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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/X/ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 28, 1998
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ............
to ...............
Commission File Number 1-13699
RAYTHEON COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-1778500
(State or Other Jurisdiction of
Incorporation or Organization) (I.R.S. Employer Identification No.)
141 SPRING STREET, LEXINGTON, MASSACHUSETTS 02421
(Address of Principal Executive Offices) (Zip Code)
(781) 862-6600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
Number of shares of Common Stock outstanding as of June 28, 1998:
338,241,000, consisting of 102,599,000 shares of Class A Common Stock and
235,642,000 shares of Class B Common Stock.
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2
RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS
(Unaudited)
June 28, 1998 Dec. 31, 1997
(In millions)
ASSETS
Current assets
Cash and marketable securities $ 317 $ 296
Accounts receivable, less
allowance for doubtful
accounts 886 1,056
Federal and foreign income
taxes, including deferred 979 1,244
Contracts in process 5,359 4,661
Inventories 2,031 1,837
Prepaid expenses 129 139
------- -------
Total current assets 9,701 9,233
Property, plant and equipment, net 2,813 2,891
Other assets, net 16,613 16,474
------- -------
Total assets $29,127 $28,598
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and current portion
of long-term debt $ 4,430 $ 5,656
Advance payments, less contracts
in process 673 525
Accounts payable 1,824 1,845
Accrued salaries and wages 643 680
Accrued expenses 2,948 3,180
-------- -------
Total current liabilities 10,518 11,886
Accrued retiree benefits 1,064 1,095
Federal and foreign income taxes,
including deferred 844 786
Long-term debt 5,994 4,406
Stockholders' equity 10,707 10,425
------- -------
Total liabilities and
stockholders' equity $29,127 $28,598
======= =======
The accompanying notes are an integral part of the financial statements.
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RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, 1998 June 29, 1997 June 28, 1998 June 29, 1997
(In millions except per share amounts)
<S> <C> <C> <C> <C>
Net sales $5,078 $3,325 $9,652 $6,224
------ ------ ------ ------
Cost of sales 3,939 2,570 7,497 4,791
Administrative and selling expenses 372 282 718 542
Research and development expenses 154 91 298 170
Special charge 84 -- 84 --
------ ------ ------ ------
Total operating expenses 4,549 2,943 8,597 5,503
------ ------ ------ ------
Operating income 529 382 1,055 721
------ ------ ------ ------
Interest expense 186 74 366 143
Interest and dividend income (4) (9) (12) (15)
Other (income) expense, net (99) 3 (102) 1
------ ------ ------ ------
Non-operating expense, net 83 68 252 129
------ ------ ------ ------
Income before taxes 446 314 803 592
Federal and foreign income taxes 176 104 319 199
------ ------ ------ ------
Net income $ 270 $ 210 $ 484 $ 393
====== ====== ====== ======
Earnings per common share
Basic $0.80 $0.89 $1.43 $1.67
Diluted $0.79 $0.88 $1.41 $1.65
Dividends declared per common share $0.20 $0.20 $0.40 $0.40
The accompanying notes are an integral part of the financial statements.
</TABLE>
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RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 28, June 29,
1998 1997
(In millions)
<S> <C> <C>
Cash flows from operating activities
Net income $ 484 $ 393
Adjustments to reconcile net income to net cash
used in operating activities, net of the
effect of acquired companies
Depreciation and amortization 393 193
Net gain on sale of operating units (94) --
Sale of receivables 554 761
Increase in accounts receivable (534) (764)
Increase in contracts in process (725) (400)
Increase in inventories (276) (118)
(Increase) decrease in long-term receivables (27) 14
Increase in advance payments 148 17
Increase in accounts payable 15 132
Net change in federal and foreign income taxes 261 33
(Decrease) increase in other current liabilities (365) 9
Other adjustments, net (73) (137)
------- ------
Net cash (used in) provided by operating activities (239) 133
------- ------
Cash flows from investing activities
Additions to property, plant and equipment (241) (201)
Increase in other assets (22) (8)
Payments related to the purchase of acquired
companies (86) (6)
Proceeds from sale of operating units 364 --
Proceeds from sale of other assets 42 --
Other adjustments, net -- (74)
------- ------
Net cash provided by (used in) investing activities 57 (289)
------- ------
Cash flows from financing activities
Dividends (136) (95)
(Decrease) increase in short-term debt (1,220) 284
Increase (decrease) in long-term debt 1,588 (4)
Purchase of treasury shares (94) (18)
Proceeds under common stock plans 45 20
All other, net -- 14
------- ------
Net cash provided by financing activities 183 201
------- ------
Effect of foreign exchange rates on cash -- (2)
------- ------
Net increase in cash and cash equivalents 1 43
Cash and cash equivalents at beginning of year 296 137
------- ------
Cash and cash equivalents at end of period 297 180
Marketable securities 20 --
------- ------
Total cash and marketable securities $ 317 $ 180
======= ======
The accompanying notes are an integral part of the financial statements.
</TABLE>
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5
RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared on
substantially the same basis as the company's Annual Consolidated Financial
Statements. These interim unaudited financial statements should be read in
conjunction with the company's Annual Report on Form 10-K for the year ended
December 31, 1997. The information furnished has been prepared from the accounts
without audit. In the opinion of management, these financial statements reflect
all adjustments, which are of a normal recurring nature, necessary for a fair
presentation of the financial statements for the interim periods. Certain prior
year amounts have been reclassified to conform with the current year
presentation.
2. Acquisitions
The company acquired the Texas Instruments' defense business (TI
Defense) in July 1997 and merged with the defense business of Hughes Electronics
Corporation (Hughes Defense) in December 1997. The assets acquired and
liabilities assumed in connection with these two transactions have been included
in the financial statements based on preliminary estimates of fair value, and
may be revised as additional information becomes available. As a result, the
financial information included in the company's financial statements is subject
to adjustment from subsequent revisions in estimates of fair value, if any are
necessary.
3. Restructuring
In January 1998, the company announced plans to reduce the newly
formed Raytheon Systems Company (RSC) workforce by 8,700 employees and reduce
facility space by approximately 8 million square feet. The company continues to
implement previously announced consolidation, integration and cost reductions
associated with RSC while reassessing the structure and operations of this
business. Through June 28, 1998, RSC employment has been reduced by
approximately 3,000 people and more than 2 million square feet have been
vacated.
In January 1998, the company also announced plans to reduce the
Raytheon Engineers & Constructors (RE&C) workforce by 1,000 employees and close
or partially close 16 offices, or approximately 1.1 million square feet.
The company is reassessing the structure and operations of this business, while
implementing the previously announced cost reduction initiatives. Through
June 28, 1998, RE&C employment has been reduced by nearly 900 people and RE&C
has vacated more than 700 thousand square feet.
Cash expenditures under the restructuring initiatives outlined above
through June 28, 1998 were $11 million for employee severance and related items
and $16 million for facility and office closures.
4. Special Purpose Entities
In connection with the sale of receivables noted in the Statement of
Cash Flows, the following special purpose entities had been established as of
June 28, 1998 and June 29, 1997, in accordance with Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities: Raytheon Aircraft
Receivables Corporation and Raytheon Engineers & Constructors Receivables
Corporation. Additionally, the following special purpose entities had been
established as of June 29, 1997: Raytheon Appliances/Amana Receivables
Corporation, Raytheon Commercial Appliances Finance Corporation and Raytheon
Commercial Appliances Receivables Corporation.
