Highlights
* Solid bookings of $5.3 billion; record backlog of $33.9 billion
* Sales of $4.9 billion, up 6 percent
* Operating income from continuing operations of $510 million, up 18
percent
* Earnings per share (EPS) from continuing operations of $0.69, up 13
percent
WALTHAM, Mass., April 25, 2007 /PRNewswire-FirstCall/ -- Raytheon
Company (NYSE: RTN) reported first quarter 2007 income from continuing
operations of $314 million or $0.69 per diluted share compared to $272
million or $0.61 per diluted share in the first quarter 2006. First quarter
2007 income from continuing operations was higher primarily due to improved
operating results at Integrated Defense Systems (IDS), Missile Systems
(MS), and Network Centric Systems (NCS).
"Our first quarter was another good quarter for the Company and a
strong start to the year," said William H. Swanson, Raytheon's Chairman and
CEO.
First quarter 2007 net income was $346 million or $0.76 per diluted
share compared to $287 million or $0.64 per diluted share in the first
quarter 2006. Net income for the first quarter 2007 included $32 million of
income from discontinued operations or $0.07 per diluted share, primarily
due to the results of Raytheon Aircraft Company (RAC), versus $15 million
of income from discontinued operations or $0.03 per diluted share in the
first quarter 2006. As previously announced, after the first quarter close,
Raytheon completed the sale of RAC to Hawker Beechcraft Inc. for $3.3
billion, with after-tax net proceeds of approximately $2.5 billion. The
Company expects to record a net after-tax gain of approximately $1 billion
in the second quarter.
Net sales for the first quarter 2007 were $4.9 billion, up 6 percent
from $4.7 billion in the first quarter 2006.
Operating cash flow from continuing operations for the first quarter
2007 was an outflow of $379 million versus an outflow of $48 million for
the first quarter 2006. The decrease in operating cash flow was primarily
due to a $400 million discretionary cash contribution made to the Company's
pension plans in the first quarter 2007 versus a $200 million discretionary
cash contribution made in the first quarter 2006.
During the first quarter 2007, the Company repurchased 5.1 million
shares for $275 million as part of the Company's previously announced share
repurchase program. In addition, as announced in March 2007, the Company's
Board of Directors authorized a 6 percent increase to the Company's annual
dividend, from $0.96 to $1.02 per share.
Net debt was $2.3 billion at the end of the first quarter 2007 compared
with $1.5 billion at year-end 2006. Net debt is defined as total debt less
cash and cash equivalents.
After the completion of the RAC sale in the second quarter, the Company
initiated the redemption of approximately $1 billion of debt maturing from
2008 - 2010, which is expected to be completed on April 27, 2007. The
Company expects to record a charge in the second quarter of approximately
$40 million after-tax ($60 million pretax) primarily associated with the
make-whole provision of this early debt retirement.
Summary Financial Results 1st Quarter %
($ in millions, except per share data) 2007 2006 Change
Net Sales $4,928 $4,660 6%
Total Operating Expenses 4,418 4,227
Operating Income 510 433 18%
Non-operating Expenses 35 22
Income from Cont. Ops. before Taxes $475 $411 16%
Income from Continuing Operations $314 $272 15%
Net Income $346 $287 21%
Diluted EPS from Continuing Operations $0.69 $0.61 13%
Diluted EPS $0.76 $0.64 19%
Operating Cash Flow from Cont. Ops. $(379) $(48)
Bookings and Backlog
Bookings 1st Quarter
(in millions) 2007 2006
Total Bookings $5,282 $4,967
Backlog Period ending
(in millions) 03/25/07 12/31/06
Backlog $33,909 $33,838
Funded Backlog $18,592 $18,186
The Company reported total bookings for the first quarter 2007 of $5.3
billion compared to $5.0 billion in the first quarter 2006. The Company
ended the first quarter 2007 with a record backlog of $33.9 billion
compared to $31.8 billion at the end of the first quarter 2006 and $33.8
billion at the end of 2006.
Outlook
2007 Financial Outlook
Bookings ($B) 21.0 - 22.0
Net Sales ($B) 21.4 - 21.9
FAS/CAS Pension Expense ($M) 270
Interest Expense, net ($M) 65 - 80
Diluted Shares (M) 446 - 448
EPS from Cont. Ops. ($) 2.85 - 3.00
Operating Cash Flow from Cont. Ops. ($B) 1.5 - 1.7
ROIC (%) 8.2 - 8.7
The Company reaffirms the full-year 2007 outlook as detailed above.
Charts containing additional information on the Company's 2007
performance and guidance are available on the Company's website at
http://www.raytheon.com. See attachment F for information on the Company's
calculation and use of ROIC, a non-GAAP financial measure.
