WALTHAM, Mass., Jan. 27, 2011 /PRNewswire-FirstCall/ -- Raytheon Company (NYSE: RTN) announced fourth quarter 2010 Adjusted EPS of $1.57 per diluted share compared to $1.31 per diluted share in the fourth quarter 2009(1), up 20 percent. The increase was primarily driven by operational improvements and capital deployment actions. Fourth quarter 2010 EPS from continuing operations was $1.37 compared to $1.30 in the fourth quarter 2009. Fourth quarter 2010 and fourth quarter 2009 EPS from continuing operations included net charges of $0.10 and $0.03, respectively, associated with the impacts of the early debt retirements. Fourth quarter 2010 also included FAS/CAS pension expense of $0.11, compared to $0.01 of FAS/CAS pension income in the fourth quarter 2009.
"Raytheon's focus on performance drove solid operating results," said William H. Swanson, Raytheon's Chairman and CEO. "The depth and breadth of our product portfolio coupled with outstanding execution positions the company well going forward."
Net sales in the fourth quarter 2010 were $6.9 billion compared to $6.7 billion in the fourth quarter 2009.
Operating cash flow from continuing operations in the fourth quarter 2010 was $861 million after a $750 million discretionary cash contribution made to the Company's pension plans, compared to $1,073 million in the fourth quarter 2009. The strong operating cash flow from continuing operations in the fourth quarter 2010 was primarily due to the timing of collections and lower cash taxes.
In the fourth quarter 2010, the Company repurchased 5.3 million shares of common stock for $250 million, as part of its previously announced share repurchase program. For the full-year 2010 the Company repurchased 29.0 million shares of common stock for $1,450 million.
As previously announced, in the fourth quarter 2010, the Company issued $2.0 billion in long-term debt and retired $678 million in long-term debt maturing in 2012 and 2013. As a result of the debt retirement and issuance of longer maturities, the Company extended the term of its debt structure at lower interest rates.
Also as previously announced, in the fourth quarter 2010, the Company signed a definitive agreement to acquire Applied Signal Technology, Inc. (AST) and commenced a cash tender offer to purchase all of the outstanding shares of common stock of AST. The transaction is expected to close in the first quarter 2011 and AST will become part of Raytheon's Space and Airborne Systems (SAS) business.
Full-Year Financial Results
Full-year 2010 Adjusted EPS was $5.58 per diluted share compared to $4.87 for the full-year 2009(2), up 15 percent. The increase was primarily driven by operational improvements and capital deployment actions. Full-year 2010 EPS from continuing operations was $4.79 compared to $4.89 for the full-year 2009.
2009 vs. 2010 EPS Variance
--------------------------
EPS Adjusted EPS(2)
--- ---------------
Full-year 2009 $4.89 $4.87
Operational Improvements 0.37 0.37
Reduced Share Count 0.23 0.23
Other Items, net 0.11 0.11
(0.44) NA
FAS/CAS Pension Adjustment*
Q2 UK Border Agency Program
Adjustment (0.75) NA
Q3 Favorable Tax Settlement 0.45 NA
Q4 Early Debt Retirement
Impact, net** (0.07) NA
----- ---
Full-year 2010 $4.79 $5.58
===== =====
* Represents the difference between the 2010 and 2009 FAS/CAS
Pension Adjustments of $(0.40) and $0.04, respectively.
** Represents the difference between the Q4 2010 and Q4 2009 early
retirement make-whole provision charges net of the acceleration of
deferred gains related to terminated interest rate swaps on the
retired debt of $(0.10) and $(0.03), respectively.
Net sales in 2010 were $25.2 billion, compared to $24.9 billion in 2009.
The Company generated strong operating cash flow for the year. Operating cash flow from continuing operations was $1.9 billion in 2010 after a $750 million discretionary cash contribution made to the Company's pension plans, compared to $2.7 billion in 2009. The Company made $1,902 million in total cash contributions to its pension plans in full-year 2010 compared to $1,115 million in full-year 2009.
The Company ended 2010 with a strong balance sheet, with $3.6 billion in cash and cash equivalents, and $3.6 billion in total debt.
(1) Adjusted EPS is EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS impact of the FAS/CAS pension adjustment and, from time to time, certain other items. In addition to the FAS/CAS pension adjustment, Q4 2010 and 2009 Adjusted EPS exclude the impacts of early debt retirements in Q4 2010 and Q4 2009, and full-year 2010 and 2009 EPS exclude the impacts of the UK Border Agency program adjustment in Q2 2010, a favorable tax settlement in Q3 2010 and early debt retirements in Q4 2010 and Q4 2009. Adjusted EPS is a non-GAAP financial measure. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.
(2) Adjusted EPS is EPS from continuing operations attributable to Raytheon Company common stockholders excluding the EPS impact of the FAS/CAS pension adjustment and, from time to time, certain other items. In addition to the FAS/CAS pension adjustment, full-year 2010 and 2009 EPS exclude the impacts of the UK Border Agency program adjustment in Q2 2010, a favorable tax settlement in Q3 2010 and early debt retirements in Q4 2010 and Q4 2009. Adjusted EPS is a non-GAAP financial measure. See attachment F for a reconciliation of this measure and a discussion of why the Company is presenting this information.
Summary Financial Results 4th Quarter %
-----------
($ in millions, except per
share data) 2010 2009 Change
---- ---- ------
Net sales $6,885 $6,667 3%
Income from continuing
operations attributable to
Raytheon Company $499 $504 -1%
Adjusted Income(1) $575 $510 13%
EPS from continuing
operations $1.37 $1.30 5%
Adjusted EPS(1) $1.57 $1.31 20%
Operating cash flow from
cont. ops. $861 $1,073
Workdays in fiscal
reporting calendar 62 61
Summary Financial Results Full-Year %
---------
($ in millions, except per
share data) 2010 2009 Change
---- ---- ------
Net sales $25,183 $24,881 1%
Income from continuing
operations attributable to
Raytheon Company $1,804 $1,936 -7%
Adjusted Income(1) $2,105 $1,928 9%
EPS from continuing
operations $4.79 $4.89 -2%
Adjusted EPS(1) $5.58 $4.87 15%
Operating cash flow from
cont. ops. $1,931 $2,745
Workdays in fiscal
reporting calendar 249 249
(1) Adjusted Income is income from continuing operations attributable
to Raytheon Company common stockholders excluding the after-tax
impact of the FAS/CAS pension adjustment and, from time to time,
certain other items. Adjusted EPS is EPS from continuing
operations attributable to Raytheon Company common stockholders
excluding the EPS impact of the FAS/CAS pension adjustment and,
from time to time, certain other items. In addition to the FAS/CAS
pension adjustment, Q4 2010 and Q4 2009 Adjusted Income and Adjusted
EPS exclude the impacts of early debt retirements in Q4 2010 and Q4
2009, and full-year 2010 and 2009 Adjusted Income and Adjusted EPS
exclude the impacts of the UK Border Agency program adjustment in
Q2 2010, a favorable tax settlement in Q3 2010 and early debt
retirements in Q4 2010 and Q4 2009. Adjusted Income and Adjusted
EPS are non-GAAP financial measures. See attachment F for a
reconciliation of these measures and a discussion of why the Company
is presenting this information.
