BETHESDA, Md., Oct. 25, 2016 /PRNewswire/ -- Lockheed
Martin (NYSE: LMT) today reported third quarter 2016 net sales from
continuing operations of $11.6
billion, compared to $10.1
billion in the third quarter of 2015. Net earnings from
continuing operations in the third quarter of 2016 were
$1.1 billion, or $3.61 per share, compared to $756 million, or $2.42 per share, in the third quarter of 2015.
Cash from operations in the third quarter of 2016 was $1.3 billion, compared to $1.5 billion in the third quarter of 2015.
"The corporation achieved a quarter of strong operational and
financial results, while also completing our strategic disposition
of IS&GS," said Lockheed Martin Chairman, President and CEO
Marillyn Hewson. "Looking ahead
to 2017, we are focused on providing innovative solutions to our
customers, while executing on our realigned business portfolio to
generate growth and value to shareholders."
Divestiture of Information Systems & Global
Solutions
On Aug. 16, 2016, the Corporation
completed the previously announced divestiture of its Information
Systems & Global Solutions (IS&GS) business segment, which
merged with Leidos Holdings, Inc. (Leidos) in a Reverse Morris
Trust transaction (the Transactions). The Transactions were the
culmination of the Corporation's strategic review of its government
information technology (IT) business and its technical services
business performed in 2015 to explore whether these businesses
could achieve greater growth and create more value for customers
and stockholders outside of Lockheed Martin. As part of the
Transactions, the Corporation also completed an exchange offer that
resulted in a reduction of Lockheed Martin common stock outstanding
by approximately 9.4 million shares (approximately three percent).
Both the exchange offer and merger qualified as tax-free
transactions to the Corporation and its stockholders, except to the
extent that cash was paid to the Corporation's stockholders in lieu
of fractional shares. Additionally, Lockheed Martin received a
one-time special cash payment of $1.8
billion, which is reported under financing activities in the
consolidated statements of cash flows.
The Corporation recognized a $1.2
billion gain as a result of the Transactions, which
represents the $2.5 billion fair
value of the shares of Lockheed Martin common stock tendered and
retired as part of the exchange offer, plus the $1.8 billion one-time special cash payment, less
the $3.0 billion net book value of
the IS&GS business segment at Aug. 16,
2016 and other adjustments of $100
million. The final gain is subject to certain post-closing
adjustments, including final working capital and tax adjustments,
which the Corporation expects to complete in the fourth quarter of
2016 or the first quarter of 2017. The operating results of the
IS&GS business segment and the gain on the Transactions have
been classified as discontinued operations. However, the cash flows
of the IS&GS business segment have not been classified as
discontinued operations, as the Corporation retained this cash as
part of the Transactions.
Consolidation of Atomic Weapons Establishment Venture
On Aug. 24, 2016, the
Corporation's ownership interest in the AWE Management Limited
(AWE) venture, which operates the United
Kingdom's nuclear deterrent program, increased by 18%. As a
result of the increase in ownership interest, the Corporation now
holds a 51% controlling interest in the AWE venture. The operating
results and cash flows of AWE have been included in the
Corporation's consolidated results since Aug. 24, 2016, the date it obtained a controlling
interest. AWE has been aligned under the Corporation's Space
Systems business segment. Previously, the Corporation
accounted for its investment in AWE using the equity method of
accounting. The Corporation recognized a $127 million non-cash gain as a result of this
transaction, which represents the fair value of the Corporation's
51% interest in AWE, less the net book value of the previously held
investment in AWE. The gain increased net earnings from continuing
operations $104 million ($0.34 per share) in the third quarter of
2016.
Summary Financial Results
The following table presents the Corporation's summary financial
results.
|
(in millions, except
per share data)1
|
|
Quarters
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
|
Net
sales
|
|
$
|
11,551
|
|
|
$
|
10,060
|
|
|
$
|
33,496
|
|
|
$
|
29,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit 2
|
|
$
|
1,423
|
|
|
$
|
1,244
|
|
|
$
|
3,810
|
|
|
$
|
3,698
|
|
|
|
Unallocated items
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS pension
adjustment
|
|
|
226
|
|
|
|
102
|
|
|
|
672
|
|
|
|
305
|
|
|
|
Special item -
severance charges
|
|
|
–
|
|
|
|
(15)
|
|
|
|
(80)
|
|
|
|
(15)
|
|
|
|
Other,
net
|
|
|
(61)
|
|
|
|
(139)
|
|
|
|
(281)
|
|
|
|
(376)
|
|
|
|
Total unallocated
items
|
|
|
165
|
|
|
|
(52)
|
|
|
|
311
|
|
|
|
(86)
|
|
|
|
Consolidated
operating profit
|
|
$
|
1,588
|
|
|
$
|
1,192
|
|
|
$
|
4,121
|
|
|
$
|
3,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations 3
|
|
$
|
1,089
|
|
|
$
|
756
|
|
|
$
|
2,794
|
|
|
$
|
2,309
|
|
|
|
Discontinued operations
|
|
|
1,306
|
|
|
|
109
|
|
|
|
1,520
|
|
|
|
363
|
|
|
|
Net
earnings
|
|
$
|
2,395
|
|
|
$
|
865
|
|
|
$
|
4,314
|
|
|
$
|
2,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations 3
|
|
$
|
3.61
|
|
|
$
|
2.42
|
|
|
$
|
9.13
|
|
|
$
|
7.30
|
|
|
|
Discontinued operations
|
|
|
4.32
|
|
|
|
0.35
|
|
|
|
4.97
|
|
|
|
1.15
|
|
|
|
Diluted earnings
per share
|
|
$
|
7.93
|
|
|
$
|
2.77
|
|
|
$
|
14.10
|
|
|
$
|
8.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from
operations 1,3
|
|
$
|
1,320
|
|
|
$
|
1,517
|
|
|
$
|
4,460
|
|
|
$
|
3,737
|
|
|
|
|
|
|
1As a
result of the divestiture of the IS&GS business segment on Aug.
