WALTHAM, Mass., July 24, 2008 /PRNewswire-FirstCall/ --
Highlights
-- Sales of $5.9 billion, up 11 percent
-- Operating income of $662 million, up 12 percent -- Earnings per share (EPS) from continuing operations of $1.00, up 27
percent
-- Solid bookings of $6.0 billion; backlog of $37.5 billion
-- Strong operating cash flow from continuing operations of $767
million
-- Full-year guidance increased for sales, EPS, operating cash flow and
ROIC
Raytheon Company (NYSE: RTN) reported second quarter 2008 income from
continuing operations of $426 million or $1.00 per diluted share compared
to $355 million or $0.79 per diluted share in the second quarter 2007.
Second quarter 2008 income from continuing operations was higher primarily
due to operational improvements and lower pension expense, as well as a
prior-year $39 million charge ($59 million pretax) or $0.09 per diluted
share for the early retirement of debt.
"All of our businesses performed well and the Company had a strong
second quarter," said William H. Swanson, Raytheon's Chairman and CEO. "We
are increasing our financial outlook for the year as a result of our solid
performance."
Second quarter 2008 net income was $426 million or $1.00 per diluted
share compared to $1,335 million or $2.97 per diluted share in the second
quarter 2007. Net income for the second quarter 2007 included $980 million
in discontinued operations or $2.18 per diluted share primarily due to the
sale of Raytheon Aircraft Company (RAC), which was completed in the second
quarter 2007.
Net sales for the second quarter 2008 were $5.9 billion, up 11 percent
from $5.3 billion in the second quarter 2007, with growth across all of the
Company's businesses.
Operating cash flow from continuing operations for the second quarter
2008 was a positive $767 million compared to an outflow of $30 million for
the second quarter 2007. The improvement in the second quarter 2008 was
primarily due to cash tax payments of $316 million made in the second
quarter 2007 attributable to the gain on the sale of RAC and a reduction in
working capital items in the second quarter 2008.
In the second quarter 2008 the Company repurchased 5.2 million shares
of common stock for $340 million, as part of the Company's previously
announced share repurchase program. The Company has repurchased 10.7
million shares of common stock year-to-date for $680 million.
Summary Financial Results
2nd Quarter % Six Months %
($ in millions, except
per share data) 2008 2007 Change 2008 2007 Change
Net Sales $5,870 $5,278 11% $11,224 $10,082 11%
Total Operating
Expenses 5,208 4,689 9,954 8,972
Operating Income 662 589 12% 1,270 1,110 14%
Non-operating
Expenses 15 53 31 88
Income from Cont.
Ops. before Taxes $647 $536 21% $1,239 $1,022 21%
Income from
Continuing
Operations $426 $355 20% $826 $679 22%
Inc. (Loss) from
Disc. Ops., Net of
Tax* - 980 NM (2) 1,002 NM
Net Income $426 $1,335 NM $824 $1,681 NM
Diluted EPS from
Continuing Ops. $1.00 $0.79 27% $1.92 $1.51 27%
Diluted EPS $1.00 $2.97 NM $1.92 $3.73 NM
Operating Cash Flow
from Cont. Ops.** $767 $(30) $834 $(383)
Workdays in Fiscal
Reporting Calendar 64 64 127 123
* Includes after-tax net gain of $986 million on sale of Raytheon
Aircraft Company (RAC) in Q2 '07
** Includes $316 million cash tax payment related to the completion of
the RAC sale in Q2 '07
NM - Not meaningful for comparison purposes due to the gain on sale of RAC
in Q2 '07
Bookings and Backlog
Bookings 2nd Quarter Six Months
(in millions) 2008 2007 2008 2007
Total Bookings $6,008 $4,832 $12,524 $9,990
Backlog Period Ending
(in millions) 06/29/08 12/31/07
Backlog $37,527 $36,614
Funded Backlog $22,226 $20,518
The Company reported total bookings for the second quarter 2008 of $6.0
billion compared to $4.8 billion in the second quarter 2007. The Company
ended the second quarter 2008 with a backlog of $37.5 billion compared to
$36.6 billion at the end of 2007 and $33.3 billion at the end of the second
quarter 2007.
Outlook
2008 Financial Outlook Current Prior*
Net Sales ($B) 22.6 - 23.1 22.4 - 22.9
FAS/CAS Pension Expense ($M) 150 150
Interest Expense, net ($M) 40 - 55 45 - 60
Diluted Shares (M) 426 - 428 427 - 429
EPS from Cont. Ops. $3.80 - $3.95 $3.65 - $3.80
Operating Cash Flow from
Cont. Ops. ($B) 2.2 - 2.4 2.0 - 2.2
ROIC (%) 9.9 - 10.4 9.6 - 10.1
* As of April 24, 2008
The Company has increased full-year 2008 guidance for net sales,
earnings per share from continuing operations, operating cash flow from
continuing operations and Return on Invested Capital (ROIC), and updated
net interest expense and diluted shares. Charts containing additional
information on the Company's 2008 guidance are available on the Company's
website at http://www.raytheon.com. See attachment F for the Company's calculation
and use of ROIC, a non-GAAP financial measure.
