Item 1. Business
GENERAL
Raytheon Company ("Raytheon" or the "Company") 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, with worldwide 2000 sales of $16.9 billion. 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.
The Company, formerly known as HE Holdings, Inc. ("HE Holdings"), is the surviving company of the December 17, 1997 merger (the "Hughes Merger") of HE Holdings, Inc. and Raytheon Company, a Delaware corporation ("Former Raytheon"). At the effective time of the Hughes Merger, the separate legal existence of Former Raytheon ceased and HE Holdings was renamed "Raytheon Company." Although, from a legal point of view, HE Holdings, Inc. is the surviving company of the Hughes Merger, the Company's business is largely conducted in the same manner as and under the senior management of Former Raytheon. Accordingly, the historical disclosures in this Form 10-K for years prior to 1998 and any year-to-year comparisons contained herein for years prior to 1998, unless otherwise specifically noted, relate to the operations of Former Raytheon, as a predecessor to the Company by merger, and not to HE Holdings, Inc. as it existed prior to the Hughes Merger.
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 National Missile Defense, 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 Area Defense (NAD) and Navy Theater Wide (NTW) systems and the Exoatmospheric Kill Vehicle (EKV) for National Missile Defense.
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 (pursuant to a joint venture with Lockheed Martin Corporation).
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 vehicles and laser sensors. 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-21.
ES airborne radars are deployed on four operational tactical fighter aircraft operated by U.S. forces (the,, 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 with Northrop Grumman Corporation providing the next generation airborne radar for the aircraft. The segment provides the Forward Looking Infrared (FLIR) and designation system for the Stealth Fighter, the infrared subsystem for the F/A-18 targeting pod, and is developing the Advanced Targeting FLIR for the F/A-18.
ES supplies integrated sensor suites for applications such as the U.S. Department of Defense's ("DoD") 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. 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. Its sensor and electronic systems are used for law enforcement, security, oil spill response, search and rescue and many other commercial and industrial applications. One commercial night vision application is a night driving safety option on the model year 2000 Cadillac(R) DeVille(R)/1/.
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 involved in command, control and communication systems; air traffic control systems; tactical radios; satellite communication ground control terminals; wide area surveillance systems; ground-based information processing systems; image processing; large scale information retrieval, processing and distribution systems; and global broadcast systems.
An example of C3I's capabilities in the area of advanced information integration is the U.S. Navy's Cooperative Engagement Capability (CEC) program. CEC integrates sensor information from multiple sources to provide ships, aircraft and land-based installations an integrated air picture. The system has now successfully completed many years of comprehensive at-sea testing, including several live fire tests, and is now facing the challenges of integration into the fleet.
C3I led Raytheon's role as the prime contractor for the Brazilian System for the Vigilance of the Amazon (SIVAM) program, which calls for the delivery of an integrated information network linking numerous sensors to regional and national coordination centers. Information will be used to enable the Brazilian Government to protect the environment, improve air safety and weather forecasts, help control epidemics, manage land occupation and usage and ensure effective law enforcement and border control.
C3I also designs and installs air traffic control (ATC) and weather systems at airports worldwide. One example is the Federal Aviation Administration (FAA)/DoD's
_________________________
/1/ Cadillac and DeVille are registered trademarks of General Motors Corporation.
Standard Terminal Automation Replacement System (STARS) program, which will modernize and upgrade approximately 331 air traffic control sites across the United States. Some of the countries Raytheon is providing ATC systems and radars for include: Australia, Canada, Cyprus, Germany, Hong Kong, India, Jamaica, The Netherlands, Norway, Oman, the People's Republic of China, Switzerland and Taiwan.
Aircraft Integration Systems. The Aircraft Integration Systems segment ("AIS") focuses on integration of airborne surveillance and intelligence systems and aircraft modifications.
AIS specializes in developing and integrating complex electronic systems for airborne Intelligence, Surveillance, and Reconnaissance (ISR) missions. AIS provides signals intelligence, air-ground surveillance, maritime surveillance, and airborne command post systems to both U.S. Government and foreign customers. In addition, AIS modernizes aging aircraft through structural refurbishment and avionics upgrades including completely new "glass" cockpits with the latest display technologies and FAA-required air traffic management systems that enhance air safety. The segment also designs and installs interiors for executive aircraft and performs Special Operations Forces Support Activity (SOFSA).
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 37 other countries.
RTSC performs complete engineering and depot-level cradle-to-grave support to Raytheon-manufactured equipment and to 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 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.
