SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) – October 25, 2004
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
| Maryland | 1-11437 | 52-1893632 | ||
| (State or other jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 6801 Rockledge Drive, Bethesda, Maryland | 20817 | |
| (Address of principal executive offices) | (Zip Code) |
(301) 897-6000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act |
Item 2.02. Results of Operations and Financial Condition.
On October 26, 2004, Lockheed Martin Corporation announced its financial results for the quarter ended September 30, 2004. The press release is furnished as Exhibit 99.1 to this Form. The information furnished pursuant to this Item 2.02, including Exhibit 99, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
Item 8.01. Other Events.
On October 25, 2004, Lockheed Martin issued a press release announcing that it has commenced cash tender offers for up to $850 million in aggregate principal amount of two of its outstanding debt issues, namely, its 7.70% Notes due 2008 and a portion of its 8.20% Notes due 2009. A copy of the press release is attached as Exhibit 99.2 to this report and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
| Exhibit No. |
Description | |
| 99.1 | Lockheed Martin Corporation Press Release dated October 26, 2004 (earnings release for third quarter ended September 30, 2004). | |
| 99.2 | Lockheed Martin Corporation Press Release dated October 25, 2004 (announcing debt tender offers). | |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LOCKHEED MARTIN CORPORATION |
| /s/ Rajeev Bhalla |
| Rajeev Bhalla |
| Vice President and Controller |
October 26, 2004
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Index to Exhibits
| Exhibit No. |
Description | |
| 99.1 | Lockheed Martin Corporation Press Release dated October 26, 2004 (earnings release for third quarter ended September 30, 2004). | |
| 99.2 | Lockheed Martin Corporation Press Release dated October 25, 2004 (announcing debt tender offers). | |
All information in this release is as of October 25, 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.
Information
Exhibit 99.1
For Immediate Release
LOCKHEED MARTIN REPORTS 2004 THIRD QUARTER RESULTS
| • | NET EARNINGS UP 41% TO $307 MILLION; YEAR-TO-DATE NET EARNINGS UP 26% TO $894 MILLION |
| • | EARNINGS PER SHARE UP 44% TO $0.69; YEAR-TO-DATE EARNINGS PER SHARE UP 27% TO $2.00 |
| • | GENERATES $1.0 BILLION IN CASH FROM OPERATIONS; $2.8 BILLION YEAR-TO-DATE |
| • | NET SALES UP 4% TO $8.4 BILLION; YEAR-TO-DATE SALES UP 12% TO $25.6 BILLION |
| • | INCREASES OUTLOOK FOR 2004 AND 2005 EARNINGS PER SHARE AND CASH FROM OPERATIONS |
BETHESDA, Maryland, October 26, 2004 – Lockheed Martin Corporation (NYSE: LMT) today reported third quarter 2004 net earnings of $307 million ($0.69 per diluted share), compared to $217 million ($0.48 per diluted share) in 2003. Net sales were $8.4 billion, a 4% increase over third quarter 2003 sales of $8.1 billion. Cash provided by operating activities for the third quarter of 2004 was $1.0 billion, after the Corporation contributed $400 million to its defined benefit pension plans’ trusts to satisfy the remaining funding requirements for 2004 and to pre-fund most of its 2005 funding requirements.
“Working together, each of our 130,000 employees is contributing on a daily basis to strong operational and financial performance,” said President and Chief Executive Officer Bob Stevens. “We continue to achieve important milestones, improve operational efficiencies and capture strategic new business, reflecting our rigorous focus on customer needs and shareholder value.”
“Through disciplined execution we have contributed to customer mission success while expanding margins, improving cash flow, and increasing returns on invested capital,” added Mr. Stevens. During the third quarter, the Corporation repurchased 3.6 million shares of common stock and announced a dividend increase of 14% to an annual rate of $1.00 per share. On October 25th, the Corporation announced tender offers to repurchase up to $850 million of long-term debt with an average coupon rate of approximately 8 percent.
1
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:
REPORTED RESULTS
(In millions, except per share data)
| 3rd Quarter |
Year-to-Date |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net sales |
$ | 8,438 | $ | 8,078 | $ | 25,561 | $ | 22,846 | ||||||||
| Operating profit |
||||||||||||||||
| Segment operating profit |
$ | 723 | $ | 627 | $ | 2,131 | $ | 1,771 | ||||||||
| Unallocated corporate expense, net: |
||||||||||||||||
| FAS/CAS pension adjustment |
(148 | ) | (80 | ) | (446 | ) | (220 | ) | ||||||||
| Other |
(14 | ) | (119 | )* | (44 | ) | (148 | )* | ||||||||
| $ | 561 | $ | 428 | $ | 1,641 | $ | 1,403 | |||||||||
| Net earnings |
$ | 307 | $ | 217 | $ | 894 | $ | 709 | ||||||||
| Diluted earnings per share |
$ | 0.69 | $ | 0.48 | $ | 2.00 | $ | 1.57 | ||||||||
| Cash flow from operations |
$ | 1,039 | $ | 285 | $ | 2,835 | $ | 1,674 | ||||||||
*The 2003 results included a charge of $127 million ($83 million after-tax or $0.18 per share) associated with the early retirement of approximately $970 million of long-term debt in the third quarter and $41 million ($27 million after-tax or $0.06 per share) for the exit from the commercial mail sorting business in the second quarter.
The following table and other sections of this press release contain forward-looking statements, which are based on the Corporation’s current expectations. Actual results may differ materially from those projected. See the “Forward-Looking Statements” discussion contained in this press release.
