BETHESDA, Md., July 19, 2016 /PRNewswire/ -- Lockheed
Martin (NYSE: LMT) today reported second quarter 2016 net sales of
$12.9 billion, compared to
$11.6 billion in the second quarter
of 2015. Net earnings in the second quarter of 2016 were
$1.0 billion, or $3.32 per share, compared to $929 million, or $2.94 per share, in the second quarter of 2015.
Cash from operations in the second quarter of 2016 was $1.5 billion, compared to $1.3 billion in the second quarter of 2015.
"The Corporation achieved exceptional operational and financial
results in the second quarter," said Lockheed Martin Chairman,
President and CEO Marillyn
Hewson. "Our strong performance enabled us to increase
our financial guidance for sales, profit, earnings per share and
cash from operations, and positions the company to deliver more
value to our customers and shareholders."
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
26,
2016
|
|
|
June
28,
2015
|
|
|
June
26,
2016
|
|
|
June
28,
2015
|
|
|
|
Net
sales
|
|
$
|
12,914
|
|
|
$
|
11,643
|
|
|
$
|
24,616
|
|
|
$
|
21,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit
|
|
$
|
1,424
|
|
|
$
|
1,400
|
|
|
$
|
2,647
|
|
|
$
|
2,706
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS pension
adjustment
|
|
|
243
|
|
|
|
120
|
|
|
|
489
|
|
|
|
239
|
|
|
|
Special item -
severance charges
|
|
|
–
|
|
|
|
–
|
|
|
|
(99)
|
|
|
|
–
|
|
|
|
Other, net
|
|
|
(101)
|
|
|
|
(75)
|
|
|
|
(174)
|
|
|
|
(144)
|
|
|
|
Total unallocated
items
|
|
|
142
|
|
|
|
45
|
|
|
|
216
|
|
|
|
95
|
|
|
|
Consolidated
operating profit
|
|
$
|
1,566
|
|
|
$
|
1,445
|
|
|
$
|
2,863
|
|
|
$
|
2,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings1
|
|
$
|
1,021
|
|
|
$
|
929
|
|
|
$
|
1,919
|
|
|
$
|
1,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share1
|
|
$
|
3.32
|
|
|
$
|
2.94
|
|
|
$
|
6.23
|
|
|
$
|
5.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from
operations1
|
|
$
|
1,473
|
|
|
$
|
1,263
|
|
|
$
|
3,140
|
|
|
$
|
2,220
|
|
|
|
1 In
the second quarter of 2016, the Corporation adopted a new
accounting standard issued by the Financial Accounting Standards
Board for employee share-based payment awards and reported the
impacts as though the standard had been adopted on Jan. 1, 2016.
Accordingly, the Corporation recognized additional income tax
benefits as an increase to net earnings and operating cash flows of
$11 million ($0.04 per share) and $115 million ($0.37 per share) in
the quarter and six months ended June 26, 2016. The adjustments for
the second quarter of 2016 include only the quarterly impacts,
whereas the adjustments for the first six months of 2016 include
the second quarter impacts and the reclassification of income tax
benefits of $104 million originally recognized in additional
paid-in capital and cash flows from financing activities in the
first quarter of 2016. The new accounting standard did not impact
any periods prior to Jan. 1, 2016.
|
|
2016 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 and changes in law
until such items have been consummated or enacted. Accordingly, the
Corporation's outlook for 2016 reflects a full year of operations
of the Information Systems & Global Solutions (IS&GS)
business as the transaction to separate and merge the IS&GS
business with Leidos Holdings, Inc. is expected to close in the
third quarter of 2016. The outlook for 2016 will be updated to
exclude the IS&GS business when and if the transaction closes.
