., (No. 17838- NC) and
------------------------------------------
on March 22, 2000, Mr. Chevedden's Massachusetts derivative action was
dismissed. The Mirarchi and Chevedden derivative complaints contain allegations
-------- ---------
similar to those included in the Consolidated Complaint in the In Re Raytheon
-----------
Securities Litigation, and further allege that the defendants purportedly
- ---------------------
breached fiduciary duties to the Company and allegedly failed to exercise due
care and diligence in the management and administration of the affairs of the
Company. On December 11, 2001, the Company and the individual defendants filed a
motion to dismiss the Mirarchi complaint (the only one of these actions for
which service of process of the complaint was by then completed.)
As previously reported, in March 2001, Washington Group International, Inc.
(f/k/a Morrison Knudsen Corporation, and referred to below as "WGI") sued the
Company in the District Court of the Fourth Judicial District of the State of
Idaho in an action entitled, Washington Group International v. Raytheon Company,
--------------------------------------------------
et. al., (Case No. CV OC 0101422D) alleging breach of contract and fraud in
- ------
connection with the sale of the Raytheon Engineers & Constructors ("RE&C")
business. WGI also sought specific performance of the purchase price adjustment
provision in the Stock Purchase Agreement. The court appointed an independent
accountant to resolve the purchase price adjustment dispute, and ordered that
WGI's fraud and breach of contract claims be submitted to arbitration as the
Company had requested. On November 8, 2001 the litigation with WGI was suspended
upon the announcement of an agreement in principle of a settlement, which is
noted below.
As previously reported, in May 2001, WGI filed for protection under Chapter 11
of the U.S. Bankruptcy Code in Reno, Nevada in an action entitled, In re
-----
Washington Group International, Inc., et al. (Case No. BK-N-01-21627-GWZ). In
- -------------------------------------------
connection with the filing, WGI filed a proposed plan of reorganization, which
was amended and modified several times. In early August 2001, WGI filed an
adversary proceeding against the Company alleging that the sale and various
other transactions constituted "fraudulent transfers" (Docket #1, No. 01-3084).
Also in early August 2001, the Company filed a proof of claim as an unsecured
creditor in the bankruptcy case.
As previously reported, in June 2001, a purported class action lawsuit entitled,
Muzinich & Co., Inc. et al v. Raytheon Company, et. al., (Civil Action No.
- ------------------------------------------------------
01-0284-S-BLW) was filed in federal court in Boise, Idaho allegedly on behalf of
all purchasers of common stock or senior notes of WGI during the period April
17, 2000 through March 1, 2001 (the class period). The putative plaintiff class
claims to have suffered harm by purchasing WGI securities because the Company
and certain of its officers allegedly violated federal securities laws by
purportedly misrepresenting the true financial condition of RE&C in order to
sell RE&C to WGI at an artificially inflated price. An amended complaint was
filed on October 1, 2001 alleging similar claims. The Company and the individual
defendants filed a motion seeking to dismiss the action in mid-November 2001.
The Court heard arguments on that motion on March 7, 2002 and it is currently
evaluating the parties' arguments regarding dismissal.
As previously reported, the Company has been named as a nominal defendant and
all of its directors have been named as defendants in two identical purported
derivative lawsuits filed in Chancery Court in New Castle County, Delaware in
July 2001, entitled Melvin P. Harr v. Barbara M. Barrett, et. al., (Civil Action
--------------------------------------------
No. 19018) and Howard Lasker v. Barbara M. Barrett, et. al., (Civil Action No.
--------------------------------------------
19027). The Harr and Lasker derivative complaints contain allegations similar to
---- ------
those included in the Muzinich class action complaint and further allege that
--------
the individual defendants breached fiduciary duties to the Company and
purportedly failed to maintain systems necessary for prudent management and
control of the Company's operations. On December 11, 2001, the Company and the
individual defendants filed a motion to dismiss the Harr complaint, the only one
of these actions for which service was by then completed. In addition, the
Company has been named as a nominal defendant and members of its Board of
Directors and several current and former officers have been named as defendants
in another purported shareholder derivative action entitled Richard J. Kager v.
