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Space Operations Summit, 28-30 May 2019, Kensington UK

Strong Showing By US Majors, Boeing Stalls on 737 MAX Production Drop By Julian Nettlefold

The US Majors continued to display resilient growth in earnings and increased order books with a strong showing in home and overseas sales. Boeing was dragged down by the 737 MAX production drop with a further sum to be offset when the scale of the problem is known. The company also suspended future guidance given the lack of a firm re-entry of service date for the 737 MAX.

Boeing

General Dynamics

Honeywell

Lockheed Martin

Northrop Grumman

Boeing Reports First-Quarter Results

  • Engaging global regulators and customers on safe return to service of the 737 MAX
  • Revenue of $22.9 bn reflecting 149 commercial deliveries and higher defense and services volume
  • GAAP EPS of $3.75 and core EPS (non-GAAP)* of $3.16
  • Operating cash flow of $2.8bn; paid $1.2bn of dividends
  • Total backlog of $487bn, including more than 5,600 commercial airplanes
  • Cash and marketable securities of $7.7bn provide strong liquidity
  • Previously issued 2019 guidance does not reflect 737 MAX impacts; new guidance to be issued at a future date

24 Apr 19. The Boeing Company [NYSE: BA] reported first-quarter revenue of $22.9bn, GAAP earnings per share of $3.75 and core earnings per share (non-GAAP)* of $3.16, reflecting lower 737 deliveries partially offset by higher defense and services volume. Boeing generated operating cash flow of $2.8bn and paid $1.2bn of dividends.

The previously issued 2019 financial guidance does not reflect 737 MAX impacts. Due to the uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet, new guidance will be issued at a future date. Boeing is making steady progress on the path to final certification for a software update for the 737 MAX, with over 135 test and production flights of the software update complete. The company continues to work closely with global regulators and our airline partners to comprehensively test the software and finalize a robust package of training and educational resources.

“Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public,” said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg. “As we work through this challenging time for our customers, stakeholders and the company, our attention remains on driving excellence in quality and performance and running a healthy sustained growth business built on strong, long-term fundamentals.”

The quarter’s operating performance was highlighted by key defense wins, strong commercial widebody performance and orders, continued robust services growth, and receiving Embraer shareholder approval for the proposed strategic partnership.

Operating cash flow was $2.8bn in the quarter, primarily reflecting lower 737 deliveries as well as timing of receipts and expenditures. During the quarter, the company paid $1.2bn in dividends, reflecting a 20 percent increase in dividends per share compared to the same period of the prior year. The company repurchased 6.1 m shares for $2.3bn in the quarter, all of which occurred prior to mid-March.

Cash and investments in marketable securities totaled $7.7bn, compared to $8.6bn at the beginning of the quarter. Debt was $14.7bn, up from $13.8bn at the beginning of the quarter primarily due to the issuance of new debt.

Total company backlog at quarter-end remained robust at $487bn.

Segment Results

Commercial Airplanes

Commercial Airplanes first-quarter revenue was $11.8bn reflecting lower 737 deliveries partially offset by favorable mix . First-quarter operating margin was 9.9 percent reflecting lower 737 deliveries partially offset by a higher margin on the 787 program. The reported margin also reflects increased costs associated with the recent 737 production rate adjustment.

During the quarter, Commercial Airplanes delivered 149 airplanes and the production rate for the 787 increased to 14 airplanes per month. Commercial Airplanes captured several widebody orders during the quarter, including orders for 18 777X airplanes for British Airways parent company IAG, 20 787 airplanes for Lufthansa, and 10 787 airplanes for Bamboo Airways. The first 777X flight test airplane rolled out of the factory, and the program remains on track for flight testing this year and first delivery in 2020.

Commercial Airplanes backlog remains healthy with over 5,600 airplanes valued at $399bn.

