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Raytheon Reports Strong Third Quarter 2008 Results, Increases Full-Year Guidance and Announces New $2.0 Billion Share Repurchase Plan

WALTHAM, Mass., Oct. 23, 2008 /PRNewswire-FirstCall/ --

  Highlights

  -- Sales of $5.9 billion, up 12 percent
  -- Operating income of $680 million, up 19 percent
  -- Earnings per share (EPS) from continuing operations of $1.01, up
     17 percent
  -- Strong bookings of $5.8 billion; backlog of $37.0 billion
  -- Credit rating upgraded to A- by Standard & Poor's and Fitch

Raytheon Company (NYSE: RTN) reported third quarter 2008 income from continuing operations of $427 million or $1.01 per diluted share compared to $380 million or $0.86 per diluted share in the third quarter 2007. Third quarter 2008 income from continuing operations was higher primarily due to operational improvements and lower pension expense.

"We delivered strong results during the quarter," said William H. Swanson, Raytheon's Chairman and CEO. "With our innovative technologies, breadth of programs, global customers and strong balance sheet, we continue to be well positioned for growth."

Third quarter 2008 net income was $427 million or $1.01 per diluted share compared to $299 million or $0.68 per diluted share in the third quarter 2007. Net income for the third quarter 2007 included an $81 million loss in discontinued operations or $0.18 per diluted share primarily related to Flight Options, which was sold in the fourth quarter 2007.

Net sales for the third quarter 2008 were $5.9 billion, up 12 percent from $5.2 billion in the third quarter 2007, with growth across all of the Company's businesses.

Operating cash flow from continuing operations for the third quarter 2008 was $758 million compared to $691 million for the third quarter 2007.

In the third quarter 2008 the Company repurchased 6.0 million shares of common stock for $340 million, as part of the Company's previously announced share repurchase program. The Company has repurchased 16.7 million shares of common stock year-to-date for $1.0 billion. Also during the quarter, both Standard & Poor's and Fitch rating services upgraded the Company's senior unsecured credit rating from BBB+ to A-.

The Board of Directors, on October 22, 2008, authorized the repurchase of an additional $2.0 billion of the Company's outstanding common stock. Share repurchases will take place from time to time at management's discretion depending on market conditions.

  Summary Financial Results

  ($ in millions,
  except per share       3rd Quarter       %       Nine Months        %
  data)                  2008    2007   Change    2008     2007    Change

  Net Sales             $5,864  $5,219      12%  $17,088  $15,301      12%
  Total Operating
   Expenses              5,184   4,647            15,138   13,619
  Operating Income         680     572      19%    1,950    1,682      16%
  Non-operating
   Expenses                 31       8                62       96
  Income from Cont.
   Ops. before Taxes      $649    $564      15%   $1,888   $1,586      19%
  Income from
   Continuing
   Operations             $427    $380      12%   $1,253   $1,059      18%
  Inc. (Loss) from
   Disc. Ops., Net of
   Tax*                    -       (81)     NM        (2)     921      NM
  Net Income              $427    $299      NM    $1,251   $1,980      NM

  Diluted EPS from
   Continuing Ops.       $1.01   $0.86      17%    $2.93    $2.36      24%
  Diluted EPS            $1.01   $0.68      NM     $2.93    $4.42      NM

  Operating Cash Flow
   from Cont. Ops.**      $758    $691            $1,592     $308
  Workdays in Fiscal
   Reporting Calendar       63      63               190      186

  *  Includes after-tax impairment charges of $69 million in the Flight
     Options (FO) business in Q3 '07 and an after-tax net gain of
     $986 million on the sale of Raytheon Aircraft Company (RAC) in Q2 '07.
  ** Includes cash tax payments of $157 million in Q3 '07 and $473 million
     in Q3 YTD '07 related to the gain on the RAC sale.
  NM - Not meaningful for comparison purposes due to impairment charges in
  FO in Q3 '07 and the gain on sale of RAC in Q2 '07.



  Bookings and Backlog


  Bookings                            3rd Quarter            Nine Months
  (in millions)                      2008     2007         2008       2007

  Total Bookings                    $5,766   $6,327      $18,290    $16,317

  Backlog                           Period Ending
  (in millions)                   09/28/08 12/31/07

  Backlog                          $36,985  $36,614
  Funded Backlog                   $21,145  $20,518

The Company reported total bookings for the third quarter 2008 of $5.8 billion compared to $6.3 billion in the third quarter 2007. The Company ended the third quarter 2008 with a backlog of $37.0 billion compared to $36.6 billion at the end of 2007 and $33.9 billion at the end of the third quarter 2007.

