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Raytheon Reports First Quarter 2004 EPS of $0.24 from Continuing Operations and Increases Full-year Guidance for EPS, Bookings, Sales and Free Cash Flow
    -- Earnings per share of $0.30 including a cumulative effect of change in
       accounting principle and discontinued operations
    -- Government and Defense bookings of $7.9 billion in the quarter, backlog
       up $3.8 billion during the quarter to $28.9 billion
    -- Free cash outflow from continuing operations of $295 million in the
       quarter, $650 million better than previous guidance

WALTHAM, Mass., April 29 /PRNewswire-FirstCall/-- Raytheon Company (NYSE: RTN) reported first quarter 2004 income from continuing operations of $101 million or $0.24 per diluted share compared to $111 million or $0.27 per diluted share in the first quarter 2003. Non-cash pension expense (FAS/CAS Pension Adjustment) negatively affected the quarter by $0.15 per diluted share on a year-over-year basis.

First quarter 2004 net income was $128 million or $0.30 per diluted share compared to $95 million or $0.23 per diluted share in 2003. Net income for the first quarter of 2004 includes a $14 million after-tax loss in discontinued operations or $0.03 per diluted share versus $16 million or $0.04 per diluted share in 2003. Net income for the first quarter of 2004 also includes a $41 million or $0.10 per diluted share cumulative effect of change in accounting principle due to the previously announced change in the Company's pension and other post-retirement benefit plans measurement date from Oct. 31 to Dec. 31.

Net sales for the first quarter 2004 were $4.7 billion, up 11 percent from $4.2 billion in the comparable period in 2003. Government and Defense sales for the quarter (after the elimination of intercompany sales) increased 9 percent to $4.1 billion from $3.8 billion in the comparable quarter. Integrated Defense Systems, Missile Systems, and Space and Airborne Systems generated double-digit sales growth in the quarter.

Free cash flow from continuing operations for the first quarter was an outflow of $295 million versus an outflow of $514 million for the comparable period in 2003. Free cash flow, including discontinued operations, for the first quarter 2004 was an outflow of $286 million versus an outflow of $819 million in 2003. Free cash flow was significantly better than prior guidance due to a successful previously discussed financial system implementation in the Northeast combined with the receipt of a large international collection earlier than expected and continued focus on working capital. Free cash flow is a non-GAAP financial measure that the Company defines as operating cash flow less capital spending and internal use software spending. Attachment F contains a table reconciling this measure to operating cash flow, the most directly comparable GAAP measure.

The Government and Defense businesses recorded first quarter bookings of $7.9 billion compared to bookings of $5.0 billion in the first quarter of 2003. Government and Defense backlog reached a record $28.9 billion, an increase of $3.8 billion over year end 2003.

Raytheon Aircraft Company's (RAC) first quarter bookings were $425 million compared to $306 million in 2003.

"I am pleased with our strong start in the first quarter," said William H. Swanson, Raytheon Chairman and CEO. "We are encouraged by our record bookings and better than expected free cash flow."

Outlook

The Company now expects 2004 earnings per share from continuing operations to be $1.30-1.40, higher than its prior guidance of $1.25-1.35. The Company also raised its full year guidance for bookings to $23 billion from $22 billion, and for net sales to more than $20 billion from $19.5-20.0 billion. The Company now expects full year free cash flow to exceed $1 billion. A chart summarizing these changes is being posted to the Company's website.

Segment Results

Integrated Defense Systems

Integrated Defense Systems (IDS) first quarter 2004 net sales were $839 million, up 28 percent compared to $654 million in the first quarter 2003, due primarily to continued growth in DD(X), the Navy's future destroyer program, and strong missile defense sales. IDS generated $94 million of first quarter 2004 operating income compared to $74 million in the 2003 comparable quarter.

During the quarter, the U.S. Army Aviation and Missile Command awarded IDS a $122 million contract for the design and development of the Surface Launched Advanced Medium Range Air-to-Air Missile (SLAMRAAM) system. IDS also received a $148 million contract to provide Patriot engineering services support.

Intelligence and Information Systems

Intelligence and Information Systems (IIS) first quarter 2004 net sales were $494 million, up 7 percent compared to $462 million in the first quarter 2003. IIS earned $45 million of operating income compared to $41 million in the comparable quarter a year ago.

During the quarter, IIS booked nearly $400 million in classified contract wins.

Missile Systems

Missile Systems (MS) first quarter 2004 net sales were $965 million, up 13 percent compared to $857 million in the first quarter 2003, driven by increased volume on the Phalanx and Standard Missile-3 programs. MS generated $107 million of operating income compared to $101 million in the comparable quarter a year ago.

