Raytheon Reports Strong First Quarter 2019 Results

- Net sales of $6.7 billion, up 7.4 percent

- EPS from continuing operations of $2.77, up 25.9 percent

- Increased annual dividend by 8.6 percent, as previously announced

News provided by

Raytheon Company

Apr 25, 2019, 06:55 ET

WALTHAM, Mass., April 25, 2019 /PRNewswire/ -- Raytheon Company (NYSE: RTN) today announced net sales for the first quarter 2019 of $6.7 billion, up 7.4 percent compared to $6.3 billion in the first quarter 2018. First quarter 2019 EPS from continuing operations was $2.77 compared to $2.20 in the first quarter 2018. The increase in the first quarter 2019 EPS from continuing operations was primarily driven by operational improvements and pension-related items.

"We delivered strong operating performance in the first quarter with our company bookings, sales, earnings per share and cash flow all ahead of our expectations," said Thomas A. Kennedy, Raytheon Chairman and CEO. "The Raytheon team remains focused on driving strong execution and future growth by developing and delivering innovative solutions that address our customers' most complex challenges."

Operating cash flow from continuing operations for the first quarter 2019 was an outflow of $411 million compared to an inflow of $283 million for the first quarter 2018. The decrease in operating cash flow from continuing operations in the first quarter 2019 was primarily due to higher net cash taxes and the timing of payments. Operating cash flow from continuing operations for the first quarter 2019 was better than the company's prior guidance.

In the first quarter 2019, the company repurchased 2.8 million shares of common stock for $500 million. In addition, as previously announced, Raytheon's Board of Directors voted to increase the annual dividend rate by 8.6 percent, from $3.47 to $3.77 per share, the fifteenth consecutive annual dividend increase.

The company had bookings of $5.4 billion in the first quarter 2019, compared with $6.3 billion in the first quarter 2018.

Summary Financial Results






1st Quarter

%


($ in millions, except per share data)

2019

2018

Change







Bookings

$

5,368


$

6,311


(14.9)%


Net Sales

$

6,729


$

6,267


7.4%


Income from Continuing Operations attributable to Raytheon Company

$

781


$

634


23.2%


EPS from Continuing Operations

$

2.77


$

2.20


25.9%


Operating Cash Flow from Continuing Operations

$

(411)


$

283




Workdays in Fiscal Reporting Calendar

63


64




Backlog at the end of the first quarter 2019 was $41.1 billion, an increase of $2.9 billion or 8 percent compared to the end of the first quarter 2018.

Backlog








































 Period Ending


($ in millions)



















Q1 2019

Q1 2018

2018


Backlog



















$

41,073


$

38,139


$

42,420
































Outlook

The company has updated its financial outlook for 2019. Charts containing additional information on the company's 2019 outlook are available on the company's website.

2019 Financial Outlook


















Current


Prior (1/31/19)


Net Sales ($B)







28.6 - 29.1


28.6 - 29.1


Deferred Revenue Adjustment ($M)







(2)


(2)


Amortization of Acquired Intangibles ($M)







(110)*


(114)


FAS/CAS Operating Adjustment ($M)







1,463


1,463


Retirement Benefits Non-service Expense, non-operating ($M)







(726)


(726)


Interest Expense, net ($M)







(153) - (158)


(153) - (158)


Diluted Shares (M)







279 - 281


279 - 281


Effective Tax Rate







17.0% - 17.5%


17.0% - 17.5%


EPS from Continuing Operations







$11.40 - $11.60


$11.40 - $11.60


Operating Cash Flow from Continuing Operations ($B)







3.9 - 4.1


3.9 - 4.1


*Denotes change from prior guidance











Segment Results

The company's reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Forcepoint™.

As previously announced, Wesley D. Kremer was appointed President of MS, succeeding Dr. Taylor W. Lawrence, who informed the company of his intention to retire. Additionally, Ralph H. Acaba was appointed President of IDS, succeeding Kremer. The new appointments were effective March 30, 2019.

Integrated Defense Systems





1st Quarter



($ in millions)



2019

2018

% Change


Net Sales



$

1,550


$

1,489


4%


Operating Income



$

258


$

273


(5)%


Operating Margin



16.6%


18.3%





Integrated Defense Systems (IDS) had first quarter 2019 net sales of $1,550 million, up 4 percent compared to $1,489 million in the first quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on various Patriot® programs and a naval radar program.

IDS recorded $258 million of operating income in the first quarter 2019 compared to $273 million in the first quarter 2018. The decrease in operating income for the quarter was primarily driven by a change in mix and other performance.

