Raytheon Reports Solid Fourth Quarter and Full-Year 2011 Results

WALTHAM, Mass., Jan. 26, 2012 /PRNewswire/ --

• Fourth quarter 2011 Adjusted EPS of $1.74, up 12 percent; EPS from continuing operations was $1.58(1)
• Full-year 2011 Adjusted EPS of $5.90, up 7 percent; full-year 2011 EPS from continuing operations was $5.28(1)
• Strong operating cash flow of $1.3 billion in the quarter and $2.2 billion for the year after a $750 million discretionary pension plan contribution
• Strong bookings of $7.1 billion in the quarter and $26.6 billion for the year; book-to-bill of 1.11 in the quarter and 1.07 for the year

Raytheon Company (NYSE: RTN) announced fourth quarter 2011 Adjusted EPS of $1.74 per diluted share compared to $1.55 per diluted share in the fourth quarter 2010(1).  The increase was driven by operational improvements and capital deployment actions.  Fourth quarter 2011 EPS from continuing operations was $1.58 compared to $1.37 in the fourth quarter 2010.  Fourth quarter 2011 included an unfavorable FAS/CAS Adjustment(1) of $0.16, compared with an unfavorable FAS/CAS Adjustment of $0.09 in the fourth quarter 2010. Fourth quarter 2010 EPS from continuing operations also included a $0.10 net charge associated with the impact of early debt retirement.

"In a year of economic uncertainty, the Raytheon team focused on what we do best - ensuring customer success through program performance and product innovation," said William H. Swanson, Raytheon's Chairman and CEO.  "Improved efficiencies and lower costs drove operating margin and earnings performance, while global demand for our affordable solutions resulted in strong orders."

Net sales for the fourth quarter 2011 were $6,441 million, compared to $6,885 million in the fourth quarter 2010, with 5 fewer workdays in the fourth quarter 2011.  The Company reported strong bookings for the fourth quarter 2011 of $7,147 million compared to $5,984 million in the fourth quarter 2010, resulting in a book-to-bill ratio of 1.11.

The Company generated strong operating cash flow in the quarter.  Operating cash flow from continuing operations for the fourth quarter 2011 was $1,319 million compared to $861 million for the fourth quarter 2010. Both fourth quarter 2011 and fourth quarter 2010 included $750 million in discretionary cash contributions to the Company's pension plans. The increase in operating cash flow from continuing operations in the fourth quarter 2011 was primarily due to the timing of collections.

In the fourth quarter 2011, the Company repurchased 7.0 million shares of common stock for $313 million as part of its previously announced share repurchase program.  For the full-year 2011, the Company repurchased 27.1 million shares of common stock for $1,250 million.  

Full-Year Financial Results

Full-year 2011 Adjusted EPS was $5.90 per diluted share compared to $5.51 for the full-year 2010(2), up 7 percent.  The increase was primarily driven by operational improvements and capital deployment actions. Full-year 2011 EPS from continuing operations was $5.28 compared to $4.79 for the full-year 2010.

Net sales in 2011 were $24.9 billion, compared to $25.2 billion in 2010.  The Company reported strong bookings in 2011 of $26.6 billion compared to $24.4 billion in 2010, resulting in a book-to-bill ratio of 1.07.

The Company generated strong operating cash flow for the year.  Operating cash flow from continuing operations was $2.2 billion in 2011, compared to $1.9 billion in 2010. Both 2011 and 2010 included $750 million in discretionary cash contributions to the Company's pension plans. The Company made $1.8 billion in total cash contributions to its pension plans in 2011 compared to $1.9 billion in 2010.

In the fourth quarter 2011, the Company issued $1.0 billion in long-term debt.  The Company ended the year with $605 million of net debt.  Net debt is defined as total debt less cash and cash equivalents.

Bookings and Backlog

The Company ended 2011 with a backlog of $35.3 billion, compared to $34.6 billion at the end of 2010.  

Outlook

The Company has provided its financial outlook for 2012.  Charts containing additional information on the Company's 2012 outlook are available on the Company's website at www.raytheon.com/ir. In the first quarter of 2012, the Company sold the remaining operating assets at a slight gain and ceased operations of Raytheon Airline Aviation Services (RAAS), the Company's residual turbo-prop commuter aircraft portfolio.  Accordingly, the favorable 2011 financial results of RAAS will be reclassified to discontinued operations beginning in the first quarter of 2012.  

Segment Results(3)

The Company's reportable segments, organized based on capabilities and technologies are: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, and Technical Services.

Fourth Quarter

Integrated Defense Systems (IDS) had fourth quarter 2011 net sales of $1,291 million compared to $1,463 million in the fourth quarter 2010.  As expected, the change in net sales was primarily due to lower sales on a U.S. Navy program and on an international Patriot program.  IDS recorded $236 million of operating income compared to $238 million in the fourth quarter 2010.  The change in operating income was primarily due to the change in volume partially offset by improved program performance and favorable contract mix.