During the quarter, MS booked $2.1 billion for the Kinetic Energy Interceptor system contract. Also during the quarter, MS booked a $525 million contract for the development and demonstration of the Non-Line of Sight Launch System (NLOS-LS), a $170 million contract to produce 225 Tactical Tomahawk LRIP missiles and a contract for Paveway II Laser Guided Bomb Kits.

Network Centric Systems

Network Centric Systems (NCS) first quarter 2004 net sales were $720 million, down 7 percent compared to $771 million in the first quarter 2003. This decline is consistent with our projected reduction in sales in the air traffic management and communications product lines. NCS recorded an operating profit of $55 million compared to $62 million in the comparable quarter a year ago.

Space and Airborne Systems

Space and Airborne Systems (SAS) first quarter 2004 net sales were $1,013 million, up 13 percent compared to $894 million in the first quarter 2003, due to stronger classified and international programs including ASTOR. SAS generated $129 million of operating income compared to $104 million in the comparable quarter a year ago.

During the quarter, SAS received $1.7 billion in bookings including $1 billion on a number of classified contracts.

Technical Services

Technical Services (TS) first quarter 2004 net sales were $474 million, down 3 percent from $491 million in the first quarter 2003, due primarily to the completion of a major base and range contract in the first quarter 2003. TS reported an operating profit of $31 million in the first quarter of 2004 compared to $36 million in the comparable quarter a year ago.

After the quarter close, the U.S. Navy awarded TS a competitive $237 million contract to provide engineering and technical services for self- defense systems aboard U.S. Navy ships, land-based test sites and ships sold to foreign countries by the United States.

Aircraft

RAC's first quarter 2004 net sales were $374 million, up 4 percent from $361 million in the first quarter 2003. RAC recorded an operating loss of $28 million in the quarter compared to a loss of $35 million in the comparable quarter in 2003.

RAC delivered 25 commercial aircraft in the first quarter of 2004, compared to 31 in the same quarter last year.

Other

Net sales for this segment in the first quarter 2004 were $175 million compared to $40 million in the first quarter 2003. The segment recorded an operating loss of $15 million in the first quarter 2004 compared to a loss of $3 million in the comparable quarter in 2003. The consolidation of Flight Options' results in this quarter account for $133 million of the increased sales and $9 million of the increase in loss versus the prior year.

Discontinued Operations

During the quarter, the Company signed a final settlement agreement on the two Massachusetts power plants and also settled a number of additional issues on completed construction projects in its former engineering and construction businesses. The Company recorded an after-tax loss from discontinued operations for the quarter of $14 million, related to its former engineering and construction and Aircraft Integration Systems businesses.

Raytheon Company (NYSE: RTN), with 2003 sales of $18.1 billion, is an industry leader in defense and government electronics, space, information technology, technical services, and business and special mission aircraft. With headquarters in Waltham, Mass., Raytheon employs 78,000 people worldwide.

Disclosure Regarding Forward-looking Statements

Certain statements included 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, including resolution of claims; 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, commuter and fractional aircraft markets; cost growth risks inherent with large long-term fixed price contracts; conflicts with other investors in joint ventures and less than wholly-owned businesses; and risks associated with outstanding letters of credit, surety bonds, guarantees and other support agreements related to a number of contracts and leases of our former engineering and construction business unit. Further information regarding the factors that could cause actual results to differ materially from the projected results can be found in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2003.

Conference Call on the First Quarter 2004 Financial Results

Raytheon's financial results conference call will be Thursday, Apr. 29, 2004 at 9 a.m. EDT. Participants will be William Swanson, Chairman and CEO, Edward Pliner, senior vice president and CFO, and other Company executives.

The dial-in number for the conference call will be (800) 901 - 5218. The conference call will also be audiocast on the Internet at 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 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 on the site.