Defense, Space & Security

Defense, Space & Security first-quarter revenue increased to $6.6 bn primarily driven by higher volume across satellites, weapons and surveillance aircraft partially offset by lower C-17 volume. First-quarter operating margin increased to 12.8 percent reflecting a gain on sale of property partially offset by unfavorable mix.

During the quarter, Defense, Space & Security was awarded a multi-year contract for 78 F/A-18 Super Hornets for the U.S. Navy as well as contracts for 5 Extra Large Unmanned Undersea Vehicles for the U.S. Navy, 5 E-7 AEW&C aircraft for the U.K. Royal Air Force, and 19 P-8 Poseidon aircraft for the U.S. Navy, Royal Norwegian Navy and U.K. Royal Navy. Key milestones achieved during the quarter included completion of the first Ground-based Midcourse Defense test with two interceptors, successful environmental testing of the Commercial Crew spacecraft, and the first flight of the SB>1 DEFIANT™ helicopter. Defense, Space & Security also delivered the first 7 KC-46 Tankers to the U.S. Air Force.

Defense, Space & Security booked orders valued at $12bn during the quarter and backlog grew to $67bn, of which 31% percent represents orders from customers outside the U.S.

Global Services

Global Services first-quarter revenue increased to $4.6bn, primarily driven by higher volume across the portfolio including the acquisition of KLX. First-quarter operating margin was 14.1 percent reflecting mix of products and services and less favorable performance.

During the quarter, Global Services was awarded contracts for Performance Based Logistics for V-22 for the U.S. Navy and P-8A training for the U.K. Royal Air Force. Global Services captured an order for 10 737-800 converted freighters for GECAS, secured an agreement to optimize crew operations for Royal Air Maroc, and expanded global distribution of hardware and chemical products to Joramco. In addition, Global Services completed the acquisition of ForeFlight, a leading provider of innovative mobile and web-based aviation applications.

Additional Financial Information

At quarter-end, Boeing Capital’s net portfolio balance was $2.5bn. Revenue in other unallocated items and eliminations decreased primarily due to the timing of eliminations for intercompany aircraft deliveries. The change in earnings from other unallocated items and eliminations is primarily due to a customer financing impairment, higher deferred compensation expense and increased enterprise research and development investment. The effective tax rate for the first quarter decreased from the same period in the prior year primarily due to a higher foreign-derived intangible income benefit and higher excess tax benefits related to share-based payments.

Outlook

The previously issued 2019 financial guidance does not reflect 737 MAX impacts. Due to the uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet, new guidance will be issued at a future date.

General Dynamics

 

 

 

 

 

24 Apr 19. General Dynamics (NYSE: GD) today reported first-quarter 2019 revenue of $9.3bn, up 22.9 percent year-over-year, with net earnings of $745m. Diluted earnings per share were $2.56.

“The solid sales gains and strong bookings reflect the market-leading performance we expect of our operating units,” said Phebe Novakovic, chairman and chief executive officer. “We are pleased with our robust backlog and remain relentlessly focused on improving operating performance.”

Backlog

General Dynamics’ total backlog at the end of first-quarter 2019 was $69.2bn, up 11.4 percent year-over-year. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $33.9bn. Total potential contract value, the sum of all backlog components, was $103.2bn, up 17.7 percent year-over-year.

Order activity remained strong across both the aerospace and defense portfolios. Aerospace booked more than $3.1bn in orders in the quarter. Significant awards in defense portfolios in the quarter included $2bn from the U.S. Navy for long-lead materials for Block V Virginia-class submarines, $580m for services to classified customers, contracts totaling $510m from the Navy for maintenance and repair of ships and a Virginia-class submarine, a blanket purchase agreement of $490m from the Defense Information Systems Agency to operate Pentagon and government-furnished network infrastructures, contracts totaling $435m to support the U.S. Army’s Stryker armored fighting vehicle and Abrams tank programs, contracts totaling $160m to produce munitions for the U.S. Army, $125m to provide helicopter training and simulation services to the Army and $115m for computing and communications equipment under the Army’s Common Hardware Systems-5 program.