OUTLOOK
(In millions, except per share data)
| Projections | |||||
| 2004 |
2005 | ||||
| Net sales |
$ | 34,400 - $34,800 | $34,500 - $36,000 | ||
| Operating profit: | |||||
| Segment operating profit |
$2,850 - $2,900 | $2,950 - $3,100 | |||
| Unallocated corporate expense, net: |
|||||
| FAS/CAS pension adjustment |
approx. (600) | (550) - (300) | |||
| Other |
approx. (50) | (50) - 0 | |||
| $ | 2,200 - $2,275 | $2,425 - $2,600 | |||
| Diluted earnings per share |
$2.65 - $2.75 | $3.00 - $3.25 | |||
| Cash flow from operations |
> $2,750 | $5,500 2004 / 2005 Combined | |||
The outlook for 2005 operating profit and earnings per share assume that the Corporation’s 2005 FAS/CAS adjustment will be within a range of ($550) to ($300) million. The range is calculated, among other factors, based on the assumption that the discount rate of 6.25% remains unchanged, the 2004 actual return on plan assets and the 2005 expected return on plan assets is 8.50% as previously projected. The 2005 FAS/CAS adjustment will not be finalized until year-end, consistent with the Corporation’s plan measurement date. The Corporation expects to update its 2005 outlook, as necessary, when it announces 2004 year-end financial results.
It is the Corporation’s practice not to incorporate adjustments to its outlook and projections for proposed acquisitions, divestitures or other unusual activities (e.g., debt tender offers) until such transactions have been consummated.
2
The debt tender offers announced on October 25, 2004 are expected to result in an unusual charge for early repayment of debt in the fourth quarter of 2004 (currently estimated to be approximately $90 million, or approximately $0.20 per share) and a reduction of Lockheed Martin’s interest expense in future periods (currently estimated to be approximately $0.10 per share annually). The exact amount of the charge and interest savings will be finalized when the tender offers have been completed and will depend on the amount of debt tendered and the aggregate purchase price for the bonds.
The charge mentioned above may be offset partially or in its entirety, by other unusual items in the fourth quarter, including the Corporation’s sale of its interest in New Skies, N.V. and Intelsat, Ltd. As previously disclosed, in June 2004, New Skies Satellites, N.V. entered into a definitive agreement for the sale of the company. In August 2004, Intelsat, Ltd. entered into a definitive agreement for the sale of the company. If these transactions are consummated at the current transaction values, we would recognize an after-tax gain of approximately $70 million ($0.15 per share) and receive after-tax proceeds of about $800 million. The transactions are subject to regulatory approvals and other closing conditions, and are expected to close in the fourth quarter of 2004 or early 2005.
Year-to-Date Results
Net sales for the nine months ended September 30, 2004 were $25.6 billion, a 12% increase over the $22.8 billion recorded in the comparable 2003 period.
Net earnings for the nine months ended September 30, 2004 were $894 million ($2.00 per share) compared to $709 million ($1.57 per share) in 2003, a 26% increase. The 2003 results included charges (reported in Unallocated Corporate Expense, net) of $127 million ($83 million after-tax or $0.18 per share) related to the early repayment of debt in the third quarter and $41 million ($27 million after-tax or $0.06 per share) for the Corporation’s exit from the commercial mail sorting business in the second quarter.
3
Cash Flow and Leverage
Cash provided by operating activities for the quarter and nine months ended September 30, 2004 was $1.0 billion and $2.8 billion. Capital expenditures for the quarter and nine months ended September 30, 2004 were approximately $135 million and $395 million. The Corporation repurchased 3.6 million of its common shares for approximately $190 million during the quarter and 9.3 million of its common shares for approximately $465 million year-to-date.
The ratio of total debt-to-capitalization was 46% at the end of the third quarter, an improvement from 48% at December 31, 2003. At September 30, 2004, the Corporation’s cash and cash equivalents balance was $2.8 billion and its short-term investments (those with original maturities greater than 90 days) were $87 million.
4
SEGMENT RESULTS
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 net.” (See our 2003 Form 10-K for a description of “Unallocated corporate expense, 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:
| 3rd Quarter |
Year-to-Date |
|||||||||||||||
| (In millions)
|
2004 |
2003 |
2004 |
2003 |
||||||||||||
| Net sales |
||||||||||||||||
| Aeronautics |
$ | 2,765 | $ | 2,675 | $ | 8,780 | $ | 7,168 | ||||||||
| Electronic Systems |
2,278 | 2,234 | 6,616 | 6,389 | ||||||||||||
| Space Systems |
1,434 | 1,498 | 4,559 | 4,570 | ||||||||||||
| Integrated Systems & Solutions |
966 | 922 | 2,836 | 2,504 | ||||||||||||
| Information & Technology Services |
991 | 743 | 2,760 | 2,202 | ||||||||||||
| Operating segments |
8,434 | 8,072 | 25,551 | 22,833 | ||||||||||||
| Other |
4 | 6 | 10 | 13 | ||||||||||||
| Total net sales |
$ | 8,438 | $ | 8,078 | $ | 25,561 | $ | 22,846 | ||||||||
| Operating profit |
||||||||||||||||
| Aeronautics |
$ | 225 | $ | 183 | $ | 670 | $ | 490 | ||||||||
| Electronic Systems |
222 | 223 | 644 | 617 | ||||||||||||
| Space Systems |
113 | 95 | 362 | 300 | ||||||||||||
| Integrated Systems & Solutions |
90 | 75 | 251 | 214 | ||||||||||||
| Information & Technology Services |
73 | 51 | 204 | 150 | ||||||||||||
| Segment operating profit |
723 | 627 | 2,131 | 1,771 | ||||||||||||
| Unallocated corporate expense net: |
||||||||||||||||
| FAS/CAS pension adjustment |
(148 | ) | (80 | ) | (446 | ) | (220 | ) | ||||||||
| Other |
(14 | ) | (119 | ) | (44 | ) | (148 | ) | ||||||||
| Total operating profit |
$ | 561 | $ | 428 | $ | 1,641 | $ | 1,403 | ||||||||
The following discussion compares the operating results of the business segments for the quarter and nine months ended September 30, 2004 to the same periods in 2003.
