* Defense sales up 7 percent
* Income from continuing operations of $0.54 per diluted share
* Operating cash inflow from continuing operations of $417 million
* Operating income excluding pension income up 6 percent year-over-year
* Loss from discontinued operations $0.87 per diluted share
LEXINGTON, Mass., July 17 /PRNewswire-FirstCall/ --
Raytheon Company (NYSE: RTN) reported second quarter 2002 sales of $4.1
billion. Adjusting for divestitures, sales for the quarter were up 4 percent,
compared with the second quarter a year ago. The company reported second
quarter operating income of $454 million, compared with $395 million in the
2001 second quarter. Excluding goodwill amortization, which was discontinued
effective Jan. 1, 2002 as a result of the adoption of SFAS No. 142, operating
income for the prior year quarter was $479 million. Excluding pension income
and goodwill amortization, operating income in the second quarter of 2002 was
$429 million, compared with $405 million in the second quarter of 2001.
Income from continuing operations was $223 million, or $0.54 per diluted
share, compared with $136 million, or $0.38 per diluted share, in the 2001
second quarter. Excluding goodwill amortization, income from continuing
operations in the second quarter of 2001 was $212 million, or $0.60 per
diluted share.
Operating cash flow from continuing operations was $417 million, compared
with $71 million in the second quarter of 2001. Discontinued operations
consumed $259 million in cash in the second quarter of 2002, compared with a
cash outflow of $81 million in the same period last year. For the first half
of 2002, operating cash flow from continuing operations was ahead of plan and
stronger than in the same period last year. Net debt at the end of the quarter
was $6.2 billion versus the company's plan of $6.9 billion.
"While we are pleased with meeting our earnings targets for the quarter,
we are even more pleased with the company's operating cash flow performance,
with continuing operations $600 million ahead of plan for the first half of
the year," said Daniel P. Burnham, Raytheon's chairman and chief executive
officer.
Including the impact of discontinued operations, the company had a net
loss of $136 million, or $0.33 per diluted share, for the second quarter 2002,
compared with a net loss of $188 million, or $0.53 per diluted share in the
second quarter 2001. The company's outlook for year-end earnings per share
from continuing operations and net debt remain unchanged from previous
guidance; 2002 EPS from continuing operations is expected to be $2.10 to $2.20
and the target for net debt is approximately $6.1 billion.
During the quarter, the company completed its review for potential
goodwill impairment in accordance with SFAS No. 142 as of Jan. 1, 2002. As a
result the company recorded a $185 million goodwill impairment, which
represented all of the goodwill at Raytheon Aircraft Company. The company has
also determined that there is no impairment of goodwill related to any of its
defense businesses beyond the $360 million recorded earlier in the year in
connection with the sale of its former Aircraft Integration Systems business.
Electronic Systems
Electronic Systems (ES) reported second quarter sales of $2.2 billion, up
7 percent compared with sales of $2.1 billion a year ago. Operating income was
$300 million in the 2002 second quarter, versus $266 million in the 2001
second quarter. Excluding goodwill amortization, ES had operating income of
$314 million in the 2001 second quarter. A decline in pension income accounted
for more than the entire decline in operating income, excluding goodwill
amortization. ES had backlog of $12.8 billion at the end of the quarter.
During the quarter, Raytheon's STANDARD Missile-3 scored its second
ballistic missile intercept in a test of the sea-based missile defense system.
The company was also awarded a $165 million contract from the U.S. Air Force
for continued production of the AIM-120 Advanced Medium-Range Air-to-Air
Missile (AMRAAM), and a contract from Boeing worth $115 million to upgrade F-
15 Eagle radars.
Command, Control, Communication and Information Systems
Command, Control, Communication and Information Systems (C3I) had sales of
$1.0 billion, up 10 percent from $931 million in the second quarter a year
ago. The business posted operating income of $106 million in the 2002 second
quarter, compared with $95 million a year ago. Excluding goodwill
amortization, operating income in the 2001 second quarter was $120 million.
