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Lockheed Martin Corporation
Lockheed Martin announced an increase to its 2004 outlook for sales, earnings per share and cash from operations. The outlook for 2004 earnings per share has improved by $0.10, to $2.50 - $2.60 and cash from operations by $400 million, to approximately $2.4 billion.
"Our first quarter results demonstrate our focus on generating cash flow commensurate with our growth in sales and profits", said Chairman and Chief Executive Officer Vance Coffman. "We continue to focus on the successful execution of our backlog, leveraging all of our capabilities to achieve customer satisfaction and profitable growth and winning new business opportunities in our core markets."
SUMMARY REPORTED RESULTS AND OUTLOOK
The following table presents the Corporation's first quarter results on a GAAP basis:
REPORTED RESULTS 1st Quarter
(In millions, except per share data) 2004 2003
Net sales $ 8,347 $ 7,059
Operating profit:
Segment operating profit $ 668 $ 552
Unallocated corporate
(expense) income, net:
FAS/CAS pension adjustment (150) (72)
Other 18 25
$ 536 $ 505
Net earnings $ 291 $ 250
Diluted earnings per share $ 0.65 $ 0.55
Cash flow from operations $ 1,062 $ 544
The following table and other sections of this press release contain forward-looking statements, which are based on the Corporation's current expectations, and exclude the effects of the proposed acquisition of The Titan Corporation. Actual results may differ materially from those projected. See the complete Forward-Looking Statements discussion included in this press release.
The Corporation has increased its outlook for 2004 as presented below:
OUTLOOK 2004 Projections
(In millions, except
per share data) Current Prior
Net sales $33,800 - $34,800 $33,500 - $34,500
Operating profit:
Segment operating profit $2,700 - $2,800 $2,650 - $2,750
Unallocated corporate
(expense) income, net:
FAS/CAS pension adjustment Approx. (600) Approx. (600)
Other (50) - 0 (50) - 0
$2,050 - $2,200 $2,000 - $2,150
Diluted earnings per share $2.50 - $2.60 $2.40 - $2.50
Cash flow from operations Approx. $2,400 greater than or
equal to $2,000
Cash Flow, Leverage and Backlog
Cash provided by operating activities in the first quarter of 2004 was $1.1 billion before capital expenditures of $106 million. At March 31, 2004, the Corporation's cash and cash equivalents balance was $2.1 billion. The ratio of debt-to-capitalization was 47% at the end of the first quarter, an improvement from 48% at December 31, 2003. The Corporation's backlog was $75.6 billion at March 31, 2004, compared to $76.9 billion at December 31, 2003.
SEGMENT RESULTS
The Corporation operates in five principal business segments. Consistent with the manner in which the Corporation's business segment operating performance is evaluated, unusual items are excluded from segment earnings before interest and taxes (operating profit) and included in "Unallocated corporate (expense) income, net." (See our 2003 Form 10-K for a description of "Unallocated corporate (expense) income, net," including the FAS/CAS pension adjustment.)
The following table presents the operating results of the five business segments and reconciles these amounts to the Corporation's financial results as determined by GAAP.
1st Quarter
2004 2003
(In millions)
Net sales
Aeronautics $ 2,874 $ 2,088
Electronic Systems 2,133 1,981
Space Systems 1,578 1,528
Integrated Systems & Solutions 907 772
Information & Technology Services 852 687
Segment net sales 8,344 7,056
Other 3 3
Total net sales $ 8,347 $ 7,059
Operating profit
Aeronautics $ 206 $ 145
Electronic Systems 202 183
Space Systems 120 104
Integrated Systems & Solutions 80 72
Information & Technology Services 60 48
Segment operating profit 668 552
Unallocated corporate
(expense) income, net:
FAS/CAS pension adjustment (150) (72)
Other 18 25
Total operating profit $ 536 $ 505
The following discussion compares the operating results of each business segment for the quarter ended March 31, 2004 to the same period in 2003.
Aeronautics
($ millions)
1st Quarter
2004 2003
Net sales $2,874 $2,088
Operating profit $206 $145
Net sales for Aeronautics increased by 38% for the quarter ended March 31, 2004 from 2003 due to growth in the Combat Aircraft and Air Mobility lines of business. Combat Aircraft sales growth of $750 million was primarily due to higher volume on the F-35 Joint Strike Fighter program and on F-16 programs as a result of increased deliveries. Increased C-130J deliveries, four in 2004 compared to three in 2003, contributed to the revenue growth in Air Mobility.
Segment operating profit increased by 42% in the first quarter of 2004 when compared to 2003. Operating profit was higher primarily due to the impact of increases in aircraft deliveries and volume in Combat Aircraft programs and the return to profitability in 2004 on C-130J deliveries.
