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 26, 2006
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)
(781) 522-3000
(Registrant’s telephone number, including area code)
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 26, 2006, Raytheon Company issued a press release announcing financial results for the fiscal quarter ended September 24, 2006. A copy of the press release is furnished with this report as Exhibit 99.1. The information in this report, including Exhibit 99.1, 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
| (d) | Exhibits |
| 99.1 | Press Release issued by Raytheon Company dated October 26, 2006. |
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SIGNATURES
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.
| RAYTHEON COMPANY | ||||
| Date: October 26, 2006 | By: | /s/ David C. Wajsgras | ||
| David C. Wajsgras Senior Vice President and Chief Financial Officer | ||||
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Exhibit 99.1
 |
 |
News release
FOR IMMEDIATE RELEASE
| Media Contact: | Investor Relations Contact: | |
| Mac Jeffery | Greg Smith | |
| 781-522-5111 | 781-522-5141 |
Raytheon Reports Strong Third Quarter 2006 Results and Increases 2006 Full-year Guidance
Highlights
| • | Earnings per share (EPS) from continuing operations of $0.72, up 41 percent |
| • | Strong operating cash flow; net debt at $2.8 billion, lowest in over 11 years |
| • | Strong bookings of $6.1 billion; sales of $5.7 billion, up 7 percent |
| • | 2006 full-year guidance increased for EPS, bookings, operating cash flow, and return on invested capital (ROIC) |
WALTHAM, Mass., (October 26, 2006) – Raytheon Company (NYSE: RTN) reported third quarter 2006 income from continuing operations of $323 million or $0.72 per diluted share compared to $231 million or $0.51 per diluted share in the third quarter 2005. Third quarter 2006 net income was $321 million or $0.71 per diluted share compared to $228 million or $0.50 per diluted share in the third quarter 2005. Third quarter 2006 net income was higher primarily due to improved operating results at Integrated Defense Systems (IDS) and Raytheon Aircraft Company (RAC), combined with a reduction in pension expense.
“Raytheon had another very strong quarter,” said William H. Swanson, Raytheon’s Chairman and CEO. “Our operating results demonstrate the Company’s continued focus on execution, and as a result, the Company is able to increase its full-year EPS, bookings, cash flow, and ROIC guidance.”
Net sales for the third quarter 2006 were $5.7 billion, up 7 percent from $5.3 billion in the third quarter 2005. Government and Defense sales for the quarter (after the elimination of
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intercompany sales) increased 5 percent to $4.7 billion from $4.5 billion in the third quarter 2005. RAC sales for the quarter increased 18 percent to $758 million from $642 million in the third quarter 2005.
Operating cash flow from continuing operations for the third quarter 2006 was $750 million versus $798 million for the third quarter 2005. Year-to-date operating cash flow from continuing operations was $1,194 million versus $1,344 million for the comparable period in 2005. The decrease in both the third quarter and year-to-date 2006 versus the comparable periods in 2005 is primarily due to higher cash tax payments in 2006.
During the third quarter 2006, the Company repurchased 5.5 million shares of common stock for $250 million as part of the Company’s previously announced share repurchase programs. The Company has repurchased 7.9 million shares of common stock year-to-date for $352 million.
Net debt was $2.8 billion at the end of the third quarter 2006 compared with $3.3 billion at year-end 2005 and $4.2 billion at the end of the third quarter 2005. Net debt is defined as total debt less cash and cash equivalents.
