LOCKHEED MARTIN CORPORATION 
By BETHESDA, Md., Jan. 24, 2013 /PRNewswire/ -- Lockheed Martin Corporation (NYSE: LMT) today reported fourth quarter 2012 net sales of $12.1 billion compared to $12.2 billion in the fourth quarter of 2011. Net earnings from continuing operations in the fourth quarter of 2012 were $569 million, or $1.73 per diluted share, compared to $698 million, or $2.14 per diluted share, in the fourth quarter of 2011. Cash used for operations in the fourth quarter of 2012 was ($1.3) billion after discretionary pension contributions of $2.5 billion, compared to cash from operations of $1.1 billion after discretionary pension contributions of $1.0 billion in the fourth quarter of 2011.
Fourth quarter 2012 net earnings from continuing operations included a non-cash FAS/CAS pension adjustment of $208 million, which reduced net earnings by $128 million, or $0.39 per diluted share; an increase in income tax expense from reduced U.S. manufacturing deductions primarily due to the Corporation's discretionary pension contributions in the fourth quarter of 2012, which reduced net earnings by $59 million, or $0.18 per diluted share; and a special charge of $25 million related to workforce reductions at the Corporation's Aeronautics business segment, which reduced net earnings by $16 million, or $0.05 per diluted share. Fourth quarter 2011 net earnings from continuing operations included a non-cash FAS/CAS pension adjustment of $230 million, which reduced net earnings by $142 million, or $0.43 per diluted share, and $46 million of premiums paid for the early retirement of debt in the fourth quarter of 2011, which reduced net earnings by $28 million, or $0.09 per diluted share.
Net sales for 2012 were $47.2 billion compared to $46.5 billion in 2011. Net earnings from continuing operations in 2012 were $2.75 billion, or $8.36 per diluted share, compared to $2.67 billion, or $7.85 per diluted share, during 2011. Cash from operations for 2012 was $1.6 billion after pension contributions of $3.6 billion, which included $2.5 billion of discretionary contributions in the fourth quarter, compared to cash from operations for 2011 of $4.3 billion after pension contributions of $2.3 billion in 2011, which included $1.0 billion of discretionary contributions in the fourth quarter.
Net earnings from continuing operations for 2012 included a non-cash FAS/CAS pension adjustment of $830 million, which reduced net earnings by $513 million, or $1.56 per diluted share; an increase in income tax expense from reduced U.S. manufacturing deductions primarily due to the Corporation's discretionary pension contributions in the fourth quarter of 2012, which reduced net earnings by $59 million, or $0.18 per diluted share; and special charges of $48 million related to workforce reductions at the Corporation's Aeronautics and former Electronic Systems business segments, which reduced net earnings by $31 million, or $0.09 per diluted share. Net earnings from continuing operations in 2011 included a non-cash FAS/CAS pension adjustment of $922 million, which reduced net earnings by $569 million, or $1.68 per diluted share, $48 million of premiums paid for the early retirement of debt in the fourth quarter of 2011, which reduced net earnings by $30 million, or $0.09 per diluted share, and a reduction to income tax expense of $89 million, or $0.26 per diluted share, related to the U.S. Congressional Joint Committee on Taxation completing its review of Internal Revenue Service resolution of adjustments for the years 2003 through 2008.
"Our dedicated team, broad portfolio, focus on program execution and proactive cost reduction efforts resulted in record performance and backlog in 2012," said Lockheed Martin Chief Executive Officer and President Marillyn Hewson. "While we still face the uncertainty of sequestration, we remain focused on delivering innovative solutions, meeting our commitments to customers and returning value to our shareholders."
Summary Financial Results
The following table presents the Corporation's summary financial results prepared in accordance with generally accepted accounting principles (GAAP):
(in millions, except per share data) Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $12,099 $12,211 $47,182 $46,499
======= ======= ======= =======
Business segment operating profit $1,339 $1,404 $5,583 $5,281
Unallocated expenses, net1, 2 (253) (298) (1,101) (1,125)
Special items - severance charges(3) (25) - (48) (136)
--- --- --- ----
Consolidated operating profit(2) $1,061 $1,106 $4,434 $4,020
====== ====== ====== ======
Net earnings (loss) from
Continuing operations $569 $698 $2,745 $2,667
Discontinued operations4 - (15) - (12)
--- --- --- ---
Net earnings $569 $683 $2,745 $2,655
==== ==== ====== ======
Diluted earnings (loss) per share from
Continuing operations $1.73 $2.14 $8.36 $7.85
Discontinued operations4 - (.05) - (.04)
--- ---- --- ----
Diluted earnings per share $1.73 $2.09 $8.36 $7.81
===== ===== ===== =====
Cash from operations5 $(1,315) $1,088 $1,561 $4,253
======= ====== ====== ======
(1) Includes non-cash FAS/CAS pension adjustment, which represents the difference between pension expense
calculated in accordance with GAAP and pension costs calculated and funded in accordance with U.S. Government Cost
Accounting Standards (CAS).
2 Gains and losses on investments used to fund the Corporation's deferred compensation plan liabilities have been
reclassified from "other non-operating (expense) income, net" to "unallocated expenses, net" for all periods
presented in order to align the classification of changes in the market value of investments held for the plan
with changes in the value of the corresponding plan liabilities. Net gains on these investments were $4 million
and $67 million for the quarter and year ended Dec. 31, 2012, respectively, and $24 million and $40 million for
the quarter and year ended Dec. 31, 2011, respectively. For additional information on the reclassification, refer
to the tables attached to this earnings release, which display the quarterly and annual impact for 2012 and 2011.
(3) Severance charges for 2012 consist of amounts associated with the elimination of certain positions at the
Aeronautics business segment in the fourth quarter and the former Electronic Systems business segment in the third
quarter. For 2011, severance charges consisted of amounts related to the elimination of certain positions at
various business segments and Corporate Headquarters. Severance charges for initiatives that are not significant
are included in business segment operating profit.
4 Discontinued operations in 2011 include the operating results of Savi Technology, Inc. and also Pacific
Architects and Engineers, Inc. through the date of its sale on April 4, 2011. Amounts related to discontinued
operations in 2012 were not significant and, accordingly, were included in consolidated operating profit.
5 The Corporation made contributions to its pension trust of $2.5 billion and $3.6 billion during the quarter and
year ended Dec. 31, 2012, respectively. During the quarter and year ended Dec. 31, 2011, the Corporation made
contributions to its pension trust of $1.0 billion and $2.3 billion, respectively.
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2013 Financial Outlook
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. It is the Corporation's practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, joint ventures, changes in tax laws, or special items until such transactions have been consummated or enacted. Refer to the "Disclosure Regarding Forward-Looking Statements" section contained in this press release.
The Corporation's outlook for 2013 is premised on the assumption that sequestration does not occur, that the U.S. Government continues to support and fund the Corporation's programs, which is consistent with the continuing resolution funding measure through March 2013, and that Congress approves defense budget legislation for government fiscal year 2013 at a level consistent with the President's proposed defense budget for the second half of the U.S. Government's fiscal year 2013.
(in millions, except per share data)
Net sales $44,500 - $46,000
=================
Business segment operating profit $5,175 - $5,325
Unallocated expenses, net(1) ~ (825)
------
Consolidated operating profit $4,350 - $4,500
===============
Diluted earnings per share from continuing
operations(2) $8.80 - $9.10
=============
Cash from operations(3) >= $4,000
=========
(1) Includes non-cash FAS/CAS pension adjustment of ($485) million, which was calculated
using a 4.0 percent discount rate, an expected long-term rate of return on plan assets of
8.0 percent, and anticipated cash contributions of approximately $1.5 billion in 2013.
(2) On Jan. 2, 2013, the President signed legislation that retroactively extended the
research and development (R&D) tax credit for two years, from Jan. 1, 2012 through Dec. 31,
2013. The Corporation expects to recognize a total benefit of approximately $75 million, or
$0.23 per diluted share, related to this R&D tax credit in 2013. Of this total, the
Corporation expects to recognize approximately $45 million, or $0.14 per diluted share,
during the first quarter of 2013, which reflects the entire benefit of the R&D tax credit
attributable to 2012 plus the benefit of the R&D tax credit attributable to the first
quarter of 2013. The Corporation will record the remainder of the R&D tax credit benefit
over subsequent quarters in 2013.
(3) Includes anticipated contributions of $1.5 billion to the Corporation's pension trust,
which it also anticipates recovering as CAS costs in 2013.
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Cash Deployment Activities
The Corporation deployed cash in 2012 by:
-- making contributions to its pension trust of $2.5 billion in the fourth
quarter and $3.6 billion during the year;
-- paying cash dividends of $373 million in the fourth quarter, after
increasing the quarterly dividend in the fourth quarter by 15 percent,
and $1.4 billion during the year;
-- repurchasing 3.1 million shares for $286 million in the fourth quarter
and 11.3 million shares for $1.0 billion during the year; and
-- making capital expenditures of $428 million in the fourth quarter and
$942 million during the year.
