<PAGE>
1
Exhibit 99.2
Raytheon Employee Savings and Investment Plan
Financial Statements
to Accompany 1999 Form 5500
Annual Report of Employee Benefit Plan
Under ERISA of 1974
For the Year Ended December 31, 1999
The supplemental schedules to the Plan's Form 5500 are not required since the
Plan's assets are held in a Master Trust. Accordingly, the Plan administrator
must file detailed financial information, including the supplemental schedules,
separately with the Department of Labor.
<PAGE>
2
Report of Independent Accountants
To the Participants and Administrator of
The Raytheon Employee Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the Raytheon Employee Savings and Investment Plan (the "Plan")
at December 31, 1999 and December 31, 1998, and the changes in net assets
available for plan benefits for the year ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Notes A and K to the financial statements, the Plan was amended
to merge and consolidate the Plan into the Raytheon Savings and Investment Plan.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 16,2000
<PAGE>
3
Statements of Net Assets Available for Plan Benefits
As of December 31, 1999 and 1998
1999 1998
Assets
Master trust investments:
At contract value (Notes B, E and M):
Investment contracts $152,581,183 $ 20,713,337
Common collective trust 2,741,885 405,365
At fair value (Notes B and M):
Registered investment companies 189,241,065 31,699,672
Common collective trust 62,574,915 10,496,295
Raytheon Company common stock 85,131,829 8,925,215
Common stock 7,967,256 -
Participant loans 44,414,163 6,229,708
------------ ------------
544,652,296 78,469,592
------------ ------------
Receivables:
Employer contributions 3,556,816 -
Accrued investment income and
other receivables 947,795 75,163
Transfer receivable (Note J) - 210,313,280
Cash and cash equivalents 9,876,650 2,117,237
------------ ------------
Total assets $559,033,557 $290,975,272
------------ ------------
Liabilities
Payable for outstanding purchases $ 356,829 $ 21,566
Accrued expenses and other payables 141,490 32,586
Transfer payable (Note K) 558,535,238 -
------------ ------------
Total liabilities $559,033,557 $ 54,152
------------ ------------
Net assets available for plan benefits $ - $290,921,120
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
4
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1999
Additions to net assets attributable to:
Investment income (Notes B, E and M):
Net depreciation of investments $(39,103,026)
Interest and dividends 30,193,248
------------
(8,909,778)
Contributions and deferrals:
Employee deferrals 44,477,008
Employer contributions 23,990,930
Transfers (Note J) 274,605,975
------------
343,073,913
Total additions 334,164,135
------------
Deductions from net assets attributable to:
Distributions to participants 50,443,869
Administrative expenses 72,190
Transfers and Plan merger (Note I and K) 574,569,196
------------
Total deductions 625,085,255
------------
Decrease in net assets (290,921,120)
Net assets, beginning of year 290,921,120
------------
Net assets, end of year $ -
============
<PAGE>
5
Notes to Financial Statements
A. Description of Plan
General
The following description of the Raytheon Employee Savings and
Investment Plan (the "Plan") provides only general information. Participants
should refer to the plan document for a complete description of the Plan's
provisions. As more fully described in Note K, effective January 1, 2000 the
participants and related account balances of the Plan were merged into the
Raytheon Savings and Investment Plan (RAYSIP). The Plan's provisions were
adopted by the RAYSIP and effective December 31, 1999 the Plan ceased to exist
as a separate entity. As more fully described in Note J, effective January 1,
1999, the participants and related account balances of several defined
contribution plans (collectively referred to as "Prior Plans") were merged into
the Plan.
The Plan is a defined contribution plan and covers the employees of the
Raytheon Support Services Company and the Range Systems Engineer Support
Company, respectively, wholly-owned subsidiaries of Raytheon Company (the
"Company"). To participate in the Plan, eligible employees must have three
months of service and may enter the Plan only on the first day of each month.
