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raytheon Q4 Earnings Presentation

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Raytheon reported strong financial results for the first quarter of 2008. Sales increased 11% to $5.4 billion compared to the first quarter of 2007, driven by growth across all business segments. Operating income rose 17% to $608 million due to increased volume and lower expenses. Earnings per share from continuing operations increased 31% to $0.93. The company also achieved record backlog of $37.7 billion and solid bookings of $6.5 billion during the quarter. Raytheon reaffirmed its full-year 2008 guidance and expects continued growth.

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News release FOR IMMEDIATE RELEASE Media Contact: Investor Relations Contact: Jon Kasle Greg Smith 781-522-5110 781-522-5141 Raytheon Reports Strong First Quarter Results Highlights • Solid bookings of $6.5 billion; record backlog of $37.7 billion • Sales of $5.4 billion, up 11 percent • Operating income of $608 million, up 17 percent • Earnings per share (EPS) from continuing operations of $0.93, up 31 percent • Repurchased 5.5 million shares for $340 million • Increased annual dividend 10 percent, from $1.02 to $1.12, as previously announced WALTHAM, Mass., (April 24, 2008) – Raytheon Company (NYSE: RTN) reported first quarter 2008 income from continuing operations of $400 million or $0.93 per diluted share compared to $324 million or $0.71 per diluted share in the first quarter 2007. First quarter 2008 income from continuing operations was higher primarily due to increased volume, combined with lower net interest and pension expense. “With the strong performance in the first quarter, the Company is off to a good start,” said William H. Swanson, Raytheon's Chairman and CEO. quot;Our strong bookings, record backlog and solid operating performance demonstrate the Company is continuing to execute and is well positioned going forward.” First quarter 2008 net income was $398 million or $0.92 per diluted share compared to $346 million or $0.76 per diluted share in the first quarter 2007. Net income for the first quarter 2008 included an after-tax loss of $2 million or $0.01 per diluted share in discontinued operations compared to income of $22 million or $0.05 per diluted share in 1
the first quarter 2007 primarily due to the results of Raytheon Aircraft Company, which was sold in the second quarter 2007. Net sales for the first quarter 2008 were $5.4 billion, up 11 percent from $4.8 billion in the first quarter 2007. Operating cash flow from continuing operations for the first quarter 2008 was a positive $67 million compared to an outflow of $353 million for the first quarter 2007. First quarter 2007 included a $400 million discretionary cash contribution made to the Company’s pension plans. In the first quarter 2008 the Company repurchased 5.5 million shares of common stock for $340 million, as part of the Company’s previously announced share repurchase program. In addition, as announced in March 2008, the Company’s Board of Directors voted to increase the Company’s annual dividend by 10 percent from $1.02 to $1.12 per share. Summary Financial Results 1st Quarter % 2008 2007 Change ($ in millions, except per share data) Net Sales $ 5,354 $ 4,804 11% Total Operating Expenses 4,746 4,283 Operating Income 608 521 17% Non-operating Expenses 16 35 Income from Cont. Ops. before Taxes $ 592 $ 486 22% Income from Continuing Operations $ 400 $ 324 23% (Loss) income from Disc. Ops., Net of Tax (2) 22 NM Net Income $ 398 $ 346 15% Diluted EPS from Continuing Operations $ 0.93 $ 0.71 31% Diluted EPS $ 0.92 $ 0.76 21% Operating Cash Flow from Cont. Ops. $ 67 $ (353) Workdays in Fiscal Reporting Calendar 63 59 2
Bookings and Backlog Bookings 1st Quarter 2008 2007 (in millions) Total Bookings $ 6,516 $ 5,158 Backlog Period Ended 03/30/08 12/31/07 (in millions) Backlog $ 37,697 $ 36,614 Funded Backlog $ 22,859 $ 20,518 The Company reported total bookings for the first quarter 2008 of $6.5 billion compared to $5.2 billion in the first quarter 2007. The Company ended the first quarter 2008 with a record backlog of $37.7 billion compared to $36.6 billion at the end of 2007 and $33.9 billion at the end of the first quarter 2007. Outlook 2008 Financial Outlook Net Sales ($B) 22.4 - 22.9 FAS/CAS Pension Expense ($M) 150 Interest Expense, net ($M) 45 - 60 Diluted Shares (M) 427 - 429 EPS from Cont. Ops. $3.65 - $3.80 Operating Cash Flow from Cont. Ops. ($B) 2.0 - 2.2 ROIC (%) 9.6 - 10.1 The Company reaffirms full-year 2008 guidance. Charts containing additional information on the Company’s 2008 guidance are available on the Company's website at www.raytheon.com. See attachment F for the Company's calculation and use of Return on Invested Capital (ROIC), a non-GAAP financial measure. 3
