UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): October 27, 2005
RAYTHEON COMPANY
(Exact name of registrant as specified in its charter)
| Delaware | 1-13699 | 95-1778500 | ||
| (State of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
| 870 Winter Street Waltham, Massachusetts |
02451 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (781) 522-3000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
On October 27, 2005, Raytheon Company issued a press release announcing financial results for the third quarter of fiscal year 2005. A copy of the press release is furnished with this report as Exhibit 99.1. The information in this Current Report on Form 8-K and the Exhibit attached is furnished in accordance with SEC Release No. 33-8216 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(c) Exhibits
| Exhibit 99.1 | Press Release issued by Raytheon Company dated October 27, 2005. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: October 27, 2005
| RAYTHEON COMPANY | ||
| By: | /s/ BIGGS C. PORTER | |
| Biggs C. Porter | ||
| Vice President and Corporate Controller, Acting Chief Financial Officer | ||
Exhibit 99.1
Media Relations
News release
FOR IMMEDIATE RELEASE
| Media Contact: | Investor Relations Contact: | |
| James Fetig | Greg Smith | |
| 781-522-5111 | 781-522-5141 |
Raytheon Reports Strong Third Quarter 2005 EPS of $0.51 from Continuing Operations, up 24 percent
| • | Sales of $5.3 billion, up 8 percent |
| • | Free cash flow from continuing operations of $702 million |
| • | Increased 2005 guidance for full-year EPS, bookings and free cash flow |
WALTHAM, Mass., (Oct. 27, 2005) – Raytheon Company (NYSE: RTN) reported third quarter 2005 income from continuing operations of $231 million or $0.51 per diluted share compared to $186 million or $0.41 per diluted share in the third quarter 2004. Third quarter 2005 income from continuing operations was higher due to better operating results in both the Government and Defense businesses and at Raytheon Aircraft Company (RAC) combined with lower interest expense.
Third quarter 2005 net income was $228 million or $0.50 per diluted share compared to $152 million or $0.34 per diluted share in the third quarter 2004. Net income for the third quarter of 2005 included a $3 million after-tax loss in discontinued operations or $0.01 per diluted share versus a $34 million after-tax loss or $0.07 per diluted share in the third quarter 2004.
“Our performance and operating results this quarter continue to demonstrate the strength of the Company,” said William H. Swanson, Raytheon’s Chairman and CEO. “This strength is reflected in our increased 2005 guidance for full-year EPS, bookings and free cash flow from continuing operations.”
Net sales for the third quarter 2005 were $5.3 billion, up 8 percent from $4.9 billion in the 2004 comparable quarter. Government and Defense sales for the quarter (after the elimination of intercompany sales) increased 9 percent to $4.5 billion from $4.1 billion in the 2004 comparable quarter. RAC sales for the quarter increased 3 percent to $642 million from $624 million in the 2004 comparable quarter.
Free cash flow from continuing operations for the third quarter 2005 was $702 million versus $268 million for the 2004 comparable quarter. In the third quarter 2004, the Company made a $210 million payment to settle a shareholder lawsuit. Free cash flow is defined by the Company as operating cash flow less capital spending and internal use software spending.
During the third quarter of 2005, the Company repurchased 5 million shares of common stock for $198 million as part of the Company’s previously announced $700 million share repurchase program, bringing the total shares of common stock repurchased year-to-date to 10 million for $390 million.
Net debt was $4.2 billion at the end of the third quarter 2005 compared with $4.6 billion at the end of 2004. After the end of the quarter, the Company initiated the redemption of $196 million of 7.375% debentures due July 15, 2025.
