BETHESDA, Md., April 21, 2020 /PRNewswire/ -- Lockheed
Martin Corporation (NYSE: LMT) today reported first quarter 2020
net sales of $15.7 billion,
compared to $14.3 billion in the
first quarter of 2019. Net earnings in the first quarter of 2020
were $1.7 billion, or $6.08 per share, compared to $1.7 billion, or $5.99 per share, in the first quarter of
2019. Cash from operations in the first quarter of 2020 was
$2.3 billion, compared to cash
from operations of $1.7 billion
in the first quarter of 2019.
"As we confront the challenges introduced by the global
pandemic, our corporation remains focused on providing vital
national security solutions for our
customers while maintaining a safe and healthy
environment for our employees," said Lockheed Martin chairman,
president and CEO Marillyn Hewson.
"I'm so proud of the work the dedicated men and women of
Lockheed Martin are doing as part of our strong
portfolio to deliver critical products and services for our
customers and long-term value for our shareholders."
Summary Financial Results
The following table presents the corporation's summary financial
results.
|
(in millions,
except per share data)
|
|
Quarters
Ended1
|
|
|
|
|
March
29, 2020
|
|
March
31, 2019
|
|
|
Net
sales
|
|
$
|
15,651
|
|
|
$
|
14,336
|
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit2
|
|
$
|
1,725
|
|
|
$
|
1,715
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
FAS/CAS operating
adjustment
|
|
469
|
|
|
512
|
|
|
|
Other,
net3
|
|
(72)
|
|
|
56
|
|
|
|
Total unallocated
items
|
|
397
|
|
|
568
|
|
|
|
Consolidated
operating profit
|
|
$
|
2,122
|
|
|
$
|
2,283
|
|
|
|
|
|
|
|
|
|
|
Net
earnings4
|
|
$
|
1,717
|
|
|
$
|
1,704
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
6.08
|
|
|
$
|
5.99
|
|
|
|
|
|
|
|
|
|
|
Cash generated
from operations
|
|
$
|
2,314
|
|
|
$
|
1,663
|
|
|
|
|
|
|
|
|
|
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 March 29 for the first
quarter of 2020 and
March 31 for the
first quarter of 2019. 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
|
Business segment
operating profit is a non-GAAP measure. See the "Non-GAAP Financial
Measures"
section of this news
release for more information.
|
|
3
|
In the first quarter
of 2019, the corporation recognized a previously deferred non-cash
gain of $51 million
($38 million, or
$0.13 per share, after tax) related to properties sold in 2015 as a
result of completing its
remaining
obligations.
|
|
4
|
Net earnings in the
first quarter of 2019 include benefits of $75 million, or $0.26 per
share, from additional
tax deductions, based
on proposed tax regulations released on March 4, 2019, which
clarified that foreign
military sales
qualify as foreign derived intangible income. Approximately $65
million, or $0.23 per share,
of the total benefit
was recorded discretely because it relates to 2018.
|
|
|
|
|
2020 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 typical
practice not to incorporate adjustments into its financial outlook
for proposed acquisitions, divestitures, ventures, changes in law,
or new accounting standards until such items have been consummated,
enacted or adopted. 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
Guidance1
|
|
January
2020
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$62,250 -
$64,000
|
|
$62,750 -
$64,250
|
|
|
|
|
|
|
|
|
|
Business segment
operating profit
|
|
$6,800 -
$6,950
|
|
$6,800 -
$6,950
|
|
|
|
|
|
|
|
|
|
Net FAS/CAS pension
adjustment2
|
|
~$2,090
|
|
~$2,090
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share3
|
|
$23.65 -
$23.95
|
|
$23.65 -
$23.95
|
|
|
|
|
|
|
|
|
|
Cash from
operations
|
|
≥$7,600
|
|
≥$7,600
|
|
|
|
|
|
|
|
|
1
|
The corporation's
2020 financial outlook includes updated guidance for net sales
reflecting the currently
expected impacts
related to COVID-19. The ultimate impact of COVID-19 on the
corporation's financial
outlook for 2020
remains uncertain. Additionally, the corporation's financial
outlook for 2020 does not
include any non-cash
impairment charge related to its equity method investment in AMMROC
as
discussed below or
potential impacts to the corporation's programs, including the F-35
program, resulting
from U.S. Government
actions related to Turkey. Currently, the corporation does not
expect U.S.
Government actions
related to Turkey will have a material impact on its 2020 financial
results.
|
|
2
|
The net FAS/CAS
pension adjustment above is presented as a single amount and
includes total expected
2020 U.S. Government
cost accounting standards (CAS) pension cost of approximately
$1,975 million and
total expected
financial accounting standards (FAS) pension income of
approximately $115 million. CAS
pension cost and the
service cost component of FAS pension expense are included in
operating profit.
