OREANDA-NEWS. Lockheed Martin (NYSE: LMT) today reported fourth quarter 2015 net sales of $12.9 billion, compared to $12.5 billion in the fourth quarter of 2014. Net earnings in the fourth quarter of 2015 were $933 million, or $3.01 per share, compared to $904 million, or $2.82 per share, in the fourth quarter of 2014. Cash from operations in the fourth quarter of 2015 was $1.4 billion, compared to $(201) million of cash used in operations, after pension contributions of $1.0 billion, in the fourth quarter of 2014.

Fourth quarter 2015 net earnings included a special charge for workforce reductions of $67 million, which decreased net earnings $44 million, or $0.14 per share; and non-recoverable transaction costs of $45 million associated with the acquisition of Sikorsky Aircraft Corporation (Sikorsky) and the Corporation’s strategic review of its government IT and technical services businesses, which decreased net earnings $28 million, or $0.09 per share.  These costs were offset by the recognition of a full-year U.S. research and development (R&D) tax credit resulting from the enactment of tax legislation in the fourth quarter of 2015, which increased net earnings $71 million, or $0.23 per share.  Fourth quarter 2014 net earnings included a special charge for a non-cash goodwill impairment of $119 million, which decreased net earnings $107 million, or $0.33 per share, partially offset by the recognition of a full-year R&D tax credit due to the temporary reinstatement of the R&D tax credit in the fourth quarter of 2014, which increased earnings $45 million, or $0.14 per share.

Net sales in 2015 were $46.1 billion, compared to $45.6 billion in 2014. Net earnings in 2015 were $3.6 billion, or $11.46 per share, compared to $3.6 billion, or $11.21 per share, in 2014. Cash from operations in 2015 was $5.1 billion, compared to cash from operations in 2014 of $3.9 billion after pension contributions of $2.0 billion.

Net earnings in 2015 included special charges for workforce reductions of $102 million, which decreased net earnings $66 million, or $0.21 per share; and non-recoverable transaction costs of $45 million associated with the acquisition of Sikorsky and the Corporation’s strategic review of its government IT and technical services businesses, which decreased net earnings $28 million, or $0.09 per share.  These costs were offset by the recognition of the R&D tax credit, which increased net earnings $71 million, or $0.23 per share.  Net earnings in 2014 included a special charge for a non-cash goodwill impairment of $119 million, which decreased net earnings $107 million, or $0.33 per share, partially offset by the recognition of the R&D tax credit, which increased earnings $45 million, or $0.14 per share.

“The corporation completed a year of exceptional operational accomplishments for customers and financial returns to stockholders,” said Lockheed Martin Chairman, President and CEO Marillyn Hewson.  “The successful closure of the Sikorsky acquisition and completion of the strategic review of our IS&GS businesses, coupled with our record backlog, position the corporation for future growth and value creation for our customers and our stockholders.”

Strategic Actions

Acquisition of Sikorsky Aircraft Corporation

On Nov. 6, 2015, the Corporation completed its acquisition of Sikorsky for $9.0 billion, net of cash acquired.  Sikorsky, a global company primarily engaged in the design, manufacture and support of military and commercial helicopters, has been aligned under the Corporation’s Mission Systems and Training (MST) business segment.  The Corporation funded the acquisition with new debt issuances, commercial paper and cash on hand.  The Corporation and United Technologies Corporation made a joint election under Section 338(h)(10) of the Internal Revenue Code, which treats the transaction as an asset purchase for tax purposes.  This election generates a cash tax benefit with an estimated net present value of $1.9 billion for the Corporation and its stockholders.  The financial results of Sikorsky have been included in the Corporation’s consolidated results of operations from the Nov. 6, 2015 acquisition date through Dec. 31, 2015.

Strategic Review of Government IT and Technical Services Businesses

Information Systems & Global Solutions Divestiture

The Corporation announced today that it has entered into a definitive agreement to separate and combine its Information Systems & Global Solutions (IS&GS) business segment with Leidos Holdings, Inc. (Leidos) in a tax-efficient Reverse Morris Trust transaction anticipated to unlock approximately $5.0 billion in estimated enterprise value for the Corporation’s stockholders, including a $1.8 billion one-time special cash payment to Lockheed Martin.  Additionally, Lockheed Martin stockholders will receive approximately 50.5 percent of the outstanding equity of Leidos on a fully diluted basis with an estimated value of $3.2 billion.  Subsequent to the program realignment described below, the IS&GS business segment represents the government IT and technical services businesses that were under strategic review.  The transaction is expected to close in the third or fourth quarter of 2016.  Until closing, IS&GS will operate as a business segment of the Corporation and financial results for the IS&GS business segment will be reported in continuing operations.  A copy of the news release announcing the transaction is available on the Corporation’s website at www.lockheedmartin.com/investor.

Program Realignment

During the fourth quarter of 2015, the Corporation realigned certain programs among its business segments in connection with the strategic review of its government IT and technical services businesses.  As part of the realignment:

  • mission IT and services programs supporting the Corporation’s platforms were transferred from the IS&GS business segment to the MST business segment;
  • energy solutions programs were transferred from the IS&GS business segment to the Missiles and Fire Control (MFC) business segment;
  • space services programs were transferred from the IS&GS business segment to the Space Systems business segment; and
  • technical services programs were transferred from the MFC business segment to the IS&GS business segment.

The program realignment did not impact the Corporation’s consolidated results of operations.  The amounts, discussion, and presentation of the Corporation’s business segment financial results for all periods included in this news release reflect this realignment.