UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): July 20, 2015
LOCKHEED
MARTIN CORPORATION
(Exact
name of registrant as specified in its charter)
| Maryland |
1-11437 |
52-1893632 |
| (State
or other jurisdiction |
(Commission
File Number) |
(IRS
Employer |
| of
incorporation) |
|
Identification
No.) |
| |
|
|
| 6801
Rockledge Drive |
|
|
| Bethesda,
Maryland |
|
20817 |
| (Address
of principal executive offices) |
|
(Zip
Code) |
| |
|
|
| |
(301)
897-6000 |
|
| (Registrant’s
telephone number, including area code) |
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
| ¨ | Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item
2.02. Results of Operations and Financial Condition.
On
July 20, 2015, Lockheed Martin Corporation issued a news release reporting its financial results for the quarter ended June 28,
2015. A copy of the news release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Exhibit 99.1 shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933, as amended.
Item
7.01 Regulation FD Disclosure.
On
July 20, 2015, Lockheed Martin issued a news release announcing that it had entered into a definitive agreement with United Technologies
Corporation to acquire Sikorsky Aircraft, a global company engaged in the design, manufacture and support of military and commercial
helicopters (the “Transaction”). In the news release, Lockheed Martin separately announced that it would be
conducting a strategic review of alternatives for its government IT and technical services businesses, primarily in the Information
Systems & Global Solutions business area and a portion of the Missiles and Fire Control business area. The strategic
review is expected to result in a spin-off to stockholders or sale of these businesses. On July 20, 2015, Lockheed Martin
also posted an investor presentation regarding the Transaction and the strategic review to its website. A copy of the news
release and the presentation are attached as Exhibit 99.2 and Exhibit 99.3 and are incorporated herein by reference.
Forward
Looking Statements
This
current report on Form 8-K contains statements which, to the extent they are not recitations of historical fact, constitute forward-looking
statements within the meaning of the federal securities laws, and are based on Lockheed Martin's current expectations and assumptions,
including, among other things, statements regarding the Transaction and the expected benefits of the Transaction, including expected
synergies and costs savings and the potential for growth and expanded capabilities and customer relationships as a result of the
Transaction; statements related to the plans, strategies and objectives of the Corporation for future operations, including statements
related to a strategic review of alternatives for its government IT and technical services businesses, or the terms, timing or
structure of any transaction involving such businesses (or whether any such transaction will take place at all); the future performance
of the Corporation or of any such businesses if any such transaction is completed; and future and estimated sales, earnings, cash
flows, charges, expenditures, dividends and share repurchases of the Corporation. The words "believe," "estimate,"
"anticipate," "project," "intend," "expect," "plan," "outlook," "scheduled,"
"forecast," and similar expressions are intended to identify forward-looking statements. There can be no assurance
that any transaction or future events will occur as anticipated, if at all, or that actual results will be as expected.
These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may
differ materially due to factors such as: the failure to obtain, delays in obtaining, or adverse conditions contained in any required
regulatory or other approvals for consummation of the Transaction; the failure to consummate or a delay in consummating the Transaction
for other reasons; the failure by the Corporation to obtain the necessary debt to finance the purchase price of the Transaction
on favorable terms or at all; the failure of the Corporation to realize the intended tax benefits from the Transaction; the Corporation's
business or the Sikorsky Aircraft Business being disrupted due to transaction-related uncertainty; the Corporation being unable
to successfully integrate the Sikorsky Aircraft Business and generate synergies and other cost savings; the risk of litigation
relating to any transaction; competitive responses to any transaction; unexpected costs, charges or expenses resulting from any
transaction; potential adverse reactions or changes to business relationships from the announcement or completion of any transaction;
risks and uncertainties related to a potential separation of, or any other transaction related to, the Corporation's government
IT and technical services businesses; the availability of funding for the Corporation's products and services both domestically
and internationally due to general economic conditions, performance, cost and other factors; the effect of capitalization changes
(such as share repurchase activity, accelerated pension funding, stock option exercises, or debt levels); and the competitive
environment for the Corporation's products and services. These are only some of the factors that may affect the forward-looking
statements contained in this current report on Form 8-K. For a discussion identifying additional important factors that could
cause actual results to vary materially from those anticipated in the forward-looking statements, see the Corporation's filings
with the SEC including, but not limited to, "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and "Risk Factors" in the Corporation's Annual Report on Form 10-K for the year ended Dec. 31, 2014 and quarterly reports
on Form 10-Q. The Corporation's filings may be accessed through the Investor Relations page of its website, www.lockheedmartin.com/investor,
or through the website maintained by the SEC at www.sec.gov. Except where required by applicable law, the Corporation expressly
disclaims a duty to provide updates to forward-looking statements after the date of this Form 8-K to reflect subsequent events,
changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements
in this Form 8-K are intended to be subject to the safe harbor protection provided by the federal securities laws.
Item
9.01. Financial Statements and Exhibits.
| Exhibit
No. |
|
Description |
| |
|
|
| 99.1 |
|
Lockheed Martin Corporation News
Release dated July 20, 2015 (earnings release reporting Lockheed Martin Corporation’s financial results for the quarter
ended June 28, 2015). |
| |
|
|
| 99.2 |
|
News Release dated July 20,
2015 issued by Lockheed Martin Corporation. |
| |
|
|
| 99.3 |
|
Investor presentation dated
July 20, 2015. |
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
| |
|
Lockheed Martin
Corporation |
| |
|
(Registrant) |
| |
|
|
| Date: July 20, 2015 |
By: |
/s/ Brian P. Colan |
| |
|
Brian P. Colan |
| |
|
Vice President and Controller |
EXHIBIT
INDEX
| Exhibit
No. |
|
Description |
| |
|
|
| 99.1 |
|
Lockheed Martin Corporation News
Release dated July 20, 2015 (earnings release reporting Lockheed Martin Corporation’s financial results for the quarter
ended June 28, 2015). |
| |
|
|
| 99.2 |
|
News
Release dated July 20, 2015 issued by Lockheed Martin Corporation.
|
| |
|
|
| 99.3 |
|
Investor
presentation dated July 20, 2015.
|
Exhibit
99.1
 |
News
Release |
Lockheed
Martin Reports Second Quarter 2015 Results
| · | Net
sales of $11.6 billion |
| · | Net
earnings of $929 million, or $2.94 per share
|
| · | Generated
cash from operations of $1.3 billion
|
| · | Repurchased
4.9 million shares for $937 million |
| · | Increases
2015 outlook for operating profit and earnings per share |
| · | Announces agreement to acquire Sikorsky Aircraft |
| · | Begins strategic review of government IT and technical services businesses |
bethesda,
Md., July 20, 2015 – Lockheed Martin (NYSE: LMT) today
reported second quarter 2015 net sales of $11.6 billion, compared to $11.3 billion in the second quarter of 2014. Net earnings
in the second quarter of 2015 were $929 million, or $2.94 per share, compared to $889 million, or $2.76 per share, in the second
quarter of 2014. Cash from operations in the second quarter of 2015 was $1.3 billion, compared to $977 million in the second quarter
of 2014.
“Solid operational and program execution in the second quarter allowed us to increase our financial
guidance for profit and earnings per share,” said Lockheed Martin chairman, president and CEO Marillyn Hewson. "Separately,
we announced two portfolio shaping initiatives today, the acquisition of Sikorsky Aircraft and a strategic review of our IT services
business in IS&GS and our technical services business in MFC. We look forward to welcoming Sikorsky to the Lockheed Martin
team and determining the best path to long-term growth for the business under review.”
Strategic Actions
Acquisition of Sikorsky Aircraft
On July 20, 2015, the Corporation announced
that it entered into a definitive agreement to acquire Sikorsky Aircraft (Sikorsky), a global company engaged in the design, manufacture
and support of military and commercial helicopters, for $9.0 billion of cash, subject to certain adjustments. The Corporation expects to fund the acquisition with a combination of new debt issuances and available cash.
The Corporation and United Technologies Corporation have agreed to make a joint election under Section 338(h)(10) of the Internal
Revenue Code, which treats the transaction as an asset purchase for tax purposes. This election generates a cash tax benefit with
an estimated net present value of $1.9 billion for the Corporation and its shareholders. The acquisition is subject to customary
closing conditions, including regulatory approval, and is expected
to close in the fourth quarter of 2015 or the first quarter of 2016. Once the acquisition is complete, the Corporation plans to
align Sikorsky under its Mission Systems and Training business segment. The Corporation’s financial results will not include
Sikorsky’s results until the acquisition is closed.
