Lockheed Martin squeezed by US defence cuts Production line: F-35s at Lockheed Martin's Texas factory Lockheed Martin, the world's largest military contractor, on Thursday revealed the impact of the US's military spending slowdown when it announced that fourth-quarter net income was below expectations and forecast declining revenue for 2014. Net earnings for the quarter fell 14 per cent year on year to $488m, on net sales down 4.7 per cent to $11.5bn. Diluted earnings per share - at $1.50 - were well below the $2.00 analysts had expected. Profits for the quarter suffered not only from declining US military spending but also from a $195m non-cash charge for goodwill impairment in part of Lockheed's missile systems and fire control division. The company took another $171m of charges for workforce reductions and a separate $25m in special charges for job cuts in its aeronautics division. Lockheed announced 4,000 job cuts in November. Military contractors have been exposed to a mixture of across-the-board "sequestration" spending cuts and the impact of the US's military drawdown in Iraq and Afghanistan. However, some of the biggest contractors - including Lockheed - had been slow to feel the cuts" impact because much of their work is paid for out of money set aside many years in advance. Lockheed also forecast that 2014 sales would decline further from the $45.4bn for 2013, to a range between $44bn and $45.5bn. It forecast a profits recovery for the current year to a range of $10.25 to $10.55 per share, however. Marillyn Hewson, Lockheed chief executive, said the company's employees had delivered an "exceptional performance" during 2013 but promised strict cost discipline this year. "We will continue our focus on improving operational efficiency, reducing our cost structure, investing in innovations to address our customers" future challenges and returning value to our shareholders," she said. The biggest sales decline was in the missiles and fire control division, where fourth-quarter sales fell 9 per cent to $1.72bn. Operating profit, however, increased 29 per cent to $350m as older systems became more profitable to supply. In the core aeronautics division, which builds the F35, the world's biggest military project, sales for the quarter declined 5.9 per cent to $3.9bn and operating profits fell 7 per cent to $414m. The division suffered from reduced volumes of C130 transport aircraft, F22 fighters, lower volumes in the F35 project and fewer deliveries of F16 fighters. Operating profits in mission systems and training - which had been one of the first divisions hit by cuts - grew 14 per cent to $213m, on sales down marginally to $1.86bn. Lockheed's results were published a day after General Dynamics, another significant Pentagon supplier, expressed optimism that December's federal government budget deal might stop some threatened future cuts to military spending.