Raytheon Increases Full-year Guidance; Reports Strong Second Quarter 2008

WALTHAM, Mass., July 24, 2008 /PRNewswire-FirstCall/ -- Highlights -- Sales of $5.9 billion, up 11 percent -- Operating income of $662 million, up 12 percent

-- Earnings per share (EPS) from continuing operations of $1.00, up 27 percent

-- Solid bookings of $6.0 billion; backlog of $37.5 billion

-- Strong operating cash flow from continuing operations of $767 million

-- Full-year guidance increased for sales, EPS, operating cash flow and ROIC

Raytheon Company (NYSE: RTN) reported second quarter 2008 income from continuing operations of $426 million or $1.00 per diluted share compared to $355 million or $0.79 per diluted share in the second quarter 2007. Second quarter 2008 income from continuing operations was higher primarily due to operational improvements and lower pension expense, as well as a prior-year $39 million charge ($59 million pretax) or $0.09 per diluted share for the early retirement of debt.

"All of our businesses performed well and the Company had a strong second quarter," said William H. Swanson , Raytheon's Chairman and CEO. "We are increasing our financial outlook for the year as a result of our solid performance."

Second quarter 2008 net income was $426 million or $1.00 per diluted share compared to $1,335 million or $2.97 per diluted share in the second quarter 2007. Net income for the second quarter 2007 included $980 million in discontinued operations or $2.18 per diluted share primarily due to the sale of Raytheon Aircraft Company (RAC), which was completed in the second quarter 2007.

Net sales for the second quarter 2008 were $5.9 billion, up 11 percent from $5.3 billion in the second quarter 2007, with growth across all of the Company's businesses.

Operating cash flow from continuing operations for the second quarter 2008 was a positive $767 million compared to an outflow of $30 million for the second quarter 2007. The improvement in the second quarter 2008 was primarily due to cash tax payments of $316 million made in the second quarter 2007 attributable to the gain on the sale of RAC and a reduction in working capital items in the second quarter 2008.

In the second quarter 2008 the Company repurchased 5.2 million shares of common stock for $340 million, as part of the Company's previously announced share repurchase program. The Company has repurchased 10.7 million shares of common stock year-to-date for $680 million.

Summary Financial Results 2nd Quarter % Six Months % ($ in millions, except per share data) 2008 2007 Change 2008 2007 Change Net Sales $5,870 $5,278 11% $11,224 $10,082 11% Total Operating Expenses 5,208 4,689 9,954 8,972 Operating Income 662 589 12% 1,270 1,110 14% Non-operating Expenses 15 53 31 88 Income from Cont. Ops. before Taxes $647 $536 21% $1,239 $1,022 21% Income from Continuing Operations $426 $355 20% $826 $679 22% Inc. (Loss) from Disc. Ops., Net of Tax* - 980 NM (2) 1,002 NM Net Income $426 $1,335 NM $824 $1,681 NM Diluted EPS from Continuing Ops. $1.00 $0.79 27% $1.92 $1.51 27% Diluted EPS $1.00 $2.97 NM $1.92 $3.73 NM Operating Cash Flow from Cont. Ops.** $767 $(30) $834 $(383) Workdays in Fiscal Reporting Calendar 64 64 127 123 * Includes after-tax net gain of $986 million on sale of Raytheon Aircraft Company (RAC) in Q2 '07 ** Includes $316 million cash tax payment related to the completion of the RAC sale in Q2 '07 NM - Not meaningful for comparison purposes due to the gain on sale of RAC in Q2 '07 Bookings and Backlog Bookings 2nd Quarter Six Months (in millions) 2008 2007 2008 2007 Total Bookings $6,008 $4,832 $12,524 $9,990 Backlog Period Ending (in millions) 06/29/08 12/31/07 Backlog $37,527 $36,614 Funded Backlog $22,226 $20,518

The Company reported total bookings for the second quarter 2008 of $6.0 billion compared to $4.8 billion in the second quarter 2007. The Company ended the second quarter 2008 with a backlog of $37.5 billion compared to $36.6 billion at the end of 2007 and $33.3 billion at the end of the second quarter 2007.

