Aerospace and defense manufacturer makes early moves for strong first quarter.
If the best defense is a strong offense, Lockheed Martin Corp. doesn't seem to have missed too many opportunities to strike. In the span of just a few months, the IndustryWeek Best Manufacturer for 2008 has already landed several new contracts, including a deal with the Canadian government valued at $1.4 billion for the purchase of 17 C-130J Super Hercules airlifters and related equipment and services.
In addition, the company inked a $250 million deal with Mitsubishi Heavy Industries and a $766 million agreement to provide tactical communications and networking solutions for the Air Force, Army and Navy.
These early maneuvers in 2008 seem to be paying off, as Lockheed Martin released its first-quarter earnings, in which the company's chairman, president and CEO Bob Stevens called the results an "excellent start" for the year. Lockheed recorded net earnings of $730 million for the quarter, compared to $690 million for the first quarter of 2007. Net sales increased 8% over first-quarter 2007 to $10 billion, while cash from operations came in at $882 million compared to $1.5 billion a year earlier.
According to Stevens, the first quarter results reflect continued progress on Lockheed Martin's commitment to build the world's premier global security company.
"We are meeting this goal by building on our core capabilities and continuing to be responsive to customers while delivering greater value to them," Stevens added. "This continued success reflects the efforts of our dedicated and talented employees who understand the important challenges facing our customers across the globe."
More recently, the programs run by both Lockheed Martin and aerospace rival Boeing Co. were evaluated by Congress earlier this month, according to a May 7 Reuters news service story, as the 2009 military budget made its way through the House and Senate. A House Air and Land Forces subcommittee recommended an additional $523 million as a down payment on 20 more Lockheed F-22 fighters in fiscal 2010, in addition to $3.9 billion to buy 15 Boeing C-17 cargo planes.
However, the Bush administration has deferred decisions on both the C-17 and F-22 production lines, leaving the programs up in the air until the president to be elected in November can decide their fate.
Earlier this week the Wall Street Journal reported another contract Lockheed is likely to win over Boeing Co., this one to build next generation navigation satellites for the U.S. military. The contract, which is worth at least $1.8 billion and involves the first eight "Block A" GPS III satellites, was expected to be awarded to Lockheed sometime this week but final word has not yet been released.
A different sort of contract for Lockheed Martin also reached a definitive conclusion recently, as the company finalized the acquisition of Atlanta-based, Eagle Group International LLC. The company provides logistics, information technology, training and healthcare services to the U.S. Department of Defense, with revenue mainly generated from work done for the U.S. Army. It is expected that the transaction will close in the second quarter of 2008, however other terms of the transaction were not disclosed.
At A Glance
Lockheed Martin Corp.
Primary Industry: Aerospace & Defense
Number of Employees: 140,000
2007 In Review
Revenue: $41.9 billion
Profit Margin: 7.24%
Sales Turnover: 1.45
Inventory Turnover: 22.3
Revenue Growth: 5.66%
Return On Assets: 10.74%
Return On Equity: 40.06%
"The acquisition of Eagle Group extends our logistics and business process outsourcing capabilities, strengthens our relationships with several key Army customers, and enhances our support for military force modernization and reset imperatives," Stevens said. "We're confident that this acquisition will create value for our customers and our shareholders."
Recent news also cleared up lingering concerns about an ongoing civil investigation involving billing problems with Lockheed Martin's Titan IV rocket. According to Reuters, the errors were the subject of an investigation by the U.S. Attorney's office in Los Angeles, which said in a statement that Lockheed obtained "excessive progress payments by manipulating its billings."
Earlier this week, Lockheed Martin agreed to pay $10.5 million to settle the investigation. Afterward the company noted that it was pleased with the resolution of the matter, and that it had voluntarily disclosed errors in billing requests from 1998 to 2001 after they were discovered during an internal review. The Titan IV rocket was retired in 2005 when it was replaced by the Titan V and Delta IV rockets.
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