Lockheed Martin 2010 Annual Report Download - page 66

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• Electronic Systems – Manages complex programs and designs, develops, produces, and integrates hardware and software
solutions to ensure the mission readiness of armed forces and government agencies worldwide. Global security solutions include
advanced sensors, decision systems, and weapons for air-, land-, and sea-based platforms. The segment integrates land vehicles,
ships, and fixed- and rotary-wing aircraft. Major products and programs include air and missile defense; tactical missiles; weapon
fire control systems; surface ship and submarine combat systems; anti-submarine and undersea warfare systems; land, sea-based,
and airborne radars; surveillance and reconnaissance systems; simulation and training systems; and integrated logistics and
sustainment services. Electronic Systems also manages and operates the Sandia National Laboratories for the U.S. Department of
Energy and is part of the consortium that manages the United Kingdom’s Atomic Weapons Establishment.
• Information Systems & Global Solutions – Provides management services, Information Technology (IT) solutions, and advanced
technology expertise across a broad spectrum of applications to U.S. Government and other customers. IS&GS provides full life-
cycle support and highly specialized talent in the areas of software and systems integration, including capabilities in space, air and
ground systems for a wide variety of defense and civil government agencies in the U.S. and abroad.
• Space Systems – Engaged in the design, research and development, engineering, and production of satellites, strategic and
defensive missile systems, and space transportation systems, including activities related to the planned replacement of the Space
Shuttle. The Satellite line of business includes both government and commercial satellites. Strategic & Defensive Missile Systems
includes missile defense technologies and systems and fleet ballistic missiles. Space Transportation Systems includes portions of
the next generation human space flight system. Through ownership interests in two joint ventures, Space Transportation Systems
also includes Space Shuttle processing activities and expendable launch services for the U.S. Government.
In 2010, we announced the realignment of two IS&GS businesses, Readiness & Stability Operations (RSO) and Savi
Technology, Inc., with our simulation, training and support business to form the Global Training & Logistics line of business within
Electronic Systems. The realignment had no effect on our consolidated results of operations, financial position, or cash flows. The
financial information in the following tables below has been reclassified to reflect this realignment and to exclude the PAE and EIG
businesses from the IS&GS business segment information (see Note 2) for all periods presented.
The following table presents net sales and operating profit of our four business segments. Net sales exclude intersegment
revenue, as these activities are eliminated in consolidation. Intercompany transactions are generally negotiated and accounted for
under terms and conditions similar to other government and commercial contracts. Operating profit of the business segments includes
the equity earnings or losses from investees in which certain of our business segments hold equity interests, because the activities of
the investees are closely aligned with the operations of those segments.
Operating profit of the business segments excludes the FAS/CAS pension adjustment discussed below; expense for certain
stock-based compensation programs including costs for stock options and restricted stock units; the effects of items not considered
part of management’s evaluation of segment operating performance, such as the charges related to the VESP and the MS2
consolidation plan (see Note 3); gains or losses from divestitures; the effects of legal settlements; Corporate costs not allocated to the
business segments; and other miscellaneous Corporate activities. The items other than the charges related to the VESP and MS2
consolidation plan are included in “Other unallocated Corporate income (expense), net” in the following table which reconciles
operating profit from the business segments to operating profit in our Statements of Earnings. The charge related to the VESP and
MS2 consolidation plan are presented together as a separate reconciling item.
The results of operations of our business segments include pension expense only as determined and funded in accordance with
U.S. Government Cost Accounting Standards (CAS) rules. The FAS/CAS pension adjustment represents the difference between
pension expense or income calculated in accordance with GAAP and pension costs calculated and funded in accordance with CAS.
CAS is a major factor in determining our pension funding requirements, and governs the extent to which pension costs can be
allocated to and recovered on U.S. Government contracts. The CAS expense is recovered through the pricing of our products and
services on U.S. Government contracts and, therefore, is recognized in each of our business segments’ net sales and cost of sales.