Capital Deployment

The company repurchased 525,000 of its outstanding shares in the first quarter. In March, the board of directors increased the company’s quarterly dividend to $1.02 per share. This 9.7 percent increase marked the company’s 22nd consecutive annual dividend increase.

Honeywell

 

 

Honeywell Delivers Strong First Quarter; Raises 2019 Sales and Earnings Per Share Guidance.

* Earnings per Share of $1.92, up 2%, up 13% Ex-Spins1; Exceeding High End of Guidance by 7 Cents

* Reported Sales Down 15% Due to Impact of Spin-Offs; Organic Sales up 8% Driven by Strength in Long-Cycle Businesses

* Operating Income Margin up 190 Basis Points to 18.5%, Segment Margin up 120 Basis Points to 20.4%

* Operating Cash Flow of $1.1bn;

*Adjusted Free Cash Flow2 of $1.2bn,

 *Conversion 82% vs. 68% in First Quarter 2018

* Revenue of $9.3 bn, up 22.9 percent year-over-year

* All segments produce year-over-year revenue growth

* Orders exceed $10.7bn, with consolidated book-to-bill of 1.2 to 1.0

* Aerospace orders surpass $3.1bn

18 Apr 19. Honeywell (NYSE: HON) today announced financial results for the first quarter of 2019 and raised its full-year sales and earnings per share guidance.

“Honeywell delivered a very strong start to 2019 with first-quarter results that exceeded the high end of our sales and earnings guidance. Organic sales grew 8% led by our long-cycle businesses in commercial aerospace, defense, and warehouse and process automation, and strong demand for commercial fire and security products. Our robust sales growth, supported by winning positions in attractive end markets and the continuous improvements we are making across our supply chain, drove earnings per share of $1.92, seven cents above the high end of our first-quarter guidance and up 13%1 excluding the impact of the spin-offs.” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Segment margin was above 20% for the second quarter in a row with 120 basis points of segment margin expansion year-over-year driven by the favorable impact of the spin-offs, increased sales volumes, and operational improvements. We also continued to make progress on cash, generating $1.2 bn of adjusted free cash flow, with conversion of 82%, up 14 percentage points year-over-year, while repurchasing $750m in Honeywell shares in the quarter. We remain on a path to 95% to 100% conversion for the full year.”

Adamczyk continued, “As a result of our first-quarter performance and our confidence in our ability to continue to deliver for our shareowners, we are raising our full-year earnings per share guidance to a new range of $7.90 to $8.15, and organic sales guidance to a new range of 3% to 6%.”

“We are very pleased with the start to 2019. Organic sales growth was strong in all of our segments this quarter. Our long-cycle backlog increased more than 10%, and our investments in new product development and commercial excellence are delivering results, while positioning the company for short- and long-term success.” Adamczyk concluded.

First-Quarter Performance

Honeywell sales for the first quarter were down 15% on a reported basis and up 8% on an organic basis. The difference between reported and organic sales primarily relates to the spin-offs of the Transportation Systems business (formerly in Aerospace) and the Homes and ADI Global Distribution business (formerly in Honeywell Building Technologies) as well as the unfavorable impact of foreign currency translation. First-quarter reported earnings per share was $1.92.

Aerospace sales for the first quarter were up 10% on an organic basis driven by robust demand from business aviation original equipment manufacturers, continued strength in the U.S. and international defense business, and growth in the commercial aviation aftermarket. Segment margin expanded 260 basis points to 25.1%, primarily driven by commercial excellence and the favorable impact from the spin-off of the Transportation Systems business.

Honeywell Building Technologies sales for the first quarter were up 9% on an organic basis driven by strong demand for commercial fire and security offerings, and global building projects growth. Segment margin expanded 240 basis points to 19.5%, primarily driven by the favorable impact from the spin-off of the Homes and ADI Global Distribution business, partially offset by stranded cost impacts related to the spin, which the company intends to eliminate by the end of 2019 as planned, and unfavorable mix.

