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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): March 16, 1998
RAYTHEON COMPANY
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(Exact name of registrant as specified in its charter)
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Delaware 1-13699 95-1778500
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(State of Incorporation) (Commission File (IRS Employer
Number) Identification
Number)
141 Spring Street
Lexington, Massachusetts 02173
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (781) 862-6600
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ITEM 5. OTHER ITEMS.
POTENTIAL YEAR 2000 ISSUES
Raytheon Company, a Delaware corporation ("Raytheon" or the "Company")
is in the process of conducting a comprehensive review of its computer systems
to identify the systems that could be affected by the "Year 2000" issue and has
initiated an enterprise-wide program to resolve the issue. The Company
continues to evaluate appropriate courses of corrective action, including
modification or replacement of certain systems. Maintenance or modification
costs will be expensed as incurred, while the costs of new software will be
capitalized and amortized over the software's estimated useful life.
The Company expects to utilize both internal staff and outside
consultants and will incur other expenses related to infrastructure and
facilities enhancements necessary to prepare the systems for the year 2000. A
significant portion of these costs are not likely to be incremental costs to the
Company, but rather will represent the deployment of existing information
technology resources. Accordingly, the Company does not expect the amounts
required to be expensed to have a material effect on its financial position or
results of operations. The amount expensed in 1997 was not material.
The Company presently believes that, with modifications to existing
software and conversions to new software, the "Year 2000" problem will not pose
significant operational problems for the Company's computer systems. It is
anticipated that all reprogramming efforts will be substantially complete by
December 31, 1998, allowing adequate time for testing. However, if such
modifications, conversions and testing are not completed on a timely basis, the
"Year 2000" problem may have a material impact on the operations of the Company.
While the Company expects to complete its "Year 2000" remediation efforts on a
timely basis, the "Year 2000" problem creates risk for the Company from problems
from third parties with whom the Company deals. Such failures of the third
parties' computer systems could have a material impact on the Company's ability
to conduct its business.
CERTAIN LITIGATION
On December 17, 1997, Raytheon merged with and into the defense business
("Hughes Defense") of Hughes Electronics Corporation ("Hughes Electronics"),
with the surviving company renamed "Raytheon Company". Prior to the merger, the
business of Hughes Defense was conducted by Hughes Aircraft Company ("HAC"), an
indirect subsidiary of Hughes Electronics.
Since 1985, several actions seeking compensatory and punitive damages in
unspecified amounts have been filed against HAC by plaintiffs alleging that they
suffered injuries as a result of the migration of alleged toxic substances into
the Tucson, Arizona water supply. These substances were disposed of at a
facility owned by the United States Government which HAC operated and Raytheon
now operates under a contract with the U.S. Air Force.
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In 1991, HAC settled with the approximately 2,000 plaintiffs in one of
these cases, Valenzuela v. Hughes Aircraft Company, for $84.5 million. HAC's
primary and excess insurance carriers contributed approximately $71 million
toward the Valenzuela settlement and HAC contributed approximately $13 million.
Subsequently, several of HAC's insurance carriers have sought or are seeking
reimbursement of the amounts they paid. Certain of these actions have been
settled or dismissed without prejudice, pending resolution of other related
toxic tort actions and exhaustion of HAC's primary insurance coverage. If the
insurers that have not settled with HAC prevail in the insurance coverage
litigation, the Company may ultimately bear responsibility for a substantial
portion of the Valenzuela settlement.
Several other actions arising out of migration of alleged toxic
substances into the Tucson water supply are still pending, including:
1. Cordova v. Hughes Aircraft Company, et al., which was filed by
an estimated 90,000 member class against HAC, McDonnell Douglas
Corporation, General Dynamics Corporation and the Tucson Airport
Authority as co-defendants. The court denied class certification
in 1996. Fewer than 200 property damage and injury claims (with
associated loss of consortium claims) remain.
2. Yslava v. Hughes Aircraft Company, an action filed by
approximately 800 individual plaintiffs, alleging injury claims
(with associated loss of consortium claims). HAC filed third
party claims against McDonnell Douglas Corporation, General
Dynamics Corporation, the Tucson Airport Authority and the City
of Tucson.
3. Lanier v. Hughes Aircraft Company, et al., a class action
seeking medical monitoring for an estimated class of 50,000
residents from the southside of Tucson.
The Company is vigorously defending these actions, and believes both
that it has strong defenses to the claims asserted against it and that it has
claims for contribution against other entities. In addition, the Company has
obtained state and federal court decisions requiring its insurers to pay defense
costs in these actions. Although the Company believes that it has good bases for
seeking indemnity coverage from its carriers, it cannot reasonably estimate
what, if any, coverage may, in fact, be available.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: March 17, 1998
RAYTHEON COMPANY
By: /s/ Christoph L. Hoffman
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Name: Christoph L. Hoffmann
Title: Executive Vice President
Law and Corporate Administration,
and Secretary