Summary Financial Results
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||
| (in millions, except per share data) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||
| Net Sales |
$ | 5,331 | $ | 4,936 | 8 | % | $ | 15,684 | $ | 14,541 | 8 | % | ||||||
| Total Operating Expenses |
4,917 | 4,579 | 14,466 | 13,593 | ||||||||||||||
| Operating Income |
414 | 357 | 16 | % | 1,218 | 948 | 28 | % | ||||||||||
| Non-operating Expenses |
61 | 94 | 212 | 661 | ||||||||||||||
| Income from Cont. Ops. before Taxes |
$ | 353 | $ | 263 | 34 | % | $ | 1,006 | $ | 287 | 251 | % | ||||||
| Income from Continuing Operations |
$ | 231 | $ | 186 | 24 | % | $ | 660 | $ | 193 | 242 | % | ||||||
| Net Income |
$ | 228 | $ | 152 | 50 | % | $ | 595 | $ | 172 | 246 | % | ||||||
| Diluted EPS from Continuing Operations |
$ | 0.51 | $ | 0.41 | 24 | % | $ | 1.45 | $ | 0.44 | 230 | % | ||||||
| Diluted EPS |
$ | 0.50 | $ | 0.34 | 47 | % | $ | 1.31 | $ | 0.39 | 236 | % | ||||||
| Free Cash Flow from Cont. Operations |
$ | 702 | $ | 268 | $ | 1,100 | $ | 888 | ||||||||||
Bookings and Backlog
Bookings
| 3rd Quarter |
Nine Months | |||||||||||
| (in millions) | 2005 |
2004 |
2005 |
2004 | ||||||||
| Bookings |
||||||||||||
| Government and Defense |
$ | 3,422 | $ | 4,770 | $ | 15,317 | $ | 17,667 | ||||
| Commercial |
737 | 969 | 2,187 | 2,558 | ||||||||
| Total Bookings |
$ | 4,159 | $ | 5,739 | $ | 17,504 | $ | 20,225 | ||||
Backlog
| Period ending | ||||||
| (in millions) | 09/25/05 |
12/31/04 | ||||
| Backlog |
$ | 33,122 | $ | 32,543 | ||
| Funded Backlog |
$ | 17,430 | $ | 18,403 | ||
The Government and Defense businesses recorded third quarter 2005 bookings of $3.4 billion compared to bookings of $4.8 billion in the third quarter of 2004.
Raytheon Aircraft Company’s third quarter 2005 bookings were $572 million compared to $704 million in the 2004 comparable quarter.
The Company ended the quarter with a backlog of $33.1 billion compared to $32.5 billion at the end of 2004. The Government and Defense businesses ended the quarter with a backlog of $30.7 billion compared to $29.6 billion at the end of 2004.
Outlook
2005 Financial Outlook
| Prior* |
Current | |||
| Bookings |
$23.7B - $24.7B | $24.5B - $25.0B | ||
| Net Sales |
$21.6B - $22.1B | $21.6B - $22.1B | ||
| FAS/CAS Pension Expense |
$463M | $465M | ||
| Interest Expense, net |
$285M - $300M | $265M - $275M | ||
| Diluted Shares |
455M | 454M | ||
| EPS from Cont. Ops. |
$1.90 - $2.00 | $2.00 - $2.05 | ||
| Cont. Ops./Total Free Cash Flow |
$1.3B - $1.5B | $1.6B - $1.8B |
* As of July 28, 2005
The Company has increased full-year 2005 guidance for earnings per share from continuing operations, bookings, and free cash flow from operations. The Company has decreased full-year 2005 guidance for net interest expense. Charts containing additional information on the Company’s guidance are available on the Company’s website at www.raytheon.com.
2006 Financial Outlook
| Bookings |
$22.B - $23.B | |||
| Net Sales |
||||
| Government and Defense |
$20.8B - $21.3B | |||
| Eliminations of Intercompany Sales |
($1.6B) | |||
| Government and Defense after Elims |
$19.2B - $19.7B | |||
| Raytheon Aircraft |
$3.0B - $3.2B | |||
| Other |
$0.7B - $0.8B | |||
| Total Company |
$23.1B - $23.6B | |||
| EPS from Cont. Ops. |
$2.40 - $2.50 | |||
| Free Cash Flow |
$1.2B - $1.4B | |||
Charts containing additional information on the Company’s 2006 guidance are available on the Company’s website at www.raytheon.com.
