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Lockheed Martin Corporation
Net earnings for the year ended December 31, 2007 were $3.0 billion ($7.10 per share), compared to $2.5 billion ($5.80 per share) in 2006. Net sales for the year ended December 31, 2007 were $41.9 billion, a 6% increase over the $39.6 billion in the comparable 2006 period. Cash from operations for the year ended December 31, 2007 was $4.2 billion, compared to $3.8 billion in 2006. Return on Invested Capital (ROIC) was 21.4% for the year ended December 31, 2007 compared to 19.2% in 2006.
"I'm very proud of our performance across the board in 2007," said Bob Stevens, Chairman, President and CEO. "Our program execution was solid, we won important new business and we continued to shape a balanced business portfolio--all while achieving outstanding financial performance. This success is a tribute to our dedicated and talented employees who understand the important challenges that face our customers."
Summary Reported Results and Financial Outlook
The following table presents the Corporation's results for the quarters and years ended December 31, in accordance with generally accepted accounting principles (GAAP):
REPORTED RESULTS
(In millions, except 4th Quarter Year
per share data) 2007 2006 2007 2006
Net sales $10,841 $10,840 $41,862 $39,620
Operating profit
Segment operating profit $1,256 $1,161 $4,691 $4,031
Unallocated corporate, net:
FAS/CAS pension adjustment (12) (69) (58) (275)
Unusual items, net -- 29 71 230
Stock compensation expense (33) (28) (149) (111)
Other, net 4 (23) (28) (105)
$1,215 $1,070 $4,527 $3,770
Net earnings $799 $729 $3,033 $2,529
Diluted earnings per share $1.89 $1.68 $7.10 $5.80
Cash from operations $420 $333 $4,241 $3,783
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 contained in this press release.
2008 FINANCIAL OUTLOOK (1)
(In millions, except per share data 2008 Projections
and percentages) Current Update October 2007
Net sales $41,800 - $42,800 $41,250 - $42,750
Operating profit:
Segment operating profit: $4,715 - $4,840 $4,660 - $4,785
Unallocated corporate, net:
FAS/CAS pension adjustment 125 40
Unusual items, net -- --
Stock compensation expense (170) (170)
Other, net (65) (65)
4,605 - 4,730 4,465 - 4,590
Interest expense (345) (345)
Other non-operating income 145 180
Earnings before income taxes $4,405 - $4,530 $4,300 - $4,425
Diluted earnings per share $7.05 - $7.25 $6.95 - $7.15
Cash from operations >/= $4,200 >/= $4,000
ROIC(2) >/= 18.5% >/= 18.0%
(1) All amounts estimated
(2) See discussion of non-GAAP performance measures at the end of this
document
The Corporation's outlook for 2008 net sales and segment operating profit has been increased primarily as a result of volume and performance in the Aeronautics business area.
The Corporation's outlook for 2008 non-cash FAS/CAS pension adjustment has been updated to reflect the:
* selection of a 6.375% discount rate at the year-end 2007 measurement
date versus the 6.25% assumed in the prior outlook;
* actual return on plan assets in 2007 that exceeded the 8.5% return
included in the prior outlook; and
* benefit of pre-funding various pension trusts during the fourth quarter
of 2007.
The Corporation's outlook for 2008 other non-operating income has been reduced to reflect lower interest income resulting from a 100 basis point decline in assumed yields on cash balances. In addition, the Corporation has removed the anticipated tax benefits associated with credits for research and development activity as legislation providing for these benefits was not extended beyond 2007.
It is the Corporation's practice not to incorporate adjustments in outlook projections for proposed acquisitions, divestitures, joint ventures, or other unusual activities until such transactions have been consummated.
Balanced Cash Deployment Strategy
Cash flow from operations was $420 million for the quarter and $4.2 billion for the year ended December 31, 2007. The Corporation continued to execute a balanced cash deployment strategy during 2007 as follows:
* repurchased 3.0 million shares at a cost of $322 million in the quarter
and 21.6 million shares at a cost of $2.1 billion in the year;
* made discretionary payments of $491 million in the fourth quarter to
pre-fund a portion of future years' funding requirements for the
Corporation's defined benefit pension plan trust and retiree medical
plan trust;
* made capital expenditures of $460 million during the quarter and
$940 million during the year;
* paid cash dividends totaling $175 million in the fourth quarter and
$615 million in the year;
* paid $12 million in the quarter and $337 million during the year for
acquisition and joint venture activities; and
* repaid $32 million of long-term debt in the year.
Segment Results
The Corporation operates in four principal business segments: Aeronautics; Electronic Systems; Information Systems & Global Services (IS&GS); and Space Systems.
Consistent with the manner in which the Corporation's business segment operating performance is evaluated, unusual items are excluded from segment results and included in "Unallocated corporate (expense) income, net." See the Corporation's 2006 Form 10-K for a description of "Unallocated corporate (expense) income, net," including the FAS / CAS pension adjustment. Schedule "C" of the financial attachments to this release contains the current year values for the various components of "Unallocated corporate (expense) income, net."
