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): July 26, 2007
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 July 26, 2007, Raytheon Company issued a press release announcing financial results for the fiscal quarter ended June 24, 2007. 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 July 26, 2007. |
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: July 26, 2007 | By: | /s/ Michael J. Wood | ||||
| Michael J. Wood | ||||||
| Vice President and Chief Accounting Officer | ||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 |
Press release issued by Raytheon Company dated July 26, 2007. |
Exhibit 99.1
Media Relations
News release
FOR IMMEDIATE RELEASE
| Media Contact: | Investor Relations Contact: | |
| Jon Kasle | Greg Smith | |
| 781-522-5110 | 781-522-5141 |
Raytheon Reports Strong Second Quarter 2007 Results and Increases Full-year Guidance
Highlights
| • | Earnings per share (EPS) from continuing operations of $0.79, up 30 percent |
| • | Sales of $5.4 billion, up 9 percent |
| • | Increases full-year guidance for EPS, bookings and ROIC |
| • | Sale of Raytheon Aircraft Company completed, resulting in after-tax net proceeds of $2.4 billion |
| • | Repurchased 9.6 million shares for $526 million |
WALTHAM, Mass., (July 26, 2007) – Raytheon Company (NYSE: RTN) reported second quarter 2007 income from continuing operations of $356 million or $0.79 per diluted share compared to $276 million or $0.61 per diluted share in the second quarter 2006. Second quarter 2007 income from continuing operations was higher primarily due to operational improvements, combined with lower net interest and pension expense. As previously announced, second quarter 2007 income from continuing operations included a $39 million charge ($59 million pretax) or $0.09 per diluted share for the early redemption of $1.0 billion of debt.
“We are very pleased with the Company’s solid operating performance in the first half of 2007, along with the significant wins during the quarter on Navy Multiband Terminal and Warfighter FOCUS programs, which represent a potential of $12 billion over the life of these programs,” said William H. Swanson, Raytheon’s Chairman and CEO. “Our strong operational improvements allow us to increase our 2007 guidance for full-year EPS and bookings.”
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Second quarter 2007 net income was $1,335 million or $2.97 per diluted share compared to $310 million or $0.69 per diluted share in the second quarter 2006. Net income for the second quarter 2007 included $979 million in discontinued operations or $2.18 per diluted share of which $986 million was attributable to the gain on the sale of Raytheon Aircraft Company (RAC), which was completed in the second quarter. The sale resulted in after-tax net proceeds of approximately $2.4 billion.
Net sales for the second quarter 2007 were $5.4 billion, up 9 percent from $5.0 billion in the second quarter 2006 led by Integrated Defense Systems (IDS), Missile Systems (MS) and Network Centric Systems (NCS).
Operating cash flow from continuing operations for the second quarter 2007 was an outflow of $46 million versus a positive $474 million for the second quarter 2006. The second quarter 2007 included $589 million in cash tax payments versus $101 million in cash tax payments paid in the second quarter 2006. Of the cash taxes paid in the second quarter 2007, $316 million was attributable to the gain on the sale of RAC.
Year-to-date operating cash flow from continuing operations was an outflow of $425 million versus a positive $426 million for the comparable period in 2006. The year-to-date decrease in operating cash flow was primarily due to $643 million in cash tax payments ($316 million attributable to the gain on the sale of RAC) in the first half 2007 versus $101 million of cash tax payments made in the first half 2006 combined with the $400 million discretionary cash contribution made to the Company’s pension plans in the first quarter 2007 versus the $200 million discretionary cash contribution made in the first quarter 2006.
During the second quarter 2007, the Company repurchased 9.6 million shares for $526 million as part of the Company’s previously announced share repurchase program. The Company has repurchased 14.7 million shares of common stock year-to-date for $801 million.
