|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 (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 (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.
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.
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