BETHESDA, Md., July 20, 2015 /PRNewswire/ -- Lockheed
Martin (NYSE: LMT) today reported second quarter 2015 net sales of
$11.6 billion, compared to
$11.3 billion in the second quarter
of 2014. Net earnings in the second quarter of 2015 were
$929 million, or $2.94 per share, compared to $889 million, or $2.76 per share, in the second quarter of 2014.
Cash from operations in the second quarter of 2015 was $1.3 billion, compared to $977 million in the second quarter of 2014.
"Solid operational and program execution in the second quarter
allowed us to increase our financial guidance for profit and
earnings per share," said Lockheed Martin chairman, president and
CEO Marillyn Hewson. "Separately, we
announced two portfolio shaping initiatives today, the acquisition
of Sikorsky Aircraft and a strategic review of our IT services
business in IS&GS and our technical services business in MFC.
We look forward to welcoming Sikorsky to the Lockheed Martin team
and determining the best path to long-term growth for the business
under review."
Strategic Actions
Acquisition of Sikorsky Aircraft
On July 20, 2015, the Corporation
announced that it entered into a definitive agreement to acquire
Sikorsky Aircraft (Sikorsky), a global company engaged in the
design, manufacture and support of military and commercial
helicopters, for $9.0 billion of
cash, subject to certain adjustments. The Corporation expects to
fund the acquisition with a combination of new debt issuances and
available cash. The Corporation and United Technologies Corporation
have agreed to make a joint election under Section 338(h)(10) of
the Internal Revenue Code, which treats the transaction as an asset
purchase for tax purposes. This election generates a cash tax
benefit with an estimated net present value of $1.9 billion for the Corporation and its
shareholders. The acquisition is subject to customary closing
conditions, including regulatory approval, and is expected to close
in the fourth quarter of 2015 or the first quarter of 2016. Once
the acquisition is complete, the Corporation plans to align
Sikorsky under its Mission Systems and Training business segment.
The Corporation's financial results will not include Sikorsky's
results until the acquisition is closed.
Strategic Review of Government IT and Technical Services
Businesses
On July 20, 2015, the Corporation
also announced that it will conduct a strategic review of the
government IT infrastructure services business within its IS&GS
business segment and the technical services business within its MFC
business segment. The programs to be reviewed represent
approximately $6.0 billion in
estimated 2015 annual sales and approximately 17,000 employees. The
Corporation expects the strategic review will result in a spin-off
to its shareholders or sale of these businesses. The IS&GS
programs that are not included in the strategic review are mostly
focused on defense and intelligence customers and will be realigned
into the Corporation's other business segments following completion
of the review. The Corporation expects to complete the strategic
review in 2015. While the Corporation performs its strategic
review, it will maintain the current operating and reporting
structure and will continue to report the financial results of the
government IT infrastructure services and technical services
businesses in its continuing operations.
Summary Financial Results
The following table presents the Corporation's summary financial
results.
|
(in millions, except
per share data)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
|
Net
sales
|
|
$
|
11,643
|
|
|
$
|
11,306
|
|
|
$
|
21,754
|
|
|
$
|
21,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit
|
|
$
|
1,400
|
|
|
$
|
1,406
|
|
|
$
|
2,706
|
|
|
$
|
2,835
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS pension
adjustment
|
|
|
120
|
|
|
|
85
|
|
|
|
239
|
|
|
|
171
|
|
|
|
Other, net
|
|
|
(75)
|
|
|
|
(65)
|
|
|
|
(144)
|
|
|
|
(148)
|
|
|
|
Total unallocated
items
|
|
|
45
|
|
|
|
20
|
|
|
|
95
|
|
|
|
23
|
|
|
|
Consolidated
operating profit
|
|
$
|
1,445
|
|
|
$
|
1,426
|
|
|
$
|
2,801
|
|
|
$
|
2,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
929
|
|
|
$
|
889
|
|
|
$
|
1,807
|
|
|
$
|
1,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
2.94
|
|
|
$
|
2.76
|
|
|
$
|
5.68
|
|
|
$
|
5.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from
operations1
|
|
$
|
1,263
|
|
|
$
|
977
|
|
|
$
|
2,220
|
|
|
$
|
3,077
|
|
|
|
1 The Corporation made
no contributions to its defined benefit pension trust during the
second quarter of 2015 compared to $515
|
|
|
million during the
second quarter of 2014. Additionally, the Corporation made
net income tax payments of $460 million during the
|
second quarter of 2015
compared to $760 million during the second quarter of
2014.
|
2015 Financial Outlook
The following table and other sections of this news release
contain forward-looking statements, which are based on the
Corporation's current expectations. Actual results may differ
materially from those projected. It is the Corporation's practice
not to incorporate adjustments into its financial outlook for
proposed acquisitions, divestitures, ventures, changes in law and
restructuring activities until such items have been consummated or
enacted. For additional factors that may impact the Corporation's
actual results, refer to the "Forward-Looking Statements" section
in this news release.
