Raytheon Reports Strong Third Quarter 2018 Results

WALTHAM, Mass., Oct. 25, 2018 /PRNewswire/ -- Raytheon Company (NYSE: RTN) today announced net sales for the third quarter 2018 of $6.8 billion, up 8.3 percent compared to $6.3 billion in the third quarter 2017. Third quarter 2018 EPS from continuing operations was $2.25 compared to $1.97 in the third quarter 2017. The increase in the third quarter 2018 EPS from continuing operations was primarily driven by operational improvements, and lower taxes primarily associated with tax reform. This was partially offset by the previously disclosed non-operating expense associated with the pension plan annuity transaction, which had an unfavorable $0.80 per share impact.

"I'm pleased with the company's operating performance in the third quarter. We delivered bookings, sales, EPS and cash flow ahead of our expectations," said Thomas A. Kennedy, Raytheon Chairman and CEO. "Strong domestic and international bookings throughout the year drove record backlog and positions us well for continued growth in 2019."

Operating cash flow from continuing operations for the third quarter 2018 was an outflow of $444 million compared to an inflow of $382 million for the third quarter 2017. The decrease in operating cash flow from continuing operations in the third quarter 2018 was primarily due to the previously disclosed $1.25 billion pretax discretionary pension contribution, partially offset by lower net cash taxes.

In the third quarter 2018, the company repurchased 0.6 million shares of common stock for $125 million. Year-to-date 2018, the company repurchased 4.5 million shares of common stock for $925 million.

The company had bookings of $8.7 billion in the third quarter 2018, resulting in a book-to-bill ratio of 1.28. Third quarter 2017 bookings were $7.0 billion.


       
              Summary Financial Results

    ---

                                                                                                                            
            
              3rd Quarter                 
            
              %                     
            
              Nine Months                             
            
              %



       ($ in millions, except per share data)                                                                                     2018                             2017                                                Change                                     2018                                        2017                                        Change




       Bookings                                                                                                                          $
            8,710                                          $
            6,957                        25.2%                                                     $
            23,715                                  $
            19,177                 23.7%



       Net Sales                                                                                                                         $
            6,806                                          $
            6,284                         8.3%                                                     $
            19,698                                  $
            18,565                  6.1%



       Income from Continuing Operations attributable to



          Raytheon Company(1)                                                                                                              $
            644                                            $
            573                        12.4%                                                      $
            2,077                                   $
            1,629                 27.5%



       EPS from Continuing Operations(1)                                                                                                  $
            2.25                                           $
            1.97                        14.2%                                                       $
            7.23                                    $
            5.59                 29.3%



       Operating Cash Flow from Continuing Operations(2)                                                                                 $
            (444)                                           $
            382                                                                                     $
            995                                   $
            1,123



       Workdays in Fiscal Reporting Calendar                                                                                        63                               62                                                                                            191                                         190


                                1 
              
              As previously disclosed, in the third quarter 2018, some of the company's pension plans purchased a group annuity contract to transfer $923 million of outstanding pension benefit obligations related to certain U.S. retirees and beneficiaries of the company's previously discontinued operations. In connection with this
                                 transaction, the company recognized a non-cash, non-operating pension settlement charge of $288 million pretax, $228 million after tax, primarily related to the accelerated recognition of actuarial losses in those plans. Third quarter and nine months 2018 EPS from Continuing Operations included an unfavorable $0.80 and $0.79 impact,
                                 respectively, related to the settlement charge.



       
              
                (2)
              
               As previously disclosed, the company made a $1.25 billion pretax discretionary pension plan contribution in the third quarter 2018.



Backlog at the end of the third quarter 2018 was a record $41.6 billion, an increase of $4.9 billion or 13.4 percent compared to the end of the third quarter 2017.

                     Backlog

    ---

                                
           
          Period Ending


        ($ in millions)      Q3 2018                         Q3 2017     2017




       Backlog                      $
       41,599                     $
     36,676 $
     38,210



Outlook

The company has updated its financial outlook for 2018. Charts containing additional information on the company's 2018 outlook are available on the company's website.


