1995 Annual Report - Lockheed Martin

Lockheed Martin CorporationBusiness AcquisitionsEffective May 1, 1994, the Corporation purchased the Space Systems Division of General DynamicsCorporation (GD Space Systems) for approximately $160 million in cash, expanding theCorporation's presence in the intermediate-lift space launch vehicle market with the Atlas series oflaunch vehicles. On April 2, 1993, the Corporation consummated a transaction with General ElectricCompany (GE) valued at approximately $3 billion to combine the aerospace and certain otherbusinesses of GE (collectively, the GE Aerospace businesses) with the businesses of the Corporationin the form of affiliated corporations. Effective February 28, 1993, the Corporation acquired thetactical military aircraft business of General Dynamics for approximately $1.5 billion in cash, plus theassumption of certain liabilities related to the business. All of the acquisitions discussed above wererecorded under the purchase method of accounting, with operating results from each acquisitionincluded with those of the Corporation beginning on the respective closing dates.Results of OperationsNet SalesThe Corporation's operating cycle is long-term and involves various types of production contractsand varying production delivery schedules. Accordingly, results of a particular year, or year-to-yearcomparisons of recorded sales and profits, may not be indicative of future operating results. Thefollowing comparative analysis should be viewed in this context.The Corporation's consolidated net sales for 1995 were $22.9 billion. Net sales for the yearremained relatively unchanged as compared to 1994 net sales, which in turn were two percent overthe $22.4 billion reported for 1993. Sales increases for 1995 in the Space & Strategic Missilessegment and the Information & Technology Services segment were largely offset by sales declinesin the Aeronautics segment and the Electronics segment. Sales for 1994 increased over 1993 levelsat Aeronautics and at Information & Technology Services, while sales at Electronics remainedrelatively flat and sales at Space & Strategic Missiles decreased in that year. Although the U.S.Government remained the Corporation's largest customer, the percentage of net sales decreased to69 percent in 1995 from 72 percent in 1994 and 78 percent in 1993. Sales to foreign governments,including sales made through the U.S. Government, as a percentage of net sales were 13 percent in1995, 15 percent in 1994 and 12 percent in 1993, while commercial sales in those same periods were18 percent, 13 percent and 10 percent, respectively.The Corporation's operating profit (earnings before interest and taxes) decreased in 1995 to $1.4billion from $2.0 billion in 1994. On June 26, 1995, the Corporation announced a corporate-wideconsolidation plan which, once fully implemented, is expected to yield annual savings of approximately$1.8 billion. Under the consolidation plan, the Corporation will close 12 facilities and laboratoriesas well as 26 duplicative field offices in the U.S. and abroad, eliminating up to approximately12,000 positions and 7.7 million square feet of unneeded capacity over the next five years. The totalcost to implement the plan, which will be largely completed over the next two years, is approximately$1.7 billion. Operating profit in 1995 included the effects of pretax charges totaling $690 million