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 Raytheon Reports Strong Fourth Quarter and Full-Year 2016 Results
   Thursday, January 26, 2017 6:55:00 AM ET

Raytheon Company (RTN ) today announced net sales for the fourth quarter 2016 of $6.2 billion compared to $6.3 billion in the fourth quarter 20151. Fourth quarter 2016 EPS from continuing operations was $1.84 compared to $1.85 in the fourth quarter 2015. Fourth quarter 2016 EPS from continuing operations included a favorable FAS/CAS Adjustment of $0.26 compared to a favorable FAS/CAS Adjustment of $0.10 in the fourth quarter 2015.

The Company made a pretax discretionary pension plan contribution in both the fourth quarter 2016 and the fourth quarter 2015, discussed further below, which had an unfavorable tax-related EPS impact of $0.04 and $0.02, respectively. The 2016 discretionary pension plan contribution was not included in the Company’s prior guidance.

Net sales in 2016 were $24.1 billion, up 3.5 percent compared to $23.2 billion in 2015. Full-year 2016 EPS from continuing operations was $7.44 compared to $6.75 for the full-year 2015.

"I’m pleased with the Company’s operating performance in 2016. We delivered solid sales and earnings growth by executing our strategy and investing in advanced capabilities that align with our global customers’ evolving requirements," said Thomas A. Kennedy, Raytheon Chairman and CEO. "Strong domestic and international bookings throughout the year drove an increase in our backlog, which positions us well for growth in the future."

The Company generated strong operating cash flow for both the fourth quarter and full-year. Operating cash flow from continuing operations for the fourth quarter 2016 was $1.1 billion compared to $0.8 billion for the fourth quarter 2015. Fourth quarter 2016 operating cash flow from continuing operations included a $500 million pretax discretionary cash contribution to the Company’s pension plans compared to $200 million in the fourth quarter 2015. For the full-year 2016 and 2015, the Company generated $2.9 billion and $2.3 billion of operating cash flow from continuing operations, respectively.

1Fourth quarter 2016 had 4 fewer work days than fourth quarter 2015.
Summary Financial Results
                                                                   4th Quarter                                               %              Twelve Months                                                 %
($ in millions, except per share data)                             2016                         2015                         Change         2016                           2015                           Change
Bookings                                                           $             7,577          $             7,861          -3.6%          $             27,836           $             25,227           10.3%
Net Sales                                                          $             6,238          $             6,328          -1.4%          $             24,069           $             23,247           3.5%
Income from Continuing Operations attributable to Raytheon Company $             544            $             558            -2.5%          $             2,210         1  $             2,061         2  7.2%
EPS from Continuing Operations                                     $             1.84           $             1.85           -0.5%          $             7.44          1  $             6.75          2  10.2%
Operating Cash Flow from Continuing Operations                     $             1,141          $             813                           $             2,852            $             2,346
Workdays in Fiscal Reporting Calendar                              57                           61                                          249                            249
1 Twelve months 2016 Income from Continuing Operations attributable to Raytheon Company and EPS from Continuing Operations included the tax-free gain of $158 million and $0.53 impact, respectively, for the second quarter 2016 TRS transaction.
2 Twelve months 2015 Income from Continuing Operations attributable to Raytheon Company and EPS from Continuing Operations included the favorable $181 million pretax ($143 million after-tax) and $0.47 impact, respectively, for the first quarter 2015 eBorders settlement.

The Company had bookings of $7.6 billion in the fourth quarter 2016, resulting in a book-to-bill ratio of 1.21. Fourth quarter 2015 bookings were $7.9 billion. Full-year 2016 bookings were a record $27.8 billion, resulting in a book-to-bill ratio of 1.16. Full-year 2015 bookings were $25.2 billion.

Backlog
($ in millions) Period Ending
                2016       2015
Backlog         $ 36,855   $ 34,669
Funded Backlog  $ 25,604   $ 25,060

Backlog at the end of 2016 was $36.9 billion, an increase of approximately $2.2 billion or 6 percent compared to the end of 2015. Funded backlog was $25.6 billion, an increase of approximately $0.5 billion compared to the end of 2015.

In the fourth quarter 2016, the Company repurchased 0.7 million shares of common stock for $100 million. For the full-year 2016, the Company repurchased 6.9 million shares of common stock for $900 million.

Outlook

The Company has provided its financial outlook for 2017. Charts containing additional information on the Company’s 2017 outlook are available on the Company’s website at www.raytheon.com/ir.

Effective January 1, 2017, the Company adopted the new revenue recognition standard utilizing the full retrospective transition method. Under this method, the standard was applied to each prior reporting period presented and the cumulative effect of applying the standard was recognized at the earliest period shown. The impact of adopting the new standard on the Company’s 2015 and 2016 net sales and operating income was not material. The 2016 net sales, effective tax rate and EPS from continuing operations in the financial outlook table below have been recast to reflect this change.

