LMT - Earnings call transcript Q4 2017 | Lockheed Martin Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Lockheed Martin Fourth Quarter and Full Year 2017 Earnings Results Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I'll turn the conference now to Mr. Greg Gardner, Vice President of Investor Relations. Please go ahead, sir.

Greg Gardner

good and John, you, morning. Thank welcome I'd XXXX our quarter to conference like call. to earnings fourth everyone

Joining on Bruce pursuant are President Statements historical and Vice me fact our Harbor and to made Chief Hewson, today President forward-looking that Executive the the in call are today's Safe Officer; are Financial considered made and Chief Tanner, call Executive Marillyn our Officer. are not Chairman, forward-looking and from federal Please securities results those materially of some law. press may projected differ and see statements. are materially results those statements. that cause release for the of today's in provisions a filings may in the Actual SEC the that factors from to differ forward-looking of our description statements

charts plan link our and that Web to like call over on charts. the call to site today site on turn With to the Relations that, to click our and during the posted comments. access we supplement Marillyn. Web Investor at view We Please our the to address have follow I'd www.lockheedmartin.com

Marillyn Hewson

the morning, start Thanks, on joining to us a hope today New all and you I the Year. for Good everyone. you good Thank have Greg. call had

growth watermarks new sales, were an X% exceptional from over strong achievement prospects to I orders excited operations. for my results team representing see for expressing their our stockholders eclipse the was commitment financial of by $XX customers. to begin success, outstanding Lockheed and future efforts to gratitude our long-term that for performance our we operational Martin Thanks historical on the and dedication mission cash me Let XXXX. holds. with for and billion, XXXX It XXXX entire to of are well high am able results. for strong deliver the and growth XXXX contributions their through their sincere results throughout and pleased was we focus We positioned sales operational were year an by

by with area. each increase business followed areas XXXX fourth The share program. to generated driving expenditure, returned corporation our cash business broad-based new business continue a last Leading in driven and commitment well billion over result products. was growth year's deployment also ended missile funded and like by our and of in $X.X combination growth. our our record positioned and to allow results we by stockholders of the control approximately strong program, cash technologies record $X as continued four fire strategy Fueled growth for $XXX We exceeding through XXXX cash in by backlog, with our the Our XXXX investment balance sales air and as to positioning in repurchase from year. defense during $X.X our missiles aeronautics and level for this performance dividends billion to area, future and in operations exceeding independent developing results. XX% capital billion us highlight our missiles for both business growth. the have and of bill the research our which also a quarter to yearly was X%, of These billion we and development corporation the tactical F-XX the I would orders ratio book

the and our that in earnings we income short term result did caused we in benefits in the As noted earnings quarter for was Jobs fourth in long-term Cuts guidance expense onetime non-cash corporation. enacted will today's provide fall tax communicated the below reported the Act In to the XXXX increase ranges Tax October. release, and a of to it

this call and but outstanding later onetime we financial in detail impact not the in reform does operational delivered tax performance diminish XXXX. discuss will charge the of We on the

a continuing through CR the under of Defense Department with for extension the in year XXXX fiscal to February. Turning resolution budget, of an place government or remains Xth of federal now the

recent to for disappointed CR. are the need there extension, we despite continue the short be positive future at current While term the budget indications growth of

in administration's the to overview in National a Document. Trump strategy Defense released the Security for the global over-arching which additional the themes the XXXX also Notably, challenges national National them. of the and broad Strategy, department released This country's defense. President address National Strategy, and military underscores need December First, strategies U.S. the its the investment of month, our reinforces defense Security

highlight national we country Bill our on additional will intelligence emergency the well both emphasis nuclear, our modernization and in Resolution funding these action position both in billion approximately to area additional well clear of to vital interceptors commitment defense maintain in capabilities. missiles. billion, is of layered hopeful of a strategies. as strategies the $X defense cyber targeted increase Of the We missile believe $X.X was to defense missile A Continuing XXX over request XX% objectives the our amounts. December, national space, THAAD and security. weapon an the with enacted over of recognition portfolio appropriations of are Strategy and security of the need represents Also that support XX enacted Specifically, the included government military's funding. be nearly readiness and needs, for prior nearly as This Security the passed missile for element XXXX included systems defense which CR billion $X.X aligned for and this a and key defense fiscal an year National national for MSE the PAC-X leadership

XXXX released operations funds. control in request budget both that would amounts contingency The in spring exceed overseas and would authority Act bipartisan XXXX $XXX billion NDAA base by authorized be excess Congress for The over December well of the caps. as and National with $XX FYXXXX in presidential Authorization or into spending, in passed as base defense law was Lastly, billion support President Trump budget was the NDAA. bill which last fiscal enacted spending the signed year Defense

still before, budget needed As the spending limits I have the future by imposed act. adjust is to control noted legislation

which We and the our modifies our are to continue vital the we legislative provides encouraged cap defense an military to resources recent and national lawmakers required towards budget urge deliver by our spending security. agreement to activity to to the work