In the fourth quarter of 2007, interest income was reclassified from segment operating profit and unallocated corporate (expense) income, net, to "Other non-operating income and expense, net", to conform to the 2007 consolidated condensed statement of earnings presentation. Schedules "I" through "N" of the attachments to this press release present historical unaudited pro forma data that has been reclassified to reflect this presentation.
The following table presents the operating results of the business segments and reconciles these amounts to the Corporation's consolidated financial results.
($ millions) 4th Quarter Year
2007 2006 2007 2006
Net sales
Aeronautics $3,004 $3,378 $12,303 $12,188
Electronic Systems 2,874 2,792 11,143 10,519
IS&GS 2,835 2,672 10,213 8,990
Space Systems 2,128 1,998 8,203 7,923
Total net sales $10,841 $10,840 $41,862 $39,620
Segment operating profit
Aeronautics $385 $383 $1,476 $1,221
Electronic Systems 360 364 1,410 1,264
IS&GS 275 227 949 804
Space Systems 236 187 856 742
Segment operating
profit 1,256 1,161 4,691 4,031
Unallocated corporate,
net (41) (91) (164) (261)
Operating profit $1,215 $1,070 $4,527 $3,770
The following discussion compares the segment operating results for the quarter and year ended December 31, 2007 to the same periods in 2006.
Aeronautics
($ millions) 4th Quarter Year
2007 2006 2007 2006
Net sales $3,004 $3,378 $12,303 $12,188
Operating profit $385 $383 $1,476 $1,221
Operating margin 12.8% 11.3% 12.0% 10.0%
Net sales for Aeronautics decreased by 11% for the quarter and increased by 1% for the year ended December 31, 2007 from the comparable 2006 periods. Sales declines in the quarter were driven by lower volume on F-16 and F-35 programs in Combat Aircraft and C-130 programs in Air Mobility. For the year, the sales increase was primarily due to higher volume in sustainment services activities in Other Aeronautics programs. In Combat Aircraft, volume increases on the F-22 program more than offset declines on the F-16 program. These increases were offset partially by lower volume on C-130 programs in Air Mobility.
Segment operating profit for Aeronautics increased by 1% for the quarter and 21% for the year ended December 31, 2007 from the comparable 2006 periods. During the quarter, Combat Aircraft operating profit increased due to improved performance on F-16 and F-22 programs. Air Mobility and Other Aeronautics programs operating profit decreased due to lower volume on support and sustainment activities. For the year, operating profit increased in Combat Aircraft mainly due to improved performance on F-22 and F-16 programs. This increase was offset partially by lower operating profit in support and sustainment activities on Air Mobility and Other Aeronautics programs.
Electronic Systems
($ millions) 4th Quarter Year
2007 2006 2007 2006
Net sales $2,874 $2,792 $11,143 $10,519
Operating profit $360 $364 $1,410 $1,264
Operating margin 12.5% 13.0% 12.7% 12.0%
Net sales for Electronic Systems increased by 3% for the quarter and 6% for the year ended December 31, 2007 from the comparable 2006 periods. During the quarter, sales increases at Maritime Systems & Sensors (MS2) more than offset decreases at Missiles & Fire Control (M&FC) and Platform, Training & Energy (PT&E). The growth at MS2 was primarily driven by increased volume in undersea and tactical systems activities. This growth partially was offset by declines in volume on certain tactical missile and air defense programs at M&FC and platform integration activities at PT&E.
For the year ended December 31, 2007, sales increased in all three lines of business. The growth at M&FC was mainly due to higher volume in fire control systems and air defense programs, which more than offset declines in tactical missile programs. At MS2, volume increases in undersea and radar systems activities were offset partially by decreases in surface systems activities. The sales growth at PT&E was primarily due to higher volume in platform integration activities, which more than offset declines in distribution technology activities.
Segment operating profit for Electronic Systems declined by 1% for the quarter and increased 12% for the year ended December 31, 2007 from the comparable 2006 periods. For the quarter, operating profit declined due to lower volume and performance on certain international air defense programs at M&FC and surface systems activities at MS2. This decline partially was offset by increases from improved performance in platform integration activities at PT&E.
For the year, operating profit increased in all three lines of business. PT&E increased primarily due to higher volume and improved performance on platform integration activities. Growth in MS2 operating profit was primarily due to higher volume on undersea and tactical systems activities that more than offset lower volume on surface systems activities. At M&FC, operating profit increased due to higher volume in fire control systems and improved performance in tactical missile programs, which partially were offset by performance on air defense programs.