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, 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 Beechjet 400A lightjet and the Hawker 800XP midsize business jet. Raytheon Aircraft also produces a 19- passenger regional airliner. The Raytheon Premier I entry-level business jet is currently completing a certification test program. A new super midsize business jet, the Hawker Horizon, is currently in development, leading to anticipated airplane certification and delivery in 2003. Raytheon Aircraft also has announced the Hawker 450, a light midsize jet.
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 variant of the Hawker 800.
Raytheon Aerospace manages approximately 1,600 aircraft at over 260 sites around the world and provides contractor logistics and training support for military and government aircraft. Raytheon Aircraft Services operates a network of business aviation service operations at airports across the U.S., and in the U.K. and Mexico.
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. Raytheon
Aircraft Charter and Management offers aircraft charter and management services to the U.S. market.
Engineering and Construction
In April 2000, the Company announced its intention to sell its Raytheon Engineers & Constructors subsidiary and discontinue its engineering and construction operating segment. The summary of operating results from discontinued operations, a description of the terms of the sale and information regarding certain ongoing liabilities related to the former engineering and construction segment is contained in the Company's Annual Report to Stockholders for the year ended December 31, 2000 on pages 26 through 31 and in the Notes to the Company's Financial Statements for the years ended December 31, 2000, 1999 and 1998 and is incorporated herein by reference.
Divestitures
Consistent with Raytheon's strategy of divesting non-core assets to focus and streamline core businesses and pay down debt, the Company divested a number of business units in 2000. Excluding the sale of RE&C, cash proceeds from divestitures and sales of investments totaled $330 million.
SALES TO THE UNITED STATES GOVERNMENT
Sales to the United States Government (the "Government"), principally to the Department of Defense, were $11.1 billion in 2000 and $11.7 billion in 1999, representing 65.8% of total sales in 2000 and 67.9% in 1999. Of these sales, $0.5 billion in 2000 and $0.7 billion in 1999 represented purchases made by the Government on behalf of foreign governments.
GOVERNMENT CONTRACTS
The Company and 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 electronics 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 significant 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 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 progress payments monthly from the Government generally in amounts equaling 75% and 80% of costs incurred under (i) DoD contracts and (ii) all other Government contracts, respectively. 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 "Item 1. Factors that Could Affect Future Results" for a description of additional business risks.
See "Item 1. Sales to the United States Government" 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, 2000 was $26.5 billion compared with $25.0 billion at the end of 1999. The 2000 amount includes funded backlog of $17.4 billion from the Government compared with $15.2 billion at the end of 1999.
Approximately $4.3 billion of the overall backlog figure represents the unperformed portion of direct orders from foreign governments. Approximately $2.1 billion of the overall backlog represents non-government foreign backlog.
Approximately $14.5 billion of the $26.5 billion 2000 year-end backlog is not expected to be filled during the following twelve months.
RESEARCH AND DEVELOPMENT
During 2000, Raytheon expended $526.3 million on research and development efforts compared with $508.5 million in 1999 and $582.1 million in 1998. 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.
SUPPLIERS
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.
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 three principal prime contractors for the DoD, including the Company. 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 we possess 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 has long been an innovative leader in the development of new products and manufacturing technologies. 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 strong 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. It is Raytheon's policy to enforce its own intellectual property rights and to respect the rights of others. Incidental to the normal course of business, infringement claims may arise or may be threatened both by and against Raytheon. In the opinion of management, these claims will not have a material adverse effect on the Company's operations.
EMPLOYMENT
As of December 31, 2000, Raytheon had approximately 93,700 employees compared with approximately 105,300 employees at the end of 1999. The decrease is mainly due to the divestiture during 2000 of Raytheon Engineers & Constructors and other divestitures.
Raytheon considers its union-management relationships to be positive, with few exceptions. In 2000, Raytheon successfully reached agreement on 15 labor contracts, with one work stoppage of six weeks involving less than 3% of the workforce.
INTERNATIONAL SALES
Raytheon's sales to customers outside the United States (including foreign military sales) were 21% of total sales in 2000 and 23% of total sales in 1999 and 1998. 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 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.
FACTORS THAT COULD AFFECT FUTURE RESULTS
This filing and the information we are incorporating by reference contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts included in this filing and the information incorporated by reference, that we expect or anticipate will or may occur in the future, including statements regarding our financial position, business strategy and measures to implement that strategy, such as changes to operations, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements. These statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including the factors discussed below, as well as other factors which might be described from time to time in our filings with the Securities and Exchange Commission.
All of the forward-looking statements we make in this filing and the information we are incorporating by reference are qualified by these cautionary statements. There can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business and operations. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. The following are some of the factors we think could cause our actual results to differ materially from expected and historical results. Other factors besides those listed here could also adversely affect the Company. All subsequent forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the factors described below and in the documents containing such forward-looking statements.
