EX-99.1 2 rtn-01252018xexhibit991x8k.htm PRESS RELEASE Exhibit
Exhibit 99.1

rtnlogo1a01a06a01a18.jpg
 
 
Raytheon Company
rtnline1a01a06a01a19.jpg
 
 
Global Headquarters
 
 
Waltham, Mass.
 
 
 
 
 
Investor Relations Contact
 
 
Todd Ernst
 
 
 
781.522.5141
 
 
 
 
 
 
 
Media Contact
 
 
 
Corinne Kovalsky
 
 
 
781.522.5899
For Immediate Release

Raytheon Reports Strong Fourth Quarter and Full-Year 2017 Results

•
Strong bookings of $8.5 billion in the quarter and $27.7 billion for the year; book-to-bill ratio of 1.26 in the quarter and 1.09 for the year
•
Fourth quarter net sales of $6.8 billion, up 8.0 percent; full-year net sales of $25.3 billion, up 5.1 percent for the year
•
Strong operating cash flow from continuing operations of $1.6 billion in the quarter and $2.7 billion for the year, after a $1.0 billion pretax discretionary pension plan contribution in the fourth quarter, which was not in prior guidance
•
Fourth quarter EPS from continuing operations of $1.35 and full-year EPS from continuing operations of $6.94; both periods included an unfavorable $0.59 impact from the enactment of the Tax Cuts and Jobs Act of 2017 and $0.09 impact from the discretionary pension contribution
__________________________________________________________________________________________________

WALTHAM, Mass., (January 25, 2018) - Raytheon Company (NYSE: RTN) today announced net sales for the fourth quarter 2017 of $6.8 billion, up 8.0 percent compared to $6.3 billion in the fourth quarter 2016. Fourth quarter 2017 EPS from continuing operations was $1.35 compared to $1.87 in the fourth quarter 2016. Fourth quarter and full-year 2017 included an unfavorable $0.59 provisional tax-related impact due to the enactment of the Tax Cuts and Jobs Act of 2017.
In addition, the company made a $1.0 billion pretax discretionary pension plan contribution in the fourth quarter 2017, which had an unfavorable tax-related EPS impact of $0.09 and was not included in the company’s prior guidance. The company made a $500 million pretax discretionary pension plan contribution in the fourth quarter 2016, which had an unfavorable tax-related EPS impact of $0.04.
Net sales in 2017 were $25.3 billion, up 5.1 percent compared to $24.1 billion in 2016. Full-year 2017 EPS from continuing operations was $6.94 compared to $7.55 for the full-year 2016.
“Raytheon delivered record sales and strong cash flow in 2017 reflecting the continued hard work and dedication of the Raytheon team,” said Thomas A. Kennedy, Raytheon Chairman and CEO. “Bookings strength across our broad portfolio of proven technology solutions positions the company well for the future.”
The company generated strong operating cash flow for both the fourth quarter and full-year. Operating cash flow from continuing operations for the fourth quarter 2017 and full-year 2017 was $1.6 billion and $2.7 billion, respectively, after making the $1.0 billion pretax discretionary cash contribution to the company’s pension plans.


1

Operating cash flow from continuing operations for the fourth quarter 2016 and full-year 2016 was $1.1 billion and $2.9 billion, respectively, after making the $500 million pretax discretionary pension contribution. Operating cash flow in the fourth quarter and full-year 2017, excluding the $1.0 billion pretax discretionary pension contribution, was better than the company’s prior guidance primarily due to favorable collections.
In the fourth quarter 2017, the company repurchased 0.5 million shares of common stock for $100 million. For the full-year 2017, the company repurchased 4.9 million shares of common stock for $800 million. Also, as previously announced in November 2017, the company’s Board of Directors authorized the repurchase of up to an additional $2.0 billion of the company’s outstanding common stock.
The company had bookings of $8.5 billion in the fourth quarter 2017, resulting in a book-to-bill ratio of 1.26. Fourth quarter 2016 bookings were $7.6 billion. Full-year 2017 bookings were $27.7 billion, resulting in a book-to-bill ratio of 1.09. Full-year 2016 bookings were $27.8 billion.
Summary Financial Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4th Quarter
 
%
 
Twelve Months
 
%
($ in millions, except per share data)
2017
 
2016
 
Change
 
2017
 
2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
Bookings
$
8,541

 
$
7,582

 
12.6%
 
$
27,718

 
$
27,809

 
-0.3%
Net Sales
$
6,783

 
$
6,279

 
8.0%
 
$
25,348

 
$
24,124

 
5.1%
Income from Continuing Operations before Taxes
$
834

 
$
825

 
1.1%
 
$
3,113

 
$
3,085

3 
0.9%
Federal and Foreign Income Taxes
$
447

1 
$
272

2 
64.3%
 
$
1,114

1 
$
873

2 
27.6%
Income from Continuing Operations attributable to Raytheon Company
$
393

