Lockheed Martin 2015 Annual Report Download - page 55

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$15 million for fire control programs due to increased deliveries (primarily Apache), partially offset by lower risk retirements
(primarily Sniper®). Adjustments not related to volume, including net profit booking rate adjustments and other matters,
were approximately $95 million lower for 2014 compared to 2013.
Backlog
Backlog increased in 2015 compared to 2014 primarily due to higher orders on PAC-3, LANTIRN/Sniper and certain
tactical missile programs, partially offset by lower orders on THAAD. Backlog decreased in 2014 compared to 2013
primarily due to lower orders on THAAD and fire control systems programs, partially offset by higher orders on certain
tactical missile programs and PAC-3.
Trends
We expect MFC’s net sales to be flat or experience a slight decline in 2016 as compared to 2015. Operating profit is
expected to decrease by approximately 20 percent, driven by contract mix and fewer risk retirements in 2016 compared to
2015. Accordingly, operating profit margin is expected to decline from 2015 levels.
Mission Systems and Training
As previously described, on November 6, 2015, we acquired Sikorsky and aligned the Sikorsky business under our MST
business segment. The results of the acquired Sikorsky business have been included in our financial results from the
November 6, 2015 acquisition date through December 31, 2015. As a result, our consolidated operating results and MST
business segment operating results for the year ended December 31, 2015 do not reflect a full year of Sikorsky operations.
Our MST business segment provides design, manufacture, service and support for a variety of military and civil
helicopters, 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; the Littoral Combat Ship (LCS); simulation and training services;
and unmanned systems and technologies. In addition, MST supports the needs of customers in cybersecurity and delivers
communication and command and control capabilities through complex mission solutions for defense applications. MST’s
major programs include Black Hawk and Seahawk helicopters, Aegis Combat System (Aegis), LCS, Space Fence, Advanced
Hawkeye Radar System, and TPQ-53 Radar System. MST’s operating results included the following (in millions):
2015 2014 2013
Net sales $ 9,091 $ 8,732 $ 9,037
Operating profit 844 936 1,065
Operating margins 9.3% 10.7% 11.8%
Backlog at year-end $30,100 $13,300 $12,600
2015 compared to 2014
MST’s net sales in 2015 increased $359 million, or 4%, compared to 2014. The increase was attributable to net sales of
approximately $400 million from Sikorsky, net of adjustments required to account for the acquisition of this business in the
fourth quarter of 2015; and approximately $220 million for integrated warfare systems and sensors programs, primarily due
to the ramp-up of recently awarded programs (Space Fence). These increases were partially offset by lower net sales of
approximately $150 million for undersea systems programs due to decreased volume as a result of in-theater force reductions
(primarily Persistent Threat Detection System); and approximately $105 million for ship and aviation systems programs
primarily due to decreased volume (Merlin Capability Sustainment Program).
MST’s operating profit in 2015 decreased $92 million, or 10%, compared to 2014. Operating profit decreased by
approximately $75 million due to performance matters on an international program; approximately $45 million for Sikorsky
due primarily to intangible amortization and adjustments required to account for the acquisition of this business in the fourth
quarter of 2015; and approximately $15 million for integrated warfare systems and sensors programs, primarily due to
investments made in connection with a recently awarded next generation radar technology program, partially offset by higher
risk retirements (including Halifax Class Modernization). These decreases were partially offset by approximately $20 million
in increased operating profit for training and logistics services programs, primarily due to reserves recorded on certain
programs in 2014 that were not repeated in 2015. Adjustments not related to volume, including net profit booking rate
adjustments and other matters, were approximately $100 million lower in 2015 compared to 2014.
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