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LMT Credit Suisse_11-20-08 1
Lockheed Martin CorporationCredit Suisse Aerospace and Defense Conference
20 November 2008
Bruce L. Tanner Executive Vice President & CFO
Ralph HeathExecutive Vice President - Aeronautics
LMT Credit Suisse_11-20-08 2
Our presentation contains “forward-looking” statements or projections based on current expectations. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to: the availability of government funding; changes in customer priorities; the impact of continued hostilities in Iraq; budgetary constraints; program and contract performance; the timing and availability of future government awards; the outcome of legal proceedings; economic, business and regulatory conditions and other factors. We disclaim any duty to update forward-looking statements to reflect new developments.
Our SEC filings (found at www.lockheedmartin.com or at www.sec.gov), including our 2007 Form 10-K and 2008 Form 10-Qs, contain more information on the types of risks and other factors that could adversely affect these statements.
Forward Looking Statements
LMT Credit Suisse_11-20-08 3
• Corporate Overview – Bruce Tanner
• Aeronautics Overview – Ralph Heath
• Discussion
Agenda
LMT Credit Suisse_11-20-08 4
Global Security Company with Balanced Portfolio
Electronic Systems$11.2B
Aeronautics$12.3B
Space Systems
$8.2B
2007 Sales = $41.9 B
Operating Segment Margins*
(%)
Lockheed Martin
IS&GS$10.2B
Defense:Air Force
Navy/USMCArmy
Int’l59% 26%
15%
Civil, HLS,Intelligence,
& Other
*See appendix for definition and calculation
Return on Invested Capital*
(%)
11.8%
3Q YTD
LMT Credit Suisse_11-20-08 5
AeronauticsKey Programs• Combat Aircraft
– F-16– F-22– F-35
• Air Mobility Aircraft– C-130J– C-5
• Aircraft Logistics/Sustainment• Advanced Development Programs
– Skunkworks
Combat Aircraft
77%Air Mobility
13%
2007 Sales = $12.3 B
U.S. Government
78%
International22%
Other 10%
LMT Credit Suisse_11-20-08 6
Electronic Systems
Missiles & Fire Control
37%
Platform Training &
Energy 22%
2007 Sales = $11.2 B
Maritime Systems &
Sensors41%
U.S. Government
74%International
26%
Key Programs• Missile Defense
– Aegis, PAC-3, THAAD, MEADS• Maritime Systems & Sensors
– Littoral Combat Ship• Radar & Surface Systems• Fire Control Systems
– SNIPER, TADS, Arrowhead• Missile Systems
– Hellfire, ATACMS, GMLRS, JAVELIN, JASSM
• Ground Vehicles– Joint Light Tactical Vehicle
• Rotary Wing– VH-71, MH-60
LMT Credit Suisse_11-20-08 7
Information Systems & Global Services
Information Systems
30%
Global Services
24%
2007 Sales = $10.2 B
Mission Solutions
46%
U.S. Government
94%
International6%
Key Programs• Mission Solutions
– Air Traffic Management– Census Activities– C4ISR– National Archives– AMF JTRS– WIN-T
• Information Systems– FBI Sentinel, NGI– HR Systems (IHOPP)– GSA Alliant– DOE Hanford
• Global Services– Peacekeeping/Nation Building (PAE)– RFID Devices (Savi)– Army Logistics Support– NASA Support (FDOC)
LMT Credit Suisse_11-20-08 8
Space Systems
Strategic & Defensive
Missile Systems
12%
2007 Sales = $8.2 B
Satellites68%
U.S. Government
94%
International6%
20%
Space Transportation
Key Programs• Satellites
– Government-GPS III, AEHF, SBIRS– Commercial
• Strategic & Defense Missiles– FBM Trident D5– Targets & Countermeasures
• Space Transportation– Orion CEV– External Tank– Space Exploration Systems
• Shuttle Operations (USA)• United Launch Alliance (ULA)
LMT Credit Suisse_11-20-08 9
Cash Flow Generation
Generated ~$16 Billion Of Cash From Operations Since 2003
Cash From Operations
($B)
LMT Credit Suisse_11-20-08 10
M&A History
Business Area
2003 2004 2005 2006 2007 2008
Electronic Systems
Leigh Aerosystems
Sippican
Soflinx
Insys HMT Vehicles
ISX
Perceptek
3DSolve
Aculight
Tenix/RLM
IS&GS Orincon
ACS
STASYS
SYTEX
Aspen
Savi Tech.
