BETHESDA, Md., Oct. 20 /PRNewswire-FirstCall/ --
-- Third quarter net sales of $11.1 billion; Year-to-date net sales of
$32.7 billion
-- Third quarter earnings per share of $2.07; Year-to-date earnings per
share of $5.61
-- Third quarter net earnings of $797 million; Year-to-date net earnings
of
$2.2 billion
-- Generated $1.4 billion in cash from operations for the quarter; $3.8
billion year-to-date
-- Increases outlook for 2009 earnings per share and return on invested
capital
-- Reaffirms outlook for 2009 net sales
-- Updates 2009 cash from operations for anticipated discretionary
pension
plan pre-funding of at least $1 billion
-- Provides initial outlook for 2010
Lockheed Martin Corporation (NYSE: LMT) today reported third quarter 2009 net
earnings of $797 million ($2.07 per diluted share), compared to $782 million
($1.92 per diluted share) in 2008. Net earnings in 2009 included higher
pension expense as disclosed in our Jan. 22, 2009 earnings release and in our
2008 Form 10-K. The third quarter of 2009 included a FAS/CAS pension
adjustment of ($113) million and an unusual tax benefit of $58 million from
the resolution of an IRS examination. These items together decreased third
quarter 2009 net earnings by $15 million ($0.04 per share). The third quarter
of 2008 included a FAS/CAS pension adjustment of $32 million and an unusual
gain of $44 million, which together increased net earnings by $49 million
($0.12 per share).
Net sales for the third quarter of 2009 were $11.1 billion, compared to $10.6
billion in 2008. Cash from operations for the third quarter of 2009 was $1.4
billion, compared to $1.1 billion in 2008.
"Our third quarter results keep the Corporation on track to achieve full year
2009 operational and financial commitments," said Bob Stevens, Chairman,
President and CEO. "Our diverse portfolio of programs is well positioned to
provide critical, global security solutions to our customers as we support
their changing program priorities and generate shareholder value."
Summary Reported Results and Outlook
The following table presents the Corporation's results for the periods
referenced in accordance with generally accepted accounting principles (GAAP):
REPORTED RESULTS 3rd Quarter Year-to-Date
----------- ------------
(In millions, except 2009 2008 2009 2008
per share data) ---- ---- ---- ----
Net sales $11,056 $10,577 $32,665 $31,599
======= ======= ======= =======
Operating profit
----------------
Segment operating profit $1,266 $1,250 $3,742 $3,715
Unallocated corporate, net:
FAS/CAS pension adjustment (113) 32 (342) 96
Stock compensation expense (40) (40) (112) (115)
Unusual items -- 44 -- 145
Other, net (28) (44) (63) (58)
---- ---- ---- ----
1,085 1,242 3,225 3,783
Interest expense 67 85 219 264
Other non-operating income/
(expense), net(1) 54 (13) 98 14
-- ---- -- --
Earnings before income taxes 1,072 1,144 3,104 3,533
Income taxes(2) 275 362 907 1,139
--- --- --- -----
Net earnings $797 $782 $2,197 $2,394
==== ==== ====== ======
Diluted earnings per share $2.07 $1.92 $5.61 $5.82
===== ===== ===== =====
Cash from operations(3) $1,424 $1,056 $3,778 $3,424
====== ====== ====== ======
(1) Includes interest income and unrealized gains (losses), net on
marketable securities held in a Rabbi Trust to fund certain employee
benefit obligations.
(2) Includes an unusual benefit from the resolution of an IRS examination
that decreased income tax expense by $58 million during the quarter
and nine month periods of 2009.
(3) In the fourth quarter of 2008, the Corporation reclassified the effect
of exchange rate changes on cash from "Cash from operations" to a
separate caption in the Statement of Cash Flows. Accordingly, the
prior period amount now reflects this presentation.
The following table and other sections of this press release contain
forward-looking statements, which are based on the Corporation's current
expectations. Actual results may differ materially from those projected. See
the "Forward-Looking Statements" discussion contained in this press release.
2009 FINANCIAL OUTLOOK (1) 2009 Projections
----------------
(In millions, except per share July 2009 Current Update
data and percentages) --------- --------------
Net sales $44,700 - $45,700 $44,700 - $45,700
================= =================
Operating profit:
-----------------
Segment operating profit $5,075 - $5,175 $5,075 - $5,175
Unallocated corporate expense, net:
FAS/CAS pension adjustment (460) (460)
Unusual items, net - - - -
Stock compensation expense (160) (160)
Other, net (100) (100)
----- -----
4,355 - 4,455 4,355 - 4,455
Interest expense (305) (305)
Other non-operating income, net 45 100
Earnings before income taxes $4,095 - $4,195 $4,150 - $4,250
Diluted earnings per share $7.15 - $7.35 $7.40 - $7.60
Cash from operations >/= $4,100 >/= $3,100
ROIC(2) >/= 18.5% >/= 19.5%
(1) All amounts approximate.
(2) See discussion of non-GAAP performance measures at the end of this
document.
The Corporation's updated outlook for 2009 diluted earnings per share
primarily reflects the following revisions:
-- An unusual benefit of $0.15 related to resolution of an IRS
examination;
and
-- an increase in Other non-operating income, net as a result of improved
market performance during the third quarter on Rabbi Trust assets.
