Raytheon Reports Solid Second Quarter Results

WALTHAM, Mass., July 28, 2011 /PRNewswire/ -- Raytheon Company (NYSE: RTN) announced second quarter 2011 Adjusted EPS of $1.39 per diluted share compared to $1.34 per diluted share in the second quarter 2010(1).  

“Raytheon’s strong second quarter performance continues to reflect our focus on execution and cost reduction activities,” said William H. Swanson, Raytheon’s Chairman and CEO. “We also saw global demand for our technologies and innovative solutions which resulted in robust bookings in the quarter.”

Second quarter 2011 EPS from continuing operations was $1.23 compared to $0.56 in the second quarter 2010.  Second quarter 2011 included an unfavorable FAS/CAS Adjustment(1) of $0.16, compared to $0.08 in the second quarter 2010.  Second quarter 2010 also included a $0.71 per diluted share unfavorable adjustment related to a UK Border Agency program.

Net sales for the second quarter 2011 were $6.2 billion, compared to $6.0 billion in the second quarter 2010.  Second quarter 2010 net sales included a $316 million reduction for the UK Border Agency program adjustment.

Operating cash flow from continuing operations for the second quarter 2011 was an outflow of $91 million compared to a positive $400 million for the second quarter 2010. The change in operating cash flow from continuing operations was primarily due to one additional payroll period in the second quarter 2011 and higher cash tax payments in the second quarter 2011.

In the second quarter 2011, the Company repurchased 6.4 million shares of common stock for $313 million as part of its previously announced share repurchase program.  Year-to-date 2011, the Company repurchased 12.5 million shares of common stock for $625 million.

The Company ended the second quarter 2011 with $1.5 billion of net debt.  Net debt is defined as total debt less cash and cash equivalents.

(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.  Q2 2010 Adjusted EPS and Adjusted Operating Margin also exclude the impact of the UK Border Agency program adjustment as discussed above.  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.

Bookings and Backlog  

The Company reported strong bookings for the second quarter 2011 of $7.4 billion compared to $5.9 billion in the second quarter 2010, resulting in a book-to-bill ratio of 1.2. During the second quarter 2011, the Company booked $1.7 billion to upgrade the Patriot Air and Missile Defense System for the Kingdom of Saudi Arabia.  

Outlook

The Company has narrowed the 2011 full-year guidance for net sales and increased guidance for operating cash flow from continuing operations.  The Company has also updated the effective tax rate and EPS from Continuing Operations to reflect a third quarter favorable tax settlement of $55 million, including interest, or $0.15 per diluted share. 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

Integrated Defense Systems (IDS) had second quarter 2011 net sales of $1,272 million compared to $1,352 million in the second quarter 2010.  As expected, the change in net sales was primarily due to lower sales on a U.S. Navy program.  IDS recorded $203 million of operating income compared to $218 million in the second quarter 2010, driven by the change in volume.

During the quarter, IDS booked $1.7 billion to upgrade the Patriot Air and Missile Defense System for the Kingdom of Saudi Arabia.

Intelligence and Information Systems

Intelligence and Information Systems (IIS) had second quarter 2011 net sales of $752 million compared to $472 million in the second quarter 2010.  IIS recorded $55 million of operating income compared to $330 million of operating loss in the second quarter 2010.  The impact of the UK Border Agency program adjustment reduced IIS’ second quarter 2010 net sales and operating income by $316 million and $395 million, respectively.

During the quarter, IIS booked $85 million for development on the Global Positioning System Operational Control Segment (GPS-OCX) program for the U.S. Air Force.  IIS also booked $481 million on a number of classified contracts.

Missile Systems

Missile Systems (MS) had second quarter 2011 net sales of $1,366 million compared to $1,415 million in the second quarter 2010.  The change in net sales was primarily due to lower sales on Standard Missile-2 (SM-2).  MS recorded $151 million of operating income compared to $162 million in the second quarter 2010, driven by the change in volume.  

During the quarter, MS booked $315 million for the development of Standard Missile-3 (SM-3) for the Missile Defense Agency. MS also booked $200 million for production of Standard Missile-6 (SM-6) for the U.S. Navy, $91 million for production of Miniature Air Launch Decoy (MALD®) for the U.S. Air Force and $81 million for the production of Tube-launched, Optically-tracked, Wireless-guided (TOW) weapon for the U.S. Army.  

Network Centric Systems

Network Centric Systems (NCS) had second quarter 2011 net sales of $1,135 million compared to $1,205 million in the second quarter 2010.  The change in net sales was primarily due to lower sales on U.S. Army sensor programs.  NCS recorded $170 million of operating income compared to $164 million in the second quarter 2010.  The increase in operating income was primarily due to favorable contract mix.

During the quarter, NCS booked $99 million for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S. Army.

Space and Airborne Systems

Space and Airborne Systems (SAS) had second quarter 2011 net sales of $1,344 million, up 12 percent compared to $1,197 million in the second quarter 2010, primarily due to growth on intelligence, surveillance and reconnaissance (ISR) systems programs and higher net sales related to Raytheon Applied Signal Technology (RAST), which was acquired in the first quarter of 2011.  SAS recorded $176 million of operating income compared to $169 million in the second quarter 2010.

During the quarter, SAS booked $109 million on an international program and $79 million for the production of Active Electronically Scanned Array (AESA) radars for the U.S. Air Force and the Air National Guard.  SAS also booked $160 million on a number of classified contracts.

Technical Services

Technical Services (TS) had second quarter 2011 net sales of $851 million compared to $834 million in the second quarter 2010.  TS recorded operating income of $72 million compared to $71 million in the second quarter 2010.  

During the quarter, TS booked $612 million on domestic training programs and $119 million on foreign training programs in support of Warfighter FOCUS activities.  TS also booked $100 million for base operations, maintenance and support services at the Harold E. Holt Naval Communications station for Australia.

About Raytheon Company

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 Second Quarter 2011 Financial Results

Raytheon’s financial results conference call will be held on Thursday, July 28, 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 (866) 318-8615 in the U.S. or (617) 399-5134 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.

SOURCE Raytheon Company