WALTHAM, Mass., Oct. 25, 2007 /PRNewswire-FirstCall/ -- Raytheon Company
(NYSE: RTN) reported third quarter 2007 income from continuing operations of
$304 million or $0.69 per diluted share compared to $267 million or $0.59 per
diluted share in the third quarter 2006. Third quarter 2007 income from
continuing operations was higher primarily due to operational improvements,
combined with lower net interest and pension expense, partially offset by an
after-tax impairment charge of $69 million ($84 million pretax) or $0.16 per
diluted share in connection with the disposition process of Flight Options.
Third quarter 2007 income from continuing operations excluding Flight Options
was $380 million or $0.86 per diluted share compared to $274 million or $0.61
per diluted share in the third quarter 2006. (1)
Raytheon also announced that on October 15, 2007 , it entered into a
definitive agreement to sell Flight Options to H.I.G. Capital, a global
private investment firm. This transaction is expected to close in the fourth
"Our program execution, strong backlog and customer focus are driving the
Company's performance and delivering value to our shareholders," said William
H. Swanson, Raytheon Chairman and CEO. "With the pending sale of Flight
Options, going forward our attention will be focused on our core business,
leading technologies and Mission Support to our global customers."
Third quarter 2007 net income was $299 million or $0.68 per diluted share
compared to $321 million or $0.71 per diluted share in the third quarter 2006.
Net income for the third quarter 2007 included a $5 million after-tax loss in
discontinued operations or $0.01 per diluted share versus a $54 million gain
or $0.12 in the third quarter 2006. Third quarter 2006 discontinued
operations results included Raytheon Aircraft Company (RAC), which was sold by
the Company in the second quarter 2007.
Net sales for the third quarter 2007 were $5.4 billion, up 8 percent from
$4.9 billion in the third quarter 2006 led primarily by Integrated Defense
Systems (IDS), Missile Systems (MS) and Network Centric Systems (NCS).
Operating cash flow from continuing operations for the third quarter 2007
was $735 million versus $733 million for the third quarter 2006. The third
quarter 2007 included $203 million in cash tax payments versus $53 million in
cash tax payments in the third quarter 2006. Of the cash taxes paid in the
third quarter 2007, $157 million was attributable to the gain on the sale of
Year-to-date operating cash flow from continuing operations was $310
million versus $1,159 million for the comparable period in 2006. The year-to-
date decrease in operating cash flow was primarily due to $846 million in cash
tax payments ($473 million attributable to the gain on the sale of RAC) versus
$154 million of cash tax payments made in the comparable period in 2006
combined with the $400 million discretionary cash contribution made to the
Company's pension plans in the first quarter 2007 versus the $200 million
discretionary cash contribution made in the first quarter 2006.
During the third quarter 2007, the Company repurchased 8.6 million shares
for $500 million as part of the Company's previously announced share
repurchase program. The Company has repurchased 23.3 million shares of common
stock year-to-date for $1.3 billion.
The Board of Directors, on October 24, 2007 , authorized the repurchase of
up to an additional $2.0 billion of the Company's outstanding common stock.
Share repurchases will take place from time to time at management's discretion
depending on market conditions.
The Company reported total bookings for the third quarter 2007 of $6.5
billion compared to $5.4 billion in the third quarter 2006. The Company ended
the third quarter 2007 with backlog of $33.9 billion compared to $31.9 billion
at the end of the third quarter 2006 and $33.8 billion at the end of 2006.
The Company has updated full-year 2007 guidance, including the
reclassification of Flight Options as a discontinued operation for full-year
2007. Charts containing additional information on the Company's 2007 guidance
are available on the Company's website at http://www.raytheon.com. See
attachment F for the Company's calculation and use of Return on Invested
Capital (ROIC), a non-GAAP financial measure.
Additional information regarding the Company's 2008 guidance will be
provided on the fourth quarter earnings conference call scheduled for January
31, 2008 .
Integrated Defense Systems (IDS) had third quarter 2007 net sales of
$1,147 million, up 11 percent compared to $1,030 million in the third quarter
2006, primarily due to growth on Missile Defense Agency and U.S. Army
programs, as well as on international programs. IDS recorded $206 million of
operating income compared to $167 million in the third quarter 2006. The
increase in operating income was primarily due to higher volume and improved
performance on several international and domestic programs.
During the quarter, IDS booked $958 million for the production phase of
mission support equipment for the two lead Zumwalt-class destroyers for the
U.S. Navy. IDS also booked $123 million for the Patriot Pure Fleet program
for the U.S. Army.
After the quarter close, IDS was awarded $1.2 billion for the Australian
Air Warfare Destroyer contract, which was booked in October 2007 .
Intelligence and Information Systems (IIS) had third quarter 2007 net
sales of $680 million, up 9 percent compared to $626 million in the third
quarter 2006, primarily due to increased volume on several U.S. Air Force and
information systems programs. IIS recorded $64 million of operating income
compared to $58 million in the third quarter 2006.