Information Systems & Global Services
($ millions) 4th Quarter Year
2007 2006 2007 2006
Net sales $2,835 $2,672 $10,213 $8,990
Operating profit $275 $227 $949 $804
Operating margin 9.7% 8.5% 9.3% 8.9%
Net sales for IS&GS increased by 6% for the quarter and 14% for the year ended December 31, 2007 from the comparable 2006 periods. For both the quarter and year, the increases were primarily attributable to sales growth at Global Services and Information Systems. The increase in Global Services sales was due to higher volume and growth in mission services activities including the impact of the acquisition of Pacific Architects & Engineers, Inc. (PAE) in September 2006. The sales increases at Information Systems were due to growth in information technology and the acquisition of Management Systems Designers Inc. (MSD) in February 2007. Mission Solutions sales were relatively unchanged for the quarter but increased for the year due to higher volume in mission & combat support activities.
Segment operating profit for IS&GS increased by 21% for the quarter and 18% for the year ended December 31, 2007 from the comparable 2006 periods. Operating profit increased for the quarter and year in all three lines of business. For the quarter, the increase in Mission Solutions was primarily driven by higher volume in mission & combat support solutions and aviation solutions activities. The increase in operating profit at Global Services was mainly due to improved performance in services activities. The Information Systems increase was due to improved performance in information technology activities. For the year, Mission Solutions increased due to higher volume in mission & combat support solutions and aviation solutions activities. Global Services growth was primarily attributable to the acquisition of PAE in September 2006. Information Systems increased primarily due to improved performance of information technology activities and the acquisition of MSD.
Space Systems
($ millions) 4th Quarter Year
2007 2006 2007 2006
Net sales $2,128 $1,998 $8,203 $7,923
Operating profit $236 $187 $856 $742
Operating margin 11.1% 9.4% 10.4% 9.4%
Net sales for Space Systems increased by 7% for the quarter and 4% for the year ended December 31, 2007 from the comparable 2006 periods. For the quarter, sales increases at Strategic & Defensive Missile Systems (S&DMS) and Space Transportation more than offset decreases in Satellites. The S&DMS growth was primarily driven by higher volume in strategic missile programs. The sales increase at Space Transportation was driven by higher volume on the Orion program, which more than offset decreases due to the formation of the United Launch Alliance L.L.C. (ULA) joint venture in the fourth quarter of 2006. The Corporation no longer records sales on Atlas launch vehicles and related support to the U.S. Government, as ULA is accounted for under the equity method of accounting. In Satellites, declines in government satellites were offset partially by increases in commercial satellites. There was one commercial satellite delivery in both the fourth quarters of 2007 and 2006.
For the year, sales increases at Satellites and S&DMS more than offset declines at Space Transportation. In Satellites, the growth was mainly driven by higher volume in government satellite activities, while commercial satellites sales remained relatively flat. There were four commercial satellite deliveries during 2007 and five in 2006. The S&DMS growth during the year was primarily driven by higher volume in strategic missile programs. The sales decline in Space Transportation in 2007 was expected given the divestiture of the International Launch Services business and the formation of ULA in the fourth quarter of 2006. This sales decline was offset partially by higher volume on the Orion program.
Segment operating profit for Space Systems increased by 26% for the quarter and 15% for the year ended December 31, 2007 from the comparable 2006 periods. For the quarter, operating profit increases in Space Transportation and S&DMS more than offset decreases in Satellites. In Space Transportation, the growth in operating profit during the quarter was mainly due to increased earnings at ULA and higher volume on the Orion program. The S&DMS growth was primarily driven by higher volume and improved performance on strategic missile programs. In Satellites, the operating profit decrease was primarily attributable to lower volume in government satellite activities.
For the year, operating profit growth in Satellites and S&DMS more than offset declines at Space Transportation. The growth in Satellites was due to improved performance in commercial and government satellite activities. Increased operating profit at S&DMS was due to higher volume and improved performance on strategic missile programs. In Space Transportation, the decline in 2007 operating profit from 2006 was mainly due to a charge recognized by ULA in the third quarter of 2007 for an asset impairment on Delta II medium lift launch vehicles. The decline also reflects benefits recognized in 2006 from risk reduction activities, including the definitization of the Evolved Expendable Launch Vehicle Launch Capabilities contract, and other performance improvements on the Atlas program, with no similar items recognized in the comparable period in 2007.
Unallocated Corporate (Expense) Income, Net
($ millions) 4th Quarter Year
2007 2006 2007 2006
FAS/CAS pension adjustment $(12) $(69) $(58) $(275)
Unusual items, net -- 29 71 230
Stock compensation expense (33) (28) (149) (111)
Other, net 4 (23) (28) (105)
Unallocated corporate
expense, net $(41) $(91) $(164) $(261)
Certain items are excluded from segment results as part of management's evaluation of segment operating performance. There were no unusual items in the fourth quarter of 2007. For purposes of segment reporting, the following unusual items were included in "Unallocated corporate (expense) income, net" for the fourth quarter of 2006 and the years ended December 31, 2007 and 2006:
2007 -
* A second quarter gain, net of state income taxes, of $25 million related
to the sale of the Corporation's remaining 20% interest in Comsat
International;
* A first quarter gain, net of state income taxes, of $25 million related
to the sale of land; and
* First quarter earnings, net of state income taxes, of $21 million
related to the reversal of legal reserves from the settlement of certain
litigation claims.
