10-QPeriod: Q3 FY2004

LOCKHEED MARTIN CORP Quarterly Report for Q3 Ended Sep 30, 2004

Filed October 28, 2004For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported its financial results for the third quarter and the first nine months of 2004. The company demonstrated solid top-line growth, with net sales increasing by 4% for the quarter and 12% year-to-date compared to the same periods in 2003. This growth was primarily driven by strong performance across most business segments, notably Aeronautics, Integrated Systems & Solutions, and Information & Technology Services. Profitability also saw a significant improvement, with operating profit up 31% for the quarter and 17% year-to-date. Net earnings for the quarter rose to $307 million ($0.69 per diluted share) from $217 million ($0.48 per diluted share) in the prior year, and year-to-date net earnings reached $894 million ($2.00 per diluted share) from $709 million ($1.57 per diluted share). The company's strong cash flow from operations, which more than doubled year-to-date, provided ample liquidity to fund investments, debt reduction, share repurchases, and increased dividends, signaling a healthy financial position.

Key Highlights

  • 1Net sales increased by 4% to $8.4 billion for the third quarter and by 12% to $25.6 billion for the first nine months of 2004, indicating robust revenue growth.
  • 2Operating profit surged by 31% to $561 million for the third quarter and by 17% to $1.6 billion for the nine months, showcasing improved operational efficiency and profitability.
  • 3Net earnings grew significantly to $307 million ($0.69/share) for the quarter and $894 million ($2.00/share) for the nine months, representing substantial year-over-year improvements.
  • 4Cash flow from operations more than doubled year-to-date, reaching $2.8 billion, highlighting the company's strong ability to generate cash.
  • 5The company made significant pension plan contributions, including a $400 million contribution in Q3 2004, with $380 million being a discretionary prepayment to reduce future funding requirements.
  • 6Shareholders received increased dividends, with quarterly dividends rising from $0.12 to $0.22 and a further increase to $0.25 announced.
  • 7Lockheed Martin actively repurchased shares, buying back 9.3 million shares for $465 million in the first nine months of 2004.

Frequently Asked Questions

Revenue growth was driven by increases in all business segments except Space Systems. Notably, Aeronautics saw growth from Air Mobility programs and higher volume on Combat Aircraft programs like the F/A-22. Electronic Systems benefited from higher volume in Maritime Systems & Sensors, while Integrated Systems & Solutions and Information & Technology Services also showed strong sales increases due to higher volume in intelligence, defense, information assurance, and IT activities.

Profitability improved significantly. Operating profit increased by 31% for the quarter and 17% for the nine-month period. This was driven by factors such as higher sales volume, improved performance on key programs like the F/A-22, and favorable recognition of profits on C-130J aircraft deliveries. Net earnings saw a substantial increase of over 40% for the quarter and over 25% year-to-date.

Lockheed Martin's liquidity remains strong, primarily supported by robust operating cash flows. Cash from operations was $2.8 billion for the first nine months of 2004, a significant increase from $1.7 billion in the prior year. The company had $2.8 billion in cash and cash equivalents at the end of the quarter, which is expected to be sufficient to meet operational, capital expenditure, dividend, and debt service requirements over the next three years.

The company is actively managing its debt. It made scheduled repayments and used cash from operations to reduce long-term debt. Notably, the company announced tender offers to purchase up to $850 million of its outstanding debt in October 2004, which is expected to result in an after-tax charge but also an estimated annual reduction in interest expense. The company also improved its debt-to-total capital ratio.