raytheonInvestor Conference Presentation - Morning Session

Missile Defense Center Woburn, MA

Dec. 1, 2005

11/30/2005

Agenda – Investor ConferenceDecember 1st, 2005

6:30–7:30 a.m. Buffet Breakfast Boston Harbor Hotel, Wharf Room7:30–8:30 Transport to Woburn8:30–8:45 Welcome and Agenda Overview - Greg Smith, Vice President, Investor Relations 8:45–9:15 Business Overview - Bill Swanson, Chairman and CEO9:15–9:45 Raytheon Aircraft - Jim Schuster, Chairman and CEO, Raytheon Aircraft Company9:45–10:00 Break10:00–12:00 p.m. Core Technology Demonstrations – Breakout Rotations

C4I TechnologiesMike Keebaugh, President, Intelligence and Information SystemsJon Jones, President, Space and Airborne SystemsJack Kelble, Vice President, Raytheon Company Constitution Room

Missile Technologies Quincy Market RoomLouise Francesconi, President, Missile Systems

RF Technologies Visualization CenterDan Smith, President, Integrated Defense Systems

EO/IR Technologies Woburn RoomColin Schottlaender, President, Network Centric Systems

12:00–1:00 Lunch Buffet1:00–3:00 Core Technology Demonstrations – Breakout Rotations3:00–3:15 Financial Outlook/2006 Guidance - Biggs Porter, Acting CFO Visualization Center3:15–3:45 Summary - Bill Swanson, Chairman and CEO3:45–4:15 Q&A - Bill Swanson/Biggs Porter4:30 p.m. Conference Ends


Dec. 1, 2005

Bill SwansonChairman & Chief Executive Officer

Raytheon Overview

11/30/2005

Forward-Looking Statements

This presentation contains forward-looking statements and projections. The Company cautions readers that such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks, and actual results may differ materially. The Company expressly disclaims any current intention to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this presentation. Important factors that could cause actual results to differ include, but are not limited to: the ability to obtain or the timing of obtaining future government awards; the availability of government funding; changes in government or customer priorities due to program reviews or revisions to strategic objectives; difficulties in developing and producing operationally advanced products and technology systems; termination of government contracts; program performance, including resolution of claims; timing of contract payments; the performance of critical subcontractors; government import and export policies and other government regulations; the ultimate resolution of contingencies and legal matters, including government investigations; the effect of regulatory actions and market conditions, particularly in relation to the general aviation, commuter and fractional aircraft businesses; cost growth risks inherent with large long-term fixed price contracts; conflicts with other investors and business risks in joint ventures and less than wholly-owned businesses; and risks associated with our former engineering and construction business related to outstanding letters of credit, surety bonds, guarantees and similar agreements and the resolution of claims and litigation. Further information regarding the factors that could cause actual results to differ materially from the projected results can be found in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2004 and quarterly reports on Form 10-Q, copies of which may be obtained at the Company's website www.raytheon.com.

11/30/2005

Customer Focus

Performance – Meet our commitments to our Customers, partners and each other, driving Customer Success.

Relationships – Build positive, solid relationships with our Customers, partners and each other. Listen, anticipate, respond, follow-through.

Solutions – Develop and provide superior Customer solutions, working as One Company.

Customer Success Is Our Mission

11/30/2005

Performance: Processes, Metrics, and Oversight

ProgramA

OversightOversight

ProcessesProcesses

MetricsMetrics

Integrated Product Development SystemEarned Value Management SystemCapability Maturity Model Integration

Award FeesFinancial metricsCPI / SPI CRAD awardsHR metricsEH&S

Bookings and Win ratesNew business assessment Customer satisfactionQualitySupplier performance