C3I had backlog of $5.0 billion at the end of the quarter.
During the quarter the company announced that it will join Lockheed
Martin's national team to design and develop the next-generation En Route
Automation Modernization (ERAM) program for the Federal Aviation
Administration. In addition, Lockheed Martin will join Raytheon's Standard
Terminal Automation Replacement System (STARS) team. Also during the quarter,
India signed an agreement with the U.S. government to purchase from Thales
Raytheon Systems eight Firefinder weapon locating radars and related support
in a procurement worth approximately $140 million. The agreement marks the
first Foreign Military Sales agreement with India in more than a decade.
Technical Services
Technical Services (TS) reported sales of $505 million for the 2002 second
quarter, compared with sales of $499 million a year ago. The business had
operating income of $9 million, down from $42 million a year ago. The sharp
decline in operating income was due primarily to a $28 million write-down of
unbillable contract costs that surfaced during the implementation of SAP. The
decline was offset by a similarly sized reserve established by the company in
the second half of 2001 to address this specific issue. Excluding goodwill
amortization, TS had operating income of $48 million in the 2001 second
quarter. TS had backlog of $1.8 billion at the end of the quarter.
Commercial Electronics
Commercial Electronics (CE) had sales of $105 million for the 2002 second
quarter, down 10 percent compared with $117 million a year ago. CE recorded
an operating loss of $4 million in the 2002 second quarter, an improvement
over the operating loss of $15 million a year ago. Excluding goodwill
amortization, CE posted a loss of $13 million in the second quarter of 2001.
During the quarter Raytheon signed an agreement with Valeo S.A., a leading
automotive systems supplier based in Paris. The new venture, which is subject
to closing conditions and is expected to be finalized in the third quarter of
2002, will develop and market Raytheon's obstacle detection radar technology
to offer "blind spot" sensors to automotive manufacturers and subsystem
developers. The technology can detect obstacles and alert drivers to
potential hazards. The company also formed a strategic alliance with WIN
Semiconductors Corp., of Taiwan to gain access to low cost production capacity
for next generation components for the wireless telecommunications market. The
agreement provides a foundation for future cooperation in developing
semiconductor process technologies.
Raytheon Aircraft Company
Raytheon Aircraft Company (RAC) reported sales of $526 million, down 32
percent from $768 million a year ago. Adjusting for divestitures, sales were
down 13 percent, reflecting weak demand in general aviation and fractional
ownership. RAC shipped 81 aircraft in the quarter, 36 fewer aircraft than it
shipped a year ago. RAC had operating income of $22 million in the 2002 second
quarter, compared with operating income of $27 million a year ago. Operating
income in the second quarter of 2002 included a positive contract adjustment
of $15 million due to improvements in cost performance on the T-6A program.
Excluding goodwill amortization, RAC had operating income of $30 million in
the 2001 second quarter. RAC had backlog of $4.7 billion at the end of the
quarter.
Discontinued Operations
On July 1, 2002 the company announced that it would adjust its estimate to
complete two Massachusetts power plants by $400 million to $450 million.
Consistent with that disclosure, the company has recorded a second quarter
charge of $450 million. The company also recorded $26 million of ongoing
costs for legal and management costs and interest related to discontinued
operations, a $21 million charge due to a contract adjustment on the Red Oak
construction project due to turbine-related delays, and $19 million of other
costs associated with the engineering and construction operations. In
addition, the company recorded a net charge of $14 million related to retained
assets and obligations of its former Aircraft Integration Systems business.
The company's total loss from discontinued operations in the quarter was $359
million after-tax, or $0.87 per diluted share.
With headquarters in Lexington, Mass., Raytheon Company is a global
technology leader in defense, government and commercial electronics, and
business and special mission aircraft.