       
                2018 Financial Outlook

    ---

                                                                                                                                             
              
                Current                                           Prior (7/26/18)




       Net Sales ($B)                                                                                                                           
              27.0 - 27.3*                                
              26.7 - 27.2



       Deferred Revenue Adjustment ($M)                                                                                                                                    (10)                                                  (10)



       Amortization of Acquired Intangibles ($M)                                                                                                                          (118)                                                 (118)



       FAS/CAS Operating Adjustment ($M)(1)                                                                                                        
              1,430*                                                            1,416



       Retirement Benefits Non-service Expense, non-operating ($M)(2)                                                                             
              (1,232)*                                                         (1,246)



       Interest Expense, net ($M)                                                                                                             
               (165) - (170)*                             
               (180) - (185)



       Diluted Shares (M)                                                                                                                           
              ~287                                       
              ~287



       Effective Tax Rate                                                                                                                                                ~10.5%                                               ~10.5%



       EPS from Continuing Operations                                                                                                               
              $10.01 - $10.11*                              
              $9.77 - $9.97



       Operating Cash Flow from Continuing Operations ($B)                                                                                       
               2.6 - 3.0                                 
               2.6 - 3.0



       
                *Denotes change from prior guidance


                                    (1)
                
                The full-year 2018 FAS/CAS Operating Adjustment had a $14 million ($0.04 per share) favorable adjustment, of which approximately $11 million ($0.03 per share) was recorded in
                                     the third quarter 2018 and approximately $3 million ($0.01 per share) is expected to be recorded in the fourth quarter 2018. This is due to the update in the third quarter 2018 of the actuarial estimates
                                     for pension and other postretirement benefit plans.


                                    (2)
                
                The full-year 2018 Retirement Benefits Non-service Expense had a $14 million ($0.04 per share) favorable adjustment, all of which was recorded in the third quarter 2018. This
                                     is due to the update in the third quarter 2018 of the actuarial estimates for pension and other postretirement benefit plans.

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(TM).


       
                Integrated Defense Systems

    ---

                                                           3rd Quarter                                      Nine Months



       ($ in millions)                          2018                    2017            % Change          2018                     2017      % Change




       Net Sales                                     $
          1,493           $
       1,391          7%                    $
           4,496   $
        4,251    6%



       Operating Income                                $
          241             $
       231          4%                      $
           776     $
        688   13%



       Operating Margin                        16.1%                  16.6%                         17.3%                   16.2%

Integrated Defense Systems (IDS) had third quarter 2018 net sales of $1,493 million, up 7 percent compared to $1,391 million in the third quarter 2017. The increase in net sales for the quarter was primarily driven by higher net sales from an international Patriot(®) program awarded in the first quarter 2018.

IDS recorded $241 million of operating income in the third quarter 2018 compared to $231 million in the third quarter 2017. The increase in operating income for the quarter was primarily driven by a favorable change in program mix and higher volume, partially offset by lower net program efficiencies.

During the quarter, IDS booked $1.3 billion to provide advanced Patriot air and missile defense capabilities for Poland. IDS also booked $191 million for the Forward Expeditionary Advanced Vehicle Radar (FEAVR) program for the U.S. Army and $75 million for a lightweight torpedo program for the U.S. Navy and international customers.


     
                Intelligence, Information and Services


                                                                    3rd Quarter                                     Nine Months



     ($ in millions)                                     2018                   2017            % Change          2018                    2017      % Change




     Net Sales                                                $
          1,742          $
       1,543          13%                   $
          5,011   $
        4,605    9%



     Operating Income                                           $
          149            $
       112          33%                     $
          394     $
        338   17%



     Operating Margin                                    8.6%                  7.3%                          7.9%                   7.3%

Intelligence, Information and Services (IIS) had third quarter 2018 net sales of $1,742 million, up 13 percent compared to $1,543 million in the third quarter 2017. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs in both the cyber and space business areas, the Development, Operations and Maintenance (DOMino) cyber program, and the Warfighter FOCUS program.

IIS recorded $149 million of operating income in the third quarter 2018 compared to $112 million in the third quarter 2017. The increase in operating income for the quarter was primarily driven by higher net program efficiencies and higher volume.

During the quarter, IIS booked $787 million on a number of classified contracts. IIS also booked $299 million on domestic and foreign training programs in support of Warfighter FOCUS activities; $108 million to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force; and $99 million on the Air and Space Operations Center Weapon System (AOC WS) program for the U.S. Air Force.