2017 Financial Outlook
                                                    2016 Actual                                                                                       2017
                                                    As Reported                                      New Rev Rec1                                     Outlook1
Net Sales ($B)                                      24.1                                             24.1                                             24.8 - 25.3
Deferred Revenue Adjustment ($M)2                   (77)                                             (77)                                             (33)
Amortization of Acquired Intangibles ($M)2          (121)                                            (121)                                            (127)
FAS/CAS Adjustment ($M)                             435                                              435                                              428
Interest Expense, net ($M)                          (216)                                            (216)                                            (216) - (221)
Diluted Shares (M)                                  297                                              297                                              291 - 293
Effective Tax Rate                                  28.3%                                            28.3%                                             31.5%
EPS from Continuing Operations3                     $7.44                                            $7.55                                            $7.20 - $7.35
Operating Cash Flow from Continuing Operations ($B) 2.9                                              2.9                                              2.8 - 3.1
1 Effective January 1, 2017, the Company adopted the new revenue recognition standard, Accounting Standards Update 2014-09. The 2016 Actuals - New Rev Rec and the 2017 Outlook above reflect this change.
2 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, respectively, for all of the business segments.
3 2016 EPS from Continuing Operations included the $0.53 tax-free gain for the second quarter TRS transaction.

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.

The pro-forma attachments at the end of this release present prior period consolidated and segment data recast to reflect the adoption of the new revenue recognition standard discussed above. The business results discussed below do not reflect these changes, because they became effective January 1, 2017.

Integrated Defense Systems
                    4th Quarter                                 Twelve Months
($ in millions)     2016             2015             % Change  2016             2015             % Change
Net Sales           $      1,406     $      1,558     -10%      $      5,476     $      5,847     -6%
Operating Income1   $      219       $      281       -22%      $      950       $      864       NM
Operating Margin1   15.6          %  18.0          %            17.3          %  14.8          %
1 Twelve months 2016 operating income and operating margin include the $158 million tax-free gain from the second quarter TRS transaction.
NM = Not Meaningful

Integrated Defense Systems (IDS) had fourth quarter 2016 net sales of $1,406 million compared to $1,558 million in the fourth quarter 2015. IDS had full-year 2016 net sales of $5,476 million compared to $5,847 million in 2015. The change in net sales for both the quarter and the full-year was primarily driven by lower net sales on an international communications program and on the Air Warfare Destroyer (AWD) program. In addition, the full-year was also driven by lower net sales on various missile defense radar production programs.

IDS recorded $219 million of operating income in the fourth quarter 2016 compared to $281 million in the fourth quarter 2015. The change in operating income for the quarter was primarily driven by a favorable contract modification on the AWD program in the fourth quarter 2015 and lower volume in the fourth quarter 2016. IDS recorded $950 million of operating income in 2016 compared to $864 million in 2015. Operating income for the full-year 2016 included the $158 million tax-free gain from the second quarter TRS transaction.

During the quarter, IDS booked approximately $1.0 billion to provide advanced Patriot air and missile defense capabilities for multiple international customers. IDS booked $189 million to provide Consolidated Contractor Logistics Support (CCLS) and $144 million on the AN/TPY-2 radar sustainment program for the Missile Defense Agency (MDA). IDS also booked $110 million on the Air and Missile Defense Radar (AMDR) program for the U.S. Navy.

Intelligence, Information and Services
                    4th Quarter                                     Twelve Months
($ in millions)     2016               2015               % Change  2016               2015               % Change
Net Sales           $       1,518      $       1,537      -1%       $       6,194      $       6,111      1%
Operating Income1   $       121        $       111        9%        $       467        $       646        NM
Operating Margin1   8.0             %  7.2             %            7.5             %  10.6            %
1 Twelve months 2015 operating income and operating margin include the favorable $181 million impact for the first quarter eBorders settlement.
NM = Not Meaningful

Intelligence, Information and Services (IIS) had fourth quarter 2016 net sales of $1,518 million compared to $1,537 million in the fourth quarter 2015. IIS had full-year 2016 net sales of $6,194 million compared to $6,111 million in 2015. The change in net sales for the full-year was primarily driven by higher net sales on cybersecurity and special mission programs.

IIS recorded $121 million of operating income in the fourth quarter 2016 compared to $111 million in the fourth quarter 2015. The change in operating income for the quarter was primarily driven by higher net program efficiencies in the fourth quarter 2016. IIS recorded $467 million of operating income in 2016 compared to $646 million in 2015. Operating income for the full-year 2015 included the favorable $181 million impact for the first quarter eBorders settlement.

During the quarter, IIS booked $90 million on domestic and foreign training programs in support of Warfighter FOCUS activities. IIS also booked $448 million on a number of classified contracts.

Missile Systems
                 4th Quarter                       Twelve Months
($ in millions)  2016        2015        % Change  2016        2015        % Change
Net Sales        $  1,895    $  1,879    1%        $  7,071    $  6,556    8%
Operating Income $  260      $  258      1%        $  916      $  868      6%
Operating Margin 13.7     %  13.7     %            13.0     %  13.2     %

Missile Systems (MS) had fourth quarter 2016 net sales of $1,895 million compared to $1,879 million in the fourth quarter 2015. MS had full-year 2016 net sales of $7,071 million compared to $6,556 million in 2015. The increase in net sales for the full-year was primarily driven by higher net sales on the Paveway(TM) program.

MS recorded $260 million of operating income in the fourth quarter 2016 compared to $258 million in the fourth quarter 2015. MS recorded $916 million of operating income in 2016 compared to $868 million in 2015. The increase in operating income for the full-year was primarily due to higher volume in 2016.

During the quarter, MS booked $362 million for Paveway(TM), $309 million for Tomahawk, $259 million for the Rolling Airframe Missile (RAM(TM)) program, $208 million for the Stinger? weapon system, $193 million for Evolved Seasparrow Missiles (ESSM?), $141 million for Standard Missile-3 (SM-3?), $114 million for Phalanx? close-in weapon systems, $76 million for Miniature Air Launched Decoy (MALD?), and $76 million for the David’s Sling weapon system’s Stunner Missile. MS also booked $175 million for the Hypersonic Air-breathing Weapon Concept (HAWC) program for the Defense Advanced Research Projects Agency (DARPA) and the U.S. Air Force.

