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Mixed Results From US Majors

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General Dynamics

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Boeing

25 Jan 17. Boeing sets cash flow record, lifts 2017 forecast for jet output. Boeing Co (BA.N) said on Wednesday it expects to deliver between 760 and 765 commercial aircraft in 2017, topping 748 deliveries in 2016.

The world’s biggest maker of jetliners said it expects 2017 core earnings, which exclude some pension and other costs, of between $9.10 and $9.30 per share on revenue of $90.5bn to $92.5bn.

Boeing forecast operating cash flow of about $10.75bn in 2017. The company reported record cash flow of $10.5bn in 2016. Boeing generated $7.7bn of operating cash flow at the end of the third quarter, fueling expectations it would hit its target of about $10bn for 2016. But the year-end figure surpassed analysts’ estimates of $10.4bn, according to Thomson Reuters I/B/E/S.

Boeing shares were up 1.5 percent at $162.90 in premarket trading. Boeing’s higher cash target for 2017 suggested it can keep generating cash by reducing costs while it increases aircraft deliveries. Boeing expects to deliver more planes in 2017 despite plans to cut output of its 777 model by 40 percent this year. Deliveries of its smaller 737 and 737 MAX models will make up the difference, producing a revenue decline in 2017.

Core earnings rose to $2.47 per share in the fourth quarter from $1.60 a year earlier. The increase came despite a $201m aftertax charge for Boeing’s KC-46A aerial refueling tanker program for the U.S. Air Force. (Source: Reuters)

Boeing Reports Fourth-Quarter Results and Provides 2017

Guidance

Fourth-Quarter 2016

* Operating cash flow of $2.8bn driven by solid operating performance

* GAAP EPS of $2.59 and core EPS (non-GAAP)* of $2.47 on solid execution

Full-Year 2016

* Revenue of $94.6bn reflecting 926 commercial and defense aircraft deliveries and services growth

* Record operating cash flow of $10.5bn; repurchased 55.1m shares for $7.0bn

* Backlog remains robust at $473bn with more than 5,700 commercial airplane orders

* Cash and marketable securities of $10.0bn provide strong liquidity

Outlook for 2017

* Operating cash flow expected to increase to approximately $10.75bn

* 2017 GAAP EPS of between $10.25 and $10.45; core EPS (non-GAAP)* of between $9.10 and $9.30

The Boeing Company [NYSE: BA] reported fourth-quarter revenue of $23.3bn with GAAP earnings per share of $2.59 and core earnings per share (non-GAAP)* of $2.47 reflecting overall solid execution on production programs and services.

Revenue was $94.6bn for the full year reflecting strong commercial deliveries and services growth across the company. GAAP earnings per share totaled $7.61 and core earnings per share (non-GAAP)* totaled $7.24.

Guidance for 2017 is set at between $10.25 and $10.45 for GAAP earnings per share and between $9.10 and $9.30 for core earnings per share (non-GAAP)*. Revenue guidance is between $90.5 and $92.5bn, including increased commercial deliveries of between 760 and 765. Operating cash flow is expected to increase by approximately $250m to $10.75bn and capital expenditures are expected to decline by approximately $300m to $2.3bn.

“With solid fourth quarter operating performance and a sharp strategic focus, we extended our aerospace market leadership in our centennial year and positioned Boeing for continued growth and success in our second century,” said Chairman, President and Chief Executive Officer Dennis Muilenburg. “We led the industry in commercial airplane deliveries for the fifth consecutive year, achieved healthy sales in our defense, space and services segments, and produced record operating cash flow, which fueled investment in innovation and our people and generated significant returns to shareholders. Looking forward, our team is intent on accelerating productivity and program execution to deliver increasing cash and profitability from our large and diverse order backlog of nearly $500bn, standing up our new integrated services business, and capturing an even greater share of the growing global aerospace market to deliver superior value to our customers, shareholders and employees.”

Operating cash flow in the quarter of $2.8bn was driven by solid operating performance, disciplined cash management, and a slight impact from timing of receipts and expenditures. During the quarter, the company repurchased 3.7m shares for $500m and paid $672m in dividends. For the full year, the company repurchased 55.1m shares for $7.0bn and paid $2.8bn in dividends. Based on strong cash generation and confidence in the company’s outlook, the board of directors in December increased the quarterly dividend per share by 30 percent and renewed the share repurchase program to $14bn. Share repurchases under the new authorization are expected to be made over the next 24 to 30 months.

Cash and investments in marketable securities totaled $10.0bn, up from $9.7bn at the beginning of the quarter. Debt was $10.0bn, down from the beginning of the quarter, due to repayment of debt. Total company backlog at quarter-end was $473bn, up from $462bn at the beginning of the quarter, and included net orders for the quarter of $32bn.

Segment Results

 Commercial Airplanes

Commercial Airplanes fourth-quarter revenue increased to $16.2bn on higher planned delivery volume and mix. Fourth-quarter operating margin was 9.1 percent, reflecting delivery mix, lower R&D and improved performance, partially offset by a $243m pre-tax charge on the KC-46 Tanker program primarily related to additional effort to incorporate previously identified changes into initial production aircraft.

During the quarter, Boeing delivered the 500th 787 Dreamliner and began final assembly of the first 787-10 aircraft. The 737 program has captured more than 3,600 orders for the 737 MAX, including recent 737 MAX 8 orders from GE Capital Aviation Services for 75 airplanes and SpiceJet for 100 airplanes. Commercial Airplanes booked 288 net orders during the quarter. Backlog remains strong with more than 5,700 airplanes valued at $416 bn.

Defense, Space & Security

Defense, Space & Security’s fourth-quarter revenue was $6.9bn Fourth-quarter operating margin was 11.8 percent, reflecting a $69m pre-tax charge on the KC-46 Tanker program at BMA, partially offset by solid execution.

Boeing Military Aircraft (BMA) fourth-quarter revenue was $2.6bn, reflecting lower planned deliveries and mix, with operating margin of 11.0 percent. During the quarter, pending international sales of F-15 and F/A-18 fighter jets and Chinook and Apache helicopters were approved by the U.S. State Department, reaching the final stage of the U.S. foreign military sales process before contract negotiations.

Network & Space Systems (N&SS) fourth-quarter revenue was $1.8bn, largely reflecting lower satellite volume, with an operating margin of 8.7 percent. During the quarter, the eighth Wideband Global SATCOM satellite was launched with an upgraded digital payload.

Global Services & Support (GS&S) fourth-quarter revenue was $2.4bn, reflecting lower volume in Aircraft Modernization & Sustainment. Operating margin was 14.9 percent largely reflecting contract mix. During the quarter, GS&S completed digital flight deck upgrades to the first of 14 NATO Airborne Warnings and Control Systems (AWACS) aircraft.

Backlog at Defense, Space & Security was $57bn, of which 37 percent represents orders from international customers.

At quarter-end, Boeing Capital’s net portfolio balance was $4.1bn. Total pension expense for the fourth quarter was $434m, down from $529m in the same period of the prior year. Unallocated items, eliminations and other revenue increased from the same period in the prior year primarily due to timing of eliminations for intercompany aircraft deliveries. The effective tax rate for the fourth quarter increased from the same period in the prior year primarily due to the reinstatement of the full year research tax credit recorded in the fourth quarter of 2015.

General Dynamics

27 Jan 17. General Dynamics Reports Fourth-Quarter, Full-Year 2016 Results.

  • Earnings from continuing operations up 5.6% to $807 m for fourth-quarter and up 3.3% to $3.1bn for full-year 2016
  • Diluted EPS up 9.2% to $2.62 in fourth-quarter and full-year up 8.7% to $9.87
  • Operating margin in fourth-quarter of 13.6%, a 30 basis-point improvement, and full-year 2016 of 13.7%, a 40 basis-point improvement
  • Return on sales of 9.8% in the quarter and full year

General Dynamics (GD) today reported fourth-quarter 2016 earnings from continuing operations of $807m, a 5.6 percent increase over fourth-quarter 2015, on revenue of $8.2 bn. Diluted earnings per share from continuing operations were $2.62 compared to $2.40 in the year-ago quarter, a 9.2 percent increase.

