News Release

Raytheon Reports Strong Second Quarter 2017 Results
-- Bookings of $6.5 billion; backlog of $36.2 billion
-- Net sales of $6.3 billion, up 4.2 percent
-- EPS from continuing operations of $1.89
-- Operating cash flow from continuing operations of $782 million
-- Increased full-year 2017 guidance for sales and EPS

WALTHAM, Mass., July 27, 2017 /PRNewswire/ -- Raytheon Company (NYSE: RTN) today announced net sales for the second quarter 2017 of $6.3 billion, up 4.2 percent compared to $6.0 billion in the second quarter 2016. Second quarter 2017 EPS from continuing operations was $1.89 compared to $2.41 in the second quarter 2016. Second quarter 2017 EPS from continuing operations included a $0.09 charge associated with the early retirement of debt. Second quarter 2016 EPS from continuing operations included a tax-free gain of $0.53 related to the previously disclosed ThalesRaytheonSystems (TRS) transaction.

"Global customer demand for our advanced capabilities continues to drive growth, resulting in stronger than expected bookings, sales, EPS and operating cash flow for the quarter and supporting increased guidance for the year," said Thomas A. Kennedy, Raytheon Chairman and CEO. "I am very proud of the Raytheon team and our continued strong operating performance as we serve the needs of our global customers and shareholders."

Operating cash flow from continuing operations for the second quarter 2017 was $782 million compared to $746 million for the second quarter 2016.

Summary Financial Results



























2nd Quarter


%


Six Months


%


($ in millions, except per share data)

2017


2016


Change


2017


2016


Change















Bookings

$

6,532


$

7,103


-8.0%


$

12,220


$

13,304


-8.1%


Net Sales

$

6,281


$

6,029


4.2%


$

12,281


$

11,831


3.8%


Income from Continuing Operations

















attributable to Raytheon Company

$

5531


$

7182


-23.0%


$

1,0561


$

1,1452


-7.8%


EPS from Continuing Operations

$

1.891


$

2.412


-21.6%


$

3.621


$

3.832


-5.5%


Operating Cash Flow from

















Continuing Operations

$

782


$

746




$

741


$

1,071




Workdays in Fiscal Reporting Calendar

64


64




128


129






1 Second quarter and six months 2017 Income from Continuing Operations attributable to Raytheon Company and EPS from Continuing Operations included the $25 million after-tax ($39 million pretax) and $0.09 unfavorable impact, respectively, related to the early retirement of debt in the second quarter 2017.




2 Second quarter and six 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 second quarter 2016 TRS transaction.















 

Bookings in the second quarter 2017 were $6.5 billion compared to $7.1 billion in the second quarter 2016.

Backlog







 Period Ending

($ in millions)

Q2 2017


Q2 2016


2016

Backlog

$

36,168



$

35,038



$

36,709














 

Backlog at the end of the second quarter 2017 was $36.2 billion, an increase of approximately $1.1 billion compared to the second quarter 2016.

In the second quarter 2017, the company repurchased 0.6 million shares of common stock for $100 million. Year-to-date 2017, the company repurchased 3.3 million shares of common stock for $500 million.

As previously announced, the company repurchased $591 million of debt that was due in March and December of 2018. As a result, in the second quarter of 2017, the company recorded a non-operating charge of $25 million after-tax ($39 million pretax) or $0.09 per share associated with the early retirement of this debt.

Outlook

The company has updated its financial outlook for 2017 and increased guidance for sales and EPS. Charts containing additional information on the company's 2017 outlook are available at www.raytheon.com/ir.

2017 Financial Outlook





Current


Prior (4/27/17)

Net Sales ($B)

25.1 - 25.6*


24.9 - 25.4

Deferred Revenue Adjustment ($M)1

(33)


(33)

Amortization of Acquired Intangibles ($M)1

(127)


(127)

FAS/CAS Adjustment ($M)

428


428

Interest Expense, net ($M)

 (196) - (201)


 (196) - (201)

Diluted Shares (M)

~292*


291 - 293

Effective Tax Rate

 ~30.5%*


 ~31.0%

EPS from Continuing Operations

$7.35 - $7.50*


$7.25 - $7.40

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 Acquired 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.

Integrated Defense Systems












2nd Quarter




Six Months



($ in millions)

2017


2016



% Change


2017


2016



% Change

Net Sales

$

1,462



$

1,399



5%


$

2,860



$

2,735



5%

Operating Income1

$

245



$

376



NM


$

457



$

522



NM

Operating Margin1

16.8%



26.9%





16.0%



19.1%





1 Second quarter 2016 and six months 2016 operating income and operating margin include the $158 million tax-free gain from the second quarter TRS transaction.

