Raytheon 2014 Annual Report Download - page 69

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60
activity on the programs described above in Total Net Sales. The decrease in materials and subcontractors costs was driven
by the activity on the programs described above in Total Net Sales, with the remaining change spread across numerous programs
with no individual or common significant driver. The increase in other cost of sales and other operating expenses was primarily
driven by a change in previously deferred precontract costs based on contract awards or funding, which had an impact of $42
million, higher general and administrative expenses of $35 million driven by higher independent research and development
activity related to electronic warfare technology, and an $18 million legal reserve for a contractual dispute.
The decrease in total operating expenses of $384 million in 2013 compared to 2012 was primarily due to a decrease in materials
and subcontractors costs of $401 million, primarily due to the activity on the programs described above in Total Net Sales.
Operating Income and Margin—The decrease in operating income of $74 million in 2014 compared to 2013 was primarily
due to a decrease in mix and other performance of $40 million and a decrease in volume of $33 million. The decrease in mix
and other performance was principally due to $7 million of income in 2014 from certain license royalties based on third-party
usage compared to $34 million in 2013 and an $18 million legal reserve for a contractual dispute. Also included in mix and
other performance in 2014 and 2013 was $40 million and $45 million, respectively, of acquisition-related costs. The decrease
in volume was principally driven by the programs described above in Total Net Sales. The decrease in operating margin in
2014 compared to 2013 was primarily driven by the change in mix and other performance.
The decrease in operating income of $68 million in 2013 compared to 2012 was due to a decrease in volume of $56 million
and a net change in EAC adjustments of $46 million, partially offset by a change in mix and other performance of $34 million.
The decrease in volume was driven principally by the programs described above in Total Net Sales. The net change in EAC
adjustments was principally from higher EAC adjustments in 2012 on integrated communications systems programs as a result
of material and labor efficiencies spread across various production programs. The increase in mix and other performance was
primarily due to $34 million of income in 2013 from certain license royalties based on third-party usage compared with $4
million in 2012, partially offset by $45 million of acquisition-related costs in 2013 compared with $33 million in 2012.
Operating margin in 2013 was relatively consistent with 2012.
Backlog and Bookings—Backlog was $6,930 million, $7,751 million and $7,440 million at December 31, 2014, 2013 and
2012, respectively. The decrease in backlog of $821 million or 11% at December 31, 2014 compared to December 31, 2013
was primarily due to a backlog adjustment of approximately $450 million for a contract that was terminated for convenience.
The increase in backlog of $311 million at December 31, 2013 compared to December 31, 2012 was primarily due to bookings
in excess of sales, principally within our Tactical Airborne Systems product line.
The bookings decrease of $586 million in 2014 compared to 2013 was driven primarily by lower bookings in our Electronic
Warfare and Tactical Airborne Systems product lines, partially offset by higher bookings in our Intelligence, Surveillance and
Reconnaissance Systems product line. In 2014, SAS booked $267 million to provide radar subsystems for the U.S. Navy,
$197 million to provide radar components for an international customer, $105 million for Advanced Targeting Forward Looking
Infrared (ATFLIR) pods and spares for the U.S. Navy and international customers, $92 million on an optical sensor satellite
program for a commercial customer, $81 million for software enhancements for the Active Electronically Scanned Array
(AESA) radars for the U.S. Air Force, and $76 million on the Navy Multiband Terminal (NMT) program. SAS also booked
$1,320 million on a number of classified contracts.
The bookings decrease of $611 million in 2013 compared to 2012 was driven primarily by the $998 million decrease in the
specifically disclosed bookings below. In 2013, SAS booked $825 million on radar contracts for international customers, $210
million to provide Multi-Spectral Targeting Systems (MTS) for unmanned aerial vehicles to the U.S. Air Force, and $132
million for the Navy Multiband Terminal (NMT) program for the U.S. Navy. SAS also booked $862 million on a number of
classified contracts.
In 2012, SAS booked $617 million on radar contracts for international customers, $205 million to provide MTS for unmanned
aerial vehicles to the U.S. Air Force, $187 million for the NMT program for the U.S. Navy, $77 million for the production of
radar warning receivers for the U.S. Navy, and $76 million for the production of the Multi-Platform Radar Technology Insertion
Program (MP-RTIP) surveillance system for NATO. SAS also booked $1,865 million on a number of classified contracts.