Form 8-K

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) – July 25, 2006

 


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)

 


 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.02. Results of Operations and Financial Condition.

On July 25, 2006, Lockheed Martin Corporation announced its financial results for the quarter and six-months ended June 30, 2006. The press release is furnished as Exhibit 99 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 9.01. Financial Statements and Exhibits.

 

Exhibit No.

 

Description

99   Lockheed Martin Corporation Press Release dated July 25, 2006 (earnings release for the quarter and six-months ended June 30, 2006).

 

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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
By  

/s/ Martin T. Stanislav

  Martin T. Stanislav
  Vice President and Controller

July 25, 2006

 

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Exhibit No.

 

Description

99

  Lockheed Martin Corporation Press Release dated July 25, 2006 (earnings release for the quarter and six-months ended June 30, 2006).

 

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Press Release

Exhibit 99

LOGO

Information

For Immediate Release

LOCKHEED MARTIN ANNOUNCES SECOND QUARTER 2006 RESULTS

 

  SECOND QUARTER NET EARNINGS UP 26% TO $580 MILLION; YEAR-TO-DATE NET EARNINGS UP 41% TO $1.2 BILLION

 

  SECOND QUARTER EARNINGS PER SHARE UP 31% TO $1.34; YEAR-TO-DATE EARNINGS PER SHARE UP 45% TO $2.68

 

  SECOND QUARTER NET SALES UP 7% TO $10.0 BILLION; YEAR-TO-DATE NET SALES UP 8% TO $19.2 BILLION

 

  GENERATES $1.6 BILLION IN CASH FROM OPERATIONS IN THE SECOND QUARTER; $2.8 BILLION YEAR-TO-DATE

 

  INCREASES OUTLOOK FOR 2006 EARNINGS PER SHARE, CASH FROM OPERATIONS AND RETURN ON INVESTED CAPITAL (ROIC)

BETHESDA, Maryland, July 25, 2006 – Lockheed Martin Corporation (NYSE: LMT) today reported second quarter 2006 net earnings of $580 million ($1.34 per diluted share) compared to $461 million ($1.02 per diluted share) in 2005. Net sales were $10.0 billion, a 7% increase over second quarter 2005 sales of $9.3 billion. Cash from operations for the second quarter of 2006 was $1.6 billion.

Net sales for the first six months of 2006 were $19.2 billion, an 8% increase over the $17.8 billion recorded in the comparable 2005 period. Net earnings for the six months ended June 30, 2006 were $1.2 billion ($2.68 per share) compared to $830 million ($1.85 per share) in 2005. Cash from operations for the first half of 2006 was $2.8 billion.

“All of our employees continue to focus on meeting customer commitments, capturing new orders, improving productivity and generating cash,” said Bob Stevens, Chairman, President and CEO. “Our results reflect excellent operational and financial performance across all business areas. This performance enabled us to increase our 2006 financial outlook, as we drive toward our long standing goal of double-digit operating margins.”

 

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SUMMARY REPORTED RESULTS AND OUTLOOK

The following table presents the Corporation’s results for the quarter and year-to-date periods ended June 30, in accordance with generally accepted accounting principles (GAAP):

 

REPORTED RESULTS

(In millions, except per share data)

   2nd Quarter     Year-to-Date  
   2006     2005     2006     2005  

Net sales

   $ 9,961     $ 9,295     $ 19,175     $ 17,783  
                                

Operating profit

        

Segment operating profit

   $ 976     $ 865     $ 1,907     $ 1,627  

Unallocated corporate, net:

        

FAS/CAS pension adjustment

     (68 )     (156 )     (136 )     (311 )

Unusual items, net

     20       41       170       58  

Stock compensation expense

     (27 )     —         (57 )     —    

Other, net

     42       14       30       20  
                                
   $ 943     $ 764     $ 1,914     $ 1,394  
                                

Net earnings

   $ 580     $ 461     $ 1,171     $ 830  
                                

Diluted earnings per share

   $ 1.34     $ 1.02     $ 2.68     $ 1.85  
                                

Cash from operations

   $ 1,613     $ 697     $ 2,798     $ 2,245  
                                

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.

