-- Defense sales up 10 percent
-- Income from continuing operations of $0.56 per diluted share
-- Operating cash flow from continuing operations of $401 million
-- Consolidated earnings of $0.36 per diluted share including discontinued
operations
-- Net debt of $6.2 billion, down from $8.8 billion a year ago
-- U.S. Government backlog up 14 percent year over year
LEXINGTON, Mass., Oct. 23 /PRNewswire-FirstCall/--
Raytheon Company (NYSE: RTN) reported third quarter 2002 sales of $4.1
billion. Adjusting for divestitures, sales for the quarter were up 10
percent, compared with the third quarter a year ago. The company reported
third quarter operating income of $455 million, compared with an operating
loss of $364 million in the third quarter a year ago. Income from continuing
operations was $228 million, or $0.56 per diluted share, compared with a loss
of $280 million, or $0.78 per diluted share, in the 2001 third quarter.
Included in the quarter's results was a favorable legal settlement that is
reflected in corporate operating results. This was offset by charges of a
similar magnitude at the company's Command, Control, Communication and
Information Systems business, discussed below.
Last year's third quarter included a $745 million charge at Raytheon
Aircraft, primarily related to exposure on commuter aircraft. Last year's
quarter also included goodwill amortization of $85 million, which was
discontinued effective Jan. 1, 2002 in accordance with SFAS No. 142. Year
over year, there has also been a decline in SFAS No. 87 pension income of $51
million.
Operating cash flow from continuing operations was $401 million in the
third quarter 2002, compared with an outflow of $113 million in the third
quarter 2001. Discontinued operations consumed $322 million in cash in the
third quarter 2002, compared with a cash outflow of $244 million in the same
period last year. For the first nine months of 2002, the company's operating
cash flow from continuing operations of $622 million was ahead of plan and
much stronger than the $453 million cash outflow in the prior year. Net debt
at the end of the quarter was $6.2 billion versus the company's plan of $6.8
billion.
"Strong sales growth in our defense businesses and solid operating cash
flow signal that we are on track and getting stronger," said Daniel P.
Burnham, Raytheon's chairman and chief executive officer. "We have been
successful in reducing costs and improving operating efficiencies,
particularly at Raytheon Aircraft, in response to a weak and increasingly
competitive commercial environment."
Including the impact of discontinued operations, the company posted net
income of $147 million, or $0.36 per diluted share, in the third quarter 2002,
compared with a net loss of $285 million, or $0.79 per diluted share, in the
third quarter 2001.
The company narrowed its outlook for 2002 earnings per diluted share from
continuing operations to $2.10 to $2.15; the target range for consolidated net
debt has been $5.9 billion to $6.2 billion. The target range for consolidated
net debt excluded Raytheon Aircraft's previously disclosed off balance sheet
financing facility. Since this financing facility no longer provides any real
economic benefit, the company now expects to eliminate this facility and the
cost of maintaining it and bring the related assets onto the company's books.
This will result in a target range for consolidated net debt at year-end of
$6.9 billion to $7.2 billion, which is consistent with the company's combined
net debt plan and previous guidance.
The company's outlook for 2003 total company revenue growth is 6 to 7
percent, with earnings per diluted share from continuing operations between
$1.60 and $1.70. The entire decline in earnings per share compared to 2002 is
due to an increase in pension expense. Excluding the impact of pension
expense, earnings are expected to be up greater than 10 percent compared with
2002. Operating cash flow from continuing operations is still expected to be
between $900 million and $1.1 billion in 2003.
The company anticipates an after-tax reduction to equity of between $2.0
billion and $2.5 billion at year-end related to the company's pension plans,
as a result of the recent weak performance of capital markets. This is a non-
cash reduction that will not affect earnings, net debt or any of the company's
bank covenants.
Electronic Systems
Electronic Systems (ES) reported third quarter sales of $2.2 billion, up
11 percent compared with sales of $2.0 billion a year ago. Operating income
was $315 million, versus $284 million in the 2001 third quarter. Excluding
goodwill amortization, ES had operating income of $333 million in the 2001
third quarter. A decline in pension income accounted for more than the entire
decline in operating income, excluding goodwill amortization. ES had total
backlog of $13.3 billion at the end of the quarter.
During the quarter, the General Accounting Office upheld the U.S. Navy's
contract award for the DD(X) program to Raytheon and its partner Northrop
Grumman Ship Systems. As a result, Raytheon added $1.1 billion to backlog
during the quarter. Raytheon will be the lead systems integrator on the
program. DD(X) is the Navy's next generation surface warship. Also during the
quarter, Raytheon was awarded a $118 million contract from the U.S. Navy for
STANDARD Missile-2 fiscal year 2002 production. The primary role of the
STANDARD Missile-2 is to provide area defense against enemy aircraft and anti-
ship missiles.
