Lockheed Martin 2011 Annual Report Download - page 42

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delivery of the first C-5M. These increases partially were offset by lower volume of approximately $660 million on the F-35
SDD contract, lower F-16 volume of approximately $340 million primarily due to a reduction of deliveries (20 F-16
deliveries in 2010 compared to 31 in 2009), and lower volume on the F-22 program of $305 million as production continued
to wind down.
Operating profit for the Aeronautics segment increased $132 million, or 9%, in 2011 compared to 2010. The increase
primarily was attributable to approximately $115 million of higher operating profit on C-130 programs due to increased
volume and the retirement of risks, increased volume and risk retirements on F-16 programs of about $50 million and C-5
programs of approximately $20 million, and about $70 million due to risk retirements on other Aeronautics sustainment
activities in 2011. These increases partially were offset by a decline in operating profit of approximately $75 million on the
F-22 program and F-35 SDD contract primarily due to lower volume and about $55 million on other programs, including
F-35 LRIP, primarily due to lower profit rate adjustments in 2011, compared to 2010.
Operating profit for the Aeronautics segment decreased by $69 million, or 4%, in 2010 compared to 2009. The decrease
primarily was attributable to a decline in operating profit on the F-22 program of about $75 million due to lower volume and
a decrease in the level of risk retirements as the production program winds down, lower volume and a decrease in the level of
risk retirements of approximately $45 million on the F-35 SDD contract, and a decline in operating profit of about
$40 million on the F-16 program due to a reduction of deliveries. These decreases more than offset increased operating profit
resulting from higher volume and risk retirements on the F-35 LRIP contracts of approximately $100 million.
The decrease in the Aeronautics segment’s operating margin from 2010 to 2009 reflects increased development and
initial production work on the F-35 program and less work on more mature programs such as the F-22 and
F-16. Development and initial production contracts yield lower profits than mature full rate programs. Accordingly, while net
sales increased in 2010 relative to 2009, operating profit decreased and consequently operating margins have declined.
Backlog increased in 2011 compared to 2010 mainly due to orders exceeding sales on the F-35 and C-5 programs,
which partially were offset by higher sales volume on the C-130 program. Backlog increased in 2010 compared to 2009
mainly due to orders exceeding sales on the C-130, F-35 and C-5 programs, which partially were offset by higher sales
volume compared to new orders on the F-22 program in 2010.
We expect that Aeronautics’ net sales in 2012 will be comparable with 2011. An increase in net sales on the F-35 LRIP
contracts is expected to be mostly offset by a decline in volume on the F-22 production program due to completion of the
production program with the last aircraft delivery in the first half of 2012. Operating profit is projected to decrease at a low
single digit percentage range from 2011 levels, resulting in a slight decline in operating margins between the years.
Electronic Systems
Our Electronic Systems business segment provides surface ship and submarine combat systems; sea-based missile
defense systems; ship systems integration; littoral combat ships; nuclear instrumentation and control systems for naval
submarines, aircraft carriers, and surface warships; air and defense missile systems; air-to-ground precision strike weapons
systems; tactical missiles; munitions; fire control and navigation systems for rotary and fixed-wing aircraft; manned and
unmanned ground vehicles; mission operations support, readiness, engineering support, and integration services; simulation
and training services; and energy programs. Electronic Systems’ major programs include the Aegis Combat System, PAC-3,
THAAD, MLRS, Hellfire, JASSM, Apache Fire Control System, LCS, and SOF CLSS.
We have classified Savi as discontinued operations (Note 14) and, therefore, financial information related to this
business has been excluded from the segment information below. Electronic Systems’ operating results included the
following:
(In millions) 2011 2010 2009
Net sales $14,622 $14,399 $13,630
Operating profit 1,788 1,748 1,648
Operating margin 12.2% 12.1% 12.1%
Backlog at year-end 24,900 23,400 23,000
Net sales for the Electronic Systems segment increased $223 million, or 2%, in 2011 compared to 2010. The increase
was due to higher volume on air defense programs (including PAC-3 and THAAD) of about $420 million, logistics activities
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