5
| Aeronautics ($ millions)
|
||||||||||||
| 3rd Quarter |
Year-to-Date | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
$ | 2,765 | $ | 2,675 | $ | 8,780 | $ | 7,168 | ||||
| Operating profit |
$ | 225 | $ | 183 | $ | 670 | $ | 490 | ||||
Net sales for Aeronautics increased by 3% for the quarter and 22% for the nine months ended September 30, 2004 from the 2003 periods. In the quarter, most of the sales growth was attributable to a $70 million increase in Air Mobility as a result of higher volume on C-5 programs. In Combat Aircraft, increased sales due to higher volume on the F-35 and F/A-22 programs offset lower sales volume on F-16 programs. For the nine-month period, a $1.5 billion increase in Combat Aircraft due to higher volume on the F-35,
F-16 and F/A-22 programs accounted for the increase in sales. The remaining increase in sales was due to increases in Air Mobility and other programs, primarily as a result of higher C-5 volume.
Segment operating profit increased by 23% for the quarter and 37% for the nine months ended September 30, 2004 from the 2003 periods. In the quarter, Combat Aircraft operating profit increased $30 million primarily as a result of higher volume and improved performance on the F/A-22 program, which more than offset a decline in sales volume on F-16 programs. The remaining increase in operating profit for the quarter was primarily due to profits recognized on the two C-130J aircraft delivered this quarter. For the nine-month period, Combat Aircraft operating profit increased $110 million primarily as a result of higher sales volume on the programs discussed above and performance on F/A-22 and other combat aircraft programs. The remaining increase was primarily attributable to profits recognized on C-130J deliveries in 2004. The Corporation began recognizing profits on C-130J deliveries in 2004 (approximately $50 million year-to-date) upon resolution of certain technical aircraft performance risks, manufacturing performance improvements and the achievement of stable production as a result of securing a multi-year contract in 2003.
6
| Electronic Systems ($ millions)
|
||||||||||||
| 3rd Quarter |
Year-to-Date | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
$ | 2,278 | $ | 2,234 | $ | 6,616 | $ | 6,389 | ||||
| Operating profit |
$ | 222 | $ | 223 | $ | 644 | $ | 617 | ||||
Net sales for Electronic Systems increased 2% for the quarter and 4% for the nine months ended September 30, 2004 from the 2003 periods. For both the quarter and the nine-month periods, higher volume in Maritime Systems & Sensors (MS2) more than offset slight declines in Missiles & Fire Control (M&FC) and Platform, Training & Transportation Solutions (PT&TS). In MS2, higher volume on surface systems programs accounted for the increased sales. M&FC sales declined primarily due to lower volume on air defense programs.
Segment operating profit decreased nominally for the quarter and increased by 4% for the nine months ended September 30, 2004, compared to the 2003 periods. In the quarter, decreases in operating profit on air defense programs at M&FC and on simulation and training programs at PT&TS offset improved performance on radar and marine programs at MS2. For the year, improved performance on radar programs at MS2 and on fire control programs at M&FC more than offset a decrease in operating profit on simulation and training programs at PT&TS. In both periods, the decrease in operating profit at PT&TS was due to the recording of a $25 million loss provision on certain international simulation and training contracts.
| Space Systems ($ millions)
|
||||||||||||
| 3rd Quarter |
Year-to-Date | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
$ | 1,434 | $ | 1,498 | $ | 4,559 | $ | 4,570 | ||||
| Operating profit |
$ | 113 | $ | 95 | $ | 362 | $ | 300 | ||||
Net sales for Space Systems decreased by 4% for the quarter and nominally for the nine months ended September 30, 2004 from the 2003 periods. For the quarter, sales declined in both Launch Services and Satellites. In Launch Services, a decline in activities on the Titan launch vehicle program was partially offset by an additional Proton launch in 2004. The decrease in Satellites was due to one less commercial satellite delivery, which more than offset higher volume on government satellite programs.
7
For the nine months ended September 30, 2004, sales decreases in Satellites more than offset increases in Strategic and Defensive Missile Systems (S&DMS) and Launch Services. The decrease in Satellites was due to one less commercial satellite delivery in 2004, which was partially offset by increased volume on government satellite programs. In S&DMS the increase was primarily attributable to fleet ballistic missile programs. The higher volume in Launch Services was due to increases in both Atlas launches (five in 2004 compared to three in 2003) and Proton launches (three in 2004 compared to two in 2003) that more than offset a decline in the Titan launch vehicle program.
Segment operating profit increased by 19% for the quarter and 21% for the nine months ended September 30, 2004, when compared to the 2003 periods. For the quarter, Launch Services operating profit increased due to improved profitability and higher volume in both the Atlas and Proton programs, which more than offset a decline in activities on the Titan launch vehicle program. Satellites’ operating profit decreased due to the absence of a commercial satellite delivery, which was partially offset by improved performance on government satellite programs. In the third quarter of 2003, government satellites operating profit included a $30 million charge related to a handling incident on a NASA satellite program.
