EX-99.1 2 rtn-04252019xexhibit991x8k.htm PRESS RELEASE Exhibit
Exhibit 99.1

rtnlogo1a01a06a01a29.jpg
 
 
Raytheon Company
rtnline1a01a06a01a29.jpg
 
 
Global Headquarters
 
 
Waltham, Mass.
 
 
 
 
 
Investor Relations Contact
 
 
Kelsey DeBriyn
 
 
 
781.522.5141
 
 
 
 
 
 
 
Media Contact
 
 
 
Corinne Kovalsky
 
 
 
781.522.5899
For Immediate Release

Raytheon Reports Strong First Quarter 2019 Results

•
Net sales of $6.7 billion, up 7.4 percent
•
EPS from continuing operations of $2.77, up 25.9 percent
•
Increased annual dividend by 8.6 percent, as previously announced
__________________________________________________________________________________________________

WALTHAM, Mass., (April 25, 2019) - 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.


1

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™.
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.



2

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.


3

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 (RAMTM), 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
 
 
 
 
 


4

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


5

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.

# # #


6

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
 
 
Net Sales
 
Operating Income
 
As a Percent of Net Sales
 
 
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