On Dec. 14, 2012, the Corporation issued $1.3 billion of senior unsecured notes (New Notes) with a fixed interest rate of 4.07% maturing in Dec. 2042 in exchange for outstanding notes totaling $1.2 billion with interest rates ranging from 5.50% to 8.50% maturing in 2023 to 2040. In connection with the exchange, the Corporation paid a premium of $393 million, of which $225 million was paid in cash and $168 million was in the form of New Notes. The premium will be amortized as additional interest expense over the term of the New Notes.
Segment Results
Effective Dec. 31, 2012, the Corporation operates in five business segments: Aeronautics; Information Systems & Global Solutions (IS&GS); Missiles and Fire Control (MFC); Mission Systems and Training (MST); and Space Systems. This structure reflects the reorganization of the Corporation's former Electronic Systems business segment into the new MFC and MST business segments in order to streamline its operations and enhance customer alignment. In connection with this reorganization, the former Electronic Systems corporate management layer was eliminated, and the former Global Training and Logistics business was split between the two new business segments. In addition, the business reporting relationships for Sandia Corporation, which manages the Sandia National Laboratories for the U.S. Government, and the U.K. Atomic Weapons Establishment (AWE) joint venture were transferred from the former Electronic Systems business segment to the Space Systems business segment. The amounts, discussion, and presentation of the Corporation's business segments as set forth in this release reflect this reorganization.
Operating profit for the business segments includes equity earnings or losses from investees because the operating activities of the investees are closely aligned with the operations of those segments. The Corporation's equity investments primarily include United Launch Alliance (ULA), United Space Alliance (USA), and AWE, all of which are part of Space Systems.
The following table presents summary financial results of the five business segments and reconciles these amounts to the Corporation's consolidated financial results.
(in millions) Quarters Ended Dec. 31,
Years Ended Dec. 31,
--------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales
Aeronautics $4,141 $3,855 $14,953 $14,362
Information Systems & Global Solutions 2,201 2,548 8,846 9,381
Missiles and Fire Control 1,897 1,826 7,457 7,463
Mission Systems and Training 1,860 1,858 7,579 7,132
Space Systems 2,000 2,124 8,347 8,161
----- ----- ----- -----
Net sales $12,099 $12,211 $47,182 $46,499
======= ======= ======= =======
Operating profit
Aeronautics $445 $461 $1,699 $1,630
Information Systems & Global Solutions 203 254 808 874
Missiles and Fire Control 272 231 1,256 1,069
Mission Systems and Training 187 171 737 645
Space Systems 232 287 1,083 1,063
--- --- ----- -----
Business segment operating profit 1,339 1,404 5,583 5,281
Unallocated expenses, net (253) (298) (1,101) (1,125)
Special items - severance charges (25) - (48) (136)
--- --- --- ----
Consolidated operating profit $1,061 $1,106 $4,434 $4,020
====== ====== ====== ======
In the discussion of comparative segment results, changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales resulting from varying production activity levels, deliveries, or service levels on individual contracts. Volume changes typically include a corresponding change in segment operating profit based on the current profit booking rate for a particular contract.
In addition, comparability of the Corporation's segment operating profit may be impacted by changes in estimated profit booking rates on the Corporation's contracts accounted for using the percentage-of-completion method of accounting. Increases in the estimated profit booking rates, typically referred to as risk retirements, usually relate to revisions in the total estimated costs at completion that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate resulting in an increase in the estimated costs at completion and a reduction of the estimated profit booking rate. Increases or decreases in estimated profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit may also be impacted, favorably or unfavorably, by other matters such as the resolution of contractual matters, reserves for disputes, asset impairments, and insurance recoveries, among others. Segment operating profit and items such as risk retirements, reductions of profit booking rates, or other matters are presented net of state income taxes.
The Corporation's consolidated net adjustments not related to volume, including net profit rate adjustments and other matters, represented approximately 27 percent and 34 percent of total segment operating profit for the quarter and year ended Dec. 31, 2012, respectively, and approximately 29 percent and 30 percent of total segment operating profit for the quarter and year ended Dec. 31, 2011.
Aeronautics
(in millions) Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $4,141 $3,855 $14,953 $14,362
Operating profit $445 $461 $1,699 $1,630
Operating margins 10.7% 12.0% 11.4% 11.3%
Aeronautics' net sales for the quarter ended Dec. 31, 2012 increased $286 million, or 7 percent, compared to the same period in 2011. The increase was attributable to higher net sales of approximately $165 million from C-5 programs due to higher aircraft deliveries (two C-5M aircraft delivered in the fourth quarter of 2012 compared to none during the same 2011 period); and about $130 million from C-130 programs primarily due to higher aircraft deliveries (nine C-130J aircraft delivered in the fourth quarter of 2012 compared to seven during the same 2011 period). Partially offsetting the increases were lower net sales of approximately $20 million from F-16 programs as lower volume on sustainment activities due to the completion of modification programs for certain international customers more than offset increased F-16 aircraft deliveries (eight F-16 aircraft delivered in the fourth quarter of 2012 compared to five during the same 2011 period). Net sales from F-35 contracts and the F-22 program were comparable to the same period in 2011.
Aeronautics' operating profit for the quarter ended Dec. 31, 2012 decreased $16 million, or 3 percent, compared to the same period in 2011. The decrease was attributable to lower operating profit as a result of lower risk retirements of approximately $50 million on F-16 programs and about $20 million on C-5 programs. Partially offsetting the decreases was higher operating profit of approximately $30 million on various other Aeronautics programs, including other sustainment activities, primarily due to increased risk retirements; about $10 million on C-130 programs primarily due to increased aircraft deliveries; and approximately $10 million from the completion of purchased intangible asset amortization on certain F-16 contracts. Operating profit was comparable to the same period in 2011 for F-35 contracts and the F-22 program. Adjustments not related to volume, including net profit booking rate adjustments described above, were approximately $35 million lower for the quarter ended Dec. 31, 2012 compared to the same period in 2011.
Aeronautics' net sales for the year ended Dec. 31, 2012 increased $591 million, or 4 percent, compared to the same period in 2011. The increase was attributable to higher net sales of approximately $745 million from F-35 Low Rate Initial Production (LRIP) contracts principally due to increased production volume; about $285 million from F-16 programs primarily due to higher aircraft deliveries (37 F-16 aircraft delivered in 2012 compared to 22 during the same 2011 period) partially offset by lower volume on sustainment activities due to the completion of modification programs for certain international customers; and approximately $140 million from C-5 programs due to higher aircraft deliveries (four C-5M aircraft delivered in 2012 compared to two during the same 2011 period). Partially offsetting the increases were lower net sales of approximately $365 million from decreased production volume and lower risk retirements on the F-22 program as final aircraft deliveries were completed in the second quarter of 2012; approximately $110 million from the F-35 development contract primarily due to the inception-to-date effect of reducing the profit booking rate in the second quarter of 2012 and to a lesser extent lower volume; and about $95 million from a decrease in volume on other sustainment activities partially offset by various other Aeronautics programs due to higher volume. Net sales for C-130 programs were comparable to the same period in 2011 as a decline in sustainment activities largely was offset by increased aircraft deliveries.
Aeronautics' operating profit for the year ended Dec. 31, 2012 increased $69 million, or 4 percent, compared to the same period in 2011. The increase was attributable to higher operating profit of approximately $105 million from C-130 programs due to an increase in risk retirements; about $50 million from F-16 programs due to higher aircraft deliveries partially offset by a decline in risk retirements; approximately $50 million from F-35 LRIP contracts due to increased production volume and risk retirements; and about $50 million from the completion of purchased intangible asset amortization on certain F-16 contracts. Partially offsetting the increases was lower operating profit of about $90 million from the F-35 development contract primarily due to the inception-to-date effect of reducing the profit booking rate in the second quarter of 2012; approximately $50 million from decreased production volume and risk retirements on the F-22 program partially offset by a resolution of a contractual matter in the second quarter of 2012; and approximately $45 million primarily due to a decrease in risk retirements on other sustainment activities partially offset by various other Aeronautics programs due to increased risk retirements and volume. Operating profit for C-5 programs was comparable to the same period in 2011. Adjustments not related to volume, including net profit booking rate adjustments and other matters described above, were approximately $30 million lower for the year ended Dec. 31, 2012 compared to the same period in 2011.
Information Systems & Global Solutions
(in millions) Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $2,201 $2,548 $8,846 $9,381
Operating profit $203 $254 $808 $874
Operating margins 9.2% 10.0% 9.1% 9.3%
The IS&GS business segment has been impacted by the continuing downturn in the federal information technology budgets and the impact of the continuing resolution that was effective on Oct. 1, 2012, the start of the U.S. Government's fiscal year.