During the quarter, IDS booked $418 million on the Air and Missile Defense Radar (AMDR) program for the U.S. Navy. IDS also booked $310 million to provide Patriot engineering services support and $103 million to provide advanced Patriot air and missile defense capability, both for the U.S. Army and international customers.

Intelligence, Information and Services





1st Quarter



($ in millions)



2019

2018

% Change


Net Sales



$

1,777


$

1,582


12%


Operating Income



$

187


$

117


60%


Operating Margin



10.5%


7.4%




Intelligence, Information and Services (IIS) had first quarter 2019 net sales of $1,777 million, up 12 percent compared to $1,582 million in the first quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs in both cyber and space.

IIS recorded $187 million of operating income in the first quarter 2019 compared to $117 million in the first quarter 2018. The increase in operating income for the quarter was primarily driven by a change in mix and other performance, which included $21 million of gains related to the consolidation, as planned, of an entity that was previously an equity investment, and $13 million of gains from asset sales.

During the quarter, IIS booked $744 million on a number of classified programs. IIS also booked $148 million on domestic and foreign training programs in support of Warfighter FOCUS activities, and $82 million to provide support for the North Warning System for the Canadian government.

Missile Systems





1st Quarter



($ in millions)



2019

2018

% Change


Net Sales



$

2,006


$

1,848


9%


Operating Income



$

190


$

212


(10)%


Operating Margin



9.5%


11.5%




Missile Systems (MS) had first quarter 2019 net sales of $2,006 million, up 9 percent compared to $1,848 million in the first quarter 2018. The increase in net sales for the quarter was spread across numerous programs.

MS recorded $190 million of operating income in the first quarter 2019 compared to $212 million in the first quarter 2018. The decrease in operating income for the quarter was primarily due to lower net program efficiencies and a change in program mix, partially offset by higher volume.

During the quarter, MS booked $102 million for Evolved Seasparrow Missiles (ESSM®) and $93 million for Rolling Airframe Missiles (RAMTM), both for the U.S. Navy and international customers. MS also booked $154 million on a number of classified contracts.

Space and Airborne Systems





1st Quarter



($ in millions)



2019

2018

% Change


Net Sales



$

1,653


$

1,568


5%


Operating Income



$

212


$

193


10%


Operating Margin



12.8%


12.3%




Space and Airborne Systems (SAS) had first quarter 2019 net sales of $1,653 million, up 5 percent compared to $1,568 million in the first quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs.

SAS recorded $212 million of operating income in the first quarter 2019 compared to $193 million in the first quarter 2018. The increase in operating income for the quarter was primarily due to higher volume and a favorable change in program mix and other performance.

During the quarter, SAS booked $288 million on the Advanced Synthetic Aperture Radar System (ASARS) program and $90 million for the Next Generation Overhead Persistent Infrared (Next Gen OPIR) program, both for the U.S. Air Force. SAS also booked $451 million on a number of classified contracts.

Forcepoint




1st Quarter



($ in millions)


2019

2018

% Change


Net Sales


$

158


$

141


12%


Operating Income (Loss)


$

(9)


$

(7)


NM


Operating Margin


(5.7)%


(5.0)%




NM = Not Meaningful






Forcepoint had first quarter 2019 net sales of $158 million, up 12 percent compared to $141 million in the first quarter 2018.

Forcepoint recorded a loss of $9 million in the first quarter 2019 compared to a loss of $7 million in the first quarter 2018.

About Raytheon
Raytheon Company, with 2018 sales of $27 billion and 67,000 employees, is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I® products and services, sensing, effects, and mission support for customers in more than 80 countries. Raytheon is headquartered in Waltham, Massachusetts. Follow us on Twitter.

Conference Call on the First Quarter 2019 Financial Results
Raytheon's financial results conference call will be held on Thursday, April 25, 2019 at 9 a.m. ET. Participants will include Thomas A. Kennedy, Chairman and CEO; Anthony F. O'Brien, vice president and CFO; and other company executives.