Outlook 2008 Financial Outlook Current Prior* Net Sales ($B) 22.6 - 23.1 22.4 - 22.9 FAS/CAS Pension Expense ($M) 150 150 Interest Expense, net ($M) 40 - 55 45 - 60 Diluted Shares (M) 426 - 428 427 - 429 EPS from Cont. Ops. $3.80 - $3.95 $3.65 - $3.80 Operating Cash Flow from Cont. Ops. ($B) 2.2 - 2.4 2.0 - 2.2 ROIC (%) 9.9 - 10.4 9.6 - 10.1 * As of April 24, 2008

The Company has increased full-year 2008 guidance for net sales, earnings per share from continuing operations, operating cash flow from continuing operations and Return on Invested Capital (ROIC), and updated net interest expense and diluted shares. Charts containing additional information on the Company's 2008 guidance are available on the Company's website at www.raytheon.com. See attachment F for the Company's calculation and use of ROIC, a non-GAAP financial measure.

Segment Results Integrated Defense Systems 2nd Quarter % Six Months % ($ in millions) 2008 2007 Change 2008 2007 Change Net Sales $1,257 $1,166 8% $2,449 $2,258 8% Operating Income $209 $212 -1% $420 $411 2% Operating Margin 16.6% 18.2% 17.1% 18.2%

Integrated Defense Systems (IDS) had second quarter 2008 net sales of $1,257 million, up 8 percent compared to $1,166 million in the second quarter 2007, primarily due to growth on U.S. Army programs. IDS recorded $209 million of operating income compared to $212 million in the second quarter 2007. The change in operating income was primarily due to program mix and favorable performance adjustments taken on certain programs in the second quarter 2007.

During the quarter, IDS booked $179 million for the upgrade and support of the Patriot system for Kuwait and South Korea . IDS also booked $143 million for the Rapid Aerostat Initial Deployment (RAID) program for the U.S. Army.

Intelligence and Information Systems 2nd Quarter % Six Months % ($ in millions) 2008 2007 Change 2008 2007 Change Net Sales $829 $666 24% $1,521 $1,254 21% Operating Income $67 $63 6% $119 $118 1% Operating Margin 8.1% 9.5% 7.8% 9.4%

Intelligence and Information Systems (IIS) had second quarter 2008 net sales of $829 million, up 24 percent compared to $666 million in the second quarter 2007, primarily due to the U.K. e-Borders program. IIS recorded $67 million of operating income compared to $63 million in the second quarter 2007. The increase in operating income was primarily due to higher volume, partially offset by certain acquisition costs and other investments in cyber operations and information security capabilities.

During the quarter, IIS booked $497 million on a number of classified contracts, including $379 million on a major classified program.

Missile Systems 2nd Quarter % Six Months % ($ in millions) 2008 2007 Change 2008 2007 Change Net Sales $1,355 $1,244 9% $2,666 $2,384 12% Operating Income $156 $134 16% $293 $254 15% Operating Margin 11.5% 10.8% 11.0% 10.7%

Missile Systems (MS) had second quarter 2008 net sales of $1,355 million, up 9 percent compared to $1,244 million in the second quarter 2007, primarily due to higher volume on the Phalanx, Paveway(TM), and Advanced Medium-Range Air-to-Air Missile (AMRAAM) programs. MS recorded $156 million of operating income compared to $134 million in the second quarter 2007. The increase in operating income was primarily due to higher volume and program performance.

During the quarter, MS booked $412 million for the production of AMRAAM for international customers and the U.S. Air Force. MS also booked $376 million for the production of Standard Missile-3 (SM-3) for the U.S. Navy and the Missile Defense Agency and $245 million for the production of Evolved Sea Sparrow Missiles (ESSM) for international customers and the U.S. Navy.

Network Centric Systems 2nd Quarter % Six Months % ($ in millions) 2008 2007 Change 2008 2007 Change Net Sales $1,173 $1,052 12% $2,240 $1,981 13% Operating Income $145 $139 4% $268 $256 5% Operating Margin 12.4% 13.2% 12.0% 12.9%

Network Centric Systems (NCS) had second quarter 2008 net sales of $1,173 million, up 12 percent compared to $1,052 million in the second quarter 2007, primarily due to increased volume on certain U.S. Army programs. NCS recorded $145 million of operating income compared to $139 million in the second quarter 2007. The increase in operating income was primarily due to higher volume.