Focused On Performance In Our Processes, Metrics, And Oversight

ProgramB

ProgramC

ProgramN

Raytheon Six SigmaRisk & Opportunity Assessments

…

Process Architecture

Operating ReviewsAOP ReviewsGate reviewsInternal Audit

Raytheon Company Evaluation Team HR reviewsStrategic Dialogs

11/30/2005

Diverse Program Portfolio

Raytheon G&D Program Portfolio:

Over 8,000 active programs

Raytheon has submitted > 5,300 proposals year to date – averaging 17 per day

Raytheon has been awarded > 3,200 new contracts year to date – averaging 10 per day

In Q3-2005, excluding 3 bookings of greater than $100M (all classified), the average Booking was under $5M

Breadth And Depth Of Program Portfolio Requires World-class Performance Processes

11/30/2005

Operating Review Process

Effective Controls And Performance Focus Drive Shareholder ValueCharts Contain Notional Data

11/30/2005

R6σ® Performance

Six Sigma continues to have significant impact – 62% of population are qualified specialists– More than 1,200 are trained experts

Recently held R6σ Celebration with over 450 attendees including 50 customers

Projects up 19%, customer projects up 39%, year-over-year

Engagements with suppliers up 34% year-over-year

Joint Stand-off Weapon (JSOW) Block II Six Sigma project cut cost by 34% while upgrading performance; recipient of 2005 Department ofDefense Packard Award

NetJets Six Sigma project yielded extra 135 days of availability and improved scheduled maintenance delivery by 30%.

Six Sigma Continues To Drive Performance

11/30/2005

Performance Focus Is Paying Off

0

5

10

15

1999 2005*

0

5

10

15

20

25

30

2003 2004 2005* 2006*

0

5

10

15

20

25

30

2003 2004 2005* 2006*

Decreasing Net Debt

0.0

0.5

1.0

1.5

2.0

2.5

2003 2004 2005* 2006*

Strong Sales Growth

Growing Operating Income

Solid Bookings

* Guidance as of Q3 2005

$ Billions

Performance Culture … Providing Customer Solutions … Driving Value

11/30/2005

Relationships: Speed & Agility

Acting As A Partner, Meeting Customers’ Urgent Requirements

Program Time to Field

Persistent Surveillance & Dissemination System of Systems (PSDS2)

6 Months

Rapid Aerostat Initial Deployment (RAID)

36 Days

Multispectral Targeting System Ball (MTS)

4 Months

Explosive Ordnance Disposal Robots (EODBOTs)

3 Months

11/30/2005

Customer Reaction

DD(X): “The Navy and [DD(X)] National Team have accomplished the most thorough ship design and integration process in the history of Navy shipbuilding. I am proud of their achievement and believe their accomplishment sets a new standard in acquisition.” - Rear Admiral Charles Hamilton, USN

Active Denial: “Raytheon’s Active Denial System (ADS)…shows great potential as a transformational technology… I appreciate the Raytheon ADS Team’s efforts to design and develop the advanced technologies necessary for the protection of our fleet.” - Rear Admiral A.M. Macy, USN

GBS: “Global Broadcast System is the best program in SMC’s [AF Space & Missile Systems Center] portfolio and a critical pathfinder for future Milsatcom advancements.” - Brigadier General Ellen Pawlikowski, USAF

Providing Our Customers With Capabilities To Get The Job Done

11/30/2005

Solutions: Leveraging Core Defense Domain Knowledge

Represents Over 2/3 Of Our Total Business

Technology/Market Capabilities - examples

RFRadarMissile Seekers

CommunicationsElectronic WarfareDirected Energy Weapons

EO / IRSeeing the extended battlespace (Space, Airborne, Surface)

Enabling Night Vision and Precision Strike Missions

Lethal and Non-lethal Applications

Battle Management/C2Sensors and PayloadsIntelligence & AnalysisIntegrated Ground Solutions

Missiles

Missile as a Node in the NetUrban Warfare

C4I

Situational AwarenessPersistent SurveillanceCommunicationsMission Planning

11/30/2005

Raytheon Strategy

Grow our position in core defense markets through a focus on key strategic pursuits, mission support, technology and Mission Assurance.