Strategic Review of Government IT and Technical Services
Businesses
On
July 20, 2015, the Corporation also announced that it will conduct a strategic review of the government IT infrastructure services
business within its IS&GS business segment and the technical services business within its MFC business segment. The programs
to be reviewed represent approximately $6.0 billion in estimated 2015 annual sales and approximately 17,000 employees. The Corporation
expects the strategic review will result in a spin-off to its shareholders or sale of these businesses. The IS&GS programs
that are not included in the strategic review are mostly focused on defense and intelligence customers and will be realigned into
the Corporation’s other business segments following completion of the review. The Corporation expects to complete the strategic
review in 2015. While the Corporation performs its strategic review,
it will maintain the current operating and reporting structure and will continue to report the financial results of the government
IT infrastructure services and technical services businesses in its continuing operations.
Summary
Financial Results
The
following table presents the Corporation’s summary financial results.
| |
(in millions, except per share
data) |
|
Quarters
Ended |
|
|
Six
Months Ended |
|
|
| |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
| |
Net sales |
|
$ |
11,643 |
|
|
$ |
11,306 |
|
|
$ |
21,754 |
|
|
$ |
21,956 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Business segment operating profit |
|
$ |
1,400 |
|
|
$ |
1,406 |
|
|
$ |
2,706 |
|
|
$ |
2,835 |
|
|
| |
Unallocated items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
FAS/CAS pension adjustment |
|
|
120 |
|
|
|
85 |
|
|
|
239 |
|
|
|
171 |
|
|
| |
Other, net |
|
|
(75 |
) |
|
|
(65 |
) |
|
|
(144 |
) |
|
|
(148 |
) |
|
| |
Total unallocated items |
|
|
45 |
|
|
|
20 |
|
|
|
95 |
|
|
|
23 |
|
|
| |
Consolidated operating profit |
|
$ |
1,445 |
|
|
$ |
1,426 |
|
|
$ |
2,801 |
|
|
$ |
2,858 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net earnings |
|
$ |
929 |
|
|
$ |
889 |
|
|
$ |
1,807 |
|
|
$ |
1,822 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Diluted earnings per share |
|
$ |
2.94 |
|
|
$ |
2.76 |
|
|
$ |
5.68 |
|
|
$ |
5.63 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash from operations1 |
|
$ |
1,263 |
|
|
$ |
977 |
|
|
$ |
2,220 |
|
|
$ |
3,077 |
|
|
| |
1
The Corporation made no contributions to its defined benefit pension trust during the second quarter of 2015 compared
to $515 million during the second quarter of 2014. Additionally, the Corporation made net income tax payments of $460
million during the second quarter of 2015 compared to $760 million during the second quarter of 2014. |
|
2015
Financial Outlook
The
following table and other sections of this news release contain forward-looking statements, which are based on the Corporation’s
current expectations. Actual results may differ materially from those projected. It is the Corporation’s practice not to
incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, changes in law and restructuring
activities until such items have been consummated or enacted. For additional factors that may impact the Corporation’s actual
results, refer to the “Forward-Looking Statements” section in this news release.
| |
(in
millions, except per share data) |
|
Current
Outlook |
|
April
Outlook |
|
| |
|
|
|
|
|
|
| |
Orders |
|
No
Change |
|
$43,500
– $45,000 |
|
| |
|
|
|
|
|
|
| |
Net sales |
|
No
Change |
|
$43,500
– $45,000 |
|
| |
|
|
|
|
|
|
| |
Business segment operating profit |
|
$5,225 –
$5,375 |
|
$5,150 –
$5,300 |
|
| |
FAS/CAS pension
adjustment |
|
No Change |
|
~475 |
|
| |
Other, net |
|
No
Change |
|
~(275) |
|
| |
Consolidated operating profit |
|
$5,425
– $5,575 |
|
$5,350
– $5,500 |
|
| |
|
|
|
|
|
|
| |
Diluted earnings per share |
|
$11.00
– $11.30 |
|
$10.85
– $11.15 |
|
| |
|
|
|
|
|
|
| |
Cash from operations |
|
No
Change |
|
≥
$5,000 |
|
| |
|
|
Cash
Deployment Activities
The
Corporation’s cash deployment activities in the second quarter of 2015 consisted of the following:
| · | repurchasing
4.9 million shares for $937 million, compared to 0.8 million shares for $124 million
in the second quarter of 2014; |
| · | paying
cash dividends of $467 million, compared to $421 million in the second quarter of 2014;
|
| · | making
capital expenditures of $191 million, compared to $150 million in the second quarter
of 2014; and |
| · | no
contributions to the Corporation’s pension trust, compared to $515 million during
the second quarter of 2014. |
Segment
Results
The
Corporation operates in five business segments: Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles
and Fire Control (MFC), Mission Systems and Training (MST) and Space Systems. The Corporation organizes its business segments
based on the nature of the products and services offered.
Operating
profit of the business segments includes the Corporation’s share of earnings or losses from equity method investees as the
operating activities of the equity method investees are closely aligned with the operations of the Corporation’s business
segments. United Launch Alliance (ULA), which is part of the Space Systems business segment, is the Corporation’s primary
equity method investee. Operating profit of the Corporation’s business segments excludes the FAS/CAS pension adjustment,
which represents the difference between total pension expense recorded in accordance with GAAP (FAS) and pension costs recoverable
on U.S. Government contracts as determined in accordance with U.S. Government Cost Accounting Standards (CAS); expense for stock-based
compensation; the effects of items not considered part of management’s evaluation of segment operating performance, such
as charges related to significant severance actions and goodwill impairments; gains or losses from divestitures; the effects of
certain legal settlements; corporate costs not allocated to the Corporation’s business segments; and other miscellaneous
corporate activities.
Changes
in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases
in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts.
Changes in volume also include the effect of fluctuations in contract profit booking rates that have occurred in reporting periods
other than those presented in the comparative segment results. Volume changes in segment operating profit are typically based
on the current profit booking rate for a particular contract.
In
addition, comparability of the Corporation’s segment sales, operating profit and operating margins may be impacted favorably
or unfavorably by changes in profit booking rates on the Corporation’s contracts accounted for using the percentage-of-completion
method of accounting. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions
in the estimated total costs that reflect improved conditions on a particular contract. Conversely, conditions on a particular
contract may deteriorate resulting in an increase in the estimated total costs to complete and a reduction in the profit booking
rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect
of such changes. Segment operating profit and margins may also be impacted favorably or unfavorably by other items. Favorable
items may include the positive resolution of contractual matters, cost recoveries on restructuring charges, insurance recoveries
and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges,
except for significant severance actions which are excluded from segment operating results; reserves for disputes; asset impairments;
and losses on sales of assets. Segment operating profit and items such as risk retirements, reductions of profit booking rates
or other matters are presented net of state income taxes.
The
following table presents summary operating results of the Corporation’s five business segments and reconciles these amounts
to the Corporation’s consolidated financial results.
| |
(in millions) |
|
Quarters
Ended |
|
|
Six
Months Ended |
|
|
| |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
| |
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Aeronautics |
|
$ |
4,131 |
|
|
$ |
3,855 |
|
|
$ |
7,265 |
|
|
$ |
7,241 |
|
|
| |
Information
Systems & Global Solutions |
|
|
1,898 |
|
|
|
1,941 |
|
|
|
3,767 |
|
|
|
3,851 |
|
|
| |
Missiles and
Fire Control |
|
|
1,777 |
|
|
|
1,891 |
|
|
|
3,280 |
|
|
|
3,758 |
|
|
| |
Mission Systems
and Training |
|
|
1,808 |
|
|
|
1,771 |
|
|
|
3,459 |
|
|
|
3,399 |
|
|
| |
Space Systems |
|
|
2,029 |
|
|
|
1,848 |
|
|
|
3,983 |
|
|
|
3,707 |
|
|
| |
Total
net sales |
|
$ |
11,643 |
|
|
$ |
11,306 |
|
|
$ |
21,754 |
|
|
$ |
21,956 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Aeronautics |
|
$ |
444 |
|
|
$ |
453 |
|
|
$ |
815 |
|
|
$ |
846 |
|
|
| |
Information
Systems & Global Solutions |
|
|
160 |
|
|
|
175 |
|
|
|
296 |
|
|
|
349 |
|
|
| |
Missiles and
Fire Control |
|
|
303 |
|
|
|
345 |
|
|
|
595 |
|
|
|
703 |
|
|
| |
Mission Systems
and Training |
|
|
234 |
|
|
|
185 |
|
|
|
453 |
|
|
|
435 |
|
|
| |
Space Systems |
|
|
259 |
|
|
|
248 |
|
|
|
547 |
|
|
|
502 |
|
|
| |
Total
business segment operating profit |
|
|
1,400 |
|
|
|
1,406 |
|
|
|
2,706 |
|
|
|
2,835 |
|
|
| |
Unallocated items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
FAS/CAS pension
adjustment |
|
|
120 |
|
|
|
85 |
|
|
|
239 |
|
|
|
171 |
|
|
| |
Other, net
|
|
|
(75 |
) |
|
|
(65 |
) |
|
|
(144 |
) |
|
|
(148 |
) |
|
| |
Total unallocated items |
|
|
45 |
|
|
|
20 |
|
|
|
95 |
|
|
|
23 |
|
|
| |
Total
consolidated operating profit |
|
$ |
1,445 |
|
|
$ |
1,426 |
|
|
$ |
2,801 |
|
|
$ |
2,858 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Corporation’s consolidated net adjustments not related to volume, including net profit booking rate adjustments and other
matters, represented approximately 39 percent of total segment operating profit for the second quarter of 2015, compared to approximately
31 percent in the second quarter of 2014.