For the nine-month period, Launch Services’ operating profit increased primarily due to U.S. Government support of the Atlas program and the benefit resulting from the first quarter termination of a launch vehicle contract by a commercial customer, which more than offset a decline in activities on the Titan launch vehicle program. Satellites’ operating profit declined due to cost growth on a government satellite program and a decline in commercial satellite deliveries.
| Integrated Systems & Solutions ($ millions)
|
||||||||||||
| 3rd Quarter |
Year-to-Date | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
$ | 966 | $ | 922 | $ | 2,836 | $ | 2,504 | ||||
| Operating profit |
$ | 90 | $ | 75 | $ | 251 | $ | 214 | ||||
Net sales for Integrated Systems & Solutions increased by 5% for the quarter and 13% for the nine months ended September 30, 2004 from the 2003 periods. For both the quarter and nine-month periods, a higher volume of intelligence, defense and information assurance activities resulted in increased sales.
8
Segment operating profit increased by 20% for the quarter and 17% for the nine months ended September 30, 2004 from the comparable 2003 periods. The increases in operating profit for both the quarter and year were primarily attributable to higher volume and performance improvements on the activities described above.
| Information & Technology Services ($ millions)
|
||||||||||||
| 3rd Quarter |
Year-to-Date | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
$ | 991 | $ | 743 | $ | 2,760 | $ | 2,202 | ||||
| Operating profit |
$ | 73 | $ | 51 | $ | 204 | $ | 150 | ||||
Net sales for Information & Technology Services increased by 33% for the quarter and 25% for the nine months ended September 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 Information Technology. Information Technology’s sales improved due to the net impact of an acquisition and a divestiture, as well as organic growth. The remaining increase in sales was primarily attributable to higher volume in Defense Services in both periods. NASA sales declined in both periods.
Segment operating profit increased by 43% for the quarter and 36% for the nine months ended September 30, 2004 from the 2003 periods. In both periods the operating profit increased mainly due to improvements in Information Technology and Defense Services.
9
THIRD QUARTER 2004 HIGHLIGHTS
| • | Received a contract from the U.S. Army to develop the Aerial Common Sensor (ACS), a next generation airborne intelligence, surveillance, reconnaissance and target identification system. |
| • | Awarded one of two contracts for the Pre-System Development and Demonstration phase of the Airborne and Maritime/Fixed Station Joint Tactical Radio System (AMF JTRS). |
| • | Received a 10-year contract from the U.S. Strategic Command to develop the new architecture and functions for the Integrated Strategic Planning and Analysis Network (ISPAN), a network-centric mission planning and execution system. |
| • | The U.S. Army announced that Lockheed Martin will receive 50 percent of the work share on the Army’s Warfighter Information Network - Tactical (WIN-T) program. |
| • | Awarded a four-year contract by the Department of Defense to provide enterprise-wide information technology support to U.S. Central Command in the U.S. and overseas. |
| • | Selected to lead the managed network services contract for the U.S. Postal Service. Program is called Universal Computing Connectivity (UCC). |
| • | Received a contract from the U.S. Navy to build the Mobile User Objective System (MUOS), a next-generation narrowband tactical satellite communications system. |
| • | Awarded a contract to design and develop the Medium Extended Air Defense System (MEADS) as part of a three-nation industrial team. |
| • | Delivered the first two Production Lot 2 F/A-22 aircraft. Eight F/A-22s delivered year-to-date (six from Lot 1 and two from Lot 2). Also delivered 24 F-16s (61 year-to-date) and 2 C-130Js (8 year-to-date). |
| • | Began assembly of the forward fuselage and wings for the first F-35 Joint Strike Fighter aircraft, leading to its initial flight in 2006. |
| • | The U.S. Navy awarded Lockheed Martin a contract to perform additional risk reduction activities associated with the Presidential Helicopter Program; Team US101, led by Lockheed Martin, has identified more than 200 U.S. suppliers from 41 states to support the “Marine One” program. |
10
###
| NEWS MEDIA CONTACT: | Tom Jurkowsky, 301/897-6352 | |
| INVESTOR RELATIONS CONTACT: | James Ryan, 301/897-6584 or | |
| Mike Gabaly, 301/897-6455 |
Web site: www.lockheedmartin.com
Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.T. on October 26, 2004. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company’s web site at: http://www.lockheedmartin.com/investor.
FORWARD-LOOKING STATEMENTS
Statements in this release that are “forward-looking statements” are based on Lockheed Martin’s current expectations and assumptions. Forward-looking statements in this release include estimates of future sales, earnings and cash flow. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results could differ materially because of factors such as: the availability of government funding 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; the results of the Corporation’s announced debt tender offers; 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 or changes in accounting or tax rules or pronouncements; the future impact of acquisitions or divestitures, joint ventures or teaming arrangements; the outcome of legal proceedings and other contingencies (including, lawsuits, government investigations or audits, 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 Corporation’s SEC filings, including the “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” “Risk Factors and Forward-Looking Statements” and “Legal Proceedings” sections of the Corporation’s annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained at the Corporation’s website: http://www.lockheedmartin.com.
All information in this release is as of October 25, 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.
