Releases

Lockheed Martin Reports First Quarter 2018 Results
- Net sales of $11.6 billion
- Net earnings of $1.2 billion, or $4.02 per share
- Generated cash from operations of $632 million after pension contributions of $1.5 billion
- Achieved backlog of approximately $105 billion
- Updates 2018 outlook for sales, business segment operating profit and earnings per share

BETHESDA, Md., April 24, 2018 /PRNewswire/ -- Lockheed Martin (NYSE: LMT) today reported first quarter 2018 net sales of $11.6 billion, compared to $11.2 billion in the first quarter of 2017. Net earnings in the first quarter of 2018 were $1.2 billion, or $4.02 per share, compared to $789 million, or $2.69 per share, in the first quarter of 2017. Cash from operations in the first quarter of 2018 was $632 million after pension contributions of $1.5 billion, compared to $1.7 billion of cash from operations in the first quarter of 2017.

"Strong operational and program execution in the first quarter allowed us to increase our financial guidance for sales, profit and earnings per share," said Lockheed Martin Chairman, President and CEO Marillyn Hewson. "Our team remains dedicated to performing with excellence, offering affordable and innovative solutions for our customers, and delivering exceptional value to our shareholders."

Adoption of New Accounting Standards

As previously reported, effective Jan. 1, 2018, the corporation adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606), which changed the way the corporation recognizes revenue for certain contracts. In addition, effective Jan. 1, 2018, the corporation adopted ASU 2017-07, Compensation-Retirement Benefits, which changed the income statement presentation of certain components of FAS pension and other postretirement benefit plan expense. The financial results for all periods presented in this news release have been adjusted to reflect the new methods of accounting.

Summary Financial Results

The following table presents the corporation's summary financial results.

 

(in millions, except per share data)

 

Quarters Ended

 
     

March 25,
2018

 

March 26,
2017

 
 

Net sales

 

$

11,635

   

$

11,212

   
             
 

Business segment operating profit1

 

$

1,310

   

$

1,091

   
 

Unallocated items

         
 

  FAS/CAS operating adjustment

 

451

   

403

   
 

  Other, net2

 

(36)

   

(92)

   
 

Total unallocated items

 

415

   

311

   
 

Consolidated operating profit

 

$

1,725

   

$

1,402

   
             
 

Net earnings1, 2

 

$

1,157

   

$

789

   
             
 

Diluted earnings per share1, 2

 

$

4.02

   

$

2.69

   
             
 

Cash from operations3

 

$

632

   

$

1,666

   
             

1

In the first quarter of 2017, the corporation revised the total estimated costs to complete the EADGE-T contract as a consequence of ongoing performance matters and recorded an additional reserve of $120 million ($74 million, or $0.25 per share, after tax) at its Rotary and Mission Systems business segment.

 
     

2

In the first quarter of 2017, the corporation recognized a $64 million charge ($40 million, or $0.14 per share, after tax), which represents the corporation's portion of a non-cash asset impairment charge recorded by its equity method investee, Advanced Military Maintenance, Repair and Overhaul Center LLC (AMMROC).

 
     

3

Cash from operations in the first quarter of 2018 included cash contributions of $1.5 billion made to the corporation's qualified defined benefit pension plans and $850 million of net tax refunds.

 

2018 Financial Outlook

The following tables and other sections of this news release contain forward-looking statements, which are based on the corporation's current expectations. Actual results may differ materially from those projected. It is the corporation's practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, changes in law and new accounting standards until such items have been consummated, enacted or adopted. For additional factors that may impact the corporation's actual results, refer to the "Forward-Looking Statements" section in this news release.

 

(in millions, except per share data)

 

Current Update

 

January 2018

 
             
 

Net sales

 

$50,350 – $51,850

 

$50,000 – $51,500

 
             
 

Business segment operating profit

 

$5,315 – $5,465

 

$5,200 – $5,350

 
             
 

Net FAS/CAS pension adjustment

 

~$1,010

 

 ~$1,010

 
             
 

Diluted earnings per share

 

$15.80 – $16.10

 

$15.20 – $15.50

 
             
 

Cash from operations

 

≥ $3,000

 

≥ $3,000

 
     

Qualified Pension Plan Expense

ASU 2017-07 requires entities to record only the service cost component of U.S. GAAP financial accounting standards (FAS) pension and other postretirement benefit plan expense in operating profit and the non-service cost components of FAS pension and other postretirement benefit plan expense (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) as part of non-operating income. Previously, the corporation recorded all components of FAS pension and other postretirement benefit plan expense in operating profit as part of cost of sales. The adoption of this standard increases consolidated operating income due to the removal of all components of FAS expense other than service cost and decreases non-operating income by the same amount with no impact to net income. The standard does not impact our U.S. Government cost accounting standards (CAS) expense, which is recorded in the results of each business segment. As a result, our FAS/CAS Adjustment will be split into: FAS/CAS Operating Adjustment and Non-Operating FAS Pension Expense. The amounts in the 2018 Outlook and 2017 Actual columns in the following table reflect the adoption of the standard.

 

(in millions)

 

 

2018

Outlook

 

2017

Actual

 
 

Total FAS expense and CAS costs

         
 

FAS pension expense

 

$

(1,425)

   

$

(1,372)

   
 

Less: CAS pension cost

 

2,435

   

2,248

   
 

Net FAS/CAS pension adjustment

 

$

1,010

   

$

876

   
             
 

Service & non-service cost reconciliation

         
 

FAS pension service cost

 

$

(630)

   

$

(635)

   
 

Less: CAS pension cost

 

2,435

   

2,248

   
 

FAS/CAS operating adjustment

 

1,805

   

1,613

   
 

Non-operating FAS pension expense

 

(795)

   

(737)

   
 

Net FAS/CAS pension adjustment

 

$

1,010

   

$

876

   
             

Cash Deployment Activities

The corporation's cash deployment activities in the first quarter of 2018 consisted of the following:

  • making contributions to its pension trust of $1.5 billion, compared to no contributions in the first quarter of 2017;
  • repurchasing 0.9 million shares for $300 million, compared to 1.9 million shares for $500 million in the first quarter of 2017;
  • paying cash dividends of $586 million, compared to $544 million in the first quarter of 2017; and
  • making capital expenditures of $216 million, compared to $170 million in the first quarter of 2017.