Aeronautics
| |
(in millions) |
|
Quarters
Ended |
|
|
Six
Months Ended |
|
|
| |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
| |
Net sales |
|
$ |
4,131 |
|
|
$ |
3,855 |
|
|
$ |
7,265 |
|
|
$ |
7,241 |
|
|
| |
Operating profit |
|
$ |
444 |
|
|
$ |
453 |
|
|
$ |
815 |
|
|
$ |
846 |
|
|
| |
Operating margins |
|
|
10.7 |
% |
|
|
11.8 |
% |
|
|
11.2 |
% |
|
|
11.7 |
% |
|
Aeronautics’
net sales for the second quarter of 2015 increased $276 million, or 7 percent, compared to the same period in 2014. The increase
was attributable to higher net sales of about $280 million for F-35 production contracts due to increased volume on aircraft production
and sustainment activities; and approximately $150 million for the C-5 program due to increased aircraft deliveries (four aircraft
delivered during the second quarter of 2015 compared to two delivered during the same period in 2014). The increases were partially
offset by lower net sales of approximately $90 million for the C-130 program due to lower sustainment activities and aircraft
contract mix; and about $45 million for the F-22 program due to decreased sustainment activities. Net sales for F-35 development
contracts were comparable.
Aeronautics’
operating profit for the second quarter of 2015 decreased $9 million, or 2 percent, compared to the same period in 2014. Operating
profit decreased by approximately $55 million for the C-130 program due to lower risk retirements and aircraft contract mix; and
approximately $15 million for the F-22 program due to decreased risk retirements and lower sustainment activities. These decreases
were partially offset by higher operating profit of approximately $30 million for the F-16 program due to increased risk retirements;
and about $30 million for F-35 production contracts due to higher risk retirements and volume. Adjustments not related to volume,
including net profit booking rate adjustments, were $30 million higher for the second quarter of 2015 compared to the same period
in 2014.
The
decline in operating margin for the second quarter of 2015 reflects the change in Aeronautics’ program mix, as sales for
programs that yield lower operating profit margins were a larger portion of total net sales (primarily F-35 and C-5 programs).
Information
Systems & Global Solutions
| |
(in millions) |
|
Quarters
Ended |
|
|
Six
Months Ended |
|
|
| |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
| |
Net sales |
|
$ |
1,898 |
|
|
$ |
1,941 |
|
|
$ |
3,767 |
|
|
$ |
3,851 |
|
|
| |
Operating profit |
|
$ |
160 |
|
|
$ |
175 |
|
|
$ |
296 |
|
|
$ |
349 |
|
|
| |
Operating margins |
|
|
8.4 |
% |
|
|
9.0 |
% |
|
|
7.9 |
% |
|
|
9.1 |
% |
|
IS&GS’
net sales decreased $43 million, or 2 percent, for the second quarter of 2015 compared to the same period in 2014. The decrease
was attributable to lower net sales of approximately $160 million due to decreased volume as a result of in-theater force reductions
(including Persistent Threat Detection System), lower customer funding levels (primarily command and control programs),
and increased competition coupled with the fragmentation of existing large contracts into multiple smaller contracts that are
awarded primarily on the basis of price when re-competed (including CMS-CITIC). The decreases were partially offset by higher
net sales of approximately $60 million for businesses acquired in the second half of 2014; and about $55 million due to increased
volume on recently awarded programs.
IS&GS’
operating profit for the second quarter of 2015 decreased $15 million, or 9 percent, compared to the same period in 2014. The
decrease was primarily attributable to the activities mentioned above for net sales. Adjustments not related to volume, including
net profit booking rate adjustments, for the second quarter of 2015 were comparable to the same period in 2014.
Missiles
and Fire Control
| |
(in millions) |
|
Quarters
Ended |
|
|
Six
Months Ended |
|
|
| |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
| |
Net sales |
|
$ |
1,777 |
|
|
$ |
1,891 |
|
|
$ |
3,280 |
|
|
$ |
3,758 |
|
|
| |
Operating profit |
|
$ |
303 |
|
|
$ |
345 |
|
|
$ |
595 |
|
|
$ |
703 |
|
|
| |
Operating margins |
|
|
17.1 |
% |
|
|
18.2 |
% |
|
|
18.1 |
% |
|
|
18.7 |
% |
|
MFC’s
net sales for the second quarter of 2015 decreased $114 million, or 6 percent, compared to the same period in 2014. The decrease
was attributable to lower net sales of approximately $115 million for air and missile defense programs due to fewer deliveries
(including Patriot Advanced Capability-3 (PAC-3)) and reduced development activities (primarily Medium Extended Air Defense System
(MEADS)).
MFC’s
operating profit for the second quarter of 2015 decreased $42 million, or 12 percent, compared to the same period in 2014. The
decrease was attributable to lower operating profit of approximately $30 million for fire control programs due to lower risk retirements
and volume (including Apache), and about $25 million for air and missile defense programs due to lower risk retirements (primarily
PAC-3). Adjustments not related to volume, including net profit booking rate adjustments, were approximately $40 million lower
for the second quarter of 2015 compared to the same period in 2014.
Mission
Systems and Training
| |
(in
millions) |
|
Quarters
Ended |
|
|
Six
Months Ended |
|
|
| |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
| |
Net
sales |
|
$ |
1,808 |
|
|
$ |
1,771 |
|
|
$ |
3,459 |
|
|
$ |
3,399 |
|
|
| |
Operating profit |
|
$ |
234 |
|
|
$ |
185 |
|
|
$ |
453 |
|
|
$ |
435 |
|
|
| |
Operating
margins |
|
|
12.9 |
% |
|
|
10.4 |
% |
|
|
13.1 |
% |
|
|
12.8 |
% |
|
MST’s
net sales for the second quarter of 2015 increased $37 million, or 2 percent, compared to the same period in 2014. Net sales
increased by approximately $90 million for integrated warfare systems and sensors programs due to the start of new programs
(primarily Space Fence) and higher volume (including Aegis). These increases were partially offset by lower net sales of
approximately $75 million for ship and aviation systems programs primarily due to decreased volume (including Merlin
Capability Sustainment Program).
MST’s
operating profit for the second quarter of 2015 increased $49 million, or 26 percent, compared to the same period in 2014. The
increase was primarily attributable to higher operating profit of approximately $50 million due to reserves recorded in 2014 on
certain training and logistics solutions programs that were not repeated in 2015; about $20 million for integrated warfare systems
and sensors programs due to increased risk retirements (primarily Halifax Class Modernization); partially offset by lower operating
profit of approximately $20 million for ship and aviation systems programs due to lower risk retirements and volume (including
naval launchers). Adjustments not related to volume, including net profit booking rate adjustments and other matters, were approximately
$50 million higher for the second quarter of 2015 compared to the same period in 2014.
Space
Systems
| |
(in millions) |
|
Quarters
Ended |
|
|
Six
Months Ended |
|
|
| |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
June
28,
2015 |
|
|
June
29,
2014 |
|
|
| |
Net sales |
|
$ |
2,029 |
|
|
$ |
1,848 |
|
|
$ |
3,983 |
|
|
$ |
3,707 |
|
|
| |
Operating profit |
|
$ |
259 |
|
|
$ |
248 |
|
|
$ |
547 |
|
|
$ |
502 |
|
|
| |
Operating margins |
|
|
12.8 |
% |
|
|
13.4 |
% |
|
|
13.7 |
% |
|
|
13.5 |
% |
|
Space
Systems’ net sales for the second quarter of 2015 increased $181 million, or 10 percent, compared to the same period in
2014. The increase was attributable to higher net sales of approximately $105 million for the Orion program due to increased volume;
and about $80 million for businesses acquired in the second half of 2014.
Space
Systems’ operating profit for the second quarter of 2015 increased $11 million, or 4 percent, compared to the same period
in 2014. The increase was attributable to higher operating profit of approximately $55 million for government satellite programs
due to increased risk retirements (primarily Mobile User Objective System and Space Based Infrared System). The
increases were partially offset by lower operating profit of approximately $40 million primarily due to lower equity earnings
for joint ventures. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were approximately
$75 million higher for the second quarter of 2015 compared to the same period in 2014.
Total
equity earnings recognized by Space Systems (primarily ULA) represented approximately $40 million, or 15 percent, of this business
segment’s operating profit for the second quarter of 2015, compared to approximately $80 million, or 32 percent, in the
second quarter of 2014.