1 
$
555

2 
-29.2%
 
$
2,022

1 
$
2,243

2,3 
-9.9%
EPS from Continuing Operations
$
1.35

1 
$
1.87

2 
-27.8%
 
$
6.94

1 
$
7.55

2,3 
-8.1%
Operating Cash Flow from Continuing Operations
$
1,624

 
$
1,141

 
 
 
$
2,747

 
$
2,852

 
 
Workdays in Fiscal Reporting Calendar
58

 
57

 
 
 
248

 
249

 
 
1 Fourth quarter and twelve months 2017 Federal and Foreign Income Taxes and Income from Continuing Operations attributable to Raytheon Company included: 1) a provisional tax-related expense of approximately $171 million due to the enactment of the Tax Cuts and Jobs Act of 2017, which had an EPS impact of $0.59, and 2) a $25 million unfavorable tax-related impact due to the $1.0 billion discretionary pension plan contribution, which had an EPS impact of $0.09.
2 Fourth quarter and twelve months 2016 Federal and Foreign Income Taxes and Income from Continuing Operations attributable to Raytheon Company included a $13 million unfavorable tax-related impact due to the $0.5 billion discretionary pension plan contribution, which had an EPS impact of $0.04.
3 Twelve months 2016 Income from Continuing Operations before Taxes and Income from Continuing Operations attributable to Raytheon Company included the tax-free gain of $158 million for the second quarter 2016 TRS transaction, which had a favorable EPS impact of $0.53.
 
 
 
 
 
 
 
 
 
 
 
 
Backlog at the end of 2017 was $38.2 billion, an increase of approximately $1.5 billion or 4 percent compared to the end of 2016.
Backlog
 
 
 
 
 
 Period Ending
($ in millions)
2017
 
 
2016
Backlog
$
38,210

 
 
$
36,709

Outlook
The company has provided its financial outlook for 2018. Charts containing additional information on the company’s 2018 outlook are available on the company’s website.


2

Effective January 1, 2018, the company adopted the new retirement benefit standard, which moves certain components of FAS pension and postretirement benefit expense from operating to non-operating income. The adoption of this standard increases operating income due to the removal of all components of FAS expense other than service cost, and decreases non-operating income by the same amount with no impact to net income. The standard does not impact our CAS expense, which is recorded in the results of each segment. As a result, our FAS/CAS Adjustment will be split into: FAS/CAS Operating Adjustment; and Other Pension Expense within non-operating. The 2017 Actuals - New Standard and the 2018 columns in the Financial Outlook table below reflect the adoption of the standard.
2018 Financial Outlook
 
 
 
 
 
 
2017 Actual
 
2018
 
As Reported
 
New Standard1
 
Outlook1
Net Sales ($B)
25.3
 
25.3
 
26.4 - 26.9
Deferred Revenue Adjustment ($M)2
(35)
 
(35)
 
(10)
Amortization of Acquired Intangibles ($M)2
(125)
 
(125)
 
(118)
FAS/CAS Adjustment ($M)
390
 
n/a
 
n/a
   FAS/CAS Operating Adjustment ($M)
n/a
 
1,303
 
1,416
   Other Pension Expense, non-operating ($M)
n/a
 
(913)
 
(958)
Interest Expense, net ($M)
 (184)
 
 (184)
 
 (180) - (185)
Diluted Shares (M)
291
 
291
 
287 - 289
Effective Tax Rate3
 35.8%
 
 35.8%
 
 ~19.0%
EPS from Continuing Operations3
$6.94
 
$6.94
 
$9.55 - $9.75
Operating Cash Flow from Continuing Operations ($B)
2.7
 
2.7
 
 3.6 - 4.0
n/a = Not Applicable
 
 
 
 
 
1 Effective January 1, 2018, the company adopted the new retirement benefit standard, Accounting Standards Update 2017-07. The 2017 Actuals - New Standard and the 2018 Outlook above reflect this change.
2 Deferred Revenue Adjustment and Amortization of Acquired Intangibles represent the unfavorable impact of the acquisition accounting adjustments to record acquired deferred revenue at fair value and the amortization of acquired intangible assets for all business segments.
3 2017 and 2018 effective tax rate reflect the enactment of the Tax Cuts and Jobs Act of 2017. 2017 was impacted unfavorably by a provisional amount of approximately $171 million, which had an impact to the 2017 rate of 5.5 percent and an EPS impact of $0.59.
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 ForcepointTM.
Integrated Defense Systems
 
 
 
 
 
 
 
 
 
 
 
4th Quarter
 
 
 
Twelve Months
 
 
($ in millions)
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Net Sales
$
1,553

