Raytheon 2005 Annual Report Download - page 63

Intelligence and Information Systems (IIS)—IIS provides systems, subsystems, and software engineering services
for national and tactical intelligence systems, as well as for homeland security and information technology solutions. IIS
had 2005 sales of $2.5 billion versus $2.3 billion in 2004 and $2.2 billion in 2003. The increase in sales in 2005 was due to
growth in classified programs. The increase in sales in 2004 was due to growth in the Distributed Common Ground
System (DCGS) program and growth in classified programs. Operating income was $229 million in 2005, versus $203
million in 2004 and $198 million in 2003.
Missile Systems (MS)—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 2005 sales of $4.1 billion versus $3.8 billion
in 2004 and $3.5 billion in 2003. The increase in sales in 2005 was due primarily to the ramp up on Tactical Tomahawk
and several developmental programs. The increase in sales in 2004 was due to continued growth in missile defense,
including work on the Standard Missile-3 program. Operating income was $431 million in 2005 versus $436 million in
2004 and $424 million in 2003. The decline in operating margin in 2005 and 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 were 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)—NCS develops and produces net-centric mission solutions for network sensors,
command and control communications, air traffic management, and homeland security. NCS had 2005 sales of $3.2
billion versus $3.1 billion in 2004 and $2.7 billion in 2003. The increase in sales in 2005 was due to growth in
developmental and communications programs. Operating income was $333 million in 2005 versus $269 million in 2004
and $13 million in 2003. The increase in operating margin in 2005 was due to improved performance and program mix.
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)—SAS designs and develops integrated systems and solutions for advanced
missions including unmanned aerial operations, electronic warfare, active electronically scanned array radars, airborne
processors, weapon grade lasers, missile defense, and intelligence, surveillance, and reconnaissance systems. SAS had 2005
sales of $4.2 billion, versus $4.1 billion in 2004 and $3.7 billion in 2003. Operating income was $606 million in 2005
versus $568 million in 2004 and $492 million in 2003. The increase in operating margin in 2005 was due to prior year
charges on an international program of $55 million as a result of a qualification test failure, and productivity
improvements on mature production programs, partially offset by cost growth on development programs. Operating
margin was higher in 2004 due primarily to productivity improvements on production programs, partially offset by prior
year charges.
Technical Services (RTSC)—RTSC provides technology solutions for defense, federal government and commercial
customers worldwide, specializing in counter-proliferation and counter-terrorism, base and range operations,
customized engineering and manufacturing services, and mission support. RTSC had 2005 sales of $2.0 billion versus
$2.0 billion in 2004 and $1.9 billion in 2003. Operating income was $146 million in 2005, versus $148 million in 2004 and
$109 million in 2003. Included in 2003 operating income were charges of $39 million related to an unfavorable change in
the scope on a long-term contract of $22 million and a provision for the collectibility of certain unbilled costs of $17
million.
Raytheon Aircraft Company (RAC)—RAC designs, develops, manufactures, markets, and provides global support
for business jets, turboprops, and piston-powered aircraft for the world’s commercial, fractional ownership, and military
aircraft markets. RAC had 2005 sales of $2.9 billion versus $2.4 billion in 2004 and $2.1 billion in 2003. The increase in
sales in 2005 was due to higher new commercial and special mission aircraft sales. The increase in sales in 2004 was
primarily due to higher new aircraft sales. Operating income was $142 million in 2005, versus $63 million in 2004 and $2
million in 2003. The increase in operating income in 2005 was due to commercial and special mission volume and sales
mix, and continued improved operating performance. The increase in operating income in 2004 was due to higher
volume on new aircraft sales as well as productivity and cost savings initiatives implemented throughout 2003 and 2004.
Included in 2005 and 2004 operating income was a $31 million and a $34 million, respectively, favorable profit
adjustments on the military training aircraft programs. Included in 2003 operating income was a $50 million favorable
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