Raytheon 2015 Annual Report Download - page 67

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57
Change in Operating Income (in millions)
Year Ended
2015
Versus Year
Ended 2014
Year Ended
2014
Versus Year
Ended 2013
Volume $ 21 $(33)
Net change in EAC adjustments 12 8
Mix and other performance 34 (5)
Total change in operating income $ 67 $(30)
% Change
(In millions, except percentages) 2015 2014 2013
2015
compared
to 2014
2014
compared
to 2013
Bookings $ 8,134 $ 6,383 $ 5,221 27.4% 22.3%
Total Backlog 10,885 9,269 9,162 17.4% 1.2%
MS is a premier developer and producer of missile and combat systems for the armed forces of the U.S. and other allied
nations. Leveraging its capabilities in advanced airframes, guidance and navigation systems, high-resolution sensors,
surveillance, targeting, and netted systems, MS develops and supports a broad range of advanced weapon systems, including
missiles, smart munitions, close-in weapon systems, projectiles, kinetic kill vehicles, directed energy effectors and advanced
combat sensor solutions. Key customers include the U.S. Navy, Army, Air Force and Marine Corps, the MDA and the armed
forces of more than 40 allied nations.
Total Net Sales—The increase in total net sales of $247 million in 2015 compared to 2014 was primarily due to $98 million
of higher net sales on the Paveway™ program principally driven by international requirements, $97 million of higher net sales
on the Tube-launched, Optically-tracked, Wireless-guided (TOW®) missile program primarily due to planned increases in
production, and $90 million of higher net sales on certain air and missile defense programs primarily due to a contract awarded
in the third quarter of 2015, partially offset by $120 million of lower net sales on the Standard Missile-3 (SM-3®) program
primarily due to the planned transition from development to production.
The decrease in total net sales of $290 million in 2014 compared to 2013 was primarily due to $298 million of lower net sales
on land warfare systems programs driven principally by planned declines in production due to the U.S. Army budget
environment.
Total Operating Expenses—The increase in total operating expenses of $180 million in 2015 compared to 2014 was primarily
due to an increase in materials and subcontractors costs of $99 million driven principally by the activity on the TOW® program
described above in Total Net Sales and activity on the Phalanx® program driven by planned increases in production, partially
offset by activity on the SM-3® program described above in Total Net Sales. Included in the change in other cost of sales and
other operating expenses was an increase in research and development expenses of $79 million principally related to advanced
capabilities.
The decrease in total operating expenses of $260 million in 2014 compared to 2013 was primarily due to a decrease in other
cost of sales and other operating expenses of $105 million and a decrease in labor costs of $75 million, both driven principally
by the land warfare systems programs as described above in Total Net Sales.
Operating Income and Margin—The increase in operating income of $67 million in 2015 compared to 2014 was primarily
due to a change in mix and other performance of $34 million and an increase in volume of $21 million. The change in mix
and other performance was driven principally by higher volume on the Paveway™ program described above in Total Net
Sales, with the remaining change spread across numerous programs with no individual or common significant driver. The
increase in volume was driven principally by the programs described above in Total Net Sales. Included in the net change in
EAC adjustments was a $25 million favorable resolution of a contractual issue in the first quarter of 2015. The increase in
operating margin in 2015 compared to 2014 was primarily due to the change in mix and other performance and the net change
in EAC adjustments.