Because we have recently sold a number of our business units, 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 1998, 1999 and 2000, we divested several non-core business units. 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 affect 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.
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 . changing concepts of national defense . political developments abroad
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.
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 66% of our net sales in 2000 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 2000, sales to international customers accounted for approximately 21% of our net sales. We expect that international sales will continue to account for a substantial portion of our net sales 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
. general economic and geopolitical conditions, including international hostilities, 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 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 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
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 in new product development. 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 technology which gains 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 significantly 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.
Sometimes we enter into contracts on a firm, fixed-price basis. This allows us to benefit from cost savings, but carries 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 would have a negative impact on our financial results. As previously disclosed, during 2000 our financial results were negatively impacted by cost overruns on certain fixed price contracts.
In connection with the sale of RE&C on July 7, 2000, the Company has retained certain liabilities and risks.
The retained liabilities and risks include the following:
o Raytheon has retained responsibility for the performance of four large, fixed price international turnkey projects that are close to completion and partially indemnified the buyer on the completion of one other existing contract. The ultimate cost to complete these projects may be higher than the Company has estimated.
o Raytheon has retained certain assets and liabilities of its engineering and construction business, the ultimate value of which may differ from the amount recorded at December 31, 2000.
o Raytheon has continuing exposure under existing guarantees, surety bonds and letters of credit related to a number of ongoing projects. The ultimate impact of these potential obligations on the Company's financial condition is uncertain.
o The purchase and sale agreement provides for a purchase price adjustment based on a cut-off date balance sheet that has not yet been finalized. Any disputes related to a purchase price adjustment are subject to binding arbitration.
While these risks or the impact of these risks are difficult to predict, any one or more of these factors could have a material adverse impact on our financial condition.
We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain 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.
A significant portion of our labor force is unionized, and our failure to maintain stable relationships with our unions could seriously harm our business.
Approximately 16,000 of our employees are unionized, which represented approximately 18% of our employees at December 31, 2000. As a result, we may experience work stoppages from time to time, 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 rights plan, which limits the ability of anyone to acquire more than 15% of our Class A or Class B 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 deterring potential acquirers 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 and the Hughes Separation Agreement, both of which are incorporated as exhibits 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. 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.
Our dual class capital structure may depress the value of your Class B Common Stock.
We have two distinct classes of common stock - Class A Common Stock and Class B Common Stock. With respect to all actions other than the election or removal of
directors, holders of Class A Common Stock and Class B Common Stock have equal voting rights. With respect to the election or removal of directors only, holders of Class A Common Stock have 80.1% of the total voting power. Holders of Class B Common Stock have the remaining 19.9% of the voting power. If you hold Class B Common Stock, the value of your securities may be depressed by the disparity in voting power. Furthermore, while shares of both our Class A and Class B Common Stock currently trade on the New York Stock Exchange, the Chicago Stock Exchange and the Pacific Exchange, the listing policies of each of these exchanges with respect to corporations with dual-class capitalizations may change in the future, and in the future such policies may not allow for the continued listing of both our Class A and Class B Common Stock.
The Company has announced plans to eliminate the dual class capital structure and reclassify the Class A and Class B Common Stock into a single new class of common stock. The proposed elimination of the dual class capital structure has been approved by the Company's Board of Directors and is subject to approval by majority vote of the outstanding Class A and Class B shares, with each voting class voting separately. Accordingly, there can be no assurance that the proposed elimination will happen.
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 and engineering and construction markets in which we participate
Item 2.
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, 2000, the Company utilized approximately 47 million square feet of floor space for manufacturing, engineering, research, administration, sales and warehousing, approximately 97% of which was located in the United States. Of such total, approximately 32% was owned, approximately 63% was leased, and approximately 5% was made available under facilities contracts for use in the performance of United States Government contracts. At December 31, 2000 the Company had approximately 2.2 million square feet of additional floor space that was not in use, including approximately 1.4 million square feet in Company-owned facilities.
There are no major encumbrances on any of the Company's plants or equipment 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 contain all equipment and facilities necessary to operate at present levels.
At December 31, 2000, 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 & Information Systems -- Fullerton, CA; Aurora, CO; 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; and Norfolk and Reston, VA;
. Commercial Electronics -- Andover, MA; Kiel, Germany; Portsmouth, UK; and Malaga, Spain; and Midland, Ontario;
. Aircraft -- Selma, AL; Salina, KS; and Wichita, KS;
. Corporate -- Lexington, MA.
A summary of the utilized floor space at December 31, 2000, by business segment, follows:
(in square feet with 000's omitted)
See "Item 1. Factors that Could Affect Future Results" above and "Item 3.
