Lockheed Martin 2002 Annual Report Download - page 31

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THIRTY-EIGHT
Lockheed Martin Corporation
MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 2002
DISCUSSION OF BUSINESS SEGMENTS
We changed the way we report the results of our business seg-
ments in the fourth quarter of 2002. The change in presentation
is being made to align the way segment operating results are
reported to senior management for their evaluation of segment
operating performance. We continue to operate in four princi-
pal business segments: Systems Integration, Space Systems,
Aeronautics and Technology Services. The changes include
the following:
•The Corporate and Other segment has been eliminated;
•Operating profit (loss) from the operations of the four
principal business segments is reconciled to the reported
consolidated results utilizing the following items:
—Unallocated Corporate income (expense), net—this
caption includes—
•Unusual items (discussed under Results of Operations
above)—The effects of unusual items that are not
considered part of management’s evaluation of the
segment’s operating results (e.g., sales of surplus real
estate, impairment charges, divestitures and other
portfolio shaping activities) are excluded from the
business segment results;
•The difference between pension costs calculated
and funded in accordance with Cost Accounting
Standards (CAS), which are reported in the business
segment results, and pension expense or income
determined in accordance with FAS 87 as reported in
Note 13 to the financial statements (FAS/CAS adjust-
ment). This amount was previously allocated to the
business segments;
•The costs of our common stock-based compensation
plans, including our Long-Term Incentive Performance
Award Program. This amount was also allocated to
the business segments previously;
•Corporate costs not allocated to the business seg-
ments and other miscellaneous Corporate activities,
including interest income and earnings and losses
from our equity investments.
—Impact of adoption of FAS 142 (discussed under
Results of Operations above)—The impact of goodwill
no longer being amortized and the change in the esti-
mated remaining useful life of the contract intangible
asset related to the F-16 program is now excluded from
segment results for all periods before January 1, 2002.
For more information on the changes in our segment
presentation and the reasons for the changes, see Note 16 to
the financial statements. The following tables of financial
information and the discussions of the results of operations of
our business segments have been adjusted to reflect the new
presentation of segment operating results and correspond to
segment information presented in Note 16.
Segment Operating Profit
(In millions)
20002001
0
500
1,000
1,500
2,000
$2,500
2002
Technology Services
Aeronautics
Space Systems
Systems Integration