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Raytheon Reports Second Quarter Results

- Net sales of $6.0 billion(1)

- Adjusted EPS of $1.36, up 11 percent; reported EPS from continuing operations was $0.56(1)

- Adjusted operating margin of 12.6 percent, up 30 basis points; reported operating margin was 5.8 percent(1)

- Solid operating cash flow from continuing operations of $400 million

WALTHAM, Mass., July 29, 2010 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE: RTN) announced second quarter 2010 Adjusted EPS of $1.36 per diluted share, compared to $1.22 per diluted share in the second quarter 2009(1). Second quarter 2010 income from continuing operations attributable to Raytheon was $0.56 per diluted share compared to $1.24 per diluted share in the second quarter 2009.

Second quarter 2010 income from continuing operations attributable to Raytheon included a ($395) million before-tax unfavorable adjustment, ($274) million after-tax or ($0.71) per diluted share, due to the previously announced program termination notice received by Raytheon Systems Limited on July 22, 2010 from the UK Border Agency. The Company believes that it performed well and delivered substantial capabilities to the customer under this program, and intends to pursue vigorously the collection of the unbilled receivables and damages and defend itself against the claims for losses and previous payments. Under U.S. Generally Accepted Accounting Principles (GAAP) the Company is required to recognize, in the second quarter 2010, the potential financial impact of the termination notice.

Second quarter 2010 income from continuing operations attributable to Raytheon also included ($0.09) per diluted share of FAS/CAS pension expense, compared to $0.02 per diluted share of FAS/CAS pension income in the second quarter 2009.

"Raytheon's underlying results during the quarter and execution of our strategy show continued growth for the year," said William H. Swanson, Raytheon's Chairman and CEO. "We continue to be well aligned with our customers' needs and we are well positioned for the future."

Net sales of $6.0 billion in the second quarter 2010 reflect the $316 million reduction for the UK Border Agency program termination. Net sales in the second quarter 2009 were $6.1 billion.

The Company generated operating cash flow from continuing operations of $400 million in the second quarter 2010 compared to $512 million in the second quarter 2009. Operating cash flow from continuing operations in the second quarter 2010 included $73 million in higher cash tax payments.

The Company ended the second quarter 2010 with $2.4 billion in cash and cash equivalents and $2.3 billion in total debt.

In the second quarter 2010, the Company repurchased 8.6 million shares of common stock for $475 million, as part of its previously announced share repurchase program. Year-to-date 2010, the Company repurchased 14.2 million shares of common stock for $775 million.

(1) A termination notice on a UK Border Agency program reduced second quarter 2010 net sales by $316 million, income from continuing operations before taxes by $395 million and EPS by $0.71 per share. Adjusted EPS is defined as EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS impact of the FAS/CAS pension adjustment and the UK Border Agency program termination adjustment. Adjusted Operating Margin is defined as total operating margin excluding the margin impact of the FAS/CAS pension adjustment and the adjustment for the UK Border Agency program termination. Adjusted EPS and Adjusted Operating Margin are non-GAAP financial measures. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.

Summary Financial Results 2nd Quarter   %   Six Months   %
($ in millions, except per share data) 2010   2009   Change   2010   2009   Change
                       
Net sales(1) $ 5,973   $ 6,125   -2%   $ 12,026   $ 12,009   0%
Income from continuing operations attributable to Raytheon Company(1) $ 212   $ 492   -57%   $ 665   $ 941   -29%
Adjusted Income(2) $ 522   $ 485   8%   $ 1,009   $ 927   9%
EPS from continuing operations(1) $ 0.56   $ 1.24   -55%   $ 1.73   $ 2.35   -26%
Adjusted EPS(2) $ 1.36   $ 1.22   11%   $ 2.63   $ 2.31   14%
Operating cash flow from cont. ops. $ 400   $ 512       $ 657   $ 923    
                       
Workdays in fiscal reporting calendar 64   64       124   125    

 

(1) The unfavorable adjustment for the UK Border Agency program termination reduced net sales in the second quarter and YTD 2010 by $316 million; reduced income from continuing operations attributable to Raytheon Company in the second quarter and YTD 2010 by $395 million (before tax), $274 million (after-tax); and reduced EPS from continuing operations in the second quarter and YTD 2010 by $0.71 and $0.72 per diluted share, respectively.