IS&GS' net sales for the quarter ended Dec. 31, 2012 decreased $347 million, or 14 percent, compared to the same period in 2011. The decrease was attributable to lower net sales of approximately $225 million due to lower volume on numerous programs (primarily Warfighter Information Network-Tactical (WIN-T); Information Technology Agency Enterprise Transport Management; Command, Control, Battle Management and Communications (C2BMC); and Hanford Mission Support contract (Hanford)); and about $120 million due to the substantial completion of certain programs during 2011 (primarily Outsourcing Desktop Initiative for NASA (ODIN); Airborne Maritime Fixed Station Joint Tactical Radio System (JTRS); and U.K. Census).
IS&GS' operating profit for the quarter ended Dec. 31, 2012 decreased $51 million, or 20 percent, compared to the same period in 2011. The decrease was attributable to lower operating profit of approximately $40 million due to the favorable impact of the ODIN contract completion in the fourth quarter of 2011; and about $20 million due to an increase in reserves for performance issues related to an international airborne surveillance system in fourth quarter of 2012. Partially offsetting the decreases was an increase in operating profit due to higher risk retirements of approximately $10 million from the HR Access program. Adjustments not related to volume, including net profit booking rate adjustments and other matters described above, were approximately $15 million lower for the quarter ended Dec. 31, 2012 compared to the same period in 2011.
IS&GS' net sales for the year ended Dec. 31, 2012 decreased $535 million, or 6 percent, compared to the same period in 2011. The decrease was attributable to lower net sales of approximately $485 million due to the substantial completion of various programs during 2011 (primarily JTRS; ODIN; and U.K. Census); and about $255 million due to lower volume on numerous other programs (primarily Hanford; WIN-T; C2BMC; and Transportation Worker Identification Credential (TWIC)). Partially offsetting the decreases were higher net sales of approximately $140 million from QTC, which was acquired early in the fourth quarter of 2011; and about $65 million from increased activity on numerous other programs, primarily federal cyber security programs and Persistent Threat Detection System (PTDS) operational support.
IS&GS' operating profit for the year ended Dec. 31, 2012 decreased $66 million, or 8 percent, compared to the same period in 2011. The decrease was attributable to lower operating profit of approximately $50 million due to the favorable impact of the ODIN contract completion in 2011; about $25 million due to an increase in reserves for performance issues related to an international airborne surveillance system in 2012; and approximately $20 million due to lower volume on certain programs (primarily C2BMC and WIN-T). Partially offsetting the decreases was an increase in operating profit due to higher risk retirements of approximately $15 million from the TWIC program; and about $10 million due to increased activity on numerous other programs, primarily federal cyber security programs and PTDS operational support. Operating profit for the JTRS program was comparable as a decrease in volume was offset by a decrease in reserves. Adjustments not related to volume, including net profit booking rate adjustments and other matters described above, were approximately $20 million higher for the year ended Dec. 31, 2012 compared to the same period in 2011.
Missiles and Fire Control
(in millions) Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $1,897 $1,826 $7,457 $7,463
Operating profit $272 $231 $1,256 $1,069
Operating margins 14.3% 12.7% 16.8% 14.3%
MFC's net sales for the quarter ended Dec. 31, 2012 increased $71 million, or 4 percent, compared to the same period in 2011. The increase was attributable to higher net sales of approximately $100 million due to higher volume for air and missile defense programs (primarily Terminal High Altitude Area Defense (THAAD) and Patriot Advanced Capability-3 (PAC-3)) partially offset by lower net sales of about $25 million from tactical missile programs (Joint Air-to-Surface Standoff Missile) due to volume.
MFC's operating profit for the quarter ended Dec. 31, 2012 increased $41 million, or 18 percent, compared to the same period in 2011. The increase was attributable to higher operating profit of approximately $35 million for air and missile defense programs (primarily PAC-3 and THAAD) due to increased risk retirements and volume; and approximately $10 million from tactical missile programs as a result of higher risk retirements. Partially offsetting the increases was lower operating profit of approximately $15 million due to decreased risk retirements from fire control systems programs (primarily Apache; Sniper(®); and LANTIRN(®)). Adjustments not related to volume, including net profit booking rate adjustments described above, were approximately $15 million higher for the quarter ended Dec. 31, 2012, compared to the same period in 2011.
MFC's net sales for the year ended Dec. 31, 2012 were comparable to the same period in 2011. Net sales decreased approximately $130 million due to lower volume and risk retirements on various services programs, and about $60 million due to lower volume from fire control systems programs (primarily Sniper(®); LANTIRN(®); and Apache). The decreases largely were offset by higher net sales of approximately $95 million due to higher volume from tactical missile programs (primarily Javelin and Hellfire) and approximately $80 million for air and missile defense programs (primarily PAC-3 and THAAD).
MFC's operating profit for the year ended Dec. 31, 2012 increased $187 million, or 17 percent, compared to the same period in 2011. The increase was attributable to higher risk retirements and volume of about $95 million from tactical missile programs (primarily Javelin and Hellfire); increased risk retirements and volume of approximately $60 million for air and missile defense programs (primarily THAAD and PAC-3); and about $45 million from a resolution of contractual matters. Partially offsetting these increases was lower risk retirements and volume on various programs, including $25 million for services programs. Adjustments not related to volume, including net profit booking rate adjustments and other matters described above, were approximately $145 million higher for the year ended Dec. 31, 2012 compared to the same period in 2011.
Mission Systems and Training
(in millions) Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $1,860 $1,858 $7,579 $7,132
Operating profit $187 $171 $737 $645
Operating margins 10.1% 9.2% 9.7% 9.0%
MST's net sales for the quarter ended Dec. 31, 2012 were comparable to the same period in 2011. An increase of approximately $35 million from training and logistics solutions, primarily due to net sales from Sim Industries, which was acquired in the fourth quarter of 2011, largely was offset by a decrease of approximately $25 million from various undersea systems programs due to lower volume.
MST's operating profit for the quarter ended Dec. 31, 2012 increased $16 million, or 9 percent, compared to the same period in 2011. The increase primarily was attributable to reserves of approximately $55 million for contract cost matters on certain ship and aviation system programs recorded in the fourth quarter of 2011 (including the terminated presidential helicopter program); and about $25 million from various other programs due to higher volume and risk retirements. The increases partially were offset by lower operating profit of about $40 million on certain ship and aviation system programs reflecting the favorable resolution of contractual matters for a certain platform integration program matter in 2011; approximately $15 million for undersea systems programs primarily due to lower volume; and about $10 million for integrated warfare systems and sensors programs due to lower volume and risk retirements. Adjustments not related to volume, including net profit booking rate adjustments and other matters described above, were approximately the same for the quarter ended Dec. 31, 2012, compared to the same period in 2011.
MST's net sales for the year ended Dec. 31, 2012 increased $447 million, or 6 percent, compared to the same period in 2011. The increase in net sales for 2012 was attributable to higher volume and risk retirements of approximately $395 million from ship and aviation system programs (primarily PTDS; Littoral Combat Ship (LCS); Vertical Launching System (VLS); and MH-60); about $115 million for training and logistics solutions programs primarily due to net sales from Sim Industries, which was acquired in the fourth quarter of 2011; and approximately $30 million as a result of increased volume on integrated warfare systems and sensors programs (primarily Aegis). Partially offsetting the increases were lower net sales of approximately $70 million from undersea systems programs due to lower volume on an international combat system program and towed array systems; and about $25 million due to lower volume on various other programs.
MST's operating profit for the year ended Dec. 31, 2012 increased $92 million, or 14 percent, compared to the same period in 2011. The increase was attributable to higher operating profit of approximately $175 million from ship and aviation system programs, which reflects higher volume and risk retirements on certain programs (primarily VLS; PTDS; MH-60; and LCS) and reserves of about $55 million for contract cost matters on ship and aviation system programs recorded in the fourth quarter of 2011 (including the terminated presidential helicopter program). Partially offsetting the increase was lower operating profit of approximately $40 million from undersea systems programs due to reduced profit booking rates on certain programs and lower volume on an international combat system program and towed array systems; and about $40 million due to lower volume on various other programs. Adjustments not related to volume, including net profit booking rate adjustments and other matters described above, were approximately $150 million higher for the year ended Dec. 31, 2012, compared to the same period in 2011.
Space Systems
(in millions) Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $2,000 $2,124 $8,347 $8,161
Operating profit $232 $287 $1,083 $1,063
Operating margins 11.6% 13.5% 13.0% 13.0%
Space Systems' net sales for the quarter ended Dec. 31, 2012 decreased $124 million, or 6 percent, compared to the same period in 2011. The decrease was principally attributable to lower net sales of approximately $120 million from certain government satellite programs (primarily Space Based Infrared System (SBIRS) and Mobile User Objective System (MUOS)) due to lower volume and a decline in risk retirements.
