Lockheed Martin

Christopher Benson

Dr. Leslee N. Higgins

Financial Analysis Project

Accounting 6130 - Financial Accounting

Part I: Introduction

This is a report on Lockheed Martin, Inc. I will, from hereon, refer to Lockheed as the company. The annual report on which this report is based was filed with the SEC on Feb 28, 2005. The report is for the fiscal year 2004. In the company's own words, "Throughout this form 10-K, we incorporate by reference, information from parts of other documents filed with the Securities and Exchange Commission". I selected Lockheed Martin Inc for this project because I think it is a great American company. Also, it has a manufacturing plant here in Marietta, in the state of Georgia, providing employment for our residents.

Lockheed Martin operates in five principal business areas: Aeronautics, Electronic Systems, Space Systems, Integrated Systems & Solutions, and Information & Technology Services (I&TS). The company generates some 81% of its revenues from its "Combat Aircraft" business units. The "Combat Aircraft" business unit designs, develops, produces and provides systems support for fighter/attack aircraft. Lockheed's major fighter/attack aircraft programs include:

F-16 "Fighting Falcon" - a low-cost, multi-role fighter

F-35 "Joint Strike Fighter" - the next generation, stealth multi-role fighter

F/A-22"Rapter" - an air dominance, attack and multi-mission Stealth fighter

F-2 "Japanese combat aircraft

C-27J "Medium transport and support aircraft

Lockheed researches, delivers and supports military aircraft for the United States government and other governments around the world. In light of this, it is safe to say that the American government is its main customer and the world as a whole is its market. For instance, Lockheed is the main contractor on the F-16 "Fighting Falcon" and continues to provide upgrades for the U.S Air Force and other countries including Canada, the U.K and Australia among others. Also, for the next generation 'F-35Joint Strike Fighter' ", the United States, United Kingdom, the Netherlands, Italy, Canada, Denmark, Norway, Turkey and Australia are working together to design, test and build a family of aircraft

to meet their joint and coalition requirements.

The company "researches, designs, manufactures and supports products (military aircraft, space systems, etc) "that are needed by governments the world over to fight the war on terrorism. The U.S government will continue to need its service many a years to come. For the immediate future, the Bush Administration intends to recommend cuts in certain projects to which Lockheed is affiliated. Even with this in mind, in my opinion the company should be in good shape for the future even if the administration's recommendations are carried through by the U.S Congress.

Part II: Company History

The 1910s marked the beginning of a set of great discoveries by the pioneers of Aviation engineering. Glenn L. Martin and the Loughead brothers, Allan and Malcolm made maiden voyages in their own "flying machines" to join the ranks of the world's aviation pioneers. In 1909, aviation pioneer Glenn L. Martin launched the maiden voyage of his first airplane, made of silk and bamboo, in Santa Ana, California. Later in 1914, Glenn formed a company, officially incorporating it as "The Glenn L. Martin Company". In 1916, the Loughead brothers established the "Loughead Aircraft Manufacturing Company" in Santa Barbara, California. They will later change the name to the "Lockheed Company".

During the ensuing decades, a number of great discoveries in aircraft engineering were made. In addition, the companies set up by Glenn L. Martin and the Loughead brothers gradually evolved with the passage of time and the discovery of new technology. Their initial products were wood and fabric seaplanes, including the "Model T plane", the "Curtiss HS-2L" flying boats, the Lockheed "Model 10 Electra, the Martin "M-130", among others.

In essence, what has become Lockheed-Martin today, started out as two distinct but related companies. The companies will change their names and merge with smaller companies such as Detroit Aircraft, as a wave of consolidations swept over the aviation and spacecraft industry. During that same period, the two companies scaled back their operations, with Lockheed focusing on the development of military aircraft while Martin focused on the "commercial airline industry, and ventured into the production of missiles, rockets, and other modern weaponry" . The two companies combined their operations in 1995 to form "The Lockheed Martin Corporation" as we know it today. The new company is incorporated in Bethesda, Maryland. Listed below are some of the subsidiaries and affiliates of the company:

* Bechtel Nevada Corporation

* ILS International Launch Services, Inc.

* Lockheed Martin Aeronautics Company

* Lockheed Martin Aircraft & Logistics Center

* Lockheed Martin Missiles and Fire Control

* Lockheed Martin Space Systems Company

* Lockheed Martin STASYS Limited

* Lockheed Martin Transportation & Security Solutions

* Lockheed Martin UK Limited

* ORINCON Corporation International

* Sippican, Inc.

* United Space Alliance

To the best of my understanding, the founding family is not currently actively involved in the business.

Part III: Letter Shareholder

At present, Dr. Vance D. Coffman is chairman of the board of directors of Lockheed Martin Corporation. The following major themes can be identified in the chairperson's letter to shareholders: "disciplined growth", "solid