Lockheed Martin 2015 Annual Report Download - page 53

Backlog
Backlog increased in 2015 compared to 2014 primarily due to higher orders on F-35 and C-130 programs. Backlog
decreased slightly in 2014 compared to 2013 primarily due to lower orders on F-16 and F-22 programs.
Trends
We expect Aeronautics’ 2016 net sales to increase in the mid-single digit percentage range as compared to 2015 due to
increased volume on the F-35 and C-130 programs, partially offset by decreased volume on the F-16 program. Operating
profit is also expected to increase in the low single-digit percentage range, driven by increased volume on the F-35 program
offset by contract mix that results in a slight decrease in operating margins between years.
Information Systems & Global Solutions
Our IS&GS business segment provides advanced technology systems and expertise, integrated information technology
solutions and management services across a broad spectrum of applications for civil, defense, intelligence and other
government customers. IS&GS’ Technical Services business provides a comprehensive portfolio of technical and
sustainment services. IS&GS has a portfolio of many smaller contracts as compared to our other business segments. IS&GS
has been impacted by the continued downturn in certain federal agencies’ information technology budgets and increased
re-competition on existing contracts coupled with the fragmentation of large contracts into multiple smaller contracts that
are awarded primarily on the basis of price. IS&GS’ operating results included the following (in millions):
2015 2014 2013
Net sales $5,596 $5,654 $6,115
Operating profit 508 472 498
Operating margins 9.1% 8.3% 8.1%
Backlog at year-end $4,800 $6,000 $6,300
2015 compared to 2014
IS&GS’ net sales decreased $58 million, or 1%, in 2015 as compared to 2014. The decrease was attributable to lower net
sales of approximately $395 million as 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 when re-competed (including CMS-CITIC). These decreases were partially offset by higher
net sales of approximately $230 million for businesses acquired in 2014; and approximately $110 million due to the start-up
of new programs and growth in recently awarded programs.
IS&GS’ operating profit increased $36 million, or 8%, in 2015 as compared to 2014. The increase was attributable to
improved program performance and risk retirements, offset by decreased operating profit resulting from the activities
mentioned above for net sales. Adjustments not related to volume, including net profit booking rate adjustments and other
matters, were approximately $70 million higher in 2015 compared to 2014.
2014 compared to 2013
IS&GS’ net sales decreased $461 million, or 8%, in 2014 as compared to 2013. The decrease was primarily attributable
to lower net sales of about $475 million due to the wind-down or completion of certain programs, driven by reductions in
direct warfighter support (including JIEDDO); and approximately $320 million due to decreased volume in technical services
programs reflecting market pressures. The decreases were offset by higher net sales of about $330 million due to the start-up
of new programs, growth in recently awarded programs and integration of recently acquired companies.
IS&GS’ operating profit decreased $26 million, or 5%, in 2014 as compared to 2013. The decrease was primarily
attributable to the activities mentioned above for sales, partially offset by severance recoveries related to the restructuring
announced in November 2013 of approximately $20 million in 2014. Adjustments not related to volume, including net profit
booking rate adjustments, were comparable in 2014 and 2013.
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