10-QPeriod: Q2 FY2001

LOCKHEED MARTIN CORP Quarterly Report for Q2 Ended Jun 30, 2001

Filed August 10, 2001For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported its second quarter and first half results for the period ending June 30, 2001. The company experienced a decrease in net sales for both periods compared to 2000, with net sales for the quarter at $5.96 billion (down 4% from $6.21 billion) and for the six months at $10.97 billion (down 7% from $11.77 billion). Despite lower sales, earnings from operations saw an increase, reflecting improved profitability. Net earnings for the quarter were $144 million, a significant increase from $42 million in the prior year, and $249 million for the six-month period, up from $96 million. This improvement was partly driven by a $111 million pre-tax gain from the sale of surplus real estate in the Space Systems segment, offset by a $100 million impairment charge on an investment in Global Telecommunications. The company also made substantial debt repayments, leading to a decrease in total debt and an improvement in the debt-to-capitalization ratio.

Key Highlights

  • 1Net sales decreased by 4% for the quarter and 7% for the six months ended June 30, 2001, compared to the prior year periods.
  • 2Net earnings showed a substantial increase, with quarterly earnings at $144 million (vs. $42 million in Q2 2000) and six-month earnings at $249 million (vs. $96 million in H1 2000).
  • 3Operating profit increased by 29% for the quarter to $419 million and by 22% for the six months to $791 million, indicating improved operational efficiency.
  • 4The company reported a pre-tax gain of $111 million from the sale of surplus real estate in its Space Systems segment.
  • 5A $100 million impairment charge was recorded in the Global Telecommunications segment related to an investment in Americom Asia-Pacific.
  • 6Total debt decreased significantly, with net cash used for financing activities at $1.2 billion in the first six months of 2001, down from $576 million in the prior year.
  • 7The backlog of undelivered orders stood at approximately $53.8 billion at the end of the quarter.

Frequently Asked Questions

The increase in net earnings was driven by a combination of factors including operational efficiencies leading to higher earnings from operations, a significant $111 million pre-tax gain from the sale of surplus real estate in the Space Systems segment, and a reduction in interest expense due to lower debt levels. These positive impacts more than offset other charges.

Lockheed Martin made significant progress in reducing its debt during the first six months of 2001, utilizing $1.2 billion in cash from operations for debt reduction. This resulted in a decrease in total debt and an improved debt-to-capitalization ratio from 58% to 54%. The company reported $1.2 billion in cash and cash equivalents and a $3.5 billion revolving credit facility, indicating sufficient liquidity.

Yes, the results were impacted by non-recurring items. A notable gain of $111 million (pre-tax) was recognized from the sale of real estate in the Space Systems segment. Conversely, a $100 million impairment charge was recognized in the Global Telecommunications segment related to an investment. The prior year's results also included a significant charge related to the Globalstar guarantee.

The Space Systems segment saw a decline in net sales primarily due to reduced commercial space activities and the absence of favorable adjustments from the prior year's Titan IV program. The Aeronautics segment's net sales also decreased due to lower deliveries of fighter aircraft and C-130J aircraft, though development activities provided some offset. Operating profit in Aeronautics remained stable due to favorable performance on other combat aircraft programs.