News Release

Raytheon Reports Third Quarter 2003 EPS of $0.05 from Continuing Operations
-- NCS business performance negatively impacted sales and EPS -- Loss per share of $0.08 including the impact of discontinued operations -- Year-to-date Government and Defense bookings up 23 percent and sales up 7 percent -- Free cash flow from continuing operations of $535 million -- 8-10 percent revenue growth expected in 2004

LEXINGTON, Mass., Oct 23, 2003 /PRNewswire-FirstCall via COMTEX/ -- Raytheon Company (NYSE: RTN) reported third quarter 2003 income from continuing operations of $21 million or $0.05 per diluted share compared to $228 million or $0.56 per diluted share in the third quarter 2002. The reduction in earnings primarily reflects performance issues in the Network Centric Systems (NCS) business including $187 million or $0.31 per diluted share primarily related to cost growth on risk programs identified last quarter. The Company also recorded charges of $39 million or $0.06 per diluted share at the Technical Services (TS) business.

At NCS, continued technical challenges, reductions and delays in scheduled deliveries, negative developments on contract negotiations, and performance deterioration all contributed to the cost growth. At TS, the charge was due to a customer-driven change in scope on a long-term contract and a change in the expectation for the recoverability of certain costs.

Non-cash pension expense (FAS/CAS pension adjustment) accounted for $0.14 of the decrease in earnings per diluted share on a year-over-year basis.

Third quarter 2003 net loss was $35 million or $0.08 per diluted share compared to net income of $147 million or $0.36 per diluted share in 2002. Net loss for the third quarter of 2003 includes a $56 million after-tax loss in discontinued operations or $0.13 per diluted share versus an $81 million after-tax loss in discontinued operations or $0.20 per diluted share in 2002. The charges in the quarter would cause a technical default relative to the interest coverage ratio in the Company's senior credit facilities. The Company will request, and expects to receive, as it has in the past, an amendment to remain in compliance.

Net sales for the third quarter 2003 were $4.4 billion, up from $4.1 billion in the comparable period in 2002. The third quarter 2003 includes $141 million of sales resulting from the previously announced consolidation of Flight Options. Government and Defense sales for the quarter (after the elimination of intercompany sales) increased 3 percent to $3.7 billion from $3.6 billion in the comparable quarter, including a $178 million negative impact to sales resulting from the NCS charges. Integrated Defense Systems (IDS), Intelligence and Information Systems (IIS), Missile Systems (MS), and Space and Airborne Systems (SAS) all generated double-digit sales growth in the quarter.

Free cash flow for the third quarter 2003 was $471 million, net of $64 million consumed by discontinued operations. Free cash flow for the comparable quarter last year was $80 million. Free cash flow from continuing operations for the third quarter was $535 million versus $402 million for the comparable period in 2002. Free cash flow is a non-GAAP financial measure that the Company defines as operating cash flow less capital spending and internal use software spending. Attachment G contains a table reconciling this measure to operating cash flow, the most directly comparable GAAP measure.

"We are disappointed that an otherwise strong quarter has been diminished by the shortfalls at Network Centric Systems and Technical Services," said William H. Swanson, Raytheon chief executive officer and president. "We have taken and will continue to take appropriate actions to address these performance issues. Going forward, we expect that these businesses will be more predictable performers." Swanson also stated, "IDS, IIS, MS and SAS all delivered strong results in the quarter and continued their exceptional performance in 2003."

The Government and Defense businesses recorded strong third quarter bookings of over $4 billion and year-to-date bookings of nearly $13 billion versus the comparable period bookings of $10.5 billion last year. RAC posted third quarter bookings of approximately $550 million and year-to-date bookings of $1.4 billion versus $2.3 billion in the 2002 comparable period. The higher 2002 bookings were due primarily to an approximately $850 million Flight Options order in the first quarter.

OUTLOOK

The Company expects fourth quarter 2003 sales to be $4.9 to $5.0 billion and income from continuing operations to be $0.52 to $0.54 per diluted share. Stronger performance in a number of the defense businesses will be offset by lower sales and profit at NCS. The Company also expects free cash flow from continuing operations to be $500 to $550 million and total free cash flow to be $450 to $500 million for the fourth quarter.

For the full year, the Company expects sales to be $17.9 to $18.0 billion and income from continuing operations to be $1.29 to $1.31 per diluted share. The Company also expects free cash flow from continuing operations to be approximately $1.2 billion and total free cash flow to be $625 to $675 million for the year.

