Lockheed Martin 2004 Annual Report Download - page 28

that are probable of future recovery in pricing of our products
and services for U.S. Government businesses. The amount that
is expected to be allocated to our commercial businesses has
been expensed through cost of sales. Any recoveries we receive
would reduce the allocated amounts included in our future U.S.
Government sales and cost of sales.
ACQUISITION AND DIVESTITURE ACTIVITIES
We continuously strive to strengthen our portfolio of products
and services to meet the current and future needs of our cus-
tomers. This is accomplished internally, through our independent
research and development activities or with acquisitions. We
selectively pursue the acquisition of businesses that comple-
ment our current portfolio and allow expansion into adjacent
markets or access to new technologies. We have made a number
of such niche acquisitions during the past several years.
In February 2005, we entered into a definitive agreement to
acquire The SYTEX Group, Inc. (TSGI) for net consideration
of $462 million. TSGI provides information technology solutions
and technical support services to the DoD and other federal
agencies. The transaction is subject to government approvals,
including a review under the Hart-Scott-Rodino Antitrust
Improvements Act and satisfaction of other closing conditions.
We expect the transaction will close in early 2005.
In June 2004, we terminated our September 2003 merger
agreement, as amended, with The Titan Corporation, as certain
closing conditions were not met on or before June 25, 2004 as
required.
We may also explore the sale of non-core businesses and
surplus real estate. If we were to decide to sell any such busi-
nesses or real estate, the resulting gains, if any, would be
recorded when the transactions are consummated and losses, if
any, would be recorded when the value of the related asset is
determined to be impaired.
RESULTS OF OPERATIONS
Since our operating cycle is long-term and involves many types
of development and production contracts with varying produc-
tion delivery schedules, the results of operations of a particular
year, or year-to-year comparisons of recorded sales and profits,
may not be indicative of future operating results. The following
discussions of comparative results among periods should be
viewed in this context. All per share amounts cited in this dis-
cussion are presented on a “per diluted share” basis.
The following discussion of net sales and operating results
will provide an overview of our operations by focusing on key
elements set forth in our statement of earnings. The
“Discussion of Business Segments” which follows, will
describe the contributions of each of our business segments to
our consolidated results for 2004, 2003 and 2002.
For 2004, net sales were $35.5 billion, a 12% increase over
2003 sales. Sales for 2003 were $31.8 billion, an increase of
20% compared to 2002. Sales increased in all segments as com-
pared to the prior year for the third straight year. The U.S.
Government is our largest customer, accounting for about 80%
of our sales for 2004, compared to 78% in 2003 and 80% in
2002. For 2004, 2003 and 2002 the operating (loss) profit items
in the table below, in addition to other items, were included in
“Net Unallocated Corporate (Expense) Income” (see the related
“Discussion of Business Segments” below).
Lockheed Martin Corporation
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 2004
26
0
5
10
15
20
25
30
35
$40
2004 2003 2002
I&TS
IS&S
Space Systems
Electronic Systems
Aeronautics
Net Sales
(In billions)