Lockheed Martin 2015 Annual Report Download - page 41

connection with former government service or as part of the screening process for a security clearance. We are currently
assessing the impact of this cyber-security incident but do not yet know the impact, if any, on Lockheed Martin or our current
or former employees.
Consolidated Results of Operations
Since our operating cycle is primarily long term and involves many types of contracts for the design, development and
manufacture of products and related activities with varying delivery schedules, the results of operations of a particular year,
or year-to-year comparisons of sales and profits, may not be indicative of future operating results. The following discussions
of comparative results among years should be reviewed 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):
2015 2014 2013
Net sales $ 46,132 $ 45,600 $ 45,358
Cost of sales (40,932) (40,345) (41,171)
Gross profit 5,200 5,255 4,187
Other income, net 236 337 318
Operating profit (a) 5,436 5,592 4,505
Interest expense (443) (340) (350)
Other non-operating income, net 30 6—
Earnings from continuing operations before income taxes 5,023 5,258 4,155
Income tax expense (1,418) (1,644) (1,205)
Net earnings from continuing operations 3,605 3,614 2,950
Net earnings from discontinued operations ——31
Net earnings $ 3,605 $ 3,614 $ 2,981
Diluted earnings per common share
Continuing operations $ 11.46 $ 11.21 $ 9.04
Discontinued operations —— .09
Total diluted earnings per common share $ 11.46 $ 11.21 $ 9.13
(a) Operating profit includes $45 million of operating loss at Sikorsky, which is less than one percent of consolidated operating profit in
2015. Sikorsky’s operating loss is net of intangible amortization and adjustments required to account for the acquisition of this
business in the fourth quarter of 2015.
Certain amounts reported in other income, net, primarily our share of earnings or losses from equity method investees,
are included in the operating profit of our business segments. Accordingly, such amounts are included in our discussion of
our business segment results of operations.
Net Sales
We generate sales from the delivery of products and services to our customers. Product sales are predominantly
generated in our Aeronautics, MFC, MST and Space Systems business segments and most of our service sales are generated
in our IS&GS and MST business segments. Our consolidated net sales were as follows (in millions):
2015 2014 2013
Products $35,882 $36,093 $35,691
Services 10,250 9,507 9,667
Total net sales $46,132 $45,600 $45,358
Substantially all of our contracts are accounted for using the percentage-of-completion method. 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 subsequent discussion of changes in our consolidated cost of sales
and our business segment results of operations because changes in our sales are typically accompanied by a corresponding
change in our cost of sales due to the nature of the percentage-of-completion method.
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