During the quarter, NCS booked $115 million for the Airborne, Maritime and Fixed Site (AMF) Joint Tactical Radio System (JTRS) program.

Space and Airborne Systems 2nd Quarter % Six Months % ($ in millions) 2008 2007 Change 2008 2007 Change Net Sales $1,096 $1,065 3% $2,091 $2,029 3% Operating Income $144 $133 8% $265 $262 1% Operating Margin 13.1% 12.5% 12.7% 12.9%

Space and Airborne Systems (SAS) had second quarter 2008 net sales of $1,096 million, up 3 percent compared to $1,065 million in the second quarter 2007. SAS recorded $144 million of operating income compared to $133 million in the second quarter 2007. The increase in operating income was primarily due to improved program performance.

SAS booked $325 million on a number of classified contracts. Technical Services 2nd Quarter % Six Months % ($ in millions) 2008 2007 Change 2008 2007 Change Net Sales $647 $514 26% $1,168 $977 20% Operating Income $45 $32 41% $80 $55 45% Operating Margin 7.0% 6.2% 6.8% 5.6%

Technical Services (TS) had second quarter 2008 net sales of $647 million, up 26 percent compared to $514 million in the second quarter 2007, primarily due to training programs. TS recorded operating income of $45 million in the second quarter 2008 compared to $32 million in the second quarter 2007. The increase in operating income was primarily due to higher volume and improved program performance.

During the quarter, TS booked $309 million for work on the Warfighter Field Operations Customer Support (FOCUS) contract for the U.S. Army to provide live, virtual and constructive training services, bringing the year- to-date bookings on the program to $419 million.

Raytheon Company (NYSE: RTN), with 2007 sales of $21.3 billion, is a technology leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 86 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. With headquarters in Waltham, Mass. , Raytheon employs 72,000 people worldwide.

Disclosure Regarding Forward-looking Statements

This release and the attachments contain forward-looking statements, including information regarding the Company's 2008 financial outlook, future plans, objectives, business prospects and anticipated financial performance. These forward-looking statements are not statements of historical facts and represent only the Company's current expectations regarding such matters. These statements inherently involve a wide range of known and unknown risks and uncertainties. The Company's actual actions and results could differ materially from what is expressed or implied by these statements. Specific factors that could cause such a difference include, but are not limited to: the Company's dependence on the U.S. Government for a significant portion of its business and the risks associated with U.S. Government sales, including changes or shifts in defense spending, uncertain funding of programs, potential termination of contracts, and difficulties in contract performance; the ability to procure new contracts; the risks of conducting business in foreign countries; the ability to comply with extensive governmental regulation, including import and export policies and procurement and other regulations; the impact of competition; the ability to develop products and technologies; the risk of cost overruns, particularly for the Company's fixed- price contracts; dependence on component availability, subcontractor performance and key suppliers; risks of a negative government audit; the use of accounting estimates in the Company's financial statements; risks associated with acquisitions, dispositions, joint ventures and other business arrangements; risks of an impairment of goodwill or other intangible assets; the outcome of contingencies and litigation matters, including government investigations; the ability to recruit and retain qualified personnel; the impact of potential security threats and other disruptions; and other factors as may be detailed from time to time in the Company's public announcements and Securities and Exchange Commission filings. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release and the attachments or to update them to reflect events or circumstances occurring after the date of this release, including any acquisitions, dispositions or other business arrangements that may be announced or closed after such date. This release and the attachments also contain non-GAAP financial measures. A GAAP reconciliation and a discussion of the Company's use of these measures are included in this release or the attachments.

Conference Call on the Second Quarter 2008 Financial Results

Raytheon's financial results conference call will be held on Thursday, July 24, 2008 at 9 a.m. EDT . Participants will include William H. Swanson , Chairman and CEO, David C. Wajsgras , senior vice president and CFO, and other Company executives.

The dial-in number for the conference call will be (800) 901 - 5217. The conference call will also be audiocast on the Internet at www.raytheon.com. Individuals may listen to the call and download charts that will be used during the call. These charts will be available for printing prior to the call.

Interested parties are encouraged to check the website ahead of time to ensure their computers are configured for the audio stream. Instructions for obtaining the free required downloadable software are posted on the site.