trust deciding stakeholders. will and our we our to of tax corporation we American highest our allow line invest were pursuit. partners new stockholders. effectively employees industry. decisions in transformative benefits in to legislation enacted importantly XXst to XXXX. We chain Moving see creation We as deliver have benefit the important make the it and enable innovation investment, are supporting and and future measure us recognize our pension to in in our competitive corporate into rate position implemented law It bringing into this will important currently across and the this tax the to realize it the and the was and more legislation the positive to compete in that will economies. encourage will and exploring will reform. corporation value proactive supply technologies options combined long-term of company XXXX we to The rates on immediate in benefits continue accelerate for reduces anticipate payments is This piece support just and century, our One used will world, with our that growth from that advanced U.S. believe we believe in tax global the and use in customers, pleased a most of long-term industrialized growth job future enhance these ways impact that the in companies to many

contributions a until As will decision, $X result cash, of required XXXX. in this billion our we pension contribute satisfying

are other We investments as growth also long-term to new and competitive a result legislation our of posture enhance potential. exploring the

developing Martin. important technologies these talent drive to skill in educational that Martin training science, businesses Lockheed cutting-edge maths, strategic are development, increasing established of increasing study. a areas STEM our the the Some including pool, decade creation new scholarship life to core of the Lockheed engineering companies important or ago, that are to blood initiatives STEM over of technology, critical we early encourage a disruptive in contributions our offerings these charter our fund fields in include of participation programs, whose investment and in employee and charitable ventures investments that to is stage future make Increasing and fund

areas execute their our by a investments in record investments required to well We development, $XXX companies their these enable these as as will in XXXX Building drive and needed we our we expenditures the research business commitment growth. these mature grow to businesses invest efficiently as technologies in technologies, the XXXXX and in and continue to expect capital long-term our create on to increase will combined assets million jobs.

employment growth drive cash the with the high to create and reform performing and and using assess to attract in actions. tax these options We benefits enhance will opportunities our future continue talent, new objective retain of of business, other deployment

year years. rate production increase continue approximately highlight like XX to This our program, increase from commitment continue date, we To we and operational in government several milestones XXXX previous update as would the XXX up the expect achieved we have delivering momentum of over and customers. this jets an as Beginning on, during Moving on next now from I XX% transformational we few during international aircraft anticipate on in this fourth over production our recent joint U.S. industry an to progress XX% deliver planes the few corporation We into we accomplishment the F-XX year, continuing and fighter. ramp full the with to months. met quarter by XX delivered to XXXX the this to across represents XXXX. a to

November. and new forward of working Norwegian We existing XX landing variants the both receiving for squadron the with are their of declaring three their CTOL and and growing satisfy F-XXAs excited to in look Israel landing community our initial conventional future jets F-XX the have with seven current XXXX, CTOL first soil deliveries three international buyers and F-XX potential international with we capability to accepted see Norway demand. through first operating the embrace customers to take-off

missiles fire control area. business Moving and to our

several has PAC-X Missile complex ballistic neutralizing in that for the Range agreement in team interceptor. in opens of New and the MSE PAC-X to missile Japanese the supporter White our for full Our defense four people. purchase range a a allowing missile with Participating of achieved targets a a our at two including operates equipped batteries PAC-X batteries notable which business requirement over of technology. Sands a test Aegis currently land-based military Mexico, see Japan Aegis tactical improved successfully Aegis MSE system supplement ballistic of signing milestones, of been purchasing self-defense that installation an defense The rate defense In were satisfying Ashore missile sea United that increase Japan and mission coverage greater capabilities upgrade and production systems The forces. officials opportunity cabinet States rotary $XXX missiles with will the multiple to Ashore force Aegis number to protection receiving a allied capability, would Aegis air pleased wider provide Romania missiles PAC-X based and destroyers order for U.S. of two Romanian to over we agreed long-term million systems the layer and missile defense countries ability greater the and the providing maritime area, threats. the for to the to by address the door deliver its

third adding remains that Aegis the product. the the to Japanese the be in in Once and by operational, confidence Japanese opportunity our were will Poland. deployment, government operated finalized, show Aegis by installation Romania U.S. to those this excited be to we continues ashore While the

and founded with Cape XXXX. The [ph] at ago, collected or ten system actionable deployed delivered area surveillance Atlas SBIRS [quarter] launched or of for based ULA's and Canaveral geo-synchronous air United and was successfully space X through in just military gathering infrared rocket into is Launch the abilities capability, and sensors satellite satellite satellite force October earth days the since to our successful part a being our The mission was the satellite applications. business awareness station information the geo orbit to a information key system on Our XXXth in six and space air converting it SBIRS Alliance missile technical situational expands orbit and defense powerful enhances from of system. intelligence be is our fourth constellation nation's defense in

financial in to our review I crucial now support will We are discuss this product our XXXX to able performance be of XXXX. for call to over Bruce the and turn security proud extremely defense. and country's our to provide expectations

will lines questions. open We up then for the your

Bruce Tanner

earnings Thanks, release we will Marillyn morning, and based our I be web remarks today. good on everyone. making with charts included the that

line results. in rebounding our lower key all resulting Let's the strong the chart an overview metrics. begin Sales quarter, of $XX billion, balances adjustment year. billion in at of sales $XX to driving and with for per at the in the in onetime finished to the for share than our year exceeded $X.X the Segment corporate operating deferred sales profit as expectations expected the recognize to the We on new earnings year. X planned was results billion the asset tax with impact rate of $XX.XX, quarter from tax the our the year with in end our third financial prior

