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Raytheon Reports Solid First Quarter 2014 Results
- EPS from continuing operations of $1.87; Adjusted EPS(1) of $1.43
- Reported operating margin of 14.3 percent; Adjusted Operating Margin(1) of 12.7 percent
- Net sales of $5.5 billion
- Strong operating cash flow from continuing operations of $659 million
- As previously announced, increased annual dividend by 10 percent to $2.42 per share

WALTHAM, Mass., April 24, 2014 /PRNewswire/ -- Raytheon Company (NYSE: RTN) announced first quarter 2014 EPS from continuing operations of $1.87 compared to $1.49 in the first quarter 2013. First quarter 2014 Adjusted EPS1 was $1.43 per diluted share compared to $1.56 per diluted share in the first quarter 2013. The first quarter 2014 Adjusted EPS1 excluded the previously announced $0.25 favorable tax impact from cash repatriation in the first quarter 2014. In addition, the first quarter 2014 Adjusted EPS1 excluded a favorable FAS/CAS Adjustment of $0.18, compared with an unfavorable FAS/CAS Adjustment of $0.14 in the first quarter 2013. The first quarter 2013 Adjusted EPS1 also excluded $0.08 associated with the impact of the 2012 research and development (R&D) tax credit approved by Congress in January 2013.

"Raytheon delivered solid operating performance in the first quarter," said Thomas A. Kennedy, Raytheon's CEO.  "Our longstanding focus on operational excellence, consistent program performance and a portfolio of affordable and innovative solutions provides a strong foundation for ongoing value creation for our global customers and shareholders."

_____________________________

1 Adjusted EPS is diluted 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. First quarter 2014 Adjusted EPS excluded the $0.25 favorable tax impact of approximately $80 million resulting from cash repatriation in the first quarter 2014. First quarter 2013 Adjusted EPS excluded the $0.08 impact of the 2012 research and development (R&D) tax credit, approved by Congress in January 2013 that relates to 2012. 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.


Summary Financial Results


1st Quarter


%

($ in millions, except per share data)

2014


2013


Change







Net Sales

$

5,508


$

5,879


-6.3%

Income from Continuing Operations attributable to

   Raytheon Company

$

589


$

490


20.2%

Adjusted Income*

$

452


$

511


-11.5%

EPS from Continuing Operations

$

1.87


$

1.49


25.5%

Adjusted EPS*

$

1.43


$

1.56


-8.3%

Operating Cash Flow from Continuing Operations

$

659


$

422



Workdays in Fiscal Reporting Calendar

62


63









* Adjusted Income is income from continuing operations attributable to Raytheon Company common stockholders, and Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders; in each case, excluding the after-tax impact of the FAS/CAS Adjustment and, from time to time, certain other items. First quarter 2014 Adjusted Income and Adjusted EPS excluded the approximately $80 million and $0.25 impact, respectively, of a favorable tax impact resulting from cash repatriation in the first quarter 2014. First quarter 2013 Adjusted Income and Adjusted EPS excluded the $25 million and $0.08 impact, respectively, of the 2012 R&D tax credit. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.


Net sales for the first quarter 2014 were $5.5 billion compared to $5.9 billion in the first quarter 2013. Net sales for the first quarter 2014 were in-line with the Company's prior financial guidance.

The Company generated strong operating cash flow for the first quarter 2014. Operating cash flow from continuing operations for the first quarter 2014 was $659 million compared to $422 million for the first quarter 2013.  The increase in operating cash from continuing operations in the first quarter 2014 was primarily due to the timing of collections.

In the first quarter 2014, the Company repurchased 2.1 million shares of common stock for $200 million. In addition, as previously announced, the Company's Board of Directors voted to increase the Company's annual dividend rate by 10 percent from $2.20 to $2.42 per share, the tenth consecutive annual dividend increase.

The Company ended the first quarter 2014 with $204 million of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.

