Lockheed Martin Reports First Quarter 2019 Results

BETHESDA, Md., April 23, 2019 /PRNewswire/ -- Lockheed Martin Corporation (NYSE: LMT) today reported first quarter 2019 net sales of $14.3 billion, compared to $11.6 billion in the first quarter of 2018. Net earnings in the first quarter of 2019 were $1.7 billion, or $5.99 per share, compared to $1.2 billion, or $4.02 per share, in the first quarter of 2018. Cash from operations in the first quarter of 2019 was $1.7 billion, compared to cash from operations of $632 million in the first quarter of 2018.

"The corporation had strong performance in the first quarter which has allowed us to increase our full year financial guidance for sales, profit, earnings per share and cash," said Lockheed Martin Chairman, President and CEO Marillyn Hewson. "Our differentiated portfolio and record backlog position us well for continued growth, and we remain focused on delivering innovative technologies and solutions for our customers, and long-term value creation for stockholders."

Summary Financial Results

The following table presents the corporation's summary financial results.


         
     (in millions, except per share data)                                                                                             
          
         Quarters Ended


                                                                                                                                     March 31,                          March 25,
                                                                                                                                          2019                                2018



         
     
              Net sales                                                                                                                $
        
             14,336                   $
        11,635





         
     
              Business segment operating profit(1)                                                                                      $
        
             1,715                    $
        1,310


         
     Unallocated items


         
     FAS/CAS operating adjustment                                                                                                    512                                      451


         
     Other, net(2)                                                                                                                    56                                     (36)



         
     Total unallocated items                                                                                                         568                                      415



         
     
              Consolidated operating profit                                                                                             $
        
             2,283                    $
        1,725





         
     
              Net earnings(3)                                                                                                           $
        
             1,704                    $
        1,157





         
     
              Diluted earnings per share                                                                                                 $
        
             5.99                     $
        4.02





         
     
              Cash generated from operations4                                                                                           $
        
             1,663                      $
        632





     
     1   Business segment operating profit is a non-GAAP measure. See the Non-GAAP Financial Measures section of this news release
            for more information.


     
     2   In the first quarter of 2019, the corporation recognized a previously deferred non-cash gain of $51 million ($38 million,
            or $0.13 per share, after tax) related to properties sold in 2015 as a result of completing its remaining obligations.


     
     3   Net earnings in the first quarter of 2019 include benefits of $75 million, or $0.26 per share, from additional tax
            deductions, based on proposed tax regulations released on March 4, 2019, which clarified that foreign military sales
            qualify as foreign derived intangible income. Approximately $65 million, or $0.23 per share, of the total benefit was
            recorded discretely because it relates to the prior year.


     
     4   Cash from operations in the first quarter of 2018 included cash contributions of $1.5 billion made to the corporation's
            qualified defined benefit pension plans and net tax refunds of $850 million.

2019 Financial Outlook

The following table and other sections of this news release contain forward-looking statements, which are based on the corporation's current expectations. Actual results may differ materially from those projected. It is the corporation's typical practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, changes in law, or new accounting standards until such items have been consummated, enacted or adopted. For additional factors that may impact the corporation's actual results, refer to the "Forward-Looking Statements" section in this news release.


            (in millions, except per share
             data)                                          Current Update           January 2019





          
     Net sales                             
       
       $56,750 - $58,250 
       $55,750 - $57,250




            Business segment operating
             profit                                 
       
       $6,100 - $6,250   
       $6,000 - $6,150




            Net FAS/CAS pension
             adjustment(1)                                     ~$1,475       
       ~$1,475




            Diluted earnings per share(2)           
       
       $20.05 - $20.35   
       $19.15 - $19.45




          
     Cash from operations                               >=$7,500      
       >=$7,400





       1   The net FAS/CAS pension adjustment
             above is presented as a single
             amount and includes expected 2019
             U.S. Government cost accounting
             standards (CAS) pension cost of
             approximately $2,565 million and
             expected financial accounting
             standards (FAS) pension expense of
             approximately $1,090 million. CAS
             pension cost and the service cost
             component of FAS pension expense is
             included in operating profit as part
             of cost of sales. The non-service
             cost component of FAS pension
             expense is included in other non-
             operating expense, net in the
             corporation's consolidated
             statements of earnings. For
             additional detail on the
             corporation's FAS/CAS pension
             adjustment see the supplemental
             table included at the end of this
             news release.



