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SECURITIES & 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 29, 1997
/ / 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 1-2833
RAYTHEON COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 04-1760395
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
141 SPRING STREET, LEXINGTON, MASSACHUSETTS 02173
(Address of Principal Executive Offices (Zip Code)
(617) 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 COMMON SHARES OUTSTANDING AT JUNE 29, 1997: 236,336,496
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RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS (Unaudited)
June 29, 1997 December 31, 1996
(In thousands)
ASSETS
Cash and marketable securities $ 181,274 $ 138,821
Accounts receivable 811,907 808,715
Federal and foreign income taxes
including deferred 212,998 246,120
Contracts in process, less
progress payments 2,993,575 2,592,006
Inventories 1,708,915 1,590,967
Prepaid expenses 268,801 227,266
----------- -----------
Total current assets 6,177,470 5,603,895
Property, plant and equipment, net 1,922,996 1,802,012
Other assets 3,742,584 3,720,169
----------- -----------
$11,843,050 $11,126,076
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current portion
of long-term debt $ 2,510,464 $ 2,226,935
Accounts payable 1,258,074 1,125,881
Advance payments, less contracts in
process 357,995 341,326
Accrued expenses 1,009,611 997,691
----------- ----------
Total current liabilities 5,136,144 4,691,833
Accrued retiree benefits 246,968 249,992
Federal and foreign income taxes,
including deferred 85,765 85,765
Long-term debt 1,496,634 1,500,476
Stockholders' equity 4,877,539 4,598,010
----------- -----------
$11,843,050 $11,126,076
=========== ===========
The accompanying notes are an integral part of the financial statements.
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RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 29, 1997 June 30, 1996 June 29, 1997 June 30,1996
(In thousands except per share data)
Net Sales $3,324,746 $3,126,779 $6,223,894 $5,914,385
---------- ---------- ---------- ----------
Cost of sales 2,570,348 2,435,359 4,790,874 4,576,648
Administrative and
selling expenses 282,305 262,569 542,370 527,297
Research and
development expenses 90,472 90,002 169,547 177,464
---------- ---------- ---------- ----------
Total operating expenses 2,943,125 2,787,930 5,502,791 5,281,409
---------- ---------- ---------- ----------
Operating income 381,621 338,849 721,103 632,976
---------- ---------- ---------- ----------
Interest expense 73,908 60,694 142,783 114,857
Interest and dividend
income (9,375) (12,293) (15,050) (32,570)
Other expense(income),
net 3,223 (23,409) 1,139 (45,236)
---------- ---------- ---------- ----------
Non-operating expense,
net 67,756 24,992 128,872 37,051
---------- ---------- ---------- ----------
Income before taxes 313,865 313,857 592,231 595,925
Federal and foreign
income taxes 104,363 104,460 199,319 200,042
---------- ---------- ---------- ----------
Net income $ 209,502 $ 209,397 $ 392,912 $ 395,883
========== ========== ========== ==========
Earnings per common
share $0.89 $0.88 $1.66 $1.66
Average number of common
shares outstanding during
period 236,293 237,474 236,285 238,783
Dividends declared per
common share $0.20 $0.20 $0.40 $0.40
The accompanying notes are an integral part of the financial statements.
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RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 29, 1997 June 30, 1996
(In thousands)
Cash flows from operating activities:
Net income $ 392,912 $ 395,883
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 193,010 175,600
Sale of receivables 760,600 309,200
Other adjustments, net (1,213,326) (1,221,484)
----------- -----------
Net cash provided (used in) operating activities 133,196 (340,801)
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (201,375) (203,853)
Payment for purchase of acquired companies,
net of cash received (5,777) (584,390)
Proceeds from sale of operating subsidiary,
net - 66,551
Intangible and deferred assets (7,993) (30,490)
All other, net (74,301) 21,829
----------- -----------
Net cash used in investing activities (289,446) (730,353)
----------- -----------
Cash flows from financing activities:
Change in short-term debt 283,529 1,398,236
Change in long-term debt (3,842) (256)
Dividends (94,530) (95,136)
Purchase of treasury shares (17,527) (260,261)
Proceeds under common stock plans 20,483 25,913
All other, net 12,790 5,853
----------- ------------
Net cash provided by financing activities 200,903 1,074,349
----------- ------------
Effect of foreign exchange rates on cash (1,798) (1,013)
----------- ------------
Net increase in cash and cash equivalents 42,855 2,182
Cash and cash equivalents at beginning of year 137,379 208,614
----------- ------------
Cash and cash equivalents at end of second quarter $ 180,234 $ 210,796
=========== ============
The accompanying notes are an integral part of the financial statements.