Space and Airborne Systems
                 4th Quarter                             Twelve Months
($ in millions)  2016           2015           % Change  2016        2015        % Change
Net Sales        $   1,612      $   1,576      2%        $  6,199    $  5,796    7%
Operating Income $   231        $   239        -3%       $  817      $  829      -1%
Operating Margin 14.3      %    15.2      %              13.2     %  14.3     %

Space and Airborne Systems (SAS) had fourth quarter 2016 net sales of $1,612 million compared to $1,576 million in the fourth quarter 2015. The increase in net sales for the quarter was primarily driven by higher net sales on an electronic warfare systems program and an international classified program. SAS had full-year 2016 net sales of $6,199 million compared to $5,796 million in 2015. The increase in net sales for the full-year was primarily due to higher net sales on classified programs.

SAS recorded $231 million of operating income in the fourth quarter 2016 compared to $239 million in the fourth quarter 2015. SAS recorded $817 million of operating income in 2016 compared to $829 million in 2015. The change in operating income for the quarter and the full-year was primarily driven by a change in program mix.

During the quarter, SAS booked $610 million for the production of Active Electronically Scanned Array (AESA) radars, $81 million to provide radar components and $75 million on a cryptographic modernization program, all for both U.S. and international customers. SAS also booked $467 million on a number of classified contracts.

Forcepoint
                    4th Quarter                 Twelve Months
($ in millions)     2016     2015     % Change  2016     2015     % Change
Net Sales           $ 143    $ 133    8%        $ 566    $ 328    NM
Operating Income    $ 11     $ 11     -         $ 51     $ 30     NM
Operating Margin    7.7   %  8.3   %            9.0   %  9.1   %
NM = Not Meaningful

Forcepoint had fourth quarter 2016 net sales of $143 million, up 8 percent compared to $133 million in the fourth quarter 2015. The increase in net sales for the quarter was primarily driven by the acquisition of Stonesoft in the first quarter of 2016. Forcepoint recorded $11 million of operating income in both the fourth quarter 2016 and in the fourth quarter 2015.

Forcepoint had full-year 2016 net sales of $566 million compared to $328 million in 2015. Forcepoint recorded $51 million of operating income in 2016 compared to $30 million in 2015. The increase in both net sales and operating income for the full-year was primarily due to the acquisition of Websense in the second quarter of 2015 and Stonesoft in the first quarter of 2016.

About Raytheon

Raytheon Company, with 2016 sales of $24 billion and 63,000 employees, is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. With a history of innovation spanning 95 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5ITM products and services, sensing, effects, and mission support for customers in more than 80 countries. Raytheon is headquartered in Waltham, Massachusetts. Follow us on Twitter.

Conference Call on the Fourth Quarter and Full-Year 2016 Financial Results

Raytheon’s financial results conference call will be held on Thursday, January 26, 2017 at 9 a.m. ET. Participants will include Thomas A. Kennedy, Chairman and CEO; Anthony F. O’Brien, vice president and CFO; and other Company executives.

The dial-in number for the conference call will be (800) 510-9691 in the U.S. or (617) 614-3453 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 due to budgetary constraints, spending cuts resulting from sequestration, a government shutdown, or otherwise, uncertain funding of programs and potential termination of contracts; difficulties in contract performance; the resolution of program terminations; the ability to procure new contracts; the risks of conducting business in foreign countries; the unpredictability of timing of international bookings; the ability to comply with extensive governmental regulation and obtain approvals, including export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations; changes in government procurement practices; the impact of competition; the ability to develop products and technologies, and the impact of associated investments and costs; the ability to recruit and retain qualified personnel; the impact of potential security and cyber threats, and other disruptions; the risk that actual pension returns, discount rates or other actuarial assumptions, including the long-term return on asset assumption, are significantly different than the Company’s current assumptions; the risk of cost overruns, particularly for the Company’s fixed-price contracts; dependence on component availability, subcontractor and partner performance and key suppliers; risks of a negative government audit; risks associated with acquisitions, investments, dispositions, joint ventures and other business arrangements; the ability to grow in the government and commercial cybersecurity markets; risks of an impairment of goodwill or other intangible assets; the impact of financial markets and global economic conditions; the use of accounting estimates in the Company’s financial statements; the outcome of contingencies and litigation matters, including government investigations; the risk of environmental liabilities; 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.