11
LOCKHEED MARTIN CORPORATION
Consolidated Statement of Earnings
Preliminary and Unaudited
(In millions, except per share data and percentages)
| QUARTER ENDED SEPTEMBER 30, |
YEAR TO DATE SEPTEMBER 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net Sales |
$ | 8,438 | $ | 8,078 | $ | 25,561 | $ | 22,846 | ||||||||
| Costs and Expenses |
7,921 | 7,540 | 24,043 | 21,426 | ||||||||||||
| Earnings from Operations |
517 | 538 | 1,518 | 1,420 | ||||||||||||
| Other Income and (Expenses), net |
44 | (110 | ) | 123 | (17 | ) | ||||||||||
| Operating Profit [EBIT] |
561 | 428 | 1,641 | 1,403 | ||||||||||||
| Interest Expense |
109 | 117 | 323 | 376 | ||||||||||||
| Earnings before Income Taxes |
452 | 311 | 1,318 | 1,027 | ||||||||||||
| Income Tax Expense |
145 | 94 | 424 | 318 | ||||||||||||
| Net Earnings |
$ | 307 | $ | 217 | $ | 894 | $ | 709 | ||||||||
| Effective Tax Rate |
32.2 | % | 30.2 | % | 32.2 | % | 31.0 | % | ||||||||
| Earnings per Common Share: |
||||||||||||||||
| Basic |
$ | 0.69 | $ | 0.49 | $ | 2.02 | $ | 1.59 | ||||||||
| Diluted |
$ | 0.69 | $ | 0.48 | $ | 2.00 | $ | 1.57 | ||||||||
| Average Number of Shares Outstanding: |
||||||||||||||||
| Basic |
441.4 | 446.6 | 443.2 | 446.9 | ||||||||||||
| Diluted |
445.9 | 450.4 | 446.8 | 450.5 | ||||||||||||
A
LOCKHEED MARTIN CORPORATION
Net Sales, Operating Profit and Margins
Preliminary and Unaudited
(In millions, except percentages)
| QUARTER ENDED SEPTEMBER 30, |
YEAR TO DATE SEPTEMBER 30, |
|||||||||||||||||||||
| 2004 |
2003 |
% Change |
2004 |
2003 |
% Change |
|||||||||||||||||
| Net sales: |
||||||||||||||||||||||
| Aeronautics |
$ | 2,765 | $ | 2,675 | 3 | % | $ | 8,780 | $ | 7,168 | 22 | % | ||||||||||
| Electronic Systems |
2,278 | 2,234 | 2 | % | 6,616 | 6,389 | 4 | % | ||||||||||||||
| Space Systems |
1,434 | 1,498 | (4 | %) | 4,559 | 4,570 | — | |||||||||||||||
| Integrated Systems & Solutions |
966 | 922 | 5 | % | 2,836 | 2,504 | 13 | % | ||||||||||||||
| Information & Technology Services |
991 | 743 | 33 | % | 2,760 | 2,202 | 25 | % | ||||||||||||||
| Segment net sales |
8,434 | 8,072 | 4 | % | 25,551 | 22,833 | 12 | % | ||||||||||||||
| Other |
4 | 6 | 10 | 13 | ||||||||||||||||||
| Total net sales |
$ | 8,438 | $ | 8,078 | 4 | % | $ | 25,561 | $ | 22,846 | 12 | % | ||||||||||
| Operating profit: |
||||||||||||||||||||||
| Aeronautics |
$ | 225 | $ | 183 | 23 | % | $ | 670 | $ | 490 | 37 | % | ||||||||||
| Electronic Systems |
222 | 223 | — | 644 | 617 | 4 | % | |||||||||||||||
| Space Systems |
113 | 95 | 19 | % | 362 | 300 | 21 | % | ||||||||||||||
| Integrated Systems & Solutions |
90 | 75 | 20 | % | 251 | 214 | 17 | % | ||||||||||||||
| Information & Technology Services |
73 | 51 | 43 | % | 204 | 150 | 36 | % | ||||||||||||||
| Segment operating profit |
723 | 627 | 15 | % | 2,131 | 1,771 | 20 | % | ||||||||||||||
| Unallocated corporate expense, Net 1 |
(162 | ) | (199 | ) | (490 | ) | (368 | ) | ||||||||||||||
| Total operating profit |
$ | 561 | $ | 428 | 31 | % | $ | 1,641 | $ | 1,403 | 17 | % | ||||||||||
| Margins: |
||||||||||||||||||||||
| Segments: |
||||||||||||||||||||||
| Aeronautics |
8.1 | % | 6.8 | % | 7.6 | % | 6.8 | % | ||||||||||||||
| Electronic Systems |
9.7 | % | 10.0 | % | 9.7 | % | 9.7 | % | ||||||||||||||
| Space Systems |
7.9 | % | 6.3 | % | 7.9 | % | 6.6 | % | ||||||||||||||
| Integrated Systems & Solutions |
9.3 | % | 8.1 | % | 8.9 | % | 8.5 | % | ||||||||||||||
| Information & Technology Services |
7.4 | % | 6.9 | % | 7.4 | % | 6.8 | % | ||||||||||||||
| Total Segments |
8.6 | % | 7.8 | % | 8.3 | % | 7.8 | % | ||||||||||||||
| Total Consolidated |
6.6 | % | 5.3 | % | 6.4 | % | 6.1 | % | ||||||||||||||
| 1 | “Unallocated corporate expense, net” includes the FAS/CAS pension adjustment, earnings and losses from equity investments, interest income, costs for stock-based compensation programs, unusual items not considered in the evaluation of segment operating performance, corporate costs not allocated to the operating segments and miscellaneous corporate activities. |
B
LOCKHEED MARTIN CORPORATION
Selected Financial Data
Preliminary and Unaudited
(In millions)
| QUARTER ENDED SEPTEMBER 30, |
YEAR TO DATE SEPTEMBER 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Summary of unallocated corporate expense, net |
||||||||||||||||
| FAS/CAS pension adjustment |
$ | (148 | ) | $ | (80 | ) | $ | (446 | ) | $ | (220 | ) | ||||
| Other 1 |
(14 | ) | (119 | ) | (44 | ) | (148 | ) | ||||||||
| Unallocated corporate expense, net |
$ | (162 | ) | $ | (199 | ) | $ | (490 | ) | $ | (368 | ) | ||||