Effective January 1, 1999, certain union employees of the former Raytheon
Systems Company, Cedar Rapids, Inc. and Raytheon Aircraft Company who
participated in Prior Plans were merged into the Plan and all eligible
employees, including those from Prior Plans, may join the Plan immediately. In
addition, the Raytheon Stock Ownership Plan for Specified Hourly Payroll
Employees (referred to as the "Prior ESOP Plan") was merged into the Plan and
created an additional employee stock ownership portion (ESOP) of the Plan.
The purpose of the Plan is to provide participants with a tax-effective
means of meeting both short and long-term investment objectives. The Plan is
intended to be a "qualified cash or deferred arrangement" under the Internal
Revenue Code (the "Code"). The ESOP is intended to be an employee stock
ownership arrangement in compliance with all of the related requirements for a
qualified stock bonus plan as defined in the Code. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan's investments are combined with the investments of other
similar defined contribution plans of the Company into the Raytheon Company
Master Trust for Defined Contribution Plans (the "Master Trust"). The trustee of
the Master Trust maintains a separate account reflecting the equitable share in
the Master Trust of each plan.
Investment income and administrative expenses relating to the Master
Trust are allocated to the individual plan based upon average monthly balances
invested by each plan.
<PAGE>
6
Contributions and Deferrals
Effective January 1, 1999, eligible employees at certain divisions of
the former Raytheon Systems Company may defer up to 20%, depending upon
division. For 1999, the annual employee deferral for a participant would not
exceed $10,000. Rollover contributions from other qualified plans are accepted
by the Plan. In addition, for certain union employees at the former Raytheon
Systems Company, Cedar Rapids, Inc. and Raytheon Aircraft Company, the Company
will match amounts ranging from 1.5% to 4% of compensation. The Company match is
participant directed at certain divisions. At divisions where the Company match
is not participant directed, the match shall be made to the Raytheon Common
Stock Fund and must be held in that fund until the beginning of the fifth plan
year following the plan year for which the contribution was made. For certain
divisions, the Company will also make qualified non-elective contributions
(QNECs), employer contributions based on hours of service or percent of pay
and/or ESOP contributions. When applicable, ESOP contributions are equal to
one-half of one percent of the participant's compensation. The ESOP portion of
the Plan provides for investment, primarily in Raytheon Company Class B common
stock; however, as required by the Code, the Plan permits limited
diversification after a participant attains age 55 or completes 10 years of plan
participation (including participation in the Prior ESOP Plan).
Participants may invest their deferrals in increments of 1% in any
combination of fourteen funds. The investment objectives of the funds range from
conservative investments with an emphasis on preservation of capital to equity
investments with an emphasis on capital gains. The underlying assets that make
up the funds include cash and equivalents, investment contracts, registered
investment companies.
Participant Accounts
Each participant's account is credited with the participant's deferral,
any applicable employer contributions (QNECs, matching contributions, employer
or ESOP) and an allocation of Plan earnings. Plan earnings are allocated based
on account balances by fund. Participant's accounts are debited with an
allocation of Plan expenses.
Vesting
Participants are immediately vested in their voluntary deferrals and
employer contributions plus actual earnings thereon for each participant who
performs an hour of service or after January 1, 1999.
Certain union employees at the former Raytheon Systems Company, Cedar
Rapids, Inc. and Raytheon Aircraft Company, whose accounts merged into the Plan
effective January 1, 1999, will retain the vesting schedule from their Prior
Plan. Vesting requirements for employer contributions plus earnings thereon may
vary depending upon when an employee became eligible to participate in the Prior
Plan. Vesting generally occurs upon completion of five years of service or upon
three years of Plan participation or upon retirement, death, disability, or
attainment of normal retirement age. Forfeitures of the non-vested portions of
terminated participants' accounts are used to reduce required contributions of
the Company. During 1999, the total amount of forfeitures from the plan was
$76,773.
Distributions to Participants
A participant may withdraw all or a portion of deferrals, employer
contributions and related earnings upon attainment of age 59 1/2. For reasons of
financial hardship, as defined in the plan document, a participant may withdraw
all or a portion of deferrals. On termination of employment, a participant will
receive a lump-sum distribution unless the vested account is valued in excess of
$5,000, and the participant elects to defer distribution. A retiree or a
beneficiary of a deceased participant may defer the distribution until January
of the year following attainment of age 65.
