10-QPeriod: Q1 FY2014

LOCKHEED MARTIN CORP Quarterly Report for Q1 Ended Mar 30, 2014

Filed April 24, 2014For Securities:LMT

Summary

Lockheed Martin Corporation's first quarter 2014 results show a notable increase in net earnings and diluted earnings per share compared to the same period in 2013. Net sales, however, experienced a slight decline, primarily driven by lower product and service sales across several segments, offset partially by growth in Aeronautics. The company's financial position remains robust, with strong operating cash flows supporting investments, dividends, and share repurchases. Management highlights the ongoing challenges and uncertainties related to U.S. government funding constraints, including the potential impacts of sequestration. Despite these headwinds, Lockheed Martin continues to focus on aligning its portfolio with national priorities and expanding international sales. The company has also initiated a restructuring plan aimed at optimizing its cost structure and workforce. Overall, while facing a dynamic geopolitical and fiscal environment, Lockheed Martin demonstrated solid profitability and effective cash management in the first quarter of 2014.

Financial Highlights

41 data points
Beta

Revenue

$10.65B

12.9% Gross Margin

Net Income

$933.00M

8.8% Net Margin

EPS (Diluted)

$2.87

Total Assets

$36.92B

Cash & Equivalents

$3.26B

Free Cash Flow

$2.10B

Financial Statements
Beta
Revenue$10.65B
Cost of Revenue$9.28B
Gross Profit$1.37B
Operating Income$1.43B
Interest Expense$86.00M
Net Income$933.00M
EPS (Basic)$2.92
EPS (Diluted)$2.87
Shares Outstanding (Basic)319.10M
Shares Outstanding (Diluted)325.10M

Key Highlights

  • 1Net earnings increased by 22.6% to $933 million, and diluted earnings per share rose to $2.87 from $2.33 in the prior year's first quarter.
  • 2Total net sales decreased by 3.8% to $10.65 billion, primarily due to lower sales in the Missiles and Fire Control, Mission Systems and Training, and Space Systems segments.
  • 3Operating profit increased by 27.9% to $1.43 billion, driven by improvements in several business segments and a favorable pension adjustment.
  • 4The company repurchased $1.1 billion of its common stock during the quarter, demonstrating a commitment to returning capital to shareholders.
  • 5Operating cash flow remained strong, totaling $2.1 billion for the quarter, supporting the company's financial flexibility.
  • 6The Aeronautics segment saw an increase in net sales, driven by higher aircraft deliveries and volume on production contracts.
  • 7The company continues to navigate U.S. government budget constraints and sequestration risks, noting potential impacts on future operations.

Frequently Asked Questions

The increase in net earnings was primarily driven by higher operating profit across several business segments, improved risk retirements on contracts, and a favorable shift in the pension accounting adjustment (FAS/CAS) from expense to income, partly due to an increase in the discount rate.

Total net sales decreased due to lower sales in multiple segments, including Missiles and Fire Control (technical services), Mission Systems and Training (integrated warfare systems and sensors, undersea systems), and Space Systems (government satellite programs like GPS-III). These decreases were partially offset by increased sales in the Aeronautics segment, driven by higher aircraft deliveries and production volumes.

Lockheed Martin acknowledges ongoing U.S. government fiscal challenges, including the Budget Control Act and sequestration. While the Bipartisan Budget Act of 2013 provided some relief for FY14 and FY15, uncertainty remains for future years. The company expects continued budget constraints and is working to mitigate these risks by expanding into adjacent markets and growing international sales, though it notes that sequestration or other cuts could materially affect operations.

Lockheed Martin initiated a restructuring plan in November 2013 to close and consolidate certain facilities and reduce its workforce by approximately 4,000 positions across its IS&GS, MST, and Space Systems segments. This plan is intended to better align its organization and cost structure with future workload projections and evolving market conditions.