-- Bookings of $5.7 billion, record backlog of $32.8 billion
-- Free cash flow from continuing operations of $220 million
-- Continued improved performance at Raytheon Aircraft Company
-- Increased guidance for full year on EPS and free cash flow
WALTHAM, Mass., Oct. 28, 2004 /PRNewswire-FirstCall/ -- Raytheon Company
(NYSE: RTN) reported third quarter 2004 income from continuing operations of
$186 million or $0.41 per diluted share compared to $21 million or $0.05 per
diluted share in the third quarter 2003. The third quarter 2003 included
charges of $226 million or $0.38 per diluted share at Network Centric Systems
(NCS) and Technical Services (TS). Non-cash pension expense (FAS/CAS Pension
Adjustment) negatively affected the third quarter 2004 by $0.13 per diluted
share on a year-over-year basis.
Third quarter 2004 net income was $152 million or $0.34 per diluted share
compared to a net loss of $35 million or $0.08 per diluted share in 2003. Net
income for the third quarter of 2004 also included a $34 million after-tax
loss in discontinued operations or $0.07 per diluted share, primarily
attributable to a foreign tax related matter, versus $56 million or $0.13 per
diluted share in 2003.
Net sales for the third quarter 2004 were $4.9 billion, up 13 percent from
$4.4 billion in the comparable period in 2003. Government and Defense sales
for the quarter (after the elimination of intercompany sales) increased 12
percent to $4.1 billion from $3.7 billion in the comparable quarter. Sales in
the third quarter 2003 included a $212 million reduction resulting from the
2003 NCS and TS charges. Excluding the effect of the 2003 charges, 2004 sales
increased over 2003 for the Company by 8 percent and for Government and
Defense by 6 percent.
Free cash flow from continuing operations for the third quarter was $220
million. Excluding the impact of the shareholder lawsuit settlement payment
of $210 million, free cash flow from continuing operations for the quarter was
$430 million versus $535 million for the comparable period in 2003. Year-to-
date cash flow from continuing operations remains ahead of prior year.
Discontinued operations consumed $16 million of cash in the third quarter 2004
versus $64 million in the comparable period in 2003. Free cash flow is defined
as operating cash flow less capital spending and internal use software
spending.
The Government and Defense businesses recorded third quarter bookings of
$4.8 billion compared to bookings of $4.1 billion in the third quarter of
2003. Government and Defense backlog reached a record $30.1 billion at the
end of the third quarter 2004.
Raytheon Aircraft Company's third quarter bookings were $704 million
compared to $383 million in 2003.
"I am very pleased that Raytheon continues to deliver positive results,"
said William H. Swanson, Raytheon Chairman and CEO. "Our program execution
and strong customer focus are driving the Company's performance."
During the third quarter of 2004, the Company retired debt with a par
value of $137 million, bringing the total debt reduction year-to-date to $1.0
billion. Subsequent to the end of the quarter, the Company initiated the
retirement of an additional $1.2 billion of debt, bringing the total expected
debt retirement for the year to $2.3 billion. The Company expects to take a
charge in the fourth quarter of $90 million or $0.13 per diluted share
associated with this debt retirement. Net debt was $5.3 billion at the end of
the third quarter compared with $6.7 billion at the end of 2003. Net debt is
defined as total debt less cash and short-term investments.
Change in Outlook
The Company now expects 2004 earnings per share from continuing operations
of $0.87 - $0.92, higher than its prior guidance of $0.79 - $0.89, as a result
of improvements at RAC and at the Government and Defense businesses. The
higher guidance includes income of $0.10 per diluted share as a result of
legislation that extended the foreign tax credit from five to 10 years and the
loss of $0.12 per diluted share from the early retirement of debt, net of
interest savings. The Company now expects full year free cash flow to exceed
$1.1 billion.
Earnings per share from continuing operations in 2005 are expected to be
$1.80-$1.90. This earnings guidance does not reflect any change in our
previously disclosed pension assumptions. The Company expects net sales for
2005 of $21.5 - $22.0 billion. Government and Defense net sales for 2005 are
expected to be $18.0 - $18.5 billion (after the elimination of intercompany
sales). RAC net sales for 2005 are expected to be $2.6 - $2.8 billion. The
Company expects 2005 free cash flow of $1.1 - $1.3 billion. Charts containing
the Company's guidance are available on the Company's website.