<PAGE>
7
Loans to Participants
A participant may borrow against a portion of the balance in the
participant's account, subject to certain restrictions. The maximum amount of a
loan is the lesser of one-half of the participant's account balance or $50,000.
The minimum loan which may be granted is $500. The interest rate applied is
equal to the prime rate published in the Wall Street Journal on the first
business day in June and December of each year. Loans must be repaid over a
period of up to five years by means of payroll deductions. In certain cases, the
repayment period may be extended up to 15 years. Interest paid to the Plan on
loans to participants is credited to the borrower's account in the investment
fund to which repayments are made.
Administrative Expenses
The Plan participants pay substantially all expenses of administering
the Plan.
B. Summary of Significant Accounting Policies
The accompanying financial statements are prepared on the accrual basis
of accounting. The provisions of AICPA Statement of Position 99-3 were adopted
in 1999 and prior period financial statements and disclosures have been
reclassified where appropriate.
The Plan's investment contracts and common collective trust are fully
benefit-responsive and are therefore included in the financial statements at
their contract value, defined as net employee contributions plus interest earned
on the underlying investments at contracted rates. Contract value approximates
fair value. Investments in mutual funds and the common collective trust are
valued at the closing net asset value reported on the last business day of the
year. Investments in securities (common stocks) traded on a national securities
exchange are valued at the last reported sales price on the last business day of
the year. Cash equivalents are short-term money market instruments and are
valued at cost, which approximates fair value. Participant loans are valued at
cost, which approximates fair value.
Security transactions are recorded on the trade date. Except for its
investment contracts (Note E), the Plan's investments are held in a trust.
Payable for outstanding security transactions represent trades which have
occurred but have not yet settled.
The Plan presents in the statement of changes in net assets the net
appreciation (depreciation) in the fair value of its investments, which consists
of the realized gains or losses and the unrealized appreciation (depreciation)
on those investments.
Dividend income is recorded on the ex-dividend date. Income from other
investments is recorded as earned on an accrual basis. Investment income
includes both dividend and interest income.
<PAGE>
8
Benefits are recorded when paid.
The preparation of the financial statements in conformity with
generally accepted accounting principles requires the Plan administrator to make
significant estimates and assumptions that affect the reported amounts of net
assets and liabilities available for benefits at the date of the financial
statements and the changes in net assets available for benefits during the
reporting period and, when applicable, disclosures of contingent assets and
liabilities at the date of the financial statements. Actual results could differ
from the estimates included in the financial statements.
The Plan provides for various investment options in any combination of
stocks, bonds, fixed income securities, mutual funds and other investment
securities. Investment securities are exposed to various risks, such as interest
rate, market and credit risk. Due to the level of risk associated with certain
investment securities and the level of uncertainty related to changes in the
value of investment securities, it is at least reasonably possible that changes
in risks in the near term would materially affect participants' account balances
and the amounts reported in the statement of net assets available for plan
benefits and the statement of changes in net assets available for plan benefits.
C. Investments
There were no investment that represented 5% or more of the Plan's net
assets at December 31, 1998 due to transfer receivable for $210,313,280 (Note J)
which made all investments equal to less than 5% of the Plan's net assets. There
were no investments that represented 5% or more of the Plan's net assets at
December 31, 1999 as there were no net assets due to the Plan merger and
consolidation into RAYSIP (Note K).
During the year ended December 31, 1999 the Plan's investments
experienced a net depreciation as follows:
Registered investment companies $ 7,294,448
Common collective trusts 11,577,692
Raytheon Company common stock (63,984,845)
Common stock 6,009,679
------------
$(39,103,026)
============
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9
D. Nonparticipant-Directed Investments
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments is as
follows:
December 31,
1999 1998
Net assets:
Raytheon Company common stock $23,824,206 $43,673,432
Cash and cash equivalents 1,171,865 601,053
----------- -----------
Total $24,996,071 $44,274,485
=========== ===========
For the year ended
December 31,1999
Changes in net assets:
Contributions $ 8,353,812
Interest and dividends 8,179
Net depreciation of investments (23,893,377)
Distributions to participants (2,782,479)
Administative expenses (12,350)
Net fund transfers (952,198)
------------
$(19,278,413)
============
E. Investment Contracts
The Plan invests in collateralized fixed income investment portfolios
which are managed by insurance companies and investment management firms. The
credited interest rates are adjusted semiannually to reflect the experienced and
anticipated yields to be earned on such investments, based on their book value.
