Raytheon Reports Solid Fourth Quarter and Full-Year 2010 Results

WALTHAM, Mass., Jan. 27, 2011 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE: RTN) announced fourth quarter 2010 Adjusted EPS of $1.57 per diluted share compared to $1.31 per diluted share in the fourth quarter 2009(1), up 20 percent.  The increase was primarily driven by operational improvements and capital deployment actions.  Fourth quarter 2010 EPS from continuing operations was $1.37 compared to $1.30 in the fourth quarter 2009. Fourth quarter 2010 and fourth quarter 2009 EPS from continuing operations included net charges of $0.10 and $0.03, respectively, associated with the impacts of the early debt retirements. Fourth quarter 2010 also included FAS/CAS pension expense of $0.11, compared to $0.01 of FAS/CAS pension income in the fourth quarter 2009.

"Raytheon's focus on performance drove solid operating results," said William H. Swanson, Raytheon's Chairman and CEO. "The depth and breadth of our product portfolio coupled with outstanding execution positions the company well going forward."

Net sales in the fourth quarter 2010 were $6.9 billion compared to $6.7 billion in the fourth quarter 2009.  

Operating cash flow from continuing operations in the fourth quarter 2010 was $861 million after a $750 million discretionary cash contribution made to the Company's pension plans, compared to $1,073 million in the fourth quarter 2009. The strong operating cash flow from continuing operations in the fourth quarter 2010 was primarily due to the timing of collections and lower cash taxes.

In the fourth quarter 2010, the Company repurchased 5.3 million shares of common stock for $250 million, as part of its previously announced share repurchase program.  For the full-year 2010 the Company repurchased 29.0 million shares of common stock for $1,450 million.

As previously announced, in the fourth quarter 2010, the Company issued $2.0 billion in long-term debt and retired $678 million in long-term debt maturing in 2012 and 2013.  As a result of the debt retirement and issuance of longer maturities, the Company extended the term of its debt structure at lower interest rates.  

Also as previously announced, in the fourth quarter 2010, the Company signed a definitive agreement to acquire Applied Signal Technology, Inc. (AST) and commenced a cash tender offer to purchase all of the outstanding shares of common stock of AST. The transaction is expected to close in the first quarter 2011 and AST will become part of Raytheon's Space and Airborne Systems (SAS) business.

Full-Year Financial Results

Full-year 2010 Adjusted EPS was $5.58 per diluted share compared to $4.87 for the full-year 2009(2), up 15 percent.  The increase was primarily driven by operational improvements and capital deployment actions. Full-year 2010 EPS from continuing operations was $4.79 compared to $4.89 for the full-year 2009.

Net sales in 2010 were $25.2 billion, compared to $24.9 billion in 2009.  

The Company generated strong operating cash flow for the year.  Operating cash flow from continuing operations was $1.9 billion in 2010 after a $750 million discretionary cash contribution made to the Company's pension plans, compared to $2.7 billion in 2009. The Company made $1,902 million in total cash contributions to its pension plans in full-year 2010 compared to $1,115 million in full-year 2009.

The Company ended 2010 with a strong balance sheet, with $3.6 billion in cash and cash equivalents, and $3.6 billion in total debt.

(1) Adjusted EPS is EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS impact of the FAS/CAS pension adjustment and, from time to time, certain other items.  In addition to the FAS/CAS pension adjustment, Q4 2010 and 2009 Adjusted EPS exclude the impacts of early debt retirements in Q4 2010 and Q4 2009, and full-year 2010 and 2009 EPS exclude the impacts of the UK Border Agency program adjustment in Q2 2010, a favorable tax settlement in Q3 2010 and early debt retirements in Q4 2010 and Q4 2009.  Adjusted EPS is a non-GAAP financial measure. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.

(2) Adjusted EPS is EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS impact of the FAS/CAS pension adjustment and, from time to time, certain other items.  In addition to the FAS/CAS pension adjustment, full-year 2010 and 2009 EPS exclude the impacts of the UK Border Agency program adjustment in Q2 2010, a favorable tax settlement in Q3 2010 and early debt retirements in Q4 2010 and Q4 2009.  Adjusted EPS is a non-GAAP financial measure. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.

Bookings and Backlog  

The Company reported bookings for the full-year 2010 of $24.4 billion and ended with a backlog of $34.6 billion.  Bookings in 2010 were affected by the timing of both domestic and international awards.

Outlook

The Company has provided its financial outlook for 2011.  Charts containing additional information on the Company's 2011 outlook are available on the Company's website at www.raytheon.com/ir.