    Attachment A

     Raytheon Company
     Financial Information
     First Quarter 2004

    (In millions except per share amounts)


                                                       Three Months Ended
                                                 28-Mar-04          30-Mar-03

    Net sales                                       $4,676             $4,201

    Cost of sales                                    3,984              3,480
    Administrative and selling expenses                326                302
    Research and development expenses                  115                106

    Total operating expenses                         4,425              3,888

    Operating income                                   251                313

    Interest expense                                   117                143
    Interest income                                    (12)               (12)
    Other expense, net                                   -                 23

    Non-operating expense, net                         105                154

    Income from continuing operations
     before taxes                                      146                159

    Federal and foreign income taxes                    45                 48

    Income from continuing operations                  101                111

    Loss from discontinued operations,
     net of tax                                        (14)               (16)

    Income before accounting change                     87                 95

    Cumulative effect of change in
     accounting principle, net of tax                   41                  -

    Net  income                                       $128                $95

    Earnings per share from continuing
     operations
        Basic                                        $0.24              $0.27
        Diluted                                      $0.24              $0.27

    Loss per share from discontinued
     operations
        Basic                                       $(0.03)            $(0.04)
        Diluted                                     $(0.03)            $(0.04)

    Earnings per share from cumulative
     effect of change in
      change in accounting principle
        Basic                                        $0.10               $-
        Diluted                                      $0.10               $-

    Earnings per share
        Basic                                        $0.31              $0.23
        Diluted                                      $0.30              $0.23

    Average shares outstanding
        Basic                                        418.6              408.5
        Diluted                                      421.3              411.1



    Attachment B

     Raytheon Company
     Segment Information
     First Quarter 2004

    (In millions)


                    Net Sales         Operating Income      Operating Margin
               Three Months Ended    Three Months Ended    Three Months Ended
              28-Mar-04  30-Mar-03  28-Mar-04  30-Mar-03  28-Mar-04  30-Mar-03

    Integrated
     Defense
     Systems      $ 839      $ 654       $ 94       $ 74      11.2%      11.3%
    Intelligence
    and Information
    Systems         494        462         45         41       9.1%       8.9%
    Missile Systems 965        857        107        101      11.1%      11.8%

    Network Centric
     Systems        720        771         55         62       7.6%       8.0%

    Space and
     Airborne
     Systems      1,013        894        129        104      12.7%      11.6%
    Technical
     Services       474        491         31         36       6.5%       7.3%

    Aircraft        374        361        (28)       (35)     -7.5%      -9.7%

    Other           175         40        (15)        (3)     -8.6%      -7.5%

    FAS/CAS Pension
     Adjustment       -          -       (121)       (28)
    Corporate and
     Eliminations  (378)      (329)       (46)       (39)

    Total       $ 4,676    $ 4,201      $ 251      $ 313       5.4%       7.5%


    Government
     and Defense
     businesses
     after
     eliminations $4,127   $ 3,800      $ 426      $ 390      10.3%      10.3%


    Attachment C

     Raytheon Company
     Other Information
     Continuing Operations
     First Quarter 2004


                                                           Backlog
                                                        (In millions)
                                                28-Mar-04          30-Mar-03

    Integrated Defense Systems                     $6,534             $5,364
    Intelligence and Information Systems            3,969              3,766
    Missile Systems                                 7,795              4,261
    Network Centric Systems                         3,447              2,946
    Space and Airborne Systems                      5,599              4,593
    Technical Services                              1,507              1,507
    Aircraft                                        2,233              4,027
    Other                                             161                220

                                                  $31,245            $26,684

    Government and Defense businesses             $28,851            $22,437

    U.S. government backlog included
     above                                        $25,551            $19,359

    Funded backlog                                $17,934            $17,786



                                                          Bookings
                                                       (In millions)
                                                     Three months ended
                                                28-Mar-04           30-Mar-03

    Government and Defense businesses              $7,921              $5,044
    Commercial businesses                             584                 336

                                                   $8,505              $5,380


                                               New Aircraft Deliveries (Units)
                                                      Three Months Ended
                                                28-Mar-04           30-Mar-03

    Hawker                                              6                   8
    Premier I                                           3                   3
    Hawker 400XP                                        4                   3
    King Air                                            5                   8
    1900D Commuter                                      1                   -
    Pistons                                             8                  14
    T-6A                                               13                  14
       Total                                           40                  50


                                                 New Aircraft Bookings (Units)
                                                      Three Months Ended
                                                28-Mar-04           30-Mar-03

    Hawker                                              7                   7
    Premier I                                           2                   3
    Hawker 400XP                                        2                   2
    King Air                                           17                   6
    1900D Commuter                                      1                   -
    Pistons                                            32                  13
    T-6A                                                7                   4
       Total                                           68                  35


    Attachment D

     Raytheon Company
     Balance Sheet Information
     First Quarter 2004

    (In millions)


