Lockheed Martin Reports First Quarter 2002 Earnings
BETHESDA, MD, April 23rd, 2002 -- Lockheed Martin Corporation (NYSE: LMT) today reported first quarter 2002 earnings from continuing operations of $0.50 per share, compared to 2001 earnings from continuing operations of $0.30 per share. There were no nonrecurring and unusual items in the first quarter of 2002. Adjusting the first quarter 2001 earnings per share for the impact of adopting SFAS No. 142 and excluding nonrecurring and unusual items, pro forma earnings per share from continuing operations would have been $0.40 per share. Including discontinued operations, the Corporation reported net earnings of $0.49 per share in the first quarter 2002 versus net earnings of $0.25 per share in the first quarter of 2001.
Download the First Quarter 2002 Earnings Attachment Q102 Earnings (PDF, 19.8 KB).
- LOCKHEED MARTIN REPORTS FIRST QUARTER 2002 EARNINGS PER SHARE FROM CONTINUING OPERATIONS OF $0.50
- REPORTS A 26% INCREASE IN FIRST QUARTER 2002 NET SALES COMPARED TO FIRST QUARTER 2001
- REAFFIRMS $2.45 - $2.50 EARNINGS PER SHARE FROM CONTINUING OPERATIONS OUTLOOK FOR 2002, WITH SALES GROWTH OF 5 - 7 PERCENT
- BOOKS ORDERS OF $8.5 BILLION AND GROWS BACKLOG TO A RECORD $73.8 BILLION
- GENERATES $338 MILLION OF FREE CASH FLOW IN THE FIRST QUARTER; REAFFIRMS 2002 FREE CASH FLOW GUIDANCE OF AT LEAST $1.0 BILLION
"We are achieving solid organic sales growth and improved profitability while we continue to maintain focus on mission success and customer satisfaction," said Chairman and Chief Executive Officer Vance Coffman. "We are also pleased with our recent credit rating upgrade which reflects confidence in our cash generation, debt reduction and financial discipline."
Net sales for the first quarter of 2002 were $6.0 billion, a 26 percent increase over the first quarter 2001 sales of $4.7 billion. Forecasted sales for the year 2002 remain unchanged at $25.0 - $25.8 billion of which 20 - 25 percent is now estimated in the second quarter and between 50 ? 55 percent in the second half of the year. Sales for the year 2003 are anticipated to be between $26.4 - $27.4 billion.
The Corporation recorded approximately $8.5 billion in orders during the quarter resulting in a record backlog of $73.8 billion at March 31, 2002 compared to the year-end 2001 backlog of $71.3 billion. Significant new orders recorded in the quarter included orders for F-22 Lot 2 production, C-5 Reliability Enhancements and Reengining Program (RERP), five new C-130J's, Fleet Ballistic Missiles, the third PAC-3 Low Rate Initial Production (LRIP) order, the THAAD program, and various government IT programs.
The Corporation generated $338 million in free cash flow in the first quarter of 2002. Free cash flow of $1.4 billion in the first quarter of 2001 included significant customer advances and proceeds resulting from the sales of surplus real estate. The net debt to capitalization ratio (net debt is defined as total debt less invested cash) was 47 percent at the end of the first quarter, down from 50.6 percent at year-end 2001. In addition, Standard & Poor's recently upgraded the Corporation's long-term debt rating to Triple-B with a stable outlook and its commercial paper rating to A-2.
The Corporation reaffirmed its 2002 earnings per share from continuing operations outlook of $2.45 - $2.50. The Corporation now estimates the quarterly distribution of earnings per share from continuing operations to be approximately 20 ? 25 percent for the second quarter and between 55 - 60 percent in the second half of the year. The 2002 earnings projection is based, among other factors, upon an assumed tax rate of 31 percent.
The Corporation also reaffirmed its 2003 earnings per share from continuing operations outlook of around 10 percent growth from the 2002 base. The earnings projection assumes an effective tax rate of 32 percent.
FIRST QUARTER 2002 DETAILED REVIEW
Net sales for the first quarter of 2002 were $6 billion, a 26% increase over the first quarter 2001 sales of $4.7 billion.
Earnings from continuing operations for the first quarter of 2002 were $224 million, or $0.50 per share, compared to the $126 million, or $0.30 per share, reported in the first quarter of 2001. There were no nonrecurring and unusual items recorded in the first quarter of 2002. However, earnings from continuing operations for the first quarter of 2001 included the after-tax impact of two nonrecurring and unusual items, which increased 2001 earnings from continuing operations by $7 million, or $0.02 per share.
