Lockheed Martin’s sales declined 3.6 percent in the first quarter, compared with a year ago, even as profit continued to build, the Bethesda-based defense giant reported Tuesday.
The decline in sales is probably the result of automatic federal spending cuts, known as the “sequester,” Bruce Tanner, executive vice president and chief financial officer, said during a conference call with analysts. The cutbacks could continue to affect sales throughout the year, he said.
The company’s net sales for the quarter were $10.7 billion, down from $11.1 billion the previous year. Profit surged by 23.2 percent, reaching $933 million, or $2.87 per share, compared with $761 million, or $2.33 per share, the year before.
The growth in profit was helped by pension adjustments and last year’s total being reduced by the cost of buyouts and other separation packages as the company cut its workforce to deal with a slowdown in federal spending. Lockheed employs 113,000, down from about 146,000 in 2009.
Cash from operations reached $2.1 billion in the first quarter, unchanged from 2013.
“We had actually expected two years ago that 2014 would have been a growth year,” Tanner said. “We’re not seeing that, and we’re not seeing that because of sequestration.”
Sales to the Defense Department fell 4 percent from 2012 to 2013, and Tanner said the company expects them to fall an additional 6 percent in 2014.
Lockheed’s aeronautics segment continued to generate the most sales — about $3.4 billion, up about 6 percent from a year ago. The increase was partly because of higher revenue from F-35 fighter aircraft production contracts, and increased aircraft deliveries for C-5 transport planes and F-16 fighters, the company said.
Sales in all other segments declined: Information systems and global solutions fell 9 percent, compared with the same period last year; missiles and fire control 6 percent; mission systems and training 11 percent; and space systems 5 percent.
Growth in international sales helped to mitigate the overall decline, Tanner said. In 2014, Lockheed expects about 20 percent of sales to be international, but Tanner noted that pending sales to clients in South Korea, Australia, and Israel, among others, may not close within the year.
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