Lockheed Martin 2013 Annual Report Download - page 11

PART I
ITEM 1. Business.
General
We are a global security and aerospace company principally engaged in the research, design, development, manufacture,
integration and sustainment of advanced technology systems, products and services. We also provide a broad range of
management, engineering, technical, scientific, logistic, and information services. We serve both domestic and international
customers with products and services that have defense, civil, and commercial applications, with our principal customers
being agencies of the U.S. Government. In 2013, 82% of our $45.4 billion in net sales were from the U.S. Government, either
as a prime contractor or as a subcontractor (including 61% from the Department of Defense (DoD)), 17% were from
international customers (including foreign military sales (FMS) contracted through the U.S. Government), and 1% were from
U.S. commercial and other customers. Our main areas of focus are in defense, space, intelligence, homeland security, and
information technology, including cyber security.
We are operating in an environment characterized by both increasing complexity in global security and continuing
economic pressures in the U.S. and globally. A significant component of our strategy in this environment is to focus on
program execution, improving the quality and predictability of the delivery of our products and services, and placing security
capability quickly into the hands of both our domestic and international customers at affordable prices. Recognizing that our
customers are resource constrained, we are endeavoring to develop and extend our portfolio domestically in a disciplined
manner with a focus on adjacent markets close to our core capabilities, as well as growing our international sales. We
continue to focus on affordability initiatives as demonstrated by our plan to close and consolidate several of our facilities as
we announced in November 2013. We also expect to continue to invest in technologies to fulfill new mission requirements
for our customers, and invest in our people so that we have the technical skills necessary to succeed without limiting our
ability to return cash to our investors in the form of dividends and share repurchases.
We operate in five business segments: Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and
Fire Control (MFC), Mission Systems and Training (MST), and Space Systems. We organize our business segments based on
the nature of the products and services offered.
Aeronautics
In 2013, our Aeronautics business segment generated net sales of $14.1 billion, which represented 31% 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 2013, U.S. Government customers accounted for 78% and international customers accounted for
22% of Aeronautics’ net sales. Net sales from Aeronautics’ combat aircraft products and services represented 21% of our
total consolidated net sales in each of 2013 and 2012, and 20% of our total consolidated net sales in 2011.
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;
• F-22 Raptor – air dominance and multi-mission fifth generation stealth fighter; and
• C-5M Super Galaxy – strategic airlifter.
The F-35 program is the largest in our corporation generating 16% of our total consolidated net sales, as well as 50% of
Aeronautics’ net sales in 2013. The F-35 program consists of a development contract and multiple production contracts. The
development contract is being performed concurrent with the production contracts. Concurrent performance of development
and production contracts is used for complex programs to test aircraft, shorten the time to field systems, and achieve overall
cost savings. We expect the development portion of the F-35 program will be substantially complete in 2017, with less
significant efforts continuing into 2019. Production of the aircraft is expected to continue for many years given the U.S.
Government’s current inventory objective of 2,443 aircraft for the Air Force, Marine Corps, and Navy; commitments from
our eight international partners and two international customers; as well as expressions of interest from other countries.
During 2013, we delivered 35 aircraft to our domestic and international partners, resulting in total deliveries of 73 production
aircraft as of December 31, 2013. We have 93 production aircraft in backlog as of December 31, 2013, including orders from
our international partners. For additional information on the F-35 program, see “Status of the F-35 Program” in
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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