During the quarter, IDS booked $2,771 million including $1,027 million for AN/TPY-2 radar contract awards for the United Arab Emirates (UAE), Missile Defense Agency (MDA) and U.S. Army.  IDS also booked $560 million to provide advanced Patriot air and missile defense capability for Taiwan, $243 million on the Zumwalt-class destroyer program for the U.S. Navy, $177 million to provide Consolidated Contractor Logistics Support (CCLS) for the MDA, and $81 million for the production of Airborne Low Frequency Sonar (ALFS) systems for the Australian Navy.  

Full-year

IDS had full-year 2011 net sales of $4,958 million compared to $5,470 million in 2010. As expected, the change in net sales was primarily due to lower sales on a U.S. Navy program and an international Patriot program. IDS recorded $836 million of operating income in 2011 compared to $870 million in 2010.  The change in operating income was primarily due to the change in volume partially offset by improved program performance.

IDS had full-year 2011 bookings of $6,392 million. During the year, IDS booked $3,147 million for the Patriot Air and Missile Defense System, including $1,698 million for the Kingdom of Saudi Arabia, $560 million for Taiwan, $340 million for other international customers, and $257 million to provide engineering services support for U.S. and international customers. IDS booked $1,027 million for AN/TPY-2 radar contract awards for the UAE, MDA and U.S. Army. IDS also booked $345 million on the Zumwalt-class destroyer program for the U.S. Navy, $268 million for the production of ALFS systems and spares for the U.S. Navy and the Australian Navy, $193 million to provide CCLS for the MDA, and $107 million for development on the competitively awarded Space Fence program for the U.S. Air Force.  

Fourth Quarter

Intelligence and Information Systems (IIS) had fourth quarter 2011 net sales of $753 million compared to $820 million in the fourth quarter 2010.  The change in net sales was primarily due to lower sales on domestic programs. IIS recorded $74 million of operating income compared to $67 million in the fourth quarter 2010.  Fourth quarter 2011 operating income included the recovery of an insurance claim.

During the quarter, IIS booked $433 million on a number of classified contracts.

In addition, as previously announced during the quarter, the Company acquired Pikewerks Corporation and Henggeler Computer Consultants, Inc., further extending the Company's capabilities to serve the cybersecurity, enterprise architecture and systems engineering needs of customers in the intelligence community as well as in the Department of Defense.

Full-year

IIS had full-year 2011 net sales of $3,015 million compared to $2,757 million in 2010. The change in net sales was primarily due to the 2010 UKBA program adjustment and higher sales on the Global Positioning System Operational Control Segment (GPS-OCX) program. IIS recorded $159 million of operating income in 2011 compared to a loss of $157 million in 2010.  The change in operating income was primarily due to adjustments related to the UKBA program and favorable contract mix.

During the year, IIS booked $520 million on the Joint Polar Satellite System (JPSS) program for NASA and $183 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force. IIS also booked $1,554 million on a number of classified contracts.

Fourth Quarter

Missile Systems (MS) had fourth quarter 2011 net sales of $1,482 million compared to $1,565 million in the fourth quarter 2010. The change in net sales was primarily due to lower sales on the Rolling Airframe Missile (RAM) and Standard Missile-2 (SM-2) programs.  MS recorded $209 million of operating income compared to $170 million in the fourth quarter 2010.  The increase in operating income was primarily due to improved program performance and a favorable contractual resolution.  

During the quarter, MS booked $383 million for the development of Standard Missile-3 (SM-3) for the Missile Defense Agency (MDA), $131 million for Paveway™ and $86 million for Advanced Medium-Range Air-to-Air Missiles (AMRAAM) for international customers; and $128 million for Evolved Seasparrow Missiles (ESSM) to the U.S. Navy and international customers; and $90 million for the Joint Stand-off Weapon (JSOW) for the U.S. Navy.  MS also booked $85 million for the development and production of Excalibur for the U.S. Marine Corps and U.S. Army.

Full-year

MS had full-year 2011 net sales of $5,590 million compared to $5,732 million in 2010.  The change in net sales was primarily due to lower sales on the SM-2, ESSM, and SM-3 programs, partially offset by higher sales on the Small Diameter Bomb II (SDB II) and Paveway™ programs.  MS recorded $693 million of operating income in 2011 compared to $650 million in 2010.  The increase in operating income in 2011 was primarily due to favorable contract mix and improved program performance.  

During the year, MS booked $1,402 million for SM-3, $696 million for AMRAAM, $393 million for ESSM, $374 million for Phalanx Weapon Systems, $311 million for Excalibur, $270 million for Paveway™, $237 million for SM-2, $225 million on a classified program, $210 million for Standard Missile-6 (SM-6), $191 million for JSOW, $152 million for Tube Launched, Optically Tracked, Wireless (TOW) missiles, and $113 million for Miniature Air Launched Decoys (MALD).