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| Summary Financial Results | 2nd Quarter | % Change |
Six Months | % Change |
||||||||||||||||
| ($ in millions, except per share data) |
2007 | 2006 | 2007 | 2006 | ||||||||||||||||
| Net Sales |
$ | 5,419 | $ | 4,973 | 9 | % | $ | 10,347 | $ | 9,633 | 7 | % | ||||||||
| Total Operating Expenses |
4,831 | 4,512 | 9,249 | 8,739 | ||||||||||||||||
| Operating Income |
588 | 461 | 28 | % | 1,098 | 894 | 23 | % | ||||||||||||
| Non-operating Expenses |
53 | 42 | 88 | 64 | ||||||||||||||||
| Income from Cont. Ops. before Taxes |
$ | 535 | $ | 419 | 28 | % | $ | 1,010 | $ | 830 | 22 | % | ||||||||
| Income from Continuing Operations |
$ | 356 | $ | 276 | 29 | % | $ | 670 | $ | 548 | 22 | % | ||||||||
| Income from Discontinued Operations* |
979 | 34 | NM | 1,011 | 49 | NM | ||||||||||||||
| Net Income |
$ | 1,335 | $ | 310 | 331 | % | $ | 1,681 | $ | 597 | 182 | % | ||||||||
| Diluted EPS from Continuing Operations |
$ | 0.79 | $ | 0.61 | 30 | % | $ | 1.49 | $ | 1.22 | 22 | % | ||||||||
| Diluted EPS |
$ | 2.97 | $ | 0.69 | 330 | % | $ | 3.73 | $ | 1.33 | 180 | % | ||||||||
| Operating Cash Flow from Cont. Ops.** |
$ | (46 | ) | $ | 474 | $ | (425 | ) | $ | 426 | ||||||||||
| * | Includes after-tax net gain of $986 million on sale of Raytheon Aircraft Company in Q2’07 |
| ** | Includes $316 million cash tax payment related to the completion of the Raytheon Aircraft Company sale in Q2’07 |
Bookings and Backlog
| Bookings | 2nd Quarter | Six Months | ||||||||||
| (in millions) |
2007 | 2006 | 2007 | 2006 | ||||||||
| Total Bookings |
$ | 4,973 | $ | 4,837 | $ | 10,255 | $ | 9,804 | ||||
| Backlog | ||||||||||||
| (in millions) |
06/24/07 | 12/31/06 | ||||||||||
| Backlog |
$ | 33,318 | $ | 33,838 | ||||||||
| Funded Backlog |
$ | 18,067 | $ | 18,186 | ||||||||
The Company reported total bookings for the second quarter 2007 of $5.0 billion compared to $4.8 billion in the second quarter 2006. The Company ended the second quarter 2007 with backlog of $33.3 billion compared to $31.5 billion at the end of the second quarter 2006 and $33.8 billion at the end of 2006.
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Outlook
| 2007 Financial Outlook | Current | Prior * | ||
| Bookings ($B) |
22.0 - 23.0 | 21.0 - 22.0 | ||
| Net Sales ($B) |
21.4 - 21.9 | 21.4 - 21.9 | ||
| FAS/CAS Pension Expense ($M) |
270 | 270 | ||
| Interest Expense, net ($M) |
45 - 60 | 65 - 80 | ||
| Diluted Shares (M) |
446 - 448 | 446 - 448 | ||
| EPS from Cont. Ops. ($) |
$3.05 - $3.20 | $2.85 - $3.00 | ||
| Operating Cash Flow from Cont. Ops. ($B) |
0.9 - 1.1** | 1.5 - 1.7 | ||
| ** Includes cash tax payments of approximately $630 million, resulting from the sale of Raytheon Aircraft |
||||
| ROIC (%) |
8.6 - 9.1 | 8.2 - 8.7 | ||
* As of April 25, 2007 |
||||
The Company has increased full-year 2007 guidance for earnings per share from continuing operations, bookings and Return on Invested Capital (ROIC), and updated net interest expense guidance. Full-year 2007 guidance for operating cash flow from continuing operations has been revised to reflect approximately $630 million in cash tax payments related to the sale of RAC, of which $316 million was paid in the second quarter 2007, with the remaining $314 million expected to be paid in the second half of 2007. Charts containing additional information on the Company’s 2007 performance and guidance are available on the Company’s website at www.raytheon.com. See attachment F for the Company’s calculation and use of ROIC, a non-GAAP financial measure.