| Summary Financial Results (in millions, except per share data) |
3rd Quarter | % Change |
Nine Months | % Change |
||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||||
| Net Sales |
$ | 5,693 | $ | 5,331 | 7 | % | $ | 16,556 | $ | 15,684 | 6 | % | ||||||
| Total Operating Expenses |
5,156 | 4,917 | 15,053 | 14,466 | ||||||||||||||
| Operating Income |
537 | 414 | 30 | % | 1,503 | 1,218 | 23 | % | ||||||||||
| Non-operating Expenses |
44 | 61 | 101 | 212 | ||||||||||||||
| Income from Cont. Ops. before Taxes |
$ | 493 | $ | 353 | 40 | % | $ | 1,402 | $ | 1,006 | 39 | % | ||||||
| Income from Continuing Operations |
$ | 323 | $ | 231 | 40 | % | $ | 923 | $ | 660 | 40 | % | ||||||
| Net Income |
$ | 321 | $ | 228 | 41 | % | $ | 918 | $ | 595 | 54 | % | ||||||
| Diluted EPS from Continuing Operations |
$ | 0.72 | $ | 0.51 | 41 | % | $ | 2.05 | $ | 1.45 | 41 | % | ||||||
| Diluted EPS |
$ | 0.71 | $ | 0.50 | 42 | % | $ | 2.04 | $ | 1.31 | 56 | % | ||||||
| Cash Flow from Continuing Operations |
$ | 750 | $ | 798 | $ | 1,194 | $ | 1,344 | ||||||||||
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Bookings and Backlog
| Bookings | 3rd Quarter | Nine Months | ||||||||||
| (in millions) |
2006 | 2005 | 2006 | 2005 | ||||||||
| Bookings |
||||||||||||
| Government and Defense |
$ | 5,237 | $ | 3,422 | $ | 14,655 | $ | 15,317 | ||||
| Commercial |
883 | 737 | 2,386 | 2,187 | ||||||||
| Total Bookings |
$ | 6,120 | $ | 4,159 | $ | 17,041 | $ | 17,504 | ||||
| Backlog | Period ending | |||||
| (in millions) |
09/24/06 | 12/31/05 | ||||
| Backlog |
$ | 34,587 | $ | 34,419 | ||
| Funded Backlog |
$ | 18,860 | $ | 17,580 | ||
The Government and Defense businesses reported third quarter 2006 bookings of $5.2 billion compared to $3.4 billion in the third quarter 2005, an increase driven by several programs in Missile Systems (MS) and Network Centric Systems (NCS). RAC reported third quarter 2006 bookings of $717 million compared to $572 million in the third quarter 2005.
The Government and Defense businesses ended the third quarter 2006 with a backlog of $31.7 billion compared to $31.2 billion at the end of 2005. The Company ended the quarter with a backlog of $34.6 billion compared to $34.4 billion at the end of 2005.
Outlook
2006 Financial Outlook
| Current | Prior * | |||
| Bookings ($B) |
23.0 - 24.0 | 22.0 - 23.0 | ||
| Net Sales ($B) |
23.1 - 23.6 | 23.1 - 23.6 | ||
| FAS/CAS Pension Expense ($M) |
378 | 378 | ||
| Interest Expense, net ($M) |
200 - 210 | 220 - 230 | ||
| Diluted Shares |
449 - 451 | 449 - 451 | ||
| EPS from Cont. Ops. ($) |
2.70 - 2.80 | 2.60 - 2.70 | ||
| Net Debt ($B) |
2.0 - 2.2 | 2.3 - 2.5 | ||
| Operating Cash Flow ($B) |
2.3 - 2.5 | 2.0 - 2.2 | ||
| ROIC (%) |
8.4 - 8.8 | 8.2 - 8.6 |
| * | As of July 27, 2006 |
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The Company has increased full-year 2006 guidance for earnings per share from continuing operations, bookings, operating cash flow, and return on invested capital (ROIC). In addition, the Company’s full-year 2006 guidance reflects a reduction in both net interest expense and net debt.
2007 Financial Outlook
| Bookings ($B) |
24.5 - 25.5 | |
| Net Sales ($B) |
||
| Government and Defense |
22.2 - 22.7 | |
| Eliminations of Intercompany Sales |
(1.7) | |
| Government and Defense after Elims |
20.5 - 21.0 | |
| Raytheon Aircraft |
3.3 | |
| Other |
0.8 | |
| Total Company |
24.6 - 25.1 | |
| EPS from Cont. Ops. ($) |
2.95 - 3.05 | |
| Operating Cash Flow ($B) |
1.7 - 1.9 | |
| ROIC (%) |
9.0 - 9.4 |
Charts containing additional information on the Company’s 2006 and 2007 guidance are available on the Company’s website at www.raytheon.com. See attachment F for the Company’s calculation and use of ROIC, a non-GAAP financial measure.