Segment Results
Integrated Defense Systems
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||||||
| (in millions, except margin percent) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||||||
| Net Sales |
$ | 919 | $ | 833 | 10 | % | $ | 2,765 | $ | 2,542 | 9 | % | ||||||||||
| Operating Income |
$ | 134 | $ | 100 | 34 | % | $ | 394 | $ | 298 | 32 | % | ||||||||||
| Operating Margin |
14.6 | % | 12.0 | % | 14.2 | % | 11.7 | % | ||||||||||||||
Integrated Defense Systems (IDS) had third quarter 2005 net sales of $919 million, up 10 percent compared to $833 million in the third quarter 2004, primarily due to growth in international programs and the Cobra Judy program partially offset, as expected, by lower sales on the Sea-Based Radar program. IDS recorded $134 million of third quarter 2005 operating income compared to $100 million in the comparable quarter a year ago. Operating income was higher primarily due to increased sales on international programs and program performance improvements.
Intelligence and Information Systems
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||||||
| (in millions, except margin percent) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||||||
| Net Sales |
$ | 649 | $ | 597 | 9 | % | $ | 1,821 | $ | 1,704 | 7 | % | ||||||||||
| Operating Income |
$ | 57 | $ | 53 | 8 | % | $ | 166 | $ | 150 | 11 | % | ||||||||||
| Operating Margin |
8.8 | % | 8.9 | % | 9.1 | % | 8.8 | % | ||||||||||||||
Intelligence and Information Systems (IIS) had third quarter 2005 net sales of $649 million, up 9 percent compared to $597 million in the third quarter 2004, primarily due to continued growth in classified programs. IIS recorded $57 million of operating income compared to $53 million in the comparable quarter a year ago.
During the quarter, IIS booked $537 million on a number of classified contracts.
As previously announced, during the quarter the Company acquired UTD, Inc., a privately held science and engineering company, which will add to Raytheon’s capabilities in mission support.
Missile Systems
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||||||
| (in millions, except margin percent) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||||||
| Net Sales |
$ | 1,005 | $ | 928 | 8 | % | $ | 3,002 | $ | 2,832 | 6 | % | ||||||||||
| Operating Income |
$ | 104 | $ | 109 | -5 | % | $ | 313 | $ | 322 | -3 | % | ||||||||||
| Operating Margin |
10.3 | % | 11.7 | % | 10.4 | % | 11.4 | % | ||||||||||||||
Missile Systems (MS) had third quarter 2005 net sales of $1,005 million, up 8 percent compared to $928 million in the third quarter 2004, primarily due to a ramp up on Tactical Tomahawk and several developmental programs. MS recorded $104 million of operating income compared to $109 million in the comparable quarter a year ago. Last year’s third quarter operating income included cost recovery for previous years’ restructuring actions.
During the quarter, MS booked $98 million for the Javelin Supplemental for the U.S. Army. MS also booked $86 million for the production of Standard Missile-3 (SM-3) for the U.S. Navy and the Missile Defense Agency.
Network Centric Systems
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||||||
| (in millions, except margin percent) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||||||
| Net Sales |
$ | 833 | $ | 764 | 9 | % | $ | 2,399 | $ | 2,226 | 8 | % | ||||||||||
| Operating Income |
$ | 87 | $ | 64 | 36 | % | $ | 244 | $ | 182 | 34 | % | ||||||||||
| Operating Margin |
10.4 | % | 8.4 | % | 10.2 | % | 8.2 | % | ||||||||||||||
Network Centric Systems (NCS) had third quarter 2005 net sales of $833 million, up 9 percent compared to $764 million in the third quarter 2004 primarily due to increased effort on development programs and communication programs. NCS recorded operating income of $87 million compared to $64 million in the comparable quarter a year ago. Operating income was higher due to improved performance.
Space and Airborne Systems
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||||||
| (in millions, except margin percent) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||||||
| Net Sales |
$ | 1,013 | $ | 929 | 9 | % | $ | 3,030 | $ | 2,927 | 4 | % | ||||||||||
| Operating Income |
$ | 143 | $ | 138 | 4 | % | $ | 444 | $ | 409 | 9 | % | ||||||||||
| Operating Margin |
14.1 | % | 14.9 | % | 14.7 | % | 14.0 | % | ||||||||||||||
Space and Airborne Systems (SAS) had third quarter 2005 net sales of $1,013 million, up 9 percent compared to $929 million in the third quarter 2004 primarily due to growth in ATFLIR production and airborne radar programs. SAS recorded $143 million of operating income compared to $138 million in the comparable quarter a year ago.