The non-service cost
components of FAS pension expense are included in non-operating
income
(expense). For
additional detail on the corporation's FAS/CAS pension adjustment,
see the supplemental
table included at the
end of this news release.
|
|
3
|
Although the
corporation typically does not update its outlook for proposed
changes in law, the above
includes the effect
of proposed tax regulations confirming that foreign military sales
(FMS) qualify for tax
deductions for
foreign derived intangible income. The corporation believes
incorporating the effect of the
proposed regulations
yields more accurate disclosure of the company's expectations
because the
proposed regulations
describe the tax treatment of FMS sales in accordance with the
corporation's
analysis of the
Internal Revenue Code.
|
|
COVID-19
The global outbreak of the coronavirus disease 2019 (COVID-19)
was declared a pandemic by the World Health Organization and a
national emergency by the U.S. Government in March 2020 and has negatively affected the U.S.
and global economy, disrupted global supply chains, resulted in
significant travel and transport restrictions, including mandated
closures and orders to "shelter-in-place," and created significant
disruption of the financial markets. Lockheed Martin has taken
measures to protect the health and safety of its employees, work
with its customers to minimize potential disruptions and support
its community in addressing the challenges posed by this global
pandemic. The extent of the impact of the COVID-19 pandemic on the
corporation's operational and financial performance, including its
ability to execute its programs in the expected timeframe, will
depend on future developments, including the duration and spread of
the pandemic and related actions taken by the U.S. Government,
state and local government officials, and international governments
to prevent disease spread, all of which are uncertain and cannot be
predicted. The outbreak did not have a material impact on the
corporation's operating results or business in the first quarter of
2020. However, the corporation is beginning to experience some
issues in each of its business areas related to COVID-19, primarily
in access to some locations and delays of supplier
deliveries. The corporation is updating its 2020 guidance for
net sales to reflect these impacts, as production and supply chain
activities have recently slowed in the Aeronautics business area.
However, the ultimate impact of COVID-19 on the corporation's 2020
outlook for sales, segment operating profit, earnings and cash
flows from operations remains uncertain. The corporation's 2020
outlook assumes, among other things, that its production facilities
continue to operate and it does not experience significant work
stoppages or closures, it is able to mitigate any supply chain
disruptions and these do not worsen, and it is able to recover its
costs under contracts and government funding priorities do not
change. In addition, the corporation's financial performance
assumes actual returns on its pension assets during 2020 will be
7.0%, and the discount rate used to re-measure its pension
liabilities at year-end 2020 will be 3.25%. Differences
between these assumed values and actual values will affect the
corporation's plan funded status and stockholders' equity as
measured at year-end 2020. The corporation is also monitoring the
impacts of COVID-19 on the fair value of its assets. While the
corporation does not currently anticipate any material impairments
on its assets as a result of COVID-19, future changes in
expectations for sales, earnings and cash flows related to
intangible assets and goodwill below its current projections could
cause these assets to be impaired. While these are the
corporation's current assumptions, this is an emerging situation
and these could change, including if the duration of the pandemic
is extended, which could affect outlook.
Investment in Advanced Military Maintenance, Repair and
Overhaul Center LLC (AMMROC)
As of March 29, 2020, the corporation had an investment in
the AMMROC joint venture with a carrying value of $435 million. Substantially all of AMMROC's
current business is dependent on a single customer contract to
provide maintenance, repair and overhaul (MRO) services for fixed
and rotary wing military aircraft that was up for re-competition.
In April 2020, subsequent to the end
of the corporation's first quarter, the customer announced its
intent to award the contract to a competitor. The corporation is
working with AMMROC's management and its joint venture partner to
understand its options, including whether there is a basis to
challenge the award and retain the MRO services, explore the
possibility of AMMROC continuing to provide MRO services as a
subcontractor to the competitor, an opportunity to replace the
contract with other customer arrangements, or winding down the
business. At this time, the corporation cannot determine the extent
of the non-cash impairment charge, if any, related to its
investment. However, if the customer moves forward with
transitioning the MRO services to the competitor and AMMROC is not
a subcontractor (or has only a limited role), the corporation
expects there would be an adverse impact to AMMROC's business and
the carrying value of its investment, which could be significant
and an impairment could occur as early as the second quarter of
2020. Other than the impact to earnings for a potential non-cash
impairment charge, currently the corporation does not expect any
other significant impacts to its 2020 operating results, financial
position or cash flows.
Cash Activities
The corporation's cash activities in the first quarter of 2020
included the following:
- paying cash dividends of $693
million, compared to $638
million in the first quarter of 2019;
- repurchasing 1.7 million shares for $756
million, which includes $500
million paid pursuant to an accelerated share repurchase
agreement (ASR), which will settle in the second quarter; compared
to 1.0 million shares for $281
million in the first quarter of 2019. The actual number of
shares delivered under the ASR is based on an average
volume-weighted average price (VWAP) over the plan period and,
based on the average VWAP as of April 20,
2020, the corporation expects to receive approximately 0.5
million additional shares upon final settlement;
- making capital expenditures of $293
million, compared to $284
million in the first quarter of 2019; and
- no net proceeds from or repayments of commercial paper,
compared to making net repayments of $200
million in the first quarter of 2019.