Attachment A
Raytheon Company
Preliminary Statement of Operations Information
Fourth Quarter 2016
(In millions, except per share amounts)                                           Three Months Ended      Twelve Months Ended
                                                                                  31-Dec-16   31-Dec-15   31-Dec-16    31-Dec-15
Net sales                                                                         $   6,238   $   6,328   $   24,069   $   23,247
Operating expenses
Cost of sales                                                                     4,655       4,808       17,947       17,574
General and administrative expenses                                               721         692         2,882        2,660
Total operating expenses                                                          5,376       5,500       20,829       20,234
Operating income                                                                  862         828         3,240        3,013
Non-operating (income) expense, net
Interest expense                                                                  58          58          232          233
Interest income                                                                   (4)         (2)         (16)         (11)
Other (income) expense, net                                                       1           (2)         (6)          4
Total non-operating (income) expense, net                                         55          54          210          226
Income from continuing operations before taxes                                    807         774         3,030        2,787
Federal and foreign income taxes                                                  266         220         857          733
Income from continuing operations                                                 541         554         2,173        2,054
Income (loss) from discontinued operations, net of tax                            --          13          1            13
Net income                                                                        541         567         2,174        2,067
Less: Net income (loss) attributable to noncontrolling interests in subsidiaries  (3)         (4)         (37)         (7)
Net income attributable to Raytheon Company                                       $   544     $   571     $   2,211    $   2,074
Basic earnings per share attributable to Raytheon Company common stockholders:
Income from continuing operations                                                 $   1.84    $   1.85    $   7.45     $   6.76
Income (loss) from discontinued operations, net of tax                            --          0.04        --           0.04
Net income                                                                        1.84        1.89        7.45         6.81
Diluted earnings per share attributable to Raytheon Company common stockholders:
Income from continuing operations                                                 $   1.84    $   1.85    $   7.44     $   6.75
Income (loss) from discontinued operations, net of tax                            --          0.04        --           0.04
Net income                                                                        1.84        1.89        7.44         6.80
Amounts attributable to Raytheon Company common stockholders:
Income from continuing operations                                                 $   544     $   558     $   2,210    $   2,061
Income (loss) from discontinued operations, net of tax                            --          13          1            13
Net income                                                                        $   544     $   571     $   2,211    $   2,074
Average shares outstanding
Basic                                                                             294.2       301.6       296.5        304.8
Diluted                                                                           294.5       302.1       296.8        305.2
Attachment A - Pro Forma
Raytheon Company
Preliminary Statement of Operations Information
Full Year 2015, and Quarters within and Full Year 2016
Effective January 1, 2017, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The amounts and presentation of our statement of operations information set forth below reflect these changes.
(In millions, except per share amounts)                                           Three Months Ended                                                                      Twelve Months Ended
                                                                                  31-Dec-16             2-Oct-16              3-Jul-16              3-Apr-16              31-Dec-16             31-Dec-15
Net sales                                                                         $         6,279       $         6,014       $         6,029       $         5,802       $         24,124      $         23,321
Operating expenses
Cost of sales                                                                     4,688                 4,474                 4,362                 4,441                 17,965                17,608
General and administrative expenses                                               711                   710                   695                   748                   2,864                 2,646
Total operating expenses                                                          5,399                 5,184                 5,057                 5,189                 20,829                20,254
Operating income                                                                  880                   830                   972                   613                   3,295                 3,067
Non-operating (income) expense, net
Interest expense                                                                  58                    58                    58                    58                    232                   233
Interest income                                                                   (4)                   (4)                   (4)                   (4)                   (16)                  (11)
Other (income) expense, net                                                       1                     (4)                   (1)                   (2)                   (6)                   4
Total non-operating (income) expense, net                                         55                    50                    53                    52                    210                   226
Income from continuing operations before taxes                                    825                   780                   919                   561                   3,085                 2,841
Federal and foreign income taxes                                                  272                   239                   205                   157                   873                   747
Income from continuing operations                                                 553                   541                   714                   404                   2,212                 2,094
Income (loss) from discontinued operations, net of tax                            --                    1                     (1)                   1                     1                     13
Net income                                                                        553                   542                   713                   405                   2,213                 2,107
Less: Net income (loss) attributable to noncontrolling interests in subsidiaries  (2)                   (2)                   (4)                   (23)                  (31)                  (3)
Net income attributable to Raytheon Company                                       $         555         $         544         $         717         $         428         $         2,244       $         2,110
Basic earnings per share attributable to Raytheon Company common stockholders:
Income from continuing operations                                                 $         1.88        $         1.84        $         2.41        $         1.43        $         7.55        $         6.88
Income (loss) from discontinued operations, net of tax                            --                    --                    --                    --                    --                    0.04
Net income                                                                        1.88                  1.84                  2.41                  1.43                  7.56                  6.92
Diluted earnings per share attributable to Raytheon Company common stockholders:
Income from continuing operations                                                 $         1.87        $         1.84        $         2.41        $         1.43        $         7.55        $         6.87
Income (loss) from discontinued operations, net of tax                            --                    --                    --                    --                    --                    0.04
Net income                                                                        1.88                  1.84                  2.41                  1.43                  7.55                  6.91
Amounts attributable to Raytheon Company common stockholders:
Income from continuing operations                                                 $         555         $         543         $         718         $         427         $         2,243       $         2,097
Income (loss) from discontinued operations, net of tax                            --                    1                     (1)                   1                     1                     13
Net income                                                                        $         555         $         544         $         717         $         428         $         2,244       $         2,110
Average shares outstanding
Basic                                                                             294.2                 295.2                 297.3                 299.2                 296.5                 304.8