Bookings and Backlog


Bookings





Backlog






($ in millions)

1st Quarter


($ in millions)

 Period Ending


2014


2013



Q1 2014

Q1 2013


2013

Bookings

$

4,293


$

3,606


Backlog

$

32,183


$

33,546


$

33,685






Funded Backlog

$

22,745


$

22,523


$

23,014

















The Company had bookings of $4.3 billion in the first quarter 2014, and ended the first quarter 2014 with a backlog of $32.2 billion and a funded backlog of $22.7 billion, an increase of $222 million compared to the first quarter 2013.

Outlook

The Company is reaffirming its prior financial outlook for 2014. Charts containing additional information on the Company's 2014 outlook are available on the Company's website at www.raytheon.com/ir.


2014 Financial Outlook






Net Sales ($B)


22.5 - 23.0

FAS/CAS Adjustment ($M)


346

Interest Expense, net ($M)


 (200) - (210)

Diluted Shares (M)


312 - 314

Effective Tax Rate


 Approx. 28.5%

EPS from Continuing Operations


$6.74 - $6.89

Adjusted EPS*


$5.76 - $5.91

Operating Cash Flow from Continuing Operations ($B)


 2.3 - 2.5




* Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders, excluding the after-tax impact of the FAS/CAS Adjustment and, from time to time, certain other items. In addition to the FAS/CAS Adjustment, 2014 Adjusted EPS guidance also excludes the $0.25 favorable tax impact of approximately $80 million resulting from cash repatriation in the first quarter 2014. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.

 


Segment Results

The Company's reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); and Space and Airborne Systems (SAS).













Integrated Defense Systems

















1st Quarter



($ in millions)





2014


2013


% Change

Net Sales





$

1,481


$

1,596


-7%

Operating Income





$

226


$

262


-14%

Operating Margin





15.3%


16.4%















Integrated Defense Systems (IDS) had first quarter 2014 net sales of $1,481 million compared to $1,596 million in the first quarter 2013. The change in net sales was primarily due to the scheduled completion of certain production phases on two international Patriot programs.

IDS recorded $226 million of operating income compared to $262 million in the first quarter 2013. The change in operating income was primarily driven by lower volume as well as higher net program efficiencies in the first quarter 2013.

During the quarter, IDS booked $515 million to provide advanced Patriot air and missile defense capability for Kuwait. IDS also booked $98 million to provide Patriot engineering services support for U.S. and international customers.











Intelligence, Information and Services













1st Quarter



($ in millions)



2014


2013


% Change

Net Sales



$

1,450


$

1,521


-5%

Operating Income



$

125


$

124


1%

Operating Margin



8.6%


8.2%













Intelligence, Information and Services (IIS) had first quarter 2014 net sales of $1,450 million compared to $1,521 million in the first quarter 2013. The change in net sales was primarily due to lower volume on training programs.

IIS recorded $125 million of operating income compared to $124 million in the first quarter 2013.

During the quarter, IIS booked $111 million on the Joint Polar Satellite System (JPSS) program for NASA and $104 million on training programs in support of Warfighter FOCUS activities, including $59 million on domestic programs and $45 million on foreign programs. IIS also booked $535 million on a number of classified contracts, including $195 million for a cyber solution for an international customer.















Missile Systems





















1st Quarter



($ in millions)







2014


2013


% Change

Net Sales







$

1,574


$

1,636


-4%

Operating Income







$

208


$

214


-3%

Operating Margin







13.2%


13.1%















Missile Systems (MS) had first quarter 2014 net sales of $1,574 million compared to $1,636 million in the first quarter 2013. The change in net sales was primarily driven by lower sales on U.S. Army programs.

MS recorded $208 million of operating income compared to $214 million in the first quarter 2013. The change in operating income was primarily due to lower volume.

During the quarter, MS booked $479 million for Standard Missile-3 (SM-3™) for the Missile Defense Agency (MDA). MS also booked $164 million for Paveway™ and $86 million for Maverick missiles for international customers.













Space and Airborne Systems

















1st Quarter



($ in millions)





2014


2013


% Change

Net Sales





$

1,398


$

1,582


-12%

Operating Income





$

190


$

227


-16%

Operating Margin





13.6%


14.3%













Space and Airborne Systems (SAS) had first quarter 2014 net sales of $1,398 million compared to $1,582 million in the first quarter 2013. The change in net sales was primarily due to lower volume on tactical communications systems programs and on classified programs.

