San Diego-based defense contractor Titan (NYSE:TTN) paused in the midst of its mating dance with suitor Lockheed Martin (NYSE:LMT), to report its earnings for the first quarter of 2004 yesterday.

Titan said its revenues rose 21% versus the prior year's quarter to $459 million, benefiting from increased national security spending by the U.S. government. The company trumpeted its revenue growth several times in its earnings announcement -- but that may have been because it was the rare point of clearly good news found therein.

At first glance, earnings were not particularly impressive, clocking in at a mere $0.03 per diluted share, down 67% from the year-ago quarter. Dreaded "onetime" charges -- that bane of smooth earnings -- were to blame for the size of the shortfall. The company incurred $0.13 per share in charges related to its planned merger with Lockheed, including $0.09 per share in due diligence costs to investigate likely violations of the Foreign Corrupt Practices Act by some of its foreign consultants.

Absent of all of those legal and accounting charges, Titan would have nearly doubled its 2003 first-quarter earnings to make $0.16 per share -- yet still fallen short of analysts' expectations of $0.19 per share in pro forma (Latin for "make-believe") earnings.

But none of the above numbers per se should matter as much to investors, as how the numbers affect the likelihood of Titan getting bought out by Lockheed. And I suspect that they affect Lockheed's plans not at all. First off, Titan made decent (if not stellar) profits before all of the merger costs. Those costs should not recur in the aftermath of the merger (and the SEC investigation, and the Department of Justice investigation). So Titan is still a profitable operation.

Plus, revenues were up. Once Lockheed gets ahold of that revenue stream, Lockheed will try to convert it into profits in the manner Lockheed thinks best. So, how well Titan has done in this respect to date will become much less relevant in the future.

Finally, with a trailing P/E of 54 and an enterprise value-to-free cash flow ratio of 35, it was never Titan's profitability that attracted Lockheed's interest. Lockheed is in this deal to acquire Titan's expertise in information technology (as fellow Fool Jeff Hwang has pointed out) and, in my opinion, to also capture Titan's 8,800 security-cleared employees.

Yesterday's earnings report changes neither of those facts.

Tom Gardner searches high and low for small, undervalued companies in Motley Fool Hidden Gems . Sign up for a free, no-obligation trial to learn more.

Fool contributor Rich Smith owns no shares in any company mentioned in this article.