Lockheed Martin Corporation Matt Shearer ACG 2021.080

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Lockheed Martin CorporationMatt ShearerACG
2021.080
Annual Report
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Executive Summary

• The future looks great for the Lockheed Martin
  Corporation. Theyve recently won a contract
  with the U.S. government to produce several
  Marine Ones, which is the Presidential
  Helicopter. Theyre in the process of acquiring
  the Titan Co. and Orincon which will greatly
  expand information and abilities. And with
  Americas renewed vigor in the space programs,
  all areas of business are doing well.
• Lockheed Martin Financial Reports

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Part A. Introduction

• CEO Robert J. Stevens
• Headquarters Bathesda, Maryland
• End of last fiscal year December 31, 2003
• Engaged in research, design, development,
  manufacturing and the integration of advanced
  technology systems, products and services
• This includes Aeronautics, Space Operations,
  Information Technology, Missile and Fire Control,
  and Transportation and Security Solutions

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Part A. Audit Report

• Independent Auditors Ernst Young LLP,
  Independent Auditors
• What did they say about the Co.? After the
  auditors ran their tests in accordance with
  auditing standards generally accepted in the
  United States, they found no misrepresentation in
  the financial statements of Lockheed Martin Co.
  So the reports were fair and assembled correctly.

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Part A. Stock Market Information

• Most recent price of the companys stock 58.88
• Twelve month trading range of the companys
  stock 45.00 - 62.50
• Dividend per share .88
• Date of the above information December 31, 2003
• My opinion about the company stock as an
  investment? Buy! Lockheed Martin is almost
  single handedly defending America, and some of
  our allies. With the administrations hard lined
  approach to threats and terrorism, the next few
  years look awful green.

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Part B. Industry Situation and Company Plans

• In todays world, information is the single most
  important weapon for defense.
• Lockheed Martin is on the very forefront of
  Integrated Systems Technologies.
• Along with these computer systems and satellites,
  Lockheed Martin recorded a record year in its
  aeronautics business and its 8th consecutive year
  of organic growth in its electronics system
  business.
• They completed strategic transactions to acquire
  the Titan Corporation, which will bolster
  intelligence and defense capabilities upon
  completion.

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Part C. Income Statement

• Single Step Format

(in millions) 2002 2003
Income from Operations 1949 1976
Net Income 1158 2019

• Income from operations didnt change much from
  2002 to 2003, but Net Income did see a nice
  increase. This tells me that Lockheed trimmed
  some fat and found a ways to keep some of its own
  money.

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Part C. Balance Sheet
(In millions) Assets Liabilities S.E.
2002 37,605 11,545 5,864
2003 35,576 10,807 6,756

• Assets decreased by more than two thousand with
  Liabilities and Stockholders equity both
  increasing by less than one thousand.

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Part C. Statement of Cash Flows

• Are cash flows from operations more or less than
  net income for the past two years? In 2002,
  Income from Operations was 33 million more than
  Net Income. In 2003, both Income from Op. and
  Net Income recorded gains of 1053 million
• Is the company growing through investing
  activities, i.e., buying property, plant and
  equipment and other long lived assets? Yes,
  Lockheed Martin invests millions in its
  affiliated companies.
• What is the companys primary source of
  financing, i.e., long-term loans, stock sales?
  Long-term loans were the main source of financing
  for 2003.
• Overall, has cash increased or decreased over the
  past two years? In 2002, cash saw a huge
  increase, entering 2003 with 2738 million, but
  at years end it was down to 1010 million.
  Acquisitions and doubling dividends from .44 to
  .88 probably had the most to do with this.

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Part D. Accounting Policies

• Cash and Cash Equivalents Cash equivalents are
  generally composed of highly liquid instruments
  with maturities of 3 months or less. Approx.
  fair value.
• Short term Investments The Corporations
  short-term investments consist of marketable
  securities that are categorized as available-for
  sale.
• Inventories Inventories are stated at the lower
  of cost or estimated net realizable value. Costs
  on long-term contracts and programs in progress
  represent recoverable costs in
• Sales Earnings Sales and anticipated profits
  under long term fixed-price production contracts
  are recorded on a percentage of completion basis,
  generally using units-of-delivery as the basis to
  measure progress toward completing and contract
  and recognizing revenues.

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Part D. AccountingTopics of Notes to Financial
Statements

• Significant Accounting Policies
• Acquisitions Divestitures
• Receivables
• Inventories
• Debt
• Income Taxes

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Part E. Financial AnalysisLiquidity Ratios for
2003

• Working Capital 508
• Current Ratio 1.05
• Receivable turnover 8.27
• Average days sales uncollected 44
• Inventory turnover 12.9
• Average days inventory on hand 28.3

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Part E. Financial AnalysisProfitability Ratios
for 2003

• Profit margin .003
• Asset turnover 1.2
• Return on assets .04
• Return on equity .156

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Part E. Financial AnalysisSolvency Ratio

• Debt to equity 2003 1.32
• 2002 1.67
• At this point, the bank owns Lockheed Martin, but
  this is because most of its business is done on
  credit with contracts extending beyond one cycle
  of operations.

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Part E. Financial AnalysisMarket Strength Ratios

• Price/earnings per share 62.5
• Dividend yield .016