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Microsoft Excel LibreOffice Calc

Raytheon Co. (RTN)


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

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).


Income Tax Expense (Benefit)

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

USD $ in millions

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

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.

Effective Income Tax Rate (EITR)

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

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

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.

Components of Deferred Tax Assets and Liabilities

Raytheon Co., components of deferred tax assets and liabilities

USD $ in millions

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

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.

Analyst Adjustments: Removal of Deferred Taxes

Raytheon Co., adjustments to financial data

USD $ in millions

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

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


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Raytheon Co., adjusted ratios

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

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


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
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 hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to Raytheon Company hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

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.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
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 hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

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.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
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 hidden hidden hidden hidden hidden
Total Raytheon Company stockholders’ equity hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted total assets hidden hidden hidden hidden hidden
Adjusted total Raytheon Company stockholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

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.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
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 hidden hidden hidden hidden hidden
Total Raytheon Company stockholders’ equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to Raytheon Company hidden hidden hidden hidden hidden
Adjusted total Raytheon Company stockholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

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.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
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 hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to Raytheon Company hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

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.