The Company expects total 2004 sales growth to be 8 to 10 percent versus prior guidance of 6 to 8 percent. Government and Defense sales growth in 2004 is expected to be 8 to 10 percent. RAC sales growth is expected to be 10 to 12 percent due to the full year impact of the consolidation of Flight Options LLC.

Income from continuing operations is expected to be $1.50 to $1.60 per diluted share in 2004 versus previous guidance of $1.60 to $1.70 per diluted share. The new income guidance reflects deterioration in the forecasted sales mix, volume and operating margin rate at NCS, and assumes no change in the pension expense assumption. As previously disclosed, a decrease in the discount rate assumption would increase our expected 2004 pension expense.

The Company continues to expect that 2004 free cash flow will be about $1.0 billion.

SEGMENT RESULTS

Integrated Defense Systems

Integrated Defense Systems (IDS) third quarter 2003 net sales were $718 million, up 33 percent compared to $541 million in the third quarter 2002 due primarily to continued growth in DD(X), the Navy's future destroyer program, strong missile defense sales, and increased Patriot engineering support for Operation Iraqi Freedom. IDS generated $82 million of operating income compared to $70 million in the 2002 comparable quarter.

Subsequent to the end of the quarter, IDS responded to a sole source solicitation released by the Naval Sea Systems Command (NAVSEA) for the design, production, integration, and testing of Cobra Judy Replacement Mission Equipment (CJRME).

Intelligence and Information Systems

Intelligence and Information Systems (IIS) third quarter 2003 net sales were $533 million, up 10 percent compared to $485 million in the third quarter 2002 due primarily to strong growth in new classified programs. IIS earned $54 million of operating income compared to $46 million in the comparable quarter a year ago.

During the quarter, IIS was awarded a $101 million contract to provide information technology operations and maintain NASA's Earth Observing System.

Missile Systems

Missile Systems (MS) third quarter 2003 net sales were $905 million, up 14 percent compared to $792 million in the third quarter 2002 driven by work on the Tomahawk remanufacturing program and an increase in production for Air Intercept Missile (AIM-9X), Enhanced Sea Sparrow Missile, Paveway, Standard Missile-3, and Tactical Tomahawk. MS generated $111 million of operating income compared to $94 million in the comparable quarter a year ago.

During the quarter, MS was awarded an $880 million not-to-exceed letter contract from the U.S. Navy to continue development of the Standard Missile-3 (SM-3); $330 million of this award was included in third quarter bookings. In addition, MS definitized its contract for the Exoatmospheric Kill Vehicle (EKV) in the amount of $159 million.

Network Centric Systems

Network Centric Systems (NCS) third quarter 2003 net sales were $556 million, down 27 percent compared to $759 million in the third quarter 2002. NCS recorded an operating loss of $138 million compared to $63 million in income in the comparable quarter a year ago. The decline in operating income reflects charges of $187 million including approximately $147 million associated with the ten previously identified programs at risk, as well as $40 million resulting from negative developments in other parts of the NCS business.

Space and Airborne Systems

Space and Airborne Systems (SAS) third quarter 2003 net sales were $930 million, up 16 percent compared to $803 million in the third quarter 2002, due to stronger classified sales and new and follow-on Air Force awards. SAS generated $131 million of operating income compared to $109 million in the comparable quarter a year ago.

During the third quarter SAS received over $300 million in classified awards and a $242 million contract to equip the Greek Air Force F-16 aircraft fleet with its ASPIS II electronic warfare system.

Technical Services

Technical Services (TS) third quarter 2003 net sales were $447 million, down 20 percent from $556 million in the third quarter 2002, due primarily to the loss of the Kwajalein missile range contract in 2002. TS reported an operating loss of $2 million compared to operating income of $37 million in the comparable quarter last year. The reduction in operating income reflects write-offs of approximately $39 million primarily related to a change in scope on a long-term contract and a provision for the recoverability of certain costs.

Aircraft

Raytheon Aircraft Company (RAC) third quarter 2003 net sales were $637 million, up from $451 million in the third quarter 2002. RAC recorded an operating loss of $10 million in the quarter compared to an operating loss of $11 million in the comparable quarter in 2002. The net impact of Flight Options' consolidation this quarter was a $141 million increase in sales and $2 million decrease in operating income.

RAC delivered 61 commercial aircraft in the third quarter of 2003, compared to 51 in the same quarter last year.

DISCONTINUED OPERATIONS

The total after-tax loss from discontinued operations for the quarter was $56 million. During the quarter, the Company recorded a $36 million after-tax charge associated with increased costs for close-out of supplier contracts and estimates of cost to complete punch list activities for two power plant construction projects. The Company also recorded a $15 million after-tax charge for period and other costs associated with its former engineering and construction businesses, including legal expense, increased costs on abandoned leases and settlement of a warranty obligation. Also, the Company recorded a $5 million after-tax charge related to its former Aircraft Integration Systems business.