 

2006 OUTLOOK

(In millions, except per share data)

   2006 Projections
   Current Update   April 2006

Net sales

   $38,500 - $39,500   $38,000 - $39,500
        

Operating profit:

    

Segment operating profit

   $3,825 - $3,925   $3,625 - $3,725

Unallocated corporate expense, net:

    

FAS/CAS pension adjustment

   approx. (275)   approx. (275)

Unusual items, net

   approx.  170    approx.  150 

Stock compensation expense

   approx. (110)   approx. (110)

Other, net

   15 – 40   5 – 30
        
   $3,625 - $3,750   $3,395 - $3,520
        

Diluted earnings per share

   $5.10 - $5.30   $4.65 - $4.85

Cash from operations

   ³ $3,600   ³ $3,400

ROIC 1

   > 16.5%   > 14.8%

1 A summary table showing the calculation of ROIC is displayed at the end of this release.

 

2


The $0.45 increase in projected 2006 diluted earnings per share is primarily driven by improved operational performance in all business segments. In addition, the current outlook reflects a reduction in the projected full-year, weighted-average number of diluted shares outstanding as a result of share repurchase activity and the recognition of an incremental $20 million ($13 million after-tax or $0.03 per share) unusual gain during the second quarter.

It is the Corporation’s practice not to incorporate adjustments to its outlook and projections for proposed acquisitions, divestitures, joint ventures, or other unusual activities until such transactions have been consummated.

CASH FLOW AND LEVERAGE

Cash from operations for the quarter and six months ended June 30, 2006 was $1.6 billion and $2.8 billion. The Corporation continued to execute its balanced cash deployment strategy during the quarter and first half of the year as follows:

 

    Repurchased 9.8 million of its common shares at a cost of $718 million in the quarter and 21.5 million of its common shares at a cost of $1.6 billion during the first six months of the year;

 

    Invested $321 million in the second quarter and $474 million during the first six months of the year for acquisition activities;

 

    Repaid $194 million of debt in the quarter and $200 million during the first six months;

 

    Made capital expenditures of $165 million in the quarter and $263 million during the first six months of the year; and

 

    Paid cash dividends of $129 million in the quarter and $261 million for the first half of year.

The Corporation’s ratio of total debt-to-capitalization was 39% at the end of the second quarter, unchanged from the December 31, 2005 level. At June 30, 2006, the Corporation had $3.4 billion in cash and short-term investments.

 

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SEGMENT RESULTS

The Corporation operates in five principal business segments: Electronic Systems; Integrated Systems & Solutions (IS&S); Information & Technology Services (I&TS); Aeronautics; and Space Systems. The results of Electronic Systems, IS&S and I&TS have been aggregated and reported as the Systems & IT Group due to the common focus on information technology and systems integration and engineering solutions across these 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 2005 Form 10-K for a description of “Unallocated corporate (expense) income, net,” including the FAS / CAS pension adjustment.

 

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The following table presents the operating results of the Systems & IT Group, Aeronautics and Space Systems and reconciles these amounts to the Corporation’s consolidated financial results.

(In millions)

 

     2nd Quarter     Year-to-Date  
     2006     2005     2006    2005  

Net sales

         
Systems & IT Group          

Electronic Systems

   $ 2,886     $ 2,740     $ 5,516    $ 4,997  

Integrated Systems & Solutions

     1,086       1,052       2,105      2,010  

Information & Technology Services

     1,070       998       1,995      1,843  
                               

Systems & IT Group

     5,042       4,790       9,616      8,850  

Aeronautics

     2,818       2,879       5,489      5,645  

Space Systems

     2,101       1,626       4,070      3,288  
                               
Total net sales    $ 9,961     $ 9,295     $ 19,175    $ 17,783  
                               

Operating profit

         
Systems & IT Group          

Electronic Systems

   $ 333     $ 295     $ 656    $ 527  

Integrated Systems & Solutions

     100       93       193      177  

Information & Technology Services

     93       86       175      157  
                               

Systems & IT Group

     526       474       1,024      861  
Aeronautics      261       245       501      467  
Space Systems      189       146       382      299  
                               

Segment operating profit

     976       865       1,907      1,627  

Unallocated corporate (expense) income, net:

     (33 )     (101 )     7      (233 )
                               

Total operating profit

   $ 943     $ 764     $ 1,914    $ 1,394  
                               

 

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The following discussion compares the operating results for the quarter and six months ended June 30, 2006 to the same periods in 2005.

