Lockheed Martin Reports 2004 Second Quarter Results
Bethesda, Md., 27-JUL-04 --
- REPORTS SECOND QUARTER 2004 NET SALES OF $8.8 BILLION, UP 14%; YEAR-TO-DATE SALES UP 16% TO $17.1 BILLION
- REPORTS SECOND QUARTER 2004 EARNINGS PER SHARE OF $0.66, UP 22%; YEAR-TO-DATE EARNINGS PER SHARE UP 20% TO $1.31
- GENERATES $734 MILLION IN CASH FROM OPERATIONS IN THE SECOND QUARTER; $1.8 BILLION YEAR-TO-DATE
- 2nd Quarter 2004 Earnings Attachments (PDF, 26.6 KB)
- Conference Call Web Cast, 11:00 - 11:30 a.m., eastern time
- July 2004 Conference Call Charts - Color (PDF, 48.9 KB) | Black & White (PDF, 34.1 KB)
Lockheed Martin Corporation (NYSE: LMT) today reported second quarter 2004 net earnings of $296 million ($0.66 per diluted share) compared to $242 million ($0.54 per diluted share) in 2003. Net sales were $8.8 billion, a 14% increase over second quarter 2003 sales of $7.7 billion. Sales and operating profit grew in all business segments during the quarter. Cash provided by operating activities for the second quarter of 2004 was $734 million.
“With our strong performance through the first six months, we are on our way to meeting this year’s operational and financial goals, said Chairman and Chief Executive Officer Vance Coffman. “Our cash generation continues to be outstanding, and we spent over $275 million repurchasing about 6 million shares during the quarter. We are well positioned and focused on serving the needs of our customers and enhancing shareholder value.”
SUMMARY REPORTED RESULTS AND OUTLOOK
The following table presents the Corporation’s results on a GAAP basis for the quarter and year-to-date periods:
The following table and other sections of this press release contain forward-looking statements, which are based on the Corporation’s current expectations. Actual results may differ materially from those projected. See the Forward-Looking Statements discussion included in this press release.
*Results are expected to be closer to the higher end of the range.
Net sales for the first six months of 2004 were $17.1 billion, a 16% increase over the $14.8 billion recorded in the comparable 2003 period.
Net earnings for the six months ended June 30, 2004 were $587 million ($1.31 per share) compared to $492 million ($1.09 per share) in 2003. The 2003 results included a pre-tax charge of $41 million (reported in Unallocated Corporate Expense, net) related to the Corporation’s exit from the commercial mail sorting business, which decreased earnings by $27 million ($0.06 per share).
Cash Flow, Leverage and Backlog
Cash provided by operating activities for the quarter and six months ended June 30, 2004 was $734 million and $1.8 billion. Capital expenditures for the quarter and six months ended June 30, 2004 were $154 million and $260 million. The Corporation repurchased 5.8 million of its common shares for $278 million during the quarter and retired $137 million of debt during the first six months of 2004. Since October 2002, the Corporation has used approximately $800 million to repurchase 17.5 million shares of its common stock. Additionally, the Corporation has reduced its long-term debt from approximately $12 billion at the end of 1999 to approximately $6 billion at June 30, 2004.
The ratio of total debt-to-capitalization was 46% at the end of the second quarter, an improvement from 48% at December 31, 2003. At June 30, 2004, the Corporation’s cash and cash equivalents balance was $2.2 billion.
The Corporation’s backlog was $74.6 billion at June 30, 2004.
The Corporation operates in five business segments. Consistent with the manner in which the Corporation’s business segment operating performance is evaluated, unusual items are excluded from segment results and included in “Unallocated corporate (expense) income, net.” (See our 2003 Form 10-K for a description of “Unallocated corporate (expense) income, net,” including the FAS / CAS pension adjustment.)
The following table presents the operating results of the five business segments and the Corporation on a consolidated basis as determined by GAAP:
The following discussion compares the operating results of the business segments for the quarter and six months ended June 30, 2004 to the same periods in 2003.
