Lockheed Space Systems Posts Double-Digit Growth

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  Space News Business

Lockheed Space Systems Posts Double-Digit Growth

By PETER B. de SELDING
Space News Staff Writer
posted: 30 October 2006
03:07 pm ET




PARIS — Lockheed Martin reported double-digit growth in its Space Systems business for the three-month and nine-month periods ending Sept. 30 on the strength of increased commercial satellite deliveries and higher revenue from its missile-defense and ballistic-missile programs.

Bethesda, Md.-based Lockheed Martin also reported a 39-percent increase in the Space Systems division’s backlog — to $22.1 billion — so far this year. NASA’s Orion crew exploration vehicle was responsible for around $500 million of the increase, Lockheed Martin Chief Financial Officer Christopher E. Kubasik said.

In an Oct. 24 conference call with investors, Lockheed Martin reported Space Systems had net sales of $5.9 billion for the first nine months of 2006, a 19-percent increase over the same period in 2005.

The company delivered four commercial satellites during the period, compared to no deliveries in 2005. Lockheed Martin reports satellite manufacturing revenues only once the spacecraft is delivered.

Space Systems’ operating profit for the same nine-month period increased by 23 percent, to $558 million, continuing the recent growth in profitability that has been a priority. A company policy on profitability of its programs has kept Lockheed Martin out of several major commercial-satellite competitions that the company judged insufficiently profitable to justify submitting a bid.

Lockheed Martin said the division’s improved profit is in part due to risk reductions made in the Atlas 5 launch-vehicle program and a U.S. Defense Department contract called EELV (Evolved Expendable Launch Vehicle) Launch Capability.

That two-year cost plus award fee contract, awarded by the U.S. Air Force in March, is valued at more than $50 million and includes support for launch pads on the East and West coasts capable of handling a total of four launches per year, according to an Air Force description of the work.

The sale of Lockheed Martin’s interests in the International Launch Services joint venture to market Russia’s Proton rocket was concluded in October, too late to be included in the quarterly report.

Kubasik said the company expects the United Launch Alliance (ULA) government-rocket joint venture with Boeing to receive final government approvals in the coming months. But “we have not set a date as of now” for when the venture might be operational. “We are implementing the terms of the consent order” from the U.S. government, which has ordered the ULA partners to structure the venture to minimize its anticompetitive aspects, Kubasik said.

Lockheed Martin has estimated that its 2007 sales will drop by $800 million once the ULA business is transferred to the new venture.

In an Oct. 25 conference call, Boeing officials said they expect that $1 billion in Boeing business forecasted for 2006, and a similar amount in 2007, would be transferred to ULA.

Lockheed Martin said that its Space Systems sales in 2006 are expected to be between $7.7 billion and $8 billion, with 2007 sales between $8.2 billion and $8.5 billion — before accounting for business to be transferred to ULA.

Kubasik said Lockheed Martin is not overly concerned about possible delays in the award of the U.S. Air Force’s Transformational Satellite (T-Sat) broadband telecommunications system because a T-Sat delay likely would lead to orders for additional Advanced Extremely High Frequency satellites, which are built by Lockheed Martin and Northr op Grumman, and are the T-Sat predecessors.

Lockheed Martin and Northro p Grumman are leading one of the two teams — the other is led by Boeing — working on initial T-Sat contracts. The selection of a single prime contractor for the full system had been expected late this year, but congressional budget cuts have thrown T-Sat’s scope and schedule into question.

“For T-Sat, we are the incumbent [contractor],” Kubasik said. “There is an opportunity for two additional [earlier-generation] satellites w hile the program is moved out or stalled.”