Lockheed Martin 2003 Annual Report Download - page 32

Aeronautics
Aeronautics’ operating results included the following:
(In millions) 2003 2002 2001
Net sales $10,202 $ 6,471 $ 5,355
Operating profit 690 448 329
Backlog at year-end 37,580 35,477 36,149
Net sales for Aeronautics increased by 58% in 2003 compared
to 2002 due to growth in the Combat Aircraft and Air Mobility lines
of business. Approximately half the growth in Combat Aircraft was
due to higher volume on the F-35 Joint Strike Fighter program with
a majority of the remaining growth attributable to F-16 programs as
a result of increased deliveries. In 2003, 62 F-16s were delivered,
41 more than in 2002. Increased C-130J deliveries contributed $470
million to the year-over-year growth in sales. There were 15 C-130J
deliveries in 2003 compared to 8 deliveries in 2002.
Net sales for Aeronautics increased by 21% in 2002 compared
to 2001 due to growth in the Combat Aircraft line of business.
Approximately 60% of the growth was due to higher volume on the
F-35 program with the majority of the remaining increase attribut-
able to the F/A-22 program. Sales in Air Mobility declined $180
million year-over-year, as 7 fewer C-130J deliveries more than off-
set sales growth in other Air Mobility programs.
Operating profit for the segment increased by 54% in 2003
compared to the 2002 periods. This increase was primarily due to
the impact of the volume increases in Combat Aircraft and per-
formance on other programs.
Operating profit for the segment increased by 36% in 2002
compared to 2001. This increase primarily resulted from the higher
volume in Combat Aircraft. Operating profit for 2002 was nega-
tively affected by $30 million in charges recorded for performance
issues on an aircraft modification contract and a change in estimate
adjustment related to cost growth on F/A-22 activities.
In all periods, the C-130J deliveries do not impact operating
profit due to the previously disclosed suspension of earnings recog-
nition on the program.
Backlog increased in 2003 as compared to 2002 primarily as a
result of booking the C-130J U.S. Government multi-year and
international F-16 contracts.
Electronic Systems
Electronic Systems’ operating results included the following:
(In millions) 2003 2002 2001
Net sales $ 8,991 $ 8,685 $ 8,079
Operating profit 858 875 816
Backlog at year-end 17,339 16,034 15,333
Net sales for Electronic Systems increased 4% in 2003 as com-
pared to 2002. Sales increases in Missiles & Fire Control (M&FC)
and Maritime Systems & Sensors (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 primari-
ly 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 deployment of
Transportation Security Administration (TSA) programs.
Net sales for Electronic Systems increased 8% in 2002 as com-
pared to 2001. Sales increased as a result of higher volume in all
three of the segment’s lines of business. Increased sales at M&FC
of $285 million were mainly due to higher volumes in air defense
and on certain tactical missile programs. PT&TS’ sales increased by
$175 million mainly as a result of volume on transportation and
security system activities (primarily the TSA programs), which off-
set declines on platform integration programs. MS2 sales increased
by $145 million primarily due to higher volumes on surface systems
and radar systems programs.
Operating profit for the segment decreased by 2% in 2003
compared to 2002. PT&TS’ operating profit declined by $40 mil-
lion due to a mix of program maturity and initial development activ-
ities 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 operat-
ing profit primarily attributable to higher volume on air defense pro-
grams at M&FC.
Operating profit for the segment increased by 7% in 2002
compared to 2001. The increase in operating profit was primarily
Lockheed Martin Corporation
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 2003
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