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<TABLE>
<CAPTION>
5. Balance Sheet Details
Certain balance sheet accounts consisted of the following at:
June 28, 1998 Dec. 31, 1997
(In millions)
<S> <C> <C>
Inventories
Finished goods $ 347 $ 314
Work in process 1,114 1,168
Materials and purchased parts 723 509
Excess of current cost over LIFO values (153) (154)
------- -------
Total inventories $ 2,031 $ 1,837
======= =======
Property, plant and equipment
At cost $ 5,206 $ 5,250
Accumulated depreciation and amortization (2,393) (2,359)
------- -------
Property, plant and equipment, net $ 2,813 $ 2,891
======= =======
Other assets
Prepaid pension and other noncurrent assets $ 2,939 $ 2,638
Excess of cost over net assets of acquired
companies, net of accumulated amortization 13,674 13,836
------- -------
Other assets, net $16,613 $16,474
======= =======
Stockholders' equity
Preferred stock, no outstanding shares $ -- $ --
Class A common stock, outstanding shares 1 1
Class B common stock, outstanding shares 2 2
Additional paid-in capital 6,170 6,151
Equity adjustments (44) (23)
Retained earnings 4,578 4,294
------- -------
Total stockholders' equity $10,707 $10,425
======= =======
</TABLE>
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6. Long-term Debt
In March 1998, the company issued $500 million of notes due 2001 which
have a coupon rate of 5.95 percent, $450 million of notes due 2005 which have a
coupon rate of 6.3 percent, $300 million of notes due 2010 which have a coupon
rate of 6.55 percent and $350 million of debentures due 2018 which have a coupon
rate of 6.75 percent. The notes due in 2001 and 2005 are not redeemable prior to
maturity. The notes due in 2010 and the debentures due in 2018 are redeemable
under certain circumstances.
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<TABLE>
<CAPTION>
7. Earnings per Share
Basic and diluted earnings per share (EPS) were calculated as follows:
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income (in millions) $270 $210 $484 $393
Share information (in thousands)
Average common shares outstanding
for basic EPS 338,366 235,709 338,458 235,682
Dilutive effect of stock options and
restricted stock 4,772 2,939 4,657 2,918
------- ------- ------- ------
Average common shares outstanding
for diluted EPS 343,138 238,648 343,115 238,600
Basic EPS $0.80 $0.89 $1.43 $1.67
Diluted EPS $0.79 $0.88 $1.41 $1.65
</TABLE>
Options to purchase 6.1 million and 3.6 million shares of common stock
outstanding at June 28, 1998 and June 29, 1997, respectively did not affect the
computation of diluted EPS for the three and six months then ended. The exercise
prices for these options were greater than the average market price of the
company's common stock during the respective periods.
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8. Comprehensive Income
The company adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income (SFAS No. 130), in the first quarter of
1998. SFAS No. 130 established standards for reporting comprehensive income and
its components, classified by their nature, in a full set of annual financial
statements. The components of other comprehensive income for the company
generally include foreign currency translation adjustments, minimum pension
liability adjustments and unrealized gains and losses on marketable securities
classified as available-for-sale.
The computation of comprehensive income follows:
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(In millions)
Net income $270 $210 $484 $393
Other comprehensive
income (5) (2) (21) (22)
---- ---- ---- ----
Total comprehensive
income $265 $208 $463 $371
==== ==== ==== ====
9. Subsequent Events
In July 1998, the company announced that it had entered into an
agreement to acquire AlliedSignal's Communications Systems business for
approximately $63 million. Also in July 1998, the company announced that it
had entered into an agreement to sell its Raytheon Systems Limited Flight
Training business. In August 1998, the company announced that it had entered
into an agreement to sell a portion of its Second Generation Ground Based
Electro Optics assets and a portion of its Focal Plane Array business. Expected
proceeds from these dispositions are approximately $114 million. There can be no
assurance that these sales will be consummated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Second quarter 1998 compared with second quarter 1997
- -------------------------------------------------------------------------------
Raytheon Company reported record second quarter 1998 earnings of $270
million, up 29% over 1997, on record sales of $5.1 billion. For the second
quarter of 1997, earnings were $210 million on sales of $3.3 billion.
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Second quarter 1998 diluted earnings per share were $0.79 based on
343.1 million average shares outstanding. Diluted earnings per share for the
second quarter of 1997 were $0.88 based on 238.6 million average shares
outstanding. The company issued 102.6 million shares of Class A common stock in
December 1997 in connection with the merger with Hughes Defense. Second quarter
1998 earnings, excluding non-recurring items, were $263 million, or $0.77 per
diluted share.
The company's second quarter 1998 results included non-recurring items
with a net favorable effect of $7 million after tax, or $0.02 per diluted share.
These items include an after-tax gain of $61 million, or $0.18 per diluted
share, from the sale of the company's commercial laundry business unit, its
European-based electronics controls business, and Seiscor Technologies, Inc., a
telephone transmission equipment business. The company also recorded a special
charge of $54 million after tax, or $0.16 per diluted share. The special charge
consisted of $27 million to write-down to estimated realizable value certain
assets the company has decided to sell and $27 million as the current estimated
asset impairment for a commercial electronics manufacturing operation located in
Korea. The company continues to monitor the status of this operation and its
impact on the company's commercial electronics business. While the company
cannot predict the ultimate outcome of this matter, in the opinion of
management, any liability arising from it will not have a material effect on the
company's financial position, liquidity or results of operations for the year
after giving effect to provisions already recorded.
The electronics businesses reported record second quarter 1998
operating income of $509 million, excluding the special charge, on sales of $3.8
billion. The 1998 results are significant increases over 1997 results primarily
due to the acquisition of TI Defense in July 1997 and the merger with Hughes
Defense in December 1997. The company continues to implement previously
announced consolidation, integration and cost reductions associated with the
newly formed Raytheon Systems Company (RSC) while reassessing the structure and
operations of this business. To date this year, RSC has reduced its workforce by
approximately 3,000 people and vacated more than 2 million square feet.
Raytheon Aircraft reported record second quarter 1998 sales of $639
million, compared with $620 million a year ago, and record operating income of
$74 million, an improvement of 21 percent compared with the same period a year
ago. The aircraft segment again experienced increased shipments of general
aviation aircraft and improved profit margins in all of its turbine aircraft
product lines. Raytheon Aircraft's Travel Air fractional ownership program also
contributed to the year-to-year improvement.
Raytheon Engineers & Constructors reported second quarter 1998 sales
of $618 million, an increase of 9 percent compared with the same period a year
ago. Operating income was $30 million, essentially flat compared to the first
quarter of 1998, and a 33 percent decrease compared with the same period a year
ago. The engineering and construction industry climate continues to be
difficult. While revenues increased over the previous year, volume growth,
particularly in lump sum turnkey international orders has not progressed as
anticipated, resulting in continued margin pressure. The company is reassessing
the structure and operations of this business, while implementing previously
announced cost reduction initiatives. Through the second quarter of 1998, RE&C
has reduced its workforce by nearly 900 people and vacated more than 700
thousand square feet of space.
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Sales to the U.S. Department of Defense were $3,193 million or 63
percent of consolidated sales in the second quarter of 1998 versus $1,506
million or 45 percent of consolidated sales in the second quarter of 1997. Total
sales to the U.S. government were $3,323 million or 65 percent of consolidated
sales in the second quarter of 1998 versus $1,368 million or 41 percent of
consolidated sales in the second quarter of 1997. The increase was due
principally to the acquisition of TI Defense and the merger with Hughes Defense.
Administrative and selling expenses increased to $372 million in the
second quarter of 1998 from $282 million in the second quarter of 1997. The
increase was due principally to the acquisition of TI Defense and the merger
with Hughes Defense, partially offset by the sale of the company's home
appliance, heating and air conditioning and commercial cooking operations in
September 1997.
Research and development expenses increased to $154 million in the
second quarter of 1998 from $91 million in the first quarter of 1997 due
principally to the acquisition of TI Defense and the merger with Hughes Defense.