| 1 The quarter and the year-to-date periods of 2003 include a $127 million charge for the early retirement of debt. The year-to-date period includes a $41 million charge from exiting the commercial mail sorting business in the second quarter of 2003. |
| |||||||||||||||
| FAS/CAS pension adjustment |
||||||||||||||||
| FAS 87 expense |
$ | (222 | ) | $ | (128 | ) | $ | (665 | ) | $ | (353 | ) | ||||
| Less: CAS costs |
(74 | ) | (48 | ) | (219 | ) | (133 | ) | ||||||||
| FAS/CAS pension adjustment - expense |
$ | (148 | ) | $ | (80 | ) | $ | (446 | ) | $ | (220 | ) | ||||
| Depreciation and amortization of property, plant and equipment |
||||||||||||||||
| Aeronautics |
$ | 24 | $ | 23 | $ | 70 | $ | 64 | ||||||||
| Electronic Systems |
41 | 43 | 121 | 117 | ||||||||||||
| Space Systems |
40 | 30 | 98 | 84 | ||||||||||||
| Integrated Systems & Solutions |
6 | 4 | 22 | 20 | ||||||||||||
| Information &Technology Services |
11 | 10 | 36 | 31 | ||||||||||||
| Segments |
122 | 110 | 347 | 316 | ||||||||||||
| Unallocated corporate expense, net |
11 | 10 | 31 | 28 | ||||||||||||
| Total depreciation and amortization |
$ | 133 | $ | 120 | $ | 378 | $ | 344 | ||||||||
| Amortization of purchased intangibles |
||||||||||||||||
| Aeronautics |
$ | 12 | $ | 13 | $ | 38 | $ | 38 | ||||||||
| Electronic Systems |
12 | 11 | 35 | 35 | ||||||||||||
| Space Systems |
2 | 2 | 6 | 6 | ||||||||||||
| Integrated Systems & Solutions |
3 | 3 | 11 | 10 | ||||||||||||
| Information &Technology Services |
4 | 2 | 11 | 5 | ||||||||||||
| Segments |
33 | 31 | 101 | 94 | ||||||||||||
| Unallocated corporate expense, net |
3 | — | 6 | — | ||||||||||||
| Total amortization of purchased intangibles |
$ | 36 | $ | 31 | $ | 107 | $ | 94 | ||||||||
C
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Balance Sheet
Preliminary and Unaudited
(In millions)
| SEPTEMBER 30, 2004 |
DECEMBER 31, 2003 | |||||
| Assets |
||||||
| Cash and cash equivalents |
$ | 2,823 | $ | 1,010 | ||
| Short-term investments |
87 | 240 | ||||
| Accounts receivable |
3,845 | 4,039 | ||||
| Inventories |
1,795 | 2,348 | ||||
| Other current assets |
1,702 | 1,764 | ||||
| Total current assets |
10,252 | 9,401 | ||||
| Property, plant and equipment, net |
3,372 | 3,489 | ||||
| Investments in equity securities |
1,108 | 1,060 | ||||
| Goodwill |
7,879 | 7,879 | ||||
| Purchased intangibles, net |
700 | 807 | ||||
| Prepaid pension asset |
1,076 | 1,213 | ||||
| Other noncurrent assets |
2,257 | 2,326 | ||||
| Total assets |
$ | 26,644 | $ | 26,175 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Accounts payable |
$ | 1,547 | $ | 1,434 | ||
| Customer advances and amounts in excess of costs incurred |
4,099 | 4,256 | ||||
| Other accrued expenses |
2,927 | 3,067 | ||||
| Current maturities of long-term debt |
— | 136 | ||||
| Total current liabilities |
8,573 | 8,893 | ||||
| Long-term debt |
6,070 | 6,072 | ||||
| Accrued pension liabilities |
1,228 | 1,100 | ||||
| Post-retirement and other noncurrent liabilities |
3,533 | 3,354 | ||||
| Stockholders’ equity |
7,240 | 6,756 | ||||
| Total liabilities and stockholders’ equity |
$ | 26,644 | $ | 26,175 | ||
D
LOCKHEED MARTIN CORPORATION
Consolidated Condensed Statement of Cash Flows
Preliminary and Unaudited
(In millions)
| YEAR ENDED SEPTEMBER 30, |
||||||||
| 2004 |
2003 |
|||||||
| Operating Activities |
||||||||
| Net income |
$ | 894 | $ | 709 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization of property, plant and equipment |
378 | 344 | ||||||
| Amortization of purchased intangibles |
107 | 94 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Receivables |
165 | 97 | ||||||
| Inventories |
693 | 23 | ||||||
| Accounts payable |
113 | 196 | ||||||
| Customer advances and amounts in excess of costs incurred |
(157 | ) | (540 | ) | ||||
| Other |
642 | 751 | ||||||
| Net cash provided by operating activities |
2,835 | 1,674 | ||||||
| Investing Activities |
||||||||
| Expenditures for property, plant and equipment |
(393 | ) | (367 | ) | ||||
| Sale (purchase) of short-term investments |
153 | (247 | ) | |||||
| Acquisitions of businesses / investments in affiliated companies |
— | (219 | ) | |||||
| Other |
40 | 18 | ||||||
| Net cash used for investing activities |
(200 | ) | (815 | ) | ||||
| Financing Activities |
||||||||
| Repayments related to long-term debt |
(137 | ) | (2,185 | ) | ||||
| Issuances of long-term debt |
— | 1,000 | ||||||
| Long-term debt issuance and repayment costs |
— | (175 | ) | |||||
| Issuances of common stock |
74 | 40 | ||||||
| Repurchases of common stock |
(465 | ) | (279 | ) | ||||
| Common stock dividends |
(294 | ) | (163 | ) | ||||
| Net cash used for financing activities |
