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Raytheon Reports Strong Fourth Quarter and Full-Year 2005 Results

* Sales of $6.2 billion, up 9 percent in quarter; $21.9 billion, up 8 percent for year * Free cash flow from continuing operations of $1.0 billion in quarter and $2.1 billion for year * Net debt of $3.3 billion; reduction of $1.3 billion for year -- lowes

WALTHAM, Mass., Feb. 2, 2006 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE: RTN) reported fourth quarter 2005 income from continuing operations of $282 million or $0.63 per diluted share compared to $246 million or $0.54 per diluted share in the fourth quarter 2004. Fourth quarter 2005 net income was $276 million or $0.61 per diluted share compared to $245 million or $0.54 per diluted share in the fourth quarter 2004.

"Raytheon had another good year," said William H. Swanson, Raytheon's Chairman and CEO. "We had strong results across the Company and ended the year with the lowest net debt in ten years. This once again demonstrates our continued commitment to our customers and shareholders."

Fourth quarter 2005 results included an after-tax $30 million gain ($45 million pretax) or $0.07 per diluted share from the sale of the Company's stake in its Indra ATM S.L., a Spanish joint venture. Fourth quarter 2005 results also included an after-tax $19 million impairment charge ($22 million pretax) or $0.04 per diluted share related to the Company's investment in Flight Options. Also, during the fourth quarter 2005, the Company recorded an after-tax $7 million charge ($10 million pretax) or $0.02 per diluted share from the early redemption of debt. Fourth quarter 2004 results included a net after-tax $13 million charge or $0.03 per diluted share related to a charge for the early redemption of debt partially offset by a benefit from the change in the tax law.

Net sales for the fourth quarter 2005 were $6.2 billion, up 9 percent from $5.7 billion in the fourth quarter 2004. Government and Defense sales for the quarter (after the elimination of intercompany sales) increased 5 percent to $4.9 billion from $4.7 billion in the fourth quarter 2004. Raytheon Aircraft Company (RAC) sales for the quarter increased 27 percent to $1,085 million from $853 million in the fourth quarter 2004.

Free cash flow from continuing operations for the fourth quarter 2005 was $1,033 million versus $760 million for the fourth quarter 2004. Free cash flow is defined by the Company as operating cash flow less capital spending and internal use software spending and constitutes a non-GAAP financial measure. See Attachment F "Non-GAAP Financial Measures" for a reconciliation of free cash flow to operating cash flow and a discussion of the Company's use of non-GAAP financial information.

During the fourth quarter 2005, the Company repurchased 1.2 million shares of common stock for $46 million as part of the Company's previously announced $700 million share repurchase program. The Company repurchased 11.2 million shares of common stock in 2005 for $436 million. Also during the quarter, the Company retired $196 million of debt, bringing the total year debt reduction to $678 million. Net debt was $3.3 billion at the end of 2005 compared with $4.6 billion at the end of 2004.

Full Year Financial Results

For the full year the Company reported income from continuing operations of $942 million or $2.08 per diluted share compared to $439 million or $0.99 per diluted share in 2004. The Company reported 2005 net income of $871 million or $1.92 per diluted share compared to $417 million or $0.94 per diluted share in 2004. Net income for 2005 included a $71 million after-tax loss in discontinued operations or $0.16 per diluted share, versus $63 million or $0.14 per diluted share in 2004. The 2004 results also included an after- tax charge of $222 million or $0.50 per diluted share for the settlement of a class action shareholder lawsuit.

Total 2005 net sales for the Company were $21.9 billion compared to $20.2 billion for 2004, an increase of 8 percent. Government and Defense sales for the year (after the elimination of intercompany sales) increased 6 percent to $18.2 billion from $17.2 billion in 2004. RAC sales for the year increased 18 percent to $2.9 billion from $2.4 billion in 2004.

Free cash flow from continuing operations was $2.1 billion in 2005 compared to $1.6 billion in 2004.