Full-year Results
Full-year earnings from continuing operations were $3.1bn, a 3.3 percent increase from 2015 on revenue of $31.4bn. Diluted earnings per share from continuing operations were up 8.7 percent at $9.87 compared to $9.08 in 2015.

“The quarter is solid showing strong growth over the year-ago quarter in both revenue and earnings and the same was true on a sequential basis. These themes played out throughout the business groups as well,” said Phebe Novakovic, chairman and chief executive officer. “The year was strong with growth in earnings, margins, return on sales and an 8.7 percent increase in EPS over the prior year.”

Margin
Company-wide operating margin was 13.6 percent for the fourth quarter, 30 basis points higher than the fourth-quarter 2015 margin, with expansion in Aerospace, Information Systems and Technology and Marine Systems. For the full year of 2016, operating margin was 13.7 percent, 40 basis points higher than the full-year 2015 margin.

Segment Highlights:

Aerospace
The Aerospace group reported fourth-quarter 2016 revenue of $2.22 bn, operating earnings of $436 m and operating margin of 19.6 percent. Compared to fourth-quarter 2015, revenue was up 3.8 percent, earnings were up 6.3 percent and margin was up 50 basis points. The group had solid order activity in the quarter and Gulfstream’s two new large-cabin business jets continue to progress ahead of schedule, including the first flight of the G600 in December.

Combat Systems
Combat Systems reported fourth-quarter 2016 revenue of $1.68bn, operating earnings of $259m and operating margin of 15.4 percent. Compared to fourth-quarter 2015, revenue was up 10.5 percent, earnings were up 10.7 percent and margin was steady as the group continued its strong program and operating performance. The group booked multiple significant contracts in the quarter, including a $320 m contract from the U.S. Army for double-V-hulled Stryker vehicles.

Information Systems and Technology
The Information Systems and Technology group reported fourth-quarter 2016 revenue of $2.28bn, operating earnings of $244m and operating margin of 10.7 percent. Compared to fourth-quarter 2015, revenue was up 5.7 percent, earnings were up 6.1 percent and margin was up 10 basis points. The group had a book-to-bill ratio (orders divided by revenue) of approximately one-to-one for the year, demonstrating continued demand for its products and services in a cost-competitive market.

Marine Systems
Marine Systems reported fourth-quarter 2016 revenue of $2.04bn, operating earnings of $186m and operating margin of 9.1 percent. Compared to fourth-quarter 2015, revenue was up 3 percent, earnings were up 8.1 percent and margin was up 40 basis points. The group continues to execute on its extensive backlog and was awarded significant contracts in the quarter, including $375m from the U.S. Navy for the design and construction of a fifth Expeditionary Sea Base auxiliary support ship.

Cash
Net cash provided by operating activities for the full year totaled $2.2bn. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.8bn for the year.

Backlog
General Dynamics’ total backlog at the end of 2016 was $59.8bn. There was strong demand in the quarter across the company’s portfolio. The estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $25bn. Total potential contract value, the sum of all backlog components, was $84.8bn at the end of the year.

Honeywell

27 Jan 17. Honeywell Reports Strong Finish to 2016. Honeywell (HON) today announced results for the fourth quarter and full-year of 2016, and reaffirmed 2017 earnings guidance.

 

“We finished 2016 with a strong fourth quarter, achieving 14% earnings growth (excluding divestitures and charges for pension mark-to-market and debt refinancing), 90 basis points of segment margin expansion excluding M&A, and free cash flow conversion of 126%,” said Honeywell Chairman and CEO Dave Cote. “For the full year, we delivered earnings growth of 8% (excluding charges for pension mark-to-market and debt refinancing) and drove strong operational segment margin expansion while making significant investments for the future, including over $250 m in incremental Aerospace OEM incentives (the equivalent of four percentage points of EPS). We funded high-return capital projects through more than $1 bn in capital expenditures, marking the third consecutive year of reinvesting at over 150% of depreciation, and we continued to upgrade our growth profile through acquisitions totaling more than $2.5bn and divestitures with aggregate annual revenues in excess of $1bn. To better drive top-line growth and improve our overall decision-making speed, we realigned our business segments and funded more than $250 m in internal restructuring projects. In addition, our debt refinancing will reduce our expected 2017 interest expense by about 8% despite increasing total borrowings by $4bn, and we returned nearly $4.5bn to our shareowners through dividends and share repurchases.”

Cote concluded, “We delivered outstanding returns again in 2016 with a total shareowner return of 15%, which exceeded the S&P’s total shareowner return by 300 basis points. More importantly, we set the stage for a successful 2017. I am confident in our ability to continue to outperform under Darius Adamczyk. It has been an honor to lead Honeywell for the past 15 years, and I know that our best days are ahead of us.”

Darius Adamczyk, President and Chief Operating Officer said, “Our business will benefit in the future from the investments we made in 2016. All of these actions, combined with our focus on enhancing organic growth, and the power of our connected businesses, make us optimistic about 2017 and beyond. We are reaffirming our 2017 earnings guidance today. As I discussed on our December outlook call, Honeywell will continue our focus on driving organic growth and margin expansion through new software opportunities, breakthrough initiatives, and an improved customer experience. We look forward to discussing this more at our annual investor conference on March 1 in New York City.”

Honeywell will discuss the results during its investor conference call today starting at 9:30 a.m. EST.

Fourth Quarter Performance

Honeywell sales for the fourth quarter were flat on a reported basis and down 1% on a core organic basis. The difference between reported and core organic sales is due to the impact of acquisitions, primarily Elster and Intelligrated, partially offset by the spin-off of Resins and Chemicals in Performance Materials and Technologies and the divestiture of the Aerospace government services business. The fourth-quarter and full-year 2016 financial results can be found in Tables 1 and 2 below.

Aerospace sales for the fourth quarter were down 5% on a core organic basis. The decrease was primarily driven by lower volumes in Business and General Aviation, higher OEM incentives, program completions in U.S. Space and International Defense, and continued weakness in the commercial helicopter business, as expected. This was partially offset by global gas turbo penetration in passenger vehicles in Transportation Systems. Segment margin declined 130 bps to 20.2%, due to higher OEM incentives, product mix, and lower volumes, partially offset by productivity net of inflation and commercial excellence.  Excluding the impact of acquisitions and higher OEM incentives, segment margin contracted by 10 basis points.

Home and Building Technologies sales for the fourth quarter were up 2% on a core organic basis driven by continued strength in our Building Solutions and Distribution businesses, double-digit growth in China and India, and new product introductions in Environmental and Energy Solutions. Segment margin declined 30 bps to 16.8%, primarily driven by acquisition amortization and integration costs. Excluding the impact of acquisitions, segment margin expanded 60 basis points driven by benefits from previously-funded restructuring and commercial excellence, partially offset by the unfavorable impact of higher Distribution sales and growth investments.

(Source: Yahoo!/PRNewswire)

 Lockheed Martin

 

24 Jan 17. Lockheed Martin Reports Fourth Quarter and Full Year 2016 Results

Lockheed warns of material weakness in Sikorsky financial statements.  Lockheed Martin Corp said on Tuesday it delivered fewer F-35 jets in 2016 than it estimated and also said it expected to report a material weakness in internal control over financial reporting at its Sikorsky helicopters business.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, that could result in misstatement of a company’s financial statements.

Lockheed, the Pentagon’s No. 1 weapons supplier, said that so far no material errors in the financial results or balances had been identified due to the control deficiencies at Sikorsky.

Lockheed also said there was no change in its previously reported financial statements due to the control deficiencies.

Lockheed, whose F-35 fighter jet program has been criticized by President Donald Trump as too expensive, said it delivered 46 F-35s in 2016, less than the 53 it had expected to deliver.

The company’s shares were down 1.5 percent at $253.65 in premarket trading.

Lockheed said it expected 2017 net sales to rise 4.6-7.1 percent, compared with a previous forecast of a 7 percent increase. It forecast 2017 earnings of $12.25-$12.55 per share.

Analysts on average were expecting a profit of $12.87 per share on a near 5 percent increase in sales, according to Thomson Reuters I/B/E/S.

