Year-to-Date: AM&M net sales for the 2012 year-to-date period increased by $29 million, or 2%, compared to the 2011 year-to-date period. Platform systems sales increased by $78 million, which was partially offset by a decline of $49 million for logistic support services. The platform systems increase was due primarily to volume on new contracts, including the Australia C-27J and international head-of-state aircraft modification contracts, and increased scope on the EC-130 aircraft for the USAF. These increases were partially offset by lower JCA volume for the USAF. Logistics support services decreased due primarily to the loss of a task order for U.S. Army contract field team support services in Southwest Asia, partially offset by increased demand for field maintenance and sustainment services on a U.S. Army rotary wing aircraft contract that was competitively won in September 2011 and for U.S. Army C-12 aircraft.
AM&M operating income for the 2012 year-to-date period decreased by $2 million, or 0.9%, compared to the 2011 year-to-date period. Operating margin decreased by 30 basis points to 9.6%. The decrease in operating margin was due to a $6 million, or 30 basis points, net favorable adjustment in the 2011 year-to-date period, comprised of a favorable price adjustment for an international modification contract, partially offset by start-up costs for the U.S. Army C-12 aircraft maintenance contract. Pension expense increased by $5 million, which reduced operating margin by 30 basis points. These decreases were partially offset by 30 basis points primarily due to lower costs related to JCA.
|Third Quarter Ended||Year-to-Date Ended|
|($ in millions)||Sept. 28, 2012||Sept. 30,2011||Decrease||Sept. 28, 2012||Sept. 30,2011||Decrease|
|Operating margin||4.1||%||7.8||%||(370) bpts||5.4||%||6.1||%||(70) bpts|
Third Quarter: NSS net sales for the 2012 third quarter decreased by $65 million, or 16%, compared to the 2011 third quarter. Less demand for U.S. Special Operations Command information technology (IT) support services, due to our previous single-award contract converting to several multiple-award contracts which reduced our workshare, lowered sales by $27 million. A decline in IT support services for select non-DoD U.S. Government agencies due to customer IT spending reductions and competitive contract losses in 2011 lowered sales by $25 million. Sales declined by $13 million for intelligence support services due to the drawdown of U.S. military forces in Iraq.NSS operating income for the 2012 third quarter decreased by $18 million, or 55%, compared to the 2011 third quarter. Operating margin decreased by 370 basis points to 4.1%, primarily due to: (1) lower contract profit rates on re-competitions of existing business and lower sales volume, which reduced operating margin by 200 basis points, (2) a $4 million inventory write-down for security and safety equipment, which reduced operating margin by 110 basis points, and (3) legal fees of $2 million related to a supplier dispute, which reduced operating margin by 60 basis points.
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