16, 2016, the operating results of the IS&GS business segment
have been classified as discontinued operations for all periods
presented. However, cash from operations includes the cash flows of
the IS&GS business segment prior to its divestiture on Aug. 16,
2016, as the Corporation retained this cash as part of the
Transactions. A $1.2 billion gain recorded as a result of the
divestiture of the IS&GS business segment is recorded in net
earnings from discontinued operations in the quarter and nine
months ended Sept. 25, 2016. Certain reclassifications of
Unallocated items were made as a result of the divestiture of the
IS&GS business segment. See the "Unallocated items" section of
this news release for additional information related to these
reclassifications.
|
|
|
|
|
|
2 The
amounts in the third quarter and first nine months of 2016 include
a non-cash gain of $127 million recognized at the Corporation's
Space Systems business segment related to the consolidation of AWE
upon obtaining control of this venture on Aug. 24, 2016, which
increased net earnings from continuing operations $104 million
($0.34 per share).
|
|
|
|
|
|
3 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 from continuing operations and operating
cash flows of $22 million ($0.07 per share) and $137
million ($0.45 per share) in the quarter and nine months ended
Sept. 25, 2016. The adjustments for the third quarter of 2016
include only the quarterly impacts, whereas the adjustments for the
first nine months of 2016 include the second and third 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. 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)
|
|
July Outlook
|
|
July Outlook
Adjusted for
IS&GS
|
|
Current
Outlook
Adjusted for
IS&GS
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$50,000
–$51,500
|
|
$45,000 –
$46,200
|
|
~$46,500
|
|
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit
|
|
$5,150 –
$5,300
|
|
$4,720 –
$4,840
|
|
~$5,025
|
|
|
FAS/CAS
pension adjustment
|
|
~975
|
|
~900
|
|
~900
|
|
|
Special
item – severance charges
|
|
~(100)
|
|
~(80)
|
|
~(80)
|
|
|
Other,
net
|
|
~(300)
|
|
~(340)
|
|
~(340)
|
|
|
Consolidated
operating profit
|
|
$5,725 –
$5,875
|
|
$5,200 –
$5,320
|
|
~$5,505
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share from continuing operations
|
|
$12.15 –
$12.45
|
|
$11.15 –
$11.45
|
|
~$12.10
|
|
|
|
|
|
|
|
|
|
|
|
Cash from
operations with F-35
Collection in 2016 1
|
|
≥ $5,500
|
|
≥ $5,350
|
|
≥
$5,700
|
|
|
Cash from
operations with F-35
Collection in 2017 1
|
|
|
|
|
|
≥
$5,000
|
|
|
|
|
|
1The
timing of cash collections associated with the F-35 program is
dependent upon the timing of negotiations for low-rate initial
production
9 and 10 contracts.
|
|
The Corporation's 2016 financial outlook for sales, operating
profit, and earnings per share have been updated to exclude the
operating results of the IS&GS business segment for the full
year, which was divested on Aug. 16,
2016. However, the 2016 financial outlook for cash from
operations includes cash flows generated by the IS&GS business
segment through the closing of the divestiture on Aug. 16, 2016, as the Corporation retained this
cash as part of the divestiture.
The Corporation also adjusted its 2016 financial outlook to
include sales of $400 million from
the AWE venture, which has been consolidated since Aug. 24, 2016 as a result of obtaining a
controlling interest, and the $127
million gain recognized in operating profit of the
Corporation's Space Systems business segment in the third quarter
of 2016 as a result of the AWE transaction. The AWE venture has
been aligned under the Corporation's Space Systems business
segment.
The financial outlook for cash from operations is likely to be
impacted by a delay in collections on the F-35 program. Any delay
in 2016 customer payments on the F-35 program will increase the
Corporation's cash from operations in 2017.
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 is 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
funding sufficient to cover its costs, the Corporation continued
work in an effort to meet the customer's desired aircraft delivery
dates. Currently, the Corporation has approximately $950 million of potential cash exposure and
$2.3 billion in termination liability
exposure related to the F-35 LRIP 9 and 10 contracts.
2017 Financial Trends
The Corporation expects its 2017 net sales to increase by
approximately 7 percent as compared to 2016. Total business segment
operating margin is expected to be in the 10.0 percent to 10.5
percent range. Depending on the timing of F-35 collections, 2017
cash from operations will be greater than or equal to $5.0 billion or greater than or equal to
$5.7 billion. The preliminary outlook
for 2017 assumes the U.S. Government continues to support and fund
the Corporation's key programs, consistent with the continuing
resolution funding measure through Dec. 9,
2016, and Congress approves budget legislation for
government fiscal year 2017 soon. Changes in circumstances may
require the Corporation to revise its assumptions, which could
materially change its current estimate of 2017 net sales, operating
margin and cash flows.
The Corporation expects the 2017 FAS/CAS pension benefit to be
approximately $800 million assuming a
3.625 percent discount rate, a 75 basis point decrease from the end
of 2015, a 5.0 percent return on plan assets in
2016, revised longevity assumptions (described below),
and other assumptions. The Corporation does not expect to make
contributions to its legacy qualified defined benefit pension plans
in 2017. A change of plus or minus 25 basis points to the assumed
discount rate, with all other assumptions held constant, would
result in an incremental increase or decrease of approximately
$125 million to the estimated 2017 FAS/CAS pension benefit. On
Oct. 20, 2016, the Society of
Actuaries published revised longevity assumptions that are used to
estimate the life expectancy of plan participants during which they
are expected to receive benefit payments. Actuarial studies have
recently been updated and would have the resultant impact of
decreasing the total number of benefit payments to plan
participants. These actuarial studies have not yet been reflected
or incorporated in the postretirement benefit plan obligation
recognized at Sept. 25, 2016 or the
FAS expense and CAS cost for 2016. The new longevity assumptions,
which the Corporation expects to adopt at the
Dec. 31, 2016 measurement date,
currently are expected to decrease the amount of the
Corporation's postretirement benefit plan obligation and
increase the Corporation's 2017 net earnings. The
Corporation will finalize the postretirement benefit plan
assumptions and determine the 2016 actual return on plan assets on
Dec. 31, 2016. The final assumptions
and actual investment return for 2016 may differ materially from
those discussed above.