Lockheed said net sales rose to $13.75bn in the fourth quarter ended Dec. 31, from $11.52bn a year earlier. Net earnings from continuing operations rose to $959m, or $3.25 per share, from $817m, or $2.63 per share.

Analysts on average were expecting a profit of $3.06 per share on revenue of $13.03bn.

— Net sales of $13.8bn in the fourth quarter and $47.2bn in 2016

— Net earnings from continuing operations of $959m, or $3.25 per share, in the fourth quarter and $3.8bn, or $12.38 per share, in 2016

— Generated cash from operations of $729 m in the fourth quarter and $5.2bn in 2016

— Backlog of $96.2bn at the end of 2016

— 2017 financial outlook provided

Lockheed Martin (NYSE: LMT) today reported fourth quarter 2016 net sales of $13.8bn, compared to $11.5bn in the fourth quarter of 2015. Net earnings from continuing operations in the fourth quarter of 2016 were $959m, or $3.25 per share, compared to $817m, or $2.63 per share, in the fourth quarter of 2015. Cash from operations in the fourth quarter of 2016 was $729m, compared to $1.4bn in the fourth quarter of 2015. Net sales in 2016 were $47.2bn, compared to $40.5bn in 2015. Net earnings from continuing operations in 2016 were $3.8bn, or $12.38 per share, compared to $3.1bn, or $9.93 per share, in 2015. Cash from operations in 2016 was $5.2bn, compared to cash from operations in 2015 of $5.1bn.

“Our dedicated employees delivered outstanding performance for our customers in 2016, resulting in exceptional financial results,” said Chairman, President, and CEO Marillyn Hewson. “Looking ahead to 2017, we remain focused on meeting commitments to customers, pursuing new business growth opportunities, investing in innovative solutions to drive affordability and prepare for the future, and returning value to our shareholders.”

2017 Financial Outlook

The Corporation’s outlook for the 2017 FAS/CAS pension benefit is expected to be approximately $880m. This incorporates a year end 2016 discount rate of 4.125%, a 25 basis point decrease from the end of 2015; an actual investment return during 2016 of approximately 5.0%; a 50 basis point reduction in our long-term rate of return assumption from 8.00% to 7.50%; and the revised longevity assumptions released on Oct. 20, 2016 by the Society of Actuaries. There are no planned contributions to our legacy qualified defined benefit pension plans in 2017.

Cash Deployment Activities

The Corporation’s cash deployment activities in the quarter and year ended Dec. 31, 2016 consisted of the following:

* repurchasing 3.2m shares for $816m and 8.9m shares for $2.1bn during the quarter and year ended Dec. 31, 2016, compared to 3.2m shares for $707m and 15.2m shares for $3.1bn during the quarter and year ended Dec. 31, 2015;

* paying cash dividends of $530m and $2.0bn during the quarter and year ended Dec. 31, 2016, compared to $505m and $1.9bn during the quarter and year ended Dec. 31, 2015;

* repaying $952m of long-term debt upon scheduled maturity during the year ended Dec. 31, 2016, compared to no repayments in the year ended Dec. 31, 2015; and

* making capital expenditures of $436 m and $1.1bn during the quarter and year ended Dec. 31, 2016, compared to $439m and $939m during the quarter and year ended Dec. 31, 2015.

Internal Controls

The Corporation is completing its assessment of the effectiveness of its internal control over financial reporting as of Dec. 31, 2016. However, the Corporation expects to report a material weakness in internal control over financial reporting at its Sikorsky Aircraft Corporation (Sikorsky) business in its Annual Report on Form 10-K for the year ended Dec. 31, 2016. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Corporation’s annual or interim financial statements could occur but will not be prevented or detected on a timely basis.

Sikorsky was acquired on Nov. 6, 2015 and generated about 10% of the Corporation’s total net sales for the year ended Dec. 31, 2016. Prior to 2016, Sikorsky was not included in assessments of the effectiveness of the Corporation’s internal control over financial reporting as the U.S. Securities and Exchange Commission (SEC) rules provide companies one year to assess controls at an acquired entity. Accordingly, in the year ended Dec. 31, 2016 the Corporation has performed its first comprehensive assessment of the design and effectiveness of internal controls at Sikorsky and determined that Sikorsky’s internal control over financial reporting was ineffective as of Dec. 31, 2016. Specifically, Sikorsky did not adequately identify, design and implement appropriate process-level controls for its processes and appropriate information technology controls for its information technology systems. As of the date of this earnings release, there have been no material errors in the financial results or balances identified as a result of the control deficiencies at Sikorsky, and there has been no restatement of prior period financial statements and no change in previously released financial results were required due to these control deficiencies.

The Corporation continues its review and will continue to enhance the risk assessment process and the design of internal controls over financial reporting at Sikorsky. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The Corporation expects that the remediation of this material weakness will be completed prior to the end of fiscal year 2017.

Segment Results

The Corporation operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space Systems.

The discussion and presentation of the operating results of the Corporation’s business segments in this news release have been impacted by the following recent events:

* The Corporation completed the divestiture of its Information Systems & Global Solutions (IS&GS) business on Aug. 16, 2016, which merged with a subsidiary of Leidos Holdings, Inc. (Leidos). The discussion and presentation of the Corporation’s segment results for all periods presented in this news release exclude the results of the IS&GS business.

* The Corporation’s ownership interest in the AWE Management Limited (AWE) venture increased by 18% on Aug. 24, 2016. As a result of the increase in ownership interest, the Corporation now holds a 51% controlling interest in AWE. Accordingly, the Corporation is required to consolidate the AWE venture, which has been aligned under the Corporation’s Space Systems business segment. The discussion of Space Systems operating results includes 100% of AWE’s sales and 51% of AWE’s operating profit since Aug. 24, 2016. Previously, the Corporation accounted for its investment in AWE using the equity method of accounting. Under the equity method, none of AWE’s sales and only 33% of AWE’s net earnings were included in operating profit of the Space Systems business segment.

* On Nov. 6, 2015, the Corporation completed the acquisition of Sikorsky, which was aligned under its RMS business segment. The discussion and presentation of the operating results of the RMS business segment include the operating results of Sikorsky since the Nov. 6, 2015 acquisition date.

Aeronautics 

Aeronautics’ net sales in the fourth quarter of 2016 increased $1.0bn, or 23 percent, compared to the same period in 2015. The increase was attributable to higher net sales of approximately $640m for the F-35 program due to increased volume on aircraft production and sustainment activities, partially offset by lower volume on development activities; about $160m for the F-16 program due to higher volume on aircraft modernization programs and increased aircraft deliveries (four aircraft delivered in the quarter ended Dec. 31, 2016 compared to two in the same period of 2015); about $100m for the C-5 program due to increased aircraft deliveries (three aircraft delivered in the quarter ended Dec. 31, 2016 compared to two in the same period of 2015) and increased sustainment activities; and about $100m for the C-130 program due to increased aircraft deliveries (eight aircraft delivered in the quarter ended Dec. 31, 2016 compared to seven in the same period of 2015) and increased sustainment activities.

Aeronautics’ operating profit in the fourth quarter of 2016 increased $104m, or 23 percent, compared to the same period in 2015. Operating profit increased about $80m for the F-35 program due to increased volume on aircraft production and sustainment activities and higher risk retirements; and about $15 m for the C-5 program due to higher risk retirements and increased aircraft deliveries. Adjustments not related to volume, including net profit booking rate adjustments, were about $50m higher in the fourth quarter of 2016 compared to the same period in 2015.

Aeronautics’ net sales in 2016 increased $2.2bn, or 14 percent, compared to 2015. The increase was attributable to higher net sales of about $1.7bn for the F-35 program due to increased volume on aircraft production and sustainment activities, partially offset by lower volume on development activities; and about $290m for C-130 program due to increased deliveries (24 aircraft delivered in the year ended Dec. 31, 2016 compared to 21 in the same period of 2015) and increased sustainment activities; and about $250m for the F-16 program primarily due to higher volume on aircraft modernization programs. The increases were partially offset by lower net sales of about $55m for the C-5 program due to decreased sustainment activities.