NM = Not Meaningful












 

Integrated Defense Systems (IDS) had second quarter 2017 net sales of $1,462 million, up 5 percent compared to $1,399 million in the second quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on an international early warning radar program awarded in the first quarter 2017.

IDS recorded $245 million of operating income in the second quarter 2017 compared to $376 million in the second quarter 2016. The second quarter 2016 included the tax-free gain of $158 million from the TRS transaction as previously disclosed, which had an approximate 1,130 basis points (11.3 percent) impact to IDS operating margin.

During the quarter, IDS booked $364 million on the Air and Missile Defense Radar (AMDR) program for the U.S. Navy and $146 million on the Multi-Function RF System (MFRFS) program for the U.S. Army. IDS also booked $178 million on two international Patriot contracts.

Intelligence, Information and Services












2nd Quarter




Six Months



($ in millions)

2017


2016


% Change


2017


2016


% Change

Net Sales

$

1,555



$

1,587



-2%


$

3,062



$

3,119



-2%

Operating Income

$

115



$

120



-4%


$

226



$

224



1%

Operating Margin

7.4%



7.6%





7.4%



7.2%




 

Intelligence, Information and Services (IIS) had second quarter 2017 net sales of $1,555 million compared to $1,587 million in the second quarter 2016.

IIS recorded $115 million of operating income in the second quarter 2017 compared to $120 million in the second quarter 2016.

During the quarter, IIS booked $374 million on domestic and foreign training programs in support of Warfighter FOCUS activities. IIS also booked $555 million on a number of classified contracts.

Missile Systems












2nd Quarter




Six Months



($ in millions)

2017


2016



% Change


2017


2016


% Change

Net Sales

$

1,901



$

1,706



11%


$

3,657



$

3,429



7%

Operating Income

$

236



$

233



1%


$

452



$

425



6%

Operating Margin

12.4%



13.7%





12.4%



12.4%




 

Missile Systems (MS) had second quarter 2017 net sales of $1,901 million, up 11 percent compared to $1,706 million in the second quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on the Standard Missile-2 (SM-2), Standard Missile-3 (SM-3®), and Paveway™ programs.

MS recorded $236 million of operating income in the second quarter 2017 compared to $233 million in the second quarter 2016. The change in operating margin was primarily due to a change in program mix.

During the quarter, MS booked $690 million for Paveway, $619 million for SM-2, $436 million for SM-3, $116 million for the Long Range Precision Fires (LRPF) Missile system, $113 million for AIM-9X Sidewinder™ short-range air-to-air missiles, and $90 million for Advanced Medium-Range Air-to-Air Missiles (AMRAAM®). MS also booked $214 million on a number of classified contracts.

Space and Airborne Systems










2nd Quarter




Six Months



($ in millions)

2017


2016


% Change


2017


2016


% Change

Net Sales

$

1,608



$

1,547



4%


$

3,163



$

2,992



6%

Operating Income

$

218



$

205



6%


$

408



$

372



10%

Operating Margin

13.6%



13.3%





12.9%



12.4%




 

Space and Airborne Systems (SAS) had second quarter 2017 net sales of $1,608 million, up 4 percent compared to $1,547 million in the second quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on a domestic classified program.

SAS recorded $218 million of operating income in the second quarter 2017 compared to $205 million in the second quarter 2016.  The increase in operating income for the quarter was primarily driven by higher volume and a favorable change in mix and other performance.

During the quarter, SAS booked $91 million for radar components for the U.S. Navy. SAS also booked $137 million on a number of classified contracts.

Forcepoint











2nd Quarter





Six Months



($ in millions)

2017


2016


% Change


2017



2016


% Change

Net Sales

$

138



$

137



1%


$

282




$

276



2%

Operating Income

$

2



$

10



-80%


$

18




$

28



-36%

Operating Margin

1.4%



7.3%





6.4%




10.1%




 

Forcepoint had second quarter 2017 net sales of $138 million compared to $137 million in the second quarter 2016.

Forcepoint recorded $2 million of operating income in the second quarter 2017 compared to $10 million in the second quarter 2016. The decrease in operating income for the quarter was primarily driven by planned investments in sales and marketing.

About Raytheon
Raytheon Company, with 2016 sales of $24 billion and 63,000 employees, is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. With a history of innovation spanning 95 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I 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 Second Quarter 2017 Financial Results
Raytheon's financial results conference call will be held on Thursday, July 27, 2017 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) 202-3048 in the U.S. or (617) 213-8843 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 and potential termination of contracts; 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 ability to recruit and retain qualified personnel; the impact of potential security and cyber threats, and other disruptions; 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





Second Quarter 2017







(In millions, except per share amounts)

