Segment Results
Integrated Defense Systems
| (in millions, except margin percent)
|
3rd Quarter | % Change |
Nine Months | % Change |
||||||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||
| Net Sales |
$ | 1,030 | $ | 919 | 12 | % | $ | 3,031 | $ | 2,765 | 10 | % | ||||||||||
| Operating Income |
$ | 167 | $ | 134 | 25 | % | $ | 502 | $ | 394 | 27 | % | ||||||||||
| Operating Margin |
16.2 | % | 14.6 | % | 16.6 | % | 14.2 | % | ||||||||||||||
Integrated Defense Systems (IDS) had third quarter 2006 net sales of $1,030 million, up 12 percent compared to $919 million in the third quarter 2005, primarily due to growth in DDG 1000 and international programs. IDS recorded $167 million of operating income compared to $134 million in the third quarter 2005. The increase in operating income was primarily due to higher volume and program performance improvements on domestic and international programs.
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During the quarter, IDS booked $92 million to provide torpedoes, spares and support for the U.S. Navy.
Intelligence and Information Systems
| (in millions, except margin percent)
|
3rd Quarter | % Change |
Nine Months | % Change |
||||||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||
| Net Sales |
$ | 626 | $ | 649 | -4 | % | $ | 1,870 | $ | 1,821 | 3 | % | ||||||||||
| Operating Income |
$ | 58 | $ | 57 | 2 | % | $ | 171 | $ | 166 | 3 | % | ||||||||||
| Operating Margin |
9.3 | % | 8.8 | % | 9.1 | % | 9.1 | % | ||||||||||||||
Intelligence and Information Systems (IIS) had third quarter 2006 net sales of $626 million compared to $649 million in the third quarter 2005, a decrease primarily due to the timing of funding on certain classified programs. IIS recorded $58 million of operating income compared to $57 million in the third quarter 2005.
During the quarter, IIS booked $294 million on a number of classified contracts, including $111 million on a major classified contract.
Missile Systems
| (in millions, except margin percent)
|
3rd Quarter | % Change |
Nine Months | % Change |
||||||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||
| Net Sales |
$ | 1,081 | $ | 1,005 | 8 | % | $ | 3,187 | $ | 3,002 | 6 | % | ||||||||||
| Operating Income |
$ | 109 | $ | 104 | 5 | % | $ | 341 | $ | 313 | 9 | % | ||||||||||
| Operating Margin |
10.1 | % | 10.3 | % | 10.7 | % | 10.4 | % | ||||||||||||||
Missile Systems (MS) had third quarter 2006 net sales of $1,081 million, up 8 percent compared to $1,005 million in the third quarter 2005, primarily due to a ramp up on Standard Missile and several development programs. MS recorded $109 million of operating income compared to $104 million in the third quarter 2005.
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During the quarter, MS booked $369 million for the production of Phalanx Weapons Systems for the U.S. Navy. MS also booked $311 million for additional development work on the Exoatmospheric Kill Vehicle (EKV) program, $267 million for the production of Standard Missile-3 (SM-3) for the Missile Defense Agency, and $163 million for the production of Tube-launched Optically guided Wire controlled (TOW) missiles for the U.S. Army.
Network Centric Systems
| 3rd Quarter | % Change |
Nine Months | % Change |
|||||||||||||||||||
| (in millions, except margin percent)
|
2006 | 2005 | 2006 | 2005 | ||||||||||||||||||
| Net Sales |
$ | 879 | $ | 833 | 6 | % | $ | 2,550 | $ | 2,399 | 6 | % | ||||||||||
| Operating Income |
$ | 87 | $ | 87 | NM | $ | 262 | $ | 244 | 7 | % | |||||||||||
| Operating Margin |
9.9 | % | 10.4 | % | 10.3 | % | 10.2 | % | ||||||||||||||
Network Centric Systems (NCS) had third quarter 2006 net sales of $879 million, up 6 percent compared to $833 million in the third quarter 2005, primarily due to growth in the Combat Systems business. NCS recorded operating income of $87 million in the third quarter 2006 and in the third quarter 2005.
During the quarter, NCS booked $285 million for the production of Improved Target Acquisition System (ITAS) for the U.S. Army and the U.S. Marine Corps. NCS also booked $97 million to provide Horizontal Technology Integration (HTI) forward-looking infrared kits to the U.S. Army.