SAS recorded $190 million of operating income compared to $227 million in the first quarter 2013. The change in operating income was primarily due to lower volume and contract mix.

During the quarter, SAS booked $116 million to provide radar spares for an international customer and $81 million for software enhancements to Active Electronically Scanned Array (AESA) radars for the U.S. Air Force. SAS also booked $216 million on a number of classified contracts.

About Raytheon
Raytheon Company, with 2013 sales of $24 billion and 63,000 employees worldwide, is a technology and innovation leader specializing in defense, security and civil markets throughout the world. With a history of innovation spanning 92 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 cyber security and 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 @Raytheon.

Conference Call on the First Quarter 2014 Financial Results
Raytheon's financial results conference call will be held on Thursday, April 24, 2014 at 9 a.m. ET. Participants will include Thomas A. Kennedy, CEO; David C. Wajsgras, senior vice president and CFO; and other Company executives.

The dial-in number for the conference call will be (866) 953-6857 in the U.S. or (617) 399-3481 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 due to budgetary constraints, spending cuts resulting from sequestration under the amended Budget Control Act of 2011, a government shutdown, or otherwise, 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.

Raytheon Company
Global Headquarters
Waltham, Mass.

Investor Relations Contact
Todd Ernst
781.522.5141

Media Contact
Dave Desilets
781.522.5855

 

 

Attachment A







Raytheon Company





Preliminary Statement of Operations Information







First Quarter 2014














(In millions, except per share amounts)




Three Months Ended





30-Mar-14


31-Mar-13








Net sales




$

5,508



$

5,879


Operating expenses







     Cost of sales




4,161



4,605


     General and administrative expenses




559



568


Total operating expenses




4,720



5,173


Operating income




788



706


Non-operating (income) expense, net







     Interest expense




51



53


     Interest income




(3)



(3)


     Other (income) expense, net






(7)


Total non-operating (income) expense, net




48



43


Income from continuing operations before taxes




740



663


Federal and foreign income taxes




147



167


Income from continuing operations




593



496


Income (loss) from discontinued operations, net of tax




7



(2)


Net income




600



494


Less: Net income attributable to noncontrolling







   interests in subsidiaries




4



6


Net income attributable to Raytheon Company




$

596



$

488









Basic earnings (loss) per share attributable to Raytheon







  Company common stockholders:







     Income from continuing operations




$

1.87



$

1.50


     Income (loss) from discontinued operations, net of tax




0.02



(0.01)


     Net income




1.89



1.49









Diluted earnings (loss) per share attributable to Raytheon







  Company common stockholders:







     Income from continuing operations




$

1.87



$

1.49


     Income (loss) from discontinued operations, net of tax




0.02



(0.01)


     Net income




1.89



1.49









Amounts attributable to Raytheon Company common







  stockholders:







     Income from continuing operations




$

589



$

490


     Income (loss) from discontinued operations, net of tax




7



(2)


     Net income




$

596



$

488









Average shares outstanding







     Basic




315.0



327.4


     Diluted




315.8



328.2


 

 

Attachment B













Raytheon Company











Preliminary Segment Information













First Quarter 2014

















































Operating Income



Net Sales (1)


Operating Income (1)


As a Percent of Net Sales (1)

(In millions, except percentages)


Three Months Ended


Three Months Ended


Three Months Ended



30-Mar-14


31-Mar-13


30-Mar-14


31-Mar-13


30-Mar-14


31-Mar-13














Integrated Defense Systems


$

1,481



$

1,596



$

226



$

262



15.3

%


16.4

%

Intelligence, Information and Services


1,450



1,521



125



124



8.6

%


8.2

%

Missile Systems


1,574



1,636



208



214



13.2

%


13.1

%

Space and Airborne Systems


1,398



1,582



190



227



13.6

%


14.3

%

FAS/CAS Adjustment






87



(71)






Corporate and Eliminations


(395)



(456)



(48)



(50)






Total


$

5,508



$

5,879



$

788



$

706



14.3

%


12.0

%

(1) 2013 amounts have been revised to reflect our April 1, 2013 segment consolidation.














