Lockheed Martin says first-quarter profit fell 18 percent
Lockheed Martin, the world's largest defense contractor, said Wednesday that its profit for the first quarter fell 18 percent compared with the same period a year ago, a decline related largely to changes in federal tax policy brought on by the recently passed health-care reform law.
The Bethesda company said it earned $547 million, or $1.45 per share, down from $666 million, or $1.68 per share, in the first three months of 2009.
The company attributed its lower earnings in part to "an unusual charge" related to legislation that ended a tax deduction for benefit costs reimbursed under Medicare Part D. The charge decreased earnings by $96 million, according to Lockheed.
Net sales increased 3 percent, from $10.4 billion last year to $10.6 billion this year.
In a conference call with investors, Robert J. Stevens, Lockheed's chairman and chief executive, expressed optimism about the company's outlook, particularly pointing to an anticipated expansion in international sales.
The strongest growth in the past quarter was in Lockheed's aeronautics group, Chief Financial Officer Bruce L. Tanner said during the call. He attributed the unit's growth to development of the Joint Strike Fighter, also known as the F-35 Lightning II.
Though the aircraft program has been troubled by cost overruns and performance problems, Stevens said Lockheed is looking to "build momentum in the program."
"I don't see anything at all extraordinarily more challenging on the F-35 that should adversely affect our ability to generate profitability and earn out margins here," Stevens said, adding that international interest in the program remains high.
The civil and defense lines of Lockheed's business spurred sales growth in its information systems and global services unit, while its electronic systems and space systems businesses remained flat, according to Tanner.
Stevens praised the company's Decennial Response Integration System, which Lockheed is using to collect and scan responses to the 2010 Census. It then delivers the raw data to the Census Bureau.
"In my judgment, our work on the census is a good example of the broad range of information technology programs and supports and services that [the information systems unit] provides to a wide variety of U.S. government agencies," he said.
Tanner forecast increased sales for the information systems and global services unit as the year continues.
The information systems unit "has the largest percentage of its operating profit that it receives in the form of award fees, and this particular year, 2010, has a greater abundance of that award-fee pool in the second half of the year," he said. "That's just the way the contracts kind of fell out this year."
With $1.6 billion in cash from operations, Lockheed said the quarter produced the highest level of cash in corporate history.
Tanner predicted a similar second quarter and then increased growth in the second half of the year.