Segment Results

The corporation operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the corporation's business segments and reconciles these amounts to the corporation's consolidated financial results.

 

(in millions)

 

Quarters Ended

 
     

March 25,
2018

 

March 26,
2017

 
 

Net sales

         
 

Aeronautics

 

$

4,398

   

$

4,120

   
 

Missiles and Fire Control

 

1,677

   

1,549

   
 

Rotary and Mission Systems

 

3,223

   

3,127

   
 

Space

 

2,337

   

2,416

   
 

Total net sales

 

$

11,635

   

$

11,212

   
             
 

Operating profit

         
 

Aeronautics

 

$

474

   

$

439

   
 

Missiles and Fire Control

 

261

   

234

   
 

Rotary and Mission Systems

 

311

   

128

   
 

Space

 

264

   

290

   
 

Total business segment operating profit

 

1,310

   

1,091

   
 

Unallocated items

         
 

  FAS/CAS operating adjustment

 

451

   

403

   
 

  Other, net

 

(36)

   

(92)

   
 

Total unallocated items

 

415

   

311

   
 

Total consolidated operating profit

 

$

1,725

   

$

1,402

   
             

Net sales of the business segments exclude intersegment sales as these activities are eliminated in consolidation. Operating profit of the business segments includes the corporation's share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of the corporation's business segments. In addition, operating profit of the corporation's business segments includes total pension costs recoverable on U.S. Government contracts as determined in accordance with CAS.

Operating profit of the business segments excludes the FAS/CAS operating adjustment, which represents the difference between the service cost portion of pension cost recorded in accordance with FAS and CAS pension cost; the non-service cost for all postretirement benefit plans, which is recorded in other non-operating expense, net; expense for stock-based compensation; the effects of items not considered part of management's evaluation of segment operating performance, such as charges related to significant severance actions and certain asset impairments; gains or losses from significant divestitures; the effects of certain legal settlements; corporate costs not allocated to the corporation's business segments; and other miscellaneous corporate activities. Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract.

In addition, comparability of the corporation's segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the corporation's contracts for which it recognizes revenue over a period of time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.

The corporation's consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 32 percent of total segment operating profit in the first quarter of 2018, compared to approximately 27 percent in the first quarter of 2017.

Aeronautics

 

(in millions)

 

Quarters Ended

 
     

March 25,
2018

 

March 26,
2017

 
 

Net sales

 

$

4,398

   

$

4,120

   
 

Operating profit

 

$

474

   

$

439

   
 

Operating margin

 

10.8

%

 

10.7

%

 

Aeronautics' net sales in the first quarter of 2018 increased $278 million, or 7 percent, compared to the same period in 2017. The increase was primarily attributable to higher net sales of approximately $185 million for the F-35 program due to increased volume on production and sustainment; and about $80 million for other combat aircraft modernization programs due to increased volume (primarily the F-16 and F-22 programs).

Aeronautics' operating profit in the first quarter of 2018 increased $35 million, or 8 percent, compared to the same period in 2017. Operating profit increased approximately $25 million for the F-35 program primarily due to increased volume on production and sustainment; and about $15 million for other combat aircraft modernization programs due to increased risk retirements and volume. Adjustments not related to volume, including net profit booking rate adjustments, were comparable in the first quarters of 2018 and 2017.

Missiles and Fire Control

 

(in millions)

 

Quarters Ended

 
     

March 25,
2018

 

March 26,
2017

 
 

Net sales

 

$

1,677

   

$

1,549

   
 

Operating profit

 

$

261

   

$

234

   
 

Operating margin

 

15.6

%

 

15.1

%

 

MFC's net sales in the first quarter of 2018 increased $128 million, or 8 percent, compared to the same period in 2017. The increase was primarily attributable to higher net sales of approximately $70 million for increased volume on classified programs; and about $50 million for tactical missiles programs due to increased volume (primarily Long Range Stand Off (LRSO) missile and Joint Air-to-Surface Standoff Missile (JASSM).

MFC's operating profit in the first quarter of 2018 increased $27 million, or 12 percent, compared to the same period in 2017. Operating profit increased approximately $15 million for sensors and global sustainment (previously referred to as fire control) programs due to increased risk retirements, partially offset by lower operating profit due to contract mix (primarily Apache, LANTIRN® and SNIPER®); and about $15 million for air and missile defense programs due to increased risk retirements. Adjustments not related to volume, including net profit booking rate adjustments, were about $45 million higher in the first quarter of 2018 compared to the same period in 2017.

Rotary and Mission Systems

 

(in millions)

 

Quarters Ended

 
     

March 25,
2018

 

March 26,
2017

 
 

Net sales

 

$

3,223

   

$

3,127

   
 

Operating profit

 

$

311

   

$

128

   
 

Operating margin

 

9.6

%

 

4.1

%

 

RMS' net sales in the first quarter of 2018 increased $96 million, or 3 percent, compared to the same period in 2017. The increase was primarily attributable to higher net sales of approximately $95 million for training and logistics solutions (TLS) programs due to higher volume on various programs; about $95 million for integrated warfare systems and sensors (IWSS) programs due to higher volume (primarily radar surveillance systems programs and the Aegis Combat System (Aegis)); and about $90 million for command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance (C6ISR) programs due to higher volume. These increases were partially offset by a decrease of $190 million for Sikorsky helicopter programs due to lower volume for government helicopter programs.

