Q2 2011 Earnings Call
July 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
Daniel Smith - Officer
Todd Ernst - Vice President of Investor Relations
Cai Von Rumohr - Cowen and Company, LLC
Robert Stallard - RBC Capital Markets, LLC
Howard Rubel - Jefferies & Company, Inc.
George Shapiro - Citi
Douglas Harned - Sanford C. Bernstein & Co., Inc.
Heidi Wood - Morgan Stanley
Robert Spingarn - Crédit Suisse AG
Jason Gursky - Citigroup Inc
Samuel Pearlstein - Wells Fargo Securities, LLC
Peter Arment - Gleacher & Company, Inc.
David Strauss - UBS Investment Bank
Previous Statements by RTN
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Good day, ladies and gentlemen, and welcome to the Raytheon Second Quarter 2011 Earnings Conference Call. My name is Deanna, and I'll be the operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. Todd Ernst, Vice President, Investor Relations. Please proceed, sir.
Thank you, Deanna. Good morning, everyone. Thank you for joining us today on our second quarter conference call. The results that we announced this morning, the audio feed of this call and the slides that we'll be referencing are available on our website at raytheon.com. Following this morning's call, an archive about 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 move on to questions.
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 are discussed in detail in our SEC filings. With that, I'll turn the call over to Bill. Bill?
Thank you, Todd. Good morning, everyone. Raytheon delivered a solid quarter with sales, margin and EPS all exceeding our expectations. Our adjusted operating margin was 12.4%, and was driven by our continued focus on performance across the businesses.
Year-to-date, adjusted operating margin increased to 12.5%, up 10 basis points compared to 2010. In the quarter, our book-to-bill was a 1.2, driven in part by the Kingdom of Saudi Arabia's decision to upgrade their Patriot System, which we announced at the Paris Air Show in June. This booking once again demonstrates that when it comes to choosing the most advanced integrated air and missile defense systems, global customers continue to look to Raytheon and to Patriot.
As you know, and an important part of our strategy is to continue to grow our international market. Our presence at the air show reaffirmed our commitment to this strategy and to our international customers. For us, this was a record year at the air show, where we met with approximately 2,100 customers from 63 nations and 44 delegations. It gave me an opportunity to personally meet with many of the delegations and customers. I was encouraged by the conversations.
Our cutting-edge technology, our innovative solutions continue to be well aligned with the evolving requirements, particularly in the areas of air and missile defense, global ISR, Air Traffic Management, Homeland Security and training.
I went into the show feeling good about our international opportunities and I left feeling more confident. The threat level around the world remains high and despite competing priorities, our customers continue to place a heightened emphasis on investments in defense and security. From a company perspective, we have an excellent pipeline, and the key is to convert these bookings within the planned timeframe.
Domestically, our customers work through the quarter to put the extended continuing resolution behind them. The funding recovery was slow to start, but it picked up steam through the quarter. Our efforts to keep programs on cost and on schedule during the CR paid off, and we're able to report domestic revenue ahead of our expectations. Domestic book-to-bill was greater than one in the quarter.
We understand that this environment is dynamic. Our customers being asked to do more with no more and is looking for innovative ways to meet what is demanded of them. This is the new reality, and it fits well with our focus on delivering capabilities and solutions that offer more value.
We not only see this in our core markets, but we also see examples of this in our growth markets. For example, as we approach the electronic warfare or EW market, from various perspectives, we can apply our capabilities in manipulating RF signals to attack, deny and defend against an adversary. Our products include the ALR-69A, which will go on a new tanker, the KC-46A; the ALR-67 for the 18 E/F and our Miniature Air Launch Decoys, MALD; plus a host of other classified products. The key here is that our EW capabilities are truly a force multiplier for our customers worldwide, allowing them to leverage existing platforms at reduce costs to continue to execute their missions. This is yet another example of how Raytheon's platform-agnostic approach to the market creates values for our customers.