 
$
1,460

 
6%
 
$
5,804

 
$
5,529

 
5%
Operating Income1
$
247

 
$
238

 
4%
 
$
935

 
$
971

 
NM
Operating Margin1
15.9
%
 
16.3
%
 
 
 
16.1
%
 
17.6
%
 
 
1 Twelve months 2016 operating income and operating margin include the $158 million tax-free gain from the second quarter 2016 ThalesRaytheonSystems (TRS) transaction.
NM = Not Meaningful
 
 
 
 
 
 
 
 
 
 
 
Integrated Defense Systems (IDS) had fourth quarter 2017 net sales of $1,553 million, up 6 percent compared to $1,460 million in the fourth quarter 2016. IDS had full-year 2017 net sales of $5,804 million compared to $5,529


3

million in 2016. The increase in net sales for both the quarter and the full-year was primarily driven by higher net sales on an international early warning radar program.
IDS recorded $247 million of operating income in the fourth quarter 2017 compared to $238 million in the fourth quarter 2016. The increase in operating income for the quarter was primarily driven by higher volume and a favorable change in program mix. IDS recorded $935 million of operating income in 2017 compared to $971 million in 2016. The change in operating income for the full-year was primarily driven by a favorable change in program mix, higher net program efficiencies and higher volume, which was more than offset by the $158 million tax-free gain from the ThalesRaytheonSystems (TRS) transaction in the second quarter 2016.
During the quarter, IDS booked $304 million on an Early Warning Surveillance Radar System (EWSRS) support program for an international customer; $280 million to provide Consolidated Contractor Logistics Support (CCLS) for the Missile Defense Agency (MDA); $264 million to provide advanced Patriot Air and Missile Defense system capabilities for international customers; and $81 million on the Army Navy/Transportable Radar Surveillance-Model 2 (AN/TPY-2) radar sustainment program for the MDA.
Shortly after the quarter close, as previously announced, IDS received a direct commercial contract worth more than $1.5 billion to provide Patriot Air and Missile Defense system capability to a member of the 14-nation Patriot partnership.
Intelligence, Information and Services
 
 
 
 
 
 
 
 
 
4th Quarter
 
 
 
Twelve Months
 
 
($ in millions)
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Net Sales
$
1,572

 
$
1,516

 
4%
 
$
6,177

 
$
6,169

 
-
Operating Income
$
117

 
$
120

 
-3%
 
$
455

 
$
467

 
-3%
Operating Margin
7.4
%
 
7.9
%
 
 
 
7.4
%
 
7.6
%
 
 
Intelligence, Information and Services (IIS) had fourth quarter 2017 net sales of $1,572 million, up 4 percent compared to $1,516 million in the fourth quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on a U.S. Air Force program and classified programs. IIS had full-year 2017 net sales of $6,177 million compared to $6,169 million in 2016.
IIS recorded $117 million of operating income in the fourth quarter 2017 compared to $120 million in the fourth quarter 2016. IIS recorded $455 million of operating income in 2017 compared to $467 million in 2016.
During the quarter, IIS booked $244 million on domestic and foreign training programs in support of Warfighter FOCUS activities; $233 million to upgrade the Phalanx® Closed-In Weapon System (CIWS) for the Royal Canadian Navy; $98 million on the Development, Operations and Maintenance (DOMino) Cyber program for the Department of Homeland Security (DHS); $97 million on the Standard Terminal Automation Replacement System (STARS) program for the Federal Aviation Administration (FAA); and $77 million to support the Naval Communication Station, Harold E. Holt facility for Australia. IIS also booked $410 million on a number of classified contracts.


4

Missile Systems
 
 
 
 
 
 
 
 
 
4th Quarter
 
 
 
Twelve Months
 
 
($ in millions)
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Net Sales
$
2,185

 
$
1,897

 
15%
 
$
7,787

 
$
7,096

 
10%
Operating Income
$
278

 
$
261

 
7%
 
$
1,010

 
$
921

 
10%
Operating Margin
12.7
%
 
13.8
%
 
 
 
13.0
%
 
13.0
%
 
 
Missile Systems (MS) had fourth quarter 2017 net sales of $2,185 million, up 15 percent compared to $1,897 million in the fourth quarter 2016. The increase in net sales for the quarter was primarily driven by higher net sales on the Advanced Medium-Range Air-to-Air Missiles (AMRAAM®), Standard Missile-3 (SM-3®) and Paveway™ programs. MS had full-year 2017 net sales of $7,787 million compared to $7,096 million in 2016. The increase in net sales for the full-year was primarily driven by higher net sales on the Paveway, SM-3 and Standard Missile-2 (SM-2) programs.
MS recorded $278 million of operating income in the fourth quarter 2017 compared to $261 million in the fourth quarter 2016. MS recorded $1,010 million of operating income in 2017 compared to $921 million in 2016. The increase in operating income for both the quarter and the full-year was primarily due to higher volume in 2017.
During the quarter, MS booked $1,132 million for Paveway; $696 million for AMRAAM; $423 million for the Joint Standoff Weapon (JSOW®); $269 million for Tomahawk; $109 million for Phalanx CIWS; $107 million for SM-3; $80 million for the Mobile Range program; and $77 million for Horizontal Technology Integration (HTI) forward-looking infrared kits. MS also booked $310 million on a number of classified contracts.
Space and Airborne Systems
 