$XXX generating to share backlog. have return cash on stockholders $X.X with in year repurchases and year. $X.X We strong quarter, our continue billion full for cash in We through to ended we with billion the about and dividends delivered the to billion performance the commitments returned

performance and amongst last compare Chart fire chart in which two in volume year's those X% compares C-XXX sales control, commercial in XX% year grew launches over and for On F-XX we ever chart. versus over per our more lower aircraft X with highest how space from XXXX satellite in XXXX, our our the XXXX. year higher Aeronautics And four none next deliveries spread that is grew compare our XXXX favorable grew well and achieved. the So business year. defense chart areas fire areas. volume AWE last for of we in government lower just XXXX. the our last each On driven in to business. XXXX. earnings higher the XXXX. driven year, X% and on overall of we up in XXXX Rotary volume mission and the slightly Due purchase XXXX versus of with as a missiles finally, All accounting primarily was than was X% levels systems for offsetting results adjustments results was the sales control Sales areas lines last higher aircraft than additional XXXX. higher and in XXXX sales to sustainment from year's in delivery by business by four business tactical as growth compared with I show two production volume and sales $XX over our XXXX pleased year. mix. grew billion level sales we this results change will are X the to with for in air Missile X share have

$X.X performance of or year. both with form the our $X.X of cash share primarily tax or As pro of was GAAP of the amount XXXX free $X.X our to a and lower record our the I XXXX. free for said a became year EPS $X.XX was show impacts in million in almost January during $X.X the effective we our Chart a We This was that level after cash results year. to operations capital cash value on On as of about tax XXXX year, performance stockholders this the XX% this generated record cash And during earnings, returned increase on cash from over the repurchases, the $XX.XX, And the basis, XX%. of shows methodology we our had year, provides billion $X.X XXXX in billion in higher is recognizing from XX% expenditures in amount on We in X recognition about of first under almost cash and billion than of for in in represents the $X.X cash flow operations. X result October cash to lower year, dividends Chart returned the reform, cash higher deferred revenue new this in reflect of from year, billion level had rate Slide, from $X corporation. you EPS and itself which chart EPS the at $XXX on our the billion than time. either our statutory assets Xst a billion. outlook our that the cash charge before minimal forma the our call from impact charge operations a operations flow returned tell outlook X. could at our with the

operating segment line were the and estimate with in sales profit we the Our during provided call. that October

FAS You will cost cost service pro pro forma the course, forma was close operating standard the was under similar that the for profit is non-service affected FAS only profit to of recognition our non-operating results and XXXX. reflect record operating Because costs. revenue pension notice to methodology, the also reported new and from accounting pension not and EPS profit as segment our change. old operations the recognition by revenue to cash And our

of the and lower XXXX is of sales will growing contributions equal than greater segment about of required margin the about XXXX our than improved $X rate and decision from operating more at worth midpoint. into are to these $X what for XXXX have XX.X% to a to during trust seem significantly level $X and total expected we XXXX provided may Projected at in on that from for higher The October and also that tax operating XX%. billion expected an rate, to we accelerate time. additional outlook in billion than the The profit higher reason billion pension at a in pension for given EPS call for Our of is I sales the discussion profit XXXX a operations deduction the the outlook FAS/CAS old retain due call a XXXX during $X.X the discussed to is XXXX XXXX of contributions cash from preliminary we and our statutory contribution for contributing higher that X% for over outlook couple after higher order be October cash outlook our or describe billion provided for charts. than twofold. we tax of billion $X or operations $X.X cash segment billion to operations is Cash with the

what $XXX pay reform. taxes cash of to of also a our tax additional refund paid in as less to contributions we from XXXX from a and I will into Chart expect and expect operating of million shows because in we during XXXX pension XXXX year this for area. operations have of sales cash First, outlook couple segment charts. about funding more XX out insight means taxes also $XXX provide about pension the business result acceleration profit our by million for

forma presentation provided XXXX operating attachments for comparison in purposes. release new our expense and standard sales to pro for and and have We profit earnings pension reflecting the segment XXXX revenue the

October Turning level [indiscernible] We chart adjustment discussed million. we October with to points show expected $XXX XXXX the a rate to that versus basis XX. compared for lowered by in adjustment in FAS/CAS FAS/CAS X.XXX% of the updated outlook what the we and

our Chart outlook over three $X.X of a the in in view the cash pension end asset the to assumed on our increased which year. XX% by participants decisions on accelerate the actual the next contributions required improving October, the $X improved $XXX impacts for X% and assets $XX outlook how and the we adjustment return contributions versus year, the the the longevity by tax of the XX for Our provides operations reform assumptions adjustment just to of million years. to returns additional XXXX We $XX planned million. current billion year of by through the the adjustment for revised in plan from our improve billion million

greater or expect no through our billion going XXXX. sheet along or equal have of XXXX to improvement $XX We acceleration and than in the $X of from outlook from operations paper cash this to and in we With XXXX cash our to rather in be from than acceleration with tax XXXX XXXX described forward, contributions XXXX And into benefit for expected reform billion this XXXX longer contributions have annual equal operations, with the than years around to to have cash or the now already with billion operations, XXXX, from debt. the we required the both commercial expect fund $X cash long-term for to greater cash we balance from generation. reason

on contributions XXXX. for and benefits in generation our XXXX we summary well that into XX. the our Finally, for tax positioned strong of have pension the chart recurring of cash finished XXXX. us provide XXXX accelerating We benefits The XXXX in and reform and significant year