Cash Deployment Activities
The Corporation's cash deployment activities in the third
quarter of 2016 consisted of the following:
- repurchasing 1.2 million shares for $278
million, compared to 4.1 million shares for $823 million in the third quarter of 2015;
- paying cash dividends of $484
million, compared to $462
million in the third quarter of 2015;
- repaying $500 million of
long-term debt upon scheduled maturity, compared to no repayments
in the third quarter of 2015; and
- making capital expenditures of $241
million, compared to $191
million in the third quarter of 2015.
Segment Results
The Corporation operates in four business segments organized
based on the nature of products and services offered: Aeronautics,
Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS)
and Space Systems.
The discussion and presentation of the operating results of the
Corporation's business segments in this news release have been
impacted by the following recent events:
- The Corporation completed the previously announced divestiture
of its IS&GS business segment on Aug.
16, 2016, which merged with Leidos. The discussion and
presentation of the Corporation's segment results for all periods
presented in this news release exclude the results of the IS&GS
business segment.
- The Corporation's ownership interest in the AWE venture
increased by 18% on Aug. 24, 2016. As
a result of the increase in ownership interest, the Corporation now
holds a 51% controlling interest in AWE and is required to
consolidate the AWE venture. AWE has been aligned under the
Corporation's Space Systems business segment. Accordingly, the
discussion and presentation of net sales, operating profit and
operating margin of the Corporation's Space Systems business
segment include the operating results of AWE since Aug. 24, 2016. Previously, the Corporation
accounted for its investment in AWE using the equity method of
accounting. Under the equity method, only 33% of AWE's net earnings
was included in operating profit and operating margin of the Space
Systems business segment.
- During the third quarter of 2016, the business segment formerly
known as Mission Systems and Training was renamed Rotary and
Missions Systems (RMS) to better reflect a broader range of
products and capabilities subsequent to the acquisition of Sikorsky
Aircraft Corporation (Sikorsky) on Nov. 6,
2015. The portfolio also reflects the realignment of certain
programs from the former IS&GS business segment to RMS in the
fourth quarter of 2015. While RMS was renamed to more accurately
reflect the expanded portfolio, there was no additional change to
the composition of the portfolio in connection with the name
change. The information for this segment for all periods included
in this news release has been labeled using the new name.
Additionally, the discussion and presentation of the operating
results of the RMS business segment include the operating results
of Sikorsky since its Nov. 6, 2015
acquisition date and alignment under the RMS business segment.
- During the fourth quarter of 2015, the Corporation realigned
certain programs among its business segments in connection with the
strategic review of its government IT and technical services
businesses. The discussion and presentation of the Corporation's
segment results for all periods presented in this news release
reflect the program realignment.
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 business segments and reconciles these amounts to the
Corporation's consolidated financial results.
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
4,188
|
|
|
$
|
3,921
|
|
|
$
|
12,362
|
|
|
$
|
11,186
|
|
|
|
Missiles and Fire
Control
|
|
|
1,737
|
|
|
|
1,769
|
|
|
|
4,851
|
|
|
|
4,801
|
|
|
|
Rotary and Mission
Systems
|
|
|
3,346
|
|
|
|
2,162
|
|
|
|
9,653
|
|
|
|
6,306
|
|
|
|
Space
Systems
|
|
|
2,280
|
|
|
|
2,208
|
|
|
|
6,630
|
|
|
|
6,723
|
|
|
|
Total net
sales
|
|
$
|
11,551
|
|
|
$
|
10,060
|
|
|
$
|
33,496
|
|
|
$
|
29,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
437
|
|
|
$
|
418
|
|
|
$
|
1,335
|
|
|
$
|
1,233
|
|
|
|
Missiles and Fire
Control
|
|
|
289
|
|
|
|
316
|
|
|
|
763
|
|
|
|
895
|
|
|
|
Rotary and Mission
Systems
|
|
|
247
|
|
|
|
245
|
|
|
|
678
|
|
|
|
687
|
|
|
|
Space
Systems
|
|
|
450
|
|
|
|
265
|
|
|
|
1,034
|
|
|
|
883
|
|
|
|
Total business
segment operating profit
|
|
|
1,423
|
|
|
|
1,244
|
|
|
|
3,810
|
|
|
|
3,698
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS pension
adjustment
|
|
|
226
|
|
|
|
102
|
|
|
|
672
|
|
|
|
305
|
|
|
|
Special item -
severance charges
|
|
|
–
|
|
|
|
(15)
|
|
|
|
(80)
|
|
|
|
(15)
|
|
|
|
Other, net
|
|
|
(61)
|
|
|
|
(139)
|
|
|
|
(281)
|
|
|
|
(376)
|
|
|
|
Total unallocated
items
|
|
|
165
|
|
|
|
(52)
|
|
|
|
311
|
|
|
|
(86)
|
|
|
|
Total
consolidated operating profit
|
|
$
|
1,588
|
|
|
$
|
1,192
|
|
|
$
|
4,121
|
|
|
$
|
3,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Corporation's consolidated net adjustments not related to
volume, including net profit booking rate adjustments and other
matters, represented approximately 28 percent of total segment
operating profit in the third quarter of 2016, compared to
approximately 31 percent in the third quarter of 2015.
