Martin's profit fell sharply in 4th quarter

January 23, 1991|By Ted Shelsby

Martin Marietta Corp., one of the nation's largest defense contractors and a supplier of Patriot missiles, reported a sharp drop in fourth-quarter earnings yesterday because of a weapon system still in development that has not been receiving very high grades for its performance.

During the quarter, Martin set aside a reserve of $78 million on its ADATS mobile air defense and anti-tank system. The company said the reserve covers capitalized pre-production costs in view of the uncertainties raised by a two-year delay in a full-scale production decision by the Army.

The company added that the reserve is intended to insulate future earnings if the ADATS program is discontinued.

If the system does go into production, as envisioned by the Army, its is anticipated that those costs will be recoverable, the company said in a press release.

ADATS is a missile-firing, anti-aircraft and tank-killing system mounted on a tanklike base. The Army is considering buying up to 378 units at a cost of more than $6 billion.

Martin officials have said in the past that the ADATS has done a good job of destroying attacking planes and helicopters during tests, but it has nevertheless been plagued with malfunctions in its power system and in its radar and target-tracking system.

During the quarter that just ended, Martin reported a profit of $57.2 million, or $1.17 a share, down from $73.5 million, or $1.41 a share, in the same quarter of 1989.

Without the ADATS reserve, the company said, fourth-quarter earnings would have amounted to $106.7 million and $2.17 a share.

Sales totaled $1.56 billion during the three months that ended Dec. 31, down from $1.6 billion in the same period of the previous year.

A company spokesman said that 1989 sales were higher because of the successful New Year's Eve launch of a commercial Titan rocket that carried two communication satellites into orbit.

For the full year, the company earned $327.6 million, up from $306.9 in 1989. On a per-share basis, that was equal to $6.52, up from $5.82.

Sales reached a record $6.13 billion, up from $5.8 billion in 1989.

"The financial results and operatSee MARTIN, 9C, Col. 3MARTIN, from 1Cing achievements of 1990 confirm that our strategies have been successful in enabling our business to continue to perform well in a difficult environment," Norman R. Augustine, chairman and chief executive, said in a prepared statement.

"Moving into 1991 and beyond, Martin Marietta is well positioned with a sound financial condition, a strong and diverse business base," he said.

Martin begins the new year with a backlog of undelivered orders of approximately $12 billion.

Earlier this month, Martin and the Westinghouse Electronic Systems Group near Linthicum were selected by the Pentagon for the full-scale development of the Longbow targeting and missile system that is to be used on the Army's Apache attack helicopter.

The new weapon system is designed for both air-to-air use against other aircraft or air-to-ground for destroying enemy tanks and other land targets.

A full production contract could mean more than $2.5 billion in new business for the two companies.

Martin noted that sales of its Astronautics Group rose 11 percent in 1990, reflecting increased production of Titan launch vehicles for the Air Force and other space-related activities.

In a recent research report, Paul H. Nisbet, an analyst with Prudential-Bache Securities said that the war in the Persian Gulf could boost Martin's revenues by as much as $1 billion.

In addition to being a supplier of the Patriot missiles, which have proved to be effective against Iraqi Scud missiles, Martin makes the LANTIRN night vision system that enables fighter plane pilots to "see" targets electronically while flying terrain-hugging, under-the-radar missions at high speed. It makes a similar night vision system that is used in the Army's Apache attack helicopter.

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