The updated outlook for 2009 cash from operations anticipates that the
Corporation will make at least a $1 billion discretionary contribution to the
defined benefit pension plans' trust during the fourth quarter.
2010 FINANCIAL OUTLOOK (1)
(In millions, except per share 2010 Projection
data and percentages) ---------------
Net sales $46,250 - $47,250
=================
Segment operating profit:
-------------------------
Segment operating profit $5,025 - $5,125
Unallocated corporate expense, net:
FAS/CAS pension adjustment (495)
Stock compensation expense (180)
Unusual items - -
Other, net (100)
-----
4,250 - 4,350
Interest Expense (275)
Other non-operating income, net - -
Earnings before income taxes $3,975 - $4,075
Diluted earnings per share $7.05 - $7.25
Cash from operations >/= $3,200
ROIC (2) >/= 16.5%
(1) All amounts approximate.
(2) See discussion of non-GAAP performance measures at the end of this
document.
The outlook for 2010 earnings before income taxes and earnings per share
assumes that the Corporation's 2010 non-cash FAS/CAS pension adjustment would
be calculated using a discount rate of 6.125%, that the return on plan assets
in 2009 would be approximately 8.5%, and that the Corporation will make a $1
billion discretionary contribution to the defined benefit pension plans' trust
in 2009. The outlook for 2010 cash from operations anticipates that the
Corporation will make additional contributions of approximately $1.4 billion
to the defined benefit pension plans' trust during 2010. The Corporation
anticipates recovering approximately $1 billion during 2010 as CAS cost, with
the remainder being recoverable in future years.
The 2010 non-cash FAS/CAS pension adjustment and related assumptions will not
be finalized until year-end 2009, consistent with the Corporation's pension
plan measurement date. These assumptions may change and could differ
materially at the year-end measurement date. For example, a 25 basis point
change in the discount rate would result in a $95 million change in the
FAS/CAS pension adjustment. Similarly, a 100 basis point change in the actual
return on plan assets would result in a $10 million change in the FAS/CAS
pension adjustment. The Corporation will update its FAS/CAS pension adjustment
and projections for cash from operations taking into account any changes in
required defined benefit plan funding obligations, as necessary, when it
announces 2009 year-end financial results.
The research and development (R&D) tax credit expires on Dec. 31, 2009, and
has not been incorporated into our outlook for 2010. The benefit of the R&D
tax credit (approximately $0.11 per share for 2009) will not be incorporated
into our 2010 outlook or results unless it is extended by Congress.
It is the Corporation's practice not to incorporate adjustments to its outlook
for proposed acquisitions, divestitures, joint ventures, or unusual items
until such transactions have been consummated.
Balanced Cash Deployment Strategy
The Corporation continued to execute its balanced cash deployment strategy
during the quarter and nine months ended Sept. 27, 2009 by:
-- repurchasing 4.6 million shares at a cost of $354 million during the
quarter and 18.3 million shares at a cost of $1.4 billion during the
nine month period of the year;
-- paying cash dividends totaling $219 million during the quarter and
$668
million during the nine month period of the year;
-- investing $233 million during the quarter and $420 million during the
nine month period of the year for acquisitions of businesses and
investments in affiliates; and
-- making capital expenditures of $182 million during the quarter and
$481
million during the nine month period of the year.
Additionally, the Corporation increased its quarterly dividend 10.5 percent or
$0.06 per share. The new quarterly dividend will be $0.63 per share payable
Dec. 31, 2009 to its holders of record as of the close of business Dec. 1,
2009.
Segment Results
The Corporation operates in four principal business segments: Electronic
Systems; Information Systems & Global Services (IS&GS); Aeronautics; and Space
Systems.
The following table presents the operating results of the four business
segments and reconciles these amounts to the Corporation's consolidated
financial results.
(In millions) 3rd Quarter Year-to-Date
----------- ------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales
---------
Electronic Systems $2,922 $2,802 $8,911 $8,686
Information Systems & Global
Services 2,977 2,950 8,756 8,312
Aeronautics 3,084 2,917 8,951 8,608
Space Systems 2,073 1,908 6,047 5,993
----- ----- ----- -----
Total net sales $11,056 $10,577 $32,665 $31,599
======= ======= ======= =======
Operating profit
----------------
Electronic Systems $389 $364 $1,185 $1,139
Information Systems & Global
Services 244 267 734 769
Aeronautics 397 375 1,151 1,064
Space Systems 236 244 672 743
--- --- --- ---
Segment operating profit 1,266 1,250 3,742 3,715
Unallocated corporate income
(expense), net (181) (8) (517) 68
----- --- ----- --
Total operating profit $1,085 $1,242 $3,225 $3,783
====== ====== ====== ======
In our discussion of comparative results, changes in net sales and operating
profit generally are expressed in terms of volume and/or performance. Volume
refers to increases (or decreases) in sales resulting from varying production
activity levels, deliveries, or service levels on individual contracts.