Systems & IT Group

($ millions)

 

     2nd Quarter    Year-to-Date
     2006    2005    2006    2005

Net sales

   $ 5,042    $ 4,790    $ 9,616    $ 8,850

Operating profit

   $ 526    $ 474    $ 1,024    $ 861

Net sales for the Systems & IT Group increased by 5% for the quarter and 9% for the six months ended June 30, 2006 from the 2005 periods. Each of the business segments in the group reported sales growth during the quarter and first half of the year.

In Electronic Systems, during the second quarter, sales increased due to higher volume in platform integration activities at Platform, Training & Transportation Solutions (PT&TS) and in surface system programs at Maritime Systems & Sensors (MS2). These increases were partially offset by a decline in fire control programs at Missiles & Fire Control (M&FC). For the first half of the year, the sales growth in Electronic Systems was due to volume increases in platform integration activities at PT&TS; surface system programs at MS2; and in air defense programs at M&FC. In IS&S, for both the quarter and year-to-date periods, the increases in sales were primarily attributable to higher volume and performance related to intelligence, defense and information assurance activities. In I&TS, for both the quarter and year-to-date periods, the increases in sales were primarily attributable to higher volume in Information Technology, which offset declines in NASA programs.

Operating profit for the Systems & IT Group increased by 11% for the quarter and 19% for the six months ended June 30, 2006 compared to the 2005 periods. Each of the business segments in the group reported growth in operating profit during the quarter and first half of the year.

In Electronic Systems, the increase in operating profit during the second quarter was attributable to improved performance on radar programs at MS2 and higher volume on platform integration activities at PT&TS which were partially offset by a decline in certain tactical missile programs at M&FC. For the six month period, Electronic Systems’ operating profit increased mainly due to improved performance on radar programs at MS2 and fire control programs at M&FC as well as higher volume on platform

 

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integration activities at PT&TS. In IS&S, for both the quarter and first half of the year, the increases were primarily attributable to higher volume and performance related to intelligence, defense and information assurance activities. In I&TS, for both the quarter and year-to-date periods, the increases were due to improved performance in Defense Services.

Aeronautics

($ millions)

 

     2nd Quarter    Year-to-Date
     2006    2005    2006    2005

Net sales

   $ 2,818    $ 2,879    $ 5,489    $ 5,645

Operating profit

   $ 261    $ 245    $ 501    $ 467

Net sales for Aeronautics decreased by 2% for the quarter and by 3% for the six months ended June 30, 2006 from the 2005 periods. During the quarter, sales declined in both Combat Aircraft and Air Mobility. The decrease in Combat Aircraft was due to lower volume on the F-22 and F-16 programs, which was partially offset by an increase in F-35 Lightning II volume. The decline in Air Mobility was mainly due to lower volume on the C-5 program. For the six month period, a decline in Air Mobility sales was partially offset by a slight increase in Combat Aircraft sales. The decline in Air Mobility was attributable to fewer C-130J deliveries and lower volume on the C-5 program. The increase in Combat Aircraft sales was mainly due to higher F-35 volume, partially offset by reduced volume on the F-16 and F-22 programs.

Segment operating profit increased by 7% for both the quarter and six months ended June 30, 2006 from the 2005 periods. During the quarter, increases in Air Mobility and other aeronautics programs more than offset a decline in Combat Aircraft. The increase in Air Mobility was mainly due to improved performance on the C-130J and other air mobility programs in 2006. In Combat Aircraft, declines in F-22 operating profit were partially offset by increases due to higher F-35 volume and improved F-16 performance. For the first half of the year, operating profit increased in Air Mobility and other aeronautics programs. Improved performance on C-130 programs accounted for the majority of the increase in Air Mobility. In Combat Aircraft, operating profit was relatively unchanged between periods. In 2006, higher operating profit on the F-35 program was offset by lower operating profit on the F-22 program. These fluctuations were attributable to the fact that in 2005, operating profit included a reduction in earnings on the F-35 program and increased volume and improved performance on the F-22 program.

