10-QPeriod: Q1 FY2002

LOCKHEED MARTIN CORP Quarterly Report for Q1 Ended Mar 31, 2002

Filed May 3, 2002For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported a strong first quarter for 2002, with net sales increasing by 26% to $5.97 billion compared to the same period in 2001. This growth was driven by robust performance across all operating segments, notably Systems Integration, Space Systems, and Aeronautics. Net earnings more than doubled to $218 million from $105 million in the prior year's quarter. Diluted earnings per share also saw a significant improvement, rising to $0.49 from $0.25. The company also benefited from the adoption of SFAS No. 142, which prohibits the amortization of goodwill, positively impacting earnings. Operating profit increased by 21% to $474 million, demonstrating improved operational efficiency. The company continues to manage its telecommunications business exit, with remaining assets classified as held for sale and expected to be sold by year-end 2002. Overall, the first quarter presented a positive financial picture with substantial year-over-year growth in both revenue and profitability.

Key Highlights

  • 1Net sales surged by 26% to $5.97 billion in Q1 2002 compared to Q1 2001, reflecting broad-based growth across all segments.
  • 2Net earnings more than doubled, reaching $218 million ($0.49 per diluted share) in Q1 2002, up from $105 million ($0.25 per diluted share) in Q1 2001.
  • 3Operating profit saw a significant increase of 21% to $474 million in Q1 2002.
  • 4The adoption of SFAS No. 142, eliminating goodwill amortization, positively impacted reported earnings.
  • 5The company continues to divest its global telecommunications services business, with remaining assets classified as held for sale.
  • 6Interest expense decreased by $49 million to $148 million due to a reduction in the debt portfolio.
  • 7Cash provided by operating activities was $428 million in Q1 2002, compared to $1.05 billion in Q1 2001, primarily due to working capital changes.

Frequently Asked Questions

Revenue growth was driven by increased volume across all operating segments. Specifically, Systems Integration benefited from growth in Missiles & Fire Control and Naval Electronics and Surveillance Systems. Space Systems saw a significant increase due to higher commercial space activities and government satellite programs. The Aeronautics segment experienced growth from programs like the Joint Strike Fighter and increased deliveries of the C-130J.

The adoption of SFAS No. 142, effective January 1, 2002, eliminated the amortization of goodwill, which had reduced earnings by $48 million in the first quarter of 2001. Additionally, the extension of the useful life of a contract intangible asset in the Aeronautics segment further reduced amortization expense. This accounting change positively impacted reported earnings and operating profit.

Lockheed Martin announced its exit from this business in December 2001. Some businesses have been realigned, while others are classified as held for sale, with the expectation that their sale will be completed by the end of 2002. The sale of COMSAT Mobile Communications was completed in Q1 2002, and an agreement to sell COMSAT World Systems was reached.

The company generated $428 million in cash from operating activities in Q1 2002 and ended the quarter with $1.37 billion in cash and cash equivalents. Management anticipates that these resources, along with existing credit facilities, will be sufficient to meet operating, capital expenditure, and debt service requirements for the next twelve months. The company also continues to explore the sale of non-core assets.