Space Systems' operating profit for the quarter ended Dec. 31, 2012 decreased $55 million, or 19 percent, compared to the same period in 2011. The decrease was attributable to lower operating profit of approximately $25 million from certain government satellite programs due to a decline in risk retirements and lower volume; and about $25 million from lower equity earnings primarily at USA due to the wind-down of the Space Shuttle program. Adjustments not related to volume, including net profit booking rate adjustments described above, were approximately $15 million lower for the quarter ended Dec. 31, 2012 compared to the same period in 2011.
Space Systems' net sales for the year ended Dec. 31, 2012 increased $186 million, or 2 percent, compared to the same period in 2011. The increase was attributable to higher net sales of approximately $150 million due to increased commercial satellite deliveries (two commercial satellites delivered in 2012 compared to one during 2011); about $125 million from the Orion Multi-Purpose Crew Vehicle (Orion) program due to higher volume and an increase in risk retirements; and approximately $70 million from increased volume on various strategic and defensive missile programs. Partially offsetting the increases were lower net sales of approximately $105 million from certain government satellite programs (primarily SBIRS and MUOS) as a result of decreased volume and a decline in risk retirements; and about $55 million from the NASA External Tank program, which ended in connection with the completion of the Space Shuttle program in 2011.
Space Systems' operating profit for the year ended Dec. 31, 2012 increased $20 million, or 2 percent, compared to the same period in 2011. The increase was attributable to higher operating profit of approximately $60 million from commercial satellite programs due to increased deliveries and reserves recorded in 2011; and about $40 million from the Orion program due to higher risk retirements and increased volume. Partially offsetting the increases was lower operating profit of approximately $45 million from lower volume and risk retirements on certain government satellite programs (primarily SBIRS); about $20 million from lower volume on the NASA External Tank program, which ended in connection with the completion of the Space Shuttle program in 2011; and approximately $20 million from lower equity earnings as a decline in launch related activities at ULA partially was offset by the resolution of contract cost matters associated with the wind-down of USA. Adjustments not related to volume, including net profit booking rate adjustments described above, were approximately $15 million higher for the year ended Dec. 31, 2012 compared to the same period in 2011.
Total equity earnings recognized by Space Systems for ULA, USA, and AWE represented approximately $55 million, or 24 percent, and about $265 million, or 24 percent, of this segment's operating profit for the quarter and year ended Dec. 31, 2012, respectively. During the quarter and year ended Dec. 31, 2011, total equity earnings recognized by Space Systems for ULA, USA, and AWE represented approximately $80 million, or 28 percent, and about $285 million, or 27 percent, respectively, of this segment's operating profit.
Income Taxes
The Corporation's effective income tax rates from continuing operations were 40.6 percent and 32.6 percent during the quarter and year ended Dec. 31, 2012, respectively, and 27.7 percent and 26.5 percent during the quarter and year ended Dec. 31, 2011, respectively. The rates for all periods benefited from tax deductions for dividends related to certain of the Corporation's defined contribution plans with an employee stock ownership plan feature. The rates for all periods benefited from tax deductions for U.S. manufacturing activities, except the fourth quarter of 2012.
The $2.5 billion discretionary pension contributions during the quarter ended Dec. 31, 2012 increased fourth quarter and 2012 income tax expense by $59 million, or $0.18 per diluted share, due to the reduced U.S. manufacturing deduction, the majority of which the Corporation expects to recover over the next two years. This impact, combined with a higher than typical recognition of the U.S. manufacturing deduction in the fourth quarter of 2011, increased the Corporation's effective income tax rate by over 9 percentage points quarter over quarter. Other factors contributed to the higher effective income tax rate in the fourth quarter of 2012 as well, including the recognition of R&D tax credits in the fourth quarter of 2011 while no such credits were recognized in the fourth quarter of 2012.
The U.S. Congressional Joint Committee on Taxation completed its review of Internal Revenue Service resolution of adjustments for the tax years 2003 through 2008 in 2011, resulting in an approximately 3 percentage point reduction in the 2011 effective income tax rate. Other factors contributed to the higher effective income tax rate for 2012 as well, including the reduced U.S. manufacturing deduction for 2012 referenced above and the recognition of R&D tax credits in 2011 while no such credits were recognized in 2012.
About Lockheed Martin
Headquartered in Bethesda, Md., Lockheed Martin is a global security and aerospace company that employs about 120,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services. The Corporation's net sales for 2012 were $47.2 billion.
Web site:www.lockheedmartin.com
Conference Call Information
Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 3:00 p.m. E.T. on Jan. 24, 2013. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the Corporation's web site at: http://www.lockheedmartin.com/investor.
Disclosure Regarding 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 flows. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results could differ materially due to factors such as:
-- the availability of funding for the Corporation's products and services
both domestically and internationally due to general economic
conditions, performance, cost, or other factors;
-- changes in domestic and international customer priorities and
requirements (including declining budgets resulting from general
economic conditions, affordability initiatives, the potential for
deferral or termination of awards, automatic sequestration under the
Budget Control Act of 2011 or Congressional actions intended to avoid
sequestration);
-- quantity revisions to the F-35 program;
-- the accuracy of the Corporation's estimates and assumptions including
those as to schedule, cost, technical and performance issues under its
contracts, cash flow, actual returns (or losses) on pension plan assets,
movements in interest rates, and other changes that may affect pension
plan assumptions;
-- the effect of capitalization changes (such as share repurchase activity,
accelerated pension funding, stock option exercises, or debt levels);
-- difficulties in developing and producing operationally advanced
technology systems, cyber security, other security threats, information
technology failures, natural disasters, public health crises or other
disruptions;
-- the timing and customer acceptance of product deliveries;
-- materials availability and the performance of key suppliers, teammates,
joint venture partners, 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 effect of legislation, rulemaking, and changes in accounting,
tax, defense procurement, changes in policy, interpretations, or
challenges to the allowability and recovery of costs incurred under
government cost accounting standards (including potential costs
associated with sequestration or other budgetary cuts to avoid
sequestration, such as severance payments made to employees and facility
closure expenses), export policy, changes in contracting policy and
contract mix;
-- the future impact of acquisitions or divestitures, joint ventures,
teaming arrangements, or internal reorganizations;
-- compliance with law and regulation and the outcome of legal proceedings
and other contingencies (including lawsuits, government investigations
or audits, and the cost of completing environmental remediation
efforts);
-- the competitive environment for the Corporation's products and services,
export policies, and potential for delays in procurement due to bid
protests;
-- the ability to attract and retain key personnel and suppliers (including
the potential for disruption associated with sequestration and related
employee severance or supplier termination costs) and to provide for the
orderly transition of management as the Corporation reduces the size of
its workforce; and
-- economic, business and political conditions domestically and
internationally and the Corporation's increased reliance on securing
international and adjacent business.
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 U.S. Securities and Exchange Commission 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 Annual Report on Form 10-K for the year ended Dec. 31, 2011 and 2012 Quarterly Reports on Form 10-Q, which may be obtained at the Corporation's website: http://www.lockheedmartin.com.
It is the Corporation's policy to update or reconfirm its financial projections only 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 Jan. 23, 2013. Lockheed Martin undertakes no duty to update any forward-looking statement to reflect subsequent events, actual results, or changes in the Corporation's expectations. The Corporation also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.
Lockheed Martin Corporation
Consolidated Statements of Earnings
(unaudited; in millions, except per share data)
Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $12,099 $12,211 $47,182 $46,499
Cost of sales 1, 2 (11,104) (11,199) (42,986) (42,755)
------- ------- ------- -------
Gross profit 995 1,012 4,196 3,744
Other income, net 66 94 238 276
--- --- --- ---
Operating profit 1,061 1,106 4,434 4,020
Interest expense (94) (96) (383) (354)
Other non-operating (expense) income, net (1) (9) (44) 21 (35)
--- --- --- ---
Earnings from continuing operations before income taxes 958 966 4,072 3,631
Income tax expense (389) (268) (1,327) (964)
---- ---- ------ ----
Net earnings from continuing operations 569 698 2,745 2,667
Net loss from discontinued operations (3) - (15) - (12)
--- --- --- ---
Net earnings $569 $683 $2,745 $2,655
==== ==== ====== ======
Effective tax rate 40.6% 27.7% 32.6% 26.5%
==== ==== ==== ====
Earnings (loss) per common share
Basic
Continuing operations $1.76 $2.16 $8.48 $7.94
Discontinued operations - (0.04) - (0.04)
--- ----- --- -----
Basic earnings per common share $1.76 $2.12 $8.48 $7.90
===== ===== ===== =====
Diluted
Continuing operations $1.73 $2.14 $8.36 $7.85
Discontinued operations - (0.05) - (0.04)
--- ----- --- -----
Diluted earnings per common share $1.73 $2.09 $8.36 $7.81
===== ===== ===== =====
Weighted average shares outstanding
Basic 322.7 322.5 323.7 335.9
Diluted 328.0 326.7 328.4 339.9
Common shares reported in stockholders' equity at end of period 321 321
1 Gains and losses on investments used to fund the Corporation's deferred compensation plan liabilities have been reclassified from "other non-operating (expense) income, net" to "unallocated expenses, net" within "cost of sales" for all periods presented in order to align the classification of changes in the market value
of investments held for the plan with changes in the value of the corresponding plan liabilities. Net gains on these investments were $4 million and $67 million for the quarter and year ended Dec. 31, 2012, respectively, and $24 million and $40 million for the quarter and year ended Dec. 31, 2011, respectively.
