TEWKSBURY, Mass. – Integrated Defense Systems, the Raytheon Co. division that operates the Portsmouth Seapower Capability Center in Rhode Island, posted full-year operating income of $870 million, a 5 percent increase from 2007’s $828 million, on net sales that grew 10 percent year over year to $5.15 billion.
The increase was “primarily due to growth on U.S. Army programs,” Raytheon said, adding that fourth-quarter operating income at Raytheon IDS was boosted by “higher volume, improved performance on several international and domestic programs and the sale of licensed software.”
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For the three months ended Dec. 31, Raytheon IDS posted operating income of $244 million, a 16 percent increase from the 2007 fourth quarter’s $211 million, on net sales that grew 10 percent year over year to $1.42 billion.
IDS last year booked orders of $2.48 billion to provide Patriot air and missile defense systems to the United Arab Emirates (UAE); $237 million to provide engineering services support for Patriot air and missile defense programs; and $229 million for the Navy’s Rapid Aerostat Initial Deployment program; and $533 million in international contracts for the design, development and support of the Patriot system, Raytheon said. That brought the division’s backlog of orders to $9.88 billion at year’s end, up from $9.30 billion at the end of 2007.
Meanwhile, its Waltham, Mass.-based parent company saw its 2008 profit tumble to $1.67 billion, a drop of 37.56 percent from its 2007 profit of $2.58 billion, on annual revenue that rose 8.79 percent to $23.17 billion. Raytheon’s earnings per diluted common share shrank to $3.95 last year from $5.79 in 2007.
Results for the year ended Dec. 31 include a one-time charge of $45 million after taxes, reflecting poor pension-investment returns and their impact on existing contracts, while 2007 results include a favorable adjustment of $219 million from certain tax-related benefits. Excluding those factors, Raytheon would have seen its full-year earnings rise to $4.06 per share last year from $3.31 the year before.
Still, “we believe there is additional material 2009 earnings per share risk from higher pension expense” at Raytheon and other defense companies, Gary Liebowitz, a New York-based analyst with Wachovia Capital Markets LLC, wrote in a report this month, according to Bloomberg News. “Pension could remain a significant headwind [for these companies] in 2010.”
For the year’s final quarter – which was three days shorter than the year-ago period – Raytheon posted a $421 million profit, a 29.60 percent decline from its 2007 fourth-quarter profit of $598 million, on net sales that rose 1.43 percent year over year to $6.09 billion. Earnings per diluted common share shrank to $1.04 from the 2007 fourth quarter’s $1.37. But excluding the previously mentioned adjustments in both years, Raytheon’s earnings would have risen to $1.13 in the quarter just ended from 96 cents a year ago.
“Raytheon had a successful 2008 with strong bookings, a record backlog and solid growth in sales and operating income,” said William H. Swanson, the parent company’s chairman and chief executive.
The company’s backlog of orders at all divisions – including Raytheon IDS, as well as Intelligence and Information Systems (IIS), Missile Systems, Network Centric Systems (NCS) and Space and Airborne Systems (SAS) – reached a record $38.88 billion at year’s end, a 6.20 percent increase from the $36.61 billion backlog it posted at the end of 2007.
Also last year, Raytheon spent $1.7 billion to buy back 30.7 million shares of its common stock, as part of its previously announced share repurchase program. The buyback included 14.1 million shares of common stock repurchased in the fourth quarter at a cost of $680 million, the company said.
Although its results lagged analyst expectations – Raytheon had been expected to post fourth-quarter earnings of $1.11 per share, on sales that were expected to rise to $6.21 billion from the year-ago $6 billion, based on a Bloomberg survey of 14 analysts – it drew a favorable response from investors. Raytheon stock rose 63 cents yesterday in New York trading to close at $50.30 per share.
The company maintained its 2009 forecast earnings per share from continuing operations of $4.45 to $4.60 on sales of $24.3 billion to $24.8 billion. Analysts in the Bloomberg survey predicted earnings of $4.59 per share on sales of about $24.7 billion.
“Our advanced technologies, program performance and diverse portfolio of products and services are uniquely suited to meet customer requirements and position us well for the future,” Swanson said.
Raytheon Co. (NYSE: RTN) – based in Waltham, Mass. – is a provider of electronics, system integration and support services to the military, homeland security and other government markets. Its Tewksbury, Mass.-based Integrated Defense Systems division (Raytheon IDS) and its Seapower Capability Center in Portsmouth, R..I., concentrate on joint battlespace integration. Raytheon employs 72,000 people worldwide and posted 2007 sales of $21.3 billion. To learn more, visit www.raytheon.com.