Performance Materials and Technologies sales for the first quarter were up 5% on an organic basis driven by broad-based growth in automation projects and maintenance and migration services in Process Solutions, as well as continued demand for fluorine products. Segment margin expanded 140 basis points to 21.9%, primarily driven by higher sales volumes and commercial excellence.

Safety and Productivity Solutions sales for the first quarter were up 10% on an organic basis driven by continued double-digit sales growth in the Intelligrated warehouse automation business, robust demand in sensing and IoT, and strong demand across China. Segment margin contracted 260 basis points to 13.4%, primarily driven by lower sales volumes in productivity products, impact of inflation, and unfavorable mix due to higher sales in Intelligrated, partially offset by commercial excellence.

Lockheed Martin

 

 

 

Lockheed Martin Reports First Quarter 2019 Results.

– Net sales of $14.3bn

– Net earnings of $1.7bn, or $5.99 per share

– Generated cash from operations of $1.7bn

– Achieved record backlog of $133.5bn

– Increases 2019 outlook for all financial metrics

23 Apr 19. Lockheed Martin Corporation (NYSE: LMT) today reported first quarter 2019 net sales of $14.3bn, compared to $11.6bn in the first quarter of 2018. Net earnings in the first quarter of 2019 were $1.7bn, or $5.99 per share, compared to $1.2bn, or $4.02 per share, in the first quarter of 2018. Cash from operations in the first quarter of 2019 was $1.7 bn, compared to cash from operations of $632m in the first quarter of 2018.

“The corporation had strong performance in the first quarter which has allowed us to increase our full year financial guidance for sales, profit, earnings per share and cash,” said Lockheed Martin Chairman, President and CEO Marillyn Hewson. “Our differentiated portfolio and record backlog position us well for continued growth, and we remain focused on delivering innovative technologies and solutions for our customers, and long-term value creation for stockholders.”

Cash Activities

The corporation’s cash activities in the first quarter of 2019 consisted of the following:

  • paying cash dividends of $638m, compared to $586m in the first quarter of 2018;
  • repurchasing 1.0m shares for $281m, compared to 0.9m shares for $300 m in the first quarter of 2018;
  • making capital expenditures of $284m, compared to $216m in the first quarter of 2018; and
  • making net repayments of $200m for commercial paper, compared to no net repayments in the first quarter of 2018.

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.

Net sales and operating profit of the corporation’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Operating profit of the corporation’s business segments includes the corporation’s share of earnings or losses from equity method investees as the operating activities of the investees are closely aligned with the operations of its business segments.

Operating profit of the corporation’s business segments also excludes the FAS/CAS operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from significant divestitures, and other miscellaneous corporate activities.

The corporation recovers CAS pension cost through the pricing of its products and services on U.S. Government contracts and, therefore, recognizes CAS pension cost in each of its business segment’s net sales and cost of sales. The corporation’s consolidated financial statements must present pension and other postretirement benefit plan expense calculated in accordance with U.S. generally accepted accounting principles (referred to as FAS pension expense). The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension expense and CAS pension cost. The non-service FAS pension cost component is included in other non‑operating expense, net on the corporation’s consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension expense (both service and non-service).

Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. In addition, comparability of the corporation’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the corporation’s contracts for which it recognizes revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.

Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.

The corporation’s consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 33 percent of total segment operating profit in the first quarter of 2019 as compared to 32 percent in the first quarter of 2018.

Aeronautics

Aeronautics’ net sales in the first quarter of 2019 increased $1.2bn, or 27 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $910m for the F-35 program due to increased volume on production, sustainment and development programs; about $100m for classified development activities due to higher volume; and about $70m for the F-22 program due to higher volume on modernization and sustainment programs.