Segment Results
Integrated Defense Systems
2nd Quarter % Six Months %
($ in millions) 2008 2007 Change 2008 2007 Change
Net Sales $1,257 $1,166 8% $2,449 $2,258 8%
Operating Income $209 $212 -1% $420 $411 2%
Operating Margin 16.6% 18.2% 17.1% 18.2%
Integrated Defense Systems (IDS) had second quarter 2008 net sales of
$1,257 million, up 8 percent compared to $1,166 million in the second
quarter 2007, primarily due to growth on U.S. Army programs. IDS recorded
$209 million of operating income compared to $212 million in the second
quarter 2007. The change in operating income was primarily due to program
mix and favorable performance adjustments taken on certain programs in the
second quarter 2007.
During the quarter, IDS booked $179 million for the upgrade and support
of the Patriot system for Kuwait and South Korea. IDS also booked $143
million for the Rapid Aerostat Initial Deployment (RAID) program for the
U.S. Army.
Intelligence and Information Systems
2nd Quarter % Six Months %
($ in millions) 2008 2007 Change 2008 2007 Change
Net Sales $829 $666 24% $1,521 $1,254 21%
Operating Income $67 $63 6% $119 $118 1%
Operating Margin 8.1% 9.5% 7.8% 9.4%
Intelligence and Information Systems (IIS) had second quarter 2008 net
sales of $829 million, up 24 percent compared to $666 million in the second
quarter 2007, primarily due to the U.K. e-Borders program. IIS recorded $67
million of operating income compared to $63 million in the second quarter
2007. The increase in operating income was primarily due to higher volume,
partially offset by certain acquisition costs and other investments in
cyber operations and information security capabilities.
During the quarter, IIS booked $497 million on a number of classified
contracts, including $379 million on a major classified program.
Missile Systems
2nd Quarter % Six Months %
($ in millions) 2008 2007 Change 2008 2007 Change
Net Sales $1,355 $1,244 9% $2,666 $2,384 12%
Operating Income $156 $134 16% $293 $254 15%
Operating Margin 11.5% 10.8% 11.0% 10.7%
Missile Systems (MS) had second quarter 2008 net sales of $1,355
million, up 9 percent compared to $1,244 million in the second quarter
2007, primarily due to higher volume on the Phalanx, Paveway(TM), and
Advanced Medium-Range Air-to-Air Missile (AMRAAM) programs. MS recorded
$156 million of operating income compared to $134 million in the second
quarter 2007. The increase in operating income was primarily due to higher
volume and program performance.
During the quarter, MS booked $412 million for the production of AMRAAM
for international customers and the U.S. Air Force. MS also booked $376
million for the production of Standard Missile-3 (SM-3) for the U.S. Navy
and the Missile Defense Agency and $245 million for the production of
Evolved Sea Sparrow Missiles (ESSM) for international customers and the
U.S. Navy.
Network Centric Systems
2nd Quarter % Six Months %
($ in millions) 2008 2007 Change 2008 2007 Change
Net Sales $1,173 $1,052 12% $2,240 $1,981 13%
Operating Income $145 $139 4% $268 $256 5%
Operating Margin 12.4% 13.2% 12.0% 12.9%
Network Centric Systems (NCS) had second quarter 2008 net sales of
$1,173 million, up 12 percent compared to $1,052 million in the second
quarter 2007, primarily due to increased volume on certain U.S. Army
programs. NCS recorded $145 million of operating income compared to $139
million in the second quarter 2007. The increase in operating income was
primarily due to higher volume.
During the quarter, NCS booked $115 million for the Airborne, Maritime
and Fixed Site (AMF) Joint Tactical Radio System (JTRS) program.
Space and Airborne Systems
2nd Quarter % Six Months %
($ in millions) 2008 2007 Change 2008 2007 Change
Net Sales $1,096 $1,065 3% $2,091 $2,029 3%
Operating Income $144 $133 8% $265 $262 1%
Operating Margin 13.1% 12.5% 12.7% 12.9%
Space and Airborne Systems (SAS) had second quarter 2008 net sales of
$1,096 million, up 3 percent compared to $1,065 million in the second
quarter 2007. SAS recorded $144 million of operating income compared to
$133 million in the second quarter 2007. The increase in operating income
was primarily due to improved program performance.
