Raytheon (RTN)

Q4 2011 Earnings Call

January 26, 2012 9:00 am ET


William H. Swanson - Chairman, Chief Executive Officer and Chairman of Executive Committee

Todd B. Ernst - Vice President of Investor Relations

David C. Wajsgras - Chief Financial Officer and Senior Vice President


George D. Shapiro - Access 3:42, LLC

Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division

Robert Spingarn - Crédit Suisse AG, Research Division

Jason M. Gursky - Citigroup Inc, Research Division

Carter Copeland - Barclays Capital, Research Division

Heidi R. Wood - Morgan Stanley, Research Division

Troy J. Lahr - Stifel, Nicolaus & Co., Inc., Research Division

Cai Von Rumohr - Cowen and Company, LLC, Research Division

David E. Strauss - UBS Investment Bank, Research Division



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Good day, ladies and gentlemen, and welcome to the Raytheon Fourth 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 conference over to your host, Mr. Todd Ernst, Vice President, Investor Relations. Please proceed, sir.

Todd B. Ernst

Thank you, Deanna. Good morning, everyone, and thank you for joining us today on our fourth quarter conference call. The results that we announced this morning, the audio feed of this call and the slides 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 on 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 with Bill -- 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.

William H. Swanson

Thank you, Todd. Good morning, everyone. Raytheon delivered solid operating results in 2011. Looking back at the year, I see a company that capitalized on global market opportunities and also successfully managed the challenges of an evolving economic environment. Our margins, earnings and cash flow were all better than expected, and bookings and backlog were strong.

In this environment, we focused on the things we could control and what we do best. We executed our strategy. We continue to implement efficiencies across the businesses, lowering our cost. We provided more affordable, innovative solutions to our customers. And this, ultimately, allowed us to deliver solid returns for our shareholders.

A bright spot and a key driver of our bookings strength was the international business, which represented 29% of the total company's bookings for the year. A couple of highlights included 2 large awards from the fourth quarter. The United Arab Emirates ordered 2 TPY-2 radars, which are the world's most advanced forward-looking mobile radars, and a key-sensing component of the THAAD missile defense system. This represents the first international sale for this product. The other highlight was Taiwan's order for additional 3 Patriot fire units.

I mentioned some of the larger ones, but there are also hundreds of smaller bookings across a number of product lines and the 81 countries where we do business. This drove the international backlog to 37% of our total backlog and demonstrates the alignment of our advanced technologies with the evolving needs of our global customers. It also points to continued success of our international strategy.

On the domestic front, we started off the year under a continuing resolution. And even after the budget was signed in mid April, the funding was slow to start up. Coupled with this, we finished the year again under a CR through December 22. With all this in mind, we're encouraged by the fact that Congress avoided another extended continuing resolution and moved forward on the fiscal year '12 defense budget. The outcome contained few, if any, surprises. I'm proud of Raytheon's team's performance and our ability to deliver in this environment. We expect the fiscal '13 budgets shortly. We expect some changes. In this environment, we're focused on the right areas and have a strong portfolio in electronic warfare, ISR, cyber and missile defense, which are priority areas for our domestic and international customers.

Regardless of any external uncertainty, the Raytheon team will remain focused on what we do best: delivering innovative products while reducing our cost and operating with improved speed and agility. We remain committed to delivering the best value for our customers and our shareholders. Our company remains strong, and we're well positioned for the future, with a proven strategy and solid financial foundation.

I'd like to take a minute to highlight a couple of the achievements of last year. In recognition for our development of top leaders, Raytheon was named the FORTUNE's 2011 North America Top Companies for Leaders list for the second consecutive year. Further, we finished 2011 with the best environmental health and safety performance in the company's history. Our safety performance is world class and industry leading, and our sustainability program continues to be recognized.

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