Aeronautics
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
|
Net
sales
|
|
$
|
4,188
|
|
|
$
|
3,921
|
|
|
$
|
12,362
|
|
|
$
|
11,186
|
|
|
|
Operating
profit
|
|
$
|
437
|
|
|
$
|
418
|
|
|
$
|
1,335
|
|
|
$
|
1,233
|
|
|
|
Operating
margin
|
|
|
10.4
|
%
|
|
|
10.7
|
%
|
|
|
10.8
|
%
|
|
|
11.0
|
%
|
|
Aeronautics' net sales in the third quarter of 2016 increased
$267 million, or 7 percent, compared
to the same period in 2015. The increase was primarily attributable
to higher net sales of approximately $300
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 $50 million for the C-5 program due primarily to
decreased sustainment activities, while aircraft deliveries were
comparable in the third quarter of 2016 compared to the same period
in 2015 (two aircraft delivered in each period).
Aeronautics' operating profit in the third quarter of 2016
increased $19 million, or 5 percent,
compared to the same period in 2015. Operating profit increased
approximately $25 million for the
F-35 program due to increased volume on aircraft production and
sustainment activities; and about $35
million for aircraft support and maintenance programs due to
reserves recorded in the third quarter of 2015 that were not
repeated in the third quarter of 2016 and increased volume. These
increases were partially offset by lower operating profit of
approximately $45 million for the
C-130 program due to contract mix and lower risk retirements.
Adjustments not related to volume, including net profit booking
rate adjustments, were comparable in the third quarters of 2016 and
2015.
Missiles and Fire Control
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
|
Net
sales
|
|
$
|
1,737
|
|
|
$
|
1,769
|
|
|
$
|
4,851
|
|
|
$
|
4,801
|
|
|
|
Operating
profit
|
|
$
|
289
|
|
|
$
|
316
|
|
|
$
|
763
|
|
|
$
|
895
|
|
|
|
Operating
margin
|
|
|
16.6
|
%
|
|
|
17.9
|
%
|
|
|
15.7
|
%
|
|
|
18.6
|
%
|
|
MFC's net sales in the third quarter of 2016 decreased
$32 million, or 2 percent, compared
to the same period in 2015. The decrease was primarily attributable
to lower net sales of approximately $40
million as a result of lower volume on certain fire control
programs (Longbow, LANTIRN® and
SNIPER®); and about $25 million for air and missile defense programs
(primarily Terminal High Altitude Area Defense) due to lower
volume. These decreases were partially offset by higher net sales
of approximately $45 million for
tactical missiles programs due to increased deliveries (primarily
Hellfire).
MFC's operating profit in the third quarter of 2016 decreased
$27 million, or 9 percent, compared
to the same period in 2015. Operating profit decreased
approximately $20 million for certain
fire control programs due to lower risk retirements (Apache) and
program mix; approximately $10
million for tactical missiles programs (including Javelin)
due to lower risk retirements; and about $20
million on other programs primarily due to lower risk
retirement. These decreases were partially offset by higher
operating profit of approximately $25
million for air and missile defense programs due to higher
risk retirements (Patriot Advanced Capability-3). Adjustments not
related to volume, including net profit booking rate adjustments,
were approximately $30 million lower
in the third quarter of 2016 compared to the same period in
2015.
Rotary and Mission Systems
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
|
Net
sales
|
|
$
|
3,346
|
|
|
$
|
2,162
|
|
|
$
|
9,653
|
|
|
$
|
6,306
|
|
|
|
Operating
profit
|
|
$
|
247
|
|
|
$
|
245
|
|
|
$
|
678
|
|
|
$
|
687
|
|
|
|
Operating
margin
|
|
|
7.4
|
%
|
|
|
11.3
|
%
|
|
|
7.0
|
%
|
|
|
10.9
|
%
|
|
RMS' net sales in the third quarter of 2016 increased
$1.2 billion, or 55 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.
RMS' operating profit in the third quarter of 2016 was
comparable to operating profit in the same period in 2015.
Operating profit from Sikorsky was approximately $25 million, inclusive of the favorable impacts
of risk retirements, which were offset by intangible asset
amortization and other adjustments required to account for the
acquisition of this business. The net profit from Sikorsky was
offset by lower operating profit of approximately $25 million from various programs due primarily
to decreased risk retirements. Adjustments not related to volume,
including net profit booking rate adjustments and other matters,
were approximately $20 million higher
in the third quarter of 2016 compared to the same period in
2015.
Space Systems
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
|
Net
sales
|
|
$
|
2,280
|
|
|
$
|
2,208
|
|
|
$
|
6,630
|
|
|
$
|
6,723
|
|
|
|
Operating
profit
|
|
$
|
450
|
|
|
$
|
265
|
|
|
$
|
1,034
|
|
|
$
|
883
|
|
|
|
Operating
margin
|
|
|
19.7
|
%
|
|
|
12.0
|
%
|
|
|
15.6
|
%
|
|
|
13.1
|
%
|
|
Space Systems' net sales in the third quarter of 2016 increased
$72 million, or 3 percent, compared
to the same period in 2015. The increase was primarily attributable
to net sales of approximately $100
million from AWE following the consolidation of this
business in the third quarter of 2016. This increase was partially
offset by lower net sales of approximately $40 million for the Orion program due to
decreased volume.
Space Systems' operating profit in the third quarter of 2016
increased $185 million, or 70
percent, compared to the same period in 2015. The increase was
primarily attributable to a non-cash, pre-tax gain of approximately
$127 million related to the
consolidation of AWE; and approximately $30
million for government and commercial satellite programs due
to higher risk retirements (primarily Space Based Infrared System
and Advanced Extremely High Frequency). Adjustments not related to
volume, including net profit booking rate adjustments and other
matters, were approximately $25
million higher in the third quarter of 2016 compared to the
same period in 2015.
