WALTHAM, Mass., April 24, 2008 Raytheon Company
(NYSE: ) reported first quarter 2008 income from continuing operations of
$400 million or $0.93 per diluted share compared to $324 million or $0.71 per
diluted share in the first quarter 2007. First quarter 2008 income from
continuing operations was higher primarily due to increased volume, combined
with lower net interest and pension expense.
“With the strong performance in the first quarter, the Company is off to a
good start,” said William H. Swanson, Raytheon’s Chairman and CEO. “Our strong
bookings, record backlog and solid operating performance demonstrate the
Company is continuing to execute and is well positioned going forward.”
First quarter 2008 net income was $398 million or $0.92 per diluted share
compared to $346 million or $0.76 per diluted share in the first quarter 2007.
Net income for the first quarter 2008 included an after-tax loss of $2 million
or $0.01 per diluted share in discontinued operations compared to income of
$22 million or $0.05 per diluted share in the first quarter 2007 primarily due
to the results of Raytheon Aircraft Company, which was sold in the second
quarter 2007.
Net sales for the first quarter 2008 were $5.4 billion, up 11 percent from
$4.8 billion in the first quarter 2007.
Operating cash flow from continuing operations for the first quarter 2008
was a positive $67 million compared to an outflow of $353 million for the
first quarter 2007. First quarter 2007 included a $400 million discretionary
cash contribution made to the Company’s pension plans.
In the first quarter 2008 the Company repurchased 5.5 million shares of
common stock for $340 million, as part of the Company’s previously announced
share repurchase program. In addition, as announced in March 2008, the
Company’s Board of Directors voted to increase the Company’s annual dividend
by 10 percent from $1.02 to $1.12 per share.
Summary Financial Results 1st Quarter %
($ in millions, except per share data) 2008 2007 Change
Net Sales $5,354 $4,804 11%
Total Operating Expenses 4,746 4,283
Operating Income 608 521 17%
Non-operating Expenses 16 35
Income from Cont. Ops. before Taxes $592 $486 22%
Income from Continuing Operations $400 $324 23%
(Loss) income from Disc. Ops., Net of Tax (2) 22 NM
Net Income $398 $346 15%
Diluted EPS from Continuing Operations $0.93 $0.71 31%
Diluted EPS $0.92 $0.76 21%
Operating Cash Flow from Cont. Ops. $67 $(353)
Workdays in Fiscal Reporting Calendar 63 59
Bookings and Backlog
Bookings 1st Quarter
(in millions) 2008 2007
Total Bookings $6,516 $5,158
Backlog Period Ended
(in millions) 03/30/08 12/31/07
Backlog $37,697 $36,614
Funded Backlog $22,859 $20,518
The Company reported total bookings for the first quarter 2008 of $6.5
billion compared to $5.2 billion in the first quarter 2007. The Company ended
the first quarter 2008 with a record backlog of $37.7 billion compared to
$36.6 billion at the end of 2007 and $33.9 billion at the end of the first
quarter 2007.
Outlook
2008 Financial Outlook
Net Sales ($B) 22.4 - 22.9
FAS/CAS Pension Expense ($M) 150
Interest Expense, net ($M) 45 - 60
Diluted Shares (M) 427 - 429
EPS from Cont. Ops. $3.65 - $3.80
Operating Cash Flow from Cont. Ops. ($B) 2.0 - 2.2
ROIC (%) 9.6 - 10.1
The Company reaffirms full-year 2008 guidance. Charts containing
additional information on the Company’s 2008 guidance are available on the
Company’s website at www.raytheon.com . See attachment F for the Company’s
calculation and use of Return on Invested Capital (ROIC), a non-GAAP financial
measure.
Segment Results
Integrated Defense Systems
1st Quarter %
($ in millions) 2008 2007 Change
Net Sales $1,192 $1,092 9%
Operating Income $211 $199 6%
Operating Margin 17.7% 18.2%
Integrated Defense Systems (IDS) had first quarter 2008 net sales of
$1,192 million, up 9 percent compared to $1,092 million in the first quarter
2007, primarily due to growth on Missile Defense Agency and U.S. Army
programs. IDS recorded $211 million of operating income compared to $199
million in the first quarter 2007. The increase in operating income was
primarily due to higher volume and the sale of licensed software.
During the quarter, IDS booked an initial $331 million for the design,
development and support of the Patriot system for international customers,
including $246 million for South Korea and $85 million for Taiwan. IDS also
booked $133 million to provide engineering services support for a Patriot air
and missile defense program for the U.S. Army.