Diluted                                                                           294.5                 295.5                 297.6                 299.6                 296.8                 305.2
Attachment B
Raytheon Company
Preliminary Segment Information
Fourth Quarter 2016
                                                                                          Operating Income
                                        Net Sales                 Operating Income        As a Percent of Net Sales
(In millions, except percentages)       Three Months Ended        Three Months Ended      Three Months Ended
                                        31-Dec-16    31-Dec-15    31-Dec-16   31-Dec-15   31-Dec-16  31-Dec-15
Integrated Defense Systems              $   1,406    $   1,558    $   219     $   281     15.6  %    18.0  %
Intelligence, Information and Services  1,518        1,537        121         111         8.0   %    7.2   %
Missile Systems                         1,895        1,879        260         258         13.7  %    13.7  %
Space and Airborne Systems              1,612        1,576        231         239         14.3  %    15.2  %
Forcepoint                              143          133          11          11          7.7   %    8.3   %
Eliminations                            (323)        (331)        (32)        (29)
Total business segment                  6,251        6,352        810         871         13.0  %    13.7  %
Acquisition Accounting Adjustments      (13)         (24)         (43)        (59)
FAS/CAS Adjustment                      --           --           117         44
Corporate                               --           --           (22)        (28)
Total                                   $   6,238    $   6,328    $   862     $   828     13.8  %    13.1  %
                                                                                          Operating Income
                                        Net Sales                 Operating Income        As a Percent of Net Sales
(In millions, except percentages)       Twelve Months Ended       Twelve Months Ended     Twelve Months Ended
                                        31-Dec-16    31-Dec-15    31-Dec-16   31-Dec-15   31-Dec-16  31-Dec-15
Integrated Defense Systems              $   5,476    $   5,847    $   950     $   864     17.3  %    14.8  %
Intelligence, Information and Services  6,194        6,111        467         646         7.5   %    10.6  %
Missile Systems                         7,071        6,556        916         868         13.0  %    13.2  %
Space and Airborne Systems              6,199        5,796        817         829         13.2  %    14.3  %
Forcepoint                              566          328          51          30          9.0   %    9.1   %
Eliminations                            (1,360)      (1,330)      (141)       (140)
Total business segment                  24,146       23,308       3,060       3,097       12.7  %    13.3  %
Acquisition Accounting Adjustments      (77)         (61)         (198)       (168)
FAS/CAS Adjustment                      --           --           435         185
Corporate                               --           --           (57)        (101)
Total                                   $   24,069   $   23,247   $   3,240   $   3,013   13.5  %    13.0  %
Attachment B - Pro Forma
Raytheon Company
Preliminary Segment Information
Full Year 2015, and Quarters within and Full Year 2016
Effective January 1, 2017, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The amounts and presentation of our segment information set forth below reflect these changes.
                                        Net Sales                                                                               Net Sales
(In millions)                           Three Months Ended                                                                      Twelve Months Ended
                                        31-Dec-16             2-Oct-16              3-Jul-16              3-Apr-16              31-Dec-16             31-Dec-15
Integrated Defense Systems              $         1,460       $         1,334       $         1,399       $         1,336       $         5,529       $         5,848
Intelligence, Information and Services  1,516                 1,534                 1,587                 1,532                 6,169                 6,137
Missile Systems                         1,897                 1,770                 1,706                 1,723                 7,096                 6,569
Space and Airborne Systems              1,600                 1,590                 1,547                 1,445                 6,182                 5,814
Forcepoint                              143                   167                   137                   139                   586                   344
Eliminations                            (324)                 (364)                 (326)                 (347)                 (1,361)               (1,330)
Total business segment                  6,292                 6,031                 6,050                 5,828                 24,201                23,382
Acquisition Accounting Adjustments      (13)                  (17)                  (21)                  (26)                  (77)                  (61)
Total                                   $         6,279       $         6,014       $         6,029       $         5,802       $         24,124      $         23,321
                                        Operating Income                                                                        Operating Income
(In millions)                           Three Months Ended                                                                      Twelve Months Ended
                                        31-Dec-16             2-Oct-16              3-Jul-16              3-Apr-16              31-Dec-16             31-Dec-15
Integrated Defense Systems              $         238         $         211         $         376         $         146         $         971         $         859
Intelligence, Information and Services  120                   123                   120                   104                   467                   648
Missile Systems                         261                   235                   233                   192                   921                   877
Space and Airborne Systems              221                   215                   205                   167                   808                   851
Forcepoint                              21                    41                    10                    18                    90                    56
Eliminations                            (33)                  (42)                  (34)                  (33)                  (142)                 (140)
Total business segment                  828                   783                   910                   594                   3,115                 3,151
Acquisition Accounting Adjustments      (43)                  (46)                  (51)                  (58)                  (198)                 (168)
FAS/CAS Adjustment                      117                   104                   109                   105                   435                   185
Corporate                               (22)                  (11)                  4                     (28)                  (57)                  (101)
Total                                   $         880         $         830         $         972         $         613         $         3,295       $         3,067
                                        Operating Income                                                                        Operating Income
                                        As a Percentage of Net Sales                                                            As a Percentage of Net Sales
                                        Three Months Ended                                                                      Twelve Months Ended
                                        31-Dec-16             2-Oct-16              3-Jul-16              3-Apr-16              31-Dec-16             31-Dec-15
Integrated Defense Systems              16.3%                 15.8%                 26.9%                 10.9%                 17.6%                 14.7%
Intelligence, Information and Services  7.9%                  8.0%                  7.6%                  6.8%                  7.6%                  10.6%
Missile Systems                         13.8%                 13.3%                 13.7%                 11.1%                 13.0%                 13.4%
Space and Airborne Systems              13.8%                 13.5%                 13.3%                 11.6%                 13.1%                 14.6%
Forcepoint                              14.7%                 24.6%                 7.3%                  12.9%                 15.4%                 16.3%
Eliminations
Total business segment                  13.2%                 13.0%                 15.0%                 10.2%                 12.9%                 13.5%
Acquisition Accounting Adjustments
FAS/CAS Adjustment
Corporate
Total                                   14.0%                 13.8%                 16.1%                 10.6%                 13.7%                 13.2%
Attachment C
Raytheon Company
Other Preliminary Information
Fourth Quarter 2016
(In millions)                                  Funded Backlog            Total Backlog
                                               31-Dec-16    31-Dec-15    31-Dec-16    31-Dec-15
Integrated Defense Systems                     $   8,438    $   8,961    $   10,224   $   10,629
Intelligence, Information and Services         2,340        2,933        5,663        6,367
Missile Systems                                9,008        7,998        11,617       10,885
Space and Airborne Systems                     5,286        4,692        8,819        6,309
Forcepoint                                     532          476          532          479
Total                                          $   25,604   $   25,060   $   36,855   $   34,669
                                               Three Months Ended        Twelve Months Ended
