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Raytheon Reports First Quarter 2004 EPS of $0.24 from Continuing Operations and Increases Full-year Guidance for EPS, Bookings, Sales and Free Cash Flow
-- Earnings per share of $0.30 including a cumulative effect of change in accounting principle and discontinued operations -- Government and Defense bookings of $7.9 billion in the quarter, backlog up $3.8 billion during the quarter to $28.9 billion -- Fr
WALTHAM, Mass., April 29 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE:
RTN) reported first quarter 2004 income from continuing operations of $101
million or $0.24 per diluted share compared to $111 million or $0.27 per
diluted share in the first quarter 2003. Non-cash pension expense (FAS/CAS
Pension Adjustment) negatively affected the quarter by $0.15 per diluted share
on a year-over-year basis.
First quarter 2004 net income was $128 million or $0.30 per diluted share
compared to $95 million or $0.23 per diluted share in 2003. Net income for
the first quarter of 2004 includes a $14 million after-tax loss in
discontinued operations or $0.03 per diluted share versus $16 million or $0.04
per diluted share in 2003. Net income for the first quarter of 2004 also
includes a $41 million or $0.10 per diluted share cumulative effect of change
in accounting principle due to the previously announced change in the
Company's pension and other post-retirement benefit plans measurement date
from Oct. 31 to Dec. 31.
Net sales for the first quarter 2004 were $4.7 billion, up 11 percent from
$4.2 billion in the comparable period in 2003. Government and Defense sales
for the quarter (after the elimination of intercompany sales) increased 9
percent to $4.1 billion from $3.8 billion in the comparable quarter.
Integrated Defense Systems, Missile Systems, and Space and Airborne Systems
generated double-digit sales growth in the quarter.
Free cash flow from continuing operations for the first quarter was an
outflow of $295 million versus an outflow of $514 million for the comparable
period in 2003. Free cash flow, including discontinued operations, for the
first quarter 2004 was an outflow of $286 million versus an outflow of $819
million in 2003. Free cash flow was significantly better than prior guidance
due to a successful previously discussed financial system implementation in
the Northeast combined with the receipt of a large international collection
earlier than expected and continued focus on working capital. Free cash flow
is a non-GAAP financial measure that the Company defines as operating cash
flow less capital spending and internal use software spending. Attachment F
contains a table reconciling this measure to operating cash flow, the most
directly comparable GAAP measure.
The Government and Defense businesses recorded first quarter bookings of
$7.9 billion compared to bookings of $5.0 billion in the first quarter of
2003. Government and Defense backlog reached a record $28.9 billion, an
increase of $3.8 billion over year end 2003.
Raytheon Aircraft Company's (RAC) first quarter bookings were $425 million
compared to $306 million in 2003.
"I am pleased with our strong start in the first quarter," said William H.
Swanson, Raytheon Chairman and CEO. "We are encouraged by our record bookings
and better than expected free cash flow."
Outlook
The Company now expects 2004 earnings per share from continuing operations
to be $1.30-1.40, higher than its prior guidance of $1.25-1.35. The Company
also raised its full year guidance for bookings to $23 billion from $22
billion, and for net sales to more than $20 billion from $19.5-20.0 billion.
The Company now expects full year free cash flow to exceed $1 billion. A
chart summarizing these changes is being posted to the Company's website.
Segment Results
Integrated Defense Systems
Integrated Defense Systems (IDS) first quarter 2004 net sales were $839
million, up 28 percent compared to $654 million in the first quarter 2003, due
primarily to continued growth in DD(X), the Navy's future destroyer program,
and strong missile defense sales. IDS generated $94 million of first quarter
2004 operating income compared to $74 million in the 2003 comparable quarter.
During the quarter, the U.S. Army Aviation and Missile Command awarded IDS
a $122 million contract for the design and development of the Surface Launched
Advanced Medium Range Air-to-Air Missile (SLAMRAAM) system. IDS also received
a $148 million contract to provide Patriot engineering services support.
Intelligence and Information Systems
Intelligence and Information Systems (IIS) first quarter 2004 net sales
were $494 million, up 7 percent compared to $462 million in the first quarter
2003. IIS earned $45 million of operating income compared to $41 million in
the comparable quarter a year ago.
During the quarter, IIS booked nearly $400 million in classified contract
wins.
Missile Systems
Missile Systems (MS) first quarter 2004 net sales were $965 million, up 13
percent compared to $857 million in the first quarter 2003, driven by
increased volume on the Phalanx and Standard Missile-3 programs. MS generated
$107 million of operating income compared to $101 million in the comparable
quarter a year ago.