Net sales for Aeronautics increased by 31% for the quarter and 34% for the six months ended June 30, 2004 from the 2003 periods, due to growth in Combat Aircraft, which more than offset a slight decline in Air Mobility. Combat Aircraft sales growth of $790 million in the quarter and $1.5 billion for the six-month period was primarily due to higher F-16 program volume including increased aircraft deliveries (22 in the quarter and 37 for the six month period in 2004 compared to 12 and 15 in the comparable 2003 periods) and higher volume on the F-35 program. Fewer scheduled C-130J deliveries (two in the quarter and six for the six month period in 2004 compared to four and seven in the comparable 2003 periods) contributed to the slight decrease in Air Mobility revenue.
Segment operating profit increased by 48% for the quarter and 45% for the six months ended June 30, 2004 from the 2003 periods. Combat Aircraft operating profit increases of $60 million in the quarter and $80 million for the six-month period were primarily due to the impact of the additional F-16 aircraft deliveries and improved performance in other Combat Aircraft programs. Air Mobility and other programs accounted for approximately $20 million and $60 million of the increase in operating profit for the quarter and year-to-date periods, and were primarily due to profits recognized on C-130J deliveries in 2004. The Corporation began recognizing profits on C-130J deliveries in 2004 (approximately $35 million year-to-date) upon resolution of certain technical aircraft performance risks, manufacturing performance improvements and the achievement of stable production as a result of securing a multi-year contract in 2003.
Net sales for Electronic Systems increased by 1% for the quarter and 4% for the six months ended June 30, 2004 from the 2003 periods. In both the quarter and six-month periods, higher volume in Maritime Systems & Sensors (MS2) and Missiles & Fire Control (M&FC), more than offset declines in Platform, Training & Transportation Solutions (PT&TS). In MS2, higher volume on surface systems and radar programs accounted for the increased sales. M&FC sales grew due to higher volume on tactical missile and fire control programs. Reduced levels of distribution technology and transportation & security solutions activities contributed to the decrease in sales at PT&TS.
Segment operating profit increased by 4% for the quarter and 7% for the six months ended June 30, 2004, compared to the 2003 periods. For both the quarter and the six-month period, improved performance on air defense and fire control programs at M&FC and on distribution technology and simulation and training programs at PT&TS, contributed to the higher operating profit. MS2’s operating profit improved slightly in both periods.
Net sales for Space Systems increased nominally for the quarter and by 2% for the six months ended June 30, 2004 from the 2003 periods. For the second quarter of 2004, a sales increase in Satellites, due to a commercial satellite delivery, and the timing of sales on fleet ballistic missile programs at Strategic and Defensive Missile Systems (S&DMS) were partially offset by lower volume in Launch Services. A decline in activities on the maturing Titan launch vehicle program contributed to lower sales in Launch Services. There were two Atlas launches and one Proton launch in the second quarters of both 2004 and 2003.
For the six months ended June 30, 2004, sales increases in Launch Services and S&DMS offset a decline in Satellites. In Launch Services, an increase in Atlas launches (four in 2004 compared to two in 2003) more than offset a decline in the Titan launch vehicle program. The increase in S&DMS was primarily attributable to the timing of sales on fleet ballistic missile programs. The decrease in Satellites was mainly due to lower sales on commercial satellite deliveries in 2004, which was partially offset by increased volume in government satellite programs.
Segment operating profit increased by 28% for the quarter and 21% for the six months ended June 30, 2004, when compared to the 2003 periods. For the quarter, Satellites’ operating profit increased due to the additional delivery and improved performance on commercial satellite programs, which more than offset a decline due to cost growth on a government satellite program. Increased operating profit in Launch Services was due to government launch vehicles programs.
For the six-month period, Launch Services’ operating profit increased primarily due to the benefit resulting from the first quarter termination of a launch vehicle contract by a commercial customer and U.S. Government support of the Atlas program, which more than offset a decline in activities on the Titan launch vehicle program. Satellites’ operating profit declined due to cost growth on a government satellite program, which more than offset the impact of improved performance and more profitable deliveries in commercial satellites.
