Document and Entity Information
Document and Entity Information | |
3 Months Ended
Mar. 28, 2010 | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2010-03-28 |
Document Fiscal Year Focus | 2,010 |
Document Fiscal Period Focus | Q1 |
Trading Symbol | LMT |
Entity Registrant Name | LOCKHEED MARTIN CORP |
Entity Central Index Key | 0000936468 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 370,997,920 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Statements of Earnings (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 28, 2010 | 3 Months Ended
Mar. 29, 2009 |
Net Sales | ||
Products | $8,488 | $8,468 |
Services | 2,149 | 1,905 |
Total Net Sales | 10,637 | 10,373 |
Cost of Sales | ||
Products | (7,606) | (7,527) |
Services | (1,917) | (1,692) |
Unallocated Corporate costs | (178) | (149) |
Total Cost of Sales | (9,701) | (9,368) |
Gross Profit, Total | 936 | 1,005 |
Other Income (Expense), Net | 46 | 52 |
Operating Profit | 982 | 1,057 |
Interest Expense | (88) | (76) |
Other Non-Operating Income (Expense), Net | 28 | (3) |
Earnings Before Income Taxes | 922 | 978 |
Income Tax Expense | (375) | (312) |
Net Earnings | $547 | $666 |
Earnings Per Common Share | ||
Basic | 1.46 | 1.69 |
Diluted | 1.45 | 1.68 |
Cash dividends declared per common share | 0.63 | 0.57 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (USD $) | ||
In Millions | Mar. 28, 2010
| Dec. 31, 2009
|
Current Assets | ||
Cash and Cash Equivalents | $3,288 | $2,391 |
Accounts Receivable, Net | 6,610 | 6,061 |
Inventories | 2,476 | 2,183 |
Deferred Income Taxes | 839 | 815 |
Other Current Assets | 706 | 1,027 |
Total Current Assets | 13,919 | 12,477 |
Property, Plant and Equipment, Net | 4,436 | 4,520 |
Goodwill | 9,938 | 9,948 |
Purchased Intangibles, Net | 283 | 311 |
Prepaid Pension Asset | 164 | 160 |
Deferred Income Taxes | 3,625 | 3,779 |
Other Assets | 3,922 | 3,916 |
Total Assets | 36,287 | 35,111 |
Current Liabilities | ||
Accounts Payable | 2,247 | 2,030 |
Customer Advances and Amounts in Excess of Costs Incurred | 5,274 | 5,049 |
Salaries, Benefits and Payroll Taxes | 1,645 | 1,648 |
Other Current Liabilities | 2,406 | 1,976 |
Total Current Liabilities | 11,572 | 10,703 |
Long-term Debt, Net | 5,053 | 5,052 |
Accrued Pension Liabilities | 11,184 | 10,823 |
Other Postretirement Benefit Liabilities | 1,328 | 1,308 |
Other Liabilities | 3,122 | 3,096 |
Total Liabilities | 32,259 | 30,982 |
Stockholders' Equity | ||
Common Stock, $1 Par Value Per Share | 369 | 373 |
Additional Paid-in Capital | ||
Retained Earnings | 12,267 | 12,351 |
Accumulated Other Comprehensive Loss | (8,608) | (8,595) |
Total Stockholders' Equity | 4,028 | 4,129 |
Total Liabilities and Stockholders' Equity | $36,287 | $35,111 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Mar. 28, 2010
| Dec. 31, 2009
| |
Common Stock, Par Value | $1 | $1 |
2_Unaudited Condensed Consolida
Unaudited Condensed Consolidated Statements of Cash Flows (USD $) | ||
In Millions | 3 Months Ended
Mar. 28, 2010 | 3 Months Ended
Mar. 29, 2009 |
Operating Activities | ||
Net earnings | $547 | $666 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Depreciation and amortization of plant and equipment | 172 | 175 |
Amortization of purchased intangibles | 27 | 27 |
Stock-based compensation | 41 | 30 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (549) | (779) |
Inventories | (293) | 33 |
Accounts payable | 217 | 120 |
Customer advances and amounts in excess of costs incurred | 225 | 326 |
Other | 1,262 | 620 |
Net cash provided by operating activities | 1,649 | 1,218 |
Investing Activities | ||
Expenditures for property, plant and equipment | (92) | (132) |
Proceeds from short-term investment transactions | 107 | |
Acquisition of businesses / investments in affiliates | (19) | (156) |
Other | (4) | (4) |
Net cash used in investing activities | (8) | (292) |
Financing Activities | ||
Repurchases of common stock | (516) | (499) |
Common stock dividends | (238) | (227) |
Issuances of common stock | 24 | 16 |
Net cash used in financing activities | (730) | (710) |
Effect of exchange rate changes on cash and cash equivalents | (14) | |
Net increase in cash and cash equivalents | 897 | 216 |
Cash and cash equivalents at beginning of period | 2,391 | 2,168 |
Cash and cash equivalents at end of period | $3,288 | $2,384 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | |
3 Months Ended
Mar. 28, 2010 | |
BASIS OF PRESENTATION | NOTE 1 BASIS OF PRESENTATION We have prepared the condensed consolidated financial statements in this Form 10-Q in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. We have continued to follow the accounting policies disclosed in the consolidated financial statements included in our 2009 Form 10-K filed with the Securities and Exchange Commission. It is our practice to close our books and records on the Sunday prior to the end of the calendar quarter to align our financial closing with our business processes. The interim financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods, as our fiscal years end on December31. The interim financial information in this Form 10-Q reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our results of operations for the interim periods. The results of operations for the quarter ended March28, 2010 are not necessarily indicative of results to be expected for the full year. |
