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Raytheon Reports Solid First Quarter 2016 Results

- Strong bookings of $6.2 billion; book-to-bill ratio of 1.08- Net sales of $5.8 billion, up 9.0 percent- EPS from continuing operations of $1.43- Solid operating cash flow from continuing operations of $325 million- As previously announced, increased annual dividend by 9.3 percent to $2.93 per share- Updated full-year 2016 guidance

WALTHAM, Mass., April 28, 2016 /PRNewswire/ -- Raytheon Company RTN, +1.29% announced net sales for the first quarter 2016 of $5.8 billion, up 9 percent compared to $5.3 billion in the first quarter 2015.

First quarter 2016 EPS from continuing operations was $1.43 compared to $1.78 in the first quarter 2015. First quarter 2016 EPS from continuing operations included, as expected, an $0.08 unfavorable impact associated with acquisition accounting adjustments related to Forcepoint™, partially offset by a tax benefit of $0.05 from adopting the new accounting standard for stock compensation, which was not in the Company's prior financial outlook. First quarter 2016 EPS from continuing operations included a favorable FAS/CAS Adjustment of $0.23 compared to a favorable FAS/CAS Adjustment of $0.10 in the first quarter 2015. In addition, first quarter 2015 EPS from continuing operations included a $0.42 favorable impact for the eBorders settlement with the U.K. Home Office.

"Raytheon had a good start to 2016 with bookings, sales, EPS and cash flow ahead of our expectations in the quarter," said Thomas A. Kennedy, Raytheon Chairman and CEO. "Demand from our global customers continues to be strong, with particular strength in bookings from domestic as well as the Middle East and North Africa region."

Operating cash flow from continuing operations for the first quarter 2016 was $325 million compared to $55 million for the first quarter 2015. The increase in operating cash flow from continuing operations in the first quarter 2016 was primarily due to the timing of collections and tax payments.

Summary Financial Results











1st Quarter


%

($ in millions, except per share data)

2016

2015


Change






Bookings

$

6,201

$

4,471


38.7%

Net Sales

$

5,763

$

5,288


9.0%

Income from Continuing Operations attributable to

Raytheon Company

$

428

$

551

1

-22.3%

EPS from Continuing Operations

$

1.43

$

1.78

1

-19.7%

Operating Cash Flow from Continuing Operations

$

325

$

55



Workdays in Fiscal Reporting Calendar

65

61



1 First quarter 2015 Income from Continuing Operations attributable to Raytheon Company and EPS from Continuing Operations included the favorable $181 million pretax ($131 million after-tax) and $0.42 impact, respectively, for the eBorders settlement.

The Company had bookings of $6.2 billion in the first quarter 2016, resulting in a book-to-bill ratio of 1.08 in the quarter. First quarter 2015 bookings were $4.5 billion.

In the first quarter 2016, the Company repurchased 3.2 million shares of common stock for $400 million. In addition, as previously announced, the Company's Board of Directors voted to increase the Company's annual dividend rate by 9.3 percent from $2.68 to $2.93 per share, the twelfth consecutive annual dividend increase.

The Company ended the first quarter 2016 with $2.7 billion of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.

Backlog





($ in millions)

Period Ending


Q1 2016

Q1 2015

2015

Backlog

$

34,768

$

32,485

$

34,669

Funded Backlog

$

26,168

$

23,723

$

25,060

Backlog at the end of the first quarter 2016 was $34.8 billion, an increase of approximately $2.3 billion compared to the end of the first quarter 2015. Funded backlog was $26.2 billion, an increase of approximately $2.4 billion compared to the end of the first quarter 2015.

Outlook

The Company has updated its financial outlook for 2016. Charts containing additional information on the Company's 2016 outlook are available on the Company's website at www.raytheon.com/ir.

