LEXINGTON, Mass., Aug. 15 /PRNewswire/ -- Raytheon Company (NYSE: RTN)
said today the cost to complete two Massachusetts power plants abandoned by
Washington Group International (WGI) will be $633 million, net of cash
receipts, well within the company's previously announced range of liability.
The estimate is the result of an extensive review of the projects.
As reflected in its Form 10-Q filing with the Securities and Exchange
Commission today, the company increased the pretax charge related to the two
projects in the second quarter from $125 million to $308 million. The company
also said its range of exposure on 15 other guaranteed construction projects
-- $49 million to $125 million -- is consistent with its earlier disclosures.
"We are very confident in the findings of our review and in the plan for
completing these projects," said Phil Le Pore, the Raytheon executive
responsible for the company's engineering and construction operations. "This
estimate represents the work plan against which the entire team will measure
their performance."
The development of the estimated cost to complete (ETC) for the
Massachusetts projects involved an integrated program management team, staffed
by Raytheon, Duke/Fluor Daniel and WGI. The ETC includes input from a number
of advisors, including Duke/Fluor Daniel, WGI and Ernst & Young.
The company believes that, relative to the original schedule for the two
projects, the construction schedule deteriorated by approximately six months
due to WGI's abandonment. The abandonment resulted in the release of vendors
and subcontractors, the demobilization of the job sites and temporary
reductions in labor productivity when work was restarted. Raytheon has
staffed and scheduled the two projects to recover several months of the
schedule slippage and this has been factored into the ETC.
Engineering for both facilities is virtually complete. At this point, the
portion of the ETC related to materials is essentially fixed, since the
majority of the required materials have already been sourced and priced.
Substantially all major subcontracts have been committed. Craft staffing
levels, consistent with the construction schedule, have already been achieved.
Functional performance testing procedures have been optimized in cooperation
with Sithe Energies. Therefore, risks or exposures in the ETC are largely
related to craft labor productivity, and the potential impact of further
construction delays on schedule damages that are provided for in the contracts
with Sithe Energies. Relative to job site performance in the second quarter,
construction productivity increased substantially in July.
The projects, an 800-megawatt power plant in Weymouth, Mass., and a
1,600-megawatt power plant in Everett, Mass., are scheduled for completion in
2002. Under the sale agreement for Raytheon's former engineering and
construction business, WGI is required to indemnify Raytheon for all amounts
expended by Raytheon to complete the projects, and Raytheon is entitled to
full cash reimbursement for these amounts and full recoupment or set-off
rights against any WGI claims against Raytheon.
With headquarters in Lexington, Mass., Raytheon Company is a global
technology leader in defense, government and commercial electronics, and
business and special mission aircraft.
Forward-looking statements
This news release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act concerning the company's
financial results, future plans, objectives and expected performance.
Specifically, statements in this release that are not historical facts,
including statements accompanied by words such as "believe," "expect,"
"anticipate," "estimate," "intend," or "plan" are intended to identify
forward-looking statements and convey the uncertainty of future events or
outcomes. The company cautions readers that any 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. Important factors that could cause actual results to differ
include, but are not limited to: the ultimate resolution of contingencies and
legal matters; the ultimate resolution of WGI's bankruptcy proceedings;
differences in anticipated and actual program results; and risks inherent with
large long-term fixed price contracts, particularly the ability to contain
cost growth. Further information regarding the factors that could cause actual
results to differ materially from projected results can be found in the
company's most recent filings with the Securities and Exchange Commission,
including Raytheon's Form 10-K for the year ended December 31, 2000 and Form
10-Q for the quarter ended July 1, 2001.
Contact:
David Polk
781.860.2386
SOURCE Raytheon Company
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Related links:
http://www.raytheon.com
CONTACT:
David Polk of Raytheon Company,
+1-781-860-2386
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