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Raytheon Reports First Quarter 2003 EPS of $0.27 from Continuing Operations
-- Bookings of $5.4 billion, exceed plan by $1 billion -- Sales increased 7 percent; government and defense businesses up 12 percent -- EPS of $0.23 including impact of discontinued operations

LEXINGTON, Mass., Apr 22, 2003 /PRNewswire-FirstCall via COMTEX/ -- Raytheon Company (NYSE: RTN) reported first quarter 2003 income from continuing operations of $111 million or $0.27 per diluted share compared to $149 million or $0.37 per diluted share in the first quarter 2002. Non-cash pension expense (FAS/CAS pension adjustment) accounted for a $0.14 decrease in earnings per diluted share on a year-over-year basis.

The Company also reported first quarter 2003 net income of $95 million or $0.23 per diluted share compared to a net loss of $583 million or $1.44 per diluted share in 2002. Net income for the first quarter of 2003 includes a $16 million after tax loss in discontinued operations, or $0.04 per diluted share. The first quarter 2002 loss was driven by a loss on the sale of Aircraft Integration Systems (AIS) and the write-off of goodwill at Raytheon Aircraft and AIS.

Net sales for the first quarter 2003 were $4.2 billion, up from $3.9 billion in the comparable period in 2002. The government and defense businesses sales (after the elimination of intercompany sales) for the quarter increased 12 percent to $3.8 billion from $3.4 billion in the comparable quarter.

Consistent with previous guidance, free cash flow was an outflow of $819 million, including $305 million consumed by discontinued operations. Free cash flow for the comparable quarter last year was an outflow of $425 million. Free cash flow represents a non-GAAP financial measure that the Company defines as operating cash flow less capital spending and internal use software spending. A table reconciling this measure to the most directly comparable GAAP measure is included in the attachments to this press release.

"Our strong government and defense bookings, sales, and record backlog demonstrate that we are executing well and maintaining our focus on customer satisfaction," said Daniel P. Burnham, Raytheon chairman and CEO. "During the quarter, we completed the acquisition of Solipsys Corporation, enhancing our ability to grow our defense business and provide integrated solutions to our customers. I am also pleased that Raytheon Aircraft has continued to meet its commitments despite the difficult market, which is a direct result of proactive measures taken by the management team."

The Company ended the quarter with backlog of $26.7 billion, up from $25.7 billion in the 2002 comparable period.

    SEGMENT RESULTS

    Integrated Defense Systems

Integrated Defense Systems (IDS) first quarter 2003 net sales were $654 million, up 11 percent compared to $591 million in the first quarter 2002 due primarily to the start-up of DD(X), the Navy's future destroyer program, as well as increased missile defense sales. IDS generated $74 million of operating income compared to $71 million in the comparable quarter.

During the quarter, IDS booked $225 million related to the renewal of an international technical support contract. In addition, subsequent to the quarter Raytheon was awarded a $300 million sole source contract to engineer, construct, integrate and test a forward-deployable Ballistic Missile Defense System (BMDS) radar. The BMDS radar, a transportable, X-band, phased array radar with sufficient sensitivity to detect, track and discriminate between missile threats, has the potential with future options to be an $800 million opportunity.

    Intelligence and Information Systems

Intelligence and Information Systems (IIS) first quarter 2003 net sales were $462 million, up 11 percent compared to $417 million in the first quarter 2002 due primarily to continued strong growth in classified programs, as well as the start-up of the NPOESS program, a low-Earth orbiting polar satellite system designed to meet the nation's future civilian science and military needs for accurate weather forecasting. IIS earned $41 million of operating income compared to $37 million in the comparable quarter a year ago.

During the quarter, IIS had more than $500 million in classified bookings, including a competitive procurement in excess of $300 million.

    Missile Systems

Missile Systems (MS) first quarter 2003 net sales were $857 million, up 18 percent compared to $727 million in the first quarter 2002 driven by several programs that are transitioning from low-rate initial production to full-rate production, as well as increased sales volume on Tomahawk and AMRAAM. MS generated $101 million of operating income compared to $94 million in the comparable quarter.

During the quarter, the U.S. Navy awarded Raytheon a $225 million contract for the production of Tactical Tomahawk missiles. In addition, Raytheon won the majority share of a U.S. Air Force competition for production of Paveway II Laser Guided Bomb Kits, totaling $174 million. The Department of Defense announced that the Air Force would award a total of up to $2 billion for Paveway production through 2009. Also during the quarter, a Raytheon joint venture received its first major international award for Javelin from the United Kingdom's Ministry of Defence. Raytheon's share of this competitive win is approximately $150 million.