(2) Adjusted Income is defined as income from continuing operations attributable to Raytheon Company common stockholders excluding the after-tax impact of the FAS/CAS pension adjustment and the UK Border Agency program termination adjustment. Adjusted EPS is defined as EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS impact of the FAS/CAS pension adjustment and the UK Border Agency program termination adjustment. Adjusted EPS and Adjusted Income are non-GAAP financial measures. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this
information.

 

Bookings and Backlog

Bookings

2nd Quarter

 

Six Months

 

($ in millions)

2010

 

2009

 

2010

 

2009

 
                 

Bookings

$ 5,901

 

$ 7,647

 

$ 12,427

 

$ 12,856

 
             

Backlog

Period Ending

         

($ in millions)

06/27/10

 

12/31/09

         
                 

Backlog(1)

$ 35,980

 

$ 36,877

         

Funded Backlog(1)

$ 22,461

 

$ 23,479

         
                 

(1) Backlog and funded backlog for the period ending 06/27/10 was reduced by $556 million for the UK
Border Agency program termination.

 
               

Year-to-date 2010 bookings were $12.4 billion, resulting in a book-to-bill ratio slightly greater than 1.

Outlook

2010 Financial Outlook

         
     

2010 Outlook

   
 

2009 Actual

 

Current

 

Prior (4/22/10)

   
               

Net Sales ($B)

24.9

 

25.6 - 26.1*

 

25.9 - 26.4

   

FAS/CAS Pension Inc./(Exp.) ($M)

27

 

(220)

 

(220)

   

Interest Expense, Net ($M)

(109)

 

(95) - (110)

 

(95) - (110)

   

Diluted Shares (M)

395.7

 

377 - 382

 

377 - 382

   

Effective Tax Rate

32.5%

 

~31.5%

 

~31.5%

   

EPS from Continuing Operations

$4.89

 

$4.00 - $4.15*

 

$4.75 - $4.90

   

Adjusted EPS(1)

$4.85

 

$5.13 - $5.28

 

$5.13 - $5.28

   

Operating Cash Flow from Cont. Ops. ($B)

2.7

 

2.0 - 2.2

 

2.0 - 2.2

   

ROIC (%)(1)

12.2

 

12.2 - 12.6

 

12.2 - 12.6

   

* Denotes change from prior guidance.

 

(1) Adjusted EPS is defined as EPS from continuing operations attributable to Raytheon Company common stockholders
excluding the EPS impact of the FAS/CAS pension adjustment and the UK Border Agency program termination
adjustment. ROIC excludes the impact of the UK Border Agency program termination adjustment. Adjusted EPS and
ROIC are non-GAAP financial measures. See attachment F for a reconciliation of Adjusted EPS to EPS from continuing
operations and attachment G for a calculation of ROIC and discussions of why the Company is presenting this
information.

 
             

The Company updated its full-year 2010 guidance to reflect the unfavorable impact of the UK Border Agency program termination. Charts containing additional information on the Company's 2010 financial outlook are available on the Company's website at www.raytheon.com/ir.

Segment Results

Integrated Defense Systems

                           
                           
   

2nd Quarter

 

%

 

Six Months

 

%

 
 

($ in millions)

2010

 

2009

 

Change

 

2010

 

2009

 

Change

 
                           
 

Net Sales

$ 1,352

 

$ 1,335

 

1%

 

$ 2,688

 

$ 2,597

 

4%

 
 

Operating Income

$ 221

 

$ 205

 

8%

 

$ 431

 

$ 393

 

10%

 
 

Operating Margin

16.3%

 

15.4%

     

16.0%

 

15.1%

     
                           
                         

Integrated Defense Systems (IDS) had second quarter 2010 net sales of $1,352 million compared to $1,335 million in the second quarter 2009. IDS recorded $221 million of operating income compared to $205 million in the second quarter 2009. The increase in operating income was primarily due to international Patriot programs.

During the quarter, IDS booked $317 million to provide advanced Patriot air and missile defense capability for an international customer.

