10-QPeriod: Q1 FY2004

LOCKHEED MARTIN CORP Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 5, 2004For Securities:LMT

Summary

Lockheed Martin Corporation reported strong first-quarter 2004 results, with net sales increasing by 18% year-over-year to $8.3 billion. This growth was driven by significant contributions across all five of its business segments, particularly Aeronautics, which saw a substantial rise in sales due to increased volume in the Joint Strike Fighter program and C-130J deliveries. Net earnings also saw a healthy increase of 16.4% to $291 million, resulting in diluted earnings per share of $0.65, up from $0.55 in the prior year. The company's operating profit grew 6% to $536 million. Operating cash flow was particularly robust, more than doubling to $1.1 billion, reflecting improved working capital management and operational discipline. The company also announced an amendment to its acquisition agreement for The Titan Corporation, with Titan stockholders set to receive $20 in cash per share, and provided updates on its ongoing financial and operational activities, including managing its debt portfolio and capital expenditures.

Key Highlights

  • 1Net sales increased by 18% to $8.3 billion for the first quarter of 2004 compared to the same period in 2003, driven by growth across all business segments.
  • 2Net earnings rose by 16.4% to $291 million, with diluted earnings per share improving to $0.65 from $0.55 in the prior year.
  • 3Operating profit increased by 6% to $536 million, with notable growth in the Aeronautics and Electronic Systems segments.
  • 4Operating cash flow surged to $1.1 billion in Q1 2004, a significant increase from $544 million in Q1 2003, indicating strong cash generation capabilities.
  • 5The company amended its agreement to acquire The Titan Corporation, with the revised terms offering Titan stockholders $20 in cash per share, totaling approximately $1.7 billion, plus assumption of debt.
  • 6Interest expense decreased by $32 million primarily due to debt reduction and the issuance of lower-cost convertible debentures.
  • 7Capital expenditures increased to $106 million, reflecting investments in property, plant, and equipment to support business growth.

Frequently Asked Questions

The primary driver of revenue growth was an 18% increase to $8.3 billion, fueled by strong performance across all five business segments. The Aeronautics segment, in particular, saw substantial growth due to higher volumes in the Joint Strike Fighter program and increased C-130J deliveries.

Lockheed Martin amended its merger agreement with The Titan Corporation. Under the revised terms, Titan stockholders will receive $20 in cash per share, totaling approximately $1.7 billion, and Lockheed Martin will assume about $600 million of Titan's long-term debt. The acquisition is still subject to Titan stockholder approval and other closing conditions, including the resolution of investigations into payments made by Titan's international consultants.

The company reported a very strong operating cash flow of $1.1 billion for the first quarter of 2004, more than double the $544 million from the prior year's first quarter. Management expects operating cash flow to remain strong, supporting internal investments, debt reduction, acquisitions, and shareholder returns.

The company is involved in several legal and environmental matters, including ongoing remediation efforts at various sites and a pending lawsuit with the U.S. Department of Energy regarding a waste remediation contract. While the company has recorded liabilities for these matters (approximately $425 million for environmental issues in total), management believes the probability of a material adverse effect on its consolidated results of operations, financial position, or cash flows is remote for most of these situations. However, the outcome of the DoE lawsuit remains uncertain.