|
(in millions, except
per share data)
|
|
Current
Outlook
|
|
April
Outlook
|
|
|
|
|
|
|
|
|
|
Orders
|
|
No
Change
|
|
$43,500 –
$45,000
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
No
Change
|
|
$43,500 –
$45,000
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit
|
|
$5,225 –
$5,375
|
|
$5,150 –
$5,300
|
|
|
FAS/CAS
pension adjustment
|
|
No
Change
|
|
~475
|
|
|
Other,
net
|
|
No
Change
|
|
~(275)
|
|
|
Consolidated
operating profit
|
|
$5,425 –
$5,575
|
|
$5,350 –
$5,500
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$11.00 –
$11.30
|
|
$10.85 –
$11.15
|
|
|
|
|
|
|
|
|
|
Cash from
operations
|
|
No
Change
|
|
>/= $5,000
|
|
|
|
|
Cash Deployment Activities
The Corporation's cash deployment activities in the second
quarter of 2015 consisted of the following:
- repurchasing 4.9 million shares for $937
million, compared to 0.8 million shares for $124 million in the second quarter of 2014;
- paying cash dividends of $467
million, compared to $421
million in the second quarter of 2014;
- making capital expenditures of $191
million, compared to $150
million in the second quarter of 2014; and
- no contributions to the Corporation's pension trust, compared
to $515 million during the second
quarter of 2014.
Segment Results
The Corporation operates in five business segments: Aeronautics,
Information Systems & Global Solutions (IS&GS), Missiles
and Fire Control (MFC), Mission Systems and Training (MST) and
Space Systems. The Corporation organizes its business segments
based on the nature of the products and services offered.
Operating profit of the business segments includes the
Corporation's share of earnings or losses from equity method
investees as the operating activities of the equity method
investees are closely aligned with the operations of the
Corporation's business segments. United Launch Alliance (ULA),
which is part of the Space Systems business segment, is the
Corporation's primary equity method investee. Operating profit of
the Corporation's business segments excludes the FAS/CAS pension
adjustment, which represents the difference between total pension
expense recorded in accordance with GAAP (FAS) and pension costs
recoverable on U.S. Government contracts as determined in
accordance with U.S. Government Cost Accounting Standards (CAS);
expense for stock-based compensation; the effects of items not
considered part of management's evaluation of segment operating
performance, such as charges related to significant severance
actions and goodwill impairments; gains or losses from
divestitures; the effects of certain legal settlements; corporate
costs not allocated to the Corporation's business segments; and
other miscellaneous corporate activities.
Changes in net sales and operating profit generally are
expressed in terms of volume. Changes in volume refer to increases
or decreases in sales or operating profit resulting from varying
production activity levels, deliveries or service levels on
individual contracts. Changes in volume also include the effect of
fluctuations in contract profit booking rates that have occurred in
reporting periods other than those presented in the comparative
segment results. Volume changes in segment operating profit are
typically based on the current profit booking rate for a particular
contract.
In addition, comparability of the Corporation's segment sales,
operating profit and operating margins may be impacted favorably or
unfavorably by changes in profit booking rates on the Corporation's
contracts accounted for using the percentage-of-completion method
of accounting. Increases in the profit booking rates, typically
referred to as risk retirements, usually relate to revisions in the
estimated total costs that reflect improved conditions on a
particular contract. Conversely, conditions on a particular
contract may deteriorate resulting in an increase in the estimated
total costs to complete and a reduction in the profit booking rate.
Increases or decreases in profit booking rates are recognized in
the current period and reflect the inception-to-date effect of such
changes. Segment operating profit and margins may also be impacted
favorably or unfavorably by other items. Favorable items may
include the positive resolution of contractual matters, cost
recoveries on restructuring charges, insurance recoveries and gains
on sales of assets. Unfavorable items may include the adverse
resolution of contractual matters; restructuring charges, except
for significant severance actions which are excluded from segment
operating results; reserves for disputes; asset impairments; and
losses on sales of assets. Segment operating profit and items such
as risk retirements, reductions of profit booking rates or other
matters are presented net of state income taxes.
The following table presents summary operating results of the
Corporation's five business segments and reconciles these amounts
to the Corporation's consolidated financial results.