Intelligence and Information Systems

                           
                           
   

2nd Quarter

 

%

 

Six Months

 

%

 
 

($ in millions)

2010

 

2009

 

Change

 

2010

 

2009

 

Change

 
                           
 

Net Sales

$ 472

 

$812

 

-42%

 

$ 1,202

 

$ 1,596

 

-25%

 
 

Operating Income (Loss)

$(329)

 

$ 66

 

NM

 

$ (279)

 

$ 127

 

NM

 
 

Operating Margin

NM

 

8.1%

     

NM

 

8.0%

     
                           
 

NM = Not Meaningful

                       
                         

Intelligence and Information Systems (IIS) had second quarter 2010 net sales of $472 million compared to $812 million in the second quarter 2009. IIS recorded $329 million of operating loss in the second quarter 2010 and $66 million of operating income in the second quarter 2009. The impact of the UK Border Agency program termination reduced IIS' second quarter 2010 net sales and operating income by $316 million and $395 million, respectively.

During the quarter, IIS booked $80 million on the Earth Observing System Data and Information System (EOSDIS) contract for NASA. IIS also booked $371 million on a number of classified contracts.

Missile Systems

                           
                           
   

2nd Quarter

 

%

 

Six Months

 

%

 
 

($ in millions)

2010

 

2009

 

Change

 

2010

 

2009

 

Change

 
                           
 

Net Sales

$ 1,415

 

$ 1,384

 

2%

 

$ 2,776

 

$ 2,752

 

1%

 
 

Operating Income

$ 164

 

$ 147

 

12%

 

$ 322

 

$ 305

 

6%

 
 

Operating Margin

11.6%

 

10.6%

     

11.6%

 

11.1%

     
                           
                         

Missile Systems (MS) had second quarter 2010 net sales of $1,415 million compared to $1,384 million in the second quarter 2009. MS recorded $164 million of operating income compared to $147 million in the second quarter 2009. The increase in operating income was primarily due to improved program performance.

During the quarter, MS booked $234 million for Standard Missile-3 (SM-3) for the Missile Defense Agency, $223 million for Phalanx Weapon Systems for the U.S. Navy, U.S. Army and international customers, $150 million for Miniature Air Launched Decoys (MALD) for the U.S. Air Force, $123 million for Evolved Sea Sparrow Missiles (ESSM) for the U.S. Navy and international customers, $84 million for Standard Missile-2 (SM-2) for the U.S. Navy and an international customer and $81 million for AIM-9X short range air-to-air missiles for the U.S. Navy and international customers.

Network Centric Systems

   
                           
                           
   

2nd Quarter

 

%

 

Six Months

 

%

 
 

($ in millions)

2010

 

2009

 

Change

 

2010

 

2009

 

Change

 
                           
 

Net Sales

$ 1,205

 

$ 1,197

 

1%

 

$ 2,381

 

$ 2,351

 

1%

 
 

Operating Income

$ 166

 

$ 170

 

-2%

 

$ 331

 

$ 333

 

-1%

 
 

Operating Margin

13.8%

 

14.2%

     

13.9%

 

14.2%

     
                           
                         

Network Centric Systems (NCS) had second quarter 2010 net sales of $1,205 million compared to $1,197 million in the second quarter 2009. NCS recorded $166 million of operating income compared to $170 million in the second quarter 2009.

During the quarter, NCS booked $100 million on a command and control program for an international customer.

Space and Airborne Systems

                           
                           
   

2nd Quarter

 

%

 

Six Months

 

%

 
 

($ in millions)

2010

 

2009

 

Change

 

2010

 

2009

 

Change

 
                           
 

Net Sales

$ 1,197

 

$ 1,136

 

5%

 

$ 2,292

 

$ 2,182

 

5%

 
 

Operating Income

$ 171

 

$ 175

 

-2%

 

$ 330

 

$ 314

 

5%

 
 

Operating Margin

14.3%

 

15.4%

     

14.4%

 

14.4%

     
                           
                         

Space and Airborne Systems (SAS) had second quarter 2010 net sales of $1,197 million, up 5 percent compared to $1,136 million in the second quarter 2009, primarily due to growth on classified business. SAS recorded $171 million of operating income compared to $175 million in the second quarter 2009. The change in operating income was primarily due to a favorable contractual settlement in the second quarter 2009.

During the quarter, SAS booked $160 million on two international AESA tactical radar programs. SAS also booked $563 million on a number of classified contracts, including $355 million on a major classified program.