RMS' operating profit in the first quarter of 2018 increased $183 million, or 143 percent, compared to the same period in 2017. Operating profit increased approximately $120 million for C6ISR programs primarily due a charge for performance matters on the EADGE-T contract, which was recorded in the first quarter of 2017 and did not recur in 2018; about $50 million for Sikorsky helicopter programs primarily due to favorable cost performance; and about $10 million for TLS programs due to higher volume. Operating profit for IWSS programs was comparable in both periods as a $35 million charge for performance matters on a ground based radar program in the first quarter of 2018 was offset by increased risk retirements on other programs. Adjustments not related to volume, including net profit booking rate adjustments, were about $110 million higher in the first quarter of 2018 compared to the same period in 2017.

Space

 

(in millions)

 

Quarters Ended

 
     

March 25,
2018

 

March 26,
2017

 
 

Net sales

 

$

2,337

   

$

2,416

   
 

Operating profit

 

$

264

   

$

290

   
 

Operating margin

 

11.3

%

 

12.0

%

 

Space's net sales in the first quarter of 2018 decreased $79 million, or 3 percent, compared to the same period in 2017. The decrease was primarily attributable to approximately $100 million for government satellite programs (primarily Space Based Infrared System (SBIRS) and Advanced Extremely High Frequency system (AEHF)) due to lower volume; and about $35 million for commercial satellite programs due to lower volume. These decreases were partially offset by an increase of approximately $60 million for strategic missile and defense systems programs due to higher volume from AWE Management Limited (AWE), partially offset by lower volume for Fleet Ballistic Missile (FBM) programs.

Space's operating profit in the first quarter of 2018 decreased $26 million, or 9 percent, compared to the same period in 2017. Operating profit decreased approximately $25 million for strategic missile and defense systems due to lower risk retirements (primarily FBM programs). Operating profit for commercial satellites was comparable in the first quarter of 2018 and 2017, which included a charge for approximately $25 million for a performance matter in both periods. Adjustments not related to volume, including net profit booking rate adjustments, were about $30 million lower in the first quarter of 2018, compared to the same period in 2017.

Total equity earnings recognized by Space (primarily ULA) represented approximately $85 million, or 32 percent, of Space's operating profit in the first quarter of 2018, compared to approximately $80 million, or 28 percent, in the first quarter of 2017.

Income Taxes

The corporation's effective income tax rate was 14.9 percent in the first quarter of 2018, compared to 23.8 percent in the first quarter of 2017. The rate for the first quarter of 2018 includes the provisional impact of the Tax Cuts and Jobs Act (the Tax Act) enacted in December 2017. The rates for both periods benefited from tax deductions for dividends paid to our defined contribution plans with an employee stock ownership plan feature, tax deductions for employee equity awards, and the research and development tax credit. The rate for the first quarter of 2018 also benefited from the Tax Act's deduction for foreign derived intangible income. The rate for the first quarter of 2017 benefited from tax deductions for U.S. manufacturing activities, which the Tax Act repealed for years after 2017.

Use of Non-GAAP Financial Measures

This news release contains the following non-generally accepted accounting principles (GAAP) financial measures (as defined by U.S. Securities and Exchange Commission Regulation G). While we believe that these non-GAAP financial measures may be useful in evaluating the financial performance of Lockheed Martin, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP. In addition, our definitions for non-GAAP financial measures may differ from similarly titled measures used by other companies or analysts.

Business segment operating profit represents the total earnings from our business segments before unallocated income and expense, interest expense, other non-operating income and expenses, and income tax expense. This measure is used by our senior management in evaluating the performance of our business segments. The table below reconciles the non-GAAP measure business segment operating profit with the most directly comparable GAAP financial measure, consolidated operating profit.

     

2018 Outlook

 
 

(in millions)

 

Current Update

 

January 2018

 
             
 

Business segment operating profit (non-GAAP)

 

$5,315 – $5,465

 

$5,200 – $5,350

 
 

 FAS/CAS operating adjustment1

 

~1,805

 

~1,805

 
 

 Other, net 2

 

~(175)

 

~(175)

 
 

Consolidated operating profit (GAAP)

 

$6,945 – $7,095

 

$6,830 – $6,980

 
             

1

Refer to the Qualified Pension Plan Expense table on page 3 of this news release for a detail of the FAS/CAS operating adjustment, which excludes $795 million of expected non-service cost that will be recorded in other non-operating expense, net in accordance with ASU 2017-07.

 

2

Other, net presented above previously included $75 million of expected non-service cost related to the corporation's non-qualified and other postretirement benefit plans, which is recorded in other non-operating expense, net in accordance with ASU 2017-07.

 

Conference Call Information

Lockheed Martin will webcast live its first quarter 2018 earnings results conference call (listen-only mode) on Tuesday, April 24, 2018, at 11:00 a.m. ET. The live webcast and relevant financial charts will be available for download on the Lockheed Martin Investor Relations website at www.lockheedmartin.com/investor.

For additional information, visit our website: www.lockheedmartin.com.

