10-QPeriod: Q2 FY2022

LOCKHEED MARTIN CORP Quarterly Report for Q2 Ended Jun 26, 2022

Filed July 19, 2022For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported its second quarter 2022 financial results, showing a decrease in net sales and net earnings compared to the prior year period. Net sales for the quarter were $15.4 billion, down from $17.0 billion in Q2 2021, primarily impacted by lower product sales across several segments, particularly Aeronautics and Space, attributed to factors like contract volume reductions and program renationalization. Net earnings significantly declined to $309 million ($1.16 per share) from $1.8 billion ($6.52 per share) in the prior year quarter. The substantial decrease in earnings was largely driven by a significant noncash, non-operating pension settlement charge of $1.5 billion recognized in the current quarter. Despite these top-line and bottom-line decreases, the company highlighted increased interest for its products and services due to the geopolitical climate, particularly in Europe, and continued strong U.S. government funding. The company also continued its commitment to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

45 data points
Beta

Revenue

$15.45B

12.7% Gross Margin

Net Income

$309.00M

2.0% Net Margin

EPS (Diluted)

$1.16

Total Assets

$51.76B

Cash & Equivalents

$1.77B

Free Cash Flow

$1.33B

Financial Statements
Beta
Revenue$15.45B
Cost of Revenue$13.49B
Gross Profit$1.96B
Operating Income$1.96B
Interest Expense$141.00M
Net Income$309.00M
EPS (Basic)$1.16
EPS (Diluted)$1.16
Shares Outstanding (Basic)265.80M
Shares Outstanding (Diluted)266.70M

Key Highlights

  • 1Net sales for Q2 2022 decreased by 9.3% to $15.4 billion compared to $17.0 billion in Q2 2021.
  • 2Net earnings for Q2 2022 plummeted to $309 million ($1.16 per diluted share) from $1.8 billion ($6.52 per diluted share) in Q2 2021.
  • 3A significant factor impacting net earnings was a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion after-tax, or $4.33 per share) recognized in the current quarter.
  • 4Sales in the Aeronautics segment decreased by 12% to $5.9 billion, primarily due to lower volume on certain contracts and supply chain delays.
  • 5The Space segment saw an 11% decrease in net sales to $2.8 billion, largely due to the renationalization of the Atomic Weapons Establishment (AWE) program.
  • 6The company continued its capital return program, paying dividends totaling $743 million and repurchasing shares during the quarter.
  • 7Backlog remained strong at $134.6 billion as of June 26, 2022, providing visibility for future revenue.

Frequently Asked Questions

The substantial decrease in net earnings was primarily due to a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion after-tax, or $4.33 per share) that Lockheed Martin recognized in the second quarter of 2022. This charge is related to the transfer of defined benefit pension obligations and plan assets to an insurance company.

Net sales decreased by 9.3% to $15.4 billion due to lower product sales across key segments. Specifically, the Aeronautics segment experienced a 12% decline in sales due to lower volumes on contracts and supply chain disruptions, while the Space segment saw an 11% decrease largely due to the renationalization of the Atomic Weapons Establishment (AWE) program. Lower volumes on specific programs within other segments also contributed to the overall sales decline.

Lockheed Martin reported a strong backlog of $134.6 billion as of June 26, 2022. The company expects to recognize approximately 36% of this backlog over the next 12 months and 59% over the next 24 months, providing significant revenue visibility for the coming years.

The company is actively managing supply chain disruptions, including accelerating payments to suppliers. To mitigate inflation impacts, Lockheed Martin is factoring heightened inflation into new contract pricing and seeking economic price adjustment clauses. While significant impacts were not seen in the first half of 2022, persistent inflation could pressure profits, especially on existing fixed-price contracts.