LOCKHEED MARTIN CORPORATION

for outstanding Lockheed Martin shares in a split-off transaction. The transaction structure, which is subject to market
conditions, is currently contemplated to be a split-off transaction resulting in a decrease in our outstanding common shares
and a significant book gain at closing. In a split-off transaction, only those stockholders that elect to participate will receive
Leidos shares in the merger transaction, provided, that, if the exchange offer is not fully subscribed, Lockheed Martin will
spin-off the remaining shares to be converted into Leidos stock in the merger pro rata.
Subsequent to the program realignment described below, our IS&GS business segment represents the government IT and
technical services businesses that were under strategic review. The transaction is expected to close in the third or fourth
quarter of 2016. Until closing, IS&GS will operate as a business segment and financial results for the IS&GS business
segment will be reported in our continuing operations.
Program Realignment
During the fourth quarter of 2015, we realigned certain programs among our business segments in connection with the
strategic review of our government IT and technical services businesses. As part of the realignment:
• command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) and government
cyber programs were transferred from the IS&GS business segment to the MST business segment;
• energy solutions programs were transferred from the IS&GS business segment to the MFC business segment;
• space ground station programs were transferred from the IS&GS business segment to Space Systems business segment;
and
• technical services programs were transferred from the MFC business segment to the IS&GS business segment.
In connection with the realignment, goodwill was reallocated between affected reporting units on a relative fair value
basis. We performed goodwill impairment tests prior and subsequent to the realignment, and there was no indication of
goodwill impairment.
Subsequent to the program realignment, the government IT and technical services businesses that were under strategic
review are now aligned under the IS&GS business segment.
Business Segments
The amounts, discussion and presentation of our business segments as set forth in this Annual Report on Form 10-K
reflect the program realignment described above for all periods presented. The realignment did not impact our consolidated
results of operations. See “Note 5 – Information on Business Segments” for additional information including revised
historical segment results under our new structure.
Aeronautics
In 2015, our Aeronautics business segment generated net sales of $15.6 billion, which represented 34% of our total
consolidated net sales. Aeronautics’ customers include the military services and various other government agencies of the
U.S. and other countries. In 2015, U.S. Government customers accounted for 72% and international customers accounted for
28% of Aeronautics’ net sales. Net sales from Aeronautics’ combat aircraft products and services represented 25%, 23%, and
21% of our total consolidated net sales in 2015, 2014, and 2013.
Aeronautics is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade
of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies.
Aeronautics’ major programs include:
• F-35 Lightning II Joint Strike Fighter – international multi-role, multi-variant, fifth generation stealth fighter
• C-130 Hercules – international tactical airlifter
• F-16 Fighting Falcon – low-cost, combat-proven, international multi-role fighter
• C-5M Super Galaxy – strategic airlifter
• F-22 Raptor – air dominance and multi-mission fifth generation stealth fighter.
The F-35 program is our largest program, generating 20% of our total consolidated net sales, as well as 59% of
Aeronautics’ net sales in 2015. The F-35 program consists of development contracts, multiple production contracts, and
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