During the quarter, IIS booked $781 million for the National Polar-
orbiting Operational Environmental Satellite System (NPOESS) program and $101
million for the U.S. Air Force's Consolidated Field Service (CFS) contract to
provide global intelligence, surveillance and reconnaissance support. IIS
also booked $279 million on a number of classified contracts.
After the quarter close, the Company acquired Oakley Networks, a leading
developer of cyber-security technology, which will add to Raytheon's
capabilities in information operations/information assurance solutions.
Missile Systems (MS) had third quarter 2007 net sales of $1,247 million,
up 15 percent compared to $1,081 million in the third quarter 2006, primarily
due to higher volume on the Standard Missile and Evolved Sea Sparrow Missile
(ESSM) programs. MS recorded $139 million of operating income compared to
$109 million in the third quarter 2006. The increase in operating income was
primarily due to higher volume and improved performance.
During the quarter, MS booked $223 million for the production of ESSM and
$201 million for Standard Missile-2 (SM-2). MS also booked $117 million for
the production of Javelin for the U.S. Army and U.S. Marines.
Network Centric Systems (NCS) had third quarter 2007 net sales of $1,036
million, up 18 percent compared to $879 million in the third quarter 2006,
primarily due to increased volume on certain U.S. Army programs. NCS recorded
$123 million of operating income compared to $87 million in the third quarter
2006. The increase in operating income was primarily due to higher volume and
improved program performance.
During the quarter, NCS booked $116 million to provide Long Range Advanced
Scout Surveillance Systems (LRAS3) and $104 million for Horizontal Technology
Integration (HTI) forward-looking infrared kits to the U.S. Army. NCS also
booked $106 million on the Long Range Radar Service Life Extension Program
Also during the quarter, the U.S. Navy directed Raytheon to proceed with
the development of the Navy Multiband Terminal (NMT).
Space and Airborne Systems (SAS) had third quarter 2007 net sales of
$1,016 million, down 5 percent compared to $1,069 million in the third quarter
2006, primarily due to lower volume on some airborne systems programs and a
reduction in classified space bookings due to customer reprioritization. SAS
recorded $121 million of operating income compared to $148 million in the
third quarter 2006. Operating income was lower primarily due to profit
adjustments taken on certain programs in both the third quarter 2006 and 2007
and reduced volume.
Technical Services (TS) had third quarter 2007 net sales of $513 million
compared to $500 million in the third quarter 2006. TS recorded operating
income of $34 million in the third quarter 2007 compared to $35 million in the
third quarter 2006.
Net sales in the third quarter 2007 were $191 million compared to $190
million in the third quarter 2006. The segment recorded an operating loss of
$96 million in the third quarter 2007 compared to an operating loss of $10
million in the third quarter 2006. During the third quarter 2007, the Company
initiated a process to dispose of its Flight Options (FO) business. The
Company recorded an after-tax impairment charge of $69 million ($84 million
pretax), which includes all of FO's remaining goodwill and a portion of its
intangible assets, as a result of the disposition process.
On October 15, 2007 , Raytheon entered into a definitive agreement to sell
FO to H.I.G. Capital, a global private investment firm. In the fourth quarter
2007, the Company expects to record an additional after-tax charge of
approximately $45 million, subject to purchase price adjustments, to write
down the net assets of FO to the expected final net sales price. The Company
will present FO as a discontinued operation in the fourth quarter 2007 and for
all periods presented.
Raytheon Company (NYSE: RTN), with 2006 sales of $20.3 billion, is a
technology leader specializing in defense, homeland security and other
government markets throughout the world. With a history of innovation
spanning 85 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 73,000 people worldwide.
Disclosure Regarding Forward-looking Statements
This release and the attachments contain forward-looking statements,
including information regarding the Company's 2007 and 2008 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: risks associated with the Company's 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 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 and procurement
and other regulations; the impact of competition; the ability to develop
products and technologies; 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;
potential further charges relating to Flight Options; risks associated with
the Company's sale of Flight Options; risks associated with the commuter and
fractional ownership aircraft markets; the outcome of contingencies and
litigation matters, including government investigations; the ability to
recruit and retain qualified personnel; risks associated with acquisitions,
joint ventures and other business arrangements; the impact of changes in the
Company's credit ratings; and other factors as may be detailed from time to
time in the Company's public announcements and Securities and Exchange
Commission filings. In addition, these statements do not give effect to the
potential impact of any acquisitions, divestitures or business combinations
that may be announced or closed after the date hereof. 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. 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.
Conference Call on the Third Quarter 2007 Financial Results
Raytheon's financial results conference call will be held on Thursday,
October 25, 2007 at 9 a.m. EDT . Participants will include William H. Swanson,
Chairman and CEO, David C. Wajsgras, senior vice president and CFO, and other
The dial-in number for the conference call will be (866) 800 - 8651. 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 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.
SOURCE Raytheon Company