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Raytheon Reports Strong Fourth Quarter and Full-Year 2017 Results

- Strong bookings of $8.5 billion in the quarter and $27.7 billion for the year; book-to-bill ratio of 1.26 in the quarter and 1.09 for the year

- Fourth quarter net sales of $6.8 billion, up 8.0 percent; full-year net sales of $25.3 billion, up 5.1 percent for the year

- Strong operating cash flow from continuing operations of $1.6 billion in the quarter and $2.7 billion for the year, after a $1.0 billion pretax discretionary pension plan contribution in the fourth quarter, which was not in prior guidance

- Fourth quarter EPS from continuing operations of $1.35 and full-year EPS from continuing operations of $6.94; both periods included an unfavorable $0.59 impact from the enactment of the Tax Cuts and Jobs Act of 2017 and $0.09 impact from the discretionary pension contribution

WALTHAM, Mass., Jan. 25, 2018 /PRNewswire/ -- Raytheon Company (NYSE: RTN) today announced net sales for the fourth quarter 2017 of $6.8 billion, up 8.0 percent compared to $6.3 billion in the fourth quarter 2016. Fourth quarter 2017 EPS from continuing operations was $1.35 compared to $1.87 in the fourth quarter 2016. Fourth quarter and full-year 2017 included an unfavorable $0.59 provisional tax-related impact due to the enactment of the Tax Cuts and Jobs Act of 2017.

In addition, the company made a $1.0 billion pretax discretionary pension plan contribution in the fourth quarter 2017, which had an unfavorable tax-related EPS impact of $0.09 and was not included in the company's prior guidance. The company made a $500 million pretax discretionary pension plan contribution in the fourth quarter 2016, which had an unfavorable tax-related EPS impact of $0.04.

Net sales in 2017 were $25.3 billion, up 5.1 percent compared to $24.1 billion in 2016. Full-year 2017 EPS from continuing operations was $6.94 compared to $7.55 for the full-year 2016.

"Raytheon delivered record sales and strong cash flow in 2017 reflecting the continued hard work and dedication of the Raytheon team," said Thomas A. Kennedy, Raytheon Chairman and CEO. "Bookings strength across our broad portfolio of proven technology solutions positions the company well for the future."

The company generated strong operating cash flow for both the fourth quarter and full-year. Operating cash flow from continuing operations for the fourth quarter 2017 and full-year 2017 was $1.6 billion and $2.7 billion, respectively, after making the $1.0 billion pretax discretionary cash contribution to the company's pension plans.  Operating cash flow from continuing operations for the fourth quarter 2016 and full-year 2016 was $1.1 billion and $2.9 billion, respectively, after making the $500 million pretax discretionary pension contribution. Operating cash flow in the fourth quarter and full-year 2017, excluding the $1.0 billion pretax discretionary pension contribution, was better than the company's prior guidance primarily due to favorable collections.

In the fourth quarter 2017, the company repurchased 0.5 million shares of common stock for $100 million. For the full-year 2017, the company repurchased 4.9 million shares of common stock for $800 million. Also, as previously announced in November 2017, the company's Board of Directors authorized the repurchase of up to an additional $2.0 billion of the company's outstanding common stock.

The company had bookings of $8.5 billion in the fourth quarter 2017, resulting in a book-to-bill ratio of 1.26. Fourth quarter 2016 bookings were $7.6 billion. Full-year 2017 bookings were $27.7 billion, resulting in a book-to-bill ratio of 1.09. Full-year 2016 bookings were $27.8 billion.

Summary Financial Results












4th Quarter

%

Twelve Months

%


($ in millions, except per share data)

2017

2016

Change

2017

2016

Change










Bookings

$

8,541

$

7,582

12.6%

$

27,718

$

27,809

-0.3%


Net Sales

$

6,783

$

6,279

8.0%

$

25,348

$

24,124

5.1%


Income from Continuing Operations before Taxes

$

834

$

825

1.1%

$

3,113

$

3,0853

0.9%


Federal and Foreign Income Taxes

$

4471

$

2722

64.3%

$

1,1141

$

8732

27.6%


Income from Continuing Operations attributable to












   Raytheon Company

$

3931

$

5552

-29.2%

$

2,0221

$

2,2432,3

-9.9%


EPS from Continuing Operations

$

1.351

$

1.872

-27.8%

$

6.941

$

7.552,3

-8.1%


Operating Cash Flow from Continuing Operations

$

1,624

$

1,141


$

2,747

$

2,852



Workdays in Fiscal Reporting Calendar

58

57


248

249



1 Fourth quarter and twelve months 2017 Federal and Foreign Income Taxes and Income from Continuing Operations attributable to Raytheon Company included: 1) a provisional tax-related expense of approximately $171 million due to the enactment of the Tax Cuts and Jobs Act of 2017, which had an EPS impact of $0.59, and 2) a $25 million unfavorable tax-related impact due to the $1.0 billion discretionary pension plan contribution, which had an EPS impact of $0.09.