Segment Results
Integrated Defense Systems
1st Quarter %
($ in millions) 2007 2006 Change
Net Sales $1,092 $963 13%
Operating Income $199 $158 26%
Operating Margin 18.2% 16.4%
Integrated Defense Systems (IDS) had first quarter 2007 net sales of
$1,092 million, up 13 percent compared to $963 million in the first quarter
2006, primarily due to growth on Missile Defense Agency, U.S. Navy and U.S.
Army programs, as well as on international programs. IDS recorded $199
million of operating income compared to $158 million in the first quarter
2006. The increase in operating income was primarily due to higher volume
and improved performance on several domestic and international programs.
During the quarter, IDS booked $229 million for additional development
work, including ship integration and detail design for the U.S. Navy's
Zumwalt Class program. IDS also booked $148 million for the manufacture and
integration support of a Terminal High Altitude Area Defense (THAAD) radar
for the Missile Defense Agency and $144 million to provide engineering
services support to the Patriot air and missile defense program for the
U.S. Army.
Intelligence and Information Systems
1st Quarter %
($ in millions) 2007 2006 Change
Net Sales $588 $611 -4%
Operating Income $55 $55 NM
Operating Margin 9.4% 9.0%
Intelligence and Information Systems (IIS) had first quarter 2007 net
sales of $588 million compared to $611 million in the first quarter 2006, a
decrease primarily due to reprioritization and procurement delays on
certain classified programs, as previously disclosed. IIS recorded $55
million of operating income in the first quarter 2007 and the first quarter
2006.
During the quarter, IIS booked $286 million on a number of classified
contracts.
Missile Systems
1st Quarter %
($ in millions) 2007 2006 Change
Net Sales $1,140 $989 15%
Operating Income $120 $110 9%
Operating Margin 10.5% 11.1%
Missile Systems (MS) had first quarter 2007 net sales of $1,140
million, up 15 percent compared to $989 million in the first quarter 2006,
primarily due to higher volume on Standard Missile and Phalanx. MS recorded
$120 million of operating income compared to $110 million in the first
quarter 2006.
During the quarter, MS booked $255 million for the production of Block
IV Tactical Tomahawk cruise missiles for the U.S. Navy. MS also booked $101
million for the production of the Joint Standoff Weapons (JSOW) for the
U.S. Air Force and Navy.
Network Centric Systems
1st Quarter %
($ in millions) 2007 2006 Change
Net Sales $929 $791 17%
Operating Income $117 $84 39%
Operating Margin 12.6% 10.6%
Network Centric Systems (NCS) had first quarter 2007 net sales of $929
million, up 17 percent compared to $791 million in the first quarter 2006,
primarily due to growth on U.S. Army programs. NCS recorded $117 million of
operating income compared to $84 million in the first quarter 2006. The
increase in operating income was primarily due to higher volume and
improved program performance.
During the quarter, NCS booked $122 million to provide support for the
Firefinder locating radar program and $92 million for the production of
Commander's Independent Viewers (CIVs) for the U.S. Army.
Space and Airborne Systems
1st Quarter %
($ in millions) 2007 2006 Change
Net Sales $964 $1,018 -5%
Operating Income $129 $145 -11%
Operating Margin 13.4% 14.2%
Space and Airborne Systems (SAS) had first quarter 2007 net sales of
$964 million, down 5 percent compared to $1,018 million in the first
quarter 2006, primarily due to the planned transition from development to
production on several major programs. SAS recorded $129 million of
operating income compared to $145 million in the first quarter 2006.
Operating income was lower primarily due to favorable program profit and
cost adjustments recorded from certain production programs in the first
quarter 2006.
During the quarter, SAS booked $96 million on a number of classified
contracts.
Technical Services
1st Quarter %
($ in millions) 2007 2006 Change
Net Sales $426 $450 -5%
Operating Income $21 $31 -32%
Operating Margin 4.9% 6.9%
Technical Services (TS) had first quarter 2007 net sales of $426
million, down 5 percent compared to $450 million in the first quarter 2006,
primarily due to lower volume on a support services program, as well as
reduced bookings at the end of 2006. TS recorded operating income of $21
million in the first quarter 2007 compared to $31 million in the first
quarter 2006. Operating income was lower primarily due to profit
adjustments recorded on certain programs and reduced volume.
During the quarter, TS booked $347 million on work for the Department
of Energy (DOE) and the Defense Threat Reduction Agency (DTRA).
Other
Net sales in the first quarter 2007 were $181 million compared to $190
million in the first quarter 2006, with an operating loss of $8 million in
the first quarter 2007 compared to an operating loss of $13 million in the
first quarter 2006.
Discontinued Operations
During the quarter, the Company recorded net income from discontinued
operations of $32 million, compared to $15 million in the first quarter
2006, primarily related to RAC.