2 Severance charges for 2012 consist of amounts associated with the elimination of certain positions at Aeronautics business segment in the fourth quarter, a charge of $25 million, and the former Electronic Systems business segment in the third quarter, a charge of $23 million. For 2011, severance charges consisted of
amounts related to the elimination of certain positions at various business segments and Corporate Headquarters, a charge of $136 million. Severance charges for initiatives that are not significant are included in business segment operating profit.
3 Discontinued operations in 2011 include the operating results of Savi Technology, Inc. and also Pacific Architects and Engineers, Inc. through the date of its sale on April 4, 2011. Amounts related to discontinued operations in 2012 were not significant and, accordingly, were included in consolidated operating profit.
Lockheed Martin Corporation
Business Segment Net Sales, Operating Profit, and Operating Margins (1)
(unaudited; in millions)
Quarters Ended Dec. 31, Years Ended Dec. 31,
----------------------- --------------------
2012 2011 % Change 2012 2011 % Change
---- ---- -------- ---- ---- --------
Net sales (1)
Aeronautics $4,141 $3,855 7% $14,953 $14,362 4%
Information Systems & Global Solutions 2,201 2,548 (14)% 8,846 9,381 (6)%
Missiles and Fire Control 1,897 1,826 4% 7,457 7,463 - %
Mission Systems and Training 1,860 1,858 - % 7,579 7,132 6%
Space Systems 2,000 2,124 (6)% 8,347 8,161 2%
----- ----- ----- -----
Total net sales $12,099 $12,211 (1)% $47,182 $46,499 1%
======= ======= ======= =======
Operating profit (1)
Aeronautics $445 $461 (3)% $1,699 $1,630 4%
Information Systems & Global Solutions 203 254 (20)% 808 874 (8)%
Missiles and Fire Control 272 231 18% 1,256 1,069 17%
Mission Systems and Training 187 171 9% 737 645 14%
Space Systems 232 287 (19)% 1,083 1,063 2%
--- --- ----- -----
Total business segment operating profit 1,339 1,404 (5)% 5,583 5,281 6%
Unallocated expenses, net:
Non-cash FAS/CAS pension adjustment:
FAS pension expense (485) (455) (1,941) (1,821)
Less: CAS expense 277 225 1,111 899
--- --- ----- ---
Non-cash FAS/CAS pension adjustment (208) (230) (830) (922)
Special items - severance charges (2) (25) - (48) (136)
Stock-based compensation (38) (41) (167) (157)
Other, net (3) (7) (27) (104) (46)
--- --- ---- ---
Total unallocated expenses, net (278) (298) (7)% (1,149) (1,261) (9)%
---- ---- ------ ------
Total consolidated operating profit $1,061 $1,106 (4)% $4,434 $4,020 10%
====== ====== ====== ======
Operating margins (1)
Aeronautics 10.7% 12.0% 11.4% 11.3%
Information Systems & Global Solutions 9.2% 10.0% 9.1% 9.3%
Missiles and Fire Control 14.3% 12.7% 16.8% 14.3%
Mission Systems and Training 10.1% 9.2% 9.7% 9.0%
Space Systems 11.6% 13.5% 13.0% 13.0%
Total business segment operating margins 11.1% 11.5% 11.8% 11.4%
Total consolidated operating margins 8.8% 9.1% 9.4% 8.6%
1 Effective Dec. 31, 2012, the Corporation reorganized its former Electronic Systems business segment into two business segments: Missiles and Fire Control and Mission Systems and Training. In connection with this reorganization, the former Electronic Systems corporate management layer was eliminated, and the former Global Training and Logistics business was split
between the two new business segments. In addition, the business reporting relationships for Sandia Corporation, which manages the Sandia National Laboratories for the U.S. Government, and the U.K. Atomic Weapons Establishment joint venture were transferred from the former Electronic Systems business segment to the Space Systems business segment. As a result, the
business segment net sales and operating profit have been adjusted to reflect this reorganization for all periods presented.
2 Severance charges for 2012 consist of amounts associated with the elimination of certain positions at Aeronautics business segment in the fourth quarter and the former Electronic Systems business segment in the third quarter. For 2011, severance charges consisted of amounts related to the elimination of certain positions at various business segments and Corporate
Headquarters. Severance charges for initiatives that are not significant are included in business segment operating profit.
3 Gains and losses on investments used to fund the Corporation's deferred compensation plan liabilities have been reclassified from "other non-operating (expense) income, net" to "unallocated expenses, net" within "cost of sales" for all periods presented in order to align the classification of changes in the market value of investments held for the plan with changes in
the value of the corresponding plan liabilities. Net gains on these investments were $4 million and $67 million for the quarter and year ended Dec. 31, 2012, respectively, and $24 million and $40 million for the quarter and year ended Dec. 31, 2011, respectively.
Lockheed Martin Corporation
Consolidated Balance Sheets
(unaudited; in millions, except
par value)
Dec. 31, Dec. 31,
2012 2011
---- ----
Assets
Current assets
Cash and cash equivalents $1,898 $3,582
Receivables, net 6,563 6,064
Inventories, net 2,937 2,481
Deferred income taxes 1,269 1,339
Other current assets 1,188 628
----- ---
Total current assets 13,855 14,094
Property, plant, and equipment,
net 4,675 4,611
Goodwill 10,370 10,148
Deferred income taxes 4,809 4,388
Other noncurrent assets 4,948 4,667
----- -----
Total assets $38,657 $37,908
======= =======
Liabilities and stockholders'
equity
Current liabilities
Accounts payable $2,038 $2,269
Customer advances and amounts in
excess of costs incurred 6,503 6,399
Salaries, benefits, and payroll
taxes 1,649 1,664
Current portion of long-term debt 150 -
Other current liabilities 1,815 1,798
----- -----
Total current liabilities 12,155 12,130
Long-term debt, net 6,158 6,460
Accrued pension liabilities 15,278 13,502
Other postretirement benefit
liabilities 1,220 1,274
Other noncurrent liabilities 3,807 3,541
----- -----
Total liabilities 38,618 36,907
Stockholders' equity
Common stock, $1 par value per
share 321 321
Additional paid-in capital - -
Retained earnings 13,211 11,937
Accumulated other comprehensive
loss (13,493) (11,257)
------- -------
Total stockholders' equity 39 1,001
--- -----
Total liabilities and
stockholders' equity $38,657 $37,908
======= =======
Lockheed Martin Corporation
Consolidated Statements of Cash
Flows
(unaudited; in millions)
Years Ended Dec. 31,
--------------------
2012 2011
---- ----
Operating activities
Net earnings $2,745 $2,655
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and
amortization 988 1,008
Stock-based
compensation 167 157
Deferred income taxes 930 (2)
Severance charges 48 136
Reduction in tax
expense from
resolution of certain
tax matters - (89)
Net adjustments
related to
discontinued
operations - (16)
Changes in operating assets and
liabilities:
Receivables, net (460) (363)
Inventories, net (422) (74)
Accounts payable (236) 609
Customer advances and
amounts in excess of
costs incurred 57 502
Postretirement benefit
plans (1,883) (393)
Income taxes (535) 304
Other, net 162 (181)
--- ----
Net cash provided by
operating activities
(1) 1,561 4,253
----- -----
Investing activities
Capital expenditures (942) (987)
Acquisitions of
businesses /
investments in
affiliates (304) (649)
Net cash provided by
short-term
investment
transactions - 510
Other, net 24 313
--- ---
Net cash used for
investing activities (1,222) (813)
------ ----
Financing activities
Repurchases of common
stock (990) (2,465)
Proceeds from stock
option exercises 440 116
Dividends paid (1,352) (1,095)
Premium paid on debt
exchange (225) -
Issuance of long-term
debt, net of related
costs - 1,980
Repayments of long-
term debt - (632)
Other, net 104 (23)
--- ---
Net cash used for
financing activities (2,023) (2,119)
------ ------
Net change in cash and
cash equivalents (1,684) 1,321
Cash and cash
equivalents at
beginning of year 3,582 2,261
----- -----
Cash and cash
equivalents at end of
year $1,898 $3,582
====== ======
1 The Corporation made contributions to its pension trust of $2.5 billion and $3.6 billion during
the
quarter and year ended Dec. 31, 2012, respectively. During the quarter and year ended Dec. 31,
2011, the Corporation made contributions to its pension trust of $1.0 billion and $2.3 billion,
respectively.
