-- Government and defense sales up 7 percent; 4 segments reported double
digit sales growth
-- First half government and defense bookings exceed comparable period by
$3.2 billion
-- Free cash flow from continuing operations of $649 million
-- EPS of $0.24 including impact of discontinued operations
LEXINGTON, Mass., July 24 /PRNewswire-FirstCall/ -- Raytheon Company
(NYSE: RTN) reported second quarter 2003 income from continuing operations of
$186 million or $0.45 per diluted share compared to $223 million or $0.54 per
diluted share in the second quarter 2002. Income from continuing operations
includes a net gain of $15 million or $0.03 per share primarily resulting from
the sale of an investment. Non-cash pension expense (FAS/CAS pension
adjustment) accounted for a $0.14 decrease in earnings per diluted share on a
year-over-year basis.
Second quarter 2003 net income was $100 million or $0.24 per diluted share
compared to a net loss of $136 million or $0.33 per diluted share in 2002.
Net income for the second quarter of 2003 includes an $86 million after-tax
loss in discontinued operations, or $0.21 per diluted share.
Net sales for the second quarter 2003 were $4.4 billion, up from $4.1
billion in the comparable period in 2002. Government and defense sales for
the quarter (after the elimination of intercompany sales) increased 7 percent
to $3.8 billion from $3.5 billion in the comparable quarter.
Free cash flow for the second quarter 2003 was $533 million, net of $116
million consumed by discontinued operations. Free cash flow for the
comparable quarter last year was $162 million. Free cash flow represents a
non-GAAP financial measure that the Company defines as operating cash flow
less capital spending and internal use software spending. Attachment F is a
table reconciling this measure to operating cash flow, the most directly
comparable GAAP measure.
"We are seeing the benefits of aligning our Strategic Business Areas with
our customer's priorities and concentrating on customer-focused metrics," said
William H. Swanson, Raytheon CEO and president. "As a result, government and
defense bookings in the first half of this year exceeded the first half of
last year by $3.2 billion." Swanson also stated, "We are pleased that
Raytheon Aircraft Company continues to execute on its balanced operating plan
in the face of tough market conditions."
In the first half of the year, the Missile Defense Strategic Business Area
(SBA) won two strategically important missile defense contracts, Ballistic
Missile Defense System (BMDS) and Sea-based TEST X-Band Radar. The Precision
Engagement SBA won Miniature Air-Launched Decoy and U.K. Precision Guided Bomb
(Paveway IV) contracts and the Intelligence Surveillance and Reconnaissance
SBA has been awarded approximately $1 billion of classified business.
In the government and defense businesses, strong second quarter bookings
of $3.8 billion lifted government and defense backlog to $22.4 billion, up
from $19.8 billion in the 2002 comparable period.
Aircraft backlog at the end of the second quarter was $2.2 billion down
from $4.7 billion a year ago. During the quarter aircraft backlog was
impacted by two events. First, the consolidation of Flight Options LLC
reduced reported backlog by $834 million. Second, NetJets canceled its order
for 50 Hawker Horizon aircraft resulting in an $895 million backlog reduction.
The first scheduled delivery of a Hawker Horizon to NetJets was to be mid-year
2005. The Company believes that this cancellation will not materially impact
financial results in 2003 or 2004.
OUTLOOK
The Company is increasing its guidance for sales growth. For 2003,
consolidated sales growth is expected to be 9 to 10 percent versus the prior
period, up from earlier guidance of 6 to 7 percent. Government and defense
sales are expected to increase 8.5 to 9 percent versus 2002 and earlier
guidance of 6 to 7 percent. As a result of the consolidation of Flight
Options LLC, we expect Raytheon Aircraft Company (RAC) 2003 sales to increase
by approximately $300 million to $350 million.
The Company has not changed its guidance for 2003 earnings per share from
continuing operations of $1.70 to $1.80 per diluted share. Increased profit
from higher forecasted government and defense sales is expected to be offset
by performance issues on several Network Centric Systems (NCS) programs.