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
4,131
|
|
|
$
|
3,855
|
|
|
$
|
7,265
|
|
|
$
|
7,241
|
|
|
|
Information Systems
& Global Solutions
|
|
|
1,898
|
|
|
|
1,941
|
|
|
|
3,767
|
|
|
|
3,851
|
|
|
|
Missiles and Fire
Control
|
|
|
1,777
|
|
|
|
1,891
|
|
|
|
3,280
|
|
|
|
3,758
|
|
|
|
Mission Systems and
Training
|
|
|
1,808
|
|
|
|
1,771
|
|
|
|
3,459
|
|
|
|
3,399
|
|
|
|
Space
Systems
|
|
|
2,029
|
|
|
|
1,848
|
|
|
|
3,983
|
|
|
|
3,707
|
|
|
|
Total net
sales
|
|
$
|
11,643
|
|
|
$
|
11,306
|
|
|
$
|
21,754
|
|
|
$
|
21,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
444
|
|
|
$
|
453
|
|
|
$
|
815
|
|
|
$
|
846
|
|
|
|
Information Systems
& Global Solutions
|
|
|
160
|
|
|
|
175
|
|
|
|
296
|
|
|
|
349
|
|
|
|
Missiles and Fire
Control
|
|
|
303
|
|
|
|
345
|
|
|
|
595
|
|
|
|
703
|
|
|
|
Mission Systems and
Training
|
|
|
234
|
|
|
|
185
|
|
|
|
453
|
|
|
|
435
|
|
|
|
Space
Systems
|
|
|
259
|
|
|
|
248
|
|
|
|
547
|
|
|
|
502
|
|
|
|
Total business segment
operating profit
|
|
|
1,400
|
|
|
|
1,406
|
|
|
|
2,706
|
|
|
|
2,835
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS pension
adjustment
|
|
|
120
|
|
|
|
85
|
|
|
|
239
|
|
|
|
171
|
|
|
|
Other, net
|
|
|
(75)
|
|
|
|
(65)
|
|
|
|
(144)
|
|
|
|
(148)
|
|
|
|
Total unallocated
items
|
|
|
45
|
|
|
|
20
|
|
|
|
95
|
|
|
|
23
|
|
|
|
Total consolidated
operating profit
|
|
$
|
1,445
|
|
|
$
|
1,426
|
|
|
$
|
2,801
|
|
|
$
|
2,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Corporation's consolidated net adjustments not related to
volume, including net profit booking rate adjustments and other
matters, represented approximately 39 percent of total segment
operating profit for the second quarter of 2015, compared to
approximately 31 percent in the second quarter of 2014.
Aeronautics
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
|
Net
sales
|
|
$
|
4,131
|
|
|
$
|
3,855
|
|
|
$
|
7,265
|
|
|
$
|
7,241
|
|
|
|
Operating
profit
|
|
$
|
444
|
|
|
$
|
453
|
|
|
$
|
815
|
|
|
$
|
846
|
|
|
|
Operating
margins
|
|
|
10.7
|
%
|
|
|
11.8
|
%
|
|
|
11.2
|
%
|
|
|
11.7
|
%
|
|
Aeronautics' net sales for the second quarter of 2015 increased
$276 million, or 7 percent, compared
to the same period in 2014. The increase was attributable to higher
net sales of about $280 million for
F-35 production contracts due to increased volume on aircraft
production and sustainment activities; and approximately
$150 million for the C-5 program due
to increased aircraft deliveries (four aircraft delivered during
the second quarter of 2015 compared to two delivered during the
same period in 2014). The increases were partially offset by lower
net sales of approximately $90
million for the C-130 program due to lower sustainment
activities and aircraft contract mix; and about $45 million for the F-22 program due to decreased
sustainment activities. Net sales for F-35 development contracts
were comparable.
Aeronautics' operating profit for the second quarter of 2015
decreased $9 million, or 2 percent,
compared to the same period in 2014. Operating profit decreased by
approximately $55 million for the
C-130 program due to lower risk retirements and aircraft contract
mix; and approximately $15 million
for the F-22 program due to decreased risk retirements and lower
sustainment activities. These decreases were partially offset by
higher operating profit of approximately $30
million for the F-16 program due to increased risk
retirements; and about $30 million
for F-35 production contracts due to higher risk retirements and
volume. Adjustments not related to volume, including net profit
booking rate adjustments, were $30
million higher for the second quarter of 2015 compared to
the same period in 2014.
The decline in operating margin for the second quarter of 2015
reflects the change in Aeronautics' program mix, as sales for
programs that yield lower operating profit margins were a larger
portion of total net sales (primarily F-35 and C-5
programs).
Information Systems & Global Solutions
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
|
Net
sales
|
|
$
|
1,898
|
|
|
$
|
1,941
|
|
|
$
|
3,767
|
|
|
$
|
3,851
|
|
|
|
Operating
profit
|
|
$
|
160
|
|
|
$
|
175
|
|
|
$
|
296
|
|
|
$
|
349
|
|
|
|
Operating
margins
|
|
|
8.4
|
%
|
|
|
9.0
|
%
|
|
|
7.9
|
%
|
|
|
9.1
|
%
|
|
IS&GS' net sales decreased $43
million, or 2 percent, for the second quarter of 2015
compared to the same period in 2014. The decrease was attributable
to lower net sales of approximately $160
million due to decreased volume as a result of in-theater
force reductions (including Persistent Threat Detection System),
lower customer funding levels (primarily command and control
programs), and increased competition coupled with the fragmentation
of existing large contracts into multiple smaller contracts that
are awarded primarily on the basis of price when re-competed
(including CMS-CITIC). The decreases were partially offset by
higher net sales of approximately $60
million for businesses acquired in the second half of 2014;
and about $55 million due to
increased volume on recently awarded programs.
