LOCKHEED MARTIN CORP [LMT] Filings

10-Q 1 lmt-20220327.htm 10-Q lmt-20220327

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 March 27, 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 266,106,974 shares of our common stock, $1 par value per share, outstanding as of April 15, 2022.

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Lockheed Martin Corporation

Form 10-Q

For the Quarterly Period Ended March 27, 2022

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			Page

PART I. FINANCIAL INFORMATION

	ITEM 1.	Financial Statements (Unaudited)

		Consolidated Statements of Earnings for the Quarters Ended March 27, 2022 and March 28, 2021	3

		Consolidated Statements of Comprehensive Income for the Quarters Ended March 27, 2022 and March 28, 2021	4

		Consolidated Balance Sheets as of March 27, 2022 and December 31, 2021	5

		Consolidated Statements of Cash Flows for the Quarters Ended March 27, 2022 and March 28, 2021	6



		Consolidated Statements of Equity for the Quarters Ended March 27, 2022 and March 28, 2021	7

		Notes to Consolidated Financial Statements	8

		Report of Independent Registered Public Accounting Firm	23

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	39

	ITEM 4.	Controls and Procedures	39

PART II. OTHER INFORMATION

	ITEM 1.	Legal Proceedings	41

	ITEM 1A.	Risk Factors	41

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

	ITEM 6.	Exhibits	43

SIGNATURE			44

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Lockheed Martin Corporation

Consolidated Statements of Earnings

(unaudited; in millions, except per share data)



	Quarters Ended
		March 27, 2022			March 28, 2021
Net sales
Products			$	12,494		$	13,753
Services			2,470			2,505
Total net sales			14,964			16,258
Cost of sales
Products			(11,161)			(12,281)
Services			(2,175)			(2,230)
Severance and restructuring charges			—			(36)
Other unallocated, net			281			475
Total cost of sales			(13,055)			(14,072)
Gross profit			1,909			2,186
Other income (expense), net			24			(4)
Operating profit			1,933			2,182
Interest expense			(135)			(140)
Non-service FAS pension income			140			93


Other non-operating income, net			123			76
Earnings before income taxes			2,061			2,211
Income tax expense			(328)			(374)


Net earnings			$	1,733		$	1,837

Earnings per common share
Basic			$	6.46		$	6.58



Diluted			$	6.44		$	6.56




Cash dividends paid per common share			$	2.80		$	2.60

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

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Lockheed Martin Corporation

Consolidated Statements of Comprehensive Income

(unaudited; in millions)



	Quarters Ended
	March 27, 2022	March 28, 2021
Net earnings		$	1,733	$	1,837
Other comprehensive income, net of tax



Amortization of previously deferred postretirement benefit plan costs		48		140
Other, net		(21)		(27)
Other comprehensive income, net of tax		27		113
Comprehensive income		$	1,760	$	1,950

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

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Lockheed Martin Corporation

Consolidated Balance Sheets

(in millions, except par value)


	March 27, 2022		December 31, 2021
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,883	$	3,604
Receivables, net	2,527		1,963
Contract assets	12,130		10,579
Inventories	3,144		2,981
Other current assets	706		688
Total current assets	20,390		19,815
Property, plant and equipment, net	7,561		7,597
Goodwill	10,811		10,813
Intangible assets, net	2,644		2,706
Deferred income taxes	2,688		2,290
Other noncurrent assets	7,416		7,652
Total assets	$	51,510	$	50,873
Liabilities and equity
Current liabilities
Accounts payable	$	2,599	$	780
Salaries, benefits and payroll taxes	2,671		3,108
Contract liabilities	7,902		8,107
Current maturities of long-term debt	500		6
Other current liabilities	2,375		1,996
Total current liabilities	16,047		13,997
Long-term debt, net	11,145		11,670
Accrued pension liabilities	8,143		8,319
Other noncurrent liabilities	6,173		5,928
Total liabilities	41,508		39,914
Stockholders’ equity
Common stock, $1 par value per share	265		271
Additional paid-in capital	—		94
Retained earnings	20,716		21,600
Accumulated other comprehensive loss	(10,979)		(11,006)
Total stockholders’ equity	10,002		10,959


Total liabilities and equity	$	51,510	$	50,873

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

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Lockheed Martin Corporation

Consolidated Statements of Cash Flows

(unaudited; in millions)


	Quarters Ended
	March 27, 2022		March 28, 2021
Operating activities
Net earnings	$	1,733	$	1,837
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	329		336
Stock-based compensation	54		47