Volume changes typically include a corresponding change in operating profit
based on the estimated profit rate at completion for a particular contract for
design, development, and production activities. Performance generally refers
to changes in contract profit booking rates. These changes to our contracts
for products usually relate to profit recognition associated with revisions to
total estimated costs at completion of the contracts that reflect improved (or
deteriorated) operating or award fee performance on a particular contract.
Changes in contract profit booking rates on contracts for products are
recognized by recording adjustments in the current period for the
inception-to-date effect of the changes on current and prior periods.
Recognition of the inception-to-date adjustment in the current or prior
periods may affect the comparison of segment operating results.
Electronic Systems
(In millions, except percentages) 3rd Quarter Year-to-Date
----------- ------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $2,922 $2,802 $8,911 $8,686
Operating profit $389 $364 $1,185 $1,139
Operating margin 13.3% 13.0% 13.3% 13.1%
---------------- ---- ---- ---- ----
Net sales for Electronic Systems increased by 4% for the quarter and 3% for
the nine months of 2009 from the comparable 2008 periods. During the quarter,
sales increases at Maritime Systems & Sensors (MS2) and Missiles & Fire
Control (M&FC) more than offset a decline at Platforms & Training (P&T). The
increase at MS2 mainly was due to higher volume on surface naval warfare,
tactical systems and radar systems programs. The increase at M&FC primarily
was due to growth on tactical missile and air defense programs. At P&T, lower
volume on platform integration activities and distribution technology programs
partially was offset by growth on simulation and training activities.
During the nine month period, sales increased in all three lines of business.
The increase at M&FC primarily was attributable to higher volume on tactical
missile programs. The increase at MS2 mainly was due to higher volume on
surface naval warfare, tactical systems and radar systems programs, which
partially were offset by declines in integrated defense technology programs.
At P&T, higher volume on simulation and training activities partially was
offset by lower volume on platform integration and distribution technology
programs. The increase in simulation and training also included sales from the
first quarter 2009 acquisition of Universal Systems and Technology, Inc.
Operating profit for Electronic Systems increased by 7% for the quarter and 4%
for the nine months of 2009 from the comparable 2008 periods. During the
quarter, an increase in operating profit at M&FC more than offset declines at
MS2 and P&T. The increase at M&FC mainly was due to higher volume and improved
performance on tactical missile and air defense programs as well as improved
performance on fire control systems. The decrease at MS2 primarily was
attributable to a reduction in the level of favorable performance adjustments
in 2009 compared to 2008 on tactical systems and surface naval warfare
programs. The decline at P&T resulted from lower volume on platform
integration activities and a reduction in the level of favorable performance
adjustments in 2009 compared to 2008 on distribution technology programs.
During the nine month period, increases in operating profit at M&FC and P&T
more than offset a decline at MS2. The increase at M&FC mainly was due to
higher volume on tactical missile programs and improved performance on fire
control systems. The increase in P&T's operating profit primarily was
attributable to improved performance on platform integration activities and
the benefit recognized in the first quarter of 2009 from favorably resolving a
simulation and training contract matter. These increases partially were offset
by declines in volume and a reduction in the level of favorable performance
adjustments in 2009 compared to 2008 on distribution technology programs. The
decrease at MS2 primarily was attributable to a reduction in the level of
favorable performance adjustments in 2009 compared to 2008 on integrated
defense technology and tactical systems programs.
Information Systems & Global Services
(In millions, except percentages) 3rd Quarter Year-to-Date
----------- ------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $2,977 $2,950 $8,756 $8,312
Operating profit $244 $267 $734 $769
Operating margin 8.2% 9.1% 8.4% 9.3%
---------------- --- --- --- ---
Net sales for IS&GS increased by 1% for the quarter and 5% for the nine months
of 2009 from the comparable 2008 periods. During the quarter, the sales
increase primarily was attributable to higher volume on enterprise civilian
services in Civil. Sales for Defense and Intelligence were relatively
unchanged between the quarters. During the nine month period, increases in
Defense and Civil partially were offset by declines in Intelligence. Defense
sales primarily increased due to higher volume on mission and combat systems
activities and readiness and stability operations. Civil increased principally
due to higher volume on enterprise civilian services. Intelligence sales
declined slightly between periods mainly due to lower volume on enterprise
integration activities.
Operating profit for IS&GS decreased by 9% for the quarter and 5% for the nine
months of 2009 from the comparable 2008 periods. During the quarter,
operating profit declined in Intelligence and Defense and remained unchanged
in Civil. The decrease in Intelligence mainly was due to a reduction in the
level of favorable performance adjustments in 2009 compared to 2008 on
security solutions activities. The decrease in Defense primarily was
attributable to performance on global programs.
During the nine month period, operating profit declines in Civil and
Intelligence more than offset growth in Defense. The decrease in Civil
primarily was attributable to the absence in 2009 of a benefit recognized in
the first quarter of 2008 for a contract restructuring and the absence of a
favorable performance adjustment recognized in the second quarter of 2008,
both of which occurred on an enterprise civilian services program. The
decrease in Intelligence mainly was due to lower volume on enterprise
integration activities and a reduction in the level of favorable performance
adjustments in 2009 compared to 2008 on security solution activities. The
increase in Defense mainly was due to volume and improved performance in
mission and combat systems and readiness and stability operations.