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RAYTHEON COMPANY AND SUBSIDIARIES CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
(1) Details of certain balance sheet accounts are as follows:
June 29, 1997 Dec. 31,1996
(In thousands)
Cash and marketable securities
Cash and cash equivalents $ 180,234 $ 137,379
Marketable securities 1,040 1,442
----------- -----------
Total cash and marketable securities $ 181,274 $ 138,821
=========== ===========
Inventories
Finished goods $ 608,531 $ 616,660
Work in process 757,550 650,132
Material and purchased parts 500,811 482,152
Excess of current cost over LIFO values (157,977) (157,977)
----------- -----------
Total Inventories $ 1,708,915 $ 1,590,967
=========== ===========
Property, plant and equipment
At cost $ 4,666,848 $ 4,490,359
Accumulated depreciation and amortization (2,743,852) (2,688,347)
Net property, plant and equipment $ 1,922,996 $ 1,802,012
=========== ===========
Stockholders' equity
Preferred stock, no outstanding shares $ - $ -
Common stock, outstanding shares 236,336 236,250
Additional paid-in capital 326,984 307,451
Equity adjustments (33,775) (11,966)
Retained earnings 4,347,994 4,066,275
----------- -----------
Total stockholders' equity $ 4,877,539 $ 4,598,010
=========== ===========
(2) In connection with the sale of receivables as noted in the Statement of Cash
Flows, the following special purpose entities were established in accordance
with Statement of Financial Accounting Standards No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinquishments of Liabilities:
Raytheon Aircraft Receivables Corporation, Raytheon Commercial Appliances
Finance Corporation, Raytheon Appliances/Amana Receivables Corporation, Raytheon
Commercial Appliances Receivables Corporation and Raytheon Engineers &
Constructors Receivables Corporation.
(3) The company will adopt Statement of Financial Accounting Standard No. 128,
Earnings per Share, in the fourth quarter of 1997. The adoption is not expected
to have a material effect on the company's financial position, results of
operations, or earnings per share.
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(4) The company will adopt Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income, in 1998, by making the appropriate
disclosures.
(5) The company will adopt Statement of Financial Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information, in 1998, by
making the appropriate disclosures.
(6) Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 presentation.
(7) The information furnished has been prepared from the accounts without
audit. In the opinion of management, the information reflects all adjustments,
which are of a normal recurring nature, necessary for a fair presentation of the
financial statements for the interim periods
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Second Quarter 1997 versus 1996
Raytheon Company reported second quarter earnings of $209.5 million, or $.89 per
share, on record second quarter sales of $3.325 billion. Operating income in
this year's second quarter was $381.6 million, up 12.6 percent from $338.8
million for the second quarter of 1996, compared to a 6.3 percent increase in
revenues over this same period.
The second quarter earnings of $209.5 million, or $.89 per share, were achieved
despite having higher interest expense of $13 million in the quarter and lower
non-operating income of $30 million due to second quarter 1996 nonrecurring
income adjustments related to a federal income tax refund claim and the release
of a contingency reserve associated with the sale of a business.
Second quarter earnings were essentially flat with last year's second quarter of
$209.4 million, earnings per share were up slightly over last year's second
quarter of $.88 per share, and sales increased 6.3 percent over last year's
second quarter of $3.127 billion.
The Aircraft segment reported record sales and operating income of $620 million
and $60 million, respectively, for the quarter. These increases in sales and
operating income of 14 percent and 25 percent, respectively, over the second
quarter of 1996 reflect substantially increased shipments of general aviation
aircraft with higher margins.