     
                Missile Systems


                                              3rd Quarter                                        Nine Months



     ($ in millions)               2018                    2017            % Change            2018                     2017      % Change




     Net Sales                          $
          2,082           $
       1,945            7%                    $
           5,981   $
        5,602     7%



     Operating Income                     $
          257             $
       280          (8)%                      $
           700     $
        732   (4)%



     Operating Margin             12.3%                  14.4%                           11.7%                   13.1%

Missile Systems (MS) had third quarter 2018 net sales of $2,082 million, up 7 percent compared to $1,945 million in the third quarter 2017. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs.

MS recorded $257 million of operating income in the third quarter 2018 compared to $280 million in the third quarter 2017. The decrease in operating income for the quarter was primarily due to lower net program efficiencies, partially offset by higher volume.

During the quarter, MS booked $499 million for Phalanx(®) Close-In Defense Systems (CIDS); $424 million for Standard Missile-6 (SM-6(®)); $115 million for Javelin; $113 million on the High-speed Unmanned Long-range Kinetic-kill (HULK) program; $89 million for Paveway(TM); $84 million for Horizontal Technology Integration (HTI) forward looking infrared kits; and $84 million for Rolling Airframe Missile (RAM(TM)). MS also booked $155 million on a number of classified contracts.


     
                Space and Airborne Systems


                                                         3rd Quarter                                      Nine Months



     ($ in millions)                          2018                    2017            % Change          2018                     2017      % Change




     Net Sales                                     $
          1,695           $
       1,597          6%                    $
           4,868   $
        4,760   2%



     Operating Income                                $
          223             $
       212          5%                      $
           622     $
        620



     Operating Margin                        13.2%                  13.3%                         12.8%                   13.0%

Space and Airborne Systems (SAS) had third quarter 2018 net sales of $1,695 million, up 6 percent compared to $1,597 million in the third quarter 2017. The increase in net sales for the quarter was driven by higher net sales on surveillance and targeting systems programs.

SAS recorded $223 million of operating income in the third quarter 2018 compared to $212 million in the third quarter 2017. The increase in operating income for the quarter was primarily due to higher volume.

During the quarter, SAS booked $282 million on the Multi-Spectral Targeting System (MTS) for the U.S. Air Force; $136 million on the Next Generation Jammer (NGJ) program for the U.S. Navy; $103 million for Active Electronically Scanned Array (AESA) radars for the U.S. Air Force; and $92 million for radar components for the U.S. Navy. SAS also booked $374 million on a number of classified contracts.


     
                Forcepoint


                                        3rd Quarter                                     Nine Months



     ($ in millions)          2018                   2017         % Change            2018                      2017      % Change




     Net Sales                     $
         173             $
      170             2%                   $
            462     $
      452          2%



     Operating Income               $
         18              $
      23          (22)%                     $
            3      $
      41       (93)%



     Operating Margin        10.4%                 13.5%                         0.6%                   9.1%

Forcepoint had third quarter 2018 net sales of $173 million, up 2 percent compared to $170 million in the third quarter 2017.

Forcepoint recorded $18 million of operating income in the third quarter 2018 compared to $23 million in the third quarter 2017. As expected, the decrease in operating income for the quarter was primarily driven by higher operating costs.

About Raytheon
Raytheon Company, with 2017 sales of $25 billion and 64,000 employees, is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. With a history of innovation spanning 96 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I(TM) 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 Third Quarter 2018 Financial Results
Raytheon's financial results conference call will be held on Thursday, October 25, 2018 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; the ability to obtain timely 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 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, including with respect to the provisional impact of the Tax Cuts and Jobs Act of 2017; the outcome of contingencies and litigation matters, including government investigations; the risk of environmental liabilities; 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


              Third Quarter 2018
    (In millions, except per share amounts)




                                                                                    
            Three Months Ended                      
           Nine Months Ended


                                                                                30-Sep-18                       1-Oct-17       30-Sep-18                       1-Oct-17






              Net sales                                                                  $
              6,806                              $
              6,284                $
       19,698  $
       18,565




              Operating expenses



              Cost of sales                                                        4,871                                4,468                                     14,180       13,355



              General and administrative expenses                                    752                                  688                                      2,194        2,079



              Total operating expenses                                             5,623                                5,156                                     16,374       15,434




              Operating income                                                     1,183                                1,128                                      3,324        3,131




              Non-operating (income) expense, net



              Retirement benefits non-service expense                                516                                  270                                        993          683



              Interest expense                                                        45                                   48                                        138          157



              Interest income                                                        (6)                                 (4)                                      (21)        (14)