Income
Taxes
The
Corporation’s effective income tax rate was 30.8 percent for the second quarter of 2015, compared to 33.7 percent for the
second quarter of 2014. The rates for both periods benefited from tax deductions for U.S. manufacturing activities and for dividends
paid to the Corporation’s defined contribution plans with an employee stock ownership plan feature. The effective rate for
the second quarter of 2015 was lower primarily due to tax reserve adjustments recorded in the second quarter of 2014. The effective
rates during both periods did not include a benefit from the U.S. research and development tax credit because the credit had expired.
Conference
Call Information
Lockheed
Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. ET on July 20, 2015. A live audio broadcast, including
relevant charts, will be available on the Investor Relations page of the Corporation’s website at: www.lockheedmartin.com/investor.
For
additional information, visit our website: www.lockheedmartin.com.
About
Lockheed Martin
Headquartered
in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 112,000 people worldwide
and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology
systems, products and services. The Corporation’s net sales for 2014 were $45.6 billion.
#
# #
Media
Contact:
Dan
Nelson, +1 301-897-6357; dan.nelson@lmco.com
Investor
Relations Contact:
Jerry
Kircher, +1 301-897-6584; jerry.f.kircher@lmco.com
Forward-Looking
Statements
This
news release contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements
within the meaning of the federal securities laws, and are based on Lockheed Martin’s current expectations and assumptions.
The words “believe,” “estimate,” “anticipate,” “project,” “intend,”
“expect,” “plan,” “outlook,” “scheduled,” “forecast” and similar expressions
are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject
to risks and uncertainties. Actual results may differ materially due to factors such as:
| · | the
Corporation’s reliance on contracts with the U.S. Government, all of which are
conditioned upon the availability of funding; |
| · | declining
budgets; affordability initiatives; the implementation of automatic sequestration under
the Budget Control Act of 2011; U.S. Government operations under a continuing resolution
or the failure to adopt a budget which may cause contracts to be delayed, canceled or
funded at lower levels or which may impact the Corporation’s operating results
and cash flows; |
| · | risks
related to the development, performance, schedule, cost and requirements of complex and
technologically advanced programs including the Corporation’s largest, the F-35
program; |
| · | economic,
industry, business and political conditions (domestic and international) including their
effects on governmental policy; |
| · | the
Corporation’s success in growing international sales and expanding into adjacent
markets and risks associated with doing business in new markets and internationally; |
| · | the
competitive environment for the Corporation’s products and services, including
increased market pressures in the Corporation’s services businesses, competition
from outside the aerospace and defense industry, and increased bid protests; |
| · | planned
production rates for significant programs and compliance with stringent performance and
reliability standards; |
| · | the
performance of key suppliers, teammates, venture partners, subcontractors and customers;
|
| · | the
timing and customer acceptance of product deliveries; |
| · | the
Corporation’s ability to attract and retain key personnel and transfer knowledge
to new personnel; the impact of work stoppages or other labor disruptions; |
| · | the
impact of cyber or other security threats or other disruptions to the Corporation’s
businesses; |
| · | the
Corporation’s ability to implement, pace and effect capitalization changes such
as share repurchase activity and pension funding or debt levels; |
| · | the
Corporation’s ability to recover certain costs under U.S. Government contracts
and changes in contract mix; |
| · | the
accuracy of the Corporation’s estimates and projections; |
| · | risk
of a future impairment of goodwill or other long-term assets; |
| · | movements
in interest rates and other changes that may affect pension plan assumptions and actual
returns on pension plan assets; |
| · | realizing
the anticipated benefits of acquisitions or divestitures, ventures, teaming arrangements
or internal reorganizations, and the Corporation’s efforts to increase the efficiency
of its operations and improve the affordability of its products and services; |
| · | the satisfaction of conditions to (including regulatory approvals) and consummation of the Corporation’s
previously announced acquisition of Sikorsky, the timing and terms of any financing for such acquisition, and its ability to successfully
integrate the Sikorsky business and realize synergies and other expected benefits of the transaction; |
| · | the terms, timing or structure of a potential transaction related to the Corporation’s government
IT and technical services businesses (or whether any such transaction will take place at all); |
| · | the
adequacy of the Corporation’s insurance and indemnities; |
| · | the
effect of changes in or interpretation of legislation, regulation or policy, including
those applicable to procurement, cost allowability or recovery, accounting, taxation,
or export; and |
| · | the
outcome of legal proceedings, bid protests, environmental remediation efforts, government
allegations that we have failed to comply with law, other contingencies and U.S. Government
identification of deficiencies in the Corporation’s business systems. |
These
are only some of the factors that may affect the forward-looking statements contained in this news release. For a discussion identifying
additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking
statements, see the Corporation’s filings with the U.S. Securities and Exchange Commission (SEC) including, but not limited
to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk
Factors” in the Corporation’s Annual Report on Form 10-K for the year ended Dec. 31, 2014 and quarterly reports on
Form 10-Q. The Corporation’s filings may be accessed through the Investor Relations page of its website, www.lockheedmartin.com/investor,
or through the website maintained by the SEC at www.sec.gov.
The
Corporation’s actual financial results likely will be different from those projected due to the inherent nature of projections.
Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking
statements contained in this news release speak only as of the date of its filing. Except where required by applicable law, the
Corporation expressly disclaims a duty to provide updates to forward-looking statements after the date of this news release to
reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them.
The forward-looking statements in this news release are intended to be subject to the safe harbor protection provided by the federal
securities laws.
Lockheed
Martin Corporation
Consolidated
Statements of Earnings1
(unaudited;
in millions, except per share data)
| | |
Quarters
Ended | | |
Six
Months Ended | |
| | |
June
28,
2015 | | |
June
29,
2014 | | |
June
28,
2015 | | |
June
29,
2014 | |
| Net
sales | |
$ | 11,643 | | |
$ | 11,306 | | |
$ | 21,754 | | |
$ | 21,956 | |
| Cost
of sales | |
| (10,272 | ) | |
| (9,965 | ) | |
| (19,120 | ) | |
| (19,244 | ) |
| Gross
profit | |
| 1,371 | | |
| 1,341 | | |
| 2,634 | | |
| 2,712 | |
| Other
income, net | |
| 74 | | |
| 85 | | |
| 167 | | |
| 146 | |
| Operating
profit | |
| 1,445 | | |
| 1,426 | | |
| 2,801 | | |
| 2,858 | |
| Interest
expense | |
| (104 | ) | |
| (85 | ) | |
| (197 | ) | |
| (171 | ) |
| Other
non-operating income, net | |
| 2 | | |
| - | | |
| 5 | | |
| 2 | |
| Earnings
before income taxes | |
| 1,343 | | |
| 1,341 | | |
| 2,609 | | |
| 2,689 | |
| Income
tax expense | |
| (414 | ) | |
| (452 | ) | |
| (802 | ) | |
| (867 | ) |
| Net
earnings | |
$ | 929 | | |
$ | 889 | | |
$ | 1,807 | | |
$ | 1,822 | |
| Effective
tax rate | |
| 30.8 | % | |
| 33.7 | % | |
| 30.7 | % | |
| 32.2 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Earnings per
common share | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | 2.98 | | |
$ | 2.81 | | |
$ | 5.76 | | |
$ | 5.73 | |
| Diluted | |
$ | 2.94 | | |
$ | 2.76 | | |
$ | 5.68 | | |
$ | 5.63 | |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average
shares outstanding | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 312.0 | | |
| 316.8 | | |
| 313.7 | | |
| 318.0 | |
| Diluted | |
| 316.1 | | |
| 322.1 | | |
| 318.2 | | |
| 323.6 | |
| | |
| | | |
| | | |
| | | |
| | |
| Common
shares reported in stockholders' equity at end of period | |
| | | |
| | | |
| 309 | | |
| 315 | |
| 1 | The
Corporation closes its books and records on the last Sunday of the calendar quarter, which was on June 28 for the second quarter
of 2015 and June 29 for the second quarter of 2014, to align its financial closing with its business processes. The consolidated
financial statements and tables of financial information included herein are labeled based on that convention. This practice only