About Lockheed Martin

Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 100,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

Forward-Looking Statements

This news release contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on Lockheed Martin's current expectations and assumptions. The words "believe," "estimate," "anticipate," "project," "intend," "expect," "plan," "outlook," "scheduled," "forecast" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:

  • the corporation's reliance on contracts with the U.S. Government, which are conditioned upon the availability of funding and can be terminated by the U.S. Government for convenience, and the corporation's ability to negotiate favorable contract terms;
  • budget uncertainty; affordability initiatives; the risk of future sequestration under the Budget Control Act of 2011 or other budget cuts;
  • risks related to the development, production, sustainment, performance, schedule, cost and requirements of complex and technologically advanced programs including the corporation's largest, the F-35 program;
  • economic, industry, business and political conditions including their effects on governmental policy (including trade policy and sanctions);
  • the corporation's success expanding into and doing business in adjacent markets and internationally; the differing risks posed by international sales, including those involving commercial relationships with unfamiliar customers and different cultures; our ability to recover investments, which is frequently dependent upon the successful operation of ventures that we do not control; and changes in foreign national priorities, and foreign government budgets;
  • the competitive environment for the corporation's products and services, including increased pricing pressures, competition from outside the aerospace and defense industry, and increased bid protests;
  • planned production rates for significant programs; compliance with stringent performance and reliability standards; materials availability;
  • the performance and financial viability of key suppliers, teammates, ventures, venture partners, subcontractors and customers;
  • the timing and customer acceptance of product deliveries;
  • the corporation's ability to continue to innovate and develop new products and to attract and retain key personnel and transfer knowledge to new personnel; the impact of work stoppages or other labor disruptions;
  • the impact of cyber or other security threats or other disruptions to the corporation's businesses;
  • the corporation's ability to implement and continue capitalization changes such as share repurchases and dividend payments (including the availability of sufficient net earnings to permit such distributions under Maryland law), pension funding as well as the pace and effect of any such capitalization changes;
  • the corporation's ability to recover certain costs under U.S. Government contracts and changes in contract mix;
  • the accuracy of the corporation's estimates and projections;
  • movements in interest rates and other changes that may affect pension plan assumptions, equity, the level of the FAS/CAS adjustment and actual returns on pension plan assets;
  • realizing the anticipated benefits of acquisitions or divestitures, ventures, teaming arrangements or internal reorganizations, and the corporation's efforts to increase the efficiency of its operations and improve the affordability of its products and services;
  • risk of an impairment of goodwill, investments or other long-term assets, including the potential impairment of goodwill, intangible assets and inventory recorded as a result of the acquisition of the Sikorsky business if it does not perform as expected, has a deterioration of projected cash flows, negative changes in market factors, including oil and gas trends, or a significant increase in carrying value of the reporting unit;
  • the adequacy of the corporation's insurance and indemnities;
  • the effect of changes in (or the interpretation of): legislation, regulation or policy, including those applicable to procurement (including competition from fewer and larger prime contractors), cost allowability or recovery, accounting, taxation (including the impact of the Tax Cuts and Jobs Act), or export; and
  • the outcome of legal proceedings, bid protests, environmental remediation efforts, government investigations or government allegations that we have failed to comply with law, other contingencies and U.S. Government identification of deficiencies in the corporation's business systems.

These are only some of the factors that may affect the forward-looking statements contained in this news release. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see the corporation's filings with the U.S. Securities and Exchange Commission (SEC) including, but not limited to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in the corporation's Annual Report on Form 10-K for the year ended Dec. 31, 2017. The corporation's filings may be accessed through the Investor Relations page of its website, www.lockheedmartin.com/investor, or through the website maintained by the SEC at www.sec.gov.

The corporation's actual financial results likely will be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this news release speak only as of the date of its filing. Except where required by applicable law, the corporation expressly disclaims a duty to provide updates to forward-looking statements after the date of this news release to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this news release are intended to be subject to the safe harbor protection provided by the federal securities laws.

 

Lockheed Martin Corporation

             

Consolidated Statements of Earnings1

             

(unaudited; in millions, except per share data)

             
               
 

Quarters Ended

   
 

March 25,
2018

 

March 26,
2017

       
               

Net sales

$           11,635

 

$           11,212

       
               

Cost of sales

(9,977)

 

(9,806)

       
               

Gross profit2

1,658

 

1,406

       
               

Other income (expense), net3

67

 

(4)

       
               

Operating profit2,3

1,725

 

1,402

       
               

Interest expense

(155)

 

(155)

       
               

Other non-operating expense, net 

(210)

 

(212)

       
               

Earnings before income taxes

1,360

 

1,035

       
               

Income tax expense

(203)

 

(246)

       
               

Net earnings2,3

$             1,157

 

$                789

       
               

   Effective tax rate

14.9

%

23.8

%

     
               

Earnings per common share

             

   Basic

$               4.05

 

$               2.72

       

   Diluted2,3

$               4.02

 

$               2.69

       
               

Weighted average shares outstanding

             

   Basic

285.5

 

290.0

       

   Diluted

287.9

 

292.8

       
               

Common shares reported in stockholders' equity at end of period

284

 

288

       

 

   

1

The corporation closes its books and records on the last Sunday of the calendar quarter to align its financial closing with its business processes, which was on Mar. 25 for the first quarter of 2018 and Mar. 26 for the first quarter of 2017. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods, as the corporation's fiscal year ends on Dec. 31.

   

2

In the first quarter of 2017, the corporation revised its estimated costs to complete the EADGE-T contract, as a consequence of ongoing performance matters and recorded an additional reserve of $120 million ($74 million, or $0.25 per share, after tax) at its RMS business segment.

   

3

In the first quarter of 2017, the corporation recognized a $64 million charge ($40 million, or $0.14 per share, after tax), which represents the corporation's portion of a non-cash asset impairment charge recorded by the corporation's equity method investee, Advanced Military Maintenance, Repair and Overhaul Center LLC, (AMMROC).