  Outlook

  2008 Financial Outlook                       Current         Prior*

  Net Sales ($B)                             22.9 - 23.2    22.6 - 23.1
  FAS/CAS Pension Inc./(Exp.) ($M)              (125)          (150)
  Interest Inc./(Exp.), net ($M)             (50) - (55)    (40) - (55)
  Diluted Shares (M)                          426 - 428      426 - 428
  EPS from Cont. Ops.                       $3.95 - $4.00  $3.80 - $3.95
  Operating Cash Flow from Cont. Ops. ($B)    2.2 - 2.4      2.2 - 2.4
  ROIC (%)                                   10.3 - 10.5     9.9 - 10.4

  * As of July 24, 2008

The Company has increased full-year 2008 guidance for net sales, earnings per share from continuing operations and Return on Invested Capital (ROIC), and updated FAS/CAS pension expense and net interest expense. See attachment F for the Company's calculation and use of ROIC, a non-GAAP financial measure.

  Outlook (Continued)


  The Company has also provided its initial financial outlook for 2009.


  2009 Financial Outlook
                                                 2008          2009
  Net Sales ($B)                             22.9 - 23.2    24.3 - 24.8
  FAS/CAS Pension Inc./(Exp.) ($M)              (125)            77
  EPS from Cont. Ops.                       $3.95 - $4.00  $4.45 - $4.60
  Operating Cash Flow from Cont. Ops. ($B)    2.2 - 2.4      2.2 - 2.4

Charts containing additional information on the Company's 2008 and 2009 guidance are available on the Company's website at http://www.raytheon.com/. Additional information regarding the Company's 2009 guidance will be provided on the fourth quarter earnings conference call scheduled for January 29, 2009.

  Segment Results

  Integrated Defense Systems
                                  3rd Quarter     %     Nine Months    %
  ($ in millions)                2008    2007  Change  2008    2007  Change

  Net Sales                     $1,276  $1,147   11%  $3,725  $3,405   9%
  Operating Income                $206    $206    0%    $626    $617   1%
  Operating Margin               16.1%   18.0%         16.8%   18.1%

Integrated Defense Systems (IDS) had third quarter 2008 net sales of $1,276 million, up 11 percent compared to $1,147 million in the third quarter 2007, primarily due to growth on U.S. Army programs and a U.S. Navy program. IDS recorded $206 million of operating income in both the third quarter 2008 and the third quarter 2007.

IDS' bookings during the quarter included $127 million on several contracts for the U.S. Army.

  Intelligence and Information Systems


                                  3rd Quarter   %     Nine Months     %
  ($ in millions)                  2008  2007 Change  2008    2007  Change

  Net Sales                        $801  $680   18%  $2,322  $1,934   20%
  Operating Income                  $67   $64    5%    $186    $182    2%
  Operating Margin                 8.4%  9.4%          8.0%    9.4%

Intelligence and Information Systems (IIS) had third quarter 2008 net sales of $801 million, up 18 percent compared to $680 million in the third quarter 2007, primarily due to the U.K. e-Borders program. IIS recorded $67 million of operating income compared to $64 million in the third quarter 2007. The increase in operating income was primarily due to higher volume, partially offset by certain acquisition costs and other investments in cyber operations and information security capabilities.

During the quarter, IIS booked $119 million on the Consolidated Field Services (CFS) contract to provide support to the U.S. Air Force. IIS also booked $294 million on a number of classified contracts.

  Missile Systems

                                 3rd Quarter     %    Nine Months     %
  ($ in millions)                2008    2007  Change  2008   2007  Change

  Net Sales                     $1,351  $1,247   8%  $4,017  $3,631   11%
  Operating Income                $145    $139   4%    $438    $393   11%
  Operating Margin               10.7%   11.1%        10.9%   10.8%

Missile Systems (MS) had third quarter 2008 net sales of $1,351 million, up 8 percent compared to $1,247 million in the third quarter 2007, primarily due to higher volume on the Advanced Medium-Range Air-to-Air Missile (AMRAAM) and Phalanx programs. MS recorded $145 million of operating income compared to $139 million in the third quarter 2007. The increase in operating income was primarily due to higher volume.