Use the Strategic Business Areas to leverage domain knowledge ofcore defense markets — across the company — to achieve growth and to expand our Mission Systems Integration opportunities.

Return Beechcraft® and Hawker® brands to a preeminent position.

Be a Customer Focused company based on:

– Performance – Promises made, promises kept

– Relationships – Listen, anticipate, respond and follow through with our Customers, partners and each other

– Solutions – Develop and provide superior Customer solutions working as One Company

Disciplined Growth Through Customer Focus

11/30/2005

Potential Shifting Budgetary Priorities

DecreasingDecreasingLarge platform impacts?Large platform impacts?

Decommission Decommission carrier(scarrier(s)? )?

Quantities or delivery Quantities or delivery schedules could changeschedules could change

StandStand--alone C2 systems alone C2 systems could come under pressurecould come under pressure

IncreasingIncreasingGround ForcesGround Forces

Special Operations ForcesSpecial Operations Forces

Command & Control (C2)Command & Control (C2)

Intelligence, Surveillance, Intelligence, Surveillance, Reconnaissance (ISR)Reconnaissance (ISR)

Unmanned SystemsUnmanned Systems

Knowledge ManagementKnowledge Management

Mission SupportMission Support

NonNon--lethal Systemslethal Systems

Precision EngagementPrecision Engagement

Raytheon’s Portfolio Is Aligned With Priority Areas

11/30/2005

Mission Systems Integration (MSI) is the integration of multiple systems (sensors, C4I, weapons) to deliver a solution to accomplish a specific mission for a customerMSI requires a thorough understanding of the mission, the systems being integrated, and the concept of operations

Emerging Program Structure

Growing Mission Systems Integration

Platform

Customer

Traditional Program Structure

Moving up from Systems provider

to a Mission Systems Integrator

(MSI) role

Core Defense (Systems,

Subsystems, Components)

Platform MSI

LSI

Customer

Growing To 22% Of G&D Business Over The Next 5 Years

Core Defense (Systems,

Subsystems, Components)

11/30/2005

MSI Opportunities: Family of Ships

Family of ShipsFamily of Ships

“DD(X) is the technology development engine for the

navy’s future ship platforms”- John J. Young Jr., ASN (RDA), Nov. 3, 2005

“DD(X) is the technology development engine for the

navy’s future ship platforms”- John J. Young Jr., ASN (RDA), Nov. 3, 2005

MSIMSI

VA ClassVA Class

LPD-17

LA ClassLA Class

CV/CVNCV/CVN

AEGISAEGIS

• Standard C2• Common Applications• Advanced Radar• Open Architecture

• Standard C2• Common Applications• Advanced Radar• Open Architecture

Forward FitForward Fit

VA ClassVA Class SSGNSSGN

DD(X)DD(X)

CVN 21CVN 21

MMDShipMMDShip

CJR

LHA(R)LHA(R)

BackfitBackfitLPD-17

CV/CVNCV/CVN

LA ClassLA Class

AEGISAEGIS

11/30/2005

MSI Opportunities: Horizontal Integration

Getting To HI Is An Evolutionary Process

11/30/2005

Returning Beechcraft® and Hawker® to Preeminence

Focus Area Progress

Service & Support

Make exceptional customer service and support RAC’s number one business priority

Quality Clearly establish the Beechcraft and Hawker brands as the industry standard for maximum value and highest quality

Products Fund and execute product derivative and modernization strategies for all existing products

Costs Drive cost reduction and productivity to improve competitiveness and financial performance

