Lockheed Martin 2015 Annual Report Download - page 93

divestitures; the effects of certain legal settlements; corporate costs not allocated to our business segments; and other
miscellaneous corporate activities. These items are included in the reconciling item “Unallocated items” between operating
profit from our business segments and our consolidated operating profit. See Note 1 (under the caption “Use of Estimates”)
for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business
segments.
Our business segments’ results of operations include pension expense only as calculated under U.S. Government Cost
Accounting Standards (CAS), which we refer to as CAS pension cost. We recover CAS pension cost through the pricing of
our products and services on U.S. Government contracts and, therefore, the CAS pension cost is recognized in each of our
business segments’ net sales and cost of sales. Since our consolidated financial statements must present pension expense
calculated in accordance with the financial accounting standards (FAS) requirements under GAAP, which we refer to as FAS
pension expense, the FAS/CAS pension adjustment increases or decreases the CAS pension cost recorded in our business
segments’ results of operations to equal the FAS pension expense.
Selected Financial Data by Business Segment
Summary operating results for each of our business segments were as follows (in millions):
2015 2014 2013
Net sales
Aeronautics $15,570 $14,920 $14,123
Information Systems & Global Solutions 5,596 5,654 6,115
Missiles and Fire Control 6,770 7,092 6,795
Mission Systems and Training 9,091 8,732 9,037
Space Systems 9,105 9,202 9,288
Total net sales $46,132 $45,600 $45,358
Operating profit
Aeronautics $ 1,681 $ 1,649 $ 1,612
Information Systems & Global Solutions 508 472 498
Missiles and Fire Control 1,282 1,344 1,379
Mission Systems and Training 844 936 1,065
Space Systems 1,171 1,187 1,198
Total business segment operating profit 5,486 5,588 5,752
Unallocated items
FAS/CAS pension adjustment
FAS pension expense (a) (1,142) (1,144) (1,948)
Less: CAS pension cost (b) 1,613 1,520 1,466
FAS/CAS pension income (expense) 471 376 (482)
Goodwill impairment charges (c) —(119) (195)
Severance charges (d) (102) — (201)
Stock-based compensation (138) (164) (189)
Other, net (e), (f) (281) (89) (180)
Total unallocated items (50) 4 (1,247)
Total consolidated operating profit $ 5,436 $ 5,592 $ 4,505
(a) FAS pension expense in 2015 and 2014 was less than in 2013 primarily due to the June 2014 plan amendments to certain of our
defined benefit pension plans to freeze future retirement benefits, partially offset by the impact of using new longevity assumptions
(Note 11).
(b) The higher CAS pension cost primarily reflects the impact of phasing in CAS Harmonization.
(c) We recognized non-cash goodwill impairment charges related to the Technical Services reporting unit within our MFC business
segment in 2014 and 2013. See Note 1 for more information.
(d) See Note 15 for information on charges related to certain severance actions at our business segments. Severance charges for initiatives
that are not significant are included in business segment operating profit.
(e) Other, net in 2015 includes a non-cash asset impairment charge of approximately $90 million related to our decision to divest
Lockheed Martin Commercial Flight Training (LMCFT) in 2016. This charge was partially offset by a net deferred tax benefit of
about $80 million, which is recorded in income tax expense. The net impact reduced net earnings by about $10 million.
(f) Other, net in 2015 includes approximately $45 million of non-recoverable transaction costs associated with the acquisition of Sikorsky
and the strategic review of our government IT and technical services businesses.
85