Technical Services

                           
                           
   

2nd Quarter

 

%

 

Six Months

 

%

 
 

($ in millions)

2010

 

2009

 

Change

 

2010

 

2009

 

Change

 
                           
 

Net Sales

$ 834

 

$ 780

 

7%

 

$ 1,635

 

$ 1,476

 

11%

 
 

Operating Income

$ 73

 

$ 53

 

38%

 

$ 140

 

$ 97

 

44%

 
 

Operating Margin

8.8%

 

6.8%

     

8.6%

 

6.6%

     
                           
                         

Technical Services (TS) had second quarter 2010 net sales of $834 million, up 7 percent compared to $780 million in the second quarter 2009, primarily due to continued growth in domestic and foreign training programs supporting the U.S. Army's Warfighter Field Operations Customer Support (FOCUS) activities. TS recorded operating income of $73 million compared to $53 million in the second quarter 2009. The increase in operating income was primarily due to improved program performance and higher volume.

During the quarter, TS booked $399 million on domestic training programs and $136 million on foreign training programs in support of the Warfighter FOCUS activities. TS also booked $95 million to provide operational and logistics support to the National Science Foundation (NSF) Office of Polar Programs.

Raytheon Company (NYSE: RTN), with 2009 sales of $25 billion, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 88 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. With headquarters in Waltham, Mass., Raytheon employs 75,000 people worldwide.

Conference Call on the Second Quarter 2010 Financial Results

Raytheon's financial results conference call will be held on Thursday, July 29, 2010 at 9 a.m. ET. Participants will include William H. Swanson, Chairman and CEO; David C. Wajsgras, senior vice president and CFO; and other Company executives.

The dial-in number for the conference call will be (866) 543-6405 in the U.S. or (617) 213-8897 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 2010 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, uncertain funding of programs, potential termination of contracts, and difficulties in contract performance; the resolution of program terminations; the ability to procure new contracts; the risks of conducting business in foreign countries; the ability to comply with extensive governmental regulation, including import and export policies, the Foreign Corrupt Practices Act, the International Traffic in Arms Regulations, and procurement and other regulations; the impact of competition; the ability to develop products and technologies; the impact of changes in the financial markets and global economic conditions; the risk that actual pension returns, discount rates or other actuarial assumptions are significantly different than the Company's assumptions; the risk of cost overruns, particularly for the Company's fixed-price contracts; dependence on component availability, subcontractor performance and key suppliers; risks of a negative government audit; the use of accounting estimates in the Company's financial statements; risks associated with acquisitions, dispositions, joint ventures and other business arrangements; risks of an impairment of goodwill or other intangible assets; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; the impact of potential security threats and other disruptions; 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. This release and the attachments also contain non-GAAP financial measures. A GAAP reconciliation and a discussion of the Company's use of these measures are included in this release or the attachments.

Media Contact:

Investor Relations Contact:

 

Jon Kasle

Marc Kaplan

 

781-522-5110

781-522-5141

 
   

Attachment A

Raytheon Company

Preliminary Statement of Operations Information

Second Quarter 2010

 
             

(In millions, except per share amounts)

Three Months Ended

 

Six Months Ended

 
     

27-Jun-10

 

28-Jun-09

 

27-Jun-10

 

28-Jun-09

 
                     

Net sales

$ 5,973

 

$ 6,125

 

$ 12,026

 

$ 12,009

 

Operating expenses

               

Cost of sales

5,038

 

4,839

 

9,822

 

9,536

 

Administrative and selling expenses

414

 

370

 

822

 

734

 

Research and development expenses

176

 

151

 

328

 

262

 
                     

Total operating expenses

5,628

 

5,360

 

10,972

 

10,532

 
                     

Operating income

345

 

765

 

1,054

 

1,477

 
                     

Interest expense

33

 

31

 

65

 

63

 

Interest income

(4)

 

(3)

 

(7)

 

(7)

 

Other (income) expense

6

 

(13)

 

5

 

(8)

 
                     

Non-operating (income) expense

35

 

15

 

63

 

48

 
                     

Income from continuing operations before taxes

310

 

750

 

991

 

1,429

 
                     

Federal and foreign income taxes

91

 

246

 

311

 

468

 
                     

Income from continuing operations

219

 

504

 

680

 

961

 
                     

Income (loss) from discontinued operations, net of tax

(4)

 

(3)

 

(12)

 

-

 
                     

Net income

215

 

501

 

668

 

961

 
                     
 

Less: Net income (loss) attributable to noncontrolling interests in subsidiaries

7

 

12

 

15

 

20

 
                     

Net income attributable to Raytheon Company

$ 208

 

$ 489

 

$ 653

 

$ 941

 
                     

Basic earnings (loss) per share attributable to Raytheon Company common stockholders:

               
 

