Lockheed Says 3rd Quarter Space Revenue Dip is Misleading
PARIS — Lockheed Martin said the drop in revenue at its Space Systems division for the three months ending Sept. 30 compared with a year ago distorts the division’s better-than-expected performance in 2015, especially in military satellite programs.
Bethesda, Maryland-based Lockheed also said it is still assessing the threat to the Atlas 5 rocket posed by a U.S. law enacted late last year that bars the use of Russian-made engines for military launches. The Atlas 5, which is powered by the Russian-built RD-180 main engine, was designed by Lockheed Martin but is built and operated by United Launch Alliance, a Boeing-Lockheed Martin joint venture.
The ban, imposed by National Defense Authorization Act of 2015, does not apply to U.S. government civil or commercial Atlas 5 launches. Whether ULA is willing or able to repurpose already-purchased engines slated for nonmilitary missions and use them for military launches — which would give the company more time to find an RD-180 replacement — remains unclear.
In an Oct. 22 filing with the U.S. Securities and Exchange Commission (SEC), Lockheed said the current U.S. Air Force bulk-purchase order with ULA — for launches through 2017, with options through 2019 — is exempted from the Russian engine prohibition.
The same is true for engines purchased or contracted before February 2014.
The law “has made it extremely difficult for the U.S.’s most reliable launch vehicle, Atlas 5, to compete in the future national security launch marketplace,” the company said in its SEC filing.
The National Defense Authorization Act of 2016 would grant ULA access to four more engines — far short of what the company says it needs to remain in the national security market until a replacement rocket can be qualified — but U.S. President Barack Obama vetoed that legislation Oct. 22 over unrelated provisions.
Lockheed and Boeing report revenue from Centennial, Colorado-based ULA as equity earnings that drop directly to the companies’ operating profit line. For the three months ending Sept. 30, both companies reported that ULA earnings were down $20 million from the same period a year ago.
Lockheed attributed the 5 percent decline in Space Systems revenue, to $1.93 billion, to the fact that it did not conduct a commercial launch in the period, compared with one launch a year ago, and to reduced revenue from the Space-Based Infrared System of missile warning satellites. Commercial launches of the Atlas 5 are handled by Lockheed Martin, as opposed to ULA.
Partly offsetting these declines was an increase in revenue from Lockheed’s work on NASA’s Orion crew transport system.
In an Oct. 20 conference call with investors, Lockheed Chief Financial Officer Bruce L. Tanner said the quarter-to-quarter comparison is misleading since last year’s period was the high point of the year for the Space Systems division.
For the full year, Tanner said, the Space Systems division is reporting “extremely good performance” both in military satellites, including the Advanced Extremely High Frequency secure communications satellites, and from ULA.
Tanner sidestepped a question on whether Lockheed would entertain bids for the sale of its share in ULA, saying: “We haven’t decided anything differently about ULA.” Rocket propulsion manufacturer Aerojet Rocketdyne made an unsolicited $2 billion offer for ULA. Boeing officials have publicly rejected the offer.
Tanner said the Space Systems division’s performance this year has been so good that the company is raising its full-year Space Systems revenue and operating profit forecasts, respectively, to $8 billion from up to $7.8 billion, and to $1.01 billion versus up to $975 million forecast in July.