 

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Space Systems

($ millions)

 

     2nd Quarter    Year-to-Date
     2006    2005    2006    2005

Net sales

   $ 2,101    $ 1,626    $ 4,070    $ 3,288

Operating profit

   $ 189    $ 146    $ 382    $ 299

Net sales for Space Systems increased by 29% for the quarter and 24% for the six months ended June 30, 2006 from the 2005 periods. In both periods, the sales growth was mainly due to volume increases in Satellites and Strategic & Defensive Missile Systems (S&DMS). The increases in Satellites were due to higher volume on both commercial and government programs. There were two commercial satellite deliveries in the second quarter of 2006 and three in the first six months of 2006 compared to no deliveries in the first six months of 2005. The increases in S&DMS were attributable to both the fleet ballistic missile and missile defense programs. In Launch Services, sales remained relatively unchanged for the quarter and six months ended June 30, 2006 from the 2005 periods.

Segment operating profit increased by 29% for the quarter and 28% for the six months ended June 30, 2006, when compared to the 2005 periods. For the quarter and six-month period, operating profit increased in Launch Services, Satellites and S&DMS. In Launch Services, operating profit increased due to improved performance on the Atlas program in both 2006 periods due to higher volume and risk reduction activities, including the first quarter definitization of the EELV Launch Capabilities contract. In S&DMS, operating profit increased due to higher volume on the programs discussed above while the increase in Satellites was primarily driven by the increase in commercial satellite deliveries.

 

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Unallocated Corporate (Expense) Income, Net

($ millions)

 

     2nd Quarter     Year-to-Date  
     2006     2005     2006     2005  

FAS/CAS pension adjustment

   $ (68 )   $ (156 )   $ (136 )   $ (311 )

Unusual items, net

     20       41       170       58  

Stock compensation expense

     (27 )     —         (57 )     —    

Other, net

     42       14       30       20  
                                

Unallocated corporate (expense) income, net

   $ (33 )   $ (101 )   $ 7     $ (233 )
                                

The FAS/CAS pension adjustment (calculated as the difference between FAS 87 expense and the CAS cost amounts) decreased in 2006 compared to 2005. This decrease is consistent with the Corporation’s previously disclosed assumptions used in computing these amounts. For more information see the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our 2005 Annual Report on Form 10-K under the caption “Critical Accounting Policies.”

Certain items are excluded from segment results as part of senior management’s evaluation of segment operating performance. Therefore, for purposes of segment reporting, the following unusual items were included in “Unallocated Corporate (expense) income, net” for the quarters and six months ended June 30, 2006 and 2005:

2006 –

 

    A second quarter gain, net of state income taxes, of $20 million related to the sale of land;

 

    A first quarter gain, net of state income taxes, of $127 million related to the sale of 21 million of our shares of Inmarsat; and

 

    A first quarter gain, net of state income taxes, of $23 million, related to the sale of the assets of Space Imaging, LLC.

These items increased our net earnings by $13 million ($0.03 per share) and $111 million ($0.25 per share) during the quarter and six months ended June 30, 2006.

 

9


2005 –

 

    A second quarter recognition of a deferred gain, net of state income taxes, of $41 million related to the June 2005 initial public offering of shares of Inmarsat;

 

    A first quarter gain, net of state income taxes, of $47 million related to the sale of our 25% interest in Intelsat, Ltd.; and

 

    A first quarter charge, net of state income tax benefits, of $30 million related to impairment in the value of a single telecommunications satellite operated by one of our wholly-owned subsidiaries.

On a net basis, these items increased our net earnings by $27 million ($0.06 per share) and $39 million ($0.09 per share) during the quarter and six months ended June 30, 2005.

The Corporation adopted FAS 123(R) “Share-Based Payments” prospectively on January 1, 2006 and recognized stock compensation expense on stock options and grants of other stock based incentive awards during the second quarter of $27 million ($17 million after-tax or $0.04 per share) and $57 million ($35 million after-tax or $0.08 per share) for the first six months of 2006.

The increase in “Other, net” is primarily attributable to other corporate activities including an increase in interest income recorded in the 2006 period, resulting mainly from higher cash balances and interest rates.