Bookings and Backlog
Bookings 4th Quarter Full-Year
----------- ---------
($ in millions) 2010 2009 2010 2009
---- ---- ---- ----
Bookings $5,984 $7,065 $24,449 $25,058
====== ====== ======= =======
Backlog Period Ending
-------------
($ in millions) 12/31/10 12/31/09
-------- --------
Backlog $34,551 $36,877
Funded Backlog $22,632 $23,479
The Company reported bookings for the full-year 2010 of $24.4 billion and ended with a backlog of $34.6 billion. Bookings in 2010 were affected by the timing of both domestic and international awards.
Outlook
2011 Financial Outlook
2010 2011
Actual Outlook*
------ --------
Net Sales ($B) 25.2 25.5 - 26.3
FAS/CAS Pension Inc./(Exp.) ($M) (230) (367)
Interest Expense, Net ($M) (110) (155) - (165)
Diluted Shares (M) 377 353 - 359
Effective Tax Rate 24.2% ~30.5%
EPS from Continuing
Operations(1) $4.79 $4.83 - $4.98
Adjusted EPS(2) $5.58 $5.50 - $5.65
Operating Cash Flow from Cont.
Ops. ($B) 1.9 2.0 - 2.2
ROIC (%)(3) 14.6 13.4 - 13.9
(1) 2010 and 2011 EPS from continuing operations includes $43 million
and $2 million of income, respectively, representing the difference
between our post-retirement benefits (PRB) credit under FAS in
accordance with GAAP and our PRB adjustment under CAS (FAS/CAS PRB
adjustment). In order to more clearly show each business'
underlying operational performance, we will begin treating the FAS/
CAS PRB adjustment (previously reported as part of each business)
consistent with the FAS/CAS pension adjustment for management
reporting in 2011. Beginning in 2011, we will change our segment
presentation to exclude from each business segment the amounts
related to the FAS/CAS PRB adjustment and combine such amounts with
our FAS/CAS pension adjustment. The foregoing changes in segment
presentation and the FAS/CAS pension adjustment are not reflected
in the amounts above but will be reflected in future reporting periods
in 2011.
(2) Adjusted EPS is EPS from continuing operations attributable to
Raytheon Company common stockholders excluding the EPS impact of the
FAS/CAS pension adjustment and, from time to time, certain other
items. In addition to the FAS/CAS pension adjustment, 2010
Adjusted EPS excludes the impacts of the UK Border Agency program
adjustment in Q2 2010, a favorable tax settlement in Q3 2010 and an
early debt retirement in Q4 2010. 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.
(3) ROIC is a non-GAAP financial measure. ROIC has been calculated
using the Company's revised ROIC definition as detailed in
attachment G. We adjusted the ROIC definition to exclude any change
from pension contributions, which eliminates all of the non-
operational pension impact from the calculation in order to more
clearly reflect the underlying business performance in ROIC. See
attachment G for more information on the revised and prior ROIC
definitions and the Company's use of ROIC.
(*) 2011 Outlook assumes the closing of the acquisition of Applied
Signal Technology in first quarter 2011. The AST acquisition is
subject to certain customary closing conditions as discussed more
fully in our Schedule TO, as amended, filed with the SEC.
The Company has provided its financial outlook for 2011. Charts containing additional information on the Company's 2011 outlook are available on the Company's website at www.raytheon.com/ir.
Segment Results
Integrated Defense Systems
4th Quarter % Full-Year %
----------- ---------
($ in
millions) 2010 2009 Change 2010 2009 Change
---- ---- ------ ---- ---- ------
Net Sales $1,463 $1,541 -5% $5,470 $5,525 -1%
Operating
Income $240 $249 -4% $879 $859 2%
Operating
Margin 16.4% 16.2% 16.1% 15.5%
Fourth Quarter
Integrated Defense Systems (IDS) had fourth quarter 2010 net sales of $1,463 million compared to $1,541 million in the fourth quarter 2009. The change in net sales was primarily due to lower sales on various U.S. Navy programs and on two joint battlefield sensor programs, partially offset by higher sales on international Patriot programs. IDS recorded $240 million of operating income compared to $249 million in the fourth quarter 2009. The change in operating income was primarily due to lower sales.
During the quarter, IDS booked $131 million to provide Patriot Guidance Enhanced Missile-Tactical (GEM-T) missiles for Kuwait, $120 million to provide Consolidated Contractor Logistics Support (CCLS) for the Missile Defense Agency (MDA), and $112 million on the Air & Missile Defense Radar (AMDR) program for the U.S. Navy.
Full-year
IDS had full-year 2010 net sales of $5,470 million compared to $5,525 million in 2009. The change in net sales was primarily due to lower sales on various U.S. Navy programs and on two joint battlefield sensor programs, partially offset by higher sales on international Patriot programs. IDS recorded $879 million of operating income in 2010 compared to $859 million in 2009. The increase in operating income was primarily due to operational improvements.
During the year, IDS booked $400 million to provide advanced Patriot air and missile defense capability for an international customer, $271 million on the Zumwalt-class destroyer program for the U.S. Navy, $228 million on the Aegis weapon system for the U.S. Navy, $222 million to provide engineering services support for a Patriot air and missile defense program for U.S. and international customers, $190 million for a U.S. Army/U.S. Navy Transportable Radar Surveillance (AN/TPY-2) radar for the MDA, $148 million to provide CCLS for the MDA, $131 million to provide GEM-T missiles for Kuwait, and $112 million on the AMDR program for the U.S. Navy.