People Make RAC a place where talented and diverse people are proud to work

RAC Focus Paying Off In Growth And Profitability


Dec. 1, 2005

Jim SchusterChairman and CEO

Raytheon Aircraft Company

11/30/2005

NBAA Announcements

4000

11/30/2005

NBAA Announcements

850XP

11/30/2005

NBAA Announcements

onanza G36 - Garmin Avionics

From This To This

11/30/2005

…The G.A. Market Looks Good Heading Into 2006

Market Indicators …No Matter How You Look At It

400

500

600

700

800

900

1000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Jet A

ircra

ft U

nits

Del

iver

ed N

ew

TRBJan ‘05

TRBJan ‘05

ActualActual ForecastForecast

HoneywellSep ’05

HoneywellSep ’05

Teal – May ‘05Teal – May ‘05

Forecast Int’lJul ’05


’04Actual

’04Actual

400

500

600

700

800

900

1000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Jet A

ircra

ft U

nits

Del

iver

ed N

ew

TRBJan ‘05

TRBJan ‘05

ActualActual ForecastForecast

HoneywellSep ’05

HoneywellSep ’05

Teal – May ‘05Teal – May ‘05



’04Actual

’04Actual

Jet Aircraft Forecast Comparison

Jet A

ircra

ft U

nits

Del

iver

ed N

ew

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Q1

00Q

2 00

Q3

00Q

4 00

Q10

1Q

2 01

Q3

01Q

4 01

Q1

02Q

2 02

Q3

02Q

4 02

Q1

03Q

2 03

Q3

03Q

4 03

Q1

04Q

2 04

Q3

04Q

4 04

Q1

05Q

2 05

Q3

05Q

4 05

Q1

06Q

2 06

Q3

06Q

4 06

2000 2001 2002 2003 2004 2005 20062000 = 3.7%2001 = 0.8%2002 = 1.6%2003 = 2.7%2004 = 4.2%2005 = 3.5%2006 = 3.4%

Order IntakeDroughts

Minimum Requirement forHealthy Bizjet Order Intake

Real U.S. GDP (Baseline Scenario 9/05)

Reuters, October 10th…• Top forecasters … are convinced the

impact of hurricanes should be short lived… the economy is unlikely to dip much below its trend rate over the next 5 quarters

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Q1

00Q

2 00

Q3

00Q

4 00

Q10

1Q

2 01

Q3

01Q

4 01

Q1

02Q

2 02

Q3

02Q

4 02

Q1

03Q

2 03

Q3

03Q

4 03

Q1

04Q

2 04

Q3

04Q

4 04

Q1

05Q

2 05

Q3

05Q

4 05

Q1

06Q

2 06

Q3

06Q

4 06

2000 2001 2002 2003 2004 2005 20062000 = 3.7%2001 = 0.8%2002 = 1.6%2003 = 2.7%2004 = 4.2%2005 = 3.5%2006 = 3.4%

Order IntakeDroughts

Minimum Requirement forHealthy Bizjet Order Intake


Reuters, October 10th…• Top forecasters … are convinced the

impact of hurricanes should be short lived… the economy is unlikely to dip much below its trend rate over the next 5 quarters


7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Per

cent

of F

leet

for S

ale

2001 2002 2003 2004 2005

Jets 9.78%

Turboprops 8.26%

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%


Per

cent

of F

leet

for S

ale

2001 2002 2003 2004 2005

Jets 9.78%

Turboprops 8.26%Percent of Used Fleet for Sale

Perc

ent O

f Fle

et F

or S

ale

Percent of Used Fleet for SaleSummary Market Indicators

Qua

ntity

0

100

200

300

400

500

600

700

800

900


Prospect V isits

Demos

Perf . Analysis

Financial Analysis

Fabric Boards

Inquiries

12 Month Average

2001 2002 2003

12 monthmoving average

2004 2005

0

100

200

300

400

500

600

700

800

900


Prospect V isits

Demos

Perf . Analysis

Financial Analysis

Fabric Boards

Inquiries

12 Month Average

2001 2002 2003

12 monthmoving average

2004 2005

11/30/2005

2006 Aircraft Deliveries

’05 vs.‘062003A 2004A 2005F 2006E Delta

4000 - - - 10* 10

800XP/850XP 47 50 58 63 5

400XP 24 28 59 48 (11)

