Six Months Ended July 1, 2012 June 30, 2013 Variance
Revenues $ 4,968$ 4,997$ 29 0.6 %
Operating earnings 444 383 (61 ) (13.7 )%
Operating margins 8.9 % 7.7 %
The Information Systems and Technology group's revenues increased slightly in
the second quarter and first half of 2013 compared with the prior-year periods.
The increase consisted of the following:
Second Quarter Six Months
Mobile communication systems $ 4 $ (7 )
Information technology (IT) solutions and mission
support services 59 97
Intelligence, surveillance and reconnaissance (ISR)
systems (41 ) (61 )
Total increase $ 22 $ 29
The increase in revenues in the IT services business in the second quarter and
first six months of 2013 was driven by higher volume on programs to provide IT
infrastructure services to commercial wireless providers and increased sales to
several U.S. government customers.
Revenues decreased in 2013 across the ISR systems business driven by lower
defense spending and a slower than expected transition to follow-on work on
Operating margins decreased in 2013 compared with the prior-year periods due to
an unfavorable program mix in our mobile communication systems business, poor
performance in our United Kingdom business and growth in lower-margin IT
services. We have consolidated our U.K. business into our North American mobile
communication systems business. This consolidation was effected to improve
operating and financial performance of the business over time.
We expect 2013 full-year revenues in the Information Systems and Technology
group to be down approximately 2 percent from 2012 with operating margins
approaching 8 percent as productivity improvements continue to take hold and we
experience a positive mix shift to some of our higher-margin legacy programs.
Corporate results consist primarily of compensation expense for stock options.
Corporate operating costs totaled $23 in the second quarter of 2013 compared
with $18 in the second quarter of 2012 and $45 in the first half of 2013
compared with $35 in the 2012 period. We expect 2013 full-year Corporate
operating costs of approximately $90.
BACKLOG AND ESTIMATED POTENTIAL CONTRACT VALUE
Our total backlog, including funded and unfunded portions, was $49.4 billion on
June 30, 2013, up 2 percent from $48.5 billion at the end of the first quarter
of 2013. Our backlog does not include work awarded on unfunded indefinite
delivery, indefinite quantity (IDIQ) contracts or unexercised options associated
with existing firm contracts, which we refer to collectively as estimated
potential contract value. On June 30, 2013, estimated potential contract value
was $27.7 billion, up 10 percent from $25.2 billion at the end of first quarter
The following table details the backlog and the estimated potential contract
value of each business group at the end of the first and second quarters of