Raytheon 2012 Annual Report Download - page 56

48
Adjusted EPS
Adjusted EPS is diluted EPS from continuing operations attributable to Raytheon Company common stockholders excluding
the EPS impact of the FAS/CAS Adjustment, tax effected at the federal statutory rate of 35% and, from time to time, certain
other items. In addition to the FAS/CAS Adjustment, our 2012 Adjusted EPS also excludes the EPS impact of the make-whole
provision on the early retirement of debt. In addition to the FAS/CAS Adjustment, our 2011 Adjusted EPS also excludes the
EPS impact of the 2011 Tax Settlement, and the UKBA LOC Adjustment tax effected at the 2011 U.K. statutory tax rate of
approximately 25%, as described in Commitments and Contingencies, beginning on page 72. In addition to the FAS/CAS
Adjustment, our 2010 Adjusted EPS also excludes the EPS impact of the 2010 Tax Settlement, the UKBA Program Adjustment
tax effected at the 2010 U.K. statutory rate of approximately 28%, the make-whole provision on the early retirement of debt,
all previously described, and the impact of the acceleration of deferred gains related to terminated interest rate swaps on the
retired debt. We are providing Adjusted EPS because management uses it for the purpose of evaluating and forecasting our
financial performance and believes that it provides additional insight into our underlying business performance. We believe
it allows investors to benefit from being able to assess our operating performance in the context of how our principal customer,
the U.S. Government, allows us to recover pension and other postretirement benefits costs and to better compare our operating
performance to others in the industry on that same basis. Adjusted EPS is not a measure of financial performance under GAAP
and should be considered supplemental to and not a substitute for financial performance in accordance with GAAP. Adjusted
EPS may not be defined and calculated by other companies in the same manner and the amounts presented may not recalculate
directly due to rounding. Adjusted EPS was as follows:
2012 2011 2010
Diluted EPS from continuing operations attributable to Raytheon Company common
stockholders $5.65 $5.22 $4.79
EPS impact of the FAS/CAS Adjustment 0.50 0.62 0.32
EPS impact of the early retirement of debt charges 0.06 — 0.13
EPS impact of UKBA LOC Adjustment —0.17 —
EPS impact of the 2010 and 2011 Tax Settlements —(0.17)(0.45)
EPS impact of the UKBA Program Adjustment —— 0.75
EPS impact of the acceleration of deferred gains related to terminated
interest rate swaps on retired debt ——(0.03)
Adjusted EPS $6.21 $5.85 $5.51
SEGMENT RESULTS
We report our results in the following segments: IDS; IIS; MS; NCS; SAS; and TS. The following provides some context for
viewing our segment performance through the eyes of management.
Given the nature of our business, bookings, net sales, and operating income (and the related operating margin percentage),
which we disclose and discuss at the segment level, are most relevant to an understanding of management’s view of our
segment performance, and often these measures have significant interrelated effects, as described below. In addition, we
disclose and discuss backlog, which represents future sales that we expect to recognize over the remaining contract period,
which is generally several years. We also disclose cost of sales and the components of cost of sales within our segment
disclosures.
Bookings—We disclose the amount of bookings and notable contract awards for each segment. Bookings generally represent
the dollar value of new contracts awarded to us during the reporting period and include firm orders for which funding has not
been appropriated. We believe bookings are an important measure of future performance and are an indicator of potential
future changes in net sales, because we cannot record revenues under a new contract without first having a booking in the
current or a preceding period (i.e., a contract award).
Total Net Sales—We generally express changes in net sales in terms of volume. Volume generally refers to increases or
decreases in revenues related to varying amounts of total operating expenses, which are comprised of cost of sales,
administrative and selling expenses, and research and development expenses, incurred on individual contracts (i.e., from
performance against contractual commitments on our bookings related to engineering, production or service activity).
Therefore, we discuss volume changes attributable principally to individual programs unless there is a discrete event (e.g., a
major contract termination, natural disaster or major labor strike), or some other unusual item that has a material effect on
changes in a segment's volume for a reported period. Due to the nature of our contracts, the amount of costs incurred and