 

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Headquartered in Bethesda, Md., Lockheed Martin employs about 135,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation reported 2005 sales of $37.2 billion.

###

 

NEWS MEDIA CONTACT:   Tom Jurkowsky, 301/897-6352
INVESTOR RELATIONS CONTACT:   Jerry Kircher, 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 July 25, 2006. 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 for our products and services both domestically and internationally; changes in government and customer priorities and requirements (including changes to respond to Department of Defense reviews, Congressional actions, budgetary constraints, cost-cutting initiatives, terrorist threats and homeland security); the impact of continued military operations in Iraq and Afghanistan on funding for existing defense programs; the award or termination of contracts; return on pension plan assets, interest and discount rates and other changes that may impact pension plan assumptions; difficulties in developing and producing operationally advanced technology systems; the timing and customer acceptance of product deliveries; materials availability and performance by key suppliers, subcontractors and customers; charges from any future impairment reviews that may result in the recognition of losses and a reduction in the book value of goodwill or other long-term assets; the future 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, government/regulatory and environmental remediation efforts); the competitive environment for the Corporation’s 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

 

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filings, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” and “Legal Proceedings” sections of the Corporation’s 2005 annual report on Form 10-K, which may be obtained at the Corporation’s website: http://www.lockheedmartin.com.

It is the Corporation’s policy to only update or reconfirm its earnings, sales, cash and ROIC outlook by issuing a press release. The Corporation generally plans to provide a forward-looking outlook as part of its quarterly earnings release but reserves the right to provide an outlook at different intervals or to revise its practice in future periods. All information in this release is as of July 24, 2006. Lockheed Martin undertakes no duty to update any forward-looking statement to reflect subsequent events, actual results or changes in the Corporation’s expectations. We also disclaim any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.

NON-GAAP PERFORMANCE MEASURES

The Corporation believes that reporting ROIC provides investors with greater visibility into how effectively Lockheed Martin uses the capital invested in its operations. The Corporation uses ROIC to evaluate multi-year investment decisions and as a long-term performance measure, and also uses ROIC as a factor in evaluating management performance for incentive compensation purposes. ROIC is not a measure of financial performance under generally accepted accounting principles, and may not be defined and calculated by other companies in the same manner. ROIC should not be considered in isolation or as an alternative to net earnings as an indicator of performance.

 

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The Corporation calculates ROIC as follows:

Net earnings plus after-tax interest expense divided by average invested capital (stockholders’ equity plus debt), after adjusting stockholders’ equity by adding back minimum pension liability balances.

 

(In millions, except percentages)        2006
Outlook
    2005 Actual     2004 Actual  

NET EARNINGS

INTEREST EXPENSE (MULTIPLIED BY 65%) 1

  }      COMBINED     $
 
1,825
241
 
 
  $
 
1,266
276
 
 

RETURN

     > $ 2,450     $ 2,066     $ 1,542  

AVERAGE DEBT 2, 5

AVERAGE EQUITY 3, 5

AVERAGE MINIMUM PENSION LIABILITY4,5

  }      COMBINED      
 
 
5,077
7,590
1,545
 
 
 
   
 
 
5,932
7,015
1,296
 
 
 

AVERAGE INVESTED CAPITAL

     < $ 14,850     $ 14,212     $ 14,243  

RETURN ON INVESTED CAPITAL

       > 16.5 %     14.5 %     10.8 %

1 Represents after-tax interest expense utilizing the federal statutory rate of 35%.
2 Debt consists of long-term debt, including current maturities, and short-term borrowings (if any).
3 Equity includes non-cash adjustments for other comprehensive losses, primarily for the additional minimum pension liability.
4 Minimum pension liability values reflect the cumulative value of entries identified in our Statement of Stockholders Equity under the caption “Minimum pension liability.” The annual minimum pension liability adjustments to equity were: 2001 = ($33M); 2002 = ($1,537M); 2003 = $331M; 2004 = ($285M); 2005 = ($105M). As these entries are recorded in the fourth quarter, the value added-back to our average equity in a given year is the cumulative impact of all prior year entries plus 20% of the current year entry value.
5 Yearly averages are calculated using balances at the start of the year and at the end of each quarter.

