Lockheed Martin told investors today it took a $225 million hit in the second quarter of 2021 on a classified aeronautics development program.
The company learned of the charge after a customer review in May. Lockheed Chief Financial Officer Kenneth Possenriede said during the company's second-quarter earnings call he expects the program will meet schedule and performance targets moving forward and ultimately transition into production.
"We're very comfortable with the charge," Possenriede said, noting the company expects there are opportunities for additional customers on the program. "I assure you we believe -- I can say this -- that there is still a very strong business case given these associated opportunities. . . . It'll be a good program for the Lockheed Martin Corporation."
Possenriede declined to discuss details of the classified effort but noted that about 40% of the projected development cost has been expended.
The charge contributed to a $163 million drop in Lockheed's second quarter operating profit, compared to 2020. The company also took a $20 million hit on the F-22 program "due to lower risk and sustainment volume," it said in a press release. The decreases were partially offset by increases in the C-130 and F-16 programs.
Possenriede noted that Lockheed's space and aeronautics business areas have the largest classified portfolios, followed by missile and fire control -- and the company expects to see growth in classified programs over time.
"We see the classified portion of Lockheed Martin growing faster than the non-classified portion of Lockheed Martin," he said.
Also, during the call, Lockheed Chief Executive Officer Jim Taiclet said the company expects its acquisition of Aerojet Rocketdyne to be finalized in the fourth quarter of this year, pending approval.