01—Abstract
Summary
Summary of the 10-K filed February 25, 2011. Cited figures are marked; the original filing is the authoritative source.
Lockheed Martin Corporation's (LMT) 2010 10-K filing reveals a robust global security company primarily serving the U.S. Government, which accounted for 84% of its $45.8 billiona in net sales.
The company operates across four key segments: Aeronautics, Electronic Systems, Information Systems & Global Solutions (IS&GS), and Space Systems. Despite facing a challenging economic environment and potential U.S. defense budget pressures, Lockheed Martin demonstrated resilience, with net sales increasing by 4%b year-over-year. The company is strategically positioning itself for the future by focusing on core program execution, cost reduction initiatives, and portfolio shaping activities, including the divestiture of certain businesses.
Financially, Lockheed Martin generated strong operating cash flows, enabling continued investment in technology and returning capital to shareholders through dividends and share repurchases. The company also managed its debt effectively and maintained significant liquidity through its revolving credit facility.
Key programs like the F-35 Joint Strike Fighter continue to be significant drivers of future revenue, though the company acknowledges development challenges and cost restructuring efforts for this program. Investors should note the company's heavy reliance on U.S. government contracts and the associated risks related to budget appropriations and regulatory compliance.
02—Key points
Key Highlights
- Net sales for 2010 reached $45.8 billion, a 4% increase from $43.995 billion in 2009, driven by growth across most business segments, with Aeronautics and Electronic Systems being key contributors.
- The U.S. Government remained the dominant customer, accounting for 84% of net sales, followed by foreign governments at 15%.
- The company generated $3.547 billion in net cash provided by operating activities, demonstrating strong cash flow generation to support operations, investments, and shareholder returns.
- Lockheed Martin repurchased $2.483 billion of its common stock in 2010 and declared dividends totaling $969 million, indicating a commitment to returning capital to shareholders.
- The F-35 Joint Strike Fighter program continues to be a significant program, representing 12% of total sales in 2010, with plans for increased production in future years, despite facing development challenges and restructuring.
- The company is actively reshaping its portfolio through divestitures, including the sale of Enterprise Integration Group (EIG) and the planned sale of Pacific Architects and Engineers, Inc. (PAE).
- Lockheed Martin's backlog at December 31, 2010, stood at $78.2 billion, providing visibility into future revenues.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Lockheed Martin kept $0.06.
- Revenue$45.67B100.0%
- Cost of revenue−$41.83B91.6%
- Gross profit$3.84B8.4%
- Operating costs$261.0M0.6%
- Operating income$4.11B9.0%
- Interest, other & tax−$1.23B2.7%
- Net income$2.88B6.3%
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $45.67B$43.87B | +4.1% |
| Cost of Revenue | $41.83B$39.72B | +5.3% |
| Gross Profit | $3.84B$4.15B | −7.3% |
| R&D Expenses | $639.00M$717.00M | −10.9% |
| Operating Income | $4.11B$4.37B | −6.0% |
| Interest Expense | $345.00M$308.00M | +12.0% |
| Net Income | $2.88B$2.97B | −3.2% |
| EPS (Basic) | $7.90$7.73 | +2.2% |
| EPS (Diluted) | $7.81$7.64 | +2.2% |
| Shares Outstanding (Basic) | 364.20M384.80M | −5.4% |
| Shares Outstanding (Diluted) | 368.30M388.90M | −5.3% |
05—Questions
Frequently Asked Questions
What was Lockheed Martin's financial performance in 2010?
In 2010, Lockheed Martin reported net sales of $45.8 billion, a 4% increase from 2009, driven by growth in its Aeronautics and Electronic Systems segments. Net earnings were $2.926 billion, or $7.94 per diluted share, compared to $3.024 billion, or $7.78 per diluted share, in 2009. The company generated strong operating cash flow of $3.547 billion.
What is Lockheed Martin's primary customer base, and are there any significant risks associated with this customer concentration?
The U.S. Government is Lockheed Martin's primary customer, accounting for 84% of its net sales in 2010. The company's risk factors highlight a significant dependence on U.S. government contracts, and a decline or reprioritization of defense funding could adversely affect its sales, earnings, and cash flow. Delays in the U.S. budget process or operating under continuing resolutions can also impact procurement and revenue timing.
What are the key business segments of Lockheed Martin, and how did they perform in 2010?
Lockheed Martin operates in four principal business segments: Aeronautics, Electronic Systems, Information Systems & Global Solutions (IS&GS), and Space Systems. In 2010, Aeronautics and Electronic Systems showed sales growth, with Aeronautics sales increasing by 8% and Electronic Systems sales by 6%. IS&GS sales increased by 4%, while Space Systems sales decreased by 5%.
How is Lockheed Martin managing its portfolio and addressing future growth?
Lockheed Martin is engaged in portfolio shaping activities, including divesting businesses like EIG and planning to sell PAE. The company also realigns internal business structures to enhance efficiency. Growth is driven by major programs such as the F-35 Joint Strike Fighter, C-130J Super Hercules, Aegis Weapon System, and various missile and space systems, with a focus on aligning its capabilities with evolving national security priorities and increasing international sales.
06—Continue