Aeronautics’ operating profit in 2016 increased $206m, or 12 percent, compared to 2015. Operating profit increased about $195m for the F-35 program due to increased volume on aircraft production and sustainment activities and higher risk retirements; and about $60m for aircraft support and maintenance programs due to higher risk retirements and increased volume. These increases were partially offset by lower operating profit of about $65m for the C-130 program due to contract mix and lower risk retirements. Adjustments not related to volume, including net profit booking rate adjustments, were about $20m higher in 2016 compared to 2015.

Missiles and Fire Control

MFC’s net sales in the fourth quarter of 2016 decreased $212m, or 11 percent, compared to the same period in 2015. The decrease was attributable to lower net sales of about $125m for air and missile defense programs due to lower deliveries and volume (primarily Patriot Advanced Capability (PAC-3) and Terminal High Altitude Area Defense (THAAD)); and about $65 m for fire control programs due to lower deliveries (primarily LANTIRN® and SNIPER®).

MFC’s operating profit in the fourth quarter of 2016 decreased $132m, or 34 percent, compared to the same period in 2015. Operating profit decreased about $110m for air and missile defense programs due to lower risk retirements (PAC-3 and THAAD) and lower deliveries and volume. Adjustments not related to volume, including net profit booking rate adjustments, were about $80m lower in the fourth quarter of 2016 compared to the same period in 2015.

MFC’s net sales in 2016 decreased $162m, or 2 percent, compared to 2015. The decrease was attributable to lower net sales of about $205m for air and missile defense programs due to decreased volume (primarily THAAD); and lower net sales of about $95m due to lower volume on various programs. These decreases were partially offset by a $75 m increase for tactical missiles programs due to increased deliveries (primarily Hellfire); and about $70m for fire control programs due to increased volume (Special Operations Forces Contractor Logistics Support Services).

MFC’s operating profit in 2016 decreased $264 m, or 21 percent, compared to 2015. Operating profit decreased about $145 m for air and missile defense programs due to lower risk retirements (PAC-3 and THAAD) and a reserve for a contractual matter; about $45 m for tactical missiles programs due to lower risk retirements (Javelin); and about $45 m for fire control programs due to lower risk retirements (Apache) and program mix. Adjustments not related to volume, including net profit booking rate adjustments and reserves, were about $225 m lower in 2016 compared to 2015.

Rotary and Mission Systems

RMS’ net sales in the fourth quarter of 2016 increased $1.0bn, or 37 percent, compared to the same period in 2015. The increase was primarily attributable to higher net sales of about $1.2bn from Sikorsky, which was acquired on Nov. 6, 2015. Net sales for 2015 include Sikorsky’s results subsequent to the acquisition date, net of certain revenue adjustments required to account for the acquisition of this business. This increase was partially offset by a decrease in net sales of about $90m for training and logistics programs due to decreased volume on various programs and the divestiture of our Lockheed Martin Commercial Flight Training (LMCFT) business which reported sales through the May 2, 2016 divestiture date.

RMS’ operating profit in the fourth quarter of 2016 increased $71m, or 45 percent, compared to the same period in 2015. Operating profit increased about $50m for our integrated warfare systems and sensors programs due to investments made in connection with a next generation radar technology program awarded during the quarter ended Dec. 31, 2015; and $35m for undersea systems programs primarily due to higher reserves for performance matters on an international program recorded during the quarter ended Dec. 31, 2015. Adjustments not related to volume, including net profit booking rate adjustments and reserves, were about $80m higher in the fourth quarter of 2016 compared to the same period in 2015.

RMS’ net sales in 2016 increased $4.4bn, or 48 percent, compared to 2015. The increase was primarily attributable to higher net sales of about $4.6bn from Sikorsky, which was acquired on Nov. 6, 2015. Net sales for 2015 include Sikorsky’s results subsequent to the acquisition date, net of certain revenue adjustments required to account for the acquisition of this business. This increase was partially offset by lower net sales of about $70 m for training and logistics programs due to the divestiture of our LMCFT business on May 2, 2016; and about $65m for ship and aviation systems programs due to decreased volume on various programs.

RMS’ operating profit in 2016 increased $62m, or 7 percent, compared to 2015. Operating profit increased about $85m for training and logistics programs due primarily to the divestiture of our LMCFT business which generated operating losses through its May 2, 2016 divestiture date; about $60m for our integrated warfare systems and sensors programs due to investments made in connection with a next generation radar technology program awarded during the year ended Dec. 31, 2015; and about $55m for undersea systems programs due primarily to higher reserves for performance matters on an international program in the year ended Dec. 31, 2015. These increases were partially offset by a decrease of $70m as a result of a higher operating loss from Sikorsky, inclusive of the unfavorable impacts of intangible asset amortization and other adjustments required to account for the acquisition of this business; about $30m for ship and aviation systems programs due primarily to performance on various programs; and about $25m for other matters. Adjustments not related to volume, including net profit booking rate adjustments and reserves, were about $155m higher in 2016 compared to 2015.

Space Systems

Space Systems’ net sales in the fourth quarter of 2016 increased $397m, or 17 percent, compared to the same period in 2015. The increase was attributable to net sales of about $310m from AWE following the consolidation of this business in the third quarter of 2016; and about $150m for commercial space transportation programs due to increased launch-related activities. These increases were partially offset by lower net sales of about $80m for the government satellite programs due to decreased volume (primarily Mobile User Objective Systems (MUOS) and Space Based Infrared Systems (SBIRS)).

Space Systems’ operating profit in the fourth quarter of 2016 decreased $33m, or 11 percent, compared to the same period in 2015. Operating profit decreased about $75m for government satellite programs due to lower risk retirements (primarily MUOS and SBIRS) and decreased volume, partially offset by about $25m of increased equity earnings from joint ventures (primarily ULA). Adjustments not related to volume, including net profit booking rate adjustments, were about $75m lower in the fourth quarter of 2016 compared to the same period in 2015.

Space Systems’ net sales in 2016 increased $304m, or 3 percent, compared to 2015. The increase was attributable to net sales of about $410m from AWE following the consolidation of this business in the third quarter of 2016; and about $150 m for commercial space transportation programs due to increased launch-related activities; and about $70m of higher net sales for various programs (primarily Fleet Ballistic Missiles) due to increased volume. These increases were partially offset by a decrease in net sales of about $340m for government satellite programs due to decreased volume (primarily SBIRS and MUOS) and the wind-down or completion of mission solutions programs.

Space Systems’ operating profit in 2016 increased $118m, or 10 percent, compared to 2015. The increase was primarily attributable to a non-cash, pre-tax gain of about $127m related to the consolidation of AWE; and about $80m of increased equity earnings from joint ventures (primarily ULA). These increases were partially offset by a decrease of about $105m for government satellite programs due to lower risk retirements (primarily SBIRS, MUOS and mission solutions programs) and decreased volume. Adjustments not related to volume, including net profit booking rate adjustments, were about $185m lower in 2016 compared to 2015.

Total equity earnings recognized by Space Systems (primarily ULA) represented about $85m, or 33 percent, and about $325m, or 25 percent, of this business segment’s operating profit during the quarter and year ended Dec. 31, 2016, compared to about $60m, or 21 percent, and about $245m, or 21 percent, during the quarter and year ended Dec. 31, 2015.

Unallocated items

Consistent with the manner in which the Corporation’s business segment operating performance is evaluated by senior management, certain items are excluded from the business segment results and are included in “Unallocated items.”

The operating results of the IS&GS business, which was divested on Aug. 16, 2016, have been reclassified as discontinued operations for all periods presented. Certain corporate overhead costs and certain defined benefit pension costs that were historically allocated to and included in the operating results of the IS&GS business have been reclassified into “Unallocated items” and included in the results of the Corporation’s continuing operations because the Corporation will continue to incur these costs subsequent to the divestiture of the IS&GS business.