The prior period amounts for IS&GS have been reclassified to conform to its
current lines of business (Civil, Defense and Intelligence). The realignment
had no impact on the segment's operating results.
Aeronautics
(In millions, except percentages) 3rd Quarter Year-to-Date
----------- ------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $3,084 $2,917 $8,951 $8,608
Operating profit $397 $375 $1,151 $1,064
Operating margin 12.9% 12.9% 12.9% 12.4%
---------------- ---- ---- ---- ----
Net sales for Aeronautics increased by 6% for the quarter and 4% for the nine
months of 2009 from the comparable 2008 periods. In both periods, sales
increased in all three lines of business. The increase in Combat Aircraft
principally was due to higher volume on the F-35 program, which more than
offset lower volume on F-22 and F-16 programs. The increase in Air Mobility
primarily was attributable to higher volume on the C-130J program, including
deliveries and support activities. There were four C-130J deliveries in the
third quarter of 2009 and three in the comparable 2008 period. There were ten
C-130J deliveries in the nine month period of 2009 and nine in the comparable
2008 period. The increase in Other Aeronautics Programs mainly was due to
higher volume on advanced development programs and P-3 programs, which
partially were offset by declines in other sustainment activities.
Operating profit for Aeronautics increased by 6% for the quarter and 8% for
the nine months of 2009 from the comparable 2008 periods. In both periods,
the growth in operating profit primarily was due to increases in Air Mobility
and Other Aeronautics Programs, which partially were offset by declines in
Combat Aircraft. The increase in Air Mobility operating profit primarily was
due to higher volume on C-130J programs and improved performance on C-130
support programs. During the nine month period, Air Mobility's operating
profit also increased due to improved performance on C-5 programs. The
increase in Other Aeronautics Programs mainly was attributable to improved
performance in sustainment activities and a favorable contract restructuring
of a P-3 modification contract. The decrease in Combat Aircraft operating
profit primarily was due to lower volume on the F-22 program and a reduction
in the level of favorable performance adjustments in 2009 compared to 2008 on
F-16 programs. These decreases more than offset increased operating profit
resulting from higher volume and improved performance on the F-35 program.
Space Systems
(In millions, except percentages) 3rd Quarter Year-to-Date
----------- ------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $2,073 $1,908 $6,047 $5,993
Operating profit $236 $244 $672 $743
Operating margin 11.4% 12.8% 11.1% 12.4%
---------------- ---- ---- ---- ----
Net sales for Space Systems increased by 9% for the quarter and 1% for the
nine months of 2009 from the comparable 2008 periods. During the quarter,
sales growth at Satellites and Space Transportation more than offset a decline
in Strategic & Defensive Missile Systems (S&DMS). The sales growth in
Satellites was due to higher volume in commercial satellite and government
satellite activities. There was one commercial satellite delivery in the third
quarter of 2009. There were no commercial satellite deliveries during the
third quarter of 2008. The increase in Space Transportation principally was
due to higher volume on the Orion program in 2009. S&DMS' sales decreased
mainly due to lower volume on defensive missile programs.
During the nine month period, growth in Satellites more than offset declines
in sales at Space Transportation and S&DMS. The sales growth in Satellites was
due to higher volume in government satellite activities, which partially was
offset by lower volume in commercial satellite activities. There was one
commercial satellite delivery during the nine month period in 2009 and two
deliveries in the comparable 2008 period. The decrease in Space Transportation
primarily was due to lower volume in commercial launch vehicle activities in
2009. There were no commercial launches during the nine month period of 2009
and one during the nine month period of 2008. S&DMS' sales decreased mainly
due to lower volume on defensive missile programs, which more than offset
growth in strategic missile programs.
Operating profit for Space Systems decreased by 3% for the quarter and 10% for
the nine months of 2009 from the comparable 2008 periods. During the quarter,
declines in operating profit in Satellites and S&DMS partially were offset by
growth in Space Transportation. Satellites' operating profit decreased
primarily due to the absence of favorable 2008 performance adjustments on
government satellite programs in 2009, which more than offset an increase
associated with the 2009 commercial satellite delivery. S&DMS' operating
profit declined slightly between periods. In Space Transportation, the
increase mainly was attributable to higher equity earnings on the United
Launch Alliance joint venture and volume on the Orion program.
During the nine month period, operating profit declined in all three lines of
business. Space Transportation's operating profit decrease mainly was
attributable to the absence in 2009 of a benefit recognized in 2008 from the
successful negotiations of a terminated commercial launch vehicle contract and
lower equity earnings in 2009 on the United Launch Alliance joint venture.
The decrease in S&DMS' operating profit primarily was attributable to a
reduction in the level of favorable performance adjustments in 2009 compared
to 2008 on strategic missile programs. In Satellites, the operating profit
decrease mainly was due to lower volume in commercial satellite activities,
which partially was offset by higher volume on government satellite
activities.