2 Fourth quarter and twelve months 2016 Federal and Foreign Income Taxes and Income from Continuing Operations attributable to Raytheon Company included a $13 million unfavorable tax-related impact due to the $0.5 billion discretionary pension plan contribution, which had an EPS impact of $0.04.


3 Twelve months 2016 Income from Continuing Operations before Taxes and Income from Continuing Operations attributable to Raytheon Company included the tax-free gain of $158 million for the second quarter 2016 TRS transaction, which had a favorable EPS impact of $0.53.





Backlog at the end of 2017 was $38.2 billion, an increase of approximately $1.5 billion or 4 percent compared to the end of 2016.

Backlog
































 Period Ending

($ in millions)


























2017

2016

Backlog


























$

38,210

$

36,709































Outlook

The company has provided its financial outlook for 2018. Charts containing additional information on the company's 2018 outlook are available on the company's website.

Effective January 1, 2018, the company adopted the new retirement benefit standard, which moves certain components of FAS pension and postretirement benefit expense from operating to non-operating income. The adoption of this standard increases operating income due to the removal of all components of FAS expense other than service cost, and decreases non-operating income by the same amount with no impact to net income. The standard does not impact our CAS expense, which is recorded in the results of each segment. As a result, our FAS/CAS Adjustment will be split into: FAS/CAS Operating Adjustment; and Other Pension Expense within non-operating. The 2017 Actuals - New Standard and the 2018 columns in the Financial Outlook table below reflect the adoption of the standard.

2018 Financial Outlook







2017 Actual


2018


As Reported


New Standard1


Outlook1

Net Sales ($B)

25.3


25.3


26.4 - 26.9

Deferred Revenue Adjustment ($M)2

(35)


(35)


(10)

Amortization of Acquired Intangibles ($M)2

(125)


(125)


(118)

FAS/CAS Adjustment ($M)

390


n/a


n/a

   FAS/CAS Operating Adjustment ($M)

n/a


1,303


1,416

   Other Pension Expense, non-operating ($M)

n/a


(913)


(958)

Interest Expense, net ($M)

(184)


(184)


 (180) - (185)

Diluted Shares (M)

291


291


287 - 289

Effective Tax Rate3

35.8%


35.8%


~19.0%

EPS from Continuing Operations3

$6.94


$6.94


$9.55 - $9.75

Operating Cash Flow from Continuing Operations ($B)

2.7


2.7


 3.6 - 4.0

n/a = Not Applicable






1 Effective January 1, 2018, the company adopted the new retirement benefit standard, Accounting Standards Update 2017-07. The 2017 Actuals - New Standard and the 2018 Outlook above reflect this change.

2 Deferred Revenue Adjustment and Amortization of Acquired Intangibles represent the unfavorable impact of the acquisition accounting adjustments to record acquired deferred revenue at fair value and the amortization of acquired intangible assets for all business segments.

3 2017 and 2018 effective tax rate reflect the enactment of the Tax Cuts and Jobs Act of 2017. 2017 was impacted unfavorably by a provisional amount of approximately $171 million, which had an impact to the 2017 rate of 5.5 percent and an EPS impact of $0.59.

Segment Results

The company's reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Forcepoint™.

Integrated Defense Systems





4th Quarter


Twelve Months



($ in millions)



2017

2016

% Change

2017

2016

% Change


Net Sales



$

1,553

$

1,460

6%

$

5,804

$

5,529

5%


Operating Income1



$

247

$

238

4%

$

935

$

971

NM


Operating Margin1



15.9%

16.3%


16.1%

17.6%



1 Twelve months 2016 operating income and operating margin include the $158 million tax-free gain from the second
quarter 2016 ThalesRaytheonSystems (TRS) transaction.