During the quarter, SAS booked $551 million on a number of classified contracts.
Technical Services
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||||||
| (in millions, except margin percent) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||||||
| Net Sales |
$ | 479 | $ | 489 | -2 | % | $ | 1,455 | $ | 1,417 | 3 | % | ||||||||||
| Operating Income |
$ | 38 | $ | 38 | 0 | % | $ | 107 | $ | 104 | 3 | % | ||||||||||
| Operating Margin |
7.9 | % | 7.8 | % | 7.4 | % | 7.3 | % | ||||||||||||||
Technical Services (TS) had third quarter 2005 net sales of $479 million compared to $489 million in the third quarter 2004. TS recorded operating income of $38 million in the third quarter of 2005 and in the comparable quarter a year ago.
During the quarter, TS was awarded an additional $62 million in orders, with a potential value of $564 million, from the Defense Threat Reduction Agency (DTRA) for work in the former Soviet Union.
Aircraft
| 3rd Quarter |
% Change |
Nine Months |
% Change |
|||||||||||||||||||
| (in millions, except margin percent) | 2005 |
2004 |
2005 |
2004 |
||||||||||||||||||
| Net Sales |
$ | 642 | $ | 624 | 3 | % | $ | 1,771 | $ | 1,568 | 13 | % | ||||||||||
| Operating Income |
$ | 34 | $ | 21 | 62 | % | $ | 69 | $ | 16 | 331 | % | ||||||||||
| Operating Margin |
5.3 | % | 3.4 | % | 3.9 | % | 1.0 | % | ||||||||||||||
Raytheon Aircraft Company (RAC) had third quarter 2005 net sales of $642 million compared to $624 million in the third quarter 2004. RAC recorded operating income of $34 million in the quarter compared to $21 million in the comparable quarter in 2004. Operating income was higher due to commercial and Special Mission delivery mix, higher revenue from other government programs, and continued improved operating performance.
Other
Net sales for the Other segment in the third quarter 2005 were $185 million compared to $164 million in the third quarter 2004. The segment recorded an operating loss of $25 million in the third quarter 2005 compared to $7 million in the comparable quarter in 2004.
Discontinued Operations
During the quarter, the Company recorded an after-tax loss from discontinued operations of $3 million or $0.01 per diluted share related to its former engineering and construction and Aircraft Integration Systems businesses.
Raytheon Company (NYSE: RTN), with 2004 sales of $20.2 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 80,000 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 products and 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 government investigations; the ultimate resolution of insurance coverage for class action shareholder and derivative lawsuits against the Company; the effect of regulatory actions and market conditions, particularly in relation to the general aviation, commuter, and fractional aircraft businesses; cost growth risks inherent with large long-term fixed price contracts; conflicts with other investors and business risks in joint ventures and less than wholly-owned businesses; and risks associated with our former engineering and construction business related to outstanding letters of credit, surety bonds, guarantees and similar agreements and the resolution of claims and litigation. 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, 2004 and quarterly reports on Form 10-Q, copies of which may be obtained at the Company’s website at www.raytheon.com.
Conference Call on the Third Quarter 2005 Financial Results
Raytheon’s financial results conference call will be Thursday, October 27, 2005 at 9 a.m. EDT. Participants will be William H. Swanson, Chairman and CEO, Biggs C. Porter, vice president and corporate controller, and acting CFO, and other Company executives.