SAS booked $325 million on a number of classified contracts.
Technical Services
2nd Quarter % Six Months %
($ in millions) 2008 2007 Change 2008 2007 Change
Net Sales $647 $514 26% $1,168 $977 20%
Operating Income $45 $32 41% $80 $55 45%
Operating Margin 7.0% 6.2% 6.8% 5.6%
Technical Services (TS) had second quarter 2008 net sales of $647
million, up 26 percent compared to $514 million in the second quarter 2007,
primarily due to training programs. TS recorded operating income of $45
million in the second quarter 2008 compared to $32 million in the second
quarter 2007. The increase in operating income was primarily due to higher
volume and improved program performance.
During the quarter, TS booked $309 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, bringing the
year- to-date bookings on the program to $419 million.
Raytheon Company (NYSE: RTN), 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 Second Quarter 2008 Financial Results
Raytheon's financial results conference call will be held on Thursday,
July 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 (800) 901 - 5217.
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.
Media Contact: Investor Relations Contact:
Jon Kasle Jim Singer
781-522-5110 781-522-5136
Attachment A
Raytheon Company
Preliminary Statement of Operations Information
Second Quarter 2008
(In millions, except per share amounts)
Three Months Ended Six Months Ended
29-Jun-08 24-Jun-07 29-Jun-08 24-Jun-07
Net sales $5,870 $5,278 $11,224 $10,082
Cost of sales 4,670 4,194 8,929 8,050
Administrative and selling
expenses 396 357 776 687
Research and development expenses 142 138 249 235
Total operating expenses 5,208 4,689 9,954 8,972
Operating income 662 589 1,270 1,110
Interest expense 34 54 68 114
Interest income (17) (57) (40) (85)
Other (income) expense, net (2) 56 3 59
Non-operating expense, net 15 53 31 88
Income from continuing operations
before taxes 647 536 1,239 1,022
Federal and foreign income taxes 221 181 413 343
Income from continuing operations 426 355 826 679
Income (loss) from discontinued
operations, net of tax - (6) (2) 16
Gain on sale of discontinued
operation, net of tax - 986 - 986
Income (loss) from discontinued
operations, net of tax - 980 (2) 1,002
Net income $426 $1,335 $824 $1,681
Earnings per share from continuing
operations
Basic $1.03 $0.81 $1.99 $1.55
Diluted $1.00 $0.79 $1.92 $1.51
Earnings per share from
discontinued operations
Basic $- $2.24 $- $2.28
Diluted $- $2.18 $- $2.22
Earnings per share
Basic $1.03 $3.06 $1.98 $3.83
Diluted $1.00 $2.97 $1.92 $3.73
Average shares outstanding
Basic 414.0 436.7 416.1 438.9
Diluted 427.7 448.8 430.0 451.0
Attachment B
Raytheon Company
Preliminary Segment Information
Second Quarter 2008
Operating
Income
Operating As a Percent
Net Sales Income of Sales
Three Months Three Months Three Months
Ended Ended Ended
29-Jun- 24-Jun- 29-Jun- 24-Jun- 29-Jun- 24-Jun-
08 07 08 07 08 07
(In millions)
Integrated Defense
Systems $1,257 $1,166 $209 $212 16.6% 18.2%
Intelligence and
Information Systems 829 666 67 63 8.1% 9.5%
Missile Systems 1,355 1,244 156 134 11.5% 10.8%
Network Centric
Systems 1,173 1,052 145 139 12.4% 13.2%
Space and Airborne
Systems 1,096 1,065 144 133 13.1% 12.5%
Technical Services 647 514 45 32 7.0% 6.2%
FAS/CAS Pension
Adjustment - - (34) (63)
Corporate and
Eliminations (487) (429) (70) (61)
Total $5,870 $5,278 $662 $589 11.3% 11.2%
Operating
Income
As a Percent
Operating of Sales
Net Sales Income Six Months
Six Months Ended Six Months Ended Ended
29-Jun- 24-Jun- 29-Jun- 24-Jun- 29-Jun- 24-Jun-
08 07 08 07 08 07
Integrated Defense
Systems $2,449 $2,258 $420 $411 17.1% 18.2%
Intelligence and
Information Systems 1,521 1,254 119 118 7.8% 9.4%
Missile Systems 2,666 2,384 293 254 11.0% 10.7%
Network Centric
Systems 2,240 1,981 268 256 12.0% 12.9%
Space and Airborne
Systems 2,091 2,029 265 262 12.7% 12.9%
Technical Services 1,168 977 80 55 6.8% 5.6%
FAS/CAS Pension
Adjustment - - (67) (125)
Corporate and
Eliminations (911) (801) (108) (121)
Total $11,224 $10,082 $1,270 $1,110 11.3% 11.0%
Attachment C
Raytheon Company
Other Preliminary Information
Second Quarter 2008
Funded
(In millions) Backlog Backlog
29-Jun-08 31-Dec-07 29-Jun-08 31-Dec-07