NM = Not Meaningful

Integrated Defense Systems (IDS) had fourth quarter 2017 net sales of $1,553 million, up 6 percent compared to $1,460 million in the fourth quarter 2016. IDS had full-year 2017 net sales of $5,804 million compared to $5,529 million in 2016. The increase in net sales for both the quarter and the full-year was primarily driven by higher net sales on an international early warning radar program.

IDS recorded $247 million of operating income in the fourth quarter 2017 compared to $238 million in the fourth quarter 2016. The increase in operating income for the quarter was primarily driven by higher volume and a favorable change in program mix. IDS recorded $935 million of operating income in 2017 compared to $971 million in 2016. The change in operating income for the full-year was primarily driven by a favorable change in program mix, higher net program efficiencies and higher volume, which was more than offset by the $158 million tax-free gain from the ThalesRaytheonSystems (TRS) transaction in the second quarter 2016.

During the quarter, IDS booked $304 million on an Early Warning Surveillance Radar System (EWSRS) support program for an international customer; $280 million to provide Consolidated Contractor Logistics Support (CCLS) for the Missile Defense Agency (MDA); $264 million to provide advanced Patriot Air and Missile Defense system capabilities for international customers; and $81 million on the Army Navy/Transportable Radar Surveillance-Model 2 (AN/TPY-2) radar sustainment program for the MDA.

Shortly after the quarter close, as previously announced, IDS received a direct commercial contract worth more than $1.5 billion to provide Patriot Air and Missile Defense system capability to a member of the 14-nation Patriot partnership.

Intelligence, Information and Services





4th Quarter


Twelve Months



($ in millions)



2017

2016

% Change

2017

2016

% Change


Net Sales



$

1,572

$

1,516

4%

$

6,177

$

6,169

-


Operating Income



$

117

$

120

-3%

$

455

$

467

-3%


Operating Margin



7.4%

7.9%


7.4%

7.6%



Intelligence, Information and Services (IIS) had fourth quarter 2017 net sales of $1,572 million, up 4 percent compared to $1,516 million in the fourth quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on a U.S. Air Force program and classified programs. IIS had full-year 2017 net sales of $6,177 million compared to $6,169 million in 2016.

IIS recorded $117 million of operating income in the fourth quarter 2017 compared to $120 million in the fourth quarter 2016. IIS recorded $455 million of operating income in 2017 compared to $467 million in 2016.

During the quarter, IIS booked $244 million on domestic and foreign training programs in support of Warfighter FOCUS activities; $233 million to upgrade the Phalanx® Closed-In Weapon System (CIWS) for the Royal Canadian Navy; $98 million on the Development, Operations and Maintenance (DOMino) Cyber program for the Department of Homeland Security (DHS); $97 million on the Standard Terminal Automation Replacement System (STARS) program for the Federal Aviation Administration (FAA); and $77 million to support the Naval Communication Station, Harold E. Holt facility for Australia. IIS also booked $410 million on a number of classified contracts.

Missile Systems





4th Quarter


Twelve Months



($ in millions)



2017

2016

% Change

2017

2016

% Change


Net Sales



$

2,185

$

1,897

15%

$

7,787

$

7,096

10%


Operating Income



$

278

$

261

7%

$

1,010

$

921

10%


Operating Margin



12.7%

13.8%


13.0%

13.0%



Missile Systems (MS) had fourth quarter 2017 net sales of $2,185 million, up 15 percent compared to $1,897 million in the fourth quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on the Advanced Medium-Range Air-to-Air Missiles (AMRAAM®), Standard Missile-3 (SM-3®) and Paveway™ programs. MS had full-year 2017 net sales of $7,787 million compared to $7,096 million in 2016. The increase in net sales for the full-year was primarily driven by higher net sales on the Paveway, SM-3 and Standard Missile-2 (SM-2) programs.

MS recorded $278 million of operating income in the fourth quarter 2017 compared to $261 million in the fourth quarter 2016. MS recorded $1,010 million of operating income in 2017 compared to $921 million in 2016. The increase in operating income for both the quarter and the full-year was primarily due to higher volume in 2017.

During the quarter, MS booked $1,132 million for Paveway; $696 million for AMRAAM; $423 million for the Joint Standoff Weapon (JSOW®); $269 million for Tomahawk; $109 million for Phalanx CIWS; $107 million for SM-3; $80 million for the Mobile Range program; and $77 million for Horizontal Technology Integration (HTI) forward-looking infrared kits. MS also booked $310 million on a number of classified contracts.