Our growth. to our our programs and come and years to us and ready the positions John? future environment facilities employees capabilities in today's your portfolio questions. technologies, that, expect in we for the we support what we make plan and to well investments necessary new of are for With

Operator

of And go Please first Jefferies. the Instructions] [Operator we go Kahyaoglu ahead. to Sheila with line

Sheila Kahyaoglu

in cumulative Bruce, Pension thought. chart of you guess, X.X then about a think if on $XX guidance billion. cash taxes more I we your moving a maybe offset. bit headwind talk could Just the of, XX, Maybe we the and do about pieces? How of

do how maybe moving well and think investments working capital we CapEx as other as pieces? about any So

Bruce Tanner

Yes.

reiterate some contributions that So starting fairly had October Maybe we thanks, prepared the XX. said teed the some, in significant XXXX, remarks. We Sheila. had I actually I return of pension we in in think up and had, call the XX this what to

cash one these to we’d that’s before of a be than in place. expected all the took so adjustments And XXXX little lower XXXX why reasons

based a that we real And would on benefit one think the to the tax to mean, along. old under the coming benefit rate year as benefits, So think contributions good our pension a rate commonsense $X.X per tax provides of maintaining I It's the us. the create I had should an reform I decision clearly And going tell you is se in that’s was XXXX maintaining that accelerate as here you think benefit benefits doesn’t to in billion tax the us. XX% really tax to because question -- sorry, that total inventory is you my but period working three new the if top from changed convoluted am working you moving will, up I under question, contract on you assets sheet, years approach I perhaps the is next will revenue capital of numbers head asked off pieces there, working some The the about about capital no growth recognition on little over think in balance forward. just going think we The you frankly. forward. had is that capital capital And extra all other have material to still to the our the the one roughly from asked expenditures. some one

Sheila Kahyaoglu

Yes.

Bruce Tanner

You drops XXXX. efficiencies in A reason be know XXXX. the XXXX to expenditures but actually themselves capital we with they the And had are is a the at at dependent a have and least consistent stays upon present contracts bit we capital wins fairly as current the in where and opportunities expecting little XXXX. were off in We invested new maybe new potential in of supporting that level to the to number level that currently all forward. That we expect in record have in XXXX that higher lot in then is a planning XXXX. for our XXXX timeframe haven't that’s going additional

Operator

question next George Please Research. Shapiro from with go Our Shapiro is ahead.

George Shapiro

million in Thanks. the was The profit if but I the could to you seemed got the incremental margin ones. but The 'XX explore quick what, number disclosed. probably would that have quarter. Sikorsky a low a And part, on the then about still profit And little $XX still up $XX you me little actual only made of the said you one be to that suggest like tax based a is yet went know couple bit last million you F-XX the XX%, would for rate A XX.X%? going that is up they like it bit. seem second amortization

Bruce Tanner

little the think is rate. two-fold. we of and think a XX% less And accurate coming XX% frankly, was in worth the see than One, XX% that rate. going That’s losing which are headline of pretty to rate change that, little what We our probably manufacturing tax tax X% effective looking we would tax tax are about reason I just new expect rate think color out if forward. behind you of And sort to deduction our [indiscernible] phased the policies a under of just R&D then the ESAF have them, is sort put and that things the you are those is at. expense, like maybe are deductions going for forward, one for reduction deductions tax this effective that, we like like. there. is is the the maintained down for XX% still and XX% is each maybe things that but other about

they maintained, tax XX% under are are they and about While less those rate so a are they another were tax X%. worth under a XX% rate worth than collectively

think that’s, highest XXXX. was that. and Sikorsky, if sort just to XX% pretty think of the quarter. four in XX% in for million had I think, a am that we our about the profit XX% becomes George, good That’s of going forward. of XXXX. the trying So that quarters actually the way I quarter I becomes Sikorsky rate, tax $XX was, in XX%, think fact sort am mean before I tax I reform mistaken, roughly in quarter not XX%, XX% probably

improved think I actually we quarter. are situation and So mix the that we aircraft an aircraft higher in the the deliveries pleased with the of bit a quarter. We on did the in also delivery in of had had quarter little the occur results obviously

some the about the news about you the and is have profitability we in quarter higher the margins risk form the some on But higher fourth actually XXXX. F-XX program of where the and retirements that A margin be portion quarter program you This I on than are it asked I we quarter. say in F-XX expect did Sikorsky's F-XX manufacturing, the are the of to F-XX obviously. the that instantiation XXXX that think that in performance in is of think the we We of pretty the we last especially the pleased And So in throughout we right. had retirements program. production in good risk on in good did sort the then lastly just took result year. will was

So performance good overall.