       2   Although the corporation typically
             does not update its outlook for
             proposed changes in law, the above
             includes the effect of recently
             proposed tax regulations confirming
             that foreign military sales (FMS)
             qualify for tax deductions for
             foreign derived intangible income.
             Even though the proposed regulations
             are still subject to public comment,
             the corporation believes
             incorporating the effect of the
             proposed regulations yields more
             accurate disclosure of the company's
             expectations because the proposed
             regulations describe the tax
             treatment of FMS sales in accordance
             with the corporation's analysis of
             the Internal Revenue Code.



    ---

Cash Activities

The corporation's cash activities in the first quarter of 2019 consisted of the following:

    --  paying cash dividends of $638 million, compared to $586 million in the
        first quarter of 2018;
    --  repurchasing 1.0 million shares for $281 million, compared to 0.9
        million shares for $300 million in the first quarter of 2018;
    --  making capital expenditures of $284 million, compared to $216 million in
        the first quarter of 2018; and
    --  making net repayments of $200 million for commercial paper, compared to
        no net repayments in the first quarter of 2018.

Segment Results

The corporation operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the corporation's business segments and reconciles these amounts to the corporation's consolidated financial results.


     
     (in millions)                                                         Quarters Ended


                                                        March 31,                           March 25,
                                                             2019                                 2018



     
     
                Net sales


     
     Aeronautics                                                 $
        
              5,584                     $
        4,398


       Missiles and Fire Control                            2,350                                      1,677


       Rotary and Mission Systems                           3,762                                      3,223


     
     Space                                                2,640                                      2,337



                    Total net sales                               $
        
              14,336                    $
        11,635





                    Operating profit


     
     Aeronautics                                                   $
        
              585                       $
        474


       Missiles and Fire Control                              417                                        261


       Rotary and Mission Systems                             379                                        311


     
     Space                                                  334                                        264



                    Total business segment operating
                     profit                                 1,715                                      1,310


     
     Unallocated items


       FAS/CAS operating adjustment                           512                                        451


     
     Other, net                                              56                                       (36)



     
     Total unallocated items                                568                                        415



                    Total consolidated operating profit            $
        
              2,283                     $
        1,725

Net sales and operating profit of the corporation's business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Operating profit of the corporation's business segments includes the corporation's share of earnings or losses from equity method investees as the operating activities of the investees are closely aligned with the operations of its business segments.

Operating profit of the corporation's business segments also excludes the FAS/CAS 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, compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from significant divestitures, and other miscellaneous corporate activities.

The corporation recovers CAS pension cost through the pricing of its products and services on U.S. Government contracts and, therefore, recognizes CAS pension cost in each of its business segment's net sales and cost of sales. The corporation's consolidated financial statements must present pension and other postretirement benefit plan expense calculated in accordance with U.S. generally accepted accounting principles (referred to as FAS pension expense). The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension expense and CAS pension cost. The non-service FAS pension cost component is included in other non?operating expense, net on the corporation's consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension expense (both service and non-service).

Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. In addition, comparability of the corporation's segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the corporation's contracts for which it recognizes revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.

Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.

The corporation's consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 33 percent of total segment operating profit in the first quarter of 2019 as compared to 32 percent in the first quarter of 2018.

Aeronautics


     
     (in millions)                                    Quarters Ended


                                     March 31,                         March 25,
                                          2019                               2018



                    Net sales                  $
       
              5,584                   $
       4,398


                    Operating profit             $
       
              585                     $
       474


                    Operating margin      10.5
                                                                                     %
                                             %                                    10.8

Aeronautics' net sales in the first quarter of 2019 increased $1.2 billion, or 27 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $910 million for the F-35 program due to increased volume on production, sustainment and development programs; about $100 million for classified development activities due to higher volume; and about $70 million for the F-22 program due to higher volume on modernization and sustainment programs.

Aeronautics' operating profit in the first quarter of 2019 increased $111 million, or 23 percent, compared to the same period in 2018. Operating profit increased approximately $105 million for the F-35 program due to increased volume on production contracts and higher risk retirements on production and sustainment programs. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were comparable in the first quarter of 2019 to the same period in 2018.

