Lockheed Martin Management Discusses Q2 2012 Results - Earnings Call Transcript

Lockheed Martin (LMT)

Q2 2012 Earnings Call

July 24, 2012 11:00 am ET


Jerry F. Kircher - Vice President of Investor Relations

Robert J. Stevens - Chairman, Chief Executive Officer and Chairman of Executive Committee

Christopher Eugene Kubasik - Vice Chairman, President, Chief Operating Officer and Member of Executive Office of the Chairman

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


Heidi Rolande Wood - Morgan Stanley, Research Division

Jason M. Gursky - Citigroup Inc, Research Division

Carter Copeland - Barclays Capital, Research Division

Richard Tobie Safran - The Buckingham Research Group Incorporated

Joseph Nadol - JP Morgan Chase & Co, Research Division

Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

David E. Strauss - UBS Investment Bank, Research Division

Robert Stallard - RBC Capital Markets, LLC, Research Division

George Shapiro

Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division

Robert Spingarn - Crédit Suisse AG, Research Division

Cai Von Rumohr - Cowen and Company, LLC, Research Division

Myles A. Walton - Deutsche Bank AG, Research Division

Howard A. Rubel - Jefferies & Company, Inc., Research Division



Good day, ladies and gentlemen, and thank you for standing by. Welcome, everyone, to the Lockheed Martin Second Quarter 2012 Earnings Results Conference Call. Today's call is being recorded. 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. Please go ahead, sir.

Jerry F. Kircher

Thank you, Karen, and good morning. I'd like to welcome everyone to our second quarter 2012 earnings conference call. Joining me today on the call are Bob Stevens, our Chairman and Chief Executive Officer; Chris Kubasik, our Vice Chairman, President and Chief Operating 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.

Robert J. Stevens

Thanks, Jerry. Thanks, everyone, for being with us today. We'll proceed on the assumption that you had an opportunity to review our releases this morning.

Since we last spoke in April, we've undertaken a fair amount of international travel to talk directly with our customers and government leaders, consistent with our strategy to increase our international work while we rebalance national security spending here in the United States. While all governments are clearly watching the global economic environment, all are keenly aware of growing security challenges.

As we assess our portfolio, we believe we possess the systems, the capabilities, the skills and the resources to support our security cooperation partners around the globe. And I was very gratified to see strong broad-based operational performance in the second quarter throughout the company based on solid execution and discipline focus. We believe our portfolio gives us opportunities to continue to expand international sales.

Relative to the government fiscal year '13 defense budget, the House has marked and committee both the Defense Authorization Bill and all 12 appropriation bills, including defense. And the Senate has marked the Defense Authorization Bill and committee and will likely mark the Defense Appropriation Bill by the end of this month. At this point, however, we do not expect the bills to be in place at the beginning of the government's fiscal year on October 1, but rather have a continuing resolution that will commence on 1 October and likely extend through the end of the calendar year, enabling the Congress to convene a lame duck session after the election where we believe a broader number of very important initiatives like the debt limit extension, entitlement reform tax policy and spending levels together, sometimes referred to as the fiscal cliff issues, will be addressed.

Sequestration continues to be a great concern to us. There is at present, very little insight or detailed understanding as to how sequestration will be implemented even though this law, requiring an additional $55 billion reduction in both defense and in non-defense discretionary accounts, will take effect January 2, 94 days into the government fiscal year. Without sufficient planning information, we have been unable to more precisely estimate the adverse impacts, and have petitioned the administration and the Congress to stop sequestration and replace it with a more constructive process, or if sequestration is to occur, provide the necessary planning information so we can properly and responsibly prepare to act.

I'll be happy to cover these or any other topics in more detail during our discussion, but first, let's turn to Chris for the operational report and Bruce for the financials. Chris?

Christopher Eugene Kubasik

Well, thanks, Bob. From an operating perspective, we had a very strong quarter in an uncertain and challenging environment. In the area of new business, we had several multiyear awards that allow us to offer innovative, relevant and affordable solutions to our customers.

In Electronic Systems, the U.S. Navy awarded a 5-year, $1 billion contract to provide more than 200 digital cockpits and integrated systems and sensors for the new MH-60 Romeo and CR helicopters. The Navy will realize significant savings due to the multiyear contracting vehicle.

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