EARNINGS PER SHARE
EARNINGS PER SHARE | |
3 Months Ended
Mar. 28, 2010 | |
EARNINGS PER SHARE | NOTE 2 EARNINGS PER SHARE We compute basic and diluted per share amounts based on net earnings for the periods presented. We use the weighted average number of common shares outstanding during the period to calculate basic earnings per share. Our calculation of diluted per share amounts includes the dilutive effects of stock options and restricted stock units based on the treasury stock method in the weighted average number of common shares. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a per diluted share basis. The calculations of basic and diluted earnings per share are as follows: Quarter Ended March28, 2010 March29, 2009 (Inmillions,exceptpersharedata) Net earnings for basic and diluted computations $ 547 $ 666 Weighted average common shares outstanding Average number of common shares outstanding for basic computations 373.5 393.4 Dilutive stock options and restricted stock 4.2 4.1 Average number of common shares outstanding for diluted computations 377.7 397.5 Earnings per common share Basic $ 1.46 $ 1.69 Diluted $ 1.45 $ 1.68 Stock options to purchase 11.2million shares of common stock outstanding at March28, 2010 and March29, 2009 had exercise prices that were in excess of the average market price of our common stock for the respective periods. As such, we did not include these stock options in our calculation of diluted earnings per share, as their effect would have been anti-dilutive. |
BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION | |
3 Months Ended
Mar. 28, 2010 | |
BUSINESS SEGMENT INFORMATION | NOTE 3 BUSINESS SEGMENT INFORMATION We operate in four principal business segments: Aeronautics, Electronic Systems, Information Systems Global Services (ISGS), and Space Systems. We organize our business segments based on the nature of the products and services offered. In the following table, total operating profit of the business segments is reconciled to the corresponding consolidated amount. The reconciling item Unallocated Corporate income (expense), net includes the FAS/CAS pension adjustment discussed below, expense for certain stock-based compensation programs including costs for stock options and restricted stock, the effects of items not considered part of managements evaluation of segment operating performance, Corporate costs not allocated to the business segments, and other miscellaneous Corporate activities. The equity earnings (losses) from investees in which certain business segments hold equity interests are included in the operating profit of the respective segments since the activities of the investees are closely aligned with the operations of those segments. The results of operations of our segments only include pension expense as determined and funded in accordance with U.S. Government Cost Accounting Standards (CAS) rules. The FAS/CAS pension adjustment represents the difference between pension expense or income calculated in accordance with GAAP and pension costs calculated and funded in accordance with CAS. CAS is a major factor in determining our pension funding requirements, and governs the extent to which pension costs can be allocated to and recovered on government contracts. The CAS expense is recovered through the pricing of our products and services on U.S. Government contracts and, therefore, is recognized in each of our segments net sales and cost of sales. Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts; however, these intercompany transactions are eliminated in consolidation and for purposes of the presentation of net sales in the related table that follows. Selected Financial Data by Business Segment Quarter Ended March28, 2010 March29, 2009 (In millions) Net sales Aeronautics $ 2,933 $ 2,781 Electronic Systems 2,914 2,913 Information Systems Global Services 2,872 2,761 Space Systems 1,918 1,918 Total $ 10,637 $ 10,373 Operating profit Aeronautics $ 324 $ 355 Electronic Systems 388 390 Information Systems Global Services 233 242 Space Systems 213 212 Total business segments 1,158 1,199 Unallocated Corporate income (expense), net (176 ) (142 ) Total $ 982 $ 1,057 Intersegment revenue Aeronautics $ 39 $ 42 Electronic Systems 204 173 Information Systems Global Services 241 236 Space Systems 23 34 |
INVENTORIES
INVENTORIES | |
3 Months Ended
Mar. 28, 2010 | |
INVENTORIES | NOTE 4 INVENTORIES Inventories consisted of the following components: March28, 2010 December31, 2009 (In millions) Work-in-process, primarily related to long-term contracts and programs in progress $ 5,897 $ 5,565 Less: Customer advances and progress payments (3,969 ) (3,941 ) 1,928 1,624 Other inventories 548 559 $ 2,476 $ 2,183 |
POSTRETIREMENT BENEFIT PLANS
POSTRETIREMENT BENEFIT PLANS | |
3 Months Ended
Mar. 28, 2010 | |