Intelligence and Information Systems
1st Quarter %
($ in millions) 2008 2007 Change
Net Sales $692 $588 18%
Operating Income $52 $55 -5%
Operating Margin 7.5% 9.4%
Intelligence and Information Systems (IIS) had first quarter 2008 net
sales of $692 million, up 18 percent compared to $588 million in the first
quarter 2007, primarily due to new programs, including U.K. e-Borders. IIS
recorded $52 million of operating income compared to $55 million in the first
quarter 2007. The decrease in operating income was primarily due to certain
acquisition costs and other investments in cyber operations and information
security capabilities, partially offset by higher volume.
During the quarter, IIS booked an additional $182 million on the U.K.
e-Borders contract, bringing the total inception-to-date bookings for this
program to $1.6 billion. IIS also booked $556 million on a number of
classified contracts, including $171 million on a major classified program.
Missile Systems
1st Quarter %
($ in millions) 2008 2007 Change
Net Sales $1,311 $1,140 15%
Operating Income $137 $120 14%
Operating Margin 10.5% 10.5%
Missile Systems (MS) had first quarter 2008 net sales of $1,311 million,
up 15 percent compared to $1,140 million in the first quarter 2007, primarily
due to higher volume on international and development programs. MS recorded
$137 million of operating income compared to $120 million in the first quarter
2007. The increase in operating income was due to higher volume.
During the quarter, MS booked $578 million for Standard Missile-3 for the
U.S. Navy and the Missile Defense Agency. MS also booked $293 million for the
production of Tactical Tomahawk cruise missiles and $127 million for the
production of AIM-9X Sidewinder short range air-to-air missiles for the U.S.
Navy. In addition, MS booked $123 million for the production of Tube-launched
Optically guided Wire controlled (TOW) missiles for international customers
and the U.S. Marine Corps.
Network Centric Systems
1st Quarter %
($ in millions) 2008 2007 Change
Net Sales $1,067 $929 15%
Operating Income $123 $117 5%
Operating Margin 11.5% 12.6%
Network Centric Systems (NCS) had first quarter 2008 net sales of $1,067
million, up 15 percent compared to $929 million in the first quarter 2007,
primarily due to increased volume on certain U.S. Army programs. NCS recorded
$123 million of operating income compared to $117 million in the first quarter
2007. The increase in operating income was primarily due to higher volume.
During the quarter, NCS booked $309 million to provide Horizontal
Technology Integration (HTI) forward-looking infrared kits and $100 million
for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S. Army.
NCS also booked $203 million for the production of Improved Target Acquisition
Systems (ITAS) for the U.S. Army and the U.S. Marine Corps.
Space and Airborne Systems
1st Quarter %
($ in millions) 2008 2007 Change
Net Sales $995 $964 3%
Operating Income $121 $129 -6%
Operating Margin 12.2% 13.4%
Space and Airborne Systems (SAS) had first quarter 2008 net sales of $995
million, up 3 percent compared to $964 million in the first quarter 2007,
primarily due to growth on airborne sensor programs. SAS recorded $121
million of operating income compared to $129 million in the first quarter
2007. The decrease in operating income was primarily due to a change in
program mix.
SAS booked $186 million on a number of classified contracts.
Technical Services
1st Quarter %
($ in millions) 2008 2007 Change
Net Sales $521 $463 13%
Operating Income $35 $23 52%
Operating Margin 6.7% 5.0%
Technical Services (TS) had first quarter 2008 net sales of $521 million,
up 13 percent compared to $463 million in the first quarter 2007, primarily
due to training, mission support, and depot support services programs. TS
recorded operating income of $35 million in the first quarter 2008 compared to
$23 million in the first quarter 2007. The increase in operating income was
primarily due to higher volume and profit adjustments taken on certain
programs in 2007.
During the quarter, TS booked $110 million for work on the Warfighter
Field Operations Customer Support (FOCUS) contract for the U.S. Army to
provide live, virtual and constructive training services.
Raytheon Company (NYSE: ), 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.
Disclosure Regarding Forward-looking Statements
This release and the attachments contain forward-looking statements,
including information regarding the Company’s 2008 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 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.
Conference Call on the First Quarter 2008 Financial Results
Raytheon’s financial results conference call will be held on Thursday,
April 24, 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) 800 – 8651. The
conference call will also be audiocast on the Internet at 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.