              Other (income) expense, net                                            (8)                                 (2)                                       (6)          26




              Total non-operating (income) expense, net                              547                                  312                                      1,104          852




              Income from continuing operations before taxes                         636                                  816                                      2,220        2,279



              Federal and foreign income taxes                                       (5)                                 248                                        165          667




              Income from continuing operations                                      641                                  568                                      2,055        1,612



              Income (loss) from discontinued operations, net of tax                                                     (1)                                                     2




              Net income                                                             641                                  567                                      2,055        1,614



              Less: Net income (loss) attributable to noncontrolling interests



                 in subsidiaries                                                     (3)                                 (5)                                      (22)        (17)




              Net income attributable to Raytheon Company                                  $
              644                                $
              572                 $
       2,077   $
       1,631






              Basic earnings per share attributable to Raytheon Company



                 common stockholders:



              Income from continuing operations                                           $
              2.25                               $
              1.97                  $
       7.24    $
       5.59



              Income (loss) from discontinued operations, net of tax                                                                                                          0.01



              Net income                                                            2.25                                 1.97                                       7.23         5.60





              Diluted earnings per share attributable to Raytheon Company



                 common stockholders:



              Income from continuing operations                                           $
              2.25                               $
              1.97                  $
       7.23    $
       5.59



              Income (loss) from discontinued operations, net of tax                                                                                                          0.01



              Net income                                                            2.25                                 1.97                                       7.23         5.60





              Amounts attributable to Raytheon Company common



                 stockholders:



              Income from continuing operations                                            $
              644                                $
              573                 $
       2,077   $
       1,629



              Income (loss) from discontinued operations, net of tax                                                     (1)                                                     2



              Net income                                                                   $
              644                                $
              572                 $
       2,077   $
       1,631






              Average shares outstanding



              Basic                                                                285.7                                290.7                                      287.2        291.6



              Diluted                                                              286.0                                291.0                                      287.5        291.9


     Attachment B


     Raytheon Company


     Preliminary Segment Information


     Third Quarter 2018


     (In millions, except percentages)


                                                                                                                                                    Operating Income


                                                      
             Net Sales                          
            Operating Income

                                                                                                                                          As a Percent of Net Sales



                                                  
             Three Months Ended                    
            Three Months Ended             Three Months Ended


                                             30-Sep-18                       
     1-Oct-17          30-Sep-18                     1-Oct-17     
              30-Sep-18           
     1-Oct-17






     Integrated Defense Systems                         $
              1,493                                   $
              1,391                            $
              241                     $
       231       16.1% 16.6%



     Intelligence, Information and Services     1,742                                     1,543                                      149                              112             8.6%             7.3%



     Missile Systems                            2,082                                     1,945                                      257                              280            12.3%            14.4%



     Space and Airborne Systems                 1,695                                     1,597                                      223                              212            13.2%            13.3%



     Forcepoint                                   173                                       170                                       18                               23            10.4%            13.5%



     Eliminations                               (377)                                    (355)                                    (45)                            (39)




     Total business segment                     6,808                                     6,291                                      843                              819            12.4%            13.0%



     Acquisition Accounting Adjustments           (2)                                      (7)                                    (30)                            (39)



     FAS/CAS Operating Adjustment                                                                                                  365                              348



     Corporate                                                                                                                       5




     Total                                              $
              6,806                                   $
              6,284                          $
              1,183                   $
       1,128       17.4% 18.0%





                                                                                                                                                    Operating Income


                                                      
             Net Sales                          
            Operating Income

                                                                                                                                          As a Percent of Net Sales



                                                  
             Nine Months Ended                     
            Nine Months Ended               Nine Months Ended


                                             30-Sep-18                       
     1-Oct-17          30-Sep-18                     1-Oct-17     
              30-Sep-18           
     1-Oct-17






     Integrated Defense Systems                         $
              4,496                                   $
              4,251                            $
              776                     $
       688       17.3% 16.2%



     Intelligence, Information and Services     5,011                                     4,605                                      394                              338             7.9%             7.3%



     Missile Systems                            5,981                                     5,602                                      700                              732            11.7%            13.1%



     Space and Airborne Systems                 4,868                                     4,760                                      622                              620            12.8%            13.0%



     Forcepoint                                   462                                       452                                        3                               41             0.6%             9.1%



     Eliminations                             (1,110)                                  (1,077)                                   (126)                           (113)