Corporate overhead costs incurred by the Corporation and previously allocated to and included in the operating results of the IS&GS business were comprised of expenses related to senior management, legal, human resources, finance, accounting, treasury, tax, information technology, communications, ethics and compliance, corporate employee benefits, incentives and stock-based compensation, shared services processing and administration and depreciation for corporate fixed assets. The amount of corporate overhead costs previously included in the operating results of the IS&GS business that have been reclassified to and included in the results of the Corporation’s continuing operations were $82m in the year ended Dec. 31, 2016 and $32m and $165m in the quarter and year ended Dec. 31, 2015. These costs are included in “Other, net” within “Unallocated items.”

Prior to the divestiture of the IS&GS business, certain IS&GS salaried employees participated in various defined benefit pension and other post-employment benefit plans administered and sponsored by the Corporation. Pension costs related to benefits earned by these employees were historically allocated to and included in the results of operations of the IS&GS business. Subsequent to the divestiture, IS&GS salaried employees that transferred to Leidos will no longer earn additional benefits under the Corporation’s defined benefit pension and other post-employment benefit plans, but remain entitled to the benefits earned through the closing of the divestiture. The Corporation retained all obligations related to the benefits earned by the IS&GS salaried employees through the closing of the divestiture and the related assets of the plans. Therefore, the Corporation will continue to incur the non-service portion of pension costs (interest cost, actuarial gains and losses and expected return on plan assets) for IS&GS salaried employees that transferred to Leidos.

Accordingly, these costs have been reclassified to and included in the results of the Corporation’s continuing operations. The non-service portion of pension costs previously included in the operating results of the IS&GS business that have been reclassified to and included in the results of the Corporation’s continuing operations were $54m in the year ended Dec. 31, 2016 and $18m and $71m in the quarter and year ended Dec. 31, 2015. These costs are included in the “FAS/CAS pension adjustment” within “Unallocated items.” The service portion of pension costs related to IS&GS salaried employees that transferred to Leidos remains in the operating results of the IS&GS business classified as discontinued operations because such costs will no longer be incurred by the Corporation subsequent to the divestiture of IS&GS.

The Corporation allocates certain corporate overhead costs and defined benefit pension costs to its business segments because under U.S. Government contracting regulations such costs are allowable in establishing prices for contracts with the U.S. Government. Although the corporate overhead costs and defined benefit pension costs that were historically allocated to and included in the operating results of the IS&GS business have been reclassified to and included in the results of the Corporation’s continuing operations for financial reporting purposes, the Corporation will allocate similar costs incurred in future periods to its remaining business segments and expects to recover a substantial amount of these costs through the pricing of its products and services to the U.S. Government and other customers in future periods.

Significant severance charges related to the IS&GS business were historically recorded at the Lockheed Martin corporate office. These charges have been reclassified into the operating results of the IS&GS business classified as discontinued operations and excluded from the results of the Corporation’s continuing operations. The amount of severance charges reclassified were $19m and $20m in the years ended Dec. 31, 2016 and 2015, respectively.

Income Taxes

The Corporation’s effective income tax rate from continuing operations was 23.6 percent and 23.2 percent in the quarter and year ended Dec. 31, 2016, compared to 16.8 percent and 27.3 percent in the quarter and year ended Dec. 31, 2015. The rates for both periods benefited from tax deductions for U.S. manufacturing activities and for dividends paid to the Corporation’s defined contribution plans with an employee stock ownership plan feature. The rate in the year ended Dec. 31, 2016 benefited from the nontaxable gain recorded in connection with the increase in AWE ownership. The rate in the quarter and year ended Dec. 31, 2016 also benefited from the R&D tax credit. As a result of legislation enacted in the fourth quarter of 2015, the R&D tax credit was permanently extended and reinstated, retroactive to the beginning of 2015. Accordingly, the effective income tax rates for both the quarter and year ended Dec. 31, 2015 reflect the credit for all of 2015, which reduced the Corporation’s effective tax rates by 7.1 percentage points for the fourth quarter and 1.6 percentage points for the full year in 2015.

In addition, the rate in the quarter and year ended Dec. 31, 2016 benefited from the additional tax benefits related to equity awards, which are now recorded as income tax benefit or expense in earnings effective with the adoption of an accounting standard update in the second quarter of 2016. As a result, the Corporation recognized additional income tax benefits of $15m and $152m during the quarter and year ended Dec. 31, 2016.

As a result of a decision in the fourth quarter of 2015 to divest LMCFT in 2016, the Corporation recorded an asset impairment charge of about $90m. This charge was partially offset by a net deferred tax benefit of about $80m. The net impact of the resulting tax benefit reduced the effective income tax rates by 5.2 percentage points for the fourth quarter and 1.2 percentage points for the full year in 2015.

Northrop Grumman

Northrop Grumman issues downbeat earnings outlook. Higher sales in its aerospace and mission systems units helped Northrop Grumman drive fourth quarter sales but the US defence contractor issued a downbeat earnings outlook for the year. The Virginia-based company said profits rose to $525m or $2.96 a share, compared with $459m or $2.49 a share in the year ago period. Sales climbed more than 12 per cent to $6.4bn driven by a near 20 per cent year-on-year jump in aerospace system sales and 9 per cent growth in missions system sales — the company’s largest divisions.

Analysts had forecast earnings of $2.48 a share, on sales of $5.9bn.

However, the company said it expects to earn between $11.30 a share to $11.60 a share in fiscal 2017, below the $12.25 a share that analysts polled by Bloomberg had forecast.

“For 2017, our outlook calls for continued investment to drive growth and performance, as we strengthen the foundation for long-term profitable growth,” Wes Bush, chief executive, said.

Northrop, which in 2015 beat Boeing and Lockheed Martin for a $80bn contract to build the US Air Force’s new stealth bombers, posted its results at a time when President Donald Trump has criticised the US government for wasteful spending on defence programmes but at a time when he has also promised to build up the American military. Northrop shares advanced more than 23 per cent last year and are down less than 1 per cent so far this year. (Source: FT.com)

Northrop Grumman Corporation (NYSE: NOC) reported fourth quarter 2016 sales increased 12 percent to $6.4bn from $5.7bn in the fourth quarter of 2015. Fourth quarter 2016 net earnings increased 14 percent to $525m, or $2.96 per diluted share, from $459m, or $2.49 per diluted share, in the fourth quarter of 2015. Fourth quarter 2016 diluted earnings per share are based on 177.6m weighted average diluted shares outstanding compared with 184.2m in the prior year period, a 4 percent decrease. The company repurchased 1.7m shares of its common stock in the fourth quarter of 2016. For 2016, net earnings increased 11 percent to $2.2bn, or $12.19 per diluted share, from $2.0bn, or $10.39 per diluted share in 2015. Diluted earnings per share for 2016 increased 17 percent and are based on 180.5m weighted average shares outstanding compared with 191.6m shares in 2015. During 2016, the company repurchased 7.3m shares of its common stock for $1.5bn. As of Dec. 31, 2016, $2.7bn remained on the company’s share repurchase authorization.

“Congratulations to our entire team on a strong fourth quarter and excellent full-year 2016 results that included higher sales accompanied by strong performance and cash generation. For 2017, our outlook calls for continued investment to drive growth and performance, as we strengthen the foundation for longterm profitable growth,” said Wes Bush, chairman, chief executive officer and president.

Fourth quarter operating income increased 21 percent and operating margin rate increased 90 basis points to 13.0 percent, which includes higher segment operating income and a $92m decline in unallocated corporate expense, principally due to lower deferred state tax expense than in the prior year period. Last year’s fourth quarter deferred state tax expense was $76m higher principally due to an accounting methods change adopted in that period. Fourth quarter 2016 segment operating income increased 8 percent to $772m, due to higher sales volume, and segment operating margin rate decreased 50 basis points to 12.1 percent. For 2016, operating income increased 4 percent to $3.2bn with an operating margin rate of 13.0 percent. The increase in 2016 operating income is due to lower unallocated corporate expense and higher sales volume, partially offset by lower net FAS/CAS pension adjustment.

