Raytheon Reports Solid Fourth Quarter and Full-Year 2013 Results
WALTHAM, Mass., Jan. 30, 2014 /PRNewswire/ -- Raytheon Company (NYSE: RTN) announced fourth quarter 2013 Adjusted EPS1 of $1.58 per diluted share compared to $1.62 per diluted share in the fourth quarter 2012. Fourth quarter 2013 EPS from continuing operations was $1.46 compared to $1.41 in the fourth quarter 2012. The fourth quarter 2012 Adjusted EPS1 excluded a $0.06 net charge associated with the impact of early debt retirement, and has been revised to include the favorable $0.02 impact for the 2012 research and development (R&D) tax credit approved by Congress in January 2013. In addition, the fourth quarter 2013 Adjusted EPS1 excluded an unfavorable FAS/CAS Adjustment of $0.12, compared with an unfavorable FAS/CAS Adjustment of $0.13 in the fourth quarter 2012.
Full-year 2013 Adjusted EPS1 was $6.38 per diluted share compared to $6.28 for the full-year 2012. Full-year 2013 EPS from continuing operations was $5.96 compared to $5.65 for the full-year 2012.
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1 Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders, and Adjusted Operating Margin is total operating margin; in each case, excluding the impact of the FAS/CAS Adjustment, and from time to time, certain other items. Full-year 2013 Adjusted EPS excluded the $0.08 impact of the 2012 research and development (R&D) tax credit, approved by Congress in January 2013, that relates to 2012. Q4 2012 and full-year 2012 Adjusted EPS also excluded the impact of the early retirement of debt as discussed above and have been revised to include the favorable $0.02 and $0.07 impact, respectively, for the 2012 R&D tax credit. Adjusted EPS and Adjusted Operating Margin are non-GAAP financial measures. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.
"Over the past year, the Raytheon team delivered solid operating results in a dynamic business environment," said William H. Swanson, Raytheon's Chairman and CEO. "We continued to expand our international business while also winning significant new programs with our advanced technologies and affordable solutions that position us well for the future."
Summary Financial Results
4th Quarter
%
Twelve Months
%
($ in millions, except per share data)
2013
2012
Change
2013
2012
Change
Net Sales
$
5,870
$
6,439
-8.8%
$
23,706
$
24,414
-2.9%
Income from Continuing Operations attributable to
Raytheon Company
$
467
$
466
0.2%
$
1,932
$
1,889
2.3%
Adjusted Income*
$
506
$
536
-5.6%
$
2,069
$
2,099
-1.4%
EPS from Continuing Operations
$
1.46
$
1.41
3.5%
$
5.96
$
5.65
5.5%
Adjusted EPS*
$
1.58
$
1.62
-2.5%
$
6.38
$
6.28
1.6%
Operating Cash Flow from Continuing Operations
$
1,106
$
988
$
2,382
$
1,951
Workdays in Fiscal Reporting Calendar
59
58
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. Full-year 2013 Adjusted Income and Adjusted EPS both excluded the $0.08 impact of the 2012 R&D tax credit. Q4 2012 and full-year 2012 Adjusted Income and Adjusted EPS also both excluded the impact of the early retirement of debt and have been revised to include the favorable $0.02 and $0.07 impact, respectively, for the 2012 R&D tax credit. Adjusted Income and Adjusted EPS are non-GAAP financial measures. See attachment F for a reconciliation of these measures and a discussion of why the Company is presenting this information.
Net sales for the fourth quarter 2013 were $5.9 billion compared to $6.4 billion in the fourth quarter 2012. Net sales in 2013 were $23.7 billion compared to $24.4 billion in 2012. Net sales for both the fourth quarter and full-year 2013 were in-line with the Company's prior financial guidance. The change in net sales for full-year 2013 reflects a 3 percent increase in international sales partially offsetting the decline in domestic sales, which included the impact of sequestration, the government shutdown, and a continuing resolution.
