1
EXHIBIT 99.1
Raytheon Savings and Investment Plan
Financial Statements
To Accompany 2000 Form 5500
Annual Report of Employee Benefit Plan
Under ERISA of 1974
For the Year Ended December 31, 2000
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.
2
Report of Independent Accountants
To the Participants and Administrator of
The Raytheon Savings and Investment Plan:
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statement 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 Savings and Investment Plan (the "Plan") at
December 31, 2000 and December 31, 1999, and the changes in net assets available
for plan benefits for the year ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. 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 of America, 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 our opinion.
As discussed in Notes A and J to the financial statements, the Raytheon Employee
Savings and Investment Plan was merged into and consolidated with the Plan.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 6, 2001
3
Raytheon Savings and Investment Plan
Statements of Net Assets Available for Plan Benefits
December 31, 2000 and 1999
- --------------------------------------------------------------------------------
2000 1999
Assets:
Master trust investments:
At contract value (Notes B, E and L)
Investment contracts $1,420,330,559 $1,365,686,304
Common collective trust 14,515,437 24,541,396
At fair value (Notes B and L)
Registered investment companies 3,608,672,695 3,418,046,502
Common collective trust 792,970,054 897,408,197
Raytheon Company common stock 1,250,608,102 767,489,840
Common stock 176,450,641 279,907,944
Participant loans 235,022,632 224,811,843
-------------- --------------
7,498,570,120 6,977,892,026
-------------- --------------
Receivables:
Employer contributions 4,012,685 456,290
Accrued investment income and
other receivables 9,966,532 9,328,981
Transfer receivable (Note J) - 558,535,238
Cash and cash equivalents 78,405,127 108,497,715
-------------- --------------
Total assets $7,590,954,464 $7,654,710,250
============== ==============
Liabilities:
Payable for outstanding purchases $ - $ 3,078,603
Accrued expenses and other payables 2,719,732 1,903,254
-------------- --------------
Total liabilities 2,719,732 4,981,857
-------------- --------------
Net assets available for plan benefits $7,588,234,732 $7,649,728,393
============== ==============
The accompanying notes are an integral part of these financial statements.
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Raytheon Savings and Investment Plan
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 2000
- -------------------------------------------------------------------------------
Additions to net assets attributable to:
Investment income (Notes B, E and L):
Net depreciation of investments $(179,849,240)
Interest and dividends 374,349,064
--------------
194,499,824
Contributions and deferrals:
Employee deferrals 469,638,124
Employer contributions 208,348,166
Transfers (Note I) 191,331,472
--------------
869,317,762
--------------
Total additions 1,063,817,586
--------------
Deductions from net assets attributable to:
Distributions to participants 834,394,548
Administrative expenses 387,643
Transfers (Note I) 290,529,056
--------------
Total deductions 1,125,311,247
--------------
Decrease in net assets (61,493,661)
Net assets, beginning of year 7,649,728,393
--------------
Net assets, end of year $7,588,234,732
==============
The accompanying notes are an integral part of these financial statements.
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Notes to Financial Statements
A. Description of Plan
General
The following description of the Raytheon 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 J, effective January 1,
2000 the participants and related account balances of the Raytheon
Employee Savings and Investment Plan (RESIP) were merged into the Plan.
The Plan is a defined contribution plan covering the majority of
employees of Raytheon Company (the "Company"). All employees are
immediately eligible to enroll in the Plan on the first day of service,
including employees from prior plans. 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"). In addition, effective January 1, 1999, the merger
of the Raytheon Stock Ownership Plan ("prior ESOP plan") creates an
additional employee stock ownership portion (ESOP) of the Plan. 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 held in the Raytheon Company Master Trust
for Defined Contribution Plans (the "Master Trust"). The trustee of the
Master Trust maintains a separate account reflecting the Plan's
equitable share in the Master Trust.
Contributions and Deferrals
Employees are allowed to defer up to 20% of their compensation to the
Plan, except for certain employees from prior plans and certain labor
unions who are limited to 17%. Employee contributions, including
rollovers are invested based on participant elections. For 2000, the
annual employee deferral for a participant cannot exceed $10,500. The
Company contributes 100 percent of the first 4 percent of compensation
that a participant contributes to the Plan. The matching Company
contribution is invested directly in 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. The
Company also makes an ESOP contribution 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 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
plans).
Certain union groups are governed by the employee contribution
limitations of the former plans, ranging from 10% to 20% of
compensation. In addition, for certain union employees at Raytheon
Company and Raytheon Aircraft Company, the Company will match up to 4%
of compensation and/or make contributions based on hours of service,
percent of pay, and ESOP contributions. Where applicable, ESOP
contributions are as described in the previous paragraph.
6
Participants may invest their deferrals in increments of 1% in any
combination of fourteen alternatives. The investment objectives range
from investments with an emphasis on preservation of capital to equity
investments with an emphasis on capital gains. The underlying
investments include cash and equivalents, investment contracts,
registered investment companies, common collective trusts, common stock
and Raytheon Company stock.
Participant Accounts
Each participant's account is credited with the participant's deferral,
the Company's contribution and an allocation of plan earnings. Plan
earnings are allocated based on account balances by investment option.