Space and Airborne Systems
| 3rd Quarter | % Change |
Nine Months | % Change |
|||||||||||||||||||
| (in millions, except margin percent)
|
2006 | 2005 | 2006 | 2005 | ||||||||||||||||||
| Net Sales |
$ | 1,069 | $ | 1,013 | 6 | % | $ | 3,144 | $ | 3,030 | 4 | % | ||||||||||
| Operating Income |
$ | 148 | $ | 143 | 3 | % | $ | 445 | $ | 444 | NM | |||||||||||
| Operating Margin |
13.8 | % | 14.1 | % | 14.2 | % | 14.7 | % | ||||||||||||||
Space and Airborne Systems (SAS) had third quarter 2006 net sales of $1,069 million, up 6 percent compared to $1,013 million in the third quarter 2005, primarily due to growth in
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the Advanced Targeting Forward Looking Infrared (ATFLIR) and Airborne Radar Production programs. SAS recorded $148 million of operating income compared to $143 million in the third quarter 2005.
During the quarter, SAS booked $96 million to supply the Hellenic Air Force with Advanced Self-Protection Integrated Suite (ASPIS) equipment for its F-16 aircraft fleet. SAS also booked $192 million on a number of classified contracts.
Technical Services
| 3rd Quarter | % Change |
Nine Months | % Change |
|||||||||||||||||||
| (in millions, except margin percent)
|
2006 | 2005 | 2006 | 2005 | ||||||||||||||||||
| Net Sales |
$ | 509 | $ | 479 | 6 | % | $ | 1,445 | $ | 1,455 | -1 | % | ||||||||||
| Operating Income |
$ | 36 | $ | 38 | -5 | % | $ | 100 | $ | 107 | -7 | % | ||||||||||
| Operating Margin |
7.1 | % | 7.9 | % | 6.9 | % | 7.4 | % | ||||||||||||||
Technical Services (TS) had third quarter 2006 net sales of $509 million, up 6 percent compared to $479 million in the third quarter 2005, primarily due to growth in the Logistics and Training Systems business. TS recorded operating income of $36 million in the third quarter of 2006 compared to $38 million in the third quarter 2005. Operating income was lower primarily due to favorable program profit adjustments recorded in the prior year.
During the quarter, TS booked $145 million on a number of Logistics and Training Systems business contracts.
Aircraft
| 3rd Quarter | % Change |
Nine Months | % Change |
|||||||||||||||||||
| (in millions, except margin percent)
|
2006 | 2005 | 2006 | 2005 | ||||||||||||||||||
| Net Sales |
$ | 758 | $ | 642 | 18 | % | $ | 1,996 | $ | 1,771 | 13 | % | ||||||||||
| Operating Income |
$ | 70 | $ | 34 | 106 | % | $ | 127 | $ | 69 | 84 | % | ||||||||||
| Operating Margin |
9.2 | % | 5.3 | % | 6.4 | % | 3.9 | % | ||||||||||||||
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Raytheon Aircraft Company (RAC) had third quarter 2006 net sales of $758 million, up 18 percent compared to $642 million in the third quarter 2005, primarily due to increased new aircraft deliveries. RAC recorded operating income of $70 million compared to $34 million in the third quarter 2005. Operating income was higher due to continued improved operating performance, favorable aircraft volume and mix, and a favorable adjustment related to warranty expense.
After the quarter, RAC received an order from NetJets® Inc. for the purchase of 48 additional Hawker® aircraft, 30 Hawker 750s and 18 Hawker 900XPs. These aircraft are expected to be delivered in the 2007 – 2009 timeframe and have a value totaling more than $500 million.
Other
Net sales for the Other segment in the third quarter 2006 were $190 million compared to $185 million in the third quarter 2005. The segment recorded an operating loss of $11 million in the third quarter 2006 compared to an operating loss of $25 million in the third quarter 2005.