Segment Results
Integrated Defense Systems
Integrated Defense Systems (IDS) third quarter 2004 net sales were $833
million, up 16 percent compared to $718 million in the third quarter 2003, due
primarily to continued growth in DD(X), the Navy's future destroyer program,
Integrated Air Defense programs, and Cobra Judy. IDS generated $100 million
of third quarter 2004 operating income compared to $82 million in the 2003
comparable quarter.
During the quarter, IDS booked $207 million for the definitization of the
Cobra Judy contract awarded in the fourth quarter of 2003, bringing the total
booked to approximately $1 billion. IDS also booked $99 million for the
definitization of the JLENS Spiral 2 Development contract awarded in the
fourth quarter of 2003, bringing the total booked to $770 million.
Intelligence and Information Systems
Intelligence and Information Systems (IIS) third quarter 2004 net sales
were $567 million, up 6 percent compared to $533 million in the third quarter
2003. IIS reported $51 million of operating income compared to $54 million in
the comparable quarter a year ago.
During the quarter, IIS booked $80 million for the Air Force's Contractor
Field Service Worldwide Support contract to provide field support for various
sensors and data links on an Intelligence, Surveillance, and Reconnaissance
(ISR) system. This contract has a value of up to $1.45 billion for the life
of the program. IIS also booked $345 million in classified contracts.
Missile Systems
Missile Systems (MS) third quarter 2004 net sales were $928 million
compared to $905 million in the third quarter 2003. MS generated $109 million
of operating income compared to $111 million in the comparable quarter a year
ago.
During the quarter, MS booked $411 million to develop and produce the new
Standard Missile-6 Extended Range Active Missile for the U.S. Navy. The U.S.
Navy also awarded MS a $287 million contract for the next-generation Block IV
Tomahawk cruise missile. MS received a contract worth approximately $144
million for AMRAAM production and logistics support from the United Kingdom
Ministry of Defense.
Network Centric Systems
Network Centric Systems (NCS) third quarter 2004 net sales were $777
million compared to $556 million in the third quarter 2003. NCS recorded
operating income of $65 million compared to an operating loss of $138 million
in the comparable quarter a year ago. Last year's third quarter included
charges resulting in a reduction in sales and operating income of $178 million
and $187 million, respectively, related to performance issues on certain NCS
programs.
During the quarter, NCS booked an additional $212 million for its role as
the Ground Sensor Integrator (GSI) on the Future Combat Systems (FCS) contract
as well as being selected to develop three sensors awarded to date by the GSI
contract. Additionally, the United Kingdom Ministry of Defence awarded a $17
million contract to conduct the assessment phase of the British Army's Joint
Effects Tactical Targeting System (JETTS) digitization requirement. The
follow on manufacture phase could exceed $500 million.
Space and Airborne Systems
Space and Airborne Systems (SAS) third quarter 2004 net sales were $929
million compared to $930 million in the third quarter 2003. SAS generated
$138 million of operating income compared to $131 million in the comparable
quarter a year ago, an increase due to international programs.
During the quarter, SAS booked $195 million for the fourth phase of a
multi-year Radar Modernization Program (RMP) to retrofit the B-2 bomber fleet
with a new Active Electronically Scanned Array (AESA) antenna. SAS also booked
$120 million on a number of classified contracts.
After the quarter close, the Company announced that it had acquired Photon
Research Associates Inc. (PRA), based in San Diego, California. PRA is a
pioneer in the development and application of physics-based modeling,
simulation and analysis products and services for the government market. The
major focus of its business operations has been in the areas of remote
sensing, missile defense, surveillance/reconnaissance, and intelligence data
analysis.
Technical Services
Technical Services (TS) third quarter 2004 net sales were $512 million
compared to $447 million in the third quarter 2003. TS reported operating
income of $38 million in the third quarter of 2004 compared to an operating
loss of $2 million in the comparable quarter a year ago. Last year's third
quarter included charges resulting in a reduction in sales and operating
income of $34 million and $39 million, respectively.
During the quarter, the National Science Foundation's Office of Polar
Programs exercised its five year option on the U.S. Antarctic Program,
awarding TS a $546 million contract extension that runs from April 2005
through March 2010.
Aircraft
Raytheon Aircraft Company's (RAC) third quarter 2004 net sales were $624
million, up 33 percent from $470 million in the third quarter 2003. RAC
recorded operating income of $21 million in the quarter compared to an
operating loss of $4 million in the comparable quarter in 2003.