    Network Centric Systems

Network Centric Systems (NCS) first quarter 2003 net sales were $771 million, up 3 percent compared to $748 million in the first quarter 2002. NCS earned $62 million in operating income compared to $73 million in the comparable quarter a year ago. The decline in operating income is due to performance issues on a few older programs.

During the quarter the United Kingdom's National Air Traffic Services awarded Raytheon a $116 million contract to supply and install radars at 20 sites throughout the United Kingdom.

    Space and Airborne Systems

Space and Airborne Systems (SAS) first quarter 2003 net sales were $894 million, up 26 percent compared to $707 million in the first quarter 2002, due primarily to higher sales on ASTOR, airborne radar programs and classified programs. SAS generated $104 million of operating income compared to $85 million in the comparable quarter as a result of higher sales volume.

During the quarter SAS received more than $200 million of bookings on classified programs.

    Technical Services

Technical Services (TS) first quarter 2003 net sales were $491 million, down 7 percent from $528 million in the first quarter 2002, due primarily to program losses in 2002. TS generated $36 million of operating income compared to $35 million in the comparable quarter.

During the quarter TS was selected to support facilities used to train astronauts and flight controllers on critical mission skills at NASA's Johnson Space Center under a five-year contract valued at $79 million including options. During the quarter, TS won 9 of 10 competitive pursuits.

    Aircraft

Raytheon Aircraft (RAC) first quarter 2003 net sales were $377 million, down from $494 million in the first quarter 2002 due primarily to lower deliveries as well as a prior year divestiture. Excluding the divestiture, sales were down $28 million, or 7 percent from the prior year. RAC's operating loss in the quarter was $38 million, compared to a loss of $53 million in the comparable quarter in 2002.

RAC delivered 31 commercial aircraft in the first quarter of 2003, compared to 43 in the same quarter last year.

    DISCONTINUED OPERATIONS

The total pretax loss from discontinued operations for the quarter was $25 million. During the quarter, the Company recorded a $12 million pretax charge associated with increased costs for two construction projects and incurred $8 million of pretax period costs for the project management office of discontinued operations. The Company transferred care, custody and control of Mystic Block 8 to the customer this month and Block 8 now is in commercial operation. The Company is on schedule to complete Block 9 at Mystic and Fore River during the second quarter of 2003. Also, the Company recorded a $5 million pretax charge primarily related to the further write-down of Boeing Business Jet program inventory retained after the disposition of AIS.

Raytheon Company (NYSE: RTN), with 2002 sales of $16.8 billion, is an industry leader in defense, government and commercial electronics, space, information technology, technical services, and business and special mission aircraft. With headquarters in Lexington, Mass., Raytheon employs more than 76,000 people worldwide.

    Disclosure Regarding Forward-looking Statements

Certain statements made in this release, including any statements relating to the Company's future plans, objectives, and projected future financial performance, contain or are based on, forward-looking statements within the meaning of the federal securities laws. Specifically, statements that are not historical facts, including statements accompanied by words such as "believe," "expect," "estimate," "intend," or "plan," and variations of these words and similar expressions, are intended to identify forward-looking statements and convey the uncertainty of future events or outcomes. The Company cautions readers that any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks, and actual results may differ materially. The Company expressly disclaims any current intention to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this release. Important factors that could cause actual results to differ include, but are not limited to: the ability to obtain or the timing of obtaining future government awards; the availability of government funding; changes in government or customer priorities due to program reviews or revisions to strategic objectives; difficulties in developing and producing operationally advanced technology systems; termination of government contracts; program performance and timing of contract payments; the performance of critical subcontractors; government import and export policies and other government regulations; the ultimate resolution of contingencies and legal matters, including investigations; the effect of market conditions, particularly in relation to the general aviation and commuter aircraft markets; the uncertainty of the timing and amount of net realizable value of Boeing Business Jet-related assets; the timing of project completion and customer acceptance of two Massachusetts construction projects; and the impact of change orders, the recoverability of the Company's claims and the outcome of defending claims asserted against the Company. Further information regarding the factors that could cause actual results to differ materially from the Company's expectations are disclosed in the Company's SEC filings, including "Item 1-Business" of the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

Conference Call on First Quarter 2003 Financial Results

Raytheon's financial results conference call will be Tuesday, April 22, 2003 at 9 a.m. Participants will be William Swanson president, Edward Pliner senior vice president and CFO and other company executives.

The conference call will be audiocast on the Internet at www.raytheon.com. Individuals may listen to the call and download charts that will be used in the call. These charts will be available for printing prior to the call.

Interested parties are urged 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 to the site.



