Lockheed Space Revenue Dips but Profit Rises
PARIS — Lockheed Martin on April 27 reported a 4 percent drop in revenue, but a 4.8 percent increase in operating profit, in its Space Systems division and said its work on navigation and telecommunications satellites for the U.S. Defense Department are among the top moneymakers for the company in the next few years.
Reporting financial results for the three months ending March 31, Lockheed Martin of Bethesda, Md., said its Denver-based Space Systems division posted an operating-profit margin of 11.8 percent on revenue of $1.84 billion.
The revenue decline compared to the same period a year earlier was due to a decrease of $100 million in work on NASA’s Orion crew-transportation system, and a drop of $35 million in the company’s work on the external fuel tank of the U.S. space shuttle. The Orion program has been reorganized following a shift in NASA policy, and the space shuttle is being retired.
Partly offsetting the declines in these programs was an $80 million increase in revenue from government satellite programs that the company did not identify.
The first three months of 2011 featured a $339.6 million contract for the fifth Mobile User Objective System (MUOS) mobile communications satellite for the U.S. Navy. The company also booked a $790 million contract from the U.S. Missile Defense Agency under the Theater High-Altitude Area Defense (THAAD) missile-defense program, which is designed to intercept missiles both inside and outside the Earth’s atmosphere.
About $50 million, or 23 percent of the Space Systems division’s operating profit, came from the United Space Alliance andspace shuttle and launch-vehicle joint ventures in which Lockheed Martin and Boeing Co. each own a 50 percent stake, the company said. A year ago, Lockheed reported $55 million in equity earnings from these two joint ventures.
In a conference call with financial analysts, Lockheed Martin Chief Financial Officer Bruce L. Tanner said the company has identified nine U.S. defense programs for which it is prime contractor that will propel growth in the next few years. Taken together, these nine programs now account for around 40 percent of Lockheed Martin revenue.
THAAD is one of the nine that Tanner said would be growing in the next couple of years. The company’s Advanced EHF telecommunications satellite contract is another of the high-growth-potential programs. Tanner said the fourth through sixth AEHF satellites would generate more revenue than the first three spacecraft.
Lockheed Martin is prime contractor for GPS-3, the U.S. Air Force’s next generation of positioning, navigation and timing satellites. Lockheed Martin announced it has cleared the critical design review for the satellites, but deliveries have not begun, making this program a major likely contributor to future revenue growth, Tanner said.
Among the major programs the company believes will neither grow nor shrink in the coming couple of years are the Orion vehicle for NASA, and the Space-Based Infrared System (SBIRS), whose first geosynchronous-orbiting model, called GEO-1, is scheduled for launch in early May. The original SBIRS contract includes two dedicated geosynchronous-orbiting satellites and two infrared sensor payloads aboard classified host satellites in highly elliptical orbit — both now in operation — as well as the ground communications infrastructure. Follow-on contracts have added additional geosynchronous satellites and elliptical-orbit sensors, and changes to the ground infrastructure.
Lockheed Martin Chief Executive Robert J. Stevens said the company will best survive the coming cuts in U.S. defense spending by sticking to what it does best rather than seeking new revenue streams outside its core defense and security portfolio.
“Will you commercialize? Will you go into markets where you have less familiarity, where you have less experience with consumer behavior, where you have different approaches to pricing and risk management?” Stevens said. “At this juncture, we don’t see any reasons to do that. We don’t have any plan to do that.”