Raytheon Reports Strong Third Quarter 2007 Results; Announces New $2.0 Billion Share Repurchase Plan
WALTHAM, Mass., Oct. 25, 2007 /PRNewswire-FirstCall/ -- Raytheon Company
(NYSE: RTN) reported third quarter 2007 income from continuing operations of
Raytheon also announced that on October 15, 2007 , it entered into a definitive agreement to sell Flight Options to H.I.G. Capital, a global private investment firm. This transaction is expected to close in the fourth quarter 2007.
"Our program execution, strong backlog and customer focus are driving the Company's performance and delivering value to our shareholders," said William H. Swanson, Raytheon Chairman and CEO. "With the pending sale of Flight Options, going forward our attention will be focused on our core business, leading technologies and Mission Support to our global customers."
Third quarter 2007 net income was
Net sales for the third quarter 2007 were
Operating cash flow from continuing operations for the third quarter 2007
was
Year-to-date operating cash flow from continuing operations was
During the third quarter 2007, the Company repurchased 8.6 million shares
for
The Board of Directors, on October 24, 2007 , authorized the repurchase of
up to an additional
The Company reported total bookings for the third quarter 2007 of
The Company has updated full-year 2007 guidance, including the reclassification of Flight Options as a discontinued operation for full-year 2007. Charts containing additional information on the Company's 2007 guidance are available on the Company's website at http://www.raytheon.com. See attachment F for the Company's calculation and use of Return on Invested Capital (ROIC), a non-GAAP financial measure.
2008 Financial Outlook Net Sales ($B) 22.1 - 22.6 EPS from Cont. Ops. ($) 3.45 - 3.65 Operating Cash Flow ($B) 1.5 - 1.7Additional information regarding the Company's 2008 guidance will be provided on the fourth quarter earnings conference call scheduled for January 31, 2008 .
Segment Results Integrated Defense Systems 3rd Quarter % Nine Months % ($ in millions) 2007 2006 Change 2007 2006 Change Net Sales $1,147 $1,030 11% $3,405 $3,031 12% Operating Income $206 $167 23% $617 $502 23% Operating Margin 18.0% 16.2% 18.1% 16.6% Integrated Defense Systems (IDS) had third quarter 2007 net sales of
During the quarter, IDS booked
After the quarter close, IDS was awarded
Intelligence and Information Systems (IIS) had third quarter 2007 net
sales of
During the quarter, IIS booked
After the quarter close, the Company acquired Oakley Networks, a leading developer of cyber-security technology, which will add to Raytheon's capabilities in information operations/information assurance solutions.
Missile Systems 3rd Quarter % Nine Months % ($ in millions) 2007 2006 Change 2007 2006 Change Net Sales $1,247 $1,081 15% $3,631 $3,187 14% Operating Income $139 $109 28% $393 $341 15% Operating Margin 11.1% 10.1% 10.8% 10.7% Missile Systems (MS) had third quarter 2007 net sales of
During the quarter, MS booked
Network Centric Systems (NCS) had third quarter 2007 net sales of
During the quarter, NCS booked
Also during the quarter, the U.S. Navy directed Raytheon to proceed with the development of the Navy Multiband Terminal (NMT).
Space and Airborne Systems 3rd Quarter % Nine Months % ($ in millions) 2007 2006 Change 2007 2006 Change Net Sales $1,016 $1,069 -5% $3,045 $3,144 -3% Operating Income $121 $148 -18% $383 $445 -14% Operating Margin 11.9% 13.8% 12.6% 14.2% Space and Airborne Systems (SAS) had third quarter 2007 net sales of
Technical Services (TS) had third quarter 2007 net sales of
Other
Net sales in the third quarter 2007 were
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
Raytheon Company (NYSE: RTN), with 2006 sales of
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 Company executives.
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.
