$ RTN. Raytheon Reports Solid Fourth Quarter and Full-Year 2014 Results.
WALTHAM, Mass., Jan. 29, 2015 /PRNewswire/ -- Raytheon Company (NYSE: RTN) announced fourth quarter 2014 EPS from continuing operations of $1.86 compared to $1.46 in the fourth quarter 2013. Fourth quarter 2014 Adjusted EPS was $1.71 per diluted share compared to $1.58 per diluted share in the fourth quarter 2013. Fourth quarter 2014 Adjusted EPS excluded a favorable FAS/CAS Adjustment of $0.15. Fourth quarter 2013 Adjusted EPS excluded an unfavorable FAS/CAS Adjustment of $0.12.
Full-year 2014 EPS from continuing operations was $6.97 compared to $5.96 for the full-year 2013. Full-year 2014 Adjusted EPS was $6.12 per diluted share compared to $6.38 per diluted share for the full-year 2013.
"Raytheon finished 2014 with strong fourth quarter operating performance, driven by continued global demand for our advanced solutions and solid execution from the Raytheon team," said Thomas A. Kennedy, Raytheon Chairman and CEO. " As we look to the year ahead, we will continue our focus on investing in innovative technologies, building on our capabilities to position the company for the future, and providing ongoing strong returns for shareholders."
The Company had bookings of $7.1 billion in the fourth quarter 2014, resulting in a book-to-bill ratio of 1.16. Full-year 2014 bookings were $24.1 billion, resulting in a book-to-bill ratio of 1.05 for the year.
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1 Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders, excluding the impact of the FAS/CAS Adjustment, and from time to time, certain other items. Adjusted EPS is a non-GAAP financial measure. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.
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Net sales for the fourth quarter 2014 were $6.1 billion, up 5 percent compared to $5.9 billion in the fourth quarter 2013. Net sales in 2014 were $22.8 billion, down 4 percent compared to $23.7 billion in 2013. Net sales for both the fourth quarter and full-year 2014 were in-line with the Company's prior financial guidance.
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 2014 was $829 million compared to $1.1 billion for the fourth quarter 2013. Fourth quarter 2014 included a $600 million pretax discretionary cash contribution to the Company's pension plans compared to $300 million in the fourth quarter 2013. For the full-year 2014 and 2013, the Company generated $2.1 billion and $2.4 billion of operating cash flow from continuing operations, respectively.
Summary Financial Results
4th Quarter
%
Twelve Months
%
($ in millions, except per share data)
2014
2013
Change
2014
2013
Change
Bookings
$
7,109
$
7,517
-5.4%
$
24,052
$
22,132
8.7%
Net Sales
$
6,143
$
5,870
4.7%
$
22,826
$
23,706
-3.7%
Income from Continuing Operations attributable to Raytheon Company
$
576
$
467
23.3%
$
2,179
$
1,932
12.8%
Adjusted Income*
$
530
$
506
4.7%
$
1,913
$
2,069
-7.5%
EPS from Continuing Operations
$
1.86
$
1.46
27.4%
$
6.97
$
5.96
16.9%
Adjusted EPS*
$
1.71
$
1.58
8.2%
$
6.12
$
6.38
-4.1%
Operating Cash Flow from Continuing Operations
$
829
$
1,106
$
2,064
$
2,382
Workdays in Fiscal Reporting Calendar
60
59
249
249
* Adjusted Income is income from continuing operations attributable to Raytheon Company common stockholders, and Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders; in each case, excluding the after-tax impact of the FAS/CAS Adjustment and, from time to time, certain other items. Twelve Months 2014 Adjusted Income and Adjusted EPS excluded the approximately $80 million and $0.26 favorable tax impact, respectively, resulting from cash repatriation in the first quarter 2014. Twelve Months 2013 Adjusted Income and Adjusted EPS excluded the $25 million and $0.08 impact, respectively, of the 2012 R&D tax credit. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.
For the full-year 2014, the Company repurchased 7.7 million shares of common stock for $750 million.
In the fourth quarter 2014, the Company issued $600 million in long-term debt.
The Company ended 2014 with $611 million of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.
As previously announced, in the fourth quarter 2014, the Company acquired Blackbird Technologies, which enhances the Company's offerings in persistent surveillance, secure mobile communications and cybersecurity solutions in intelligence and special operations markets, and is now part of Raytheon's Intelligence, Information and Services (IIS) business.
Backlog
($ in millions)
Period Ending
2014
2013
Backlog
$
33,571
$
33,685
Funded Backlog
$
23,092
$
23,014
Backlog at the end of 2014 was comprised of 40 percent international compared to 37 percent at the end of 2013.
Outlook
The Company has provided its financial outlook for 2015. Charts containing additional information on the Company's 2015 outlook are available on the Company's website at www.raytheon.com/ir.
2015 Financial Outlook
2014 Actual
2015 Outlook
Net Sales ($B)
22.8
22.3 - 22.8
FAS/CAS Adjustment ($M)
286
197
Interest Expense, net ($M)
(203)
(225) - (235)
Diluted Shares (M)
313
305 - 307
Effective Tax Rate
26.5%
Approx. 27.5%
EPS from Continuing Operations
$6.97
$6.20 - $6.35
Adjusted EPS**
$6.12
$5.49 - $5.64
Operating Cash Flow from Continuing Operations ($B)
2.1
2.3 - 2.6
** Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders, excluding the after-tax impact of the FAS/CAS Adjustment and, from time to time, certain other items. In addition to the FAS/CAS Adjustment, 2014 Adjusted EPS and 2015 Adjusted EPS guidance also excludes the impact of certain tax related items. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.