Effective January 1, 2002, the Corporation adopted SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets". The new FASB standard eliminated the amortization of goodwill. Also, in connection with the adoption of SFAS No. 142, the Corporation extended the estimated remaining useful life of the Aeronautics' segment's contract intangible asset related to the F-16 program. Assuming SFAS No. 142 had been adopted as of January 1, 2001, the Corporation would have recognized a $53 million after-tax, or $0.12 per share, increase in earnings from continuing operations. Adjusting for SFAS No. 142 and excluding the impact of the nonrecurring and unusual items, pro forma earnings from continuing operations for first quarter 2001 of $172 million or $0.40 per share would compare to the $224 million or $0.50 per share earned in the first quarter of 2002.
Interest expense of $148 million for the quarter ended March 31, 2002 was $49 million lower than the comparable period in 2001 as a result of the reduction in the Corporation's debt portfolio.
On December 7, 2001, the Corporation announced its plans to exit the Global Telecommunications services business. The plan included the sale of certain Lockheed Martin Global Telecommunications (LMGT) businesses (World Systems, Mobile Communications, Lockheed Martin Intersputnik and COMSAT International) and the realignment of other LMGT businesses and telecommunications equity investments to other Lockheed Martin business units. The results of operations of the businesses held for sale are reported in discontinued operations.
On January 11, 2002, the Corporation completed the sale of its Mobile Communications business to Telenor. No gain or loss was recognized on this transaction. On March 18, 2002, the Corporation announced the sale of its World Systems business. The sale is subject to regulatory approval and customary closing conditions, and it is expected that the transaction will be completed by year-end. No gain or loss is expected to be recognized on this transaction.
The losses from discontinued operations were $6 million, or $0.01 per share, and $21 million, or $0.05 per share, for the first quarter of 2002 and 2001, respectively.
For the first quarter of 2002 and 2001, the Corporation's net earnings were $218 million, or $0.49 per share, and $105 million, or $0.25 per share, respectively.
To enhance the comparability and discussion of the Corporation's continuing operations, segment earnings before interest and taxes are presented below excluding nonrecurring and unusual items. As disclosed in the 2001 Annual Report, retirement plan income (SFAS 87 and SFAS 106) is allocated to the segments and has declined from 2001 due to a decrease in pension income (SFAS 87) which negatively affects margins over comparable periods. Also, the Corporation now reflects all goodwill amortization for periods prior to January 1, 2002 in the Corporate and Other segment since such amortization ceased with the adoption of SFAS No. 142. The effect of extending Aeronautics' contract intangible asset related to the F-16 program is also reflected in the Corporate and Other segment. As a result of these changes, 2001 EBIT for all segments has been adjusted for the adoption of this Statement.
Net sales for the Systems Integration segment increased by 11 percent for the quarter ended March 31, 2002 from the comparable 2001 period. The increase in sales for the first quarter of 2002 is primarily attributable to volume growth in the segment's Missiles & Fire Control and Naval Electronics and Surveillance Systems lines of business. These increases were partially offset by volume declines experienced in the Systems Integration-Owego line of business.
EBIT for the segment increased by 1 percent for the quarter from the comparable 2001 period. While net sales increased, margins were reduced by the decline in volume on mature production programs at Owego offset by higher volume on development programs at Missiles & Fire Control.
Net sales for the Space Systems segment increased by 32 percent for the first quarter 2002 from the comparable 2001 period. The increase in sales is primarily attributable to a higher volume of commercial space activities driven by three commercial launches this quarter compared to none in 2001. Sales were higher in government space due to increased volume on government satellite programs and ground systems that were partially offset by lower production activities on government launch vehicles.
Space Systems pro forma EBIT increased by 40 percent for the quarter ended March 31, 2002 from the comparable 2001 period. The increase in pro forma EBIT is primarily due to the three commercial launches previously discussed, as well as the absence in 2002 of a $40 million loss provision recorded in the first quarter of 2001 on certain commercial satellite contracts. EBIT decreased in the government launch vehicle business due to volume declines. Also, the increased level of initial development activities on government satellite programs lowered Space Systems' margins in the quarter when compared to 2001.
In 2001, the nonrecurring and unusual item reflected a gain on the sale of surplus real estate.
Net sales for the Aeronautics segment increased by 56 percent for the quarter ended March 31, 2002 from the comparable 2001 period. The majority of the increase in sales for the quarter was attributable to higher volume on the F-22 program. Additionally, there were two C-130J's delivered in the first quarter of 2002 as contrasted with no deliveries in the respective 2001 period. Increased development activities on international F-16 programs and the F-35 Joint Strike Fighter program, as well as volume increases on C-130 support activities and other aeronautical programs, also contributed to the growth in sales. These increases were partially offset by decreased volume on F-16 support activities.
Aeronautics EBIT increased by 23 percent for the quarter when compared to the same period of 2001. The increase in EBIT was primarily attributable to the improved performance on tactical combat aircraft production programs. Aeronautics' lower margin was attributable to programs in development. The net change in C-130J deliveries did not impact EBIT for the comparative periods due to the previously reported suspension of earnings recognition on the program.