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
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$50,000 –
$51,500
|
|
$49,600 –
$51,100
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit
|
|
$5,150 –
$5,300
|
|
$5,025 –
$5,175
|
|
|
FAS/CAS
pension adjustment
|
|
~975
|
|
~975
|
|
|
Special
item – severance charges
|
|
~(100)
|
|
~(100)
|
|
|
Other,
net
|
|
~(300)
|
|
~(275)
|
|
|
Consolidated
operating profit
|
|
$5,725 –
$5,875
|
|
$5,625 –
$5,775
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$12.15 –
$12.45
|
|
$11.50 –
$11.80
|
|
|
|
|
|
|
|
|
|
Cash from
operations
|
|
≥
$5,500
|
|
≥ $5,400
|
|
|
|
|
The Corporation may determine to fund customer programs itself
pending government appropriations. If the Corporation incurs costs
in excess of funds obligated on a contract, it may be at risk for
reimbursement of the excess costs. In 2014 and 2015, the
Corporation received customer authorization and initial funding to
begin producing F-35 aircraft to be acquired under low-rate initial
production (LRIP) 9 and 10 contracts, respectively. The Corporation
continues to negotiate these contracts with its customer.
Throughout the negotiation process, the Corporation has incurred
costs in excess of funds obligated and has provided multiple
notifications to its customer that current funding is insufficient
to cover the production process. Despite not yet receiving
additional funding, the Corporation continued work in an effort to
meet the customer's desired aircraft delivery dates. As a result,
as of June 26, 2016, the Corporation
has approximately $900 million of
potential cash exposure and $3.0
billion in termination liability exposure related to the
F-35 LRIP 9 and 10 contracts. The Corporation is currently
negotiating final contract terms with its customer and expects to
receive additional funding by the end of 2016.
Cash Deployment Activities
The Corporation's cash deployment activities in the second
quarter of 2016 consisted of the following:
- repurchasing 2.1 million shares for $501
million, compared to 4.9 million shares for $937 million in the second quarter of 2015;
- paying cash dividends of $501
million, compared to $467
million in the second quarter of 2015;
- repaying $452 million of
long-term notes upon scheduled maturity, compared to no repayments
in the second quarter of 2015; and
- making capital expenditures of $235
million, compared to $191
million in the second quarter of 2015.
Segment Results
We operate in five business segments: Aeronautics, IS&GS,
Missiles and Fire Control (MFC), Mission Systems and Training (MST)
and Space Systems. We organize our business segments based on the
nature of the products and services offered. During the fourth
quarter of 2015, we realigned certain programs among our business
segments. The amounts, discussion and presentation of our business
segments for all periods presented in this news release reflect the
program realignment. Additionally, the results of our MST business
segment include the operations of Sikorsky since its November 6, 2015 acquisition date. Accordingly,
the results of Sikorsky operations are included in our business
segment results of operations for the quarter ended June 26, 2016 but not for the quarter ended
June 28, 2015.
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 U.S. generally accepted
accounting principles (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 certain asset
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. 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 margin 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 margin 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; certain asset
impairments; and losses on sales of assets. 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 26,
2016
|
|
|
June 28,
2015
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
4,375
|
|
|
$
|
4,131
|
|
|
$
|
8,174
|
|
|
$
|
7,265
|
|
|
|
Information Systems
& Global Solutions
|
|
|
1,337
|
|
|
|
1,408
|
|
|
|
2,671
|
|
|
|
2,798
|
|
|
|
Missiles and Fire
Control
|
|
|
1,680
|
|
|
|
1,649
|
|
|
|
3,114
|
|
|
|
3,032
|
|
|
|
Mission Systems and
Training
|
|
|
3,303
|
|
|
|
2,165
|
|
|
|
6,307
|
|
|
|
4,144
|
|
|
|
Space
Systems
|
|
|
2,219
|
|
|
|
2,290
|
|
|
|
4,350
|
|
|
|
4,515
|
|
|
|
Total net
sales
|
|
$
|
12,914
|
|
|
$
|
11,643
|
|
|
$
|
24,616
|
|
|
$
|
21,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
478
|
|
|
$
|
444
|
|
|
$
|
898
|
|
|
$
|
815
|
|
|
|
Information Systems
& Global Solutions
|
|
|
151
|
|
|
|
107
|
|
|
|
260
|
|
|
|
252
|
|
|
|
Missiles and Fire
Control
|
|
|
253
|
|
|
|
293
|
|
|
|
474
|
|
|
|
579
|
|
|
|
Mission Systems and
Training
|
|
|
202
|
|
|
|
262
|
|
|
|
431
|
|
|
|
442
|
|
|
|
Space
Systems
|
|
|
340
|
|
|
|
294
|
|
|
|
584
|
|
|
|
618
|
|
|
|
Total business segment
operating profit
|
|
|
1,424
|
|
|
|
1,400
|
|
|
|
2,647
|
|
|
|
2,706
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS pension
adjustment
|
|
|
243
|
|
|
|
120
|
|
|
|
489
|
|
|
|
239
|
|
|
|
Special item -
severance charges
|
|
|
–
|
|
|
|
–
|
|
|
|
(99)
|
|
|
|
–
|
|
|
|
Other, net
|
|
|
(101)
|
|
|
|
(75)
|
|
|
|
(174)
|
|
|
|
(144)
|
|
|
|
Total unallocated
items
|
|
|
142
|
|
|
|
45
|
|
|
|
216
|
|
|
|
95
|
|
|
|
Total consolidated
operating profit
|
|
$
|
1,566
|
|
|
$
|
1,445
|
|
|
$
|
2,863
|
|
|
$
|
2,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Corporation's consolidated net adjustments not related to
volume, including net profit booking rate adjustments and other
matters, represented approximately 31 percent of total segment
operating profit in the second quarter of 2016, compared to
approximately 39 percent in the second quarter of 2015.