 

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LOCKHEED MARTIN CORPORATION

Consolidated Condensed Statement of Earnings

Preliminary and Unaudited

(In millions, except per share data and percentages)

 

     THREE MONTHS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,  
     2006     2005     2006     2005  

Net sales

   $ 9,961     $ 9,295     $ 19,175     $ 17,783  

Cost of sales

     9,121       8,637       17,575       16,583  
                                
     840       658       1,600       1,200  

Other income and expenses, net

     103       106       314       194  
                                

Operating profit

     943       764       1,914       1,394  

Interest expense

     92       94       186       184  
                                

Earnings before income taxes

     851       670       1,728       1,210  

Income tax expense

     271       209       557       380  
                                

Net earnings

   $ 580     $ 461     $ 1,171     $ 830  
                                

Effective tax rate

     31.8 %     31.2 %     32.2 %     31.4 %
                                

Earnings per common share:

        

Basic

   $ 1.35     $ 1.03     $ 2.71     $ 1.87  

Diluted

   $ 1.34     $ 1.02     $ 2.68     $ 1.85  

Average number of shares outstanding:

        

Basic

     428.8       445.3       432.4       443.3  

Diluted

     433.7       451.3       437.4       448.9  

Common shares reported in stockholders’ equity at June 30:

         421.5       441.2  

 

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LOCKHEED MARTIN CORPORATION

Net Sales, Operating Profit and Margins

Preliminary and Unaudited

(In millions, except percentages)

 

     THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
     2006     2005     % Change    2006     2005     % Change
Net sales:              

Systems & IT Group:

             

Electronic Systems

   $ 2,886     $ 2,740        $ 5,516     $ 4,997    

Integrated Systems & Solutions

     1,086       1,052          2,105       2,010    

Information & Technology Services

     1,070       998          1,995       1,843    
                                     

Systems & IT Group

     5,042       4,790       5%      9,616       8,850      9%

Aeronautics

     2,818       2,879     (2)%      5,489       5,645     (3)%

Space Systems

     2,101       1,626     29%      4,070       3,288     24%
                                     

Total net sales

   $ 9,961     $ 9,295       7%    $ 19,175     $ 17,783       8%
                                     
Operating profit:              

Systems & IT Group:

             

Electronic Systems

   $ 333     $ 295        $ 656     $ 527    

Integrated Systems & Solutions

     100       93          193       177    

Information & Technology Services

     93       86          175       157    
                                     

Systems & IT Group

     526       474     11%      1,024       861     19%

Aeronautics

     261       245       7%      501       467       7%

Space Systems

     189       146     29%      382       299     28%
                                     

Segment operating profit

     976       865     13%      1,907       1,627     17%

Unallocated corporate (expense) / income, net

     (33 )     (101 )        7       (233 )  
                                     

Total operating profit

   $ 943     $ 764     23%    $ 1,914     $ 1,394     37%
                                     
Margins:              

Systems & IT Group:

             

Electronic Systems

     11.5 %     10.8 %        11.9 %     10.5 %  

Integrated Systems & Solutions

     9.2 %     8.8 %        9.2 %     8.8 %  

Information & Technology Services

     8.7 %     8.6 %        8.8 %     8.5 %  

Systems & IT Group

     10.4 %     9.9 %        10.6 %     9.7 %  

Aeronautics

     9.3 %     8.5 %        9.1 %     8.3 %  

Space Systems

     9.0 %     9.0 %        9.4 %     9.1 %  

Total operating segments

     9.8 %     9.3 %        9.9 %     9.1 %  

Total Consolidated

     9.5 %     8.2 %        10.0 %     7.8 %  

 

15


LOCKHEED MARTIN CORPORATION

Selected Financial Data

Preliminary and Unaudited

(In millions)

 

     THREE MONTHS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,  
     2006     2005     2006     2005  

Summary of unallocated corporate (expense) / income, net

        

FAS/CAS pension adjustment

   $ (68 )   $ (156 )   $ (136 )   $ (311 )

Unusual items, net

     20       41       170       58  

Stock compensation expense

     (27 )     —         (57 )     —    

Other, net

     42       14       30       20  
                                

Unallocated corporate (expense) / income, net

   $ (33 )   $ (101 )   $ 7     $ (233 )
                                