During the quarter, MS booked $2.1 billion for the Kinetic Energy
Interceptor system contract. Also during the quarter, MS booked a $525
million contract for the development and demonstration of the Non-Line of
Sight Launch System (NLOS-LS), a $170 million contract to produce 225 Tactical
Tomahawk LRIP missiles and a contract for Paveway II Laser Guided Bomb Kits.
Network Centric Systems
Network Centric Systems (NCS) first quarter 2004 net sales were $720
million, down 7 percent compared to $771 million in the first quarter 2003.
This decline is consistent with our projected reduction in sales in the air
traffic management and communications product lines. NCS recorded an
operating profit of $55 million compared to $62 million in the comparable
quarter a year ago.
Space and Airborne Systems
Space and Airborne Systems (SAS) first quarter 2004 net sales were $1,013
million, up 13 percent compared to $894 million in the first quarter 2003, due
to stronger classified and international programs including ASTOR. SAS
generated $129 million of operating income compared to $104 million in the
comparable quarter a year ago.
During the quarter, SAS received $1.7 billion in bookings including $1
billion on a number of classified contracts.
Technical Services
Technical Services (TS) first quarter 2004 net sales were $474 million,
down 3 percent from $491 million in the first quarter 2003, due primarily to
the completion of a major base and range contract in the first quarter 2003.
TS reported an operating profit of $31 million in the first quarter of 2004
compared to $36 million in the comparable quarter a year ago.
After the quarter close, the U.S. Navy awarded TS a competitive $237
million contract to provide engineering and technical services for self-
defense systems aboard U.S. Navy ships, land-based test sites and ships sold
to foreign countries by the United States.
Aircraft
RAC's first quarter 2004 net sales were $374 million, up 4 percent from
$361 million in the first quarter 2003. RAC recorded an operating loss of $28
million in the quarter compared to a loss of $35 million in the comparable
quarter in 2003.
RAC delivered 25 commercial aircraft in the first quarter of 2004,
compared to 31 in the same quarter last year.
Other
Net sales for this segment in the first quarter 2004 were $175 million
compared to $40 million in the first quarter 2003. The segment recorded an
operating loss of $15 million in the first quarter 2004 compared to a loss of
$3 million in the comparable quarter in 2003. The consolidation of Flight
Options' results in this quarter account for $133 million of the increased
sales and $9 million of the increase in loss versus the prior year.
Discontinued Operations
During the quarter, the Company signed a final settlement agreement on the
two Massachusetts power plants and also settled a number of additional issues
on completed construction projects in its former engineering and construction
businesses. The Company recorded an after-tax loss from discontinued
operations for the quarter of $14 million, related to its former engineering
and construction and Aircraft Integration Systems businesses.
Raytheon Company (NYSE: RTN), with 2003 sales of $18.1 billion, is an
industry leader in defense and government electronics, space, information
technology, technical services, and business and special mission aircraft.
With headquarters in Waltham, Mass., Raytheon employs 78,000 people worldwide.
Disclosure Regarding Forward-looking Statements
Certain statements included in this release, including any statements
relating to the Company's future plans, objectives, and projected future
financial performance, contain or are based on, forward-looking statements
within the meaning of the federal securities laws. Specifically, statements
that are not historical facts, including statements accompanied by words such
as "believe," "expect," "estimate," "intend," or "plan," and variations of
these words and similar expressions, are intended to identify forward-looking
statements and convey the uncertainty of future events or outcomes. The
Company cautions readers that any such forward-looking statements are based on
assumptions that the Company believes are reasonable, but are subject to a
wide range of risks, and actual results may differ materially. The Company
expressly disclaims any current intention to provide updates to forward-
looking statements, and the estimates and assumptions associated with them,
after the date of this release. Important factors that could cause actual
results to differ include, but are not limited to: the ability to obtain or
the timing of obtaining future government awards; the availability of
government funding; changes in government or customer priorities due to
program reviews or revisions to strategic objectives; difficulties in
developing and producing operationally advanced technology systems;
termination of government contracts; program performance, including resolution
of claims; timing of contract payments; the performance of critical
subcontractors; government import and export policies and other government
regulations; the ultimate resolution of contingencies and legal matters,
including investigations; the effect of market conditions, particularly in
relation to the general aviation, commuter and fractional aircraft markets;
cost growth risks inherent with large long-term fixed price contracts;
conflicts with other investors in joint ventures and less than wholly-owned
businesses; and risks associated with outstanding letters of credit, surety
bonds, guarantees and other support agreements related to a number of
contracts and leases of our former engineering and construction business unit.