                                               31-Dec-16    31-Dec-15    31-Dec-16    31-Dec-15
Total Bookings                                 $   7,577    $   7,861    $   27,836   $   25,227
                                               Three Months Ended        Twelve Months Ended
                                               31-Dec-16    31-Dec-15    31-Dec-16    31-Dec-15
Administrative and selling expenses            $   525      $   497      $   2,127    $   1,954
Research and development expenses              196          195          755          706
Total general and administrative expenses      $   721      $   692      $   2,882    $   2,660
Attachment C - Pro Forma
Raytheon Company
Other Preliminary Information
Full Year 2015, and Quarters within and Full Year 2016
Effective January 1, 2017, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The amounts and presentation of our other information set forth below reflect these changes.
(In millions)                                                                                       Remaining
                                                                                                    Performance
                                                                                                    Obligations
                                                                                                    (Total Backlog)
                                                                                                                        31-Dec-16
Integrated Defense Systems                                                                                              $        10,159
Intelligence, Information and Services                                                                                  5,662
Missile Systems                                                                                                         11,568
Space and Airborne Systems                                                                                              8,834
Forcepoint                                                                                                              486
Total                                                                                                                   $        36,709
                                        Bookings                                                                        Bookings
(In millions)                           Three Months Ended                                                              Twelve Months Ended
                                        31-Dec-16           2-Oct-16            3-Jul-16            3-Apr-16            31-Dec-16           31-Dec-15
Integrated Defense Systems              $        2,062      $        1,025      $        1,273      $        1,017      $        5,377      $        6,389
Intelligence, Information and Services  980                 1,731               1,599               1,253               5,563               5,319
Missile Systems                         2,439               1,932               1,891               1,632               7,894               8,149
Space and Airborne Systems              1,935               2,060               2,217               2,202               8,414               4,936
Forcepoint                              166                 175                 123                 97                  561                 352
Total                                   $        7,582      $        6,923      $        7,103      $        6,201      $        27,809     $        25,145
Attachment D
Raytheon Company
Preliminary Balance Sheet Information
Fourth Quarter 2016
(In millions)
                                                                 31-Dec-16    31-Dec-15
Assets
Current assets
Cash and cash equivalents                                        $   3,303    $   2,328
Short-term investments                                           100          872
Contracts in process, net                                        6,202        5,564
Inventories                                                      659          635
Prepaid expenses and other current assets                        414          413
Total current assets                                             10,678       9,812
Property, plant and equipment, net                               2,166        2,005
Goodwill                                                         14,788       14,731
Other assets, net                                                2,420        2,733
Total assets                                                     $   30,052   $   29,281
Liabilities, Redeemable Noncontrolling Interest and Equity
Current liabilities
Advance payments and billings in excess of costs incurred        $   2,239    $   2,193
Accounts payable                                                 1,520        1,402
Accrued employee compensation                                    1,234        1,154
Other current liabilities                                        1,434        1,377
Total current liabilities                                        6,427        6,126
Accrued retiree benefits and other long-term liabilities         7,775        7,140
Long-term debt                                                   5,335        5,330
Redeemable noncontrolling interest                               449          355
Equity
Raytheon Company stockholders’ equity
Common stock                                                     3            3
Additional paid-in capital                                       --           398
Accumulated other comprehensive loss                             (7,411)      (7,176)
Retained earnings                                                17,474       16,903
Total Raytheon Company stockholders’ equity                      10,066       10,128
Noncontrolling interests in subsidiaries                         --           202
Total equity                                                     10,066       10,330
Total liabilities, redeemable noncontrolling interest and equity $   30,052   $   29,281
Attachment D - Pro Forma
Raytheon Company
Preliminary Balance Sheet Information
December 31, 2016
Effective January 1, 2017, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The amounts and presentation of our balance sheet information set forth below reflect these changes.
(In millions)
                                                                 31-Dec-16
Assets
Current assets
Cash and cash equivalents                                        $         3,303
Short-term investments                                           100
Receivables, net                                                 1,163
Contract assets                                                  5,041
Inventories                                                      608
Prepaid expenses and other current assets                        670
Total current assets                                             10,885
Property, plant and equipment, net                               2,166
Goodwill                                                         14,788
Other assets, net                                                2,399
Total assets                                                     $         30,238
Liabilities, Redeemable Noncontrolling Interest and Equity
Current liabilities
Contract liabilities                                             $         2,646
Accounts payable                                                 1,520
Accrued employee compensation                                    1,234
Other current liabilities                                        1,139
Total current liabilities                                        6,539
Accrued retiree benefits and other long-term liabilities         7,758
Long-term debt                                                   5,335
Redeemable noncontrolling interest                               449
Equity
Raytheon Company stockholders’ equity
Common stock                                                     3
Additional paid-in capital                                       --
Accumulated other comprehensive loss                             (7,411)
Retained earnings                                                17,565
Total Raytheon Company stockholders’ equity                      10,157
Noncontrolling interests in subsidiaries                         --
Total equity                                                     10,157
Total liabilities, redeemable noncontrolling interest and equity $         30,238
Attachment E
Raytheon Company
Preliminary Cash Flow Information
Fourth Quarter 2016
                                                                                                                                                 Twelve Months Ended
(In millions)                                                                                                                                    31-Dec-16   31-Dec-15
Cash flows from operating activities
Net income                                                                                                                                       $   2,174   $   2,067
(Income) loss from discontinued operations, net of tax                                                                                           (1)         (13)
Income from continuing operations                                                                                                                2,173       2,054
Adjustments to reconcile to net cash provided by (used in) operating activities from continuing operations, net of acquisitions and divestitures
Depreciation and amortization                                                                                                                    515         489
Stock-based compensation                                                                                                                         151         140
Gain on sale of equity method investment                                                                                                         (158)       --
Deferred income taxes                                                                                                                            109         (56)
