Raytheon: $5.7 billion net sales 2Q 2014

Raytheon Company announced second quarter 2014 EPS from continuing operations of $1.59 compared to $1.50 in the second quarter 2013. Second quarter 2014 Adjusted EPS1 was $1.41 per diluted share compared to $1.64per diluted share in the second quarter 2013. Second quarter 2014 Adjusted EPS1 excluded a favorable FAS/CAS Adjustment of $0.18, compared with an unfavorable FAS/CAS Adjustment of$0.14 in the second quarter 2013. Net sales for the second quarter 2014 were $5.7 billioncompared to $6.1 billion in the second quarter 2013.

“Demand for Raytheon’s innovative and affordable solutions from our global customers was strong in the quarter, and international opportunities in the second half of the year are significant,” saidThomas A. Kennedy, Raytheon’s CEO. “Second quarter sales, earnings and cash flow all exceeded our expectations, reflecting the continuing hard work and dedication of the Raytheon team.”

The Company had bookings of $6.8 billion in the second quarter 2014, resulting in a book-to-bill ratio of 1.19. In the second quarter 2013, bookings were $5.3 billion. Year-to-date 2014 bookings were $11.1 billion compared to year-to-date 2013 bookings of $8.9 billion.

The Company generated solid operating cash flow for the second quarter 2014. Operating cash flow from continuing operations for the second quarter 2014 was $153 million compared to an outflow of$41 million for the second quarter 2013. The increase in operating cash from continuing operations in the second quarter 2014 was primarily due to the timing of collections.

In the second quarter 2014, the Company repurchased 2.6 million shares of common stock for$250 million. Year-to-date 2014, the Company repurchased 4.6 million shares of common stock for $450 million.

On May 12, 2014, Standard & Poor’s Rating Service upgraded the Company’s senior unsecured credit rating from A- to A, reflecting the Company’s strong financial position. The Company ended the second quarter 2014 with $560 million of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.

Backlog at the end of the second quarter was $33.0 billion and funded backlog was $23.6 billion, an increase of $1.4 billion compared to the second quarter 2013.

The Company has reaffirmed 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.

The Company’s reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); and Space and Airborne Systems (SAS).

IDS recorded $219 million of operating income compared to $326 million in the second quarter 2013. The change in operating income was driven by lower volume and a $38 million adjustment from a decrease in estimated incentive fees on the AWD program due to an increase in the shipbuilder’s expected cost to complete their portion of the program. In addition, second quarter 2013 included a favorable contract modification.Integrated Defense Systems (IDS) had second quarter 2014 net sales of $1,549 million compared to $1,721 million in the second quarter 2013. The change in net sales was primarily due to the scheduled completion of production phases on certain international Patriot programs, as well as lower sales on a combat tactical radar program and the Australian Air Warfare Destroyer (AWD) program.

IIS recorded $127 million of operating income compared to $131 million in the second quarter 2013.Intelligence, Information and Services (IIS) had second quarter 2014 net sales of $1,518 million compared to $1,570 million in the second quarter 2013. The change in net sales included lower volume on training and mission support programs, partially offset by higher volume on domestic and international classified programs.

During the quarter, IIS booked $515 million on domestic training programs and $160 million on foreign training programs in support of Warfighter FOCUS activities. IIS also booked $521 million for a U.S. Air Force program and approximately $160 million to provide operations and maintenance services on an international radar system. IIS booked $379 million on a number of classified contracts.

MS recorded $190 million of operating income compared to $213 million in the second quarter 2013. The change in operating income was primarily due to lower volume and program mix, partially offset by improved program performance in the second quarter 2014.Missile Systems (MS) had second quarter 2014 net sales of $1,539 million compared to $1,690 million in the second quarter 2013. The change in net sales was primarily driven by lower sales on U.S. Army programs.

During the quarter, MS booked $764 million for Tube-launched, Optically-tracked, Wireless-guided (TOW) missiles for the U.S. Army, U.S. Marines and international customers, $289 million for Standard Missile-6 (SM-6) for the U.S. Navy, $259 million for AIM-9X Sidewinder short range air-to-air missiles for the U.S. Navy, U.S. Air Force and international customers, $179 million for Advanced Medium-Range Air-to-Air Missiles (AMRAAM) for the U.S. Air Force, U.S. Navy and international customers, $130 million for Phalanx weapon systems for the U.S. Navy and U.S. Army, $81 million on Miniature Air-Launch Decoy (MALD®) for the U.S. Air Force, $79 million for Rolling Airframe Missile (RAM) program for the U.S. Navy and international customers, and $75 million for Standard Missile-3 (SM-3™) for the Missile Defense Agency (MDA). MS also booked $140 million on a classified program.

SAS recorded $202 million of operating income compared to $216 million in the second quarter 2013. The change in operating income was primarily due to lower volume.Space and Airborne Systems (SAS) had second quarter 2014 net sales of $1,505 million compared to $1,620 million in the second quarter 2013. The change in net sales was primarily due to lower volume on intersegment sales related to a combat tactical radar program for IDS and on classified programs.

During the quarter, SAS booked $129 million to provide radar subsystems for the U.S. Navy. SAS also booked $431 million on a number of classified contracts.

Source and image: Raytheon