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. 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
|
|
|
|
|
March
29, 2020
|
|
March
31, 2019
|
|
|
Net
sales
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
6,369
|
|
|
$
|
5,584
|
|
|
|
Missiles and Fire
Control
|
|
2,619
|
|
|
2,350
|
|
|
|
Rotary and Mission
Systems
|
|
3,746
|
|
|
3,762
|
|
|
|
Space
|
|
2,917
|
|
|
2,640
|
|
|
|
Total net
sales
|
|
$
|
15,651
|
|
|
$
|
14,336
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
672
|
|
|
$
|
585
|
|
|
|
Missiles and Fire
Control
|
|
396
|
|
|
417
|
|
|
|
Rotary and Mission
Systems
|
|
376
|
|
|
379
|
|
|
|
Space
|
|
281
|
|
|
334
|
|
|
|
Total business
segment operating profit
|
|
1,725
|
|
|
1,715
|
|
|
|
Unallocated
items
|
|
|
|
|
|
|
FAS/CAS
operating adjustment
|
|
469
|
|
|
512
|
|
|
|
Other,
net
|
|
(72)
|
|
|
56
|
|
|
|
Total unallocated
items
|
|
397
|
|
|
568
|
|
|
|
Total consolidated
operating profit
|
|
$
|
2,122
|
|
|
$
|
2,283
|
|
|
|
|
|
|
|
|
|
Net sales and operating profit of the corporation's business
segments exclude intersegment sales, cost of sales, and profit as
these activities are eliminated in consolidation. Operating profit
of the corporation's business segments includes the corporation's
share of earnings or losses from equity method investees as the
operating activities of the investees are closely aligned with the
operations of its business segments.
Operating profit of the corporation's business segments also
excludes the FAS/CAS operating adjustment described below, a
portion of corporate costs not considered allowable or allocable to
contracts with the U.S. Government under the applicable U.S.
Government cost accounting standards (CAS) or federal acquisition
regulations (FAR), and other items not considered part of
management's evaluation of segment operating performance such as a
portion of management and administration costs, legal fees and
settlements, environmental costs, stock-based compensation expense,
retiree benefits, significant severance actions, significant asset
impairments, gains or losses from significant divestitures, and
other miscellaneous corporate activities.
The corporation recovers CAS pension cost through the pricing of
its products and services on U.S. Government contracts and,
therefore, recognizes CAS pension cost in each of its business
segments' net sales and cost of sales. The corporation's
consolidated financial statements must present pension and other
postretirement benefit plan expense calculated in accordance with
U.S. generally accepted accounting principles (referred to as FAS
expense). The operating portion of the net FAS/CAS pension
adjustment represents the difference between the service cost
component of FAS pension expense and CAS pension cost. The
non-service FAS pension expense component is included in other
non‑operating expense on the corporation's consolidated statements
of earnings. The net FAS/CAS pension adjustment increases or
decreases CAS pension cost to equal total FAS pension expense (both
service and non-service).
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 for which it
recognizes revenue over time using the percentage-of-completion
cost-to-cost method to measure progress towards completion.
Increases in profit booking rates, typically referred to as risk
retirements, usually relate to revisions in the estimated total
costs to fulfill the performance obligations 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 fulfill the performance obligations
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, which may or may not
impact sales. Favorable items may include the positive resolution
of contractual matters, 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 certain assets.
The corporation's consolidated net adjustments not related to
volume, including net profit booking rate adjustments, represented
approximately 27 percent of total segment operating profit in the
first quarter of 2020 as compared to 33 percent in the first
quarter of 2019.
Aeronautics
|
(in millions)
|
|
Quarters
Ended
|
|
|
|
|
March
29,
2020
|
|
March
31,
2019
|
|
Net
sales
|
|
$
|
6,369
|
|
|
$
|
5,584
|
|
|
Operating
profit
|
|
$
|
672
|
|
|
$
|
585
|
|
|
Operating
margin
|
|
10.6
|
%
|
|
10.5
|
%
|
Aeronautics' net sales in the first quarter of 2020 increased
$785 million, or 14 percent, compared to the same period in
2019. The increase was primarily attributable to higher net sales
of approximately $695 million for the F-35 program due to
increased volume on production, sustainment, and development
contracts; and about $70 million for
higher volume on classified development contracts.
Aeronautics' operating profit in the first quarter of 2020
increased $87 million, or 15 percent, compared to the same
period in 2019. Operating profit increased approximately
$80 million for the F-35 program due
to higher volume on production, sustainment, and development
contracts. Adjustments not related to volume, including net profit
booking rate adjustments, in the first quarter of 2020 were
comparable to the same period in 2019.
Missiles and Fire Control
|
(in millions)
|
|
Quarters
Ended
|
|
|
|
|
March
29,
2020
|
|
March
31,
2019
|
|
|
Net
sales
|
|
$
|
2,619
|
|
|
$
|
2,350
|
|
|
|
Operating
profit
|
|
$
|
396
|
|
|
$
|
417
|
|
|
|
Operating
margin
|
|
15.1
|
%
|
|
17.7
|
%
|
|
MFC's net sales in the first quarter of 2020 increased
$269 million, or 11 percent, compared to the same period in
2019. The increase was primarily attributable to higher net sales
of approximately $175 million for
tactical and strike missile programs due to increased volume
(primarily High-Mobility Artillery Rocket Systems (HIMARS), Guided
Multiple Launch Rocket Systems (GMLRS) and hypersonic development
programs); and about $125 million for
integrated air and missile defense programs due to increased volume
(primarily Terminal High Altitude Area Defense (THAAD) and Patriot
Advanced Capability-3 (PAC-3)). These increases were partially
offset by a decrease of $40 million
as a result of lower volume on energy programs and the divestiture
of the Distributed Energy Solutions business in November 2019.