During the quarter, MS booked $200 million for the production of Phalanx for the U.S. Navy, $125 million for the competitive development of the U.S. Army-led Joint Air to Ground Missile (JAGM) program and $114 million for the production of the Rolling Airframe Missile (RAM) for an international customer.

  Network Centric Systems

                                3rd Quarter     %     Nine Months     %
  ($ in millions)               2008    2007  Change  2008    2007  Change

  Net Sales                    $1,145  $1,036   11%  $3,385  $3,017   12%
  Operating Income               $143    $123   16%    $411    $379    8%
  Operating Margin              12.5%   11.9%         12.1%   12.6%

Network Centric Systems (NCS) had third quarter 2008 net sales of $1,145 million, up 11 percent compared to $1,036 million in the third quarter 2007, primarily due to increased volume on certain U.S. Army programs. NCS recorded $143 million of operating income compared to $123 million in the third quarter 2007. The increase in operating income was primarily due to higher volume.

During the quarter, NCS booked $233 million for the design and development phase of the Joint Precision Approach and Landing System (JPALS) for the U.S. Navy.

  Space and Airborne Systems

                                  3rd Quarter     %     Nine Months     %
  ($ in millions)                2008    2007  Change  2008    2007  Change

  Net Sales                     $1,092  $1,016    7%  $3,183  $3,045   5%
  Operating Income                $147    $121   21%    $412    $383   8%
  Operating Margin               13.5%   11.9%         12.9%   12.6%

Space and Airborne Systems (SAS) had third quarter 2008 net sales of $1,092 million, up 7 percent compared to $1,016 million in the third quarter 2007, primarily due to increased volume on certain domestic sensor programs. SAS recorded $147 million of operating income compared to $121 million in the third quarter 2007. The increase in operating income was primarily due to higher volume and improved program performance.

  SAS booked $434 million on a number of classified contracts.



  Technical Services

                                  3rd Quarter   %     Nine Months     %
  ($ in millions)                  2008  2007 Change  2008    2007  Change

  Net Sales                        $689  $554   24%  $1,857  $1,531   21%
  Operating Income                  $45   $37   22%    $125     $92   36%
  Operating Margin                 6.5%  6.7%          6.7%    6.0%

Technical Services (TS) had third quarter 2008 net sales of $689 million, up 24 percent compared to $554 million in the third quarter 2007, primarily due to growth in training programs. TS recorded operating income of $45 million in the third quarter 2008 compared to $37 million in the third quarter 2007. The increase in operating income was primarily due to higher volume.

During the quarter, TS booked $437 million for the Air Traffic Control Optimum Training Solution (ATCOTS) contract for the Federal Aviation Administration (FAA). TS also booked an additional $409 million for work on the Warfighter Field Operations Customer Support (FOCUS) contract for the U.S. Army, bringing the year-to-date bookings on the program to $827 million.

Raytheon Company (NYSE: RTN), with 2007 sales of $21.3 billion, is a technology leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 86 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 72,000 people worldwide.

Conference Call on the Third Quarter 2008 Financial Results

Raytheon's financial results conference call will be held on Thursday, October 23, 2008 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) 770 - 7051. 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.

Disclosure Regarding Forward-looking Statements

This release and the attachments contain forward-looking statements, including information regarding the Company's 2008 and 2009 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 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 impact of the current downturn in the financial markets; 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
  Third Quarter 2008

  (In millions, except per share amounts)


                                 Three Months Ended     Nine Months Ended
                                28-Sep-08  23-Sep-07  28-Sep-08  23-Sep-07

  Net sales                        $5,864     $5,219    $17,088    $15,301
  Operating expenses
    Cost of sales                   4,674      4,150     13,603     12,200
    Administrative and selling
     expenses                         380        355      1,156      1,042
    Research and development
     expenses                         130        142        379        377

  Total operating expenses          5,184      4,647     15,138     13,619

  Operating income                    680        572      1,950      1,682

    Interest expense                   29         41         97        155
    Interest income                   (16)       (42)       (56)      (127)
    Other expense, net                 18          9         21         68