Segment Results Integrated Defense Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 1,192 $ 1,092 9% Operating Income $ 211 $ 199 6% Operating Margin 17.7% 18.2% Integrated Defense Systems (IDS) had first quarter 2008 net sales of $1,192 million, up 9 percent compared to $1,092 million in the first quarter 2007, primarily due to growth on Missile Defense Agency and U.S. Army programs. IDS recorded $211 million of operating income compared to $199 million in the first quarter 2007. The increase in operating income was primarily due to higher volume and the sale of licensed software. During the quarter, IDS booked an initial $331 million for the design, development and support of the Patriot system for international customers, including $246 million for South Korea and $85 million for Taiwan. IDS also booked $133 million to provide engineering services support for a Patriot air and missile defense program for the U.S. Army. Intelligence and Information Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 692 $ 588 18% Operating Income $ 52 $ 55 -5% Operating Margin 7.5% 9.4% Intelligence and Information Systems (IIS) had first quarter 2008 net sales of $692 million, up 18 percent compared to $588 million in the first quarter 2007, primarily due to new programs, including U.K. e-Borders. IIS recorded $52 million of operating income compared to $55 million in the first quarter 2007. The decrease in operating income was primarily due to certain acquisition costs and other investments in cyber operations and information security capabilities, partially offset by higher volume. 4
During the quarter, IIS booked an additional $182 million on the U.K. e-Borders contract, bringing the total inception-to-date bookings for this program to $1.6 billion. IIS also booked $556 million on a number of classified contracts, including $171 million on a major classified program. Missile Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 1,311 $ 1,140 15% Operating Income $ 137 $ 120 14% Operating Margin 10.5% 10.5% Missile Systems (MS) had first quarter 2008 net sales of $1,311 million, up 15 percent compared to $1,140 million in the first quarter 2007, primarily due to higher volume on international and development programs. MS recorded $137 million of operating income compared to $120 million in the first quarter 2007. The increase in operating income was due to higher volume. During the quarter, MS booked $578 million for Standard Missile-3 for the U.S. Navy and the Missile Defense Agency. MS also booked $293 million for the production of Tactical Tomahawk cruise missiles and $127 million for the production of AIM-9X Sidewinder short range air-to-air missiles for the U.S. Navy. In addition, MS booked $123 million for the production of Tube-launched Optically guided Wire controlled (TOW) missiles for international customers and the U.S. Marine Corps. Network Centric Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 1,067 $ 929 15% Operating Income $ 123 $ 117 5% Operating Margin 11.5% 12.6% 5
Network Centric Systems (NCS) had first quarter 2008 net sales of $1,067 million, up 15 percent compared to $929 million in the first quarter 2007, primarily due to increased volume on certain U.S. Army programs. NCS recorded $123 million of operating income compared to $117 million in the first quarter 2007. The increase in operating income was primarily due to higher volume. During the quarter, NCS booked $309 million to provide Horizontal Technology Integration (HTI) forward-looking infrared kits and $100 million for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S. Army. NCS also booked $203 million for the production of Improved Target Acquisition Systems (ITAS) for the U.S. Army and the U.S. Marine Corps. Space and Airborne Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 995 $ 964 3% Operating Income $ 121 $ 129 -6% Operating Margin 12.2% 13.4% Space and Airborne Systems (SAS) had first quarter 2008 net sales of $995 million, up 3 percent compared to $964 million in the first quarter 2007, primarily due to growth on airborne sensor programs. SAS recorded $121 million of operating income compared to $129 million in the first quarter 2007. The decrease in operating income was primarily due to a change in program mix. SAS booked $186 million on a number of classified contracts. Technical Services 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 521 $ 463 13% Operating Income $ 35 $ 23 52% Operating Margin 6.7% 5.0% 6