The dial-in number for the conference call will be (866) 588-8312 in the U.S. or (409) 220-9941 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, a government shutdown, or otherwise, uncertain funding of programs, potential termination of contracts and performance under undefinitized contract awards; difficulties in contract performance; the resolution of program terminations; the ability to procure new contracts; the risks of conducting business in foreign countries; the unpredictability of timing of international bookings; the ability to comply with extensive governmental regulation, including export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations; dependence on U.S. government approvals for international contracts; changes in government procurement practices; the impact of competition; the ability to develop products and technologies, and the impact of associated investments and costs; the ability to recruit and retain qualified personnel; the impact of potential security and cyber threats, and other disruptions; the risk that actual pension returns, discount rates or other actuarial assumptions, including the long-term return on asset assumption, are significantly different than the company's current assumptions; the risk of cost overruns, particularly for the company's fixed-price contracts; dependence on material and component availability, subcontractor and partner performance and key suppliers; risks of a negative government audit; risks associated with acquisitions, investments, dispositions, joint ventures and other business arrangements; the ability to grow in the government and commercial cybersecurity markets; risks of an impairment of goodwill or other intangible assets; the impact of financial markets and global economic conditions; the use of accounting estimates in the company's financial statements; the outcome of contingencies and litigation matters, including government investigations; the risk of environmental liabilities; changes in tax laws and regulations, or their interpretation; 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.

Attachment A

Raytheon Company

Preliminary Statement of Operations Information

First Quarter 2019

(In millions, except per share amounts)










Three Months Ended




31-Mar-19


1-Apr-18








Net sales


$

6,729



$

6,267



Operating expenses






Cost of sales


4,877



4,532



General and administrative expenses


739



694



Total operating expenses


5,616



5,226



Operating income


1,113



1,041



Non-operating (income) expense, net






Retirement benefits non-service expense


181



239



Interest expense


44



47



Interest income


(13)



(7)



Other (income) expense, net


(20)



5



Total non-operating (income) expense, net


192



284



Income from continuing operations before taxes


921



757



Federal and foreign income taxes


146



133



Income from continuing operations


775



624



Income (loss) from discontinued operations, net of tax


—



(1)



Net income


775



623



Less: Net income (loss) attributable to noncontrolling interests in subsidiaries


(6)



(10)



Net income attributable to Raytheon Company


$

781



$

633









Basic earnings per share attributable to Raytheon Company common stockholders:






Income from continuing operations


$

2.77



$

2.20



Income (loss) from discontinued operations, net of tax


—



—



Net income


2.77



2.20









Diluted earnings per share attributable to Raytheon Company common stockholders:






Income from continuing operations


$

2.77



$

2.20



Income (loss) from discontinued operations, net of tax


—



—



Net income


2.77



2.19









Amounts attributable to Raytheon Company common stockholders:






Income from continuing operations


$

781



$

634



Income (loss) from discontinued operations, net of tax


—



(1)



Net income


$

781



$

633









Average shares outstanding






Basic


281.9



288.5



Diluted


282.2



288.8



Attachment B

Raytheon Company

Preliminary Segment Information

First Quarter 2019

(In millions, except percentages)













Operating Income

As a Percent of Net Sales





Net Sales


Operating Income






Three Months Ended


Three Months Ended


Three Months Ended





31-Mar-19


1-Apr-18


31-Mar-19


1-Apr-18


31-Mar-19


1-Apr-18


















Integrated Defense Systems


$

1,550



$

1,489



$

258



$

273



16.6%


18.3%



Intelligence, Information and Services


1,777



1,582



187



117



10.5%


7.4%



Missile Systems


2,006



1,848



190



212



9.5%


11.5%



Space and Airborne Systems


1,653



1,568



212



193



12.8%


12.3%



Forcepoint


158



141



(9)



(7)



(5.7)%


(5.0)%



Eliminations


(414)



(357)



(47)



(40)








Total business segment


6,730



6,271



791



748



11.8%


11.9%



Acquisition Accounting Adjustments


(1)



(4)



(28)



(33)








FAS/CAS Operating Adjustment


—



—



366



354








Corporate


—



—



(16)



(28)








Total


$

6,729



$

6,267



$

1,113



$

1,041



16.5%


16.6%



















Attachment C

Raytheon Company

Other Preliminary Information

First Quarter 2019

(In millions)
















Backlog



31-Mar-19


31-Dec-18









Integrated Defense Systems



$

11,380



$

11,557



Intelligence, Information and Services


6,377



6,233



Missile Systems



12,664



13,976



Space and Airborne Systems



10,157



10,126



Forcepoint



495



528



Total backlog



$

41,073



$

42,420




















Three Months Ended


Bookings



31-Mar-19


1-Apr-18









Total bookings



$

5,368



$

6,311




















Three Months Ended


General and Administrative Expenses



31-Mar-19


1-Apr-18









Administrative and selling expenses


$

544



$

528



Research and development expenses


195



166



Total general and administrative expenses


$

739



$

694

















Cash, Cash Equivalents and Restricted Cash



31-Mar-19


31-Dec-18









Cash and cash equivalents


$

2,093



$

3,608



Restricted cash

12



16



Cash, cash equivalents and restricted cash shown in Attachment E

$

2,105



$

3,624



Attachment D

Raytheon Company

Preliminary Balance Sheet Information

First Quarter 2019

(In millions)








