Lockheed Martin 2013 Annual Report Download - page 36

Consolidated Results of Operations
Since our operating cycle is long-term and involves many types of contracts for the design, development, and
manufacturing of products and related activities with varying delivery schedules, the results of operations of a particular
year, or year-to-year comparisons of recorded sales and profits, may not be indicative of future operating results. The
following discussions of comparative results among years should be viewed in this context. All per share amounts cited in
these discussions are presented on a “per diluted share” basis, unless otherwise noted. Our consolidated results of operations
were as follows (in millions, except per share data):
2013 2012 2011
Operating results
Net sales $ 45,358 $ 47,182 $ 46,499
Cost of sales (41,171) (42,986) (42,755)
Other income, net 318 238 276
Operating profit 4,505 4,434 4,020
Interest expense (350) (383) (354)
Other non-operating income (expense), net —21 (35)
Income tax expense (1,205) (1,327) (964)
Net earnings from continuing operations 2,950 2,745 2,667
Net earnings (loss) from discontinued operations 31 — (12)
Net earnings $ 2,981 $ 2,745 $ 2,655
Diluted earnings (loss) per common share
Continuing operations $ 9.04 $ 8.36 $ 7.85
Discontinued operations .09 — (.04)
Total $ 9.13 $ 8.36 $ 7.81
Amounts reported in other income, net (primarily our share of earnings or losses from equity method investees) on our
Statements of Earnings are included in the segment operating profit and segment operating margins of our “Business
Segment Results of Operations” but are excluded from the consolidated net sales and cost of sales tables below.
Net Sales
Products sales are predominantly generated in our Aeronautics, MFC, MST, and Space Systems business segments, and
most of our services sales are generated in our IS&GS and MFC business segments. Our consolidated net sales were as
follows (in millions):
2013 2012 2011
Net sales
Products $35,691 $37,817 $36,925
Services 9,667 9,365 9,574
Total net sales $45,358 $47,182 $46,499
Substantially all of our contracts are accounted for using the percentage-of-completion method of accounting. Under the
percentage-of-completion method, we record net sales on contracts based upon our progress towards completion on a
particular contract, as well as our estimate of the profit to be earned at completion. The following discussion of material
changes in our consolidated net sales should be read in tandem with the following discussion of changes in our consolidated
cost of sales and our “Business Segment Results of Operations” section because, due to the nature of percentage-of-
completion accounting, changes in our sales are typically accompanied by a corresponding change in our cost of sales.
Products Sales
Our products sales represent about 80% of our net sales for both 2013 and 2012. Products sales decreased $2.1 billion, or
6%, in 2013 compared to 2012 primarily due to lower volume and deliveries. Products sales decreased about $915 million at
Aeronautics primarily due to fewer aircraft deliveries (primarily F-16 and C-130) and lower volume and risk retirements on
F-22 due to completion of aircraft deliveries in 2012, partially offset by increased volume and risk retirements on F-35
production contracts and increased aircraft deliveries on the C-5 program; about $750 million at IS&GS for various programs
due to lower volume (such as Next Generation Identification (NGI) and En Route Automation Modernization (ERAM)
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