With these formalities out of the way, I'd like to turn the call over to Michael Strianese. Mike, please go ahead.Michael Strianese Thanks, Eric, and good morning, everyone. I know today's a really busy day with earnings, so thanks for listening to our call. Overall, 2010 was a good year for L-3 as we faced a lot of significant industry changes. Our business strategy is in series with the current environment, and we remain poised for success going forward. We continued several important internal initiatives to increase efficiency and streamline our operations. We've also put a lot of attention on developing L-3's collaborative culture, and now the company is broadly recognized as a full service solutions provider. I'd like to thank all of our employees for their work in 2010. There were a lot of achievements that wouldn't have been made possible without their dedication to performance and their commitment to our customers. Here's a summary of our fourth quarter and year end results. Our earnings per share for the fourth quarter were $2.37. That's up 23% compared to 2009's fourth quarter and $8.25 for the year, which represented an 8% increase. Operating margins and cash flow remained strong. Sales were $4.3 billion, led by 13% growth on our C3ISR segment, and a 2% increase in Electronic Systems, which offset declines in Aircraft Modernization and Maintenance and Government Services. Orders grew 4% to $4.4 billion versus the 2009 fourth quarter, resulting in a book-to-bill ratio of 1.04 for the quarter and 1.0 for the year. Our funded backlog was $11.4 billion at year end, and let me reiterate, that was funded backlog, all funded. Most, if not all, of our year end numbers are sales at $16.7 billion, orders at $15.7 billion. Orders were up 6% over last year, notwithstanding the environment, but the point is these numbers all represent yet another record year of growth for L-3, albeit, as you know, at a slower rate.
Cash flow continued to be outstanding in the fourth quarter. We exceeded our guidance for the year by $30 million, and that was after contributing an additional $50 million to our pension plan, generating a total of $1.29 billion in free cash flow for the year. Our strategy for deploying this cash has always been to take a balanced and opportunistic approach, both investing in our growth prospects and returning value to shareholders, and that continued in the fourth quarter. As you may recall from our Analyst Day, our belief that given current market conditions and valuations, our M&A strategy was focused on smaller targets that enhance our capabilities and portfolio, and that were at compelling valuations.We completed four transactions in 2010 that we believe are excellent examples of this strategy, and each was a negotiated non-auction transaction, which L-3 paid reasonable price, all at hold, for the four companies, we spent $753 million in 2010. The last acquisition in the fourth quarter was FUNA International, which is a German company that's a leading supplier of control and safety systems, communication systems and entertainment solutions for cruise ships, ferries and mega yachts, expanding our capability to service this market from our Electronic Systems segment. FUNA is expected to generate approximately $60 million of sales in 2011, and that's before revenue synergies, which was the fundamental driver for this transaction. It was the goal to bring existing L-3 marine products to FUNA customers, as well as bringing FUNA systems into L-3's customer base, and we see very good revenue synergies going both ways on that acquisition. As we evaluate companies in the coming year, our criteria for transactions won't change. As always, there are a number of targets that we are currently evaluating. We will continue to do so. Of course, should the right opportunity come up for a larger strategic purchase, we have the dry powder to pursue that as well. We'll continue to focus on portfolio-shaping, and expect to divest non-core businesses, and we continue to drive growth and operating efficiencies across the company.
Our strategy has always been to use our cash flow to deliver shareholder value. We achieved this through acquisition activities, stock repurchases and dividends. Our total dividends paid in 2010 were $184 million, marking our sixth consecutive yearly increase. We also repurchased 365 million of stock in the fourth quarter, bringing our total 2010 repurchases to 834 million. Given our current valuation, our confidence in our business and the M&A environment, repurchasing shares remains a very compelling use of our cash going forward. Our 2011 guidance assumes $0.5 billion of share repurchases, and as we did in 2010, we'll likely to buy back more than that.In terms of some significant awards, there was a lot of activity in the fourth quarter. Again, the orders were $4.4 billion, so it was a long list, I'll just punch down some highlights for now. One, the C-17 TSS [training system sustainment] contract, which is our first significant program win in the wide body aircraft simulation market; the tactical unmanned area vehicle, additional funding for the TUAV; communication systems and EO/IR sensors for EMARSS, we also were a team member for that program, as well as a prime where we did not win but again, we still have our systems included, which shows the strength of our positioning; five additional Liberty aircraft expanding the fleet to 42; two army small ISR aircraft; IEDs of the pre-EMARSS aircraft that we'll put on the contract; flexible areas of balanced technology for Fast; and aerostat-based perimeter surveillance system for Bahrain; various WESCAM EO/IR sensors and target orders including the U.S. Army, Iraq, FMS program, the UK MoD, and that's for the links M9A and C3X, as well as an order from the Republic of Malta for humanitarian purposes; enhanced combat optical site heavy or ECOSH for use on crew-served weapons; MRCDL, the latest in our advanced data link technology, which enables realtime video sharing in theater; an interior modification job for Brunei for a 747 airplane; and follow-on orders continued strong as well, especially for Liberty logistics work, our EO/IR turrets; our ROVER 6 kits, Predator and Warrior UAV com systems; our ProVision systems started to get international, interest with orders for 15 machines in Canada, and 10 in Mexico; traveling wave tubes for the Commercial Space business; coms-on-the move [communications-on-the-move] products; and commercial aviation TDNs [tactical data network], that is for Delta and Virgin Airlines. Read the rest of this transcript for free on seekingalpha.com