affects interim periods, as the Corporation's fiscal year ends on Dec. 31. |
Lockheed
Martin Corporation
Business
Segment Summary Operating Results
(unaudited;
in millions)
| | |
Quarters Ended | | |
| | |
Six Months Ended | | |
| |
| | |
June 28,
2015 | | |
June 29,
2014 | | |
% Change | |
June 28,
2015 | | |
June 29,
2014 | | |
% Change |
| Net sales | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Aeronautics | |
$ | 4,131 | | |
$ | 3,855 | | |
| 7 | % | |
$ | 7,265 | | |
$ | 7,241 | | |
| - | % |
| Information Systems & Global Solutions | |
| 1,898 | | |
| 1,941 | | |
| (2) | % | |
| 3,767 | | |
| 3,851 | | |
| (2) | % |
| Missiles and Fire Control | |
| 1,777 | | |
| 1,891 | | |
| (6) | % | |
| 3,280 | | |
| 3,758 | | |
| (13) | % |
| Mission Systems and Training | |
| 1,808 | | |
| 1,771 | | |
| 2 | % | |
| 3,459 | | |
| 3,399 | | |
| 2 | % |
| Space Systems | |
| 2,029 | | |
| 1,848 | | |
| 10 | % | |
| 3,983 | | |
| 3,707 | | |
| 7 | % |
| Total net sales | |
$ | 11,643 | | |
$ | 11,306 | | |
| 3 | % | |
$ | 21,754 | | |
$ | 21,956 | | |
| (1) | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating profit | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Aeronautics | |
$ | 444 | | |
$ | 453 | | |
| (2) | % | |
$ | 815 | | |
$ | 846 | | |
| (4) | % |
| Information Systems & Global Solutions | |
| 160 | | |
| 175 | | |
| (9) | % | |
| 296 | | |
| 349 | | |
| (15) | % |
| Missiles and Fire Control | |
| 303 | | |
| 345 | | |
| (12) | % | |
| 595 | | |
| 703 | | |
| (15) | % |
| Mission Systems and Training | |
| 234 | | |
| 185 | | |
| 26 | % | |
| 453 | | |
| 435 | | |
| 4 | % |
| Space Systems | |
| 259 | | |
| 248 | | |
| 4 | % | |
| 547 | | |
| 502 | | |
| 9 | % |
| Total business segment operating profit | |
| 1,400 | | |
| 1,406 | | |
| - | % | |
| 2,706 | | |
| 2,835 | | |
| (5) | % |
| Unallocated items | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| FAS/CAS pension adjustment | |
| 120 | | |
| 85 | | |
| | | |
| 239 | | |
| 171 | | |
| | |
| Other, net | |
| (75 | ) | |
| (65 | ) | |
| | | |
| (144 | ) | |
| (148 | ) | |
| | |
| Total unallocated items | |
| 45 | | |
| 20 | | |
| N/M | | |
| 95 | | |
| 23 | | |
| N/M | |
| Total consolidated operating profit | |
$ | 1,445 | | |
$ | 1,426 | | |
| 1 | % | |
$ | 2,801 | | |
$ | 2,858 | | |
| (2) | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating margins | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Aeronautics | |
| 10.7 | % | |
| 11.8 | % | |
| | | |
| 11.2 | % | |
| 11.7 | % | |
| | |
| Information Systems & Global Solutions | |
| 8.4 | % | |
| 9.0 | % | |
| | | |
| 7.9 | % | |
| 9.1 | % | |
| | |
| Missiles and Fire Control | |
| 17.1 | % | |
| 18.2 | % | |
| | | |
| 18.1 | % | |
| 18.7 | % | |
| | |
| Mission Systems and Training | |
| 12.9 | % | |
| 10.4 | % | |
| | | |
| 13.1 | % | |
| 12.8 | % | |
| | |
| Space Systems | |
| 12.8 | % | |
| 13.4 | % | |
| | | |
| 13.7 | % | |
| 13.5 | % | |
| | |
| Total business segment operating margins | |
| 12.0 | % | |
| 12.4 | % | |
| | | |
| 12.4 | % | |
| 12.9 | % | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total consolidated operating margins | |
| 12.4 | % | |
| 12.6 | % | |
| | | |
| 12.9 | % | |
| 13.0 | % | |
| | |
Lockheed
Martin Corporation
Consolidated
Balance Sheets
(unaudited;
in millions, except par value)
| |
|
June
28,
2015 |
|
|
Dec.
31,
2014 |
|
| Assets |
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
3,202 |
|
|
$ |
1,446 |
|
| Receivables, net |
|
|
7,064 |
|
|
|
5,884 |
|
| Inventories, net |
|
|
3,032 |
|
|
|
2,882 |
|
| Deferred income taxes |
|
|
1,469 |
|
|
|
1,451 |
|
| Other current assets |
|
|
520 |
|
|
|
666 |
|
| Total current assets |
|
|
15,287 |
|
|
|
12,329 |
|
| |
|
|
|
|
|
|
|
|
| Property, plant and equipment, net |
|
|
4,640 |
|
|
|
4,755 |
|
| Goodwill |
|
|
10,867 |
|
|
|
10,862 |
|
| Deferred income taxes |
|
|
4,035 |
|
|
|
4,013 |
|
| Other noncurrent assets |
|
|
5,019 |
|
|
|
5,114 |
|
| Total assets |
|
$ |
39,848 |
|
|
$ |
37,073 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities and stockholders' equity |
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
2,016 |
|
|
$ |
1,570 |
|
| Customer advances and amounts in excess of costs incurred |
|
|
5,549 |
|
|
|
5,790 |
|
| Salaries, benefits and payroll taxes |
|
|
1,808 |
|
|
|
1,826 |
|
| Current portion of long-term debt |
|
|
452 |
|
|
|
- |
|
| Other current liabilities |
|
|
2,799 |
|
|
|
1,926 |
|
| Total current liabilities |
|
|
12,624 |
|
|
|
11,112 |
|
| |
|
|
|
|
|
|
|
|
| Accrued pension liabilities |
|
|
11,387 |
|
|
|
11,413 |
|
| Other postretirement benefit liabilities |
|
|
1,090 |
|
|
|
1,102 |
|
| Long-term debt, net |
|
|
7,950 |
|
|
|
6,169 |
|
| Other noncurrent liabilities |
|
|
3,815 |
|
|
|
3,877 |
|
| Total liabilities |
|
|
36,866 |
|
|
|
33,673 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders' equity |
|
|
|
|
|
|
|
|
| Common stock, $1 par value per share |
|
|
309 |
|
|
|
314 |
|
| Additional paid-in capital |
|
|
- |
|
|
|
- |
|
| Retained earnings |
|
|
14,129 |
|
|
|
14,956 |
|
| Accumulated other comprehensive loss |
|
|
(11,456 |
) |
|
|
(11,870 |
) |
| Total stockholders' equity |
|
|
2,982 |
|
|
|
3,400 |
|
| Total liabilities and stockholders' equity |
|
$ |
39,848 |
|
|
$ |
37,073 |
|
Lockheed
Martin Corporation
Consolidated
Statements of Cash Flows
(unaudited;
in millions)
| | |
Six
Months Ended | |
| | |
June
28,
2015 | | |
June
29,
2014 | |
| | |
| | |
| |
| Operating
activities | |
| | | |
| | |
| Net
earnings | |
$ | 1,807 | | |
$ | 1,822 | |
| Adjustments
to reconcile net earnings to net cash provided by operating activities | |
| | | |
| | |
| Depreciation
and amortization | |
| 490 | | |
| 479 | |
| Stock-based compensation | |
| 89 | | |
| 97 | |
| Changes
in assets and liabilities | |
| | | |
| | |
| Receivables,
net | |
| (1,183 | ) | |
| (598 | ) |
| Inventories,
net | |
| (154 | ) | |
| 307 | |
| Accounts
payable | |
| 453 | | |
| 557 | |
| Customer
advances and amounts in excess of costs incurred | |
| (211 | ) | |
| (160 | ) |
| Postretirement
benefit plans | |
| 580 | | |
| 125 | |
| Income
taxes | |
| 471 | | |
| 311 | |
| Other,
net | |
| (122 | ) | |
| 137 | |
| Net
cash provided by operating activities | |
| 2,220 | | |
| 3,077 | |
| | |
| | | |
| | |
| Investing
activities | |
| | | |
| | |
| Capital
expenditures | |
| (309 | ) | |
| (253 | ) |
| Acquisitions
of businesses and investments in affiliates | |
| - | | |
| (172 | ) |
| Other,
net | |
| 91 | | |
| (1 | ) |
| Net
cash used for investing activities | |
| (218 | ) | |
| (426 | ) |
| | |
| | | |
| | |
| Financing
activities | |
| | | |
| | |
| Issuance
of long-term debt, net of related costs | |
| 2,213 | | |
| - | |
| Repurchases
of common stock | |
| (1,541 | ) | |
| (1,230 | ) |
| Proceeds
from stock option exercises | |
| 84 | | |
| 223 | |
| Dividends
paid | |
| (965 | ) | |
| (865 | ) |
| Other,
net | |
| (37 | ) | |
| 40 | |
| Net
cash used for financing activities | |
| (246 | ) | |
| (1,832 | ) |
| | |
| | | |
| | |
| Net
change in cash and cash equivalents | |
| 1,756 | | |
| 819 | |
| Cash
and cash equivalents at beginning of period | |
| 1,446 | | |
| 2,617 | |
| Cash
and cash equivalents at end of period | |
$ | 3,202 | | |
$ | 3,436 | |
Lockheed
Martin Corporation
Consolidated
Statement of Stockholders' Equity
(unaudited;
in millions)
| | |
| | |
| | |
| | |
Accumulated | | |
| |
| | |
| | |
Additional | | |
| | |
Other | | |
Total | |
| | |
Common | | |
Paid-In | | |
Retained | | |
Comprehensive | | |
Stockholders' | |
| | |
Stock | | |
Capital | | |
Earnings | | |
Loss | | |
Equity | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance
at Dec. 31, 2014 | |
$ | 314 | | |
$ | - | | |
$ | 14,956 | | |
$ | (11,870 | ) | |
$ | 3,400 | |
| Net earnings | |
| - | | |
| - | | |
| 1,807 | | |
| - | | |
| 1,807 | |
| Other
comprehensive income, net of tax1 | |
| - | | |
| - | | |
| - | | |
| 414 | | |
| 414 | |
| Repurchases of common
stock | |
| (8 | ) | |
| (318 | ) | |
| (1,215 | ) | |
| - | | |
| (1,541 | ) |
| Dividends
declared2 | |
| - | | |
| - | | |
| (1,419 | ) | |
| - | | |
| (1,419 | ) |
| Stock-based awards and
ESOP activity | |
| 3 | | |
| 318 | | |
| - | | |
| - | | |
| 321 | |
| Balance at June 28, 2015 | |
$ | 309 | | |
$ | - | | |
$ | 14,129 | | |
$ | (11,456 | ) | |
$ | 2,982 | |
| 1 | Primarily
represents the reclassification adjustment for recognition of prior period amounts related
to postretirement benefit plans. |
| 2 | Represents
dividends of $1.50 per share declared during each of the first and second quarters of
2015. Additionally, includes dividends of $1.50 per share declared
in the second quarter of 2015 and payable in the third quarter of 2015. |
Lockheed
Martin Corporation
Operating
Data
(unaudited;
in millions, except aircraft deliveries)
| Backlog | |
June 28,
2015 | | |
Dec. 31,
2014 | | |
| | |
| |
| Aeronautics | |
$ | 23,200 | | |
$ | 27,600 | | |
| | | |
| | |
| Information Systems & Global Solutions | |
| 7,500 | | |
| 8,700 | | |
| | | |
| | |
| Missiles and Fire Control | |
| 12,200 | | |
| 13,600 | | |
| | | |
| | |
| Mission Systems and Training | |