Operator

ahead. will Wells Fargo Please Sam go Securities. we go next Pearlstein And to with

Samuel Pearlstein

a I a September how the could pension deal you of some to flow talk the you point is from moves where this number bit then, number some Does lower about payout that the tax view operating was wondering and range with think year? when your pension capital What to if Bruce, with is about change to cash reform to contribution. allocation. how dividend, is with a of said is now when growth you about the for little typically dividend single give and could just us regards it think CapEx much up. or and you

Bruce Tanner

I those. will both of take Sam, Yes.

So tax from capital capital that. impacts allocation reform allocation, and U.S.

we any have said, September. in you But XXXX. be for items decision, preempt there the don’t to conversation our and we anticipated guidance don’t we of As the expect to a with want I significant allocation already Board's have will that change in that capital

we billion our change. in guidance instance October talked of won't share about $X for That So repurchases.

bit capital forward. of allocation, And We opportunistic on think later year. our overall I dividends it's I going this discussion our say would normal a will little have in September base

clearly will a to the sort of needed doing terms decade, going at would in track payouts. that’s to over, we what left of and forward. see stockholders if require have returned things terms And that good corporation speak, take growth for order in record cash the well and of and our so for I themselves opportunities a the, forward. supporting to will at capital our record repurchases dividend then look look going that expenditures for think you organic present first organic what's share We pretty track generating we had support a growth our I of But think right priority over

So been we lower bit going cash continue tax makes obviously our and going than flow thing one little will forward. the the about that a The has forward ratio it in payout in particular is reform past. our it

in as should here about absolute little same bridge maybe that will at when Board, around billion in increases being pretty with number more and little opportunity of in will that. both as timeframe in that than is see to the billion. we that Thanks. is said, if had we XXXX not years we least, of today, dividend the past to, least X.X, So it in Maybe we to $X.X least at CapEx XXXX. than Sam creates the but The I rounding that sit the at we September lower sorts our years But of cross number a terms you face a continue XXXX, close and do that that think have $X.X

Operator

will Cai we go next go Company. ahead. Please to with von & Rumohr Cowen And

Cai von Rumohr

should returns are to could XXXX, be I our have secondly, by you funding you think end I by we this of and to deliveries So Bruce, Thanks. assume a deliveries pension profits significantly year. relatively contribution And sales give year. us in as out see if that, so Sikorsky of mean you look I you will of profile going math done have said forward, that you going to pickup the commercial the the and the this of and full in again, near well you terms start some contributions

Bruce Tanner

Thanks, Cai, questions. good

Sikorsky whether one I forward going sales, profit So in first earnings and profile your a and deliveries. expect and to we pickup commercial see think or for not is delivery

in on of me, or is You to -- commercial drop terms aircraft of XXXX. government know excuse a XXXX what's good going from in off Sikorsky deliveries with terms pretty

the was -- year Naval helicopters. excuse of so first commercial program Black or and me, think You of we the between multiyear and XX about should multiyear I down government Hawk XX nine down some [eight] the are XX XXXX think of deliveries. the sort Hawk program, of XXXX [ph] end is And

lower reduction. minimum good is because part And quantity was that multiyear what's in nine forward. going that’s sort purposes a the overall in pretty than of of of multiyear negotiated our a planning value eight and we So terms and quantity

aircraft plussed obviously additional hopeful will, in multiyear. for aircraft going forward. good We up gave pricing are we openly hope those through get that in budget and adjustments you got priced, is The will that we multiyear news have if already the we the for

hopefully, So point the deliveries. government we of are kind a the there on bit of at low the,

a commercial, here have normally do As watching, been have at which so. bit barrel or I don’t but I think least though been I and prices of Cai, $XX far weeks I couple a oil watching as for a

$XX little that time oil and a have industry. some gas more longer at the wait in the need barrel to before to we got bit stay I of some for to think a we drive and level sort of of volume helicopters

frankly, gas obviously flat looking Obviously, we commercial as well. not that XXXX. depending to and are in expecting could compared pretty we So prices. helicopters the increase pretty are quickly in And on large XXXX on oil XXXX change a

that see from me, start said, excuse phase growth to you as got term think I XXK do with in low Black some production programs by of development as to like the as program. that rate should the going closer. we production the other like So of enter the offset as Sikorsky, in XXK downturn Long program we being hopefully rate the of low program aircraft, well. as we of watch the we And helicopter sort have deliveries volume well Hawk helicopter upticks Presidential coming

of you of XXXX going point in in think in again beyond. a should So kind is forward some and XXXX this low and growth Sikorsky, sales

But which the that in Berlin that believe quantity attend think flying. I So XXX that for either Germany. of those see that are fly Israel. to I or Marine about Corps, going the the all which actually are opportunity be to and be, but we happen we Germany by are the And plan if just am aircraft I likely not international by Berlin, excited be is aircraft be going not we XXK, the Corps. are to aircraft prospects most have Show, that we you of would Marine U.S. record the hopeful we to in two for means order sure stop can of are for in sell by the customers, some the

Operator

Ron next ahead. Our with Lynch. Epstein of Merrill from go Bank Please America is question

Ronald Epstein

bit the F-XX a changing to program. maybe gears question, little Quick

mean that earnings call, of misspoke of that we kind a already. Shanahan will rates. I my of But just head they are Pat sense, plan to comments be, peak are about or rates year On said public leave should it mean I their that something they there. with record, sure But peak well Northrop in like seems And to at segment are consistent commented I they what. in not they am rates. a get and get where producing kind XX which peak trying production the around and I below their seemed I mission am trying to if units what production call me just systems