Raytheon Company (NYSE: RTN), with 2005 sales of $21.9 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
This release and the attachments contain forward-looking statements, including information regarding the Company’s 2006 and 2007 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: risks associated with the Company’s U.S. government sales, including changes or shifts in defense spending, uncertain funding of programs, potential termination of contracts, and difficulties in contract performance; the ability to procure new contracts; the risks of conducting business in foreign countries; the ability to comply with extensive governmental regulation, including import and export policies and procurement, aircraft manufacturing and other regulations; the impact of competition; the ability to develop
8
products and technologies; the risk of cost overruns, particularly for the Company’s fixed-price contracts; dependence on component availability, subcontractor performance and key suppliers; risks of a negative government audit; the use of accounting estimates in the Company’s financial statements; the potential impairment of the Company’s goodwill; risks associated with the general aviation, commuter and fractional ownership aircraft markets; accidents involving the Company’s aircraft; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; risks associated with acquisitions, joint ventures and other business arrangements; the impact of changes in the Company’s credit ratings; risks associated with exploring strategic alternatives for RAC, including the uncertainty of whether a transaction will be consummated and the potential disruption to RAC’s business during such transaction; and other factors as may be detailed from time to time in the Company’s public announcements and Securities and Exchange Commission filings. In addition, these statements do not give effect to the potential impact of any acquisitions, divestitures or business combinations, including any potential RAC transaction, that may be announced or closed after the date hereof. 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.
Conference Call on the Third Quarter 2006 Financial Results
Raytheon’s financial results conference call will be Thursday, October 26, 2006 at 9 a.m. ET. Participants will include William H. Swanson, Chairman and CEO, David C. Wajsgras, senior vice president and CFO, and other Company executives.
The dial-in number for the conference call will be (866) 800 - 8651. 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.
# # #
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Attachment A
Raytheon Company
Preliminary Statement of Operations Information
Third Quarter 2006
| (In millions except per share amounts) | Three Months Ended | Nine Months Ended | ||||||||||||||
| 24-Sep-06 | 25-Sep-05 | 24-Sep-06 | 25-Sep-05 | |||||||||||||
| Net sales |
$ | 5,693 | $ | 5,331 | $ | 16,556 | $ | 15,684 | ||||||||
| Cost of sales |
4,656 | 4,445 | 13,529 | 13,053 | ||||||||||||
| Administrative and selling expenses |
373 | 348 | 1,124 | 1,053 | ||||||||||||
| Research and development expenses |
127 | 124 | 400 | 360 | ||||||||||||
| Total operating expenses |
5,156 | 4,917 | 15,053 | 14,466 | ||||||||||||
| Operating income |
537 | 414 | 1,503 | 1,218 | ||||||||||||
| Interest expense |
64 | 79 | 201 | 237 | ||||||||||||
| Interest income |
(17 | ) | (14 | ) | (58 | ) | (38 | ) | ||||||||
| Other (income) expense, net |
(3 | ) | (4 | ) | (42 | ) | 13 | |||||||||