Missiles and Fire Control


     
     (in millions)                                    Quarters Ended


                                     March 31,                         March 25,
                                          2019                               2018



                    Net sales                  $
       
              2,350                   $
       1,677


                    Operating profit             $
       
              417                     $
       261


                    Operating margin      17.7
                                                                                     %
                                             %                                    15.6

MFC's net sales in the first quarter of 2019 increased $673 million, or 40 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $295 million for tactical and strike missiles programs due to increased volume (primarily precision fires, classified programs and new hypersonic missile programs); about $220 million for integrated air and missile defense programs due to contract mix and increased volume (primarily Terminal High Altitude Area Defense (THAAD) and Patriot Advanced Capability-3 (PAC-3)); and about $140 million for sensors and global sustainment programs due to increased volume (primarily Apache and Special Operations Forces Global Logistics Support Services).

MFC's operating profit in the first quarter of 2019 increased $156 million, or 60 percent, compared to the same period in 2018. Operating profit increased approximately $75 million for integrated air and missile defense programs due to contract mix, higher volume and higher risk retirements on international programs (primarily PAC-3 and THAAD); and about $55 million for tactical and strike missiles programs due to higher risk retirements and higher volume (primarily precision fires). Adjustments not related to volume, including net profit booking rate adjustments, were about $50 million higher in the first quarter of 2019 compared to the same period in 2018.

Rotary and Mission Systems


     
     (in millions)                                    Quarters Ended


                                     March 31,                         March 25,
                                          2019                               2018



                    Net sales                  $
       
              3,762                  $
       3,223


                    Operating profit             $
       
              379                    $
       311


                    Operating margin      10.1
                                                                                    %
                                             %                                    9.6

RMS' net sales in the first quarter of 2019 increased $539 million, or 17 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $295 million for integrated warfare systems and sensors (IWSS) programs due to higher volume (primarily Radar Surveillance Systems and Multi Mission Surface Combatant) and about $170 million for Sikorsky helicopter programs due to higher volume (primarily the combat rescue helicopter program, military aircraft services, and mission systems programs).

RMS' operating profit in the first quarter of 2019 increased $68 million, or 22 percent, compared to the same period in 2018. Operating profit increased approximately $30 million for IWSS programs due to higher risk retirements and higher volume (primarily Radar Surveillance Systems), partially offset by a $50 million charge for a ground-based radar program; about $15 million for Sikorsky helicopter programs primarily due to higher risk retirements and higher volume for mission systems programs, partially offset by lower margin contracts for helicopter development programs. The increase in operating profit also included an increase of about $15 million for C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower charges for various programs. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were about $30 million higher in the first quarter of 2019 compared to the same period in 2018.

Space


     
     (in millions)                                    Quarters Ended


                                     March 31,                         March 25,
                                          2019                               2018



                    Net sales                  $
       
              2,640                   $
       2,337


                    Operating profit             $
       
              334                     $
       264


                    Operating margin      12.7
                                                                                     %
                                             %                                    11.3

Space's net sales in the first quarter of 2019 increased $303 million, or 13 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of $260 million for government satellite programs due to higher volume (primarily Next Generation Overhead Persistent Infrared (Next Gen OPIR); Global Positioning System (GPS) III; government satellite services; and Advanced Extremely High Frequency (AEHF)); and about $50 million for the Orion program due to higher volume.

Space's operating profit in the first quarter of 2019 increased $70 million, or 27 percent, compared to the same period in 2018. Operating profit increased approximately $65 million for government satellite programs due to higher risk retirements (primarily AEHF) and higher volume (primarily GPS III; government satellite services; and AEHF); and about $15 million for the Orion program due to higher risk retirements and higher volume. These increases were partially offset by a decrease of approximately $20 million due to lower equity earnings for ULA. Adjustments not related to volume, including net profit booking rate adjustments, were about $70 million higher in the first quarter of 2019, compared to the same period in 2018.

Total equity earnings recognized by Space (primarily ULA) represented approximately $65 million, or 19 percent, of Space's operating profit in the first quarter of 2019, compared to approximately $85 million, or 32 percent, in the first quarter of 2018.

Income Taxes

The corporation's effective income tax rate was 12.4 percent in the first quarter of 2019, compared to 14.9 percent in the first quarter of 2018. The rate for the first quarter of 2019 benefited from additional tax deductions based on proposed tax regulations released on March 4, 2019, which clarified that foreign military sales qualify for foreign derived intangible income treatment. Approximately $65 million, or $0.23 per share, of this benefit was recorded discretely because it relates to the prior year. The rates for both periods benefited from tax deductions for dividends paid to the corporation's defined contribution plans with an employee stock ownership plan feature, tax deductions for foreign derived intangible income related to direct commercial sales, tax deductions for employee equity awards, and the research and development tax credit.