IS&GS' operating profit for the second quarter of 2015
decreased $15 million, or 9 percent,
compared to the same period in 2014. The decrease was primarily
attributable to the activities mentioned above for net sales.
Adjustments not related to volume, including net profit booking
rate adjustments, for the second quarter of 2015 were comparable to
the same period in 2014.
Missiles and Fire Control
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
|
Net
sales
|
|
$
|
1,777
|
|
|
$
|
1,891
|
|
|
$
|
3,280
|
|
|
$
|
3,758
|
|
|
|
Operating
profit
|
|
$
|
303
|
|
|
$
|
345
|
|
|
$
|
595
|
|
|
$
|
703
|
|
|
|
Operating
margins
|
|
|
17.1
|
%
|
|
|
18.2
|
%
|
|
|
18.1
|
%
|
|
|
18.7
|
%
|
|
MFC's net sales for the second quarter of 2015 decreased
$114 million, or 6 percent, compared
to the same period in 2014. The decrease was attributable to lower
net sales of approximately $115
million for air and missile defense programs due to fewer
deliveries (including Patriot Advanced Capability-3 (PAC-3)) and
reduced development activities (primarily Medium Extended Air
Defense System (MEADS)).
MFC's operating profit for the second quarter of 2015 decreased
$42 million, or 12 percent, compared
to the same period in 2014. The decrease was attributable to lower
operating profit of approximately $30
million for fire control programs due to lower risk
retirements and volume (including Apache), and about $25 million for air and missile defense programs
due to lower risk retirements (primarily PAC-3). Adjustments not
related to volume, including net profit booking rate adjustments,
were approximately $40 million lower
for the second quarter of 2015 compared to the same period in
2014.
Mission Systems and Training
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
Net
sales
|
|
$
|
1,808
|
|
|
$
|
1,771
|
|
|
$
|
3,459
|
|
|
$
|
3,399
|
|
|
Operating
profit
|
|
$
|
234
|
|
|
$
|
185
|
|
|
$
|
453
|
|
|
$
|
435
|
|
|
Operating
margins
|
|
|
12.9
|
%
|
|
|
10.4
|
%
|
|
|
13.1
|
%
|
|
|
12.8
|
%
|
|
MST's net sales for the second quarter of 2015 increased
$37 million, or 2 percent, compared
to the same period in 2014. Net sales increased by approximately
$90 million for integrated warfare
systems and sensors programs due to the start of new programs
(primarily Space Fence) and higher volume (including Aegis). These
increases were partially offset by lower net sales of approximately
$75 million for ship and aviation
systems programs primarily due to decreased volume (including
Merlin Capability Sustainment Program).
MST's operating profit for the second quarter of 2015 increased
$49 million, or 26 percent, compared
to the same period in 2014. The increase was primarily attributable
to higher operating profit of approximately $50 million due to reserves recorded in 2014 on
certain training and logistics solutions programs that were not
repeated in 2015; about $20 million
for integrated warfare systems and sensors programs due to
increased risk retirements (primarily Halifax Class Modernization);
partially offset by lower operating profit of approximately
$20 million for ship and aviation
systems programs due to lower risk retirements and volume
(including naval launchers). Adjustments not related to volume,
including net profit booking rate adjustments and other matters,
were approximately $50 million higher
for the second quarter of 2015 compared to the same period in
2014.
Space Systems
|
(in
millions)
|
|
Quarters
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
June 28,
2015
|
|
|
June 29,
2014
|
|
|
|
Net
sales
|
|
$
|
2,029
|
|
|
$
|
1,848
|
|
|
$
|
3,983
|
|
|
$
|
3,707
|
|
|
|
Operating
profit
|
|
$
|
259
|
|
|
$
|
248
|
|
|
$
|
547
|
|
|
$
|
502
|
|
|
|
Operating
margins
|
|
|
12.8
|
%
|
|
|
13.4
|
%
|
|
|
13.7
|
%
|
|
|
13.5
|
%
|
|
Space Systems' net sales for the second quarter of 2015
increased $181 million, or 10
percent, compared to the same period in 2014. The increase was
attributable to higher net sales of approximately $105 million for the Orion program due to
increased volume; and about $80
million for businesses acquired in the second half of
2014.