  Summary Financial Results   4th Quarter     %       Full Year       %
  (in millions, except per
  share data)                 2005    2004  Change  2005     2004   Change

  Net Sales                  $6,210  $5,704    9%  $21,894  $20,245    8%
  Total Operating Expenses    5,741   5,264         20,207   18,857
  Operating Income              469     440    7%    1,687    1,388   22%
  Non-operating Expenses         35     148            247      809
  Income from Cont. Ops.
   before Taxes                $434    $292   49%   $1,440     $579  149%
  Income from Continuing
   Operations                  $282    $246   15%     $942     $439  115%
  Net Income                   $276    $245   13%     $871     $417  109%

  Diluted EPS from
   Continuing Operations      $0.63   $0.54   17%    $2.08    $0.99  110%
  Diluted EPS                 $0.61   $0.54   13%    $1.92    $0.94  104%

  Free Cash Flow from Cont.
   Operations                $1,033    $760         $2,133   $1,648



  Bookings and Backlog


  Bookings                               4th Quarter        Full Year
  (in millions)                         2005     2004     2005     2004

  Bookings
  Government and Defense                $5,230   $4,200  $20,546  $21,867
  Commercial                             2,094    1,275    4,282    3,833
  Total Bookings                        $7,324   $5,475  $24,828  $25,700

  Backlog                               Period ending
  (in millions)                       12/31/05  12/31/04

  Backlog                              $34,419  $32,543
  Funded Backlog                       $17,580  $18,403

The Government and Defense businesses reported fourth quarter 2005 bookings of $5.2 billion with full-year 2005 bookings of $20.5 billion. The Government and Defense businesses ended 2005 with a backlog of $31.2 billion, an increase of $1.6 billion over year end 2004.

RAC's fourth quarter 2005 bookings were $1.8 billion compared to $1.1 billion in the fourth quarter 2004. During the quarter, NetJets Inc. placed an order with a value in excess of $1 billion for 50 new Hawker 4000 super- midsize business jets and a related maintenance program. Full-year 2005 bookings were $3.5 billion versus $3.1 billion for 2004.

Raytheon ended the year with a total backlog of $34.4 billion compared to $32.5 billion at the end of 2004.

  Outlook

  2006 Financial Outlook                 Prior *            Current


  Bookings                         $22.0B - $23.0B      $22.0B - $23.0B
  Net Sales                        $23.1B - $23.6B      $23.1B - $23.6B
  FAS/CAS Pension Expense               $362M                $360M
  Interest Expense, net             $250M - $260M        $245M - $255M
  Diluted Shares                         451M                 449M
  EPS from Cont. Ops.              $2.40 - $2.50        $2.45 - $2.55

  Net Debt                          $3.1B - $3.3B        $2.6B - $2.8B
  Operating Cash Flow               $1.7B - $1.9B        $1.7B - $1.9B

   * As of December 1, 2005

The Company has increased full-year 2006 guidance for earnings per share from continuing operations primarily as a result of a $16 million after-tax gain in 2006 ($25 million pretax) or $0.04 per diluted share from the sale of the Company's interest in Space Imaging. Charts containing additional information on the Company's 2006 guidance are available on the Company's website at http://www.raytheon.com/.

  Segment Results

  Integrated Defense Systems

                                   4th Quarter    %      Full Year      %
  (in millions, except margin
  percent)                         2005   2004  Change  2005    2004  Change

  Net Sales                       $1,042   $914   14%  $3,807  $3,456   10%
  Operating Income                  $154   $119   29%    $548    $417   31%
  Operating Margin                 14.8%  13.0%         14.4%   12.1%

Integrated Defense Systems (IDS) had fourth quarter 2005 net sales of $1,042 million, up 14 percent compared to $914 million in the fourth quarter 2004, primarily due to growth in international programs, DD(X), and the Cobra Judy program. IDS recorded $154 million of fourth quarter 2005 operating income compared to $119 million in the fourth quarter 2004. Operating income was higher primarily due to increased sales on international programs and program performance improvements.

