Lockheed Martin 2013 Annual Report Download - page 46

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Warfighter Information Network-Tactical (WIN-T); Command, Control, Battle Management and Communications
(C2BMC); and TWIC). Partially offsetting the decreases were higher net sales of approximately $140 million from QTC,
which was acquired early in the fourth quarter of 2011; and about $65 million from increased activity on numerous other
programs, primarily federal cyber security programs and PTDS operational support.
IS&GS’ operating profit for 2012 decreased $66 million, or 8%, compared to 2011. The decrease was attributable to
lower operating profit of approximately $50 million due to the favorable impact of the ODIN contract completion in 2011;
about $25 million due to an increase in reserves for performance issues related to an international airborne surveillance
system in 2012; and approximately $20 million due to lower volume on certain programs (primarily C2BMC and WIN-T).
Partially offsetting the decreases was an increase in operating profit due to higher risk retirements of approximately
$15 million from the TWIC program; and about $10 million due to increased activity on numerous other programs, primarily
federal cyber security programs and PTDS operational support. Operating profit for the JTRS program was comparable as a
decrease in volume was offset by a decrease in reserves. Adjustments not related to volume, including net profit booking rate
adjustments and other matters described above, were approximately $20 million higher for 2012 compared to 2011.
Backlog
Backlog decreased in 2013 compared to 2012 primarily due to lower orders on several programs (such as ERAM and
NGI), higher sales on certain programs (the National Science Foundation Antarctic Support and the DISA GSM-O), and
declining activities on several smaller programs primarily due to the continued downturn in federal information technology
budgets. Backlog decreased in 2012 compared to 2011 primarily due to the substantial completion of various programs in
2011 (primarily ODIN, U.K. Census, and JTRS).
Trends
We expect IS&GS’ net sales to decline in 2014 in the high single digit percentage range as compared to 2013 primarily
due to the continued downturn in federal information technology budgets. Operating profit is also expected to decline in 2014
in the high single digit percentage range consistent with the expected decline in net sales, resulting in margins that are
comparable with 2013 results.
Missiles and Fire Control
Our MFC business segment provides air and missile defense systems; tactical missiles and air-to-ground precision strike
weapon systems; logistics and other technical services; fire control systems; mission operations support, readiness,
engineering support, and integration services; and manned and unmanned ground vehicles. MFC’s major programs include
PAC-3, THAAD, Multiple Launch Rocket System, Hellfire, Joint Air-to-Surface Standoff Missile (JASSM), Javelin, Apache
Fire Control System (Apache), Sniper®, Low Altitude Navigation and Targeting Infrared for Night (LANTIRN®), and SOF
CLSS. MFC’s operating results included the following (in millions):
2013 2012 2011
Net sales $ 7,757 $ 7,457 $ 7,463
Operating profit 1,431 1,256 1,069
Operating margins 18.4% 16.8% 14.3%
Backlog at year-end 15,000 14,700 14,400
2013 compared to 2012
MFC’s net sales for 2013 increased $300 million, or 4%, compared to 2012. The increase was primarily attributable to
higher net sales of approximately $450 million for air and missile defense programs (THAAD and PAC-3) due to increased
production volume and deliveries; about $70 million for fire control programs due to net increased deliveries and volume;
and approximately $55 million for tactical missile programs due to net increased deliveries. The increases were partially
offset by lower net sales of about $275 million for various technical services programs due to lower volume driven by the
continuing impact of defense budget reductions and related competitive pressures. The increase for fire control programs was
primarily attributable to increased deliveries on the Sniper®and LANTIRN®programs, increased volume on the SOF CLSS
program, partially offset by lower volume on Longbow Fire Control Radar and other programs. The increase for tactical
missile programs was primarily attributable to increased deliveries on JASSM and other programs, partially offset by fewer
deliveries on the Guided Multiple Launch Rocket System and Javelin programs.
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