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Lockheed Martin Corporation
"With our strong performance through the first six months, we are on our way to meeting this year's operational and financial goals," said Chairman and Chief Executive Officer Vance Coffman. "Our cash generation continues to be outstanding, and we spent over $275 million repurchasing about 6 million shares during the quarter. We are well positioned and focused on serving the needs of our customers and enhancing shareholder value."
SUMMARY REPORTED RESULTS AND OUTLOOK
The following table presents the Corporation's results on a GAAP basis for the quarter and year-to-date periods:
REPORTED RESULTS
(In millions, except 2nd Quarter Year-to-Date
per share data) 2004 2003 2004 2003
Net sales $8,776 $7,709 $17,123 $14,768
Operating profit
Segment operating
profit $740 $592 $1,408 $1,144
Unallocated corporate
(expense), net:
FAS/CAS pension
adjustment (148) (68) (298) (140)
Other (48) (54) (30) (29)
$544 $470 $1,080 $975
Net earnings $296 $242 $587 $492
Diluted earnings
per share $0.66 $0.54 $1.31 $1.09
Cash flow
from operations $734 $845 $1,796 $1,389
The following table and other sections of this press release contain forward-looking statements, which are based on the Corporation's current expectations. Actual results may differ materially from those projected. See the Forward-Looking Statements discussion included in this press release.
OUTLOOK
(In millions, except per share data) 2004 Projections
Net sales $33,800 - $34,800*
Operating profit:
Segment operating profit $2,700 - $2,800*
Unallocated corporate (expense)
income, net:
FAS/CAS pension adjustment approx. (600)
Other (50) - 0
$2,050 - $2,200*
Diluted earnings per share $2.50 - $2.60*
Cash flow from operations Approx. $2,400
* Results are expected to be closer to the higher end of the range.
Year-to-Date Results
Net sales for the first six months of 2004 were $17.1 billion, a 16% increase over the $14.8 billion recorded in the comparable 2003 period.
Net earnings for the six months ended June 30, 2004 were $587 million ($1.31 per share) compared to $492 million ($1.09 per share) in 2003. The 2003 results included a pre-tax charge of $41 million (reported in Unallocated Corporate Expense, net) related to the Corporation's exit from the commercial mail sorting business, which decreased earnings by $27 million ($0.06 per share).
Cash Flow, Leverage and Backlog
Cash provided by operating activities for the quarter and six months ended June 30, 2004 was $734 million and $1.8 billion. Capital expenditures for the quarter and six months ended June 30, 2004 were $154 million and $260 million. The Corporation repurchased 5.8 million of its common shares for $278 million during the quarter and retired $137 million of debt during the first six months of 2004. Since October 2002, the Corporation has used approximately $800 million to repurchase 17.5 million shares of its common stock. Additionally, the Corporation has reduced its long-term debt from approximately $12 billion at the end of 1999 to approximately $6 billion at June 30, 2004.
The ratio of total debt-to-capitalization was 46% at the end of the second quarter, an improvement from 48% at December 31, 2003. At June 30, 2004, the Corporation's cash and cash equivalents balance was $2.2 billion.
The Corporation's backlog was $74.6 billion at June 30, 2004. SEGMENT RESULTS
The Corporation operates in five business segments. Consistent with the manner in which the Corporation's business segment operating performance is evaluated, unusual items are excluded from segment results 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 the Corporation on a consolidated basis as determined by GAAP:
(In millions) 2nd Quarter Year-to-Date
2004 2003 2004 2003
Net sales
Aeronautics $3,141 $2,405 $6,015 $4,493
Electronic Systems 2,205 2,174 4,338 4,155
Space Systems 1,547 1,544 3,125 3,072
Integrated Systems
& Solutions 963 810 1,870 1,582
Information &
Technology Services 917 772 1,769 1,459
Operating segments 8,773 7,705 17,117 14,761
Other 3 4 6 7
Total net sales $8,776 $7,709 $17,123 $14,768
Operating profit
Aeronautics $239 $162 $445 $307
Electronic Systems 220 211 422 394
Space Systems 129 101 249 205
Integrated Systems
& Solutions 81 67 161 139
Information &
Technology Services 71 51 131 99
Segment operating
profit 740 592 1,408 1,144
Unallocated corporate
(expense) net:
FAS/CAS pension
adjustment (148) (68) (298) (140)
Other (48) (54) (30) (29)
Total operating profit $544 $470 $1,080 $975
The following discussion compares the operating results of the business segments for the quarter and six months ended June 30, 2004 to the same periods in 2003.
