Raytheon Reports Solid Third Quarter 2012 Results

-- Strong bookings of $7.3 billion; book-to-bill of 1.21

-- Adjusted EPS(1) of $1.60, up 15 percent; EPS from continuing operations was $1.51, up 6 percent

-- Adjusted Operating Margin(1), of 13.8 percent, up 80 basis points; reported operating margin of 13.0 percent up 120 basis points

-- Net sales of $6.0 billion, down 1 percent

-- Strong operating cash flow from continuing operations of $1.1 billion

-- Increased full-year 2012 guidance for EPS

Oct 25, 2012, 07:00 ET from Raytheon Company

WALTHAM, Mass., Oct. 25, 2012 /PRNewswire/ -- Raytheon Company (NYSE: RTN) announced third quarter 2012 Adjusted EPS(1) of $1.60 per diluted share compared to $1.39 per diluted share in the third quarter 2011, up 15 percent. The increase was primarily driven by operational improvements and capital deployment actions. Third quarter 2012 EPS from continuing operations was $1.51 compared to $1.42 in the third quarter 2011. Third quarter 2012 included an unfavorable FAS/CAS Adjustment of $0.09, compared with an unfavorable FAS/CAS Adjustment of $0.14 in the third quarter 2011. Third quarter 2011 also included a $0.17 per diluted share favorable tax settlement.

"Raytheon's strong operating performance in the third quarter reflects our continued focus on reducing cost, and increasing productivity," said William H. Swanson, Raytheon's Chairman and CEO. "Our bookings in the quarter were strong, and we have significant opportunities in both domestic and international markets for our innovative technologies and affordable solutions."

____________________________________ 1 Adjusted EPS is EPS from continuing operations attributable to Raytheon Company common stockholders and Adjusted Operating Margin is total operating margin, in each case, excluding the impact of the FAS/CAS Adjustment, and from time to time, certain other items.  Q3 2011 Adjusted EPS also excludes the impact of the favorable tax settlement as discussed above. Adjusted EPS and Adjusted Operating Margin are non-GAAP financial measures. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.

Q3 2011 vs. Q3 2012 EPS Variance

3rd Quarter

Nine Months

EPS

Adjusted EPS*

EPS

Adjusted EPS*

Q3 2011

$

1.42

$

1.39

$

3.68

$

4.13

Operational Improvements

0.07

0.07

0.24

0.24

Reduced Share Count

0.08

0.08

0.27

0.27

Other Items, net

0.06

0.06

(0.05)

(0.05)

FAS/CAS Adjustment**

0.05

0.10

UKBA LOC Adjustment

0.17

2011 Tax Settlement

(0.17)

(0.17)

Q3 2012

$

1.51

$

1.60

$

4.24

$

4.61

* Adjusted EPS is a non-GAAP financial measure. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information. Amounts may not add due to rounding.

**  Represents the difference between the 3rd quarter 2012 and 3rd quarter 2011 FAS/CAS Adjustments of $(0.09) and $(0.14), respectively and the first nine months of 2012 and first nine months of 2011 FAS/CAS Adjustments of $(0.36) and $(0.46), respectively.

Net sales for the third quarter 2012 were $6,045 million, compared to $6,116 million in the third quarter 2011. The Company reported strong bookings for the third quarter 2012 of $7,293 million, resulting in a book-to-bill ratio of 1.21. Bookings in the third quarter 2011 were $6,884 million.

The Company generated strong operating cash flow in the quarter.  Operating cash flow from continuing operations for the third quarter 2012 was $1,111 million compared to $845 million for the third quarter 2011.  The increase in operating cash from continuing operations in the third quarter 2012 was primarily due to the timing of collections and pension contributions, partially offset by higher tax payments.

In the third quarter 2012, the Company repurchased 2.2 million shares of common stock for $125 million as part of its previously announced share repurchase program. Year-to-date 2012, the Company repurchased 14.1 million shares of common stock for $725 million.

The Company ended the third quarter 2012 with $1.0 billion of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.

