01—Abstract
Summary
Summary of the 10-K filed February 8, 2019. Cited figures are marked; the original filing is the authoritative source.
Lockheed Martin Corporation (LMT) reported strong financial performance for the fiscal year ending December 31, 2018.
The company generated $53.8 billiona in net sales, with a significant portion (70%) derived from U.S. Government contracts. The F-35 program remains the largest single program, contributing approximately 27% of total net sales and showing continued production and international interest. The company's strategic focus on program execution, affordability, and innovation across its four segments (Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space) appears to be yielding positive results, as evidenced by a substantial increase in net sales and operating profit compared to the previous year.
Lockheed Martin also demonstrated a commitment to shareholder returns through increased dividends and share repurchases, signaling confidence in its future financial health and operational capabilities. The robust backlog of $130.5 billionb at the end of 2018 provides a solid foundation for future revenue and earnings.
02—Key points
Key Highlights
- Net sales increased to $53.8 billion in 2018 from $49.96 billion in 2017, driven by growth across multiple segments, particularly Aeronautics and Missiles and Fire Control.
- Operating profit increased to $7.33 billion in 2018 from $6.74 billion in 2017, reflecting improved sales and operational performance.
- The F-35 program continues to be a significant revenue driver, representing 27% of total net sales in 2018, with strong international demand and ongoing production.
- Total backlog reached $130.5 billion at December 31, 2018, an increase from $105.5 billion at the end of 2017, indicating a strong pipeline of future business.
- The company returned significant capital to shareholders through dividends ($2.3 billion) and share repurchases ($1.5 billion) in 2018.
- Aeronautics and Missiles and Fire Control segments showed notable year-over-year sales growth.
- The company anticipates mid-single digit net sales growth in 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Lockheed Martin kept $0.09.
- Revenue$53.76B100.0%
- Cost of revenue−$46.49B86.5%
- Gross profit$7.27B13.5%
- Operating costs$60.0M0.1%
- Operating income$7.33B13.6%
- Interest, other & tax−$2.29B4.3%
- Net income$5.05B9.4%
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 8, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $53.76B$49.96B | +7.6% |
| Cost of Revenue | $46.49B$43.59B | +6.7% |
| Gross Profit | $7.27B$6.37B | +14.2% |
| R&D Expenses | $1.30B$1.20B | +8.3% |
| Operating Income | $7.33B$6.74B | +8.7% |
| Interest Expense | $668.00M$651.00M | +2.6% |
| Net Income | $5.05B$1.96B | +157.1% |
| EPS (Basic) | $17.74$6.82 | +160.1% |
| EPS (Diluted) | $17.59$6.75 | +160.6% |
| Shares Outstanding (Basic) | 284.50M287.80M | −1.1% |
| Shares Outstanding (Diluted) | 286.80M290.60M | −1.3% |
05—Questions
Frequently Asked Questions
What is the primary revenue source for Lockheed Martin?
The primary revenue source for Lockheed Martin is contracts with the U.S. Government, which accounted for 70% of total net sales in 2018, with the Department of Defense being the largest customer.
How did the F-35 program perform in 2018?
The F-35 program was Lockheed Martin's largest program in 2018, contributing 27% of total net sales and 68% of the Aeronautics segment's net sales. The program saw increased production volume and sustainment activities, and achieved significant milestones including the start of the Initial Operational Test & Evaluation (IOT&E) phase.
What is the company's approach to shareholder returns?
Lockheed Martin actively returns capital to shareholders through dividends and share repurchases. In 2018, the company increased its quarterly dividend by 10% and its Board of Directors approved a $1.0 billion increase to its share repurchase program, with $3.0 billion remaining authorization at year-end.
What are the main risks highlighted in the report?
Key risks include heavy dependence on U.S. Government contracts, potential impacts from government funding uncertainties and shutdowns, program execution challenges (especially on large programs like the F-35), compliance with procurement laws and regulations, increased competition, international sales risks, cybersecurity threats, and the management of acquisitions and divestitures.
06—Continue