Total equity earnings recognized by Space Systems (primarily
ULA) represented approximately $70
million, or 16 percent, of this business segment's operating
profit in the third quarter of 2016, compared to approximately
$70 million, or 26 percent, in the
third quarter of 2015.
Unallocated items
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
Sept. 25,
2016
|
|
|
Sept. 27,
2015
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS pension
adjustment
|
|
$
|
226
|
|
|
$
|
102
|
|
|
$
|
672
|
|
|
$
|
305
|
|
|
|
Special item -
severance charges
|
|
|
–
|
|
|
|
(15)
|
|
|
|
(80)
|
|
|
|
(15)
|
|
|
|
Other,
net
|
|
|
(61)
|
|
|
|
(139)
|
|
|
|
(281)
|
|
|
|
(376)
|
|
|
|
Total unallocated
items
|
|
$
|
165
|
|
|
$
|
(52)
|
|
|
$
|
311
|
|
|
$
|
(86)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consistent with the manner in which the Corporation's business
segment operating performance is evaluated by senior management,
certain items are excluded from the business segment results and
are included in "Unallocated items." See the Corporation's 2015
Annual Report on Form 10-K for a description of "Unallocated
items."
As a result of the divestiture of the IS&GS business segment
on Aug. 16, 2016, the operating
results of the IS&GS business segment have been reclassified as
discontinued operations for all periods presented. Certain
corporate overhead costs and certain defined benefit pension costs
that were historically allocated to and included in the
operating results of the IS&GS business segment have been
reclassified into "Unallocated items" and included in the results
of the Corporation's continuing operations because the
Corporation will continue to incur these costs subsequent to the
divestiture of the IS&GS business segment.
Corporate overhead costs incurred by the Corporation and
previously allocated to and included in the operating results of
the IS&GS business segment were comprised of expenses related
to senior management, legal, human resources, finance, accounting,
treasury, tax, information technology, communications, ethics and
compliance, corporate employee benefits, incentives and stock-based
compensation, shared services processing and administration and
depreciation for corporate fixed assets. The amount of corporate
overhead costs previously included in the operating results of the
IS&GS business segment that have been reclassified to and
included in the results of the Corporation's continuing operations
were $17 million and $82 million in the quarter and nine months ended
Sept. 25, 2016 and $40 million and $133
million in the quarter and nine months ended Sept. 27, 2015. These costs are included in
"Other, net" within "Unallocated items."
Prior to the divestiture of the IS&GS business segment,
certain IS&GS salaried employees participated in various
defined benefit pension and other post-employment benefit plans
administered and sponsored by the Corporation. Pension costs
related to benefits earned by these employees were historically
allocated to and included in the results of operations of the
IS&GS business segment. Subsequent to the divestiture,
IS&GS salaried employees that transferred to Leidos will no
longer earn additional benefits under the Corporation's defined
benefit pension and other post-employment benefit plans, but remain
entitled to the benefits earned through the closing of the
divestiture. The Corporation retained all obligations related to
the benefits earned by the IS&GS salaried employees through the
closing of the divestiture and the related assets of the plans.
Therefore, the Corporation will continue to incur the non-service
portion of pension costs (interest cost, actuarial gains and losses
and expected return on plan assets) for IS&GS salaried
employees that transferred to Leidos. Accordingly, these costs have
been reclassified to and included in the results of the
Corporation's continuing operations. The non-service portion of
pension costs previously included in the operating results of the
IS&GS business segment that have been reclassified to and
included in the results of the Corporation's continuing operations
were $11 million and $54 million in the quarter and nine months ended
Sept. 25, 2016 and $17 million and $53
million in the quarter and nine months ended Sept. 27, 2015. These costs are included in
"FAS/CAS pension adjustment" within "Unallocated items." The
service portion of pension costs related to IS&GS salaried
employees that transferred to Leidos remains in the operating
results of the IS&GS business segment classified as
discontinued operations because such costs will no longer be
incurred by the Corporation subsequent to the divestiture of
IS&GS.
The Corporation allocates certain corporate overhead costs and
defined benefit pension costs to its business segments because
under U.S. Government contracting regulations such costs are
allowable in establishing prices for contracts with the U.S.
Government. Although the corporate overhead costs and defined
benefit pension costs that were historically allocated to and
included in the operating results of the IS&GS business segment
have been reclassified to and included in the results of the
Corporation's continuing operations for financial reporting
purposes, the Corporation will allocate similar costs incurred in
future periods to its remaining business segments and expects to
recover a substantial amount of these costs through the pricing of
its products and services to the U.S. Government and other
customers in future periods.
Significant severance charges related to the IS&GS business
segment were historically recorded at the Lockheed Martin corporate
office. These charges have been reclassified into the operating
results of the IS&GS business segment classified as
discontinued operations and excluded from the results of the
Corporation's continuing operations. The amount of severance
charges reclassified were $19 million
in the nine months ended Sept. 25,
2016 and $20 million in the
quarter and nine months ended Sept. 27,
2015.
Income Taxes
The Corporation's effective income tax rate from continuing
operations was 23.7 percent in the third quarter of 2016, compared
to 30.6 percent in the third 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 third 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
nontaxable gain recorded in connection with the increase in AWE
ownership.