 

 

 

 

Lockheed Martin Corporation

                     

Business Segment Summary Operating Results

                     

(unaudited; in millions)

                     
                       
 

Quarters Ended

           
 

March 25,
2018

 

March 26,
2017

   

% Change

       

Net sales 

                     

  Aeronautics

$      4,398

 

$      4,120

   

7

%

       

  Missiles and Fire Control

1,677

 

1,549

   

8

%

       

  Rotary and Mission Systems

3,223

 

3,127

   

3

%

       

  Space

2,337

 

2,416

   

(3)

%

       

     Total net sales

$    11,635

 

$    11,212

   

4

%

       
                       

Operating profit 

                     

  Aeronautics

$         474

 

$         439

   

8

%

       

  Missiles and Fire Control

261

 

234

   

12

%

       

  Rotary and Mission Systems1

311

 

128

   

143

%

       

  Space

264

 

290

   

(9)

%

       

     Total business segment operating profit1

1,310

 

1,091

   

20

%

       

Unallocated items

                     

  FAS/CAS operating adjustment

451

 

403

               

  Other, net2

(36)

 

(92)

               

Total unallocated items

415

 

311

   

33

%

       

     Total consolidated operating profit1,2

$      1,725

 

$      1,402

   

23

%

       
                       

Operating margins 

                     

  Aeronautics

10.8

%

10.7

%

             

  Missiles and Fire Control

15.6

%

15.1

%

             

  Rotary and Mission Systems

9.6

%

4.1

%

             

  Space

11.3

%

12.0

%

             

     Total business segment operating margins

11.3

%

9.7

%

             
                       

     Total consolidated operating margins

14.8

%

12.5

%

             
                       

1  In the first quarter of 2017, the corporation revised its estimated costs to complete the EADGE-T contract, as a consequence of ongoing

   performance matters and recorded an additional reserve of $120 million ($74 million, or $0.25 per share, after tax) at its RMS business

   segment.

                       

2  In the first quarter of 2017, the corporation recognized a $64 million charge ($40 million, or $0.14 per share, after tax), which represents the

   corporation's portion of a non-cash asset impairment charge recorded by the corporation's equity method investee, AMMROC.

 

 

 

 

Lockheed Martin Corporation

     

Consolidated Balance Sheets

     

(unaudited; in millions, except par value)

     
       
       
       
 

March 25,
2018

 

Dec. 31,
2017

Assets

     

Current assets

     

  Cash and cash equivalents

$             2,393

 

$             2,861

  Receivables, net

2,373

 

2,265

  Contract assets

9,405

 

7,992

  Inventories

3,196

 

2,878

  Other current assets

449

 

1,509

    Total current assets

17,816

 

17,505

       

Property, plant and equipment, net

5,749

 

5,775

Goodwill 

10,806

 

10,807

Intangible assets, net

3,730

 

3,797

Deferred income taxes

3,084

 

3,156

Other noncurrent assets

5,449

 

5,580

      Total assets

$           46,634

 

$           46,620

       

Liabilities and equity

     

Current liabilities

     

  Accounts payable

$             2,715

 

$             1,467

  Contract liabilities

6,550

 

7,028

  Salaries, benefits and payroll taxes

1,771

 

1,785

  Current maturities of long-term debt

750

 

750

  Other current liabilities

2,188

 

1,883

      Total current liabilities

13,974

 

12,913

       

Long-term debt, net

13,473

 

13,513

Accrued pension liabilities

14,199

 

15,703

Other postretirement benefit liabilities

713

 

719

Other noncurrent liabilities

4,386

 

4,548

      Total liabilities

46,745

 

47,396

       

Stockholders' equity

     

  Common stock, $1 par value per share

284

 

284

  Additional paid-in capital

-

 

-

  Retained earnings

14,123

 

11,405

  Accumulated other comprehensive loss

(14,589)

 

(12,539)

      Total stockholders' deficit

(182)

 

(850)

  Noncontrolling interests in subsidiary

71

 

74

      Total deficit

(111)

 

(776)

      Total liabilities and equity

$           46,634

 

$           46,620

 

 

 

Lockheed Martin Corporation

     

Consolidated Statements of Cash Flows

     

(unaudited; in millions)

     
       
       
 

Quarters Ended

 

March 25,
2018

 

March 26,
2017

       

Operating activities

     

Net earnings

$          1,157

 

$             789

Adjustments to reconcile net earnings to net cash provided by operating activities

     

  Depreciation and amortization

279

 

285

  Stock-based compensation

38

 

44

  Changes in assets and liabilities

     

      Receivables, net

(108)

 

(799)

      Contract assets

(1,413)

 

(62)

      Inventories

(318)

 

(225)

      Accounts payable

1,290

 

1,111

      Contract liabilities

(478)

 

(185)

      Postretirement benefit plans

(1,145)

 

345

      Income taxes

1,064

 

175

  Other, net

266

 

188

      Net cash provided by operating activities

632

 

1,666

       

Investing activities

     

Capital expenditures

(216)

 

(170)

Other, net

130

 

4

      Net cash used for investing activities

(86)

 

(166)

       

Financing activities

     

Repurchases of common stock

(300)

 

(500)

Dividends paid

(586)

 

(544)

Proceeds from stock option exercises

33

 

31

Other, net

(161)

 

(108)

      Net cash used for financing activities

(1,014)

 

(1,121)

       

Net change in cash and cash equivalents

(468)

 

379

Cash and cash equivalents at beginning of period

2,861

 

1,837

Cash and cash equivalents at end of period

$          2,393

 

$          2,216

 

 

 

Lockheed Martin Corporation

                         

Consolidated Statement of Equity

                         

(unaudited; in millions)

                         
                           
             

Accumulated

           
     

Additional

     

Other

 

Total

 

Noncontrolling

   
 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Stockholders'

 

Interests

 

Total

 

Stock

 

Capital

 

Earnings

 

Loss

 

Deficit4

 

in Subsidiary

 

Equity4

                           
                           

