(Item No. 3 on the Proxy Card)
The Audit Committee of the Board of Directors has reappointed PricewaterhouseCoopers LLP (PwC) as the independent
registered public accounting firm to audit our financial statements for the fiscal year beginning January 1, 2018. We are asking
shareholders to ratify this appointment. Representatives of PwC are expected to be present at the Annual Meeting. They may
make a statement, and they will be available to respond to appropriate questions.
In the event that shareholders fail to ratify the appointment of PwC, the Audit Committee may reconsider the appointment.
Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent
registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be
in the best interests of Raytheon and its shareholders.
The following report of the Audit Committee does not constitute soliciting material and shall not be deemed to be incorporated
by reference into any other filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, including by
any general statement incorporating this proxy statement, except to the extent we specifically incorporate this information
by reference, and shall not otherwise be deemed filed under such Acts.
AUDIT COMMITTEE REPORT
The Audit Committee is composed entirely of independent directors who meet the independence and financial literacy
requirements of the NYSE and the SEC. The Audit Committee focuses, among other things, on: (1) the integrity of Raytheon’s
financial statements; (2) the independence, qualifications and performance of Raytheon’s independent audit firm; and (3) the
performance of Raytheon’s internal auditors.
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent
registered public accounting firm retained to audit Raytheon’s financial statements. PricewaterhouseCoopers LLP (PwC), or
one of its predecessor firms, has been retained as Raytheon’s independent audit firm continuously since 1961. In connection
with the foregoing, the Audit Committee carefully considers PwC’s independence. In 2017, we received the written disclosures
and letter from PwC required by applicable Public Company Accounting Oversight Board (PCAOB) requirements regarding
independent registered public accounting firm communications with audit committees concerning independence; these
documents report that PwC is independent under applicable standards in connection with its audit opinion for Raytheon’s
2017 financial statements. We also periodically discuss with PwC its independence from Raytheon and work with PwC on
the planning for and selection of a new lead engagement partner in conjunction with the mandatory rotation of the lead
engagement partner every five years. We also have from time to time considered whether to rotate the independent audit firm.
In addition, the Audit Committee pre-approves all audit and non-audit services to be provided by PwC, and the fees for those
services, in order to assure that they do not impair PwC’s independence. Our Chair has the delegated authority to pre-approve
services with fees up to $100,000, and these pre-approvals are later to be reviewed and ratified at our next meeting. We
further require PwC and management to report on actual fees charged for each category of service periodically throughout
the year. The Audit Committee reviews the scope of the annual integrated audit and the related PwC engagement letter,
which our Chair signs on behalf of the Committee. We also discuss with PwC the qualifications of the independent auditors
working on the Raytheon account and the planning and staffing of the audit. Based on the foregoing, we believe that the
continued retention of PwC to serve as Raytheon’s independent audit firm in 2018 is in the best interests of Raytheon and
its shareholders.
The Audit Committee meets with management periodically to consider the adequacy of Raytheon’s internal controls and
the objectivity of its financial reporting. We discuss these matters with PwC and with appropriate Raytheon management
personnel and internal auditors. We regularly meet privately with both PwC and the internal auditors, each of whom has
unrestricted access to the Audit Committee. We also regularly review the performance of the internal audit function.
Management has primary responsibility for Raytheon’s financial statements and the overall financial reporting process, including
Raytheon’s system of internal controls. Raytheon’s independent audit firm is responsible for (i) performing an audit of the
annual financial statements prepared by management, (ii) expressing an opinion as to whether those financial statements fairly
present the financial position, results of operations and cash flows of Raytheon in conformity with U.S. generally accepted
accounting principles, (iii) expressing an opinion on the effectiveness of Raytheon’s internal control over financial reporting,
and (iv) discussing with us any issues they believe should be raised with us.
During fiscal year 2017, we reviewed Raytheon’s audited financial statements and met with both management and PwC
to discuss those financial statements. Management has represented to us that the financial statements were prepared in
accordance with U.S. generally accepted accounting principles and PwC has issued an unqualified audit report regarding
such financial statements.
Periodically throughout fiscal year 2017, we reviewed with management and PwC Raytheon’s progress in testing and
evaluating Raytheon’s internal control over financial reporting. We have reviewed management’s assessment and report on
the effectiveness of Raytheon’s internal control over financial reporting. We also have reviewed PwC’s audit report on the
effectiveness of Raytheon’s internal control over financial reporting included in Raytheon’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2017.
We reviewed and discussed with PwC the matters required to be communicated by PwC to the Audit Committee by Auditing
Standard No.1301 (Communications with Audit Committees) adopted by the PCAOB. We also discussed with management the
significant accounting estimates utilized by Raytheon, the reasonableness of significant judgments, and the clarity of disclosures
in the financial statements.
Based on the reviews and discussions with management and PwC referred to above, including our determination of PwC’s
independence, we recommended to the Board that Raytheon’s audited financial statements be included in Raytheon’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2017.
Submitted by the Audit Committee
Tracy A. Atkinson, Chair,
Robert E. Beauchamp, Letitia A. Long, George R. Oliver, James A. Winnefeld, Jr., and Robert O. Work
INDEPENDENT AUDITORS: AUDIT AND NON-AUDIT FEES
The following table sets forth the fees and expenses billed by PwC for audit, audit-related, tax and all other services rendered
for 2017 and 2016.
|
2017 |
2016 |
| Audit Fees(1) |
$ 13.3 million |
$ 14.0 million |
| Audit-Related Fees(2) |
0.5 million |
0.4 million |
| Tax Fees(3) |
1.1 million |
1.4 million |
| All Other Fees |
– |
– |
| Total |
$14.9 million |
$15.8 million |
(1) Represents fees and expenses for professional services provided in connection with the audit of our annual audited financial statements and review of our quarterly
financial statements, advice on accounting matters directly related to the audit, audit services provided in connection with other financial statements, and other
statutory or regulatory filings.
(2) Represents fees and expenses for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements
and not reported under “Audit Fees.” Includes fees for audits of financial statements of 401(k) and other employee benefit plans, fees for certain agreed-upon
procedures, and fees related to accounting consulting and due diligence services relating to acquisitions.
(3) Tax Fees for 2017 include approximately $0.3 million for non-U.S. tax compliance services, $0.5 million for U.S. tax compliance services and $0.3 million for tax
consulting, advisory and planning services. Tax Fees for 2016 include approximately $0.3 million for non-U.S. tax compliance services, $0.3 million for U.S. tax
compliance services, and $0.8 million for tax consulting, advisory and planning services.
The amounts shown above do not include PwC fees and expenses of approximately $0.9 million and $0.9 million in 2017 and 2016, respectively, paid by our pension
plans for audits of financial statements of such plans and certain international tax compliance services. These services were rendered by PwC to the pension plans and
were billed directly to such plans.
