Lockheed Martin 2013 Annual Report Download - page 45

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Aeronautics’ operating profit for 2012 increased $69 million, or 4%, compared to 2011. The increase was attributable to
higher operating profit of approximately $105 million from C-130 programs due to an increase in risk retirements;
about $50 million from F-16 programs due to higher aircraft deliveries partially offset by a decline in risk retirements;
approximately $50 million from F-35 production contracts due to increased production volume and risk retirements; and
about $50 million from the completion of purchased intangible asset amortization on certain F-16 contracts. Partially
offsetting the increases was lower operating profit of about $90 million from the F-35 development contract primarily due to
the inception-to-date effect of reducing the profit booking rate in the second quarter of 2012; approximately $50 million from
decreased production volume and risk retirements on the F-22 program partially offset by a resolution of a contractual matter
in the second quarter of 2012; and approximately $45 million primarily due to a decrease in risk retirements on other
sustainment activities partially offset by various other Aeronautics programs due to increased risk retirements and volume.
Operating profit for C-5 programs was comparable to 2011. Adjustments not related to volume, including net profit booking
rate adjustments and other matters described above, were approximately $30 million lower for 2012 compared to 2011.
Backlog
Backlog decreased in 2013 compared to 2012 mainly due to lower orders on F-16, C-5, and C-130 programs, partially
offset by higher orders on the F-35 program. Backlog decreased in 2012 compared to 2011 mainly due to lower orders on
F-35 and C-130 programs, partially offset by higher orders on F-16 programs.
Trends
We expect Aeronautics’ net sales to increase in 2014 in the mid-single digit percentage range as compared to 2013
primarily due to an increase in net sales from F-35 production contracts. Operating profit is expected to increase slightly
from 2013, resulting in a slight decrease in operating margins between the years due to program mix.
Information Systems & Global Solutions
Our IS&GS business segment provides advanced technology systems and expertise, integrated information technology
solutions, and management services across a broad spectrum of applications for civil, defense, intelligence, and other
government customers. IS&GS has a portfolio of many smaller contracts as compared to our other business segments.
IS&GS has been impacted by the continued downturn in federal information technology budgets. IS&GS’ operating results
included the following (in millions):
2013 2012 2011
Net sales $8,367 $8,846 $9,381
Operating profit 759 808 874
Operating margins 9.1% 9.1% 9.3%
Backlog at year-end 8,300 8,700 9,300
2013 compared to 2012
IS&GS’ net sales decreased $479 million, or 5%, for 2013 compared to 2012. The decrease was attributable to lower net
sales of about $495 million due to decreased volume on various programs (command and control programs for classified
customers, NGI, and ERAM programs); and approximately $320 million due to the completion of certain programs (such as
Total Information Processing Support Services, the Transportation Worker Identification Credential (TWIC), and ODIN).
The decrease was partially offset by higher net sales of about $340 million due to the start-up of certain programs (such as
the DISA GSM-O and the National Science Foundation Antarctic Support).
IS&GS’ operating profit decreased $49 million, or 6%, for 2013 compared to 2012. The decrease was primarily
attributable to lower operating profit of about $55 million due to certain programs nearing the end of their lifecycles, partially
offset by higher operating profit of approximately $15 million due to the start-up of certain programs. Adjustments not
related to volume, including net profit booking rate adjustments and other matters, were comparable for 2013 compared to
2012.
2012 compared to 2011
IS&GS’ net sales for 2012 decreased $535 million, or 6%, compared to 2011. The decrease was attributable to lower net
sales of approximately $485 million due to the substantial completion of various programs during 2011 (primarily JTRS;
ODIN; and U.K. Census); and about $255 million due to lower volume on numerous other programs (primarily Hanford;
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