The annualized average yield and credited interest rates were as follows:
Annualized Credited
average interest
yield rate
For the year ended December 31, 1999:
Chase Manhanttan Bank (429666) 5.69% 5.69%
Deutsche Bank AG (FID-RAY-1) 5.59% 5.59%
Fidelity IPL (633-GCDC) 5.75% 5.76%
Fidelity STIF 5.22% 5.74%
State Street Bank and Trust (99054) 5.70% 5.70%
Westdeutsche Landesbank (WLB 6173) 5.69% 5.69%
For the year ended December 31, 1998:
Banker's Trust (WBS 92-485) 6.85% 6.85%
Metropolitan Life Insurance Company (GIC GA-12908) 6.58% 6.58%
Metropolitan Life Insurance Company (GIC GA-13659) 6.10% 6.10%
Prudential Asset Management Company (GIC 917163-001) 6.75% 6.75%
Connecticut General (GIC 0025174) 5.58% 5.58%
Fidelity IPL (633-GCDC) 5.62% 5.62%
Monumental Life Insurance Company
(GIC BDA00463FR-00) 7.84% 7.84%
<PAGE>
10
The contract values are subject to limitations in certain situations
including large workforce reductions and plan termination.
F. Federal Income Tax Status
The Internal Revenue Service has determined and informed the Company by
letter dated June 1995 that the Plan and related trust are designed in
accordance with applicable sections of the Code. The Plan has been amended since
receiving the determination letter. However, the Plan administrator and the
Plan's legal counsel believe that the Plan is currently designed and being
operated in compliance with applicable requirements of the Code.
G. Plan Termination
Although it has not expressed any intention to do so, the Company
reserves the right under the Plan at any time or times to discontinue its
contributions and to terminate the Plan subject to the provisions of ERISA. In
the event of plan termination, after payment of all expenses and proportional
adjustment of accounts to reflect such expenses, fund losses or profits, and
reallocations, each participant shall be entitled to receive any amounts then
credited to his or her account.
H. Related Party Transactions
The Plan's trustee is Fidelity Management Trust Company (the
"Trustee"). The Trustee holds the funds for the Plan and is responsible for
managing the Plan's investment assets, executing all investment transactions,
recording approved transactions, and, therefore these transactions qualify as
party-in-interest.
In accordance with the provisions of the Plan, the Trustee acts as the
Plan's agent for purchases and sales of shares of Raytheon Company common stock.
These transactions are performed on a Master Trust level. For the Master Trust,
purchases amounted to $721,986,347 and sales amounted to $204,780,412 for the
year ended December 31, 1999.
I. Transfers
Transfers include transfers of participant accounts, individually
and/or in groups, between the Plan and all other plans included in the Master
Trust for those participants and/or groups of participants who changed plans
during the year. Transfers also include transfers of participant accounts,
individually and/or in-groups, between the Plan and similar savings plans of
other companies for those participants who changed companies during the year.
J. Transfer Receivable
As part of an overall effort to minimize plan design differences and
increase administrative efficiencies, the Board of Directors of Raytheon Company
voted on December 16, 1998 to merge the participants and their account balances
from several Prior Plans into the Plan. The Prior Plans ceased to exist on
December 31, 1998 and effective January 1, 1999, the plan provisions of the Plan
govern.