| 12,300 | | |
| 11,700 | | |
| | | |
| | |
| Space Systems | |
| 17,600 | | |
| 18,900 | | |
| | | |
| | |
| Total backlog | |
$ | 72,800 | | |
$ | 80,500 | | |
| | | |
| | |
| | |
Quarters Ended | | |
Six Months Ended | |
| | |
June 28,
2015 | | |
June 29,
2014 | | |
June 28,
2015 | | |
June 29,
2014 | |
| Orders | |
$ | 7,500 | | |
$ | 9,500 | | |
$ | 14,000 | | |
$ | 17,200 | |
| | |
Quarters Ended | | |
Six Months Ended | |
| Aircraft Deliveries | |
June 28,
2015 | | |
June 29,
2014 | | |
June 28,
2015 | | |
June 29,
2014 | |
| F-16 | |
| 3 | | |
| 4 | | |
| 6 | | |
| 8 | |
| F-35 | |
| 11 | | |
| 6 | | |
| 19 | | |
| 14 | |
| C-130J | |
| 6 | | |
| 6 | | |
| 10 | | |
| 11 | |
| C-5 | |
| 4 | | |
| 2 | | |
| 5 | | |
| 4 | |
Exhibit 99.2
News
Release
Lockheed
Martin to Acquire Sikorsky Aircraft and Conduct Strategic Review of
IT
and Technical Services Businesses
Corporation
takes actions to shape portfolio for future growth
BETHESDA,
Md., July 20, 2015 –
Lockheed Martin (NYSE: LMT) has entered into a definitive agreement to acquire Sikorsky Aircraft, a world leader in military and
commercial rotary-wing aircraft, for $9.0 billion. The price is effectively reduced to approximately $7.1 billion, after taking
into account tax benefits resulting from the transaction.
“Sikorsky
is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defense products and technologies,”
said Marillyn Hewson, Lockheed Martin chairman, president and CEO. “I’m confident this acquisition will help us extend
our core business into the growing areas of helicopter production and sustainment. Together, we’ll offer a strong portfolio
of helicopter solutions to our global customers and accelerate the pace of innovation and new technology development.”
The
acquisition is subject to customary conditions, including securing regulatory approvals, and is expected to close by late fourth
quarter 2015 or early first quarter 2016. The transaction will have no impact on the company’s previously stated commitments
to return cash to shareholders through dividends and to reduce outstanding share count to below 300 million shares by the end
of 2017.
Lockheed
Martin and United Technologies Corporation have agreed to make a joint election under Section 338(h)(10) of the Internal Revenue
Code, which treats the transaction as an asset purchase for tax purposes. The election generates a tax benefit with an estimated
present value of $1.9 billion for Lockheed Martin and its shareholders.
The
Corporation plans to align Sikorsky under the Lockheed Martin Mission Systems and Training (MST) business segment. MST and Stratford,
Conn., based Sikorsky currently partner on a number of critical programs, including the VH-92 Presidential Helicopter, Combat
Rescue Helicopter and the Naval MH-60 Helicopter.
Separately,
Lockheed Martin will conduct a strategic review of alternatives for its government IT and technical services businesses, primarily
in the Information Systems & Global Solutions business segment and a portion of the Missiles and Fire Control business segment.
The programs to be reviewed represent roughly $6 billion in estimated 2015 annual sales and more than 17,000 employees.
“As
global security market dynamics shift, this review will strengthen our competitive posture, enabling sustained, profitable growth
and positioning Lockheed Martin to deliver value for customers, shareholders and employees,” Hewson said.
Lockheed
Martin is a leading IT and technical services provider around the globe, and with a series of recent wins in the U.S., Europe
and Australia, the business is well positioned for the future. However, following recent shifts in market dynamics, Lockheed Martin
will explore whether the businesses can achieve greater growth and create more value for customers and shareholders outside of
the Corporation. The strategic review is expected to result in a spin-off to Lockheed Martin shareholders or sale of these components.
The
IS&GS programs that are not included in the strategic review are mostly focused on defense and intelligence customers and
will be realigned into the Corporation’s other four business segments following completion of the review.
For
more information and updates on the Sikorsky Aircraft Acquisition, visit: lockheedmartin.com/sikorsky.
About
Lockheed Martin
Headquartered
in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 112,000 people worldwide
and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology
systems, products and services. The Corporation’s net sales for 2014 were $45.6 billion.
#
# #
Media
Contact:
Dan
Nelson, +1 301-897-6357; dan.nelson@lmco.com
Investor
Relations Contacts:
Jerry
Kircher, vice president, Investor Relations, +1 301-897-6584; jerry.f.kircher@lmco.com
Greg
Gardner, director, Investor Relations, +1 301-897-6455; greg.m.gardner@lmco.com
Forward
Looking Statements
This
news release contains statements which, to the extent they are not recitations of historical fact, constitute forward-looking
statements within the meaning of the federal securities laws, and are based on Lockheed Martin’s current expectations and
assumptions, including, among other things, statements regarding the Corporation’s proposed acquisition of Sikorsky Aircraft
(the “Transaction”) and the expected benefits of the Transaction, including expected synergies and costs savings and
the potential for growth and expanded capabilities and customer relationships as a result of the Transaction; statements related
to the plans, strategies and objectives of the Corporation for future operations, including statements related to a potential
strategic alternative transaction related to its government IT and technical services businesses, or the terms, timing or structure
of any such transaction (or whether any such transaction will take place at all); the future performance of the Corporation or
of any such businesses if any such transaction is completed; and future and estimated sales, earnings, cash flows, charges, expenditures,
dividends and share repurchases of the Corporation. The words “believe,” “estimate,” “anticipate,”
“project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,”
“forecast,” and similar expressions are intended to identify forward-looking statements. There can be no assurance
that any transaction or future events will occur as anticipated, if at all, or that actual results will be as expected. These
statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially
due to factors such as: the failure to obtain, delays in obtaining, or adverse conditions contained in any required regulatory
or other approvals for consummation of the Transaction; the failure to consummate or a delay in consummating the Transaction for
other reasons; the failure by the Corporation to obtain the necessary debt to finance the purchase price of the Transaction
on favorable terms or at all; the failure of the Corporation to realize the intended tax benefits from the Transaction; the Corporation’s
business or the Sikorsky Aircraft being disrupted due to transaction-related uncertainty; the Corporation being unable to successfully
integrate the Sikorsky Aircraft and generate synergies and other cost savings; the risk of litigation relating to any transaction;
competitive responses to any transaction; unexpected costs, charges or expenses resulting from any transaction; potential adverse
reactions or changes to business relationships from the announcement or completion of any transaction; risks and uncertainties
related to a potential separation of, or any other transaction related to, the Corporation’s government IT and technical
services businesses; the availability of funding for the Corporation’s products and services both domestically and internationally
due to general economic conditions, performance, cost and other factors; the effect of capitalization changes (such as share repurchase
activity, accelerated pension funding, stock option exercises, or debt levels); and the competitive environment for the Corporation’s
products and services. These are only some of the factors that may affect the forward-looking statements contained in this news
release. For a discussion identifying additional important factors that could cause actual results to vary materially from those
anticipated in the forward-looking statements, see the Corporation’s filings with the SEC including, but not limited to,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors”
in the Corporation’s Annual Report on Form 10-K for the year ended Dec. 31, 2014 and quarterly reports on Form 10-Q. The
Corporation’s filings may be accessed through the Investor Relations page of its website, www.lockheedmartin.com/investor,
or through the website maintained by the SEC at www.sec.gov. Except where required by
applicable law, the Corporation expressly disclaims a duty to provide updates to forward-looking statements after the date of
this news release to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions
associated with them. The forward-looking statements in this news release are intended to be subject to the safe harbor protection
provided by the federal securities laws.