POSTRETIREMENT BENEFIT PLANS | NOTE 5 POSTRETIREMENT BENEFIT PLANS The net pension cost and the net postretirement benefit cost related to our qualified defined benefit pension plans and our retiree medical and life insurance plans include the following components: Quarter Ended March28, 2010 March29, 2009 (In millions) Qualified defined benefit pension plans Service cost $ 225 $ 217 Interest cost 469 453 Expected return on plan assets (507 ) (507 ) Amortization of prior service cost 21 20 Recognized net actuarial losses 149 76 Total net pension expense $ 357 $ 259 Retiree medical and life insurance plans Service cost $ 9 $ 9 Interest cost 41 41 Expected return on plan assets (32 ) (27 ) Amortization of prior service cost (4 ) (6 ) Recognized net actuarial losses 6 11 Total net postretirement expense $ 20 $ 28 In December 2009, we made discretionary contributions of $1.5 billion related to our qualified defined benefit pension plans and $58 million related to our retiree medical and life insurance plans. Based on our known requirements as of March28, 2010, no contributions related to the qualified defined benefit pension plans are expected to be required in 2010. There were no contributions in the first quarter of 2010. We expect to make discretionary contributions of $1.4 billion related to the qualified defined benefit pension plans in 2010, and may review options for further discretionary contributions during the year. Also, we expect to make required contributions of $155 million related to our retiree medical and life insurance plans in 2010. |
LEGAL PROCEEDINGS AND CONTINGEN
LEGAL PROCEEDINGS AND CONTINGENCIES | |
3 Months Ended
Mar. 28, 2010 | |
LEGAL PROCEEDINGS AND CONTINGENCIES | NOTE 6 LEGAL PROCEEDINGS AND CONTINGENCIES We are a party to or have property subject to litigation and other proceedings, including matters arising under provisions relating to the protection of the environment. We believe the probability is remote that the outcome of these matters will have a material adverse effect on the Corporation as a whole. We cannot predict the outcome of legal proceedings with certainty. These matters include the following items which have been previously reported. Legal Proceedings On June24, 2009, the U.K. Ministry of Defence (MoD) sent us a letter alleging that we were in default on the Soothsayer contract under which we were providing electronic warfare equipment to the British military.The total value of the contract is UK 144million, of which UK 39million has been paid to date (representing approximately US $215 million and US $58 million, based on the exchange rate as of March28, 2010).The MoD has demanded repayment of amounts paid under the contract, liquidated damages of UK 2million (representing approximately US $3 million based on the exchange rate as of March28, 2010), interest on those amounts, and has reserved the right to collect any excess future re-procurement costs.We dispute the MoDs position. Following an unsuccessful mediation effort in October 2009, we served notice of arbitration on the MoD pursuant to the contract terms. We plan to seek damages for wrongful termination of the contract, including costs incurred but not paid. On April24, 2009, we filed a declaratory judgment action against the N.Y. Metropolitan Transportation Authority and its Capital Construction Company (collectively, the MTA) asking the U.S. District Court for the Southern District of N.Y. to find that the MTA is in material breach of our agreement based on the MTAs failure to provide access to sites where work must be performed and customer-furnished equipment necessary to complete the contract.The contract provides for the design and installation of an integrated electronic security system for the MTA and has a total value of $323 million, of which $241 million has been paid to date.The MTA filed an answer and counterclaim on May26, 2009, alleging that we breached the contract, and subsequently terminated the contract for alleged default.The MTA is seeking monetary damages and other relief under the contract, including the cost to complete the contract and potential re-procurement costs.We dispute the MTAs allegations and are defending against them.On July2, 2009, the sureties under the performance bond that we posted for the contract filed their own declaratory judgment action seeking to be excused from performing for the MTA, noting that they were unable to conclude that we were in material default under the contract or, in the alternative, seeking indemnification from us.On July7, 2009, we filed an amended complaint against the MTA adding claims for wrongful termination and for breach of contract damages, including costs incurred but not paid. The MTA has filed an amended counterclaim. Discovery is proceeding in the action. In a related matter, on April7, 2010, Five Star Electric, our electrical subcontrac |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | |
3 Months Ended
Mar. 28, 2010 | |