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 2013 was $1.1 billion compared to $1.0 billion for the fourth quarter 2012. For the full-year 2013 and 2012, the Company generated $2.4 billion and $2.0 billion of operating cash flow from continuing operations, respectively.
In the fourth quarter 2013, the Company repurchased 4.7 million shares of common stock for $400 million as part of its previously announced share repurchase program. For the full-year 2013, the Company has repurchased 15.2 million shares of common stock for approximately $1.1 billion. Also, as previously announced in November 2013, 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 ended 2013 with $437 million of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.
Bookings and Backlog
Bookings
Backlog
($ in millions)
4th Quarter
Twelve Months
($ in millions)
Period Ending
2013
2012
2013
2012
2013
2012
Bookings
$
7,517
$
7,892
$
22,132
$
26,504
Backlog
$
33,685
$
36,181
Funded Backlog
$
23,014
$
24,047
The Company had bookings of $7.5 billion in the fourth quarter 2013 and ended 2013 with a backlog of $33.7 billion.
Outlook
The Company has provided its financial outlook for 2014. Charts containing additional information on the Company's 2014 outlook are available on the Company's website at www.raytheon.com/ir.
2014 Financial Outlook
2013 Actual
2014 Outlook
Net Sales ($B)
23.7
22.5 - 23.0
FAS/CAS Adjustment ($M)
(249)
346
Interest Expense, net ($M)
(198)
(200) - (210)
Diluted Shares (M)
324
312 - 314
Effective Tax Rate
29.3%
Approx. 28.5%
EPS from Continuing Operations
$5.96
$6.74 - $6.89
Adjusted EPS*
$6.38
$5.76 - $5.91
Operating Cash Flow from Continuing Operations ($B)
2.4
2.3 - 2.5
* 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. 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)
2013
2012
% Change
2013
2012
% Change
Net Sales
$
1,569
$
1,730
-9%
$
6,489
$
6,492
—%
Operating Income
$
241
$
262
-8%
$
1,115
$
1,047
6%
Operating Margin
15.4%
15.1%
17.2%
16.1%
Integrated Defense Systems (IDS) had fourth quarter 2013 net sales of $1,569 million compared to $1,730 million in the fourth quarter 2012. The change in net sales was primarily due to an international Patriot program nearing completion and lower volume on a tactical radar program. IDS had full-year 2013 net sales of $6,489 million compared to $6,492 million in 2012.
IDS recorded $241 million of operating income compared to $262 million in the fourth quarter 2012. The change in operating income was primarily driven by lower volume. IDS recorded $1,115 million of operating income in 2013 compared to $1,047 million in 2012. The change in operating income for the full-year 2013 was primarily driven by international programs.
During the quarter, IDS booked $1,277 million on a ground based air defense system for Oman. IDS also booked $393 million for the Engineering and Manufacturing Development (EMD) phase of the Air and Missile Defense Radar (AMDR) and $75 million on the Zumwalt-class destroyer program for the U.S. Navy. In addition, IDS booked $173 million for the production of an AN/TPY-2 radar, $172 million to provide Consolidated Contractor Logistics Support (CCLS) and $122 million for a radar sustainment contract for the Missile Defense Agency (MDA).
Intelligence, Information and Services
4th Quarter
Twelve Months
($ in millions)
2013
2012
% Change
2013
2012
% Change
Net Sales
$
1,458
$
1,603
-9%
$
6,045
$
6,335
-5%
Operating Income
$
121
$
136
-11%
$
510
$
536
-5%
Operating Margin
8.3%
8.5%
8.4%
8.5%
Intelligence, Information and Services (IIS) had fourth quarter 2013 net sales of $1,458 million compared to $1,603 million in the fourth quarter 2012. The change in net sales was primarily due to lower volume on training and certain classified programs. IIS had full-year 2013 net sales of $6,045 million compared to $6,335 million in 2012. The change in net sales was primarily due to a National Science Foundation (NSF) Polar contract, which was completed in the first quarter 2012, and lower volume on training and classified programs.
