Lockheed Martin 2002 Annual Report Download - page 28

THIRTY-FIVE
in Inmarsat did not impact our results of operations. The trans-
action generated net cash proceeds of about $115 million after
transaction costs and federal and state income tax payments.
On an ongoing basis, we will continue to explore the sale
of various non-core businesses, passive equity investments and
surplus real estate. If we were to decide to sell any such holdings
or real estate, the resulting gains, if any, would be recorded
when the transactions are consummated and losses, if any,
would be recorded when they are probable and estimable. We
also continue to review our businesses on an ongoing basis to
identify ways to improve organizational effectiveness and per-
formance, and to focus on our core business strategy.
RESULTS OF OPERATIONS
Since our operating cycle is long-term and involves many
types of development and production contracts with varying
production 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 peri-
ods should be viewed in this context.
Effective January 1, 2002, we adopted FAS 142,
“Goodwill and Other Intangible Assets,” as discussed more
fully in Note 1 of the notes to the financial statements. We
completed the initial step of the goodwill impairment test
required by the new rules and concluded that no adjustment to
the balance of goodwill at the date we adopted the standard
was required. We also reassessed the estimated remaining use-
ful lives of other intangible assets as part of our adoption of
the Statement. As a result of that review, we extended the esti-
mated remaining useful life of the intangible asset related to
our F-16 fighter aircraft program from six to ten years, effec-
tive January 1, 2002. The most important factors considered in
making this determination included the existing backlog for
F-16 deliveries which extends production beyond the life we
originally anticipated, and our outlook for potential new orders
for the F-16 during the next ten years. Relative to new orders,
we expect that the F-16 will continue to be the dominant
fighter aircraft available for many countries in the interna-
tional market until the F-35 Joint Strike Fighter is available.
As a result of the adoption, amortization expense for goodwill
and certain other intangibles for 2002 was lower compared to
2001 by $274 million, and was lower compared to 2000 by
$297 million.
Continuing Operations
For 2002, net sales were $26.6 billion, an 11% increase over
2001 sales. Sales for 2001 were $24.0 billion, a decrease of
2% compared to 2000. Sales increased in all segments during
2002 as compared to 2001. Sales growth in our Aeronautics
and Technology Services segments during 2001 were more
than offset by decreases in the remaining business segments as
compared to 2000. Adjusting for acquisitions and divestitures,
sales would have remained comparable when comparing 2001
to 2000. The U.S. Government is our largest customer,
accounting for about 80% of our sales for 2002 compared to
78% in 2001 and 72% in 2000.
0
5
10
15
20
25
$30
Net Sales
(In billions)
200020012002
Technology Services
Aeronautics
Space Systems
Systems Integration
Lockheed Martin Corporation