These items, coupled with the income tax benefit of $59 million ($0.14 per share) described in the Income Taxes discussion below, increased net earnings by $105 million ($0.25 per share) during the year ended December 31, 2007.
2006 -
* Fourth quarter earnings, net of state income taxes, of $29 million
related to the reversal of transaction related reserves upon the
expiration of indemnity provision in the Aerospace Electronics Systems
divestiture agreement consummated in 2000;
* A third quarter gain, net of state income taxes, of $31 million related
to the sale of land;
* A second quarter gain, net of state income taxes, of $20 million related
to the sale of land;
* A first quarter gain, net of state income taxes, of $127 million from
the sale of 21 million shares of Inmarsat; and
* A first quarter gain, net of state income taxes, of $23 million related
to the sale of the assets of Space Imaging, LLC.
The fourth quarter item increased net earnings by $19 million ($0.04 per share). Net earnings from these items, coupled with a third quarter charge related to a debt exchange of $11 million ($0.03 per share) and the income tax benefit of $62 million ($0.14 per share) described in the Income Taxes discussion below, increased net earnings by $201 million ($0.45 per share) during the year ended December 31, 2006.
The increase in "Other, net" for the quarter and year ended December 31, 2007 from the comparable periods in 2006 is primarily attributable to lower expense on various corporate items.
Income Taxes
The Corporation's effective income tax rates were 32.4% and 30.6% for the quarter and year ended December 31, 2007, and 30.5% and 29.6% for the comparable 2006 periods. These rates were lower than the 35% statutory rate for all periods due to tax benefits for US manufacturing activities, dividends related to employee stock ownership plans, and R&D tax credits. The 2007 tax rate was also reduced by an IRS audit settlement that decreased tax expense by $59 million and the 2006 tax rate was also reduced by extraterritorial tax benefits, including a $62 million refund claim for additional benefits in prior years.
The 1% increase in the 2007 tax rate when compared to 2006 is primarily the result of the elimination of the extraterritorial tax benefits in 2007, partially offset by additional tax benefits resulting from a statutory increase in US manufacturing benefits, new legislation that provided enhanced R&D tax credits, and the favorable closure of an IRS audit.
Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
Website: www.lockheedmartin.com
Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 3 p.m. E.T. on January 24, 2008. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company's website 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 U.S. and foreign government funding for our products and services; changes in customer priorities and requirements (including changes to respond to Department of Defense reviews, Congressional actions, budgetary constraints, cost-cutting initiatives, election cycles, terrorist threats and homeland security); the impact of continued military operations in Iraq and Afghanistan on funding for existing and future defense programs; the award or termination of contracts; return on benefit plan assets, interest and discount rates and other changes that may impact benefit plan assumptions; difficulties in developing and producing highly advanced technology systems; the timing of customer acceptance and product deliveries; materials availability and performance by suppliers, subcontractors and customers; charges from any future impairment reviews that may result in the recognition of losses and a reduction in the book value of goodwill or other long-term assets; variability in the earnings or losses recorded for joint ventures which we do not control and account for using the equity method of accounting; the future impact of legislation, changes in accounting, tax rules, or export policies; the impact of acquisition or divestiture, joint venture or teaming activities; the outcome of legal proceedings and other contingencies (including lawsuits, government/regulatory investigations or audits, and environmental remediation efforts); the competitive environment for the Corporation's 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 Corporation's SEC filings, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors," and "Legal Proceedings" sections of the Corporation's 2006 annual report on Form 10-K, which may be obtained at the Corporation's website: http://www.lockheedmartin.com/.
It is the Corporation's policy to only update or reconfirm its financial outlook by issuing a press release. The Corporation generally plans to provide a forward-looking outlook as part of its quarterly earnings release but reserves the right to provide an outlook at different intervals or to revise its practice in future periods. All information in this release is as of January 23, 2008. Lockheed Martin undertakes no duty to update any forward-looking statement to reflect subsequent events, actual results or changes in the Corporation's expectations. We also disclaim any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.
NON-GAAP PERFORMANCE MEASURES
The Corporation believes that reporting ROIC provides investors with visibility into how Lockheed Martin uses capital invested in its operations. The Corporation uses ROIC to evaluate multi-year investment decisions as a long-term performance measure, and as a factor in evaluating management performance for incentive compensation purposes. ROIC is not a measure of financial performance under generally accepted accounting principles, and may not be defined and calculated by other companies in the same manner. ROIC should not be considered in isolation or as an alternative to net earnings as an indicator of performance.
The Corporation calculates ROIC as follows:
Net earnings plus after-tax interest expense divided by average invested capital (stockholders' equity plus debt), after adjusting stockholders' equity by adding back adjustments related to postretirement benefit plans.