Operating income was $529 million or 10.4 percent of sales in the
second quarter of 1998 versus $382 million or 11.5 percent of sales in the
second quarter of 1997. Operating income excluding the special charge was $613
million or 12.1 percent of sales in the second quarter of 1998.
Interest expense in the second quarter of 1998 increased to $186
million from $74 million in the second quarter of 1997 due principally to the
higher debt level resulting from the acquisition of TI Defense and the merger
with Hughes Defense.
Other income, net in the second quarter of 1998 of $99 million
included a $94 million pre-tax gain from divestitures.
Six months 1998 versus six months 1997
For the first six months of 1998, Raytheon's net income was $484
million on sales of $9.7 billion, or $1.41 per diluted share based on 343.1
million average shares outstanding. Net income for the first six months of 1998,
excluding non-recurring items, was $477 million, or $1.39 per diluted share. For
the first six months of 1997, net income was $393 million on sales of $6.2
billion, or $1.65 per diluted share based on 238.6 million shares outstanding.
Sales to the U.S. Department of Defense were $5,355 million or 55
percent of consolidated sales during the first six months of 1998 versus $2,084
million or 33 percent of consolidated sales during the first six months of 1997.
Total sales to the U.S. government were $6,358 million or 66 percent of
consolidated sales during the first six months of 1998 versus $2,689 million or
43 percent of consolidated sales during the first six months of 1997. The
increase was due principally to the acquisition of TI Defense and the merger
with Hughes Defense.
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Operating income was $1,055 million or 10.9 percent of sales for the
first six months of 1998 versus $721 million or 11.6 percent of sales for the
first six months of 1997. Operating income, excluding the special charge, was
$1,139 million or 11.8 percent of sales in the second quarter of 1998.
Administrative and selling expenses increased to $718 million for the
first six months of 1998 from $542 million for the first six months of 1997 due
principally to the acquisition of TI Defense and the merger with Hughes Defense,
partially offset by the sale of the company's home appliance, heating and air
conditioning and commercial cooking operations in September 1997.
Research and development expenses increased to $298 million for the
first six months of 1998 from $170 million for the first six months of 1997 due
principally to the acquisition of TI Defense and the merger with Hughes Defense.
Interest expense for the first six months of 1998 increased to $366
million from $143 million for the first six months of 1997 due principally to
the higher debt level resulting from the acquisition of TI Defense and the
merger with Hughes Defense.
Other income, net for the first six months of 1998 of $102 million
included a $94 million pre-tax gain from divestitures.
The effective tax rate of 39.7 percent for the first six months of
1998 reflects primarily the United States statutory rate of 35 percent reduced
by Foreign Sales Corporation tax credits and research and development tax
credits applicable to certain government contracts, offset by non-deductible
amortization of goodwill.
Total employment was approximately 114,900 at June 28, 1998,
approximately 119,200 at December 31, 1997 and approximately 74,200 at June 29,
1997. The increase from June 29, 1997 was due principally to the acquisition of
TI Defense and the merger with Hughes Defense.
The company operates in three major business areas: Electronics, both
commercial and defense, Engineering and Construction and Aircraft. The business
operations within the Electronics segment outlined below were formed in
conjunction with the planned consolidation and organization of the company's
electronics businesses and the creation of Raytheon Systems Company in December
1997. Certain prior year amounts were reclassified to conform with the current
year presentation, including the reclassification of Cedarapids, Inc. from
Engineering and Construction to Commercial Electronics.
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Segment financial information follows (in millions):
Sales Segment Income
Three Months Ended Three Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
Defense Systems $1,264 $197
Sensors and Electronic
Systems 742 121
Intelligence, Information
and Aircraft
Integration Systems 715 80
Command, Control and
Communication Systems,
Training, Services,
Commercial Electronics
and Other 1,100 111
------ ----
Total Electronics 3,821 $2,137 509 $276
Engineering and Construction 618 568 30 45
Aircraft 639 620 74 61
------ ------ ---- ----
Total $5,078 $3,325 $613 $382
====== ====== ==== ====
Sales Segment Income
Six Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
Defense Systems $2,431 $374
Sensors and Electronic
Systems 1,387 222
Intelligence, Information
and Aircraft
Integration Systems 1,370 163
Command, Control and
Communication Systems,
Training, Services,
Commercial Electronics
and Other 2,204 209
------ ------
Total Electronics 7,392 $4,106 968 $543
Engineering and Construction 1,162 1,064 63 89
Aircraft 1 098 1,054 108 89
------ ------ ------ ----
Total $9,652 $6,224 $1,139 $721
====== ====== ====== ====
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Backlog consisted of the following at:
June 28, Dec. 31, June 29,
1998 1997 1997
(In millions)
Electronics $15,625 $16,641 $ 7,581
Engineering and Construction 2,691 2,900 3,288
Aircraft 2,148 1,709 1,607
------- ------- -------
Total backlog $20,464 $21,250 $12,476
U.S. government backlog
included above $11,589 $12,547 $ 5,425
Financial Condition and Liquidity
During the first six months of 1998 funds used in operating activities
were $239 million, $372 million more than during the first six months of 1997,
due principally to increased working capital requirements in support of the
electronics businesses and Raytheon Aircraft.
Capital expenditures were $241 million during the first six months of
1998 versus $201 million during the first six months of 1997. Capital
expenditures for the full year 1998 are expected to be above the 1997 level due
principally to the acquisition of TI Defense and the merger with Hughes Defense.
During the first six months of 1998, the company made payments of $86
million for transaction related expenditures incurred in connection with the
acquisition of TI Defense and the merger with Hughes Defense.
During the second quarter of 1998, the company sold its commercial
laundry business unit, its European-based electronics controls business, and
Seiscor Technologies, Inc., a telephone transmission equipment business.
Proceeds from these divestitures were $364 million in cash and $19 million in
securities. The company has been divesting non-core assets as part of its
strategy to focus and streamline its core businesses.
Dividends declared to stockholders during the first six months of 1998
were $136 million versus $95 million during the first six months of 1997. The
quarterly dividend rate was $0.20 per share for the first two quarters of 1998
and the first two quarters of 1997.
During the first six months of 1998, outstanding shares were reduced
by the repurchase of 1.6 million shares on the open market at a cost of $94
million.
In February 1995, the Board of Directors authorized the repurchase of
up to 12 million shares of the company's common stock and in January 1998, the
Board of Directors ratified and reauthorized the repurchase of the remaining 2.5
million shares originally authorized. There have been 9.7 million shares
purchased under these authorizations through June 28, 1998. There were 0.2
million shares repurchased under this program during the first six months of
1998.
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In January 1998, the Board of Directors authorized the purchase of up
to 5 million shares of the company's common stock per year over the next five
years to counter the dilution due to the exercise of stock options. There were
1.4 million shares repurchased under this program during the first six months of
1998 to offset 1.4 million shares issued due to the exercise of employee stock
options.
Debt, net of cash and marketable securities, was $10,107 million at
June 28, 1998 as compared with $9,766 million at December 31, 1997. Net debt, as
a percent of capital, was 49 percent at June 28, 1998 as compared with 48
percent at December 31, 1997.
During the first six months of 1998, the company issued $1.6 billion
of long-term notes and debentures, reduced the company's short-term borrowings
by $1.2 billion and essentially completed the company's previously announced
plans to refinance the acquisition of TI Defense and the merger with Hughes
Defense.
Lines of credit with certain commercial banks exist as sources of
direct borrowing and/or as a standby facility to support the issuance of
commercial paper by the company. The lines of credit were $7.4 billion and $9.0
billion at June 28, 1998 and December 31, 1997, respectively. At June 28, 1998,
there were no borrowings under these lines of credit. At December 31, 1997, $3.5
billion had been borrowed under the lines of credit.
The company's need for, cost of and access to funds are dependent on
future operating results, as well as conditions external to the company. The
company believes that its cash position and its sources of and access to capital
markets are adequate to support current operations.
