Raytheon 2012 Annual Report Download - page 50

42
programs driven principally by reduced customer program requirements, on acoustic sensor systems due to higher 2011
deliveries based on customer demand, on various air traffic control programs due to planned declines in production and on
an international command, control, communications, computers and intelligence (C4I) program driven principally by program
schedule requirements. The lower net sales at NCS were partially offset by higher net sales on a close combat tactical radar
program and an air traffic control program due to planned increases in production.
Products and Services Net Sales - 2012 vs. 2011—The decrease in product net sales of $345 million in 2012 compared to
2011 was primarily due to lower external product net sales of $355 million at NCS. The decrease in external product net sales
at NCS was primarily due to the activity on the programs described above. Service net sales in 2012 were relatively consistent
with 2011. Included in service net sales in 2012 was higher external service net sales of $115 million at IIS, partially offset
by lower external service net sales of $103 million at TS. The increase in external service net sales at IIS was primarily due
to higher service net sales on classified programs and on cybersecurity solutions driven by recent acquisitions and increased
customer orders. The decrease in external service net sales at TS was primarily due to lower external service net sales on the
NSF Polar contract, which was completed in the first quarter of 2012.
Total Net Sales - 2011 vs. 2010—The decrease in total net sales of $359 million in 2011 compared to 2010 was primarily due
to lower external net sales of $492 million at IDS, $380 million at NCS and $143 million at TS, partially offset by higher
external net sales of $501 million at SAS and $259 million at IIS. The decrease in external net sales at IDS was primarily due
to lower net sales from the scheduled completion of certain design and production phases on a U.S. Navy combat systems
program and the deferment of certain work due to the U.S. Navy's extension of the program schedule and lower net sales, as
planned, on an international Patriot program driven by the completion of scheduled design and certain production efforts. The
decrease in external net sales at NCS was primarily due to lower net sales on U.S. Army sensor programs due to a planned
decline in production, lower net sales on a combat vehicle sensor program, due to a program restructuring and related termination
for convenience, and lower net sales on a U.S. Army radar support program, principally due to the completion of significant
upgrade efforts, partially offset by higher net sales on numerous programs, including acoustic sensor system sales and combat
vehicle sensor program sales for domestic and international customers. The decrease in external net sales at TS was primarily
due to lower net sales on a Defense Threat Reduction Agency (DTRA) program which completed significant efforts at the
end of 2010 and lower net sales on training programs, principally domestic training programs supporting the U.S. Army's
Warfighter Field Operations Customer Support (FOCUS) activities due to a decrease in customer determined activity levels,
partially offset by higher net sales on various depot services operations programs, driven primarily by new contract awards.
The increase in external net sales at SAS was primarily due to higher net sales related to Raytheon Applied Signal Technology
(RAST), which we acquired in the first quarter of 2011, higher volume on ISR systems programs due to increased bookings
over the last few years driven by customer demand for these capabilities, and higher volume, as production work increased,
as planned, on an international airborne tactical radar program awarded in the first half of 2010. The increase in external net
sales at IIS was primarily due to the difference in net sales from the UKBA program on which RSL was notified of its termination
in the second quarter of 2010 (UKBA Program), as described in Commitments and Contingencies, beginning on page 72. Net
sales from the UKBA Program in 2011 were higher than 2010 by $240 million, primarily driven by the adjustment recorded
in the second quarter of 2010 from a change in our estimated revenue and costs (UKBA Program Adjustment), which negatively
impacted sales by $316 million. Also included in the increase in external net sales at IIS was higher net sales on a GPS
command, control, and mission capabilities program awarded in the first quarter of 2010, primarily as a result of scheduled
design and build efforts.
Products and Services Net Sales - 2011 vs. 2010—The decrease in product net sales of $638 million in 2011 compared to
2010 was primarily due to lower external product net sales of $427 million at NCS, $391 million at IDS and $129 million at
MS, partially offset by higher external product net sales of $328 million at SAS. The decrease in external product net sales at
IDS and NCS and the increase in external product net sales at SAS were primarily due to the activity in the programs described
above. The decrease in external product net sales at MS was primarily due to lower net sales on the Standard Missile-2 (SM-2),
Evolved Seasparrow Missile (ESSM) and Standard Missile-3 (SM-3) programs, principally from lower volume driven by
scheduled lower production build rates. The decrease in external product net sales at MS was partially offset by higher net
sales on the Small Diameter Bomb II (SDB II) and Paveway™ programs, principally from higher volume due to scheduled
increases in design and production efforts. The increase in service net sales of $279 million in 2011 compared to 2010 was
primarily due to higher external service net sales of $202 million at IIS and $173 million at SAS, partially offset by lower
external service net sales of $101 million at IDS. The increase in external service net sales at IIS was primarily due to higher
service net sales on classified programs. The increase in external service net sales at SAS was primarily due to increased
volume on ISR systems programs and higher service net sales related to RAST. The decrease in external service net sales at