Use of Non-GAAP Financial Measures

This news release contains the following non-generally accepted accounting principles (non-GAAP) financial measures (as defined by U.S. Securities and Exchange Commission Regulation G). While the corporation believes that these non-GAAP financial measures may be useful in evaluating the financial performance of Lockheed Martin, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP. In addition, the corporation's definitions for non-GAAP financial measures may differ from similarly titled measures used by other companies or analysts.

Business segment operating profit represents the total earnings from the corporation's business segments before unallocated income and expense. This measure is used by the corporation's senior management in evaluating the performance of its business segments and is a performance goal in the corporation's annual incentive plan. Business segment operating margin is calculated by dividing business segment operating profit by sales. The table below reconciles the non-GAAP measure business segment operating profit with the most directly comparable GAAP financial measure, consolidated operating profit.


          
     (in millions)                                         2019 Financial Outlook


                                                                      Current Update          January 2019





                         Business segment operating profit
                          (non-GAAP)                          
     
            $6,100 - $6,250 
     $6,000 - $6,150


            FAS/CAS operating adjustment(1)                               ~2,050         
     ~2,050


          
     Other, net                                                    ~(125)         
     ~(165)


                         Consolidated operating profit (GAAP) 
     
            $8,025 - $8,175 
     $7,885 - $8,035






       1   Refer to the supplemental table "Other
             Financial and Operating Information"
             included in this news release for a
             detail of the FAS/CAS operating
             adjustment, which excludes $575
             million of expected non-service cost
             that will be recorded in other non-
             operating expense, net.

    ---

Conference Call Information

Lockheed Martin Corporation will webcast live its first quarter 2019 earnings results conference call (listen-only mode) on Tuesday, April 23, 2019, at 11:00 a.m. ET. The live webcast and relevant financial charts will be available for download on the Lockheed Martin Investor Relations website at www.lockheedmartin.com/investor.

For additional information, visit our website: www.lockheedmartin.com.

About Lockheed Martin

Headquartered in Bethesda, Maryland, Lockheed Martin Corporation is a global security and aerospace company that employs approximately 105,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

Forward-Looking Statements

This news release contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on Lockheed Martin's current expectations and assumptions. The words "believe," "estimate," "anticipate," "project," "intend," "expect," "plan," "outlook," "scheduled," "forecast" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:

    --  the corporation's reliance on contracts with the U.S. Government, which
        are conditioned upon the availability of funding and can be terminated
        by the U.S. Government for convenience, and the corporation's ability to
        negotiate favorable contract terms;
    --  budget uncertainty; affordability initiatives; the risk of future
        sequestration under the Budget Control Act of 2011 or other budget cuts;
        the impact of any future government shutdowns (including the potential
        that the corporation works on unfunded contracts to preserve their cost
        and/or schedule); continuing delay in obtaining export approvals from
        the Department of State resulting from the prior shutdown and staffing
        shortages; or the potential that DoD funds are repurposed;
    --  risks related to the development, production, sustainment, performance,
        schedule, cost and requirements of complex and technologically advanced
        programs including the corporation's largest, the F-35 program;
    --  economic, industry, business and political conditions including their
        effects on governmental policy (including government actions to prevent
        the sale or delivery of the corporation's products, such as delays in
        obtaining Congressional approvals for exports requiring Congressional
        notification to the Kingdom of Saudi Arabia, the United Arab Emirates
        and Turkey and the Pentagon's decision to suspend the sales of F-35
        aircraft to Turkey), or other trade policies or sanctions (including
        potential sanctions on the Kingdom of Saudi Arabia);
    --  the corporation's success expanding into and doing business in adjacent
        markets and internationally; the differing risks posed by international
        sales, including those involving commercial relationships with
        unfamiliar customers and different cultures; its ability to recover
        investments, which is frequently dependent upon the successful operation
        of ventures that it does not control; and changes in foreign national
        priorities, and foreign government budgets;
    --  the competitive environment for the corporation's products and services,
        including increased pricing pressures, aggressive pricing in the absence
        of cost realism evaluation criteria, competition from outside the
        aerospace and defense industry, and increased bid protests;
    --  planned production rates for significant programs; compliance with
        stringent performance and reliability standards; materials availability;
    --  the performance and financial viability of key suppliers, teammates,
        ventures, venture partners, subcontractors and customers;
    --  the timing and customer acceptance of product deliveries;
    --  the corporation's ability to continue to innovate and develop new
        products and to attract and retain key personnel and transfer knowledge
        to new personnel; the impact of work stoppages or other labor
        disruptions;
    --  the impact of cyber or other security threats or other disruptions to
        the corporation's businesses;
    --  the corporation's ability to implement and continue and the timing and
        impact of capitalization changes such as share repurchases and dividend
        payments;
    --  timing and estimates regarding pension funding and the success of the
        corporation's efforts to reduce volatility of its outstanding pension
        obligations and to accelerate CAS cost recovery and recover certain
        associated costs from the U.S. Government;
    --  the corporation's ability to recover certain costs under U.S. Government
        contracts and changes in contract mix;
    --  the accuracy of the corporation's estimates and projections;
    --  movements in interest rates and other changes that may affect pension
        plan assumptions, equity, the level of the FAS/CAS adjustment and actual
        returns on pension plan assets;
    --  realizing the anticipated benefits of acquisitions or divestitures,
        ventures, teaming arrangements or internal reorganizations, and the
        corporation's efforts to increase the efficiency of its operations and
        improve the affordability of its products and services;
    --  risk of an impairment of goodwill and intangible assets, investments or
        other long-term assets, including the potential impairment of goodwill,
        intangible assets and inventory recorded as a result of the acquisition
        of the Sikorsky business and the potential further impairment of its
        equity investment in Advanced Military Maintenance, Repair and Overhaul
        Center LLC (AMMROC);
    --  the adequacy of the corporation's insurance and indemnities;
    --  the effect of changes in (or in the interpretation of) procurement and
        other regulations and policies affecting the corporation's industry,
        including export of its products from the U.S. and other countries, cost
        allowability or recovery, aggressive government positions with respect
        to the use and ownership of intellectual property and potential changes
        to the DoD's acquisition regulations relating to progress payments and
        performance-based payments and a preference for fixed-price contracts;
    --  the effect of changes in accounting, taxation, or export laws,
        regulations, and policies; and
    --  the outcome of legal proceedings, bid protests, environmental
        remediation efforts, government investigations or government allegations
        that the corporation has failed to comply with law, other contingencies
        and U.S. Government identification of deficiencies in the corporation's
        business systems.

These are only some of the factors that may affect the forward-looking statements contained in this news release. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see the corporation's filings with the U.S. Securities and Exchange Commission (SEC) including, but not limited to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in the corporation's Annual Report on Form 10-K for the year ended Dec. 31, 2018. The corporation's filings may be accessed through the Investor Relations page of its website, www.lockheedmartin.com/investor, or through the website maintained by the SEC at www.sec.gov.

The corporation's actual financial results likely will be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this news release speak only as of the date of its filing. Except where required by applicable law, the corporation expressly disclaims a duty to provide updates to forward-looking statements after the date of this news release to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this news release are intended to be subject to the safe harbor protection provided by the federal securities laws.



     
                Lockheed Martin Corporation



     
                Consolidated Statements of Earnings(1)



     
                (unaudited; in millions, except per share data)




                                                                                                                                                         Quarters Ended



                                                                                                                                                     
     
       March 31,     
     
      March 25,
                                                                                                                                                                    2019                2018






     
                Net sales                                                                                                                                     $14,336             $11,635



     
                Cost of sales                                                                                                                                (12,148)            (9,977)




     Gross profit                                                                                                                                                 2,188               1,658



     Other income, net(2)                                                                                                                                            95                  67




     
                Operating profit                                                                                                                                2,283               1,725



     Interest expense                                                                                                                                             (171)              (155)



     Other non-operating expense, net                                                                                                                             (167)              (210)




     Earnings before income taxes                                                                                                                                 1,945               1,360



     Income tax expense(3)                                                                                                                                        (241)              (203)




     
                Net earnings                                                                                                                                   $1,704              $1,157




        Effective tax rate                                                                                                                                         12.4
                                                                                                                                                                       %     14.9
            %




     
                Earnings per common share(3)



        Basic                                                                                                                                                     $6.03               $4.05



        Diluted                                                                                                                                                   $5.99               $4.02



     
                Weighted average shares outstanding



        Basic                                                                                                                                                     282.5               285.5



        Diluted                                                                                                                                                   284.3               287.9



     Common shares reported in stockholders' equity at end of period                                                                                                281                 284





     
                1  The corporation closes its books and records on the last Sunday of the calendar quarter to align its financial



        closing with its business processes, which was on March 31 for the first quarter of 2019 and March 25 for the



        first quarter of 2018. The consolidated financial statements and tables of financial information included herein are



        labeled based on that convention. This practice only affects interim periods, as the corporation's fiscal year ends on Dec. 31.



