Raytheon 2004 Annual Report Download - page 58

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Operating Margin 2004 2003 2002
Integrated Defense Systems 12.1% 11.6% 12.2%
Intelligence and Information Systems 8.9 9.5 9.5
Missile Systems 11.3 12.0 12.3
Network Centric Systems 8.8 0.7 9.0
Space and Airborne Systems 14.0 13.4 13.2
Technical Services 7.3 5.5 5.4
Aircraft 2.6 0.1 (1.9)
Other (5.9) (5.9) (5.7)
FAS/CAS Pension Adjustment
Corporate and Eliminations
Total 6.9% 7.3% 10.6%
Integrated Defense Systems (IDS) provides mission systems integration for the air, surface, and subsurface
battlespace. IDS had 2004 sales of $3.5 billion versus $2.9 billion in 2003 and $2.4 billion in 2002. The increase in
sales in 2004 was due to continued growth on DD(X), the Navy’s future destroyer program. The increase in sales in
2003 was due to continued growth on DD(X) as well as strong missile defense sales. Operating income was $417
million in 2004, $331 million in 2003, and $289 million in 2002. The decrease in operating margin in 2003 was due
to lower volume on higher margin international programs.
Intelligence and Information Systems (IIS) provides signal and image processing, geospatial intelligence,
airborne and spaceborne command and control, ground engineering support, weather and environmental
management, and information technology. IIS had 2004 sales of $2.2 billion versus $2.0 billion in 2003 and $1.9
billion in 2002. The increase in sales in 2004 was due to growth in the DCGS (Distributed Common Ground
System) program and growth in classified programs. The increase in sales in 2003 was due to strong growth in
classified programs, as well as the start-up of the NPOESS (National Polar-orbiting Operational Environmental
Satellite Systems) program. Operating income was $198 million in 2004 versus $194 million in 2003 and $180
million in 2002.
Missile Systems (MS) provides air-to-air, precision strike, surface Navy air defense, and land combat missiles,
guided projectiles, kinetic kill vehicles, and directed energy weapons. MS had 2004 sales of $3.8 billion versus $3.5
billion in 2003 and $3.0 billion in 2002. The increase in sales in 2004 was due to continued growth in missile
defense, including work on the Standard Missile-3 program. The increase in sales in 2003 was due to the
Tomahawk remanufacture program and Evolved Sea Sparrow Missile (ESSM) program reaching full rate
production and several production programs transitioning from engineering development to low rate initial
production including Air Intercept Missile (AIM-9X), and Tactical Tomahawk. Sales also increased on several
missile defense programs in order to meet accelerated deployment. Operating income was $436 million in 2004
versus $424 million in 2003 and $373 million in 2002. The decline in operating margin in 2004 was due to the
wind-down of cost recovery for prior year restructuring actions. The costs related to these restructuring actions
were accrued in 1997 through 2000, but are being recovered through the pricing of products and services to the
U.S. government over a five year period. The wind-down of this recovery was substantially completed in 2004.
Network Centric Systems (NCS) provides network centric solutions to integrate sensors, communications, and
command and control to manage the battlespace. NCS had 2004 sales of $3.1 billion versus $2.8 billion in 2003 and
$3.1 billion in 2002. Operating income was $274 million in 2004 versus $19 million in 2003 and $278 million in
2002. Included in 2003 were charges resulting in a reduction in sales and operating income of $228 million and
$237 million, respectively, related to performance issues on certain NCS programs.
Space and Airborne Systems (SAS) provides electro-optical/infrared sensors, airborne radars, solid state high
energy lasers, precision guidance systems, electronic warfare systems, and space-qualified systems for civil and