------------------
Daniel P. Burnham, et. al., (Civil Action No. 01-11180-JLT) filed in July 2001
- --------------------------
in the U. S. District Court in Massachusetts. The Kager derivative complaint
-----
contains
17
allegations similar to those included in the Muzinich complaint, and further
--------
alleges that the individual defendants breached fiduciary duties to the Company
and purportedly failed to maintain systems necessary for prudent management and
control of the Company's operations.
On November 8, 2001, all claims and litigation between the Company and WGI
referenced above were suspended upon the announcement of an agreement in
principle of a settlement that, among other things, would end all pending
litigation between the Company and WGI. The settlement between the Company and
WGI was part of WGI's plan of reorganization (the "Plan"), which was confirmed
by the Bankruptcy Court on December 21, 2001. On January 4, 2002, the Bankruptcy
Court approved the WGI settlement documents. On January 25, 2002, the parties
executed and delivered the WGI settlement documents and the Plan became
effective. Appeals have been filed challenging the Bankruptcy Court's orders
approving the Plan and approving the settlement between the Company and WGI,
however the WGI settlement documents are now effective and are being implemented
and the litigation between the Company and WGI has been dismissed. For
additional information related to the settlement between the Company and WGI and
liability relating to the Company's former engineering and construction
business, see Management's Discussion and Analysis of Financial Condition and
Results of Operations - Discontinued Operations on page 28 of the Company's 2001
Annual Report to Stockholders and Note B Discontinued Operations to the
Company's Financial Statements on page 40 of the Company's 2001 Annual Report to
Stockholders.
Although the Company believes that it and the other defendants have meritorious
defenses to the claims made in each and all of the aforementioned complaints and
intends to contest each lawsuit vigorously, an adverse resolution of any of the
lawsuits could have a material adverse effect on the Company's financial
position and results of operations in the period in which the lawsuits are
resolved. The Company is not presently able to reasonably estimate potential
losses, if any, related to any of the lawsuits.
Defense contractors are subject to many levels of audit and investigation.
Agencies which oversee contract performance include: the Defense Contract Audit
Agency, the Department of Defense Inspector General, the General Accounting
Office, the Department of Justice and Congressional Committees. The Department
of Justice from time to time has convened grand juries to investigate possible
irregularities by the Company in government contracting.
As previously reported, the Department of Justice has informed the Company that
the Government has concluded its investigation of the contemplated sale by
Raytheon Canada Ltd., a subsidiary of the Company, of troposcatter radio
equipment to a customer in Pakistan. The Company has produced documents in
response to grand jury subpoenas, and grand jury appearances have taken place.
The Company has cooperated fully with the investigation. The Government has not
informed the Company of a final decision with respect to this matter. An adverse
decision relating to this matter ultimately could have a material adverse effect
on the Company's results of operations or financial condition.
As previously reported, the Company has been cooperating with the staff of the
Securities and Exchange Commission, which is conducting an investigation
relating to the Company's former engineering and construction business and
related accounting and other matters. The Company has been responding to
subpoenas, providing documents and information to the SEC staff, and is
continuing to cooperate with the SEC staff in its investigation. The Company is
unable to predict the outcome of the inquiry or any action that the SEC might
take.
The Company is permitted to charge to its Government contracts an allocable
portion of the amount that the Company accrues for self-insurance. There is a
disagreement between the Company and the Government about the way that the
Company allocated self-insurance charges for product liability risks associated
with its Raytheon Aircraft business units. The Government has not asserted a
claim for a specific amount, but the allocation practice at issue was adopted in
1988 and the Government claim could be material when it is quantified.
The Company is involved in various stages of investigation and cleanup relative
to remediation of various environmental sites. All appropriate costs incurred in
connection therewith have been accrued. Due to the complexity of environmental
laws and regulations, the varying costs and effectiveness of alternative cleanup
methods and technologies, the uncertainty of insurance coverage and the
unresolved extent of the Company's responsibility, it is difficult to determine
the ultimate outcome of these matters. However, in the opinion of management,
any liability will not have a material effect on the Company's financial
position, liquidity or results of
18
operations. Additional information regarding the effect of compliance with
environmental protection requirements and the resolution of environmental claims
against the Company and its operations is contained in the "Risk Factors"
section beginning on page 8 of this Report, in Management's Discussion and
Analysis of Financial Condition and Results of Operation - Commitments and
Contingencies on page 31 of the Company's 2001 Annual Report to Stockholders and
in Note M to the Company's Financial Statements on page 48 of the Company's 2001
Annual Report to Stockholders.