     
                2  In the first quarter of 2019, the corporation recognized a previously deferred non-cash gain of $51 million ($38 million,



        or $0.13 per share, after tax) related to properties sold in 2015 as a result of completing its remaining obligations.



     
                3  Net earnings in the first quarter of 2019 include benefits of $75 million, or $0.26 per share, from additional tax deductions,



        based on proposed tax regulations released on March 4, 2019, which clarified that foreign military sales qualify as foreign



        derived intangible income. Approximately $65 million, or $0.23 per share, of the total benefit was recorded discretely because



        it relates to prior year.


                 Lockheed Martin Corporation


                 Business Segment Summary
                  Operating Results


                 (unaudited; in millions)




                                                                              Quarters Ended



                                                                                 March 31,                                          March 25,                                        % Change
                                                                                        2019                                              2018



                 Net sales



     Aeronautics                                                                     $5,584                                            $4,398                                               27

                                                                                                                                                                                            %


      Missiles and Fire Control                                                        2,350                                             1,677                                               40

                                                                                                                                                                                            %


      Rotary and Mission Systems                                                       3,762                                             3,223                                               17

                                                                                                                                                                                            %



     Space                                                                            2,640                                             2,337                                               13

                                                                                                                                                                                            %



                      Total net sales                                                $14,336                                           $11,635                                               23

                                                                                                                                                                                            %





                 Operating profit



     Aeronautics                                                                       $585                                              $474                                               23

                                                                                                                                                                                            %


      Missiles and Fire Control                                                          417                                               261                                               60

                                                                                                                                                                                            %


      Rotary and Mission Systems                                                         379                                               311                                               22

                                                                                                                                                                                            %



     Space                                                                              334                                               264                                               27

                                                                                                                                                                                            %



                      Total business segment                                           1,715                                             1,310                                               31
                       operating profit
                                                                                                                                                                                            %


                 Unallocated items


      FAS/CAS operating adjustment                                                       512                                               451



     Other, net(1)                                                                       56                                              (36)



                 Total unallocated items                                                 568                                               415                                               37

                                                                                                                                                                                            %



                      Total consolidated operating                                    $2,283                                            $1,725                                               32
                       profit
                                                                                                                                                                                            %





                 Operating margin



     Aeronautics                                                                       10.5
                                                                                                                                            %

                                                                                           %                                             10.8


      Missiles and Fire Control                                                         17.7
                                                                                                                                            %

                                                                                           %                                             15.6


      Rotary and Mission Systems                                                        10.1
                                                                                                                                            %

                                                                                           %                                              9.6



     Space                                                                             12.7
                                                                                                                                            %

                                                                                           %                                             11.3


                      Total business segment                                            12.0
                       operating margin                                                                                                     %

                                                                                           %                                             11.3




                      Total consolidated operating                                      15.9
                       margin                                                                                                               %

                                                                                           %                                             14.8




                   1 In the first quarter of 2019, the corporation recognized a previously deferred non-cash gain of


                                                                               
                  $51 million ($38 million, or $0.13 per share, after tax) related to properties sold in 2015 as a



       result of completing its remaining obligations.



     
                Lockheed Martin Corporation



     
                Consolidated Balance Sheets



     
                (in millions, except par value)




                                                                                                                               
              
                March 31,                                  
              
                Dec. 31,
                                                                                                                                                                     2019                                                            2018



                                                                                                                              
              
                (unaudited)



     
                Assets



     Current assets



       Cash and cash equivalents                                                                                                                                    $991                                                            $772



       Receivables, net                                                                                                                                            2,833                                                           2,444



       Contract assets                                                                                                                                            10,497                                                           9,472



       Inventories                                                                                                                                                 3,285                                                           2,997



       Other current assets                                                                                                                                          425                                                             418




         Total current assets                                                                                                                                     18,031                                                          16,103





     Property, plant and equipment, net                                                                                                                            6,140                                                           6,124



     Goodwill                                                                                                                                                     10,769                                                          10,769



     Intangible assets, net                                                                                                                                        3,425                                                           3,494



     Deferred income taxes                                                                                                                                         3,169                                                           3,208