Raytheon Company (NYSE: RTN), with 2002 sales of $16.8 billion, is an industry leader in defense, government and commercial electronics, space, information technology, technical services, and business and special mission aircraft. With headquarters in Lexington, Mass., Raytheon employs more than 76,000 people worldwide.

Disclosure Regarding Forward-looking Statements

Certain statements made in this release, 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 federal securities laws. Specifically, statements that are not historical facts, including statements accompanied by words such as "believe," "expect," "estimate," "intend," or "plan," and 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 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 release. 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 technology systems; termination of government contracts; program performance, including resolution of claims, particularly at the Company's NCS business unit; 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 investigations; the effect of market conditions, particularly in relation to the general aviation and commuter aircraft markets; the uncertainty of the timing and amount of net realizable value of Boeing Business Jet-related assets; risks inherent with large long-term fixed price contracts, particularly the ability to contain cost growth; the Company's lack of construction industry expertise resulting from the Company's sale of its Engineers and Constructors business; the timing of project completion and customer acceptance of two Massachusetts construction projects; delays and cost growth arising from testing and commissioning processes conducted at the Massachusetts projects; the final determination by the Company of the required expenditures to complete the Massachusetts projects; and the impact of change orders, the recoverability of the Company's claims and the outcome of defending claims asserted against the Company. Further information regarding the factors that could cause actual results to differ materially from the Company's expectations are disclosed in the Company's SEC filings, including "Item 1-Business" of the Company's Annual Report on Form 10-K for the year ended December 31, 2002 and in the Company's Quarterly Report on Form 10-Q for the quarter ended June 29, 2003.

Conference Call on the Third Quarter 2003 Financial Results

Raytheon's financial results conference call will be Thursday, October 23, 2003 at 9 a.m. EDT. Participants will be William Swanson, chief executive officer and president, Edward Pliner, senior vice president and CFO, and other company executives.

The dial-in number for the conference call will be (800) 299-9630. The conference call will also be audiocast on the Internet at www.raytheon.com. Individuals may listen to the call and download charts that will be used during the call. These charts will be available for printing prior to the call.

Interested parties are urged to check the website ahead of time to ensure their computers are configured for the audio stream. Instructions for obtaining the free required downloadable software are posted on the site.

    Media Contact:                Investor Relations Contact:
     James Fetig                  Tim Oliver
     781-860-2386                 781-860-2167


    Attachment A

    Raytheon Company
    Financial Information
    Third Quarter 2003
    (In millions, except per share amounts)

                                  Three Months Ended      Nine Months Ended
                               28-Sep-03    29-Sep-02   28-Sep-03   29-Sep-02

    Net sales                     $4,378       $4,092     $13,008     $12,098

    Cost of sales                  3,776        3,240      10,826       9,607
    Administrative and selling
     expenses                        305          285         952         892
    Research and development
     expenses                        129          112         366         337

    Total operating expenses       4,210        3,637      12,144      10,836

    Operating income                 168          455         864       1,262

    Interest expense                 137          118         415         388
    Interest income                  (10)          (7)        (33)        (24)
    Other (income) expense            12           15          27          36

    Non-operating expense, net       139          126         409         400

    Income from continuing operations
     before taxes                     29          329         455         862

    Federal and foreign income taxes   8          101         137         262

    Income from continuing operations 21          228         318         600

    Loss from discontinued
     operations, net of tax          (56)         (81)       (158)       (664)

    Income (loss) before
     extraordinary item and
     accounting change               (35)         147         160         (64)

    Extraordinary gain from debt
     repurchases, net of tax           -            -           -           1

    Cumulative effect of change in
     accounting principle, net of tax  -            -           -        (509)

    Net income (loss)               $(35)        $147        $160       $(572)

    Earnings per share from
     continuing operations
     Basic                         $0.05        $0.56       $0.77       $1.50
     Diluted                       $0.05        $0.56       $0.77       $1.47

    Loss per share from discontinued
     operations
     Basic                        $(0.14)      $(0.20)     $(0.38)     $(1.66)
     Diluted                      $(0.13)      $(0.20)     $(0.38)     $(1.62)

    Loss per share from cumulative
     effect of change in accounting
     principle
     Basic                            $-          $-          $-       $(1.27)
     Diluted                          $-          $-          $-       $(1.25)