Aeronautics
($ millions)
2nd Quarter Year-to-Date
2004 2003 2004 2003
Net sales $3,141 $2,405 $6,015 $4,493
Operating profit $239 $162 $445 $307
Net sales for Aeronautics increased by 31% for the quarter and 34% for the six months ended June 30, 2004 from the 2003 periods, due to growth in Combat Aircraft, which more than offset a slight decline in Air Mobility. Combat Aircraft sales growth of $790 million in the quarter and $1.5 billion for the six-month period was primarily due to higher F-16 program volume including increased aircraft deliveries (22 in the quarter and 37 for the six month period in 2004 compared to 12 and 15 in the comparable 2003 periods) and higher volume on the F-35 program. Fewer scheduled C-130J deliveries (two in the quarter and six for the six month period in 2004 compared to four and seven in the comparable 2003 periods) contributed to the slight decrease in Air Mobility revenue.
Segment operating profit increased by 48% for the quarter and 45% for the six months ended June 30, 2004 from the 2003 periods. Combat Aircraft operating profit increases of $60 million in the quarter and $80 million for the six-month period were primarily due to the impact of the additional F-16 aircraft deliveries and improved performance in other Combat Aircraft programs. Air Mobility and other programs accounted for approximately $20 million and $60 million of the increase in operating profit for the quarter and year-to-date periods, and were primarily due to profits recognized on C- 130J deliveries in 2004. The Corporation began recognizing profits on C-130J deliveries in 2004 (approximately $35 million year-to-date) upon resolution of certain technical aircraft performance risks, manufacturing performance improvements and the achievement of stable production as a result of securing a multi-year contract in 2003.
Electronic Systems
($ millions)
2nd Quarter Year-to-Date
2004 2003 2004 2003
Net sales $2,205 $2,174 $4,338 $4,155
Operating profit $220 $211 $422 $394
Net sales for Electronic Systems increased by 1% for the quarter and 4% for the six months ended June 30, 2004 from the 2003 periods. In both the quarter and six-month periods, higher volume in Maritime Systems & Sensors (MS2) and Missiles & Fire Control (M&FC), more than offset declines in Platform, Training & Transportation Solutions (PT&TS). In MS2, higher volume on surface systems and radar programs accounted for the increased sales. M&FC sales grew due to higher volume on tactical missile and fire control programs. Reduced levels of distribution technology and transportation & security solutions activities contributed to the decrease in sales at PT&TS.
Segment operating profit increased by 4% for the quarter and 7% for the six months ended June 30, 2004, compared to the 2003 periods. For both the quarter and the six-month period, improved performance on air defense and fire control programs at M&FC and on distribution technology and simulation and training programs at PT&TS, contributed to the higher operating profit. MS2's operating profit improved slightly in both periods.
Space Systems
($ millions)
2nd Quarter Year-to-Date
2004 2003 2004 2003
Net sales $1,547 $1,544 $3,125 $3,072
Operating profit $129 $101 $249 $205
Net sales for Space Systems increased nominally for the quarter and by 2% for the six months ended June 30, 2004 from the 2003 periods. For the second quarter of 2004, a sales increase in Satellites, due to a commercial satellite delivery, and the timing of sales on fleet ballistic missile programs at Strategic and Defensive Missile Systems (S&DMS) were partially offset by lower volume in Launch Services. A decline in activities on the maturing Titan launch vehicle program contributed to lower sales in Launch Services. There were two Atlas launches and one Proton launch in the second quarters of both 2004 and 2003.
For the six months ended June 30, 2004, sales increases in Launch Services and S&DMS offset a decline in Satellites. In Launch Services, an increase in Atlas launches (four in 2004 compared to two in 2003) more than offset a decline in the Titan launch vehicle program. The increase in S&DMS was primarily attributable to the timing of sales on fleet ballistic missile programs. The decrease in Satellites was mainly due to lower sales on commercial satellite deliveries in 2004, which was partially offset by increased volume in government satellite programs.