MFC's operating profit in the first quarter of 2020 decreased
$21 million, or 5 percent, compared to the same period in
2019. Operating profit decreased approximately $55 million for integrated air and missile
defense programs due to lower risk retirements on international
contracts (primarily PAC-3 and THAAD). This decrease was partially
offset by an increase of $20 million
for sensors and global sustainment programs due to higher risk
retirements (primarily Low Altitude Navigation and Targeting
Infrared for Night (LANTIRN®) and Sniper Advanced Targeting Pod
(SNIPER®)). Adjustments not related to volume, including net profit
booking rate adjustments, were $30
million lower in the first quarter of 2020 compared to the
same period in 2019.
Rotary and Mission Systems
|
(in millions)
|
|
Quarters
Ended
|
|
|
|
|
March
29,
2020
|
|
March
31,
2019
|
|
|
Net
sales
|
|
$
|
3,746
|
|
|
$
|
3,762
|
|
|
|
Operating
profit
|
|
$
|
376
|
|
|
$
|
379
|
|
|
|
Operating
margin
|
|
10.0
|
%
|
|
10.1
|
%
|
|
RMS' net sales in the first quarter of 2020 were comparable to
the same period in 2019. Net sales decreased approximately
$95 million for Sikorsky helicopter
programs due to lower volume (primarily combat rescue helicopter
and Black Hawk production programs). This decrease was mostly
offset by an increase of about $85
million for C6ISR (command, control, communications,
computers, cyber, combat systems, intelligence, surveillance, and
reconnaissance) programs due to higher volume (primarily undersea
combat systems programs).
RMS' operating profit in the first quarter of 2020 was
comparable to the same period in 2019. Operating profit increased
approximately $20 million for
Sikorsky helicopter programs due to better cost performance and
higher risk retirements on international military aircraft
programs. This increase was offset by a $20
million decrease for integrated warfare systems and sensors
(IWSS) programs as lower risk retirements were partially offset by
charges that were $30 million lower
on a ground-based radar program. Adjustments not related to volume,
including net profit booking rate adjustments, were $35 million lower in the first quarter of
2020 compared to the same period in 2019.
Space
|
(in millions)
|
|
Quarters
Ended
|
|
|
|
|
March
29,
2020
|
|
March
31,
2019
|
|
|
Net
sales
|
|
$
|
2,917
|
|
|
$
|
2,640
|
|
|
|
Operating
profit
|
|
$
|
281
|
|
|
$
|
334
|
|
|
|
Operating
margin
|
|
9.6
|
%
|
|
12.7
|
%
|
|
Space's net sales in the first quarter of 2020 increased
$277 million, or 10 percent, compared to the same period in
2019. The increase was primarily attributable to higher net sales
of approximately $180 million for
strategic and missile defense programs due to higher volume
(primarily hypersonic development programs and fleet ballistic
missile programs); and about $100
million for government satellite programs due to higher
volume (primarily Next Generation Overhead Persistent Infrared
(Next Gen OPIR)).
Space's operating profit in the first quarter of 2020 decreased
$53 million, or 16 percent, compared to the same period in
2019. Operating profit decreased approximately $40 million for government satellite programs due
to lower risk retirements (primarily Advanced Extremely High
Frequency (AEHF)); and about $35
million due to lower equity earnings from the corporation's
investment in United Launch Alliance (ULA). These decreases were
partially offset by an increase of $20
million for commercial satellite programs for charges
recorded for performance matters in 2019 not repeated in 2020.
Adjustments not related to volume, including net profit booking
rate adjustments, were $40 million
lower in the first quarter of 2020, compared to the same
period in 2019.
Total equity earnings recognized by Space from equity method
investments (primarily ULA) represented approximately
$30 million, or 11 percent of Space's operating profit in the
first quarter of 2020, compared to approximately $65 million,
or 19 percent in the first quarter of 2019.
Income Taxes
The corporation's effective income tax rate was
15.4 percent in the first quarter of 2020, compared to
12.4 percent in the first quarter of 2019. The rate for the
first quarter of 2019 benefited from additional tax deductions of
$65 million, or $0.23 per share, recorded discretely for 2018,
based on proposed tax regulations released on March 4, 2019, which clarified that foreign
military sales qualify for foreign derived intangible income
treatment. The rates for both periods benefited from tax deductions
for employee equity awards, the research and development tax
credit, tax deductions for foreign derived intangible income, and
dividends paid to the corporation's defined contribution plans with
an employee stock ownership plan feature.
Use of Non-GAAP Financial Measures
This news release contains the following non-generally accepted
accounting principles (non-GAAP) financial measures (as defined by
U.S. Securities and Exchange Commission (SEC) Regulation G). While
management believes that these non-GAAP financial measures may be
useful in evaluating the financial performance of the corporation,
this information should be considered supplemental and is not a
substitute for financial information prepared in accordance with
GAAP. In addition, the corporation's definitions for non-GAAP
financial measures may differ from similarly titled measures used
by other companies or analysts.