Raytheon Company (NYSE: RTN), with 2006 sales of $20.3 billion, is a
technology leader specializing in defense, homeland security and other
government markets throughout the world. With a history of innovation
spanning 85 years, Raytheon provides state-of-the-art electronics, mission
systems integration and other capabilities in the areas of sensing;
effects; and command, control, communications and intelligence systems, as
well as a broad range of mission support services. With headquarters in
Waltham, Mass., Raytheon employs 73,000 people worldwide.
Disclosure Regarding Forward-looking Statements
This release and the attachments contain forward-looking statements,
including information regarding the Company's 2007 financial outlook,
future plans, objectives, business prospects and anticipated financial
performance. These forward-looking statements are not statements of
historical facts and represent only the Company's current expectations
regarding such matters. These statements inherently involve a wide range of
known and unknown risks and uncertainties. The Company's actual actions and
results could differ materially from what is expressed or implied by these
statements. Specific factors that could cause such a difference include,
but are not limited to: risks associated with the Company's U.S. government
sales, including changes or shifts in defense spending, uncertain funding
of programs, potential termination of contracts, and difficulties in
contract performance; the ability to procure new contracts; the risks of
conducting business in foreign countries; the ability to comply with
extensive governmental regulation, including import and export policies and
procurement and other regulations; the impact of competition; the ability
to develop products and technologies; the risk of cost overruns,
particularly for the Company's fixed-price contracts; dependence on
component availability, subcontractor performance and key suppliers; risks
of a negative government audit; the use of accounting estimates in the
Company's financial statements; the potential impairment of the Company's
goodwill; risks associated with Flight Options' ability to compete and meet
its financial objectives; risks associated with the commuter and fractional
ownership aircraft markets; the outcome of contingencies and litigation
matters, including government investigations; the ability to recruit and
retain qualified personnel; risks associated with acquisitions, joint
ventures and other business arrangements; the impact of changes in the
Company's credit ratings; and other factors as may be detailed from time to
time in the Company's public announcements and Securities and Exchange
Commission filings. In addition, these statements do not give effect to the
potential impact of any acquisitions, divestitures or business combinations
that may be announced or closed after the date hereof. The Company
undertakes no obligation to make any revisions to the forward-looking
statements contained in this release and the attachments or to update them
to reflect events or circumstances occurring after the date of this
release.
Conference Call on the First Quarter 2007 Financial Results Raytheon's
financial results conference call will be held on Wednesday, April 25, 2007
at 9 a.m. EDT. Participants will include William H. Swanson, Chairman and
CEO, David C. Wajsgras, senior vice president and CFO, and other Company
executives.
The dial-in number for the conference call will be (866) 800 - 8651.
The conference call will also be audiocast on the Internet at
http://www.raytheon.com. Individuals may listen to the call and download charts
that will be used during the call. These charts will be available for
printing prior to the call.
Interested parties are encouraged to check the website ahead of time to
ensure their computers are configured for the audio stream. Instructions
for obtaining the free required downloadable software are posted on the
site.
Attachment A
Raytheon Company
Preliminary Statement of Operations Information
First Quarter 2007
(In millions except per share amounts) Three Months Ended
25-Mar-07 26-Mar-06
Net sales $4,928 $4,660
Cost of sales 3,981 3,807
Administrative and selling expenses 340 319
Research and development expenses 97 101
Total operating expenses 4,418 4,227
Operating income 510 433
Interest expense 60 69
Interest income (28) (21)
Other (income) expense, net 3 (26)
Non-operating expense, net 35 22
Income from continuing operations
before taxes 475 411
Federal and foreign income taxes 161 139
Income from continuing operations 314 272
Income from discontinued operations,
net of tax 32 15
Net income $346 $287
Earnings per share from continuing
operations
Basic $0.71 $0.61
Diluted $0.69 $0.61
Earnings per share from discontinued
operations
Basic $0.07 $0.03
Diluted $0.07 $0.03
Earnings per share
Basic $0.78 $0.65
Diluted $0.76 $0.64
Average shares outstanding
Basic 441.0 442.3
Diluted 453.5 448.8
Attachment B
Raytheon Company
Preliminary Segment Information
First Quarter 2007
(In millions)
Operating Income
As a Percent
Net Sales Operating Income of Sales
