Raytheon Reports Strong Fourth Quarter and Full-Year 2009 Results; Reaffirms Outlook for Continued Growth in 2010

Jan 28, 2010, 07:00 ET from Raytheon Company

WALTHAM, Mass., Jan. 28, 2010 /PRNewswire-FirstCall/ --

Highlights

  • Solid bookings of $7.1 billion in the quarter and $25.1 billion for the year
  • Delivered strong sales growth of 10 percent in the quarter and 7 percent for the year  
  • Fourth quarter diluted earnings per share (EPS) from continuing operations of $1.30, up 29 percent; full-year 2009 EPS from continuing operations of $4.89, up 24 percent
  • Strong operating cash flow of $1.1 billion in the quarter and $2.7 billion for the year

Raytheon Company (NYSE: RTN) reported fourth quarter 2009 income from continuing operations of $517 million, up 21 percent compared to $428 million in the fourth quarter 2008.  EPS from continuing operations for the fourth quarter 2009 was $1.30, up 29 percent compared to $1.01 in the fourth quarter 2008.  Fourth quarter 2008 income from continuing operations included a $45 million ($69 million pretax) unfavorable adjustment due to the impact of pension investment returns on existing contracts in 2008.  

"Our 2009 results reflect the increasing global demand for our capabilities, as well as the Company's strong operational performance," said William H. Swanson, Raytheon's Chairman and CEO. "Looking ahead, we expect continued growth by providing our customers with innovative solutions that address their evolving needs."

Net sales in the fourth quarter 2009 were $6.7 billion, up 10 percent from $6.1 billion in the fourth quarter 2008.  

Operating cash flow from continuing operations in the fourth quarter 2009 was $1,073 million compared to $444 million in the fourth quarter 2008. In the fourth quarter 2008 the Company made $660 million in discretionary cash contributions to its pension plans. The Company made $1,115 million in total cash contributions to its pension plans in full-year 2009 compared to $1,174 million in full-year 2008.

In the fourth quarter 2009 the Company repurchased 6.0 million shares of common stock for $300 million, as part of its previously announced share repurchase program.  For the full-year 2009 the Company repurchased 25.8 million shares of common stock for $1.2 billion.

Full-Year Financial Results

Full-year 2009 income from continuing operations was $2.0 billion, up 16 percent compared to $1.7 billion for the full-year 2008.  EPS from continuing operations for the full-year 2009 was $4.89, up 24 percent compared to $3.93 for the full-year 2008.  

Net sales in 2009 were $24.9 billion, up 7 percent from $23.2 billion in 2008, with all of Raytheon's businesses contributing to the sales growth.

The Company generated strong operating cash flow for the year.  Operating cash flow from continuing operations was $2.7 billion in 2009 compared to $2.0 billion in 2008.  The increase in operating cash flow in 2009 was primarily due to improved performance and lower net cash tax payments.  The Company paid $627 million in cash taxes in 2009 and received $419 million in tax refunds and credits, primarily related to the discretionary cash contributions that it made to its pension plans in December 2008. The Company paid $545 million in cash taxes in 2008 and received $97 million in tax refunds and credits.

The Company ended 2009 in a net cash position of $313 million ($2.6 billion in cash and cash equivalents less total debt of $2.3 billion).

Summary Financial Results

4th Quarter

%

Full-Year

%

($ in millions, except per share data)

2009

2008(1)

Change

2009

2008(1)

Change

Net sales

$6,667   

$6,086   

10%

$  24,881   

$ 23,174   

7%

Income from continuing operations

$    517   

$    428   

21%

$    1,977   

$   1,698   

16%

Income from continuing operations attributable to Raytheon Company

$    504   

$    421   

20%

$    1,936   

$   1,674   

16%

FAS/CAS Adjusted Income(2)

$    500   

$    441   

13%

$    1,918   

$   1,754   

9%

EPS from continuing operations

$   1.30   

$   1.01   

29%

$      4.89   

$      3.93   

24%

FAS/CAS Adjusted EPS(2) 

$   1.29   

$   1.06   

22%

$      4.85   

$      4.12   

18%

Operating cash flow from cont. ops.

$1,073   

$    444   

$    2,745   

$   2,036   

Workdays in fiscal reporting calendar

61   

60   

249   

250   

(1) Fourth quarter and full-year 2008 includes a $45 million ($69 million pretax) unfavorable adjustment due to the impact of pension investment returns on existing contracts in 2008.

