Lockheed Martin 2013 Annual Report Download - page 49

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Frequency (AEHF) system, Orion, Global Positioning Satellite (GPS) III system, Geostationary Operational Environmental
Satellite R-Series (GOES-R), and Mobile User Objective System (MUOS). Operating profit for our Space Systems business
segment includes our share of earnings for our investment in United Launch Alliance (ULA), which provides expendable
launch services to the U.S. Government. Space Systems’ operating results included the following (in millions):
2013 2012 2011
Net sales $ 7,958 $ 8,347 $ 8,161
Operating profit 1,045 1,083 1,063
Operating margins 13.1% 13.0% 13.0%
Backlog at year-end 20,500 18,100 16,000
2013 compared to 2012
Space Systems’ net sales for 2013 decreased $389 million, or 5%, compared to 2012. The decrease was primarily
attributable to lower net sales of approximately $305 million for commercial satellite programs due to fewer deliveries (zero
delivered during 2013 compared to two for 2012); and about $290 million for the Orion program due to lower volume. The
decreases were partially offset by higher net sales of approximately $130 million for government satellite programs due to
net increased volume; and about $65 million for strategic and defensive missile programs (primarily FBM) due to increased
volume and risk retirements. The increase for government satellite programs was primarily attributable to higher volume on
AEHF and other programs, partially offset by lower volume on GOES-R, MUOS, and SBIRS programs.
Space Systems’ operating profit for 2013 decreased $38 million, or 4%, compared to 2012. The decrease was primarily
attributable to lower operating profit of approximately $50 million for the Orion program due to lower volume and risk
retirements and about $30 million for government satellite programs due to decreased risk retirements, which were partially
offset by higher equity earnings from joint ventures of approximately $35 million. The decrease in operating profit for
government satellite programs was primarily attributable to lower risk retirements for MUOS, GPS III, and other programs,
partially offset by higher risk retirements for the SBIRS and AEHF programs. Operating profit for 2013 included about
$15 million of charges, net of recoveries, related to the November 2013 restructuring plan. Adjustments not related to
volume, including net profit booking rate adjustments and other matters, were approximately $15 million lower for 2013
compared to 2012.
2012 compared to 2011
Space Systems’ net sales for 2012 increased $186 million, or 2%, compared to 2011. The increase was attributable to
higher net sales of approximately $150 million due to increased commercial satellite deliveries (two commercial satellites
delivered in 2012 compared to one during 2011); about $125 million from the Orion program due to higher volume and an
increase in risk retirements; and approximately $70 million from increased volume on various strategic and defensive missile
programs. Partially offsetting the increases were lower net sales of approximately $105 million from certain government
satellite programs (primarily SBIRS and MUOS) as a result of decreased volume and a decline in risk retirements; and about
$55 million from the NASA External Tank program, which ended in connection with the completion of the Space Shuttle
program in 2011.
Space Systems’ operating profit for 2012 increased $20 million, or 2%, compared to 2011. The increase was attributable
to higher operating profit of approximately $60 million from commercial satellite programs due to increased deliveries and
reserves recorded in 2011; and about $40 million from the Orion program due to higher risk retirements and increased
volume. Partially offsetting the increases was lower operating profit of approximately $45 million from lower volume and
risk retirements on certain government satellite programs (primarily SBIRS); about $20 million from lower risk retirements
and lower volume on the NASA External Tank program, which ended in connection with the completion of the Space Shuttle
program in 2011; and approximately $20 million from lower equity earnings as a decline in launch related activities at ULA
partially was offset by the resolution of contract cost matters associated with the wind-down of United Space Alliance
(USA). Adjustments not related to volume, including net profit booking rate adjustments described above, were
approximately $15 million higher for 2012 compared to 2011.
Equity earnings
Total equity earnings recognized by Space Systems (primarily ULA in 2013) represented approximately $300 million, or
29% of this segment’s operating profit during 2013. During 2012 and 2011, total equity earnings recognized by Space
Systems from ULA, USA, and the U.K. Atomic Weapons Establishment joint venture represented approximately
$265 million and $285 million, or 24% and 27% of this segment’s operating profit.
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