SEC Filing | Lockheed Martin Corp

View:

lmt-20220626

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 26, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 1-11437

LOCKHEED MARTIN CORPORATION

(Exact name of registrant as specified in its charter)

Maryland

52-1893632

(State or other jurisdiction of
incorporation or organization)

(I.R.S. 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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1 par value	LMT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non–accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 265,152,217 shares of our common stock, $1 par value per share, outstanding as of July 15, 2022.

Table of Contents

Lockheed Martin Corporation

Form 10-Q

For the Quarterly Period Ended June 26, 2022

Table of Contents


			Page

PART I. FINANCIAL INFORMATION

	ITEM 1.	Financial Statements (Unaudited)

		Consolidated Statements of Earnings for the Quarters and Six Months Ended June 26, 2022 and June 27, 2021	3

		Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended June 26, 2022 and June 27, 2021	4

		Consolidated Balance Sheets as of June 26, 2022 and December 31, 2021	5

		Consolidated Statements of Cash Flows for the Six Months Ended June 26, 2022 and June 27, 2021	6

		Consolidated Statements of Equity for the Quarters Ended June 26, 2022 and June 27, 2021	7

		Consolidated Statements of Equity for the Six Months Ended June 26, 2022 and June 27, 2021	8

		Notes to Consolidated Financial Statements	9

		Report of Independent Registered Public Accounting Firm	27

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	48

	ITEM 4.	Controls and Procedures	48

PART II. OTHER INFORMATION

	ITEM 1.	Legal Proceedings	50

	ITEM 1A.	Risk Factors	50

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

	ITEM 6.	Exhibits	53

SIGNATURE			54

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Lockheed Martin Corporation

Consolidated Statements of Earnings

(unaudited; in millions, except per share data)



	Quarters Ended				Six Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Net sales
Products	$	12,761	$	14,258	$	25,255	$	28,011
Services	2,685		2,771		5,155		5,276
Total net sales	15,446		17,029		30,410		33,287
Cost of sales
Products	(11,395)		(12,866)		(22,556)		(25,147)
Services	(2,362)		(2,438)		(4,537)		(4,668)
Severance and restructuring charges	—		—		—		(36)
Other unallocated, net	267		426		548		901
Total cost of sales	(13,490)		(14,878)		(26,545)		(28,950)
Gross profit	1,956		2,151		3,865		4,337
Other income, net	7		41		31		37
Operating profit	1,963		2,192		3,896		4,374
Interest expense	(141)		(142)		(276)		(282)
Non-service FAS pension (expense) income	(1,331)		94		(1,191)		187


Other non-operating (expense) income, net	(161)		26		(38)		102
Earnings before income taxes	330		2,170		2,391		4,381
Income tax expense	(21)		(355)		(349)		(729)


Net earnings	$	309	$	1,815	$	2,042	$	3,652

Earnings per common share
Basic	$	1.16	$	6.54	$	7.65	$	13.13



Diluted	$	1.16	$	6.52	$	7.62	$	13.08




Cash dividends paid per common share	$	2.80	$	2.60	$	5.60	$	5.20

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

Lockheed Martin Corporation

Consolidated Statements of Comprehensive Income

(unaudited; in millions)



	Quarters Ended				Six Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Net earnings	$	309	$	1,815	$	2,042	$	3,652
Other comprehensive income, net of tax
Postretirement benefit plans
Net other comprehensive income recognized during the period, net of tax of $461 million	1,698		—		1,698		—
Amounts reclassified from accumulated other comprehensive loss	47		140		95		280
Pension settlement charge, net of tax of $314 million	1,156		—		1,156		—
Other, net	(90)		31		(111)		4
Other comprehensive income, net of tax	2,811		171		2,838		284
Comprehensive income	$	3,120	$	1,986	$	4,880	$	3,936

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

Lockheed Martin Corporation

Consolidated Balance Sheets

(in millions, except par value)


	June 26, 2022		December 31, 2021
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,775	$	3,604
Receivables, net	3,401		1,963
Contract assets	11,753		10,579
Inventories	3,431		2,981
Other current assets	613		688
Total current assets	20,973		19,815
Property, plant and equipment, net	7,569		7,597
Goodwill	10,794		10,813
Intangible assets, net	2,584		2,706
Deferred income taxes	2,680		2,290
Other noncurrent assets	7,158		7,652
Total assets	$	51,758	$	50,873
Liabilities and equity
Current liabilities
Accounts payable	$	2,309	$	780
Salaries, benefits and payroll taxes	2,935		3,108
Contract liabilities	8,077		8,107