Electronic Systems
($ millions)
1st Quarter
2004 2003
Net sales $2,133 $1,981
Operating profit $202 $183
Net sales for Electronic Systems increased by 8% for the quarter ended March 31, 2004 compared to 2003. The sales increase was primarily attributable to higher volume in surface system programs at Maritime Systems & Sensors (MS2) and in combat vision programs at Missiles & Fire Control (M&FC).
Segment operating profit increased by 10% for the quarter in 2004 compared to 2003. Operating profit was higher primarily due to improved performance on tactical missile and air defense programs at M&FC and distribution technology programs at Platform, Training & Transportation Systems.
Space Systems
($ millions)
1st Quarter
2004 2003
Net sales $1,578 $1,528
Operating profit $120 $104
Net sales for Space Systems increased 3% for the quarter ended March 31, 2004 compared to 2003. The sales growth was primarily attributable to an increase in Launch Services (two Atlas launches in 2004 compared to none in 2003), which more than offset a decline in Satellites due to one less commercial satellite delivery.
Space Systems' operating profit increased by 15% for the quarter ended March 31, 2004 compared to 2003. Launch Services' operating profit increased due to the benefit resulting from the termination of a launch vehicle contract by a commercial customer and U.S. Government support of the Atlas program, which more than offset a decline in activities on the maturing Titan launch vehicle program. Satellites' operating profit declined due to performance on certain government satellite programs, which more than offset improved performance in commercial satellites.
Integrated Systems & Solutions
($ millions)
1st Quarter
2004 2003
Net sales $907 $772
Operating profit $80 $72
Net sales for Integrated Systems & Solutions (IS&S) increased by 17% and operating profit increased 11% for the quarter ended March 31, 2004 from the comparable 2003 period. These increases were primarily attributable to a higher volume of intelligence, defense and information assurance activities.
Information & Technology Services
($ millions)
1st Quarter
2004 2003
Net sales $852 $687
Operating profit $60 $48
Net sales for Information & Technology Services (I&TS) increased by 24% for the quarter ended March 31, 2004 compared to 2003. The increase in sales was primarily attributable to higher volume of $120 million in Information Technology. Information Technology's results included the net impact of the Corporation's November 2003 purchase of the ACS federal government IT business and the concurrent sale of its commercial IT business, as well as organic growth on existing IT programs. The remaining increase in sales was attributable to higher volume in Defense Services, which were partially offset by a decline in NASA program sales.
Segment operating profit increased by 25% for the quarter ended March 31, 2004 from the comparable 2003 period. Operating profit increased mainly due to the higher volume in Information Technology.
FIRST QUARTER 2004 HIGHLIGHTS
* The Department of Defense has thoroughly reviewed plans and readiness
for the F/A-22 to enter its Initial Operational Test & Evaluation
(IOT&E) phase, which is expected to start imminently. Two F/A-22s were
delivered to the U.S. Air Force during the first quarter, bringing the
total number to 23 since the program's inception.
* Lockheed Martin received production contracts totaling $505 million for
Patriot Advanced Capability-3 (PAC-3) missiles and related support
equipment.
* Awarded Multiple Kill Vehicles (MKV) prime contract by Missile Defense
Agency. An eight-year contract, it has an approximate value of $760
million.
* Awarded a contract for $472 million to enter the Risk Reduction and
System Definition phase of the Air Force's Transformational
Communications MILSATCOM Space Segment.
* Selected to provide engineering, technical and program management
services to the U.S. Navy that will streamline the contracting process
at Naval Sea Systems Command.
* Awarded a $130 million contract for components for six F-2 aircraft to
Japan.
* Ireland and Norway became the fourth and fifth countries, respectively,
to select Javelin as their medium-range, anti-armor missile. Total
contract value including both countries is approximately $100 million.
* U.S. Navy awarded a contract for $92 million to deliver the MK 41
Vertical Launching System (VLS) for three Arleigh Burke-class Aegis
destroyers.
* Received an $89 million contract for the second Low-Rate Initial
Production (LRIP II) purchase of the High Mobility Artillery Rocket
System (HIMARS) for the U.S. Army and Marine Corps.
* Singapore joined the F-35 program as a Security Cooperation
Participant, the 11th country to become part of the JSF team.
* Awarded a $700 million, nine-year information technology solutions
contract by the Environmental Protection Agency.
Web site: www.lockheedmartin.com
Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.T. on April 27, 2004. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company's web site at: http://www.lockheedmartin.com/investor.
