10-KPeriod: FY2014

LOCKHEED MARTIN CORP Annual Report, Year Ended Dec 31, 2014

Filed February 9, 2015For Securities:LMT

Summary

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 billion 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% 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 billion 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.

Financial Highlights

46 data points
Beta

Revenue

$39.95B

11.7% Gross Margin

Net Income

$3.61B

9.0% Net Margin

EPS (Diluted)

$11.21

Total Assets

$37.05B

Cash & Equivalents

$1.45B

Free Cash Flow

$3.87B

Financial Statements
Beta
Revenue$39.95B
Cost of Revenue$35.26B
Gross Profit$4.68B
R&D Expenses$733.00M
Operating Income$5.01B
Interest Expense$340.00M
Net Income$3.61B
EPS (Basic)$11.41
EPS (Diluted)$11.21
Shares Outstanding (Basic)316.80M
Shares Outstanding (Diluted)322.40M

Key Highlights

  • 179% 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.
  • 2The F-35 program is the company's largest single program, accounting for 17% of total consolidated net sales in 2014.
  • 3The company had a significant backlog of $80.5 billion at December 31, 2014.
  • 4Net earnings from continuing operations were $3.6 billion ($11.21 per diluted share) in 2014.
  • 5The 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.
  • 6Lockheed Martin is actively managing its capital structure, increasing dividends by 13% in 2014 and continuing share repurchase programs.
  • 7Key risks include dependence on U.S. government appropriations, regulatory compliance, and increased competition, particularly in the IS&GS segment.

Frequently Asked Questions

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.

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.

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.

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.