During the quarter, IDS booked $379 million for ship integration and detail design for the U.S. Navy's DD(X) Destroyer. IDS also booked $308 million for Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System (JLENS) development for the U.S. Army.

  Intelligence and Information Systems

                                    4th Quarter   %      Full Year      %
  (in millions, except margin
  percent)                           2005  2004 Change  2005    2004  Change

  Net Sales                          $688  $630    9%  $2,509  $2,334    7%
  Operating Income                    $63   $53   19%    $229    $203   13%
  Operating Margin                   9.2%  8.4%          9.1%    8.7%

Intelligence and Information Systems (IIS) had fourth quarter 2005 net sales of $688 million, up 9 percent compared to $630 million in the fourth quarter 2004, primarily due to continued growth in classified programs. IIS recorded $63 million of operating income compared to $53 million in the fourth quarter 2004.

During the quarter, IIS booked $336 million on a number of classified contracts, bringing the total classified bookings for the year to over $1.5 billion.

  Missile Systems

                                  4th Quarter     %      Full Year      %
  (in millions, except margin
  percent)                        2005    2004  Change  2005    2004  Change

  Net Sales                      $1,122  $1,012   11%  $4,124  $3,844    7%
  Operating Income                 $118    $114    4%    $431    $436   -1%
  Operating Margin                10.5%   11.3%         10.5%   11.3%

Missile Systems (MS) had fourth quarter 2005 net sales of $1,122 million, up 11 percent compared to $1,012 million in the fourth quarter 2004, primarily due to a ramp up on Tactical Tomahawk and several developmental programs. MS recorded $118 million of operating income compared to $114 million in the fourth quarter 2004. Last year's fourth quarter operating income included cost recovery for previous years' restructuring actions.

During the quarter, MS booked $236 million for the production of Standard Missile-2 (SM-2) for foreign military sales. MS also booked $152 million for the production of 198 Evolved SeaSparrow Missiles (ESSM) for the U.S. Navy and six allied nations.

  Network Centric Systems

                                   4th Quarter    %      Full Year      %
  (in millions, except margin
  percent)                         2005   2004  Change  2005    2004  Change

  Net Sales                         $806   $824   -2%  $3,205  $3,050    5%
  Operating Income                   $89    $87    2%    $333    $269   24%
  Operating Margin                 11.0%  10.6%         10.4%    8.8%

Network Centric Systems (NCS) had fourth quarter 2005 net sales of $806 million compared to $824 million in the fourth quarter 2004. NCS recorded operating income of $89 million compared to $87 million in the fourth quarter 2004.

During the quarter, NCS booked $109 million to provide Command and Independent Viewer (CIV) Systems for the Bradley Program. NCS also booked $97 million for Firefinder locating radars for the U.S. Army, bringing the total Firefinder bookings for the year to $240 million.

  Space and Airborne Systems


                                    4th Quarter     %     Full Year      %
  (in millions, except margin
  percent)                          2005    2004  Change  2005   2004 Change

  Net Sales                        $1,145  $1,141   0%  $4,175  $4,068   3%
  Operating Income                   $162    $159   2%    $606    $568   7%
  Operating Margin                  14.1%   13.9%        14.5%   14.0%

Space and Airborne Systems (SAS) had fourth quarter 2005 net sales of $1,145 million compared to $1,141 million in the fourth quarter 2004. SAS recorded $162 million of operating income compared to $159 million in the fourth quarter 2004.

During the quarter, SAS booked $142 million for the production of F-15 radars for Singapore. SAS also booked $119 million for the production of Advanced Targeting Forward Looking Infrared (ATFLIR) pods and spares for the U.S. Navy.