(2) FAS/CAS Adjusted Income is defined as income from continuing operations attributable to Raytheon Company common stockholders excluding the after-tax impact of the FAS/CAS pension adjustment.  FAS/CAS Adjusted EPS is defined as EPS from continuing operations attributable to Raytheon Company common stockholders excluding the earnings per share impact of the FAS/CAS pension adjustment.  FAS/CAS Adjusted EPS and FAS/CAS Adjusted Income 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

4th Quarter

Full-Year

($ in millions)

2009

2008

2009

2008

Bookings

$      7,065

$      8,530

$     25,058

$   26,820

Backlog

Period Ending

($ in millions)

12/31/09

12/31/08

Backlog*

$     36,877

$     38,884

Funded Backlog

$     23,479

$     21,986

* Due to a change in Missile Defense Agency priorities, on June 10, 2009 the Kinetic Energy Interceptor (KEI) program was terminated for convenience, resulting in a $2.4 billion reduction of the Company's backlog at the end of the second quarter 2009.

Bookings exceeded net sales in both the fourth quarter and full-year 2009.  

The Company ended 2009 with a backlog of $36.9 billion and its highest year-end funded backlog of $23.5 billion.

Outlook

2010 Financial Outlook

2010 Outlook

2009A

Current

Prior (10/22/09)

Net Sales ($B)

24.9

25.9 - 26.4

25.9 - 26.4

FAS/CAS Pension Inc./(Exp.) ($M)

27

(220)*

(228)

Interest Expense, Net ($M)

(109)

(95) - (110)*

(90) - (105)

Diluted Shares (M)

395.7

377 - 382

377 - 382

Effective Tax Rate

32.5%

~31.5%

~31.5%

EPS from Continuing Operations

$4.89

$4.75 - $4.90

$4.75 - $4.90

FAS/CAS Adjusted EPS(1)

$4.85

$5.13 - $5.28*

$5.16 - $5.31

Operating Cash Flow from Cont. Ops. ($B)

2.7

2.0 - 2.2

2.0 - 2.2

ROIC (%)(1)

12.2

12.2 - 12.6

Not provided

* Denotes change from prior guidance.

(1) FAS/CAS Adjusted EPS is defined as EPS from continuing operations attributable to Raytheon Company common stockholders excluding the earnings per share impact of the FAS/CAS pension adjustment. The statutory tax rate of 35.0% was used to calculate the after-tax impact of the current FAS/CAS pension adjustment. The effective tax rate of 31.5% was used to calculate the after-tax impact of the prior FAS/CAS pension adjustment. FAS/CAS Adjusted EPS and ROIC are non-GAAP financial measures.  See attachment F for a reconciliation of FAS/CAS Adjusted EPS to EPS from continuing operations and attachment G for a calculation of ROIC and discussions of why the Company is presenting this information.

The Company is reaffirming its prior guidance for 2010 and providing more detailed information.  Charts containing additional information on the Company's 2010 guidance are available on the Company's website at www.raytheon.com.  

Segment Results

Integrated Defense Systems

4th Quarter

%

Full-Year

%

($ in millions)

2009

2008

Change

2009

2008

Change

Net Sales

$  1,541   

$  1,423   

8%

$  5,525   

$  5,148   

7%

Operating Income

$     249   

$     244   

2%

$     859   

$     870   

-1%

Operating Margin

16.2%

17.1%

15.5%

16.9%

Fourth Quarter

Integrated Defense Systems (IDS) had fourth quarter 2009 net sales of $1,541 million, up 8 percent compared to $1,423 million in the fourth quarter 2008, primarily due to growth on international Patriot programs.  IDS recorded $249 million of operating income compared to $244 million in the fourth quarter 2008.  

During the quarter, IDS booked $990 million for a letter contract on ground-system hardware and initial spares for the Patriot Air and Missile Defense System for Taiwan, after receiving contract awards totaling $1.1 billion.  IDS also booked $160 million related to the renewal of an international Patriot technical support contract and $315 million for systems design work for the Zumwalt-class destroyer for the U.S. Navy.

Full-year

IDS had full-year 2009 net sales of $5,525 million, up 7 percent compared to $5,148 million in 2008. The increase in sales was primarily due to growth on international Patriot programs. IDS recorded $859 million of operating income in 2009 compared to $870 million in 2008.  