Segment Results
Integrated Defense Systems
| ($ in millions) |
2nd Quarter | % Change |
Six Months | % Change |
||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
| Net Sales |
$ | 1,166 | $ | 1,038 | 12 | % | $ | 2,258 | $ | 2,001 | 13 | % | ||||||||||
| Operating Income |
$ | 212 | $ | 177 | 20 | % | $ | 411 | $ | 335 | 23 | % | ||||||||||
| Operating Margin |
18.2 | % | 17.1 | % | 18.2 | % | 16.7 | % | ||||||||||||||
Integrated Defense Systems (IDS) had second quarter 2007 net sales of $1,166 million, up 12 percent compared to $1,038 million in the second quarter 2006, primarily due to
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growth on Missile Defense Agency, U.S. Navy and U.S. Army programs, as well as on international programs. IDS recorded $212 million of operating income compared to $177 million in the second quarter 2006. The increase in operating income was primarily due to higher volume and improved performance on several domestic programs.
During the quarter, IDS booked $298 million to provide system and software engineering for the Ballistic Missile Defense System (BMDS) program, $146 million related to the renewal of an international Patriot technical support contract, and $113 million for the continued design, production, integration, and testing of Cobra Judy Replacement Mission Equipment (CJRME).
Intelligence and Information Systems
| ($ in millions) |
2nd Quarter | % Change |
Six Months | % Change |
||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
| Net Sales |
$ | 666 | $ | 633 | 5 | % | $ | 1,254 | $ | 1,244 | 1 | % | ||||||||||
| Operating Income |
$ | 63 | $ | 58 | 9 | % | $ | 118 | $ | 113 | 4 | % | ||||||||||
| Operating Margin |
9.5 | % | 9.2 | % | 9.4 | % | 9.1 | % | ||||||||||||||
Intelligence and Information Systems (IIS) had second quarter 2007 net sales of $666 million, up 5 percent compared to $633 million in the second quarter 2006, primarily due to increased volume on several U.S. Air Force programs and on certain classified programs. IIS recorded $63 million of operating income compared to $58 million in the second quarter 2006.
During the quarter, IIS booked $332 million on a number of classified contracts, including $157 million on a major classified contract.
Missile Systems
| ($ in millions) |
2nd Quarter | % Change |
Six Months | % Change |
||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
| Net Sales |
$ | 1,244 | $ | 1,117 | 11 | % | $ | 2,384 | $ | 2,106 | 13 | % | ||||||||||
| Operating Income |
$ | 134 | $ | 122 | 10 | % | $ | 254 | $ | 232 | 9 | % | ||||||||||
| Operating Margin |
10.8 | % | 10.9 | % | 10.7 | % | 11.0 | % | ||||||||||||||
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Missile Systems (MS) had second quarter 2007 net sales of $1,244 million, up 11 percent compared to $1,117 million in the second quarter 2006, primarily due to higher volume on Standard Missile, AIM-9X and Phalanx. MS recorded $134 million of operating income compared to $122 million in the second quarter 2006.
During the quarter, MS booked $175 million for the production of Advanced Medium-Range Air-to-Air Missile (AMRAAM) for the U.S. Air Force. MS also booked $105 million for additional development on the Rolling Airframe Missile (RAM) program for the U.S. Navy and $91 million for the production of Standard Missile-3 (SM-3).
Network Centric Systems
| ($ in millions) |
2nd Quarter | % Change |
Six Months | % Change |
||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
| Net Sales |
$ | 1,052 | $ | 880 | 20 | % | $ | 1,981 | $ | 1,671 | 19 | % | ||||||||||
| Operating Income |
$ | 139 | $ | 91 | 53 | % | $ | 256 | $ | 175 | 46 | % | ||||||||||
| Operating Margin |
13.2 | % | 10.3 | % | 12.9 | % | 10.5 | % | ||||||||||||||
Network Centric Systems (NCS) had second quarter 2007 net sales of $1,052 million, up 20 percent compared to $880 million in the second quarter 2006, primarily due to growth on U.S. Army programs. NCS recorded $139 million of operating income compared to $91 million in the second quarter 2006. The increase in operating income was primarily due to higher volume and improved program performance.
