Raytheon 2009 Annual Report 2010 Board of Directors
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Raytheon 2009 Annual Report 2010 Board of Directors William H. Swanson Stephen J. Hadley Ronald L. Skates Chairman and Principal Retired President and Chief Executive Officer The RiceHadley Group, LLC Chief Executive Officer Raytheon Company Data General Corporation Frederic M. Poses Vernon E. Clark Retired Chairman and William R. Spivey Admiral Chief Executive Officer Retired President and Chief of Naval Operations Trane, Inc. Chief Executive Officer U.S. Navy (Ret.) Luminent, Inc. Michael C. Ruettgers* John M. Deutch Retired Chairman and Linda G. Stuntz Institute Professor Chief Executive Officer Partner Massachusetts Institute EMC Corporation Stuntz, Davis & Staffier, P.C. of Technology In an environment full of challenges, Raytheon delivered *Lead Director another year of outstanding performance in 2009. Staying true to our vision and values, we executed at a world- 2010 Leadership Team class level through 8,000 programs and 15,000 contracts, William H. Swanson Jon C. Jones* Daniel L. Smith bringing Mission Assurance to our customers and solid Chairman and President President Chief Executive Officer Space and Airborne Systems Integrated Defense Systems Raytheon Company growth to our shareholders. Our domain knowledge, Taylor W. Lawrence, Ph.D. Jay B. Stephens Thomas M. Culligan President Senior Vice President technological leadership and culture of innovation con- Senior Vice President Missile Systems General Counsel and Secretary Business Development, RII Raytheon Company tinue to create expanding opportunities globally. Our Raytheon Company Keith J. Peden Senior Vice President David C. Wajsgras 75,000 customer-focused employees continue to bring Lynn A. Dugle Human Resources Senior Vice President and President Raytheon Company Chief Financial Officer Intelligence and Raytheon Company forth new solutions at an accelerating pace. Above all, Information Systems Rebecca R. Rhoads Vice President and Pamela A. Wickham our commitment to the people we serve continues to Lawrence J. Harrington Chief Information Officer Vice President Vice President Raytheon Company Corporate Affairs inspire us to outperform our customer expectations and Internal Audit and Communications Raytheon Company Mark E. Russell Raytheon Company Vice President contribute to a safer, healthier world. John D. Harris II Engineering, Technology David Wilkins President and Mission Assurance Vice President Technical Services Raytheon Company Contracts and Supply Chain Raytheon Company Michael M. Hoeffler Colin J.R. Schottlaender Vice President President Richard R. Yuse Evaluation Team Network Centric Systems President Raytheon Company Space and Airborne Systems * On March 6, 2010 we were all saddened to hear of the sudden passing of Jon Jones, a Raytheon vice president who served as president of our Space and Airborne Systems business. Jon was a valued contributor to Raytheon for 33 years, an outstanding leader within our company, industry and community, and someone who exhibited all of the company’s values. During his distinguished career at Raytheon, his leadership supported programs of utmost importance to our men and women in uniform, as well as our employees. Jon Jones was a true patriot. Our deepest condolences go out to all of Jon’s family and friends. Ray_AR_Cov_2009.indd 19 3/30/10 10:49:11 AM Raytheon Financial Highlights Years ended December 31 2007 2008 2009 In millions, except per share amounts and percentages Net Sales $21,301 $23,174 $24,881 Operating Income 2,354 2,620 3,042 Income from Continuing Operations (Adjusted in 2007)1 1,500 1,698 1,977 Diluted EPS from Continuing Operations 3.29 3.93 4.89 (Attributable to Raytheon Company Common Stockholders) (Adjusted in 2007)1 Operating Cash Flow from Continuing Operations 1,249 2,036 2,745 Dividends Declared per Share 1.02 1.12 1.24 Debt to Capital 15.2% 20.1% 19.0% Return on Invested Capital (Adjusted in 2007)1 10.5% 11.1% 12.2% Net Sales Operating Income Diluted EPS from Continuing Operations ROIC (Adjusted in 2007)1 (Adjusted in 2007)1 In billions, except per share amounts and percentages $24.9 $3.0 $4.89 $23.2 $21.3 $2.6 $19.7 $2.4 $3.93 12.2% $18.5 11.1% 10.5% $2.0 $3.29 9.8% 8.2% $1.6 $2.62 $1.97 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 (1) 2007 income from continuing operations, diluted EPS from continuing operations attributable to Raytheon Company common stockholders and return on invested capital have all been adjusted to exclude the $219 million or $0.49 per diluted share favorable adjustment due to certain tax-related benefits. These measures are non-GAAP financial measures. Please see the page that precedes the back cover of this report for a reconciliation of these measures to GAAP and a discussion of why the Company is presenting this information. 