 
 
 
 
 
 
 
 
4th Quarter
 
 
 
Twelve Months
 
 
($ in millions)
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Net Sales
$
1,670

 
$
1,600

 
4%
 
$
6,430

 
$
6,182

 
4%
Operating Income
$
242

 
$
221

 
10%
 
$
862

 
$
808

 
7%
Operating Margin
14.5
%
 
13.8
%
 
 
 
13.4
%
 
13.1
%
 
 
Space and Airborne Systems (SAS) had fourth quarter 2017 net sales of $1,670 million, up 4 percent compared to $1,600 million in the fourth quarter 2016. The increase in net sales for the quarter was primarily due to higher net sales on airborne radar programs. SAS had full-year 2017 net sales of $6,430 million compared to $6,182 million in 2016. The increase in net sales for the full-year was primarily due to higher net sales on an electronic warfare systems program and a domestic classified program.
SAS recorded $242 million of operating income in the fourth quarter 2017 compared to $221 million in the fourth quarter 2016. SAS recorded $862 million of operating income in 2017 compared to $808 million in 2016. The change in operating income for the quarter and full-year was primarily driven by higher volume in 2017 and a favorable change in program mix.
During the quarter, SAS booked $411 million on a number of classified contracts.


5

Forcepoint
 
 
 
 
 
 
 
 
 
4th Quarter
 
 
 
Twelve Months
 
 
($ in millions)
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Net Sales
$
156

 
$
143

 
9%
 
$
608

 
$
586

 
4%
Operating Income
$
(8
)
 
$
21

 
NM
 
$
33

 
$
90

 
NM
Operating Margin
(5.1
)%
 
14.7
%
 
 
 
5.4
%
 
15.4
%
 
 
NM = Not Meaningful
 
 
 
 
 
 
 
 
 
 
 
Forcepoint had fourth quarter 2017 net sales of $156 million compared to $143 million in the fourth quarter 2016. Forcepoint had full-year 2017 net sales of $608 million compared to $586 million in 2016.
Forcepoint recorded a loss of $8 million in the fourth quarter 2017 compared to operating income of $21 million in the fourth quarter 2016. Forcepoint recorded $33 million of operating income in 2017 compared to $90 million in 2016. The decrease in operating income for both the quarter and the full-year was primarily driven by higher selling and marketing 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, C5ITM 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 Fourth Quarter and Full-Year 2017 Financial Results
Raytheon’s financial results conference call will be held on Thursday, January 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 (877) 280-4958 in the U.S. or (857) 244-7315 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


6

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.

# # #


7

Attachment A
 
 
 
 
 
 
 
 
Raytheon Company
 

 
 
 
 
Preliminary Statement of Operations Information
 
 
 
 
 
 
 
 
Fourth Quarter 2017
 
 
 
 
 
 
 
 
(In millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
Net sales
 
$
6,783

 
$
6,279

 
$
25,348

 
$
24,124

Operating expenses
 
 
 
 
 
 
 
 
Cost of sales
 
5,171

 
4,688

 
19,076

 
17,965

General and administrative expenses
 
742

 
711

 
2,954

 
2,864

Total operating expenses
 
5,913

 
5,399

 
22,030

 
20,829

Operating income
 
870

 
880

 
3,318

 
3,295

Non-operating (income) expense, net
 
 
 
 
 
 
 
 
Interest expense
 
48

 
58

 
205

 
232

Interest income
 
(7
)
 
(4
)
 
(21
)
 
(16
)
Other (income) expense, net
 
(5
)
 
1

 
21

 
(6
)
Total non-operating (income) expense, net
 
36

 
55

 
205

 
210

Income from continuing operations before taxes
 
834

 
825

 
3,113

 
3,085

Federal and foreign income taxes
 
447

 
272

 
1,114

 
873

Income from continuing operations
 
387

 
553

 
1,999

 
2,212

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

 
—

 
2

 
1

Net income
 
387

 
553

 
2,001

 
2,213

Less: Net income (loss) attributable to noncontrolling interests in subsidiaries
 
(6
)
 
(2
)
 
(23
)
 