Aeronautics
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
|
Net
sales
|
|
$
|
4,375
|
|
|
$
|
4,131
|
|
|
$
|
8,174
|
|
|
$
|
7,265
|
|
|
|
Operating
profit
|
|
$
|
478
|
|
|
$
|
444
|
|
|
$
|
898
|
|
|
$
|
815
|
|
|
|
Operating
margin
|
|
|
10.9
|
%
|
|
|
10.7
|
%
|
|
|
11.0
|
%
|
|
|
11.2
|
%
|
|
Aeronautics' net sales in the second quarter of 2016 increased
$244 million, or 6 percent, compared
to the same period in 2015. The increase was primarily attributable
to higher net sales of approximately $390
million for the F-35 program due to increased volume on
aircraft production and sustainment activities. This increase
was partially offset by lower net sales of approximately
$180 million for the C-5 program due
to decreased deliveries (two aircraft delivered in the second
quarter of 2016 compared to four delivered in the same period in
2015) and sustainment activities.
Aeronautics' operating profit in the second quarter of 2016
increased $34 million, or 8 percent,
compared to the same period in 2015. Operating profit increased
approximately $60 million for the
F-35 program due to increased volume and sustainment activities and
higher risk retirements. This increase was partially offset by
lower operating profit of approximately $25
million on various programs, primarily due to lower risk
retirements and decreased volume. Adjustments not related to
volume, including net profit booking rate adjustments, were
approximately $25 million lower in
the second quarter of 2016 compared to the same period in 2015.
Information Systems & Global Solutions
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
|
Net
sales
|
|
$
|
1,337
|
|
|
$
|
1,408
|
|
|
$
|
2,671
|
|
|
$
|
2,798
|
|
|
|
Operating
profit
|
|
$
|
151
|
|
|
$
|
107
|
|
|
$
|
260
|
|
|
$
|
252
|
|
|
|
Operating
margin
|
|
|
11.3
|
%
|
|
|
7.6
|
%
|
|
|
9.7
|
%
|
|
|
9.0
|
%
|
|
IS&GS' net sales in the second quarter of 2016 decreased
$71 million, or 5 percent, compared
to the same period in 2015. The decrease was attributable to lower
net sales of approximately $50
million as a result of the completion of certain programs to
provide IT solutions to U.S. defense and intelligence agencies
(including the U.S. Army Corps of Engineers (ACE) IT program) 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; and approximately
$20 million due to lower volume,
primarily as a result of schedule delays caused by development
issues on a large international data center migration and
consolidation program due to unanticipated challenges in
application remediation and data center migration activities.
IS&GS' operating profit in the second quarter of 2016
increased $44 million, or 41 percent,
compared to the same period in 2015. The increase was primarily
attributable to higher operating profit of approximately
$40 million due to contract close-out
activities and completion of various programs and, to a lesser
extent, improved program performance; and approximately
$20 million due to reserves recorded
in the second quarter of 2015 that were not repeated in the second
quarter of 2016. These increases were partially offset by lower
operating profit of approximately $15
million as a result of the development issues on the
international data center migration and consolidation program
described above. Adjustments not related to volume, including net
profit booking rate adjustments, were approximately $55 million higher in the second quarter of 2016
compared to the same period in 2015.
