Lockheed Martin 1996 Annual Report Download - page 58

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Management's Discussion and Analysis
of Financial Condition and Results of Operations
Continued
The Corporation remains exposed to other inherent
risks associated with U.S. Government contracting. These
risks include technological uncertainties and obsolescence,
changes in government policies and dependence on annual
Congressional appropriation and allotment of funds.
Progress has been made in expanding the Corporation's
presence in related commercial and nondefense markets,
most notably in space and telecommunications activities,
information management and systems integration. Although
these lines of business are not dependent on defense bud-
gets, they share many of the risks associated with the
Corporation's primary businesses, as well as others unique
to the commercial marketplace. Such risks include develop-
ment of competing products, technological feasibility, prod-
uct obsolescence and the risks inherent in conducting
business internationally.
Discussion of Business Segments
The Corporation's operations are divided into five business
segments: Space & Strategic Missiles; Electronics; Informa-
tion & Services; Aeronautics; and Energy, Materials and
Other. As previously mentioned, the Corporation recently
announced a new organizational structure that combined
the Tactical Systems businesses with those of Lockheed
Martin and reassigned certain heritage Lockheed Martin
business units. The discussion of business segments that
follows reflects this new structure. Certain amounts for
the prior years have been reclassified to conform with the
1996 presentation.
The following table displays net sales for the Lockheed
Martin business segments for each of the three years in the
period ended December 31,1996 which correspond to the
segment information presented in Note 15 to the consoli-
dated financial statements.
Operating profit by industry segment for each of the three
years in the period ended December 31, 1996 is also pre-
sented in Note 15 to the consolidated financial statements.
The following table displays the pretax impact of the non-
recurring items discussed earlier as reflected in each seg-
ment's operating profit for each of the three years presented.
(In millions)
Nonrecurring Items
Space & Strategic Missiles
Electronics
Information & Services
Aeronautics
Energy, Materials and Other
1996
$(25)
—
(86)
(46)
215
$ 58
1995
$(263)
(93)
(24)
(138)
(172)
$(690)
1994
$ —
—
—
—
168
$168
The 1996 total in the above table reflects the $365 million
pretax gain from the exchange of Materials, offset by
$307 million of pretax charges relating to the Corporation's
environmental remediation business and other corporate
actions. The 1995 total reflects the merger related and con-
solidation expenses, while the 1994 total consists of the
$118 million Materials IPO gain and the receipt of the
$50 million acquisition termination fee from the proposed
Grumman acquisition.
The following table depicts operating profit excluding
nonrecurring items for each of the three years in the period
ended December 31, 1996. The subsequent discussion of
significant operating results of each business segment
56
(In millions)
Net Sales
Space & Strategic Missiles
Electronics
Information & Services
Aeronautics
Energy, Materials and Other
1996
$ 7,904
6,705
5,863
5,596
807
$26,875
1995
$ 7,813
3,357
4,173
6,617
893
$22,853
1994
$ 7,000
4,059
3,986
7,091
770
$22,906