Space Systems' operating profit for the second quarter of 2015
increased $11 million, or 4 percent,
compared to the same period in 2014. The increase was attributable
to higher operating profit of approximately $55 million for government satellite programs due
to increased risk retirements (primarily Mobile User Objective
System and Space Based Infrared System). The increases were
partially offset by lower operating profit of approximately
$40 million primarily due to lower
equity earnings for joint ventures. Adjustments not related to
volume, including net profit booking rate adjustments and other
matters, were approximately $75
million higher for the second quarter of 2015 compared to
the same period in 2014.
Total equity earnings recognized by Space Systems (primarily
ULA) represented approximately $40
million, or 15 percent, of this business segment's operating
profit for the second quarter of 2015, compared to approximately
$80 million, or 32 percent, in the
second quarter of 2014.
Income Taxes
The Corporation's effective income tax rate was 30.8 percent for
the second quarter of 2015, compared to 33.7 percent for the second
quarter of 2014. The rates for both periods benefited from tax
deductions for U.S. manufacturing activities and for dividends paid
to the Corporation's defined contribution plans with an employee
stock ownership plan feature. The effective rate for the second
quarter of 2015 was lower primarily due to tax reserve adjustments
recorded in the second quarter of 2014. The effective rates during
both periods did not include a benefit from the U.S. research and
development tax credit because the credit had expired.
Conference Call Information
Lockheed Martin will webcast the earnings conference call
(listen-only mode) at 11 a.m. ET on
July 20, 2015. A live audio
broadcast, including relevant charts, will be available on the
Investor Relations page of the Corporation's website at:
www.lockheedmartin.com/investor.
For additional information, visit our website:
www.lockheedmartin.com.
About Lockheed Martin
Headquartered in Bethesda, Maryland, Lockheed Martin is a
global security and aerospace company that employs approximately
112,000 people worldwide and is principally engaged in the
research, design, development, manufacture, integration and
sustainment of advanced technology systems, products and services.
The Corporation's net sales for 2014 were $45.6 billion.
Forward-Looking Statements
This news release contains statements that, to the extent they
are not recitations of historical fact, constitute forward-looking
statements within the meaning of the federal securities laws, and
are based on Lockheed Martin's current expectations and
assumptions. The words "believe," "estimate," "anticipate,"
"project," "intend," "expect," "plan," "outlook," "scheduled,"
"forecast" and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of
future performance and are subject to risks and uncertainties.
Actual results may differ materially due to factors such as:
- the Corporation's reliance on contracts with the U.S.
Government, all of which are conditioned upon the availability of
funding;
- declining budgets; affordability initiatives; the
implementation of automatic sequestration under the Budget Control
Act of 2011; U.S. Government operations under a continuing
resolution or the failure to adopt a budget which may cause
contracts to be delayed, canceled or funded at lower levels or
which may impact the Corporation's operating results and cash
flows;
- risks related to the development, performance, schedule, cost
and requirements of complex and technologically advanced programs
including the Corporation's largest, the F-35 program;
- economic, industry, business and political conditions (domestic
and international) including their effects on governmental
policy;
- the Corporation's success in growing international sales and
expanding into adjacent markets and risks associated with doing
business in new markets and internationally;
- the competitive environment for the Corporation's products and
services, including increased market pressures in the Corporation's
services businesses, competition from outside the aerospace and
defense industry, and increased bid protests;
- planned production rates for significant programs and
compliance with stringent performance and reliability
standards;
- the performance of key suppliers, teammates, venture partners,
subcontractors and customers;
- the timing and customer acceptance of product deliveries;
- the Corporation's ability to attract and retain key personnel
and transfer knowledge to new personnel; the impact of work
stoppages or other labor disruptions;
- the impact of cyber or other security threats or other
disruptions to the Corporation's businesses;
- the Corporation's ability to implement, pace and effect
capitalization changes such as share repurchase activity and
pension funding or debt levels;
- the Corporation's ability to recover certain costs under U.S.
Government contracts and changes in contract mix;
- the accuracy of the Corporation's estimates and
projections;
- risk of a future impairment of goodwill or other long-term
assets;
- movements in interest rates and other changes that may affect
pension plan assumptions and actual returns on pension plan
assets;
- realizing the anticipated benefits of acquisitions or
divestitures, ventures, teaming arrangements or internal
reorganizations, and the Corporation's efforts to increase the
efficiency of its operations and improve the affordability of its
products and services;
- the satisfaction of conditions to (including regulatory
approvals) and consummation of the Corporation's previously
announced acquisition of Sikorsky, the timing and terms of any
financing for such acquisition, and its ability to successfully
integrate the Sikorsky business and realize synergies and other
expected benefits of the transaction;
- the terms, timing or structure of a potential transaction
related to the Corporation's government IT and technical services
businesses (or whether any such transaction will take place at
all);
- the adequacy of the Corporation's insurance and
indemnities;
- materials availability;
- the effect of changes in or interpretation of legislation,
regulation or policy, including those applicable to procurement,
cost allowability or recovery, accounting, taxation, or export;
and
- the outcome of legal proceedings, bid protests, environmental
remediation efforts, government allegations that we have failed to
comply with law, other contingencies and U.S. Government
identification of deficiencies in the Corporation's business
systems.
