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Raytheon Reports Strong Third Quarter 2016 Results
- Strong bookings of $6.9 billion; book-to-bill ratio of 1.15
- Net sales of $6.0 billion, up 4 percent
- EPS from continuing operations of $1.79
- Solid operating cash flow from continuing operations of $640 million
- Increased full-year 2016 guidance for EPS

WALTHAM, Mass., Oct. 27, 2016 /PRNewswire/ -- Raytheon Company (NYSE: RTN) today announced net sales for the third quarter 2016 of $6.0 billion, up 4 percent compared to $5.8 billion in the third quarter 2015.

Third quarter 2016 EPS from continuing operations was $1.79 compared to $1.47 in the third quarter 2015. Third quarter 2016 EPS from continuing operations included a favorable FAS/CAS Adjustment of $0.23 compared to a favorable FAS/CAS Adjustment of $0.09 in the third quarter 2015.

"The Company's strong operating performance in the third quarter reflects our continued focus on driving global growth and creating value for our customers and shareholders," said Thomas A. Kennedy, Raytheon Chairman and CEO.

Operating cash flow from continuing operations for the third quarter 2016 was $0.6 billion compared to $1.1 billion for the third quarter 2015. Operating cash flow from continuing operations in the third quarter 2016 was lower than the third quarter 2015, as expected, primarily due to the timing of collections and payments. Year-to-date operating cash flow from continuing operations was $1.7 billion in 2016 versus $1.5 billion for the comparable period in 2015. The increase in operating cash flow from continuing operations in 2016 was primarily due to the timing of cash taxes.

Summary Financial Results


















3rd Quarter

%


Nine Months

%


($ in millions, except per share data)

2016


2015

Change


2016

2015

Change










Bookings

$

6,940



$

5,315


30.6%


$

20,259


$

17,366


16.7%

Net Sales

$

6,033



$

5,783


4.3%


$

17,831


$

16,919


5.4%

Income from Continuing Operations attributable to
    Raytheon Company

$

528



$

448


17.9%


$

1,666

1

$

1,503

2

10.8%

EPS from Continuing Operations

$

1.79



$

1.47


21.8%


$

5.60

1

$

4.91

2

14.1%

Operating Cash Flow from Continuing Operations

$

640



$

1,102




$

1,711


$

1,533



Workdays in Fiscal Reporting Calendar

63



63




192


188



1 Nine months 2016 Income from Continuing Operations attributable to Raytheon Company and EPS from Continuing Operations included the tax-free gain of $158 million and $0.53 impact, respectively, for the TRS transaction.

2 Nine months 2015 Income from Continuing Operations attributable to Raytheon Company and EPS from Continuing Operations included the favorable $181 million pretax ($138 million after-tax) and $0.45 impact, respectively, for the first quarter 2015 eBorders settlement.










The Company had bookings of $6.9 billion in the third quarter 2016, resulting in a book-to-bill ratio of 1.15 in the quarter. Third quarter 2015 bookings were $5.3 billion. Year-to-date 2016 bookings were $20.3 billion, resulting in a book-to-bill ratio of 1.14. Year-to-date 2015 bookings were $17.4 billion.

In the third quarter 2016, the Company repurchased 1.4 million shares of common stock for $198 million. Year-to-date 2016, the Company repurchased 6.2 million shares of common stock for $801 million.

Backlog


($ in millions)

 Period Ending


Q3 2016


Q3 2015


2015

Backlog

$

35,811



$

33,571



$

34,669


Funded Backlog

$

25,666



$

24,361



$

25,060


Backlog at the end of the third quarter 2016 was $35.8 billion, an increase of approximately $2.2 billion compared to the end of the third quarter 2015. Funded backlog was $25.7 billion, an increase of approximately $1.3 billion compared to the end of the third quarter 2015.

Outlook

The Company has updated its financial outlook for 2016 and increased guidance for EPS. Charts containing additional information on the Company's 2016 outlook are available on the Company's website at www.raytheon.com/ir.

2016 Financial Outlook





Current


Prior (7/28/16)

Net Sales ($B)

24.2 - 24.5*


24.0 - 24.5

Deferred Revenue Adjustment ($M)1

(77)


(77)

Amortization of Acquired Intangibles ($M)1

(121)


(121)

FAS/CAS Adjustment ($M)

433*


428

Interest Expense, net ($M)

 (215) - (220)*


 (215) - (225)

Diluted Shares (M)

~297*


296 - 298

Effective Tax Rate

 ~28.0%


 ~28.0%

EPS from Continuing Operations

$7.28 - $7.38*


$7.13 - $7.33

Operating Cash Flow from Continuing Operations ($B)

 2.8 - 3.1


 2.8 - 3.1

* Denotes change from prior guidance




1 Deferred Revenue Adjustment and Amortization of Intangibles represent the unfavorable impact of the acquisition accounting adjustments to record acquired deferred revenue at fair value and the amortization of acquired intangible assets for all business segments.