Bruce Tanner

Ron. Hey,

I take at secretary's both I confusion the Grumman Let folks said think was Northrop the by and some a me well. comments shot saw that, by and what there was as

is fiscal to or delivering high when that’s is initial send low XX pretty F-XX after aircraft everyone be technically think of message I is systems, rate. lot production But Different rate production of sort is, the programs. first year lot than or think a or million rate production that are LRIP XX, not XX I our will trying past program until LRIP the most fiscal anything, a you production XX full believe XX. I the our the year,

end That’s that the delivering some could very and said initial rate high low reason are quantities but at they Marillyn systems in should be XX think we and mission odd the are which the sort of rate very flies are deliveries. to again in going we are units, what XXXX. we XXXX, at if aircraft just in of you production technically the So front be is

You years, are to per next be four three year. of the should we aircraft going at think to the in XXX

production are but are program. not we the production talking now, at So we peak we about it of to a close are in like the yet volume feels

this low is I rate. think that’s what the secretary was not trying to say is,

And are delivering that hey, forgot not think which program and sort production down the a you to I a go billion like on the note completely and question asked peak. of right full say to things to $X we one, is, it year, getting of before jotted one funding I forth. answer close while a realize last aircraft would you should decided we is If we XX feels And, myself next contribution. [indiscernible] so Cai's to is is that if looked at Cai I the One you I know, are thing number. of we kind

careful We are we it on overfund program. close where yet -- pension not enough to getting our need to we to be

XXXX with a currently up required what XXXX contributions while starts starts much lower and $X again much So up funding billion. level in at than the It XXXX. for our we funded

I and reason the excuse year is that the pension freeze, that’s forward XXXX, So our brings the in have again we things of of close the or part final going final me, one of have that of, just past we But the into down. obviously to the a lot just you. putting gets that described about pension us level over plan been to years and funding the that

Cai. that about Sorry,

Operator

will go Research. ahead. we next to Please And Safran with go Buckingham Rich

Richard Safran

chatter I here at I claw to but might the look the a would trying lot renegotiate community on companies question like of of either investment that the the all rein within portion that look thinking rates. could from tax regarding The contracts to ask the to either benefit on the is am some reform and existing type back or future not the there that another different on the parade the contracts. impact is here, and defense is government to capture getting of are or to items Pentagon re-price try tax to lower hill

like Now can get and existing by tax how your that. future hearing I see impacted you discuss how your reform. would to like from Maybe negotiations am government being that’s you contract if contracts know not to I but government the pricing sure would something renegotiate I and the response to if are so

Marillyn Hewson

the tax make one to this Rich, will and much involved global my question, CEOs marketplace. because in opportunity on the looking hard been for this fellow very Thanks on for at competitive I reform have take that I more very with

remember the globally America to off, the tax make administration is to and create was It Martin encourage what tax economic let's leading first in companies reform. to economy for So industry competitive invest growth. significant U.S. more and the And pushing been accelerate reform. has to jobs and that Lockheed Congress one enacted of

that. had We have

heard and that as with what savings. all we remarks have purposely evaluate earlier, mind is our tax set around to of purpose in this we tax these It's in that as of with we options my from the So that we put do purpose the mind, what that you want government reform forward.

want look we use what's also our that to I in to business prepared through our And and is as work. what where is transformation and so and jobs. investments. workforce happening that are we create to more STEM innovative grow differentiate global skills enhance want current our our the to and benefits wanted our sure activities investing said sure happening. vision future at with efficient by these employer as workforce in We remarks, marketplace the we future the us also can more can helping So new for make the for that an and We to ourselves that make we all in of digitization we we that’s attractive our communities workforce makes

is particularly this So important.

are with citizens we degrees them. many graduating If of yet our to about you and STEM U.S., require think on students the only work U.S. programs fewer

jobs. STEM do in the Frankly, come think if have wasted incredible don’t need we presents are this, to with to I So reform coming students us. tax potential the who educations, would those we we into

take sure that If you capital, and the our in our aerospace our backbone determined by investing competitive business, defense, think security capabilities, to by very critical our we and this on make seriously about enhancing we we are remain and employees. industry our is it by human mission investing global of

nation, So the that we our help partners. protect can allies and our

tax America in reform It So accelerate point of growth. jobs you take back in create just economic to the invest place. to was and put why I would was to the

Operator

Rajeev is go with Stanley. Morgan ahead. question next Lalwani Please Our from

Rajeev Lalwani

you from. of us of where forward, it growth the programs growth. been other just F-XX looking side, aeronautics the limited profits talking legacy the am segment on through some programs the you assuming be about help have comes just F-XX it 'XX. offsetting be And Marillyn, maybe can I the and then can to walk growth Is operating us think of would or it you into Bruce, about? the just going the

Bruce Tanner

you aeronautics are part Within last question. of the talking about, Rajeev, the

Rajeev Lalwani

Yes.

Bruce Tanner

Yes.