Missiles and Fire Control
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
|
Net
sales
|
|
$
|
1,680
|
|
|
$
|
1,649
|
|
|
$
|
3,114
|
|
|
$
|
3,032
|
|
|
|
Operating
profit
|
|
$
|
253
|
|
|
$
|
293
|
|
|
$
|
474
|
|
|
$
|
579
|
|
|
|
Operating
margin
|
|
|
15.1
|
%
|
|
|
17.8
|
%
|
|
|
15.2
|
%
|
|
|
19.1
|
%
|
|
MFC's net sales in the second quarter of 2016 increased
$31 million, or 2 percent, compared
to the same period in 2015. The increase was attributable to higher
net sales of approximately $60
million for fire control programs due to increased
deliveries (including SNIPER® and Special Operations Forces
Contractor Logistics Support Services (SOF CLSS)); and
approximately $35 million for air and
missile defense programs (primarily Patriot Advanced Capability-3
(PAC-3) due to increased deliveries). This increase was partially
offset by lower net sales of approximately $45 million for tactical missiles programs due to
fewer deliveries (primarily Guided Multiple Launch Rocket Systems
(GMLRS)); and approximately $20
million for various other programs due to lower volume.
MFC's operating profit in the second quarter of 2016 decreased
$40 million, or 14 percent, compared
to the same period in 2015. The decrease was attributable to lower
operating profit of approximately $15
million for air and missile defense programs primarily due
to a reserve for contractual matters, lower risk retirements and
contract mix; approximately $15
million for tactical missile programs, primarily due to
lower risk retirements on various programs and fewer deliveries
(primarily GMLRS); and approximately $10
million for fire control programs, primarily due to lower
risk retirements (Apache) and program mix. Adjustments not related
to volume, including net profit booking rate adjustments, were
approximately $35 million lower in
the second quarter of 2016 compared to the same period in 2015.
Mission Systems and Training
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
Net
sales
|
|
$
|
3,303
|
|
|
$
|
2,165
|
|
|
$
|
6,307
|
|
|
$
|
4,144
|
|
|
Operating
profit
|
|
$
|
202
|
|
|
$
|
262
|
|
|
$
|
431
|
|
|
$
|
442
|
|
|
Operating
margin
|
|
|
6.1
|
%
|
|
|
12.1
|
%
|
|
|
6.8
|
%
|
|
|
10.7
|
%
|
|
MST's net sales in the second quarter of 2016 increased
$1.1 billion, or 53 percent, compared
to the same period in 2015. The increase was primarily attributable
to net sales of approximately $1.2
billion from Sikorsky, net of adjustments required to
account for the acquisition of this business which occurred in the
fourth quarter of 2015. This increase was partially offset by lower
net sales of approximately $60
million for various programs, primarily due to decreased
volume.
MST's operating profit in the second quarter of 2016 decreased
$60 million, or 23 percent, compared
to the same period in 2015. The decrease was primarily attributable
to lower operating profit of approximately $30 million from undersea systems programs, which
includes a reserve for performance matters on an international
program and lower risk retirements; and due to an operating loss of
approximately $30 million from
Sikorsky due primarily to intangible amortization and adjustments
required to account for the acquisition of this business.
Adjustments not related to volume, including net profit booking
rate adjustments and other matters, were approximately $35 million lower in the second quarter of 2016
compared to the same period in 2015.
Space Systems
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
June 26,
2016
|
|
|
June 28,
2015
|
|
|
|
Net
sales
|
|
$
|
2,219
|
|
|
$
|
2,290
|
|
|
$
|
4,350
|
|
|
$
|
4,515
|
|
|
|
Operating
profit
|
|
$
|
340
|
|
|
$
|
294
|
|
|
$
|
584
|
|
|
$
|
618
|
|
|
|
Operating
margin
|
|
|
15.3
|
%
|
|
|
12.8
|
%
|
|
|
13.4
|
%
|
|
|
13.7
|
%
|
|
Space Systems' net sales in the second quarter of 2016 decreased
$71 million, or 3 percent, compared
to the same period in 2015. The decrease was primarily attributable
to lower net sales of approximately $115
million for government satellite programs due to decreased
volume (primarily Space Based Infrared System (SBIRS), Advanced
Extremely High Frequency (AEHF) and Mobile User Objective System
(MUOS)). This decrease was partially offset by higher net sales of
approximately $40 million for
strategic and defensive missile systems due to increased
volume.
