Raytheon 2005 Annual Report Download - page 62

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Operating Income (In millions) 2005 2004 2003
Integrated Defense Systems $ 548 $ 417 $ 331
Intelligence and Information Systems 229 203 198
Missile Systems 431 436 424
Network Centric Systems 333 269 13
Space and Airborne Systems 606 568 492
Technical Services 146 148 109
Aircraft 142 63 2
Other (117) (40) (34)
FAS/CAS Pension Adjustment (465) (474) (109)
Corporate and Eliminations (166) (202) (110)
Total $1,687 $1,388 $1,316
Operating Margin 2005 2004 2003
Integrated Defense Systems 14.4% 12.1% 11.6%
Intelligence and Information Systems 9.1 8.7 9.0
Missile Systems 10.5 11.3 12.0
Network Centric Systems 10.4 8.8 0.5
Space and Airborne Systems 14.5 14.0 13.4
Technical Services 7.4 7.4 5.7
Aircraft 5.0 2.6 0.1
Other (15.0) (5.9) (5.9)
FAS/CAS Pension Adjustment
Corporate and Eliminations
Total 7.7% 6.9% 7.3%
The net sales of the Company’s government and defense businesses increased in 2004 and 2005. These increases were
generally due to growth in U.S. defense spending. The Company currently expects these market trends to continue to
positively impact the Company’s sales in 2006. The Company’s expectations are based on the Company’s planning
assumptions and projections and assessment of numerous factors, including macro-environmental factors which are
outside the Company’s control. The Company believes the current market environment is generally consistent with the
Company’s planning assumptions and performance for the defense businesses, however, there are numerous factors
which could materially impact the environment, including rising budget deficits, costs associated with current U.S.
Department of Defense operations overseas, and other issues affecting the U.S. Department of Defense budget and may
represent a risk to the Company’s expected future performance.
The Company expects that the Space and Airborne Systems operating margin for 2006 will be less than its margin in 2005
primarily due to the favorable margin impact of certain contracts nearing completion in 2005.
The net sales for Aircraft increased in 2004 and 2005. The Company expects an increase in sales at Aircraft in 2006 but
not at the same growth rate as that experienced in 2005 due to higher volume from derivative aircraft introductions in
2005 and market demand for Beechcraft and Hawker products in 2006 that is increasing at a rate lower than 2005.
Integrated Defense Systems (IDS)—IDS provides integrated air defense, maritime, and joint battlespace solutions.
IDS had 2005 sales of $3.8 billion versus $3.5 billion in 2004 and $2.9 billion in 2003. The increase in sales in 2005 was
due to growth on international programs and the Cobra Judy Replacement Mission Equipment program. The increase in
sales in 2004 was due to continued growth on DD(X), the Navy’s future destroyer program. Operating income was $548
million in 2005, versus $417 million in 2004 and $331 million in 2003. The increase in operating margin in 2005 was due
to higher sales on international programs.
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