Intelligence and Information Systems
4th Quarter % Full-Year %
----------- ---------
($ in millions) 2010 2009 Change 2010* 2009 Change
---- ---- ------ ----- ---- ------
Net Sales $820 $803 2% $2,757 $3,204 -14%
Operating Income
(Loss) $69 $64 8% $(150) $259 NM
Operating Margin 8.4% 8.0% -5.4% 8.1%
*Full-year 2010 includes a $316 million reduction to net sales and a
$395 million reduction to operating income due to the UK Border
Agency program termination in the second quarter 2010.
NM = Not Meaningful
-------------------
Fourth Quarter
Intelligence and Information Systems (IIS) had fourth quarter 2010 net sales of $820 million compared to $803 million in the fourth quarter 2009. The increase in net sales was primarily due to higher sales on Global Positioning System Operational Control Segment (GPS-OCX), a GPS command, control and mission capabilities program. IIS recorded $69 million of operating income compared to $64 million in the fourth quarter 2009. The increase in operating income was primarily due to improved program performance.
During the quarter, IIS booked $167 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force. IIS also booked $281 million on a number of classified contracts.
Full-year
IIS had full-year 2010 net sales of $2,757 million compared to $3,204 million in 2009. The change in net sales was primarily due to lower sales on the UK Border Agency program and a U.S. Air Force program, partially offset by higher sales on the GPS-OCX program.
During the year, IIS booked $901 million on a contract to develop the next-generation GPS-OCX for the U.S. Air Force, $167 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) support to the U.S. Air Force, and $80 million on the Earth Observing System Data and Information System (EOSDIS) contract for NASA. IIS also booked $1,723 million on a number of classified contracts.
Missile Systems
4th Quarter % Full-Year %
----------- ---------
($ in
millions) 2010 2009 Change 2010 2009 Change
---- ---- ------ ---- ---- ------
Net
Sales $1,565 $1,413 11% $5,732 $5,561 3%
Operating
Income $170 $154 10% $654 $604 8%
Operating
Margin 10.9% 10.9% 11.4% 10.9%
--------- ---- ---- ---- ----
Fourth Quarter
Missile Systems (MS) had fourth quarter 2010 net sales of $1,565 million, up 11 percent compared to $1,413 million in the fourth quarter 2009, primarily due to higher sales on the Paveway(TM), Standard Missile-3 (SM-3), and Advanced Medium-Range Air-to-Air Missiles (AMRAAM) programs. MS recorded $170 million of operating income compared to $154 million in the fourth quarter 2009. The increase in operating income was primarily due to higher volume.
During the quarter, MS booked $546 million for the production of Paveway(TM) for the Kingdom of Saudi Arabia and other international customers, $247 million for the production of Tomahawk missiles for the U.S. Navy, and $85 million on a classified program.
Full-year
MS had full-year 2010 net sales of $5,732 million compared to $5,561 million in 2009. The increase in net sales in 2010 was primarily due to higher sales on the SM-3, AMRAAM, Tube Launched, Optically Tracked, Wireless (TOW) missiles, and Paveway(TM) programs. MS recorded $654 million of operating income in 2010 compared to $604 million in 2009. The increase in operating income in 2010 was primarily due to favorable contract mix and improved program performance.
During the year, MS booked $743 million for SM-3, $698 million for AMRAAM, $675 million on a classified program, $668 million for Paveway(TM), $501 million for Tomahawk missiles, $451 million for engineering and manufacturing development on the Small Diameter Bomb II (SDB II) contract, $425 million for Standard Missile-2 (SM-2), $274 million for Rolling Airframe Missiles (RAM), $271 million for Phalanx Weapon Systems, $262 million for development work on the Exoatmospheric Kill Vehicle (EKV), $209 million for AIM-9X Sidewinder short range air-to-air missiles, $198 million for the Javelin program, $168 million for Miniature Air Launched Decoys (MALD), $147 million for Evolved Sea Sparrow Missiles (ESSM), $122 million for TOW missiles, and $114 million for Joint Stand-off Weapon (JSOW).
Network Centric Systems
4th Quarter % Full-Year %
----------- ---------
($ in
millions) 2010 2009 Change 2010 2009 Change
---- ---- ------ ---- ---- ------
Net
Sales $1,310 $1,259 4% $4,918 $4,822 2%
Operating
Income $198 $169 17% $701 $674 4%
Operating
Margin 15.1% 13.4% 14.3% 14.0%
Fourth Quarter
Network Centric Systems (NCS) had fourth quarter 2010 net sales of $1,310 million, up 4 percent compared to $1,259 million in the fourth quarter 2009, primarily due to higher sales on a classified international program. NCS recorded $198 million of operating income compared to $169 million in the fourth quarter 2009. The increase in operating income was primarily due to improved program performance.
During the quarter, NCS booked $180 million on the Standard Terminal Automation Replacement System (STARS) program for the Federal Aviation Administration (FAA) and Department of Defense (DoD), $96 million for Improved Thermal Sight Systems (ITSS) for an international customer, and $94 million for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S. Army.
Full-year
NCS had full-year 2010 net sales of $4,918 million compared to $4,822 million in 2009. The increase in net sales was primarily due to sales related to detection systems and customer funded research and development. NCS recorded $701 million of operating income compared to $674 million in 2009. The increase in operating income was primarily due to improved program performance and higher sales.
During the year, NCS booked $254 million on the STARS program for the FAA and DoD, $250 million for LRAS3 for the U.S. Army, $146 million on a command and control program for an international customer, $111 million for Horizontal Technology Integration (HTI) forward-looking infrared kits for the U.S. Army, $104 million on the Navy Multiband Terminal (NMT) program for the U.S. Navy, and $96 million for ITSS for an international customer.
Space and Airborne Systems
4th Full-
Quarter % Year %
------- -----
($ in
millions) 2010 2009 Change 2010 2009 Change
---- ---- ------ ---- ---- ------
Net Sales $1,300 $1,266 3% $4,830 $4,582 5%
Operating
Income $165 $174 -5% $686 $647 6%
Operating
Margin 12.7% 13.7% 14.2% 14.1%
Fourth Quarter
Space and Airborne Systems (SAS) had fourth quarter 2010 net sales of $1,300 million, up 3 percent compared to $1,266 million in the fourth quarter 2009, primarily due to growth on classified business and on a multi-spectral targeting system program. SAS recorded $165 million of operating income compared to $174 million in the fourth quarter 2009. The change in operating income was primarily due to a change in contract mix.
During the quarter, SAS booked $374 million for the production of Active Electronically Scanned Array (AESA) radars for the U.S. Navy and an international customer. SAS also booked $192 million on a number of classified contracts.
