Raytheon 2004 Annual Report Download - page 51

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Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
Raytheon Company (the “Company”) is one of the largest defense electronics contractors in the world, serving all
branches of the U.S. military and other U.S. government agencies, NATO, and many allied governments. The
Company is a leader in its core defense markets: radars and radio-frequency systems; sensors and electro-optics;
precision weapons; and command, control, communications, and information systems. In all of these markets, the
Company provides full life-cycle services to its customers, including product design, delivery, and support.
Raytheon Aircraft is a leading provider of business and special mission aircraft and delivers a broad line of jet,
turboprop, and piston-powered airplanes to individual, corporate, and government customers worldwide.
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The global War on Terrorism, Operation Enduring Freedom, and Operation Iraqi Freedom, have altered the
defense and security environment of the United States. These events have had, and for the foreseeable future are
likely to continue to have, a significant impact on the markets for defense and advanced technology systems and
products. The U.S. Department of Defense (DoD) continues to focus on both supporting ongoing operations and
transforming our military to confront future threats. Our customers plan to operate in a new paradigm. They
define an approach that emphasizes speed, precision, and flexibility; and by sharing superior knowledge, enables
forces to seize and sustain initiative, concentrate combat power, and prevent an enemy response. In this new
environment, the need for advanced technology and defense electronics is clear.
The recent growth in military expenditures is driven by the multi-pronged approach required to fight the War
on Terrorism, replenish war materials consumed during continued operations in Afghanistan and Iraq, and sustain
the momentum in pursuit of transformation. The Company is an active participant in all three efforts.
Much of the Company’s business is with the DoD, and the Company’s future growth prospects are sensitive to
changes in the DoD budget. In particular, the DoD Research, Development, Test and Evaluation (RDT&E) budget
and the DoD Procurement budget, collectively known as the investment accounts, are a key source of funding for
the Company’s programs. The Future Years Defense Program included in the President’s FY06 budget submission
to Congress shows continued projected growth in the investment accounts through FY11, with some shift from
RDT&E to Procurement in the later years. The FY05 supplemental request submitted to Congress, while primarily
targeted to supporting ongoing operations in Iraq and Afghanistan, also includes proposed additional investment
account funding.
The Company’s strategy is designed to capitalize on the breadth and depth of the Company’s technology and
domain expertise in order to meet the evolving needs of the Company’s customers. The Company is focusing on
the following Strategic Business Areas, which are aligned with the ongoing military operations and Department of
Defense transformation goals and the goals of the Department of Homeland Security:
• Missile Defense
• Precision Engagement
• Intelligence, Surveillance and Reconnaissance
• Homeland Security
Missile Defense The Company is working with the U.S. Missile Defense Agency and other companies to develop
and test a layered system that will detect, identify, and intercept missiles in all phases of flight – the boost,
midcourse, and terminal phases. The fundamental components of integrated missile defense are sensors,
interceptors, command and control, and systems integration. The Company is a technology leader in all of these