Raytheon Reports Strong First Quarter Results
WALTHAM, Mass., April 25, 2007 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE: RTN) reported first quarter 2007 income from continuing operations of $314 million or $0.69 per diluted share compared to $272 million or $0.61 per diluted share in the first quarter 2006. First quarter 2007 income from continuing operations was higher primarily due to improved operating results at Integrated Defense Systems (IDS), Missile Systems (MS), and Network Centric Systems (NCS).
"Our first quarter was another good quarter for the Company and a strong start to the year," said William H. Swanson, Raytheon's Chairman and CEO.
First quarter 2007 net income was $346 million or $0.76 per diluted share compared to $287 million or $0.64 per diluted share in the first quarter 2006. Net income for the first quarter 2007 included $32 million of income from discontinued operations or $0.07 per diluted share, primarily due to the results of Raytheon Aircraft Company (RAC), versus $15 million of income from discontinued operations or $0.03 per diluted share in the first quarter 2006. As previously announced, after the first quarter close, Raytheon completed the sale of RAC to Hawker Beechcraft Inc. for $3.3 billion, with after-tax net proceeds of approximately $2.5 billion. The Company expects to record a net after-tax gain of approximately $1 billion in the second quarter.
Net sales for the first quarter 2007 were $4.9 billion, up 6 percent from $4.7 billion in the first quarter 2006.
Operating cash flow from continuing operations for the first quarter 2007 was an outflow of $379 million versus an outflow of $48 million for the first quarter 2006. The decrease in operating cash flow was primarily due to a $400 million discretionary cash contribution made to the Company's pension plans in the first quarter 2007 versus a $200 million discretionary cash contribution made in the first quarter 2006.
During the first quarter 2007, the Company repurchased 5.1 million shares for $275 million as part of the Company's previously announced share repurchase program. In addition, as announced in March 2007, the Company's Board of Directors authorized a 6 percent increase to the Company's annual dividend, from $0.96 to $1.02 per share.
Net debt was $2.3 billion at the end of the first quarter 2007 compared with $1.5 billion at year-end 2006. Net debt is defined as total debt less cash and cash equivalents.
After the completion of the RAC sale in the second quarter, the Company initiated the redemption of approximately $1 billion of debt maturing from 2008 - 2010, which is expected to be completed on April 27, 2007. The Company expects to record a charge in the second quarter of approximately $40 million after-tax ($60 million pretax) primarily associated with the make-whole provision of this early debt retirement.
Summary Financial Results 1st Quarter % ($ in millions, except per share data) 2007 2006 Change Net Sales $4,928 $4,660 6% Total Operating Expenses 4,418 4,227 Operating Income 510 433 18% Non-operating Expenses 35 22 Income from Cont. Ops. before Taxes $475 $411 16% Income from Continuing Operations $314 $272 15% Net Income $346 $287 21% Diluted EPS from Continuing Operations $0.69 $0.61 13% Diluted EPS $0.76 $0.64 19% Operating Cash Flow from Cont. Ops. $(379) $(48) Bookings and Backlog Bookings 1st Quarter (in millions) 2007 2006 Total Bookings $5,282 $4,967 Backlog Period ending (in millions) 03/25/07 12/31/06 Backlog $33,909 $33,838 Funded Backlog $18,592 $18,186
The Company reported total bookings for the first quarter 2007 of $5.3 billion compared to $5.0 billion in the first quarter 2006. The Company ended the first quarter 2007 with a record backlog of $33.9 billion compared to $31.8 billion at the end of the first quarter 2006 and $33.8 billion at the end of 2006.
Outlook 2007 Financial Outlook Bookings ($B) 21.0 - 22.0 Net Sales ($B) 21.4 - 21.9 FAS/CAS Pension Expense ($M) 270 Interest Expense, net ($M) 65 - 80 Diluted Shares (M) 446 - 448 EPS from Cont. Ops. ($) 2.85 - 3.00 Operating Cash Flow from Cont. Ops. ($B) 1.5 - 1.7 ROIC (%) 8.2 - 8.7 The Company reaffirms the full-year 2007 outlook as detailed above.