Accidents involving personal injuries and property damage occur in general
aviation travel. When permitted by appropriate government agencies, Raytheon
Aircraft investigates accidents related to its products involving fatalities or
serious injuries. Through a relationship with FlightSafety International,
Raytheon Aircraft provides initial and recurrent pilot and maintenance training
services to reduce the frequency of accidents involving its products.
Raytheon Aircraft is a defendant in a number of product liability lawsuits which
allege personal injury and property damage and seek substantial recoveries
including, in some cases, punitive and exemplary damages. Raytheon Aircraft
maintains partial insurance coverage against such claims and maintains a level
of uninsured risk determined by management to be prudent. Additional information
regarding aircraft product liability insurance is contained in Note M to the
Company's Financial Statements on page 47 of the Company's 2001 Annual Report to
Stockholders.
The insurance policies for product liability coverage held by Raytheon Aircraft
do not exclude punitive damages, and it is the position of Raytheon Aircraft and
its counsel that punitive damage claims are therefore covered. Historically, the
defense of punitive damage claims has been undertaken and paid by insurance
carriers. Under the law of some states, however, insurers are not required to
respond to judgments for punitive damages. Nevertheless, to date no judgments
for punitive damages have been sustained.
Various other claims and legal proceedings generally incidental to the normal
course of business are pending or threatened on behalf of or against the
Company. While the Company cannot predict the outcome of these matters, in the
opinion of management, any liability arising from them will not have a material
adverse effect on the Company's financial position, liquidity or results of
operations after giving effect to provisions already recorded.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 4(A). Executive Officers of the Registrant
The executive officers of the Company are listed below. Each executive officer
was elected by the Board of Directors to serve for a term of one year and until
his or her successor is elected and qualified or until his or her earlier
removal, resignation or death.
Daniel P. Burnham: Chairman and Chief Executive Officer since July 31, 1999.
Prior thereto, Mr. Burnham served as President and Chief Executive Officer from
December 1, 1998 to July 31, 1999 and as President and Chief Operating Officer
from July 1, 1998 to December 1, 1998. Prior to joining the Company, Mr. Burnham
was Vice Chairman of AlliedSignal, Inc. from October 1997 and President of
AlliedSignal Aerospace and an Executive Vice President of AlliedSignal, Inc.
from 1992 until becoming Vice Chairman in 1997. Age: 55.
Franklyn A. Caine: Senior Vice President and Chief Financial Officer since April
1999. Prior to assuming his present position, Mr. Caine was Executive Vice
President and Chief Financial Officer of Wang Laboratories, Inc. from 1994. Age:
52.
Richard J. Foley: Vice President and Corporate Director of Contracts since
February 1999. Prior to assuming his present position, Mr. Foley was appointed
Corporate Director of Contracts in April 1998. Between 1995 and 1998, Mr. Foley
was the Manager of Contracts of Raytheon's Electronic Systems Division. Mr.
Foley has served Raytheon for more than 35 years holding senior contract
management positions with the Company. Age: 57.
Richard A. Goglia: Vice President and Treasurer since January 1999. Prior to
assuming such position, Mr. Goglia was Director, International Finance from
March 1997. Prior to joining the Company, Mr. Goglia was Senior Vice
President--Corporate Finance, GE Capital
19
Corporation from 1989. Age: 50.
Francis S. Marchilena: Executive Vice President of Raytheon Company and
President - Command, Control, Communication and Information Systems since June
2000. Prior to assuming his present position, Mr. Marchilena was Senior Vice
President and General Manager of the Command, Control and Communication Systems
Segment and Executive Vice President and General Manager of the Training and
Services Segment of the former Raytheon Systems Company. Between 1996 and 1998,
Mr. Marchilena was the Assistant General Manager for Raytheon Electronic
Systems. Mr. Marchilena has served Raytheon for more than 33 years holding
increasingly responsible management positions with the Company. Age: 56.
Neal E. Minahan: Senior Vice President and General Counsel since July 2001.