Space and Airborne Systems





4th Quarter


Twelve Months



($ in millions)



2017

2016

% Change

2017

2016

% Change


Net Sales



$

1,670

$

1,600

4%

$

6,430

$

6,182

4%


Operating Income



$

242

$

221

10%

$

862

$

808

7%


Operating Margin



14.5%

13.8%


13.4%

13.1%



Space and Airborne Systems (SAS) had fourth quarter 2017 net sales of $1,670 million, up 4 percent compared to $1,600 million in the fourth quarter 2016. The increase in net sales for the quarter was primarily due to higher net sales on airborne radar programs. SAS had full-year 2017 net sales of $6,430 million compared to $6,182 million in 2016. The increase in net sales for the full-year was primarily due to higher net sales on an electronic warfare systems program and a domestic classified program.

SAS recorded $242 million of operating income in the fourth quarter 2017 compared to $221 million in the fourth quarter 2016. SAS recorded $862 million of operating income in 2017 compared to $808 million in 2016. The change in operating income for the quarter and full-year was primarily driven by higher volume in 2017 and a favorable change in program mix.

During the quarter, SAS booked $411 million on a number of classified contracts.

Forcepoint






4th Quarter


Twelve Months



($ in millions)




2017

2016

% Change

2017

2016

% Change


Net Sales




$

156

$

143

9%

$

608

$

586

4%


Operating Income




$

(8)

$

21

NM

$

33

$

90

NM


Operating Margin




(5.1)%

14.7%


5.4%

15.4%



NM = Not Meaningful











Forcepoint had fourth quarter 2017 net sales of $156 million compared to $143 million in the fourth quarter 2016. Forcepoint had full-year 2017 net sales of $608 million compared to $586 million in 2016.

Forcepoint recorded a loss of $8 million in the fourth quarter 2017 compared to operating income of $21 million in the fourth quarter 2016. Forcepoint recorded $33 million of operating income in 2017 compared to $90 million in 2016. The decrease in operating income for both the quarter and the full-year was primarily driven by higher selling and marketing costs.

About Raytheon
Raytheon Company, with 2017 sales of $25 billion and 64,000 employees, is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. With a history of innovation spanning 96 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I™ products and services, sensing, effects, and mission support for customers in more than 80 countries. Raytheon is headquartered in Waltham, Massachusetts. Follow us on Twitter.

Conference Call on the Fourth Quarter and Full-Year 2017 Financial Results
Raytheon's financial results conference call will be held on Thursday, January 25, 2018 at 9 a.m. ET. Participants will include Thomas A. Kennedy, Chairman and CEO; Anthony F. O'Brien, vice president and CFO; and other company executives.

The dial-in number for the conference call will be (877) 280-4958 in the U.S. or (857) 244-7315 outside of the U.S. The conference call will also be audiocast on the Internet at www.raytheon.com/ir. 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 encouraged 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.

Disclosure Regarding Forward-looking Statements
This release and the attachments contain forward-looking statements, including information regarding the company's financial outlook, future plans, objectives, business prospects and anticipated financial performance. These forward-looking statements are not statements of historical facts and represent only the company's current expectations regarding such matters. These statements inherently involve a wide range of known and unknown risks and uncertainties. The company's actual actions and results could differ materially from what is expressed or implied by these statements. Specific factors that could cause such a difference include, but are not limited to: the company's dependence on the U.S. government for a significant portion of its business and the risks associated with U.S. government sales, including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration, a government shutdown, or otherwise, uncertain funding of programs, potential termination of contracts and performance under undefinitized contract awards; difficulties in contract performance; the resolution of program terminations; the ability to procure new contracts; the risks of conducting business in foreign countries; the unpredictability of timing of international bookings; the ability to comply with extensive governmental regulation, including export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations; the ability to obtain timely U.S. government approvals for international contracts; changes in government procurement practices; the impact of competition; the ability to develop products and technologies, and the impact of associated investments and costs; the ability to recruit and retain qualified personnel; the impact of potential security and cyber threats, and other disruptions; the risk that actual pension returns, discount rates or other actuarial assumptions, including the long-term return on asset assumption, are significantly different than the company's current assumptions; the risk of cost overruns, particularly for the company's fixed-price contracts; dependence on component availability, subcontractor and partner performance and key suppliers; risks of a negative government audit; risks associated with acquisitions, investments, dispositions, joint ventures and other business arrangements; the ability to grow in the government and commercial cybersecurity markets; risks of an impairment of goodwill or other intangible assets; the impact of financial markets and global economic conditions; the use of accounting estimates in the company's financial statements, including with respect to the provisional impact of the Tax Cuts and Jobs Act of 2017; the outcome of contingencies and litigation matters, including government investigations; the risk of environmental liabilities; and other factors as may be detailed from time to time in the company's public announcements and Securities and Exchange Commission filings. The company undertakes no obligation to make any revisions to the forward-looking statements contained in this release and the attachments or to update them to reflect events or circumstances occurring after the date of this release, including any acquisitions, dispositions or other business arrangements that may be announced or closed after such date.