  Technical Services

                                    4th Quarter   %      Full Year      %
  (in millions, except margin
  percent)                           2005  2004 Change  2005    2004  Change

  Net Sales                          $525  $570   -8%  $1,980  $1,987    0%
  Operating Income                    $39   $44  -11%    $146    $148   -1%
  Operating Margin                   7.4%  7.7%          7.4%    7.4%

Technical Services (TS) had fourth quarter 2005 net sales of $525 million compared to $570 million in the fourth quarter 2004. This decline is consistent with our projected reduction in sales due to the completion of several large programs. TS recorded operating income of $39 million in the fourth quarter of 2005 compared to $44 million in the fourth quarter 2004.

During the quarter, TS booked $86 million on the Live Training Program with the U.S. Army.

  Aircraft

                                   4th Quarter    %      Full Year      %
  (in millions, except margin
  percent)                          2005   2004 Change  2005    2004  Change

  Net Sales                        $1,085  $853   27%  $2,856  $2,421   18%
  Operating Income                    $73   $47   55%    $142     $63  125%
  Operating Margin                   6.7%  5.5%          5.0%    2.6%

Raytheon Aircraft Company (RAC) had fourth quarter 2005 net sales of $1,085 million, up 27 percent compared to $853 million in the fourth quarter 2004, primarily due to higher new commercial and special mission aircraft deliveries. RAC recorded operating income of $73 million in the quarter compared to $47 million in the fourth quarter 2004. Operating income was higher due to commercial and special mission volume and delivery mix, and continued improved operating performance.

During the quarter, RAC received an order from NetJets Inc. for 50 new Hawker 4000 super-midsize business jets. These aircraft will be delivered in the 2007 - 2015 timeframe and have an aggregate value totaling more than $1 billion including the related maintenance program. Also during the quarter, RAC received a $270 million contract modification from the U.S. government for the Lot 13 option exercise of JPATS T-6A.

Other

Net sales for the Other segment in the fourth quarter 2005 were $215 million compared to $183 million in the fourth quarter 2004. The segment recorded an operating loss of $51 million in the fourth quarter 2005 compared to an operating loss of $11 million in the comparable quarter in 2004. The fourth quarter 2005 included the impairment charge related to the Company's investment in Flight Options.

Discontinued Operations

During the quarter, the Company recorded an after-tax loss from discontinued operations of $6 million. In January 2006, the Company resolved the purchase price dispute related to the Company's $1.1 billion sale of its Aircraft Integration Systems business (AIS) in 2002 and recorded a $17 million after-tax charge in the fourth quarter 2005. The Company also recorded an $11 million after-tax benefit at its former engineers and constructors business primarily related to the receipt of insurance proceeds from the class action lawsuit settled earlier in 2005.

Raytheon Company (NYSE: RTN), with 2005 sales of $21.9 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 80,000 people worldwide.

Disclosure Regarding Forward-looking Statements

This release and the attachments contain forward-looking statements, including information regarding the Company's 2006 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, aircraft manufacturing 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 the general aviation, commuter and fractional ownership aircraft markets; accidents involving the Company's aircraft; 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. 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 Fourth Quarter 2005 Financial Results

Raytheon's financial results conference call will be Thursday, February 2, 2006 at 9 a.m. ET. Participants will be William H. Swanson, Chairman and CEO, Biggs C. Porter, vice president and corporate controller, and acting 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 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
  Fourth Quarter 2005
  (In millions except per share amounts)

                                    Three Months Ended   Twelve Months Ended

                                    31-Dec-05 31-Dec-04 31-Dec-05  31-Dec-04

  Net sales                           $6,210  $5,704    $21,894     $20,245

  Cost of sales                        5,177   4,739     18,230      16,981
  Administrative and selling
   expenses                              421     399      1,474       1,385
  Research and development expenses      143     126        503         491