These are only some of the factors that may affect the
forward-looking statements contained in this news release. For a
discussion identifying additional important factors that could
cause actual results to vary materially from those anticipated in
the forward-looking statements, see the Corporation's filings with
the U.S. Securities and Exchange Commission (SEC) including, but
not limited to, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Risk Factors" in the
Corporation's Annual Report on Form 10-K for the year ended
Dec. 31, 2014 and quarterly reports
on Form 10-Q. The Corporation's filings may be accessed through the
Investor Relations page of its website,
www.lockheedmartin.com/investor, or through the website maintained
by the SEC at www.sec.gov.
The Corporation's actual financial results likely will be
different from those projected due to the inherent nature of
projections. Given these uncertainties, forward-looking statements
should not be relied on in making investment decisions. The
forward-looking statements contained in this news release speak
only as of the date of its filing. Except where required by
applicable law, the Corporation expressly disclaims a duty to
provide updates to forward-looking statements after the date of
this news release to reflect subsequent events, changed
circumstances, changes in expectations, or the estimates and
assumptions associated with them. The forward-looking statements in
this news release are intended to be subject to the safe harbor
protection provided by the federal securities laws.
Lockheed Martin
Corporation
|
|
|
Consolidated
Statements of Earnings1
|
|
(unaudited; in
millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 28,
2015
|
|
June 29,
2014
|
|
June 28,
2015
|
|
June 29,
2014
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
11,643
|
|
$
11,306
|
|
$
21,754
|
|
$
21,956
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
(10,272)
|
|
(9,965)
|
|
(19,120)
|
|
(19,244)
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
1,371
|
|
1,341
|
|
2,634
|
|
2,712
|
|
|
|
|
|
|
|
|
|
|
|
Other income,
net
|
|
74
|
|
85
|
|
167
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
1,445
|
|
1,426
|
|
2,801
|
|
2,858
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(104)
|
|
(85)
|
|
(197)
|
|
(171)
|
|
|
|
|
|
|
|
|
|
|
|
Other non-operating
income, net
|
|
2
|
|
-
|
|
5
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
1,343
|
|
1,341
|
|
2,609
|
|
2,689
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
(414)
|
|
(452)
|
|
(802)
|
|
(867)
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
929
|
|
$
889
|
|
$
1,807
|
|
$
1,822
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
30.8
|
%
|
33.7
|
%
|
30.7
|
%
|
32.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
2.98
|
|
$
2.81
|
|
$
5.76
|
|
$
5.73
|
|
Diluted
|
|
$
2.94
|
|
$
2.76
|
|
$
5.68
|
|
$
5.63
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
312.0
|
|
316.8
|
|
313.7
|
|
318.0
|
|
Diluted
|
|
316.1
|
|
322.1
|
|
318.2
|
|
323.6
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
reported in stockholders' equity at end of period
|
|
|
|
|
|
309
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
1
The Corporation closes its books and records on the last
Sunday of the calendar quarter, which was on June 28 for the second
quarter of 2015 and June 29
|
|
for the
second quarter of 2014, to align its financial closing with its
business processes. The consolidated financial statements and
tables of financial
|
|
information included herein are labeled based on that convention.
This practice only affects interim periods, as the Corporation's
fiscal year ends on Dec. 31.