    Attachment A

    Raytheon Company
    Financial Information
    First Quarter 2003

    (In millions, except per share amounts)
                                                        Three Months Ended
                                                   30-Mar-03         31-Mar-02

    Net sales                                       $4,201            $3,911

    Cost of sales                                    3,480             3,160
    Administrative and selling expenses                302               294
    Research and development expenses                  106               104

    Total operating expenses                         3,888             3,558

    Operating income                                   313               353

    Interest expense                                   143               140
    Interest income                                    (12)               (8)
    Other expense                                       23                 8

    Non-operating expense, net                         154               140

    Income from continuing operations
     before taxes                                      159               213

    Federal and foreign income taxes                    48                64

    Income from continuing operations                  111               149

    Loss from discontinued operations,
     net of tax                                        (16)             (224)

    Income (loss) before extraordinary
     item and accounting change                         95               (75)

    Extraordinary gain from debt
     repurchases, net of tax                             -                 1

    Cumulative effect of change in
     accounting principle, net of tax                    -              (509)

    Net income (loss)                                  $95             $(583)

    Earnings per share from continuing operations
      Basic                                          $0.27             $0.38
      Diluted                                        $0.27             $0.37

    Loss per share from discontinued operations
      Basic                                         $(0.04)           $(0.57)
      Diluted                                       $(0.04)           $(0.55)

    Loss per share from cumulative effect
     of change in accounting principle
      Basic                                           $-              $(1.29)
      Diluted                                         $-              $(1.26)

    Earnings (loss) per share
      Basic                                          $0.23            $(1.47)
      Diluted                                        $0.23            $(1.44)

    Average shares outstanding
      Basic                                          408.5             395.7
      Diluted                                        411.1             404.9



    Attachment B

    Raytheon Company
    Segment Information
    First Quarter 2003

    (In millions)

                                                              Operating Income
                       Net Sales       Operating Income  As a Percent of Sales
                   Three Months Ended  Three Months Ended   Three Months Ended
                   30-Mar-03 31-Mar-02 30-Mar-03 31-Mar-02 30-Mar-03 31-Mar-02

 Integrated Defense
  Systems              $ 654     $ 591       $74     $71       11.3%     12.0%
 Intelligence and
  Information
  Systems                462       417        41      37        8.9%      8.9%
 Missile Systems         857       727       101      94       11.8%     12.9%
 Network Centric Systems 771       748        62      73        8.0%      9.8%
 Space and Airborne
  Systems                894       707       104      85       11.6%     12.0%
 Technical Services      491       528        36      35        7.3%      6.6%
 Aircraft                377       494       (38)    (53)     -10.1%   - 10.7%
 FAS/CAS Pension
  Adjustment               -         -       (29)     52

 Corporate and
  Eliminations          (305)     (301)      (38)    (41)

 Total                $4,201    $3,911      $313    $353        7.5%      9.0%




    Attachment C

    Raytheon Company
    Other Information
    Continuing Operations
    First Quarter 2003


                                                             Backlog
                                                          (In millions)
                                                  30-Mar-03          31-Mar-02

    Integrated Defense Systems                     $5,364             $4,385
    Intelligence and Information Systems            3,766              2,974
    Missile Systems                                 4,261              3,298
    Network Centric Systems                         2,946              2,975
    Space and Airborne Systems                      4,593              4,917
    Technical Services                              1,507              1,947
    Aircraft                                        4,027              4,873
    Corporate                                         220                292

                                                  $26,684            $25,661

    U.S. government backlog included above        $19,352            $17,275


                                                   Aircraft Deliveries (Units)
                                                        Three Months Ended
                                                    30-Mar-03        31-Mar-02

    Hawker                                              8                  9
    Premier I                                           3                  6
    Beechjet                                            3                  5
    King Air                                            8                 12
    1900D Commuter                                      -                  3
    Pistons                                            14                 14
    T-6A                                               14                 10
       Total                                           50                 59


                                                     Aircraft Bookings (Units)
                                                        Three Months Ended
                                                    30-Mar-03        31-Mar-02

    Hawker                                              7                 40
    Premier I                                           3                 32
    Beechjet                                            2                 39
    King Air                                            6                  8
    Pistons                                            13                 18
    T-6A                                                4                  -
       Total                                           35                137




    Attachment D

    Raytheon Company
    Preliminary Financial Information
    First Quarter 2003

    (In millions)