During the year, IDS booked $1,982 million to fund new production and upgrades of the Patriot Air and Missile Defense System for Taiwan and United Arab Emirates (UAE).  IDS also booked $650 million on the Zumwalt-class destroyer program, $157 million to provide Finland with Surface Launched Medium Range Air-to-Air Missile (SL-AMRAAM) systems, and $150 million for Joint Land Attack Cruise Missile Defense Elevated Netted Sensor Systems (JLENS) for the U.S. Army.

Intelligence and Information Systems

4th Quarter

%

Full-Year

%

($ in millions)

2009

2008

Change

2009

2008

Change

Net Sales

$     803   

$     810   

-1%

$  3,204   

$  3,132   

2%

Operating Income

$      64   

$      67   

-4%

$     259   

$     253   

2%

Operating Margin

8.0%

8.3%

8.1%

8.1%

Fourth Quarter

Intelligence and Information Systems (IIS) had fourth quarter 2009 net sales of $803 million compared to $810 million in the fourth quarter 2008.  IIS recorded $64 million of operating income compared to $67 million in the fourth quarter 2008.  

During the quarter, IIS booked $153 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force. IIS also booked $519 million on a number of classified contracts.

Full-year

IIS had full-year 2009 net sales of $3,204 million compared to $3,132 million in 2008.  IIS recorded $259 million of operating income in 2009 compared to $253 million in 2008.  

During the year, IIS booked $1,364 million on a number of classified contracts.

Missile Systems

4th Quarter

%

Full-Year

%

($ in millions)

2009

2008

Change

2009

2008

Change

Net Sales

$  1,413   

$  1,366   

3%

$  5,561   

$  5,408   

3%

Operating Income

$     154   

$     142   

8%

$     604   

$     584   

3%

Operating Margin

10.9%

10.4%

10.9%

10.8%

Fourth Quarter

Missile Systems (MS) had fourth quarter 2009 net sales of $1,413 million compared to $1,366 million in the fourth quarter 2008, primarily due to higher volume on the Evolved Sea Sparrow Missile (ESSM), Maverick, and Phalanx programs. MS recorded $154 million of operating income compared to $142 million in the fourth quarter 2008.  

During the quarter, MS booked $222 million for the production of Standard Missile-2 (SM-2) for international customers and the U.S. Navy, and $101 million for the development of Standard Missile-3 (SM-3) for the Missile Defense Agency.  MS also booked $201 million for the production of ESSM for international customers and the U.S. Navy, $170 million for the production of Maverick missiles for an international customer and $111 million for the production of Tube Launched, Optically Tracked, Wireless (TOW) missiles for international customers and the U.S. Army.

Full-year

MS had full-year 2009 net sales of $5,561 million compared to $5,408 million in 2008.  The increase in sales in 2009 was primarily due to higher volume on the SM-3 and Maverick programs.  MS recorded $604 million of operating income in 2009 compared to $584 million in 2008.  The increase in operating income in 2009 was primarily due to higher volume.  

During the year, MS booked $645 million for the Advanced Medium-Range Air-to-Air Missile (AMRAAM) program for international customers and the U.S. Air Force, $514 million for TOW missiles for international customers and the U.S. Army, and $508 million for ESSM and $402 million for Phalanx Weapon Systems for international customers and the U.S. Navy. MS also booked $384 million on SM-2 for international customers and the U.S. Navy, $318 million for SM-3 for the Missile Defense Agency and $294 million for Tactical Tomahawk cruise missiles for the U.S. Navy.

Network Centric Systems

4th Quarter

%

Full-Year

%

($ in millions)

2009

2008

Change

2009

2008

Change

Net Sales

$  1,259   

$  1,125   

12%

$  4,822   

$  4,510   

7%

Operating Income

$     169   

$     148   

14%

$     674   

$     575   

17%

Operating Margin

13.4%

13.2%

14.0%

12.7%

Fourth Quarter

Network Centric Systems (NCS) had fourth quarter 2009 net sales of $1,259 million, up 12 percent compared to $1,125 million in the fourth quarter 2008, due to higher volume on various programs, primarily for the U.S. Army.  NCS recorded $169 million of operating income compared to $148 million in the fourth quarter 2008.  The increase in operating income was primarily due to the increased volume.

During the quarter, NCS booked $446 million on an international classified program and an additional $127 million for a toll system replacement program.