1 RAY_AR09_3.30.10_text_pps.indd 1 4/2/10 1:36:52 PM Dear Fellow Shareholders, Raytheon had another strong year in 2009—results that We are seeing strong support, domestically and interna- build on our past success and strengthen the foundation tionally, in another key strategic area: our Intelligence, on which we will strive to be even better in the future. Surveillance and Reconnaissance work, particularly in the classified arena. I believe that our accomplishments in 2009, as well as during the last several years, are rooted in Raytheon’s In Homeland Security, Raytheon’s engineers meld the Vision, Strategy, Goals and Values (VSGVs). Our VSGVs world’s finest sensor, command and control and com- are reflected in our focus on the customer, in our technology munications systems into innovative Homeland Security and innovation leadership, in our commitment to execution, technology solutions that protect people on continents and in the positive spirit of our employees as measured by around the world. We focus our strengths on some of the our employee opinion survey. By generating world-class ideas world’s most urgent needs in border security, identity and putting these ideas into action, we seek to provide our management, Cybersecurity, aviation security and critical men and women in uniform and others with the systems and infrastructure protection. Our team crafts customer require- services they need to be safe and to succeed, and to enable the ments into tested and proven solutions to address some of success of all of our stakeholders around the world. the world’s most compelling needs. In a challenging environment for many businesses, we had Our training solutions span commercial, civilian govern- the right strategic focus, the right processes and the right ment and military, both domestically and worldwide. We talent in place to meet our customers’ needs, to grow, and are providing training support to every active U.S. soldier to build on our reputation for corporate responsibility. through a contract with the U.S. Army, to every Federal This focus is reflected in our strong results for 2009 — in a Aviation Administration air traffic controller, and to every book-to-bill ratio greater than one and a year-end backlog NASA astronaut. We are seeing increased demand in the of $37 billion, which bodes well for the future. For the year, international training marketplace, a growth opportunity. we had a 7 percent increase in sales — and international 2009 was a year in which the growing importance of Cyber- sales, including foreign military sales, represented 21 security was clear. Raytheon’s Cybersecurity solutions are percent of the total. International bookings were also strong, setting new standards in this emerging marketplace, capabili- representing 30 percent of total bookings. Earnings per ties that have been enhanced through a series of acquisitions share from continuing operations were up 24 percent, cash these last few years in insider threat software, vulnerability flow was robust, and we continued to improve our return on assessments and information operations, and infrastructure invested capital (ROIC), by 10 percent from 2008 to 2009. protection, engineering, research and analysis. In 2009, The company maintains a strong focus on program we acquired BBN Technologies, a leader in technology execution and the prudent management of capital and development with expertise spanning speech and language investments. This focus maximizes operating income and processing, privacy and security systems, networking, data cash, and continues to improve ROIC. It allows us to pursue mining, distributed systems and surveillance systems; and a capital deployment strategy that balances funding for in early 2010, Raytheon Australia acquired business assets growing our business, pension stability and returning cash owned by Compucat Research Pty Ltd to enhance Raytheon’s to our shareholders through dividend payments and share ability to meet the future information security needs of the repurchases — repurchases that totaled 25.8 million shares Australian intelligence community. for $1.2 billion in 2009. This focus on expanding our portfolio with key technolo- Diverse Portfolio Aligned gies and personnel — and integrating acquisitions with our core competencies — has secured our position as a world- With Global Customer Needs leading expert in Cybersecurity products and services. As Our portfolio is strong, broad-based and aligned with our our world becomes ever more dependent on the electronic customers’ priorities, both in the United States and around systems that support and protect us, our leadership is the world. positioned to provide a strategic benefit for years to come. One example of this alignment is in Missile Defense, As we step back and look at the company’s strategies and where the U.S. administration has identified our Standard capabilities, they are well aligned with our customers’ needs. Missile-3 and X-Band Radar as critical elements in missile Our innovative technologies are used across platforms, both defense systems for the United States and its allies. Other new and already in-service, a position that gives us, and countries, too, have confirmed their need for world-class our customers, considerable flexibility.