Raytheon 2012 Annual Report Download - page 67

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The decrease in total net sales of $421 million in 2011 compared to 2010 was primarily due to $283 million of lower net sales
on U.S. Army sensor programs due to a planned decline in production, $124 million of lower net sales on a combat vehicle
sensor program, principally from lower volume due to a program restructuring and related termination for convenience, and
$98 million of 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 a combined $106 million on acoustic sensor
system sales and combat vehicle sensor program sales for domestic and international customers.
Total Operating Expenses—The decrease in total operating expenses of $267 million in 2012 compared to 2011 was driven
primarily by the activity on the programs, and for the reasons described above in Total Net Sales. The decrease in materials
and subcontractor costs of $192 million was driven primarily by the activity on the programs, and for the reasons described
above in Total Net Sales. The decrease in labor costs of $77 million was spread across numerous programs driven by the
various reduced program requirements.
The decrease in total operating expenses of $396 million in 2011 compared to 2010 was driven primarily by the activity on
U.S. Army sensor programs, a combat vehicle sensor program and a U.S. Army radar support program for the reasons described
above in Total Net Sales, partially offset by the activity on numerous programs, including acoustic sensor systems and a combat
vehicle sensor program for domestic and international customers as described above in Total Net Sales. The decrease in
materials and subcontractor costs of $356 million was driven primarily by the net decreased volume on the programs described
above due to a planned decline in production.
Operating Income and Margin—The decrease in operating income of $172 million in 2012 compared to 2011 was primarily
due to a change in mix and other performance of $131 million, driven primarily by reduced deliveries of acoustic sensor
systems, and reduced sales on U.S. Army and other production programs. Included in the change in mix and other performance
are $17 million of costs related to ending a supplier agreement and $14 million for inventory valuation allowances. The
decrease in operating margin in 2012 compared to 2011 was primarily due to the change in mix and other performance.
The decrease in operating income of $25 million in 2011 compared to 2010 was primarily due to decreased volume, which
had an impact of $59 million, principally driven by the programs described above in Total Net Sales, and a net change in EAC
adjustments of $22 million, which was spread across numerous programs with no individual or common significant driver,
partially offset by a change in contract mix and other performance of $56 million, principally driven by higher domestic and
international acoustic sensor systems sales. Included in operating income in 2010 was a negative EAC adjustment of $28
million relating to an infrastructure protection program as a result of a change in our estimated revenue and costs due to the
termination of a subcontractor and the Company's subsequent direct assumption of that subcontractor's scope of work. The
increase in operating margin in 2011 compared to 2010 was primarily due to the change in contract mix and other performance
and the net change in EAC adjustments described above.
Backlog and Bookings—Backlog was $4,364 million, $4,160 million and $4,912 million at December 31, 2012, 2011 and
2010, respectively. The increase in backlog of $204 million or 5% at December 31, 2012 compared to December 31, 2011
was primarily due to bookings in excess of external sales, principally within our C4I product line, primarily on an international
C4I program, partially offset by our Combat and Sensing Systems (CSS) product line, primarily on U.S. Army programs. The
decrease in backlog of $752 million at December 31, 2011 compared to December 31, 2010 was primarily due to external
sales in excess of bookings in 2011, principally within our Combat and Sensing Systems (CSS) and C4I product lines, primarily
on U.S. Army programs.
Bookings increased by $457 million in 2012 compared to 2011. In 2012, NCS booked $650 million on an international C4I
program, $187 million for the Navy Multiband Terminal (NMT) program for the U.S. Navy and $173 million on the Standard
Terminal Automation Replacement System (STARS) program for the FAA.
Bookings decreased by $402 million in 2011 compared to 2010. In 2011, NCS booked $211 million for the production of
Sentinel radars, spares and services for the U.S. Army and international customers, $146 million for the Long Range Advanced
Scout Surveillance Systems (LRAS3) program for the U.S. Army, $71 million for the Thermal Weapon Sight (TWS) program
for the U.S. Army and $64 million for Enhanced Position Location Reporting System (EPLRS) and MicroLight® radios from
the Australian Defence Materiel Organisation (DMO).
In 2010, NCS booked $254 million on the STARS program for the FAA and the DoD, $250 million for the LRAS3 program
for the U.S. Army, $146 million on a command and control program for an international customer, $111 million for Horizontal