2016 Financial Outlook





Current


Prior (1/28/16)

Net Sales ($B)

24.0 - 24.5


24.0 - 24.5

Deferred Revenue Adjustment ($M)1

(77)*


(67)

Amortization of Acquired Intangibles ($M)1

(121)


(121)

FAS/CAS Adjustment ($M)

428


428

Interest Expense, net ($M)

(220) - (230)


(220) - (230)

Diluted Shares (M)

296 - 298


296 - 298

Effective Tax Rate

~28.5%*


~30.0%

EPS from Continuing Operations

$6.93 - $7.13*


$6.80 - $7.00

Operating Cash Flow from Continuing Operations ($B)

2.7 - 3.0


2.7 - 3.0

* Denotes change from prior guidance




1 Deferred Revenue Adjustment and Amortization of Intangibles represent the unfavorable impact of the acquisition accounting adjustments to record acquired deferred revenue at fair value and the amortization of acquired intangible assets for all business segments.

Segment Results

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

As previously reported, effective January 1, 2016, the Company reclassified, for all business segments, acquisition accounting adjustments such that they are no longer reported within the business segments and are instead reported in separate deferred revenue adjustment and amortization of acquired intangibles line items. In addition, as previously reported, effective January 1, 2016, the Company reorganized the IDS and IIS business segments. The business results that follow reflect the above changes.

Integrated Defense Systems


1st Quarter


($ in millions)

2016

2015

% Change

Net Sales

$

1,337

$

1,307

2%

Operating Income

$

147

$

183

-20%

Operating Margin

11.0%

14.0%


Integrated Defense Systems (IDS) had first quarter 2016 net sales of $1,337 million, up 2 percent compared to $1,307 million in the first quarter 2015. The increase in net sales for the quarter was primarily driven by higher sales on certain international Patriot programs.

IDS recorded $147 million of operating income in the first quarter 2016 compared to $183 million in the first quarter 2015. The change in operating income for the quarter was primarily driven by a $36 million unfavorable program adjustment. This program is included in one of the Company's joint ventures. As such, approximately 50 percent of the unfavorable impact is reversed on the Company's income statement on the net loss attributable to noncontrolling interest line. The adjustment is related to costs to replace or repair defective shelters built by one of our subcontractors on an international command and control program in the first quarter 2016. The company is pursuing recovery of these costs.

During the quarter, IDS booked $191 million to provide Patriot engineering services support for U.S. and international customers and $84 million to provide advanced Patriot air and missile defense capability for the U.S. Army. IDS also booked $198 million on a classified program.

Intelligence, Information and Services


1st Quarter


($ in millions)

2016

2015

% Change

Net Sales

$

1,493

$

1,461

2%

Operating Income1

$

100

$

295

NM

Operating Margin

6.7%

20.2%


1 First quarter 2015 operating income includes the favorable $181 million impact of the eBorders settlement.

NM = Not Meaningful

Intelligence, Information and Services (IIS) had first quarter 2016 net sales of $1,493 million, up 2 percent compared to $1,461 million in the first quarter 2015. The increase in net sales for the quarter was primarily driven by higher sales on cybersecurity and special missions programs.

IIS recorded $100 million of operating income in the first quarter 2016 compared to $295 million in the first quarter 2015. First quarter 2015 operating income included the favorable $181 million impact of the eBorders settlement.

During the quarter, IIS booked $301 million for a U.S. Air Force program. IIS also booked $555 million on a number of classified contracts.

Missile Systems


1st Quarter


($ in millions)

2016

2015

% Change

Net Sales

$

1,720

$

1,473

17%

Operating Income

$

192

$

207

-7%

Operating Margin

11.2%

14.1%


Missile Systems (MS) had first quarter 2016 net sales of $1,720 million, up 17 percent compared to $1,473 million in the first quarter 2015. The increase in net sales for the quarter was primarily driven by higher sales on the Paveway™ and Advanced Medium-Range Air-to-Air Missile (AMRAAM [®] ) programs.

MS recorded $192 million of operating income in the first quarter 2016 compared to $207 million in the first quarter 2015. The decrease in operating income for the quarter was primarily driven by higher net program efficiencies and a favorable resolution of a contractual issue in the first quarter 2015, as well as an unfavorable change on incentive fees on a missile defense program in the first quarter 2016. This was partially offset by higher volume and a favorable...


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