Business segment operating profit represents operating profit
from the corporation's business segments before unallocated income
and expense. This measure is used by the corporation's senior
management in evaluating the performance of its business segments
and is a performance goal in the corporation's annual incentive
plan. Business segment operating margin is calculated by dividing
business segment operating profit by sales. The table below
reconciles the non-GAAP measure business segment operating profit
with the most directly comparable GAAP financial measure,
consolidated operating profit.
|
(in
millions)
|
|
2020 Financial
Outlook1
|
|
|
|
|
|
|
|
Business segment
operating profit (non-GAAP)
|
|
$6,800 -
$6,950
|
|
|
FAS/CAS operating
adjustment2
|
|
~1,875
|
|
|
Other, net
|
|
~(230)
|
|
|
Consolidated
operating profit (GAAP)
|
|
$8,445 -
$8,595
|
|
|
|
|
|
|
1
|
The corporation's
2020 financial outlook includes updated guidance for net sales
reflecting the currently
expected impacts
related to COVID-19. The ultimate impact of COVID-19 on the
corporation's financial
outlook for 2020
remains uncertain. Additionally, the corporation's financial
outlook for 2020 does not
include any non-cash
impairment charge related to its equity method investment in AMMROC
or potential
impacts to the
corporation's programs, including the F-35 program, resulting from
U.S. Government
actions related to
Turkey. Currently, the corporation does not expect U.S. Government
actions related to
Turkey will have a
material impact on its 2020 financial results.
|
|
2
|
Refer to the
supplemental table "Other Financial and Operating Information"
included in this news release
for a detail of the
FAS/CAS operating adjustment, which excludes $215 million of
expected non-service
FAS income that will
be recorded in non-operating income (expense).
|
|
Conference Call Information
Lockheed Martin Corporation will webcast live the earnings
results conference call (listen-only mode) on Tuesday,
April 21, 2020, at 11 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 the corporation's website:
www.lockheedmartin.com.
About Lockheed Martin
Headquartered in Bethesda,
Maryland, Lockheed Martin Corporation is a global security
and aerospace company that employs approximately 110,000 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 impact of the COVID-19 outbreak or future epidemics on our
business, including the potential for facility closures or work
stoppages, supply chain disruptions, program delays, our ability to
recover our costs under contracts, changing government funding and
acquisition priorities and payment policies and regulations; and
potential impacts to the fair value of our assets;
- our reliance on contracts with the U.S. Government, which are
conditioned upon the availability of funding and can be terminated
by the U.S. Government for convenience, and our ability to
negotiate favorable contract terms;
- budget uncertainty, affordability initiatives or the risk of
future budget cuts;
- risks related to the development, production, sustainment,
performance, schedule, cost and requirements of complex and
technologically advanced programs including our largest, the F-35
program;
- planned production rates for significant programs; compliance
with stringent performance and reliability standards; materials
availability;
- the performance and financial viability of key suppliers,
teammates, joint ventures, joint venture partners, subcontractors
and customers;
- economic, industry, business and political conditions including
their effects on governmental policy and government actions that
disrupt our supply chain or prevent the sale or delivery of our
products (such as delays in obtaining Congressional approvals for
exports requiring Congressional notification and export license
delays due to COVID-19);
- trade policies or sanctions (including Turkey's removal from the F-35 program, the
impact of U.S. Government sanctions on Turkey and potential sanctions on the
Kingdom of Saudi Arabia);
- our success expanding into and doing business in adjacent
markets and internationally and the differing risks posed by
international sales;
- changes in foreign national priorities and foreign government
budgets;
- the competitive environment for our products and services,
including increased pricing pressures, aggressive pricing in the
absence of cost realism evaluation criteria, competition from
outside the aerospace and defense industry, and bid protests;
- the timing and customer acceptance of product deliveries;
- our ability to continue to innovate and develop new products
and 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 our businesses;
- our ability to implement and continue, and the timing and
impact of, capitalization changes such as share repurchases and
dividend payments;
- our ability to recover costs under U.S. Government contracts
and changes in contract mix;
- the accuracy of our estimates and projections;
- timing and estimates regarding pension funding and movements in
interest rates and other changes that may affect pension plan
assumptions, stockholders' equity, the level of the FAS/CAS
adjustment and actual returns on pension plan assets;
- the successful operation of joint ventures that we do not
control and our ability to recover our investments;
- realizing the anticipated benefits of acquisitions or
divestitures, joint ventures, teaming arrangements or internal
reorganizations;
- our efforts to increase the efficiency of our operations and
improve the affordability of our products and services;
- risk of an impairment of our assets, including a potential
