LOCKHEED MARTIN ANNOUNCES FIRST QUARTER 2007 RESULTS
Bethesda, MD, April 24, 2007
Lockheed Martin Corporation (NYSE: LMT) today reported
first quarter 2007 net earnings of $690 million ($1.60 per
diluted share), compared to $591 million ($1.34 per diluted
share) in 2006. Net sales were $9.3 billion, a 1% increase
over first quarter 2006 sales of $9.2 billion. Cash from
operations for the first quarter of 2007 was $1.5 billion,
compared to $1.2 billion in 2006.
“Our first quarter earnings reflect our commitment to strong
operational and financial performance,” said Bob Stevens,
Chairman, President and CEO. “We are proud of our
capabilities and will continue to deliver on our commitments
as we sustain value for our customers, shareholders and
employees.”
Summary Reported Results and Outlook
The following table presents the Corporation’s
results for the quarter ended March 31, in accordance with
generally accepted accounting principles (GAAP):
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.
The increase in projected net sales primarily reflects the
acquisitions of Management Systems Designers (MSD) and RLM
Systems.
The $0.35 - $0.40 per share increase in projected 2007
earnings per share is driven by realized and anticipated
operational performance improvements across all business
segments (expected to be $0.14 - $0.19 per share) and the
benefit of $0.21 per share recognized on unusual items
during the first quarter of 2007.
It is the Corporation's practice not to incorporate
adjustments to its outlook and projections for proposed
acquisitions, divestitures, joint ventures, or other unusual
activities until such transactions have been consummated.
Balanced Cash Deployment Strategy
The Corporation continued to execute its balanced cash
deployment strategy during the first quarter as follows:
• repurchased 7.6 million shares at a cost of $739 million;
• declared a $148 million dividend, which was paid early in
the second quarter;
• invested $95 million in acquisition activities;
• made capital expenditures of $84 million; and
• repaid $17 million of long-term debt.
Segment
Results
In February 2007, the Corporation announced a realignment of
some of its business segments. The realignment was made to
enhance support for critical customer missions and increase
the Corporation’s integration of resources in areas of solid
growth potential. The Corporation combined the Information
Technology & Global Services (IT&GS) business segment and
the Integrated Systems & Solutions business segment to form
the Information Systems & Global Services (IS&GS) business
segment, which operates in three lines of business (LOBs):
Information Systems, Global Services and Mission
Solutions.
At the same time, the following additional realignments took
place:
-
Transportation and Security Solutions, previously
part of Electronic Systems is now part of IS&GS,
with the majority of its operations reported in the
Mission Solutions LOB and the remainder in the
Information Systems LOB;
-
Management of Sandia National Laboratories and the
ownership interest in the joint venture that manages
the Atomic Weapons Establishment in the U.K., both
previously part of IT&GS, now report to the
Electronic Systems business segment in the Platform,
Training & Energy (PT&E) LOB, formerly the Platform,
Training & Transportation Solutions LOB; and
-
Aircraft & Logistics Centers, previously part of
IT&GS, now reports to the Aeronautics business
segment in the Other Aeronautics Programs LOB.
The Corporation now operates in
four principal business segments: Aeronautics; Electronic
Systems; IS&GS; and Space Systems. Schedules “I” through
“K” of the attachments to this release present selected
historical unaudited pro forma data that has been
reclassified to reflect the reorganization.
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 income / (expense), net.” See our
2006 Form 10-K for a description of “Unallocated corporate
income / (expense), 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 income /
(expense), net.”
The following table presents the operating results of the
four business segments and reconciles these amounts to the
Corporation’s consolidated financial results.
The following discussion compares the operating results for
the quarter ended March 31, 2007 to the same period in 2006.
Aeronautics
Net sales for Aeronautics remained unchanged for the quarter
ended March 31, 2007 from the 2006 period. Declines in Air
Mobility and Combat Aircraft offset increased sales in Other
Aeronautics Programs. The decline in Air Mobility was
mainly due to lower volume on the C-5 and other air mobility
programs. The decrease in Combat Aircraft was mainly due to
lower volume on F-22 and F-117 programs, which more than
offset increased F-35 volume. The increase in Other
Aeronautics Programs was mainly due to higher volume in
logistics services activities.
Segment operating profit increased by 20% for the quarter
ended March 31, 2007 from the 2006 period. Operating profit
increased in both Combat Aircraft and Air Mobility due to
improved performance on F-22 and F-16 programs and on C-130
sustainment activities in 2007.
Electronic Systems
Net sales for Electronic Systems increased by 3% for the
quarter ended March 31, 2007 from the 2006 period. The
increase was primarily due to higher volume in platform
integration activities at PT&E and surface systems
activities at Maritime Systems & Sensors (MS2). These
increases more than offset declines in air defense programs
at Missiles & Fire Control (M&FC).
Operating profit for Electronic Systems increased by 4% for
the quarter ended March 31, 2007 compared to the 2006
period. The increase was primarily attributable to higher
volume and improved performance in platform integration
activities at PT&E and undersea and surface systems
activities at MS2. These increases more than offset lower
operating profit in air defense programs at M&FC.