Exhibit 99.3
Lockheed Martin Corporation Portfolio Shaping Actions & 2 nd Quarter 2015 Financial Results July 20 , 2015 11:00 am EDT Webcast login at www.lockheedmartin.com/investor Webcast replay & podcast available by 2:30 p.m. EDT July 20 , 2015 at www.lockheedmartin.com/investor Audio replay available from 2:30 p.m. EDT July 20, 2015 through midnight July 21 , 2015 Access the audio replay at: 855 - 859 - 2056 U.S . and Canada 404 - 537 - 3406 International Replay confirmation code: 62402264
Lockheed Martin Corporation Acquisition of Sikorsky Aircraft & Strategic Review
3 Forward Looking Statements This presentation contains statements which, to the extent they are not recitations of historical fact, constitute forward - looki ng statements within the meaning of the federal securities laws, and are based on Lockheed Martin’s current expectations and assumptions, i ncl uding, among other things, statements regarding the Corporation’s proposed acquisition of Sikorsky (the “Transaction”) and the expec ted benefits of the Transaction, including expected synergies and costs savings and the potential for growth and expanded capabil iti es and customer relationships as a result of the Transaction; statements related to the plans, strategies and objectives of the Corp ora tion for future operations, including statements related to a potential strategic alternative transaction related to its government IT an d technical services businesses, or the terms, timing or structure of any such transaction (or whether any such transaction will take pla ce at all); the future performance of the Corporation or of any such businesses if any such transaction is completed; and future and estimate d s ales, earnings, cash flows, charges, expenditures, dividends and share repurchases of the Corporation. The words “believe,” “estimate ,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,” “forecast,” and similar expressions are intended to identify forward - looking statements. There can be no assurance that any transaction or future events will occur as anticipated, if at all, or th at actual results will be as expected. These statements are not guarantees of future performance and are subject to risks and uncertainti es. Actual results may differ materially due to factors such as: the failure to obtain, delays in obtaining, or adverse conditions conta ine d in any required regulatory or other approvals for consummation of the Transaction; the failure to consummate or a delay in consummat ing the Transaction for other reasons; the failure by the Corporation to obtain the necessary debt to finance the purchase price of the Transaction on favorable terms or at all; the failure of the Corporation to realize the intended tax benefits from the Transaction; the C orp oration’s business or the Sikorsky Aircraft business being disrupted due to transaction - related uncertainty; the Corporation being unable to successfully integrate the Sikorsky Aircraft business and generate synergies and other cost savings; the risk of litigation r ela ting to any transaction; competitive responses to any transaction; unexpected costs, charges or expenses resulting from any transaction; pot ential adverse reactions or changes to business relationships from the announcement or completion of any transaction; risks and unce rta inties related to a potential separation of, or any other transaction related to, the Corporation’s government IT and technical serv ice s businesses; the availability of funding for the Corporation’s products and services both domestically and internationally due to general economic conditions, performance, cost and other factors; the effect of capitalization changes (such as share repurchase acti vit y, accelerated pension funding, stock option exercises, or debt levels); and the competitive environment for the Corporation’s p rod ucts and services. These are only some of the factors that may affect the forward - looking statements contained in this presentation. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward - looking statements, see the Corporation’s filings with the SEC including, but not limited to, “Management’s Discussion and An aly sis of Financial Condition and Results of Operations” and “Risk Factors” in the Corporation’s Annual Report on Form 10 - K for the year e nded Dec. 31, 2014 and quarterly reports on Form 10 - Q. The Corporation’s filings may be accessed through the Investor Relations page of its website, www.lockheedmartin.com/investor , or through the website maintained by the SEC at www.sec.gov . Except where required by applicable law, the Corporation expressly disclaims a duty to provide updates to forward - looking statements after the date of th is presentation to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward - looking statements in this presentation are intended to be subject to the safe harbor protecti on provided by the federal securities laws.
4 Reshaping the Portfolio • Signed Definitive Agreement to Acquire Sikorsky Aircraft – Access to Military & Commercial Rotary - Wing Segment Valued at More Than $30 Billion Annually – Complementary Defense Investment With Low Execution Risk – Attractively Priced National Asset Using Section 338(h)(10) Tax Election – Anticipate Close Later This Year or in the First Quarter of 2016 • Strategic Review of Government IT and Technical Services – Increased Competition and Price Sensitivity Impacting Ability to Compete…Businesses May Create More Value Outside of Corporation – Remaining IS&GS Businesses Expected to Realign Within Other Business Areas Portfolio Shaping Actions For Value Creation
5 Sikorsky Overview • World Leader in the Design, Manufacture, and Service of Military and Commercial Helicopters • ~15,000 Highly Skilled Employees • Headquartered in Stratford , CT • Operates in 20 Countries, With Products Used in Over 40 Countries 75% 25% Commercial Military Revenue Composition 2015 Expected Revenue ~$6.5B* 50% 50% Int’l Domestic *UTC Paris Air Show Update June 2015
6 Acquisition Rationale • Sikorsky Has Familiar Customers and Is Well Positioned With an Established Brand and Robust Backlog • Sikorsky and Our Mission Systems and Training Business Have a 40 Year History of Partnering on Programs • Strong Aftermarket Business Provides a Long - Term Source of Earnings • Opportunity To Access Historically Low Interest Rate Environment • Access to the Section 338(h)(10) Tax Election Provides Approximately $2 Billion of Expected Value
7 Future Growth Prospects • Sikorsky Military Business Secures and Extends Our Core Defense Business – Multiple USG Development Helicopter Programs are Funded and Expected to Transition Into Production in 2018 (CH - 53K, Presidential, Combat Rescue) • Enables Further Expansion of Our International Operations Through Sikorsky’s Footprint • Well Established Footprint in Commercial Aviation Segment Opportunities for Growth
8 Transaction Valuation No Change to Our Previously Outlined Plan to Return Cash to Stockholders Through Dividends and Stock Repurchases Between 2015 and 2017 • Gross Purchase Price $9.0B • Adjusted Price After 338(h)(10) Election 7.1B • Transaction to Be Funded With a Combination of New Debt and Available Cash EBITDA Multiple* 13.0X 10.3X *2015 EBITDA
9 Synergy Overview • ~$2 Billion Tax Synergy From Section 338(h)(10) Tax Election • Run - Rate Expected Cost Synergies of ~$150 Million Annually • Strong Lockheed Martin Relationships With International Governments…Ability to Match Security Needs With Full Spectrum of Our Combined Security Offerings Synergy Opportunities
10 Strategic Evaluation of IT & Services Current Structure Potential Future State Strategic Review Retain IS&GS MST MFC Space Air Traffic Management Yes Technical Services Yes Government/Enterprise IT Yes Commercial Cyber Yes Government Healthcare IT Yes Mission IT & Services Energy Solutions Space / Space Services Missiles & Fire Control Technical Services Yes Businesses Under Strategic Review…Approximately ~$6 Billion Annual Sales With Mid 7% Margin
11 Summary of Announcements • A Combination of Two Powerful Portfolio Reshaping Activities Creating Long - Term Stockholder Value • Significant Synergies With Low Execution Risk • Corporation Increasingly Positioned for Long - Term Growth Value Creation for Investors and Customers
Lockheed Martin Corporation 2 nd Quarter 2015 Financial Results Conference Call July 20, 2015 11:00 am EDT
