Raytheon Reports Strong Second Quarter 2007 Results and Increases Full-year Guidance.

Highlights

- Earnings per share (EPS) from continuing operations of $0.79, up 30 percent

- Sales of $5.4 billion, up 9 percent

- Increases full-year guidance for EPS, bookings and ROIC

- Sale of Raytheon Aircraft Company completed, resulting in after-tax net proceeds of $2.4 billion

- Repurchased 9.6 million shares for $526 million

WALTHAM, Mass., July 26, 2007 /PRNewswire-FirstCall/ -- Raytheon Company reported second quarter 2007 income from continuing operations of $356 million or $0.79 per diluted share compared to $276 million or $0.61 per diluted share in the second quarter 2006. Second quarter 2007 income from continuing operations was higher primarily due to operational improvements, combined with lower net interest and pension expense. As previously announced, second quarter 2007 income from continuing operations included a $39 million charge ($59 million pretax) or $0.09 per diluted share for the early redemption of $1.0 billion of debt.

"We are very pleased with the Company's solid operating performance in the first half of 2007, along with the significant wins during the quarter on Navy Multiband Terminal and Warfighter FOCUS programs, which represent a potential of $12 billion over the life of these programs," said William H. Swanson, Raytheon's Chairman and CEO. "Our strong operational improvements allow us to increase our 2007 guidance for full-year EPS and bookings."

Second quarter 2007 net income was $1,335 million or $2.97 per diluted share compared to $310 million or $0.69 per diluted share in the second quarter 2006. Net income for the second quarter 2007 included $979 million in discontinued operations or $2.18 per diluted share of which $986 million was attributable to the gain on the sale of Raytheon Aircraft Company (RAC), which was completed in the second quarter. The sale resulted in after-tax net proceeds of approximately $2.4 billion.

Net sales for the second quarter 2007 were $5.4 billion, up 9 percent from $5.0 billion in the second quarter 2006 led by Integrated Defense Systems (IDS), Missile Systems (MS) and Network Centric Systems (NCS).

Operating cash flow from continuing operations for the second quarter 2007 was an outflow of $46 million versus a positive $474 million for the second quarter 2006. The second quarter 2007 included $589 million in cash tax payments versus $101 million in cash tax payments paid in the second quarter 2006. Of the cash taxes paid in the second quarter 2007, $316 million was attributable to the gain on the sale of RAC.

Year-to-date operating cash flow from continuing operations was an outflow of $425 million versus a positive $426 million for the comparable period in 2006. The year-to-date decrease in operating cash flow was primarily due to $643 million in cash tax payments ($316 million attributable to the gain on the sale of RAC) in the first half 2007 versus $101 million of cash tax payments made in the first half 2006 combined with the $400 million discretionary cash contribution made to the Company's pension plans in the first quarter 2007 versus the $200 million discretionary cash contribution made in the first quarter 2006.

During the second quarter 2007, the Company repurchased 9.6 million shares for $526 million as part of the Company's previously announced share repurchase program. The Company has repurchased 14.7 million shares of common stock year-to-date for $801 million.

 
  Summary Financial Results      2nd Quarter     %      Six Months      % 
  ($ in millions, except per 
     share data)                 2007    2006  Change  2007     2006  Change 
 
  Net Sales                     $5,419  $4,973    9%  $10,347  $9,633    7% 
  Total Operating Expenses       4,831   4,512          9,249   8,739 
  Operating Income                 588     461   28%    1,098     894   23% 
  Non-operating Expenses            53      42             88      64 
  Income from Cont. Ops. before 
    Taxes                         $535    $419   28%   $1,010    $830   22% 
  Income from Continuing 
    Operations                    $356    $276   29%     $670    $548   22% 
  Income from Discontinued 
    Operations*                    979      34   NM     1,011      49   NM 
  Net Income                    $1,335    $310  331%   $1,681    $597  182% 
 
  Diluted EPS from Continuing 
    Operations                   $0.79   $0.61   30%    $1.49   $1.22   22% 
  Diluted EPS                    $2.97   $0.69  330%    $3.73   $1.33  180% 
 
  Operating…