FORWARD-LOOKING STATEMENTS
Statements in this release that are "forward-looking statements" are based on Lockheed Martin's current expectations and assumptions. Forward-looking statements in this release include estimates of future sales, earnings and cash flow. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results could differ materially because of factors such as: the availability of government funding domestically and internationally; changes in government and customer priorities and requirements (including changes to respond to terrorist threats and improve homeland security); the impact of continued hostilities in Iraq on funding for existing defense programs; the award or termination of contracts; difficulties in developing and producing operationally advanced technology systems; the timing and customer acceptance of product deliveries; performance issues with key suppliers, subcontractors and customers; cost reduction and productivity efforts; financial market and other changes that may impact pension plan assumptions; charges from any future impairment reviews that may result in the recognition of losses and a reduction in the book value of investments, goodwill or other long-term assets; the future impact of legislation; the completion and integration of proposed acquisitions or divestitures; the outcome of legal proceedings and other contingencies (including, lawsuits, government investigations and environmental remediation efforts); the competitive environment for defense and information technology products and services; and economic, business and political conditions domestically and internationally.
These are only some of the factors that may affect the forward-looking statements contained in this press release. For further information regarding risks and uncertainties associated with Lockheed Martin's business, please refer to the "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Risk Factors and Forward-Looking Statements" sections of the Corporation's SEC filings, including its annual report on Form 10-K, copies of which may be obtained at the Corporation's website: http://www.lockheedmartin.com/.
All information in this release is as of April 27, 2004. Lockheed Martin undertakes no duty to update any forward-looking statement to reflect subsequent events, actual results or changes in the Corporation's expectations.
LOCKHEED MARTIN CORPORATION
Consolidated Results
Preliminary and Unaudited
(In millions, except per share data and percentages)
QUARTER ENDED MARCH 31,
2004 2003
Net Sales $8,347 $7,059
Operating Profit [EBIT] $ 536 $ 505
Interest Expense $ 108 $ 140
Pre-tax Earnings $ 428 $ 365
Income Tax Expense $ 137 $ 115
Effective Tax Rate 32.0% 31.5%
Net Earnings $ 291 $ 250
Earnings Per Share:
Basic $ 0.66 $ 0.56
Diluted $ 0.65 $ 0.55
Average Shares Outstanding
Basic 444.3 448.8
Diluted 447.5 452.5
LOCKHEED MARTIN CORPORATION
Net Sales and Operating Profit
Preliminary and Unaudited
(In millions, except percentages)
QUARTER ENDED MARCH 31,
2004 2003 % Increase
Net sales
Aeronautics $2,874 $2,088 38 %
Electronic Systems 2,133 1,981 8 %
Space Systems 1,578 1,528 3 %
Integrated Systems & Solutions 907 772 17 %
Information & Technology Services 852 687 24 %
Segment net sales 8,344 7,056 18 %
Other 3 3
Total net sales $8,347 $7,059 18 %
Operating profit
Aeronautics $ 206 $ 145 42 %
Electronic Systems 202 183 10 %
Space Systems 120 104 15 %
Integrated Systems & Solutions 80 72 11 %
Information & Technology Services 60 48 25 %
Segment operating profit 668 552 21 %
Unallocated corporate (expense)
income, net(1) (132) (47)
Total operating profit $ 536 $ 505 6 %
Margins
Aeronautics 7.2% 6.9%
Electronic Systems 9.5% 9.2%
Space Systems 7.6% 6.8%
Integrated Systems & Solutions 8.8% 9.3%
Information & Technology Services 7.0% 7.0%
Segments 8.0% 7.8%
Total Consolidated 6.4% 7.2%
(1) "Unallocated corporate (expense) income, net" includes the FAS/CAS
pension adjustment, earnings and losses from equity investments,
interest income, costs for stock-based compensation programs, unusual
items not considered in the evaluation of segment operating
performance, corporate costs not allocated to the operating segments
and miscellaneous Corporate activities.