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, or could lead to 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.
During October, November and December 1999, the Company and two of its officers were named as defendants in purported class action lawsuits filed in the United States District Court for the District of Massachusetts on October 14, 1999 by Merrill Roth (No. 99-12143NG), on October 15, 1999 by Robert Johnson (No. 99-12146PBS) and Jeffrey Gelfand (No. 99-121954JLT), on October 18, 1999 by Sidney Meisel (No. 99-12142PBS) and A. Richard Albrecht (No. 99-12178PBS), on October 19, 1999 by Barbara Rice (No. 99-12185NG), on October 26, 1999 by David DeForrest (No. 99-12222PBS) and Maureen Rocks (No. 99-12225PBS), on November 3, 1999 by Deborah Isaac (No. 99-12297PBS), on November 8, 1999 by Jay Fleishman (No. 99-12339PBS), on December 1, 1999 by Lasensky Paper Stock PSP (No. 99- 12463NG), and on December 10, 1999 by Osprey Partners Investment Management, LLC (No. 99-12539-PB); in the United States District Court for the Southern District of New York on October 25, 1999 by Raymond Masri (No. 99-10789); and in the United States District Court for the District of Maryland on October 21, 1999 by Edwin Hankin (No. S-99-3211) (collectively the "Complaints"). The Complaints have been consolidated in the United States District Court for the District of Massachusetts (the "Court"). The Court appointed a lead plaintiff and, on June 12, 2000, a Consolidated and Amended Class Action Complaint (the "Consolidated Complaint") was filed, naming four additional former or present officers as defendants and alleging a 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, which the plaintiffs opposed. The Court heard argument on the motion to dismiss on February 9, 2001 and has taken the motion under advisement.
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 Company anticipates that the two Delaware actions (collectively, the "Derivative Complaints") will be consolidated in the future. The Derivative Complaints contain allegations similar to those included in the Complaints 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.
Although the Company believes that it and the other defendants have meritorious defenses to the claims made in both the Consolidated Complaint and the Derivative Complaints and intends to contest the lawsuits vigorously, an adverse resolution 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 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 governmental contracting.
The U.S. Customs Service 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 reached 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.
In November 1999, the Company filed a complaint against Towers, Perrin, Forster & Crosby (TPF&C) in the U.S. District Court for the District of Massachusetts. The complaint arises out of a series of events concerning certain Hughes Electronics pension plans (the "Hughes Plans"), portions of which were acquired by the Company in connection with the merger with Hughes Defense. Specifically, the complaint alleges that the Company was damaged by (i) false representations made to the Company by TPF&C regarding the amount of surplus in the Hughes Plans and (ii) errors committed by TPF&C in providing administrative services to the Hughes Plans. The complaint seeks damages in an amount to be determined at trial. This matter has been transferred to the U.S. District Court for the Central District of California.
The description of the Company's disputes with Hughes Electronics regarding (i) the determination of the final purchase price for Hughes Defense and (ii) a claim by the Company against Hughes Electronics concerning the accuracy and completeness of disclosures made by Hughes Electronics prior to the merger of Raytheon Company and HE Holdings, Inc. contained in the Company's Annual Report to Stockholders for the year ended December 31, 2000 at pages 26-31 and in Note K to the Company's Financial Statements, respectively, is incorporated herein by reference.
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 operations after giving effect to provisions already recorded.
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 K to the Company's Financial Statements included in the Company's Annual Report to Stockholders for the year ended December 31, 2000, and is incorporated herein by reference.
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 claims and legal proceedings generally incidental to the normal course of business are pending or threatened 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 effect on the Company's financial position, liquidity or results of operations after giving effect to provisions already recorded.
Item 4.