                                                 28-Mar-04          31-Dec-03
    Assets
    Cash and cash equivalents                         $340               $661
    Accounts receivable                                446                485
    Contracts in process                             3,441              2,762
    Inventories                                      2,003              1,998
    Deferred federal and foreign income
     taxes                                             524                466
    Prepaid expenses and other current
     assets                                            103                154
    Assets from discontinued operations                 55                 59
      Total current assets                           6,912              6,585

    Property, plant and equipment, net               2,681              2,711
    Deferred federal and foreign income
     taxes                                             244                337
    Goodwill                                        11,478             11,479
    Other assets, net                                2,447              2,556
        Total assets                               $23,762            $23,668

    Liabilities and Stockholders' Equity
    Notes payable and current portion of
     long-term debt                                    $13                $15
    Advance payments, less contracts in
     process                                         1,188              1,038
    Accounts payable                                   757                833
    Accrued salaries and wages                         711                767
    Other accrued expenses                           1,098              1,153
    Liabilities from discontinued
     operations                                         68                 43
      Total current liabilities                      3,835              3,849

    Accrued retiree benefits and other
     long-term liabilities                           3,237              3,281
    Long-term debt                                   6,538              6,517
    Subordinated notes payable                         859                859
    Stockholders' equity                             9,293              9,162
        Total liabilities and
         stockholders' equity                      $23,762            $23,668


    Attachment E

     Raytheon Company
     Cash Flow Information
     First Quarter 2004

    (In millions)

    Cash flow information
                                                        Three Months Ended
                                                 28-Mar-04          30-Mar-03

    Income from continuing operations                 $101               $111
    Depreciation                                        85                 76
    Amortization                                        16                 13
    Working capital                                   (604)              (674)
    Discontinued operations                              9               (305)
    Capital spending                                   (60)               (58)
    Internal use software spending                     (25)               (21)
    Other                                              192                 39
          Subtotal - free cash flow (a)               (286)              (819)

    Net activity in financing receivables               95                104
    Acquisitions                                       (70)               (40)
    Divestitures and sale of investments                 4                  -
    Dividends                                          (83)               (83)
    Issuance of common stock                             4                 17
    Debt (repayments) issuances                         (3)               793
    Space Imaging debt guarantee                         -               (130)
    Other                                               18                  1
             Total cash flow                         $(321)             $(157)


    Segment free cash flow information
                                                         Three Months Ended
                                                  28-Mar-04          30-Mar-03

    Integrated Defense Systems                       $(129)              $(13)
    Intelligence and Information Systems               (45)               (87)
    Missile Systems                                    (41)              (219)
    Network Centric Systems                           (129)              (173)
    Space and Airborne Systems                        (115)               (50)
    Technical Services                                  16                  6
    Aircraft                                           (20)                 4
    Other                                                -                  4
    Discontinued operations                              9               (305)
    Corporate                                          168                 14
                                                     $(286)             $(819)


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


    Attachment F

     Raytheon Company
     Reconciliation of Non-GAAP Financial Measures and Other Information
     First Quarter 2004

    (In millions)

    Free cash flow

                                                        Three Months Ended
                                                 28-Mar-04           30-Mar-03
    Operating cash flow                             $(201)              $(740)
    Less: Capital spending                            (60)                (58)
          Internal use software
           spending                                   (25)                (21)
            Free cash flow                           (286)               (819)
    Less: Discontinued operations                       9                (305)
              Free cash flow from
               continuing operations                $(295)              $(514)

    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.

    Debt-to-capital ratio

                                                28-Mar-04           31-Dec-03
    Notes payable and current portion
     of long-term debt                                $13                 $15
    Long-term debt                                  6,538               6,517
    Subordinated notes payable                        859                 859
              Total debt                           $7,410              $7,391

    Notes payable and current portion
     of long-term debt                                $13                 $15
    Long-term debt                                  6,538               6,517
    Subordinated notes payable                        859                 859
    Stockholders' equity                            9,293               9,162
              Total capital                       $16,703             $16,553

              Debt-to-capital ratio                 44.4%               44.7%


    Media Contact:
     James Fetig
     781-522-5111

    Investor Relations Contact:
     Tim Oliver
     781-522-5141
SOURCE  Raytheon Company
    -0-                             04/29/2004
    /CONTACT: James Fetig, +1-781-522-5111, or Tim Oliver, +1-781-522-5141,
both of Raytheon Company /
    /Web site:  http://www.raytheon.com/
    (RTN)

CO:  Raytheon Company
ST:  Massachusetts
IN:  CPR ARO
SU:  ERN CCA MAV

CP-ES 
-- NETH001 --
8652 04/29/2004 07:04 EDT http://www.prnewswire.com