LOCKHEED MARTIN CORPORATION
Selected Financial Data
Preliminary and Unaudited
(In millions)
QUARTER ENDED MARCH 31,
2004 2003
Summary of unallocated corporate
(expense) income, net
FAS/CAS pension adjustment $(150) $ (72)
Other 18 25
Unallocated corporate (expense)
income, net $(132) $ (47)
FAS/CAS pension adjustment
FAS 87 expense $(223) $(108)
Less: CAS expense and funding (73) (36)
FAS/CAS pension adjustment -
expense $(150) $ (72)
Depreciation and amortization of property,
plant and equipment
Aeronautics $ 23 $ 21
Electronic Systems 39 37
Space Systems 33 27
Integrated Systems & Solutions 7 7
Information & Technology Services 13 11
Segments 115 103
Unallocated corporate expense, net 11 5
Total depreciation and
amortization $ 126 $ 108
Amortization of purchased intangibles
Aeronautics $ 12 $ 12
Electronic Systems 12 12
Space Systems 2 2
Integrated Systems & Solutions 3 3
Information & Technology Services 4 2
Segments 33 31
Unallocated corporate expense, net 3 -
Total amortization of
purchased intangibles $ 36 $ 31
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Balance Sheet
Preliminary and Unaudited
(In millions)
MARCH 31, DECEMBER 31,
2004 2003
Assets
Cash and cash equivalents $ 2,124 $ 1,010
Short-term investments - 240
Accounts receivable 4,018 4,039
Inventories 2,223 2,348
Other current assets 1,792 1,764
Total current assets 10,157 9,401
Property, plant and equipment, net 3,423 3,489
Investments in equity securities 1,065 1,060
Goodwill 7,879 7,879
Purchased intangibles, net 771 807
Prepaid pension asset 1,168 1,213
Other noncurrent assets 2,360 2,326
Total assets $26,823 $26,175
Liabilities and Stockholders' Equity
Accounts payable $ 1,611 $ 1,434
Customer advances and amounts in
excess of costs incurred 4,124 4,256
Other accrued expenses 3,046 3,067
Current maturities of long-term debt 121 136
Total current liabilities 8,902 8,893
Long-term debt 6,072 6,072
Accrued pension liabilities 1,276 1,100
Post-retirement and other
noncurrent liabilities 3,549 3,354
Stockholders' equity 7,024 6,756
Total liabilities and
stockholders' equity $26,823 $26,175
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Cash Flows
Preliminary and Unaudited
(In millions)
QUARTER ENDED MARCH 31,
2004 2003
Operating Activities
Net earnings $ 291 $ 250
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization of
property, plant and equipment 126 108
Amortization of purchased intangibles 36 31
Changes in operating assets and liabilities:
Receivables 21 (143)
Inventories 278 181
Accounts payable 177 (16)
Customer advances and amounts in
excess of costs incurred (132) (16)
Other 265 149
Net cash provided by operating activities 1,062 544
Investing Activities
Expenditures for property, plant
and equipment (106) (78)
Short-term investments 240 -
Acquisitions of businesses /
investments in affiliated companies (4) (159)
Other 17 5
Net cash provided by (used for)
investing activities 147 (232)
Financing Activities
Repayments related to long-term debt (15) (637)
Issuances of common stock 18 10
Repurchases of common stock - (279)
Common stock dividends (98) (54)
Net cash used for financing activities (95) (960)
Net increase (decrease) in cash and
cash equivalents 1,114 (648)
Cash and cash equivalents at
beginning of period 1,010 2,738
Cash and cash equivalents at
end of period $2,124 $2,090
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Stockholders' Equity
Preliminary and Unaudited
(In millions)
Additional
Common Paid-In Retained
Stock Capital Earnings
Balance at January 1, 2004 $ 446 $2,477 $5,054
Net earnings 291
Common stock dividends (98)
Stock awards and options,
and ESOP activity 1 67
Other comprehensive (loss)
Balance at March 31, 2004 $ 447 $2,544 $5,247
Accumulated
Unearned Other Total
ESOP Comprehensive Stockholders'
Shares (Loss) Equity
Balance at January 1, 2004 $ (17) $(1,204) $6,756
Net earnings 291
Common stock dividends (98)
Stock awards and options, and
ESOP activity 10 78
Other comprehensive (loss) (3) (3)
Balance at March 31, 2004 $ (7) $(1,207) $7,024
LOCKHEED MARTIN CORPORATION
Preliminary and Unaudited
Operating Data
(In millions, except deliveries and launches)
MARCH 31, DECEMBER 31,
2004 2003
Backlog
Aeronautics $36,063 $37,580
Electronic Systems 18,261 17,339
Space Systems 12,259 12,813
Integrated Systems & Solutions 4,347 4,350
Information & Technology Services 4,717 4,817
Total $75,647 $76,899
QUARTER ENDED MARCH 31,
2004 2003
Deliveries(1)
F-16(2) 15 3
C-130J 4 3
Launches
Atlas 2 -
Proton 1 -
Titan IV 1 -
(1) Deliveries -- Aircraft delivered to and accepted by customers.
(2) Sales were recognized upon delivery of 11 of the 15 F-16's in 2004 and
on all three F-16's in 2003 (unit-of-delivery sales recognition).
Sales were previously recognized on the remaining four 2004 F-16's on
a percentage-of-completion basis.
SOURCE: Lockheed Martin Corporation
CONTACT: News Media: Tom Jurkowsky, +1-301-897-6352, or Investor
Relations: James Ryan, +1-301-897-658, or Mike Gabaly, +1-301-897-6455, all of
Lockheed Martin Corporation
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