Segment operating profit increased by 28% for the quarter and 21% for the six months ended June 30, 2004, when compared to the 2003 periods. For the quarter, Satellites' operating profit increased due to the additional delivery and improved performance on commercial satellite programs, which more than offset a decline due to cost growth on a government satellite program. Increased operating profit in Launch Services was due to government launch vehicles programs.
For the six-month period, Launch Services' operating profit increased primarily due to the benefit resulting from the first quarter 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 Titan launch vehicle program. Satellites' operating profit declined due to cost growth on a government satellite program, which more than offset the impact of improved performance and more profitable deliveries in commercial satellites.
Integrated Systems & Solutions
($ millions)
2nd Quarter Year-to-Date
2004 2003 2004 2003
Net sales $963 $810 $1,870 $1,582
Operating profit $81 $67 $161 $139
Net sales for Integrated Systems & Solutions increased by 19% for the quarter and 18% for the six months ended June 30, 2004 from the 2003 periods. For both the quarter and six-month periods, a higher volume of intelligence, defense and information assurance activities resulted in increased sales.
Segment operating profit increased by 21% for the quarter and 16% for the six months ended June 30, 2004 from the comparable 2003 periods. For both the quarter and six-month periods, the higher volume on the activities described above accounted for the increased operating profit.
Information & Technology Services
($ millions)
2nd Quarter Year-to-Date
2004 2003 2004 2003
Net sales $917 $772 $1,769 $1,459
Operating profit $71 $51 $131 $99
Net sales for Information & Technology Services increased by 19% for the quarter and 21% for the six months ended June 30, 2004 from the 2003 periods. For both the quarter and year-to-date periods, the increases in sales were primarily attributable to higher volume in the Information Technology line of business. Information Technology's sales improved due to the net impact of an acquisition and a divestiture, as well as organic growth on existing IT programs. The remaining increase in sales was primarily attributable to higher volume in Defense Services. NASA sales declined in both periods.
Segment operating profit increased by 39% for the quarter and 32% for the six months ended June 30, 2004 from the 2003 periods. In both periods the operating profit increased mainly due to improvements in Information Technology and Defense Services.
SECOND QUARTER 2004 HIGHLIGHTS
* Received contracts for 22 F/A-22 fighter aircraft and associated
support activities under production Lot 4.
* Received a contract to procure long-lead items for 24 F/A-22 fighter
aircraft under production Lot 5.
* Delivered the last four F/A-22's under production Lot 1 to the U.S. Air
Force during the quarter, bringing to 27 the total number of Raptors
delivered inception to date on the program.
* Selected to design and build the first of the U.S. Navy's new Littoral
Combat Ships.
* Awarded a contract to develop the Joint Common Missile, a new air-to-
ground weapon that will be deployed aboard U.S. Army, Navy and Marine
Corps fixed- and rotary-wing aircraft.
* Received an award for work on the U.S. Navy's MH-60R maritime
helicopter program.
* Selected to produce the new Compact Kinetic Energy Missile, the next-
generation hypervelocity anti-tank weapon.
* Awarded one of two industry contracts for the concept development phase
of the U.S. Air Force's Space Based Radar program.
* Awarded a five-year information technology contract from the
Environmental Protection Agency.
* Received a two-year option on the Mission Support Operations Contract -
Houston Mission Control Center.
Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.T. on July 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 future impact of 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 July 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 YEAR TO DATE
JUNE 30, JUNE 30,
2004 2003 2004 2003
Net Sales $8,776 $7,709 $17,123 $14,768
Operating Profit [EBIT] $544 $470 $1,080 $975
Interest Expense $106 $119 $214 $259
Pre-tax Earnings $438 $351 $866 $716
Income Tax Expense $142 $109 $279 $224
Effective Tax Rate 32.4% 31.1% 32.2% 31.3%
Net Earnings $296 $242 $587 $492
Earnings Per Share:
Basic $0.67 $0.54 $1.32 $1.10
Diluted $0.66 $0.54 $1.31 $1.09
Average Shares Outstanding:
Basic 443.9 445.3 444.1 447.1
Diluted 447.0 448.7 447.2 450.6
LOCKHEED MARTIN CORPORATION
Net Sales and Operating Profit
Preliminary and Unaudited
(In millions, except percentages)
QUARTER ENDED JUNE 30, YEAR TO DATE JUNE 30,
% %
2004 2003 Change 2004 2003 Change
Net sales
Aeronautics $3,141 $2,405 31% $6,015 $4,493 34%
Electronic Systems 2,205 2,174 1% 4,338 4,155 4%
Space Systems 1,547 1,544 -% 3,125 3,072 2%
Integrated Systems
& Solutions 963 810 19% 1,870 1,582 18%
Information &
Technology Services 917 772 19% 1,769 1,459 21%
Segment net sales 8,773 7,705 14% 17,117 14,761 16%
Other 3 4 6 7
Total net sales $8,776 $7,709 14% $17,123 $14,768 16%
Operating profit
Aeronautics $239 $162 48% $445 $307 45%
Electronic Systems 220 211 4% 422 394 7%
Space Systems 129 101 28% 249 205 21%
Integrated Systems
& Solutions 81 67 21% 161 139 16%
Information &
Technology Services 71 51 39% 131 99 32%
Segment operating
profit 740 592 25% 1,408 1,144 23%
Unallocated corporate
expense, net(1) (196) (122) (328) (169)
Total operating
profit $544 $470 16% $1,080 $975 11%
Margins
Segments:
Aeronautics 7.6% 6.7% 7.4% 6.8%
Electronic Systems 10.0% 9.7% 9.7% 9.5%
Space Systems 8.3% 6.5% 8.0% 6.7%
Integrated Systems
& Solutions 8.4% 8.3% 8.6% 8.8%
Information &
Technology Services 7.7% 6.6% 7.4% 6.8%
Segments 8.4% 7.7% 8.2% 7.8%
Total Consolidated 6.2% 6.1% 6.3% 6.6%
(1) "Unallocated corporate expense, 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 YEAR TO DATE
JUNE 30, JUNE 30,
2004 2003 2004 2003
Summary of unallocated
corporate expense, net
FAS/CAS pension adjustment $(148) $(68) $(298) $(140)
Other(1) (48) (54) (30) (29)
Unallocated corporate
expense, net $(196) $(122) $(328) $(169)
(1) Includes a $41 million charge related to the Corporation's exit from
the commercial mail sorting business in the quarter and year-to-date
periods ended June 30, 2003.
FAS/CAS pension adjustment
FAS 87 expense $(220) $(117) $(443) $(225)
Less: CAS costs (72) (49) (145) (85)
FAS/CAS pension adjustment -
expense $(148) $(68) $(298) $(140)
Depreciation and amortization of
property, plant and equipment
Aeronautics $23 $20 $46 $41
Electronic Systems 41 37 80 74
Space Systems 25 27 58 54
Integrated Systems & Solutions 9 9 16 16
Information & Technology Services 12 10 25 21
Segments 110 103 225 206
Unallocated corporate expense, net 9 13 20 18
Total depreciation and
amortization $119 $116 $245 $224
Amortization of purchased intangibles
Aeronautics $13 $13 $25 $25
Electronic Systems 11 12 23 24
Space Systems 2 2 4 4
Integrated Systems & Solutions 4 4 7 7
Information & Technology Services 3 1 7 3
Segments 33 32 66 63
Unallocated corporate expense, net 2 - 5 -
Total amortization of
purchased intangibles $35 $32 $71 $63
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Balance Sheet
Preliminary and Unaudited
(In millions)
JUNE 30, DECEMBER 31,
2004 2003
Assets
Cash and cash equivalents $2,243 $1,010
Short-term investments - 240
Accounts receivable 3,677 4,039
Inventories 2,054 2,348
Other current assets 1,645 1,764
Total current assets 9,619 9,401
Property, plant and equipment, net 3,438 3,489