The Electronics segment led Raytheon's increase in second quarter sales and
operating income, as segment sales grew 14 percent and segment operating income
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increased 22 percent, compared with the second quarter of 1996. All business
groups in ElectronicsORaytheon Electronic Systems, Raytheon E-Systems and
Commercial ElectronicsOwere up in both sales and operating income compared to
the same period a year ago, with record sales and operating income for the
quarter for Raytheon E-Systems, and strong sales and operating income for
Raytheon Electronic Systems and Commercial Electronics.
The Engineering and Construction segment reported operating income of $52
million on revenues of $765 million. While engineering and construction activity
remained constrained due to the pace of international turnkey projects,
operating income was essentially flat with the first quarter on higher sales.
The Major Appliances segment reported second quarter sales of $393 million and
operating income of $26 million. Sales were down $21 million from 1996 due
principally to the discontinuance of the manual-clean cooking ranges for which a
charge was taken in the third quarter of 1996 to exit the business. Operating
income was down $4 million from 1996 due principally to increased advertising
and promotion expenses.
The company announced the completion of the acquisition of Texas Instruments'
defense business on July 11, 1997 shortly after the close of the quarter. This
business is a premier supplier of advanced defense systems, including
precision-guided weapons and night vision systems.
In January 1997, Raytheon entered into an agreement to merge with Hughes
Electronics' defense operations, with the combined company to be called
Raytheon. The Hughes transaction is valued at $9.5 billion, comprised of
approximately $5.1 billion in common stock and $4.4 billion in debt to be
assumed by the merged company. The notes to the financial statements in
Raytheon's 1996 Annual Report, Form 10-K for the year ended December 31, 1996,
and Form 8-K's filed on January 16, 1997 and May 23, 1997, provide a more
complete description of the Hughes transaction.
General Motors, the parent company of Hughes Electronics Corporation, has
received a ruling from the Internal Revenue Service relating to certain Federal
income tax consequences of the merger and related transactions, the continuing
validity of which is a condition to the merger. The merger is also subject to
certain regulatory approvals, including Hart-Scott-Rodino antitrust review, and
approval by Raytheon, General Motors (GM) and GM "H" stockholders.
The company announced on July 14, 1997, shortly after the close of the quarter,
that it had signed an agreement to sell the home appliance, heating and air
conditioning and commercial cooking segments of the Major Appliances segment.
The sale is subject to U. S. government approval. The company expects to
complete the sale in the third quarter.
The company will retain its commercial laundry business and its electronic
controls business of the Major Appliances segment. In 1996 these two businesses
accounted for approximately 20 percent of revenues and 50 percent of profits for
the Major Appliances segment. The company is continuing its strategic assessment
of these two businesses.
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On July 29, 1997, after the close of the quarter, the company announced that the
letters of credit necessary to release the financing for the SIVAM contract were
issued. With the issuance of the letters of credit, the SIVAM contract is
effective and Raytheon began work on the contract.
The four sources providing financing for the program are the United States
Export Import Bank, AB Svensk Exportkredit (the Swedish export bank), Raytheon
and the SIVAM Vendor Trust. The U. S. Export Import Bank is providing the
majority of the financing for the program, with loans totaling just over US $1
billion.
Segment Data
(millions of dollars)
Three Months Ended Six Months Ended
Sales June 29,1997 June 30,1996 June 29,1997 June 30,1996
- ----- ------------ ------------ ------------ ------------
Electronics $1,547 $1,355 $2,990 $2,634
Engineering and Construction 765 814 1,446 1,513
Aircraft 620 544 1,054 996
Major Appliances 393 414 734 771
------ ------ ------ ------
Total sales $3,325 $3,127 $6,224 $5,914
Segment Income
Electronics $ 244 $ 200 $ 489 $ 400
Engineering and Construction 52 61 105 117
Aircraft 60 48 89 72
Major Appliances 26 30 38 44
------ ------ ------ ------
Total segment sales $ 382 $ 339 $ 721 $ 633
Segment Income as a
Percent of Sales
Electronics 15.8% 14.8% 16.3% 15.2%
Engineering and Construction 6.8 7.5 7.3 7.7
Aircraft 9.7 8.8 8.5 7.2
Major Appliances 6.6 7.2 5.2 5.7
----- ----- ----- -----
Total segment income 11.5% 10.8% 11.6% 10.7%
as a percent of sales
Certain reclassifications of prior period information were made to conform to
the current year presentation.