IIS recorded $121 million of operating income compared to $136 million in the fourth quarter 2012. IIS recorded $510 million of operating income in 2013 compared to $536 million in 2012. The change in operating income for the full-year 2013 was primarily driven by lower volume.
During the quarter, IIS booked $585 million on a number of classified contracts, including $100 million for international cyber.
Missile Systems
4th Quarter
Twelve Months
($ in millions)
2013
2012
% Change
2013
2012
% Change
Net Sales
$
1,638
$
1,781
-8%
$
6,599
$
6,639
-1%
Operating Income
$
201
$
198
2%
$
830
$
861
-4%
Operating Margin
12.3%
11.1%
12.6%
13.0%
Missile Systems (MS) had fourth quarter 2013 net sales of $1,638 million compared to $1,781 million in the fourth quarter 2012. The change in net sales was primarily driven by lower sales on U.S. Army sensor programs. MS had full-year 2013 net sales of $6,599 million compared to $6,639 million in 2012. The change in net sales was primarily driven by lower sales on U.S. Army sensor programs, partially offset by higher sales on an international Paveway™ program and on an air warfare systems program.
MS recorded $201 million of operating income compared to $198 million in the fourth quarter 2012. MS recorded $830 million of operating income in 2013 compared to $861 million in 2012. The change in operating income for the full-year 2013 was primarily due to a change in contract mix.
During the quarter, MS booked $189 million for Evolved Sea Sparrow Missile (ESSM) and $177 million for Phalanx Weapon Systems for the U.S. Navy and international customers. MS also booked $172 million for Paveway™ for the U.S. Air Force and international customers and $81 million for the Joint Standoff Weapon (JSOW) for the U.S. Navy.
Space and Airborne Systems
4th Quarter
Twelve Months
($ in millions)
2013
2012
% Change
2013
2012
% Change
Net Sales
$
1,613
$
1,820
-11%
$
6,371
$
6,823
-7%
Operating Income
$
253
$
283
-11%
$
920
$
988
-7%
Operating Margin
15.7%
15.5%
14.4%
14.5%
Space and Airborne Systems (SAS) had fourth quarter 2013 net sales of $1,613 million compared to $1,820 million in the fourth quarter 2012. SAS had full-year 2013 net sales of $6,371 million compared to $6,823 million in 2012. The change in net sales for both the fourth quarter and full-year 2013 was primarily due to lower volume on intelligence, surveillance and reconnaissance systems programs and on classified programs.
SAS recorded $253 million of operating income compared to $283 million in the fourth quarter 2012. SAS recorded $920 million of operating income in 2013 compared to $988 million in 2012. The change in operating income for both the fourth quarter and full-year 2013 was primarily due to lower volume.
During the quarter, SAS booked $566 million on tactical airborne system upgrades for international customers, $134 million on the Global Aircrew Strategic Network Terminal (Global ASNT) program for the U.S. Air Force and $83 million on the Navy Multiband Terminal (NMT) program. SAS also booked $163 million on a number of classified contracts.
About Raytheon
Raytheon Company, with 2013 sales of $24 billion and 63,000 employees worldwide, is a technology and innovation leader specializing in defense, security and civil markets throughout the world. With a history of innovation spanning 92 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as cyber security and a broad range of mission support services. Raytheon is headquartered in Waltham, Mass. For more about Raytheon, visit us at www.raytheon.com and follow us on Twitter @raytheon.
Conference Call on the Fourth Quarter and Full-Year 2013 Financial Results
Raytheon's financial results conference call will be held on Thursday, January 30, 2014 at 9 a.m. ET. Participants will include William H. Swanson, Chairman and CEO; Thomas A. Kennedy, executive vice president and COO; David C. Wajsgras, senior vice president and CFO; and other Company executives.
The dial-in number for the conference call will be (866) 953-6858 in the U.S. or (617) 399-3482 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.
