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Lockheed Martin Corporation (LMT)
Q409 Earnings Call
January 28, 2010 03:00 PM ET
Jerry Kircher - Vice President Investor Relations
Robert J. Stevens - Chairman & Chief Executive Officer
Bruce Tanner - Executive Vice President & Chief Financial Officer
Doug Harned - Sanford Bernstein
Peter J. Arment - Broadpoint
Ron Epstein - Banc of America
Howard Rubel - Jefferies & Co.
Joseph Nadol - JP Morgan
Joe Campbell - Barclays Capital
Richard Safran - Buckingham Research Group
George Shapiro - Access 342
Heidi Wood - Morgan Stanley & Co.
Myles Walton - Oppenheimer & Co.
David Strauss - UBS
Cai von Rumohr - Cowen & Company
Troy Lahr - Stifel, Nicolaus & Company
Robert Spingarn - Credit Suisse Securities.
Sam Pearlstein - Wells Fargo
Brian Ruttenbur - Morgan Keegan
Itay Michaeli - Citi
Previous Statements by LMT
» Lockheed Martin Corporation Q3 2009 Earnings Call Transcript
» Lockheed Martin Corporation Q2 2009 Earnings Call Transcript
» Lockheed Martin Corporation, Q1 2009 Earnings Call Transcript
Thank you Bo and good afternoon everyone. I would like to welcome you to our fourth quarter 2009 earnings conference call. Joining me today on the call are Bob Stevens, our Chairman and Chief Executive Officer and Bruce Tanner, our Executive Vice President and Chief Financial Officer.
I’d like remind you the 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 the 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 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 would like to turn the call over to Bob.
Thanks Jerry. Good afternoon everybody. Thanks for joining the call today. It’s probably a little late in the year for this, but let me wish you all happy New Year and hope 2010 is off to a good start for you all.
As we entered 2009, we certainly had some expectations about the environmental circumstances that we would face during the year. With a new administration we expected some new priorities, although it was difficult at the outset to predict exactly how those new priorities would unfold.
Given the work that we do with our customers all around the world we were absolutely certain that the global security environment had many growing challenges that we needed to face.
And like all of you, we watched as the global economy struggled, mindful of the potential pressure that might be applied to our company and certainly those that might be applied to our suppliers in the form of insufficient liquidity or other impacts as they might face.
By about mid-year 2009, we had a pretty good assessment of where the program priority shifts were likely to occur as the new administration made some changes and several of our programs were terminated or canceled or capped, some with immediate effect.
Now, that certainly was a circumstance that we have not seen in prior years. One that confronted us with some sizable near-term operational and financial challenges that required us to take immediate action to rebalance our portfolio and realign our operations.
We did, by strengthening our executive focus on operations and reconstituting the Chief Operating Officer position, by reallocating talent and resources to different parts of the company where we thought they would be best applied and by making the difficult but necessary reductions and consolidations to emerge leaner and in good fighting shape.
Even with these additional challenges, we worked to maintain our momentum in our focus and performance in 2009 continued at a high level, achieving record sales, record cash generation, a 20% return on invested capital and achieving our $5 billion segment operating profit goal a year earlier than we'd originally planned.
Maybe more than anything else, we recognized that we and our customers are facing a new reality as they confront expanding mission requirements and greater fiscal pressure that’s simply not going to go away in the near term.
And as the industry leader, we are working now to contain costs, shorten cycle times, improve quality and meet the commitments that we've made by redoubling our focus on operational excellence, which has been a strength of our company, with the recognition that we really should seize this moment to do a better job.
If this sounds a little bit like back to basics, it is just that because in our judgment, the best way for us to move forward to reach our potential and to continue to grow is to increase our focus on the basics of execution because that’s what our customers need most from us now.
We have very solid fundamentals in this company. We have extraordinary talent and our access to the people and ideas is unconstrained. We have resources for investment.
We have a creative energy in this company that drives innovation and a competitive spirit that thrives on meeting big challenges and it’s a dominant part of our culture.
And we have the right long-term view. Our global security strategy is sound. Security needs aren’t going away even with fiscal pressures. They will grow in volume and in diversity.
Security here at home and with our trading partners abroad is essential to our economic recovery and growth for the prosperity of our citizens and to the well being of many others.
Security is so essential that Americans have always invested in what was needed even in times of economic stress and will continue to do so. So while some of our programs and operations were impacted by reprioritization decisions in 2009.
Our longer term business prospects have been strongly reenforced with commitments to tactical aircraft, airlift, missile defense capabilities and space systems, intelligence, surveillance and reconnaissance systems that lead to situation awareness and the command and control systems that allow them to work effectively, sea power through Aegis and the Littoral Combat Ship, precision guide of weapons and a variety of other programs all of which having been strongly supportive.
We saw evidence of this support in the recently enacted 2010 budget, which solidly funded our programs. I believe we will also see this support in the 2011 budget scheduled for release next week, February 1st, that budget will likely target some top line growth and be accompanied by a request for additional overseas contingency operational funds.
And I believe, we'll see this support sustain throughout the future year defense program and in the quadrennial defense review that’s also going to be released next month.
With the changes 2009 introduced into our portfolio, we’re now in alignment with government priorities and needs. And our back-to-basics approach that emphasis tight processes that yield predictable results, flexible systems that are adaptable and responsive to the accelerating pace of change, and those that can be used by multiple customers and services, will position us well for revenue growth greater than the defense budget while we drive to meet our goal of expanding our international sales to 20% of our total revenue by 2012.
There will be a continuing demand for global security solutions and that demand will favor those with a proven track record of execution, which has been a hallmark of our success, and we’re going to build upon that strength as we drive toward perfect performance.
Let me ask Bruce now to give you some further details on 2009, but I would like to come back in a few moments and give you some color on the Joint Strike Fighter before we open the line for your questions.
I like to build on Bob's earlier comments regarding our solid performance in 2009 and we've included some charts on our website to help with my discussion. I'd encourage you to open those charts now and follow along with me as I make my comments.