Premier 29 37 33 40 7

King Airs 86 104 116 137 21

Pistons 82 93 109 126 17

Total Commercial 268 312 375 424 49T6 68 67 60 60 -Total 336 379 435 484 49

*excludes 1 leased aircraft

2006 – 3rd Straight Year Of Double Digit Growth

11/30/2005

Margin Expansion …

. . . Derivative Products, Completion Of Lot Programs And Productivity Are Driving Margins . . .

Volume/Derivative Products

-3

0

3

6

9

(3.1%)

0.1%

2.6%

4.8%5.0 - 5.5%

9 - 10%

Premier/HorizonLot Completions

R6S/Productivity

(1.9%)

2001 2002 2003 2005F 2006E 2009E2004

OP

MARGI

N

% ~ ~

11/30/2005

Productivity…

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005F 2006E

$237K

$276K

$325K

$360K

$227K$214K$191K$K

Sales Per Employee

… Productivity Gains Continue –Sales Per Employee Nearly Doubled Since 2000

11/30/2005

New Products and Derivatives Drive Revenues…

‘06‘95 ‘01 ‘03‘96 ‘97 ‘98 ‘99 ‘00 ‘02 ‘04

4000

G36

G58

HW 350

H 800 XPI

H 850 XP

C90-GT

Premier 1A

350 ER

T6 B

‘05

800XP 400XPPremier I

800 XP-PL21KA-PL21

T6

Premier ER

B200 GT

1995-2004 Six Product Introductions

To Be Announced

To Be Announced

… 12 New Products / Derivatives Introduced 2005/06 –Twice As Many As The Prior 10 Years Combined

11/30/2005

4000

11/30/2005

0

0.5

1

1.5

2

2.5

3

3.5

2001 2004 2005F 2006E 2007E 2008E 2009E

Major Areas Of Focus

Asset Reduction – On Track

Inventory ≈ $225M– Used aircraft – sell off 1000’s– Outsourcing– Factory design – cycle time reduction

across all operations– Expand vendor managed inventory

programs

Financing ≈ $200M– Further development of 3rd party

financing sources– Get RAC completely out of the

financing business

Fixed Assets ≈ $200M– Disposition of asset intensive

operations – restructuring– Continued “Micromanagement” of

capital expenditures≈ $800M (26%) Reduction 2001-2005 … Another $600M

Planned Through 2009

Gross Assets $B

$B

3.1

2.3

Inventory & Financing PP&E Other

1.7

($800M)

($600M)

11/30/2005

Customer Service and Support

11/30/2005

RAC – Right On Track …2006 – 2009

Sales – Compound growth of ≈ 10% through 2009

Margins – Continued margin expansion –high single digit margins by 2009

Gross Assets – Another $600M reduction through 2009

Cash Flow – Continued positive cash flow and conversion rate

Productivity – Clearly establish Raytheon Aircraft as a lean, flexible, cost competitive general aviation company

Customer Service & Support –Finishing the job – True Mission Assurance

Products – Introduction of 3 to 5 new product upgrades every year

… Continued Execution – Reliable Performance

Strategies Paying Off

Sales – 3 straight years of double digit growth

Margins – nearly 800 basis points improvement since 2001

Gross Assets – Reduced by $800M since 2001

Cash Flow – Positive cash flow / >100% cash conversion for all of the last 4 years

Productivity – Lowest hours per aircraft on record. Sales per employee nearly doubled since 2000

Customer Service & Support – Highest ratings on record

Products – 12 New Products / upgrades introduced 2005 / 06

11/28/2005 Page 13


Dec. 1, 2005

raytheonInvestor Conference Presentation - Morning Session

Economy & Finance

Transcript of raytheonInvestor Conference Presentation - Morning Session