Lockheed Martin [LMT] on Tuesday reported higher earnings and sales in its fourth quarter driven by a pension tailwind, the acquisition of Sikorsky Aircraft, a nuclear weapons venture in Britain and results in the Aeronautics segment.

However, the company reported guidance for 2017 that is well below consensus estimates and warned that it expects a material weakness in internal controls over financial reporting at Sikorsky, which Lockheed Martin acquired from United Technologies Corp. [UTX] in Nov. 2015.

Lockheed Martin Chairman, President and CEO Marillyn Hewson
Lockheed Martin Chairman, President and CEO Marillyn Hewson

Net income increased 6 percent to $988 million, $3.35 earnings per share (EPS), from $933 million ($3.01 EPS) a year ago. Earnings from continuing operations, which exclude the former IS&GS segment sold to Leidos [LDOS] last year, rose 17 percent to $959 million ($3.25 EPS) from $817 million ($2.63 EPS) a year ago, topping Wall Street estimates by 19 cents per share.

Sales in the quarter jumped 20 percent to $13.8 billion from $11.5 billion a year ago. Sikorsky added $1.2 billion in sales and the United Kingdom Atomic Weapons Establishment, which Lockheed Martin took a controlling interest in during 2016, contributed $310 million to the top line. The company’s F-35 and F-16 fighter programs, and C-5 and C-130 transport aircraft programs, also helped to boost sales.

Earnings rose due to lower pension costs and to a lesser extent on a slight improvement in segment profits, which benefited from gains in the Aeronautics, and Rotary and Mission Systems segments.

For 2016 net income soared 47 percent to $5.3 billion, $17.49 EPS, from $3.6 billion, $11.46 EPS a year ago. Earnings from continuing operations increased 23 percent to $3.8 billion, $12.38 EPS, from $3.1 billion, $9.93 EPS, in 2015. Sales increased 12 percent to $47.2 billion from $40.5 billion a year ago and free cash flow was $4.1 billion for the year.

Sales and per share earnings were record highs for the company in 2016, Marillyn Hewson, chairman, president and CEO of Lockheed Martin, said on an earnings call. She added that the company’s performance exceeded full year goals as well.

This year Lockheed Martin is forecasting sales to range between $49.4 billion and $50.6 billion, up 5 percent on the low end of the range from 2016 results. Growth will be driven by the Aeronautics segment.

Earnings in 2017 are expected to range between $12.25 EPS and $12.55 EPS, with the midpoint of the range 50 cents below analysts’ consensus projections due to lower than expected pension benefits. Operating profit is expected to be between $5.6 billion and $5.7 billion.

Hewson said the company’s $96.2 billion in backlog, which is a billion higher than a year ago, will help fuel growth in 2017. Bookings in the fourth quarter were around $19 billion, 140 percent of sales.

Lockheed Martin in its earnings release disclosed that it expects to report a material weakness in internal control over financial reporting at Sikorsky as of Dec. 31, 2016.

“Specifically, Sikorsky did not adequately identify, design and implement appropriate process-level controls for its processes and appropriate information technology controls for its information technology systems,” Lockheed Martin said. However, so far the company hasn’t found any “material errors in the financial results or balances identified as result of the control deficiencies at Sikorsky” and no restatement of prior financial statements and results, it added.

Bruce Tanner, Lockheed Martin’s chief financial officer, said on the call that the control weaknesses are limited to Sikorsky. He said the analysis of Sikorsky’s financial statements is expected to completed by February when Lockheed Martin files its annual report and that the remediation process will be completed later this year.

Regarding the status of the Pentagon’s budget, Hewson said that Lockheed Martin doesn’t expect its financial results this year to be impacted by the continuing resolution, which appropriates federal spending in FY ’17 at FY ’16 levels until a budget agreement can be reached in Congress. The continuing resolution expires on April 28.