Lockheed Martin 2015 Annual Report Download - page 56

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2014 compared to 2013
MST’s net sales decreased $305 million, or 3%, in 2014 as compared to 2013. Net sales decreased by approximately
$305 million due to the wind-down or completion of certain C4ISR programs (primarily PTDS); about $85 million for
undersea systems programs due to decreased volume and deliveries; and about $55 million related to the settlements of
contract cost matters on certain programs in 2013 that were not repeated in 2014 (including a portion of the terminated
presidential helicopter program). The decreases were partially offset by higher net sales of approximately $80 million for
integrated warfare systems and sensors programs due to increased volume (primarily Space Fence); and approximately
$40 million for training and logistics solutions programs due to increased deliveries (primarily Close Combat Tactical
Trainer).
MST’s operating profit decreased $129 million, or 12%, in 2014 as compared to 2013. The decrease was primarily
attributable to lower operating profit of approximately $120 million related to the settlements of contract cost matters on
certain programs in 2013 that were not repeated in 2014 (including a portion of the terminated presidential helicopter
program); approximately $55 million due to the reasons described above for lower C4ISR program sales, as well as
performance matters on an international program; and approximately $45 million due to higher reserves recorded on certain
training and logistics solutions programs. The decreases were partially offset by higher operating profit of approximately
$45 million for performance matters and reserves recorded in 2013 that were not repeated in 2014; and about $60 million for
various programs due to increased risk retirements (including MH-60 and radar surveillance programs). Adjustments not
related to volume, including net profit booking rate adjustments and other matters, were approximately $85 million lower for
2014 compared to 2013.
Backlog
Backlog increased in 2015 compared to 2014 primarily due to the addition of Sikorsky backlog, as well as higher orders
on new program starts (such as Australian Defence Force Pilot Training System). Backlog increased in 2014 compared to
2013 primarily due to higher orders on new program starts (such as Space Fence).
Trends
We expect MST’s 2016 net sales to increase in the mid-double digit percentage range compared to 2015 net sales due to
the inclusion of Sikorsky programs for a full year, partially offset by a decline in volume due to the wind-down or
completion of certain programs. Operating profit is expected to be equivalent to 2015 on higher volume, and operating
margin is expected to decline due to costs associated with the Sikorsky acquisition, including the impact of purchase
accounting adjustments, integration costs and inherited restructuring costs associated with actions committed to by Sikorsky
prior to acquisition.
Space Systems
Our Space Systems business segment is engaged in the research and development, design, engineering and production of
satellites, strategic and defensive missile systems and space transportation systems. Space Systems provides network-enabled
situational awareness and integrates complex global systems to help our customers gather, analyze, and securely distribute
critical intelligence data. Space Systems is also responsible for various classified systems and services in support of vital
national security systems. Space Systems’ major programs include the Trident II D5 Fleet Ballistic Missile (FBM), Orion,
Space Based Infrared System (SBIRS), AEHF, GPS-III, Geostationary Operational Environmental Satellite R-Series
(GOES-R), and MUOS. Operating profit for our Space Systems business segment includes our share of earnings for our
investment in ULA, which provides expendable launch services to the U.S. Government. Space Systems’ operating results
included the following (in millions):
2015 2014 2013
Net sales $ 9,105 $ 9,202 $ 9,288
Operating profit 1,171 1,187 1,198
Operating margins 12.9% 12.9% 12.9%
Backlog at year-end $17,400 $20,300 $21,400
2015 compared to 2014
Space Systems’ net sales in 2015 decreased $97 million, or 1%, compared to 2014. The decrease was attributable to
approximately $335 million lower net sales for government satellite programs due to decreased volume (primarily AEHF)
and the wind-down or completion of mission solutions programs; and approximately $55 million for strategic missile and
defense systems due to lower volume. These decreases were partially offset by higher net sales of approximately
$235 million for businesses acquired in 2014; and approximately $75 million for the Orion program due to increased volume.
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