For the fourth quarter of 2016, federal and foreign income tax expense increased to $223m from $162m in the prior year period; the company’s effective tax rate increased to 29.8 percent from 26.1 percent. For 2016, federal and foreign income tax expense declined to $723m from $800m in 2015, and the company’s effective tax rate declined to 24.7 percent from 28.7 percent. The company’s lower effective tax rate for 2016 is principally due to $85m of excess tax benefits related to adoption of an accounting standards update for stock-based compensation, a $40 m benefit recognized in connection with the resolution of the IRS examination of the company’s 2007-2011 tax returns, and a $33 m benefit associated with the repatriation of earnings from certain foreign subsidiaries.

Total backlog as of Dec. 31, 2016, was $45.3bn compared with $35.9bn as of Dec. 31, 2015.

Fourth quarter 2016 cash provided by operating activities totaled $1.5bn compared to $1.6bn provided in the fourth quarter of 2015. Fourth quarter 2016 free cash flow totaled $1.2bn after capital expenditures of $312m. For the full year, cash provided by operations improved to $2.8bn from $2.2bn in 2015, and free cash flow improved to $1.9bn from $1.7bn in 2015. Higher cash provided by operations and free cash flow are due to prior year voluntary pension contributions, changes in trade working capital and higher net earnings than in 2015, partially offset by an increase in net income tax payments.

Last year’s cash results included a $500m pre-tax voluntary pension contribution, which reduced cash results by $325m on an after-tax basis. Year-to-date changes in cash and cash equivalents include the following for cash from operating, investing and financing activities through Dec. 31, 2016: Operating • $2.8bn provided by operations Investing • $920m for capital expenditures Financing • $1.5bn for repurchase of common stock • $749m net proceeds from issuance of long-term debt • $640m for dividends • $321m for repayment of long-term debt

Effective Jan. 1, 2016, the company realigned from four to three segments: Aerospace Systems, Mission Systems and Technology Services.

Fourth quarter 2016 segment operating income increased 8 percent due to higher operating income at Aerospace Systems and Mission Systems. For 2016, segment operating income increased 1 percent due to higher operating income at Aerospace Systems and Mission Systems. Fourth quarter 2016 and full year 2016 segment operating margin rate declined to 12.1 percent and 12.0 percent, respectively, primarily due to changes in contract mix and timing of risk retirements in Aerospace Systems.

Aerospace Systems

Aerospace Systems fourth quarter 2016 sales increased 20 percent, and 2016 sales increased 9 percent. Higher sales in both periods are principally due to higher volume for Manned Aircraft and Autonomous Systems programs. Manned Aircraft sales rose due to higher restricted and E-2D volume, as well as increased F-35 deliveries, partially offset by lower volume on the B-2 program. For 2016, the company also had lower F/A-18 deliveries than in 2015. Autonomous Systems sales for both periods rose due to higher volume on the Triton and Global Hawk programs, partially offset by the ramp-down of the NATO Alliance Ground Surveillance (AGS) program. Space sales were also higher for both periods due to higher restricted volume, which largely offset lower volume for the Advanced Extremely High Frequency and James Webb Space Telescope programs. Aerospace Systems fourth quarter 2016 operating income increased 18 percent, and 2016 operating income increased 3 percent. Operating margin rate for both periods was 11.4 percent. Income for both periods includes a $45m gain on a property sale and higher operating income and margin rate for Autonomous Systems programs, partially offset by lower operating income and margin rate for Manned Aircraft due to changes in contract mix and the timing of risk retirements.

Mission Systems

Mission Systems fourth quarter 2016 sales increased 9 percent due to higher volume across all reporting areas. Higher Sensors and Processing sales are primarily due to higher volume on airborne C4ISR programs, partially offset by lower volume for land and avionics C4ISR. Higher Advanced Capabilities sales include higher volume on navigation and maritime programs and missile defense and protective systems programs. Higher Cyber and ISR sales are due to increased volume for restricted and space programs. For 2016, sales increased 2 percent due to higher volume on Sensors and Processing and Advanced Capabilities programs, partially offset by lower volume on Cyber and ISR programs. Sensors and Processing sales increased primarily due to higher volume on communications programs, including ramp up on the JCREW program, increased restricted volume, and ramp up on the G/ATOR program, partially offset by lower volume on international programs. Higher Advanced Capabilities sales include increased volume for restricted programs and maritime systems and marine systems programs. Lower Cyber and ISR sales reflect lower volume on space programs. Mission Systems fourth quarter 2016 operating income increased 7 percent, and operating margin rate decreased to 13.7 percent.

Fourth quarter operating income reflects higher sales volume and a $21m gain on the sale of a commercial cyber business, partially offset by a $49m forward loss provision on an Advanced Capabilities program, principally due to cost growth for changes impacting fixed price options, which may not be fully recovered through additional contract value. For 2016, operating income increased 2 percent, consistent with higher sales volume, and operating margin rate was unchanged at 13.2 percent.

Technology Services

Technology Services fourth quarter 2016 sales increased 8 percent due to higher sales for all reporting areas. For 2016, sales were comparable to the prior year and include higher volume for Systems and Modernization and Services programs, partially offset by lower volume for Advanced Defense Services and Global Logistics and Modernization programs. Technology Services fourth quarter 2016 operating income was unchanged from the prior year period, and operating margin rate declined 90 basis points to 10.3 percent. For 2016, operating income and operating margin rate were comparable to the prior year period.

Guidance

The company’s 2017 financial guidance assumes no disruption to or cancellation of any of our significant programs and no disruption to or shutdown of government operations. Guidance for 2017 also assumes adequate appropriations and funding for the company’s programs for the remainder of the year.

Raytheon

26 Jan 17. Raytheon Reports Strong Fourth Quarter and Full-Year 2016 Results. Raytheon’s sales fall 1.4 pct, shares drop. Raytheon Co reported a 1.4 percent fall in quarterly revenue, hurt by slower sales in its units that make missile systems and the tracking and navigation sensors used in aircraft and missiles. The maker of Patriot missiles forecast 2017 sales of $24.8bn-$25.3bn, below analysts’ average estimate of $25.55bn, according to Thomson Reuters I/B/E/S. Shares of the Waltham, Mass.-based company were down 3 percent to $142.50 following the results announcement.

The company said sales in its missile systems unit, which makes Paveway smart bombs and medium-range air-to-air missiles, rose 1 percent to $1.90bn in the fourth quarter ended Dec. 31, the slowest rise in six quarters. The missile systems unit, which is Raytheon’s biggest business, accounted for 29.4 percent of its 2016 revenue.

During a call with analysts, Chief Executive Tom Kennedy said the Trump administration’s pursuit of ISIS could boost future precision missile sales. Sales in Raytheon’s space and airborne systems business, its second-biggest unit by revenue, recorded the slowest growth in four quarters, with a 2 percent rise. The unit contributed 25.6 percent to its full-year sales. The company’s total sales fell to $6.24bn from $6.33bn a year earlier.

Raytheon said there were four fewer work days in the fourth quarter, compared with the same period a year earlier, reducing its sales by about $100 m per day.

Income from continuing operations attributable to Raytheon shareholders fell 2.5 percent to $544 m, or $1.84 per share, in the fourth quarter from $558 m, or $1.85 per share, a year earlier.

Raytheon said its tax-related earnings were reduced by 4 cents per share as it made a $500 m pretax discretionary pension plan contribution in the quarter. The company, which adopted a new revenue recognition standard from Jan. 1, said it expected earnings from continuing operations of $7.20-$7.35 per share for 2017. Raytheon said the impact of adopting the new accounting standard on the company’s 2015 and 2016 net sales and operating income was not material. Bookings fell 3.6 percent to $7.58bn in the fourth quarter, but were up 10.3 percent to a record $27.84bn for the full year. Bookings is a forward-looking metric that measures the value of firm orders won by Raytheon. Raytheon’s shares had risen 23.9 percent in the past 12 months up to Wednesday’s close of $146.87, compared with a 29.7 percent increase in the Dow Jones U.S. Aerospace & Defense index. (Source: Reuters)

Raytheon Company (NYSE: RTN) today announced net sales for the fourth quarter 2016 of $6.2bn compared to $6.3bn in the fourth quarter 20151. Fourth quarter 2016 EPS from continuing operations was $1.84 compared to $1.85 in the fourth quarter 2015. Fourth quarter 2016 EPS from continuing operations included a favorable FAS/CAS Adjustment of $0.26 compared to a favorable FAS/CAS Adjustment of $0.10 in the fourth quarter 2015. The Company made a pretax discretionary pension plan contribution in both the fourth quarter 2016 and the fourth quarter 2015, discussed further below, which had an unfavorable tax-related EPS impact of $0.04 and $0.02, respectively. The 2016 discretionary pension plan contribution was not included in the Company’s prior guidance. Net sales in 2016 were $24.1bn, up 3.5 percent compared to $23.2bn in 2015. Full-year 2016 EPS from continuing operations was $7.44 compared to $6.75 for the full-year 2015.

