Raytheon 2012 Annual Report Download - page 63

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55
Total Operating Expenses—The decrease in total operating expenses of $91 million in 2012 compared to 2011 was primarily
due to the UKBA LOC Adjustment in the first quarter of 2011, as described in Commitments and Contingencies beginning
on page 72, which had an impact of $80 million and primarily drove the change in other cost of sales and other operating
expenses. The decrease in materials and subcontractor costs of $60 million was driven primarily by the activity on the UKBA
Program as described above.
The decrease in total operating expenses of $58 million in 2011 compared to 2010 was driven primarily by a reduction in
operating expenses related to the UKBA Program. Included in other cost of sales and other operating expenses in 2011 was
$80 million related to the UKBA LOC Adjustment, as described in Commitments and Contingencies beginning on page 72.
Included in other cost of sales and other operating expenses in 2010 was $79 million related to the UKBA Program Adjustment.
Operating Income and Margin—The increase in operating income of $88 million and the related increase in operating margin
in 2012 compared to 2011 was primarily due to a net change in EAC adjustments of $75 million, driven principally by the
UKBA LOC Adjustment in the first quarter of 2011, which had an impact of $80 million. Mix and other performance in 2012
included $31 million of legal and other period expenses in connection with the UKBA Program dispute and arbitration,
compared to $21 million in 2011. Mix and other performance in 2012 also included an insurance recovery for legal expenses
of $34 million, compared to $9 million in 2011. Operating income in 2012 and 2011 was reduced by approximately $18 million
and $14 million, respectively, of certain cyber security-related acquisition costs and investments.
The increase in operating income of $316 million in 2011 compared to 2010 and the related increase in operating margin was
primarily due to a net change in EAC adjustments of $297 million, principally driven by the UKBA Program Adjustment in
2010, which had an impact of $395 million, partially offset by the UKBA LOC Adjustment in 2011, which had an impact of
$80 million. Operating income in 2011 included $21 million of legal and other period expenses in connection with the UKBA
Program dispute and arbitration compared to $10 million of legal and other period costs in 2010. Operating income in 2011
included $9 million relating to an insurance recovery. IIS' operating income was also reduced by approximately $14 million
in 2011 and $17 million in 2010 by certain cyber security related acquisition costs and investments.
Backlog and Bookings—Backlog was $3,989 million, $4,366 million and $4,319 million at December 31, 2012, 2011 and
2010, respectively. The decrease in backlog of $377 million or 9% at December 31, 2012 compared to December 31, 2011
was primarily due to sales in excess of bookings in 2012, primarily for the Global Positioning System Advanced Control
Segment (GPS-OCX) and JPSS programs. Backlog at December 31, 2011 was relatively consistent with December 31, 2010.
Bookings decreased by $461 million in 2012 compared to 2011. In 2012, IIS booked $172 million on a contract to provide
ISR support to the U.S. Air Force. IIS also booked $1,812 million on a number of classified contracts.
Bookings decreased by $492 million in 2011 compared to 2010. In 2011, IIS booked $520 million on the JPSS program for
NASA, $183 million on a contract to provide ISR support to the U.S. Air Force and $134 million for development on the
GPS-OCX program for the U.S. Air Force. IIS also booked $1,554 million on a number of classified contracts.
In 2010, IIS booked a $901 million award on a contract to develop the next-generation GPS-OCX for the U.S. Air Force, a
$167 million booking on a major U.S. Air Force program, $80 million on the Earth Observing System Data and Information
System (EOSDIS) contract for NASA and $1,723 million on a number of classified contracts, including $371 million on a
major classified program.