Income from continuing operations

$ 0.56

 

$ 1.25

 

$ 1.76

 

$ 2.38

 
 

Income (loss) from discontinued operations, net of tax

(0.01)

 

(0.01)

 

(0.03)

 

-

 
 

Net income

0.55

 

1.24

 

1.73

 

2.38

 
                     

Diluted earnings (loss) per share attributable to Raytheon Company common stockholders:

               
 

Income from continuing operations

$ 0.56

 

$ 1.24

 

$ 1.73

 

$ 2.35

 
 

Income (loss) from discontinued operations, net of tax

(0.01)

 

(0.01)

 

(0.03)

 

-

 
 

Net income

0.55

 

1.23

 

1.70

 

2.35

 
                     

Amounts attributable to Raytheon Company common stockholders:

               
 

Income from continuing operations

$ 212

 

$ 492

 

$ 665

 

$ 941

 
 

Income (loss) from discontinued operations, net of tax

(4)

 

(3)

 

(12)

 

-

 
 

Net income

$ 208

 

$ 489

 

$ 653

 

$ 941

 
                     

Average shares outstanding

               
   

Basic

378.5

 

392.5

 

378.1

 

395.7

 
   

Diluted

383.1

 

397.3

 

383.7

 

400.6

 
                   

Attachment B

Raytheon Company

Preliminary Segment Information

Second Quarter 2010

 
                         
                 

Operating Income

 
 

Net Sales

 

Operating Income

 

As a Percent of Net Sales

 

(In millions, except percentages)

Three Months Ended

 

Three Months Ended

 

Three Months Ended

 
 

27-Jun-10

 

28-Jun-09

 

27-Jun-10

 

28-Jun-09

 

27-Jun-10

 

28-Jun-09

 
                         

Integrated Defense Systems

$ 1,352

 

$ 1,335

 

$ 221

 

$ 205

 

16.3%

 

15.4%

 

Intelligence and Information Systems

472

 

812

 

(329)

 

66

 

-69.7%

 

8.1%

 

Missile Systems

1,415

 

1,384

 

164

 

147

 

11.6%

 

10.6%

 

Network Centric Systems

1,205

 

1,197

 

166

 

170

 

13.8%

 

14.2%

 

Space and Airborne Systems

1,197

 

1,136

 

171

 

175

 

14.3%

 

15.4%

 

Technical Services

834

 

780

 

73

 

53

 

8.8%

 

6.8%

 

FAS/CAS Pension Adjustment

-

 

-

 

(55)

 

11

         

Corporate and Eliminations

(502)

 

(519)

 

(66)

 

(62)

         
                         

Total

$ 5,973

 

$ 6,125

 

$ 345

 

$ 765

 

5.8%

 

12.5%

 
                         
                       
                 

Operating Income

 
 

Net Sales

 

Operating Income

 

As a Percent of Net Sales

 

(In millions, except percentages)

Six Months Ended

 

Six Months Ended

 

Six Months Ended

 
 

27-Jun-10

 

28-Jun-09

 

27-Jun-10

 

28-Jun-09

 

27-Jun-10

 

28-Jun-09

 
                         

Integrated Defense Systems

$ 2,688

 

$ 2,597

 

$ 431

 

$ 393

 

16.0%

 

15.1%

 

Intelligence and Information Systems

1,202

 

1,596

 

(279)

 

127

 

-23.2%

 

8.0%

 

Missile Systems

2,776

 

2,752

 

322

 

305

 

11.6%

 

11.1%

 

Network Centric Systems

2,381

 

2,351

 

331

 

333

 

13.9%

 

14.2%

 

Space and Airborne Systems

2,292

 

2,182

 

330

 

314

 

14.4%

 

14.4%

 

Technical Services

1,635

 

1,476

 

140

 

97

 

8.6%

 

6.6%

 

FAS/CAS Pension Adjustment

-

 

-

 

(108)

 

22

         

Corporate and Eliminations

(948)

 

(945)

 

(113)

 

(114)

         
                         

Total

$ 12,026

 

$ 12,009

 

$ 1,054

 

$ 1,477

 

8.8%

 

12.3%

 
                       

Attachment C

 

Raytheon Company

 

Other Preliminary Information

 

Second Quarter 2010

 
                   
                   

(In millions)

Funded Backlog

 

Total Backlog

 
   

27-Jun-10

 

31-Dec-09

 

27-Jun-10

 