non-cash impairment charge as early as the second quarter for our
equity investment in Advanced Military Maintenance, Repair and
Overhaul Center LLC (AMMROC) and the potential impairment of
goodwill, intangible assets and inventory recorded as a result of
the acquisition of the Sikorsky business;
- the availability and adequacy of our insurance and
indemnities;
- our ability to benefit fully from or adequately protect our
intellectual property rights;
- the effect of changes in (or in the interpretation of)
procurement and other regulations and policies affecting our
industry, including export of our products, cost allowability or
recovery and potential changes to the U.S. Department of Defense's
(DoD) acquisition regulations relating to progress payments and
performance-based payments and a preference for fixed-price
contracts; including the potential for DoD to temporarily modify
these in response to COVID-19;
- the effect of changes in accounting, taxation, or export laws,
regulations, and policies and their interpretation or application;
and
- the outcome of legal proceedings, bid protests, environmental
remediation efforts, audits, government investigations or
government allegations that we have failed to comply with law,
other contingencies and U.S. Government identification of
deficiencies in our 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 differ materially from those anticipated in
the forward-looking statements, see the corporation's filings with
the U.S. Securities and Exchange Commission 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, 2019 and subsequent 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
|
|
|
|
|
March
29,
2020
|
|
March
31,
2019
|
|
|
Net
sales
|
|
$
|
15,651
|
|
|
$
|
14,336
|
|
|
|
Cost of
sales
|
|
(13,560)
|
|
|
(12,148)
|
|
|
|
Gross
profit
|
|
2,091
|
|
|
2,188
|
|
|
|
Other income,
net2
|
|
31
|
|
|
95
|
|
|
|
Operating
profit
|
|
2,122
|
|
|
2,283
|
|
|
|
Interest
expense
|
|
(148)
|
|
|
(171)
|
|
|
|
Other non-operating
income (expense), net
|
|
56
|
|
|
(167)
|
|
|
|
Earnings before
income taxes
|
|
2,030
|
|
|
1,945
|
|
|
|
Income tax
expense3
|
|
(313)
|
|
|
(241)
|
|
|
|
Net
earnings
|
|
$
|
1,717
|
|
|
$
|
1,704
|
|
|
|
Effective tax
rate
|
|
15.4
|
%
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
Earnings per
common share
|
|
|
|
|
|
|
Basic
|
|
$
|
6.10
|
|
|
$
|
6.03
|
|
|
|
Diluted
|
|
$
|
6.08
|
|
|
$
|
5.99
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
Basic
|
|
281.3
|
|
|
282.5
|
|
|
|
Diluted
|
|
282.6
|
|
|
284.3
|
|
|
|
|
|
|
|
|
|
|
Common shares
reported in stockholders' equity at end of period
|
|
279
|
|
|
281
|
|
|
|
|
|
|
|
|
|
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 March 29 for the first quarter of
2020 and March 31 for the
first quarter of
2019. The consolidated financial statements and tables of financial
information included herein
are labeled based on
that convention. This practice only affects interim periods, as the
corporation's fiscal
year ends on
Dec. 31.
|
2
|
In the first quarter
of 2019, the corporation recognized a previously deferred non-cash
gain of $51 million ($38
million, or $0.13 per
share, after tax) related to properties sold in 2015 as a result of
completing its remaining
obligations.
|
3
|
Net earnings in the
first quarter of 2019 include benefits of $75 million, or $0.26 per
share, from additional tax
deductions, based on
proposed tax regulations released on March 4, 2019, which clarified
that foreign military
sales qualify as
foreign derived intangible income. Approximately $65 million, or
$0.23 per share, of the total
benefit was recorded
discretely because it relates to 2018.
|
Lockheed Martin
Corporation
|
Business Segment
Summary Operating Results
|
(unaudited;
in millions)
|
|
|
|
|
Quarters
Ended
|
|
|
|
|
|
|
March
29,
2020
|
|
March
31,
2019
|
|
%
Change
|
|
|
Net
sales
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
6,369
|
|
|
$
|
5,584
|
|
|
14
|
%
|
|
|
Missiles and Fire
Control
|
|
2,619
|
|
|
2,350
|
|
|
11
|
%
|
|
|
Rotary and Mission
Systems
|
|
3,746
|
|
|
3,762
|
|
|
—
|
%
|
|
|
Space
|
|
2,917
|
|
|
2,640
|
|
|
10
|
%
|
|
|
Total net
sales
|
|
$
|
15,651
|
|
|
$
|
14,336
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
$
|
672
|
|
|
$
|
585
|
|
|
15
|
%
|
|
|
Missiles and Fire
Control
|
|
396
|
|
|
417
|
|
|
(5)
|
%
|
|
|
Rotary and Mission
Systems
|
|
376
|
|
|
379
|
|
|
(1)
|
%
|
|
|
Space
|
|
281
|
|
|
334
|
|
|
(16)
|
%
|
|
|
Total business
segment operating profit
|
|
1,725
|
|
|
1,715
|
|
|
1
|
%
|
|
|
Unallocated
items
|
|
|
|
|
|
|
|
|
FAS/CAS operating
adjustment
|
|
469
|
|
|
512
|
|
|
|
|
|
Other,
net1
|
|
(72)
|
|
|
56
|
|
|
|
|
|
Total unallocated
items
|
|
397
|
|
|
568
|
|
|
(30)
|
%
|
|
|
Total consolidated
operating profit
|
|
$
|
2,122
|
|
|
$
|
2,283
|
|
|
(7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margin
|
|
|
|
|
|
|
|
|
Aeronautics
|
|
10.6
|
%
|
|
10.5
|
%
|
|
|
|
|
Missiles and Fire
Control
|
|
15.1
|
%
|
|
17.7
|
%
|
|
|
|
|
Rotary and Mission
Systems
|
|
10.0
|
%
|
|
10.1
|
%
|
|
|
|
|
Space
|
|
9.6
|
%
|
|
12.7
|
%
|
|
|
|
|
Total business
segment operating margin
|
|
11.0
|
%
|
|
12.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
operating margin
|
|
13.6
|
%
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
In the first quarter
of 2019, the corporation recognized a previously deferred non-cash
gain of $51 million ($38
million,
or $0.13
per share, after tax) related to
properties sold in 2015 as a result of completing its
remaining obligations.
|
Lockheed Martin
Corporation
|
Consolidated
Balance Sheets
|
(in millions,
except par value)
|
|
|
|
|
March
29,
2020
|
|
Dec.
