* Defense businesses continue to deliver solid performance in the quarter, with sales up 10% and operating income up 7% year-over-year.
* Operating cash flow in defense businesses was $593 million in the quarter. Net debt was cut to $7.0 billion, down $1.7 billion in the quarter and $2.0 billion for the year.
* Excluding the impact of a third quarter charge at Raytheon Aircraft, EPS from continuing operations was $0.40 for the fourth quarter and $1.35 for the year. Including the impact of the charge, EPS from continuing operations for the fourth quarter was $0.15 and $0.01 for the year.
* Raytheon Aircraft gets JPATS award valued at $1.22 billion with options, its largest military order ever.
LEXINGTON, Mass., Jan. 23 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE: RTN - news) reported fourth quarter sales of $4.6 billion, up from $4.4 billion in the fourth quarter of 2000. Income from continuing operations in the quarter was $57 million, or $0.15 per diluted share, compared with $190 million or $0.55 per diluted share a year ago. Fourth quarter 2001 EPS was negatively affected by a high tax rate resulting from a third quarter 2001 charge at Raytheon Aircraft Company. Excluding the impact of the charge, Raytheon had diluted EPS of $0.40 from continuing operations in the fourth quarter.
The defense businesses continued to deliver solid performance in the fourth quarter, with sales increasing 10 percent year-over-year and operating income up 7 percent. Adjusting for divestitures, sales in the defense businesses were up 11 percent.
"Our defense businesses are hitting on all cylinders, having consistently met or exceeded targets for revenue, cash and margin," said Daniel P. Burnham, Raytheon's chairman and chief executive officer. "I am especially pleased with how we've executed our strategy to reduce debt, despite the continuing challenges in discontinued operations. With our successful equity offerings, our cash generation in the defense businesses, and recent steps to reshape our portfolio, we're achieving financial flexibility to focus resources on the highest growth areas of our business." Burnham said the company is well positioned to capitalize on emerging opportunities in missile defense; intelligence, surveillance and reconnaissance (ISR) electronics; precision strike weapon systems; and homeland defense.
Raytheon had operating cash flow of $438 million in the quarter, $639 million from continuing operations that was offset by a $201 million cash outflow related to discontinued operations. This does not include $500 million received during the quarter from Hughes Electronics Corporation. The company expects to receive an additional $135.5 million from Hughes in the second quarter of 2002 to settle an acquisition purchase price dispute that began in 1998. In October, the company completed a $1.0 billion common stock offering, following a $1.2 billion equity offering in May. At the end of the fourth quarter, net debt was $7.0 billion, compared with $8.8 billion at the end of the third quarter of 2001, and $10.6 billion at its peak at the end of the first quarter of 1998. Raytheon expects to receive approximately $1.1 billion from the impending sale of Aircraft Integration Systems during the first quarter of 2002.
Including the impact of discontinued operations of $143 million after-tax and the extraordinary loss on debt repurchases, the company recorded a net loss in the fourth quarter of 2001 of $106 million, or $0.28 per diluted share, compared with net income of $168 million, or $0.49 per diluted share, in the fourth quarter of 2000.
Full-year 2001 sales totaled $16.9 billion, flat from the previous year due primarily to divestitures and continued weakness in the commercial aircraft business. Excluding divestitures, full-year sales for the defense businesses were up 8 percent. The company reported 2001 income from continuing operations of $5 million, or $0.01 per diluted share, compared with $498 million, or $1.46 per diluted share in 2000. Excluding the impact of the third quarter 2001 charge at Raytheon Aircraft, the company had diluted EPS from continuing operations of $1.35 for the year.
Including the impact of discontinued operations and the extraordinary loss on debt repurchases, the company recorded a loss of $703 million for the year, or $1.95 per diluted share, compared with net income of $141 million, or $0.41 per diluted share, in 2000. Consolidated operating cash outflow for the year, including discontinued operations cash outflow of $635 million, was $502 million, compared with operating cash inflow of $416 million for 2000.
