Raytheon 2007 Annual Report Download - page 74

Operating Income and Margin. The decrease in operating income of $44 million in 2007 and the related decline in margin
were primarily due to profit adjustments and lower volume on a sensor program and certain classified programs, partially
offset by improved program performance on an international aircraft integration program.
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.
Backlog and Bookings. The 2007 decrease in backlog of $315 million was primarily due to stop work orders issued on a
space classified program. In 2007, SAS booked over $860 million on a number of classified contracts including $381
million on a major classified program in the fourth quarter. SAS also booked $329 million related to a capability for a
satellite system.
In 2006, SAS booked approximately $1.5 billion on classified contracts compared to $0.9 billion in 2005. The $371
million increase in backlog in 2006 compared to 2005 was mainly due to bookings on space classified programs.
Technical Services (TS)
% Change
(In millions except percentages) 2007 2006 2005
2007
compared
to 2006
2006
compared
to 2005
Net Sales $2,174 $2,153 $2,066 1.0% 4.2%
Operating Income 139 153 152 -9.2% 0.7%
Operating Margin 6.4% 7.1% 7.4%
Gross Bookings $1,610 $1,418 $1,373 13.5% 3.3%
Total Backlog 1,925 1,815 1,874 6.1% -3.1%
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. In 2007, TS led a team that secured the Warfighter Field Operations Customer Support
(FOCUS) contract to consolidate the U.S. Army live, virtual and constructive training operations and support systems
worldwide. TS was also selected as the preferred bidder for the Defence Training Rationalisation contract for the U.K.
Ministry of Defence, which is expected to enhance TS’ integrated training capability. In addition, TS was awarded a
contract to provide support for the Widebody Airborne Sensor Platform (WASP) data collection on a Missile Defense
Agency DC-10, as well as an Anti-Terrorism Force Protection (ATFP) Physical Security and Services contract for U.S.
Naval facilities which extends TS capabilities into the homeland security market.
Net Sales. The increase in sales in 2007 of $21 million was primarily due to higher volume on certain Defense Threat
Reduction Agency (DTRA) programs, training, and international programs partially offset by a $113 million decrease at
our depot services operation.
The increase in sales in 2006 was primarily due to additional deliveries and the ramp up of construction services on
certain DTRA programs. This was partially offset by the wind down of three major programs: GUAM, AUTEC and Navy
and Marine Corps Intranet (NMCI).
Operating Income and Margin. The decrease in operating income of $14 million in 2007 and the related decline in
margins were primarily due to decreased volume in our higher margin depot services operation.
The decrease in operating margin in 2006 was primarily due to a profit adjustment related to certain program costs which
may be deemed unrecoverable.
Backlog and Bookings. The increase in backlog and bookings was primarily due to bookings on the U.S. Army’s Warfighter
Field Operations Customer Support (FOCUS) contract, work for the Department of Energy and the DTRA. TS booked
$492 million on work for the Department of Energy and the DTRA and $118 million on the FOCUS contract in 2007.
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