(In millions, except percentages) 2007 Actual 2006 Actual
Net Earnings $3,033 $2,529
Interest Expense (multiplied by 65%) (1) 229 235
Return $3,262 $2,764
Average debt (2),(5) $4,416 $4,727
Average equity (3),(5) 7,661 7,686
Average Benefit Plan Adjustments (4),(5) 3,171 2,006
Average Invested Capital $15,248 $14,419
Return on invested capital 21.4% 19.2%
(In millions, except percentages) 2008 Projections
Current Update October 2007
Net Earnings Combined Combined
Interest Expense (multiplied by 65%) (1)
Return >/= $3,185 >/= $3,150
Average debt (2),(5)
Average equity (3),(5) Combined Combined
Average Benefit Plan Adjustments (4),(5)
Average Invested Capital < / = $17,200 < / = $17,300
Return on invested capital >/= 18.5% >/= 18.0%
(1) Represents after-tax interest expense utilizing the federal statutory
rate of 35%.
(2) Debt consists of long-term debt, including current maturities, and
short-term borrowings (if any).
(3) Equity includes non-cash adjustments, primarily for the recognized and
unrecognized benefit plan-related amounts, the adjustment for adoption
of FAS 158 and the minimum pension liability.
(4) Average benefit plan adjustments reflect the cumulative value of
entries identified in our Statement of Stockholders Equity discussed
in Note 3.
(5) Yearly averages are calculated using balances at the start of the year
and at the end of each quarter.
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Earnings
Unaudited
(In millions, except per share data and percentages)
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
Net sales $10,841 $10,840 $41,862 $39,620
Cost of sales 9,717 9,809 37,628 36,186
1,124 1,031 4,234 3,434
Other income and expenses, net 91 39 293 336
Operating profit 1,215 1,070 4,527 3,770
Interest expense 87 85 352 361
Other non-operating income and expense,
net 54 64 193 183
Earnings before income taxes 1,182 1,049 4,368 3,592
Income tax expense 383 320 1,335 1,063
Net earnings $799 $729 $3,033 $2,529
Effective tax rate 32.4% 30.5% 30.6% 29.6%
Earnings per common share:
Basic $1.94 $1.72 $7.29 $5.91
Diluted $1.89 $1.68 $7.10 $5.80
Average number of shares outstanding:
Basic 412.3 423.4 416.0 428.1
Diluted 423.4 432.8 427.1 436.4
Common shares reported in stockholders'
equity at December 31: 409.4 421.3
A
LOCKHEED MARTIN CORPORATION
Net Sales, Segment Operating Profit and Margins
Unaudited
(In millions, except percentages)
QUARTER ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
2007 2006 % Change 2007 2006 % Change
Net sales:
Aeronautics $3,004 $3,378 (11%) $12,303 $12,188 1%
Electronic Systems 2,874 2,792 3% 11,143 10,519 6%
Information Systems
& Global Services 2,835 2,672 6% 10,213 8,990 14%
Space Systems 2,128 1,998 7% 8,203 7,923 4%
Total net sales $10,841 $10,840 -% $41,862 $39,620 6%
Operating profit:
Aeronautics $385 $383 1% $1,476 $1,221 21%
Electronic Systems 360 364 (1%) 1,410 1,264 12%
Information Systems
& Global Services 275 227 21% 949 804 18%
Space Systems 236 187 26% 856 742 15%
Segment operating
profit 1,256 1,161 8% 4,691 4,031 16%
Unallocated
corporate expense,
net (41) (91) (164) (261)
$1,215 $1,070 14% $4,527 $3,770 20%
Margins:
Aeronautics 12.8% 11.3% 12.0% 10.0%
Electronic Systems 12.5 13.0 12.7 12.0
Information Systems
& Global Services 9.7 8.5 9.3 8.9
Space Systems 11.1 9.4 10.4 9.4
Total operating
segments 11.6 10.7 11.2 10.2
Total consolidated 11.2% 9.9% 10.8% 9.5%
B
LOCKHEED MARTIN CORPORATION
Selected Financial Data
Unaudited
(In millions, except per share data)
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
Unallocated corporate (expense) /
income, net
FAS/CAS pension adjustment $(12) $(69) $(58) $(275)
Unusual items, net - 29 71 230
Stock compensation expense (33) (28) (149) (111)
Other, net 4 (23) (28) (105)
Unallocated corporate expense,
net $(41) $(91) $(164) $(261)
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
FAS/CAS pension adjustment
FAS 87 expense $(169) $(234) $(687) $(938)
Less: CAS costs (157) (165) (629) (663)
FAS/CAS pension adjustment
- expense $(12) $(69) $(58) $(275)
QUARTER ENDED DECEMBER 31, 2007 YEAR ENDED DECEMBER 31, 2007
Operating Net Earnings Operating Net Earnings
profit earnings per share profit earnings per share
Unusual Items
- 2007
Gain on sale of
interest in
Comsat
International $- $- $- $25 $16 $0.04
Gain on sale of
surplus land - - - 25 16 0.04
Earnings from
reversal of
legal
reserves - - - 21 14 0.03
Benefit from
closure of an
IRS audit - - - - 59 0.14
$- $- $- $71 $105 $0.25
QUARTER ENDED DECEMBER 31, 2006 YEAR ENDED DECEMBER 31, 2006
Earnings Operating Net Earnings
Operating Net per profit earnings (Loss)
profit earnings share (loss) (loss) per share
Unusual Items
