10-QPeriod: Q3 FY2014

LOCKHEED MARTIN CORP Quarterly Report for Q3 Ended Sep 28, 2014

Filed October 24, 2014For Securities:LMT

Summary

Lockheed Martin Corporation's (LMT) third-quarter 2014 report shows a slight dip in net sales to $11.11 billion from $11.35 billion in the prior year's comparable quarter, largely driven by decreases in product sales across several segments, including Aeronautics and Space Systems, due to program wind-downs and reduced volumes. Despite the revenue contraction, net earnings saw a modest increase to $888 million, or $2.76 per diluted share, up from $873 million, or $2.66 per diluted share, in Q3 2013. This earnings growth was supported by improved operating profit, which rose to $1.39 billion from $1.25 billion, aided by favorable adjustments related to pension accounting and a more favorable FAS/CAS pension adjustment. The company continues to navigate a challenging U.S. government funding environment, emphasizing its strategy to diversify revenue streams by expanding into adjacent markets and growing international sales. Lockheed Martin also demonstrated a commitment to shareholder returns, with significant share repurchases and an increased share repurchase authorization, underscoring confidence in its ongoing financial strength and future prospects.

Financial Highlights

41 data points
Beta

Revenue

$11.11B

11.5% Gross Margin

Net Income

$888.00M

8.0% Net Margin

EPS (Diluted)

$2.76

Total Assets

$36.93B

Cash & Equivalents

$2.96B

Free Cash Flow

$990.00M

Financial Statements
Beta
Revenue$11.11B
Cost of Revenue$9.84B
Gross Profit$1.27B
Operating Income$1.39B
Interest Expense$82.00M
Net Income$888.00M
EPS (Basic)$2.81
EPS (Diluted)$2.76
Shares Outstanding (Basic)316.30M
Shares Outstanding (Diluted)321.80M

Key Highlights

  • 1Net sales for the quarter were $11.11 billion, a decrease of 2.1% compared to $11.35 billion in the prior year's quarter.
  • 2Net earnings increased to $888 million ($2.76 per diluted share) from $873 million ($2.66 per diluted share) in the prior year's quarter, indicating improved profitability despite lower sales.
  • 3Operating profit increased to $1.39 billion from $1.25 billion year-over-year, driven by favorable pension adjustments and better performance in certain segments.
  • 4The company repurchased approximately 1.6 million shares for $278 million during the quarter, and announced a $2.0 billion increase to its share repurchase program.
  • 5The Aeronautics segment experienced a slight decline in sales and operating profit, with the F-35 program sales down but production contracts showing increased volume.
  • 6The Information Systems & Global Solutions (IS&GS) segment saw a decrease in sales and operating profit, reflecting program wind-downs and reduced funding levels.
  • 7Space Systems segment sales increased due to commercial space transportation programs, though government satellite programs saw lower volumes.

Frequently Asked Questions

For the third quarter of 2014, Lockheed Martin reported a slight decrease in net sales to $11.11 billion from $11.35 billion in the same period of 2013. However, net earnings saw an increase to $888 million from $873 million, and diluted earnings per share rose to $2.76 from $2.66. This improvement in profitability was supported by an increase in operating profit to $1.39 billion from $1.25 billion, partly due to favorable pension accounting adjustments.

The company's MD&A section highlights ongoing U.S. government fiscal and economic challenges, including spending constraints under the Budget Control Act and sequestration. While the Bipartisan Budget Act provided some clarity, continued uncertainty regarding defense spending remains a concern. Lockheed Martin is mitigating this by focusing on expanding into adjacent markets and growing international sales.

Lockheed Martin actively returned capital to shareholders through share repurchases and dividends. During the quarter, the company repurchased approximately 1.6 million shares and announced a $2.0 billion increase to its share repurchase program, bringing the total remaining authorization to $3.9 billion as of September 28, 2014. Dividends paid also increased year-over-year.

Aeronautics, IS&GS, and Space Systems reported lower product sales, driven by factors like program wind-downs, reduced government volumes, and specific program completions (e.g., AEHF satellite). Space Systems saw a boost in service sales from commercial space transportation. Overall operating profit saw an increase due to favorable pension adjustments and some segment performance improvements despite revenue declines in key areas like IS&GS.