 

     THREE MONTHS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,  
     2006     2005     2006     2005  
FAS/CAS pension adjustment         

FAS 87 expense

   $ (234 )   $ (280 )   $ (468 )   $ (559 )

Less: CAS costs

     (166 )     (124 )     (332 )     (248 )
                                

FAS/CAS pension adjustment - expense

   $ (68 )   $ (156 )   $ (136 )   $ (311 )
                                

 

     THREE MONTHS ENDED JUNE 30, 2006    SIX MONTHS ENDED JUNE 30, 2006  
     Operating profit    Net earnings    Earnings
per share
   Operating profit     Net earnings    

Earnings

per share

 

Unusual Items

               

Gain on sale of land

   $ 20    $ 13    $ 0.03    $ 20     $ 13     $ 0.03  

Gain on sale of Inmarsat stock

     —        —        —        127       83       0.19  

Gain on sale of Space Imaging’s assets

     —        —        —        23       15       0.03  
                                             
   $ 20    $ 13    $ 0.03    $ 170     $ 111     $ 0.25  
                                             
     THREE MONTHS ENDED JUNE 30, 2005    SIX MONTHS ENDED JUNE 30, 2005  
     Operating profit    Net earnings   

Earnings

per share

   Operating profit
(loss)
    Net earnings
(loss)
    Earnings (loss)
per share
 

Unusual Items

               

Gain on Inmarsat IPO

   $ 41    $ 27    $ 0.06    $ 41     $ 27     $ 0.06  

Gain on sale of Intelsat stock

     —        —        —        47       31       0.07  

LMI impairment charge

     —        —        —        (30 )     (19 )     (0.04 )
                                             
   $ 41    $ 27    $ 0.06    $ 58     $ 39     $ 0.09  
                                             

 

16


LOCKHEED MARTIN CORPORATION

Selected Financial Data

Preliminary and Unaudited

(In millions)

 

    THREE MONTHS ENDED JUNE 30,   SIX MONTHS ENDED JUNE 30,
    2006   2005   2006   2005

Depreciation and amortization of property, plant and equipment

       

Systems & IT Group:

       

Electronic Systems

  $ 46   $ 43   $ 89   $ 84

Integrated Systems & Solutions

    12     12     22     20

Information & Technology Services

    4     4     7     7
                       

Systems & IT Group

    62     59     118     111

Aeronautics

    36     31     71     60

Space Systems

    35     32     65     63
                       

Segments

    133     122     254     234

Unallocated corporate expense, net

    16     10     30     24
                       

Total depreciation and amortization

  $ 149   $ 132   $ 284   $ 258
                       
    THREE MONTHS ENDED JUNE 30,   SIX MONTHS ENDED JUNE 30,
    2006   2005   2006   2005

Amortization of purchased intangibles

       

Systems & IT Group:

       

Electronic Systems

  $ 12   $ 12   $ 24   $ 24

Integrated Systems & Solutions

    4     3     8     7

Information & Technology Services

    5     5     10     9
                       

Systems & IT Group

    21     20     42     40

Aeronautics

    13     13     25     25

Space Systems

    2     2     4     4
                       

Segments

    36     35     71     69

Unallocated corporate expense, net

    3     3     7     6
                       

Total amortization of purchased intangibles

  $ 39   $ 38   $ 78   $ 75
                       

 

17


LOCKHEED MARTIN CORPORATION

Consolidated Condensed Balance Sheet

Preliminary and Unaudited

(In millions)

 

    

JUNE 30,

2006

  

DECEMBER 31,

2005

Assets

     

Cash and cash equivalents

   $ 2,956    $ 2,244

Short-term investments

     430      429

Receivables

     4,367      4,579

Inventories

     1,880      1,921

Other current assets

     1,330      1,356
             

Total current assets

     10,963      10,529

Property, plant and equipment, net

     3,891      3,924

Goodwill

     8,827      8,447

Purchased intangibles, net

     525      560

Prepaid pension asset

     1,269      1,360

Other assets

     2,961      2,924
             

Total assets

   $ 28,436    $ 27,744
             

Liabilities and Stockholders’ Equity

     

