10-QPeriod: Q1 FY2009

LOCKHEED MARTIN CORP Quarterly Report for Q1 Ended Mar 29, 2009

Filed April 23, 2009For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported its first-quarter 2009 results, showing a modest increase in net sales to $10.4 billion from $10.0 billion in the prior year, driven by growth across most segments except Aeronautics. However, operating profit saw a decline of 10% to $1,057 million from $1,178 million, impacted by higher unallocated corporate costs and a shift in pension accounting adjustments. Net earnings decreased to $666 million ($1.68 per diluted share) from $730 million ($1.75 per diluted share) in the first quarter of 2008. The company generated strong operating cash flow of $1,218 million, an increase from $880 million in the prior year, largely due to improvements in operating working capital. Lockheed Martin continued its capital return program, repurchasing $499 million in common stock and declaring $227 million in dividends, up from $172 million in the prior year's comparable period. The company also highlighted its stable liquidity position, with $2.4 billion in cash and cash equivalents and an undrawn $1.5 billion revolving credit facility, despite broader market concerns.

Financial Highlights

24 data points
Beta

Revenue

$10.09B

10.0% Gross Margin

Net Income

$666.00M

6.6% Net Margin

EPS (Diluted)

$1.68

Cash & Equivalents

$2.38B

Free Cash Flow

$1.09B

Financial Statements
Beta
Revenue$10.09B
Cost of Revenue$9.37B
Gross Profit$1.00B
Operating Income$1.04B
Interest Expense$76.00M
Net Income$666.00M
EPS (Basic)$1.69
EPS (Diluted)$1.68

Key Highlights

  • 1Net sales increased by 4% to $10.4 billion, driven by growth in Electronic Systems and Information Systems & Global Services (IS&GS), despite a slight decrease in Aeronautics.
  • 2Operating profit decreased by 10% to $1,057 million, influenced by higher unallocated corporate costs and a negative pension adjustment, partially offset by segment-level improvements.
  • 3Net earnings were $666 million, or $1.68 per diluted share, down from $730 million, or $1.75 per diluted share, in the prior year.
  • 4Operating cash flow significantly improved, rising to $1,218 million from $880 million, primarily due to better working capital management.
  • 5The company returned substantial capital to shareholders through $499 million in share repurchases and $227 million in dividends during the quarter.
  • 6Lockheed Martin maintained a strong liquidity position with $2.4 billion in cash and cash equivalents and an undrawn $1.5 billion revolving credit facility.
  • 7The company is actively assessing the impact of the U.S. Department of Defense's fiscal year 2010 budget recommendations, which include potential changes to program priorities.

Frequently Asked Questions

Net sales increased by 4% to $10.4 billion, primarily due to higher volumes in the Electronic Systems and IS&GS segments. However, operating profit decreased by 10% to $1,057 million. Net earnings also declined to $666 million ($1.68 per diluted share) from $730 million ($1.75 per diluted share) year-over-year, impacted by increased corporate costs and pension adjustments.

Lockheed Martin reported a strong increase in operating cash flow to $1,218 million, up from $880 million in the prior year, driven by improved working capital management. The company also returned significant capital to shareholders through $499 million in share repurchases and $227 million in dividends. Liquidity remains robust, with $2.4 billion in cash and cash equivalents and an available $1.5 billion credit facility.

The company is closely evaluating the Department of Defense's fiscal year 2010 budget recommendations. While some programs like the Joint Strike Fighter and AEHF satellite are expected to see stable or increased support, others like the VH-71 Presidential Helicopter program face cancellation. The DoD's potential shift of work from contractors to government employees could also affect future business levels. Lockheed Martin believes it is well-positioned in areas targeted for increased funding, such as intelligence, surveillance, and reconnaissance (ISR) and cybersecurity.

Lockheed Martin is involved in various legal proceedings and environmental matters, including class-action lawsuits related to employee savings plans and environmental remediation efforts at former facilities. The company states that it believes the probability is remote that the outcome of these matters will have a material adverse effect on its consolidated results of operations, financial position, or cash flows. Environmental liabilities recorded were $809 million, with a corresponding asset for estimated future recovery of $683 million.