     Total business segment                    19,708                                    18,593                                    2,369                            2,306            12.0%            12.4%



     Acquisition Accounting Adjustments          (10)                                     (28)                                    (97)                           (123)



     FAS/CAS Operating Adjustment                                                                                                1,072                              978



     Corporate                                                                                                                    (20)                            (30)




     Total                                             $
              19,698                                  $
              18,565                          $
              3,324                   $
       3,131       16.9% 16.9%



     Attachment C


     Raytheon Company


     Other Preliminary Information


     Third Quarter 2018


     (In millions)







     
                Backlog                                                                                          30-Sep-18                        31-Dec-17






     Integrated Defense Systems                                                                                               $
              11,148                                 $
       9,186



     Intelligence, Information and Services                                                                          6,563                                       6,503



     Missile Systems                                                                                                  13,906                                      13,426



     Space and Airborne Systems                                                                                        9,483                                       8,611



     Forcepoint                                                                                                          499                                         484




     Total backlog                                                                                                            $
              41,599                                $
       38,210







                                                                           
            Three Months Ended                   
             Nine Months Ended



     
                Bookings                                            30-Sep-18                       1-Oct-17     30-Sep-18                        1-Oct-17






     Total bookings                                                             $
              8,710                               $
              6,957                                $
       23,715             $
      19,177







                                                                           
            Three Months Ended                   
             Nine Months Ended



     
                General and Administrative Expenses                 30-Sep-18                       1-Oct-17     30-Sep-18                        1-Oct-17






     Administrative and selling expenses                                        $
              533                                 $
              510                                 $
       1,601              $
      1,547



     Research and development expenses                                    219                                  178                                        593                           532



     Total general and administrative expenses                                  $
              752                                 $
              688                                 $
       2,194              $
      2,079








     
                Cash, Cash Equivalents and Restricted Cash                                                       30-Sep-18                        31-Dec-17






     Cash and cash equivalents                                                                                               $
              2,073                                 $
       3,103



     Restricted cash                                                                                                                                          12                            12



     Cash, cash equivalents and restricted cash shown in Attachment E                                                                                              $
        2,085                 $
     3,115



     Attachment D


     Raytheon Company


     Preliminary Balance Sheet Information


     Third Quarter 2018


     (In millions)




                                                                              30-Sep-18              31-Dec-17




     
                Assets



     Current assets



     Cash and cash equivalents                                                          $
        2,073                     $
        3,103



     Short-term investments                                                          -                            297



     Receivables, net                                                            1,527                           1,324



     Contract assets                                                             5,715                           5,247



     Inventories                                                                   804                             594



     Prepaid expenses and other current assets                                     516                             761




     Total current assets                                                       10,635                          11,326





     Property, plant and equipment, net                                          2,639                           2,439



     Goodwill                                                                   14,865                          14,871



     Other assets, net                                                           1,995                           2,224



     Total assets                                                                      $
        30,134                    $
        30,860






     
                Liabilities, Redeemable Noncontrolling Interest and Equity



     Current liabilities



     Commercial paper                                                                     $
        300                       $
        300



     Contract liabilities                                                        2,931                           2,927



     Accounts payable                                                            1,392                           1,519



     Accrued employee compensation                                               1,252                           1,342



     Other current liabilities                                                   1,281                           1,260




     Total current liabilities                                                   7,156                           7,348





     Accrued retiree benefits and other long-term liabilities                    6,355                           8,287



     Long-term debt                                                              4,753                           4,750





     Redeemable noncontrolling interest                                            560                             512





     Equity



     Raytheon Company stockholders' equity



     Common stock                                                                    3                               3



     Additional paid-in capital                                                      -



     Accumulated other comprehensive loss(1)                                   (8,413)                        (7,935)



     Retained earnings(1)                                                       19,720                          17,895




     Total Raytheon Company stockholders' equity                                11,310                           9,963



     Noncontrolling interests in subsidiaries                                        -




     Total equity                                                               11,310                           9,963




     Total liabilities, redeemable noncontrolling interest and equity                  $
        30,134                    $
        30,860



              (1)              In the first quarter 2018 we adopted ASU
                                  2018-02, Income Statement -Reporting
                                  Comprehensive Income (Topic 220):
                                  Reclassification of Certain Tax Effects
                                  from Accumulated Other Comprehensive
                                  Income. As a result, we reclassified
                                  $1,451 million from accumulated other
                                  comprehensive loss to retained earnings
                                  related to the reclassification of
                                  stranded income tax effects of the Tax
                                  Cuts and Jobs Act of 2017.