31-Dec-09

 
                   

Integrated Defense Systems

$ 5,637

 

$ 5,595

 

$ 9,463

 

$ 10,665

 

Intelligence and Information Systems *

1,013

 

1,588

 

4,619

 

4,360

 

Missile Systems

6,296

 

6,454

 

7,838

 

7,657

 

Network Centric Systems

4,221

 

4,389

 

5,143

 

5,501

 

Space and Airborne Systems

3,215

 

3,402

 

5,930

 

5,921

 

Technical Services

2,079

 

2,051

 

2,987

 

2,773

 
                   

Total

$ 22,461

 

$ 23,479

 

$ 35,980

 

$ 36,877

 
                   

* Backlog and funded backlog for the period ending June 27, 2010 was reduced by a net $556 million for the UK Border Agency program
termination.

 
                 
           
   

Bookings

 
   

Three Months Ended

 
   

27-Jun-10

 

28-Jun-09

 
           

Total Bookings

$ 5,901

 

$ 7,647

 
         
   

Attachment D

 

Raytheon Company

 

Preliminary Balance Sheet Information

 

Second Quarter 2010

 
   

(In millions)

 
     

27-Jun-10

 

31-Dec-09

 

Assets

         

Cash and cash equivalents

$ 2,385

 

$ 2,642

 

Accounts receivable, net

131

 

120

 

Contracts in process

4,461

 

4,373

 

Inventories

330

 

344

 

Deferred taxes

301

 

273

 

Prepaid expenses and other current assets

112

 

116

 
 

Total current assets

7,720

 

7,868

 
             

Property, plant and equipment, net

1,953

 

2,001

 

Deferred taxes

326

 

436

 

Prepaid retiree benefits

130

 

111

 

Goodwill

 

11,921

 

11,922

 

Other assets, net

1,231

 

1,269

 
   

Total assets

$ 23,281

 

$ 23,607

 
             

Liabilities and Equity

       

Current liabilities

       

Advance payments and billings in excess of costs incurred

$ 2,159

 

$ 2,224

 

Accounts payable

1,330

 

1,397

 

Accrued employee compensation

972

 

868

 

Other accrued expenses

1,214

 

1,034

 
 

Total current liabilities

5,675

 

5,523

 
             

Accrued retiree benefits and other long-term liabilities

5,261

 

5,793

 

Deferred taxes

23

 

23

 

Long-term debt

2,327

 

2,329

 
             

Equity

         

Raytheon Company stockholders' equity

       

Common stock

4

 

4

 

Additional paid-in capital

11,332

 

10,991

 

Accumulated other comprehensive loss

(4,712)

 

(4,824)

 

Treasury stock, at cost

(6,222)

 

(5,446)

 

Retained earnings

9,473

 

9,102

 
 

Total Raytheon Company stockholders' equity

9,875

 

9,827

 

Noncontrolling interests in subsidiaries

120

 

112

 
   

Total equity

9,995

 

9,939

 
   

Total liabilities and equity

$ 23,281

 

$ 23,607

 
   
           

Attachment E

Raytheon Company

Preliminary Cash Flow Information

Second Quarter 2010

 
                 

(In millions)

Three Months Ended

 

Six Months Ended

 
 

27-Jun-10

 

28-Jun-09

 

27-Jun-10

 

28-Jun-09

 
                 

Net income (loss)

$ 215

 

$ 501

 

$ 668

 

$ 961

 

(Income) loss from discontinued operations, net of tax

4

 

3

 

12

 

-

 

Income (loss) from continuing operations

219

 

504

 

680

 

961

 
                 

Depreciation

75

 

73

 

149

 

144

 

Amortization

28

 

24

 

57

 

50

 

Working capital (excluding pension and taxes)*

651

 

313

 

(26)

 

(625)

 

Discontinued operations

-

 

(3)

 

2

 

(9)

 

Net activity in financing receivables

6

 

6

 

22

 

15

 

Other

(579)

 

(408)

 

(225)

 

378

 

Net operating cash flow

400

 

509

 

659

 

914

 
                 

Capital spending

(64)

 

(48)

 

(109)

 

(81)

 

Internal use software spending

(17)

 

(21)

 

(31)

 

(34)

 

Acquisitions

-

 

-

 

(12)

 

-

 

Dividends

(143)

 

(122)

 

(260)

 

(234)

 

Repurchases of common stock

(475)

 

(300)

 

(775)

 

(600)

 

Warrants exercised

87

 

-

 

250

 

-

 

Other

(16)

 

(29)

 

21

 

(25)

 

Total cash flow

$ (228)

 

$ (11)

 

$ (257)

 

$ (60)

 
                 

* Working capital (excluding pension and taxes) is a summation of changes in: accounts receivable, net, contracts in process and advance
payments and billings in excess of costs incurred, inventories, prepaid expenses and other current assets, accounts payable, accrued
employee compensation, and other accrued expenses from the Statements of Cash Flows.

