Raytheon Report Reflects US Army Contracts Drought

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Raytheon reported today its financial performance for the second quarter of 2012. Overall, net sales were US$5.99 billion, representing a 3 percent drop compared to the second quarter in 2011. The half-year sales volume is also representing a 3 percent drop compared to the first half of the last year. Although the order intake has reduced in the first half of 2012 Raytheon’s funded backlog has increased from $22.462 Billion to $23.085 billion. The total backlog at the end of the first half of 2012 was $33.923 Billion, reflecting $1.6 billion drop since December 2011. Nevertheless, due to recent stock repurchasing, the company increased ‘earning per share’ (EPS) by 13 percent. Optimistic this trend will continue, Raytheon has increased its full-year 2012 outlook guidance for EPS and operating cash flow from continuing operations. Following is an overview of the main highlights of three Raytheon segments involved in military programs.


The largest division was Space and Airborne Systems (SAS) that recorded net sales of $1,377 million in the second quarter, up $33 million compared to $1,344 million in the second quarter 2011. This increase came from an international tactical radar program. Improved program performance has also impacted the operating income that jumped $28 to $204 million in the second quarter 2012 (compared to the second quarter of 2011). In this period the division booked $462 million on a number of classified contracts and $205 million in new orders for multi-spectral targeting systems (MTS) payloads for Unmanned Aerial Vehicles to the U.S. Air Force.

The second largest operation, Raytheon Missile Systems (MS) delivered net sales of $1,355 million in the second quarter, $11 million below the second quarter last year, nevertheless, operating profit was $169 million, 18 million above last year’s operating income, reflecting improved program performance. (Second quarter 2011 included an unfavorable $15 million adjustment related to a contractual settlement.) During the second quarter Raytheon’s Missile Systems booked contracts worth over $1.3 Billion with the US Missile Defense Agency and US Navy.

Network Centric Systems (NCS) delivering net sales of $962 million in the period, 15% drop from the $1,135 million in the second quarter 2011. This drop in sales is attributed to lower sales on U.S. Army programs. This lower volume impacted the operating income reported: $123 million, down 28% from $170 million reported in the second quarter 2011. The change was also attributed to a change in contract mix. The single major Army program won in this quarter was a new contract worth $82 million for the Army Advanced Field Artillery Tactical Data System (AFATDS) program.

Technical Services (TS) had second quarter 2012 net sales of $821 million compared to $851 million in the second quarter 2011; operating income of $75 million was reported, $3 million above the second quarter 2011. Among the prominent achievements were $568 million booked on domestic training programs and $90 million on foreign training programs, in support of Warfighter FOCUS activities.