Charts containing additional information on the Company's 2007 performance and guidance are available on the Company's website at http://www.raytheon.com/. See attachment F for information on the Company's calculation and use of ROIC, a non-GAAP financial measure.
Segment Results Integrated Defense Systems 1st Quarter % ($ in millions) 2007 2006 Change Net Sales $1,092 $963 13% Operating Income $199 $158 26% Operating Margin 18.2% 16.4%
Integrated Defense Systems (IDS) had first quarter 2007 net sales of $1,092 million, up 13 percent compared to $963 million in the first quarter 2006, primarily due to growth on Missile Defense Agency, U.S. Navy and U.S. Army programs, as well as on international programs. IDS recorded $199 million of operating income compared to $158 million in the first quarter 2006. The increase in operating income was primarily due to higher volume and improved performance on several domestic and international programs.
During the quarter, IDS booked $229 million for additional development work, including ship integration and detail design for the U.S. Navy's Zumwalt Class program. IDS also booked $148 million for the manufacture and integration support of a Terminal High Altitude Area Defense (THAAD) radar for the Missile Defense Agency and $144 million to provide engineering services support to the Patriot air and missile defense program for the U.S. Army.
Intelligence and Information Systems 1st Quarter % ($ in millions) 2007 2006 Change Net Sales $588 $611 -4% Operating Income $55 $55 NM Operating Margin 9.4% 9.0%
Intelligence and Information Systems (IIS) had first quarter 2007 net sales of $588 million compared to $611 million in the first quarter 2006, a decrease primarily due to reprioritization and procurement delays on certain classified programs, as previously disclosed. IIS recorded $55 million of operating income in the first quarter 2007 and the first quarter 2006.
During the quarter, IIS booked $286 million on a number of classified contracts.
Missile Systems 1st Quarter % ($ in millions) 2007 2006 Change Net Sales $1,140 $989 15% Operating Income $120 $110 9% Operating Margin 10.5% 11.1%
Missile Systems (MS) had first quarter 2007 net sales of $1,140 million, up 15 percent compared to $989 million in the first quarter 2006, primarily due to higher volume on Standard Missile and Phalanx. MS recorded $120 million of operating income compared to $110 million in the first quarter 2006.
During the quarter, MS booked $255 million for the production of Block IV Tactical Tomahawk cruise missiles for the U.S. Navy. MS also booked $101 million for the production of the Joint Standoff Weapons (JSOW) for the U.S. Air Force and Navy.
Network Centric Systems 1st Quarter % ($ in millions) 2007 2006 Change Net Sales $929 $791 17% Operating Income $117 $84 39% Operating Margin 12.6% 10.6%
Network Centric Systems (NCS) had first quarter 2007 net sales of $929 million, up 17 percent compared to $791 million in the first quarter 2006, primarily due to growth on U.S. Army programs. NCS recorded $117 million of operating income compared to $84 million in the first quarter 2006. The increase in operating income was primarily due to higher volume and improved program performance.
During the quarter, NCS booked $122 million to provide support for the Firefinder locating radar program and $92 million for the production of Commander's Independent Viewers (CIVs) for the U.S. Army.
Space and Airborne Systems 1st Quarter % ($ in millions) 2007 2006 Change Net Sales $964 $1,018 -5% Operating Income $129 $145 -11% Operating Margin 13.4% 14.2%
Space and Airborne Systems (SAS) had first quarter 2007 net sales of $964 million, down 5 percent compared to $1,018 million in the first quarter 2006, primarily due to the planned transition from development to production on several major programs. SAS recorded $129 million of operating income compared to $145 million in the first quarter 2006. Operating income was lower primarily due to favorable program profit and cost adjustments recorded from certain production programs in the first quarter 2006.
During the quarter, SAS booked $96 million on a number of classified contracts.
