LEXINGTON, Mass., Dec. 19 /PRNewswire-FirstCall/ -- Raytheon Company
(NYSE: RTN) announced today that it will record additional charges in the
fourth quarter resulting from increased costs on projects in its divested
Engineers and Constructors (E&C) business. The increased costs at the two
Massachusetts power plants Raytheon is completing for the Exelon Corporation
(formerly Sithe Energies) will necessitate a charge to discontinued operations
that could be in the range of $150-200 million, and will raise the total loss
on these projects beyond the third quarter 2002 estimate of $1.3 billion. The
charge will result in a similarly sized cash outflow during 2003.
At both the Mystic and Fore River facilities, further deterioration of
already low labor productivity levels has caused construction staffing levels
to remain higher than anticipated. While total staffing has decreased and will
continue to come down as construction nears completion, the third quarter 2002
estimate assumed fewer craft laborers and less remaining work at this point in
time.
At Mystic, the Block 9 oil flush process has been delayed by two months
due to the need for more extensive cleaning than was planned, and in some
instances the need to replace piping. This delay has caused both higher
liquidated damages and labor expenses. The current schedule supports
performance testing for Mystic during early April.
At Fore River, the request to allow the air blow process to continue 24
hours a day has not yet been approved by the Energy Facilities Siting Board.
The inability to conduct this process as planned has extended the air blow
process by six weeks. The current schedule supports performance testing for
Fore River during mid-April.
This estimated range of $150-200 million assumes that labor productivity
at the two sites does not improve, and reflects the maximum liquidated damages
at Mystic due to schedule under the contract. The estimate does not include
recurring period costs and allocated interest expense.
While the Company continues to pursue cost savings opportunities, claims,
and other recovery efforts, this estimate does not reflect any significant
offsetting benefits.
The Company is preparing a detailed estimate of cost at completion (ECAC)
for each of the two projects and expects to complete this process in
mid-January. The Company expects to report the results of this analysis in
its Jan. 24 earnings release; further updates are not anticipated before then.
The Company does not anticipate incremental charges at any of the other
E&C projects in the fourth quarter. This charge is not expected to impact any
of the company's bank covenants.
Based in Lexington, Mass., Raytheon is a global technology leader in
defense, government and commercial electronics, and business and special
mission aircraft.
Safe Harbor
Certain statements made in this update, including any statements relating
to the company's future plans, objectives, and projected future financial
performance, contain or are based on, forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Specifically, statements that are not historical facts, including statements
accompanied by words such as "believe," "expect," "estimate," "intend," or
"plan," variations of these words and similar expressions, 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 upon assumptions that the company
believes are reasonable, but are subject to a wide range of risks, and actual
results may differ materially. Given these uncertainties, readers should not
rely on forward-looking statements. Forward-looking statements also represent
the company's estimates and assumptions only as of the date that they were
made. Important factors that could cause actual results to differ include,
but are not limited to: the performance of critical subcontractors and
suppliers; the timing of project completion and customer acceptance of the
Massachusetts Projects; the timing and cost associated with the ultimate
resolution of the turbine combustor issues at the Massachusetts Projects; the
company's lack of construction industry expertise resulting from the company's
sale of RE&C; the continued decline of craft labor productivity at the
Massachusetts Projects; the company's inability to recover amounts required to
be paid in connection with pre-funded liquidated damages; risks inherent with
large long-term fixed price contracts, particularly the ability to contain
cost growth; and the ultimate resolution of contingencies and legal matters.
Further information regarding the factors that could cause actual results to
differ materially from projected results can be found in the company's filings
with the Securities and Exchange Commission, including "Item 1 - Business" in
the company's Annual Report on Form 10-K for the year ended December 31, 2001
and in the company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2002, June 30, 2002, and September 29, 2002.
Contact:
James Fetig
781-953-3434
SOURCE Raytheon Company
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Related links:
http://www.raytheon.com
CONTACT:
James Fetig of Raytheon Company,
+1-781-953-3434
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