Technical Services (TS) had first quarter 2008 net sales of $521 million, up 13 percent compared to $463 million in the first quarter 2007, primarily due to training, mission support, and depot support services programs. TS recorded operating income of $35 million in the first quarter 2008 compared to $23 million in the first quarter 2007. The increase in operating income was primarily due to higher volume and profit adjustments taken on certain programs in 2007. During the quarter, TS booked $110 million for work on the Warfighter Field Operations Customer Support (FOCUS) contract for the U.S. Army to provide live, virtual and constructive training services. Raytheon Company (NYSE: RTN), with 2007 sales of $21.3 billion, is a technology leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 86 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. With headquarters in Waltham, Mass., Raytheon employs 72,000 people worldwide. Disclosure Regarding Forward-looking Statements This release and the attachments contain forward-looking statements, including information regarding the Company’s 2008 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, uncertain funding of programs, potential termination of contracts, and difficulties in contract performance; the ability to procure new contracts; the risks of conducting business in foreign countries; the ability to comply with extensive governmental regulation, including import and export policies and procurement and other regulations; the impact of competition; the ability to develop products and technologies; the risk of cost overruns, particularly for the Company’s fixed-price contracts; dependence on component availability, subcontractor performance and key suppliers; risks of a negative government audit; the use of accounting estimates in the Company’s financial 7
statements; risks associated with acquisitions, dispositions, joint ventures and other business arrangements; risks of an impairment of goodwill or other intangible assets; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; the impact of potential security threats and other disruptions; 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. This release and the attachments also contain non-GAAP financial measures. A GAAP reconciliation and a discussion of the Company's use of these measures are included in this release or the attachments. Conference Call on the First Quarter 2008 Financial Results Raytheon’s financial results conference call will be held on Thursday, April 24, 2008 at 9 a.m. EDT. Participants will include William H. Swanson, Chairman and CEO, David C. Wajsgras, senior vice president and CFO, and other Company executives. The dial-in number for the conference call will be (866) 800 – 8651. The conference call will also be audiocast on the Internet at www.raytheon.com. 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. ### 8
Attachment A Raytheon Company Preliminary Statement of Operations Information First Quarter 2008 (In millions, except per share amounts) Three Months Ended 30-Mar-08 25-Mar-07 Net sales $ 5,354 $ 4,804 Cost of sales 4,259 3,856 Administrative and selling expenses 380 330 Research and development expenses 107 97 Total operating expenses 4,746 4,283 Operating income 608 521 Interest expense 34 60 Interest income (23) (28) Other expense, net 5 3 Non-operating expense, net 16 35 Income from continuing operations before taxes 592 486 Federal and foreign income taxes 192 162 Income from continuing operations 400 324 (Loss) income from discontinued operations, net of tax (2) 22 Net income $ 398 $ 346 Earnings per share from continuing operations Basic $ 0.96 $ 0.73 Diluted $ 0.93 $ 0.71 (Loss) earnings per share from discontinued operations Basic $ (0.01) $ 0.05 Diluted $ (0.01) $ 0.05 Earnings per share Basic $ 0.95 $ 0.78 Diluted $ 0.92 $ 0.76 Average shares outstanding Basic 418.2 441.0 Diluted 432.3 453.5