Participant accounts are charged with an allocation of plan expenses.
Vesting
Effective January 1, 1999, all employee and employer contributions and
earnings thereon are fully and immediately 100% vested for each
participant who performs an hour of service on or after January 1,
1999.
Prior to 1999, participants were immediately vested in their voluntary
deferrals plus actual earnings thereon. Vesting requirements for
employer contributions plus earnings thereon varied depending upon when
an employee became eligible to participate in the Plan. Vesting
generally occurred 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 and pay Plan expenses. At
December 31, 2000 and 1999, Plan forfeitures were $3,522,216 and
$2,490,451, respectively. During 2000, the total amount of forfeitures
from the Plan, relating to contributions made prior to January 1, 1999,
was $922,184.
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.
Effective July 2000, participants who have investments in Raytheon
Common Stock may elect to reinvest dividends within the Plan or receive
dividends in cash. Any dividends received in cash by participants will
be subject to taxes in the year of receipt. In December 2000, the
Company's Board of Directors declared a quarterly dividend of $.20 per
share. Of the $7,720,338 in dividends relating to the Plan,
approximately $400,000 was received in cash by participants who elected
the cash payment option.
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 loans are secured by the balance in the participant's account and
bear interest equal to the prime rate published in the Wall Street
Journal on the first business day in each calendar quarter and such
rate will apply to loans which are made at any time during each
respective calendar quarter. 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.
Plan investments are stated at fair value except the Plan's benefit
responsive investment contracts which are included in the financial
statements at their contract value, defined as net employee
contributions plus interest earned on the underlying investments at
contracted rates. Investments in registered investment companies 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.
Security transactions are recorded on the trade date. Payables for
outstanding purchases represent trades which have occurred but have not
yet settled.
The Plan presents in the statement of changes in net assets available
for plan benefits 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 dividends and interest income.
Benefits are recorded when paid.
The preparation of financial statements in conformity with generally
accepted accounting principles, requires the Plan administrator to make
estimates and assumptions that affect the reported amounts of net
assets and liabilities and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from the
estimates included in the financial statements.
8
The Plan provides for various investment options in any combination of
stocks, 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.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). SFAS No. 133 requires that an entity recognize all
derivatives in the statement of net assets available for plan benefits
and measure those instruments at fair value.
SFAS No. 133 is effective for fiscal years beginning after June 15,
2000. Pursuant to SFAS No. 137, the Plan is required to adopt SFAS No.
133 effective January 1, 2001. Management has not yet determined the
impact that SFAS No. 133 will have on the Plan's financial statements.
C. Investments
The following presents investments that represent 5 percent or more of
the Plan's net assets:
December 31,
2000 1999
Fidelity Equity Income fund $1,049,363,041 $1,130,114,968
Raytheon Common Stock fund** 1,250,608,102 767,489,840
BT Pyramid Equity Index fund 792,970,054 897,408,197
Fidelity Magellan fund 651,972,218 681,632,410
Fidelity Blue Chip fund 572,226,613 575,996,214
Fidelity Balanced fund 388,440,429 417,684,330
Deutsche Bank AG 497,146,897 477,990,216
Vanguard Primecap 429,824,496 N/A
** Amount is made up of both participant and non-participant directed
amounts.
During the year ended December 31, 2000 the Plan's investments
(including gains and losses on investments bought and sold, as well as
held during the year) depreciated in value by $179,849,240 as follows:
Registered investment companies $(285,257,385)
Common collective trusts (78,638,298)
Raytheon Company common stock 246,524,170
Common stock (62,477,727)
--------------
$(179,849,240)
==============
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,
2000 1999
Net assets:
Raytheon Company common stock $457,991,760 $177,372,404
Cash and cash equivalents 4,400,304 8,724,595
------------ ------------
$462,392,064 $186,096,999
============ ============
December 31,
2000
Changes in net assets:
Contributions $174,439,371
Interest and dividends 5,922,154
Net appreciation of investments 120,700,430
Distribution to participants (27,432,924)
Administrative expenses (184,925)
Net transfers to other investments 2,850,959
------------
$276,295,065
============
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E. Investment Contracts
Investments include collateralized fixed income investment portfolios,
which are managed by investment management firms. The assets underlying
the investment contracts are owned by the Plan and are maintained by
the investment management firms. The accounts are credited with
earnings on the underlying investments and charged for participant
withdrawals and administrative expenses. The contracts are included in
the financial statements at contract values as reported to the Plan by
the insurance companies. Contract value represents contributions made
under the contracts, plus earnings, less participant withdrawals and
administrative expenses. The Plan utilizes a benefit responsive wrapper
contract issued by a third party that provides market and cash flow
risk protection to the Plan. The value of the wrapper is the difference
between the fair value of the underlying assets and the contract value.
At December 31, 2000, the value of the wrapper was $57,706,801.
Participants may ordinarily direct the withdrawals or transfer of all
or a portion of their investment at contract value.