- 2006
Earnings from
expiration of AES
transaction
indemnification $29 $19 $0.04 $29 $19 $0.04
Gain on sales of
surplus land - - - 51 33 0.08
Benefit from IRS
claims for export
tax benefits - - - - 62 0.14
Debt related expenses - - - - (11) (0.03)
Gain on sale of
interest in
Inmarsat - - - 127 83 0.19
Gain on Space Imaging
sale - - - 23 15 0.03
$29 $19 $0.04 $230 $201 $0.45
C
LOCKHEED MARTIN CORPORATION
Selected Financial Data
Unaudited
(In millions)
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
Depreciation and amortization of
plant and equipment
Aeronautics $60 $42 $181 $154
Electronic Systems 77 55 227 190
Information Systems & Global Services 16 22 68 65
Space Systems 46 37 136 132
Segments 199 156 612 541
Unallocated corporate expense, net 13 15 54 59
Total depreciation and amortization $212 $171 $666 $600
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
Amortization of purchased intangibles
Aeronautics $12 $13 $50 $50
Electronic Systems 5 13 27 47
Information Systems & Global Services 13 15 55 46
Space Systems 3 2 9 9
Segments 33 43 141 152
Unallocated corporate expense, net 3 3 12 12
Total amortization of purchased
intangibles $36 $46 $153 $164
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
Other non-operating income and
expense, net
Interest income $54 $64 $193 $199
Debt related expenses - - - 16
Total other non-operating income
and expense, net $54 $64 $193 $183
D
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Balance Sheet
Unaudited
(In millions, except percentages)
DECEMBER 31, DECEMBER 31,
2007 2006
Assets
Cash and cash equivalents $2,648 $1,912
Short-term investments 333 381
Receivables 4,925 4,595
Inventories 1,718 1,657
Deferred income taxes 756 900
Other current assets 560 719
Total current assets 10,940 10,164
Property, plant and equipment, net 4,320 4,056
Goodwill 9,387 9,250
Purchased intangibles, net 463 605
Prepaid pension asset 313 235
Deferred income taxes 760 1,487
Other assets 2,743 2,434
Total assets $28,926 $28,231
Liabilities and Stockholders' Equity
Accounts payable $2,163 $2,221
Customer advances and amounts in
excess of costs incurred 4,254 3,856
Other accrued expenses 3,350 3,442
Current maturities of long-term debt 104 34
Total current liabilities 9,871 9,553
Long-term debt, net 4,303 4,405
Accrued pension liabilities 1,192 3,025
Other postretirement and other
noncurrent liabilities 3,755 4,364
Stockholders' equity 9,805 6,884
Total liabilities and stockholders' equity $28,926 $28,231
Total debt-to-capitalization ratio: 31% 39%
E
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Cash Flows
Unaudited
(In millions)
YEAR ENDED DECEMBER 31,
2007 2006
Operating Activities
Net earnings $3,033 $2,529
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 819 764
Changes in operating assets and liabilities:
Receivables (324) 94
Inventories (57) (530)
Accounts payable (66) 217
Customer advances and amounts in excess of
costs incurred 394 475
Other 442 234
Net cash provided by operating activities 4,241 3,783
Investing Activities
Expenditures for property, plant and equipment (940) (893)
Sale of short-term investments, net 48 48
Acquisitions of businesses / investments in
affiliates (337) (1,122)
Divestitures of businesses / investments in
affiliates 26 180
Other (2) 132
Net cash used for investing activities (1,205) (1,655)
Financing Activities
Issuances of common stock and related amounts 474 756
Repurchases of common stock (2,127) (2,115)
Common stock dividends (615) (538)
Premium and transaction costs for debt exchange - (353)
Repayments of long-term debt (32) (210)
Net cash used for financing activities (2,300) (2,460)
Net increase (decrease) in cash and cash
equivalents 736 (332)
Cash and cash equivalents at beginning of period 1,912 2,244
Cash and cash equivalents at end of period $2,648 $1,912
F
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Stockholders' Equity
Unaudited
(In millions)
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Stockholders'
Stock Capital Earnings Loss Equity
Balance at
January 1, 2007 $421 $755 $9,269 $(3,561) $6,884
Adoption of
FIN 48 (a) 31 31
Net earnings 3,033 3,033
Common stock
dividends (b) (615) (615)
Stock-based awards
and ESOP
activity 10 879 889
Repurchases of
common stock (c) (22) (1,634) (471) (2,127)
Other comprehensive
income (d) 1,710 1,710
Balance at
December 31, 2007 $409 $- $11,247 $(1,851) $9,805
(a) The Corporation adopted Financial Accounting Standards Board
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income
Taxes" on January 1, 2007. The cumulative effect of adopting the
provisions of FIN 48 was a non-cash increase to opening retained
earnings of $31 million.