Forward-Looking Statements
Certain statements made in this release, including any statements relating
to the company's future plans, objectives, and projected future financial
performance, contain or are based on, forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Specifically, statements that are not historical facts, including statements
accompanied by words such as "believe," "expect," "estimate," "intend," or
"plan," variations of these words and similar expressions, are intended to
identify forward-looking statements and convey the uncertainty of future
events or outcomes. The company cautions readers that any such forward-
looking statements are based on assumptions that the company believes are
reasonable, but are subject to a wide range of risks, and actual results may
differ materially. Given these uncertainties, readers should not rely on
forward-looking statements. Forward-looking statements also represent the
company's estimates and assumptions only as of the date that they were made.
The company expressly disclaims any current intention to provide updates to
forward-looking statements, and the estimates and assumptions associated with
them, after the date of this press release. Important factors that could cause
actual results to differ include, but are not limited to: differences in
anticipated and actual program results; risks inherent with large long-term
fixed price contracts, particularly the ability to contain cost growth; the
ultimate resolution of contingencies and legal matters; the ability to realize
anticipated cost efficiencies; timely development and certification of new
aircraft; the effect of market conditions, particularly in relation to the
general aviation and commuter aircraft markets; the impact of changes in the
collateral values of financed aircraft, particularly commuter aircraft; the
ability to finance ongoing operations at attractive rates; government
customers' budgetary constraints; government import and export policies; and
other government regulations; termination of government contracts; financial
and governmental risks related to international transactions; the ability to
recruit and retain qualified employees; delays and uncertainties regarding the
timing of the award of international programs; changes in government or
customer priorities due to program reviews or revisions to strategic
objectives; difficulties in developing and producing operationally advanced
technology systems; economic business and political conditions domestically
and internationally; program performance and timing of contract payments; the
performance of critical subcontractors and the ability to obtain adequate
insurance; the timing and customer acceptance of product deliveries; the
impact of competitive products and pricing; the uncertainty of the timing and
amount of net realizable value of Boeing Business Jet-related assets; and
risks associated with the continuing project obligations and retained assets
and retained liabilities of Raytheon Engineers & Constructors (RE&C) including
timely completion of two Massachusetts construction projects, among other
things. Further information regarding the factors that could cause actual
results to differ materially from projected results can be found in the
company's filings with the Securities and Exchange Commission, including "Item
1-Business" in the company's Annual Report on Form 10-K for the year ended
December 31, 2001.
Conference Call on Second Quarter 2002 Financial Results
Raytheon Company will be holding a conference call at 9:00 AM ET on
Thursday, July 18, 2002, to review Second Quarter 2002 results. In order to
participate, please call (877) 606-5624 (domestic) or (706) 679-7694
(international).
If you are unable to participate on this call, a digital recording will be
available two hours after the completion of the call from July 18, 2002, to
August 18, 2002. To access the recording, please dial (800) 642-1687
(domestic) or (706) 645-9291 (international) and enter the conference ID
4857743.
This conference call will be audio cast on the Internet at
http://www.Raytheon.com. Individuals may listen to the call and view charts as they
are referenced. These charts will be available for printing prior to the
call.
Participants are urged to check the website ahead of time to ensure their
computers are configured for the audio stream. Instructions for obtaining the
required downloadable software are posted to the site.