Unallocated Corporate Income (Expense), Net
(In millions) 3rd Quarter Year-to-Date
----------- ------------
2009 2008 2009 2008
---- ---- ---- ----
FAS/CAS pension adjustment $(113) $32 $(342) $96
Stock compensation expense (40) (40) (112) (115)
Unusual items -- 44 -- 145
Other, net (28) (44) (63) (58)
---- ---- ---- ----
Unallocated corporate
income (expense), net $(181) $(8) $(517) $68
---------------------- ===== === ===== ===
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 included in "Unallocated
corporate income (expense), net." See the Corporation's 2008 Form 10-K for a
description of "Unallocated corporate income (expense), net," including the
FAS/CAS pension adjustment.
The FAS/CAS pension adjustment (calculated as the difference between FAS
pension expense and the CAS cost amounts) resulted in an expense in 2009
compared to income in 2008 due to the negative actual return on plan assets in
2008 and a lower discount rate at Dec. 31, 2008. This trend is consistent
with the Corporation's previously disclosed assumptions used to compute these
amounts.
For purposes of segment reporting, unusual items are included in "Unallocated
corporate income (expense), net":
2009 -
-- There were no unusual items affecting operating profit during the nine
months of the year.
In the third quarter, we resolved an IRS examination of our U.S. Federal
Income Tax Returns for the years 2005-2007. As a result, we recognized an
unusual tax benefit that reduced our income tax expense and increased our net
earnings by $58 million ($0.15 per share) during the quarter and nine month
periods of 2009.
2008 -
-- A third quarter gain, net of state income taxes, of $44 million
representing the recognition of a portion of the deferred net gain
from
the 2006 sale of the Corporation's ownership interest in Lockheed
Khrunichev Energia International, Inc. (LKEI) and International Launch
Services, Inc. (ILS). At the time of the sale, the Corporation
deferred
recognition of any gains pending the expiration of its responsibility
to
refund advances for future launch services.
-- Second quarter earnings, net of state income taxes, of $85 million
associated with reserves related to various land sales that are no
longer required. Reserves were recorded at the time of each land sale
based on the U.S. Government's assertion of its right to share in the
sale proceeds. This matter was favorably settled with the U.S.
Government in the second quarter. This item increased net earnings by
$56 million ($0.14 per share) during the second quarter of 2008; and
-- A first quarter gain, net of state income taxes, of $16 million
representing the recognition of a portion of the deferred net gain
from
the 2006 sale of the Corporation's ownership interest in LKEI and ILS.
This item increased net earnings by $10 million ($0.02 per share)
during
the first quarter of 2008.
Recognition of the deferred net gain increased net earnings by $28 million
($0.07 per share) during the third quarter of 2008. This item, along with the
second quarter reserve reversal and the first quarter gain increased net
earnings by $94 million ($0.23 per share) during the nine months ended Sept.
28, 2008.
Income Taxes
Our effective income tax rates were 25.7% and 29.2% for the quarter and nine
months ended Sept. 27, 2009, and 31.6% and 32.2% for the quarter and nine
months ended Sept. 28, 2008. These rates were lower than the statutory rate
of 35% for all periods due to tax benefits for U.S. manufacturing activities
and dividends related to our employee stock ownership plans.
The effective tax rates for the third quarter and first nine months of 2009
were lower than the comparable periods in 2008, primarily due to the
resolution of an IRS examination in the third quarter of 2009 that reduced
income tax expense by $58 million and the extension of the research and
development (R&D) credit as a result of the enactment, on Oct. 3, 2008, of the
Emergency Economic Stabilization Act (EESA) of 2008. Although EESA
retroactively extended the R&D credit for two years from Jan. 1, 2008 to Dec.
31, 2009, we did not recognize the benefit until EESA became law in the fourth
quarter of 2008. In addition to these items, the effective tax rate for the
nine month period of 2009 was affected by the partial elimination of a
valuation allowance previously provided against certain foreign company
deferred tax assets arising from carryforwards of unused tax benefits.
Headquartered in Bethesda, Md., Lockheed Martin is a global security company
that employs about 140,000 people worldwide and is principally engaged in the
research, design, development, manufacture, integration and sustainment of
advanced technology systems, products and services. The Corporation reported
2008 sales of $42.7 billion.
Web site: www.lockheedmartin.com
Conference call: Lockheed Martin will webcast the earnings conference call
(listen-only mode) at 11:00 a.m. E.D.T. on Oct. 20, 2009. A live audio
broadcast, including relevant charts, will be available on the Investor
Relations page of the company's web site at:
http://www.lockheedmartin.com/investor.
FORWARD-LOOKING STATEMENTS
Statements in this release that are "forward-looking statements" are based on
Lockheed Martin's current expectations and assumptions. Forward-looking
statements in this release include estimates of future sales, earnings and
cash flow. These statements are not guarantees of future performance and are
subject to risks and uncertainties. Actual results could differ materially
due to factors such as: the availability of government funding for our
products and services both domestically and internationally; changes in
government and customer priorities and requirements (including changes to
respond to the priorities of Congress and the Administration, budgetary
constraints, and cost-cutting initiatives); the impact of economic recovery
and stimulus plans and continued military operations in Iraq and Afghanistan
on funding for existing defense programs; the award or termination of
contracts; actual returns (or losses) on pension plan assets, interest and
discount rates and other changes that may affect pension plan assumptions; the
effect of capitalization changes (such as share repurchase activity, advance
pension funding, option exercises, or debt levels) on earnings per share;
difficulties in developing and producing operationally advanced technology
systems; the timing and customer acceptance of product deliveries; materials
availability and performance by key suppliers, subcontractors and customers;
charges from any future impairment reviews that may result in the recognition
of losses and a reduction in the book value of goodwill or other long-term
assets; the future impact of legislation, rulemaking, and changes in
accounting, tax, defense procurement, or export policies; the future impact of
acquisitions or divestitures, joint ventures or teaming arrangements; the
outcome of legal proceedings and other contingencies (including lawsuits,
government investigations or audits, and environmental remediation efforts);
the competitive environment for the Corporation's products and services; and
economic, business and political conditions domestically and internationally.
