Raytheon 2013 Annual Report Download - page 53

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Total Cost of Sales - 2013 vs. 2012—The decrease in total cost of sales of $560 million in 2013 compared to 2012 was primarily
due to lower external cost of sales of $264 million at IIS and $232 million at SAS, both primarily due to the activity on the
programs and for the reasons described above in Total Net Sales.
Products and Services Cost of Sales - 2013 vs. 2012—The decrease in products cost of sales of $420 million in 2013 compared
to 2012 was primarily due to lower external products cost of sales of $197 million at SAS and $141 million at IDS. The
decrease in external products cost of sales at SAS was primarily due to the activity on the programs and for the reasons
described above in Total Net Sales. The decrease in external products cost of sales at IDS was primarily due to the scheduled
completion of certain production phases on an international Patriot program awarded in the first quarter of 2008, partially
offset by higher external products cost of sales on other integrated air and missile defense programs for international and
domestic customers, driven principally by scheduled program production requirements and timing of new awards, and higher
external products cost of sales on a missile defense radar program for an international customer driven principally by scheduled
program production requirements. The remaining change in external products costs of sales at IDS was spread across numerous
programs with no individual or common significant driver. The decrease in services cost of sales of $140 million in 2013
compared to 2012 was primarily due to lower external services cost of sales of $175 million at IIS, driven principally by
activity on the programs and for the reasons described above in Total Net Sales.
Total Cost of Sales - 2012 vs. 2011—The decrease in total cost of sales of $572 million in 2012 compared to 2011 was primarily
due to lower external cost of sales of $235 million at IIS and $140 million at SAS and $82 million of lower expense in 2012
compared to 2011 related to the FAS/CAS Adjustment described below in Segment Results. The decrease in external cost of
sales at IIS was primarily due to the NSF Polar contract described above in Total Net Sales and by activity on the UKBA
Program, including $80 million related to the UKBA LOC Adjustment in the first quarter of 2011, as described in Commitments
and Contingencies beginning on page 67. The decrease in external cost of sales at SAS was primarily due to the activity on
the programs and for the reasons described above in Total Net Sales as well as lower volume on certain sensor systems programs
due to program schedule requirements.
Products and Services Cost of Sales - 2012 vs. 2011—The decrease in products cost of sales of $533 million in 2012 compared
to 2011 was primarily due to lower external product cost of sales of $219 million at IIS and $186 million at SAS. The decrease
in external products cost of sales at IIS was driven principally by activity on the UKBA Program, including $80 million related
to the UKBA LOC Adjustment in the first quarter of 2011, as described in Commitments and Contingencies beginning on
page 67. The decrease in external product cost of sales at SAS was primarily due to the activity on the programs and for the
reasons described above in Total Net Sales as well as lower volume on certain sensor systems programs due to program
schedule requirements. Services cost of sales in 2012 was relatively consistent with 2011.
General and Administrative Expenses
% of Total Net Sales
(In millions, except percentages) 2013 2012 2011 2013 2012 2011
Administrative and selling expenses $ 1,771 $ 1,882 $ 1,847 7.5% 7.7% 7.5%
Research and development expenses 465 451 450 2.0% 1.8% 1.8%
Total general and administrative expenses $ 2,236 $ 2,333 $ 2,297 9.4% 9.6% 9.3%
The decrease in administrative and selling expenses of $111 million in 2013 compared to 2012 was primarily due to a $36
million decrease in net state taxes allocated to our contracts, $34 million driven by the timing of bid and proposal expenses
on various contract pursuits, and a $17 million decrease in marketing and selling expenses.
The increase in administrative and selling expenses of $35 million in 2012 compared to 2011 was primarily due to increased
bid and proposal expenses of $73 million due to the timing of various radar, classified, electronic warfare and communications
programs and an increase of $62 million in state taxes allocated to our contracts, partially offset by decreases in marketing
and selling expenses of $47 million, $27 million of lower acquisition-related costs for Raytheon Applied Signal Technology,
Inc. (RAST), and a $15 million increase in insurance recovery, net of legal and period expenses, in connection with the UKBA
Program dispute and arbitration at IIS.