Lockheed Martin Corporation
Consolidated Statement of Stockholders' Equity
(unaudited; in millions)
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Stockholders'
Stock Capital Earnings Loss Equity
----- ------- -------- ---- ------
Balance at Dec. 31, 2011 $321 $ - $11,937 $(11,257) $1,001
Net earnings - - 2,745 - 2,745
Other comprehensive loss, net of tax (1) - - - (2,236) (2,236)
Repurchases of common stock (2) (11) (889) (108) - (1,008)
Dividends declared (3) - - (1,363) - (1,363)
Stock-based awards and ESOP activity 11 889 - - 900
Balance at Dec. 31, 2012 $321 $ - $13,211 $(13,493) $39
(1) At Dec. 31, 2012, the Corporation recognized a non-cash, after-tax reduction to stockholders' equity of $3.2 billion, as a result of the year-end remeasurement of its postretirement benefit plans. Partially offsetting this reduction was an $858 million recognition of
previously deferred amounts. The decrease primarily was due to a lower discount rate at Dec. 31, 2012 of 4.00% as compared to 4.75% at Dec. 31, 2011.
(2) The Corporation repurchased 3.1 million shares of its common stock for $286 million during the quarter ended Dec. 31, 2012. For the year ended Dec. 31, 2012, the Corporation repurchased 11.3 million shares for $1.0 billion, of which 0.2 million shares purchased for $18 million
were settled and paid in January of 2013. The Corporation's Board of Directors has approved a share repurchase program, authorizing an amount available for share repurchases of $6.5 billion. As of Dec. 31, 2012, the Corporation had repurchased a total of 54.3 million shares of its
common stock under its share repurchase program for $4.2 billion, and had remaining authorization of $2.3 billion for future share repurchases.
(3) Includes dividends of $1.00 per share declared during each of the quarters ended March 25, 2012, June 24, 2012, Sept. 30, 2012, and a fourth quarter dividend of $1.15 per share declared during the quarter ended Sept. 30, 2012. Additionally includes dividend equivalent cash
payments for unvested RSUs that are paid only upon vesting.
Lockheed Martin
Corporation
Operating
Data
(unaudited; in millions, except
aircraft deliveries)
Backlog Dec. 31, Dec. 31,
2012 2011
---- ----
Aeronautics $30,100 $30,500
Information
Systems
&
Global
Solutions 8,700 9,300
Missiles
and
Fire
Control 14,700 14,400
Mission
Systems
and
Training 10,700 10,500
Space
Systems 18,100 16,000
Total
backlog $82,300 $80,700
======= =======
Quarters Ended Dec. Years Ended Dec.
31, 31,
-------------------- -----------------
Aircraft
Deliveries 2012 2011 2012 2011
---- ---- ---- ----
F-16 8 5 37 22
F-22 - 6 8 14
F-35 13 2 30 9
C-130J 9 7 34 33
C-5M 2 - 4 2
Lockheed Martin Corporation
Business Segment Net Sales, Operating Profit, and Operating Margins
As Reported and Adjusted to Reflect Reorganization of Electronic Systems (1)
(unaudited; in millions)
Quarter Ended March 25, 2012 Quarter Ended June 24, 2012 Quarter Ended Sept. 30, 2012
---------------------------- --------------------------- ----------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales (1)
Aeronautics $3,706 $ - $3,706 $3,408 $ - $3,408 $3,698 $ - $3,698
Information Systems & Global Solutions 2,090 - 2,090 2,263 - 2,263 2,292 - 2,292
Electronic Systems 3,609 (3,609) - 3,866 (3,866) - 3,818 (3,818) -
Missiles and Fire Control - 1,766 1,766 - 1,843 1,843 - 1,951 1,951
Mission Systems and Training - 1,838 1,838 - 2,019 2,019 - 1,862 1,862
Space Systems 1,888 5 1,893 2,384 4 2,388 2,061 5 2,066
Total net sales $11,293 $ - $11,293 $11,921 $ - $11,921 $11,869 $ - $11,869
======= ======================== ======= ======= ======================== ======= ======= ======================== =======
Operating profit (1)
Aeronautics $385 $ - $385 $454 $ - $454 $415 $ - $415
Information Systems & Global Solutions 188 - 188 208 - 208 209 - 209
Electronic Systems 541 (541) - 526 (526) - 509 (509) -
Missiles and Fire Control - 371 371 - 313 313 - 300 300
Mission Systems and Training - 157 157 - 195 195 - 198 198
Space Systems 226 13 239 282 18 300 301 11 312
Total business segment operating profit 1,340 - 1,340 1,470 - 1,470 1,434 - 1,434
Unallocated expenses, net (2) (328) 32 (296) (270) (8) (278) (336) 39 (297)
---- --- ---- ---- --- ---- ---- --- ----
Total consolidated operating profit $1,012 $32 $1,044 $1,200 $(8) $1,192 $1,098 $39 $1,137
====== === ====== ====== === ====== ====== === ======
Operating margins (1)
Aeronautics 10.4% - % 10.4% 13.3% - % 13.3% 11.2% - % 11.2%
Information Systems & Global Solutions 9.0% - % 9.0% 9.2% - % 9.2% 9.1% - % 9.1%
Electronic Systems 15.0% (15.0)% - % 13.6% (13.6)% - % 13.3% (13.3)% - %
Missiles and Fire Control - % 21.0% 21.0% - % 17.0% 17.0% - % 15.4% 15.4%
Mission Systems and Training - % 8.5% 8.5% - % 9.7% 9.7% - % 10.6% 10.6%
Space Systems 12.0% 0.6% 12.6% 11.8% 0.8% 12.6% 14.6% 0.5% 15.1%
Total business segment operating margins 11.9% - % 11.9% 12.3% - % 12.3% 12.1% - % 12.1%
Total consolidated operating margins 9.0% 0.2% 9.2% 10.1% (0.1)% 10.0% 9.3% 0.3% 9.6%
Three Months Ended March 25, 2012 Six Months Ended June 24, 2012 Nine Months Ended Sept. 30, 2012
--------------------------------- ------------------------------ --------------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales (1)
Aeronautics $3,706 $ - $3,706 $7,114 $ - $7,114 $10,812 $ - $10,812
Information Systems & Global Solutions 2,090 - 2,090 4,353 - 4,353 6,645 - 6,645
Electronic Systems 3,609 (3,609) - 7,475 (7,475) - 11,293 (11,293) -
Missiles and Fire Control - 1,766 1,766 - 3,609 3,609 - 5,560 5,560
Mission Systems and Training - 1,838 1,838 - 3,857 3,857 - 5,719 5,719
Space Systems 1,888 5 1,893 4,272 9 4,281 6,333 14 6,347
Total net sales $11,293 $ - $11,293 $23,214 $ - $23,214 $35,083 $ - $35,083
======= ======================== ======= ======= ======================== ======= ======= ======================== =======
Operating profit (1)
Aeronautics $385 $ - $385 $839 $ - $839 $1,254 $ - $1,254
Information Systems & Global Solutions 188 - 188 396 - 396 605 - 605
Electronic Systems 541 (541) - 1,067 (1,067) - 1,576 (1,576) -
Missiles and Fire Control - 371 371 - 684 684 - 984 984
Mission Systems and Training - 157 157 - 352 352 - 550 550
Space Systems 226 13 239 508 31 539 809 42 851
Total business segment operating profit 1,340 - 1,340 2,810 - 2,810 4,244 - 4,244
Unallocated expenses, net (2) (328) 32 (296) (598) 24 (574) (934) 63 (871)
---- --- ---- ---- --- ---- ---- --- ----
Total consolidated operating profit $1,012 $32 $1,044 $2,212 $24 $2,236 $3,310 $63 $3,373
====== === ====== ====== === ====== ====== === ======
Operating margins (1)
Aeronautics 10.4% - % 10.4% 11.8% - % 11.8% 11.6% - % 11.6%
Information Systems & Global Solutions 9.0% - % 9.0% 9.1% - % 9.1% 9.1% - % 9.1%
Electronic Systems 15.0% (15.0)% - % 14.3% (14.3)% - % 14.0% (14.0)% - %
Missiles and Fire Control - % 21.0% 21.0% - % 19.0% 19.0% - % 17.7% 17.7%
Mission Systems and Training - % 8.5% 8.5% - % 9.1% 9.1% - % 9.6% 9.6%
Space Systems 12.0% 0.6% 12.6% 11.9% 0.7% 12.6% 12.8% 0.6% 13.4%
Total business segment operating margins 11.9% - % 11.9% 12.1% - % 12.1% 12.1% - % 12.1%
Total consolidated operating margins 9.0% 0.2% 9.2% 9.5% 0.1% 9.6% 9.4% 0.2% 9.6%
1 Effective Dec. 31, 2012, the Corporation reorganized its former Electronic Systems business segment into two business segments: Missiles and Fire Control and Mission Systems and Training. In connection with this reorganization, the former Electronic Systems corporate management layer was eliminated, and the former Global Training and Logistics business was split between the two new business segments. In addition, the business reporting relationships for Sandia Corporation, which manages the Sandia National Laboratories for the U.S. Government, and the U.K.
