Lockheed Martin 2004 Annual Report Download - page 67

NOTE 15 — INFORMATION ON BUSINESS SEGMENTS
The Corporation operates in five business segments: Aeronautics,
Electronic Systems, Space Systems, Integrated Systems &
Solutions (IS&S), and Information & Technology Services
(I&TS). In the following tables of financial data, the total of the
operating results of these business segments is reconciled to the
corresponding consolidated amount. With respect to the caption
“Operating profit,” the reconciling item “Net unallocated
Corporate expense” includes the FAS/CAS pension adjustment
(see discussion below), earnings and losses from equity invest-
ments, interest income, costs for stock-based compensation
programs, the effects of items not considered part of manage-
ment’s evaluation of segment operating performance, Corporate
costs not allocated to the operating segments and other miscel-
laneous Corporate activities. For financial data other than
“Operating profit,” all activities other than those pertaining to
the principal business segments are included in “Other.”
The FAS/CAS pension adjustment represents the differ-
ence between pension expense or income calculated for finan-
cial reporting purposes under GAAP in accordance with FAS
87, and pension costs calculated and funded in accordance with
U.S. Government Cost Accounting Standards (CAS), which are
reflected in the business segment results. CAS is a major factor
in determining pension funding requirements for the
Corporation, and governs the extent of allocability and recover-
ability of pension costs on government contracts. The CAS
expense is recovered through the pricing of the Corporation’s
products and services on U.S. Government contracts, and there-
fore recognized in segment net sales. The results of operations
of the Corporation’s segments only include pension expense as
determined and funded in accordance with CAS rules.
Transactions between segments are generally negotiated
and accounted for under terms and conditions that are similar to
other government and commercial contracts; however, these
intercompany transactions are eliminated in consolidation and
for purposes of the presentation of “Net sales” in the related
table that follows. Other accounting policies of the business
segments are the same as those described in Note 1 —
Significant Accounting Policies.
Following is a brief description of the activities of the prin-
cipal business segments:
•Aeronautics — Engaged in design, research and develop-
ment, systems integration, production, support and
upgrade of advanced military aircraft and related technolo-
gies. Its customers include the military services of the
United States and allied countries throughout the world.
Major products and programs include the F-16 multi-role
fighter, F/A-22 air dominance, attack and multi-mission
combat aircraft, F-35 Joint Strike Fighter, C-130J tactical
airlift aircraft, C-5 strategic airlift aircraft, and support for
the F-117 stealth fighter and special mission and recon-
naissance aircraft (e.g., P-3 Orion, S-3 Viking and U-2).
The Corporation also produces major components for the
F-2 fighter and is a co-developer of the C-27J tactical
transport and T-50 advanced jet trainer.
•Electronic Systems — Engaged in the design, research,
development, integration and production of high perform-
ance systems for undersea, shipboard, land and airborne
applications. Major product lines include: missiles and fire
control systems; air and theater missile defense systems;
surface ship and submarine combat systems; anti-submarine
and undersea warfare systems; avionics and ground combat
vehicle integration; systems integration and program man-
agement for fixed and rotary-wing aircraft systems; radars;
platform integration systems; homeland security systems;
surveillance and reconnaissance systems; advanced avia-
tion management; security and information technology
solutions; simulation and training systems; and postal
automation systems.
•Space Systems — Engaged in the design, research, devel-
opment, engineering, and production of satellites, strategic
and defensive missile systems and launch services. The
satellite product line includes both government and com-
mercial satellites. Strategic and defensive missile systems
include airborne and missile defense technologies and fleet
ballistic missiles. Launch services include launches on
Atlas, Proton and Titan launch vehicles, and also include
the Space Shuttle’s external tank. In addition, the segment
has investments in joint ventures that are principally
engaged in businesses that complement and enhance other
activities of the segment.
Lockheed Martin Corporation
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