Year 2000 Date Conversion
The company is in the process of conducting a comprehensive review to
identify the computer systems that could be affected by the "Year 2000" issue,
and is conducting a major enterprise-wide program to resolve the issues. The
company continues to evaluate appropriate courses of corrective action. The
company has made significant progress to-date in the detection activities, with
certain corrective actions underway. The company is also in the process of
evaluating potential product-related implications that may result from the "Year
2000" issue. The "Year 2000" issue also creates risk for the company from
unforeseen problems from suppliers and vendors with whom the company deals. The
company is in the process of contacting its key suppliers and other vendors to
determine the possible impact on its business. To address this issue, the
company plans to audit the "Year 2000" compliance of selected vendors. While the
company presently believes that the "Year 2000" issue will not pose significant
operational problems to the company and expects no material impacts, there can
be no assurance that the company's program will be successful.
Accounting Standards
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This accounting
standard, which is effective for fiscal years beginning after December 15, 1998,
requires that certain costs incurred in connection with internal-use computer
software projects be capitalized. The adoption of SOP 98-1 is not expected to
have a material effect on the company's financial position or results of
operations.
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In April 1998, the AICPA issued Statement of Position 98-5, Reporting
on the Costs of Start-Up Activities. This accounting standard, which is
effective for fiscal years beginning after December 15, 1998, requires that
certain costs of start-up activities and organization costs be expensed as
incurred. The adoption of SOP 98-1 is not expected to have a material effect on
the company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. This accounting standard, which
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999, requires that all derivatives be recognized as either assets or
liabilities at fair value. The effect of adopting SFAS No. 133 on the company's
financial position and results of operations has not yet been determined.
On January 1, 1999, eleven participating countries of the European
Union will convert to a common currency, the euro, which will become their
official currency. National currencies will initially remain legal tender. The
company is currently conducting an internal analysis to determine the impact of
the euro conversion on its business; however, the euro conversion is not
expected to have a material impact on the company's business.
Forward-Looking Statements
Statements which are not historical facts contained in this Report are
forward-looking statements under the provisions of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. These risks
include, in addition to the specific uncertainties referenced in this report,
the effect of worldwide political and market conditions, the impact of
competitive products and pricing and the timing of awards and contracts,
particularly international contracts. Further information regarding the factors
that could cause actual results to differ materially from projected results can
be found in Raytheon's reports filed with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the year ended December
31, 1997.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
At the annual meeting of stockholders held on May 27, 1998, the
stockholders of the company took the following action:
1. The holders of Class A common stock and Class B common stock, voting
together as a single class, elected the following four directors for terms of
office expiring at the annual meeting of stockholders in the year 2001:
Name For Withhold
John M. Deutch 920,634,913 14,017,062
James N. Land, Jr. 920,638,832 14,013,143
Henrique de Campos Meirelles 919,012,762 15,639,213
Dennis J. Picard 919,241,875 15,410,101
<PAGE>
17
The following directors continued in office after the meeting:
Ferdinand Colloredo-Mansfeld, Steven D. Dorfman, Thomas E. Everhart, John R.
Galvin, Barbara B. Hauptfuhrer, Richard D. Hill, L. Dennis Kozlowski, Thomas L.
Phillips, Warren B. Rudman and Alfred M. Zeien.
2. The holders of Class A common stock and Class B common stock,
voting as separate classes, rejected a stockholder proposal which recommended
that the company adopt the CERES principles. The Class A vote was 4,624,786 for
and 60,461,682 against, with 2,536,296 abstentions and 12,168,929 broker
non-votes. The Class B vote was 14,120,038 for and 159,296,345 against, with
7,133,531 abstentions and 13,076,587 broker non-votes.
3. The holders of Class A common stock and Class B common stock,
voting as separate classes, rejected a stockholder proposal which recommended
that the company prepare a comprehensive report on its foreign military sales.
The Class A vote was 2,287,727 for and 61,730,187 against, with 3,599,703
abstentions and 12,174,077 broker non-votes. The Class B vote was 10,377,513 for
and 163,643,944 against, with 6,528,456 abstentions and 13,076,587 broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Termination, Replacement and Restatement Agreement dated as of May 1,
1998 among Raytheon Company and the Lenders named therein establishing
a new Facility R 364-Day Credit Agreement.
10.2 Termination, Replacement and Restatement Agreement dated as of May 1,
1998 among Raytheon Company and the Lenders named therein establishing
a new Facility H 364-Day Credit Agreement.
10.3 Agreement dated as of June 15, 1998 between Raytheon Company and
Daniel P. Burnham.
27 Financial Data Schedule (filed only electronically with the Securities
and Exchange Commission).
99 Restated and Amended Financial Data Schedules for the years 1995,
1996, 1997 and 1998 (filed only electronically with the Securities
and Exchange Commission).
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements 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 (Registrant)
By: /s/ Peter R. D'Angelo
Peter R. D'Angelo
Executive Vice President and
Chief Financial Officer
August 12, 1998
<PAGE>
1
NO. EXHIBIT LIST
10.1 Termination, Replacement and Restatement Agreement dated as of May 1,
1998 among Raytheon Company and the Lenders named therein establishing
a new Facility R 364-Day Credit Agreement.
10.2 Termination, Replacement and Restatement Agreement dated as of May 1,
1998 among Raytheon Company and the Lenders named therein establishing
a new Facility H 364-Day Credit Agreement.
10.3 Agreement dated as of June 15, 1998 between Raytheon Company and
Daniel P. Burnham.
27 Financial Data Schedule (filed only electronically with the Securities
and Exchange Commission).
99 Restated and Amended Financial Data Schedules for the years 1995,
1996, 1997 and 1998 (filed only electronically with the Securities
and Exchange Commission).
<PAGE>
1
EXHIBIT 10.1
TERMINATION, REPLACEMENT AND RESTATEMENT AGREEMENT (this "TRR
Agreement") dated as of May 1, 1998, among RAYTHEON COMPANY, a Delaware
corporation (the "Borrower"), the financial institutions listed in Annex I
hereto under the captions "Continuing Lenders" (the "Continuing Lenders") and
"Additional Lenders" (the "Additional Lenders", and together with the Continuing
Lenders, the "Lenders"), BANCAMERICA ROBERTSON STEPHENS, as Syndication Agent,
CANADIAN IMPERIAL BANK OF COMMERCE and CREDIT SUISSE FIRST BOSTON, as
Documentation Agents, and THE CHASE MANHATTAN BANK, a New York banking
corporation, as administrative agent (in such capacity, the "Administrative
Agent") for the Lenders. Capitalized terms used and not defined herein shall
have the meanings assigned to such terms in the New Credit Agreement (as defined
below).
WHEREAS, the Borrower, the Continuing Lenders, certain other lenders
and the Administrative Agent are parties to an 364-day Credit Agreement dated as
of May 2, 1997 (the "Original Credit Agreement");
WHEREAS, the Original Credit Agreement is to be terminated as provided
herein; and
WHEREAS, the Continuing Lenders and the Additional Lenders are
willing, subject to the terms and conditions of this TRR Agreement, to replace
the Original Credit Agreement with a new credit agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual agreements contained in
this TRR Agreement and other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Replacement and Restatement. Subject to the conditions set
forth in Section 3 hereof:
(a) the Original Credit Agreement, including all schedules and
exhibits thereto, is hereby terminated, subject to applicable provisions set
forth therein as to the survival of certain rights and obligations, and
simultaneously replaced by a new credit agreement (the "New Credit Agreement")
identical in form and substance to the Original Credit Agreement except as
expressly set forth below.