Space Systems' operating profit in the second quarter of 2016
increased $46 million, or 16 percent,
compared to the same period in 2015. The increase was primarily
attributable to approximately $80
million of increased equity earnings in joint ventures
(primarily ULA). This increase was partially offset by lower
operating profit of approximately $20
million for government satellite programs due primarily to
lower risk retirements (SBIRS and MUOS); and approximately
$20 million for commercial satellite
programs due primarily to performance matters on certain programs.
Adjustments not related to volume, including net profit booking
rate adjustments and other matters, were approximately $75 million lower in the second quarter of 2016
compared to the same period in 2015.
Total equity earnings recognized by Space Systems (primarily
ULA) represented approximately $120
million, or 35 percent, of this business segment's operating
profit in the second quarter of 2016, compared to approximately
$40 million, or 14 percent, in the
second quarter of 2015.
Income Taxes
The Corporation's effective income tax rate was 27.1 percent in
the second quarter of 2016, compared to 30.8 percent in the second
quarter of 2015. 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 rate in the second quarter of
2016 also benefited from the research and development tax credit,
which was permanently extended and reinstated in the fourth quarter
of 2015, and from the additional tax benefits related to employee
share-based payment awards which are now recorded as income tax
benefit or expense in earnings effective with the adoption of an
accounting standard update in the second quarter of 2016. The
Corporation early adopted the accounting standard update during the
second quarter of 2016 and was therefore required to report the
impacts as though the accounting standard update had been adopted
on Jan. 1, 2016. Accordingly,
the Corporation recognized additional income tax benefits of
$11 million and $115 million during the quarter and six months
ended June 26, 2016. The
adjustments for the second quarter include only the quarterly
impacts, whereas the adjustments for the first six months of 2016
include the second quarter impacts and the reclassification of
income tax benefits of $104 million
originally recognized in additional paid-in capital in the first
quarter of 2016.
Conference Call Information
Lockheed Martin will webcast live its second quarter 2016
earnings results conference call (listen-only mode) on Tuesday, July 19, 2016, at 11:00 a.m. ET. The live webcast and relevant
financial charts will be available for download on the Lockheed
Martin Investor Relations 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 125,000 people worldwide and is
principally engaged in the research, design, development,
manufacture, integration and sustainment of advanced technology
systems, products and services.
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 or Congressional actions intended to replace
sequestration;
- risks related to the development, production, 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, ventures, 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 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 ability to successfully integrate the Sikorsky business and
realize synergies and other expected benefits of this acquisition,
and the impact of oil and gas trends on financial performance;
- adjustments required as a result of the ongoing purchase
accounting analysis related to the Sikorsky acquisition;
- risks related to the completion of the Corporation's previously
announced transaction with Leidos related to the Corporation's
IS&GS business segment, including anticipated timing; obtaining
stockholder and regulatory approvals and anticipated tax treatment;
the dependency of any split-off transaction on market conditions;
and the value to be received in any split-off transaction and the
amount of any potential decrease in outstanding shares or book
gain;
- the adequacy of the Corporation's insurance and
indemnities;
- materials availability;
- the effect of changes in (or interpretation of): legislation,
regulation or policy, including those applicable to procurement
(including competition from fewer and larger prime contractors),
cost allowability or recovery, accounting, taxation, or export;
and
- the outcome of legal proceedings, bid protests, environmental
remediation efforts, government investigations or 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 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, 2015 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 26,
2016
|
|
June 28,
2015
|
|
June 26,
2016
|
|
June 28,
2015
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
12,914
|
|
$
11,643
|
|
$
24,616
|
|
$
21,754
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
(11,490)
|
|
(10,272)
|
|
(21,957)
|
|
(19,120)
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
1,424
|
|
1,371
|
|
2,659
|
|
2,634
|
|
|
|
|
|
|
|
|
|
|
|
Other income,
net
|
|
142
|
|
74
|
|
204
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
1,566
|
|
1,445
|
|
2,863
|
|
2,801
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(166)
|
|
(104)
|
|
(330)
|
|
(197)
|
|
|
|
|
|
|
|
|
|
|
|
Other non-operating
income, net
|
|
-
|
|
2
|
|
1
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
1,400
|
|
1,343
|
|
2,534
|
|
2,609
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
(379)
|
|
(414)
|
|
(615)
|
|
(802)
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings2
|
|
$
1,021
|
|
$
929
|
|
$
1,919
|
|
$
1,807
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
27.1
|
%
|
30.8
|
%
|
24.3
|
%
|
30.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share2
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
3.37
|
|
$
2.98
|
|
$
6.32
|
|
$
5.76
|
|
Diluted
|
|
$
3.32
|
|
$
2.94
|
|
$
6.23
|
|
$
5.68
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
303.1
|
|
312.0
|
|
303.8
|
|
313.7
|
|
Diluted
|
|
307.1
|
|
316.1
|
|
307.9
|
|
318.2
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
reported in stockholders' equity at end of period
|
|
|
|
|
|
301
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The Corporation closes its books and records on the last Sunday of
the calendar quarter to align its financial closing with its
business processes, which was on
|
|
June 26
for the second quarter of 2016 and June 28 for the second quarter
of 2015. 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.
