Raytheon (RTN) Q3 2011 Earnings Call October 27, 2011 9:00 am ET Executives 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 Analysts Noah Poponak - Goldman Sachs Group Inc., Research Division Robert Stallard - RBC Capital Markets, LLC, Research Division Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division Robert Spingarn - Crédit Suisse AG, Research Division George Shapiro - Citi Douglas S. Harned - Sanford C. Bernstein & Co., LLC., 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 Presentation Operator
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 effective 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's performance was solid in the third quarter. Our focus on execution drove strong margins and cash flow. Our new awards resulted in a book to bill of 1.12 and reflects a good customer demand for our products. Execution was strong across all our businesses. Our bookings were driven in part by 13 programs over $100 million each, primarily driven by a Missile Systems, which had over 50% of these contract awards. I want to point out that this was the second highest quarter in bookings ever for our Missile business. In dollar terms, these 13 awards represent more than 40% of our $6.9 billion for the quarter. The remaining 60% of orders was comprised of hundreds of programs averaging under $5 million each. The take away for us is that our customers continue to invest in our affordable and innovative solutions that Raytheon has to offer. It's also notable during the quarter we received just under $1.3 billion of international orders. We continue to see strong demand globally for our technologies and products. Our Classified business remains an area of strength as well, with sales increasing by 10% in the quarter, the vast majority of which was organic. As we all know, the overall budget environment remains fluid. Once again, we're operating under a continuing resolution, which is reflected in our updated guidance. Dave will provide some color on this in his remarks.
Given the economic environment, we're focusing on the things we can control. We continue to work closely with our customers to reduce costs, shorten timelines and improve efficiency. Our efforts to streamline the supply chain, reduce overhead and optimize our facility utilization are moving forward, and we are seeing continued improvements.Given today's global threat environment, we believe defense will continue to be a high priority in our government's future spending plans. As such, I want to take a few minutes today to highlight some of the recent key technology wins, and theres' a lot of exciting work that we're doing to support our customers which will drive future growth. Raytheon BBN received an order or orders from the U.S. Army for a variant of the Boomerang shooter detection system, which pinpoints incoming small arms fires from the shooters, helping to protect our troops. IDS was awarded a contract for developing an integrated GPS-based system for navy surface ships and subsurface platforms, which uses open architecture net-centric approach to allow hosting the positioning, navigation and timing data in a common computing environment, thus enhancing the ship's operability with onboard systems. While at the same time, SAS received a contract from the Air Force Research Laboratory for the development of advanced high anti-jam GPS situational awareness sensors for applications on small weapons and UAV systems. And just to further emphasize our cutting-edge technology and innovative solutions continue to be well aligned with our customers' evolving requirements, particularly in the areas of air and missile defense, ISR, EW, Air Traffic Management, Homeland Security and training. Let me sum up by saying we had a solid quarter in a challenging environment. Our strategies and our efforts to take out costs are reflected in our results, and we will continue to deliver value for our customers and our shareholders. All of this is made possible by the dedication, hard work and world-class talent of the Raytheon team. Read the rest of this transcript for free on seekingalpha.com