Raytheon Reports Lower Earnings

Raytheon Co, which last week won a multibillion-dollar bidding war for Hughes Electronics defense unit, Monday reported lower fourth-quarter profits and cited its Amana appliance and other non-defense businesses.

Raytheon said its profits fell to $177.4 million, or 75 cents a share, from $222.3 million, or 92 cents a share, in 1995s fourth quarter. The profits did, however, meet Wall Street analysts expectations. Sales, which rose to $3.367 billion in the fourth quarter vs. $3.360 billion in the year-ago quarter, hit records in three of its four business units.

However, difficulties with the Lexington, mass-based Rayth- eons commercial businesses, including its Engineers & Constructors unit and its Amana appliance division, depressed the 1996 earnings.

 

Analysts expect that Raytheon may try to sell or spin-off one or several of its commercial businesses to pay down the more than $11 billion in debt with its proposed takeovers of the Hughes and Texas Instruments defense assets.

Raytheon Thursday defeated Northrop Grumman Corp in the bidding war for Hughes Aircraft, one of the last big prizes in the rapidly consolidating defense industry, agreeing to a stock-and-debt deal valued at $9.5 billion.

Combined with its $2.95 million cash offer for the Texas Instruments assets, the deals vaulted Raytheon into the No. 3 spot among defense firms, with expected revenues of $21 billion in 1997.

Raytheons 75th anniversary year is off to a fitting and historic start, company chairman Dennis Picard said in a statement. In this new year, our company has taken decisive steps to join with new defense electronics teammates to meet the competitive challenges and market opportunities of the future.

The company said the defense deals, expected to close by the end of the second quarter, would slightly hurt 1997 earnings but would provide a minimal boost in 1998 and increasingly help profits in subsequent years.

Engineers & Constructors, which designs and builds large-scale projects such as power plants, pulp and paper mills and airports, has had trouble getting financing in place for some of the works in developing countries.

We are addressing the issues squarely and expect to see more of the financings close as we move into the first quarter, Raytheon spokesman Robert McWade said.

The Amana appliance sector was hit, particularly in the third quarter, by tighter profit margins in the industry and increased sales promotion costs that partly carried through into the fourth quarter.

McWade said Amana responded by moving to higher margin products, closing a Delaware, Ohio, manufacturing plant of low-margin, manual clean ovens, and by cutting manufacturing and operating costs.

The entire appliance industry has been experiencing margin pressures throughout 1996, he said. This is an improving performance picture for us in the fourth quarter, he said.

For the year, the company had profits of $761.2 million, or $3.21 a share, on sales of $12.26 billion, the highest in its history. In 1995, Raytheon earned $792.5 million, or $3.25 a share, on $11.716 billion in sales.

Raytheon stock closed down 62.5 cents to $48 on the New York Stock Exchange. Analysts said the earnings were in line with forecasts. I think they pretty much managed the expectations of everyone and delivered, one analyst said.