Lockheed Martin 2004 Annual Report Download - page 32

Operating profit for the segment increased by 30% in 2004
compared to 2003. Combat Aircraft operating profit increased
$95 million primarily as a result of higher sales volume on the
programs discussed above and improved performance on the
F/A-22 program. The remaining increase was primarily attrib-
utable to $85 million in operating profit recognized on the
C-130Js delivered in 2004. The Corporation began recognizing
profits on C-130J deliveries in 2004 upon resolution of certain
technical aircraft performance risks, manufacturing perform-
ance improvements and the achievement of stable production as
a result of securing a multi-year contract in 2003.
Operating profit for the segment increased by 54% in 2003
compared to 2002. This increase was primarily due to the impact
of the volume increases in Combat Aircraft and performance on
other programs. In 2003 and 2002, the C-130J deliveries did not
impact operating profit due to the previously disclosed suspension
of earnings recognition on the program.
Backlog decreased in 2004 as compared to 2003 primarily
as a result of sales volume on the F-35 and F-16 programs as
well as deliveries of C-130J aircraft.
Electronic Systems
Electronic Systems’ operating results included the following:
(In millions) 2004 2003 2002
Net sales $ 9,724 $ 8,991 $ 8,685
Operating profit 969 858 875
Backlog at year-end 18,239 17,339 16,034
Net sales for Electronic Systems increased 8% in 2004 as
compared to 2003. The increase in sales was due to higher vol-
ume in Maritime Systems & Sensors (MS2) and Missiles &
Fire Control (M&FC). Higher volume on surface systems pro-
grams accounted for most of MS2’s sales growth of $450 mil-
lion. M&FC’s sales increased $265 million, primarily due to
higher volume on fire control and tactical missile programs.
Net sales for Electronic Systems increased 4% in 2003 as
compared to 2002. Sales increases in M&FC and MS2 more than
offset a decline at Platform, Training & Transportation Systems
(PT&TS). Increased volume in air defense and tactical missile
programs accounted for the majority of M&FC’s $250 million
sales growth over 2002. In MS2, the $155 million increase in sales
was primarily due to higher volume on radar and surface systems
programs. The PT&TS decline of $100 million was the result of
lower volume on transportation and security system activities. The
majority of this decline is attributable to the 2002 rapid deploy-
ment of Transportation Security Administration (TSA) programs.
Operating profit for the segment increased by 13% in 2004
compared to 2003. Operating profit increased $145 million due
to improved performance on tactical missile and fire control
programs at M&FC and on radar programs at MS2. The
decrease in operating profit at PT&TS was due to a $25 million
loss provision recorded in the third quarter of 2004 on certain
international simulation and training contracts.
Operating profit for the segment decreased by 2% in 2003
compared to 2002. PT&TS’ operating profit declined by $40
million due to a changing mix of program maturity and initial
development activities on platform integration programs, as
well as the impact of the decline in volume in transportation and
security system activities. These decreases more than offset a
$25 million increase in operating profit primarily attributable to
higher volume on air defense programs at M&FC.
The increase in backlog during 2004 over 2003 resulted
from increased orders on development programs.
Space Systems
Space Systems’ operating results included the following:
(In millions) 2004 2003 2002
Net sales $ 6,357 $ 6,021 $ 5,287
Operating profit 489 403 279
Backlog at year-end 16,112 12,813 10,701
Net sales for Space Systems increased by 6% in 2004 com-
pared to 2003, as increases in Satellites of $320 million and
Strategic & Defensive Missile Systems (S&DMS) of $75 mil-
lion more than offset a decrease in Launch Services. The
increase in Satellites was due to increased volume on govern-
ment satellite programs and one additional commercial satellite
delivery in 2004. In S&DMS, the increase was primarily attrib-
utable to fleet ballistic missile programs. The lower volume in
Launch Services was mainly due to a decline in the Titan launch
vehicle program, which more than offset increases in both Atlas
launches (six in 2004 compared to five in 2003) and Proton
launches (four in 2004 compared to two in 2003).
Lockheed Martin Corporation
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 2004
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