Raytheon Reports Strong First Quarter 2019 Results

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(TM).

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 (RAM(TM)), 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

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