RAC delivered 83 commercial aircraft in the third quarter of 2004,
compared to 61 in the same quarter last year.
Other
Net sales for this segment in the third quarter 2004 were $164 million
compared to $191 million in the third quarter 2003. The segment recorded an
operating loss of $7 million in the third quarter 2004 compared to an
operating loss of $5 million in the comparable quarter in 2003.
Discontinued Operations
During the quarter, the Company recorded an after-tax loss from
discontinued operations of $34 million, related to its former engineering and
construction and Aircraft Integration Systems businesses. The Company
recorded a $24 million charge in the quarter for a foreign tax related item.
Raytheon Company (NYSE: RTN), with 2003 sales of $18.1 billion, is an
industry leader in defense and government electronics, space, information
technology, technical services, and business and special mission aircraft.
With headquarters in Waltham, Mass., Raytheon employs 78,000 people worldwide.
Disclosure Regarding Forward-looking Statements
Certain statements included 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, including resolution
of claims; 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 government investigations; an agreement to settle a shareholder
class action lawsuit pending in federal court in Massachusetts has not yet
received final approval by the court; the ultimate resolution of insurance
coverage for the shareholder litigation; the effect of market conditions,
particularly in relation to the general aviation, commuter, and fractional
aircraft markets; cost growth risks inherent with large long-term fixed price
contracts; conflicts with other investors in joint ventures and less than
wholly-owned businesses; and risks associated with outstanding letters of
credit, surety bonds, guarantees and other similar agreements related to a
number of contracts and leases of our former engineering and construction
businesses. Further information regarding the factors that could cause actual
results to differ materially from the projected results can be found in the
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended December 31, 2003.
Conference Call on the Third Quarter 2004 Financial Results
Raytheon's financial results conference call will be Thursday, October 28,
2004 at 9 a.m. EDT. Participants will be William H. Swanson, Chairman and CEO,
Edward Pliner, senior vice president and CFO, and other Company executives.
The dial-in number for the conference call will be (800) 265-0241. 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 Greg Smith
781-522-5111 781-522-5141
Attachment A
Raytheon Company
Financial Information
Third Quarter 2004
(In millions except Three Months Ended Nine Months Ended
per share amounts) 26-Sep-04 28-Sep-03 26-Sep-04 28-Sep-03
Net sales $4,936 $4,378 $14,541 $13,008
Cost of sales 4,117 3,776 12,206 10,826
Administrative and selling
expenses 339 305 1,022 952
Research and development expenses 123 129 365 366
Total operating expenses 4,579 4,210 13,593 12,144
Operating income 357 168 948 864
Interest expense 100 137 326 415
Interest income (11) (10) (33) (33)
Other expense, net 5 12 368 27
Non-operating expense, net 94 139 661 409
Income from continuing operations
before taxes 263 29 287 455
Federal and foreign income taxes 77 8 94 137
Income from continuing operations 186 21 193 318
Loss from discontinued
operations, net of tax (34) (56) (62) (158)
Income (loss) before accounting
change 152 (35) 131 160
Cumulative effect of change in
accounting principle, net of tax - - 41 -
Net income (loss) $152 $(35) $172 $160
Earnings (loss) per share from
continuing operations
Basic $0.41 $0.05 $0.44 $0.77
Diluted $0.41 $0.05 $0.44 $0.77
Loss per share from discontinued
operations
Basic $(0.08) $(0.14) $(0.14) $(0.38)
Diluted $(0.07) $(0.13) $(0.14) $(0.38)
Earnings per share from
cumulative effect of change in
accounting principle
Basic $- $- $0.09 $-
Diluted $- $- $0.09 $-
Earnings (loss) per share