(b) The heading of the New Credit Agreement shall read as follows:
"FACILITY R 364-DAY CREDIT AGREEMENT dated as of May 1, 1998, among
RAYTHEON COMPANY, a Delaware corporation (the "Borrower"), the Lenders (as
defined in Article I), BANCAMERICA ROBERTSON STEPHENS, as Syndication Agent (in
such capacity the "Syndication Agent"), CANADIAN IMPERIAL BANK OF COMMERCE and
CREDIT SUISSE FIRST BOSTON, as Documentation Agents (in such capacity, each a
"Documentation Agent" and, collectively, the "Documentation Agents"), and THE
CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent
(in such capacity, the "Administrative Agent") for the Lenders."
and all references to the "Closing Date" in the New Credit Agreement shall be
deemed to refer to May 1, 1998.
<PAGE>
2
(c) (i) The definition of "Maturity Date" in Section 1.01 of the New
Credit Agreement shall read as follows:
" 'Maturity Date' shall mean April 30, 1999."
(d) All references to the "Hughes Credit Agreements" in the New Credit
Agreement shall be deemed to refer to the Hughes Credit Agreements and any
replacements and restatements thereof.
(e) Section 3.05 of the New Credit Agreement shall read as follows:
"The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet, statement of income and statement of cash flows as of and for the
fiscal year ended December 31, 1997, audited by and accompanied by the opinion
of Coopers & Lybrand, independent public accountants. Such financial statements
present fairly the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries as of such date and for such period. Such
balance sheet and the notes thereto disclose all material liabilities, direct or
contingent, of the Borrower and its consolidated Subsidiaries as of the date
thereof. Such financial statements were prepared in accordance with GAAP applied
on a consistent basis."
(f) Section 3.06 of the New Credit Agreement shall read as follows:
"There has been no material adverse change in the business, assets,
operations or condition, financial or otherwise, of the Borrower and the
Subsidiaries, taken as a whole, since December 31, 1997."
(g) The references to "May 2, 1997" in Exhibit A, Exhibit B, Exhibit
C, Exhibit D-1, Exhibit D-2, Exhibit D-3 and Exhibit D-4 of the Original Credit
Agreement shall be changed to references to "May 1, 1998" in the New Credit
Agreement.
(h) Schedule 2.01 to the New Credit Agreement shall be in the form of
Schedule 2.01 to this TRR Agreement.
SECTION 2. Representations and Warranties. The Borrower represents and
warrants to each of the Lenders that:
(a) This TRR Agreement and the New Credit Agreement have been duly
authorized and, in the case of this TRR Agreement, executed and delivered by it
and constitute its legal, valid and binding obligations enforceable in
accordance with their terms.
(b) The representations and warranties set forth in Article III of the
New Credit Agreement, after giving effect to this TRR Agreement, are true and
correct in all material respects on the date hereof, with the same effect as if
made on the date hereof, except to the extent such representations and
warranties expressly relate to an earlier date.
<PAGE>
3
(c) Before and after giving effect to this TRR Agreement, no Default
or Event of Default has occurred and is continuing.
SECTION 3. Conditions to Effectiveness. This TRR Agreement shall
become effective as of May 1, 1998 (the "Effective Date") upon the occurrence of
the following conditions precedent:
(a) The Administrative Agent shall have received counterparts of this
TRR Agreement which, when taken together, bear the signatures of all the parties
hereto.
(b) The Administrative Agent shall have received, on behalf of itself
and the Lenders, a favorable written opinion of counsel to the Borrower,
substantially to the effect set forth in Exhibits E and F of the Original Credit
Agreement but referring to this TRR Agreement and the New Credit Agreement, (i)
dated the date hereof, (ii) addressed to the Administrative Agent and the
Lenders, and (iii) covering such other matters relating to this TRR Agreement
and the transactions contemplated hereby as the Administrative Agent shall
reasonably request, and the Borrower hereby instructs such counsel to deliver
such opinion.
(c) All legal matters incident to this TRR Agreement, the New Credit
Agreement and the Borrowings and extensions of credit hereunder shall be
satisfactory to the Lenders and to Cravath, Swaine & Moore, counsel for the
Administrative Agent.
(d) The Administrative Agent shall have received on the date hereof
(i) a copy of the certificate or articles of incorporation, including all
amendments thereto, of the Borrower, certified as of a recent date by the
Secretary of State of the State of Delaware, and a certificate as to the good
standing of the Borrower as of a recent date, from such Secretary of State; (ii)
a certificate of the Secretary or Assistant Secretary of the Borrower dated the
date hereof and certifying (A) that attached thereto is a true and complete copy
of the by-laws of the Borrower as in effect on the date hereof and at all times
since a date prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of the Borrower authorizing this TRR Agreement
and the execution, delivery and performance of this TRR Agreement and the
borrowings under the New Credit Agreement, and that such resolutions have not
been modified, rescinded or amended and are in full force and effect, (C) that
the certificate or articles of incorporation of the Borrower have not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing this TRR Agreement
or any other document delivered in connection herewith on behalf of the
Borrower; (iii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; and (iv) such other documents as the Lenders
or Cravath, Swaine & Moore, counsel for the Administrative Agent, may reasonably
request.
<PAGE>
4
(e) The Administrative Agent shall have received a certificate, dated
the date hereof and signed by a Financial Officer of the Borrower, confirming
compliance with the representations and warranties set forth in paragraphs (b)
and (c) of Section 2.
(f) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the date hereof, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.
(g) The commitments under the 364-day Credit Agreement dated as of May
2, 1997, among the Borrower, the lenders party thereto, BankAmerica Robertson
Stephens, as Syndication Agent, Canadian Imperial Bank of Commerce and Credit
Suisse First Boston, as Documentation Agents, and The Chase Manhattan Bank, as
administrative agent shall have been terminated and all principal, interest and
other amounts outstanding thereunder (including all Fees accrued thereunder to
the Closing Date) shall have been paid in full.
SECTION 4. Applicable Law. THIS TRR AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
SECTION 5. Original Credit Agreement. Until the occurrence of the
Effective Date as provided in Section 3 hereof, the Original Credit Agreement
shall continue in full force and effect in accordance with the provisions
thereof and the rights and obligations of the parties thereto shall not be
affected hereby, and all Fees and interest accruing under the Old Credit
Agreement shall continue to accrue at the rates provided for therein.
SECTION 6. Counterparts. This TRR Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract.
SECTION 7. Expenses. The Borrower agrees to reimburse the
Administrative Agent for its out-of-pocket expenses in connection with this TRR
Agreement including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused this TRR
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
RAYTHEON COMPANY,
By:
Name: Herbert Deitcher
Title: Senior VP and Treasurer
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
By:
Name:
Title:
<PAGE>
1
EXHIBIT 10.2
TERMINATION, REPLACEMENT AND RESTATEMENT AGREEMENT (this "TRR
Agreement") dated as of May 1, 1998, among RAYTHEON COMPANY (formerly HE
Holdings, Inc.), a Delaware corporation (the "Borrower"), the financial
institutions listed in Annex I hereto under the captions "Continuing Lenders"
(the "Continuing Lenders") and "Additional Lenders" (the "Additional Lenders",
and together with the Continuing Lenders, the "Lenders"), BANCAMERICA ROBERTSON
STEPHENS, as Syndication Agent, CITICORP USA, INC. AND MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Documentation Agents, and THE CHASEMANHATTAN BANK, a New
York banking corporation, as administrative agent for the Lenders. Capitalized
terms used and not defined herein shall have the meanings assigned to such terms
in the New Credit Agreement (as defined below).