|
|
Lockheed Martin
Corporation
|
|
|
|
|
|
|
Business Segment
Summary Operating Results
|
|
|
|
|
|
|
(unaudited; in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
June 28,
2015
|
|
June 29,
2014
|
|
|
%
Change
|
|
June 28,
2015
|
|
June 29,
2014
|
|
|
%
Change
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$ 4,131
|
|
$ 3,855
|
|
|
7
|
%
|
|
$ 7,265
|
|
$ 7,241
|
|
|
-
|
%
|
Information
Systems & Global Solutions
|
|
1,898
|
|
1,941
|
|
|
(2)
|
%
|
|
3,767
|
|
3,851
|
|
|
(2)
|
%
|
Missiles and
Fire Control
|
|
1,777
|
|
1,891
|
|
|
(6)
|
%
|
|
3,280
|
|
3,758
|
|
|
(13)
|
%
|
Mission
Systems and Training
|
|
1,808
|
|
1,771
|
|
|
2
|
%
|
|
3,459
|
|
3,399
|
|
|
2
|
%
|
Space
Systems
|
|
2,029
|
|
1,848
|
|
|
10
|
%
|
|
3,983
|
|
3,707
|
|
|
7
|
%
|
Total net
sales
|
|
$ 11,643
|
|
$ 11,306
|
|
|
3
|
%
|
|
$ 21,754
|
|
$ 21,956
|
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
444
|
|
$ 453
|
|
|
(2)
|
%
|
|
$
815
|
|
$ 846
|
|
|
(4)
|
%
|
Information
Systems & Global Solutions
|
|
160
|
|
175
|
|
|
(9)
|
%
|
|
296
|
|
349
|
|
|
(15)
|
%
|
Missiles and
Fire Control
|
|
303
|
|
345
|
|
|
(12)
|
%
|
|
595
|
|
703
|
|
|
(15)
|
%
|
Mission
Systems and Training
|
|
234
|
|
185
|
|
|
26
|
%
|
|
453
|
|
435
|
|
|
4
|
%
|
Space
Systems
|
|
259
|
|
248
|
|
|
4
|
%
|
|
547
|
|
502
|
|
|
9
|
%
|
Total business segment
operating profit
|
1,400
|
|
1,406
|
|
|
-
|
%
|
|
2,706
|
|
2,835
|
|
|
(5)
|
%
|
Unallocated
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAS/CAS
pension adjustment
|
|
120
|
|
85
|
|
|
|
|
|
239
|
|
171
|
|
|
|
|
Other,
net
|
|
(75)
|
|
(65)
|
|
|
|
|
|
(144)
|
|
(148)
|
|
|
|
|
Total unallocated
items
|
|
45
|
|
20
|
|
|
N/M
|
|
|
95
|
|
23
|
|
|
N/M
|
|
Total consolidated
operating profit
|
|
$ 1,445
|
|
$ 1,426
|
|
|
1
|
%
|
|
$ 2,801
|
|
$ 2,858
|
|
|
(2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
10.7
|
%
|
11.8
|
%
|
|
|
|
|
11.2
|
%
|
11.7
|
%
|
|
|
|
Information
Systems & Global Solutions
|
|
8.4
|
%
|
9.0
|
%
|
|
|
|
|
7.9
|
%
|
9.1
|
%
|
|
|
|
Missiles and
Fire Control
|
|
17.1
|
%
|
18.2
|
%
|
|
|
|
|
18.1
|
%
|
18.7
|
%
|
|
|
|
Mission
Systems and Training
|
|
12.9
|
%
|
10.4
|
%
|
|
|
|
|
13.1
|
%
|
12.8
|
%
|
|
|
|
Space
Systems
|
|
12.8
|
%
|
13.4
|
%
|
|
|
|
|
13.7
|
%
|
13.5
|
%
|
|
|
|
Total business segment
operating margins
|
12.0
|
%
|
12.4
|
%
|
|
|
|
|
12.4
|
%
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
operating margins
|
|
12.4
|
%
|
12.6
|
%
|
|
|
|
|
12.9
|
%
|
13.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lockheed Martin
Corporation
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
(unaudited; in
millions, except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 28,
2015
|
|
Dec. 31,
2014
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
3,202
|
|
$
1,446
|
Receivables,
net
|
|
7,064
|
|
5,884
|
Inventories,
net
|
|
3,032
|
|
2,882
|
Deferred
income taxes
|
|
1,469
|
|
1,451
|
Other current
assets
|
|
520
|
|
666
|
Total current assets
|
|
15,287
|
|
12,329
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
4,640
|
|
4,755
|
Goodwill
|
|
10,867
|
|
10,862
|
Deferred income
taxes
|
|
4,035
|
|
4,013
|
Other noncurrent
assets
|
|
5,019
|
|
5,114
|
Total
assets
|
|
$
39,848
|
|
$ 37,073
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
|
$
2,016
|
|
$
1,570
|
Customer
advances and amounts in excess of costs incurred
|
5,549
|
|
5,790
|
Salaries,
benefits and payroll taxes
|
|
1,808
|
|
1,826
|
Current
portion of long-term debt
|
|
452
|
|
-
|
Other current
liabilities
|
|
2,799
|
|
1,926
|
Total current
liabilities
|
|
12,624
|
|
11,112
|
|
|
|
|
|
Accrued pension
liabilities
|
|
11,387
|
|
11,413
|
Other postretirement
benefit liabilities
|
|
1,090
|
|
1,102
|
Long-term debt,
net
|
|
7,950
|
|
6,169
|
Other noncurrent
liabilities
|
|
3,815
|
|
3,877
|
Total
liabilities
|
|
36,866
|
|
33,673
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common stock,
$1 par value per share
|
|
309
|
|
314
|
Additional
paid-in capital
|
|
-
|
|
-
|
Retained
earnings
|
|
14,129
|
|
14,956
|
Accumulated
other comprehensive loss
|
|
(11,456)
|
|
(11,870)
|
Total stockholders'
equity
|
|
2,982
|
|
3,400
|
