Lockheed Martin Corporation (LMT)

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Lockheed Martin Corporation (LMT)

Q4 2012 Earnings Call

January 24, 2013 3:00 pm ET


Jerry F. Kircher, III – Vice President-Investor Relations

Marillyn A. Hewson – President and Chief Executive Officer

Bruce L. Tanner – Executive Vice President and Chief Financial Officer


Robert M. Spingarn – Credit Suisse

Jason M. Gursky – Citigroup Global Markets Inc.

Richard Safran – Buckingham Research

Doug S. Harned – Sanford C. Bernstein & Co. LLC

Peter J. Arment – Sterne, Agee & Leach, Inc.

Myles A. Walton – Deutsche Bank Securities

Joseph B. Nadol III – JP Morgan Securities

Howard A. Rubel – Jefferies & Co., Inc.

George Shapiro – Shapiro Research

Carter Copeland – Barclays Capital

Cai von Rumohr – Cowen & Company

David E. Strauss – UBS Securities LLC

Sam Pearlstein – Wells Fargo

Noah Poponak – Goldman Sachs & Company

Bill R. Loomis – Stifel, Nicolaus & Co., Inc.



Good day, and welcome everyone to Lockheed Martin Fourth Quarter and Full-Year 2012 Earnings Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Jerry Kircher, Vice President of Investor Relations. Sir, please go ahead.

Jerry F. Kircher, III

Thank you, Karen, and good afternoon, everyone. I’d like to welcome you to our fourth quarter 2012 earnings conference call. Joining me today on the call are Marillyn Hewson, our Chief Executive Officer and President and Bruce Tanner, our Executive Vice President and Chief Financial Officer.

I would remind you that statements made in today’s call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities law. Actual results may differ. Please see today’s press release and our SEC filings for a description of some of the factors that may cause the actual results to vary materially from anticipated results. We have posted charts on our website today that we plan to address during the call to supplement our comments. Please access our website at www.lockheedmartin.com, and click on the Investor Relations link to view and follow the charts.

With that, I’d like to turn the call over to Marillyn.

Marillyn A. Hewson

Thanks, Jerry. Good afternoon, everyone. Thank you for joining us on the call today. And I hope you’ve all had a good start to the New Year. Before I begin, I want to say that it’s a pleasure to be here on my first earnings call and I look forward to working with you going forward. I hope you got a chance to review our press release outlining fourth quarter and full-year results. I am extraordinarily pleased and proud of our Lockheed Martin team.

We have continued to achieve strong program execution and focus in a challenging environment. These efforts enable the corporation to achieve exceptional operational and financial results in 2012. Let me begin with a brief summary of 2012. Strong order bookings in the fourth quarter resulted in our achieving a record annual level of almost $49 billion in new business awards from domestic and international customers.

Noteworthy awards included $4.4 billion on the F-35 Joint Strike Fighter program for additional production activities, $2 billion for two additional spacecraft on the Advanced EHF Military Communications program for the Air Force and $800 million for additional Patriot-3 missile defense components for the U.S. government and Taiwan.

These new orders enabled us to finish 2012 with a record backlog of over $82 billion. Our backlog of work provides a solid foundation for the future and is a direct indicator of the close alignment of our portfolio products with customers’ strategic priorities and requirements, even in today’s demanding fiscal climate.

Other record performance levels for the corporation included growing our earnings per share from continuing operations to $8.36, the highest EPS level we have ever achieved increasing our segment operating profit to almost $5.6 billion, $300 million above the 2011 level. Expanding our segment operating margin to a record 11.8%, an increase of 40 basis points above the 2011 level, and growing our sales to over $47 billion, despite a challenging budget environment.

These achievements reflect our commitment to affordability as our team drives for increased efficiencies and improved execution for our customers. We also continue to implement our cash deployment strategy to generate value to shareholders through dividend payments and share repurchases. In the fourth quarter, we paid $373 million in dividend and repurchased $286 million in shares. These actions brought our full-year total for cash return to shareholders to $2.4 billion reflecting dividend payments of $1.4 billion and share repurchases of $1 billion.

In addition to the cash returns in 2012, we generated 20% total shareholder return achieved by stock-price appreciation and dividend yield. These results reflect the quality of our work force, the strength of the corporation and the focus we all have on delivering value to our customers and shareholders. Thanks to everyone in the company for their contributions in driving the strong achievements.

In addition to these results, we also continued our strategic acquisitions under our String of Pearls strategy, with the purchase of two businesses in the quarter. Both of these acquisitions expand our offerings in support of our customers increased emphasis on advanced unmanned systems and are consistent with our goal to maintain a portfolio of technology advanced options that will generate value for customers and shareholders.

The first acquisition was for Chandler/May, a company that specializes in the design, manufacturing and support of unmanned aerial systems. The second acquisition was for CDL Systems, a software engineering firm that specializes in the development and licensing of vehicle control software for unmanned systems. These purchases following our acquisition early in 2012 of Procerus Technologies, and will be part of our mission systems and training business, where they will be integrated into our growing portfolio of unmanned systems and technologies.

Turning now to operational performance, our five business areas continue to execute with exceptional skill and focus in providing critical products and services to customers. While the quarter contain numerous accomplishments across the enterprise, I’d like to highlight two unprecedented successes in the ballistic missile defense test arena.

First, four of our five business areas provided equipment and support in the first ever integrated ballistic missile defense test of the Aegis, Patriot and THAAD systems. These systems work together to successfully detect, track and destroy multiple ballistic missile and cruise missile targets in a live fire test. This operational test was conducted by soldiers, sailors and airmen from multiple combatant commands and demonstrated the maturity and reliability of these essential missile defense systems.

It also demonstrated the benefits of layered, interoperable missile defense solutions that can provide protection to the U.S. and allies against the increasing proliferation of ballistic missiles. With the proven reliability and capabilities of our Aegis, Patriot and THAAD systems, we look forward to growing domestic and international customer demand for missile defense systems.

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