Lockheed Martin 2005 Annual Report Download - page 31

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continue฀to฀decline฀over฀the฀next฀few฀years;฀however,฀with฀the฀
Greek฀Government’s฀contract฀authorization฀for฀30฀aircraft,฀firm฀
production฀is฀currently฀planned฀through฀2009.฀During฀2005,฀23฀
F-22s฀ were฀ delivered฀ and฀ the฀ program฀ achieved฀ initial฀฀
operational฀ capability,฀ indicating฀ its฀ readiness฀ for฀ service.฀฀
The฀Lot฀5฀contract฀for฀the฀production฀of฀24฀aircraft฀is฀expected฀
to฀continue฀production฀of฀the฀F-22฀into฀2008,฀and฀we฀received฀
advanced฀procurement฀contracts฀for฀production฀of฀Lots฀6฀and฀7฀
associated฀with฀long฀lead฀activities.฀The฀initial฀F-35฀test฀aircraft฀
is฀ being฀ readied฀ for฀ its฀ first฀ flight฀ and฀ significant฀ progress฀ is฀
being฀made฀on฀the฀carrier-based฀and฀short฀takeoff฀variants฀as฀
well.฀ Activity฀ on฀ the฀ C-130J฀ program฀ included฀ 15฀aircraft฀
deliveries฀in฀2005.฀Through฀2005,฀we฀have฀delivered฀16฀of฀the฀
60฀ aircraft฀ under฀ the฀ multi-year฀ award,฀ and฀ production฀ and฀
delivery฀ of฀ the฀ remaining฀ multi-year฀ aircraft฀ are฀ expected฀ to฀
continue฀into฀2009.
The฀ Electronic฀ Systems฀ business฀ segment฀ has฀ a฀ broad฀
portfolio฀ of฀ products฀ and฀ services.฀ Many฀ of฀ its฀ activities฀
involve฀ a฀ combination฀ of฀ both฀ development฀ and฀ production฀
contracts฀with฀varying฀delivery฀schedules.฀This฀business฀seg-
ment฀has฀continued฀to฀expand฀its฀core฀competencies฀as฀a฀lead-
ing฀ systems฀ integrator,฀ as฀ demonstrated฀ with฀ its฀ role฀ as฀ the฀
prime฀ contractor฀ on฀ the฀ Presidential฀ Helicopter฀ and฀ Littoral฀
Combat฀Ship฀programs.฀
The฀Space฀Systems฀business฀segment฀is฀a฀key฀supplier฀of฀
space฀solutions,฀primarily฀to฀our฀U.S.฀Government฀customers.฀
Growth฀will฀depend฀on฀our฀government฀satellite฀business฀and฀
our฀ ability฀to฀ capture฀ market฀share.฀The฀ commercial฀ satellite฀
and฀launch฀vehicle฀industries฀continue฀to฀be฀very฀competitive,฀
with฀resulting฀pricing฀pressures.฀During฀2005,฀the฀final฀Titan฀
IV฀ was฀ launched฀ and฀ we฀ now฀ plan฀ to฀ continue฀ to฀ provide฀
launch฀ services฀ to฀ our฀ U.S.฀ Government฀ customers฀ with฀ our฀
Atlas฀V฀vehicle฀through฀the฀EELV฀program.
The฀IS&S฀and฀I&TS฀business฀segments฀continue฀to฀focus฀
their฀ capabilities฀ in฀ providing฀ information฀ technology฀ ser-
vices฀ to฀ defense,฀ intelligence฀ and฀ other฀ government฀ custom-
ers.฀ We฀ expect฀ continued฀ strong฀ growth฀ in฀ providing฀
information฀technology฀solutions฀to฀government฀agencies.
In฀ the฀ following฀ table฀ of฀ financial฀ data,฀ total฀ operating฀
profit฀of฀the฀business฀segments฀is฀reconciled฀to฀the฀correspond-
ing฀ consolidated฀ amount.฀ The฀ reconciling฀ item฀ “Net฀ unallo-
cated฀ Corporate฀ expense”฀ includes฀ the฀ FAS/CAS฀ pension฀
adjustment฀ (see฀ discussion฀ below),฀ earnings฀ and฀ losses฀ from฀
equity฀ investments,฀ interest฀ income,฀ costs฀ for฀ certain฀ stock-
based฀compensation฀programs,฀the฀effects฀of฀items฀not฀consid-
ered฀ 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.
The฀ FAS/CAS฀ pension฀ adjustment฀ represents฀ the฀ differ-
ence฀between฀pension฀expense฀or฀income฀calculated฀for฀finan-
cial฀ reporting฀ purposes฀ in฀ accordance฀ with฀ FAS฀ 87,฀ and฀
pension฀costs฀calculated฀and฀funded฀in฀ accordance฀with฀ U.S.฀
Government฀CAS,฀which฀are฀reflected฀in฀the฀business฀segment฀
results.฀CAS฀is฀a฀major฀factor฀in฀determining฀our฀pension฀fund-
ing฀ requirements,฀ and฀ governs฀ the฀ extent฀ of฀ allocability฀ and฀
recoverability฀ of฀pension฀costs฀on฀government฀contracts.฀The฀
CAS฀expense฀is฀recovered฀through฀the฀pricing฀of฀our฀products฀
and฀ services฀ on฀ U.S.฀ Government฀ contracts,฀ and฀ therefore฀
recognized฀in฀ segment฀net฀sales.฀The฀results฀of฀operations฀of฀
the฀segments฀only฀include฀pension฀expense฀as฀determined฀and฀
funded฀in฀accordance฀with฀CAS฀rules.
This฀table฀shows฀net฀sales฀and฀operating฀profit฀of฀the฀busi-
ness฀segments฀and฀reconciles฀to฀the฀consolidated฀total.
(In฀millions)  2004 2003

Aeronautics  $฀11,785 $฀10,206
Electronic฀Systems  9,729 8,996
Space฀Systems  6,359 6,024
Integrated฀Systems฀&฀Solutions  3,851 3,422
Information฀&฀Technology฀Services  3,802 3,176
 $฀35,526 $฀31,824

Aeronautics   $฀ 899 $฀ 690
Electronic฀Systems  969 858
Space฀Systems  489 403
Integrated฀Systems฀&฀Solutions  334 291
Information฀&฀Technology฀Services  285 226
฀ Total฀business฀segments  2,976 2,468
Net฀unallocated฀Corporate฀expense  (887) (449)
  $฀ 2,089 $฀ 2,019
The฀following฀segment฀discussions฀also฀include฀informa-
tion฀ relating฀ to฀ negotiated฀ backlog฀ for฀ each฀ segment.฀ Total฀
negotiated฀ backlog฀ was฀ approximately฀ $75฀ billion฀ and฀ $74฀
billion฀ at฀ December฀ 31,฀ 2005฀ and฀ 2004,฀ respectively.฀ This฀
amount฀ included฀ both฀ funded฀ backlog฀ (unfilled฀ firm฀ orders฀
for฀which฀funding฀has฀been฀both฀authorized฀and฀appropriated฀
by฀ the฀ customer–Congress฀ in฀ the฀ case฀ of฀ U.S.฀ Government฀
agencies)฀and฀unfunded฀backlog฀(firm฀orders฀for฀which฀fund-
ing฀ has฀ not฀yet฀been฀ appropriated).฀ Negotiated฀backlog฀does฀
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