(31
)
Net income attributable to Raytheon Company
 
$
393

 
$
555

 
$
2,024

 
$
2,244

 
 
 
 
 
 
 
 
 
Basic earnings per share attributable to Raytheon Company common stockholders:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
1.35

 
$
1.88

 
$
6.95

 
$
7.55

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

 
—

 
0.01

 
—

Net income
 
1.35

 
1.88

 
6.96

 
7.56

 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Raytheon Company common stockholders:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
1.35

 
$
1.87

 
$
6.94

 
$
7.55

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

 
—

 
0.01

 
—

Net income
 
1.35

 
1.88

 
6.95

 
7.55

 
 
 
 
 
 
 
 
 
Amounts attributable to Raytheon Company common stockholders:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
393

 
$
555

 
$
2,022

 
$
2,243

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

 
—

 
2

 
1

Net income
 
$
393

 
$
555

 
$
2,024

 
$
2,244

 
 
 
 
 
 
 
 
 
Average shares outstanding
 
 
 
 
 
 
 
 
Basic
 
289.6

 
294.2

 
291.1

 
296.5

Diluted
 
290.0

 
294.5

 
291.4

 
296.8





Attachment A - Pro Forma
 
 
Raytheon Company
 
 
 
 
 
 
 
 
 
 
 
 
Preliminary Statement of Operations Information
 
 
 
 
 
 
Full-Year 2016, and Quarters within and Full-Year 2017
 
 
 
 
 
 
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2017-07, Compensation-Retirement Benefits (Topic 715). The tables below provide additional information with respect to the line items within our statement of operations information impacted by the new standard.
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
1-Oct-17
 
2-Jul-17
 
2-Apr-17
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
6,783

 
$
6,284

 
$
6,281

 
$
6,000

 
$
25,348

 
$
24,124

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
 
5,171

 
4,690

 
4,685

 
4,530

 
19,076

 
17,965

General and administrative expenses
 
742

 
736

 
747

 
729

 
2,954

 
2,864

Total operating expenses
 
5,913

 
5,426

 
5,432

 
5,259

 
22,030

 
20,829

Operating income
 
870

 
858

 
849

 
741

 
3,318

 
3,295

Non-operating (income) expense, net
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
48

 
48

 
51

 
58

 
205

 
232

Interest income
 
(7
)
 
(4
)
 
(5
)
 
(5
)
 
(21
)
 
(16
)
Other (income) expense, net
 
(5
)
 
(2
)
 
35

 
(7
)
 
21

 
(6
)
Total non-operating (income) expense, net
 
36

 
42

 
81

 
46

 
205

 
210

Income from continuing operations before taxes
 
$
834

 
$
816

 
$
768

 
$
695

 
$
3,113

 
$
3,085

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments for ASU 2017-07
 
 
 
 
 
 
 
 
 
 
 
 

 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
1-Oct-17
 
2-Jul-17
 
2-Apr-17
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
 
(186
)
 
(222
)
 
(164
)
 
(164
)
 
(736
)
 
(458
)
General and administrative expenses
 
(44
)
 
(48
)
 
(42
)
 
(43
)
 
(177
)
 
(143
)
Total operating expenses
 
(230
)
 
(270
)
 
(206
)
 
(207
)
 
(913
)
 
(601
)
Operating income
 
230

 
270

 
206

 
207

 
913

 
601

Non-operating (income) expense, net
 
 
 
 
 
 
 
 
 
 
 
 
Other pension expense
 
230

 
270

 
206

 
207

 
913

 
601

Interest expense
 
—

 
—

 
—

 
—

 
—

 
—

Interest income
 
—

 
—

 
—

 
—

 
—

 
—

Other (income) expense, net
 
—

 
—

 
—

 
—

 
—

 
—

Total non-operating (income) expense, net
 
230

 
270

 
206

 
207

 
913

 
601

Income from continuing operations before taxes
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
1-Oct-17
 
2-Jul-17
 
2-Apr-17
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
6,783

 
$
6,284

 
$
6,281

 
$
6,000

 
$
25,348

 
$
24,124

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
 
4,985

 
4,468

 
4,521

 
4,366

 
18,340

 
17,507

General and administrative expenses
 
698

 
688

 
705

 
686

 
2,777

 
2,721

Total operating expenses
 
5,683

 
5,156

 
5,226

 
5,052

 
21,117

 
20,228

Operating income
 
1,100

 
1,128

 
1,055

 
948

 
4,231

 
3,896

Non-operating (income) expense, net
 
 
 
 
 
 
 
 
 
 
 
 
Other pension expense
 
230

 
270

 
206

 
207

 
913

 
601

Interest expense
 
48

 
48

 
51

 
58

 
205

 
232

Interest income
 
(7
)
 
(4
)
 
(5
)
 
(5
)
 
