Lockheed Martin this week warned that "a material weakness in internal control over financial reporting" at its Sikorsky helicopter unit could force it to restate its results in its annual K-10 filing with the Securities and Exchange Commission in February. Lockheed bought Sikorsky from United Technologies for $9 billion in November 2015. No errors have been uncovered so far. In its fourth quarter 2016 earnings call on January 24, Lockheed Martin said that Sikorsky had not been included in an earlier group-wide assessment of internal reporting controls due to normal accounting rules and procedures. CFO Bruce Tanner told analysts that any remediation of the group balance sheet that might be required will likely be completed by the end of this year.
As part of Lockheed Martin's Rotary and Mission Systems division, Sikorsky contributed to this unit's $13.5 billion net sales in 2016—representing a 48 percent increase on 2015 (given that the Sikorsky acquisition was only completed on November 6 that year). Sikorsky generated $4.6 billion of these net sales last year. In 2014, the last full year it was owned by United Technologies, it achieved net sales of $7.5 billion.
According to the General Aviation Manufacturers Association, Sikorsky is estimated to have delivered eight civil turbine helicopters in the first nine months of 2016. This compares with 29 in the same period in 2015.
"Having Sikorsky as part of our company now opens up a lot of opportunities for us," commented Lockheed Martin CEO Marillyn Hewson. "We do expect, at some point, the commercial business will come back.”
In the fourth quarter of 2016, Sikorsky's increased net sales of $1.2 billion were a key factor in a 37 percent increase in combined $3.8 billion in net sales for Lockheed Martin's Rotary and Mission Systems division. The unit boosted its operating profit for the fourth quarter by 45 precent to $228 million, and for all of 2016, increased profits by 7.3 percent to $906 million, achieving an operating margin of 6.7 percent. Sikorsky's contribution to results in this division offset a drop in net sales in the training and logistics sector and from the divestiture of Lockheed Martin Commercial Flight Training.