Three Months Ended


Six Months Ended



2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16










Net sales


$

6,281



$

6,029



$

12,281



$

11,831


Operating expenses








Cost of sales


4,685



4,362



9,215



8,803


General and administrative expenses

747



695



1,476



1,443


Total operating expenses

5,432



5,057



10,691



10,246


Operating income


849



972



1,590



1,585


Non-operating (income) expense, net








Interest expense

51



58



109



116


Interest income


(5)



(4)



(10)



(8)


Other (income) expense, net

35



(1)



28



(3)


Total non-operating (income) expense, net

81



53



127



105


Income from continuing operations before taxes

768



919



1,463



1,480


Federal and foreign income taxes

221



205



419



362


Income from continuing operations

547



714



1,044



1,118


Income (loss) from discontinued operations, net of tax



(1)



3




Net income


547



713



1,047



1,118


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

(6)



(4)



(12)



(27)


Net income attributable to Raytheon Company

$

553



$

717



$

1,059



$

1,145











Basic earnings per share attributable to Raytheon Company common stockholders:








Income from continuing operations

$

1.90



$

2.41



$

3.62



$

3.84


Income (loss) from discontinued operations, net of tax





0.01




Net income


1.90



2.41



3.63



3.84











Diluted earnings per share attributable to Raytheon Company common stockholders:








Income from continuing operations

$

1.89



$

2.41



$

3.62



$

3.83


Income (loss) from discontinued operations, net of tax





0.01




Net income


1.89



2.41



3.63



3.84











Amounts attributable to Raytheon Company common stockholders:








Income from continuing operations

$

553



$

718



$

1,056



$

1,145


Income (loss) from discontinued operations, net of tax



(1)



3




Net income


$

553



$

717



$

1,059



$

1,145











Average shares outstanding








Basic


291.7



297.3



292.1



298.2


Diluted


292.0



297.6



292.4



298.6


 

 

Attachment B













Raytheon Company




Preliminary Segment Information











Second Quarter 2017












(In millions, except percentages)






















Operating Income




Net Sales


Operating Income


As a Percent of Net Sales




Three Months Ended


Three Months Ended


Three Months Ended




2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16
















Integrated Defense Systems

$

1,462



$

1,399



$

245



$

376



16.8%



26.9%



Intelligence, Information and Services

1,555



1,587



115



120



7.4%



7.6%



Missile Systems

1,901



1,706



236



233



12.4%



13.7%



Space and Airborne Systems

1,608



1,547



218



205



13.6%



13.3%



Forcepoint


138



137



2



10



1.4%



7.3%



Eliminations


(372)



(326)



(37)



(34)







Total business segment

6,292



6,050



779



910



12.4%



15.0%



Acquisition Accounting Adjustments

(11)



(21)



(42)



(51)







FAS/CAS Adjustment





109



109







Corporate






3



4







Total


$

6,281



$

6,029



$

849



$

972



13.5%



16.1%



























Operating Income




Net Sales


Operating Income


As a Percent of Net Sales




Six Months Ended


Six Months Ended


Six Months Ended




2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16
















Integrated Defense Systems

$

2,860



$

2,735



$

457



$

522



16.0%



19.1%



Intelligence, Information and Services

3,062



3,119



226



224



7.4%



7.2%



Missile Systems

3,657



3,429



452



425



12.4%



12.4%



Space and Airborne Systems

3,163



2,992



408



372



12.9%



12.4%



Forcepoint


282



276



18



28



6.4%



10.1%



Eliminations


(722)



(673)



(74)



(67)







Total business segment

12,302



11,878



1,487



1,504



12.1%



12.7%



Acquisition Accounting Adjustments

(21)



(47)



(84)



(109)







FAS/CAS Adjustment





217



214







Corporate






(30)



(24)







Total


$

12,281



$

11,831



$

1,590



$

1,585



12.9%



13.4%



 

 


Attachment C










Raytheon Company






Other Preliminary Information







Second Quarter 2017










(In millions)




























Backlog







2-Jul-17


31-Dec-16











Integrated Defense Systems






$

10,055



$

10,159


Intelligence, Information and Services






5,908



5,662


Missile Systems







11,382



11,568


Space and Airborne Systems






8,398



8,834


Forcepoint







425



486


Total backlog







$

36,168



$

36,709

























Three Months Ended


Six Months Ended

Bookings



2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16











Total bookings



$

6,532



$

7,103



$

12,220



$

13,304

























Three Months Ended


Six Months Ended

General and Administrative Expenses


2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16











Administrative and selling expenses


$

547



$

514



$

1,105



$

1,063


Research and development expenses


200



181



371



380


Total general and administrative expenses


$

747



$

695



$

1,476



$

1,443






















Cash, Cash Equivalents and Restricted Cash






2-Jul-17


31-Dec-16











Cash and cash equivalents






$

2,167



$

3,303


Restricted cash




8




Total cash, cash equivalents and restricted cash shown in Attachment E


$

2,175



$

3,303


 

