RAYTHEON COMPANY 333 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) 3333333333333 333 SEGMENT RESULTS Reportable segments have been determined based upon product lines and include the following: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, Technical Services, Aircraft, and Other. In 2003, the Company began reporting its defense businesses in six segments. In addition, the Company’s Commercial Electronics businesses were reassigned to the new defense businesses. Also, the Company created an Other seg- ment comprised of Flight Options LLC, Raytheon Airline Aviation Services LLC, and Raytheon Professional Services LLC. Also in 2003, the Company changed the way pension expense or income is reported in the Company’s segment results as described above in Consolidated Results of Operations. Information for all periods presented was restated to reflect these changes. Integrated Defense Systems (IDS) provides mission systems integration for the air, surface, and subsurface battlespace. IDS had 2003 sales of $2.9 billion versus $2.4 billion in 2002 and $2.3 billion in 2001. The increase in sales in 2003 was due to con- tinued growth on DD(X), the Navy’s future destroyer program, as well as strong missile defense sales. The increase in sales in 2002 was due to higher missile defense volume. Operating income was $331 million in 2003 versus $289 million in 2002 and $238 million in 2001. Excluding goodwill amortization, operating income was $256 million in 2001 or 11.3 percent of net sales. The decrease in operating margin in 2003 was due to lower volume on higher mar- gin international programs Intelligence and Information Systems (IIS) provides signal and image processing, geospatial intelligence, airborne and space- borne command and control, ground engineering support, weather and environmental management, and information technology. IIS had 2003 sales of $2.0 billion versus $1.9 billion in 2002 and $1.7 billion in 2001. The increase in sales in 2003 and 2002  was due to strong growth in classified programs, as well as the start-up of the NPOESS (National Polar-orbiting Operational Environmental Satellite Systems) program. Operating income was $194 million in 2003 versus $180 million in 2002 and $139 million in 2001. Excluding goodwill amortization, operating income was $179 million in 2001 or 10.3 percent of net sales.  Missile Systems (MS) provides air-to-air, precision strike, sur- face Navy air defense, and land combat missiles, guided projec- tiles, kinetic kill vehicles, and directed energy weapons. MS had 2003 sales of $3.5 billion versus $3.0 billion in 2002 and $2.9 bil- lion in 2001. The increase in sales in 2003 was due to the Tomahawk remanufacture program reaching full rate production and several production programs transitioning from engineering development to low rate initial production including Air Intercept Missile (AIM-9X), Evolved Sea Sparrow Missile (ESSM), and Tactical Tomahawk. Sales also increased on several missile defense programs in order to meet accelerated deployment. The increase in sales in 2002 was due to the ramp up on the Exo- Atmospheric Kill Vehicle program and the transition of the ESSM program to full rate production. Operating income was $424 mil- lion in 2003 versus $373 million in 2002 and $257 million in 2001. Excluding goodwill amortization, operating income was $356 mil- lion in 2001 or 12.3 percent of net sales.  Network Centric Systems (NCS) provides network centric solu- tions to integrate sensors, communications, and command and control to manage the battlespace. NCS had 2003 sales of $2.8 billion versus $3.1 billion in 2002 and $2.9 billion in 2001. Operating income was $19 million in 2003 versus $278 million in 2002 and $246 million in 2001. Excluding goodwill amortization, operating income was $313 million in 2001 or 10.9 percent of net sales. The decrease in sales and operating income in 2003 was Net Sales (In millions) 2003 2002 2001 Integrated Defense Systems $ 2,864 $ 2,366 $ 2,265 Intelligence and Information Systems 2,045 1,887 1,736 Missile Systems 3,538 3,038 2,901 Network Centric Systems 2,809 3,091 2,865 Space and Airborne Systems 3,677 3,243 2,738 Technical Services 1,963 2,133 2,050 Aircraft 2,088 2,040 2,471 Other 573 210 207 Corporate and Eliminations (1,448) (1,248) (1,216) Total $18,109 $16,760 $16,017 Operating Income (In millions) 2003 2002 2001 Integrated Defense Systems $ 331 $ 289 $ 238 Intelligence and Information Systems 194 180 139 Missile Systems 424 373 257 Network Centric Systems 19 278 246 Space and Airborne Systems 492 428 339 Technical Services 107 116 123 Aircraft 2 (39) (77) Other (34) (12) (758) FAS/CAS Pension Adjustment (109) 210 386 Corporate and Eliminations (110) (40) (127) Total $1,316 $1,783 $ 766 2003 2002 2001 Integrated Defense Systems 11.6% 12.2% 10.5% Intelligence and Information Systems 9.5 9.5 8.0 Missile Systems 12.0 12.3 8.9 Network Centric Systems 0.7 9.0 8.6 Space and Airborne Systems 13.4 13.2 12.4 Technical Services 5.5 5.4 6.0 Aircraft 0.1 (1.9) (3.1) Other (5.9) (5.7) (366.2) FAS/CAS Pension Adjustment Corporate and Eliminations Total 7.3% 10.6% 4.8% Operating Margin