01—Abstract
Summary
Summary of the 10-K filed February 9, 2015. Cited figures are marked; the original filing is the authoritative source.
Lockheed Martin Corporation's (LMT) 2014 10-K filing reveals a company heavily reliant on U.S. government contracts, with 79% of its $45.6 billiona in net sales coming from this source, primarily the Department of Defense.
The company operates across five segments: Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and Fire Control (MFC), Mission Systems and Training (MST), and Space Systems. The Aeronautics segment, driven by the F-35 program (17%b of total sales), remains the largest, while IS&GS faces challenges from declining IT budgets and contract fragmentation. The company emphasizes program execution, affordability, and strategic investment in technology and personnel, while also focusing on growing international sales.
Key financial highlights include managing a backlog of $80.5 billionc at year-end 2014, with 40% expected to convert to sales in 2015. The company reported net earnings from continuing operations of $3.6 billion ($11.21 per diluted share) for 2014.
Risk factors highlighted include heavy dependence on U.S. government funding, regulatory compliance, competition, supply chain dependencies, and international sales risks. The company is actively returning capital to shareholders through dividends and share repurchases, with a significant increase in quarterly dividends in 2014 and an ongoing share repurchase program.
02—Key points
Key Highlights
- 79% of Lockheed Martin's $45.6 billion in net sales in 2014 were derived from U.S. government contracts, with 59% from the Department of Defense.
- The F-35 program is the company's largest single program, accounting for 17% of total consolidated net sales in 2014.
- The company had a significant backlog of $80.5 billion at December 31, 2014.
- Net earnings from continuing operations were $3.6 billion ($11.21 per diluted share) in 2014.
- The company's five business segments are Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and Fire Control (MFC), Mission Systems and Training (MST), and Space Systems.
- Lockheed Martin is actively managing its capital structure, increasing dividends by 13% in 2014 and continuing share repurchase programs.
- Key risks include dependence on U.S. government appropriations, regulatory compliance, and increased competition, particularly in the IS&GS segment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Lockheed Martin kept $0.09.
- Revenue$39.95B100.0%
- Cost of revenue−$35.26B88.3%
- Gross profit$4.68B11.7%
- Operating costs$329.0M0.8%
- Operating income$5.01B12.5%
- Interest, other & tax−$1.40B3.5%
- Net income$3.61B9.0%
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 9, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $39.95B$45.36B | −11.9% |
| Cost of Revenue | $35.26B$41.17B | −14.3% |
| Gross Profit | $4.68B$4.19B | +11.8% |
| R&D Expenses | $733.00M$697.00M | +5.2% |
| Operating Income | $5.01B$4.50B | +11.3% |
| Interest Expense | $340.00M$350.00M | −2.9% |
| Net Income | $3.61B$2.98B | +21.2% |
| EPS (Basic) | $11.41$9.29 | +22.8% |
| EPS (Diluted) | $11.21$9.13 | +22.8% |
| Shares Outstanding (Basic) | 316.80M320.90M | −1.3% |
| Shares Outstanding (Diluted) | 322.40M326.50M | −1.3% |
05—Questions
Frequently Asked Questions
What is Lockheed Martin's primary source of revenue?
Lockheed Martin's primary source of revenue is from contracts with agencies of the U.S. Government, which accounted for 79% of its net sales in 2014, with the Department of Defense being the largest customer.
Which segment is the largest contributor to Lockheed Martin's revenue?
The Aeronautics segment is the largest contributor, with net sales of $14.9 billion in 2014, representing 32% of total consolidated net sales. This segment is significantly driven by the F-35 Joint Strike Fighter program.
What is the company's outlook regarding U.S. government spending and its impact?
Lockheed Martin expects continued downward pressure on sales and operating profit due to U.S. government budget reductions and potential sequestration. While the company is seeking to diversify through international sales and adjacent markets, its business remains heavily tied to government appropriations.
How is Lockheed Martin returning value to shareholders?
Lockheed Martin returned value to shareholders through a combination of dividends and share repurchases. In 2014, the company increased its quarterly dividend by 13% and continued to repurchase its common stock, demonstrating a commitment to returning capital to investors.
06—Continue