Full-year
SAS had full-year 2010 net sales of $4,830 million, up 5 percent compared to $4,582 million in 2009. The increase in net sales was primarily due to growth in classified business. SAS recorded $686 million of operating income in 2010 compared to $647 million in 2009. The increase in operating income was primarily due to higher sales and favorable contract mix, partially offset by $19 million of favorable contractual settlements in 2009.
During the year, SAS booked $618 million for the production of AESA radars for the U.S. Air Force, U.S. Navy, Air National Guard and international customers, and $90 million for the production of Advanced Countermeasures Electronic System (ACES) for Egypt. SAS also booked $1,106 million on a number of classified contracts.
Technical Services
4th Full-
Quarter % Year %
------- -----
($ in
millions) 2010 2009 Change 2010 2009 Change
---- ---- ------ ---- ---- ------
Net Sales $964 $888 9% $3,472 $3,161 10%
Operating
Income $83 $58 43% $300 $215 40%
Operating
Margin 8.6% 6.5% 8.6% 6.8%
Fourth Quarter
Technical Services (TS) had fourth quarter 2010 net sales of $964 million, up 9 percent compared to $888 million in the fourth quarter 2009, primarily due to growth in domestic and foreign training programs supporting the U.S. Army's Warfighter Field Operations Customer Support (FOCUS) activities and higher sales on programs with the Transportation Security Administration (TSA). TS recorded operating income of $83 million in the fourth quarter 2010 compared to $58 million in the fourth quarter 2009, primarily due to operational improvements.
During the quarter, TS booked $91 million on domestic training programs and $47 million on foreign training programs in support of the Warfighter FOCUS activities.
Full-year
TS had full-year 2010 net sales of $3,472 million, up 10 percent compared to $3,161 million in 2009. The increase in net sales was primarily due to growth in domestic and foreign training programs and programs with the TSA. TS recorded operating income of $300 million in 2010 compared to $215 million in 2009. The increase in operating income was primarily due to operational improvements.
During the year, TS booked $952 million on domestic training programs and $328 million on foreign training programs in support of the Warfighter FOCUS activities. TS also booked $173 million to provide operational and logistics support to the National Science Foundation (NSF) Office of Polar Programs and $88 million on the Security Equipment Integration Services (SEIS) contract for the TSA.
Raytheon Company (NYSE: RTN), with 2010 sales of $25 billion, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 89 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 a broad range of mission support services. With headquarters in Waltham, Mass., Raytheon employs 72,000 people worldwide.
Conference Call on the Fourth Quarter and Full-Year 2010 Financial Results
Raytheon's financial results conference call will be held on Thursday, January 27, 2011 at 9 a.m. ET. Participants will include William H. Swanson, Chairman and CEO; David C. Wajsgras, senior vice president and CFO; and other Company executives.
The dial-in number for the conference call will be (877) 415-3182 in the U.S. or (857) 244-7325 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, uncertain funding of programs, potential termination of contracts, and difficulties in contract performance; the resolution of program terminations; the ability to procure new contracts; the risks of conducting business in foreign countries; the ability to comply with extensive governmental regulation, including import and export policies, the Foreign Corrupt Practices Act, the International Traffic in Arms Regulations, and procurement and other regulations; the impact of competition; the ability to develop products and technologies; the impact of changes in the financial markets and global economic conditions; the risk that actual pension returns, discount rates or other actuarial assumptions are significantly different than the Company's assumptions; the risk of cost overruns, particularly for the Company's fixed-price contracts; dependence on component availability, subcontractor performance and key suppliers; risks of a negative government audit; the use of accounting estimates in the Company's financial statements; risks associated with acquisitions, dispositions, joint ventures and other business arrangements; risks of an impairment of goodwill or other intangible assets; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; the impact of potential security threats and other disruptions; 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. This release and the attachments also contain non-GAAP financial measures. A GAAP reconciliation and a discussion of the Company's use of these measures are included in this release or the attachments.
Media Contact: Investor Relations Contact:
Jon Kasle Todd Ernst
781-522-5110 781-522-5141
Attachment A
Raytheon Company
Preliminary Statement of Operations Information
Fourth Quarter 2010
(In millions,
except per
share Twelve Months
amounts) Three Months Ended Ended
------------------ -------------
31- 31- 31-
Dec- 31-Dec- Dec- Dec-
10 09 10 09
---- -------- ---- ----
Net sales $6,885 $6,667 $25,183 $24,881
------ ------ ------- -------
Operating
expenses
Cost of sales 5,506 5,317 20,303 19,747
Administrative
and selling
expenses 432 392 1,648 1,527
Research and
development
expenses 143 158 625 565
--- --- --- ---
Total
operating
expenses 6,081 5,867 22,576 21,839
----- ----- ------ ------
Operating
income 804 800 2,607 3,042
--- --- ----- -----
Interest
expense 28 28 126 123
Interest
income (6) (3) (16) (14)
Other
(income)
expense 67 21 65 3
--- --- --- ---
Non-
operating
(income)
expense 89 46 175 112
--- --- --- ---
Income from
continuing
operations
before taxes 715 754 2,432 2,930
Federal and
foreign
income taxes 201 237 589 953
--- --- --- ---
Income from
continuing
operations 514 517 1,843 1,977
Income (loss)
from
discontinued
operations,
net of tax (40) - 36 (1)
--- --- --- ---
Net income 474 517 1,879 1,976
Less: Net
income
(loss)
attributable
to
noncontrolling
interests in
subsidiaries 15 13 39 41
--- --- --- ---
Net income
attributable
to Raytheon
Company $459 $504 $1,840 $1,935
==== ==== ====== ======
Basic
earnings
(loss) per
share
attributable
to Raytheon
Company
common
stockholders:
Income from
continuing
operations $1.38 $1.32 $4.84 $4.96
Income (loss)
from
discontinued
operations,
net of tax (0.11) - 0.10 -
Net income 1.26 1.32 4.94 4.96
Diluted
earnings
(loss) per
share
attributable
to Raytheon
Company
common
stockholders:
Income from
continuing
operations $1.37 $1.30 $4.79 $4.89
