We are a global security and aerospace company principally engaged in the research, design, development, manufacture, integration, and sustainment of advanced technology systems and products. 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 2012, 82% of our $47.2 billionin 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 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. Subject to uncertainties discussed in the "Industry Considerations" section below, we continue to expect 2013 net sales will decline at a mid-single digit percentage rate from our record 2012 net sales amount. We expect our 2013 segment operating profit will be comparable to 2012 levels due to improved contract performance, and 2013 segment operating profit margin will accordingly be slightly higher than 2012 levels. We expect 2014 net sales will decline slightly from 2013 levels and that business segment operating margin will remain above 11.5%. Our preliminary outlook for 2014 assumes all impacts known to us associated with sequestration, the U.S. Governmentcontinues to support and fund our key programs, and Congressapproves budget legislation for government fiscal year (GFY) 2014 on a timely basis. Changes in circumstances may require us to revise our assumptions, which could materially reduce our 2014 net sales and earnings trends discussed above. The potential collateral effects of U.S. Governmentspending reductions such as significant rescheduling or termination activity with our supplier base, contractual actions (including partial or complete terminations), severance payments made to our employees, expenses for facilities closures, and impairment of assets (including goodwill) are not included in the estimates above. The following discussion is a supplement to and should be read in conjunction with the accompanying consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended December 31, 2012(2012 Form 10-K). INDUSTRY CONSIDERATIONS
U.S. Government Funding Constraints
U.S. Government, our principal customer, continues to face significant fiscal and economic challenges such as financial deficits, budget uncertainty, increasing debt levels, and an economy with restrained growth. In order to address these challenges, the U.S. Governmentcontinues to focus on discretionary spending, entitlements, taxes, and other initiatives to stimulate the economy, create jobs, and reduce the deficit. In doing so, the Administration and Congressmust balance decisions regarding defense, homeland security, and other federal spending priorities in a constrained fiscal environment largely imposed by the Budget Control Act of 2011 (Budget Act). The Budget Act established limits on discretionary spending, which will reduce planned defense spending by a minimum of $487 billionover a 10 year period that began with GFY 2012 (a U.S. Governmentfiscal year starts on October 1and ends on September 30).