Full-year

NCS had full-year 2009 net sales of $4,822 million, up 7 percent compared to $4,510 million in 2008.  The increase in sales was due to higher volume on various production programs, primarily for the U.S. Army.  NCS recorded $674 million of operating income compared to $575 million in 2008.  The increase in operating income was primarily due to improved program performance and higher volume.

During the year, NCS booked $163 million for Improved Target Acquisition Systems (ITAS), $146 million for Horizontal Technology Insertion (HTI) forward-looking infrared kits, $117 million for Commander's Independent Viewers (CIV), $107 million for the Secure Mobile Anti-Jam Reliable Tactical Terminal (SMART-T) program and $97 million for Thermal Weapon Sights II for the U.S. Army, and $82 million for the Global Positioning Satellite-Aided Geosynchronous Augmented Navigation (GAGAN) system for the India Space Research Organization (ISRO).

Space and Airborne Systems

4th Quarter

%

Full-Year

%

($ in millions)

2009

2008

Change

2009

2008

Change

Net Sales

$  1,266   

$  1,166   

9%

$  4,582   

$  4,280   

7%

Operating Income

$     174   

$     167   

4%

$     647   

$     569   

14%

Operating Margin

13.7%

14.3%

14.1%

13.3%

Fourth Quarter

Space and Airborne Systems (SAS) had fourth quarter 2009 net sales of $1,266 million, up 9 percent compared to $1,166 million in the fourth quarter 2008, primarily due to growth on classified business. SAS recorded $174 million of operating income compared to $167 million in the fourth quarter 2008.  The increase in operating income was primarily due to higher volume.

During the quarter, SAS booked $122 million for the B-2 Radar Modernization Program (RMP).  SAS also booked $131 million on a number of classified contracts.

Full-year

SAS had full-year 2009 net sales of $4,582 million, up 7 percent compared to $4,280 million in 2008, primarily due to growth on classified business.  SAS recorded $647 million of operating income in 2009 compared to $569 million in 2008.  The increase in operating income was primarily due to higher volume, favorable mix and contractual settlements.

During the year, SAS booked $422 million to supply APG-63 fire control radars and support equipment for the Japan Air Self-Defense Force, $295 million for the B-2 RMP and $147 million on the Integrated Sensor Is Structure (ISIS) radar program for the Defense Advanced Research Projects Agency (DARPA).  SAS also booked $1,330 million on a number of classified contracts.

Technical Services

4th Quarter

%

Full-Year

%

($ in millions)

2009

2008

Change

2009

2008

Change

Net Sales

$     888   

$     744   

19%

$  3,161   

$  2,601   

22%

Operating Income

$      58   

$      49   

18%

$     215   

$     174   

24%

Operating Margin

6.5%

6.6%

6.8%

6.7%

Fourth Quarter

Technical Services (TS) had fourth quarter 2009 net sales of $888 million, up 19 percent compared to $744 million in the fourth quarter 2008, primarily due to continued growth in domestic and foreign operational training programs for the U.S. Army's Warfighter Field Operations Customer Support activities.  TS recorded operating income of $58 million in the fourth quarter 2009 compared to $49 million in the fourth quarter 2008, primarily due to higher volume.  

During the quarter, TS booked $67 million for work on domestic operational training programs for the U.S. Army.

Full-year

TS had full-year 2009 net sales of $3,161 million, up 22 percent compared to $2,601 million in 2008.  TS recorded operating income of $215 million in 2009 compared to $174 million in 2008.  The increase in net sales and operating income were primarily due to continued strong growth in domestic and foreign operational training programs and the Federal Aviation Administration's (FAA) Air Traffic Control Optimum Training Solutions (ATCOTS).

During the year, TS booked $1,011 million on domestic operational training programs and $300 million on foreign operational training programs for the U.S. Army. TS also booked $160 million to upgrade Phalanx Weapon Systems for the Royal Canadian Navy and $100 million for a Defense Threat Reduction Agency (DTRA) program.

Raytheon Company (NYSE: RTN), with 2009 sales of $25 billion, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 88 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 75,000 people worldwide.

Conference Call on the Fourth Quarter and Full-Year 2009 Financial Results

Raytheon's financial results conference call will be held on Thursday, January 28, 2010 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) 543-6405 in the U.S. or (617) 213-8897 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 2010 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, 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, 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 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.