Other current liabilities	3,158		2,002
Total current liabilities	16,479		13,997
Long-term debt, net	11,644		11,670
Accrued pension liabilities	5,808		8,319
Other noncurrent liabilities	6,395		5,928
Total liabilities	40,326		39,914
Stockholders’ equity
Common stock, $1 par value per share	264		271
Additional paid-in capital	—		94
Retained earnings	19,336		21,600
Accumulated other comprehensive loss	(8,168)		(11,006)
Total stockholders’ equity	11,432		10,959


Total liabilities and equity	$	51,758	$	50,873

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

Lockheed Martin Corporation

Consolidated Statements of Cash Flows

(unaudited; in millions)


	Six Months Ended
	June 26, 2022		June 27, 2021
Operating activities
Net earnings	$	2,042	$	3,652
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	672		670
Stock-based compensation	134		127


Deferred income taxes	(1,172)		24
Pension settlement charge	1,470		—
Severance and restructuring charges	—		36

Changes in assets and liabilities
Receivables, net	(1,438)		(633)
Contract assets	(1,174)		(1,880)
Inventories	(450)		426
Accounts payable	1,522		743
Contract liabilities	(30)		(166)
Income taxes	1,065		33
Qualified defined benefit pension plans	(231)		(133)
Other, net	331		117
Net cash provided by operating activities	2,741		3,016
Investing activities
Capital expenditures	(572)		(599)
Other, net	(11)		210
Net cash used for investing activities	(583)		(389)
Financing activities
Issuance of long-term debt, net of related costs	2,267		—
Repayments of long-term debt	(2,250)		—
Repurchases of common stock	(2,356)		(1,500)
Dividends paid	(1,511)		(1,460)

Other, net	(137)		(82)
Net cash used for financing activities	(3,987)		(3,042)
Net change in cash and cash equivalents	(1,829)		(415)
Cash and cash equivalents at beginning of period	3,604		3,160
Cash and cash equivalents at end of period	$	1,775	$	2,745

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

Lockheed Martin Corporation

Consolidated Statements of Equity

For the Quarters Ended June 26, 2022 and June 27, 2021

(unaudited; in millions)



	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiary		Total Equity
Balance at March 27, 2022	$	265	$	—	$	20,716	$	(10,979)	$	10,002	$	—	$	10,002
Net earnings	—		—		309		—		309		—		309
Other comprehensive income, net of tax	—		—		—		2,811		2,811		—		2,811
Dividends declared	—		—		(1,497)		—		(1,497)		—		(1,497)
Repurchases of common stock	(2)		(179)		(192)		—		(373)		—		(373)
Stock-based awards, ESOP activity and other	1		179		—		—		180		—		180
Balance at June 26, 2022	$	264	$	—	$	19,336	$	(8,168)	$	11,432	$	—	$	11,432

Balance at March 28, 2021	$	278	$	65	$	21,977	$	(16,008)	$	6,312	$	21	$	6,333
Net earnings	—		—		1,815		—		1,815		—		1,815
Other comprehensive income, net of tax	—		—		—		171		171		—		171
Dividends declared	—		—		(1,454)		—		(1,454)		—		(1,454)
Repurchases of common stock	(2)		(121)		(377)		—		(500)		—		(500)
Stock-based awards, ESOP activity and other	—		178		—		—		178		—		178

Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(13)		(13)
Balance at June 27, 2021	$	276	$	122	$	21,961	$	(15,837)	$	6,522	$	8	$	6,530

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

Lockheed Martin Corporation

Consolidated Statements of Equity

For the Six Months Ended June 26, 2022 and June 27, 2021

(unaudited; in millions)



	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiary		Total Equity
Balance at December 31, 2021	$	271	$	94	$	21,600	$	(11,006)	$	10,959	$	—	$	10,959
Net earnings	—		—		2,042		—		2,042		—		2,042
Other comprehensive income, net of tax	—		—		—		2,838		2,838		—		2,838
Dividends declared	—		—		(2,246)		—		(2,246)		—		(2,246)
Repurchases of common stock	(8)		(305)		(2,060)		—		(2,373)		—		(2,373)
Stock-based awards, ESOP activity and other	1		211		—		—		212		—		212
Balance at June 26, 2022	$	264	$	—	$	19,336	$	(8,168)	$	11,432	$	—	$	11,432

Balance at December 31, 2020	$	279	$	221	$	21,636	$	(16,121)	$	6,015	$	23	$	6,038
Net earnings	—		—		3,652		—		3,652		—		3,652
Other comprehensive income, net of tax	—		—		—		284		284		—		284
Dividends declared	—		—		(2,179)		—		(2,179)		—		(2,179)
Repurchases of common stock	(4)		(348)		(1,148)		—		(1,500)		—		(1,500)
Stock-based awards, ESOP activity and other	1		249		—		—		250		—		250
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(15)		(15)
Balance at June 27, 2021	$	276	$	122	$	21,961	$	(15,837)	$	6,522	$	8	$	6,530

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited)

NOTE 1 - BASIS OF PRESENTATION

We prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, these consolidated financial statements reflect all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations, financial condition, and cash flows for the interim periods presented. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates. Significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales and cost recognition; postretirement benefit plans; environmental liabilities and assets for the portion of environmental costs that are probable of future recovery; evaluation of goodwill, intangible assets, investments and other assets for impairment; income taxes including deferred tax assets; fair value measurements; and contingencies. The consolidated financial statements include the accounts of subsidiaries we control and variable interest entities if we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation.