Income (loss)
from
discontinued
operations,
net of tax (0.11) - 0.10 -
Net income 1.25 1.30 4.88 4.89
Amounts
attributable
to Raytheon
Company
common
stockholders:
Income from
continuing
operations $499 $504 $1,804 $1,936
Income (loss)
from
discontinued
operations,
net of tax (40) - 36 (1)
--- --- --- ---
Net income $459 $504 $1,840 $1,935
==== ==== ====== ======
Average
shares
outstanding
Basic 363.2 382.2 372.7 390.4
Diluted 366.0 388.4 377.0 395.7
Attachment B
Raytheon Company
Preliminary Segment Information
Fourth Quarter 2010
Net Sales Operating Income
(In millions,
except Three Months
percentages) Three Months Ended Ended
------------------ -------------
31- 31- 31- 31-
Dec- Dec- Dec- Dec-
10 09 10 09
---- ---- ---- ----
Integrated Defense
Systems $1,463 $1,541 $240 $249
Intelligence and
Information
Systems 820 803 69 64
Missile Systems 1,565 1,413 170 154
Network Centric
Systems 1,310 1,259 198 169
Space and Airborne
Systems 1,300 1,266 165 174
Technical Services 964 888 83 58
FAS/CAS Pension
Adjustment - - (60) 6
Corporate and
Eliminations (537) (503) (61) (74)
---- ---- --- ---
Total $6,885 $6,667 $804 $800
====== ====== ==== ====
Net Sales Operating Income
(In millions,
except Twelve Months Twelve Months
percentages) Ended Ended
-------------- --------------
31- 31- 31- 31-
Dec- Dec- Dec- Dec-
10 09 10 09
---- ---- ---- ----
Integrated Defense
Systems $5,470 $5,525 $879 $859
Intelligence and
Information
Systems 2,757 3,204 (150) 259
Missile Systems 5,732 5,561 654 604
Network Centric
Systems 4,918 4,822 701 674
Space and Airborne
Systems 4,830 4,582 686 647
Technical Services 3,472 3,161 300 215
FAS/CAS Pension
Adjustment - - (230) 27
Corporate and
Eliminations (1,996) (1,974) (233) (243)
------ ------ ---- ----
Total $25,183 $24,881 $2,607 $3,042
======= ======= ====== ======
Operating Income
As a Percent of
Net Sales
(In millions, except
percentages) Three Months Ended
------------------
31- 31-
Dec- Dec-
10 09
---- ----
Integrated Defense
Systems 16.4% 16.2%
Intelligence and
Information Systems 8.4% 8.0%
Missile Systems 10.9% 10.9%
Network Centric Systems 15.1% 13.4%
Space and Airborne
Systems 12.7% 13.7%
Technical Services 8.6% 6.5%
FAS/CAS Pension
Adjustment
Corporate and
Eliminations
Total 11.7% 12.0%
Operating Income
As a Percent of
Net Sales
(In millions, except Twelve Months
percentages) Ended
--------------
31- 31-
Dec- Dec-
10 09
---- ----
Integrated Defense
Systems 16.1% 15.5%
Intelligence and
Information Systems -5.4% 8.1%
Missile Systems 11.4% 10.9%
Network Centric Systems 14.3% 14.0%
Space and Airborne
Systems 14.2% 14.1%
Technical Services 8.6% 6.8%
FAS/CAS Pension
Adjustment
Corporate and
Eliminations
Total 10.4% 12.2%
Attachment C
Raytheon Company
Other Preliminary Information
Fourth Quarter 2010
(In millions) Funded Backlog Total Backlog
-------------- -------------
31- 31- 31- 31-
Dec- Dec- Dec- Dec-
10 09 10 09
---- ---- ---- ----
Integrated Defense
Systems $6,433 $5,595 $8,473 $10,665
Intelligence and
Information Systems 725 1,588 4,319 4,360
Missile Systems 6,385 6,454 8,212 7,657
Network Centric Systems 3,740 4,389 4,912 5,501
Space and Airborne
Systems 3,266 3,402 5,981 5,921
Technical Services 2,083 2,051 2,654 2,773
----- ----- ----- -----
Total $22,632 $23,479 $34,551 $36,877
======= ======= ======= =======
Bookings Bookings
Three Months Twelve Months
Ended Ended
------------- -------------
31- 31- 31- 31-
Dec- Dec- Dec- Dec-
10 09 10 09
---- ---- ---- ----
Bookings $5,984 $7,065 $24,449 $25,058
====== ====== ======= =======
Attachment D
Raytheon Company
Preliminary Balance Sheet Information
Fourth Quarter 2010
(In millions)
31- 31-
Dec- Dec-
10 09
---- ----
Assets
Cash and cash equivalents $3,638 $2,642
Contracts in process 4,414 4,493
Inventories 363 344
Deferred taxes 266 273
Prepaid expenses and other current
assets 141 116
--- ---
Total current assets 8,822 7,868
Property, plant and equipment, net 2,003 2,001
Deferred taxes 106 436
Goodwill 12,045 11,922
Other assets, net 1,446 1,380
----- -----
Total assets $24,422 $23,607
======= =======
Liabilities and Equity
Current liabilities
Advance payments and billings in
excess of costs incurred $2,201 $2,224
Accounts payable 1,538 1,397
Accrued employee compensation 901 868
Other accrued expenses 1,320 1,034
----- -----
Total current liabilities 5,960 5,523
Accrued retiree benefits and other
long-term liabilities 4,815 5,793
Deferred taxes 147 23
Long-term debt 3,610 2,329
Equity
Raytheon Company stockholders' equity
Common stock 4 4
Additional paid-in capital 11,406 10,991
Accumulated other comprehensive loss (5,146) (4,824)
Treasury stock, at cost (6,900) (5,446)
Retained earnings 10,390 9,102
------ -----
Total Raytheon Company stockholders'
equity 9,754 9,827
Noncontrolling interests in
subsidiaries 136 112
--- ---
Total equity 9,890 9,939
----- -----
Total liabilities and equity $24,422 $23,607
======= =======
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Fourth Quarter 2010
(In millions) Three Months Ended
------------------
31-Dec-10 31-Dec-09
--------- ---------
Net income (loss) $474 $517
(Income) loss from discontinued
operations, net of tax 40 -
--- ---
Income (loss) from continuing
operations 514 517
Depreciation 79 79
Amortization 30 28
Working capital (excluding pension
and taxes)* 495 178
Other (257) 271
---- ---
Net operating cash flow 861 1,073
Discontinued operations 4 (4)
Capital spending (135) (142)
Internal use software spending (22) (18)
Acquisitions (140) (334)
Dividends (135) (118)
Repurchases of common stock (250) (300)
Debt issuance 1,975 496
Debt repayments (678) (474)
Warrants exercised - -
Other 9 21
--- ---
Total cash flow $1,489 $200
====== ====
(In millions) Twelve Months Ended
-------------------
31-Dec-10 31-Dec-09
--------- ---------
Net income (loss) $1,879 $1,976
(Income) loss from discontinued
operations, net of tax (36) 1
--- ---
Income (loss) from continuing
operations 1,843 1,977
Depreciation 304 299
Amortization 116 103
Working capital (excluding pension
and taxes)* 358 (47)
Other (690) 413
---- ---
Net operating cash flow 1,931 2,745
Discontinued operations 11 (20)
Capital spending (319) (280)
Internal use software spending (67) (67)
Acquisitions (152) (334)
Dividends (536) (473)
Repurchases of common stock (1,450) (1,200)
Debt issuance 1,975 496
Debt repayments (678) (474)
Warrants exercised 250 -
Other 31 (10)
--- ---
Total cash flow $996 $383
==== ====
* Working capital (excluding pension and taxes) is a summation of
changes in: contracts in process and advance payments and billings
in excess of costs incurred, inventories, prepaid expenses and other
current assets, accounts payable, accrued employee compensation,
and other accrued expenses from the Statements of Cash Flows.