31,
2019
|
|
|
|
(unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,988
|
|
|
$
|
1,514
|
|
|
Receivables,
net
|
|
2,892
|
|
|
2,337
|
|
|
Contract
assets
|
|
10,189
|
|
|
9,094
|
|
|
Inventories
|
|
3,539
|
|
|
3,619
|
|
|
Other current
assets
|
|
614
|
|
|
531
|
|
|
Total current
assets
|
|
19,222
|
|
|
17,095
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
6,605
|
|
|
6,591
|
|
|
Goodwill
|
|
10,565
|
|
|
10,604
|
|
|
Intangible assets,
net
|
|
3,142
|
|
|
3,213
|
|
|
Deferred income
taxes
|
|
3,164
|
|
|
3,319
|
|
|
Other noncurrent
assets
|
|
6,550
|
|
|
6,706
|
|
|
Total
assets
|
|
$
|
49,248
|
|
|
$
|
47,528
|
|
|
|
|
|
|
|
|
Liabilities and
equity
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,166
|
|
|
$
|
1,281
|
|
|
Contract
liabilities
|
|
7,205
|
|
|
7,054
|
|
|
Salaries, benefits
and payroll taxes
|
|
2,022
|
|
|
2,466
|
|
|
Current maturities of
long-term debt and commercial paper
|
|
1,250
|
|
|
1,250
|
|
|
Other current
liabilities
|
|
2,009
|
|
|
1,921
|
|
|
Total current
liabilities
|
|
15,652
|
|
|
13,972
|
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
11,439
|
|
|
11,404
|
|
|
Accrued pension
liabilities
|
|
13,078
|
|
|
13,234
|
|
|
Other noncurrent
liabilities
|
|
5,592
|
|
|
5,747
|
|
|
Total
liabilities
|
|
45,761
|
|
|
44,357
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
Common stock, $1 par
value per share
|
|
279
|
|
|
280
|
|
|
Additional paid-in
capital
|
|
—
|
|
|
—
|
|
|
Retained
earnings
|
|
18,708
|
|
|
18,401
|
|
|
Accumulated other
comprehensive loss
|
|
(15,541)
|
|
|
(15,554)
|
|
|
Total stockholders'
equity
|
|
3,446
|
|
|
3,127
|
|
|
Noncontrolling
interests in subsidiary
|
|
41
|
|
|
44
|
|
|
Total
equity
|
|
3,487
|
|
|
3,171
|
|
|
Total liabilities and
equity
|
|
$
|
49,248
|
|
|
$
|
47,528
|
|
|
|
|
|
|
|
Lockheed Martin
Corporation
|
Consolidated
Statements of Cash Flows
|
(unaudited;
in millions)
|
|
|
|
Quarters
Ended
|
|
|
March
29,
2020
|
|
March
31,
2019
|
Operating
activities
|
|
|
|
|
Net
earnings
|
|
$
|
1,717
|
|
|
$
|
1,704
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities
|
|
|
|
|
Depreciation and
amortization
|
|
301
|
|
|
277
|
|
Stock-based
compensation
|
|
42
|
|
|
37
|
|
Gain on property
sale
|
|
—
|
|
|
(51)
|
|
Changes in assets and
liabilities
|
|
|
|
|
Receivables,
net
|
|
(555)
|
|
|
(389)
|
|
Contract
assets
|
|
(1,095)
|
|
|
(1,025)
|
|
Inventories
|
|
80
|
|
|
(288)
|
|
Accounts
payable
|
|
1,894
|
|
|
744
|
|
Contract
liabilities
|
|
151
|
|
|
305
|
|
Postretirement
benefit plans
|
|
(39)
|
|
|
278
|
|
Income
taxes
|
|
167
|
|
|
243
|
|
Other, net
|
|
(349)
|
|
|
(172)
|
|
Net cash provided
by operating activities
|
|
2,314
|
|
|
1,663
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Capital
expenditures
|
|
(293)
|
|
|
(284)
|
|
Other, net
|
|
(2)
|
|
|
27
|
|
Net cash used for
investing activities
|
|
(295)
|
|
|
(257)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Dividends
paid
|
|
(693)
|
|
|
(638)
|
|
Repurchases of common
stock
|
|
(756)
|
|
|
(281)
|
|
Repayments of
commercial paper, net
|
|
—
|
|
|
(200)
|
|
Other, net
|
|
(96)
|
|
|
(68)
|
|
Net cash used for
financing activities
|
|
(1,545)
|
|
|
(1,187)
|
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
|
474
|
|
|
219
|
|
Cash and cash
equivalents at beginning of period
|
|
1,514
|
|
|
772
|
|
Cash and cash
equivalents at end of period
|
|
$
|
1,988
|
|
|
$
|
991
|
|
Lockheed Martin
Corporation
|
Consolidated
Statement of Equity
|
(unaudited;
in millions)
|
|
|
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|
Noncontrolling
Interests
in
Subsidiary
|
|
Total
Equity
|
|
Balance at
December 31, 2019
|
|
$
|
280
|
|
|
$
|
—
|
|
|
$
|
18,401
|
|
|
$
|
(15,554)
|
|
|
$
|
3,127
|
|
|
$
|
44
|
|
|
$
|
3,171
|
|
|
Net
earnings
|
|
—
|
|
|
—
|
|
|
1,717
|
|
|
—
|
|
|
1,717
|
|
|
—
|
|
|
1,717
|
|
|
Other comprehensive
income, net of tax1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
Repurchases of common
stock
|
|
(2)
|
|
|
(29)
|
|
|
(733)
|
|
|
—
|
|
|
(764)
|
|
|
—
|
|
|
(764)
|
|
|
Dividends
declared2
|
|
—
|
|
|
—
|
|
|
(677)
|
|
|
—
|
|
|
(677)
|
|
|
—
|
|
|
(677)
|
|
|
Stock-based awards,
ESOP activity and
other
|
|
1
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
30
|
|
|
Net decrease in
noncontrolling interests in
subsidiary
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(3)
|
|
|
Balance at March
29, 2020
|
|
$
|
279
|
|
|
$
|
—
|
|
|
$
|
18,708
|
|
|
$
|
(15,541)
|
|
|
$
|
3,446
|
|
|
$
|
41
|
|
|
$
|
3,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Primarily represents
the reclassification adjustment for the recognition of prior period
amounts related to pension and other postretirement benefit
plans.
