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Lockheed Martin (LMT)
Q1 2011 Earnings Call
April 26, 2011 11:00 am ET
Bruce Tanner - Chief Financial Officer and Executive Vice President
Bob Stevens - Chairman, Chief Executive Officer and Chairman of Executive Committee
Jerry Kircher - Vice President of Investor Relations
Robert Stallard - RBC Capital Markets, LLC
Cai Von Rumohr - Cowen and Company, LLC
Jason Gursky - Citigroup
Howard Rubel - Jefferies & Company, Inc.
Eric Hugel - Stephens Inc.
George Shapiro - Citi
Joseph Nadol - JP Morgan Chase & Co
Heidi Wood - Morgan Stanley
Douglas Harned - Sanford C. Bernstein & Co., Inc.
Carter Copeland - Barclays Capital
Robert Spingarn - Crédit Suisse AG
Richard Safran - Buckingham Research Group, Inc.
Samuel Pearlstein - Wells Fargo Securities, LLC
Myles Walton - Deutsche Bank AG
Peter Arment - Gleacher & Company, Inc.
David Strauss - UBS Investment Bank
Previous Statements by LMT
» Lockheed Martin's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Lockheed Martin Management Discusses Q3 2010 Results - Earnings Call Transcript
» Lockheed Martin Q2 2010 Earnings Call Transcript
Thank you, Sean, and good morning. I'd like to welcome everyone to our First Quarter 2011 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.
Statements made in today's call that are not historical fact 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 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 Bob.
Thanks, Jerry. Good morning, everyone. Thanks for joining us today. I'll proceed on the basis that you've had an opportunity to read today's earnings release for first quarter results, which I felt provided a good start for 2011, including booking over $12 billion in orders that expanded our backlog to over $80 billion while achieving sales growth of 3%. Our focus, operational tempo, quality and overall execution remain strong. We were again able to generate exceptional cash flow with cash from operations of $1.7 billion. This robust focus on cash generation continues to be a key element of our strategy to provide sustained return to shareholders while still ensuring appropriate investments in our business.
Since we last spoke with you in January, the dynamic change in world events continues to demonstrate the growing spectrum of complex global security requirements faced by our country and our customers. In addition to ongoing operations in Iraq and Afghanistan, instability on the Korean Peninsula, an emerging China and a threatening Iran, just this past quarter, we've seen unprecedented civil demonstrations for democratic reform across Northern Africa and the Middle East, tragic earthquakes and tsunamis in Japan and New Zealand, requiring an instant human experience response, and actions to protect civilians in Libya from the risk of widespread massacre by government forces. These events and others underscore the ongoing and at times unanticipated critical missions that our military must fulfill.
With this velocity of change and the volume and volatility of global events continuing to expand, more demands on our military are likely. For our company, these events are having the effect of changing some of the near-term priorities of our international customers, delaying, for example, orders for F-16s in Iraq and C-130Js in the United Arab Emirates, while the need for an integrated air and missile defense system in the UAE has been reemphasized and elevated.
On April 15, agreement was reached on the FY '11 appropriations bill ending the continuing resolution that had been in place since the start of the fiscal year that began last October. The final bill signed into law by the President includes $531 billion for DoD-based budget authority and $158 billion for Overseas Contingency Operations funds. The resolution of the FY '11 Appropriations Bill was particularly important because it provides the resources and visibility our customers need to maintain their operational focus.
With funding issues resolved, we're also able to reaffirm our previously stated financial guidance for calendar year 2011. Congress is now turning attention to the fiscal '12 defense budget where the President has requested $553 billion for the base budget and $118 billion for Overseas Contingency Operations. However, as we've already seen, there'll be much more discussion about the right levels of security investment.
Let me turn to some operational highlights and start with a view of the development, production and sustainment of the Joint Strike Fighter, which is showing good progress. On the development program, momentum continues to build in flight test. In the first quarter, overall, we completed 199 flights against the plan of 142, achieving the highest quarterly level to date. The maturity of the STOVL aircraft is showing marked improvement, completing 101 flights versus a plan of 62, including 61 vertical landings. The conventional and carrier variants are also performing well, and overall, test point productivity is ahead of plan and software development continues to meet the revised base line.
On the production program, progress also continues. The first 2 production aircraft flew for the first time in preparation for a delivery to the United States Air Force that we anticipate will occur over the next couple of weeks. Low-rate initial production continues to accelerate with 62 aircraft in backlog, and we look forward to placing Lot 5 under contract later this year.