Sales to the U. S. government, including Foreign Military Sales were $1.368
billion, an increase of $82 million or 6.4 percent from the comparable quarte
of 1996. U. S. government sales were 41.1 percent of consolidated net sales
in 1997, and were also 41.1 percent of sales in 1996.
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Administration and selling expenses were $282.3 million or 8.5 percent of
sales in 1997 versus $262.6 million or 8.4 percent of sales in 1996.
Research and development expenses were $90.5 million or 2.7 percent of sales in
1997 versus $90.0 million or 2.9 percent of sales in 1996. Research and
development expenses increased in the Aircraft segment but were mostly offset by
lower spending in the Electronics segment.
Operating income was $381.6 million or 11.5 percent of sales versus $338.8
million or 10.8 percent of sales in 1996. Operating income in 1997 was 12.6
percent above 1996.
Interest expense increased to $73.9 million in 1997 from $60.7 million in 1996.
The increase was due to higher debt levels from the acquisitions of Chrysler
Technologies and Rust Engineering late in the second quarter of 1996 and higher
short term interest rates.
Interest and dividend income declined to $9.4 million in 1997 from $12.3 million
in 1996. The 1996 results included accrued interest before tax on a retroactive
federal income tax refund claim.
Other expense (income), net for 1997 was an expense of $3.2 million versus
income of $23.4 million in 1996. The 1996 results included $20 million income
before tax from the release of a contingency reserve associated with the sale of
a business.
The 1997 effective tax rate of 33.3 percent reflects the statutory rate of 35
percent reduced principally by Foreign Sales Corporation tax credits and
incremental research and development tax credits applicable to certain
government contracts, partially offset by non-deductible amortization of
goodwill.
For reasons discussed above, net income for 1997 was $209.5 million versus
$209.4 million in 1996.
Earnings per common share for the second quarter of 1997 were $.89 versus $.88
in 1996. The average number of shares outstanding during the second quarter of
1997 was 236.3 million versus 237.5 million in 1996. During the quarter
outstanding shares were increased by approximately 269 thousand shares due to
the exercise of employee stock options. These were mostly offset by the
repurchase of 220 thousand shares in the open market at a cost of $10.7 million.
Six months 1997 versus 1996
Consolidated net sales during the first six months of 1997 increased by 5.2
percent to $6.224 billion from $5.914 billion in 1996. Sales increased in the
Electronics and Aircraft segments, partially offset by lower sales in the
Engineering and Construction and Major Appliances segments.
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Sales to the U. S. government were $2.688 billion in the first half of 1997
versus $2.432 billion in 1996 and were 43.2 percent of consolidated net sales in
1997 versus 41.1 percent in 1996.
Operating income was $721.1 million or 11.6 percent of sales in 1997 versus
$633.0 million or 10.7 percent of sales in 1996. Operating income for the first
six months of 1997 was 13.9 percent above 1996.
Non-operating expense was $128.9 million in 1997 versus $37.1 million in 1996.
Interest expense increased to $142.8 million from $114.9 million in 1996 due
principally to the acquisitions of Chrysler Technologies and Rust Engineering.
Interest and dividend income decreased to $15.1 million in 1997 from $32.6
million in 1996. The 1996 results included accrued interest before tax on a
retroactive federal income tax refund claim. Other expense (income) was an
expense of $1.1 million in 1997 versus income of $45.2 million in 1996. The 1996
results included $40 million income before tax from the release of a contingency
reserve associated with the sale of a business.
The effective tax rate of 33.7 percent in 1997 reflects the statutory rate of 35
percent reduced principally by Foreign Sales Corporation tax credits and
incremental research and development tax credits applicable to certain
government contracts, partially offset by non-deductible amortization of
goodwill.
For reasons discussed above, net income for 1997 was $392.9 million versus
$395.9 million in 1996.
Earnings per share were $1.66 for the first six months of 1997 and $1.66 for the
comparable period of 1996. The average number of common shares outstanding was
236.3 million for the first six months of 1997 versus 238.8 million for 1996.