Fourth Quarter

Network Centric Systems (NCS) had fourth quarter 2011 net sales of $1,137 million compared to $1,310 million in the fourth quarter 2010.  The change in net sales was primarily due to lower sales on U.S. Army programs.  NCS recorded $175 million of operating income compared to $196 million in the fourth quarter 2010.  The change in operating income was primarily due to lower volume partially offset by improved program performance.

Full-year

NCS had full-year 2011 net sales of $4,497 million compared to $4,918 million in 2010.  The change in net sales was primarily due to lower sales on U.S. Army programs.  NCS recorded $667 million of operating income compared to $692 million in 2010.  The change in operating income was primarily due to lower volume partially offset by improved program performance and favorable contract mix.

During the year, NCS booked $211 million for the production of Sentinel radars, spares, and services for the U.S. Army and international customers, $146 million for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S. Army, $71 million for the Thermal Weapon Sight (TWS) program for the U.S. Army and $64 million for Enhanced Position Location Reporting System (EPLRS) and MicroLight® radios for the Australian Defence Materiel Organisation (DMO).

Fourth Quarter

Space and Airborne Systems (SAS) had fourth quarter 2011 net sales of $1,341 million compared to $1,300 million in the fourth quarter 2010.  The increase in net sales was primarily due to higher net sales related to Raytheon Applied Signal Technology, which was acquired in the first quarter of 2011.  SAS recorded $214 million of operating income compared to $163 million in the fourth quarter 2010.  The increase in operating income was primarily due to improved program performance.

During the quarter, SAS booked $212 million for the production of Active Electronically Scanned Array (AESA) radars for the U.S. Navy. SAS also booked $177 million on a number of classified contracts.

Full-year

SAS had full-year 2011 net sales of $5,255 million, up 9 percent compared to $4,830 million in 2010.  The increase in net sales was primarily due to higher net sales related to Raytheon Applied Signal Technology, and growth on intelligence, surveillance and reconnaissance (ISR) systems programs and an international airborne tactical radar program.  SAS recorded $717 million of operating income in 2011 compared to $676 million in 2010.  The increase in operating income was primarily due to higher sales and improved program performance partially offset by acquisition-related costs related to Raytheon Applied Signal Technology.

During the year, SAS booked $782 million on an international AESA program for F-15's to the Kingdom of Saudi Arabia, $291 million for the production of AESA radars for the U.S. Air Force, U.S. Navy and the Air National Guard, and $78 million on radar contracts for an international customer.  SAS also booked $954 million on a number of classified contracts.

Fourth Quarter

Technical Services (TS) had fourth quarter 2011 net sales of $886 million compared to $964 million in the fourth quarter 2010.  The change in net sales was primarily due to lower sales on programs nearing completion, including a Defense Threat Reduction Agency (DTRA) program and a Transportation Security Administration (TSA) program. TS recorded operating income of $84 million compared to $82 million in the fourth quarter 2010.  The change in operating income was primarily due to improved program performance.

During the quarter, TS booked $39 million on domestic training programs and $98 million on foreign training programs in support of Warfighter FOCUS activities.  

Full-year

TS had full-year 2011 net sales of $3,353 million compared to $3,472 million in 2010.  The change in net sales was primarily due to lower sales on a DTRA program, which is nearing completion and on Warfighter FOCUS, partially offset by higher sales on various depot services operations programs.  TS recorded operating income of $312 million in 2011 compared to $297 million in 2010.  The increase in operating income was primarily due to contract mix and operational improvements.  

During the year, TS booked $994 million on domestic training programs and $347 million on foreign training programs in support of the Warfighter FOCUS activities. TS also booked $150 million to provide operational and logistics support to the National Science Foundation (NSF) Office of Polar Programs, $120 million to design, develop and deliver technical training for a commercial customer and $100 million for base operations, maintenance and support services at the Harold E. Holt Naval Communications station for Australia.

About Raytheon

Raytheon Company, with 2011 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 90 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 71,000 people worldwide. For more about Raytheon, visit us at www.raytheon.com and follow us on Twitter at @raytheon.

Conference Call on the Fourth Quarter and Full-Year 2011 Financial Results

Raytheon's financial results conference call will be held on Thursday, January 26, 2012 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 (866) 510-0712 in the U.S. or (617) 597-5380 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 and cyber 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.

Investor Relations Contact
Todd Ernst
781.522.5141

Media Contact
Jon Kasle
781.522.5110

(1) Adjusted EPS is EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS impact of the FAS/CAS Adjustment and, from time to time, certain other items.  In addition to the FAS/CAS Adjustment: Q4 2010 Adjusted EPS excludes the impact of early debt retirement; full-year 2010 Adjusted EPS excludes the impact of the UKBA Program Adjustment in Q2 2010, a favorable tax settlement in Q3 2010 and early debt retirement in Q4 2010; full-year 2011 Adjusted EPS excludes the impact of the UKBA LOC Adjustment in Q1 2011 and the favorable tax settlement in Q3 2011. 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 Adjustment and, from time to time, certain other items.  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.

(3) Q4 2011 results reflect 5 fewer workdays compared with Q4 2010

SOURCE Raytheon Company