We close our books and records on the last Sunday of the interim calendar quarter, which was on June 26 for the second quarter of 2022 and June 27 for the second quarter of 2021, to align our financial closing with our business processes. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods as our fiscal year ends on December 31.

The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the full year or future periods. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K).

NOTE 2 - EARNINGS PER COMMON SHARE

The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions):


	Quarters Ended		Six Months Ended
	June 26, 2022	June 27, 2021	June 26, 2022	June 27, 2021
Weighted average common shares outstanding for basic computations	265.8	277.4	267.0	278.1
Weighted average dilutive effect of equity awards	0.9	1.0	0.9	1.0
Weighted average common shares outstanding for diluted computations	266.7	278.4	267.9	279.1

We compute basic and diluted earnings per common share by dividing net earnings by the respective weighted average number of common shares outstanding for the periods presented. Our calculation of diluted earnings per common share also includes the dilutive effects for the assumed vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs) based on the treasury stock method. There were no significant anti-dilutive equity awards during the quarters and six months ended June 26, 2022 and June 27, 2021. Basic and diluted weighted average common shares outstanding have decreased in 2022 and 2021 due to share repurchases. See “Note 9 - Stockholders’ Equity” for more information.

Table of Contents

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 3 - INFORMATION ON BUSINESS SEGMENTS

Overview

We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We organize our business segments based on the nature of products and services offered.

Selected Financial Data by Business Segment

Net sales and operating profit of our business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.

Summary Operating Results

Summary operating results for each of our business segments were as follows (in millions):



	Quarters Ended				Six Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Net sales
Aeronautics	$	5,862	$	6,666	$	12,263	$	13,053
Missiles and Fire Control	2,747		2,944		5,199		5,693
Rotary and Mission Systems	4,012		4,242		7,564		8,349
Space	2,825		3,177		5,384		6,192
Total net sales	$	15,446	$	17,029	$	30,410	$	33,287
Operating profit
Aeronautics	$	612	$	572	$	1,291	$	1,265
Missiles and Fire Control	418		401		802		797
Rotary and Mission Systems	403		458		751		891
Space	268		335		513		562
Total business segment operating profit	1,701		1,766		3,357		3,515
Unallocated items
FAS/CAS pension operating adjustment	425		489		851		978


Severance and restructuring charges	—		—		—		(36)
Other, net	(163)		(63)		(312)		(83)
Total unallocated items	262		426		539		859
Total consolidated operating profit	$	1,963	$	2,192	$	3,896	$	4,374
Intersegment sales
Aeronautics	$	58	$	52	$	118	$	105
Missiles and Fire Control	161		167		317		296
Rotary and Mission Systems	453		448		908		926
Space	99		92		182		174
Total intersegment sales	$	771	$	759	$	1,525	$	1,501
Amortization of purchased intangibles
Aeronautics	$	(1)	$	(1)	$	(1)	$	(1)
Missiles and Fire Control	—		—		(1)		(1)
Rotary and Mission Systems	(58)		(58)		(116)		(116)
Space	(3)		(22)		(6)		(44)
Total amortization of purchased intangibles	$	(62)	$	(81)	$	(124)	$	(162)

Table of Contents

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Unallocated Items

Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, changes in the fair value of strategic investments in companies made by our Lockheed Martin Ventures Fund, stock-based compensation expense, changes in the fair value of investments held in a trust for deferred compensation plans, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 10 - Other” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

FAS/CAS Pension Operating Adjustment

We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each of our business segment’s net sales and cost of sales. Our consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with FAS requirements under U.S. GAAP. The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension (expense) income and total CAS pension cost. The non-service FAS pension (expense) income components are included in non-service FAS pension (expense) income in our consolidated statements of earnings. As a result, to the extent that CAS pension cost exceeds the service cost component of FAS pension (expense) income, we have a favorable FAS/CAS pension operating adjustment.

The total FAS/CAS pension adjustment for the quarters and six months ended June 26, 2022 and June 27, 2021, including the service and non-service cost components of FAS pension (expense) income for our qualified defined benefit pension plans, were as follows (in millions):


	Quarters Ended				Six Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022			June 27, 2021
Total FAS (expense) income and CAS cost
Total FAS pension (expense) income	$	(1,355)	$	67		$	(1,239)	$	133
Less: CAS pension cost	449		516			899		1,032