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: 54
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:
Philip W. Cheney: Vice President - Engineering since May 1998. Prior to assuming his present position, Dr. Cheney was Vice President - Commercial Electronics from July 1994. Prior thereto, Dr. Cheney was Vice President - Engineering from February 1990. Age: 65
Kenneth C. Dahlberg: Executive Vice President - Business Development and President, Raytheon International, Inc. since January 2000. Prior to assuming his present positions, Mr. Dahlberg was Executive Vice President and President and Chief Operating Officer of Raytheon Systems Company since December 1997. Prior thereto, Mr. Dahlberg was Senior Vice President of Hughes Aircraft Company from September 1994 and Vice President of Hughes Electronics Corporation from May 1993. Age: 56
Dennis M. Donovan: Senior Vice President - Human Resources since October 1998. Prior to assuming his present position, Mr. Donovan was Vice President - Human Resources of GE Power Systems from 1991. Age: 52
Richard A. Goglia: Vice President and Treasurer since January 1999. Prior to assuming such position, Mr. Goglia was Director, International Finance from March 1997; and Senior Vice President--Corporate Finance, GE Capital Corporation from 1989. Age: 49
Thomas D. Hyde: Senior Vice President and General Counsel since January 2000. Prior to assuming his present position, Mr. Hyde was Senior Vice President, Secretary and General Counsel from September 1998; Senior Vice President and General Counsel from February 1998; and Vice President and General Counsel from February 1994. Age: 52
James L. Infinger: Vice President and Chief Information Officer since October 1997. Prior to assuming his present position Mr. Infinger was Senior Vice President and Chief Information Officer of CompUSA, Inc. from June 1994. Age: 43
Francis S. Marchilena: Executive Vice President and President - Command, Control, Communication & 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 of the former Raytheon Systems Company. Age: 55
Edward S. Pliner: Vice President and Corporate Controller since April 2000. Prior to assuming his present position, Mr. Pliner was Partner of PricewaterhouseCoopers LLP from September 1995. Age: 43
William H. Swanson: Executive Vice President 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. Age: 52
Hansel E. Tookes, II: Executive Vice President and Chairman and Chief Executive Officer of Raytheon Aircraft Company since August 2000. Prior to assuming his present position, Mr. Tookes was President and Chief Executive Officer of Raytheon Aircraft Company from January 2000 and President and Chief Operating Officer of Raytheon Aircraft Company from September 1999. Prior thereto, Mr. Tookes was President of Pratt & Whitney's Large Military Engines group from 1996 and Executive Vice President of Aircraft Products of Hamilton Standard from 1994. Age: 53
PART II
Item 5.
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
At December 31, 2000, there were 249,475 record holders of the Company's Class A common stock and 17,689 record holders of the Company's Class B common stock. Additional information required by this Item 5 is contained on page 52 of Raytheon's Annual Report to Stockholders for the year ended December 31, 2000 and in Note O to Raytheon's Financial Statements for the years ended December 31, 2000, 1999 and 1998 and is incorporated herein by reference.
On March 7, 2000 the Company issued an aggregate $2.25 billion of notes consisting of the following: $200 million principal face amount floating rate notes due 2002 (the "Floating Rate Notes"); an aggregate $800 million principal face amount notes due 2003 (the "7.90% Notes"); an aggregate $850 million principal face amount notes due 2006 (the "8.20% Notes"); an aggregate $400 million principal face amount notes due 2010 (the "8.30% Notes" and, together with the Floating Rate Notes, 7.90% Notes and 8.20% Notes the "Notes"). The group of underwriters of the Notes was lead by Credit Suisse First Boston and Morgan Stanley Dean Witter. The offering price of the Floating Rate Notes was 100%, resulting in proceeds to the Company of 99.75% ($199,500,000) after underwriting discounts and commissions of .250% ($500,000). The offering price of the 7.90% Notes was 99.830%, resulting in proceeds to the Company of 99.480% ($795,840,000) after underwriting discounts and commissions of .520% ($4,160,000). The offering price of the 8.20% Notes was 99.979%, resulting in proceeds to the Company of 99.379% ($844,721,500) after underwriting discounts and commissions of .621% ($5,278,500). The offering price of the 8.30% Notes was 99.862%, resulting in proceeds to the Company of 99.212% ($396,848,000) after underwriting discounts and commissions of .788% ($3,152,000).
The Notes were offered and sold to (i) Qualified Institutional Buyers as defined in Rule 144A of the Securities Act in transactions exempt from registration pursuant to Rule 144A, (ii) a limited number of other institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of the Securities Act in private sales exempt from registration under the Securities Act in minimum denominations of $100,000, and/or (iii) to non-U.S. persons outside the United States in reliance on Regulation S of the Securities Act in transactions meeting the requirements of Regulation S. The proceeds of the Notes were used to reduce commercial paper and bank borrowings with various maturities and bearing interest at various rates.
Pursuant to the terms of a Registration Rights Agreement executed in connection with the issuance of the Debentures, the Company filed an exchange offer registration statement on Form S-4 in July 2000 covering the offer by the Company to exchange
floating rate exchange notes due 2002, 7.90% exchange notes due 2003, 8.20% exchange notes due 2006 and 8.30% exchange notes due 2010 registered under the Securities Act of 1933 for the outstanding Floating Rate Notes, 7.90% Notes, 8.20% Notes and 8.30% Notes, respectively.
Item 6.
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 Annual Report to Stockholders for the year ended December 31, 2000 on page 25 and is incorporated herein by reference.
Item 7.