In addition, the rate in the third quarter of 2016 benefited
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
$22 million and $137 million during the quarter and nine months
ended Sept. 25, 2016. The adjustments
for the third quarter include only the quarterly impacts, whereas
the adjustments for the first nine months of 2016 include the
second and third 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 third quarter 2016
earnings results conference call (listen-only mode) on Tuesday, Oct. 25, 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 98,000 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
remaining 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 and continue
capitalization changes such as share repurchase activity and
payment of dividends (including in the event of a deficit in
equity, the availability of sufficient net earnings to permit such
distributions under Maryland law),
pension funding and/or debt activity as well as the pace and effect
of any such capitalization changes;
- 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, investments or other
long-term assets;
- movements in interest rates and other changes that may affect
pension plan assumptions, equity, the level of FAS/CAS earnings 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 whether the Corporation is able to realize the
intended benefits and anticipated tax treatment of the divestiture
of its former IS&GS business segment and merger with Leidos in
a Reverse Morris Trust transaction;
- 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 (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, 2
|
|
|
|
|
|
|
|
|
|
(unaudited; in
millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 25,
2016
|
|
Sept. 27,
2015
|
|
Sept. 25,
2016
|
|
Sept. 27,
2015
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
11,551
|
|
$
10,060
|
|
$
33,496
|
|
$
29,016
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
(10,167)
|
|
(8,963)
|
|
(29,787)
|
|
(25,661)
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
1,384
|
|
1,097
|
|
3,709
|
|
3,355
|
|
|
|
|
|
|
|
|
|
|
|
Other income,
net
|
|
204
|
|
95
|
|
412
|
|
257
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit3
|
|
1,588
|
|
1,192
|
|
4,121
|
|
3,612
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(162)
|
|
(104)
|
|
(492)
|
|
(301)
|
|
|
|
|
|
|
|
|
|
|
|
Other non-operating
income, net
|
|
1
|
|
1
|
|
2
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations before income taxes
|
|
1,427
|
|
1,089
|
|
3,631
|
|
3,317
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense4
|
|
(338)
|
|
(333)
|
|
(837)
|
|
(1,008)
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings from
continuing operations4
|
|
1,089
|
|
756
|
|
2,794
|
|
2,309
|
|
Net earnings from
discontinued operations
|
|
1,306
|
|
109
|
|
1,520
|
|
363
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings4
|
|
$
2,395
|
|
$
865
|
|
$
4,314
|
|
$
2,672
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
23.7
|
%
|
30.6
|
%
|
23.1
|
%
|
30.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
Continuing operations4
|
|
$
3.64
|
|
$
2.45
|
|
$
9.25
|
|
$
7.41
|
|
Discontinued operations
|
|
4.38
|
|
0.35
|
|
5.03
|
|
1.16
|
|
Basic
earnings per common share
|
|
$
8.02
|
|
$
2.80
|
|
$
14.28
|
|
$
8.57
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
3.61
|
|
$
2.42
|
|
$
9.13
|
|
$
7.30
|
|
Discontinued operations
|
|
4.32
|
|
0.35
|
|
$
4.97
|
|
1.15
|
|
Diluted
earnings per common share
|
|
$
7.93
|
|
$
2.77
|
|
$
14.10
|
|
$
8.45
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
298.5
|
|
308.4
|
|
302.0
|
|
311.9
|
|
Diluted
|
|
302.1
|
|
312.7
|
|
305.9
|
|
316.3
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
reported in stockholders' equity at end of period
|
|
|
|
291
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Sept. 25
for the third quarter of 2016 and Sept. 27 for the third 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 As
a result of the divestiture of the IS&GS business segment on
Aug. 16, 2016, the operating results of the IS&GS business
segment have been classified as
|
|
discontinued operations for all periods presented. A $1.2
billion gain recorded as a result of the divestiture of the
IS&GS business segment is recorded in net
|
|
earnings
from discontinued operations in the quarter and nine months ended
Sept. 25, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
The amounts in the third quarter and first nine months of 2016
include a non-cash gain of $127 million recognized at the
Corporation's Space Systems business
|
|
segment
related to the consolidation of the AWE venture upon obtaining
control of this venture on Aug. 24, 2016, which increased net
earnings from continuing
|
|
operations $104 million (or $0.34 per share).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 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 from continuing
operations and operating cash flows of $22 million ($0.07 per
share) and $137 million
|
|
($0.45
per share) in the quarter and nine months ended Sept. 25,
2016. The adjustments for the third quarter of 2016 include
only the quarterly impacts, whereas
|
|
the
adjustments for the first nine months of 2016 include the second
and third 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
|
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
Sept. 25,
2016
|
|
Sept. 27,
2015
|
|
|
%
Change
|
|
Sept. 25,
2016
|
|
Sept. 27,
2015
|
|
|
%
Change
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
4,188
|
|
$
3,921
|
|
|
7
|
%
|
|
$
12,362
|
|
$
11,186
|
|
|
11
|
%
|
Missiles and
Fire Control
|
|
1,737
|
|
1,769
|
|
|
(2)
|
%
|
|
4,851
|
|
4,801
|
|
|
1
|
%
|
Rotary and
Mission Systems
|
|
3,346
|
|
2,162
|
|
|
55
|
%
|
|
9,653
|
|
6,306
|
|
|
53
|
%
|
Space
Systems
|
|
2,280
|
|
2,208
|
|
|
3
|
%
|
|
6,630
|
|
6,723
|
|
|
(1)
|
%
|
Total net
sales
|
|
$
11,551
|
|
$
10,060
|
|
|
15
|
%
|
|
$
33,496
|
|
$
29,016
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
437
|
|
$
418
|
|
|
5
|
%
|
|
$
1,335
|
|
$
1,233
|
|
|
8
|
%
|
Missiles and
Fire Control
|
|
289
|
|
316
|
|
|
(9)
|
%
|
|
763
|
|
895
|
|
|
(15)
|
%
|
Rotary and
Mission Systems
|
|
247
|
|
245
|
|
|
1
|
%
|
|
678
|
|
687
|
|
|
(1)
|
%
|
Space
Systems1
|
|
450
|
|
265
|
|
|
70
|
%
|
|
1,034
|
|
883
|
|
|
17
|
%
|
Total business segment
operating profit
|
1,423
|
|
1,244
|
|
|
14
|
%
|
|
3,810
|
|
3,698
|
|
|
3
|
%
|
Unallocated
items2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS
pension adjustment
|
|
226
|
|
102
|
|
|
|
|
|
672
|
|
305
|
|
|
|
|
Special item -
severance charges
|
|
-
|
|
(15)
|
|
|
|
|
|
(80)
|
|
(15)
|
|
|
|
|
Other,
net
|
|
(61)
|
|
(139)
|
|
|
|
|
|
(281)
|
|
(376)
|
|
|
|
|
Total unallocated
items
|
|
165
|
|
(52)
|
|
|
|
|
|
311
|
|
(86)
|
|
|
|
|
Total consolidated
operating profit
|
|
$
1,588
|
|
$
1,192
|
|
|
33
|
%
|
|
$
4,121
|
|
$
3,612
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
10.4
|
%
|
10.7
|
%
|
|
|
|
|
10.8
|
%
|
11.0
|
%
|
|
|
|
Missiles and
Fire Control
|
|
16.6
|
%
|
17.9
|
%
|
|
|
|
|
15.7
|
%
|
18.6
|
%
|
|
|
|
Rotary and
Mission Systems
|
|
7.4
|
%
|
11.3
|
%
|
|
|
|
|
7.0
|
%
|
10.9
|
%
|
|
|
|
Space
Systems
|
|
19.7
|
%
|
12.0
|
%
|
|
|
|
|
15.6
|
%
|
13.1
|
%
|
|
|
|
Total business segment
operating margin
|
12.3
|
%
|
12.4
|
%
|
|
|
|
|
11.4
|
%
|
12.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
operating margin
|
|
13.7
|
%
|
11.8
|
%
|
|
|
|
|
12.3
|
%
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The amounts in the third quarter and first nine months of 2016
include a non-cash gain of $127 million related to the
consolidation of AWE upon
|
|
|
|
|
obtaining control of this venture on Aug. 24, 2016, which increased
net earnings from continuing operations $104 million (or $0.34 per
share).