|
|
|
|
|
|
|
|
|
|
|
|
2 In
the second quarter of 2016, the Corporation adopted a new
accounting standard issued by the Financial Accounting Standards
Board for employee share-based
|
|
payment
awards and reported the impacts as though the standard had been
adopted on Jan. 1, 2016. Accordingly, the Corporation
recognized additional
|
|
income
tax benefits as an increase to net earnings and operating cash
flows of $11 million ($0.04 per share) and $115 million ($0.37 per
share) in the quarter and
|
|
six
months ended June 26, 2016. The adjustments for the second
quarter of 2016 include only the quarterly impacts, whereas the
adjustments for the first six
|
|
months
of 2016 include the second quarter impacts and the reclassification
of income tax benefits of $104 million originally recognized in
additional paid-in
|
|
capital
and cash flows from financing activities in the first quarter of
2016. The new accounting standard did not impact any periods
prior to Jan. 1, 2016.
|
|
Lockheed Martin
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Segment
Summary Operating Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited; in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
June 26,
2016
|
|
June 28,
2015
|
|
|
%
Change
|
|
June 26,
2016
|
|
June 28,
2015
|
|
|
%
Change
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
4,375
|
|
$
4,131
|
|
|
6
|
%
|
|
$
8,174
|
|
$
7,265
|
|
|
13
|
%
|
Information
Systems & Global Solutions
|
|
1,337
|
|
1,408
|
|
|
(5)
|
%
|
|
2,671
|
|
2,798
|
|
|
(5)
|
%
|
Missiles and
Fire Control
|
|
1,680
|
|
1,649
|
|
|
2
|
%
|
|
3,114
|
|
3,032
|
|
|
3
|
%
|
Mission
Systems and Training
|
|
3,303
|
|
2,165
|
|
|
53
|
%
|
|
6,307
|
|
4,144
|
|
|
52
|
%
|
Space
Systems
|
|
2,219
|
|
2,290
|
|
|
(3)
|
%
|
|
4,350
|
|
4,515
|
|
|
(4)
|
%
|
Total net
sales
|
|
$
12,914
|
|
$
11,643
|
|
|
11
|
%
|
|
$
24,616
|
|
$
21,754
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
478
|
|
$
444
|
|
|
8
|
%
|
|
$
898
|
|
$
815
|
|
|
10
|
%
|
Information
Systems & Global Solutions
|
|
151
|
|
107
|
|
|
41
|
%
|
|
260
|
|
252
|
|
|
3
|
%
|
Missiles and
Fire Control
|
|
253
|
|
293
|
|
|
(14)
|
%
|
|
474
|
|
579
|
|
|
(18)
|
%
|
Mission
Systems and Training
|
|
202
|
|
262
|
|
|
(23)
|
%
|
|
431
|
|
442
|
|
|
(2)
|
%
|
Space
Systems
|
|
340
|
|
294
|
|
|
16
|
%
|
|
584
|
|
618
|
|
|
(6)
|
%
|
Total business segment
operating profit
|
1,424
|
|
1,400
|
|
|
2
|
%
|
|
2,647
|
|
2,706
|
|
|
(2)
|
%
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS
pension adjustment
|
|
243
|
|
120
|
|
|
|
|
|
489
|
|
239
|
|
|
|
|
Other,
net
|
|
(101)
|
|
(75)
|
|
|
|
|
|
(273)
|
|
(144)
|
|
|
|
|
Total unallocated