Atomic Weapons Establishment joint venture were transferred from the former Electronic Systems business segment to the Space Systems business segment. As a result, the business segment net sales and operating profit have been adjusted to reflect this reorganization for all periods presented.
(2) Gains and losses on investments used to fund the Corporation's deferred compensation plan liabilities have been reclassified from "other non-operating income (expense), net" to "unallocated expenses, net" within "cost of sales" for all periods presented in order to align the classification of changes in the market value of investments held for the plan with changes in the value of the corresponding plan liabilities. Net gains on these investments were $4 million and $67 million for the quarter and year ended Dec. 31, 2012, respectively, and $24 million and $40
million for the quarter and year ended Dec. 31, 2011, respectively.
Lockheed Martin Corporation
Business Segment Net Sales, Operating Profit, and Operating Margins
As Reported and Adjusted to Reflect Reorganization of Electronic Systems (1)
(unaudited; in millions)
Quarter Ended March 27, 2011 Quarter Ended June 26, 2011 Quarter Ended Sept. 25, 2011 Quarter Ended Dec. 31, 2011
---------------------------- --------------------------- ---------------------------- ---------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales (1)
Aeronautics $3,152 $ - $3,152 $3,390 $ - $3,390 $3,965 $ - $3,965 $3,855 $ - $3,855
Information Systems & Global Solutions 2,149 - 2,149 2,361 - 2,361 2,323 - 2,323 2,548 - 2,548
Electronic Systems 3,482 (3,482) - 3,780 (3,780) - 3,663 (3,663) - 3,697 (3,697) -
Missiles and Fire Control - 1,762 1,762 - 1,983 1,983 - 1,892 1,892 - 1,826 1,826
Mission Systems and Training - 1,715 1,715 - 1,793 1,793 - 1,766 1,766 - 1,858 1,858
Space Systems 1,843 5 1,848 2,012 4 2,016 2,168 5 2,173 2,111 13 2,124
Total net sales $10,626 $ - $10,626 $11,543 $ - $11,543 $12,119 $ - $12,119 $12,211 $ - $12,211
======= ====================== ======= ======= ====================== ======= ======= ====================== ======= ======= ====================== =======
Operating profit (1)
Aeronautics $328 $ - $328 $397 $ - $397 $444 $ - $444 $461 $ - $461
Information Systems & Global Solutions 194 - 194 213 - 213 213 - 213 254 - 254
Electronic Systems 432 (432) - 478 (478) - 447 (447) - 431 (431) -
Missiles and Fire Control - 284 284 - 278 278 - 276 276 - 231 231
Mission Systems and Training - 136 136 - 183 183 - 155 155 - 171 171
Space Systems 217 12 229 263 17 280 251 16 267 258 29 287
Total business segment operating profit 1,171 - 1,171 1,351 - 1,351 1,355 - 1,355 1,404 - 1,404
Unallocated expenses, net (2) (307) 16 (291) (358) 6 (352) (314) (6) (320) (322) 24 (298)
---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
Total consolidated operating profit $864 $16 $880 $993 $6 $999 $1,041 $(6) $1,035 $1,082 $24 $1,106
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Operating margins (1)
Aeronautics 10.4% - % 10.4% 11.7% - % 11.7% 11.2% - % 11.2% 12.0% - % 12.0%
Information Systems & Global Solutions 9.0% - % 9.0% 9.0% - % 9.0% 9.2% - % 9.2% 10.0% - % 10.0%
Electronic Systems 12.4% (12.4)% - % 12.6% (12.6)% - % 12.2% (12.2)% - % 11.7% (11.7)% - %
Missiles and Fire Control - % 16.1% 16.1% - % 14.0% 14.0% - % 14.6% 14.6% - % 12.7% 12.7%
Mission Systems and Training - % 7.9% 7.9% - % 10.2% 10.2% - % 8.8% 8.8% - % 9.2% 9.2%
Space Systems 11.8% 0.6% 12.4% 13.1% 0.8% 13.9% 11.6% 0.7% 12.3% 12.2% 1.3% 13.5%
Total business segment operating margins 11.0% - % 11.0% 11.7% - % 11.7% 11.2% - % 11.2% 11.5% - % 11.5%
Total consolidated operating margins 8.1% 0.2% 8.3% 8.6% 0.1% 8.7% 8.6% (0.1)% 8.5% 8.9% 0.2% 9.1%
Three Months Ended March 27, 2011 Six Months Ended June 26, 2011 Nine Months Ended Sept. 25, 2011 Year Ended Dec. 31, 2011
--------------------------------- ------------------------------ -------------------------------- ------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales (1)
Aeronautics $3,152 $ - $3,152 $6,542 $ - $6,542 $10,507 $ - $10,507 $14,362 $ - $14,362
Information Systems & Global Solutions 2,149 - 2,149 4,510 - 4,510 6,833 - 6,833 9,381 - 9,381
Electronic Systems 3,482 (3,482) - 7,262 (7,262) - 10,925 (10,925) - 14,622 (14,622) -
Missiles and Fire Control - 1,762 1,762 - 3,745 3,745 - 5,637 5,637 - 7,463 7,463
Mission Systems and Training - 1,715 1,715 - 3,508 3,508 - 5,274 5,274 - 7,132 7,132
Space Systems 1,843 5 1,848 3,855 9 3,864 6,023 14 6,037 8,134 27 8,161
Total net sales $10,626 $ - $10,626 $22,169 $ - $22,169 $34,288 $ - $34,288 $46,499 $ - $46,499
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Operating profit (1)
Aeronautics $328 $ - $328 $725 - $725 $1,169 $ - $1,169 $1,630 $ - $1,630
Information Systems & Global Solutions 194 - 194 407 - 407 620 - 620 874 - 874
Electronic Systems 432 (432) - 910 (910) - 1,357 (1,357) - 1,788 (1,788) -
Missiles and Fire Control - 284 284 - 562 562 - 838 838 - 1,069 1,069
Mission Systems and Training - 136 136 - 319 319 - 474 474 - 645 645
Space Systems 217 12 229 480 29 509 731 45 776 989 74 1,063
Total business segment operating profit 1,171 - 1,171 2,522 - 2,522 3,877 - 3,877 5,281 - 5,281
Unallocated expenses, net (2) (307) 16 (291) (665) 22 (643) (979) 16 (963) (1,301) 40 (1,261)
---- --- ---- ---- --- ---- ---- --- ---- ------ --- ------
Total consolidated operating profit $864 $16 $880 $1,857 $22 $1,879 $2,898 $16 $2,914 $3,980 $40 $4,020
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Operating margins (1)
Aeronautics 10.4% - % 10.4% 11.1% - % 11.1% 11.1% - % 11.1% 11.3% - % 11.3%
Information Systems & Global Solutions 9.0% - % 9.0% 9.0% - % 9.0% 9.1% - % 9.1% 9.3% - % 9.3%
Electronic Systems 12.4% (12.4)% - % 12.5% (12.5)% - % 12.4% (12.4)% - % 12.2% (12.2)% - %
Missiles and Fire Control - % 16.1% 16.1% - % 15.0% 15.0% - % 14.9% 14.9% - % 14.3% 14.3%
Mission Systems and Training - % 7.9% 7.9% - % 9.1% 9.1% - % 9.0% 9.0% - % 9.0% 9.0%
Space Systems 11.8% 0.6% 12.4% 12.5% 0.7% 13.2% 12.1% 0.8% 12.9% 12.2% 0.8% 13.0%
Total business segment operating margins 11.0% - % 11.0% 11.4% - % 11.4% 11.3% - % 11.3% 11.4% - % 11.4%
Total consolidated operating margins 8.1% 0.2% 8.3% 8.4% 0.1% 8.5% 8.5% - % 8.5% 8.6% - % 8.6%
1 Effective Dec. 31, 2012, the Corporation reorganized its former Electronic Systems business segment into two business segments: Missiles and Fire Control and Mission Systems and Training. In connection with this reorganization, the former Electronic Systems corporate management layer was eliminated, and the former Global Training and Logistics business was split between the two new business segments. In addition, the business reporting relationships for Sandia Corporation, which manages the Sandia National Laboratories for the U.S. Government, and the U.K. Atomic Weapons Establishment joint venture were transferred from the former Electronic Systems business segment to the Space Systems business segment.
As a result, the business segment net sales and operating profit have been adjusted to reflect this reorganization for all periods presented.
