Raytheon 2006 Annual Report Download - page 72

Space and Airborne Systems (SAS)
% Change
(In millions except percentages) 2006 2005 2004
2006
versus
2005
2005
versus
2004
Net Sales $4,319 $4,175 $4,068 3.4% 2.6%
Operating Income 604 606 568 -0.3% 6.7%
Operating Margin 14.0% 14.5% 14.0%
Gross Bookings 4,021 3,996 3,901 0.6% 2.4%
Total Backlog 5,591 5,220 5,216 7.1% 0.1%
SAS designs and develops integrated systems and solutions for advanced missions including intelligence, surveillance and
reconnaissance, precision engagement, unmanned aerial operations, special forces operations and space. During 2006,
SAS submitted a major proposal for the Joint Cargo Aircraft (JCA) program managed by the U.S. Army and Air Force,
which we anticipate will be decided in early 2007. The JCA will be a new transport aircraft that can perform rapid-
response intra-theater missions with cargo, equipment and soldiers, and would represent a key Mission System
Integration role for the business.
Net Sales. The increase in sales in 2006 was primarily due to increased production on the Advanced Targeting Forward
Looking Infrared (ATFLIR) program. Sales also increased due to additional orders for Hunter Strike targeting systems
and a follow-on contract for International Greek Advanced Self-Protection Integrated Suite (ASPIS) electronic warfare
products, partially offset by the restructuring of space programs. Sales growth in 2005 was driven by the ramp up of full
rate production for ATFLIR and the Electronic Warfare Decoy programs, partially offset by lower sales on an
international program and the beginning of the restructuring of space programs.
Operating Income and Margin. The decrease in operating margin in 2006 was due to the completion of a number of
mature airborne radar production programs which delivered their final product in the first quarter of 2006 and had
provided margin improvement in late 2004 and 2005. The increase in operating margin in 2005 was due to charges in
2004 on an international program of $55 million as a result of a qualification test failure, and productivity improvements
in 2005 on certain mature airborne radar production programs, partially offset by cost growth on development programs.
The 2007 margin is expected to be lower than 2006 primarily due to certain profit improvements not expected to recur
on programs at or nearing completion in 2006.
Backlog and Bookings. In 2006, SAS booked approximately $1.5 billion on classified contracts. In 2005, SAS booked $586
million for a multi-year production contract of 190 APG-79 Active Electronically Scanned Array (AESA) radars for the
F/A-18 Super Hornet program. In 2004, SAS booked over $1.3 billion on a number of classified contracts.
Technical Services (TS)
% Change
(In millions except percentages) 2006 2005 2004
2006
versus
2005
2005
versus
2004
Net Sales $2,049 $1,980 $1,987 3.5% -0.4%
Operating Income 147 146 148 0.7% -1.4%
Operating Margin 7.2% 7.4% 7.4%
Gross Bookings 1,334 1,242 1,802 7.4% -31.1%
Total Backlog 1,572 1,594 1,773 -1.4% -10.1%
TS 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. During 2006, TS continued deploying its Mission Support ReadiLogTM Integrated Solution
Sets, including condition-based maintenance; integrated information management; integrated supply chain management;
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