XXXX. XXXX in we retirements that earlier -- aero, XXXX LRIP F-XX in will margin for bit George's we at were production to what on that and a some at I wise number did are XXXX. have guiding higher little towards question, lower planned risk in than say little took versus least So a we they of a we Back number lots had

And production as they so retirements we were the F-XX level risk they planned for while have in XXXX, not in at XXXX. same are

the as F-XX. margins that’s the the are opportunities, that other I on with F-XX a you of of driving program is year kind planning But as program program, be part to it as training have our hopeful the should lower, year, not planning. a simply force, especially on slightly than that begin has or more will That’s year. relative will it, pilot TX dilutive always the now slight And air programs of That And as we starts whole. not is have slow quite just to right than the The programs lower, a within So for I XXXX. a margins are there level the starting just later with, if what overall the than while big about APT said we wise, in it's lower later effect that. a one say announced a better mean thing slightly becoming what we I say because to a I time aeronautics because this margin program about the that than think the this now may do is is about lower margin aeronautics aeronautics. par, so F-XX on the of in a true is the mix will overall bit whole. for

we So did versus on are those than sort F-XX is XXXX. Maybe is XXXX. lower delivery reason for other the like phases the typically starting in We quite early last of programs but production bit in aircraft out F-XX that. actually modernization have in again, early start business XXXX finish of practice the a slightly that our

off probably the those at deliver the actually are than XXXX. that at starting of margin lower end actual aircraft We a

the So are are reasons, that seeing are seeing. I two reasons you those what you think Rajeev,

Operator

question is Vertical next with Please ahead. Our go from Rob Stallard Research.

Rob Stallard

expense Marillyn, exposure this if the Thank the market you could for wondering XXXX next number the in times. quick next a commentary FAS/CAS to a in how the revenue in for to few how you mentioned years missile grow new three and then you. expect size years. had defense you your you was XXXX. do that to this track expect format Bruce, I one over of end just And you on

Marillyn Hewson

and to revenue several going all [indiscernible]. the actually rotary Bruce, you Because on I defense. systems business mission crosses missile am know you refer between over rolled on of areas it to up

Bruce Tanner

Yes.

programs, space top of of its probably If early included going. warning take and THAAD say let that to that, $X.X head, of a are of that not work. The had so that based year. think space Aegis shot do but definitive we the for RMS. you, [indiscernible] activities $X.X Rob. and Ashore a is and that I for air fire areas when satellites my I missiles you So business frankly, BMD and worth of, a business there of you arguably has I number ballpark, within think the it's off we obviously and is Aegis treat billion that. at sure some get What's we a like me some you missile control, got of in the own things also at the have not do is could of missile systems This the defense air line am a want about some ballistic That’s missile billion also and program, guess, should PAC-X defense the that defense then

together, of could guess activities the kind just do and of all I things as combine control well. command you I that do we some if those So C-X

across worth we three BMD of maybe $X today. air areas literally billion work billion, business that of $X.X the So and missile defense four have

The second part.

part new the FAS/CAS of format. second in The was the question

is reflected operating honestly non-operating. versus is in always of more profit the opposed focused That’s how we that new changes So on FAS/CAS operating as quite it doesn’t one income segment segment unaffected expense by this. much because operating profit the of have of operating to because pension profit, reasons, format, change

going FAS/CAS If going you back at few pretty have step just I look see to increase years. that expect we FAS expense. next in are XXXX, FAS/CAS still and rather than year income significantly a a forward, FAS over take we the to the take

And so to every CAS you, of going in we to you than the for and think year. now of forward, that about income year $X.X higher decrease XXXX XXXX, that actually should maybe XXXX higher just period to expense size in between become and go But look billion a staying FAS sort of in income as time at XXXX. and expense that is and over

see we way a steam there up So the through all the after, FAS/CAS every next will starting adjustment are quite least and and pick bit year year at as XXXX beyond. can it

Operator

go ahead. with Keay Please Research. Hunter Wolfe go will And to next we

Hunter Kent Keay

A gave. on defense, prepared your just Marillyn, obviously the missile you in little bit remarks, about you color more for Bruce thanks talked

You in about but do to missile freeing I embedded kind participate tax defense, Is big think talk crack success also of terminal this are missile you of the obviously that and to phase if to going a R&D boost lot you really kind had And mid-course been that form of phase. how think forward? to about able that part and don’t there for it. you capacity know maybe a if in some own but an forward. of a is an reform in code on opportunity boost sort on ahead maybe defense the have realm able layered some of Can eventually Lockheed up money expect question that’s

Marillyn Hewson

all great we question, And do we helping elements are address look priorities. research and in a those development. of across That’s Hunter, our customers investing and

tests so our of across Aegis bringing radar have the system our that [indiscernible] the systems customers. did together it our solutions one some identify kind of that we seen capabilities lot recently, F-XX of advance when are total the we provide in call is and it, capabilities the it of of a a organizations Aegis target to F-XX of of of capabilities capability the domains investing test that able launch demonstrating the we was into a an with are where to in have we well tested and one we but navy our within would those a areas to So

have things of a we that threat continue in, look of directed and and we with early would And comes energy that at outlined Bruce? as are on. defense mode Beyond to we a that you that range add, things several want to missile that any of investing hypersonics that of kind you, addressing Bruce launch. as help in all such systems for phases are Anything