The Company is increasing its guidance on free cash flow from continuing
operations by $100 million to a range of $1,050 million to $1,150 million.
Cash outflow from discontinued operations is expected to increase by
approximately $100 million to a range of $425 million to $475 million. Total
free cash flow from operations is expected to be between $575 million to $725
million.
SEGMENT RESULTS
Integrated Defense Systems
Integrated Defense Systems (IDS) second quarter 2003 net sales were $701
million, up 17 percent compared to $599 million in the second quarter 2002 due
primarily to continued growth in DD(X), the Navy's future destroyer program,
as well as strong missile defense sales. IDS generated $80 million of
operating income compared to $72 million in the 2002 comparable quarter.
During the quarter, IDS booked two important missile defense contracts.
IDS received a sole-source contract to engineer, construct, integrate and test
a forward-deployable Ballistic Missile Defense System (BMDS) radar valued at
approximately $350 million and the Sea-based Test-XBR contract valued at
approximately $419 million to fabricate, assemble and test a radar mounted on
an ocean-going platform.
Intelligence and Information Systems
Intelligence and Information Systems (IIS) second quarter 2003 net sales
were $525 million, up 15 percent compared to $457 million in the second
quarter 2002 due primarily to strong growth in new classified programs as well
as growth in the National Polar-orbiting Operational Environmental Satellite
System (NPOESS) program. IIS earned $46 million of operating income compared
to $41 million in the comparable quarter a year ago.
Missile Systems
Missile Systems (MS) second quarter 2003 net sales were $833 million, up
14 percent compared to $729 million in the second quarter 2002 driven by work
on the Tomahawk remanufacturing program and an increase in production for Air
Intercept Missile (AIM-9x), Tactical Tomahawk and Enhanced Sea Sparrow
Missile. MS generated $104 million of operating income compared to $93
million in the comparable quarter.
During the quarter, MS was selected by the United Kingdom Ministry of
Defence to supply Paveway IV to meet the Royal Air Force's requirement for a
new Precision Guided Bomb (PGB), an award estimated at approximately $175
million. In addition, MS was selected by the U.S. Air Force for an $88
million contract to develop and demonstrate a Miniature Air-Launched Decoy
(MALD) and received a $96 million contract for the continued production of the
AIM-120 Advanced Medium Range Air-to-Air Missile (AMRAAM).
Network Centric Systems
Network Centric Systems (NCS) second quarter 2003 net sales were $716
million, down 6 percent compared to $760 million in the second quarter 2002.
NCS earned $20 million in operating income compared to $58 million in the
comparable quarter a year ago. The decline in operating income is due to
performance issues on several programs.
During the quarter, NCS was awarded a contract valued at approximately $90
million for the Navy's Cooperative Engagement Capabilities (CEC) program to
produce 13 self-defense systems. Subsequent to the quarter, NCS was selected
by the U.S. Army to enter into negotiations on a contract to serve as Ground
Sensor Integrator (GSI) for Future Combat Systems (FCS). In addition, NCS was
selected to enter into a contract to develop the Battle Command Mission
Execution (BCME) component for FCS.
Space and Airborne Systems
Space and Airborne Systems (SAS) second quarter 2003 net sales were $886
million, up 11 percent compared to $798 million in the second quarter 2002,
due primarily to stronger classified sales. SAS generated $127 million of
operating income compared to $108 million in the comparable quarter.
During the quarter, SAS was awarded a $242 million contract with the
Hellenic Ministry of National Defense to produce the Advanced Self-Protection
Integrated Suite (ASPIS II) for its F-16 aircraft fleet, a $110 million
contract by the U.S. Army's Special Operations Command for the design and
delivery of electro-optic sensor systems for use on board helicopters during
day or night operations, and a $63 million contract to continue the
modernization of the radar on the U.S. Air Force's B-2 "Spirit" Bomber.