 

Attachment A

Raytheon Company

Preliminary Statement of Operations Information

Fourth Quarter 2017

(In millions, except per share amounts)














Three Months Ended


Twelve Months Ended




31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16












Net sales


$

6,783



$

6,279



$

25,348



$

24,124



Operating expenses










Cost of sales


5,171



4,688



19,076



17,965



General and administrative expenses


742



711



2,954



2,864



Total operating expenses


5,913



5,399



22,030



20,829



Operating income


870



880



3,318



3,295



Non-operating (income) expense, net










Interest expense


48



58



205



232



Interest income


(7)



(4)



(21)



(16)



Other (income) expense, net


(5)



1



21



(6)



Total non-operating (income) expense, net


36



55



205



210



Income from continuing operations before taxes


834



825



3,113



3,085



Federal and foreign income taxes


447



272



1,114



873



Income from continuing operations


387



553



1,999



2,212



Income (loss) from discontinued operations, net of tax






2



1



Net income


387



553



2,001



2,213



Less: Net income (loss) attributable to noncontrolling interests



   in subsidiaries


(6)



(2)



(23)



(31)



Net income attributable to Raytheon Company


$

393



$

555



$

2,024



$

2,244













Basic earnings per share attributable to Raytheon Company










   common stockholders:










Income from continuing operations


$

1.35



$

1.88



$

6.95



$

7.55



Income (loss) from discontinued operations, net of tax






0.01





Net income


1.35



1.88



6.96



7.56













Diluted earnings per share attributable to Raytheon Company










   common stockholders:










Income from continuing operations


$

1.35



$

1.87



$

6.94



$

7.55



Income (loss) from discontinued operations, net of tax






0.01





Net income


1.35



1.88



6.95



7.55













Amounts attributable to Raytheon Company common










   stockholders:










Income from continuing operations


$

393



$

555



$

2,022



$

2,243



Income (loss) from discontinued operations, net of tax






2



1



Net income


$

393



$

555



$

2,024



$

2,244













Average shares outstanding










Basic


289.6



294.2



291.1



296.5



Diluted


290.0



294.5



291.4



296.8



 

 

Attachment A - Pro Forma

Raytheon Company

Preliminary Statement of Operations Information

Full-Year 2016, and Quarters within and Full-Year 2017

(In millions)














Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2017-07, Compensation-Retirement Benefits (Topic 715). The tables below provide additional information with respect to the line items within our statement of operations information impacted by the new standard.














As reported















Three Months Ended


Twelve Months Ended



31-Dec-17


1-Oct-17


2-Jul-17


2-Apr-17


31-Dec-17


31-Dec-16














Net sales


$

6,783



$

6,284



$

6,281



$

6,000



$

25,348



$

24,124


Operating expenses













Cost of sales


5,171



4,690



4,685



4,530



19,076



17,965


General and administrative expenses


742



736



747



729



2,954



2,864


Total operating expenses


5,913



5,426



5,432



5,259



22,030



20,829


Operating income


870



858



849



741



3,318



3,295


Non-operating (income) expense, net













Interest expense


48



48



51



58



205



232


Interest income


(7)



(4)



(5)



(5)



(21)



(16)


Other (income) expense, net


(5)



(2)



35



(7)



21



(6)


Total non-operating (income) expense, net


36



42



81



46



205



210


Income from continuing operations before taxes


$

834



$

816



$

768



$

695



$

3,113



$

3,085















Adjustments for ASU 2017-07















Three Months Ended


Twelve Months Ended



31-Dec-17


1-Oct-17


2-Jul-17


2-Apr-17


31-Dec-17


31-Dec-16














Net sales


$



$



$



$



$



$


Operating expenses













Cost of sales


(186)