Deferred income taxes	(411)		63

Severance and restructuring charges	—		36

Changes in assets and liabilities
Receivables, net	(564)		(236)
Contract assets	(1,551)		(1,363)
Inventories	(163)		289
Accounts payable	1,829		1,023
Contract liabilities	(205)		(290)
Income taxes	697		301
Qualified defined benefit pension plans	(116)		(66)
Other, net	(222)		(229)
Net cash provided by operating activities	1,410		1,748
Investing activities
Capital expenditures	(268)		(281)
Other, net	17		112
Net cash used for investing activities	(251)		(169)
Financing activities
Repurchases of common stock	(2,000)		(1,000)
Dividends paid	(767)		(739)



Other, net	(113)		(67)
Net cash used for financing activities	(2,880)		(1,806)
Net change in cash and cash equivalents	(1,721)		(227)
Cash and cash equivalents at beginning of period	3,604		3,160
Cash and cash equivalents at end of period	$	1,883	$	2,933

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

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Lockheed Martin Corporation

Consolidated Statements of Equity

(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	—		—		1,733		—		1,733		—		1,733
Other comprehensive income, net of tax	—		—		—		27		27		—		27
Dividends declared	—		—		(749)		—		(749)		—		(749)
Repurchases of common stock	(6)		(126)		(1,868)		—		(2,000)		—		(2,000)
Stock-based awards, ESOP activity and other	—		32		—		—		32		—		32
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		—		—
Balance at March 27, 2022	$	265	$	—	$	20,716	$	(10,979)	$	10,002	$	—	$	10,002

Balance at December 31, 2020	$	279	$	221	$	21,636	$	(16,121)	$	6,015	$	23	$	6,038
Net earnings	—		—		1,837		—		1,837		—		1,837
Other comprehensive income, net of tax	—		—		—		113		113		—		113
Dividends declared	—		—		(725)		—		(725)		—		(725)
Repurchases of common stock	(2)		(227)		(771)		—		(1,000)		—		(1,000)
Stock-based awards, ESOP activity and other	1		71		—		—		72		—		72
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(2)		(2)
Balance at March 28, 2021	$	278	$	65	$	21,977	$	(16,008)	$	6,312	$	21	$	6,333

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

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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 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
		March 27, 2022	March 28, 2021
Weighted average common shares outstanding for basic computations			268.3	279.0
Weighted average dilutive effect of equity awards			0.9	1.0
Weighted average common shares outstanding for diluted computations			269.2	280.0

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 ended March 27, 2022 and March 28, 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.

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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 thus 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 for each of our business segments were as follows (in millions):



	Quarters Ended
		March 27, 2022			March 28, 2021
Net sales
Aeronautics			$	6,401		$	6,387
Missiles and Fire Control			2,452			2,749
Rotary and Mission Systems			3,552			4,107
Space			2,559			3,015
Total net sales			$	14,964		$	16,258
Operating profit
Aeronautics			$	679		$	693
Missiles and Fire Control			384			396
Rotary and Mission Systems			348			433
Space			245			227
Total business segment operating profit			1,656			1,749
Unallocated items
FAS/CAS pension operating adjustment			426			489


Severance and restructuring charges			—			(36)
Other, net			(149)			(20)
Total unallocated items			277			433
Total consolidated operating profit			$	1,933		$	2,182
Intersegment sales
Aeronautics			$	60		$	53
Missiles and Fire Control			156			129
Rotary and Mission Systems			455			478
Space			83			82
Total intersegment sales			$	754		$	742
Amortization of purchased intangibles
Aeronautics			$	—		$	—
Missiles and Fire Control			(1)			(1)
Rotary and Mission Systems			(58)			(58)
Space			(3)			(22)
Total amortization of purchased intangibles			$	(62)		$	(81)

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Unallocated Items

Business segment operating profit also excludes the FAS/CAS pension operating adjustment, 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, stock-based compensation expense, 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 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 FAS 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.

Total FAS/CAS pension adjustment for the quarters ended March 27, 2022 and March 28, 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
		March 27, 2022			March 28, 2021
Total FAS income and CAS cost
Total FAS pension income			$	116		$	66
Less: CAS pension cost			450			516
Total FAS/CAS pension adjustment			$	566		$	582

Service and non-service cost reconciliation
FAS pension service cost			$	(24)		$	(27)
Less: CAS pension cost			450			516
Total FAS/CAS pension operating adjustment			426			489
Non-service FAS pension income			140			93
Total FAS/CAS pension adjustment			$	566		$	582

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Net sales by products and services, contract type, customer, and geographic region were as follows (in millions):