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 Annual Report to Stockholders for the year ended December 31, 2000 on pages 26 through 31 and is incorporated herein by reference.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item 7A is contained in the Company's Annual Report to Stockholders for the year ended December 31, 2000 on pages 30 and 31 and is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data
Selected quarterly financial data and the financial statements and supplementary data of the Registrant are contained in the Company's Annual Report to Stockholders for the year ended December 31, 2000 in Note O and on pages 32 through 50, respectively, and are incorporated herein by reference. Schedules required under Regulation S-X are filed as "Financial Statement Schedules" pursuant to Item 14 hereof.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
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 25, 2001 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.
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 25, 2001 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.
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 25, 2001 under the caption "Stock Ownership" and is incorporated herein by reference.
Item 13.
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 25, 2001 under the caption "Certain Relationships and Related Transactions" and is incorporated herein by reference.
PART IV
Item 14.
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 and Subsidiaries Consolidated, as contained in Raytheon's 2000 Annual Report to Stockholders, are hereby incorporated by reference:
Balance Sheets at December 31, 2000 and 1999
Statements of Income for the Years Ended
December 31, 2000, 1999 and 1998
Statements of Stockholders' Equity for the Years Ended December 31, 2000, 1999 and 1998
Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998
(2) The following financial statement schedule is included herein:
Schedule II, Reserves for the Three Years Ended December 31, 2000
Schedules I, III and IV are omitted because they are not required, not applicable or the information is otherwise included.
(b) Reports on Form 8-K
Raytheon Company Current Report on Form 8-K filed with the Securities and Exchange Commission on February 25, 2000
Raytheon Company Current Report on Form 8-K filed with the Securities and Exchange Commission on December 1, 2000
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of January 16, 1997 by and between Raytheon Company and HE Holdings, Inc., filed as an exhibit to Former Raytheon's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 17, 1997, is hereby incorporated by reference.
2.2 Hughes Spin-Off Separation Agreement dated as of December 17, 1997 by and between HE Holdings, Inc. and General Motors Corporation filed as an exhibit to the Company's Registration Statement on Form S-3, File No. 333-44321, is hereby incorporated by reference.
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 hereby incorporated by reference.
4.1 Indenture 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 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.
4.3 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.
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 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.
10.5 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.
10.6 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.
10.7 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.
10.8 Form of Raytheon Company Change in Control Severance Agreement, filed as an exhibit to Former Raytheon's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, is hereby incorporated by reference. The Company has entered into Change in Control Severance Agreements in the form of Agreement filed as Exhibit 10.8 with each of the following executives: Franklyn A. Caine, Francis S. Marchilena and William H. Swanson. The agreements are designed to provide the executive with certain severance benefits following a termination, all as more fully described in the form of Agreement. The Company has also entered into Change in Control Severance Agreements in the form of Agreement filed as Exhibit 10.8 with six other executives, but which are immaterial to the Company. The agreements are designed to provide the executive with certain severance benefits following a termination, all as more fully described in the form of Agreement.
10.9 Restricted Unit Award Agreement between the Company and Dennis J. Picard, filed as an exhibit to Former Raytheon's Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, is hereby incorporated by reference.
10.10 Form of Executive Change in Control Severance Agreement, filed as an exhibit to the Company's Registration Statement on Form S- 4, File No. 333-37223, is incorporated herein by reference. The Company has entered into Executive Change in Control Severance Agreements in the form of Agreement filed as Exhibit 10.10 with each of the following executives: Kenneth C. Dahlberg, Louise L. Francesconi, Robert L. Horowitz, Donald R. Infante and Jack O. Pearson. Such agreements are designed to provide the executive with certain payments if still employed by the Company at the end of the second and third years after the Spin-Off Merger Effective Time, all as more fully described in the form of Agreement.
10.11 Form of Executive Retention Agreement, filed as an exhibit to the Company's Registration Statement on Form S-4, File No. 333- 37223, is incorporated herein by reference. The Company has entered into Executive Retention Agreements in the form of Agreement filed as Exhibit 10.11 with each of the following executives: Kenneth C. Dahlberg, Louise L. Francesconi, Robert L. Horowitz, Donald R. Infante, and Jack O. Pearson. Such agreements are designed to provide the executive with certain payments if still employed by the Company at the end of the second and third years after the Spin-Off Merger Effective Time, all as more fully described in the form of Agreement.
10.12 Agreement dated as of June 15, 1998 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 Agreement dated February 22, 1999 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 dated December 17, 1999 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 Retention Agreement between Raytheon Company and Hansel E. Tookes, II dated as of April 7, 2000.*
10.16 Raytheon Company $4 billion Credit Facility -- Five Year Competitive Advance and Revolving Credit Facility, filed as an exhibit to Former Raytheon's Quarterly Report on Form 10-Q for the quarter ended March 30, 1997, is hereby incorporated by reference.