Technical Services
Technical Services (TS) second quarter 2003 net sales were $465 million,
down 8 percent from $505 million in the second quarter 2002, due primarily to
the loss of the Kwajalein missile range contract in 2002. TS generated $34
million of operating income compared to $5 million in the comparable quarter
last year. Prior period results included a $28 million write-down.
During the quarter, the Defense Threat Reduction Agency selected TS to
perform on three Cooperative Threat Reduction Integrating Contract (CTRIC)
task orders. The combined potential value of the contracts, including all
options, is approximately $300 million, subject to final negotiations.
Aircraft
Raytheon Aircraft Company (RAC) second quarter 2003 net sales were $627
million, up from $526 million in the second quarter 2002. RAC's operating
income in the quarter was $7 million, compared to $11 million in the
comparable quarter in 2002. The net impact of Flight Options' consolidation
this quarter is a $54 million increase in sales and no impact on operating
income.
RAC delivered 67 commercial aircraft in the second quarter of 2003,
compared to 60 in the same quarter last year.
DISCONTINUED OPERATIONS
The total pretax loss from discontinued operations for the quarter was
$133 million. During the quarter, the Company recorded a $106 million pretax
charge associated with increased costs for two construction projects and
recorded a $13 million pretax charge for period and other costs associated
with its former engineering and construction businesses. Also, the Company
recorded a $14 million pretax charge related to cost growth on the Boeing
Business Jet (BBJ) program and further write-down of BBJ inventory retained
after the disposition of its former Aircraft Integration Systems business.
Raytheon Company (NYSE: RTN), with 2002 sales of $16.8 billion, is an
industry leader in defense, government and commercial electronics, space,
information technology, technical services, and business and special mission
aircraft. With headquarters in Lexington, Mass., Raytheon employs more than
76,000 people worldwide.
Disclosure Regarding 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 federal securities laws. Specifically, statements that are not
historical facts, including statements accompanied by words such as "believe,"
"expect," "estimate," "intend," or "plan," and 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. 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
release. Important factors that could cause actual results to differ include,
but are not limited to: the ability to obtain or the timing of obtaining
future government awards; the availability of government funding; changes in
government or customer priorities due to program reviews or revisions to
strategic objectives; difficulties in developing and producing operationally
advanced technology systems; termination of government contracts; program
performance and timing of contract payments; the performance of critical
subcontractors; government import and export policies and other government
regulations; the ultimate resolution of contingencies and legal matters,
including investigations; the effect of market conditions, particularly in
relation to the general aviation and commuter aircraft markets; the
uncertainty of the timing and amount of net realizable value of Boeing
Business Jet-related assets; the Company's lack of construction industry
expertise resulting from the Company's sale of its Engineers and Constructors
business; the timing of project completion and customer acceptance of two
Massachusetts construction projects; further delays and cost growth arising
from testing and commissioning processes conducted at the Massachusetts
projects; the final determination by the Company of the required expenditure
to complete the Massachusetts projects; and the impact of change orders, the
recoverability of the Company's claims and the outcome of defending claims
asserted against the Company. Further information regarding the factors that
could cause actual results to differ materially from the Company's
expectations are disclosed in the Company's SEC filings, including "Item 1-
Business" of the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 and Quarterly Report on Form 10-Q for the quarter ended
March 30, 2003.
Conference Call on the Second Quarter 2003 Financial Results
Raytheon's financial results conference call will be Thursday, July 24,
2003 at 9 a.m. Participants will be William Swanson chief executive officer
and president, Edward Pliner senior vice president and CFO and other company
executives.
The dial in number for the conference call will be (800) 299-9630 with a
participant access code of 91291306. 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.
