Lockheed Martin Reports Strong

http://www.lockheedmartin.com/investor/general_information/annual_reports.html
http://www.dailymarkets.com/stock/2011/01/28/lockheed-martin-reports-strong-2/
Summary:

Aeronautics is one of the four divisions of Lockheed Martin. The aeronautics sales increase 19% and it contributes the most to the net sales of 2010. Lockheed Martin uses the term net sales instead of net income. Net sale is basically the total sales of all division in the company. Aeronautics has a better result due to the increase in producing transport airplane. The C-130J and C-5 is the main multipurpose transport airplane in the US Army. The increase in volume does generate majority of income to Lockheed Martin. However, the US government decreases the production of F-16, F-22 and F-35 combat aircraft. The profit went down by 4% and profit margin has shrunk. Although the demand of combat aircraft decreases, the transport aircraft helps Lockheed to turn the table and end up with $3.9 Billion profit. The electronic Systems and Global solution divisions remain in a stable growth. The last division is the Space System and the sales decreases by 13% ($2.3B). The sales decrease due to lower volume on launching activities and space shuttle program. Those activities are the main source of income for this division. Even though there are increases in Space Satellites, the profit cannot cover the loss.

Analysis:

The operating activities increased by $374 million due to increased contributions to the pension trust of $758 million. The second factor is the increase in transport aircraft production. Since it is a bigger plane, Lockheed need more resources in manufacture as well as to maintain the aircraft after sales. However, Lockheed benefited from the lower income tax payment and eventually it ended up with $374 million.

Majority of the investing activities are conducted for capital expenditures. Lockheed invested in facilities infrastructure and equipment. They support new and existing programs across all of our business segments and as the result, the company will benefit from their effective performance. Capital expenditures for property, plant and equipment amounted to $820 million in 2010. Lockheed receives a $798 million from the sale of their sister company EIG. The discontinued company closed all their accounts last year and the transaction coasts $17 million.

During 2010, Lockheed repurchased 33 million of their common stock for $2,483 million up to an authorized amount of $3.0 billion. Under this program, they can determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. Their finance activity is to repurchase stocks. Parts of the profit are repaid to shareholders in the form of dividends. Lockheed did not purposely reduce the number of shares held by the public.

Reflection:

            US defense is the biggest contractor of Lockheed Martin. However, the United States as the big brother of the world begins to pull themselves out of the war zone and conflict. Funding in the combat aircraft decreases due to the decrease in demand. They dominated in the military race and it is time for the US government to cut their paces. Instead of making fighter jets, they have Lockheed to make transport aircraft. Increase in transport aircraft benefit US in responding to emergency. The rapid increase in natural disaster does raise the demand in these types of aircraft. It is costly to produce huge transport aircraft and it increases the operating expenses. However later in the year, the sales will eventually cover the cost of making the aircraft. Space exploration is a interesting program for human beings and our curiosity tend to want to know more about the universe. US dominated the space exploration race as well and they begin to reduce the expenditure in the space program. The investing activity is likely to decrease in Space System division because the government decides to decrease the production of Space equipment.            

            The nuclear disaster in Japan causes technology and mechanic industry to a halt. Countries that rely on their equipment and technology may seek for alternative temporary. Eastern Europe and the Pacific Asia have their own manufacturer and there is very high possibility that the manufacturer import some raw materials from Japan but the exporting in Japan is currently closed. The Eastern European and Asian aviation manufacture may see Lockheed Martin as their temporary manufacture.