Prior to assuming his present position, Mr. Minahan was Vice President and
Deputy General Counsel from December 1999 to June 2001; Senior Vice President,
Raytheon Systems Company from December 1998 to November 1999; Deputy General
Counsel Raytheon Company, January 1998 to November 1998 and Assistant General
Counsel from 1990 to January 1998. Prior to that, he was Counsel from 1972 to
1990. Age: 57.
Keith J. Peden: Senior Vice President - Human Resources since March 2001. Prior
to assuming his present position, Mr. Peden was Vice President Deputy Director -
Human Resources since November 1997 and Corporate Director of Benefits and
Compensation since April 1993. Age: 51.
Edward S. Pliner: Vice President and Corporate Controller since April 2000.
Prior to assuming his present position, Mr. Pliner was a Partner of
PricewaterhouseCoopers LLP from September 1995. Age: 44.
Rebecca B. Rhoads: Vice President and Chief Information Officer since April
2001. Prior to assuming her present position, Ms. Rhoads was Vice President of
Information Systems Technology for Raytheon Electronic Systems from February
2000 and Vice President of Information Technology, Defense Systems Segment since
July 1999. Between 1996 and 1999, Ms. Rhoads was Director of the Raytheon Test
Systems Design Center. Age: 44.
James E. Schuster: Executive Vice President of Raytheon Company and Chairman and
Chief Executive Officer - Raytheon Aircraft Company since May 2001. Prior to
assuming his present position, Mr. Schuster was Vice President of Raytheon
Company and President of Aircraft Integration Systems from April 2000 and Senior
Vice President and Deputy General Manager for Aircraft Integration Systems since
September 1999. Prior to joining the Company, Mr. Schuster was President, Motors
& Generators, Magnetex, Inc. since 1996. Age: 48.
Gregory S. Shelton: Vice President - Engineering and Technology since May 2001.
Prior to assuming his present position, Mr. Shelton served as Vice President of
Engineering for Raytheon's missiles business since 1998. Prior to that, he was
Vice President, Engineering for Hughes Weapons Systems segment from 1996 to
1997. He also served as Vice President and Product Line Manager, Air Missiles
and Advanced Programs and Technology for Hughes Missile Systems Company from
1995 to 1996. Age: 51.
William H. Swanson: Executive Vice President of Raytheon Company and President -
Electronic Systems since January 2000. Prior to assuming his present position,
Mr. Swanson was Executive Vice President and Chairman and Chief Executive
Officer of Raytheon Systems Company from December 1997; Executive Vice President
and General Manager - Raytheon Electronic Systems Division from March 1995; and
Senior Vice President and General Manager - Missile Systems Division from 1990.
Mr. Swanson has served Raytheon for more than 28 years holding increasingly
responsible management positions with the Company. Age: 53.
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
At December 31, 2001, there were 76,041 record holders of the Company's common
stock. Additional information required by this Item 5 is contained on page 56 of
the Company's 2001 Annual Report to Stockholders and in Note Q to the Company's
Financial Statements on page 53 of the Company's 2001 Annual Report to
Stockholders and is incorporated herein by reference.
During 2001, the Company eliminated its dual class capital structure and
reclassified its Class A and Class B
20
common stock into a single new class of common stock. The Company also effected
a 20-for-1 reverse-forward stock split that resulted in holders of fewer than 20
shares of common stock being cashed out of their holdings.
In May 2001, the Company issued 17,250,000, 8.25 percent, equity security units
for $50 per unit totaling $837 million, net of offering costs. Also, in May
2001, the Company issued 14,375,000 shares of common stock for $27.50 per share.
In October 2001, the Company issued 31,578,900 shares of common stock for $33.25
per share. Sales of the foregoing securities were registered under the
Securities Act of 1933, as amended. The proceeds of the offerings were used to
reduce debt and for general corporate purposes.