PAE
MSD
RLM
EagleInternat’l
Space Systems
Coherent Nantero
22 Acquisitions Closed Since 2003 for >$3 Billion
LMT Credit Suisse_11-20-08 11
Share Repurchase Focus Continues… ~40 Million of Authority RemainsDouble Digit Increases to Annual Dividends…+36% Announced Oct. 2008
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2003 2004 2005 2006 2007Dividends
($B)
Shareholder Focus: Stock Repurchases & Dividends
Share Repurchases
$0.5
$0.8
$1.2
$2.1 $2.1
$0.3
$0.4
$0.5
$0.5$0.6
LMT Credit Suisse_11-20-08 12
($B)
Shareholder Focus: Goal: Return 50% of Annual Free Cash to Shareholders
Share Repurchases
$0.5
$0.8
$1.2
$2.1 $2.1
$0.3
$0.4
$0.5
$0.5$0.6
Returned $9 Billion to Shareholders over Last Five Years
66%
55%
72%
91% 83%
LMT Credit Suisse_11-20-08 13
Credit Suisse Aerospace & Defense Conference
LMT Credit Suisse_11-20-08 13
LMT Credit Suisse_11-20-08 14
Development Rate Production Post Production
TimeNext-Gen Airlift
UAV
F-35F-22
F-16C-130
U-2
P-3
C-5
Future Bomber
LMT Credit Suisse _11-20-08 14
Stalker
Aeronautics Portfolio
LMT Credit Suisse_11-20-08 15
The Future Is Flying
LMT Credit Suisse_11-20-08 15
• Tracking to Development Milestones
• Building Production Aircraft
• Standing Up Global Delivery System
• Maintaining Strong Partnerships
LMT Credit Suisse_11-20-08 16
World-Class Performance
LMT Credit Suisse_11-20-08 16
Development
49 Aircraft38 Zero Defect
Production3 World-Class Lines
LMT Credit Suisse_11-20-08 17
DiscussionPowered by Innovation . . . Guided By Integrity
LMT Credit Suisse_11-20-08 17
LMT Credit Suisse_11-20-08 19
Non-GAAP Financial Measures DisclosureThis presentation contains non-Generally Accepted Accounting Principles (GAAP) financial measures (as defined by SEC Regulation G). While we believe that these non-GAAP financial measures may be useful in evaluating Lockheed Martin, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP. In addition, our definitions for non-GAAP measures may differ from similarly titled measures used by other companies or analysts.
Segment Operating Profit / MarginSegment Operating Profit represents the total earnings from our business segments before unallocated corporate (expense) and income, interest expense, other non-operating income and expense, and income tax expense. This measure is used by our senior management in evaluating the performance of our business segments. The caption “Unallocated Corp. Expense”, or “Unallocated Corp. (Exp.) / Inc.” reconciles Segment Operating Profit to consolidated Operating Profit. The caption “Other Pre-Tax Expense (net)” reconciles Segment Operating Profit to consolidated Earnings Before Income Taxes. Segment Margin is calculated by dividing Segment Operating Profit by Sales.
ROICManagement believes that Return on Invested Capital (ROIC) provides greater visibility into how effectively Lockheed Martin deploys capital. Management uses ROIC as a target level to help ensure that overall performance is understood and acceptable when capital is invested. ROIC is not a measure of financial performance under GAAP, and may not be defined and calculated by other companies in the same manner. ROIC should not be considered in isolation or as an alternative to net earnings as an indicator of company performance.Management uses these measures to compare segment performance and for comparisons to other companies within our industry as an alternative to GAAP. These measures also may be helpful to investors in understanding period-over-period financial results separate and apart from items that may, or could, have a disproportionate positive or negative impact on our financial results in any particular period.
Free Cash FlowFree Cash Flow is calculated by subtracting Capital Expenditures from Cash From Operations
Definitions of Non-GAAP Measures
LMT Credit Suisse_11-20-08 20
Reconciliation to GAAP($M)
ActualActual Actual Actual Actual Actual Actual YTD 3Q2002 2003 2004 2005 2006 2007 2008
Sales $26,578 $31,824 $35,526 $37,213 $39,620 $41,862 $31,599
Segment Op. Profit 2,020 2,468 2,976 3,421 4,031 4,691 3,715
Unallocated Corp. Expense (862) (449) (887) (568) (261) (164) 68
Consolidated EBIT $1,158 $2,019 $2,089 $2,853 $3,770 $4,527 $3,783
Segment Margin 7.6% 7.8% 8.4% 9.2% 10.2% 11.2% 11.8%
Consolidated Margin 4.4% 6.3% 5.9% 7.7% 9.5% 10.8% 12.0%
LMT Credit Suisse_11-20-08 21
Actual Actual Actual Actual Actual Actual2002 2003 2004 2005 2006 2007
Net Earnings $500 $1,053 $1,266 $1,825 $2,529 $3,033Interest Exp x .65 378 317 276 241 235 229
Return $878 $1,370 $1,542 $2,066 $2,764 $3,262
Debt (Average) $7,491 $6,612 $5,932 $5,077 $4,727 $4,416Equity (Average) 6,853 6,170 7,015 7,590 7,686 7,661Benefit Plan Adjustment (Avg.) 341 1,504 1,296 1,545 2,006 3,171
Invested Capital $14,685 $14,286 $14,243 $14,212 $14,419 $15,248
ROIC 6.0% 9.6% 10.8% 14.5% 19.2% 21.4%
Our definition of Return on Invested Capital (ROIC) is net earnings plus after-tax interest expense divided by average invested capital (stockholders' equity plus debt), after adjusting stockholders’ equity by adding back adjustments related to postretirement benefit plans. Average benefit plan adjustments reflect the cumulative value of entries identified in our Statement of Stockholders Equity related to recognized and unrecognized benefit plan-related amounts, the adjustment for adoption of FAS 158 and the minimum pension liability.
ROIC Calculation($M, Except %)