  Non-operating expense, net           31          8         62         96

  Income from continuing operations
   before taxes                       649        564      1,888      1,586

  Federal and foreign income taxes    222        184        635        527

  Income from continuing operations   427        380      1,253      1,059

  Operating income (loss) from
   discontinued operations, net of
   tax                                  -        (81)        (2)       (65)
  Gain on sale of discontinued
   operation, net of tax                -          -          -        986

  Income (loss) from discontinued
   operations, net of tax               -        (81)        (2)       921

  Net income                         $427       $299     $1,251     $1,980

  Earnings per share from continuing
   operations
    Basic                           $1.04      $0.88      $3.03      $2.43
    Diluted                         $1.01      $0.86      $2.93      $2.36

  Earnings (loss) per share from
   discontinued operations
    Basic                              $-     $(0.19)    $(0.01)     $2.11
    Diluted                            $-     $(0.18)    $(0.01)     $2.06

  Earnings per share
    Basic                           $1.04      $0.69      $3.02      $4.54
    Diluted                         $1.01      $0.68      $2.93      $4.42

  Average shares outstanding
    Basic                           409.9      431.2      413.9      436.3
    Diluted                         421.6      443.0      427.2      448.2



  Attachment B

  Raytheon Company
  Preliminary Segment Information
  Third Quarter 2008



                                                          Operating Income
                                                               As a
                        Net Sales      Operating Income    Percent of Sales
  (In millions,     Three Months Ended Three Months Ended Three Months Ended
   except              28-Sep-  23-Sep-  28-Sep-  23-Sep-  28-Sep-  23-Sep-
   percentages)           08       07       08       07       08       07
  Integrated Defense
   Systems             $1,276   $1,147    $206     $206     16.1%    18.0%
  Intelligence and
   Information
   Systems                801      680      67       64      8.4%     9.4%
  Missile Systems       1,351    1,247     145      139     10.7%    11.1%
  Network Centric
   Systems              1,145    1,036     143      123     12.5%    11.9%
  Space and Airborne
   Systems              1,092    1,016     147      121     13.5%    11.9%
  Technical Services      689      554      45       37      6.5%     6.7%
  FAS/CAS Pension
   Adjustment               -        -     (26)     (67)
  Corporate and
   Eliminations          (490)    (461)    (47)     (51)

  Total                $5,864   $5,219    $680     $572     11.6%    11.0%




                                                          Operating Income
                                                               As a
                         Net Sales      Operating Income  Percent of Sales
                    Nine Months Ended  Nine Months Ended Nine Months Ended
                      28-Sep-  23-Sep-  28-Sep-  23-Sep-  28-Sep-  23-Sep-
                        08       07        08       07       08       07
  Integrated Defense
   Systems             $3,725   $3,405    $626     $617     16.8%   18.1%
  Intelligence and
   Information Systems  2,322    1,934     186      182      8.0%    9.4%
  Missile Systems       4,017    3,631     438      393     10.9%   10.8%
  Network Centric
   Systems              3,385    3,017     411      379     12.1%   12.6%
  Space and Airborne
   Systems              3,183    3,045     412      383     12.9%   12.6%
  Technical Services    1,857    1,531     125       92      6.7%    6.0%
  FAS/CAS Pension
   Adjustment               -        -     (93)    (192)
  Corporate and
   Eliminations        (1,401)  (1,262)   (155)    (172)

  Total               $17,088  $15,301  $1,950   $1,682     11.4%   11.0%



  Attachment C

  Raytheon Company
  Other Preliminary Information
  Third Quarter 2008


  (In millions)                        Funded Backlog      Total Backlog
                                  28-Sep-08  31-Dec-07 28-Sep-08  31-Dec-07

  Integrated Defense Systems        $4,334     $4,781    $7,943     $9,296
  Intelligence and Information
   Systems                           2,199      2,325     5,518      5,636
  Missile Systems                    5,514      5,218     9,949      9,379
  Network Centric Systems            4,045      3,957     5,498      5,102
  Space and Airborne Systems         3,164      3,037     5,246      5,276
  Technical Services                 1,889      1,200     2,831      1,925

  Total                            $21,145    $20,518   $36,985    $36,614



                                          Bookings
                                     Three Months Ended
                                    28-Sep-08  23-Sep-07

