Lockheed Martin 2005 Annual Report Download - page 36
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Theincreaseinthe“Other,net”componentofunallocated
Corporate(expense)income,netof$84millionfrom2004to
2005 was primarily due to higher interest income due to a
largerinvestedcashbalanceandhigherinterestratesin2005.
Thedecreaseof$81millionfrom2003to2004wasprimarily
duetolowerearningsonourequityinvestmentsin2004.
Wehavea balancedcashdeploymentanddisciplinedgrowth
strategytoenhanceourbusinesses,increaseshareholdervalue
and position ourselves to take advantage of new business
opportunities when they arise. Consistent with that strategy,
we have invested in our business (e.g., capital expenditures,
independent research and development), repurchased shares,
increased our dividends, opportunistically reduced our debt
andmadeselectacquisitionsofbusinesses.Thefollowingpro-
videsanoverviewofourexecutionofthisstrategy.
Net cash provided by operating activities increased by $270
millionto$3.2billionin2005ascomparedto2004afterhav-
ingincreased by$1.1billionto$2.9billionin 2004ascom-
paredto2003.In2005,theincreasewasprimarilyattributable
toanincreaseinnetearningsof$559millionascomparedto
2004, which more than offset a $386 million reduction in
workingcapitalimprovementsbetweentheyears.In2004,the
increasewasattributabletoanincreaseinnetearningsof$213
million, and also to an increase in working capital improve-
ments of $799 million compared to 2003. The remaining
increaseincashbetweentheperiodswasduetothetimingof
income tax payments and various other operating activities.
Thefocusonimprovingourcashmanagementprocessescontin-
uestocontributetotheaggregatereductioninoperatingwork-
ingcapitalaccounts(receivables,inventories,accountspayable,
andcustomeradvancesandamountsinexcessofcostsincurred),
including an aggregate reduction of $106 million in 2005 as
comparedtoareductionof$492millionin2004.Althoughwe
will continue to focus on management of operating working
capital accounts, we do not expect the rate of improvements
wehaveexperiencedinpriorperiodstocontinue.
Capitalexpenditures—Capitalexpendituresforproperty,plant
andequipmentamounted to $865 millionin2005,$769mil-
lionin2004and$687millionin2003.Weexpectourcapital
expenditurestoincreaseoverthenexttwoyearsconsistentwith
the expected growth in our business and to support specific
programrequirements.
Acquisitions,divestituresandotheractivities—Wehaveapro-
cess to selectively identify businesses for acquisition that
meet our financial targets and disciplined growth strategy.
Wehavefocusedongovernmentinformationtechnologypro-
viders,systemsintegratorsandcomplementarytechnologies.
Wepaid$564millionforfourbusinessesin2005,$91mil-
lion for two businesses in 2004 and $645 million for two
businessesin2003.
During 2005,wereceivedproceedsof$935million from
the divestiture of non-core equity investments. The proceeds
included$752millionfromthesaleofourinvestmentinIntelsat,
Ltd., $140 million from the sale of Inmarsat shares and the
redemptionofcertainInmarsatequity-relatedinvestments,and
$33millionfromthesaleofourNeuStarinvestment.
During2004,NewSkiesSatellites,N.V.wassoldtoapri-
vateequity firm.Ourportion oftheproceeds was $148mil-
lion,$140millionofwhichwasreceivedin2004.Alsoduring
2004, we received cash from Inmarsat Group Holdings, Ltd.
amounting to $50 million which reduced the amount of our
investment.In2003,InmarsatVentures,Ltd.wasacquiredby
a consortium of private equity firms in a leveraged buyout
transaction.Inexchangeforourinterest,wereceivedcashof
$114 million and retained an ownership interest in the new
Inmarsat holding company, Inmarsat Group Holdings, Ltd.,
valued at $96 million. Also in 2003, we paid $130 million
relatedtoourguaranteeofSpaceImaging,LLC’sborrowings
underitscreditfacility.
LockheedMartinCorporation
MANAGEMENT’SDISCUSSIONANDANALYSISOF
FINANCIALCONDITIONANDRESULTSOFOPERATIONS
December31,2005
Net Sales
(In billions)
Net Sales
(In billions)
0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
$40
Operating Profit
(In millions)
0
500
1000
1500
2000
2500
3000
3500
0
500
1,000
1,500
2,000
2,500
3,000
$3,500
Net Cash Provided by Operating Activities
(In millions)
0
500
1000
1500
2000
2500
3000
3500
0
500
1,000
1,500
2,000
2,500
3,000
$3,500
2004 2003
Aeronautics
Electronic Systems
Space Systems
IS&S
I&TS
Segment Operating Profit
(In millions)
2004 2003
Aeronautics
Electronic Systems
Space Systems
IS&S
I&TS
Net Cash Provided By Operating Activities
(In millions)
2004 2003
Debt-To-Total Capital Ratio
(In percent)
0.0
0.1
0.2
0.3
0.4
0.5
0%
10%
20%
30%
40%
50%
Debt-To-Total Capital Ratio
2004 2003
0%
3%
6%
9%
12%
15%
Revised Return On Invested Capital Ratio(1)
2004 2003
Return On Invested Capital
(In percent)
0.00
0.03
0.06
0.09
0.12
0.15
Negotiated Backlog
(In billions)
Negotiated Backlog
(In billions)
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
$80
2004 2003
Aeronautics
Electronic Systems
Space Systems
IS&S
I&TS
(1) Calculation was revised in 2005. See Note (f) to
the Consolidated Financial Data—Five Year
Summary on page 74 for additional information
on the calculation.