The dial-in number for the conference call will be (800) 265 - 0241. 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
Third Quarter 2005
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| (In millions except per share amounts) | 25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
||||||||||||
| Net sales |
$ | 5,331 | $ | 4,936 | $ | 15,684 | $ | 14,541 | ||||||||
| Cost of sales |
4,445 | 4,129 | 13,053 | 12,242 | ||||||||||||
| Administrative and selling expenses |
348 | 327 | 1,053 | 986 | ||||||||||||
| Research and development expenses |
124 | 123 | 360 | 365 | ||||||||||||
| Total operating expenses |
4,917 | 4,579 | 14,466 | 13,593 | ||||||||||||
| Operating income |
414 | 357 | 1,218 | 948 | ||||||||||||
| Interest expense |
79 | 100 | 237 | 326 | ||||||||||||
| Interest income |
(14 | ) | (11 | ) | (38 | ) | (33 | ) | ||||||||
| Other expense, net |
(4 | ) | 5 | 13 | 368 | |||||||||||
| Non-operating expense, net |
61 | 94 | 212 | 661 | ||||||||||||
| Income from continuing operations before taxes |
353 | 263 | 1,006 | 287 | ||||||||||||
| Federal and foreign income taxes |
122 | 77 | 346 | 94 | ||||||||||||
| Income from continuing operations |
231 | 186 | 660 | 193 | ||||||||||||
| Loss from discontinued operations, net of tax |
(3 | ) | (34 | ) | (65 | ) | (62 | ) | ||||||||
| Income before accounting change |
228 | 152 | 595 | 131 | ||||||||||||
| Cumulative effect of change in accounting principle, net of tax |
— | — | — | 41 | ||||||||||||
| Net income |
$ | 228 | $ | 152 | $ | 595 | $ | 172 | ||||||||
| Earnings per share from continuing operations |
||||||||||||||||
| Basic |
$ | 0.52 | $ | 0.41 | $ | 1.47 | $ | 0.44 | ||||||||
| Diluted |
$ | 0.51 | $ | 0.41 | $ | 1.45 | $ | 0.44 | ||||||||
| Loss per share from discontinued operations |
||||||||||||||||
| Basic |
$ | (0.01 | ) | $ | (0.08 | ) | $ | (0.14 | ) | $ | (0.14 | ) | ||||
| Diluted |
$ | (0.01 | ) | $ | (0.07 | ) | $ | (0.14 | ) | $ | (0.14 | ) | ||||
| Earnings per share from cumulative effect of change in accounting principle |
||||||||||||||||
| Basic |
$ | — | $ | — | $ | — | $ | 0.09 | ||||||||
| Diluted |
$ | — | $ | — | $ | — | $ | 0.09 | ||||||||
| Earnings per share |
||||||||||||||||
| Basic |
$ | 0.51 | $ | 0.34 | $ | 1.33 | $ | 0.40 | ||||||||
| Diluted |
$ | 0.50 | $ | 0.34 | $ | 1.31 | $ | 0.39 | ||||||||
| Average shares outstanding |
||||||||||||||||
| Basic |
445.6 | 449.2 | 448.4 | 434.1 | ||||||||||||
| Diluted |
452.1 | 453.5 | 454.4 | 437.3 | ||||||||||||
Attachment B
Raytheon Company
Segment Information
Third Quarter 2005
| Net Sales Three Months Ended |
Operating Income Three Months Ended |
Operating Income As a Percent of Sales Three Months Ended |
||||||||||||||||||||
| (In millions) | 25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
||||||||||||||||
| Integrated Defense Systems |
$ | 919 | $ | 833 | $ | 134 | $ | 100 | 14.6 | % | 12.0 | % | ||||||||||
| Intelligence and Information Systems |
649 | 597 | 57 | 53 | 8.8 | % | 8.9 | % | ||||||||||||||
| Missile Systems |
1,005 | 928 | 104 | 109 | 10.3 | % | 11.7 | % | ||||||||||||||
| Network Centric Systems |
833 | 764 | 87 | 64 | 10.4 | % | 8.4 | % | ||||||||||||||
| Space and Airborne Systems |
1,013 | 929 | 143 | 138 | 14.1 | % | 14.9 | % | ||||||||||||||
| Technical Services |
479 | 489 | 38 | 38 | 7.9 | % | 7.8 | % | ||||||||||||||
| Aircraft |