(b) Includes dividends ($0.35 per share) declared and paid in the first,
second and third quarters and a dividend ($0.42 per share) paid in the
fourth quarter.
(c) The Corporation repurchased 3.0 million shares of its common stock for
$322 million during the fourth quarter. During the year, the
Corporation repurchased 21.6 million common shares for $2.1 billion.
The Corporation has 32.7 million shares remaining under its share
repurchase program as of the end of 2007.
(d) At December 31, 2007, the Corporation recognized a non-cash, after-tax
increase of stockholder's equity of approximately $1.7 billion, as a
result of the required remeasurement of the pension plans. The
increase was primarily the result of increasing the discount rate
assumption from 5.875% at December 31, 2006 to 6.375% at December 31,
2007.
G
LOCKHEED MARTIN CORPORATION
Operating Data
Unaudited
(In millions)
DECEMBER 31, DECEMBER 31,
2007 2006
Backlog
Aeronautics $26,300 $26,900
Electronic Systems 21,200 19,700
Information Systems & Global Services 11,800 10,500
Space Systems 17,400 18,800
Total $76,700 $75,900
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
Aircraft Deliveries 2007 2006 2007 2006
F-16 9 20 41 67
F-22 7 8 24 27
C-130J 3 4 12 12
H
LOCKHEED MARTIN CORPORATION
Proforma Consolidated Condensed Statement of Earnings (a)
Unaudited
(In millions, except per share data and percentages)
QUARTER ENDED
March 31, June 30, September 30,
2007 2007 2007
Net sales $9,275 $10,651 $11,095
Cost of sales 8,365 9,597 9,949
910 1,054 1,146
Other income and expenses, net 75 110 17
Operating profit 985 1,164 1,163
Interest expense 93 93 79
Other non-operating income and
expenses, net 37 67 35
Earnings before income taxes 929 1,138 1,119
Income tax expense 239 360 353
Net earnings $690 $778 $766
Effective tax rate 25.7% 31.6% 31.5%
Earnings per common share:
Basic $1.64 $1.87 $1.85
Diluted $1.60 $1.82 $1.80
Average number of shares outstanding:
Basic 421.4 416.7 413.5
Diluted 432.1 426.5 424.5
QUARTER ENDED
March 31, June 30, September 30, December 31,
2006 2006 2006 2006
Net sales $9,214 $9,961 $9,605 $10,840
Cost of sales 8,454 9,121 8,802 9,809
760 840 803 1,031
Other income and
expenses, net 170 63 64 39
Operating profit 930 903 867 1,070
Interest expense 94 92 90 85
Other non-operating income
and expenses, net 41 40 38 64
Earnings before income taxes 877 851 815 1,049
Income tax expense 286 271 186 320
Net earnings $591 $580 $629 $729
Effective tax rate 32.6% 31.8% 22.8% 30.5%
Earnings per common share:
Basic $1.36 $1.35 $1.48 $1.72
Diluted $1.34 $1.34 $1.46 $1.68
Average number of shares
outstanding:
Basic 436.0 428.8 424.3 423.4
Diluted 441.3 433.7 431.9 432.8
(a) In the fourth quarter of 2007, interest income was reclassified
from segment operating profit and unallocated corporate (expense)
income, net to "Other non-operating income and expense, net" to
conform to the 2007 consolidated condensed statement of earnings
presentation. Schedules "I" through "N" of the attachments to this
press release present historical unaudited pro forma data that has
been reclassified to reflect this presentation.
I
LOCKHEED MARTIN CORPORATION
Proforma Consolidated Condensed Statement of Earnings
Unaudited
(In millions, except per share data and percentages)
YEAR ENDED DECEMBER 31,
2006 2005
Net sales $39,620 $37,213
Cost of sales 36,186 34,676
3,434 2,537
Other income and expenses, net 336 316
Operating profit 3,770 2,853
Interest expense 361 370
Other non-operating income and expenses, net 183 133
Earnings before income taxes 3,592 2,616
Income tax expense 1,063 791
Net earnings $2,529 $1,825
Effective tax rate 29.6% 30.2%
Earnings per common share:
Basic $5.91 $4.15
Diluted $5.80 $4.10
Average number of shares outstanding:
Basic 428.1 440.3
Diluted 436.4 445.7
J
LOCKHEED MARTIN CORPORATION
Proforma Sales, Operating Profit and Margins
Unaudited
(In millions, except percentages)
QUARTER ENDED
March 31, June 30, September 30,
2007 2007 2007
Net sales (a):
Aeronautics $2,821 $3,136 $3,342
Electronic Systems 2,515 2,927 2,827
Information Systems & Global Services 2,145 2,520 2,713
Space Systems 1,794 2,068 2,213
Total net sales $9,275 $10,651 $11,095
Operating profit:
Aeronautics $299 $378 $414
Electronic Systems 317 387 346