Basic $0.34 $(0.08) $0.40 $0.39
Diluted $0.34 $(0.08) $0.39 $0.39
Average shares outstanding
Basic 449.2 414.3 434.1 411.5
Diluted 453.5 417.8 437.3 414.5
Attachment B
Raytheon Company
Segment Information
Third Quarter 2004
(In millions)
Operating Income
Net Sales Operating Income As a Percent of Sales
Three Months Ended Three Months Ended Three Months Ended
26-Sep-04 28-Sep-03 26-Sep-04 28-Sep-03 26-Sep-04 28-Sep-03
Integrated Defense
Systems $833 $718 $100 $82 12.0% 11.4%
Intelligence and
Information
Systems 567 533 51 54 9.0% 10.1%
Missile Systems 928 905 109 111 11.7% 12.3%
Network Centric
Systems 777 556 65 (138) 8.4% -24.8%
Space and Airborne
Systems 929 930 138 131 14.9% 14.1%
Technical
Services 512 447 38 (2) 7.4% -0.4%
Aircraft 624 470 21 (4) 3.4% -0.9%
Other 164 191 (7) (5) -4.3% -2.6%
FAS/CAS Pension
Adjustment - - (117) (27)
Corporate and
Eliminations (398) (372) (41) (34)
Total $4,936 $4,378 $357 $168 7.2% 3.8%
Operating Income
Net Sales Operating Income As a Percent of Sales
Nine Months Ended Nine Months Ended Nine Months Ended
26-Sep-04 28-Sep-03 26-Sep-04 28-Sep-03 26-Sep-04 28-Sep-03
Integrated Defense
Systems $2,542 $2,073 $298 $236 11.7% 11.4%
Intelligence and
Information
Systems 1,614 1,520 147 141 9.1% 9.3%
Missile Systems 2,832 2,595 322 316 11.4% 12.2%
Network Centric
Systems 2,277 2,043 186 (56) 8.2% -2.7%
Space and Airborne
Systems 2,927 2,710 409 362 14.0% 13.4%
Technical
Services 1,482 1,403 105 68 7.1% 4.8%
Aircraft 1,568 1,371 16 (27) 1.0% -2.0%
Other 492 343 (29) (13) -5.9% -3.8%
FAS/CAS Pension
Adjustment - - (356) (82)
Corporate and
Eliminations (1,193) (1,050) (150) (81)
Total $14,541 $13,008 $948 $864 6.5% 6.6%
Attachment C
Raytheon Company
Other Information
Continuing Operations
Third Quarter 2004
Funded
Backlog Backlog
(In millions) (In millions)
26-Sep-04 31-Dec-03 26-Sep-04 31-Dec-03
Integrated Defense Systems $6,566 $6,526 $2,831 $3,318
Intelligence and
Information Systems 3,913 3,899 860 655
Missile Systems 8,328 5,028 4,109 4,069
Network Centric Systems 3,725 3,259 2,635 2,488
Space and Airborne Systems 5,715 4,865 3,714 3,801
Technical Services 1,865 1,510 904 858
Aircraft 2,449 2,279 2,449 2,279
Other 288 176 288 176
$32,849 $27,542 $17,790 $17,644
Government and Defense
businesses $30,112 $25,087 $15,053 $15,189
U.S. government backlog
included above $26,036 $21,353
Bookings
(In millions)
Three months ended
26-Sep-04 28-Sep-03
Government and Defense businesses $4,770 $4,092
Commercial businesses 969 554
$5,739 $4,646
New Aircraft Deliveries (Units)
Three Months Ended
26-Sep-04 28-Sep-03
Hawker 13 7
Premier I 11 7
Hawker 400XP 5 7
King Air 31 18
Pistons 25 22
T-6A 18 19
Total 103 80
New Aircraft Bookings (Units)
Three Months Ended
26-Sep-04 28-Sep-03
Hawker 21 6
Premier I 9 2
Hawker 400XP 4 8
King Air 46 26
Pistons 78 15
Total 158 57
Attachment D
Raytheon Company
Preliminary Financial Information
Third Quarter 2004
(In millions)
Balance sheets
26-Sep-04 31-Dec-03
Assets
Cash and cash equivalents $1,049 $661
Short-term investments 74 -
Accounts receivable 452 485
Contracts in process 2,871 2,660
Inventories 1,965 1,998
Deferred federal and foreign income
taxes 534 466
Prepaid expenses and other current
assets 262 154
Assets from discontinued operations 20 59
Total current assets 7,227 6,483
Property, plant and equipment, net 2,671 2,711
Deferred federal and foreign income
taxes 156 337
Goodwill 11,477 11,479
Other assets, net 2,467 2,556
Total assets $23,998 $23,566
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $835 $15
Advance payments, less contracts in
process 1,150 936
Accounts payable 824 833
Accrued salaries and wages 932 767
Other accrued expenses 1,185 1,086
Liabilities from discontinued
operations 30 43
Total current liabilities 4,956 3,680
Accrued retiree benefits and other
long-term liabilities 3,256 3,281
Long-term debt 5,135 6,517
Subordinated notes payable 458 859
Minority interest 92 67
Stockholders' equity 10,101 9,162
Total liabilities and
stockholders' equity $23,998 $23,566