Further information regarding the factors that could cause actual results to
differ materially from the projected results can be found in the Company's
filings with the Securities and Exchange Commission, including the Company's
Annual Report on Form 10-K for the year ended December 31, 2003.
Conference Call on the First Quarter 2004 Financial Results
Raytheon's financial results conference call will be Thursday, Apr. 29,
2004 at 9 a.m. EDT. Participants will be William Swanson, Chairman and CEO,
Edward Pliner, senior vice president and CFO, and other Company executives.
The dial-in number for the conference call will be (800) 901 - 5218. 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 urged to check the website ahead of time to ensure
their computers are configured for the audio stream. Instructions for
obtaining the free required downloadable software are posted on the site.
Attachment A
Raytheon Company
Financial Information
First Quarter 2004
(In millions except per share amounts)
Three Months Ended
28-Mar-04 30-Mar-03
Net sales $4,676 $4,201
Cost of sales 3,984 3,480
Administrative and selling expenses 326 302
Research and development expenses 115 106
Total operating expenses 4,425 3,888
Operating income 251 313
Interest expense 117 143
Interest income (12) (12)
Other expense, net - 23
Non-operating expense, net 105 154
Income from continuing operations
before taxes 146 159
Federal and foreign income taxes 45 48
Income from continuing operations 101 111
Loss from discontinued operations,
net of tax (14) (16)
Income before accounting change 87 95
Cumulative effect of change in
accounting principle, net of tax 41 -
Net income $128 $95
Earnings per share from continuing
operations
Basic $0.24 $0.27
Diluted $0.24 $0.27
Loss per share from discontinued
operations
Basic $(0.03) $(0.04)
Diluted $(0.03) $(0.04)
Earnings per share from cumulative
effect of change in
change in accounting principle
Basic $0.10 $-
Diluted $0.10 $-
Earnings per share
Basic $0.31 $0.23
Diluted $0.30 $0.23
Average shares outstanding
Basic 418.6 408.5
Diluted 421.3 411.1
Attachment B
Raytheon Company
Segment Information
First Quarter 2004
(In millions)
Net Sales Operating Income Operating Margin
Three Months Ended Three Months Ended Three Months Ended
28-Mar-04 30-Mar-03 28-Mar-04 30-Mar-03 28-Mar-04 30-Mar-03
Integrated
Defense
Systems $ 839 $ 654 $ 94 $ 74 11.2% 11.3%
Intelligence
and Information
Systems 494 462 45 41 9.1% 8.9%
Missile Systems 965 857 107 101 11.1% 11.8%
Network Centric
Systems 720 771 55 62 7.6% 8.0%
Space and
Airborne
Systems 1,013 894 129 104 12.7% 11.6%
Technical
Services 474 491 31 36 6.5% 7.3%
Aircraft 374 361 (28) (35) -7.5% -9.7%
Other 175 40 (15) (3) -8.6% -7.5%
FAS/CAS Pension
Adjustment - - (121) (28)
Corporate and
Eliminations (378) (329) (46) (39)
Total $ 4,676 $ 4,201 $ 251 $ 313 5.4% 7.5%
Government
and Defense
businesses
after
eliminations $4,127 $ 3,800 $ 426 $ 390 10.3% 10.3%
Attachment C
Raytheon Company
Other Information
Continuing Operations
First Quarter 2004
Backlog
(In millions)
28-Mar-04 30-Mar-03
Integrated Defense Systems $6,534 $5,364
Intelligence and Information Systems 3,969 3,766
Missile Systems 7,795 4,261
Network Centric Systems 3,447 2,946
Space and Airborne Systems 5,599 4,593
Technical Services 1,507 1,507
Aircraft 2,233 4,027
Other 161 220
$31,245 $26,684
Government and Defense businesses $28,851 $22,437
U.S. government backlog included
above $25,551 $19,359
Funded backlog $17,934 $17,786
Bookings
(In millions)
Three months ended
28-Mar-04 30-Mar-03
Government and Defense businesses $7,921 $5,044
Commercial businesses 584 336
$8,505 $5,380
New Aircraft Deliveries (Units)
Three Months Ended
28-Mar-04 30-Mar-03
Hawker 6 8
Premier I 3 3
Hawker 400XP 4 3
King Air 5 8
1900D Commuter 1 -
Pistons 8 14
T-6A 13 14
Total 40 50
New Aircraft Bookings (Units)
Three Months Ended
28-Mar-04 30-Mar-03