Information Systems & Global Services 198 231 245
Space Systems 185 214 221
Segment operating profit 999 1,210 1,226
Unallocated corporate (expense) /
income, net (14) (46) (63)
$985 $1,164 $1,163
Margins:
Aeronautics 10.6% 12.1% 12.4%
Electronic Systems 12.6 13.2 12.2
Information Systems & Global Services 9.2 9.2 9.0
Space Systems 10.3 10.3 10.0
Total operating segments 10.8 11.4 11.1
Total consolidated 10.6% 10.9% 10.5%
QUARTER ENDED
March 31, June 30, September 30, December 31,
2006 2006 2006 2006
Net sales (a):
Aeronautics $2,823 $3,004 $2,983 $3,378
Electronic Systems 2,453 2,698 2,576 2,792
Information Systems &
Global Services 1,969 2,158 2,191 2,672
Space Systems 1,969 2,101 1,855 1,998
Total net sales $9,214 $9,961 $9,605 $10,840
Operating profit:
Aeronautics $250 $272 $316 $383
Electronic Systems 306 318 276 364
Information Systems &
Global Services 180 194 203 227
Space Systems 192 188 175 187
Segment operating profit 928 972 970 1,161
Unallocated corporate
(expense) / income, net 2 (69) (103) (91)
$930 $903 $867 $1,070
Margins:
Aeronautics 8.9% 9.1% 10.6% 11.3%
Electronic Systems 12.5 11.8 10.7 13.0
Information Systems &
Global Services 9.1 9.0 9.3 8.5
Space Systems 9.8 8.9 9.4 9.4
Total operating segments 10.1 9.8 10.1 10.7
Total consolidated 10.1% 9.1% 9.0% 9.9%
(a) Net sales unchanged from previously disclosed amounts
K
LOCKHEED MARTIN CORPORATION
Proforma Sales, Operating Profit and Margins
Unaudited
(In millions, except percentages)
YEAR ENDED DECEMBER 31,
2006 2005
Net sales (a):
Aeronautics $12,188 $12,349
Electronic Systems 10,519 9,811
Information Systems & Global Services 8,990 8,233
Space Systems 7,923 6,820
Total net sales $39,620 $37,213
Operating profit:
Aeronautics $1,221 $1,018
Electronic Systems 1,264 1,078
Information Systems & Global Services 804 720
Space Systems 742 605
Segment operating profit 4,031 3,421
Unallocated corporate expense, net (261) (568)
$3,770 $2,853
Margins:
Aeronautics 10.0% 8.2%
Electronic Systems 12.0 11.0
Information Systems & Global Services 8.9 8.7
Space Systems 9.4 8.9
Total operating segments 10.2% 9.2%
Total consolidated 9.5% 7.7%
(a) Net sales unchanged from previously disclosed amounts
L
LOCKHEED MARTIN CORPORATION
Proforma Unallocated Corporate (Expense) / Income, net and Other Non-
Operating Income and Expense, net
Unaudited
(In millions, except percentages)
QUARTER ENDED
March 31, June 30, September 30,
2007 2007 2007
Unallocated corporate (expense)
/ income, net:
FAS/CAS pension adjustment $(14) $(14) $(18)
Unusual items, net 46 25 -
Stock compensation expense (49) (33) (34)
Other, net 3 (24) (11)
Unallocated corporate (expense) /
income, net $(14) $(46) $(63)
Other non-operating income and
expense, net
Interest income $37 $67 $35
Debt related expenses - - -
Total other non-operating income
and expense, net $37 $67 $35
QUARTER ENDED
March 31, June 30, September 30, December 31,
2006 2006 2006 2006
Unallocated corporate
(expense) / income, net:
FAS/CAS pension
adjustment $(68) $(68) $(70) $(69)
Unusual items, net 150 20 31 29
Stock compensation
expense (30) (27) (26) (28)
Other, net (50) 6 (38) (23)
Unallocated corporate
(expense) / income,
net $2 $(69) $(103) $(91)
Other non-operating income
and expense, net
Interest income $41 $40 $54 $64
Debt related expenses - - 16 -
Total other non-operating
income and expense, net $41 $40 $38 $64
M
LOCKHEED MARTIN CORPORATION
Proforma Unallocated Corporate (Expense) / Income, net and Other Non-
Operating Income and Expense, net
Unaudited
(In millions, except percentages)
YEAR ENDED DECEMBER 31,
2006 2005
Unallocated corporate (expense) /
income, net:
FAS/CAS pension adjustment $(275) $(626)
Unusual items, net 230 173
Stock compensation expense (111) -
Other, net (105) (115)
Unallocated corporate expense, net $(261) $(568)
Other non-operating income and expense, net
Interest income $199 $143
Debt related expenses 16 10
Total other non-operating income and expense, net $183 $133
N
First Call Analyst:
FCMN Contact:
SOURCE: Lockheed Martin Corporation
CONTACT: Media, Tom Jurkowsky, +1-301-897-6352, or Investor Relations,
Jerry Kircher, +1-301-897-6584, both of Lockheed Martin Corporation
Web site: http://www.lockheedmartin.com/
Company News On-Call: http://www.prnewswire.com/comp/534163.html