Media Contact: Investor Relations Contact:
James Fetig Tim Oliver
781-860-2386 781-860-2167
Attachment A
Raytheon Company
Financial Information
Second Quarter 2003
(In millions, except per share
amounts) Three Months Ended Six Months Ended
29-Jun-03 30-Jun-02 29-Jun-03 30-Jun-02
Net sales $4,429 $4,095 $8,630 $8,006
Cost of sales 3,570 3,207 7,050 6,367
Administrative and selling expenses 345 313 647 607
Research and development expenses 131 121 237 225
Total operating expenses 4,046 3,641 7,934 7,199
Operating income 383 454 696 807
Interest expense 135 130 278 270
Interest income (11) (9) (23) (17)
Other (income) expense (8) 13 15 21
Non-operating expense, net 116 134 270 274
Income from continuing operations
before taxes 267 320 426 533
Federal and foreign income taxes 81 97 129 161
Income from continuing operations 186 223 297 372
Loss from discontinued operations,
net of tax (86) (359) (102) (583)
Income (loss) before extraordinary
item and accounting change 100 (136) 195 (211)
Extraordinary gain from debt
repurchases, net of tax - - - 1
Cumulative effect of change in
accounting principle, net of tax - - - (509)
Net income (loss) $100 $(136) $195 $(719)
Earnings per share from continuing
operations
Basic $0.45 $0.56 $0.72 $0.94
Diluted $0.45 $0.54 $0.72 $0.91
Loss per share from discontinued
operations
Basic $(0.21) $(0.90) $(0.25) $(1.47)
Diluted $(0.21) $(0.87) $(0.25) $(1.43)
Loss per share from cumulative effect
of change in accounting principle
Basic $- $- $- $(1.28)
Diluted $- $- $- $(1.25)
Earnings (loss) per share
Basic $0.24 $(0.34) $0.48 $(1.81)
Diluted $0.24 $(0.33) $0.47 $(1.76)
Average shares outstanding
Basic 411.6 400.0 410.1 397.8
Diluted 414.9 412.9 412.8 408.6
Attachment B
Raytheon Company
Segment Information
Second Quarter 2003
(In millions)
Operating Income
Net Sales Operating Income As a Percent of Sales
Three Months Ended Three Months Ended Three Months Ended
29-Jun-03 30-Jun-02 29-Jun-03 30-Jun-0229-Jun-0330-Jun-02
Integrated
Defense Systems $701 $599 $80 $72 11.4% 12.0%
Intelligence and
Information
Systems 525 457 46 41 8.8% 9.0%
Missile Systems 833 729 104 93 12.5% 12.8%
Network Centric
Systems 716 760 20 58 2.8% 7.6%
Space and Airborne
Systems 886 798 127 108 14.3% 13.5%
Technical Services 465 505 34 5 7.3% 1.0%
Aircraft 627 526 7 11 1.1% 2.1%
FAS/CAS Pension
Adjustment - - (29) 53
Corporate and
Eliminations (324) (279) (6) 13
Total $4,429 $4,095 $ 383 $ 454 8.6% 11.1%
Attachment C
Raytheon Company
Other Information
Continuing Operations
Second Quarter 2003
Backlog
(In millions)
29-Jun-03 30-Jun-02
Integrated Defense Systems $5,720 $4,117
Intelligence and Information
Systems 3,673 2,885
Missile Systems 4,167 3,517
Network Centric Systems 2,960 2,782
Space and Airborne Systems 4,418 4,673
Technical Services 1,477 1,815
Aircraft 2,170 4,672
Corporate 202 278
$24,787 $24,739
U.S. government backlog included
above $19,481 $16,669
Bookings Bookings
(In millions) (In millions)
Three months ended Six months ended
29-Jun-03 30-Jun-02 29-Jun-03 30-Jun-02
Government and Defense businesses $3,766 $2,920 $8,810 $5,659
Commercial businesses 517 335 853 1,974
$4,283 $3,255 $9,663 $7,633
Aircraft Deliveries (Units)
Three Months Ended
29-Jun-03 30-Jun-02
Hawker 13 11
Premier I 8 7
Beechjet 7 5
King Air 21 12
1900D Commuter 1 3
Pistons 20 26
T-6A 17 17
Total 87 81
Aircraft Bookings (Units)
Three Months Ended
29-Jun-03 30-Jun-02
Hawker 12 9
Premier I 4 8
Beechjet 6 3
King Air 17 12
1900D Commuter 1 -
Pistons 13 37
T-6A - 9
Total 53 78
Attachment D
Raytheon Company
Preliminary Financial Information
