10-QPeriod: Q2 FY2020

LOCKHEED MARTIN CORP Quarterly Report for Q2 Ended Jun 28, 2020

Filed July 21, 2020For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported strong financial results for the second quarter and first half of 2020, demonstrating resilience despite the ongoing COVID-19 pandemic. Net sales increased by 12% and 17% year-over-year for the first half and second quarter, respectively, driven by robust performance across all four business segments, particularly Aeronautics and Missiles and Fire Control. Diluted earnings per share also saw a significant increase, reflecting improved profitability and effective cost management. The company's financial strength is underpinned by its substantial backlog and continued demand from its primary customer, the U.S. Government. LMT's proactive management of supply chain disruptions related to COVID-19, coupled with government support measures, helped mitigate operational impacts. The company's 2020 outlook remains positive, with expected high-single digit net sales growth, reflecting confidence in its business operations and strategic positioning within the aerospace and defense sector.

Financial Highlights

45 data points
Beta

Revenue

$16.22B

13.6% Gross Margin

Net Income

$1.63B

10.0% Net Margin

EPS (Diluted)

$5.79

Total Assets

$49.60B

Cash & Equivalents

$2.85B

Free Cash Flow

$2.18B

Financial Statements
Beta
Revenue$16.22B
Cost of Revenue$14.01B
Gross Profit$2.21B
Operating Income$2.09B
Interest Expense$149.00M
Net Income$1.63B
EPS (Basic)$5.81
EPS (Diluted)$5.79
Shares Outstanding (Basic)279.80M
Shares Outstanding (Diluted)280.80M

Key Highlights

  • 1Total net sales for the quarter increased to $16.22 billion, up 12% from $14.43 billion in the prior year's quarter.
  • 2Net earnings for the quarter rose to $1.63 billion, a 15% increase from $1.42 billion in the same period last year.
  • 3Diluted earnings per share for the quarter were $5.79, up from $5.00 in the prior year's quarter.
  • 4Aeronautics segment sales grew significantly, driven by the F-35 program, with operating profit up 25% year-over-year.
  • 5Missiles and Fire Control segment sales increased 16% due to higher volume in integrated air and missile defense and tactical/strike missile programs.
  • 6The company generated $4.5 billion in net cash from operating activities in the first half of 2020, a substantial increase from $3.3 billion in the prior year.
  • 7LMT maintained a strong cash position with $2.9 billion in cash and cash equivalents as of June 28, 2020.

Frequently Asked Questions

Lockheed Martin reported that while COVID-19 presented challenges such as increased costs, supplier delays, and travel restrictions, its financial results for the first half of 2020 were positively impacted by favorable contract awards and strong performance. Proactive measures and government support helped to mitigate disruptions. The company expects that the ultimate impact remains uncertain and depends on future developments.

Revenue growth was driven by increased volume across all four business segments. Specifically, the Aeronautics segment saw growth from the F-35 program and classified contracts, while Missiles and Fire Control benefited from higher volume in integrated air and missile defense and tactical/strike missile programs. Rotary and Mission Systems saw an increase due to Sikorsky helicopter programs, and Space benefited from higher volume in government satellite programs like Next Gen OPIR and Hypersonics.

The F-35 program remains a significant contributor, representing approximately 28% of total consolidated net sales for the quarter and six months ended June 28, 2020. The program continues to progress with ongoing production, development, and sustainment contracts, and the company delivered 25 production aircraft in Q2 2020.

The company generated strong operating cash flows which funded operations, capital expenditures, debt service, dividends, and share repurchases. Lockheed Martin paid dividends totaling $1.4 billion in the first half of 2020 and repurchased $1.0 billion of its common stock. The company also issued $1.2 billion in senior unsecured notes and used proceeds to redeem existing debt.