Word of Accounting Change Sends Lockheed Shares Down

Lockheed Martin Corp. disclosed in a Securities and Exchange Commission filing that 25% of its third-quarter per-share earnings came from an accounting adjustment.

The disclosure sent the aerospace and defense company’s shares falling $5.06, or nearly 5%, to close at $101.94 on the New York Stock Exchange.

Analysts and investors said they were annoyed that Lockheed wasn’t more upfront about the accounting change. The company did not disclose the adjustment in its third-quarter earnings news release or in a conference call with analysts and selected investors.

“It’s the magnitude of it, and the fact they didn’t talk about it during the conference call,” said Jose Romero, an analyst at Safeco Asset Management, which owns 676,740 Lockheed shares.

The company now says it should have handled the matter differently.

“Clearly, in hindsight, we should have been more sensitive,” Lockheed spokesman Jim Fetig said. “We’re going to be more responsive to any feedback we get.”

The maker of the F-15 and F-22 fighter jets, Titan rockets and the C-130 military transport plane said in its Nov. 2 quarterly filing with the SEC that the accounting adjustment increased net income by $78 million, or 41 cents a share, to $318 million, or $1.67. A significant improvement in its Atlas II rocket program, part of its Space & Strategic Missiles unit, enabled Lockheed to transfer some of the reserves it had set aside for that program to earnings.

Per-share results for the most recent quarter matched the average estimate of analysts surveyed by First Call Corp. In the year-ago quarter, Bethesda, Md.-based Lockheed had net income of $331 million, or $1.51 a share.

The Wall Street Journal reported the accounting change’s effect on net income in its Wednesday edition.