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IIS is a leader in intelligence, surveillance and reconnaissance (ISR), advanced cyber solutions, weather and
environmental solutions, and information-based solutions for law enforcement and homeland security. Approximately
half of its business is for classified customers. Other key customers include the U.S. Intelligence Community, DoD
agencies, the Federal Bureau of Investigations (FBI), and the National Oceanographic and Atmospheric Association
(NOAA).
Total Net Sales and Total Operating Expenses—The decrease in net sales of $447 million in 2010 compared to 2009 was
primarily due to $385 million of lower net sales on the UK Border Agency Program driven principally by the $316 million
adjustment recorded in the second quarter of 2010 from a change in our estimated revenue and costs on the UK Border
Agency Program, $68 million of lower net sales on a distributed ground systems program for the U.S. Air Force
principally from lower volume as a result of the planned program schedule, and $65 million of lower net sales on certain
classified programs. The decrease in net sales was partially offset by $104 million of higher net sales, as a result of
scheduled design and build efforts on Global Positioning System Advanced Control Segment (GPS-OCX), a GPS
command, control and mission capabilities program awarded in the first quarter of 2010. Operating expenses in 2010
remained relatively consistent with 2009.
The increase in net sales of $72 million in 2009 compared to 2008 was primarily due to $114 million of higher net sales on
three major classified programs and $29 million of higher net sales on a U.S. Air Force program, principally from higher
volume driven by additional task orders from expanded customer scope, partially offset by $98 million of lower net sales
on an international advanced border control and security program, principally from lower volume as subcontractor work
related to the initial development phase was completed in June 2009. The increase in operating expenses of $66 million in
2009 compared to 2008 was driven primarily by the activity in the programs described above.
Operating Income and Margin—The decrease in operating income of $409 million in 2010 compared to 2009 and the
related decrease in operating margin was primarily due to $419 million of operating income impact related to the UK
Border Agency Program driven by the $395 million adjustment recorded in the second quarter of 2010 from a change in
our estimated revenue and costs previously described, partially offset by $16 million of improved program performance
spread across numerous programs. IIS’ operating income was also reduced by approximately $17 million in 2010 and
2009 by certain cybersecurity-related acquisition costs and investments.
The increase in operating income of $6 million in 2009 compared to 2008 was primarily due to lower cybersecurity-
related acquisition costs and investments, which had a $12 million impact on operating income. Operating margin in
2009 remained consistent with 2008. IIS’ operating margin was reduced by approximately $17 million in 2009 and
approximately $29 million in 2008 by certain cybersecurity-related acquisition costs and investments.
Backlog and Bookings—The decrease in backlog of $41 million at December 31, 2010 compared to December 31, 2009 was
primarily due to a $556 million net backlog adjustment on the UK Border Agency Program, recorded in the second
quarter of 2010, partially offset by higher bookings in 2010 described below. The decrease in backlog of $777 million at
December 31, 2009 compared to December 31, 2008 was primarily due to lower 2009 bookings described below.
The increase in bookings of $1,180 million in 2010 compared to 2009 included a $901 million award on a contract to
develop the next-generation GPS-OCX for the U.S. Air Force, a $167 million booking on a major U.S. Air Force program,
$80 million on the Earth Observing System Data and Information System (EOSDIS) contract for NASA and $1,723
million on a number of classified contracts, including $371 million on a major classified program, compared to $1,364
million in 2009.
The decrease in bookings of $675 million in 2009 was primarily due to $426 million of lower classified bookings and $154
million of lower bookings on the U.K. e-Borders contract. In 2009, IIS booked $1,364 million on a number of classified
contracts compared to $1,790 million in 2008. Bookings in 2009 included $148 million and $123 million on two major
classified programs and $158 million on a contract to provide intelligence, surveillance and reconnaissance (ISR) to the
U.S. Air Force.
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