Raytheon 2014 Annual Report Download - page 54

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45
The increase in research and development expenses of $35 million in 2014 compared to 2013 was primarily due to higher
independent research and development activity related to electronic warfare technology. Research and development expenses
in 2013 were relatively consistent in amount and as a percentage of total net sales with 2012.
Total Operating Expenses
% of Total Net Sales
(In millions, except percentages) 2014 2013 2012 2014 2013 2012
Total operating expenses $ 19,647 $ 20,768 $ 21,425 86.1% 87.6% 87.8%
The decrease in total operating expenses of $1,121 million in 2014 compared to 2013 was primarily due to the decrease in
total cost of sales of $1,237 million, the primary drivers of which are described above in Total Cost of Sales.
The decrease in total operating expenses of $657 million in 2013 compared to 2012 was primarily due to the decrease in total
cost of sales of $560 million, the primary drivers of which are described above in Total Cost of Sales.
Operating Income
% of Total Net Sales
(In millions, except percentages) 2014 2013 2012 2014 2013 2012
Total operating income $ 3,179 $ 2,938 $ 2,989 13.9% 12.4% 12.2%
The increase in operating income of $241 million in 2014 compared to 2013 was due to the decrease in total operating expenses
of $1,121 million, the primary drivers of which are described above in Total Operating Expenses, offset by the decrease in
total net sales of $880 million, the primary drivers of which are described above in Total Net Sales.
The decrease in operating income of $51 million in 2013 compared to 2012 was due to the decrease in total net sales of $708
million, the primary drivers of which are described above in Total Net Sales, offset by the decrease in total operating expenses
of $657 million, the primary drivers of which are described above in Total Operating Expenses.
Total Non-Operating (Income) Expense, Net
(In millions) 2014 2013 2012
Non-operating (income) expense, net
Interest expense $ 213 $ 210 $ 201
Interest income (10)(12)(9)
Other expense (income), net (7)(17) 18
Total non-operating (income) expense, net $ 196 $ 181 $ 210
The increase in total non-operating (income) expense, net of $15 million in 2014 compared to 2013, was primarily due to a
$10 million change in the fair value of marketable securities held in trust associated with certain of our non-qualified deferred
compensation plans, due to net gains of $11 million in 2014 compared to a net gains of $21 million in 2013.
The decrease in total non-operating (income) expense, net of $29 million in 2013 compared to 2012, was primarily due to the
$29 million pretax charge associated with the make-whole provision on the early repurchase of long-term debt in the fourth
quarter of 2012.
Federal and Foreign Income Taxes
(In millions) 2014 2013 2012
Federal and foreign income taxes $ 790 $ 808 $ 878
The decrease in federal and foreign income taxes of $18 million in 2014 compared to 2013 was primarily due to the tax benefit
of the foreign dividend described below, offset by an increase in annual business income. The decrease in federal and foreign