Net sales for the Technology Services segment increased by 15 percent for the first quarter of 2002 when compared to the same period of 2001. The increase in sales was primarily attributable to organic growth in the segment's government information technology programs and sales from the December 2001 acquisition of OAO Corporation. This combined increase in sales was partially offset by declines in volume on commercial information technology and military aircraft programs.
EBIT for the segment increased by 14 percent for the quarter when compared to the same period of 2001. The increase in EBIT was primarily attributable to the changes in volumes previously discussed and improved performance in the commercial information technology line of business.
Corporate and Other
Pro forma EBIT for the Corporate and Other segment decreased by $40 million as compared to the first quarter of 2001. The decrease is primarily the result of lower interest income and an increase in corporate expenses, primarily in stock-based compensation costs, partially offset by increased equity earnings from investments.
In 2001 the nonrecurring and unusual item included the impairment of the Corporation's investment in Americom Asia-Pacific. Also the Corporation now reflects all goodwill amortization for periods prior to January 1, 2002 and the effect of extending Aeronautics' contract intangible asset related to the F-16 program in Corporate and Other's pro forma EBIT.
FIRST QUARTER 2002 ACHIEVEMENTS
- Successfully launched 1 Proton, 1 Titan IV, and 2 Atlas launch vehicles during the quarter.
- Launched the 95th consecutive successful Trident II D5 Fleet Ballistic Missile.
The unique lift-fan propulsion system of the F-35 Joint Strike Fighter STOVL variant won the prestigious Collier Trophy.
- Lockheed Martin's Pike County Operations facility in Troy, Ala., won the 2002 Shingo Prize for excellence in manufacturing.
- Delivered 5 F-16 and 2 C-130J aircraft during the quarter.
- Awarded a $1.3 billion contract for 13 F-22 Raptor Air Dominance Fighters & Related Program Activities.
- The Hellenic government selected the C-27J for its new Medium Range Transport Aircraft (MRTA) program.
- Awarded the initial increment of a $420 million contract modification to develop the SPY-IE prototype tactical radar.
- The Patriot Advanced Capability-3 (PAC-3) Missile successfully intercepted and destroyed an incoming Tactical Ballistic Missile during Operational Testing. Additionally,
- Lockheed Martin received a $300 million contract for continued production of the PAC-3 Missile.
- Received an $80 million contract to produce laser-guided bomb kits, marking the first time since the inception of the Paveway II program that a second supplier was chosen to make laser guidance kits.
- Successfully delivered the 5,000th Longbow Hellfire Missile to the U.S. Army and the United Kingdom and the 300th Close Combat Tactical Trainer to the U.S. Army.
- Achieved the full integration of OAO Corporation into the Technology Services business segment.
Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.S.T. on April 23, 2002. A live audio broadcast will be available on the Investor Relations page of the company's web site at http://www.lockheedmartin.com/investor. An on-demand replay of the webcast will be available following the call and will continue for the following 30 days.
NOTE: Statements in this press release, including the statements relating to projected future financial performance, are considered forward-looking statements under the federal securities laws. Sometimes these statements will contain words such as "believes," "expects," "intends," "plans," "estimates," "outlook," "forecast," and other similar words. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other important factors that could cause our actual performance or achievements to be materially different from those we may project.
Our actual financial results will likely be different from those projected due to the inherent nature of projections and may be better or worse than projected. Given these uncertainties, you should not rely on forward-looking statements. Forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this press release to reflect events or circumstances or changes in expectations or the occurrence of anticipated events.
In addition to the factors set forth in our 2000 Form 10-K and other more recent filings with the Securities and Exchange Commission (www.sec.gov), the following factors could affect our forward-looking statements: our ability to achieve or quantify savings for our customers or ourselves through our global cost-cutting program and other financial management programs; the ability to obtain or the timing of obtaining future government awards; the availability of government funding and customer requirements both domestically and internationally; changes in government or customer priorities due to program reviews or revisions to strategic objectives (including changes in priorities to respond to recent terrorist threats or to improve homeland protection); difficulties in developing and producing operationally advanced technology systems; the competitive environment; economic business and political conditions domestically and internationally (including economic disruption caused by recent terrorist threats); program performance and the timing of contract payments; the timing and customer acceptance of product deliveries and launches; and the outcome of contingencies (including completion of any acquisitions and divestitures, litigation and environmental remediation efforts). Realization of the value of the Corporation's investments in equity securities (including Astrolink International, LLC, Inmarsat, Ltd., Intelsat, Ltd., Loral Space & Communications, Ltd., and Space Imaging LLC) may be affected by the investee's ability to obtain adequate funding and execute its business plan, general market conditions, industry considerations specific to the investee's business, and/or other factors. The inability of an investee to obtain future funding or successfully execute its business plan could adversely affect our earnings in the periods affected by those events. These are only some of the numerous factors that may affect the forward-looking statements contained in this press release.
News Media Contact: Meghan Mariman, 301/897-6195
Investor Relations Contact: James Ryan, 301/897-6584 or Randa Middleton, 301/897-6455