1995 Annual Report - Lockheed Martin

Management's Discussion and Analysis of Financial Condition and Results of Operations Continued1995 versus four launches in the eight months of 1994 when the program results were included inthe Corporation's results of operations. The 1995 net sales were also favorably impacted by anincrease in activity in various classified programs throughout the segment.The decrease in net sales between 1994 and 1993 was principally the result of a 21 percent salesdecline in the Air Force Titan IV program due to the stretch-out of the program and the impact ofcertain 1993 nonrecurring launch pad and engineering activities. This segment also experiencedlower activity in 1994 on various classified programs, lower revenues due to the terminations of theFollow-on Early Warning System program and the Advanced Solid Rocket Motor program, anddecreased production contract requirements for the Trident II fleet ballistic missile program. Thesedecreases were partially offset by the aforementioned addition of the former GD Space Systems.Operating profit for the segment increased by 46 percent in 1995 compared to 1994 afterdecreasing by six percent in 1994 compared to 1993. The 1995 increase was attributable to theinclusion of the Atlas launch services program for the full year, the receipt of a favorable settlementresulting from the prior termination of the Advanced Solid Rocket Motor program and the inclusionin 1994 of charges related to certain fixed-price programs, including a charge of $22 million relatedto the cancellation and final settlement on the Mobile Satellite Antenna subcontract and chargestotaling $43 million related to a military air command, control and communication programfor a foreign government. The decrease in operating profit for 1994 compared to 1993 principallyreflects the sales decreases and the charges described above, offset partially by improved performancerelated to the Milstar communications satellite program and fleet ballistic missiles contractsrecorded in 1994.AeronauticsNet sales of the Aeronautics segment decreased by seven percent in 1995 compared to 1994 dueto fewer deliveries of F-16 fighter aircraft and C-130 airlift aircraft. These decreases were partiallyoffset by the delivery of eight P-3 maritime patrol aircraft to the Republic of Korea in 1995,compared to no deliveries in 1994. Net sales for 1994 increased by more than seven percent comparedto 1993, reflecting the inclusion of a full year's operation of the former tactical military aircraftbusiness of General Dynamics, which was purchased effective February 28,1993. In addition, thesegment recorded in 1994 additional C-130 deliveries and F-22 development revenues which werepartially offset by decreases in certain contract field support programs.Operating profit increased by four percent in 1995 compared to 1994 even though salesdecreased for that period. This increase is principally due to recognition of earnings related to theP-3 aircraft deliveries which more than offset the 1995 increase in the C-130J development costs, andthe inclusion in 1994 of charges taken against earnings in connection with the Pratt & Whitney fanreverser program. Operating profit in 1994 increased by nearly seven percent compared with 1993,with the inclusion of the former tactical military aircraft business of General Dynamics for the fullyear being the most significant element of that increase. Other positive factors included the net effect