(822 | ) | (1,762 | ) | ||||
| Net increase (decrease) in cash and cash equivalents |
1,813 | (903 | ) | |||||
| Cash and cash equivalents at beginning of period |
1,010 | 2,738 | ||||||
| Cash and cash equivalents at end of period |
$ | 2,823 | $ | 1,835 | ||||
E
LOCKHEED MARTIN CORPORATION
Consolidated Statement of Stockholders’ Equity
Preliminary and Unaudited
(In millions)
| Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Unearned Compensation |
Unearned ESOP Shares |
Accumulated Other Comprehensive (Loss) |
Total Stockholders’ Equity |
||||||||||||||||||||||
| Balance at January 1, 2004 |
$ | 446 | $ | 2,477 | $ | 5,054 | $ | (17 | ) | $ | (1,204 | ) | $ | 6,756 | ||||||||||||||
| Net earnings |
894 | 894 | ||||||||||||||||||||||||||
| Common stock dividends |
(294 | ) | (294 | ) | ||||||||||||||||||||||||
| Repurchases of common stock |
(9 | ) | (456 | ) | (465 | ) | ||||||||||||||||||||||
| Stock-based awards and ESOP activity, net |
3 | 344 | $ | (23 | ) | 17 | 341 | |||||||||||||||||||||
| Other comprehensive income |
8 | 8 | ||||||||||||||||||||||||||
| Balance at September 30, 2004 |
$ | 440 | $ | 2,365 | $ | 5,654 | $ | (23 | ) | $ | — | $ | (1,196 | ) | $ | 7,240 | ||||||||||||
F
LOCKHEED MARTIN CORPORATION
Operating Data
Preliminary and Unaudited
(In millions, except deliveries and launches)
| SEPTEMBER 30, 2004 |
DECEMBER 31, 2003 | |||||
| Backlog |
||||||
| Aeronautics |
$ | 32,726 | $ | 37,580 | ||
| Electronic Systems |
18,127 | 17,339 | ||||
| Space Systems |
14,949 | 12,813 | ||||
| Integrated Systems & Solutions |
4,880 | 4,350 | ||||
| Information & Technology Services |
4,647 | 4,817 | ||||
| Total |
$ | 75,329 | $ | 76,899 | ||
| QUARTER ENDED SEPTEMBER 30, |
YEAR TO DATE SEPTEMBER 30, | |||||||
| 2004 |
2003 |
2004 |
2003 | |||||
| Deliveries 1 |
||||||||
| F-16 2 |
24 | 25 | 61 | 40 | ||||
| C-130J |
2 | 2 | 8 | 9 | ||||
| Launches |
||||||||
| Atlas |
1 | 1 | 5 | 3 | ||||
| Proton |
1 | — | 3 | 2 | ||||
| Titan IV |
— | 1 | 1 | 2 | ||||
| 1 | Deliveries - Aircraft delivered to and accepted by customers. |
| 2 | Sales were recognized upon delivery of certain aircraft (unit-of-delivery sales recognition) and for others, sales were recognized on a percentage-of-completion basis. |
G
Information
LOCKHEED MARTIN CORPORATION ANNOUNCES TENDER OFFERS FOR UP TO
$850 MILLION OF ITS OUTSTANDING DEBT
BETHESDA, Maryland, October 25, 2004 – Lockheed Martin Corporation (NYSE: LMT) today announced that it is commencing cash tender offers for up to $850 million in aggregate principal amount of two of its outstanding debt issues.
“These tender offers serve to continue to strengthen Lockheed Martin’s balance sheet, reduce annual interest expense and increase financial flexibility, in line with our balanced and disciplined strategy of cash deployment,” said President and CEO Bob Stevens.
The table below indicates the debt issues included in the tender offers and related information.
| CUSIP Number |
Title of Security |
Principal Amount Outstanding |
Reference U.S. Treasury Security |
Fixed Spread |
Maximum Consideration per $1,000 Principal Amount | |||||||
| 539830AJ8 |
7.70% Notes due 2008 | $ | 390,555,000 | 2.625% U.S. Treasury Note due May 2008 |
.37% | $ | 1,156.17 | |||||
| 539830AL3 |
8.20% Notes due 2009 | $ | 993,020,000 | 3.375% U.S. Treasury Note due October 2009 |
.45% | $ | 1,214.38 | |||||
The tender offers consist of two separate offers: an “Any and All Offer” and a “Maximum Tender Offer”, both made pursuant to an Offer to Purchase dated October 26, 2004 which contains a more comprehensive description of the terms of the tender offers.
In the Any and All Offer, Lockheed Martin is offering to purchase any and all of the approximately $391 million outstanding principal amount of its 7.70% Notes due 2008 (the “2008 Notes”).
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In the Maximum Tender Offer, Lockheed Martin is offering to purchase up to the Maximum Tender Amount of its 8.20% Notes due 2009 (the “2009 Notes”). The “Maximum Tender Amount” will equal the difference between $850 million and the principal amount of the 2008 Notes purchased in the Any and All Offer. The amount of the 2009 Notes that are purchased in the Maximum Tender Offer may be prorated as set forth in the Offer to Purchase.
The Any and All Offer is scheduled to expire at 5:00 p.m., New York City time, on November 9, 2004, unless extended or earlier terminated. Holders of the 2008 Notes must validly tender and not withdraw their notes before the expiration date for the Any and All Offer to receive the full tender offer consideration or maximum consideration, as applicable.