 
               

Attachment F

Raytheon Company

Non-GAAP Financial Measures - Adjusted Measures

Second Quarter 2010

 
                                         

Adjusted EPS Non-GAAP Reconciliation

                               
                                         

(In millions, except per share amounts)

               

2010 Current Guidance

 

2010 Prior Guidance

 
         

Three Months Ended

 

Six Months Ended

 

Low end

 

High end

 

Low end

 

High end

 
         

2010

 

2009

 

2010

 

2009

 

of range

 

of range

 

of range

 

of range

 
                                 

Diluted earnings per share from continuing operations
attributable to Raytheon Company common stockholders

$ 0.56

 

$ 1.24

 

$ 1.73

 

$ 2.35

 

$ 4.00

 

$ 4.15

 

$ 4.75

 

$ 4.90

 

Less: Per share impact of the FAS/CAS Pension Adjustment (A)

(0.09)

 

0.02

 

(0.18)

 

0.04

 

(0.38)

 

(0.38)

 

(0.38)

 

(0.38)

 

Less: Per share impact of United Kingdom (UK) Border Agency
program termination (B)

(0.71)

 

-

 

(0.72)

 

-

 

(0.75)

 

(0.75)

 

-

 

-

 

Adjusted EPS (1)

$ 1.36

 

$ 1.22

 

$ 2.63

 

$ 2.31

 

$ 5.13

 

$ 5.28

 

$ 5.13

 

$ 5.28

 
                                         
                                         

(A) FAS/CAS Pension Adjustment

$ (55)

 

$ 11

 

$ (108)

 

$ 22

 

$ (220)

 

$ (220)

 

$ (220)

 

$ (220)

 
   

Tax effect (at 35% federal statutory rate)

19

 

(4)

 

38

 

(8)

 

77

 

77

 

77

 

77

 
 

After-tax impact

(36)

 

7

 

(70)

 

14

 

(143)

 

(143)

 

(143)

 

(143)

 
 

Diluted Shares

383.1

 

397.3

 

383.7

 

400.6

 

382.0

 

377.0

 

382.0

 

377.0

 
 

Per share impact (2)

$ (0.09)

 

$ 0.02

 

$ (0.18)

 

$ 0.04

 

$ (0.38)

 

$ (0.38)

 

$ (0.38)

 

$ (0.38)

 
                                         
                                         

(B) UK Border Agency program termination

$ (395)

 

$ -

 

$ (395)

 

$ -

 

$ (395)

 

$ (395)

 

$ -

 

$ -

 
   

Tax effect (actual at 30.6% blended global tax rate and guidance at 28% UK statutory rate)

121

 

-

 

121

 

-

 

111

 

111

 

-

 

-

 
 

After-tax adjustment

(274)

 

-

 

(274)

 

-

 

(284)

 

(284)

 

-

 

-

 
 

Diluted Shares

383.1

 

397.3

 

383.7

 

400.6

 

382.0

 

377.0

 

382.0

 

377.0

 
 

Per share impact (2)

$ (0.71)

 

$ -

 

$ (0.72)

 

$ -

 

$ (0.75)

 

$ (0.75)

 

$ -

 

$ -

 
                                       

Adjusted Income from Continuing Operations attributable to Raytheon Company common stockholders Non-GAAP Reconciliation

 
                 
 

Three Months Ended

 

Six Months Ended

 
 

2010

 

2009

 

2010

 

2009

 
                 

Income from Continuing Operations attributable to Raytheon Company common stockholders

$ 212

 

$ 492

 

$ 665

 

$ 941

 

FAS/CAS Pension Adjustment (Tax effected at 35% federal statutory rate)

36

 

(7)

 

70

 

(14)

 
                 

UK Border Agency program termination (Tax effected at 30.6% blended global tax rate)

274

 

-

 

274

 

-

 
                 

Adjusted Income (1)