Segment Results

Integrated Defense Systems

Fourth Quarter

Integrated Defense Systems (IDS) had fourth quarter 2010 net sales of $1,463 million compared to $1,541 million in the fourth quarter 2009.  The change in net sales was primarily due to lower sales on various U.S. Navy programs and on two joint battlefield sensor programs, partially offset by higher sales on international Patriot programs.  IDS recorded $240 million of operating income compared to $249 million in the fourth quarter 2009.  The change in operating income was primarily due to lower sales.

During the quarter, IDS booked $131 million to provide Patriot Guidance Enhanced Missile-Tactical (GEM-T) missiles for Kuwait, $120 million to provide Consolidated Contractor Logistics Support (CCLS) for the Missile Defense Agency (MDA), and $112 million on the Air & Missile Defense Radar (AMDR) program for the U.S. Navy.

Full-year

IDS had full-year 2010 net sales of $5,470 million compared to $5,525 million in 2009. The change in net sales was primarily due to lower sales on various U.S. Navy programs and on two joint battlefield sensor programs, partially offset by higher sales on international Patriot programs. IDS recorded $879 million of operating income in 2010 compared to $859 million in 2009.  The increase in operating income was primarily due to operational improvements.

During the year, IDS booked $400 million to provide advanced Patriot air and missile defense capability for an international customer, $271 million on the Zumwalt-class destroyer program for the U.S. Navy, $228 million on the Aegis weapon system for the U.S. Navy, $222 million to provide engineering services support for a Patriot air and missile defense program for U.S. and international customers, $190 million for a U.S. Army/U.S. Navy Transportable Radar Surveillance (AN/TPY-2) radar for the MDA, $148 million to provide CCLS for the MDA, $131 million to provide GEM-T missiles for Kuwait, and $112 million on the AMDR program for the U.S. Navy.

Intelligence and Information Systems

Fourth Quarter

Intelligence and Information Systems (IIS) had fourth quarter 2010 net sales of $820 million compared to $803 million in the fourth quarter 2009. The increase in net sales was primarily due to higher sales on Global Positioning System Operational Control Segment (GPS-OCX), a GPS command, control and mission capabilities program.  IIS recorded $69 million of operating income compared to $64 million in the fourth quarter 2009.  The increase in operating income was primarily due to improved program performance.

During the quarter, IIS booked $167 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force.  IIS also booked $281 million on a number of classified contracts.

Full-year

IIS had full-year 2010 net sales of $2,757 million compared to $3,204 million in 2009. The change in net sales was primarily due to lower sales on the UK Border Agency program and a U.S. Air Force program, partially offset by higher sales on the GPS-OCX program.  

During the year, IIS booked $901 million on a contract to develop the next-generation GPS-OCX for the U.S. Air Force, $167 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force, and $80 million on the Earth Observing System Data and Information System (EOSDIS) contract for NASA.  IIS also booked $1,723 million on a number of classified contracts.

Missile Systems

Fourth Quarter

Missile Systems (MS) had fourth quarter 2010 net sales of $1,565 million, up 11 percent compared to $1,413 million in the fourth quarter 2009, primarily due to higher sales on the Paveway™, Standard Missile-3 (SM-3), and Advanced Medium-Range Air-to-Air Missiles (AMRAAM) programs. MS recorded $170 million of operating income compared to $154 million in the fourth quarter 2009.  The increase in operating income was primarily due to higher volume.

During the quarter, MS booked $546 million for the production of Paveway™ for the Kingdom of Saudi Arabia and other international customers, $247 million for the production of Tomahawk missiles for the U.S. Navy, and $85 million on a classified program.

Full-year

MS had full-year 2010 net sales of $5,732 million compared to $5,561 million in 2009.  The increase in net sales in 2010 was primarily due to higher sales on the SM-3, AMRAAM, Tube Launched, Optically Tracked, Wireless (TOW) missiles, and Paveway™ programs.  MS recorded $654 million of operating income in 2010 compared to $604 million in 2009.  The increase in operating income in 2010 was primarily due to favorable contract mix and improved program performance.  

During the year, MS booked $743 million for SM-3, $698 million for AMRAAM, $675 million on a classified program, $668 million for Paveway™, $501 million for Tomahawk missiles, $451 million for engineering and manufacturing development on the Small Diameter Bomb II (SDB II) contract, $425 million for Standard Missile-2 (SM-2), $274 million for Rolling Airframe Missiles (RAM), $271 million for Phalanx Weapon Systems, $262 million for development work on the Exoatmospheric Kill Vehicle (EKV), $209 million for AIM-9X Sidewinder short range air-to-air missiles, $198 million for the Javelin program, $168 million for Miniature Air Launched Decoys (MALD), $147 million for Evolved Sea Sparrow Missiles (ESSM), $122 million for TOW missiles, and $114 million for Joint Stand-off Weapon (JSOW).