(222)



(164)



(164)



(736)



(458)


General and administrative expenses


(44)



(48)



(42)



(43)



(177)



(143)


Total operating expenses


(230)



(270)



(206)



(207)



(913)



(601)


Operating income


230



270



206



207



913



601


Non-operating (income) expense, net













Other pension expense


230



270



206



207



913



601


Interest expense













Interest income













Other (income) expense, net













Total non-operating (income) expense, net


230



270



206



207



913



601


Income from continuing operations before taxes


$



$



$



$



$



$















Pro Forma















Three Months Ended


Twelve Months Ended



31-Dec-17


1-Oct-17


2-Jul-17


2-Apr-17


31-Dec-17


31-Dec-16














Net sales


$

6,783



$

6,284



$

6,281



$

6,000



$

25,348



$

24,124


Operating expenses













Cost of sales


4,985



4,468



4,521



4,366



18,340



17,507


General and administrative expenses


698



688



705



686



2,777



2,721


Total operating expenses


5,683



5,156



5,226



5,052



21,117



20,228


Operating income


1,100



1,128



1,055



948



4,231



3,896


Non-operating (income) expense, net













Other pension expense


230



270



206



207



913



601


Interest expense


48



48



51



58



205



232


Interest income


(7)



(4)



(5)



(5)



(21)



(16)


Other (income) expense, net


(5)



(2)



35



(7)



21



(6)


Total non-operating (income) expense, net


266



312



287



253



1,118



811


Income from continuing operations before taxes


$

834



$

816



$

768



$

695



$

3,113



$

3,085


 

 

Attachment B

Raytheon Company

Preliminary Segment Information

Fourth Quarter 2017

(In millions, except percentages)











Operating Income



Net Sales


Operating Income


As a Percent of Net Sales



Three Months Ended


Three Months Ended


Three Months Ended



31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16














Integrated Defense Systems


$

1,553



$

1,460



$

247



$

238



15.9%


16.3%

Intelligence, Information and Services


1,572



1,516



117



120



7.4%


7.9%

Missile Systems


2,185



1,897



278



261



12.7%


13.8%

Space and Airborne Systems


1,670



1,600



242



221



14.5%


13.8%

Forcepoint


156



143



(8)



21



(5.1)%


14.7%

Eliminations


(346)



(324)



(35)



(33)






Total business segment


6,790



6,292



841



828



12.4%


13.2%

Acquisition Accounting Adjustments


(7)



(13)



(37)



(43)






FAS/CAS Adjustment






95



117






Corporate






(29)



(22)






Total


$

6,783



$

6,279



$

870



$

880



12.8%


14.0%
























Operating Income



Net Sales


Operating Income


As a Percent of Net Sales



Twelve Months Ended


Twelve Months Ended


Twelve Months Ended



31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16














Integrated Defense Systems


$

5,804



$

5,529



$

935



$

971



16.1%


17.6%

Intelligence, Information and Services


6,177



6,169



455



467



7.4%


7.6%

Missile Systems


7,787



7,096



1,010



921



13.0%


13.0%

Space and Airborne Systems


6,430



6,182



862



808



13.4%


13.1%

Forcepoint


608



586



33



90



5.4%


15.4%

Eliminations


(1,423)



(1,361)



(148)



(142)






Total business segment


25,383



24,201



3,147



3,115



12.4%


12.9%

Acquisition Accounting Adjustments


(35)



(77)



(160)



(198)






FAS/CAS Adjustment






390



435






Corporate






(59)



(57)






Total


$

25,348



$

24,124



$

3,318



$

3,295



13.1%


13.7%

 

 

Attachment B - Pro Forma

Raytheon Company

Preliminary Segment Information

Full-Year 2016, and Quarters within and Full-Year 2017

(In millions, except percentages)
















Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2017-07, Compensation-Retirement Benefits (Topic 715). The tables below provide additional information with respect to the line items within our segment information impacted by the new standard.

















