Lockheed Martin 2001 Annual Report Download - page 27

Lockheed Martin Corporation
December 31, 2001
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating profit for the segment increased by 39 per-
cent in 2000 compared to 1999. The current year increase
is primarily attributable to the absence in 2000 of a $210
million negative adjustment recorded during the second
quarter of 1999 that resulted from changes in estimates
related to the C-130J program due to cost growth and a
reduction in production rates. This increase was partially
offset by an approximate $115 million reduction in 2000
operating profit resulting from the decrease in aircraft sales
and deliveries mentioned in the preceding paragraph.
Technology Services
Net sales for the Technology Services segment
increased by four percent in 2001 compared to 2000.
Excluding the sales attributable to Lockheed Martin
Energy Technologies and Retech, two business units that
were divested in 2000, and the acquisition of OAO
Corporation in December of 2001, sales would have
increased seven percent for the year. Sales increased $190
million primarily due to increased volume on the segment’s
government information technology and aircraft and logis-
tics programs. This growth was partially offset by lower
sales volume of $15 million associated with the segment’s
energy-related contracts due to program completions.
Net sales of the Technology Services segment increased
by three percent in 2000 as compared to 1999. The
increase in 2000 sales is comprised of an approximate
$150 million increase in various federal technology services
programs including the Consolidated Space Operations
Contract and the Rapid Response contract. These increases
were partially offset by an approximate $95 million decline
in volume on aircraft maintenance and logistics contracts and
certain energy-related contracts due to program completions.
Operating profit for the segment increased by 12 per-
cent for the year compared to 2000. Absent the earnings
from the divested and acquired businesses, operating profit
would have increased 11 percent for the year. Operating
profit increased by approximately $25 million in 2001 from
higher volumes in the segment’s government information tech-
nology and aircraft maintenance and logistics contracts. This
improvement was somewhat offset by a reduction in operat-
ing profit due to the completion of energy-related contracts.
Operating profit for the segment decreased by 15 per-
cent in 2000 compared to 1999. The decline in operating
profit is attributable directly to a loss of approximately $40
million incurred in the realigned commercial information
technology lines of business and the impact of the previ-
ously mentioned volume declines on certain energy-related
contracts. Somewhat offsetting the decline was increased
operating profit attributable to various federal technology
services programs including the impact of the volume
increases discussed above and increased profitability on
certain information services contracts, and improved perform-
ance on certain aircraft maintenance and logistics contracts.
In December 2001, the Corporation completed its acqui-
sition of all of the outstanding stock of OAO Corporation
(OAO), a provider of information technology solutions to
the federal government. OAO will be included in the
Technology Services segment. OAO’s revenues for all of
2001 approximated 1% of the Corporation’s 2001 net sales.
The segment has a business unit which provides serv-
ices to the government of Argentina, and in which the
Corporation’s net investment at December 31, 2001 was
approximately $25 million. Relative to this business unit,
the Corporation does not expect that the current economic
situation in Argentina, including the devaluation of the
Argentine peso, will have a material impact on its results
of operations, cash flows or financial position.
Corporate and Other
Net sales in the Corporate and Other segment were
immaterial for 2001 and 2000 due to the reclassification
of IMS results of operations to discontinued operations in
connection with its divestiture in July 2001. The decline in
net sales from 1999 was primarily due to reduced volume
in the segment’s properties line of business and the absence
in 2000 of sales attributable to the Corporation’s commer-
cial graphics company, Real 3D, which was divested in the
fourth quarter of 1999.
Operating profit for the Corporate and Other segment
decreased by $52 million when comparing 2001 to 2000.
The decline was principally due to lower equity earnings
from investments and an increase in miscellaneous corpo-
rate expenses including stock-based compensation costs.
Operating profit for the segment increased by $56 million
in 2000 compared to 1999 mainly due to increased equity
earnings from investments, primarily related to the merger
with COMSAT.
Lockheed Martin Annual Report >>> 34