Media Contact: Investor Relations Contact: Jon Kasle Jim Singer 781-522-5110 781-522-5136 Attachment A Raytheon Company Preliminary Statement of Operations Information Second Quarter 2008 (In millions, except per share amounts) Three Months Ended Six Months Ended 29-Jun-08 24-Jun-07 29-Jun-08 24-Jun-07 Net sales $5,870 $5,278 $11,224 $10,082 Cost of sales 4,670 4,194 8,929 8,050 Administrative and selling expenses 396 357 776 687 Research and development expenses 142 138 249 235 Total operating expenses 5,208 4,689 9,954 8,972 Operating income 662 589 1,270 1,110 Interest expense 34 54 68 114 Interest income (17) (57) (40) (85) Other (income) expense, net (2) 56 3 59 Non-operating expense, net 15 53 31 88 Income from continuing operations before taxes 647 536 1,239 1,022 Federal and foreign income taxes 221 181 413 343 Income from continuing operations 426 355 826 679 Income (loss) from discontinued operations, net of tax - (6) (2) 16 Gain on sale of discontinued operation, net of tax - 986 - 986 Income (loss) from discontinued operations, net of tax - 980 (2) 1,002 Net income $426 $1,335 $824 $1,681 Earnings per share from continuing operations Basic $1.03 $0.81 $1.99 $1.55 Diluted $1.00 $0.79 $1.92 $1.51 Earnings per share from discontinued operations Basic $- $2.24 $- $2.28 Diluted $- $2.18 $- $2.22 Earnings per share Basic $1.03 $3.06 $1.98 $3.83 Diluted $1.00 $2.97 $1.92 $3.73 Average shares outstanding Basic 414.0 436.7 416.1 438.9 Diluted 427.7 448.8 430.0 451.0 Attachment B Raytheon Company Preliminary Segment Information Second Quarter 2008 Operating Income Operating As a Percent Net Sales Income of Sales Three Months Three Months Three Months Ended Ended Ended 29-Jun- 24-Jun- 29-Jun- 24-Jun- 29-Jun- 24-Jun- 08 07 08 07 08 07 (In millions) Integrated Defense Systems $1,257 $1,166 $209 $212 16.6% 18.2% Intelligence and Information Systems 829 666 67 63 8.1% 9.5% Missile Systems 1,355 1,244 156 134 11.5% 10.8% Network Centric Systems 1,173 1,052 145 139 12.4% 13.2% Space and Airborne Systems 1,096 1,065 144 133 13.1% 12.5% Technical Services 647 514 45 32 7.0% 6.2% FAS/CAS Pension Adjustment - - (34) (63) Corporate and Eliminations (487) (429) (70) (61) Total $5,870 $5,278 $662 $589 11.3% 11.2% Operating Income As a Percent Operating of Sales Net Sales Income Six Months Six Months Ended Six Months Ended Ended 29-Jun- 24-Jun- 29-Jun- 24-Jun- 29-Jun- 24-Jun- 08 07 08 07 08 07 Integrated Defense Systems $2,449 $2,258 $420 $411 17.1% 18.2% Intelligence and Information Systems 1,521 1,254 119 118 7.8% 9.4% Missile Systems 2,666 2,384 293 254 11.0% 10.7% Network Centric Systems 2,240 1,981 268 256 12.0% 12.9% Space and Airborne Systems 2,091 2,029 265 262 12.7% 12.9% Technical Services 1,168 977 80 55 6.8% 5.6% FAS/CAS Pension Adjustment - - (67) (125) Corporate and Eliminations (911) (801) (108) (121) Total $11,224 $10,082 $1,270 $1,110 11.3% 11.0% Attachment C Raytheon Company Other Preliminary Information Second Quarter 2008 Funded (In millions) Backlog Backlog 29-Jun-08 31-Dec-07 29-Jun-08 31-Dec-07 Integrated Defense Systems $8,882 $9,296 $5,044 $4,781 Intelligence and Information Systems 5,756 5,636 2,554 2,325 Missile Systems 10,250 9,379 5,873 5,218 Network Centric Systems 5,479 5,102 4,244 3,957 Space and Airborne Systems 5,102 5,276 3,301 3,037 Technical Services 2,058 1,925 1,210 1,200 Total $37,527 $36,614 $22,226 $20,518 Bookings Three Months Ended 29-Jun-08 24-Jun-07 Total Bookings $6,008 $4,832 Attachment D Raytheon Company Preliminary Balance Sheet Information Second Quarter 2008 (In millions) 29-Jun-08 31-Dec-07 Assets Cash and cash equivalents $2,554 $2,655 Accounts receivable, net 113 126 Contracts in process 4,366 3,821 Inventories 379 386 Deferred taxes 440 432 Prepaid expenses and other current assets 129 196 Total current assets 7,981 7,616 Property, plant and equipment, net 2,021 2,058 Prepaid retiree benefits 645 617 Goodwill 11,657 11,627 Other assets, net 1,293 1,363 Total assets $23,597 $23,281 Liabilities and Stockholders' Equity Advance payments and billings in excess of costs incurred $1,933 $1,845 Accounts payable 1,128 1,141 Accrued employee compensation 846 902 Other accrued expenses 903 900 Total current liabilities 4,810 4,788 Accrued retiree benefits and other long-term liabilities 3,006 3,016 Deferred taxes 543 451 Long-term debt 2,269 2,268 Minority interest 233 216 Stockholders' equity Common stock 4 4 Additional paid-in capital 10,788 10,544 Accumulated other comprehensive loss (1,856) (1,956) Treasury stock, at cost (3,225) (2,502) Retained earnings 7,025 6,452 Total stockholders' equity 12,736 12,542 Total liabilities and stockholders' equity $23,597 $23,281 Attachment E Raytheon Company Preliminary Cash Flow Information Second Quarter 2008 (In millions) Three Months Ended Six Months Ended 29-Jun-08 24-Jun-07 29-Jun-08 24-Jun-07 Net income $426 $1,335 $824 $1,681 (Income) loss from discontinued operations, net of tax - (980) 2 (1,002) Income from continuing operations 426 355 826 679 Depreciation 73 73 142 140 Amortization 24 21 47 40 Working capital (excluding pension and taxes)* 318 (39) (385) (692) Discontinued operations (6) (20) (16) (83) Net activity in financing receivables 5 35 25 56 Other (79) (475) 179 (606) Net operating cash flow 761 (50) 818 (466) Capital spending (56) (57) (99) (95) Internal use software spending (13) (19) (30) (34) Acquisitions (33) - (34) - Investment activity and divestitures 9 3,117 9 3,117 Dividends (118) (113) (227) (220) Repurchases of common stock (340) (526) (680) (801) Debt repayments - (1,041) - (1,038) Discontinued operations - - - (28) Other 57 74 142 150 Total cash flow $267 $1,385 $(101) $585