|
2
|
Represents dividends
of $2.40 per share declared for the first quarter of
2020.
|
Lockheed Martin
Corporation
|
Other Financial
and Operating Information
|
(unaudited;
in millions, except for aircraft deliveries and
weeks)
|
|
|
|
|
2020
Outlook
|
|
2019
Actual
|
|
Total FAS expense
and CAS costs
|
|
|
|
|
|
FAS pension income
(expense)1
|
|
$
|
115
|
|
|
$
|
(1,093)
|
|
|
Less: CAS pension
cost
|
|
1,975
|
|
|
2,565
|
|
|
Net FAS/CAS pension
adjustment
|
|
$
|
2,090
|
|
|
$
|
1,472
|
|
|
|
|
|
|
|
|
Service and
non-service cost reconciliation
|
|
|
|
|
|
FAS pension service
cost
|
|
$
|
(100)
|
|
|
$
|
(516)
|
|
|
Less: CAS pension
cost
|
|
1,975
|
|
|
2,565
|
|
|
FAS/CAS operating
adjustment
|
|
1,875
|
|
|
2,049
|
|
|
Non-operating FAS
pension income (cost)2
|
|
215
|
|
|
(577)
|
|
|
Net FAS/CAS pension
adjustment
|
|
$
|
2,090
|
|
|
$
|
1,472
|
|
|
|
|
|
|
|
1
|
The corporation
projects FAS pension income in 2020, compared to FAS pension
expense in 2019, as a result
of completing the
planned freeze of its salaried pension plans effective Jan. 1, 2020
that was previously
announced on July 1,
2014. The corporation's FAS pension expense is comprised of service
cost, interest
cost, expected return
on plan assets, amortization of prior service credit, and
amortization of actuarial losses.
The service cost and
amortization of actuarial losses components of FAS pension expense
are significantly
lower due to the
freeze. As a result, the expected return on plan assets and
amortization of prior service credit
exceed all other FAS
pension expense components in 2020. For additional information
regarding the
corporation's FAS
pension expense or income and CAS pension cost, see the
corporation's Annual Report on
Form 10-K for the
year ended Dec. 31, 2019.
|
2
|
The corporation
records the non-service cost components of net periodic benefit
cost as part of other non-
operating income
(expense) in the consolidated statement of earnings. The
non-service cost components in
the table above
relate only to the corporation's qualified defined benefit pension
plans. The corporation
expects total
non-service income (cost) for its qualified defined benefit pension
plans in the table above, along
with non-service cost
for its other postretirement benefit plans of $30 million, to total
non-service credit of $185
million for 2020. The
corporation recorded non-service cost for its other postretirement
benefit plans of $116
million in 2019, in
addition to its total non-service cost for its qualified defined
benefit pension plans in the
table above, for a
total of $693 million in 2019.
|
|
|
|
|
|
Backlog
|
|
March
29,
2020
|
|
Dec.
31,
2019
|
|
Aeronautics
|
|
$
|
52,886
|
|
|
$
|
55,636
|
|
|
Missiles and Fire
Control
|
|
27,070
|
|
|
25,796
|
|
|
Rotary and Mission
Systems
|
|
37,484
|
|
|
34,296
|
|
|
Space
|
|
26,680
|
|
|
28,253
|
|
|
Total
backlog
|
|
$
|
144,120
|
|
|
$
|
143,981
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Aircraft
Deliveries
|
|
March
29,
2020
|
|
March
31,
2019
|
|
F-35
|
|
22
|
|
|
26
|
|
|
C-130J
|
|
3
|
|
|
5
|
|
|
C-5
|
|
—
|
|
|
—
|
|
|
Government helicopter
programs
|
|
13
|
|
|
15
|
|
|
Commercial helicopter
programs
|
|
—
|
|
|
—
|
|
|
International
military helicopter programs
|
|
2
|
|
|
2
|
|
|
|
|
|
|
Number of Weeks in
Reporting Period
|
|
2020
|
|
2019
|
|
First
quarter
|
|
13
|
|
|
13
|
|
|
Second
quarter
|
|
13
|
|
|
13
|
|
|
Third
quarter
|
|
13
|
|
|
13
|
|
|
Fourth
quarter
|
|
13
|
|
|
13
|
|
View original
content:http://www.prnewswire.com/news-releases/lockheed-martin-reports-first-quarter-2020-results-301043946.html
SOURCE Lockheed Martin