Lockheed Martin’s sales declined 1 percent to $11.3 billion in the second quarter of 2014 compared to the same period one year ago, while profits grew 3.5 percent, helped by gains in the company’s pension accounts.
The Bethesda-based defense giant on Tuesday reported profits of $889 million — $2.76 per share — compared to $859 million, or $2.64 per diluted share, in the second quarter of 2013. Net earnings also included pension income of $85 million, which increased net earnings by $53 million in the second quarter.
Many federal contractors have experienced a decline in revenues as they adjust to a slowdown in government spending.
“I think we’re actually doing well in terms of performing on contracts and growing our international business,” executive vice president and chief financial officer Bruce Tanner said in a conference call with analysts on Tuesday morning — which he noted was “one of the keys to offsetting” the lingering effects of the federal spending cuts known as sequestration.
Total cash from operations was $977 million, compared to $623 million in 2013.
Tanner noted Lockheed in May won a contract to build a new presidential helicopter, and has been expanding business in Australia.
Still, Lockheed’s aeronautics unit was the only segment to show an increase in net sales; sales grew by 13 percent or $448 million, primarily because of an increase in volume in production contracts for the F-35 fighter jet. Operating profit in the segment increased $46 million, or 11 percent, compared to the same period in 2013.
The company has been dealing with investigations into the F-35 fighters -- which comprised about 18 percent of total sales in the second quarter — after reports of engine fires beginning in late June.
“The effects of the engine investigation really won’t have an effect on our revenue,” Tanner said. “International customers we spoke to believe this is an issue that will be resolved, will be resolved in fairly short order, and will not have an influence on their decision.”
Space systems sales saw the biggest decline — sales fell $239 million or 11 percent compared to the same quarter in 2013, primarily because of lower sales to government satellite programs, and operating profit for the segment decreased about 10 percent.
Lockheed’s information systems segment saw sales decrease by $160 million, or 8 percent compared to the same period one year ago. Missiles and fire control saw net sales decrease by $152 million or 7 percent.
Lockheed’s recent amendments to its pension plan for union employees did not affect its financial results, the company noted. Beginning in 2016, the pay-based element of the formula used to determine retirement benefits will be frozen, and in 2020 the service-based component will be frozen so participants.