Summary Financial Results

3rd Quarter

%

Nine Months

%

($ in millions, except per share data)

2012

2011

Change

2012

2011

Change

Net Sales

$

6,045

$

6,116

-1%

$

17,975

$

18,369

-2%

Income from Continuing Operations attributable to

   Raytheon Company

$

501

$

498

1%

$

1,423

$

1,309

9%

Adjusted Income*

$

532

$

487

9%

$

1,545

$

1,473

5%

EPS from Continuing Operations

$

1.51

$

1.42

6%

$

4.24

$

3.68

15%

Adjusted EPS*

$

1.60

$

1.39

15%

$

4.61

$

4.13

12%

Operating Cash Flow from Continuing Operations

$

1,111

$

845

$

963

$

816

Workdays in Fiscal Reporting Calendar

63

63

191

191

* Adjusted Income is income from continuing operations attributable to Raytheon Company common stockholders, excluding the after-tax impact of the FAS/CAS Adjustment and, from time to time, certain other items. Q3 2011 Adjusted Income also excludes the favorable tax settlement discussed above. Adjusted Income and Adjusted EPS are non-GAAP financial measures. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.

 

Bookings and Backlog

Bookings

($ in millions)

3rd Quarter

Nine Months

2012

2011

2012

2011

Bookings

$

7,293

$

6,884

$

18,612

$

19,408

Backlog

($ in millions)

Period Ending

Q3 2012

2011

Q3 2011

Backlog

$

35,015

$

35,312

$

34,985

Funded Backlog

$

22,886

$

22,462

$

21,734

The Company had bookings of $7.3 billion in the third quarter 2012 and had a period ending backlog of $35.0 billion

Outlook

The Company has updated its full-year 2012 outlook. Charts containing additional information on the Company's 2012 outlook are available on the Company's website at www.raytheon.com/ir

2012 Financial Outlook

Current

Prior (7/26/12)

Net Sales ($B)

 24.3 - 24.7*

24.5 - 25.0

FAS/CAS Adjustment ($M)

(252)*

(284)

Interest Expense, net ($M)

(190) - (200)

(190) - (200)

Diluted Shares (M)

334 - 335

 334 - 335

Effective Tax Rate

~32%

~32%

EPS from Continuing Operations

 $5.36 - $5.46*

$5.15 - $5.30

Adjusted EPS**

 $5.85 - $5.95*

$5.70 - $5.85

Operating Cash Flow from Continuing Operations ($B)

 1.8 - 2.0*

 1.7 - 1.9

* Denotes change from prior guidance.

** Adjusted EPS is a non-GAAP financial measure. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.

Although it remains uncertain if sequestration under the Budget Control Act (BCA) will be implemented, sequestration could have a significant impact on the U.S. Military, the Aerospace and Defense Industry and Federal spending. Several industry associations estimate that sequestration, if implemented, could have a severe impact on U.S. Aerospace and Defense Industry employment nationwide. We believe that Raytheon's large international market presence, portfolio of programs, technology and focus on high priority areas should help to mitigate some of the potential overall impact.

Segment Results

The Company's reportable segments are: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, and Technical Services.

Integrated Defense Systems

3rd Quarter

Nine Months

($ in millions)

2012

2011

% Change

2012

2011

% Change

Net Sales

$

1,275

$

1,176

8%

$

3,716

$

3,667

1%

Operating Income

$

240

$

204

18%

$

692

$

600

15%

Operating Margin

18.8%

17.3%

18.6%

16.4%

Integrated Defense Systems (IDS) had third quarter 2012 net sales of $1,275 million, up 8 percent compared to $1,176 million in the third quarter 2011. The increase in net sales was primarily due to higher sales on an international Patriot program. IDS recorded $240 million of operating income compared to $204 million in the third quarter 2011. The increase in operating income was primarily due to favorable contract mix and higher volume in the third quarter 2012.

During the quarter, IDS booked $123 million for the Upgraded Early Warning Radar (UEWR) system for the Missile Defense Agency (MDA) and the U.S. Air Force.  IDS also booked $84 million to provide air and missile defense capability for the U.S. Army.

Intelligence and Information Systems

3rd Quarter

Nine Months

($ in millions)

2012

2011

% Change

2012

2011*

% Change

Net Sales

$

742

$

760

-2%

$

2,257

$

2,262

-

Operating Income

$

60

$

58

3%

$

183

$

85

NM

Operating Margin

8.1%

7.6%

8.1%

3.8%

* First quarter 2011 included an $80 million reduction to operating income due to the UKBA LOC Adjustment as described in attachment F.