| Non-operating expense, net |
44 | 61 | 101 | 212 | ||||||||||||
| Income from continuing operations before taxes |
493 | 353 | 1,402 | 1,006 | ||||||||||||
| Federal and foreign income taxes |
170 | 122 | 479 | 346 | ||||||||||||
| Income from continuing operations |
323 | 231 | 923 | 660 | ||||||||||||
| Loss from discontinued operations, net of tax |
(2 | ) | (3 | ) | (5 | ) | (65 | ) | ||||||||
| Net income |
$ | 321 | $ | 228 | $ | 918 | $ | 595 | ||||||||
| Earnings per share from continuing operations |
||||||||||||||||
| Basic |
$ | 0.73 | $ | 0.52 | $ | 2.09 | $ | 1.47 | ||||||||
| Diluted |
$ | 0.72 | $ | 0.51 | $ | 2.05 | $ | 1.45 | ||||||||
| Loss per share from discontinued operations |
||||||||||||||||
| Basic |
$ | — | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.14 | ) | |||||
| Diluted |
$ | — | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.14 | ) | |||||
| Earnings per share |
||||||||||||||||
| Basic |
$ | 0.73 | $ | 0.51 | $ | 2.08 | $ | 1.33 | ||||||||
| Diluted |
$ | 0.71 | $ | 0.50 | $ | 2.04 | $ | 1.31 | ||||||||
| Average shares outstanding |
||||||||||||||||
| Basic |
441.9 | 445.6 | 442.3 | 448.4 | ||||||||||||
| Diluted |
451.6 | 452.1 | 450.5 | 454.4 | ||||||||||||
Attachment B
Raytheon Company
Preliminary Segment Information
Third Quarter 2006
(In millions)
| Net Sales Three Months Ended |
Operating Income Three Months Ended |
Operating Income As a Percent of Sales |
||||||||||||||||||||
| 24-Sep-06 | 25-Sep-05 | 24-Sep-06 | 25-Sep-05 | 24-Sep-06 | 25-Sep-05 | |||||||||||||||||
| Integrated Defense Systems |
$ | 1,030 | $ | 919 | $ | 167 | $ | 134 | 16.2 | % | 14.6 | % | ||||||||||
| Intelligence and Information Systems |
626 | 649 | 58 | 57 | 9.3 | % | 8.8 | % | ||||||||||||||
| Missile Systems |
1,081 | 1,005 | 109 | 104 | 10.1 | % | 10.3 | % | ||||||||||||||
| Network Centric Systems |
879 | 833 | 87 | 87 | 9.9 | % | 10.4 | % | ||||||||||||||
| Space and Airborne Systems |
1,069 | 1,013 | 148 | 143 | 13.8 | % | 14.1 | % | ||||||||||||||
| Technical Services |
509 | 479 | 36 | 38 | 7.1 | % | 7.9 | % | ||||||||||||||
| Aircraft |
758 | 642 | 70 | 34 | 9.2 | % | 5.3 | % | ||||||||||||||
| Other |
190 | 185 | (11 | ) | (25 | ) | -5.8 | % | -13.5 | % | ||||||||||||
| FAS/CAS Pension Adjustment |
— | — | (93 | ) | (117 | ) | ||||||||||||||||
| Corporate and Eliminations |
(449 | ) | (394 | ) | (34 | ) | (41 | ) | ||||||||||||||
| Total |
$ | 5,693 | $ | 5,331 | $ | 537 | $ | 414 | 9.4 | % | 7.8 | % | ||||||||||
| Net Sales Nine Months Ended |
Operating Income Nine Months Ended |
Operating Income As a Percent of Sales Nine Months Ended |
||||||||||||||||||||
| 24-Sep-06 | 25-Sep-05 | 24-Sep-06 | 25-Sep-05 | 24-Sep-06 | 25-Sep-05 | |||||||||||||||||
| Integrated Defense Systems |
$ | 3,031 | $ | 2,765 | $ | 502 | $ | 394 | 16.6 | % | 14.2 | % | ||||||||||
| Intelligence and Information Systems |
1,870 | 1,821 | 171 | 166 | 9.1 | % | 9.1 | % | ||||||||||||||
| Missile Systems |
3,187 | 3,002 | 341 | 313 | 10.7 | % | 10.4 | % | ||||||||||||||
| Network Centric Systems |
2,550 | 2,399 | 262 | 244 | 10.3 | % | 10.2 | % | ||||||||||||||
| Space and Airborne Systems |
3,144 | 3,030 | 445 | 444 | 14.2 | % | 14.7 | % | ||||||||||||||
| Technical Services |
1,445 | 1,455 | 100 | 107 | 6.9 | % | 7.4 | % | ||||||||||||||
| Aircraft |
1,996 | 1,771 | 127 | 69 | 6.4 | % | 3.9 | % | ||||||||||||||
| Other |
582 | 566 | (34 | ) | (66 | ) | -5.8 | % | -11.7 | % | ||||||||||||