During the quarter, NCS booked $159 million for development work on the U.S. Navy Multiband Terminal (NMT) contract, which has a combined potential value over its lifetime in excess of $1 billion for development and production.
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Space and Airborne Systems
| ($ in millions) |
2nd Quarter | % Change |
Six Months | % Change |
||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
| Net Sales |
$ | 1,065 | $ | 1,057 | 1 | % | $ | 2,029 | $ | 2,075 | -2 | % | ||||||||||
| Operating Income |
$ | 133 | $ | 152 | -13 | % | $ | 262 | $ | 297 | -12 | % | ||||||||||
| Operating Margin |
12.5 | % | 14.4 | % | 12.9 | % | 14.3 | % | ||||||||||||||
Space and Airborne Systems (SAS) had second quarter 2007 net sales of $1,065 million compared to $1,057 million in the second quarter 2006. SAS recorded $133 million of operating income compared to $152 million in the second quarter 2006. Operating income was lower primarily due to profit adjustments taken on certain programs.
During the quarter, SAS booked over $200 million on a number of classified contracts.
Technical Services
| ($ in millions) |
2nd Quarter | % Change |
Six Months | % Change |
||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
| Net Sales |
$ | 473 | $ | 466 | 2 | % | $ | 899 | $ | 916 | -2 | % | ||||||||||
| Operating Income |
$ | 29 | $ | 30 | -3 | % | $ | 50 | $ | 61 | -18 | % | ||||||||||
| Operating Margin |
6.1 | % | 6.4 | % | 5.6 | % | 6.7 | % | ||||||||||||||
Technical Services (TS) had second quarter 2007 net sales of $473 million compared to $466 million in the second quarter 2006. TS recorded operating income of $29 million in the second quarter 2007 compared to $30 million in the second quarter 2006.
During the quarter, TS was awarded the U.S. Army’s Warfighter Field Operations Customer Support (FOCUS) contract to improve the readiness and effectiveness of U.S. Army soldiers. This Indefinite Delivery/Indefinite Quantity (IDIQ) contract has a potential total value in excess of $11 billion over a 10-year period.
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Other
Net sales in the second quarter 2007 were $217 million compared to $202 million in the second quarter 2006, with operating income of $1 million in the second quarter 2007 compared to an operating loss of $10 million in the second quarter 2006.
Raytheon Company (NYSE: RTN), with 2006 sales of $20.3 billion, is a technology leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 85 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. With headquarters in Waltham, Mass., Raytheon employs 73,000 people worldwide.
Disclosure Regarding Forward-looking Statements
This release and the attachments contain forward-looking statements, including information regarding the Company’s 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 and other regulations; the impact of competition; the ability to develop 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 Flight Options’ ability to compete and meet its financial objectives; risks associated with the commuter and fractional ownership aircraft markets; 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; 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
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potential impact of any acquisitions, divestitures or business combinations 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 Second Quarter 2007 Financial Results
Raytheon’s financial results conference call will be held on Thursday, July 26, 2007 at 9 a.m. EDT. 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 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.
