NEW DELHI: U.S. weapons maker Lockheed Martin Corporation reported third quarter 2020 net sales of $16.5 billion, compared to $15.2 billion in the third quarter of 2019.
Net earnings from continuing operations in the third quarter of 2020 were $1.8 billion, or $6.25 per share, compared to $1.6 billion, or $5.66 per share, in the third quarter of 2019. Cash from operations in the third quarter of 2020 was $1.9 billion, compared to cash from operations of $2.5 billion in the third quarter of 2019.
“In the third quarter, our dedicated workforce and resilient supply chain continued to support our customers’ vital national security missions, overcoming the challenges of the pandemic,” said James Taiclet, Lockheed Martin president and CEO.
“As a result, we delivered strong results across our key financial metrics and we expect to build on this success through the remainder of the year. Looking ahead to 2021, we remain focused on driving innovation and growing our assets and capabilities to further benefit our customers and shareholders,” he added.
2021 Financial Trends
The corporation expects its 2021 net sales to increase to greater than or equal to $67 billion. Total business segment operating margin in 2021 is expected to be in the 10.9 percent to 11.1 percent range and cash from operations is expected to be greater than or equal to $8.1 billion, net of $1.0 billion of planned pension contributions.
The preliminary outlook for 2021 assumes continued support and funding of our programs, including recovery of COVID-19 cost impacts, and a statutory tax rate of 21%. Additionally, the preliminary outlook for 2021 assumes that there will not be significant reductions in customer budgets, changes in funding priorities and that the U.S. Government will not continue to operate under a continuing resolution for an extended period in which new contract and program starts are restricted. Changes in circumstances may require the corporation to revise its assumptions, which could materially change its current estimate of 2021 net sales, operating margin and cash flows.
The corporation currently expects a total net FAS/CAS pension benefit of approximately $2.1 billion in 2021. This estimate assumes a 2.50 percent discount rate (a 75 basis point decrease from the end of 2019), a 7.00 percent return on plan assets in 2020, 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 2021 FAS/CAS pension benefit. A change of plus or minus 100 basis points to the return on plan assets in 2020 only, with all other assumptions held constant, would result in an incremental increase or decrease of approximately $15 million to the estimated net 2021 FAS/CAS pension benefit.
The corporation expects to make contributions of approximately $1.0 billion to its qualified defined benefit pension plans in 2021 and anticipates recovering approximately $2.1 billion of CAS pension cost. The corporation will complete the annual remeasurement of its postretirement benefit plans and update its estimated 2021 FAS/CAS pension adjustment on Dec. 31, 2020. The final assumptions and actual investment return for 2020 may differ materially from those discussed above.
COVID-19
The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020 and has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place” and quarantine restrictions, and created significant disruption of the financial markets. Lockheed Martin has taken measures to protect the health and safety of its employees, work with its customers and suppliers to minimize disruptions and support its community in addressing the challenges posed by this ongoing global pandemic.
The pandemic has presented unprecedented business challenges, and the corporation has experienced impacts in each business area related to COVID-19, primarily in increased coronavirus-related costs, delays in supplier deliveries, impacts of travel restrictions, site access and quarantine requirements, and the impacts of remote work and adjusted work schedules.
Despite these challenges, the corporation and the U.S. Government’s pro-active efforts, especially with regard to the supply chain, helped to partially mitigate the disruptions caused by COVID-19 on the corporation’s operations in the first nine months of 2020.
In addition, favorable contract award timing, strong operational performance and lower travel and overhead expenditures due to COVID-19 restrictions partially offset the impacts of COVID-19 on the corporation’s financial results in the first nine months of 2020. However, the ultimate impact of COVID-19 in future periods remains uncertain. The corporation’s 2020 outlook and 2021 financial trends assumes, among other things, that its production facilities continue to operate and it does not experience significant work stoppages or closures, it is able to mitigate any supply chain disruptions and these do not worsen, and it is able to recover its costs under U.S. Government contracts and government funding priorities do not change. While these are the corporation’s current assumptions, they could change and will depend on future pandemic related developments, including the duration of the pandemic and any potential subsequent waves of COVID-19 infection and government actions.