     Attachment E


     Raytheon Company


     Preliminary Cash Flow Information


     Third Quarter 2018


     (In millions)


                                                                                                          
            Nine Months Ended


                                                                                                      30-Sep-18                      1-Oct-17




     Cash flows from operating activities



     Net income                                                                                                $
              2,055                      $
     1,614



     (Income) loss from discontinued operations, net of tax                                                  -                                   (2)




     Income from continuing operations                                                                   2,055                                  1,612



     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                                                                         417                                    401



     Stock-based compensation                                                                              137                                    127



     Loss on repayment of long-term debt                                                                     -                                    39



     Deferred income taxes                                                                                (16)                                 (137)



     Changes in assets and liabilities



     Receivables, net                                                                                    (205)                                 (226)



     Contract assets and contract liabilities                                                            (468)                                 (962)



     Inventories                                                                                         (212)                                  (83)



     Prepaid expenses and other current assets                                                              72                                    148



     Income taxes receivable/payable                                                                       194                                     66



     Accounts payable                                                                                     (64)                                 (191)



     Accrued employee compensation                                                                        (91)                                  (68)



     Other current liabilities                                                                            (44)                                    35



     Accrued retiree benefits                                                                            (748)                                   452



     Other, net                                                                                           (32)                                  (90)




     Net cash provided by (used in) operating activities from continuing operations                        995                                  1,123



     Net cash provided by (used in) operating activities from discontinued operations                        1                                    (1)



     Net cash provided by (used in) operating activities                                                   996                                  1,122




     Cash flows from investing activities



     Additions to property, plant and equipment                                                          (546)                                 (323)



     Proceeds from sales of property, plant and equipment                                                    -                                    31



     Additions to capitalized internal use software                                                       (42)                                  (49)



     Purchases of short-term investments                                                                     -                                 (399)



     Maturities of short-term investments                                                                  309                                    517



     Payments for purchases of acquired companies, net of cash received                                      -                                  (93)



     Proceeds from sale of business, net of transaction costs                                               11



     Other                                                                                                 (9)                                   (2)




     Net cash provided by (used in) investing activities                                                 (277)                                 (318)




     Cash flows from financing activities



     Dividends paid                                                                                      (728)                                 (679)



     Net borrowings (payments) on commercial paper                                                           -                                   300



     Repayments of long-term debt                                                                            -                                 (591)



     Loss on repayment of long-term debt                                                                     -                                  (38)



     Repurchases of common stock under share repurchase programs                                         (925)                                 (700)



     Repurchases of common stock to satisfy tax withholding obligations                                   (91)                                  (84)



     Contribution from noncontrolling interests in Forcepoint                                                -                                     8



     Other                                                                                                 (5)




     Net cash provided by (used in) financing activities                                               (1,749)                               (1,784)




     Net increase (decrease) in cash, cash equivalents and restricted cash                             (1,030)                                 (980)



     Cash, cash equivalents and restricted cash at beginning of the year                                 3,115                                  3,303



     Cash, cash equivalents and restricted cash at end of period                                               $
              2,085                      $
     2,323



     Attachment F


     Raytheon Company


     Supplemental EPS Information


     Third Quarter 2018


     (In millions, except per share amounts)




                                                                                                                             
     Three Months Ended                         
        Nine Months Ended


                                                                                                                 30-Sep-18                 1-Oct-17        30-Sep-18                          1-Oct-17





     Per share impact of the pension settlement charge (A)                                $
      0.80          
     $                                         $
              0.79                              
     $




                                             
              (A) 
     Pension settlement charge              $
      288       
           $                                                $
        288                      
     $


                                                              Tax effect (at 21% statutory
                                                               rate)                           (60)                                                (60)



                                                            
     After-tax impact                  228                                                  228


                                                            
     Diluted shares                  286.0                                                287.5



                                                            
     Per share impact                      $
      0.80       
           $                                               $
        0.79                      
     $




Raytheon Company
Global Headquarters
Waltham, Mass.

Investor Relations Contact
Kelsey DeBriyn
781.522.5141

Media Contact
Corinne Kovalsky
781.522.5899

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SOURCE Raytheon Company