items
|
|
142
|
|
45
|
|
|
|
|
|
216
|
|
95
|
|
|
|
|
Total consolidated
operating profit
|
|
$
1,566
|
|
$
1,445
|
|
|
8
|
%
|
|
$
2,863
|
|
$
2,801
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
10.9
|
%
|
10.7
|
%
|
|
|
|
|
11.0
|
%
|
11.2
|
%
|
|
|
|
Information
Systems & Global Solutions
|
|
11.3
|
%
|
7.6
|
%
|
|
|
|
|
9.7
|
%
|
9.0
|
%
|
|
|
|
Missiles and
Fire Control
|
|
15.1
|
%
|
17.8
|
%
|
|
|
|
|
15.2
|
%
|
19.1
|
%
|
|
|
|
Mission
Systems and Training
|
|
6.1
|
%
|
12.1
|
%
|
|
|
|
|
6.8
|
%
|
10.7
|
%
|
|
|
|
Space
Systems
|
|
15.3
|
%
|
12.8
|
%
|
|
|
|
|
13.4
|
%
|
13.7
|
%
|
|
|
|
Total business segment
operating margins
|
11.0
|
%
|
12.0
|
%
|
|
|
|
|
10.8
|
%
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
operating margins
|
|
12.1
|
%
|
12.4
|
%
|
|
|
|
|
11.6
|
%
|
12.9
|
%
|
|
|
|
Lockheed Martin
Corporation
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
(unaudited; in
millions, except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 26,
2016
|
|
December 31,
2015¹
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
1,269
|
|
$
1,090
|
Receivables,
net
|
|
9,275
|
|
8,061
|
Inventories,
net
|
|
5,136
|
|
4,962
|
Other current
assets
|
|
393
|
|
460
|
Total current assets
|
|
16,073
|
|
14,573
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
5,438
|
|
5,490
|
Goodwill
|
|
13,621
|
|
13,576
|
Intangible assets,
net
|
|
4,051
|
|
4,147
|
Deferred income
taxes
|
|
5,830
|
|
5,931
|
Other noncurrent
assets
|
|
5,395
|
|
5,411
|
Total
assets
|
|
$
50,408
|
|
$
49,128
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
|
$
2,778
|
|
$
1,974
|
Customer
advances and amounts in excess of costs incurred
|
7,236
|
|
6,988
|
Salaries,
benefits and payroll taxes
|
|
2,012
|
|
1,916
|
Current
maturities of long-term debt
|
|
502
|
|
956
|
Other current
liabilities
|
|
3,067
|
|
2,085
|
Total current
liabilities
|
|
15,595
|
|
13,919
|
|
|
|
|
|
Long-term debt,
net
|
|
14,307
|
|
14,305
|
Accrued pension
liabilities
|
|
11,816
|
|
11,807
|
Other postretirement
benefit liabilities
|
|
1,073
|
|
1,070
|
Other noncurrent
liabilities
|
|
4,620
|
|
4,930
|
Total
liabilities
|
|
47,411
|
|
46,031
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common stock,
$1 par value per share
|
|
301
|
|
303
|
Additional
paid-in capital
|
|
-
|
|
-
|
Retained
earnings
|
|
13,800
|
|
14,238
|
Accumulated
other comprehensive loss
|
|
(11,104)
|
|
(11,444)
|
Total stockholders'
equity
|
|
2,997
|
|
3,097
|
Total liabilities and
stockholders' equity
|
|
$
50,408
|
|
$
49,128
|
|
|
|
|
|
|
|
|
|
|
1
Certain prior period amounts have been reclassified to conform with
current period presentation.