These are only some of the factors that may affect the forward-looking
statements contained in this press release. For further information regarding
risks and uncertainties associated with Lockheed Martin's business, please
refer to the Corporation's SEC filings, including the "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Risk
Factors," and "Legal Proceedings" sections of the Corporation's 2008 annual
report on Form 10-K, which may be obtained at the Corporation's website:
http://www.lockheedmartin.com
It is the Corporation's policy to only update or reconfirm its financial
projections by issuing a press release. The Corporation generally plans to
provide a forward-looking outlook as part of its quarterly earnings release
but reserves the right to provide an outlook at different intervals or to
revise its practice in future periods. All information in this release is as
of Oct. 19, 2009. Lockheed Martin undertakes no duty to update any
forward-looking statement to reflect subsequent events, actual results or
changes in the Corporation's expectations. We also disclaim any duty to
comment upon or correct information that may be contained in reports published
by investment analysts or others.
NON-GAAP PERFORMANCE MEASURES
The Corporation believes that reporting ROIC provides investors with greater
visibility into how effectively Lockheed Martin uses the capital invested in
its operations. The Corporation uses ROIC to evaluate multi-year investment
decisions and as a long-term performance measure, and also uses ROIC as a
factor in evaluating management performance for incentive compensation
purposes. ROIC is not a measure of financial performance under generally
accepted accounting principles, and may not be defined and calculated by other
companies in the same manner. ROIC should not be considered in isolation or
as an alternative to net earnings as an indicator of performance.
The Corporation calculates ROIC as follows:
Net earnings plus after-tax interest expense divided by average invested
capital (stockholders' equity plus debt), after adjusting stockholders' equity
by adding back adjustments related to postretirement benefit plans.
(In millions, except 2010 Outlook 2009 Outlook 2009 Prior
percentages) ------------ ------------ ----------
Net Earnings Combined Combined Combined
Interest Expense (multiplied
by 65%) (1)
Return >/= $2,900 >/= $3,100 >/= $3,000
Average debt (2, 5) Combined Combined Combined
Average equity (3, 5)
Average Benefit Plan
Adjustments (4, 5)
Average Invested Capital /= 16.5% >/= 19.5% >/= 18.5%
-------------------------- -------- -------- --------
(1) Represents after-tax interest expense utilizing the federal statutory
rate of 35%.
(2) Debt consists of long-term debt, including current maturities, and
short-term borrowings (if any).
(3) Equity includes non-cash adjustments, primarily to recognize the
funded / unfunded status of our benefit plans.
(4) Average Benefit Plan Adjustments reflect the cumulative value of
entries identified in our Statement of Stockholders' Equity discussed
in Note 3.
(5) Yearly averages are calculated using balances at the start of the year
and at the end of each quarter.
LOCKHEED MARTIN CORPORATION
Condensed Consolidated Statement of Earnings
Unaudited
(In millions, except per share data and percentages)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- -------------------
September September September September
27, 28, 27, 28,
2009 (a) 2008 (a) 2009 (a) 2008 (a)
-------- -------- -------- --------
Net sales $11,056 $10,577 $32,665 $31,599
Cost of sales 10,060 9,455 29,652 28,217
------ ----- ------ ------
996 1,122 3,013 3,382
Other income (expense), net 89 120 212 401
-- --- --- ---
Operating profit 1,085 1,242 3,225 3,783
Interest expense 67 85 219 264
Other non-operating income
(expense), net 54 (13) 98 14
-- --- -- --
Earnings before income taxes 1,072 1,144 3,104 3,533
Income tax expense 275 362 907 1,139
--- --- --- -----
Net earnings $797 $782 $2,197 $2,394
==== ==== ====== ======
Effective tax rate 25.7% 31.6% 29.2% 32.2%
==== ==== ==== ====
Earnings per common share:
Basic $2.09 $1.97 $5.67 $5.97
Diluted $2.07 $1.92 $5.61 $5.82
Average number of shares outstanding
Basic 381.4 397.4 387.2 401.1
Diluted 385.5 407.1 391.3 411.1
Common shares reported in stockholders'
equity at quarter end: 378.2 398.2
(a) It is our practice to close our books and records on the Sunday prior
to the end of the calendar quarter. The interim financial statements
and tables of financial information included herein are labeled based
on that convention.
