Lockheed Profit Drops 28% on Expenses

Lockheed Martin Corp., the biggest U.S. military contractor, said Tuesday that third-quarter profit declined 28% because of pension and debt-retirement expenses. Sales jumped 23% on demand for fighter jets.

Net income was $217 million, or 48 cents a share, compared with $300 million, or 64 cents, a year ago, the Bethesda, Md.-based company said. Sales rose to $8.1 billion from $6.5 billion a year earlier.

Results included $163 million of pension and debt costs. It’s the third straight quarter that pension expenses have erased gains in Lockheed’s defense businesses.

The company got a third of the quarter’s sales from military-aircraft programs, benefiting from U.S. spending on new fighter jets including the F-35 Joint Strike Fighter and F/A-22.

“They took a big charge for the retirement of debt, and if you adjust for that number, it’s a good quarter,” said Brian James, an analyst at Loomis Sayles & Co., which owns Lockheed shares. “This is the year they bring on the F/A-22 production big time and the beginning of development of the JSF. The revenue was well above what I expected.”

Profit this year will be $2.95 to $3.05 a share, excluding pension and debt costs, the company said. It had 2002 profit of $2.21. Including all costs, Lockheed said it still expected 2003 profit of $2.25 to $2.35.

Shares of Lockheed fell 78 cents to $45.51 on the New York Stock Exchange. They have dropped 18% in the last year.

Excluding 18 cents a share of costs to retire debt early, Lockheed said it would have had profit last quarter of 66 cents a share.

It was expected to report profit of 58 cents on sales of $7.6 billion, based on the average estimate of analysts surveyed by Thomson First Call.