|
Lockheed Martin
Corporation
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
(unaudited; in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 26,
2016
|
|
June 28,
2015
|
|
|
|
|
Operating
activities
|
|
|
|
Net
earnings
|
$
1,919
|
|
$
1,807
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities
|
|
|
|
Depreciation
and amortization
|
593
|
|
490
|
Stock-based
compensation
|
97
|
|
89
|
Severance
charges
|
99
|
|
-
|
Changes in
assets and liabilities
|
|
|
|
Receivables,
net
|
(1,214)
|
|
(1,183)
|
Inventories,
net
|
(233)
|
|
(154)
|
Accounts
payable
|
806
|
|
453
|
Customer advances and
amounts in excess of costs incurred
|
239
|
|
(211)
|
Postretirement benefit
plans
|
515
|
|
580
|
Income
taxes
|
237
|
|
471
|
Other,
net
|
82
|
|
(122)
|
Net cash provided by operating activities
|
3,140
|
|
2,220
|
|
|
|
|
Investing
activities
|
|
|
|
Capital
expenditures
|
(386)
|
|
(309)
|
Other, net
|
59
|
|
91
|
Net cash used for
investing activities
|
(327)
|
|
(218)
|
|
|
|
|
Financing
activities
|
|
|
|
Issuance of long-term
debt, net of related costs
|
-
|
|
2,213
|
Repayments of
long-term debt
|
(452)
|
|
-
|
Repurchases of common
stock
|
(1,002)
|
|
(1,541)
|
Dividends
paid
|
(1,034)
|
|
(965)
|
Proceeds from stock
option exercises
|
53
|
|
84
|
Other, net
|
(199)
|
|
(37)
|
Net cash used for
financing activities
|
(2,634)
|
|
(246)
|
|
|
|
|
Net change in cash
and cash equivalents
|
179
|
|
1,756
|
Cash and cash
equivalents at beginning of period
|
1,090
|
|
1,446
|
Cash and cash
equivalents at end of period
|
$
1,269
|
|
$
3,202
|
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, 2015
|
$
303
|
|
$
-
|
|
$
14,238
|
|
$
(11,444)
|
|
$
3,097
|
Net
earnings
|
-
|
|
-
|
|
1,919
|
|
-
|
|
1,919
|
Other comprehensive
income, net of tax1
|
-
|
|
-
|
|
-
|
|
340
|
|
340
|
Repurchases of common
stock
|
(5)
|
|
(159)
|
|
(838)
|
|
-
|
|
(1,002)
|
Dividends
declared2
|
-
|
|
-
|
|
(1,519)
|
|
-
|
|
(1,519)
|
Stock-based awards
and ESOP activity
|
3
|
|
159
|
|
-
|
|
-
|
|
162
|
|
|
|
|
|
|
|
|
|
|
Balance at June
26, 2016
|
$
301
|
|
$
-
|
|
$
13,800
|
|
$
(11,104)
|
|
$
2,997
|
|
|
|
|
|
|
|
|
|
|
1
Primarily represents the reclassification adjustment for the
recognition of prior period amounts related to postretirement
benefit plans.
|
|
|
|
|
|
|
|
|
|
|
2
Represents dividends of $1.65 per share declared during the first,
second and third quarter of 2016.
|
|
|
|
|
Lockheed Martin
Corporation
|
|
|
|
|
|
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
(unaudited; in
millions, except aircraft deliveries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
June 26,
2016
|
|
Dec. 31,
2015
|
|
|
|
|
Aeronautics
|
|
$
28,800
|
|
$
31,800
|
|
|
|
|
Information Systems
& Global Solutions
|
4,300
|
|
4,800
|
|
|
|
|
Missiles and Fire
Control
|
|
15,300
|
|
15,500
|
|
|
|
|
Mission Systems and
Training
|
29,500
|
|
30,100
|
|
|
|
|
Space
Systems
|
|
18,500
|
|
17,400
|
|
|
|
|
Total
backlog
|
|
$
96,400
|
|
$
99,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
Aircraft
Deliveries
|
|
June 26,
2016
|
|
June 28,
2015
|
|
June 26,
2016
|
|
June 28,
2015
|
F-16
|
|
3
|
|
3
|
|
5
|
|
6
|
F-35
|
|
14
|
|
11
|
|
20
|
|
19
|
C-130J
|
|
6
|
|
6
|
|
12
|
|
10
|
C-5
|
|
2
|
|
4
|
|
4
|
|
5
|
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SOURCE Lockheed Martin