Attachment A
Raytheon Company
Financial Information
Second Quarter 2002
(In millions, except per share amounts)
Three Months Ended Six Months Ended
Pro forma Pro forma
As As excluding As As excluding
reported reported goodwill reported reported goodwill
30-Jun 01-Jul 01-Jul 30-Jun 01-Jul 01-Jul
02 01 01 02 01 01
Net sales $4,095 $4,097 $4,097 $8,006 $7,869 $7,869
Cost of sales 3,207 3,283 3,199 6,367 6,355 6,186
Administrative
and selling
expenses 313 296 296 607 566 566
Research and
development
expenses 121 123 123 225 245 245
Total
operating
expenses 3,641 3,702 3,618 7,199 7,166 6,997
Operating
income 454 395 479 807 703 872
Interest expense,
net 121 171 171 253 351 351
Other expense
(income),
net 13 (18) (18) 21 (48) (48)
Non-operating
expense, net 134 153 153 274 303 303
Income from
continuing
operations
before taxes 320 242 326 533 400 569
Federal and
foreign
income taxes 97 106 114 161 170 193
Income from
continuing
operations 223 136 212 372 230 376
Loss from
discontinued
operations,
net of tax (359) (328) (328) (583) (546) (546)
Loss before
extraordinary
item and
accounting
change (136) (192) (116) (211) (316) (170)
Extraordinary
gain from
debt repurchases,
net of tax - 4 4 1 4 4
Cumulative effect
of
change in
accounting
principle,
net of tax - - - (509) - -
Net loss $(136) $(188) $(112) $(719) $(312) $(166)
Earnings per share
from
continuing
operations
Basic $0.56 $0.39 $0.61 $0.94 $0.67 $1.09
Diluted $0.54 $0.38 $0.60 $0.91 $0.66 $1.08
Loss per share from
discontinued operations
Basic $(0.90) $(0.94) $(0.94) $(1.47) $(1.58) $(1.58)
Diluted $(0.87) $(0.93) $(0.93) $(1.43) $(1.56) $(1.56)
Loss per share
from cumulative
effect of
change in
accounting
principle
Basic $- $- $- $(1.28) $- $-
Diluted $- $- $- $(1.25) $- $-
Loss per
share
Basic $(0.34) $(0.54) $(0.32) $(1.81) $(0.90) $(0.48)
Diluted $(0.33) $(0.53) $(0.32) $(1.76) $(0.89) $(0.47)
Average shares
outstanding
Basic 400.0 349.9 349.9 397.8 345.0 345.0
Diluted 412.9 354.3 354.3 408.6 349.7 349.7
Attachment B
Raytheon Company
Segment Information
Second Quarter 2002
As reported
Operating Income
Net Sales Operating Income As a Percent of Sales
(In millions) Three Months Ended Three Months Ended Three Months Ended
30-Jun-02 01-Jul-01 30-Jun-02 01-Jul-01 30-Jun-02 01-Jul-01
Electronic
Systems $2,201 $2,055 $300 $266 13.6% 12.9%
Command, Control,
Communication
and Information
Systems 1,025 931 106 95 10.3% 10.2%
Technical Services 505 499 9 42 1.8% 8.4%
Commercial
Electronics 105 117 (4) (15) -3.8% -12.8%
Aircraft 526 768 22 27 4.2% 3.5%
Corporate and
Eliminations (267) (273) 21 (20)
Total $4,095 $4,097 $454 $395 11.1% 9.6%
Excluding goodwill
Operating Income
Net Sales Operating Income As a Percent of Sales
(In millions) Three Months Ended Three Months Ended Three Months Ended
30-Jun-02 01-Jul-01 30-Jun-02 01-Jul-01 30-Jun-02 01-Jul-01
Electronic
Systems $2,201 $2,055 $ 300 $ 314 13.6% 15.3%
Command, Control,
Communication
and Information
Systems 1,025 931 106 120 10.3% 12.9%
Technical Services 505 499 9 48 1.8% 9.6%
Commercial
Electronics 105 117 (4) (13) -3.8% -11.1%
Aircraft 526 768 22 30 4.2% 3.9%
Corporate and
Eliminations (267) (273) 21 (20)
Total $4,095 $4,097 $ 454 $ 479 11.1% 11.7%
Excluding goodwill and pension
Operating Income
Net Sales Operating Income As a Percent of Sales
(In millions) Three Months Ended Three Months Ended Three Months Ended
30-Jun-02 01-Jul-01 30-Jun-02 01-Jul-01 30-Jun-02 01-Jul-01
Electronic
Systems $2,201 $2,055 $ 289 $ 276 13.1% 13.4%
Command, Control,
Communication
and Information
Systems 1,025 931 105 109 10.2% 11.7%
Technical Services 505 499 5 40 1.0% 8.0%