Total liabilities and
stockholders' equity
|
|
$
39,848
|
|
$ 37,073
|
Lockheed Martin
Corporation
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
(unaudited; in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 28,
2015
|
|
June 29,
2014
|
|
|
|
|
Operating
activities
|
|
|
|
Net
earnings
|
$
1,807
|
|
$
1,822
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities
|
|
|
|
Depreciation
and amortization
|
490
|
|
479
|
Stock-based
compensation
|
89
|
|
97
|
Changes in
assets and liabilities
|
|
|
|
Receivables,
net
|
(1,183)
|
|
(598)
|
Inventories,
net
|
(154)
|
|
307
|
Accounts
payable
|
453
|
|
557
|
Customer advances and
amounts in excess of costs incurred
|
(211)
|
|
(160)
|
Postretirement benefit
plans
|
580
|
|
125
|
Income
taxes
|
471
|
|
311
|
Other,
net
|
(122)
|
|
137
|
Net cash provided
by operating activities
|
2,220
|
|
3,077
|
|
|
|
|
Investing
activities
|
|
|
|
Capital
expenditures
|
(309)
|
|
(253)
|
Acquisitions of
businesses and investments in affiliates
|
-
|
|
(172)
|
Other, net
|
91
|
|
(1)
|
Net cash used for
investing activities
|
(218)
|
|
(426)
|
|
|
|
|
Financing
activities
|
|
|
|
Issuance of long-term
debt, net of related costs
|
2,213
|
|
-
|
Repurchases of common
stock
|
(1,541)
|
|
(1,230)
|
Proceeds from stock
option exercises
|
84
|
|
223
|
Dividends
paid
|
(965)
|
|
(865)
|
Other, net
|
(37)
|
|
40
|
Net cash used for
financing activities
|
(246)
|
|
(1,832)
|
|
|
|
|
Net change in cash
and cash equivalents
|
1,756
|
|
819
|
Cash and cash
equivalents at beginning of period
|
1,446
|
|
2,617
|
Cash and cash
equivalents at end of period
|
$
3,202
|
|
$
3,436
|
Lockheed Martin
Corporation
|
|
|
Consolidated
Statement of Stockholders' Equity
|
|
|
(unaudited; in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Additional
|
|
|
|
Other
|
|
Total
|
|
Common
|
|
Paid-In
|
|
Retained
|
|
Comprehensive
|
|
Stockholders'
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
Loss
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec.
31, 2014
|
$
314
|
|
$
-
|
|
$
14,956
|
|
$
(11,870)
|
|
$
3,400
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
-
|
|
-
|
|
1,807
|
|
-
|
|
1,807
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income, net of tax1
|
-
|
|
-
|
|
-
|
|
414
|
|
414
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common
stock
|
(8)
|
|
(318)
|
|
(1,215)
|
|
-
|
|
(1,541)
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared2
|
-
|
|
-
|
|
(1,419)
|
|
-
|
|
(1,419)
|
|
|
|
|
|
|
|
|
|
|
Stock-based awards
and ESOP activity
|
3
|
|
318
|
|
-
|
|
-
|
|
321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June
28, 2015
|
$
309
|
|
$
-
|
|
$
14,129
|
|
$
(11,456)
|
|
$
2,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Primarily represents the reclassification adjustment for
recognition of prior period amounts related to postretirement
benefit plans.
|
|
|
|
|
|
|
|
|
|
|
2
Represents dividends of $1.50 per share declared during each of the
first and second quarters of 2015. Additionally, includes dividends
of $1.50 per share
|
declared
in the second quarter of 2015 and payable in the third quarter of
2015.
|
Lockheed Martin
Corporation
|
|
|
|
Operating
Data
|
|
|
|
(unaudited; in
millions, except aircraft deliveries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
June 28,
2015
|
|
Dec. 31,
2014
|
|
|
|
|
Aeronautics
|
|
$
23,200
|
|
$ 27,600
|
|
|
|
|
Information Systems
& Global Solutions
|
7,500
|
|
8,700
|
|
|
|
|
Missiles and Fire
Control
|
|
12,200
|
|
13,600
|
|
|
|
|
Mission Systems and
Training
|
12,300
|
|
11,700
|
|
|
|
|
Space
Systems
|
|
17,600
|
|
18,900
|
|
|
|
|
Total
backlog
|
|
$
72,800
|
|
$ 80,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 28,
2015
|
|
June 29,
2014
|
|
June 28,
2015
|
|
June 29,
2014
|
Orders
|
|
$
7,500
|
|
$
9,500
|
|
$
14,000
|
|
$ 17,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
Aircraft
Deliveries
|
|
June 28,
2015
|
|
June 29,
2014
|
|
June 28,
2015
|
|
June 29,
2014
|
F-16
|
|
3
|
|
4
|
|
6
|
|
8
|
F-35
|
|
11
|
|
6
|
|
19
|
|
14
|
C-130J
|
|
6
|
|
6
|
|
10
|
|
11
|
C-5
|
|
4
|
|
2
|
|
5
|
|
4
|
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SOURCE Lockheed Martin