Command, Control, Communication and Information Systems
Command, Control, Communication and Information Systems (C3I) had sales of
$1.0 billion, up 9 percent from $945 million in the third quarter a year ago.
The business posted operating income of $101 million, compared with $94
million in the third quarter 2001. The current quarter included a charge
related to a dispute on a previously terminated commercial contract and a
charge related to a current dispute that could affect the collection of
amounts due under the contract. The charges totaled $20 million. Excluding
goodwill amortization, operating income in the 2001 third quarter was $119
million. C3I had total backlog of $5.7 billion at the end of the quarter.
During the quarter Raytheon was awarded a contract for work on the
National Polar-orbiting Operational Environmental Satellite System (NPOESS) by
NPOESS prime contractor TRW. As a result, the company added $919 million to
backlog during the quarter. Raytheon will provide the entire ground system
for NPOESS, including the Command, Control and Communications Segment and the
interface Data Processing Segment. In addition, Raytheon is developing and
manufacturing the NPOESS primary electro-optical imaging sensor. Also during
the quarter, the company received a $40 million U.S. Navy contract to continue
developing the Mobile User Objective System (MUOS). Raytheon was one of two
companies down selected. The Navy plans to select a single contractor for the
$6 billion program.
Technical Services
Technical Services (TS) reported sales of $556 million for the 2002 third
quarter, compared with sales of $524 million a year ago. The business had
operating income of $40 million, versus $38 million a year ago. Excluding
goodwill amortization, TS had operating income of $46 million in the 2001
third quarter. A decline in pension income accounted for the entire decline in
operating income, excluding goodwill amortization. TS had backlog of $1.7
billion at the end of the quarter.
Commercial Electronics
Commercial Electronics (CE) had sales of $102 million for the quarter,
flat compared with a year ago. CE recorded an operating loss of $2 million in
the 2002 third quarter, an improvement over the operating loss of $22 million
a year ago.
During the quarter the company finalized an agreement with Paris-based
Valeo S.A., to form a joint venture, Valeo Raytheon Systems, that will develop
and market "blind spot" sensors to automotive manufacturers and subsystem
developers. The sensors, based on Raytheon technology, can detect obstacles
and alert drivers to potential hazards.
Raytheon Aircraft Company
Raytheon Aircraft Company (RAC) reported sales of $451 million, versus
$449 million a year ago. Adjusting for divestitures, sales were up 11 percent
due to a mix of higher priced aircraft and higher volume of used aircraft.
RAC had operating income of $1 million in the 2002 third quarter, compared
with an operating loss of $758 million a year ago, which included charges of
$693 million in connection with its commuter aircraft business and $52 million
related to used general aviation aircraft. RAC had backlog of $4.4 billion at
the end of the quarter.
Discontinued Operations
On Oct. 11, 2002 the company announced that it would adjust its estimate
to complete two Massachusetts power plants by $70 million to $75 million. The
company also disclosed that it expected additional costs associated with the
completion of the Red Oak and Ratchaburi construction projects and period
costs associated with interest and the project management office of
discontinued operations, bringing the total estimated charge to $115 million
to $124 million. Consistent with that disclosure, the company has recorded a
third quarter charge of $120 million pretax related to the company's former
engineering and construction business. The company's total loss from
discontinued operations in the quarter was $81 million after-tax, or $0.20 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.
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 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," "plan," or "outlook"
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 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, including
investigations; risks associated with equity investments in third party or
joint ventures; 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
performance of critical subcontractors and suppliers, the timing of project
completion and customer acceptance of two Massachusetts construction projects;
the timing and cost associated with the ultimate resolution of turbine
combustor issues at the two Massachusetts construction projects; the Company's
lack of construction industry expertise resulting from the Company's sale of
RE&C; the continued decline of craft labor productivity at the two
Massachusetts construction projects; and the Company's inability to recover
amounts required to be paid in connection with pre-funded liquidated damages;
among other things. Further information regarding the factors that could
cause actual results to differ materially from the Company's projected results
can be found in the Company's filings with the Securities and Exchange
Commission, including statements under "Item 1-Business" of Raytheon Company's
Annual Report on Form 10-K for the year ended December 31, 2001.
