Raytheon 2003 Annual Report Download - page 26

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) 3333333333333
RAYTHEON COMPANY 333
333 SEGMENT RESULTS
Reportable segments have been determined based upon product
lines and include the following: Integrated Defense Systems,
Intelligence and Information Systems, Missile Systems, Network
Centric Systems, Space and Airborne Systems, Technical Services,
Aircraft, and Other. In 2003, the Company began reporting its
defense businesses in six segments. In addition, the Company’s
Commercial Electronics businesses were reassigned to the new
defense businesses. Also, the Company created an Other seg-
ment comprised of Flight Options LLC, Raytheon Airline Aviation
Services LLC, and Raytheon Professional Services LLC. Also in
2003, the Company changed the way pension expense or income
is reported in the Company’s segment results as described above
in Consolidated Results of Operations. Information for all periods
presented was restated to reflect these changes.
Net Sales
(In millions) 2003 2002 2001
Integrated Defense Systems $ 2,864 $ 2,366 $ 2,265
Intelligence and Information Systems 2,045 1,887 1,736
Missile Systems 3,538 3,038 2,901
Network Centric Systems 2,809 3,091 2,865
Space and Airborne Systems 3,677 3,243 2,738
Technical Services 1,963 2,133 2,050
Aircraft 2,088 2,040 2,471
Other 573 210 207
Corporate and Eliminations (1,448) (1,248) (1,216)
Total $18,109 $16,760 $16,017
Operating Income
(In millions) 2003 2002 2001
Integrated Defense Systems $ 331 $ 289 $ 238
Intelligence and Information Systems 194 180 139
Missile Systems 424 373 257
Network Centric Systems 19 278 246
Space and Airborne Systems 492 428 339
Technical Services 107 116 123
Aircraft 2(39) (77)
Other (34) (12) (758)
FAS/CAS Pension Adjustment (109) 210 386
Corporate and Eliminations (110) (40) (127)
Total $1,316 $1,783 $ 766
Operating Margin
2003 2002 2001
Integrated Defense Systems 11.6% 12.2% 10.5%
Intelligence and Information Systems 9.5 9.5 8.0
Missile Systems 12.0 12.3 8.9
Network Centric Systems 0.7 9.0 8.6
Space and Airborne Systems 13.4 13.2 12.4
Technical Services 5.5 5.4 6.0
Aircraft 0.1 (1.9) (3.1)
Other (5.9) (5.7) (366.2)
FAS/CAS Pension Adjustment
Corporate and Eliminations
Total 7.3% 10.6% 4.8%
Integrated Defense Systems (IDS) provides mission systems
integration for the air, surface, and subsurface battlespace. IDS
had 2003 sales of $2.9 billion versus $2.4 billion in 2002 and
$2.3 billion in 2001. The increase in sales in 2003 was due to con-
tinued growth on DD(X), the Navy’s future destroyer program, as
well as strong missile defense sales. The increase in sales in 2002
was due to higher missile defense volume. Operating income was
$331 million in 2003 versus $289 million in 2002 and $238 million
in 2001. Excluding goodwill amortization, operating income was
$256 million in 2001 or 11.3 percent of net sales. The decrease in
operating margin in 2003 was due to lower volume on higher mar-
gin international programs
Intelligence and Information Systems (IIS) provides signal and
image processing, geospatial intelligence, airborne and space-
borne command and control, ground engineering support, weather
and environmental management, and information technology. IIS
had 2003 sales of $2.0 billion versus $1.9 billion in 2002 and
$1.7 billion in 2001. The increase in sales in 2003 and 2002
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
$194 million in 2003 versus $180 million in 2002 and $139 million
in 2001. Excluding goodwill amortization, operating income was
$179 million in 2001 or 10.3 percent of net sales.
Missile Systems (MS) provides air-to-air, precision strike, sur-
face Navy air defense, and land combat missiles, guided projec-
tiles, kinetic kill vehicles, and directed energy weapons. MS had
2003 sales of $3.5 billion versus $3.0 billion in 2002 and $2.9 bil-
lion in 2001. The increase in sales in 2003 was due to the
Tomahawk remanufacture program reaching full rate production
and several production programs transitioning from engineering
development to low rate initial production including Air Intercept
Missile (AIM-9X), Evolved Sea Sparrow Missile (ESSM), and
Tactical Tomahawk. Sales also increased on several missile
defense programs in order to meet accelerated deployment. The
increase in sales in 2002 was due to the ramp up on the Exo-
Atmospheric Kill Vehicle program and the transition of the ESSM
program to full rate production. Operating income was $424 mil-
lion in 2003 versus $373 million in 2002 and $257 million in 2001.
Excluding goodwill amortization, operating income was $356 mil-
lion in 2001 or 12.3 percent of net sales.
Network Centric Systems (NCS) provides network centric solu-
tions to integrate sensors, communications, and command and
control to manage the battlespace. NCS had 2003 sales of
$2.8 billion versus $3.1 billion in 2002 and $2.9 billion in 2001.
Operating income was $19 million in 2003 versus $278 million in
2002 and $246 million in 2001. Excluding goodwill amortization,
operating income was $313 million in 2001 or 10.9 percent of net
sales. The decrease in sales and operating income in 2003 was