Q3 2010 Earnings Call
October 28, 2010 9:00 am ET
David Wajsgras - Chief Financial Officer and Senior Vice President
William Swanson - Chairman, Chief Executive Officer and Chairman of Executive Committee
Marc Kaplan - Vice President of Investor Relations
Cai Von Rumohr - Cowen and Company, LLC
Douglas Harned - Bernstein Research
Robert Stallard - RBC Capital Markets Corporation
George Shapiro - Citi
Joseph Nadol - JP Morgan Chase & Co
Richard Safran - Buckingham Research Group, Inc.
Robert Spingarn - Crédit Suisse AG
Noah Poponak - Goldman Sachs Group Inc.
Samuel Pearlstein - Wells Fargo Securities, LLC
Myles Walton - Deutsche Bank AG
Troy Lahr - Stifel, Nicolaus & Co., Inc.
Peter Arment - Gleacher & Company, Inc.
David Strauss - UBS Investment Bank
Good day, ladies and gentlemen, and welcome to the Raytheon Third Quarter 2010 Results Conference Call. My name is John, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. Marc Kaplan, Vice President of Investor Relations. Please proceed.
Thank you, John. Good morning, everyone, and thank you for joining us today on our third 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'll start with some brief remarks by Bill and Dave, and then we'll move on to questions. Please limit your questions to one per caller to allow for broader participation.
Before I turn the call over to 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 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 discussed in detail in our SEC filings.
Thank you, Marc. Good morning, everyone.
We delivered solid results during the quarter, with sales of $6.3 billion, adjusted operating margin at 12.9% and adjusted EPS of $1.36 and operating cash flow of $413 million. Bookings during the quarter were $6 billion and on a year-to-date basis, our book-to-bill ratio was around one. Our Missile business brought in over $2 billion in orders during the quarter driven by broad-based demand from U.S. and the international customers. At our other businesses, the pipeline remains healthy.
We continue to see strong demand. We also see a continuation of the congestion that we discussed on our prior conference calls and webcast that impacted timing of awards. I'd like to put it in perspective. We really don't see the if issue, just when, and in this environment, when is a little more difficult to predict. Given that, the onus is on us to further reduce our cycle times. We have an internal push to increase speed, and we applaud the government's efforts to increase efficiency and reform export control. I think that's good for both sides.
Within this environment of challenges and opportunities, we continue to execute well. Our strong program performance, coupled with Six Sigma and lean processes to take cost out of our business, is reflected in our results during the quarter. Our updated outlook for the year and our competitive position also reflects this domestically and internationally.
Our customers in the U.S. are dealing with challenges. What I'm hearing from the DoD [Department of Defense] leadership is that the Department needs to continue to invest in capabilities to defeat threats to national security. At the same time, economic conditions require an increased focus on controlling costs on both sides. We support the DoD's overall objectives to prioritize spending, improve efficiency, reward contractors that deliver strong program performance, and we stand ready to help.
On the International side, our business is strong and continues to grow. International sales from the third quarter are up 11%, reaching 24% of our total sales. Again, the driver is the threat environment which remains high, particularly in the Middle East and parts of Asia. Our customers in these regions have the resources to support the required investments in their security. We have a number of additional important international orders in various stages of the procurement and notification process.
If you stand back and look at world events, the threat environment remains high. It hasn't changed. For all of us, this means that we need to get even better at what we do. Raytheon's well positioned for the future. We have outstanding technology, we have a flexible portfolio, and our consistent focus on providing innovative, affordable and proven solutions will ensure that we remain well positioned.
To help put that in perspective, we've institutionalized Six Sigma and the philosophy of continuous improvement. We made the tough choices on getting the utilization rates in our factories up. We've invested in common engineering supply chain, financial, IT and HR systems that enable us to design anywhere, manufacturing anywhere and ship from anywhere. And our talent can transfer their knowledge across the company. We have a strong balance sheet for some time now so we have the financial strength to continue to make the right investments in our business and for our shareholders.