Income Tax Accounting Policy
Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Analyst Adjustments: Removal of Deferred Taxes
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Raytheon and its domestic subsidiaries provide for federal income taxes on pretax accounting income at rates in effect under existing tax law. Foreign subsidiaries record provisions for income taxes at applicable foreign tax rates in a similar manner. Such provisions differ from the amounts currently payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Raytheon provides for a U.S. tax liability on outside basis differences in the foreign subsidiaries related to amounts which have been previously taxed in the U.S. and undistributed earnings generated after December 31, 2017. This deferred tax liability generally relates to foreign currency movement and foreign withholding taxes. Raytheon continues to assert indefinite reinvestment on outside basis differences related to all other items, such as acquisition accounting adjustments. With the exception of Forcepoint, payments made for state income taxes are included in administrative and selling expenses as these costs can generally be recovered through the pricing of products and services to the U.S. government in the period in which the tax is payable. Accordingly, the state income tax provision (benefit) is allocated to contracts when it is paid (recovered) or otherwise agreed as allocable with the U.S. government. Payments made for state income taxes related to Forcepoint are included in federal and foreign income tax expense.

Source: 10-K (filing date: 2019-02-13).

Raytheon Co., income tax expense (benefit), continuing operations

USD $ in millions

	12 months ended	Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Federal
	Foreign
	State
	Current income tax expense
	Federal
	Foreign
	State
	Deferred income tax expense (benefit)
	Provision for federal and foreign income taxes

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

Item	Description	The company
Current income tax expense	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Raytheon Co.’s current income tax expense increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Deferred income tax expense (benefit)	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Raytheon Co.’s deferred income tax expense (benefit) increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Provision for federal and foreign income taxes	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Raytheon Co.’s provision for federal and foreign income taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Raytheon Co., effective income tax rate (EITR) reconciliation

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Statutory tax rate
	Foreign derived intangible income (FDII)
	Research and development tax credit (R&D tax credit)
	Equity compensation
	Foreign income tax rate differential
	Prior year true-up
	Tax benefit related to discretionary pension contributions
	R&D tax credit claims related to the 2014-2017 tax years
	Irish restructuring
	Change in valuation allowance
	Domestic manufacturing deduction benefit
	Remeasurement of deferred taxes
	One-time transition tax on previously undistributed foreign earnings
	TRS tax-free gain
	Tax settlements and refund claims
	Tax benefit on foreign dividend
	Other, net
	Effective tax rate

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

Item	Description	The company
Effective tax rate	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Raytheon Co.’s effective tax rate increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Raytheon Co., components of deferred tax assets and liabilities

USD $ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Accrued employee compensation and benefits
	Other accrued expenses and reserves
	Contract balances and inventories
	Pension benefits
	Other retiree benefits
	Net operating loss and tax credit carryforwards
	Depreciation and amortization
	Partnership outside basis difference
	Other
	Valuation allowance
	Noncurrent deferred tax assets (liabilities)

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

Item	Description	The company
Noncurrent deferred tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Raytheon Co.’s noncurrent deferred tax assets (liabilities) declined from 2016 to 2017 and from 2017 to 2018.

Raytheon Co., adjustments to financial data

USD $ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Raytheon Company Stockholders’ Equity
	Total Raytheon Company stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Total Raytheon Company stockholders’ equity (adjusted)
	Adjustment to Net Income Attributable To Raytheon Company
	Net income attributable to Raytheon Company (as reported)
	Add: Deferred income tax expense (benefit)
	Net income attributable to Raytheon Company (adjusted)

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

Raytheon Co., Financial Data: Reported vs. Adjusted

Raytheon Co., adjusted ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Raytheon Co.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Raytheon Co.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Raytheon Co.’s adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Raytheon Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Raytheon Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Raytheon Co., Ratios: Reported vs. Adjusted

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income attributable to Raytheon Company
	Net sales
	Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in millions)
	Adjusted net income attributable to Raytheon Company
	Net sales
	Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ Net profit margin = 100 × Net income attributable to Raytheon Company ÷ Net sales
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net income attributable to Raytheon Company ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Raytheon Co.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Net sales
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in millions)
	Net sales
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Raytheon Co.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Total assets
	Total Raytheon Company stockholders’ equity
	Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in millions)
	Adjusted total assets
	Adjusted total Raytheon Company stockholders’ equity
	Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ Financial leverage = Total assets ÷ Total Raytheon Company stockholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Raytheon Company stockholders’ equity
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Raytheon Co.’s adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income attributable to Raytheon Company
	Total Raytheon Company stockholders’ equity
	Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in millions)
	Adjusted net income attributable to Raytheon Company
	Adjusted total Raytheon Company stockholders’ equity
	Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ ROE = 100 × Net income attributable to Raytheon Company ÷ Total Raytheon Company stockholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net income attributable to Raytheon Company ÷ Adjusted total Raytheon Company stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Raytheon Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income attributable to Raytheon Company
	Total assets
	Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in millions)
	Adjusted net income attributable to Raytheon Company
	Adjusted total assets
	Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-11).

2018 Calculations

¹ ROA = 100 × Net income attributable to Raytheon Company ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net income attributable to Raytheon Company ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Raytheon Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

	Raytheon Co.	Other companies (not purchased previously)
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Raytheon Co. (RTN)

Analysis of Income Taxes

Income Tax Accounting Policy

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Analyst Adjustments: Removal of Deferred Taxes

Raytheon Co., Financial Data: Reported vs. Adjusted

Adjusted Ratios: Removal of Deferred Taxes (Summary)

Raytheon Co., Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)