The Maximum Tender Offer is scheduled to expire at 5:00 p.m., New York City time, on November 24, 2004, unless extended or earlier terminated. Holders of the 2009 Notes must validly tender and not validly withdraw their Notes on or before the early tender date, which is 5:00 p.m., New York City time, on November 9, 2004, unless extended or earlier terminated, to receive the full tender offer consideration or maximum consideration, as applicable. Holders of the 2009 Notes who validly tender their 2009 Notes after the early tender date and do not validly withdraw their notes before the expiration date for the Maximum Tender Offer will receive the late tender offer consideration, which is the full tender offer consideration or maximum consideration, as applicable, minus $20 per $1,000 principal amount of notes tendered by such holder that are accepted for purchase. Holders of 2009 Notes who tender their notes on or before the early tender date may not withdraw their notes after the early tender date except 2009 Notes validly tendered on or before the early tender date may be validly withdrawn at any time on or after the applicable price determination date, which is 2:00 p.m., New York City time, on November 22, 2004, and before the maximum tender offer expiration date if the full tender offer consideration for 2009 Notes is the maximum consideration and in the limited circumstances described fully in the Offer to Purchase.
The full tender offer consideration for each $1,000 principal amount of notes tendered and accepted for payment pursuant to the tender offers will be determined in the manner described in the Offer to Purchase by reference to a fixed spread specified for the applicable notes over the yield based on the bid side price of the U.S. Treasury
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Security specified on the cover page of the Offer to Purchase, as calculated by the dealer managers at 2:00 p.m., New York City time, on the second trading day before the applicable expiration date for the offers. If the full tender offer consideration for either series of notes, as calculated based on the fixed spread applicable to such series, would be greater than the maximum consideration for each series of notes as specified in the chart included in this press release, payments to holders of such validly tendered and purchased notes will be based on the maximum consideration instead of the full tender offer consideration described above. In addition to the full tender offer consideration, maximum consideration or the late tender offer consideration, as applicable, accrued and unpaid interest up to, but not including, the applicable settlement date will be paid in cash on all validly tendered notes accepted in the tender offers. The settlement dates for the Any and All Offer and the Maximum Tender Offer will follow promptly after the applicable expiration dates and currently are expected to be Wednesday, November 10, 2004, and Thursday, December 2, 2004, respectively.
Lockheed Martin expects to use available cash to fund the purchase of tendered notes accepted for purchase.
Lockheed Martin has retained J. P. Morgan Securities Inc. and Citigroup to serve as joint dealer managers, The Bank of New York to serve as depositary and Morrow & Co., Inc. to serve as information agent for the tender offers.
Requests for copies of the Offer to Purchase and requests for assistance relating to the procedures for tendering may be directed to Morrow & Co., Inc., the Information Agent, by telephone at (212) 754-8000, banks and brokers call toll-free at (800) 654-2468, or all others call toll-free at (800) 607-0088, or in writing at 445 Park Avenue, New York, New York, 10022. Request for assistance relating to the terms and conditions of the tender offers may be directed to either J. P. Morgan at 866-834-4666 or Citigroup at 800-558-3745.
Neither tender offer is conditioned upon any minimum principal amount of either series of Notes being tendered or the consummation of the other tender offer, and each tender offer may be amended, extended or terminated individually. Notwithstanding any other provision of the tender offers, Lockheed Martin’s obligation to accept for purchase, and to pay for, Notes validly tendered and not validly withdrawn pursuant to the tender offers is conditioned on the satisfaction or, where possible, the waiver of conditions specified in the Offer to Purchase.
This press release is not an offer to purchase or a solicitation, which may be made only pursuant to the terms of the Offer to Purchase. The offers to purchase the Notes do not constitute an offer to purchase Notes in any jurisdiction in which, or to or from any person to or from whom, it is unlawful to make such offer or solicitation under applicable securities or blue sky laws. In those jurisdictions where the securities, blue sky or other laws require the tender offers to be made by a licensed broker or dealer, the tender offers shall be deemed to be made on behalf of Lockheed Martin by the Dealer Managers or one or more registered brokers or dealer licensed under the laws of such jurisdiction.
Headquartered in Bethesda, Md., Lockheed Martin employs about 130,000 people worldwide and is principally engaged in the research, design, development, manufacture and integration of advanced technology systems, products and services. The Corporation reported 2003 sales of $31.8 billion.
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###
| NEWS MEDIA CONTACT: | Tom Jurkowsky, 301/897-6352 | |
| INVESTOR RELATIONS CONTACT: | James Ryan, 301/897-6584 or Mike Gabaly, 301/897-6455 |
FORWARD-LOOKING STATEMENTS
Statements in this press release that are “forward-looking statements” are based on Lockheed Martin’s current expectations and assumptions. Forward-looking statements in this release include references to a strengthened Lockheed Martin balance sheet, reduced annual interest expense and increased financial flexibility. 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; the results of the Corporation’s announced debt tender offers; 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 or changes in accounting or tax rules or pronouncements; the future impact of acquisitions or divestitures, joint ventures or teaming arrangements; the outcome of legal proceedings and other contingencies (including, lawsuits, government investigations or audits, and environmental remediation efforts); the competitive environment for defense and information technology products and services; and economic, business and political conditions domestically and internationally. In addition, holders of the 2008 Notes and 2009 Notes should review the significant consequences to holders of participating or not participating in the tender offers as described in the Offer to Purchase.
These are only some of the factors that may affect the forward-looking statements contained in this press release. For further information regarding risks and uncertainties associated with Lockheed Martin’s business, please refer to the Corporation’s SEC filings, including the “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” “Risk Factors and Forward-Looking Statements” and “Legal Proceedings” sections of the Corporation’s annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained at the Corporation’s website: http://www.lockheedmartin.com.
All information in this release is as of October 25, 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.
4