Lockheed Martin 2013 Annual Report Download - page 94

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Substantially all assets measured at fair value, other than derivatives, represent investments classified as trading
securities held in a separate trust to fund certain of our non-qualified deferred compensation plans and are recorded in other
noncurrent assets on our Balance Sheets. The fair values of equity securities and mutual funds are determined by reference to
the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction
costs. The fair values of U.S. Government and other securities are determined using model-derived valuations in which all
significant inputs are observable in active markets. The fair values of derivative instruments, which consist of foreign
currency exchange forward and interest rate swap contracts, primarily are determined based on the present value of future
cash flows using model-derived valuations that use observable inputs such as interest rates, credit spreads, and foreign
currency exchange rates. We did not have any transfers of assets or liabilities between levels of the fair value hierarchy
during 2013.
In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts for cash and cash equivalents,
accounts receivable, and accounts payable approximated their fair values. The estimated fair value of our outstanding debt
was $7.4 billion and $8.2 billion at December 31, 2013 and 2012, and the outstanding principal amount was $7.0 billion and
$7.2 billion at December 31, 2013 and 2012, excluding unamortized discounts of $882 million and $892 million. The
estimated fair values of our outstanding debt were determined based on quoted prices for similar instruments in active
markets (Level 2).
In the fourth quarter of 2013, we recorded a non-cash goodwill impairment charge of $195 million, net of state tax
benefits, in connection with our annual goodwill impairment test. The fair value determination of goodwill was determined
using a combination of a DCF analysis and market-based valuation methodologies and is classified as a Level 3 fair value
measurement due to the significance of the unobservable inputs used. See Note 1 for further information on this non-cash
goodwill impairment charge and our valuation methodologies.
Note 16 – Summary of Quarterly Information (Unaudited)
A summary of quarterly information is as follows (in millions, except per share data):
2013 Quarters
First Second Third Fourth
Net sales $11,070 $11,408 $11,347 $11,533
Operating profit 1,119 1,298 1,254 834
Net earnings from continuing operations (a) 761 859 842 488
Net earnings from discontinued operations ——31—
Net earnings 761 859 873 488
Basic earnings per share (b) 2.37 2.68 2.72 1.53
Diluted earnings per share 2.33 2.64 2.66 1.50
2012 Quarters
First Second Third Fourth
Net sales $11,293 $11,921 $11,869 $12,099
Operating profit 1,044 1,192 1,137 1,061
Net earnings (c) 668 781 727 569
Basic earnings per share 2.06 2.41 2.25 1.76
Diluted earnings per share (b) 2.03 2.38 2.21 1.73
(a) The first quarter of 2013 included a tax benefit of $37 million from the R&D tax credit attributable to 2012 (Note 8) and a charge of
$30 million ($19 million after tax) related to certain severance actions (Note 2). The fourth quarter of 2013 included charges of
$195 million ($176 million after tax) related to a non-cash goodwill impairment charge (Note 1) and $171 million ($111 million after
tax) related to certain severance actions (Note 2).
(b) The sum of the quarterly earnings per share amounts do not equal the earnings per share amount included on our Statements of
Earnings, primarily due to the timing of our share repurchases during each respective year.
(c) The fourth quarter of 2012 included a reduction in the income tax benefit of the U.S. manufacturing deduction primarily caused by
$2.5 billion of tax-deductible discretionary pension contributions in the fourth quarter of 2012, which increased income tax expense by
$59 million ($.18 per share).
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