Information Systems & Global Services
Net sales for IS&GS increased by 9% for the quarter ended
March 31, 2007 from the 2006 period. Sales increased in all
three of the segment’s lines of business. The increase in
Information Systems was due to organic growth and the
acquisitions of MSD in 2007 and Aspen Systems Corporation in
2006. The increase in Global Services was due to the
acquisitions of Pacific Architects and Engineers Inc. and
Savi Technology Inc. in 2006.
Operating profit for IS&GS increased by 11% for the quarter
ended March 31, 2007 compared to the 2006 period. The
increase was primarily due to improved performance in both
Mission Solutions and Information Systems.
Space Systems
Net sales for Space Systems decreased by 9% for the quarter
ended March 31, 2007 from the 2006 period. The sales
decline was expected given the formation of the United
Launch Alliance (ULA) joint venture and the divestiture of
the International Launch Services business 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. This sales decline in Space Transportation
was partially offset by increases in Strategic & Defensive
Missile Systems (S&DMS) and Satellites. S&DMS sales
increased due to higher volume in strategic missile
programs. At Satellites, higher volume in government
satellite activities more than offset declines in commercial
satellite activities. There were no commercial satellite
deliveries in the first quarter of 2007 compared to one
delivery during the comparable 2006 period.
Segment operating profit decreased by 4% for the quarter
ended March 31, 2007 compared to the 2006 period. Operating
profit declines in Space Transportation were partially
offset by increases in Satellites and S&DMS activities. In
Space Transportation, the decline in operating profit was
mainly due to 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. In Satellites, the increase was mainly due to
higher volume and improved performance on government
satellite activities. The S&DMS growth was primarily driven
by higher volume and improved performance on strategic
missile programs.
Unallocated Corporate Income (Expense), Net
The FAS/CAS pension adjustment (calculated as the
difference between FAS 87 expense and the CAS cost amounts)
decreased in 2007 compared to 2006. This decrease is
consistent with the Corporation’s previously disclosed
assumptions used to compute these amounts.
Certain items are excluded from segment results as part
of senior management’s evaluation of segment operating
performance. For purposes of segment reporting, the
following unusual items were included in “Unallocated
Corporate income (expense), net” for the quarters ended
March 31, 2007 and 2006:
2007 –
- A gain, net of state income taxes, of $25 million
related to the sale of land; and
- 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, along with the income tax benefit of $59
million ($0.14 per share) described below, increased net
earnings by $89 million ($0.21 per share) during the quarter
ended March 31, 2007.
2006 –
- A gain, net of state income taxes, of $127 million
from the sale of 21 million shares of Inmarsat; and
- A gain, net of state income taxes, of $23 million
related to the sale of the assets of Space Imaging, LLC.
On a net basis, these items increased net earnings by $98
million ($0.22 per share) during the quarter ended March 31,
2006.
Income Taxes
Our effective tax rates for the quarters ended March 31,
2007 and 2006 were 25.7% and 32.6%. Income tax expense was
reduced by $59 million ($0.14 per share) due to the March
2007 completion of an IRS audit, which also reduced the
effective tax rate for this quarter by 6.4%. Also reducing
the effective tax rate were increased deductions in 2007 for
US manufacturing activities and dividends related to our
employee stock ownership plan. For the quarter ended March
31, 2006, the effective tax rate was lower than the
statutory rate primarily due to tax benefits related to
export sales and tax deductions for US manufacturing
activities and dividends related to the employee stock
ownership plan.
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.
FORWARD-LOOKING STATEMENTS
Statements in this release that are "forward-looking
statements" are based on Lockheed Martin’s current
expectations and assumptions. Forward-looking statements in
this release include estimates of future sales, earnings and
cash flow. These statements are not guarantees of future
performance and are subject to risks and uncertainties.
Actual results could differ materially because of factors
such as: the availability of government funding for our
products and services both domestically and internationally;
changes in government and 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 defense programs; the award or
termination of contracts; return on pension plan assets,
interest and discount rates and other changes that may
impact pension plan assumptions; difficulties in developing
and producing operationally advanced technology systems; the
timing and customer acceptance of product deliveries;
materials availability and performance by key 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; the future impact of legislation,
changes in accounting, tax rules, or export policies; the
future impact of acquisitions or divestitures, joint
ventures or teaming arrangements; 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 projections 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 April 23,
2007. 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 greater visibility into how
effectively Lockheed Martin uses the capital invested in its
operations. The Corporation uses ROIC to evaluate
multi-year investment decisions and as a long-term
performance measure, and also uses ROIC 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 minimum
pension liability balances.
Contact:
NEWS MEDIA CONTACT: Tom Jurkowsky, 301/897-6352
INVESTOR RELATIONS CONTACT: Jerry Kircher, 301/897-6584
Web site:
www.lockheedmartin.com
Conference call: Lockheed Martin will webcast the
earnings conference call (listen-only mode) at 11 a.m. E.D.T.
on April 24, 2007. A live audio broadcast, including
relevant charts, will be available on the Investor Relations
page of the company's web site at:
http://www.lockheedmartin.com/investor. |
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