Commercial
Electronics 105 117 (4) (14) -3.8% -12.0%
Aircraft 526 768 14 16 2.7% 2.1%
Corporate and
Eliminations (267) (273) 20 (22)
Total $4,095 $4,097 $429 $405 10.5% 9.9%
Attachment C
Raytheon Company
Other Information
Continuing Operations
Second Quarter 2002
(In millions, except total employees and aircraft shipments)
Backlog
30-Jun-02 01-Jul-01
Electronic Systems $12,795 $12,984
Command, Control, Communication
and Information Systems 5,021 5,767
Technical Services 1,816 1,859
Commercial Electronics 435 515
Aircraft 4,672 4,010
$24,739 $25,135
U.S. government backlog included
above $16,669 $16,526
Total Employees
30-Jun-02 01-Jul-01
Total employees 77,500 86,700
Aircraft Shipments (Units)
Three Months Ended
30-Jun-02 01-Jul-01
Hawker 11 17
Premier I 7 1
Beechjet (Commercial) 5 5
King Air 12 42
1900D Commuter 3 2
Pistons 26 42
T-6A 17 8
Total aircraft shipments 81 117
Attachment D
Raytheon Company
Preliminary Financial Information
Second Quarter 2002
(In millions)
Balance sheets
30-Jun-02 31-Dec-01 01-Jul-01
Assets
Cash and cash equivalents $1,642 $1,214 $529
Accounts receivable 461 480 537
Contracts in process 3,523 3,165 3,636
Inventories 2,083 2,030 2,146
Deferred federal and foreign income
taxes 649 669 588
Prepaid expenses and other current
assets 119 309 150
Assets from discontinued operations 105 1,631 1,674
Total current assets 8,582 9,498 9,260
Property, plant and equipment, net 2,319 2,196 2,361
Goodwill, net 11,168 11,370 12,087
Other assets, net 3,588 3,572 3,052
Total assets $25,657 $26,636 $26,760
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $1,783 $1,363 $254
Advance payments, less contracts in
process 845 883 1,042
Accounts payable 767 910 1,031
Accrued salaries and wages 560 573 502
Other accrued expenses 1,428 1,490 1,057
Liabilities from discontinued
operations 609 550 684
Total current liabilities 5,992 5,769 4,570
Accrued retiree benefits and other
long-term liabilities 1,269 1,283 1,182
Deferred federal and foreign income
taxes 835 563 755
Long-term debt 6,038 6,874 8,562
Mandatorily redeemable equity
securities 857 857 856
Stockholders' equity 10,666 11,290 10,835
Total liabilities and
stockholders' equity $25,657 $26,636 $26,760
Debt-to-capital ratio
30-Jun-02 31-Dec-01 01-Jul-01
Debt $7,821 $8,237 $8,816
Capital 19,344 20,384 20,507
Debt-to-capital ratio 40.4% 40.4% 43.0%
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Second Quarter 2002
(In millions)
Cash flow information
Three Months Ended
30-Jun-02 01-Jul-01
Income from continuing operations $223 $136
Depreciation 73 71
Amortization 14 98
Working capital 15 (234)
Capital spending (105) (92)
Internal use software spending (26) (44)
Discontinued operations (259) (81)
Other 223 136
Subtotal - operating cash flow 158 (10)
Net activity in financing receivables (6) (33)
Divestitures - 155
Dividends (80) (68)
Offering proceeds - 1,213
Issuance of common stock 53 -
Other (1) 12
Change in net debt $124 $1,269
Segment operating cash flow
information
Three Months Ended
30-Jun-02 01-Jul-01
Electronic Systems $203 $30
Command, Control, Communication
and Information Systems 32 77
Technical Services 82 2
Commercial Electronics 5 (20)
Aircraft (70) (74)
Discontinued operations (259) (81)
Other 165 56
$158 $(10)
News Media Contact:
David Polk
781.860.2386
Investor Relations Contact:
Timothy Oliver
781.860.2167
SOURCE Raytheon Company
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Related links:
http://www.raytheon.com
CONTACT:
David Polk, +1-781-860-2386, or Timothy
Oliver, +1-781-860-2167, both for Raytheon Company
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