<PAGE>
11
The transfer receivable by Prior Plan at December 31, 1998 is as
follows:
Raytheon Savings and Investment Plan for Specified
Hourly Payroll Employees $109,994,457
Raytheon Tucson Bargaining Unit Employees Savings
and Investment Plan 46,783,076
Raytheon Savings and Retirement Plan (10014) 18,676,997
Serv-Air, Inc. Savings and Retirement Plan 18,053,874
Raytheon Stock Ownership Plan for Specified Hourly
Payroll Employees 16,804,876
------------
Total $210,313,280
------------
Subsequent to December 31, 1998, the Plan and RAYSIP were further
amended with respect to the transfer amounts related to certain Prior Plans
covering hourly payroll employees. The amounts shown above for the Raytheon
Savings and Investment Plan for Specified Hourly Payroll Employees and the
Raytheon Stock Ownership Plan for Specified Hourly Payroll Employees were
increased to reflect a complete transfer of those specific plans into the Plan.
Additionally, certain unions from the E-Systems, Inc. Employee Savings Plan
were also merged into RESIP. These changes resulted in a net increase in the
actual transfer receivable to the Plan as of December 31, 1998 of $274,605,975.
This amount is reflected in the 1999 transfer activity.
K. Transfer Payable
In a continuing effort to improve administrative efficiencies, the Plan
was amended and effective January 1, 2000 was merged into and consolidated with
RAYSIP. The Plan ceased to exist as a separate plan after December 31, 1999 and
effective January 1, 2000 the provisions of the RAYSIP were modified to
incorporate the Plan provisions related to Plan eligible and certain union
employees. As of December 31, 1999 the transfer payable to the RAYSIP is
$558,535,238. This represents a complete transfer of all assets and obligations
related to the Plan.
L. Subsequent Event
On April 14, 2000, the Company signed a definitive agreement with
Morrison Knudsen to sell all of the stock of Raytheon Engineers & Constructors,
Inc. and several subsidiaries. Employees of Raytheon Engineers & Constructors
enrolled in the Plan will consequently be treated as vested terminated employees
effective on the closing date of the transaction.
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12
M. Master Trust
The following is a summary of net assets available for plan benefits by
Plan under the Master Trust of December 31, 1999:
<TABLE>
<CAPTION>
Raytheon
Raytheon Savings and
Raytheon Employee Investment Raytheon
Savings and Savings and Plan for Defined
Investment Investment Puerto Rico Contribution
Plan Plan Based Master
Employees Trust
<S> <C> <C> <C> <C>
Assets
Master trust investments:
At contract value:
Investment contracts $1,365,686,304 $152,581,183 $ 200,776 $1,518,468,263
Common collective trust 24,541,396 2,741,885 3,608 27,286,889
At fair value:
Registered investment companies 3,418,046,502 189,241,065 744,624 3,608,032,191
Common collective trust 897,408,197 62,574,915 233,408 960,216,520
Raytheon Company common stock 767,489,840 85,131,829 302,334 852,924,003
Common stock 279,907,944 7,967,256 - 287,875,200
Participant loans 224,811,843 44,414,163 126,313 269,352,319
-------------- ------------ ---------- --------------
Total investments 6,977,892,026 544,652,296 1,611,063 7,524,155,385
-------------- ------------ ---------- --------------
Cash and cash equivalents 108,497,715 9,876,650 28,117 118,402,482
Receivables:
Employer contributions 456,290 3,556,816 - 4,013,106
Accrued investment income and other
receivables 9,328,981 947,795 3,349 10,280,125
Transfer receivable* 558,535,238 - - 558,535,238
-------------- ------------ ---------- --------------
Total assets $7,654,710,250 $559,033,557 $1,642,529 $8,215,386,336
-------------- ------------ ---------- --------------
Liabilities
Payable for outstanding purchases $ 3,078,603 $ 356,829 $ 1,287 $ 3,436,719
Accrued expenses and other payables 1,903,254 141,490 513 2,045,257