Segment Results
The Company's reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); and Space and Airborne Systems (SAS).
Integrated Defense Systems
4th Quarter
Twelve Months
($ in millions)
2014
2013
% Change
2014
2013
% Change
Net Sales
$
1,627
$
1,569
4%
$
6,085
$
6,489
-6%
Operating Income
$
299
$
241
24%
$
974
$
1,115
-13%
Operating Margin
18.4%
15.4%
16.0%
17.2%
Integrated Defense Systems (IDS) had fourth quarter 2014 net sales of $1,627 million, up 4 percent compared to $1,569 million in the fourth quarter 2013. The increase in net sales was primarily due to higher sales on international Patriot programs. IDS had full-year 2014 net sales of $6,085 million compared to $6,489 million in 2013. The change in net sales was primarily due to the scheduled completion of production phases on certain international Patriot programs, a missile defense radar program, and a close combat radar program.
IDS recorded $299 million of operating income in the fourth quarter 2014 compared to $241 million in the fourth quarter 2013. The increase in operating income was primarily driven by improved operating performance and a change in program mix. IDS recorded $974 million of operating income in 2014 compared to $1,115 million in 2013. The change in operating income for the full-year 2014 was primarily driven by lower volume and a change in mix on international Patriot programs.
During the quarter, IDS booked $2,038 million to provide advanced Patriot air and missile defense capability for Qatar and $355 million for the Air Warfare Destroyer (AWD) program for the Australian Navy. IDS also booked $192 million to provide Consolidated Contractor Logistics Support (CCLS) and $154 million for a radar sustainment contract for the Missile Defense Agency (MDA).
Intelligence, Information and Services
4th Quarter
Twelve Months
($ in millions)
2014
2013
% Change
2014
2013
% Change
Net Sales
$
1,538
$
1,458
5%
$
5,984
$
6,045
-1%
Operating Income
$
131
$
121
8%
$
508
$
510
—
Operating Margin
8.5%
8.3%
8.5%
8.4%
Intelligence, Information and Services (IIS) had fourth quarter 2014 net sales of $1,538 million, up 5 percent compared to $1,458 million in the fourth quarter 2013. The increase in net sales was primarily driven by higher volume on classified programs. IIS had full-year 2014 net sales of $5,984 million compared to $6,045 million in 2013.
IIS recorded $131 million of operating income in the fourth quarter 2014 compared to $121 million in the fourth quarter 2013. The increase in operating income was primarily driven by higher volume. IIS recorded $508 million of operating income in 2014 compared to $510 million in 2013.
During the quarter, IIS booked $111 million on the Allied System for Geospatial Intelligence (ASG) program for the United Kingdom. IIS also booked $391 million on a number of classified contracts.
Missile Systems
4th Quarter
Twelve Months
($ in millions)
2014
2013
% Change
2014
2013
% Change
Net Sales
$
1,719
$
1,638
5%
$
6,309
$
6,599
-4%
Operating Income
$
212
$
201
5%
$
800
$
830
-4%
Operating Margin
12.3%
12.3%
12.7%
12.6%
Missile Systems (MS) had fourth quarter 2014 net sales of $1,719 million, up 5 percent compared to $1,638 million in the fourth quarter 2013. The increase in net sales was primarily driven by higher volume on the Advanced Medium-Range Air-to-Air Missile (AMRAAM) and Evolved Sea Sparrow Missile (ESSM) programs. MS had full-year 2014 net sales of $6,309 million compared to $6,599 million in 2013. The change in net sales was primarily driven by lower sales on U.S. Army programs.
MS recorded $212 million of operating income in the fourth quarter 2014 compared to $201 million in the fourth quarter 2013. The increase in operating income was primarily due to higher volume. MS recorded $800 million of operating income in 2014 compared to $830 million in 2013. The change in operating income for the full-year 2014 was primarily due to lower volume.
During the quarter, MS booked $509 million for AMRAAM for the U.S. Air Force, U.S. Navy and international customers. MS also booked $146 million for ESSM for the U.S. Navy and international customers and $102 million for Tube-launched, Optically-tracked, Wireless-guided (TOW) missiles for the U.S. Army, U.S. Marines and international customers.
Space and Airborne Systems
4th Quarter
Twelve Months
($ in millions)
2014
2013
% Change
2014
2013
% Change
Net Sales
$
1,660
$
1,613
3%
$
6,072
$
6,371
-5%
Operating Income
$
217
$
253
-14%
$
846
$
920
-8%
Operating Margin
13.1%
15.7%
13.9%
14.4%
Space and Airborne Systems (SAS) had fourth quarter 2014 net sales of $1,660 million, up 3 percent compared to $1,613 million in the fourth quarter 2013. The increase in net sales was primarily driven by higher volume on an electronic warfare systems program. SAS had full-year 2014 net sales of $6,072 million compared to $6,371 million in 2013. The change in net sales for the full-year 2014 was primarily due to lower volume on intersegment sales and on classified programs.
SAS recorded $217 million of operating income in the fourth quarter 2014 compared to $253 million in the fourth quarter 2013. The change in operating income was primarily due to the timing of program efficiencies. SAS recorded $846 million of operating income in 2014 compared to $920 million in 2013. The change in operating income for the full-year 2014 was primarily due to a change in program mix and lower volume.
During the quarter, SAS booked $105 million for Advanced Targeting Forward Looking Infrared (ATFLIR) pods and spares for the U.S. Navy and international customers. SAS also booked $76 million on the Navy Multiband Terminal (NMT) program and $150 million on a number of classified contracts.