Media Contact:

Investor Relations Contact:

Jon Kasle

Marc Kaplan

781-522-5110

781-522-5141

Attachment A

Raytheon Company

Preliminary Statement of Operations Information

Fourth Quarter 2009

(In millions, except per share amounts)

Three Months Ended

Twelve Months Ended

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

Total net sales

$                 6,667 

$                  6,086 

$            24,881 

$               23,174 

Operating expenses

    Cost of sales

5,317 

4,903 

19,747 

18,489 

    Administrative and selling expenses

392 

392 

1,527 

1,548 

    Research and development expenses

158 

138 

565 

517 

Total operating expenses

5,867 

5,433 

21,839 

20,554 

Operating income

800 

653 

3,042 

2,620 

    Interest expense

28 

32 

123 

129 

    Interest income

(3)

(8)

(14)

(64)

    Other expense, net

21 

12 

33 

Non-operating expense, net

46 

36 

112 

98 

Income from continuing operations before taxes

754 

617 

2,930 

2,522 

Federal and foreign income taxes

237 

189 

953 

824 

Income from continuing operations

517 

428 

1,977 

1,698 

Income (loss) from discontinued operations, net of tax

(1)

(2)

Net income

517 

428 

1,976 

1,696 

    Less: Net income attributable to noncontrolling interests

13 

41 

24 

Net income attributable to Raytheon Company

$                    504 

$                     421 

$              1,935 

$                 1,672 

Basic earnings (loss) per share attributable to Raytheon Company common stockholders:

      Income from continuing operations

$                   1.32 

$                    1.03 

$                4.96 

$                   4.01 

      Income (loss) from discontinued operations

(0.01)

      Net income

1.32 

1.03 

4.96 

4.01 

Diluted earnings (loss) per share attributable to Raytheon Company common stockholders:

    Income from continuing operations

$                   1.30 

$                    1.01 

$                4.89 

$                   3.93 

    Income (loss) from discontinued operations

(0.01)

    Net income

1.30 

1.01 

4.89 

3.92 

Amounts attributable to Raytheon Company common stockholders:

      Income from continuing operations

$                    504 

$                     421 

$              1,936 

$                 1,674 

      Income (loss) from discontinued operations

(1)

(2)

      Net income

$                    504 

$                     421 

$              1,935 

$           1,672 

Average shares outstanding

      Basic

382.2 

409.8 

390.4 

417.2 

      Diluted

388.4 

416.4 

395.7 

426.5 

Attachment B

Raytheon Company

Preliminary Segment Information

Fourth Quarter 2009

Operating Income

Total Net Sales

Operating Income

As a Percent of Sales

(In millions, except percentages)

Three Months Ended

Three Months Ended

Three Months Ended

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

Integrated Defense Systems

$               1,541

$               1,423

$                  249

$                  244

16.2%

17.1%

Intelligence and Information Systems

                    803

                    810

                      64

                      67

8.0%

8.3%

Missile Systems

                 1,413

                 1,366

                    154

                    142

10.9%

10.4%

Network Centric Systems

                 1,259

                 1,125

                    169

                    148

13.4%

13.2%

Space and Airborne Systems

                 1,266

                 1,166

                    174

                    167

13.7%

14.3%

Technical Services

                    888

                    744

                      58

                      49

6.5%

6.6%

FAS/CAS Pension Adjustment

                        -

                        -

                        6

                    (30)

Corporate and Eliminations

                  (503)

                  (548)

                    (74)

                  (134)

Total

$               6,667

$               6,086

$                  800

$                  653

12.0%

10.7%

Operating Income

Total Net Sales

Operating Income

As a Percent of Sales

(In millions, except percentages)

Twelve Months Ended

Twelve Months Ended

Twelve Months Ended

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

Integrated Defense Systems

$               5,525

$               5,148

$                  859

$                  870

15.5%

16.9%

Intelligence and Information Systems

                 3,204

                 3,132

                    259

                    253

8.1%

8.1%

Missile Systems

                 5,561

                 5,408

                    604

                    584

10.9%

10.8%

Network Centric Systems

                 4,822

                 4,510

                    674

                    575

14.0%

12.7%

Space and Airborne Systems

                 4,582

                 4,280

                    647

                    569

14.1%

13.3%

Technical Services

                 3,161

                 2,601

                    215

                    174

6.8%

6.7%

FAS/CAS Pension Adjustment

                        -

                        -

                      27

                  (123)