	Quarter Ended March 27, 2022
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,417	$	2,173	$	2,788	$	2,116	$	12,494
Services	984		279		764		443		2,470
Total net sales	$	6,401	$	2,452	$	3,552	$	2,559	$	14,964
Net sales by contract type
Fixed-price	$	4,686	$	1,713	$	2,218	$	637	$	9,254
Cost-reimbursable	1,715		739		1,334		1,922		5,710
Total net sales	$	6,401	$	2,452	$	3,552	$	2,559	$	14,964
Net sales by customer
U.S. Government	$	4,213	$	1,595	$	2,511	$	2,516	$	10,835
International (a)	2,150		852		971		34		4,007
U.S. commercial and other	38		5		70		9		122
Total net sales	$	6,401	$	2,452	$	3,552	$	2,559	$	14,964
Net sales by geographic region
United States	$	4,251	$	1,600	$	2,581	$	2,525	$	10,957
Europe	1,023		256		187		24		1,490
Asia Pacific	721		106		432		7		1,266
Middle East	262		465		176		3		906
Other	144		25		176		—		345
Total net sales	$	6,401	$	2,452	$	3,552	$	2,559	$	14,964


	Quarter Ended March 28, 2021
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,479	$	2,410	$	3,300	$	2,564	$	13,753
Services	908		339		807		451		2,505
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258
Net sales by contract type
Fixed-price	$	4,734	$	1,878	$	2,677	$	614	$	9,903
Cost-reimbursable	1,653		871		1,430		2,401		6,355
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258
Net sales by customer
U.S. Government	$	4,273	$	2,041	$	2,810	$	2,551	$	11,675
International (a)	2,099		703		1,220		457		4,479
U.S. commercial and other	15		5		77		7		104
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258
Net sales by geographic region
United States	$	4,288	$	2,046	$	2,887	$	2,558	$	11,779
Europe	854		182		201		455		1,692
Asia Pacific	893		51		650		2		1,596
Middle East	284		458		170		—		912
Other	68		12		199		—		279
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258

(a)International sales include foreign military sales (FMS) contracted through the U.S. Government and direct commercial sales to international governments and other international customers.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 29% of our total consolidated net sales for the quarter ended March 27, 2022 and 27% of our total consolidated net sales for the quarter ended March 28, 2021.

Total assets for each of our business segments were as follows (in millions):


	March 27, 2022		December 31, 2021
Assets
Aeronautics	$	12,232	$	10,756
Missiles and Fire Control	5,410		5,243
Rotary and Mission Systems	17,569		17,664
Space	6,315		6,199
Total business segment assets	41,526		39,862
Corporate assets (a)	9,984		11,011
Total assets	$	51,510	$	50,873

(a)Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery, investments held in a separate trust and investments held in Lockheed Martin Ventures Fund.

NOTE 4 - CONTRACT ASSETS AND LIABILITIES

Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in millions):


	March 27, 2022		December 31, 2021
Contract assets	$	12,130	$	10,579
Contract liabilities	7,902		8,107

Contract assets increased $1.6 billion during the quarter ended March 27, 2022, due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the quarter ended March 27, 2022 for which we have not yet billed our customers (primarily on the F-35 program at Aeronautics). There were no significant credit or impairment losses related to our contract assets during the quarters ended March 27, 2022 and March 28, 2021.

Contract liabilities decreased $205 million during the quarter ended March 27, 2022, primarily due to revenue recognized in excess of payments received on these performance obligations. During the quarter ended March 27, 2022, we recognized $2.1 billion of our contract liabilities at December 31, 2021 as revenue. During the quarter ended March 28, 2021, we recognized $2.3 billion of our contract liabilities at December 31, 2020 as revenue.

NOTE 5 - INVENTORIES

Inventories consisted of the following (in millions):


	March 27, 2022		December 31, 2021
Materials, spares and supplies	$	630	$	624
Work-in-process	2,312		2,163
Finished goods	202		194
Total inventories	$	3,144	$	2,981

Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

identify and contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of sales consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of March 27, 2022 and December 31, 2021, $749 million and $634 million of pre-contract costs were included in inventories.

NOTE 6 - POSTRETIREMENT BENEFIT PLANS

The pretax FAS (expense) income related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions):



	Quarters Ended
		March 27, 2022			March 28, 2021
Qualified defined benefit pension plans
Operating:
Service cost			$	(24)		$	(27)
Non-operating:
Interest cost			(302)			(311)
Expected return on plan assets			502			569
Recognized net actuarial losses			(150)			(252)
Amortization of prior service credits			90			87

Non-service FAS pension income			140			93
Total FAS pension income			$	116		$	66
Retiree medical and life insurance plans
Operating:
Service cost			$	(2)		$	(3)
Non-operating:
Interest cost			(12)			(13)
Expected return on plan assets			34