Raytheon Reports Solid Fourth Quarter and Full-Year 2008 Results; Reaffirms Outlook for Continued Growth in 2009

Highlights - Year-end backlog increased to a record $38.9 billion - Delivered strong full-year sales growth of 9% - Fourth quarter adjusted EPS from continuing operations of $1.13 grew by 18%; reported EPS from continuing...


As part of its previously announced share repurchase program, the Company repurchased 14.1 million shares of common stock for $680 million in the fourth quarter 2008 and 30.7 million shares for $1.7 billion for the year.

(1) Adjusted EPS and income from continuing operations are non-GAAP financial measures. Fourth quarter and full-year 2008 adjusted EPS and income from continuing operations exclude the $45 million ($69 million pretax) or $0.11 per diluted share unfavorable adjustment due to the impact of pension investment returns on existing contracts (the "CAS Pension Adjustment"). Fourth quarter and full-year 2007 adjusted EPS and income from continuing operations exclude a $0.49 per diluted share ($214 million) and $0.49 per diluted share ($219 million) favorable adjustment, respectively, due to certain tax-related benefits. Please see attachment G for a reconciliation of these measures to EPS and income from continuing operations under GAAP and a discussion of why the Company is presenting this information.

(2) Adjusted EPS and income from continuing operations are non-GAAP financial measures. Full-year 2008 adjusted EPS and income from continuing operations exclude the $45 million ($69 million pretax) or $0.11 per diluted share unfavorable CAS Pension Adjustment. Full-year 2007 adjusted EPS and income from continuing operations exclude a $0.49 per diluted share ($219 million) favorable adjustment due to certain tax-related benefits. Please see attachment G for a reconciliation of these measures to EPS and income from continuing operations under GAAP and a discussion of why the Company is presenting this information.

(1) Adjusted Summary Financial Results include non-GAAP financial measures which exclude the impact of certain items noted below. The fourth quarter and full-year 2008 adjusted measures exclude the $45 million ($69 million pretax) or $0.11 per diluted share unfavorable adjustment due to the impact of pension investment returns on existing contracts (the "CAS Pension Adjustment"). Fourth quarter and full-year 2007 adjusted EPS and income from continuing operations exclude a $0.49 per diluted share ($214 million) and $0.49 per diluted share ($219 million) favorable adjustment, respectively, due to certain tax-related benefits. See attachment G for a reconciliation of these measures to the comparable GAAP measures and a discussion of why the Company is presenting this information.

Bookings and Backlog

The Company ended 2008 with a record backlog of $38.9 billion, up 6 percent compared to $36.6 billion at the end of 2007.

Outlook

The Company is reaffirming its prior guidance for 2009 and providing more detailed information. Charts containing additional information on the Company's 2009 guidance are available on the Company's website at www.raytheon.com. See attachment F for the Company's calculation and use of Return on Invested Capital (ROIC), a non-GAAP financial measure.

Segment Results

Fourth Quarter

Integrated Defense Systems (IDS) had fourth quarter 2008 net sales of $1,423 million compared to $1,290 million in the fourth quarter 2007, primarily due to growth on U.S. Army programs. IDS recorded $244 million of operating income compared to $211 million in the fourth quarter 2007. The increase in operating income was primarily due to higher volume, improved performance on several international and domestic programs, and the sale of licensed software.

During the quarter, IDS booked $2,483 million to provide advanced Patriot air and missile defense capability for the United Arab Emirates (UAE). IDS also booked $154 million for the production of torpedo kits for the U.S. Navy.

Full-year

IDS had full-year 2008 net sales of $5,148 million compared to $4,695 million in 2007. The increase in sales was primarily due to higher volume on U.S. Army programs. IDS recorded $870 million of operating income in 2008 compared to $828 million in 2007. The increase in operating income was primarily due to higher volume, partially offset by a change in contract mix.