Corporate and Eliminations

               (1,974)

               (1,905)

                  (243)

                  (282)

Total

$             24,881

$             23,174

$               3,042

$               2,620

12.2%

11.3%

Attachment C

Raytheon Company

Other Preliminary Information

Fourth Quarter 2009

(In millions)

Funded Backlog

Total Backlog

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

Integrated Defense Systems

$                    5,595

$                    4,802

$                  10,665

$                    9,883

Intelligence and Information Systems

                      1,588

                      1,890

                      4,360

                      5,137

Missile Systems*

                      6,454

                      6,082

                      7,657

                      9,937

Network Centric Systems

                      4,389

                      4,593

                      5,501

                      5,733

Space and Airborne Systems

                      3,402

                      2,731

                      5,921

                      5,442

Technical Services

                      2,051

                      1,888

                      2,773

                      2,752

Total

$                  23,479

$                  21,986

$                  36,877

$                  38,884

Bookings

Three Months Ended

Bookings                    

Twelve Months Ended      

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

Bookings

$                    7,065

$                    8,530

$                  25,058

$                  26,820

* Due to a change in Missile Defense Agency priorities, on June 10, 2009 the Kinetic Energy Interceptor (KEI) program was terminated for convenience, resulting in a $2.4 billion reduction of the Company's backlog at the end of the second quarter of 2009.

Attachment D

Raytheon Company

Preliminary Balance Sheet Information

Fourth Quarter 2009

(In millions)

31-Dec-09

31-Dec-08

Assets

    Cash and cash equivalents

$                   2,642 

$                   2,259 

    Accounts receivable, net

120 

105 

    Contracts in process

4,373 

3,793 

    Inventories

344 

325 

    Current tax asset

441 

    Deferred taxes

273 

395 

    Prepaid expenses and other current assets

116 

99 

Total current assets

7,868 

7,417 

Property, plant and equipment, net

2,001 

2,024 

Deferred taxes

436 

735 

Prepaid retiree benefits

111 

56 

Goodwill

11,922 

11,662 

Other assets, net

1,269 

1,240 

   Total assets

$                 23,607 

$                 23,134 

Liabilities and Equity

Current liabilities

    Advance payments and billings in excess of costs incurred

$                   2,224 

$                   1,970 

    Accounts payable

1,397 

1,201 

    Accrued employee compensation

868 

913 

    Other accrued expenses

1,034 

1,065 

Total current liabilities

5,523 

5,149 

Accrued retiree benefits and other long-term liabilities

5,793 

6,488 

Deferred taxes

23 

Long-term debt

2,329 

2,309 

Equity

 Raytheon Company stockholders' equity

    Common stock

    Additional paid-in capital

10,991 

10,873 

    Accumulated other comprehensive loss

(4,824)

(5,182)

    Treasury stock, at cost

(5,446)

(4,254)

    Retained earnings

9,102 

7,646 

Total Raytheon Company stockholders' equity

9,827 

9,087 

    Noncontrolling interest in subsidiaries

112 

101 

Total equity

9,939 

9,188 

   Total liabilities and equity

$                 23,607 

$                 23,134 

Attachment E

Raytheon Company

Preliminary Cash Flow Information

Fourth Quarter 2009

(In millions)

Three Months Ended

Twelve Months Ended

31-Dec-09

31-Dec-08

31-Dec-09

31-Dec-08

Net income

$                    517 

$                    428 

$                 1,976 

$                 1,696 

Loss (income) from discontinued operations, net of tax

Income from continuing operations

517 

428 

1,977 

1,698 

Depreciation

79 

75 

299 

292 

Amortization

28 

27 

103 

98 

Working capital (excluding pension and taxes)*

178 

629 

(47)

247 

Discontinued operations

(4)

(20)

(21)

Net activity in financing receivables

18 

22 

46 

68 

Other

253 

(737)

367 

(367)

   Net operating cash flow

1,069 

444 

2,725 

2,015 

Capital spending

(142)

(137)

(280)

(304)

Internal use software spending

(18)

(16)

(67)

(74)

Acquisitions

(334)

(334)

(54)

Investment activity and divestiture

Dividends

(118)

(116)

(473)

(460)

Repurchases of common stock

(300)

(680)

(1,200)

(1,700)

Debt issuance

496 

496 

Debt repayment

(474)

(474)

Other

21 

(10)

172 

   Total cash flow

$                    200 

$                  (502)

