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Raytheon Company Q1 2010 Earnings Call Transcript

Raytheon Company Q1 2010 Earnings Call Transcript

Raytheon Company (RTN)

Q1 2010 Earnings Call

April 22, 2010 9:00 am ET


Marc Kaplan - VP, Investor Relations

Bill Swanson - Chairman and CEO

Dave Wajsgras - SVP and CFO


Robert Spingarn - Credit Suisse

Troy Lahr - Stifel Nicolaus

Peter Arment - Broadpoint Gleacher

Carter Copeland - Barclays Capital

Sam Pearlstein - Well Fargo securities

Doug Harned - Sanford Bernstein

David Strauss - UBS Securities

Joe Nadol - JPMorgan

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Good day ladies and gentlemen and welcome to the Raytheon's first quarter 2010 conference call. My name is Michael and I'll be your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (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's Mr. 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 first 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 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 are going to 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 in a wide range of assumption 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. Bill?

Bill Swanson

Thank you, Marc. Good morning everyone. We had a strong quarter and we're off to a good start for the year. The company had bookings of $6.5 billion and sales of $6.1 billion, a book-to-bill greater than 1. Our operating profit margins were solid, driven by strong program performance.

Our FAS/CAS adjusted EPS was up 17% and we delivered good cash flow, clearly another solid quarter of performance for the company. As we mentioned in January we expected to deliver continued growth for the year. Our results in the first quarter and our positive outlook are a result of our successful execution of our customer-focused strategy.

There are lots of exciting things going on in the company, so I wanted to do something a little bit different this morning and take a few minutes on this call to highlight some of them for you. Let me start with IIS.

We booked over $1.7 billion in new business ending the quarter with a book-to-bill ration close to 2.5 times. IIS booked $886 million on a compatibly awarded contract for the US Air Force to develop the next-generation ground control stations for GPS. We called the program GPS OCX.

The program will provide anti-jam capabilities to our warfighters, ensure future air traffic control systems and facilitate the advancement of commercial GPS applications. I am very proud of our innovative solution and the team is off to a great start.

IIS also booked $624 million on a number of classified contracts during the quarter, including $340 million on a major classified program. As many of you are aware we can’t say much about these programs. So it is clear that customers value the unique capabilities that we offer. The order book at IIS is very solid and the business is well positioned for future growth.

At our integrated defense systems business we delivered good growth and strong margins. Importantly, during the quarter the navy awarded initial funding for the third Zumwalt ship, a meaningful step toward addressing any questions about the outlook for this successful program. Its performing well and the advance technologies that we are developing will support the US Navy and other Navies for decades to come.

At Missile systems we booked $535 million on a major classified program in the quarter. We also had a number of significant bookings for the Missile Defense Agency, the US Navy, the US Army and intentional customers, Missile systems continues to be well positioned for future growth.

At Raytheon we differentiate ourselves in the market, based on our technologies and are focused on continuous innovation. I want to take a few minutes on the recent key technology wins across the company. There is a lot of exciting work that we are doing to support our customers, which will drive future growth.

For example, during the quarter we won a contract with the Office of Naval Research to continue our cutting-edge work on the Compound Semiconductor Materials On Silicon or the COSMOS program as we call it. The potential future value of this disrupted technology that we are developing is significant both to our customers and to Raytheon. We will be able to deliver even more affordable sensors while continually deliver world class performance.

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