NM - Not Meaningful

Intelligence and Information Systems (IIS) had third quarter 2012 net sales of $742 million compared to $760 million in the third quarter 2011. IIS recorded $60 million of operating income compared to $58 million in the third quarter 2011.

During the quarter, IIS booked $170 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force.  IIS also booked $559 million on a number of classified contracts.

Missile Systems

3rd Quarter

Nine Months

($ in millions)

2012

2011

% Change

2012

2011

% Change

Net Sales

$

1,443

$

1,413

2%

$

4,149

$

4,108

1%

Operating Income

$

189

$

178

6%

$

538

$

484

11%

Operating Margin

13.1%

12.6%

13.0%

11.8%

Missile Systems (MS) had third quarter 2012 net sales of $1,443 million compared to $1,413 million in the third quarter 2011. The increase in net sales was primarily driven by higher sales on the Standard Missile 3 (SM-3) program. MS recorded $189 million of operating income compared to $178 million in the third quarter 2011. The increase in operating income was primarily due to improved program performance.

During the quarter, MS booked $1,242 million for the production and development of SM-3 for the Missile Defense Agency (MDA). MS also booked $350 million for the production of Tube-launched, Optically-tracked, Wireless-guided (TOW) missiles for the U.S. Army and Marines, $101 million for Phalanx weapon systems for the U.S. Navy and an international customer, and $87 million on Miniature Air-Launch Decoy (MALD®) for the U.S. Air Force.

Network Centric Systems

3rd Quarter

Nine Months

($ in millions)

2012

2011

% Change

2012

2011

% Change

Net Sales

$

963

$

1,104

-13%

$

2,925

$

3,360

-13%

Operating Income

$

131

$

162

-19%

$

370

$

492

-25%

Operating Margin

13.6%

14.7%

12.6%

14.6%

Network Centric Systems (NCS) had third quarter 2012 net sales of $963 million compared to $1,104 million in the third quarter 2011. The change in net sales, as expected, was primarily due to lower sales on U.S. Army production programs. NCS recorded $131 million of operating income compared to $162 million in the third quarter 2011. The change in operating income was primarily due to a change in contract mix and lower volume in the third quarter 2012.

During the quarter, NCS booked $70 million on the Family of Advanced Beyond-Line-of-Sight Terminals (FAB-T) program for the U.S. Air Force.

Space and Airborne Systems

3rd Quarter

Nine Months

($ in millions)

2012

2011

% Change

2012

2011

% Change

Net Sales

$

1,322

$

1,305

1%

$

3,956

$

3,914

1%

Operating Income

$

190

$

171

11%

$

567

$

503

13%

Operating Margin

14.4%

13.1%

14.3%

12.9%

Space and Airborne Systems (SAS) had third quarter 2012 net sales of $1,322 million compared to $1,305 million in the third quarter 2011. SAS recorded $190 million of operating income compared to $171 million in the third quarter 2011. The increase in operating income was primarily due to a change in contract mix and improved program performance.

During the quarter, SAS booked $105 million for an international sensor program. SAS also booked $382 million on a number of classified contracts.

Technical Services

3rd Quarter

Nine Months

($ in millions)

2012

2011

% Change

2012

2011

% Change

Net Sales

$

785

$

817

-4%

$

2,408

$

2,467

-2%

Operating Income

$

64

$

75

-15%

$

210

$

228

-8%

Operating Margin

8.2%

9.2%

8.7%

9.2%

Technical Services (TS) had third quarter 2012 net sales of $785 million compared to $817 million in the third quarter 2011. The change in net sales was due to lower net sales on a National Science Foundation (NSF) Polar contract, which was completed in the first quarter 2012. TS recorded operating income of $64 million compared to $75 million in the third quarter 2011. 

During the quarter, TS booked $246 million for work on the Air Traffic Control Optimum Training Solution (ATCOTS) contract for the Federal Aviation Administration (FAA). TS also booked $252 million on domestic training programs and $137 million on foreign training programs in support of Warfighter FOCUS activities. 