“I’m pleased with the Company’s operating performance in 2016. We delivered solid sales and earnings growth by executing our strategy and investing in advanced capabilities that align with our global customers’ evolving requirements,” said Thomas A. Kennedy, Raytheon Chairman and CEO. “Strong domestic and international bookings throughout the year drove an increase in our backlog, which positions us well for growth in the future.”

The Company generated strong operating cash flow for both the fourth quarter and full-year. Operating cash flow from continuing operations for the fourth quarter 2016 was $1.1bn compared to $0.8bn for the fourth quarter 2015. Fourth quarter 2016 operating cash flow from continuing operations included a $500 m pretax 2 discretionary cash contribution to the Company’s pension plans compared to $200m in the fourth quarter 2015.

For the full-year 2016 and 2015, the Company generated $2.9bn and $2.3bn of operating cash flow from continuing operations, respectively.

Income from Continuing Operations attributable to Raytheon Company and EPS from Continuing Operations included the favorable $181m pretax ($143m after-tax) and $0.47 impact, respectively, for the first quarter 2015 eBorders settlement. The Company had bookings of $7.6bn in the fourth quarter 2016, resulting in a book-to-bill ratio of 1.21. Fourth quarter 2015 bookings were $7.9bn. Full-year 2016 bookings were a record $27.8bn, resulting in a book-to-bill ratio of 1.16. Full-year 2015 bookings were $25.2 bn.

Backlog at the end of 2016 was $36.9bn, an increase of approximately $2.2bn or 6 percent compared to the end of 2015. Funded backlog was $25.6bn, an increase of approximately $0.5bn compared to the end of 2015. In the fourth quarter 2016, the Company repurchased 0.7m shares of common stock for $100m. For the full-year 2016, the Company repurchased 6.9m shares of common stock for $900m.

Outlook The Company has provided its financial outlook for 2017. Charts containing additional information on the Effective January 1, 2017, the Company adopted the new revenue recognition standard utilizing the full retrospective transition method. Under this method, the standard was applied to each prior reporting period 3 presented and the cumulative effect of applying the standard was recognized at the earliest period shown. The impact of adopting the new standard on the Company’s 2015 and 2016 net sales and operating income was not material. The 2016 net sales, effective tax rate and EPS from continuing operations in the financial outlook table below have been recast to reflect this change.

The Company’s reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Forcepoint.

Integrated Defense Systems (IDS)

Integrated Defense Systems (IDS) had fourth quarter 2016 net sales of $1,406m compared to $1,558m in the fourth quarter 2015. IDS had full-year 2016 net sales of $5,476m compared to $5,847m in 2015. The change in net sales for both the quarter and the full-year was primarily driven by lower net sales on an international communications program and on the Air Warfare Destroyer (AWD) program. In addition, the full-year was also driven by lower net sales on various missile defense radar production programs. 4 IDS recorded $219m of operating income in the fourth quarter 2016 compared to $281m in the fourth quarter 2015. The change in operating income for the quarter was primarily driven by a favorable contract modification on the AWD program in the fourth quarter 2015 and lower volume in the fourth quarter 2016. IDS recorded $950m of operating income in 2016 compared to $864m in 2015. Operating income for the full-year 2016 included the $158m tax-free gain from the second quarter TRS transaction. During the quarter, IDS booked approximately $1.0bn to provide advanced Patriot air and missile defense capabilities for multiple international customers. IDS booked $189m to provide Consolidated Contractor Logistics Support (CCLS) and $144m on the AN/TPY-2 radar sustainment program for the Missile Defense Agency (MDA). IDS also booked $110m on the Air and Missile Defense Radar (AMDR) program for the U.S. Navy.

Intelligence, Information and Services (IIS)

Intelligence, Information and Services (IIS) had fourth quarter 2016 net sales of $1,518m compared to $1,537m in the fourth quarter 2015. IIS had full-year 2016 net sales of $6,194m compared to $6,111m in 2015. The change in net sales for the full-year was primarily driven by higher net sales on cybersecurity and special mission programs. IIS recorded $121m of operating income in the fourth quarter 2016 compared to $111m in the fourth quarter 2015. The change in operating income for the quarter was primarily driven by higher net program efficiencies in the fourth quarter 2016. IIS recorded $467 m of operating income in 2016 compared to $646m in 2015. Operating income for the full-year 2015 included the favorable $181m impact for the first quarter eBorders settlement. During the quarter, IIS booked $90m on domestic and foreign training programs in support of Warfighter FOCUS activities. IIS also booked $448m on a number of classified contracts.

Missile Systems (MS)

MS had full-year 2016 net sales of $7,071m compared to $6,556m in 2015. The increase in net sales for the full-year was primarily driven by higher net sales on the Paveway™ program. 5 MS recorded $260m of operating income in the fourth quarter 2016 compared to $258m in the fourth quarter 2015. MS recorded $916m of operating income in 2016 compared to $868m in 2015. The increase in operating income for the full-year was primarily due to higher volume in 2016. During the quarter, MS booked $362m for Paveway™, $309m for Tomahawk, $259m for the Rolling Airframe Missile (RAM™) program, $208m for the Stinger® weapon system, $193m for Evolved Seasparrow Missiles (ESSM®), $141m for Standard Missile-3 (SM-3®), $114m for Phalanx® close-in weapon systems, $76 m for Miniature Air Launched Decoy (MALD®), and $76m for the David’s Sling weapon system’s Stunner Missile. MS also booked $175m for the Hypersonic Air-breathing Weapon Concept (HAWC) program for the Defense Advanced Research Projects Agency (DARPA) and the U.S. Air Force.

Space and Airborne Systems (SAS)

Space and Airborne Systems (SAS) had fourth quarter 2016 net sales of $1,612m compared to $1,576m in the fourth quarter 2015. The increase in net sales for the quarter was primarily driven by higher net sales on an electronic warfare systems program and an international classified program. SAS had full-year 2016 net sales of $6,199m compared to $5,796m in 2015. The increase in net sales for the full-year was primarily due to higher net sales on classified programs. SAS recorded $231m of operating income in the fourth quarter 2016 compared to $239m in the fourth quarter 2015. SAS recorded $817m of operating income in 2016 compared to $829 m in 2015. The change in operating income for the quarter and the full-year was primarily driven by a change in program mix. During the quarter, SAS booked $610m for the production of Active Electronically Scanned Array (AESA) radars, $81m to provide radar components and $75 m on a cryptographic modernization program, all for both U.S. and international customers. SAS also booked $467m on a number of classified contracts.

Forcepoint

Forcepoint had fourth quarter 2016 net sales of $143m, up 8 percent compared to $133m in the fourth quarter 2015. The increase in net sales for the quarter was primarily driven by the acquisition of Stonesoft in the first quarter of 2016. Forcepoint recorded $11m of operating income in both the fourth quarter 2016 and in the fourth quarter 2015. 6 Forcepoint had full-year 2016 net sales of $566m compared to $328m in 2015. Forcepoint recorded $51m of operating income in 2016 compared to $30 m in 2015. The increase in both net sales and operating income for the full-year was primarily due to the acquisition of Websense in the second quarter of 2015 and Stonesoft in the first quarter of 2016.

