Last year around this time, Lockheed used its quarterly earnings call to air its concerns over the Pentagon’s demand at the time that Lockheed pay for some of the design changes needed on the fighter jet. It also cited possible liability costs.
This year, the tone was different. Outgoing Chief Executive Bob Stevens, who is due to retire at the end of the year, told analysts the company would do everything it needed to “have very high quality relations” with the government.
SEC guidelines require publicly traded companies to disclose potential liabilities and risks to shareholders, including possible exposure to termination costs.
In its SEC filing on Thursday, Lockheed said it had about $400 million in potential liability exposure as of September 30, but the total would rise to $1.1 billion by the end of the year, including about $250 million in cash exposure.
No comment was immediately available from the Pentagon’s F-35 program office.
In the filing, Lockheed said it had revised downward its estimated profit on the F-35 development program by $85 million to date because it had made only “minimal progress” in getting the Pentagon to tie $530 million in incentive fees to specific developmental milestones.
It said $13 million of the remaining fee had been tied to specific milestones in 2012, even though the program had seen significant flight test activity this year.
Even when incentive fees were linked to milestones, “the U.S. government fee determinations have been less than our self-assessment of the significant progress accomplished during the evaluation periods,” Lockheed said.