|
|
|
|
|
|
|
|
|
|
2
The following reclassifications of "Unallocated items" were made as
a result of the divestiture of the IS&GS business
segment:
|
|
|
|
|
i) the
non-service portion of pension costs for IS&GS employees that
participated in the Corporation's defined benefit pension and
other
|
|
|
|
|
post-employment benefit plans were reclassified from the operating
results of the IS&GS business segment to "FAS/CAS
pension
|
|
|
|
|
adjustment" and were $11 million and $54 million in the quarter and
nine months ended Sept. 25, 2016 and $17 million and $53 million
in
|
|
|
|
|
the
quarter and nine months ended Sept. 27, 2015, ii) Corporate
overhead costs allocated to and included in the operating results
of
|
|
|
|
|
the
IS&GS business segment were reclassified to "Other, net" and
were $17 million and $82 million in the quarter and nine months
ended
|
|
|
|
|
Sept.
25, 2016 and $40 million and $133 million in the quarter and nine
months ended Sept. 27, 2015, and iii) significant
severance
|
|
|
|
|
charges
related to the IS&GS business segment that were historically
recorded in "Special item - severance charges"
were
|
|
|
|
|
reclassified to net earnings from discontinued operations and were
$19 million in the nine months ended Sept. 25, 2016
and
|
|
|
|
|
$20
million in the quarter and nine months ended Sept. 27, 2015. For
more information see the "Unallocated items" section of
the
|
|
|
|
|
accompanying news release.
|
|
|
|
|
Lockheed Martin
Corporation
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
(unaudited; in
millions, except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 25,
2016
|
|
Dec. 31,
2015¹
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
2,895
|
|
$
1,090
|
Receivables,
net
|
|
8,955
|
|
7,254
|
Inventories,
net
|
|
4,852
|
|
4,819
|
Other current
assets
|
|
408
|
|
441
|
Assets of
discontinued operations2
|
|
-
|
|
969
|
Total current assets
|
|
17,110
|
|
14,573
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
5,369
|
|
5,389
|
Goodwill
|
|
10,791
|
|
10,695
|
Intangible assets,
net
|
|
4,205
|
|
4,022
|
Deferred income
taxes
|
|
5,850
|
|
6,068
|
Other noncurrent
assets
|
|
5,414
|
|
5,396
|
Assets of
discontinued operations2
|
|
-
|
|
3,161
|
Total
assets
|
|
$
48,739
|
|
$
49,304
|
|
|
|
|
|
Liabilities and
equity
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
|
$
2,840
|
|
$
1,745
|
Customer
advances and amounts in excess of costs incurred
|
6,830
|
|
6,703
|
Salaries,
benefits and payroll taxes
|
|
1,856
|
|
1,707
|
Current
maturities of long-term debt
|
|
-
|
|
956
|
Other current
liabilities
|
|
2,899
|
|
1,859
|
Liabilities of
discontinued operations2
|
|
-
|
|
948
|
Total current
liabilities
|
|
14,425
|
|
13,918
|
|
|
|
|
|
Long-term debt,
net
|
|
14,304
|
|
14,305
|
Accrued pension
liabilities
|
|
11,859
|
|
11,807
|
Other postretirement
benefit liabilities
|
|
1,083
|
|
1,070
|
Other noncurrent
liabilities
|
|
4,638
|
|
4,902
|
Liabilities of
discontinued operations2
|
|
-
|
|
205
|
Total
liabilities
|
|
46,309
|
|
46,207
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common stock,
$1 par value per share
|
|
291
|
|
303
|
Additional
paid-in capital
|
|
-
|
|
-
|
Retained
earnings
|
|
13,023
|
|
14,238
|
Accumulated
other comprehensive loss
|
|
(10,991)
|
|
(11,444)
|
Total stockholders'
equity
|
|
2,323
|
|
3,097
|
Noncontrolling
interests in subsidiary
|
|
107
|
|
-
|
Total
equity
|
|
2,430
|
|
3,097
|
Total liabilities and
equity
|
|
$
48,739
|
|
$
49,304
|
|
|
|
|
|
|
|
|
|
|
1
Certain prior period amounts have been reclassified to conform with
current period presentation.