$                    383 

$                  (396)

*  Working capital (excluding pension and taxes) is a summation of changes in: accounts receivable, net, 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 - FAS/CAS Adjusted Measures

Fourth Quarter 2009

FAS/CAS Adjusted EPS Non-GAAP Reconciliation

Fourth Quarter

Full Year

2010 Guidance

2009 

2008 

2009 

2008 

Low end of range

High end of range

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

$            1.30 

$            1.01*

$            4.89 

$            3.93*

$            4.75 

$            4.90 

Less: Per share impact of the FAS/CAS Pension Adjustment**

0.01 

(0.05)

0.04 

(0.19)

(0.38)

(0.38)

FAS/CAS Adjusted EPS ***

$            1.29 

$            1.06 

$            4.85 

$            4.12 

$            5.13 

$            5.28 

** FAS/CAS Pension Adjustment

$                 6 

$             (30)

$               27 

$           (123)

$           (220)

$           (220)

   Tax affect (at 35.0% federal statutory rate)

(2)

10 

(9)

43 

77 

77 

   After-tax FAS/CAS Pension Adjustment

(20)

18 

(80)

(143)

(143)

   Diluted Shares

388.4 

416.4 

395.7 

426.5 

382.0 

377.0 

   Per share impact of the FAS/CAS Pension Adjustment

$            0.01 

$          (0.05)

$            0.04 

$          (0.19)

$          (0.38)

$          (0.38)

*  Fourth quarter and full-year 2008 EPS from continuing operations includes the $45 million ($69 million pretax) unfavorable adjustment due to the impact of pension investment returns on existing contracts in 2008.    

FAS/CAS Adjusted Income from Continuing Operations attributable to Raytheon Company common stockholders Non-GAAP Reconciliation

Fourth Quarter

Full Year

2009

2008

2009

2008

Income from Continuing Operations attributable to Raytheon Company common stockholders

$             504

$             421

$          1,936

$          1,674

FAS/CAS Pension Adjustment (Tax affected at 35.0% federal statutory rate)

                 (4)

                 20

               (18)

                 80

FAS/CAS Adjusted Income from Continuing Operations attributable to Raytheon common stockholders***

$             500

$             441

$          1,918

$          1,754

***  These amounts are not measures of financial performance under U.S. generally accepted accounting principles (GAAP).  They should be considered supplemental to and not a substitute for financial performance in accordance with GAAP and may not be defined and calculated by other companies in the same manner. FAS/CAS Adjusted EPS is defined as EPS from continuing operations attributable to Raytheon Company common stockholders excluding the earnings per share impact of the FAS/CAS pension adjustment.  FAS/CAS Adjusted Income from Continuing Operations attributable to Raytheon Company common stockholders is defined as Income from Continuing Operations attributable to Raytheon Company common stockholders excluding the impact of the FAS/CAS pension adjustment.  We are providing these measures, which exclude the impact of the FAS/CAS pension adjustment, because management uses them for the purposes of evaluating and forecasting the Company's financial performance and we believe it allows investors to benefit from being able to assess our operating performance in the context of how our principal customer, the U.S. Government, allows us to recover pension costs and to better compare our operating performance to others in the industry on that same basis.  

Attachment G

Raytheon Company

Preliminary Return on Invested Capital Non-GAAP Financial Measure

Fourth Quarter 2009

We define Return on Invested Capital (ROIC) as income from continuing operations excluding the after-tax affect of the FAS/CAS Pension Adjustment 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 impact of the accounting standard for employers' accounting for defined benefit pension and other postretirement plans.  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, except percentages)

2009

2010 Initial Guidance

Low end

High end

of range

of range

Income from continuing operations

$                       1,977   

FAS/CAS Pension Adjustment, after-tax *

(18)  

Net interest expense, after-tax *

71   

Combined

Combined

Lease expense, after-tax *

66   

Return

$                       2,096   

$                  2,155   

$                  2,200   

Net debt **

$                        (132)  

Equity less investment in discontinued operations

9,560   

Lease expense x 8, plus financial guarantees

2,815   

Combined

Combined

Minimum pension liability

5,007   

Invested capital from continuing operations ***

$                     17,250   

$                17,700   

$                17,500   

ROIC

12.2%

12.2%

12.6%

*  Federal statutory tax rate of 35.0%  

**  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  

SOURCE Raytheon Company



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