Textron

25 Jan 17. Textron Reports Fourth Quarter 2016 Results; Enters Agreement to Acquire Arctic Cat Inc.; Announces 2017 Financial Outlook. Textron Inc. (TXT) today reported fourth quarter 2016 income from continuing operations of $0.78 per share compared to $0.81 per share in the fourth quarter of 2015. During this year’s fourth quarter, the company recorded an $8m pre-tax restructuring charge ($0.02 per share, after-tax). Excluding this item, adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $0.80 per share for the fourth quarter of 2016.

Revenues in the quarter were $3.8bn, down 2.5 percent from the fourth quarter of 2015. Textron segment profit in the quarter was $391m, up $13m from the fourth quarter of 2015.

“Overall, revenues were down in the quarter but we were encouraged by increasing demand at Industrial and strong operating performance at Bell,” said Textron Chairman and CEO Scott C. Donnelly. “We also completed the first flight of our production Scorpion jet as we continued to ramp investment in this program to position us to compete for opportunities in 2017.”

Full-year income from continuing operations was $3.09 per share compared to $2.50 per share last year. Full-year adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $2.62 per share, compared to $2.50 in 2015.

Cash Flow

Net cash provided by operating activities of continuing operations of the manufacturing group for the full year was $988m, compared to $1,038m last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $573m compared to $631m last year.

Acquisition

Today, Textron announced that it has reached a definitive agreement to acquire Arctic Cat Inc. (ACAT) in a cash transaction valued at approximately $247m, plus the assumption of existing debt. Arctic Cat is a leader in the recreational vehicle industry. The company manufactures and markets all-terrain vehicles (ATVs), side-by-sides and snowmobiles, in addition to related parts, garments and accessories under the Arctic Cat® and Motorfist® brand names.

“Arctic Cat is a superb strategic fit for Textron,” said Donnelly. “With our recent product introductions in the outdoor recreational vehicle market under the Stampede name, we believe Arctic Cat, one of the most recognized brands in the industry, provides an excellent platform to expand our portfolio, increase our distribution and create growth within our Specialized Vehicles business.”

Textron has agreed to make a cash tender offer for all outstanding shares of Arctic Cat common stock at a price of $18.50 per share. The tender offer is expected to commence no later than February 7, 2017. The completion of the acquisition is subject to customary conditions and regulatory approvals.

Share Repurchase Plan

On January 24, 2017, Textron’s Board of Directors approved a new authorization for the repurchase of up to 25m shares, under which the company intends to purchase shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes.

Outlook

Textron is forecasting 2017 revenues of approximately $14.3bn, up four percent. Textron expects full-year 2017 GAAP earnings per share from continuing operations will be in the range of $2.40 to $2.65, or $2.50 to $2.70 on an adjusted basis (non-GAAP), which is reconciled to GAAP in an attachment to this release. The company is estimating net cash provided by operating activities of continuing operations of the manufacturing group will be between $1,035m and $1,135m and manufacturing cash flow before pension contributions (the non-GAAP measure) will be between $650 and $750m with planned pension contributions of about $55m. Textron intends to update its 2017 outlook to include Arctic Cat following the completion of the transaction.

Donnelly continued, “Our outlook reflects the continuation of our strategy around organic growth through new product investments amid challenging end markets. As we transition our product portfolios to comprise a greater percentage of these new offerings, we’ll expect improvement in our growth rate and margins over the longer term.”

UTC

25 Jan 17. UTC Reports Full Year 2016 Results, Affirms 2017 Outlook.

* 2016 GAAP EPS of $6.13, up 35 percent versus prior year

* 2016 Adjusted EPS of $6.61, up 5 percent versus prior year

* 2016 Sales of $57.2bn, up 2 percent versus the prior year including 2 percent organic sales growth

* Affirms 2017 expectations for Adjusted EPS of $6.30 to $6.60* on sales of $57.5bn to $59bn

United Technologies posts in line results as climate-control sales rise. United Technologies, the maker of aerospace and building systems, delivered results that matched analysts’ estimates in the latest quarter, helped along by higher sales in its climate, controls and security unit. The Connecticut-based company said profits plunged to $1bn in the three months ended in December, from $3.3bn over the same period a year ago. That translated to earnings of $1.26 a share, compared with a loss of 30 cents a share in the year ago period. However, it still missed analysts estimates for earnings of $1.35 a share. Adjusting for one-time items, earnings per share rose 2 per cent from a year ago to $1.56 a share in line with estimates. Sales increased by 3 per cent to $14.7bn, also in line with estimates. New equipment orders at Otis climbed three per cent from the prior year and were flat in China, where the company has seen recently seen soft demand. Sales in the unit were down modestly to $3.06bn, from $3.09bn in the prior year quarter. Net sales rose 4 per cent in its aerospace business and about three per cent in its climate-control business.

The company reiterated its projection for earnings to decline next year in the range of $6.30 to $6.60 a share, down from its 2016 earnings of $6.61 a share. It also reaffirmed its forecast of organic sales growth in the range of two to four per cent and sales in the range of $57.5bn to $59bn. Carrier, a unit of United Technologies was strong-armed by President Donald Trump into abandoning plants to shutter an Indiana plant and move jobs to Mexico as part of his campaign pledge to keep manufacturing jobs in America. Carrier had said at the time that “incentives offered by state” were crucial to the deal. The company’s results have been previously been impacted by soft demand for its Otis elevators and delays and technical issues that have hindered production at Pratt & Whitney, United’s unit that produces engines for big aircrafts. United Technology shares climbed 14 per cent last year and are up nearly two per cent so far this year. (Source: FT.com)

United Technologies Corp. (NYSE: UTX) today reported fourth quarter and full year 2016 results.  All results in this release reflect continuing operations unless otherwise noted.

“In 2016, UTC delivered solid financial results with adjusted earnings just above the top end of our expectations,” said UTC Chairman and Chief Executive Officer Gregory Hayes. “UTC also realized significant operational achievements. Our aerospace businesses supported the entry into service of the A320neo and CSeries programs, our Climate, Controls & Security business introduced over 100 new products to enhance future growth, and Otis increased its global segment share for new equipment orders.”

Hayes continued, “We remain confident in the 2017 expectations we laid out in December. Despite an uncertain global macro environment, our growing aerospace backlog and strategic investments in the commercial businesses position us well to generate higher organic growth in 2017, and we remain on track to our 2020 targets,” Hayes added. “UTC remains focused on innovation for growth, execution, structural cost reduction, and disciplined capital allocation.”

Full year 2016 GAAP EPS of $6.13 was up 35 percent versus the prior year. 2016 results included $0.48 of net restructuring and other significant items, as compared with $1.77 in 2015. Adjusted EPS of $6.61 increased 5 percent year over year.

Full year sales of $57.2bn increased by 2 percent, as 2 points of organic sales growth and 1 point of net acquisitions growth were partially offset by 1 point of adverse foreign exchange.  Net income for the year was $5.1bn, up 27 percent versus the prior year. Cash flow from operations for the year was $6.4bn (127 percent of net income attributable to common shareholders) and capital expenditures were $1.7bn. Free cash flow of $4.7bn in the year was 93 percent of net income attributable to common shareowners.

Fourth quarter sales of $14.7bn were up 3 percent over the prior year. GAAP EPS was $1.26 (up from ($0.30) in the fourth quarter of 2015) and included 30 cents of net restructuring and other significant items. Adjusted EPS of $1.56 was up 2 percent versus the prior year.

In the fourth quarter, Otis new equipment orders increased 3 percent versus the prior year at constant currency, including China where new equipment orders were flat.  Equipment orders at UTC Climate, Controls & Security increased by 2 percent.  Commercial aftermarket sales were down 6 percent at Pratt & Whitney, and were up 3 percent at UTC Aerospace Systems.

UTC affirms its 2017 outlook and anticipates:

* Adjusted EPS of $6.30 to $6.60*;

* Total sales of $57.5 to $59bn, with year over year growth of 1 to 3 percent including organic sales growth of 2 to 4 percent*;

* Free cash flow in the range of 90 to 100 percent* of net income attributable to common shareowners;

* Share repurchases of $3.5bn in 2017; and

* A $1bn to $2bn placeholder for acquisitions.

*Note: When we provide expectations for adjusted EPS, organic sales and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort.

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