Attachment B Raytheon Company Preliminary Segment Information First Quarter 2008 Operating Income Net Sales Operating Income As a Percent of Sales (In millions) Three Months Ended Three Months Ended Three Months Ended 30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07 Integrated Defense Systems $ 1,192 $ 1,092 $ 211 $ 199 17.7% 18.2% Intelligence and Information Systems 692 588 52 55 7.5% 9.4% Missile Systems 1,311 1,140 137 120 10.5% 10.5% Network Centric Systems 1,067 929 123 117 11.5% 12.6% Space and Airborne Systems 995 964 121 129 12.2% 13.4% Technical Services 521 463 35 23 6.7% 5.0% FAS/CAS Pension Adjustment - - (33) (62) Corporate and Eliminations (424) (372) (38) (60) Total $ 5,354 $ 4,804 $ 608 $ 521 11.4% 10.8%
Attachment C Raytheon Company Other Preliminary Information First Quarter 2008 Funded (In millions) Backlog Backlog 30-Mar-08 31-Dec-07 30-Mar-08 31-Dec-07 Integrated Defense Systems $ 9,306 $ 9,296 $ 5,382 $ 4,781 Intelligence and Information Systems 5,831 5,636 2,641 2,325 Missile Systems 9,661 9,379 5,674 5,218 Network Centric Systems 5,696 5,102 4,547 3,957 Space and Airborne Systems 5,277 5,276 3,341 3,037 Technical Services 1,926 1,925 1,274 1,200 $ 37,697 $ 36,614 $ 22,859 $ 20,518 Total Bookings Three Months Ended 30-Mar-08 25-Mar-07 Total Bookings $ 6,516 $ 5,158
Attachment D Raytheon Company Preliminary Balance Sheet Information First Quarter 2008 (In millions) 30-Mar-08 31-Dec-07 Assets Cash and cash equivalents $ 2,287 $ 2,655 Accounts receivable, net 128 126 Contracts in process 4,068 3,821 Inventories 385 386 Deferred taxes 436 432 Prepaid expenses and other current assets 193 196 Total current assets 7,497 7,616 Property, plant and equipment, net 2,035 2,058 Prepaid retiree benefits 631 617 Goodwill 11,632 11,627 Other assets, net 1,339 1,363 Total assets $ 23,134 $ 23,281 Liabilities and Stockholders' Equity Advance payments and billings in excess of costs incurred $ 1,842 $ 1,845 Accounts payable 1,044 1,141 Accrued employee compensation 563 902 Other accrued expenses 1,025 900 Total current liabilities 4,474 4,788 Accrued retiree benefits and other long-term liabilities 3,038 3,016 Deferred taxes 483 451 Long-term debt 2,288 2,268 Minority interest 219 216 Stockholders' equity 12,632 12,542 Total liabilities and stockholders' equity $ 23,134 $ 23,281
Attachment E Raytheon Company Preliminary Cash Flow Information First Quarter 2008 (In millions) Three Months Ended 30-Mar-08 25-Mar-07 Net income $ 398 $ 346 Plus (less): Loss (income) from discontinued operations, net of tax 2 (22) Income from continuing operations 400 324 Depreciation 69 67 Amortization 23 19 Working capital (703) (653) Discontinued operations (10) (63) Net activity in financing receivables 20 21 Other 258 (131) Net operating cash flow 57 (416) Capital spending (43) (38) Internal use software spending (17) (15) Dividends (109) (107) Repurchases of common stock (340) (275) Debt repayments - 3 Discontinued operations - (28) Other 84 76 Total cash flow $ (368) $ (800)
Attachment F Raytheon Company Preliminary Return on Invested Capital Non-GAAP Financial Measure First Quarter 2008 We define Return on Invested Capital (ROIC) as income from continuing operations plus after-tax net interest expense plus one-third of operating lease expense after-tax (estimate of interest portion of operating lease expense) divided by average invested capital after capitalizing operating leases (operating lease expense times a multiplier of 8), adding financial guarantees less net investment in Discontinued Operations, and adding back the cumulative minimum pension liability/impact of FAS 158. ROIC is not a measure of financial performance under generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies in the same manner. ROIC should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. We use ROIC as a measure of efficiency and effectiveness of our use of capital and as an element of management compensation. Return on Invested Capital 2008 Guidance (In millions) Low end High end of range of range Income from continuing operations Net interest expense, after-tax* Combined Combined Lease expense, after-tax* Return $ 1,655 $ 1,720 Net debt ** Equity less investment in discontinued operations Lease expense x 8 plus financial guarantees Combined Combined Minimum pension liability (cumulative) Invested capital from continuing operations*** $ 17,300 $ 17,100 ROIC 9.6% 10.1% * Effective 2008 tax rate: 34.1% (2008 guidance) ** Net debt is defined as total debt less cash and cash equivalents and is calculated using a 2 point average *** Calculated using a 2 point average

