Lockheed Martin 2003 Annual Report Download - page 5

DEAR FELLOW SHAREHOLDERS,
With our management team united behind a straightforward and keenly focused strategy of disciplined
growth, Lockheed Martin was, and continues to be, distinguished by robust operational and financial
performance in 2003. As a result, we enter 2004 well positioned to fulfill the potential and promise of
this innovative corporation of 130,000 dedicated men and women.
This strategy of disciplined growth is to increase shareholder value by:
■Putting operational performance and customer satisfaction at the top of our priorities.
■Maintaining consistent financial performance including strong cash flow and increasing financial
strength and flexibility.
■Focusing on profitable growth in our core markets of Defense, Homeland Security and Government
Information Technology (IT). We also look forward to working with NASA to support America’s
reinvigorated commitment to space exploration.
Successful execution of this strategy was demonstrated in the numbers with a third straight year of positive
momentum. Net sales in 2003 grew 20 percent to $31.8 billion. We have grown segment operating profit
faster than sales, reflecting steadily improving margins. For the third consecutive year, orders remain strong
with a backlog of $76.9 billion at the end of 2003. Our Aeronautics business enjoyed a record year for sales
and our Electronic Systems business completed a seventh consecutive year of organic growth.
We continued our record of consistent cash flow generation that reached $1.8 billion in 2003, and
deployed cash to enhance shareholder value through:
■Debt reduction. We reduced debt by $1.4 billion in 2003 and $3.7 billion since 2000. Our ratio of
debt to total capital, at 48 percent, is now within our goal of 40 to 50 percent. We also restructured
about $1 billion of debt to achieve lower interest expense.
■Share repurchase. We have been buying back our shares periodically. Since we started our share
repurchase activity about a year ago, we have retired approximately 11 million shares.
■Dividends. Financial flexibility and vitality are also reflected in our doubling the annual dividend
rate from 44 cents to 88 cents per common share.
■Acquisitions. Growing business in our core markets is key to competing successfully, and we have
made selective acquisitions to continue strengthening our position in defense and civil government IT.
Lockheed Martin last year completed strategic transactions with ACS and Orincon, and announced
the proposed acquisition of The Titan Corporation. We expect these transactions will bring additional
capabilities, a talented workforce and customers. These transactions will help us be more competitive
in the defense and civil government IT markets.
About 25 percent of our sales are from IT solutions and services to defense, intelligence and civil
government agencies.
The Titan acquisition, when completed and integrated with Orincon, will bolster our core capabilities
in critical intelligence, knowledge management and data fusion that are applicable to national defense.
In the ACS transaction, we acquired the defense and most of the civil government IT business of ACS,
while ACS acquired Lockheed Martin’s commercial IT business.
LOCKHEED MARTIN ANNUAL REPORT 2003 — 3