WHEREAS, the Borrower, the Continuing Lenders, certain other lenders
and the Administrative Agent are parties to an 364-day Credit Agreement dated as
of May 30, 1997 (the "Original Credit Agreement");
WHEREAS, the Original Credit Agreement is to be terminated as provided
herein; and
WHEREAS, the Continuing Lenders and the Additional Lenders are
willing, subject to the terms and conditions of this TRR Agreement, to replace
the Original Credit Agreement with a new credit agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual agreements contained in
this TRR Agreement and other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Replacement and Restatement. Subject to the conditions set
forth in Section 3 hereof:
(a) the Original Credit Agreement, including all schedules and
exhibits thereto, is hereby terminated, subject to applicable provisions set
forth therein as to the survival of certain rights and obligations, and
simultaneously replaced by a new credit agreement (the "New Credit Agreement")
identical in form and substance to the Original Credit Agreement except as
expressly set forth below.
(b) The heading of the New Credit Agreement shall read as follows:
"FACILITY H 364-DAY CREDIT AGREEMENT dated as of May 1, 1998, among
RAYTHEON COMPANY, a Delaware corporation (the "Borrower"), the Lenders (as
defined in Article I), BANCAMERICA ROBERTSON STEPHENS, as Syndication Agent, (in
such capacity the "Syndication Agent"), CITICORP USA, INC. AND MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Documentation Agents, (in such capacity, each a
"Documentation Agent" and, collectively, the "Documentation Agents" and, THE
CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent
(in such capacity, the "Administrative Agent") for the Lenders."
and all references to the "Closing Date" in the New Credit Agreement shall be
deemed to refer to May 1, 1998.
<PAGE>
2
(c) (i) The definition of "Maturity Date" in Section 1.01 of the New
Credit Agreement shall read as follows:
" 'Maturity Date' shall mean April 30, 1999."
(d) All references to the "Raytheon Credit Agreements" in the New
Credit Agreement shall be deemed to refer to the Raytheon Credit Agreements and
any replacements and restatements thereof.
(e) Section 3.05 of the New Credit Agreement shall read as follows:
"The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet, statement of income and statement of cash flows as of and for the
fiscal year ended December 31, 1997, audited by and accompanied by the opinion
of Coopers & Lybrand, independent public accountants. Such financial statements
present fairly the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries as of such date and for such period. Such
balance sheet and the notes thereto disclose all material liabilities, direct or
contingent, of the Borrower and its consolidated Subsidiaries as of the date
thereof. Such financial statements were prepared in accordance with GAAP applied
on a consistent basis."
(f) Section 3.06 of the New Credit Agreement shall read as follows:
"There has been no material adverse change in the business, assets,
operations or condition, financial or otherwise, of the Borrower and the
Subsidiaries, taken as a whole, since December 31, 1997."
(g) The references to "May 30, 1997" in Exhibit A, Exhibit B, Exhibit
C, Exhibit D-1, Exhibit D-2, Exhibit D-3 and Exhibit D-4 of the Original Credit
Agreement shall be changed to references to "May 1, 1998" in the New Credit
Agreement.
(h) Schedule 2.01 to the New Credit Agreement shall be in the form of
Schedule 2.01 to this TRR Agreement.
SECTION 2. Representations and Warranties. The Borrower represents and
warrants to each of the Lenders that:
(a) This TRR Agreement and the New Credit Agreement have been duly
authorized and, in the case of this TRR Agreement, executed and delivered by it
and constitute its legal, valid and binding obligations enforceable in
accordance with their terms.
(b) The representations and warranties set forth in Article III of the
New Credit Agreement, after giving effect to this TRR Agreement, are true and
correct in all material respects on the date hereof, with the same effect as if
made on the date hereof, except to the extent such representations and
warranties expressly relate to an earlier date.
<PAGE>
3
(c) Before and after giving effect to this TRR Agreement, no Default
or Event of Default has occurred and is continuing.
SECTION 3. Conditions to Effectiveness. This TRR Agreement shall
become effective as of May 1, 1998 (the "Effective Date") upon the occurrence of
the following conditions precedent:
(a) The Administrative Agent shall have received counterparts of this
TRR Agreement which, when taken together, bear the signatures of all the parties
hereto.
(b) The Administrative Agent shall have received, on behalf of itself
and the Lenders, a favorable written opinion of counsel to the Borrower,
substantially to the effect set forth in Exhibits E and F of the Original Credit
Agreement but referring to this TRR Agreement and the New Credit Agreement, (i)
dated the date hereof, (ii) addressed to the Administrative Agent and the
Lenders, and (iii) covering such other matters relating to this TRR Agreement
and the transactions contemplated hereby as the Administrative Agent shall
reasonably request, and the Borrower hereby instructs such counsel to deliver
such opinion.
(c) All legal matters incident to this TRR Agreement, the New Credit
Agreement and the Borrowings and extensions of credit hereunder shall be
satisfactory to the Lenders and to Cravath, Swaine & Moore, counsel for the
Administrative Agent.
(d) The Administrative Agent shall have received on the date hereof
(i) a copy of the certificate or articles of incorporation, including all
amendments thereto, of the Borrower, certified as of a recent date by the
Secretary of State of the State of Delaware, and a certificate as to the good
standing of the Borrower as of a recent date, from such Secretary of State; (ii)
a certificate of the Secretary or Assistant Secretary of the Borrower dated the
date hereof and certifying (A) that attached thereto is a true and complete copy
of the by-laws of the Borrower as in effect on the date hereof and at all times
since a date prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of the Borrower authorizing this TRR Agreement
and the execution, delivery and performance of this TRR Agreement and the
borrowings under the New Credit Agreement, and that such resolutions have not
been modified, rescinded or amended and are in full force and effect, (C) that
the certificate or articles of incorporation of the Borrower have not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing this TRR Agreement
or any other document delivered in connection herewith on behalf of the
Borrower; (iii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; and (iv) such other documents as the Lenders
or Cravath, Swaine & Moore, counsel for the Administrative Agent, may reasonably
request.
<PAGE>
4
(e) The Administrative Agent shall have received a certificate, dated
the date hereof and signed by a Financial Officer of the Borrower, confirming
compliance with the representations and warranties set forth in paragraphs (b)
and (c) of Section 2.
(f) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the date hereof, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.
(g) The commitments under the 364-day Credit Agreement dated as of May
30, 1997, among the Borrower, the lenders party thereto, BankAmerica Robertson
Stephens, as Syndication Agent, Citicorp USA, Inc. and Morgan Guaranty Trust
Company of New York, as Documentation Agents, and the Chase Manhattan Bank, as
administrative agent shall have been terminated and all principal, interest and
other amounts outstanding thereunder (including all Fees accrued thereunder to
the Closing Date) shall have been paid in full.
SECTION 4. Applicable Law. THIS TRR AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
SECTION 5. Original Credit Agreement. Until the occurrence of the
Effective Date as provided in Section 3 hereof, the Original Credit Agreement
shall continue in full force and effect in accordance with the provisions
thereof and the rights and obligations of the parties thereto shall not be
affected hereby, and all Fees and interest accruing under the Old Credit
Agreement shall continue to accrue at the rates provided for therein.
SECTION 6. Counterparts. This TRR Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract.
SECTION 7. Expenses. The Borrower agrees to reimburse the
Administrative Agent for its out-of-pocket expenses in connection with this TRR
Agreement including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused this TRR Agreement
to be duly executed by their respective authorized officers as of the day and
year first written above.
RAYTHEON COMPANY,
By:
Name: Herbert Deitcher
Title: Senior VP and Treasurer
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
By:
Name:
Title:
<PAGE>
1
EXHIBIT 10.3
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is made and entered into this
15th day of June, 1998, between Raytheon Company, a corporation organized and
existing under the laws of the State of Delaware with its Executive Offices in
Lexington, Massachusetts ("Company" or "Raytheon"), and Daniel P. Burnham ("the
Executive").
1. Employment: The Company has offered to employ the Executive, and the
Executive has accepted employment with the Company, commencing July 1, 1998. The
Executive is an employee at will of the Company.