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raytheon Q4 Earnings Presentation

  • 1. News release FOR IMMEDIATE RELEASE Media Contact: Investor Relations Contact: Jon Kasle Greg Smith 781-522-5110 781-522-5141 Raytheon Reports Strong First Quarter Results Highlights • Solid bookings of $6.5 billion; record backlog of $37.7 billion • Sales of $5.4 billion, up 11 percent • Operating income of $608 million, up 17 percent • Earnings per share (EPS) from continuing operations of $0.93, up 31 percent • Repurchased 5.5 million shares for $340 million • Increased annual dividend 10 percent, from $1.02 to $1.12, as previously announced WALTHAM, Mass., (April 24, 2008) – Raytheon Company (NYSE: RTN) reported first quarter 2008 income from continuing operations of $400 million or $0.93 per diluted share compared to $324 million or $0.71 per diluted share in the first quarter 2007. First quarter 2008 income from continuing operations was higher primarily due to increased volume, combined with lower net interest and pension expense. “With the strong performance in the first quarter, the Company is off to a good start,” said William H. Swanson, Raytheon's Chairman and CEO. quot;Our strong bookings, record backlog and solid operating performance demonstrate the Company is continuing to execute and is well positioned going forward.” First quarter 2008 net income was $398 million or $0.92 per diluted share compared to $346 million or $0.76 per diluted share in the first quarter 2007. Net income for the first quarter 2008 included an after-tax loss of $2 million or $0.01 per diluted share in discontinued operations compared to income of $22 million or $0.05 per diluted share in 1
  • 2. the first quarter 2007 primarily due to the results of Raytheon Aircraft Company, which was sold in the second quarter 2007. Net sales for the first quarter 2008 were $5.4 billion, up 11 percent from $4.8 billion in the first quarter 2007. Operating cash flow from continuing operations for the first quarter 2008 was a positive $67 million compared to an outflow of $353 million for the first quarter 2007. First quarter 2007 included a $400 million discretionary cash contribution made to the Company’s pension plans. In the first quarter 2008 the Company repurchased 5.5 million shares of common stock for $340 million, as part of the Company’s previously announced share repurchase program. In addition, as announced in March 2008, the Company’s Board of Directors voted to increase the Company’s annual dividend by 10 percent from $1.02 to $1.12 per share. Summary Financial Results 1st Quarter % 2008 2007 Change ($ in millions, except per share data) Net Sales $ 5,354 $ 4,804 11% Total Operating Expenses 4,746 4,283 Operating Income 608 521 17% Non-operating Expenses 16 35 Income from Cont. Ops. before Taxes $ 592 $ 486 22% Income from Continuing Operations $ 400 $ 324 23% (Loss) income from Disc. Ops., Net of Tax (2) 22 NM Net Income $ 398 $ 346 15% Diluted EPS from Continuing Operations $ 0.93 $ 0.71 31% Diluted EPS $ 0.92 $ 0.76 21% Operating Cash Flow from Cont. Ops. $ 67 $ (353) Workdays in Fiscal Reporting Calendar 63 59 2
  • 3. Bookings and Backlog Bookings 1st Quarter 2008 2007 (in millions) Total Bookings $ 6,516 $ 5,158 Backlog Period Ended 03/30/08 12/31/07 (in millions) Backlog $ 37,697 $ 36,614 Funded Backlog $ 22,859 $ 20,518 The Company reported total bookings for the first quarter 2008 of $6.5 billion compared to $5.2 billion in the first quarter 2007. The Company ended the first quarter 2008 with a record backlog of $37.7 billion compared to $36.6 billion at the end of 2007 and $33.9 billion at the end of the first quarter 2007. Outlook 2008 Financial Outlook Net Sales ($B) 22.4 - 22.9 FAS/CAS Pension Expense ($M) 150 Interest Expense, net ($M) 45 - 60 Diluted Shares (M) 427 - 429 EPS from Cont. Ops. $3.65 - $3.80 Operating Cash Flow from Cont. Ops. ($B) 2.0 - 2.2 ROIC (%) 9.6 - 10.1 The Company reaffirms full-year 2008 guidance. Charts containing additional information on the Company’s 2008 guidance are available on the Company's website at www.raytheon.com. See attachment F for the Company's calculation and use of Return on Invested Capital (ROIC), a non-GAAP financial measure. 3