Item 6. Selected Financial Data
The information required by this Item 6 is included in the "Five Year
Statistical Summary" contained in the Company's 2001 Annual Report to
Stockholders on page 23 and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item 7 is contained in the Company's 2001
Annual Report to Stockholders on pages 24 through 33 and is incorporated herein
by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item 7A is contained in the Company's 2001
Annual Report to Stockholders on page 33 and is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
Selected quarterly financial data is contained in Note Q on page 53 and the
financial statements and supplementary data of the Company are on pages 34
through 54, respectively, of the Company's 2001 Annual Report to Stockholders
and are incorporated herein by reference. Schedules required under Regulation
S-X are filed as "Financial Statement Schedules" pursuant to Item 14 of this
Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the directors of the Company is contained in the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held on
April 24, 2002 under the captions "The Board of Directors and Board Committees"
and "Election of Directors" and is incorporated herein by reference. Information
regarding the executive officers of the Company is contained in Part I, Item
4(A) of this Form 10-K.
Item 11. Executive Compensation
This information is contained in the Company's definitive proxy statement for
the Annual Meeting of Stockholders to be held on April 24, 2002 under the
caption "Executive Compensation" and, except for the information required by
Items 402(k) and 402(l) of Regulation S-K, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is contained in the Company's definitive proxy statement for
the Annual Meeting of Stockholders to be held on April 24, 2002 under the
caption "Stock Ownership" and is incorporated herein by reference.
21
Item 13. Certain Relationships and Related Transactions
This information is contained in the Company's definitive proxy statement for
the Annual Meeting of Stockholders to be held on April 24, 2002 under the
caption "Certain Relationships and Related Transactions" and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
(1) The following financial statements of Raytheon Company as
contained in Raytheon's 2001 Annual Report to Stockholders, are
hereby incorporated by reference:
Balance Sheets at December 31, 2001 and 2000
Statements of Income for the Years Ended December 31, 2001, 2000
and 1999
Statements of Stockholders' Equity for the Years Ended December
31, 2001, 2000 and 1999
Statements of Cash Flows for the Years Ended December 31, 2001,
2000 and 1999
Notes to Consolidated Financial Statements for the Year Ended
December 31, 2001
(2) The following financial statement schedule is included herein:
Schedule II, Reserves for the Three Years Ended December 31,
2001
Schedules I, III and IV are omitted because they are not
required, not applicable or the information is otherwise
included.
(3) The reports of Raytheon's independent auditors with respect to
the above referenced financial statements and financial statement
schedule are hereby incorporated by reference
(b) Reports on Form 8-K
Raytheon Company Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 19, 2001
Raytheon Company Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 31, 2001
(c) Exhibits
3.1 Raytheon Company Restated Certificate of Incorporation, restated
as of February 11, 1998 filed as an exhibit to Raytheon's Annual
Report on Form 10-K for the year ended December 31, 1997, is
hereby incorporated by reference.
3.2 Raytheon Company Amended and Restated By-Laws, as amended through
January 28, 1998 filed as an exhibit to Raytheon's Annual Report
on Form 10-K for the year ended December 31, 1997, is
22
hereby incorporated by reference.
3.3 Certificate of Amendment of Restated Certificate of Incorporation
of Raytheon Company to effect a reverse stock split of the
Registrant's Class A and Class B common stock, filed as an
exhibit to Raytheon's Registration Statement on Form S-8, File
No. 333-52535, is hereby incorporated by reference.
3.4 Certificate of Amendment of Restated Certificate of Incorporation
of Raytheon Company to effect a forward stock split of the
Registrant's Class A and Class B common stock, filed as an
exhibit to Raytheon's Registration Statement on Form S-8, File
No. 333-52535, is hereby incorporated by reference.
3.5 Certificate of Amendment of Restated Certificate of Incorporation
of Raytheon Company to reclassify the Registrant's Class A and
Class B common stock into a single new class of common stock,
filed as an exhibit to Raytheon's Registration Statement on Form
S-8, File No. 333-52535, is hereby incorporated by reference.
4.1 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 to Former Raytheon's Registration Statement
on Form S-3, File No. 33-59241, is hereby incorporated by
reference.
4.2 Indenture relating to Subordinated Debt Securities dated as of July
3, 1995 between Raytheon Company and The Bank of New York, Trustee,
filed as an exhibit to Former Raytheon's Registration Statement on
Form S-3, File No. 33-59241, is hereby incorporated by reference.