2. Severance:
(a) If prior to the completion of a full calendar year of employment with
the Company, the Company terminates the employment of the Executive or
demotes the Executive for any reason other than: (i) Cause or
Disability as defined in Section 3 of this Agreement; or (ii) the death
of the Executive, the Company will pay the Executive an amount equal to
the sum of: (a) three times the Executive's starting annual base
salary; and (b) three times the Executive's target annual cash bonus
(the target annual incentive bonus being two hundred percent (200%) of
the Executive's starting annual base salary).
(b) If the Company thereafter terminates the employment of the Executive or
demotes the Executive for any reason other than: (i) Cause or
Disability as defined in Section 3 of this Agreement; or (ii) the death
of the Executive, the Company will pay the Executive an amount equal to
the sum of: (a) three times the Executive's base salary for the
immediately preceding full calendar year; and (b) three times the
annual cash bonus received by the Executive for the immediately
preceding full calendar year.
The Executive must notify the Company in writing within thirty (30)
days after the occurrence of any action, event or circumstance, or any failure
to act by the Company, upon which the Executive bases a claim for severance
under this Agreement. Failure to notify the Company in writing within such
thirty (30) day period will constitute a waiver of the claim, but will not bar
or hinder subsequent claims by the Executive arising out of other actions,
events, circumstances or failures to act by the Company. The Executive will not
receive multiple severance payments under this Agreement, and will be entitled
only to one severance payment under Subsection 2(a) or (b), as the case may be.
<PAGE>
- 2 -
The severance amounts described above, net of any applicable
withholding, will be paid to the Executive in a lump sum within thirty (30) days
following the receipt by the Company of the written notice from the Executive;
provided, however, that if the parties proceed to arbitration of the claim
pursuant to Section 5 of this Agreement, the severance amount awarded by the
arbitrators will be paid by the Company within thirty (30) days after the award.
Upon termination of employment, the Executive will remain vested in any
and all shares of restricted stock or restricted stock equivalents in which he
was vested immediately prior to termination of employment.
3. Definitions:
"Cause" means the Executive's (i) conviction of, or plea of nolo
contendere to, a felony; (ii) use of illegal drugs; or (iii) willful misconduct,
willful neglect or willful negligence in the performance of his duties, which
the Board of Directors reasonably believes has caused demonstrable injury to the
Company, monetary or otherwise, including injury to the goodwill and reputation
of the Company. The acts or events described in (i) through (iii), above, will
constitute Cause only if the Executive is given written notice that the Company
intends to terminate the Executive's employment for Cause, which notice will
specify the particular acts, events or failures to act which perform the basis
for the determination to terminate the employment of the Executive. In the case
of a termination for Cause as described in clause (iii) above, the Executive
will be given the opportunity within thirty (30) days of the receipt of such
notice to meet with the Executive Committee of the Board of Directors to defend
such acts, events or failures to act, prior to termination. The Executive's
title and authority may be suspended pending such meeting.
The term "Disability" as used in this Agreement means a physical or mental
incapacity of the Executive which has prevented him from performing the duties
customarily assigned by the Company for a period of not more than sixty (60)
days, whether or not consecutive, out of any twelve (12) consecutive months, and
which thereafter can reasonably be expected, in the judgment of a physician
selected by the Company, to continue.
4. Notices: Any notice, request, demand or other communication hereunder must be
in writing and will be deemed to have been duly given when personally delivered
to the Corporate Secretary on behalf of the Company or the Executive, as the
case may be, or when delivered by certified mail, return receipt requested, at
the following addresses:
<PAGE>
- 3 -
If to the Company: Senior Vice President - Human Resources
Raytheon Company
141 Spring Street
Lexington MA 02173
If to the Executive: Daniel P. Burnham
6 Essex Road
Summit, NJ 07901
5. Arbitration: Any controversy or dispute between the Company and the Executive
arising under or in connection with this Agreement shall be settled by
arbitration. Arbitration will be conducted in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association before a panel of three arbitrators sitting in Boston,
Massachusetts. The award of the arbitrators will be final and nonappealable, and
judgment may be entered on the award of the arbitrators by any court of
competent jurisdiction. All expenses of the arbitration will be borne by the
Company, including, without limitation, legal fees and expert witnesses,
regardless of the outcome of the arbitration.
6. Section Headings: Sections and other headings contained in this Agreement are
for reference only and will not affect in any way the meaning or interpretation
of the Agreement.
7. Governing Law: This Agreement is governed by the laws of the Commonwealth of
Massachusetts.
8. Enforceability: Should any court of competent jurisdiction issue a final
determination affecting any provision of this Agreement, the provision or
provisions so affected will be automatically conformed to the determination, and
otherwise this Agreement will continue in full force and effect.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the date and year first above written.
Raytheon Company Executive
By: -------------------------- ------------------------------
Thomas D. Hyde
<PAGE>
1
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[CASH] 208,614
[SECURITIES] 1,670
[RECEIVABLES] 948,843
[ALLOWANCES] (22,043)
[INVENTORY] 1,502,983
[CURRENT-ASSETS] 5,275,218
[PP&E] 4,115,749
[DEPRECIATION] (2,531,714)
[TOTAL-ASSETS] 9,840,944
[CURRENT-LIABILITIES] 3,690,423
[BONDS] 1,487,735
[COMMON] 240,690
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 4,051,274
[TOTAL-LIABILITY-AND-EQUITY] 9,840,944
[SALES] 11,804,174
[TOTAL-REVENUES] 11,804,174
[CGS] 9,159,447
[TOTAL-COSTS] 9,159,447
[OTHER-EXPENSES] 440,581
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 196,627
[INCOME-PRETAX] 1,191,683
[INCOME-TAX] 399,195
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 792,488
[EPS-PRIMARY] 3.25
[EPS-DILUTED] 3.22
</TABLE>
- ---------------
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] MAR-31-1996
[CASH] 181,495
[SECURITIES] 1,237
[RECEIVABLES] 902,717
[ALLOWANCES] 0
[INVENTORY] 1,623,756
[CURRENT-ASSETS] 5,509,945
[PP&E] 4,171,314
[DEPRECIATION] 2,569,461
[TOTAL-ASSETS] 10,257,887