| FAS/CAS Pension Adjustment |
— | — | (283 | ) | (349 | ) | ||||||||||||||||
| Corporate and Eliminations |
(1,249 | ) | (1,125 | ) | (128 | ) | (104 | ) | ||||||||||||||
| Total |
$ | 16,556 | $ | 15,684 | $ | 1,503 | $ | 1,218 | 9.1 | % | 7.8 | % | ||||||||||
Attachment C
Raytheon Company
Other Preliminary Information
Third Quarter 2006
| Backlog (In millions) |
Funded Backlog (In millions) | |||||||||||
| 24-Sep-06 | 31-Dec-05 | 24-Sep-06 | 31-Dec-05 | |||||||||
| Integrated Defense Systems |
$ | 7,411 | $ | 8,010 | $ | 3,277 | $ | 3,009 | ||||
| Intelligence and Information Systems |
4,009 | 4,077 | 748 | 642 | ||||||||
| Missile Systems |
8,913 | 8,040 | 4,805 | 4,443 | ||||||||
| Network Centric Systems |
4,532 | 4,307 | 3,374 | 2,839 | ||||||||
| Space and Airborne Systems |
5,257 | 5,220 | 2,724 | 2,851 | ||||||||
| Technical Services |
1,546 | 1,594 | 1,013 | 916 | ||||||||
| Aircraft |
2,656 | 2,891 | 2,656 | 2,600 | ||||||||
| Other |
263 | 280 | 263 | 280 | ||||||||
| $ | 34,587 | $ | 34,419 | $ | 18,860 | $ | 17,580 | |||||
| Government and Defense businesses |
$ | 31,668 | $ | 31,248 | $ | 15,941 | $ | 14,700 | ||||
| Bookings (In millions) Three Months Ended |
||||||||||||
| 24-Sep-06 | 25-Sep-05 | |||||||||||
| Government and Defense businesses |
$ | 5,237 | $ | 3,422 | ||||||||
| Commercial businesses |
883 | 737 | ||||||||||
| $ | 6,120 | $ | 4,159 | |||||||||
|
New Aircraft Deliveries (Units) |
||||||||||||
| 24-Sep-06 | 25-Sep-05 | |||||||||||
| Hawker 800XP |
18 | 13 | ||||||||||
| Premier |
9 | 2 | ||||||||||
| Hawker 400XP |
12 | 14 | ||||||||||
| King Air |
36 | 27 | ||||||||||
| Pistons |
20 | 8 | ||||||||||
| T-6A |
18 | 16 | ||||||||||
| Total |
113 | 80 | ||||||||||
|
New
Aircraft Bookings (Units) |
||||||||||||
| 24-Sep-06 | 25-Sep-05 | |||||||||||
| Hawker 4000 |
2 | — | ||||||||||
| Hawker 800XP |
18 | 11 | ||||||||||
| Premier |
10 | 9 | ||||||||||
| Hawker 400XP |
13 | 11 | ||||||||||
| King Air |
39 | 38 | ||||||||||
| Pistons |
20 | 13 | ||||||||||
| T-6A |
2 | — | ||||||||||
| Total |
104 | 82 | ||||||||||
Attachment D
Raytheon Company
Preliminary Balance Sheet Information
Third Quarter 2006
(In millions)
Balance sheets
| 24-Sep-06 | 31-Dec-05 | |||||
| Assets |
||||||
| Cash and cash equivalents |
$ | 1,162 | $ | 1,202 | ||
| Accounts receivable, less allowance for doubtful accounts |
367 | 425 | ||||
| Contracts in process |
3,799 | 3,469 | ||||
| Inventories |
2,139 | 1,722 | ||||
| Deferred federal and foreign income taxes |
341 | 435 | ||||
| Prepaid expenses and other current assets |
273 | 314 | ||||
| Total current assets |
8,081 | 7,567 | ||||
| Property, plant and equipment, net |
2,588 | 2,675 | ||||
| Goodwill |
11,617 | 11,554 | ||||
| Other assets, net |
2,501 | 2,585 | ||||
| Total assets |
$ | 24,787 | $ | 24,381 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Notes payable and current portion of long-term debt |
$ | 582 | $ | 79 | ||
| Subordinated notes payable |
— | 408 | ||||
| Advance payments and billings in excess of costs incurred |
1,965 | 2,012 | ||||
| Accounts payable |
1,084 | 962 | ||||
| Accrued salaries and wages |
971 | 987 | ||||
| Other accrued expenses |
1,285 | 1,403 | ||||
| Liabilities from discontinued operations |
50 | 49 | ||||
| Total current liabilities |
5,937 | 5,900 | ||||
| Accrued retiree benefits and other long-term liabilities |
3,695 | 3,559 | ||||
| Deferred federal and foreign income taxes |
209 | 125 | ||||
| Long-term debt |
3,401 | 3,969 | ||||