Net sales for Integrated Systems & Solutions increased by 19% for the quarter and 18% for the six months ended June 30, 2004 from the 2003 periods. For both the quarter and six-month periods, a higher volume of intelligence, defense and information assurance activities resulted in increased sales.
Segment operating profit increased by 21% for the quarter and 16% for the six months ended June 30, 2004 from the comparable 2003 periods. For both the quarter and six-month periods, the higher volume on the activities described above accounted for the increased operating profit.
Net sales for Information & Technology Services increased by 19% for the quarter and 21% for the six months ended June 30, 2004 from the 2003 periods. For both the quarter and year-to-date periods, the increases in sales were primarily attributable to higher volume in the Information Technology line of business. Information Technology’s sales improved due to the net impact of an acquisition and a divestiture, as well as organic growth on existing IT programs. The remaining increase in sales was primarily attributable to higher volume in Defense Services. NASA sales declined in both periods.
Segment operating profit increased by 39% for the quarter and 32% for the six months ended June 30, 2004 from the 2003 periods. In both periods the operating profit increased mainly due to improvements in Information Technology and Defense Services.
SECOND QUARTER 2004 HIGHLIGHTS
- Received contracts for 22 F/A-22 fighter aircraft and associated support activities under production Lot 4.
- Received a contract to procure long-lead items for 24 F/A-22 fighter aircraft under production Lot 5.
- Delivered the last four F/A-22’s under production Lot 1 to the U.S. Air Force during the quarter, bringing to 27 the total number of Raptors delivered inception to date on the program.
- Selected to design and build the first of the U.S. Navy's new Littoral Combat Ships.
- Awarded a contract to develop the Joint Common Missile, a new air-to-ground weapon that will be deployed aboard U.S. Army, Navy and Marine Corps fixed- and rotary-wing aircraft.
- Received an award for work on the U.S. Navy’s MH-60R maritime helicopter program.
- Selected to produce the new Compact Kinetic Energy Missile, the next-generation hypervelocity anti-tank weapon.
- Awarded one of two industry contracts for the concept development phase of the U.S. Air Force’s Space Based Radar program.
- Awarded a five-year information technology contract from the Environmental Protection Agency.
- Received a two-year option on the Mission Support Operations Contract - Houston Mission Control Center.
Statements in this release that are forward-looking statements are based on Lockheed Martin’s current expectations and assumptions. Forward-looking statements in this release include estimates of future sales, earnings and cash flow. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results could differ materially because of factors such as: the availability of government funding domestically and internationally; changes in government and customer priorities and requirements (including changes to respond to terrorist threats and improve homeland security); the impact of continued hostilities in Iraq on funding for existing defense programs; the award or termination of contracts; difficulties in developing and producing operationally advanced technology systems; the timing and customer acceptance of product deliveries; performance issues with key suppliers, subcontractors and customers; cost reduction and productivity efforts; financial market and other changes that may impact pension plan assumptions; charges from any future impairment reviews that may result in the recognition of losses and a reduction in the book value of investments, goodwill or other long-term assets; the future impact of legislation; the future impact of acquisitions or divestitures; the outcome of legal proceedings and other contingencies (including, lawsuits, government investigations and environmental remediation efforts); the competitive environment for defense and information technology products and services; and economic, business and political conditions domestically and internationally.
These are only some of the factors that may affect the forward-looking statements contained in this press release. For further information regarding risks and uncertainties associated with Lockheed Martin’s business, please refer to the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Risk Factors and Forward-Looking Statements” sections of the Corporation’s SEC filings, including its annual report on Form 10-K, copies of which may be obtained at the Corporation’s website: http://www.lockheedmartin.com.
All information in this release is as of July 27, 2004. Lockheed Martin undertakes no duty to update any forward-looking statement to reflect subsequent events, actual results or changes in the Corporation’s expectations.