10-QPeriod: Q1 FY2019

LOCKHEED MARTIN CORP Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 24, 2019For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported strong financial results for the first quarter of 2019, with total net sales increasing by 23% year-over-year to $14.3 billion. This significant growth was driven by robust performance across all business segments, particularly Aeronautics and Missiles and Fire Control (MFC), fueled by increased production volumes and new contract awards. Net earnings surged by 47% to $1.7 billion, translating to a diluted EPS of $5.99, up from $4.02 in the prior year's quarter. The company also demonstrated solid cash flow generation, with net cash provided by operating activities significantly increasing year-over-year. The strong operational performance and healthy cash generation position Lockheed Martin favorably for continued growth and shareholder returns.

Financial Highlights

43 data points
Beta

Revenue

$14.34B

15.3% Gross Margin

Net Income

$1.70B

11.9% Net Margin

EPS (Diluted)

$5.99

Total Assets

$47.68B

Cash & Equivalents

$991.00M

Free Cash Flow

$1.66B

Financial Statements
Beta
Revenue$14.34B
Cost of Revenue$12.15B
Gross Profit$2.19B
Operating Income$2.28B
Interest Expense$171.00M
Net Income$1.70B
EPS (Basic)$6.03
EPS (Diluted)$5.99
Shares Outstanding (Basic)282.50M
Shares Outstanding (Diluted)284.30M

Key Highlights

  • 1Total net sales increased by 23% to $14.3 billion, driven by strong performance in Aeronautics (+27%) and MFC (+40%).
  • 2Net earnings saw a substantial increase of 47% to $1.7 billion.
  • 3Diluted earnings per share (EPS) rose to $5.99, up from $4.02 in the prior year's quarter.
  • 4Net cash provided by operating activities increased significantly by $1.0 billion year-over-year, reaching $1.66 billion.
  • 5The company repurchased 1.0 million shares of common stock for $284 million during the quarter.
  • 6The backlog remained strong at $133.5 billion, with an expectation to recognize approximately 37% over the next 12 months.
  • 7The F-35 program continues to be a major contributor, accounting for approximately 26% of total net sales.

Frequently Asked Questions

The primary drivers for the substantial increase in net sales were higher production volumes in the Aeronautics segment, particularly for the F-35 program, and increased volume and favorable contract mix in the Missiles and Fire Control (MFC) segment for tactical and strike missile programs, as well as integrated air and missile defense programs. Service sales also saw a notable increase across multiple segments.

Profitability improved significantly. Net earnings increased by 47% to $1.7 billion, and diluted EPS rose to $5.99 from $4.02 in the prior year's quarter. This improvement was driven by higher sales volumes, effective cost management, and favorable adjustments related to profit booking rates on contracts.

Lockheed Martin expects 2019 net sales to increase in the mid-single digit range compared to 2018. The company anticipates total business segment operating profit margin to be approximately 10.7% and cash from operations to be greater than or equal to $7.5 billion. This outlook is contingent on continued U.S. Government support and funding for its key programs.

The company is involved in several legal proceedings, including two civil False Claims Act lawsuits related to the acquisition of Sikorsky, and a Department of Justice complaint alleging civil False Claims Act and Anti-Kickback Act violations at the Hanford facility. While the company believes it has strong defenses and does not currently expect a material loss from these, potential adverse resolutions could impact net earnings and cash flows in the period they are recognized or paid. Environmental remediation costs are ongoing, with significant liabilities and corresponding receivables recorded, subject to recoverability under U.S. Government contracts.