4.3 Supplemental Indenture dated as of December 17, 1997 between
Raytheon Company and The Bank of New York, Trustee filed as an
exhibit to Raytheon's Annual Report on Form 10-K for the year
ended December 31, 1997, is hereby incorporated by reference.
4.4 Second Supplemental Indenture, dated as of May 9, 2001, between
Raytheon Company and the Bank of New York, filed as an exhibit to
Raytheon's Form 8-K, dated May 10, 2001, is hereby incorporated by
reference.
4.5 Rights Agreement dated as of December 15, 1997 between the Company
and State Street Bank and Trust Company, as Rights Agent, filed as
an exhibit to the Company's Registration Statement on Form 8-A,
File No. 1-13699, is hereby incorporated by reference.
4.6 Amendment to Rights Agreement dated as of May 15, 2001 between the
Company and State Street Bank and Trust Company, as Rights Agent.*
4.7 Agreement of Substitution and Amendment of Rights Agreement dated
as of March 5, 2002 between the Company and American Stock
Transfer and Trust Company.*
4.8 Form of Senior Debt Securities filed as an exhibit to Raytheon's
Registration Statement on Form S-3, File No. 333-58474, is hereby
incorporated by reference.
4.9 Form of Subordinated Debt Securities filed as an exhibit to
Raytheon's Registration Statement on Form S-3, File No. 333-58474,
is hereby incorporated by reference.
4.10 Certificate of Trust of RC Trust I filed as an exhibit to
Raytheon's Registration Statement on Form S-3, File No.
333-58474, is hereby incorporated by reference.
4.11 Amended and Restated Declaration of Trust of RC Trust I, dated as
of May 9, 2001, among Raytheon Company, The Bank of New York as
initial Property Trustee, The Bank of New York (Delaware) as
initial Delaware Trustee, and the Regular Trustee, filed as an
exhibit to Raytheon's Form 8-K, dated May 10, 2001, is hereby
incorporated by reference.
23
4.12 Certificate of Trust of RC Trust II filed as an exhibit to Raytheon's
Registration Statement on Form S-3, File No. 333-58474, is hereby
incorporated by reference.
4.13 Declaration of Trust of RC Trust II filed as an exhibit to Raytheon's
Registration Statement on Form S-3, File No. 333-58474, is hereby
incorporated by reference.
4.14 Purchase Contract Agreement dated May 9, 2001, filed as an exhibit to
Raytheon's filing on Form 8-K, dated May 10, 2001, is hereby
incorporated by reference.
4.15 Form of Preferred Security filed as an exhibit to Raytheon's Form
8-K, dated May 10, 2001, is hereby incorporated by reference.
4.16 Pledge Agreement dated May 9, 2001, among Raytheon Company, Bank One
Trust Company, N.A., as Collateral Agent, Custodial Agent and
Securities Intermediary and the Bank of New York, as Purchase
Contract Agent, filed as an exhibit to Raytheon's Form 8-K/A, dated
May 10, 2001, is hereby incorporated by reference.
4.17 Form of Remarketing Agreement among Raytheon Company and The Bank of
New York as Purchase Contract Agent, filed as an exhibit to
Raytheon's Form 8-K, dated May 10, 2001, is hereby incorporated by
reference.
10.1 Raytheon Company 1976 Stock Option Plan, as amended, filed as an
exhibit to the Company's Registration Statement on Form S-8, File No.
333-45629, is hereby incorporated by reference.
10.2 Raytheon Company 1991 Stock Plan, as amended, filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended
July 4, 1999, is hereby incorporated by reference.
10.3 Raytheon Company 1995 Stock Option Plan, as amended, filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 4, 1999, is hereby incorporated by reference.
10.4 Raytheon Company 2001 Stock Plan, filed as an exhibit to the
Company's Registration Statement on Form S-8, File No. 333-52535, is
hereby incorporated by reference.
10.5 Plan for Granting Stock Options in Substitution for Stock Options
Granted by Texas Instruments Incorporated, filed as an exhibit to the
Company's Registration Statement on Form S-8, File No. 333- 45629, is
hereby incorporated by reference.
10.6 Plan for Granting Stock Options in Substitution for Stock Options
Granted by Hughes Electronics Corporation, filed as an exhibit to the
Company's Registration Statement on Form S-8, File No. 333- 45629, is
hereby incorporated by reference.