Raytheon expects 2002 EPS from continuing operations to be $1.30 to $1.40, or $2.10 to $2.20, after the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. The company expects sales growth of 6 percent, adjusted for divestitures, and operating cash flow of $343 million for the year, excluding dividends and divestitures.
Electronic Systems
Electronic Systems (ES) reported fourth quarter 2001 sales of $2.1 billion, up 7 percent from a year ago due to new program starts. Adjusted for divestitures, ES sales were up 9 percent on a year-over-year basis. ES had operating income of $319 million in the quarter, compared with $350 million in the fourth quarter of 2000. Included in the fourth quarter of 2000 was a reversal of a previously recorded restructuring charge.
During the quarter, the Missile Defense Agency (formerly known as the Ballistic Missile Defense Organization) conducted the second successful intercept of a ballistic missile using Raytheon's Exoatmospheric Kill Vehicle (EKV), the PAVE PAWS Early Warning Radar (EWR), and Ground Based Radar- Prototype (BR-P). The test demonstrated the repeatability of the EKV's "hit- to-kill" technology and validated the design, capabilities and performance of the technology and systems Raytheon is developing for the Ground-based Midcourse Defense Segment (formerly National Missile Defense) program.
ES had backlog of $12.4 billion at the end of the fourth quarter.
Command, Control, Communication and Information Systems
Command, Control, Communication and Information Systems (C3I) had sales of $1.0 billion in the fourth quarter, up 18 percent from $883 million in the fourth quarter of 2000. C3I had operating income of $123 million, up 13 percent from $109 million a year ago. The improvement in sales and operating income was due largely to U.S. Navy, domestic air traffic control, and classified programs.
During the quarter, Raytheon was awarded a contract to provide Command and Control Switching System (CCSS) depot-level logistics support to Ogden Air Logistics Center at Hill Air Force Base, Utah. The contract has a value of up to $428 million.
C3I had backlog of $5.6 billion at the end of the fourth quarter.
Technical Services
Technical Services (TS) had sales of $543 million, up 18 percent from $462 million in the fourth quarter of 2000. TS recorded operating income of $42 million, an increase of 91 percent from $22 million in the fourth quarter of 2000. Sales and operating income in the fourth quarter of 2000 were negatively affected by contract adjustments.
During the fourth quarter of 2001, Raytheon was awarded a U.S. Navy engineering services contract with a potential value of $430 million. The contract from Naval Air Systems Command is to provide the supplies and services required to plan, manage and execute engineering, industrial, logistics and operational support services. The company also was awarded a subcontract, valued at up to $350 million, from Science Applications International Corporation to provide spares, repairs, modifications and support to the U.S. Air Force's Air Logistics Centers.
TS had backlog of $2.0 billion at the end of the fourth quarter.
Aircraft Integration Systems
Aircraft Integration Systems (AIS) recorded sales of $346 million in the fourth quarter of 2001, compared with $341 million a year ago. AIS recorded operating income of $23 million in the quarter, compared with an operating loss of $8 million in the 2000 fourth quarter. During the fourth quarter of 2000, AIS took a contract write-down on the Boeing Business Jet program of $39 million.
After the close of the quarter, Raytheon announced that it has agreed to sell AIS to L-3 Communications for $1.13 billion. The sale is expected to close by the end of the first quarter 2002. As part of the transaction, Raytheon will retain the ASTOR (Airborne Standoff Radar) program, certain receivables and the Boeing Business Jet program, which is nearing completion. The company expects to deliver one remaining aircraft in the first quarter of 2002 and the last aircraft in the second quarter of 2002.
AIS had backlog of $1.9 billion at the end of the fourth quarter.
Commercial Electronics
Commercial Electronics (CE) had fourth quarter sales of $114 million, compared with $182 million a year ago. The divestiture of Raytheon Recreational Marine in January of 2001 accounted for a $30 million decline in sales. CE recorded an operating loss for the quarter of $14 million. The loss was due primarily to continued weakness in CE's markets.