  • 4. Segment Results Integrated Defense Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 1,192 $ 1,092 9% Operating Income $ 211 $ 199 6% Operating Margin 17.7% 18.2% Integrated Defense Systems (IDS) had first quarter 2008 net sales of $1,192 million, up 9 percent compared to $1,092 million in the first quarter 2007, primarily due to growth on Missile Defense Agency and U.S. Army programs. IDS recorded $211 million of operating income compared to $199 million in the first quarter 2007. The increase in operating income was primarily due to higher volume and the sale of licensed software. During the quarter, IDS booked an initial $331 million for the design, development and support of the Patriot system for international customers, including $246 million for South Korea and $85 million for Taiwan. IDS also booked $133 million to provide engineering services support for a Patriot air and missile defense program for the U.S. Army. Intelligence and Information Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 692 $ 588 18% Operating Income $ 52 $ 55 -5% Operating Margin 7.5% 9.4% Intelligence and Information Systems (IIS) had first quarter 2008 net sales of $692 million, up 18 percent compared to $588 million in the first quarter 2007, primarily due to new programs, including U.K. e-Borders. IIS recorded $52 million of operating income compared to $55 million in the first quarter 2007. The decrease in operating income was primarily due to certain acquisition costs and other investments in cyber operations and information security capabilities, partially offset by higher volume. 4
  • 5. During the quarter, IIS booked an additional $182 million on the U.K. e-Borders contract, bringing the total inception-to-date bookings for this program to $1.6 billion. IIS also booked $556 million on a number of classified contracts, including $171 million on a major classified program. Missile Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 1,311 $ 1,140 15% Operating Income $ 137 $ 120 14% Operating Margin 10.5% 10.5% Missile Systems (MS) had first quarter 2008 net sales of $1,311 million, up 15 percent compared to $1,140 million in the first quarter 2007, primarily due to higher volume on international and development programs. MS recorded $137 million of operating income compared to $120 million in the first quarter 2007. The increase in operating income was due to higher volume. During the quarter, MS booked $578 million for Standard Missile-3 for the U.S. Navy and the Missile Defense Agency. MS also booked $293 million for the production of Tactical Tomahawk cruise missiles and $127 million for the production of AIM-9X Sidewinder short range air-to-air missiles for the U.S. Navy. In addition, MS booked $123 million for the production of Tube-launched Optically guided Wire controlled (TOW) missiles for international customers and the U.S. Marine Corps. Network Centric Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 1,067 $ 929 15% Operating Income $ 123 $ 117 5% Operating Margin 11.5% 12.6% 5
  • 6. Network Centric Systems (NCS) had first quarter 2008 net sales of $1,067 million, up 15 percent compared to $929 million in the first quarter 2007, primarily due to increased volume on certain U.S. Army programs. NCS recorded $123 million of operating income compared to $117 million in the first quarter 2007. The increase in operating income was primarily due to higher volume. During the quarter, NCS booked $309 million to provide Horizontal Technology Integration (HTI) forward-looking infrared kits and $100 million for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S. Army. NCS also booked $203 million for the production of Improved Target Acquisition Systems (ITAS) for the U.S. Army and the U.S. Marine Corps. Space and Airborne Systems 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 995 $ 964 3% Operating Income $ 121 $ 129 -6% Operating Margin 12.2% 13.4% Space and Airborne Systems (SAS) had first quarter 2008 net sales of $995 million, up 3 percent compared to $964 million in the first quarter 2007, primarily due to growth on airborne sensor programs. SAS recorded $121 million of operating income compared to $129 million in the first quarter 2007. The decrease in operating income was primarily due to a change in program mix. SAS booked $186 million on a number of classified contracts. Technical Services 1st Quarter % 2008 2007 Change ($ in millions) Net Sales $ 521 $ 463 13% Operating Income $ 35 $ 23 52% Operating Margin 6.7% 5.0% 6
