Raytheon 2012 Annual Report Download - page 41

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International Growth
Because of the breadth of our offerings, our systems integration capability, the value of our solutions and our strong legacy
in the international marketplace, we believe that we are well positioned to continue to grow our international business. As
discussed under “International Considerations,” we believe demand continues to grow for solutions in air and missile defense,
air traffic management, precision engagement, homeland security, naval systems integration and ISR. In addition, as coalition
forces increasingly integrate military operations worldwide, we believe that our capabilities in network-enabled operations
will continue to be a key discriminator in these markets.
Our international sales, including foreign military sales through the U.S. Government, were $6.2 billion in 2012 and $6.1
billion in 2011, and our international bookings were $6.0 billion in 2012 and $7.7 billion in 2011.
Focus on the Customer and Execution
Our customer focus continues to be a critical part of our strategy—underpinned by a focus on performance, relationships and
solutions. Performance means being able to meet customer commitments which is ensured through strong processes, metrics
and oversight. We maintain a “process architecture” that spans our six businesses and our broad programs and pursuits. It
consists of processes such as Integrated Product Development System (IPDS), which assures consistency of evaluation and
execution at each step in a program's life-cycle. It also includes our Achieving Process Excellence (APEX), which is our SAP
business system software for accounting, finance and program management; Process Re-Invention Integrating Systems for
Manufacturing (PRISM), which is our SAP software for manufacturing operations; Advanced Company Estimating System
(ACES) which is our cost proposal system; and Raytheon Enterprise Supplier Assessment (RESA) tool for Supply Chain
Management. These processes and systems are linked to an array of front-end and back-end metrics. With this structure, we
are able to track results and be alerted to potential issues through numerous oversight mechanisms, including operating reviews
and annual operating plan reviews.
We are also continuing to build strong customer relationships by working with them as partners and including them on Raytheon
Six SigmaTM teams to jointly improve their programs and processes. We are increasingly focused on responding to our
customers' changing requirements with rapid and effective solutions to real-world problems. In recognition of our customers'
constraints and priorities, we also continue to drive various cost reductions across the Company by continuing to focus on
improving productivity and strong execution throughout our programs. We have worked to reduce costs across the Company,
improve efficiencies in our production facilities, and continue to increase value through Raytheon Six SigmaTM, the
implementation of lean processes, reduced cycle times and strategic supply chain initiatives in addition to other initiatives.
FINANCIAL SUMMARY
We use the following key financial performance measures to manage our business on a consolidated basis and by business
segment, and to monitor and assess our results of operations:
– Bookings—a forward-looking metric that measures the value of new contracts awarded to us during the year;
– Net Sales—a growth metric that measures our revenue for the current year;
– Operating Income—a measure of our profit from continuing operations for the year, before non-operating expenses, net
and taxes; and
– Operating Margin—a measure of our operating income as a percentage of total net sales.
We also focus on earnings per share (EPS), including Adjusted EPS, and measures to assess our cash generation and the
efficiency and effectiveness of our use of capital, such as free cash flow (FCF) and return on invested capital (ROIC).
Considered together, we believe these metrics are strong indicators of our overall performance and our ability to create
shareholder value. We feel these measures are balanced among long-term and short-term performance, efficiency and growth.
We also use these and other performance metrics for executive compensation purposes.
In addition, we maintain a strong focus on program execution and the prudent management of capital and investments in order
to maximize operating income and cash. We pursue a capital deployment strategy that balances funding for growing our
business, including capital expenditures, acquisitions, and research and development; prudently managing our balance sheet,
including debt repayments and pension contributions; and returning cash to our stockholders, including dividend payments
and share repurchases.
Bookings were $26.5 billion, $26.6 billion and $24.4 billion in 2012, 2011 and 2010, respectively, resulting in backlog of
$36.2 billion, $35.3 billion and $34.6 billion at December 31, 2012, 2011 and 2010, respectively. Backlog represents the dollar