Lockheed Martin 2003 Annual Report Download - page 30

Net Earnings (Loss)
We reported net earnings of $1.1 billion, or $2.34 per diluted share,
in 2003, compared to net earnings of $500 million, or $1.11 per
diluted share, in 2002 and a net loss of $1.0 billion ($2.42 per dilut-
ed share) in 2001.
DISCUSSION OF BUSINESS SEGMENTS
As described more fully in Note 16 to the financial statements, we
announced the formation of Integrated Systems & Solutions
(IS&S), a new business segment, in 2003. With the formation of
IS&S, the former Systems Integration business segment is now
named Electronic Systems. Also in 2003, we changed the name of
our Technology Services business segment to Information &
Technology Services (I&TS) to better reflect the scope of its activ-
ities. We operate in five business segments: Aeronautics, Electronic
Systems, Space Systems, IS&S, and I&TS. The following segment
information has been reclassified from amounts previously report-
ed to reflect the current business segments.
Net sales have increased in each of our business segments over
the last 3 years. Our demonstrated performance and broad portfolio
of capabilities have contributed to this growth.
In the Aeronautics business segment, sales have increased as
we ramped up activities on the F-35 program, delivered more F-16
aircraft and entered low-rate production on the F/A-22 program.
During 2003, we increased deliveries of F-16s to 62 aircraft, from
the 21 aircraft delivered in 2002, reflecting the backlog associated
with several of our international F-16 customers. We anticipate the
F-16 deliveries to be in the range of 70 – 75 aircraft over the next
2 years. The C-130J program was awarded a multi-year award for
60 aircraft during 2003. This award solidifies our production plan-
ning and long-term supplier pricing as we complete the initial 119
aircraft program and produce aircraft under the new award. We
expect the program will return to profitability in 2004.
The Electronic Systems business segment has a broad portfo-
lio of products and services. Many of its activities involve a combi-
nation of both development and production contracts with varying
delivery schedules. We expect this mix of contract types to contin-
ue in the short term, and it may affect the year-to-year comparisons
of segment margins and the operating results of the lines of business
within Electronic Systems.
The Space Systems business segment is a key supplier of
space solutions, primarily to our U.S. Government customers.
Satellites and Strategic & Defensive Missile System activities,
primarily for our U.S. Government customers, are expected to
experience steady growth as we work on our existing backlog
and any new awards that we may receive. However, the com-
mercial satellite and launch vehicle industries continue to be
very competitive. We did receive new orders for both commer-
cial satellites and launch vehicles in 2003; however, the majori-
ty of those orders relate to replacement satellites versus an
expansion of telecommunications capacity. The Satellites line of
business received 5 new commercial satellite orders during
2003. The Launch Services line of business received 11 new
awards for launch missions, including 7 Proton, 1 Atlas V and 3
EELV missions. To date, the segment has received 18 EELV mis-
sion assignments from the U.S. Government, including the 3
under contract. The activities in the Titan program will continue,
though at a lower level than prior years, as we work to complete
the remaining 3 missions.
The IS&S and the I&TS business segments have strengthened
their capabilities in providing information technology services to
defense, intelligence and other government customers. We expect
continued strong growth in providing information technology serv-
ices to government agencies.
In the following tables of financial data, the total of the operat-
ing results of the business segments is reconciled to the correspon-
ding consolidated amount. With respect to the caption “Operating
profit,” the reconciling item “Unallocated Corporate (expense)
income, net” includes the FAS/CAS pension adjustment (see dis-
cussion below), earnings and losses from equity investments (main-
ly telecommunications), interest income, costs for stock-based
compensation programs, the effects of items not considered part of
management’s evaluation of segment operating performance, and
Corporate costs not allocated to the operating segments, as well as
other miscellaneous Corporate activities.
Lockheed Martin Corporation
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 2003
28