Conference Call on Third Quarter 2002 Financial Results
Raytheon will hold a conference call at 9:00 AM ET on Thursday, October
24, 2002, to review Third 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 October 24, 2002,
for 30 days. To access the recording, please dial (800) 642-1687 (domestic)
or (706) 645-9291 (international) and enter the conference ID 6059831.
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
free required downloadable software are posted to the site.
Attachment A
Raytheon Company
Financial Information
Third Quarter 2002
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
Pro forma Pro forma
As As excluding As As excluding
reported reported goodwill reported reported goodwill
29-Sep-02 30-Sep-01 30-Sep-01 29-Sep-02 30-Sep-01 30-Sep-01
Net sales $4,092 $3,755 $3,755 $12,098 $11,624 $11,624
Cost of sales 3,240 3,727 3,642 9,607 10,082 9,828
Administrative and
selling expenses 285 287 287 892 853 853
Research and
development
expenses 112 105 105 337 350 350
Total operating
expenses 3,637 4,119 4,034 10,836 11,285 11,031
Operating income
(loss) 455 (364) (279) 1,262 339 593
Interest expense,
net 111 165 165 364 516 516
Other expense
(income), net 15 18 18 36 (30) (30)
Non-operating
expense, net 126 183 183 400 486 486
Income (loss) from
continuing
operations
before taxes 329 (547) (462) 862 (147) 107
Federal and foreign
income taxes 101 (267) (264) 262 (97) (71)
Income (loss) from
continuing
operations 228 (280) (198) 600 (50) 178
Loss from
discontinued
operations, net
of tax (81) (5) (5) (664) (551) (551)
Income (loss) before
extraordinary item
and accounting
change 147 (285) (203) (64) (601) (373)
Extraordinary gain
from debt
repurchases, net
of tax - - - 1 4 4
Cumulative effect of
change in accounting
principle, net of
tax - - - (509) - -
Net income (loss) $147 $(285) $(203) $(572) $(597) $(369)
Earnings (loss) per
share from continuing
operations
Basic $0.56 $(0.78) $(0.55) $1.50 $(0.14) $0.51
Diluted $0.56 $(0.78) $(0.55) $1.47 $(0.14) $0.51
Loss per share
from discontinued
operations
Basic $(0.20) $(0.01) $(0.01) $(1.66) $(1.58) $(1.58)
Diluted $(0.20) $(0.01) $(0.01) $(1.62) $(1.58) $(1.58)
Loss per share
from cumulative
effect of change
in accounting
principle
Basic $- $- $- $(1.27) $- $-
Diluted $- $- $- $(1.25) $- $-
Earnings (loss) per
share
Basic $0.36 $(0.79) $(0.56) $(1.43) $(1.71) $(1.05)
Diluted $0.36 $(0.79) $(0.56) $(1.40) $(1.71) $(1.05)
Average shares
outstanding
Basic 403.7 359.4 359.4 399.8 349.8 349.8
Diluted 408.7 359.4 359.4 408.7 349.8 349.8
Attachment B
Raytheon Company
Segment Information
Third 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
29-Sep-02 30-Sep-01 29-Sep-02 30-Sep-01 29-Sep-02 30-Sep-01
Electronic
Systems $2,230 $2,014 $ 315 $ 284 14.1% 14.1%
Command, Control,
Communication
and Information
Systems 1,033 945 101 94 9.8% 9.9%
Technical Services 556 524 40 38 7.2% 7.3%
Commercial
Electronics 102 101 (2) (22) -2.0% -21.8%
Aircraft 451 449 1 (758) 0.2% -168.8%
Corporate and
Eliminations (280) (278) - -
Total $4,092 $3,755 $ 455 $(364) 11.1% -9.7%
Excluding goodwill
Operating Income
Net Sales Operating Income As a Percent of Sales
(In millions) Three Months Ended Three Months Ended Three Months Ended
29-Sep-02 30-Sep-01 29-Sep-02 30-Sep-01 29-Sep-02 30-Sep-01
Electronic
Systems $2,230 $2,014 $ 315 $ 333 14.1% 16.5%
Command, Control,
Communication
and Information
Systems 1,033 945 101 119 9.8% 12.6%
Technical Services 556 524 40 46 7.2% 8.8%
Commercial
Electronics 102 101 (2) (20) -2.0% -19.8%
Aircraft 451 449 1 (757) 0.2% -168.6%
Corporate and
Eliminations (280) (278) - -
Total $4,092 $3,755 $ 455 $(279) 11.1% -7.4%
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
29-Sep-02 30-Sep-01 29-Sep-02 30-Sep-01 29-Sep-02 30-Sep-01
Electronic
Systems $2,230 $2,014 $ 303 $ 295 13.6% 14.6%
Command, Control,