Attachment F (Page 1 of 2)
Raytheon Company
Non-GAAP Financial Measures - Adjusted EPS, Adjusted Income and
Adjusted Operating Margin
Fourth Quarter 2010
Adjusted EPS Non-GAAP
Reconciliation
---------------------
(In millions, except per share
amounts)
Fourth Quarter
--------------
2010 2009
---- ----
Diluted earnings per share from
continuing operations
attributable to Raytheon
Company common
stockholders $1.37 $1.30
Per share impact of the FAS/CAS
Pension Adjustment (A) 0.11 (0.01)
Per share impact of United
Kingdom (UK) Border Agency
program adjustment (B) - -
Per share impact of the
favorable tax settlement (C) - -
Per share impact of the early
debt retirement make-whole
provision (D) 0.13 0.04
Per share impact of the
acceleration of deferred gains
related to terminated interest
rate swaps on retired debt (E) (0.03) (0.01)
----- -----
Adjusted EPS (1) $1.57 $1.31
===== =====
(A) FAS/CAS Pension Adjustment $60 $(6)
Tax effect (at 35%
federal statutory
rate) (21) 2
--- ---
After-tax impact 39 (4)
Diluted Shares 366.0 388.4
-----
Per share impact $0.11 $(0.01)
=====
UK Border Agency program
(B) adjustment $- $-
Tax effect (at 28% UK
statutory tax rate) - -
--- ---
After-tax adjustment - -
Diluted Shares - -
---
Per share impact $- $-
===
(C) Favorable tax settlement $- $-
Diluted Shares - -
---
Per share impact $- $-
===
Early debt retirement
(D) make-whole provision $73 $22
Tax effect (at 35%
federal statutory
rate) (26) (8)
--- ---
After-tax impact 47 14
Diluted Shares 366.0 388.4
-----
Per share impact $0.13 $0.04
=====
Acceleration of deferred
gains related to
terminated interest rate
(E) swaps on retired debt $(15) $(6)
Tax effect (at 35%
federal statutory
rate) 5 2
--- ---
After-tax impact (10) (4)
Diluted Shares 366.0 388.4
-----
Per share impact $(0.03) $(0.01)
=======
Adjusted EPS Non-GAAP
Reconciliation
---------------------
(In millions, except per share
amounts)
Full Year
---------
2010 2009
---- ----
Diluted earnings per share from
continuing operations
attributable to Raytheon
Company common
stockholders $4.79 $4.89
Per share impact of the FAS/CAS
Pension Adjustment (A) 0.40 (0.04)
Per share impact of United
Kingdom (UK) Border Agency
program adjustment (B) 0.75 -
Per share impact of the
favorable tax settlement (C) (0.45) -
Per share impact of the early
debt retirement make-whole
provision (D) 0.13 0.04
Per share impact of the
acceleration of deferred gains
related to terminated interest
rate swaps on retired debt (E) (0.03) (0.01)
----- -----
Adjusted EPS (1) $5.58 $4.87
===== =====
(A) FAS/CAS Pension Adjustment $230 $(27)
Tax effect (at 35%
federal statutory
rate) (80) 9
--- ---
After-tax impact 150 (18)
Diluted Shares 377.0 395.7
-----
Per share impact $0.40 $(0.04)
=====
UK Border Agency program
(B) adjustment $395 $-
Tax effect (at 28% UK
statutory tax rate) (111) -
---- ---
After-tax adjustment 284 -
Diluted Shares 377.0 -
-----
Per share impact $0.75 $-
=====
(C) Favorable tax settlement $(170) $-
Diluted Shares 377.0 -
-----
Per share impact $(0.45) $-
=======
Early debt retirement
(D) make-whole provision $73 $22
Tax effect (at 35%
federal statutory
rate) (26) (8)
--- ---
After-tax impact 47 14
Diluted Shares 377.0 395.7
-----
Per share impact $0.13 $0.04
=====
Acceleration of deferred
gains related to
terminated interest rate
(E) swaps on retired debt $(15) $(6)
Tax effect (at 35%
federal statutory
rate) 5 2
--- ---
After-tax impact (10) (4)
Diluted Shares 377.0 395.7
-----
Per share impact $(0.03) $(0.01)
=======
Adjusted EPS Non-GAAP
Reconciliation
---------------------
(In millions, except per share
amounts) 2011 Guidance
-------------
Low High
end end
of of
range range
------ ------
Diluted earnings per share from
continuing operations
attributable to Raytheon
Company common
stockholders $4.83 $4.98
Per share impact of the FAS/CAS
Pension Adjustment (A) 0.67 0.68
Per share impact of United
Kingdom (UK) Border Agency
program adjustment (B) - -
Per share impact of the
favorable tax settlement (C) - -
Per share impact of the early
debt retirement make-whole
provision (D) - -
Per share impact of the
acceleration of deferred gains
related to terminated interest
rate swaps on retired debt (E) - -
--- ---
Adjusted EPS (1) $5.50 $5.65
===== =====
(A) FAS/CAS Pension Adjustment $367 $367
Tax effect (at 35%
federal statutory
rate) (128) (128)
---- ----
After-tax impact 239 239
Diluted Shares 359.0 353.0
-----
Per share impact $0.67 $0.68
=====
UK Border Agency program
(B) adjustment
Tax effect (at 28% UK
statutory tax rate)
After-tax adjustment
Diluted Shares
Per share impact
(C) Favorable tax settlement
Diluted Shares
Per share impact
Early debt retirement
(D) make-whole provision
Tax effect (at 35%
federal statutory
rate)
After-tax impact
Diluted Shares
Per share impact
Acceleration of deferred
gains related to
terminated interest rate
(E) swaps on retired debt
Tax effect (at 35%
federal statutory
rate)
After-tax impact
Diluted Shares
Per share impact
(1) These amounts are not measures of financial performance under
U.S. generally accepted accounting principles (GAAP). They should
be considered supplemental to and not a substitute for financial
performance in accordance with GAAP and may not be defined and
calculated by other companies in the same manner. These amounts
exclude the FAS/CAS Pension Adjustment and, from time to time,
certain other items. We are providing these measures because
management uses them for the purposes of evaluating and forecasting
the Company's financial performance and believes that they provide
additional insights into the Company's underlying business
performance. We also believe that they allow investors to benefit
from being able to assess our operating performance in the context
of how our principal customer, the U.S. Government, allows us to
recover pension costs and to better compare our operating
performance to others in the industry on that same basis. Amounts
may not recalculate directly due to rounding.