Raytheon Aircraft Company
Raytheon Aircraft Company (RAC) had sales of $718 million in the 2001 fourth quarter, compared with $847 million a year ago. RAC shipped 129 aircraft during the quarter, including 15 Premier I business jets. The business had an operating loss of $37 million in the fourth quarter of 2001, compared with operating income of $60 million a year ago. The loss was driven by lower volume and adverse mix, with shipments of Hawkers, Beechjets and 1900D products down 18 units year-over-year.
During the quarter, RAC was awarded a contract worth potentially $1.22 billion for T-6A Texan II military training aircraft, associated ground-based training devices and technical support. The contract is the largest in RAC's history, and is part of the Joint Primary Aircraft Training System (JPATS) program, which calls for nearly 800 aircraft through the year 2017. To date, the U.S. Air Force and U.S. Navy have ordered 168 of the two-seat T-6As.
During the quarter, Raytheon announced its intention to form a joint venture between Raytheon Travel Air, its fractional aircraft ownership business, and Flight Options Inc. The new company, in which Raytheon would own 49.9 percent and Flight Options would own 50.1 percent, will be able to capitalize on the growing demand for fractional ownership services. Under terms of the agreement, RAC will supply the new company, Flight Options LLC, with 115 new business jets over five years in a transaction worth approximately $900 million. The transaction is expected to be finalized by the end of the first quarter 2002.
RAC had backlog of $4.2 billion at the end of the fourth quarter.
Discontinued Operations
The company recorded a fourth quarter loss from discontinued operations of $143 million after-tax, or $0.37 per diluted share. The loss included $68 million for increased cost-to-complete estimates for two Massachusetts construction projects; $53 million primarily related to cost growth on certain other construction projects rejected by Washington Group International in the third quarter of 2001 on which the company has guarantees or other support agreements; and $22 million for legal and management costs and interest expense related to discontinued operations.
Based in Lexington, Mass., Raytheon Company is a global technology leader in defense, government and commercial electronics, and business and special mission aircraft.
Conference Call on fourth quarter 2001 Financial Results
There will be a conference call beginning at 9 a.m. ET on Jan. 24 to review the company's fourth quarter and full-year results. To listen to the call, dial 877.604.2081 (in the U.S.) or 706.679.7694 (international callers). There will also be an audio cast of the call on www.raytheon.com. Slides will also be available on the website.
A replay of the conference will be run from Noon ET Jan. 24 through Noon ET Jan. 28. The replay number is 800-642-1687 for U.S. callers and 706-645- 9291 for international callers. The reservation number for the replay is 2699723.
Forward-Looking Statements
Certain statements made in this release, including any statements relating
to the company's future plans, objectives, and projected future financial
performance, contain or are based on, forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Specifically, statements that are not historical facts, including statements
accompanied by words such as "believe," "expect," "estimate," "intend," or
"plan," variations of these words and similar expressions, are intended to
identify forward-looking statements and convey the uncertainty of future
events or outcomes.
The company cautions readers that any such forward-
looking statements are based on assumptions that the company believes are
reasonable, but are subject to a wide range of risks, and actual results may
differ materially. Given these uncertainties, readers should not rely on
forward-looking statements.
Forward-looking statements also represent the
company's estimates and assumptions only as of the date that they were made.
The company expressly disclaims any current intention to provide updates to
forward-looking statements, and the estimates and assumptions associated with
them, after the date of this press release. Important factors that could cause
actual results to differ include, but are not limited to: differences in
anticipated and actual program results; risks inherent with large long-term
fixed price contracts, particularly the ability to contain cost growth; the
ultimate resolution of contingencies and legal matters; the ability to realize
anticipated cost efficiencies; timely development and certification of new
aircraft; the effect of market conditions, particularly in relation to the
general aviation and commuter aircraft markets;
the impact of changes in the
collateral values of financed aircraft, particularly commuter aircraft; the
ability to finance ongoing operations at attractive rates; government
customers' budgetary constraints; government import and export policies;
termination of government contracts; financial and governmental risks related
to international transactions; delays and uncertainties regarding the timing
of the award of international programs; changes in government or customer
priorities due to program reviews or revisions to strategic objectives;
difficulties in developing and producing operationally advanced technology
systems; economic business and political conditions domestically and
internationally; program performance and timing of contract payments; the
timing and customer acceptance of product deliveries; the outcome of the
company's efforts in the integration of acquisitions and the completion of any
divestitures, the impact of competitive products and pricing; and risks
associated with the continuing project obligations and retained assets and
retained liabilities of Raytheon Engineers & Constructors (RE&C) including
timely completion of two Massachusetts construction projects, among other
things. Further information regarding the factors that could cause actual
results to differ materially from projected results can be found in the
company's filings with the Securities and Exchange Commission, including "Item
1-Business" in the company's Annual Report on Form 10-K for the year ended
December 31, 2000.
