This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Lockheed Martin Corp. (LMT) on January 22, 2009.
Management:
Chairman, President and CEO: Robert Stevens
EVP, CFO: Bruce Tanner
VP, IR: Jerry Kircher
Key Investor Issues:
- Full year net earnings were $3.2 billion versus $3 billion in 2007.
- Net sales for 2008 were $42.7 billion, an increase of 2% from $41.9 billion in 2007.
- Return on invested capital rose from 21.4% in 2007 to 21.7% in 2008.
Fourth Quarter Financial Highlights:
The aeronautics team has reportedly been performing at an exceptional level across their portfolio.
- The management continues to retire risk on the development effort regarding the largest program, the F-35 Joint Strike Fighter.
- The Carrier version design and development is moving forward on schedule.
- The integration and verification of the Mission System suite continues to parallel on the cooperative avionics test bed aircraft.
- Production activities in Fort Worth are accelerating with all development aircraft and now the first low rate initial production aircraft in assembly.
- International partner participation remains solid and the company seeing additional interest by non-partner nations.
- Each of the large aircraft production programs, the C-130J, the F16 and the F22 secured new domestic or international awards that enabled all three to extend their production lines.
- The C-130J program won new orders from India, Qatar and the U.S. Government, solidifying production through December 2012.
- To accommodate new orders, the management is working to double current annual production rate from 12 to 24 aircraft in 2010.
- The F16 program added to the list of international customers with a new contract from Morocco.
- The management reported that 24 countries have now chosen the F16 and this contract extended the production line through December 2012.
- The F22 Raptor program continued to demonstrate extraordinary manufacturing performance in 2008.
The Space Systems business won both the GPS3 and Gozar competitions.
- These wins are a direct measure of the world class expertise in next generation satellite systems.
- The management feels honored to be trusted as a partner providing these mission critical navigation and weather solution to the United States Air Force and to NOA.
- The Space segment performed flawlessly on the successful Phoenix Mars Lander mission.
The management expressed satisfaction with the sales growth rate and the new business win performance in the Information Systems and Global Services business.
- The win rate was exceptional on new business awards and enabled the business to close the year with a record backlog that is reflective of clear and compelling value delivery to customers.
- The wins resulted in an organic growth rate of 13% and solidly position the business for strong sales growth in the future.
The company recorded some challenging programs that required additional efforts to achieve mission success.
- The programs included Java, the Littoral combat ship and the V871 Presidential helicopter.
- On Java, the management implemented reliability improvements that achieved recertification of the program and new production awards.
- On the Littoral combat ship, the company completed sea trials that demonstrated unequaled speed, maneuverability and capabilities on the first ship of this new class of naval vessel.
- The maturity and performance of the ship resulted in its commissioning by the United States Navy in November.
The company completed the acquisition of Universal Systems and Technology earlier in the month and included them in our 2009 outlook.
- Unitek provides interactive training and simulation solutions to DOD and international customers.
- The company be managed within the electronic systems business and will extend capabilities and relationship and support growing customer demand for operational readiness and training solutions.
The company successfully won a long term contract in Canada to modernize the Halifax Class Navy Frigate and its missile defense.
- The management secured the first sale in the Middle East of the Pac 3 Missile defense system with a contract award from the United Arab Emirates.
- These diverse awards demonstrate the broad spectrum of product offerings and the ability to bring value to new international customers.
- For the third year in a row, Lockheed Martin was ranked by Business Week Magazine as one of the top 10 places to launch a career.
- The sustained recognition that Lockheed Martin is a desirable and valuable place to work continues to fuel the inflow of more than one million resumes in 2008 and enabled the company to hire more than 13,000 new employees.
The 2009 U.S. Defense budget provided mid single digit growth above prior year levels and solid funding for the major programs.
- The current outlook for the fiscal 2010 budget is projected to provide a growth of about 2% to 3% over 2009 levels.
- Despite this growth rate, the management continues to believe that revenue growth will exceed the overall BOD growth rate driven by strong expansion in our F-35 program and information technology sales.