About Raytheon

Raytheon Company, with 2011 sales of $25 billion and 71,000 employees worldwide, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 90 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. Raytheon is headquartered in Waltham, Mass. For more about Raytheon, visit us at www.raytheon.com and follow us on Twitter at @raytheon.

Conference Call on the Third Quarter 2012 Financial Results

Raytheon's financial results conference call will be held on Thursday, October 25, 2012 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) 510-0712 in the U.S. or (617) 597-5380 outside of the U.S. The conference call will also be audiocast on the Internet at www.raytheon.com/ir. Individuals may listen to the call and download charts that will be used during the call. These charts will be available for printing prior to the call.

Interested parties are encouraged to check the website ahead of time to ensure their computers are configured for the audio stream.  Instructions for obtaining the free required downloadable software are posted on the site.

Disclosure Regarding Forward-looking Statements

This release and the attachments contain forward-looking statements, including information regarding the Company's financial outlook, future plans, objectives, business prospects and anticipated financial performance. These forward-looking statements are not statements of historical facts and represent only the Company's current expectations regarding such matters.  These statements inherently involve a wide range of known and unknown risks and uncertainties.  The Company's actual actions and results could differ materially from what is expressed or implied by these statements.  Specific factors that could cause such a difference include, but are not limited to: the Company's dependence on the U.S. Government for a significant portion of its business and the risks associated with U.S. Government sales, including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration under the Budget Control Act of 2011, or otherwise, uncertain funding of programs, potential termination of contracts, and difficulties in contract performance; the resolution of program terminations; 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, the Foreign Corrupt Practices Act, the International Traffic in Arms Regulations, and procurement and other regulations; the impact of competition; the ability to develop products and technologies; the impact of changes in the financial markets and global economic conditions; the risk that actual pension returns, discount rates or other actuarial assumptions are significantly different than the Company's assumptions; 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; risks associated with acquisitions, dispositions, joint ventures and other business arrangements; risks of an impairment of goodwill or other intangible assets; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; the impact of potential security and cyber threats, and other disruptions; and other factors as may be detailed from time to time in the Company's public announcements and Securities and Exchange Commission filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release and the attachments or to update them to reflect events or circumstances occurring after the date of this release, including any acquisitions, dispositions or other business arrangements that may be announced or closed after such date. This release and the attachments also contain non-GAAP financial measures. A GAAP reconciliation and a discussion of the Company's use of these measures are included in this release or the attachments.

Attachment A

Raytheon Company

Preliminary Statement of Operations Information

Third Quarter 2012

(In millions, except per share amounts)

Three Months Ended

Nine Months Ended

30-Sep-12

02-Oct-11

30-Sep-12

02-Oct-11

Net sales

$

6,045

$

6,116

$

17,975

$

18,369

Operating expenses

Cost of sales

4,689

4,815

14,000

14,646

Administrative and selling expenses

389

426

1,198

1,288

Research and development expenses

181

153

543

454

Total operating expenses

5,259

5,394

15,741

16,388

Operating income

786

722

2,234

1,981

Non-operating (income) expense, net

Interest expense

49

41

149

127

Interest income

(3)

(5)

(6)

(12)

Other (income) expense

(5)

14

(10)

15

Total non-operating (income) expense, net

41

50

133

130

Income from continuing operations before taxes

745

672

2,101

1,851

Federal and foreign income taxes

237

165

668

521

Income from continuing operations

508

507

1,433

1,330

Income (loss) from discontinued operations, net of tax

(1)

3

(4)

14

Net income

507

510

1,429

1,344

Less: Net income (loss) attributable to noncontrolling

interests in subsidiaries

7

9

10

21

Net income attributable to Raytheon Company

$

500

$

501

$

1,419

$

1,323

Basic earnings (loss) per share attributable to Raytheon

Company common stockholders:

Income from continuing operations

$

1.51

$

1.42

$

4.26

$

3.70

Income (loss) from discontinued operations, net of tax

0.01

(0.01)

0.04

Net income

1.51

1.43

4.25

3.73

Diluted earnings (loss) per share attributable to Raytheon

Company common stockholders:

Income from continuing operations

$

1.51

$

1.42

$

4.24

$

3.68

Income (loss) from discontinued operations, net of tax

0.01

(0.01)