Segment Results

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

Integrated Defense Systems










3rd Quarter



Nine Months


($ in millions)

2016


2015

% Change


2016


2015

% Change

Net Sales

$

1,334



$

1,417


-6%


$

4,070



$

4,289


-5%

Operating Income1

$

209



$

198


6%


$

731



$

583


NM

Operating Margin1

15.7%



14.0%




18.0%



13.6%



1 Nine months 2016 operating income and operating margin include the favorable $158 million impact of the TRS transaction.

NM = Not Meaningful










Integrated Defense Systems (IDS) had third quarter 2016 net sales of $1,334 million compared to $1,417 million in the third quarter 2015. The change in net sales for the quarter was primarily driven by lower net sales on various radar production programs and on an international communications program due to scheduled completion of certain production phases on these programs.

IDS recorded $209 million of operating income in the third quarter 2016 compared to $198 million in the third quarter 2015. The increase in operating income for the quarter was primarily driven by higher net program efficiencies, partially offset by lower volume in the third quarter 2016.

During the quarter, IDS booked $265 million to provide advanced Patriot air and missile defense capabilities for an international customer. IDS also booked $92 million for the Engineering and Manufacturing Development (EMD) phase on the competitively awarded Enterprise Air Surveillance Radar (EASR) program for the U.S. Navy.

Intelligence, Information and Services










3rd Quarter




Nine Months



($ in millions)

2016


2015


% Change


2016


2015


% Change

Net Sales

$

1,541



$

1,519



1%


$

4,676



$

4,574



2%

Operating Income1

$

122



$

118



3%


$

346



$

535



NM

Operating Margin1

7.9%



7.8%





7.4%



11.7%




1 Nine months 2015 operating income and operating margin include the favorable $181 million impact of the eBorders settlement.

NM = Not Meaningful












Intelligence, Information and Services (IIS) had third quarter 2016 net sales of $1,541 million, up 1 percent compared to $1,519 million in the third quarter 2015. 

IIS recorded $122 million of operating income in the third quarter 2016 compared to $118 million in the third quarter 2015.

During the quarter, IIS booked $255 million on the Joint Precision Approach and Landing System (JPALS) program for the U.S. Navy, $286 million on domestic and foreign training programs in support of Warfighter FOCUS activities, $107 million to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force, and $101 million to provide a common ground station for unmanned vehicles for the U.S. Air Force. IIS also booked $435 million on a number of classified contracts.

Missile Systems








3rd Quarter



Nine Months


($ in millions)

2016


2015

% Change


2016


2015

% Change

Net Sales

$

1,800



$

1,645


9%


$

5,176



$

4,677


11%

Operating Income

$

241



$

219


10%


$

656



$

610


8%

Operating Margin

13.4%



13.3%




12.7%



13.0%



Missile Systems (MS) had third quarter 2016 net sales of $1,800 million, up 9 percent compared to $1,645 million in the third quarter 2015. The increase in net sales for the quarter was primarily driven by higher sales on the Paveway™ and Advanced Medium-Range Air-to-Air Missile (AMRAAM®) programs.

MS recorded $241 million of operating income in the third quarter 2016 compared to $219 million in the third quarter 2015. The increase in operating income for the quarter was primarily driven by higher volume.

During the quarter, MS booked $538 million for Standard Missile-3 (SM-3®), $376 million for Phalanx weapon systems, and $176 million for Tube-launched, Optically-tracked, Wireless-guided (TOW®) missiles, all for both U.S. and international customers.

Space and Airborne Systems








3rd Quarter



Nine Months


($ in millions)

2016


2015

% Change


2016


2015

% Change

Net Sales

$

1,590



$

1,446


10%


$

4,587



$

4,220


9%

Operating Income

$

210



$

213


-1%


$

586



$

590


-1%

Operating Margin

13.2%



14.7%




12.8%



14.0%



Space and Airborne Systems (SAS) had third quarter 2016 net sales of $1,590 million, up 10 percent compared to $1,446 million in the third quarter 2015. The increase in net sales for the quarter was primarily driven by higher sales on an international classified program.