Attachment A
Raytheon Company
Financial Information
Fourth Quarter 2001
(In millions, except per share amounts)
Three Months Ended Twelve Months Ended
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
Net sales $4,631 $4,380 $16,867 $16,895
Cost of sales 3,787 3,443 14,401 13,530
Administrative and selling
expenses 303 298 1,232 1,214
Research and development expenses 111 131 475 526
Total operating expenses 4,201 3,872 16,108 15,270
Operating income 430 508 759 1,625
Interest expense, net 144 178 660 736
Other expense (income), net 12 (1) (18) 12
Non-operating expense, net 156 177 642 748
Income from continuing operations
before taxes 274 331 117 877
Federal and foreign income taxes 217 141 112 379
Income from continuing operations 57 190 5 498
Discontinued operations
Loss from discontinued
operations, net of tax - - - (70)
Loss on disposal of discontinued
operations, net of tax (143) (22) (692) (287)
(143) (22) (692) (357)
Income (loss) before
extraordinary item (86) 168 (687) 141
Extraordinary loss from debt
repurchases, net of tax (20) - (16) -
Net income (loss) $(106) $168 $(703) $141
Earnings per share from
continuing operations
Basic $0.15 $0.56 $0.01 $1.47
Diluted $0.15 $0.55 $0.01 $1.46
Loss per share from discontinued
operations
Basic $(0.38) $(0.06) $(1.94) $(1.05)
Diluted $(0.37) $(0.06) $(1.92) $(1.05)
Extraordinary loss per share
Basic $(0.05) $- $(0.04) $-
Diluted $(0.05) $- $(0.04) $-
Earnings (loss) per share
Basic $(0.28) $0.50 $(1.97) $0.42
Diluted $(0.28) $0.49 $(1.95) $0.41
Average shares outstanding
Basic 377.5 338.6 356.7 338.4
Diluted 383.2 344.0 361.3 341.1
Attachment B
Raytheon Company
Segment Information
Fourth Quarter 2001
Operating Income
Net Sales Operating Income As a Percent of Sales
(In millions) Three Months Ended Three Months Ended Three Months Ended
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
Electronic
Systems $2,128 $1,986 $319 $350 15.0% 17.6%
Command, Control,
Communication and
Information
Systems 1,039 883 123 109 11.8% 12.3%
Technical Services 543 462 42 22 7.7% 4.8%
Aircraft Integration
Systems 346 341 23 (8) 6.6% -2.3%
Commercial
Electronics 114 182 (14) - -12.3% 0.0%
Aircraft 718 847 (37) 60 -5.2% 7.1%
Corporate and
Eliminations (257) (321) (26) (25)
Total $4,631 $4,380 $430 $508 9.3% 11.6%
Operating Income
Net Sales Operating Income As a Percent of Sales
Twelve Months Ended Twelve Months Ended Twelve Months Ended
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
Electronic
Systems $8,000 $7,584 $1,098 $1,039 13.7% 13.7%
Command, Control,
Communication and
Information
Systems 3,770 3,419 396 358 10.5% 10.5%
Technical Services 2,042 1,810 159 124 7.8% 6.9%
Aircraft
Integration
Systems 1,120 1,220 25 48 2.2% 3.9%
Commercial
Electronics 453 666 (57) (4) -12.6% -0.6%
Aircraft 2,572 3,220 (772) 164 -30.0% 5.1%
Corporate and
Eliminations (1,090) (1,024) (90) (104)
Total $16,867 $16,895 $ 759 $1,625 4.5% 9.6%
Note: Corporate and Eliminations includes certain company-wide activities
that have not been attributed to a particular segment and intercompany
eliminations.