Investments in equity securities 1,083 1,060
Goodwill 7,879 7,879
Purchased intangibles, net 736 807
Prepaid pension asset 1,122 1,213
Other noncurrent assets 2,363 2,326
Total assets $26,240 $26,175
Liabilities and Stockholders' Equity
Accounts payable $1,522 $1,434
Customer advances and amounts
in excess of costs incurred 3,762 4,256
Other accrued expenses 2,852 3,067
Current maturities of long-term debt - 136
Total current liabilities 8,136 8,893
Long-term debt 6,070 6,072
Accrued pension liabilities 1,452 1,100
Post-retirement and other
noncurrent liabilities 3,548 3,354
Stockholders' equity 7,034 6,756
Total liabilities and
stockholders' equity $26,240 $26,175
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Cash Flows
Preliminary and Unaudited
(In millions)
YEAR TO DATE JUNE 30,
2004 2003
Operating Activities
Net earnings $587 $492
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization of
property, plant and equipment 245 224
Amortization of purchased intangibles 71 63
Changes in operating assets and liabilities:
Receivables 365 244
Inventories 434 159
Accounts payable 85 65
Customer advances and amounts in
excess of costs incurred (494) (176)
Other 503 318
Net cash provided by operating activities 1,796 1,389
Investing Activities
Expenditures for property, plant
and equipment (260) (202)
Sale (purchase) of short-term investments 240 (229)
Acquisition of businesses/investments
in affiliated companies - (219)
Other 32 7
Net cash provided by (used for)
investing activities 12 (643)
Financing Activities
Repayments related to long-term debt (137) (1,209)
Issuances of common stock 36 22
Repurchases of common stock (278) (279)
Common stock dividends (196) (109)
Net cash used for financing activities (575) (1,575)
Net increase (decrease) in
cash and cash equivalents 1,233 (829)
Cash and cash equivalents at
beginning of period 1,010 2,738
Cash and cash equivalents at
end of period $2,243 $1,909
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Stockholders' Equity
Preliminary and Unaudited
(In millions)
Additional
Common Paid-In Retained Unearned
Stock Capital Earnings Compensation
Balance at
January 1, 2004 $446 $2,477 $5,054
Net earnings 587
Common stock
dividends (196)
Repurchases of
common stock (6) (272)
Stock awards
and options,
and ESOP activity 3 161 $(25)
Other comprehensive
income
Balance at
June 30, 2004 $443 $2,366 $5,445 $(25)
Accumulated
Unearned Other Total
ESOP Comprehensive Stockholders'
Shares (Loss) Equity
Balance at
January 1, 2004 $(17) $(1,204) $6,756
Net earnings 587
Common stock
dividends (196)
Repurchases of
common stock (278)
Stock awards
and options,
and ESOP activity 17 156
Other comprehensive
income 9 9
Balance at
June 30, 2004 $ - $(1,195) $7,034
LOCKHEED MARTIN CORPORATION
Preliminary and Unaudited
Operating Data
(In millions, except deliveries and launches)
JUNE 30, DECEMBER 31,
2004 2003
Backlog
Aeronautics $34,960 $37,580
Electronic Systems 17,922 17,339
Space Systems 12,723 12,813
Integrated Systems & Solutions 4,281 4,350
Information & Technology Services 4,674 4,817
Total $74,560 $76,899
QUARTER ENDED JUNE 30, YEAR TO DATE JUNE 30,
2004 2003 2004 2003
Deliveries(1)
F-16 2 22 12 37 15
C-130J 2 4 6 7
Launches
Atlas 2 2 4 2
Proton 1 1 2 2
Titan IV - 1 1 1
(1) Deliveries - Aircraft delivered to and accepted by customers.
(2) Sales were recognized upon delivery of certain aircraft (unit-of-
delivery sales recognition) and for others, sales were recognized on
a percentage-of-completion basis.
SOURCE: Lockheed Martin Corporation
CONTACT: News Media: Tom Jurkowsky, +1-301-897-6352, or Investor
Relations: James Ryan, +1-301-897-6584, or Mike Gabaly, +1-301-897-6455, all
of Lockheed Martin Corporation
Company News On-Call: http://www.prnewswire.com/comp/534163.html