Balance at Dec. 31, 2017

$            284

 

$            -

 

$       11,405

 

$        (12,539)

 

$             (850)

 

$            74

 

$             (776)

                           

Net earnings

-

 

-

 

1,157

 

-

 

1,157

 

-

 

1,157

                           

Other comprehensive income, net of tax1

-

 

-

 

-

 

358

 

358

 

-

 

358

                           

Repurchases of common stock 

(1)

 

(25)

 

(274)

 

-

 

(300)

 

-

 

(300)

                           

Dividends declared2

-

 

-

 

(573)

 

-

 

(573)

 

-

 

(573)

                           

Stock-based awards, ESOP activity and other

1

 

25

 

-

 

-

 

26

 

-

 

26

                           

Reclassification of effects from tax reform3

-

 

-

 

2,408

 

(2,408)

 

-

 

-

 

-

                           

Net decrease in noncontrolling interests in subsidiary

-

 

-

 

-

 

-

 

-

 

(3)

 

(3)

                           
                           

Balance at March 25, 2018

$            284

 

$            -

 

$       14,123

 

$        (14,589)

 

$             (182)

 

$            71

 

$             (111)

                           
                           
                           

1  Primarily represents the reclassification adjustment for the recognition of prior period amounts related to pension and other postretirement benefit plans.

                           

2  Represents dividends of $2.00 per share declared for the first quarter of 2018.

                           

3  In the first quarter of 2018, the corporation adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification

    of Certain Tax Effects from Accumulated Other Comprehensive Income. Accordingly, the corporation reclassified the stranded income tax effects in

    accumulated other comprehensive loss resulting from the Tax Act to retained earnings.

                           

4  The deficit in equity was predominantly due to a $1.9 billion net one-time charge recorded at Dec. 31, 2017, which was primarily due to the estimated

   impacts of the enactment of the Tax Act and the annual Dec. 31, 2017 re-measurement adjustment related to the corporation's pension and other

   postretirement benefit plans of $1.4 billion. Under Maryland law, if a corporation has a deficit in equity, it is still able to pay dividends and make share

   repurchases in an amount limited to its net earnings in either the current or the preceding fiscal year or from the net earnings for the preceding eight

   quarters and if it is otherwise able to pay its debts as these come due.

 

 

 

Lockheed Martin Corporation

     

Operating Data

     

(unaudited; in millions, except aircraft deliveries)

     
       
       
       

Backlog

March 25,
2018

 

Dec. 31,
2017

Aeronautics

$         35,111

 

$         35,692

Missiles and Fire Control

18,018

 

17,729

Rotary and Mission Systems

30,096

 

30,030

Space

21,531

 

22,042

  Total backlog

$      104,756

 

$      105,493

       
 

Quarters Ended

Aircraft Deliveries 

March 25,
2018

 

March 26,
2017

F-35

14

 

15

F-16 

-

 

2

C-130J

3

 

5

C-5

1

 

1

Government helicopter programs 

18

 

32

Commercial helicopter programs 

1

 

-

International military helicopter programs

1

 

1

 

 

 

Lockheed Martin Corporation

                                                             

Consolidated Statements of Earnings - Adjusted for Impacts of New Accounting Standards

                                                   

(unaudited; in millions, except per share data)

                                                             
                                                               
                                                               
 

Quarter Ended March 26, 2017

 

Quarter Ended June 25, 2017

 

Quarter Ended Sept. 24, 2017

 

Quarter Ended Dec. 31, 2017

 


Historical

 

Adjustments
for New Rev

Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

 


Historical

 

Adjustments
for New Rev
Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

 


Historical

 

Adjustments
for New Rev
Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

 


Historical

 

Adjustments
for New Rev
Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

                                                               

Aeronautics

$               4,106

 

$                             14

 

$                               -

 

$               4,120

 

$               5,225

 

$                         (303)

 

$                               -

 

$               4,922

 

$               4,771

 

$                           (55)

 

$                               -

 

$               4,716

 

$               6,046

 

$                         (394)

 

$                               -

 

$               5,652

                                                               

Missiles and Fire Control

1,489

 

60

 

-

 

1,549

 

1,637

 

147

 

-

 

1,784

 

1,793

 

164

 

-

 

1,957

 

2,293

 

(301)

 

-

 

1,992

                                                               

Rotary and Mission Systems

3,101

 

26

 

-

 

3,127

 

3,410

 

4

 

-

 

3,414

 

3,353

 

10

 

-

 

3,363

 

4,351

 

(592)

 

-

 

3,759

                                                               

Space

2,361

 

55

 

-

 

2,416

 

2,413

 

30

 

-

 

2,443

 

2,252

 

53

 

-

 

2,305

 

2,447

 

(6)

 

-

 

2,441

                                                               

Net sales

11,057

 

155

 

-

 

11,212

 

12,685

 

(122)

 

-

 

12,563

 

12,169

 

172

 

-

 

12,341

 

15,137

 

(1,293)

 

-

 

13,844

                                                               

Aeronautics

436

 

3

 

-

 

439

 

550

 

17

 

-

 

567

 

517

 

(4)

 

-

 

513

 

661

 

(4)

 

-

 

657

                                                               

Missiles and Fire Control

219

 

15

 

-

 

234

 

268

 

(15)

 

-

 

253

 

270

 

28

 

-

 

298

 

296

 

(47)

 

-

 

249

                                                               

Rotary and Mission Systems

108

 

20

 

-

 

128

 

254

 

17

 

-

 

271

 

244

 

13

 

-

 

257

 

299

 

(53)

 

-

 

246

                                                               

Space

288

 

2

 

-

 

290

 

256

 

-

 

-

 

256

 

218

 

1

 

-

 

219

 

231

 

(16)

 

-

 

215

                                                               