Adjusted EPS is diluted EPS from continuing operations attributable
to Raytheon Company common stockholders excluding the EPS impact of
the FAS/CAS Pension Adjustment and, from time to time, certain
other items. In addition to the FAS/CAS Pension Adjustment, fourth
quarter 2010 and 2009 Adjusted EPS exclude the earnings per share
impact of the charges associated with the make-whole provision on
the early retirement of debt and the impact of the acceleration of
deferred gains related to terminated interest rate swaps on retired
debt. In addition to the FAS/CAS Pension Adjustment, 2010 and 2009
Adjusted EPS exclude an adjustment on the UK Border Agency program,
on which RSL was notified of its termination in the second quarter
of 2010, at the UK statutory tax rate that was in effect in the
second quarter of 28%, the favorable tax settlement in the third
quarter 2010 as a result of our receipt of final approval from the
IRS and the U.S Congressional Joint Committee on Taxation of the
IRS' examination of our tax returns for the 1998-2005 tax years,
and the impacts of the early retirement of debt in the fourth
quarter 2010 and 2009, previously described.
Attachment F (Page 2 of 2)
Raytheon Company
Non-GAAP Financial Measures - Adjusted EPS, Adjusted Income and
Adjusted Operating Margin
Fourth Quarter 2010
Adjusted Income Non-GAAP Reconciliation
---------------------------------------
(In
millions)
Fourth Quarter Full Year
-------------- ---------
2010 2009 2010 2009
---- ---- ---- ----
Income from
continuing
operations
attributable to
Raytheon Company
common stockholders $499 $504 $1,804 $1,936
FAS/CAS Pension
Adjustment (Tax
effect at 35%
federal statutory
rate) 39 (4) 150 (18)
UK Border Agency
program adjustment
(Tax effect at 28%
UK statutory tax
rate) - - 284 -
Favorable tax
settlement - - (170) -
Early debt
retirement make-
whole provision
(Tax effect at 35%
federal statutory
rate) 47 14 47 14
Acceleration of
deferred gains
related to
terminated interest
rate swaps on
retired debt (Tax
effect at 35%
federal statutory
rate) (10) (4) (10) (4)
Adjusted Income (1) $575 $510 $2,105 $1,928
==== ==== ====== ======
Adjusted Operating
Margin Non-GAAP
Reconciliation
------------------
Fourth Quarter Full Year
-------------- ---------
2010 2009 2010 2009
---- ---- ---- ----
Operating Margin 11.7 % 12.0 % 10.4 % 12.2 %
Impact of the FAS/
CAS Pension
Adjustment 0.9 % (0.1) % 0.9 % (0.1) %
Impact of UK Border
Agency program
adjustment - % - % 1.4 % - %
Adjusted Operating
Margin (1) 12.5 % 11.9 % 12.7 % 12.1 %
===== ===== ===== =====
(In
millions) 2011 Guidance
-------------
Low
end High end
of
range of range
------ --------
Income from
continuing
operations
attributable to
Raytheon Company
common stockholders $1,708 $1,760
FAS/CAS Pension
Adjustment (Tax
effect at 35%
federal statutory
rate) 239 239
UK Border Agency
program adjustment
(Tax effect at 28%
UK statutory tax
rate) - -
Favorable tax
settlement - -
Early debt
retirement make-
whole provision
(Tax effect at 35%
federal statutory
rate) - -
Acceleration of
deferred gains
related to
terminated interest
rate swaps on
retired debt (Tax
effect at 35%
federal statutory
rate) - -
Adjusted Income (1) $1,947 $1,999
====== ======
Adjusted Operating
Margin Non-GAAP
Reconciliation
------------------
2011 Guidance
-------------
Low
end High end
of
range of range
------ --------
Operating Margin 10.6 % 10.8 %
Impact of the FAS/
CAS Pension
Adjustment 1.4 % 1.4 %
Impact of UK Border
Agency program
adjustment - % - %
Adjusted Operating
Margin (1) 12.0 % 12.2 %
===== =====
(1) These amounts are not measures of financial performance under U.S.
generally accepted accounting principles (GAAP). They should be
considered supplemental to and not a substitute for financial
performance in accordance with GAAP and may not be defined and
calculated by other companies in the same manner. These amounts
exclude the FAS/CAS Pension Adjustment and, from time to time,
certain other items. We are providing these measures because
management uses them for the purposes of evaluating and forecasting
the Company's financial performance and believes that they provide
additional insights into the Company's underlying business
performance. We also believe that they allow investors to benefit
from being able to assess our operating performance in the context
of how our principal customer, the U.S. Government, allows us to
recover pension costs and to better compare our operating
performance to others in the industry on that same basis. Amounts
may not recalculate directly due to rounding.
Adjusted Income is income from continuing operations attributable to
Raytheon Company common stockholders excluding the after-tax impact
of the FAS/CAS Pension Adjustment at the federal statutory tax rate
of 35% and, from time to time, certain other items. In addition to
the FAS/CAS Pension Adjustment, fourth quarter of 2010 and 2009
Adjusted Income exclude the impact of the charges associated with
the make-whole provision on the early retirement of debt and the
impact of the acceleration of deferred gains related to terminated
interest rate swaps on retired debt. In addition to the FAS/CAS
Pension Adjustment, 2010 and 2009 Adjusted Income exclude the after-
tax impact of an adjustment on the UK Border Agency program in the
second quarter 2010, previously described, the favorable tax
settlement in the third quarter 2010, previously described, and the
early retirement of debt in the fourth quarter 2010 and 2009,
previously described.
