Lockheed Martin 2013 Annual Report Download - page 47

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MFC’s operating profit for 2013 increased $175 million, or 14%, compared to 2012. The increase was primarily
attributable to higher operating profit of approximately $85 million for air and missile defense programs (THAAD and
PAC-3) due to increased risk retirements and volume; about $85 million for fire control programs (Sniper®, LANTIRN®and
Apache) due to increased risk retirements and higher volume; and approximately $75 million for tactical missile programs
(Hellfire and various programs) due to increased risk retirements. The increases were partially offset by lower operating
profit of about $45 million for the resolution of contractual matters in the second quarter of 2012; and approximately
$15 million for various technical services programs due to lower volume partially offset by increased risk retirements.
Adjustments not related to volume, including net profit booking rate adjustments and other matters, were approximately
$100 million higher for 2013 compared to 2012.
2012 compared to 2011
MFC’s net sales for 2012 were comparable to 2011. Net sales decreased approximately $130 million due to lower
volume and risk retirements on various services programs, and about $60 million due to lower volume from fire control
systems programs (primarily Sniper®; LANTIRN®; and Apache). The decreases largely were offset by higher net sales of
approximately $95 million due to higher volume from tactical missile programs (primarily Javelin and Hellfire) and
approximately $80 million for air and missile defense programs (primarily PAC-3 and THAAD).
MFC’s operating profit for 2012 increased $187 million, or 17%, compared to 2011. The increase was attributable to
higher risk retirements and volume of about $95 million from tactical missile programs (primarily Javelin and Hellfire);
increased risk retirements and volume of approximately $60 million for air and missile defense programs (primarily THAAD
and PAC-3); and about $45 million from a resolution of contractual matters. Partially offsetting these increases was lower
risk retirements and volume on various programs, including $25 million for services programs. Adjustments not related to
volume, including net profit booking rate adjustments and other matters described above, were approximately $145 million
higher for 2012 compared to 2011.
Backlog
Backlog increased in 2013 compared to 2012 mainly due to higher orders on the THAAD program and lower sales
volume compared to new orders on certain fire control systems programs in 2013, partially offset by lower orders on
technical services programs and certain tactical missile programs. Backlog increased in 2012 compared to 2011 mainly due
to increased orders and lower sales on fire control systems programs (primarily LANTIRN®and Sniper®) and on various
services programs, partially offset by lower orders and higher sales volume on tactical missiles programs.
Trends
We expect MFC’s net sales to be flat to slightly down in 2014 compared to 2013, primarily due to a decrease in net sales
on technical services programs partially offset by an increase in net sales from missiles and fire control programs. Operating
profit is expected to decrease in the high single digit percentage range, driven by a reduction in expected risk retirements in
2014. Accordingly, operating profit margin is expected to slightly decline from 2013.
Mission Systems and Training
Our MST business segment provides ship and submarine mission and combat systems; mission systems and sensors for
rotary and fixed-wing aircraft; sea and land-based missile defense systems; radar systems; littoral combat ships; simulation
and training services; and unmanned systems and technologies. MST’s major programs include Aegis Combat System
(Aegis), LCS, MH-60, TPQ-53 Radar System, and MK-41 Vertical Launching System (VLS). MST’s operating results
included the following (in millions):
2013 2012 2011
Net sales $ 7,153 $ 7,579 $ 7,132
Operating profit 905 737 645
Operating margins 12.7% 9.7% 9.0%
Backlog at year-end 10,800 10,700 10,500
2013 compared to 2012
MST’s net sales for 2013 decreased $426 million, or 6%, compared to 2012. The decrease was primarily attributable to
lower net sales of approximately $275 million for various ship and aviation systems programs due to lower volume
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