$ 522

 

$ 485

 

$ 1,009

 

$ 927

 
                 
               

Adjusted operating margin Non-GAAP Reconciliation

                       
                         

(In millions, except per share amounts)

               

2010 Current Guidance

 
 

Three Months Ended

 

Six Months Ended

 

Low end

 

High end

 
 

2010

 

2009

 

2010

 

2009

 

of range

 

of range

 
                         

Operating margin

5.8 %

 

12.5 %

 

8.8 %

 

12.3 %

 

9.4 %

 

9.6 %

 

Less: Impact of the FAS/CAS Pension Adjustment

(0.9) %

 

0.2 %

 

(0.9) %

 

0.2 %

 

(0.9) %

 

(0.9) %

 

Less: Impact of UK Border Agency program termination

(5.9) %

 

0.0 %

 

(2.9) %

 

0.0 %

 

(1.5) %

 

(1.5) %

 

Adjusted operating margin (1)

12.6 %

 

12.3 %

 

12.6 %

 

12.1 %

 

11.8 %

 

12.0 %

 
                         
                         

(1) These amounts are not measures of financial performance under U.S. generally accepted accounting principles (GAAP). They should be
considered supplemental to and not a substitute for financial performance in accordance with GAAP and may not be defined and calculated by
other companies in the same manner. We are providing these measures because management uses them for the purposes of evaluating and
forecasting the Company's financial performance and we believe it allows investors to benefit from being able to assess our operating
performance in the context of how our principal customer, the U.S. Government, allows us to recover pension costs and to better compare our
operating performance to others in the industry on that same basis and excluding significant unusual items.


Adjusted EPS is defined as diluted EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS
impact of the FAS/CAS pension adjustment and the UK Border Agency program termination. Adjusted operating margin is defined as total operating
margin excluding the margin impact of the FAS/CAS pension adjustment and the UK Border Agency program termination. Adjusted Income from
continuing operations attributable to Raytheon Company common stockholders is defined as income from continuing operations attributable to
Raytheon Company common stockholders excluding the after-tax impact of the FAS/CAS pension adjustment and the after-tax impact of the UK
Border Agency program termination.



(2) Amounts may not recalculate directly due to rounding.

 
                       

Attachment G

 

Raytheon Company

 

Preliminary Return on Invested Capital Non-GAAP Financial Measure

 

Second Quarter 2010

 
   

The Company defines Return on Invested Capital (ROIC) as income from continuing operations excluding the after-tax effect of
the FAS/CAS pension adjustment and the after-tax effect of the UK Border Agency program termination adjustment plus after-tax
net interest expense plus one-third of operating lease expense after-tax (estimate of interest portion of operating lease expense)
divided by average invested capital after capitalizing operating leases (operating lease expense times a multiplier of 8), adding
financial guarantees less net investment in Discontinued Operations, and adding back the impact of the accounting standard for
employers' accounting for defined benefit pension and other postretirement plans. ROIC is not a measure of financial
performance under generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies
in the same manner. ROIC should be considered supplemental to and not a substitute for financial information prepared in
accordance with GAAP. The Company uses ROIC as a measure of efficiency and effectiveness of its use of capital and as an
element of management compensation.

 
 
             

Return on Invested Capital

           
             

(In millions, except percentages)

   

2010 Current Guidance

 
     

Low end

 

High end

 
 

2009

 

of range

 

of range

 

Income from continuing operations

$ 1,977

         

FAS/CAS Pension Adjustment, after-tax *

(18)

         

UK Border Agency program termination, after-tax **

-

         

Net interest expense, after-tax *

71

 

Combined

 

Combined

 

Lease expense, after-tax *

66

         

Return

$2,096

 

$ 2,155

 

$ 2,220

 
             

Net debt ***

$ (132)

         

Equity less investment in discontinued operations

9,560

         

Lease expense x 8, plus financial guarantees

2,815

 

Combined

 

Combined

 

Minimum pension liability

5,007

         

Invested capital from continuing operations ****

$ 17,250

 

$ 17,700

 

$ 17,500

 
             

ROIC

12.2%

 

12.2%

 

12.6%

 
             

* Federal statutory tax rate of 35%

 

** U.K. statutory tax rate of 28%

 

*** Net debt is defined as total debt less cash and cash equivalents and is calculated using a 2 point average

 

**** Calculated using a 2 point average

 
           

SOURCE Raytheon Company

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