Technical Services 1st Quarter % ($ in millions) 2007 2006 Change Net Sales $426 $450 -5% Operating Income $21 $31 -32% Operating Margin 4.9% 6.9%
Technical Services (TS) had first quarter 2007 net sales of $426 million, down 5 percent compared to $450 million in the first quarter 2006, primarily due to lower volume on a support services program, as well as reduced bookings at the end of 2006. TS recorded operating income of $21 million in the first quarter 2007 compared to $31 million in the first quarter 2006. Operating income was lower primarily due to profit adjustments recorded on certain programs and reduced volume.
During the quarter, TS booked $347 million on work for the Department of Energy (DOE) and the Defense Threat Reduction Agency (DTRA).
Net sales in the first quarter 2007 were $181 million compared to $190 million in the first quarter 2006, with an operating loss of $8 million in the first quarter 2007 compared to an operating loss of $13 million in the first quarter 2006.
During the quarter, the Company recorded net income from discontinued operations of $32 million, compared to $15 million in the first quarter 2006, primarily related to RAC.
Raytheon Company (NYSE: RTN), with 2006 sales of $20.3 billion, is a technology leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 85 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 73,000 people worldwide.
Disclosure Regarding Forward-looking Statements
This release and the attachments contain forward-looking statements, including information regarding the Company's 2007 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: risks associated with the Company's 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 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 and procurement and other regulations; the impact of competition; the ability to develop products and technologies; 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; the potential impairment of the Company's goodwill; risks associated with Flight Options' ability to compete and meet its financial objectives; risks associated with the commuter and fractional ownership aircraft markets; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; risks associated with acquisitions, joint ventures and other business arrangements; the impact of changes in the Company's credit ratings; and other factors as may be detailed from time to time in the Company's public announcements and Securities and Exchange Commission filings. In addition, these statements do not give effect to the potential impact of any acquisitions, divestitures or business combinations that may be announced or closed after the date hereof. 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.
Conference Call on the First Quarter 2007 Financial Results Raytheon's financial results conference call will be held on Wednesday, April 25, 2007 at 9 a.m. EDT. 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) 800 - 8651. The conference call will also be audiocast on the Internet at http://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 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.
Attachment A Raytheon Company Preliminary Statement of Operations Information First Quarter 2007 (In millions except per share amounts) Three Months Ended 25-Mar-07 26-Mar-06 Net sales $4,928 $4,660 Cost of sales 3,981 3,807 Administrative and selling expenses 340 319 Research and development expenses 97 101 Total operating expenses 4,418 4,227 Operating income 510 433 Interest expense 60 69 Interest income (28) (21) Other (income) expense, net 3 (26) Non-operating expense, net 35 22 Income from continuing operations before taxes 475 411 Federal and foreign income taxes 161 139 Income from continuing operations 314 272 Income from discontinued operations, net of tax 32 15 Net income $346 $287 Earnings per share from continuing operations Basic $0.71 $0.61 Diluted $0.69 $0.61 Earnings per share from discontinued operations Basic $0.07 $0.03 Diluted $0.07 $0.03 Earnings per share Basic $0.78 $0.65 Diluted $0.76 $0.64 Average shares outstanding Basic 441.0 442.3 Diluted 453.5 448.8 Attachment B Raytheon Company Preliminary Segment Information First Quarter 2007 (In millions) Operating Income As a Percent Net Sales Operating Income of Sales Three Months Ended Three Months Ended Three