Lockheed Martin Reports Net Sales of $15.2 Billion in 3Q19

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Lockheed Martin Corporation has reported third quarter 2019 net sales of $15.2 billion, compared to $14.3 billion in the third quarter of 2018. Net earnings in the third quarter of 2019 were $1.6 billion, or $5.66 per share, compared to $1.5 billion, or $5.14 per share, in the third quarter of 2018. Cash from operations in the third quarter of 2019 was $2.5 billion, compared to cash from operations of $361 million after pension contributions of $1.5 billion in the third quarter of 2018.

"The corporation achieved another quarter of strong growth and outstanding operational performance," said Lockheed Martin Chairman, President and CEO Marillyn Hewson. "As we look ahead to 2020, we remain focused on providing innovative solutions for our customers, investing for long-term growth, and generating value for our shareholders."

2020 Financial Trends

The corporation expects its 2020 net sales to increase to approximately $62.0 billion. Total business segment operating margin in 2020 is expected to be in the 10.5 percent to 10.8 percent range and cash from operations is expected to be greater than or equal to $7.2 billion, net of $500 million of pension contributions. The preliminary outlook for 2020 assumes there is no impact from U.S. Government actions related to Turkey and the U.S. Government continues to support and fund the corporation's key programs. Changes in circumstances may require the corporation to revise its assumptions, which could materially change the corporation's current estimate of 2020 net sales, operating margin and cash flows.

The corporation currently expects a total net FAS/CAS pension benefit of approximately $2.1 billion in 2020. This estimate assumes a 3.25 percent discount rate (a 100 basis point decrease from the end of 2018), a 15.00 percent return on plan assets in 2019, and a 7.00 percent expected long-term rate of return on plan assets in future years, among other assumptions. A change of plus or minus 25 basis points to the assumed discount rate, with all other assumptions held constant, would result in an incremental increase or decrease of approximately $15 million to the estimated net 2020 FAS/CAS pension benefit. The impact of changes in the discount rate is significantly less than in prior years (i.e., $15 million for 2020 compared to $120 million for 2019) due to the expected completion of the planned freeze of the corporation's salaried pension plans that was previously announced on July 1, 2014, which is discussed in further detail below. A change of 100 basis points to the return on plan assets in 2019, with all other assumptions held constant, would impact the net 2020 FAS/CAS pension benefit by approximately $15 million. As noted above, the corporation expects to make contributions of approximately $500 million to its qualified defined benefit pension plans in 2020 and anticipates recovering approximately $2.2 billion of CAS pension cost. The corporation will complete the annual remeasurement of its postretirement benefit plans and update its estimated 2020 FAS/CAS pension adjustment on Dec. 31, 2019. The final assumptions and actual investment return for 2019 may differ materially from those discussed above.

As previously announced on July 1, 2014, the corporation will complete the final step of the planned freeze of its qualified and nonqualified defined benefit pension plans for salaried employees effective Jan. 1, 2020. The service-based component of the formula used to determine retirement benefits will be frozen such that participants will no longer earn further credited service for any period after Dec. 31, 2019. As a result of these changes, the plans will be fully frozen effective Jan. 1, 2020. Retirees already collecting benefits and former employees with a vested benefit will not be affected by the change. Current employees also will retain all benefits already earned in their pension plan to date.

Cash Activities

The corporation's cash activities in the third quarter of 2019 included the following:

• paying cash dividends of $621 million, compared to $569 million in the third quarter of 2018;
• repurchasing 0.6 million shares for $210 million, compared to 0.6 million shares for $216 million in the third quarter of 2018;
• making capital expenditures of $308 million, compared to $339 million in the third quarter of 2018;
• no net proceeds from or repayments of commercial paper, compared to net proceeds of $490 million in the third quarter of 2018; and
• making no pension contributions, compared to pension contributions of $1.5 billion in the third quarter of 2018.

As previously reported on Sept. 26, 2019, the corporation increased its quarterly dividend by $0.20 per share, to $2.40 per share, beginning with the dividend payment in the fourth quarter of 2019. The corporation also increased its share repurchase authority by $1.0 billion with $3.3 billion in total remaining authorization for future repurchases of common stock under the program as of Sept. 29, 2019.

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.