(21
)
 
(16
)
Other (income) expense, net
 
(5
)
 
(2
)
 
35

 
(7
)
 
21

 
(6
)
Total non-operating (income) expense, net
 
266

 
312

 
287

 
253

 
1,118

 
811

Income from continuing operations before taxes
 
$
834

 
$
816

 
$
768

 
$
695

 
$
3,113

 
$
3,085



Attachment B
 
 
 
 
 
 
 
 
 
 
 
 
Raytheon Company
 

 
 
Preliminary Segment Information
 
 
 
 
 
 
 
 
 
 
 
 
Fourth Quarter 2017
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
 
31-Dec-17
 
31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Integrated Defense Systems
 
$
1,553

 
$
1,460

 
$
247

 
$
238

 
15.9
 %
 
16.3
%
Intelligence, Information and Services
 
1,572

 
1,516

 
117

 
120

 
7.4
 %
 
7.9
%
Missile Systems
 
2,185

 
1,897

 
278

 
261

 
12.7
 %
 
13.8
%
Space and Airborne Systems
 
1,670

 
1,600

 
242

 
221

 
14.5
 %
 
13.8
%
Forcepoint
 
156

 
143

 
(8
)
 
21

 
(5.1
)%
 
14.7
%
Eliminations
 
(346
)
 
(324
)
 
(35
)
 
(33
)
 


 


Total business segment
 
6,790

 
6,292

 
841

 
828

 
12.4
 %
 
13.2
%
Acquisition Accounting Adjustments
 
(7
)
 
(13
)
 
(37
)
 
(43
)
 
 
 
 
FAS/CAS Adjustment
 
—

 
—

 
95

 
117

 
 
 
 
Corporate
 
—

 
—

 
(29
)
 
(22
)
 
 
 
 
Total
 
$
6,783

 
$
6,279

 
$
870

 
$
880

 
12.8
 %
 
14.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
 
 
Net Sales
 
Operating Income
 
As a Percent of Net Sales
 
 
Twelve Months Ended
 
Twelve Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Integrated Defense Systems
 
$
5,804

 
$
5,529

 
$
935

 
$
971

 
16.1
 %
 
17.6
%
Intelligence, Information and Services
 
6,177

 
6,169

 
455

 
467

 
7.4
 %
 
7.6
%
Missile Systems
 
7,787

 
7,096

 
1,010

 
921

 
13.0
 %
 
13.0
%
Space and Airborne Systems
 
6,430

 
6,182

 
862

 
808

 
13.4
 %
 
13.1
%
Forcepoint
 
608

 
586

 
33

 
90

 
5.4
 %
 
15.4
%
Eliminations
 
(1,423
)
 
(1,361
)
 
(148
)
 
(142
)
 
 
 
 
Total business segment
 
25,383

 
24,201

 
3,147

 
3,115

 
12.4
 %
 
12.9
%
Acquisition Accounting Adjustments
 
(35
)
 
(77
)
 
(160
)
 
(198
)
 
 
 
 
FAS/CAS Adjustment
 
—

 
—

 
390

 
435

 
 
 
 
Corporate
 
—

 
—

 
(59
)
 
(57
)
 
 
 
 
Total
 
$
25,348

 
$
24,124

 
$
3,318

 
$
3,295

 
13.1
 %
 
13.7
%

 


Attachment B - Pro Forma
 
 
Raytheon Company
 
 
 
 
Preliminary Segment Information
 
 
 
 
 
 
Full-Year 2016, and Quarters within and Full-Year 2017
 
 
 
 
 
 
(In millions, except percentages)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2017-07, Compensation-Retirement Benefits (Topic 715). The tables below provide additional information with respect to the line items within our segment information impacted by the new standard.
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
1-Oct-17
 
2-Jul-17
 
2-Apr-17
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net sales
 
$
6,783

 
$
6,284

 
$
6,281

 
$
6,000

 
$
25,348

 
$
24,124

 
 
 
 
 
 
 
 
 
 
 
 
 
As reported
 
 
 
 
 
 
 
 
 
 
 
 

 
Operating Income
 
 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
1-Oct-17
 
2-Jul-17
 
2-Apr-17
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Total business segment
 
$
841

 
$
819

 
$
779

 
$
708

 
$
3,147

 
$
3,115

Acquisition Accounting Adjustments
 
(37
)
 
(39
)
 
(42
)
 
(42
)
 
(160
)
 
(198
)
FAS/CAS Adjustment
 
95

 
78

 
109

 
108

 
390

 
435

Corporate
 
(29
)
 
—

 
3

 
(33
)
 
(59
)
 
(57
)
Total
 
$
870

 
$
858

 
$
849

 
$
741

 
$
3,318

 
$
3,295

 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating income as a percentage of net sales
 