 

 

Attachment C










Raytheon Company








Other Preliminary Information










First Quarter 2014






























(In millions)



Funded Backlog


Total Backlog




30-Mar-14


31-Dec-13


30-Mar-14


31-Dec-13











Integrated Defense Systems



$

8,977



$

9,397



$

10,596



$

10,916


Intelligence, Information and Services


2,585



2,592



5,579



5,856


Missile Systems



6,564



6,859



8,667



9,162


Space and Airborne Systems



4,619



4,166



7,341



7,751


Total



$

22,745



$

23,014



$

32,183



$

33,685

























Bookings






Three Months Ended






30-Mar-14


31-Mar-13















Total Bookings



$

4,293



$

3,606





























General and

Administrative Expenses








Three Months Ended








30-Mar-14


31-Mar-13















Administrative and selling expenses


$

448



$

461






Research and development expenses


$

111



$

107






Total general and administrative expenses


$

559



$

568






 

 

Attachment D






Raytheon Company




Preliminary Balance Sheet Information






First Quarter 2014












(In millions)









30-Mar-14


31-Dec-13

Assets






Current assets






     Cash and cash equivalents



$

3,036



$

3,296


     Short-term investments



1,495



1,001


     Contracts in process, net



5,211



4,870


     Inventories



363



363


     Prepaid expenses and other current assets



334



286


          Total current assets



10,439



9,816








Property, plant and equipment, net



1,902



1,937


Goodwill



12,765



12,764


Other assets, net



1,435



1,450


               Total assets



$

26,541



$

25,967








Liabilities and Equity






Current liabilities






     Advance payments and billings in excess of costs incurred



$

2,612



$

2,350


     Accounts payable



1,078



1,178


     Accrued employee compensation



867



1,068


     Other accrued expenses



1,422



1,214


          Total current liabilities



5,979



5,810








Accrued retiree benefits and other long-term liabilities



4,244



4,226


Long-term debt



4,735



4,734








Equity






  Raytheon Company stockholders' equity






     Common stock



3



3


     Additional paid-in capital



1,795



1,972


     Accumulated other comprehensive loss



(4,962)



(5,113)


     Retained earnings



14,582



14,173


          Total Raytheon Company stockholders' equity



11,418



11,035


     Noncontrolling interests in subsidiaries



165



162


          Total equity



11,583



11,197


               Total liabilities and equity



$

26,541



$

25,967


   

 

Attachment E




Raytheon Company


Preliminary Cash Flow Information




First Quarter 2014








(In millions)

Three Months Ended


30-Mar-14


31-Mar-13





Net income

$

600



$

494


(Income) loss from discontinued operations, net of tax

(7)



2


Income from continuing operations

593



496






Depreciation

73



74


Amortization

34



34


Working capital (excluding pension and income taxes)*

(530)



(793)


Other long-term liabilities

(12)



(15)


Pension and other postretirement benefit plans

180



291


Other, net

321



335


               Net operating cash flow from continuing operations

$

659



$

422






Supplemental Cash Flow Information








Capital spending

$

(39)



$

(49)


Internal use software spending

(12)



(9)


Purchases of short-term investments

(1,345)



(201)


Sales of short-term investments

457




Maturities of short-term investments

400



153


Dividends

(174)



(164)


Repurchases of common stock under stock repurchase programs

(200)



(225)










* Working capital (excluding pension and income taxes) is a summation of changes in: contracts in process, net and advance payments and billings in excess of costs incurred, inventories, prepaid expenses and other current assets, accounts payable, accrued employee compensation, and other accrued expenses from the Consolidated Statements of Cash Flows.