  Total operating expenses             5,741   5,264     20,207      18,857

  Operating income                       469     440      1,687       1,388

  Interest expense                        75      92        312         418
  Interest income                        (14)    (12)       (52)        (45)
  Other (income) expense, net            (26)     68        (13)        436

  Non-operating expense, net              35     148        247         809

  Income from continuing operations
   before taxes                          434     292      1,440         579

  Federal and foreign income taxes       152      46        498         140

  Income from continuing operations      282     246        942         439

  Loss from discontinued
   operations, net of tax                 (6)     (1)       (71)        (63)

  Income before accounting change        276     245        871         376

  Cumulative effect of change in
   accounting principle, net of tax        -       -          -          41

  Net income                            $276    $245       $871        $417

  Earnings per share from
   continuing operations
      Basic                            $0.64   $0.55      $2.11       $1.00
      Diluted                          $0.63   $0.54      $2.08       $0.99

  Loss per share from discontinued
   operations
      Basic                           $(0.02)     $-     $(0.16)     $(0.14)
      Diluted                         $(0.02)     $-     $(0.16)     $(0.14)

  Earnings per share from
   cumulative effect of change in
   accounting principle
      Basic                               $-      $-         $-       $0.09
      Diluted                             $-      $-         $-       $0.09

  Earnings per share
      Basic                            $0.62   $0.54      $1.95       $0.95
      Diluted                          $0.61   $0.54      $1.92       $0.94

  Average shares outstanding
      Basic                            442.6   450.2      447.0       438.1
      Diluted                          449.0   456.4      453.3       442.2



  Attachment B

  Raytheon Company
  Segment Information
  Fourth Quarter 2005

  (In millions)

                                                           Operating Income
                                                             As a Percent
                      Net Sales       Operating Income         of Sales
                 Three Months Ended  Three Months Ended   Three Months Ended
                 31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04

  Integrated
   Defense
   Systems          $1,042     $914     $154    $119       14.8%      13.0%
  Intelligence and
   Information
   Systems             688      630       63      53        9.2%       8.4%
  Missile Systems    1,122    1,012      118     114       10.5%      11.3%
  Network Centric
   Systems             806      824       89      87       11.0%      10.6%
  Space and Airborne
   Systems           1,145    1,141      162     159       14.1%      13.9%
  Technical Services   525      570       39      44        7.4%       7.7%
  Aircraft           1,085      853       73      47        6.7%       5.5%
  Other                215      183      (51)    (11)     -23.7%      -6.0%
  FAS/CAS Pension
   Adjustment            -        -     (116)   (118)
  Corporate and
   Eliminations       (418)    (423)     (62)    (54)

  Total             $6,210   $5,704     $469    $440        7.6%       7.7%



                                                          Operating Income
                                                            As a Percent
                       Net Sales       Operating Income       of Sales
                 Twelve Months Ended Twelve Months Ended Twelve Months Ended
                 31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04

  Integrated
   Defense
   Systems          $3,807   $3,456     $548     $417      14.4%     12.1%
  Intelligence and
   Information
   Systems           2,509    2,334      229      203       9.1%      8.7%
  Missile Systems    4,124    3,844      431      436      10.5%     11.3%
  Network Centric
   Systems           3,205    3,050      333      269      10.4%      8.8%
  Space and Airborne
   Systems           4,175    4,068      606      568      14.5%     14.0%
  Technical Services 1,980    1,987      146      148       7.4%      7.4%
  Aircraft           2,856    2,421      142       63       5.0%      2.6%
  Other                781      675     (117)     (40)    -15.0%     -5.9%
  FAS/CAS Pension
   Adjustment            -        -     (465)    (474)
  Corporate and
   Eliminations     (1,543)  (1,590)    (166)    (202)

  Total            $21,894  $20,245   $1,687   $1,388       7.7%      6.9%



  Attachment C

  Raytheon Company
  Other Information
  Fourth Quarter 2005

                                                              Funded
                                          Backlog             Backlog
                                       (In millions)       (In millions)
                                   31-Dec-05 31-Dec-04  31-Dec-05  31-Dec-04