[CURRENT-LIABILITIES] 4,058,489
[BONDS] 1,487,089
[COMMON] 239,316
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 4,107,437
[TOTAL-LIABILITY-AND-EQUITY] 10,257,887
[SALES] 2,787,606
[TOTAL-REVENUES] 2,8796063
[CGS] 2,141,289
[TOTAL-COSTS] 2,141,289
[OTHER-EXPENSES] 87,462
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 54,163
[INCOME-PRETAX] 282,068
[INCOME-TAX] 95,582
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 186,486
[EPS-PRIMARY] .78
[EPS-DILUTED] .77
</TABLE>
<PAGE>
3
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] JUN-30-1996
[CASH] 211,532
[SECURITIES] 758
[RECEIVABLES] 1,170,523
[ALLOWANCES] 0
[INVENTORY] 1,713,488
[CURRENT-ASSETS] 6,147,470
[PP&E] 4,366,821
[DEPRECIATION] 2,654,136
[TOTAL-ASSETS] 11,620,923
[CURRENT-LIABILITIES] 5,427,048
[BONDS] 1,496,071
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 236,361
[OTHER-SE] 4,101,186
[TOTAL-LIABILITY-AND-EQUITY] 11,620,923
[SALES] 5,914,385
[TOTAL-REVENUES] 5,914,385
[CGS] 4,576,648
[TOTAL-COSTS] 4,576,648
[OTHER-EXPENSES] 177,464
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 114,857
[INCOME-PRETAX] 595,925
[INCOME-TAX] 200,042
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 395,883
[EPS-PRIMARY] 1.66
[EPS-DILUTED] 1.64
</TABLE>
<PAGE>
4
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] SEP-29-1996
[CASH] 159,834
[SECURITIES] 1,603
[RECEIVABLES] 977,501
[ALLOWANCES] 0
[INVENTORY] 1,765,654
[CURRENT-ASSETS] 6,278,335
[PP&E] 4,446,091
[DEPRECIATION] 2,692,400
[TOTAL-ASSETS] 11,785,748
[CURRENT-LIABILITIES] 5,494,401
[BONDS] 1,493,205
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 236,036
[OTHER-SE] 4,212,331
[TOTAL-LIABILITY-AND-EQUITY] 11,785,748
[SALES] 8,946,745
[TOTAL-REVENUES] 8,946,745
[CGS] 7,004,735
[TOTAL-COSTS] 7,004,735
[OTHER-EXPENSES] 288,326
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 185,684
[INCOME-PRETAX] 821,842
[INCOME-TAX] 238,069
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 583,773
[EPS-PRIMARY] 2.45
[EPS-DILUTED] 2.43
</TABLE>
<PAGE>
5
[TEXT]
[ARTICLE] 5
[LEGEND]
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[CASH] 137,379
[SECURITIES] 1,442
[RECEIVABLES] 828,975
[ALLOWANCES] (20,260)
[INVENTORY] 1,590,967
[CURRENT-ASSETS] 5,527,895
[PP&E] 4,490,359
[DEPRECIATION] (2,688,347)
[TOTAL-ASSETS] 11,198,076
[CURRENT-LIABILITIES] 4,691,833
[BONDS] 1,092,333
[COMMON] 236,250
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 4,361,760
[TOTAL-LIABILITY-AND-EQUITY] 11,198,076
[SALES] 12,330,538
[TOTAL-REVENUES] 12,330,538
[CGS] 9,753,970
[TOTAL-COSTS] 9,753,970
[OTHER-EXPENSES] 357,271
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 256,253
[INCOME-PRETAX] 1,083,462
[INCOME-TAX] 322,311
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 761,151
[EPS-PRIMARY] 3.22
[EPS-DILUTED] 3.17
</TABLE>
<PAGE>
6
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] MAR-30-1997
[CASH] 121,885
[SECURITIES] 11,658
[RECEIVABLES] 843,926
[ALLOWANCES] 0
[INVENTORY] 1,708,748
[CURRENT-ASSETS] 5,926,068
[PP&E] 4,547,144
[DEPRECIATION] 2,693,866
[TOTAL-ASSETS] 11,496,419
[CURRENT-LIABILITIES] 4,947,469
[BONDS] 1,498,530
[COMMON] 236,287
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 4,481,400
[TOTAL-LIABILITY-AND-EQUITY] 11,496,419
[SALES] 2,899,148
[TOTAL-REVENUES] 2,899,148
[CGS] 2,220,526
[TOTAL-COSTS] 2,220,526
[OTHER-EXPENSES] 79,075
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 68,875
[INCOME-PRETAX] 278,366
[INCOME-TAX] 94,956
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 183,410
[EPS-PRIMARY] .78
[EPS-DILUTED] .77
</TABLE>
<PAGE>
7
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] JUN-29-1997
[CASH] 180,234
[SECURITIES] 1,040
[RECEIVABLES] 811,907
[ALLOWANCES] 0
[INVENTORY] 1,708,915
[CURRENT-ASSETS] 6,177,470
[PP&E] 4,666,848
[DEPRECIATION] 2,743,852
[TOTAL-ASSETS] 11,843,050
[CURRENT-LIABILITIES] 5,136,144
[BONDS] 1,496,634
[COMMON] 236,336
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 4,641,203
[TOTAL-LIABILITY-AND-EQUITY] 11,843,050
[SALES] 6,223,894
[TOTAL-REVENUES] 6,223,894
[CGS] 4,790,874
[TOTAL-COSTS] 4,790,874
[OTHER-EXPENSES] 169,547
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 142,783
[INCOME-PRETAX] 592,231
[INCOME-TAX] 199,319
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 392,912
[EPS-PRIMARY] 1.66
[EPS-DILUTED] 1.65
</TABLE>
<PAGE>
8
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] SEPT-28-1997
[CASH] 266,633
[SECURITIES] 1,051
[RECEIVABLES] 953,652
[ALLOWANCES] 0
[INVENTORY] 1,652,815
[CURRENT-ASSETS] 6,553,969
[PP&E] 4,928,196
[DEPRECIATION] 2,881,238
[TOTAL-ASSETS] 15,256,152
[CURRENT-LIABILITIES] 5,345,121
[BONDS] 4,386,377
[COMMON] 236,331
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 4,778,765
[TOTAL-LIABILITY-AND-EQUITY] 15,256,152
[SALES] 9,669,204
[TOTAL-REVENUES] 9,669,204
[CGS] 7,426,576
[TOTAL-COSTS] 7,426,576
[OTHER-EXPENSES] 290,057
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 262,593
[INCOME-PRETAX] 914,498
[INCOME-TAX] 310,366
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 604,132
[EPS-PRIMARY] 2.56
[EPS-DILUTED] 2.53
</TABLE>
<PAGE>
9
[ARTICLE] 5
[MULTIPLIER] 1,000,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[CASH] 296
[SECURITIES] 0
[RECEIVABLES] 1,056
[ALLOWANCES] (22)
[INVENTORY] 1,837
[CURRENT-ASSETS] 9,233
[PP&E] 5,250
[DEPRECIATION] (2,359)
[TOTAL-ASSETS] 28,598
[CURRENT-LIABILITIES] 11,886
[BONDS] 4,406
[COMMON] 3
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 10,425
[TOTAL-LIABILITY-AND-EQUITY] 28,598
[SALES] 13,673
[TOTAL-REVENUES] 13,673
[CGS] 10,584
[TOTAL-COSTS] 10,584
[OTHER-EXPENSES] 910
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 397
[INCOME-PRETAX] 790
[INCOME-TAX] 263
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 527
[EPS-PRIMARY] 2.20
[EPS-DILUTED] 2.18
</TABLE>
<PAGE>
10
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] MAR-29-1998
[CASH] 312
[SECURITIES] 20
[RECEIVABLES] 1,116
[ALLOWANCES] 0
[INVENTORY] 2,059
[CURRENT-ASSETS] 9,801
[PP&E] 5,376
[DEPRECIATION] (2,510)
[TOTAL-ASSETS] 29,192
[CURRENT-LIABILITIES] 10,812
[BONDS] 5,990
[COMMON] 3
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 10,532
[TOTAL-LIABILITY-AND-EQUITY] 29,192
[SALES] 4,574
[TOTAL-REVENUES] 4,574
[CGS] 3,558
[TOTAL-COSTS] 3,558
[OTHER-EXPENSES] 144
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 179
[INCOME-PRETAX] 358
[INCOME-TAX] 143
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 215
[EPS-PRIMARY] 0.63
[EPS-DILUTED] 0.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-28-1998
<CASH> 297
<SECURITIES> 20
<RECEIVABLES> 886
<ALLOWANCES> 0
<INVENTORY> 2,031
<CURRENT-ASSETS> 9,701
<PP&E> 5,206
<DEPRECIATION> (2,393)
<TOTAL-ASSETS> 29,127
<CURRENT-LIABILITIES> 10,518
<BONDS> 5,994
<COMMON> 3
0
0
<OTHER-SE> 10,704
<TOTAL-LIABILITY-AND-EQUITY> 29,127
<SALES> 9,652
<TOTAL-REVENUES> 9,652
<CGS> 7,497
<TOTAL-COSTS> 7,497
<OTHER-EXPENSES> 382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 366
<INCOME-PRETAX> 803
<INCOME-TAX> 319
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 484
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.41
</TABLE>