Tax benefit from stock-based awards                                                                                                              --          (47)
Changes in assets and liabilities
Contracts in process, net and advance payments and billings in excess of costs incurred                                                          (593)       (637)
Inventories                                                                                                                                      (23)        (223)
Prepaid expenses and other current assets                                                                                                        181         (28)
Income taxes receivable/payable                                                                                                                  (185)       (181)
Accounts payable                                                                                                                                 152         107
Accrued employee compensation                                                                                                                    77          72
Other current liabilities                                                                                                                        (6)         58
Accrued retiree benefits                                                                                                                         419         637
Other, net                                                                                                                                       40          (39)
Net cash provided by (used in) operating activities from continuing operations                                                                   2,852       2,346
Net cash provided by (used in) operating activities from discontinued operations                                                                 --          13
Net cash provided by (used in) operating activities                                                                                              2,852       2,359
Cash flows from investing activities
Additions to property, plant and equipment                                                                                                       (561)       (406)
Proceeds from sales of property, plant and equipment                                                                                             34          59
Additions to capitalized internal use software                                                                                                   (64)        (51)
Purchases of short-term investments                                                                                                              (472)       (1,392)
Sales of short-term investments                                                                                                                  --          209
Maturities of short-term investments                                                                                                             1,184       1,793
Payments for purchases of acquired companies, net of cash received                                                                               (57)        (1,954)
Other                                                                                                                                            (11)        (2)
Net cash provided by (used in) investing activities                                                                                              53          (1,744)
Cash flows from financing activities
Dividends paid                                                                                                                                   (850)       (797)
Repurchases of common stock under share repurchase programs                                                                                      (900)       (1,000)
Repurchases of common stock to satisfy tax withholding obligations                                                                               (96)        (99)
Acquisition of noncontrolling interest in RCCS LLC                                                                                               (90)        --
Contribution from noncontrolling interests in Forcepoint                                                                                         11          --
Tax benefit from stock-based awards                                                                                                              --          47
Sale of noncontrolling interest in Forcepoint                                                                                                    --          343
Other                                                                                                                                            (5)         (3)
Net cash provided by (used in) financing activities                                                                                              (1,930)     (1,509)
Net increase (decrease) in cash and cash equivalents                                                                                             975         (894)
Cash and cash equivalents at beginning of the year                                                                                               2,328       3,222
Cash and cash equivalents at end of period                                                                                                       $   3,303   $   2,328
Attachment E - Pro Forma
Raytheon Company
Preliminary Cash Flow Information
Full Year 2015, and Quarters within and Full Year 2016
Effective January 1, 2017, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The amounts and presentation of our cash flow information set forth below reflect these changes.
                                                                                                                                                 Three Months Ended                                                                      Twelve Months Ended
(In millions)                                                                                                                                    31-Dec-16             2-Oct-16              3-Jul-16              3-Apr-16              31-Dec-16             31-Dec-15
Cash flows from operating activities
Net income                                                                                                                                       $         553         $         542         $         713         $         405         $         2,213       $         2,107
(Income) loss from discontinued operations, net of tax                                                                                           --                    (1)                   1                     (1)                   (1)                   (13)
Income from continuing operations                                                                                                                553                   541                   714                   404                   2,212                 2,094
Adjustments to reconcile to net cash provided by (used in) operating activities from continuing operations, net of acquisitions and divestitures
Depreciation and amortization                                                                                                                    138                   130                   123                   124                   515                   489
Stock-based compensation                                                                                                                         31                    31                    35                    54                    151                   140
Gain on sale of equity method investment                                                                                                         --                    --                    (158)                 --                    (158)                 --
Deferred income taxes                                                                                                                            217                   (31)                  (23)                  (30)                  133                   (42)
Tax benefit from stock-based awards                                                                                                              --                    --                    --                    --                    --                    (47)
Changes in assets and liabilities
Receivables, net                                                                                                                                 82                    186                   (156)                 (94)                  18                    12
Contracts assets and contract liabilities                                                                                                        280                   (433)                 (197)                 (295)                 (645)                 (656)
Inventories                                                                                                                                      27                    (23)                  (55)                  41                    (10)                  (187)
Prepaid expenses and other current assets                                                                                                        (47)                  122                   (13)                  143                   205                   (61)
Income taxes receivable/payable                                                                                                                  (107)                 (142)                 (125)                 189                   (185)                 (181)
Accounts payable                                                                                                                                 100                   3                     92                    (43)                  152                   107
