Raytheon Company (RTN)

RTN 
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Raytheon Co. (RTN)

Q4 2009 Earnings Call

January 28, 2010 9:00 am ET

Executives

Marc Kaplan - VP, IR

William Swanson - Chairman & CEO

David Wajsgras - SVP & CFO

Analysts

Robert Spingarn - Credit Suisse First Boston LLC

Ronald Epstein - Merrill Lynch

Myles Walton - Oppenheimer

Howard Rubel - Jefferies & Company

George Shapiro - Access 342

Troy Lahr - Stifel Nicolaus

Joseph Campbell - Barclays Capital

Sam Pearlstein - Wells Fargo Securities

Douglas Harned - Sanford C. Bernstein

Joe Nadal - JPMorgan

Robert Stallard - Macquarie Group

Michael French - Morgan Joseph

Brian Ruttenbur - Morgan Keegan

Peter Arment - Broadpoint

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Raytheon fourth quarter 2009 earnings conference call. My name is Michael and I will be your operator for today. At this time, all participants are in listen-only mode. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Marc Kaplan, Vice President of Investor Relations. You may proceed.

Marc Kaplan

Thank you, Michael. Good morning, everyone. And thank you for joining us today on our fourth quarter conference call. The results that we announced this morning, the audio feed of this call and the slides that we'll reference are available on our website at raytheon.com. Following the live call, an archive of both the audio replay and a printable version of the slides will be available in the Investor Relations section of our website.

With me today are Bill Swanson, our Chairman and Chief Executive Officer; and Dave Wajsgras, our Chief Financial Officer. We will start with some brief remarks by Bill and Dave and then we'll move on to questions. Please limit your questions to two per caller to allow for broader participation.

Before I turn the call over to Bill, I would like to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and expected performance constitute forward-looking statements. These statements are based on a wide range of assumptions that the company believes are reasonable, but are subject to a range of uncertainties and risks that are summarized at the end of our earnings release and that we discuss in detail in our SEC filings. Bill?

William Swanson

Thank you, Mark. Good morning, everyone. 2009 was another good year for the company and we remain confident about our future. Clearly there were significant and varied challenges to many business around the world this past year. Yet within this environment we stayed true to the strategic direction we set several years ago. We have right strategy the right processes and the right talent in place to meet our customers' needs and to deliver strong financial results.

We believe our performance reflects the strength of our strategic planning and execution and our company's alignment with customer priorities. We are well positioned to take advantage of the changes taking place in the world to build on our record of performance and to create value for our customers and our shareholders.

Looking at 2009, we have a book-to-bill ratio greater than one and we ended the year with a backlog of $37 billion including the highest year-end funded backlog in the company's history. Our full year sales were up 7% our EPS was up 24% we generated strong cash flow and we continued to improve our return on invested capital.

As we mentioned at October, we expect to deliver solid growth in 2010. Dave will provide you with more color on our financial performance both for the quarter and for the year in a few minutes and our outlook for 2010. But I wanted to first hit a couple of the highlights. We continue to see good performance across our portfolio, which is recognized by our customers, it's clearly a major contributing factor to our growth both in the U.S. and international markets.

Within these markets we're seeing strong demand in important areas to Raytheon. Good example is missile defense, the administration has identified our Standard Missile-3 and extend radars as critical elements in the missile defense systems for the U.S. and our outliers around the world. Other countries like the UAE, Taiwan and Japan have confirmed their need for world-class capabilities.

We're seeing strong support domestically and internationally for our Intelligence, Surveillance & Reconnaissance work particularly in the classified area. There is also increasing demand for our homeland security solutions, which were highlighted by $446 million international classified award in the fourth quarter. Our bookings in homeland security doubled in 2009 and our sales growth over the past two years have averaged just under 20%. Training also continues to be a strong area. We booked $1.3 billion of domestic in foreign operational training programs during 2009.

As you would expect there is also increasing demand our world-class cyber solutions, which as setting new standards in the emerging markets space. And our core business continues to do well in missiles for example we're seeing strong demand for AMRAAM, Evolved SeaSparrow, Standard Missile-2, TOW and Phalanx just to mentioned a few. In addition to focusing our customers' immediate priorities, as a technology company we're able to both forward fit and backward fit our solutions to enhance our customers. capabilities. As a result we're able react quickly to meet our customers' machine critical needs at an affordable cost.

Our broad range of customer spend, the major U.S. defense and security agencies and we do business in 80 countries around the world. 30% of our total bookings and 21% of our total sales during year worked from international customers. Going forward, we believe that our international business will continue to be a key driver in Raytheon's growth. In summary, our businesses are performing well with over 8000 programs and 15,000 contracts. We have a diverse portfolio we are well positioned and we will continue to be a predictable performer. Our portfolio is built on capabilities that support and meet the global needs of our customers both today and tomorrow.

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