12.8
%
 
13.7
%
 
13.5
%
 
12.4
%
 
13.1
%
 
13.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments for ASU 2017-07
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
 
 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
1-Oct-17
 
2-Jul-17
 
2-Apr-17
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Total business segment
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Acquisition Accounting Adjustments
 
—

 
—

 
—

 
—

 
—

 
—

FAS/CAS Adjustment
 
230

 
270

 
206

 
207

 
913

 
601

Corporate
 
—

 
—

 
—

 
—

 
—

 
—

Total
 
$
230

 
$
270

 
$
206

 
$
207

 
$
913

 
$
601

 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
 
 
Three Months Ended
 
Twelve Months Ended
 
 
31-Dec-17
 
1-Oct-17
 
2-Jul-17
 
2-Apr-17
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
 
 
 
Total business segment
 
$
841

 
$
819

 
$
779

 
$
708

 
$
3,147

 
$
3,115

Acquisition Accounting Adjustments
 
(37
)
 
(39
)
 
(42
)
 
(42
)
 
(160
)
 
(198
)
FAS/CAS Operating Adjustment
 
325

 
348

 
315

 
315

 
1,303

 
1,036

Corporate
 
(29
)
 
—

 
3

 
(33
)
 
(59
)
 
(57
)
Total
 
$
1,100

 
$
1,128

 
$
1,055

 
$
948

 
$
4,231

 
$
3,896

 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating income as a percentage of net sales
 
16.2
%
 
18.0
%
 
16.8
%
 
15.8
%
 
16.7
%
 
16.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 

Attachment C
 
 
 
 
 
 
 
 
 
Raytheon Company

 
 
 
 
Other Preliminary Information
 
 
 
 
 
 
 
 
 
Fourth Quarter 2017
 
 
 
 
 
 
 
 
 
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Backlog
 
 
 
 
 
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
Integrated Defense Systems
 
 
 
 
 
 
$
9,186

 
$
10,159

Intelligence, Information and Services
 
 
 
 
 
6,503

 
5,662

Missile Systems
 
 
 
 
 
 
13,426

 
11,568

Space and Airborne Systems
 
 
 
 
 
 
8,611

 
8,834

Forcepoint
 
 
 
 
 
 
484

 
486

Total backlog
 
 
 
 
 
 
$
38,210

 
$
36,709

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
Bookings
 
 
31-Dec-17
 
31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
Total bookings
 
 
$
8,541

 
$
7,582

 
$
27,718

 
$
27,809

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
General and Administrative Expenses
 
 
31-Dec-17
 
31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
Administrative and selling expenses
 
$
566

 
$
515

 
$
2,220

 
$
2,109

Research and development expenses
 
176

 
196

 
734

 
755

Total general and administrative expenses
 
$
742

 
$
711

 
$
2,954

 
$
2,864

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash, Cash Equivalents and Restricted Cash
 
 
 
 
 
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
$
3,103

 
$
3,303

Restricted cash
 
 
 
12

 
—

Total cash, cash equivalents and restricted cash shown in Attachment E
 
 
 
$
3,115

 
$
3,303





Attachment D
 
 
 
Raytheon Company

Preliminary Balance Sheet Information
 
Fourth Quarter 2017
(In millions)
 
 
 
 
 
 
 
 
31-Dec-17
 
31-Dec-16
 
 
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
3,103

 
$
3,303

Short-term investments
297

 
100

Receivables, net
1,324

 
1,163

Contract assets
5,247

 
5,041

Inventories
594

 
608

Prepaid expenses and other current assets
761

 
670

Total current assets
11,326

 
10,885

 
 
 
 
Property, plant and equipment, net
2,439

 
2,166

Goodwill
14,871

 
14,788

Other assets, net
2,224

 
2,399

Total assets
$
30,860

 
$
30,238

 
 
 
 
Liabilities, Redeemable Noncontrolling Interest and Equity
 
 
 
Current liabilities
 
 
 
Commercial paper
$
300

 
$
—

Contract liabilities
2,927

 
2,646

Accounts payable
1,519

 
1,520

Accrued employee compensation
1,342

 
1,234

Other current liabilities
1,260

 
1,139

Total current liabilities
7,348

 
6,539

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

 
7,758

Long-term debt
4,750

 
5,335

 
 
 
 
Redeemable noncontrolling interest
512

 
449

 
 
 
 
Equity
 
 
 
Raytheon Company stockholders’ equity
 
 
 
Common stock
3

 
3

Additional paid-in capital
—

 
—

Accumulated other comprehensive loss
(7,935
)
 
(7,411
)
Retained earnings
17,895

 
17,565

Total Raytheon Company stockholders’ equity
9,963

 
10,157

Noncontrolling interests in subsidiaries
—

 
—

Total equity
9,963

 
10,157

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

 
$
30,238



Attachment E
 
 
 