10.7 Raytheon Company 1997 Nonemployee Directors Restricted Stock Plan,
filed as an exhibit to the Company's Registration Statement on Form
S-8, File No. 333-45629, is hereby incorporated by reference.
10.8 Raytheon Company Deferral Plan for Directors, filed as an exhibit to
Former Raytheon's Registration Statement on Form S-8, File No.
333-22969, is hereby incorporated by reference.
24
10.9 Form of Executive Change in Control Severance Agreement between
the Company and each of the following executives: Franklyn A.
Caine, Francis S. Marchilena, Neal E. Minahan, Keith J. Peden,
James E. Schuster and William H. Swanson.*
10.10 Form of Executive Change in Control Severance Agreement between
the Company and each of the following executives: Richard A.
Goglia, Edward S. Pliner, Rebecca R. Rhoads, and Gregory S.
Shelton.*
10.11 Employment Agreement between Raytheon Company and Daniel P.
Burnham, filed as an exhibit to Raytheon's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, is hereby
incorporated by reference.
10.12 Severance Agreement between Raytheon Company and Daniel P.
Burnham, filed as an exhibit to Raytheon's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, is hereby
incorporated by reference.
10.13 Employment Agreement between Raytheon Company and Franklyn A.
Caine, filed as an exhibit to Raytheon's Quarterly Report on Form
10-Q for the quarter ended April 4, 1999, is hereby incorporated
by reference.
10.14 Amendment to William H. Swanson's Change in Control Severance
Agreement, filed as an exhibit to Raytheon's Annual Report on
Form 10-K for the year ended December 31, 1999, is hereby
incorporated by reference.
10.15 Employment Agreement between Raytheon Company and Edward S.
Pliner.*
10.16 Retention Agreement between Raytheon Company and Hansel E.
Tookes, II, filed as an exhibit to Raytheon's Annual Report on
Form 10-K for the year ended December 31, 2000, is hereby
incorporated by reference.
10.17 Letter Agreement between Raytheon Company and Hansel E. Tookes,
II amending the Retention Agreement referenced in Exhibit
10.16 between the parties dated as of April 7, 2000.*
10.18 Employment Agreement between Raytheon Company and Keith J.
Peden.*
10.19 HE Holdings, Inc. Five Year Competitive Advance and Revolving
Credit Facility, filed as an exhibit to the Company's Registration
Statement on Form S-4, File No. 333-37223, is hereby incorporated
by reference.
10.20 Third Amended and Restated Purchase and Sale Agreement dated as of
March 9, 2001 among
25
Raytheon Aircraft Credit Corporation, Raytheon Aircraft
Receivables Corporation and the Purchasers named therein, filed
as an exhibit to Raytheon's Quarterly Report on Form 10-Q for the
quarter ended April 1, 2001, is hereby incorporated by reference.
10.21 Reaffirmation of Amended and Restated Repurchase Agreement dated
as of March 9, 2001 among Raytheon Aircraft Company and the
Purchasers named therein, filed as an exhibit to Raytheon's
Quarterly Report on Form 10-Q for the quarter ended April 1,
2001, is hereby incorporated by reference.
10.22 Amendment and Reaffirmation of Amended and Restated Guarantee
dated as of March 9, 2001 among Raytheon Company and the
Purchasers named therein, filed as an exhibit to Raytheon's
Quarterly Report on Form 10-Q for the quarter ended April 1,
2001, is hereby incorporated by reference.
10.23 364 Day Competitive Advance and Revolving Credit Facility dated
as of November 28, 2001, among Raytheon Company, as Borrower,
Raytheon Technical Services Company and Raytheon Aircraft
Company, as Guarantors, the lenders named therein, and J.P.
Morgan Chase Bank as Administrative Agent for the lenders.*
10.24 Five-Year Competitive Advance and Revolving Credit Facility
dated as of November 28, 2001, among Raytheon Company, as
Borrower, Raytheon Technical Services Company and Raytheon
Aircraft Company, as Guarantors, the lenders named therein, and
J.P. Morgan Chase Bank as Administrative Agent for the lenders.*
10.25 Raytheon Savings and Investment Plan, as amended and restated
effective January 1, 1999, filed as an exhibit to Raytheon's
Annual Report on Form 10-K for the year ended December 31, 1999
and incorporated by reference.