FAIR VALUE MEASUREMENTS | NOTE 7 FAIR VALUE MEASUREMENTS The accounting standard for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. The standard is applicable whenever assets and liabilities are measured and included in the financial statements at fair value. The fair value hierarchy established in the standard prioritizes the inputs used in valuation techniques into three levels as follows: Level 1 Observable inputs quoted prices in active markets for identical assets and liabilities. Level 1 assets in the following table include equity securities and interests in mutual funds which are valued using quoted market prices. Level 2 Observable inputs other than the quoted prices in active markets for identical assets and liabilities includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets. Level 2 assets in the following table include U.S. Government securities, corporate debt securities, U.S. Government-sponsored enterprise securities, and other securities which are valued based on inputs other than quoted prices that are observable for the asset (e.g., interest rates and yield curves observable at commonly quoted intervals). The Level 2 derivative assets and liabilities relate to foreign currency exchange contracts and are valued based on observable market prices, but are not exchanged in an active market. See Note 8 under the caption Derivative Financial Instruments for further information related to our derivative instruments. Level 3 Unobservable inputs includes amounts derived from valuation models where one or more significant inputs are unobservable and require us to develop relevant assumptions. At March28, 2010, we have no assets or liabilities measured and recorded at fair value on a recurring basis that are categorized as Level 3, or that were transferred in or out of the Level 3 category during 2010. The following table presents assets and liabilities measured and recorded at fair value on a recurring basis and their level within the fair value hierarchy as of March28, 2010: Level1 Level2 Balanceasof March 28, 2010 (In millions) Assets Equity securities $ 153 $ $ 153 Mutual funds 310 310 U.S. Government securities 327 327 Corporate debt securities 86 86 U.S. Government-sponsored enterprise securities 79 79 Other securities 37 37 Derivative assets 44 44 Total assets $ 463 $ 573 $ 1,036 Derivative liabilities 34 34 Net assets $ 463 $ 539 $ 1,002 We maintain a Rabbi Trust which includes investments to fund certain of our non-qualified deferred compensation plans. Investments in the trust are classified as trading securities and, accordingly, changes |
OTHER
OTHER | |
3 Months Ended
Mar. 28, 2010 | |
OTHER | NOTE 8 OTHER Matters Included in Earnings In March 2010, the President signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Beginning January1, 2013, these laws change the tax treatment for retiree prescription drug expenses by eliminating the tax deduction available to the extent that those expenses are reimbursed under Medicare Part D. Because the tax benefits associated with these future deductions were reflected as deferred tax assets in the financial statements included in our 2009 Form 10-K, the elimination of the tax deductions resulted in a reduction in deferred tax assets and a charge to net earnings of $96 million ($0.25 per share) in the first quarter of 2010. Stockholders Equity Share Repurchase Program We have a share repurchase program which provides for the repurchase of up to 178.0million shares of our common stock from time-to-time at managements discretion. We used cash to repurchase shares under the program as follows: In the first quarter of 2010, $516 million to repurchase 6.5million common shares that were executed and settled during the first quarter of 2010; and In the first quarter of 2009, $499 million to repurchase 7.3million common shares that were executed and settled during the first quarter of 2009, and an additional $56 million to repurchase 0.8million common shares purchased in March 2009 that were settled in April 2009. As we repurchase our common shares, we reduce common stock for the $1 of par value of the shares repurchased, with the remainder of the purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess of purchase price over par value as a reduction of retained earnings. As of March28, 2010, we had repurchased a total of 155.7million shares under the program, and there remained approximately 22.3million shares authorized for repurchase in the future. Dividends During the first quarter of 2010, we declared and paid quarterly dividends totaling $238 million ($0.63 per share). During the first quarter of 2009, we declared and paid quarterly dividends totaling $277 million ($0.57 per share). Comprehensive Income The components of comprehensive income for the quarter ended March28, 2010 and March29, 2009 consisted of the following: Quarter Ended March28, 2010 March29, 2009 (In millions) Net earnings $ 547 $ 666 Other comprehensive income (loss) (13 ) (1 ) Comprehensive income $ 534 $ 665 Income Tax and Interest Payments We received federal and foreign income tax refunds, net of payments made, of $319 million for the three months ended March28, 2010, which included a $325 million refund from the Internal Revenue Service (IRS) related to estimated taxes paid for the 2009 calendar year. Income tax payments and refunds are included in Other in operating activities on our Statement of Cash Flows. Federal and foreign income tax payments made, net of refunds rece |