2 Gains and losses on investments used to fund the Corporation's deferred compensation plan liabilities have been reclassified from "other non-operating income (expense), net" to "unallocated expenses, net" within "cost of sales" for all periods presented in order to align the classification of changes in the market value of investments held for the plan with changes in the value of the corresponding plan liabilities. Net gains on these investments were $4 million and $67 million for the quarter and year ended Dec. 31, 2012, respectively, and $24 million and $40 million for the quarter and year ended Dec. 31, 2011, respectively.
Lockheed Martin Corporation
Consolidated Statements of Earnings
As Reported and Adjusted for Gains and Losses on Investments (1)
(unaudited; in millions)
Quarter Ended March 25, 2012 Quarter Ended June 24, 2012 Quarter Ended Sept. 30, 2012
---------------------------- --------------------------- ----------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales $11,293 $ - $11,293 $11,921 $ - $11,921 $11,869 $ - $11,869
Cost of sales (10,316) 32 (10,284) (10,741) (8) (10,749) (10,888) 39 (10,849)
------- --- ------- ------- --- ------- ------- --- -------
Gross profit 977 32 1,009 1,180 (8) 1,172 981 39 1,020
Other income, net 35 - 35 20 - 20 117 - 117
--- --- --- --- --- --- --- --- ---
Operating profit 1,012 32 1,044 1,200 (8) 1,192 1,098 39 1,137
Interest expense (96) - (96) (96) - (96) (97) - (97)
Other non-operating income, net 35 (32) 3 13 8 21 45 (39) 6
--- --- --- --- --- --- --- --- ---
Earnings from continuing operations before income taxes 951 - 951 1,117 - 1,117 1,046 - 1,046
Income tax expense (283) - (283) (336) - (336) (319) - (319)
---- --- ---- ---- --- ---- ---- --- ----
Net earnings $668 $ - $668 $781 $ - $781 $727 $ - $727
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Three Months Ended March 25, 2012 Six Months Ended June 24, 2012 Nine Months Ended Sept. 30, 2012
--------------------------------- ------------------------------ --------------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales $11,293 $ - $11,293 $23,214 $ - $23,214 $35,083 $ - $35,083
Cost of sales (10,316) 32 (10,284) (21,057) 24 (21,033) (31,945) 63 (31,882)
------- --- ------- ------- --- ------- ------- --- -------
Gross profit 977 32 1,009 2,157 24 2,181 3,138 63 3,201
Other income, net 35 - 35 55 - 55 172 - 172
--- --- --- --- --- --- --- --- ---
Operating profit 1,012 32 1,044 2,212 24 2,236 3,310 63 3,373
Interest expense (96) - (96) (192) - (192) (289) - (289)
Other non-operating income, net 35 (32) 3 48 (24) 24 93 (63) 30
--- --- --- --- --- --- --- --- ---
Earnings from continuing operations before income taxes 951 - 951 2,068 - 2,068 3,114 - 3,114
Income tax expense (283) - (283) (619) - (619) (938) - (938)
---- --- ---- ---- --- ---- ---- --- ----
Net earnings $668 $ - $668 $1,449 $ - $1,449 $2,176 $ - $2,176
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1 Gains and losses on investments used to fund the Corporation's deferred compensation plan liabilities have been reclassified from "other non-operating income, net" to "unallocated expenses, net" within "cost of sales" for all periods presented in order to align the classification of changes in the market value of investments held for the plan with changes in the value of the corresponding plan liabilities. Net gains on these investments were $4 million and $67 million for the quarter and year ended Dec. 31, 2012, respectively, and $24 million and $40
million for the quarter and year ended Dec. 31, 2011, respectively.
Lockheed Martin Corporation
Consolidated Statements of Earnings
As Reported and Adjusted for Gains and Losses on Investments (1)
(unaudited; in millions)
Quarter Ended March 27, 2011 Quarter Ended June 26, 2011 Quarter Ended Sept. 25, 2011 Quarter Ended Dec. 31, 2011
---------------------------- --------------------------- ---------------------------- ---------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales $10,626 $ - $10,626 $11,543 $ - $11,543 $12,119 $ - $12,119 $12,211 $ - $12,211
Cost of sales (9,812) 16 (9,796) (10,637) 6 (10,631) (11,123) (6) (11,129) (11,223) 24 (11,199)
------ --- ------ ------- --- ------- ------- --- ------- ------- --- -------
Gross profit 814 16 830 906 6 912 996 (6) 990 988 24 1,012
Other income, net 50 - 50 87 - 87 45 - 45 94 - 94
--- --- --- --- --- --- --- --- --- --- --- ---
Operating profit 864 16 880 993 6 999 1,041 (6) 1,035 1,082 24 1,106
Interest expense (85) - (85) (84) - (84) (89) - (89) (96) - (96)
Other non-operating income (expense), net 19 (16) 3 9 (6) 3 (3) 6 3 (20) (24) (44)
--- --- --- --- --- --- --- --- --- --- --- ---
Earnings from continuing operations before income taxes 798 - 798 918 - 918 949 - 949 966 - 966
Income tax expense (242) - (242) (170) - (170) (284) - (284) (268) - (268)
---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
Net earnings from continuing operations 556 - 556 748 - 748 665 - 665 698 - 698
Net loss (earnings) from discontinued operations (26) - (26) (6) - (6) 35 - 35 (15) - (15)
--- --- --- --- --- --- --- --- --- --- --- ---
Net earnings $530 $ - $530 $742 $ - $742 $700 $ - $700 $683 $ - $683
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Three Months Ended March 27, 2011 Six Months Ended June 26, 2011 Nine Months Ended Sept. 25, 2011 Year Ended Dec. 31, 2011
--------------------------------- ------------------------------ -------------------------------- ------------------------
As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted As Reported Reclassification As Adjusted
----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- ----------- ----------- ---------------- -----------
Net sales $10,626 $ - $10,626 $22,169 $ - $22,169 $34,288 $ - $34,288 $46,499 $ - $46,499
Cost of sales (9,812) 16 (9,796) (20,449) 22 (20,427) (31,572) 16 (31,556) (42,795) 40 (42,755)
------ --- ------ ------- --- ------- ------- --- ------- ------- --- -------
Gross profit 814 16 830 1,720 22 1,742 2,716 16 2,732 3,704 40 3,744
Other income, net 50 - 50 137 - 137 182 - 182 276 - 276
--- --- --- --- --- --- --- --- --- --- --- ---
Operating profit 864 16 880 1,857 22 1,879 2,898 16 2,914 3,980 40 4,020
Interest expense (85) - (85) (169) - (169) (258) - (258) (354) - (354)
Other non-operating income (expense), net 19 (16) 3 28 (22) 6 25 (16) 9 5 (40) (35)
--- --- --- --- --- --- --- --- --- --- --- ---
Earnings from continuing operations before income taxes 798 - 798 1,716 - 1,716 2,665 - 2,665 3,631 - 3,631
Income tax expense (242) - (242) (412) - (412) (696) - (696) (964) - (964)
---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
Net earnings from continuing operations 556 - 556 1,304 - 1,304 1,969 - 1,969 2,667 - 2,667
Net loss (earnings) from discontinued operations (26) - (26) (32) - (32) 3 - 3 (12) - (12)
--- --- --- --- --- --- --- --- --- --- --- ---
Net earnings $530 $ - $530 $1,272 $ - $1,272 $1,972 $ - $1,972 $2,655 $ - $2,655
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(1) Gains and losses on investments used to fund the Corporation's deferred compensation plan liabilities have been reclassified from "other non-operating income (expense), net" to "unallocated expenses, net" within "cost of sales" for all periods presented in order to align the classification of changes in the market value of investments held for the plan with changes in the value of the corresponding plan liabilities. Net gains on these investments were $4 million and $67 million for the quarter and year ended Dec. 31, 2012, respectively, and $24 million and $40 million for the quarter and year ended Dec. 31, 2011, respectively.
Lockheed Martin Corporation
Backlog - Reorganization of Electronic Systems
(unaudited; in millions)
March 27, June 26, Sept. 25, Dec. 31, March 25, June 24, Sept. 30, Dec. 31,
2011 2011 2011 2011 2012 2012 2012 2012
---- ---- ---- ---- ---- ---- ---- ----
Backlog:
--------
Aeronautics $31,300 $29,900 $27,800 $30,500 $28,200 $26,900 $26,600 $30,100
Information Systems & Global Solutions 9,100 8,600 8,300 9,300 8,700 8,300 8,200 8,700
Missiles and Fire Control 12,100 11,800 11,500 14,400 13,400 13,500 14,500 14,700
Mission Systems and Training 10,500 10,400 10,200 10,500 10,900 11,000 10,800 10,700
Space Systems 17,000 16,500 15,200 16,000 15,400 15,800 15,500 18,100
------ ------ ------ ------ ------ ------ ------ ------
Total backlog $80,000 $77,200 $73,000 $80,700 $76,600 $75,500 $75,600 $82,300
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SOURCE Lockheed Martin