# # #
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Attachment A
Raytheon Company
Preliminary Statement of Operations Information
Second Quarter 2007
| (In millions except per share amounts) | Three Months Ended | Six Months Ended | ||||||||||||||
| 24-Jun-07 | 25-Jun-06 | 24-Jun-07 | 25-Jun-06 | |||||||||||||
| Net sales |
$ | 5,419 | $ | 4,973 | $ | 10,347 | $ | 9,633 | ||||||||
| Cost of sales |
4,326 | 4,032 | 8,307 | 7,839 | ||||||||||||
| Administrative and selling expenses |
367 | 345 | 707 | 664 | ||||||||||||
| Research and development expenses |
138 | 135 | 235 | 236 | ||||||||||||
| Total operating expenses |
4,831 | 4,512 | 9,249 | 8,739 | ||||||||||||
| Operating income |
588 | 461 | 1,098 | 894 | ||||||||||||
| Interest expense |
54 | 68 | 114 | 137 | ||||||||||||
| Interest income |
(57 | ) | (13 | ) | (85 | ) | (34 | ) | ||||||||
| Other expense (income), net |
56 | (13 | ) | 59 | (39 | ) | ||||||||||
| Non-operating expense, net |
53 | 42 | 88 | 64 | ||||||||||||
| Income from continuing operations before taxes |
535 | 419 | 1,010 | 830 | ||||||||||||
| Federal and foreign income taxes |
179 | 143 | 340 | 282 | ||||||||||||
| Income from continuing operations |
356 | 276 | 670 | 548 | ||||||||||||
| Net (loss) income from discontinued operations |
(7 | ) | 34 | 25 | 49 | |||||||||||
| Net gain on disposal |
986 | — | 986 | — | ||||||||||||
| Income from discontinued operations |
979 | 34 | 1,011 | 49 | ||||||||||||
| Net income |
$ | 1,335 | $ | 310 | $ | 1,681 | $ | 597 | ||||||||
| Earnings per share from continuing operations |
||||||||||||||||
| Basic |
$ | 0.82 | $ | 0.62 | $ | 1.53 | $ | 1.24 | ||||||||
| Diluted |
$ | 0.79 | $ | 0.61 | $ | 1.49 | $ | 1.22 | ||||||||
| Earnings per share from discontinued operations |
||||||||||||||||
| Basic |
$ | 2.24 | $ | 0.08 | $ | 2.30 | $ | 0.11 | ||||||||
| Diluted |
$ | 2.18 | $ | 0.08 | $ | 2.24 | $ | 0.11 | ||||||||
| Earnings per share |
||||||||||||||||
| Basic |
$ | 3.06 | $ | 0.70 | $ | 3.83 | $ | 1.35 | ||||||||
| Diluted |
$ | 2.97 | $ | 0.69 | $ | 3.73 | $ | 1.33 | ||||||||
| Average shares outstanding |
||||||||||||||||
| Basic |
436.7 | 442.7 | 438.9 | 442.5 | ||||||||||||
| Diluted |
448.8 | 450.9 | 451.0 | 450.3 | ||||||||||||
Attachment B
Raytheon Company
Preliminary Segment Information
Second Quarter 2007
(In millions)
| Net Sales Three Months Ended |
Operating Income Three Months Ended |
Operating Income As a Percent of Sales Three Months Ended |
||||||||||||||||||||
| 24-Jun-07 | 25-Jun-06 | 24-Jun-07 | 25-Jun-06 | 24-Jun-07 | 25-Jun-06 | |||||||||||||||||
| Integrated Defense Systems |
$ | 1,166 | $ | 1,038 | $ | 212 | $ | 177 | 18.2 | % | 17.1 | % | ||||||||||
| Intelligence and Information Systems |
666 | 633 | 63 | 58 | 9.5 | % | 9.2 | % | ||||||||||||||
| Missile Systems |
1,244 | 1,117 | 134 | 122 | 10.8 | % | 10.9 | % | ||||||||||||||
| Network Centric Systems |
1,052 | 880 | 139 | 91 | 13.2 | % | 10.3 | % | ||||||||||||||
| Space and Airborne Systems |
1,065 | 1,057 | 133 | 152 | 12.5 | % | 14.4 | % | ||||||||||||||
| Technical Services |
473 | 466 | 29 | 30 | 6.1 | % | 6.4 | % | ||||||||||||||
| Other |
217 | 202 | 1 | (10 | ) | 0.5 | % | -5.0 | % | |||||||||||||
| FAS/CAS Pension Adjustment |
— | — | (63 | ) | (96 | ) | ||||||||||||||||
| Corporate and Eliminations |
(464 | ) | (420 | ) | (60 | ) | (63 | ) | ||||||||||||||