    Earnings (loss) per share
     Basic                        $(0.08)       $0.36       $0.39      $(1.43)
     Diluted                      $(0.08)       $0.36       $0.39      $(1.40)

    Average shares outstanding
     Basic                         414.3        403.7       411.5       399.8
     Diluted                       417.8        408.7       414.5       408.7


    Attachment B

     Raytheon Company
     Segment Information
     Third Quarter 2003

    (In millions)


                                                            Operating Income
                      Net Sales       Operating Income   As a Percent of Sales
                 Three Months Ended   Three Months Ended   Three Months Ended
                 28-Sep-03 29-Sep-02  28-Sep-03 29-Sep-02  28-Sep-03 29-Sep-02

    Integrated
     Defense Systems $ 718     $ 541       $ 82      $ 70      11.4%     12.9%
    Intelligence
     and Information
     Systems           533       485         54        46      10.1%      9.5%
    Missile Systems    905       792        111        94      12.3%     11.9%
    Network Centric
     Systems           556       759       (138)       63     -24.8%      8.3%
    Space and Airborne
     Systems           930       803        131       109      14.1%     13.6%
    Technical Services 447       556         (2)       37      -0.4%      6.7%
    Aircraft           637       451        (10)      (11)     -1.6%     -2.4%
    FAS/CAS Pension
     Adjustment          -         -        (28)       53
    Corporate and
     Eliminations     (348)     (295)       (32)       (6)

    Total           $4,378    $4,092      $ 168     $ 455       3.8%     11.1%



    Attachment C

     Raytheon Company
     Other Information
     Continuing Operations
     Third Quarter 2003


                                           Backlog
                                        (In millions)
                                    28-Sep-03  29-Sep-02

    Integrated Defense Systems         $5,399     $4,920
    Intelligence and Information
     Systems                            3,876      3,674
    Missile Systems                     4,187      3,498
    Network Centric Systems             2,972      2,610
    Space and Airborne Systems          4,580      4,501
    Technical Services                  1,606      1,694
    Aircraft                            2,016      4,423
    Corporate                             183        260

                                      $24,819    $25,580

    Government and Defense businesses $22,620    $20,897

    U.S. government backlog included
     above                            $19,419    $17,986



                                          Bookings             Bookings
                                       (In millions)        (In millions)
                                     Three months ended   Nine Months Ended
                                    28-Sep-03  29-Sep-02 28-Sep-03   29-Sep-02

    Government and Defense
     businesses                       $4,091     $4,799   $12,901     $10,458
    Commercial businesses                555        335     1,408       2,308

                                      $4,646     $5,134   $14,309     $12,766



                                   Aircraft Deliveries (Units)
                                      Three Months Ended
                                    28-Sep-03  29-Sep-02

    Hawker                                  7          9
    Premier I                               7          3
    Beechjet                                7          4
    King Air                               18         16
    1900D Commuter                          -          3
    Pistons                                22         16
    T-6A                                   19         13
       Total                               80         64



                                   Aircraft Bookings (Units)
                                      Three Months Ended
                                    28-Sep-03  29-Sep-02

    Hawker                                  6          7
    Premier I                               2          2
    Beechjet                                8          4
    King Air                               26         11
    1900D Commuter                          -          -
    Pistons                                15          5
    T-6A                                    -          -
       Total                               57         29



    Attachment D

     Raytheon Company
     Preliminary Financial Information
     Third Quarter 2003

    (In millions)

    Balance sheets
                                           28-Sep-03   31-Dec-02   29-Sep-02
    Assets
    Cash and cash equivalents                   $203        $544        $619
    Accounts receivable                          543         675         440
    Contracts in process                       3,255       3,016       3,478
    Inventories                                2,085       2,032       2,275
    Deferred federal and foreign income
     taxes                                       485         601         548
    Prepaid expenses and other current
     assets                                      135         247         151
    Assets from discontinued operations           60          75          83
      Total current assets                     6,766       7,190       7,594

    Property, plant and equipment, net         2,620       2,396       2,324
    Goodwill                                  11,474      11,170      11,170
    Deferred federal and foreign income
     taxes                                       358         281           -
    Other assets, net                          2,578       2,909       3,524
        Total assets                         $23,796     $23,946     $24,612

    Liabilities and Stockholders' Equity
    Notes payable and current portion of
     long-term debt                             $559      $1,153        $776
    Advance payments, less contracts in
     process                                   1,008         819         781
    Accounts payable                             786         776         803
    Accrued salaries and wages                   826         710         747
    Other accrued expenses                     1,082       1,316       1,185
    Liabilities from discontinued
     operations                                   75         333         383
      Total current liabilities                4,336       5,107       4,675