Hawker 7 7
Premier I 2 3
Hawker 400XP 2 2
King Air 17 6
1900D Commuter 1 -
Pistons 32 13
T-6A 7 4
Total 68 35
Attachment D
Raytheon Company
Balance Sheet Information
First Quarter 2004
(In millions)
28-Mar-04 31-Dec-03
Assets
Cash and cash equivalents $340 $661
Accounts receivable 446 485
Contracts in process 3,441 2,762
Inventories 2,003 1,998
Deferred federal and foreign income
taxes 524 466
Prepaid expenses and other current
assets 103 154
Assets from discontinued operations 55 59
Total current assets 6,912 6,585
Property, plant and equipment, net 2,681 2,711
Deferred federal and foreign income
taxes 244 337
Goodwill 11,478 11,479
Other assets, net 2,447 2,556
Total assets $23,762 $23,668
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $13 $15
Advance payments, less contracts in
process 1,188 1,038
Accounts payable 757 833
Accrued salaries and wages 711 767
Other accrued expenses 1,098 1,153
Liabilities from discontinued
operations 68 43
Total current liabilities 3,835 3,849
Accrued retiree benefits and other
long-term liabilities 3,237 3,281
Long-term debt 6,538 6,517
Subordinated notes payable 859 859
Stockholders' equity 9,293 9,162
Total liabilities and
stockholders' equity $23,762 $23,668
Attachment E
Raytheon Company
Cash Flow Information
First Quarter 2004
(In millions)
Cash flow information
Three Months Ended
28-Mar-04 30-Mar-03
Income from continuing operations $101 $111
Depreciation 85 76
Amortization 16 13
Working capital (604) (674)
Discontinued operations 9 (305)
Capital spending (60) (58)
Internal use software spending (25) (21)
Other 192 39
Subtotal - free cash flow (a) (286) (819)
Net activity in financing receivables 95 104
Acquisitions (70) (40)
Divestitures and sale of investments 4 -
Dividends (83) (83)
Issuance of common stock 4 17
Debt (repayments) issuances (3) 793
Space Imaging debt guarantee - (130)
Other 18 1
Total cash flow $(321) $(157)
Segment free cash flow information
Three Months Ended
28-Mar-04 30-Mar-03
Integrated Defense Systems $(129) $(13)
Intelligence and Information Systems (45) (87)
Missile Systems (41) (219)
Network Centric Systems (129) (173)
Space and Airborne Systems (115) (50)
Technical Services 16 6
Aircraft (20) 4
Other - 4
Discontinued operations 9 (305)
Corporate 168 14
$(286) $(819)
(a) See Attachment F for a description of free cash flow.
Attachment F
Raytheon Company
Reconciliation of Non-GAAP Financial Measures and Other Information
First Quarter 2004
(In millions)
Free cash flow
Three Months Ended
28-Mar-04 30-Mar-03
Operating cash flow $(201) $(740)
Less: Capital spending (60) (58)
Internal use software
spending (25) (21)
Free cash flow (286) (819)
Less: Discontinued operations 9 (305)
Free cash flow from
continuing operations $(295) $(514)
Note: Free cash flow represents a non-GAAP financial measure defined as
operating cash flow less capital spending and internal use
software spending. The Company's management uses non-GAAP
financial measures to evaluate the operating performance of its
business and as a component for determining incentive-based
compensation. In addition, the Company believes that free cash
flow is an important measure of performance used by some
investors, equity analysts and others to make informed investment
decisions. The definitions used here may differ from those used
by other companies.
Debt-to-capital ratio
28-Mar-04 31-Dec-03
Notes payable and current portion
of long-term debt $13 $15
Long-term debt 6,538 6,517
Subordinated notes payable 859 859
Total debt $7,410 $7,391
Notes payable and current portion
of long-term debt $13 $15
Long-term debt 6,538 6,517
Subordinated notes payable 859 859
Stockholders' equity 9,293 9,162
Total capital $16,703 $16,553
Debt-to-capital ratio 44.4% 44.7%
Media Contact:
James Fetig
781-522-5111
Investor Relations Contact:
Tim Oliver
781-522-5141
SOURCE: Raytheon Company
Web site: http://www.raytheon.com/