642 | 624 | 34 | 21 | 5.3 | % | 3.4 | % | ||||||||||||||
| Other |
185 | 164 | (25 | ) | (7 | ) | -13.5 | % | -4.3 | % | ||||||||||||
| FAS/CAS Pension Adjustment |
— | — | (117 | ) | (117 | ) | ||||||||||||||||
| Corporate and Eliminations |
(394 | ) | (392 | ) | (41 | ) | (42 | ) | ||||||||||||||
| Total |
$ | 5,331 | $ | 4,936 | $ | 414 | $ | 357 | 7.8 | % | 7.2 | % | ||||||||||
| Net Sales Nine Months Ended |
Operating Income Nine Months Ended |
Operating Income As a Percent of Sales Nine Months Ended |
||||||||||||||||||||
| 25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
|||||||||||||||||
| Integrated Defense Systems |
$ | 2,765 | $ | 2,542 | $ | 394 | $ | 298 | 14.2 | % | 11.7 | % | ||||||||||
| Intelligence and Information Systems |
1,821 | 1,704 | 166 | 150 | 9.1 | % | 8.8 | % | ||||||||||||||
| Missile Systems |
3,002 | 2,832 | 313 | 322 | 10.4 | % | 11.4 | % | ||||||||||||||
| Network Centric Systems |
2,399 | 2,226 | 244 | 182 | 10.2 | % | 8.2 | % | ||||||||||||||
| Space and Airborne Systems |
3,030 | 2,927 | 444 | 409 | 14.7 | % | 14.0 | % | ||||||||||||||
| Technical Services |
1,455 | 1,417 | 107 | 104 | 7.4 | % | 7.3 | % | ||||||||||||||
| Aircraft |
1,771 | 1,568 | 69 | 16 | 3.9 | % | 1.0 | % | ||||||||||||||
| Other |
566 | 492 | (66 | ) | (29 | ) | -11.7 | % | -5.9 | % | ||||||||||||
| FAS/CAS Pension Adjustment |
— | — | (349 | ) | (356 | ) | ||||||||||||||||
| Corporate and Eliminations |
(1,125 | ) | (1,167 | ) | (104 | ) | (148 | ) | ||||||||||||||
| Total |
$ | 15,684 | $ | 14,541 | $ | 1,218 | $ | 948 | 7.8 | % | 6.5 | % | ||||||||||
Attachment C
Raytheon Company
Other Information
Third Quarter 2005
| Backlog (In millions) |
Funded Backlog (In millions) | |||||||||||
| 25-Sep-05 |
31-Dec-04 |
25-Sep-05 |
31-Dec-04 | |||||||||
| Integrated Defense Systems |
$ | 7,004 | $ | 6,628 | $ | 3,178 | $ | 3,454 | ||||
| Intelligence and Information Systems |
4,153 | 4,066 | 612 | 811 | ||||||||
| Missile Systems |
8,011 | 8,341 | 4,395 | 4,517 | ||||||||
| Network Centric Systems |
4,175 | 3,587 | 2,881 | 2,623 | ||||||||
| Space and Airborne Systems |
5,690 | 5,216 | 2,957 | 3,127 | ||||||||
| Technical Services |
1,635 | 1,773 | 953 | 939 | ||||||||
| Aircraft |
2,203 | 2,638 | 2,203 | 2,638 | ||||||||
| Other |
251 | 294 | 251 | 294 | ||||||||
| $ | 33,122 | $ | 32,543 | $ | 17,430 | $ | 18,403 | |||||
| Government and Defense businesses |
$ | 30,668 | $ | 29,611 | $ | 14,976 | $ | 15,471 | ||||
| U.S. government backlog included above |
$ | 26,960 | $ | 25,525 | ||||||||
| Bookings (In millions) Three Months Ended | ||||||
| 25-Sep-05 |
26-Sep-04 | |||||
| Government and Defense businesses |
$ | 3,422 | $ | 4,770 | ||
| Commercial businesses |
737 | 969 | ||||
| $ | 4,159 | $ | 5,739 | |||
| New Aircraft Deliveries (Units) Three Months Ended | ||||||
| 25-Sep-05 |
26-Sep-04 | |||||
| Hawker 800XP |
13 | 13 | ||||
| Premier I / IA |
2 | 11 | ||||
| Hawker 400XP |
14 | 5 | ||||
| King Air |
27 | 31 | ||||
| Pistons |
8 | 25 | ||||
| T-6A |
16 | 18 | ||||
| Total |
80 | 103 | ||||
| New Aircraft Bookings (Units) Three Months Ended | ||||||
| 25-Sep-05 |
26-Sep-04 | |||||
| Horizon |
— | 1 | ||||
| Hawker 800XP |
11 | 20 | ||||
| Premier I / IA |
9 | 9 | ||||
| Hawker 400XP |
11 | 4 | ||||
| King Air |
38 | 46 | ||||
| Pistons |
13 | 78 | ||||
| Total |
82 | 158 | ||||
Attachment D
