Raytheon Reports Solid Q4 Numbers

Raytheon Press Release

Raytheon Company announced fourth quarter 2008 adjusted income from continuing operations of $466 million or $1.13 per diluted share, compared to $420 million or $0.96 per diluted share in the fourth quarter 2007(1).

Reported fourth quarter 2008 income from continuing operations was $421 million or $1.02 per diluted share compared to $634 million or $1.45 per diluted share in the fourth quarter 2007. Fourth quarter 2008 income from continuing operations included a $45 million or $0.11 per diluted share unfavorable adjustment due to the impact of pension investment returns on existing contracts (the “CAS Pension Adjustment”). Fourth quarter 2007 income from continuing operations included a $214 million or $0.49 per diluted share favorable adjustment due to tax-related benefits.

“Raytheon had a successful 2008 with strong bookings, a record backlog and solid growth in sales and operating income,” said William H. Swanson, Raytheon Chairman and CEO. “Our advanced technologies, program performance and diverse portfolio of products and services are uniquely suited to meet customer requirements and position us well for the future.”

Net sales in the fourth quarter 2008 were $6.1 billion compared to $6.0 billion in the fourth quarter 2007. The Company’s solid sales performance in the fourth quarter 2008 was achieved with 3 fewer work days than the fourth quarter 2007.

The Company continued to generate solid operating cash flow in the fourth quarter 2008. Operating cash flow from continuing operations in the fourth quarter 2008 was $444 million compared to $941 million in the fourth quarter 2007. The change was primarily due to $381 million in tax refunds in the fourth quarter 2007. The Company also made $160 million more in discretionary cash contributions to its pension plans in the fourth quarter 2008 ($660 million in 2008 compared to $500 million in 2007).

The Company ended the year with $50 million of net debt. Net debt is defined as total debt less cash and cash equivalents.

Full-Year Financial Results

Full-year 2008 adjusted income from continuing operations was $1.7 billion or $4.06 per diluted share, compared to $1.5 billion or $3.31 per diluted share in 2007(2). Reported full-year 2008 income from continuing operations was $1.7 billion or $3.95 per diluted share compared to $1.7 billion or $3.80 per diluted share in 2007. Full-year 2008 income from continuing operations included the $45 million or $0.11 per diluted share unfavorable CAS Pension Adjustment. Full-year 2007 income from continuing operations included a $219 million or $0.49 per diluted share favorable adjustment due to tax-related benefits.

2008 net sales were $23.2 billion compared to $21.3 billion in 2007, an increase of 9 percent. All of Raytheon’s businesses contributed to the Company’s sales growth.

The Company generated excellent operating cash flow for the year. Operating cash flow from continuing operations was $2.0 billion in 2008 compared to $1.2 billion in 2007. The increase in operating cash flow in 2008 was primarily due to a reduction in working capital items, lower net cash tax payments and lower discretionary cash contributions made to the Company’s pension plans. The Company paid $448 million in net cash taxes in 2008, compared to $734 million in 2007 (which included $631 million in tax payments attributable to the gain on the sale of Raytheon Aircraft Company (RAC) and $381 million in tax refunds). The Company also made $660 million in discretionary cash contributions to its pension plans in 2008 compared to $900 million in 2007.

As part of its previously announced share repurchase program, the Company repurchased 14.1 million shares of common stock for $680 million in the fourth quarter 2008 and 30.7 million shares for $1.7 billion for the year.

(1) Adjusted EPS and income from continuing operations are non-GAAP financial measures. Fourth quarter and full-year 2008 adjusted EPS and income from continuing operations exclude the $45 million ($69 million pretax) or $0.11 per diluted share unfavorable adjustment due to the impact of pension investment returns on existing contracts (the “CAS Pension Adjustment”). Fourth quarter and full-year 2007 adjusted EPS and income from continuing operations exclude a $0.49 per diluted share ($214 million) and $0.49 per diluted share ($219 million) favorable adjustment, respectively, due to certain tax-related benefits. Please see attachment G for a reconciliation of these measures to EPS and income from continuing operations under GAAP and a discussion of why the Company is presenting this information.

(2) Adjusted EPS and income from continuing operations are non-GAAP financial measures. Full-year 2008 adjusted EPS and income from continuing operations exclude the $45 million ($69 million pretax) or $0.11 per diluted share unfavorable CAS Pension Adjustment. Full-year 2007 adjusted EPS and income from continuing operations exclude a $0.49 per diluted share ($219 million) favorable adjustment due to certain tax-related benefits. Please see attachment G for a reconciliation of these measures to EPS and income from continuing operations under GAAP and a discussion of why the Company is presenting this information.

Read about the rest of Raytheon’s results here.