During the first six months of 1997, outstanding shares were increased by 455
thousand principally due to the exercise of employee stock options. These were
mostly offset by the repurchase of 369 thousand shares on the open market at a
cost of $17.5 million.
On February 22, 1995, the Board of Directors authorized the repurchase of up to
12 million shares of the company's common stock. There have been 9.5 million
shares purchased under this authorization.
The book value of common shares outstanding at the end of the period was $20.64
as compared with $19.46 at December 31, 1996 and $18.35 at June 30, 1996.
All share and per share data have been restated for the two-for-one stock split
on October 23, 1995.
Backlog consisted of the following at:
June 29,1997 December 31,1996 June 30, 1996
(In millions)
Electronics $7,280 $7,303 $7,118
Engineering and Construction 3,536 3,565 2,332
Aircraft 1,607 1,163 1,355
Major Appliances 53 35 36
------- -------- ---------
$12,476 $12,066 $10,841
U. S. government backlog $5,425 $5,637 $5,062
included above
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During the first six months of 1997 there was a positive cash flow from
operations of $133.2 million versus a negative cash flow of $340.8 million for
the comparable period in 1996. Net income plus depreciation and amortization
provided a positive cash flow of $585.9 million. Working capital requirements
principally receivables, contracts in process and inventories were $1.213
billion in the period. The company sold $760.6 million of receivables, including
general and commuter aviation long-term receivables and a fractional ownership
in a defined pool of engineering and construction and appliance receivables, to
a bank syndicate and other financial institutions. During the period funds were
used for additions to property, plant and equipment of $201.4 million and
dividend payments of $94.5 million. Principally as a result of the above,
short-term debt increased by $283.5 million.
Debt, net of cash and marketable securities, was $3,826 million at June 29,
1997, as compared with $3,589 million at December 31, 1996, and $3,902 million
at June 30, 1996. Net debt as a percentage of total capitalization was 44.0
percent at June 29, 1997, as compared with 43.8 percent at December 31, 1996,
and 47.4 percent at June 30, 1996.
Capital expenditures were $201.4 million for the first six months of 1997 versus
$203.9 million in the first six months of 1996. Capital expenditures in 1997 are
expected to be moderately above the 1996 level, excluding the effect of
acquisitions.
Dividends declared to stockholders in the first six months of 1997 were $94.5
million versus $95.1 million in 1996. The dividend rate was $.20 per quarter for
the first two quarters of 1997 and for all quarters of 1996.
Total employment was 74,200 at June 29, 1997 versus 75,300 at December 31, 1996,
and 76,700 at June 30, 1996. The decrease from June 30, 1996 is due principally
to employee reductions in the Electronics and Major Appliances segments.
Credit ratings for the company, based on the proposed acquisitions, have been
lowered by Moody's to P-2 for short-term borrowing and Baa1 for senior debt, by
Standard and Poor's to A-3 for short-term borrowing and BBB for senior debt.
Duff & Phelps has provided ratings of D-2 for short-term borrowing and BBB+ for
senior debt. The company expects that its cash flow from operations and asset
reductions will be sufficient to maintain investment grade credit ratings and
available debt financing will be sufficient to meet any additional funding
requirements in 1997.
The company announced in the third quarter of 1996 that it would exit the
manual-clean range market and dispose of the assets related to that operation,
including its facility located in Delaware, Ohio, and recorded a $34.0 million
pre-tax charge for this closing. The after-tax effect was $22.1 million or $.09
per share.
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The company enters into interest rate swaps and locks and foreign currency
forward agreements with commercial and investment banks to reduce the impact of
changes in interest rates and foreign exchange rates on long-term debt and on
purchases, sales and financing arrangements with lenders, vendors, customers and
foreign subsidiaries. The company meets its working capital requirements mainly
with variable rate short-term financing. The company also enters into foreign
exchange forward contracts to minimize fluctuations in the value of payments due
to international vendors and the value of foreign currency denominated receipts.
The hedges used by the company are directly related to a particular asset,
liability, or transaction for which a firm commitment is in place. The impact on
the financial position, liquidity, and results of operations from likely changes
in foreign exchange and interest rates is immaterial due to the minimizing of
risk through the hedging of transactions related to specific assets,
liabilities, or commitments.