     Other noncurrent assets(1)                                                                                                                                    6,150                                                           5,178




           Total assets                                                                                                                                          $47,684                                                         $44,876






     
                Liabilities and equity



     Current liabilities



       Accounts payable                                                                                                                                           $3,097                                                          $2,402



       Contract liabilities                                                                                                                                        6,796                                                           6,491



       Salaries, benefits and payroll taxes                                                                                                                        1,861                                                           2,122



       Current maturities of long-term debt and commercial paper                                                                                                   1,300                                                           1,500




       Other current liabilities(1)                                                                                                                                2,349                                                           1,883




           Total current liabilities                                                                                                                              15,403                                                          14,398





     Long-term debt, net                                                                                                                                          12,621                                                          12,604



     Accrued pension liabilities                                                                                                                                  11,418                                                          11,410



     Other postretirement benefit liabilities                                                                                                                        698                                                             704



     Other noncurrent liabilities(1)                                                                                                                               5,022                                                           4,311




           Total liabilities                                                                                                                                      45,162                                                          43,427





     Stockholders' equity



       Common stock, $1 par value per share                                                                                                                          281                                                             281



       Additional paid-in capital



       Retained earnings                                                                                                                                          16,278                                                          15,434



       Accumulated other comprehensive loss                                                                                                                     (14,094)                                                       (14,321)




           Total stockholders' equity                                                                                                                              2,465                                                           1,394



       Noncontrolling interests in subsidiary                                                                                                                         57                                                              55




           Total equity                                                                                                                                            2,522                                                           1,449




           Total liabilities and equity                                                                                                                          $47,684                                                         $44,876






     
                 1 Effective Jan. 1, 2019, the corporation adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842).



        As of March 31, 2019, right-of-use operating lease assets were $969 million and operating lease liabilities were


                                                                                                                 
                 $1.1 billion. Approximately $812 million of operating lease liabilities were classified as noncurrent. There was



        no impact to the corporation's consolidated statements of earnings or cash flows as a result of adopting this



        standard. The 2018 periods were not restated for the adoption of ASU 2016-02.


                          Lockheed Martin
                           Corporation


                          Consolidated
                           Statements of
                           Cash Flows


                          (unaudited; in
                           millions)






                                              Quarters Ended



                                                 March 31,   March 25,
                                                        2019       2018





                          Operating
                           activities


             Net earnings                             $1,704     $1,157


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


               Depreciation
                and
                amortization                             277        279


               Stock-based
                compensation                              37         38


               Gain on
                property sale                           (51)


               Changes in
                assets and
                liabilities


                   Receivables,
                    net                                (389)     (108)


                   Contract assets                   (1,025)   (1,413)


                   Inventories                         (288)     (318)


                   Accounts
                    payable                              744      1,290


                   Contract
                    liabilities                          305      (478)


                   Postretirement
                    benefit plans                        278    (1,145)


                   Income taxes                          243      1,064


               Other, net                              (172)       266



                               Net cash
                                provided by
                                operating
                                activities             1,663        632





                          Investing
                           activities


             Capital
              expenditures                             (284)     (216)


             Other, net                                   27        130



                               Net cash used
                                for investing
                                activities             (257)      (86)





                          Financing
                           activities


             Dividends paid                            (638)     (586)


             Repurchases of
              common stock                             (281)     (300)


             Repayments of
              commercial
              paper, net                               (200)


             Other, net                                 (68)     (128)



                               Net cash used
                                for financing
                                activities           (1,187)   (1,014)





                          Net change in
                           cash and cash
                           equivalents                   219      (468)


                          Cash and cash
                           equivalents at
                           beginning of
                           period                        772      2,861



                          Cash and cash
                           equivalents at
                           end of period                $991     $2,393



            
                Lockheed Martin Corporation



            
                Consolidated Statement of Equity



            
                (unaudited; in millions)




                                                                                                                                                                                                        
          
          Accumulated


                                                                                                                                                                         Additional                        
          
          Other            
         
         Total         
         
         Noncontrolling


                                                                                                  
              
                Common                                             Paid-in     
     
     Retained    
          
          Comprehensive    
         
         Stockholders'       
         
          Interests       
     
     Total


                                                                                                   
              
                Stock                                             Capital     
     
     Earnings        
          
          Loss             
         
         Equity        
         
          in Subsidiary     
     
     Equity

                                                                                                                                                                                                                                                                                                               ---




            
                Balance at Dec. 31, 2018                                                                            $281                
              