  • 7. Technical Services (TS) had first quarter 2008 net sales of $521 million, up 13 percent compared to $463 million in the first quarter 2007, primarily due to training, mission support, and depot support services programs. TS recorded operating income of $35 million in the first quarter 2008 compared to $23 million in the first quarter 2007. The increase in operating income was primarily due to higher volume and profit adjustments taken on certain programs in 2007. During the quarter, TS booked $110 million for work on the Warfighter Field Operations Customer Support (FOCUS) contract for the U.S. Army to provide live, virtual and constructive training services. Raytheon Company (NYSE: RTN), with 2007 sales of $21.3 billion, is a technology leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 86 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. With headquarters in Waltham, Mass., Raytheon employs 72,000 people worldwide. Disclosure Regarding Forward-looking Statements This release and the attachments contain forward-looking statements, including information regarding the Company’s 2008 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, uncertain funding of programs, potential termination of contracts, and difficulties in contract performance; the ability to procure new contracts; the risks of conducting business in foreign countries; the ability to comply with extensive governmental regulation, including import and export policies and procurement and other regulations; the impact of competition; the ability to develop products and technologies; the risk of cost overruns, particularly for the Company’s fixed-price contracts; dependence on component availability, subcontractor performance and key suppliers; risks of a negative government audit; the use of accounting estimates in the Company’s financial 7
  • 8. statements; risks associated with acquisitions, dispositions, joint ventures and other business arrangements; risks of an impairment of goodwill or other intangible assets; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; the impact of potential security threats and other disruptions; 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. This release and the attachments also contain non-GAAP financial measures. A GAAP reconciliation and a discussion of the Company's use of these measures are included in this release or the attachments. Conference Call on the First Quarter 2008 Financial Results Raytheon’s financial results conference call will be held on Thursday, April 24, 2008 at 9 a.m. EDT. Participants will include William H. Swanson, Chairman and CEO, David C. Wajsgras, senior vice president and CFO, and other Company executives. The dial-in number for the conference call will be (866) 800 – 8651. The conference call will also be audiocast on the Internet at www.raytheon.com. 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. ### 8
  • 9. Attachment A Raytheon Company Preliminary Statement of Operations Information First Quarter 2008 (In millions, except per share amounts) Three Months Ended 30-Mar-08 25-Mar-07 Net sales $ 5,354 $ 4,804 Cost of sales 4,259 3,856 Administrative and selling expenses 380 330 Research and development expenses 107 97 Total operating expenses 4,746 4,283 Operating income 608 521 Interest expense 34 60 Interest income (23) (28) Other expense, net 5 3 Non-operating expense, net 16 35 Income from continuing operations before taxes 592 486 Federal and foreign income taxes 192 162 Income from continuing operations 400 324 (Loss) income from discontinued operations, net of tax (2) 22 Net income $ 398 $ 346 Earnings per share from continuing operations Basic $ 0.96 $ 0.73 Diluted $ 0.93 $ 0.71 (Loss) earnings per share from discontinued operations Basic $ (0.01) $ 0.05 Diluted $ (0.01) $ 0.05 Earnings per share Basic $ 0.95 $ 0.78 Diluted $ 0.92 $ 0.76 Average shares outstanding Basic 418.2 441.0 Diluted 432.3 453.5