Media Contact: Investor Relations Contact: Jon Kasle Greg Smith 781-522-5110 781-522-5141 Attachment A Raytheon Company Preliminary Statement of Operations Information Third Quarter 2007 (In millions except per share amounts) Three Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Net sales $5,355 $4,936 $15,702 $14,569 Cost of sales 4,276 4,047 12,583 11,886 Administrative and selling expenses 460 327 1,167 991 Research and development expenses 142 106 377 342 Total operating expenses 4,878 4,480 14,127 13,219 Operating income 477 456 1,575 1,350 Interest expense 41 65 155 202 Interest income (42) (15) (127) (49) Other expense (income), net 9 (2) 68 (41) Non-operating expense, net 8 48 96 112 Income from continuing operations before taxes 469 408 1,479 1,238 Federal and foreign income taxes 165 141 505 423 Income from continuing operations 304 267 974 815 (Loss) income from discontinued operations, net of tax (5) 54 20 103 Gain on sale, net of tax - - 986 - (Loss) income from discontinued operations (5) 54 1,006 103 Net income $299 $321 $1,980 $918 Earnings per share from continuing operations Basic $0.70 $0.60 $2.23 $1.84 Diluted $0.69 $0.59 $2.17 $1.81 (Loss) earnings per share from discontinued operations Basic $(0.01) $0.12 $2.31 $0.23 Diluted $(0.01) $0.12 $2.24 $0.23 Earnings per share Basic $0.69 $0.73 $4.54 $2.08 Diluted $0.68 $0.71 $4.42 $2.04 Average shares outstanding Basic 431.2 441.9 436.3 442.3 Diluted 443.0 451.6 448.2 450.5 Attachment B Raytheon Company Preliminary Segment Information Third Quarter 2007 (In millions) Operating Income Net Sales Operating Income As a Percent of Sales Three Months Ended Three Months Ended Three Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Integrated Defense Systems $1,147 $1,030 $206 $167 18.0% 16.2% Intelligence and Information Systems 680 626 64 58 9.4% 9.3% Missile Systems 1,247 1,081 139 109 11.1% 10.1% Network Centric Systems 1,036 879 123 87 11.9% 9.9% Space and Airborne Systems 1,016 1,069 121 148 11.9% 13.8% Technical Services 513 500 34 35 6.6% 7.0% Other 191 190 (96) (10) -50.3% -5.3% FAS/CAS Pension Adjustment - - (67) (90) Corporate and Eliminations (475) (439) (47) (48) Total $5,355 $4,936 $477 $456 8.9% 9.2% Operating Income Net Sales Operating Income As a Percent of Sales Nine Months Ended Nine Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Integrated Defense Systems $3,405 $3,031 $617 $502 18.1% 16.6% Intelligence and Information Systems 1,934 1,870 182 171 9.4% 9.1% Missile Systems 3,631 3,187 393 341 10.8% 10.7% Network Centric Systems 3,017 2,550 379 262 12.6% 10.3% Space and Airborne Systems 3,045 3,144 383 445 12.6% 14.2% Technical Services 1,412 1,416 84 96 5.9% 6.8% Other 589 582 (103) (33) -17.5% -5.7% FAS/CAS Pension Adjustment - - (192) (271) Corporate and Eliminations (1,331) (1,211) (168) (163) Total $15,702 $14,569 $1,575 $1,350 10.0% 9.3% Attachment C Raytheon Company Other Preliminary Information Third Quarter 2007 Funded Backlog Backlog (In millions) (In millions) 23-Sep-07 31-Dec-06 23-Sep-07 31-Dec-06 Integrated Defense Systems $8,458 $7,934 $3,399 $4,088 Intelligence and Information Systems 4,142 3,935 925 893 Missile Systems 9,078 9,504 4,866 5,135 Network Centric Systems 5,407 5,059 4,094 4,037 Space and Airborne Systems 4,900 5,591 2,907 2,770 Technical Services 1,686 1,572 1,044 1,020 Other 218 243 218 243 Total $33,889 $33,838 $17,453 $18,186 Bookings (In millions) Three Months Ended 23-Sep-07 24-Sep-06 Total Bookings $6,463 $5,403 Attachment D Raytheon Company Preliminary Balance Sheet Information Third Quarter 2007 (In millions) 23-Sep-07 31-Dec-06 Assets Cash and cash equivalents $2,609 $2,460 Accounts receivable, less allowance for doubtful accounts 155 178 Contracts in process 3,894 3,600 Inventories 543 487 Deferred taxes 215 257 Prepaid expenses and other current assets 391 239 Assets held for sale - 2,296 Total current assets 7,807 9,517 Property, plant and equipment, net 2,062 2,131 Deferred taxes 74 189 Goodwill 11,464 11,539 Other assets, net 2,084 2,115 Total assets $23,491 $25,491 Liabilities and Stockholders' Equity Notes payable and current portion of long-term debt $119 $687 Advance payments and billings in excess of costs incurred 1,786 1,962 Accounts payable 982 920 Accrued employee compensation 950 944 Other accrued expenses 1,138 1,193 Liabilities held for sale - 1,009 Total current liabilities 4,975 6,715 Accrued retiree benefits and other long-term liabilities 4,083 4,232 Deferred taxes - - Long-term debt 2,249 3,278 Minority interest 211 165 Stockholders' equity 11,973 11,101 