Business Segment Operating Profit

1,051

 

40

 

-

 

1,091

 

1,328

 

19

 

-

 

1,347

 

1,249

 

38

 

-

 

1,287

 

1,487

 

(120)

 

-

 

1,367

                                                               

Total Unallocated Items

98

 

-

 

213

 

311

 

157

 

-

 

212

 

369

 

179

 

-

 

211

 

390

 

372

 

-

 

210

 

582

                                                               

Total Consolidated Operating Profit

1,149

 

40

 

213

 

1,402

 

1,485

 

19

 

212

 

1,716

 

1,428

 

38

 

211

 

1,677

 

1,859

 

(120)

 

210

 

1,949

                                                               

Interest expense

(155)

 

-

 

-

 

(155)

 

(160)

 

-

 

-

 

(160)

 

(162)

 

-

 

-

 

(162)

 

(174)

 

-

 

-

 

(174)

                                                               

Other non-operating income (expense), net

1

 

-

 

(213)

 

(212)

 

(2)

 

-

 

(212)

 

(214)

 

(7)

 

-

 

(211)

 

(218)

 

7

 

-

 

(210)

 

(203)

                                                               

Earnings from continuing operations before income taxes

995

 

40

 

-

 

1,035

 

1,323

 

19

 

-

 

1,342

 

1,259

 

38

 

-

 

1,297

 

1,692

 

(120)

 

-

 

1,572

                                                               

Income tax expense

(232)

 

(14)

 

-

 

(246)

 

(381)

 

(6)

 

-

 

(387)

 

(320)

 

(14)

 

-

 

(334)

 

(2,407)

 

18

 

-

 

(2,389)

                                                               

Net earnings from continuing operations

763

 

26

 

-

 

789

 

942

 

13

 

-

 

955

 

939

 

24

 

-

 

963

 

(715)

 

(102)

 

-

 

(817)

                                                               

Net earnings from discontinued operations

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

73

 

-

 

-

 

73

                                                               

Net earnings

$                  763

 

$                             26

 

$                               -

 

$                  789

 

$                  942

 

$                             13

 

$                               -

 

$                  955

 

$                  939

 

$                             24

 

$                               -

 

$                  963

 

$                 (642)

 

$                         (102)

 

$                               -

 

$                 (744)

                                                               

     Effective tax rate

23.3%

         

23.8%

 

28.8%

         

28.8%

 

25.4%

         

25.8%

 

142.3%

         

152.0%

                                                               

Earnings per common share

                                                             
                                                               

Basic

                                                             
                                                               

     Continuing operations

$                 2.63

 

$                         0.09

 

$                               -

 

$                 2.72

 

$                 3.27

 

$                         0.04

 

$                               -

 

$                 3.31

 

$                 3.27

 

$                         0.08

 

$                               -

 

$                 3.35

 

$                (2.50)

 

$                        (0.35)

 

$                               -

 

$                (2.85)

                                                               

     Discontinued operations

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

0.25

 

-

 

-

 

0.25

                                                               

Basic earnings per common share

$                 2.63

 

$                         0.09

 

$                               -

 

$                 2.72

 

$                 3.27

 

$                         0.04

 

$                               -

 

$                 3.31

 

$                 3.27

 

$                         0.08

 

$                               -

 

$                 3.35

 

$                (2.25)

 

$                        (0.35)

 

$                               -

 

$                (2.60)

                                                               

Diluted

                                                             
                                                               

     Continuing operations

$                 2.61

 

$                         0.08

 

$                               -

 

$                 2.69

 

$                 3.23

 

$                         0.05

 

$                               -

 

$                 3.28

 

$                 3.24

 

$                         0.08

 

$                               -

 

$                 3.32

 

$                (2.50)

 

$                        (0.35)

 

$                               -

 

$                (2.85)

                                                               

     Discontinued operations

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

0.25

 

-

 

-

 

0.25

                                                               

Diluted earnings per common share

$                 2.61

 

$                         0.08

 

$                               -

 

$                 2.69

 

$                 3.23

 

$                         0.05

 

$                               -

 

$                 3.28

 

$                 3.24

 

$                         0.08

 

$                               -

 

$                 3.32

 

$                (2.25)

 

$                        (0.35)

 

$                               -

 

$                (2.60)

 

 

 

Lockheed Martin Corporation

                                                             

Consolidated Statements of Earnings - Adjusted for Impacts of New Accounting Standards

                                                     

(unaudited; in millions, except per share data)

                                                             
                                                               
                                                               
 

Three Months Ended March 26, 2017

 

Six Months June 25, 2017

 

Nine Months Ended Sept. 24, 2017

 

Twelve Months Dec. 31, 2017

 


Historical

 

Adjustments
for New Rev 
Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

 


Historical

 

Adjustments for New Rev Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

 


Historical

 

Adjustments
for New Rev
Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

 


Historical

 

Adjustments
for New Rev
Rec Guidance

 

Reclassification
for New Pension
Guidance

 


Adjusted

                                                               

Aeronautics

$          4,106

 

$          14

 

$                -

 

$        4,120

 

$          9,331

 

$               (289)

 

$                -

 

$        9,042

 

$        14,102

 

$          (344)

 

$                -

 

$      13,758

 

$        20,148

 

$           (738)

 

$                 -

 

$      19,410

                                                               

Missiles and Fire Control

1,489

 

60

 

-

 

1,549

 

3,126

 

207

 

-

 

3,333

 

4,919

 

371

 

-

 

5,290

 

7,212

 

70

 

-

 

7,282

                                                               

Rotary and Mission Systems

3,101

 

26

 

-

 

3,127

 

6,511

 

30

 

-

 

6,541

 

9,864

 

40

 

-

 

9,904

 

14,215

 

(552)