A
LOCKHEED MARTIN CORPORATION
Net Sales, Segment Operating Profit and Margins
Unaudited
(In millions, except percentages)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ -----------------------
September September September September
27, 28, % 27, 28, %
2009 2008 Change 2009 2008 Change
Net sales
---------
Electronic Systems $2,922 $2,802 4% $8,911 $8,686 3%
Information Systems &
Global Services 2,977 2,950 1 8,756 8,312 5
Aeronautics 3,084 2,917 6 8,951 8,608 4
Space Systems 2,073 1,908 9 6,047 5,993 1
----- ----- ----- -----
Total net sales $11,056 $10,577 5% $32,665 $31,599 3%
======= ======= ======= =======
Operating profit
----------------
Electronic Systems $389 $364 7% $1,185 $1,139 4%
Information Systems &
Global Services 244 267 (9) 734 769 (5)
Aeronautics 397 375 6 1,151 1,064 8
Space Systems 236 244 (3) 672 743 (10)
--- --- --- ---
Segment operating
profit 1,266 1,250 1 3,742 3,715 1
Unallocated corporate
(expense) income, net (181) (8) (517) 68
---- -- ---- --
$1,085 $1,242 (13)% $3,225 $3,783 (15)%
====== ====== ====== ======
Margins:
--------
Electronic Systems 13.3% 13.0% 13.3% 13.1%
Information Systems &
Global Services 8.2 9.1 8.4 9.3
Aeronautics 12.9 12.9 12.9 12.4
Space Systems 11.4 12.8 11.1 12.4
Total operating segments 11.5 11.8 11.5 11.8
Total consolidated 9.8% 11.7% 9.9% 12.0%
B
LOCKHEED MARTIN CORPORATION
Selected Financial Data
Unaudited
(In millions, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- -------------------
September September September September
27, 2009 28, 2008 27, 2009 28, 2008
-------- -------- -------- --------
Unallocated corporate (expense)
income, net
-----------
FAS/CAS pension adjustment $(113) $32 $(342) $96
Stock compensation expense (40) (40) (112) (115)
Unusual items - 44 - 145
Other, net (28) (44) (63) (58)
--- --- --- ---
Unallocated corporate (expense)
income, net $(181) $(8) $(517) $68
===== === ===== ===
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- -------------------
September September September September
27, 2009 28, 2008 27, 2009 28, 2008
-------- -------- -------- --------
FAS/CAS pension adjustment
--------------------------
FAS pension expense $(259) $(116) $(777) $(347)
Less: CAS costs (146) (148) (435) (443)
---- ---- ---- ----
FAS/CAS pension adjustment
- (expense) income $(113) $32 $(342) $96
===== === ===== ===
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 27, 2009 SEPTEMBER 27, 2009
---------------------- ----------------------
Earnings Earnings
Operating Net per Operating Net per
profit earnings share profit earnings share
------ -------- ----- ------ -------- -----
Unusual Item - 2009
-------------------
Resolution of 2005 - 2007
IRS examination $- $58 $0.15 $- $58 $0.15
-- --- ----- -- --- -----
$- $58 $0.15 $- $58 $0.15
== === ===== == === =====
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 28, 2008 SEPTEMBER 28, 2008
---------------------- ----------------------
Earnings Earnings
Operating Net per Operating Net per
profit earnings share profit earnings share
------ -------- ----- ------ -------- -----
Unusual Items - 2008
--------------------
ILS/LKEI deferred gain $44 $28 $0.07 $60 $38 $0.09
Earnings associated with
prior years' land sales - - - 85 56 0.14
-- -- -- -- -- ----
$44 $28 $0.07 $145 $94 $0.23
=== === ===== ==== === =====
C
LOCKHEED MARTIN CORPORATION
Selected Financial Data
Unaudited
(In millions)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- -------------------
September September September September
27, 2009 28, 2008 27, 2009 28, 2008
-------- -------- -------- --------
Depreciation and amortization
of plant and equipment
----------------------
Electronic Systems $60 $69 $177 $189
Information Systems & Global
Services 18 16 50 49
Aeronautics 49 52 143 137
Space Systems 46 36 131 109
-- -- --- ---
Segments 173 173 501 484
Unallocated corporate expense, net 15 14 43 38
-- -- -- --
Total depreciation and
amortization of plant
and equipment $188 $187 $544 $522
==== ==== ==== ====
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- -------------------
September September September September
27, 2009 28, 2008 27, 2009 28, 2008
-------- -------- -------- --------
Amortization of purchased intangibles
-------------------------------------
Electronic Systems $2 $2 $7 $8
Information Systems & Global
Services 10 10 32 33
Aeronautics 13 12 37 38
Space Systems 2 1 5 3
-- -- -- --
Segments 27 25 81 82
Unallocated corporate expense, net - 2 - 8
-- -- -- --
Total amortization of
purchased intangibles $27 $27 $81 $90
=== === === ===
D
LOCKHEED MARTIN CORPORATION
Condensed Consolidated Balance Sheet
Unaudited
(In millions)
SEPTEMBER 27, DECEMBER 31,
2009 2008
---- ----
Assets
------
Cash and cash equivalents $2,709 $2,168
Receivables 6,067 5,296
Inventories 2,079 1,902
Deferred income taxes 747 755
Other current assets 841 562
--- ---
Total current assets 12,443 10,683
Property, plant and equipment, net 4,430 4,488
Goodwill 9,944 9,526
Purchased intangibles, net 338 355
Prepaid pension asset 135 122
Deferred income taxes 4,596 4,651
