Lockheed Martin 2013 Annual Report Download - page 42

The operating results in the following tables exclude businesses included in discontinued operations (Note 14) for all
years presented. Summary operating results for each of our business segments were as follows (in millions):
2013 2012 2011
Net sales
Aeronautics $14,123 $14,953 $14,362
Information Systems & Global Solutions 8,367 8,846 9,381
Missiles and Fire Control 7,757 7,457 7,463
Mission Systems and Training 7,153 7,579 7,132
Space Systems 7,958 8,347 8,161
Total net sales $45,358 $47,182 $46,499
Operating profit
Aeronautics $ 1,612 $ 1,699 $ 1,630
Information Systems & Global Solutions 759 808 874
Missiles and Fire Control 1,431 1,256 1,069
Mission Systems and Training 905 737 645
Space Systems 1,045 1,083 1,063
Total business segment operating profit 5,752 5,583 5,281
Unallocated expenses, net
FAS/CAS pension adjustment
FAS pension expense (1,948) (1,941) (1,821)
Less: CAS cost 1,466 1,111 899
FAS/CAS pension expense (a) (482) (830) (922)
Goodwill impairment charge (b) (195) ——
Severance charges (c) (201) (48) (136)
Stock-based compensation (189) (167) (157)
Other, net (180) (104) (46)
Total unallocated expenses, net (1,247) (1,149) (1,261)
Total consolidated operating profit $ 4,505 $ 4,434 $ 4,020
(a) We expect FAS/CAS pension income in 2014 of about $345 million as further discussed in the “Critical Accounting Policies -
Postretirement Benefit Plans” section below.
(b) We recognized a non-cash goodwill impairment charge related to the Technical Services reporting unit within our MFC business
segment. For more information, see “Note 1 – Significant Accounting Policies” of our consolidated financial statements.
(c) See “Note 2 – Restructuring Charges” of our consolidated financial statements for information on charges related to certain severance
actions at our business segments and Corporate Headquarters. Severance charges for initiatives that are not significant are included in
business segment operating profit.
The following segment discussions also include information relating to backlog for each segment. Backlog was
approximately $82.6 billion, $82.3 billion, and $80.7 billion at December 31, 2013, 2012, and 2011. These amounts included
both funded backlog (firm orders for which funding has been both authorized and appropriated by the customer – Congress
in the case of U.S. Government agencies) and unfunded backlog (firm orders for which funding has not yet been
appropriated). Backlog does not include unexercised options or task orders to be issued under indefinite-delivery, indefinite-
quantity contracts. Funded backlog was approximately $55.0 billion at December 31, 2013.
Management evaluates performance on our contracts by focusing on net sales and operating profit, and not by type or
amount of operating expense. Consequently, our discussion of business segment performance focuses on net sales and
operating profit, consistent with our approach for managing the business. This approach is consistent with the overall life
cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit, and
monitors performance on our contracts in a similar manner through their completion.
We regularly provide customers with reports of our costs as the contract progresses. The cost information in the reports
is accumulated in a manner specified by the requirements of each contract. For example, cost data provided to our customer
for a product would typically align to the subcomponents of that product (such as a wing-box on an aircraft), and for services
would align to the type of work being performed (such as help-desk support). Our contracts generally are cost-based, which
allows for the recovery of costs in the pricing of our products and services. Most of our contracts are bid and negotiated with
our customers under circumstances in which we are required to disclose our estimated costs to provide the product or service.
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