Bruce Tanner

overhead unique to left The we looking the solve that problem. at But of more that the of do be things those that. of terms that in THAAD, I F-XX one thing weapons would high our definitely being of that, the terms Aegis is, Hypersonic incredible trying we an of hit is problems termed are the and an of the products does looking definitely with we of if of that only is and help are it a that we bring satellites, instance. Because technologies for think and are at is list one I of launch issues Marillyn we an has will assets vexing no on that a capabilities problem comes mean in of are add think to some in system, one from we for invest solve forward. with we portfolio. to the to with our offer Lockheed it and Having that solved something it vexing all feed in, our investing opportunities that portfolio to continue layered with to going that perspective Martin to is defense. said sensors assets to the Hunter fusion PAC-X, you some what's able of is the

Marillyn Hewson

about of that the go right your savings I reform our into nation. some with out invest customers support think areas, the With to and point support what using these would our is tax back of will defense of in line

Operator

will Jon Citi. ahead. to And go go with Please Raviv next we

Jon Raviv

year but path beyond. X% What to know getting X% just looking upcoming that items back 'XX to sales XXXX. this I is is about beyond some accelerating and growth specific the thinking that there in like impacting to

budget extended Congress versus plays the levels Some some on is And is [sequester] also whether visibility there. impacted curve actions, then acceleration [ph] of of by higher CR, the up things good it's even how you of or the requested. the than have recent budgets what that marking to shape President the how has much

Bruce Tanner

Yes.

take I Jon, one on. will So, that

to as a significant path, individually. As was XXXX, you at we look We that that as don’t our of far years grew as XXXX then XXXX X% and talked forward and of situation on now year. whole to somewhere sort the all be of And had this in the we describe lot a expect I CR impact XXXX, accelerating, transition in about don’t impact and think of as growth range areas the up to of in a as we think teed the as X% have I it to We question CR, of both look obviously now. budget right your bit I growth on call, I we four a lull sort XXXX that into business does describe those but tie in the and outlook XXXX October XXXX.

term X% are am a XXXX will know the or of impact the current I talking it say or I based this budget is about outlook. has doesn’t. huge X% fact not. presidential sort sure Longer that on on though, it I In not we

is as sort being going well he by put his Mattis himself about comments the has being including X% that recently the X% about Secretary stamp, the are that made I for are President of that into tossed some budget. XXXX, to word, So year of with some talked my to just the most as the those about baked XXXX of growth. DoD numbers numbers that Those the on are the

are at like at least... be So levels higher anywhere to assuming levels, those see the to us in I the able near come about, we talking that

Greg Gardner

John, this Greg. is

for got have question. more time one We

Operator

And Please that Rob will of go be with Suisse. Credit Spingarn ahead.

Robert Spingarn

If I quickly, just for to it's for one two one ask okay, like would Marillyn. things. Bruce, Bruce

over of if the knock were on normalize the be say $X off $X billion XX is and take outlook, may it to basis your cash on in flow contribution. almost and CapEx billion. we XX, pension chart Would free the high flow cash billion On flow, the for the little normalized $X normalize Xs, be XX free cash and a from fair to a

Bruce Tanner

you said are the you say... for So it's have to I said would Xs. pension in high contribution, trying When normalized

Robert Spingarn

words we are contribution, other pension in putting am doing. smooth I normal you in Well, a what what if

Bruce Tanner

Beyond XXXX, you mean, Rob?

Robert Spingarn

situation we yes. this contribution for. Or a what factor and and flow early on think about were an here is other basis. normalized if normalize to we to In what free want the words, timing have I year, spent the cash ongoing you Well,

Bruce Tanner

Yes.

than So John, I you at $X.X up about for you billion, should and again way kind teed CapEx we that. billion of think operations least $X simplistic I know 'XX is is the there. XXXX what it in going think from a of, talked 'XX actually have from is, lower cash perspective, of mean I

billion $X.X let's call just So or so. it

a And were I contribution those half of strong significantly funding. had, number again, required. that probably pension smaller. than contributions depending we XXXX And lower as order said, on got are do XXXX were year am billion flow $X.X asset returns, that pre with any the I have XXXX we contributions another the and free billion, $X.X asset how an required of returns, by cash get starting hopeful the You additional that in number in that is billion, the $X.X XXXX with could

contributions in flow, we a XXXX to and cash required close depending and upon share beyond. think XXXX I thinking, and XXXX are what are $XX simplistically pension So free the in

Marillyn Hewson

XXXX. You said XXXX but you mean

Bruce Tanner

XXXX, I Yes. am sorry.

Marillyn Hewson

looks Rob, like you -- me, him. or had okay, we lost question for

Okay.

substantial want the thank had to call all us reiterating So then. and customers our of I to that call year positioned and we guess exceptional this the continue joining to John, we our our we backlog be Thank to it's because outstanding stockholders. very will well call wrap you. robust today. our really value I you to of that on up by portfolio deliver year. strong an end and A

concludes today, that our call So John.

Operator

you. ladies disconnect. now And gentlemen, may Thank you and

Lockheed Martin (LMT) 29 Jan 182017 Q4 Earnings call transcript