| Total |
$ | 5,419 | $ | 4,973 | $ | 588 | $ | 461 | 10.9 | % | 9.3 | % | ||||||||||
| Net Sales Six Months Ended |
Operating Income Six Months Ended |
Operating Income As a Percent of Sales Six Months Ended |
||||||||||||||||||||
| 24-Jun-07 | 25-Jun-06 | 24-Jun-07 | 25-Jun-06 | 24-Jun-07 | 25-Jun-06 | |||||||||||||||||
| Integrated Defense Systems |
$ | 2,258 | $ | 2,001 | $ | 411 | $ | 335 | 18.2 | % | 16.7 | % | ||||||||||
| Intelligence and Information Systems |
1,254 | 1,244 | 118 | 113 | 9.4 | % | 9.1 | % | ||||||||||||||
| Missile Systems |
2,384 | 2,106 | 254 | 232 | 10.7 | % | 11.0 | % | ||||||||||||||
| Network Centric Systems |
1,981 | 1,671 | 256 | 175 | 12.9 | % | 10.5 | % | ||||||||||||||
| Space and Airborne Systems |
2,029 | 2,075 | 262 | 297 | 12.9 | % | 14.3 | % | ||||||||||||||
| Technical Services |
899 | 916 | 50 | 61 | 5.6 | % | 6.7 | % | ||||||||||||||
| Other |
398 | 392 | (7 | ) | (23 | ) | -1.8 | % | -5.9 | % | ||||||||||||
| FAS/CAS Pension Adjustment |
— | — | (125 | ) | (181 | ) | ||||||||||||||||
| Corporate and Eliminations |
(856 | ) | (772 | ) | (121 | ) | (115 | ) | ||||||||||||||
| Total |
$ | 10,347 | $ | 9,633 | $ | 1,098 | $ | 894 | 10.6 | % | 9.3 | % | ||||||||||
Attachment C
Raytheon Company
Other Preliminary Information
Second Quarter 2007
| Backlog (In millions) |
Funded Backlog (In millions) | |||||||||||
| 24-Jun-07 | 31-Dec-06 | 24-Jun-07 | 31-Dec-06 | |||||||||
| Integrated Defense Systems |
$ | 7,958 | $ | 7,934 | $ | 3,879 | $ | 4,088 | ||||
| Intelligence and Information Systems |
3,615 | 3,935 | 877 | 893 | ||||||||
| Missile Systems |
9,356 | 9,504 | 5,071 | 5,135 | ||||||||
| Network Centric Systems |
5,328 | 5,059 | 4,031 | 4,037 | ||||||||
| Space and Airborne Systems |
5,115 | 5,591 | 2,968 | 2,770 | ||||||||
| Technical Services |
1,701 | 1,572 | 996 | 1,020 | ||||||||
| Other |
245 | 243 | 245 | 243 | ||||||||
| Total |
$ | 33,318 | $ | 33,838 | $ | 18,067 | $ | 18,186 | ||||
| Bookings (In millions) Three Months Ended |
||||||||||||
| 24-Jun-07 | 25-Jun-06 | |||||||||||
| Total Bookings |
$ | 4,973 | $ | 4,837 | ||||||||
Attachment D
Raytheon Company
Preliminary Balance Sheet Information
Second Quarter 2007
(In millions)
Balance sheets
| 24-Jun-07 | 31-Dec-06 | |||||
| Assets |
||||||
| Cash and cash equivalents |
$ | 3,045 | $ | 2,460 | ||
| Accounts receivable, less allowance for doubtful accounts |
152 | 178 | ||||
| Contracts in process |
3,945 | 3,600 | ||||
| Inventories |
537 | 487 | ||||
| Deferred taxes |
227 | 257 | ||||
| Prepaid expenses and other current assets |
244 | 239 | ||||
| Assets held for sale |
— | 2,296 | ||||
| Total current assets |
8,150 | 9,517 | ||||
| Property, plant and equipment, net |
2,086 | 2,131 | ||||
| Deferred taxes |
240 | 189 | ||||
| Goodwill |
11,541 | 11,539 | ||||
| Other assets, net |
2,273 | 2,115 | ||||
| Total assets |
$ | 24,290 | $ | 25,491 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Notes payable and current portion of long-term debt |
$ | 686 | $ | 687 | ||
| Advance payments and billings in excess of costs incurred |
1,895 | 1,962 | ||||
| Accounts payable |
893 | 920 | ||||
| Accrued salaries and wages |
754 | 944 | ||||
| Other accrued expenses |
1,379 | 1,193 | ||||
| Liabilities held for sale |
— | 1,009 | ||||
| Total current liabilities |
5,607 | 6,715 | ||||