0.04

Net income

1.50

1.43

4.23

3.71

Amounts attributable to Raytheon Company common

stockholders:

Income from continuing operations

$

501

$

498

$

1,423

$

1,309

Income (loss) from discontinued operations, net of tax

(1)

3

(4)

14

Net income

$

500

$

501

$

1,419

$

1,323

Average shares outstanding

Basic

332.0

350.5

334.3

354.3

Diluted

333.0

351.4

335.4

356.4

 

 

Attachment B

Raytheon Company

Preliminary Segment Information

Third Quarter 2012

Operating Income

Net Sales

Operating Income

As a Percent of Net Sales

(In millions, except percentages)

Three Months Ended

Three Months Ended

Three Months Ended

30-Sep-12

02-Oct-11

30-Sep-12

02-Oct-11

30-Sep-12

02-Oct-11

Integrated Defense Systems

$

1,275

$

1,176

$

240

$

204

18.8

%

17.3

%

Intelligence and Information Systems

742

760

60

58

8.1

%

7.6

%

Missile Systems

1,443

1,413

189

178

13.1

%

12.6

%

Network Centric Systems

963

1,104

131

162

13.6

%

14.7

%

Space and Airborne Systems

1,322

1,305

190

171

14.4

%

13.1

%

Technical Services

785

817

64

75

8.2

%

9.2

%

FAS/CAS Adjustment

(47)

(75)

Corporate and Eliminations

(485)

(459)

(41)

(51)

Total

$

6,045

$

6,116

$

786

$

722

13.0

%

11.8

%

Operating Income

Net Sales

Operating Income

As a Percent of Net Sales

(In millions, except percentages)

Nine Months Ended

Nine Months Ended

Nine Months Ended

30-Sep-12

02-Oct-11

30-Sep-12

02-Oct-11

30-Sep-12

02-Oct-11

Integrated Defense Systems

$

3,716

$

3,667

$

692

$

600

18.6

%

16.4

%

Intelligence and Information Systems

2,257

2,262

183

85

8.1

%

3.8

%

Missile Systems

4,149

4,108

538

484

13.0

%

11.8

%

Network Centric Systems

2,925

3,360

370

492

12.6

%

14.6

%

Space and Airborne Systems

3,956

3,914

567

503

14.3

%

12.9

%

Technical Services

2,408

2,467

210

228

8.7

%

9.2

%

FAS/CAS Adjustment

(188)

(254)

Corporate and Eliminations

(1,436)

(1,409)

(138)

(157)

Total

$

17,975

$

18,369

$

2,234

$

1,981

12.4

%

10.8

%

 

Attachment C

Raytheon Company

Other Preliminary Information

Third Quarter 2012

(In millions)

Funded Backlog

Total Backlog

30-Sep-12

31-Dec-11

30-Sep-12

31-Dec-11

Integrated Defense Systems

$

6,757

$

7,100

$

8,404

$

9,766

Intelligence and Information Systems

1,051

829

4,002

4,366

Missile Systems

6,436

6,205

9,784

8,570

Network Centric Systems

3,159

3,267

3,941

4,160

Space and Airborne Systems

3,553

3,104

6,091

5,864

Technical Services

1,930

1,957

2,793

2,586

Total

$

22,886

$

22,462

$

35,015

$

35,312

Bookings

Bookings

Three Months Ended

Nine Months Ended

30-Sep-12

02-Oct-11

30-Sep-12

02-Oct-11

Total Bookings

$

7,293

$

6,884

$

18,612

$

19,408

Attachment D

Raytheon Company

Preliminary Balance Sheet Information

Third Quarter 2012

(In millions)

30-Sep-12

31-Dec-11

Assets

Cash and cash equivalents

$

3,032

$

4,000

Short-term investments

614

Contracts in process, net

4,789

4,526

Inventories

482

336

Deferred taxes

83

221

Prepaid expenses and other current assets

260

226

Total current assets

9,260

9,309

Property, plant and equipment, net

1,929

2,006

Deferred taxes

720

657

Goodwill

12,546

12,544

Other assets, net

1,242

1,338

Total assets

$

25,697

$

25,854

Liabilities and Equity

Current liabilities

Advance payments and billings in excess of costs incurred

$

2,169

$

2,542

Accounts payable

1,190

1,507

Accrued employee compensation

1,130

941

Other accrued expenses

1,179

1,140

Total current liabilities

5,668

6,130

Accrued retiree benefits and other long-term liabilities

6,192

6,774

Deferred taxes

3

5

Long-term debt

4,609

4,605

Equity

Raytheon Company stockholders' equity

Common stock

3

3

Additional paid-in capital

11,900

11,676

Accumulated other comprehensive loss

(6,506)

