Raytheon Company Reports Operating Results (10-Q)

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Oct 27, 2011
Raytheon Company (RTN, Financial) filed Quarterly Report for the period ended 2011-10-02.

Raytheon Co. has a market cap of $15.01 billion; its shares were traded at around $42.44 with a P/E ratio of 7.8 and P/S ratio of 0.6. The dividend yield of Raytheon Co. stocks is 4.1%. Raytheon Co. had an annual average earning growth of 13.7% over the past 10 years.

Highlight of Business Operations:

Third Quarter. The decrease in cost of sales of $149 million in the third quarter of 2011 compared to the third quarter of 2010 was primarily due to decreased costs of $142 million at IDS, $98 million at NCS and $59 million at TS, partially offset by increased costs of $99 million at SAS, and $23 million of higher expense in the third quarter of 2011 compared to the third quarter of 2010 related to the FAS/CAS Adjustment described below in Segment Results. The decreased costs at IDS were driven primarily by the activity on the international Patriot program, U.S. Navy combat systems program, missile defense program and the various other programs described above in Total Net Sales. The decreased costs at NCS were driven primarily by the activity on the U.S. Army sensor program, U.S. Army communications program and combat vehicle sensor program described above in Total Net Sales. The decreased costs at TS were driven primarily by activity on a DTRA program which completed significant efforts at the end of 2010, activity from programs with the Transportation Security Administration (TSA), driven primarily by the completion of the major system integration efforts on a program awarded in the first quarter of 2010, and activity on training programs, principally domestic and foreign training programs supporting the U.S. Army's Warfighter FOCUS activities due to a decrease in customer determined activity levels. The increased costs at SAS were driven primarily by RAST programs and the activity on the intelligence, surveillance and reconnaissance systems programs described above in Total Net Sales. The decrease in product cost of sales of $137 million in the third quarter of 2011 compared to the third quarter of 2010 was primarily due to lower external product cost of sales of $106 million at IDS and $93 million at NCS, driven primarily by the activity in the programs described above, partially offset by higher external product cost of sales of $72 million at SAS, driven primarily by the activity in the programs described above. Service cost of sales in the third quarter of 2011 remained relatively consistent as a percentage of net sales compared to the third quarter of 2010.

Sales to the DoD were 83% and 86% of total net sales in the first nine months of 2011 and 2010, respectively. Sales to the U.S. Government were 87% and 90% of total net sales in the first nine months of 2011 and 2010, respectively. The decrease in sales to the DoD as a percentage of total net sales was primarily driven by the UKBA Program Adjustment in the first nine months of 2010. Included in both DoD and U.S. Government sales were foreign military sales through the U.S. Government of $2,283 million and $2,410 million in the first nine months of 2011 and 2010, respectively. Total international sales, including foreign military sales, were $4,561 million or 24.8% of total net sales in the first nine months of 2011 compared to $4,099 million or 22.4% of total net sales in the first nine months of 2010. International sales in the first nine months of 2010 included the UKBA Program Adjustment, which had an impact of $316 million.

above in Total Net Sales. The decreases were partially offset by $417 million of increased costs at SAS driven primarily by the activity on the intelligence, surveillance and reconnaissance systems programs, RAST programs and the international airborne tactical radar program described above in Total Net Sales, and $116 million of higher expense in the first nine months of 2011 compared to the first nine months of 2010 related to the FAS/CAS Adjustment described below in Segment Results. Included in cost of sales in the first nine months of 2011 was $80 million related to the drawdown by the UKBA on letters of credit provided by RSL (UKBA LOC Adjustment), as described in Commitments and Contingencies on page 44. Included in cost of sales in the first nine months of 2010 was $79 million related to the UKBA Program Adjustment described above in Total Net Sales. The decrease in product cost of sales of $240 million in the first nine months of 2011 compared to the first nine months of 2010 was primarily due to lower external product cost of sales of $251 million at NCS and $242 million at IDS, driven primarily by the activity in the programs described above, and $101 million at IIS, driven primarily by activity on the UKBA Program described above in Total Net Sales and lower external product net sales on a classified program, with the remaining change spread across numerous programs with no individual or common significant driver, partially offset by higher external costs of sales of $356 million at SAS, driven primarily by the activity in the programs described above. The increase in service cost of sales of $115 million in the first nine months of 2011 compared to the first nine months of 2010 was primarily due to higher external service cost of sales of $112 million at IIS, driven primarily by activity on classified programs.

Bookings decreased $704 million in the first nine months of 2011 compared to the first nine months of 2010. In addition to bookings noted above, in the first nine months of 2011, MS booked $690 million for the development and production of SM-3 for the MDA, $200 million for production of Standard Missile-6 (SM-6) for the U.S. Navy, $177 million for the production of Excalibur for the U.S. Army and an international customer, $91 million for production of Miniature Air-Launch Decoy (MALD®) for the U.S. Air Force and $81 million for the production of Tube-launched, Optically-tracked, Wireless-guided (TOW) missiles for the U.S. Army. In addition to the bookings noted above, in the first nine months of 2010, MS booked $535 million on a classified program, $446 million for the development of SM-3 and $111 million for development work on the EKV program for the MDA, $291 million for the production of SM-2 for an international customer and the U.S. Navy, $203 million for the production of Tomahawk missiles for the U.S. Navy, $102 million for the production of the JSOW for the U.S. Navy, $95 million for the production of TOW missiles for international customers and the U.S. Army, $81 million for the production of AIM-9X short range air-to-air missiles for the U.S. Navy and international customers, $223 million for the Phalanx Weapons System for the U.S. Navy, $150 million for the MALD program for the U.S. Air Force

Backlog and Bookings. Backlog was $8,581 million at October 2, 2011 compared to $8,212 million at December 31, 2010. Bookings increased $85 million in the third quarter of 2011 compared to the third quarter of 2010. In the third quarter of 2011, MS booked $584 million for the production of Advanced Medium-Range Air-to-Air Missiles (AMRAAM) for the U.S. Air Force and international customers, $329 million for the development of SM-3 for the MDA, $221 million for production of ESSM for the U.S. Navy and international customers, $200 million for a major classified program, $195 million for Phalanx weapon systems for the U.S. Navy and international customers, $179 million for the production of SM-2 for the U.S. Navy and international customers, $104 million for the production of Paveway for the U.S. Air Force and international customers, and $91 million for the production of the Joint Stand-off Weapon (JSOW) for the U.S. Navy and international customers. In the third quarter of 2010, MS booked $545 million for the production of AMRAAM for the U.S. Air Force and international customers, $451 million for engineering and manufacturing development of Small Diameter Bomb II (SDB II) for the joint U.S. Air Force and U.S Navy program, $237 million for SM-3 for the MDA and an international customer, $204 million for the production of Rolling Airframe Missile (RAM) for the U.S. Navy and an international customer, $119 million for the Javelin program for the U.S. Army and international customers, $112 million for the production of AIM-9X Sidewinder short range air-to-air missiles for the U.S. Navy and international customers, and $106 million for development work on the Exoatmospheric Kill Vehicle (EKV) for the MDA.

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