                $            -        $15,434                       $(14,321)                      $1,394                              $55            $1,449



            Net earnings                                                                                                        -                                                               1,704                                                       1,704                                             1,704



            Other comprehensive income, net of tax(1)                                                                           -                                                                                                227                          227                                               227



            Repurchases of common stock                                                                                       (1)                                                 (46)          (237)                                                      (284)                                            (284)



            Dividends declared(2)                                                                                               -                                                               (623)                                                      (623)                                            (623)



            Stock-based awards, ESOP activity and                                                                               1                                                    46                                                                         47                                                47
      other



            Net increase in noncontrolling interests in                                                                         -                                                                                                                                                              2                 2
      subsidiary

                                                                                                                                                                                                                                                                                                               ---


            
                Balance at March 31, 2019                                                                           $281                
              
                $            -        $16,278                       $(14,094)                      $2,465                              $57            $2,522

                                                                                                                                                                                                                                                                                                               ===




            
                 1 Primarily represents the reclassification adjustment for the recognition of prior period amounts related to pension and other postretirement plans.



            
                 2 Represents dividends of $2.20 per share declared for the first quarter of 2019.



     
                Lockheed Martin Corporation



     
                Other Financial and Operating Information



     
                (unaudited; in millions, except for aircraft deliveries and weeks)




                                                                                                                                                                                                    2019                                                 2018
                                                                                                                                                                                     Outlook                                                Actual




     
                Total FAS expense and CAS costs



     FAS pension expense                                                                                                                                                                                  $
              
                (1,090)                   $
       1,431)



     Less: CAS pension cost                                                                                                                                                                       2,565                                                2,433



     Net FAS/CAS pension adjustment                                                                                                                                                                         $
              
                1,475                     $
       1,002






     
                Service and non-service cost reconciliation



     FAS pension service cost                                                                                                                                                                               $
              
                (515)                    $
       (630)



     Less: CAS pension cost                                                                                                                                                                       2,565                                                2,433




     FAS/CAS operating adjustment                                                                                                                                                                 2,050                                                1,803



     Non-operating FAS pension cost(1)                                                                                                                                                            (575)                                               (801)



     Net FAS/CAS pension adjustment                                                                                                                                                                         $
              
                1,475                     $
       1,002





                   1 The corporation records the non-service cost components of net periodic benefit cost as part of other non-operating expense, net in the 
              consolidated statements of earnings. The non-service cost
                    components in the table above relate only to the corporation's qualified defined benefit 
              pension plans. The corporation expects total non-service costs for its qualified defined benefit pension plans in
                    the table above, along with non-
              service costs for its other postretirement benefit plans of $115 million, to total $690 million for 2019. The corporation recorded non-service costs for 
              its
                    other postretirement benefit plans of $67 million in 2018, in addition to its total non-service costs for its qualified defined benefit pension 
              plans in the table above, for a total of $868 million in
                    2018.





     
                Backlog                                                                                                                                                                     March 31,                                           Dec. 31,
                                                                                                                                                                                                    2019                                                 2018




     Aeronautics                                                                                                                                                                                           $
              
                52,344                    $
       55,601



     Missiles and Fire Control                                                                                                                                                                   23,214                                               21,363



     Rotary and Mission Systems                                                                                                                                                                  31,327                                               31,320



     Space                                                                                                                                                                                       26,585                                               22,184



     
                  Total backlog                                                                                                                                                                         $
              
                133,470                   $
       130,468





                                                                                                                                                                               Quarters Ended




     
                Aircraft Deliveries                                                                                                                                                         March 31,                                           March 25,
                                                                                                                                                                                                    2019                                                 2018




     F-35                                                                                                                                                                                            26                                                   14



     C-130J                                                                                                                                                                                           5                                                    3



     C-5                                                                                                                                                                                                                                                  1



     Government helicopter programs                                                                                                                                                                  15                                                   18



     Commercial helicopter programs                                                                                                                                                                                                                       1



     International military helicopter programs                                                                                                                                                       2                                                    1





     
                Number of Weeks in Reporting Period                                                                                                                                              2019                                                 2018




     First quarter                                                                                                                                                                                   13                                                   12



     Second quarter                                                                                                                                                                                  13                                                   13



     Third quarter                                                                                                                                                                                   13                                                   14



     Fourth quarter                                                                                                                                                                                  13                                                   13

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SOURCE Lockheed Martin