Lockheed Martin 1996 Annual Report Download - page 60

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Continued
30 percent compared to 1994, reflecting the sales volume
decreases described previously, the negative earnings impli-
cations of contract charges related to the LANTIRN program
close-out and from investments in new businesses, and sub-
stantial completion of subcontract activities on the Patriot
and other mature production programs.
Information & Services — Net sales of the
Information & Services segment increased by 40 percent
in 1996 compared to 1995 due to the inclusion of the opera-
tions of certain Tactical Systems companies since April 1,
1996. Excluding the operations of the Tactical Systems com-
panies, 1996 net sales for the segment were comparable to
1995 levels. Increases in commercial product distribution
activities in 1996 were largely offset by the transfer of
the Corporation's contracts for Space Shuttle processing
operations to USA during 1996, as mentioned above. Net
sales for 1995 increased by five percent compared to 1994
due to increases in sales for commercial product manufac-
turing and distribution activities and in information
management activities.
Operating profit for the segment increased by 12 percent
in 1996 due to the inclusion of the operations of the Tactical
Systems companies discussed above. However, excluding the
operations of the Tactical Systems companies, operating
profit in 1996 for the segment decreased by 30 percent com-
pared to 1995. This decrease was principally the result of
charges taken in the current year related to certain informa-
tion systems contracts and accounts, and from losses taken at
two of the Corporation's subsidiaries. Operating profit in
1995 increased by 36 percent compared to 1994, reflecting
increased award fee recognition, the impact of sales volume
increases and improvements in margin performance
throughout the segment.
Aeronautics — Net sales of the Aeronautics segment
decreased by 15 percent in 1996 compared to 1995, and
by seven percent in 1995 compared to 1994. The net sales
decreases in both years were principally due to fewer deliv-
eries of F-16 fighter aircraft and C-130 airlift aircraft. Net
sales for 1995 reflect the delivery of eight P-3 maritime
patrol aircraft to the Republic of Korea. There were no
comparable deliveries of P-3 aircraft in 1996 or 1994.
Operating profit decreased by eight percent in 1996
compared to 1995 as a result of the volume decreases dis-
cussed above. Operating profit in 1995 increased by four per-
cent compared to 1994 despite the sales decrease for that
period, primarily as a result of recognition of earnings
related to the P-3 aircraft deliveries, which more than offset
the 1995 increase in C-130J development costs, and the inclu-
sion in 1994 of charges taken against earnings in connection
with the Pratt & Whitney fan reverser program.
Energy, Materials and Other — Net sales of this
segment decreased by ten percent in 1996 compared to 1995
after increasing by 16 percent in 1995 compared to 1994.
The 1996 net sales decrease was principally the result of the
divestiture of Materials during the fourth quarter of 1996 as
described above. The 1995 increase reflected the January
1995 Materials acquisition of the construction aggregates
business of Dravo Corporation as well as the commence-
ment of activities under the Idaho National Engineering and
Environmental Laboratory Management and Operations
and Pit 9 contracts in the fourth quarter of 1994.
Operating profit for this segment decreased by five per-
cent in 1996 compared to 1995. Losses on certain of the Cor-
poration's environmental programs were largely offset by
gains from the sale of a portion of the Corporation's invest-
ment portfolio. Operating profit increased by 44 percent in
1995 compared to 1994 due to the inclusion of a full year of
activities under the Idaho National Engineering and Envi-
ronmental Laboratory Management and Operations contract
and earnings growth from increased production volume
at Materials.
Backlog
Total negotiated backlog of $50.4 billion at December 31,
1996 included both unfilled firm orders for the Corporation's
products for which funding has been both authorized and
appropriated by the customer (Congress, in the case of U.S.
Government agencies) and firm orders for which funding has