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Lockheed Martin Corp. Reports Operating Results (10-Q)

October 25, 2012 | About:
10qk

10qk

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Lockheed Martin Corp. (LMT) filed Quarterly Report for the period ended 2012-09-30.

Lockheed Martin Corporation has a market cap of $30.14 billion; its shares were traded at around $93.54 with a P/E ratio of 10.3 and P/S ratio of 0.7. The dividend yield of Lockheed Martin Corporation stocks is 4.3%. Lockheed Martin Corporation had an annual average earning growth of 13.5% over the past 10 years. GuruFocus rated Lockheed Martin Corporation the business predictability rank of 4.5-star.

Highlight of Business Operations:

Net sales for the quarter ended September 30, 2012 were $11.9 billion, a $250 million, or 2%, decrease over the quarter ended September 25, 2011 net sales of $12.1 billion. The decrease was due to a $185 million, or 2%, decrease in product sales and a $65 million, or 3%, decrease in services sales. Net sales for the nine months ended September 30, 2012 were $35.1 billion, a $795 million, or 2%, increase over the nine months ended September 25, 2011 net sales of $34.3 billion. The increase was due to an $893 million, or 3%, increase in product sales, partially offset by a $98 million, or 1%, decrease in services sales.

Cost of sales for the quarter ended September 30, 2012 were $10.9 billion, a $235 million, or 2%, decrease over the quarter ended September 25, 2011 cost of sales of $11.1 billion. The decrease was due to a $254 million decrease in cost of product sales and reduction in severance charges of $16 million, partially offset by a $19 million increase in other unallocated costs and a $16 million increase in cost of services sales as further discussed in the following sections. Cost of sales for the nine months ended September 30, 2012 were $31.9 billion, a $373 million, or 1%, increase over the nine months ended September 25, 2011 cost of sales of $31.6 billion. The increase was due to a $483 million increase in cost of product sales and a $58 million increase in other unallocated costs, partially offset by a reduction in severance charges of $113 million and a $55 million decrease in cost of services sales and as further discussed in the following sections.

During the quarter and nine months ended September 25, 2011, we recorded severance charges totaling $39 million and $136 million, net of state tax benefits. The severance charges recorded in the third quarter of 2011 related to our IS&GS business segment and Corporate Headquarters. In the second quarter of 2011, we recorded severance charges totaling $97 million, net of state tax benefits, of which $49 million and $48 million related to our Aeronautics and Space Systems business segments. These charges reduced our net earnings by $25 million ($.07 per share) and by $88 million ($.25 per share) for the quarter and nine months ended September 25, 2011. We recovered a significant amount of these charges through the pricing of our products and services to the U.S. Government and other customers. Space Systems paid and recovered most of its severance charges in the second half of 2011, Aeronautics paid and recovered most of its severance charges during the quarter ended March 25, 2012, and IS&GS paid and recovered most of its severance charges during the first half of 2012.

Operating profit for the Aeronautics business segment increased $85 million, or 7%, during the nine months ended September 30, 2012, compared to the nine months ended September 25, 2011. The increase in operating profit was attributable to approximately $100 million for F-16 programs driven by increased risk retirements and higher aircraft deliveries, an increase of about $95 million for C-130 programs due to risk retirements on international production contracts, an increase of about $50 million for F-35 LRIP contracts due to increased risk retirements and higher production volume, an increase of about $40 million due to increased risk retirements on various programs, and a reduction of purchased intangible amortization expense on F-16 contracts of about $40 million. Partially offsetting the increases were lower operating profit of approximately $95 million for other sustainment activities principally due to declines in risk retirements; a decline of about $90 million for the F-35 development contract primarily due to the inception-to-date effect of reducing the profit booking rate in the second quarter of 2012; and a decrease of approximately $50 million for the F-22 programs due to lower volume and risk retirements partially offset by a resolution of a contractual matter in the second quarter of 2012. Adjustments not related to volume, including net profit rate adjustments and the resolution of the contractual matter described above, were approximately $5 million higher in the nine months ended September 30, 2012, compared to the nine months ended September 25, 2011.

Net sales for the IS&GS business segment decreased $31 million, or 1%, during the quarter ended September 30, 2012 and $188 million, or 3%, during the nine months ended September 30, 2012, compared to the quarter and nine months ended September 25, 2011. The decreases in net sales during both periods were attributable to declines of approximately $40 million during the quarter ended September 30, 2012 and $100 million during the nine months ended September 30, 2012 from the completion of the ODIN program, decreases of about $30 million during the quarter ended September 30, 2012 and $150 million during the nine months ended September 30, 2012 due to cessation of the AMF JTRS program, and declines of about $30 million during the quarter ended September 30, 2012 and $85 million during the nine months ended September 30, 2012 from the completion of the U.K. Census program in the fourth quarter of 2011. Additionally, net sales also decreased during the nine months ended September 30, 2012 by about $75 million due to lower volume on the Hanford program as a result of decreased funding under the American Recovery and Reinvestment Act of 2009. Partially offsetting the decreases were increases of approximately $70 million during the quarter ended September 30, 2012 and $220 million during the nine months ended September 30, 2012 as a result of increased activity for other numerous programs, primarily federal cyber security programs and PTDS operational support, as well as net sales from an acquisition in the fourth quarter of 2011.

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