Communication
and Information
Systems 1,033 945 100 110 9.7% 11.6%
Technical Services 556 524 37 37 6.7% 7.1%
Commercial
Electronics 102 101 (2) (21) -2.0% -20.8%
Aircraft 451 449 (6) (771) -1.3% -171.7%
Corporate and
Eliminations (280) (278) (1) (4)
Total $4,092 $3,755 $ 431 $(354) 10.5% -9.4%
Attachment C
Raytheon Company
Other Information
Continuing Operations
Third Quarter 2002
Backlog
29-Sep-02 30-Sep-01
Electronic Systems $13,345 $12,356
Command, Control, Communication
and Information Systems 5,709 5,673
Technical Services 1,694 1,781
Commercial Electronics 409 488
Aircraft 4,423 4,031
$25,580 $24,329
U.S. government backlog included above $17,986 $15,749
Total Employees
29-Sep-02 30-Sep-01
Total employees 76,800 81,600
Aircraft Shipments (Units) Aircraft Bookings (Units)
Three Months Ended Three Months Ended
29-Sep-02 30-Sep-01 29-Sep-02 30-Sep-01
Hawker 9 8 4 20
Premier I 3 2 (13) (1)
Beechjet (Commercial) 4 4 4 1
King Air 16 16 11 13
1900D Commuter 3 - - 1
Pistons 16 30 5 9
T-6A 13 13 - -
Total aircraft shipments 64 73 11 43
Attachment D
Raytheon Company
Preliminary Financial Information
Third Quarter 2002
(In millions)
Balance sheets
29-Sep-02 31-Dec-01 30-Sep-01
Assets
Cash and cash equivalents $619 $1,214 $579
Accounts receivable 440 480 508
Contracts in process 3,478 3,204 3,551
Inventories 2,128 2,030 2,212
Deferred federal and
foreign income taxes 597 669 672
Prepaid expenses and
other current assets 151 309 792
Assets from discontinued
operations 83 1,631 1,680
Total current assets 7,496 9,537 9,994
Property, plant and
equipment, net 2,324 2,196 2,128
Goodwill, net 11,170 11,370 11,450
Other assets, net 3,524 3,572 3,186
Total assets $24,514 $26,675 $26,758
Liabilities and Stockholders'
Equity
Notes payable and current portion
of long-term debt $776 $1,363 $1,722
Advance payments, less
contracts in process 781 883 887
Accounts payable 803 910 887
Accrued salaries and wages 747 573 628
Other accrued expenses 1,178 1,529 1,461
Liabilities from discontinued
operations 383 550 454
Total current liabilities 4,668 5,808 6,039
Accrued retiree benefits
and other long-term liabilities 1,221 1,283 1,082
Deferred federal and
foreign income taxes 837 563 592
Long-term debt 6,088 6,874 7,622
Mandatorily redeemable
equity securities 858 857 856
Stockholders' equity 10,842 11,290 10,567
Total liabilities and
stockholders' equity $24,514 $26,675 $26,758
Debt-to-capital ratio
29-Sep-02 31-Dec-01 30-Sep-01
Debt $6,864 $8,237 $9,344
Capital 18,564 20,384 20,767
Debt-to-capital ratio 37.0% 40.4% 45.0%
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Third Quarter 2002
(In millions)
Cash flow information
Three Months Ended
29-Sep-02 30-Sep-01
Income (loss) from continuing operations $228 $(280)
Depreciation 77 72
Amortization 15 98
Working capital 107 164
Capital spending (96) (105)
Internal use software spending (42) (28)
Discontinued operations (322) (244)
Other 112 (34)
Subtotal - operating cash flow 79 (357)
Net activity in financing receivables (115) (11)
Divestitures 43 -
Dividends (81) (72)
Issuance of common stock 62 -
Other (54) (38)
Change in net debt $(66) $(478)
Segment operating cash flow information
Three Months Ended
29-Sep-02 30-Sep-01
Electronic Systems $230 $160
Command, Control, Communication
and Information Systems 67 1
Technical Services 27 13
Commercial Electronics 17 (9)
Aircraft (81) (260)
Discontinued operations (322) (244)
Other 141 (18)
$79 $(357)
News Media Contact:
David Polk
781.860.2492
Investor Relations Contact:
Timothy Oliver
781.860.2167
SOURCE Raytheon Company
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Related links:
http://www.raytheon.com
CONTACT:
News Media, David Polk, +1-781-860-2492; or
Investor Relations, Timothy Oliver, +1-781-860-2167, both of
Raytheon
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