10.17 HE Holdings, Inc. $3 billion Credit Facility - 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.
10.18 Amended and Restated Purchase and Sale Agreement dated as of March 18, 1999 among Raytheon Aircraft Credit Corporation, Raytheon Aircraft Receivables Corporation and the Purchasers named therein, filed as an exhibit to Raytheon's Annual Report on Form 10-K for the year ended December 31, 1998, is hereby incorporated by reference.
10.19 Amendment and Restatement dated as of November 9, 1999 to the Amended and Restated Purchase and Sale Agreement dated as of March 18, 1999 among Raytheon Aircraft Credit Corporation, Raytheon Aircraft Receivables Corporation and the Purchasers named therein, filed as an exhibit to Raytheon's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated by reference.
10.20 Reaffirmation of Amended and Restated Repurchase Agreement dated as of March 10, 2000 of the Amended and Restated Repurchase Agreement, dated as of March 18, 1999 made by Raytheon Aircraft Company.*
10.21 First Amendment, dated as of June 27, 2000, to the Second Amended and Restated Purchase and Sale Agreement, dated as of March 10, 2000, among Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit Corporation, Bank of America, N.A., The Chase Manhattan Bank, Citibank, N.A. and Credit Suisse First Boston.*
10.22 Second Amendment, dated as of October 31, 2000, to the Second Amended and Restated Purchase and Sale Agreement, dated as of March 10, 2000, among Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit Corporation, the Bank of America, N.A., the Chase Manhattan Bank, Citibank, N.A. and Credit Suisse First Boston.*
10.23 Amended and Restated Guarantee dated as of March 18, 1999, made by Raytheon Company in favor of the Purchasers named therein and Bank of America National Trust and Savings Association, as Managing Facility Agent, filed as an exhibit to Raytheon's Annual Report on Form 10-K for the year ended December 31, 1998, is hereby incorporated by reference.
10.24 Reaffirmation of Amended and Restated Guarantee dated as of March 10, 2000, of the Amended and Restated Guarantee, dated as of March 18, 1999 made by Raytheon Company.*
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.
13 Raytheon Company 2000 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).*
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.)
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 5, 2001
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 Executive March 5, 2001 - --------------------- Officer (Principal Executive Daniel P. Burnham Officer)
/s/ Barbara M. Barrett Director March 5, 2001 - ---------------------- Barbara M. Barrett
/s/ Ferdinand Colloredo-Mansfeld Director March 5, 2001 - -------------------------------- Ferdinand Colloredo-Mansfeld
/s/ John M. Deutch Director March 5, 2001 - ------------------ John M. Deutch
Director - ---------------------- Thomas E. Everhart
/s/ John R. Galvin Director March 5, 2001 - ------------------ John R. Galvin
/s/ L. Dennis Kozlowski Director March 5, 2001 - ----------------------- L. Dennis Kozlowski
/s/ Henrique de Campos Meirelles Director March 5, 2001 - -------------------------------- Henrique de Campos Meirelles
/s/ Dennis J. Picard Director March 5, 2001 - -------------------- Dennis J. Picard
/s/ Frederic M. Poses Director March 5, 2001 - --------------------- Frederic M. Poses
/s/ Warren B. Rudman Director March 5, 2001 - -------------------- Warren B. Rudman
Director - ------------------------ Michael C. Ruettgers
/s/ William R. Spivey Director March 5, 2001 - --------------------- William R. Spivey
Director - ------------------- Alfred M. Zeien
/s/ Edward S. Pliner Vice President and Corporate March 5, 2001 - -------------------- Controller (Chief Accounting Edward S. Pliner Officer)
RAYTHEON COMPANY ---------------- SCHEDULE II - RESERVES FOR THE THREE YEARS ENDED DECEMBER 31, 2000 ------------------------------------------- (In millions)
Note (1) - Uncollectible accounts and adjustments, less recoveries
EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated as of January 16, 1997 by and between Raytheon Company and HE Holdings, Inc., filed as an exhibit to Former Raytheon's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 17, 1997, is hereby incorporated by reference.
2.2 Hughes Spin-Off Separation Agreement dated as of December 17, 1997 by and between HE Holdings, Inc. and General Motors Corporation filed as an exhibit to the Company's Registration Statement on Form S-3, File No. 333-44321, is hereby incorporated by reference.
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 hereby incorporated by reference.
4.1 Indenture 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 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.
4.3 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.
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 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.
10.5 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.
10.6 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.
10.7 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.