  Integrated Defense Systems        $8,010     $6,628     $3,009    $3,454
  Intelligence and Information
   Systems                           4,077      4,066        642       811
  Missile Systems                    8,040      8,341      4,443     4,517
  Network Centric Systems            4,307      3,587      2,839     2,623
  Space and Airborne Systems         5,220      5,216      2,851     3,127
  Technical Services                 1,594      1,773        916       939
  Aircraft                           2,891      2,638      2,600     2,638
  Other                                280        294        280       294

                                   $34,419    $32,543    $17,580   $18,403

  Government and Defense
   businesses                      $31,248    $29,611    $14,700   $15,471

  U.S. government backlog
   included  above                 $27,171    $25,525


                                      Bookings               Bookings
                                   (In millions)          (In millions)
                                 Three Months Ended     Twelve months ended
                               31-Dec-05  31-Dec-04   31-Dec-05    31-Dec-04

  Government and Defense
   businesses                   $5,230     $4,200     $20,546      $21,867
  Commercial businesses          2,094      1,275       4,282        3,833

                                $7,324     $5,475     $24,828      $25,700


                                     New Aircraft            New Aircraft
                                  Deliveries (Units)      Deliveries (Units)
                                  Three Months Ended     Twelve months ended
                                31-Dec-05   31-Dec-04   31-Dec-05  31-Dec-04

  Hawker 800XP                     26           17          58          50
  Premier I / IA                   19           14          30          37
  Hawker 400XP                     19           14          53          28
  King Air                         46           46         114         104
  1900D Commuter                    -            -           -           1
  Pistons                          53           35          99          93
  T-6A                             14           16          62          67
    Total                         177          142         416         380


                                     New Aircraft           New Aircraft
                                   Bookings (Units)       Bookings (Units)
                                 Three Months Ended     Twelve months ended
                                31-Dec-05  31-Dec-04    31-Dec-05  31-Dec-04

  Hawker 4000                      50            2          52           4
  Hawker 800XP                     12           17          43          79
  Premier I / IA                   17           13          34          34
  Hawker 400XP                     18           11          39          43
  King Air                         36           45         138         139
  1900D Commuter                    -            -           -           1
  Pistons                          12           35          70         157
  T-6A                             54           50          60          57
    Total                         199          173         436         514



  Attachment D

  Raytheon Company
  Preliminary Financial Information
  Fourth Quarter 2005

  (In millions)

  Balance sheets
                                                 31-Dec-05        31-Dec-04
  Assets
  Cash and cash equivalents                       $1,202             $556
  Accounts receivable, less allowance for
   doubtful accounts                                 425              478
  Contracts in process                             3,469            3,514
  Inventories                                      1,722            1,745
  Deferred federal and foreign income taxes          435              469
  Prepaid expenses and other current assets          314              343
  Assets from discontinued operations                  -               19
    Total current assets                           7,567            7,124

  Property, plant and equipment, net               2,675            2,738
  Deferred federal and foreign income taxes            -               71
  Goodwill                                        11,554           11,516
  Other assets, net                                2,585            2,704
    Total assets                                 $24,381          $24,153

  Liabilities and Stockholders' Equity
  Notes payable and current portion of
   long-term debt                                    $79             $516
  Subordinated notes payable                         408                -
  Advance payments and billings in excess of
   costs incurred                                  2,012            1,900
  Accounts payable                                   962              867
  Accrued salaries and wages                         987              934
  Other accrued expenses                           1,403            1,403
  Liabilities from discontinued operations            49               24
    Total current liabilities                      5,900            5,644

