This summary is based on the third quarter fiscal 2008 earnings call conducted by Lockheed Martin Corp. (LMT) on October 21, 2008.
Management:
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EVP and CFO: Bruce Tanner
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VP, IR: Jerry Kircher
Key Investors Issues
- Earnings of $782 million or $1.92 a share were up from $766 million or $1.80 a share in 2007.
- Net sales were $10.6 billion, a 5% decrease from 2007.
- The firm repurchased 3.7 million shares at a cost of $401 million.
Year to Date Highlights:
- Sales were up 1% to $31.6 billion from $31 billion in 2007.
- Earnings were up 7% to $2.4 billion or $5.97 a share.
- Repurchased 22.3 million shares at a cost of $2.4 billion and paid out $510 million in dividends.
Third Quarter Highlights
The firm reported earnings of $782 million or $1.92 a share, up from $766 million or $1.80 a share in 2007 due to a beneficial pension adjustment.
- Net sales were $10.6 billion, a 5% decrease from 2007 sales of $11.1 billion on weak segment performance.
- Cash from operations was $1.0 billion, compared to $935 million in 2007.
- The company retired $1.0 billion of long-term debt as a result of the previously announced floating rate convertible debt redemption.
- It repurchased 3.7 million shares at a cost of $401 million.
- Capital expenditures of $229 million were made and it paid cash dividends of $170 million.
Segment Highlights:
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Aeronautics sales decreased by 13% as decreases in Combat Aircraft and Air Mobility sales more than offset increases in Other Aeronautics Programs.
- The decrease in Combat Aircraft was due to lower volume on F-16 and F-35 programs.
- The decrease in Air Mobility was due to lower volume on the C-130J program, including deliveries and support activities, and lower volume on other air mobility programs.
- There were three C-130J deliveries in the third quarter of 2008 and four in the comparable 2007 period.
The increase in Other Aeronautics Programs was due to higher volume in sustainment services activities.
- Operating profit decreased by 9% declining in Combat Aircraft, Air Mobility and Other Aeronautics Programs due to lower volumes.
- The increase in Other Aeronautics Programs mainly was due to higher volume in sustainment services activities, which partially was offset by a decrease in operating profit due to performance on a P-3 modification contract.
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Electronic Systems sales decreased by 1% as lower sales volume on platform integration activities at Platform, Training & Energy (PT&E) and radar systems activities at Maritime Systems & Sensors (MS2) were offset by higher sales volume on tactical missile and fire control programs at Missiles & Fire Control (M&FC).
- Operating profit increased by 5% as increases in MS2 and PT&E more than offset a decline in M&FC attributable to fire control and tactical missile programs.
- The increase in MS2 mainly was attributable to improved performance on surface systems programs, while the increase at PT&E primarily was due to improved performance on distribution technology and platform integration activities.
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IS&GS sales increased by 9% as sales increased in all three lines of business.
- The increase in Global Services principally was due to global and mission services activities and Pacific Architect & Engineers (PAE) programs.
- The increase in Information Systems was due to higher volume on enterprise solutions & services activities.
- The increase in Mission Solutions primarily was driven by mission and combat support solutions activities as well as by transportation and security solutions.
- Operating profit increased by 9% driven by Global Services and Mission Solutions.
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Space Systems sales decreased by 14% with a sales decline in Satellites partially offset by growth in Space Transportation.
- In Satellites, sales declined due to lower volume in commercial and government satellite activities in both periods.
- Operating profit increased by 10% due to Space Transportation, this partially was offset by a decline in Satellites.
- In Space Transportation, the increase was due to higher equity earnings on the United Launch Alliance joint venture, volume on the Orion program and successful negotiations of a terminated commercial launch service contract in early 2008.
Operational Insights:
- The 2009 DoD appropriations bill was recently signed into law by President Bush at $512 billion.
- This core defense budget reflects growth of approximately 6% above 2008 levels and provides solid support for the firms products, including funds for extensions and growth on a number of key programs.
- The portfolio of programs is expected to grow consistent with the DoD core budget, driven primarily by strong future growth on the F-35 Joint Strike Fighter Program.
Specific items approved in the new budget includes funds for the third LRIP contract on the F-35 Joint Strike Fighter; eight C-130J aircraft and $523 million for lot 10 long-lead procurement activities on the F-22 Raptor.