Attachment C
Raytheon Company
Other Information
Fourth Quarter 2001
(In millions, except total employees and aircraft shipments)
Backlog
31-Dec-01 31-Dec-00
Electronic Systems $12,371 $11,968
Command, Control,
Communication and
Information Systems 5,592 5,396
Technical Services 1,952 2,135
Aircraft Integration
Systems 1,922 2,120
Commercial Electronics 467 513
Aircraft 4,165 4,398
$26,469 $26,530
U.S. government backlog
included above $17,763 $17,374
Total Employees
31-Dec-01 31-Dec-00
Total employees 87,200 93,700
Aircraft Shipments (Units) Aircraft Shipments (Units)
Three Months Ended Twelve Months Ended
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
Hawker 15 19 55 67
Premier I 15 - 18 -
Beechjet (Commercial) 8 15 25 51
King Air 32 28 119 151
1900D Commuter 6 13 11 54
Pistons 36 42 136 153
T-6A 17 12 47 49
Total aircraft shipments 129 129 411 525
Attachment D
Raytheon Company
Preliminary Financial Information
Fourth Quarter 2001
(In millions)
Balance sheets
31-Dec-01 31-Dec-00
Assets
Cash and cash equivalents $1,214 $871
Accounts receivable 481 505
Contracts in process 3,492 4,061
Inventories 2,174 1,908
Deferred federal and foreign income taxes 660 476
Prepaid expenses and other current assets 310 178
Net assets from discontinued operations - 14
Total current assets 8,331 8,013
Property, plant and equipment, net 2,353 2,491
Goodwill, net 12,298 13,281
Other assets, net 3,520 2,992
Total assets $26,502 $26,777
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $1,364 $877
Advance payments, less contracts in process 883 1,135
Accounts payable 937 1,099
Accrued salaries and wages 606 549
Other accrued expenses 1,431 1,205
Net liabilities from discontinued
operations 391 -
Total current liabilities 5,612 4,865
Accrued retiree benefits and other
long-term liabilities 1,082 1,262
Deferred federal and foreign income taxes 633 773
Long-term debt 6,875 9,054
Mandatorily redeemable equity
securities 857 -
Stockholders' equity 11,443 10,823
Total liabilities and
stockholders' equity $26,502 $26,777
Debt-to-capital ratio
31-Dec-01 31-Dec-00
Debt $8,239 $9,931
Capital 20,539 20,754
Debt-to-capital ratio 40.1% 47.9%
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Fourth Quarter 2001
(In millions)
Cash flow information
Three Months Ended Twelve Months Ended
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
Income from continuing operations $57 $190 $5 $498
Depreciation 84 64 308 276
Amortization 103 106 421 418
Working capital 538 439 (182) (138)
Capital spending (181) (144) (486) (431)
Internal use software spending (38) (38) (149) (111)
Discontinued operations (201) 4 (635) (102)
Other 76 151 216 6
Subtotal - operating cash flow 438 772 (502) 416
Net activity in financing receivables (159) (59) (175) (92)
Hughes Defense settlement 500 - 500 -
Divestitures - 154 266 330
Dividends (73) (68) (281) (272)
Offering proceeds 1,012 - 2,225 -
Other 24 (9) 2 97
Change in net debt $1,742 $790 $2,035 $479
Restructuring amounts included in
operating cash flow above $11 $44 $53 $249
Segment operating cash flow information
Three Months Ended Twelve Months Ended
31-Dec-01 31-Dec-00 31-Dec-01 31-Dec-00
Electronic Systems $429 $413 $692 $611
Command, Control, Communication
and Information Systems 142 176 61 204
Technical Services (43) 33 (57) 21
Aircraft Integration Systems 65 66 (20) 120
Commercial Electronics (4) (7) (45) 63
Aircraft 119 42 (457) (372)
Discontinued operations (201) 4 (635) (102)
Other (69) 45 (41) (129)
$438 $772 $(502) $416
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