    Accrued retiree benefits and other
     long-term liabilities                     2,853       2,831       1,221
    Deferred federal and foreign income
     taxes                                         -           -         837
    Long-term debt                             6,702       6,280       6,088
    Mandatorily redeemable equity
     securities                                  859         858         858
    Stockholders' equity                       9,046       8,870      10,933
        Total liabilities and
         stockholders' equity                $23,796     $23,946     $24,612



    Attachment E

     Raytheon Company
     Preliminary Cash Flow Information
     Third Quarter 2003

    (In millions)

    Cash flow information
                                                       Three Months Ended
                                                28-Sep-03           29-Sep-02

    Income from continuing operations                 $21                $228
    Depreciation                                       82                  77
    Amortization                                       16                  15
    Working capital                                   426                 107
    Discontinued operations                           (64)               (322)
    Capital spending                                 (106)                (96)
    Internal use software spending                    (22)                (42)
    Other                                             118                 113
          Subtotal - free cash flow (a)               471                  80

    Net activity in financing receivables              (2)               (115)
    Acquisitions                                      (20)                  -
    Divestitures and sale of investments               14                  43
    Dividends                                         (82)                (81)
    Issuance of common stock                           28                  62
    Debt repayments                                  (450)             (1,008)
    Synthetic lease maturity                         (125)                  -
    Other                                               5                  (4)
             Total cash flow                        $(161)            $(1,023)


    Segment free cash flow information
                                                       Three Months Ended
                                                28-Sep-03          29-Sep-02

    Integrated Defense Systems                        $36                 $55
    Intelligence and Information Systems               43                  46
    Missile Systems                                   196                  37
    Network Centric Systems                           110                  49
    Space and Airborne Systems                        153                 111
    Technical Services                                 36                  27
    Aircraft                                         (111)                (81)
    Discontinued operations                           (64)               (322)
    Other                                              72                 158
                                                     $471                 $80


    (a) See Attachment G for a description of free cash flow.



    Attachment F

     Raytheon Company
     Definitions
     Third Quarter 2003

    (In millions except share and per share amounts)


    Debt-to-capital ratio

                                          28-Sep-03   31-Dec-02    29-Sep-02
    Notes payable and current portion of
     long-term debt                             559       1,153          776
    Long-term debt                            6,702       6,280        6,088
    Mandatorily redeemable equity
     securities                                 859            (1)         (1)
            Total debt                        8,120       7,433        6,864

    Notes payable and current portion of
     long-term debt                             559       1,153          776
    Long-term debt                            6,702       6,280        6,088
    Mandatorily redeemable equity
     securities                                 859         858          858
    Stockholders' equity                      9,046       8,870       10,933
            Total capital                    17,166      17,161       18,655

            Debt-to-capital ratio             47.3%       43.3%        36.8%

    (1) The Company adopted SFAS No. 150  in the third quarter of 2003
        which requires that the mandatorily redeemable equity securities be
        classified as debt.  In accordance with SFAS No. 150, prior periods
        were not restated.


    NCS and TS EPS impact
                                             NCS          TS
                                          28-Sep-03   28-Sep-03
            Operating income impact of
             charge                             187          39
            Effective tax rate for the
             nine months ended
             September 28, 2003               30.1%       30.1%
            After tax impact                    131          27

            Q3 diluted shares
             outstanding                      417.8       417.8

            EPS impact                        $0.31       $0.06


    Operating margin rate

    Operating margin rate is defined as operating income divided by net sales.


    Attachment G

     Raytheon Company
     Reconciliation of Non-GAAP Financial Measure
     Third Quarter 2003

    (In millions)

    Reconciliation of Non-GAAP Financial Measure

    Operating cash flow
                                                      Three Months Ended
                                                 28-Sep-03         29-Sep-02
    Operating cash flow                               $599              $218
    Less:    Capital spending                         (106)              (96)
             Internal use software
              spending                                 (22)              (42)
                Free cash flow                        $471               $80



    Note:  Free cash flow represents a non-GAAP financial measure defined as
           operating cash flow less capital spending and internal use software
           spending.   The Company's management uses non-GAAP financial
           measures to evaluate the operating performance of its business and
           as a component for determining incentive-based compensation.  In
           addition, the Company believes that free cash flow is an important
           measure of performance used by some investors, equity analysts and
           others to make informed investment decisions.  The definitions used
           here may differ from those used by other companies.

SOURCE Raytheon Company

Media, James Fetig, +1-781-860-2386, or Investor Relations, Tim
Oliver, +1-781-860-2167, both of Raytheon Company
www.raytheon.com