Three Months Ended


Twelve Months Ended




31-Dec-17


1-Oct-17


2-Jul-17


2-Apr-17


31-Dec-17


31-Dec-16

















Total net sales


$

6,783



$

6,284



$

6,281



$

6,000



$

25,348



$

24,124


















As reported

















Operating Income




Three Months Ended


Twelve Months Ended




31-Dec-17


1-Oct-17


2-Jul-17


2-Apr-17


31-Dec-17


31-Dec-16

















Total business segment


$

841



$

819



$

779



$

708



$

3,147



$

3,115



Acquisition Accounting Adjustments


(37)



(39)



(42)



(42)



(160)



(198)



FAS/CAS Adjustment


95



78



109



108



390



435



Corporate


(29)





3



(33)



(59)



(57)



Total


$

870



$

858



$

849



$

741



$

3,318



$

3,295


















Total operating income as a percentage of




















   net sales


12.8%



13.7%



13.5%



12.4%



13.1%



13.7%


















Adjustments for ASU 2017-07

















Operating Income




Three Months Ended


Twelve Months Ended




31-Dec-17


1-Oct-17


2-Jul-17


2-Apr-17


31-Dec-17


31-Dec-16

















Total business segment


$



$



$



$



$



$



Acquisition Accounting Adjustments














FAS/CAS Adjustment


230



270



206



207



913



601



Corporate














Total


$

230



$

270



$

206



$

207



$

913



$

601


















Pro Forma

















Operating Income




Three Months Ended


Twelve Months Ended




31-Dec-17


1-Oct-17


2-Jul-17


2-Apr-17


31-Dec-17


31-Dec-16

















Total business segment


$

841



$

819



$

779



$

708



$

3,147



$

3,115



Acquisition Accounting Adjustments


(37)



(39)



(42)



(42)



(160)



(198)



FAS/CAS Operating Adjustment


325



348



315



315



1,303



1,036



Corporate


(29)





3



(33)



(59)



(57)



Total


$

1,100



$

1,128



$

1,055



$

948



$

4,231



$

3,896


















Total operating income as a percentage of




















   net sales


16.2%



18.0%



16.8%



15.8%



16.7%



16.1%


















 

 

Attachment C

Raytheon Company

Other Preliminary Information

Fourth Quarter 2017

(In millions)






















Backlog







31-Dec-17


31-Dec-16













Integrated Defense Systems







$

9,186



$

10,159



Intelligence, Information and Services






6,503



5,662



Missile Systems







13,426



11,568



Space and Airborne Systems







8,611



8,834



Forcepoint







484



486



Total backlog







$

38,210



$

36,709




























Three Months Ended


Twelve Months Ended


Bookings



31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16













Total bookings



$

8,541



$

7,582



$

27,718



$

27,809




























Three Months Ended


Twelve Months Ended


General and Administrative Expenses



31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16













Administrative and selling expenses


$

566



$

515



$

2,220



$

2,109



Research and development expenses


176



196



734



755



Total general and administrative expenses


$

742



$

711



$

2,954



$

2,864

























Cash, Cash Equivalents and Restricted Cash







31-Dec-17


31-Dec-16













Cash and cash equivalents




$

3,103



$

3,303



Restricted cash




12





Total cash, cash equivalents and restricted cash shown in Attachment E




$

3,115



$

3,303



 

 

Attachment D

Raytheon Company

Preliminary Balance Sheet Information

Fourth Quarter 2017

(In millions)








31-Dec-17


31-Dec-16







Assets





Current assets





Cash and cash equivalents

$

3,103



$

3,303



Short-term investments

297



100



Receivables, net

1,324



1,163



Contract assets

5,247



5,041



Inventories

594



608



Prepaid expenses and other current assets

761



670



Total current assets

11,326



10,885








Property, plant and equipment, net

2,439



2,166



Goodwill

14,871



14,788



Other assets, net

2,224



2,399



Total assets

$

30,860



$

30,238








Liabilities, Redeemable Noncontrolling Interest and Equity





Current liabilities





Commercial paper

$

300



$



Contract liabilities

2,927



2,646



Accounts payable

1,519



1,520



Accrued employee compensation

1,342



1,234



Other current liabilities

1,260



1,139



Total current liabilities

7,348



6,539








Accrued retiree benefits and other long-term liabilities

8,287



7,758



Long-term debt

4,750



5,335








Redeemable noncontrolling interest

512



449








Equity





Raytheon Company stockholders' equity





  Common stock

3



3



  Additional paid-in capital





  Accumulated other comprehensive loss

(7,935)



(7,411)



