10-QPeriod: Q3 FY2013

LOCKHEED MARTIN CORP Quarterly Report for Q3 Ended Sep 29, 2013

Filed October 25, 2013For Securities:LMT

Summary

Lockheed Martin Corporation's (LMT) third-quarter 2013 results show resilience amidst evolving fiscal landscapes, particularly concerning U.S. government spending. The company reported net earnings of $873 million, or $2.66 per diluted share, for the quarter ended September 29, 2013. This represents a notable increase from $727 million, or $2.21 per diluted share, in the same period last year. The company highlighted a decrease in net sales to $11.3 billion from $11.9 billion year-over-year, primarily driven by lower product sales across several segments, though this was partially offset by growth in services sales. Despite the slight dip in overall sales, operational performance remained robust, with a focus on cost management and efficient program execution. The company's outlook for 2013 indicated an expected mid-single digit decline in net sales compared to 2012, with segment operating profit anticipated to remain comparable. Investors should note the ongoing impact of U.S. government budget constraints, including sequestration, which continue to be a primary factor influencing future revenue and operational planning. Lockheed Martin remains committed to returning value to shareholders through dividends and share repurchases, underscoring its stable financial footing.

Financial Highlights

44 data points
Beta

Revenue

$11.35B

10.4% Gross Margin

Net Income

$873.00M

7.7% Net Margin

EPS (Diluted)

$2.66

Total Assets

$38.91B

Cash & Equivalents

$2.66B

Free Cash Flow

$691.00M

Financial Statements
Beta
Revenue$11.35B
Cost of Revenue$10.16B
Gross Profit$1.18B
Operating Income$1.25B
Interest Expense$84.00M
Net Income$873.00M
EPS (Basic)$2.72
EPS (Diluted)$2.66
Shares Outstanding (Basic)321.30M
Shares Outstanding (Diluted)327.50M

Key Highlights

  • 1Net earnings increased to $873 million ($2.66 per diluted share) in Q3 2013, up from $727 million ($2.21 per diluted share) in Q3 2012.
  • 2Total net sales decreased by 5% to $11.3 billion in Q3 2013, primarily due to a 7% decline in product sales, partially offset by a 5% increase in services sales.
  • 3The Aeronautics segment saw a 2% decrease in net sales, largely due to fewer deliveries of the F-35 program, though operating profit remained stable.
  • 4The Missiles and Fire Control (MFC) segment reported a 3% increase in net sales and a significant 19% increase in operating profit, driven by higher volume in air and missile defense programs.
  • 5Shareholder returns remain a priority, with $1.5 billion spent on share repurchases during the first nine months of 2013 and a $3.0 billion increase to the share repurchase program authorized.
  • 6The company continues to manage significant U.S. government budget uncertainties, including sequestration, which is expected to impact future business operations.
  • 7Defined benefit pension plan contributions totaled $1.5 billion for the first nine months of 2013, completing the planned 2013 funding.

Frequently Asked Questions

For the quarter ended September 29, 2013, Lockheed Martin reported net earnings of $873 million, or $2.66 per diluted share, compared to $727 million, or $2.21 per diluted share, in the same period of 2012. Total net sales decreased to $11.3 billion from $11.9 billion year-over-year.

The decrease in net sales was primarily driven by lower volume and deliveries across several product lines, notably in the Aeronautics and Information Systems & Global Solutions (IS&GS) segments. Specific programs contributing to the decline include the F-35 program in Aeronautics and various command and control programs in IS&GS.

Lockheed Martin acknowledges the significant impact of U.S. government budget constraints, including sequestration, on the defense industry. The company's outlook for 2013 anticipated a mid-single digit decline in net sales due to these factors. While the company has experienced minimal impacts to date from GFY 2013 sequestration, future impacts remain uncertain and are being closely monitored. The company's business strategy aims to align with critical national priorities, and it expects to recover certain costs related to government actions, such as WARN Act notifications, through contract pricing.

Lockheed Martin demonstrates a strong commitment to shareholder returns. During the first nine months of 2013, the company repurchased $1.5 billion of its common stock. Furthermore, on September 26, 2013, the Board of Directors approved an additional $3.0 billion increase to the share repurchase program, indicating confidence in future cash flows and a desire to enhance shareholder value.