Recurring costs associated with the company's environmental compliance program
are not material and are expensed as incurred. Capital expenditures in
connection with the environmental compliance are immaterial. The company is
involved in various stages of investigation and cleanup relative to remediation
of various sites. All appropriate costs incurred in connection therewith have
been expensed. Due to the complexity of environmental laws and regulations, the
varying costs and effectiveness of alternative cleanup methods and technologies,
the uncertainty of insurance coverage, and the unresolved extent of the
company's responsibility, it is difficult to determine the ultimate outcome of
these matters. However, in the opinion of management, any additional liability
will not have a material effect on the company's financial position, liquidity,
or results of operations after giving effect to provisions already recorded.
The company will adopt Statement of Financial Accounting Standard No. 128,
Earnings per Share, in the fourth quarter of 1997. The adoption is not expected
to have a material effect on the company's financial position, results of
operations, or earnings per share.
The company will adopt Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, in 1998, by making the appropriate
disclosures.
The company will adopt Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information, in 1998, by
making the appropriate disclosures.
Forward Looking Statements
Statements which are not historical facts contained in this report are
forward-looking statements that involve risks and uncertainties. These risks
include, in addition to the specific uncertainties referenced in this report,
the ability to realize anticipated cost efficiencies from the recently completed
acquisition of the defense systems and electronics business of Texas Instruments
and the pending merger of the Company with the defense business of Hughes
Electronics Corporation, the effect of worldwide political and market
conditions, the impact of competitive products and pricing and the timing of
awards and 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 SEC, including, our Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and our Current Reports on Form 8-K
dated January 16, 1997 and May 23, 1997.
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PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 Restricted Unit Award Agreement betwen
Raytheon Company and Dennis J. Picard
Exhibit 27 Financial Data Schedule (filed only
electronically with the Securities and
Exchange Commission).
(b) Reports on Form 8-K
(1) Raytheon Company Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 23,1997.
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 13 , 1997
EXHIBIT 10.1
RESTRICTED UNIT AWARD AGREEMENT
This Restricted Unit Award Agreement, dated as of April 23, 1997,
between Raytheon Company, a Delaware corporation (the "Corporation"), and Dennis
J. Picard an employee of the Corporation (the "Holder").
WHEREAS, it has been the Holder's intention to retire as Chairman and
Chief Executive Officer of the Corporation on or about August 28, 1997; and
WHEREAS, in order to induce the Holder to delay his scheduled
retirement date and thereby ensure his continued availability to the
Corporation, the Compensation Committee of the Board of Directors (the
"Committee") has granted to the Holder a Restricted Unit Award consisting of Two
Hundred Thousand (200,000) units, with each unit representing one share of
Common Stock of the Corporation; and
WHEREAS, the parties hereto desire to evidence such Restricted Unit
Award by this written agreement.
NOW, THEREFORE, in consideration of the foregoing and the Holder's
acceptance of the terms and conditions hereof, the parties hereto agree as
follows:
1. If the Holder is continuously employed by the Corporation or one of
its subsidiaries from the date of grant of this Restricted Unit Award through
the dates listed below (each a "Vesting Date"), then on each such Vesting Date
the Holder shall be vested with the right to receive the number of units set
forth opposite such Vesting Date and such right shall not thereafter be subject
to forfeiture for any reason. By virtue of such vesting, the Holder shall be
entitled to a cash payment in respect of such vested units on the Payment Date
(as defined in Section 7 below). No payment (other than in connection with
withholding tax obligations noted in Section 8 below) shall be required from the
Holder in connection with this Restricted Unit Award.