10.8 Form of Raytheon Company Change in Control Severance Agreement, filed as an exhibit to Former Raytheon's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, is hereby incorporated by reference. The Company has entered into Change in Control Severance Agreements in the form of Agreement filed as Exhibit 10.8 with each of the following executives: Franklyn A. Caine, Francis S. Marchilena and William H. Swanson. The agreements are designed to provide the executive with certain severance benefits following a termination, all as more fully described in the form of Agreement. The Company has also entered into Change in Control Severance Agreements in the form of Agreement filed as Exhibit 10.8 with six other executives, but which are immaterial to the Company. The agreements are designed to provide the executive with certain severance benefits following a termination, all as more fully described in the form of Agreement.
10.9 Restricted Unit Award Agreement between the Company and Dennis J. Picard, filed as an exhibit to Former Raytheon's Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, is hereby incorporated by reference.
10.10 Form of Executive Change in Control Severance Agreement, filed as an exhibit to the Company's Registration Statement on Form S- 4, File No. 333-37223, is incorporated herein by reference. The Company has entered into Executive Change in Control Severance Agreements in the form of Agreement filed as Exhibit 10.10 with each of the following executives: Kenneth C. Dahlberg, Louise L. Francesconi, Robert L. Horowitz, Donald R. Infante and Jack O. Pearson. Such agreements are designed to provide the executive with certain payments if still employed by the Company at the end of the second and third years after the Spin-Off Merger Effective Time, all as more fully described in the form of Agreement.
10.11 Form of Executive Retention Agreement, filed as an exhibit to the Company's Registration Statement on Form S-4, File No. 333- 37223, is incorporated herein by reference. The Company has entered into Executive Retention Agreements in the form of Agreement filed as Exhibit 10.11 with each of the following executives: Kenneth C. Dahlberg, Louise L. Francesconi, Robert L. Horowitz, Donald R. Infante, and Jack O. Pearson. Such agreements are designed to provide the executive with certain payments if still employed by the Company at the end of the second and third years after the Spin-Off Merger Effective Time, all as more fully described in the form of Agreement.
10.12 Agreement dated as of June 15, 1998 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 Agreement dated February 22, 1999 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 dated December 17, 1999 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 Retention Agreement between Raytheon Company and Hansel E. Tookes, II dated as of April 7, 2000.*
10.16 Raytheon Company $4 billion Credit Facility -- Five Year Competitive Advance and Revolving Credit Facility, filed as an exhibit to Former Raytheon's Quarterly Report on Form 10-Q for the quarter ended March 30, 1997, is hereby incorporated by reference.
10.17 HE Holdings, Inc. $3 billion Credit Facility - 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.
10.18 Amended and Restated Purchase and Sale Agreement dated as of March 18, 1999 among Raytheon Aircraft Credit Corporation, Raytheon Aircraft Receivables Corporation and the Purchasers named therein, filed as an exhibit to Raytheon's Annual Report on Form 10-K for the year ended December 31, 1998, is hereby incorporated by reference.
10.19 Amendment and Restatement dated as of November 9, 1999 to the Amended and Restated Purchase and Sale Agreement dated as of March 18, 1999 among Raytheon Aircraft Credit Corporation, Raytheon Aircraft Receivables Corporation and the Purchasers named therein, filed as an exhibit to Raytheon's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated by reference.
10.20 Reaffirmation of Amended and Restated Repurchase Agreement dated as of March 10, 2000 of the Amended and Restated Repurchase Agreement, dated as of March 18, 1999 made by Raytheon Aircraft Company.*
10.21 First Amendment, dated as of June 27, 2000, to the Second Amended and Restated Purchase and Sale Agreement, dated as of March 10, 2000, among Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit Corporation, Bank of America, N.A., The Chase Manhattan Bank, Citibank, N.A. and Credit Suisse First Boston.*
10.22 Second Amendment, dated as of October 31, 2000, to the Second Amended and Restated Purchase and Sale Agreement, dated as of March 10, 2000, among Raytheon Aircraft Receivables Corporation, Raytheon Aircraft Credit Corporation, the Bank of America, N.A., the Chase Manhattan Bank, Citibank, N.A. and Credit Suisse First Boston.*
10.23 Amended and Restated Guarantee dated as of March 18, 1999, made by Raytheon Company in favor of the Purchasers named therein and Bank of America National Trust and Savings Association, as Managing Facility Agent, filed as an exhibit to Raytheon's Annual Report on Form 10-K for the year ended December 31, 1998, is hereby incorporated by reference.
10.24 Reaffirmation of Amended and Restated Guarantee dated as of March 10, 2000, of the Amended and Restated Guarantee, dated as of March 18, 1999 made by Raytheon Company.*
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.
13 Raytheon Company 2000 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).*
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.)