Other assets 3,856 3,614
----- -----
Total assets $35,742 $33,439
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $2,245 $2,030
Customer advances and amounts in excess
of costs incurred 4,934 4,535
Other current liabilities 4,162 3,735
Current maturities of long-term debt 242 242
--- ---
Total current liabilities 11,583 10,542
Long-term debt, net 3,563 3,563
Accrued pension liabilities 12,793 12,004
Other postretirement benefit and other
noncurrent liabilities 4,663 4,465
Stockholders' equity 3,140 2,865
----- -----
Total liabilities and stockholders' equity $35,742 $33,439
======= =======
Total debt-to-capitalization ratio: 55% 57%
== ==
E
LOCKHEED MARTIN CORPORATION
Condensed Consolidated Statement of Cash Flows
Unaudited
(In millions)
NINE MONTHS ENDED
------------------
September September
27, 2009 28, 2008
-------- --------
Operating Activities
--------------------
Net earnings $2,197 $2,394
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of plant and equipment 544 522
Amortization of purchased intangibles 81 90
Stock-based compensation 112 115
Excess tax benefits on stock compensation (16) (90)
Changes in operating assets and liabilities:
Receivables (720) (426)
Inventories (107) (18)
Accounts payable 189 (141)
Customer advances and amounts in excess of costs
incurred 350 91
Other 1,148 887
----- ---
Net cash provided by operating activities (a) 3,778 3,424
----- -----
Investing Activities
--------------------
Expenditures for property, plant and equipment (481) (503)
Net proceeds from (payments for) short-term investment
transactions (389) 262
Acquisitions of businesses / investments in affiliates (420) (195)
Other 11 (27)
-- ---
Net cash used for investing activities (1,279) (463)
------ ----
Financing Activities
--------------------
Repurchases of common stock (1,362) (2,338)
Issuances of common stock and related amounts 32 242
Excess tax benefits on stock compensation 16 90
Common stock dividends (668) (510)
Issuance of long-term debt and related costs - 491
Repayments of long-term debt - (1,103)
------ ------
Net cash used for financing activities (1,982) (3,128)
------ ------
Effect of exchange rate changes on cash and cash
equivalents (a) 24 (18)
Net increase (decrease) in cash and cash equivalents 541 (185)
Cash and cash equivalents at beginning of period 2,168 2,648
----- -----
Cash and cash equivalents at end of period $2,709 $2,463
====== ======
(a) In the fourth quarter of 2008, the Corporation reclassified the effect
of exchange rate changes on cash from "Cash from operations" to a
separate caption in the Statement of Cash Flows. Accordingly, the
prior period amount now reflects this presentation.
F
LOCKHEED MARTIN CORPORATION
Condensed Consolidated Statement of Stockholders' Equity
Unaudited
(In millions, except per share data)
Accumulated
Other Total
Additional Compre- Stock-
Common Paid-In Retained hensive holders'
Stock Capital Earnings Loss Equity
--------------------------------------
Balance at December 31, 2008 $393 $- $11,621 $(9,149) $2,865
Net earnings 2,197 2,197
Common stock dividends declared (a) (908) (908)
Stock-based awards and ESOP
activity 3 315 318
Common stock repurchases (b) (18) (315) (1,029) (1,362)
Other comprehensive income 30 30
---- -- ------- -------- ------
Balance at September 27, 2009 $378 $- $11,881 $(9,119) $3,140
==== == ======= ======== ======
(a) Includes dividends ($0.57 per share) declared and paid in the first,
second and third quarters. This amount also includes a dividend
($0.63 per share) that was declared on September 24, 2009 and is
payable on December 31, 2009 to shareholders of record on December 1,
2009.
(b) The Corporation repurchased 4.6 million shares for $354 million during
the third quarter. Year-to-date, the Corporation has repurchased
18.3 million common shares for $1.4 billion. The Corporation has
35.4 million shares remaining under its share repurchase program,
including the 20.0 million of additional shares that were authorized
for repurchase under the program in September 2009.
G
LOCKHEED MARTIN CORPORATION
Operating Data
Unaudited
September 27, December 31,
2009 2008
---- ----
Backlog
-------
(In millions)
Electronic Systems $20,500 (1) $22,500
Information Systems & Global Services 12,000 (2) 13,300
Aeronautics 25,900 27,200
Space Systems 18,000 17,900
------ ------
Total $76,400 $80,900
======= =======
(1) Reflects the termination for convenience of the VH-71 program, a
$985 million reduction of backlog.
(2) Reflects the termination for convenience of the TSAT Mission
Operations System (TMOS) program, a $1,600 million reduction of
backlog.
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- -------------------
September September September September
Aircraft Deliveries 27, 2009 28, 2008 27, 2009 28, 2008
------------------- -------- -------- -------- --------
F-16 8 7 24 23
F-22 4 7 14 17
C-130J 4 3 10 9
H
SOURCE Lockheed Martin Corporation
News Media: Jeff Adams, +1-301-897-6308, or Investor Relations: Jerry
Kircher, +1-301-897-6584, both of Lockheed Martin Corporation
