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25 Jan 07. The FT reported that Lockheed Martin predicted that the new Democratic-controlled Congress would approve increased US defence spending as the world responded to the “uncertain security market” from events such as the recent Chinese anti-satellite test.

The world’s largest defence contractor by sales provided the industry’s most bullish assessment to date of future spending trends ahead of the White House budget and supplemental requests being prepared by the Pentagon.

“In our judgement, with a $14.2tn economy, the nation has a lot to protect, and we might see even more funds flow in,” said Bob Stevens, Lockheed Martin’s chairman and chief executive.

Mr Stevens declined to be drawn on whether the recent Chinese destruction of a satellite with a ground-launched rocket would temper the opposition among some
Democrats to maintaining spending levels on missiles and space systems, one of his company’s largest businesses.

However, he noted that Congress had never failed to provide funding to address what he called “the complexity in the world”, either in the budget or through approving supplemental requests.

Some industry executives expect the Pentagon budget to flatten or decline in real terms over the next few years, with companies looking to compensate by improving margins, expanding internationally and diversifying. Lockheed, for example, is the biggest provider of IT services to the US government. Mr Stevens’ remarks came as Lockheed raised its 2007 earnings’ forecast and announced plans to boost margins and raise operating earnings by $1bn by the end of the decade. He pointed to an increased focus on homeland security and law enforcement work in addition to its core aircraft, ship and missiles business, but ruled out any move into commercial aerospace.

The company said international sales would start to displace the dominant position of its largest customer, the US defense department. This could include “selective” additions to the eight countries currently in the Joint Strike
Fighter programme, now known as the F-35 Lightning II, as well as winning contracts for its fast-growing IT and outsourcing unit.

General Dynamics

24 Jan 07. General Dynamics (NYSE: GD) reported financial results for the fourth quarter and full year of 2006, which ended December 31. (All per-share data reported below has been adjusted to reflect a two-for-one stock split that occurred March 24, 2006.)

Fourth-Quarter Results

General Dynamics’ earnings from continuing operations in the fourth quarter of 2006 were $463m, or $1.13 per share on a fully diluted basis, an increase of 16.3 percent compared to 2005 fourth-quarter earnings from continuing operations of $398m, or $0.98 per share fully diluted. Revenue for the fourth quarter of 2006 was $6.5bn, compared to fourth-quarter 2005 revenue of $5.8bn.

Full-year 2006 Results

Earnings from continuing operations for 2006 grew by 18.1 percent to $1.71bn, or $4.20 per share on a fully diluted basis, compared with earnings of $1.45bn, or $3.58 fully diluted, in 2005. Revenue for the full year of 2006 was $24.1bn, compared with $21bn for 2005, an increase of 14.7 percent.


Net cash provided by operating activities from continuing operations totaled $824m in the quarter and $2.16bn for the year. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $687m in the quarter and $1.82bn for the year.


The company’s funded backlog grew by approximately $1bn in the fourth quarter of 2006, to $32.7bn; it increased $4.5bn compared to year-end 2005. Total backlog at year-end 2006 was $43.7bn.


Company-wide operating margins for the full year increased by 50 basis points over 2005, to 10.9 percent. Operating margins for the fourth quarter increased to 10.8 percent from 10

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