Date Number of Units
December 1, 1997 66,667
August 28, 1998 66,667
Holder's Board-Approved 66,666
Retirement Date
2. Notwithstanding the provisions of Section 1 above, the Holder's
right to receive the number of units set forth opposite such Vesting Date shall
be fully vested and not thereafter subject to forfeiture for any reason upon the
occurrence of one or more of the following events: (i) the death of the Holder;
(ii) the Holder's total disability as evidenced by commencement and continuation
for more than one year of benefits under the Corporation's Long Term Disability
Plan (or if not a member of the Long Term Disability Plan the Holder would have
been eligible for benefits using Long Term Disability Plan standards); or (iii)
a Change in Control of the Corporation, provided that consummation of the
pending merger of the Corporation with and into HE Holdings, Inc. shall not
constitute a Change in Control hereunder. For purposes of this Agreement, the
term "Change in Control" means a Change in Control as defined in the Raytheon
Company 1991 Stock Plan.
3. The granting of this Restricted Unit Award shall not be deemed to
create a contract of employment between the Holder and the Corporation and shall
not in any way prohibit or restrict the right of the Corporation to terminate
the Holder's employment at any time, for any reason. The Holder shall not be
deemed for any purpose to be a stockholder of the Corporation with respect to
any of the units granted hereby.
4. If, prior to the applicable Vesting Date for any units covered
hereby, the Holder ceases to be an employee of the Corporation or one of its
subsidiaries, then the Holder right shall forfeit the right to receive units
which have not theretofore vested pursuant to the terms of this Agreement.
5. The units granted to the Holder shall not be (i) transferable by the
Holder other than by will or the laws of descent and distribution or (ii)
subject to execution, attachment or similar process.
6. As part of this Restricted Unit Award, from the date hereof through
the Settlement Date (as defined in Section 7 below), the Corporation shall pay
to the Holder, in cash, dividend rights on the units covered hereby at such
times as dividends are paid to the Corporation's common stockholders and in per
unit amounts equal to such per share dividends. The Corporation shall be
entitled to deduct or withhold from any dividend rights paid to the Holder
hereunder amounts sufficient to satisfy all applicable tax withholding
obligations.
7. The settlement with respect to all units covered by this Restricted
Unit Award is to be made solely in cash on the Payment Date in an amount equal
to the average of the high and low price per share of the Corporation's Common
Stock (Class B Common Stock if the pending merger of the Corporation with and
into HE Holdings, Inc. has been consummated) as reported on the New York Stock
Exchange ("NYSE") Composite Transactions as of the Settlement Date.
For purposes of this Agreement, the "Settlement Date" means that date
within one year following the Holder's last day worked designated as the
Settlement Date by the Holder in writing to the Corporation, provided that such
date may not be earlier than the date such notice is delivered to the
Corporation. If the Holder fails to designate a Settlement Date, the Settlement
Date shall be the first anniversary of the Holder's last day worked. In the
event that the Settlement Date falls on a day that is not a NYSE trading day,
the Settlement Date shall be the next preceding NYSE trading day.
For purposes of this Agreement, the "Payment Date" means that date
which is two business days after the Settlement Date.
For purposes of this Agreement, "last day worked" means the last day on
which the Holder was responsible for performing his assigned duties for the
Corporation.
8. The Corporation's obligations to make payment on the Paymen
Date shall be subject to the Holder's satisfaction of all applicable tax
withholding obligations.
9. Pro rata adjustments shall automatically be made in the number of
units covered hereby to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and similar changes in the capital structure of
the Corporation, or a merger, dissolution or reorganization of the Corporation
after the date hereof so that the Holder is treated in a manner equivalent to
that of holders of the Corporation's Common Stock.
10. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
11. This Agreement may not be amended except by a written instrument
signed by the Holder and by a duly authorized representative of the Committee.
12. Notices required or permitted hereunder shall be in writing and
shall be delivered personally or by mail, postage prepaid, addressed to the
Office of the General Counsel of the Corporation, 141 Spring Street, Lexington,
Massachusetts 02173, and to the Holder at his address as shown on the
Corporation's payroll records, or to such other address as the Holder by notice
to the Corporation may designate in writing from time to time.
RAYTHEON COMPANY
By: /s/ Gail P. Anderson
Gail P. Anderson
Vice President - Human Resources
ACCEPTED:
/s/ Dennis J. Picard
Dennis J. Picard
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
[DESCRIPTION] ART. 5 FDS FOR 2ND QUARTER 10-Q
[TEXT]
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<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> 1,093,706
<COMMON> 236,336
0
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> 0
</TABLE>
