Second-Quarter Results: Momentum and Confidence at the Mid-Year Mark
DATE: July 24, 2012
TO: All Lockheed Martin Employees
FROM: Bob Stevens, Chairman and Chief Executive Officer
Chris Kubasik, Vice Chairman, President and Chief Operating Officer
SUBJECT: Second-Quarter Results: Momentum and Confidence at the Mid-Year Mark
Today we reported admirable second-quarter operating results that demonstrate your continued commitment to strong financial and operational performance during the most uncertain and challenging business environment in decades. Your focus on execution and your efforts to improve efficiency and control costs across the breadth of our company made it possible for us to grow sales in the quarter by 3 percent and earnings per share from continuing operations by 10 percent.
In addition, we generated $845 million in cash after contributing $607 million to our pension plans during the quarter. We also returned $512 million in cash to shareholders in dividends and share repurchases, which tracks to our 2012 objective to return at least 50 percent of free cash flow to shareholders.
Our sales growth reflects strong alignment between our portfolio and customer needs, including greater volume on the Littoral Combat Ship, MH-60 helicopters, Persistent Threat Detection System units, and the Orion crew exploration vehicle, plus increased deliveries of F-16s. We were selected by the U.S. Defense Information Systems Agency to manage the transformation of the Defense Department’s global data network, and we are encouraged by the robust customer demand for our cyber security solutions.
The F-35 program continues to gain momentum in developmental flight testing, production activities, and international interest. For the year, the test program remains ahead of plan for flights and test points. We also made progress on software development, and we delivered three production aircraft in the quarter. With seven more deliveries since the quarterly period ended on June 24, including delivery of our first international jet to the United Kingdom, we have delivered 12 production aircraft this year. Internationally, during the second quarter Norway announced its initial order for two aircraft, and we submitted our proposal to supply 60 aircraft to South Korea. In addition, since the quarterly period ended, Japan signed a letter of agreement to purchase its first four aircraft.
A major uncertainty we face is the issue of sequestration. By now, we hope you have seen our memo on sequestration and know that we are urging the U.S. government to find a better way to address the national issues of deficit spending and debt reduction. Despite this uncertainty, we see much that makes us proud and confident about the future: Your performance and our second-quarter results have put us on course for a strong year. We have the best portfolio in the business. Our international growth prospects are bright, and we are celebrating 100 years of making a difference in the world. That is a lot of positive momentum.
On that strong foundation, the best way to secure our future is to stay focused on delivering value to customers and shareholders. Thank you for your dedication, which makes it all possible.