Raytheon Company
Preliminary Financial Information
Third Quarter 2005
| (In millions) | 25-Sep-05 |
31-Dec-04 | ||||
| Balance sheets |
||||||
| Assets |
||||||
| Cash and cash equivalents |
$ | 820 | $ | 556 | ||
| Accounts receivable |
452 | 478 | ||||
| Contracts in process |
3,676 | 3,514 | ||||
| Inventories |
2,014 | 1,745 | ||||
| Deferred federal and foreign income taxes |
420 | 469 | ||||
| Prepaid expenses and other current assets |
316 | 343 | ||||
| Assets from discontinued operations |
15 | 19 | ||||
| Total current assets |
7,713 | 7,124 | ||||
| Property, plant and equipment, net |
2,591 | 2,738 | ||||
| Deferred federal and foreign income taxes |
— | 71 | ||||
| Goodwill |
11,549 | 11,516 | ||||
| Other assets, net |
2,471 | 2,704 | ||||
| Total assets |
$ | 24,324 | $ | 24,153 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Notes payable and current portion of long-term debt |
$ | 472 | $ | 516 | ||
| Subordinated notes payable |
408 | — | ||||
| Advance payments and billings in excess of costs incurred |
2,056 | 1,900 | ||||
| Accounts payable |
964 | 867 | ||||
| Accrued salaries and wages |
968 | 934 | ||||
| Other accrued expenses |
1,317 | 1,403 | ||||
| Liabilities from discontinued operations |
29 | 24 | ||||
| Total current liabilities |
6,214 | 5,644 | ||||
| Accrued retiree benefits and other long-term liabilities |
3,145 | 3,224 | ||||
| Deferred federal and foreign income taxes |
150 | — | ||||
| Long-term debt |
4,170 | 4,229 | ||||
| Subordinated notes payable |
— | 408 | ||||
| Minority interest |
140 | 97 | ||||
| Stockholders’ equity |
10,505 | 10,551 | ||||
| Total liabilities and stockholders’ equity |
$ | 24,324 | $ | 24,153 | ||
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Third Quarter 2005
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| (In millions) | 25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
||||||||||||
| Cash flow information |
||||||||||||||||
| Income from continuing operations |
$ | 231 | $ | 186 | $ | 660 | $ | 193 | ||||||||
| Depreciation |
86 | 93 | 262 | 267 | ||||||||||||
| Amortization |
23 | 19 | 65 | 54 | ||||||||||||
| Working capital |
245 | (62 | ) | (106 | ) | 215 | ||||||||||
| Discontinued operations |
(4 | ) | (16 | ) | (56 | ) | (32 | ) | ||||||||
| Capital spending |
(71 | ) | (75 | ) | (183 | ) | (209 | ) | ||||||||
| Internal use software spending |
(25 | ) | (23 | ) | (61 | ) | (73 | ) | ||||||||
| Net activity in financing receivables |
(12 | ) | 48 | 79 | 145 | |||||||||||
| Other |
225 | 82 | 384 | 296 | ||||||||||||
| Subtotal - free cash flow (a) |
698 | 252 | 1,044 | 856 | ||||||||||||
| Sale of short-term investments |
— | — | — | (74 | ) | |||||||||||
| Acquisitions |
(39 | ) | — | (99 | ) | (70 | ) | |||||||||
| Investment activity and divestitures |
— | — | 7 | 4 | ||||||||||||
| Dividends |
(99 | ) | (90 | ) | (289 | ) | (258 | ) | ||||||||
| Issuance of common stock |
— | — | — | 867 | ||||||||||||
| Repurchase of common stock |
(198 | ) | — | (390 | ) | — | ||||||||||
| Debt repayments |
(31 | ) | (143 | ) | (93 | ) | (1,001 | ) | ||||||||
| Other |
35 | 26 | 84 | 64 | ||||||||||||
| Total cash flow |
$ | 366 | $ | 45 | $ | 264 | $ | 388 | ||||||||
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
|||||||||||||
| Segment free cash flow information |
||||||||||||||||
| Integrated Defense Systems |