 

-

 

13,663

                                                               

Space

2,361

 

55

 

-

 

2,416

 

4,774

 

85

 

-

 

4,859

 

7,026

 

138

 

-

 

7,164

 

9,473

 

132

 

-

 

9,605

                                                               

Net sales

11,057

 

155

 

-

 

11,212

 

23,742

 

33

 

-

 

23,775

 

35,911

 

205

 

-

 

36,116

 

51,048

 

(1,088)

 

-

 

49,960

                                                               

Aeronautics

436

 

3

 

-

 

439

 

986

 

20

 

-

 

1,006

 

1,503

 

16

 

-

 

1,519

 

2,164

 

12

 

-

 

2,176

                                                               

Missiles and Fire Control

219

 

15

 

-

 

234

 

487

 

-

 

-

 

487

 

757

 

28

 

-

 

785

 

1,053

 

(19)

 

-

 

1,034

                                                               

Rotary and Mission Systems

108

 

20

 

-

 

128

 

362

 

37

 

-

 

399

 

606

 

50

 

-

 

656

 

905

 

(3)

 

-

 

902

                                                               

Space

288

 

2

 

-

 

290

 

544

 

2

 

-

 

546

 

762

 

3

 

-

 

765

 

993

 

(13)

 

-

 

980

                                                               

Business Segment Operating Profit

1,051

 

40

 

-

 

1,091

 

2,379

 

59

 

-

 

2,438

 

3,628

 

97

 

-

 

3,725

 

5,115

 

(23)

 

-

 

5,092

                                                               

Total Unallocated Items

98

 

-

 

213

 

311

 

255

 

-

 

425

 

680

 

434

 

-

 

636

 

1,070

 

806

 

-

 

846

 

1,652

                                                               

Total Consolidated Operating Profit

1,149

 

40

 

213

 

1,402

 

2,634

 

59

 

425

 

3,118

 

4,062

 

97

 

636

 

4,795

 

5,921

 

(23)

 

846

 

6,744

                                                               

Interest expense

(155)

 

-

 

-

 

(155)

 

(315)

 

-

 

-

 

(315)

 

(477)

 

-

 

-

 

(477)

 

(651)

 

-

 

-

 

(651)

                                                               

Other non-operating income (expense), net

1

 

-

 

(213)

 

(212)

 

(1)

 

-

 

(425)

 

(426)

 

(8)

 

-

 

(636)

 

(644)

 

(1)

 

-

 

(846)

 

(847)

                                                               

Earnings from continuing operations before income taxes

995

 

40

 

-

 

1,035

 

2,318

 

59

 

-

 

2,377

 

3,577

 

97

 

-

 

3,674

 

5,269

 

(23)

 

-

 

5,246

                                                               

Income tax expense

(232)

 

(14)

 

-

 

(246)

 

(613)

 

(20)

 

-

 

(633)

 

(933)

 

(34)

 

-

 

(967)

 

(3,340)

 

(16)

 

-

 

(3,356)

                                                               

Net earnings from continuing operations

763

 

26

 

-

 

789

 

1,705

 

39

 

-

 

1,744

 

2,644

 

63

 

-

 

2,707

 

1,929

 

(39)

 

-

 

1,890

                                                               

Net earnings from discontinued operations

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

73

 

-

 

-

 

73

                                                               

Net earnings

$             763

 

$          26

 

$                  -

 

$           789

 

$          1,705

 

$               39

 

$                 -

 

$        1,744

 

$          2,644

 

$           63

 

$                -

 

$        2,707

 

$          2,002

 

$          (39)

 

$                 -

 

$        1,963

                                                               

     Effective tax rate

23.3%

         

23.8%

 

26.4%

         

26.6%

 

26.1%

         

26.3%

 

63.4%

         

64.0%

                                                               

Earnings per common share

                                                             
                                                               

Basic

                                                             
                                                               

     Continuing operations

$            2.63

 

$           0.09

 

$                  -

 

$          2.72

 

$            5.90

 

$            0.13

 

$                 -

 

$          6.03

 

$            9.16

 

$          0.22

 

$                -

 

$          9.38

 

$            6.70

 

$          (0.14)

 

$                 -

 

$          6.56

                                                               

     Discontinued operations

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

0.26

 

-

 

-

 

0.26

                                                               

Basic earnings per common share

$            2.63

 

$           0.09

 

$                  -

 

$          2.72

 

$            5.90

 

$            0.13

 

$                  -

 

$          6.03

 

$            9.16

 

$           0.22

 

$                 -

 

$          9.38

 

$            6.96

 

$          (0.14)

 

$                  -

 

$          6.82

                                                               

Diluted

                                                             
                                                               

     Continuing operations

$            2.61

 

$           0.08

 

$                  -

 

$          2.69

 

$            5.84

 

$            0.13

 

$                 -

 

$          5.97

 

$            9.08

 

$          0.21

 

$                -

 

$          9.29

 

$            6.64

 

$           (0.14)

 

$                 -

 

$          6.50

                                                               

     Discontinued operations

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

0.25

 

-

 

-

 

0.25

                                                               

Diluted earnings per common share

$            2.61

 

$           0.08

 

$                  -

 

$          2.69

 

$            5.84

 

$            0.13

 

$                 -

 

$          5.97

 

$            9.08

 

$           0.21

 

$                 -

 

$          9.29

 

$            6.89

 

$          (0.14)

 

$                  -

 

$          6.75

 

 

 

SOURCE Lockheed Martin

For further information: Media Contact: Bill Phelps, 301-897-6308; william.phelps@lmco.com; Investor Relations Contacts: Greg Gardner, 301-897-6584; greg.m.gardner@lmco.com; Kelly Stevens, 301-897-6455; kelly.stevens@lmco.com