Three Months Ended Three Months Ended Three Months Ended
25-Mar-07 26-Mar-06 25-Mar-07 26-Mar-06 25-Mar-07 26-Mar-06
Integrated
Defense Systems $1,092 $963 $199 $158 18.2% 16.4%
Intelligence and
Information
Systems 588 611 55 55 9.4% 9.0%
Missile Systems 1,140 989 120 110 10.5% 11.1%
Network Centric
Systems 929 791 117 84 12.6% 10.6%
Space and
Airborne Systems 964 1,018 129 145 13.4% 14.2%
Technical Services 426 450 21 31 4.9% 6.9%
Other 181 190 (8) (13) -4.4% -6.8%
FAS/CAS Pension
Adjustment - - (62) (85)
Corporate and
Eliminations (392) (352) (61) (52)
Total $4,928 $4,660 $510 $433 10.3% 9.3%
Attachment C
Raytheon Company
Other Preliminary Information
First Quarter 2007
Funded
Backlog Backlog
(In millions) (In millions)
25-Mar-07 31-Dec-06 25-Mar-07 31-Dec-06
Integrated Defense Systems $8,089 $7,934 $4,156 $4,088
Intelligence and Information
Systems 3,747 3,935 909 893
Missile Systems 9,638 9,504 5,386 5,135
Network Centric Systems 5,146 5,059 4,041 4,037
Space and Airborne Systems 5,210 5,591 2,784 2,770
Technical Services 1,825 1,572 1,062 1,020
Other 254 243 254 243
Total $33,909 $33,838 $18,592 $18,186
Bookings
(In millions)
Three Months Ended
25-Mar-07 26-Mar-06
Total Bookings $5,282 $4,967
Attachment D
Raytheon Company
Preliminary Balance Sheet Information
First Quarter 2007
(In millions)
Balance sheets
25-Mar-07 31-Dec-06
Assets
Cash and cash equivalents $1,660 $2,460
Accounts receivable, less allowance
for doubtful accounts 174 178
Contracts in process 3,895 3,600
Inventories 499 487
Deferred federal and foreign income
taxes 240 257
Prepaid expenses and other current
assets 233 239
Assets held for sale 2,398 2,296
Total current assets 9,099 9,517
Property, plant and equipment, net 2,105 2,131
Deferred federal and foreign income
taxes 230 189
Goodwill 11,539 11,539
Other assets, net 2,110 2,115
Total assets $25,083 $25,491
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $686 $687
Advance payments and billings in
excess of costs incurred 1,947 1,962
Accounts payable 833 920
Accrued salaries and wages 757 944
Other accrued expenses 1,196 1,193
Liabilities held for sale 1,018 1,009
Total current liabilities 6,437 6,715
Accrued retiree benefits and other
long-term liabilities 3,973 4,232
Long-term debt 3,283 3,278
Minority interest 179 165
Stockholders' equity 11,211 11,101
Total liabilities and
stockholders' equity $25,083 $25,491
Attachment E
Raytheon Company
Preliminary Cash Flow Information
First Quarter 2007
(In millions)
Cash flow information
Three Months Ended
25-Mar-07 26-Mar-06
Income from continuing operations $314 $272
Depreciation 69 69
Amortization 20 19
Working capital (670) (517)
Discontinued operations (37) 28
Net activity in financing receivables 21 45
Other (133) 64
Net operating cash flow (416) (20)
Capital spending (39) (35)
Internal use software spending (15) (4)
Acquisitions - (47)
Investment activity and divestitures - 22
Dividends (107) (98)
Repurchase of common stock (275) (102)
Debt repayments 3 (32)
Discontinued operations (27) (8)
Other 76 66
Total cash flow $(800) $(258)
Attachment F
Raytheon Company
Non-GAAP Financial Measures
First Quarter 2007
We define Return on Invested Capital (ROIC) as income from continuing
operations plus after-tax net interest expense plus one-third of operating
lease expense after-tax (estimate of interest portion of operating lease
expense) divided by average invested capital after capitalizing operating
leases (operating lease expense times a multiplier of 8), adding financial
guarantees less net investment in Discontinued Operations, and adding back
the cumulative minimum pension liability/impact of adopting FAS 158. ROIC
is not a measure of financial performance under generally accepted
accounting principles (GAAP) and may not be defined and calculated by
other companies in the same manner. ROIC should be considered supplemental
to and not a substitute for financial information prepared in accordance
with GAAP. We use ROIC as a measure of efficiency and effectiveness of our
use of capital and as an element of management compensation.
Return on Invested Capital
(In millions) 2007 Guidance
Low end High end
of range of range
Income from continuing operations
Net interest expense, after-tax* Combined Combined
Lease expense, after-tax*
Return $1,400 $1,465
Net debt **
Equity less investment in discontinued
operations
Lease expense x 8 plus financial
guarantees Combined Combined
Minimum pension liability (cumulative)
Invested capital from continuing
operations*** $17,050 $16,850
ROIC 8.2% 8.7%
* effective tax rate: 34.2% (2007 guidance)
** Net debt is defined as total debt less cash and cash equivalents and
is calculated using a 2 point average
*** Calculated using a 2 point average
Media Contact: Investor Relations Contact:
Mac Jeffery Greg Smith
781-522-5111 781-522-5141
SOURCE Raytheon Company
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Related links:
http://www.raytheon.com/
CONTACT:
Media, Mac Jeffery, +1-781-522-5111, or
Investors, Greg Smith, +1-781-522-5141, both of Raytheon Company
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