Lockheed Martin 2001 Annual Report Download - page 26

Lockheed Martin Annual Report >>> 33
Lockheed Martin Corporation
(Continued)
commercial space activities as well as an approximate
$50 million increase in various other space system activi-
ties. Year-over-year sales also increased due to the absence
in 2000 of $90 million in negative adjustments recorded
during 1999 related to the Titan IV program. These adjust-
ments included the effects of changes in estimates for award
and incentive fees resulting from a second quarter 1999
Titan IV launch failure, as well as a more conservative
assessment of future program performance. In addition,
2000 sales were also favorably impacted by an approxi-
mate $50 million adjustment recorded in 2000 on the Titan
IV program as a result of contract modifications and improved
performance on the program. The contract modifications,
which resulted primarily from the U.S. Government’s Broad
Area Review team recommendations, provided for a more
balanced sharing of future risk. The improved performance
on the program resulted from the successful implementation
of corrective actions and initiatives taken since the previ-
ously mentioned 1999 Titan IV launch failure.
Space Systems operating profit increased by nine per-
cent as compared to 2000. The segment’s 2001 operating
profit increased by approximately $70 million due to the
volume increases and improved performance in ground
systems, government satellite programs and other space
segment activities. These increases were partially offset by
higher year-over-year losses in Commercial Space. The
commercial launch vehicle business included $60 million in
higher charges for market and pricing pressures when com-
pared to 2000 and a $40 million loss provision recorded
in the first quarter of 2001 for certain commercial satellite
contracts related to schedule and technical issues. These
negative adjustments were somewhat offset by $50 million
of favorable contract adjustments on certain launch vehicle
contracts. Additionally, operating profit was negatively
impacted by lower production activities for government
launch vehicles. The year-to-year comparison of operating
profit was not affected by the $50 million favorable Titan
IV adjustment recorded in 2000 as discussed above, due
to a $55 million charge related to a more conservative
assessment of government launch vehicle programs that
was recorded in the fourth quarter of 2000.
Operating profit for the segment decreased by 22 per-
cent in 2000 compared to 1999. Continued market and
pricing pressures on commercial space programs, increased
investment in certain launch vehicle programs and reduced
margins on commercial satellites decreased 2000 operating
profit by $180 million from 1999. This decrease included
charges of $85 million recorded in 2000 on the Atlas
launch vehicle program related to continued market and
pricing pressures. In addition, 2000 operating profit was
further reduced by $35 million due to the impact of the vol-
ume declines on government satellite programs mentioned
previously. Consistent with the change in sales, the absence
in 2000 of the negative adjustments recorded during 1999
on the Titan IV program, combined with the favorable adjust-
ments recorded in 2000 on the same program, had an
approximate $140 million positive impact on 2000 operat-
ing profit. The remainder of the decrease is primarily attrib-
utable to an approximate $55 million decrease in operating
profit related to a more conservative assessment of future
performance on government launch vehicle programs.
Aeronautics
Net sales for the Aeronautics segment increased by 10
percent in 2001 compared to 2000. During 2001, sales
increased approximately $400 million primarily due to the
initial ramp up on F-22 production and increased develop-
ment activities related to international F-16 programs.
Volume increases from F-16 and C-130 support activities
also increased sales by approximately $230 million.
These increases were partially offset by declines in sales
of $260 million resulting from fewer F-16 and C-130J
deliveries in 2001.
Net sales of the Aeronautics segment decreased by
11 percent in 2000 compared to 1999. Approximately
95 percent of the decrease in 2000 sales is attributable
to declines in F-16 and C-130J sales and deliveries. These
decreases more than offset increases in sales related to the
F-22 program.
Aeronautics operating profit increased by 21 percent
for the year when compared to the same period of 2000.
For the year, operating profit increased by approximately
$115 million due to increased volume and performance on
the F-22 program, development activities on international
F-16 programs and other aeronautical programs. This
increase was partially offset by a decline in F-16 deliveries.
The net change in C-130J deliveries did not impact EBIT
for the comparative periods due to the previously reported
suspension of earnings recognition on the program.