13 Forward Looking Statements Our presentation contains “forward - looking statements” or projections based on Lockheed Martin’s current expectations and assump tions. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may dif fer materially due to factors such as: the Corporation’s reliance on contracts with the U.S. Government, all of which are conditioned upon the a vai lability of funding; declining budgets; affordability initiatives; the implementation of automatic sequestration under the Budget Control Act of 2011; U.S. Government operations under a continuing resolution or the failure to adopt a budget which may cause contracts to be del aye d, canceled or funded at lower levels or which may impact the Corporation’s operating results and cash flows; risks related to the development, performance, schedule, cost and requirements of complex and technologically advanced programs including the Corporation’s largest, the F - 35 program; economic , industry, business and political conditions (domestic and international) including their effects on governmental policy; the Corporation’s success in growing international sales and expanding into adjacent markets and risks associated with doing business in new markets and internationally; the competitive environment for the Corporation’s products and services, including increased market pressures in the Corporation’s services businesses, competition from outside the aerospa ce and defense industry, and increased bid protests; planned production rates for significant programs and compliance with stringent performance and reliability standards ; the performance of key suppliers, teammates, joint venture partners, subcontractors, and customers; the timing and customer acceptance of product deliveries; the Corporation’s ability to attract and retain key personnel and transfer knowledge to new personnel ; the impact of work stoppages or other labor disruptions; cyber security or other security threats, or other disruptions; the ability to implement, pace and effect capitalization changes such as share repurchase activity and pension funding or debt levels; the Corporation’s ability to recover certain costs under U.S. Government contracts and changes in contract mix; the accuracy of the Corporation’s estimates and projections; risk of a future impairment of goodwill or other long - term assets ; movements in interest rates and other changes that may affect pension plan assumptions and actual returns on pension plan assets; realizing the anticipated benefits of acquisitions or divestitures, ventures, teaming arrangements or internal reorganizations, and the Cor por ation’s efforts to increase the efficiency of its operations and improve the affordability of its products and services ; the adequacy of the Corporation’s insurance and indemnities; materials availability; the effect of changes in or the interpretation of: legislation , regulation or policy, including those applicable to procurement, cost allowability or recovery, accounting, taxation or export; the outcome of legal proceedings, bid protests, environmental remediation efforts, government allegations that we have failed to comply with law , other contingencies and U.S. Government identification of deficiencies in the Corporation’s business systems; the satisfaction of conditions ( including regulatory approvals) and consummation of the previously announced acquisition of Sikorsky, the timing and terms of an y financing for such acquisition, and the Corporation’s ability to successfully integrate the Sikorsky business and realize syn erg ies and other expected benefits of the transaction; and the terms, timing or structure of a potential transaction related to the Corporation’s government IT and technical services businesses (or whether any such transaction will take place at all ). Except where required by applicable law, we disclaim any duty to update these forward - looking statements . Our SEC filings (found at www.lockheedmartin.com/investor , or through the website maintained by the SEC at www.sec.gov ), including, our Annual Report on Form 10 - K for the year ended Dec. 31, 2014 and 2015 10 - Qs, contain more information on the types of risks a nd other factors that could adversely affect these statements.
14 2 nd Quarter 2015 Overview • Achieved Sales of $11.6 Billion • Achieved Segment Operating Margin* of 12.0% and Earnings Per Share of $2.94 • Generated $1.3 B illion in Cash From Operations • Returned $1.4 Billion of Cash to Stockholders, Including Repurchasing 4.9M Shares for $937 Million • Increased Outlook for Operating Profit and Earnings Per Share Strong Quarterly Results *See Chart 25 for Definitions of Non - GAAP Measures
15 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 2Q 2014 2Q 2015 $11.6B $11.3B Sales Summary 2Q Sales Exceeded 2014… Tracking to Full Year Outlook ($B) +3%
16 4% 6% 8% 10% 12% 2Q 2014 2Q 2015 12.0% 12.4% Segment Margin (%) *See Chart 25 for Definitions of Non - GAAP Measures Segment Operating Margins* 2Q Margin Exceeded Expectations… Increasing Full Year Outlook
17 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 2Q 2014 2Q 2015 ($ EPS) $2.76 $2.94 Solid EPS Growth Earnings Per Share +7%
18 $0.0 $0.5 $1.0 $1.5 2Q YTD 2014 2Q YTD 2015 June YTD $1.5B ($B) $ 1.2B $0.0 $0.3 $0.6 $0.9 $1.2 2Q 2014 2Q 2015 2Q Comparison $937M ($B) $124M Share Repurchases Ahead of 2014 Quarter and YTD Pace…On Track for ≥ $2.0B Target Share Repurchase Activity
19 0% 30% 60% 90% 120% 150% $0 $1,000 $2,000 $3,000 2Q 2015 YTD 2015 ($M) *See Chart 25 for Definitions of Non - GAAP Measures Share Repurchases $937M Shares $467M Dividends 131% Total Cash Returned (% FCF*) YTD Cash From Ops $ 2,220 M Less YTD CapEx (309) YTD Free Cash Flow* $ 1,911 M $1,404M Cash Returned to Stockholders Strong Cash Returns to Stockholders Dividends $2,506M $965M Dividends $1,541M Shares
20 2015 Outlook Update ($M, Except EPS) Prior (April) Current (July) *See Chart 25 for Definitions of Non - GAAP Measures Orders $ 43,500 - 45,000 No Change Sales $43,500 - 45,000 No Change Segment Operating Profit* $5,150 - 5,300 $5,225 - 5,375 Unallocated Corp Inc / (Exp) FAS/CAS Pension Adjustment ~ 475 No Change Other, Net ~ (275) No Change Operating Profit $5,350 - 5,500 $5,425 - 5,575 EPS $10.85 - 11.15 $11.00 - 11.30 Cash From Operations ≥ $5,000 No Change
21 2015 Sales Outlook ($M) Sales (Prior) $7,000 - 7,300 Aeronautics $14,700 - 15,000 Space $7,500 - 7,800 MFC $7,300 - 7,600 IS&GS $43,500 - 45,000M $7,000 - 7,300 MST Sales (Current) $7,000 - 7,300 Aeronautics $14,700 - 15,000 Space $7,500 - 7,800 MFC $7,300 - 7,600 IS&GS $43,500 - 45,000M $7,000 - 7,300 MST No Change to Sales Outlook
22 2015 Segment Operating Profit* Outlook Segment Operating Profit Outlook Increased by $75M Segment Op Profit (Current) $5,150 - 5,300M Segment Op Profit (Prior) $5,225 - 5,375M *See Chart 25 for Definitions of Non - GAAP Measures $ 1,230 - 1,260 Aeronautics $ 1,625 - 1,655 Space $900 - 930 MFC $590 - 620 IS&GS $805 - 835 MST $ 1,230 - 1,260 Aeronautics $ 1,625 - 1,655 Space $945 - 975 MFC $590 - 620 IS&GS $835 - 865 MST ($M)
23 Summary Strong Quarter Tactically and Strategically • Strong Quarter of Operational and Financial Performance • Cash Deployment Actions Continuing to Generate Returns to Stockholders • Results Reflect Program Execution, Proactive Measures, and Broad Business Portfolio • Portfolio Actions…Sikorsky and Strategic Review
24 Financial Appendix
25 Non - GAAP Financial Measures Disclosure This presentation, and today’s conference call remarks, contain non - Generally Accepted Accounting Principles (GAAP) financial measures (as defined by SEC Regulation G). While we believe that these non - GAAP financial measures may be useful in evaluating Lockheed Martin, this information should be considered supplemental and is not a substitute for financial informat ion prepared in accordance with GAAP. In addition, our definitions for non - GAAP measures may differ from similarly titled measures used by other companies or analysts . Free Cash Flow Lockheed Martin defines Free Cash Flow (FCF) as Cash from Operations, less Capital Expenditures . Segment Operating Profit / Margin Segment Operating Profit represents the total earnings from our business segments before unallocated income and expense, interest expense, other non - operating income and expense, and income tax expense. This measure is used by our senior management in evaluating the performance of our business segments. The caption “Total Unallocated I tems” reconciles Segment Operating Profit to Consolidated Operating Profit. Segment Margin is calculated by dividing Segment Operating Profit by Sales. Mid - point Segment Margin represents the mid - point of the outlook range for Segment Operating Profit divided by the mid - point of the outlook range for Sales . ( $ Millions) 2015 Outlook (April) 2015 Outlook (July) Sales $43,500 – 45,000 No Change Segment Operating Profit $5,150 – 5,300 $5,225 – 5,375 Mid - Point Segment Margin 11.8% 12.0% Consolidated Operating Profit $5,350 – 5,500 $5,425 – 5,575 Sales Profit Margin Sales Profit Margin Segment Operating Profit 11,643$ 1,400$ 12.0% 11,306$ 1,406$ 12.4% Total Unallocated Items - 45 - 20 Consolidated Operating Profit (GAAP) 11,643$ 1,445$ 12.4% 11,306$ 1,426$ 12.6% 2Q 20142Q 2015 Definitions of Non - GAAP Measures
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