Lockheed Martin 1996 Annual Report Download - page 54

Management's Discussion and Analysis
of Financial Condition and Results of Operations
Continued
The Corporation's consolidated results of operations for
1996 include the operations of Tactical Systems from April
1, 1996. On February 3, 1997, concurrent with the announce-
ment of the proposed transaction with Newco, the Corpora-
tion announced a new organizational structure which
reassigned management responsibility for certain business
units. As a result, the Corporation's operations are now
divided into five business segments: Space & Strategic
Missiles; Electronics; Information & Services; Aeronautics;
and Energy, Materials and Other. The operations of Tactical
Systems have been reflected, for 1996 segment reporting
purposes, in the Information & Services, Electronics, and
Energy, Materials and Other segments. Prior year data has
been reclassified to conform to the new structure.
The Corporation's consolidated net sales for 1996 were
a record $26.9 billion. Net sales for the year were 18 percent
greater than 1995 net sales, which in turn were relatively
unchanged compared to 1994 net sales. The 1996 increase
principally resulted from the inclusion of the operations of
Tactical Systems. This increase more than offset sales
Net Sales
In millions
decreases in the Aeronautics segment. Sales increases for
1995 in the Space & Strategic Missiles segment and the
Information & Services segment were largely offset by sales
declines in the Aeronautics segment and the Electronics seg-
ment. The U.S. Government remained the Corporation's
largest customer, comprising 70 percent of the Corporation's
net sales for 1996 compared to 69 percent in 1995 and 72
percent in 1994.
The Corporation's operating profit (earnings before
interest and taxes) was approximately $2.7 billion in 1996,
which was significantly greater than the $1.4 billion reported
in 1995 and the $2.0 billion reported in 1994. However, the
reported amounts for each of the three years presented
included the financial impacts of various nonrecurring
events, the details of which are described below. Excluding
the effects of these nonrecurring events for each year, oper-
ating profit for 1996 would have been approximately 29 per-
cent greater than the 1995 amount, which in turn would have
been approximately 14 percent greater than the 1994
amount. A significant portion of the 1996 increase resulted
from the inclusion of the operations of Tactical Systems.
Additional growth in operating profit in 1996 resulted
from increases in the Space & Strategic Missiles and
Electronics segments, slightly offset by declines in the
Aeronautics segment.
During the third quarter of 1996, the Corporation
announced its intention to distribute via an exchange offer
its remaining 81 percent interest in Martin Marietta Materi-
als, Inc. (Materials) to its stockholders (the Exchange Offer).
Under the terms of the Exchange Offer, the Corporation's
stockholders were given the opportunity to exchange each
Lockheed Martin common share held for 4.72 common
shares of Materials on a tax-free basis. The Exchange Offer
expired by its terms on October 18, 1996 and was oversub-
scribed. On October 23, 1996, approximately 7.9 million
shares of the Corporation's common stock were exchanged
for the 37.35 million shares of Materials common stock held
by the Corporation. Upon the closing of this transaction, the
Corporation had no remaining ownership interest in Materi-
als and had reduced its common shares outstanding by
approximately four percent. The Corporation recognized a
pretax gain of $365 million related to this exchange in the
fourth quarter of 1996.