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Third Quarter 2004
(In millions)
Cash flow information
Three Months Ended
26-Sep-04 28-Sep-03
Income from continuing operations $186 $21
Depreciation 93 82
Amortization 19 16
Working capital (62) 402
Discontinued operations (16) (64)
Capital spending (75) (106)
Internal use software spending (23) (22)
Other 82 142
Subtotal - free cash flow (a) 204 471
Net activity in financing receivables 48 (2)
Acquisitions - (20)
Divestitures and sale of investments - 14
Dividends (90) (82)
Issuance of common stock - 28
Debt repayments (143) (450)
Synthetic lease maturity - (125)
Other 26 5
Total cash flow $45 $(161)
Segment free cash flow information
Three Months Ended
26-Sep-04 28-Sep-03
Integrated Defense Systems $80 $36
Intelligence and Information Systems 71 43
Missile Systems 28 196
Network Centric Systems 140 111
Space and Airborne Systems 50 153
Technical Services 22 36
Aircraft 58 (95)
Other (7) (4)
Discontinued operations (16) (64)
Corporate (222) 59
$204 $471
(a) See Attachment F for a description of free cash flow.
Attachment F
Raytheon Company
Non-GAAP Financial Measures and Other Information
Third Quarter 2004
(In millions except per share amounts)
This release contains non-GAAP financial measures (as defined by SEC
Regulation G). While these non-GAAP financial measures may be useful in
evaluating the Company, this information should be considered supplemental
to and not as a substitute for financial information prepared in
accordance with generally accepted accounting principles.
Free cash flow is considered a "non-GAAP" financial measure under SEC
guidelines. The Company uses non-GAAP financial measures to facilitate
management's internal comparisons to the Company's historical operating
results, to competitor's operating results, and to provide greater
transparency to investors of supplemental information used by management
in its financial and operational decision-making. The Company uses
certain of these non-GAAP financial measures to evaluate its operating
performance and to determine management incentive compensation. The
Company also uses non-GAAP financial measures which exclude certain
charges and credits because it believes that such items are not indicative
of its core operating results, are not indicative of trends, and do not
provide meaningful comparisons with other reporting periods.
Free cash flow
Guidance
Three Months Ended Twelve Months Ended
26-Sep-04 28-Sep-03 31-Dec-04 31-Dec-05
Operating cash flow $302 $599 $1,670+ $1,700-1,900
Less: Capital spending (75) (106) (400) (400)-(425)
Internal use software spending (23) (22) (115) (140)-(160)
Free cash flow 204 471 1,150+ 1,120-1,315
Less: Discontinued operations (16) (64) (40)-(50) (15)-(20)
Free cash flow from
continuing operations $220 $535 $1,100+ $1,100-$1,300
Q3 2003 NCS and TS EPS Charge Impact
28-Sep-03
Operating income impact of NCS
charge $187
Operating income impact of TS
charge 39
Total NCS and TS charge $226
Effective tax rate for the nine
months ended September 28, 2003 30.1%
After tax impact of NCS and TS
charge $158
Q3 2003 diluted shares outstanding 417.8
Q3 2003 NCS and TS EPS charge
impact $0.38
FAS/CAS Pension Adjustment Impact
Three Months Ended
26-Sep-04 28-Sep-03 Change
FAS/CAS pension adjustment $(117) $(27)
Effective tax rate for the three
months ended September
26, 2004 and September 28, 2003,
respectively, excluding
the effect of charges related to the
early retirement of
debt in 2004 29.7% 27.6%
After tax impact of the FAS/CAS
pension adjustment $(82) $(20)
Q3 2004 and 2003 diluted shares
outstanding 453.5 417.8
Q3 2004 and 2003 FAS/CAS pension
adjustment impact $(0.18) $(0.05) $(0.13)
SOURCE Raytheon Company
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Related links:
http://www.raytheon.com
CONTACT:
Media Contact: James Fetig +1-781-522-5111
or Investor Relations Contact: Greg Smith, +1-781-522-5141, both
of Raytheon
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