Network Centric Systems

Fourth Quarter

Network Centric Systems (NCS) had fourth quarter 2010 net sales of $1,310 million, up 4 percent compared to $1,259 million in the fourth quarter 2009, primarily due to higher sales on a classified international program. NCS recorded $198 million of operating income compared to $169 million in the fourth quarter 2009.  The increase in operating income was primarily due to improved program performance.

During the quarter, NCS booked $180 million on the Standard Terminal Automation Replacement System (STARS) program for the Federal Aviation Administration (FAA) and Department of Defense (DoD), $96 million for Improved Thermal Sight Systems (ITSS) for an international customer, and $94 million for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S. Army.

Full-year

NCS had full-year 2010 net sales of $4,918 million compared to $4,822 million in 2009.  The increase in net sales was primarily due to sales related to detection systems and customer funded research and development.  NCS recorded $701 million of operating income compared to $674 million in 2009.  The increase in operating income was primarily due to improved program performance and higher sales.

During the year, NCS booked $254 million on the STARS program for the FAA and DoD, $250 million for LRAS3 for the U.S. Army, $146 million on a command and control program for an international customer, $111 million for Horizontal Technology Integration (HTI) forward-looking infrared kits for the U.S. Army, $104 million on the Navy Multiband Terminal (NMT) program for the U.S. Navy, and $96 million for ITSS for an international customer.

Space and Airborne Systems

Fourth Quarter

Space and Airborne Systems (SAS) had fourth quarter 2010 net sales of $1,300 million, up 3 percent compared to $1,266 million in the fourth quarter 2009, primarily due to growth on classified business and on a multi-spectral targeting system program. SAS recorded $165 million of operating income compared to $174 million in the fourth quarter 2009.  The change in operating income was primarily due to a change in contract mix.

During the quarter, SAS booked $374 million for the production of Active Electronically Scanned Array (AESA) radars for the U.S. Navy and an international customer. SAS also booked $192 million on a number of classified contracts.

Full-year

SAS had full-year 2010 net sales of $4,830 million, up 5 percent compared to $4,582 million in 2009.  The increase in net sales was primarily due to growth in classified business.  SAS recorded $686 million of operating income in 2010 compared to $647 million in 2009.  The increase in operating income was primarily due to higher sales and favorable contract mix, partially offset by $19 million of favorable contractual settlements in 2009.

During the year, SAS booked $618 million for the production of AESA radars for the U.S. Air Force, U.S. Navy, Air National Guard and international customers, and $90 million for the production of Advanced Countermeasures Electronic System (ACES) for Egypt. SAS also booked $1,106 million on a number of classified contracts.

Technical Services

Fourth Quarter

Technical Services (TS) had fourth quarter 2010 net sales of $964 million, up 9 percent compared to $888 million in the fourth quarter 2009, primarily due to growth in domestic and foreign training programs supporting the U.S. Army's Warfighter Field Operations Customer Support (FOCUS) activities and higher sales on programs with the Transportation Security Administration (TSA).  TS recorded operating income of $83 million in the fourth quarter 2010 compared to $58 million in the fourth quarter 2009, primarily due to operational improvements.  

During the quarter, TS booked $91 million on domestic training programs and $47 million on foreign training programs in support of the Warfighter FOCUS activities.

Full-year

TS had full-year 2010 net sales of $3,472 million, up 10 percent compared to $3,161 million in 2009.  The increase in net sales was primarily due to growth in domestic and foreign training programs and programs with the TSA.  TS recorded operating income of $300 million in 2010 compared to $215 million in 2009.  The increase in operating income was primarily due to operational improvements.  

During the year, TS booked $952 million on domestic training programs and $328 million on foreign training programs in support of the Warfighter FOCUS activities. TS also booked $173 million to provide operational and logistics support to the National Science Foundation (NSF) Office of Polar Programs and $88 million on the Security Equipment Integration Services (SEIS) contract for the TSA.

Raytheon Company (NYSE: RTN), with 2010 sales of $25 billion, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 89 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.

Conference Call on the Fourth Quarter and Full-Year 2010 Financial Results

Raytheon's financial results conference call will be held on Thursday, January 27, 2011 at 9 a.m. ET. 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 (877) 415-3182 in the U.S. or (857) 244-7325 outside of the U.S.  The conference call will also be audiocast on the Internet at www.raytheon.com/ir.  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.

Disclosure Regarding Forward-looking Statements

This release and the attachments contain forward-looking statements, including information regarding the Company's 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 resolution of program terminations; 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, the Foreign Corrupt Practices Act, the International Traffic in Arms Regulations, and procurement and other regulations; the impact of competition; the ability to develop products and technologies; the impact of changes in the financial markets and global economic conditions; the risk that actual pension returns, discount rates or other actuarial assumptions are significantly different than the Company's assumptions; 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.

SOURCE Raytheon Company