$ | 115 | $ | 80 | $ | 275 | $ | 273 | ||||||||
| Intelligence and Information Systems |
48 | 78 | 63 | 112 | ||||||||||||
| Missile Systems |
16 | 28 | 298 | 220 | ||||||||||||
| Network Centric Systems |
215 | 139 | 217 | 67 | ||||||||||||
| Space and Airborne Systems |
198 | 50 | 20 | 157 | ||||||||||||
| Technical Services |
58 | 17 | 72 | 20 | ||||||||||||
| Aircraft |
(75 | ) | 86 | (82 | ) | 133 | ||||||||||
| Other |
18 | 13 | 42 | (37 | ) | |||||||||||
| Discontinued operations |
(4 | ) | (16 | ) | (56 | ) | (32 | ) | ||||||||
| Corporate |
109 | (223 | ) | 195 | (57 | ) | ||||||||||
| Total free cash flow |
$ | 698 | $ | 252 | $ | 1,044 | $ | 856 | ||||||||
| (a) | See Attachment F for a description of free cash flow. |
Attachment F
Raytheon Company
Non-GAAP Financial Measures
Third Quarter 2005
Free cash flow is a “non-GAAP” financial measure under SEC regulations. The Company defines free cash flow as operating cash flow less capital spending and internal use software spending. Our definition may differ from similarly titled measures used by others. The Company uses free cash flow to facilitate management’s internal comparisons to the Company’s historical operating results and to competitors’ operating results and as an element of management incentive compensation. The Company believes disclosure of free cash flow performance provides investors greater transparency with respect to information used by management in its financial and operational decision making. While this information may be useful in evaluating the Company, it should be considered supplemental to and not as a substitute for financial information prepared in accordance with generally accepted accounting principles.
Free cash flow
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 25-Sep-05 |
26-Sep-04 |
25-Sep-05 |
26-Sep-04 |
|||||||||||||
| Operating cash flow |
$ | 794 | $ | 350 | $ | 1,288 | $ | 1,138 | ||||||||
| Less: Capital spending |
(71 | ) | (75 | ) | (183 | ) | (209 | ) | ||||||||
| Internal use software spending |
(25 | ) | (23 | ) | (61 | ) | (73 | ) | ||||||||
| Free cash flow |
698 | 252 | 1,044 | 856 | ||||||||||||
| Plus: Discontinued operations |
4 | 16 | 56 | 32 | ||||||||||||
| Free cash flow from continuing operations |
$ | 702 | $ | 268 | $ | 1,100 | $ | 888 | ||||||||
| Free cash flow guidance | ||||||||||||||||
| Current Guidance |
Prior Guidance |
|||||||||||||||
| Low end of range |
High end of range |
Low end of range |
High end of range |
|||||||||||||
| 2005 |
||||||||||||||||
| Full year |
||||||||||||||||
| Operating cash flow |
$ | 2,105 | $ | 2,260 | $ | 1,735 | $ | 1,895 | ||||||||
| Less: Capital and internal software spending |
(500 | ) | (450 | ) | (500 | ) | (450 | ) | ||||||||
| Free cash flow |
1,605 | 1,810 | 1,235 | 1,445 | ||||||||||||
| Plus: Discontinued operations |
40 | 35 | 80 | 75 | ||||||||||||
| Free cash flow from continuing operations |
$ | 1,645 | $ | 1,845 | $ | 1,315 | $ | 1,520 | ||||||||
| Guidance |
||||||||
| Low end of range |
High end of range |
|||||||
| 2006 |
||||||||
| Full year |
||||||||
| Operating cash flow |
$ | 1,700 | $ | 1,855 | ||||
| Less: Capital and internal software spending |
(530 | ) | (480 | ) | ||||
| Free cash flow |
1,170 | 1,375 | ||||||
| Plus: Discontinued operations |
30 | 25 | ||||||
| Free cash flow from continuing operations |
$ | 1,200 | $ | 1,400 | ||||