 


Attachment D





Raytheon Company



Preliminary Balance Sheet Information



Second Quarter 2017


(In millions)











2-Jul-17


31-Dec-16


Assets





Current assets





Cash and cash equivalents

$

2,167



$

3,303



Short-term investments

410



100



Receivables, net

1,560



1,163



Contract assets

5,728



5,041



Inventories

581



608



Prepaid expenses and other current assets

491



670



Total current assets

10,937



10,885








Property, plant and equipment, net

2,172



2,166



Goodwill

14,827



14,788



Other assets, net

2,293



2,399



Total assets

$

30,229



$

30,238








Liabilities, Redeemable Noncontrolling Interest and Equity





Current liabilities





Commercial paper

$

300



$



Contract liabilities

2,704



2,646



Accounts payable

1,278



1,520



Accrued employee compensation

1,179



1,234



Other current liabilities

1,126



1,139



Total current liabilities

6,587



6,539








Accrued retiree benefits and other long-term liabilities

7,731



7,758



Long-term debt

4,747



5,335








Redeemable noncontrolling interest

349



449








Equity





Raytheon Company stockholders' equity





Common stock

3



3



Additional paid-in capital





Accumulated other comprehensive loss

(6,994)



(7,411)



Retained earnings

17,806



17,565



Total Raytheon Company stockholders' equity

10,815



10,157



Noncontrolling interests in subsidiaries





Total equity

10,815



10,157



Total liabilities, redeemable noncontrolling interest and equity

$

30,229



$

30,238



 

 

Attachment E




Raytheon Company


Preliminary Cash Flow Information




Second Quarter 2017




(In millions)





Six Months Ended


2-Jul-17


3-Jul-16

Cash flows from operating activities




Net income

$

1,047



$

1,118


(Income) loss from discontinued operations, net of tax

(3)




Income from continuing operations

1,044



1,118


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




Depreciation and amortization

263



247


Stock-based compensation

92



89


Gain on sale of equity method investment



(158)


Loss on repayment of long-term debt

39




Deferred income taxes

(105)



(53)


Changes in assets and liabilities




Receivables, net

(393)



(250)


Contract assets and contract liabilities

(622)



(492)


Inventories

27



(14)


Prepaid expenses and other current assets

112



130


Income taxes receivable/payable

99



64


Accounts payable

(238)



49


Accrued employee compensation

(54)



(43)


Other current liabilities

(25)



(76)


Accrued retiree benefits

564



445


Other, net

(62)



15


Net cash provided by (used in) operating activities

741



1,071


Cash flows from investing activities




Additions to property, plant and equipment

(181)



(237)


Proceeds from sales of property, plant and equipment

31



1


Additions to capitalized internal use software

(33)



(26)


Purchases of short-term investments

(399)



(472)


Maturities of short-term investments

100



599


Payments for purchases of acquired companies, net of cash received

(39)



(57)


Other

(1)



6


Net cash provided by (used in) investing activities

(522)



(186)


Cash flows from financing activities




Dividends paid

(447)



(419)


Net borrowings (payments) on commercial paper

300




Repayments of long-term debt

(591)




Loss on repayment of long-term debt

(38)




Repurchases of common stock under share repurchase programs

(500)



(602)


Repurchases of common stock to satisfy tax withholding obligations

(79)



(92)


Acquisition of noncontrolling interest in RCCS LLC



(90)


Contribution from noncontrolling interests in Forcepoint

8



11


Other



(5)


Net cash provided by (used in) financing activities

(1,347)



(1,197)


Net increase (decrease) in cash, cash equivalents and restricted cash

(1,128)



(312)


Cash, cash equivalents and restricted cash at beginning of the year

3,303



2,328


Cash, cash equivalents and restricted cash at end of period

$

2,175



$

2,016


 

 

Attachment F






Raytheon Company








Supplemental EPS Information







Second Quarter 2017








(In millions, except per share amounts)


















Three Months Ended


Six Months Ended






2-Jul-17


3-Jul-16


2-Jul-17


3-Jul-16









Per share impact of early debt retirement (A)

$

0.09



$



$

0.09



$


Per share impact of TRS transaction (B)



0.53





0.53














(A)

Early debt retirement

$

39



$



$

39



$




Tax effect (at 35% statutory rate)

(14)





(14)





After-tax impact

25





25





Diluted shares

292.0





292.4





Per share impact

$

0.09



$



$

0.09



$














(B)

TRS transaction


$



$

158



$



$

158



Diluted shares




297.6





298.6



Per share impact


$



$

0.53



$



$

0.53


 

Raytheon Company
Global Headquarters
Waltham, Mass.

Investor Relations Contact
Todd Ernst
781.522.5141

Media Contact
Corinne Kovalsky
781.522.5899

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SOURCE Raytheon Company