Lockheed Martin 2010 Annual Report Download - page 38

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Operating profit for the segment increased by 3% in 2010 compared to 2009. Operating profit increases at M&FC and GT&L
more than offset a decline at MS2. The $73 million increase at M&FC mainly was due to higher volume and improved performance
on certain tactical missile programs and higher volume on air defense programs. The $23 million increase at GT&L primarily was
attributable to higher volume on readiness and stability operations and improved performance on simulation and training programs.
These increases more than offset declines due to lower volume and performance on other logistics programs and the absence in 2010
of a benefit recognized in the first quarter of 2009 from favorably resolving a contract matter at simulation & training programs. The
$44 million decrease in operating profit at MS2 mainly was due to lower volume and performance on undersea warfare programs and
a decrease in the level of favorable performance adjustments on surface naval warfare programs in 2010. These declines partially were
offset by higher volume and improved performance on ship & aviation systems and radar systems programs in 2010.
Operating profit for the segment increased by 5% in 2009 compared to 2008. In 2009, increases in operating profit at M&FC
and GT&L more than offset declines at MS2. Operating profit increased $110 million at M&FC mainly due to higher volume and
improved performance on fire control systems and tactical missile programs. The increase in operating profit of $34 million at GT&L
primarily was due to higher volume and improved performance on simulation and training programs and readiness and stability
operations. Additionally, the increase included a benefit recognized in 2009 from favorably resolving a simulation and training
contract matter. These increases partially were offset by lower volume and performance on other logistics programs. There was a $67
million decrease in operating profit at MS2, which primarily was attributable to lower volume on ship & aviation programs and a
reduction in the level of favorable performance adjustments on ship & aviation systems and undersea warfare programs in 2009
compared to 2008.
Backlog increased in 2010 compared to 2009 primarily from increased orders for air defense and tactical missile programs at
M&FC and readiness and stability operations at GT&L. These increases partially were offset by higher sales volume on ship &
aviation systems and surface naval warfare programs at MS2. Backlog decreased in 2009 compared to 2008 due to the U.S.
Government’s exercise of the termination for convenience clause on the VH-71 Presidential Helicopter Program at MS2, which
resulted in a $985 million reduction. This decline more than offset increased orders on air defense and tactical missile programs at
M&FC and simulation and training activities at GT&L.
We expect Electronic Systems’ sales to decline in 2011 in the low single digit percentage range as compared to 2010. The
decline primarily is due to our completion of the persistent threat detection system (PTDS) program in 2010, coupled with the delayed
timing of awards such as the Littoral Combat Ship and certain missile defense contracts. We expect the decline to be partially offset
by growth in readiness and stability contracts. Operating profit is expected to decline in line with sales, with operating margins
expected to be similar to those in 2010.
Information Systems & Global Solutions
Our IS&GS business segment provides management services, Information Technology (IT) solutions, and advanced technology
expertise across a broad spectrum of applications to U.S. Government and other customers. The segment operates in the Civil,
Defense, and Intelligence lines of business. IS&GS’ key programs and activities include the En-Route Automation Modernization
(ERAM) program, the Airborne Maritime Fixed Joint Tactical Radio System (JTRS) program, the Hanford Mission Support contract,
and the Decennial Response Integration System (DRIS 2010) program. The DRIS 2010 program substantially was completed in 2010.
IS&GS’ programs also include a large number of IDIQ and task order types of contracts across each of its lines of business. IS&GS’
operating results included the following:
(In millions)
2010
2009
2008
Net sales
$ 9,959
$ 9,608
$ 9,069
Operating profit
890
895
919
Operating margin
8.9%
9.3%
10.1%
Backlog at year-end
9,700
10,600
11,500
Net sales for IS&GS increased by 4% in 2010 compared to 2009. Sales increased in Civil and Defense but declined in
Intelligence during the year. Civil increased $437 million principally due to higher volume on enterprise civilian services. Defense
sales increased $20 million primarily due to higher volume on mission and combat systems activities. The $106 million decline in
Intelligence programs mainly was due to lower volume on security solutions.
Net sales for IS&GS increased by 6% in 2009 compared to 2008. Sales increased in all three lines of business during the year.
Net sales at Civil increased by $324 million principally due to higher volume on enterprise civilian services. Defense sales increased
$192 million primarily due to higher volume on mission and combat systems activities. The $23 million increase in Intelligence
mainly was due to higher volume on security solutions.