Months Ended 25-Mar-07 26-Mar-06 25-Mar-07 26-Mar-06 25-Mar-07 26-Mar-06 Integrated Defense Systems $1,092 $963 $199 $158 18.2% 16.4% Intelligence and Information Systems 588 611 55 55 9.4% 9.0% Missile Systems 1,140 989 120 110 10.5% 11.1% Network Centric Systems 929 791 117 84 12.6% 10.6% Space and Airborne Systems 964 1,018 129 145 13.4% 14.2% Technical Services 426 450 21 31 4.9% 6.9% Other 181 190 (8) (13) -4.4% -6.8% FAS/CAS Pension Adjustment - - (62) (85) Corporate and Eliminations (392) (352) (61) (52) Total $4,928 $4,660 $510 $433 10.3% 9.3% Attachment C Raytheon Company Other Preliminary Information First Quarter 2007 Funded Backlog Backlog (In millions) (In millions) 25-Mar-07 31-Dec-06 25-Mar-07 31-Dec-06 Integrated Defense Systems $8,089 $7,934 $4,156 $4,088 Intelligence and Information Systems 3,747 3,935 909 893 Missile Systems 9,638 9,504 5,386 5,135 Network Centric Systems 5,146 5,059 4,041 4,037 Space and Airborne Systems 5,210 5,591 2,784 2,770 Technical Services 1,825 1,572 1,062 1,020 Other 254 243 254 243 Total $33,909 $33,838 $18,592 $18,186 Bookings (In millions) Three Months Ended 25-Mar-07 26-Mar-06 Total Bookings $5,282 $4,967 Attachment D Raytheon Company Preliminary Balance Sheet Information First Quarter 2007 (In millions) Balance sheets 25-Mar-07 31-Dec-06 Assets Cash and cash equivalents $1,660 $2,460 Accounts receivable, less allowance for doubtful accounts 174 178 Contracts in process 3,895 3,600 Inventories 499 487 Deferred federal and foreign income taxes 240 257 Prepaid expenses and other current assets 233 239 Assets held for sale 2,398 2,296 Total current assets 9,099 9,517 Property, plant and equipment, net 2,105 2,131 Deferred federal and foreign income taxes 230 189 Goodwill 11,539 11,539 Other assets, net 2,110 2,115 Total assets $25,083 $25,491 Liabilities and Stockholders' Equity Notes payable and current portion of long-term debt $686 $687 Advance payments and billings in excess of costs incurred 1,947 1,962 Accounts payable 833 920 Accrued salaries and wages 757 944 Other accrued expenses 1,196 1,193 Liabilities held for sale 1,018 1,009 Total current liabilities 6,437 6,715 Accrued retiree benefits and other long-term liabilities 3,973 4,232 Long-term debt 3,283 3,278 Minority interest 179 165 Stockholders' equity 11,211 11,101 Total liabilities and stockholders' equity $25,083 $25,491 Attachment E Raytheon Company Preliminary Cash Flow Information First Quarter 2007 (In millions) Cash flow information Three Months Ended 25-Mar-07 26-Mar-06 Income from continuing operations $314 $272 Depreciation 69 69 Amortization 20 19 Working capital (670) (517) Discontinued operations (37) 28 Net activity in financing receivables 21 45 Other (133) 64 Net operating cash flow (416) (20) Capital spending (39) (35) Internal use software spending (15) (4) Acquisitions - (47) Investment activity and divestitures - 22 Dividends (107) (98) Repurchase of common stock (275) (102) Debt repayments 3 (32) Discontinued operations (27) (8) Other 76 66 Total cash flow $(800) $(258) Attachment F Raytheon Company Non-GAAP Financial Measures First Quarter 2007 We define Return on Invested Capital (ROIC) as income from continuing operations 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 cumulative minimum pension liability/impact of adopting FAS 158. 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. We use ROIC as a measure of efficiency and effectiveness of our use of capital and as an element of management compensation. Return on Invested Capital (In millions) 2007 Guidance Low end High end of range of range Income from continuing operations Net interest expense, after-tax* Combined Combined Lease expense, after-tax* Return $1,400 $1,465 Net debt ** Equity less investment in discontinued operations Lease expense x 8 plus financial guarantees Combined Combined Minimum pension liability (cumulative) Invested capital from continuing operations*** $17,050 $16,850 ROIC 8.2% 8.7% * effective tax rate: 34.2% (2007 guidance) ** 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 Media Contact: Investor Relations Contact: Mac Jeffery Greg Smith 781-522-5111 781-522-5141
SOURCE: Raytheon Company
CONTACT: Media, Mac Jeffery, +1-781-522-5111, or Investors, Greg Smith,
+1-781-522-5141, both of Raytheon Company
Web site: http://www.raytheon.com/