Lockheed Martin 2013 Annual Report Download - page 44

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Aeronautics
Our Aeronautics business segment is engaged in the research, design, development, manufacture, integration,
sustainment, support, and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air
vehicles, and related technologies. Aeronautics’ major programs include the F-35 Lightning II Joint Strike Fighter, C-130
Hercules, F-16 Fighting Falcon, F-22 Raptor, and the C-5M Super Galaxy. Aeronautics’ operating results included the
following (in millions):
2013 2012 2011
Net sales $14,123 $14,953 $14,362
Operating profit 1,612 1,699 1,630
Operating margins 11.4% 11.4% 11.3%
Backlog at year-end 28,000 30,100 30,500
2013 compared to 2012
Aeronautics’ net sales for 2013 decreased $830 million, or 6%, compared to 2012. The decrease was primarily
attributable to lower net sales of approximately $530 million for the F-16 program due to fewer aircraft deliveries (13 aircraft
delivered in 2013 compared to 37 delivered in 2012) partially offset by aircraft configuration mix; about $385 million for the
C-130 program due to fewer aircraft deliveries (25 aircraft delivered in 2013 compared to 34 in 2012) partially offset by
increased sustainment activities; approximately $255 million for the F-22 program, which includes about $205 million due to
decreased production volume as final aircraft deliveries were completed during the second quarter of 2012 and $50 million
from the favorable resolution of a contractual matter during the second quarter of 2012; and about $270 million for various
other programs (primarily sustainment activities) due to decreased volume. The decreases were partially offset by higher net
sales of about $295 million for F-35 production contracts due to increased production volume and risk retirements;
approximately $245 million for the C-5 program due to increased aircraft deliveries (six aircraft delivered in 2013 compared
to four in 2012) and other modernization activities; and about $70 million for the F-35 development contract due to increased
volume.
Aeronautics’ operating profit for 2013 decreased $87 million, or 5%, compared to 2012. The decrease was primarily
attributable to lower operating profit of about $85 million for the F-22 program, which includes approximately $50 million
from the favorable resolution of a contractual matter in the second quarter of 2012 and about $35 million due to decreased
risk retirements and production volume; approximately $70 million for the C-130 program due to lower risk retirements and
fewer deliveries partially offset by increased sustainment activities; about $65 million for the C-5 program due to the
inception-to-date effect of reducing the profit booking rate in the third quarter of 2013 and lower risk retirements;
approximately $35 million for the F-16 program due to fewer aircraft deliveries partially offset by increased sustainment
activity and aircraft configuration mix. The decreases were partially offset by higher operating profit of approximately
$180 million for F-35 production contracts due to increased risk retirements and volume. Operating profit was comparable
for the F-35 development contract and included adjustments of approximately $85 million to reflect the inception-to-date
impacts of the downward revisions to the profit booking rate in both 2013 and 2012. Adjustments not related to volume,
including net profit booking rate adjustments and other matters, were approximately $75 million lower for 2013 compared to
2012.
2012 compared to 2011
Aeronautics’ net sales for 2012 increased $591 million, or 4%, compared to 2011. The increase was attributable to
higher net sales of approximately $745 million from F-35 production contracts principally due to increased production
volume; about $285 million from F-16 programs primarily due to higher aircraft deliveries (37 F-16 aircraft delivered in
2012 compared to 22 in 2011) partially offset by lower volume on sustainment activities due to the completion of
modification programs for certain international customers; and approximately $140 million from C-5 programs due to higher
aircraft deliveries (four C-5M aircraft delivered in 2012 compared to two in 2011). Partially offsetting the increases were
lower net sales of approximately $365 million from decreased production volume and lower risk retirements on the F-22
program as final aircraft deliveries were completed in the second quarter of 2012; approximately $110 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 and to a lesser extent lower volume; and about $95 million from a decrease in volume on other sustainment activities
partially offset by various other Aeronautics programs due to higher volume. Net sales for C-130 programs were comparable
to 2011 as a decline in sustainment activities largely was offset by increased aircraft deliveries.
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