Lockheed Martin 2005 Annual Report Download - page 19

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   

The฀financial฀section฀of฀our฀Annual฀Report฀includes฀manage-
ment’s฀discussion฀and฀analysis,฀our฀consolidated฀financial฀state-
ments,฀ notes฀ to฀ those฀ financial฀ statements฀ and฀ a฀ five-year฀
summary฀of฀financial฀information.฀We฀have฀ prepared฀the฀fol-
lowing฀summary,฀or฀“roadmap,”฀to฀assist฀in฀your฀review฀of฀the฀
financial฀section.฀It฀is฀designed฀to฀give฀you฀an฀overview฀of฀our฀
company฀and฀focus฀your฀review฀by฀directing฀you฀to฀some฀of฀the฀
more฀important฀activities฀and฀events฀that฀occurred฀this฀year.

Lockheed฀Martin฀Corporation฀principally฀researches,฀designs,฀
develops,฀ manufactures,฀ integrates,฀ operates฀ and฀ sustains฀
advanced฀ technology฀ systems,฀ products฀ and฀ services.฀ We฀
mainly฀serve฀customers฀in฀domestic฀and฀international฀defense,฀
civil฀agencies,฀and฀homeland฀security.฀Our฀sales฀to฀agencies฀of฀
the฀ U.S.฀ Government฀ represented฀ 85%฀ of฀ our฀ sales฀ in฀ 2005.฀
Of฀the฀remaining฀15%฀of฀sales,฀approximately฀13%฀related฀to฀
sales฀ to฀ international฀ customers,฀ with฀ the฀ remainder฀ attribut-
able฀ to฀ commercial฀ customers.฀ In฀ 2004฀ and฀ 2003,฀ sales฀ to฀
agencies฀of฀the฀U.S.฀Government฀represented฀80%฀and฀78%฀of฀
our฀ total฀ sales,฀ respectively.฀ Our฀ main฀ areas฀ of฀ focus฀ are฀ in฀
defense,฀ space,฀ intelligence/homeland฀ security,฀ and฀ govern-
ment฀information฀technology.฀
We฀ operate฀ in฀ five฀ principal฀ business฀ segments:฀
Aeronautics,฀ Electronic฀ Systems,฀ Space฀ Systems,฀ Integrated฀
Systems฀&฀Solutions฀(IS&S),฀and฀Information฀&฀Technology฀
Services฀ (I&TS).฀ As฀ a฀ lead฀ systems฀ integrator,฀ our฀ products฀
and฀services฀range฀from฀electronics฀and฀information฀systems,฀
including฀integrated฀net-centric฀solutions,฀to฀missiles,฀aircraft,฀
spacecraft฀and฀launch฀services.

The฀financial฀section฀includes฀the฀following:
Management’s฀discussion฀and฀analysis,฀or฀MD&A฀(pages฀17฀
through฀ 40) —provides฀ management’s฀ view฀ about฀ industry฀
trends,฀ risks฀ and฀ uncertainties฀ relating฀ to฀ Lockheed฀ Martin,฀
accounting฀policies฀that฀we฀view฀as฀critical฀in฀light฀of฀our฀busi-
ness,฀our฀results฀of฀operations,฀including฀discussions฀about฀the฀
key฀performance฀drivers฀of฀each฀of฀our฀business฀segments,฀our฀
financial฀ position฀ and฀ cash฀ flows,฀ commitments฀ and฀ contin-
gencies,฀ important฀ events฀ or฀ transactions฀ that฀ have฀ occurred฀
over฀ the฀ last฀ three฀ years,฀ and฀ forward-looking฀ information,฀฀
as฀appropriate.
Reports฀ related฀ to฀ the฀ financial฀ statements฀ and฀ internal฀
control฀ over฀ financial฀ reporting฀ (pages฀ 41฀ through฀ 43) —
include฀the฀following:฀
•฀ ฀A฀report฀from฀management,฀indicating฀our฀responsibility฀for฀
financial฀reporting,฀the฀financial฀statements,฀and฀the฀system฀
of฀ internal฀ control฀ over฀ financial฀ reporting฀ and฀ an฀ assess-
ment฀of฀the฀effectiveness฀of฀those฀controls;
•฀ ฀A฀ report฀ from฀ Ernst฀ &฀ Young฀ LLP,฀ an฀ independent฀ regis-
tered฀ public฀ accounting฀ firm,฀ including฀ their฀ opinions฀ on฀
management’s฀assessment฀of฀internal฀control฀over฀financial฀
reporting฀ and฀ the฀ effectiveness฀ of฀ internal฀ control฀ over฀
financial฀reporting;฀and
•฀ ฀A฀report฀from฀Ernst฀&฀Young฀LLP,฀including฀their฀opinion฀
on฀the฀fair฀presentation฀of฀our฀financial฀statements฀based฀on฀
their฀audits.฀
Financial฀ statements฀ (pages฀ 44฀ through฀ 47) —include฀ our฀
consolidated฀statements฀of฀earnings,฀cash฀flows฀and฀stockhold-
ers’฀ equity฀ for฀ each฀ of฀ the฀ last฀ three฀ years,฀ and฀ our฀ balance฀
sheet฀as฀of฀the฀end฀of฀the฀last฀two฀years.฀Our฀financial฀state-
ments฀are฀prepared฀in฀accordance฀with฀U.S.฀generally฀accepted฀
accounting฀principles฀(GAAP).
Notes฀ to฀ the฀ financial฀ statements฀ (pages฀ 48฀ through฀ 72)—
provide฀ insight฀ into฀ and฀ are฀ an฀ integral฀ part฀ of฀ our฀ financial฀
statements.฀ The฀ notes฀ contain฀ explanations฀of฀our฀ significant฀
accounting฀ policies,฀ details฀ about฀ certain฀ of฀ the฀ captions฀ on฀
the฀ financial฀ statements,฀information฀about฀significant฀events฀
or฀transactions฀that฀have฀occurred,฀discussions฀about฀legal฀pro-
ceedings,฀commitments฀and฀contingencies,฀and฀selected฀finan-
cial฀information฀relating฀to฀our฀business฀segments.฀The฀notes฀
to฀ the฀ financial฀ statements฀ also฀ are฀ prepared฀ in฀ accordance฀
with฀GAAP.
Lockheed฀Martin฀Corporation
MANAGEMENT’S฀DISCUSSION฀AND฀ANALYSIS฀OF฀
FINANCIAL฀CONDITION฀AND฀RESULTS฀OF฀OPERATIONS
December฀31,฀2005