Raytheon Reports Solid Second Quarter 2012 Results

WALTHAM, Mass., July 26, 2012 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE: RTN) announced second quarter 2012 Adjusted EPS of $1.55 per diluted share compared to $1.37 per diluted share in the second quarter 2011¹, up 13 percent. The increase was driven by operational improvements and capital deployment actions. Second quarter 2012 EPS from continuing operations was $1.41 compared to $1.20 in the second quarter 2011. Second quarter 2012 included an unfavorable FAS/CAS Adjustment of $0.14, compared with an unfavorable FAS/CAS Adjustment of $0.16 in the second quarter 2011.

"Raytheon reported solid operating performance in the second quarter driven by strong execution across the Company," said William H. Swanson, Raytheon's Chairman and CEO. "As we celebrate our 90th anniversary this month, we continue to build on a long heritage of solving complex customer problems with innovative solutions and world class technology while creating value for shareholders and customers."

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¹ Adjusted EPS is EPS from continuing operations attributable to Raytheon Company common stockholders and Adjusted Operating Margin is total operating margin, in each case, excluding the impact of the FAS/CAS Adjustment, and from time to time, certain other items. Adjusted EPS and Adjusted Operating Margin are non-GAAP financial measures. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.

Net sales for the second quarter 2012 were $5,992 million, compared to $6,201 million in the second quarter 2011.

Operating cash flow from continuing operations for the second quarter 2012 was an outflow of $259 million compared to an outflow of $89 million for the second quarter 2011. Year-to-date operating cash flow from continuing operations was an outflow of $148 million versus an outflow of $29 million for the comparable period in 2011. The change in operating cash from continuing operations for both the quarter and year-to-date were primarily due to the timing of collections.

In the second quarter 2012, the Company repurchased 4.0 million shares of common stock for $200 million as part of its previously announced share repurchase program. Year-to-date 2012, the Company repurchased 11.9 million shares of common stock for $600 million.

The Company ended the second quarter 2012 with $1.7 billion of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.

The Company had bookings of $6.2 billion in the second quarter 2012 and ended the quarter with a backlog of $33.9 billion.

Outlook

The Company has updated its full-year 2012 outlook and increased guidance for EPS and operating cash flow from continuing operations. Charts containing additional information on the Company's 2012 outlook are available on the Company's website at http://raytheon.com/ir.

Segment Results

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

Integrated Defense Systems (IDS) had second quarter 2012 net sales of $1,221 million compared to $1,272 million in the second quarter 2011. As expected, the change in net sales was primarily due to lower sales on a U.S. Navy program. IDS recorded $236 million of operating income compared to $203 million in the second quarter 2011. The change in operating income was primarily due to favorable contract mix and improved program performance.

During the quarter, IDS booked $134 million to provide advanced Patriot air and missile defense capability for an international customer.

Intelligence and Information Systems (IIS) had second quarter 2012 net sales of $751 million compared to $752 million in the second quarter 2011. IIS recorded $61 million of operating income compared to $55 million in the second quarter 2011.

During the quarter, IIS booked $458 million on a number of classified contracts.

Missile Systems (MS) had second quarter 2012 net sales of $1,355 million compared to $1,366 million in the second quarter 2011. MS recorded $169 million of operating income compared to $151 million in the second quarter 2011. The increase in operating income was primarily due to improved program performance. Second quarter 2011 included an unfavorable $15 million adjustment related to a contractual settlement.

During the quarter, MS booked $687 million for an Exoatmospheric Kill Vehicle (EKV) contract for the Missile Defense Agency (MDA). MS also booked $348 million for Tomahawk for the U.S. Navy and international customers, and $302 million for the production of Standard Missile-6 (SM-6) for the U.S. Navy.

Network Centric Systems (NCS) had second quarter 2012 net sales of $962 million compared to $1,135 million in the second quarter 2011. The change in net sales, as expected, was primarily due to lower sales on U.S. Army programs. NCS recorded $123 million of operating income compared to $170 million in the second quarter 2011. The change in operating income was primarily due to a change in contract mix and lower volume in the second quarter 2012.

During the quarter, NCS booked $90 million on the Standard Terminal Automation Replacement System (STARS) program for the Federal Aviation Administration (FAA) and $82 million on the Advanced Field Artillery Tactical Data System (AFATDS) program for the U.S. Army.

Space and Airborne Systems (SAS) had second quarter 2012 net sales of $1,377 million compared to $1,344 million in the second quarter 2011. The increase in net sales was primarily due to higher net sales on an international tactical radar program. SAS recorded $204 million of operating income compared to $176 million in the second quarter 2011. The increase in operating income was primarily due to improved program performance.

During the quarter, SAS booked $205 million to provide multi-spectral targeting systems (MTS) for Unmanned Aerial Vehicles to the U.S. Air Force. SAS also booked $462 million on a number of classified contracts.

Technical Services (TS) had second quarter 2012 net sales of $821 million compared to $851 million in the second quarter 2011. The change in net sales was primarily due to lower net sales on a National Science Foundation (NSF) Polar contract, which was completed in the first quarter 2012. TS recorded operating income of $75 million compared to $72 million in the second quarter 2011. The increase in operating income was primarily due to improved program performance.

During the quarter, TS booked $568 million on domestic training programs and $90 million on foreign training programs in support of Warfighter FOCUS activities.

About Raytheon
Raytheon Company, with 2011 sales of $25 billion and 71,000 employees worldwide, 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. Raytheon is headquartered in Waltham, Mass. For more about Raytheon, visit us at www.raytheon.com and follow us on Twitter at @raytheon.

Conference Call on the Second Quarter 2012 Financial Results
Raytheon's financial results conference call will be held on Thursday, July 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.

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