Adjusted Operating Margin is defined as total operating margin
excluding the margin impact of the FAS/CAS Pension Adjustment and
the UK Border Agency program adjustment, previously described.
Attachment G (Page 1 of 2)
Raytheon Company
Preliminary Return on Invested Capital Non-GAAP Financial Measure
Fourth Quarter 2010
Revised ROIC Calculation
------------------------
Our revised definition of Return on Invested Capital (ROIC) is the
same as our prior definition except stockholders' equity is now
adjusted to add back the Company's liability for defined benefit
pension plans, net of tax, instead of just the impact of the
accounting standard for employers' accounting for defined benefit
pension plans. We adjusted the ROIC definition to exclude any
change from pension contributions, which eliminates all of the non-
operational pension impact from the calculation in order to more
clearly reflect the underlying business performance in ROIC. We
define ROIC as income from continuing operations excluding the
after-tax effect of the FAS/CAS Pension Adjustment and, from time
to time, certain other items, plus after-tax net interest expense
plus one-third of operating lease expense after-tax (estimate of
interest portion of operating lease expense) divided by average
invested capital after capitalizing operating leases (operating
lease expense times a multiplier of 8), adding financial guarantees
less net investment in Discontinued Operations, and adding back the
liability for defined benefit pension plans, net of tax. 2009 ROIC
also excludes from income from continuing operations the after-tax
effect of the fourth quarter 2009 charge associated with the make-
whole provision on the early retirement of debt and 2010 ROIC also
excludes from income from continuing operations the after-tax
effect of the second quarter 2010 UK Border Agency program
adjustment, the third quarter 2010 favorable tax settlement and the
after-tax effect of the fourth quarter 2010 charge associated with
the make-whole provision on the early retirement of debt. ROIC is
not a measure of financial performance under generally accepted
accounting principles (GAAP) and may not be defined and calculated
by other companies in the same manner. ROIC should be considered
supplemental to and not a substitute for financial information
prepared in accordance with GAAP. The Company uses ROIC as a measure
of the efficiency and effectiveness of its use of capital and as an
element of management compensation.
Return on Invested Capital
(In millions, except 2011 Initial
percentages) Guidance
-------------
High
Low end end
of of
2009 2010 range range
---- ---- ------ ------
Income from continuing
operations $1,977 $1,843
FAS/CAS Pension
Adjustment, after-tax * (18) 150
Q2 2010 UK Border Agency
program adjustment,
after-tax ** - 284
Q3 2010 favorable tax
settlement - (170) Combined Combined
Q4 2009 and 2010 early
debt retirement make-
whole provision, after-
tax * 14 47
Net interest expense,
after-tax * 71 72
Lease expense, after-tax * 66 67
--- ---
Return $2,110 $2,293 $2,165 $2,215
------ ------ ------ ------
Net debt *** $(132) $(171)
Equity less investment in
discontinued operations 9,560 9,944
Lease expense x 8, plus
financial guarantees 2,815 2,890 Combined Combined
Pension liability, net of
tax 3,612 3,049
Invested capital from
continuing operations
**** $15,855 $15,712 $16,185 $15,985
------- ------- ------- -------
ROIC 13.3% 14.6% 13.4% 13.9%
---- ---- ---- ----
* Calculated utilizing the federal statutory tax rate of 35%
** Calculated utilizing the UK statutory tax rate in effect in Q2
2010 of 28%
*** Net debt is defined as total debt less cash and cash equivalents
and is calculated using a 2-point average
**** Calculated using a 2-point average
Attachment G (Page 2 of 2)
Raytheon Company
Preliminary Return on Invested Capital Non-GAAP Financial Measure
Fourth Quarter 2010
Prior ROIC Calculation
----------------------
Our prior definition of Return on Invested Capital (ROIC) was income
from continuing operations excluding the after-tax effect of the
FAS/CAS Pension Adjustment plus after-tax net interest expense
plus one-third of operating lease expense after-tax (estimate of
interest portion of operating lease expense) divided by average
invested capital after capitalizing operating leases (operating
lease expense times a multiplier of 8), adding financial guarantees
less net investment in Discontinued Operations, and adding back the
impact of the accounting standard for employers' accounting for
defined benefit pension and other postretirement plans. 2009 ROIC
also excludes from income from continuing operations the after-tax
effect of the fourth quarter 2009 charge associated with the make-
whole provision on the early retirement of debt and 2010 ROIC also
excludes from income from continuing operations the after-tax
effect of the second quarter 2010 UK Border Agency program
adjustment, the third quarter 2010 favorable tax settlement and the
after-tax effect of the fourth quarter 2010 charge associated with
the make-whole provision on the early retirement of debt. ROIC is
not a measure of financial performance under generally accepted
accounting principles (GAAP) and may not be defined and calculated
by other companies in the same manner. ROIC should be considered
supplemental to and not a substitute for financial information
prepared in accordance with GAAP. The Company uses ROIC as a measure
of the efficiency and effectiveness of its use of capital and as an
element of management compensation.
Return on Invested
Capital
(In millions, except 2011 Initial
percentages) Guidance
-------------
High
Low end end
of of
2009 2010 range range
---- ---- ------ ------
Income from
continuing
operations $1,977 $1,843
FAS/CAS Pension
Adjustment, after-
tax * (18) 150
Q2 2010 UK Border
Agency program
adjustment, after-
tax ** - 284
Q3 2010 favorable
tax settlement - (170) Combined Combined
Q4 2009 and 2010
early debt
retirement make-
whole provision,
after-tax * 14 47
Net interest
expense, after-tax
* 71 72
Lease expense,
after-tax * 66 67
--- ---
Return $2,110 $2,293 $2,165 $2,215
------ ------ ------ ------
Net debt *** $(132) $(171)
Equity less
investment in
discontinued
operations 9,560 9,944
Lease expense x 8,
plus financial
guarantees 2,815 2,890 Combined Combined
Unfunded projected
benefit obligation 5,007 5,024
Invested capital
from continuing
operations **** $17,250 $17,687 $18,581 $18,381
------- ------- ------- -------
ROIC 12.2% 13.0% 11.7% 12.1%
---- ---- ---- ----
* Calculated utilizing the federal statutory tax rate of 35%
** Calculated utilizing the UK statutory tax rate in effect in Q2
2010 of 28%
*** Net debt is defined as total debt less cash and cash equivalents
and is calculated using a 2-point average
**** Calculated using a 2-point average
SOURCE Raytheon Company
