Lockheed Martin is continuing efforts to improve its credit rating and put the company on a sounder financial footing, including a drive to retire debt and reach a debt-to-equity level of 50%, the defense giant's chief financial officer Robert Stevens reports.

Lockheed Martin's debt stands at about $11 billion, with a debt-to-equity ratio of 61.3%. That position means Lockheed Martin is "too brittle with respect to its capital structure," Stevens said.

Progress is being made in improving the debt picture. This year the company already has retired about $1 billion. The proceeds from the pending $500 million sale of its control business and $1.67 billion sale of the Aerospace Electronics Systems unit, both to BAE Systems, will go to debt reduction.
But selling off businesses won't in itself make the company healthy. "We can't divest ourselves to that level," Stevens said. Reaching the lower debt level isn't expected to happen quickly, although Stevens said he hasn't set a timeline.

The desire to reduce debt has spurred a strong desire to generate cash flow. Stevens said the company's goal is $1 billion a year in free cash flow. That may be an ambitious target-"I like to set the bar high," Stevens said.

Lockheed Martin has been able to improve operations of several of its units, but one area that still lags is the commercial space business. General market weakness, rather than Lockheed Martin problems, are largely responsible for that situation. Stevens said the company is pursuing several initiatives to strengthen its position in the depressed commercial space market, including cutting overhead.

By Robert Wall