Media Contact: Investor Relations Contact:
Jon Kasle Greg Smith
781-522-5110 781-522-5141
Attachment A
Raytheon Company
Preliminary Statement of Operations Information
First Quarter 2008
(In millions, except per share amounts) Three Months Ended
30-Mar-08 25-Mar-07
Net sales $5,354 $4,804
Cost of sales 4,259 3,856
Administrative and selling expenses 380 330
Research and development expenses 107 97
Total operating expenses 4,746 4,283
Operating income 608 521
Interest expense 34 60
Interest income (23) (28)
Other expense, net 5 3
Non-operating expense, net 16 35
Income from continuing operations before taxes 592 486
Federal and foreign income taxes 192 162
Income from continuing operations 400 324
(Loss) income from discontinued
operations, net of tax (2) 22
Net income $398 $346
Earnings per share from continuing operations
Basic $0.96 $0.73
Diluted $0.93 $0.71
(Loss) earnings per share from
discontinued operations
Basic $(0.01) $0.05
Diluted $(0.01) $0.05
Earnings per share
Basic $0.95 $0.78
Diluted $0.92 $0.76
Average shares outstanding
Basic 418.2 441.0
Diluted 432.3 453.5
Attachment B
Raytheon Company
Preliminary Segment Information
First Quarter 2008
Operating Income
Net Sales Operating Income As a Percent of Sales
(In millions) Three Months Ended Three Months Ended Three Months Ended
30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07
Integrated
Defense
Systems $1,192 $1,092 $211 $199 17.7% 18.2%
Intelligence
and Information
Systems 692 588 52 55 7.5% 9.4%
Missile Systems 1,311 1,140 137 120 10.5% 10.5%
Network Centric
Systems 1,067 929 123 117 11.5% 12.6%
Space and Airborne
Systems 995 964 121 129 12.2% 13.4%
Technical Services 521 463 35 23 6.7% 5.0%
FAS/CAS Pension
Adjustment - - (33) (62)
Corporate and
Eliminations (424) (372) (38) (60)
Total $5,354 $4,804 $608 $521 11.4% 10.8%
Attachment C
Raytheon Company
Other Preliminary Information
First Quarter 2008
Funded
(In millions) Backlog Backlog
30-Mar-08 31-Dec-07 30-Mar-08 31-Dec-07
Integrated Defense
Systems $9,306 $9,296 $5,382 $4,781
Intelligence and
Information Systems 5,831 5,636 2,641 2,325
Missile Systems 9,661 9,379 5,674 5,218
Network Centric Systems 5,696 5,102 4,547 3,957
Space and Airborne
Systems 5,277 5,276 3,341 3,037
Technical Services 1,926 1,925 1,274 1,200
Total $37,697 $36,614 $22,859 $20,518
Bookings
Three Months Ended
30-Mar-08 25-Mar-07
Total Bookings $6,516 $5,158
Attachment D
Raytheon Company
Preliminary Balance Sheet Information
First Quarter 2008
(In millions)
30-Mar-08 31-Dec-07
Assets
Cash and cash equivalents $2,287 $2,655
Accounts receivable, net 128 126
Contracts in process 4,068 3,821
Inventories 385 386
Deferred taxes 436 432
Prepaid expenses and other current assets 193 196
Total current assets 7,497 7,616
Property, plant and equipment, net 2,035 2,058
Prepaid retiree benefits 631 617
Goodwill 11,632 11,627
Other assets, net 1,339 1,363
Total assets $23,134 $23,281
Liabilities and Stockholders' Equity
Advance payments and billings in
excess of costs incurred $1,842 $1,845
Accounts payable 1,044 1,141
Accrued employee compensation 563 902
Other accrued expenses 1,025 900
Total current liabilities 4,474 4,788
Accrued retiree benefits and other
long-term liabilities 3,038 3,016
Deferred taxes 483 451
Long-term debt 2,288 2,268
Minority interest 219 216
Stockholders' equity 12,632 12,542
Total liabilities and
stockholders' equity $23,134 $23,281
Attachment E
Raytheon Company
Preliminary Cash Flow Information
First Quarter 2008
(In millions) Three Months Ended
30-Mar-08 25-Mar-07
Net income $398 $346
Plus (less): Loss (income) from
discontinued operations, net of tax 2 (22)
Income from continuing operations 400 324
Depreciation 69 67
Amortization 23 19
Working capital (703) (653)
Discontinued operations (10) (63)
Net activity in financing receivables 20 21
Other 258 (131)
Net operating cash flow 57 (416)
Capital spending (43) (38)
Internal use software spending (17) (15)
Dividends (109) (107)
Repurchases of common stock (340) (275)
Debt repayments - 3
Discontinued operations - (28)
Other 84 76
Total cash flow $(368) $(800)
Attachment F
Raytheon Company
Preliminary Return on Invested Capital Non-GAAP Financial Measure
First 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 cumulative minimum pension liability/impact of 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) 2008 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 $1,655 $1,720
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*** $17,300 $17,100
ROIC 9.6% 10.1%
* Effective 2008 tax rate: 34.1% (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