|
|
|
|
|
|
2
The assets and liabilities of the IS&GS business segment have
been classified as assets and
|
liabilities of discontinued operations as of Dec. 31,
2015.
|
|
Lockheed Martin
Corporation
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
(unaudited; in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
Sept. 25,
2016
|
|
Sept. 27,
2015
|
|
|
|
|
Operating
activities
|
|
|
|
Net
earnings
|
$
4,314
|
|
$
2,672
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities
|
|
|
|
Depreciation
and amortization
|
888
|
|
726
|
Stock-based
compensation
|
124
|
|
118
|
Severance
charges
|
99
|
|
35
|
Gain on
divestiture of IS&GS business segment
|
(1,234)
|
|
-
|
Gain on step
acquisition of AWE
|
(104)
|
|
-
|
Changes in
assets and liabilities
|
|
|
|
Receivables,
net
|
(1,537)
|
|
(861)
|
Inventories,
net
|
(235)
|
|
(359)
|
Accounts
payable
|
1,033
|
|
637
|
Customer advances and
amounts in excess of costs incurred
|
57
|
|
(421)
|
Postretirement benefit
plans
|
787
|
|
868
|
Income
taxes
|
37
|
|
126
|
Other, net
|
231
|
|
196
|
Net cash provided by
operating activities1
|
4,460
|
|
3,737
|
|
|
|
|
Investing
activities
|
|
|
|
Capital
expenditures
|
(627)
|
|
(500)
|
Other, net
|
76
|
|
89
|
Net cash used for
investing activities
|
(551)
|
|
(411)
|
|
|
|
|
Financing
activities
|
|
|
|
Special cash payment
from divestiture of IS&GS business segment
|
1,800
|
|
-
|
Issuance of long-term
debt, net of related costs
|
-
|
|
2,213
|
Repayments of
long-term debt
|
(952)
|
|
-
|
Repurchases of common
stock
|
(1,280)
|
|
(2,364)
|
Dividends
paid
|
(1,518)
|
|
(1,427)
|
Proceeds from stock
option exercises
|
75
|
|
126
|
Other, net
|
(229)
|
|
(20)
|
Net cash used for
financing activities
|
(2,104)
|
|
(1,472)
|
|
|
|
|
Net change in cash
and cash equivalents
|
1,805
|
|
1,854
|
Cash and cash
equivalents at beginning of period
|
1,090
|
|
1,446
|
Cash and cash
equivalents at end of period
|
$
2,895
|
|
$
3,300
|
|
|
|
|
1
Cash from operations includes the cash flows generated
by the IS&GS business segment through the
closing of the divestiture of this business segment on Aug. 16,
2016, as the Corporation retained this
cash as part of the divestiture.
|
|
Lockheed Martin
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited; in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Other
|
|
Total
|
|
Non-
|
|
|
|
Common
|
|
Paid-In
|
|
Retained
|
|
Comprehensive
|
|
Stockholders'
|
|
controlling
|
|
Total
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
Loss
|
|
Equity
|
|
Interest
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec.
31, 2015
|
$
303
|
|
$
-
|
|
$
14,238
|
|
$
(11,444)
|
|
$
3,097
|
|
$
-
|
|
$
3,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
-
|
|
-
|
|
4,314
|
|
-
|
|
4,314
|
|
-
|
|
4,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income, net of tax1
|
-
|
|
-
|
|
-
|
|
453
|
|
453
|
|
-
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares tendered and
retired in connection with divestiture of IS&GS business
segment
|
(9)
|
|
-
|
|
(2,488)
|
|
-
|
|
(2,497)
|
|
-
|
|
(2,497)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common
stock
|
(6)
|
|
(272)
|
|
(1,002)
|
|
-
|
|
(1,280)
|
|
-
|
|
(1,280)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared2
|
-
|
|
-
|
|
(2,056)
|
|
-
|
|
(2,056)
|
|
-
|
|
(2,056)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based awards,
ESOP activity and other
|
3
|
|
272
|
|
17
|
|
-
|
|
292
|
|
-
|
|
292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
non-controlling interests in subsidiary
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
107
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Sept.
25, 2016
|
$
291
|
|
$
-
|
|
$
13,023
|
|
$
(10,991)
|
|
$
2,323
|
|
$
107
|
|
$
2,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 in each of
the first, second and third quarters of 2016. Additionally,
includes dividends of $1.82 per share
|
declared
in the third quarter of 2016 and payable in the fourth quarter of
2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lockheed Martin
Corporation
|
|
|
|
|
|
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
(unaudited; in
millions, except aircraft deliveries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
Sept. 25,
2016
|
|
Dec. 31,
2015
|
|
|
|
|
Aeronautics
|
|
$
27,900
|
|
$
31,800
|
|
|
|
|
Missiles and Fire
Control
|
|
14,500
|
|
15,500
|
|
|
|
|
Rotary and Mission
Systems
|
29,200
|
|
30,100
|
|
|
|
|
Space
Systems
|
|
19,800
|
|
17,400
|
|
|
|
|
Total
backlog
|
|
$
91,400
|
|
$
94,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
Aircraft
Deliveries
|
|
Sept. 25,
2016
|
|
Sept. 27,
2015
|
|
Sept. 25,
2016
|
|
Sept. 27,
2015
|
F-16
|
|
3
|
|
3
|
|
8
|
|
9
|
F-35
|
|
10
|
|
12
|
|
30
|
|
31
|
C-130J
|
|
4
|
|
4
|
|
16
|
|
14
|
C-5
|
|
2
|
|
2
|
|
6
|
|
7
|
|
|
|
|
|
|
|
|
|
Logo -
http://photos.prnewswire.com/prnh/20140402/PH96591LOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/lockheed-martin-reports-third-quarter-2016-results-300350105.html
SOURCE Lockheed Martin