Lockheed Hints Classified Satellite Order in the Offing for 2012

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PARIS — Lockheed Martin expects a multibillion-dollar production order from the U.S. government in 2012 for a next-generation satellite system following the completion of early development on the contract, which began in early 2009, the company’s chief financial officer said July 27.

In a conference call with financial analysts, Bruce L. Tanner did not identify the program in question. But the dates and contract volume point to the next-generation optical Earth observation satellite system that the U.S. government wants to operate alongside less-precise satellites built by commercial companies.

“It is a large opportunity,” Tanner said in the conference call. “We still see that as likely occurring in … 2012 in terms of, I’ll say, the quantity orders. We’re now performing some development work.”

Bethesda, Md.-based Lockheed Martin was awarded a contract for a classified imaging system following a decision by the U.S. Office of the Director of National Intelligence to develop so-called exquisite, or extremely high-resolution, imaging satellites under government procurement for the U.S. National Reconnaissance Office. At the same time, the U.S. National Geospatial-Intelligence Agency would contract for commercial imagery.

Tanner said the production order for the classified satellites remains on track for a 2012 start.

“You should think of that as being multibillions of dollars’ worth of orders,” Tanner said. “That’s about as specific as I guess I want to get.”

Presenting the company’s earnings for the three months ending June 30, Lockheed Martin said its Denver-based Space Systems division increased revenue by 1 percent, to $2.08 billion, compared with the same period a year ago. But operating profit was up 9.4 percent, to $245 million, giving the division an operating margin of 11.8 percent, up from 10.9 percent a year earlier.

Lockheed Martin said the increased profit was due to a higher volume of business on the Orion Crew Exploration Vehicle, the future of which remains uncertain as NASA, which had proposed to scrap the project, negotiates the space agency’s program direction with the U.S. Congress.

The company said it also saw higher profit margins in its government satellite work, which more than offset lower margins on commercial satellites.

Higher earnings came as well from the company’s 50 percent equity stake in United Launch Alliance of Denver, which is co-owned with Boeing Co.

The Space Systems division’s full-year revenue forecast remains unchanged at $8.25 billion to $8.5 billion. But the company raised the division’s expected operating profit forecast by $30 million at both the lower and upper end, to between $935 million and $960 million.

In addition to United Launch Alliance, Lockheed Martin co-owns with Boeing the United Space Alliance joint venture of Houston, which manages operations of the U.S. space shuttle. The retirement of the shuttle in the coming year will result in a one-time jump in profit for the joint venture either late this year or early in 2011. Once that occurs, United Space Alliance’s financial performance is expected to “drop fairly dramatically,” Tanner said. But ongoing operations of United Launch Alliance, which is two or three times as large as United Space Alliance in terms of revenue, combined with government satellite contracts, will prevent the Space Systems division’s results from declining materially, he said.

Lockheed Martin Chief Executive Robert J. Stevens said during the call that the company is increasingly optimistic that as NASA and the Congress compromise on the agency’s future program outline, a role for Orion will be secured. One increasingly likely scenario, he said, is for Orion to evolve from a crew transport vehicle to a crew lifeboat to be attached to the international space station and used in an emergency.

“Over time it can evolve into a crew exploration or crew transport vehicle that would include lifting astronauts from the Earth,” Stevens said of Orion. “Our sense is that individuals [in Congress] see the merit and risk reduction associated with Orion, and that there will be a role for the Orion spacecraft in some fashion as the strategy unfolds.”