Accounts payable

   $ 1,935    $ 1,998

Customer advances and amounts in excess of costs incurred

     4,784      4,331

Other accrued expenses

     3,143      2,897

Current maturities of long-term debt

     41      202
             

Total current liabilities

     9,903      9,428

Long-term debt

     4,746      4,784

Accrued pension liabilities

     2,441      2,097

Other postretirement and other noncurrent liabilities

     3,688      3,568

Stockholders’ equity

     7,658      7,867
             

Total liabilities and stockholders’ equity

   $ 28,436    $ 27,744
             

 

18


LOCKHEED MARTIN CORPORATION

Consolidated Condensed Statement of Cash Flows

Preliminary and Unaudited

(In millions)

 

     SIX MONTHS ENDED JUNE 30,  
     2006     2005  

Operating Activities

    

Net earnings

   $ 1,171     $ 830  

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation and amortization

     284       258  

Amortization of purchased intangibles

     78       75  

Changes in operating assets and liabilities:

    

Receivables

     269       (124 )

Inventories

     44       107  

Accounts payable

     (81 )     194  

Customer advances and amounts in excess of costs incurred

     453       544  

Other

     580       361  
                

Net cash provided by operating activities

     2,798       2,245  
                

Investing Activities

    

Expenditures for property, plant and equipment

     (263 )     (208 )

Purchases of short-term investments

     (1 )     (18 )

Acquisitions of businesses / investments in affiliated companies

     (474 )     (413 )

Divestitures of businesses / investments in affiliated companies

     156       803  

Other

     50       3  
                

Net cash (used for) / provided by investing activities

     (532 )     167  
                

Financing Activities

    

Common stock activity, net

     (1,093 )     (149 )

Common stock dividends

     (261 )     (222 )

Repayments of long-term debt

     (200 )     (39 )
                

Net cash used for financing activities

     (1,554 )     (410 )
                

Net increase in cash and cash equivalents

     712       2,002  

Cash and cash equivalents at beginning of period

     2,244       1,060  
                

Cash and cash equivalents at end of period

   $ 2,956     $ 3,062  
                

 

19


LOCKHEED MARTIN CORPORATION

Consolidated Condensed Statement of Stockholders’ Equity

Preliminary and Unaudited

(In millions)

 

     Common
Stock
    Additional
Paid-In
Capital
    Retained
Earnings
    Unearned
Compensation
    Other
Comprehensive
Loss
    Total
Stockholders’
Equity
 

Balance at January 1, 2006

   $ 432     $ 1,724     $ 7,278     $ (14 )   $ (1,553 )   $ 7,867  

Net earnings

         1,171           1,171  

Common stock dividends (a)

         (389 )         (389 )

Stock-based awards and ESOP activity

     12       680         14         706  

Repurchases of common stock

     (22 )     (1,568 )           (1,590 )

Other comprehensive loss

             (107 )     (107 )
                                                

Balance at June 30, 2006

   $ 422     $ 836     $ 8,060     $ —       $ (1,660 )   $ 7,658  
                                                

(a) Includes dividends ($0.30 per share) declared and paid in the first and second quarters. This amount also includes a dividend ($0.30 per share) that was declared on June 22, 2006 and is payable on September 29, 2006 to shareholders of record on September 1, 2006.

 

20


LOCKHEED MARTIN CORPORATION

Operating Data

Preliminary and Unaudited

(In millions)

 

    

JUNE 30,

2006

  

DECEMBER 31,

2005

Backlog

     

Systems & IT Group:

     

Electronic Systems

   $ 21,110    $ 19,932

Integrated Systems & Solutions

     4,665      3,974

Information & Technology Services

     5,215      5,414
             

Systems & IT Group

     30,990      29,320

Aeronautics

     26,760      29,580

Space Systems

     15,930      15,925
             

Total

   $ 73,680    $ 74,825
             

 

     THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
     2006    2005    2006    2005

Deliveries

           

F-16

   12    16    30    30

F-22

   9    4    15    7

C-130J

   3    3    5    7

Launches

           

Atlas

   1    —      2    2

Proton

   —      1    1    2

 

21