Accrued employee compensation                                                                                                                    102                   18                    308                   (351)                 77                    72
Other current liabilities                                                                                                                        18                    17                    (33)                  (43)                  (41)                  17
Accrued retiree benefits                                                                                                                         (274)                 248                   224                   221                   419                   637
Other, net                                                                                                                                       21                    (27)                  10                    5                     9                     (48)
Net cash provided by (used in) operating activities from continuing operations                                                                   1,141                 640                   746                   325                   2,852                 2,346
Net cash provided by (used in) operating activities from discontinued operations                                                                 --                    --                    (1)                   1                     --                    13
Net cash provided by (used in) operating activities                                                                                              1,141                 640                   745                   326                   2,852                 2,359
Cash flows from investing activities
Additions to property, plant and equipment                                                                                                       (217)                 (107)                 (87)                  (150)                 (561)                 (406)
Proceeds from sales of property, plant and equipment                                                                                             9                     24                    --                    1                     34                    59
Additions to capitalized internal use software                                                                                                   (17)                  (21)                  (14)                  (12)                  (64)                  (51)
Purchases of short-term investments                                                                                                              --                    --                    (472)                 --                    (472)                 (1,392)
Sales of short-term investments                                                                                                                  --                    --                    --                    --                    --                    209
Maturities of short-term investments                                                                                                             362                   223                   472                   127                   1,184                 1,793
Payments for purchases of acquired companies, net of cash received                                                                               --                    --                    --                    (57)                  (57)                  (1,954)
Other                                                                                                                                            (2)                   (15)                  6                     --                    (11)                  (2)
Net cash provided by (used in) investing activities                                                                                              135                   104                   (95)                  (91)                  53                    (1,744)
Cash flows from financing activities
Dividends paid                                                                                                                                   (215)                 (216)                 (218)                 (201)                 (850)                 (797)
Repurchases of common stock under share repurchase programs                                                                                      (99)                  (199)                 (202)                 (400)                 (900)                 --
Repurchases of common stock to satisfy tax withholding obligations                                                                               (1)                   (3)                   (58)                  (34)                  (96)                  (1,000)
Acquisition of noncontrolling interest in RCCS LLC                                                                                               --                    --                    (90)                  --                    (90)                  (99)
Contribution from noncontrolling interests in Forcepoint                                                                                         --                    --                    --                    11                    11                    --
Tax benefit from stock-based awards                                                                                                              --                    --                    --                    --                    --                    47
Sale of noncontrolling interest in Forcepoint                                                                                                    --                    --                    --                    --                    --                    343
Other                                                                                                                                            --                    --                    --                    (5)                   (5)                   (3)
Net cash provided by (used in) financing activities                                                                                              (315)                 (418)                 (568)                 (629)                 (1,930)               (1,509)
Net increase (decrease) in cash and cash equivalents                                                                                             961                   326                   82                    (394)                 975                   (894)
Cash and cash equivalents at beginning of the year                                                                                               2,342                 2,016                 1,934                 2,328                 2,328                 3,222
Cash and cash equivalents at end of period                                                                                                       $         3,303       $         2,342       $         2,016       $         1,934       $         3,303       $         2,328
Attachment F
Raytheon Company
Supplemental EPS Information
Fourth Quarter 2016
(In millions, except per share amounts)                              Three Months Ended    Twelve Months Ended
                                                                     31-Dec-16  31-Dec-15  31-Dec-16  31-Dec-15
Per share impact of the FAS/CAS Adjustment (A)                       $   0.26   $   0.10   $   0.95   $   0.39
Per share impact of the TRS transaction (B)                          --         --         0.53       --
Per share impact of the eBorders settlement (C)                      --         0.02       --         0.47
Per share impact of discretionary pension contributions (D)          0.04       0.02       0.04       0.02
(A)         FAS/CAS Adjustment                                       $   117    $   44     $   435    $   185
                         Tax effect (at 35% statutory rate)          (41)       (15)       (152)      (65)
            After-tax impact                                         76         29         283        120
            Diluted shares                                           294.5      302.1      296.8      305.2
            Per share impact                                         $   0.26   $   0.10   $   0.95   $   0.39
(B)         TRS transaction                                          $   --     $   --     $   158    $   --
            Diluted shares                                           --         --         296.8      --
            Per share impact                                         $   --     $   --     $   0.53   $   --
(C)         eBorders settlement                                      $   --     $   --     $   --     $   181
                         Tax effect (at 21% blended global tax rate) --         5          --         (38)
            After-tax impact                                         --         5          --         143
            Diluted shares                                           --         302.1      --         305.2
            Per share impact                                         $   --     $   0.02   $   --     $   0.47
(D)         Tax impact of discretionary pension contribution         $   13     $   5      $   13     $   5
            Diluted shares                                           294.5      302.1      296.8      305.2
            Per share impact                                         $   0.04   $   0.02   $   0.04   $   0.02

Raytheon Company Global Headquarters Waltham, Mass.

Investor Relations Contact Todd Ernst 781.522.5141

Media Contact Corinne Kovalsky 781.522.5899

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/raytheon-reports-strong-fourth-quarter-and-full-year-2016-results-300397095.html

SOURCE Raytheon Company

https://rt.prnewswire.com/rt.gif?NewsItemId=NE96256&Transmission_Id=201701260655PR_NEWS_USPR_____NE96256&DateId=20170126



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