10-KPeriod: FY2018

LOCKHEED MARTIN CORP Annual Report, Year Ended Dec 31, 2018

Filed February 8, 2019For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported strong financial performance for the fiscal year ending December 31, 2018. The company generated $53.8 billion 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 billion at the end of 2018 provides a solid foundation for future revenue and earnings.

Financial Highlights

51 data points
Beta

Revenue

$53.76B

13.5% Gross Margin

Net Income

$5.05B

9.4% Net Margin

EPS (Diluted)

$17.59

Total Assets

$44.88B

Cash & Equivalents

$772.00M

Free Cash Flow

$3.14B

Financial Statements
Beta
Revenue$53.76B
Cost of Revenue$46.49B
Gross Profit$7.27B
R&D Expenses$1.30B
Operating Income$7.33B
Interest Expense$668.00M
Net Income$5.05B
EPS (Basic)$17.74
EPS (Diluted)$17.59
Shares Outstanding (Basic)284.50M
Shares Outstanding (Diluted)286.80M

Key Highlights

  • 1Net 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.
  • 2Operating profit increased to $7.33 billion in 2018 from $6.74 billion in 2017, reflecting improved sales and operational performance.
  • 3The 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.
  • 4Total 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.
  • 5The company returned significant capital to shareholders through dividends ($2.3 billion) and share repurchases ($1.5 billion) in 2018.
  • 6Aeronautics and Missiles and Fire Control segments showed notable year-over-year sales growth.
  • 7The company anticipates mid-single digit net sales growth in 2019.

Frequently Asked Questions

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.

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.

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.

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.