  Retained earnings

17,895



17,565



Total Raytheon Company stockholders' equity

9,963



10,157



  Noncontrolling interests in subsidiaries





Total equity

9,963



10,157



Total liabilities, redeemable noncontrolling interest and equity

$

30,860



$

30,238



 

 

Attachment E

Raytheon Company

Preliminary Cash Flow Information

Fourth Quarter 2017

(In millions)



Twelve Months Ended



31-Dec-17


31-Dec-16







Cash flows from operating activities





Net income

$

2,001



$

2,213



(Income) loss from discontinued operations, net of tax

(2)



(1)



Income from continuing operations

1,999



2,212



Adjustments to reconcile to net cash provided by (used in) operating activities from continuing





   operations, net of the effect of acquisitions and divestitures





Depreciation and amortization

550



515



Stock-based compensation

173



151



Gain on sale of equity method investment



(158)



Loss on repayment of long-term debt

39





Deferred income taxes

252



133



Changes in assets and liabilities





Receivables, net

(157)



18



Contract assets and contract liabilities

88



(645)



Inventories

14



(10)



Prepaid expenses and other current assets

204



205



Income taxes receivable/payable

(193)



(185)



Accounts payable

(94)



152



Accrued employee compensation

111



77



Other current liabilities

106



(41)



Accrued retiree benefits

(250)



419



Other, net

(95)



9



Net cash provided by (used in) operating activities from continuing operations

2,747



2,852



Net cash provided by (used in) operating activities from discontinued operations

(2)





Net cash provided by (used in) operating activities

2,745



2,852



Cash flows from investing activities





Additions to property, plant and equipment

(543)



(561)



Proceeds from sales of property, plant and equipment

46



34



Additions to capitalized internal use software

(68)



(64)



Purchases of short-term investments

(696)



(472)



Maturities of short-term investments

517



1,184



Payments for purchases of acquired companies, net of cash received

(93)



(57)



Other

20



(11)



Net cash provided by (used in) investing activities

(817)



53



Cash flows from financing activities





Dividends paid

(910)



(850)



Net borrowings (payments) on commercial paper

300





Repayments of long-term debt

(591)





Loss on repayment of long-term debt

(38)





Repurchases of common stock under share repurchase programs

(800)



(900)



Repurchases of common stock to satisfy tax withholding obligations

(85)



(96)



Acquisition of noncontrolling interest in RCCS LLC



(90)



Contribution from noncontrolling interests in Forcepoint

8



11



Other



(5)



Net cash provided by (used in) financing activities

(2,116)



(1,930)



Net increase (decrease) in cash, cash equivalents and restricted cash

(188)



975



Cash, cash equivalents and restricted cash at beginning of the year

3,303



2,328



Cash, cash equivalents and restricted cash at end of period

$

3,115



$

3,303



 

 

Attachment F

Raytheon Company

Supplemental EPS Information

Fourth Quarter 2017

(In millions, except per share amounts)












Three Months Ended


Twelve Months Ended



31-Dec-17


31-Dec-16


31-Dec-17


31-Dec-16











Per share impact of the enactment of the Tax Cuts and Jobs Act of

















   2017 (A)

$

0.59



$



$

0.59



$



Per share impact of discretionary pension contributions (B)

0.09



0.04



0.09



0.04



Per share impact of early debt retirement (C)





0.09





Per share impact of TRS transaction (D)







0.53













(A)

Tax impact of the enactment of the Tax Cuts and Jobs Act of 2017

$

171



$



$

171



$




Diluted shares

290.0





291.4






Per share impact

$

0.59



$



$

0.59



$













(B)

Tax impact of discretionary pension contribution

$

25



$

13



$

25



$

13




Diluted shares

290.0



294.5



291.4



296.8




Per share impact

$

0.09



$

0.04



$

0.09



$

0.04













(C)

Early debt retirement

$



$



$

39



$





Tax effect (at 35% statutory rate)





(14)






After-tax impact





25






Diluted shares





291.4






Per share impact

$



$



$

0.09



$













(D)

TRS transaction

$



$



$



$

158




Diluted shares







296.8




Per share impact

$



$



$



$

0.53



 

Raytheon Company
Global Headquarters
Waltham, Mass.

Investor Relations Contact
Todd Ernst
781.522.5141

Media Contact
Corinne Kovalsky
781.522.5899

SOURCE Raytheon Company

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