 

 













Attachment F












Raytheon Company












Non-GAAP Financial Measures - Adjusted EPS, Adjusted Income and Adjusted Operating Margin












First Quarter 2014
























Adjusted EPS Non-GAAP Reconciliation












(In millions, except per share amounts)







2014 Guidance


Three Months Ended


Low end


High end


30-Mar-14


31-Mar-13


of range


of range

Diluted EPS from continuing operations attributable to Raytheon Company common stockholders

$

1.87


$

1.49


$

6.74


$

6.89

Per share impact of the FAS/CAS Adjustment (A)

(0.18)


0.14


(0.72)


(0.72)

Per share impact of the tax benefit of cash repatriation (B)

(0.25)



(0.25)


(0.26)

Per share impact of the 2012 research and development (R&D) tax credit (C)


(0.08)



Adjusted EPS (2), (3)

$

1.43


$

1.56


$

5.76


$

5.91



















(A)

FAS/CAS Adjustment

$

(87)


$

71


$

(346)


$

(346)


         Tax effect (1)

30


(25)


121


121


After-tax impact

(57)


46


(225)


(225)


Diluted shares

315.8


328.2


314.0


312.0


Per share impact

$

(0.18)


$

0.14


$

(0.72)


$

(0.72)









(B)

Tax benefit of cash repatriation

$

(80)


$


$

(80)


$

(80)


Diluted shares

315.8



314.0


312.0


Per share impact

$

(0.25)


$


$

(0.25)


$

(0.26)









(C)

2012 R&D tax credit

$


$

(25)


$


$


Diluted shares


328.2




Per share impact

$


$

(0.08)


$


$









Adjusted Income Non-GAAP Reconciliation
















(In millions)









Three Months Ended






30-Mar-14


31-Mar-13





Income from continuing operations attributable to Raytheon Company common stockholders

$

589


$

490





FAS/CAS Adjustment (1)

(57)


46





Tax benefit of cash repatriation

(80)






2012 R&D tax credit


(25)





Adjusted Income (2), (4)

$

452


$

511













Adjusted Operating Margin Non-GAAP Reconciliation






















2014 Guidance


Three Months Ended


Low end


High end


30-Mar-14


31-Mar-13


of range


of range

Operating Margin

14.3%


12.0%


14.1%


14.3%

FAS/CAS Adjustment

(1.6)%


1.2%


(1.5)%


(1.5)%

Adjusted Operating Margin (2), (5)

12.7%


13.2%


12.6%


12.8%










(1)

Tax effected at 35% federal statutory tax rate.













(2)

These amounts are not measures of financial performance under U.S. generally accepted accounting principles (GAAP).  They should be considered supplemental to and not a substitute for financial performance in accordance with GAAP and may not be defined and calculated by other companies in the same manner. These amounts exclude the FAS/CAS Adjustment and, from time to time, certain other items. We are providing these measures because management uses them for the purposes of evaluating and forecasting the Company's financial performance and believes that they provide additional insights into the Company's underlying business performance. We also believe that they allow investors to benefit from being able to assess our operating performance in the context of how our principal customer, the U.S. Government, allows us to recover pension and postretirement benefit (PRB) costs and to better compare our operating performance to others in the industry on that same basis. Amounts may not recalculate directly due to rounding.













(3)

Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders excluding the after-tax impact of the FAS/CAS Adjustment and, from time to time, certain other items. Three Months Ended March 30, 2014 and Guidance Adjusted EPS excludes the $0.25 impact of a net tax benefit of approximately $80 million resulting from cash repatriation in connection with a transaction with a foreign subsidiary in January 2014. Three Months Ended March 31, 2013 Adjusted EPS excludes the earnings per share impact of an R&D tax credit that relates to 2012. In January 2013, Congress approved legislation that included the extension of the R&D tax credit. The legislation retroactively reinstated the R&D tax credit for 2012 and extended it through December 31, 2013. As a result, we recorded the 2012 benefit in the first quarter of 2013.













(4)

Adjusted Income is income from continuing operations attributable to Raytheon Company common stockholders excluding the after-tax impact of the FAS/CAS Adjustment and, from time to time, certain other items. Three Months Ended March 30, 2014 Adjusted Income also excludes the net tax benefit as discussed above. Three Months Ended March 31, 2013 Adjusted Income also excludes the R&D tax credit that relates to 2012, as discussed above.













(5)

Adjusted Operating Margin is defined as total operating margin excluding the margin impact of the FAS/CAS Adjustment and, from time to time, certain other items.













 

 

SOURCE Raytheon Company

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