  Accrued retiree benefits and other
   long-term liabilities                           3,559            3,224
  Deferred federal and foreign income taxes          125                -
  Long-term debt                                   3,969            4,229
  Subordinated notes payable                           -              408
  Minority interest                                  119               97
  Stockholders' equity                            10,709           10,551
      Total liabilities and stockholders'
       equity                                    $24,381          $24,153



  Attachment E

  Raytheon Company
  Preliminary Cash Flow Information
  Fourth Quarter 2005

  (In millions)

  Cash flow information
                                      Three Months Ended Twelve Months Ended
                                     31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04

  Income from continuing operations      $282      $246     $942      $439
  Depreciation                             92        94      354       361
  Amortization                             25        19       90        73
  Working capital                         530       435      424       650
  Discontinued operations                  25       (11)     (31)      (43)
  Capital spending                       (155)     (154)    (338)     (363)
  Internal use software spending          (14)      (30)     (75)     (103)
  Net activity in financing
   receivables                             40        48      119       193
  Other                                   233       102      617       398
      Subtotal - free cash flow (a)     1,058       749    2,102     1,605

  Sale of short-term investments            -        74        -         -
  Acquisitions                            (26)      (42)    (125)     (112)
  Investment activity and divestitures     71        43       78        47
  Dividends                               (98)      (91)    (387)     (349)
  Issuance of common stock                  -         -        -       867
  Repurchase of common stock              (46)        -     (436)        -
  Debt repayments                        (585)   (1,253)    (678)   (2,254)
  Other                                     8        27       92        91
        Total cash flow                  $382     $(493)    $646     $(105)


  Segment free cash flow information
                                      Three Months Ended Twelve Months Ended
                                     31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04

  Integrated Defense Systems             $63      $126      $338      $399
  Intelligence and Information Systems   106        57       169       169
  Missile Systems                        (24)       65       274       285
  Network Centric Systems                154       167       371       234
  Space and Airborne Systems             247        80       267       237
  Technical Services                      42        38       114        58
  Aircraft                               155       101        73       234
  Other                                   10        45        52         8
  Discontinued operations                 25       (11)      (31)      (43)
  Corporate                              280        81       475        24
      Total free cash flow            $1,058      $749    $2,102    $1,605


  (a) See Attachment F for a description of free cash flow.

  Attachment F

  Raytheon Company
  Non-GAAP Financial Measures
  Fourth Quarter 2005



  Free cash flow is a "non-GAAP" financial measure under SEC regulations.
  The Company defines free cash flow as operating cash flow less capital
  spending and internal use software spending.  Our definition may differ
  from similarly titled measures used by others.  The Company uses free
  cash flow to facilitate management's internal comparisons to the
  Company's historical operating results and to competitors' operating
  results and as an element of management incentive compensation.  The
  Company believes disclosure of free cash flow performance provides
  investors greater transparency with respect to information used by
  management in its financial and operational decision making.  While this
  information may be useful in evaluating the Company, it should be
  considered supplemental to and not as a substitute for financial
  information prepared in accordance with generally accepted accounting
  principles.


  Free cash flow
                                  Three Months Ended    Twelve Months Ended
                                 31-Dec-05  31-Dec-04  31-Dec-05   31-Dec-04
  Operating cash flow             $1,227      $933      $2,515      $2,071
  Less:  Capital spending           (155)     (154)       (338)       (363)
         Internal use software
          spending                   (14)      (30)        (75)       (103)
         Free cash flow            1,058       749       2,102       1,605
  Plus:  Discontinued operations     (25)       11          31          43
         Free cash flow from
          continuing operations   $1,033      $760      $2,133      $1,648



  Media Contact:                      Investor Relations Contact:
  Steve Brecken                       Greg Smith
  781-522-5127                        781-522-5141

First Call Analyst:
FCMN Contact: brecken@raytheon.com

SOURCE: Raytheon Company

CONTACT: Media Contact: Steve Brecken, +1-781-522-5127, or Investor
Relations Contact: Greg Smith, +1-781-522-5141, both of Raytheon

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

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