Integrated Defense Systems $8,882 $9,296 $5,044 $4,781
Intelligence and Information
Systems 5,756 5,636 2,554 2,325
Missile Systems 10,250 9,379 5,873 5,218
Network Centric Systems 5,479 5,102 4,244 3,957
Space and Airborne Systems 5,102 5,276 3,301 3,037
Technical Services 2,058 1,925 1,210 1,200
Total $37,527 $36,614 $22,226 $20,518
Bookings
Three Months Ended
29-Jun-08 24-Jun-07
Total Bookings $6,008 $4,832
Attachment D
Raytheon Company
Preliminary Balance Sheet Information
Second Quarter 2008
(In millions)
29-Jun-08 31-Dec-07
Assets
Cash and cash equivalents $2,554 $2,655
Accounts receivable, net 113 126
Contracts in process 4,366 3,821
Inventories 379 386
Deferred taxes 440 432
Prepaid expenses and other current
assets 129 196
Total current assets 7,981 7,616
Property, plant and equipment, net 2,021 2,058
Prepaid retiree benefits 645 617
Goodwill 11,657 11,627
Other assets, net 1,293 1,363
Total assets $23,597 $23,281
Liabilities and Stockholders' Equity
Advance payments and billings in
excess of costs incurred $1,933 $1,845
Accounts payable 1,128 1,141
Accrued employee compensation 846 902
Other accrued expenses 903 900
Total current liabilities 4,810 4,788
Accrued retiree benefits and other
long-term liabilities 3,006 3,016
Deferred taxes 543 451
Long-term debt 2,269 2,268
Minority interest 233 216
Stockholders' equity
Common stock 4 4
Additional paid-in capital 10,788 10,544
Accumulated other comprehensive loss (1,856) (1,956)
Treasury stock, at cost (3,225) (2,502)
Retained earnings 7,025 6,452
Total stockholders' equity 12,736 12,542
Total liabilities and
stockholders' equity $23,597 $23,281
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Second Quarter 2008
(In millions) Three Months Ended Six Months Ended
29-Jun-08 24-Jun-07 29-Jun-08 24-Jun-07
Net income $426 $1,335 $824 $1,681
(Income) loss from discontinued
operations, net of tax - (980) 2 (1,002)
Income from continuing operations 426 355 826 679
Depreciation 73 73 142 140
Amortization 24 21 47 40
Working capital (excluding pension
and taxes)* 318 (39) (385) (692)
Discontinued operations (6) (20) (16) (83)
Net activity in financing
receivables 5 35 25 56
Other (79) (475) 179 (606)
Net operating cash flow 761 (50) 818 (466)
Capital spending (56) (57) (99) (95)
Internal use software spending (13) (19) (30) (34)
Acquisitions (33) - (34) -
Investment activity and
divestitures 9 3,117 9 3,117
Dividends (118) (113) (227) (220)
Repurchases of common stock (340) (526) (680) (801)
Debt repayments - (1,041) - (1,038)
Discontinued operations - - - (28)
Other 57 74 142 150
Total cash flow $267 $1,385 $(101) $585
* Working capital (excluding pension and taxes) is a summation of
changes in: accounts receivable, net, contracts in process and advance
payments and billings in excess of costs incurred, inventories, prepaid
expenses and other current assets, accounts payable, accrued employee
compensation, and other accrued expenses from the Statements of Cash Flows.
Attachment F
Raytheon Company
Preliminary Return on Invested Capital Non-GAAP Financial Measure
Second 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 impact of Statement of Financial Accounting Standards No. 158,
Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans (SFAS No. 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
2008 Current 2008 Prior
(In millions) Guidance Guidance
Low end High end Low end High end
of range of range of range of range
Income from continuing
operations
Net interest expense,
after-tax* Combined Combined Combined Combined
Lease expense, after-tax*
Return $1,715 $1,780 $1,655 $1,720
Net debt**
Equity less investment in
discontinued operations
Lease expense x 8, plus
financial guarantees Combined Combined Combined Combined
SFAS No. 158 impact
Invested capital from
continuing operations*** $17,300 $17,100 $17,300 $17,100
ROIC 9.9% 10.4% 9.6% 10.1%
* Effective 2008 tax rate: 33.5% (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
SOURCE Raytheon Company
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CONTACT:
Media, Jon Kasle, +1-781-522-5110, or
Investors, Jim Singer, +1-781-522-5136, both of Raytheon Company
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