| Minority interest |
165 | 119 | ||||
| Stockholders’ equity |
11,380 | 10,709 | ||||
| Total liabilities and stockholders’ equity |
$ | 24,787 | $ | 24,381 | ||
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Third Quarter 2006
(In millions)
Cash flow information
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 24-Sep-06 | 25-Sep-05 | 24-Sep-06 | 25-Sep-05 | |||||||||||||
| Net income |
$ | 321 | $ | 228 | $ | 918 | $ | 595 | ||||||||
| Depreciation |
90 | 86 | 271 | 262 | ||||||||||||
| Amortization |
23 | 23 | 70 | 65 | ||||||||||||
| Working capital |
37 | 245 | (621 | ) | (106 | ) | ||||||||||
| Discontinued operations |
2 | (4 | ) | (2 | ) | (56 | ) | |||||||||
| Net activity in financing receivables |
35 | (12 | ) | 141 | 79 | |||||||||||
| Other |
244 | 228 | 415 | 449 | ||||||||||||
| Net operating cash flow |
752 | 794 | 1,192 | 1,288 | ||||||||||||
| Capital spending |
(68 | ) | (71 | ) | (173 | ) | (183 | ) | ||||||||
| Internal use software spending |
(25 | ) | (25 | ) | (51 | ) | (61 | ) | ||||||||
| Acquisitions |
(40 | ) | (39 | ) | (87 | ) | (99 | ) | ||||||||
| Investment activity and divestitures |
— | — | 50 | 7 | ||||||||||||
| Dividends |
(108 | ) | (99 | ) | (313 | ) | (289 | ) | ||||||||
| Repurchase of common stock |
(250 | ) | (198 | ) | (352 | ) | (390 | ) | ||||||||
| Debt repayments |
(74 | ) | (31 | ) | (445 | ) | (93 | ) | ||||||||
| Other |
50 | 35 | 139 | 84 | ||||||||||||
| Total cash flow |
$ | 237 | $ | 366 | $ | (40 | ) | $ | 264 | |||||||
Attachment F
Raytheon Company
Non-GAAP Financial Measures
Third Quarter 2006
Return on Invested Capital (ROIC) is a “non-GAAP” financial measure under SEC regulations. The Company defines ROIC as income from continuing operations plus after-tax net interest expense plus one-third of operating lease expense after-tax (estimate of interest portion of the operating lease expense), divided by average invested capital after capitalizing operating leases (operating lease expense times a multiplier of 8) and adding financial guarantees. ROIC is not a measure of financial performance under generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies in the same manner. ROIC should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The Company uses ROIC to make the most efficient and effective use of capital and as an element of management incentive compensation.
Return on Invested Capital
| (In millions) | Current 2006 Guidance | |||||||
| Low end of range | High end of range | |||||||
| Income from Continuing Operations |
||||||||
| Net Interest Expense, after-tax* |
Combined | Combined | ||||||
| Lease Expense, after-tax* |
||||||||
| Return |
$ | 1,415 | $ | 1,460 | ||||
| Net Debt ** |
||||||||
| Equity** |
Combined | Combined | ||||||
| Lease Expense x 8 plus Financial Guarantees** |
||||||||
| Invested Capital |
$ | 16,775 | $ | 16,575 | ||||
| ROIC |
8.4 | % | 8.8 | % | ||||
| 2007 Guidance | ||||||||
| Low end of range | High end of range | |||||||
| Income from Continuing Operations |
||||||||
| Net Interest Expense, after-tax* |
Combined | Combined | ||||||
| Lease Expense, after-tax* |
||||||||
| Return |
$ | 1,510 | $ | 1,555 | ||||
| Net Debt ** |
||||||||
| Equity** |
Combined | Combined | ||||||
| Lease Expense x 8 plus Financial Guarantees** |
||||||||
| Invested Capital |
$ | 16,700 | $ | 16,500 | ||||
| ROIC |
9.0 | % | 9.4 | % | ||||
| * | effective tax rate of 33.9% (2006 Guidance) and 34.0% (2007 Guidance) |
| ** | two-point average |