SAS recorded $210 million of operating income in the third quarter 2016 compared to $213 million in the third quarter 2015. The decrease in operating income for the quarter was primarily due to a change in program mix partially offset by higher volume.

During the quarter, SAS booked $164 million to provide integrated Sentinel support services for the U.K. Royal Air Force. SAS also booked $922 million on a number of classified contracts.

Forcepoint








3rd Quarter



Nine Months


($ in millions)

2016


2015

% Change


2016


2015

% Change

Net Sales

$

149



$

114


31%


$

423



$

195


NM

Operating Income

$

19



$

20


-5%


$

40



$

19


NM

Operating Margin

12.8%



17.5%




9.5%



9.7%



NM = Not Meaningful










Forcepoint (FP) had third quarter 2016 net sales of $149 million, up 31 percent compared to $114 million in the third quarter 2015. The increase in net sales for the quarter was primarily driven by higher sales in Federal products and services, and the acquisition of Stonesoft in the first quarter of 2016.

FP recorded $19 million of operating income in the third quarter 2016 compared to $20 million in the third quarter 2015. The decrease in operating margin for the quarter was primarily due to a change in product mix and an increase in commissions expense due to higher bookings.

About Raytheon

Raytheon Company, with 2015 sales of $23 billion and 61,000 employees, is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. With a history of innovation spanning 94 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5ITM products and services, sensing, effects, and mission support for customers in more than 80 countries. Raytheon is headquartered in Waltham, Massachusetts. Follow us on Twitter.

Conference Call on the Third Quarter 2016 Financial Results

Raytheon's financial results conference call will be held on Thursday, October 27, 2016 at 9 a.m. ET. Participants will include Thomas A. Kennedy, Chairman and CEO; Anthony F. O'Brien, vice president and CFO; and other Company executives.

The dial-in number for the conference call will be (866) 953-6856 in the U.S. or (617) 399-3480 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, 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 unpredictability of timing of international bookings; the ability to comply with extensive governmental regulation and obtain approvals, including export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations; changes in government procurement practices; the impact of competition; the ability to develop products and technologies, and the impact of associated investments and costs; the impact of potential security and cyber threats, and other disruptions; the ability to recruit and retain qualified personnel; the risk that actual pension returns, discount rates or other actuarial assumptions, including the long-term return on asset assumption, are significantly different than the Company's current assumptions; the risk of cost overruns, particularly for the Company's fixed-price contracts; dependence on component availability, subcontractor and partner performance and key suppliers; risks of a negative government audit; risks associated with acquisitions, investments, dispositions, joint ventures and other business arrangements; the ability to grow in the government and commercial cybersecurity markets; risks of an impairment of goodwill or other intangible assets; the impact of financial markets and global economic conditions; the use of accounting estimates in the Company's financial statements; the outcome of contingencies and litigation matters, including government investigations; the risk of environmental liabilities; 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.

 

Attachment A









Raytheon Company



Preliminary Statement of Operations Information









Third Quarter 2016


















(In millions, except per share amounts)


Three Months Ended


Nine Months Ended



2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15










Net sales


$

6,033



$

5,783



$

17,831



$

16,919


Operating expenses









Cost of sales


4,512



4,408



13,292



12,766


General and administrative expenses


715



678



2,161



1,968


Total operating expenses


5,227



5,086



15,453



14,734


Operating income


806



697



2,378



2,185


Non-operating (income) expense, net









Interest expense


58



58



174



175


Interest income


(4)



(3)



(12)



(9)


Other (income) expense, net


(4)



9



(7)



6


Total non-operating (income) expense, net


50



64



155



172


Income from continuing operations before taxes


756



633



2,223



2,013


Federal and foreign income taxes


233



189



591



513


Income from continuing operations


523



444



1,632



1,500


Income (loss) from discontinued operations, net of tax


1



(1)



1




Net income


524



443



1,633



1,500















Less: Net income (loss) attributable to noncontrolling
    interests in subsidiaries


(5)



(4)



(34)



(3)


Net income attributable to Raytheon Company


$

529



$

447



$

1,667



$

1,503











Basic earnings per share attributable to Raytheon Company
    common stockholders:









Income from continuing operations


$

1.79



$

1.47



$

5.60



$

4.91


Income (loss) from discontinued operations, net of tax









Net income


1.79



1.47



5.61



4.92











Diluted earnings per share attributable to Raytheon Company
    common stockholders:









Income from continuing operations


$

1.79



$

1.47



$

5.60



$

4.91


Income (loss) from discontinued operations, net of tax









Net income


1.79



1.47



5.60



4.91











Amounts attributable to Raytheon Company common
    stockholders:









Income from continuing operations


$

528



$

448



$

1,666



$

1,503


Income (loss) from discontinued operations, net of tax


1



(1)



1




Net income


$

529



$

447



$

1,667



$

1,503











Average shares outstanding









Basic


295.2



303.9



297.2



305.8


Diluted


295.5



304.3



297.5



306.2


 

 

Attachment B













Raytheon Company





Preliminary Segment Information













Third Quarter 2016

















































Operating Income



Net Sales


Operating Income


As a Percent of Net Sales

(In millions, except percentages)


Three Months Ended


Three Months Ended


Three Months Ended



2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15














Integrated Defense Systems


$

1,334



$

1,417



$

209



$

198



15.7

%


14.0

%

Intelligence, Information and Services


1,541



1,519



122



118



7.9

%


7.8

%

Missile Systems


1,800



1,645



241



219



13.4

%


13.3

%

Space and Airborne Systems


1,590



1,446



210



213



13.2

%


14.7

%

Forcepoint


149



114



19



20



12.8

%


17.5

%

Eliminations


(364)



(331)



(42)



(42)






Total business segment


6,050



5,810



759



726



12.5

%


12.5

%

Acquisition Accounting Adjustments


(17)



(27)



(46)



(63)






FAS/CAS Adjustment






104



43






Corporate






(11)



(9)






Total


$

6,033



$

5,783



$

806



$

697



13.4

%


12.1

%





































Operating Income



Net Sales


Operating Income


As a Percent of Net Sales

(In millions, except percentages)


Nine Months Ended


Nine Months Ended


Nine Months Ended



2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15














Integrated Defense Systems


$

4,070



$

4,289



$

731



$

583



18.0

%


13.6

%

Intelligence, Information and Services


4,676



4,574



346



535



7.4

%


11.7

%

Missile Systems


5,176



4,677



656



610



12.7

%


13.0

%

Space and Airborne Systems


4,587



4,220



586



590



12.8

%


14.0

%

Forcepoint


423



195



40



19



9.5

%


9.7

%

Eliminations


(1,037)



(999)



(109)



(111)






Total business segment


17,895



16,956



2,250



2,226



12.6

%


13.1

%

Acquisition Accounting Adjustments


(64)



(37)



(155)



(109)






FAS/CAS Adjustment






318



141






Corporate






(35)



(73)






Total


$

17,831



$

16,919



$

2,378



$

2,185



13.3

%


12.9

%

 

 

Attachment C














Raytheon Company










Other Preliminary Information














Third Quarter 2016










































(In millions)





Funded Backlog


Total Backlog








2-Oct-16


31-Dec-15


2-Oct-16


31-Dec-15















Integrated Defense Systems







$

7,996



$

8,961



$

9,667



$

10,629


Intelligence, Information and Services






2,833



2,933



6,127



6,367


Missile Systems







8,998



7,998



11,077



10,885


Space and Airborne Systems







5,336



4,692



8,435



6,309


Forcepoint







503



476



505



479


Total







$

25,666



$

25,060



$

35,811



$

34,669











































Three Months Ended


Nine Months Ended








2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15















Total Bookings







$

6,940



$

5,315



$

20,259



$

17,366











































Three Months Ended


Nine Months Ended








2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15















Administrative and selling expenses






$

536



$

495



$

1,602



$

1,457


Research and development expenses






179



183



559



511


Total general and administrative expenses






$

715



$

678



$

2,161



$

1,968






























 

 

Attachment D




Raytheon Company


Preliminary Balance Sheet Information


Third Quarter 2016





(In millions)





2-Oct-16


31-Dec-15

Assets




Current assets




Cash and cash equivalents

$

2,342



$

2,328


Short-term investments

462



872


Contracts in process, net

6,469



5,564


Inventories

651



635


Prepaid expenses and other current assets

231



413


Total current assets

10,155



9,812






Property, plant and equipment, net

2,053



2,005


Goodwill

14,791



14,731


Other assets, net

2,453



2,733


Total assets

$

29,452



$

29,281






Liabilities, Redeemable Noncontrolling Interest and Equity




Current liabilities




Advance payments and billings in excess of costs incurred

$

2,063



$

2,193


Accounts payable

1,415



1,402


Accrued employee compensation

1,131



1,154


Other current liabilities

1,392



1,377


Total current liabilities

6,001



6,126






Accrued retiree benefits and other long-term liabilities

7,284



7,140


Long-term debt

5,334



5,330






Redeemable noncontrolling interest

366



355






Equity




Raytheon Company stockholders' equity




Common stock

3



3


Additional paid-in capital



398


Accumulated other comprehensive loss

(6,856)