The crediting interest rates are adjusted quarterly to reflect the
experienced and anticipated yields to be earned on such investments,
based on their book value. The average yield and crediting interest
rates were as follows:
Crediting
Average interest
yield rate
For the year ended December 31, 2000:
Chase Manhattan Bank (429666) 5.79% 5.99%
Deutsche Bank AG (FID-RAY-1) 5.69% 5.89%
Fidelity IPL (633-GCDC) 5.94% 6.10%
Fidelity STIF 5.90% 6.48%
State Street Bank and Trust (99054) 5.80% 6.00%
Westdeutsche Landesbank (WLB6173) 5.79% 5.99%
For the year ended December 31, 1999:
Chase Manhattan 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 (WLB6173) 5.69% 5.69%
F. Federal Income Tax Status
The Internal Revenue Service has determined and informed the Company by
letter dated July 1995 that the Plan and related trust are designed in
accordance with applicable sections of the Code. The Plan has been
amended and restated 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 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 all amounts then credited to his or her account.
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H. Related Party Transactions
The Plan's trustee is Fidelity Management Trust Company (the
"Trustee"). Certain Plan investments are shares of mutual funds
managed by the Trustee 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 $327,276,469 and sales
amounted to $183,423,711 for the year ended December 31, 2000.
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.
In 2000, the Company sold Raytheon Engineers & Constructors, Inc.
(RE&C) to Washington Group International, Inc. (WGI), formerly known as
Morrison Knudsen. Employees of RE&C enrolled in the former RESIP or the
Plan were given an option to transfer account balances to WGI or to
retain the balances within the Plan. Participants who elected to
transfer funds totaled $39,734,253 and were transferred to WGI in 2000.
J. Mergers
The Plan was amended and, effective January 1, 2000, the former RESIP
was merged into and consolidated with the Plan. The amount transferred
into the Plan from RESIP was $558,535,238. The provisions of the Plan
were modified to incorporate the RESIP provisions related to prior
RESIP eligible and certain union employees.
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L. Master Trust
The following is a summary of net assets available for plan benefits by
Plan under the Master Trust as of December 31, 2000:
Raytheon Raytheon Raytheon
Raytheon Employee Savings and Defined
Savings and Savings and Investment Plan Contribution
Investment Investment for Puerto Rico Master
Plan Plan Based Employees Trust
Assets:
Master trust investments:
At contract value:
Investment contracts $1,420,330,559 $ - $ - $1,420,330,559
Common collective trust 14,515,437 14,515,437
At fair value:
Registered investment companies 3,608,672,695 3,608,672,695
Common collective trust 792,970,054 792,970,054
Raytheon Company common stock 1,250,608,102 1,250,608,102
Common stock 176,450,641 176,450,641
Participant loans 235,022,632 235,022,632
-------------- ------------ -------------- --------------
Total investments 7,498,570,120 - - 7,498,570,120
-------------- ------------ -------------- --------------
Cash and cash equivalents 78,405,127 78,405,127
Receivables:
Employer contributions 4,012,685 4,012,685
Accrued investment income &
other receivables 9,966,532 9,966,532
Transfer receivable* - -
-------------- ------------ -------------- --------------
Total assets $7,590,954,464 $ - $ - $7,590,954,464
============== ============ ============== ==============
Liabilities:
Payable for outstanding purchases $ - $ - $ - $ -
Accrued expenses and other
payables 2,719,732 2,719,732
Transfer payable* - - - -
-------------- ------------ -------------- --------------
Total liabilities $ 2,719,732 $ - $ - $ 2,719,732
============== ============ ============== ==============
Net assets available for plan
benefits $ 7,588,234,732 $ - $ - $7,588,234,732
=============== ============ ============== ==============
Percentage of total trust assets 100% 0% 0% 100%
* See Note J
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The following is a summary of net assets available for plan benefits by
Plan under the Master Trust as of December 31, 1999
Raytheon Raytheon
Raytheon Raytheon Savings and Defined
Savings and Employee Investment Plan Contribution
Investment Plan Investment for Puerto Rico Master
Plan Based Employees Trust
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 &
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 1,903,254 141,490 513 2,045,257
payables
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
benefits $7,649,728,393 $ - $1,640,729 $7,651,369,122
============== ============ =========== ==============
Percentage of total trust assets 99.98% - 0.02% 100.00%
* See Note J
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The following is a summary of investment income by Plan under the
Master Trust for the year ended December 31, 2000.
Raytheon Raytheon Raytheon
Raytheon Employee Savings and Defined
Savings and Savings and Investment Plan Contribution
Investment Investment for Puerto Rico Master
Plan Plan Based Employees Trust
Investment income:
Interest and dividends $ 374,349,064 $ - $ - $ 374,349,064
Net appreciation/ (depreciation)
Registered investment companies (285,257,385) (285,257,385)
Common collective trust (78,638,298) (78,638,298)
Raytheon Company common stock 246,524,170 246,524,170
Common stock (62,477,727) (62,477,727)
------------ ---------- ---------- -------------
(179,849,240) - - (179,849,240)
------------ ---------- ---------- -------------
Total investment income/ (loss) $ 194,499,824 $ - $ - $ 194,499,824
============ ========== ========== =============