Q1 2011 Earnings Call
April 28, 2011 9:00 am ET
David Wajsgras - Chief Financial Officer and Senior Vice President
William Swanson - Chairman, Chief Executive Officer and Chairman of Executive Committee
Todd Ernst - Vice President of Investor Relations
Robert Stallard - RBC Capital Markets, LLC
Howard Rubel - Jefferies & Company, Inc.
George Shapiro - Citi
Joseph Nadol - JP Morgan Chase & Co
Heidi Wood - Morgan Stanley
Douglas Harned - Sanford C. Bernstein & Co., Inc.
Joseph Campbell - Barclays Capital
Robert Spingarn - Crédit Suisse AG
Jason Gursky - Citigroup Inc
Samuel Pearlstein - Wells Fargo Securities, LLC
Myles Walton - Deutsche Bank AG
Troy Lahr - Stifel, Nicolaus & Co., Inc.
Peter Arment - Gleacher & Company, Inc.
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Thank you, Alicia. Good morning, everyone. Thank you for joining us today on our first quarter conference call. The results that we announced this morning, the audio feed of this call and the slide that we'll reference are available on our website at raytheon.com. Following this morning's call, an archive of both the audio replay and a printable version of the slides will be available in the Investors section of our website.
With me today are Bill Swanson, our Chairman and Chief Executive Officer; and Dave Wajsgras, our Chief Financial Officer. We'll start with some brief remarks by Bill and Dave, and then we move on to questions.
Before I turn the call over at Bill, I'd 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, 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 are discussed in detail in our SEC filings. With that, I'll turn the call over to Bill.
Thank you, Todd. Good morning, everyone. Raytheon delivered solid operating results in the quarter. Bookings, sales, margin and cash flow generation all exceeded our expectations. This is especially notable given the headwind from one of the longest periods under continuing resolution on record which started last October and ended this month.
During the quarter, our team worked closely with the customer in order to minimize any impact from funding delays. This effort was mandatory to keep our programs on schedule and cost. Further, our focus on cost efficiencies and execution resulted in solid operational performance in the quarter. Thus we were able to reaffirm our sales, adjusted EPS and cash flow guidance for the year.
We continue to focus on International where we see strong demand for our products. For example, our international bookings were 28% for the quarter. Threat levels remain high and our customers continue to turn to Raytheon for cutting edge technologies and innovative solutions to address the rapidly evolving requirements.
In the quarter, International accounted for 25% of total sales and grew by 7%. Our international pipeline remains robust for the remainder of the year. The pipeline includes UAE, TPY-2 ground radar, Taiwan Patriot and additional international missile sales including Patriot upgrades to the Kingdom of Saudi Arabia. Our Classified business continues to be strong as well, with sales increasing by 26% in the quarter, the vast majority of which was organic.
Let me take a minute to talk about some key highlights from the quarter. IDS was awarded $107 million U.S. Air Force design contract for the Space Fence System. Space Fence is the future of space situational awareness and will provide our customer with enhanced capability to track and detect space objects. This program extends our core radar capabilities into an exciting new application. Whether it's ground-based radars like Space Fence or C-Base , like our recent down select on air and missile defense radar, AMDR, or airborne like our upgraded F-15, F-18 and RACR ACE radars, Raytheon's radar franchise continues to generate opportunities for growth and value creation.
Earlier this month, the Raytheon SM-3 program had its 19th successful intercept. This operational test demonstrated the key role Raytheon plays in missile defense. During this test, the Raytheon built TPY-2 ground-based radar autonomously detected and tracked the target. This track information was data-linked to a U.S. Navy destroyer that launched the Raytheon SM-3 Block 1A missile which successfully intercepted an intermediate range ballistic missile target.
This concept of forward-base sensor-queuing the shooter is called launch on remote. This is important because the concept is a central capability of Phased Adaptive Approach, PAA, for Europe. And it demonstrates how the integration of remotely deployed sensors and shooters greatly expands the battle space and defended area against a broader range of ballistic missile threats. As part of the secondary objectives of this test, a Raytheon built sensor on the space tracking surveillance system and the C-based expand radar participated in the test and successfully tracked the target.
Near the end of the first quarter, the Missile Defense Agency awarded Raytheon Missile Systems a $312 million contract for the advanced capabilities for the next iteration of the SM-3 missile, the Block 1B. The continued evolution of Raytheon sensors and interceptors brings innovative missile defense solutions to the U.S. forces and our allies.