From: Communications, Corporate
Sent: Thursday, October 23, 2008 9:47 AM
Subject: Memo from Bob Stevens: 3Q Earnings and Lockheed Martin Outlook
Importance: High
Memorandum
DATE:
October 23, 2008
TO:
U.S. Employees
FROM:
Bob Stevens, Chairman, President and CEO
SUBJECT: 3Q Earnings and Lockheed Martin Outlook
The announcement of our third-quarter earnings provides a snapshot on
the health of our company--and it is a picture of rock solid performance:
Strong liquidity with $2.5 billion of cash available; high credit ratings; low
debt; a robust backlog of about $76 billion; and margin expansion across
all of our business areas. We continue to perform well on our programs
and funding for those programs--based on the approved FY09 Department
of Defense budget--appears to be solid. Despite the recent market
upheavals and the current political environment, I have great confidence
in the future of our business.
All of us have been concerned about recent events affecting the world’s
financial markets and the potential impact on our business and personal
lives. I’d like to provide some perspective that may give you insight into
both areas of concern.
No one can predict the future, but I believe our Corporation is well
prepared to weather this storm. We have long been managing the
company to maximize our financial strength and agility in the marketplace,
while also giving our very best to our customers. I pledge, with your
support, to maintain that course.
With regard to the more personal side of the financial crisis, if you
participate in Lockheed Martin’s pension plan, you’re probably wondering
how our pension fund is faring. Pension investments have been affected
by the stock market swings, but pension assets are well diversified. The
pension investment managers take a long-term view in selecting
investments, a strategy consistent with long-term commitments. If
additional funding is required, the Corporation has always made the
needed contributions and we plan to continue this practice. In fact, this is
required by law.
If you invest in our 401(k) and other savings plans, you may have seen
declines in the value of your account--especially if you’ve chosen to place
a higher percentage of your investment in the more aggressive, stockbased funds. It’s important--not only during volatile periods, but on an
ongoing basis--to make sure your investment selections are appropriate
for your personal financial goals.
Lockheed Martin encourages
employees to save, especially through pre-tax plans like the 401(k), which
can enhance your savings.
As we progress through this difficult period, I’m sure you will maintain
your focus on the essential elements that have brought Lockheed Martin
to its current success: our values, our dedication to our customers, and
our commitment to excellence. Thank you for all you do to make
Lockheed Martin the best it can be. It’s your hard work that will carry us
through this period and into a brighter future.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~
Subj:
Date:
From:
To:
Pension funding
10/26/2008 6:57:53 PM Pacific Daylight Time
jan.moncallo@lmco.com
SUNKLEIN2@aol.com
)
Here's one analyst's comments on LM pension…
Sent from the Internet (Details
LOCKHEED’S PENSIONS BLOW A GASKET: Shares of Lockheed Martin
flew past a diving Dow Tuesday and ended around 9% down for the day. If
catching a falling knife is tricky, how much harder will it be for investors to
bag a falling F-35 Lightning II? By all indications, Lockheed had a slow
third quarter. At midyear, the company was boasting of 6% sales growth
and 14% more profits per share than it earned in the first half of 2007.
Three months closer to year's end, we're now looking at just 2% sales
growth but still a healthy 12% rise in earnings per share -- so three's a bit
of a slowdown, but hardly the stuff that 9% sell-offs are usually made of. It
must have been something else that spooked the market Tuesday. Maybe
it was the warning that the explosion of America's equity markets just
blew a hole in Lockheed's pension plan. Tuesday, in an interview with
Market Watch, Lockheed's CFO advised that the company's pension plan
has dropped by 25% in value over the last month and a half. Unless things
turn around in a hurry, management expects that it will have to contribute
$100 million next year to bridge the gap between expectations and the
reality of its pension fund's growth trajectory. In related news, Morgan
Stanley, citing the risk of similar pension shortfalls as one factor in its
downgrades, warned investors Tuesday to avoid Lockheed rivals such as
United Technologies. $100 million? That sounds like a lot ... I know it
does. Yet for a $40 billion-plus revenue creator like Lockheed, it really
isn't. To Lockheed, it's more of a rounding error. The company's still
expecting to generate $4.3 billion in operating cash flow this year, and
another $4 billion or more next year. I'd say, judging from historical
capital-spending trends, this leaves the company with some $3 billion in
cool, hard, free cash flows next year -- even after patching its pension
shortfall. At today's price, that works out to a price-to-free cash flow ratio
of 11, which seems fair relative to analyst growth expectations (12% long
term). It's perhaps more than fair, for a chance to own one of the world's
largest defense contractors, along with peers such as General Dynamics
and Raytheon. Nor do I think those growth expectations are overly
optimistic. Although sales are up only 2% so far this year, backlog has
grown more than twice as quickly -- a suggestion that faster sales growth
lies ahead. And if Lockheed can grow profits at 12% on 2% sales growth,
just imagine what it can do if the company's sales accelerate. My guess:
Lockheed will regain its lost altitude, and perhaps more rapidly than we
think. (Motley Fool, 10/22)
Jan Moncallo
Vice President, Human Resources
Lockheed Martin Mission Services
1670 N. Newport Road
Colorado Springs, CO 80916
719-597-2003 phone
719-597-6707 fax