Aeronautics’ operating profit in the first quarter of 2019 increased $111m, or 23 percent, compared to the same period in 2018. Operating profit increased approximately $105m for the F-35 program due to increased volume on production contracts and higher risk retirements on production and sustainment programs. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were comparable in the first quarter of 2019 to the same period in 2018.

Missiles and Fire Control

MFC’s net sales in the first quarter of 2019 increased $673m, or 40 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $295m for tactical and strike missiles programs due to increased volume (primarily precision fires, classified programs and new hypersonic missile programs); about $220m for integrated air and missile defense programs due to contract mix and increased volume (primarily Terminal High Altitude Area Defense (THAAD) and Patriot Advanced Capability-3 (PAC-3)); and about $140m for sensors and global sustainment programs due to increased volume (primarily Apache and Special Operations Forces Global Logistics Support Services).

MFC’s operating profit in the first quarter of 2019 increased $156m, or 60 percent, compared to the same period in 2018. Operating profit increased approximately $75m for integrated air and missile defense programs due to contract mix, higher volume and higher risk retirements on international programs (primarily PAC-3 and THAAD); and about $55m for tactical and strike missiles programs due to higher risk retirements and higher volume (primarily precision fires). Adjustments not related to volume, including net profit booking rate adjustments, were about $50 m higher in the first quarter of 2019 compared to the same period in 2018.

Rotary and Mission Systems

RMS’ net sales in the first quarter of 2019 increased $539m, or 17 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $295m for integrated warfare systems and sensors (IWSS) programs due to higher volume (primarily Radar Surveillance Systems and Multi Mission Surface Combatant) and about $170m for Sikorsky helicopter programs due to higher volume (primarily the combat rescue helicopter program, military aircraft services, and mission systems programs).

RMS’ operating profit in the first quarter of 2019 increased $68m, or 22 percent, compared to the same period in 2018. Operating profit increased approximately $30m for IWSS programs due to higher risk retirements and higher volume (primarily Radar Surveillance Systems), partially offset by a $50 m charge for a ground-based radar program; about $15m for Sikorsky helicopter programs primarily due to higher risk retirements and higher volume for mission systems programs, partially offset by lower margin contracts for helicopter development programs. The increase in operating profit also included an increase of about $15m for C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower charges for various programs. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were about $30m higher in the first quarter of 2019 compared to the same period in 2018.

Space

Space’s net sales in the first quarter of 2019 increased $303m, or 13 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of $260m for government satellite programs due to higher volume (primarily Next Generation Overhead Persistent Infrared (Next Gen OPIR); Global Positioning System (GPS) III; government satellite services; and Advanced Extremely High Frequency (AEHF)); and about $50m for the Orion program due to higher volume.

Space’s operating profit in the first quarter of 2019 increased $70m, or 27 percent, compared to the same period in 2018. Operating profit increased approximately $65m for government satellite programs due to higher risk retirements (primarily AEHF) and higher volume (primarily GPS III; government satellite services; and AEHF); and about $15 m for the Orion program due to higher risk retirements and higher volume. These increases were partially offset by a decrease of approximately $20m due to lower equity earnings for ULA. Adjustments not related to volume, including net profit booking rate adjustments, were about $70m higher in the first quarter of 2019, compared to the same period in 2018.

Total equity earnings recognized by Space (primarily ULA) represented approximately $65m, or 19 percent, of Space’s operating profit in the first quarter of 2019, compared to approximately $85m, or 32 percent, in the first quarter of 2018.

Income Taxes

The corporation’s effective income tax rate was 12.4 percent in the first quarter of 2019, compared to 14.9 percent in the first quarter of 2018. The rate for the first quarter of 2019 benefited from additional tax deductions based on proposed tax regulations released on March 4, 2019, which clarified that foreign military sales qualify for foreign derived intangible income treatment. Approximately $65m, or $0.23 per share, of this benefit was recorded discretely because it relates to the prior year. The rates for both periods benefited from tax deductions for dividends paid to the corporation’s defined contribution plans with an employee stock ownership plan feature, tax deductions for foreign derived intangible income related to direct commercial sales, tax deductions for employee equity awards, and the research and development tax credit.