  Total Bookings                      $5,766     $6,327



  Attachment D

  Raytheon Company
  Preliminary Balance Sheet Information
  Third Quarter 2008

  (In millions)
                                                28-Sep-08      31-Dec-07
  Assets
    Cash and cash equivalents                      $2,761         $2,655
    Accounts receivable, net                          120            126
    Contracts in process                            4,366          3,821
    Inventories                                       356            386
    Deferred taxes                                    452            432
    Prepaid expenses and other current assets         113            196
      Total current assets                          8,168          7,616

  Property, plant and equipment, net                1,990          2,058
  Prepaid retiree benefits                            668            617
  Goodwill                                         11,667         11,627
  Other assets, net                                 1,273          1,363
      Total assets                                $23,766        $23,281

  Liabilities and Stockholders' Equity
    Advance payments and billings in excess
     of costs incurred                             $1,850         $1,845
    Accounts payable                                1,196          1,141
    Accrued employee compensation                     838            902
    Other accrued expenses                          1,175            900
      Total current liabilities                     5,059          4,788

  Accrued retiree benefits and other
   long-term liabilities                            2,959          3,016
  Deferred taxes                                      515            451
  Long-term debt                                    2,273          2,268
  Minority interest                                   253            216
  Stockholders' equity
  Common stock                                          4              4
  Additional paid-in capital                       10,838         10,544
  Accumulated other comprehensive loss             (1,900)        (1,956)
  Treasury stock, at cost                          (3,571)        (2,502)
  Retained earnings                                 7,336          6,452
      Total stockholders' equity                   12,707         12,542
        Total liabilities and stockholders'
         equity                                   $23,766        $23,281



  Attachment E

  Raytheon Company
  Preliminary Cash Flow Information
  Third Quarter 2008

  (In millions)                   Three Months Ended   Nine Months Ended
                                  28-Sep-08 23-Sep-07 28-Sep-08  23-Sep-07

  Net income                         $427      $299     $1,251     $1,980
  (Income) loss from discontinued
   operations, net of tax               -        81          2       (921)
  Income from continuing operations   427       380      1,253      1,059

  Depreciation                         75        74        217        214
  Amortization                         24        21         71         61
  Working capital (excluding
   pension and taxes)*                  3       163       (382)      (529)
  Discontinued operations              (5)       40        (21)       (43)
  Net activity in financing
   receivables                         21        15         46         71
  Other                               208        38        387       (568)
    Net operating cash flow           753       731      1,571        265

  Capital spending                    (68)      (65)      (167)      (160)
  Internal use software spending      (28)      (17)       (58)       (51)
  Acquisitions                        (20)        -        (54)         -
  Investment activity and
   divestitures                         -         -          9      3,117
  Dividends                          (117)     (111)      (344)      (331)
  Repurchases of common stock        (340)     (500)    (1,020)    (1,301)
  Debt repayments                       -      (568)         -     (1,606)
  Discontinued operations               -        (1)         -        (29)
  Other                                27        95        169        245
      Total cash flow                $207     $(436)      $106       $149


  * 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
  Preliminary Return on Invested Capital Non-GAAP Financial Measure
  Third Quarter 2008



  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 impact of Statement of Financial Accounting Standards No. 158,
  Employers' Accounting for Defined Benefit Pension and Other Postretirement
  Plans (SFAS No. 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

                                           2008 Current       2008 Prior
  (In millions, except percentages)          Guidance          Guidance
                                         Low end High end  Low end High end
                                        of range of range of range of range
  Income from continuing operations
  Net interest expense, after-tax*      Combined Combined Combined Combined
  Lease expense, after-tax*
  Return                                  $1,780   $1,800   $1,715   $1,780

  Net debt **
  Equity less investment in discontinued
   operations
  Lease expense x 8, plus financial
   guarantees                           Combined Combined Combined Combined
  SFAS No. 158 impact

  Invested capital from continuing
   operations***                         $17,300  $17,100  $17,300  $17,100

  ROIC                                     10.3%    10.5%     9.9%    10.4%

  *   Effective 2008 tax rate: 33.5% (2008 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

SOURCE: Raytheon Company

CONTACT: Media, Jon Kasle, +1-781-522-5110, or Investor Relations, Marc
Kaplan, +1-781-522-5141, both of Raytheon Company

Web site: http://www.raytheon.com/

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