Lockheed Martin Profit Rises 20% as Stevens to Retire
Lockheed Martin Corp. (LMT), the world’s largest defense company, reported first-quarter profit rose 20 percent as Robert Stevens, the chairman and chief executive officer, announced plans to retire.
Stevens, 60, will step down as CEO in January and be replaced by Chris Kubasik, 51, currently the president and chief operating officer, Lockheed said today in a statement after the financial results were announced. Stevens intends to remain chairman until 2014. Marillyn Hewson, 58, will succeed Kubasik, the company said.
A former U.S. Marine Corps corporal, Stevens came to Lockheed when the defense contractor acquired Loral Systems Manufacturing Co. in 1996. He had been at Loral since 1987. Stevens succeeded Lockheed CEO Vance Coffman in August 2004.
Stevens’ tenure as the CEO has been marked by the challenges of designing and building the F-35 Joint Strike Fighter, Lockheed’s single largest program and, at about $382 billion, the Pentagon’s most expensive weapon system. The jet’s development has been delayed, costs have risen and the Defense Department now plans to reduce its purchases of the planes.
“I did not learn about leadership in business school,” Stevens told the Marine Corps Heritage Foundation in May 2010 after receiving a leadership award. “I learned about leadership when I was 18 years old” in the Marines. Stevens holds a graduate degree from Columbia University in New York.
Kubasik said today that developing international markets for the F-35, continued building of the U.S. Navy’s Littoral Combat Ship and winning a new U.S. Air Force bomber will drive the company’s growth.
Lockheed also sees health care and energy as “adjacent markets” that offer potential for growth as new starts in the U.S. defense industry are squeezed by demands to cut the U.S. budget deficit, Kubasik said in an interview.
The company said today in a statement that first-quarter net income from continuing operations rose to $665 million, or $2.02 a share, from $556 million, or $1.57 a share, a year earlier. The average estimate of 20 analysts surveyed by Bloomberg was for a profit of $1.71 a share. Sales increased 6.3 percent to $11.3 billion aided by sales of jet fighters, cargo planes and electronic systems.
The company reaffirmed its 2012 forecast made in January of profit of $7.70 to $7.90 a share.
Lockheed rose 72 cents to $91.70 at the close in New York trading, the highest price since Oct. 20, 2008, and has gained 13 percent this year.
The threat of automatic cuts in the U.S. defense budget of $500 billion over 10 years, which would take effect starting in January unless Congress and the president reverse them, is likely to affect the F-35 program.
The Pentagon already has proposed reducing its budget by about $490 billion over a decade, a proposal that includes buying 13 fewer F-35 jets than previously planned in fiscal 2013. Purchase of as many as 179 planes may be pushed off beyond 2017, the Pentagon has said.
Even with the proposed long-term cuts to the F-35 program, U.S. orders for trial production lots of the jet drove sales and profit at Lockheed’s Aeronautics unit.
More than half of the increase in sales at the unit during the quarter came from F-35 orders, Bethesda, Maryland-based Lockheed said in the statement today. Aeronautics sales rose 18 percent to $3.71 billion and unit profit increased 17 percent, the company said. Sales of F-16 jets and C-130 cargo planes also contributed to the revenue increase, the company said.
A union strike at the company’s Fort Worth, Texas, plant where F-35 and F-16 jets are assembled, hasn’t “brought us to our knees,” Kubasik told reporters on a conference call today.
Fort Worth Strike
The International Association of Machinists began striking on April 23 in protest against Lockheed’s proposal to switch employees’ pension plans to a defined contribution system from a defined benefit plan, Stevens and Kubasik said.
“I was personally surprised that the union chose to strike on this matter,” Stevens said.
Jennifer Whitlow, a Lockheed spokeswoman said in an e-mail that “we are willing to meet with the union at any time to continue discussions, but at this time, neither party has requested a meeting.” Lockheed has sufficient components to meet immediate needs and is using salaried employees to continue operations, she said.
Katrina White at the Fort Worth chapter of the International Machinists Union said she would seek a comment from the union officers.
Sales at Lockheed’s Electronics Systems unit, which makes anti-missile systems and oversees the Navy’s Littoral Combat Ship program, rose 3.6 percent to $3.6 billion because of ship and aviation programs. Profit increased 25 percent due to lower risk in rocket launch systems and the Joint Air-to-Surface Standoff Missile, the company said.
Space Systems sales increased 2.4 percent to $1.89 billion, Lockheed said. Unit profit rose 4.1 percent.
Sales at the Information Systems & Global Solutions unit fell 2.7 percent to $2.1 billion. Profit at the unit, which provides information-technology services to U.S. agencies including the Pentagon, fell 3.1 percent.
Lockheed’s discontinued operations included the Pacific Architects & Engineers unit that was sold in April 2011.
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