Northrop Grumman

 

 

 

 

Northrop Grumman Reports First Quarter 2019 Financial Results.

• Q1 Sales Increase 22 Percent to $8.2bn

 • Q1 EPS Increase 6 Percent to $5.06

• Strong Operational Performance at All Sectors

 • Q1 Net Awards Total $12.3 Bn; Backlog Increases 7 Percent to $57.3 Bn

• 2019 MTM-adjusted EPS1 Guidance Increased to $18.90 to $19.30

24 Apr 19. Northrop Grumman Corporation (NYSE: NOC) reported first quarter 2019 sales increased 22 percent to $8.2bn from $6.7bn in the first quarter of 2018. First quarter 2019 net earnings increased 3 percent to $863m from $840m in the first quarter of 2018 reflecting strong performance and the addition of Innovation Systems, partially offset by $96m of pre-tax intangible asset amortization and property, plant and equipment step-up depreciation. First quarter 2019 diluted earnings per share increased 6 percent to $5.06 from $4.79 in the first quarter of 2018, and reflect a 3 percent reduction in weighted average share count, primarily resulting from the $1bn accelerated share repurchase completed in January 2019.

“In first quarter 2019, we achieved higher sales, improved performance and captured substantial new awards,” said Kathy Warden, chief executive officer and president. “These results are a good start to the year and provide the building blocks for our future growth. With a continued emphasis on performance, we are sharpening our focus on operational efficiency and agility to bring the power of our portfolio to solve our customers’ rapidly evolving needs.”

Sales

First quarter 2019 sales increased $1.5 bn primarily due to the addition of $1.4 bn of sales from Innovation Systems and higher sales at Aerospace Systems, partially offset by lower sales at Technology Services. Operating Income and Margin Rate First quarter 2019 operating income increased $88m, or 10 percent, primarily due to higher segment operating income, including $167m of operating income from Innovation Systems, partially offset by a $98m increase in unallocated corporate expense due to intangible asset amortization and PP&E step-up depreciation.

First quarter 2019 operating margin rate declined to 11.4 percent from 12.6 percent due to the increase in unallocated corporate expense, partially offset by improved segment performance. Segment Operating Income and Margin Rate First quarter 2019 segment operating income increased $205 m, or 27 percent, primarily due to the addition of $167m of operating income from Innovation Systems and higher operating income at Aerospace Systems.

Segment operating margin rate increased due to improved performance at Aerospace Systems and Mission Systems. Federal and Foreign Income Taxes The effective tax rate for the first quarter of 2019 increased to 16.5 percent from 15.9 percent in the first quarter of 2018. Net Earnings and Diluted Earnings Per Share Net earnings for the first quarter of 2019 increased $23m primarily due to the increase in operating income, partially offset by a $54m decrease in our FAS (non-service) pension benefit and the higher effective tax rate. Diluted earnings per share increased $0.27, or 6 percent, reflecting a 3 percent increase in net earnings and a 3 percent reduction in weighted-average diluted shares outstanding.

Operating Cash Flows Net cash used in operating activities during the first quarter of 2019 increased $676m, principally due to changes in trade working capital. These changes reflect the completion of an ERP conversion as well as the inclusion of Innovation Systems. Although successfully completed, the ERP conversion delayed billings and cash receipts of approximately $350m, which the company expects will be recovered in the second quarter of 2019. Innovation Systems used approximately $250m of operating cash during the quarter. First quarter cash trends are generally consistent with prior years where operating cash flows have been heavily weighted toward the second half of the year.