10.26 Raytheon Employee Savings and Investment Plan, as amended and
restated effective January 1, 1999, filed as an exhibit to
Raytheon's Annual Report on Form 10-K for the year ended December
31, 1999 and incorporated by reference.
10.27 Raytheon Excess Savings Plan, filed as an exhibit to
Post-Effective Amendment No. 1 to the Company's Registration
Statement on Form S-8, File No. 333-56117, is hereby incorporated
by reference.
10.28 Raytheon Deferred Compensation Plan, filed as an exhibit to Post-
Effective Amendment No. 1 to the Company's Registration Statement
on Form S-8, File No. 333-56117, is hereby incorporated by
reference.
10.29 Guarantee Agreement, dated as of May 9, 2001, between Raytheon
Company and The Bank of New York as initial Guarantee Trustee,
filed as an exhibit to Raytheon's Form 8-K, dated May 10, 2001,
is hereby incorporated by reference.
10.30 Raytheon Supplemental Executive Retirement Plan.*
12 Statement regarding Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Dividends for the year ended
December 31, 2001.*
13 Raytheon Company 2001 Annual Report to Stockholders (furnished
for the information of the Commission and not to be deemed
"filed" as part of this Report except to the extent that portions
thereof are expressly incorporated herein by reference).*
26
21 Subsidiaries of Raytheon Company.*
23.1 Consent of Independent Accountants.*
23.2 Reports of Independent Accountants.*
(Exhibits marked with an asterisk (*) are filed electronically
herewith.)
27
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RAYTHEON COMPANY
/s/ Franklyn A. Caine
Franklyn A. Caine
Senior Vice President and Chief Financial
Officer for the Registrant
Dated: March 18, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Daniel P. Burnham
Chairman and Chief March 18, 2002
- ----------------------- Executive Officer
Daniel P. Burnham (Principal Executive
Officer)
/s/ Barbara M. Barrett
- ---------------------- Director March 18, 2002
Barbara M. Barrett
/s/ Ferdinand Colloredo-Mansfeld
- -------------------------------- Director March 18, 2002
Ferdinand Colloredo-Mansfeld
/s/ John M. Deutch
- -------------------- Director March 18, 2002
John M. Deutch
/s/ Thomas E. Everhart
Director March 18, 2002
- ----------------------
Thomas E. Everhart
/s/ John R. Galvin
- -------------------- Director March 18, 2002
John R. Galvin
/s/ L. Dennis Kozlowski
- ------------------- Director March 18, 2002
L. Dennis Kozlowski
/s/ Henrique de Campos Meirelles
- --------------------------- Director March 18, 2002
Henrique de Campos Meirelles
/s/ Frederic M. Poses
- --------------------- Director March 18, 2002
Frederic M. Poses
28
/s/ Warren B. Rudman
- ----------------- Director March 18, 2002
Warren B. Rudman
/s/ Michael C. Ruettgers
Director March 18, 2002
- ----------------------
Michael C. Ruettgers
/s/ William R. Spivey
- --------------------- Director March 18, 2002
William R. Spivey
/s/ Alfred M. Zeien
Director March 18, 2002
- ----------------------
Alfred M. Zeien
/s/ Edward S. Pliner
- ---------------------- Vice President and March 18, 2002
Edward S. Pliner Corporate Controller
(Chief Accounting Officer)
29
RAYTHEON COMPANY
----------------
SCHEDULE II - RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 2001
-------------------------------------------
(In millions)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Balance at Charged to Charged to Deductions Balance at
beginning costs other Note (1) end of
Description of period and expenses accounts Period
----------- --------- ------
Year ended December 31, 2001:
Allowance for doubtful
accounts receivable $22.9 $2.3 - $2.9 $22.3
Year ended December 31, 2000:
Allowance for doubtful
accounts receivable $26.6 $3.9 - $7.6 $22.9
Year ended December 31, 1999:
Allowance for doubtful $20.8 $8.3 - $2.5 $26.6
Accounts receivable
Note (1) - Uncollectible accounts and adjustments, less recoveries.
30