| Accrued retiree benefits and other long-term liabilities |
4,075 | 4,232 | ||||
| Long-term debt |
2,233 | 3,278 | ||||
| Minority interest |
195 | 165 | ||||
| Stockholders’ equity |
12,180 | 11,101 | ||||
| Total liabilities and stockholders’ equity |
$ | 24,290 | $ | 25,491 | ||
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Second Quarter 2007
(In millions)
Cash flow information
| Three Months Ended | Six Months Ended |
|||||||||||||||
| 24-Jun-07 | 25-Jun-06 | 24-Jun-07 | 25-Jun-06 | |||||||||||||
| Income from continuing operations |
$ | 356 | $ | 276 | $ | 670 | $ | 548 | ||||||||
| Depreciation |
74 | 74 | 143 | 143 | ||||||||||||
| Amortization |
23 | 22 | 43 | 41 | ||||||||||||
| Working capital |
(48 | ) | (47 | ) | (718 | ) | (564 | ) | ||||||||
| Discontinued operations |
(4 | ) | (14 | ) | (41 | ) | 14 | |||||||||
| Net activity in financing receivables |
35 | 29 | 56 | 74 | ||||||||||||
| Other |
(486 | ) | 120 | (619 | ) | 184 | ||||||||||
| Net operating cash flow |
(50 | ) | 460 | (466 | ) | 440 | ||||||||||
| Capital spending |
(57 | ) | (53 | ) | (96 | ) | (88 | ) | ||||||||
| Internal use software spending |
(19 | ) | (21 | ) | (34 | ) | (25 | ) | ||||||||
| Acquisitions |
— | — | — | (47 | ) | |||||||||||
| Investment activity and divestitures |
3,117 | 28 | 3,117 | 50 | ||||||||||||
| Dividends |
(113 | ) | (107 | ) | (220 | ) | (205 | ) | ||||||||
| Repurchase of common stock |
(526 | ) | — | (801 | ) | (102 | ) | |||||||||
| Debt repayments |
(1,041 | ) | (339 | ) | (1,038 | ) | (371 | ) | ||||||||
| Discontinued operations |
— | (10 | ) | (27 | ) | (18 | ) | |||||||||
| Other |
74 | 23 | 150 | 89 | ||||||||||||
| Total cash flow |
$ | 1,385 | $ | (19 | ) | $ | 585 | $ | (277 | ) | ||||||
Attachment F
Raytheon Company
Non-GAAP Financial Measures
Second Quarter 2007
We define 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 operating lease expense) divided by average invested capital after capitalizing operating leases (operating lease expense times a multiplier of 8), adding financial guarantees less net investment in Discontinued Operations, and adding back the cumulative minimum pension liability/impact of FAS 158. 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. We use ROIC as a measure of efficiency and effectiveness of our use of capital and as an element of management compensation.
Return on Invested Capital
| (In millions) | 2007 Current Guidance | 2007 Prior Guidance | ||||||||||||||
| Low end of range |
High end of range |
Low end of range |
High end of range |
|||||||||||||
| Income from continuing operations Net interest expense, after-tax* Lease expense, after-tax* |
Combined | Combined | Combined | Combined | ||||||||||||
| Return |
$ | 1,470 | $ | 1,535 | $ | 1,400 | $ | 1,465 | ||||||||
| Net debt ** Equity less investment in discontinued operations Lease expense x 8 plus financial guarantees Minimum pension liability (cumulative) |
Combined | Combined | Combined | Combined | ||||||||||||
| Invested capital from continuing operations*** |
$ | 17,050 | $ | 16,850 | $ | 17,050 | $ | 16,850 | ||||||||
| ROIC |
8.6 | % | 9.1 | % | 8.2 | % | 8.7 | % | ||||||||
| * | Effective tax rate: 33.9% (2007 guidance) |
| ** | Net debt is defined as total debt less cash and cash equivalents and is calculated using a 2 point average |
| *** | Calculated using a 2 point average |