AEROSPACE SYSTEMS

First quarter 2019 sales increased $216m, or 7 percent, due to higher sales in all three business areas. Manned Aircraft sales reflect higher volume on restricted, F-35 and E-2D programs. Autonomous Systems sales increased due to higher volume on several programs, including Triton, partially offset by lower NATO AGS volume as that program nears completion. Space sales reflect higher volume on a secure communications satellite program.

Operating Income First quarter 2019 operating income increased $41m, or 12 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 10.9 percent from 10.4 percent principally due to improved performance on Manned Aircraft and Autonomous Systems programs, partially offset by the timing of risk retirements and changes in contract mix on Space programs.

INNOVATION SYSTEMS

First quarter 2019 sales increased $126 m, or 10 percent, compared with pro forma sales of $1.3 bn in the first quarter of 2018, due to higher sales in all three business areas. Space Systems sales reflect higher volume on national security satellite systems. Defense Systems sales increased due to higher volume on tactical missiles and subsystems, including the Advanced Anti-Radiation Guided Missile (AARGM) program, and precision munitions and armament products, partially offset by lower sales on ammunition products. Flight Systems sales reflect higher volume on launch vehicles, principally Groundbased Midcourse Defense, and aerospace structures. Operating Income First quarter 2019 operating income totaled $167 m and operating margin rate was 11.6 percent. First quarter results benefited from the timing of favorable negotiations on certain commercial contracts.

MISSION SYSTEMS

First quarter 2019 sales were comparable to the first quarter of 2018, and reflect higher Cyber and ISR volume, offset by lower Advanced Capabilities and Sensors and Processing volume. Cyber and ISR sales increased principally due to higher volume on space payloads and mission programs. Advanced Capabilities sales decreased due to lower missile defense volume, primarily related to the JRDC program, which completed during the first quarter of 2018, partially offset by higher volume on advanced technology restricted programs. Sensors and Processing sales reflect lower volume on targeting programs and communications programs, partially offset by higher restricted volume.

Operating Income First quarter 2019 operating income increased $12m, or 3 percent, due to a higher operating margin rate. Operating margin rate increased to 13.3 percent from 12.9 percent, primarily due to improved performance on Advanced Capabilities and Sensors and Processing programs, partially offset by lower performance on Cyber and ISR programs.

TECHNOLOGY SERVICES

First quarter 2019 sales declined $167 m, or 15 percent, primarily due to program completions across the sector. Global Services sales declined principally due to the completion of a state and local services contract and certain defense services contracts, largely the JRDC program. Global Logistics and Modernization sales declined primarily due to the completion of a manned aircraft sustainment program, KC-10, partially offset by sales growth on strategic and electronic systems sustainment programs. Operating Income First quarter 2019 operating income declined $20m, or 16 percent, primarily due to lower sales. Operating margin rate decreased to 10.4 percent from 10.7 percent.

Raytheon

 

 

 

Raytheon Reports Strong First Quarter 2019 Results.

– Net sales of $6.7 bn, up 7.4 percent

– EPS from continuing operations of $2.77, up 25.9 percent

– Increased annual dividend by 8.6 percent, as previously announced

25 Apr 19. Raytheon Company (NYSE: RTN) today announced net sales for the first quarter 2019 of $6.7bn, up 7.4 percent compared to $6.3bn in the first quarter 2018. First quarter 2019 EPS from continuing operations was $2.77 compared to $2.20 in the first quarter 2018. The increase in the first quarter 2019 EPS from continuing operations was primarily driven by operational improvements and pension-related items.

“We delivered strong operating performance in the first quarter with our company bookings, sales, earnings per share and cash flow all ahead of our expectations,” said Thomas A. Kennedy, Raytheon Chairman and CEO. “The Raytheon team remains focused on driving strong execution and future growth by developing and delivering innovative solutions that address our customers’ most complex challenges.”