Second Quarter 2003
(In millions)
Balance sheets
29-Jun-03 31-Dec-02 30-Jun-02
Assets
Cash and cash equivalents $364 $544 $1,642
Accounts receivable 571 675 461
Contracts in process 3,490 3,016 3,563
Inventories 2,114 2,032 2,230
Deferred federal and foreign income
taxes 507 601 600
Prepaid expenses and other current
assets 221 247 119
Assets from discontinued operations 63 75 105
Total current assets 7,330 7,190 8,720
Property, plant and equipment, net 2,461 2,396 2,319
Deferred federal and foreign income
taxes 316 281 -
Goodwill 11,488 11,170 11,168
Other assets, net 2,698 2,909 3,588
Total assets $24,293 $23,946 $25,795
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $968 $1,153 $1,783
Advance payments, less contracts in
process 932 819 845
Accounts payable 824 776 767
Accrued salaries and wages 670 710 560
Other accrued expenses 1,240 1,316 1,475
Liabilities from discontinued
operations 56 333 609
Total current liabilities 4,690 5,107 6,039
Accrued retiree benefits and other
long-term liabilities 2,882 2,831 1,269
Deferred federal and foreign income
taxes - - 835
Long-term debt 6,746 6,280 6,038
Mandatorily redeemable equity
securities 859 858 857
Stockholders' equity 9,116 8,870 10,757
Total liabilities and
stockholders' equity $24,293 $23,946 $25,795
Debt-to-capital ratio
29-Jun-03 31-Dec-02 30-Jun-02
Debt $7,714 $7,433 $7,821
Capital 17,689 17,161 19,435
Debt-to-capital ratio 43.6% 43.3% 40.2%
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Second Quarter 2003
(In millions)
Cash flow information
Three Months Ended
29-Jun-03 30-Jun-02
Income from continuing operations $186 $223
Depreciation 78 73
Amortization 14 14
Working capital 220 15
Discontinued operations (116) (259)
Capital spending (79) (105)
Internal use software spending (28) (26)
Other 258 227
Subtotal - free cash flow (a) 533 162
Net activity in financing receivables 54 (6)
Divestitures and sale of investments 40 -
Dividends (82) (80)
Issuance of common stock 18 53
Debt repayments (602) (11)
Other 16 40
Total cash flow $(23) $158
Segment free cash flow information
Three Months Ended
29-Jun-03 30-Jun-02
Integrated Defense Systems $196 $58
Intelligence and Information Systems 61 11
Missile Systems (59) 2
Network Centric Systems 46 44
Space and Airborne Systems 131 125
Technical Services 33 82
Aircraft 7 (70)
Discontinued operations (116) (259)
Other 234 169
$533 $162
(a) See Attachment F for a description of free cash flow.
Attachment F
Raytheon Company
Reconciliation of Non-GAAP Financial Measure
Second Quarter 2003
(In millions)
Reconciliation of Non-GAAP Financial Measure
Three Months Ended
29-Jun-03 30-Jun-02
Operating cash flow $640 $293
Less: Capital spending (79) (105)
Internal use software
spending (28) (26)
Free cash flow $533 $162
Note: Free cash flow represents a non-GAAP financial measure defined
as operating cash flow less capital spending and internal use
software spending. The Company's management uses non-GAAP
financial measures to evaluate the operating performance of its
business and as a component for determining incentive-based
compensation. In addition, the Company believes that free cash
flow is an important measure of performance used by some investors,
equity analysts and others to make informed investment decisions.
The definitions used here may differ from those used by other
companies.
SOURCE Raytheon Company
 back to top
Related links:
http://www.raytheon.com
CONTACT:
Media Contact: James Fetig, +1-781-860-2386,
or Investor Relations Contact: Tim Oliver, +1-781-860-2167, both
of Raytheon
|