  • 10. Attachment B Raytheon Company Preliminary Segment Information First Quarter 2008 Operating Income Net Sales Operating Income As a Percent of Sales (In millions) Three Months Ended Three Months Ended Three Months Ended 30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07 Integrated Defense Systems $ 1,192 $ 1,092 $ 211 $ 199 17.7% 18.2% Intelligence and Information Systems 692 588 52 55 7.5% 9.4% Missile Systems 1,311 1,140 137 120 10.5% 10.5% Network Centric Systems 1,067 929 123 117 11.5% 12.6% Space and Airborne Systems 995 964 121 129 12.2% 13.4% Technical Services 521 463 35 23 6.7% 5.0% FAS/CAS Pension Adjustment - - (33) (62) Corporate and Eliminations (424) (372) (38) (60) Total $ 5,354 $ 4,804 $ 608 $ 521 11.4% 10.8%
  • 11. Attachment C Raytheon Company Other Preliminary Information First Quarter 2008 Funded (In millions) Backlog Backlog 30-Mar-08 31-Dec-07 30-Mar-08 31-Dec-07 Integrated Defense Systems $ 9,306 $ 9,296 $ 5,382 $ 4,781 Intelligence and Information Systems 5,831 5,636 2,641 2,325 Missile Systems 9,661 9,379 5,674 5,218 Network Centric Systems 5,696 5,102 4,547 3,957 Space and Airborne Systems 5,277 5,276 3,341 3,037 Technical Services 1,926 1,925 1,274 1,200 $ 37,697 $ 36,614 $ 22,859 $ 20,518 Total Bookings Three Months Ended 30-Mar-08 25-Mar-07 Total Bookings $ 6,516 $ 5,158
  • 12. Attachment D Raytheon Company Preliminary Balance Sheet Information First Quarter 2008 (In millions) 30-Mar-08 31-Dec-07 Assets Cash and cash equivalents $ 2,287 $ 2,655 Accounts receivable, net 128 126 Contracts in process 4,068 3,821 Inventories 385 386 Deferred taxes 436 432 Prepaid expenses and other current assets 193 196 Total current assets 7,497 7,616 Property, plant and equipment, net 2,035 2,058 Prepaid retiree benefits 631 617 Goodwill 11,632 11,627 Other assets, net 1,339 1,363 Total assets $ 23,134 $ 23,281 Liabilities and Stockholders' Equity Advance payments and billings in excess of costs incurred $ 1,842 $ 1,845 Accounts payable 1,044 1,141 Accrued employee compensation 563 902 Other accrued expenses 1,025 900 Total current liabilities 4,474 4,788 Accrued retiree benefits and other long-term liabilities 3,038 3,016 Deferred taxes 483 451 Long-term debt 2,288 2,268 Minority interest 219 216 Stockholders' equity 12,632 12,542 Total liabilities and stockholders' equity $ 23,134 $ 23,281
  • 13. Attachment E Raytheon Company Preliminary Cash Flow Information First Quarter 2008 (In millions) Three Months Ended 30-Mar-08 25-Mar-07 Net income $ 398 $ 346 Plus (less): Loss (income) from discontinued operations, net of tax 2 (22) Income from continuing operations 400 324 Depreciation 69 67 Amortization 23 19 Working capital (703) (653) Discontinued operations (10) (63) Net activity in financing receivables 20 21 Other 258 (131) Net operating cash flow 57 (416) Capital spending (43) (38) Internal use software spending (17) (15) Dividends (109) (107) Repurchases of common stock (340) (275) Debt repayments - 3 Discontinued operations - (28) Other 84 76 Total cash flow $ (368) $ (800)
  • 14. Attachment F Raytheon Company Preliminary Return on Invested Capital Non-GAAP Financial Measure First Quarter 2008 We define Return on Invested Capital (ROIC) as income from continuing operations plus after-tax net interest expense plus one-third of operating lease expense after-tax (estimate of interest portion of operating lease expense) divided by average invested capital after capitalizing operating leases (operating lease expense times a multiplier of 8), adding financial guarantees less net investment in Discontinued Operations, and adding back the cumulative minimum pension liability/impact of FAS 158. ROIC is not a measure of financial performance under generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies in the same manner. ROIC should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. We use ROIC as a measure of efficiency and effectiveness of our use of capital and as an element of management compensation. Return on Invested Capital 2008 Guidance (In millions) Low end High end of range of range Income from continuing operations Net interest expense, after-tax* Combined Combined Lease expense, after-tax* Return $ 1,655 $ 1,720 Net debt ** Equity less investment in discontinued operations Lease expense x 8 plus financial guarantees Combined Combined Minimum pension liability (cumulative) Invested capital from continuing operations*** $ 17,300 $ 17,100 ROIC 9.6% 10.1% * Effective 2008 tax rate: 34.1% (2008 guidance) ** Net debt is defined as total debt less cash and cash equivalents and is calculated using a 2 point average *** Calculated using a 2 point average