Raytheon Company

Preliminary Cash Flow Information
 
 
 
Fourth Quarter 2017
 
 
 
(In millions)
 
 
 
 
Twelve Months Ended
 
31-Dec-17
 
31-Dec-16
 
 
 
 
Cash flows from operating activities
 
 
 
Net income
$
2,001

 
$
2,213

(Income) loss from discontinued operations, net of tax
(2
)
 
(1
)
Income from continuing operations
1,999

 
2,212

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
550

 
515

Stock-based compensation
173

 
151

Gain on sale of equity method investment
—

 
(158
)
Loss on repayment of long-term debt
39

 
—

Deferred income taxes
252

 
133

Changes in assets and liabilities
 
 
 
Receivables, net
(157
)
 
18

Contract assets and contract liabilities
88

 
(645
)
Inventories
14

 
(10
)
Prepaid expenses and other current assets
204

 
205

Income taxes receivable/payable
(193
)
 
(185
)
Accounts payable
(94
)
 
152

Accrued employee compensation
111

 
77

Other current liabilities
106

 
(41
)
Accrued retiree benefits
(250
)
 
419

Other, net
(95
)
 
9

Net cash provided by (used in) operating activities from continuing operations
2,747

 
2,852

Net cash provided by (used in) operating activities from discontinued operations
(2
)
 
—

Net cash provided by (used in) operating activities
2,745

 
2,852

Cash flows from investing activities
 
 
 
Additions to property, plant and equipment
(543
)
 
(561
)
Proceeds from sales of property, plant and equipment
46

 
34

Additions to capitalized internal use software
(68
)
 
(64
)
Purchases of short-term investments
(696
)
 
(472
)
Maturities of short-term investments
517

 
1,184

Payments for purchases of acquired companies, net of cash received
(93
)
 
(57
)
Other
20

 
(11
)
Net cash provided by (used in) investing activities
(817
)
 
53

Cash flows from financing activities
 
 
 
Dividends paid
(910
)
 
(850
)
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
(800
)
 
(900
)
Repurchases of common stock to satisfy tax withholding obligations
(85
)
 
(96
)
Acquisition of noncontrolling interest in RCCS LLC
—

 
(90
)
Contribution from noncontrolling interests in Forcepoint
8

 
11

Other
—

 
(5
)
Net cash provided by (used in) financing activities
(2,116
)
 
(1,930
)
Net increase (decrease) in cash, cash equivalents and restricted cash
(188
)
 
975

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

 
2,328

Cash, cash equivalents and restricted cash at end of period
$
3,115

 
$
3,303



Attachment F

 
 
 
 
Raytheon Company
 
 
 
 
 
 
 
Supplemental EPS Information
 
 
 
 
 
 
 
 
Fourth Quarter 2017
 
 
 
 
 
 
 
(In millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
 
 
 
31-Dec-17

31-Dec-16
 
31-Dec-17
 
31-Dec-16
 
 
 
 
 
 
 
 
Per share impact of the enactment of the Tax Cuts and Jobs Act of 2017 (A)
$
0.59

 
$
—

 
$
0.59

 
$
—

Per share impact of discretionary pension contributions (B)
0.09

 
0.04

 
0.09

 
0.04

Per share impact of early debt retirement (C)
—

 
—

 
0.09

 
—

Per share impact of TRS transaction (D)
—

 
—

 
—

 
0.53

 
 
 
 
 
 
 
 
 
 
 
 
(A)
Tax impact of the enactment of the Tax Cuts and Jobs Act of 2017
$
171

 
$
—

 
$
171

 
$
—

 
Diluted shares
290.0

 
—

 
291.4

 
—

 
Per share impact
$
0.59

 
$
—

 
$
0.59

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
(B)
Tax impact of discretionary pension contribution
$
25

 
$
13

 
$
25

 
$
13

 
Diluted shares
 
290.0

 
294.5

 
291.4

 
296.8

 
Per share impact
 
$
0.09

 
$
0.04

 
$
0.09

 
$
0.04

 
 
 
 
 
 
 
 
 
(C)
Early debt retirement
$
—

 
$
—

 
$
39

 
$
—

 
 
Tax effect (at 35% statutory rate)
—

 
—

 
(14
)
 
—

 
After-tax impact
—

 
—

 
25

 
—

 
Diluted shares
—

 
—

 
291.4

 
—

 
Per share impact
$
—

 
$
—

 
$
0.09

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
(D)
TRS transaction
 
$
—

 
$
—

 
$
—

 
$
158

 
Diluted shares
 
—

 
—

 
—

 
296.8

 
Per share impact
 
$
—

 
$
—

 
$
—

 
$
0.53