Total liabilities and stockholders' equity $23,491 $25,491 Attachment E Raytheon Company Preliminary Cash Flow Information Third Quarter 2007 (In millions) Three Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Income from continuing operations $304 $267 $974 $815 Depreciation 76 72 219 215 Amortization 22 19 65 60 Working capital 219 80 (499) (484) Discontinued operations (4) 19 (45) 33 Net activity in financing receivables 15 22 71 96 Other 99 273 (520) 457 Net operating cash flow 731 752 265 1,192 Capital spending (65) (58) (161) (146) Internal use software spending (18) (25) (52) (50) Acquisitions - (40) - (87) Investment activity and divestitures - - 3,117 50 Dividends (111) (108) (331) (313) Repurchase of common stock (500) (250) (1,301) (352) Debt repayments (568) (74) (1,606) (445) Discontinued operations - (9) (27) (27) Other 95 49 245 138 Total cash flow $(436) $237 $149 $(40) Attachment F Raytheon Company Non-GAAP Financial Measures Third Quarter 2007 We define ROIC as income from continuing operations plus after-tax net interest expense plus one-third of operating lease expense after-tax (estimate of interest portion of operating lease expense) divided by average invested capital after capitalizing operating leases (operating lease expense times a multiplier of 8), adding financial guarantees less net investment in Discontinued Operations, and adding back the cumulative minimum pension liability/impact of FAS 158. ROIC is not a measure of financial performance under generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies in the same manner. ROIC should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. We use ROIC as a measure of efficiency and effectiveness of our use of capital and as an element of management compensation. Return on Invested Capital 2007 Current 2007 Prior (In millions) Guidance Guidance Low end High end Low end High end of range of range of range of range Income from continuing operations Net interest expense, after-tax* Combined Combined Combined Combined Lease expense, after-tax* Return $1,450 $1,515 $1,470 $1,535 Net debt ** Equity less investment in discontinued operations Lease expense x 8 plus financial guarantees Combined Combined Combined Combined Minimum pension liability (cumulative) Invested capital from continuing operations*** $16,885 $16,685 $17,050 $16,850 ROIC 8.6% 9.1% 8.6% 9.1% * Effective tax rate: 33.9% (2007 guidance) ** Net debt is defined as total debt less cash and cash equivalents and is calculated using a 2 point average *** Calculated using a 2 point average Attachment G Raytheon Company Preliminary Financial Information Excluding Flight Options Non-GAAP Reconciliation Third Quarter 2007 (In millions except per share amounts) Three Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Net sales as reported under GAAP $5,355 $4,936 $15,702 $14,569 Less: Flight Options (136) (137) (401) (423) Net sales excluding Flight Options* $5,219 $4,799 $15,301 $14,146 Three Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Operating income as reported under GAAP $477 $456 $1,575 $1,350 Add Back: Flight Options, including a Q3 2007 pretax impairment charge of $84 million 95 12 107 41 Operating income excluding Flight Options* $572 $468 $1,682 $1,391 Three Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Operating margin as reported under GAAP 8.9% 9.2% 10.0% 9.3% Operating margin excluding Flight Options* 11.0% 9.8% 11.0% 9.8% Three Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Income from continuing operations as reported under GAAP $304 $267 $974 $815 Add Back: Flight Options, including a Q3 2007 after-tax impairment charge of $69 million 76 7 85 28 Income from continuing operations excluding Flight Options* $380 $274 $1,059 $843 Three Months Ended Nine Months Ended 23-Sep-07 24-Sep-06 23-Sep-07 24-Sep-06 Diluted EPS from continuing operations as reported under GAAP $0.69 $0.59 $2.17 $1.81 Add Back: Loss per share of Flight Options, including a Q3 2007 after-tax impairment charge of $0.16 0.17 0.02 0.19 0.06 Diluted EPS from continuing operations excluding Flight Options* $0.86 $0.61 $2.36 $1.87 * These amounts are not measures of financial performance under generally accepted accounting principles (GAAP). They should be considered supplemental to and not a substitute for financial performance in accordance with GAAP. We are providing these non-GAAP measures to provide insight on how we expect continuing operations to appear when Flight Options is reported as a discontinued operation in the fourth quarter 2007.SOURCE Raytheon Company