    Balance sheets
                                             30-Mar-03   31-Dec-02   31-Mar-02
    Assets
    Cash and cash equivalents                   $387        $544      $1,484
    Accounts receivable                          537         675         375
    Contracts in process                       3,629       3,016       3,649
    Inventories                                2,045       2,032       2,159
    Deferred federal and foreign income
     taxes                                       438         601         567
    Prepaid expenses and other current
     assets                                      214         247         160
    Assets from discontinued operations           74          75         150
      Total current assets                     7,324       7,190       8,544

    Property, plant and equipment, net         2,387       2,396       2,293
    Deferred federal and foreign income
     taxes                                       417         281           -
    Goodwill                                  11,290      11,170      11,359
    Other assets, net                          2,894       2,909       3,597
        Total assets                         $24,312     $23,946     $25,793

    Liabilities and Stockholders' Equity
    Notes payable and current portion of
     long-term debt                           $1,528      $1,153      $1,792
    Advance payments, less contracts in
     process                                     877         819         921
    Accounts payable                             693         776         782
    Accrued salaries and wages                   625         710         561
    Other accrued expenses                     1,139       1,316       1,413
    Liabilities from discontinued
     operations                                   51         333         369
      Total current liabilities                4,913       5,107       5,838

    Accrued retiree benefits and other
     long-term liabilities                     2,887       2,831       1,252
    Deferred federal and foreign income
     taxes                                         -           -         908
    Long-term debt                             6,695       6,280       5,995
    Mandatorily redeemable equity
     securities                                  858         858         857
    Stockholders' equity                       8,959       8,870      10,943
        Total liabilities and
         stockholders' equity                $24,312     $23,946     $25,793


    Debt-to-capital ratio
                                            30-Mar-03   31-Dec-02   31-Mar-02

    Debt                                      $8,223      $7,433      $7,787
    Capital                                   18,040      17,161      19,587
      Debt-to-capital ratio                    45.6%       43.3%       39.8%



    Attachment E

    Raytheon Company
    Preliminary Cash Flow Information
    First Quarter 2003

    (In millions)

    Cash flow information
                                                        Three Months Ended
                                                   30-Mar-03         31-Mar-02

    Income from continuing operations                 $111               $149
    Depreciation                                        76                 72
    Amortization                                        13                 16
    Working capital                                   (512)              (402)
    Discontinued operations                           (305)              (224)
    Capital spending                                   (58)               (85)
    Internal use software spending                     (21)               (26)
    Other                                             (123)                75
          Subtotal - free cash flow (a)               (819)              (425)

    Net activity in financing receivables              104                (60)
    Hughes Defense settlement                            -                134
    Acquisitions                                       (40)                 -
    Divestitures                                         -              1,123
    Space Imaging debt guarantee                      (130)                 -
    Dividends                                          (83)               (79)
    Issuance of common stock                            17                  8
    Debt borrowings (repayments)                       793               (442)
    Other                                                1                 11
             Total cash flow                         $(157)              $270


    Segment free cash flow information
                                                         Three Months Ended
                                                    30-Mar-03        31-Mar-02

    Integrated Defense Systems                        $(13)             $(125)
    Intelligence and Information Systems               (88)               (47)
    Missile Systems                                   (219)              (101)
    Network Centric Systems                           (173)              (127)
    Space and Airborne Systems                         (50)               (77)
    Technical Services                                   6                 22
    Aircraft                                             3                 34
    Discontinued operations                           (305)              (224)
    Other                                               20                220
                                                     $(819)             $(425)


    (a) See Attachment F for a description of free cash flow.




    Attachment F

    Raytheon Company
    Reconciliation of Non-GAAP Financial Measure
    First Quarter 2003

    (In millions)

    Reconciliation of Non-GAAP Financial Measure
                                                        Three Months Ended
                                                   30-Mar-03         31-Mar-02
    Operating cash flow                              $(740)            $(314)
    Less:    Capital spending                          (58)              (85)
             Internal use software
              spending                                 (21)              (26)
                Free cash flow                       $(819)            $(425)



    Note:  Free cash flow represents a non-GAAP financial measure defined
    as operating cash flow less capital spending and internal use software
    spending.   The Company's management uses non-GAAP financial
    measures to evaluate the operating performance of its business and
    as a component for determining incentive-based compensation.  In
    addition, the Company believes that free cash flow is an important
    measure of performance used by some investors, equity analysts and
    others to make informed investment decisions.  The definitions
    used here may differ from those used by other companies.


    Media Contact:
     James Fetig
     781-860-2386

    Investor Relations Contact:
     Tim Oliver
     781-860-2167

SOURCE Raytheon Company

Media, James Fetig, +1-781-860-2386; or Investor Relations, Tim
Oliver, +1-781-860-2167, both of Raytheon Company
http:// www.raytheon.com