Brian Bradley
NS&D Monitor
1/30/2015
Defense industry executives identified contracts that support the nuclear triad as significant revenue factors during Fourth Quarter Fiscal Year 2014 earnings announcements this week. During separate conference calls this week, Boeing and Lockheed Martin leadership expressed optimism about the future of the companies’ ongoing joint work on the classified long-range strike bomber program, and Boeing CEO and Chairman Jim McNerney outright predicted the team would receive the LRSB contract, which Air Force estimates have suggested could total $44 to $55 billion. “[T]here is no question that when we win Long-Range Strike, and I’m sounding as confident as I can, because I do believe we will, that it will solidify the future of [Boeing defense division headquarters in] St. Louis for many, many years to come,” McNerney said during Boeing’s Fourth Quarter FY 2014 conference call on Wednesday. The Air Force is expected to award an LRSB contract to either the Boeing-Lockheed team or to Northrop Grumman by this spring.
Like McNerney, Lockheed Martin Chairwoman, President and CEO Marillyn Hewson, expressed confidence about Lockheed’s ongoing work on the program, while declining to outline specifics. “We think we have a very strong position on that program and pursuing it, and there’ll be a word sometime this year, and that’s all about I can [say] about them,” she said. The Air Force estimates it will spend $550 million per aircraft. While the FY 2015 appropriations bill approved by Congress provided $913.7 million for research, development, testing and evaluation for the LRSB, Rep. John Fleming (R-La.), Co-Chair of the Long-Range Strike Caucus, said during a speech this week at a caucus event on Capitol Hill that experts have deduced that funding outlined in the Future Years’ Defense Plan suggests “the significant R&D” on the next-gen bomber has finished.
LRSB ‘Fully Funded’ in FY 2015
McNerney said the LRSB was fully funded for the Fourth Quarter of FY 2014, and he said Boeing continues to invest in technology and innovation for programs including the LRSB, which the Air Force has singled out as a top priority. The LRSB contributed to Boeing Military Aircraft group’s earnings of $3 billion, its Defense, Space & Security division’s revenue of $7.6 billion, and the company’s overall revenue of $24.5 billion, all in the Fourth Quarter of FY 2014.
Lockheed Reports Increases in Areas Associated with Strategic Forces
LRSB work contributed to Lockheed Martin’s 6 percent increase in Aeronautics revenue, from $3.9 billion in sales in the Fourth Quarter of FY 2013 to $4.1 billion in the same timeframe the following year, according to a Jan. 27 announcement. Lockheed also posted a 14 percent year-over-year increase in revenue for its Space Systems division—which helps maintain the Minuteman 3—from $2 billion to $2.3 billion.
FISAC Hurts Northrop
The Jan. 29 release of Northrop Grumman’s Fourth Quarter FY 2014 earnings shows revenue of the company’s Technical Services division decreased 2 percent year-over-year, from $691 million to $679 million, partly because of “lower volume” in the ICBM business, according to a Northrop press release. Northrop has served on a “partial-bridge” contract entailing work scope reductions in its role as ICBM Prime Integration Contractor (IPIC) as the Air Force steps into its role as manager of Minuteman 3 sustainment.
The Air Force awarded a $534 million contract to BAE Systems in July 2013, to be the service’s primary support contractor under the newly installed Future ICBM Sustainment and Acquisition Construct (FISAC), which started the process of Northrop Grumman phasing out of its IPIC role. Northrop’s partial-bridge contract will expire Sept. 30. However, Northrop rebounded earlier this month to beat Boeing for a $963.5 million contract to maintain the Minuteman 3 Ground Subsystem until 2020. Northrop posted an overall 1 percent revenue loss in the quarter compared to the fourth quarter of FY 2013, from $6.12 billion to $6.11 billion, according to the release.
General Dynamics Increasing work on Ohio Replacement
General Dynamics Chairwoman and CEO Phebe Novakovic during her company’s Fourth Quarter of FY 2014 conference call said Electric Boat continues to increase year-over-year work on the Ohio-class replacement submarine, as development of the SSBN(X) has continued “on pace” on the sole-source contract, she said. “And it’s going very well,” Novakovic said. “So we like where we are positioned there.” Ohio-class replacement subcontractors include B&W and Huntington Ingalls. Year over year, revenue for General Dynamics’ Marine Systems segment grew more than any other division, as the group earned 25 percent more in the Fourth Quarter of 2014 than the Fourth Quarter of 2013. Earnings increased from $1.6 billion to $2 billion, according to the company’s earnings results. Overall, General Dynamics posted a 4 percent increase in year-over-year revenue, as earnings rose from $8 billion to $8.4 billion.