31-Mar-19


31-Dec-18


Assets





Current assets





Cash and cash equivalents

$

2,093



$

3,608



Receivables, net

1,424



1,648



Contract assets

5,971



5,594



Inventories

882



758



Prepaid expenses and other current assets(1)

586



529



Total current assets

10,956



12,137








Property, plant and equipment, net

2,899



2,840



Operating lease right-of-use assets(1)

816



805



Goodwill

14,882



14,864



Other assets, net

2,023



2,024



Total assets

$

31,576



$

32,670








Liabilities, Redeemable Noncontrolling Interests and Equity





Current liabilities





Commercial paper and current portion of long-term debt

$

800



$

300



Contract liabilities

2,930



3,309



Accounts payable

1,361



1,964



Accrued employee compensation

995



1,509



Other current liabilities(1)

1,594



1,381



Total current liabilities

7,680



8,463








Accrued retiree benefits and other long-term liabilities(1)

6,848



6,922



Long-term debt

4,256



4,755



Operating lease liabilities(1)

652



647








Redeemable noncontrolling interests

432



411








Equity





Raytheon Company stockholders' equity





  Common stock

3



3



  Additional paid-in capital

—



—



  Accumulated other comprehensive loss

(8,399)



(8,618)



  Retained earnings

20,104



20,087



Total Raytheon Company stockholders' equity

11,708



11,472



  Noncontrolling interests in subsidiaries

—



—



Total equity

11,708



11,472



Total liabilities, redeemable noncontrolling interests and equity

$

31,576



$

32,670





(1)

In the first quarter 2019 we adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). As a result we recast certain amounts
on our balance sheet to reflect the recognition of operating lease right-of-use assets and operating lease liabilities and other reclassifications.
Included in other current liabilities is $201 million and $194 million at March 31, 2019 and December 31, 2018, respectively, related to the
current portion of operating lease liabilities.

Attachment E

Raytheon Company

Preliminary Cash Flow Information

First Quarter 2019

(In millions)



Three Months Ended



31-Mar-19


1-Apr-18


Cash flows from operating activities





Net income

$

775



$

623



(Income) loss from discontinued operations, net of tax

—



1



Income from continuing operations

775



624



Adjustments to reconcile to net cash provided by (used in) operating activities from continuing





  operations, net of the effect of acquisitions and divestitures





Depreciation and amortization

140



135



Stock-based compensation

59



63



Deferred income taxes

(44)



(77)



Changes in assets and liabilities





Receivables, net

236



(314)



Contract assets and contract liabilities

(731)



(174)



Inventories

(124)



(46)



Prepaid expenses and other current assets

(59)



138



Income taxes receivable/payable

181



290



Accounts payable

(484)



(167)



Accrued employee compensation

(523)



(420)



Other current liabilities

3



(60)



Accrued retiree benefits

219



306



Other, net

(59)



(15)



Net cash provided by (used in) operating activities from continuing operations

(411)



283



Net cash provided by (used in) operating activities from discontinued operations

—



1



Net cash provided by (used in) operating activities

(411)



284



Cash flows from investing activities





Additions to property, plant and equipment

(274)



(219)



Additions to capitalized internal use software

(10)



(12)



Maturities of short-term investments

—



309



Payments for purchases of acquired companies, net of cash received

(8)



—



Other

—



(1)



Net cash provided by (used in) investing activities

(292)



77



Cash flows from financing activities





Dividends paid

(245)



(230)



Net borrowings (payments) on commercial paper

—



—



Repurchases of common stock under share repurchase programs

(500)



(400)



Repurchases of common stock to satisfy tax withholding obligations

(66)



(72)



Other

(5)



(5)



Net cash provided by (used in) financing activities

(816)



(707)



Net increase (decrease) in cash, cash equivalents and restricted cash

(1,519)



(346)



Cash, cash equivalents and restricted cash at beginning of the year

3,624



3,115



Cash, cash equivalents and restricted cash at end of period

$

2,105



$

2,769



Raytheon Company
Global Headquarters
Waltham, Mass.

Investor Relations Contact 
Kelsey DeBriyn
781.522.5141

Media Contact 
Corinne Kovalsky
781.522.5899

SOURCE Raytheon Company