(7,001)

Treasury stock, at cost

(8,913)

(8,153)

Retained earnings

12,578

11,656

Total Raytheon Company stockholders' equity

9,062

8,181

Noncontrolling interests in subsidiaries

163

159

Total equity

9,225

8,340

Total liabilities and equity

$

25,697

$

25,854

Attachment E

Raytheon Company

Preliminary Cash Flow Information

Third Quarter 2012

Three Months Ended

Nine Months Ended

30-Sep-12

02-Oct-11

30-Sep-12

02-Oct-11

Net income

$

507

$

510

$

1,429

$

1,344

Loss (Income) from discontinued operations, net of tax

1

(3)

4

(14)

Income from continuing operations

508

507

1,433

1,330

Depreciation

80

79

238

230

Amortization

33

34

103

98

Working capital (excluding pension and income taxes)**

432

257

(911)

(873)

Other long-term liabilities

(12)

(74)

(38)

(55)

Pension and other postretirement benefits

179

(268)

120

(260)

Other

(109)

310

18

346

Net operating cash flow from continuing operations

1,111

845

963

816

Supplemental Cash Flow Information

Capital spending

(67)

(90)

(204)

(197)

Internal use software spending

(14)

(24)

(60)

(74)

Acquisitions

(7)

(1)

(7)

(551)

Dividends

(165)

(152)

(478)

(440)

Repurchases of common stock

(125)

(312)

(725)

(937)

** Working capital (excluding pension and income taxes) is a summation of changes in: contracts in process and advance payments and billings in excess of costs incurred, inventories, prepaid expenses and other current assets, accounts payable, accrued employee compensation, and other accrued expenses from the Statements of Cash Flows.

 

Attachment F

Raytheon Company

Non-GAAP Financial Measures - Adjusted EPS, Adjusted Income and Adjusted Operating Margin

Third Quarter 2012

Adjusted EPS Non-GAAP Reconciliation

2012

2012

(In millions, except per share amounts)

Current Guidance

Prior Guidance

Three Months Ended

Nine Months Ended

Low end

High end

Low end

High end

2012

2011

2012

2011

of range

of range

of range

of range

 

Diluted earnings per share from continuing operations  attributable to Raytheon Company common stockholders

$

1.51

$

1.42

$

4.24

$

3.68

$

5.36

$

5.46

$

5.15

$

5.30

Per share impact of the FAS/CAS Adjustment (A)

0.09

0.14

0.36

0.46

0.49

0.49

0.55

0.55

Per share impact of the UK Border Agency (UKBA) LOC         Adjustment (B)

0.17

Per share impact of the favorable tax settlement (C)

(0.17)

(0.17)

Adjusted EPS (3), (4)

$

1.60

$

1.39

$

4.61

$

4.13

$

5.85

$

5.95

$

5.70

$

5.85

(A)

FAS/CAS Adjustment

$

47

$

75

$

188

$

254

$

252

$

252

$

284

$

284

Tax effect (1)

(16)

(26)

(66)

(89)

(88)

(88)

(99)

(99)

After-tax impact

31

49

122

165

164

164

185

185

Diluted shares

333.0

351.4

335.4

356.4

335.0

334.0

335.0

334.0

Per share impact

$

0.09

$

0.14

$

0.36

$

0.46

$

0.49

$

0.49

$

0.55

$

0.55

(B)

UKBA LOC Adjustment

$

$

$

$

80

$

$

$

$

Tax effect (2)

(21)

After-tax impact

59

Diluted shares

356.4

Per share impact

$

$

$

$

0.17

$

$

$

$

(C)

Favorable tax settlement

$

$

(60)

$

$

(60)

$

$

$

$

Diluted shares

351.4

356.4