* Working capital (excluding pension and taxes) is a summation of changes in: accounts receivable, net, contracts in process and advance payments and billings in excess of costs incurred, inventories, prepaid expenses and other current assets, accounts payable, accrued employee compensation, and other accrued expenses from the Statements of Cash Flows.

Attachment F Raytheon Company Preliminary Return on Invested Capital Non-GAAP Financial Measure Second Quarter 2008

We define Return on Invested Capital (ROIC) as income from continuing operations plus after-tax net interest expense plus one-third of operating lease expense after-tax (estimate of interest portion of operating lease expense) divided by average invested capital after capitalizing operating leases (operating lease expense times a multiplier of 8), adding financial guarantees less net investment in Discontinued Operations, and adding back the impact of Statement of Financial Accounting Standards No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans (SFAS No. 158). ROIC is not a measure of financial performance under generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies in the same manner. ROIC should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. We use ROIC as a measure of efficiency and effectiveness of our use of capital and as an element of management compensation.

Return on Invested Capital 2008 Current 2008 Prior (In millions) Guidance Guidance Low end High end Low end High end of range of range of range of range Income from continuing operations Net interest expense, after-tax* Combined Combined Combined Combined Lease expense, after-tax* Return $1,715 $1,780 $1,655 $1,720 Net debt** Equity less investment in discontinued operations Lease expense x 8, plus financial guarantees Combined Combined Combined Combined SFAS No. 158 impact Invested capital from continuing operations*** $17,300 $17,100 $17,300 $17,100 ROIC 9.9% 10.4% 9.6% 10.1% * Effective 2008 tax rate: 33.5% (2008 guidance)

** Net debt is defined as total debt less cash and cash equivalents and is calculated using a 2 point average

*** Calculated using a 2 point average

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