Operating cash flow from continuing operations for the first quarter 2019 was an outflow of $411m compared to an inflow of $283m for the first quarter 2018. The decrease in operating cash flow from continuing operations in the first quarter 2019 was primarily due to higher net cash taxes and the timing of payments. Operating cash flow from continuing operations for the first quarter 2019 was better than the company’s prior guidance.

In the first quarter 2019, the company repurchased 2.8 m shares of common stock for $500 m. In addition, as previously announced, Raytheon’s Board of Directors voted to increase the annual dividend rate by 8.6 percent, from $3.47 to $3.77 per share, the fifteenth consecutive annual dividend increase.

The company had bookings of $5.4bn in the first quarter 2019, compared with $6.3bn in the first quarter 2018.

Segment Results

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™.

As previously announced, Wesley D. Kremer was appointed President of MS, succeeding Dr. Taylor W. Lawrence, who informed the company of his intention to retire. Additionally, Ralph H. Acaba was appointed President of IDS, succeeding Kremer. The new appointments were effective March 30, 2019.

Integrated Defense Systems (IDS)

Integrated Defense Systems (IDS) had first quarter 2019 net sales of $1,550m, up 4 percent compared to $1,489m in the first quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on various Patriot® programs and a naval radar program.

IDS recorded $258 m of operating income in the first quarter 2019 compared to $273 m in the first quarter 2018. The decrease in operating income for the quarter was primarily driven by a change in mix and other performance.

During the quarter, IDS booked $418m on the Air and Missile Defense Radar (AMDR) program for the U.S. Navy. IDS also booked $310m to provide Patriot engineering services support and $103m to provide advanced Patriot air and missile defense capability, both for the U.S. Army and international customers.

Intelligence, Information and Services (IIS)

Intelligence, Information and Services (IIS) had first quarter 2019 net sales of $1,777m, up 12 percent compared to $1,582 m in the first quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs in both cyber and space.

IIS recorded $187m of operating income in the first quarter 2019 compared to $117m in the first quarter 2018. The increase in operating income for the quarter was primarily driven by a change in mix and other performance, which included $21m of gains related to the consolidation, as planned, of an entity that was previously an equity investment, and $13m of gains from asset sales.

During the quarter, IIS booked $744m on a number of classified programs. IIS also booked $148m on domestic and foreign training programs in support of Warfighter FOCUS activities, and $82 m to provide support for the North Warning System for the Canadian government.

Missile Systems (MS)

Missile Systems (MS) had first quarter 2019 net sales of $2,006m, up 9 percent compared to $1,848m in the first quarter 2018. The increase in net sales for the quarter was spread across numerous programs.

MS recorded $190m of operating income in the first quarter 2019 compared to $212 m in the first quarter 2018. The decrease in operating income for the quarter was primarily due to lower net program efficiencies and a change in program mix, partially offset by higher volume.

During the quarter, MS booked $102m for Evolved Seasparrow Missiles (ESSM®) and $93m for Rolling Airframe Missiles (RAMTM), both for the U.S. Navy and international customers. MS also booked $154m on a number of classified contracts.

Space and Airborne Systems (SAS)

Space and Airborne Systems (SAS) had first quarter 2019 net sales of $1,653m, up 5 percent compared to $1,568m in the first quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs.

SAS recorded $212 m of operating income in the first quarter 2019 compared to $193m in the first quarter 2018. The increase in operating income for the quarter was primarily due to higher volume and a favorable change in program mix and other performance.

During the quarter, SAS booked $288 m on the Advanced Synthetic Aperture Radar System (ASARS) program and $90 m for the Next Generation Overhead Persistent Infrared (Next Gen OPIR) program, both for the U.S. Air Force. SAS also booked $451m on a number of classified contracts.

Forcepoint

Forcepoint had first quarter 2019 net sales of $158 m, up 12 percent compared to $141 m in the first quarter 2018.

Forcepoint recorded a loss of $9 m in the first quarter 2019 compared to a loss of $7 m in the first quarter 2018.

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