WASHINGTON (Reuters) - Top U.S. weapons maker Lockheed Martin Corp (LMT.N) posted a higher-than-expected first-quarter net profit and announced a succession plan that will bring in President Chris Kubasik as chief executive officer in January.
Lockheed, which builds F-35, F-22 and F-16 fighter jets, Aegis missiles and new coastal warships, affirmed its forecast of $45 billion to $46 billion in revenue for the full year and said operating profit should reach $3.9 billion to $4 billion, or $7.70 to $7.90 per share.
Bob Stevens, current chairman and CEO, said he planned to retire after 25 years with the company in January, but would stay on as chairman until January 2014, subject to the board’s approval. He will be 62 when he steps down at that point, still shy of a mandatory retirement age of 65.
“When I look at future challenges, I recognize they will certainly extend beyond my mandatory retirement age and I wanted to assure that we have a tested and trusted leadership team in place who can provide continuity and evolve our strategy over the longer term,” said Stevens, 60. “We have that leadership team in place now.”
Kubasik, 51, will move into the CEO spot in January, with Marillyn Hewson, 58, current head of the company’s electronic systems business, becoming president and chief operating officer.
Kubasik said he did not expect “a whole lot of change” in the company’s direction when he took over the reins, noting that he would “build upon the foundation” that he helped create in his current role, and other top leadership roles in the past.
Stevens said Lockheed was focused on continuing to grow despite “increasing headwinds” in the defense sector, drawing on a strong core business, increasing international sales and moves into adjacent markets.
Kubasik said he hoped to expand international sales to about 20 percent of company revenue from 17 percent now.
Stevens said the company had begun making contingency plans in case U.S. lawmakers are not able to reverse $500 billion in additional defense cuts due to take effect in January under “sequestration,” but said it would continue to press for a more “sensible” approach.
He said he was disappointed that union workers at the company’s Fort Worth, Texas, plant and two military bases had rejected the company’s contract offer and gone on strike, but added that Lockheed had a contingency plan to keep the F-35 Joint Strike Fighter program, its single biggest program, on track.
Lockheed said first-quarter net profit rose to $668 million from $530 million a year earlier. Analysts polled by Thomson Reuters I/B/E/S had expected a first-quarter profit of $553.3 million.
Earnings from continuing operations rose 29 percent to $2.02 per share from $1.57 a year earlier.
Net sales reached $11.3 billion in the quarter, up 6 percent from $10.6 billion a year earlier, the company said.
It said cash from operations during the first quarter of 2012 was $458 million, after pension contributions of $505 million and tax payments of $150 million.
That compared to cash from operations of $1.7 billion during the first quarter of 2011, which benefited from a tax refund of $236 million and no pension contributions.
Stevens said the strong first-quarter results reflected the strength of the company’s portfolio, but cost-cutting efforts would continue.
“Throughout the remainder of 2012, we will focus on reducing costs and improving program execution to remain competitive and deliver value,” he said in a statement.
Lockheed paid shareholders $327 million in cash dividends in the first quarter and bought back 2.7 million shares for $242 million. It said the results included a noncash pension adjustment of $207 million, which reduced net earnings by 39 cents per share.
Sales and earnings were off slightly in the company’s information systems and global solutions business, largely due to the Pentagon’s cancellation of part of the Joint Tactical Radio System, and completion of a NASA initiative, it said.
Reporting By Andrea Shalal-Esa; Editing by Muralikumar Anantharaman