Lockheed Martin 2015 Annual Report Download - page 42

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Product Sales
Our product sales represent 78% of our total sales in 2015 and 79% of our total sales in 2014. Product sales decreased
$211 million, or 1%, in 2015 as compared to 2014. Lower product sales of about $290 million at Space Systems,
approximately $250 million at MFC and approximately $110 million at IS&GS were offset by higher product sales of about
$320 million at MST and approximately $120 million at Aeronautics. The decrease in product sales at Space Systems was
attributable to lower volume for government satellite programs (primarily Advanced Extremely High Frequency (AEHF).
Product sales at MFC decreased due to lower volume on air and missile defense systems programs (primarily PAC-3). The
decline in product sales at IS&GS was a result of key program completions, lower customer funding levels and increased
competition, coupled with the fragmentation of existing large contracts into multiple smaller contracts that are awarded
primarily on the basis of price. The increase in product sales at MST was primarily attributable to product sales from
Sikorsky, which we acquired in the fourth quarter of 2015. Product sales at Aeronautics increased primarily due to higher
volume on F-35 production contracts, as well as increased deliveries on our C-5 program; partially offset by fewer aircraft
deliveries for our C-130 and F-16 programs and lower sustainment activities on our F-22 program.
Our product sales represent 79% of our total sales in both 2014 and 2013. Product sales increased $402 million, or 1%,
in 2014 as compared to 2013. Higher product sales of about $815 million at Aeronautics and approximately $280 million at
MFC were partially offset by lower product sales of about $275 million at Space Systems, approximately $235 million at
IS&GS and approximately $185 million at MST. The increase in product sales at Aeronautics was attributable to higher
volume on F-35 production contracts and sustainment activities, increased aircraft deliveries (F-16 program) and increased
risk retirements (F-22 program). Product sales at MFC increased as a result of increased volume on air and missile defense
systems programs (primarily THAAD), and increased deliveries on fire control programs (including the Apache Fire Control
System (Apache)). The decline in product sales at Space Systems was due to lower volume for government satellite programs
(primarily Advanced Extremely High Frequency (AEHF), Global Positioning System III (GPS-III), and Mobile User
Objective System (MUOS)); and as a result of mission solutions’ programs transitioning from development to operations and
support, wind-down or completion of certain programs, and defense budget cuts. The decline in product sales at Space
Systems was partially offset by increased volume in the Orion program (primarily the first unmanned test flight of the Orion
Multi-Purpose Crew Vehicle (MPCV)). Lower product sales at IS&GS were primarily due to the wind down or completion
of certain programs and decreased volume in technical services programs reflecting market pressures. Lower product sales at
MST were primarily driven by the wind-down or completion of certain command, control, communications, computers,
intelligence, surveillance and reconnaissance (C4ISR) programs (primarily PTDS).
Service Sales
Our service sales represent 22% of our total sales in 2015 and 21% of our total sales in 2014. Service sales increased
$743 million, or 8%, in 2015 as compared to 2014. The increase in service sales was primarily attributable to higher service
sales of approximately $530 million at Aeronautics and about $190 million at Space Systems. Higher service sales at
Aeronautics were primarily due to increased sustainment activities (primarily F-35). The increase in service sales at Space
Systems was primarily due to service sales of entities acquired in the third quarter of 2014.
Our service sales represent 21% of our total sales in both 2014 and 2013. Service sales decreased $160 million, or 2%, in
2014 as compared to 2013. Lower service sales of approximately $225 million at IS&GS and approximately $120 million at
MST were partially offset by higher service sales at Space Systems of about $190 million. The decline in service sales at
IS&GS was primarily due to various technical services programs as a result of decreased volume reflecting market pressures.
The decline in service sales at MST was primarily due to the wind-down or completion of certain programs. The increase in
sales at Space Systems was primarily due to commercial space transportation programs resulting from launch-related
activities.
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