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Total Net Sales and Total Operating Expenses—The increase in net sales of $311 million in 2010 compared to 2009 was
primarily due to $232 million of higher net sales from growth on TS’ training programs, principally domestic and foreign
training programs supporting the U.S. Army’s Warfighter FOCUS activities due to an increase in customer determined
activity levels, and $53 million of higher net sales from programs with the Transportation Security Administration (TSA),
driven primarily by system integration efforts on a program awarded in the first quarter of 2010. The increase in
operating expenses of $226 million in 2010 compared to 2009 was driven primarily by the activity in the programs
described above.
The increase in net sales of $560 million in 2009 compared to 2008 was primarily due to $589 million of higher net sales
from growth on TS’ training programs, principally domestic and foreign training programs supporting the U.S. Army’s
Warfighter FOCUS activities, which began significant efforts in May 2008, and training activities performed on the Air
Traffic Control Optimum Training Solutions (ATCOTS) contract for the FAA, a program awarded in 2008, which began
training activities in the fourth quarter of 2008. The increase was partially offset by $98 million of lower net sales on a
DTRA program, principally from lower volume due to the substantial completion of contract scope in the fourth quarter
of 2008. The increase in operating expenses of $519 million in 2009 compared to 2008 was driven primarily by the activity
in the programs described above.
Operating Income and Margin—The increase in operating income of $85 million in 2010 compared to 2009 was primarily
due to improved program performance, which had a $65 million impact on operating income, and increased volume,
which had an $18 million impact on operating income. The improved program performance was driven primarily by cost
efficiencies associated with increased levels of program activities on various training programs, which had a $22 million
positive impact on 2010 operating income, the majority of which was on programs nearing completion; contract
modifications that impacted the scope on certain training programs and an international mission support program,
which had an $11 million positive impact on 2010 operating income; prior year profit adjustments due to a change in
estimate related to certain mission support program costs, which had a $6 million negative impact on 2009 operating
income; and higher award fees on a fixed-price service contract, which had a $3 million positive impact on 2010
operating income. The increase in operating margin in 2010 compared to 2009 was primarily due to the improved
program performance described above.
The increase in operating income of $41 million in 2009 compared to 2008 was primarily due to increased volume, which
had a $37 million impact on operating income. Operating margin in 2009 remained relatively consistent with 2008.
Backlog and Bookings—Backlog at December 31, 2010 remained relatively consistent with December 31, 2009 and
December 31, 2008.
Bookings in 2010 remained relatively consistent with 2009. In 2010, TS booked $952 million on domestic training
programs and $328 million on foreign training programs in support of the Warfighter FOCUS activities, $173 million to
provide operational and logistics support to the National Science Foundation (NSF) Office of Polar Programs and $88
million on the Security Equipment Integration Services (SEIS) contract for the TSA.
Bookings in 2009 remained relatively consistent with 2008. In 2009, TS booked $1.0 billion on domestic training
programs and $300 million on foreign training programs in support of the U.S. Army’s Warfighter FOCUS activities,
$160 million to upgrade Phalanx Weapon Systems for the Royal Canadian Navy and $100 million for DTRA.
In 2008, TS booked $890 million on domestic training programs and $67 million on foreign training programs in support
of the U.S. Army’s Warfighter FOCUS activities as well as $436 million on the FAA’s ATCOTS contract.
FAS/CAS Pension Adjustment
The FAS/CAS Pension Adjustment represents the difference between our pension expense or income under FAS in
accordance with GAAP and our pension expense under CAS. The results of each segment only include pension expense
under CAS that we generally recover through the pricing of our products and services to the U.S. Government.
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