Transfer payable* - 558,535,238 - 558,535,238
-------------- ------------ ---------- --------------
Total liabilities $ 4,981,857 $559,033,557 $ 1,800 $ 564,017,214
-------------- ------------ ---------- --------------
Net assets available for plan benefit $7,649,728,393 $ - $1,640,729 $7,651,369,122
============== ============ ========== ==============
Percentage of total trust assets 99.98% 0.00% 0.02% 100.00%
* See Note K
</TABLE>
<PAGE>
13
The following is a summary of net assets available for plan benefits by
Plan under the Master Trust as of December 31, 1998:
<TABLE>
<CAPTION>
Raytheon
Savings and
Raytheon Investment
Raytheon Employee Plan for Other prior Raytheon
Savings and Savings and Puerto Rico plans merged Defined
Investment Investment Based December 31, Contributions
Plan Plan Employees 1998 Master Trust
<S> <C> <C> <C> <C> <C>
Assets
Master trust investments:
At contract value:
Investment contracts $ 776,630,273 $ 20,713,337 $ 87,670 $ 521,071,601 $ 1,318,502,881
Common collective trusts 15,198,859 405,365 1,716 10,197,509 25,803,449
At fair value:
Registered investment 1,144,209,772 31,699,672 575,071 1,522,564,673 2,699,049,188
companies
Common collective trust 519,296,605 10,496,295 241,676 215,568,215 745,602,791
Raytheon Company common 356,701,412 8,925,215 321,152 549,724,121 915,671,900
stock
Common stock - - - 172,859,819 172,859,819
Participant loans 127,374,239 6,229,708 37,300 117,046,618 250,687,865
-------------- ------------ ---------- -------------- ---------------
Total investments 2,939,411,160 78,469,592 $1,264,585 $3,109,032,556 6,128,177,893
-------------- ------------ ---------- -------------- ---------------
Cash and cash equivalents 80,249,335 2,117,237 13,742 64,877,770 147,258,084
Receivables:
Employer contributions - - - 3,595,261 3,595,261
Accrued investment income and
other receivables 3,214,568 75,163 2,417 4,247,441 7,539,589
Transfer receivable* 3,824,865,272 210,313,280 - - 4,035,178,552
-------------- ------------ ---------- -------------- ---------------
Total assets $6,847,740,335 $290,975,272 $1,280,744 $3,181,753,028 $10,321,749,379
-------------- ------------ ---------- -------------- ---------------
Liabilities
Payable for outstanding $ 861,953 $ 21,566 $ 776 $ 1,047,830 $ 1,932,125
purchases
Accrued expenses and other 1,415,440 32,586 1,019 1,353,322 2,802,367
payables
Transfer payable* - - - 3,179,351,876 3,179,351,876
-------------- ------------ ---------- -------------- ---------------
Total liabilities $ 2,277,393 $ 54,152 $ 1,795 $3,181,753,028 $ 3,184,086,368
-------------- ------------ ---------- -------------- ---------------
Net assets available for plan $6,845,462,942 $290,921,120 $1,278,949 $ - $ 7,137,663,011
benefits ============== ============ ========== ============== ===============
Percentage of total trust assets 95.91% 4.07% 0.02% 0.00% 100.00%
* See Note J
</TABLE>
<PAGE>
14
The following is a summary of investment income by Plan under the
Master Trust for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Raytheon
Savings and
Raytheon Investment Raytheon
Raytheon Employee Plan for Defined
Savings and Savings and Puerto Rico Contribution
Investment Investment Based Master
Plan Plan Employees Trust
<S> <C> <C> <C> <C>
Investment income:
Interest and dividends $ 422,485,598 $ 30,193,248 $ 96,208 $ 452,775,054
Net appreciation/(depreciation):
Registered investment companies 133,664,027 7,294,448 43,969 141,002,444
Common collective trusts 166,058,412 11,577,692 46,175 177,682,279
Raytheon Company common stock (498,666,117) (63,984,845) (240,144) (562,891,106)
Common stock 189,763,388 6,009,679 - 195,773,067
------------- ------------ --------- -------------
(9,180,290) (39,103,026) (150,000) (48,433,316)
------------- ------------ --------- -------------
Total investment income/(loss) $ 413,305,308 $ (8,909,778) $ (53,792) $ 404,341,738
============= ============ ========= =============
</TABLE>
