Raytheon 2010 Annual Report Download - page 59

In 2008, IIS booked $1.8 billion on a number of classified contracts, including $379 million and $271 million on two
major classified programs.
Missile Systems
% Change
(In millions, except percentages) 2010 2009 2008
2010
compared
to 2009
2009
compared
to 2008
Total Net Sales $5,732 $5,561 $5,408 3.1% 2.8%
Total Operating Expenses 5,078 4,957 4,824 2.4% 2.8%
Operating Income 654 604 584 8.3% 3.4%
Operating Margin 11.4% 10.9% 10.8%
Bookings $6,485 $5,548 $6,043 16.9% -8.2%
Total Backlog 8,212 7,657 9,937 7.2% -22.9%
MS is a premier developer and producer of missile systems for the armed forces of the U.S. and other allied nations.
Leveraging its key capabilities in advanced airframes, guidance and navigation systems, high-resolution sensors, targeting,
and netted systems, MS develops and supports a broad range of cutting-edge weapon systems, including missiles, smart
munitions, close-in weapon systems, projectiles, kinetic kill vehicles and directed energy effectors. Key customers include
the U.S. Navy, Army, Air Force and Marine Corps, the MDA, and the armed forces of more than 40 allied nations.
Total Net Sales and Total Operating Expenses—The increase in net sales of $171 million in 2010 compared to 2009 was
primarily due to $108 million of higher net sales on the Standard Missile-3 program, principally from higher volume
driven by scheduled development efforts, $100 million of higher net sales on the AMRAAM program, principally from
higher volume driven by scheduled higher production build rates, $92 million of higher net sales on the tube-launched,
optically-tracked, wireless guided missile program, principally from higher volume driven by scheduled higher
production build rates and $84 million of higher net sales on the PavewayTM program, principally from higher volume
driven by scheduled production efforts on an international award. The increase in net sales was partially offset by $96
million of lower net sales on a non line-of-sight missile program, principally from lower volume, as the program received
a stop work-order in the second quarter of 2010 and $82 million of lower net sales on the KEI program, which was
terminated for convenience in the second quarter of 2009 as described above. The increase in operating expenses of $121
million in 2010 compared to 2009 was driven primarily by the activity in the programs described above.
The increase in net sales of $153 million in 2009 compared to 2008 was primarily due to $76 million of higher net sales on
the Standard Missile-3 program, principally from increased volume due to higher subcontractor effort related to program
deliveries along with increased development efforts, $60 million of higher net sales on the Maverick Missile program due
primarily to material costs resulting from international orders received in 2009, and $57 million of higher net sales related
to development effort on a competitive missile program. The increase in net sales was partially offset by $71 million in
lower net sales on the KEI program, which was terminated for convenience in the second quarter of 2009, as described
above. The increase in operating expenses of $133 million in 2009 compared to 2008 was driven primarily by the activity
in the programs described above.
Operating Income and Margin—The increase in operating income of $50 million in 2010 compared to 2009 was primarily
due to a change in contract mix spread across numerous programs, with no individual or common significant driver,
which had a $19 million impact on operating income, improved program performance, which had a $18 million impact
on operating income, primarily due to $11 million from labor and material production efficiencies on various air
weapons systems programs and increased volume, which had a $13 million impact on operating income. The increase in
operating margin in 2010 compared to 2009 was primarily due to the contract mix and the improved program
performance described above.
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