(7,176)


Retained earnings

17,320



16,903


Total Raytheon Company stockholders' equity

10,467



10,128


Noncontrolling interests in subsidiaries



202


Total equity

10,467



10,330


Total liabilities, redeemable noncontrolling interest and equity

$

29,452



$

29,281


 

 

Attachment E




Raytheon Company


Preliminary Cash Flow Information




Third Quarter 2016









Nine Months Ended

(In millions)

2-Oct-16


27-Sep-15

Cash flows from operating activities




Net income

$

1,633



$

1,500


(Income) loss from discontinued operations, net of tax

(1)




Income from continuing operations

1,632



1,500








Adjustments to reconcile to net cash provided by (used in) operating activities from continuing operations, net of acquisitions and divestitures




Depreciation and amortization

377



353


Stock-based compensation

120



114


Gain on sale of equity method investment

(158)




Deferred income taxes

(102)



(248)


Tax benefit from stock-based awards



(43)


Changes in assets and liabilities




Contracts in process, net and advance payments and billings in excess of costs incurred

(1,016)



(700)


Inventories

(15)



(207)


Prepaid expenses and other current assets

276



7


Income taxes receivable/payable

(78)



3


Accounts payable

52



63


Accrued employee compensation

(25)



109


Other current liabilities

(47)



47


Accrued retiree benefits

693



583


Other, net

2



(48)


Net cash provided by (used in) operating activities from continuing operations

1,711



1,533


Net cash provided by (used in) operating activities from discontinued operations




Net cash provided by (used in) operating activities

1,711



1,533


Cash flows from investing activities




Additions to property, plant and equipment

(344)



(239)


Proceeds from sales of property, plant and equipment

25



45


Additions to capitalized internal use software

(47)



(37)


Purchases of short-term investments

(472)



(658)


Sales of short-term investments



209


Maturities of short-term investments

822



1,336


Payments for purchases of acquired companies, net of cash received

(57)



(1,892)


Other

(9)



(6)


Net cash provided by (used in) investing activities

(82)



(1,242)


Cash flows from financing activities




Dividends paid

(635)



(595)


Repurchases of common stock under share repurchase programs

(801)



(750)


Repurchases of common stock to satisfy tax withholding obligations

(95)



(98)


Acquisition of noncontrolling interest in RCCS LLC

(90)




Contribution from noncontrolling interests in Forcepoint

11




Tax benefit from stock-based awards



43


Sale of noncontrolling interest in Forcepoint



343


Other

(5)



(3)


Net cash provided by (used in) financing activities

(1,615)



(1,060)


Net increase (decrease) in cash and cash equivalents

14



(769)


Cash and cash equivalents at beginning of the year

2,328



3,222


Cash and cash equivalents at end of period

$

2,342



$

2,453


 

 


Attachment F




Raytheon Company






Supplemental EPS Information









Third Quarter 2016




















(In millions, except per share amounts)


Three Months Ended


Nine Months Ended






2-Oct-16


27-Sep-15


2-Oct-16


27-Sep-15

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

$

0.23



$

0.09



$

0.70



$

0.30


Per share impact of the TRS transaction (B)





0.53




Per share impact of the eBorders settlement (C)



0.01





0.45














(A)

FAS/CAS Adjustment

$

104



$

43



$

318



$

141




Tax effect (at 35% statutory rate)

(36)



(15)



(111)



(49)



After-tax impact

68



28



207



92



Diluted shares

295.5



304.3



297.5



306.2



Per share impact

$

0.23



$

0.09



$

0.70



$

0.30














(B)

TRS transaction


$



$



$

158



$



Diluted shares






297.5





Per share impact


$



$



$

0.53



$














(C)

eBorders settlement


$



$



$



$

181




Tax effect (at 23.7% blended global tax rate)

 



4





(43)



After-tax impact



4





138



Diluted shares




304.3





306.2



Per share impact


$



$

0.01



$



$

0.45


 

Investor Relations Contact
Todd Ernst
781.522.5141

Media Contact
Corinne Kovalsky
781.522.5899

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/raytheon-reports-strong-third-quarter-2016-results-300352043.html

SOURCE Raytheon Company

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